-----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, WA+tz+QDB6lYI+s06+jamDPNQaoTrZC+oJRn07AVB/6a1T/kb9Wo8E3dtMf5B2i7 28AMy+VuZj01U1DoPKgv9Q== 0001116502-02-001033.txt : 20020731 0001116502-02-001033.hdr.sgml : 20020731 20020731093505 ACCESSION NUMBER: 0001116502-02-001033 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20020731 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: 02715386 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: JMB CAPITAL PARTNERS LP CENTRAL INDEX KEY: 0001165776 IRS NUMBER: 260015969 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 1999 AVENUE OF THE STARS STREET 2: SUITE 2040 CITY: LOS ANGELES STATE: CA ZIP: 90067 BUSINESS PHONE: 3102862929 MAIL ADDRESS: STREET 1: 1999 AVE OF THE STARS CITY: LOS ANGELES STATE: CA ZIP: 90067 SC 13D/A 1 sc13d-audiobrooks.txt AMENDMENT NO. 1 TO FORM SC13D United States SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ---------------- SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 1 )* Liquid Audio, Inc. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, par value $.001 - -------------------------------------------------------------------------------- (Title of Class of Securities) 53631T 10 2 - -------------------------------------------------------------------------------- (CUSIP Number) Jonathan Brooks JMB Capital Partners, L.P. 1999 Avenue of the Stars, Suite 2040 Los Angeles, CA 90067 (310) 286-2929 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) July 30, 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 that 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 [_]. Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent. (Page 1 of 8 Pages) - ---------- * The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). CUSIP No. 53631T 10 2 13D Page 2 of 8 Pages ________________________________________________________________________________ 1 NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) JMB Capital Partners, L.P. ________________________________________________________________________________ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [_] (b) [_] ________________________________________________________________________________ 3 SEC USE ONLY ________________________________________________________________________________ 4 SOURCE OF FUNDS* WC ________________________________________________________________________________ 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [_] ________________________________________________________________________________ 6 CITIZENSHIP OR PLACE OF ORGANIZATION California ________________________________________________________________________________ 7 SOLE VOTING POWER NUMBER OF 1,163,800 SHARES _________________________________________________________________ 8 SHARED VOTING POWER BENEFICIALLY 0 OWNED BY _________________________________________________________________ EACH 9 SOLE DISPOSITIVE POWER REPORTING 1,163,800 PERSON _________________________________________________________________ 10 SHARED DISPOSITIVE POWER WITH 0 ________________________________________________________________________________ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,163,800 ________________________________________________________________________________ 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [_] ________________________________________________________________________________ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.1% ________________________________________________________________________________ 14 TYPE OF REPORTING PERSON* PN ________________________________________________________________________________ *SEE INSTRUCTIONS BEFORE FILLING OUT! CUSIP No. 53631T 10 2 13D Page 3 of 8 Pages ________________________________________________________________________________ 1 NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Smithwood Partners, LLC ________________________________________________________________________________ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [_] (b) [_] ________________________________________________________________________________ 3 SEC USE ONLY ________________________________________________________________________________ 4 SOURCE OF FUNDS* WC ________________________________________________________________________________ 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [_] ________________________________________________________________________________ 6 CITIZENSHIP OR PLACE OF ORGANIZATION California ________________________________________________________________________________ 7 SOLE VOTING POWER NUMBER OF 1,163,800 SHARES _________________________________________________________________ 8 SHARED VOTING POWER BENEFICIALLY 0 OWNED BY _________________________________________________________________ EACH 9 SOLE DISPOSITIVE POWER REPORTING 1,163,800 PERSON _________________________________________________________________ 10 SHARED DISPOSITIVE POWER WITH 0 ________________________________________________________________________________ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,163,800 ________________________________________________________________________________ 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [_] ________________________________________________________________________________ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.1% ________________________________________________________________________________ 14 TYPE OF REPORTING PERSON* HC ________________________________________________________________________________ *SEE INSTRUCTIONS BEFORE FILLING OUT! CUSIP No. 53631T 10 2 13D Page 4 of 8 Pages ________________________________________________________________________________ 1 NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Jonathan Brooks ________________________________________________________________________________ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [_] (b) [_] ________________________________________________________________________________ 3 SEC USE ONLY ________________________________________________________________________________ 4 SOURCE OF FUNDS* WC ________________________________________________________________________________ 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [_] ________________________________________________________________________________ 6 CITIZENSHIP OR PLACE OF ORGANIZATION California ________________________________________________________________________________ 7 SOLE VOTING POWER NUMBER OF 1,163,800 SHARES _________________________________________________________________ 8 SHARED VOTING POWER BENEFICIALLY 0 OWNED BY _________________________________________________________________ EACH 9 SOLE DISPOSITIVE POWER REPORTING 1,163,800 PERSON _________________________________________________________________ 10 SHARED DISPOSITIVE POWER WITH 0 ________________________________________________________________________________ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,163,800 ________________________________________________________________________________ 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [_] ________________________________________________________________________________ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.1% ________________________________________________________________________________ 14 TYPE OF REPORTING PERSON* IN, HC ________________________________________________________________________________ *SEE INSTRUCTIONS BEFORE FILLING OUT! CUSIP No. 53631T 10 2 13D Page 5 of 8 Pages ________________________________________________________________________________ Item 1. Security and Issuer. This Amendment No. 1 to Schedule 13D relates to shares of common stock par value $.001 per share ("Common Stock") of Liquid Audio, Inc., a Delaware corporation (the "Issuer"). The principal executive offices of the Issuer are located at 800 Chesapeake Drive, Redwood City, CA 94063. Amendment No. 1 amends items nos. 4 and 5 of the Schedule 13D. ________________________________________________________________________________ Item 2. Identity and Background. (a) This Amendment No. 1 to Schedule 13D is being filed by JMB Capital Partners, L.P., Smithwood Partners, LLC and Mr. Jonathan Brooks (collectively, the "Reporting Persons"). JMB Capital Partners, L.P. is a California limited partnership ("JMB Capital"). Smithwood Partners, LLC, a California limited liability company ("Smithwood"), is the general partner of JMB Capital. Mr. Brooks is the sole member and manager of Smithwood. (b) The principal address of each of the Reporting Persons is 1999 Avenue of the Stars, suite 2040, Los Angeles, CA 90067. (c) The principal business of JMB Capital and Smithwood is investing in companies. The principal occupation of Mr. Brooks is investment management. (d) None of the Reporting Persons have, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) None of the Reporting Persons have, during the last five years, been party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) Mr. Brooks is a citizen of the United State of America. ________________________________________________________________________________ Item 3. Source and Amount of Funds or Other Consideration. The aggregate purchase price of the 1,163,800 shares of Common Stock owned by the Reporting Persons is $2,810,210. The source of funds used by JMB capital to purchase the Common Stock was working capital derived from capital contributions from its limited partners. CUSIP No. 53631T 10 2 13D Page 6 of 8 Pages ________________________________________________________________________________ Item 4. Purpose of Transaction. On July 23, 2002, JMB Capital sent a letter to the Board of Directors of the Issuer suggesting, among other things, that the Issuer discontinue its operations and distribute its cash to the shareholders of the Issuer, and that the Issuer terminate its pending merger proposal with Alliance Entertainment. The Issuer responded to JMB Capital by letter dated July 24, 2002, a copy of which was filed with the Securities and Exchange Commission on July 24, 2002 pursuant to Rule 425 under the Securities Act of 1933, a copy of which is filed as Exhibit 2 to this Amendment No. 1 to the Schedule 13D and is incorporated herein by reference. On July 30, 2002, JMB Capital further responded to the Issuer. A copy of JMB Capital's response, dated July 30, 2002, is filed as Exhibit 3 to this Amendment No. 1 to Schedule 13D and is incorporated herein by reference. ________________________________________________________________________________ Item 5. Interest in Securities of the Issuer. (a) The aggregate percentage of shares of Common Stock reported owned by each of the Reporting Persons is based upon 22,745,624 shares of the Common Stock outstanding as of May 6, 2002, which is the total number of outstanding shares of Common Stock as reported in the Issuer's Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on May 28, 2002. (b) JMB Capital beneficially owns 1,163,800 shares of Common Stock, constituting approximately 5.1% of the shares of Common Stock outstanding. JMB Capital has sole voting and dispositive power with respect to the 1,163,800 shares owned by it. As general partner of JMB Capital, Smithwood beneficially owns 1,163,800 shares of Common Stock, constituting approximately 5.1% of the shares outstanding. As general partner of JMB Capital, Smithwood has sole voting and dispositive power with respect to the 1,163,800 shares owned by JMB Capital by virtue of its authority to vote and dispose of such shares. As the sole member and manager of Smithwood, Mr. Brooks beneficially owns 1,163,800 shares of Common Stock constituting approximately 5.1% of the shares of Common Stock outstanding . As the sole member and manager of Smithwood, Mr. Brooks has sole voting and dispositive power with respect to the 1,163,800 shares owned by JMB Capital by virtue of his authority to vote and dispose of such shares. (c) No transactions in the Common Stock were effected since the most recent filing on Schedule 13D by any of the Reporting Persons. (d) No person, other than the Reporting Persons, is known to have the right to receive, or the power to direct the receipt of dividends from or proceeds from the sale of such shares of the Common Stock. (e) Not Applicable. CUSIP No. 53631T 10 2 13D Page 7 of 8 Pages ________________________________________________________________________________ Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. Not Applicable ________________________________________________________________________________ Item 7. Material to be Filed as Exhibits. Exhibit No. 1 Joint Filing Agreement. Exhibit No. 2 Letter from the Issuer to JMB Capital, dated July 24, 2002. Exhibit No. 3 Letter from JMB Capital to the Board of Directors of the Issuer, dated July 30, 2002. ________________________________________________________________________________ SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: July 30, 2002 JMB CAPITAL PARTNERS, L.P. By: Smithwood Partners, LLC,. General Partner By: /s/ Jonathan Brooks ----------------------------------- Jonathan Brooks, Sole Member and Manager SMITHWOOD PARTNERS, LLC By: /s/ Jonathan Brooks ----------------------------------- Jonathan Brooks, Sole Member and Manager /s/ Jonathan Brooks ----------------------------------- Jonathan Brooks, individually EX-1 3 jointfilingagreemt.txt JOINT FILING AGREEMENT Exhibit No. 1 ------------- JOINT FILING AGREEMENT The undersigned hereby consent to the joint filing by any of them of a Statement on Schedule 13D and any amendments thereto, whether heretofore or hereafter filed, relating to the securities of Liquid Audio, Inc. and hereby affirm that this Amendment No. 1 to Schedule 13D is being filed on behalf of each of the undersigned. Dated: July 30, 2002 JMB Capital Partners, L.P. By: Smithwood Partners, LLC, General Partner By: /s/ Jonathan Brooks ------------------------------ Name: Jonathan Brooks Title: Sole Member and Manager Dated: July 30, 2002 Smithwood Partners, LLC By: /s/ Jonathan Brooks ------------------------------ Name: Jonathan Brooks Title: Sole Member and Manager Dated: July 30, 2002 By: /s/ Jonathan Brooks ------------------------------- Name: Jonathan Brooks, individually EX-2 4 jmb724.txt LETTER DATED JULY 24 Exhibit 2 --------- [LIQUID AUDIO LETTERHEAD] July 24, 2002 Mr. Jonathan Brooks JMB Capital Partners, L.P. 1999 Avenue of the Stars, Suite 2040 Los Angeles, CA 90067 Dear Mr. Brooks: We feel compelled to respond to your July 23rd letter to our Board, which you chose to make public through your Schedule 13D filing. At best, your comments can be characterized as disingenuous and indicative of a short-term stockholder's indifference to the best interests of all Liquid Audio stockholders. Your letter is couched in the language of a long-term investor when, in fact, you have owned the bulk of your Liquid Audio holdings for less than seven weeks and subsequent to Liquid Audio's first announcement of its transaction with Alliance on June 14th. We reject your opportunistic demand for a liquidation. It is obvious that you seek only short-term profits and care nothing for the long-term interests of stockholders as you agitate to dismantle a company that has bright prospects and compelling technology. The Board has determined that the self-tender offer and merger with Alliance is in the best interests of stockholders and is clearly superior to any alternative that has been proposed. Accordingly, Liquid Audio has no intention to terminate or further renegotiate the merger agreement with Alliance. We will bring this transaction to a vote of our stockholders and currently expect to hold the stockholder meeting as scheduled on September 26, 2002. Approval requires only the approval of a majority of shares voting at the meeting. If the merger vote fails, the Company will consider all of its business alternatives to benefit its stockholders, which will not necessarily result in a liquidation. We anticipate that you and our other stockholders will benefit from this transaction. We believe that after you actually review the proxy statement and offer to purchase and consider the alternatives, you will find it in your best interest to tender your shares in the self-tender offer and vote in favor of the merger to get the benefit of tender. In this regard, you should note that the musicmaker.com group (holding 6.9%) and senior management (holding 6.6%) have announced that they will not tender into the self-tender offer. This will increase the amount of cash you and other tendering stockholders will receive if the tender offer is oversubscribed. Very truly yours, Gerald Kearby Chief Executive Officer EX-3 5 jmb730.txt LETTER DATED JULY 30 Exhibit 3 --------- JMB CAPITAL PARTNERS, L.P. 1999 Avenue of the Stars, Suite 2040 Los Angeles, CA 90067 Dear Gerry, Thank you for your prompt response. Unfortunately for shareholders, I believe your ability to develop profit-producing products pales in comparison to your knack for crafting absurd letters, destroying shareholder value, burning through over 100 million dollars of capital and entering into indefensible merger proposals that put your personal advantage above the interests of your shareholders. I find it quite ironic that you label me a short-term holder when in fact the vast majority of your shareholder base has turned over as the stock has plummeted from approximately $45 per share in late 1999 to currently trade at under $2.50 per share (or roughly sixty five percent of the cash on the balance sheet, implying a value for our company's technology of ZERO). Gerry, I have reviewed your recently filed S-4. Please address the following points in your next prompt response: 1) Please explain why you would continue to push for the "proposed" reverse merger with Alliance Entertainment when your three largest shareholders, who represent over 20 percent of the shares outstanding, have publicly expressed their strong distaste for this transaction. In addition, I have received numerous phone calls since my first 13D was filed from other significant holders that are equally distraught with the direction you have chosen to take this company. Once again, I believe you will be soundly defeated if you decide to take this proposal to a vote. 2) Alliance Entertainment has agreed to pay you and Mr. Flynn $1.5 million EACH as "retention" and "non-compete" fees - in addition to attractive salary packages as part of a three year employment contract. I believe this is a form of corporate greenmail on behalf of Alliance Entertainment to get their hands on our cash balances. Please explain to me how you can justify this compensation level in light of your corporate achievements. 3) You have presided over a company that since Jan 1, 1999, has spent over $90 million in cash, principally obtained from its shareholders, to generate less than $21 million in revenue and a mountain of losses. Since you claim the company has "bright prospects and compelling technology", please explain to me why the company's shares have traded at a substantial discount to its cash value for an extended period of time. 4) The recent history of Alliance Entertainment is not encouraging either, beginning with its bankruptcy filing in 1997 (during current CEO Weisman's tenure as COO and later CEO). Since emerging from Bankruptcy in late 1998, the business has, in my opinion, remained on shaky financial footing. In two of the three complete years since it emerged from Chapter 11 it has lost money, while in the third it was barely breakeven. Further, in the most recent quarter, the company again generated red ink, losing three million dollars for its common shareholders in the first three months of this year. Please explain to me the "synergies" of this proposed merger when Liquid Audio has dismissed 40 percent of its workforce while Alliance Entertainment plans a spin-off to its shareholders of its Digital Media Infrastructure Services Group prior to the closing of the merger. 5) The size of our cash cushion is an issue that is highlighted again and again in the negotiations with Alliance and its affiliates, as detailed in the Background of the Merger section of the S-4. The only pre-condition specific to Liquid Audio's financial performance particularized in the merger agreement is a requirement that our company carefully husband its cash and maintain certain minimum balances; no mention is ever made as to sales or earnings criteria. Please explain to your shareholders what value Alliance sees in this proposed transaction other than our cash. 6) Please explain to me and your other shareholders how the calculation was made to pay Broadview Financial $650,000 in fees for a fairness opinion and adequacy opinion. I believe these fees are excessive. Furthermore, I believe their fairness opinion in terms of quality is akin to the fairness opinion issued in the M&F Worldwide/Panavision fiasco - a transaction management plans to unwind following angry shareholder lawsuits. In conclusion, I pose the following question to you, Gerry: Why does it matter when I purchased my stock? Would you have preferred that I make my purchases at 20-40 dollars per share? Would that make my in excess of five percent ownership more legitimate? Remember, I am a larger shareholder than you Gerry (who in the last two years based on your own filings with the SEC have only been a seller of the stock). My purchases at under $2.50 were made possible because the market has such great distrust and disgust with existing management as to make this "opportunistic" investment possible. Had you managed your business properly and effectively, I doubt I would own a share. Sincerely, /s/ Jonathan Brooks - ------------------- Jonathan Brooks -----END PRIVACY-ENHANCED MESSAGE-----