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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1 to
Annual Report on
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended May 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 0-27852
PLATINUM ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3802328
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2001 Butterfield Road
Downers Grove, Illinois 60515
(Address of principal executive offices, including zip code)
(630) 769-0033
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes (X) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. ( )
The aggregate market value of the registrant's voting stock held by
non-affiliates of the registrant (based upon the per share closing sale price of
$6.875 on September 26, 1997, and for the purpose of this calculation only, the
assumption that all of the registrant's directors and executive officers are
affiliates) was approximately $29,590,901.
The number of shares outstanding of the registrant's Common Stock, par
value $.001, as of September 26, 1997 was 5,287,038.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference into this
report:
Annual Report to Stockholders for the Fiscal Year Ended May 31, 1997
(Parts II and IV)
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The Registrant, in order to provide the information previously indicated as
being incorporated by reference to the Notice of Annual Meeting of
Stockholders and Proxy Statement for the Annual Meeting of Stockholders,
hereby amends and restates the Annual Report on Form 10-K filed August 29, 1997.
PART I
ITEM 1. BUSINESS.
THE COMPANY
The Company is a full-service music company that produces, licenses,
acquires, markets and distributes high quality recorded music for a variety of
musical formats. The Company has produced recorded music products in the
Gospel, Adult Contemporary, Country and Blues music formats, primarily under its
CGI Records, River North Records and House of Blues labels. With its
acquisition of Intersound, Inc. ("Intersound"), effective January 1, 1997, the
Company expanded its artist base and music catalog within its existing music
genres, added new music genres to its repertoire, including Classical/Themed
Productions and Urban/Dance, and added Intersound to its list of labels.
Since its inception in 1991, the Company has sought to expand its catalog
of master recordings and publishing rights through strategic and complementary
acquisitions, as well as through the signing of established artists. One of the
Company's core business activities, and an integral part of the Company's growth
strategy, is the expansion and exploitation of its music catalog. Following the
acquisition of Intersound, the Company owns or controls a music catalog with
over 12,000 master recordings.
The Company's music catalog contains master recordings of some of the best
selling Gospel music acts such as The Winans, Andrae Crouch, and Walter Hawkins.
According to the RIAA, Gospel is the fastest growing music segment, having
increased its market share and revenues by 38% and 30%, respectively, in 1996
and 1995. In addition, the Company, through the acquisition of Intersound,
expanded its Gospel roster to include artists such as Candi Staton, the Mighty
Clouds of Joy, and Vicki Winans. The Company believes that it is currently
positioned as a market leader in Gospel music. The Company has also released
music by established artists in other music genres. These artists include The
Beach Boys, Peter Cetera, The Alan Parsons Project and Crystal Bernard. Through
the acquisition of Intersound, the Company expanded its roster to include
artists such as Kansas, Crystal Gayle, The Ohio Players, Bellamy Brothers, Eddie
Rabbitt, Confunkshun and The Gap Band.
STRATEGY
The Company's strategy for growth and expansion of its position in the
recorded music business is based on: (i) selling diversified recorded music
offerings in formats which management believes have growth potential; (ii)
expanding and exploiting its music catalog through the acquisition of master
recordings and music publishing rights from other music companies at attractive
prices; (iii) introducing records by established artists with a history of
successful releases; and (iv) leveraging its unique distribution position
through both independent distribution channels and relationships with certain
larger record companies to provide wider distribution of certain of the
Company's products. The Company believes that this strategy distinguishes the
Company from certain of its larger competitors who have traditionally focused on
the development of new artists with the potential for mass appeal. The Company
intends to remain focused on artists and musical formats characterized by
relatively low development costs and predictable unit sales volumes. This
strategy may also include licensed compilations of previously recorded music,
"Best of" albums, and tribute albums to well known musical artists with a
history of successful releases.
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MARKET FOCUS
The Company focuses on artists and musical formats characterized by low
development costs and predictable unit sales volumes. The Company plans to
continue to broaden its musical catalog in order to expand its sales
opportunities in the Gospel, Adult Contemporary, Blues, Country,
Classical/Themed Productions and Urban/Dance markets. Because the recorded
music business is particularly dependent on changing audience tastes and the
ability to identify, attract and sign artists as well as produce compilations of
existing recorded music, the Company believes that a diversification of musical
offerings, through the identification of additional markets with growth
potential, reduces revenue volatility. The Company believes that it can obtain
market share in these markets through the identification, acquisition and
exploitation of catalog items.
COMPILATIONS
A significant portion of the Company's products are compilations of
previously recorded music that enable the Company to exploit its large catalog
of master recordings. Compilations can be produced at significantly lower cost
than new artist releases and provide the Company with more predictable unit
sales volumes.
INTRODUCE ARTIST-DRIVEN RECORDS
The Company is committed to developing high quality recorded music with
artists with a history of successful releases. The Company does not primarily
focus on developing new acts due to unpredictable sales and high development
costs. The Company believes that its strategy reduces the risks associated with
promoting and sponsoring records because of the artist's existing fan base. In
addition, the recoupment of costs associated with recording and marketing an
album is more predictable with an artist who has a history of sales because the
Company is less involved in selecting producers, recording studios and
additional musicians than would be the case with a new artist.
ACQUIRE MUSIC MASTER RECORDINGS AND PUBLISHING RIGHTS
The Company is committed to developing its music catalog, which has
historically provided a recurring source of sales for the Company. The Company
believes that its success depends significantly on its ability to invest in,
develop and market rights to its catalog of recorded music. The Company plans
to expand its catalog for exploitation (a) through acquisitions and strategic
relationships as long as it is economically feasible to do so and (b) by
re-recording previous hit songs of artists currently on its roster.
DISTRIBUTION
The Company's distribution relationship with PolyGram has represented a
distinguishing aspect of its operations and business strategy compared with
other independent record companies. The Company's recent acquisition of
Intersound, which possesses its own proprietary direct to retail distribution
capabilities, provides the Company with additional retail distribution channels.
As the Company more fully integrates the operations of Intersound, it plans to
utilize its PolyGram distribution relationship for certain "front line" products
from each of the two companies' libraries, which products the Company believes
will receive the best marketing leverage through that channel. "Mid-line"
products, including much of the compilation and "best of" products from each of
the two libraries, are expected to be distributed via the less expensive retail
distribution channels which have been established by Intersound. The Company's
distribution agreement with PolyGram expires in 2002.
RECENT ACQUISITIONS.
Consistent with its growth strategy, the Company has completed four
acquisitions and has entered into a definitive purchase agreement for a
pending acquisition since the consummation of its initial public offering
in March 1996.
On June 20, 1996, the Company acquired substantially all of the assets of
R.E.X. for $480,000, which approximated the indebtedness of R.E.X. to the
Company, and the assumption of $100,000 in liabilities. Prior to the
acquisition, the Company was the primary distributor for R.E.X., which produces,
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licenses and markets recorded music, primarily in the contemporary Christian
format of Gospel music, for markets primarily in the United States. R.E.X.'s
artist roster acquired by the Company includes Sixpence None the Richer,
Whitecross, Six Feet Deep, The Waiting and Tammy Trent.
On September 19, 1996, the Company acquired substantially all of the assets
of Double J for 88,000 shares of Common Stock, the assumption of approximately
$100,000 of debt and the assumption of $75,000 in liabilities. Double J
develops and acquires ownership of musical compositions and exploits those
compositions by means of recordings, performances, audio-visual works, print
publications and other licenses. Double J controls the copyrights to more than
250 country songs, three of which reached No. 1 on the country music charts
during the past year, including the Country Music Association and Academy of
Country Music's Song of the Year CHECK YES OR NO performed by George Strait.
On November 12, 1996, the Company purchased from Private, Inc., a
subsidiary of BMG, for $3,063,000 in cash, a 50% interest in the HOB Joint
Venture. The HOB Joint Venture was formed to develop and produce recordings
featuring Blues, Gospel and other music formats under the "House of Blues"
label. Artists on the House of Blues record label include Cissy Houston and
Blind Boys of Alabama, each of whom received a Grammy Award in 1997 and 1996,
respectively, and The Blues Brothers, featuring Dan Aykroyd and Jim Belushi.
Effective January 1, 1997, the Company acquired substantially all of the
assets of Intersound for $24,000,000 in cash, $5,000,000 in convertible
promissory notes and the assumption of certain liabilities for a total
purchase price of $41,000,000 (the "Intersound Acquisition"). The Company and
its subsidiaries entered into a credit facility with Bank of Montreal,
individually and as agent for certain banks, in order to finance the cash
portion of the Intersound consideration, to refinance certain bank debt incurred
by Intersound and to pay fees and expenses associated with the transaction (the
"New Credit Facility"). The New Credit Facility matures on October 31, 1997.
As of August 29, 1997, the amount outstanding under the New Credit Facility was
approximately $35,000,000.
PENDING ACQUISITION. On September 10, 1997, the Company terminated the
purchase and sale agreement with K-tel International, Inc. entered into
March 3, 1997.
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MARKETS
GOSPEL
The Company owns a catalog of master recordings of some of the best selling
Gospel music acts of all time. These acts include The Winans, Andrae Crouch and
Walter Hawkins. A significant portion of this catalog was acquired by the
Company in 1993 from Lexicon Music, Inc. Consistent with its belief that Gospel
music sales are artist-driven rather than "hit" driven, the Company has
acquired, and continues to pursue the acquisition of, master recordings of
established Gospel artists who have a history of stable base sales. In
addition, the Company has signed established artists, typically artists with a
ministry, for modest advances to produce new recordings. The Company also has
an exclusive contract with the National Baptist Convention USA, Inc., which has
8.5 million members, to record live gospel music on behalf of the religious
denomination for commercial distribution. Intersound also has a leadership
position in Gospel music. During 1995, Intersound released Gospel artist
William Becton's BROKEN album, which achieved number one status in the BILLBOARD
Gospel rankings. With its acquisition of Intersound, the Company increased its
catalog of Gospel recordings and expanded its artist roster to include artists
such as Candi Staton, the Mighty Clouds of Joy, DeLeon Richards and Vicki
Winans.
ADULT CONTEMPORARY
In 1993, the Company expanded its music offerings to include Adult
Contemporary music with the signing of Peter Cetera, formerly the lead singer of
the rock group Chicago and an established solo artist. Mr. Cetera's first album
by the Company was released in July 1995 and was titled ONE CLEAR VOICE. His
second album, titled YOUR THE INSPIRATION (A COLLECTION), includes both new
songs and re-recordings of some of Chicago's former No. 1 hits. Since the
Company's release of YOUR THE INSPIRATION (A COLLECTION) in May 1997, it has
charted as one of BILLBOARD'S top 200 albums for 10 weeks in a row and the first
single off the album, DO YOU LOVE ME THAT MUCH, has reached No. 6 in BILLBOARD'S
adult contemporary rankings.
In addition, the Company has relationships with other established Adult
Contemporary artists including The Beach Boys, The Alan Parsons Project and
Kansas. These artists, along with Peter Cetera, not only provide the Company
with the ability to produce and market artist-driven records with more
predictable sales, but also, based on the artists' past sales and established
fan base, have the potential to produce a record that charts in the "top ten."
The Company believes that its association with these artists will increase its
ability to sign other established artists. According to R&R magazine, the
Company's River North label was the tenth largest adult contemporary label for
1996.
BLUES
The Company produces and markets compilations of Blues recordings,
primarily with music licensed from other companies and signs established
artists. The Company has successfully produced and marketed compilations of
Blues recordings featuring a variety of artists titled ESSENTIAL BLUES,
VOLUME I, ESSENTIAL BLUES, VOLUME II, ESSENTIAL WOMEN IN BLUES, BLUES DOWN
DEEP: A TRIBUTE TO JANIS JOPLIN, and various other compilation albums under
its LIVING IN THE HOUSE OF BLUES series, which are the products of the HOB
Joint Venture. The Company's Blues releases have charted in the Top 15 on
the Blues Chart published by BILLBOARD magazine, including BLUES BROTHERS AND
FRIENDS, LIVE FROM CHICAGO'S HOUSE OF BLUES which has charted in the Top 10
every week since its release in May 1997. During fiscal 1998, the Company
also plans to release new recordings by The Blues Brothers, featuring Dan
Aykroyd and Jim Belushi, and Otis Rush and a tribute album to the Rolling
Stones.
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COUNTRY
During the Company's fiscal year ended May 31, 1995, the Company
established its Country music operations in Nashville, Tennessee.
Originally, the Company targeted established or up and coming country
artists, who are heavily dependent on costly radio promotion for their sales.
In 1996 and 1997, the Company shifted its strategy for its country music
operations to sign only country artists with an established fan base, thereby
eliminating high radio promotion expenses. During fiscal 1997, the Company
released THE GIRL NEXT DOOR, the debut album by Crystal Bernard (a songwriter
and actress who stared on NBC's WINGS and the co-host of the 32nd Annual
Academy of Country Music Awards). Also on the Company's artist roster are
country artists Holly Dunn and Ronna Reeves, both who have been installed on
the Country Music Foundation's Walkway of Stars.
With the acquisition of Intersound the Company was able to expand on its
focus on predictable sales with Intersound's "Classic Country" concept which
produces "Latest and Greatest" releases for classic country acts. The addition
of Intersound also expanded the Company's artist roster to include country acts
such as The Bellamy Brothers, Exile, Dan Seals, Crystal Gayle and Eddie Rabbitt.
Through the Intersound Acquisition, the Company has added the following
music genres to its current repertoire:
CLASSICAL/THEMED PRODUCTIONS
Through the Intersound Acquisition, the Company acquired one of the
industry's leading creators of classical and theme-based products, which are
recordings arranged around a specific theme and often targeted to a specific
demographic audience. Intersound develops themed products through new
recordings and by using its existing catalog to release titles in a new format.
Intersound's theme-based products range from the music of Hollywood and Broadway
to recordings with established artists like Peter Nero, Doc Severinsen, and
Dizzy Gillespie. Intersound also creates classical music releases based on
concepts such as "Opera for Orchestra" or a collection of certain works of
Beethoven. Other themed music releases produced and marketed by the Company
include "Best of" decades or genre music, music for various party themes, music
from favorite TV shows and holiday music with Christmas or other holiday
selections. Intersound has significant experience in developing packaging and
promoting themed products. These theme-based releases have been highly
successful, with six releases having been certified gold by the RIAA in 1995.
In addition, at the end of fiscal 1997, Intersound's label had two albums
simultaneously ranked as No. 1 in BILLBOARD -- The Taliesen Orchestra's ORNICO
FLOW: THE MUSIC OF ENYA on the Classical Crossover chart and ROMANCE AND
ROSES on the Classical Budget chart.
URBAN/DANCE MUSIC
Intersound's Urban music division focuses on several specialty niches
including classic rhythm and blues ("R&B"), dance and bass music. In classic
R&B, Intersound employs an experienced staff that is well versed in radio and
other promotions for this musical genre. Management believes that Intersound
can increase its classic R&B offerings by signing and producing new recordings
from established artists such as Cameo, Confunkshun and The Gap Band.
Intersound also focuses on R&B music from the '60s, '70s and early '80s. The
Company also entered into an agreement with nonviolence rap artist Trapp to
release his album STOP THE GUNFIGHT, which includes two tracks featuring the
late rap artists Tupac Shakur and Notorious B.I.G. This album was released in
late April 1997 and reached No. 2 on BILLBOARD'S Heatseekers chart along with
BOOTY MIX 2: THE NEXT BOUNCE which ranked No. 96 on BILLBOARD'S top 200 Best
Selling Album chart.
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DISTRIBUTION, SALES AND PROMOTION
The Company distributes its products through a multi-channel system
comprised of (i) PolyGram domestically; (ii) Platinum Christian Distribution
division to the Christian retail market and (iii) under the Intersound label
through the Company's direct sales force. The Company primarily distributes
internationally by means of licensing arrangements. The Company has had an
exclusive domestic retail distribution agreement with PolyGram since 1993. The
Company's Christian distribution company, Platinum Christian Distribution,
distributes the Company's Christian music products as well as recorded music for
artists affiliated with other record companies. The following table sets forth
the percentage of gross product sales by distribution channel:
PERCENTAGE OF TOTAL GROSS PRODUCT SALES
BY DISTRIBUTION CHANNEL
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FISCAL
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1997 1996
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(1) PolyGram 46.9% 58.2%
(2) Intersound 32.8 -
(3) Platinum Christian Distribution
(to Christian bookstores) 9.1 23.2
(4) Record Clubs/Direct Sales 11.2 10.8
(5) Telemarketing - 7.8
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During fiscal 1996, Company management significantly reduced the Company's
telemarketing efforts due to the increased costs of television advertising.
The Company believes that the diversity of its distribution channels, which
was established through substantial investment in fiscal 1995 and 1996 and which
the Company plans to continue to pursue, will help the Company absorb shifts in
audience taste and the economy, and provide the foundation for the Company's
expansion into and exploitation of additional markets.
THIRD PARTIES
In May of 1993, the Company entered an exclusive distribution agreement
(the "Distribution Agreement") with PolyGram, the largest distributor of
recorded music in the world. Under the Distribution Agreement, PolyGram was
appointed the exclusive distributor for the Company's records throughout the
United States. PolyGram does not distribute releases on the Intersound label.
In addition, the Company has retained the right to distribute its records
through key-outlet sales, licenses or sales to record clubs, sales through
Christian bookstore channels and other third party licenses of master
recordings. The services provided by PolyGram include billing and collecting
from customers, distributing promotional copies of records, coordinating and
placing advertisements and undertaking retail marketing and inventory control
activities. The Company is solely responsible for all costs of production and
manufacture of the records including packaging, advertisement, freight and
insurance and is obliged to deliver to PolyGram sufficient records to ensure
adequate stock for distribution. For its services, PolyGram is entitled to a
distribution fee based on sales volume to secular accounts of 15-18% of the net
sales for all records distributed under the agreement, less reserves set aside
against returns and credits, and a monthly fee of 2% of the aggregate credit
price for copies of returned records. For sales to stores in the Christian
bookstore market, the distribution fee is 12% of net sales. Fees owed by the
Company to PolyGram are secured by all Company products in PolyGram's
possession. The terms of the distribution agreement, initially three years, was
extended to December 31, 2002.
PolyGram owns and distributes labels such as Motown Records, A&M Records,
Mercury Records and others. The Company is one of the few record companies not
owned by PolyGram whose products are
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distributed by PolyGram. The Company's relationship with PolyGram has provided,
and is expected to continue to provide, the Company with access to distribution
channels not readily available to other independent recorded music companies.
The Company primarily distributes internationally by means of licensing
arrangements. The first of these arrangements began during fiscal 1996 with MCA
Records, Ltd. ("MCA"). The Company has terminated its arrangement with MCA and
entered into international licensing arrangements on a country-by-country basis.
Revenues derived from the licensing of recording masters are calculated as a
percentage of retail sales by the licensee net of returns and are recognized by
the Company upon notification of retail sales net of returns by the licensee.
PLATINUM CHRISTIAN DISTRIBUTION
Platinum Christian Distribution, an operating division of the Company,
distributes the Company's Christian music products, as well as recorded music
for artists affiliated with other labels, including Mercury, Motown and PolyGram
into the Christian Bookstore market. Platinum Christian Distribution also
distributes Christmas albums for artists including The Statler Brothers, Donna
Summer and Kathy Mattea.
INTERSOUND DISTRIBUTION AND PROMOTION
Intersound sells many of its products through a salaried direct sales
force. Customer contact is made by the Intersound sales department which is
organized to cover specific regions of the country and Canada. In addition to
the sales operation at the Roswell, Georgia facility, Intersound has regional
sales offices located throughout the United States and Canada. Additionally,
Intersound has sales personnel that cover certain specialty retail sectors,
international customers and record club and catalog customers. The Company's
in-house sales personnel typically provide additional sales coverage to smaller
chains and independent retail stores. Internationally, Intersound sells
products through overseas distributors and currently maintains relationships
with ten distributors worldwide. Additionally, Intersound licenses recordings
from its catalog that is included in recordings produced overseas. These sales
are typically transacted title by title, and are sometimes done in a theme
grouping. Intersound has licensing relationships with various companies in
Europe, Asia, Australia and South America. Other key sales personnel, located
primarily at the Roswell, Georgia facility, play a sales support and retail
marketing role. The principal function of these individuals is to support
Intersound's marketing efforts with its large retail customers.
LIBRARY
The Company owns or controls the copyrights to over 12,000 master
recordings. The Company's library was recently appraised by an independent
appraiser to be worth $48.3 million. By combining selections from its library
with licensed rights to certain master recordings and compositions obtained from
third parties, including most major labels, the Company has been successful in
creating compilation products. In addition, with the addition of the Intersound
library, the Company will be able to create more themed products.
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RELATIONSHIP WITH ARTISTS
CONTRACT TERMS
The Company seeks to contract with its artists on an exclusive basis for
the marketing of their recordings in return for a royalty based on the net sales
of the recordings. The Company generally seeks to obtain rights on a worldwide
basis. A typical contract with an artist may provide for a number of albums to
be delivered, with advances against royalties being paid upon delivery of each
album, although advances are often made prior to recording. The Company
generally has an option to take each album that the artist is contracted to
deliver, exercisable within an agreed period of time, usually a few months
following delivery of the previous album. Normally, if an option is not
exercised, the artist has no obligation to deliver additional albums. Provisions
in contracts with established artists vary considerably, and may, for example,
require the Company to release a fixed number of albums and/or contain an option
exercisable by the Company covering more than one album. The Company seeks to
obtain rights to exploit product delivered by the artist for the life of the
product's copyright. Under the contracts, advances are normally recoupable
against royalties paid to the artist. The Company also seeks to recoup a
portion of certain marketing and tour support costs, if any, against artist
royalties.
RECORDING
Contracts either provide for the artists to deliver completed recordings or
for the Company to undertake the recording with the artist. If the recording
costs are advanced by the Company, they are added to the advances paid to the
artist and recouped against royalties payable to the artist. The Company's
staff is involved in selecting producers, recording studios, any additional
musicians needed and songs to be recorded, as well as supervising the output of
recording sessions, although for experienced artists, such involvement may be
less.
OPTION PROGRAM
The Company has granted and intends to continue to grant stock options to
certain artists ("Artist Options") as an inducement to sign with the Company.
The Company expects that these stock options will have vesting schedules tied to
the achievement of identified sales and other performance milestones. The
Company will evaluate the use of options on a case by case basis based on its
assessment of the cost of making cash advances to the artist, the sales
potential of the artist and the financial impact of granting such options.
Under current industry practice, cash advances to an artist are recouped from
royalties payable to the artist from record sales. Because the Artist Options
would not be subject to recoupment, the Company believes that such options will
provide a valuable method of attracting, signing and retaining artists while
maintaining appropriate economic incentives for the artists. In addition, the
corresponding reduction in cash advances should positively impact the Company's
cash flow.
PRODUCTION AND MANUFACTURING
The Company is a full service record company with an art department that
provides design and finished film for print-ready manufacturing of record cover
design.
The Company's finished music products have historically been manufactured
by wholly-owned subsidiaries of PolyGram. However, through the acquisition of
Intersound, the Company has found more cost effective manufacturing sources, and
intends to coordinate all of its manufacturing through the Roswell, Georgia
facilities. The Company does not believe that termination of the manufacturing
arrangements with the PolyGram subsidiaries will have any material adverse
impact on its distribution arrangements with PolyGram nor the Company's business
or results of operations.
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INTELLECTUAL PROPERTY
COPYRIGHT
The Company's recorded music business, like that of other companies
involved in recorded music, primarily rests on ownership or control and
exploitation of musical works and sound recordings. The Company's music
products are protected under applicable domestic and international copyright
laws. In addition, the Company owns or controls the copyrights to over 12,000
master recordings.
Although circumstances vary from case to case, rights and royalties
relating to a particular recording typically operate as follows: When a
recording is made, copyright in that recording vests either in the recording
artist (and is licensed to the recording company) or in the record company
itself, depending on the terms of the agreement between them. Similarly, when a
musical composition is written, copyright in the composition vests either in the
writer (and is licensed to music publishing company) or in the publishing
company itself. Artists generally record songs that are controlled by music
publishers. The rights to reproduce such songs on soundcarriers are obtained by
the Company from music publishers or collection societies on their behalf. The
manufacture and sale of a soundcarrier results in royalties being payable by the
record company to the publishing company at industry agreed or statutory rates
for the use of the composition (and the publishing company in turn pays a
royalty to the writer) and by the record company to the recording artist for the
use of the recording. The Company operates in an industry in which revenues are
adversely affected by the unauthorized reproduction of recordings for commercial
sale, commonly referred to as "piracy," and by home taping for personal use.
LICENSING
The Company is engaged in licensing activity involving both the acquisition
of rights to certain master recordings and compositions for its own projects and
the granting of rights to third parties in the master recordings and
compositions it owns. The Company typically obtains an ownership or
co-ownership interest in all newly-recorded compositions appearing on albums
released by the Company that are written by the artists performing the
compositions. The rights to use all other compositions appearing on albums or
audiovisual works are obtained from the publishers of those compositions under
agreements that, for albums, are called mechanical licenses, which are often
issued through a central agency, and for audiovisual works are called
synchronization licenses. The mechanical license fee is customarily indexed to
a statutory rate established under the United States Copyright Act, which
currently is 6.95 cents for a performance of up to five minutes and higher for
performances of greater length. Although fees for synchronization licenses vary
from set fees to percentages of sales price, the fee often corresponds to the
statutory rate for mechanical licenses. The Company typically issues its own
mechanical and synchronization licenses to third parties when compositions from
its own catalog are used by others. The availability and terms of such
cross-licensing arrangements are generally made possible by existing industry
practices based on reciprocity.
Performance rights in compositions owned by the Company are enforced under
agreements the Company has with the performing rights organizations, American
Society of Composers, Authors and Publishers ("ASCAP"), Broadcast Music, Inc.
("BMI") and SESAC, Inc., which licenses commercial users of music such as radio
and television broadcasters, restaurants and retailers and disburses collected
fees based upon the frequency and type of performances they identify. Print
publishing rights in compositions owned by the Company are either directly
licensed by the Company to third party users or are enforced through an agency
called Christian Copyright Licensing International, which issues print licenses
to churches and other organizations and collects and disburses the fees.
The Company will also, in selected instances, obtain under license
agreements the right to use master recordings owned by others, either in
original album form or for compilation projects. Although the terms of such
agreements vary, they are typically for a period of three to five years and
involve the payment of a royalty in the range of five to eight cents for the use
of individual masters and between 16% and 20% of suggested retail price for
complete original albums. The company typically licenses to others only the
right to use individual masters for compilation projects under terms similar to
those under which
-10-
<PAGE>
the Company obtains master license rights. Should such industry practices
change, there can be no assurance that the Company will be able to obtain
licenses from third parties on terms satisfactory to The Company, and the
Company's business, particularly with respect to compilation products, could be
materially adversely affected.
COMPETITION
The business success of the Company depends, among other things, on the
skill and creativity of the employees of the Company and on their relationships
with artists. The Company faces intense competition for discretionary consumer
spending from numerous other record companies and other forms of entertainment
offered by film companies, video companies and others. The Company competes
directly with other record companies, including the six major international
recorded music companies, which distribute Gospel, Blues, Adult Contemporary,
Country, Rock, Classical and Urban music, as well as other record and music
publishing companies for signing established and new artists and songwriters and
acquiring music catalogs. Many of the Company's competitors have significantly
longer operating histories, greater financial resources and larger music
catalogs than the Company. The Company's ability to compete successfully will
be largely dependent upon its ability to build upon and maintain its reputation
for quality music products and to introduce music products which are accepted by
consumers.
EMPLOYEES
As of August 19, 1997, the Company employed 132 employees, of whom 40 were
located in the Company's Downers Grove, Illinois facilities, 82 were located in
the Company's Roswell, Georgia facilities, and 10 were located in Nashville,
Tennessee. Of such employees, 76 were engaged in marketing, sales and related
customer services, 29 were engaged in administration and accounting, 10 were
engaged in legal, royalty and publishing services and 17 were engaged in
production.
None of the Company's employees is represented by a labor union. The
Company has not experienced any work stoppage and considers relations with its
employees to be good.
SAFE HARBOR PROVISION
This Report contains certain forward-looking statements (within the
meaning of the Private Securities Litigation Reform Act of 1995) that involve
substantial risks and uncertainties. When used in this Report, the words
"anticipate," "believe," "estimate" and "expect" and similar expressions as
they relate to the Company or its management are intended to identify such
forward-looking statements. A number of important factors could cause the
Company's actual results, performance or achievements for fiscal 1998 and
beyond to differ materially from those expressed in such forward-looking
statements. These factors include, without limitation, commercial success of
the Company's repertoire, charges and costs related to acquisitions,
relationships with artists and producers, attraction and retention of key
personnel, general economic and business conditions and enhanced competition
and new competitors in the recorded music industry. In addition, the Company
intends to refinance its current credit facility when it becomes due in full
on October 31, 1997. If such refinancing does not occur, the consequences
could be materially adverse to the Company's business, results of operations
and financial position. There are no assurances that such refinancing could
be obtained on terms favorable to the Company, or at all. In addition, the
Company's failure to refinance its current credit facility could hamper its
ability to obtain long-term bank or other financing for the K-tel
Acquisition.
The Company has consolidated indebtedness that is substantial in
relation to its stockholders' equity. As of May 31, 1997, the Company had
outstanding approximately $40 million of total debt and approximately $8
million of stockholders' equity.
The Company's indebtedness has several important consequences, including
but not limited to the following: (i) a substantial portion of the Company's
cash flow from operations must be dedicated to debt service requirements
(principal and interest) on its indebtedness and will not be available for
other purposes; (ii) the Company's ability to obtain additional financing in
the future for working capital, capital expenditures, acquisitions, or for
general corporate purposes may be impaired; (iii) the Company's leverage may
increase its vulnerability to economic downturns and limit its ability to
withstand competitive pressures; and (iv) the Company's ability to capitalize
on significant business opportunities may be limited.
The Company's ability to satisfy its existing debt obligations will
depend in the near term on its ability to sell additional equity and obtain
long term financing to replace its current debt, and its ability to satisfy
both existing and future debt obligations will depend on its future operating
performance, which will be affected by prevailing economic conditions and
financial, business and other factors, certain of which are beyond the
Company's control. If the Company is unable to service its indebtedness, it
will be forced to adopt an alternative strategy that may include actions such
as reducing or delaying capital expenditures, selling assets, or
restructuring its indebtedness. There can be no assurance that any of these
strategies could be effected on satisfactory terms, if at all. In addition,
there can be no assurance that the Company will not increase its leverage to
meet capital requirements in the future. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
-11-
<PAGE>
ITEM 2. FACILITIES
The Company is headquartered in Downers Grove, Illinois. It currently
leases its 11,200 square foot office facility, which lease expires February 1,
1999. This facility houses the executive office offices of the Company, as well
as the management, accounting and sales staff. The Company also leases a
facility in Roswell, Georgia which houses the warehouse and distribution
centers, production studios, art departments and marketing and promotion
operations. This facility contains 59,334 square feet in total and has a lease
term expiring December 31, 1999. The Company also leases sales offices in
Minneapolis, MN, Dallas, TX, Ontario, Nashville, TN, Hartford, CT and Annapolis,
MD. In addition, the Company sub-leases 4,267 square feet of office space in
Nashville, Tennessee, pursuant to a lease expiring October 31, 1997, that houses
the promotional staff of River North Records, the staff of Double J and the
administrative and sales staff of the Platinum Christian Distribution; a 3,300
square foot warehouse, located in Downers Grove, Illinois, that houses the mail
order distribution operations of the Company. The Company has secured new space
for its operations in Nashville described above at approximately the same cost
as the current lease. Finally, the Company leases 6,142 square feet of
additional space in Nashville, Tennessee, pursuant to a lease expiring November
17, 1997. This space is currently being sub-leased to a third party.
The Company believes that its facilities are in good condition and adequate
for its current operations.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not presently a party to any legal proceedings that the
Company believes are material to the Company or its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended May 31, 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock trades on the Nasdaq National Market under the
symbol "PTET." The following table sets forth the high and low closing prices
for fiscal 1997 since the Company's initial public offering on March 12, 1996,
as reported by Nasdaq. Such quotations reflect inter-dealer prices without
markup, markdown or commissions and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
Price Range of Common Stock
----------------------------
High Low
<S> <C> <C>
Fiscal Year Ended May 31, 1996:
4th Quarter (from March 12, 1996 to May 31, 1996*) $17 3/4 $11 1/2
Fiscal Year Ended May 31, 1997:
1st Quarter $19 1/4 $13 3/4
2nd Quarter 16 1/4 8 1/2
3rd Quarter 8 1/2 6
4th Quarter 7 5
</TABLE>
* Prior to March 12, 1996, there was no established public trading market for
the Common Stock.
At August 29, 1997, there were approximately 60 stockholders of record and
5,184,474 shares of
-12-
<PAGE>
Common Stock outstanding.
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth selected consolidated statement of
operations and consolidated balance sheet data for the Company as of the dates
and for the periods indicated. The selected consolidated financial data as of
and for the years ended May 31, 1997, 1996 and 1995, the five months ended may
31, 1994 and the year ended December 31, 1993 listed below have been derived
from the audited consolidated financial statements of the Company. The selected
consolidated financial data as of and for the unaudited pro forma year ended May
31, 1994 was derived from audited financial statements of the Company as of and
for the five months ended May 31, 1994 and the year ended December 31, 1993.
The following data should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
consolidated financial statements and related notes incorporated by reference
herein.
<TABLE>
<CAPTION>
PRO FORMA
YEAR ENDED FIVE MONTHS
YEAR ENDED MAY 31, MAY 31, ENDED YEAR ENDED
------------------------------ 1994 MAY 31, DECEMBER 31,
1997 1996 1995 (UNAUDITED) 1994 1993
---------- ---------- --------- ----------- ----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C> <C>
Gross revenues (1) $ 42,633 $ 25,489 $ 15,866 $ 8,929 $ 4,255 $ 5,489
Returns, allowances and discounts (1) (11,176) (5,444) (3,633) (1,174) (584) (590)
Allowance for unrecoupable artist advances (855) (2,507) (1,128) (1,219) (433) (1,361)
--------------------------------------------------------------------------
Total net revenues 30,602 17,538 11,105 6,536 3,238 3,538
Gross profit 12,812 4,236 4,204 1,235 490 576
Merger, restructuring and one-time costs (2) 3,336 - - - - -
Operating loss (4,638) (3,937) (4,729) (1,406) (901) (1,766)
Interest and other financing costs (4,918) (570) (157) (48) (27) (33)
Loss from continuing operations (9,354) (4,401) (4,840) (1,454) (928) (1,799)
Loss from discontinued operations - (226) (4,684) (2,050) (755) (1,519)
Net loss (9,354) (4,627) (9,524) (3,504) (1,683) (3,318)
Less-Cumulative preferred dividends (3) (602)
Loss applicable to common shares (5,229)
Per common share:
Loss from continuing operations: $ (1.82) $ (1.71) $ (2.12)
Loss from discontinued operations - (0.08) (2.05)
--------------------------------------
Net loss (4) $ (1.82) $ (1.79) $ (4.17)
--------------------------------------
--------------------------------------
Weighted average number of common
shares outstanding (4) 5,136,830 2,925,987 2,284,090
</TABLE>
(1) During the Company's normal course of business, discounts are extended to
customers on product sales. The operations for the years ended May 31,
1996 and 1995 have been reclassified to conform to the financial statement
presentation for the year ended May 31, 1997. Discounts for the five
months ended may 31, 1994 and the year ended December 31, 1993 were
insignificant.
(2) As a result of the business acquisitions completed by the Company during
fiscal 1997, the Company incurred significant costs to merge and
restructure its business with the acquired companies. Such merger and
restructuring costs include severance costs, relocation costs, lease
commitment write-off's, warehouse closing costs and other costs. Such
costs incurred approximated $1,650,000, of which $315,000 is accrued at
May 31, 1997, relating primarily to severance costs and a distribution
termination fee. The restructuring is expected to be completed by the
end of the second quarter of fiscal 1998. Such restructuring resulted in
shifts in the selling and promotion efforts of the Company's Country
label and in-house sales department and a shift in third-party
fulfillment of Platinum Christian Distribution. One-time costs,
totaling $1,686,000, include approximately $1,100,000 of product returns
which were significantly in excess of the Company's historical returns
experience due to the termination of a distribution agreement and the
termination of certain customer relationships. In addition, one-time
costs include write-offs of artist advances and accounts receivable in
areas for which the Company has chosen to redirect its resources.
-13-
<PAGE>
(3) Represents accrued dividends on the Company's Series A-1 Redeemable
Non-Convertible Preferred Stock, which dividends were paid concurrent
with the redemption of the stock during March 1996. The Company has
never paid a dividend on its Common Stock.
(4) Net loss per common share is computed based upon the weighted average
number of common shares outstanding. Common and common equivalent
shares issued during the 12-month period prior to the Company's March
12, 1996 initial public offering of Common Stock ("IPO") have been
included in the calculation for fiscal 1996 as if they were outstanding
for that period using the treasury stock method and the IPO price of $13
per share. In addition, all convertible Preferred Stock and convertible
Class A Common Stock and Class B Common Stock are treated as if
converted into shares of Common Stock at the date of issuance. No
effect has been given to common equivalent shares issued for any other
period as the effect would be antidilutive.
A portion of the net proceeds received from the IPO during fiscal 1996
were used to retire indebtedness of the Company and redeem a portion of
the Series A-1 Non-Convertible Preferred Stock. Supplemental loss per
common share, adjusted to reflect the elimination of interest expense
incurred on such borrowings during fiscal 1996 and the payment of
mandatory preferred dividends, is $1.52 per common share for fiscal 1996.
(5) Includes short-term debt for all periods indicated.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information in response to this item is incorporated by reference to
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the 1997 Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information in response to this item is incorporated by reference to
the Consolidated Financial Statements, together with the report thereon of Ernst
& Young LLP dated August 29, 1997 in the 1997 Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The following persons served as directors of the Company during fiscal year
ending May 31, 1997 and will continue to serve as directors until their terms of
office expire (as indicated below) or until their successors are elected and
qualified.
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR TERM
NAME AGE POSITION WITH COMPANY SINCE EXPIRES
- ------------------------------ --- ----------------------------------------- ---------- ----------
<S> <C> <C> <C> <C>
Steven Devick (1). . . . . . 45 Chairman of the Board, Chief Executive 1992 1998
Officer and President
Douglas C. Laux. . . . . . . 44 Chief Financial Officer, Secretary and 1995 1999
Director
Michael P. Cullinane(1)(2) . 47 Director 1992 1997
Craig Duchossois(1)(2) . . . 52 Director 1994 1998
Andrew J. Filipowski(1). . . 47 Director 1992 1997
Rodney L. Goldstein(1) . . . 45 Director 1994 1998
Paul L. Humenansky . . . . . 40 Director 1992 1999
Thomas J. Salentine(2) . . . 29 Director 1997 1999
Isaac Tigrett. . . . . . . . 48 Director 1995 1997
</TABLE>
- ------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Steven Devick is a co-founder of the Company and has served as its Chairman
of the Board and Chief Executive Officer since January 1992. On January 1,
1996, Mr. Devick assumed the additional office of President. Mr. Devick is also
a director of PLATINUM TECHNOLOGY, INC. (Nasdaq: PLAT), a publicly-held software
company not affiliated with the Company ("PTI"), and an officer and director of
several privately-held companies. See "Compensation Committee Interlocks and
Insider Participation."
Douglas C. Laux has served the Company as Chief Financial Officer and as a
Director since September 1995 and as Secretary since February 1996. From
October 1986 until he joined the Company, Mr. Laux was a partner in the
accounting firm of Ernst & Young LLP.
Michael P. Cullinane has been a Director of the Company since March 1992.
Mr. Cullinane jointed PTI in 1988 as Senior Vice President and Chief Financial
Officer. He has also served as PTI's Treasurer since 1989, as its Executive
Vice President since 1994 and as a Director since 1989.
Craig Duchossois has been a Director of the Company since April 1994. Mr.
Duchossois has been President and Chief Executive Officer of Duchossois
Industries, Inc., a privately-held diversified manufacturing and service
organization since 1986. Mr. Duchossois also serves as Chairman of the Board of
Directors of a privately-held company.
-14-
<PAGE>
Andrew J. Filipowski is a co-founder of the Company and has served as a
Director since January 1992. Mr. Filipowski is also a co-founder of PTI and has
been Chairman of the Board of Directors, President and Chief Executive Officer
of PTI since its formation in April 1987. Mr. Filipowski serves as a director
of Eagle River Interactive (Nasdaq: ERIV) ("Eagle River") and System Software
Associates (Nasdaq: SSAX), both publicly-held companies, and as a director of
several privately-held companies. See "Compensation Committee Interlocks and
Insider Participation."
Rodney L. Goldstein has been a Director of the Company since June 1994.
Since 1981, Mr. Goldstein has been the managing partner of Frontenac Company
("Frontenac"). Mr. Goldstein currently serves on the boards of Eagle River and
a number of privately-held companies.
Paul L. Humenansky has been a Director of the Company since March 1992.
Mr. Humenansky is a founder and director of PTI and was appointed Chief
Operations Officer of PTI in January 1993. Mr. Humenansky also served as PTI's
Executive Vice President, Product Development from 1987 until 1992. Mr.
Humenansky also serves on the boards of two privately-held companies.
Thomas J. Salentine has been a director of the Company since February 1997.
Mr. Salentine served as an investment analyst at Frontenac from 1993 to 1994,
and returned to Frontenac in 1996 after completing a Masters of Management
degree with distinction from the J.L. Kellogg Graduate School of Management at
Northwestern University. Mr. Salentine previously spent three years as an
analyst and associate with Bear, Stearns & Co., Inc. and also worked with
DreamWorks SKG.
Isaac Tigrett has been a Director of the Company since September 1995. For
the last five years, Mr. Tigrett has been involved with HOB Entertainment, Inc.
("House of Blues"), as a principal founder, Chairman and Chief Executive
Officer. Mr. Tigrett was also a co-founder of the Hard Rock Cafe. See "Certain
Relationships and Related Transactions."
EXECUTIVE OFFICERS
Set forth below is a table identifying executive officers of the Company
who are not identified in the tables entitled "Directors and Executive Officers
of the Registrant -- Directors."
NAME AGE POSITION
- ------------------------- --- -------------------------------------------
Thomas R. Leavens. . . . 49 Chief Operating Officer and General Counsel
Mr. Leavens has been the General Counsel and Chief Operating Officer of the
Company since September 1992. From December 1986 until he joined the Company,
Mr. Leavens was a partner in the law firm McBride, Baker & Coles.
The Board of Directors elects officers annually and such officers serve at
the discretion of the Board. Each of Messrs. Devick and Laux, however, have an
employment agreement
-15-
<PAGE>
with the Company. See "Executive Compensation -- Employment Agreements." There
are no family relationships among any of the directors or officers of the
Company.
SECTION 16(a) COMPLIANCE
Section 16 of the Securities Exchange Act of 1934, as amended (the "1934
Act"), requires the Company's officers and directors and persons who own greater
than 10% of a registered class of the Company's equity securities to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission (the "Commission") and The Nasdaq Stock Market. Based solely on a
review of the forms it has received and on written representations from certain
reporting persons that no such forms were required for them, the Company
believes that, during fiscal 1997 all Section 16 filing requirements applicable
to its officers, directors and greater than 10% beneficial owners were complied
with by such persons, except that Mr. Duchossois inadvertently failed to timely
report a purchase of shares of Common Stock of the Company on Form 4, Messrs.
Laux and Leavens inadvertently failed to timely file a Form 5 and Mr. Salentine
failed to timely file a Form 3.
ITEM 11. EXECUTIVE COMPENSATION.
The following table provides information concerning the annual and
long-term compensation for services rendered to the Company during the fiscal
year ended May 31, 1997 to its chief executive officer and the other executive
officers of the Company whose total annual salary and bonus exceeded $100,000
during such period (each, a "Named Executive Officer").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES ALL OTHER
------------------------ UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION SALARY ($) BONUS ($) OPTIONS (#) ($)
- ------------------------------------- ---------- --------- ----------- ------------
<S> <C> <C> <C> <C>
Steven Devick. . . . . . . . . . . . $570,263 -- 200,000(1) --
President and Chief Executive 268,044(2)
Officer (1)
Douglas C. Laux. . . . . . . . . . . 252,911 -- 125,000 --
Chief Financial Officer and
Secretary (3)
Thomas R. Leavens. . . . . . . . . . 200,483 -- 55,000 --
Chief Operating Officer and
General Counsel
</TABLE>
- ------------------
(1) Such options were granted on February 18, 1997 in connection with an option
repricing transaction. See "Compensation Committee Report on Repricing of
Opions."
(2) The vesting of such options held by Mr. Devick was accelerated to February
18, 1997 in consideration of the Devick Guaranty (as hereinafter defined).
See "Certain Relationships and Related Transactions."
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<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR -- The following table provides
information on grants of stock options during the fiscal year ended May 31, 1997
to the Named Executive Officers. No stock appreciation rights were granted to
the Named Executive Officers during fiscal 1997.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- -----------------------------------------------------------------------------------
PERCENT OF
NUMBER OF TOTAL POTENTIAL REALIZABLE VALUE AT
SECURITIES OPTIONS ASSUMED ANNUAL RATES OF
UNDERLYING GRANTED TO STOCK PRICE APPRECIATION FOR
OPTIONS EMPLOYEES EXERCISE OR OPTION TERM(2)
GRANTED IN FISCAL BASE PRICE EXPIRATION ------------------------------
NAME (#)(1) YEAR ($/SH) DATE 5% ($) 10% ($)
- ---- ----------- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Devick . . . . . . . . . 200,000(3) 53.6% 6.75 4/29/06 604,674 1,762,491
268,044(4) 6.00 1/13/07 1,011,429 2,563,159
Douglas C. Laux . . . . . 125,000(5) 14.3% 6.00 1/13/07 354,641 1,033,701
Thomas R. Leavens. . . . 55,000(5) 6.3% 6.00 1/13/07 207,535 525,935
</TABLE>
- ------------------
(1) Each of these options was granted pursuant to the Employee Incentive
Compensation Plan and is subject to the terms of such plan. All options
were granted at an exercise price equal to the fair market value of the
Company's Common Stock on the date of grant as determined by the
Compensation Committee of the Board of Directors of the Company.
(2) In accordance with the rules of the Securities and Exchange Commission (the
"Commission"), shown are the hypothetical gains or "option spreads" that
would exist for the respective options. These gains are based on assumed
rates of annual compounded stock price appreciation of 5% and 10% from the
date the option was granted over the full option term of ten years. The 5%
and 10% assumed rates of appreciation are mandated by the rules of the
Commission and do not represent the Company's estimate or projection for
future increases in the price of its Common Stock.
(3) Such options were granted on February 18, 1997 in connection with an option
repricing transaction and vested in full on such date. See "Compensation
Committee Report on Repricing of Options."
(4) The vesting of such options held by Mr. Devick was accelerated to February
18, 1997 in consideration of the Devick Guaranty. See "Certain
Relationships and Related Transactions."
(5) One-third of these options become exercisable annually beginning 1/13/98.
FISCAL YEAR-END OPTION VALUES -- The following table sets forth for the
Named Executive Officers information concerning the value of unexercised stock
options at May 31, 1997. No stock options were exercised during the fiscal year
ended May 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED IN-THE-
UNEXERCISED OPTIONS AT FISCAL MONEY OPTIONS AT FISCAL YEAR-
YEAR-END (#) END (1)($)
-------------------------------- ------------------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- -------------------------------- ------------------------------------
<S> <C> <C>
Steven Devick. . . . . . 676,344/676,344 ---/---
Douglas C. Laux. . . . . 65,100/216,200 ---/---(2)
Thomas R. Leavens. . . . 53,333/81,667 125,000/---
</TABLE>
-17-
<PAGE>
- ------------------
(1) The value per option is calculated by subtracting the exercise price from
the closing price of the Common Stock on the Nasdaq National Market on May
31, 1997 of $5.625 per share.
(2) Upon exercise of certain of these options (exercisable for 39,000 shares of
Common Stock at an exercise price of $6.00 per share), Mr. Laux will
receive a cash bonus equal to the exercise price.
EMPLOYMENT AGREEMENTS
As of May 31, 1997 the Company was a party to the following employment
agreements:
The Company entered into an employment agreement with Douglas C. Laux,
pursuant to which Mr. Laux became the Chief Financial Officer of the Company
effective September 11, 1995. Mr. Laux's employment agreement provides for an
annual base salary of $250,000. In addition, Mr. Laux was granted options to
purchase 39,000 shares of Common Stock at an exercise price of $6.00 per share
of Common Stock, with options for 13,000 shares becoming exercisable on each of
July 25, 1996, 1997 and 1998. The agreement further provides that upon the
exercise by Mr. Laux of any of such options, he will be entitled to receive a
cash bonus equal to the exercise price. The term of Mr. Laux's employment
agreement is three years.
On January 31, 1997, the Company entered into an employment agreement
with Steven Devick, for the position of President and Chief Executive Officer
of the Company. The term of Mr. Devick's employment with the Company is from
January 31, 1997 until the Company repays in full the debt outstanding under
the New Credit Facility (as hereinafter defined). See "Certain Relationships
and Related Transactions." The agreement provides for an annual base salary
of $575,000 plus an annual bonus in the amount of twenty-five percent (25%)
of his base salary, subject to the terms of the agreement.
No other executive had an employment agreement with the Company as of May
31, 1997.
COMPENSATION COMMITTEE REPORT ON REPRICING OF OPTIONS
The Compensation Committee and the Board of Directors approved and ratified
the repricing of certain options to purchase Common Stock for Mr. Devick during
the fiscal year ended May 31, 1997.
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<PAGE>
The Board of Directors approved and ratified the repricing by the Company
of certain options to purchase Common Stock granted to Mr. Devick in
consideration of the Devick Guaranty, under the Employee Compensation Plan in
fiscal 1996 on February 18, 1997 at the fair market value of the Company's
Common Stock on the grant date as determined by the Compensation Committee.
See "Certain Relationships and Related Transactions."
The following table provides information on repricing of stock options
granted to Mr. Devick during fiscal year ended May 31,
1997.
<TABLE>
<CAPTION>
NUMBER OF MARKET EXERCISE
SECURITIES PRICE OF PRICE OF EXPIRATION
UNDERLYING STOCK AT STOCK AT NEW DATE OF
OPTIONS TIME OF TIME OF EXERCISE OPTION AT
DATE OF REPRICED REPRICING REPRICING PRICE DATE OF
NAME REPRICING (#) ($) ($) ($) REPRICING
- ---- --------- --------- --------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Steven Devick . . . . . . 2/18/97 200,000 6.75 11.625 6.75 4/29/06
</TABLE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors sets and administers
the policies that govern the annual and long-term compensation of executive
officers of the Company. The non-employee members of the Compensation Committee
(the "Incentive Plan Committee"), based in part on recommendations by Mr.
Devick, make all decisions concerning awards of stock options under the
Company's stock option plans, except the non-discretionary plan for non-employee
directors. Mr. Devick does not participate in the Compensation Committee's
determinations with respect to his own compensation.
COMPENSATION POLICIES TOWARD EXECUTIVE OFFICERS
The Compensation Committee aims to provide competitive levels of
compensation that relate compensation with the Company's annual and long-term
performance goals, reward above average corporate performance, recognize
individual initiative and achievements, and assist the Company in attracting and
retaining qualified executives. The Compensation Committee attempts to achieve
these objectives through a combination of base salary, stock options, and cash
bonus awards. In making its determination, the Compensation Committee utilizes
outside information to obtain compensation information concerning comparable
companies in the entertainment industry.
-19-
<PAGE>
BASE SALARY
The base salary for Messrs. Devick and Laux is governed by the terms of
their respective employment agreements with the Company. See "Executive
Compensation - Employment Agreements." The base salary for fiscal 1997
reported herein for Mr. Leavens was determined by the Compensation Committee
based on subjective evaluations of each individual officer's performance, the
Company's performance, and a comparison to salary ranges for executives of
other companies in the entertainment industry.
INCENTIVE STOCK OPTIONS
Stock options are granted to executive officers and other employees of the
Company as a means of providing long-term incentives. The Compensation
Committee believes that stock options encourage increased performance by the
Company's employees, including its officers, and align the interests of the
Company's employees with the interests of the Company's stockholders. Stock
options were granted to Messrs. Devick, Laux and Leavens utilizing the same
criteria as were used for setting base salaries. During fiscal 1997, the
Company repriced certain stock options and accelerated the vesting of certain
stock options held by Mr. Devick in consideration for the Devick Guaranty, and
not as compensation for Mr. Devick's services. See "Certain Relationships and
Related Transactions" and "Compensation Committee Report on Repricing of
Options."
CASH BONUS AWARDS
The Compensation Committee considers on an annual basis whether to pay cash
bonuses to some or all of the Company's employees, including the Company's
executive officers. None of the Named Executive Officers received cash bonuses
for fiscal 1997.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Company entered into an employment agreement with Mr. Devick during
fiscal 1997, prior to which Mr. Devick did not have a written agreement with
the Company regarding his compensation. Pursuant to such agreement, Mr.
Devick's annual base salary was set at $575,000 plus an annual bonus in the
amount of twenty-five percent (25%) of his base salary. The Incentive Plan
Committee granted certain stock options to Mr. Devick to recognize fully his
contributions, including the successful acquisition of Intersound, Inc. by
the Company on January 31, 1997, and to provide him with sufficient incentives
to continue his efforts as Chief Executive Officer.
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<PAGE>
COMPLIANCE WITH SECTION 162(m)
The Compensation Committee currently intends for all compensation paid to
the Named Executive Officers to be tax deductible to the Company pursuant to
Section 162(m) ("Section 162(m)") of the Code. Section 162(m) provides that
compensation paid to the Named Executive Officers in excess of $1,000,000 cannot
be deducted by the Company for Federal income tax purposes unless, in general,
such compensation is performance based, is established by a committee of outside
directors and is objective and the plan or agreement providing for such
performance-based compensation has been approved in advance by stockholders.
Consistent with this intention, the Company submitted the Incentive Plan for
stockholder approval last year, and the Compensation Committee made all stock
option awards to the Named Executive Officers for 1995 pursuant to the Incentive
Plan. In the future, however, the Board may determine to adopt a compensation
program that does not satisfy the conditions of Section 162(m) if in the Board's
judgment, after considering the additional costs of not satisfying 162(m), such
program is appropriate.
COMPENSATION COMMITTEE
Steven Devick
Michael P. Cullinane
Craig Duchossois
Andrew J. Filipowski
Rodney L. Goldstein
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Devick, Cullinane, Duchossois, Filipowski and Goldstein are the
members of the Company's Compensation Committee. Mr. Devick serves on the
Compensation Committee of PTI, of which Mr. Filipowski is Chairman and Chief
Executive Officer and Mr. Cullinane is Executive Vice President, Chief Financial
Officer and Treasurer.
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<PAGE>
PERFORMANCE GRAPH
COMPARISON OF 14 MONTH CUMULATIVE TOTAL RETURN*
AMONG PLATINUM ENTERTAINMENT, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND A PEER GROUP
(in dollars)
[GRAPH]
3/12/96 5/96 8/96 11/96 2/97 5/97
Platinum Entertainment 100 129 115 65 46 43
Peer Group 100 98 88 91 90 102
Nasdaq 100 116 107 121 122 131
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<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of August 31, 1997, certain information
with respect to the beneficial ownership of the Company's Common Stock by (i)
each person known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) each Company director, (iii) each of
the Named Executive Officers and (iv) all Company executive officers and
directors as a group.
AMOUNT AND
NATURE OF PERCENT
BENEFICIAL OF
NAME AND ADDRESS OWNERSHIP(1) CLASS
- ----------------------------------------------- ------------ --------
Steven Devick (2). . . . . . . . . . . . . . . 1,045,617 15.4%
Frontenac VI Limited Partnership (3) . . . . . 644,522 12.2
Goldman Sachs & Co. (4). . . . . . . . . . . . 602,306 11.4
Andrew J. Filipowski (5) . . . . . . . . . . . 554,934 10.5
The Vanguard Explorer Fund, Inc. (6) . . . . . 400,000 7.6
Wellington Management Company LLP (7). . . . . 400,000 7.6
T. Rowe Price Associates, Inc. (8) . . . . . . 350,000 6.6
Wells Fargo Bank, N.A. (9) . . . . . . . . . . 342,000 6.5
Craig Duchossois (10). . . . . . . . . . . . . 161,667 3.1
Douglas C. Laux (11) . . . . . . . . . . . . . 65,200 1.2
Thomas R. Leavens (12) . . . . . . . . . . . . 53,333 1.0
Paul L. Humenansky (10). . . . . . . . . . . . 17,667 *
Michael P. Cullinane (10). . . . . . . . . . . 17,667 *
Rodney L. Goldstein (13) . . . . . . . . . . . 7,667 *
Isaac Tigrett (14) . . . . . . . . . . . . . . 7,667 *
Thomas J. Salentine. . . . . . . . . . . . . . -- --
All Executive Officers and Directors as a Group
(10 persons)(2)(5)(10)(11)(12)(13)(14). . . . . 1,931,419 30.8
- ------------------
* Less than one percent
(1) Unless otherwise indicated below, the persons in the above table have sole
voting and investment power with respect to all shares shown as
beneficially owned by them.
(2) Includes 803,078 shares underlying stock options that are currently
exercisable. The address of Mr. Devick is c/o Platinum Entertainment,
Inc., 2001 Butterfield Road, Downers Grove, Illinois 60515.
(3) The address of Frontenac VI Limited Partnership is c/o Frontenac Company,
135 South LaSalle Street, Suite 3800, Chicago, Illinois 60604.
(4) Based on a 13G dated February 10, 1997, Goldman Sachs & Co., The Goldman
Sachs Group, L.P. and Goldman Sachs Equity Portfolios, Inc. on behalf of GS
Small Cap Equity Fund share voting and dispositive power with respect to an
aggregate of 602,306 shares of Common Stock. The address for the foregoing
reporting persons is 85 Broad Street, New York, NY 10004.
(5) Includes 99,067 shares held by Platinum Venture Partners. Mr. Filipowski
is the President, Chief Executive Officer and a stockholder of the general
partner of Platinum Venture Partners and in such capacities may be deemed
to have voting and investment power with respect to shares held by this
entity. Mr. Filipowski disclaims beneficial ownership of such shares. The
address of Mr. Filipowski is c/o PLATINUM technology,
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<PAGE>
inc., 1815 South Meyers Road, Oakbrook Terrace, Illinois 60181. Includes
7,667 shares underlying stock options that are currently exercisable.
(6) Based on a 13G dated February 10, 1997, Vanguard Explorer Fund, Inc.
("Vanguard") has sole voting power, and shared dispositive power, with
respect to 400,000 shares of Common Stock. The address for Vanguard is
P.O. Box 2600, Valley Forge, Pennsylvania 19482.
(7) Based on a 13G dated January 24, 1997, Wellington Management Company, LLP
("WMC"), in its capacity as investment adviser, shares dispositive power
with respect to 400,000 shares of Common Stock owned of record by its
clients. The address for WMC is 75 State Street, Boston, Massachusetts,
02109.
(8) Based on a 13G dated February 14, 1997. These securities are owned by
various individual and institutional investors which T. Rowe Price
Associates, Inc. ("Price Associates") serves as investment adviser with
power to direct investments and/or sole power to vote the securities.
For purposes of the reporting requirements of the Securities Exchange Act
of 1934, Price Associates is deemed to be a beneficial owner of such
securities; however, Price Associates expressly disclaims that it is, in
fact, the beneficial owner of such securities. The address for T. Rowe
Price is 100 E. Pratt Street, Baltimore, Maryland 21202.
(9) Based on a 13G dated February 14, 1997, Wells Fargo Bank, N.A. ("Wells
Fargo") has sole voting power with respect to 316,000 of the 342,000
shares listed in the table, and has shared dispositive power with respect
to all shares. The address for Wells Fargo is 464 California Street, San
Francisco, California 94163.
(10) Includes 11,667 shares underlying stock options that are currently
exercisable.
(11) Includes 65,100 shares underlying stock options that are currently
exercisable.
(12) Such 53,333 shares consist of shares underlying stock options that are
currently exercisable.
(13) Includes 7,667 shares underlying stock options that are currently
exercisable. Excludes 644,522 shares held by Frontenac VI Limited
Partnership. Mr. Goldstein is a general partner of Frontenac Company,
the general partner of Frontenac VI Limited Partnership, and in such
capacity shares voting and investment power with respect to shares held
by this entity.
(14) Such 6,333 shares underlie options that are currently exercisable.
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<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
JOINT VENTURE
The Company and House of Blues Records, Inc. ("HOB") formed the House of
Blues Music Company, a joint venture between HOB and the Company ("Venture"),
effective November 1, 1996. The Company invested approximately $3,100,000 for a
50% interest in the Venture. HOB contributed to the Venture a license in HOB's
trademarks, logo and other intellectual property in consideration for its 50%
interest in the Venture. HOB is a subsidiary of House of Blues Entertainment,
Inc. Isaac Tigrett, the Chairman and Chief Executive Officer of House of Blues
Entertainment, Inc., is also a director of the Company.
The Venture develops and produces recordings and related film and video
properties featuring primarily Blues and Gospel music. The Venture, exclusively
through the Company, manufactures, distributes, performs, exhibits and sells
sound recordings and related audiovisual works under the "House of Blues" label.
The Company distributes the Venture's products through its normal distribution
channels for a fee to the Venture. During fiscal 1997, the Company recorded
$48,000 representing its share of the earnings in the Venture.
DEVICK GUARANTY
In order to fund the cash consideration for the acquisition of Intersound,
Inc. the Company and its subsidiaries entered into that certain Credit
Agreement, dated January 31, 1997, as amended and restated, with Bank of
Montreal, individually and as agent for certain lenders, pursuant to which the
lenders agreed to provide a term loan in the amount of $25,000,000 and a
revolving credit facility in the amount of $10,000,000 (the "New Credit
Facility"). Steven Devick, a director and officer of the Company, has personally
guaranteed borrowings under the New Credit Facility up to $12,500,000 (the
"Devick Guaranty"). In consideration of the Devick Guaranty, the Company
repriced certain stock options and accelerated the vesting of certain options
held by Mr. Devick. See "Compensation Committee Report on Repricing of Options."
The Company has adopted a policy that all future transactions with
affiliated entities or persons will be on terms no less favorable than could be
obtained from unrelated parties and all future transactions between the Company
and its officers, directors, principal stockholders and affiliates will be
approved by a majority of the Company's independent directors.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. The following Consolidated Financial Statements and Notes thereto,
included in the 1997 Annual Report, are incorporated by reference:
Report of Independent Auditors
Consolidated Balance Sheets as of May 31, 1997 and 1996
Consolidated Statements of Operations for the Years Ended May 31,
1997, 1996 and 1995
Consolidated Statements of Stockholders' Equity (Net Capital
Deficiency) for the Years Ended May 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
2. All financial statement schedules are omitted because such schedules
are not required or the information required has been presented in the
aforementioned financial statements.
3. The following exhibits are filed with this Report or incorporated by
reference as set forth below.
Exhibit
Number
- -------
3.1 * Third Amended and Restated Certificate of Incorporation of the
Registrant is herein incorporated by reference to the Registrant's
Registration Statement on Form S-1, as amended (File No. 33-80357)
dated March 11, 1996.
3.2 * Amended and Restated Bylaws of the Registrant is herein incorporated
by reference to the Registrant's Registration Statement on Form S-1,
as amended (File No. 33-80357) dated March 11, 1996.
4.1 * Specimen stock certificate representing Common Stock is herein
incorporated by reference to the Registrant's Registration Statement
on Form S-1, as amended (File No. 33-80357) dated March 11, 1996.
4.2 * Amended and Restated Registration Rights Agreement is herein
incorporated by reference to the Registrant's Registration Statement
on Form S-1, as amended (File No. 33-80357) dated March 11, 1996.
4.3 * Amendment No. 1 to Amended and Restated Registration Rights Agreement
is herein incorporated by reference to the Registrant's Registration
Statement on Form S-1, as amended (File No. 33-80357) dated March 11,
1996.
4.4 * Registration Rights Agreement, dated as of January 31, 1997, between
Registrant and Intersound, Inc. is herein incorporated by reference to
the Registrant's Form 8-K filed with the Commission on February 18,
1997 pursuant to Section 13 of the Securities Exchange Act of 1934
(the "Intersound 8-K").
4.5 * Convertible Promissory Note, dated January 31, 1997, issued by the
Registrant in the principal amount of $3,125,000 is herein
incorporated by reference to the Intersound 8-K.
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<PAGE>
4.6 * Convertible Promissory Note, dated January 31, 1997, issued by the
Registrant in the principal amount of $1,875,000 is herein
incorporated by reference to the Intersound 8-K.
4.7 * Warrant to Purchase Shares of Common Stock of the Registrant, dated
January 31, 1997, is herein incorporated by reference to the
Intersound 8-K.
10.1* Letter Agreement by and between House of Blues Records, Inc. and the
Registrant, dated August 26, 1996, is herein incorporated by reference
to the Registrants Form 10-Q filed with the Commission on October 14,
1996 pursuant to Section 13 of the Securities Exchange Act of 1934
(the "First Quarter 10-Q").
10.2* Asset Purchase Agreement by and between Scott Entertainment, Inc.,
shareholders of Scott Entertainment, Inc., as listed in the Asset
Purchase Agreement, and the Registrant, dated September 19, 1996, with
exhibits, is herein incorporated by reference to the First Quarter 10-
Q.
10.3* Amended and Restated Platinum Entertainment, Inc. 1995 Employee
Incentive Compensation Plan is herein incorporated by reference to the
First Quarter 10-Q.
10.4* Agreement for Purchase of Joint Venture Interest by the Registrant
from Private, Inc., dated as of November 12, 1996 is herein
incorporated by reference to the Registrant's Form 8-K filed pursuant
to Section 13 of the Securities Exchange Act of 1934, dated as of
November 12, 1996 (the "HOB 8-K").
10.5* Disclosure Letter to Agreement for Purchase of Joint Venture Interest
by Platinum Entertainment, Inc. from Private, Inc. is herein
incorporated by reference to the HOB 8-K.
10.6* Assignment and Assumption of Joint Venture Interest, by and among the
Registrant, Private, Inc. and Bertelsman Music Group, Inc., dated as
of November 12, 1996 is herein incorporated by reference to the HOB 8-
K.
10.7* Asset Purchase Agreement, by and between River North Studios, Inc.
(subsidiary of the Registrant) and Intersound, Inc., dated as of
November 13, 1996 is herein incorporated by reference to the
Registrant's Form 10-Q filed with the Commission on January 14, 1997
pursuant to Section 13 of the Securities Exchange Act of 1934.
10.8* First Amendment to Asset Purchase Agreement, dated January 31, 1997,
between River North Studios, Inc. and Intersound, Inc. is herein
incorporated by reference to the Intersound 8-K.
10.9* Employment Agreement of Don Johnson, dated February 1, 1997 is herein
incorporated by reference to the Intersound 8-K.
10.10* Amended and Restated Credit Agreement, dated as of January 31, 1997,
among the Registrant, Bank of Montreal and the Banks who are or may
become parties thereto is herein incorporated by reference to the
Intersound 8-K.
10.11* Security Agreement, dated as of January 31, 1997, among the
Registrant, Bank of Montreal and the Banks who are or may become
parties thereto is herein incorporated by reference to the Intersound
8-K.
10.12* Security Agreement re: Intellectual Property, dated as of January 31,
1997, among the Registrant, its subsidiaries and Bank of Montreal is
herein incorporated by reference to the Intersound 8-K.
10.13* Pledge Agreement, dated as of January 31, 1997, between the Registrant
and Bank of Montreal is herein incorporated by reference to the
Intersound 8-K.
10.14* Guaranty, dated as of January 31, 1997, made by Steven Devick is
herein incorporated by reference to the Intersound 8-K.
10.15* Term Credit Note, dated January 31, 1997, issued by the Registrant in
the principal amount of $25,000,000 is herein incorporated by
reference to the Intersound 8-K.
10.16* Revolving Credit Note, dated January 31, 1997, issued by the
Registrant in the principal amount of $10,000,000 is herein
incorporated by reference to the Intersound 8-K.
10.17* Purchase and Sale Agreement, dated March 3, 1997, between Platinum
Entertainment, Inc. and K-tel International, Inc. is herein
incorporated by reference to the Registrant's
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<PAGE>
Form 10-Q filed with the Commission on April 11, 1997 pursuant to
Section 13 of the Securities Exchange Act of 1934 (the "Third Quarter
10-Q").
10.18* Earnest Money Escrow Agreement, dated March 3, 1997, among Platinum
Entertainment, Inc., K-tel Entertainment, Inc. and Midwest Trust
Services, Inc. is herein incorporated by reference to the Third
Quarter 10-Q.
10.19* Voting Agreement, dated March 3, 1997, among Platinum Entertainment,
Inc., Mr. Philip Kives, K-5 Leisure Products, Inc. and National
Development Ltd. is herein incorporated by reference to the Third
Quarter 10-Q.
10.20* First Amendment to Amended and Restated Credit Agreement, dated
April 22, 1997 between Platinum Entertainment, Inc., Bank of Montreal,
individually and as Agent, and PPM America Special Investments Fund
L.P. and the Guarantors' Consent attached thereto.
10.21* Second Amendment to Amended and Restated Credit Agreement, dated
June 12, 1997 between Platinum Entertainment, Inc., Bank of Montreal,
individually and as Agent, and PPM America Special Investments Fund
L.P. and the Guarantors' Consent attached thereto.
10.22* Third Amendment to Amended and Restated Credit Agreement, dated
July 31, 1997 between Platinum Entertainment, Inc., Bank of Montreal,
individually and as Agent, and PPM America Special Investments Fund
L.P. and the Guarantors' Consent attached thereto.
11.* Statement re computation of per share earnings.
13.* 1997 Annual Report. With the exception of the information
incorporated by reference into Items 7, 8 and 14(a) of this Annual
Report on Form 10-K, the 1997 Annual Report to Stockholders is not
deemed filed as part of this Annual Report on Form 10-K.
23.* Report and Consent of Independent Auditors dated August 29, 1997.
27.* Financial Data Schedule.
- -----------------
*Previously filed
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K
during the last quarter of the period covered by this Annual
Report on Form 10-K.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Platinum Entertainment, Inc. has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized, on this 29th day of
September, 1997.
PLATINUM ENTERTAINMENT, INC.
By: /s/ STEVEN DEVICK
-----------------------
Steven Devick
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons in the capacities
indicated on September 29, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
-------------- ----------------
<S> <C>
/s/ STEVEN DEVICK Chairman of the Board, President and Chief
----------------- Executive Officer (principal executive officer)
Steven Devick
/s/ DOUGLAS C. LAUX Chief Financial Officer (principal financial and
------------------- accounting officer) and Director
Douglas C. Laux
/s/ MICHAEL P. CULLINANE
-------------------- Director
Michael P. Cullinane
-------------------- Director
Craig Duchossois
-------------------- Director
Andrew J. Filipowski
------------------- Director
Rodney L. Goldstein
-------------------- Director
Paul L. Humenansky
/s/ THOMAS J. SALENTINE
-------------------- Director
Thomas J. Salentine
-------------------- Director
Isaac Tigrett
</TABLE>
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