UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JULY 14, 2002
LIQUID AUDIO, INC.
--------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 0-25977 77-0421089
--------------------------------------------------------------------------------
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification Number)
800 Chesapeake Drive,
Redwood City, California 94063
(Address of principal executive offices) (Zip Code)
(650) 549-2000
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Item 5. Other Events.
On July 15, 2002, Liquid Audio, Inc. announced that it and Alliance
Entertainment Corp. had 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
Liquid Audio 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 proposed stock-for-stock transaction would be accounted for as a purchase
and is intended to qualify as tax-free to the stockholders of Liquid Audio and
Alliance Entertainment. The shares will be publicly traded on The Nasdaq
National Market.
Liquid Audio's board of directors also considered a proposal by Steel
Partners II, L.P. to purchase all outstanding shares of Liquid Audio common
stock for $2.75 per share and determined, after consultation with its financial
advisor, that the offer by Steel Partners was inadequate.
Liquid Audio also announced that its board of directors 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.
Liquid Audio understands that executives Gerald W. Kearby and Robert G.
Flynn have committed not to tender their shares in the self-tender offer.
AEC Associates LLC, a limited liability company controlled by The Yucaipa
Companies, is Alliance's controlling stockholder and has amended its earlier
voting agreement requiring AEC to vote in favor of the original merger to
apply to the amended merger agreement.
At the closing of the merger, the board of Liquid Audio will be increased
to nine positions, six of which will be designated by the Alliance shareholders
and three of which will be designated by the existing Liquid Audio board of
directors. Eric Weisman, the current President and Chief Executive Officer of
Alliance, will become President and Chief Executive Officer of the new company
and Gerald W. Kearby, the current President and Chief Executive Officer of
Liquid Audio, will remain Chief Executive Officer of the Liquid Audio division
and lead the company's digital businesses. In connection with the original
merger agreement signed on June 12, 2002, Messrs. Robert G. Flynn and Gerald W.
Kearby each executed a "Terms of Employment" dated June 12, 2002 with Alliance,
pursuant to which certain terms of employment will become effective upon the
closing of the merger.
A copy of the Amended and Restated Agreement and Plan of Merger, dated as
of June 12, 2002 and amended and restated as of July 14, 2002 by and among
Liquid Audio, Inc., April Acquisition Corp., and Alliance Entertainment Corp. is
attached hereto as Exhibit 2.1, the amendment to the Voting and Conversion
Agreement dated as of June 12, 2002 and as amended July 14, 2002 between Liquid
Audio, Inc. and AEC Associates LLC is attached hereto as Exhibit 2.2, the Terms
of Employment Agreement for Robert G. Flynn between
Robert G. Flynn and Alliance Entertainment Corp. dated as of June 12, 2002 is
attached hereto as Exhibit 10.1, the Terms of Employment Agreement for Gerald
W. Kearby between Gerald W. Kearby and Alliance Entertainment Corp. dated as of
June 12, 2002 is attached hereto as Exhibit 10.2 and the press release dated
July 15, 2002 is attached hereto as Exhibit 99.1. Such Exhibits are
incorporated by reference into this Item 5 and the foregoing description is
qualified in its entirety by reference to such Exhibits.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired.
Not Applicable.
(b) Pro forma financial information.
Not Applicable.
(c) Exhibits.
Exhibit Description
------- -----------
2.1 Amended and Restated Agreement and Plan of Merger, dated as of June 12,
2002 and amended and restated as of July 14, 2002 by and among Liquid
Audio, Inc., April Acquisition Corp. and Alliance Entertainment Corp.
2.2 Amendment to the Voting and Conversion Agreement dated as of June 12,
2002 and amended as of July 14, 2002 between Liquid Audio, Inc. and AEC
Associates LLC
10.1 Terms of Employment Agreement for Robert G. Flynn between Robert G.
Flynn and Alliance Entertainment Corp. dated as of June 12, 2002
10.2 Terms of Employment Agreement for Gerald W. Kearby between Gerald W.
Kearby and Alliance Entertainment Corp. dated as of June 12, 2002
99.1 Press release dated July 15, 2002 (incorporated by reference to Form
425 filed by the Registrant on July 15, 2002)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
LIQUID AUDIO, INC.
By: /s/ Gerald W. Kearby
-------------------------------
Name: Gerald W. Kearby
Title: Chief Executive Officer
July 17, 2002
INDEX TO EXHIBITS
2.1 Amended and Restated Agreement and Plan of Merger, dated as of June 12,
2002 and amended and restated as of July 14, 2002 by and among Liquid
Audio, Inc., April Acquisition Corp. and Alliance Entertainment Corp.
2.2 Amendment to the Voting and Conversion Agreement dated as of June 12,
2002 and amended as of July 14, 2002 between Liquid Audio, Inc. and AEC
Associates LLC
10.1 Terms of Employment Agreement for Robert G. Flynn between Robert G.
Flynn and Alliance Entertainment Corp. dated as of June 12, 2002
10.2 Terms of Employment Agreement for Gerald W. Kearby between Gerald W.
Kearby and Alliance Entertainment Corp. dated as of June 12, 2002
99.1 Press release dated July 15, 2002 (incorporated by reference to Form
425 filed by the Registrant on July 15, 2002)