EXHIBIT 1 JMB Capital Partners, L.P. 1999 Avenue of the Stars, Suite 2040 Los Angeles, California 90067 July 23, 2002 Board of Directors Liquid Audio, Inc. 800 Chesapeake Drive Redwood City, California 94063 Ladies and Gentlemen: Let's not wait until...Merger Agreement • July 23rd, 2002 • JMB Capital Partners Lp • Services-computer integrated systems design
Let's not wait until September 26th. In our view, the proposed merger agreement with Alliance Entertainment, even as recently modified, is not in the best interests of the shareholders and should be terminated immediately. Instead, Liquid Audio, Inc. (the "Company") should discontinue its operations and distribute its cash to its shareholders. In the current environment of corporate mismanagement, the Company should focus its efforts on maximizing shareholder values rather than engaging in transactions such as the proposed merger which do not have the support of its shareholders. The distribution of the Company's cash to its shareholders is the best course of action for the Company to take in order to preserve the remaining, albeit, greatly diminished, equity value for its shareholders.
