-----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, NdtskyqIK1ZMdq1FFzFaRDsCX3Dc9S+CaHoiID8KQ9GUo/Vsb0HOdGwgi4C5ynju j8y7IXwZrbP6tMR2Kcrc+Q== 0000921895-02-000380.txt : 20020719 0000921895-02-000380.hdr.sgml : 20020719 20020717115314 ACCESSION NUMBER: 0000921895-02-000380 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20020717 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: STEEL PARTNERS II L P CENTRAL INDEX KEY: 0000915653 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 150 EAST 52ND STREET STREET 2: 21ST FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 212-813-1500 MAIL ADDRESS: STREET 1: 150 EAST 52ND STREET, 21ST FLOOR CITY: NY STATE: NY ZIP: 10022 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: 02704474 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 SC 13D/A 1 sc13d11la01874_07162002.htm sec document

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                 --------------

                                  SCHEDULE 13D
                                 (Rule 13d-101)

             INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
            TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
                                  RULE 13d-2(a)

                               (Amendment No. 11)1

                               LIQUID AUDIO, INC.
- --------------------------------------------------------------------------------
                                (Name of Issuer)

                         COMMON STOCK, $0.001 PAR VALUE
- --------------------------------------------------------------------------------
                         (Title of Class of Securities)

                                   53631T 10 2
- --------------------------------------------------------------------------------
                                 (CUSIP Number)

                              STEVEN WOLOSKY, ESQ.
               OLSHAN GRUNDMAN FROME ROSENZWEIG & WOLOSKY LLP
                                 505 Park Avenue
                            New York, New York 10022
                                 (212) 753-7200
- --------------------------------------------------------------------------------
                  (Name, Address and Telephone Number of Person
                Authorized to Receive Notices and Communications)

                                  July 16, 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.


                         (Continued on following pages)

                               (Page 1 of 8 Pages)

- --------
     1      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)

                                  STEEL PARTNERS II, 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 ITEM 2(d) OR 2(e)                                 |_|
- --------------------------------------------------------------------------------
     6         CITIZENSHIP OR PLACE OF ORGANIZATION

                     DELAWARE
- --------------------------------------------------------------------------------
 NUMBER OF         7      SOLE VOTING POWER
   SHARES
BENEFICIALLY                    2,062,866
  OWNED BY
    EACH
 REPORTING
PERSON WITH    -----------------------------------------------------------------
                   8      SHARED VOTING POWER

                                -0-
               -----------------------------------------------------------------
                   9      SOLE DISPOSITIVE POWER

                                2,062,866
               -----------------------------------------------------------------
                  10      SHARED DISPOSITIVE POWER

                                -0-
- --------------------------------------------------------------------------------
     11        AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
               PERSON

                     2,062,866
- --------------------------------------------------------------------------------
     12        CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
               CERTAIN SHARES*                                               |_|
- --------------------------------------------------------------------------------
     13        PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

                     9.1%
- --------------------------------------------------------------------------------
     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)

                                  WARREN G. LICHTENSTEIN
- --------------------------------------------------------------------------------
     2         CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*         (a) |_|
                                                                         (b) |_|
- --------------------------------------------------------------------------------
     3         SEC USE ONLY

- --------------------------------------------------------------------------------
     4         SOURCE OF FUNDS*
                     OO
- --------------------------------------------------------------------------------
     5         CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
               PURSUANT TO ITEM 2(d) OR 2(e)                                 |_|
- --------------------------------------------------------------------------------
     6         CITIZENSHIP OR PLACE OF ORGANIZATION

                     USA
- --------------------------------------------------------------------------------
 NUMBER OF         7      SOLE VOTING POWER
   SHARES
BENEFICIALLY                    2,062,866
  OWNED BY
    EACH
 REPORTING
PERSON WITH
- --------------------------------------------------------------------------------
                   8      SHARED VOTING POWER

                                -0-
               -----------------------------------------------------------------
                   9      SOLE DISPOSITIVE POWER

                                2,062,866
               -----------------------------------------------------------------
                  10      SHARED DISPOSITIVE POWER

                                -0-
- --------------------------------------------------------------------------------
     11        AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
               PERSON

                     2,062,866
- --------------------------------------------------------------------------------
     12        CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
               CERTAIN SHARES*                                               |_|
- --------------------------------------------------------------------------------
     13        PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

                     9.1%
- --------------------------------------------------------------------------------
     14        TYPE OF REPORTING PERSON*

                     IN
================================================================================

                      *SEE INSTRUCTIONS BEFORE FILLING OUT!






- -----------------------                                     --------------------
CUSIP No. 53631T 10 2                   13D                  Page 4 of 8 Pages
- -----------------------                                     --------------------


            The following  constitutes  Amendment No. 11 ("Amendment No. 11") to
the  Schedule 13D filed by the  undersigned.  This  Amendment  No. 11 amends the
Schedule 13D as specifically set forth.

   Item 4 is hereby amended to add the following:

                 On July 16, 2002,  Steel  Partners II delivered a letter to the
Board of Directors of the Issuer in response to the Issuer's  rejection by press
release of Steel Partners II's offer to acquire all of the Issuer's  outstanding
Common  Stock for $2.75 per share in cash.  In the  letter,  Steel  Partners  II
questions  the motives of the Board of Directors of the Issuer in entering  into
the merger agreement with Alliance  Entertainment Corp. and whether the Board of
Directors fully evaluated the risks of merging with Alliance.  Steel Partners II
also criticizes the Board of Directors'  decision not to enter into  discussions
with Steel  Partners II concerning its offer and to lower the threshold at which
the  Issuer's  poison  pill is  triggered  from 15% to 10%.  Steel  Partners  II
continues to believe that its all-cash offer is superior to the proposed  merger
with Alliance and provides  shareholders an opportunity to maximize the value of
their shares in the short-term at a premium. A copy of the letter is filed as an
exhibit to this Amendment No. 11 and incorporated herein by reference.

   Item 7 is hereby amended to add the following exhibit:

               12.    Letter  from  Steel  Partners  II,  L.P.  to the  Board of
                      Directors of Liquid Audio, Inc., dated July 16, 2002.







- -----------------------                                     --------------------
CUSIP No. 53631T 10 2                   13D                  Page 5 of 8 Pages
- -----------------------                                     --------------------


                                   SIGNATURES


            After  reasonable  inquiry  and to the  best  of his  knowledge  and
belief, each of the undersigned certifies that the information set forth in this
statement is true, complete and correct.


Dated:  July 16, 2002                          STEEL PARTNERS II, L.P.

                                               By:  Steel Partners, L.L.C.
                                                    General Partner


                                               By: /s/ Warren G. Lichtenstein
                                                   -----------------------------
                                                   Warren G. Lichtenstein
                                                   Chief Executive Officer


                                               /s/ Warren G. Lichtenstein
                                               ---------------------------------
                                               WARREN G. LICHTENSTEIN









- -----------------------                                     --------------------
CUSIP No. 53631T 10 2                   13D                  Page 6 of 8 Pages
- -----------------------                                     --------------------


                                  EXHIBIT INDEX


Exhibit                                                                  Page
- -------                                                                  ----

1.          Joint Filing Agreement, dated July 26,
            2001 (previously filed).

2.          Letter from Steel Partners II, L.P. to the
            Board of Directors of Liquid Audio, Inc.,
            dated September 10, 2001 (previously
            filed).

3.          Letter from Steel Partners II, L.P. to
            certain officers and directors of Liquid
            Audio, Inc., dated October 3, 2001
            (previously filed).

4.          Letter from Steel Partners II, L.P. to the
            Board of Directors of Liquid Audio, Inc.,
            dated October 22, 2001 (previously filed).

5.          Letter from Steel Partners II, L.P. to the
            Board of Directors of Liquid Audio, Inc.,
            dated October 25, 2001 (previously filed).

6.          Letter from Steel Partners II, L.P. to the
            Board of Directors of Liquid Audio, Inc.,
            dated November 26, 2001 (previously
            filed).

7.          Letter from Steel Partners II, L.P. to the
            Board of Directors of Liquid Audio, Inc.,
            dated April 16, 2002 (previously filed).

8.          Letter from Steel Partners II, L.P. to the
            Board of Directors of Liquid Audio, Inc.,
            dated May 29, 2002 (previously filed).

9.          Letter from Steel Partners II, L.P. to the
            Board of Directors of Liquid Audio, Inc.,
            dated June 14, 2002 (previously filed).

10.         Letter from Steel Partners II, L.P. to the
            Board of Directors of Liquid Audio, Inc.,
            dated June 18, 2002 (previously filed).

11.         Letter from Steel Partners II, L.P. to the
            Board of Directors of Liquid Audio, Inc.,
            dated June 26, 2002 (previously filed).

12.         Letter from Steel Partners II, L.P. to the                  7-8
            Board of Directors of Liquid Audio, Inc.,
            dated July 16, 2002.






- -----------------------                                     --------------------
CUSIP No. 53631T 10 2                   13D                  Page 7 of 8 Pages
- -----------------------                                     --------------------



                             STEEL PARTNERS II, L.P.
                              150 East 52nd Street
                                   21st Floor
                            New York, New York 10022
                                    --------
                               TEL (212) 813-1500
                               FAX (212) 813-2198


July 16, 2002


The Board of Directors
Liquid Audio, Inc.
800 Chesapeake Drive
Redwood City, California 94063

Ladies and Gentlemen:


Steel  Partners II, L.P.,  the largest  shareholder  of Liquid Audio,  Inc. (the
"Company"),  is  extremely  disappointed  by the recent  actions of the Board of
Directors.  We believe that by entering into the revised  merger  agreement with
Alliance  Entertainment  Corp.  ("Alliance") and rejecting our offer to purchase
the Company for $2.75 per share in cash without ever  returning one of our phone
calls,  the  Board  has  not  acted  in the  best  interests  of  the  Company's
shareholders.  We are shocked  that the  Company  would dare to present a merger
proposal to shareholders  that  incorporates a coercive tender in which the only
way  shareholders  can  recoup a portion  of their  investment  is to vote for a
transaction that they do not support.

Based on reactions  from many other large  shareholders,  we believe this latest
merger  proposal  will  fail  by a wide  margin  because  shareholders  want  an
immediate  return of their capital on a risk-free  basis.  Shareholders  are not
interested  in "taking a flyer" on a leveraged  business  that  operates on thin
margins,  that has a high  customer  concentration  risk and that  operates in a
music industry that has been decimated in recent years.  We firmly believe there
is no strategic  reason for Alliance to acquire the Company and that  Alliance's
sole motivation in this transaction is to fix its own capital structure problems
with the  Company's  cash.  We further  question  whether the Board of Directors
fully  understands such problems or has conducted the necessary due diligence to
understand the many significant  issues which could exist below the surface.  If
Alliance is looking  for cash,  it should go public  based on its own  business.
Therefore,  it all comes down to price and the latest merger  agreement is still
inadequate and not in the best interest of the Company's shareholders.  We still
believe our offer is superior to the  Alliance  transaction  and we reaffirm our
offer to  acquire  the  Company  for $2.75 per share in cash as set forth in our
letter dated June 14, 2002.  Further,  if the Board were willing to meet with us
and demonstrate value beyond this amount, we would consider raising our bid.






- -----------------------                                     --------------------
CUSIP No. 53631T 10 2                   13D                  Page 8 of 8 Pages
- -----------------------                                     --------------------



We also are stunned by the Board's  decision to lower the threshold at which the
poison pill is  triggered  from 15% to 10%.  What  purpose does this serve other
than to prevent the true owners of the Company from  deciding the  direction and
leadership of the Company particularly where the market has expressed its belief
as to the "potential true" value of the Alliance  transaction,  (i.e., below our
cash offer)?  This is yet another example of arrogance  demonstrated by both the
Board and its advisors.  Further,  what special consideration has Messrs. Kearby
and Flynn received from Alliance so that they will not sell their equity?

We believe  that the Board's  actions  represent a breach of  fiduciary  duty to
shareholders that in many ways mirror the  transgressions of the boards involved
in the many high profile  corporate  governance  disasters of the current times.
Clearly,  the Board's  only  objective is to ensure the  employment  of managers
whose track record to date includes destroying  shareholder value to the tune of
over $100 million.  Further,  the Board has continuously ignored attempts by its
largest  shareholders to hold a meeting of shareholders  where all  shareholders
can decide the fate of Company.  We remain  shocked that the Board  continues to
demonstrate  such poor behavior toward its  shareholders  when it has nothing to
gain given its nominal  ownership in the Company.  We, along with many  outraged
shareholders,   strongly  urge  the  Board  to  cancel  this  merger   agreement
immediately  and to sell the Company to a buyer who is willing to pay full value
in cash for the Company.

Please call me to discuss at (310) 246-3741.


Very truly yours,


/s/ Josh Schechter
- ------------------
Josh Schechter

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