Filed by Liquid Audio, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 13e-4(c) and Rule 14a-12
under the Securities Act of 1934
July 15, 2002
Subject Company: Alliance Entertainment Corp.
Commission File No. 001-13054
MEDIA CONTACTS:
Roy Winnick Kimberly Strop Sue D'Agostino
Kekst and Company Liquid Audio, Inc. Alliance Entertainment Corp.
(212) 521-4842 (650) 549-2194 (973) 657-1558
roy-winnick@kekst.com kstrop@liquidaudio.com suedag@aent.com
FOR IMMEDIATE RELEASE
LIQUID AUDIO AMENDS MERGER AGREEMENT WITH ALLIANCE ENTERTAINMENT TO PROVIDE $30
MILLION CASH RETURN TO ITS STOCKHOLDERS NEW TERMS OFFER SIGNIFICANT RETURN
OF VALUE TO LIQUID AUDIO STOCKHOLDERS
REDWOOD CITY, Calif. (July 15, 2002)--Liquid Audio, Inc. (Nasdaq: LQID) ("Liquid
Audio" or the "Company") today announced that it and Alliance Entertainment
Corp. have modified certain terms of their previously announced merger
agreement. Pursuant to the amended agreement, which has been unanimously
approved by the boards of directors of both companies, Liquid Audio intends to
conduct a self-tender offer under which it would acquire 10 million shares of
the Company's common stock at $3.00 per share in cash in connection with the
merger. Approximately 12.75 million shares of Liquid Audio common stock would
remain outstanding after completion of a fully-subscribed tender offer. After
the resulting merger, Liquid Audio stockholders will own 26 percent of the
combined enterprise and Alliance Entertainment stockholders will own 74 percent.
The shares will be publicly traded on the Nasdaq National Market.
"The revised terms reflect our determination to pursue a transaction that
delivers maximum value to all Liquid Audio stockholders," said Gerald Kearby,
President and CEO of Liquid Audio, Inc. "We believe the transaction contemplated
by the revised merger agreement is clearly superior to any alternative that has
been proposed."
Liquid Audio's board of directors also considered Steel Partners' proposal to
purchase all outstanding shares of the Company's common stock for $2.75 per
share and determined after consultation with its financial advisor that Steel
Partners' offer is inadequate. Liquid Audio also announced that its board of
directors has approved an amendment to its Preferred Stock Rights Agreement to
revise the beneficial ownership threshold at which a person or group of persons
becomes an "acquiring person" and triggers certain provisions under the Rights
Agreement. As revised, a person or group would become an "acquiring person" if
that person or group becomes the beneficial owner of 10 percent or more of the
outstanding shares of Liquid Audio common stock. Prior to such amendment, the
beneficial ownership threshold was 15 percent.
The issuance of new Liquid Audio shares in the merger is subject to approval by
a majority of the Liquid Audio shares that are voted at the meeting and approval
of the appropriate regulatory agencies. The board has set September 26, 2002, as
the date for the special shareholders' meeting to vote on the transaction. The
Company understands that executives Gerald W. Kearby and Robert G. Flynn have
committed not to tender their shares in the self-tender offer.
ALLIANCE ENTERTAINMENT CORP.
Alliance Entertainment Corp. ("AEC") provides strategy and business process
management ("BPM") solutions for its trading partners managing physical
entertainment media through brick-and-mortar ("B&M") and e-commerce channels by
leveraging merchandising, technology, information management, supply chain
management and customer care services core competencies. AEC's trading partners
include retailers, consumer goods and services companies, media companies and
manufacturers of physical entertainment media. By applying its core
competencies, in a fashion that addresses the needs of its trading partners, AEC
continues to develop, innovative BPM solutions that allow its trading partners
to outsource elements of their business in order to satisfy their physical
entertainment media needs.
LIQUID AUDIO, INC.
Liquid Audio, Inc. is a leading provider of software, infrastructure and
services for the secure digital delivery of media over the Internet. The Liquid
Audio solution gives content owners, Web sites and companies the ability to
publish, syndicate and securely sell digital media online with copy protection
and copyright management. Using the Liquid(TM) Player software, available for
free download at www.liquidaudio.com, consumers can preview and purchase
downloadable music from hundreds of affiliate Web sites in the Liquid Music
Network(TM).
Liquid, Liquid Audio, Liquid Player, Liquid Music Network and the Liquid Audio
logo are trademarks of Liquid Audio, Inc.
Forward-Looking Statements
All statements made in this release, other than statements of historical fact,
are forward-looking statements. The words "anticipate," "believe," "estimate,"
"expect," "intend," "will," "guidance" and similar expressions typically are
used to identify forward-looking statements. Forward-looking statements are
based on the then-current expectations, beliefs, assumptions, estimates and
forecasts about the businesses of Liquid Audio and Alliance Entertainment and
the industries and markets in which the companies operate. Those statements are
not guarantees of future performance and involve risks, uncertainties and
assumptions that will be difficult to predict. Therefore, actual outcomes and
results may differ materially from what is expressed or implied by those
forward-looking statements. Factors that may affect Liquid Audio's and Alliance
Entertainment's businesses, financial condition and operating results include
the
effects of changes in the economy, consumer spending, the stock market and
the industries in which they operate generally, changes affecting the Internet
and e-commerce, the ability of the companies to maintain relationships with
strategic partners and suppliers, the ability of the companies to timely and
successfully develop, maintain and protect their technology and product and
service offerings and execute operationally and the ability of the companies to
attract and retain qualified personnel. These factors may also include, but are
not limited to, general market conditions, our ability to develop new products
to meet market demand, our ability to successfully combine two geographically
dispersed businesses, our ability to realize synergies of the merger; our
ability to maintain cost controls; the mix of products and services our
customers require and the effects of natural disasters, international conflicts
and other events beyond our control. More information about potential factors
that could affect Liquid Audio can be found in its most recent Form 10-K, Form
10-Q and other reports and statements filed by Liquid Audio with the Securities
and Exchange Commission ("SEC"). Each of Liquid Audio and Alliance Entertainment
expressly disclaims any intent or obligation to update those forward-looking
statements, except as otherwise specifically stated by it.
Additional Information and Where to Find It
Liquid Audio plans to file a Registration Statement on SEC Form S-4 in
connection with the merger and a Tender Offer Statement on schedule TO in
connection with the offer, and both companies expect to mail a Proxy
Statement/Prospectus to their respective stockholders containing information
about the merger. Investors and stockholders of Liquid Audio and Alliance
Entertainment are urged to read the Registration Statement, the Tender Offer
Statement and Proxy Statement/Prospectus carefully when they are available. The
Registration Statement and the Proxy Statement/Prospectus will contain important
information about the companies, the merger and related matters. Investors and
stockholders will be able to obtain free copies of these documents through the
Web site maintained by the SEC at http://www.sec.gov. Free copies of the Proxy
Statement/Prospectus and these other documents may also be obtained from Liquid
Audio by directing a request through the Liquid Audio Web site at
HTTP://WWW.LIQUIDAUDIO.COM or by mail to Liquid Audio, Inc., Attention: Investor
Relations.
In addition to the Registration Statement, the Tender Offer Statement and the
Proxy Statement/Prospectus, Liquid Audio files annual, quarterly and special
reports, proxy statements and other information with the SEC. You may read and
copy any reports, statements or other information filed by Liquid Audio at the
SEC's public reference rooms at 450 Fifth Street, N.W., Washington, D.C. 20549
or at any of the SEC's other public reference rooms in New York and Chicago.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Liquid Audio's filings with the SEC are also available to the
public from commercial document-retrieval services and at the Web site
maintained by the SEC at http://www.sec.gov.
Interests of Certain Persons in the Merger
The directors and executive officers of Liquid Audio and Alliance Entertainment
have interests in the merger, some of which may differ from, or may be in
addition to, those of the stockholders of Liquid Audio and Alliance
Entertainment generally. A description of the interests that the directors and
executive officers of the companies have in the merger will be available in the
Proxy Statement/Prospectus.
Solicitation of Proxies
Liquid Audio and Alliance Entertainment, their respective directors, executive
officers and certain other members of their management and employees may be
soliciting proxies from stockholders of Liquid Audio and Alliance Entertainment
in favor of the merger. Information concerning the participants will be set
forth in the Proxy Statement/Prospectus when it is filed with the SEC.