SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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LIQUID AUDIO, INC.
(Name of Registrant as Specified in Its Charter)
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MM COMPANIES, INC.,
JEWELCOR MANAGEMENT, INC., BARINGTON COMPANIES EQUITY PARTNERS, L.P., RAMIUS
SECURITIES, LLC, DOMROSE SONS PARTNERSHIP,
JAMES A. MITAROTONDA and SEYMOUR HOLTZMAN
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
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On August 27, 2002, MM Companies, Inc. sent the following letter to the
Board of Directors and the Secretary of Liquid Audio, Inc.:
MM Companies, Inc.
888 Seventh Avenue
17th Floor
New York, New York 10019
August 27, 2002
Liquid Audio, Inc.
800 Chesapeake Drive
Redwood City, California 94063
Attention: Members of the Board and Secretary
Gentlemen and Ladies:
We were outraged to learn that, on the eve of the long-delayed 2002
annual meeting of Liquid Audio shareholders, the board of directors of the
Company has purported to expand the size of the board from five to seven
directors and to appoint two new directors for terms expiring in 2003 and 2004.
This further attempt by management to manipulate the corporate
machinery to its own advantage is an insult to the shareholders, who will
finally have a choice in the future of their company at next month's meeting.
The Company's board has consisted of five members for at least ten months. Last
year, our group's request for two seats on the Company's board was summarily
rejected. Under the management-supported Alliance Entertainment merger--which we
continue to oppose--Liquid Audio's representation on the surviving company board
would be reduced to three directors. Why the sudden rush to expand the board
now, with directors who under management's plan for the Company would serve only
six weeks?
We think the answer is self-evident. The purpose of expanding the
board at this time, behind closed doors and without shareholder consent, can
only be to entrench management, disadvantage our group's proxy contest and
further compromise the rights of shareholders to elect representatives of their
choice to direct the destiny of their company.
Accordingly, we believe the board's action has no legitimate
corporate purpose and flies in the face of settled principles of Delaware law.
We have commenced a challenge to the board's action in Delaware court, which we
intend to vigorously pursue.
We are confident in our position that the court should invalidate
management's unconscionable board expansion gambit. However, if the action of
the board is for any reason not rescinded or invalidated, we inform the Company
that we are making a conforming change in our long-standing proposal to expand
the size of the board, for presentation to shareholders at the upcoming annual
meeting. Our proposal will be to increase the size of the board by four
directors in addition to the directors in office at the time of the meeting. If
the Company persists in maintaining that the number of incumbent directors is
now seven, our proposal is to increase the size of the board to 11. If the size
of the board reverts, as it should, to five, our proposal will revert to
increasing the size of the board to 9. In all other respects, our proposals for
the
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upcoming annual meeting remain unchanged, including the number and identity of
our nominees for election as director.
Finally, we indignantly note the continuing waste of corporate
assets resulting from management's "no-holds-barred, fight-at-all-costs"
strategy in the pending proxy contest. We demand public disclosure of all costs
that management is incurring for these purposes and hold management strictly
accountable for the accelerating depletion of the Company's cash.
Very truly yours,
/s/ James Mitarotonda
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James Mitarotonda
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