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. 5)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)
November 26, 2001
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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 9 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 9 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 1,866,366
OWNED BY
EACH
REPORTING
PERSON WITH -----------------------------------------------------------------
8 SHARED VOTING POWER
-0-
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
1,866,366
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
1,866,366
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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)
8.2%
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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 9 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 1,866,366
OWNED BY
EACH
REPORTING
PERSON WITH -----------------------------------------------------------------
8 SHARED VOTING POWER
-0-
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
1,866,366
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
1,866,366
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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)
8.2%
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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 9 Pages
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The following constitutes Amendment No. 5 ("Amendment No. 5") to the
Schedule 13D filed by the undersigned. This Amendment No. 5 amends the Schedule
13D as specifically set forth.
Item 4 is hereby amended to add the following:
On November 26, 2001, Steel Partners II delivered a letter to
the Board of Directors of the Issuer expressing its disappointment with
management in view of certain recent developments including, among other things,
(i) management's decision to appoint two new directors without shareholder
approval, (ii) the Issuer's alarmingly high cash burn-rate, (iii) management's
refusal to address questions from shareholders and research analysts at its
previous conference call on third quarter earnings, and (iv) the recent
engagement of an investment banking firm if the purpose of such engagement is to
acquire and integrate other businesses rather than pursuing a sale of the Issuer
to the highest bidder. Steel Partners II also calls for the resignation of
Sylvia Kessel from the Board of Directors and expresses its support of
shareholder proposals recently announced by musicmaker.com, Inc. which would
remove barriers to the sale of the Issuer. A copy of the letter is filed as an
exhibit to this Amendment No. 5 and incorporated herein by reference.
The first paragraph of Item 5(a) is hereby amended and restated as follows:
(a) The aggregate percentage of Shares of Common Stock reported
owned by each person named herein is based upon 22,704,615 Shares outstanding,
which is the total number of Shares of Common Stock outstanding as reported in
the Issuer's Quarterly Report on Form 10-Q for the quarter ended September 30,
2001.
Item 7 is hereby amended to add the following exhibit:
6. Letter from Steel Partners II, L.P. to the Board of Directors
of Liquid Audio, Inc., dated November 26, 2001.
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CUSIP No. 53631T 10 2 13D Page 2 of 9 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: November 26, 2001 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 9 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 7 to 9
the Board of Directors of Liquid
Audio, Inc., dated November 26, 2001.
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CUSIP No. 53631T 10 2 13D Page 7 of 9 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
November 26, 2001
Board of Directors
Liquid Audio, Inc.
800 Chesapeake Drive
Redwood City, California 94063
Attn: Gerald Kearby,
Chairman of the Board and
Chief Executive Officer
Dear Mr. Kearby:
We continue to be shocked by the continued display of arrogance by
the Board of Directors of Liquid Audio, Inc. ("Liquid Audio" or the "Company")
toward the Company's shareholders in light of several recent developments. The
appointment of two new directors without a shareholder vote was especially
disappointing given their lack of ownership in the Company. The Company should
not have appointed any new directors who did not already own a significant stake
in Liquid Audio. We believe that the interests of all directors should be
aligned with the interests of the shareholders in order to ensure that the Board
will strive to maximize shareholder value. Additionally, given the overwhelming
disappointment in management as recently expressed by a number of shareholders,
we believe that any director nominees proposed to be appointed to the Board
should have been elected by the Company's shareholders. We further believe that
Sylvia Kessel should resign from the Board given her recent resignation from
Metromedia. In the event that Ms. Kessel does resign, we expect the Board to
immediately schedule a meeting of shareholders for the election of a director to
fill the vacancy created by the resignation and that such nominee be a
significant shareholder of the Company.
According to the Company's Form 10-Q for the quarter ended September
30, 2001, the Company's burn-rate was reduced from $9 million to $6.6 million
during the third fiscal quarter of 2001. We still believe that the Company's
burn-rate is inconceivably high and that management has a long way to go to
control Company expenses. Going forward, we are concerned that despite limited
visibility into the next fiscal year, management will squander another $.25 per
share in cash during the first quarter of 2002. These are just some of our
concerns with the Company's financial
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CUSIP No. 53631T 10 2 13D Page 8 of 9 Pages
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condition which we sought to present to management during the Company's recent
conference call on earnings for the third quarter of 2001. However, to our
ultimate frustration, these concerns where not addressed since management
gratuitously chose not to accept questions from both shareholders or research
analysts during the conference call. The Board should understand that as
directors of a public company, it has a fiduciary duty to all its shareholders
to address any material concerns presented to the Board relating to business of
the Company. We presumed that the purpose of conference calls on earnings,
rather than just issuing a press release, was to directly address shareholder
concerns. However, the Board's evasion of our questions during the conference
call as well as its failure to return numerous follow-up telephone calls from
representatives of Steel Partners II, indicates to us that the Board simply does
not understand its fiduciary duties to shareholders.
It has recently come to our attention that the Board may have
engaged an investment banking firm. We believe this strategy is sound so long as
the purpose is to identify a buyer for the Company. It is our hope that the
Company has not hired advisors for the purpose of seeking acquisitions. We have
no faith in the Board's ability to manage the Company, let alone its ability to
acquire and integrate other businesses. In fact, based on our research and
discussions with other shareholders, we believe that any entity which succeeds
in acquiring the Company will seek to liquidate what remains of Liquid Audio
unless the successful bidder is a "strategic buyer" and there are synergies
between the respective businesses. Accordingly, we are supportive of some of the
recent proposals announced by musicmaker.com that will remove barriers to a sale
of Liquid Audio including declassifying the Board to provide that all Board
members be elected annually, permitting shareholders to remove directors with or
without cause and removing the "poison pill." Based on concerns voiced by fellow
shareholders of Liquid Audio, we believe that these measures will pass at the
next annual meeting of shareholders.
Based on the quarterly burn-rate and financial performance of the
Company, we believe our recent offer to purchase the Company for $3.00 per share
was fair. We also believe that Liquid Audio's stock price performance since our
offer to acquire the Company was made public on October 23, 2001 indicates that
the market supports our offer. On October 22, 2001, the day prior to the public
release of our offer, the closing price of Liquid Audio stock was $2.36 per
share. After the offer was publicly disclosed a day later, the market price
reached a high of $2.87 per share and closed at $2.55 per share, representing an
8% increase from the previous day's closing price. From October 23, 2001 through
November 2, 2001, the closing market price of Liquid Audio stock reached a high
of $2.72. However, since the Board's rejection of the offer on November 5, 2001,
the stock price has dropped to $2.38 as of November 23, 2001,
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CUSIP No. 53631T 10 2 13D Page 9 of 9 Pages
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just slightly higher than the stock price immediately prior to the public
announcement of the offer. We believe that the Company's languishing stock price
since the rejection of our offer is a clear indication that the market has
little faith in the Company's ability to prosper under its current management.
On behalf of all shareholders, we again implore management to hire
an investment banking firm to sell the Company to the highest bidder instead of
wasting the Company's cash with no results. We also would like to meet with
management immediately to discuss our offer. If action is not immediately taken
by the Board, we believe that the shareholders of the Company will seek to hold
all Board members accountable for failing to exercise their fiduciary
responsibilities.
Please call me to discuss these matters at (212) 813-1500.
Sincerely,
/s/ Warren G. Lichtenstein
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Warren G. Lichtenstein