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. 11)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)
July 16, 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
-----------------------------------------------------------------
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
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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
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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. 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.
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CUSIP No. 53631T 10 2 13D Page 5 of 8 Pages
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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
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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 7-8
Board of Directors of Liquid Audio, Inc.,
dated July 16, 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
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.
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CUSIP No. 53631T 10 2 13D Page 8 of 8 Pages
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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
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Josh Schechter