Liquid Audio Files Lawsuit Against MM Companies and Steel Partners

Aug 21, 2002 12:00 PM, Editors

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Liquid Audio (Redwood City, Calif.) announced that it has filed a lawsuit against MM Companies Inc. and Steel Partners II, L.P., in U.S. District Court for the Southern District of New York. Liquid Audio is asking the court to prohibit MM Companies and Steel Partners from violating the federal securities laws in connection with their campaigns to take control of Liquid Audio, as well as seeking compensatory and punitive damages as a result of their alleged violations.

Liquid Audio's complaint alleges that MM Companies has failed to register as an investment company under the Investment Company Act of 1940, and that its purchase of Liquid Audio shares and subsequent proxy contest to take control of Liquid Audio's board of directors is therefore in violation of that Act. The complaint also charges that Steel Partners is conducting an illegal proxy contest by failing to make the proper filings with the Securities and Exchange Commission (SEC) and that, in the course of its contest, Steel Partners has distributed false and misleading statements to Liquid Audio stockholders.

Liquid Audio is seeking to enjoin MM Companies from continuing its campaign to take control of Liquid Audio and from communicating with Liquid Audio stockholders. In addition, Liquid Audio is seeking to require Steel Partners to comply with the SEC's proxy rules, tthereby retracting its recent press release concerning Liquid Audio's proposed merger with Alliance Entertainment and to disseminate corrective disclosure.

According to Gerry Kearby, Liquid Audio's president and CEO, "Liquid Audio's board of directors remains committed to our combination with Alliance Entertainment. We simply cannot allow MM Companies and Steel Partners to continue to spread misinformation about the transaction. We believe that they should be required to play by the rules."

For updates on the pending merger and this suit, visit www.liquidaudio.com.






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