Opinion ID: 2275517
Heading Depth: 1
Heading Rank: 6

Heading: Alliance Merger

Text: On June 13, 2002, Liquid Audio announced a stock-for-stock merger transaction with Alliance Entertainment Corp. (Alliance). This announcement came three days after MM mailed its proxy statement and other materials to the stockholders of Liquid Audio, and one day before the scheduled Court of Chancery hearing in connection with the Section 220 complaint. In addition to announcing the merger, the Liquid Audio board also announced that: the July 1, 2002 meeting would be postponed; a special meeting of stockholders of Liquid Audio would be held sometime in the future to vote upon the merger; and, if the merger received the requisite stockholder and regulatory approval, the merger would close in the Fall of 2002. Based upon this announcement, the annual meeting was postponed indefinitely by the Liquid Audio board. The merger with Alliance that was announced to the stockholders of Liquid Audio on June 13, 2002 and the merger agreement executed by Liquid Audio and Alliance in connection therewith were not approved unanimously by the Board. The record reflects that at a meeting of the Board held to vote upon the merger and the merger agreement, defendants Kearby, Flynn, Imbler and Doig voted for the merger and the merger agreement and defendant Winblad voted against the merger and the merger agreement. After Liquid Audio announced that the annual meeting would be postponed indefinitely, MM filed an amended complaint, seeking an order of the Court of Chancery directing Liquid Audio to hold the annual meeting as soon as possible, and a motion for expedited and summary proceedings. On June 20, 2002, the Court of Chancery granted MM's motion for expedited and summary proceedings and directed that a trial in connection with MM's application for relief be held on July 15, 2002. Shortly, before that trial took place, the Liquid Audio board announced that certain terms of the merger agreement had been modified to permit Liquid Audio to conduct a self-tender offer under which Liquid would acquire up to 10 million shares of its common stock at $3.00 per share in cash, if the merger was approved by the stockholders of Liquid Audio. Upon consummation of the merger and a fully subscribed self-tender offer, Liquid Audio's stockholders would own 26% and Alliance stockholders would own 74% of the combined enterprise. The Liquid Audio board also announced that certain senior officers of Liquid Audio committed not to tender their shares in the self-tender offer. Finally, the Liquid Audio board announced that the Director Defendants reduced the trigger of Liquid Audio's shareholders rights plan or poison pill to 10% from 15%. The modified merger agreement was approved unanimously by the Board at a meeting held on July 14, 2002. After expedited discovery, a trial was held on July 15, 2002. The Court of Chancery ordered that the annual meeting of Liquid Audio's shareholders occur on September 26, 2002. The record date for the meeting was August 12, 2002.