-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TKqBiSWS+MqhQUzC1D7Z6hEQwekPdl8My5iFIIk5zeJgsPB/Z+ymErIU70SBy/jQ YSTcC3mzKI672iM56le8wQ== 0000922423-02-000660.txt : 20020617 0000922423-02-000660.hdr.sgml : 20020617 20020617100146 ACCESSION NUMBER: 0000922423-02-000660 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20020617 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: LIQUID AUDIO INC CENTRAL INDEX KEY: 0001016613 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 770421089 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-57595 FILM NUMBER: 02680221 BUSINESS ADDRESS: STREET 1: 800 CHESAPEAKE DRIVE CITY: REDWOOD CITY STATE: CA ZIP: 94063 BUSINESS PHONE: 6505492000 MAIL ADDRESS: STREET 1: LIQUID AUDIO INC STREET 2: 800 CHESAPEAKE DRIVE CITY: REDWOOD CITY STATE: CA ZIP: 94063 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: MUSICMAKER COM INC CENTRAL INDEX KEY: 0001079786 STANDARD INDUSTRIAL CLASSIFICATION: PHONOGRAPH RECORDS & PRERECORDED AUDIO TAPES & DISKS [3652] IRS NUMBER: 541811721 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 1740 BROADWAY STREET 2: 23RD FLOOR CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: (212) 265- MAIL ADDRESS: STREET 1: 1831 WIEHLE AVENUE STREET 2: SUITE 128 CITY: RESTON STATE: VA ZIP: 20190 SC 13D/A 1 kl06030_sc13da.txt SCHEDULE 13D AMENDMENT NO. 11 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D (Rule 13d-101) (Amendment No.11) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(A) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) Liquid Audio, Inc. (Name of Issuer) ---------------- Common Stock, $.001 par value ----------------------------- (Title of Class of Securities) 53631T102000 ------------ (CUSIP Number) Mr. James Mitarotonda c/o Barington Capital Group, L.P. 888 Seventh Avenue, 17th Floor New York, N.Y. 10019 (212) 974-5700 -------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) June 13, 2002 ------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f), or 13d-1(g), check the following box: |_|. Introduction. This Amendment No. 11 amends and supplements the Schedule 13D, dated September 28, 2001, as amended to date (the "Schedule 13D"), filed with the Securities and Exchange Commission by musicmaker.com, Inc. ("musicmaker"), Jewelcor Management, Inc., Barington Companies Equity Partners, L.P., Ramius Securities, LLC and Domrose Sons Partnership with respect to the common stock, $.001 par value, of Liquid Audio, Inc., a Delaware corporation (the "Company"). The principal executive offices of the Company are located at 800 Chesapeake Drive, Redwood City, California 94063. Item 4 of the Schedule 13D, "Purpose of Transaction," is amended by adding the following: On June 14, 2002, musicmaker amended its existing complaint filed against the Company in the Court of Chancery of the State of Delaware In and For New Castle County pursuant to Section 211 of the Delaware General Corporation Law to seek an order to compel the Company to hold its 2002 annual meeting of stockholders on July 1, 2002. On the same date, musicmaker sent a letter to Eric Weisman, President and CEO of Alliance Entertainment Corp., a copy of which is attached hereto as Exhibit 99.17, and a letter to Ann Winblad, a member of the Company's board of directors, a copy of which is attached hereto as Exhibit 99.18. Earlier, on June 13, 2002, musicmaker sent a letter to Gerald W.Kearby, President and Chief Executive Officer of the Company, a copy of which is attached hereto as Exhibit 99.19. Item 7 of the Schedule 13D, "Material to be Filed as Exhibits," is amended by adding the following: 99.17 Letter dated June 14, 2002 from musicmaker to Eric Weisman, President and CEO of Alliance Entertainment Corp. 99.18 Letter dated June 14, 2002 from musicmaker to Ann Winblad, a member of the board of directors of the Company. 99.19 Letter dated June 13, 2002 from musicmaker to Gerald W. Kearby, President and Chief Executive Officer of the Company. -2- SIGNATURES After reasonable inquiry and to the best knowledge and belief of the undersigned, the undersigned certify that the information set forth in this Statement is true, complete and correct. Dated: June 17, 2002 MUSICMAKER.COM, INC. By /s/ James A. Mitarotonda ------------------------------------- Name: James A. Mitarotonda Title: President and Chief Executive Officer JEWELCOR MANAGEMENT, INC. By /s/ Seymour Holtzman ------------------------------------- Name: Seymour Holtzman Title: Chairman and Chief Executive Officer BARINGTON COMPANIES EQUITY PARTNERS, L.P. By: Barington Companies Investors, LLC, its general partner By /s/ James. A. Mitarotonda ------------------------------------ Name: James A. Mitarotonda Title: President and Chief Executive Officer RAMIUS SECURITIES, LLC By: Ramius Capital Group, LLC, its managing member By /s/ Marran Ogilvie ------------------------------------ Name: Marran Ogilvie Title: Authorized Signatory DOMROSE SONS PARTNERSHIP By /s/ James A. Mitarotonda ----------------------------------- Name: James A. Mitarotonda Title: Partner -3- EX-99 3 kl06030_ex99-17.txt EXHIBIT 99.17 LETTER Exhibit 99.17 musicmaker.com, Inc. c/o Barington Capital Group, L.P. 888 Seventh Avenue 17th Floor New York, New York 10019 June 14, 2002 Alliance Entertainment Corp. 4250 Coral Ridge Drive Coral Springs, Florida 33065 Attention: Eric Weisman President and CEO Re: Liquid Audio, Inc. Dear Mr. Weisman: Your company, Alliance Entertainment, has purported to enter into an agreement for the acquisition of a majority interest in Liquid Audio, Inc. through a merger transaction. Well before you and Liquid Audio announced the agreement yesterday, musicmaker.com, Inc. and other members of its group announced and then commenced a proxy solicitation for election of directors of Liquid Audio and control of its board at an annual meeting of stockholders scheduled for July 1, 2002. We also publicly cautioned Liquid Audio not to enter into any agreement or take other action that would commit Liquid Audio to a major corporate transaction in advance of the stockholders meeting. You undoubtedly knew both of our solicitation and our cautionary notice to the company at the time you and Liquid Audio purported to execute your agreement. You should have known as well that Wilson, Sonsini, Goodrich & Rosati, who represented Liquid Audio in its negotiations with Alliance Entertainment, has represented and continues to represent musicmaker.com. In our view Wilson Sonsini's representation of Liquid Audio in the circumstances is adverse to the interests of musicmaker.com and a violation of applicable principles of professional conduct. We have so informed Wilson Sonsini, and this should have been apparent to you as well. We note further that the breakup fee provisions of your purported agreement unconscionably seek to penalize Liquid Audio stockholders for exercising their rights to reject your transaction and a properly constituted board of Liquid Audio for exercising its fiduciary duties to do the same. We therefore inform you that we do not regard your agreement with Liquid Audio as binding on the company and we will conduct ourselves accordingly. Very truly yours. /s/ James Mitarotonda --------------------------------------- James Mitarotonda President and Chief Executive Officer EX-99 4 kl06030_ex99-18.txt EXHIBIT 99.18 LETTER Exhibit 99.18 musicmaker.com, Inc. c/o Barington Capital Group, L.P. 888 Seventh Avenue 17th Floor New York, New York 10019 VIA FEDERAL EXPRESS - ------------------- June 14, 2002 Ann L.Winblad Hummer Winblad Venture Partners 2 South Park, 2nd Floor San Francisco, CA 94109 Dear Ms. Winblad: The reason I am writing to you is that telephonic and written communications to Mr. Kearby have been fruitless because Mr. Kearby has failed to respond. Although shareholders do not have the specific financial information regarding the proposed transaction with Alliance Entertainment Corp., many respected individuals in the industry have indicated that Alliance is involved in an industry that operates on very thin margins, which makes profitability very difficult. As you may be aware, Alliance filed bankruptcy in 1997, and was then acquired by Yucaipa Companies in 1998. Furthermore, Yucaipa gave Alliance an additional $25 million in November 2000, to fund its digital properties. Why would a company with $600 million in revenues in its most recent fiscal year merge with Liquid Audio, who only had revenues of $136,000 in the most recent quarter? I would speculate that Yucaipa's interest in Liquid Audio is for the approximate $85 million in cash that Liquid Audio has in the bank. I suspect that Alliance has a substantial amount of debt, and desperately needs a cash infusion to continue to operate its business. The proposed transaction has onerous and ridiculous breakup fees, which in my opinion, are clearly designed to entrench Liquid Audio's current management and permit Mr. Kearby to maintain his position with the company and continue wasting corporate assets. The inclusion of a provision to pay Alliance an additional $750,000 if the Company decides to liquidate within six months if the transaction is not approved by shareholders is unconscionable. I am sure you realize the anger Liquid Audio's shareholders have toward management and the Board of Directors, as they have lost hundreds of millions of dollars in market value. We have received numerous calls from large and small shareholders who are outraged and disgusted with the shabby treatment they have received from the management of the Company. It seems to me that as a venture capitalist you would require the management of the Company to be sensitive to shareholder concerns, especially as the Company lost over $37 million last year, and had a cash burn in the recent quarter of $5 million. The Company did not announce or hold its 2002 Annual Meeting of Stockholders on a timely basis and has wasted substantial sums of money in an effort to frustrate and thwart the shareholder process. I respectfully request that you and your fellow directors permit the Annual Meeting of Shareholders to occur on Monday, July 1, 2002, as the Company had originally scheduled. The Company has already spent the money for this meeting and filed its preliminary proxy with the Securities and Exchange Commission. I sincerely believe that two substantial outside directors, such as James Mitarotonda and myself, would provide shareholders an avenue in which to express their views. The Company needs input from "truly independent directors." In the investment banking industry, your reputation should be sacred. In my opinion, you have done yourself and your firm a great disservice by permitting yourself to be involved in the wasteful acts carried out by management and the Board of Directors of Liquid Audio, Inc. How could you in good conscience allow the Company to potentially pay up to $3 million in breakup fees, when you know the shareholders want the Company to liquidate its assets? The shareholders spoke clearly yesterday when the stock dropped by 10% and traded more than three times its normal volume. If you would like to discuss this matter, I can be reached at (570) 822-6277, ext. 23. Sincerely, /s/ Seymour Holtzman ----------------------------- Seymour Holtzman Chairman of the Board EX-99 5 kl06030_ex99-19.txt EXHIBIT 99.19 LETTER Exhibit 99.19 musicmaker.com, Inc. c/o Barington Capital Group, L.P. 888 Seventh Avenue 17th Floor New York, New York 10019 VIA FACSIMILE (650) 549-2104 AND FEDERAL EXPRESS - ---------------------------- June 13, 2002 Gerald W. Kearby President and Chief Executive Officer Liquid Audio, Inc. 800 Chesapeake Drive Redwood City, Ca 94063 Dear Mr. Kearby: I would like to have said that I was shocked and dismayed by your proposed action to merge Liquid Audio with Alliance Entertainment Corp., but I have come to believe that the senior management and Board of Directors of the company are primarily interested in perpetuating their own positions, rather than in enhancing shareholder values. In my opinion, the record industry is greatly troubled on all levels, and this "shotgun wedding" will only accelerate the losses. I sincerely hope that the company has not included a breakup fee in this proposed transaction, as that most certainly would be repugnant. Both musicmaker.com, Inc. and the company have already incurred substantial costs in this proxy solicitation. Delaying the Annual Meeting will only cause both parties to incur additional needless expenses and waste significant time. The company should go forward with the July 1, 2002 Annual Meeting and let the shareholders vote on the director nominees. This vote will be a clear message as to whether or not the shareholders support your management. You very well know your large shareholders. Why not call them to see what type of support, or lack thereof, they would give you in this transaction? As of 11:20 a.m. today, the stock price is down approximately 10% following your announcement. Isn't this tell tale? Please call me if you wish to further discuss this matter. Sincerely, /s/ Seymour Holtzman --------------------------- Seymour Holtzman Chairman of the Board P.S. Our phones are "ringing off the hook" with irate shareholders expressing their outrage. cc: Board of Directors -----END PRIVACY-ENHANCED MESSAGE-----