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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
PLATINUM ENTERTAINMENT, INC.
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(Name of Issuer)
Common Stock, par value $.001 per share
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(Title of Class of Securities)
727909103
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(CUSIP Number)
Andrew J. Filipowski 1815 South Meyers Road, Oakbrook Terrace, Illinois 60181
630-620-5000
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
December 12, 1997
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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SCHEDULE 13D
CUSIP No. 727909103 Page 2 of 9 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Platinum Venture Partners II, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) /X/
3 SEC USE ONLY
4 SOURCE OF FUNDS*
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d) or 2(E) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 337,500
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON WITH 10 SHARED DISPOSITIVE POWER
337,500
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
337,500
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.0%
14 TYPE OF REPORTING PERSON*
PN
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SCHEDULE 13D
CUSIP No. 727909103 Page 3 of 9 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Platinum Venture Partners, Inc.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) /X/
3 SEC USE ONLY
4 SOURCE OF FUNDS*
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d) or 2(E) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 436,567(a)
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON WITH 1 0 SHARED DISPOSITIVE POWER
436,567(a)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
436,567(a)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.8%
14 TYPE OF REPORTING PERSON*
CO
(a) Includes 99,067 shares owned by Platinum Venture Partners I, L.P., of which
partnership Platinum Venture Partners, Inc. is the general partner.
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ITEM 1. SECURITY AND ISSUER
This Schedule 13D, filed December 22, 1997, relates to Common Stock, $.001
par value per share, (the "Common Stock") of Platinum Entertainment, Inc., a
Delaware corporation ("Company"), whose principal executive offices are located
at 2001 Butterfield Road, Suite 1400, Downers Grove, Illinois 60515.
ITEM 2. IDENTITY AND BACKGROUND
(a), (b), (c) and (f). This statement is being filed on behalf of each of
the following persons ("Reporting Persons"):
(i) Platinum Venture Partners II, L.P. ("PVP II"); and
(ii) Platinum Venture Partners, Inc. ("PVP").
PVP II was formed in order to engage in the acquiring, holding and
disposing of investments in various companies for investment purposes. PVP is
the general partner of PVP II and was formed to act as the general partner of
PVP II. The principal business address of PVP II and PVP is 2001 Butterfield
Road, Suite 1400, Downers Grove, Illinois 60515. Andrew J. Filipowski
("Filipowski") is the sole director, a stockholder and the President and Chief
Executive Officer of PVP. In such capacities, Filipowski may be deemed to be
the beneficial owner of the shares owned by PVP II and, as such, reports his
holdings on Schedule 13G. Filipowski's present principal occupation is as the
President and Chief Executive Officer of PLATINUM TECHNOLOGY, INC. The address
of PLATINUM TECHNOLOGY, INC. is 1815 South Meyers Road, Oakbrook Terrace,
Illinois 60181.
In response to Items 2(d) and 2(e) of Schedule 13D, during the last five
years, neither any Reporting Person nor, to the best knowledge of each Reporting
Person, any individual otherwise identified in response to Item 2, has been
convicted in a criminal proceeding or been a party to any civil proceeding of a
judicial or administrative body of competent jurisdiction which resulted in or
subjected any of them to a judgment, decree, or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Pursuant to a Stock and Warrant Purchase Agreement, dated as of December
12, 1997 ("Purchase Agreement"), PVP II acquired from the Company 2,500
shares of the Company's Series C Convertible Preferred Stock, par value $.001
per share ("Preferred Stock"), and warrants to purchase 450,000 shares of
Common Stock ("Warrants"). PVP II has entered into an understanding with
Filipowski and Steven Devick ("Devick"), the Chairman and Chief Executive
Officer of the Company, whereby, in the event PVP II has not received a
return of its total investment in the Preferred Stock by December 12, 1998,
Filipowski and Devick have agreed to make arrangements to make up any
shortfall. In exchange for this arrangement, PVP II transferred to Devick
and Filipowski, Warrants to purchase an aggregate of 112,500 shares of Common
Stock. Copies of the Warrants are attached hereto as Exhibits 1 and 2. A
copy of the Certificate of Designations for the Preferred Stock
("Certificate") is attached hereto as Exhibit 3. A copy of the Purchase
Agreement is attached hereto as Exhibit 4. The Company also issued and sold,
on December 12, 1997, 20,000 shares of its Series B Convertible Preferred
Stock ("Series B Preferred Stock") and a warrant to purchase 3,600,000 shares
of Common Stock ("Purchaser Warrants") to certain purchasers ("Purchasers")
unaffiliated with the Reporting Persons.
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The funds used by PVP II to pay the purchase price for the Preferred Stock
and Warrants were obtained from capital contributions made by its general and
limited partners pursuant to preexisting capital commitments. To the extent
that PVP, as general partner of PVP II, contributed any funds to PVP II, such
funds were obtained by PVP from capital contributions made by its stockholders.
ITEM 4. PURPOSE OF TRANSACTION
The Reporting Persons have acquired the shares of Preferred Stock and
Warrants for investment purposes.
Copies of the Warrants and Certificate are attached hereto as Exhibits and
incorporated herein by reference. Set forth below is a summary of the material
terms of such documents. The following summary is qualified in its entirety by
reference to the Warrants and Certificate.
TERMS OF THE PREFERRED STOCK
DIVIDENDS. The Preferred Stock accrues dividends compounded quarterly at
an annual rate of 12% for the first year, 14% for the second year, 16% for the
third year, 18% for the fourth and fifth years and 20% thereafter, of the $1,000
per share liquidation value ("Liquidation Value") in preference to any dividend
on any other class of capital stock.
OPTIONAL REDEMPTION. The Preferred Stock is redeemable, in whole or part,
at the option of the Company, at any time, on at least 60 days' notice, at a
redemption price equal to the Liquidation Value plus accrued and unpaid
dividends ("Redemption Value").
CONVERSION. A Preferred Stockholder has the right to convert each share of
Preferred Stock, at the option of the holder, at any time or times, commencing
two years from the date of issuance, into shares of Common Stock at the
Conversion Price. The "Conversion Price" will be the lesser of (i) $5.9375 per
share of Common Stock and (ii) 100% of the average of the daily closing price
per share of the Common Stock for 30 consecutive trading days following the
public release by the Company of its consolidated earnings statement for the
1998 fiscal year; provided that if shares of Common Stock are not then traded on
any national securities exchange or quoted on the Nasdaq Stock Market or a
similar service, the closing price for the foregoing purpose shall be deemed to
be the fair market value of a share of Common Stock as determined in good faith
by the Board of Directors. If the Board of Directors is unable to determine
fair market value or if the holders of a majority of the outstanding shares of
the Series B Preferred Stock disagree with the Board's determination, then fair
market value will be determined by an independent financial expert. The number
of shares of Common Stock issuable upon conversion of a share of Preferred Stock
will be such number as is equal to the quotient obtained by dividing the then
applicable Redemption Value of such share by the Conversion Price. The
Conversion Price and the number of shares issuable upon conversion of the
Preferred Stock will be subject to adjustment upon the occurrence of certain
events as set forth in the Certificate.
CHANGE OF CONTROL. In the event there is a Change of Control of the
Company (as defined in the Certificate), the Company will be obligated to offer
to purchase the outstanding shares of Preferred Stock at a price equal to a
premium over the then applicable Redemption Value ("Repurchase Price"). The
Company is obligated to make such offer as soon as practicable and if possible
not less than 60 days prior to the effective date of the Change of Control
("Trigger Date"). Payment for the Preferred Stock tendered pursuant to such
offer will be made on the Trigger Date. The Repurchase Price will be payable in
cash or, at the Company's election, either in cash or in Common Stock depending
upon the circumstances resulting in the Change of Control. Notwithstanding the
foregoing, the holders of Preferred Stock will not have any rights upon a Change
of control solely if and to the extent that any such
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rights would be triggered or otherwise become exercisable (a) upon the
acquisition of any shares of Common Stock pursuant to the exercise of any
Purchaser Warrant, (b) upon the exercise of any of the rights and privileges
granted to the Purchasers relating to the corporate governance of the
Company, (c) upon the exercise of any of the rights and privileges granted to
the Purchasers relating to voting rights, or (d) otherwise as a result of the
equity ownership or designation of directors by the Purchasers or their
affiliates, employees, partners or members.
LIQUIDATION PREFERENCES. In the event of any voluntary or involuntary
dissolution, liquidation or winding up of the Company, the Preferred
Stockholders will be entitled to receive, after payment or provision for payment
of the Company's debts an other obligations, in preference to the holders of any
class of stock junior to the Preferred Stock, an aggregate amount equal to the
Liquidation Value plus accrued and unpaid dividends.
TERMS OF THE WARRANTS
EXERCISE RIGHTS. The Common Stock underlying the Warrants may be purchased
at a price ("Exercise Price") equal to the lesser of (i) $6.25 per share of
Common Stock ("Initial Exercise Price") and (ii) 82.5% of the average of the
daily closing price per share of the Common Stock for 30 consecutive trading
days following the public release by the Company of its consolidated earnings
statement for the 1998 fiscal year ("Thirty Day Period"); provided that if
shares of Common Stock are not then traded on any national securities exchange
or quoted on the Nasdaq Stock Market or a similar service, the closing price for
the foregoing purpose shall be deemed to be the fair market value of a share of
Common Stock as determined in good faith by the Board of Directors. If the
Board of Directors is unable to determine fair market value or if the holders of
a majority of the outstanding shares of the Series B Preferred Stock disagree
with the Board's determination, then fair market value will be determined by an
independent financial expert. Notwithstanding the foregoing, if at any time
prior to the expiration of the Thirty Day Period, no shares of the Series B
Preferred Stock remain outstanding, the Exercise Price will be the Initial
Exercise Price. The Exercise Price may be paid in cash or equivalent shares.
The Exercise Price and the number of shares issuable upon the exercise of the
Warrants will be subject to adjustment upon the occurrence of certain events as
set forth in the Warrants.
EXERCISE PERIOD. The Warrant is exercisable at any time, or from time to
time, from the date of issuance until October 31, 2007.
PUT OPTIONS. At any time on or after the fifth anniversary of the issue
date, any holder of a Warrant may require the Company to repurchase all of its
Warrants and shares of Common Stock issued in connection with the exercise of
its Warrant ("Five Year Put Option") at a price equal to the current market
price of the Common Stock less any applicable exercise price for the Warrant.
At or any time after a Change of Control, any holder of a Warrant may require
the Company to repurchase its Warrant ("Change of Control Put Option") at Fair
Market Value (as defined in the Warrant). Change of Control under the Warrant
is defined in the same manner as such term is defined in the Certificate.
Notwithstanding the foregoing, the holders of the Warrants do not have the Five
Year Put Option unless a majority in interest of the holders of shares issued
upon exercise of or underlying the Purchaser Warrants have exercised their Five
Year Put Option. In addition, the Change of Control Put Option will be not be
triggered or otherwise become exercisable (a) upon the acquisition of any shares
of Common Stock pursuant to the exercise of any Purchaser Warrant, (b) upon the
exercise of any of the rights and privileges granted to the Purchasers relating
to the corporate governance of the Company, (c) upon the exercise of any of the
rights and privileges granted to the Purchasers relating to voting rights, or
(d) otherwise as a result of the equity ownership or designation of directors by
the Purchasers or their affiliates, employees, partners or members.
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The Reporting Persons may from time to time acquire additional shares of
Common Stock in the open market or in privately negotiated transactions, subject
to availability of Common Stock at prices deemed favorable, the Company's
business or financial condition and other factors and conditions the Reporting
Persons deem appropriate. Alternatively, the Reporting Persons may sell all or
a portion of the Preferred Stock, Warrant, or Common Stock issued upon exercise
of the Warrant or conversion of the Preferred Stock in privately negotiated
transactions or in the open market pursuant to the exercise of certain
registration rights granted to the holders of Preferred Stock and Warrants, in
each case subject to the factors and conditions referred to above and to the
terms of the Preferred Stock and the Warrant, as the case may be.
Except as described in the Purchase Agreement, the Warrant or the
Certificate, and as otherwise set forth in this Schedule 13D, no Reporting
Person or any individual otherwise identified in Item 2 has any present plans or
proposals which relate to or would result in: (a) the acquisition by any person
of additional securities of the Company, or the disposition of securities of the
Company; (b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any of its subsidiaries;
(c) a sale or transfer or a material amount of assets of the Company or of any
of its subsidiaries; (c) a sale or transfer of a material amount of assets of
the Company or of any of its subsidiaries; (d) any change in the present board
of directors or management of the Company, including any plans or proposals to
change the number or term of directors or to fill any existing vacancies on the
board; (e) any material change in the present capitalization or dividend policy
of the Company; (f) any other material change in the Company's business or
corporate structure; (g) changes in the Company's charter, bylaws or instruments
corresponding thereto or other actions which may impede the acquisition of
control of the Company by any person; (h) causing a class of securities of the
Company to be delisted from a national securities exchange or to cease to be
authorized to be quoted in an inter-dealer quotation system of a registered
national securities association; (i) a class of equity securities of the Company
becoming eligible for termination of registration pursuant to Section 12(g)(4)
of the Securities Exchange Act of 1934; or (j) any action similar to any of
those enumerated above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) Shares of Preferred Stock are not convertible into shares of Common
Stock until December 12, 1999. Accordingly, pursuant to Rule 13d-3(d) of the
Securities Exchange Act of 1934, each of the Reporting Persons is deemed to
beneficially own zero shares of Common Stock in connection with the
conversion of Preferred Stock. As of the date hereof, the Warrants held by
the Reporting Person (after taking into account the transfer of a portion of
the Warrants to Filipowski and Devick as described in Item 3) may be
exercised at any time and from time to time on or after December 12, 1997
(but no later than October 31, 2007) to purchase an aggregate of 337,500 of
Common Stock, subject to adjustment under certain circumstances.
Accordingly, PVP II may be deemed to beneficially own an aggregate of 337,500
shares of Common Stock which represents 6.0% of the outstanding shares of
Common Stock.
(b) By virtue of the relationships between and among the Reporting
Persons described in Item 2, each of the Reporting Persons may be deemed to
share the power to direct the voting and disposition of the 337,500 shares of
Common Stock underlying the Warrants issued pursuant to the Purchase
Agreement and beneficially owned by PVP II. PVP is also the beneficial owner
of 99,067 shares of Common Stock owned by Platinum Venture Partners I, L.P.
("PVP I"), of which PVP is the general partner. Accordingly, PVP shares
voting power and dispositive power with respect to 436,567 shares of Common
Stock, which represents 7.8% of the outstanding shares of Common Stock.
(c) Filipowski has sole voting and dispositive power with respect to
512,117 shares of Common Stock, of which number 7,667 represents shares
underlying stock options which are presently exercisable. In addition,
Filipowski, in his capacity as the sole director, a stockholder and the
President and Chief Executive Officer of PVP, may be deemed to be the beneficial
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owner of the shares owned by PVP II and PVP I. Accordingly, Filipowski is the
beneficial owner of 948,684 shares of Common Stock, which represents 16.7% of
the outstanding shares of Common Stock.
(d) Except as set forth in this Schedule 13D, no Reporting Person nor, to
the best knowledge of each Reporting Person, any other person identified in Item
2, beneficially owns any shares of Common Stock or has effected any transaction
shares of Common Stock during the preceding 60 days.
Item 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
The Company has granted to holders of Preferred Stock and Warrants certain
piggyback registration rights with respect to the shares of Common Stock
issuable upon the exercise of the Warrant or the conversion of the Preferred
Stock; provided, however, that the holders of the Warrants or the Preferred
Stock will not be entitled to such piggyback registration rights in connection
with a registration effected by the Company as a result of the exercise of a
demand registration right by the holders of the Purchaser Warrants or the Series
B Preferred Stock.
Except as described elsewhere in this Schedule 13D and as set forth in the
Purchase Agreement, the Certificate and the Warrants, to the best knowledge of
the Reporting Persons, there exist no contracts, arrangements, understandings or
relationships among the persons named in Item 2 and between such persons and any
person with respect to any securities of the Company, including but not limited
to transfer or voting of any securities of the Company, finder's fees, joint
ventures, loan or option arrangements, puts or calls, guarantees of profits,
division of profits or loss, or the giving or withholding proxies.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
1. Warrant, dated December 12, 1997, for 315,000 shares of Common Stock,
par value $.001 per share, of Platinum Entertainment, Inc. issued to Platinum
Venture Partners II, L.P.
2. Warrant, dated December 12, 1997, for 135,000 shares of Common Stock,
par value $.001 per share, of Platinum Entertainment, Inc. issued to Platinum
Venture Partners II, L.P.
3. Certificate of Designations, dated December 12, 1997, governing
Platinum Entertainment, Inc.'s Series C Convertible Preferred Stock, par value
$.001 per share.
4. Stock and Warrant Purchase Agreement, dated December 12, 1997 by and
between Platinum Entertainment, Inc. and the purchasers named therein.
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SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, each
of the undersigned certifies that the information set forth in this statement is
true, complete and correct.
Date: December 22, 1997
PLATINUM VENTURE PARTNERS II, L.P.
By: Platinum Venture Partners, Inc.,
Its General Partner
By /s/ Andrew J. Filipowski
-------------------------------
Andrew J. Filipowski, President
PLATINUM VENTURE PARTNERS, INC.
By: /s/ Andrew J. Filipowski
-------------------------------
Andrew J. Filipowski, President
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EXHIBIT INDEX
EXHIBIT NO. PAGE NO.
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1. Warrant, dated December 12, 1997, for 315,000 shares of
Common Stock, par value $.001 per share, of Platinum
Entertainment, Inc. issued to Platinum Venture Partners II,
L.P.
2. Warrant, dated December 12, 1997, for 135,000 shares of
Common Stock, par value $.001 per share, of Platinum
Entertainment, Inc. issued to Platinum Venture Partners II,
L.P.
3. Certificate of Designations, dated December 12, 1997,
governing Platinum Entertainment, Inc.'s Series C
Convertible Preferred Stock, par value $.001 per share.
4. Stock and Warrant Purchase Agreement, dated December 12,
1997 by and between Platinum Entertainment, Inc. and the
purchasers named therein.
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EXHIBIT 1
NEITHER THIS WARRANT NOR ANY SECURITIES ACQUIRED UPON THE EXERCISE
OF THIS WARRANT (THE "SECURITIES") HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS
AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER SUCH ACT
AND SUCH LAWS AS EVIDENCED BY AN OPINION OF COUNSEL DELIVERED AND REASONABLY
ACCEPTABLE TO THE COMPANY.
______________________________________________
PLATINUM ENTERTAINMENT, INC.
COMMON STOCK PURCHASE WARRANT
_______________________________________________
This certifies that, for good and valuable consideration, Platinum
Entertainment, Inc., a Delaware corporation (the "Company"), grants to
Platinum Venture Partners II, L.P., its successors and permitted assigns (the
"Warrantholder"), the right to subscribe for and purchase from the Company
three hundred fifteen thousand (315,000) validly issued, fully paid and
nonassessable shares (the "Warrant Shares") of the Company's Common Stock,
par value $.001 per share (the "Common Stock"), at the purchase price per
share equal to the Exercise Price, as defined herein, at any time prior to
5:00 p.m., New York City time, on October 31, 2007 (the "Expiration Date"),
subject to the terms, conditions and adjustments herein set forth.
This Warrant is being issued in connection with the issue and sale
by the Company of shares of its Series C Convertible Stock, par value $.001
per share (the "Series C Preferred Stock") pursuant to the closing condition
set forth in Section 3.1.21 of the Investment Agreement, dated as of October
12, 1997, among the Company, MAC Music LLC ("MAC") and SK-Palladin, LP
(together with MAC, the "Investors"), as amended and as hereafter amended
(the "Investment Agreement"). This Warrant is the Warrant referred to in
Section 3.1.21(b) of the Investment Agreement. References herein to the
"Warrants" shall mean each Warrant issued pursuant to the closing condition
set forth in Section 3.1.21(b) of the Investment Agreement, or upon transfer
or following partial exercise of any Warrant originally issued pursuant to
the closing condition set forth in Section 3.1.21(b) of the Investment
Agreement. Notwithstanding the foregoing, in accordance with Section 3.1.21
of the Investment Agreement, the Warrants are not governed by the Investment
Agreement and the holders of the Warrants do not have any of the rights and
privileges granted to the Investors pursuant to the Investment Agreement in
<PAGE>
2
connection with the issuance of warrants to the Investors thereunder (the
"Investor Warrants").
The "Exercise Price" shall mean (x) prior to the expiration of the
Thirty Day Period (as defined below), $6.25 per share of Common Stock, as
adjusted hereunder (the "Initial Exercise Price"), or (y) after the
expiration of the Thirty Day Period, the lesser of (1) the Initial Exercise
Price, as adjusted hereunder, and (2) 82.5% of the average of the daily
Closing Price per share of Common Stock for the 30 consecutive trading days
following the public release by the Company of its consolidated earnings
statement for the fiscal year ending May 31, 1998 (the "Thirty Day Period"),
subject to appropriate adjustment for the events described in Section 6.1(a)
herein if any such event occurs during the Thirty Day Period; provided that
if shares of Common Stock are not then traded on any national securities
exchange or quoted by NASDAQ or a similar service, the Closing Price for the
foregoing purposes shall be deemed to be the fair market value of a share of
Common Stock as shall be determined in good faith by the Board of Directors
of the Company. If the holders of a majority in interest of the Warrant
Shares issuable upon the exercise of the Investor Warrants disagree with the
Board's determination of fair market value for the purposes of the Investor
Warrants, the fair market value for the purposes of the Warrant shall be the
fair market value determined for the purposes of the Investor Warrants.
Notwithstanding the foregoing, if at any time prior to the expiration of the
Thirty Day Period, no shares of the Series B Preferred Stock remain
outstanding, the definition of "Exercise Price" shall mean the Initial
Exercise Price, as adjusted hereunder. The Exericise Price as determined in
accordance with the foregoing shall be adjusted from time to time in
accordance with the provisions of Section 6.
1. EXERCISE OF WARRANTS.
1.1 EXERCISE OF WARRANT. This Warrant may be exercised, in
whole or in part, at any time or from time to time prior to the Expiration
Date, by surrendering to the Company at its principal office this Warrant,
with an Exercise Form (as defined herein) duly executed by the Warrantholder
and accompanied by payment of the Exercise Price for the number of shares of
Common Stock specified in such Exercise Form.
1.2 CASHLESS EXERCISE. In lieu of the payment of the Exercise
Price, the Warrantholder shall have the right (but not the obligation) to
require the Company to convert this Warrant, in whole or in part, into shares
of Common Stock (the "Conversion Right") as provided for in this Section 1.2.
Upon exercise of the Conversion Right, the Company shall deliver to the
Warrantholder (without payment by the Warrantholder of any of the Exercise
Price) that number of shares of Common Stock equal to the quotient obtained
by dividing (x) the value of the Warrant or portion thereof being exercised
at the time the Conversion Right is exercised (determined by subtracting the
aggregate Exercise Price in effect
<PAGE>
3
immediately prior to the exercise of the Conversion Right for the number of
shares for which the Warrant is being exercised from the aggregate Current
Market Price (as defined herein) of the shares of Common Stock issuable upon
exercise of the Warrant for the number of shares for which the Warrant is
being exercised immediately prior to the exercise of the Conversion Right) by
(y) the Current Market Price of one share of Common Stock immediately prior
to the exercise of the Conversion Right. The Conversion Right may be
exercised at any time or from time to time prior to the Expiration Date by
surrendering to the Company at its principal office this Warrant, with an
Exercise Form duly executed by the Warrantholder and indicating that the
Warrantholder wishes to exercise the Conversion Right and specifying the
total number of shares of Common Stock for which the Warrant is being
exercised.
1.3 DELIVERY OF WARRANT SHARES; EFFECTIVENESS OF EXERCISE.
(a) DELIVERY OF WARRANT SHARES. A stock certificate or
certificates for the Warrant Shares specified in the Exercise Form along with
a check for the amount of cash to be paid in lieu of fractional shares, if
any, shall be delivered to the Warrantholder within 10 Business Days after
the Exercise Date (as defined herein); PROVIDED, HOWEVER, that if the
Conversion Right is exercised in accordance with Section 1.2 and a
determination by the Board of Directors is required to determine the Current
Market Price of the Common Stock, such delivery shall be made promptly after
such determination is made. If this Warrant shall have been exercised only
in part, the Company shall, at the time of delivery of the stock certificate
or certificates and cash in lieu of fractional shares, if any, deliver to the
Warrantholder a new Warrant evidencing the rights to purchase the remaining
Warrant Shares, which new Warrant shall in all other respects be identical
with this Warrant.
(b) EFFECTIVENESS OF EXERCISE. The exercise of this
Warrant shall be deemed to have been effective immediately prior to the close
of business on the Business Day on which this Warrant is exercised in
accordance with Section 1.1 or 1.2 (the "Exercise Date"). The Person in
whose name any certificate for shares of Common Stock shall be issuable upon
such exercise shall be deemed to be the record holder of such shares of
Common Stock for all purposes on the Exercise Date.
1.4 PAYMENT OF TAXES. The issuance of certificates for
Warrant Shares shall be made without charge to the Warrantholder for any
stock transfer or other issuance tax in respect thereof; PROVIDED, HOWEVER,
that the Warrantholder shall be required to pay any and all taxes that may be
payable in respect of any transfer involved in the issuance and delivery of
any certificate in a name other than that of the then Warrantholder as
reflected upon the books of the Company.
<PAGE>
4
2. RESTRICTIVE LEGENDS.
2.1 WARRANTS. Except as otherwise permitted by this Section
2, each Warrant (and each Warrant issued in substitution for any Warrant
pursuant to Section 4) shall be stamped or otherwise imprinted with a legend
in substantially the following form:
NEITHER THIS WARRANT NOR ANY SECURITIES ACQUIRED UPON THE EXERCISE OF
THIS WARRANT (THE "SECURITIES") HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED,
SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER
SUCH ACT AND SUCH LAWS AS EVIDENCED BY AN OPINION OF COUNSEL DELIVERED AND
REASONABLY ACCEPTABLE TO THE COMPANY.
2.2 WARRANT SHARES. Except as otherwise permitted by this
Section 2, each stock certificate for Warrant Shares issued upon the exercise
of any Warrant and each stock certificate issued upon the direct or indirect
transfer of any such Warrant Shares shall be stamped or otherwise imprinted
with a legend in substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT AND SUCH LAWS AS EVIDENCED BY AN OPINION OF COUNSEL
DELIVERED AND REASONABLY ACCEPTABLE TO THE COMPANY.
2.3 REMOVAL OF LEGENDS. Notwithstanding the foregoing, the
Warrantholder may require the Company to issue a Warrant or a stock
certificate for Warrant Shares, in each case without a legend, if either (i)
such Warrant or such Warrant Shares, as the case may be, have been registered
for resale under the Securities Act and sold pursuant to such registration or
(ii) if reasonably requested by the Company, the Warrantholder has delivered
to the Company an opinion of legal counsel (from a firm reasonably
satisfactory to the Company) which opinion shall be
<PAGE>
5
addressed to the Company and be reasonably satisfactory in form and substance
to the Company's counsel, to the effect that such registration is not
required with respect to such Warrant or such Warrant Shares, as the case may
be.
3. RESERVATION AND REGISTRATION OF SHARES, ETC.
The Company covenants and agrees as follows:
(a) All Warrant Shares that are issued upon the exercise
of this Warrant will, upon issuance, be validly issued, fully paid and
nonassessable, not subject to any preemptive rights, and free from all taxes,
liens, security interests, charges, and other encumbrances with respect to
the issuance thereof, other than taxes in respect of any transfer occurring
contemporaneously with such issue.
(b) During the period within which this Warrant may be
exercised, the Company will at all times have authorized and reserved, and
keep available free from preemptive rights, a sufficient number of shares of
Common Stock to provide for the exercise of the rights represented by this
Warrant.
4. LOSS OR DESTRUCTION OF WARRANT.
Subject to the terms and conditions hereof, upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant and, in the case of loss, theft or
destruction, of such bond or indemnification as the Company may reasonably
require, and, in the case of mutilation, upon surrender and cancellation of
this Warrant, the Company will execute and deliver a new Warrant of like
tenor.
5. OWNERSHIP OF WARRANT.
The Company may deem and treat the Person in whose name this Warrant
is registered as the holder and owner hereof (notwithstanding any notations
of ownership or writing hereon made by anyone other than the Company) for all
purposes and shall not be affected by any notice to the contrary, until
presentation of this Warrant for registration of transfer.
6. CERTAIN ADJUSTMENTS.
6.1 The number of Warrant Shares purchasable upon the exercise
of this Warrant and the Exercise Price shall be subject to adjustment as
follows:
<PAGE>
6
(a) STOCK DIVIDENDS, SUBDIVISION, COMBINATION OR
RECLASSIFICATION OF COMMON STOCK. If at any time after the date of the
issuance of this Warrant the Company shall (i) declare a stock dividend on
the Common Stock payable in shares of its capital stock (including Common
Stock), (ii) increase the number of shares of Common Stock outstanding by a
subdivision or split-up of shares of Common Stock, (iii) decrease the number
of shares of Common Stock outstanding by a combination of shares of Common
Stock or (iv) issue any shares of its capital stock in a reclassification of
the Common Stock, then, on the record date for such dividend or the effective
date of such subdivision or split-up, combination or reclassification, as the
case may be, the number and kind of shares to be delivered upon exercise of
this Warrant will be adjusted so that the Warrantholder will be entitled to
receive the number and kind of shares of capital stock that such
Warrantholder would have owned or been entitled to receive upon or by reason
of such event had this Warrant been exercised immediately prior thereto, and
the Exercise Price will be adjusted as provided below in paragraph (h).
(b) REORGANIZATION, ETC. If at any time after the date
of issuance of this Warrant any consolidation of the Company with or merger
of the Company with or into any other Person (other than a merger or
consolidation in which the Company is the surviving or continuing corporation
and which does not result in any reclassification of, or change (other than a
change in par value or from par value to no par value or from no par value to
par value, or as a result of a subdivision or combination) in, outstanding
shares of Common Stock) or any sale, lease or other transfer of all or
substantially all of the assets of the Company to any other person (each, a
"Reorganization Event"), shall be effected in such a way that the holders of
Common Stock shall be entitled to receive cash, stock, other securities or
assets (whether such cash, stock, other securities or assets are issued or
distributed by the Company or another Person) with respect to or in exchange
for Common Stock, then, upon exercise of this Warrant the Warrantholder shall
have the right to receive the kind and amount of cash, stock, other
securities or assets receivable upon such Reorganization Event by a holder of
the number of shares of Common Stock that such Warrantholder would have been
entitled to receive upon exercise of this Warrant had this Warrant been
exercised immediately before such Reorganization Event, subject to
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 6.1. Notwithstanding the foregoing,
if more than 20% in aggregate value of the cash, stock, other securities or
assets deliverable to such holder in accordance with the foregoing provisions
of this Section 6(b) would consist of cash or debt securities, then the
Warrantholder shall have the right (the "Special Reorganization Right") at
its election, exercisable by giving written notice to the Company prior to
120 days following the consummation of such Reorganization Event to receive
from the Company, and the Company shall pay to the Warrantholder promptly
after the exercise by the Warrantholder of the Special Reorganization Right,
instead of the cash, stock, other securities or assets otherwise deliverable
to such holder, an amount of cash equal to the fair market value of this
Warrant immediately prior to the announcement of such Reorganization Event,
to be determined by an
<PAGE>
7
Independent Financial Expert giving due consideration to such factors as the
financial condition and prospects of the Company, the remaining unexpired
term of the Warrant and the market price of the Common Stock of the Company
after announcement of such Reorganization Event. The Company shall not enter
into any of the transactions referred to in this Section 6.1(b) unless
effective provision shall be made so as to give effect to the provisions set
forth in this Section 6.1(b).
(c) CERTAIN ISSUANCES OF COMMON STOCK. If at any time
after the date of issuance of this Warrant the Company shall issue or sell,
or fix a record date for the issuance of, (A) Common Stock (or securities
convertible into or exchangeable or exercisable for Common Stock) (other than
Excluded Securities) or (B) rights, options or warrants entitling the holders
thereof to subscribe for or purchase Common Stock (or securities convertible
into or exchangeable or exercisable for Common Stock) (other than Excluded
Securities), in any such case, at a price per share (treating the price per
share of the securities convertible into or exchangeable or exercisable for
Common Stock as equal to (x) the sum of (i) the price for a unit of the
security convertible into or exchangeable or exercisable for Common Stock
plus (ii) any additional consideration initially payable upon the conversion
of such security into Common Stock or the exchange or exercise of such
security for Common Stock divided by (y) the number of shares of Common Stock
initially underlying such convertible, exchangeable or exercisable security)
that is less than the greater of the Current Market Price of the Common Stock
and the Exercise Price on the date of such issuance or such record date (the
"Measuring Price") then, immediately after the date of such issuance or sale
or on such record date, the number of shares of Common Stock to be delivered
upon exercise of this Warrant shall be increased so that the Warrantholder
thereafter shall be entitled to receive the number of shares of Common Stock
determined by multiplying the number of shares of Common Stock such
Warrantholder would have been entitled to receive immediately before the date
of such issuance or sale or such record date by a fraction, the denominator
of which shall be the number of shares of Common Stock outstanding
(calculated to include the shares of Common Stock underlying the Warrants,
shares of Common Stock underlying the Investor Warrants, shares of Common
Stock underlying the Harnick Warrant and all then currently exerciseable,
convertible and exchangeable securities that are "in the money") on such date
plus the number of shares of Common Stock that the aggregate offering price
of the total number of shares so offered for subscription or purchase (or the
aggregate purchase price of the convertible, exchangeable or exerciseable
securities so offered plus the aggregate of amount of any additional
consideration initially payable upon conversion into Common Stock or exchange
or exercise for Common Stock) would purchase at the Measuring Price and the
numerator of which shall be the number of shares of Common Stock outstanding
(calculated to include the shares of Common Stock underlying the Warrants,
shares of Common Stock underlying the Investor Warrants, shares of Common
Stock underlying the Harnick Warrant and all then currently exerciseable,
convertible and exchangeable securities that are "in the money") on such date
plus the number of additional shares of Common Stock offered for subscription
or purchase (or into or for which the convertible or exchangeable
<PAGE>
8
securities or rights, options or warrants so offered are initially
convertible or exchangeable or exercisable, as the case may be), and the
Exercise Price shall be adjusted as provided below in paragraph (i).
"Excluded Securities" means (A) shares of Common Stock issued upon conversion
or exercise of convertible securities, warrants and options of the Company,
outstanding on the date this Warrant is originally issued, (B) shares of
Common Stock, and options to purchase such shares, issued to officers,
directors, employees or former employees of, or consultants to, the Company
or any of its subsidiaries pursuant to any equity incentive plan, agreement
or other arrangement which has been approved by a vote of at least two-thirds
(2/3) of the Board of Directors of the Company, (C) shares of Common Stock
issued upon conversion of shares of the Company's Series B Convertible
Preferred Stock, par value $.001 per share (the "Series B Preferred Stock"),
(D) shares of Common Stock issued upon exercise of the Investor Warrants,
including any increase in the number of shares of Common Stock issuable under
such Investor Warrants as a result of the conditional annual increase
provision included therein, (E) shares of Common Stock issued upon conversion
of shares of the Company's Series C Convertible Preferred Stock, par value
$.001 per share, (F) shares of Common Stock issued upon exercise of the
Harnick Warrant and (G) shares of Common Stock issued upon exercise of any
Warrant.
(d) EXTRAORDINARY DISTRIBUTIONS. If at any time after
the date of issuance of this Warrant the Company shall distribute to all
holders of its Common Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the
continuing or surviving corporation and the Common Stock is not changed or
exchanged) cash, evidences of indebtedness, securities or other assets
(excluding (i) ordinary course cash dividends to the extent such dividends do
not exceed the Company's retained earnings and (ii) dividends payable in
shares of capital stock for which adjustment is made under Section 6.1(a)) or
rights, options or warrants to subscribe for or purchase securities of the
Company (excluding those for which adjustment is made under Section 6.1(c)),
then the number of shares of Common Stock to be delivered to such
Warrantholder upon exercise of this Warrant shall be increased so that the
Warrantholder thereafter shall be entitled to receive the number of shares of
Common Stock determined by multiplying the number of shares such
Warrantholder would have been entitled to receive immediately before such
record date by a fraction, the denominator of which shall be the Current
Market Price per share of Common Stock on such record date minus the then
fair market value (as reasonably determined by the Board of Directors of the
Company in good faith) of the portion of the cash, evidences of indebtedness,
securities or other assets so distributed or of such rights or warrants
applicable to one share of Common Stock (provided that such denominator shall
in no event be less than $.01) and the numerator of which shall be the
Current Market Price per share of the Common Stock, and the Exercise Price
shall be adjusted as provided below in paragraph (h).
(e) PRO RATA REPURCHASES. If at any time after the date of
issuance of this Warrant, the Company or any subsidiary thereof shall make a Pro
<PAGE>
9
Rata Repurchase, then the number of shares of Common Stock to be delivered to
such Warrantholder upon exercise of this Warrant shall be increased so that the
Warrantholder thereafter shall be entitled to receive the number of shares of
Common Stock determined by multiplying the number of shares of Common Stock such
Warrantholder would have been entitled to receive immediately before such Pro
Rata Repurchase by a fraction (which in no event shall be less than one) the
denominator of which shall be (i) the product of (x) the number of shares of
Common Stock outstanding immediately before such Pro Rata Repurchase and (y) the
Current Market Price of the Common Stock as of the day immediately preceding the
first public announcement by the Company of the intent to effect such Pro Rata
Repurchase minus (ii) the aggregate purchase price of the Pro Rata Repurchase
(provided that such denominator shall never be less than $.01), and the
numerator of which shall be the product of (i) the number of shares of Common
Stock outstanding immediately before such Pro Rata Repurchase minus the number
of shares of Common Stock repurchased in such Pro Rata Repurchase and (ii) the
Current Market Price of the Common Stock as of the day immediately preceding the
first public announcement by the Company of the intent to effect such Pro Rata
Repurchase.
(f) FRACTIONAL SHARES. No fractional shares of Common
Stock or scrip shall be issued to any Warrantholder in connection with the
exercise of this Warrant. Instead of any fractional shares of Common Stock
that would otherwise be issuable to such Warrantholder, the Company will pay
to such Warrantholder a cash adjustment in respect of such fractional
interest in an amount equal to that fractional interest of the then Current
Market Price per share of Common Stock.
(g) CARRYOVER. Notwithstanding any other provision of
this Section 6.1, no adjustment shall be made to the number of shares of
Common Stock to be delivered to the Warrantholder (or to the Exercise Price)
if such adjustment represents less than .05% of the number of shares to be so
delivered, but any lesser adjustment shall be carried forward and shall be
made at the time and together with the next subsequent adjustment that
together with any adjustments so carried forward shall amount to .05% or more
of the number of shares to be so delivered.
(h) EXERCISE PRICE ADJUSTMENT. Whenever the number of
Warrant Shares purchasable upon the exercise of the Warrant is adjusted as
provided pursuant to this Section 6.1, the Exercise Price per share payable
upon the exercise of this Warrant shall be adjusted by multiplying such
Exercise Price immediately prior to such adjustment by a fraction, of which
the numerator shall be the number of Warrant Shares purchasable upon the
exercise of the Warrant immediately prior to such adjustment, and of which
the denominator shall be the number of Warrant Shares purchasable immediately
thereafter; PROVIDED, HOWEVER, that the Exercise Price for each Warrant Share
shall in no event be less than the par value of such Warrant Share.
<PAGE>
10
(i) MULTIPLE ADJUSTMENTS. If any action or transaction
would require adjustment of the number of shares of Common Stock to be
delivered to the Warrantholder upon exercise of this Warrant pursuant to more
than one paragraph of this Section 6.1, only one adjustment shall be made and
each such adjustment shall be the amount of adjustment that has the highest
absolute value.
6.2 NOTICE OF ADJUSTMENT. Whenever the number of Warrant
Shares or the Exercise Price of such Warrant Shares is adjusted, as herein
provided, the Company shall promptly mail by first class mail, postage
prepaid, to the Warrantholder, notice of such adjustment or adjustments and a
certificate of a firm of independent public accountants of recognized
national standing selected by the Board of Directors of the Company (who
shall be appointed at the Company's expense and who may be the independent
public accountants regularly employed by the Company) setting forth the
number of Warrant Shares and the Exercise Price of such Warrant Shares after
such adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was
made.
7. PUT RIGHTS. The Warrantholder shall have the following Put
Rights:
(a) At the earlier of (i) the fifth anniversary of the
date hereof and (ii) a Change of Control, the Warrantholder may notify the
Company in writing (the "PUT NOTICE") of the Warrantholder's desire to cause
the Company to repurchase, in the case of clause (i) above, all (but not less
than all) of the Warrant Shares (issued or represented by the Warrant) at a
price per share equal to the Repurchase Price (the "Five-Year Put"), or, in
the case of clause (ii) above, the Warrant at the Change of Control
Repurchase Price (the "Change of Control Put").
(b) If the Company receives a Put Notice pursuant to
Section 7(a), it shall deliver to the Warrantholder, by first class mail,
postage prepaid, mailed as soon as practicable and if possible within thirty
(30) days of the receipt by the Company of the Put Notice, a notice stating:
(i) the date as of which such repurchase shall occur (which date (the "Put
Closing") shall be not less than ten (10) nor more than thirty (30) days
following the date of such notice, but in any event prior to the Expiration
Date); (ii) in the case of a Five-Year Put, the number of Warrant Shares
(issued or represented by this Warrant) to be purchased from the
Warrantholder and the Repurchase Price (which shall be calculated as of the
date of the Put Notice) or, in the case of a Change of Control Put, the
Change of Control Repurchase Price; and (iii) the place or places where
certificate or certificates representing this Warrant or Warrant Shares are
to be surrendered for payment; PROVIDED, HOWEVER, that the Company shall have
no obligation to send the notice set forth above or to repurchase the
Warrants and Warrant Shares following the exercise of the Five Year Put (and
the provisions of paragraph (c) below shall not be applicable to any failure
by the Company to repurchase the Warrants and the Warrant Shares following
the exercise of the Five Year Put), unless the holders of not less than a
majority of the shares of
<PAGE>
11
Common Stock issued or issuable upon exercise of the Investor Warrants (the
"Investor Warrant Shares") shall also have exercised the "five year put"
provided for in the Investor Warrants.
(c) With respect to Warrants and Warrant Shares properly
tendered for repurchase, if the Company fails to pay the Repurchase Price or
the Change of Control Repurchase Price on the date fixed for repurchase, the
Corporation shall also pay interest thereon at the rate of 12% per annum,
compounded on a quarterly basis, until such time as such satisfaction shall
have occurred.
(d) At the Put Closing, the Warrantholder shall deliver
to the Company the certificate or certificates representing the
Warrantholder's Warrant or Warrant Shares and the Company shall deliver to
the Warrantholder an amount equal to, in the case of a Five-Year Put, the
product obtained by multiplying (i) the number of such Warrant Shares (issued
or represented by this Warrant) by (ii) the Repurchase Price or, in the case
of a Change of Control Put, the Change of Control Repurchase Price, by
cashier's or certified check payable to the Warrantholder or by wire transfer
of immediately available funds to an account designated by the Warrantholder.
(e) The Company shall not (and shall not permit any
Affiliate of the Company to) enter into any contract or other consensual
arrangement that by its terms restricts the Company's ability to honor the
Put.
8. AMENDMENTS. Any provision of this Warrant may be amended and
the observance thereof waived only with the written consent of the Company
and the Warrantholder.
9. NOTICES OF CORPORATE ACTION. So long as this Warrant has not
been exercised in full, in the event of:
(a) any consolidation or merger involving the Company and
any other party or any transfer of all or substantially all the assets of the
Company to any other party, or
(b) any voluntary or involuntary dissolution, liquidation
or winding-up of the Company,
the Company will mail, by first class mail, postage prepaid, to the
Warrantholder a notice specifying (i) the date or expected date on which any
such record is to be taken for the purpose of a dividend, distribution or
right and the amount and character of any such dividend, distribution or
right and (ii) the date or expected date on which a reorganization,
reclassification, recapitalization, consolidation, merger, transfer,
dissolution, liquidation or winding-up is to take place and the time, if any
such time is to be fixed, as of which the holders of record of Common Stock
(or other securities) shall be
<PAGE>
12
entitled to exchange their shares of Common Stock (or other securities) for
the securities or other property deliverable upon such reorganization,
reclassification, recapitalization, consolidation, merger, transfer,
dissolution, liquidation or winding-up. Such notice shall be delivered as
soon as practicable and if possible at least 20 days prior to the date
therein specified in the case of any date referred to in the foregoing
subdivisions (i) and (ii). Failure to give the notice specified hereunder
shall have no effect on the status or effectiveness of the action to which
the required notice relates.
10. DEFINITIONS.
As used herein, unless the context otherwise requires, the following
terms have the following meanings:
"AFFILIATE" means, with respect to any Person, any other Person
that, directly or indirectly, controls, is controlled by, or is under common
control with such first Person. For the purpose of this definition,
"control" shall mean, as to any Person, the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"BUSINESS DAY" means any day other than a Saturday, Sunday or a day
on which national banks are authorized by law or executive order to close in
the State of New York.
"CHANGE OF CONTROL" shall mean (i) the direct or indirect sale,
lease, exchange or other transfer of all or substantially all of the assets
of the Company to any Person or entity or group of Persons or entities acting
in concert as a partnership or other group within the meaning of Rule 13d-5
under the Exchange Act (a "GROUP OF PERSONS"), (ii) the merger or
consolidation of the Company with or into another corporation with the effect
that the then existing stockholders of the Company hold less than 50% of the
combined voting power of the then outstanding securities of the surviving
corporation of such merger or the corporation resulting from such
consolidation ordinarily (and apart from rights accruing under special
circumstances) having the right to vote in the election of directors, (iii)
the replacement of a majority of the Board of Directors of the Company, over
a two-year period, from the directors who constituted the Board of Directors
at the beginning of such period, and such replacement shall not have been
approved by the Board of Directors of the Company (or its replacements
approved by the Board of Directors of the Company) as constituted at the
beginning of such period, (iv) a Person or Group of Persons (other than the
Investors and their Affiliates, employees, partners or members) shall, as a
result of a tender or exchange offer, open market purchases, privately
negotiated purchases or otherwise, have become the beneficial owner (within
the meaning of Rule 13d-3 under the Exchange Act) of securities of the
Company representing 49% or more of the combined voting power of the then
outstanding securities of the Company ordinarily (and apart from rights
accruing under special circumstances) having the right to vote in the
election of directors. Notwithstanding the foregoing, no Change of Control
shall be
<PAGE>
13
deemed to have occurred (a) upon the acquisition of any shares of Common
Stock of the Company pursuant to the exercise of the Investor Warrants, (b)
upon the exercise of any of the rights and privileges granted to each of the
Investors pursuant to Section 6.2.5 of the Investment Agreement, (c) upon the
exercise of any rights and privileges granted to the holders of the Series B
Preferred Stock pursuant to the Certificate of the Powers, Designations,
Preferences and Rights of the Series B Preferred Stock or (d) otherwise as a
result of the equity ownership or designation of directors by the Investors
or their Affiliates, employees, partners or members.
"CHANGE OF CONTROL REPURCHASE PRICE" means (i) if any Investor
Warrants are then outstanding, an amount in cash, on a per Warrant Share
basis, equal to the "Change of Control Repurchase Price" (on a per Investor
Warrant Share basis) for the Investor Warrants, or (ii) if no Investor
Warrants are then outstanding, an amount of cash equal to the fair market
value of this Warrant immediately prior to the announcement of a Change of
Control, to be determined by an Independent Financial Expert selected by the
Company and a majority in interest of the Warrant Shares, giving due
consideration to such factors as the financial condition and prospects of the
Company, the remaining unexpired term of this Warrant and the market price of
the Common Stock of the Company after announcement of such Change of Control.
"CLOSING PRICE" of the Common Stock as of any day, means (a) the
last reported sale price of such stock (regular way) or, in case no such sale
takes place on such day, the average of the closing bid and asked prices, in
either case as reported on the principal national securities exchange on
which the Common Stock is listed or admitted to trading or (b) if the Common
Stock is not listed or admitted to trading on any national securities
exchange, the last reported sale price or, in case no such sale takes place
on such day, the average of the highest reported bid and lowest reported
asked quotation for the Common Stock, in either case reported on the National
Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ"), or a similar service if NASDAQ is no longer reporting such
information.
"COMMON STOCK" has the meaning specified on the cover of this
Warrant.
"COMPANY" has the meaning specified on the cover of this Warrant.
"CURRENT MARKET PRICE" means, with respect to each share of Common
Stock as of any date, the average of the daily Closing Prices per share of
Common Stock for the 10 consecutive trading days commencing 15 trading days
prior to such date; provided that if on any such date the shares of Common
Stock are not listed or admitted for trading on any national securities
exchange or quoted by NASDAQ or a similar service, the Current Market Price
for a share of Common Stock shall be the fair market value of such share as
determined in good faith by the Board of Directors of the Company; provided
that if the holders of a majority in interest of the Investor Warrant Shares
disagree with the Board of Director's determination of fair market value for
purposes of the Investor Warrants, the fair market
<PAGE>
14
value for purposes of this Warrant shall be the same as the fair market value
determined for purposes of the Investor Warrants.
"EXERCISE FORM" means an Exercise Form in the form annexed hereto as
Exhibit A.
"EXPIRATION DATE" has the meaning specified on the cover of this
Warrant.
"HARNICK WARRANT" means the warrant to purchase 50,000 shares of
Common Stock to be issued to Carl D. Harnick at the closing of the Investment
Agreement.
"INDEPENDENT FINANCIAL EXPERT" means an independent nationally
recognized investment banking firm.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, limited liability company,
unincorporated organization, estate, other entity or government or any agency
or political subdivision thereof.
"PRO RATA REPURCHASE" means any purchase of shares of Common Stock
by the Company or by any of its subsidiaries whether for cash, shares of
capital stock of the Company, other securities of the Company, evidences of
indebtedness of the Company or any other Person or any other property
(including, without limitation, shares of capital stock, other securities or
evidences of indebtedness of a subsidiary of the Company), or any combination
thereof, which purchase is subject to Section 13(e) of the Securities
Exchange Act of 1934, as amended, or is made pursuant to an offer made
available to all holders of Common Stock.
"REPURCHASE PRICE" means, on any date, the Current Market Price per
share of Common Stock as of such date, less the per share Exercise Price;
PROVIDED, that if at the time of determination of the Repurchase Price, the
Warrantholder shall be entitled to receive any securities or property other
than Common Stock, the Repurchase Price shall include a cash amount per
Warrant Share equal to that portion of the fair value of such securities or
property allocable to each Warrant Share.
"SECURITIES ACT" has the meaning specified on the cover of this
Warrant.
"WARRANTHOLDER" has the meaning specified on the cover of this
Warrant.
"WARRANT SHARES" has the meaning specified on the cover of this
Warrant; provided, however, that Warrant Shares shall not include shares sold
to the
<PAGE>
15
public pursuant to Rule 144 under the Securities Act of 1933, as amended, or
pursuant to an effective registration statement under the Securities Act.
11. MISCELLANEOUS.
11.1 ENTIRE AGREEMENT. This Warrant constitutes the entire
agreement between the Company and the Warrantholder with respect to this
Warrant.
11.2 BINDING EFFECT; BENEFITS. This Warrant shall inure to the
benefit of and shall be binding upon the Company and the Warrantholder and
their respective successors and assigns. Nothing in this Warrant, expressed
or implied, is intended to or shall confer on any person other than the
Company and the Warrantholder, or their respective successors or assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Warrant.
11.3 SECTION AND OTHER HEADINGS. The section and other
headings contained in this Warrant are for reference purposes only and shall
not be deemed to be a part of this Warrant or to affect the meaning or
interpretation of this Warrant.
11.4 NOTICES. All notices and other communications required or
permitted hereunder shall be in writing and shall be delivered personally,
telecopied or sent by certified, registered or express mail, postage prepaid.
Any such notice shall be deemed given when so delivered personally,
telecopied or sent by certified, registered or express mail, as follows:
(a) if to the Company, addressed to:
Platinum Entertainment, Inc.
2001 Butterfield Road
Downers Grove, Illinois 60515
Telecopy: (630) 769-0049
Attention: Chief Executive Officer
with a copy to:
Katten, Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661
Telecopy: (312) 902-1061
Attention: Matthew S. Brown, Esq.
<PAGE>
16
(b) if to the Warrantholder, addressed to:
______________________________________
______________________________________
______________________________________
Telecopy:_____________________________
Any party may by notice given in accordance with this Section 11.4 designate
another address or person for receipt of notices hereunder.
11.5 SEVERABILITY. Any term or provision of this Warrant which
is invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the terms and
provisions of this Warrant or affecting the validity or enforceability of any
of the terms or provisions of this Warrant in any other jurisdiction.
11.6 GOVERNING LAW. This Warrant shall be deemed to be a
contract made under the laws of the State of Delaware and for all purposes
shall be governed by and construed in accordance with the laws of such State
applicable to such agreements made and to be performed entirely within such
State.
11.7 CERTAIN REMEDIES. The Warrantholder shall be entitled to
an injunction or injunctions to prevent breaches of the provisions of this
Warrant and to enforce specifically the terms and provisions of this Warrant
in any court of the United States or any court of any state having
jurisdiction, this being in addition to any other remedy to which the
Warrantholder may be entitled at law or in equity.
11.8 NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing
contained in this Warrant shall be deemed to confer upon the Warrantholder
any rights as a stockholder of the Company or as imposing any liabilities on
the Warrantholder to purchase any securities whether such liabilities are
asserted by the Company or by creditors or stockholders of the Company or
otherwise.
<PAGE>
17
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer.
PLATINUM ENTERTAINMENT, INC.
By:___________________________________
Name:
Title:
Dated: _________, 1997
<PAGE>
18
EXHIBIT A
EXERCISE FORM
(To be executed upon exercise of this Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant, to purchase __________ of the Warrant Shares and
[herewith tenders payment for such Warrant Shares to the order of Platinum
Entertainment, Inc. in the amount of $__________] [hereby exercises its
Conversion Right] in accordance with the terms of this Warrant. The undersigned
requests that a certificate for [such Warrant Shares] [that number of Warrant
Shares to which the undersigned is entitled as calculated pursuant to
Section 1.2] be registered in the name of the undersigned and that such
certificates be delivered to the undersigned's address below.
Dated:__________________________
Signature____________________________
____________________________
(Print Name)
____________________________
(Street Address)
____________________________
(City) (State) (Zip Code)
<PAGE>
EXHIBIT 2
NEITHER THIS WARRANT NOR ANY SECURITIES ACQUIRED UPON THE EXERCISE
OF THIS WARRANT (THE "SECURITIES") HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS
AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER SUCH ACT
AND SUCH LAWS AS EVIDENCED BY AN OPINION OF COUNSEL DELIVERED AND REASONABLY
ACCEPTABLE TO THE COMPANY.
______________________________________________
PLATINUM ENTERTAINMENT, INC.
COMMON STOCK PURCHASE WARRANT
_______________________________________________
This certifies that, for good and valuable consideration, Platinum
Entertainment, Inc., a Delaware corporation (the "Company"), grants to
Platinum Venture Partners II, L.P., its successors and permitted assigns (the
"Warrantholder"), the right to subscribe for and purchase from the Company
one hundred thirty-five thousand (135,000) validly issued, fully paid and
nonassessable shares (the "Warrant Shares") of the Company's Common Stock,
par value $.001 per share (the "Common Stock"), at the purchase price per
share equal to the Exercise Price, as defined herein, at any time prior to
5:00 p.m., New York City time, on October 31, 2007 (the "Expiration Date"),
subject to the terms, conditions and adjustments herein set forth.
This Warrant is being issued in connection with the issue and sale
by the Company of shares of its Series C Convertible Stock, par value $.001
per share (the "Series C Preferred Stock") pursuant to the closing condition
set forth in Section 3.1.21 of the Investment Agreement, dated as of October
12, 1997, among the Company, MAC Music LLC ("MAC") and SK-Palladin, LP
(together with MAC, the "Investors"), as amended and as hereafter amended
(the "Investment Agreement"). This Warrant is the Warrant referred to in
Section 3.1.21(b) of the Investment Agreement. References herein to the
"Warrants" shall mean each Warrant issued pursuant to the closing condition
set forth in Section 3.1.21(b) of the Investment Agreement, or upon transfer
or following partial exercise of any Warrant originally issued pursuant to
the closing condition set forth in Section 3.1.21(b) of the Investment
Agreement. Notwithstanding the foregoing, in accordance with Section 3.1.21
of the Investment Agreement, the Warrants are not governed by the Investment
Agreement and the holders of the Warrants do not have any of the rights and
privileges granted to the Investors pursuant to the Investment Agreement in
<PAGE>
2
connection with the issuance of warrants to the Investors thereunder (the
"Investor Warrants").
The "Exercise Price" shall mean (x) prior to the expiration of the
Thirty Day Period (as defined below), $6.25 per share of Common Stock, as
adjusted hereunder (the "Initial Exercise Price"), or (y) after the
expiration of the Thirty Day Period, the lesser of (1) the Initial Exercise
Price, as adjusted hereunder, and (2) 82.5% of the average of the daily
Closing Price per share of Common Stock for the 30 consecutive trading days
following the public release by the Company of its consolidated earnings
statement for the fiscal year ending May 31, 1998 (the "Thirty Day Period"),
subject to appropriate adjustment for the events described in Section 6.1(a)
herein if any such event occurs during the Thirty Day Period; provided that
if shares of Common Stock are not then traded on any national securities
exchange or quoted by NASDAQ or a similar service, the Closing Price for the
foregoing purposes shall be deemed to be the fair market value of a share of
Common Stock as shall be determined in good faith by the Board of Directors
of the Company. If the holders of a majority in interest of the Warrant
Shares issuable upon the exercise of the Investor Warrants disagree with the
Board's determination of fair market value for the purposes of the Investor
Warrants, the fair market value for the purposes of the Warrant shall be the
fair market value determined for the purposes of the Investor Warrants.
Notwithstanding the foregoing, if at any time prior to the expiration of the
Thirty Day Period, no shares of the Series B Preferred Stock remain
outstanding, the definition of "Exercise Price" shall mean the Initial
Exercise Price, as adjusted hereunder. The Exericise Price as determined in
accordance with the foregoing shall be adjusted from time to time in
accordance with the provisions of Section 6.
1. EXERCISE OF WARRANTS.
1.1 EXERCISE OF WARRANT. This Warrant may be exercised, in
whole or in part, at any time or from time to time prior to the Expiration
Date, by surrendering to the Company at its principal office this Warrant,
with an Exercise Form (as defined herein) duly executed by the Warrantholder
and accompanied by payment of the Exercise Price for the number of shares of
Common Stock specified in such Exercise Form.
1.2 CASHLESS EXERCISE. In lieu of the payment of the Exercise
Price, the Warrantholder shall have the right (but not the obligation) to
require the Company to convert this Warrant, in whole or in part, into shares
of Common Stock (the "Conversion Right") as provided for in this Section 1.2.
Upon exercise of the Conversion Right, the Company shall deliver to the
Warrantholder (without payment by the Warrantholder of any of the Exercise
Price) that number of shares of Common Stock equal to the quotient obtained
by dividing (x) the value of the Warrant or portion thereof being exercised
at the time the Conversion Right is exercised (determined by subtracting the
aggregate Exercise Price in effect
<PAGE>
3
immediately prior to the exercise of the Conversion Right for the number of
shares for which the Warrant is being exercised from the aggregate Current
Market Price (as defined herein) of the shares of Common Stock issuable upon
exercise of the Warrant for the number of shares for which the Warrant is
being exercised immediately prior to the exercise of the Conversion Right) by
(y) the Current Market Price of one share of Common Stock immediately prior
to the exercise of the Conversion Right. The Conversion Right may be
exercised at any time or from time to time prior to the Expiration Date by
surrendering to the Company at its principal office this Warrant, with an
Exercise Form duly executed by the Warrantholder and indicating that the
Warrantholder wishes to exercise the Conversion Right and specifying the
total number of shares of Common Stock for which the Warrant is being
exercised.
1.3 DELIVERY OF WARRANT SHARES; EFFECTIVENESS OF EXERCISE.
(a) DELIVERY OF WARRANT SHARES. A stock certificate or
certificates for the Warrant Shares specified in the Exercise Form along with
a check for the amount of cash to be paid in lieu of fractional shares, if
any, shall be delivered to the Warrantholder within 10 Business Days after
the Exercise Date (as defined herein); PROVIDED, HOWEVER, that if the
Conversion Right is exercised in accordance with Section 1.2 and a
determination by the Board of Directors is required to determine the Current
Market Price of the Common Stock, such delivery shall be made promptly after
such determination is made. If this Warrant shall have been exercised only
in part, the Company shall, at the time of delivery of the stock certificate
or certificates and cash in lieu of fractional shares, if any, deliver to the
Warrantholder a new Warrant evidencing the rights to purchase the remaining
Warrant Shares, which new Warrant shall in all other respects be identical
with this Warrant.
(b) EFFECTIVENESS OF EXERCISE. The exercise of this
Warrant shall be deemed to have been effective immediately prior to the close
of business on the Business Day on which this Warrant is exercised in
accordance with Section 1.1 or 1.2 (the "Exercise Date"). The Person in
whose name any certificate for shares of Common Stock shall be issuable upon
such exercise shall be deemed to be the record holder of such shares of
Common Stock for all purposes on the Exercise Date.
1.4 PAYMENT OF TAXES. The issuance of certificates for
Warrant Shares shall be made without charge to the Warrantholder for any
stock transfer or other issuance tax in respect thereof; PROVIDED, HOWEVER,
that the Warrantholder shall be required to pay any and all taxes that may be
payable in respect of any transfer involved in the issuance and delivery of
any certificate in a name other than that of the then Warrantholder as
reflected upon the books of the Company.
<PAGE>
4
2. RESTRICTIVE LEGENDS.
2.1 WARRANTS. Except as otherwise permitted by this Section
2, each Warrant (and each Warrant issued in substitution for any Warrant
pursuant to Section 4) shall be stamped or otherwise imprinted with a legend
in substantially the following form:
NEITHER THIS WARRANT NOR ANY SECURITIES ACQUIRED UPON THE EXERCISE OF
THIS WARRANT (THE "SECURITIES") HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED,
SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER
SUCH ACT AND SUCH LAWS AS EVIDENCED BY AN OPINION OF COUNSEL DELIVERED AND
REASONABLY ACCEPTABLE TO THE COMPANY.
2.2 WARRANT SHARES. Except as otherwise permitted by this
Section 2, each stock certificate for Warrant Shares issued upon the exercise
of any Warrant and each stock certificate issued upon the direct or indirect
transfer of any such Warrant Shares shall be stamped or otherwise imprinted
with a legend in substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT AND SUCH LAWS AS EVIDENCED BY AN OPINION OF COUNSEL
DELIVERED AND REASONABLY ACCEPTABLE TO THE COMPANY.
2.3 REMOVAL OF LEGENDS. Notwithstanding the foregoing, the
Warrantholder may require the Company to issue a Warrant or a stock
certificate for Warrant Shares, in each case without a legend, if either (i)
such Warrant or such Warrant Shares, as the case may be, have been registered
for resale under the Securities Act and sold pursuant to such registration or
(ii) if reasonably requested by the Company, the Warrantholder has delivered
to the Company an opinion of legal counsel (from a firm reasonably
satisfactory to the Company) which opinion shall be
<PAGE>
5
addressed to the Company and be reasonably satisfactory in form and substance
to the Company's counsel, to the effect that such registration is not
required with respect to such Warrant or such Warrant Shares, as the case may
be.
3. RESERVATION AND REGISTRATION OF SHARES, ETC.
The Company covenants and agrees as follows:
(a) All Warrant Shares that are issued upon the exercise
of this Warrant will, upon issuance, be validly issued, fully paid and
nonassessable, not subject to any preemptive rights, and free from all taxes,
liens, security interests, charges, and other encumbrances with respect to
the issuance thereof, other than taxes in respect of any transfer occurring
contemporaneously with such issue.
(b) During the period within which this Warrant may be
exercised, the Company will at all times have authorized and reserved, and
keep available free from preemptive rights, a sufficient number of shares of
Common Stock to provide for the exercise of the rights represented by this
Warrant.
4. LOSS OR DESTRUCTION OF WARRANT.
Subject to the terms and conditions hereof, upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant and, in the case of loss, theft or
destruction, of such bond or indemnification as the Company may reasonably
require, and, in the case of mutilation, upon surrender and cancellation of
this Warrant, the Company will execute and deliver a new Warrant of like
tenor.
5. OWNERSHIP OF WARRANT.
The Company may deem and treat the Person in whose name this Warrant
is registered as the holder and owner hereof (notwithstanding any notations
of ownership or writing hereon made by anyone other than the Company) for all
purposes and shall not be affected by any notice to the contrary, until
presentation of this Warrant for registration of transfer.
6. CERTAIN ADJUSTMENTS.
6.1 The number of Warrant Shares purchasable upon the exercise
of this Warrant and the Exercise Price shall be subject to adjustment as
follows:
<PAGE>
6
(a) STOCK DIVIDENDS, SUBDIVISION, COMBINATION OR
RECLASSIFICATION OF COMMON STOCK. If at any time after the date of the
issuance of this Warrant the Company shall (i) declare a stock dividend on
the Common Stock payable in shares of its capital stock (including Common
Stock), (ii) increase the number of shares of Common Stock outstanding by a
subdivision or split-up of shares of Common Stock, (iii) decrease the number
of shares of Common Stock outstanding by a combination of shares of Common
Stock or (iv) issue any shares of its capital stock in a reclassification of
the Common Stock, then, on the record date for such dividend or the effective
date of such subdivision or split-up, combination or reclassification, as the
case may be, the number and kind of shares to be delivered upon exercise of
this Warrant will be adjusted so that the Warrantholder will be entitled to
receive the number and kind of shares of capital stock that such
Warrantholder would have owned or been entitled to receive upon or by reason
of such event had this Warrant been exercised immediately prior thereto, and
the Exercise Price will be adjusted as provided below in paragraph (h).
(b) REORGANIZATION, ETC. If at any time after the date
of issuance of this Warrant any consolidation of the Company with or merger
of the Company with or into any other Person (other than a merger or
consolidation in which the Company is the surviving or continuing corporation
and which does not result in any reclassification of, or change (other than a
change in par value or from par value to no par value or from no par value to
par value, or as a result of a subdivision or combination) in, outstanding
shares of Common Stock) or any sale, lease or other transfer of all or
substantially all of the assets of the Company to any other person (each, a
"Reorganization Event"), shall be effected in such a way that the holders of
Common Stock shall be entitled to receive cash, stock, other securities or
assets (whether such cash, stock, other securities or assets are issued or
distributed by the Company or another Person) with respect to or in exchange
for Common Stock, then, upon exercise of this Warrant the Warrantholder shall
have the right to receive the kind and amount of cash, stock, other
securities or assets receivable upon such Reorganization Event by a holder of
the number of shares of Common Stock that such Warrantholder would have been
entitled to receive upon exercise of this Warrant had this Warrant been
exercised immediately before such Reorganization Event, subject to
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 6.1. Notwithstanding the foregoing,
if more than 20% in aggregate value of the cash, stock, other securities or
assets deliverable to such holder in accordance with the foregoing provisions
of this Section 6(b) would consist of cash or debt securities, then the
Warrantholder shall have the right (the "Special Reorganization Right") at
its election, exercisable by giving written notice to the Company prior to
120 days following the consummation of such Reorganization Event to receive
from the Company, and the Company shall pay to the Warrantholder promptly
after the exercise by the Warrantholder of the Special Reorganization Right,
instead of the cash, stock, other securities or assets otherwise deliverable
to such holder, an amount of cash equal to the fair market value of this
Warrant immediately prior to the announcement of such Reorganization Event,
to be determined by an
<PAGE>
7
Independent Financial Expert giving due consideration to such factors as the
financial condition and prospects of the Company, the remaining unexpired
term of the Warrant and the market price of the Common Stock of the Company
after announcement of such Reorganization Event. The Company shall not enter
into any of the transactions referred to in this Section 6.1(b) unless
effective provision shall be made so as to give effect to the provisions set
forth in this Section 6.1(b).
(c) CERTAIN ISSUANCES OF COMMON STOCK. If at any time
after the date of issuance of this Warrant the Company shall issue or sell,
or fix a record date for the issuance of, (A) Common Stock (or securities
convertible into or exchangeable or exercisable for Common Stock) (other than
Excluded Securities) or (B) rights, options or warrants entitling the holders
thereof to subscribe for or purchase Common Stock (or securities convertible
into or exchangeable or exercisable for Common Stock) (other than Excluded
Securities), in any such case, at a price per share (treating the price per
share of the securities convertible into or exchangeable or exercisable for
Common Stock as equal to (x) the sum of (i) the price for a unit of the
security convertible into or exchangeable or exercisable for Common Stock
plus (ii) any additional consideration initially payable upon the conversion
of such security into Common Stock or the exchange or exercise of such
security for Common Stock divided by (y) the number of shares of Common Stock
initially underlying such convertible, exchangeable or exercisable security)
that is less than the greater of the Current Market Price of the Common Stock
and the Exercise Price on the date of such issuance or such record date (the
"Measuring Price") then, immediately after the date of such issuance or sale
or on such record date, the number of shares of Common Stock to be delivered
upon exercise of this Warrant shall be increased so that the Warrantholder
thereafter shall be entitled to receive the number of shares of Common Stock
determined by multiplying the number of shares of Common Stock such
Warrantholder would have been entitled to receive immediately before the date
of such issuance or sale or such record date by a fraction, the denominator
of which shall be the number of shares of Common Stock outstanding
(calculated to include the shares of Common Stock underlying the Warrants,
shares of Common Stock underlying the Investor Warrants, shares of Common
Stock underlying the Harnick Warrant and all then currently exerciseable,
convertible and exchangeable securities that are "in the money") on such date
plus the number of shares of Common Stock that the aggregate offering price
of the total number of shares so offered for subscription or purchase (or the
aggregate purchase price of the convertible, exchangeable or exerciseable
securities so offered plus the aggregate of amount of any additional
consideration initially payable upon conversion into Common Stock or exchange
or exercise for Common Stock) would purchase at the Measuring Price and the
numerator of which shall be the number of shares of Common Stock outstanding
(calculated to include the shares of Common Stock underlying the Warrants,
shares of Common Stock underlying the Investor Warrants, shares of Common
Stock underlying the Harnick Warrant and all then currently exerciseable,
convertible and exchangeable securities that are "in the money") on such date
plus the number of additional shares of Common Stock offered for subscription
or purchase (or into or for which the convertible or exchangeable
<PAGE>
8
securities or rights, options or warrants so offered are initially
convertible or exchangeable or exercisable, as the case may be), and the
Exercise Price shall be adjusted as provided below in paragraph (i).
"Excluded Securities" means (A) shares of Common Stock issued upon conversion
or exercise of convertible securities, warrants and options of the Company,
outstanding on the date this Warrant is originally issued, (B) shares of
Common Stock, and options to purchase such shares, issued to officers,
directors, employees or former employees of, or consultants to, the Company
or any of its subsidiaries pursuant to any equity incentive plan, agreement
or other arrangement which has been approved by a vote of at least two-thirds
(2/3) of the Board of Directors of the Company, (C) shares of Common Stock
issued upon conversion of shares of the Company's Series B Convertible
Preferred Stock, par value $.001 per share (the "Series B Preferred Stock"),
(D) shares of Common Stock issued upon exercise of the Investor Warrants,
including any increase in the number of shares of Common Stock issuable under
such Investor Warrants as a result of the conditional annual increase
provision included therein, (E) shares of Common Stock issued upon conversion
of shares of the Company's Series C Convertible Preferred Stock, par value
$.001 per share, (F) shares of Common Stock issued upon exercise of the
Harnick Warrant and (G) shares of Common Stock issued upon exercise of any
Warrant.
(d) EXTRAORDINARY DISTRIBUTIONS. If at any time after
the date of issuance of this Warrant the Company shall distribute to all
holders of its Common Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the
continuing or surviving corporation and the Common Stock is not changed or
exchanged) cash, evidences of indebtedness, securities or other assets
(excluding (i) ordinary course cash dividends to the extent such dividends do
not exceed the Company's retained earnings and (ii) dividends payable in
shares of capital stock for which adjustment is made under Section 6.1(a)) or
rights, options or warrants to subscribe for or purchase securities of the
Company (excluding those for which adjustment is made under Section 6.1(c)),
then the number of shares of Common Stock to be delivered to such
Warrantholder upon exercise of this Warrant shall be increased so that the
Warrantholder thereafter shall be entitled to receive the number of shares of
Common Stock determined by multiplying the number of shares such
Warrantholder would have been entitled to receive immediately before such
record date by a fraction, the denominator of which shall be the Current
Market Price per share of Common Stock on such record date minus the then
fair market value (as reasonably determined by the Board of Directors of the
Company in good faith) of the portion of the cash, evidences of indebtedness,
securities or other assets so distributed or of such rights or warrants
applicable to one share of Common Stock (provided that such denominator shall
in no event be less than $.01) and the numerator of which shall be the
Current Market Price per share of the Common Stock, and the Exercise Price
shall be adjusted as provided below in paragraph (h).
(e) PRO RATA REPURCHASES. If at any time after the date of
issuance of this Warrant, the Company or any subsidiary thereof shall make a Pro
<PAGE>
9
Rata Repurchase, then the number of shares of Common Stock to be delivered to
such Warrantholder upon exercise of this Warrant shall be increased so that the
Warrantholder thereafter shall be entitled to receive the number of shares of
Common Stock determined by multiplying the number of shares of Common Stock such
Warrantholder would have been entitled to receive immediately before such Pro
Rata Repurchase by a fraction (which in no event shall be less than one) the
denominator of which shall be (i) the product of (x) the number of shares of
Common Stock outstanding immediately before such Pro Rata Repurchase and (y) the
Current Market Price of the Common Stock as of the day immediately preceding the
first public announcement by the Company of the intent to effect such Pro Rata
Repurchase minus (ii) the aggregate purchase price of the Pro Rata Repurchase
(provided that such denominator shall never be less than $.01), and the
numerator of which shall be the product of (i) the number of shares of Common
Stock outstanding immediately before such Pro Rata Repurchase minus the number
of shares of Common Stock repurchased in such Pro Rata Repurchase and (ii) the
Current Market Price of the Common Stock as of the day immediately preceding the
first public announcement by the Company of the intent to effect such Pro Rata
Repurchase.
(f) FRACTIONAL SHARES. No fractional shares of Common
Stock or scrip shall be issued to any Warrantholder in connection with the
exercise of this Warrant. Instead of any fractional shares of Common Stock
that would otherwise be issuable to such Warrantholder, the Company will pay
to such Warrantholder a cash adjustment in respect of such fractional
interest in an amount equal to that fractional interest of the then Current
Market Price per share of Common Stock.
(g) CARRYOVER. Notwithstanding any other provision of
this Section 6.1, no adjustment shall be made to the number of shares of
Common Stock to be delivered to the Warrantholder (or to the Exercise Price)
if such adjustment represents less than .05% of the number of shares to be so
delivered, but any lesser adjustment shall be carried forward and shall be
made at the time and together with the next subsequent adjustment that
together with any adjustments so carried forward shall amount to .05% or more
of the number of shares to be so delivered.
(h) EXERCISE PRICE ADJUSTMENT. Whenever the number of
Warrant Shares purchasable upon the exercise of the Warrant is adjusted as
provided pursuant to this Section 6.1, the Exercise Price per share payable
upon the exercise of this Warrant shall be adjusted by multiplying such
Exercise Price immediately prior to such adjustment by a fraction, of which
the numerator shall be the number of Warrant Shares purchasable upon the
exercise of the Warrant immediately prior to such adjustment, and of which
the denominator shall be the number of Warrant Shares purchasable immediately
thereafter; PROVIDED, HOWEVER, that the Exercise Price for each Warrant Share
shall in no event be less than the par value of such Warrant Share.
<PAGE>
10
(i) MULTIPLE ADJUSTMENTS. If any action or transaction
would require adjustment of the number of shares of Common Stock to be
delivered to the Warrantholder upon exercise of this Warrant pursuant to more
than one paragraph of this Section 6.1, only one adjustment shall be made and
each such adjustment shall be the amount of adjustment that has the highest
absolute value.
6.2 NOTICE OF ADJUSTMENT. Whenever the number of Warrant
Shares or the Exercise Price of such Warrant Shares is adjusted, as herein
provided, the Company shall promptly mail by first class mail, postage
prepaid, to the Warrantholder, notice of such adjustment or adjustments and a
certificate of a firm of independent public accountants of recognized
national standing selected by the Board of Directors of the Company (who
shall be appointed at the Company's expense and who may be the independent
public accountants regularly employed by the Company) setting forth the
number of Warrant Shares and the Exercise Price of such Warrant Shares after
such adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was
made.
7. PUT RIGHTS. The Warrantholder shall have the following Put
Rights:
(a) At the earlier of (i) the fifth anniversary of the
date hereof and (ii) a Change of Control, the Warrantholder may notify the
Company in writing (the "PUT NOTICE") of the Warrantholder's desire to cause
the Company to repurchase, in the case of clause (i) above, all (but not less
than all) of the Warrant Shares (issued or represented by the Warrant) at a
price per share equal to the Repurchase Price (the "Five-Year Put"), or, in
the case of clause (ii) above, the Warrant at the Change of Control
Repurchase Price (the "Change of Control Put").
(b) If the Company receives a Put Notice pursuant to
Section 7(a), it shall deliver to the Warrantholder, by first class mail,
postage prepaid, mailed as soon as practicable and if possible within thirty
(30) days of the receipt by the Company of the Put Notice, a notice stating:
(i) the date as of which such repurchase shall occur (which date (the "Put
Closing") shall be not less than ten (10) nor more than thirty (30) days
following the date of such notice, but in any event prior to the Expiration
Date); (ii) in the case of a Five-Year Put, the number of Warrant Shares
(issued or represented by this Warrant) to be purchased from the
Warrantholder and the Repurchase Price (which shall be calculated as of the
date of the Put Notice) or, in the case of a Change of Control Put, the
Change of Control Repurchase Price; and (iii) the place or places where
certificate or certificates representing this Warrant or Warrant Shares are
to be surrendered for payment; PROVIDED, HOWEVER, that the Company shall have
no obligation to send the notice set forth above or to repurchase the
Warrants and Warrant Shares following the exercise of the Five Year Put (and
the provisions of paragraph (c) below shall not be applicable to any failure
by the Company to repurchase the Warrants and the Warrant Shares following
the exercise of the Five Year Put), unless the holders of not less than a
majority of the shares of
<PAGE>
11
Common Stock issued or issuable upon exercise of the Investor Warrants (the
"Investor Warrant Shares") shall also have exercised the "five year put"
provided for in the Investor Warrants.
(c) With respect to Warrants and Warrant Shares properly
tendered for repurchase, if the Company fails to pay the Repurchase Price or
the Change of Control Repurchase Price on the date fixed for repurchase, the
Corporation shall also pay interest thereon at the rate of 12% per annum,
compounded on a quarterly basis, until such time as such satisfaction shall
have occurred.
(d) At the Put Closing, the Warrantholder shall deliver
to the Company the certificate or certificates representing the
Warrantholder's Warrant or Warrant Shares and the Company shall deliver to
the Warrantholder an amount equal to, in the case of a Five-Year Put, the
product obtained by multiplying (i) the number of such Warrant Shares (issued
or represented by this Warrant) by (ii) the Repurchase Price or, in the case
of a Change of Control Put, the Change of Control Repurchase Price, by
cashier's or certified check payable to the Warrantholder or by wire transfer
of immediately available funds to an account designated by the Warrantholder.
(e) The Company shall not (and shall not permit any
Affiliate of the Company to) enter into any contract or other consensual
arrangement that by its terms restricts the Company's ability to honor the
Put.
8. AMENDMENTS. Any provision of this Warrant may be amended and
the observance thereof waived only with the written consent of the Company
and the Warrantholder.
9. NOTICES OF CORPORATE ACTION. So long as this Warrant has not
been exercised in full, in the event of:
(a) any consolidation or merger involving the Company and
any other party or any transfer of all or substantially all the assets of the
Company to any other party, or
(b) any voluntary or involuntary dissolution, liquidation
or winding-up of the Company,
the Company will mail, by first class mail, postage prepaid, to the
Warrantholder a notice specifying (i) the date or expected date on which any
such record is to be taken for the purpose of a dividend, distribution or
right and the amount and character of any such dividend, distribution or
right and (ii) the date or expected date on which a reorganization,
reclassification, recapitalization, consolidation, merger, transfer,
dissolution, liquidation or winding-up is to take place and the time, if any
such time is to be fixed, as of which the holders of record of Common Stock
(or other securities) shall be
<PAGE>
12
entitled to exchange their shares of Common Stock (or other securities) for
the securities or other property deliverable upon such reorganization,
reclassification, recapitalization, consolidation, merger, transfer,
dissolution, liquidation or winding-up. Such notice shall be delivered as
soon as practicable and if possible at least 20 days prior to the date
therein specified in the case of any date referred to in the foregoing
subdivisions (i) and (ii). Failure to give the notice specified hereunder
shall have no effect on the status or effectiveness of the action to which
the required notice relates.
10. DEFINITIONS.
As used herein, unless the context otherwise requires, the following
terms have the following meanings:
"AFFILIATE" means, with respect to any Person, any other Person
that, directly or indirectly, controls, is controlled by, or is under common
control with such first Person. For the purpose of this definition,
"control" shall mean, as to any Person, the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"BUSINESS DAY" means any day other than a Saturday, Sunday or a day
on which national banks are authorized by law or executive order to close in
the State of New York.
"CHANGE OF CONTROL" shall mean (i) the direct or indirect sale,
lease, exchange or other transfer of all or substantially all of the assets
of the Company to any Person or entity or group of Persons or entities acting
in concert as a partnership or other group within the meaning of Rule 13d-5
under the Exchange Act (a "GROUP OF PERSONS"), (ii) the merger or
consolidation of the Company with or into another corporation with the effect
that the then existing stockholders of the Company hold less than 50% of the
combined voting power of the then outstanding securities of the surviving
corporation of such merger or the corporation resulting from such
consolidation ordinarily (and apart from rights accruing under special
circumstances) having the right to vote in the election of directors, (iii)
the replacement of a majority of the Board of Directors of the Company, over
a two-year period, from the directors who constituted the Board of Directors
at the beginning of such period, and such replacement shall not have been
approved by the Board of Directors of the Company (or its replacements
approved by the Board of Directors of the Company) as constituted at the
beginning of such period, (iv) a Person or Group of Persons (other than the
Investors and their Affiliates, employees, partners or members) shall, as a
result of a tender or exchange offer, open market purchases, privately
negotiated purchases or otherwise, have become the beneficial owner (within
the meaning of Rule 13d-3 under the Exchange Act) of securities of the
Company representing 49% or more of the combined voting power of the then
outstanding securities of the Company ordinarily (and apart from rights
accruing under special circumstances) having the right to vote in the
election of directors. Notwithstanding the foregoing, no Change of Control
shall be
<PAGE>
13
deemed to have occurred (a) upon the acquisition of any shares of Common
Stock of the Company pursuant to the exercise of the Investor Warrants, (b)
upon the exercise of any of the rights and privileges granted to each of the
Investors pursuant to Section 6.2.5 of the Investment Agreement, (c) upon the
exercise of any rights and privileges granted to the holders of the Series B
Preferred Stock pursuant to the Certificate of the Powers, Designations,
Preferences and Rights of the Series B Preferred Stock or (d) otherwise as a
result of the equity ownership or designation of directors by the Investors
or their Affiliates, employees, partners or members.
"CHANGE OF CONTROL REPURCHASE PRICE" means (i) if any Investor
Warrants are then outstanding, an amount in cash, on a per Warrant Share
basis, equal to the "Change of Control Repurchase Price" (on a per Investor
Warrant Share basis) for the Investor Warrants, or (ii) if no Investor
Warrants are then outstanding, an amount of cash equal to the fair market
value of this Warrant immediately prior to the announcement of a Change of
Control, to be determined by an Independent Financial Expert selected by the
Company and a majority in interest of the Warrant Shares, giving due
consideration to such factors as the financial condition and prospects of the
Company, the remaining unexpired term of this Warrant and the market price of
the Common Stock of the Company after announcement of such Change of Control.
"CLOSING PRICE" of the Common Stock as of any day, means (a) the
last reported sale price of such stock (regular way) or, in case no such sale
takes place on such day, the average of the closing bid and asked prices, in
either case as reported on the principal national securities exchange on
which the Common Stock is listed or admitted to trading or (b) if the Common
Stock is not listed or admitted to trading on any national securities
exchange, the last reported sale price or, in case no such sale takes place
on such day, the average of the highest reported bid and lowest reported
asked quotation for the Common Stock, in either case reported on the National
Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ"), or a similar service if NASDAQ is no longer reporting such
information.
"COMMON STOCK" has the meaning specified on the cover of this
Warrant.
"COMPANY" has the meaning specified on the cover of this Warrant.
"CURRENT MARKET PRICE" means, with respect to each share of Common
Stock as of any date, the average of the daily Closing Prices per share of
Common Stock for the 10 consecutive trading days commencing 15 trading days
prior to such date; provided that if on any such date the shares of Common
Stock are not listed or admitted for trading on any national securities
exchange or quoted by NASDAQ or a similar service, the Current Market Price
for a share of Common Stock shall be the fair market value of such share as
determined in good faith by the Board of Directors of the Company; provided
that if the holders of a majority in interest of the Investor Warrant Shares
disagree with the Board of Director's determination of fair market value for
purposes of the Investor Warrants, the fair market
<PAGE>
14
value for purposes of this Warrant shall be the same as the fair market value
determined for purposes of the Investor Warrants.
"EXERCISE FORM" means an Exercise Form in the form annexed hereto as
Exhibit A.
"EXPIRATION DATE" has the meaning specified on the cover of this
Warrant.
"HARNICK WARRANT" means the warrant to purchase 50,000 shares of
Common Stock to be issued to Carl D. Harnick at the closing of the Investment
Agreement.
"INDEPENDENT FINANCIAL EXPERT" means an independent nationally
recognized investment banking firm.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, limited liability company,
unincorporated organization, estate, other entity or government or any agency
or political subdivision thereof.
"PRO RATA REPURCHASE" means any purchase of shares of Common Stock
by the Company or by any of its subsidiaries whether for cash, shares of
capital stock of the Company, other securities of the Company, evidences of
indebtedness of the Company or any other Person or any other property
(including, without limitation, shares of capital stock, other securities or
evidences of indebtedness of a subsidiary of the Company), or any combination
thereof, which purchase is subject to Section 13(e) of the Securities
Exchange Act of 1934, as amended, or is made pursuant to an offer made
available to all holders of Common Stock.
"REPURCHASE PRICE" means, on any date, the Current Market Price per
share of Common Stock as of such date, less the per share Exercise Price;
PROVIDED, that if at the time of determination of the Repurchase Price, the
Warrantholder shall be entitled to receive any securities or property other
than Common Stock, the Repurchase Price shall include a cash amount per
Warrant Share equal to that portion of the fair value of such securities or
property allocable to each Warrant Share.
"SECURITIES ACT" has the meaning specified on the cover of this
Warrant.
"WARRANTHOLDER" has the meaning specified on the cover of this
Warrant.
"WARRANT SHARES" has the meaning specified on the cover of this
Warrant; provided, however, that Warrant Shares shall not include shares sold
to the
<PAGE>
15
public pursuant to Rule 144 under the Securities Act of 1933, as amended, or
pursuant to an effective registration statement under the Securities Act.
11. MISCELLANEOUS.
11.1 ENTIRE AGREEMENT. This Warrant constitutes the entire
agreement between the Company and the Warrantholder with respect to this
Warrant.
11.2 BINDING EFFECT; BENEFITS. This Warrant shall inure to the
benefit of and shall be binding upon the Company and the Warrantholder and
their respective successors and assigns. Nothing in this Warrant, expressed
or implied, is intended to or shall confer on any person other than the
Company and the Warrantholder, or their respective successors or assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Warrant.
11.3 SECTION AND OTHER HEADINGS. The section and other
headings contained in this Warrant are for reference purposes only and shall
not be deemed to be a part of this Warrant or to affect the meaning or
interpretation of this Warrant.
11.4 NOTICES. All notices and other communications required or
permitted hereunder shall be in writing and shall be delivered personally,
telecopied or sent by certified, registered or express mail, postage prepaid.
Any such notice shall be deemed given when so delivered personally,
telecopied or sent by certified, registered or express mail, as follows:
(a) if to the Company, addressed to:
Platinum Entertainment, Inc.
2001 Butterfield Road
Downers Grove, Illinois 60515
Telecopy: (630) 769-0049
Attention: Chief Executive Officer
with a copy to:
Katten, Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661
Telecopy: (312) 902-1061
Attention: Matthew S. Brown, Esq.
<PAGE>
16
(b) if to the Warrantholder, addressed to:
______________________________________
______________________________________
______________________________________
Telecopy:_____________________________
Any party may by notice given in accordance with this Section 11.4 designate
another address or person for receipt of notices hereunder.
11.5 SEVERABILITY. Any term or provision of this Warrant which
is invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the terms and
provisions of this Warrant or affecting the validity or enforceability of any
of the terms or provisions of this Warrant in any other jurisdiction.
11.6 GOVERNING LAW. This Warrant shall be deemed to be a
contract made under the laws of the State of Delaware and for all purposes
shall be governed by and construed in accordance with the laws of such State
applicable to such agreements made and to be performed entirely within such
State.
11.7 CERTAIN REMEDIES. The Warrantholder shall be entitled to
an injunction or injunctions to prevent breaches of the provisions of this
Warrant and to enforce specifically the terms and provisions of this Warrant
in any court of the United States or any court of any state having
jurisdiction, this being in addition to any other remedy to which the
Warrantholder may be entitled at law or in equity.
11.8 NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing
contained in this Warrant shall be deemed to confer upon the Warrantholder
any rights as a stockholder of the Company or as imposing any liabilities on
the Warrantholder to purchase any securities whether such liabilities are
asserted by the Company or by creditors or stockholders of the Company or
otherwise.
<PAGE>
17
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer.
PLATINUM ENTERTAINMENT, INC.
By:___________________________________
Name:
Title:
Dated: _________, 1997
<PAGE>
18
EXHIBIT A
EXERCISE FORM
(To be executed upon exercise of this Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant, to purchase __________ of the Warrant Shares and
[herewith tenders payment for such Warrant Shares to the order of Platinum
Entertainment, Inc. in the amount of $__________] [hereby exercises its
Conversion Right] in accordance with the terms of this Warrant. The undersigned
requests that a certificate for [such Warrant Shares] [that number of Warrant
Shares to which the undersigned is entitled as calculated pursuant to
Section 1.2] be registered in the name of the undersigned and that such
certificates be delivered to the undersigned's address below.
Dated:__________________________
Signature____________________________
____________________________
(Print Name)
____________________________
(Street Address)
____________________________
(City) (State) (Zip Code)
<PAGE>
EXHIBIT 3
PLATINUM ENTERTAINMENT, INC.
CERTIFICATE OF THE POWERS, DESIGNATIONS,
PREFERENCES AND RIGHTS OF THE
SERIES C CONVERTIBLE PREFERRED STOCK,
PAR VALUE $.001 PER SHARE
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
The following resolution was duly adopted by the Board of Directors
of Platinum Entertainment Inc., a Delaware corporation (the "Corporation"),
pursuant to the provisions of Section 151 of the General Corporation Law of
the State of Delaware, on December 12, 1997, by the unanimous written consent
of the Board of Directors:
RESOLVED that, pursuant to the authority expressly granted to the
Board of Directors of the Corporation by the Certificate of Incorporation of
the Corporation, and pursuant to Section 151(g) of the General Corporation
Law of the State of Delaware, there be created from the 46,515,152 shares of
Preferred Stock, par value $.001 per share (the "Preferred Stock"), of the
Corporation authorized to be issued pursuant to the Certificate of
Incorporation, a series of Preferred Stock consisting of 2,500 shares of
Series C Convertible Preferred Stock (the "Series C Preferred Stock"), the
voting powers, designations, preferences and relative, participating,
optional or other special rights of which, and qualifications, limitations or
restrictions thereof, shall be as follows:
1. DEFINITIONS. As used herein, the following terms shall have
the following meanings:
1.1 "Affiliate" shall mean, with respect to any Person, any
other Person that, directly or indirectly, controls, is controlled by, or is
under common control with, such first Person. For the purpose of this
definition, "control" shall mean, as to any Person, the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
<PAGE>
1.2 "Affiliate Warrants" shall mean the warrant for an
aggregate of 135,000 shares of Common Stock to be issued to Platinum venture
Partners I, L.P., and the warrant for an aggregate of 315,000 shares of
Common Stock to be issued to Platinum Venture Partners II, L.P., each such
warrant to be issued on the Closing Date (as defined in the Investment
Agreement).
1.3 "Board of Directors" shall mean the Board of Directors of
the Corporation or, with respect to any action to be taken by the Board of
Directors, any committee of the Board of Directors duly authorized to take
such action.
1.4 "Business Day" shall mean any day other than a Saturday,
Sunday or other day on which commercial banks in the City of New York are
authorized or required by law or executive order to close.
1.5 "Certificate of Incorporation" shall mean the Certificate
of Incorporation of the Corporation, as amended from time to time.
1.6 "Change of Control" shall mean (i) the direct or indirect
sale, lease, exchange or other transfer of all or substantially all of the
assets of the Corporation to any Person or group of Persons acting in concert
as a partnership or other group within the meaning of Rule 13d-5 under the
Exchange Act (a "GROUP OF PERSONS"), (ii) the merger or consolidation of the
Corporation with or into another corporation with the effect that the then
existing stockholders of the Corporation hold less than 50% of the combined
voting power of the then outstanding securities of the surviving corporation
of such merger or the corporation resulting from such consolidation
ordinarily (and apart from rights accruing under special circumstances)
having the right to vote in the election of directors, (iii) the replacement
of a majority of the Board of Directors, over a two-year period, from the
directors who constituted the Board of Directors at the beginning of such
period, and such replacement shall not have been approved by the Board of
Directors (or its replacements approved by the Board of Directors) as
constituted at the beginning of such period, or (iv) a Person or Group of
Persons (other than the Investors and their Affiliates, employees, partners
or members) shall, as a result of a tender or exchange offer, open market
purchases, privately negotiated purchases or otherwise, have become the
beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of
securities of the Corporation representing 49% or more of the combined voting
power of the then outstanding securities of the Corporation ordinarily (and
apart from rights accruing under special circumstances) having the right to
vote in the election of directors. Notwithstanding the foregoing, no Change
of Control shall be deemed to have occurred (a) upon the acquisition of any
shares of Common Stock of the Company pursuant to the exercise of any
warrants issued pursuant to the Investment Agreement, (b) upon the exercise
of any of the rights and privilges granted to each of the Purchasers pursuant
to Section 6.2.5 of the Investment Agreement, (c) upon the exercise of any
rights and privileges granted to the holders of the Series B Preferred Stock
pursuant to Section 5.1 of the
<PAGE>
3
Series B Certificate of Designation or (d) otherwise as a result of the
equity ownership or designation of directors by the Investors or their
Affiliates, employees, partners or members.
1.7 "Class A Common Stock" shall mean the class of Class A
Common Stock, par value $.001 per share, of the Corporation or any other
class of stock resulting from successive changes or reclassifications of such
Class A Common Stock consisting solely of changes in par value, or from par
value to no par value, or as a result of a subdivision or combination.
1.8 "Class B Common Stock" shall mean the class of Class B
Common Stock, par value $.001 per share, of the Corporation or any other
class of stock resulting from successive changes or reclassifications of such
Class B Common Stock consisting solely of changes in par value, or from par
value to no par value, or as a result of a subdivision or combination.
1.9 "Closing Price" of the Common Stock, as of any day, shall
mean (a) the last reported sale price of such stock (regular way), or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, in either case as reported on the principal national securities
exchange on which such stock is listed or admitted to trading or (b) if the
Common Stock is not listed or admitted to trading on any national securities
exchange, the last reported sale price, or in case no such sale takes place
on such day, the average of the highest reported bid and the lowest reported
asked quotation for the Common Stock, in either case reported on NASDAQ, or a
similar service if NASDAQ is no longer reporting such information.
1.10 "Common Stock" shall mean the class of Common Stock, par
value $.001 per share, of the Corporation or any other class of stock
resulting from successive changes or reclassifications of such Common Stock
consisting solely of changes in par value, or from par value to no par value,
or as a result of a subdivision or combination.
1.11 "Common Stock Conversion Rate" shall mean, as of any date,
a rate for each share of Series C Preferred Stock equal to (i) the
Liquidation Value thereof plus all accrued and unpaid dividends thereon
(whether or not declared), divided by (ii) the Conversion Price in effect as
of such date.
1.12 "Conversion Price" shall mean (x) prior to the expiration
of the Thirty Day Period (as defined below), $5.9375 per share of Common
Stock, as
<PAGE>
4
adjusted hereunder (the "Initial Conversion Price"), or (y) after the
expiration of the Thirty Day Period, the lesser of (1) the Initial Conversion
Price, as adjusted hereunder, and (2) 100% of the average of the daily
Closing Price per share of Common Stock for the 30 consecutive trading days
following the release by the Corporation of its consolidated earnings
statement for the fiscal year ending May 31, 1998 (the "Thirty Day Period"),
subject to appropriate adjustment for the events described in Section 4.5(a)
herein if any such event occurs during the Thirty Day Period; provided that
if the shares of Common Stock are not then traded on any national securities
exchange or quoted by NASDAQ or a similar service, the Closing Price for the
foregoing purposes shall be deemed to be the fair market value of the shares
of Common Stock as determined in good faith by the Board of Directors of the
Corporation. If the holders of a majority of the outstanding shares of
Series B Preferred Stock disagree with the Board's determination of fair
market value for purposes of the Series B Preferred Stock, the fair market
value for purposes of the Series C Preferred Stock shall be the fair market
value determined for purposes of the Series B Preferred Stock. The
Conversion Price as determined in accordance with the foregoing shall be
adjusted from time to time in accordance with the provisions of Section 4.
1.13 "Current Market Price" shall mean, with respect to each
share of Common Stock as of any date, the average of the daily Closing Prices
per share of Common Stock for the 10 consecutive Trading Days commencing 15
Trading Days prior to such date; provided that if on any such date the shares
of Common Stock are not listed or admitted for trading on any national
securities exchange or quoted by NASDAQ or a similar service, the Current
Market Price for a share of Common Stock shall be the fair market value of
such share as determined in good faith by the Board of Directors; PROVIDED,
HOWEVER, that if the holders of the shares of Series B Preferred Stock
disagree with the Board's determination of fair market value for purposes of
the Series B Preferred Stock, the fair market value for purposes of the
Series C Preferred Stock shall be the fair market value determined for
purposes of the Series B Preferred Stock.
1.14 "Dividend Amount" shall mean an amount per share of Series C
Preferred Stock (rounded to the nearest $ .01) equal to (1) $30 per $1,000
Liquidation Value of Series C Preferred Stock during the first year after the
Issue Date, (2) $35 per $1,000 Liquidation Value of Series C Preferred Stock
during the second year after the Issue Date, (3) $40 per $1,000 Liquidation
Value of Series C Preferred Stock during the third year after the Issue Date,
(4) $45 per $1,000 Liquidation Value of Series C Preferred Stock during the
fourth and fifth years after the Issue Date and (5) $50 per $1,000
Liquidation Value of Series C Preferred Stock at all times after the fifth
anniversary of the Issue Date.
<PAGE>
5
1.15 "Dividend Rate" shall mean (1) 3% per quarter during the
first year after the Issue Date, (2) 3.5% per quarter during the second year
after the Issue Date, (3) 4% per quarter during the third year after the
Issue Date, (4) 4.5% per quarter during the fourth and fifth years after the
Issue Date and (5) 5% per quarter at all times after the fifth anniversary of
the Issue Date.
1.16 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
1.17 "Excluded Securities" means (a) shares of Common Stock
issued upon conversion or exercise of convertible securities, warrants and
options of the Corporation outstanding on the Issue Date, (b) shares of
Common Stock, and options to purchase such shares, issued to officers,
directors, employees or former employees of, or consultants to, the
Corporation or any of its subsidiaries pursuant to any equity incentive plan,
agreement or other arrangement which has been approved by a vote of at least
two-thirds (2/3rds) of the Board of Directors, (c) shares of Common Stock
issued upon conversion of shares of the Company's Series B Preferred Stock,
(d) shares of Common Stock issued upon exercise of the warrants issued to the
purchasers of the shares of Series B Preferred Stock pursuant to the
Investment Agreement, (e) shares of Common Stock issued upon conversion of
shares of the Series C Preferred Stock, (f) shares of Common Stock issued
upon exercise of the Affiliate Warrants and (g) shares of Common Stock issued
upon exercise of the Harnick Warrant.
1.18 "Harnick Warrant" means the warrant to purchase
50,000 shares of Common Stock to be issued to Carl D. Harnick on the Closing
Date (as defined in the Investment Agreement).
1.19 "Issue Date" shall mean the Closing Date (as defined in
the Investment Agreement).
1.20 "Investment Agreement" shall mean the Investment
Agreement, dated as of October 12, 1997, as amended, between the Corporation,
the Investors and certain other parties thereto, as hereafter amended from
time to time.
1.21 "Investors" shall mean MAC Music LLC, a Delaware limited
liability company, and SK-Palladin Partners, LP, a Delaware limited
partnership.
1.22 "Junior Stock" shall mean the Common Stock, the Class A
<PAGE>
6
Common Stock, the Class B Common Stock, the Series A-1 Preferred Stock, the
Series A-2 Preferred Stock and the shares of any other class or series of
stock of the Corporation which, by the terms of the Certificate of
Incorporation or of the instrument by which the Board of Directors, acting
pursuant to authority granted in the Certificate of Incorporation, shall fix
the relative rights, preferences and limitations thereof, shall be junior to
the Series C Preferred Stock in respect of the right to receive dividends and
to participate in any distribution of assets other than by way of dividends.
1.23 "Liquidation Value" shall have the meaning assigned to
such term in Section 6.1 hereof.
1.24 "NASDAQ" shall mean the National Association of
Securities Dealers, Inc. Automated Quotation System.
1.25 "Parity Stock" shall mean the shares of Series B Preferred
Stock and shares of any other class or series of stock of the Corporation
which, by the terms of the Certificate of Incorporation or of the instrument
by which the Board of Directors, acting pursuant to authority granted in the
Certificate of Incorporation, shall fix the relative rights, preferences and
limitations thereof, shall, in the event that the stated dividends thereon
are not paid in full, be entitled to share ratably with the Series C
Preferred Stock in the payment of dividends, including accumulations, if any,
in accordance with the sums which would be payable on such shares if all
dividends were declared and paid in full, and shall, in the event that the
amounts payable thereon on liquidation are not paid in full, be entitled to
share ratably with the Series C Preferred Stock in any distribution of assets
other than by way of dividends in accordance with the sums which would be
payable in such distribution if all sums payable were discharged in full;
PROVIDED, HOWEVER, that the term "Parity Stock" shall be deemed to refer (i)
in Section 2.2 hereof, to any stock which is Parity Stock in respect of the
right to receive dividends and (ii) in Section 6 hereof, to any stock which
is Parity Stock in respect of any distribution of assets other than by way of
dividends.
1.26 "Person" shall mean any individual, corporation,
partnership, joint venture, association, joint-stock company, trust, limited
liability company, unincorporated organization, estate, other entity or
government or any agency or political subdivision thereof.
1.27 "Pro Rata Repurchase" shall mean any purchase of shares of
Common Stock by the Corporation or by any of its subsidiaries whether for
cash, shares of capital stock of the Corporation,
<PAGE>
7
other securities of the Corporation, evidences of indebtedness of the
Corporation or any other Person or any other property (including, without
limitation, shares of capital stock, other securities or evidences of
indebtedness of a subsidiary of the Corporation), or any combination thereof,
effected while any of the shares of Series C Preferred Stock are outstanding,
which purchase is subject to Section 13(e) of the Exchange Act or is made
pursuant to an offer made available to all holders of Common Stock.
1.28 "Senior Stock" shall mean the shares of any class or
series of stock of the Corporation which, by the terms of the Certificate of
Incorporation or of the instrument by which the Board of Directors, acting
pursuant to authority granted in the Certificate of Incorporation, shall fix
the relative rights, preferences and limitations thereof, shall be senior to
the Series C Preferred Stock in respect of the right to receive dividends or
to participate in any distribution of assets other than by way of dividends.
1.29 "Series A-1 Preferred Stock" shall mean the class of
Series A-1 Non Convertible Preferred Stock, par value $.001 per share, of the
Corporation or any other class of stock resulting from successive changes or
reclassifications of such Series A-1 Non Convertible Preferred Stock
consisting solely of changes in par value, or from par value to no par value,
or as a result of a subdivision or combination.
1.30 "Series A-2 Preferred Stock" shall mean the class of
Series A-2 Convertible Preferred Stock, par value $.001 per share, of the
Corporation or any other class of stock resulting from successive changes or
reclassifications of such Series A-2 Convertible Preferred Stock consisting
solely of changes in par value, or from par value to no par value, or as a
result of a subdivision or combination.
1.31 "Series B Preferred Stock" shall mean the class of Series
B Convertible Preferred Stock, par value $.001 per share, of the Corporation
or any other class of stock resulting from successive changes or
reclassifications of such Series B Convertible Preferred Stock consisting
solely of changes in par value, or from par value to no par value, or as a
result of a subdivision or combination.
1.32 "Series B Certificate of Designation" shall mean the
Certificate of the Powers, Designations, Preferences and Rights of the Series
B Convertible Preferred Stock, Par Value $.001 Per Share, in the form filed
by the Corporation with the Secretary of State of Delaware, as the same may
be amended from time to time.
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8
1.33 "Trading Day" shall mean, so long as the Common Stock is
listed or admitted to trading on a national securities exchange, a day on
which the principal national securities exchange on which the Common Stock is
listed is open for the transaction of business, or, if the Common Stock is
not so listed or admitted for trading on any national securities exchange, a
day on which NASDAQ is open for the transaction of business.
2. DIVIDENDS.
2.1 The holders of the outstanding shares of Series C
Preferred Stock shall be entitled to receive quarterly dividends, when, as
and if declared by the Board of Directors out of funds legally available
therefor. Each quarterly dividend shall be an amount per share (rounded to
the nearest $.01) equal to the Dividend Amount and shall be payable on the
last Business Day of August, November, February and May in each year (each a
"Dividend Payment Date"), to the holders of record of Series C Preferred
Stock at the close of business on the preceding Business Day, or such other
dates as are fixed by the Board Directors within ten (10) days prior to the
Dividend Payment Date (each a "Record Date"). Such dividends shall become
payable beginning on the first Dividend Payment Date for which the Record
Date is subsequent to the Issue Date. Dividends on each share of Series C
Preferred Stock shall be cumulative and shall accrue on a day-to-day basis,
whether or not earned, from and after the day immediately succeeding the date
on which such share was issued, and shall be payable in cash (except upon
conversion). Dividends on the Series C Preferred Stock that are not declared
and paid when due will compound quarterly on each Dividend Payment Date at
the Dividend Rate. Dividends payable for any partial dividend period shall be
computed on the basis of actual days elapsed over a 360 day year.
2.2 Except as hereinafter provided in this Section 2.2, unless
(a) full cumulative dividends on the outstanding shares of Series C Preferred
Stock and any Parity Stock that shall have accrued and become payable as of
any date shall have been paid, or declared and funds shall have been set
apart for payment thereof, and (b) all applicable redemption, exchange and
repurchase obligations with respect to the outstanding shares of Series C
Preferred Stock and any Parity Stock shall have been satisfied, no dividend
or other distribution (payable other than in shares of Junior Stock) shall be
paid to the holders of Junior Stock or Parity Stock, and no shares of Series
C Preferred Stock, Parity Stock or Junior Stock shall be purchased or
redeemed by the Corporation or any of its subsidiaries (except by conversion
into or exchange for, or out of the net cash proceeds from the concurrent
sale of, Junior Stock), nor shall any monies be paid or made available for a
sinking fund for the purchase or
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9
redemption of any Series C Preferred Stock, Junior Stock or Parity Stock;
PROVIDED, HOWEVER, nothing set forth herein shall prohibit or limit the
Corporation's ability to (i) purchase shares of Series B Preferred Stock in
accordance with the terms of Section 7 of the Series B Certificate of
Designation, or (ii) purchase in accordance with the terms set forth therein
any of the warrants issued pursuant to the Investment Agreement following a
"change of control" as defined in such warrants unless, in the cases of both
clauses (i) and (ii), the Corporation is also required to purchase shares of
Series C Preferred Stock pursuant to Section 7 of this Certificate of
Designation. When dividends are not paid in full upon the shares of Series C
Preferred Stock and any Parity Stock, all dividends declared upon shares of
Series C Preferred Stock and all Parity Stock shall be declared pro rata so
that the amount of dividends declared per share on Series C Preferred Stock
and all such Parity Stock shall in all cases bear to each other the same
ratio that accrued cumulative dividends per share on the shares of Series C
Preferred Stock and all such Parity Stock bear to each other. Holders of
shares of Series C Preferred Stock shall not be entitled to any dividends,
whether payable in cash, property or stock, in excess of full cumulative
dividends, as herein provided, on Series C Preferred Stock.
3. REDEMPTION.
3.1 The Corporation may, at its sole option, subject to the
provisions of Section 2.2, redeem at any time after the Issue Date, out of funds
legally available therefor, all (or, in accordance with Section 3.2, less than
all) of the outstanding shares of Series C Preferred Stock at a redemption price
for each share of Series C Preferred Stock called for redemption pursuant to
this Section 3.1 equal to the Redemption Price (as hereinafter defined). The
term "Redemption Price" shall mean, with respect to each share of Series C
Preferred Stock, an amount equal to the Liquidation Value thereof and all
accrued and unpaid dividends thereon to the redemption date. With respect to
each share of Series C Preferred Stock properly tendered for redemption, if the
Corporation fails to pay the redemption price upon such tender, the Corporation
shall also pay an amount equal to interest on the amount determined in the above
sentence at 12% per annum, compounded on a quarterly basis, from the date fixed
for redemption to the date the Redemption Price is actually paid.
3.2 The Corporation may not redeem outstanding shares of Series
C Preferred Stock pursuant to Section 3.1 above unless it concurrently redeems
shares of Series B Preferred Stock pursuant to Section 3.1 of the Series B
Certificate of Designation. In the event that fewer than all the outstanding
shares of Series C Preferred Stock and Series B Preferred Stock are to be
redeemed pursuant to Section 3.1 above and pursuant to Section 3.1 of the Series
B Certificate of
<PAGE>
10
Designation, the number of shares of Series C Preferred Stock and Series B
Preferred Stock to be redeemed shall be redeemed on a pro rata basis based on
the number of shares held by each holder thereof.
3.3 In the event the Corporation shall elect to redeem shares
of Series C Preferred Stock pursuant to Section 3.1, it shall provide notice
of such redemption by first class mail, postage prepaid, mailed not less than
sixty (60) nor more than ninety (90) days prior to the redemption date, to
each record holder of the shares to be redeemed, at such holder's address as
the same appears on the books of the Corporation. Each such notice shall
state: (i) the time and date as of which the redemption shall occur; (ii)
the total number of shares of Series C Preferred Stock to be redeemed and, if
fewer than all the shares held by such holder are to be redeemed, the number
of such shares to be redeemed from such holder; (iii) the Redemption Price;
(iv) that shares of Series C Preferred Stock called for redemption may be
converted at any time prior to the time and date fixed for redemption (unless
(x) the Corporation shall default in the payment of the Redemption Price, in
which case such right shall not terminate at such time and date or (y) the
holders of such shares do not yet have the right to convert such shares under
Section 4 below); (v) the Common Stock Conversion Rate; (vi) the place or
places where certificates for such shares are to be surrendered for payment
of the Redemption Price; and (vii) that dividends on the shares to be
redeemed will cease to accrue on such redemption date.
3.4 If notice of redemption shall have been given by the
Corporation as provided in Section 3.3, dividends on the shares of Series C
Preferred Stock so called for redemption shall cease to accrue, such shares
shall no longer be deemed to be outstanding, and all rights of the holders
thereof as stockholders of the Corporation with respect to shares so called
for redemption (except the right to receive from the Corporation the
Redemption Price without interest and except the right to convert such shares
in accordance with Section 4) shall cease (including any right to receive
dividends otherwise payable on any Dividend Payment Date that would have
occurred after the time and date of redemption) from and after the time and
date fixed in the notice of redemption as the time and date of redemption
(unless the Corporation shall default in the payment of the Redemption Price,
in which case such rights shall not terminate at such time and date). Upon
surrender (in accordance with the notice of redemption) of the certificate or
certificates for any shares to be so redeemed (properly endorsed or assigned
for transfer, if the Corporation shall so require and the notice of
redemption shall so state), such shares shall be redeemed by the Corporation
at the Redemption Price. In case fewer than all the shares represented by
any such certificate are to be redeemed, a new certificate shall be issued
representing the unredeemed shares, without cost to the holder thereof,
together with the amount of cash, if any, in
<PAGE>
11
lieu of fractional shares. Subject to applicable escheat laws, any moneys so
set aside by the Corporation and unclaimed at the end of one year from the
redemption date shall revert to the general funds of the Corporation, after
which reversion the holders of such shares so called for redemption shall
look only to the general funds of the Corporation for the payment of the
redemption price without interest. Any interest accrued on funds so
deposited shall be paid to the Corporation from time to time.
4. CONVERSION RIGHTS.
4.1 Each holder of a share of Series C Preferred Stock shall
have the right, at any time after the second anniversary of the Issue Date,
or, as to any share of Series C Preferred Stock called for redemption with a
date fixed for redemption which is after the second anniversary of the Issue
Date, at any time prior to the time and date fixed for such redemption
(unless the Corporation defaults in the payment of the Redemption Price, in
which case such right shall not terminate at such time and date), to convert
such share into fully paid and nonassessable shares of Common Stock at the
Common Stock Conversion Rate as of the date of conversion.
4.2 No fractional shares or scrip representing fractions of
shares of Common Stock shall be issued upon conversion of Series C Preferred
Stock. Instead of any fractional interest in a share of Common Stock that
would otherwise be deliverable upon the conversion of a share of Series C
Preferred Stock, the Corporation shall, subject to Section 4.5(e), make a
cash payment (calculated to the nearest $.01) equal to such fraction
multiplied by the Closing Price of the Common Stock on the last Trading Day
prior to the date of conversion.
4.3 Any holder of shares of Series C Preferred Stock electing
to convert such shares into Common Stock shall surrender the certificate or
certificates for such shares at the offices of the Corporation (or at such
other place as the Corporation may designate by notice to the holders of
shares of Series C Preferred Stock) during regular business hours, duly
endorsed to the Corporation or in blank, or accompanied by instruments of
transfer to the Corporation or in blank, in form reasonably satisfactory to
the Corporation, and shall give written notice to the Corporation at such
offices that such holder elects to convert such shares of Series C Preferred
Stock. As soon as practicable after any holder deposits certificates for
shares of Series C Preferred Stock, accompanied by the written notice above
prescribed, the Corporation shall issue and deliver at such office to the
holder for whose account such shares were surrendered, or to his nominee,
certificates representing the number of shares of Common Stock and the cash
in lieu of fractional shares, if any, to which such holder is entitled upon
such conversion.
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12
4.4 Conversion shall be deemed to have been made as of the
date that certificates for the shares of Series C Preferred Stock to be
converted and the written notice, are received by the Corporation; and the
Person entitled to receive the Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder of such Common Stock
on such date. The Corporation shall not be required to deliver certificates
for shares of Common Stock while the stock transfer books for such stock or
for Series C Preferred Stock are duly closed for any purpose, but
certificates for shares of Common Stock shall be issued and delivered as soon
as practicable after the opening of such books.
4.5 The Common Stock Conversion Rate shall be adjusted from
time to time as follows:
(a) If the Corporation shall, at any time or from time to
time while any shares of the Series C Preferred Stock are outstanding, (i)
pay a dividend on its Common Stock in shares of its capital stock, (ii)
combine its outstanding shares of Common Stock into a smaller number of
shares, (iii) subdivide its outstanding shares of Common Stock or (iv) issue
by reclassification of its shares of Common Stock any shares of capital stock
of the Corporation, then the Common Stock Conversion Rate in effect
immediately before such action shall be adjusted so that the holders of the
Series C Preferred Stock, upon conversion of shares thereof immediately
following such action, shall be entitled to receive the kind and amount of
shares of capital stock of the Corporation which they would have owned or
been entitled to receive upon or by reason of such event if such shares of
Series C Preferred Stock had been converted immediately before the record
date or effective date for such action.
(b) If the Corporation shall, at any time or from time to
time while any of the Series C Preferred Stock is outstanding, issue or sell,
or fix a record date for the issuance of, (A) Common Stock (or securities
convertible or exchangeable into or exercisable for Common Stock) (other than
Excluded Securities) or (B) rights, options or warrants entitling the holders
thereof to subscribe for or purchase Common Stock (or securities convertible
into or exchangeable or exercisable for shares of Common Stock) (other than
Excluded Securities), in any such case, at a price per share (treating the
price per share of securities convertible into or exchangeable or exercisable
for Common Stock as equal to (x) the sum of (i) the price for a unit of the
security convertible into or exchangeable or exercisable for Common Stock
plus (ii) any additional consideration initially payable upon the conversion
of such security into or the exchange or exercise of such security for Common
Stock, divided by (y) the number of shares of Common Stock initially
underlying such
<PAGE>
13
exercisable, convertible or exchangeable security) that is less than the
greater of the Current Market Price of the Common Stock and the Conversion
Price on the date of such issuance or such record date (the "Measuring
Price"), then the Common Stock Conversion Rate shall be adjusted so that it
shall equal the rate determined by multiplying the Common Stock Conversion
Rate in effect immediately prior to giving effect to this Section 4.5 by a
fraction, the numerator of which shall be the number of shares of Common
Stock outstanding (calculated to include the shares of Common Stock
underlying the warrants issued under the Investment Agreement, the shares of
Common Stock underlying the Affiliate Warrants, the shares of Common Stock
underlying the Harnick Warrant and all then currently exercisable,
convertible and exchangeable securities that are "in-the-money") on the date
of issuance of such rights, options or warrants plus the number of additional
shares of Common Stock offered for subscription or purchase (or into or for
which the exercisable, convertible or exchangeable securities so offered are
initially exercisable, convertible or exchangeable), and the denominator of
which shall be the number of shares of Common Stock outstanding (calculated
to include the shares of Common Stock underlying the warrants issued under
the Investment Agreement, the shares of Common Stock underlying the Affiliate
Warrants, the shares of Common Stock underlying the Harnick Warrant and all
then currently exercisable, convertible and exchangeable securities that are
"in-the-money") on the date of issuance of such rights, options or warrants
plus the number of shares which the aggregate offering price of the total
number of shares so offered for subscription or purchase (or the aggregate
purchase price of the exercisable, convertible or exchangeable securities so
offered plus the aggregate amount of any additional consideration initially
payable upon exercise, conversion or exchange for or into Common Stock) would
purchase at such Measuring Price.
(c) If the Corporation shall, at any time or from time to
time while any of the Series C Preferred Stock is outstanding, distribute to
all holders of shares of its Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Corporation is
the continuing or surviving corporation and the Common Stock is not changed
or exchanged) cash, evidences of indebtedness, securities or other assets
(excluding (i) ordinary course cash dividends to the extent such dividends do
not exceed the Corporation's retained earnings and (ii) dividends payable in
shares of Common Stock for which adjustment is made under Section 4.5(a)) or
rights, options or warrants to subscribe for or purchase securities of the
Corporation (excluding those for which adjustment is made under Section
4.5(b)), then in each such case the Common Stock Conversion Rate shall be
adjusted so that it shall equal the rate determined by multiplying the Common
Stock Conversion Rate in effect immediately prior to the date of such
distribution by a
<PAGE>
14
fraction, the numerator of which shall be the Current Market Price of the
Common Stock on the record date referred to below, and the denominator of
which shall be such Current Market Price of the Common Stock less the then
fair market value (as determined by the Board of Directors in good faith or,
if requested by the holders of the Series B Preferred Stock in accordance
with the terms of the Series B Certificate of Designation, the fair market
value determined pursuant to the Series B Certificate of Designation) of the
portion of the cash, evidences of indebtedness, securities or other assets so
distributed or of such rights, options or warrants applicable to one share of
Common Stock (provided that such denominator shall never be less than $.01).
(d) If the Corporation or any subsidiary thereof shall,
at any time or from time to time while any of the Series C Preferred Stock is
outstanding, make a Pro Rata Repurchase, the Common Stock Conversion Rate
shall be adjusted by multiplying the Common Stock Conversion Rate in effect
immediately prior to such action by a fraction (which in no event shall be
less than one (1)), the numerator of which shall be the product of (i) the
number of shares of Common Stock outstanding immediately before such Pro Rata
Repurchase minus the number of shares of Common Stock repurchased in such Pro
Rata Repurchase and (ii) the Current Market Price of the Common Stock as of
the day immediately preceding the first public announcement by the
Corporation of the intent to effect such Pro Rata Repurchase, and the
denominator of which shall be (i) the product of (x) the number of shares of
Common Stock outstanding immediately before such Pro Rata Repurchase and (y)
the Current Market Price of the Common Stock as of the day immediately
preceding the first public announcement by the Corporation of the intent to
effect such Pro Rata Repurchase minus (ii) the aggregate purchase price of
the Pro Rata Repurchase (provided that such denominator shall never be less
than $.01).
(e) All calculations under this Section 4.5 shall be made
to the nearest $.01 (with $.005 being rounded upward), one-hundredth of a
share (with .005 being rounded upward) or, in the case of a conversion rate,
one ten-thousandth (with .00005 being rounded upward). Notwithstanding any
other provision of this Section 4.5, the Corporation shall not be required to
make any adjustment of the Common Stock Conversion Rate unless such
adjustment would require an increase or decrease of at least 0.05% of such
rate. Any lesser adjustment shall be carried forward and shall be made at
the time of and together with the next subsequent adjustment which, together
with any adjustment or adjustments so carried forward, shall amount to an
increase or decrease of at least 0.05% in such rate. Any adjustments under
this Section 4.5 shall be made successively whenever an event requiring such
an adjustment occurs.
<PAGE>
15
(f) Whenever an adjustment in the Common Stock Conversion
Rate is required, the Corporation shall promptly cause to be mailed (but in
any event not later than five (5) days after the date of the event giving
rise to such adjustment) first-class postage prepaid, to the holders of
record of the outstanding shares of Series C Preferred Stock, notice of such
adjustment and a certificate of a firm of independent public accountants of
recognized national standing selected by the Board of Directors (who shall be
appointed at the Corporation's expense and who may be the independent public
accountants regularly employed by the Corporation) setting forth the adjusted
Common Stock Conversion Rate in effect as of such date determined as provided
herein. Such notice and certificate shall set forth in reasonable detail
such facts as shall be necessary to show the reason for and the manner of
computing such adjustment.
(g) In the event that at any time as a result of an
adjustment made pursuant to this Section 4.5, the holder of any share of
Series C Preferred Stock thereafter surrendered for conversion shall become
entitled to receive any shares of stock of the Corporation other than shares
of Common Stock, the conversion rate of such other shares so receivable upon
conversion of any such share of Series C Preferred Stock shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to Common Stock contained in
subparagraphs (a) through (f) and (h) of this Section 4.5, and the provisions
of this Section 4 with respect to the Common Stock shall apply on like or
similar terms to any such other shares and the determination of the Board of
Directors as to any such adjustment shall be conclusive.
(h) No adjustment shall be made pursuant to this Section
if the effect thereof would be to reduce the Conversion Price below the par
value of the Common Stock.
4.6 In case (a) any consolidation or merger to which the
Corporation is a party, other than a merger or consolidation in which the
Corporation is the surviving or continuing corporation and which does not
result in any reclassification of, or change (other than a change in par
value or from par value to no par value or from no par value to par value, or
as a result of a subdivision or combination) in, outstanding shares of Common
Stock or (b) any sale or conveyance of all or substantially all of the
property and assets of the Corporation is effected in such a way that the
holders of Common Stock shall be entitled to receive stock or other
securities or assets with respect to or in exchange for Common Stock, then
upon conversion of each share of Series C Preferred Stock the holder thereof
shall be entitled to receive the kind and amount of shares of stock or other
securities and
<PAGE>
16
property receivable upon such consolidation, merger, sale or conveyance by a
holder of the number of shares of Common Stock into which such shares of
Series C Preferred Stock could have been converted immediately prior to such
consolidation, merger, sale or conveyance, subject to adjustments which shall
be as nearly equivalent as may be practicable to the adjustments provided for
in this Section 4. The Corporation shall not enter into any of the
transactions referred to in clause (a) or (b) of the preceding sentence
unless provision shall be made so as to give effect to the provisions set
forth in this Section 4.6. The provisions of this Section 4.6 shall apply
similarly to successive consolidations, mergers, sales or conveyances.
4.7 The Corporation shall at all times reserve and keep
available, free from preemptive rights, out of its authorized but unissued
stock, for the purpose of effecting the conversion of the shares of Series C
Preferred Stock, such number of its duly authorized shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of Series C Preferred Stock into such Common Stock at any
time (assuming that, at the time of the computation of such number of shares,
all such Common Stock would be held by a single holder). The Corporation
shall from time to time, in accordance with the laws of the State of
Delaware, use its best efforts to cause the authorized amount of Common Stock
to be increased if the aggregate of the authorized amount of the Common Stock
remaining unissued and the issued shares of such Common Stock in its treasury
(other than any shares of such Common Stock reserved for issuance in any
other connection) shall not be sufficient to permit the conversion of the
shares of Series C Preferred Stock into the Common Stock. The Corporation
covenants that any shares of Common Stock issued upon conversions of the
Series C Preferred Stock shall be validly issued, fully paid and
nonassessable.
4.8 If any shares of Common Stock which would be issuable upon
conversion of shares of Series C Preferred Stock hereunder require
registration with or approval of any governmental authority before such
shares may be issued upon conversion, the Corporation will in good faith and
as expeditiously as possible cause such shares to be duly registered or
approved, as the case may be.
4.9 The Corporation shall pay any and all issue or other taxes
that may be payable in respect of any issue or delivery of shares of Common
Stock on conversion of shares of Series C Preferred Stock pursuant hereto.
The Corporation shall not, however, be required to pay any tax which is
payable in respect of any transfer involved in the issue or delivery of
Common Stock in a name other than that in which the shares of Series C
Preferred Stock so converted were registered, and no such issue or delivery
shall be made unless and until the person requesting such issue
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17
has paid to the Corporation the amount of such tax, or has established, to
the satisfaction of the Corporation, that such tax has been paid.
4.10 For purposes of this Section 4, the number of shares of
Common Stock at any time outstanding shall not include any shares of Common
Stock then owned or held by or for the account of the Corporation or any
subsidiary. The Corporation shall not pay a dividend or make any
distribution on shares of Common Stock held in the treasury of the
Corporation.
4.11 If any action or transaction would require adjustment of
the Common Stock Conversion Rate pursuant to more than one paragraph of this
Section 4, only one adjustment shall be made and each such adjustment shall
be the amount of adjustment that has the highest absolute value.
4.12 In case:
(a) of a consolidation or merger to which the Corporation
is a party and for which approval of any stockholders of the Corporation is
required; or
(b) of the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation; or
(c) of any Pro Rata Repurchase;
then, in each case, the Corporation shall cause to be mailed, first-class
postage prepaid, to the holders of record of the outstanding shares of Series
C Preferred Stock, at least twenty (20) days prior to the applicable record
date hereinafter specified, a notice stating (x) the date on which a record
is to be taken for the purpose of any distribution or grant of rights or
warrants triggering an adjustment to the Common Stock Conversion Rate
pursuant to this Section 4, or, if a record is not to be taken, the date as
of which the holders of record of Common Stock entitled to such distribution,
rights or warrants are to be determined, or (y) the date on which any
reclassification, consolidation, merger, sale, conveyance, dissolution,
liquidation, winding up or Pro Rata Repurchase is expected to become
effective, and the date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reclassification,
consolidation, merger, sale, conveyance, dissolution, liquidation, winding up
or Pro Rata Repurchase. Failure to give the notice specified hereunder shall
have no effect on the status or effectiveness of the action to which the
required notice relates.
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18
5. VOTING. The shares of Series C Preferred Stock shall have no
voting rights except as required by law.
6. LIQUIDATION RIGHTS.
6.1 Upon the dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, the holders of the shares of
Series C Preferred Stock shall be entitled to receive out of the assets of
the Corporation available for distribution to stockholders, in preference to
the holders of, and before any payment or distribution shall be made on,
Junior Stock, the amount of $1,000 per share (the "Liquidation Value"), plus
an amount equal to all accrued and unpaid dividends to the date of final
distribution (whether or not declared).
6.2 Neither the sale, exchange or other conveyance (for cash,
shares of stock, securities or other consideration) of all or substantially
all the property and assets of the Corporation nor the merger or
consolidation of the Corporation into or with any other corporation, or the
merger or consolidation of any other corporation into or with the
Corporation, shall be deemed to be a dissolution, liquidation or winding up,
voluntary or involuntary, for the purposes of this Section 6.
6.3 After the payment to the holders of the shares of Series C
Preferred Stock of full preferential amounts provided for in this Section 6,
the holders of Series C Preferred Stock as such shall have no right or claim
to any of the remaining assets of the Corporation.
6.4 In the event the assets of the Corporation available for
distribution to the holders of shares of Series C Preferred Stock upon any
dissolution, liquidation or winding up of the Corporation, whether voluntary
or involuntary, shall be insufficient to pay in full all amounts to which
such holders are entitled pursuant to Section 6.1, no such distribution shall
be made on account of any shares of any Parity Stock upon such dissolution,
liquidation or winding up unless proportionate distributive amounts shall be
paid on account of the shares of Series C Preferred Stock, ratably, in
proportion to the full distributable amounts for which holders of all Parity
Stock are entitled upon such dissolution, liquidation or winding up.
70 CHANGE OF CONTROL
7.1 In the event that the Corporation becomes aware of a
Change of Control or pending Change of Control, the Corporation shall make an
offer (the "Change of Control Offer") to purchase all of the outstanding
shares of Series C Preferred Stock at a purchase price for each share of
Series C
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19
Preferred Stock equal to the Repurchase Price (as hereinafter defined) on the
effective date of such Change of Control (the "Trigger Date"). The
Repurchase Price will be payable (x) in cash, in the case of a Change of
Control pursuant to clause (i) through (iii) of the definition of a Change of
Control and (y), at the Corporation's election, either in cash or in Common
Stock, in the case of a Change of Control pursuant to clause (iv) of the
definition of a Change of Control. In the event that the Corporation elects
to pay the Repurchase Price in Common Stock, such Common Stock shall be
concurrently registered under the Act and under the securities or blue sky
laws of any jurisdiction designated by any holder of Series C Preferred Stock
which accepts the Change of Control Offer. The term "Repurchase Price" shall
mean, with respect to each share of Series C Preferred Stock, (x) if paid in
cash, 110% of the sum of the Liquidation Value thereof and any accrued and
unpaid dividends thereon to the date of such purchase, or (y) if paid in
Common Stock, 125% of the sum of the Liquidation Value thereof and any
accrued and unpaid dividends thereon to the date of such purchase. With
respect to each share of Series C Preferred Stock properly tendered for
repurchase, if the Corporation fails to pay the Repurchase Price upon such
tender, the Corporation shall also pay an amount equal to interest on the
amount determined in the above sentence at 12% per annum, compounded on a
quarterly basis, from the date fixed for repurchase to the date the
Repurchase Price is actually paid. The Change of Control Offer must be made
as soon as practicable and if possible not less than sixty (60) days prior to
the Trigger Date, shall remain open for at least forty (40) and not more than
fifty (50) days (or such longer time as may be required by applicable law or
regulation) and shall comply, to the extent required, with the applicable
requirements of Rule 14e-1 under the Exchange Act and any other applicable
securities laws and regulations.
7.2 In the event the Corporation is required to make a Change
of Control Offer pursuant to Section 7.1, it shall provide notice of such
Change of Control Offer (the "Notice of Offer") by first class mail, postage
prepaid, to each record holder of the shares of Series C Preferred Stock, at
such holder's address as the same appears on the books of the Corporation.
Each such Notice of Offer shall state: (i) that the Corporation is offering
to purchase all outstanding shares of Series C Preferred Stock and that such
offer is irrevocable; (ii) the Trigger Date, which will be the date on which
any such purchase will be consummated; (iii) the total number of shares of
Series C Preferred Stock which the Corporation is offering to purchase from
such holder; (iv) the Repurchase Price; (v) the last day on which the Change
of Control Offer may be accepted (the "Expiration Date"), (vi) the place or
places where certificates for shares of Series C Preferred Stock are to be
surrendered for payment of the Repurchase Price and (vii) in the event of a
Change of Control pursuant to clause (iv) of the definition of a Change of
Control, the terms, amount and kind of
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20
consideration paid and the identity, if known by the Corporation, of the
Person or Group of Persons triggering such Change of Control and whether the
Corporation is electing to pay the Repurchase Price in cash or Common Stock.
7.3 Any holder of outstanding shares of Series C Preferred
Stock may, at its sole option, elect to accept the Change of Control Offer
with respect to all or less than all of such holder's outstanding Series C
Preferred Stock by delivering written notice of such acceptance to the
Corporation on or before the Expiration Date. On the Trigger Date, the
Corporation will pay to each holder that has accepted the Change of Control
Offer the Repurchase Price for the shares of Series C Preferred Stock which
such holder has elected to sell to the Corporation against delivery (in
accordance with the Notice of Offer) of the certificate or certificates for
any shares to so purchased (properly endorsed or assigned for transfer, if
the Corporation shall so require and the Notice of Offer shall so state). In
case fewer than all the shares represented by any such certificate are to be
repurchased, a new certificate shall be issued representing the shares which
are not purchased, without cost of the holder thereof, together with the
amount of cash, if any, in lieu of fractional shares.
80 OTHER PROVISIONS.
8.1 Shares of Series C Preferred Stock issued and reacquired
will, upon compliance with the applicable requirements of Delaware law, have
the status of authorized but unissued shares of Preferred Stock of the
Corporation undesignated as to series and may with any and all other
authorized but unissued shares of Preferred Stock of the Corporation be
designated or redesignated and issued or reissued, as the case may be, as
part of any series of Preferred Stock of the Corporation, except that any
issuance or reissuance of shares of Series C Preferred Stock must be in
compliance with this certificate of designation.
8.2 The Corporation shall be entitled to recognize the
exclusive right of a Person registered on its records as the holder of shares
of Series C Preferred Stock, and such record holder shall be deemed the
holder of such shares for all purposes.
8.3 All notice periods referred to herein shall commence on
the date of the mailing of the applicable notice.
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21
IN WITNESS WHEREOF, Platinum Entertainment, Inc. has caused this
certificate to be signed and attested this day of December, 1997.
PLATINUM ENTERTAINMENT, INC.
By:_________________________________
Name: Steven Devick
Title: Chief Executive Officer
<PAGE>
PLATINUM ENTERTAINMENT, INC.
STOCK AND WARRANT PURCHASE AGREEMENT
This Stock and Warrant Purchase Agreement (this "Agreement"), dated
December 12, 1997, is between PLATINUM ENTERTAINMENT, INC., a Delaware
corporation (the "Corporation"), and the persons and entities named on
Schedule 1 attached hereto (the "Purchasers").
RECITALS
A. The Corporation has entered into an Investment Agreement, dated as
of October 12, 1997 (as amended by amendments dated October 26, 1997, October
30, 1997 and November 26, 1997, by and between the Corporation, MAC Music LLC
and SK-Palladin Partners, LP (the "Investment Agreement").
B. The closing of the transactions contemplated by this Agreement is a
condition precedent to the obligation of the Investment Agreement purchasers
to consummate the transactions contemplated by the Investment Agreement.
C. The Purchasers desire to purchase from the Corporation, and the
Corporation desires to issue and sell to the Purchasers in the aggregate, (x)
2,500 shares of Series C Convertible Preferred Stock of the Corporation, par
value $.001 per share (the "Series C Shares"), and (y) warrants (the
"Warrants") to purchase 450,000 shares of Common Stock of the Corporation,
par value $.001 per share (the "Common Stock"), for an aggregate purchase
price of $2,500,000, all upon the terms and subject to the conditions set
forth herein.
AGREEMENTS
In consideration of the recitals and the mutual covenants herein
contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
In addition to terms defined elsewhere in this Agreement, as used in this
Agreement:
"Closing" means the closing of the sale and purchase of the Series C
Shares and Warrants pursuant to this Agreement.
"Commission" means the Securities and Exchange Commission.
<PAGE>
"Person" means a natural person, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization or other entity or a governmental entity or any
department, agency or political subdivision thereof.
"Securities Act" means the Securities Act of 1933, as amended.
ARTICLE II
AUTHORIZATION AND SALE OF COMMON SHARES
2.1 AUTHORIZATION. The Corporation will, prior to the Closing,
authorize the issuance and sale to the Purchasers of the Series C Shares and
Warrants.
2.2 SALE OF SERIES C SHARES AND WARRANTS TO THE PURCHASERS. Upon the
terms and subject to the conditions herein set forth and in reliance upon the
representations and warranties set forth herein, the Corporation agrees to
sell to each Purchaser, free and clear of any liens, claims, charges and
encumbrances whatsoever (except for any created by or through the
Purchasers), and each Purchaser agrees to purchase from the Corporation, at
the Closing, the number of Series C Shares and Warrants for the number of
shares of Common Stock set forth opposite each such Purchaser's name on
Schedule 1 attached hereto, for the aggregate purchase price set forth
opposite each such Purchaser's name on Schedule 1 attached hereto.
ARTICLE III
CLOSING; DELIVERY
3.1 CLOSING. The Closing will be held at the offices of Katten Muchin &
Zavis, 525 West Monroe Street, Chicago, Illinois, on December 12, 1997, at
10:00 a.m., or at such other time, date and place as may be agreed to by the
Corporation and the Purchasers.
3.2 DELIVERY. At the Closing, the Corporation will deliver to each
Purchaser a certificate for such Purchaser's Series C Shares and a Warrant
for the appropriate number of shares of Common Stock, each duly executed and
registered in the name of such Purchaser, against payment by such Purchaser
of the aggregate purchase price therefore by wire transfer to an account
designated by the Corporation.
ARTICLE IV
CONDITIONS TO CLOSING BY THE PURCHASERS
The obligation of the Purchasers to purchase the Series C Shares and
Warrants at the Closing is subject to the fulfillment by the Corporation of
all covenants and agreements contained in this Agreement to be performed or
complied with by the Corporation at or prior to the Closing.
2
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
The Corporation hereby represents and warrants to the Purchasers on the
date hereof and as of the date of the Closing as follows:
5.1 ORGANIZATION AND STANDING. The Corporation is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware.
5.2 CORPORATE POWER. The Corporation has the requisite corporate power
to own all the properties owned by it and to conduct its business as
presently being and as proposed to be conducted by it. The Corporation has
all requisite corporate power to enter into this Agreement, to issue and sell
the Series C Shares and Warrants and to carry out and perform its obligations
under the terms of this Agreement.
5.3 AUTHORIZATION. All corporate action on the part of the Corporation,
its directors and stockholders necessary for the authorization, execution,
delivery and performance by the Corporation of this Agreement, and the
consummation of the transactions contemplated hereby, and for the
authorization, issuance, sale and delivery of the Series C Shares and
Warrants, has been taken.
5.4 ENFORCEABILITY. This Agreement constitutes the legal, valid and
binding obligation of the Corporation, enforceable against it in accordance
with their terms, subject to any applicable bankruptcy, reorganization,
insolvency, moratorium, or other laws or equitable principles affecting the
enforcement of creditors' rights generally.
5.5 VALIDITY OF SECURITIES. The Series C Shares, when issued, sold and
delivered in accordance with the terms of this Agreement, will be duly
authorized, validly issued, fully paid, non-assessable and free and clear of
all liens, charges, claims and encumbrances whatsoever, except for any
created by or through the Purchasers. The Warrants, when issued, sold and
delivered in accordance with the terms of this Agreement, will be duly
authorized and validly issued, non-assessable and free and clear of all
liens, charges, claims and encumbrances whatsoever, except for any created by
or through the Purchaser. The shares of Common Stock to be issued upon
conversion of the Series C Shares and exercise of the Warrants have been
reserved for issuance and when issued will, assuming payment of the exercise
price for the Warrants, be duly authorized, validly issued, fully paid,
non-assessable and free and clear of all liens, charges, claims and
encumbrances whatsoever, except for any created by or through the Purchasers.
3
<PAGE>
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby represents and warrants to the Corporation on the
date hereof and as of the date of the Closing as follows:
6.1 ENFORCEABILITY. This Agreement constitutes the legal, valid and
binding obligation of such Purchaser, enforceable against such Purchaser in
accordance with its terms, subject to any applicable bankruptcy,
reorganization, insolvency, moratorium, or other laws or equitable principles
affecting the enforcement of creditors' rights generally.
6.2 PURCHASE FOR INVESTMENT. Such Purchaser will acquire the Series C
Shares, the Warrants and the shares of Common Stock issuable upon conversion
of the Series C Shares and exercise of the Warrants for investment and not
with a view to distributing all or any part thereof in any transaction which
would constitute a "distribution" within the meaning of the Securities Act.
Such Purchaser acknowledges that neither the Series C Shares, the Warrants
nor the shares of Common Stock issuable upon conversion of the Series C
Shares and exercise of the Warrants have not been registered under the
Securities Act and the Corporation is under no obligation to file a
registration statement with the Commission with respect to the such
securities.
6.3 INVESTOR QUALIFICATIONS. Such Purchaser (a) has such knowledge and
experience in financial and business matters that such Purchaser is capable
of evaluating the merits and risks of an investment in the Series C Shares
and Warrants; (b) is able to bear the complete loss of such Purchaser's
investment in the Series C Shares and Warrants; and (c) has had the
opportunity to ask questions of, and receive answers from, the Corporation
and its management concerning the terms and conditions of the offering of the
Series C Shares and Warrants and to obtain additional information. The
Purchaser is not relying upon any statements or instruments made or issued by
any Person other than the Corporation and its officers in making its decision
to invest in the Series C Shares and Warrants.
ARTICLE VII
COVENANTS OF THE CORPORATION
7.1 LEGENDS. Until (i) the securities represented by such certificate
are effectively registered under the Securities Act, or (ii) the holder of
such securities delivers to the Corporation a written opinion acceptable to
the Corporation from legal counsel to such holder to the effect that such
legend is no longer necessary under the Securities Act, the Corporation will
cause each certificate representing securities issued pursuant to this
Agreement or in exchange for or replacement of or as a distribution with
respect to such securities to be stamped or otherwise imprinted with a legend
in substantially the following form:
4
<PAGE>
"The securities represented by this certificate have not
been registered under the Securities Act of 1933, as
amended, and thus may not be transferred unless so
registered or unless an exemption from registration is
available."
ARTICLE VIII
MISCELLANEOUS
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained herein will survive the execution and delivery of this
Agreement and any investigation made at any time by or on behalf of the
Purchasers or the Corporation.
8.2 SUCCESSORS AND ASSIGNS. All covenants and agreements contained in
this Agreement by or on behalf of any of the parties hereto will bind and
inure to the benefit of the respective successors and assigns of the parties
hereto, whether so expressed or not.
8.3 DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement
are inserted for convenience of reference only and do not constitute a part
of this Agreement.
8.4 NOTICES. Any notices desired, required or permitted to be given
hereunder will be delivered personally or mailed, certified mail, return
receipt requested, or delivered by overnight courier service, to the
following addresses, or such other address as any party hereto designates by
written notice to the Corporation, and will be deemed to have been given upon
delivery, if delivered personally, five days after mailing, if mailed, or one
business day after delivery to the overnight courier service, if delivered by
overnight courier service:
If to the Corporation, to:
Platinum Entertainment, Inc.
2001 Butterfield Road, Suite 1400
Downers Grove, Illinois 60515
Attention: Chief Executive Officer
If to the Purchasers, to the addresses set forth on the stock record book
of the Corporation.
8.5 GOVERNING LAW. The validity, meaning and effect of this Agreement
will be determined in accordance with the internal laws of the State of
Illinois applicable to contracts made and to be performed in that state.
8.6 EXHIBITS. All exhibits hereto are an integral part of this
Agreement.
5
<PAGE>
8.7 FINAL AGREEMENT. This Agreement, together with those documents
referred to herein, constitutes the final agreement of the parties concerning
the matters referred to herein, and supersedes all prior agreements and
understandings.
8.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute one instrument.
6
<PAGE>
The parties hereto have executed this Stock and Warrant Purchase
Agreement as of the date first set forth above.
PLATINUM ENTERTAINMENT, INC.
By:______________________________________
Its:_____________________________________
PLATINUM VENTURE PARTNERS I, L.P.
By:______________________________________
Its:_____________________________________
PLATINUM VENTURE PARTNERS II, L.P.
By:______________________________________
Its:_____________________________________
<PAGE>
SCHEDULE 1
NUMBER OF NUMBER OF
PURCHASER SERIES C SHARES WARRANT SHARES PURCHASE PRICE
Platinum Venture 2,500 450,000 $2,500,000
Partners II, L.P.,
as nominee
