Exhibit 4.2
FIRST AMENDMENT TO THE
PREFERRED STOCK RIGHTS AGREEMENT
This First Amendment ("First Amendment") to the Preferred Stock Rights
Agreement dated as of August 7, 2001 (the "Rights Agreement") by and between
Liquid Audio, Inc. (the "Company") and Mellon Investor Services, LLC, as Rights
Agent (the "Rights Agent"), is entered into and effective as of July 14, 2002.
Capitalized terms used herein but not defined herein shall have the meanings
given to such terms in the Rights Agreement.
RECITALS
WHEREAS, pursuant to Section 27 of the Rights Agreement the Company may
supplement or amend the Rights Agreement in any respect without the approval of
any holders of Rights and the Rights Agent shall, if the Company so directs but
subject to the other provisions of Section 27, execute such supplement or
amendment.
WHEREAS, the Board of Directors has authorized this First Amendment;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby amend the Rights Agreement as follows:
1. Section 1(a) is hereby amended and restated in its entirety as
follows:
(a) "Acquiring Person" shall mean any Person, who or which,
together with all Affiliates and Associates of such Person, shall be
the Beneficial Owner of 10% or more of the Common Shares then
outstanding, but shall not include the Company, any Subsidiary of the
Company or any employee benefit plan of the Company or of any
Subsidiary of the Company, or any entity holding Common Shares for or
pursuant to the terms of any such plan. Notwithstanding the foregoing,
no Person shall be deemed to be an Acquiring Person as the result of an
acquisition of Common Shares by the Company which, by reducing the
number of shares outstanding, increases the proportionate number of
shares beneficially owned by such Person to 10% or more of the Common
Shares of the Company then outstanding; provided, however, that if a
Person shall become the Beneficial Owner of 10% or more of the Common
Shares of the Company then outstanding by reason of share purchases by
the Company and shall, after such share purchases by the Company,
become the Beneficial Owner of any additional Common Shares of the
Company (other than pursuant to a dividend or distribution paid or made
by the Company on the outstanding Common Shares in Common Shares or
pursuant to a split or subdivision of the outstanding Common Shares),
then such Person shall be deemed to be an Acquiring Person unless upon
becoming the Beneficial Owner of such additional Common Shares of the
Company such Person does not beneficially own 10% or more of the Common
Shares of the Company then outstanding. Notwithstanding the foregoing,
(i) if the Company's Board of Directors determines in good faith that a
Person who would otherwise be an "Acquiring Person," as defined
pursuant to the foregoing provisions of this paragraph (a), has become
such inadvertently (including, without limitation, because (A) such
Person was unaware that it beneficially owned a percentage of the
Common Shares that would otherwise cause such Person to be an
"Acquiring Person," as defined pursuant to the foregoing provisions of
this paragraph (a), or (B) such Person was aware of the extent of the
Common Shares it beneficially owned but had no actual knowledge of the
consequences of such beneficial ownership under this Agreement) and
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without any intention of changing or influencing control of the
Company, and if such Person divested or divests as promptly as
practicable a sufficient number of Common Shares so that such Person
would no longer be an "Acquiring Person," as defined pursuant to the
foregoing provisions of this paragraph (a), then such Person shall not
be deemed to be or to have become an "Acquiring Person" for any
purposes of this Agreement; and (ii) if, as of the date hereof, any
Person is the Beneficial Owner of 10% or more of the Common Shares
outstanding, such Person shall not be or become an "Acquiring Person,"
as defined pursuant to the foregoing provisions of this paragraph (a),
unless and until such time as such Person shall become the Beneficial
Owner of additional Common Shares (other than pursuant to a dividend or
distribution paid or made by the Company on the outstanding Common
Shares in Common Shares or pursuant to a split or subdivision of the
outstanding Common Shares), unless, upon becoming the Beneficial Owner
of such additional Common Shares, such Person is not then the
Beneficial Owner of 10% or more of the Common Shares then outstanding.
2. Governing Law. This First Amendment shall be deemed to be a contract
made under the laws of the State of Delaware and for all purposes shall be
governed by and construed in accordance with the laws of such State applicable
to contracts to be made and performed entirely within such State; provided,
however, that all provisions regarding the rights, duties and obligations of the
Rights Agent shall be governed by and construed in accordance with the laws of
the State of New York applicable to contracts made and to be performed entirely
within such State.
3. Counterparts. This First Amendment may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to be duly executed, all as of the day and year first above written.
LIQUID AUDIO, INC.
By: /S/ XXXXXX XXXXXX
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Name: Xxxxxx Xxxxxx
Title: Chief Executive Officer
"RIGHTS AGENT"
MELLON INVESTOR SERVICES LLC
By: /S/ XXXXX X. XXXXX
------------------------
Name: Xxxxx X. Xxxxx
Title: Assistant Vice President
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