Liquid Audio, Alliance Entertainment Call Off Merger

Liquid Audio, Inc. and Alliance Entertainment Corp. have mutually agreed to terminate their agreement to merge dated June 12, 2002 and amended and restated as of July 14, 2002.

Both companies entered into the merger agreement in the hope that combining their operations would provide strategic advantages for the digital and physical distribution of entertainment media and that the transaction could create stockholder value.

While the management of both companies still supports the strategic aspects of the merger, a significant percentage of Liquid Audio stockholders have publicly expressed opposition to the proposed merger and the companies believe that the termination is in the best interests of both parties.

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