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LIQUID AUDIO, INC.
(Name of Registrant as Specified in Its Charter)
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MUSICMAKER.COM, 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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THE MUSICMAKER.COM GROUP
c/o musicmaker.com, Inc.
888 Seventh Avenue, 17th Floor
New York, New York 10019
212-974-5700
An Important Message to all Liquid Audio Stockholders
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Dear Fellow Liquid Audio Stockholders:
We are writing to ask for your support to elect our two nominees to the Liquid
Audio, Inc. ("Liquid Audio" or the "Company") Board of Directors, as well as to
change the Company's by-laws to increase the size of the board and allow only
stockholders to fill vacancies on the board. If we are successful in changing
the by-laws, we will seek your support for the election of four other nominees
to the board. The musicmaker group is the second largest stockholder of Liquid
Audio, owning 1,568,100 shares or approximately 6.9% of the Company's
outstanding common stock.
Our goals are simple, straightforward and will in our opinion, benefit all
Liquid Audio stockholders:
WE WANT TO PRESERVE AND ENHANCE
THE COMPANY'S VALUE!
Our nominees for director will do this by:
o Shutting down the Company's cash draining operations immediately
o Exploring the sale or licensing of the Company's intellectual property
to monetize these assets without spending a substantial amount of
Company funds
o Distributing cash to stockholders which is not needed for operations
or our proposed acquisition program
o Exploring the acquisition of alternative businesses with positive cash
flow and current profitability
We ask for your support and need every shareholder's vote
to make a difference
The Company's Business Plan is Fatally Flawed
Liquid Audio's Management has spent over $103 million in an unsuccessful effort
to become a platform for the distribution of music over the internet. Management
candidly admits that it does not know when the Company will become profitable.
if ever!
In the past five years Liquid Audio has spent $103 million of shareholder money
and only generated revenues in its most recent fiscal quarter of $136,000! Even
under the Company's so-called "restructuring plan" implemented last year, Liquid
Audio has been depleting its cash at the rate of $5 million per quarter... a
staggering $20 million a year...while its revenues have plummeted!
Current Management Will Not Likely Build Value
for Stockholders
We cannot look to current management to reverse the tumbling fortunes of our
Company, because:
o Having developed and presided over the Company's failed business plan,
it lacks the objectivity to redirect the Company's operations
o It has been inattentive to stockholder concerns, to the point of not
even entertaining questions on the Company's quarterly earnings calls
o It has sought to insulate itself behind corporate barricades,
including a poison pill, a staggered board, a prohibition on action by
written consent and various supermajority voting provisions
o Even in its current proxy materials, it has persisted with the same
tired and unrealistic storyline, teasing stockholders with unfounded
hopes for the Company's technology and alliances with no credible plan
ever to become profitable or cash flow positive
o It has wasted corporate assets by requiring the musicmaker.com group
to file several lawsuits to compel the Company to follow normal proxy
procedures
It is hardly surprising, but certainly disheartening, that the Company has had a
revolving boardroom door. Four of the six directors that served on the Company's
board when it went public less than three years ago are no longer with the
Company. During this time, the stock ownership of board members and their
affiliates has shrunk from 28.9% to 8.3%. Hardly a show of confidence in the
future of the Company or the competence of its management!
The Nominees of the musicmaker.com Group Are Committed to Maximizing
Stockholder Value
Our nominees have one objective--to maximize value for all stockholders. James
Mitarotonda and Seymour Holtzman, respectively CEO and Chairman of
musicmaker.com, and two of our other nominees, implemented a stockholder value
strategy when they took control of musicmaker.com last year. At the time,
musicmaker.com was wedded to a money losing, cash depleting business plan in the
online music delivery industry similar to Liquid Audio.
The musicmaker.com group acted immediately by:
o Making a $3.00 per share cash distribution to all stockholders
o Shutting down musicmaker.com's cash draining operations
o Cutting expenses to a minimum (no full time employees)
o Exploring opportunities for profitable business operations
Our nominees have accomplished credentials in business, finance, and management.
They will work to protect and enhance the value of your investment in the
Company--right now, not in some vague over-the-horizon time frame. Our nominees
are also committed to eliminating the Company's poison pill and other take-over
defenses and removing any provision of the Company's charter and by-laws that
entrench management.
Our Nominees are ready to Act on Behalf of all Stockholders
At the Company's 2002 annual meeting, you can decide whether Liquid Audio will
continue to squander its assets on an ill-conceived and unrealistic business
plan or whether those assets will be applied towards creating value for all
stockholders.
If you care about preserving the value of our stock, we urge you to vote:
o FOR the election of our nominees Seymour Holtzman and James A.
Mitarotonda as Class III directors
o FOR our proposal to increase the size of the board to nine directors
o FOR our proposal to authorize only stockholders to fill vacancies
o FOR the election of our nominees Jesse Choper, William Fox, Thomas
Constance and Joseph Wright to fill the new directorships
We need you to vote FOR all of these proposals, so that the musicmaker.com group
nominees will have the votes necessary to pursue our platform on your behalf.
Our Task is Great and Your Support is Needed
IMPORTANT! Because of the Company's current charter, an affirmative vote of
two-thirds of the outstanding shares is needed to amend the by-laws and adopt
our proposals to expand the board. Every vote is important and could make a
critical difference in the future of our Company.
Act now! If you are a stockholder of record,
sign and return the WHITE proxy card voting in favor of
the musicmaker.com group proposals.
Do not execute the green proxy card furnished by current management. Even if you
have previously executed management's green proxy card, you may change your vote
by signing and returning a later dated WHITE proxy card of the musicmaker.com
group. Only the latest dated proxy card will count.
If you hold your shares in street name, through a broker, bank or other
custodian, carefully follow the instructions of your custodian and direct it to
vote on your behalf FOR the musicmaker.com group proposals.
Our nominees are ready to act on your behalf.
Vote FOR the musicmaker.com group proposals
on the WHITE proxy card
We thank you for your support.
For the musicmaker.com group,
/s/ James A. Mitarotonda /s/ Seymour Holtzman
James A. Mitarotonda Seymour Holtzman
212-974-5701 570-822-6277
If you have any questions or need help voting FOR the
musicmaker.com group proposals, please contact our proxy
solicitor
D.F. King
77 Water Street, 20th Floor
New York, New York 10005
Toll free at (800) 431-9643
or collect at (212) 269-5550