<PAGE>
As filed with the Securities and Exchange Commission on May 18, 1999
Registration 333-76985
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
AUDIBLE, INC.
(Exact name of registrant as specified in its charter)
Delaware 7375 22-3407945
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)
----------------
Andrew J. Huffman
President and Chief Executive Officer
Audible, Inc.
65 Willowbrook Boulevard
Wayne, N.J. 07470
(973) 890-4070
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------
Copies to:
Edwin M. Martin, Jr., Esquire Brian D. Goldstein, Esquire
Nancy A. Spangler, Esquire Testa, Hurwitz & Thibeault, LLP
Piper & Marbury L.L.P. 125 High Street
1200 19th Street, N.W. Boston, MA 02110
Washington, D.C. 20036 (617) 248-7000
(202) 861-3900
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]___________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]___________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]___________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
<CAPTION>
Proposed Maximum
Title of Each Class of Securities To Aggregate Amount of
Be Registered Offering Price(1) Registration Fee(2)
- -----------------------------------------------------------------------------
<S> <C> <C>
Shares of Common Stock, par value $.01 $46,000,000 $0
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act.
(2) A registration fee of $12,788 was paid at the time of the initial filing
of this registration statement.
----------------
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
13. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses payable by us in
connection with the sale and distribution of the securities offered hereby,
other than underwriting discounts and commissions. All of the amounts shown are
estimated except the Securities and Exchange Commission registration fee, the
National Association Securities Dealers, Inc. filing fee and the Nasdaq
National Market listing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................. $12,788
National Association of Securities Dealers, Inc. filing fee......... 5,100
Nasdaq National Market listing fee.................................. 1,000
Transfer agent's and registrar's fees............................... *
Printing expenses................................................... *
Legal fees and expenses............................................. *
Accounting fees and expenses........................................ *
Blue Sky filing fees and expenses................................... 10,000
Miscellaneous expenses.............................................. *
-------
Total............................................................. *
=======
</TABLE>
- --------
* To be filed by amendment.
14. Indemnification of Officers and Directors
Section 145 of the Delaware General Corporation Law ("Section 145") permits
indemnification of directors, officers, agents and controlling persons of a
corporation under certain conditions and subject to certain limitations. Our
bylaws include provisions to require us to indemnify our directors and officers
to the fullest extent permitted by Section 145, including circumstances in
which indemnification is otherwise discretionary. Section 145 also empowers us
to purchase and maintain insurance that protects our officers, directors,
employees and agents against any liabilities incurred in connection with their
service in such positions.
At present, there is no pending litigation or proceeding involving any of
our directors or officers as to which indemnification is being sought nor are
we aware of any threatened litigation that may result in claims for
indemnification by any officer or director.
The form of Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification of our directors and officers by the
Underwriters, for certain liabilities arising under the Securities Act.
15. Recent Sales of Unregistered Securities
During the last three years, we have issued unregistered securities in the
transactions described below. These securities were offered and sold by us in
reliance upon the exemptions provided for in Section 4(2) of the Securities
Act, relating to sales not involving any public offering, Rule 506 of the
Securities Act relating to sales to accredited investors and Rule 701 of the
Securities Act relating to a compensatory benefit plan. The sales were made
without the use of an underwriter and the certificates representing the
securities sold contain a restrictive legend that prohibits transfer without
registration or an applicable exemption.
(1) In July 1996, we issued 2,000,000 shares of Series B preferred stock to a
group of accredited investors at a purchase price of $1.50 per share for an
aggregate of $3,000,000.
(2) In November 1996, we issued an additional 50,000 shares of Series B
preferred stock to two accredited investors at a purchase price of $1.50
per share for an aggregate of $75,000.
II-1
<PAGE>
(3) In November 1996, we issued warrants to purchase an aggregate of 46,082
shares of Series B preferred stock in connection with loans made to us.
(4) In March 1997, we issued 2,250,000 shares of Series C preferred stock to a
group of accredited investors at a purchase price of $4.00 per share for an
aggregate of $9,000,000.
(5) In March 1997, we issued warrants to purchase 450,000 shares of common
stock to holders of Series C preferred stock in connection with the Series
C preferred stock financing.
(6) In July 1997, we issued a warrant to purchase 12,188 shares of Series C
preferred stock in connection with a loan made to us.
(7) In February 1998, we issued 1,350,000 shares of Series D preferred stock to
a group of accredited investors at a purchase price of $4.00 per share for
an aggregate of $5,400,000.
(8) In April 1998, we issued a warrant to purchase 5,000 shares of Series D
preferred stock in connection with a loan made to us.
(9) In December 1998, we issued an additional 2,500,000 shares of Series D
preferred stock to a group of accredited investors at a purchase price of
$4.00 per share for an aggregate of $10,000,000.
(10) In February 1999, we issued an additional 250,000 shares of Series D
preferred stock to an accredited investor at a purchase price of $4.00 per
share for an aggregate of $1,000,000.
(11) In April 1999, we issued a warrant to purchase 100,000 shares of common
stock to an accredited investor.
(12) From December 1995 through March 1999, we sold an aggregate of 5,068,180
shares of common stock at purchase prices ranging from $.07 to $4.00 per
share, for an aggregate of $1,526,384.
16. Exhibits and Financial Statement Schedules
(a) Exhibits
Exhibit No. Description
1.1 Form of Underwriting Agreement
3.1 Restated Certificate of Incorporation of Audible, dated March 31,
1997
3.1.1 Certificate of Amendment of Certificate of Incorporation, dated
July 22, 1997
3.1.2 Certificate of Amendment of Certificate of Incorporation, dated
February 25, 1998
3.1.3 Certificate of Amendment of Certificate of Incorporation, dated
December 18, 1998
3.2* Form of Amended and Restated Certificate of Incorporation of
Audible
3.3 Bylaws of Audible
3.3.1 Amendment No. 1 to Audible, Inc. Bylaws, dated March 17, 1998
3.4* Form of Amended and Restated Bylaws of Audible
4.1* Specimen stock certificate for shares of common stock of Audible
5.1** Opinion of Piper & Marbury L.L.P.
10.1*+ License Agreement dated November 4, 1998, by and between Microsoft
Corporation and Audible
10.2*+ Digital Rights Management Agreement dated November 4, 1998,
between Microsoft Corporation and Audible
10.3*+ Development Agreement dated November 12, 1998, by and between
RealNetworks, Inc. and Audible
10.4* RealMedia Architecture Partner Program Internet Agreement dated
November 12, 1998, between RealNetworks, Inc. and Audible
10.5 Master Lease Agreement dated November 19, 1996, by and between
Comdisco, Inc. as lessor, and Audible as lessee
10.5.1 Addendum to Master Lease Agreement dated November 20, 1996, by and
between Comdisco, Inc., as lessor, and Audible, as lessee
(relating to Exhibit 10.5)
II-2
<PAGE>
10.6 Warrant Agreement to purchase 30,573 shares of Series B preferred
stock at a price of $2.68 per share, dated November 19, 1996, and
re-issued as of August 17, 1998, by Audible to Comdisco, Inc.
10.7 Warrant Agreement to purchase 12,188 shares of Series C preferred
stock at a price of $4.00 per share, dated July 24, 1997, issued
by Audible to Comdisco, Inc.
10.8 Loan and Security Agreement dated April 6, 1998, by and between
Silicon Valley Bank, as lender, and Audible, as borrower, for a
revolving line of credit of up to $1,000,000
10.9 Warrant to Purchase Stock issued April 6, 1998, by Audible to
Silicon Valley Bank, entitling Silicon Valley Bank to purchase
5,000 shares of common stock at a price of $4.00 per share
10.10 Security and Loan Agreement dated November 20, 1996, between
Audible, as borrower, and Imperial Bank, as lender, for up to
$500,000
10.11 Warrant Agreement to purchase 12,500 shares of Series B preferred
stock at a price of $3.00 per share, dated November 20, 1996,
issued by Audible to Imperial Bank
10.12 Promissory Note dated March 28, 1997, from Donald Katz in favor of
Audible, in the principal amount of $100,000
10.12.1 Allonge to Note dated April 21, 1999 between Donald Katz and
Audible (relating to Exhibit 10.12.1)
10.13 Security Agreement dated March 28, 1997, by and between Donald
Katz and Audible
10.14 Amended and Restated Registration Rights Agreement dated February
26, 1998, by and among Audible and certain stockholders named
therein
10.14.1 Amendment No. 1 to Amended and Restated Registration Rights
Agreement dated December 18, 1998 (relating to Exhibit 10.14)
10.15 1999 Stock Incentive Plan
10.16 Form of Common Stock Warrants issued March 31, 1997 by Audible to
various investors in connection with the Series C preferred stock
financing
10.17 Form of Stock Restriction Agreement by and between Audible and the
Named Executive Officers made in connection with various purchases
and sales of shares of restricted common stock
10.18 Form of Promissory Note made by the Named Executive Officers in
favor of Audible in connection with various purchases and sales of
shares of restricted common stock
10.19 Office Lease dated June 20, 1997, by and between Audible, as
tenant, and Passaic Investment LLC, Sixty-Five Willowbrook
Investment LLC and Wayne Investment LLC, as tenants-in-common, as
landlord
10.20 Sublease Agreement dated July 19, 1996, by and between Audible, as
sublessee, and Painewebber Incorporated, as sublessor
10.21*+ Agreement dated April 3, 1999 by and between Audible and Diamond
Multimedia Systems, Inc.
10.22* Common Stock Purchase Warrant, issued April 22, 1999, to Microsoft
Corporation
11.1 Statement of computation of loss per share
23.1 Consent of KPMG LLP
23.2** Consent of Piper & Marbury L.L.P. (included as part of Exhibit 5.1
hereto)
24.1 Power of Attorney (included in signature pages)
27 Financial Data Schedule
- --------
+ Portions of this Exhibit were omitted and have been filed separately with
the Secretary of the Commission pursuant to the Registrant's Application
Requesting Confidential Treatment under Rule 406 of the Act.
* Filed herewith.
** To be filed by amendment.
(b) Financial Statement Schedules:
Schedules have been omitted because the information required to be shown in
the schedules is not applicable or is included elsewhere in our financial
statements or the notes thereto.
II-3
<PAGE>
17. Undertakings
The undersigned Registrant hereby undertakes to provide to the underwriter
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions of its Charter or Bylaws or the Delaware
General Corporation Law or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted form the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Company has duly
caused this Amendment to Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Wayne, New Jersey,
on the 18th day of May, 1999.
AUDIBLE, INC.
By: /s/ Andrew J. Huffman
----------------------------------
Andrew J. Huffman
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment to Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<C> <S> <C>
/s/ Andrew J. Huffman President, Chief Executive May 18, 1999
--------------------------------- Officer and Director
Andrew J. Huffman (Principal Executive
Officer)
* Director of Finance and May 18, 1999
--------------------------------- Administration (Principal
Anthony Nash Financial Officer)
* Chairman of the Board of May 18, 1999
--------------------------------- Directors
Donald R. Katz
* Director May 18, 1999
---------------------------------
Timothy Mott
* Director May 18, 1999
---------------------------------
R. Bradford Burnham
* Director May 18, 1999
---------------------------------
Thomas Hirschfeld
* Director May 18, 1999
---------------------------------
W. Bingham Gordon
* Director May 18, 1999
---------------------------------
Winthrop Knowlton
* Director May 18, 1999
---------------------------------
Richard Brass
</TABLE>
*By: /s/ Nancy A. Spangler
---------------------------------
Nancy A. Spangler
Attorney-In-Fact
II-5
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
1.1 Form of Underwriting Agreement
3.1 Restated Certificate of Incorporation of Audible, dated March 31,
1997
3.1.1 Certificate of Amendment of Certificate of Incorporation, dated
July 22, 1997
3.1.2 Certificate of Amendment of Certificate of Incorporation, dated
February 25, 1998
3.1.3 Certificate of Amendment of Certificate of Incorporation, dated
December 18, 1998
3.2* Form of Amended and Restated Certificate of Incorporation of
Audible
3.3 Bylaws of Audible
3.3.1 Amendment No. 1 to Audible, Inc. Bylaws, dated March 17, 1998
3.4* Form of Amended and Restated Bylaws of Audible
4.1* Specimen stock certificate for shares of common stock of Audible
5.1** Opinion of Piper & Marbury L.L.P.
10.1*+ License Agreement dated November 4, 1998, by and between Microsoft
Corporation and Audible
10.2*+ Digital Rights Management Agreement dated November 4, 1998,
between Microsoft Corporation and Audible
10.3*+ Development Agreement dated November 12, 1998, by and between
RealNetworks, Inc. and Audible
10.4* RealMedia Architecture Partner Program Internet Agreement dated
November 12, 1998, between RealNetworks, Inc. and Audible
10.5 Master Lease Agreement dated November 19, 1996, by and between
Comdisco, Inc. as lessor, and Audible as lessee
10.5.1 Addendum to Master Lease Agreement dated November 20, 1996, by and
between Comdisco, Inc., as lessor, and Audible, as lessee
(relating to Exhibit 10.5)
10.6 Warrant Agreement to purchase 30,573 shares of Series B preferred
stock at a price of $2.68 per share, dated November 19, 1996, and
re-issued as of August 17, 1998, by Audible to Comdisco, Inc.
10.7 Warrant Agreement to purchase 12,188 shares of Series C preferred
stock at a price of $4.00 per share, dated July 24, 1997, issued
by Audible to Comdisco, Inc.
10.8 Loan and Security Agreement dated April 6, 1998, by and between
Silicon Valley Bank, as lender, and Audible, as borrower, for a
revolving line of credit of up to $1,000,000
10.9 Warrant to Purchase Stock issued April 6, 1998, by Audible to
Silicon Valley Bank, entitling Silicon Valley Bank to purchase
5,000 shares of common stock at a price of $4.00 per share
10.10 Security and Loan Agreement dated November 20, 1996, between
Audible, as borrower, and Imperial Bank, as lender, for up to
$500,000
10.11 Warrant Agreement to purchase 12,500 shares of Series B preferred
stock at a price of $3.00 per share, dated November 20, 1996,
issued by Audible to Imperial Bank
10.12 Promissory Note dated March 28, 1997, from Donald Katz in favor of
Audible, in the principal amount of $100,000
10.12.1 Allonge to Note dated April 21, 1999 between Donald Katz and
Audible (relating to Exhibit 10.12.1)
<PAGE>
10.13 Security Agreement dated March 28, 1997, by and between Donald
Katz and Audible
10.14 Amended and Restated Registration Rights Agreement dated February
26, 1998, by and among Audible and certain stockholders named
therein
10.14.1 Amendment No. 1 to Amended and Restated Registration Rights
Agreement dated December 18, 1998 (relating to Exhibit 10.14)
10.15 1999 Stock Incentive Plan
10.16 Form of Common Stock Warrants issued March 31, 1997 by Audible to
various investors in connection with the Series C preferred stock
financing
10.17 Form of Stock Restriction Agreement by and between Audible and the
Named Executive Officers made in connection with various purchases
and sales of shares of restricted common stock
10.18 Form of Promissory Note made by the Named Executive Officers in
favor of Audible in connection with various purchases and sales of
shares of restricted common stock
10.19 Office Lease dated June 20, 1997, by and between Audible, as
tenant, and Passaic Investment LLC, Sixty-Five Willowbrook
Investment LLC and Wayne Investment LLC, as tenants-in-common, as
landlord
10.20 Sublease Agreement dated July 19, 1996, by and between Audible, as
sublessee, and Painewebber Incorporated, as sublessor
10.21*+ Agreement dated April 13, 1999 by and between Audible and Diamond
Multimedia Systems, Inc.
10.22* Common Stock Purchase Warrant, issued April 22, 1999, to Microsoft
Corporation
11.1 Statement of computation of loss per share
23.1 Consent of KPMG LLP
Consent of Piper & Marbury L.L.P. (included as part of Exhibit 5.1
23.2** hereto)
24.1 Power of Attorney (included in signature pages)
27 Financial Data Schedule
- --------
+ Portions of this Exhibit were omitted and have been filed separately with
the Secretary of the Commission pursuant to the Registrant's Application
Requesting Confidential Treatment under Rule 406 of the Act.
* Filed herewith.
** To be filed by amendment.
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
AUDIBLE, INC.
AUDIBLE, INC., a corporation organized and existing under the laws of the
State of Delaware (the "Corporation"), hereby certifies as follows:
1. The name of the Corporation is Audible, Inc. (formerly Audible Words
Corporation). The date of filing of its original Certificate of Incorporation
with the Secretary of State was November 3, 1995.
2. This Amended and Restated Certificate of Incorporation restates and
integrates and further amends the Certificate of Incorporation of the
Corporation and all prior amendments thereto by deleting from the Certificate of
Incorporation, as amended, all provisions thereof and substituting in lieu
thereof the Amended and Restated Certificate of Incorporation set forth in
Paragraph 3 below.
3. The text of the Certificate of Incorporation as amended or
supplemented heretofore is further amended and restated hereby to read as herein
set forth in full:
FIRST. Name. The name of the Corporation is: Audible, Inc.
----
SECOND. Registered Office and Agent. The address of the
---------------------------
Corporation's registered office in the State of Delaware is The Corporation
Trust Center, 1209 Orange Street, in the City of Wilmington, County of New
Castle. The name of the Corporation's registered agent at such address is The
Corporation Trust Company.
THIRD. Purpose. The nature of the business or purposes to be
-------
conducted or promoted by the Corporation is as follows:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware and to possess and
exercise all of the powers and privileges granted by such law and any other law
of Delaware.
FOURTH. Authorized Capital. The total number of shares of all
------------------
classes of stock which the Corporation shall have authority to issue is
60,000,000 shares, of which (i) 50,000,000 shall be shares of common stock, par
value $0.01 per share (the "Common Stock"), and (ii) 10,000,000 shall be shares
of preferred stock, par value $0.01 per share (the "Preferred Stock").
<PAGE>
A. Common Stock
------------
(1) General. The voting, dividend and liquidation rights of the
-------
holders of the Common Stock are subject to and qualified by the rights of the
holders of the Preferred Stock of any series as may be designated by the Board
of Directors upon any issuance of the Preferred Stock of any series.
(2) Voting. The holders of the Common Stock are entitled to one vote
------
for each share held at all meetings of stockholders. There shall be no
cumulative voting.
(3) Dividends. Dividends may be declared and paid on the Common
---------
Stock from funds lawfully available therefor as and when determined by the Board
of Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
(4) Liquidation. Upon the dissolution or liquidation of the
-----------
Corporation, whether voluntary or involuntary, holders of Common Stock will be
entitled to receive all assets of the Corporation available for distribution to
its stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.
(5) Redemption. The Common Stock is not redeemable.
----------
B. Preferred Stock. The Board of Directors expressly is authorized,
---------------
subject to limitations prescribed by the Delaware General Corporation Law and
the provisions of this Amended and Restated Certificate of Incorporation of the
Corporation, to provide, by resolution and by filing a certificate pursuant to
the Delaware General Corporation Law, for the issuance from time to time of the
shares of Preferred Stock in one or more series, to establish from time to time
the number of shares to be included in each such series, and to fix the
designation, powers, preferences and other rights of the shares of each such
series and to fix the qualifications, limitations and restrictions thereon,
including, but without limiting the generality of the foregoing, the following:
(1) the number of shares constituting that series and the distinctive
designation of that series;
(2) the dividend rate on the shares of that series, whether dividends
shall be cumulative, and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that series;
(3) whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such voting rights;
-2-
<PAGE>
(4) whether that series shall have conversion privileges, and, if so,
the terms and conditions of such conversion, including provision for adjustment
of the conversion rate in such events as the Board of Directors shall determine;
(5) whether or not the shares of that series shall be redeemable,
and, if so, the terms and conditions of such redemption, including the dates
upon or after which they shall be redeemable, and the amount per share payable
in case of redemption, which amount may vary under different conditions and at
different redemption rates;
(6) whether that series shall have a sinking fund for the redemption
or purchase of shares of that series, and, if so, the terms and amount of such
sinking fund;
(7) the rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the Corporation, and
the relative rights of priority, if any, of payment of shares of that series;
and
(8) any other relative powers, preferences, and rights of that
series, and qualifications, limitations or restrictions on that series.
FIFTH. Board of Directors. In furtherance of and not in limitation
------------------
of powers conferred by statute, it is further provided:
A. Election of directors need not be by written ballot unless the
By-Laws of the Corporation shall so provide. Except as otherwise provided in
this Amended and Restated Certificate of Incorporation or a certificate of
designation relating to the rights of the holders of any class or series of
Preferred Stock, voting separately by class or series, to elect additional
directors under specified circumstances, the number of directors of the
Corporation shall be as fixed from time to time by or pursuant to the By-Laws of
the Corporation. No director of the Corporation need be a stockholder of the
Corporation.
B. The Board of Directors shall be classified with respect to the
time for which they severally hold office into three separate classes, Class I,
Class II and Class III, which shall be as nearly equal in number as possible,
and shall be adjusted from time to time in the manner specified in the By-Laws
of the Corporation to maintain such proportionality. Each intial director in
Class I shall hold office for a term expiring at the 2000 annual meeting of
stockholders. Each initial director in Class II shall hold office initially for
a term expiring at the 2001 annual meeting of stockholders. Each initial
director in Class III shall hold office for a term expiring at the 2002 annual
meeting of stockholders. Notwithstanding the foregoing provisions of this
Article FIFTH, each director shall serve until such director's successor is duly
elected and qualified or until such director's earlier death, resignation or
removal. At each annual meeting of stockholders, the successors to the class of
directors whose term expires at that meeting shall be elected to hold office for
a term expiring at the annual meeting of stockholders
-3-
<PAGE>
held in the third year following the year of their election and until their
successors have been duly elected and qualified or until any such director's
earlier death, resignation or removal.
C. The Board of Directors is expressly authorized to adopt, amend or
repeal the By-Laws of the Corporation.
SIXTH. Meetings of Stockholders. Meetings of stockholders may be
------------------------
held within or without the State of Delaware, as the By-Laws of the Corporation
may provide. Upon the closing of an underwritten initial public offering of the
Corporation's Common Stock pursuant to the effective registration statement
under the Securities Act of 1933, as amended, any action required or permitted
to be taken at any annual or special meeting of stockholders of the Corporation
may be taken only upon the vote of stockholders at an annual or special meeting
duly noticed and called in accordance with the General Corporation Law of the
State of Delaware and may not be taken by written consent of stockholders
without a meeting, unless such consent is unanimous.
SEVENTH: Special Meetings of Stockholders. Special meeting of
--------------------------------
stockholders may be called at any time by the Chairman of the Board, the
President, the Board of Directors, the holders of a majority of the outstanding
shares of the Corporation's capital stock and entitled to vote generally in the
election of directors. Business transacted at any special meeting of
stockholders shall be limited to matters relating to the purpose or purposes
stated in the notice of meeting.
EIGHTH. Limitation on Liability. No director of the Corporation
-----------------------
shall be personally liable to the Corporation or to any stockholder of the
Corporation for monetary damages for breach of fiduciary dity as a director,
provided that this provision shall not limit the liability of a director (i) for
any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involved
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the General Corporation Law of Delaware, or (iv) for any transaction from which
the director derived an improper personal benefit.
If the General Corporation Law of Delaware or any other statute of the
State of Delaware hereafter is amended to authorize the further elimination or
limitation of the liability of directors of the corporation, then the liability
of a director of the corporation shall be limited to the fullest extent
permitted by the statutes of the State of Delaware, as so amended, and such
elimination or limitation of liability shall be in addition to, and not in lieu
of, the limitation on the liability of a director provided by the foregoing
provisions of this Sixth Article.
Any repeal of or amendment to this Sixth Article shall be prospective
only and shall not adversely affect any limitation on the liability of a
director of the corporation existing at the time of such repeal or amendment.
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<PAGE>
NINTH. To the extent permitted by law, the Corporation shall fully
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding (whether
civil, criminal, administrative or investigative) by reason of the fact that
such person is or was a director or officer of the Corporation, or is or was
serving at the request of the Corporation as a director or officer of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding.
To the extent permitted by law, the Corporation may fully indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding (whether civil,
criminal, administrative or investigative) by reason of the fact that such
person is or was an employee or agent of the Corporation, or is or was serving
at the request of the Corporation as an employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding.
The Corporation may advance expenses (including attorneys' fees) incurred
by a director or officer in advance of the final disposition of such action,
suit or proceeding upon the receipt of an undertaking by or on behalf of the
director or officer to repay such amount if it shall ultimately be determined
that such director or officer is not entitled to indemnification. The
Corporation may advance expenses (including attorneys' fees) incurred by an
employee or agent in advance of the final disposition of such action, suit or
proceeding upon such terms and conditions, if any, as the Board of Directors
deems appropriate.
TENTH. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute and the
Certificate of Incorporation, and all rights conferred upon stockholders herein
are granted subject to this reservation.
4. This Amended and Restated Certificate of Incorporation was duly
adopted by the Board of Directors in accordance with Section 245 of the General
Corporation Law of the Sate of Delaware.
5. This Amended and Restated Certificate of Incorporation was duly
adopted by written consent of the stockholders in accordance with the applicable
provisions of Sections 228, 242 and 245 of the General Corporation Law of the
State of Delaware.
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<PAGE>
IN WITNESS WHEREOF, Audible, Inc. has caused this Certificate to be signed
by Andrew J. Huffman, its President and Chief Executive Officer this __ day of
______, 1999.
AUDIBLE, INC.
By:_________________________________________
Andrew J. Huffman
President and Chief Executive Officer
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<PAGE>
EXHIBIT 3.4
AUDIBLE, INC.
AMENDED AND RESTATED
BY-LAWS
Dated _____________, 1999
<PAGE>
AUDIBLE, INC.
AMENDED AND RESTATED
--------------------
BY-LAWS
-------
Table of Contents
<TABLE>
<S> <C>
ARTICLE 1 - Stockholders..................................
Section 1.1 Place of Meetings.......................
Section 1.2 Annual Meeting..........................
Section 1.3 Special Meetings........................
Section 1.4 Notice of Meetings......................
Section 1.5 Voting List.............................
Section 1.6 Quorum..................................
Section 1.7 Adjournments............................
Section 1.8 Voting and Proxies......................
Section 1.9 Action at Meeting.......................
Section 1.10 Action without Meeting..................
Section 1.11 Stockholder Nominations and Proposals...
ARTICLE 2 - Directors.....................................
Section 2.1 General Powers..........................
Section 2.2 Number; Election and Qualification......
Section 2.3 Enlargement of the Board................
Section 2.4 Tenure..................................
Section 2.5 Vacancies...............................
Section 2.6 Resignation.............................
Section 2.7 Regular Meetings........................
Section 2.8 Special Meetings........................
Section 2.9 Notice of Special Meetings..............
Section 2.10 Meetings by Telephone Conference Calls..
Section 2.11 Quorum..................................
Section 2.12 Action at Meeting.......................
Section 2.13 Action by Consent.......................
Section 2.14 Removal.................................
Section 2.15 Committees..............................
Section 2.16 Compensation of Directors...............
ARTICLE 3 - Officers......................................
Section 3.1 Enumeration.............................
Section 3.2 Election................................
Section 3.3 Qualification...........................
Section 3.4 Tenure..................................
Section 3.5 Resignation and Removal.................
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Section 3.6 Vacancies.............................................
Section 3.7 Chairman of the Board and Vice-Chairman
of the Board..........................................
Section 3.8 President.............................................
Section 3.9 Vice Presidents.......................................
Section 3.10 Secretary and Assistant Secretaries...................
Section 3.11 Treasurer and Assistant Treasurers....................
Section 3.12 Salaries..............................................
ARTICLE 4 - Capital Stock...............................................
Section 4.1 Issuance of Stock.....................................
Section 4.2 Certificates of Stock.................................
Section 4.3 Transfers.............................................
Section 4.4 Lost, Stolen or Destroyed Certificates................
Section 4.5 Record Date...........................................
ARTICLE 5 - Indemnification.............................................
Section 5.1 Indemnification in Actions, Suits or Proceedings Other
Than Those by or in the Right of Company..............
Section 5.2 Indemnification in Actions, Suits or Proceedings by or
in the Right of the Company...........................
Section 5.3 Authorization of Indemnification......................
Section 5.4 Advancement of Expenses...............................
Section 5.5 Claims................................................
Section 5.6 Insurance.............................................
ARTICLE 6 - General Provisions..........................................
Section 6.1 Fiscal Year...........................................
Section 6.2 Corporate Seal........................................
Section 6.3 Waiver of Notice......................................
Section 6.4 Voting of Securities..................................
Section 6.5 Evidence of Authority.................................
Section 6.6 Certificate of Incorporation..........................
Section 6.7 Transactions with Interested Parties..................
Section 6.8 Severability..........................................
Section 6.9 Pronouns..............................................
ARTICLE 7 - Amendments..................................................
Section 7.1 By the Board of Directors.............................
Section 7.2 By the Stockholders...................................
</TABLE>
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<PAGE>
AMENDED AND RESTATED
BY-LAWS
OF
AUDIBLE, INC.
ARTICLE 1 - Stockholders
------------------------
1.1 Place of Meeting. All meetings of stockholders shall be held at such
-----------------
place within or without the State of Delaware as may be designated from time to
time by the Board of Directors or the President or, if not so designated, at the
registered office of the Company.
1.2 Annual Meeting. The annual meeting of stockholders for the election
---------------
of directors and for the transaction of such other business as may properly be
brought before the meeting shall be held at such date, time and place as may be
fixed by the Board of Directors or the President. If this date shall fall upon
a legal holiday at the place of the meeting, then such meeting shall be held on
the next succeeding business day at the same hour. If no annual meeting is held
in accordance with the foregoing provisions, the Board of Directors shall cause
the meeting to be held as soon thereafter as convenient. If no annual meeting
is held in accordance with the foregoing provisions, a special meeting may be
held in lieu of the annual meting, and any action taken at that special meeting
shall have the same effect as if it had been taken at the annual meeting, and in
such case all references in these By-Laws to the annual meeting of the
stockholders shall be deemed to refer to such special meeting.
1.3 Special Meetings. Special meetings of stockholders may be called at
-----------------
any time by the Chairman of the Board, the President, the Board of Directors or
the holders of a majority of the outstanding shares of the Company's capital
stock and entitled to vote generally in the election of directors. Business
transacted at any special meeting of stockholders shall be limited to matters
relating to the purpose or purposes stated in the notice of meeting.
1.4 Notice of Meetings. Except as otherwise provided by law, written
-------------------
notice of each meeting of stockholders, whether annual or special, shall be
given not less than ten nor more than 60 days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notices of all meetings
shall state the place, date and hour of the meeting. The notice of a special
meeting shall state, in addition, the purpose or purposes for which the meeting
is called. If mailed, notice is given when deposited in the United States mail,
postage prepaid, directed to the stockholder at his address as it appears on the
records of the Company.
1.5 Voting List. The officer who has charge of the stock ledger of the
------------
Company shall prepare, at least 10 days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least 10 days prior to the
meeting, at a place within the city where the meeting is to be held. The list
shall also be produced and kept at the time and
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<PAGE>
place of the meeting during the whole time of the meeting, and may be inspected
by any stockholder who is present.
1.6 Quorum. Except as otherwise provided by law, the Certificate of
-------
Incorporation or these By-Laws, the holders of a majority of the shares of the
capital stock of the Company issued and outstanding and entitled to vote at the
meeting, present in person or represented by proxy, shall constitute a quorum
for the transaction of business.
1.7 Adjournments. Any meeting of stockholders may be adjourned to any
------------
other time and to any other place at which a meeting of stockholders may be held
under these By-Laws by the stockholders present or represented at the meeting
and entitled to vote, although less than a quorum, or, if no stockholder is
present, by any officer entitled to preside at or to act as Secretary of such
meeting. It shall not be necessary to notify any stockholder of any adjournment
of less than 30 days if the time and place of the adjourned meeting are
announced at the meeting at which adjournment is taken, unless after the
adjournment a new record date is fixed for the adjourned meeting. At the
adjourned meeting, the Company may transact any business which might have been
transacted at the original meeting.
1.8 Voting and Proxies. Each stockholder shall have one vote for each
-------------------
share of stock entitled to vote held of record by such stockholder and a
proportionate vote for each fractional share so held, unless otherwise provided
in the Certificate of Incorporation. Each stockholder of record entitled to
vote at a meeting of stockholders, or to express consent or dissent to corporate
action in writing without a meeting, may vote or express such consent or dissent
in person or may authorize another person or persons to vote or act for him by
written proxy executed by the stockholder or his authorized agent and delivered
to the Secretary of the Company. No such proxy shall be voted or acted upon
after three years from the date of its execution, unless the proxy expressly
provides for a longer period.
1.9 Action at Meeting. When a quorum is present at any meeting, the
------------------
holders of a majority of the stock present or represented and voting on a matter
(or if there are two or more classes of stock entitled to vote as separate
classes, then in the case of each such class, the holders of a majority of the
stock of that class present or represented and voting on a matter) shall decide
any matter to be voted upon by the stockholders at such meeting, except when a
different vote is required by express provision of law, the Certificate of
Incorporation or these By-Laws. Any election by stockholders shall be
determined by a plurality of the votes cast by the stockholders entitled to vote
at the election.
1.10 Action without Meeting. Upon the closing of an underwritten initial
-----------------------
public offering of the Company's Common Stock pursuant to the effective
registration statement under the Securities Act of 1933, as amended, any action
required or permitted to be taken at any annual or special meeting of
stockholders of the Company may be taken only upon the vote of stockholders at
an annual or special meeting duly noticed and called in accordance with the
General Corporation Law of the State of Delaware and may not be taken by written
consent of stockholders without a meeting, unless such consent is unanimous.
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<PAGE>
1.11 Stockholder Nominations and Proposals. (a) No proposal for a
-------------------------------------
stockholder vote (a "Stockholder Proposal") shall be submitted to the
stockholders of the Company unless the stockholder submitting such proposal (the
"Proponent") shall have filed a written notice setting forth with particularity
(i) the names and business addresses of the Proponent and all Persons (as such
term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as
amended, (the "Exchange Act")) acting in concert with the Proponent; (ii) the
names and addresses of the Proponent and the Persons identified in clause (i),
as they appear on the Company's books (if they so appear); (iii) the class and
number of shares of the Company beneficially owned by the Proponent and the
Persons identified in clause (i); (iv) a description of the Stockholder Proposal
containing all information material thereto; (v) a description of all
arrangements or understandings between the Proponent and any other Persons
(including the names of such other Persons) in connection with the Stockholder
Proposal and any material interest of the Proponent or such Persons in such
Stockholder Proposal and (vi) such other information as the Board of Directors
reasonably determines is necessary or appropriate to enable the Board of
Directors and stockholders to consider the Stockholder Proposal. Upon receipt
of the Stockholder Proposal and prior to the stockholders' meeting at which such
Stockholder Proposal will be considered, if the Board of Directors or a
designated committee or the officer who will preside at the meeting of the
stockholders determines that the information provided in a Stockholder Proposal
does not satisfy the requirements of this Section 1.11 or is otherwise not in
accordance with applicable law, the Secretary of the Company shall promptly
notify the Proponent of the deficiency in the notice. Such Proponent shall have
the opportunity to cure the deficiency by providing additional information to
the Secretary within the period of time, not to exceed five days from the date
such deficiency notice is given to the Proponent, determined by the Board of
Directors, such committee or such officer. If the deficiency is not cured
within such period, or if the Board of Directors, such committee or such officer
determines that the additional information provided by the Proponent, together
with the information previously provided, does not satisfy the requirements of
this Section 1.11 or is otherwise not in accordance with applicable law, then
such Stockholder Proposal shall not be presented for action at the stockholders'
meeting in question.
(b) Only persons who are selected and recommended by the Board of
Directors or the nominating committee thereof, or who are nominated by the
stockholders in accordance with the procedures set forth in this Section 1.11,
shall be eligible for election or qualified to serve as directors. Nominations
of individuals for election to the Board of Directors at any annual meeting or
special meeting of the stockholders at which directors are to be elected may be
made by any stockholder of the Company entitled to vote for the election of
directors at that meeting by compliance with the procedures set forth in this
Section 1.11 except as may be otherwise provided in the Certificate of
Incorporation with respect to the right of holders of Preferred Stock of the
Company to nominate and elect a specified number of directors in certain
circumstances. Nominations by stockholders shall be made by written notice (a
"Nomination Notice"), which shall set forth (i) as to each individual nominated
(A) the name, date of birth, business address and residence address of such
nominee; (B) the business experience during the past five years of such nominee,
including his or her principal occupations or employment during such period, the
name and principal business of any Company or other organization in which such
occupations and employment were carried on, and such other information as to the
nature of his or her responsibilities and the level of professional competence
as may be sufficient to permit assessment of his or her prior business
experience; (C) whether the nominee is or has ever been at any time a director,
officer or owner of 5% or more of any class of capital stock, partnership
interests or other
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<PAGE>
equity interest of any Company, partnership or other entity; (D) any
directorships held by such nominee in any company with a class of securities
registered pursuant to section 12 of the Exchange Act or subject to the
requirements of section 15(d) of the Exchange Act or any company registered as
an investment company under the Investment Company Act of 1940, as amended; (E)
whether, in the last five years, such nominee has been convicted in a criminal
proceeding or has been subject to a judgment, order, finding or decree of any
federal, state or other governmental entity, concerning any violation of
federal, state, or other law, or any proceeding in bankruptcy, which conviction,
judgment, order, finding, decree or proceeding may be material to the evaluation
of the ability or integrity of the nominee; and (F) any other information
relating to the nominee that would be required to be disclosed in a proxy
statement or other filings required to be made in connection with solicitations
of proxies for election of directors pursuant to section 14 of the Exchange Act,
and the rules and regulations promulgated thereunder; and (ii) as to the person
submitting the Nomination Notice and any Person acting in concert with such
Person, (w) the name and business address of such person and Persons, (x) the
name and business address of such person and Persons as they appear on the books
of the Company (if they so appear); (y) the class and number of shares of the
Company which are beneficially owned by such person and Persons, and (z) any
other information relating to such stockholder that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
section 14 of the Exchange Act and the rules and regulations promulgated
thereunder. A written consent to being named in a proxy statement as a nominee,
and to serve as a director if elected, signed by the nominee, shall be filed
with any Nomination Notice. If the presiding officer at any stockholders'
meeting determines that a nomination was not made in accordance with the
procedures prescribed by these By-laws, he shall so declare to the meeting and
the defective nomination shall be disregarded.
(c) Nomination Notices and Stockholder Proposals must be delivered to the
Secretary at the principal executive office of the Company or mailed and
received at the principal executive offices of the Company (a) in the case of
any annual meeting, not less than 60 days nor more than 90 days prior to the
anniversary date of the immediately preceding annual meeting of stockholders;
provided, however, that (i) in the event that the annual meeting is called for a
date that is not within 30 days before or 60 days after such anniversary date,
or (ii) in the case of the annual meeting of stockholders held during the 1999
fiscal year of the Company, notice by the stockholder in order to be timely must
be so received no later than the close of business on the tenth day following
the day on which notice of the date of the annual meeting was mailed or public
disclosure of the date of the annual meeting was made, whichever first occurs;
and (b) in the case of a special meeting of stockholders called for the purpose
of electing directors, not later than the close of business on the tenth day
following the day on which notice of the date of the special meeting was mailed
or public disclosure of the date of the special meeting was made, whichever
first occurs.
ARTICLE 2 - Directors
---------------------
2.1 General Powers. The business and affairs of the Company shall be
---------------
managed by or under the direction of a Board of Directors, who may exercise all
of the powers of the Company except as otherwise provided by law, the
Certificate of Incorporation or these By-Laws. In the event of a vacancy in the
Board of Directors, the remaining directors, except as otherwise provided by
law, may exercise the powers of the full Board until the vacancy is filled.
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<PAGE>
2.2 Number; Election and Qualification. The number of directors which
-----------------------------------
shall constitute the whole Board of Directors shall be determined by resolution
of the Board of Directors, but in no event shall be less than one. The number
of directors may be decreased at any time and from time to time by a majority of
the directors then in office, but only to eliminate vacancies existing by reason
of the death, resignation, removal or expiration of the term of one of more
directors. Unless otherwise provided in the Certificate of Incorporation, the
Board of Directors shall divide the directors into three classes, which shall be
as equal in number as possible; and, when the number of directors is changed,
shall determine the class or classes to which the increased or decreased number
of directors shall be apportioned, which shall be done so as to maintain as
equal a number of directors in each class as possible; provided, however, that
-------- -------
no decrease in the number of directors shall affect the term of any director
then in office. Directors need not be stockholders of the Company.
2.3 Enlargement of the Board. The number of directors may be increased at
-------------------------
any time and from time to time by a majority of the directors then in office.
2.4 Tenure. The directors shall be elected at the annual meeting of
-------
stockholders by such stockholders as have the right to vote on such election.
At each annual meeting of stockholders, directors elected to succeed those whose
terms are expiring shall be elected for a term of office expiring at the annual
meeting of stockholders held in the third year following their election and
until their respective successors are elected and qualified, or until such
director's earlier death, resignation or removal.
2.5 Vacancies. Any vacancy in the Board of Directors, however occurring,
----------
including a vacancy resulting from an enlargement of the Board, may be filled by
vote of a majority of the directors then in office, although less than a quorum,
or by a sole remaining director. A director elected to fill a vacancy shall be
elected for the unexpired term of his predecessor in office, and a director
chosen to fill a position resulting from an increase in the number of directors
shall hold office until the next annual meeting of stockholders and until his
successor is elected and qualified, or until his earlier death, resignation or
removal.
2.6 Resignation. Any director may resign by delivering his written
------------
resignation to the Company at its principal office or to the President or
Secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
2.7 Regular Meetings. Provided that meetings are held at least once
-----------------
during each of the Company's fiscal quarters, regular meetings of the Board of
Directors may be held without notice at such time and place, either within or
without the State of Delaware, as shall be determined from time to time by the
Board of Directors; provided that any director who is absent when such a
determination is made shall be given notice of the determination. A regular
meeting of the Board of Directors may be held without notice immediately after
and at the same place as the annual meeting of stockholders.
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<PAGE>
2.8 Special Meetings. Special meetings of the Board of Directors may be
-----------------
held at any time and place, within or without the State of Delaware, designated
in a call by any member of the Board of Directors or the President of the
Company.
2.9 Notice of Special Meetings. Notice of any special meeting of the
---------------------------
Board of Directors shall be given to each director by the Secretary or by the
officer or one of the directors calling the meeting. Notice shall be duly given
to each director (i) by giving notice to such director in person or by telephone
at least 24 hours in advance of the meeting, (ii) by sending a facsimile,
telegram or telex, or delivering written notice by hand, to his last known
business or home address at least 24 hours in advance of the meeting, or (iii)
by mailing written notice to his last known business or home address at least 72
hours in advance of the meeting. A notice or waiver of notice of a meeting of
the Board of Directors need not specify the purposes of the meeting.
2.10 Meetings by Telephone Conference Calls. Directors or any members of
---------------------------------------
any committee designated by the directors may participate in a meeting of the
Board of Directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation by such means shall constitute
presence in person at such meeting.
2.11 Quorum. A majority of the total number of the whole Board of
-------
Directors shall constitute a quorum at all meetings of the Board of Directors.
In the event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such director
so disqualified; provided, however, that in no case shall less than one-third
(1/3) of the number so fixed constitute a quorum. In the absence of a quorum at
any such meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice other than announcement at the meeting,
until a quorum shall be present
2.12 Action at Meeting. At any meeting of the Board of Directors at which
------------------
a quorum is present, the vote of a majority of those present shall be sufficient
to take any action, unless a different vote is specified by law, the Certificate
of Incorporation or these By-Laws.
2.13 Action by Consent. Any action required or permitted to be taken at
------------------
any meeting of the Board of Directors or of any committee of the Board of
Directors may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent to the action in writing, and the written
consents are filed with the minutes of proceedings of the Board or committee.
2.14 Removal. Any one or more or all of the directors may be removed, with
--------
or without cause, by the holders of a majority of the shares then entitled to
vote at an election of directors, except that the directors elected by the
holders of a particular class or series of stock may be removed without cause
only by vote of the holders of a majority of the outstanding shares of such
class or series.
2.15 Committees. The Board of Directors may, by resolution passed by a
-----------
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of
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<PAGE>
the directors of the Company. The Board may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of a committee, the member or members of the committee present at any
meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors
and subject to the provisions of the General Company Law of the State of
Delaware, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the Company and
may authorize the seal of the Company to be affixed to all papers which may
require it. Each such committee shall keep minutes and make such reports as the
Board of Directors may from time to time request. Except as the Board of
Directors may otherwise determine, any committee may make rules for the conduct
of its business, but unless otherwise provided by the directors or in such
rules, its business shall be conducted as nearly as possible in the same manner
as is provided in these By-Laws for the Board of Directors.
2.16 Compensation of Directors. Directors may be paid such compensation
--------------------------
for their services and such reimbursement for expenses of attendance at meetings
as the Board of Directors may from time to time determine. No such payment
shall preclude any director from serving the Company or any of its parent or
subsidiary Companies in any other capacity and receiving compensation for such
service.
ARTICLE 3 - Officers
--------------------
3.1 Enumeration. The officers of the Company shall consist of a
------------
President, a Secretary, a Treasurer and such other officers with such other
titles as the Board of Directors shall determine, including a Chairman of the
Board, a Vice-Chairman of the Board, and one or more Vice Presidents, Assistant
Treasurers, and Assistant Secretaries. The Board of Directors may appoint such
other officers as it may deem appropriate.
3.2 Election. The President, Treasurer and Secretary shall be elected
---------
annually by the Board of Directors at its first meeting following the annual
meeting of stockholders. Other officers may be appointed by the Board of
Directors at such meeting or at any other meeting.
3.3 Qualification. No officer need be a stockholder. Any two or more
--------------
offices may be held by the same person.
3.4 Tenure. Except as otherwise provided by law, by the Certificate of
-------
Incorporation or by these By-Laws, each officer shall hold office until his
successor is elected and qualified, unless a different term is specified in the
vote choosing or appointing him, or until his earlier death, resignation or
removal.
3.5 Resignation and Removal. Any officer may resign by delivering his
------------------------
written resignation to the Company at its principal office or to the President
or Secretary. Such
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<PAGE>
resignation shall be effective upon receipt unless it is specified to be
effective at some other time or upon the happening of some other event.
Any officer may be removed at any time, with or without cause, by vote of a
majority of the entire number of directors then in office.
Except as the Board of Directors may otherwise determine, no officer who
resigns or is removed shall have any right to any compensation as an officer for
any period following his resignation or removal, or any right to damages on
account of such removal, whether his compensation be by the month or by the year
or otherwise, unless such compensation is expressly provided in a duly
authorized written agreement with the Company.
3.6 Vacancies. The Board of Directors may fill any vacancy occurring in
----------
any office for any reason and may, in its discretion, leave unfilled for such
period as it may determine any offices other than those of President, Treasurer
and Secretary. Each such successor shall hold office for the unexpired term of
his predecessor and until his successor is elected and qualified, or until his
earlier death, resignation or removal.
3.7 Chairman of the Board and Vice-Chairman of the Board. The Board of
-----------------------------------------------------
Directors may appoint a Chairman of the Board and may designate the Chairman of
the Board as Chief Executive Officer. If the Board of Directors appoints a
Chairman of the Board, he shall perform such duties and possess such powers as
are assigned to him by the Board of Directors. If the Board of Directors
appoints a Vice-Chairman of the Board, he shall, in the absence or disability of
the Chairman of the Board, perform the duties and exercise the powers of the
Chairman of the Board and shall perform such other duties and possess such other
powers as may from time to time be vested in him by the Board of Directors.
3.8 President. Unless the Board of Directors otherwise determines, the
----------
President shall be the Chief Operating Officer of the Company. Unless the Board
of Directors has designated the Chairman of the Board as Chief Executive
Officer, the President shall also be the Chief Executive Officer of the Company.
The President shall, subject to the direction of the Board of Directors, have
general charge and supervision of the business of the Company. Unless otherwise
provided by the Board of Directors, he shall preside at all meetings of the
stockholders, if he is a director, at all meetings of the Board of Directors.
The President shall perform such other duties and shall have such other powers
as the Board of Directors may from time to time prescribe.
3.9 Vice Presidents. Any Vice President shall perform such duties and
----------------
possess such powers as the Board of Directors or the President may from time to
time prescribe. In the event of the absence, inability or refusal to act of the
President, the Vice President (or if there shall be more than one, the Vice
Presidents in the order determined by the Board of Directors) shall perform the
duties of the President and when so performing shall have all the powers of and
be subject to all the restrictions upon the President. The Board of Directors
may assign to any Vice President the title of Executive Vice President, Senior
Vice President or any other title selected by the Board of Directors.
-11-
<PAGE>
3.10 Secretary and Assistant Secretaries. The Secretary shall perform such
------------------------------------
duties and shall have such powers as the Board of Directors or the President may
from time to time prescribe. In addition, the Secretary shall perform such
duties and have such powers as are incident to the office of the secretary,
including without limitation the duty and power to give notices of all meetings
of stockholders and special meetings of the Board of Directors, to attend all
meetings of stockholders and the Board of Directors and keep a record of the
proceedings, to maintain a stock ledger and prepare lists of stockholders and
their addresses as required, to be custodian of corporate records and the
corporate seal and to affix and attest to the same on documents.
Any Assistant Secretary shall perform such duties and possess such powers
as the Board of Directors, the President or the Secretary may from time to time
prescribe. In the event of the absence, inability or refusal to act of the
Secretary, the Assistant Secretary, (or if there shall be more than one, the
Assistant Secretaries in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any meeting
of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.
3.11 Treasurer and Assistant Treasurers. The Treasurer shall perform such
-----------------------------------
duties and shall have such powers as may from time to time be assigned to him by
the Board of Directors or the President. In addition, the Treasurer shall
perform such duties and have such powers as are incident to the office of
treasurer, including without limitation the duty and power to keep and be
responsible for all funds and securities of the Company, to deposit funds of the
Company in depositories selected in accordance with these By-Laws, to disburse
such funds as ordered by the Board of Directors, to make proper accounts of such
funds, and to render as required by the Board of Directors statements of all
such transactions and of the financial condition of the Company.
The Assistant Treasurers shall perform such duties and possess such powers
as the Board of Directors, the President or the Treasurer may from time to time
prescribe. In the event of the absence, inability, or refusal to act of the
Treasurer, the Assistant Treasurer, (or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Treasurer.
3.12 Salaries. Officers of the Company shall be entitled to such salaries,
---------
compensation or reimbursement as shall be fixed or allowed from time to time by
the Board of Directors.
-12-
<PAGE>
ARTICLE 4 - Capital Stock
-------------------------
4.1 Issuance of Stock. Unless otherwise voted by the stockholders and
------------------
subject to the provisions of the Certificate of Incorporation, the whole or any
part of any unissued balance of the authorized capital stock of the Company or
the whole or any part of any unissued balance of the authorized capital stock of
the Company held in its treasury may be issued, sold, transferred or otherwise
disposed of by vote of the Board of Directors in such manner, for such
consideration and on such terms as the Board of Directors may determine.
4.2 Certificates of Stock. Every holder of stock of the Company shall be
----------------------
entitled to have a certificate, in such form as may be prescribed by law and by
the Board of Directors, certifying the number and class of shares owned by him
in the Company. Each such certificate shall be signed by, or in the name of the
Company by, the Chairman or Vice-Chairman, if any, of the Board of Directors, or
the President or a Vice President, and the Treasurer or an Assistant Treasurer,
or the Secretary or an Assistant Secretary of the Company. Any or all of the
signatures on the certificate may be a facsimile.
Each certificate for shares of stock which are subject to any restriction
on transfer pursuant to the Certificate of Incorporation, the By-Laws,
applicable securities laws or any agreement among any number of shareholders or
among such holders and the Company shall have conspicuously noted on the face or
back of the certificate either the full text of the restriction or a statement
of the existence of such restriction.
4.3 Transfers. Except as otherwise established by rules and regulations
----------
adopted by the Board of Directors, and subject to applicable law, shares of
stock may be transferred on the books of the Company by the surrender to the
Company or its transfer agent of the certificate representing such shares
properly endorsed or accompanied by a written assignment or power of attorney
properly executed, and with such proof of authority or the authenticity of
signature as the Company or its transfer agent may reasonably require. Except
as may be otherwise required by law, by the Certificate of Incorporation or by
these By-Laws, the Company shall be entitled to treat the record holder of stock
as shown on its books as the owner of such stock for all purposes, including the
payment of dividends and the right to vote with respect to such stock,
regardless of any transfer, pledge or other disposition of such stock until the
shares have been transferred on the books of the Company in accordance with the
requirements of these By-Laws.
4.4 Lost, Stolen or Destroyed Certificates. The Company may issue a new
---------------------------------------
certificate of stock in place of any previously issued certificate alleged to
have been lost, stolen, or destroyed, upon such terms and conditions as the
Board of Directors may prescribe, including the presentation of reasonable
evidence of such loss, theft or destruction and the giving of such indemnity as
the Board of Directors may require for the protection of the Company or any
transfer agent or registrar.
4.5 Record Date. The Board of Directors may fix in advance a date as a
------------
record date for the determination of the stockholders entitled to notice of or
to vote at any meeting of stockholders or to express consent (or dissent) to
corporate action in writing without a meeting,
-13-
<PAGE>
or entitled to receive payment of any dividend or other distribution or
allotment of any rights in respect of any change, conversion or exchange of
stock, or for the purpose of any other lawful action. Such record date shall not
be more than 60 nor less than 10 days before the date of such meeting, nor more
than 60 days prior to any other action to which such record date relates.
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day before the day on which notice is given, or, if
notice is waived, at the close of business on the day before the day on which
the meeting is held. The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors is necessary, shall be the day on which the
first written consent is expressed. The record date for determining
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating to such purpose.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
ARTICLE 5 - Indemnification
---------------------------
5.1 Indemnification in Actions, Suits or Proceedings Other Than Those by
--------------------------------------------------------------------
or in the Right of the Company. (a) The Company shall indemnify any person who
- ------------------------------
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding (whether civil, criminal, administrative
or investigative) by reason of the fact that such person is or was a director or
officer of the Company, or is or was serving at the request of the Company as a
director or officer of another Company, partnership, joint venture, trust,
employee benefit plan or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, if such person acted in good faith and in a manner which such person
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe that such conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
---- ----------
presumption that the person did not act in good faith and in a manner which such
person reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had reasonable
cause to believe that such conduct was unlawful.
(b) The Company may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding (whether civil, criminal, administrative or investigative) by
reason of the fact that such person is or was an employee or agent of the
Company, or is or was serving at the request of the Company as an employee or
agent of another Company, partnership, joint venture, trust, employee benefit
plan or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts
-14-
<PAGE>
paid in settlement actually and reasonably incurred by such person in connection
with such action, suit or proceeding, if such person acted in good faith and in
a manner which such person reasonably believed to be in or not opposed to the
best interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that such conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
---- ----------
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that such conduct was
unlawful.
5.2 Indemnification in Actions, Suits or Proceedings by or in the Right of
----------------------------------------------------------------------
the Company. (a) The Company shall indemnify any person who was or is a party
- -----------
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding by or in the right of the Company to procure a
judgment in its favor by reason of the fact that such person is or was a
director or officer of the Company, or is or was serving at the request of the
Company as a director of officer of another Company, partnership, joint venture,
trust, employee benefit plan or other enterprise, against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit if such person acted in
good faith and in a manner which such person reasonably believed to be in or not
opposed to the best interest of the Company. No such indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Company unless and only to the extent that the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which such court shall deem proper.
(b) The Company may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding by or in the right of the Company to procure a judgment in
its favor by reason of the fact that such person is or was an employee or agent
of the Company, or is or was serving at the request of the Company as an
employee or agent of another Company, partnership, joint venture, trust,
employee benefit plan or other enterprise, against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit if such person acted in
good faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the Company. No such indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Company unless and only to the extent that the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which such court shall deem proper.
5.3 Authorization of Indemnification. Any indemnification under this
--------------------------------
Article 5 shall be made by the Company only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because such person or persons have met the
applicable standard of conduct set forth in Sections 5.1 and
-15-
<PAGE>
5.2 hereof. Such determination shall be made (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (2) if there are no such directors, or if such directors
so direct, by independent legal counsel in a written opinion, or (3) by the
stockholders.
5.4 Advancement of Expenses. The Company may advance expenses (including
-----------------------
attorneys' fees) incurred by a director or officer in advance of the final
disposition of such action, suit or proceeding upon the receipt of an
undertaking by or on behalf of the director of officer to repay such amount if
it shall ultimately be determined that such director or officer is not entitled
to indemnification. The Company may advance expenses (including attorneys'
fees) incurred by an employee or agent in advance of the final disposition of
such action, suit or proceeding upon such terms and conditions, if any, as the
Board of Directors deems appropriate.
5.5 Claims. If a claim for indemnification or payment of expenses under
------
this Article 5 is not paid with 60 days after a written claim therefor is
received by the Company, the claimant may recover the unpaid amount of such
claim and, if successful in whole or in part, shall be entitled to be paid the
expense of prosecuting the claim. In any such action, the Company shall have
the burden of proving that the claimant was not entitled to the requested
indemnification or payment of expenses under applicable law.
5.6 Insurance. The Company shall have power to purchase and maintain
---------
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Company as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the Company would have the power to indemnify him against
such liability under the provisions of this Article.
ARTICLE 6 - General Provisions
------------------------------
6.1 Fiscal Year. Except as from time to time otherwise designated by the
------------
Board of Directors, the fiscal year of the Company shall begin on the first day
of January in each year and end on the last day of December in each year.
6.2 Corporate Seal. The corporate seal shall be in such form as shall be
---------------
approved by the Board of Directors.
6.3 Waiver of Notice. Whenever any notice whatsoever is required to be
-----------------
given by law, by the Certificate of Incorporation or by these By-Laws, a waiver
of such notice either in writing signed by the person entitled to such notice or
such person's duly authorized attorney, or by telegraph, cable or any other
available method, whether before, at or after the time stated in such waiver, or
the appearance of such person or persons at such meeting in person or by proxy,
shall be deemed equivalent to such notice.
6.4 Voting of Securities. Except as the directors may otherwise
---------------------
designate, the President or Treasurer may waive notice of, and act as, or
appoint any person or persons to act
-16-
<PAGE>
as, proxy or attorney-in-fact for this Company (with or without power of
substitution) at, any meeting of stockholders or shareholders of any other
Company or organization, the securities of which may be held by this Company.
6.5 Evidence of Authority. A certificate by the Secretary, or an
----------------------
Assistant Secretary, or a temporary Secretary as to any action taken by the
stockholders, directors, a committee or any officer or representative of the
Company shall as to all persons who rely on the certificate in good faith be
conclusive evidence of such action.
6.6 Certificate of Incorporation. All references in these By-Laws to the
-----------------------------
Certificate of Incorporation shall be deemed to refer to the Certificate of
Incorporation of the Company, as amended and in effect from time to time.
6.7 Transactions with Interested Parties. No contract or transaction
-------------------------------------
between the Company and one or more of the directors or officers, or between the
Company and any other Company, partnership, association, another organization in
which one or more of the directors or officers are directors or officers, or
have a financial interest, shall be void or voidable solely for this reason, or
solely because the director or officer is present at or participates in the
meeting of the Board of Directors or a committee of the Board of Directors which
authorizes the contract or transaction or solely because his or their votes are
counted for such purpose, if:
(1) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board or committee
in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors,
even though the disinterested directors be less than a quorum;
(2) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the
stockholders; or
(3) The contract or transaction is fair as to the Company as of the
time it is authorized, approved or, ratified, by the Board of
Directors, a committee of the Board of Directors, or the
stockholders.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
6.8 Severability. Any determination that any provision of these By-Laws
-------------
is for any reason inapplicable, illegal or ineffective shall not affect or
invalidate any other provision of these By-Laws.
-17-
<PAGE>
6.9 Pronouns. All pronouns used in these By-Laws shall be deemed to refer
---------
to the masculine, feminine or neuter, singular or plural, as the identity of the
person or persons may require.
ARTICLE 7 - Amendments
----------------------
7.1 By the Board of Directors. These By-Laws may be altered, amended or
--------------------------
repealed or new by-laws may be adopted by the affirmative vote of a majority of
the directors present at any regular or special meeting of the Board of
Directors at which a quorum is present.
7.2 By the Stockholders. These By-Laws may be altered, amended or
--------------------
repealed or new by-laws may be adopted by the affirmative vote of the holders of
a majority of the shares of the capital stock of the Company issued and
outstanding and entitled to vote at any regular meeting of stockholders, or at
any special meeting of stockholders, provided notice of such alteration,
amendment, repeal or adoption of new by-laws shall have been stated in the
notice of such special meeting. Notwithstanding the foregoing, the affirmative
vote of the holders of at least 66-2/3% of the outstanding stock shall be
required to alter, amend or repeal Sections 2.2 and 2.3 of Article 2.
-18-
<PAGE>
Exhibit 4.1
COMMON STOCK COMMON STOCK
NUMBER [AUDIBLE LOGO] SHARES
INCORPORATED UNDER THE LAWS SEE REVERSE FOR
OF THE STATE OF DELAWARE CERTAIN DEFINITIONS
AUDIBLE, INC.
CUSIP __________
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, $.01 PAR VALUE, OF
AUDIBLE, INC.
(hereinafter called the Corporation), transferable on the books of the
Corporation by the holder hereof in person or by duly authorized attorney upon
surrender of this certificate properly endorsed.
This certificate is not valid until countersigned and registered by the
Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
AUDIBLE, INC.
DELAWARE
1999 SEAL]
/s/ ANDREW J. HUFFMAN /s/ DONALD KATZ
PRESIDENT SECRETARY
COUNTERSIGNED AND REGISTERED:
(NEW YORK, NEW YORK)
TRANSFER AGENT
AND REGISTRAR
AUTHORIZED SIGNATURE
AUDIBLE, INC.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<PAGE>
TEN COM- as tenants in common UNIF GIFT MIN ACT-
_________________Custodian______________
TEN ENT- as tenants by the entireties
(Cust) (Minor)
JT TEN- as joint tenants with
right of survivorship and
under Uniform Gifts to Minors Act
not as tenants in common
--
- --------------------------------------
(State)
Additional abbreviations may also be used though not in the above list.
For Value received, _________________________________hereby sell, assign
and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- ------------------------------------------------------------------------------
________________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE
________________________________________________________________________________
__________________________________________________________________________Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint __________________________________Attorney to
transfer the said stock on the books of the within-named Corporation with full
power of substitution in the premises.
Dated,________________________ X________________________________________________
X________________________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE
FACE OF THE CERTIFICATE, IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE
WHATSOEVER.
SIGNATURE GUARANTEED:___________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
<PAGE>
EXHIBIT 10.1
A G R E E M E N T
(As Amended)
This Agreement (this "Agreement") is entered into as of November 4, 1998,
(the "Effective Date"), as amended, April 22, 1999, by and between MICROSOFT
CORPORATION, a Washington corporation with principal offices at One Microsoft
Way, Redmond, Washington 98052 (hereinafter "Microsoft"), and AUDIBLE, INC., a
Delaware corporation with principal offices at 65 Willowbrook Boulevard, Wayne,
New Jersey 07040 (hereinafter "Audible").
WHEREAS, Audible is the creator and provider of an Internet-based service
that permits customers to use a computer with an Internet browser to select and
download spoken word audio files consisting of licensed and original literary,
business, and entertainment works and other types of spoken word information in
a secure Audible-proprietary file format, via the World Wide Web (currently
using the URL "http://www.audible.com"), and to play back such Content using
Audible's proprietary software or transfer to other devices (such as the Audible
Mobile Player) for portable playback;
WHEREAS, Microsoft develops, markets and licenses computer software,
including operating systems software and applications;
WHEREAS, Audible and Microsoft both desire for Audible to undertake certain
development work with respect to Audible's proprietary software, pursuant to the
terms and conditions of this Agreement;
WHEREAS, Microsoft desires to license the versions of Audible's software
developed pursuant to this Agreement for inclusion in certain Microsoft
products, and Audible desires to license said software to Microsoft, pursuant to
the terms and conditions of this Agreement;
WHEREAS, Audible and Microsoft both desire that Microsoft shall become an
authorized distributor of said software pursuant to the terms and conditions of
this Agreement; and
WHEREAS, Audible and Microsoft desire to work together to integrate
Audible's Content portfolio and security technology to operate with hardware and
software designed by or for Microsoft for "electronic books" capable of visually
displaying text and simultaneously delivering an audio reading of the displayed
text.
NOW THEREFORE, in consideration of the premises stated above, the mutual
covenants of the parties and other good and valuable consideration the receipt
and sufficiency of which is hereby acknowledged, the parties agree as follows:
DEFINITIONS
-----------
For purposes of this Agreement, in addition to the capitalized terms
defined elsewhere herein, the following terms shall have the meanings described
below:
<PAGE>
Affiliate means (a) an entity that controls, is controlled by, or is under
---------
common control with a party; or (b) an entity that shall purchase or succeed to
all or substantially all of the assets of that party. "Control" means
ownership, directly or indirectly, of more than fifty percent (50%) of the
outstanding shares or securities (representing the right to vote for the
election of directors or other managing authority), or if the entity does not
have outstanding shares or securities, as may be the case in a partnership,
joint venture or unincorporated association, "control" means more than fifty
percent (50%) of the ownership interest representing the right to make the
decisions for such corporation, company or other entity. A corporation, company
or other entity shall be deemed to be an Affiliate only so long as such control.
ASF means Microsoft's Active Streaming Format version 1.0.
---
Audible Software for Windows CE means the version of the Client Software to
-------------------------------
be developed by Audible under Section 1.2 of this Agreement to run on Windows CE
enabling playback of audio content, and which is capable of running as a
component of Windows CE for the Palm-size PC and Windows CE for the AutoPC. The
Audible Software for Windows CE shall include reasonable documentation for such
software, including complete source code and design documentation.
audible.com means the Internet-based service controlled or sponsored by
-----------
Audible which permits customers to use a computer with an Internet browser to
select, download and license copies of Content, for pay, in an Audible-
proprietary file format, via a World Wide Web site currently using the URL
"http://www.audible.com"
Audible Media Player Filter means a Direct Show filter to be developed by
---------------------------
Audible under Section 1.1 of this Agreement to enable the Windows Media Player
on Windows and current Windows NT platforms to access the Content. The Audible
Media Player Filter shall include reasonable documentation for such software,
including complete source code and design documentation.
Audible Mobile Players means the portable playback device available to End
----------------------
Users from Audible for the purpose of downloading Content and playing it under
certain terms and conditions promulgated by Audible.
AudibleReady means the "AudibleReady" mark adopted by Audible to signify
------------
that designated equipment and software may be used to access Audible's Content,
which designated equipment and software must meet the standards promulgated by
Audible.
Windows CE for the AutoPC means the version of Windows CE, including the
-------------------------
user interface and associated applications, developed by Microsoft for a
computing device designed for use specifically in vehicles such as automobiles.
Client Software means Audible's proprietary software that is used as of the
---------------
Effective Date to download and play back the Content.
_____________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
-2-
<PAGE>
CODEC means the software implementation of a compressor/decompressor
-----
algorithm, which enables computing devices to play audio stored in a compatible
compression format.
Confidential Information shall have the meaning set forth in the Non-
------------------------
Disclosure Agreement referenced in Section 15.1.
Content means Spoken Word Audio files consisting of licensed and original
-------
literary, business, and entertainment works and other types of spoken word
information which Audible has the right to distribute via the World Wide Web to
be accessed by computing devices.
Content Payments means (a) payments made by Audible to third parties for
----------------
the use or licensing or other distribution rights for specific Content items
whether (i) calculated on the basis of usage of the specific Content items, or
(ii) on the basis of a flat fee, advance or other sum not derived from usage of
the Content, which shall be attributable to specific items within the Content on
an amortized basis over a reasonable period of time, and (b) costs incurred by
Audible in the creation of original Content directly or through its agents and
contractors.
Customized Software means the Audible Media Player Filter, the Audible
-------------------
Software for Windows CE, and any other software developed by Audible as a result
of or in connection with the Development Work.
Dedicated Reading Machines means a new class of hardware devices under
--------------------------
development by Microsoft and its development partners and by other third parties
that both (a) are designed and marketed to be used mainly for the purpose of
both reading text from and listening to spoken word audio and (b) are capable of
simultaneously displaying the text that corresponds with the audio that is
playing, provided that neither (i) personal computers (PCs), laptop computers
and general-purpose Windows CE based devices which are primarily designed for
other purposes, nor (ii) audio-only devices, such as the Audible Mobile Player,
shall qualify as Dedicated Reading Machines even if such devices satisfy the
requirements of (a) and (b) above.
Development Work means the work to be performed by Audible and its agents
----------------
under Section 1 of this Agreement.
End User means a current or prospective customer to whom Audible or its
--------
distributors offer to license Content for such customer's own use and not for
resale or redistribution.
First Option Payment means the sum of One Million Five Hundred Thousand
--------------------
Dollars to be paid by Microsoft to Audible under Section 7.1 of this Agreement.
Gross Content Revenue means the amount of actual gross cash receipts
---------------------
derived by Audible from the licensing of Content by Audible to End Users who
access the Content through a version of the Customized Software distributed
directly or indirectly by Microsoft.
Integrated E-book Title means a single file that contains both text and
-----------------------
audio renditions of the same work and is readable by a Dedicated Reading
Machine.
_____________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
-3-
<PAGE>
Integration means the combination of a version of the Customized Software with
-----------
Microsoft Products for distribution by Microsoft as permitted under this
Agreement.
Intellectual Property means any copyrights, moral rights, maskworks, patents
---------------------
(including patent improvements), patent applications, patent rights, trade
secrets, trademarks, trade names, service marks or other intellectual property
rights under applicable law of any applicable country.
Manager shall mean someone in the management chain of the applicable party who
-------
is a senior executive in terms of responsibility, and who is familiar with the
administration of this Agreement.
Microsoft Products means computer hardware and/or software products developed,
------------------
licensed, and/or marketed by or for Microsoft.
Net Content Revenue means the Gross Content Revenues, less (a) any Content
-------------------
Payments, (b) Revenue Sharing Payments, (c) sales or use taxes, excise taxes,
value-added taxes, and duties, and (d) any payments made by Audible to Microsoft
for digital rights management, in each case attributable to the licensing of
Content by Audible to End Users who access the Content through a Microsoft-
distributed version of the Customized Software.
Windows NT Media Services means Microsoft's computer software currently titled
-------------------------
"Windows NT Media Services" and its successors, which enables computer servers
to distribute streaming audio and video.
NRE Expenditures means the costs incurred by Audible in connection with
----------------
Audible's development work pursuant to Sections 1.2, 1.3 and 1.4(a)(i) of this
Agreement which shall consist of (a) the time spent by individuals on behalf of
Audible in performing the work at a reasonable labor charge, including any
overtime compensation and including direct program management, (b) an allocation
for Audible's administrative expenses attributable to the implementation and
management of the work, fixed at [* * *]% of labor charges under subsection (a),
(c) the cost of calls, faxes, copying, media, meals and local transportation
outside of regular business hours, and other third party charges incurred by
Audible in relation to the work, (d) the cost of materials, equipment, supplies,
and licenses directly used in connection with the work, (e) reasonable travel
and living expenses of Audible's staff and agents when away from their normal
place of business to perform the work, and (f) other reasonable expenses
incurred by Audible directly to perform the work.
OEMs means Microsoft-approved original equipment manufacturers of computing
----
equipment distributed with Microsoft Products.
Windows CE for Palm-size PC means the version of Windows CE, including the
-------------- ------------
user interface and associated applications, developed by Microsoft for a palm
size computing device.
Plus! means Microsoft's collection of add-on software applications for
-----
Microsoft's Windows 98 operating system and/or Microsoft's Windows NT 5.x
operating system.
_____________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
-4-
<PAGE>
Revenue Sharing Payments means payments (other than Content Payments)
------------------------
made by Audible to third parties with respect to obtaining distribution rights,
OEM rights, promotion, and licensing of Client Software and Content in
conjunction with Microsoft Products.
Sample Windows Media Content means five sample titles or portions of
----------------------------
titles of non-secured promotional Content of Audible's choice in the ASF format
compatible with Windows NT Media Services to be provided by Audible on
audible.com for access and use by End Users.
Secure or secured means encrypted or protected by any other method
-----------------
designed to prevent unauthorized use.
Spoken Word Audio means recorded or broadcast spoken word audio content for
-----------------
sale in the form of audio book distribution, text based audio programming, time
shifted conference proceedings, soundtracks from television broadcasts, audio
business programming, and/or time shifted radio distribution.
SiteBuilder Network means Microsoft's web-based information service to
-------------------
assist web developers located at the URL www.microsoft.com/sitebuilder.
Term means an initial period of five years from the Effective Date and any
----
renewals and extensions of this Agreement.
Update shall mean a significant error correction, maintenance release,
------
major upgrade, improvement, extension and successor or replacement version of a
computer software product. Updates shall be in source code and object code form.
Windows 9x means Microsoft Windows 95 and 98 operating systems.
----------
Windows CE means the 32 bit operating system and successor versions,
----------
designed for use with embedded, portable and mobile computing devices and
designated by Microsoft as the Windows CE operating system.
Windows Media Player means Microsoft's software for the playback of
--------------------
streaming media on Windows 9x and Windows NT-based computers.
Windows NT means Microsoft's Windows NT operating systems for workstations.
----------
1. INTEGRATION OF PRODUCTS - AUDIBLE'S ROLE
----------------------------------------
1.1 The Media Player. Audible, with the assistance and development tools
----------------
from Microsoft described in Article 2 below, shall develop the Audible Media
Player Filter. As part of that effort, Audible shall:
a. develop the Audible Media Player Filter in accordance with written
specifications mutually agreed to by both parties and consistent with
Windows Media Player APIs to download and securely play back Audible
Content on Windows and Windows NT desktops; and
_____________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
-5-
<PAGE>
b. create an HTML-based web page that will, when accessed by a user
of Windows Media Player dynamically assemble an application from Microsoft-
provided components and other software components, which application, when
combined with the Audible Media Player Filter and other required user
interface elements, facilitates Windows Media Player-based playback of
Content. Audible shall use and make secure one or more Microsoft-provided
CODECs, as necessary to decode the Audible Content using the Windows Media
Player through the Web page described in the preceding sentence.
1.2. The Windows CE Platform. Audible, with the assistance and
-----------------------
development tools from Microsoft described in Article 2 below, shall develop the
Audible Software for Windows CE in accordance with written specifications
mutually agreed to by both parties. The Audible Software for Windows CE shall
initially be designed for Windows CE for the Palm-size PC and Windows CE for the
AutoPC. Other versions of Windows CE may be added to this Development Work as
determined by mutual written agreement of Microsoft and Audible, including
agreement regarding any compensation to be paid to Audible for its additional
development effort.
1.3. Synchronize Sound With Text. Audible shall exercise reasonable
---------------------------
efforts, jointly with Microsoft, to evaluate and implement the use of the ASF
file format, or such other formats as agreed to by the parties, to synchronize
sound content with text for use in then-current versions of Windows 9x, Windows
NT and Windows CE. Prior to commencement of Development Work under this Section
1.4, the parties shall agree to a reasonable project statement that will guide
the direction and scope of the efforts. The parties expect that this project
will result in a design document, a specification, and finally an implementation
of the specification, all of which shall be owned by Microsoft (except that any
Intellectual Property of Audible, preexisting as of the commencement of
Development Work under Section 1.3 or created by Audible outside of any
development work for Microsoft, applied in the performance of the work shall
continue to be the property of Audible for all purposes and shall only be deemed
licensed to Microsoft for the purposes of using the work product created under
this Section).
1.4. The Electronic Book Platform. (a) Within [* * *] days of Microsoft
----------------------------
requesting a port and providing file format specifications Audible shall port
Content from Audible's portfolio that Audible has rights to port:
(i) to the ASF file format or, in the alternative, to any such
single file format that Microsoft reasonably determines to utilize for
Electronic Books content;
(ii) at Microsoft's request, to other file formats, provided
Microsoft and Audible shall first agree upon reasonable compensation and
terms for Audible performing such work; and
(iii) at Microsoft's request, to future versions of the ASF file
format released during the Term as mutually agreed to by the parties and,
if mutually agreed, subject to
_____________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
-6-
<PAGE>
Microsoft's payment of reasonable amounts to Audible to reimburse the costs
of porting to such future versions;
In any case stated in (i), (ii) or (iii), as long as such file format reasonably
provides adequate security for Audible's Content and generally meets Audible's
business and technical needs, Audible shall port as much of its Content
portfolio as Microsoft requests and for which Microsoft agrees to pay NRE
Expenditures pursuant to Section 8.3. Audible shall offer such ported Content
to End Users on substantially similar terms and conditions, and through
substantially similar distribution channels (including without limitation
audible.com), as Audible offers its other Content to End Users. If Audible
determines in good faith that, given then-existing Audible resources, the
Microsoft requested porting cannot be finished in [* * * ] days, then parties
will discuss in good faith whether Microsoft will fund the acquisition of
additional resources as part of the NRE Expenditure reimbursement, or whether
the parties will extend the period for completing the porting.
(b) Audible shall have no obligation to commence any Development Work
under this Section 1.4 until such time as Microsoft has selected the file format
under Section 1.4(a)(i) and provided Audible with specifications for the
selected file format.
1.5. API Specifications. The Development Work under Section 1.1 shall be
------------------
consistent with Microsoft's Windows Media Player API specification.
1.6 Audible Branding. Audible shall, in a manner to be mutually agreed by
----------------
the parties and in compliance with Section 5.3(d) below, include Audible
branding and promotional information in the Development Work under Sections 1.1
and 1.2.
1.7 Implementation Schedule. Time is of the essence in the performance of
-----------------------
both parties under this Agreement. Audible's timely progress in the Development
Work depends on the timely performance of Microsoft's obligations under this
Agreement.
1.8 Media Player Timing. Audible shall release to the public from
-------------------
audible.com the Audible Media Player Filter for Windows 98 and Windows NT 4.0,
as set forth in this Agreement, no later than the last to occur of (a) [* * *]
days after Audible releases similar software for any product or technology
competitive with the Windows Media Player, or (b) [* * *] days after the
commercial release of the Windows Media Player for Windows 98 and Windows NT
4.0.
1.9 Audible Software for Windows CE Timing. Audible shall provide to
--------------------------------------
Microsoft the Audible Software for Windows CE, as set forth in this Agreement,
on a time schedule indicated by Microsoft and agreed by Audible as necessary for
required testing and modification to be included in the commercial release of
Windows CE for Palm-sized PC device and the AutoPC.
1.10 Non-Exclusivity. Subject to Section 9 below, the Development Work
---------------
will be performed by Audible on a non-exclusive basis and shall not affect the
right of Audible to perform research and development efforts for others or on
its own behalf with respect to the same
_____________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
-7-
<PAGE>
or similar technologies as are the subject of this Agreement, provided that
Audible shall take necessary steps to ensure that no Microsoft Intellectual
Property is used or made available in connection with such other research or
development efforts (unless such Intellectual Property is otherwise licensed for
the use). Except as stated in Sections 7.1, 9, and 16, Audible shall have the
right to use, reproduce, modify and distribute, in its discretion, derivatives
of the Development Work and to use, make, license and sell products based
thereon, during and after the Term of this Agreement. This shall include the
right to permit the installation of the Customized Software or any portion
thereof as an OEM and an after-market product for Windows-based equipment.
Except as otherwise expressly provided herein, this Agreement does not grant to
Microsoft any right or interest in and to any future developments by or on
behalf of Audible or any new products and services offered by Audible.
1.11 Representatives; Meeting. Audible hereby agrees to have at least one
------------------------
Manager designated as the primary contact person on its behalf for matters
relating to this Agreement and its implementation. Audible hereby further
agrees that, at least semi-annually, during the period commencing on the
Effective Date and ending on the termination or expiration of the Term, upon the
written notice by Microsoft, it will meet, at a mutually agreeable time and
location, to confidentially discuss the progress of work under this Agreement,
product trends, implementation issues, areas of collaboration, and other related
items. Audible will bear its own expenses regarding such meetings.
1.12 Sample Windows Media Content. Audible shall create the Sample
----------------------------
Windows Media Content in accordance with written technical specifications
approved in advance by Microsoft, and shall deliver the Sample Windows Media
Content as provided in Section 5.1.
2. INTEGRATION OF PRODUCTS - MICROSOFT'S ROLE
------------------------------------------
2.1. The Media Player. In connection with Audible's Development Work
----------------
under Section 1.1 above, Microsoft shall provide (as an express condition of
such Audible Development Work) [* * *], reasonable design and technical
assistance and development tools to Audible for use solely in connection with
the development of the Audible Media Player Filter for Windows 9x and Windows
NT.
2.2. The Windows CE Platform. In connection with Audible's Development
-----------------------
Work under Section 1.2 above, Microsoft shall provide (as an express condition
of such Audible Development Work) [* * *], reasonable design and technical
assistance and development tools to Audible for use solely in connection with
development of the Audible Software for Windows CE for Windows CE for Palm-size
PC and Windows CE for AutoPC and such other Windows CE-based platforms as
Microsoft and Audible may determine.
2.3. The Electronic Book Platform. In connection with Audible's
----------------------------
development obligations under Sections 1.3 and 1.4 above, Microsoft shall
provide (as an express condition of such Audible Development Work) [* * *],
reasonable design and technical assistance and development tools for use solely
in connection with synchronization of sound with text under Section 1.3 and
porting Content under Section 1.4. Without limitation to the foregoing,
_____________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
-8-
<PAGE>
Microsoft shall, with Audible's assistance, specify the interfaces, APIs, and
other technical specifications necessary to synchronize Content with text
content.
2.4. Other Software. In connection with all Development Work, Microsoft
--------------
shall provide, [* * * ], the Microsoft retail packaged software product set
forth in Exhibit D.
2.5 Test Equipment. Microsoft shall provide to Audible [* * *], to the
--------------
extent available, production models of Auto PC and Palm-sized PC devices for use
to implement the Development Work.
2.6 Representatives; Meeting. Microsoft hereby agrees to have at least
------------------------
one Manager designated as the primary contact person on its behalf for matters
relating to this Agreement and its implementation. Microsoft hereby further
agrees that, at least semi-annually, during the period commencing on the
Effective Date and ending on the termination or expiration of the Term, upon the
written notice by Audible, it will meet, at a mutually agreeable time and
location, to confidentiality discuss the progress of work under this Agreement,
product trends, implementation issues, areas of collaboration, and other related
items. Microsoft party will bear its own expenses regarding such meetings.
2.7 Non-exclusive Relationship. Except as explicitly provided in
--------------------------
Sections 7.1, 9 and 16 (as applicable), nothing in this Agreement will be
construed as restricting Microsoft's or Audible's ability to acquire, license,
develop, manufacture or distribute for itself, or have others acquire, license,
develop, manufacture or distribute for it, similar technology performing the
same or similar functions as the technology contemplated by this Agreement, or
to market and distribute such similar technology in addition to the technology
contemplated by this Agreement.
3. TEST, ACCEPTANCE, UPDATES, AND MAINTENANCE
------------------------------------------
3.1 Testing. Microsoft shall evaluate the final version of each item of
-------
Customized Software and shall submit a written acceptance or rejection to
Audible within [* * *] days after Microsoft's receipt of each such item.
Acceptance shall be in writing, and Microsoft shall not unreasonably withhold or
delay its acceptance.
(a) If Microsoft identifies and documents for Audible errors in the
Development Work during the [* * *] period prior to acceptance, then
Audible shall acknowledge each severity one (critical) error within [* *
*], and correct any substantial or material error within the time specified
in Exhibit C.
(b) If Audible fails to make any error corrections discovered before
acceptance in the correction period specified herein, then Microsoft may,
at its option: (i) accept and retain the Development Work with rights as
set forth in Section 4.1; (ii) extend the correction period; or (iii) only
with respect to the initial delivery of each component of the Customized
Software, terminate this Agreement upon written notice to Audible, with
effects after termination as set forth in Section 14.
_____________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
-9-
<PAGE>
Notwithstanding the above, the individual components of the Development
Work shall be deemed accepted upon commercial distribution of the component in
question, and upon completion of the [* * *] period stated above without any
report of errors. Errors shall mean failure of the deliverable to comply in a
substantial or material way with the agreed upon specifications.
3.2 Updates. During the term of this Agreement, whenever Audible creates
-------
an Update to the functionality of the Client Software that is related to the
Audible Software for Windows CE, Audible shall create a corresponding Update to
the Audible Software for Windows CE and deliver such Audible Software for
Windows CE Update to Microsoft no later than first commercial release of such
Client Software Update. In order to facilitate the simultaneous release of any
particular Client Software Update and the corresponding Audible Software for
Windows CE Update, Audible will cooperate with Microsoft in the development of
such Updates (including, by way of example, providing development assistance and
information on such Updates). Upon receipt of any Update, Microsoft shall
review and test the Update pursuant to Section 3.1. Upon Microsoft's acceptance
of any Update, such Update shall be deemed to be part of the Audible Software
for Windows CE for all purposes of this Agreement. If Microsoft secures
unrestricted source code rights by exercising its option under Section
4.1(d)(ii), and if Microsoft then creates a derivative work of the Audible
Software for Windows CE with substantially similar functionality but which is
not enabled to access Audible Content, or in which access to Audible Content is
afforded less than a parity position when compared to any other Spoken Word
Audio, then Audible shall have the right, upon written notice to Microsoft, to
discontinue its obligation to provide Updates to Microsoft under this Section
3.2.
3.3 Ongoing Assistance. Throughout the term, upon Microsoft's request,
------------------
Audible shall provide reasonable error correction and development assistance
with respect to the Customized Software and derivative works that permit
playback of Audible Content.
4. GRANT OF LICENSES
-----------------
4.1. Audible License Grant. (a) Subject to the terms and conditions of
---------------------
this Agreement and the payment of all required fees, Audible hereby grants to
Microsoft a [* * *] license as to the Customized Software, to:
(i) use, reproduce, distribute, import, transmit, broadcast, publicly
perform and display, license, rent, lease and sell in object code form the
Customized Software, as a component of Microsoft Products or on a stand-
alone basis for use with such Microsoft Products;
(ii) use, make modify and create derivative works of the Audible Software
for Windows CE and the Audible Media Player Filter in source code form, and
to distribute such modifications and derivative works pursuant to
subsection (i); and
(iii) to grant to third parties any and all of the foregoing rights under
(i), including the right to license such rights to further third parties.
_____________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
-10-
<PAGE>
(b) Notwithstanding the above, the license granted by Audible to Microsoft
under this Section 4.1 shall not include rights to components of the Client
Software which are licensed by third parties to Audible as follows: [* * *].
Audible hereby agrees that, under the direction of Microsoft and pursuant to
third-party license rights to be obtained by Microsoft for those third-party
components, Audible will provide to Microsoft assistance to integrate those
licensed components into the Customized Software as required. Audible shall
remove from each delivery of Customized Software all software code that Audible
excludes from its license pursuant to this Section 4.1(b).
(c) Source Code License. The license to use source code and related
-------------------
documentation (collectively, the "source code") for the Customized Software as
stated in Section 4.1(a)(i) above shall be subject to the following terms and
conditions. Such source code shall only be used under strict confidentiality
obligations for purposes of:
(i) maintaining, fixing and enhancing the Customized Software for
integration with Microsoft Products, while maintaining substantially similar
functionality of the Customized Software, and
(ii) meeting Microsoft's contractual obligations to third-party
licensees who have a right to request and receive the source code of Microsoft
Products, in which case such disclosure shall be pursuant to the same terms and
conditions applicable to disclosure of the source code of Microsoft's own
programs,
(d) Notwithstanding the foregoing, Microsoft may exercise the license
rights granted hereunder in source code for the Audible Software for Windows CE
free of the scope of use restrictions stated in Section 4.1(c)(i) and (ii), if
and only if: (i) Audible Software for Windows CE is included in a commercial
release of Windows CE for Palm-top devices or AutoPC as a standard module of
such release's functionality and direct successor versions commercially released
for a period of five (5) years, and for so long as Microsoft continues to
promote and enable access to Audible Content via such derivative works for
Audible Software for Windows CE in such versions of Windows CE, or (ii)
Microsoft pays Audible a mutually agreed, one-time license fee [* * *].
(e) Microsoft's obligation to "promote Audible Content" as used in Section
4(d)(i) shall, at a minimum, consist of the following:
(i) Should software that allows browsing of the Internet be included
in the operating system for Windows CE for Palm-top devices or AutoPC, and
should such browsing software have a "Favorites" folder which includes default
URLs for sites other than Microsoft sites, the URL for audible.com shall be
included as a default URL in such "Favorites" folder; and
(ii) The obligation regarding promotion and branding set forth in
Section 5.3.
_____________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
-11-
<PAGE>
(f) Microsoft hereby agrees that the source code and any copies thereof,
as well as all modifications and improvements made to the source code by or for
Audible, are and remain the sole and exclusive property of Audible.
Notwithstanding the foregoing sentence, all modifications, enhancements, and
improvements made to the source code by or for Microsoft shall be the sole and
exclusive property of Microsoft. Microsoft agrees that the source code may not
be used to support a service bureau operation or for the benefit of any party
other than Microsoft or its sublicensees or assignees as allowed herein.
Furthermore, Microsoft agrees it shall only make reasonable number of copies of
the source code in accordance with Microsoft customary product development
practices. Microsoft agrees that it will not (and it will not allow others to)
alter or remove any copyright, trade secret, patent, proprietary and/or other
legal notices contained on or in copies of the source.
4.2 The license rights under Section 4.1 shall be perpetual pursuant to
the terms of this Agreement, provided that this Agreement is not terminated by
Microsoft pursuant to Section 3.1(b) prior to acceptance of any Customized
Software, or by Audible due to the default of Microsoft under the provisions of
this Agreement. (For avoidance of doubt, if Microsoft does not accept only one
of either the Audible Media Player Software or the Audible Software for Windows
CE, then Microsoft's license shall survive only with respect to the accepted
software.) If Microsoft terminates this Agreement pursuant to Section 3.1(b)
without accepting any Customized Software, the license shall terminate upon
termination of this Agreement. If Microsoft has not secured unrestricted source
code rights pursuant to Section 4.1(d)(ii), the license shall terminate with
respect to each Microsoft Product upon the release of a major new version of
said Microsoft Product (i.e., a product with a higher version number to the left
of the decimal point) at least six (6) months after termination of this
Agreement. However, if Microsoft has secured unrestricted source code rights
pursuant to Section 4.1(d)(ii), the license shall continue in perpetuity
pursuant to the terms of this Agreement (without prejudice to Audible's
remedies, other than termination, for Microsoft breach). In any event, existing
sublicenses granted by Microsoft as of the date of notice of termination shall
survive termination for the then-current term of such sublicenses.
4.3 Sublicenses. Sublicenses granted by Microsoft to licensees shall
-----------
comport with the terms of this Agreement and include reasonable terms and
conditions to protect Audible's Intellectual Property and Confidential
Information in the same manner as Microsoft protects its own Intellectual
Property and Confidential Information, and to limit liability to Audible in the
same manner as Microsoft limits its own liability vis a vis the third parties.
4.4 License to Microsoft Data and Software. When Microsoft provides
--------------------------------------
development tools or other software to Audible hereunder, the terms of
Microsoft's standard end user license agreement included therewith shall govern
Audible's use thereof to the extent not inconsistent with the terms hereof.
5. PROMOTION AND DISTRIBUTION OBLIGATIONS
--------------------------------------
5.1 Promotion by Audible. By not later than [* * *] days after beginning
--------------------
the Development Work contemplated in Section 1.4 above, Audible shall provide
the Sample
_____________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
-12-
<PAGE>
Windows Media Content to End Users via a link to audible.com. Audible grants
Microsoft a nonexclusive, worldwide, perpetual, irrevocable license to use,
reproduce, distribute, broadcast, transmit, publicly perform and display,
license, rent, lease and sell the Sample Windows Media Content, and to grant
third parties any or all of the foregoing rights, including the right to grant
further sublicenses. Audible shall make such Sample Windows Media Content
available to users free of charge, subject to the terms and conditions
applicable to End Users' access to the Content and to Audible's right to cancel
or terminate access by an End User to the Content for failure to abide by such
terms and conditions. At the request of Microsoft, Audible shall include in
audible.com in connection with the Sample Windows Media Content a reasonable
amount of Microsoft branding and promotional information, as well as Audible
branding and promotional information.
5.2 Distribution By Microsoft. Microsoft intends to promote and
-------------------------
distribute the Audible Software for Windows CE or derivative works thereof as a
component of a future version of Windows CE for Palm-size PC and a future
version of Windows CE for AutoPC as well as other Windows CE based platforms to
be determined by Microsoft. Furthermore, as long as the Customized Software
meets Microsoft's reasonable quality criteria, Microsoft shall distribute during
the Term the Customized Software, as follows:
a. a version of the Customized Software will be included in a future
release of Plus!, subject to the following conditions: (i) Microsoft has
not finalized plan for future releases of Plus!, and Microsoft reserves the
right to discontinue the product and change its policies regarding the
distribution of third party software within Plus!; and (ii) if Microsoft
continues with future versions of Plus!, Microsoft shall distribute the
free version of the Customized Software in at least one version release of
Plus! (i.e. one version identified by a unique whole number and tenths
digit, such as 2.1 or 2.4). Audible shall make a unique, valuable
commercial promotional offer to Plus! users that will not be available with
any other version of the Customized Software;
b. Microsoft will evaluate other mechanisms to enhance and expand
the distribution of the Customized Software and will consider Audible's
suggestions and recommendations in that regard.
5.3 Promotion by Microsoft. (a) During the Term, Microsoft shall endorse
----------------------
Audible's client/server system, as integrated with Microsoft technologies
pursuant to this Agreement, as a preferred means of publishing and distributing
Spoken Word Audio for Dedicated Reading Machines. Such endorsements shall be
made in press releases and in appropriate consumer messaging on Microsoft web
sites, including but not limited to the website located at the URL
http://www.microsoft.com. Microsoft intends to [* * *]; provided, however, if
Audible should not port its Content as set forth in Section 1.4(a), then
Microsoft is relieved of its obligation to so [* * *].
(b) Microsoft shall promote the Customized Software and the Audible
Content [* * *] on the website located at the URL http://www.microsoft.com. for
a period of [* * *] months after
_____________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
-13-
<PAGE>
release to market of the Customized Software. Microsoft will also provide links
from such location to the Audible web site.
(c) Microsoft shall promote the Audible Media Player Filter and make it
available for download in the SiteBuilder Network, for a period of [* * *]
months after Audible's release to market of the Audible Media Player Filter.
(d) Microsoft will display the following Audible mark(s) in connection
with the distribution of the Customized Software, subject to Audible's
reasonable review of such use for trademark quality control purposes.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
PLAYER BRANDING MARK OR SUCCESSOR MARK UNLESS MS
------ -------- --------------------------------
REASONABLY SUSPECTS SUCCESSOR MARK
----------------------------------
INFRINGES A THIRD PARTY MARK
-----------------------------------
- --------------------------------------------------------------------------------------------------------------------
Audible Media Player Yes in User Interface Audible
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CE Client Yes in CE in User Interface: Yes for Audible
a period of one (1) year from its
initial release date if stand alone
application; in addition, and during
the term of this Agreement, Audible
shall be allowed to place an audio
message in the application that will
announce a brief branding message
(the text of which shall be mutually
agreed upon) upon the application's
launch
Not in User Interface, but Yes in
help section if a standard module of
the OS, and indicating, in a mutually AudibleReady
agreed fashion, Audible as the
default or preferred source for
Spoken Word Audio.
------------------------------------
In Dedicated Reading Machine: Not in AudibleReady
User
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
_____________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
-14-
<PAGE>
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Interface, but yes in help
section
------------------------------------
If Microsoft exercises option to [* * None (except for appropriate
*] license under Section 4.1(d), no copyright notices where other
branding requirement in derivative such copyright notices are
works of the Audible Software for located)
Windows CE (except for appropriate
copyright notices where other such
copyright notices are located).
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(e) In the event Microsoft establishes during the Term a technical
methodology for dynamic upgrades by which existing Windows CE-based hardware
product customers and future customers of Windows CE-based hardware products can
be distributed software in the form of upgrades, Microsoft shall promptly
evaluate the Customized Software for distribution through that mechanism to
customers of the versions of Windows CE in which Microsoft then incorporates the
Customized Software. Additionally, as determined by Microsoft in its sole
discretion, Microsoft may include the Audible Media Player Filter and/or the
Audible Software for Windows CE in any OEM marketing programs established by
Microsoft with respect to the technical methodology for dynamic upgrades.
5.4 Level of Efforts. Microsoft's marketing and promotional efforts in
----------------
regards to Audible shall be [* * *] in Plus! and running on Windows CE.
5.5 Audio-Out Jack Specifications. As soon as reasonably possible after
-----------------------------
the Effective Date and during the Term, Microsoft will issue to OEMs the
specification for audio-out jacks for mobile playback of audio content as an
optional component in appropriate versions of Windows CE-based products that
make use of the Audible Software for Windows CE for playback of Spoken Word
Audio for which an audio subsystem and built-in speaker are required.
5.6 Promotional Materials. During the Term, each party hereby grants to
---------------------
the other the right to create its own promotional materials to be used in its
distribution and promotion of the Customized Software and audible.com. Once
approved, promotional materials may continue to be used until the party
indicates in writing that further use is disapproved, after a reasonable notice
period. All costs associated with the development, production and delivery of
such promotional materials are the responsibility of the party creating the
materials. In addition, each party grants to the other the right to use the
logos and trademarks of the other party which are listed in Exhibit A hereto,
pursuant to usage guidelines as may be provided from time to time, in
_____________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
-15-
<PAGE>
promotional materials created by that party, for as long as this Agreement is in
force, subject to prior review and approval by the trademark owner for trademark
quality control purposes.
5.7 Distribution by Audible. During the term, Audible shall make the
-----------------------
Content available on audible.com such that End Users of the Customized Software
may access and use the Content, in accordance with the audible.com standard
terms and conditions.
6. CONTENT; AUDIBLE MOBILE PLAYERS
-------------------------------
6.1. Expansion Efforts. Audible shall exercise commercially reasonable
-----------------
efforts, to expand its Content in order to support Microsoft's efforts to
provide for a diverse and rich audio offering for its Electronic Books project.
Nothing herein shall be construed as an obligation on the part of Audible to
obtain rights to textual content. Microsoft shall advise and consult with
Audible concerning the acquisition of content that may be relevant to
Microsoft's Electronic Book efforts.
6.2 Purchase of Players. On the Effective Date, Microsoft shall purchase
-------------------
300 Audible Mobile Players at a [* * *], for a total purchase price of $50,000.
6.3 Content Hosting. At Microsoft's option, Audible shall, on financial
---------------
terms agreed to by the parties, produce and/or host Microsoft-specific audio
content on Audible's web site for secure, targeted distribution to the mobile
players described in Section 6.2 above for a fee to be negotiated. Any license
fees required to be paid to third-parties for content that Microsoft wishes to
include in its content package but for which Audible does not have a license,
shall be borne by Microsoft, provided that Audible has advised Microsoft of the
cost and terms for including such Content in advance. Audible shall inform
Microsoft whether Audible has already licensed each item of requested content.
At Microsoft's further option, Audible and Microsoft may negotiate volume
discounts on the licensing of Content for use by Microsoft employees.
6.4 Editorial Control. Audible reserves the right and discretion to
-----------------
determine the information to be available as part of the Content and the
inclusion or deletion of any item as part of Content.
7. ELECTRONIC BOOK LICENSE AND OPTION
----------------------------------
7.1. [ *** ]. In consideration for the payment by Microsoft of the First
-------
Option Payment, Audible grants Microsoft the [* * *] to distribute Client
Software or any other software or hardware permitting End Users to access and
use Content ("Access Technology"), for use in connection with Integrated E-book
Titles or with Dedicated Reading Machines for a period of [* * *] months
commencing on the Effective Date, insofar as Audible [* * *].
7.2 The Option. Audible hereby grants to Microsoft an option to extend
----------
the [* * *] license described in Section 7.1 above, for two further periods,
upon payment of the amounts stated below, as follows:
(a) Months [* * *] - $[* * *], payable no later than the end of month
[* * *];
_____________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
-16-
<PAGE>
(b) Months [* * *] - $[* * *], payable no later than the end of month
[* * *].
7.3 Use of Payments. Audible agrees to use all of the First Option
---------------
Payment and any subsequent option payments made by Microsoft for the purpose of
[* * *], which rights may be used by Microsoft as part of the license granted in
Section 7.1 above, and may also be used by Audible in connection with its
products and services.
7.4 Content for Electronic Books. Audible agrees to grant access through
----------------------------
its proprietary system to Content, in any format offered by Audible, to
Microsoft or distributors designated by Microsoft for integration into
Integrated E-book Titles at no more than [* * *]% of standard list price for
direct sale to End Users. Audible shall use its reasonable efforts to amend
existing contracts or execute new contracts to permit Audible to sublicense the
distribution of Content to Microsoft and its designated distributors as part of
Integrated E-book Titles.
7.5 Limitations. If Microsoft elects not to exercise any specific [* * *]
-----------
option referenced in Section 7.2 above, Microsoft's right to exercise any
subsequent option referred in Section 7.2 shall be waived. Notwithstanding
anything contained herein to the contrary, the rights and options granted
pursuant to this Section 7 shall be subject in all cases to such [ *** ]
restrictions as may be applicable to Audible's underlying rights to use the
Content.
8. FEES AND ROYALTIES
------------------
8.1 Content Sales Royalty. Audible will pay Microsoft a royalty on
---------------------
Content licensed and distributed by Audible to each End User that activates an
Audible account using a version of the Customized Software (or a derivative work
thereof) distributed directly or indirectly by Microsoft as follows:
(a) the greater of [* * *]% of Net Content Revenues or [* * *]% of
Gross Content Revenues for each customer account following its activation;
(b) the greater of [* * *]% of Net Content Revenues or [* * *]% of
Gross Content Revenues for each customer account following its activation
where the Customized Software is burned into ROM in devices running Windows
CE;
(c) except as otherwise stated in subparagraph (d) below, in the case
of other Content licensed to be used with a Dedicated Reading Machines
and/or Integrated E-book Titles, the royalty will be the greater of [* *
*]% of Net Content Revenues or [* * *]% of Gross Content Revenues for each
such customer account following its activation;
(d) for each period that Microsoft chooses to exercise its option to
renew [ *** ] for Dedicated Reading Machines and/or Integrated E-book
Titles pursuant to Section 7 above, royalty payment obligations by Audible
described in Section 8.1(c) above shall be increased as follows:
(i) in months [* * *], to the greater of [* * *]% of Net Content
Revenues or [* * *]% of Gross Content Revenues; and
_____________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
-17-
<PAGE>
(ii) in months [* * *], to the greater of [* * *]% of Net Content
Revenues or [ *** ] of Gross Content Revenues.
8.2 Duration and Payment. In all cases, these royalties will be paid
--------------------
throughout the Term of the Agreement and cease upon the expiration or
termination of the Agreement. Payments of royalties owed by Audible to
Microsoft shall be made on a yearly basis within 30 days of each anniversary
date of the Effective Date, accompanied by documentation for the calculation of
the royalties due.
8.3 Development Payments. Microsoft shall pay Audible a one-time fee in
--------------------
the amount of $200,000 for the project identified in Section 1.2. Microsoft
acknowledges completion of this project and acceptance in February 1999.
Microsoft shall reimburse Audible the amount of its NRE Expenditures up to a sum
not to exceed $[* * *] for each of the projects identified in Section 1.3. Such
NRE funds shall be non-refundable. Audible shall present to Microsoft an
estimate of the expected NRE Expenditures at the commencement of each project
and shall invoice Microsoft for such sums as are actually incurred on a monthly
basis. If parties agree that Audible will do further development work to
improve the integration of the Client Software with Windows generally, or with
Windows CE-based platforms or successor products, including any platforms and
upgrades of such products, or in connection with other development efforts, then
the parties will negotiate in good faith to agree on the appropriate amount of
Microsoft's compensation to Audible for such work.
8.4 Audit Provisions. Audible shall keep records in accordance with
----------------
generally accepted accounting principles and in sufficient detail to permit a
review of the accuracy of royalty payments to Microsoft and cost reimbursements
claimed by Audible under this Agreement. Such records shall be kept for three
years following the payment date for royalties. Upon Microsoft's written
request for an audit, Audible shall permit independent auditors designated by
Microsoft, paid by Microsoft, and approved by Audible, to examine, during
ordinary business hours, records, and materials of Audible for the purpose of
determining royalties due Microsoft or costs requiring reimbursement by
Microsoft and in such a manner as not to interfere with normal business
activities. The auditor will sign a confidentiality agreement and will only
disclose to Microsoft any amounts overpaid or underpaid for the period examined.
Microsoft's request for an audit will be provided to Audible in writing and will
be made at least sixty (60) days prior to any audit. Such request will not
occur more than once each year. In the event an audit identifies an
underpayment of royalties by Audible, Audible shall pay an amount equal to the
sum of such underpayment, and shall reimburse Microsoft for all costs of the
audit (if the underpayment is more than 5% of amounts due for the period).
8.5 Taxes. All taxes, duties, fees and governmental charges of any kind
-----
(except United States or state taxes based on the net income of Audible) which
are levied, assessed or otherwise imposed by or under the authority of any
government or political subdivision on any royalties payable hereunder, or any
aspect of this Agreement, shall be borne by Microsoft and
_____________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
-18-
<PAGE>
shall not be considered a part of, a deduction from, or an offset against
payments due to Audible hereunder.
8.6 No Set Off. Payments under this Agreement are not subject to set off
----------
except in the event of a good faith payment dispute.
9. NON-INTERFERENCE
----------------
Audible shall not enter into any other agreement that would preclude
integration during the Term of any Audible audio technologies or Content with
Dedicated Reading Machines, Windows Media Player, and/or versions of Windows CE.
Nothing herein, except for [ *** ], shall be deemed a warranty that all Content
is available for use via Microsoft Products based on Windows 95 and 98 and
Windows NT. Audible reserves the right to exclude Content for which Audible may
not possess the required licensed rights, and to acquire individual items of
Content, if it is beneficial to Audible's business in its reasonable opinion,
which may not permit distribution of such Content via all or some Microsoft
Products.
10. INTELLECTUAL PROPERTY RIGHTS
----------------------------
10.1. Audible Property. Notwithstanding any provision of this Agreement
----------------
to the contrary, Microsoft hereby acknowledges and agrees that, as between
Audible and Microsoft, and for all purposes under the laws of all countries,
including Section 117 of the United States Copyright Act, as amended, Audible
owns, will own, and at all times shall continue to own, any and all Intellectual
Property in and to Client Software, audible.com, Content licenses, all material
it creates or provides as part of the Development Work, and all related
documentation and information provided to Microsoft, including without
limitation any updates, upgrades, patches, or other functionality of any
description arising from any of them, and all pre-existing Audible algorithms,
security data, software, and Audible hardware (the "Audible Intellectual
Property").
10.2 Microsoft Property. Notwithstanding any provision of this Agreement
------------------
to the contrary, Audible hereby acknowledges and agrees that, as between Audible
and Microsoft, and for all purposes under the laws of all countries, including
Section 117 of the United States Copyright Act, as amended, Microsoft owns, will
own, and at all times shall continue to own, any and all Intellectual Property
in and to Microsoft Products, Microsoft's Electronic Books development, the
results of the joint project under Section 1.3 hereof, and the Audible Media
Player Filter components contributed by Microsoft, and all related documentation
and information provided to Audible, including without limitation any updates,
upgrades, patches, or other functionality of any description arising from any of
them, and all pre-existing Microsoft algorithms, security data, software, and
Microsoft hardware (the "Microsoft Intellectual Property").
10.3 Notices on Copies. (a) Microsoft shall place notice substantially
-----------------
similar to the following on all tangible media containing copies of any
Customized Software:
(C) 199x by Microsoft Corporation and its suppliers. All rights
reserved..
-19-
<PAGE>
(b) Microsoft shall place the following notice in all distributed copies
of the Customized Software:
Copyright (c) 1998 by
Audible, Inc.
All Rights Reserved
10.4 Trademarks. Microsoft hereby acknowledges that Audible claims
----------
"Audible", "audible.com", "AudibleReady" and all other variations of "Audible"
used by Audible in connection with its products and services as trademarks
belonging to Audible. Audible hereby acknowledges that Microsoft claims the
marks listed as Microsoft trademarks in Exhibit A as trademarks belonging to
Microsoft. The parties hereby agree that the use by it of any trademark of the
other pursuant to rights granted under this Agreement shall not create any
right, title or interest, in or to the other's marks and that any and all
goodwill associated with the trademarks of the other party shall belong to that
party.
10.5 Proprietary Notices. Each party agrees that it will not (and it will
-------------------
not allow others to) alter or remove any copyright, trade secret, patent,
proprietary and/or other legal notices contained on or in copies of the
intellectual property and any other tangible materials provided by one party to
the other. The existence of any copyright notice on software or any written
works shall not be construed as an admission, or be deemed to create a
presumption, that publication of such materials has occurred.
10.6 No Other Rights. Except as expressly provided in this Agreement, no
---------------
license under any patents, copyrights, trademarks, trade secrets or any other
intellectual property rights, express or implied, are granted by either party
under this Agreement.
11. LIMITED WARRANTY
----------------
11.1 Warranty. Audible represents and warrants to Microsoft that, (i) it
--------
has all rights and authority necessary to perform under this Agreement; (ii) the
Client Software and Customized Software, and the Audible marks listed in Exhibit
A do not infringe any patent, copyright, trade secret, trademark, right of
privacy or publicity, or other intellectual property rights of any third party;
and (iii) it will perform all services under this Agreement in a workmanlike
manner, by qualified personnel, in accordance with high professional standards.
Microsoft represents and warrants to Audible that (i) it has all rights and
authority necessary to perform under this Agreement, (ii) the information,
software and tools provided to Audible under Section 2 do not infringe any
patent, copyright, trade secret, trademark or other intellectual property rights
of any third party.
11.2 Disclaimer. THE WARRANTIES CONTAINED IN SECTION 11.1 ABOVE IS A
----------
LIMITED WARRANTY AND ARE THE ONLY WARRANTIES MADE BY THE PARTIES. EACH PARTY
MAKES NO OTHER WARRANTY EXPRESS OR IMPLIED, AND THERE ARE EXPRESSLY EXCLUDED ALL
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, AND NON-
_____________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
-20-
<PAGE>
INFRINGEMENT. NEITHER PARTY PROVIDES A WARRANTY THAT OPERATION OF SOFTWARE WILL
BE UNINTERRUPTED OR ERROR-FREE.
_____________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
-21-
<PAGE>
12. INDEMNIFICATION
---------------
12.1 Defense. Each party (the "indemnifying party") shall, at its expense
-------
and the other party's ("other party") request, defend any claim or action
brought against the other party, and the other party's subsidiaries, affiliates,
directors, officers, and employees, to the extent it is based upon a claim that,
(i) if true, would constitute a breach of the indemnifying party's warranties
under Section 11.1; (ii) is based on any product or service offered by the
indemnifying party, except to the extent arising from the contributions of the
other party; or (iii) is based on damage to property or injury to person caused
by the employees, permittees, or agents of the other party. To the extent the
other party requests that the indemnifying party defend such claim, the party
requesting indemnification shall (i) provide the indemnifying party reasonably
prompt notice in writing of any such claim or action and permit the indemnifying
party, through counsel mutually acceptable to both parties, to answer and defend
such claim or action; and (ii) provide the indemnifying party information,
assistance and authority, at the indemnifying party's expense, to help the
indemnifying party to defend such claim or action. In such event, the other
party will have the right to employ separate counsel at its own cost and
participate in the defense of any claim or action which the indemnifying party
is defending. The indemnifying party may not settle any claim or action under
this Section 12 on the other party's behalf without first obtaining the written
consent of the other party, which permission will not be unreasonably withheld
or delayed.
12.2 Indemnity. Regardless of whether the other party requests the
---------
indemnifying party to defend, the indemnifying party will indemnify and hold the
other party harmless from and against any damages finally awarded against the
other party or agreed pursuant to a settlement, and any costs and fees
(including without limitation, attorneys' fees other than fees for separate
counsel under Section 12.1) reasonably incurred by the other party that are
attributable to such a claim or action; provided, however, that:
(i) the indemnifying party will not be responsible for any settlement
made by the other party without the indemnifying party's written
permission, which permission will not be unreasonably withheld or
delayed,
(ii) if the indemnifying party has replaced or corrected infringing
materials, pursuant to Section 12.4, its indemnity obligation will in
no event include the damages accruing as a result of the other
party's failure to adopt, use and distribute (on a prospective basis
only) such replacement or corrected version as soon as reasonably
possible
(iii) if the indemnifying party is defending a claim pursuant to the other
party's request, and if the other party unreasonably withholds
consent to a settlement proposed by the indemnifying party, the
maximum amount that the indemnifying party will be responsible for
shall be the amount payable under such settlement plus any costs and
fees that the other party would have incurred in connection with such
claim if it had been so settled.
_____________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
-22-
<PAGE>
12.3 Publicity Regarding Settlement. In the event the other party and the
------------------- ----------
indemnifying party agree to settle a claim or action, each party agrees not to
publicize the settlement without first obtaining the written permission of the
other party to this Agreement, which permission will not be unreasonably
withheld.
12.4 Duty to Correct. Should Audible's Client Software or Customized
---------------
Software ("Audible Infringing Materials"), or Microsoft's information, software
and tools provided to Audible under Section 2 or software tools licensed under
Section 4.3 ("Microsoft Infringing Materials"), or any portion thereof, be held
to constitute an infringement in breach of the warranties under Section 11.1 and
use as contemplated by this Agreement be enjoined, the providing party shall
notify the other party and immediately, at the expense of the providing party:
(i) procure for the other party the right to continue use of such Infringing
Materials or portion thereof, as applicable, as licensed in this Agreement; or
(ii) replace or modify the Infringing Materials or portion thereof with a
version that is non-infringing, with equivalent functionality in all material
respects.
12.5 THIS SECTION STATES THE ENTIRE LIABILITY OF THE PARTIES TO EACH OTHER
WITH RESPECT TO THIRD PARTY CLAIMS FOR INFRINGEMENT OR MISAPPROPRIATION.
13. LIABILITY, DAMAGES AND DISCLAIMERS
----------------------------------
13.1 Limitation of Liability. Except in connection with payments due to
-----------------------
third party indemnification under this Agreement and except for claims relating
to the infringement or misappropriation of the intellectual property or
confidential information of a party, IN THE EVENT EITHER PARTY IS FOUND LIABLE
TO THE OTHER FOR ANY MATTER RELATING TO OR ARISING FROM THE TRANSACTIONS
CONTEMPLATED UNDER THIS AGREEMENT, THE TERMINATION OF THIS AGREEMENT, THE
OPERATION OR USE OF SOFTWARE, OR A PARTY'S SERVICES, THAT PARTY'S LIABILITY
THEREFOR SHALL NOT EXCEED THE GREATER OF [* * *] DOLLARS OR [* * *] THE AMOUNT
PAID BY MICROSOFT HEREUNDER; PROVIDED THAT THIS LIMITATION DOES NOT APPLY TO
OBLIGATIONS ARISING UNDER SECTION 12 OR SECTION 15. THE LIMITATION IN THIS
SECTION IS A MATERIAL TERM IN THE PARTIES' AGREEMENT.
13.2 Limitation of Damages. Except in connection with payments due to
---------------------
third party indemnification under this Agreement and except for claims relating
to the infringement or misappropriation of the intellectual property or
disclosure of confidential information of a party, NEITHER PARTY SHALL BE LIABLE
TO THE OTHER FOR ANY: (A) SPECIAL, INDIRECT, INCIDENTAL, PUNITIVE, OR
CONSEQUENTIAL DAMAGES ARISING FROM OR RELATED TO THE OPERATION OR USE OF
DEVELOPMENT WORK OR SERVICES, INCLUDING SUCH DAMAGES, WITHOUT LIMITATION,
ARISING FROM LOSS OF OR DAMAGE TO DATA OR PROGRAMMING, LOSS OF REVENUE OR
PROFITS, FAILURE TO REALIZE SAVINGS OR OTHER BENEFITS, DAMAGE TO
_____________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
-23-
<PAGE>
EQUIPMENT, AND CLAIMS BY ANY THIRD PERSON, EVEN IF THE PARTIES HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES; AND (B) CLAIMS MADE A SUBJECT OF A LEGAL
PROCEEDING MORE THAN 24 MONTHS AFTER ANY SUCH CAUSE OF ACTION FIRST AROSE;
PROVIDED THAT THESE LIMITATIONS DO NOT APPLY TO OBLIGATIONS ARISING UNDER
SECTION 12 OR SECTION 15..
13.3 Disclaimer. THE PARTIES HEREBY EXPRESSLY DISCLAIM ANY LIABILITY OR
----------
DAMAGES IN EXCESS OF THE LIMITS PROVIDED FOR ABOVE.
14. TERM
----
14.1. Term. The term of this Agreement shall commence on the Effective
----
Date and continue for an initial period of five years unless terminated earlier
pursuant to Section 14.2. hereof (the "Term"). This Agreement will be
automatically renewed for additional two year periods without notice unless
either party notifies the other party in writing at least 90 days prior to
expiration of the current term that it wishes not to renew this Agreement.
14.2. Termination. This Agreement shall terminate as provided below:
-----------
a. Audible may, at its option, terminate this Agreement upon thirty
(30) days' advance written notice to Microsoft in the event that Microsoft
shall: file for bankruptcy or suffer an involuntary bankruptcy that is not
dismissed within ninety (90) days; or cease to conduct operations in the
ordinary course of business; or fail to comply with any of its material
obligations under this Agreement, which failure to comply shall be
continuing for thirty (30) days following Microsoft's receipt of written
notice from Audible stating the nature of Microsoft's non-compliance;
b. Microsoft may, at its option, terminate this Agreement upon
thirty (30) days' advance written notice to Audible in the event that
Audible shall: file for bankruptcy or suffer an involuntary bankruptcy that
is not dismissed within ninety (90) days; or cease to conduct operations in
the ordinary course of business; or fail to comply with any of its
obligations under this Agreement, which failure to comply shall be
continuing for thirty (30) days following Audible's receipt of written
notice from Microsoft stating the nature of Audible's non-compliance.
14.3. Continuing Liability. The notification by either party of its
--------------------
intent to terminate this Agreement does not relieve either party of any
obligations which have accrued under the terms and conditions of this Agreement,
inclusive of those terms and conditions which extend beyond the date of
termination.
14.4 Effect of Termination. Upon termination of this Agreement for any
---------------------
reason, the rights and obligations hereunder (except obligations for payments)
shall terminate, except that the provisions relating to license rights (to the
extent indicated in Section 4.2 above and provided Microsoft has paid to Audible
all fees payable under this Agreement), proprietary rights, confidentiality, and
indemnification shall remain in effect. Upon a request by any party hereto,
confidential information of one party in the possession of the other shall be
returned except to the
_____________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
-24-
<PAGE>
extent necessary for the receiving party to continue exercising its rights after
the termination or expiration of this Agreement or to protect its legal rights
hereunder. Termination or expiration shall not effect the confidential nature of
such information.
15. CONFIDENTIALITY
---------------
15.1 Obligations. The information and software (including CODECs, source
-----------
code and documentation therefor) exchanged by the parties hereunder, including
the terms and conditions hereof, shall be subject to the Non-Disclosure
Agreement ("NDA") between the parties dated June 5, 1998, which is attached
hereto as Exhibit B. For purposes of this Agreement such NDA shall be read as
(i) applying to information and software disclosed by the parties during the
Term in connection with the transactions contemplated herein, and (ii) with
respect to any particular information, having a term that survives as long as
the applicable information (including without limitation the source code of
either party) remains within the definition of Confidential Information.
15.2 Intellectual Property. Notwithstanding the above, the parties agree
---------------------
that whether or not intellectual property of the parties (including copyrighted
works) is disclosed in confidence, the intellectual property rights of the
parties shall remain in effect in accordance with the laws applicable to the
intellectual property in question. Nothing in this Section is intended to affect
the understandings of the parties elsewhere in this Agreement with respect to
ownership and use of intellectual property.
16. [* * *]
16.1 Microsoft. Microsoft hereby agrees that, during the Term, [* * *]
---------
16.2 Audible. For as long as Microsoft has made the payments under
-------
Sections 7.1 and 7.2 above, Audible hereby agrees that, during the Term, [* *
*].
16.3 General. Each party agrees that, in addition to other remedies
-------
provided at law or in equity, upon a breach by such party of the covenant
contained in this Section 16, the other party shall be entitled to an injunction
against the breaching party, and any third parties in concert with the breaching
party, prohibiting further breach of the covenant contained herein. The parties
agree that it is impossible to measure in money the damages that may accrue to
the nonbreaching party by reason of the breaching party's failure to obey the
covenant stated above. Therefore, in the event of a breach or a threatened
breach by a party of the covenant in this Section 16, the parties agree that
such covenant may be enforced by a court of competent jurisdiction by a decree
for specific performance, in addition to other remedies nonbreaching party may
have.
EACH PARTY HAS CONSULTED WITH COUNSEL, HAS READ THIS SECTION 16, AND AGREES
THAT THE CONSIDERATION PROVIDED HEREUNDER IS FAIR AND REASONABLE AND FURTHER
AGREES THAT [* * *] CONTEMPLATED IN THIS SECTION 16 ARE LIKEWISE FAIR AND
REASONABLE.
_____________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
-25-
<PAGE>
17. GENERAL PROVISIONS
------------------
17.1 Entire Agreement. This Agreement and its schedules constitute the
----------------
entire agreement of the parties on the subject matter of this Agreement and
supersedes all prior agreements and understandings which may exist between the
parties, with respect to the subject matter hereof. All amendments to this
Agreement must be in writing and signed by both parties.
17.2 Assignment. Neither party may assign or transfer this Agreement or
----------
any rights granted to it hereunder without the prior written consent of the
other party, which consent shall not be unreasonably withheld or delayed. For
the purposes of this Agreement, a merger, consolidation, or other corporate
reorganization, or a transfer or sale of a controlling interest in a party's
stock (excluding such transactions with existing shareholders, transfers to
relatives by operation of law, or sale of securities in the public market, none
of which result in a new single entity or affiliated group of entities gaining
control of such party), or of all or substantially all of its assets
(collectively, a "Corporate Transfer") shall be deemed to be an assignment.
(a) In the event Microsoft does not consent to a Corporate Transfer
or consents to a Corporate Transfer with conditions that are not acceptable to
Audible, and if Audible wishes to pursue the Corporate Transfer, then Microsoft
may terminate this Agreement (except for the provisions that survive as stated
elsewhere in this Agreement) as its sole remedy and Audible may continue with
the proposed Corporate Transfer. Such termination shall not result in any
liability from one party to the other except for amounts that were due and
payable on the date of termination. Subject to the preceding two sentences, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their successors and assigns.
(b) (i) If, at any time during which Microsoft holds [ *** ] rights
under Section 7, Microsoft shall have the right of first negotiation on any
Corporate Transfer as follows: If Audible receives an unsolicited proposal from
a third party (a "Solicitor") that Audible wishes to pursue (except during the
six (6) month period set forth in the sixth sentence below), or Audible
determines to solicit proposals or otherwise enter into discussions that would
result in a Corporate Transfer, Audible shall give written notice to Microsoft
of such occurrence (a "Corporate Transfer Notice"). Microsoft shall have seven
(7) days after receipt of the Corporate Transfer Notice to provide notice to
Audible in writing (a "Negotiation Notice") of its desire to negotiate in good
faith with Audible regarding a Corporate Transfer involving Microsoft. If
Microsoft does not deliver such Negotiation Notice within 7 days of receipt
receiving the Corporate Transfer Notice, Audible will be free to negotiate with
any third party or parties regarding a Corporate Transfer. If Microsoft
delivers a Negotiation Notice to Audible within 7 days of Microsoft receiving
the Corporate Transfer Notice, then (A) Audible will furnish to Microsoft such
relevant and pertinent information about Audible as may be appropriate to enable
Microsoft to engage in good faith negotiations, and (B) the parties will
negotiate exclusively in good faith regarding a Corporate Transfer until no
later than 21 days from the date Microsoft received the Corporate Transfer
Notice. If, after 21 days, the parties cannot come to terms regarding a
Corporate Transfer of Audible, Audible will be free to negotiate with any third
party or parties regarding a Corporate Transfer. If a definitive agreement for
a Corporate Transfer has not been entered into by Audible and any such third
party
_____________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
-26-
<PAGE>
or parties within six (6) months from the date of a Negotiation Notice delivered
by Audible to Microsoft, then the right of first negotiation process described
above in this Section 17.2(b) will again apply as if no such original
Negotiation Notice had been delivered to Microsoft. No Corporate Transfer that
occurs in violation of the process outlined above shall be valid. If Audible
makes a Corporate Transfer to a third party purchaser in accordance with the
terms of this Section 17.2, this Section 17.2 shall not apply to that third
party purchaser, unless the purpose of the Corporate Transfer was to circumvent
or defeat this Section 17.2. Clause (A) of this subsection (i) will not require
Audible to disclose to Microsoft the name of the Solicitor, or the amount of any
proposal or offer from such Solicitor and the material terms thereof or such
other information as would be reasonably expected to allow Microsoft to derive
the identity of the Solicitor if such information is subject to a non-disclosure
agreement and such information has not been provided by Audible to any other
third party other than professional advisors of Audible.
(ii) During any period in which the provisions of Section
17.2(b)(i) are effective and any representative or affiliate of Microsoft serves
as a member of the Board of Directors of Audible (the "Director"), the Director
shall not participate in any discussions, deliberations or proceedings of the
Board of Directors with respect to its consideration of any Corporate Transfer.
17.3 Internal Dispute Resolution. In the event of any problem, claim, or
---------------------------
dispute arising from, out of, or based upon this Agreement, or the business
relationship between the parties, the aggrieved party shall promptly notify the
other party of the existence of the problem, claim, or dispute, and such other
party shall promptly undertake all reasonable efforts to resolve the matter,
including but not limited to, submitting such problem, claim or dispute for
resolution to a Manager of each party. The Managers shall make a good faith
effort to resolve the dispute as quickly as possible. In the event that the
Managers cannot resolve such dispute within twenty (20) days the matter may at
the option of either party, be submitted for resolution to each party's chief
executive with overall responsibility for the subject matter in dispute for a
period of twenty (20) days.
17.4 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the law of the State of Washington applicable to contracts
between residents of the State of Washington, and entered into and performed
entirely in the State of Washington. Any action instituted by either party
arising out of this Agreement shall only be brought, tried and resolved in the
State of Washington.
17.5 Severability. If any provision of this Agreement or the application
------------
thereof to any person or circumstances shall, for any reason and to any extent,
be void or unenforceable, the application of the remainder of this Agreement to
such person or circumstances and the application of such provision to other
persons or circumstances shall be interpreted so as best to reasonably reflect
the intent of the parties hereto. The parties further agree to replace such
void or unenforceable provisions of this Agreement with valid and enforceable
provisions which will achieve, to the extent possible, the economic, business
and other purposes of the void or unenforceable provisions.
_____________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
-27-
<PAGE>
17.6. Relationship. Nothing in this Agreement or in the activities
------------
contemplated by the parties pursuant to this Agreement shall be deemed to create
an agency, partnership, employment or joint venture relationship between the
parties. Each party shall be deemed to be acting solely on its own behalf and,
except as expressly stated, has no authority to pledge the credit of, or incur
obligations or perform any acts or make any statements on behalf of, the other
party. Neither arty shall represent to any person or permit any person to act
upon the belief that it has any such authority from the other party. Neither
party's officers or employees, agents or contractors shall be deemed officers,
employees, agents or contractors of the other party for any purpose.
17.7 Agreement Announcement. The parties agree that upon execution of
----------------------
this Agreement, both parties may announce and/or confirm the existence of this
Agreement to the business, trade and general press, or to any other person or
entity provided that the parties agree on the content, and date of the
announcement, and venue and vehicle for the announcement.
17.8. No Waiver. No waiver of any breach of the Agreement shall be deemed
---------
to be a waiver of any subsequent breach.
17.9 Force Majeure. Neither party will be liable for any failure or delay
--------------
in its performance under this Agreement due to causes, including, but not
limited to, and act of God, an act of civil or military authority, fire,
epidemic, flood, earthquake, riot, war, sabotage, labor shortage or dispute, and
governmental action, which are beyond its reasonable control; provided that the
delayed party: (a) gives the other party written notice of such cause promptly,
and in any event within 15 days of discovery thereof; and (b) uses its
reasonable efforts to correct such failure or delay in its performance.
17.10 Attorneys' Fees. A prevailing party in an action to enforce this
---------------
Agreement shall have the right to collect from the other its reasonable expenses
incurred in enforcing this Agreement including attorneys' fees.
17.11 Construction of Agreement. This Agreement has been negotiated by
-------------------------
the parties hereto, shall be deemed to have been drafted by both parties, and
the language hereof shall be construed neutrally and not for or against any
party. Where appropriate the singular shall include the plural. The headings
of this Agreement are only for convenience and not intended to convey any
substantive meaning. In the event of a conflict between the provisions of the
Agreement and the provisions of any exhibit, the provisions of the exhibits
shall control to the extent of the conflict but otherwise the two shall be read
together as much as possible.
17.12 Notices. All notices, requests or other communication required or
-------
permitted hereunder shall be given or made in writing and shall be (i) delivered
personally (including commercial carrier), (ii) sent by overnight mail service,
postage prepaid or (iii) sent by telecopier with confirmation of receipt and a
copy by regular mail, addressed to the person stated below, at the address noted
at the beginning of this Agreement, or at such other address as may from time to
time be designated by such party to the other in writing.
If to Audible:
_____________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
-28-
<PAGE>
Audible, Inc.
65 Willowbrook Blvd.
Wayne, NJ 07470
Attn: Managing Director, Business/Legal Affairs
Phone: 973-890-4070
Fax: 973-890-2442
With a copy to:
PIPER & MARBURY L.L.P.
1200 19th Street, N.W.
Washington, D.C. 20036
Attention: Edwin M. Martin, Jr., Esq.
If to Microsoft:
Microsoft Corporation
One Microsoft Way
Redmond, WA 98052-6399
Attn.: Vice President, Technology Development
--------------------------------------
Phone: (425) 936-8180
--------------
Fax: (425) 936-7329
--------------
With a copy to:
Law & Corporate Affairs
Fax: (425) 936-7409
Any notice, request or other communication shall be deemed to have been
given and to be effective upon receipt or refusal by the addressee. Any party
may change its address for notices hereunder, effective upon giving of notice of
such change hereunder to the other party.
17.13 Other Remedies. Unless expressly stated to the contrary, subject to
--------------
the appropriate limitations of liability herein contained, any and all remedies
herein expressly conferred upon a party shall be deemed cumulative and not
exclusive of any other remedy conferred hereby or by law, and the exercise of
any one remedy shall not preclude the exercise of any other.
17.14 Counterparts. This Agreement may be executed in two or more
-------------
counterparts, each of which will be deemed an original and all of which together
will constitute one instrument.
17.15 Exports. Each party shall be responsible for its own compliance with
---------
all applicable export laws and regulations in its distribution of the Customized
Software and other Development Work. Upon request, each party shall reasonably
cooperate with the other party to assist with such compliance.
_____________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
-29-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by the undersigned, with authority to do so and intending to be legally bound,
as of the date first above written.
WITNESS: AUDIBLE, INC.
/s/ Andrew J. Huffman
_________________________________
Name Name: Andrew J. Huffman
Title: President and CEO
WITNESS: MICROSOFT CORPORATION
/s/ Dick Brass
_________________________________
Name Name: Dick Brass
Title: Vice President
_____________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
-30-
<PAGE>
EXHIBIT 10.2
DIGITAL RIGHTS MANAGEMENT AGREEMENT
This Digital Rights Management Agreement (the "Agreement") is entered into and
effective as of November 4, 1998 (the "Effective Date") by and between MICROSOFT
CORPORATION, a Washington corporation with principal offices at One Microsoft
Way, Redmond, WA 98052 ("Microsoft"), and AUDIBLE, INC., a Delaware corporation
with principal offices at 65 Willowbrook Boulevard, Wayne, New Jersey 07040
("Audible").
Recitals
i. Whereas, Microsoft develops, markets, and licenses computer software,
including operating system software and applications;
ii. Whereas, Audible is the creator and provider of an Internet-based
service that permits customers to use a computer with an Internet browser to
select and download spoken word audio files consisting of licensed and original
literary, business, and entertainment works and other types of spoken word
information in a secure Audible-proprietary file format, via the World Wide Web
(currently using the URL "http://www.audible.com"), and to play back such
Content using Audible's proprietary software or transfer to other devices (such
as the Audible Mobile Player) for portable playback;
iii. Whereas, Microsoft intends to develop a Digital Rights Management
technology, which controls the use of digitized electronic text, audio,
software, or other content so that licensors may limit end users to specifically
licensed uses ("DRM"); and
iv. Whereas, in addition to other business relationships between the
parties, Audible and Microsoft wish to cooperate in Microsoft's DRM project, on
the terms and conditions set forth herein.
Agreement
NOW THEREFORE, the parties agree as follows:
1. Definitions.
-----------
For purposes of this Agreement, in addition to the capitalized terms
defined elsewhere herein, the following terms shall have the meanings described
below:
1.1 "Audible.com" means the Internet-based service controlled or sponsored
by Audible which permits customers to use a computer with an Internet browser to
select, download and license copies of Content, for pay, in an Audible-
proprietary file format, via a World Wide Web site currently using the URL
"http://www.audible.com."
<PAGE>
1.2 "Audible Mobile Player" means the portable playback device available
to End-Users from Audible for the purpose of downloading Content and playing it
under certain terms and conditions promulgated by Audible.
1.3 "Audible Security Code" means version 1.0 of the computer software
created by or for Audible, in object and source code form, which permits End
Users to use Content they download from the Audible.com only in the manner for
which the Content is licensed to them. Audible Security Code is further
described in Exhibit A.
1.4 "Client Software" means Audible's proprietary software that is used as
of the Effective Date to download and play back the Content from Audible.com.
1.5 "Content" means Spoken Word Audio files consisting of licensed and
original literary, business, and entertainment works and other types of spoken
word information which Audible has the right to distribute via the World Wide
Web to be accessed by computing devices.
1.6 "Development Agreement" means that certain Agreement by and between
the parties dated of even date herewith, by which, among other provisions,
Audible will modify the Client Software and license it to Microsoft for
distribution.
1.7 "Documentation" means any and all documentation, user manuals, service
manuals, database definitions and structures (including identification of each
table and field), reference manuals, specifications, make files which specify
source code modules and forms, sample databases, installation software which
builds installation disk images, installation guides, graphics files and other
files, development plans and notes, materials associated with production of the
"on-line help" feature of the Audible Security Code, flow charts, diagrams,
drawings, maintenance notes, release notes, notes regarding errors, source code
notation, and other notes, memos, spreadsheets and other documentation made by
or for Audible and pertaining to all or any part of the object code or source
code of the Audible Security Code, whether printed on paper or stored in
electronic, optical or other machine readable form, in each case, as in
existence on the date of this Agreement.
1.8 "DRM API" means an application program interface for the DRM,
permitting application software programs to access DRM functionality.
1.9 "Electronic Book" means a single file that contains both text and
audio renditions of the same work (e.g., books, magazines and other such analog
printed content) and is readable by a Dedicated Reading Machine. As used
herein, "Dedicated Reading Machines" means a new class of hardware devices under
development by Microsoft and its development partners and by other third parties
that both (a) are designed and marketed to be used mainly for the purpose of
both reading text from and listening to spoken word audio and (b) are capable of
simultaneously displaying the text that corresponds with the audio that is
playing, provided that neither (i) personal computers (PCs), laptop computers
and general-purpose Windows CE based devices
______________
***Confidential Information has been omitted and has been filed separately with
the Securities and Exchange Commission.
2
<PAGE>
which are primarily designed for other purposes, nor (ii) audio-only devices,
such as the Audible Mobile Player, shall qualify as Dedicated Reading Machines
even if such devices satisfy the requirements of (a) and (b) above.
1.10 "Gross Transaction Revenue" means the actual gross amounts received by
Audible in its capacity as a Clearinghouse, as defined in Section 5.1 of this
Agreement, for confirming the licensing of DRM encoded content pursuant to
Section 5.2.
1.11 "Microsoft Products" means computer hardware and/or software products
developed, licensed, and/or marketed by or for Microsoft.
1.12 "Net Transaction Revenue" means the Gross Transaction Revenues, less
sales or use taxes, excise taxes, value-added taxes, and duties, in each case
attributable to the amounts received by Audible, in its capacity as a
Clearinghouse, as defined in Section 5.1 of this Agreement, for confirming the
licensing of DRM encoded content pursuant to Section 5.2, and less any payments
made by Audible to Microsoft as royalties for use of DRM in its capacity as a
Clearinghouse (other than those set forth in Section 5.2).
1.13 "NRE Expenditures" means the costs incurred by Audible in connection
with Audible's development work under Section 4 of this Agreement, which shall
consist of (a) the time spent by individuals on behalf of Audible in performing
the work at a reasonable labor charge, including any overtime compensation and
expenses and including direct program management, (b) an allocation for
Audible's administrative expenses attributable to the implementation and
management of the work, fixed at [ *** ] of labor charges under subsection (a),
(c) the cost of calls, faxes, copying, media, meals and local transportation
outside of regular business hours, and other third party charges incurred by
Audible in relation to the work, (d) the cost of materials, equipment, supplies,
and licenses used in connection with the work, (e) reasonable travel and living
expenses of Audible's staff and agents when away from their normal place of
business in connection with the work, and (f) other reasonable expenses incurred
by Audible in connection with the work.
1.14 "OEMs" means Microsoft-approved original equipment manufacturers of
computing equipment utilizing Microsoft operating systems, applications, or
other technology.
1.15 "Spoken Word Audio" means spoken word audio content for sale in the
------------------
form of audio book distribution, text based audio programming, time shifted
conference proceedings, soundtracks from television broadcasts, audio business
programming, and/or time shifted radio distribution.
2. Audible Security Code.
---------------------
2.1 Delivery. Within five (5) days after the Effective Date, Audible
--------
shall deliver the Audible Security Code and all Documentation to Microsoft at
the following address: Steve Stone, Microsoft Corporation, One Microsoft Way,
Redmond, Washington 98052. As part of the
______________
***Confidential Information has been omitted and has been filed separately with
the Securities and Exchange Commission.
3
<PAGE>
services to be provided under Section 3 of this Agreement, Audible will provide
one-day, on site consulting services in accordance with industry standards, at
Microsoft's Redmond, Washington campus to explain the deliverables hereunder to
Microsoft's designated technical personnel.
2.2 Acceptance. Microsoft shall evaluate the Audible Security Code within
----------
ten (10) days of receipt to confirm that the delivery is complete. If the
delivery of Audible Security Code and Documentation is not complete in its
contents, Audible agrees to promptly deliver to Microsoft any missing items.
2.3 License. (a) Upon receipt by Microsoft, Audible shall be deemed to
-------
grant to Microsoft a [ *** ] license to:
(i) Use, copy, edit, format, modify, translate and create
derivative works of the source and object code versions of the Audible Security
Code, and the Documentation internally by Microsoft solely for the purpose of
incorporating all or part of the Audible Security Code or derivative works
thereof in Microsoft Products which implement DRM;
(ii) Reproduce, license, rent, lease, transmit, sell or otherwise
distribute, and have reproduced, licensed, rented, leased, transmitted, sold or
otherwise distributed, to and by third parties, (i) source code and/or object
code versions of the Audible Security Code or derivative works thereof, solely
as incorporated in Microsoft Products which implement DRM, and (ii) the
Documentation and derivative works thereof for use in connection with Microsoft
Products which implement DRM; and
(iii) Subject to subsection 2.3(b) below, grant the rights set forth
in this Section 2.3(a)(ii) in the Audible Security Code and the Documentation to
third parties, including the right to license such rights to further third
parties.
(b) Source Code License. The license to use and permit others to
use source code and related documentation (collectively, the "source code") for
the Audible Security Code as stated in subsection 2.3(a) above shall be subject
to the following terms and conditions. Such source code shall only be used and
sublicensed under confidentiality and non-disclosure obligations. Microsoft
hereby agrees that the source code remains the sole and exclusive property of
Audible. Microsoft agrees that the source code may not be used for the benefit
of any party other than Microsoft or its sublicensees or assignees as allowed
herein, and must not be made available publicly or without the restrictions
stated in this Agreement as it may compromise the security of Audible's own
products and services. Microsoft agrees that it will not (and it will not allow
others to) alter or remove any copyright, trade secret, patent, proprietary
and/or other legal notices contained on or in copies of the source code.
Except as noted below, the foregoing license grants include a license under any
current and future patents owned or licensable by Audible to the extent
necessary: (i) to exercise any license right granted herein; and (ii) to
combine the Audible Security Code or derivative works thereof with any Microsoft
Product which implements DRM. Except as expressly licensed to Microsoft
______________
***Confidential Information has been omitted and has been filed separately with
the Securities and Exchange Commission.
4
<PAGE>
in this Agreement, Audible retains all right, title and interest in and to the
Audible Security Code and the Documentation. Subject to the license grant in
Section 2.3 and Audible's ownership of the underlying Audible Security Code and
Documentation, Microsoft shall own all right, title and interest in and to any
derivative works of the Audible Security Code and Documentation created by or
for Microsoft.
Notwithstanding the above, the license granted by Audible to Microsoft under
this subsection 2.3(b) shall not include [ *** ]. Audible hereby agrees that,
under the direction of Microsoft and pursuant to third-party license rights to
be obtained by Microsoft for those third-party components, Audible will provide
to Microsoft assistance to integrate those licensed components into the Audible
Security Code as required. Audible shall remove from each delivery of Audible
Security Code all software code that Audible excludes from its license pursuant
to this subsection 2.3(b).
(c) Notwithstanding any provision of this Agreement, it shall be
Microsoft's responsibility to determine whether Microsoft may export the Audible
Security Code and Documentation from the United States under applicable laws and
regulations and to obtain any necessary permits and licenses which may be
required for such purposes. Audible shall cooperate with Microsoft in any
Microsoft request for such licenses and clearances. Microsoft shall indemnify
and hold harmless Audible and its officers, directors, employees and agents for
any damages, penalties, losses and fines payable by Audible or any officer,
director, employee or agent as a result of Microsoft's exportation of the
Audible Security Code, Documentation or any part thereof in contravention of
law.
2.4 License Fee. In consideration of the license granted to Microsoft
-----------
under Section 2.3, Microsoft shall pay Audible a one-time license fee of Two
Hundred Fifty Thousand Dollars (US$250,000) within thirty (30) days of receipt
of the complete Audible Security Code and Documentation by Microsoft.
2.5 Proprietary Rights in Audible Security Code and Use Restrictions. (a)
----------------------------------------------------------------
The parties acknowledge that the source code for the Audible Security Code is
one of Audible's trade secrets. As between the parties, Audible is and shall
remain the exclusive owner of all proprietary rights embodied in the Audible
Security Code and Documentation, including all copyrights, patent rights, trade
secrets, know how, and the "Audible" trademark . Microsoft agrees that it shall
not distribute the source code for the Audible Security Code, in whole or in
part, to any third party, except as permitted under this Section 2, and only
under license and nondisclosure terms that comport with the terms of this
Agreement and are at least as protective as Microsoft employs for source code of
the Microsoft Products that include the Audible Source Code. Microsoft shall
exercise reasonable efforts to enforce the terms of those third party agreements
as they relate to the Audible Security Code.
(b) Microsoft agrees that it will not (and it will not allow others to)
alter or remove any copyright, trade secret, patent, proprietary and/or other
legal notices contained on or in copies of the Audible Security Code and
Documentation. The existence of any copyright notice on
______________
***Confidential Information has been omitted and has been filed separately with
the Securities and Exchange Commission.
5
<PAGE>
software or any written works shall not be construed as an admission, or be
deemed to create a presumption, that publication of such materials has occurred.
The source code of the Audible Security Code shall be treated indefinitely as
confidential under this Agreement, whether or not it is marked as confidential.
(c) Audible reserves all rights in the Audible Security Code and
Documentation not expressly granted herein. Audible shall have no obligation
under this Agreement to provide any hardware, software or services that are not
expressly provided for herein.
3. DRM Development Assistance. Upon Microsoft's request, Audible shall answer
--------------------------
any Microsoft questions about the Audible Security Code, provide Microsoft with
input, design advice, and technical assistance in the development of DRM, and
advise Microsoft of its reasonable business needs with respect to support of
Content under DRM. Audible shall provide such assistance [ *** ].
4. DRM Implementation.
------------------
4.1 Utilization of DRM. Audible shall implement DRM on a non-exclusive
------------------
basis in the operation of Audible.com as soon as commercially reasonable after
DRM is made available to Audible for the purpose of licensing Audible Content
ported to DRM pursuant to a development agreement between Audible and Microsoft
to Electronic Book customers. Microsoft shall provide the client software to be
used to enable the Audible Content to be accessed by Electronic Book customers.
4.2 Client Software. Microsoft and Audible will evaluate and implement if
---------------
the anticipated development may be completed within the NRE Expenditure limit of
[ *** ] in the future the inclusion of standard DRM APIs into future versions of
the Client Software on non-exclusive basis, i.e. there may be other Content
security and rights-management software included in such future versions of the
Client Software.
4.3 Beta Releases and SDKs. No later than Microsoft provides such
----------------------
materials to any third party with similar input into the development of DRM,
Microsoft shall provide to Audible Microsoft's standard beta program releases
for DRM APIs and Microsoft's externally distributed software development kits
(SDKs) for DRM APIs, if available, for purposes of the work described in section
4.1 above.
4.4 Payments. In connection with Audible's efforts to enable audible.com
--------
to permit access to Content by Electronic Book customers as stated in Section
4.1 above Microsoft hereby agrees to reimburse Audible the amount of its NRE
Expenditures in a total amount not to exceed [ *** ]. Such NRE funds shall be
non-refundable. Audible shall invoice Microsoft for such sums as are actually
incurred on a monthly basis along with supporting materials documenting the NRE
Expenditures.
5. DRM Clearinghouse.
-----------------
______________
***Confidential Information has been omitted and has been filed separately with
the Securities and Exchange Commission.
6
<PAGE>
5.1 Nonexclusive Clearinghouse. (a) Microsoft anticipates that, in
--------------------------
conjunction with the distribution of DRM, it will license other entities
("Clearinghouses") to confirm that text, audio, software, or other content
encoded under DRM is properly licensed for End User use. In that event,
Microsoft shall designate Audible as a nonexclusive Clearinghouse as soon as
such designations are available, on terms at least as favorable as any similarly
situated Clearinghouse, including a license to DRM software necessary for
operating as a Clearinghouse. For that purpose, Microsoft hereby agrees to
deliver to Audible [ *** ], for a period of two years from the commercial
release of DRM, any Microsoft Product for securing electronic audio content with
DRM. Microsoft shall provide a number of copies of such Microsoft Products
sufficient for the operation of Audible.com. Audible's use of each such
Microsoft Product shall be subject to the standard Microsoft end user license
agreement included therewith, provided that such licenses must be perpetual and
must be [ *** ] during the two-year period after commercial release of DRM.
Microsoft shall refer any content providers wishing to secure their Spoken Word
Audio content under DRM to Audible (on a nonexclusive basis). Microsoft
anticipates that it will provide Clearinghouses with a secure publishing toolkit
to redistribute to content providers, to assist in the encoding of content
compatible with DRM or will encourage content providers to license such secure
publishing toolkit from Audible. For a period of two (2) years from the
commercial release of DRM, Microsoft agrees that Audible will be a [ *** ]
Clearinghouse and with regard to major [ *** ] by Microsoft in the field of
secure audio distribution over the Internet.
(b) After the expiration of said two-year period, Audible shall have
the option to continue as a Clearinghouse, and to acquire DRM-related Microsoft
Products as described above, on terms and pricing [ *** ].
5.2 Transaction Fees. Audible reserves the right to charge a fee to
----------------
content providers or End Users each time Audible, acting as a Clearinghouse,
confirms the licensing of DRM encoded content. In such event, Audible shall
share any such transaction fee with Microsoft as follows. Microsoft shall not
receive transaction fees under this Agreement on any given Audible revenues to
the extent Audible pays Microsoft transaction fees thereon under the Development
Agreement.
5.2.1 in all cases not covered by Section 5.2.2, the greater of [ ***
] of Net Transaction Revenues or [ *** ] of Gross Transaction Revenues, unless
otherwise provided below;
5.2.2 for each year that Microsoft chooses to exercise its option for
exclusive access rights pursuant to Section 7 of the Development Agreement, the
greater of [ *** ] of Net Transaction Revenues or [ *** ] of Gross Transaction
Revenues.
5.3 Payments. Payments of royalties owed by Audible to Microsoft for a
--------
given calendar month shall be made within thirty (30) days from the end of the
month, accompanied by documentation indicating the calculation of the royalties
due.
______________
***Confidential Information has been omitted and has been filed separately with
the Securities and Exchange Commission.
7
<PAGE>
5.4 Audit Provisions. During the term of this Agreement, Audible agrees to
----------------
keep all usual and proper records and books of account and all usual and proper
entries relating to Gross Transaction Revenues and Net Transaction Revenues.
Microsoft may cause an audit to be made of the applicable records in order to
verify invoices or other statements by Audible, and prompt adjustment shall be
made to compensate for any errors or omissions disclosed by such audit. Any
such audit shall be conducted by an independent certified public accountant
selected by Microsoft (other than on a contingent-fee basis) and shall be
conducted during regular business hours at Audible's offices and in such a
manner as not to interfere with Audible's normal business activities. Any such
audit shall be paid for by Microsoft unless material discrepancies are
disclosed. "Material" shall mean a discrepancy amounting to at least five
percent (5%) of the amount that should have been reported. If material
discrepancies are disclosed, Audible agrees to pay Microsoft for the reasonable
costs associated with the audit. Audible shall pay interest of one percent (1%)
per month on all moneys due Microsoft to remedy material discrepancies more than
six (6) months old at time of audit.
5.5 No Set Off. The payments due under this Agreement are not subject to
----------
any right of set-off except in the event of a good faith payment dispute.
6. Nondisclosure; Public Statements.
--------------------------------
6.1 Nondisclosure.
-------------
(a) The information and software (including source code and documentation
therefor) exchanged by the parties hereunder, including the terms and conditions
hereof, shall be subject to the Non-Disclosure Agreement (NDA) between the
parties dated June 5, 1998, which is attached hereto as Exhibit B. For purposes
of this Agreement such NDA shall be read as (i) applying to information and
software disclosed by the parties during the Term in connection with the
transactions contemplated herein, and (ii) with respect to any particular
information, having a term that survives as long as the applicable information
(including without limitation the source code of either party) remains within
the definition of Confidential Information.
(b) Notwithstanding the above, the parties agree that whether or not
intellectual property of the parties (including copyrighted works) is disclosed
in confidence, the intellectual property rights of the parties shall remain in
effect in accordance with the laws applicable to the intellectual property in
question. Nothing in this Section is intended to affect the understandings of
the parties elsewhere in this Agreement with respect to ownership and use of
intellectual property.
6.2 Press. Microsoft and Audible agree that they will publicly announce
-----
the cooperation of the parties with respect to rights management technology and
technology sharing and that the initial press release or communication to the
press and/or public regarding this Agreement and the parties' relationship shall
be made only after prior consultation with the other party. Subsequent accurate
press releases and other communications to the press and/or public
______________
***Confidential Information has been omitted and has been filed separately with
the Securities and Exchange Commission.
8
<PAGE>
regarding the parties' relationship may be made by either party subject to the
confidentiality obligations set forth in Section 6.1.
7. Term and Termination.
--------------------
7.1 Term. The term of this Agreement shall commence on the Effective Date
----
and unless terminated earlier as provided herein, shall continue for five (5)
years after the Effective Date.
7.2 Termination. In the event either party shall materially fail to
-----------
perform or comply with this Agreement or any provision thereof, and fail to
remedy the default within thirty (30) days after the receipt of notice to that
effect, then the other party shall have the right, at its sole option and upon
written notice to the defaulting party, to terminate this Agreement upon written
notice. Any notice of default hereunder shall be prominently labeled "NOTICE OF
DEFAULT." The rights and remedies provided in this section shall not be
exclusive and are in addition to any other rights and remedies provided by law
or this Agreement.
7.3 Survival. The following provisions shall survive termination of this
--------
Agreement: 2.3, 2.5, 6.1, 7.3, 8, 9 and10. Section 2.3 shall not survive
termination if the termination is due to Microsoft's violation of the terms of
Sections 2.3, 2.5 or 6.1, for failure to accept the Audible Security Code, or
for failure to pay amounts due under this Agreement. Section 9 only survives
termination for a period of two years.
8. Warranties.
----------
8.1 Audible. Audible warrants and represents that:
-------
8.1.1 It has the full power to enter into this Agreement;
8.1.2 It has not previously and will not grant any rights to any
third party that are inconsistent with the rights granted to Microsoft herein;
and
8.1.3 Except as noted in subsection 2.3(b), the Audible Security Code
and the Documentation is original to Audible, the Audible Security Code does not
include any third party software or code, and Microsoft' exercise of rights
granted to Microsoft hereunder in the Audible Security Code and the
Documentation shall not infringe any copyright, trade secret, or, to the best of
Audible's knowledge, any United States patent, trademark, or any other
proprietary or personal right held by any third party (provided that Audible
does not make any representation or warranty with respect to the combination of
the Audible Security Code or Documentation with any other hardware, software or
services not provided by Audible).
8.2 Microsoft. Microsoft warrants and represents that:
---------
8.2.1 It has the full power to enter into this Agreement; and
______________
***Confidential Information has been omitted and has been filed separately with
the Securities and Exchange Commission.
9
<PAGE>
8.2.2 It has not previously and will not grant any rights to any
third party that are inconsistent with the rights granted to Audible herein.
8.3 DISCLAIMER. EXCEPT AS EXPRESSLY STATED IN THIS SECTION 8, AUDIBLE
----------
PROVIDES THE AUDIBLE SECURITY CODE TO MICROSOFT ON AN "AS IS" BASIS AND AUDIBLE
AND MICROSOFT DISCLAIM ALL WARRANTIES UNDER THE APPLICABLE LAWS OF ANY COUNTRY,
EXPRESS OR IMPLIED, REGARDING THE AUDIBLE SECURITY CODE, THE DOCUMENTATION, THE
DRM, AND THE ABILITY OF THE PARTIES TO DEVELOP ANY PRODUCTS OR SERVICES RELATING
TO DRM, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR TITLE OR WARRANTY OF NON-INFRINGEMENT OF ANY INTELLECTUAL
PROPERTY OR WARRANTY AGAINST COMPUTER VIRUSES. IT IS THE ULTIMATE
RESPONSIBILITY OF MICROSOFT TO DETERMINE THE SUITABILITY OF THE AUDIBLE SECURITY
CODE FOR ITS NEEDS. AUDIBLE DOES NOT WARRANT THAT OPERATION OF ANY PRODUCTS
DERIVED FROM THE AUDIBLE SECURITY CODE WILL BE UNINTERRUPTED OR ERROR-FREE.
9. Indemnity.
----------
9.1 Indemnification. Each party shall, at its expense and the other
---------------
party's request, defend any claim or action brought against the other party and
its subsidiaries, affiliates, directors, officers, employees, agents and
independent contractors, to the extent it is based upon any product or service
offered by the indemnifying party, including a claim for infringement of any
patent, copyright, trademark, trade secret or other proprietary or personal
right of a third party, except to the extent arising from the contributions of
the other party. The indemnifying party will indemnify and hold the indemnified
party harmless from and against any damages finally awarded against the
indemnified party or agreed pursuant to a settlement in accordance with the
requirements of this Section, and any costs and fees (including without
limitation, attorneys' fees) reasonably incurred by the indemnified party that
are attributable to such a claim. The indemnifying party will not be
responsible for any settlement made by the indemnified party without the
indemnifying party's written permission, which permission will not be
unreasonably withheld. To the extent the indemnified party requests that the
other party defend such claim, the indemnified party shall (i) provide the
indemnifying party reasonably prompt notice in writing of any such claim or
action and permit the indemnifying party, through counsel mutually acceptable to
both parties, to answer and defend such claim or action; and (ii) provide the
indemnifying party information, assistance and authority, at the indemnifying
party's expense, to help to defend such claim or action. The indemnified party
will have the right to employ separate counsel and participate in the defense of
any claim or action which the indemnifying party is defending. The indemnified
party may not settle any claim or action under this Section 9 on the other
party's behalf without first obtaining the written consent of the indemnifying
party, which permission will not be unreasonably withheld.
______________
***Confidential Information has been omitted and has been filed separately with
the Securities and Exchange Commission.
10
<PAGE>
9.2 Settlement. In the event Microsoft and Audible agree to settle a
----------
claim or action under Section 9.1, each party agrees not to publicize the
settlement without first obtaining the written permission of the other party to
this Agreement, which permission will not be unreasonably withheld.
9.3 Duty to Correct. Notwithstanding anything in this Section 9, should
---------------
the Audible Security Code or the Documentation ("Infringing Materials"), or any
portion thereof, be held to constitute an infringement and use as contemplated
by this Agreement be enjoined or be threatened to be enjoined, Audible shall
notify the other party and immediately, at Audible's expense (not to exceed in
any event [ *** ]): (i) procure for Microsoft the right to continue use of such
Infringing Materials or portion thereof, as applicable, as licensed in this
Agreement; or (ii) replace or modify the Infringing Materials or portion thereof
with a version that is non-infringing, provided that the replacement or modified
version is functionally substantially equivalent.
9.4 Exclusion. The provisions of this Section 9 shall not apply to any
---------
claim of patent infringement against Microsoft or related parties to the extent
based upon the combination of the Audible Security Code or Documentation, or any
portion thereof, with hardware, software or services not provided by Audible.
10. General.
--------
10.1 Governing Law; Venue; Attorneys Fees. This Agreement shall be
------------------------------------
construed and controlled by the laws of the State of Washington, and each party
further consents to jurisdiction by the state or federal courts sitting in the
State of Washington. Process may be served on either party by U.S. Mail,
postage prepaid, certified or registered, return receipt requested, or by such
other method as is authorized by law. If either Microsoft or Audible employs
attorneys to enforce any rights arising out of or relating to this Agreement,
the prevailing party shall be entitled to recover reasonable attorneys' fees and
costs, including expert witness fees.
10.2 Notices; Requests. All notices and requests in connection with this
-----------------
Agreement shall be deemed given as of the day they are (i) deposited in the U.S.
mails, postage prepaid, certified or registered, return receipt requested; or
(ii) sent by overnight courier, charges prepaid, with a confirming fax; and
addressed as follows:
Audible: Audible, Inc.
65 Willowbrook Blvd.
Third Floor
Wayne, New Jersey 07470
Attention: Managing Director, Business & Legal Affairs
Fax: 973 890-2442
------------
Phone: 973 890-4070 x225
-----------------
______________
***Confidential Information has been omitted and has been filed separately with
the Securities and Exchange Commission.
11
<PAGE>
with a cc to: Piper & Marbury, L.L.P.
1200 Nineteenth Street, N.W.
Washington, D.C. 20036-2430
Attention: Edwin M. Martin, Jr.
Phone: 202-861-3900
FAX: 202-223-2085
Microsoft: MICROSOFT CORPORATION
One Microsoft Way
Redmond, WA 98052-6399
Attention: ______________________
with a cc to: MICROSOFT CORPORATION
One Microsoft Way
Redmond, WA 98052-6399
Attention: Vice President, Technology Development
----------------------
Phone: (425) 936-8180
--------------
Fax: (425) 936-7329
--------------
Attention: Law & Corporate Affairs Department
Fax: U.S. Legal Group
(425) 936-7329
or to such other address as the party to receive the notice or request so
designates by written notice to the other.
10.3 Assignment. Audible may not assign this Agreement or any portion
----------
thereof, to any third party unless Microsoft expressly consents to such
assignment in writing. In the event Microsoft does not consent to such
assignment or consents to such assignment with conditions that are not
acceptable to Audible, if Audible wishes to pursue the assignment, then
Microsoft may terminate this Agreement (except for the provisions that survive
as stated in Section 7.3) as its sole remedy and Audible may continue with the
proposed assignment. Such termination shall not result in any liability from
one party to the other except for amounts that were due and payable on the date
of termination. This Agreement will inure to the benefit of and be binding upon
the parties, their successors, administrators, heirs, and permitted assigns.
10.4 Severability. In the event that any provision of this Agreement is
------------
found invalid or unenforceable pursuant to judicial decree or decision, the
remainder of this Agreement shall remain valid and enforceable according to its
terms. The parties intend that the provisions of this Agreement be enforced to
the fullest extent permitted by applicable law. Accordingly, the
______________
***Confidential Information has been omitted and has been filed separately with
the Securities and Exchange Commission.
12
<PAGE>
parties agree that if any provisions are deemed not enforceable, they shall be
deemed modified to the extent necessary to make them enforceable.
10.5 Entire Agreement; Modification; No Offer. The parties hereto agree
----------------------------------------
that this Agreement (and the Microsoft Non-Disclosure Agreement to the extent
incorporated herein) constitutes the entire agreement between the parties with
respect to the subject matter hereof and merges all prior and contemporaneous
communications. It shall not be modified except by a written agreement dated
subsequent hereto signed on behalf of Audible and Microsoft by their duly
authorized representatives. Neither this Agreement nor any written or oral
statements related hereto constitute an offer, and this Agreement shall not be
legally binding until executed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the dates indicated below.
MICROSOFT CORPORATION AUDIBLE, INC.
/s/ Dick Brass /s/ Andrew J. Huffman
- -------------------------- -------------------------------------
By (sign) By (sign)
Dick Brass Andrew J. Huffman
- -------------------------- -------------------------------------
Name (Print) Name (Print)
Vice President President and CEO
- -------------------------- -------------------------------------
Title Title
11/04/98 11/04/98
- -------------------------- -------------------------------------
Date Date
______________
***Confidential Information has been omitted and has been filed separately with
the Securities and Exchange Commission.
13
<PAGE>
EXHIBIT 10.3
AGREEMENT
This Agreement is effective as of November 12, 1998 (the "Effective Date"),
between REALNETWORKS, INC., with an address at 1111 Third Avenue, Suite 2900,
Seattle, Washington 98101 ("RN"); and AUDIBLE INC., with an address at 65
Willowbrook Blvd., Wayne, NJ 07470 ("Audible"). In consideration for the
rights and licenses granted below, the parties hereby agree as follows:
WHEREAS, Audible is in the business of licensing, creating, delivering and
offering for playback through the desktop and mobile audio devices digital sound
files over the Internet and corporate intranets;
WHEREAS, RN is in the business of developing and distributing technology and
products to enable the real-time transmission and playback of digital data files
through a server-client system over the Internet and corporate intranets;
WHEREAS, Audible desires to develop certain of its products to be compatible and
interoperable with certain RN products in order to enable the delivery and
desktop playback of Audible-enabled digital sound files through RN's RealPlayer,
as further defined below; and
WHEREAS, RN desires to promote and distribute certain Audible Products, as
further defined below, and desires the RealPlayer G2 (and all future versions of
the RealPlayer which may be developed during the Term) to be a preferred desktop
player for Audible-enabled digital sound files.
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Definitions.
-----------
1.1 "Active Merchandising" shall mean RN's marketing of Audible Content
Bundles to be sold with RealPlayer Plus, described more fully in Sections 4.2
and 8.
1.2 "Advance" means a non-refundable payment.
1.3 "Audible Content" means spoken word or musical content licensed by
Audible from third party licensors or produced by Audible, which content is
encoded into Audible's file format and is accessible for playback using the
then-current Audible decoder(s) during the Term.
1.4 "Audible Desktop Player" means the Audible software currently used to
play back Audible Content on personal computers (which do not include handheld
computers or other mobile devices not specifically deemed personal computers).
1.5 "Audible Documentation" means End User License Agreements,
instructions, users' guides, manuals, diagrams and other written material,
whether in printed or electronic form and intended for end users and which
describes the installation, functions, use and operation of the Audible
Products.
_________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
1
<PAGE>
1.6 "Audible Plug-in" means the software developed by or on behalf of
Audible that when added to RealPlayer G2 (and to future versions of the
RealPlayer that may be developed during the Term) enables the desktop playback
of Audible Content.
1.7 "Audible Product(s)" means the Audible hardware player ("Audible
MobilePlayer") and Audible's client software ("Audible Client Software"), all as
of the date of execution of this Agreement and solely as they may be modified
during the Term and as further described on Exhibit A hereto, and related
Documentation.
1.8 "Audible Third Party Product" means mobile playback devices utilizing
proprietary functionality licensed by Audible to third parties.
1.9 [* * *].
1.10 "RealPlayer" means the client portion of RN's client-server
RealSystem designed primarily to be used for Internet or intranet-based delivery
of streaming audio, video and other media, and which enables the playback of RN-
formatted media files over the Internet or a corporate intranet on an end user's
personal computer.
1.11 "RN Codecs" means audio compression and decompression software
wholly-owned by RN. Specific RN Codecs are described more fully in attached
Exhibit G.
1.12 [* * *].
1.13 [* * *].
2. RN's Rights and Obligations.
---------------------------
2.1 License. Audible hereby grants RN a non-exclusive, non-transferable,
-------
worldwide license to market, sublicense for distribution and distribute Audible
Products on a stand-alone basis and bundled with other RN products, both in
physical formats and electronically from RN's website, and through RN's
distributors. RN's right to "sublicense for distribution" shall be governed by
the Price List set forth in Exhibit F and as it may be amended during the Term.
2.2 Sales Efforts. [* * *]. RN will include pertinent information about
-------------
the Audible Products in all RN's promotional and marketing materials targeted
for Intranet customers.
2.3 Fair Dealing. In conducting all activities relating to the Audible
------------
Products hereunder, RN agrees to: (i) conduct business in a manner that reflects
favorably at all times on the Audible Products and Audible's good name, goodwill
and reputation; (ii) not employ deceptive, misleading or unethical practices
that are or might be detrimental to the Audible Products, including
disparagement of Audible or the Audible Products; (iii) not make any false or
misleading representations with regard to Audible or the Audible Products; (iv)
not publish or employ any misleading or deceptive advertising material; (v) not
make any representations, warranties or guaranties to anyone with respect to the
specifications, features or capabilities of the Audible Products that are
inconsistent with the literature distributed by Audible, including all
warranties and disclaimers contained in such literature; and (vi) not engage in
illegal or deceptive trade practices with respect to the Audible Products.
_________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
2
<PAGE>
2.4 Mobile Content Site. RN shall maintain a "Mobile Content Site" as
-------------------
part of its Daily Briefing/Timecast sites, and/or successors thereto. [* * *]
The parties will cooperate to secure the participation of additional content
providers in the Mobile Content Site. In addition, Audible may supply excerpts
of Audible Content for distribution via the Mobile Content Site. Such excerpts
shall be chosen at Audible's discretion and approved by RN, approval of which
will not be unreasonably withheld. Such excerpts may be updated from time to
time upon mutual agreement.
2.5 [* * *]
2.6 Audible.com Link in "Sites". Upon the availability of the public Gold
----------------------------
version of the Audible Plug-in RN will feature Audible.com in the "Sites " pull-
down menu in the next immediate release of the RealPlayer G2 (and in the
comparable menu of future versions of the RealPlayer which may be developed
during the Term) releases and/or on its website(s). Such feature in "Sites" or
its successor shall include "pull-downs" to sub-categories within Audible.com.
2.7 RN Technical Support. RN will make commercially reasonable best
---------------------
efforts to provide technical support to Audible in support of Audible's
Product Development efforts as defined below in Section 3.1.
2.8 RN Codecs
---------
2.8.1 [* * *]
_________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
3
<PAGE>
2.8.2 In consideration for RN's grant to Audible [* * *] Audible
shall pay RN a one-time royalty per Audible MobilePlayer and Audible Third Party
Product which contains any one or more such RN [* * *] actually used by end-
users (net of returns), at the rates set forth in Exhibit H. The royalty shall
be payable as of the "Royalty Commencement Date" as defined in Exhibit H, and
shall be paid in accordance with the terms of Exhibit H. This royalty payment
obligation, and the payment terms of Exhibit H, shall survive the termination of
this Agreement, and shall remain in full force and effect during the five year
period set forth in Section 2.8.1. End users who license, acquire or purchase
Audible Products, Audible Content or Audible Third Party Products containing any
RN Codec or [* * *] during the Term shall have the right to use the same in
perpetuity.
2.8.3 [* * *] Such bundle may, in Audible's discretion,
contain other Audible software.
2.9 Mobile RealAudio Download Functionality.
----------------------------------------
2.9.1 RN will make commercially reasonable efforts to ensure that its
encoding tools present the mobile download option, which may be enabled by end
users of said encoding tools, upon the earlier of the release of the Gold
version of its G2 encoding tools or [* * *] of execution of this Agreement.
2.9.2 [* * *]
2.9.3 Audible shall develop a client plug-in (at Audible's discretion
part of the Audible Plug-in) to provide "mobile download client functionality"
for Mobile RealAudio files ("Client Plug-in"). The Client Plug-in will present
customers with an "easy-to-use" and seamless content download option. Audible
will use its best efforts to develop and make available for distribution the
Client Plug-in upon the release of the Gold version of its G2 encoding tools, [*
* *] of execution of this Agreement.
3. Audible's Rights and Obligations.
--------------------------------
3.1 Product Development. Audible will use its best efforts to create an
-------------------
Audible Plug-in for RealPlayer G2 [* * *] of execution of this Agreement,
assuming RN has provided commercially reasonable timely and effective support to
Audible in its efforts to develop and deploy the Audible Plug-in. The Audible
Plug-in shall allow the RealPlayer G2 to play back Audible Content. [* * *]. RN
will introduce Audible to outside contractors with whom RN has worked should
Audible desire to obtain their services in connection with the development of
the Audible Plug-in.
3.2 Beta Releases. So that RN will remain fully knowledgeable about the
-------------
Audible Products, Audible will provide RN with private beta releases of the
Audible Products as soon as such releases are available, and with reasonable
notice and access to planned product changes.
3.3 Order Fulfillment. All orders of Audible Products from RN customers
-----------------
will be fulfilled by Audible provided that Audible's standard costs of shipping
& handling will be collected by RN and promptly remitted to Audible. The
parties shall agree on ordering, fulfillment, and billing methods.
_________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
4
<PAGE>
3.4 [* * *].
4. Audible Advances.
----------------
4.1 Total Advance. Audible will pay RN Advances in accordance with
-------------
Sections 4.2 through 4.6, below, totaling $250,000.
4.2 Content Sales Advance. Audible will pay a Content Sales Advance of
---------------------
$[* * *] against RN's revenue share for the joint sale of Audible Content
Bundles. Content Bundles shall consist of approximately [* * *] Audible Content
titles and shall be offered for sale by RN as an optional attachment to all
versions of RealPlayer Plus sales for a minimum of [* * *] days of Active
Merchandising. RN shall commence Active Merchandising promptly after release of
the Audible Plug-in for RealPlayer G2 upon written notice to Audible. All
Content Bundles shall be hosted and delivered from Audible servers in a fashion
that shall be completely transparent to the customer who will only see that the
Content Bundles are originating from the RN web site. RN shall be responsible
for all customer billing associated with the sale of Content Bundles.
By way of example, Content Bundles may be priced at $[* * *] or $[* *
*] and may consist of thematically linked Audible Content titles (e.g. "Comic
Genius", "Great Reads") or the customer may have the option to select a certain
number of Audible Content titles from a broad selection of Audible Content. As
part of RN's obligation to engage in such Active Merchandising, RN shall use
commercially reasonable best efforts to engage in a variety of marketing tests
to determine the most effective marketing program that will result in the
greatest number of sales of Content Bundles. By way of example, such tests
shall include placement of access to the Content Bundles in different areas of
the RealStore, [* * *], tests of advertising methods, co-development of
promotions, and other commercially reasonable efforts to develop the most
effective marketing and sales program. [* * *].
The payment of the Content Sales Advance shall be as follows:
4.2.1 Audible shall pay an Advance of $[* * *], due and payable [* *
*] days after the Effective Date;
4.2.2 Audible shall pay an Advance of $[* * *], due and payable [* *
*] days after commencement of Active Merchandising by RN;
4.2.3 Audible shall pay an Advance of $[* * *], due and payable [* *
*] days after commencement of Active Merchandising by RN.
4.3 Content Sales Revenue Share. The parties' respective revenue shares
---------------------------
from joint sales of Audible Content Bundles shall be as follows:
4.3.1 "Gross Revenue From Content Bundles" from such joint sales
shall mean any and all revenue generated by such sales;
4.3.2 The parties shall be reimbursed from Gross Revenue from
Content Bundles for any reasonable actual out-of-pocket third party obligations
directly attributable to such joint sales. The parties shall provide each other
with a written accounting of all such third party obligations on a monthly
_________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
5
<PAGE>
basis, commencing on the date the Content Bundles are initially offered for sale
and continuing for as long as the Content Bundles are offered for sale;
4.3.3 Any third party obligations directly attributable to such
joint sales which cannot be reimbursed in a sales period because of insufficient
Gross Revenue From Content Bundles shall carry over to subsequent sales periods,
and shall be reimbursed from Gross Revenue From Content Bundles in subsequent
sales periods;
4.3.4 After payment of any such third-party obligations, Audible
shall be entitled to all revenues generated from the sale of Content Bundles
until Audible has fully recouped the Content Sales Advance as set forth in
Section 4.2 above. Immediately upon Audible's full recoupement, the amounts
remaining after such third-party reimbursements shall be [* * *] RN and Audible.
4.3.5 Audible shall provide RN with a detailed statement of account,
together with a check in the amount of any payment due hereunder, on a monthly
net 30 day basis commencing on the date the Content Bundles are initially
offered for sale.
4.4 Royalty Advance for Playback Devices. Audible will pay a Royalty
------------------------------------
Advance of $[* * *] applied to royalties owed by Audible for the first [* * *]
units of Audible-enabled mobile playback devices (referenced in paragraph 2.8.2
above), based upon the royalty rate of $[* * *] per unit. This Royalty Advance
shall be due and payable [* * *] days after the Effective Date [* * *]. The
royalty rates set forth in this section 4.4 are payable per-unit. Audible shall
pay one royalty per Audible-enabled playback device that accesses and plays
RealAudio files or Audible files encoded using the RN [* * *]. The royalty rates
and terms for additional units are set forth in Exhibit H.
4.5 [* * *].
4.5.1 [* * *].
4.5.2 [* * *].
4.5.3 [* * *].
4.5.4 [* * *].
4.6 Banner Advertising Advance. Audible will pay RN a Banner Advertising
--------------------------
Advance of $ [* * *], which RN shall apply, to advertising fees incurred by
Audible for banner advertising on RN web sites. This Banner Advertising Advance
shall be paid in the following manner: RN and Audible shall mutually agree upon
an advertising schedule (including number of impressions and locations of
advertisements) pursuant to which, for example, at the applicable rates,
Audible's fees shall be approximately $[* * *] per month for a [* * *] month
schedule. The applicable rates for such Audible advertising shall be at the most
favorable ratecard offered by RN to third parties for comparable advertising at
the time the schedule is agreed upon by Audible and RN. Advertising fees
incurred by Audible shall be invoiced and shall be payable according to RN's
standard policies. Subject to RN's commercially reasonable best efforts to
deliver on the mutually agreed-up advertising schedule, the full amount of this
$[* * *] Banner Advertising Advance shall be paid by Audible no later than [* *
*].
_________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
6
<PAGE>
5 G2 Plug-In Release.
------------------
5.1 Plug-In Release. Audible shall make best efforts to release a plug-in
---------------
for the RealPlayer G2 enabling the playback of Audible Content, developed
pursuant to the Real Media Architecture Agreement entered into contemporaneously
with this Agreement. RN will make commercially reasonable efforts to provide
timely and effective support to Audible relating to the development and
deployment of this plug-in. Audible shall release this plug-in no later than [*
* *], and shall release a client plug-in enabling mobile RealAudio downloading
as soon as possible thereafter.
5.2 [* * *].
5.3 [* * *].
5.4 [* * *].
6. Support and Maintenance.
-----------------------
6.1 Customer Support. RN will provide first tier Support to its customers
----------------
who purchase less than 1,000 units of the Audible MobilePlayer. Audible shall
provide Support to customers who purchase 1,000 or more units and whom have
requested support directly from the manufacturer. Audible will, in turn,
support RN's customer support staff in a commercially reasonable manner. The
parties will agree on appropriate levels of Support for the Audible Products,
but at a minimum each party will provide Support at the same professional and
customer access levels as such party generally provides its customers for other
of its products. In addition, Audible will designate a salesperson to do one
demonstration of the Audible Products to RN's customers if the parties agree
that it is appropriate.
6.2 Training. As soon as possible after the Effective Date, at its own
--------
expense, Audible will exercise commercially reasonable best efforts to train
RN's customer support personnel to be able to provide Support for the Audible
Products. Such training shall occur at a mutually agreed upon location and
time. Audible will provide RN's customer support personnel with on-going access
to continuing training as reasonably mutually determined to be necessary to
allow RN to meet its Support requirements as set forth in this Agreement.
6.3 Product Marketing Materials. As of the Effective Date, Audible has
---------------------------
supplied RN with background material concerning the nature, operation and
customer benefits of the Audible Products, including but not limited to product
descriptions, target customer segments, ROI analysis for corporate users, and
descriptions of appropriate Audible Content. [* * *]. Audible shall provide RN
with updates and additions to such background material if, as and when available
and will promptly reply to any questions from RN about such background material.
[* * *].
7. [* * *] Development and Licensing Efforts.
---------------------------------
7.1 Audible Security Technology. Audible and RN may work together, if
---------------------------
the parties agree it is commercially reasonable to do so, to adapt the Audible
security technology into marketable server, tool and/or player products. At a
minimum, under the RMA Agreement (see Section 3.1), Audible shall have the right
to sell its RMA-based products incorporating Audible's security technology to
RMA customers, subject to the terms of the RMA Agreement. In addition, and if
RN and Audible agree that the Audible security technology is able to be extended
and enhanced, the parties shall negotiate in good faith a
_________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
7
<PAGE>
mutually acceptable licensing agreement which allows RN to resell such
technology and include it in RN's product line.
7.2 [* * *] Licensing Efforts. [* * *]
-----------------
7.3 IMAS Pilot Program. The parties agree to make commercially reasonable
-------------------
best efforts to have in place at least [* * *] successful corporate reference
deployments (as reasonably determined by the parties in good faith) within [* *
*] days of execution of this Agreement as part of the Pilot Program designed to
illustrate the appeal of the Audible Products. Audible shall make up to a total
of [* * *] Audible MobilePlayers (inclusive of all [* * *] program participants)
available [* * *] or the program participants provided that such qualified
corporate customers are of a mutually agreed upon quality and prominence. RN
shall provide all such program participants with sufficient intranet server
software and [* * *] to participate in the program.
7.4 IMAS Commercial Rollout. [* * *]. Audible agrees to fully cooperate
-----------------------
with RN in support of such a roll-out.
7.5 Music Codec Collaboration. Audible and RN will make commercially
----------------------------
reasonable efforts to select appropriate codecs for music content, taking into
consideration issues including but not limited to performance and cost. If RN
can provide a music codec acceptable to Audible, and Audible desires to use such
codec, RN shall license Audible such codec under the terms and conditions of
Section 2.11 of this Agreement. If Audible uses a music codec other than one
provided by RN, Audible shall make commercially reasonable best efforts to
enable the Audible Plug-in to play streaming and downloaded music content via
the RealPlayer.
8. Marketing Activities. The parties agree to cooperate in good faith on
--------------------
mutually beneficial promotional and marketing activities, including but not
limited to those activities set forth below:
8.1 RN Marketing Programs. RN shall generate marketing programs from time
---------------------
to time which may include but will not necessarily be limited to direct mailing,
advertising, and limited-time promotional bundles. Audible will assist RN in
these marketing programs through mutually agreed to special hardware pricing,
content pricing, or other mutually agreed to considerations. In addition,
Audible will, at RN's reasonable request, will provide RN with marketing
collateral regarding the Audible Products, and assistance with sponsoring agreed
upon marketing events.
8.2 Promotion of Audible. RN shall make marketing and promotional
--------------------
information about the Audible Products and the Audible web site available from
various RN web sites within [* * *] of the Effective Date. [* * *].
8.3 [* * *].
8.4 Not for Resale Copies. Audible will provide RN, at no charge, a
---------------------
reasonable number of copies of the Audible Products for internal testing
purposes and for use in providing demonstrations to prospective customers.
8.5 Public Announcements. The parties agree to jointly implement
--------------------
appropriate public relations activities in support of the launch of the Audible
Products. The parties will cooperate on a press release and other activities
intended to generate press coverage for the activities contemplated by this
_________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
8
<PAGE>
Agreement. Each party must obtain the prior written consent of the other party
before publishing or releasing any press release, advertising or other publicity
concerning this Agreement or the relationship. The parties shall not issue any
press release or other publicity concerning the nature of this Agreement until
the Audible plug-in for RealPlayer G2 is released.
8.6 Promotion of RN. Audible shall make sufficient marketing and
---------------
promotional information, subject to RN's approval, about RN and the RealPlayer,
including web links to Real.com, available from the Audible web site within 30
days of the release of the Audible Plug-in.
9. Use of Trademarks.
-----------------
9.1 RN Marks. Audible acknowledges that the marks of RN identified on
--------
Exhibit C and other marks used by RN in connection with the RN Products (the "RN
Marks") are trademarks of RN. RN hereby grants to Audible a non-exclusive, non-
transferable, limited license to use, and Audible agrees that it shall always
use, the RN Marks solely in connection with Audible's advertising, marketing and
distribution of the Audible MobilePlayer and Audible Products which incorporates
RN technology. Audible shall only use such trademarks in the form and manner set
forth in RN's Trademark Usage Guidelines, as set forth on Exhibit C, or as
otherwise prescribed by RN from time to time. Audible agrees to cooperate with
RN in facilitating RN's monitoring and control of the nature and quality of
products and services bearing the RN Marks, and to supply RN with specimens of
Audible's use of the RN Marks upon request. Audible understands and agrees that
the use of any RN Mark in connection with this Agreement shall not create any
right, title or interest, in or to the RN Marks and that all such use and
goodwill associated with the RN Marks will inure to the benefit of RN.
9.2 Audible Marks. RN acknowledges that the marks of Audible identified
-------------
on Exhibit E and other marks used by Audible in connection with the Audible
Products (the "Audible Marks") are trademarks of Audible. Audible hereby grants
to RN a non-exclusive, non-transferable, limited license to use, and RN agrees
that it shall always use, the Audible Marks solely in connection with RN's
advertising, marketing and distribution of the Audible Products. RN shall only
use such trademarks in the form and manner set forth in Audible's Trademark
Usage Guidelines, as set forth on Exhibit E, or as otherwise prescribed by
Audible from time to time. RN agrees to cooperate with Audible in facilitating
Audible's monitoring and control of the nature and quality of products and
services bearing the Audible Marks, and to supply Audible with specimens of RN's
use of the Audible Marks upon request. RN understands and agrees that the use
of any Audible Mark in connection with this Agreement shall not create any
right, title or interest, in or to the Audible Marks and that all such use and
goodwill associated with the Audible Marks will inure to the benefit of Audible.
9.3 Notices. Neither party shall remove or alter any trademark, service
-------
mark, trade name, copyright or other proprietary notices appearing on or in
copies of either party's products referred to herein or any documentation
associated therewith, and shall include the same notices in and on all copies of
any literature or materials made pursuant to this Agreement.
9.4 Except as necessary to comply with Section 9.3, above, no rights in
the trademarks, service marks, trade names, or other identifying names or
symbols of third parties are conferred by this Agreement, [* * *].
10. Limitations on Rights. Except as expressly provided herein, the parties
----------------------
shall not copy, modify, reproduce, display, decompile, reverse engineer,
localize, store, translate, sell, lease or otherwise transfer,
_________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
9
<PAGE>
distribute or use any of the other party's Products or Documentation, in whole
or in part, without the other party's prior written consent. All rights not
specifically granted herein with respect to the RN Products are reserved to RN,
and with respect to the Audible Products are reserved to Audible. Each party
acknowledges that the other party's Products are being licensed, not sold to it,
and that any distribution or delivery of any Products to an End User will be by
license, which the End User will be required to accept prior to being able to
use the Product.
11. Compensation, Pricing and Payment.
---------------------------------
11.1 Audible MobilePlayer. Audible will provide the Audible MobilePlayer
--------------------
and associated Audible Client Software to RN according to the Price List
attached hereto as Exhibit F. The parties agree to review and may agree to
revise the Price List based upon commercially reasonable data every six months
during the Term or as otherwise agreed to in writing by the parties.
11.2 [* * *].
11.3 Payment. RN shall pay Audible for the Audible Products within thirty
-------
(30) days of receipt of an invoice from Audible which reflects the purchase
orders submitted by RN during the invoiced period. Audible shall pay RN
royalties based on sales of hardware players bundled with RN technology in
accordance with Section 2.10 and Exhibit H.
11.4 Taxes.
-----
11.4.1 Audible shall pay all taxes, duties, import and export fees,
and any other charges or assessments which are applicable to Audible's
performance of this Agreement, and shall indemnify and hold RN harmless from any
encumbrance, fine, penalty, or other expense which RN may incur as a result of
Audible's failure to pay any such taxes, duties, fees, charges, or assessments.
All amounts under this Agreement not paid by Audible when due shall accrue
interest at the rate of one and one half-percent (1.5%) per month or the maximum
amount allowed by law, whichever is lower.
11.4.2 RN shall be responsible for paying all sales and RN corporate
income taxes imposed on the sale of the Audible Products by RN. RN shall pay all
taxes, duties, import and export fees, and any other charges or assessments
which are applicable to RN's performance of this Agreement, and shall indemnify
and hold Audible harmless from any encumbrance, fine, penalty, or other expense
which Audible may incur as a result of RN's failure to pay any such taxes,
duties, fees, charges, or assessments. All amounts under this Agreement not paid
by Audible when due shall accrue interest at the rate of one and one half-
percent (1.5%) per month or the maximum amount allowed by law, whichever is
lower.
_________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
10
<PAGE>
12. Proprietary and Confidential Information.
----------------------------------------
12.1 Title. Title to and ownership of all copies of the RealPlayer and
-----
Documentation, whether in machine-readable or printed form, and including,
without limitation, derivative works prepared by Audible (but excluding the
Audible Plug-in) or RN, and all related technical know-how and all rights
therein (including, without limitation, rights in patents, copyrights, and trade
secrets applicable thereto), are and shall remain the exclusive property of RN
and its suppliers. Audible shall not take any action to jeopardise, limit or
interfere in any manner with RN's ownership of and rights with respect thereto.
Title to and ownership of all copies of the Audible Products, the Audible Plug-
in and Documentation, whether in machine-readable or printed form, and
including, without limitation, derivative works prepared by Audible, and all
related technical know-how and all rights therein (including, without
limitation, rights in patents, copyrights, and trade secrets applicable
thereto), are and shall remain the exclusive property of Audible and its
suppliers. RN shall not take any action to jeopardise, limit or interfere in
any manner with Audible's ownership of and rights with respect thereto.
12.2 Reverse Engineering. Except as expressly provided herein, neither
-------------------
party shall reverse engineer, decompile, reverse translate, or in any way
attempt to derive any source code from the other's Products, or authorize or
allow any of the foregoing, without the other party's prior written consent.
12.3 Enforcement Responsibilities. Each party shall take all reasonable
----------------------------
measures to ensure that the other's rights in the Products are not infringed and
that all provisions in the End User License Agreements are honored. In the
event of any violations or suspected violations of such, each party shall
immediately notify the other and shall assist the other party to take whatever
action is appropriate, including litigation to enforce such provisions.
12.4 Confidentiality Each party will keep confidential and will take all
---------------
necessary steps and precautions to cause its agents and employees to keep
confidential the: (i) terms and conditions of this Agreement; and (ii) and any
and all other information, whether disclosed orally or in writing, which is
furnished by one party or which comes to the attention of or is acquired by the
other party, and which is declared confidential, or should reasonably be
construed to be confidential, including, but not limited to, information
pertaining to business activities and operations, reports, ideas, concepts,
techniques, designs, specifications, drawings, diagrams, data, code, customer
lists, financial information, pricing information, business plans, company
goals, expansion plans, or other technical or business information (collectively
"Confidential Information"). Any Confidential Information disclosed in writing
or in some other tangible form shall prominently display the phrase
"Confidential Information." Each party agrees to safeguard the same from
unauthorized disclosure or use. In addition, except as expressly provided
herein, each party agrees not to disassemble, decompile, or otherwise reverse
engineer the Products or technology of the other party or otherwise attempt to
learn the source code, structure or algorithms or ideas underlying such products
or technology or any Confidential Information, without the other party's prior
written consent. The parties' obligations set forth in this section shall
survive any expiration or termination of this Agreement. Upon a party's
request, the other party shall promptly return all Confidential Information and
all copies thereof, if any.
12.5 Limitations on Obligations. The obligations of confidentiality and
--------------------------
non-disclosure imposed under this Section 10 shall not apply to data and
information which: (a) is published or otherwise becomes available to the
general public as part of the public domain without breach of this Agreement;
(b) is furnished to a party by a third person which does not involve a breach of
the third person's obligations to party owning the Confidential Information; (c)
was in a party's possession prior to the
_________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
11
<PAGE>
disclosure by the non-disclosing party in accordance herewith or pursuant to
other Agreements between the parties; (d) a party is required by law, regulation
or judicial process, to disclose; or (e) a party establishes was developed
independently of Confidential Information furnished to it.
13. Warranties.
----------
13.1 Audible hereby represents to RN that: (a) Audible is the exclusive
owner of all rights and interests in the Audible Products (exclusive of those
elements licensed from third parties) and has the right to grant the rights
granted to RN herein; (b) neither the Audible Products nor the marketing or sale
of the Audible Products by RN as authorized by this Agreement infringes any
copyright, patent, trademark, license or other proprietary right of any person
or entity; (c) the Audible Products do not contain any material that is libelous
or defamatory or that discloses private or personal matters concerning any
person, obscene, indecent or pornographic material or any computer "virus" or
other contaminating or destructive feature; and (d) for a period of ninety (90)
days from the date of delivery to the end user, that the Audible Products will
perform in accordance with Audible's specifications and marketing materials
concerning such Audible Products.
13.2 [* * *].
13.3 NO WARRANTY, CONDITION, UNDERTAKING OR TERM, EXPRESS OR IMPLIED,
STATUTORY OR OTHERWISE, AS TO THE CONDITION, QUALITY, DURABILITY, PERFORMANCE,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF EITHER PARTY'S RESPECTIVE
PRODUCTS IS GIVEN OR ASSUMED BY EITHER PARTY AND ALL SUCH WARRANTIES,
CONDITIONS, UNDERTAKINGS AND TERMS ARE HEREBY EXCLUDED.
14. [* * *]
15. Limitation of Liability. UNDER NO CIRCUMSTANCES AND UNDER NO LEGAL THEORY,
-----------------------
WHETHER IN TORT, CONTRACT OR OTHERWISE, SHALL EITHER PARTY BE LIABLE TO THE
OTHER PARTY OR ANY OTHER PERSON FOR ANY INDIRECT, SPECIAL,
_________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
12
<PAGE>
INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES OF ANY CHARACTER INCLUDING,
WITHOUT LIMITATION, DAMAGES FOR LOSS OF GOODWILL, WORK STOPPAGE, COMPUTER
FAILURE OR MALFUNCTION EVEN IF THE PARTY SHALL HAVE BEEN INFORMED OF THE
POSSIBILITY OF SUCH DAMAGES.
16. Term and Termination.
--------------------
16.1 Term. This Agreement shall commence on the Effective Date and shall
----
terminate two (2) years thereafter (the "Term"). This Agreement may only be
renewed or extended pursuant to an agreement in writing that is signed by the
authorized representatives of both parties.
16.2 Termination for Breach. This Agreement may be terminated by either
----------------------
party for cause immediately by written notice upon the occurrence of any of the
following events: (i) if the other ceases to do business, or otherwise
terminates its business, other than by reason of a sale of all or substantially
all of the assets of such party or the merger or consolidation of such party;
(ii) if the other breaches any material provision of this Agreement and fails to
fully cure such breach within thirty (30) days' of written notice describing the
breach; or (iii) if the other becomes insolvent or seeks protection under any
bankruptcy, receivership, trust, deed, creditor's arrangement, or comparable
proceeding, or if any such proceeding is instituted against the other and not
dismissed within thirty (30) days. Either party may cease marketing, selling,
or distributing any product hereunder immediately and without notice if the
other party reasonably believes that such action is necessary in order to avoid
potential liability to third parties or under applicable law.
16.3 Effect of Termination. Upon termination of this Agreement, RN will
---------------------
stop marketing and selling the Audible Products, but RN may distribute its
existing inventory of Audible Products and may distribute Audible Products
electronically or physically as necessary to meet customer commitments in effect
as of the date of termination, in accordance with this Agreement for a period of
up to one hundred eighty (180) days. RN shall continue to pay Audible for all
Audible Products distributed during such 180 period as provided in Sections 2.1,
11.1 and Exhibit F. Upon termination of this Agreement, Audible shall stop
marketing and selling the RealPlayer and shall be under no further obligation to
use the RealPlayer as Audible's desktop player; however, Audible may continue
distributing the RealPlayer as provided herein for a period of up to one hundred
eighty (180) days. Termination by either party will not affect the rights of any
end user under the terms of the End User License Agreement.
16.4 Survival. The provisions of Sections 2.8, Exhibit H, 10, 12, 13, 14,
--------
15, 16.3, 16.4, 17 and 18 shall survive expiration or termination of this
Agreement.
17. Dispute Resolution. Any dispute arising out of or relating to this
------------------
Agreement shall be resolved in accordance with the procedures specified in this
Section 17, which shall be the sole and exclusive procedures for the resolution
of any such dispute.
17.1 Executive Negotiations. The parties shall attempt in good faith to
----------------------
resolve any dispute relating to this Agreement promptly by negotiation between
executives who have authority to settle the controversy. In the event a dispute
cannot be resolved, either party may give the other party written notice of any
dispute not resolved in the normal course of business. Within fifteen (15)
days after delivery of such a notice, the receiving party shall submit to the
other a written response. The notice and response shall include a statement of
each party's position and a summary of arguments supporting that position.
Within thirty (30) days after delivery of the disputing party's notice, the
senior executive
_________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
13
<PAGE>
officers of Audible and RN shall meet at a mutually acceptable time and place,
and thereafter as often as they reasonably deem necessary, to attempt to resolve
the dispute. All reasonable requests for information made by one party to the
other will be honored. All negotiations pursuant to this Section 17.1 are
confidential and shall be treated as compromise and settlement negotiations for
purposes of the Federal Rules of Evidence and state rules of evidence.
17.2 Arbitration. If any dispute relating to this Agreement shall not have
-----------
been resolved through the use of the non-binding procedures specified in Section
17.1 within one hundred (100) days of the initial notice of either party to the
other of a dispute, such dispute shall be settled by binding arbitration;
provided, however, that if one party has requested the other to participate in
the non-binding procedure specified in Section 17.1 and the other has failed to
participate, the requesting party may initiate arbitration before expiration of
the above stated period. Arbitration shall be governed by AAA Rules, with
arbitrators to be mutually agreed upon by the parties. Arbitration shall take
place in King County, Washington. The arbitrators shall not be empowered to
award damages in excess of compensatory damages, and each party hereby
irrevocably waives any right to recover such damages with respect to any dispute
or disagreement resolved by arbitration. Notwithstanding the foregoing, the
prevailing party in any arbitration or other proceeding based on a dispute
arising out of this Agreement or the RMA Agreement shall be entitled to recover
its reasonable attorneys' fees and costs.
17.3 Provisional Remedies. A party, without prejudice to the mandatory
--------------------
procedures of this Section 17, may file a complaint for statute of limitations
or venue reasons, or seek a preliminary injunction or other provisional judicial
relief, if in its sole judgment such action is necessary to avoid irreparable
damage or to preserve the status quo. Notwithstanding such action, the parties
will continue to participate in good faith in the procedures specified in this
Section 17.
18. General.
-------
18.1 Independent Contractor. The relationship created by this Agreement is
----------------------
one of independent contractors, and not partners, franchisees or joint
venturers. No employees, consultants, contractors or agents of one party are
employees, consultants, contractors or agents of the other party, nor do they
have any authority to bind the other party by contract or otherwise to any
obligation, except as expressly set forth herein. They will not represent to
the contrary, either expressly, implicitly or otherwise.
18.2 Notices. All notices and demands under this Agreement will be in
-------
writing and will be delivered by personal service, confirmed fax, confirmed e-
mail, express courier, or certified mail, return receipt requested, to the
address of the receiving party set forth below, or at such different address as
may be designated by such party by written notice to the other party from time
to time. Notice will be effective on receipt. Notices should be addressed to:
_________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
14
<PAGE>
<TABLE>
<CAPTION>
RN: AI:
<S> <C>
Russell Braun Travis Millman
GM, Strategic Products VP, Business Development
RealNetworks, Inc. Audible Inc.
1111 Third Avenue, Suite 2900 65 Willowbrook Blvd.
Seattle, WA 98101 Wayne, NJ 07470
Voice: (206) 674-____ Voice: 973-890-4070, x237
Fax: (206) 674-____ Fax: 973-890-2442
E-mail: [email protected] E-mail: [email protected]
With a copy to: With a copy to:
Kelly Jo MacArthur, VP & General Counsel
Voice: (206) 674-2213 Brian Fielding, Managing Director
Fax: (206) 674-2695 Business & Legal Affairs
E-mail: [email protected] Voice: 973-890-4070, x225
Fax: 973-890-2442
E-mail: [email protected]
</TABLE>
18.3 No Assignment. This Agreement may not be assigned by either party
-------------
without the prior written consent of the other, except pursuant to the sale of
substantially all assets of a party, or a merger or consolidation. This
Agreement shall be binding upon and inure to the benefit of the parties'
permitted successors and assigns.
18.4 Export Licenses. The parties acknowledge that the laws and
---------------
regulations of the United States may restrict the export and re-export of
certain commodities and technical data of United States origin. Each party
agrees that it will not export or re-export the Products in any form without the
appropriate United States or foreign government licenses. In particular but
without limitation, none of the Products, Documentation or underlying
information or technology may be exported or re-exported (i) into (or to a
national or resident of) Cuba, Iraq, Libya, Yugoslavia (Serbia and Montenegro),
North Korea, Iran, Angola, Sudan, Syria or any other country to which the U.S.
has embargoed goods; or (ii) to anyone on the U.S. Treasury Department's list of
Specially Designed Nationals or the U.S. Commerce Department's Table of Deny
Orders.
18.5 U.S. Government Contracts. If either party is acquiring Products and
-------------------------
Documentation on behalf of the U.S. Government, the following provisions apply:
if Products are supplied to the Department of Defense ("DOD"), Products are
subject to "Restricted Rights," including a legend to be affixed to the
Products, as that term is defined in the DOD Supplement to the Federal
Acquisition Regulations ("DFAR") in paragraph 252.227-7013(c)(1). If Products
are supplied to any unit or agency of the U.S. Government other than DOD, the
U.S. Government's rights in the Products will be as defined in paragraph 52.227-
19(c)(2) of the Federal Acquisition Regulations ("FAR").
18.6 Miscellaneous. This Agreement, and the Exhibits attached hereto and
-------------
made a part hereof, together with the RMA Agreement dated as of November 12,
1998, constitutes the complete and exclusive agreement between RN and Audible
with respect to its subject matter, and supersede all prior oral or written
understandings, communications or agreements not specifically incorporated
herein or therein. This Agreement, when executed in combination with the RMA
Agreement dated as of November 12, 1998, supersedes in whole the Bundling
Agreement dated as of July 27, 1997. This Agreement may
_________
***Confidential information has been omitted and has been filed separately with
the Securities and Exchange Commission.
15
<PAGE>
not be modified except in a writing duly signed by an authorized officer of RN
and Audible. The waiver by either party of any breach of this Agreement by the
other party will not waive subsequent defaults by such party of the same or a
different kind. If any provision of this Agreement is held to be unenforceable
for any reason, such provision shall be reformed only to the extent necessary to
make it enforceable, and such decision shall not affect the enforceability of
such provision under other circumstances, or of the remaining provisions hereof
under all circumstances. The failure of any party to enforce any of the
provisions hereof shall not be construed to be a waiver of the right of such
party thereafter to enforce such provisions. Any and all remedies herein
expressly conferred upon a party shall be deemed cumulative and not exclusive of
any other remedy conferred hereby or by law, and the exercise of any one remedy
shall not preclude the exercise of any other. Headings shall not be considered
in interpreting this Agreement.
18.7 [* * *].
18.7.1 [* * *].
18.8 Governing Law. This Agreement shall be governed by the laws of the
-------------
State of Washington, United States of America, excluding that body of law known
as conflicts of law. This Agreement shall not be governed by the United Nations
Convention of Contracts for the International Sale of Goods, the application of
which is hereby expressly excluded.
INTENDING TO BE LEGALLY BOUND, the parties have executed this Agreement by their
duly authorized representatives, to be effective as of the date first written
above.
AUDIBLE INC. REALNETWORKS, INC.
By /s/ Andy Huffman By /s/ Rob Glaser
--------------------------- -----------------------------
Andy Huffman Rob Glaser
President & CEO CEO
Date: 11/12/98 Date: 11/23/98
------------------------ -------------------------
16
<PAGE>
EXHIBIT 10.4
RealMedia Architecture Partner Program Internet Agreement
This Agreement is entered into as of November 12, 1998 (the "Effective Date") by
and between RealNetworks, Inc., a Washington corporation with a principal place
of business at 1111 Third Avenue, Suite 2900, Seattle, Washington 98101 ("RN")
and Audible Inc., a Delaware corporation with an address at 65 Willowbrook
Blvd., Wayne, NJ 07470 ("Partner").
WHEREAS, RN has developed and owns all right, title and interest in the
RealMedia Architecture ("RMA", as further defined below), an open platform for
development of streaming media applications and tools, which allows software
developers to build new applications and extend current applications to inter-
operate with a wide variety of datatypes;
WHEREAS, RN has established a licensing program (the "Partner Program") which
allows independent software developers to create, market and sell applications
based on RMA, and to receive other benefits of participating in the Partner
Program; and
WHEREAS, Partner desires to participate in the Partner Program and to receive
the attendant rights and benefits;
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. DEFINITIONS
1.1 "License Key" means the authorization code that is generated by the License
Key Tool and that enables RMA Server Software to stream RealMedia
datatypes. License Keys that generate User-Streams and enable features of a
Partner Product are provided to a Partner's end-user customers.
1.2 "License Key Tool" means the version of the License Key Tool that is
provided to Partner by RN, which is specific and unique to the Partner
Product. The License Key Tool is used to generate unique License Keys for a
Partner Product.
1.3 "Licensed Software" means RN Players, the RealMedia SDK, including
associated RealMedia Libraries, RMA Server Software, whether in Object Code
or Source Code form, License Key Tools and License Keys, and related User
Documentation and specifications.
1.4 "New Release" means a new major release of the RMA Servers or the Partner
Products in which major new functionality has been added in addition to any
complement of bug fixes supplied, and which is designated as a change in
the digit to the left of the decimal point in the product version number
[(x).x.x]. "Update" means a minor release, enhancement, revision,
modification or upgrade of the RMA Servers or Partner Products, designated
as a change in the tenths digit in the product version number [x.(x).x], or
in the digit to the right of the tenths digit in the product version number
[x.x.(x)]. By way of clarification, if either party markets a new and
distinct product along with and in addition to an existing program, then
such new and distinct product shall be treated as a New Release, not an
Update.
1.5 "Object Code" means computer code assembled or compiled in magnetic or
electronic binary form on software media, which are readable and useable by
machines, but not generally readable by humans without reverse-engineering,
reverse-compiling or reverse-assembly.
1.6 "Partner Product(s)" means the products and applications developed by
Partner which are compatible with RMA Servers, as further described on
Exhibit A hereto. Partner Products shall include:
(a) "Partner Client Software," which means software that connects to an
RMA Player and utilizes the RMA application programming interfaces
("APIs");
-1-
<PAGE>
(b) "Partner Tools," which means software tools that may import datatypes
and export datatypes using the RealMedia Libraries; and/or that are
used to perform RMA-related functions including, but not limited to,
server administration, plug-in file systems, server monitoring, and
assembly; and
(c) "Partner Server Applications," which means software that interfaces
with an RMA Server and adds datatypes that can be streamed from an RMA
Server.
1.7 "RealMedia Architecture" or "RMA" means the software platform developed by
RN that allows for the development of streaming media products and tools,
and which is designed specifically for the existing infrastructure of the
Internet and corporate Intranets. RMA includes the following components:
(a) "Players," which are stand-alone applications or as components
embedded in other applications that play media files.
(b) "RealMedia Datatypes," which are datatypes that can be streamed using
RMA Server APIs and played using RMA Player APIs.
(c) "RealMedia Libraries," which are contained in the RealMedia SDK and
are Object Code implementations of various APIs.
(d) "RealMedia SDK" or "SDK," which contains the tools and information
needed for software developers to create tools for use in producing
streaming media and to adapt or build applications that stream from
RMA Servers and play in Players. The SDK contains a Player, Player
APIs, Server APIs, RealMedia Libraries, Sample Source Code and
RealMedia Server Software for use solely in developing Partner
Products.
(e) "RMA Server Software" or "RMA Server" in Object Code form, which
streams files reliably over networks, and which has the capabilities
set forth on Exhibit B hereto.
(f) "Sample Source Code," which provides an example of how to develop an
RMA application.
1.8 "Term" is defined in Section 8.1.
1.9 "Territory" means the world, except as otherwise limited by Section 15.5.
1.10 "User Documentation" means RN's user manuals, technical manuals, release
notes including advertisements for RMA Servers, installation and operation
instructions, and other data and documentation describing the use of RMA
Servers normally supplied to RN's customers.
1.11 "User-Stream" means the stream of media-compatible data necessary to
deliver the media type associated with a Partner Product from an RMA Server
to a single end-user client computer. The number of User-Streams being
delivered by a given RMA Server is measured by counting the number of end-
users simultaneously served by User-Streams originating at that RMA Server.
2. DEVELOPMENT LICENSE
2.1 License. Subject to the terms and conditions of this Agreement, RN grants
-------
to Partner a non-exclusive, nontransferable license to use and install the
RealMedia SDK for the sole purpose of developing Partner Products that are
based upon the RMA architecture. Partner, including its designated
subcontractors, if any, shall only use the SDK on a single computer or on a
computer network. Partner may make a single copy of the SDK for back-up
and archival purposes only, provided that any copy must contain all
proprietary notices included in the original. Partner may download
associated online documentation for purposes of using the SDK, but may not
make further copies of the documentation.
2.2 Limitations.
-----------
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<PAGE>
(a) The SDK may be used solely to develop and test a Partner Product. It
may not be used for any commercial, non-commercial, educational or
internal purpose, and may not be used in any way that allows or causes
the transmission of audio, video or other media files across the
Internet or any computer network without a separate written license
agreement from RN.
(b) Partner is expressly prohibited from using, licensing, selling,
transferring or otherwise distributing any Partner Product except as
expressly provided in this Agreement.
(c) Except as expressly provided herein, Partner shall not copy, modify,
reproduce, display, decompile, reverse engineer, store, translate,
sublicense, assign, sell, lease or otherwise transfer or distribute
the SDK, or any of its rights therein, in whole or in part, nor may
Partner use the SDK to clone any client, server or other RN product.
All rights not specifically granted herein to Partner are reserved to
RN.
(d) Nothing contained in this Agreement shall be deemed or construed to
grant Partner the exclusive right to develop, or have distributed by
PN, Partner Products for any particular category of datatypes.
3. DISTRIBUTION OF PARTNER PRODUCTS
3.1 By Partner.
----------
(a) Partner Client Software. Partner shall have the right and license to
-----------------------
market, promote, license and distribute the Partner Client Software
bundled with the RMA Player both physically and electronically in all
channels of distribution, including from Partner's web site, and
including but not limited to CD-ROM installation disks and/or third
party OEM disks. Such bundle may, in Partner's discretion, contain
other Partner software. Such distribution right shall be for the
latest versions of the RMA Player released by RN during the Term and
shall be free of any royalty obligation. Partner's Authorized
Distributors shall have the right and license to market promote,
license and distribute the Partner Client Software both physically and
electronically in all channels of distribution, including from
Partner's web site, and including but not limited to CD-ROM
installation disks and/or third party OEM disks. End users who
license, acquire or purchase the Partner Client Software and RMA
Player during the Term shall have the right to use the same in
perpetuity. Partner Client Software shall be distributed by RN in
accordance with Section 3.2(a). Partner may include a link offering or
promoting the Partner Client Software from the Partner website to a
hidden link on a RN website from which the Partner Client Software may
be downloadable, and may promote the Partner Client Software on
Partner's website.
(b) Partner Tools; Partner Server Applications. If applicable, subject to
------------------------------------------
the terms and conditions set forth in this Agreement, and payment of
the License Fees set forth in Section 7.1, RN grants Partner a non-
exclusive license to distribute Partner Server Applications and
Partner Tools containing any Licensed Software through all methods and
channels of distribution in the Territory during the Term, including
through electronic distribution.
(c) Limitations; Requirements.
-------------------------
(i) Partner's end-user license agreements for the Partner Products
shall prohibit further distribution of the RMA Libraries, any RMA
files or other components of RMA by Partner's end-users.
(ii) Partner shall include a prominent and valid copyright notice, in
the form reasonably requested by RN, in Partner Products
specifying that components of Partner's Products are owned by and
used under license from RN and its suppliers. Partner shall not
alter or remove any copyright or trademark notices contained in
any Licensed Software or User Documentation. In addition, Partner
shall display RN's "RMA logo" and the words "RMA Compatible" on
the
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product packaging and all product manuals and documentation, in
accordance with any Trademark Usage Guidelines provided by RN.
(iii) Partner may only distribute Partner Products that have been
designed, developed, and tested to function with an RMA Server.
To ensure that all components of the Partner Products
interoperate properly and are compatible with the RMA Server, RN
may elect to test the Partner Products or, at RN's option, will
have the Partner Products tested by a third party testing lab at
Partner's expense. Under no circumstances shall Partner Products
be held to a standard any greater than that applicable RN and/or
other third-party products. RN shall provide development support
to Partner to aid in Partner's resolution of problems discovered
in the testing process, as set forth in Section 6.1.
(iv) Partner agrees to promptly deliver to RN all releases, including
beta releases, of its Partner Products, for use by RN as set
forth in Section 3.2.
3.2 By RN.
-----
(a) Partner Client Software. Partner hereby grants RN a non-exclusive
-----------------------
perpetual royalty-free right and license to market, promote and
distribute, by itself or through Authorized Distributors, the Partner
Client Software, in the Territory By any means and in all channels of
distribution. Provided that RN determines that the Partner Client
Software is compatible with RMA, the Partner Client Software complies
with the technical specifications agreed upon by the parties, that
Partner continues to support the Partner Client Software in a
commercially reasonable manner through upgrades if applicable,
technical support and promotion), RN agrees to promote, market and
distribute the Partner Client Software as follows:
(i) RN will make good faith effort to include the Partner Client
Software as a standard feature in the RN Players in all non-
electronic distribution channels.
(ii) RN will include the Partner Client Software in all full-featured
versions of the RN Players distributed electronically over the
Internet. All Players which do not include the Partner Client
Software will include an automatic download feature that makes
the Partner Client Software available whenever a Player attempts
to receive a Partner datatype.
(iii) RN will promote the Partner Client Software from the RN Partner
page website.
(iv) RN shall not be obligated to include the Partner Client Software
in any special versions of the Player provided to a RN third
party licensee if such licensee will not accept the Partner
Client Software
(v) In the event that either party secures a distribution
arrangement with an OEM or other distributor that necessitates
that either the RMA Server or the Partner Product be compiled or
"ported" to run on a third party platform, the parties will
negotiate in good faith and cooperate as reasonably necessary to
enable such arrangement.
(b) Partner Tools; Partner Server Applications. RN and Partner agree to
------------------------------------------
negotiate in good faith a mutually acceptable Electronic Distribution
Agreement which Agreement may allow RN the non-exclusive right and
license to market, promote and distribute, by itself or through
Authorized Distributors, the Partner Tools and Partner Server
Applications, in the Territory during the Term.
4. DISTRIBUTION OF THE RMA SERVER
4.1 Grant of License. Subject to the terms and conditions of this Agreement,
----------------
and payment of the License Fees set forth in Section 7.1, if applicable, RN
grants Partner a non-exclusive, non-transferable right and license, in the
Territory during the Term, to:
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<PAGE>
(a) market, license and distribute Object Code copies of the RMA Server
Software and User Documentation to end-user customers only in
conjunction with a Partner Product.
(b) license and distribute one copy of the Partner Client Software with
each copy of the RMA Server Software distributed to an end-user
customer;
(c) generate License Keys with an authorized, RN-provided License Key
Tool, and duplicate, market and distribute License Keys associated
with Partner Product to Partner's authorized resellers and
distributors ("Authorized Distributors") and end-user customers;
(d) sublicense to Authorized Distributors the right to market, license and
distribute Object Code copies of the RMA Server Software, User
Documentation and License Keys to end-user customers only as part of a
bundle with partner Client Software; and
(e) determine the price at which Partner and its Authorized Distributors
will license and distribute the Partner Products, RMA Server Software
and License Keys to end-user customers, independent of any License Fee
payable by Partner to RN.
4.2 Distribution Requirements.
-------------------------
(a) End User License Agreements. Partner shall distribute and shall cause
---------------------------
its Authorized Distributors to distribute to their end-user customers
RN's standard end-user Server License Agreement, which is contained in
RN's product packaging. The license granted in such end-user license
agreement shall be between RN and Partner's end-user's. A copy of
RN's standard end-user Server License Agreement is attached hereto as
Exhibit C.
(b) Fulfillment for RMA Servers. Partner may either: (i) download RMA
---------------------------
Servers from a private RN download site; or (ii) place an order with
RN for physical pre-packaged copies of the RMA Servers. RN will ship
all physical product to Partner or Partner's authorized designee, by
shipment method specified by Partner. All orders are shipped F.O.B.
RN's designated fulfillment location. As a convenience, RN may prepay
freight charges, and such charges will be billed to Partner. All risk
of loss or damage in transit will be borne by Partner. Partner shall
inspect the RMA Servers upon receipt at the delivery location.
Acceptance shall be deemed to occur unless Partner provides RN with
notice of non-acceptance within three (3) business days of receipt. A
Partner may only reject an RMA Server for one of the following
reasons: (i) missing labels or User Documentation, (ii) defective
media, or (iii) defective performance.
(c) Source Code Escrow. (i) Partner will deposit with Data Securities
-------------------
International, Inc. (the "Escrow Agent"), a complete and correct set
of the Source Code version (as defined immediately below) and Object
Code version of the Partner Products to be held in escrow (the "escrow
products") and shall enter into the Escrow Agent's Master Preferred
escrow agreement (attached hereto as Exhibit D), pursuant to which RN
shall have the right to require that the Escrow Agent provide some or
all of the Escrow Products to RN or third parties if so required by a
governmental agency or court with jurisdiction over RN, or in the
event that partner undertakes or is subject to any of the actions set
forth in Section 8.2(b), or if Partner is in material breach of this
Agreement. Partner shall pay any required escrow fee directly to the
Escrow Agent.
(ii) RN's access to the Source Code version of the Partner Products
shall be SOLELY for the purpose of fixing any bugs related to the
Partner Products that render the RMA unusable as contemplated under
the terms of this Agreement. RN shall have no derivative rights in
the Partner Products under any circumstances and may use any "fix" as
contemplated by this subsection SOLELY under the terms and conditions
of this Agreement.
(iii) The Source Code version of the Partner Products referred to in
this Section 4.2.c shall not include rights to components of the
Partner Products which are licensed by third parties to Partner as
follows: CyLink Corporation rights to DSS (Digital Signature Standard)
under patents no. 4,200,770 ("Diffie/Hellman Patent")
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<PAGE>
and 4,218,582 ("Hellman/Merkle Patent"); and DSP Group, Inc. rights
regarding G.723.1 speech CODEC. Partner hereby agrees that, under the
direction of RN and pursuant to third-party license rights to be
obtained by RN for those third-party components, Partner will provide
to RN assistance to integrate those licensed components into the
Partner Products as required solely for the purpose set forth in
4.2.c(ii) above.
(d) Trademark Usage. If Partner distributes the RMA Server Software as
---------------
part of a Bundle, Partner shall prominently display RN's "RMA logo"
and the words "RMA Compatible" on the product packaging and all
product manuals and documentation, in accordance with any Trademark
Usage Guidelines provided by RN.
(e) Updates; New Release. During the Term, Partner shall make available
--------------------
to RN at no charge, upon release by Partner, a copy of all Updates and
New Releases to the Partner Products. Each Update or New Release
shall, upon release by Partner, be subject to all of the terms and
conditions of the Agreement.
5. MARKETING CONSIDERATIONS
In consideration for participating in the Partner Program, Partner shall be
entitled to receive the following marketing considerations from RN:
5.1 Trademark License. Partner shall have the right to use RN's trademarks and
-----------------
logos in connection with Partner's user interfaces, packaging, collateral
material and website, subject to compliance with RN's Trademark Usage
Guidelines. Partner agrees to furnish RN with samples of any proposed
usage of RN's trademarks or logos, and obtain RN's prior approval for such
usage, which approval will not be unreasonably withheld.
5.2 Customer Mailings. RN will send semi-annual emails throughout the Term to
-----------------
RN's targeted customers promoting the Partner Products. Partner shall have
the right to review and approve the contents of such email, which approval
won't be unreasonably withheld. At Partner's discretion, such emails may
list Partner's universal resource locators ("URL's") so that prospective
customers can obtain additional information about the Partner Products.
Additionally, RN will solicit from existing RN customers their desire to
receive collateral material from Partner. On Partner's behalf, providing
that Partner reimburses RN for its costs of mailing and supplies all
collateral material, RN will make one "bonded" mailing during the Term to
RN's customers who indicate a desire to receive collateral material about
the Partner Products.
5.3 Participation in RN Events. RN agrees to feature Partner in the Partner
--------------------------
Lab at RN's RealMedia user conference. From time to time, RN will also
include Partner in RN press releases, and offer Partner the opportunity to
participate in trade shows and conference displays as RN deems appropriate.
5.4 Real Developer Program. RN will provide partner a complimentary membership
----------------------
in the Real Developers program at the "Apps Developer" level for one year
from the Effective Date.
5.5 Advertising Impressions. During the Term, RN will provide Partner, without
-----------------------
charge, a minimum of 5,000 page impressions of advertising on RN's website,
Real.com, in such locations as RN determines in its discretion. Such
advertising shall commence simultaneously with the Gold release of the
Partner Client Software.
6. SOFTWARE SUPPORT; UPGRADES
6.1 Development Support. RN shall provide complimentary technical support to
-------------------
Partner in connection with Real Developers program for ninety (90) days
from the Effective Date. Such support includes unlimited telephone support
and priority e-mail support, and five (5) additional support calls after
the expiration of the 90-day period.
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<PAGE>
6.2 Technical Support for Partner Products. Partner shall be solely
--------------------------------------
responsible for providing, and agrees that it will provide, all end-user
technical and customer support for the Partner Products.
6.3 Technical Support for RMA Servers. Partner agrees that it will provide
---------------------------------
first-tier technical and customer support, by telephone and e-mail and in
accordance with RN's reasonable minimum support requirements, for RMA
Server Software distributed by Partner and its Authorized Distributors. RN
will enroll Partner, without charge, in a one-day RealMedia technical
training seminar at RN's facilities, to train Partner to provide first-line
technical support to its end-user customers for RMA Server Software.
Partner shall be responsible for all out-of-pocket costs it incurs to
attend such seminar. RN shall provide second-tier technical support, by
telephone and email, from 8:00 A.M-5:00 P.M. PST Monday through Friday to
Partner's primary support contact for RMA Servers. RN's telephone
"hotline" shall be staffed by technical personnel with a working knowledge
of the RMA Servers. RN shall not provide technical support to Partner's
Authorized Distributors or end-users, unless such customers purchase
technical support service from RN directly.
6.4 Updates; New Releases. During the Term, RN shall make available to Partner
---------------------
at no charge, upon release by RN, a copy of all corresponding Updates on
the RN website. RN shall make New Releases available free of any additional
charge and shall, upon release to Partner, be subject to all of the terms
and conditions of the Agreement.
7. PAYMENT
7.1 License Fees. In consideration of the rights and licenses granted herein,
------------
Partner agrees to pay RN the following License Fees:
(a) In the event at any time during the Term Partner distributes RMA
Server code or RMA-based tools, Partner shall pay RN the sum of Ninety
Dollars ($90.00) plus Eight Percent (8%) of the total gross revenue
received by Partner from the sale, license or distribution of all RMA-
based products, including Partner Products, RMA Servers, License Keys,
Updates, New Releases and any site licenses.
(b) Notwithstanding Section 7.1(a), Partner shall not owe RN any License
Fee on the sale of Partner Products and License Keys that enable
datatypes other than streaming audio or video to customers who have
purchased their RMA Server directly from RN, provided Partner does not
distribute an additional RMA Server or New Release to such customers.
(c) RN reserves the right to revise the License Fees set forth above
within thirty (30) days of the start of each calendar year and again
upon the commercial release of each New Release. RN shall provide
Partner thirty (30) days' written notice of any change in the License
Fee.
7.2 Payment Terms. Partner will provide RN with a written report by the 20th
-------------
day of each month for the preceding calendar month setting forth: (a) the
number of RMA Servers distributed, (b) the names and address to whom the
RMA Servers were distributed; (c) the number of Partner Products
distributed; (d) the number of License Keys distributed; (e) the type and
number of any other RMA-based products or related licenses distributed; (f)
the price per unit charged for each of the foregoing; (g) gross revenue
receivable by Partner (whether or not actually collected); and (h) the
amount due to RN pursuant to Section 7.1 for the preceding month. The
report shall be accompanied by the payment due. Payments shall be
calculated based on sales invoiced by Partner and its Authorized
Distributors, whether or not the revenue is actually collected. All
payments due hereunder shall be made in United States Dollars, without
withholding or offset of any kind. Interest shall accrue on all amounts
past due hereunder at the monthly rate of one and one half percent (1.5%)
or at the maximum legal rate, whichever is less.
7.3 Rebates. RN will pay Partner a rebate of License Fees, according to the
-------
following schedule:
(a) If Partner has paid RN between $250,000 and $500,000 in License Fees
during the Term, RN shall pay Partner a rebate of Five Percent (5%) of
the total License Fees paid;
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<PAGE>
(b) If Partner has paid RN between $500,001 and $1,500,000 in License Fees
during the Term, RN shall pay Partner a rebate of Ten Percent (10%) of
the total License Fees paid; and
(c) If Partner has paid RN $1,500,001 or more in License Fees during the
Term, RN shall pay Partner a rebate of Fifteen Percent (15%) of the
total License Fees paid.
(d) RN shall pay all rebates within ninety (90) days of receipt of the
final monthly report and accompanying License Fees after the
expiration of this Agreement. The payment of a rebate by RN shall not
be deemed as evidence of or confirmation that RN agrees that total
amount due and owing RN under this Agreement has been paid by Partner,
and shall not in any way affect RN's right to conduct any audit as set
forth in Sections 7.4 and 7.5 during the period set forth therein.
7.4 Books and Records. Partner shall keep books of account with respect to the
-----------------
amounts due and the calculations required to be made under Section 7.1.
Upon RN's reasonable written request, and no more than once per year of the
Term, RN may audit and inspect all such books of account, through an
independent third party auditor and during normal business hours, provided
that such auditor shall undertake in writing to protect the confidentiality
of the business data and records of Partner. The cost of any such audit
shall be paid by RN; provided, however, that in the event RN initiates an
audit under this Section 7.4 and it is finally determined that the amount
reported and paid by Partner pursuant to Section 7.1 for the period(s)
audited is, in the aggregate, less than ninety-five per cent (95%) of the
aggregate amount actually due, then Partner shall pay the reasonable costs
and expenses of said audit. If any such audit reveals an underpayment of
license fees, Partner shall make any correcting payment within thirty (30)
days. Any underpayment shall be subject to interest of one and one-half
percent (1.5%) per month or the maximum amount allowed by law, whichever is
less. Partner will maintain the books and records applicable to each
reporting period for at least three years following the close of such
period.
7.5 Audit of Authorized Distributors. For all Authorized Distributors,
--------------------------------
Partner, in its sole discretion, shall either: (a) retain for itself the
right to audit the books and records of any such Authorized Distributor; or
(b) require that the Authorized Distributor agree in writing to permit,
upon the written request of RN to Partner, an independent auditor paid by
RN to examine the necessary books and records of any such Authorized
Distributor, provided that such accountant shall agree to protect the
confidentiality of the business data and records and to disclose to RN only
the accuracy or inaccuracy of the reporting required hereunder. Any such
audits shall be arranged through Partner.
8. TERM AND TERMINATION
8.1 Term. This Agreement shall commence as of the Effective Date, and
----
terminate two (2) years thereafter ("the Term"), unless earlier terminated
as provided herein.
8.2 Termination by Either Party. Either party may terminate this Agreement
---------------------------
immediately upon written notice to the other party in the event of any of
the following:
(a) should the other party fail to perform any material term or condition
of this Agreement, which shall constitute a default of this Agreement,
and such default has not been corrected within thirty (30) days of
written notice from the non-breaching party. In the event of a breach
of Section 9 no cure period need be provided.
(b) should the other party (i) make a general assignment for the benefit
of creditors; (ii) institute proceedings to be adjudicated a voluntary
bankrupt, or consent to the filing of a petition of bankruptcy against
it; (iii) be adjudicated by a court of competent jurisdiction as being
bankrupt or insolvent; (iv) seek reorganization under any bankruptcy
act, or consent to the filing of a petition seeking such
reorganization; or (v) have a decree entered against it by a court of
competent jurisdiction appointing a receiver, liquidator, trustee, or
assignee in bankruptcy or in insolvency covering all or substantially
all of such party's property or providing for the liquidation of such
party's property or business affairs provided that such decree is not
dismissed within 45 days.
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<PAGE>
8.4 Effect of Termination.
---------------------
(a) Upon the effective date of termination of this Agreement for a
material breach by Partner, the licenses granted hereunder shall
terminate immediately. Partner will either immediately return all
Licensed Software to RN or certify in writing to RN that all copies of
all Licensed Software have been destroyed. RN may discontinue
promotion and distribution of Partner Products or continue to
distribute Partner Products during the Sell-Off Period, set forth in
Section 8. 3(b), at its sole discretion. Notwithstanding anything
in this Agreement to the contrary, under no circumstances may Partner
distribute Partner Client Software after the expiration or termination
of this Agreement, for any reason, without RN's express written
consent.
(b) For two (2) months after the expiration or termination of this
Agreement other than by reason of Partner's material breach ("Sell-Off
Period"), Partner may advertise and sell the Partner Products, RMA
Server and the License Keys in its inventory or necessary to fulfill
orders confirmed as of the expiration or termination date, and shall
pay License Fees and render statements in the same manner as during
the Term. After the end of the Sell-Off Period, Partner shall return
to RN, at Partner's expense, all copies of the Partner Products, RMA
Server and the License Keys, or RN may instruct Partner to destroy
them. Partner shall furnish RN with affidavits certified by an
officer of Partner evidencing such destruction.
(c) Any termination of this Agreement shall not release Partner from
paying any amount that may then be owing to RN, or that may become due
to RN in the future.
(d) Notwithstanding any other terms or conditions of the Agreement, the
rights of end-user customers to use any RMA Servers or License Keys
distributed by Partner shall survive any termination or expiration of
the Agreement, provided that License Fees for said RMA Servers and
License Keys have been paid to RN.
9. CONFIDENTIALITY
"Confidential Information" means any trade secret information or
information otherwise designated by a party as being confidential relating
to either party's products, product plans, designs, computer code,
technical information, costs, pricing, financing, marketing plans, business
opportunities, personnel, research and development or know-how.
Confidential Information shall not include information that (i) is or
becomes generally known or available through no fault of the receiving
party, (ii) was known by or disclosed to the receiving party prior to
disclosure, (iii) is independently developed by the receiving party, or
(iv) is made generally available by the disclosing party without any
restriction. The parties shall use reasonable efforts and at least the same
care that each uses to protect its own Confidential Information of like
importance, to prevent unauthorized dissemination or disclosure of the
other party's confidential information during and for three (3) years
following the last day of the Term. Neither party will use the other's
Confidential Information for purposes other than those necessary to
directly further the purposes of this Agreement. Neither party will
disclose to third parties the other's Confidential Information without the
prior written consent of the other party, provided, however, that nothing
will preclude a party from making disclosure to a third party for the
purpose of due diligence in a financing transaction, merger, acquisition,
business combination or other similar transaction, or from making any
disclosures to any governmental agency having jurisdiction over the
disclosing party, or unless otherwise required by law, government order or
court proceeding. Each party shall return the Confidential Information to
the other party upon termination of the Agreement or upon the request of
the other party. Except as expressly provided in this Agreement, no
ownership or license right is granted in any Confidential Information.
10. PROPRIETARY RIGHTS
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10.1 Partner. Partner shall retain all right, title and interest in and to the
-------
Partner Products, including any copyright, patent, trade secret, or other
intellectual property rights therein, subject to RN's underlying ownership
in any Licensed Software included therein, and Partner Confidential
Information. Notwithstanding the foregoing, Partner agrees that it shall
not register or attempt to register any patents in connection with any
Partner Product, including, but not limited to, in any device, process,
method, function or invention included therein or necessary for the
operation thereof, which would in any way interfere with, limit or
prohibit RN's continued use, development or ownership of RMA.
10.2 RN. RN shall retain all right, title and interest in and to the Licensed
--
Software, including any copyright, patent, trade secret, or other
intellectual property rights therein, all RN trademarks and all RN
Confidential Information, and any copies thereof, regardless of the media
or form on or in which the Licensed Software or copies may exist. Partner
acknowledges and agrees that the Licensed Software is proprietary to RN,
and is protected by the copyright laws of the United States and
international copyright treaties. Unauthorized copying of the Licensed
Software, including modification, merger or inclusion with any other
software, is expressly forbidden. Partner shall not be deemed, by anything
contained in or done pursuant to this Agreement, to acquire any right,
title or interest in any trademark, copyright, patent or other
intellectual property of RN, and shall do nothing to prejudice the value
or validity of RN's rights therein or ownership thereof.
11. LIMITED WARRANTY.
11.1 RN warrants, solely for the benefit of Partner, that for a period of
ninety (90) days from the date of delivery to Partner: (i) the Licensed
Software, if operated as directed, will substantially achieve the
functionality described in the User Documentation, and (ii) that the media
containing the Licensed Software, if provided by RN, is free in material
respects from defects in material and workmanship; provided, however, that
the foregoing warranty is expressly contingent (and shall be otherwise
void) upon: (1) the use of the Licensed Software strictly in accordance
with the instructions and User Documentation therefor; (2) the absence of
misuse or damage thereto; (3) the absence of any alteration or
modification thereto; and (4) Partner's acceptance of Licensed Software
for distribution with knowledge that the media upon which the Licensed
Software are reproduced may contain certain defects. RN makes no
representation or warranty that the information or functions contained in
the Licensed Software will meet Partner's requirements or that the use or
operation of the Licensed Software will be uninterrupted, error free or
secure, or that any Licensed Software defects are correctable or will be
corrected. THE FOREGOING WARRANTY SHALL NOT APPLY TO THE SAMPLE SOURCE
CODE, WHICH IS PROVIDED TO PARTNER AS IS, WITHOUT WARRANTY OF ANY KIND.
11.2 NO OTHER WARRANTIES. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, RN
-------------------
AND ITS LICENSORS DISCLAIM ALL OTHER WARRANTIES, EITHER EXPRESS OR
IMPLIED, INCLUDING, BUT NOT LIMITED TO IMPLIED WARRANTIES OF
MERCHANTIBILITY AND FITNESS FOR A PARTICULAR PURPOSE, WHICH ARE EXPRESSLY
DISCLAIMED, WITH REGARD TO THE LICENSED SOFTWARE AND THE USER
DOCUMENTATION. THIS LIMITED WARRANTY GIVES PARTNER SPECIFIC LEGAL RIGHTS.
PARTNER MAY HAVE OTHERS, WHICH VARY FROM STATE/JURISDICTION TO
STATE/JURISDICTION.
11.3 Remedies. RN's entire liability and Partner's exclusive remedy for any
--------
breach of the limited warranty set forth in Section 11.1 shall be, in RN's
sole discretion: (i) to replace Partner's defective media; or (ii) to
advise Partner how to achieve substantially the same functionality with
the Licensed Software as described in the User Documentation through a
procedure different from that set forth in the User Documentation.
Repaired, corrected or replaced Licensed Software and User Documentation
shall be covered by this limited warranty for period remaining under the
warranty that covered the original Software, or if longer, for thirty (30)
days after the date RN either shipped to Partner the repaired or replaced
Licensed Software or RN advised Partner as to how to operate the Licensed
Software so as to achieve the functionality described in the
Documentation, whichever is applicable.
12. INDEMNIFICATION
12.1 Each party (the "Indemnifying Party") agrees to hold harmless, indemnify
and defend the other party (the "Indemnified Party") from and against any
losses, damages, costs and expenses (including reasonable
-10-
<PAGE>
attorneys' fees and costs) arising out of or relating to any claims that
the Indemnifying Party's products infringes any copyright, patent,
trademark, trade secret or other proprietary right of any third party. The
Indemnifying Party shall not be liable in the event that (i) the
Indemnified Party continued marketing, sale, distribution or use of the
Indemnifying Party's products after receiving prior written notice from
the Indemnifying Party that the Indemnified Party should cease such
activities due to a third party claim of infringement against such
products; or (ii) the claim of infringement results from the Indemnified
Party's combination or use of the Indemnifying Party's products with any
third party product, program or data not supplied by the Indemnifying
Party.
12.2 Conditions of Indemnification. A party's obligation to indemnify the
-----------------------------
other party is expressly conditioned on the Indemnified Party: (i) giving
written notice of the claim promptly to the Indemnifying Party; (ii)
giving the Indemnifying Party sole control of the defense and settlement
of the claim; (iii) providing to the Indemnifying Party all available
information and assistance (at the Indemnifying Party 's expense); and
(iv) not compromising or settling such claim.
13. LIMITATION OF LIABILITY
UNDER NO CIRCUMSTANCES AND UNDER NO LEGAL THEORY, WHETHER IN TORT, CONTRACT OR
OTHERWISE, SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR ANY OTHER PERSON
FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES OF ANY
CHARACTER INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF GOODWILL, WORK
STOPPAGE, COMPUTER FAILURE OR MALFUNCTION, EVEN IF THE PARTY SHALL HAVE BEEN
INFORMED OF THE POSSIBILITY OF SUCH DAMAGES.
14. DISPUTE RESOLUTION
Any dispute arising out of or relating to this Agreement shall be resolved in
accordance with the procedures specified in this Section 14, which shall be the
sole and exclusive procedures for the resolution of any such dispute.
14.1 Executive Negotiations. The parties shall attempt in good faith to
----------------------
resolve any dispute relating to this Agreement promptly by negotiation between
executives who have authority to settle the controversy. In the event a dispute
cannot be resolved, either party may give the other party written notice of any
dispute not resolved in the normal course of business. Within fifteen (15)
days after delivery of such a notice, the receiving party shall submit to the
other a written response. The notice and response shall include a statement of
each party's position and a summary of arguments supporting that position.
Within thirty (30) days after delivery of the disputing party's notice, the
senior executive officers of Partner and RN shall meet at a mutually acceptable
time and place, and thereafter as often as they reasonably deem necessary, to
attempt to resolve the dispute. All reasonable requests for information made by
one party to the other will be honored. All negotiations pursuant to this
Section 14.1 are confidential and shall be treated as compromise and settlement
negotiations for purposes of the Federal Rules of Evidence and state rules of
evidence.
14.2 Arbitration. If any dispute relating to this Agreement shall not
-----------
have been resolved through the use of the non-binding procedures specified in
Section 14.1 within one hundred (100) days of the initial notice of either party
to the other of a dispute, such dispute shall be settled by binding arbitration;
provided, however, that if one party has requested the other to participate in
the non-binding procedure specified in Section 14.1 and the other has failed to
participate, the requesting party may initiate arbitration before expiration of
the above stated period. Arbitration shall be governed by AAA Rules, with
arbitrators to be mutually agreed upon by the parties. Arbitration shall take
place in King County, Washington. The arbitrators shall not be empowered to
award damages in excess of compensatory damages, and each party hereby
irrevocably waives any right to recover such damages with respect to any dispute
or disagreement resolved by arbitration.
-11-
<PAGE>
14.3 Provisional Remedies. A party, without prejudice to the mandatory
--------------------
procedures of this Section 14, may file a complaint for statute of limitations
or venue reasons, or seek a preliminary injunction or other provisional judicial
relief, if in its sole judgment such action is necessary to avoid irreparable
damage or to preserve the status quo. Notwithstanding such action, the parties
will continue to participate in good faith in the procedures specified in this
Section 14.
15. GENERAL
15.1 Independent Contractor. The relationship created by this Agreement
----------------------
is one of independent contractors, and not partners, franchisees or joint
venturers. No employees, consultants, contractors or agents of one party are
employees, consultants, contractors or agents of the other party, nor do they
have any authority to bind the other party by contract or otherwise to any
obligation, except as expressly set forth herein. They will not represent to
the contrary, either expressly, implicitly or otherwise.
15.2 Notices. All notices and demands under this Agreement will be in
-------
writing and will be delivered by personal service, confirmed fax, confirmed e-
mail, express courier, or certified mail, return receipt requested, to the
address of the receiving party set forth below, or at such different address as
may be designated by such party by written notice to the other party from time
to time. Notice will be effective on receipt. Notices should be addressed to:
<TABLE>
<CAPTION>
RN: AI:
<S> <C>
Russell Braun Travis Millman
GM Strategic Products VP, Business Development
RealNetworks, Inc. Audible Inc.
1111 Third Avenue, Suite 2900 65 Willowbrook Blvd.
Seattle, WA 98101 Wayne, NJ 07470
Voice: (206) 674-2288____ Voice: 973-890-4070, x237
Fax: (206) 674-____ Fax: 973-890-2442
E-mail: [email protected] E-mail: [email protected]
With a copy to: With a copy to:
Kelly Jo MacArthur, VP & General Counsel Brian Fielding, Managing Director
Voice: (206) 674-2213 Voice: 973-890-4070, x225
Fax: (206) 674-2695 Fax: 973-890-2442
E-mail: [email protected] E-mail: [email protected]
</TABLE>
15.3 No Assignment. This Agreement may not be assigned by either party
-------------
without the prior written consent of the other, except pursuant to the sale of
substantially all assets of a party, or a merger or consolidation. In the event
of a sale of substantially all assets of Partner, or a merger or consolidation
involving Partner, the terms and conditions contained in Section 4 of this
Agreement shall not survive. This Agreement shall be binding upon and inure to
the benefit of the parties' permitted successors and assigns.
-12-
<PAGE>
15.4 Survival. The following provisions shall survive the expiration or
--------
termination of this Agreement: 2.2, 7.2, 7.4, 7.5, 8.4, 9-14, and 15.4.
15.5 Export Licenses. The parties acknowledge that the laws and
----------------
regulations of the United States may restrict the export and re-export of
certain commodities and technical data of United States origin. Each party
agrees that it will not export or re-export the Products in any form without the
appropriate United States or foreign government licenses. In particular but
without limitation, none of the Products, Documentation or underlying
information or technology may be exported or re-exported (i) into (or to a
national or resident of) Cuba, Iraq, Libya, Yugoslavia (Serbia and Montenegro),
North Korea, Iran, Angola, Sudan, Syria or any other country to which the U.S.
has embargoed goods; or (ii) to anyone on the U.S. Treasury Department's list of
Specially Designed Nationals or the U.S. Commerce Department's Table of Deny
Orders.__
15.6 U.S. Government Restricted Rights and Export Restriction. The
---------------------------------------------------------
Licensed Software and User Documentation are provided with RESTRICTED RIGHTS.
Use, duplication or disclosure by the Government is subject to restrictions set
forth in subparagraphs (a) through (d) of the Commercial Computer Software--
Restricted Rights at FAR 52.227-19 when applicable, or in subparagraph
(c)(1)(ii) of the Rights in Technical Data and Computer Software clause at DFARS
252.227-7013, and in similar clauses in the NASA FAR supplement, as applicable.
Manufacturer is Progressive Networks, Inc./1111 Third Avenue, Suite 500/
Seattle, Washington, 98101. Partner acknowledges that none of the Software or
underlying information or technology may be downloaded or otherwise exported or
re-exported: (i) into (or to a national or resident of) Cuba, Iran, Iraq, Libya,
North Korea, Syria, Sudan or Angola or any other country to which the U.S. has
embargoed goods; or (ii) to anyone on the U.S. Treasury Department's list of
Specially Designated Nationals or the U.S. Commerce Department's Table of Denial
Orders.
15.7 Miscellaneous. This RMA Agreement, and the Exhibits attached hereto
-------------
and made a part hereof, together with the business Agreement between the parties
dated as of November 12, 1998,constitute the complete and exclusive agreement
between RN and Partner with respect to its subject matter, and supersede all
prior oral or written understandings, communications or agreements not
specifically incorporated herein or therein. This RMA Agreement, when executed
in combination with the business Agreement between the parties dated as of
November 12, 1998, supersedes in whole the Bundling Agreement dated as of July
27, 1997. This Agreement may not be modified except in a writing duly signed by
an authorized officer of RN and Partner. The waiver by either party of any
breach of this Agreement by the other party will not waive subsequent defaults
by such party of the same or a different kind. If any provision of this
Agreement is held to be unenforceable for any reason, such provision shall be
reformed only to the extent necessary to make it enforceable, and such decision
shall not affect the enforceability of such provision under other circumstances,
or of the remaining provisions hereof under all circumstances. The failure of
any party to enforce any of the provisions hereof shall not be construed to be a
waiver of the right of such party thereafter to enforce such provisions. Any
and all remedies herein expressly conferred upon a party shall be deemed
cumulative and not exclusive of any other remedy conferred hereby or by law, and
the exercise of any one remedy shall not preclude the exercise of any other.
Headings shall not be considered in interpreting this Agreement.
15.8 Announcements. The parties agree that neither party shall publicize
--------------
the existence of this Agreement until such time as the initial publicity
announcement is made pursuant to the business Agreement between the parties
dated as of November 12, 1998. Each party must obtain the prior written consent
of the other party before publishing any press release or other publicity
concerning this Agreement which includes any details of the other company's
products or personnel.
-13-
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
Effective Date written above.
REAL NETWORKS, INC. AUDIBLE, INC._____________________
By: /s/ Robert Glaser By: /s/ Andy Huffman
------------------------- ------------------------------
Name: Robert Glaser Name: Andy Huffman
----------------------- ----------------------------
Title: CEO Title: President and CEO
---------------------- ---------------------------
Date: 11/24/98 Date: 11/12/98
----------------------- ----------------------------
-14-
<PAGE>
EXHIBIT 10.21
A G R E E M E N T
This Agreement (this "Agreement") is entered into as of April 13, 1999,
(the "Effective Date") by and between DIAMOND MULTIMEDIA SYSTEMS, INC., a
Delaware corporation with principal offices at 2880 Junction Avenue, San Jose,
California 95134 (hereinafter "Diamond"), and AUDIBLE, INC., a Delaware
corporation with principal offices at 65 Willowbrook Boulevard, Wayne, New
Jersey 07470 (hereinafter "Audible").
WHEREAS, Audible(TM) is the creator and provider of an Internet-based
service that permits customers to use a computer with an Internet browser to
select and download spoken word audio files consisting of licensed and original
literary, business, and entertainment works and other types of spoken word
information in a secure Audible-proprietary file format, via the World Wide Web
(currently using the URL "http://www.audible.com"(TM)), and to play back such
content using Audible's proprietary software by means of a personal computer, an
audio-capable personal digital assistant and/or a portable audio devices;
WHEREAS, Diamond is the developer and owner of certain Internet audio MP3-
compatible hardware products, including the Rio family of portable audio
players, and wishes the Rio II portable audio player and follow-on hardware
products thereto to be AudibleReady, as defined below;
WHEREAS, Audible and Diamond both believe it is in their best interests to
enable Audible content on Diamond hardware products and, for that purpose,
desire to undertake certain development work with respect to achieving the goal
of making the Rio Products AudibleReady and Audible's client software compatible
with the Rio Products, pursuant to the terms and conditions of this Agreement;
WHEREAS, Diamond desires to license such developments from Audible for the
purpose of allowing users of the Rio Products to access and play audio content
available through Audible, pursuant to the terms and conditions of this
Agreement; and
WHEREAS, in furtherance of the work described above, Audible and Diamond
both desire to engage in certain promotion and marketing efforts with respect to
both Audible's services and the Rio Products, pursuant to the terms and
conditions of this Agreement.
NOW THEREFORE, in consideration of the premises stated above, the mutual
covenants of the parties and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties, intending to be
legally bound, agree as follows:
I. DEFINITIONS
-----------
For purposes of this Agreement, in addition to the capitalized terms
defined elsewhere herein, the following terms shall have the meanings described
below:
1.1 Affiliate means (a) an entity that controls, is controlled by, or is under
---------
common control with a party; or (b) an entity that shall purchase or succeed to
all or substantially all of the assets of that party. "Control" means
ownership, directly or indirectly, of more than fifty percent (50%) of the
outstanding shares or securities (representing the right to vote for the
election of directors
<PAGE>
or other managing authority), or if the entity does not have outstanding shares
or securities, as may be the case in a partnership, joint venture or
unincorporated association, "control" means more than fifty percent (50%) of the
ownership interest representing the right to make the decisions for such
corporation, company or other entity. A corporation, company or other entity
shall be deemed to be an Affiliate only so long as such control.
1.2 Anticipated Launch Date means the date on which it is anticipated that the
-----------------------
first commercial version of the Rio II will be released, as established by
Diamond from time to time. As of the Effective Date, the Anticipated Launch
Date is [***].
1.3 Audible Development Work means the software development work to be
------------------------
performed by Audible and its agents, as defined in Section 2.2 of this
Agreement.
1.4 Audible Firmware means the computer software to be provided by Audible to
----------------
Diamond, in either source or object code, under this Agreement and which
consists of (i) the CODEC, (ii) a security module with various components
designed to ensure that the Rio Products handle Content in compliance with
Audible's security policies as determined by Audible and (iii) a Content
interpretation and navigation module, and any upgrades, enhancements and
modifications to any of the above from time to time either provided by Audible
to Diamond or developed by Diamond with the permission of Audible.
1.5 Audible Software means the modified version of the Client Software to be
----------------
developed by Audible under Section 2 of this Agreement, for use with the Rio II
and other Rio Products, and any updates, upgrades, and enhancements thereto and
new versions thereof provided to users of Rio Products..
1.6 audible.com means the Internet-based service controlled or sponsored by
-----------
Audible which permits customers to use a computer with an Internet browser to
select, download and license copies of Content, for pay, in an Audible-
proprietary file format, via a World Wide Web site currently using the URL
"http://www.audible.com"(TM)
1.7 AudibleReady means the brand adopted by Audible, as it may be changed from
------------
time to time, to signify that designated equipment and/or software is enabled
for access to, downloading and playback of Audible's Content.
-
1.8 Client Software means Audible's proprietary "AudibleManager" software, that
---------------
is used as of the Effective Date to download and playback Content and transfer
the Content to the portable device.
1.9 CODEC means a decompression algorithm provided by Audible to Diamond
-----
hereunder, that is used to enable compatible computing and/or hardware devices
to playback Content, and any replacement algorithm selected by mutual agreement
of the parties.
1.10 Content means spoken word audio content that is either licensed by Audible
-------
from third parties or produced by or on behalf of Audible (e.g., literary,
business, and entertainment works,
________________
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
2
<PAGE>
and other types of spoken word content), which content is encoded into Audible's
file format and is accessible for playback using the then-current Audible
decoder(s).
1.11 Diamond Development Work means the software development work to be
------------------------
performed by Diamond and its agents, as defined in Section 2.5 of this
Agreement.
1.12 Integration means the combination during the Term of a version of the
-----------
Audible Firmware (or such other security algorithm as agreed to by the parties)
with the Rio II and other Rio Products, as a core, embedded component thereof,
for distribution by Diamond as part of such Rio Products to enable access to and
downloading of Content by Rio Product users, as permitted under this Agreement.
"Integrated" means that the Diamond Product in question has been enabled to
access and download Content as a core, embedded component of the product.
1.13 Intellectual Property means any copyright, patent, registered design,
---------------------
copyright, design right, topography right, rights in mask works, trade mark,
service mark, application to register any of the aforementioned rights, rights
in the nature of any of the aforementioned rights, moral rights, trade secrets,
rights in unpatented know-how, right of confidence and any other intellectual or
industrial property rights of any nature whatsoever recognized in any part of
the world.
1.14 Manager shall mean a person in the management chain of the applicable
-------
party who is a senior executive in terms of responsibility, and who is familiar
with the administration of this Agreement.
1.15 Rio Products means Diamond's family of portable hardware devices released
------------
by Diamond during the Term for playback of audio content via the Internet,
including content in MP3 format, that Diamond will develop, commencing with the
Rio II product, and any follow-on products thereto, whether such products are
branded with the trademark "RIO" or with other names.
1.16 Rio II means the next major release of the Diamond Rio Internet mobile
------
audio device currently scheduled for commercial availability by the Anticipated
Launch Date.
1.17 Term means the period described in Section 14, herein, commencing on the
----
Effective Date and including any renewals and extensions of this Agreement.
2. DEVELOPMENT AND INTEGRATION OF PRODUCTS
----------------------------------------
2.1 Audible's Commitment. Subject to the terms of this Agreement,
--------------------
including without limitation, the fulfillment by Diamond of its obligations
under this Agreement, Audible hereby agrees to perform the Audible Development
Work as described in Section 2.2.
2.2 Audible Development Work.
------------------------
(a) Development of Audible Software. Audible, with the assistance of
-------------------------------
Diamond as reasonably requested by Audible, shall exercise its reasonable best
efforts to develop Audible Software for use with the Rio II. The Audible
Software, when used with the Rio II and
________________
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
3
<PAGE>
other required user interface elements, will be designed to facilitate (i) the
downloading of Content from audible.com by users of the Rio II who register with
audible.com directly or indirectly through a Diamond portal, and (ii) transfer
of Content to the Rio II for portable playback of Content. Audible agrees to
commit the necessary resources and management involvement to support this
project and to accomplish the objectives of the project. Audible and Diamond
shall agree in good faith, after the release of the AudibleReady Rio II product,
with respect to further development of the Audible Software required to make
follow-on Rio Products AudibleReady pursuant to the terms of this Agreement.
(b) Modification of Audible Firmware. Audible, with the assistance of
--------------------------------
Diamond as reasonably requested by Audible, shall exercise its reasonable best
efforts to develop and deliver to Diamond modifications to the Audible Firmware
for the successful Integration with the Rio II. Delivery of the Audible
Firmware shall be pursuant to a schedule mutually agreed by the parties, taking
into account the Anticipated Launch Date. Audible agrees to commit the
necessary resources and management involvement to support this project and to
accomplish the objectives of the project. Audible and Diamond shall agree in
good faith, after the release of the AudibleReady Rio II product, with respect
to further modifications to the Audible Firmware required to make follow-on Rio
Products AudibleReady pursuant to the terms of this Agreement.. Audible does
not warrant that the Audible Development Work will permit the successful
Integration with the Rio Products.
(c) Specifications. The Audible Development Work will be conducted in
--------------
accordance with such technical specifications as may be determined by Audible,
in its reasonable discretion, with the assistance of Diamond as reasonably
requested by Audible. Audible's obligation to complete the Audible Development
Work and permit Integration is subject to the ability of the Integrated product
to permit the offering of Content by means of the Audible Software on a secured,
per program and subscription basis as currently done by Audible with its
MobilePlayer, and the availability to Rio Products users of substantially all of
Audible's on-device navigation features and functionality. Audible agrees to
exercise its reasonable best efforts to develop the Audible Software in a manner
that provides for as smooth experience as possible for the user with respect to
account creation with audible.com and downloading of Audible Content Bundles as
described in Section 6 below.
(d) Non-Exclusivity. The Audible Development Work will be performed
---------------
by Audible on a non-exclusive basis and shall not affect the right of Audible to
perform research, development and integration efforts for others or on its own
behalf with respect to the same or similar technologies as are the subject of
this Agreement.
(e) Use of Development Work. Notwithstanding any other provision of
-----------------------
this Agreement, Audible shall have the right to use, reproduce, modify and
distribute, in its discretion, the Audible Development Work (and any portion
thereof), and any deliverables to Diamond in connection therewith, and to use,
make, license and sell products based thereon, during and after the Term of this
Agreement. This shall include the right to permit the installation of Audible
Software and Audible Firmware or any portion thereof as part of an OEM product
or an after-market product for Windows-based personal computers, audio-capable
________________
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
4
<PAGE>
personal digital assistants, and portable audio devices. This Agreement does not
grant to Diamond any right or interest in and to any future developments by or
on behalf of Audible or any new products and services offered by Audible, except
as expressly provided in this Agreement
2.3 Diamond's Obligations Regarding Audible Development Work. Diamond
--------------------------------------------------------
agrees reasonably to cooperate with Audible in furtherance of successfully
completing the Audible Development Work. As part of this, Diamond agrees to
promptly provide to Audible, [***]:
(a) Access and Assistance. Such access to Diamond's personnel and
---------------------
other resources as Audible may reasonably request in connection with the
performance of the Audible Development Work, including without limitation, such
design, technical assistance, development tools, application program interfaces
("APIs") and software (in source code and object code format, as appropriate) as
are necessary or desirable to enable Audible to perform the Audible Development
Work, and make the Audible Software interoperate with the Rio II; and
(b) Prototypes and Production Models. To the extent available,
--------------------------------
development environments, prototypes and production models of the Rio II as
necessary to implement the Audible Development Work. In the event Diamond does
not have available such hardware, Audible may purchase such hardware as is
needed and the cost thereof shall be paid by Diamond.
2.4 Diamond's Commitment. Subject to the terms of this Agreement,
--------------------
including without limitation, the fulfillment by Audible of its covenants under
this Section 2, Diamond hereby agrees to perform the Diamond Development Work as
described in Section 2.5.
2.5 Diamond Development Work.
------------------------
(a) Diamond Development Work. Diamond, with the assistance of Audible
------------------------
as reasonably requested by Diamond, shall exercise its reasonable best
efforts to Integrate the Audible Firmware as stated above with the Rio II
and to allow users of the Rio II to playback Content. Diamond agrees to
commit the necessary resources and management involvement to support the
Diamond Development Work and to accomplish the objectives of the project.
Diamond and Audible shall agree in good faith, after the release of the
AudibleReady Rio II product, with respect to further Diamond Development
Work required to make follow-on Rio Products AudibleReady pursuant to the
terms of this Agreement. Diamond shall not modify the Audible Firmware for
any purpose except with the prior written approval of Audible.
(b) Specifications. The Diamond Development Work will be conducted in
--------------
accordance with such technical specifications as may be determined by
Diamond, in its reasonable discretion, with the approval of Audible which
shall not be unreasonably denied. Such specifications shall provide that
the Rio II will incorporate the Audible Firmware, and will be compatible
with, and able to interoperate with, the Audible Software, and enable
playback of the Content.
________________
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
5
<PAGE>
(c) Audible's Obligations Regarding Diamond Development Work. Audible
--------------------------------------------------------
agrees reasonably to cooperate with Diamond in furtherance of successfully
completing the Diamond Development Work. As part of this, Audible agrees
to promptly provide to Diamond, [***], such access to Audible's personnel
and other resources as Diamond may reasonably request in connection with
the performance of the Diamond Development Work, including without
limitation, such design, technical assistance, development tools, and
software [***] as are necessary or desirable to enable Diamond to perform
the Diamond Development Work and make the Audible Software and the Audible
Firmware interoperate with the Rio II.
(d) Non-Exclusivity. The Diamond Development Work will be performed
---------------
by Diamond on a non-exclusive basis and shall not affect the right of
Diamond to perform research, development and integration efforts for others
or on its own behalf with respect to the same or similar technologies as
are the subject of this Agreement.
(e) Updates. Diamond and Audible, with each other's assistance as
--------
reasonably requested by the other party, shall exercise its reasonable best
efforts to Integrate updates, fixes and enhancements to the Audible
Firmware, the Audible Software, the Rio Products and the OEM Rio Products
as defined below, with the approval of the party whose technology it is,
for purposes of maintaining the security features of the Audible Firmware,
and correcting any material errors and bugs affecting any major
functionality of the Audible Software, the Integrated Rio Products and OEM
Rio Products with Audible technology, as such errors and fixes are
documented by instances of data loss or product malfunction..
2.6 Representatives; Meetings. Each party hereby agrees to have at least
-------------------------
one Manager designated as the primary contact person on its behalf for matters
relating to this Agreement and its implementation. Each party hereby further
agrees that, through the end of [***], they will endeavor in good faith to have
once a week a conference call, and monthly a meeting, with the joint technical
and business personnel of the parties to discuss the progress of the development
work and technical and business issues presented by this Agreement. Thereafter,
upon the written request of the other party, the parties will make reasonable
efforts to meet, at a mutually agreeable times and locations, to confidentially
discuss the progress of work under this Agreement, product trends,
implementation issues, areas of collaboration, and other related issues. [***].
Each party further agrees to provide the other with periodic reports regarding
the progress of work under this Agreement.
2.7 Implementation Schedule. The Audible Development Work and the Diamond
-----------------------
Development Work shall be implemented promptly and diligently in accordance with
an implementation schedule to be mutually agreed upon by the parties, taking
into account the Anticipated Launch Date, which schedule shall become a part of
this Agreement upon approval by the parties. Both parties recognize that time
is of the essence to this Agreement with respect to the development work that
needs to be performed by the Anticipated Launch Date and, as it respects their
own development work, the parties agree to exercise their best efforts to permit
the Integrated Rio II that is AudibleReady to be available on the Anticipated
Launch Date.
________________
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
6
<PAGE>
2.8 Development Costs. [***].
-----------------
2.9 Review Rights. Each party will have the right, in its reasonable
-------------
discretion, to conduct technical reviews of the progress of the other party's
performance of its development work at the facilities of the other party and at
such other locations where any part of the work may be performed. Each party
will provide reasonable cooperation to the other in performing such reviews,
including without limitation, providing that party with access to all work in
progress, documents and other materials, as reasonably requested by the
reviewing party. Each party may perform such reviews at a mutually agreeable
time and date during normal business hours at the location where the work is
being performed by providing the other with advance written notice. In
performing such reviews, each party shall not unduly interfere with the
operation of the other's business activities, and shall comply with the other
party's reasonable safety and security policies and procedures. Diamond hereby
agrees to provide to Audible or its designee the opportunity to review in
detail, prior to release, the code of the Integrated Rio II for purposes of
determining compliance with Audible's security and functional requirements.
2.10 Testing
-------
(a) Goals of Testing. The parties agree to cooperate with each other
----------------
in the testing of the Audible Software and the Integrated Rio II, for the
purposes of determining that: (i) the Audible Firmware has been
successfully Integrated into the Rio II; (ii) the Audible Software and the
Rio II are compatible, interoperable and able to interface with each other
and with Content; (iii) when used with other necessary hardware, software
and interfaces (if any), the Audible Software and the Rio II are
compatible, interoperable and able to interface with audible.com; (iv) the
use of the Audible Software in combination with the Rio II preserves the
functionality of the Rio II without materially degrading its performance
(as described in the applicable specifications); and (v) the use of the Rio
II in combination with the Audible Software preserves the functionality of
the Audible Software without materially degrading its performance (as
described in the applicable specifications) (the foregoing, collectively,
constituting "Testing").
(b) Testing Procedures. Testing and acceptance of the development
------------------
work and resulting products of the parties shall occur in accordance with
such testing plan(s), procedures and schedule(s) as are mutually agreed to
by the parties. In the event defects in the form of non-conformities with
the Testing specifications are discovered during the implementation of the
acceptance plan(s), each party shall exercise prompt and reasonable efforts
to correct and remediate the defect(s), and subsequently thereto the
acceptance plan(s) shall continue. Neither shall unreasonably withhold or
delay its approval of the Testing and the development work.
(c) Third Party Components. Notwithstanding any provision of this
----------------------
Agreement to the contrary, neither party shall be responsible for the
manufacture or performance or failure to perform of hardware, software or
other components provided by third parties and which are used in connection
with the operation of that party's products or services, or for errors or
omissions of the other party's employees and agents.
________________
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
7
<PAGE>
2.11 [***].
3. PRODUCT BRANDING AND INTEGRATION OBLIGATIONS
--------------------------------------------
3.1 By Audible.
----------
(a) Branding. Audible agrees that, at Diamond's request, it will
--------
incorporate appropriate Diamond/Rio II branding into the Audible Software,
thereby creating a co-branded version of the software for the exclusive use
of customers of the Integrated Rio II product. Such Diamond/Rio II
branding shall be subject to Diamond's supplying Audible with high-
resolution digital artwork, logos, and other materials, in appropriate
formats, which Diamond desires to be incorporated into the software. The
placement, form and format of any such branding shall be as mutually agreed
upon by the parties. Nothing herein is intended to preclude Audible from
doing any other type of branding on its products and services. In
addition, Audible agrees to feature prominently the Rio II product on
audible.com by means of placements, banners or other ways that the parties
mutually agree to. The web site shall refer visitors to audible.com who
are interested in acquiring Rio Products back to a Diamond web site.
Diamond shall develop a system for tracking visits to its web sites which
are triggered by a referral from audible.com.
(b) Further Development. Audible agrees that, for as long as Diamond
-------------------
is in compliance with the terms of this Agreement, it shall exercise
reasonable commercial efforts to update, upgrade, and modify the Audible
Software so as to make it interoperable and compatible with follow-on Rio
Products which are manufactured by or for Diamond pursuant to technical
specifications to be agreed to by the parties
3.2 By Diamond.
----------
(a) Branding and Integration. Diamond agrees that, commencing with
------------------------
the Rio II product release, by the Anticipated Launch Date it will
Integrate the Rio Products to make them AudibleReady, and will prominently
brand the Rio Products with the AudibleReady logo (which logo will be
provided by Audible to Diamond) on (i) the Rio II units (as described
below), (ii) the box in which the Rio II is distributed, (iii) Diamond's
in-box materials (e.g., manuals, user guides, inserts, etc.), and (iv) as
appropriate, Rio II-related marketing materials (e.g., print advertising,
Diamond's web site, banner advertisements). The placement, form and format
of such branding shall be as mutually agreed upon by the parties; however,
Diamond agrees that it shall include the AudibleReady logo [***] such
branding shall be legible and reasonably easy to distinguish. The mutually
agreed-upon placement, form and format of the AudibleReady logo to be
included on the Rio II shall be attached to this Agreement as an Exhibit
within 15 days of the Effective Date of this Agreement. Nothing herein is
intended to preclude Diamond from doing any other type of branding on its
products. To the extent that, notwithstanding the parties' development
efforts in accordance with Section 2 above, the Rio II cannot be Integrated
by the Anticipated Launch Date, the parties hereby agree to continue to
work in
________________
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
8
<PAGE>
good faith to Integrate the Rio Products as promptly as possible, subject
to Audible's rights under Section 12.2(a).
(b) Further Development. Diamond agrees that, for as long as Audible
-------------------
is in compliance with the terms of this Agreement, it shall exercise
reasonable commercial efforts to Integrate the Rio Products that follow the
Rio II in order to enable access by users to audible.com and downloading of
the Content using the Rio Products, pursuant to technical specifications to
be agreed to by the parties.
3.3 Diamond's OEM Obligations. In the event that OEM products based on or
-------------------------
derived from Diamond Rio Products (the "OEM Rio Products") are to be authorized
by Diamond, Diamond agrees to use its good faith efforts to promote and seek to
Integrate Audible technology and AudibleReady branding in such products, and to
participate in Audible co-marketing programs with respect to such products.
Such efforts will include, without limitation, introducing Audible to existing
and prospective OEMs of Diamond. Audible acknowledges and agrees that the
decision whether to include Audible technology, AudibleReady branding and to
participate in Audible co-marketing programs will be in the reasonable
discretion of Diamond and its OEMs. Third party OEMs Integrating Audible's
technology in their products must receive the necessary Intellectual Property
licenses directly from Audible. [***].
4. DISTRIBUTION AND INSTALLATION OF THE AUDIBLE SOFTWARE.
-----------------------------------------------------
4.1 Provision of the Audible Software. Subject to Diamond's compliance of
---------------------------------
its obligations under Section 2 above, Audible hereby agrees to provide Diamond
with a master copy of the Audible Software prior to the Anticipated Launch Date
to enable the Content on the Rio II.
4.2 Distribution By Diamond. Commencing with the first commercial release
-----------------------
of the Rio II, Diamond hereby agrees to make its best reasonable efforts to ship
the Integrated Rio II, with a copy of the Audible Software in-box with each unit
shipped to Diamond's distributors and customers. Diamond agrees to pay for the
cost of making the required copies of the Audible Software for such purposes.
Diamond further agrees to make its best reasonable efforts during the Term, for
as long as the Audible Software meets Diamond's reasonable quality criteria, to
distribute a version of the Audible Software as a core component of future
releases and natural upgrade path(s) of the Rio Products, subject to Diamond's
right to discontinue the product.
4.3 Installation of the Audible Software. With respect to copies of the
------------------------------------
Audible Software distributed by Diamond with Integrated Rio products, Diamond
agrees that, as part of the initial software installation process for the Rio
II, the Audible Software and registration with audible.com will be a default
part of the installation process which may be deselected at the end user's
option.
________________
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
9
<PAGE>
5. GRANT OF LICENSES
-----------------
5.1 License to Audible Software.
---------------------------
(a) Subject to the terms and conditions of this Agreement, Audible
hereby grants to Diamond a [***] license to use, reproduce, and make, or
have others make for it, one or more copies of the Audible Software in
object code form only, solely to:
(i) Distribute a copy of the Audible Software in connection
with the sale of Integrated Rio Products to end users, pursuant to non-
exclusive sublicenses thereof, solely for the purpose of the end users'
personal use of the Integrated Rio Products, solely to play Content
using the Integrated Rio Products, and not for redistribution;
(ii) Distribute a copy of the Audible Software to OEMs for
further distribution as part of the sale of OEM Rio Products to end
users or on a standalone basis, pursuant to non-exclusive sublicenses
thereof, solely for the purpose of the end users' personal use, and
solely to play Content using the OEM Rio Products, and not for
redistribution;
(iii) Distribute a copy of the Audible Software to end users on a
standalone basis, pursuant to non-exclusive sublicenses thereof, solely
for the purpose of the end users' personal use, and solely to play
Content.
(iv) Implement Diamond's marketing and promotion obligations
under this Agreement; and
(v) Provide support to recipients of the Integrated Rio
Products from Diamond and OEM Rio Products that include Audible
technology as permitted above.
(b) Scope of Use of Audible Software. No right to modify the Audible
--------------------------------
Software or to use or receive any software created by Audible for a third
party is granted to Diamond hereunder. In addition, Diamond shall not, and
shall not permit any third party to, modify, translate, decompile, nor
create or attempt to create, by reverse engineering or otherwise, the
source code from any object code supplied hereunder, or adapt the Audible
Software in any way or use it to create a derivative work. Portions of the
Audible Software may not be used independently of the Audible Software, but
only in connection with enabling the Integrated Rio Products, OEM Rio
Products and personal computers to access and download Content. Any right
not expressly granted to Diamond by this Agreement is hereby expressly
reserved by Audible. No identifying marks, copyright or proprietary right
notices may be deleted from any copy of the Audible Software or from any
portion thereof. Diamond shall not make to any recipient of the Audible
Software any warranty or representation regarding the Audible Software or
Audible's products and/or services which does not comport with Audible's
written representations to users of its products and services, unless such
warranties and
________________
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
10
<PAGE>
representations have been approved in writing in advance by Audible after
review thereof. All rights not expressly granted to Diamond are hereby
reserved to Audible.
5.2 License to Audible Firmware. Subject to the terms and conditions of
---------------------------
this Agreement, Audible hereby grants to Diamond a [***] license to use and
reproduce the Audible Firmware for the sole purpose of performing the Diamond
Development Work and the Integration and making and selling, or having others
make and sell for Diamond, Rio Products so that users of the Integrated Rio
Products can use the Rio Products to playback the Content therewith. No
identifying marks, copyright or proprietary right notices may be deleted from
any copy of the Audible Firmware or from any portion thereof. Diamond shall not
make to any recipient of the Rio Products any warranty or representation
regarding the Audible Firmware unless such warranties and representations have
been approved in writing in advance by Audible after review thereof. All rights
not expressly granted to Diamond are hereby reserved to Audible.
Notwithstanding the above, Audible hereby grants to Diamond for the Term a [***]
license to use, reproduce and distribute (pursuant to an end user software
license agreement) [***] contained in the security module of the Audible
Firmware for the sole purpose of [***] to customers of the Integrated Rio
Products.
5.3 License to Diamond Data and Software. Subject to the terms of this
------------------------------------
Agreement, Diamond hereby grants to Audible a [***] license to use, reproduce
and make one or more copies of, adapt, and create derivative works based upon,
and have others do any of the foregoing for Audible, the APIs, information,
software, and tools to be provided to Audible by Diamond under this Agreement
for purposes of developing, supporting, refreshing, enhancing, and modifying the
Audible Software, the Audible Firmware, the Integrated Rio Products, the Content
and any future derivations therefrom (collectively, the "Diamond Information").
Furthermore, Diamond hereby grants to Audible a [***] license to distribute the
Diamond APIs and related software required to interoperate with the Rio Products
and OEM Rio Products to end users, pursuant to non-exclusive sublicenses
thereof, only for the purpose of using them with the Rio Products or OEM Rio
Products.
5.4 Term. The licenses granted to Diamond under this Section 5 shall
----
commence on the Effective Date and expire upon expiration or earlier termination
of the Term as described below. With respect to units of Integrated Rio
Products sold or otherwise transferred to end users prior to the end of the
Term, the licenses to the Integrated Audible Firmware and any Audible Software
distributed in connection therewith to the users (including any Audible Software
otherwise distributed in connection with OEM Rio Products pursuant to this
Agreement) shall continue for as long as the user uses the Rio unit in
compliance with the applicable terms of the licenses from Diamond and Audible.
Upon termination or earlier expiration of the Term, each party shall retain a
[***] license to use the Audible Software and the Integrated Audible Firmware,
in the case of Diamond, and to the Diamond Information, in the case of Audible,
for the sole purpose of providing any necessary maintenance and support to that
party's customers using the Integrated Rio Products and OEM Rio Products.
5.5 Sublicensing of the Audible Software and Subdistribution of Audible
-------------------------------------------------------------------
Firmware and Audible Software. (a) Any permitted sublicenses granted by
- -----------------------------
Diamond to end users of the
________________
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
11
<PAGE>
Audible Software as stated in Section 5.1(a) above shall comport with and be
subject to the terms and conditions generally applicable to users of the Client
Software, as such terms are published on or through audible.com, or as such
terms are otherwise provided by Audible, either by means of a direct license
from Audible to the end user or, if the parties agree, by means of a form of end
user agreement that covers the license terms for both Audible's and Diamond's
products and of which both Audible and Diamond are contractual beneficiaries.
(b) To the extent Diamond wishes to distribute the Audible Firmware and/or
Audible Software to a third-party OEM, wholesaler or retailer for sale by that
third-party under a private label of the third-party or as part of specially
designed hardware for that party, Diamond shall have the right to effect such
distribution subject to the terms of this Agreement and Audible's prior written
approval which shall not be unreasonably withheld.
5.6 Export Approvals. Diamond shall obtain, with Audible's cooperation,
----------------
any licenses or approvals that may, from time-to-time, be required by the United
States Department of Commerce, or by any other agency or department of the U.S.
government, prior to undertaking any export or overseas distribution of any
Integrated Rio Products or any Audible Software or other software and data
resulting from the development work of either Audible or Diamond, and hereby
agrees to indemnify and hold harmless Audible, its affiliates, shareholders,
directors, and officers for any damages, costs, penalties, fines, and attorneys'
fees resulting from the failure or alleged failure to obtain such licenses or
approvals.
5.7 Right to Access Content. The parties agree that, notwithstanding any
-----------------------
other provision of this Agreement, at all times all Content will be served,
controlled and delivered from an Audible server. Diamond acknowledges and
agrees that no provision of this Agreement, including this Section 5.7,
constitutes a sublicense of or to Content itself or the right to use Content as
part of any product or service not controlled and served by Audible. All use of
Content is subject to the terms of the licensing agreements between Audible and
content owners.
5.8 Proprietary Rights Notices. In addition to the other terms of this
--------------------------
Agreement, no identifying marks, copyright or proprietary right notices may be
deleted from any copy of any materials provided by one party to the other
hereunder.
5.9 No Other rights. No right or license is granted under this Agreement
---------------
for the use or other utilization of the parties' Intellectual Property, directly
or indirectly, for the benefit of any person or entity other than the party who
owns such property. In no event shall Diamond use, or allow the use of, the
Audible Software, the Audible Firmware (including any modifications thereto), or
any other materials provided by Audible to Diamond in connection with any
service bureau or timesharing arrangement or for purposes not related to the
Integration. Likewise, in no event shall Audible use, or allow the use of, the
Diamond Information (including any modifications thereto), or any other
materials provided by Diamond to Audible in connection with any service bureau
or timesharing arrangement or for purposes not related to the Integration.
Except as expressly provided in this Agreement, no license under any
Intellectual Property rights, express or implied, are granted by one party to
the other under this Agreement. Audible and
________________
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
12
<PAGE>
Diamond shall have no obligation under this Agreement to provide any hardware,
services or software that are not expressly provided for herein.
6. PROMOTION AND MARKETING OBLIGATIONS
-----------------------------------
6.1 Promotion in General. The parties agree to promote and market
--------------------
audible.com, the Rio Products and the Audible Software in accordance with this
Section 6 and Schedule A..
6.2 Level of Efforts. In achieving the marketing and promotional goals
----------------
stated in Schedule A, the parties shall exercise their best efforts and their
marketing and promotional efforts shall be no less aggressive than the efforts
they undertake with respect to other entities in similar markets that provide
core applications for audio content for use in connection with mobile hardware.
6.3 Promotional Materials. During the Term, each party hereby grants to
---------------------
the other the right to create its own promotional materials to be used in its
distribution and promotion of the Rio Products, audible.com and the Content, but
reserves the right to reasonably approve any and all such materials prior to
their use. Once approved, promotional materials may not be disapproved for
further use unreasonably. All costs associated with the development, production
and delivery of such promotional materials are the responsibility of the party
creating the materials. In addition, each party grants to the other the right
to use the logos and trademarks of the other party which are listed in Schedule
B hereto in promotional materials created by that party, including business
cards, for as long as this Agreement is in force, subject to prior review and
approval by the trademark owner for trademark quality control purposes.
6.4 Conduct. During the term, in conducting all activities relating to
-------
this Agreement, each of Diamond and Audible agrees to: (i) conduct business in a
manner that reflects favorably at all times on the business of the other party;
(ii) not employ deceptive, misleading or unethical practices that are
detrimental to the parties, their products, and services; (iii) not make any
false or misleading representations with regard to the other party's products
and services; (iv) not publish or employ any misleading or deceptive advertising
material; and (v) not make any representations, warranties or guaranties to
anyone with respect to the specifications, features or capabilities of the other
products that are inconsistent with the literature distributed by the other
party, including all warranties and disclaimers contained in such literature.
7. AUDIBLE CONTENT
---------------
7.1 Editorial Control Over Content. Audible reserves the right and
------------------------------
discretion to determine the information to be available as part of the Content
and the inclusion or deletion of any item as part of Content. In addition,
Audible reserves the right to include or delete any item or part of Content from
any Audible Content Bundle as described in Schedule A in the event Audible no
longer possesses the right to use such Content, in which case Audible will
replace the deleted item with an item of Content of similar value and quality.
________________
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
13
<PAGE>
8. FEES, REVENUE SHARING AND PAYMENTS
----------------------------------
8.1 Revenue Sharing By Audible In consideration of the covenants of
--------------------------
Diamond under Sections 3 and 4 above, and for as long as Diamond Integrates the
Audible Firmware into the Rio Products and/or OEM Rio Products that incorporate
the Audible technology and incorporates Audible's AudibleReady branding into its
Rio Products and on-box, in-box and other marketing branding requirements
described above, Audible agrees to share with Diamond a percentage of revenue
generated from the sales of Content to end users of Integrated Rio Products
("Fees") as follows:
(i) Audible agrees to pay Diamond a royalty equal to [***] percent
([***]%) of Net Content Revenue.
(ii) "Net Content Revenue" shall mean the amount of (y) actual gross
cash receipts derived from transmission of Content to each individual Audible
account of an end user of an Integrated Rio Product, or to a customer that
establishes an Audible account after clicking through to audible.com directly
from Diamond's RioPort web site, in each case for a rolling period of 12 months
following the creation of each such customer account, less (z) any third party
licensor payments, cash, trade or promotional discounts, sales or use taxes,
excise taxes, value-added taxes, and duties.
8.2 Revenue Sharing by Diamond. In consideration of the covenants of
--------------------------
Audible under Section 3.1(a) above, Diamond agrees to pay Audible a royalty
equal to [***] percent ([***] %) of Net Unit Revenue. "Net Unit Revenue" shall
mean the amount of (y) actual gross cash receipts derived by Diamond from the
sale of Rio Products and OEM Rio Products to customers referred to Diamond from
audible.com, less (z) any cash, trade or promotional discounts, sales or use
taxes, excise taxes, value-added taxes, cost of any third-party bundled items,
and duties.
8.3 Payments. Each party shall pay the fees payable to the other under
--------
this Section 8, in United States Dollars, on a quarterly basis, within 30 days
of the end of each calendar quarter during the Term and for as long thereafter
as the customer events that trigger the payment of fees hereunder take place
(i.e., the sale of Content to new Integrated Rio Products customers and the
- ----
referrals sales from audible.com), provided that, for payments after the Term,
the party entitled to the fees is not in material breach of this Agreement.
Such payments shall be accompanied by documentation of the calculation of the
fees for that quarter. For this purpose, this Section 8 survives expiration or
early termination of this Agreement.
8.4 Audit Provisions. Each party agrees to keep records in accordance
----------------
with generally accepted accounting principles and in sufficient detail to permit
a review of the accuracy of all fees and payments under this Agreement. Such
records shall be kept for three years following the termination or expiration of
this Agreement. Upon a party's written request for an audit, the other party
shall permit independent auditors designated by the requesting party which are
reasonably acceptable to the party being audited (which approval shall not be
unreasonably withheld) to examine, during ordinary business hours, books,
records, and materials of the party
________________
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
14
<PAGE>
being audited, for the purpose of determining the correctness of payments made
or due for the period examined. The cost of any such audit shall be borne by the
party requesting the audit, and the audit shall be conducted in such a manner as
not to interfere with the audited party's normal business activities. The
auditor will sign a confidentiality agreement and will only disclose to the
party requesting the audit any amounts overpaid or underpaid for the period
examined. All requests for audits will be provided in writing and will be made
at least thirty (30) days prior to any audit. Such request will not occur more
than twice each year. In the event an audit identifies an underpayment to a
party, the party which made the underpayment shall promptly pay an amount equal
to the sum of such underpayment.
8.5 Taxes.
-----
(a) Diamond. All taxes, duties, fees and governmental charges of any
-------
kind (except United States or state taxes based on the net income of
Audible) which are levied, assessed or otherwise imposed by or under the
authority of any government or political subdivision on Diamond on any Fees
payable to Diamond hereunder, or on any aspect of this Agreement, shall be
borne by Diamond, and shall not be considered a part of, a deduction from,
or an offset against payments due to Audible hereunder.
(b) Audible. All taxes, duties, fees and governmental charges of any
-------
kind (except United States or state taxes based on the net income of
Audible) which are levied, assessed or otherwise imposed by or under the
authority of any government or political subdivision on Audible on any Fees
payable to Audible hereunder shall be borne by Audible, and shall not be
considered a part of, a deduction from, or an offset against payments due
to Diamond hereunder.
9. [***]
9.1 [***].
9.2 [***].
9.3 [***].
10. INTELLECTUAL PROPERTY RIGHTS
----------------------------
10.1 Audible Property. Notwithstanding any provision of this Agreement to
----------------
the contrary, subject to Diamond's ownership rights set forth in Section 10.2,
Diamond hereby acknowledges and agrees that, as between Audible and Diamond, and
for all purposes under the laws of all countries, including Section 117 of the
United States Copyright Act and all applicable patent laws, Audible owns, will
own, and at all times shall continue to own, any and all Intellectual Property
in and to all proprietary materials of Audible provided to Diamond hereunder or
otherwise made available to Diamond or its customers, including but not limited
to, Audible Software, audible.com, Content licenses, Client Software, and
Audible Firmware and all related documentation and information provided by
Audible to Diamond, including without
________________
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
15
<PAGE>
limitation any updates, upgrades, enhancements, modifications, derivative works,
customizations, patches, or other functionality or materials of any description
arising from any of them whether made by or for Audible or Diamond, and all pre-
existing Audible algorithms, processes, security data, software, and Audible
hardware (collectively, the "Audible Intellectual Property"). Diamond hereby
assigns to Audible all rights, title and interest it may have or acquire in or
to any Audible Intellectual Property and will execute any documents reasonably
required by Audible to evince such assignment.
10.2 Diamond Property. Notwithstanding any other provision of this
----------------
Agreement, subject to Audible's ownership rights set forth in Section 10.1,
above, Audible hereby acknowledges and agrees that, as between Audible and
Diamond, and for all purposes under the laws of all countries, including Section
117 of the United States Copyright Act and all applicable patent laws, Diamond
owns, will own, and at all times shall continue to own, any and all Intellectual
Property in and to the Rio Products and all related documentation and
information provided to Audible, including without limitation the Diamond
Information, and all pre-existing Diamond algorithms, security data, software,
and Diamond hardware (the "Diamond Intellectual Property"). Audible hereby
assigns to Diamond any rights it may acquire in or to the Diamond Intellectual
Property and will execute any documents reasonably required by Audible to evince
such assignment.
10.3 Notices on Copies.
-----------------
(a) Diamond shall place the following notice on all tangible media
containing copies of any Audible Software:
This software is the property of Audible, Inc. Possession and use of
this software must conform strictly to the license agreement between
Diamond and Audible, Inc., and possession does not convey any right
to disclose, reproduce or permit others to use the software without
the specific written authorization of Audible, Inc.
(b) Diamond shall place the following notice on all distributed
copies of the Audible Software:
Copyright (c) 199_ by
Audible, Inc.
All Rights Reserved
(c) Audible shall place the following notice on all tangible media
containing copies of any Diamond APIs:
This software is the property of Diamond Multimedia Systems, Inc.
(Diamond). Possession and use of this software must conform strictly
to the license agreement between Diamond and Audible, Inc., and
possession
________________
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
16
<PAGE>
does not convey any right to disclose, reproduce or permit others to
use the software without the specific written authorization of
Diamond.
(d) Audible shall place the following notice on all distributed
copies of the Diamond APIs:
Copyright (c) 199_ by
Diamond Multimedia Systems, Inc.
All Rights Reserved
10.4 Trademarks. Diamond hereby acknowledges and agrees that "Audible",
----------
"audible.com", "AudibleReady" and all other variations of "Audible" used by
Audible in connection with its products and services are trademarks belonging to
Audible. Audible hereby acknowledges and agrees that "Diamond", "Rio",
"RioPort" and "RioPort.com" and all other variations of "Diamond" and "Rio" used
by Diamond in connection with its products and services are trademarks belonging
to Diamond. The parties hereby agree that the use by it of any trademark of the
other pursuant to rights granted under this Agreement shall not create any
right, title or interest, in or to the other's marks and that all goodwill
associated with the trademarks of the other party shall belong to that party.
Each party hereby grants to the other a non-exclusive, limited license to use
and reproduce the trademarks of the other listed in Schedule B for purposes of
fulfilling each party's obligations under this Agreement, subject to the prior
review and approval of such uses by the trademark owner, which approval shall
not be unreasonably withheld or delayed.
10.5 Proprietary Notices. Each party agrees that it will not (and it will
-------------------
not allow others to) alter or remove any copyright, trade secret, patent,
proprietary and/or other legal notices contained on or in copies of the
intellectual property and any other tangible materials provided by one party to
the other. The existence of any copyright notice on software or any written
works shall not be construed as an admission, or be deemed to create a
presumption, that publication of such materials has occurred.
10.6 No Other Rights. Except as expressly provided in this Agreement, no
---------------
license under any patents, copyrights, trademarks, trade secrets or any other
intellectual property rights, express or implied, are granted by either party
under this Agreement.
11. LIMITED WARRANTY
----------------
11.1 Each party represents and warrants to the other that (i) it has all
rights and authority necessary to perform under this Agreement; (ii) it has all
rights, licenses and authority necessary to authorize the other party to
exercise the rights granted to the other party under this Agreement; (iii) it
will perform all services under this Agreement in a workmanlike manner, by
qualified personnel, in accordance with high professional standards; and (iv)
its services and products which are the subject matter of this Agreement are, or
will be by January 1, 2000, Year 2000 compliant in that they will record, store,
process, and present calendar dates falling on or after January 1, 2000, in
substantially the same manner and with substantially the same
________________
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
17
<PAGE>
functionality, as calendar dates falling on or before December 31, 1999, and
without any ambiguity as to the correct date, including leap year date data.,
and will not provide invalid results or end processing as a result of date data
falling after January 1, 2000.
11.2 THE WARRANTY CONTAINED IN SECTION 11.1 ABOVE IS A LIMITED WARRANTY
AND IS THE ONLY WARRANTY MADE BY THE PARTIES HEREUNDER. EACH PARTY MAKES NO
OTHER WARRANTY, WHETHER EXPRESS OR IMPLIED, AND EXPRESSLY EXCLUDED AND
DISCLAIMED ARE ALL WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, TITLE, AND NON-INFRINGEMENT. NEITHER PARTY PROVIDES A WARRANTY THAT
OPERATION OF ANY SOFTWARE WILL BE UNINTERRUPTED OR ERROR-FREE.
12. INDEMNIFICATION
---------------
12.1 General Indemnification. (a) Each party (the "Indemnifying Party")
-----------------------
agrees to indemnify, defend and hold harmless the other, and its respective
officers, directors, employees, agents, successors and assigns (collectively,
the "Indemnified Party"), from any and all losses (including reasonable costs
and expenses and reasonable attorney's fees) arising from or in connection with
any of the following:
(a) Any claim arising out of or based on a breach or alleged breach
of the confidentiality obligations and intellectual property provisions set
forth in this Agreement, by the other party or its employees,
subcontractors, agents or other persons within that party's control;
(b) Any claim by a third party to the extent based on any personal
injuries, death or damage to tangible personal or real property resulting
from any act or omission of the other party, or its employees,
subcontractors or agents (solely in their respective capacities as
employees, subcontractors or agents); and
(c) Any claim by a third party to the extent based on any product or
service or representation by the other party, or its employees,
subcontractors, or agents (solely in their respective capacities as
employees, subcontractors or agents).
The Indemnifying Party's obligations are conditioned upon the Indemnified Party
(a) giving the Indemnifying Party prompt written notice of any claim, action,
suit or proceeding for which the Indemnified Party is seeking indemnity; (b)
granting complete control of the defense and settlement to the indemnifying
party; and (c) provides at the Indemnifying Party's expense reasonable
assistance in the defense or settlement thereof..
________________
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
18
<PAGE>
12.2 Intellectual Property Indemnification.
-------------------------------------
(a) Each party (the "Indemnifying Party") agrees to hold harmless,
indemnify and defend the other party (the "Indemnified Party") from and
against any losses, damages, costs and expenses (including reasonable
attorneys' fees and costs) arising out of or relating to any claims that
the Indemnifying Party's products infringes any United States, Canadian,
Mexican, Japanese, and European Union countries patent, copyright,
trademark, trade secret or other proprietary right of any third party. The
Indemnifying Party shall not be liable in the event that (i) the
Indemnified Party continues marketing, sale, distribution or use of the
Indemnifying Party's products after receiving prior written notice from the
Indemnifying Party that the Indemnified Party should cease such activities
due to a third party claim of infringement against such products, or (ii)
the claim of infringement results from the Indemnified Party's combination
or use of the Indemnifying Party's products with any third party product,
program or data not supplied by the Indemnifying Party.
(b) The Indemnifying Party will pay all damages awarded by a court of
competent jurisdiction or arbitral panel attributable to such claim or
payable in settlement thereof, provided that the Indemnified Party (i)
gives the Indemnifying Party prompt written notice of any claim, action,
suit or proceeding for which the Indemnified Party is seeking indemnity,
(ii) grants the Indemnifying Party complete control of the defense and
settlement of the claim, and (iii) provides at the Indemnifying Party's
expense reasonable assistance in the defense or settlement thereof. If any
settlement results in any ongoing liability to, or prejudices or
detrimentally impacts the Indemnified Party, and such obligation,
liability, prejudice or impact can reasonably be expected to be material,
then such settlement shall require the Indemnified Party's written consent,
which consent shall not be unreasonably be withheld. The Indemnified Party
shall be permitted to participate in such defense and settlement
proceedings at its own expense.
(c) THE PARTIES AGREE THAT THIS SECTION 10.2 STATES THE ENTIRE
LIABILITY OF THE PARTIES TO EACH OTHER WITH RESPECT TO THIRD PARTY CLAIMS
FOR INFRINGEMENT OR MISAPPROPRIATION.
13. LIABILITY, DAMAGES AND DISCLAIMERS
----------------------------------
13.1 Limitation of Damages. Except in connection with payments due to
---------------------
third party indemnification under this Agreement and except for claims relating
to the infringement or misappropriation of the intellectual property or
confidential information of a party, NEITHER PARTY SHALL BE LIABLE TO THE OTHER
OR TO ANY THIRD PARTY FOR ANY: (A) SPECIAL, INDIRECT, INCIDENTAL, PUNITIVE, OR
CONSEQUENTIAL DAMAGES ARISING FROM OR RELATED TO THIS AGREEMENT, INCLUDING
WITHOUT LIMITATION, THE OPERATION OR USE OF DEVELOPMENT WORK OR SERVICES,
INCLUDING SUCH DAMAGES, WITHOUT LIMITATION, ARISING FROM LOSS OF OR DAMAGE TO
DATA OR PROGRAMMING, LOSS OF REVENUE OR PROFITS, FAILURE TO REALIZE SAVINGS OR
OTHER BENEFITS, DAMAGE TO EQUIPMENT, AND
________________
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
19
<PAGE>
CLAIMS BY ANY THIRD PERSON, EVEN IF THE PARTIES HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES; AND (B) CLAIMS MADE A SUBJECT OF A LEGAL PROCEEDING
MORE THAN 24 MONTHS AFTER THE DATE UPON WHICH ANY SUCH CAUSE OF ACTION FIRST
AROSE.
13.2 Disclaimer. THE PARTIES HEREBY EXPRESSLY DISCLAIM ANY DAMAGES
----------
DESCRIBED IN SECTION 13.1..
14. TERM
----
14.1 Term. The term of this Agreement shall commence on the Effective
----
Date and continue for an initial period of three years unless terminated earlier
pursuant to Section 14.2 hereof (the "Term"). This Agreement will be
automatically renewed for additional two year periods without notice unless
either party notifies the other party in writing at least 90 days prior to
expiration of the current term that it wishes not to renew this Agreement.
14.2 Termination. This Agreement shall terminate as provided below:
-----------
(a) Audible may, at its option, terminate this Agreement upon 30
days' advance written notice to Diamond in the event that Diamond: files
for bankruptcy or suffers an involuntary bankruptcy that is not dismissed
within ninety (90) days; or ceases to conduct operations in the ordinary
course of business; or fails to comply with any of its material obligations
under this Agreement, which failure to comply continues for thirty (30)
days following Diamond's receipt of written notice from Audible stating the
nature of Diamond's non-compliance, or in the event Diamond fails to
Integrate the Rio II for its first commercial release and such failure is
not due to Audible's material breach of this Agreement;
(b) Diamond may, at its option, terminate this Agreement upon thirty
(30) days' advance written notice to Audible in the event that Audible:
files for bankruptcy or suffers an involuntary bankruptcy that is not
dismissed within ninety (90) days; or ceases to conduct operations in the
ordinary course of business; or fails to comply with any of its material
obligations under this Agreement, which failure to comply continues for 30
days following Audible's receipt of written notice from Diamond stating the
nature of Audible's non-compliance.
14.3 Continuing Liability. The notification by either party of its intent
--------------------
to terminate this Agreement does not relieve either party of any obligations
which have accrued under the terms and conditions of this Agreement, inclusive
of those terms and conditions which extend beyond the date of termination.
14.4 Effect of Termination. Upon termination of this Agreement for any
---------------------
reason, the rights and obligations hereunder (except obligations for payments
and the limited licenses that survive under Section 5.4) shall terminate, except
that the provisions relating to proprietary rights, confidentiality, and
indemnification shall remain in effect. Upon the termination or expiration of
this Agreement, or upon a request by either party hereto, (i) all confidential
________________
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
20
<PAGE>
information of one party in the possession of the other shall be returned except
to the extent necessary for the receiving party to continue exercising its
rights after the termination or expiration of this Agreement or to protect its
legal rights hereunder; and (ii) within thirty (30) days following termination,
expiration, or receipt of such request, the party under the obligation to return
the confidential information shall certify in writing the completion of such
steps. Termination or expiration of this Agreement shall not effect the
confidential nature of any such information.
15. CONFIDENTIALITY
---------------
15.1 Obligations.
-----------
(a) Each of Diamond and Audible each agree to hold in strictest
confidence any information and material which is related to the other's
business and products, or which is designated as proprietary and/or
confidential herein by either party. Each party agrees not to make use of
such information and material (or cause or permit others to do so) other
than for the performance of this Agreement. Both parties agree that
proprietary and confidential information (whether or not marked as such)
includes, without limitation, information related to research and
development efforts, security data, CODEC information, software (in both
source code and object code form), the terms of agreements with third
parties, implementation data, cost information, supplier information,
customer lists, salaries and business affairs of the parties to this
Agreement or their clients. The parties' obligations of confidentiality
under this Agreement shall survive termination of this Agreement.
(b) Diamond acknowledges that the Client Software, the Audible
Software, and the Audible Firmware are valuable property of Audible
containing trade secrets of Audible and that, in the course of the
implementation of this Agreement, Diamond will become privy to information
regarding the Client Software, the Audible Software, and the Audible
Firmware that Audible regards as proprietary and confidential. In this
regard, Diamond agrees that neither Diamond nor its employees and agents
shall communicate, disclose or in any manner convey any proprietary or
confidential information regarding the Client Software, the Audible
Software, or the Audible Firmware to any person, organization, company,
institution or business without the prior written consent of Audible.
(c) Audible acknowledges that the Diamond technology embodied in the
Rio Products (excluding Audible Firmware and Audible Software) are valuable
property of Diamond containing trade secrets of Diamond and that, in the
course of the implementation of this Agreement, Audible will become privy
to information regarding the Rio Products technology that Diamond regards
as proprietary and confidential. In this regard, Audible agrees that
neither Audible nor its employees and agents shall communicate, disclose or
in any manner convey any proprietary or confidential information regarding
the Rio Products technology to any person, organization, company,
institution or business without the prior written consent of Diamond.
________________
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
21
<PAGE>
15.2 Exclusions. The parties' obligations under this Section 15 shall not
----------
apply to (a) information that is or becomes a matter of public knowledge through
no fault of or action by the party receiving it, (b) information that prior to
disclosure was rightfully in the possession of the party receiving it as a
result of disclosure by a third party under no obligation or restriction of
confidentiality, (c) information that, subsequent to disclosure, is rightfully
obtained by the receiving party from a third party under no obligation or
restriction of confidentiality, and (d) information that is independently
developed by the receiving party without resort to information of the other
party that is confidential under this Agreement. The parties acknowledge that
the disclosure of confidential information of the other would cause substantial
harm to that party that could not be remedied by the payment of damages alone.
Accordingly, the parties agree that such party will be entitled to preliminary
and permanent injunctive relief and other equitable relief for any breach of
this Section 15.
15.3 Intellectual Property. Notwithstanding the above, the parties
---------------------
agree that whether or not intellectual property of the parties (including
copyrighted works) is disclosed in confidence, the intellectual property rights
of the parties shall remain in effect in accordance with the laws applicable to
the intellectual property in question. Nothing in this Section is intended to
affect the understandings of the parties elsewhere in this Agreement with
respect to ownership and use of intellectual property.
16. GENERAL PROVISIONS
------------------
16.1 Entire Agreement. This Agreement and its schedules constitute the
----------------
entire agreement of the parties on the subject matter of this Agreement and
supersedes all prior agreements and understandings which may exist between the
parties, with respect to the subject matter hereof. All amendments to this
Agreement must be in writing and signed by both parties.
16.2 Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, this Agreement may not be assigned by Diamond voluntarily or by
operation of law, to any other person, entities, firm, or corporation, in whole
or in part, without the express written approval of Audible. Any attempt to do
so shall be void. This Agreement shall apply to, inure to the benefit of, and
be binding upon, the parties' permitted successors and assigns.
16.3 Internal Dispute Resolution. In the event of any problem, claim, or
---------------------------
dispute arising from, out of, or based upon this Agreement, or the business
relationship between the parties, the aggrieved party shall promptly notify the
other party of the existence of the problem, claim, or dispute, and such other
party shall promptly undertake all reasonable efforts to resolve the matter,
including but not limited to, submitting such problem, claim or dispute for
resolution to a Manager of each party. The Managers shall make a good faith
effort to resolve the dispute as quickly as possible. In the event that the
Managers cannot resolve such dispute within 20 days the matter may at the option
of either party, be submitted for resolution to each party's chief executive
with overall responsibility for the subject matter in dispute for a period of 20
days.
16.4 Governing Law and Arbitration. (a) This Agreement shall be governed
-----------------------------
by and construed in accordance with the law of the State of New Jersey
applicable to contracts between
________________
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
22
<PAGE>
residents of the State of New Jersey, and entered into and performed entirely in
the State of New Jersey, without giving effect to principles of conflict of
laws. Any action instituted by either party arising out of this Agreement for
interim relief shall only be brought, tried and resolved in the State of New
Jersey or the State of California, at the option of the party bringing the
claim.
(b) Any controversy or claim arising out of or relating to this Agreement
for the breach hereof which cannot be settled by the parties pursuant to Section
16.3, shall be settled by arbitration in accordance with the commercial
arbitration rules of the American Arbitration Association as set forth herein.
Each party may select one (1) arbitrator. Selection shall be completed within
20 days of the receipt of a demand for arbitration. If either party fails to
select an arbitrator within such twenty day period, the one (1) selected shall
act as sole arbitrator. If two (2) arbitrators have been selected, the two (2)
arbitrators selected shall select a third within fifteen (15) days after their
selection. If they fail to do so, the third arbitrator shall be selected by the
American Arbitration Association. The arbitrators shall set a date of hearing
no later than sixty (60) days from the date all arbitrators have been selected
and shall enter a decision within thirty (30) days of the end of the proceeding.
The arbitration shall take place at a location to be agreed upon by the parties.
If the parties are unable to agree, the arbitrators shall select a location in
either New jersey, New York City, or California for the arbitration. In any
such arbitration proceeding the arbitrators shall adopt and apply the provisions
of the Federal Rules of Civil Procedure relating to discovery so that each party
shall allow and may obtain discovery of any matter not privileged which is
relevant to the subject matter involved in the arbitration to the same extent as
if such arbitration were a civil action pending in a United States District
Court; provided, however, that each party shall be entitled to no more than four
-----------------
(4) depositions upon oral examination. The award of any arbitration shall be
final, conclusive and binding on the parties hereto. The arbitrators may award
any legal or equitable remedy. The arbitration award shall include an award of
attorneys' fees, in the amount of such fees, to the prevailing party. Judgment
upon any arbitration award may be entered and enforced in any court of competent
jurisdiction. Either party to an arbitration hereunder may bring an action for
injunctive relief against the other party if such action is necessary to
preserve jurisdiction of the arbitrators or to maintain status quo pending the
arbitrators decision.
16.5 Severability. If any provision of this Agreement or the application
------------
thereof to any person or circumstances shall, for any reason and to any extent,
be void or unenforceable, the application of the remainder of this Agreement to
such person or circumstances and the application of such provision to other
persons or circumstances shall be interpreted so as best to reasonably reflect
the intent of the parties hereto. The parties further agree to replace such
void or unenforceable provisions of this Agreement with valid and enforceable
provisions that will achieve, to the extent possible, the economic, business and
other purposes of the void or unenforceable provisions.
16.6 Relationship. The parties agree that their relationship hereunder is
------------
that of independent contractors. Nothing in this Agreement or in the activities
contemplated by the parties pursuant to this Agreement shall be deemed to create
an agency, partnership, employment or joint venture relationship between the
parties. Each party shall be deemed to be acting solely
________________
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
23
<PAGE>
on its own behalf and, except as expressly stated, has no authority to pledge
the credit of, or incur obligations or perform any acts or make any statements
on behalf of, the other party. Neither arty shall represent to any person or
permit any person to act upon the belief that it has any such authority from the
other party. Neither party's officers or employees, agents or contractors shall
be deemed officers, employees, agents or contractors of the other party for any
purpose.
16.7 Agreement Announcement. The parties agree that upon execution of
----------------------
this Agreement, both parties may announce and/or confirm the existence of this
Agreement to the business, trade and general press, or to any other person or
entity provided that the parties agree on the content, and date of the
announcement, and venue and vehicle for the announcement.
16.8 No Waiver. No waiver of any breach of the Agreement shall be deemed
---------
to be a waiver of any subsequent breach.
16.9 Force Majeure. Neither party will be liable for any failure or
-------------
delay in its performance under this Agreement due to causes, including, but not
limited to, and act of God, an act of civil or military authority, fire,
epidemic, flood, earthquake, riot, war, sabotage, labor shortage or dispute,
failure of suppliers to perform or failures in supply chains, and governmental
action, which are beyond its reasonable control; provided that the delayed
party: (a) gives the other party written notice of such cause promptly, and in
any event within 15 days of discovery thereof; and (b) uses its reasonable
efforts to correct such failure or delay in its performance.
16.10 Attorneys' Fees. A prevailing party in an action to enforce this
---------------
Agreement shall have the right to collect from the other its reasonable expenses
incurred in enforcing this Agreement including attorneys' fees.
16.11 Construction of Agreement. This Agreement has been negotiated by
-------------------------
the parties hereto, shall be deemed to have been drafted by both parties, and
the language hereof shall be construed neutrally and not for or against any
party. Where appropriate the singular shall include the plural. In the event
of a conflict between the provisions of the Agreement and the provisions of any
exhibit, the provisions of the exhibits shall control to the extent of the
conflict but otherwise the two shall be read together as much as possible
16.12 Notices. All notices, requests or other communication required or
-------
permitted hereunder shall be given or made in writing and shall be (i) delivered
personally (including commercial carrier), (ii) sent by overnight mail service,
postage prepaid, or (iii) sent by telecopier or email with confirmation of
receipt and a copy by regular mail, addressed to the person stated below, at the
address noted at the beginning of this Agreement, or at such other address as
may from time to time be designated by such party to the other in writing.
If to Audible:
Audible, Inc.
65 Willowbrook Boulevard
Wayne, New Jersey 0747
Attention: Travis Millman
________________
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
24
<PAGE>
With a copy to:
Audible, Inc.
65 Willowbrook Boulevard
Wayne, New Jersey 0747
Attention: Brian Fielding
and to:
PIPER & MARBURY L.L.P.
1200 19th Street, N.W.
Washington, D.C. 20036
Attention: Edwin M. Martin, Jr., Esq.
If to Diamond:
Diamond Multimedia Systems, Inc
2880 Junction Avenue
San Jose, California 9513
Attention: David Watkins
With a copy to:
Diamond Multimedia Systems, Inc
2880 Junction Avenue
San Jose, California 9513
Attention: General Counsel
Any notice, request or other communication shall be deemed to have been
given and to be effective upon receipt or refusal by the addressee. Any party
may change its address for notices hereunder, effective upon giving of notice of
such change hereunder to the other party.
16.13 Other Remedies. Unless expressly stated to the contrary, subject to
--------------
the appropriate limitations of liability herein contained, any and all remedies
herein expressly conferred upon a party shall be deemed cumulative and not
exclusive of any other remedy conferred hereby or by law, and the exercise of
any one remedy shall not preclude the exercise of any other.
16.14 Counterparts. This Agreement may be executed in two or more
-------------
counterparts, each of which will be deemed an original and all of which together
will constitute one instrument.
________________
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
25
<PAGE>
16.15 Headings. The titles and headings of the various sections and
--------
paragraphs in this Agreement are intended solely for convenience of reference
and are not intended for any other purpose whatsoever or to explain, modify, or
place any construction on any of the provisions of this Agreement.
16.16 No Waiver. A failure of either party to exercise any right provided
---------
for herein shall not be deemed to be a waiver of any right hereunder.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by the undersigned, with authority to do so and intending to be legally bound,
as of the Effective Date.
WITNESS: AUDIBLE, INC.
/s/ Andrew J. Huffman
- ------------------------------ -------------------------------
Name Name: Andrew J. Huffman
-------------------------
Title: President & CEO
------------------------
Date: 05-07-99
-------------------------
WITNESS: DIAMOND MULTIMEDIA, INC.
/s/ David Watkins
- ------------------------------ -------------------------------
Name Name: David Watkins
-------------------------
Title: President RIOPORT
-------------------------
Date: 04-22-99
-------------------------
________________
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
26
<PAGE>
EXHIBIT 10.22
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR
TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS IN ACCORDANCE WITH THE REGISTRATION
REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS OR SOME OTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS IS AVAILABLE WITH
RESPECT THERETO.
COMMON STOCK PURCHASE WARRANT
Warrant No. M-1 Number of Shares Set Forth on Schedule I Hereto
AUDIBLE, INC.
1. Issuance. This Warrant is issued to Microsoft Corporation ("Microsoft")
--------
by Audible, Inc., a Delaware corporation (hereinafter with its successors called
the "Company").
2. Purchase Price; Number of Shares. Subject to the terms and conditions
--------------------------------
hereinafter set forth, the registered holder of this Warrant (the "Holder"),
commencing on the date hereof, is entitled upon surrender of this Warrant with
the subscription form annexed hereto duly executed, at the office of the Company
or such other office as the Company shall notify the Holder of in writing, to
purchase from the Company at the price per share (the "Purchase Price") set
forth on Schedule A hereto such number of fully paid and nonassessable shares of
----------
Common Stock, $0.01 par value, of the Company (the "Common Stock") as is set
forth on Schedule A hereto (the "Warrant Shares"). This Warrant is fully
----------
vested.
3. Payment of Purchase Price; Cashless Exercise.
--------------------------------------------
(a) The Purchase Price may be paid in cash, by check or wire transfer in
immediately available funds, or as provided in 3(b) below.
(b) At any time during the term of this Warrant, the Holder may also elect to
exercise this Warrant (the "Conversion Right") with respect to a particular
number of Warrant Shares (the "Converted Warrant Shares"), and the Company shall
deliver to the Holder (without payment by the Holder of the Purchase Price in
cash or any other consideration (other than the surrender of rights to receive
Warrant Shares hereunder)) that number of shares of Common Stock equal to the
quotient obtained by dividing: (x) the difference between (i) the product of (A)
the Current Market Price of a share of Common Stock multiplied by (B) the number
of Converted Warrant Shares and (ii) the product of (A) the Exercise Price
multiplied by (B) the number of the
<PAGE>
Converted Warrant Shares, in each case as of the Conversion Date (as defined in
Section 3(c) below)), by (y) the Current Market Price of a share of Common Stock
on the Conversion Date. No fractional Warrant Shares shall be issuable upon
exercise of the Conversion Right, and if the number of Warrant Shares to be
issued determined in accordance with the following formula is other than a whole
number, the Company shall pay to the holder of this Warrant an amount in cash
equal to the Current Market Price of the resulting fractional Warrant Share on
the Conversion Date.
(c) The Conversion Right may be exercised by the Holder by the surrender of
this Warrant as provided in Section 3(b), together with a written statement
specifying that the Holder thereby intends to exercise the Conversion Right and
indicating the number of Converted Warrant Shares which are covered by the
exercise of the Warrant. Such conversion shall be effective upon receipt by the
Corporation of this Warrant, together with the aforesaid written statement, or
on such later date as is specified therein (the "Conversion Date"). The
Corporation shall issue to the Holder as of the Conversion Date a certificate
for the Warrant Shares issuable upon exercise of the Conversion Right and, if
applicable, a new warrant of like tenor evidencing the balance of the Warrant
Shares remaining subject to this Warrant.
(d) The term "Current Market Price" for the Common Stock as of a specified
date shall mean: (i) if the Common Stock is publicly traded on such date, the
average closing price per share over the preceding 10 trading days as reported
on the principal stock exchange or quotation system on which the Common Stock is
listed or quoted; or (ii) if the Common Stock is not publicly traded on such
date, the Board of directors of the Company shall determine Current Market Price
in its reasonable good faith judgment. The foregoing notwithstanding, if Holder
advises the Board of Directors in writing that Holder disagrees with such
determination, then the Company and Holder shall promptly agree upon a reputable
investment banking firm to undertake such valuation. If the valuation of such
investment banking firm is greater than that determined by the Board of
Directors, then all fees and expenses of such investment banking firm shall be
paid by the Company. In all other circumstances, such fees and expenses shall
be paid by Holder.
4. Partial Exercise. This Warrant may be exercised in part, and the Holder
----------------
shall be entitled to receive a new warrant, which shall be dated as of the date
of this Warrant, covering the number of shares in respect of which this Warrant
shall not have been exercised.
5. Issuance Date. The person or persons in whose name or names any
-------------
certificate representing shares of Common Stock is issued hereunder shall be
deemed to have become the holder of record of the shares represented thereby as
at the close of business on the date this Warrant is exercised with respect to
such shares, whether or not the transfer books of the Company shall be closed.
6. Expiration Date. This Warrant shall expire at the close of business on
---------------
November 18, 2003, and shall be void thereafter.
<PAGE>
7. Reserved Shares; Valid Issuance. The Company covenants that it will at
-------------------------------
all times from and after the date hereof reserve and keep available such number
of its authorized shares of Common Stock, free from all preemptive or similar
rights therein, as will be sufficient to permit the exercise of this Warrant in
full. The Company further covenants that such shares as may be issued pursuant
to the exercise of this Warrant will, upon issuance, be duly and validly issued,
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issuance thereof.
8. Adjustment of Number of Shares; Exercise Price; Nature of Securities
--------------------------------------------------------------------
Issuable Upon Exercise of Warrants.
----------------------------------
(a) Exercise Price; Adjustment of Number of Shares. The Exercise Price set
----------------------------------------------
forth in Schedule A hereto and the number of shares purchasable hereunder shall
be subject to adjustment from time to time as hereinafter provided.
(b) Reorganization, Reclassification, Consolidation, Merger or Sale. If any
---------------------------------------------------------------
capital reorganization or reclassification of the capital stock of the Company,
or any consolidation or merger of the Company with another entity, or the sale
of all or substantially all of the Company's assets to another person or entity
(collectively referred to as a "Transaction") shall be effected in such a way
that holders of Common Stock shall be entitled to receive stock, securities,
cash or assets with respect to or in exchange for Common Stock, then, as a
condition of such Transaction, reasonable, lawful and adequate provisions shall
be made whereby the holder of this Warrant shall thereafter have the right to
purchase and receive upon the basis and upon the terms and conditions specified
in this Warrant, upon exercise of this Warrant and in lieu of the Warrant Shares
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby, such number, amount and like kind of shares of stock,
securities, cash or assets as may be issued or payable pursuant to the terms of
the Transaction with respect to or in exchange for the number of shares of
Common Stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby as if such shares were outstanding
immediately prior to the Transaction, and in any such case appropriate provision
shall be made with respect to the rights and interest of the holders to the end
that the provisions hereof (including, without limitation, provisions for
adjustments of the Exercise Price and of the number of Warrant Shares
purchasable and receivable upon the exercise of this Warrant) shall thereafter
be applicable, as nearly as may be practicable, in relation to any shares of
stock or securities thereafter deliverable upon the exercise hereof.
(c) Stock Splits, Stock Dividends and Reverse Stock Splits. If at any time
------------------------------------------------------
after the first to occur of: (i) the IPO or (ii) the date 12 months after the
date hereof, the Company shall subdivide its outstanding shares of Common Stock
into a greater number of shares, or shall declare and pay any stock dividend
with respect to its outstanding stock that has the effect of increasing the
number of outstanding shares of Common Stock, the Exercise Price in effect
immediately prior to such subdivision or stock dividend shall be proportionately
reduced and the number of Warrant Shares purchasable pursuant to this Warrant
immediately prior to such subdivision or stock dividend shall be proportionately
increased, and conversely, in case at any time after the first to occur of: (i)
the IPO or (ii) the date 12 months after the date hereof, the
<PAGE>
Company shall combine its outstanding shares of Common Stock into a smaller
number of shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased and the number of Warrant Shares
purchasable upon the exercise of this Warrant immediately prior to such
combination shall be proportionately reduced.
(d) Dissolution, Liquidation or Wind-Up. In case the Company shall, at
-----------------------------------
any time prior to the exercise of this Warrant, dissolve, liquidate or wind up
its affairs, the holder hereof shall be entitled, upon the exercise of this
Warrant, to receive, in lieu of the Warrant Shares which the holder would have
been entitled to receive, the same kind and amount of assets as would have been
issued, distributed or paid to such holder upon any such dissolution,
liquidation or winding up with respect to such Warrant Shares, had such holder
hereof been the holder of record of the Warrant Shares receivable upon the
exercise of this Warrant on the record date for the determination of those
persons entitled to receive any such liquidating distribution.
(e) Accountant's Certificate. In each case of an adjustment in the
------------------------
Exercise Price, number of Warrant Shares or other stock, securities or property
receivable upon the exercise of this Warrant, the Company shall compute, and
upon the holder's request shall at the Company's expense cause independent
public accountants of recognized standing selected by the Company and reasonably
acceptable to the holder to certify such computation, such adjustment in
accordance with the terms of this Warrant and prepare a certificate setting
forth such adjustment and showing in detail the facts upon which such adjustment
is based, including a statement of (i) the number of shares of Common Stock of
each class outstanding or deemed to be outstanding, (ii) the adjusted Exercise
Price and (iii) the number of Warrant Shares issuable upon exercise of this
Warrant. The Company will forthwith mail a copy of each such certificate to the
holder hereof. In the event that the holder disputes such adjustment, the holder
shall be entitled to select an additional firm of independent certified public
accountants of national standing and paid for by the holder to certify such
adjustment and the Company and the holder shall use their good faith best
efforts to agree on such adjustment based on the reports of the two accounting
firms. In the event that the Company and the holder are still unable to reach
agreement as to such adjustment, the Company and the holder agree to submit such
determination to binding arbitration. Upon determination of such adjustment, the
Board of Directors shall forthwith make the adjustments described therein.
9. Fractional Shares. In no event shall any fractional share of Common
-----------------
Stock be issued upon any exercise of this Warrant. If, upon exercise of this
Warrant as an entirety, the Holder would, except as provided in this Section 9,
be entitled to receive a fractional share of Common Stock, then the Company
shall issue the next higher number of full shares of Common Stock, issuing a
full share with respect to such fractional share.
10. Notices of Record Date, Etc. In the event of:
---------------------------
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend
<PAGE>
or other distribution, or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities or
property, or to receive any other right,
(b) any reclassification of the capital stock of the Company, capital
reorganization of the Company, consolidation or merger involving the
Company, or sale or conveyance of all or substantially all of its assets,
or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then and in each such event the Company will mail or cause to be mailed to the
Holder a notice specifying (i) the date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and stating the amount
and character of such dividend, distribution or right, or (ii) the date on which
any such reclassification, reorganization, consolidation, merger, sale or
conveyance, dissolution, liquidation or winding-up is to take place, and the
time, if any is to be fixed, as of which the holders of record in respect of
such event are to be determined. Such notice shall be mailed at least 20 days
prior to the date specified in such notice on which any such action is to be
taken.
11. Amendment. The terms of this Warrant may be amended, modified or
---------
waived only with the written consent of the Company and the holder of this
Warrant.
12. Governing Law. The provisions and terms of this Warrant shall be
-------------
governed by and construed in accordance with the internal laws of the State of
New Jersey.
13. Successors and Assigns. This Warrant shall be binding upon the
----------------------
Company's successors and assigns and shall inure to the benefit of the Holder's
successors, legal representatives and permitted assigns.
14. Business Days. If the last or appointed day for the taking of any
-------------
action required or the expiration of any right granted herein shall be a
Saturday or Sunday or a legal holiday, then such action may be taken or right
may be exercised on the next succeeding day which is not a Saturday or Sunday or
such a legal holiday.
Original Issue Date: April 23, 1999 AUDIBLE, INC.
By: /s/ Andrew J. Huffman
---------------------
Andrew J. Huffman
Title: President
<PAGE>
SCHEDULE I
The Holder shall be entitled to exercise this Warrant for shares of Common
Stock as follows:
(i) In the event of the closing of the Company's initial public offering of
shares of its Common Stock pursuant to an effective registration statement (the
"IPO") within 12 months of the date hereof, the Holder shall be entitled to
purchase 100,000 shares of Common Stock, as the Common Stock is then
constituted, without taking into effect any adjustment in the shares of Common
Stock by reason of reclassification, change, stock dividend, stock split,
reorganization or other increases in the Common Stock (an "Adjustment"); and the
"Purchase Price" shall be equal to the Company's initial per share "price to the
public" in the IPO as set forth on the cover page of the final prospectus for
the IPO.
(ii) In the event that the Company has not closed an IPO prior to 12 months of
the date hereof, the Holder shall be entitled to purchase 100,000 shares of
Common Stock, as the Common Stock is then constituted, without taking into
effect any Adjustment and the "Purchase Price" shall be $6.00 per share.
<PAGE>
Subscription
To:____________________ Date:_________________________
The undersigned hereby subscribes for __________ shares of Common Stock
covered by this Warrant. The certificate(s) for such shares shall be issued in
the name of the undersigned or as otherwise indicated below:
______________________________
Signature
______________________________
Name for Registration
______________________________
Mailing Address
<PAGE>
Assignment
For value received ____________________________ hereby sells,
assigns and transfers unto ______________________________________
_________________________________________________________________
Please print or typewrite name and address of Assignee
_________________________________________________________________
the within Warrant, and does hereby irrevocably constitute and appoint
_______________________ its attorney to transfer the within Warrant on the books
of the within named Company with full power of substitution on the premises.
Dated:_______________________
______________________________
In the Presence of:
_____________________________
