According to the Company’s FORM 10-Q for the quarterly period ended June 30, 2006, in June 2004, the proposed settlement was submitted to the court for preliminary approval. The court requested that any objections to preliminary approval of the settlement be submitted by July 14, 2004, and the underwriter defendants formally objected to the settlement. The plaintiff and issuer defendants separately filed replies to the underwriter defendants' objections to the settlement on August 4, 2004. The court granted preliminary approval on February 15, 2005, subject to certain modifications. On August 31, 2005, the court issued a preliminary order further approving the modifications to the settlement and certifying the settlement cases. The court also appointed the Notice Administrator for the settlement and ordered that notice of the settlement be distributed to all settlement class members beginning on November 15, 2005 and completed by January 15, 2006. The settlement fairness hearing was held on April 24, 2006, and the court reserved decision. If the court determines that the settlement is fair to the class members, the settlement will be approved. There can be no assurance that this proposed settlement would be approved and implemented in its current form, or at all.

As summarized by the same SEC filing, in June 2001, the Company and certain of its officers were named as defendants in a securities class action filed in United States District Court for the Southern District of New York related to its initial public offering in July 1999. The lawsuits also named certain of the underwriters of the IPO as well as certain of the Company's officers and directors and former directors as defendants. Approximately 300 other issuers and their underwriters have had similar suits filed against them, all of which are included in a single coordinated proceeding in the Southern District of New York (the “IPO Litigations”). An amendment complaint was filed on April 19, 2002. On July 1, 2002, the underwriter defendants in the consolidated actions moved to dismiss all of the IPO Litigations, including the action involving the Company. On July 15, 2002 the Company along with other non-underwriter defendants in the coordinated cases also moved to dismiss the IPO Litigations. On February 19, 2003, the court ruled on the motions. The court granted the Company's motion to dismiss the claims against the Company under Rule 10b-5, due to the insufficiency of the allegations against the Company. The motions to dismiss the claims under Section 11 of the Securities Act were denied as to virtually all of the defendants in the consolidated cases, including the Company. The Company's individual officers, directors and former director defendants in the IPO Litigation signed a tolling agreement and were dismissed from the action without prejudice on October 9, 2002. In June 2003, a proposed settlement of this litigation was reached among the plaintiffs, the issuer defendants in the consolidated actions, the issuer officers and directors named as defendants, and the issuers' insurance companies. The settlement would provide, among other things, a release for the Company and for the individual defendants for the conduct alleged to be wrongful in the amended complaint. The Company would agree to undertake other responsibilities under the partial settlement, including agreeing to assign away, not assert, or release certain potential claims the Company that may have against the underwriters. Any direct financial impact of the proposed settlement is expected to be borne by the Company's insurance carriers.

The complaint alleges that defendants Audible, Inc. and certain individuals violated the federal securities laws by issuing and selling Audible common stock pursuant to the July 16, 1999 IPO without disclosing to investors that some of the underwriters in the offering, including the lead underwriters, had solicited and received excessive and undisclosed commissions from certain investors. The complaint alleges that, in exchange for the excessive commissions, joint lead underwriters Credit Suisse First Boston Corporation, J.P. Morgan Securities Inc., Volpe Brown Whelen & Company, LLC and Wit Capital Corporation allocated Audible shares to customers at the IPO price of $9.00 per share. To receive the allocations (i.e., the ability to purchase shares) at $9.00, the underwriters' brokerage customers had to agree to purchase additional shares in the aftermarket at progressively higher prices. The requirement that customers make additional purchases at progressively higher prices as the price of Audible stock rocketed upward (a practice known on Wall Street as ``laddering'') was intended to (and did) drive Audible's share price up to artificially high levels. This artificial price inflation, the complaint alleges, enabled both the underwriters and their customers to reap enormous profits by buying stock at the $9.00 IPO price and then selling it later for a profit at inflated aftermarket prices, which rose as high as $23.50 during its first day of trading. Rather than allowing their customers to keep their profits from the IPO, the complaint alleges, the underwriters required their customers to ``kick back'' some of their profits in the form of secret commissions. These secret commission payments were sometimes calculated after the fact based on how much profit each investor had made from his or her IPO stock allocation. The complaint further alleges that defendants violated the Securities Act of 1933 because the Prospectus distributed to investors and the Registration Statement filed with the SEC in order to gain regulatory approval for the Audible offering contained material misstatements regarding the commissions that the underwriters would derive from the IPO transaction and failed to disclose the additional commissions and ``laddering'' scheme discussed above.