sec document
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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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. 12)1
LIQUID AUDIO, INC.
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(Name of Issuer)
COMMON STOCK, $0.001 PAR VALUE
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(Title of Class of Securities)
53631T 10 2
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(CUSIP Number)
STEVEN WOLOSKY, ESQ.
OLSHAN GRUNDMAN FROME ROSENZWEIG & WOLOSKY LLP
505 Park Avenue
New York, New York 10022
(212) 753-7200
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
August 9, 2002
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(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)
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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).
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CUSIP No. 53631T 10 2 13D Page 2 of 8 Pages
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1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
STEEL PARTNERS II, L.P.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_|
(b) |_|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) |_|
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
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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
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10 SHARED DISPOSITIVE POWER
-0-
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
2,062,866
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* |_|
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.1%
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14 TYPE OF REPORTING PERSON*
PN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
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CUSIP No. 53631T 10 2 13D Page 3 of 8 Pages
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1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
WARREN G. LICHTENSTEIN
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_|
(b) |_|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) |_|
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
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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-
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
2,062,866
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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%
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14 TYPE OF REPORTING PERSON*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
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CUSIP No. 53631T 10 2 13D Page 4 of 8 Pages
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The following constitutes Amendment No. 12 ("Amendment No. 12") to
the Schedule 13D filed by the undersigned. This Amendment No. 12 amends the
Schedule 13D as specifically set forth.
Item 4 is hereby amended to add the following:
On August 9, 2002, Steel Partners II delivered a letter to the
Board of Directors of the Issuer opposing the merger agreement with Alliance
Entertainment Corp. and questioning whether the sole purpose of the transaction
is to enrich certain members of management at the expense of the Issuer's
stockholders. Steel Partners II believes that it should be apparent to the Board
that the merger will not be approved by the stockholders and, therefore, the
Board should begin discussions immediately with all potential buyers who are
willing to pay a fair price for the Issuer and/or continue pursuing a
liquidation strategy. Steel Partners II continues to believe that its all-cash
offer is superior to the proposed merger with Alliance and provides stockholders
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. 12
and incorporated herein by reference.
Item 7 is hereby amended to add the following exhibit:
13. Letter from Steel Partners II, L.P. to the Board of
Directors of Liquid Audio, Inc., dated August 9, 2002.
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CUSIP No. 53631T 10 2 13D Page 5 of 8 Pages
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SIGNATURES
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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: August 9, 2002 STEEL PARTNERS II, L.P.
By: Steel Partners, L.L.C.
General Partner
By: /s/ Warren G. Lichtenstein
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Warren G. Lichtenstein
Chief Executive Officer
/s/ Warren G. Lichtenstein
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WARREN G. LICHTENSTEIN
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CUSIP No. 53631T 10 2 13D Page 6 of 8 Pages
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EXHIBIT INDEX
Exhibit Page
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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
Board of Directors of Liquid Audio, Inc.,
dated July 16, 2002 (previously filed).
13. Letter from Steel Partners II, L.P. to the 7 to 8
Board of Directors of Liquid Audio, Inc.,
dated August 9, 2002.
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CUSIP No. 53631T 10 2 13D Page 7 of 8 Pages
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STEEL PARTNERS II, L.P.
150 East 52nd Street
21st Floor
New York, New York 10022
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TEL (212) 813-1500
FAX (212) 813-2198
August 9, 2002
The Board of Directors
Liquid Audio, Inc.
800 Chesapeake Drive
Redwood City, CA 94063
Ladies and Gentlemen:
As you know, Steel Partners II, L.P. ("Steel Partners"), the largest shareholder
of Liquid Audio, Inc. (the "Company"), is vehemently opposed to the proposed
reverse merger with Alliance Entertainment Corp. We strongly believe this
transaction was arranged to benefit management at the expense of all other
shareholders. The bottom line is that Gerald Kearby and Robert Flynn, the
Company's top two executives, struck a deal which guarantees each of them a
minimum of $2 million while all other shareholders could be left with a minority
interest in an illiquid company.
Assuming that all shareholders (excluding Messrs. Kearby and Flynn) will tender
100% of their shares and will receive $1.50 in cash for each share owned,
shareholders will be stuck with a "stub" that will likely trade for $1 or less.
Therefore, shareholders would receive approximately $2.50 per share of value, or
9% less than the $2.75 per share in cash offered by Steel Partners in June and
substantially less than the liquidation value as reported by the Company. The
latter alternatives provide a risk-free return to shareholders.
Over the last year we repeatedly asked the Board and its advisors to let the
shareholders decide the fate of Liquid Audio. Unfortunately for shareholders,
the Board chose to act in the best interests of management at the expense of the
remaining shareholders by pursuing the Alliance transaction and delaying the
annual meeting of shareholders costing shareholders an additional $5 million in
cash "burn" plus several million in transaction fees and expenses. We remain
astonished that the Board continues to pursue this transaction when it should be
apparent that it will be overwhelmingly voted down.
Therefore, we will let corporate democracy prevail as the Liquid Audio
shareholders will have their say at the annual meeting on September 26. We
believe they will not only vote down this merger, but will remove Mr. Kearby and
Raymond Doig as directors and will likely approve corporate governance proposals
that will allow shareholders to rid the Company of irresponsible directors in
favor of people whose interests are aligned with all shareholders.
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CUSIP No. 53631T 10 2 13D Page 8 of 8 Pages
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In our opinion, the merger agreement will never pass since the Company's five
largest shareholders who own approximately 33% of the outstanding shares have
publicly stated their intent to vote against it. Given the inevitable outcome at
the annual meeting, we ask that all remaining directors and officers resign
immediately after the votes are cast and counted. This will reaffirm the
shareholders' disapproval of the Board and its past actions. We believe an
expeditious transition will serve to protect our investment from further
diminution in value.
Because we believe this merger will not be approved, we think the Board should
begin discussions immediately with all potential buyers who are willing to pay a
fair price for the Company regardless of Messrs. Kearby's and Flynn's
involvement in the business on a go-forward basis and/or continue pursuing a
liquidation strategy by shuttering the business immediately. It is our
understanding that 40% of employees were terminated since the merger agreement
was signed and that more employees will be released as per the understanding
with Alliance to minimize the Company's cash "burn."
We would like to remind the Board that the Company belongs to its shareholders
and should be run for their benefit and not just to enrich management. Again, we
invite the Board to contact us so that we can begin an orderly transition of the
Company or to pursue our offer. Please call me to discuss any of these issues at
(310) 246-3741.
Very truly yours,
/s/ Josh Schechter
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Josh Schechter