<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 0-27852
PLATINUM ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3802328
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2001 Butterfield Road
Downers Grove, Illinois 60515
(Address of principal executive offices, including zip code)
(630) 769-0033
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
5,275,040 Shares of Common Stock, par value $.001 per share, at January 14, 1998
<PAGE>
PLATINUM ENTERTAINMENT, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 1997
TABLE OF CONTENTS
PAGE
----
Part I - FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheets pro forma November 30, 1997
(Unaudited), November 30, 1997 (Unaudited) and May 31,
1997. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations for the three and
six months ended November 30, 1997 and 1996 (Unaudited) . . 5
Consolidated Statements of Cash Flows for the three and
six months ended November 30, 1997 and 1996 (Unaudited) . . 6
Notes to Unaudited Consolidated Financial Statements. . . . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . 10
Part II - OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . 17
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . 18
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Exhibits
2
<PAGE>
PART 1 - FINANICAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
PLATINUM ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
(NOTE 1)
NOVEMBER 30, NOVEMBER 30, MAY 31,
1997 1997 1997
(UNAUDITED) (UNAUDITED)
ASSETS
<S> <C> <C> <C>
Current assets:
Cash $ 3,694 $ 226 $53
Cash in escrow, net reserves of $1,750, $1,750 and $-,
respectively - - 1,750
Accounts receivable, less allowances of $3,312,
$3,312 and $3,291, respectively 19,095 19,095 15,034
Artist advances 2,791 2,791 2,444
Inventories, less allowances of $492, $492
and $350, respectively 5,354 5,354 5,416
Other 788 388 1,068
-------------------------------------
Total current assets 31,722 27,854 25,765
Artist advances, net of current amounts, less allowances
of $10,691, $10,691 and $9,745, respectively 3,061 3,061 2,297
Equipment and leasehold improvements, net 1,069 1,069 1,185
Music catalog, less accumulated amortization of $719,
$719 and $327, respectively 18,885 18,885 19,277
Music publishing rights, less accumulated amortization
of $298, $298 and $203, respectively 3,529 3,529 3,624
Goodwill, less accumulated amortization of $302, $302
and $97, respectively 7,946 7,946 6,001
Equity investment in joint venture 2,954 2,954 3,154
Deferred financing fees 727 - -
Other 1,097 1,097 1,001
-------------------------------------
Total assets $ 70,990 $ 66,395 $ 62,304
-------------------------------------
-------------------------------------
</TABLE>
3
See accompanying notes to financial statements
<PAGE>
PLATINUM ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
(NOTE 1)
NOVEMBER 30, NOVEMBER 30, MAY 31,
1997 1997 1997
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving line of credit $ - $ 10,000 $ 9,706
Term loan - 25,000 25,000
Current portion of long-term bank debt 2,000 - -
Accounts payable 7,240 7,240 4,038
Accrued liabilities and other 4,284 5,403 2,521
Reserve for future returns 3,491 3,491 2,660
Royalties payable 5,913 5,913 5,513
----------------------------------------
Total current liabilities 22,928 57,047 49,438
Convertible subordinated debentures 5,000 5,000 5,000
Bank debt 18,000 - -
Stockholders' equity:
Preferred Stock:
Preferred Stock ($.001 par value); 10,000,000 shares
authorized, no shares issued and outstanding pro forma
November 30, November 30 and May 31, 1997, respectively - - -
Series B Convertible Preferred Stock ($.001 par value);
20,000 shares issued and outstanding pro forma
November 30, 1997, no shares issued and
outstanding November 30 and May 31, 1997, respectively - - -
Series C Convertible Preferred Stock ($.001 par value);
2,500 shares issued and outstanding pro forma
November 30, 1997, no shares issued and
outstanding November 30 and May 31, 1997, respectively - - -
Common Stock:
Common Stock ($.001 par value); 40,000,000 shares authorized,
5,274,403 shares issued and outstanding pro forma November
30 and November 30, 1997 and 5,171,439 shares issued and
outstanding May 31, 1997, respectively 5 5 5
Additional paid-in capital 58,475 37,761 37,261
Accumulated deficit (33,418) (33,418) (29,400)
----------------------------------------
Stockholders' equity 25,062 4,348 7,866
----------------------------------------
Total liabilities and stockholders' equity $ 70,990 $ 66,395 $ 62,304
----------------------------------------
----------------------------------------
</TABLE>
4
See accompanying notes to financial statements
<PAGE>
PLATINUM ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
QUARTER ENDED NOVEMBER 30 SIX MONTHS ENDED NOVEMBER 30
-------------------------- -----------------------------
1997 1996 1997 1996
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Gross product sales $ 19,676 $ 5,962 $ 31,356 $ 11,609
Less: Returns and allowances (3,203) (1,199) (6,220) (2,272)
Less: Discounts (1,561) (319) (2,165) (763)
-------------------------- -----------------------------
Net product sales 14,912 4,444 22,971 8,574
Licensing, publishing and other revenues 373 355 932 470
-------------------------- -----------------------------
Net sales 15,285 4,799 23,903 9,044
Cost of sales and services 7,401 3,215 11,094 5,804
-------------------------- -----------------------------
Gross profit 7,884 1,584 12,809 3,240
Other operating expenses:
Selling, general and administrative 5,269 2,441 9,233 4,745
Merger, restructuring and one-time costs 1,964 - 2,965 -
Depreciation and amortization 515 97 1,000 167
-------------------------- -----------------------------
7,748 2,538 13,198 4,912
-------------------------- -----------------------------
Operating income (loss) 136 (954) (389) (1,672)
Interest income 21 36 42 126
Interest expense (1,450) (2) (2,659) (5)
Other financing costs (363) - (813) -
Equity loss (215) - (200) -
-------------------------- -----------------------------
Net loss $ (1,871) $ (920) $ (4,019) $ (1,551)
-------------------------- -----------------------------
-------------------------- -----------------------------
Per common share $ (0.35) $ (0.18) $ (0.77) $ (0.30)
Weighted average number of common shares outstanding 5,275,460 5,142,106 5,224,804 5,102,221
</TABLE>
5
See accompanying notes to financial statements
<PAGE>
PLATINUM ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED NOVEMBER 30
-------------------------------------
PRO FORMA 1997 1996
1997
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (4,019) $ (4,019) $ (1,551)
Adjustments to reconcile net loss to net cash used in
operating activities:
Charge to provision for future returns 198 198 175
Charge to provision for doubtful accounts 200 200 -
Charge to provision for co-op advertising 221 221 -
Charge to provision for unrecoupable artist balances 296 296 237
Depreciation and amortization 1,000 1,000 167
Equity loss from joint venture 200 200 -
Write-off of one-time costs 2,525 2,525 -
Changes in operating assets and liabilities:
Accounts receivable (4,482) (4,482) (1,282)
Inventories (338) (338) (777)
Notes receivable - - 1,025
Artist advances (2,057) (2,057) (2,038)
Accounts payable 3,202 3,202 (142)
Accrued liabilities and other 1,763 2,882 (801)
Reserve for future returns (468) (468) -
Royalties payable 400 400 2,041
Other (707) (307) (735)
-------------------------------------
Net cash used in operating activities (2,066) (547) (3,681)
INVESTING ACTIVITIES
Investment in joint venture - - (3,063)
Prepaid acquisition costs - - (259)
Cash paid for acquisition - - (100)
Purchases of equipment and leasehold improvements (74) (74) (166)
-------------------------------------
Net cash used in investing activities (74) (74) (3,588)
FINANCING ACTIVITIES
Proceeds from revolving line of credit 294 294 -
Payments on revolving line of credit (10,000) - -
Payment of bank term loan (25,000) - -
Proceeds from long-term debt 20,000 - -
Deferred financing costs (727) - -
Proceeds from sale of Common Stock 500 500 -
Net proceeds from sale of preferred stock and warrants
to purchase Common Stock 20,714 - -
-------------------------------------
Net cash provided by financing activities 5,781 794 -
-------------------------------------
Net increase (decrease) in cash 3,641 173 (7,269)
Cash, beginning of period 53 53 8,222
-------------------------------------
Cash, end of period $ 3,694 $ 226 $ 953
-------------------------------------
-------------------------------------
</TABLE>
6
See accompanying notes to financial statements
<PAGE>
PLATINUM ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. BASIS OF PRESENTATION
The financial statements included herein are unaudited and have been
prepared in accordance with generally accepted accounting principles for interim
financial reporting and Securities and Exchange Commission ("Commission")
regulations. In the opinion of management, the financial statements reflect all
adjustments (of a normal and recurring nature) which are necessary to present
fairly the financial position, results of operations and cash flows for the
interim periods presented, except as addressed in Note 4 below. These financial
statements should be read in conjunction with the audited consolidated financial
statements and notes thereto for the fiscal year ended May 31, 1997 of Platinum
Entertainment, Inc. ("Company") included in the Annual Report on Form 10-K/A.
The interim results presented are not necessarily indicative of the results that
may be expected for the year ending May 31, 1998.
On December 12, 1997, the Company sold 22,500 shares (including 2,500
shares to affiliates of the Company) of convertible preferred stock and
warrants to purchase 4,050,000 shares (including 450,000 shares to affiliates
of the Company) of Common Stock for aggregate consideration of $22,500
(approximately $20,714 net of related costs) (collectively the "Preferred
Stock with Warrants Issuance"). The net proceeds were used to pay amounts
outstanding under the Company's $35,000 acquisition-related bank financing
with Bank of Montreal ("BMO"). In addition, the Company refinanced its
banking facility with BMO resulting in bank debt of $20,000 with a three-year
term and a $10,000 three-year revolving credit facility. The Company was not
required to draw against the available line of credit when the refinancing
was effectuated. These events have been reflected in the pro forma
consolidated balance sheet at November 30, 1997 and the pro forma
consolidated statement of cash flows for the six months ended November 30,
1997 as if they had occurred on such date. See also Notes 3 and 4 below.
2. NET LOSS PER COMMON SHARE
Net loss per common share is computed based upon the weighted average
number of common shares outstanding.
3. DEBT
On January 31, 1997, the Company entered a Credit Agreement with BMO,
individually and as agent, to provide a 90-day term loan in the amount of
$25,000 and a 90-day revolving credit facility in the amount of $10,000 (the
"Original Credit Facility"). The Original Credit Facility was extended through
December 31, 1997 and was refinanced on December 12, 1997 as discussed below.
Financing costs associated with the Original Credit Facility from January 31,
1997 through November 30, 1997 approximated 9% of the total facility. The
interest incurred on the Original Credit Facility was initially LIBOR plus 6%
and was increased to LIBOR plus 9% effective August 1, 1997.
On December 12, 1997, the Company refinanced the Original Credit Facility
with the net proceeds from the Preferred Stock with Warrants Issuance and an
amended credit agreement with BMO (the "Amended Credit Facility"). Under the
terms of the Amended Credit Facility, the Company has $20,000 in bank debt with
a three year term, due in quarterly installments beginning June 1, 1998, bearing
interest at the bank's base rate plus 1.0% per annum, and a $10,000 available
revolving line of credit, due in three years and bearing interest at the bank's
base rate plus 1/2 of 1.0% per annum. The Company was not required to draw
against the available line of credit when the refinancing was effectuated.
Borrowings under the revolving line of credit are limited to the Borrowing Base,
as defined, which is based upon eligible accounts receivable and inventory. The
Amended Credit Facility contains certain financial covenants and is secured by
substantially all of the Company's assets.
7
<PAGE>
4. PREFERRED STOCK AND WARRANTS
Pursuant to an Investment Agreement dated October 12, 1997, and as amended,
on December 12, 1997 the Company issued and sold to certain parties (the
"Purchasers"), for aggregate gross consideration of $20,000, 20,000 shares of
Series B Convertible Preferred Stock ("Series B Preferred Stock") and warrants
to purchase 3,600,000 shares of Common Stock ("Purchaser Warrants"). The
Company also issued and sold to a certain affiliate of the Company, for
aggregate gross consideration of $2,500, 2,500 shares of Series C Convertible
Preferred Stock ("Series C Preferred Stock") and warrants to purchase 450,000
shares of Common Stock (the "Affiliate Warrants"). The Series B Preferred Stock
and the Series C Preferred Stock are collectively referred to as the "Preferred
Stock."
The Preferred Stock accrues dividends compounded at an annual rate of 12.0%
for the first year, 14.0% for the second year, 16.0% for the third year, 18.0%
for the fourth and fifth years and 20% at all times thereafter, of the purchase
price of the Preferred Stock, in preference to any dividends on any other class
of capital stock. The Preferred Stock will be redeemable by the Company at any
time at a price equal to the purchase price paid by the Purchasers thereof plus
accrued and unpaid dividends. The Preferred Stock will be convertible,
commencing two years from the date of issue, into shares of Common Stock at the
lesser of $5.9375 or the average of the daily closing price per share of 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 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 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 which may be received upon exercise of
the Purchaser Warrants will be increased by an amount equal to 12.0% of the
shares initially underlying the Purchaser Warrants on each anniversary of the
original date of issuance of the Series B Preferred Stock, so long as any Series
B Preferred Stock remains outstanding. The Common Stock underlying the
Purchaser and Affiliate Warrants may be purchased at an exercise price per share
of the lesser of $6.25 and 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 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 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 Preferred
Stock disagree with the Board's determination, then fair market value will be
determined by an independent financial expert.
The value of the net proceeds ($20,714) of the Preferred Stock with
Warrants Issuance is to be assigned to each of the securities involved in the
transaction. The Company has engaged an independent company to value each
equity security issued and sold in the Preferred Stock with Warrants Issuance
and will disclose the proper valuation of such securities upon completion of
the valuation, as appropriate.
8
<PAGE>
5. MERGER AND RESTRUCTURING COSTS
As a result of the acquisition of substantially all the assets of
Intersound, Inc. ("Intersound") during January 1997, the Company incurred
significant costs to merge and restructure its business with Intersound. Such
merger and restructuring costs include severance costs, relocation costs, lease
commitment write-offs, warehouse closing costs and other related costs and were
primarily expensed during fiscal 1997. $39 and $265 of such costs were expensed
during the three and six months ended November 30, 1997, respectively. The
restructuring is substantially complete at the end of the second quarter of
fiscal 1998. Such restructuring resulted in shifts in the selling and promotion
efforts of the Company's Country label and in-house sales department and a
change in third-party fulfillment of Platinum Christian Distribution from
Riverside Book and Bible House, Inc. to the Company's primary third-party
distributor, PolyGram Group Distribution, Inc. The shift in third-party
fulfillment of Platinum Christian Distribution was not fully implemented until
September 1, 1997, resulting in negligible revenues for product sales to the
Christian bookstore market during the first fiscal quarter of 1998.
6. TERMINATION OF THE K-TEL AGREEMENT
On March 3, 1997, the Company and K-tel International, Inc. ("K-tel")
signed a purchase and sale agreement (the "K-tel Agreement") pursuant to which
the Company agreed to acquire K-tel's worldwide music business assets, except
for K-tel's European and former Soviet Union music business, through the
purchase of the stock of K-tel International (USA), Inc. and Dominion Music,
Inc., both wholly-owned subsidiaries of K-tel ("the K-tel Acquisition"). The
Company deposited $1,750 in escrow in accordance with the K-tel Agreement. On
September 10, 1997, the Company terminated the K-tel Agreement alleging that
K-tel materially breached the K-tel Agreement. Both the Company and K-tel have
filed claim to the escrowed amounts. The outcome of such claims is uncertain.
Accordingly, the Company reserved the full escrowed amount during the second
fiscal quarter. In addition, approximately $175 and $950 of legal, accounting,
and other incremental costs associated with the K-tel Acquisition were expensed
by the Company during the three and six months ended November 30, 1997,
respectively. These costs are classified as merger, restructuring and one-time
costs in the consolidated statements of operations.
7. RECLASSIFICATIONS
Certain amounts in the three and six months ended November 30, 1996
consolidated statements of operations have been reclassified to conform with the
three and six months ended November 30, 1997 presentation.
8. SUBSEQUENT EVENT
See Notes 1, 3 and 4.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information in this section should be read together with the
consolidated financial statements and notes thereto that are included elsewhere
in this filing.
OVERVIEW
The Company is a full-service music company that produces, licenses,
acquires, markets and distributes high quality recorded music for a variety of
musical genres. The Company currently produces music in the gospel,
classical/themed, adult contemporary, country, blues and urban/dance genres,
primarily under its CGI Records, Intersound Classical, River North Records,
Intersound Country, House of Blues and Intersound Urban labels. The Company's
products include new releases, typically by artists established in a particular
genre, as well as compilations and repackagings of previously recorded music
that enable the Company to exploit its catalog of master recordings.
On December 12, 1997, the Company sold 22,500 shares (including 2,500
shares to affiliates of the Company) of convertible preferred stock and warrants
to purchase 4,050,000 shares (including 450,000 shares to affiliates of the
Company) of Common Stock for aggregate consideration of $22,500,000
(approximately $20,714,000 net of related costs) (collectively the "Preferred
Stock with Warrants Issuance"). The net proceeds were used to pay amounts
outstanding under the Company's $35,000,000 acquisition-related bank financing
with Bank of Montreal ("BMO"). In addition, the Company refinanced its banking
facility with BMO resulting in bank debt of $20,000,000 with a three-year term
and a $10,000,000 three-year available revolving credit facility. The Company
was not required to draw against the available line of credit when the
refinancing was effectuated. See "Capital Resources."
As a result of the acquisition of substantially all the assets of
Intersound, Inc. ("Intersound") during January 1997, the Company incurred
significant costs to merge and restructure its business with Intersound. Such
merger and restructuring costs include severance costs, relocation costs, lease
commitment write-offs, warehouse closing costs and other related costs and were
primarily expensed during fiscal 1997. $39,000 and $265,000 of such costs were
expensed during the three and six months ended November 30, 1997, respectively.
The restructuring is substantially complete at the end of the second quarter of
fiscal 1998. Such restructuring resulted in shifts in the selling and promotion
efforts of the Company's Country label and in-house sales department and a
change in third-party fulfillment of Platinum Christian Distribution from
Riverside Book and Bible House, Inc. to the Company's primary third-party
distributor, PolyGram Group Distribution, Inc. ("PGD"). The shift in
third-party fulfillment of Platinum Christian Distribution was not fully
implemented until September 1, 1997, resulting in negligible revenues for
product sales to the Christian bookstore market during the first fiscal quarter
of 1998.
On March 3, 1997, the Company and K-tel International, Inc. ("K-tel")
signed a purchase and sale agreement (the "K-tel Agreement") pursuant to which
the Company agreed to acquire K-tel's worldwide music business assets, except
for K-tel's European and former Soviet Union music business, through the
purchase of the stock of K-tel International (USA), Inc. and Dominion Music,
Inc., both wholly-owned subsidiaries of K-tel ("the K-tel Acquisition"). The
Company deposited $1,750,000 in escrow in accordance with the K-tel Agreement.
On September 10, 1997, the Company terminated the K-tel Agreement alleging that
K-tel materially breached the K-tel Agreement. Both the Company and K-tel have
filed claim to the escrowed amounts. The outcome of such claims is uncertain.
Accordingly, the Company reserved the full escrowed amount during the second
fiscal quarter. In addition, approximately $175,000 and $950,000 of legal,
accounting, and other incremental costs associated with the K-tel Acquisition
were expensed by the Company during the three and six months ended November 30,
1997, respectively. These costs are classified as merger, restructuring and
one-time costs in the consolidated statements of operations.
The Company records revenues for music products when such products are
shipped to retailers. In accordance with industry practice, the Company's music
products are sold on a returnable basis. The
10
<PAGE>
Company's allowance for future returns is based upon its historical returns,
SOUNDSCAN data and the return rate of the Company's primary distributor, PGD.
A significant recurring funding requirement of the Company is for artist
and repertoire ("A&R") expenses, which include recording costs and advances to
artists. The Company makes substantial payments each period for recording costs
and advances in order to maintain and enhance its artist roster. These costs
are recouped from the artists' royalties, to the extent possible, from future
album sales. Artist advances are capitalized as an asset when the current
popularity and past performance of the artist provides a sound basis for
estimating the probable future recoupment of such advances from earnings
otherwise payable to the artist.
The Company primarily distributes internationally by means of licensing
arrangements. The first of these arrangements began during fiscal 1996 with MCA
Records, Ltd. The Company terminated this arrangement during the first fiscal
quarter of 1998 and has entered international licensing arrangements on a
country-by-country basis. Revenues derived from the licensing of recorded
masters are calculated as a percentage of retail sales by the licensee net of
returns and are recognized by the Company upon notification of retail sales net
of returns by the licensee.
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of gross revenues, certain
items which are included in the Company's statements of operations for the
fiscal periods reflected below. Operating results for any period are not
necessarily indicative of results for any future periods.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
NOVEMBER 30,
------------------------------------------------
1997 1996
(IN THOUSANDS, EXCEPT PERCENTAGE AMOUNTS)
<S> <C> <C> <C> <C>
Total gross revenues . . . . . . . . . . $20,049 100.0% $6,317 100.0%
Less: Returns and allowances . . . . . . (3,203) -16.0% (1,199) -19.0%
Less: Discounts. . . . . . . . . . . . . (1,561) -7.8% (319) -5.0%
-------- --------
Total net revenues . . . . . . . . . . . 15,285 76.2% 4,799 76.0%
Cost of sales and services . . . . . . . 7,401 36.9% 3,215 50.9%
-------- --------
Gross profit . . . . . . . . . . . . . . 7,884 39.3% 1,584 25.1%
Other operating expenses:
Selling, general and
administrative expenses. . . . . . . . 5,269 26.3% 2,441 38.6%
Merger, restructuring and
one-time costs . . . . . . . . . . . . 1,964 9.8% - -
Depreciation and amortization. . . . . . 515 2.6% 97 1.5%
-------- --------
7,748 38.7% 2,538 40.1%
-------- --------
Operating income (loss). . . . . . . . . 136 0.6% (954) -15.0%
Interest income. . . . . . . . . . . . . 21 0.1% 36 0.6%
Interest expense . . . . . . . . . . . . (1,450) -7.2% (2) -
Other financing costs. . . . . . . . . . (363) -1.8% - -
Equity loss. . . . . . . . . . . . . . . (215) -1.1% - -
-------- --------
Net loss . . . . . . . . . . . . . . . . ($1,871) -9.4% ($920) -14.4%
-------- --------
-------- --------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
NOVEMBER 30,
------------------------------------------------
1997 1996
(IN THOUSANDS, EXCEPT PERCENTAGE AMOUNTS)
<S> <C> <C> <C> <C>
Total gross revenues . . . . . . . . . . $32,288 100.0% $12,079 100.0%
Less: Returns and allowances . . . . . . (6,220) -19.3% (2,272) -18.8%
Less: Discounts. . . . . . . . . . . . . (2,165) -6.7% (763) -6.3%
-------- --------
Total net revenues . . . . . . . . . . . 23,903 74.0% 9,044 74.9%
Cost of sales and services . . . . . . . 11,094 34.4% 5,804 48.1%
-------- --------
Gross profit . . . . . . . . . . . . . . 12,809 39.6% 3,240 26.8%
Other operating expenses:
Selling, general and
administrative expenses. . . . . . . . 9,233 28.6% 4,745 39.3%
Merger, restructuring and
one-time costs . . . . . . . . . . . . 2,965 9.2% - -
Depreciation and amortization. . . . . . 1,000 3.1% 167 1.4%
-------- --------
13,198 40.9% 4,912 40.7%
-------- --------
Operating income (loss). . . . . . . . . (389) -1.3% (1,672) -13.9%
Interest income. . . . . . . . . . . . . 42 0.1% 126 1.0%
Interest expense . . . . . . . . . . . . (2,659) -8.2% (5) -
Other financing costs. . . . . . . . . . (813) -2.5% - -
Equity loss. . . . . . . . . . . . . . . (200) -0.6% - -
-------- --------
Net loss . . . . . . . . . . . . . . . . ($4,019) -12.5% ($1,551) -12.9%
-------- --------
-------- --------
</TABLE>
GROSS REVENUES
Gross revenues increased $13,732,000 or 217.4% to $20,049,000 for the
current fiscal quarter compared to the comparable period of the prior fiscal
year, and increased $20,209,000 or 167.3% to $32,288,000 for the six months
ended November 30, 1997 compared to the comparable period of the prior fiscal
year. The increase related to increased revenues in all genres with the
exception of Country, for which the Company experienced a decrease in
incremental revenues recognized in the first quarter of the
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<PAGE>
prior fiscal year from the release of The Beach Boys' STARS AND STRIPES,
VOLUME I. Significant contributions to revenues for the current fiscal
quarter include John Denver's A CELEBRATION OF LIFE and the continued success
of Peter Cetera's A COLLECTION (River North), William Becton's HEART OF A
LOVE SONG (CGI Records), BOOTLEG BOOTY, a compilation of various urban
artists, and George Clinton's LIVE...AND KICKIN' (Intersound Urban), Eddie
Rabbitt's BEATIN' THE ODDS (Intersound Country), PAINT IT, BLUE - a tribute
to the Rolling Stones by various blues artists (House of Blues) and numerous
Christmas releases (Intersound Classical).
RETURNS AND ALLOWANCES
Returns and allowances increased $2,004,000 or 167.1% to $3,203,000 for the
current fiscal quarter compared to the comparable period of the prior fiscal
year, and increased $3,948,000 or 173.8% to $6,220,000 for the six months ended
November 30, 1997 compared to the comparable period of the prior fiscal year.
Returns and allowances as a percentage of gross product sales, less discounts,
decreased to 17.7% for the current fiscal quarter from 21.2% for the comparable
period of the prior fiscal year, and remained relatively unchanged at 21.3% for
the six months ended November 30, 1997 from 20.9% for the comparable period of
the prior fiscal year. The decrease in the current fiscal quarter is primarily
due to unusually high returns in the prior year second quarter as a result of a
weakened music retail market at that time.
DISCOUNTS
Discounts increased $1,242,000 or 389.3% to $1,561,000 for the current
fiscal quarter compared to the comparable period of the prior fiscal year, and
increased $1,402,000 or 183.7% to $2,165,000 for the six months ended November
30, 1997 compared to the comparable period of the prior fiscal year. Discounts
as a percentage of gross product sales increased to 7.9% for the current fiscal
quarter from 5.4% for the comparable period of the prior fiscal year, and
remained relatively unchanged at 6.9% for the six months ended November 30, 1997
from 6.6% for the comparable period of the prior fiscal year. The increase in
the current fiscal quarter is primarily due to customer incentives owed on
activity through the recently acquired Intersound distribution system; no such
incentives were owed in the prior year second quarter.
COST OF SALES AND SERVICES
Cost of sales and services increased $4,186,000 or 130.2% to $7,401,000 for
the current fiscal quarter compared to the comparable period of the prior fiscal
year, and increased $5,290,000 or 91.1% to $11,094,000 for the six months ended
November 30, 1997 compared to the comparable period of the prior fiscal year.
Cost of sales and services as a percentage of gross revenues decreased to 36.9%
for the current fiscal quarter from 50.9% for the comparable period of the prior
fiscal year, and decreased to 34.% for the six months ended November 30, 1997
from 48.1% for the comparable period of the prior fiscal year. The decreased
costs are primarily a result of the lower cost of product sales associated with
direct-to-retail activity, which is generally subject to lower royalty costs and
does not incur a third-party distribution fee. In addition, the Company is
experiencing manufacturing cost savings due to volume discounts as a result of
the acquisitions completed during fiscal 1997.
GROSS PROFIT
Gross profit increased $6,300,000 or 397.7% to $7,884,000 for the current
fiscal quarter compared to the comparable period of the prior fiscal year, and
increased $9,569,000 or 295.3% to $12,809,000 for the six months ended November
30, 1997 compared to the comparable period of the prior fiscal year. As a
percentage of gross revenues, gross profit increased to 39.3% for the current
fiscal quarter from 25.1% for the comparable period of the prior fiscal year,
and increased to 39.6% for the six months ended November 30, 1997 from 26.8% for
the comparable period of the prior fiscal year. The increase is primarily a
result of the lower cost of product sales associated with direct-to-retail
activity, which is
12
<PAGE>
generally subject to lower royalty costs and does not incur a third-party
distribution fee. In addition, the Company is experiencing manufacturing cost
savings due to volume discounts as a result of the acquisitions completed during
fiscal 1997.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased $2,828,000 or 115.9%
to $5,269,000 for the current fiscal quarter compared to the comparable period
of the prior fiscal year, and increased $4,488,000 or 94.6% to $9,233,000 for
the six months ended November 30, 1997 compared to the comparable period of the
prior fiscal year. Selling general and administrative expenses as a percentage
of gross revenues decreased to 26.3% for the current fiscal quarter from 38.6%
for the comparable period of the prior fiscal year, and decreased to 28.6% for
the six months ended November 30, 1997 from 39.3% for the comparable period of
the prior fiscal year. The percentage decrease relates to synergies realized
from the acquisitions completed during fiscal 1997 and an increased revenue
base.
MERGER, RESTRUCTURING AND ONE-TIME COSTS
See "Overview" above for details of nonrecurring merger, restructuring and
one-time costs of $1,964,000 and $2,965,000 for the three and six months ended
November 30, 1997, respectively.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased to $515,000 for the current fiscal
quarter from $97,000 for the comparable period of the prior fiscal year, and
increased to $1,000,000 for the six months ended November 30, 1997 from $167,000
for the comparable period of the prior fiscal year. The increase relates
primarily to amortization expense resulting from approximately $31,000,000 of
music catalog, music publishing rights and goodwill assets recorded from the
acquisitions completed during fiscal 1997.
OPERATING INCOME (LOSS)
As a result of the factors described above, operating income of $136,000
was experienced in the current fiscal quarter compared to a loss of $954,000 in
the comparable period of the prior fiscal year, and an operating loss of
$389,000 was experienced during the six months ended November 30, 1997 compared
to an operating loss of $1,672,000 for the comparable period of the prior fiscal
year.
INCOME TAXES
No tax expense or benefit has been recorded through November 30, 1997 due
to the Company's net operating loss carryforward and related valuation
allowance, as required under generally accepted accounting principles. Pursuant
to Section 382 of the Internal Revenue Code of 1986, as amended ("Section 382"),
the Company's net operating loss carryforward of approximately $22,601,000 at
May 31, 1997, expiring in years 2007 through 2012, is subject to annual
limitations due to a change in ownership as a result of the IPO in March 1996
and the recently completed Preferred Stock with Warrants Issuance. Accordingly,
approximately $12,349,000 of the net operating loss carryforward is subject to
an annual limitation of approximately $2,200,000.
INTEREST EXPENSE
Interest expense for the current fiscal quarter totaled $1,405,000 compared
to $2,000 for the comparable period of the prior fiscal year, and totaled
$2,659,000 for the six months ended November 30, 1997 compared to $5,000 for the
comparable period of the prior fiscal year. See "Capital Resources" below for
details of the Company's current debt structures.
13
<PAGE>
OTHER FINANCING COSTS
Other financing costs of $363,000 and $813,000 were incurred during the
three and six months ended November 30, 1997, respectively, due to the funding
of the Intersound Acquisition. These costs represent fees incurred as a result
of extension of the Original Credit Facility. See "Capital Resources" below for
details of the Company's current debt structures.
NET LOSS
The net loss for the current fiscal quarter totaled $1,871,000 compared to
a net loss of $920,000 for the comparable period of the prior fiscal year, and
totaled $4,019,000 for the six months ended November 30, 1997 compared to a net
loss of $1,551,000 for the comparable period of the prior fiscal year. The
increased net loss relates primarily to non-recurring financing, merger,
restructuring and one-time costs ($2,327,000 and $3,778,000 for the three and
six months ended November 30, 1997, respectively) and interest expense
($1,405,000 and $2,659,000 for the three and six months ended November 30, 1997,
respectively) related to the Intersound Acquisition, as well as an increase in
depreciation and amortization related to the acquisitions completed during
fiscal 1997, offset by the increase in gross profit as discussed above.
RECENTLY ISSUED ACCOUNTING STANDARDS
Statement of Financial Accounting Standards ("SFAS") No. 128, EARNINGS PER
SHARE, establishes standards for computing and presenting earnings per share
("EPS") and simplifies the standards for computing EPS currently found in
Accounting Principles Standards Board ("APB") Opinion No. 15, EARNINGS PER
SHARE. Common stock equivalents under APB Opinion No. 15, with the exception of
contingently issuable shares (shares issuable for little or no cash
consideration), are no longer included in the calculation of primary or basic
EPS. Under SFAS No. 128, contingently issuable shares are included in the
calculation of diluted EPS. This Statement is effective for the Company's
fiscal quarter ending February 28, 1998. The impact of SFAS 128 is not expected
to be material to the Company's financial disclosures.
SFAS No. 129, DISCLOSURE OF INFORMATION ABOUT CAPITAL STRUCTURE,
establishes standards for disclosing information about an entity's capital
structure. This Statement requires disclosure of the pertinent rights and
privileges of various securities outstanding (stock, options, warrants,
preferred stock, debt and participation rights) including dividend and
liquidation preferences, participant rights, call prices and dates, conversion
or exercise prices and redemption requirements. This Statement is effective for
the Company's fiscal year ending May 31, 1998. The impact of SFAS 129 is not
expected to materially change the Company's financial disclosures.
SEASONALITY
The Company's results of operations are subject to seasonal variations. In
accordance with industry practice, the Company records revenues for music
product when such products are shipped to retailers. The Company has
historically experienced a decline in revenues and operating income in its third
fiscal quarter (December, January and February) due to the fact that retailers
purchase products from the Company in the quarter ending November 30 in
anticipation of holiday sales. As a result, sales are traditionally lower
during December and the post holiday period. However, the acquisition of
Intersound is expected to help mitigate the seasonality of the third fiscal
quarter in the future due to its history of new releases during January and
February.
14
<PAGE>
SIGNIFICANT MATTERS
On December 12, 1997, the Company sold 22,500 shares (including 2,500
shares to affiliates of the Company) of convertible preferred stock and warrants
to purchase 4,050,000 shares (including 450,000 shares to affiliates of the
Company) of Common Stock for aggregate consideration of $22,500,000
(approximately $20,714,000 net of related costs). The net proceeds were used to
pay amounts outstanding under the Company's $35,000,000 acquisition-related bank
financing with BMO. In addition, the Company refinanced its banking facility
with BMO resulting in bank debt of $20,000,000 with a three-year term and a
$10,000,000 three-year available revolving credit facility. The Company was not
required to draw against the available line of credit when the refinancing was
effectuated. See "Capital Resources."
LIQUIDITY
The Company's cash balances were $226,000 and $53,000 at November 30 and
May 31, 1997, respectively. Assuming the Preferred Stock with Warrants Issuance
and bank refinancing that occurred on December 12,1997 had occurred on November
30, 1997, the Company's cash balance would have been $3,694,000. See Note 1 to
the Consolidated Financial Statements. Net cash used in operating activities
was $2,066,000 for the six months ended November 30, 1997. The uses primarily
reflect net cash used to fund accounts receivable of $4,482,000 and artist
advances of $2,057,000, attributable to releases by such artists as Peter
Cetera, The Bellamy Brothers and George Clinton, several Blues compilations, and
scheduled future releases including Kansas, Phoebe Snow, and numerous Gospel
albums, by artists including Bronx Mass Choir and Terri Carroll. The net uses
were offset primarily by increases in accounts payable and accrued and other
liabilities funding of $3,202,000 and $2,882,000, respectively, and a $2,525,000
write-off of one-time costs. See "Results of Operations - Merger, Restructuring
and One-Time Costs."
Net cash provided by financing activities for the six months ended November
30, 1997 was $500,000 from the sale of shares of Common Stock to a director of
the Company and $294,000 in borrowings under the revolving line of credit under
the Original Credit Facility. The Original Credit Facility was refinanced
subsequent to November 30, 1997. See "Capital Resources." In addition, the
Company sold equity securities for net proceeds of $20,714,000 subsequent to
November 30, 1997. See "Significant Matters" and "Capital Resources." Assuming
the Preferred Stock with Warrants Issuance and bank refinancing that occurred on
December 12,1997 had occurred on November 30, 1997, the Company's net cash
provided by financing activities for the six months ended November 30, 1997
would have been $5,781,000. See Note 1 to the Consolidated Financial
Statements.
A significant recurring funding requirement of the Company is for A&R
expenses, which include recording costs and advances to artists. The Company
makes substantial payments each period for recording costs and advances in order
to maintain and enhance its artist roster. These costs are recouped from the
artists' royalties, to the extent possible, from future album sales. Artist
advances are capitalized when the current popularity and past performance of the
artist provides a sound basis for estimating the probable future recoupment of
such advances from earnings otherwise payable to the artist.
CAPITAL RESOURCES
On January 31, 1997, the Company entered a Credit Agreement with BMO,
individually and as agent, to provide a 90-day term loan in the amount of
$25,000,000 and a 90-day revolving credit facility in the amount of $10,000,000
(the "Original Credit Facility"). The Original Credit Facility was extended
through December 31, 1997 and was refinanced on December 12, 1997 as discussed
below. Financing costs associated with the Original Credit Facility from
January 31, 1997 through November 30, 1997 approximated 9% of the total
facility. The interest incurred on the Original Credit Facility was initially
LIBOR plus 6% and was increased to LIBOR plus 9% effective August 1, 1997.
15
<PAGE>
On December 12, 1997, the Company refinanced the Original Credit Facility
with the net proceeds from the Preferred Stock with Warrants Issuance and the
Amended Credit Facility. Under the terms of the Amended Credit Facility, the
Company has $20,000,000 in bank debt with a three year term, due in quarterly
installments beginning June 1, 1998, bearing interest at the bank's base rate
plus 1.0% per annum, and a $10,000,000 available revolving line of credit, due
in three years and bearing interest at the bank's base rate plus 1/2 of 1.0% per
annum. The Company was not required to draw against the available line of
credit when the refinancing was effectuated. Borrowings under the revolving
line of credit are limited to the Borrowing Base, as defined, which is based
upon eligible accounts receivable and inventory. The Amended Credit Facility
contains certain financial covenants and is secured by substantially all of the
Company's assets.
Pursuant to an Investment Agreement dated October 12, 1997, and as amended,
on December 12, 1997 the Company issued and sold to certain parties (the
"Purchasers"), for aggregate gross consideration of $20,000,000, 20,000 shares
of Series B Convertible Preferred Stock ("Series B Preferred Stock") and
warrants to purchase 3,600,000 shares of Common Stock ("Purchaser Warrants").
The Company also issued and sold to a certain affiliate of the Company, for
aggregate gross consideration of $2,500,000, 2,500 shares of Series C
Convertible Preferred Stock ("Series C Preferred Stock") and warrants to
purchase 450,000 shares of Common Stock (the "Affiliate Warrants"). The Series
B Preferred Stock and the Series C Preferred Stock are collectively referred to
as the "Preferred Stock."
The Preferred Stock accrues dividends compounded at an annual rate of 12.0%
for the first year, 14.0% for the second year, 16.0% for the third year, 18.0%
for the fourth and fifth years and 20% at all times thereafter, of the purchase
price of the Preferred Stock, in preference to any dividends on any other class
of capital stock. The Preferred Stock will be redeemable by the Company at any
time at a price equal to the purchase price paid by the Purchasers thereof plus
accrued and unpaid dividends. The Preferred Stock will be convertible,
commencing two years from the date of issue, into shares of Common Stock at the
lesser of $5.9375 or the average of the daily closing price per share of 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 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 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 which may be received upon exercise of
the Purchaser Warrants will be increased by an amount equal to 12.0% of the
shares initially underlying the Purchaser Warrants on each anniversary of the
original date of issuance of the Series B Preferred Stock, so long as any Series
B Preferred Stock remains outstanding. The Common Stock underlying the
Purchaser and Affiliate Warrants may be purchased at an exercise price per share
of the lesser of $6.25 and 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 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 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 Preferred
Stock disagree with the Board's determination, then fair market value will be
determined by an independent financial expert.
The Company intends to upgrade its current computer systems prior to the
end of fiscal 1998. While the Company has no material purchase commitments to
date, estimated upgrade expenditures are $500,000 to $750,000.
16
<PAGE>
The Company's near and long-term capital requirements will depend on
numerous factors, including the rate at which the Company grows and acquires new
artists and products. The Company has various ongoing needs for capital,
including working capital for operations, artist advances and project
development costs and capital expenditures to maintain and expand its
operations. In addition, as part of its strategy, the Company evaluates
potential acquisitions of music catalogs, publishing rights and labels. The
Company may in the future consummate acquisitions which may require the Company
to make additional capital expenditures, and such expenditures may be
significant. Future acquisitions, as well as other ongoing capital needs, may
be funded with institutional financing, seller financing and/or additional
equity or debt offerings. The Company currently does not have any material
commitments for capital expenditures for the next twelve months.
Stockholders' equity at November 30, 1997 totaled $4,348,000 compared to
$7,866,000 at May 31, 1997. This decrease of $3,518,000 or 44.7% is due to net
losses experienced by the Company during the six months ended November 30, 1997
offset by an equity sale of $500,000. Assuming the equity sale and bank
refinancing that occurred on December 12, 1997 had occurred on November 30,
1997, the Company's stockholders' equity at November 30, 1997 would have been
$25,062,000. See Note 1 to the Consolidated Financial Statements.
INFLATION
The impact of inflation on the Company's operating results has been
moderate in recent periods, reflecting generally lower rates of inflation in the
economy. While inflation has not had a material impact on operating results,
there is no assurance that the Company's business will not be affected by
inflation in the future.
SAFE HARBOR PROVISION
This filing contains certain forward-looking statements (within the meaning
of the Private Securities Litigation Reform Act of 1995) that involve
substantial risks and uncertainties. When used in this filing, the words
"anticipate," "believe," "estimate" and "expect" and similar expressions as they
relate to the Company or its management are intended to identify such
forward-looking statements. A number of important factors could cause the
Company's actual results, performance or achievements for fiscal 1998 and beyond
to differ materially from those expressed in such forward-looking statements.
These factors include, without limitation, commercial success of the Company's
repertoire, charges and costs related to acquisitions, relationships with
artists and producers, attraction and retention of key personnel, general
economic and business conditions and enhanced competition and new competitors in
the recorded music industry.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On September 10, 1997, the Company terminated the K-tel Agreement alleging
that K-tel materially breached the K-tel Agreement. See "Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Termination of the K-tel Agreement." Both the Company and K-tel have filed
claim to the escrowed amount. On September 12, 1997, K-tel filed suit against
the Company in the United States District Court for the District of Minnesota
("Minnesota Action"), claiming that it is entitled to the escrowed funds because
it terminated the K-tel Agreement when the transaction was not consummated
within the agreed time limits. K-tel has also asserted a claim for promissory
estoppel on the grounds that is incurred expenses in connection with the
transaction in reliance on the Company's assurances it had the financial ability
to close the transaction and alleges breach of confidentiality and
non-solicitation agreement and defamation by the Company. On October 3, 1997,
the Company filed suit against K-tel in the United States
17
<PAGE>
District Court for the Northern District of Illinois ("Illinois Action"),
alleging that K-tel (a) materially failed to comply with its covenant to
conduct its business in the ordinary course when it deviated from the release
schedule provided to the Company; (b) neglected its business, shifted its focus
to its successor business and failed to maintain the assets of its subsidiaries;
and (c) breached its representation and warranty that there were no material
adverse changes in the business and operations of its subsidiaries. In addition
to the escrowed funds, the Company is seeking a buyer's reimbursement under the
K-tel Agreement of $1,750,000. Alternatively, the Company is seeking rescission
of the K-tel Agreement and return of the escrowed funds. On December 10, 1997,
the Company filed its answer in the Minnesota Action, together with its
affirmative defenses and counterclaims, which counterclaims substantially
restated the claims originally made by the Company against K-tel in the Illinois
Action. On December 15, 1997, the Company voluntarily dismissed its complaint
filed in the Illinois Action and will pursue the claims made in that complaint
through the Minnesota Action. As of the date of this filing, the outcome of
such claims is uncertain. The Company intends to prosecute vigorously its
action against K-tel and defend vigorously K-tel's action.
On November 13, 1997, JCSHO, Inc., a Minnesota corporation, formerly known
as Intersound, Inc. ("JCSHO"), filed a complaint against the Company in the
District Court of Minnesota, Fourth Division. JCSHO alleges breach of contract
by the Company with regard to the convertible subordinated debentures in the
aggregate principal amount of $5,000,000 (the "Convertible Subordinated
Debentures") made payable to JCSHO in connection with the Intersound
Acquisition. JCSHO alleges that the Company is in default on its obligations
under the Convertible Subordinated Debentures due to failure to make certain
payments under the Convertible Subordinated Debentures at a defined default
interest rate. JCSHO is seeking damages in the amount of $5,000,000 and costs,
disbursements and attorney's fees. The Company believes that JCSHO's
allegations are without merit and intends to vigorously defend this litigation.
On January 7, 1998, the Company filed a motion to dismiss the complaint or in
the alternative to move the litigation to Illinois.
The Company is not a party to any other material litigation.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A. Exhibits.
3.1 Third Amended and Restated Certificate of Incorporation of the
Registrant, as amended.
3.2 Amended and Restated By-laws of the Registrant, as amended.
4.1 Warrant to Purchase 315,000 Shares of Common Stock of the Registrant
issued to Platinum Venture Partners II, L.P., as nominee, dated
December 12, 1997.
4.2 Warrant to Purchase 135,000 Shares of Common Stock of the Registrant
issued to Platinum Venture Partners II, L.P., as nominee, dated
December 12, 1997.
4.3 Warrant to Purchase 1,800,000 Shares of Common Stock of the Registrant
issued to SK-Palladin Partners, LP, dated December 12, 1997.
4.4 Warrant to Purchase 1,800,000 Shares of Common Stock of the Registrant
issued to MAC Music LLC, dated December 12, 1997.
4.5 Warrant to Purchase 50,000 Shares of Common Stock of the Registrant
issued to Carl D. Harnick, dated December 12, 1997.
4.6 Registration Rights Agreement, dated December 12, 1997, between the
Registrant and Platinum Venture Partners I, L.P and Platinum Venture
Partners II, L.P.
4.7 Registration Rights Agreement, dated December 12, 1997, between the
Registrant and Carl D. Harnick.
*10.1 Platinum Entertainment, Inc. 1997 Employee Stock Purchase Plan,
effective June 1, 1997, is herein incorporated by reference to the
1997 Annual Meeting of Stockholders Proxy Statement filed with
the Commission December 2, 1997 (the "1997 Annual Meeting of
Stockholders Proxy Statement").
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<PAGE>
*10.2 Platinum Entertainment, Inc. 1995 Directors' Stock Option Plan,
as amended and restated as of October 1, 1997, is herein
incorporated by reference to the 1997 Annual Meeting of
Stockholders Proxy Statement.
*10.3 Investment Agreement among the Company, MAC Music LLC and
SK-Palladin Partners, LP dated as of October 12, 1997 (the
"Investment Agreement"), is herein incorporated by reference to
the Company's Quarterly Report on Form 10-Q for the quarterly
period ended August 31, 1997 filed with the Commission October
14, 1997.
*10.4 Amendment to the Investment Agreement dated October 28, 1997, is
herein incorporated by reference to the 1997 Annual Meeting of
Stockholders Proxy Statement.
*10.5 Amendment to the Investment Agreement dated October 30, 1997, is
herein incorporated by reference to the 1997 Annual Meeting of
Stockholders Proxy Statement.
*10.6 Amendment to the Investment Agreement dated November 26, 1997, is
herein incorporated by reference to the 1997 Annual Meeting of
Stockholders Proxy Statement.
10.7 Stock and Warrant Purchase Agreement, dated December 12, 1997
between the Registrant and Platinum Venture Partners II, L.P., as
nominee.
10.8 Amendment No. 1 dated as of December 12, 1997 to Employment
Agreement between the Registrant and Steven Devick dated June 1,
1997.
10.9 Amendment No. 1 dated as of December 12, 1997 to Employment
Agreement between the Registrant and Douglas C. Laux dated June
1, 1997.
10.10 Amendment No. 1 dated as of December 12, 1997 to Employment
Agreement between the Registrant and Thomas R. Leavens dated June
1, 1997.
10.11 Credit Agreement, dated as December 12, 1997, among the
Registrant, Intersound, Inc. and the Banks who are or may become
parties thereto, and exhibits and schedules thereto.
10.12 Term Credit Note, dated December 12, 1997, issued by the
Registrant in the principal amount of $20,000,000.
10.13 Revolving Credit Note, dated December 12, 1997, issued by the
Registrant in the principal amount of $10,000,000.
10.14 Security Agreement, dated December 12, 1997, among the
Registrant, its subsidiaries and Bank of Montreal and the Banks
who are or may become parties thereto, and schedules thereto.
10.15 Security Agreement re: Intellectual Property, dated as of
December 12, 1997, among the Registrant, its subsidiaries and the
Bank of Montreal and the Banks who are or may become parties
thereto, and schedules thereto.
10.16 Pledge Agreement, dated December 12, 1997, among the Registrant,
its subsidiaries and the Bank of Montreal and the Banks who are
or may become parties thereto.
27. Financial Data Schedule.
* Previously filed.
B. Form 8-K.
On December 15, 1997, a Form 8-K was filed by the Registrant announcing the
sale of $22,500,000 of preferred equity and the refinancing of bank debt.
19
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Platinum
Entertainment, Inc. has duly caused this filing to be signed on its behalf by
the undersigned, thereunto duly authorized, on this 14th day of January, 1998.
PLATINUM ENTERTAINMENT, INC.
By: /s/ Steven Devick
------------------------------------------
Steven Devick
Chairman of the Board, President and Chief
Executive Officer
By: /s/ Douglas C. Laux
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Douglas C. Laux
Chief Financial Officer
(Principal Financial and Accounting Officer)
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THIRD AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PLATINUM ENTERTAINMENT, INC.
(ORIGINAL CERTIFICATE OF INCORPORATION
FILED NOVEMBER 21, 1991)
PLATINUM ENTERTAINMENT, INC. (the "Corporation"), a corporation organized
and existing under and by virtue of the General Corporation Law of the State of
Delaware (the "Law"), does hereby certify:
A. That the Board of Directors of the Corporation adopted a resolution
setting forth the Third Amended and Restated Certificate of Incorporation set
forth below, declaring it advisable and submitting it to the stockholders
entitled to vote in respect thereof for their consideration of such Third
Amended and Restated Certificate of Incorporation.
B. That by written consent executed in accordance with Section 228 of the
Law, the holders of a majority of the outstanding stock entitled to vote
thereon, and a majority of the outstanding stock of each class entitled to vote
thereon as a class, has voted in favor of the adoption of the Third Amended and
Restated Certificate of Incorporation set forth below.
C. That the Third Amended and Restated Certificate of Incorporation set
forth below has been duly adopted in accordance with Sections 242 and 245 of the
Law:
ARTICLE I
The name of the Corporation is: Platinum Entertainment, Inc.
ARTICLE II
The address of its registered office in the State of Delaware is 1209
Orange Street, Wilmington, County of New Castle. The name of its registered
agent is The Corporation Trust Company.
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ARTICLE III
The nature of the business to be conducted or promoted is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
ARTICLE IV
The total number of shares of all classes of stock which the Corporation
shall have authority to issue is Eighty-Seven Million Eight Hundred Thirty-Five
Thousand and One Hundred Fifty-Two (87,835,152), divided into:
(i) Two Hundred Forty Thousand (240,000) shares of Class A Common Stock
having a par value of $0.001 per share (the "Class A Common Stock");
(ii) One Million Eighty Thousand (1,080,000) shares of Class B Common
Stock having a par value of $0.001 per share (the "Class B Common
Stock");
(iii) Forty Million (40,000,000) shares of Common Stock having a par value
of $0.001 per share (the "Common Stock"); and
(iv) Forty-Six Million Five Hundred Fifteen Thousand One Hundred
Fifty-Two (46,515,152) shares of Preferred Stock having a par value
of $0.001 per share (the "Preferred Stock"), of which Eighteen
Million Two Hundred Fifty-Seven Thousand Five Hundred Seventy-Six
(18,257,576) shares shall be of a series designated "Series A-1
Non-Convertible Preferred Stock" (the "Series A-1 Preferred Stock"),
Eighteen Million Two Hundred Fifty-Seven Thousand Five Hundred
Seventy-Six (18,257,576) shares shall be of a series designated
"Series A-2 Convertible Preferred Stock" (the "Series A-2 Preferred
Stock"), and the balance of which may be issued from time to time in
one or more series as set forth in Section E of this ARTICLE IV.
As of the date of the filing of this Third Amended and Restated Certificate
of Incorporation, each issued share of Class A Common Stock, Class B Common
Stock and Common Stock of the Corporation shall be reclassified and changed into
one-twenty-fifth of one share of Class A Common Stock, Class B Common Stock and
Common Stock, respectively, in each case having the terms specified in this
ARTICLE IV. Each outstanding stock certificate which immediately prior to the
date hereof represented a number of shares of Class A Common Stock, Class B
Common Stock and Common Stock shall, without any action on the part of the
holder, hereupon and hereafter, until surrendered as hereinafter provided,
represent that number of shares of Class A Common Stock, Class B Common Stock or
Common Stock, as the case may be, equal to one-twenty-fifth of the number of
shares of the Class A Common Stock, Class B Common Stock or Common Stock
represented by such certificate. The registered holder of each such certificate
may on or after the date hereof surrender such certificate to the Corporation
for cancellation and, upon such surrender, shall receive in exchange therefor,
without charge, a new certificate registered in the name of such holder
representing that number of shares of
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Class A Common Stock, Class B Common Stock or Common Stock, as the case may be,
equal to one-twenty-fifth of the number of shares of the Class A Common Stock,
Class B Common Stock or Common Stock which, prior to the date of filing hereof,
was represented by the certificate(s) representing shares of Class A Common
Stock, Class B Common Stock or Common Stock.
In connection with each exchange of certificates contemplated by the
paragraph above, the Corporation may pay to the exchanging holders cash in an
amount equal to the Market Price of any fractional shares in lieu of issuing
such fractional shares. "MARKET PRICE" of any security means the average of the
closing prices of such security's sales on all recognized securities exchanges
on which such security may at the time be listed, or, if there has been no sale
on any such exchange on any day, the average of the highest bid and lowest asked
prices on all such exchanges at the end of such day, or, if on any day such
security is not so listed, the average of the representative bid and asked
prices quoted in the NASDAQ System as of 4:00 p.m., New York time, or, if on any
day such security is not quoted in the NASDAQ System, the average of the highest
bid and lowest asked prices on such day in the domestic over-the-counter market
as reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 21 days
consisting of the day as of which "Market Price" is being determined and the 20
consecutive business days prior to such day. If at any time such security is
not listed on any recognized securities exchange or quoted in the NASDAQ System
or the over-the-counter market, the "Market Price" will be the fair value
thereof determined in good faith by the Board of Directors of the Corporation.
The powers, preferences and relative, participating, optional or other
rights of the capital stock and the qualifications, limitations or restrictions
thereof are as follows:
SECTION A. CLASS A COMMON STOCK, CLASS B
COMMON STOCK AND COMMON STOCK
1. VOTING RIGHTS. Except as otherwise required by law, the holders of
each share of Class A Common Stock, Class B Common Stock and Common Stock shall
have one vote per share on each matter submitted to a vote of the stockholders
of the Corporation. Except as otherwise required by law or expressly provided
herein, Class A Common Stock, Class B Common Stock, Common Stock, Series A-1
Preferred Stock and Series A-2 Preferred Stock shall vote together and not as
separate classes or series.
2. DIVIDEND RIGHTS. Subject to all of the rights of any series of
Preferred Stock now or hereafter authorized, holders of Class A Common Stock,
Class B Common Stock and Common Stock shall be entitled to receive on a per
share basis such dividends and other distributions in cash, stock or property of
the Corporation as may be declared thereon by the Board of Directors from time
to time out of assets or funds of the Corporation legally available therefor.
In addition and subject to the restrictions set forth in the first sentence of
this Section A.2., dividends shall be declared and paid to holders of either
Class A Common Stock, Class B Common Stock or Common Stock only if such
dividends are declared and paid to holders of such classes on an equal per share
basis.
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If at any time a distribution of Class A Common Stock, Class B Common
Stock, Common Stock or any other securities of the Corporation is to be made to
holders of either Class A Common Stock, Class B Common Stock or Common Stock
(hereinafter sometimes referred to as a "share distribution"), such share
distribution may be declared and paid only as follows:
(a) A share distribution consisting of shares of Class A Common Stock
to holders of Class A Common Stock; provided, there shall also be a
simultaneous share distribution consisting of shares of Class B Common
Stock to holders of Class B Common Stock and shares of Common Stock to
holders of Common Stock on an equal per share basis; or
(b) A share distribution consisting of shares of Class B Common Stock
to holders of Class B Common Stock; provided, there shall also be a
simultaneous share distribution consisting of shares of Class A Common
Stock to holders of Class A Common Stock and shares of Common Stock to
holders of Common Stock on an equal per share basis; or
(c) A share distribution consisting of shares of Common Stock to
holders of Common Stock; provided, there shall also be a simultaneous share
distribution consisting of shares of Class A Common Stock to holders of
Class A Common Stock and shares of Class B Common Stock to holders of Class
B Common Stock on an equal per share basis; or
(d) A share distribution consisting of any other class of securities
of the Corporation to the holders of Class A common Stock, Class B Common
Stock and Common Stock on an equal per share basis.
3. LIQUIDATION RIGHTS. In the event of any dissolution, liquidation or
winding up of the affairs of the Corporation, whether voluntary or involuntary
(sometimes referred to herein as a "Liquidation"), after payment or provision
for payment of the debts and other liabilities of the Corporation, subject to
the liquidation preferences of any holders of any outstanding Preferred Stock
now or hereafter authorized, the remaining assets and funds (the "Funds") of the
Corporation shall be divided as follows: (i) Class A Common Stock shall have
first priority to the Funds, paid among and ratably to the holders of Class A
Common Stock, up to an amount equal to eight dollars and thirty-three cents
($8.33) per share multiplied by the number of shares of Class A Common Stock
then issued and outstanding; (ii) after the priority described in (i) shall have
been satisfied, Class B Common Stock shall next have priority to the Funds, paid
among and ratably to the holders of Class B Common Stock, up to an amount equal
to two dollars and fifty cents ($2.50) per share multiplied by the number of
shares of Class B Common Stock then issued and outstanding; and (iii) the
remainder of the Funds, if any, shall be paid among and ratably to the holders
of Class A Common Stock, Class B Common Stock, Common Stock and Series A-2
Preferred Stock, based upon the number of shares of Class A Common Stock, Class
B Common Stock and Common Stock then held by such. holders and the number
(including any fraction) of shares of Common Stock into which the shares of
Series A-2 Preferred Stock then held by such holders are convertible. The per
share liquidation preferences stated above for the Class A Common Stock and the
Class B Common Stock shall be equitably
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adjusted as determined by the Corporation's Board of Directors in the event of a
stock split, stock dividend, reverse split, combination or other
recapitalization which would necessitate an adjustment. For purposes of this
ARTICLE IV, except for a sale of all or substantially all of the assets of the
Corporation which shall be treated as a Liquidation under this ARTICLE IV, the
merger or consolidation of the Corporation with or into any other corporation or
corporations, or the merger of any other corporation or corporations into the
Corporation, in which consolidation or merger the stockholders of the
Corporation receive distributions in cash or securities of another corporation
or corporations as a result of such consolidation or merger, shall not be
treated as a Liquidation. Notwithstanding anything to the contrary contained in
this Third Amended and Restated Certificate of Incorporation, this Section A.3.
and the rights contained herein may be altered or amended only with the approval
of holders of a majority of the shares of Class A Common Stock, with respect to
rights relating to the Class A Common Stock, and the Class B Common Stock, with
respect to rights relating to the Class B Common Stock.
4. STOCK SPLITS. The Corporation may not split, divide or combine the
shares of the Class A Common Stock, the Class B Common Stock or the Common
Stock, unless, at the same time, the Corporation splits, divides or combines, as
the case may be, the shares of the Class A Common Stock, the Class B Common
Stock and the Common Stock in the same proportion and manner.
5. CONVERSION.
(a) CONVERSION PROCEDURE.
(i) Any holder of shares of Class A Common Stock or Class B
Common Stock may at any time convert all or any number of such shares held by
such holder into an equal number of shares of Common Stock.
(ii) Each conversion of shares of Class A Common Stock or Class B
Common Stock will be deemed to have been effected as of the close of business on
the date on which the certificate or certificates representing such shares to be
converted have been surrendered at the principal office of the Corporation. At
such time as such conversion has been effected, the rights of the holder of such
shares of Class A Common Stock or Class B Common Stock as such holder will cease
and the person (or entity) or persons (or entities) in whose name or names any
certificate or certificates for shares of Common Stock are to be issued upon
such conversion will be deemed to have become the holder or holders of record of
the shares of Common Stock represented thereby.
(iii) As soon as possible after a conversion has been
effected (but in any event within three business days in the case of subsection
(A) and (B) below), the Corporation will deliver to the converting holder:
(A) a certificate or certificates representing the number
of shares of Common Stock issuable by reason of such conversion in
such name or names and such denomination or denominations as the
converting holder has specified;
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(B) payment in cash of an amount equal to all dividends
declared but unpaid with respect to each share converted; and
(C) a certificate representing any shares of Class A Common
Stock or Class B Common Stock which were represented by the
certificate or certificates delivered to the Corporation in connection
with such conversion but which were not converted.
(iv) The issuance of certificates for shares of Common Stock upon
conversion of shares of Class A Common Stock or Class B Common Stock will be
made without charge to the holders of such shares for any issuance tax in
respect thereof or other cost incurred by the Corporation in connection with
such conversion and the related issuance of shares of Common Stock. Upon
conversion of each share of Class A Common Stock or Class B Common Stock, the
Corporation will take all such actions as are possible in order to insure that
the Common Stock issuable with respect to such conversion will be validly
issued, fully paid and nonassessable.
(v) The Corporation will not close its books against the
transfer of shares of Class A Common Stock or Class B Common Stock or of Common
Stock issued or issuable upon conversion of shares of Class A Common Stock or
Class B Common Stock in any manner which interferes with the timely conversion
of shares of Class A Common Stock or Class B Common Stock.
(b) NOTICES.
(i) The Corporation will give written notice to all holders of
shares of Class A Common Stock and Class B Common Stock as soon as possible but
in any event at least 20 days prior to the date on which the Corporation closes
its books or takes a record (A) with respect to any dividend or distribution
upon Common Stock, (B) with respect to any pro rata subscription offer to
holders of Common Stock or (C) for determining rights to vote with respect to
any Liquidation.
(ii) The Corporation will also give written notice to the holders
of shares of Class A Common Stock and Class B Common Stock as soon as possible
but in any event at least 20 days prior to the date on which any Liquidation
will take place.
(c) RESERVATION OF COMMON STOCK. The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the shares of Class
A Common Stock and Class B Common Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of Class A Common Stock and Class B Common Stock, and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of Class A
Common Stock and Class B Common Stock, the Corporation will take such corporate
action as may be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purpose.
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(d) TAXES AND CHARGES. The Corporation will pay all taxes and other
governmental charges that may be imposed in respect of the issue or delivery of
shares of Common Stock upon conversion of shares of Class A Common Stock or
Class B Common Stock.
(e) PROTECTION OF CONVERSION RIGHTS. The Corporation shall not amend
its Certificate of Incorporation or participate in any reorganization, transfer
of assets, consolidation, merger, dissolution, issuance or sale of securities or
take any other voluntary action, for the purpose of avoiding or seeking to avoid
the observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section A.5. and will take all
actions that may be necessary or appropriate in order to protect the rights of
the holders of shares of Class A Common Stock and Class B Common Stock to
convert such shares against impairment.
(f) AUTOMATIC CONVERSION. The shares of Class A Common Stock and
Class B Common Stock shall automatically be converted into the number of shares
of Common Stock into which the shares of Class A Common Stock and Class B Common
Stock are then convertible upon the closing of a Qualified Public Offering;
provided, however, that the Corporation shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon such conversion
unless certificates evidencing such shares of Class A Common Stock and Class B
Common Stock being converted are either delivered to the Corporation or any
transfer agent or the holder notifies the Corporation or any transfer agent that
such certificates have been lost, stolen or destroyed and executes an agreement
reasonably satisfactory to the Corporation to indemnify the Corporation from any
loss incurred by it in connection therewith. Upon the automatic conversion of
Class A Common Stock and Class B Common Stock, the holder of such Class A Common
Stock and Class B Common Stock shall surrender the certificates representing
such shares at the office of the Corporation or of any transfer agent for the
Common Stock. Thereupon, there shall be issued and delivered to such holder,
promptly at such office and in his name as shown on such surrendered certificate
or certificates, a certificate or certificates for the number of shares of
Common Stock into which the shares of Class A Common Stock and Class B Common
Stock surrendered were convertible on the date on which such automatic
conversion occurred.
(g) CANCELLATION OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK.
No share or shares of Class A Common Stock or Class B Common Stock acquired by
the Corporation by reason of conversion or otherwise shall be reissued, and all
such shares shall be canceled, retired and eliminated from the shares which the
Corporation shall be authorized to issue.
SECTION B. SERIES A-1 PREFERRED STOCK
1. RANK. As to distributions upon Liquidation, the shares of Series A-1
Preferred Stock shall rank senior to the Class A Common Stock, the Class B
Common Stock, the Common Stock and the Series A-2 Preferred Stock.
2. VOTING RIGHTS. Except as otherwise required by law or expressly
provided herein, each share of Series A-1 Preferred Stock shall not entitle the
holder thereof to vote on any
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matters submitted to a vote of the stockholders of the Corporation. Except as
otherwise required by law or expressly provided herein, the holders of Series
A-1 Preferred Stock, Series A-2 Preferred Stock, Class A Common Stock, Class B
Common Stock and Common Stock shall vote together and not as separate classes or
series.
3. DIVIDEND RIGHTS. In each of the first two years in which shares of
Series A-1 Preferred Stock are outstanding, the holders of shares of Series A-1
Preferred Stock shall be entitled to receive, on a per share basis, when and as
declared by the Board of Directors out of funds legally available therefor and
before any dividends are declared on any shares of any other capital stock of
the Corporation, cumulative cash dividends at the annual rate of 1.65 cents per
share (such number to be adjusted proportionately in the event the shares of
Series A-1 Preferred Stock are subdivided into a larger number or combined into
a small number). Such dividends shall be fully cumulative and shall accrue
(whether or not declared), without interest, on the first day of the year in
which such dividends may be payable. After the first two years in which shares
of Series A-1 Preferred Stock are outstanding, the holders of shares of Series
A-1 Preferred Stock shall be entitled to receive, on a per share basis, such
dividends and other distributions in cash, stock or property of the Corporation
as may be declared thereon by the Board of Directors from time to time out of
assets or funds of the Corporation legally available therefor, provided that
such dividends and other distributions shall not exceed an annual rate of 2.3
cents per share (such number to be adjusted proportionately in the event the
shares of Series A-1 Preferred Stock are subdivided into a larger number or
combined into a small number).
4. LIQUIDATION RIGHTS.
(a) In the event of any Liquidation (as defined in Section A.3. of
this ARTICLE IV, including the penultimate sentence of such Section), each
holder of shares of Series A-1 Preferred Stock then outstanding shall be
entitled to be paid out of the assets of the Corporation legally available for
distribution to its stockholders, before any payment or declaration and setting
apart for payment of any amount shall be made in respect of the Class A Common
Stock, the Class B Common Stock, the Common Stock or the Series A-2 Preferred
Stock, an amount equal to the Series A-1 Liquidation Price per share of Series
A-1 Preferred Stock held by such holder. If upon any Liquidation, the assets to
be distributed to the holders of Series A-1 Preferred Stock shall be
insufficient to permit the payment in full to such holders of the aforesaid
preferential amount, then all of the assets of the Corporation available for
distribution to the holders of Series A-1 Preferred Stock shall be distributed
to such holders ratably in proportion to the full preferential amount each such
holder is otherwise entitled to receive.
(b) After the payment or the setting aside for such payment of the
preferential amounts payable upon a Liquidation to the holders of Series A-1
Preferred Stock hereunder, the holders of Series A-1 Preferred Stock as such
shall have no right or claim to any of the remaining assets of the Corporation.
(c) If any of the assets of the Corporation are to be distributed
other than in cash for purposes of satisfying the liquidation preference of any
shares of capital stock of the Corporation, then the Board of Directors of the
Corporation shall determine the fair market value of the assets to be
distributed to the holders of Series A-1 Preferred Stock, Series A-2
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Preferred Stock, Class A Common Stock, Class B Common Stock or Common Stock,
subject to the consent of the holders of a majority of the shares of Series A-1
Preferred Stock then outstanding. If the Corporation does not promptly receive
the consent of the holders of a majority of the shares of Series A-1 Preferred
Stock then outstanding, then the Board of Directors of the Corporation shall
promptly engage independent competent appraisers to determine the value of the
assets to be distributed. The Corporation shall, upon receipt of such
appraiser's valuation, give prompt written notice to each holder of shares of
Series A-1 Preferred Stock of the appraiser's valuation.
5. REDEMPTION.
(a) The Corporation may at its option redeem, on any date designated
pursuant to clause (b) of this Section B.5. (an "Optional Redemption Date"), all
or part of the Series A-1 Preferred Stock then outstanding. Notwithstanding the
preceding sentence, (i) on June 30, 2000 (the "First Mandatory Redemption
Date"), the Corporation shall redeem the lesser of (A) one-half of the shares of
Series A-1 Preferred Stock originally issued (such number of shares to be
proportionately adjusted in the event of a subdivision or combination of the
Series A-1 Preferred Stock) and (B) all of the Series A-1 Preferred Stock
outstanding on such Redemption Date and (ii) on June 30, 2001 (the "Second
Mandatory Redemption Date" and, collectively with an Optional Redemption Date
and the First Redemption Date, a "Redemption Date"), the Corporation shall
redeem all of the Series A-1 Preferred Stock then outstanding. The Corporation
shall redeem all shares of Series A-1 Preferred Stock to be redeemed on a
Redemption Date by payment on such Redemption Date to the holder thereof of a
price per share equal to the Series A-1 Redemption Price. Any such redemption
shall be allocated ratably among all holders of Series A-1 Preferred Stock in
accordance with the number of shares of Series A-1 Preferred Stock then held.
(b) At least 30 but no more than 60 days prior to a Redemption Date,
the Corporation shall give written notice to the holders of Series A-1 Preferred
Stock setting forth (i) the Redemption Date, the number of shares of Series A-1
Preferred Stock being redeemed, the Series A-1 Redemption Price and that the
holder is to surrender to the Corporation in the manner and at the place
designated, the certificate or certificates representing the shares of Series
A-1 Preferred to be redeemed or (ii) that the Corporation does not have funds
legally available for the redemption of the Series A-1 Preferred Stock on such
Redemption Date.
(c) So long as any shares of Series A-1 Preferred Stock are
outstanding, no shares of any other class or series of the capital stock of the
Corporation will be redeemed, purchased or otherwise acquired for any
consideration (and no moneys shall be paid to or made available for a sinking
fund for the redemption of any shares of such stock) by the Corporation, other
than (i) the repurchase of certain shares of Class B Common Stock, Common Stock
and stock options therefor held by certain employees of the Corporation and
other parties in exchange for the right to receive bonuses as contemplated on
Schedule 5.10 of the Series A Purchase Agreement, provided, however, that no
such bonus shall be paid to any such party in connection with any such exchange
so long as any shares of Series A-1 Preferred Stock are outstanding; and (ii)
the repurchase of shares of Common Stock from any employee of the Corporation
(other than the officers and directors of the Corporation) upon the termination
of such employee's employment by the Corporation, provided that such repurchase
is approved by
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a majority of the entire Board of Directors of the Corporation. The Corporation
will not permit any Subsidiary to purchase or otherwise acquire for
consideration any shares of stock of the Corporation unless the Corporation
would be permitted, pursuant to this paragraph, to purchase or otherwise acquire
such shares at such time and in such manner.
(d) In addition to, and without any limitation whatsoever upon, the
redemption rights set forth in clause (a) of this Section B.5., the holders of
Series A-1 Preferred Stock shall have the following redemption rights:
(i) If at any time a Change in Ownership (as hereinafter
defined) has occurred or the Corporation obtains knowledge that a Change in
Ownership is to occur, the Corporation shall give prompt written notice of such
Change in Ownership, describing in reasonable detail the definitive terms and
date of consummation thereof, to each holder of Series A-1 Preferred Stock, but
in any event such notice shall not be given later than five days after the
occurrence of such Change in Ownership. The holder or holders of shares of
Series A-1 Preferred Stock then outstanding may elect to require the Corporation
to redeem all or any portion of the Series A-1 Preferred Stock owned by such
holder or holders at a price per share equal to the Series A-1 Redemption Price
by giving written notice to the Corporation of such election prior to the later
of (a) 30 days after receipt of the Corporation's notice and (b) 20 days prior
to the consummation of the Change in Ownership (the "Expiration Date"). The
Corporation shall give prompt written notice of any such election to all other
holders of Series A-1 Preferred Stock within five days after the receipt
thereof, and each such holder shall have until the later of (a) the Expiration
Date or (b) ten days after receipt of such second notice to elect (by giving
written notice to the Corporation) to require the Corporation to redeem, at a
price per share equal to the Series A-1 Redemption Price, all or any portion of
the shares of Series A-1 Preferred Stock owned by such holder. Upon receipt of
such election(s), the Corporation shall be obligated to redeem the aggregate
number of shares of Series A-1 Preferred Stock specified therein on the later of
(a) the occurrence of the Change in Ownership or (b) ten days after the
Corporation's receipt of such election(s). If in any case a proposed Change in
Ownership does not occur, all elections for redemption in connection therewith
shall be automatically rescinded. The term "Change in Ownership" means any sale
or issuance or series of sales and/or issuances of shares of the Corporation's
capital stock by the Corporation or any holders thereof which results in any
Person or group of affiliated Persons (other than the holders of Common Stock
and Preferred Stock as of the date of the Series A Purchase Agreement (as
hereinafter defined)) owning capital stock of the Corporation possessing the
voting power (under ordinary circumstances) to elect a majority of the
Corporation's Board of Directors.
(ii) If a Fundamental Change is proposed to occur, the
Corporation shall give written notice of such Fundamental Change, describing in
reasonable detail the definitive terms and date of consummation thereof, to each
holder of Series A-1 Preferred Stock not more than 45 days nor less than 30 days
prior to the consummation thereof (the "Initial Series A-1 Redemption Notice").
The holder or holders of the Series A-1 Preferred Stock then outstanding may
elect to require the Corporation to redeem all or any portion of the Series A-1
Preferred Stock owned by such holder or holders at a price per share equal to
the Series A-1 Redemption Price by giving written notice to the Corporation of
such election prior to the later of (a) 20 days prior to the consummation of the
Fundamental Change or (b) 30 days after receipt of the Initial Series A-1
Redemption Notice from the Corporation. The Corporation shall give
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prompt written notice of such election to all other holders of Series A-1
Preferred Stock (but in any event within five days prior to the consummation
of the Fundamental Change), and each such holder shall have until ten days
after the receipt of such notice to elect (by written notice given to the
Corporation) to require the Corporation to redeem, at a price per share equal
to the Series A-1 Redemption Price, all or any portion of the Series A-1
Preferred Stock owned by such holder. Upon receipt of such election(s), the
Corporation shall be obligated to redeem the aggregate number of shares of
Series A-1 Preferred Stock specified therein upon the consummation of such
Fundamental Change. If any proposed Fundamental Change does not occur, all
elections for redemption in connection therewith shall be automatically
rescinded. The term "Fundamental Change" means any merger or consolidation
to which the Corporation is a party, except for a merger in which the
Corporation is the surviving corporation and, after giving effect to such
merger, the holders of the Corporation's outstanding capital stock
immediately prior to the merger shall own the Corporation's outstanding
capital stock possessing the voting power (under ordinary circumstances) to
elect a majority of the Corporation's Board of Directors after such merger.
(e) Each holder of Series A-1 Preferred Stock to be redeemed shall
surrender to the Corporation, on or prior to the redemption date specified in
such notice, the certificate or certificates representing the number of shares
specified in such notice. In the event less than all the shares represented by
any such certificate are to be redeemed, the Corporation shall issue a new
certificate representing the unredeemed shares. Payment of the redemption price
is due, and shall be paid in full in cash, on the applicable redemption date.
The redemption price applicable to each share of Series A-1 Preferred Stock
being redeemed shall be paid to the order of the person whose name appears as
the owner on the certificate or certificates surrendered for redemption upon
surrender of such certificate or certificates to the Corporation or its transfer
agent. Despite being called or tendered for redemption, shares of Series A-1
Preferred Stock shall remain outstanding until the full redemption price
applicable to such shares has been paid by the Corporation to the holder of such
shares.
(f) Notwithstanding anything to the contrary contained herein, Series
A-1 Preferred Stock shall be subject to automatic and mandatory redemption in
the event of a Qualified Public Offering upon the closing of such offering (and
as a condition thereof) at the Series A-1 Redemption Price (which shall in such
event be paid in full in cash; provided, however, that a holder of shares of
Series A-1 Preferred Stock may elect, by providing written notice to the
Corporation, to receive the Series A-1 Redemption Price in shares of Common
Stock (valued at the initial public offering price) with respect to all or a
portion of such holder's shares of Series A-1 Preferred Stock).
(g) If the funds of the Corporation legally available therefor shall
be insufficient to discharge in full any redemption requirement set forth in
this Section B.5., funds to the extent legally available for such purpose shall
be set aside, and the maximum number of full shares of Series A-1 Preferred
Stock that can be redeemed with such funds shall be redeemed from the holders of
the Series A-1 Preferred Stock, PRO RATA based on the aggregate Series A-1
Redemption Price of the shares to be redeemed from such holders. Thereafter,
the Corporation shall redeem shares of Series A-1 Preferred Stock ratably as set
forth above from the holders of such shares as funds legally available therefor
become available and supplementary redemption notices setting forth the date of
redemption, the number of shares of
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Series A-1 Preferred Stock being redeemed, the Series A-1 Redemption Price and
that the holder is to surrender to the Corporation in the manner and at the
place designated, the certificate or certificates representing the shares of
Series A-1 Preferred to be redeemed, shall be delivered to such holders of
Series A-1 Preferred Stock. Such supplementary redemption notices shall specify
a redemption date which shall be not less than 10 nor more than 30 days after
the date of such notice.
(h) The Corporation shall not, and shall not permit any Subsidiary of
the Corporation to, purchase or acquire any shares of Series A-1 Preferred Stock
other than pursuant to the terms of this Section or pursuant to an offer made on
the equivalent terms to all holders of Series A-1 Preferred Stock at the time
outstanding.
6. CANCELLATION OF SERIES A-1 PREFERRED STOCK. No share or shares of
Series A-1 Preferred Stock acquired by the Corporation by reason of redemption,
conversion or otherwise shall be reissued, and all such shares shall be
canceled, retired and eliminated from the shares which the Corporation shall be
authorized to issue.
SECTION C. SERIES A-2 PREFERRED STOCK
1. RANK. As to distributions upon Liquidation, the shares of Series A-2
Preferred Stock shall rank (a) junior to the liquidation preferences of the
Class A Common Stock, the Class B Common Stock and the Series A-1 Preferred
Stock and (b) otherwise on a parity with the Class A Common Stock, the Class B
Common Stock and the Common Stock.
2. VOTING RIGHTS. Except as otherwise required by law or expressly
provided herein, each share of Series A-2 Preferred Stock shall entitle the
holder thereof to vote on all matters submitted to a vote of the stockholders of
the Corporation and to have the number of votes equal to the number of shares of
Common Stock into which such share of Series A-2 Preferred Stock is then
convertible pursuant to the provisions hereof, assuming for this purpose only
that shares of Series A-2 Preferred Stock are convertible into fractional
shares, at the record date for the determination of stockholders entitled to
vote on such matters or, if no such record date is established, at the date such
vote is taken or any written consent of stockholders is solicited. Except as
otherwise required by law or expressly provided herein, the holders of shares of
Series A-1 Preferred Stock, Series A-2 Preferred Stock, Class A Common Stock,
Class B Common Stock and Common Stock shall vote together and not as separate
classes or series.
3. DIVIDEND RIGHTS. The holders of shares of Series A-2 Preferred Stock
shall be entitled to receive ratably, subject to the provisions of law and on a
parity with the Class A Common Stock, the Class B Common Stock and the Common
Stock (based upon the number of shares of the Class A Common Stock, the Class B
Common Stock and the Common Stock then held by such holders and the number
(including any fraction) of shares of the Common Stock into which the shares of
Series A-2 Preferred Stock then held by such holders are then convertible), such
dividends and other distributions in cash, stock or property of the Corporation
as may be declared thereon by the Board of Directors from time to time out of
assets or funds of the Corporation legally available therefore.
4. LIQUIDATION RIGHTS.
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(a) After the payment or the setting aside for such payment of the
preferential amounts payable upon a Liquidation to the holders of Class A Common
Stock and Class B Common Stock pursuant to Section A.3. of this ARTICLE IV and
to the holders of Series A-1 Preferred Stock pursuant to Section B.4. of this
ARTICLE IV, all of the remaining assets of the Corporation, if any, shall be
distributed to the holders of shares of Class A Common Stock, Class B Common
Stock and Common Stock and the holders of shares of Series A-2 Preferred Stock
ratably based upon the number of shares of Class A Common Stock, Class B Common
Stock and Common Stock then held by such holders and the number (including any
fraction) of shares of Common Stock into which the shares of Series A-2
Preferred Stock then held by such holders are then convertible.
(b) Nothing contained in this Section C.4. shall be deemed to prevent
any holder of Series A-2 Preferred Stock from exercising such holder's right of
conversion pursuant to Section C.6. hereof with respect to any share of Series
A-2 Preferred Stock at any time prior to the distribution of the Corporation's
assets in the Liquidation.
5. REPURCHASE.
(a) The Corporation shall not, and shall not permit any Subsidiary of
the Corporation to, purchase or acquire any shares of Series A-2 Preferred Stock
other than pursuant to an offer made on the equivalent terms to all holders of
Series A-2 Preferred Stock at the time outstanding.
(b) In connection with any redemption of the Series A-1 Preferred
Stock pursuant to Section B.5. of this ARTICLE IV, any holder of shares of
Series A-2 Preferred may elect to sell, at the time of such redemption, to the
Corporation up to .01% of such shares of Series A-2 Preferred Stock at a price
per share equal to the fair market value of such shares as reasonably determined
in good faith by the Board of Directors of the Corporation.
6. CONVERSION.
(a) CONVERSION PROCEDURE.
(i) Any holder of shares of Series A-2 Preferred Stock may, at
any time, convert all or any number of such shares held by such holder into a
number of shares of Common Stock computed by multiplying the number of such
shares to be converted by thirty-three cents (33CENTS) (such amount to be
adjusted proportionately in the event the shares of Series A-2 Preferred Stock
are subdivided into a greater number or combined into a lesser number) and
dividing the result by the Series A-2 Conversion Price (as hereinafter defined)
then in effect.
(ii) Each conversion of shares of Series A-2 Preferred Stock will
be deemed to have been effected as of the close of business on the date on which
the certificate or certificates representing such shares to be converted have
been surrendered at the principal office of the Corporation. At such time as
such conversion has been effected, the rights of the holder of such shares of
Series A-2 Preferred Stock as such holder will cease and the person (or entity)
or persons (or entities) in whose name or names any certificate or certificates
for shares of
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Common Stock are to be issued upon such conversion will be deemed to have become
the holder or holders of record of the shares of Common Stock represented
thereby.
(iii) As soon as possible after a conversion has been
effected (but in any event within three business days in the case of subsection
(A) and (B) below), the Corporation will deliver to the converting holder:
(A) a certificate or certificates representing the number
of shares of Common Stock issuable by reason of such conversion in
such name or names and such denomination or denominations as the
converting holder has specified;
(B) payment in cash of an amount equal to all dividends
declared but unpaid with respect to each share converted, plus the
amount payable under subsection (vi) below with respect to such
conversion; and
(C) a certificate representing any shares of Series A-2
Preferred Stock which were represented by the certificate or
certificates delivered to the Corporation in connection with such
conversion but which were not converted.
(iv) The issuance of certificates for shares of Common Stock upon
conversion of shares of Series A-2 Preferred Stock will be made without charge
to the holders of such shares of Series A-2 Preferred Stock for any issuance tax
in respect thereof or other cost incurred by the Corporation in connection with
such conversion and the related issuance of shares of Common Stock. Upon
conversion of each share of Series A-2 Preferred Stock, the Corporation will
take all such actions as are necessary in order to insure that the Common Stock
issuable with respect to such conversion will be validly issued, fully paid and
nonassessable.
(v) The Corporation will not close its books against the
transfer of shares of Series A-2 Preferred Stock or of Common Stock issued or
issuable upon conversion of shares of Series A-2 Preferred Stock in any manner
which interferes with the timely conversion of shares of Series A-2 Preferred
Stock.
(vi) If any fractional interest in a share of Common Stock would,
except for the provisions of this subsection (vi), be deliverable upon any
conversion of shares of Series A-2 Preferred Stock, the Corporation, in lieu of
delivering the fractional share therefor, will pay an amount to the holder
thereof equal to the Market Price (as defined below) of such fractional interest
as of the date of conversion. "MARKET PRICE" of any security means the average
of the closing prices of such security's sales on all recognized securities
exchanges on which such security may at the time be listed, or, if there has
been no sale on any such exchange on any day, the average of the highest bid and
lowest asked prices on all such exchanges at the end of such day, or, if on any
day such security is not so listed, the average of the representative bid and
asked prices quoted in the NASDAQ System (as hereinafter defined) as of 4:00
P.M., New York time, or, if on any day such security is not quoted in the NASDAQ
System, the average of the highest bid and lowest asked prices on such day in
the domestic over-the-counter market as reported by the National Quotation
Bureau, Incorporated, or any similar successor organization, in each such case
averaged over a period of 21 days consisting of the day as of which "Market
Price" is being determined and the 20 consecutive business days prior to such
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day. If at any time such security is not listed on any recognized securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
"Market Price" will be the fair value thereof reasonably determined in good
faith by the Board of Directors of the Corporation.
(b) SERIES A-2 CONVERSION PRICE.
(i) The initial Series A-2 Conversion Price for Series A-2
Preferred Stock will be eight dollars and thirty-three cents ($8.33). In order
to prevent dilution of the conversion rights granted under this Section C.6.,
the Series A-2 Conversion Price will be subject to adjustment from time to time
pursuant to this Section C.6.
(ii) If and whenever on or after the original date of issuance of
shares of Series A-2 Preferred Stock the Corporation issues or sells, or in
accordance with Section C.6.(c) is deemed to have issued or sold, any share of
its Common Stock for a consideration per share less than the Series A-2
Conversion Price in effect immediately prior to the time of such issue or sale,
then forthwith upon such issue or sale, or deemed issuance or sale, the Series
A-2 Conversion Price will be reduced, in order to increase the number of shares
of Common Stock into which Series A-2 Preferred Stock is convertible, to that
price per share determined by multiplying the Series A-2 Conversion Price in
effect immediately prior to such issuance or sale, or deemed issuance or sale,
by a fraction (x) the numerator of which shall be the sum of (A) the number of
shares of Common Stock outstanding and which in accordance with Section C.6.(c)
have been, and continue to be, deemed outstanding (other than any such shares
which may be deemed to be outstanding and which are referred to in clause (x) of
such Section C.6.(c)) immediately prior to the issuance or sale or deemed
issuance or sale of such Common Stock, plus (B) the number of shares of Common
Stock then issuable upon conversion of the shares of Class A Common Stock and
Class B Common Stock outstanding immediately prior to the issuance or deemed
issuance of such Common Stock, plus (C) the number of shares of Common Stock
which the aggregate consideration (if any) received by the Corporation for the
total number of such shares of Common Stock so issued or sold or deemed issued
or sold would purchase at the Series A-2 Conversion Price in effect immediately
prior to such issue or sale or deemed issuance or sale, and (y) the denominator
of which shall be the sum of (A) the number of shares of Common Stock
outstanding and which in accordance with Section C.6.(c) have been, and continue
to be, deemed outstanding (other than any such shares which may be deemed to be
outstanding and which are referred to in clause (x) of such Section C.6.(c))
immediately prior to such issue or sale, or deemed issuance or sale plus, (B)
the number of shares of Common Stock then issuable upon conversion of the shares
of Class A Common Stock and Class B Common Stock outstanding immediately prior
to such issue or sale or deemed issuance or sale, plus (C) the number of such
shares of Common Stock so issued or sold or deemed issued or sold; provided,
however, that additional shares of Common Stock issued or sold without
consideration shall be deemed to have been issued or sold for $.001 per share.
(c) EFFECT ON SERIES A-2 CONVERSION PRICE OF CERTAIN EVENTS. For
purposes of determining the adjusted Series A-2 Conversion Price under Section
C.6.(b), the following will be applicable:
(i) ISSUANCE OF OPTIONS. If the Corporation in any manner
grants any rights or options to subscribe for or to purchase Common Stock or any
stock or other securities
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convertible into or exchangeable for Common Stock (such rights or options being
herein called "Options" and such convertible or exchangeable stock or securities
being herein called "Convertible Securities") and the price per share for which
Common Stock is issuable upon the exercise of such Options or upon conversion or
exchange of such Convertible Securities is less than the Series A-2 Conversion
Price in effect immediately prior to the time of the granting of such Options,
then the total maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon conversion or exchange of such Convertible
Securities will be deemed to be outstanding and to have been issued and sold by
the Corporation for such price per share. For purposes of this Section, the
"price per share for which Common Stock is issuable" will be determined by
dividing (A) the total amount, if any, received or receivable by the Corporation
as consideration for the granting of such Options, plus the minimum aggregate
amount of additional consideration payable to the Corporation upon exercise of
all such Options, plus in the case of such Options which relate to Convertible
Securities, the minimum aggregate amount of additional consideration, if any,
payable to the Corporation upon the issuance or sale of such Convertible
Securities and the conversion or exchange thereof, by (B) the total maximum
number of shares of Common Stock issuable upon the exercise of Options or upon
the conversion or exchange of all such Convertible Securities issuable upon the
exercise of such Options. No further adjustment of the Series A-2 Conversion
Price will be made when Convertible Securities are actually issued upon the
exercise of such Options or when Common Stock is actually issued upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Corporation in
any manner issues or sells any Convertible Securities and the price per share
for which Common Stock is issuable upon such conversion or exchange is less than
the Series A-2 Conversion Price in effect immediately prior to the time of such
issue or sale, then the maximum number of shares of Common Stock issuable upon
conversion or exchange of such Convertible Securities will be deemed to be
outstanding and to have been issued and sold by the Corporation for such price
per share. For the purposes of this Section, the "price per share for which
Common Stock is issuable" will be determined by dividing (A) the total amount
received or receivable by the Corporation as consideration for the issue or sale
of such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities. No
further adjustment of the Series A-2 Conversion Price will be made when Common
Stock is actually issued upon the conversion or exchange of such Convertible
Securities, and if any such issue or sale of such Convertible Securities is made
upon exercise of any Options for which adjustments of the Series A-2 Conversion
Price had been or are to be made pursuant to other provisions of this Section
C.6., no further adjustment of the Series A-2 Conversion Price will be made by
reason of such issue or sale.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the conversion or exchange of any Convertible Securities, or
the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock change at any time, and such change is not due
solely to the operation of anti-dilution provisions similar in nature to those
set forth in this Section C.6., the Series A-2 Conversion Price in effect at the
time of such change will be
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readjusted to the Series A-2 Conversion Price which would have been in effect at
such time had such Options or Convertible Securities still outstanding provided
for such changed purchase price, additional consideration or changed conversion
rate, as the case may be, at the time initially granted, issued or sold;
provided that if such adjustment would result in an increase of the Series A-2
Conversion Price then in effect, such adjustment will not be effective until 30
days after written notice thereof has been given by the Corporation to all
holders of shares of Series A-2 Preferred Stock (except no notice need be given
and no delay in such adjustment shall occur if such adjustment is made pursuant
to the terms of such Options or Convertible Securities upon their original
issuance).
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. Upon the expiration of any Option or the termination of any right
to convert or exchange any Convertible Security without the exercise of any such
Option or right, the Series A-2 Conversion Price then in effect hereunder will
be adjusted to the Series A-2 Conversion Price which would have been in effect
at the time of such expiration or termination had such Option or Convertible
Security, to the extent outstanding immediately prior to such expiration or
termination, never been issued.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common Stock,
Option or Convertible Security is issued or sold or deemed to have been issued
or sold for cash, the consideration received therefor will be deemed to be the
net amount received by the Corporation therefor. In case any Common Stock,
Options or Convertible Securities are issued or sold for a consideration other
than cash, the amount of the consideration other than cash received by the
Corporation will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Corporation will be the Market Price thereof as of the date of
receipt. If any Common Stock, Option or Convertible Security is issued in
connection with any merger in which the Corporation is the surviving
Corporation, the amount of consideration therefor will be deemed to be the fair
value of such portion of the net assets and business of the non-surviving
Corporation as is attributable to such Common Stock, Options or Convertible
Securities, as the case may be. The fair value of any consideration other than
cash and securities will be reasonably determined in good faith by the Board of
Directors of the Corporation.
(vi) INTEGRATED TRANSACTIONS. In case any Option is issued in
connection with the issue or sale of other securities of the Corporation,
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
will be deemed to have been issued without consideration.
(vii) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time does not include shares owned or held by or for
the account of the Corporation or any subsidiary, and the disposition of any
shares so owned or held will be considered an issue or sale of Common Stock.
(viii) RECORD DATE. If the Corporation takes a record of the
holders of Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (B) to subscribe for or purchase Common Stock, Options
or Convertible Securities, then for purposes of this Section
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C.6. such record date will be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon the declaration
of such dividend or upon the making of such other distribution or the date of
the granting of such right of subscription or purchase, as the case may be.
(ix) CERTAIN EVENTS. If any event occurs of the type
contemplated by the provisions of this Section C.6. but not expressly provided
for by such provisions (including, without limitation, the granting of stock or
capital appreciation rights, phantom stock rights or other rights with equity
features), then the Board of Directors of the Corporation shall make an
appropriate adjustment in the Series A-2 Conversion Price so as to protect the
rights of the holders of Series A-2 Preferred Stock; provided that no such
adjustment shall increase the Series A-2 Conversion Price as otherwise
determined pursuant to this Section C.6. or decrease the number of shares of
Common Stock issuable upon conversion of each share of Series A-2 Preferred
Stock.
(x) CERTAIN EXCEPTIONS. Anything herein to the contrary
notwithstanding, no adjustment will be made to the Series A-2 Conversion Price
by reason of (i) the issuance of shares of Common Stock upon exercise of options
outstanding on the date of filing of this Third Amended and Restated Certificate
of Incorporation, (ii) the issuance after the date of the Series A Purchase
Agreement of options to employees, officers, directors or consultants of the
Corporation for the purchase, when taken together, of an aggregate of up to
16,000 shares of Common Stock (such number to be proportionately adjusted in the
event of a subdivision or a combination of the Common Stock) (the "Future
Options") (iii) shares of Common Stock issued upon exercise of the Future
Options, (iv) the issuance of shares of Common Stock upon conversion of Class A
Common Stock, Class B Common Stock or Series A-2 Preferred Stock, and (v) the
issuance of shares of Class A Common Stock, Class B Common Stock or Common Stock
upon a subdivision or combination of the Common Stock for which an adjustment to
the Series A-2 Conversion Price is made pursuant to Section C.6.(d).
(d) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Corporation
at any time after the date of filing of this Third Amended and Restated
Certificate of Incorporation subdivides (by any stock split, stock dividend,
recapitalization or otherwise) its outstanding shares of Common Stock into a
greater number of shares, the Series A-2 Conversion Price in effect immediately
prior to such subdivision will be proportionately reduced, and if the
Corporation at any time after the date of filing of this Third Amended and
Restated Certificate of Incorporation combines (by reverse stock split or
otherwise) its outstanding shares of Common Stock into a smaller number of
shares, the Series A-2 Conversion Price in effect immediately prior to such
combination will be proportionately increased.
(e) REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.
Any capital reorganization, reclassification, consolidation, merger or sale of
all or substantially all of the Corporation's assets to another person or entity
which is effected in such a way that holders of Common Stock are entitled to
receive (either directly or upon subsequent liquidation) stock, securities or
assets with respect to or in exchange for Common Stock is referred to herein as
an "Organic Change." Prior to the consummation of any Organic Change, the
Corporation will make appropriate provisions (in form and substance satisfactory
to the holders of a majority of the shares of Series A-2 Preferred Stock then
outstanding) to insure that each of the holders
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of Series A-2 Preferred Stock will thereafter have the right to acquire and
receive, in lieu of or in addition to the shares of Common Stock immediately
theretofore acquirable and receivable upon the conversion of such holder's
shares of Series A-2 Preferred Stock, such shares of stock, securities or assets
as such holder would have received in connection with such Organic Change if
such holder had converted his Series A-2 Preferred Stock immediately prior to
such Organic Change. In any such case, the Corporation will make appropriate
provisions (in form and substance satisfactory to the holders of a majority of
the shares of Series A-2 Preferred Stock then outstanding) to insure that the
provisions of this Section C.6. will thereafter be applicable to Series A-2
Preferred Stock (including, in the case of any such consolidation, merger or
sale in which the successor corporation or purchasing corporation is other than
the Corporation, an immediate adjustment of the Series A-2 Conversion Price to
the value for the Common Stock reflected by the terms of such consolidation,
merger or sale, and a corresponding immediate adjustment in the number of shares
of Common Stock acquirable and receivable upon conversion of shares of Series
A-2 Preferred Stock, if the value so reflected is less than the Series A-2
Conversion Price in effect immediately prior to such consolidation, merger or
sale). The Corporation will not effect any such consolidation, merger or sale,
unless prior to the consummation thereof, the successor corporation (if other
than the Corporation) resulting from consolidation or merger or the corporation
purchasing such assets assumes by written instrument (in form reasonably
satisfactory to the holders of a majority of the shares of Series A-2 Preferred
Stock then outstanding), the obligation to deliver to each such holder such
shares of stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to acquire.
(f) NOTICES.
(i) Immediately upon any adjustment of the Series A-2 Conversion
Price, the Corporation will give written notice thereof to all holders of shares
of Series A-2 Preferred Stock, setting forth in reasonable detail and certifying
the calculation of such adjustment.
(ii) The Corporation will give written notice to all holders of
shares of Series A-2 Preferred Stock as soon as possible but in any event at
least 20 days prior to the date on which the Corporation closes its books or
takes a record (A) with respect to any dividend or distribution upon Common
Stock, (B) with respect to any pro rata subscription offer to holders of Common
Stock or (C) for determining rights to vote with respect to any Liquidation.
(iii) The Corporation will also give written notice to the
holders of shares of Series A-2 Preferred Stock as soon as possible but in any
event at least 20 days prior to the date on which any Liquidation will take
place.
(g) PURCHASE RIGHTS. If at any time the Corporation grants, issues
or sells any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of Common
Stock ("Purchase Rights"), then each holder of shares of Series A-2 Preferred
Stock will be entitled to acquire, upon the terms applicable to such Purchase
Rights, the aggregate Purchase Rights which such holder could have acquired if
such holder had held the number of shares of Common Stock acquirable upon
conversion of such holder's shares of Series A-2 Preferred Stock immediately
before the date on which a record is
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taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.
(h) RESERVATION OF COMMON STOCK. The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the shares of
Series A-2 Preferred Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of Series A-2 Preferred Stock, and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Series A-2 Preferred Stock, the
Corporation will take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
(i) TAXES AND CHARGES. The Corporation will pay all taxes and other
governmental charges that may be imposed in respect of the issue or delivery of
shares of Common Stock upon conversion of shares of Series A-2 Preferred Stock.
(j) PROTECTION OF CONVERSION RIGHTS. The Corporation shall not amend
its Certificate of Incorporation or participate in any reorganization, transfer
of assets, consolidation, merger, dissolution, issuance or sale of securities or
take any other voluntary action, for the purpose of avoiding or seeking to avoid
the observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section C.6. and will take all
actions that may be necessary or appropriate in order to protect the rights of
the holders of shares of Series A-2 Preferred Stock to convert such shares
against impairment.
(k) AUTOMATIC CONVERSION. The shares of Series A-2 Preferred Stock
shall automatically be converted into shares of Common Stock at the Series A-2
Conversion Price then in effect upon the earlier to occur of (i) the date on
which a majority of the shares of Series A-2 Preferred Stock originally issued
and outstanding (such number to be adjusted proportionately in the event the
shares of Series A-2 Preferred Stock are subdivided into a greater number or
combined into a lesser number) shall have been converted into shares of Common
Stock or (ii) the closing of a Qualified Public Offering; provided, however,
that the Corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such conversion unless certificates
evidencing such shares of Series A-2 Preferred Stock being converted are either
delivered to the Corporation or any transfer agent or the holder notifies the
Corporation or any transfer agent that such certificates have been lost, stolen
or destroyed and executes an agreement reasonably satisfactory to the
Corporation to indemnify the Corporation from any loss incurred by it in
connection therewith. Upon the automatic conversion of Series A-2 Preferred
Stock, the holder of such Series A-2 Preferred Stock shall surrender the
certificates representing such shares at the office of the Corporation or of any
transfer agent for the Common Stock. Thereupon, there shall be issued and
delivered to such holder, promptly at such office and in his name as shown on
such surrendered certificate or certificates, a certificate or certificates for
the number of shares of Common Stock into which the shares of Series A-2
Preferred Stock surrendered were convertible on the date on which such automatic
conversion occurred. In connection with the Qualified Public Offering, any
former holder of
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shares of Series A-2 Preferred Stock converted pursuant to this paragraph (k) of
this Section C.6. may elect to sell, at such time, to the Corporation up to .01%
of its Common Stock at a price per share equal to the price per share received
by the Corporation in the Qualified Public Offering upon notice and delivery of
such shares to the Corporation.
7. BOARD REPRESENTATION. (a) For so long as any Series A-2 Preferred
Stock shall remain outstanding, except as provided in clause (b) of this Section
7, the Board of Directors of the Corporation, and any committee thereof, shall
at all times have at least two members that have been designated by the holders
of a majority of the Series A-2 Preferred Stock.
(b) For so long as any Series A-2 Preferred Stock shall remain
outstanding, subject to the terms of Section D of this Article IV, without the
affirmative vote, or written consent, of the holders of not less than a majority
of the outstanding shares of Series A-2 Preferred Stock, the number of members
of the Board of Directors shall not exceed nine; provided however, that (i) the
number of members of the Board of Directors may be increased to ten (without
such affirmative vote, or written consent) by the addition of two members who
are approved by the Chief Executive Officer of the Corporation and by the
affirmative vote, or written consent, of the holders of not less than a majority
of the outstanding shares of Series A-2 Preferred Stock and (ii) so long as such
additional two members are members of the Board of Directors of the Corporation,
the number of members of the Board of Directors designated pursuant to clause
(a) of this Section 7 shall be reduced to one.
8. CANCELLATION OF SERIES A-2 PREFERRED STOCK. No share or shares of
Series A-2 Preferred Stock acquired by the Corporation by reason of redemption,
conversion or otherwise shall be reissued, and all such shares shall be
canceled, retired and eliminated from the shares which the Corporation shall be
authorized to issue.
SECTION D. SERIES A PREFERRED STOCK: GENERAL PROVISIONS
1. EVENTS OF NONCOMPLIANCE.
(a) DEFINITION. An Event of Noncompliance shall be deemed to have
occurred if:
(i) the Corporation fails to make any redemption payment with
respect to the Series A Preferred Stock which it is obligated to make hereunder,
whether or not such payment is legally permissible or is prohibited by any
agreement to which the Corporation is subject;
(ii) the Corporation breaches or otherwise fails to perform or
observe any other covenant or agreement set forth herein or in the Series A
Purchase Agreement; provided, that no Event of Noncompliance shall be deemed to
have occurred under this subparagraph (ii) if either (x) holder(s) of a majority
of the shares of Series A Preferred Stock then outstanding shall not have
provided written notice to the Corporation specifying the nature of such breach
or failure or (y) the Corporation establishes (to the reasonable satisfaction of
the holders of a majority of the Series A Preferred Stock then outstanding) that
(a) the particular Event of Noncompliance has not been caused by knowing or
purposeful conduct by the
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Corporation or any Subsidiary, (b) the Corporation has exercised, and continues
to exercise, its best efforts to expeditiously cure the Event of Noncompliance
(if cure is possible), (c) the Event of Noncompliance is not material to the
financial condition, operating results, operations, assets, rights or business
prospects of the Corporation and its Subsidiaries, taken as a whole, and (d) the
Event of Noncompliance is not material to any holder's investment in the Series
A Preferred Stock;
(iii) any default or the happening of any other event shall
occur under one or more indentures, agreements or other instruments under which
any Indebtedness of the Corporation or any Subsidiary may be issued, the effect
of which is the acceleration of the maturity of Indebtedness of the Corporation
outstanding thereunder which, in the aggregate, equals of exceeds $250,000;
(iv) a receiver, conservator, custodian, liquidator or trustee of
the Corporation or any Subsidiary or of all or any of the assets of any of them,
is appointed by court order and such order remains in effect for more than
thirty (30) days; or an order for relief is entered under the federal bankruptcy
laws with respect to the Corporation or any Subsidiary; or any of the material
assets of any of them is sequestered by court order and such order remains in
effect for more than thirty (30) days after such filing;
(v) the Corporation or any Subsidiary files a petition in
voluntary bankruptcy or seeking relief under any provision of any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in effect, or
consents to the filing of any petition against it under any such law;
(vi) the Corporation or any Subsidiary makes an assignment for
the benefit of its creditors, or admits in writing its inability to pay, or in
fact does not pay, its debts generally as they become due, or consents to the
appointment of a receiver, conservator, custodian, liquidator or trustee of the
Corporation or any Subsidiary, or all or any part of the property of any of
them; or
(vii) any representation or warranty contained in the Series
A Purchase Agreement or required to be furnished to any holder of Series A
Preferred Stock pursuant to the Series A Purchase Agreement is false, inaccurate
or misleading in any material respect on the date or dates made or furnished,
subject to the survival provisions of Section 9.2 of the Series A Purchase
Agreement; provided, that no Event of Noncompliance shall be deemed to have
occurred under this subparagraph (vii) if either (a) the Corporation establishes
(to the reasonable satisfaction of the holders of a majority of the Series A
Preferred Stock then outstanding) that such false, inaccurate or misleading
representation or warranty is not material to any holder's investment in the
Series A Preferred Stock or (b) the Corporation shall have redeemed all of the
shares of Series A-1 Preferred Stock by payment of the full redemption price
therefore.
(b) ELECTION OF DIRECTORS. (i) If at any time there has occurred
and is continuing an Event of Noncompliance and such Event of Noncompliance has
continued for a period of at least 14 days, the holders of Series A Preferred
Stock shall have the exclusive and special right (in addition to any other
voting rights), voting separately as a class, to elect, at any
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annual meeting of stockholders, at a special meeting held in place thereof, at a
special meeting of the holders of Series A Preferred Stock called as hereinafter
provided, or by written consent, a majority of the members of the Board of
Directors.
(ii) At any time after an Event of Noncompliance has occurred and
is continuing, the secretary of the Corporation may and, upon written request of
holders of record of at least 20% of the shares of Series A Preferred Stock then
outstanding addressed to him at the registered office of the Corporation shall,
call a special meeting of the holders of Series A Preferred Stock for the
purpose of electing such members of the Board of Directors, such meeting to be
held at the registered office of the Corporation, or such other place as such
request shall specify, as soon as practicable after the receipt of such request,
upon the notice provided by law and the by-laws of the Corporation for the
holding of special meetings of stockholders. If such special meeting shall not
be called by the secretary within 3 days after receipt of such request, then the
holders of record of at least 20% of the shares of Series A Preferred Stock then
outstanding may designate in writing one of their number to call such a meeting
at the place designated by such holders and upon the notice above provided, and
any person so designated for that purpose shall have access to the stock records
of the Corporation for such purpose.
(iii) At any meeting at which the holders of Series A
Preferred Stock shall be entitled to elect a majority of the members of the
Board of Directors as provided above, the holders of a majority of the shares of
Series A Preferred Stock then outstanding present in person or by proxy shall
constitute a quorum for the election of such directors, and the vote of the
holders of shares representing a majority of the shares of Series A Preferred
Stock so present at any such meeting at which there shall be such a quorum shall
be sufficient to elect such directors. The election of such directors shall
automatically increase the number of members of the Board of Directors by the
number of directors so elected. Therefore, the number of additional directors
to be elected by such holders shall be equal to the total number of directors
immediately prior to such election, plus one (e.g., if there were five
directors, the number of additional directors would be six). The persons so
elected as directors by the holders of Series A Preferred Stock shall hold
office until the next annual meeting of stockholders and until their successors
shall have been elected by such holders or until there shall be no existing
Event of Noncompliance. Upon there ceasing to be any existing Event of
Noncompliance, any directors so elected by the holders of Series A Preferred
Stock shall forthwith cease to be directors of the Corporation, and the number
of directorships shall automatically be reduced accordingly. If a vacancy
occurs in a directorship elected by the holders of Series A Preferred Stock
voting separately as a class, a successor may be appointed by the remaining
directors or director so elected by the holders of Series A Preferred Stock.
(iv) At any meeting at which the holders of Series A Preferred
Stock shall be entitled to elect the majority of the members of the Board of
Directors as provided above, or any adjournment thereof, (A) the absence of a
quorum of the holders of Series A Preferred Stock shall not prevent the election
of directors other than those to be elected by the holders of Series A Preferred
Stock voting separately as a class, (B) the absence of a quorum of the holders
of classes or series of stock entitled to elect directors other than those
elected by the holders of Series A Preferred Stock shall not prevent the
election of the directors to be elected by the holders of Series A Preferred
Stock voting separately as a class, (C) in the
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absence of a quorum of the holders of Series A Preferred Stock, the holders of
shares representing a majority of the shares of Series A Preferred Stock present
in person or by proxy shall have power to adjourn from time to time the meeting
for the election of the directors which they are entitled to elect voting
separately as a class, without notice other than announcement at the meeting,
until a quorum shall be present, and (D) in the absence of a quorum of the
holders of the classes or series of stock entitled to elect directors other than
those elected by the holders of Series A Preferred Stock, the holders of a
majority of such classes or series present in person or by proxy shall have
power to adjourn from time to time the meeting for the election of the directors
which they are entitled to elect, without notice other than announcement at the
meeting, until a quorum shall be present.
(v) At any time after the holders of Series A Preferred Stock
shall have become entitled to elect a majority of the Board of Directors
pursuant to this Section D.1., such holders may do so by a consent in writing
setting forth the action so taken, and signed by the holders of shares
representing a majority of the shares of Series A Preferred Stock then
outstanding.
(c) REDEMPTION OF SERIES A-1 PREFERRED STOCK. In addition to the
rights set forth in paragraph (b) of this Section D.1., if at any time an Event
of Noncompliance has occurred and has (other than with respect to an Event of
Noncompliance under Section D.1.(a)(i)) continued uncured for a period of at
least 14 days, the holders of a majority of the shares of Series A-1 Preferred
Stock then outstanding may demand (by written notice delivered to the
Corporation) immediate redemption of all or any portion of the Series A-1
Preferred Stock owned by such holders at a price per share equal to the Series
A-1 Redemption Price. The Corporation will give prompt written notice of such
election to the other holders of Series A-1 Preferred Stock (but in any event
within 10 days after receipt of the initial demand for redemption), and each
such other holder may demand immediate redemption of all or any portion of such
holder's Series A-1 Preferred Stock by giving written notice thereof to the
Corporation within 30 days after receipt of the Corporation's notice. The
Corporation will redeem all Series A-1 Preferred Stock as to which rights under
this paragraph have been exercised at the Series A-1 Redemption Price, within 45
days after receipt of the initial demand for redemption on the terms and
conditions provided in Section B.5. for a redemption of Series A-1 Preferred
Stock.
(d) OTHER RIGHTS. If an Event of Noncompliance exists, each holder
of shares of Series A Preferred Stock shall also have any other rights to which
such holder is entitled to under any contract or agreement at any time and any
other rights which such holder may have pursuant to applicable law.
(e) DELAYS OR OMISSIONS. No failure to exercise or delay in the
exercise of any right, power or remedy accruing to any holder of Series A
Preferred Stock upon any Event of Noncompliance hereunder shall impair such
right, power or remedy of such holder or shall it be construed to be a waiver of
any such Event of Noncompliance, or an acquiescence therein, or of or in any
similar Event of Noncompliance thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any Event of Noncompliance
theretofore or thereafter occurring.
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2. DEFINITIONS. As used in Section B, Section C or Section D of this
ARTICLE IV, the following terms have the following meanings:
"Indebtedness" of any Person shall mean the principal of, premium, if
any, and unpaid interest on (a) indebtedness for money borrowed from others; (b)
indebtedness guaranteed, directly or indirectly, in any manner by such Person,
or in effect guaranteed, directly or indirectly, in any manner by such Person
through an agreement, contingent or otherwise, to supply funds to, or in any
other manner invest in, the debtor, or to purchase indebtedness, or to purchase
and pay for property if not delivered or pay for services if not performed,
primarily for the purpose of enabling the debtor to make payment of the
indebtedness or to assure the owners of the indebtedness against loss; (c) all
indebtedness secured by any mortgage, lien, pledge, charge or other encumbrance
upon property owned by such Person, even though such Person has not in any
manner become liable for the payment of such indebtedness; (d) all indebtedness
of such Person created or arising under any conditional sale, lease (intended
primarily as a financing device) or other title retention or security agreement
with respect to property acquired by such Person even though the rights and
remedies of the seller, lessor or lender under such agreement or lease in the
event of default may be limited to repossession or sale of such property; and
(e) renewals, extensions and refunding of any such indebtedness.
"Person" means an individual, a partnership, a Corporation, an
association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization or a governmental entity or any
department, agency or political subdivision thereof.
"Public Offering" means a firm commitment underwritten public offering
of Common Stock to the public pursuant to a registration statement declared
effective under the Securities Act of 1933, as amended, other than an offering
made in connection with a business acquisition or combination or an employee
benefit plan.
"Qualified Public Offering" means a Public Offering in which:
(i) the aggregate gross proceeds received by the Corporation
in such Public Offering equals or exceeds Ten Million
Dollars ($10,000,000);
(ii) the price per share received by the Corporation in such
Public Offering is equal to or greater than $10.00; and
(iii) upon the closing of such Public Offering, the Common Stock
will either be quoted on the National Association of
Securities Dealers Automated Quotation System/National
Market Systems ("NASDAQ System") or listed on the American
Stock Exchange or the New York Stock Exchange.
"Series A Purchase Agreement" means that certain Series A-1 and Series
A-2 Preferred Stock Purchase Agreement dated as of June 30, 1994 by and between
the Corporation, Frontenac VI Limited Partnership, certain other investors and
certain other persons, as such agreement may from time to time be amended in
accordance with its terms.
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"Series A-1 Liquidation Price" means 29.7 cents per share (such amount
to be proportionately decreased in the event the Series A-1 Preferred Stock is
subdivided into a greater 1number or increased in the event the Series A-1
Preferred Stock is combined into a lesser number), plus accrued but unpaid
dividends on such share, plus declared but unpaid dividends on such share, and
plus the amount (if any) by which (a) the sum of accrued but unpaid dividends on
such share and dividends paid on such share is less than (b) 3.3 cents (such
amount to be proportionately decreased in the event the Series A-1 Preferred
Stock is subdivided into a greater number or increased in the event the
Series A-1 Preferred Stock is combined into a lesser number).
"Series A Preferred Stock" means any of the Series A-1 Preferred Stock
or the Series A-2 Preferred Stock.
"Series A-1 Redemption Price" means 29.7 cents per share (such amount
to be proportionately decreased in the event the Series A-1 Preferred Stock is
subdivided into a greater number or increased in the event the Series A-1
Preferred Stock is combined into a lesser number), plus accrued but unpaid
dividends on such share, plus declared but unpaid dividends on such share, and
plus the amount (if any) by which (a) the sum of accrued but unpaid dividends on
such share and dividends paid on such share is less than (b) 3.3 cents (such
amount to be proportionately decreased in the event the Series A-1 Preferred
Stock is subdivided into a greater number or increased in the event the
Series A-1 Preferred Stock is combined into a lesser number).
"Subsidiary" means any Corporation, association or other business
entity of which securities or other ownership interests representing more than
fifty percent (50%) of the ordinary voting power are, at the time as of which
any determination is being made, owned or controlled by the Corporation or one
or more Subsidiaries of the Corporation or by the Corporation and one or more
Subsidiaries of the Corporation.
3. MISCELLANEOUS.
(a) NOTICES. Except as otherwise expressly provided hereunder, all
notices referred to in Section B, Section C or Section D of this ARTICLE IV
shall be in writing and shall be delivered personally or by registered or
certified mail, return receipt requested and postage prepaid, or by reputable
overnight courier services, charges prepaid, and shall be deemed to have been
given when personally delivered to such holder, one (1) business day after the
same is delivered to such an overnight courier service, charges prepaid, or five
(5) business days after the same has been so deposited in the United States
mail, certified or registered mail, return receipt requested, postage prepaid,
and addressed (i) to the Corporation, at its principal executive offices and
(ii) to any holder of Series A Preferred Stock, at such holder's address as it
appears in the stock records of the Corporation (unless otherwise indicated by
any such holder).
(b) REGISTRATION OF TRANSFER. The Corporation shall keep at its
principal office a register for the registration of Series A Preferred Stock.
Upon the surrender of any certificate representing Series A Preferred Stock at
such place, the Corporation shall, at the request of the record holder of such
certificate, execute and deliver (at the Corporation's expense) a new
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certificate or certificates in exchange therefor representing in the aggregate
the number of shares of Series A Preferred Stock represented by the surrendered
certificate. Each such new certificate shall be registered in such name and
shall represent such number of shares of Series A Preferred Stock as is
requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate.
(c) REPLACEMENT OF CERTIFICATES. Upon receipt of evidence reasonably
satisfactory to the Corporation (an affidavit of the registered holder shall be
satisfactory) of the ownership and the loss, theft, destruction or mutilation of
any certificate evidencing shares of Series A Preferred Stock, and, in the case
of any such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Corporation (provided that if the holder is a financial
institution or other institutional investor its own agreement shall be
satisfactory), or, in the case of any such mutilation upon surrender of such
certificate, the Corporation shall (at its expense) execute and deliver in lieu
of such certificate a new certificate of like kind representing the number of
shares of Series A Preferred Stock represented by such lost, stolen, destroyed
or mutilated certificate.
(d) AMENDMENT AND WAIVER. No amendment, modification or waiver shall
be binding or effective with respect to any provision of Section B, Section C or
this Section D of this ARTICLE IV hereof, and no change in the terms of such
Sections may be accomplished by merger or consolidation of the Corporation with
another corporation or entity, without the prior written consent of the holders
of a majority of the shares of Series A Preferred Stock outstanding at the time
such action is taken.
SECTION E. ADDITIONAL SERIES OF PREFERRED STOCK.
Subject to the terms contained in any designation of a series of Preferred
Stock and subject to the other provisions of this Third Amended and Restated
Certificate of Incorporation, the Board of Directors of the Corporation (the
"Board of Directors") is hereby expressly authorized to provide for the issuance
of and to issue shares of the Preferred Stock in series, and by filing a
certificate pursuant to the laws of the State of Delaware, to establish from
time to time the number of shares to be included in each such series, and to fix
the designation, powers, preferences and rights of the shares of each such
series and any qualifications, limitations or restrictions thereof. The number
of authorized shares of Preferred Stock may be increased or decreased (but not
below the number of shares thereof then outstanding) by the affirmative vote of
the holders of a majority of the Common Stock, without a vote of the holders of
any Preferred Stock, or of any series thereof, unless a vote of any such holders
is required pursuant to the certificate or certificates establishing such series
of Preferred Stock.
C. GENERAL PROVISIONS.
1. VOTING. Except as provided by law or this Third Amended and Restated
Certificate of Incorporation with respect to voting by class or series, the
holder of each outstanding share of stock of the Corporation (regardless of
class or series) shall be entitled to one vote (except with respect to any
greater or lesser vote or no vote which may be fixed by this Third Amended and
Restated Certificate of Incorporation or by the resolution of the Board of
Directors providing for the issue of a series of Preferred Stock, in which event
the holder of
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each outstanding share of such series shall be entitled to such vote or no vote
as may be fixed in such resolution), on each matter submitted to a vote at a
meeting of stockholders.
2. QUORUM AT STOCKHOLDERS' MEETINGS. At any meeting of stockholders, the
presence in person or by proxy of the holders of record of issued and
outstanding shares of stock of the Corporation entitled to vote a majority of
the votes entitled to be voted at such meeting shall constitute a quorum for all
purposes, except as otherwise provided by this Third Amended and Restated
Certificate of Incorporation or required by applicable law.
ARTICLE V
This Third Amended and Restated Certificate of Incorporation shall not be
amended, and no series of Preferred Stock shall be designated (other than the
Series A Preferred Stock), to do any of the following without the affirmative
vote or written consent of the holders of not less than a majority of the
outstanding shares of Series A Preferred Stock:
(a) amend or repeal any provision of, or add any provision to, this Third
Amended and Restated Certificate of Incorporation, if such action
would alter or change the preferences, rights, privileges or powers
of, or the restrictions provided for the benefit of, the Series A
Preferred Stock, or increase or decrease the number of shares of the
Series A Preferred Stock authorized;
(b) authorize or issue shares of any class of stock not authorized herein,
or of any series of Preferred Stock, having any preference or priority
as to dividends or assets superior to or on a parity with any such
preference or priority of the Series A Preferred Stock, issue any
shares of the Series A Preferred Stock (other than pursuant to the
Series A Purchase Agreement), or authorize or issue shares of stock of
any class or any bonds, debentures, notes or other obligations
convertible into or exchangeable for, or having option rights to
purchase, any shares of Series A Preferred Stock or of any other class
or series of stock of the Corporation having any preference or
priority as to dividends or assets superior to or on a parity with any
such preference or priority of the Series A Preferred Stock;
(c) reclassify any stock into shares having any preference or priority as
to dividends or assets superior to or on a parity with any such
preference or priority of the Series A Preferred Stock;
(d) amend or repeal any provision of this ARTICLE V.
ARTICLE VI
The business and affairs of the Corporation shall be managed by or under
the direction of a Board of Directors consisting of not less than seven nor more
than fifteen persons. The exact number shall be determined from time to time by
resolution adopted by the affirmative
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vote of a majority of the directors in office at the time of adoption of such
resolution. Initially, the number of directors shall be eleven.
Such directors shall be divided into three classes, Class I, Class II and
Class III; with Class I and Class II each having four members and Class III
having three members. At the election of directors immediately following the
adoption of this Third Amended and Restated Certificate of Incorporation,
Class I directors will be elected for a one-year term, Class II directors will
be elected for a two-year term and Class III directors will be elected for a
three-year term. At each annual meeting of stockholders after such election,
successors to the class of directors whose term expires at that annual meeting
shall be elected for a three-year term. If the number of directors is changed,
any increase or decrease shall be apportioned among the classes by the Board of
Directors so as to maintain the number of directors in each class as nearly
equal as reasonably possible, and any additional director of any class elected
to fill a vacancy resulting from an increase in such class shall hold office for
a term that shall coincide with the remaining term of that class. In no case
will a decrease in the number of directors shorten the term of any incumbent
director even though such decrease may result in an inequality of the classes
until the expiration of such term. A director shall hold office until the
annual meeting of the year in which his term expires and until his successor
shall be elected and shall qualify, subject, however, to prior death,
resignation, retirement or removal from office. No director elected by the
stockholders of the Corporation may be removed except for cause. Except as
required by law or the provisions of this Third Amended and Restated Certificate
of Incorporation, all vacancies on the Board of Directors and newly-created
directorships shall be filled by the Board of Directors. Any director elected
to fill a vacancy not resulting from an increase in the number of directors
shall have the same remaining term as that of his predecessor.
Notwithstanding the foregoing, whenever the holders of any one or more
class or series of preferred stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorship shall be governed by the terms
of this Third Amended and Restated Certificate of Incorporation and any
resolutions of the Board of Directors applicable thereto, and such directors so
elected shall not be divided into classes pursuant to this Article VI.
Notwithstanding anything to the contrary contained in this Third Amended and
Restated Certificate of Incorporation, the affirmative vote of the holders of at
least 80% of the shares entitled to vote generally in the election of directors
shall be required to amend, alter or repeal, or to adopt any provision
inconsistent with, this Article VI.
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to adopt, amend or repeal the
By-laws of the Corporation.
ARTICLE VII
Election of directors need not be by written ballot unless the By-laws of
the Corporation so provide.
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ARTICLE VIII
The Corporation reserves the right to amend, alter or repeal any provision
contained in this Third Amended and Restated Certificate of Incorporation, in
the manner now or hereafter prescribed by statute, and all rights conferred upon
the stockholders herein are granted subject to this reservation.
ARTICLE IX
The Corporation shall indemnify, in accordance with and to the full extent
now or hereafter permitted by law, any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(including, without limitation, an action by or in the right of the
Corporation), by reason of his acting as a director of the Corporation (and the
Corporation, in the discretion of the Board of Directors, may so indemnify a
person by reason of the fact that he is or was an officer or employee of the
Corporation or is or was serving at the request of the Corporation in any other
capacity for or on behalf of the Corporation) against any liability or expense
actually and reasonably incurred by such person in respect thereof; provided,
however, that the Corporation shall not be obligated to indemnify any such
person (i) with respect to proceedings, claims or actions initiated or brought
voluntarily by such person and not by way of defense, or (ii) for any amounts
paid in settlement of an action effected without the prior written consent of
the Corporation to such settlement. Such indemnification is not exclusive of
any other right to indemnification provided by law, agreement or otherwise.
ARTICLE X
No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided, however, that this provision shall not eliminate
or limit the liability of a director (i) for any breach of the director's duty
of loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit.
ARTICLE XI
No amendment to or repeal of Article IX or X of this Third Amended and
Restated Certificate of Incorporation shall apply to or have any effect on the
rights of any individual referred to in Articles IX or X for or with respect to
acts or omissions of such individual occurring prior to such amendment or
repeal.
ARTICLE XII
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(a) WRITTEN CONSENT. At any time after the closing of a Public Offering,
any action required or permitted to be taken by the stockholders of the
Corporation must be effected at a duly called annual or special meeting of
stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders.
(b) SPECIAL MEETINGS. Special meetings of stockholders of the Corporation
may be called upon not less than ten nor more than 60 days' written notice only
by the Board of Directors pursuant to a resolution approved by a majority of the
Board of Directors.
(c) AMENDMENT. Notwithstanding anything contained in this Third Amended
and Restated Certificate of Incorporation to the contrary, the affirmative vote
of the holders of at least 80% of the shares entitled to vote generally in the
election of directors shall be required to amend, alter or repeal, or to adopt
any provision inconsistent with, this Article XII.
ARTICLE XIII
Meetings of stockholders may be held within or without the State of
Delaware as the By-Laws of the Corporation may provide. The books of the
Corporation may be kept outside the State of Delaware at such place or places as
may be designated from time to time by the Board of Directors of the Corporation
or in the By-laws of the Corporation. Election of directors need not be by
written ballot unless the By-laws of the Corporation so provide.
ARTICLE XIV
The By-laws of the Corporation may be altered, amended, or repealed or new
By-laws may be adopted by the Board of Directors or by the vote of the holders
of 66-2/3% of the shares entitled to vote generally for the election of
directors if notice of such alteration, amendment, repeal or adoption of new
By-laws is contained in the notice of such special meeting.
IN WITNESS WHEREOF, the Corporation has caused this Third Amended and
Restated Certificate of Incorporation to be signed by its Chairman and Chief
Executive Officer on February 27, 1996.
PLATINUM ENTERTAINMENT, INC.
By: /s/ Steven Devick
-----------------
Steven Devick
Chairman and Chief Executive Officer
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<PAGE>
CERTIFICATE OF RETIREMENT AND PROHIBITION OF
REISSUANCE OF SHARES
OF
PLATINUM ENTERTAINMENT, INC.
(Pursuant to Section 243 of the General Corporation Law
of the State of Delaware)
It is hereby certified that:
1. The name of the corporation (hereinafter called the "corporation") is
Platinum Entertainment, Inc.
2. On March 15, 1996, the corporation retired 240,000 shares of its Class
A Common Stock, 1,080,000 shares of its Class B Common Stock, 18,257,576 shares
of its Series A-1 Non-Convertible Preferred Stock and 18,257,576 shares of its
Series A-2 Convertible Preferred Stock.
3. The Restated Certificate of Incorporation of the corporation prohibits
the reissuance of the shares of Class A Common Stock, Class B Common Stock,
Series A-1 Non-Convertible Preferred Stock and Series A-2 Convertible Preferred
Stock when so retired, and the shares so retired constitute all the authorized
shares of Class A Common Stock, Class B Common Stock, Series A-1 Non-Convertible
Preferred Stock and Series A-2 Convertible Preferred Stock; and pursuant to the
provisions of Section 243 of the General Corporation Law of the State of
Delaware, upon the effective date of the filing of this Certificate as therein
provided, the Restated Certificate of Incorporation of said corporation shall be
amended so as to effect a reduction in the authorized number of shares of the
corporation by the elimination therefrom of all reference to (i) said Class A
Common Stock, comprising Two Hundred Forty Thousand (240,000) shares of the par
value of $.001 each, (ii) said Class B Common Stock, comprising One Million
Eighty Thousand (1,080,000) shares of the par value of $.001 each, (iii) said
Series A-1 Non-Convertible Preferred Stock, comprising Eighteen Million Two
Hundred Fifty Seven Thousand Five Hundred Seventy Six (18,257,576) shares of the
par value of $.001 each, and (iv) said Series A-2 Convertible Preferred Stock
comprising Eighteen Million Two Hundred Fifty Seven Thousand Five Hundred
Seventy Six (18,257,576) shares of the par value of $.001 each.
Steven Devick
Chairman of the Board
Attest:
Douglas C. Laux
Secretary
<PAGE>
PLATINUM ENTERTAINMENT, INC.
CERTIFICATE OF THE POWERS, DESIGNATIONS,
PREFERENCES AND RIGHTS OF THE
SERIES B 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 vote at a meeting 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 10,000,000 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 20,000 shares of Series B Convertible Preferred
Stock (the "Series B 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.
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 II,
L.P., as nominee, and the warrant for an aggregate of 315,000 shares of Common
Stock to be issued to Platinum Venture Partners II, L.P., as nominee, each
<PAGE>
2
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)
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.
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
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<PAGE>
3
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 B 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
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 Board of Directors
is unable to determine the fair market value, or 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 then the fair market value will be determined
by an Independent Financial Expert in accordance with the provisions set forth
in the definition of Current Market Price herein. The Conversion
<PAGE>
4
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. If the Board of Directors
is unable to determine the fair market value, or if the holders of a
majority-in-interest of the shares of Series B Preferred Stock disagree with the
Board's determination of fair market value by written notice delivered to the
Corporation within five (5) business days after the Board's determination
thereof is communicated in writing to holders of the Series B Preferred Stock
affected thereby, which notice specifies a majority-in-interest of such holders'
determination of fair market value, then the Corporation and a
majority-in-interest of such holders shall select an Independent Financial
Expert which shall determine such fair market value. If the Corporation and
such holders are unable to agree upon an Independent Financial Expert within
fifteen (15) days after the request of such holders, each of the Corporation and
such holders shall select an Independent Financial Expert within five (5) days
following the expiration of such fifteen (15) day period, and these Independent
Financial Experts shall select a third Independent Financial Expert. The
determination of fair market value by such Independent Financial Expert shall be
final, binding and conclusive on the Corporation and all holders of the Series B
Preferred Stock. All costs and fees of any of the Independent Financial Experts
retained in accordance with the foregoing shall be borne by the Corporation.
1.14 "Dividend Amount" shall mean an amount per share of Series B
Preferred Stock (rounded to the nearest $ .01) equal to (1) $30 per $1,000
Liquidation Value of Series B Preferred Stock during the first year after the
Issue Date,(2) $35 per $1,000 Liquidation Value of Series B Preferred Stock
during the second year after the Issue Date, (3)$40 per $1,000 Liquidation Value
of Series B Preferred Stock during the third year after the Issue Date,(4) $45
per $1,000 Liquidation Value of Series B Preferred Stock during the fourth and
fifth years after the Issue Date and (5) $50 per $1,000 Liquidation Value of
Series B Preferred Stock at all times after the fifth anniversary of the Issue
Date.
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.
<PAGE>
5
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 the
shares of 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 the conversion 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
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 B 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.
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6
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 C 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 B 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 B
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, 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 B 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 B Preferred Stock in respect of the right to receive dividends or to
participate in any distribution of assets other than by way of dividends.
<PAGE>
7
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 C Preferred Stock" shall mean the class of Series C
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 C 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 C Certificate of Designation" shall mean the
Certificate of the Powers, Designations, Preferences and Rights of the Series C
Preferred Stock, in the form filed by the Corporation with the Secretary of
State of Delaware, as the same may be amended from time to time.
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 B 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 B 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 B Preferred Stock shall be cumulative and
shall accrue on a day-to-day basis,
<PAGE>
8
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 B 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 B 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 B 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 B 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 redemption of any Series B Preferred Stock, Junior Stock or Parity
Stock. When dividends are not paid in full upon the shares of Series B
Preferred Stock and any Parity Stock, all dividends declared upon shares of
Series B Preferred Stock and all Parity Stock shall be declared pro rata so that
the amount of dividends declared per share on Series B 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 B Preferred Stock
and all such Parity Stock bear to each other. Holders of shares of Series B
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 B 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 B Preferred Stock at a redemption price
for each share of Series B 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 B
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 B 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
<PAGE>
9
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
B Preferred Stock pursuant to Section 3.1 above unless it concurrently redeems
shares of Series C Preferred Stock pursuant to Section 3.1 of the Series C
Certificate of Designations. In the event that fewer than all the outstanding
shares of Series B Preferred Stock and Series C Preferred Stock are to be
redeemed pursuant to Section 3.1 above and pursuant to Section 3.1 of the Series
C Certificate of Designation, the number of shares of Series B Preferred Stock
and Series C 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 B 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 B 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 B 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 B
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
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10
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 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 B Preferred Stock shall
have the right, at any time after the second anniversary of the Issue Date, or,
as to any share of Series B 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 B 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 B 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 B 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 B 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 B Preferred Stock. As soon as
practicable after any holder deposits certificates for shares of Series B
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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11
4.4 Conversion shall be deemed to have been made as of the date
that certificates for the shares of Series B 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 B 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 B 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 B
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 B 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 B 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 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
<PAGE>
12
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 exerciseable,
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 exerciseable, 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 B 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 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 a majority of the Series B Preferred Stock, by an Independent
Financial Expert selected in the manner described in the definition of the term
"Current Market Price") 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).
<PAGE>
13
(d) If the Corporation or any subsidiary thereof shall, at
any time or from time to time while any of the Series B 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.
(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 B 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 B
<PAGE>
14
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 B 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 B
Preferred Stock the holder thereof shall be entitled to receive the kind and
amount of shares of stock or other securities and 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 B 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 B
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 B 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
<PAGE>
15
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 B
Preferred Stock into the Common Stock. The Corporation covenants that any
shares of Common Stock issued upon conversions of the Series B 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 B 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 B 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 B Preferred Stock so
converted were registered, and no such issue or delivery shall be made unless
and until the person requesting such issue 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;
<PAGE>
16
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 B
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.
5. VOTING.
5.1 The shares of Series B Preferred Stock shall have no voting
rights except as required by law or as set forth below:
(a) If on the fifth anniversary of the Issue Date any
shares of Series B Preferred Stock remain outstanding, then the number of
directors constituting the Board of Directors shall be increased by four (4) (in
addition to any such increase in directorships required by any similar provision
of the Certificate of Incorporation or the certificate of designation in respect
of any other class or series of preferred stock of the Corporation) and the
holders of shares of Series B Preferred Stock (in addition to all other rights)
shall have the exclusive right, voting separately as a class, to elect eight (8)
directors of the Corporation.
(b) Such voting rights may be exercised initially either by
written consent or at a special meeting of the holders of the shares of Series B
Preferred Stock having such voting rights, called as hereinafter provided, or at
any annual meeting of stockholders held for the purpose of electing directors,
and thereafter at each such annual meeting until such time as shares of Series B
Preferred Stock are no longer outstanding, at which time or times such voting
rights and the term of the directors elected pursuant to Section 5.1(a) shall
terminate.
(c) At any time when such voting rights shall have vested
in holders of shares of Series B Preferred Stock described in Section 5.1(a),
and if such rights shall not already have been exercised by written consent, a
proper officer of the Corporation may call, and, upon the written request,
addressed to the Secretary of the Corporation, of the record holders of shares
representing twenty-five percent (25%) of the voting power of the shares then
outstanding of Series B
<PAGE>
17
Preferred Stock, shall call, a special meeting of the holders of shares of
Series B
Preferred Stock. Such meeting shall be held at the earliest practicable date
upon the notice required for annual meetings of stockholders at the place for
holding annual meetings of stockholders of the Corporation, or, if none, at a
place designated by the Board of Directors. Notwithstanding the provisions of
this Section 5.1(c), no such special meeting shall be called during a period
within 60 days immediately preceding the date fixed for the next annual meeting
of stockholders.
(d) At any meeting held for the purpose of electing
directors at which the holders of shares of Series B Preferred Stock shall have
the right to elect directors as provided herein, the presence in person or by
proxy of the holders of shares representing more than fifty percent (50%) in
voting power of the then outstanding shares of Series B Preferred Stock having
such right shall be required and shall be sufficient to constitute a quorum of
such class for the election of directors by such class.
(e) Any director elected by holders of shares of Series B
Preferred Stock pursuant to the voting right created under this Section 5.1
shall hold office until the next annual meeting of stockholders (unless such
term has previously terminated pursuant to Section 5.1(b)) and any vacancy in
respect of any such director shall be filled only by vote of the remaining
director[s] so elected, or if there be no such remaining director, by the
holders of shares of Series B Preferred Stock by written consent or at a special
meeting called in accordance with the procedures set forth in Section 5.1(c),
or, if no such special meeting is called or written consent executed, at the
next annual meeting of stockholders. Upon any termination of such voting right,
subject to applicable law, the term of office of all directors elected by
holders of shares of Series B Preferred Stock voting separately as a class
pursuant to this Section 5.1 shall terminate.
(f) So long as any shares of Series B Preferred Stock
remain outstanding, unless a greater percentage shall then be required by law,
the Corporation shall not, without the affirmative vote at a meeting or the
written consent with or without a meeting of the holders of shares of Series B
Preferred Stock representing at least a majority of the aggregate voting power
on the matters set forth in this Section 5.1(f) of shares of Series B Preferred
Stock, voting as a separate class, (i) authorize or issue any Senior Stock or
Parity Stock or reclassify any Junior Stock as Parity Stock or Senior Stock or
reclassify any Parity Stock as Senior Stock, (ii) amend, alter or repeal any of
the provisions of the Certificate of Incorporation, so as in any such case to
materially and adversely affect the preferences, special rights, powers or
privileges of the shares of Series B Preferred Stock, (iii) redeem, repurchase,
retire or otherwise acquire any capital stock or options to purchase capital
stock of the Corporation (other than purchases of capital stock or options from
employees of the Corporation or any of its subsidiaries in connection with
termination of employment or from other Persons providing services to the
Corporation or any of its subsidiaries in an amount not to exceed $1,000,000 in
the aggregate for all such
<PAGE>
18
purchases after the Issue Date) or (iv) declare or pay any dividends or other
distributions with respect to Junior Stock or Parity Stock.
(g) In addition to the foregoing, the holders of the Series
B Preferred Stock shall have such other voting, consent and approval rights as
are specified in the Investment Agreement.
(h) In exercising the voting rights set forth in this
Section 5.1, each share of Series B Preferred Stock shall have a number of votes
equal to its Liquidation Value.
5.2 No consent of holders of shares of Series B Preferred Stock
shall be required for (i) the creation of any indebtedness of any kind of the
Corporation or (ii) the authorization or issuance of any class of Junior Stock.
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 B 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 B
Preferred Stock of full preferential amounts provided for in this Section 6, the
holders of Series B 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 B 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 B Preferred
<PAGE>
19
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.
7. 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 B Preferred Stock at a purchase price for each share of Series B
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 B Preferred Stock which accepts the Change of Control
Offer. The term "Repurchase Price" shall mean, with respect to each share of
Series B 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 B 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 B 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 B 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 B
Preferred Stock which the Corporation is offering to purchase from such holder;
(iv) the Repurchase Price; (v) the last day on which the
<PAGE>
20
Change of Control Offer may be accepted (the "Expiration Date"), (vi) the place
or places where certificates for shares of Series B 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 consideration paid or to be 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 B 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 B 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 B 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.
8. TRANSACTIONS WITH AFFILIATES. As long as any shares of Series B
Preferred Stock remain outstanding, the Corporation shall not, and shall not
permit any of its subsidiaries to, enter into any transaction with any Affiliate
of the Corporation or such subsidiary (including, without limitation, the
purchase, sale, lease or exchange of any property or the rendering of any
services, with or to any Affiliate and investments, loans or advances by or to
any Affiliate) except for transactions entered into in good faith pursuant to
the reasonable requirements of the business of the Corporation or such
subsidiary and on terms substantially no less favorable to the Corporation or
such subsidiary than those that the Corporation or such subsidiary would obtain
in a comparable arm's-length transaction with a Person not an Affiliate of the
Corporation or such subsidiary.
9. OTHER PROVISIONS.
9.1 Shares of Series B 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
<PAGE>
21
Corporation, except that any issuance or reissuance of shares of Series B
Preferred Stock must be in compliance with this certificate of designation.
9.2 The Corporation shall be entitled to recognize the exclusive
right of a Person registered on its records as the holder of shares of Series B
Preferred Stock, and such record holder shall be deemed the holder of such
shares for all purposes.
9.3 All notice periods referred to herein shall commence on the
date of the mailing of the applicable notice.
IN WITNESS WHEREOF, Platinum Entertainment, Inc. has caused this
certificate to be signed and attested this 12th day of December, 1997.
PLATINUM ENTERTAINMENT, INC.
By: /s/ Steven Devick
---------------------------------
Name: Steven Devick
Title: Chief Executive Officer
<PAGE>
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 vote at a meeting 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 10,000,000 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.
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 II,
L.P., as nominee, and the warrant for an aggregate of 315,000 shares of Common
Stock to be issued to Platinum Venture Partners II, L.P., as nominee, each such
warrant to be issued on the Closing Date (as defined in the Investment
Agreement).
<PAGE>
2
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 privileges 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 Series B Certificate of Designation or
(d) otherwise as a result of the equity ownership or designation of directors
by the Investors of 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.
<PAGE>
3
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 B 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 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
<PAGE> 4
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.
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 the
shares of Series B Preferred Stock, (d) shares of Common Stock issued upon
exercise of the warrants
<PAGE>
5
issued to the purchasers of the shares of Series B Preferred Stock pursuant to
the Investment Agreement, (e) shares of Common Stock issued upon the conversion
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
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
<PAGE>
6
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, 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 B 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.
<PAGE>
7
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 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.
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
<PAGE>
8
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 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
<PAGE>
9
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 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 lieu of fractional shares.
Subject to applicable escheat laws, any moneys so set aside by the Corporation
and unclaimed at
<PAGE>
10
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.
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
<PAGE>
11
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 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
exerciseable, convertible and
<PAGE>
12
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 exerciseable,
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 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
<PAGE>
13
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.
(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
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14
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 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
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15
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 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
<PAGE>
16
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.
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
<PAGE>
17
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.
7. 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
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
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18
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 consideration paid or to be 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.
8. 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.
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19
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.
IN WITNESS WHEREOF, Platinum Entertainment, Inc. has caused this
certificate to be signed and attested this 12th day of December, 1997.
PLATINUM ENTERTAINMENT, INC.
By: /s/ Steven Devick
---------------------------------
Name: Steven Devick
Title: Chief Executive Officer
<PAGE>
AMENDED AND RESTATED BY-LAWS
OF
PLATINUM ENTERTAINMENT, INC.
ARTICLE I
OFFICES
SECTION 1.1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
SECTION 1.2. The corporation may also have offices at such other places
both within and without the State of Delaware as the board of directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 2.1. All meetings of the stockholders for the election of
directors shall be held at such place within or without the State of Delaware as
shall be designated from time to time by the board of directors and stated in
the notice of the meeting. Meetings of stockholders for any other purpose may
be held at such time and place, within or without the State of Delaware, as
shall be stated by the board of directors in its notice of the meeting.
SECTION 2.2. Annual meetings of stockholders, at which stockholders shall
elect directors as provided in the corporation's certificate of incorporation
and Section 2.4 of Article II of the by-laws and transact such other business as
may properly be brought before the meeting in accordance with Section 2.5 of
Article II of the by-laws, shall be held on the second Tuesday in October if not
a legal holiday, and if a legal holiday, then on the next business day
following, or on such other date as shall be designated from time to time by the
board of directors and stated in the notice of the meeting.
SECTION 2.3. Except as otherwise required by law, written notice of the
annual meeting stating the place, date and hour of the meeting shall be given to
each stockholder entitled to vote at such meeting not fewer than 10 nor more
than 60 days before the date of the meeting.
SECTION 2.4. Only persons who are nominated in accordance with the
following procedures shall be eligible to serve as directors. Nominations of
persons for election to the board of directors of the corporation at a meeting
of stockholders may be
<PAGE>
made (i) by or at the direction of the board of directors, or (ii) by any
stockholder of the corporation entitled to vote for the election of directors at
the meeting who complies with the notice procedures set forth in this Article
II, Section 2.4. Such nominations, other than those made by or at the direction
of the board of directors, shall be made pursuant to timely notice in writing to
the secretary of the corporation. To be timely, a stockholder's notice must be
delivered to, or mailed and received by, the secretary of the corporation at the
principal executive offices of the corporation not less than 60 nor more than 90
days prior to the meeting; provided, however, that if the corporation has not
"publicly disclosed" (in the manner provided in the last sentence of this
Article II, Section 2.4) the date of the meeting at least 70 days prior to the
meeting date, notice may be timely made by a stockholder under this Section if
received by the secretary of the corporation not later than the close of
business on the tenth day following the day on which the corporation publicly
disclosed the meeting date. Such stockholder's notice shall set forth (i) as to
each person whom the stockholder proposes to nominate for election or
re-election as a director, all information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors,
or is otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of l934, as amended (including such person's written
consent to being named in the proxy statement as a nominee and to serving as
director if elected); and (ii) as to the stockholder giving notice (A) the name
and address, as they appear on the corporation's books, of such stockholder, and
(B) the class and number of shares of the corporation which are beneficially
owned by such stockholder. At the request of the board of directors any person
nominated by the board of directors for election as a director shall furnish to
the secretary of the corporation that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible to serve as a director of the corporation unless nominated in
accordance with the procedures set forth herein. The presiding officer shall,
if the facts so warrant, determine and declare to the meeting that a nomination
was not made in accordance with the procedures prescribed by the by-laws, and if
such officer should so determine, such officer shall so declare to the meeting
and the defective nomination shall be disregarded. For purposes of these
by-laws, "publicly disclosed" or "public disclosure" shall mean disclosure in a
press release reported by the Dow Jones News Service, Associated Press, or a
comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission.
SECTION 2.5. At an annual meeting of the stockholders, only such business
shall be conducted as shall have been brought before the meeting (i) by or at
the direction of the board of directors, or (ii) by any stockholder of the
corporation who complies with the notice procedures set forth in this Article
II, Section 2.5, in the time herein provided. For business to be properly
brought before an annual meeting by a stockholder, the stockholders must deliver
written notice to, or mail such written notice so that it is
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<PAGE>
received by, the secretary of the corporation, at the principal executive
offices of the corporation, not less than 120 nor more than 150 days prior to
the first anniversary of the date of the corporation's consent solicitation or
proxy statement released to stockholders in connection with the previous year's
election of directors or meeting of stockholders, except that if no annual
meeting of stockholders or election by consent was held in the previous year or
if the date of the annual meeting has been changed by more than 30 days from the
previous year's meeting, a proposal shall be received by the corporation within
10 days after the corporation has "publicly disclosed" the date of the meeting
in the manner provided in Article II, Section 2.4 above. The stockholder's
notice to the secretary shall set forth as to each matter the stockholder
proposes to bring before the annual meeting (A) a brief description of the
business desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (B) the name and address, as
they appear on the corporation's books, of the stockholder proposing such
business, (C) the class and number of shares of the corporation which are
beneficially owned by the stockholder, and (D) any material interest of the
stockholder in such business. At an annual meeting, the presiding officer
shall, if the facts warrant, determine and declare to the meeting that business
was not properly brought before the meeting and in accordance with the
provisions of this Article, Section 2.5, and if he should so determine, he shall
so declare to the meeting and any such business not properly brought before the
meeting shall not be transacted. Whether or not the foregoing procedures are
followed, no matter which is not a proper matter for stockholder consideration
shall be brought before the meeting.
SECTION 2.6. Special meetings of the stockholders may be called only by
the board of directors. The business transacted at any special meeting of the
stockholders shall be limited to the purposes stated in the notice for the
meeting transmitted to stockholders.
SECTION 2.7. Written notice of a special meeting stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called, shall be given not fewer than 10 nor more than 60 days before the date
of the meeting, to each stockholder entitled to vote at such meeting.
SECTION 2.8. In order that the corporation may determine the stockholders
entitled to vote at any meeting of stockholders or any adjournment thereof, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the board of directors may fix a record date, which shall not precede the date
upon which the resolution fixing the record date is adopted, and which shall be
(i) not more than 60 nor less than 10 days before the date of a meeting, and
(ii) not more than 60 days prior to the other action. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
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<PAGE>
stockholders shall apply to any adjournment of the meeting; provided, however,
that the board of directors may fix a new record date for any adjourned meeting.
SECTION 2.9. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least 10 days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
10 days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
SECTION 2.10. The holders of a majority of the voting power of the stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise provided by
statute or by the certificate of incorporation. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented; provided that, if the adjournment is for more than 30 days, or if a
new record date is fixed by the directors, a new notice shall be transmitted to
the shareholders. At such adjourned meeting at which a quorum shall be present
or represented any business may be transacted at the meeting as originally
notified.
SECTION 2.11. When a quorum is present at any meeting, the affirmative
vote of the holders of a majority of the voting power of the stock, and cast
affirmatively or negatively at the meeting, shall decide any question brought
before such meeting, unless the question is one upon which by express provision
of statute or of the certificate of incorporation, a different vote is required
in which case such express provision shall govern and control the decision of
such question; provided, however, all elections shall be determined by a
plurality of the votes cast.
SECTION 2.12. Unless otherwise provided in the certificate of
incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
At any meeting of the stockholders, every stockholder entitled to vote may vote
in person or by proxy authorized by an instrument in writing
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<PAGE>
or by a transmission permitted by law filed in accordance with the procedure
established for the meeting. Any copy, facsimile telecommunication or other
reliable reproduction of the writing or transmission created pursuant to this
paragraph may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used; provided that, such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of the
entire original writing or transmission. All voting, including on the election
of directors but excepting where otherwise required by law, may be by a voice
vote; provided, however, that upon demand therefor by a stockholder entitled to
vote or by his or her proxy, a stock vote shall be taken. Every stock vote
shall be taken by ballots, each of which shall state the name of the stockholder
or proxy voting and such other information as may be required under the
procedure established for the meeting. The corporation may, and to the extent
required by law, shall, in advance of any meeting of stockholders, appoint one
or more inspectors to act at the meeting and make a written report thereof. The
corporation may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. If no inspector or alternate is able to act at
a meeting of stockholders, the person presiding at the meeting may, and to the
extent required by law, shall, appoint one or more inspectors to act at the
meeting. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector with
strict impartiality and according to the best of his ability. Every vote taken
by ballots shall be counted by an inspector or inspectors appointed by the
chairman of the meeting.
SECTION 2.13. The chairman of the board of directors shall preside at all
meetings of the stockholders. In the absence or inability to act of the
chairman, the vice chairman, the president or an executive vice president (in
that order) shall preside, and in their absence or inability to act another
person designated by one of them shall preside. The secretary of the
corporation shall act as secretary of each meeting of the stockholders. In the
event of his absence or inability to act, the chairman of the meeting shall
appoint a person who need not be a stockholder to act as secretary of the
meeting.
SECTION 2.14. Meetings of the stockholders shall be conducted in a fair
manner but need not be governed by any prescribed rules of order. The presiding
officer's rulings on procedural matters shall be final. The presiding officer
is authorized to impose reasonable time limits on the remarks of individual
stockholders and may take such steps as such officer may deem necessary or
appropriate to assure that the business of the meeting is conducted in a fair
and orderly manner.
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<PAGE>
ARTICLE III
DIRECTORS
SECTION 3.1. The business and affairs of the corporation shall be under
the direction of or managed by a board comprised of directors who need not be
residents of the State of Delaware or stockholders of the corporation. The
number of directors shall be determined in the manner provided in the
certificate of incorporation of the corporation.
SECTION 3.2. Directors shall be elected by class for three year or other
terms as specified in the certificate of incorporation, and each director
elected shall hold office during the term for which he is elected and until his
successor is elected and qualified. Except as required by law or in the
corporation's certificate of incorporation, a director may be removed only for
cause.
SECTION 3.3. Any vacancies occurring in the board of directors and newly
created directorships shall be filled as provided in the certificate of
incorporation of the corporation.
MEETINGS OF THE BOARD OF DIRECTORS
SECTION 3.4. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 3.5. The first meeting of each newly elected board of directors
shall be held immediately following the adjournment of the annual meeting of the
stockholders at the same place as such annual meeting and no notice of such
meeting shall be necessary to the newly elected directors in order legally to
constitute the meeting, provided a quorum shall be present. In the event such
meeting is not held at such time and place, the meeting may be held at such time
and place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
SECTION 3.6. Regular meetings of the board of directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
SECTION 3.7. Special meetings of the board may be called by the chairman
or president on at least one days' notice to each director, either personally,
or by courier, telephone, telefax, mail or telegram. Special meetings shall be
called by the chairman or president in like manner and on like notice at the
written request of one-half or more of the directors comprising the board
stating the purpose or purposes for which such meeting is requested. Notice of
any meeting of the board of directors for which a notice is required may be
waived in writing signed by the person or persons entitled to such notice,
whether before or after the
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time of such meeting, and such waiver shall be equivalent to the giving of such
notice. Attendance of a director at any such meeting shall constitute a waiver
of notice thereof, except where a director attends a meeting for the express
purpose of objecting to the transaction of any business because such meeting is
not lawfully convened. Neither the business to be transacted at nor the purpose
of any meeting of the board of directors for which a notice is required need be
specified in the notice, or waiver of notice, of such meeting. The chairman
shall preside at all meetings of the board of directors. In the absence or
inability to act of the chairman, the vice chairman, the president or an
executive vice president (in that order) shall preside, and in their absence or
inability to act another director designated by one of them shall preside.
SECTION 3.8. At all meetings of the board a majority of the then duly
elected directors shall constitute a quorum for the transaction of business and
the act of a majority of the directors present at any meeting at which there is
a quorum shall be the act of the board of directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the board of directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
SECTION 3.9. Any action required or permitted to be taken at any meeting
of the board of directors or of any committee thereof may be taken without a
meeting, if all members of the board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the board or committee.
COMMITTEES OF DIRECTORS
SECTION 3.10. The board of directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he, she or they constitute a quorum, may unanimously appoint another
member of the board of directors to act at the meeting in the place of any such
absent or disqualified member. Any such committee, to the extent provided in
the resolution of the board of directors, shall have and may exercise all the
powers and authority of the board of directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to amending the certificate of incorporation
(except that a committee may, to the extent authorized in the resolution or
resolutions providing for the
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issuance of shares of stock adopted by the board of directors as provided in
subsection (a) of Section 151 of the Delaware General Corporation Law, fix the
designations and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the corporation or fix the number of shares of any series
of stock or authorize the increase or decrease of the shares of any series), and
if the resolution which designates the committee or a supplemental resolution of
the board of directors shall so provide, such committee shall have the power and
authority to adopt a certificate of ownership and merger pursuant to Section 253
of the Delaware General Corporation Law or to declare a dividend or to authorize
the issuance of stock. Such committee or committees shall have such name or
names as may be determined from time to time by resolution adopted by the board
of directors.
SECTION 3.11. Each committee shall keep regular minutes of its meetings
and shall file such minutes and all written consents executed by its members
with the secretary of the corporation. Each committee may determine the
procedural rules for meeting and conducting its business and shall act in
accordance therewith, except as otherwise provided herein or required by law.
Adequate provision shall be made for notice to members of all meetings; a
majority and all matters shall be determined by a majority vote of the members
present. Action may be taken by any committee without a meeting if all members
thereof consent thereto in writing, and the writing or writings are filed with
the minutes of the proceedings of such committee.
COMPENSATION OF DIRECTORS
SECTION 3.12. In the discretion of the board of directors, the directors
may be paid their expenses, if any, of attendance at each meeting of the board
of directors and may be paid a fixed sum for attendance at each meeting of the
board of directors or a stated salary as director. No such payment shall
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
ARTICLE IV
NOTICES
SECTION 4.1. Whenever, under applicable law or the certificate of
incorporation or these by-laws, notice is required to be given to any director
or stockholder, unless otherwise provided in the certificate of incorporation or
these by-laws, such notice may be given in writing, by courier or mail,
addressed to such director or stockholder, at his or her address as it appears
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on the records of the corporation, with freight or postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall have
been deposited with such courier or in the United States mail.
SECTION 4.2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
SECTION 5.1. The officers of the corporation shall be chosen by the board
of directors and shall be a president, a secretary and a treasurer. The board
of directors may also choose a chairman or one or more vice-chairmen,
vice-presidents, assistant vice-presidents, assistant secretaries and assistant
treasurers. Any number of offices may be held by the same person, unless the
certificate of incorporation or these by-laws otherwise provide. The board of
directors may also designate persons as officers of divisions of the
corporation, but such persons shall not be officers of the corporation.
SECTION 5.2. The board of directors at its first meeting after each annual
meeting of stockholders shall choose a president, a secretary, a treasurer and
such other officers as the board of directors shall deem desirable.
SECTION 5.3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be provided for
in these by-laws determined from time to time by the board.
SECTION 5.4. The salaries of all officers of the corporation shall be
fixed by the board of directors.
SECTION 5.5. The officers of the corporation shall hold office until their
successors are chosen and qualify or until their earlier resignation or removal.
Any officer elected or appointed by the board of directors may be removed at any
time by the affirmative vote of a majority of the board of directors. Any
vacancy occurring in any office of the corporation shall be filled by the board
of directors.
SECTION 5.6. The president shall be the principal executive officer of the
corporation. Subject to the direction and control of the board of directors, he
or she shall be in charge of the business of the corporation; he or she shall
see that the resolutions and directions of the board of directors are carried
into
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effect except in those instances in which that responsibility is specifically
assigned to some other person by the board of directors; and, in general, he or
she shall discharge all duties incident to the office of president and such
other duties as may be prescribed by the board of directors from time to time.
Except in those instances in which the authority to execute is expressly
delegated to another officer or agent of the corporation or a different mode of
execution is expressly prescribed by the board of directors or these by-laws, he
or she may execute for the corporation certificates for its shares, and any
contracts, deeds, mortgages, bonds, or other instruments which the board of
directors has authorized to be executed, and he or she may accomplish such
execution either under or without the seal of the corporation and either
individually or with the secretary, any assistant secretary, or any other
officer thereunto authorized by the board of directors, according to the
requirements of the form of the instrument. He or she may vote all securities
which the corporation is entitled to vote except as and to the extent such
authority shall be vested in a different officer or agent of the corporation by
the board of directors.
SECTION 5.7. The vice-presidents shall perform such duties and have such
powers as the board of directors or the president may from time to time
prescribe. A vice-president may execute contracts on behalf of the corporation
pertaining to the normal course of his or her duties. In the absence of the
president or in the event of his or her inability to act, the vice-president
(or in the event there be more than one vice-president, the vice-presidents in
the order designated, or in the absence of any designation, then in the order of
their election) shall perform the duties of the president, and when so acting,
shall have all the powers of and be subject to all the restrictions upon the
president.
SECTION 5.8. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He or she shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the board of directors,
and shall perform such other duties as may be prescribed by the board of
directors or president, under whose supervision he or she shall be. He or she
shall have custody of the corporate seal of the corporation and he or she, or an
assistant secretary, shall have authority to affix the same to any instrument
requiring it and when so affixed, it may be attested by his or her signature or
by the signature of such assistant secretary.
The board of directors may give general authority to any other officer to
affix the seal of the corporation and to attest the affixing by his or her
signature.
SECTION 5.9. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the
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board of directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the secretary or in the event of his
or her inability or refusal to act, perform the duties and exercise the powers
of the secretary and shall perform such other duties and have such other powers
as the board of directors may from time to time prescribe.
SECTION 5.10. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors. He or she
shall disburse the funds of the corporation as may be ordered by the board of
directors, taking proper vouchers for such disbursements, and shall render to
the president and the board of directors, at its regular meetings, or when the
board of directors so requires, an account of all of his or her transactions as
treasurer and of the financial condition of the corporation. If required by the
board of directors, he or she shall give the corporation a bond (which shall be
renewed every six years) in such sum and with such surety or sureties as shall
be satisfactory to the board of directors for the faithful performance of the
duties of his or her office and for the restoration to the corporation, in case
of his or her death, resignation, retirement or removal from office, of all
books, papers, vouchers, money and other property of whatever kind in his or her
possession or under his or her control belonging to the corporation.
SECTION 5.11. The assistant treasurer, or if there shall be more than one,
the assistant treasurers in the order determined by the board of directors (or
if there be no such determination, then in the order of their election), shall,
in the absence of the treasurer or in the event of his or her inability or
refusal to act, perform the duties and exercise the powers of the treasurer and
shall perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
ARTICLE VI
CERTIFICATES OF STOCK
SECTION 6.1. Every holder of stock in the corporation shall be entitled to
have a certificate, signed by, or in the name of the corporation by (a) the
president or a vice-president, and (b) the treasurer or an assistant treasurer,
the secretary or an assistant secretary of the corporation; certifying the
number of shares owned in the corporation. If the corporation shall be
authorized to issue more than one class of stock or more than one series of any
class, the designations, preferences and relative, participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights
shall be set forth in full or summarized on the face or back of the certificate
which the corporation shall issue to represent such class or series of stock;
provided that, except as otherwise provided in Section 202 of the General
Corporation Law of Delaware, in lieu of the foregoing requirements, there may be
set forth on the face or back of the certificate which the corporation shall
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issue to represent such class or series of stock, a statement that the
corporation will furnish without charge to each stockholder who so requests the
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
SECTION 6.2. Where a certificate is countersigned (1) by a transfer agent
other than the corporation or its employee, or (2) by a registrar other than the
corporation or its employee, any other signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if the or
she were such officer, transfer agent or registrar at the date of issue.
SECTION 6.3. Subject to the foregoing, certificates for stock of the
corporation shall be in form as the board of directors may from time to time
prescribe.
LOST CERTIFICATES
SECTION 6.4. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the board of directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his or
her legal representative, to advertise the same in such manner as it shall
require and/or give the corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the corporation or its
transfer agent or registrar with respect to the certificate alleged to have been
lost, stolen or destroyed.
TRANSFERS OF STOCK
SECTION 6.5. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
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REGISTERED STOCKHOLDERS
SECTION 6.6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends and to vote as such owner and to hold liable for calls and assessments
a person registered on its books as the owner of shares, and shall not be bound
to recognize any equitable or other claim to or interest in such share or shares
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VII
CONFLICT OF INTERESTS
SECTION 7.1. No contract or transaction between the corporation and one or
more of its directors or officers, or between the corporation and any other
corporation, partnership, association, or other organization in which one or
more of its directors or officers are directors or officers, or have a financial
interest, shall be void or voidable solely for this reason, or solely because
the director or officer is present at or participates in the meeting of the
board of committee thereof which authorizes the contract or transaction, or
solely because his, her or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the board of
directors or the committee, and the board or committee in good faith
authorizes the contract or transaction by the affirmative vote of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or
(2) The material facts as to his or her relationship interest and as
to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction
is specifically approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation as of
the time it is authorized, approved or ratified, by the board of
directors, a committee thereof, or the stockholders.
SECTION 7.2. Common or interested directors may be counted in determining
the presence of a quorum at a meeting of the board of directors or of a
committee which authorizes the contract or transaction.
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ARTICLE VIII
GENERAL PROVISIONS
DIVIDENDS
SECTION 8.1. Dividends upon the capital stock of the corporation, subject
to the provisions of the certificate of incorporation, if any, may be declared
by the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock or
rights to acquire same, subject to the provisions of the certificate of
incorporation.
SECTION 8.2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
CHECKS
SECTION 8.3. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
FISCAL YEAR
SECTION 8.4. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
SEAL
SECTION 8.5. The corporate seal shall have inscribed thereon the name of
the corporation and the words "Corporate Seal, Delaware." The seal may be used
by causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
ARTICLE IX
AMENDMENTS
These by-laws may be altered, amended, or repealed or new by-laws may be
adopted only in the manner provided in the corporation's certificate of
incorporation.
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BY-LAW
AMENDMENT
Article III of the Amended and Restated By-laws of the corporation is
amended by adding a new Section 3.13 as set forth below:
"SPECIAL PROVISIONS
SECTION 3.13. The provisions of this Section 3.13, when applicable in
accordance with their terms, shall supersede any other provisions set forth
in these By-laws to the extent that such other provisions are inconsistent
with the terms or requirements of this Section 3.13.
(a) As used in this Section 3.13, the following terms shall have
the respective meanings set forth below:
An "Affiliate" of, or a person affiliated with, a specified
Person, means a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control
with, the Person specified. The term "control" (including the terms
"controlling," "controlled by" and "under common control with") means the
possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a person, whether through the
ownership of voting securities, by contract, or otherwise. No member of,
or owner of a limited partnership interest in, any Purchaser shall be
deemed to be an affiliate of, or a person "affiliated" with, such Purchaser
solely by reason of such membership or ownership.
"Change of Control" means (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 Purchasers and their Affiliates) shall,
as a result of a tender or exchange offer, open market purchases, privately
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2
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.
"Closing" means the closing of the sale of the and purchase of
the Warrants as contemplated by the Investment Agreement.
"Closing Date" means the date of the Closing.
"Credit Agreement" has the meaning set forth in the Investment
Agreement.
"Common Stock" means the corporation's Common Stock, par value
$.001 per share.
"Investment Agreement" means the Investment Agreement, dated as
of October 12, 1997, by and among the corporation, MAC Music LLC and
SK-Palladin Partners, LP.
"Option" means any option, warrant, conversion privilege or
other right to purchase or otherwise acquire any authorized but unissued
or treasury shares of the corporation's capital stock.
"Person" means any individual, firm, corporation, partnership,
limited liability company or partnership, trust, incorporated or
unincorporated association, joint venture, joint stock company, government
(or an agency or political subdivision thereof) or other entity of any
kind, and shall include any successor (by merger or otherwise) of such
entity.
"Purchaser Director" means any person nominated for election to
the board of directors or serving as a member of the board of directors
who has been designated by the Purchasers in accordance with the
Investment Agreement.
"Purchasers" mean MAC Music LLC and SK-Palladin Partners, LP.
"Subsidiary" means any corporation, limited or general
partnership, joint venture, association, limited liability company or
partnership, joint stock company, trust, unincorporated organization, or
other entity
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3
analogous to any of the foregoing of which 50% or more of the equity
ownership is, at the time, owned, directly or indirectly by the
corporation.
"Unaffiliated Director" means a director who is not a Purchaser
Director and who is not an officer or employee of the corporation or of
any Affiliate of the corporation.
"Warrant" means a Warrant issued by the corporation pursuant to
the Investment Agreement.
"Warrant Shares" means shares of Common Stock underlying the
Warrants and shares of Common Stock which were received by upon exercise
of a Warrant.
(b) So long as the Purchasers, or the Affiliates, employees,
partners or members of any Purchaser, hold, in the aggregate, not less
than 35% of the Warrants Shares represented immediately following the
Closing by the Warrants sold pursuant to the Investment Agreement (with
appropriate adjustment made for any stock dividend, split-up or
subdivision or any combination or reclassification made or effected
subsequent to the Closing Date): (i) the board of directors shall consist
of not more than eleven (11) members, four (4) of which shall be Purchaser
Directors and two (2) of which shall be Unaffiliated Directors, (ii) not
less than two (2) members of each Committee of the board of directors
(including, without limitation, the executive, audit and compensation
committees) shall be Purchaser Directors and the Purchasers Directors and
Unaffiliated Directors who are members of such Committee shall together
constitute not less than a majority of the members thereof, and (iii) each
of the following corporate actions shall be required to be approved by not
less than two-thirds of the directors then in office (unless the Purchaser
Directors constitute a majority of the members of the board of directors,
in which event, such action shall be required to be approved by a majority
of the directors then in office):
(1) any incurrence of indebtedness by the corporation
or any Subsidiary in excess of $1,000,000, other than draw-downs
under the revolving credit facility contained in the Credit Agreement
(as defined in the Investment Agreement) or in another loan agreement
approved in the manner set forth in this Section 3.13(b)(iii); any
refinancing of the corporation's or any Subsidiary's indebtedness;
any amendment to the terms of any instrument evidencing or governing
any indebtedness of the corporation or a Subsidiary; any issuance of
debt or equity securities by the corporation or any Subsidiary (other
than securities issued by a Subsidiary to the corporation); and the
grant of any Options by the corporation; PROVIDED, HOWEVER, that the
provisions of
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4
this Section 3.13(b)(iii) shall not apply to (x) any issuance by the
corporation of debt or equity securities having financial terms which
are more favorable to the corporation than the financial terms of the
Preferred Stock where the proceeds from the issuance of such debt or
equity securities are to be used by the corporation solely to redeem
the Preferred Stock or prepay the subordinated notes issued in
connection with the acquisition by the corporation of Intersound,
Inc., (y) borrowing funds under the Credit Agreement for the purpose
of prepaying of the subordinated notes issued in connection with the
acquisition by the corporation of Intersound, Inc., or (z) the grant
of any employee stock options issued pursuant to any plan or
arrangement which has been approved by a majority of the Unaffiliated
Directors;
(2) any acquisition or disposition of material assets
of the corporation or any Subsidiary; entering into any joint
business venture or material licensing arrangement involving the
corporation or any Subsidiary, or any licensing arrangement involving
the corporation or its Subsidiaries outside the ordinary course of
business; or entering into any transaction which will result in a
Change of Control;
(3) approval or amendment of or change to the
corporation's annual budget; and
(4) the hiring, dismissal, election or removal of any
members of the senior management team of the corporation (including,
without limitation, the chief executive officer, chief operating
officer, chief financial officer and President of any Subsidiary of
the corporation) or any material change to the terms and conditions
of employment of any such Person.
(c) So long as the Purchasers, or the Affiliates, employees,
partners or members of any Purchaser, hold, in the aggregate, not less
than 15% of the Warrants Shares represented immediately following the
Closing by the Warrants sold pursuant to the Investment Agreement (with
appropriate adjustment made for any stock dividend, split-up or
subdivision or any combination or reclassification made or effected
subsequent to the Closing Date), (i) two (2) member of the board of
directors shall be Purchaser Directors, and (ii) not less than one member
of each Committee shall be a Purchaser Director.
(d) In the event that either (i) the corporation defaults in
its obligation to purchase the Warrants in accordance with Section 7 of
the Warrants, or (ii) an Event of Default exists and is continuing (and
has not been
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5
waived) under the Credit Agreement (as the same may be amended from time
to time subsequent to the date hereof) or any successor debt instrument
thereto and such Event of Default has either (1) continued for a period of
not less than 30 days following the expiration of any applicable notice
and cure period under such Credit Agreement or successor debt instrument
or (2) resulted in the acceleration of the indebtedness outstanding
thereunder, the Purchasers shall be entitled to designate, and the
corporation shall cause to be elected, an additional number of Purchaser
Directors which, when added to the number of Purchaser Directors then
serving on the board of directors, shall constitute a majority of the
members of the board of directors. If the size of the board of directors
cannot be expanded in order to accomplish the result set forth in the
first sentence of this Subsection (d), the corporation shall cause such
number of directors who are not Purchaser Directors to be removed and
replaced by Purchaser Directors as may be necessary to accomplish such
result.
(e) So long as any Warrants or Warrant Shares remain
outstanding, the corporation shall not enter into any transaction with an
Affiliate of the corporation (other than transactions between or among the
corporation and its Subsidiaries in the ordinary course) involving the
payment or receipt of amounts in excess of $200,000, or the transfer of
any property or assets having a fair market value in excess of $200,000,
unless such transaction has been approved by members of the board of
directors who constitute a majority of the Purchaser Directors and the
Unaffiliated Directors.
(f) Notwithstanding anything to the contrary set forth in this
Section 3.13:
(1) the provisions of Sections 3.13(b)(i),
3.13(b)(ii), 3.13(c) and 3.13(d) shall be suspended during any period
in which the holders of the corporation's Series B Convertible
Preferred Stock, par value $.001 per share (the "Series B Convertible
Preferred Stock"), are entitled pursuant to Section 5.10 the
Certificate of the Powers, Designations, Preferences and Rights of
the Series B Convertible Preferred Stock (the "Certificate of
Designation") to elect eight directors to the corporation's board of
directors, and during such period the directors elected by the
holders of the Series B Convertible Preferred Stock shall be deemed
to be "Purchaser Directors" for purposes of Sections 3.13(b)(iii) and
3.13(e); and
(2) the provisions of Sections 3.13(b)(ii),
3.13(b)(iii) and 3.13(e) shall terminate on the later of (x) 66
months from the Closing Date and (y) the date on which all
outstanding shares of Series B Convertible Preferred Stock are
redeemed by the corporation pursuant to Section 3 of the Certificate
of Designation.
<PAGE>
6
(g) The provisions of Section this Section 3.13 may not be
amended except by unanimous action of the board of directors."
<PAGE>
Exhibit 4.1
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., as nominee, 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
<PAGE>
2
privileges granted to the Investors pursuant to the Investment Agreement in
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
<PAGE>
3
exercised (determined by subtracting the aggregate Exercise Price in effect
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
<PAGE>
14
value for purposes of the Investor Warrants, the fair market 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
<PAGE>
17
purchase any securities whether such liabilities are asserted by the Company or
by creditors or stockholders of the Company or otherwise.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer.
PLATINUM ENTERTAINMENT, INC.
By: /s/ Steven Devick
-----------------------------------------
Name: Steven Devick
Title: Chief Executive Officer
Dated: December 12 , 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 4.2
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., as nominee, 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
<PAGE>
2
privileges granted to the Investors pursuant to the Investment Agreement in
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
<PAGE>
3
exercised (determined by subtracting the aggregate Exercise Price in effect
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
<PAGE>
14
value for purposes of the Investor Warrants, the fair market 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
<PAGE>
17
purchase any securities whether such liabilities are asserted by the Company or
by creditors or stockholders of the Company or otherwise.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer.
PLATINUM ENTERTAINMENT, INC.
By: /s/ Steven Devick
-----------------------------------
Name: Steven Devick
Title: Chief Executive Officer
Dated: December 12, 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 4.3
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
SK-Palladin Partners, LP, its successors and assigns (the "Warrantholder"),
the right to subscribe for and purchase from the Company One Million Eight
Hundred Thousand (1,800,000) 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 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 B Convertible Preferred Stock, par value
$.001 per share (the "Series B Preferred Stock"), pursuant to the terms of an
Investment Agreement, dated as of October 12, 1997, as amended and as hereafter
amended (the "Investment Agreement"), among the Company, the Warrantholder and
certain other parties, and is subject to the terms thereof. This Warrant is one
of the "Warrants" referred to in the Investment Agreement, and the Warrantholder
is entitled to the rights and subject to the obligations contained in the
Investment Agreement.
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
<PAGE>
2
Period, the lesser of (1) the Initial Exercise Price 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 Board of Directors is
unable to determine the fair market value, or if the holders of a majority in
interest of the Warrant Shares issuable upon exercise of the Warrants
disagree with the Board's determination of fair market value, then fair
market value will be determined by an Independent Financial Expert in
accordance with the provisions set forth in the definition of Current Market
Price herein. 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 Exercise Price as
determined in accordance with the foregoing shall be adjusted from time to
time in accordance with the provisions of Section 6.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings ascribed thereto in the Investment Agreement.
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 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
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3
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 or an Independent Financial Expert 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.
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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
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5
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 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.
<PAGE>
6
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:
(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 (i).
(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
<PAGE>
7
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 Independent Financial Expert selected by the parties in
accordance with the procedure set forth in the definition of Current Market
Price herein, 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 Affiliate 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
<PAGE>
8
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 Affiliate 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 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 Series B
Preferred Stock, (D) shares of Common Stock issued upon exercise of the
Affiliate Warrants, (E) shares of Common Stock issued upon conversion of
shares of the Company's Series C Convertible Preferred Stock, par value $.001
per share ("Series C Preferred Stock"), (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
<PAGE>
9
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 (i).
(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
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) OTHER ADJUSTMENTS (CONDITIONAL ANNUAL INCREASE IN
WARRANT SHARES). On each anniversary of the date of the issuance of this
Warrant, if any shares of Series B Preferred Stock remain outstanding, then as
of each such anniversary the number of shares of Common Stock to be delivered
upon exercise of the Warrant shall be increased by an amount equal to 12% of the
Warrant Shares issuable upon the exercise of this Warrant (calculated without
giving effect to any prior adjustment pursuant to this section 6(f)).
(g) 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.
<PAGE>
10
(h) 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.
(i) 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 (other than any adjustment made pursuant
to Section 6.1(f) hereunder), 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.
(j) 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
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11
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.
(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. In addition, the Warrantholder shall be entitled to the rights and
remedies provided in Section 6.2 of the Investment Agreement.
(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.
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12
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
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.
"Affiliate Warrants" mean the warrants issued in connection with the
issue and sale by the Company of shares of its Series C Preferred Stock on the
Closing Date (as defined in the Investment Agreement).
<PAGE>
13
"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) 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.
"CHANGE OF CONTROL REPURCHASE PRICE" means 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 in accordance
with the procedure set forth in the definition of Current Market Price herein,
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
<PAGE>
14
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. If the
Board of Directors is unable to determine the fair market value, or if the
holders of a majority in interest of the Warrant Shares issued or issuable
upon conversion of the Warrants issued pursuant to the Investment Agreement
disagree with the Board's determination of fair market value by written
notice delivered to the Company within five (5) business days after the
Board's determination thereof is communicated in writing to such holders,
which notice specifies a majority-in-interest of such holders' determination
of fair market value, then the Company and a majority-in-interest of such
holders shall select an Independent Financial Expert which shall determine
such fair market value. If the Company and such holders are unable to agree
upon an Independent Financial Expert within fifteen (15) days after the
request by such holders, each of the Company and such holders shall select an
Independent Financial Expert within five (5) days following the expiration of
such fifteen (15) day period, and these Independent Financial Experts shall
select a third Independent Financial Expert. The determination of fair
market value by such Independent Financial Expert shall be final, binding and
conclusive on the Company and all holders of the Warrants and Warrant Shares.
All costs and fees of any of this Independent Financial Experts retained in
accordance with the foregoing shall be borne by the Company.
"EXERCISE FORM" means an Exercise Form in the form annexed hereto as
Exhibit A.
"EXERCISE PRICE" has the meaning specified on the cover of this
Warrant.
"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.
<PAGE>
15
"INDEPENDENT FINANCIAL EXPERT" means an independent nationally
recognized investment banking firm.
"INVESTORS" means MAC Music LLC, a Delaware limited liability company,
and SK-Palladin Partners, LP, a Delaware limited partnership.
"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 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 together with the Investment
Agreement constitute the entire agreement between the Company and the
Warrantholder with respect to this Warrant.
<PAGE>
16
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.
(b) if to the Warrantholder, addressed to:
SK-Palladin Partners, LP
1285 Avenue of the Americas, 21st Floor
New York, New York 10019
Attention: Mark J. Schwartz
----------------------------
Telecopy: (212) 641-5065
----------------------------
<PAGE>
17
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.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer.
PLATINUM ENTERTAINMENT, INC.
By: Steven Devick
-----------------------------------
Name: Steven Devick
Title: Chief Executive Officer
Dated: December 12, 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 4.4
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 MAC
Music LLC, its successors and assigns (the "Warrantholder"), the right to
subscribe for and purchase from the Company One Million Eight Hundred
Thousand (1,800,000) 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 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 B Convertible Preferred Stock, par
value $.001 per share (the "Series B Preferred Stock"), pursuant to the terms
of an Investment Agreement, dated as of October 12, 1997, as amended and as
hereafter amended (the "Investment Agreement"), among the Company, the
Warrantholder and certain other parties, and is subject to the terms thereof.
This Warrant is one of the "Warrants" referred to in the Investment
Agreement, and the Warrantholder is entitled to the rights and subject to the
obligations contained in the Investment Agreement.
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
<PAGE>
2
Period, the lesser of (1) the Initial Exercise Price 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 Board of Directors is
unable to determine the fair market value, or if the holders of a majority in
interest of the Warrant Shares issuable upon exercise of the Warrants
disagree with the Board's determination of fair market value, then fair
market value will be determined by an Independent Financial Expert in
accordance with the provisions set forth in the definition of Current Market
Price herein. 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 Exercise Price as
determined in accordance with the foregoing shall be adjusted from time to
time in accordance with the provisions of Section 6.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings ascribed thereto in the Investment Agreement.
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 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
<PAGE>
3
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 or an Independent Financial Expert 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
<PAGE>
5
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 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.
<PAGE>
6
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:
(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 (i).
(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
<PAGE>
7
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 Independent Financial Expert selected by the parties
in accordance with the procedure set forth in the definition of Current
Market Price herein, 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 Affiliate 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
<PAGE>
8
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 Affiliate 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 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 Series B
Preferred Stock, (D) shares of Common Stock issued upon exercise of the
Affiliate Warrants, (E) shares of Common Stock issued upon conversion of
shares of the Company's Series C Convertible Preferred Stock, par value $.001
per share ("Series C Preferred Stock"), (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
<PAGE>
9
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 (i).
(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 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) OTHER ADJUSTMENTS (CONDITIONAL ANNUAL INCREASE IN
WARRANT SHARES). On each anniversary of the date of the issuance of this
Warrant, if any shares of Series B Preferred Stock remain outstanding, then
as of each such anniversary the number of shares of Common Stock to be
delivered upon exercise of the Warrant shall be increased by an amount equal
to 12% of the Warrant Shares issuable upon the exercise of this Warrant
(calculated without giving effect to any prior adjustment pursuant to this
section 6(f)).
(g) 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.
<PAGE>
10
(h) 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.
(i) 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 (other than any adjustment made
pursuant to Section 6.1(f) hereunder), 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.
(j) 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
<PAGE>
11
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.
(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. In addition, the Warrantholder shall be entitled to the
rights and remedies provided in Section 6.2 of the Investment Agreement.
(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.
<PAGE>
12
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 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.
"Affiliate Warrants" mean the warrants issued in connection with
the issue and sale by the Company of shares of its Series C Preferred Stock
on the Closing Date (as defined in the Investment Agreement).
<PAGE>
13
"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) 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.
"CHANGE OF CONTROL REPURCHASE PRICE" means 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 in accordance with the procedure set forth in the definition
of Current Market Price herein, 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
<PAGE>
14
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. If the
Board of Directors is unable to determine the fair market value, or if the
holders of a majority in interest of the Warrant Shares issued or issuable
upon conversion of the Warrants issued pursuant to the Investment Agreement
disagree with the Board's determination of fair market value by written
notice delivered to the Company within five (5) business days after the
Board's determination thereof is communicated in writing to such holders,
which notice specifies a majority-in-interest of such holders' determination
of fair market value, then the Company and a majority-in-interest of such
holders shall select an Independent Financial Expert which shall determine
such fair market value. If the Company and such holders are unable to agree
upon an Independent Financial Expert within fifteen (15) days after the
request by such holders, each of the Company and such holders shall select an
Independent Financial Expert within five (5) days following the expiration of
such fifteen (15) day period, and these Independent Financial Experts shall
select a third Independent Financial Expert. The determination of fair
market value by such Independent Financial Expert shall be final, binding and
conclusive on the Company and all holders of the Warrants and Warrant Shares.
All costs and fees of any of this Independent Financial Experts retained in
accordance with the foregoing shall be borne by the Company.
"EXERCISE FORM" means an Exercise Form in the form annexed hereto
as Exhibit A.
"EXERCISE PRICE" has the meaning specified on the cover of this
Warrant.
"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.
<PAGE>
15
"INDEPENDENT FINANCIAL EXPERT" means an independent nationally
recognized investment banking firm.
"INVESTORS" means MAC Music LLC, a Delaware limited liability
company, and SK-Palladin Partners, LP, a Delaware limited partnership.
"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 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 together with the
Investment Agreement constitute the entire agreement between the Company and
the Warrantholder with respect to this Warrant.
<PAGE>
16
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>
17
(b) if to the Warrantholder, addressed to:
MAC Music LLC
c/o Alpine Equity Partners, LP
1285 Avenue of the Americas, 21st Floor
New York, New York 10019
Attention: Lorraine E. Jackson
----------------------------
Telecopy: (212) 641-5148
----------------------------
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
<PAGE>
18
purchase any securities whether such liabilities are
asserted by the Company or by creditors or stockholders of the Company or
otherwise.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its duly authorized officer.
PLATINUM ENTERTAINMENT, INC.
By: Steven Devick
------------------------------------------
Name: Steven Devick
Title: Chief Executive Officer
Dated: December 12, 1997
<PAGE>
19
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 4.5
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 Carl
D. Harnick, his successors and permitted assigns (the "Warrantholder"), the
right to subscribe for and purchase from the Company Fifty Thousand (50,000)
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. References herein to "Warrants" or "Warrant"
shall mean this Warrant.
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
<PAGE>
2
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 Exercise 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 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.
<PAGE>
3
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.
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
<PAGE>
4
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 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
<PAGE>
5
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:
(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
<PAGE>
6
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 (i).
(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 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
<PAGE>
7
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,
the Investor Warrants, the Affiliate Warrants 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, the Investor Warrants, Affiliate Warrants 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 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
<PAGE>
8
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
(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 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
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
<PAGE>
9
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.
(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.
<PAGE>
10
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.
(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
<PAGE>
11
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 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.
<PAGE>
12
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.
"AFFILIATE WARRANTS" mean the warrants issued in connection with
the issue and sale by the Company of shares of its Series C Preferred Stock
on the Closing Date (as defined in the Investment Agreement).
"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.
<PAGE>
13
"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 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.
<PAGE>
14
"EXPIRATION DATE" has the meaning specified on the cover of this
Warrant.
"INDEPENDENT FINANCIAL EXPERT" means an independent nationally
recognized investment banking firm.
"INVESTMENT AGREEMENT" means the Investment Agreement, dated as of
October 12, 1997, as amended and as hereafter amended, among the Investors
and the Company.
"INVESTORS" means MAC Music LLC, a Delaware limited liability
company, and SK-Palladin Partners, LP, a Delaware limited partnership.
"INVESTOR WARRANTS" mean the warrants issued to the Investors
pursuant to the Investment Agreement.
"INVESTOR WARRANT SHARES" mean the shares of Common Stock issued or
issuable upon exercise of the Investor Warrants.
"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.
<PAGE>
15
"WARRANT SHARES" has the meaning specified on the cover of this
Warrant; provided, however, that Warrant Shares shall not include shares sold
to the 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:
Carl D. Harnick
3069 Ann Street
Baldwin, New York 11510
Telecopy: (212) 641-5125
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
<PAGE>
17
purchase any securities whether such liabilities are asserted by the Company
or by creditors or stockholders of the Company or otherwise.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its duly authorized officer.
PLATINUM ENTERTAINMENT, INC.
By: /s/ Steven Devick
-----------------------------------
Name: Steven Devick
Title: Chief Executive Officer
Dated: December 12, 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>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement"), dated as of
December 12, 1997, is among Platinum Entertainment, Inc., a Delaware corporation
(the "COMPANY"), Platinum Venture Partners I, L.P. ("PVP-I") and Platinum
Venture Partners II, L.P. ("PVP-II", together with PVP-I, the "AFFILIATES")
WHEREAS, the Company and the Affiliates deem it desirable to enter
into this Agreement in order to induce the Affiliates to purchase an aggregate
of 2,500 shares of Series C Preferred Stock, par value $.001 per share (the
"SERIES C PREFERRED STOCK") and warrants (the "WARRANTS", together with the
Series C Preferred Stock, the "SECURITIES") for an aggregate of 450,000 shares
of common stock of the Company, par value $.001 per share ("COMMON STOCK"), such
securities to be issued and sold to the Affiliates at the closing of the
Investment Agreement, dated October 12, 1997, as amended (the "INVESTMENT
AGREEMENT"), among the Company, MAC Music LLC ("MAC") and SK-Palladin Partners,
LP (together with MAC, the "Investors").
In consideration of the mutual promises and covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1. DEFINITIONS.
The terms defined in this Section 1 shall have the following meanings
for all purposes of this Agreement:
"Act" means the Securities Act of 1933, as amended, or any superseding
Federal statute, and the rules and regulations promulgated thereunder, all as
the same shall be in effect from time to time. References to a particular
section of the Securities Act of 1933, as amended, shall include a reference to
the comparable section, if any, of any such superseding Federal statute.
"Business Day" means any day other than a Saturday, Sunday or federal
holiday, and consists of the time period from 12:00 a.m. through 12:00 midnight,
New York City time.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any superseding Federal statute, and the rules and regulations promulgated
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934, as amended, shall
include a reference to the comparable section, if any, of such superseding
Federal statute.
"Investor Warrants" means the warrants initially issued to the
Investors pursuant to the Investment Agreement.
<PAGE>
2
"Person" means any individual, firm, corporation, partnership, limited
liability company or partnership, trust, incorporated or unincorporated
association, joint venture, joint stock company, government (or an agency or
political subdivision thereof) or other entity of any kind, and shall include
any successor (by merger or otherwise) of such entity.
"Registrable Securities" shall mean the shares of Common Stock issued
or issuable upon conversion or exercise of the Securities.
"SEC" means the Securities and Exchange Commission.
"Series B Preferred Stock" means the Series B Convertible Preferred
Stock, par value $.001 per share, initially issued to the Investors pursuant to
the Investment Agreement.
"Transfer" means, with respect to any Securities, any sale,
assignment, transfer or disposition by gift or otherwise, including without
limitation, any distribution in liquidation or otherwise by a corporation or
partnership or other Person.
2. SECURITIES SUBJECT TO THIS AGREEMENT.
2.1. REGISTRABLE SECURITIES. Registrable Securities will cease to
be Registrable Securities when such Registrable Securities are sold pursuant to
Rule 144 under the Act or a registration statement covering such Registrable
Securities has been declared effective under the Securities Act by the SEC and
such Registrable Securities have been disposed of pursuant to such effective
registration statement.
2.2. HOLDERS OF REGISTRABLE SECURITIES. A Person is deemed to be a
holder of Registrable Securities whenever such Person owns of record Registrable
Securities, or holds a warrant to purchase, or a security convertible into or
exercisable or exchangeable for, Registrable Securities whether or not such
acquisition or conversion has actually been effected and disregarding any legal
restrictions upon the exercise of such rights. If the Company receives
conflicting instructions, notices or elections from two or more persons with
respect to the same Registrable Securities, the Company may act upon the basis
of the instructions, notice or election received from the registered owner of
such Registrable Securities. Registrable Securities issuable upon exercise of
an option or upon conversion of another security shall be deemed outstanding.
3. PIGGY-BACK REGISTRATION.
3.1. PIGGY-BACK RIGHTS. If the Company proposes to file a
registration statement under the Act with respect to an offering by the Company
for its
<PAGE>
3
own account or for the account of any other holder of registration rights
exercising demand registration rights (such other holder or registration rights
being "DEMAND HOLDER") of any class of equity securities (other than a
registration statement on Form S-4 or S-8 or any successor or other forms not
available for registering equity securities for sale to the public), then the
Company shall give written notice of such proposed filing to each holder of
Registrable Securities at least thirty (30) days before the anticipated filing
date, and such notice shall describe in detail the proposed registration and
distribution (including those jurisdictions where registration under the
securities or blue sky laws is intended) and offer such holders the opportunity
to register such number of Registrable Securities as each such holder may
request. The Company shall use its best efforts (within ten (10) days of the
notice provided for in the preceding sentence) to cause the managing underwriter
or underwriters of a proposed underwritten offering (the "UNDERWRITER") to
permit the holders of Registrable Securities that have requested to participate
in the registration for such offering to include such Registrable Securities in
such offering on the same terms and conditions as the securities of the Company
or the Demand Holder, as the case may be, included therein. Notwithstanding the
foregoing, (x) if in the opinion of the Underwriter the total amount or kind of
securities which the holders of Registrable Securities, the Company and any
other persons or entities intend to include in such offering (the "TOTAL
SECURITIES") is sufficiently large so as to have a material adverse effect on
the distribution of the Total Securities, then the amount or kind of securities
to be offered for the account of such holders of Registrable Securities and such
other persons or entities other than (i) the Company, if such registration is
being filed for the Company's own account, or (ii) the Demand Holders, if such
registration is being made at the demand of a Demand Holder, shall be reduced
pro rata (to zero, if necessary) to the extent necessary to reduce the Total
Securities to the amount recommended by the Underwriter and (y) holders of
Registrable Securities shall have no piggyback rights in connection with a
registration statement filed as a result of the exercise of a demand
registration right by the holders of Series B Preferred Stock or Investor
Warrants (or, in each case, shares of Common Stock issued or issuable upon
exercise thereof) pursuant to the Investment Agreement unless holders of (x)
662/3% of the outstanding shares of Series B Preferred Stock, if any, and (y)
662/3% in interest of the shares of Common Stock underlying the Investor
Warrants consent in writing to the grant of such piggyback rights.
3.2. EXPENSES. The Company shall bear all Registration Expenses in
connection with any registration pursuant to this Section 3.
<PAGE>
4
4. HOLDBACK AGREEMENTS.
4.1. RESTRICTIONS ON PUBLIC SALE BY HOLDERS OF REGISTRABLE
SECURITIES. To the extent not inconsistent with applicable law, each holder of
Registrable Securities participating in such registration agrees not to effect
any public sale or distribution of any Registrable Securities being registered
or of any securities convertible into or exchangeable or exercisable for such
Registrable Securities, including a sale pursuant to Rule 144 under the
Securities Act, during the ten (10) Business Days prior to, and during the
ninety (90) days beginning on, the effective date of such registration statement
(except as part of such registration), if and to the extent requested by the
Company in the case of a non-underwritten public offering or if and to the
extent requested by the Underwriter in the case of an underwritten public
offering.
4.2. RESTRICTIONS ON PUBLIC SALE BY THE COMPANY. The Company agrees
not to effect any public sale or distribution of any of its equity securities,
or any securities convertible into or exchangeable or exercisable for such
equity securities (except pursuant to registrations on Form S-4 or S-8 or any
successor or other forms not available for registering equity securities for
sale to the public) during the ten (10) Business Days prior to, and during the
ninety (90) day period beginning on, the later of (i) the effective date of any
registration statement in which the holders of Registrable Securities are
participating and (ii) the commencement of a public distribution of the
Registrable Securities pursuant to such registration statement.
5. REGISTRATION PROCEDURES.
5.1. OBLIGATIONS OF THE COMPANY. Whenever registration of
Registrable Securities has been requested pursuant to Section 3 of this
Agreement, the Company shall use reasonable efforts to effect the registration
and sale of such Registrable Securities in accordance with the intended method
of distribution thereof, and in connection with any such request, the Company
shall, as soon as reasonably practicable:
(a) prepare and file with the SEC (in any event not later than
thirty (30) business days after receipt of a request to file a registration
statement with respect to Registrable Securities) a registration statement
on any form for which the Company then qualifies which counsel for the
Company shall deem appropriate and which form shall be available for the
sale of such Registrable Securities in accordance with the intended method
of distribution thereof, and use its best efforts to cause such
registration statement to become effective under the Act; provided,
however, that before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company shall (A) provide counsel
selected by the holders of a majority of the Registrable Securities being
registered in such registration ("HOLDERS' COUNSEL") with an
<PAGE>
5
opportunity to participate in the preparation of such registration
statement and each prospectus included therein (and each amendment or
supplement thereto) to be filed with the SEC, which documents shall be
subject to the review of Holders' Counsel, and (B) notify the Holders'
Counsel and each seller of Registrable Securities of any stop order issued
or threatened by the SEC and take all reasonable action required to prevent
the entry of such stop order or to remove it if entered;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period which will terminate when all Registrable
Securities covered by such registration statement have been sold (but not
before the expiration of the ninety (90) day period referred to in
Section 4(3) of the Act and Rule 174 thereunder, if applicable), and comply
with the provisions of the Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof
set forth in such registration statement;
(c) furnish to each seller of Registrable Securities, prior to
filing a registration statement, copies of such registration statement as
is proposed to be filed, and thereafter such number of copies of such
registration statement, each amendment and supplement thereto (in each case
including all exhibits thereto), the prospectus included in such
registration statement (including each preliminary prospectus) and such
other documents as each such seller may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such
seller;
(d) use reasonable efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller of Registrable Securities requests, and to
continue such qualification in effect in such jurisdiction for as long as
is permissible pursuant to the laws of such jurisdiction, or for as long as
any such seller requests or until all of such Registrable Securities are
sold, whichever is shortest, and do any and all other acts and things which
may be reasonably necessary or advisable to enable any such seller to
consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller; provided, however, that the Company shall
not be required to (A) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this Section
5.1(d), (B) subject itself to taxation in any such jurisdiction or (C)
consent to general service of process in any such jurisdiction;
<PAGE>
6
(e) use reasonable efforts to cause the Registrable Securities
covered by such registration statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary by
virtue of the business and operations of the Company to enable the seller
or sellers of Registrable Securities to consummate the disposition of such
Registrable Securities;
(f) notify each seller of Registrable Securities at any time
when a prospectus relating thereto is required to be delivered under the
Act, upon discovery that, or upon the happening of any event as a result of
which, the prospectus included in such registration statement contains an
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances under which they were made,
and the Company shall promptly prepare a supplement or amendment to such
prospectus and furnish to each seller a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so
that, after delivery to the purchasers of such Registrable Securities, such
prospectus shall not contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances
under which they were made;
(g) enter into and perform customary agreements (including an
underwriting agreement in customary form with the Underwriter, if any,
selected as provided in Section 3) and take such other actions as are
reasonably required in order to facilitate the disposition of such
Registrable Securities;
(h) make available for inspection by any seller of Registrable
Securities, any managing underwriter participating in any disposition
pursuant to such registration statement, Holders' Counsel and any attorney,
accountant or other agent retained by any such seller or any managing
underwriter (each, an "INSPECTOR" and collectively, the "INSPECTORS"), all
financial and other records, pertinent corporate documents and properties
of the Company and its subsidiaries (collectively, the "RECORDS") as shall
be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's and its subsidiaries' officers,
directors and employees, and the independent public accountants of the
Company, to supply all information reasonably requested by any such
Inspector in connection with such registration statement;
(i) if such sale is pursuant to an underwritten offering,
obtain a "cold comfort" letter from the Company's independent public
accountants in customary form and covering such matters of the type
customarily covered by
<PAGE>
7
"cold comfort" letters as Holders' Counsel or the managing underwriter
reasonably requests;
(j) furnish, at the request of any seller of Registrable
Securities on the date such securities are delivered to the underwriters
for sale pursuant to such registration or, if such securities are not being
sold through underwriters, on the date the registration statement with
respect to such securities becomes effective, an opinion, dated such date,
of counsel representing the Company for the purposes of such registration,
addressed to the underwriters, if any, and to the seller making such
request, covering such legal matters with respect to the registration in
respect of which such opinion is being given as such seller may reasonably
request and are customarily included in such opinions;
(k) otherwise use reasonable efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable but no later than
fifteen (15) months after the effective date of the registration statement,
an earnings statement covering a period of twelve (12) months beginning
after the effective date of the registration statement, in a manner which
satisfies the provisions of Section 11(a) of the Act;
(l) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are
then listed (including NASDAQ), provided, that the applicable listing
requirements are satisfied;
(m) provide officers' certificates and other customary closing
documents;
(n) cooperate with each seller of Registrable Securities and
each underwriter participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings
required to be made with the National Association of Securities Dealers,
Inc. (the "NASD"); and
(o) use reasonable efforts to take all other steps necessary
to effect the registration of the Registrable Securities contemplated
hereby.
5.2. NOTICE TO DISCONTINUE. Each holder of Registrable Securities
agrees that, upon receipt of any notice from the Company of the happening of any
event of the kind described in Section 5.1(f), such holder shall forthwith
discontinue disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until such holder's receipt of
the copies of the supplemented or amended prospectus contemplated by
Section 5.1(f) and, if so directed by the
<PAGE>
8
Company, such holder shall deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in such holder's possession, of
the prospectus covering such Registrable Securities which is current at the time
of receipt of such notice. If the Company shall give any such notice, the
Company shall extend the period during which such registration statement shall
be maintained effective pursuant to this Agreement (including without limitation
the period referred to in Section 5.1(b)) by the number of days during the
period from and including the date of the giving of such notice pursuant to
Section 5.1(f) to and including the date when the holder shall have received the
copies of the supplemented or amended prospectus contemplated by and meeting the
requirements of Section 5.1(f).
6. REGISTRATION EXPENSES. The Company shall pay all expenses (other than
underwriting discounts and commissions) arising from or incident to the
performance of, or compliance with, this Agreement, including without
limitation, (i) SEC, stock exchange, NASDAQ and NASD registration and filing
fees, (ii) all fees and expenses incurred in complying with securities or blue
sky laws (including reasonable fees, charges and disbursements of counsel in
connection with blue sky qualifications of the Registrable Securities),
(iii) all printing, messenger and delivery expenses, (iv) the fees, charges and
disbursements of counsel to the Company and of its independent public
accountants and any other accounting and legal fees, charges and expenses
incurred by the Company (including without limitation any expenses arising from
any special audits incident to or required by any registration or
qualification), and (v) any liability insurance or other premiums for insurance
obtained by the Company and the reasonable fees, charges and expenses of any
special experts retained by the Company in connection with any piggy-back
registration pursuant to the terms of this Agreement, regardless of whether such
registration statement is declared effective. In connection with each
registration hereunder, the Company shall reimburse the holders of Registrable
Securities being registered in such registration for the reasonable fees,
charges and disbursements of not more than one counsel chosen by the holders of
a majority of Registrable Securities being registered in such registration. All
of the expenses described in this Section 6 are referred to herein as
"REGISTRATION EXPENSES."
7. INDEMNIFICATION; CONTRIBUTION.
7.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify, to the fullest extent permitted by law, each holder of Registrable
Securities, its officers, directors, partners, employees, advisors and agents
and each Person who controls (within the meaning of the Act or the Exchange Act)
such holder from and against any and all losses, claims, damages, liabilities
and expenses (including reasonable costs of investigation) arising out of or
based upon any untrue, or alleged untrue, statement of a material fact contained
in any registration statement, prospectus or preliminary prospectus or
notification or offering circular (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) or arising
<PAGE>
9
out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same are caused by or contained in
any information furnished in writing to the Company by such holder expressly for
use therein and provided further that the Company will not be liable to any
holder of Registrable Securities or any person controlling such holder with
respect to any loss, claim, liability, expense, charge or damage arising out of
or based on any untrue statement or alleged untrue statement or omission or
alleged omission to state a material fact in any preliminary prospectus which is
corrected in the prospectus. The Company shall also indemnify any underwriters
of the Registrable Securities, their officers, directors and employees and each
Person who controls such underwriters (within the meaning of the Act and the
Exchange Act) to the same extent as provided above with respect to the
indemnification of the holders of Registrable Securities.
7.2. INDEMNIFICATION BY HOLDERS. In connection with any
registration statement in which a holder of Registrable Securities is
participating pursuant to Section 3 hereof, each such holder shall furnish to
the Company in writing such information with respect to such holder as the
Company may reasonably request or as may be required by law for use in
connection with any such registration statement or prospectus and each holder,
by its participation in such registration, agrees to indemnify, to the extent
permitted by law, the Company, any underwriter retained by the Company and their
respective directors, officers, employees and each Person who controls the
Company or such underwriter (within the meaning of the Act and the Exchange Act)
to the same extent as the foregoing indemnity from the Company to the holders of
Registrable Securities, but only with respect to any such information furnished
in writing by or on behalf of such holder.
7.3. CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person entitled to
indemnification hereunder (the "REGISTRATION RIGHTS INDEMNIFIED PARTY") agrees
to give prompt written notice to the indemnifying party (the "REGISTRATION
RIGHTS INDEMNIFYING PARTY") after the receipt by the Registration Rights
Indemnified Party of any written notice of the commencement of any action, suit,
proceeding or investigation or threat thereof made in writing for which the
Registration Rights Indemnified Party intends to claim indemnification or
contribution pursuant to this Agreement; provided, that the failure so to notify
the Registration Rights Indemnifying Party shall not relieve the Registration
Rights Indemnifying Party of any liability that it may have to the Registration
Rights Indemnified Party hereunder unless, and only to the extent that, such
failure results in the Registration Rights Indemnifying Party's forfeiture of
substantial rights or defenses. If notice of commencement of any such action is
given to the Registration Rights Indemnifying Party as above provided, the
Registration Rights Indemnifying Party shall be entitled to participate in and,
to the extent it may wish, jointly with any other Registration Rights
Indemnifying Party similarly notified, to assume the defense of such action at
its own expense, with counsel chosen by it and
<PAGE>
10
satisfactory to such Registration Rights Indemnified Party. The Registration
Rights Indemnified Party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel (other than reasonable costs of investigation) shall be paid by the
Registration Rights Indemnified Party unless (i) the Registration Rights
Indemnifying Party agrees to pay the same, (ii) the Registration Rights
Indemnifying Party fails to assume the defense of such action with counsel
satisfactory to the Registration Rights Indemnified Party in its reasonable
judgment, (iii) the named parties to any such action (including any impleaded
parties) have been advised by such counsel that either (A) representation of
such Registration Rights Indemnified Party and the Registration Rights
Indemnifying Party by the same counsel would be inappropriate under applicable
standards of professional conduct or (B) there may be one or more legal defenses
available to the Registration Rights Indemnified Party which are different from
or additional to those available to the Registration Rights Indemnifying Party.
No Registration Rights Indemnifying Party shall, without the prior written
consent of each Registration Rights Indemnified Party, settle, compromise or
consent to the entry of any judgment unless such settlement, compromise or
consent includes an unconditional release of the Registration Rights Indemnified
Party from all liability relating thereto. In either of such cases the
Registration Rights Indemnifying Party shall not have the right to assume the
defense of such action on behalf of such Registration Rights Indemnified Party.
No Registration Rights Indemnifying Party shall be liable for any settlement
entered into without its written consent, which consent shall not be
unreasonably withheld, conditioned or delayed.
7.4. CONTRIBUTION. If the indemnification provided for in this
Section 7 from the Indemnifying Party is unavailable to a Registration Rights
Indemnified Party hereunder in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then the Indemnifying Party, in
lieu of indemnifying such Registration Rights Indemnified Party, shall
contribute to the amount paid or payable by such Registration Rights Indemnified
Party as a result of such losses, claims, damages, liabilities or expenses in
such proportion as is appropriate to reflect the relative fault of the
Registration Rights Indemnifying Party and Registration Rights Indemnified Party
in connection with the actions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative faults of such Registration Rights Indemnifying Party and
Registration Rights Indemnified Party shall be determined by reference to, among
other things, whether any action in question, including any untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact, has been made by, or relates to information supplied by, such
Registration Rights Indemnifying Party or Registration Rights Indemnified Party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
<PAGE>
11
forth in Sections 7.1, 7.2 and 7.3, any legal or other fees, charges or expenses
reasonably incurred by such party in connection with any investigation or
proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7.4 were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person.
8. RULE 144. The Company covenants that it shall file any reports
required to be filed by it under the Exchange Act and the rules and regulations
adopted by the Commission thereunder; and that it shall take such further action
as each holder of Registrable Securities may reasonably request (including
providing any information necessary to comply with Rules 144 and 144A under the
Securities Act), all to the extent required from time to time to enable such
holder to sell Registrable Securities without registration under the Act within
the limitation of the exemptions provided by (a) Rule 144 or Rule 144A under the
Act, as such rules may be amended from time to time, or (b) any similar rules or
regulations hereafter adopted by the SEC. The Company shall, upon the request
of any holder of Registrable Securities, deliver to such holder a written
statement as to whether it has complied with such requirements.
9. MISCELLANEOUS.
9.1. PERFORMANCE; WAIVER. The provisions of this Agreement may be
modified or amended, and waivers and consents to the performance and observance
of the terms hereof may be given by written instrument executed and delivered by
the Company and the Purchasers. The failure at any time to require performance
of any provision hereof shall in no way affect the full right to require such
performance at any time thereafter (unless performance thereof has been waived
in accordance with the terms hereof for all purposes and at all times by the
parties to whom the benefit of such performance is to be rendered). The waiver
by any party to this Agreement of a breach of any provision hereof shall not be
taken or held to be a waiver of any succeeding breach of such provision of any
other provision or as a waiver of the provision itself.
9.2. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of the
parties hereto. The Company may not assign any of its rights under this
Agreement, except to a successor-in-interest to the Company, without the written
consent of the Affiliates. No Person other than the parties hereto and their
successors and permitted assigns is intended to be a beneficiary of this
Agreement.
<PAGE>
12
9.3. NOTICES. All notices or other communications given or made
hereunder shall be validly given or made if in writing and delivered by
facsimile transmission or in Person at, mailed by registered or certified mail,
return receipt requested, postage prepaid, or sent by a reputable overnight
courier to, the following addresses (and shall be deemed effective at the time
of receipt thereof).
If to the Company:
Platinum Entertainment, Inc.
20001 Butterfield Road, Suite 1400
Downers Grove, Illinois 60515
Telecopy: (630) 769-0049
Attention: Chief Executive Officer
with a copies to:
Katten, Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois
Telecopy: (312) 902-1061
Attention: Matthew S. Brown, Esq.
If to the holders of Registrable Securities, to the addresses set
forth on on the stock record books of the Company.
or to such other address as the party to whom notice is to be given may have
previously furnished notice in writing to the other in the manner set forth
above.
9.4. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND PERFORMED ENTIRELY WITHIN SUCH STATE. EACH OF THE PARTIES HERETO
AGREES TO SUBMIT TO THE JURISDICTION OF THE STATE AND FEDERAL COURTS IN THE
STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT.
9.5. SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, each of the Company and the Affiliates directs that such court
interpret and apply the remainder of this Agreement in the manner that it
determines most closely effectuates their intent in entering into this
Agreement, and in doing so particularly take
<PAGE>
13
into account the relative importance of the term, provision, covenant or
restriction being held invalid, void or unenforceable.
9.6. HEADINGS; INTERPRETATION. The index and section headings herein
are for convenience only and shall not affect the construction hereof.
References to sections means sections of this Agreement unless the context
otherwise requires. References to herein or hereof mean this Agreement.
9.7. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
between the parties relating to the subject matter hereof and supersedes any and
all prior oral or written agreements, representations or warranties, contracts,
understandings, correspondence, conversations, and memoranda, whether written or
oral, between the Company and the Affiliates, or between or among any agents,
representatives, parents, predecessors in interest or successors in interest,
with respect to the subject matter hereof.
9.8. NO THIRD PARTY RIGHTS. Except for the indemnified parties, this
Agreement is intended solely for the benefit of the parties hereto and is not
intended to confer any benefits upon, or create any rights in favor of, any
Person (including, without limitation, any stockholder or debtholder of the
Company) other than the parties hereto.
9.9. REMEDIES FOR BREACH. The parties agree that in addition to any
other rights or remedies which may be available at law or equity, the parties
shall be entitled to seek specific performance of any obligation of any party
hereto.
<PAGE>
14
9.10. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original and both of which together shall
be deemed to be one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
PLATINUM ENTERTAINMENT, INC.
By: /s/ Steven Devick
----------------------------------
Name: Steven Devick
Title: Chief Executive Officer
PLATINUM VENTURE PARTNERS I, .L.P.
By: /s/ Steven Devick
----------------------------------
General Partner
By:
-----------------------------
Name:
Title:
PLATINUM VENTURE PARTNERS II, .L.P.
By: /s/ Steven Devick
----------------------------------
General Partner
By:
-----------------------------
Name:
Title:
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement"), dated as of
December 12, 1997, is among Platinum Entertainment, Inc., a Delaware
corporation (the "COMPANY") and Carl D. Harnick ("Harnick").
WHEREAS, the Company has agreed to issue to Harnick a warrant or
warrants (the "Securities") for an aggregate of 50,000 shares of common stock of
the Company, par value $.001 per share ("COMMON STOCK"), such Securities to be
issued to Harnick at the closing of the Investment Agreement, dated October 12,
1997, as amended, among the Company, MAC Music LLC and SK-Palladin Partners, LP.
In consideration of the mutual promises and covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1. DEFINITIONS.
The terms defined in this Section 1 shall have the following meanings
for all purposes of this Agreement:
"Act" means the Securities Act of 1933, as amended, or any superseding
Federal statute, and the rules and regulations promulgated thereunder, all as
the same shall be in effect from time to time. References to a particular
section of the Securities Act of 1933, as amended, shall include a reference to
the comparable section, if any, of any such superseding Federal statute.
"Business Day" means any day other than a Saturday, Sunday or federal
holiday, and consists of the time period from 12:00 a.m. through 12:00 midnight,
New York City time.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any superseding Federal statute, and the rules and regulations promulgated
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934, as amended, shall
include a reference to the comparable section, if any, of such superseding
Federal statute.
"Person" means any individual, firm, corporation, partnership, limited
liability company or partnership, trust, incorporated or unincorporated
association, joint venture, joint stock company, government (or an agency or
political subdivision thereof) or other entity of any kind, and shall include
any successor (by merger or otherwise) of such entity.
"Registrable Securities" shall mean the shares of Common Stock issued
or issuable upon conversion or exercise of the Securities.
<PAGE>
2
"SEC" means the Securities and Exchange Commission.
"Transfer" means, with respect to any Securities, any sale,
assignment, transfer or disposition by gift or otherwise, including without
limitation, any distribution in liquidation or otherwise by a corporation or
partnership or other Person.
2. SECURITIES SUBJECT TO THIS AGREEMENT.
2.1. REGISTRABLE SECURITIES. Registrable Securities will cease to
be Registrable Securities when such Registrable Securities are sold pursuant to
Rule 144 under the Act or a registration statement covering such Registrable
Securities has been declared effective under the Securities Act by the SEC and
such Registrable Securities have been disposed of pursuant to such effective
registration statement.
2.2. HOLDERS OF REGISTRABLE SECURITIES. A Person is deemed to be a
holder of Registrable Securities whenever such Person owns of record Registrable
Securities, or holds a warrant to purchase, or a security convertible into or
exercisable or exchangeable for, Registrable Securities whether or not such
acquisition or conversion has actually been effected and disregarding any legal
restrictions upon the exercise of such rights. If the Company receives
conflicting instructions, notices or elections from two or more persons with
respect to the same Registrable Securities, the Company may act upon the basis
of the instructions, notice or election received from the registered owner of
such Registrable Securities. Registrable Securities issuable upon exercise of
an option or upon conversion of another security shall be deemed outstanding.
3. PIGGY-BACK REGISTRATION.
3.1. PIGGY-BACK RIGHTS. If the Company proposes to file a
registration statement under the Act with respect to an offering by the Company
for its own account or for the account of any other holder of registration
rights exercising demand registration rights (such other holder or registration
rights being "DEMAND HOLDER") of any class of equity securities (other than a
registration statement on Form S-4 or S-8 or any successor or other forms not
available for registering equity securities for sale to the public), then the
Company shall give written notice of such proposed filing to each holder of
Registrable Securities at least thirty (30) days before the anticipated filing
date, and such notice shall describe in detail the proposed registration and
distribution (including those jurisdictions where registration under the
securities or blue sky laws is intended) and offer such holders the opportunity
to register such number of Registrable Securities as each such holder may
request. The Company shall use its best efforts (within ten (10) days of the
notice provided for in the preceding sentence) to cause the managing underwriter
or underwriters of a proposed underwritten offering (the "UNDERWRITER") to
permit the holders of Registrable
<PAGE>
3
Securities that have requested to participate in the registration for such
offering to include such Registrable Securities in such offering on the same
terms and conditions as the securities of the Company or the Demand Holder, as
the case may be, included therein. Notwithstanding the foregoing, if in the
opinion of the Underwriter the total amount or kind of securities which the
holders of Registrable Securities, the Company and any other persons or entities
intend to include in such offering (the "TOTAL SECURITIES") is sufficiently
large so as to have a material adverse effect on the distribution of the Total
Securities, then the amount or kind of securities to be offered for the account
of such holders of Registrable Securities and such other persons or entities
other than (i) the Company, if such registration is being filed for the
Company's own account, or (ii) the Demand Holders, if such registration is being
made at the demand of a Demand Holder, shall be reduced pro rata (to zero, if
necessary) to the extent necessary to reduce the Total Securities to the amount
recommended by the Underwriter.
3.2. EXPENSES. The Company shall bear all Registration Expenses in
connection with any registration pursuant to this Section 3.
4. HOLDBACK AGREEMENTS.
4.1. RESTRICTIONS ON PUBLIC SALE BY HOLDERS OF REGISTRABLE
SECURITIES. To the extent not inconsistent with applicable law, each holder of
Registrable Securities participating in such registration agrees not to effect
any public sale or distribution of any Registrable Securities being registered
or of any securities convertible into or exchangeable or exercisable for such
Registrable Securities, including a sale pursuant to Rule 144 under the
Securities Act, during the ten (10) Business Days prior to, and during the
ninety (90) days beginning on, the effective date of such registration statement
(except as part of such registration), if and to the extent requested by the
Company in the case of a non-underwritten public offering or if and to the
extent requested by the Underwriter in the case of an underwritten public
offering.
4.2. RESTRICTIONS ON PUBLIC SALE BY THE COMPANY. The Company agrees
not to effect any public sale or distribution of any of its equity securities,
or any securities convertible into or exchangeable or exercisable for such
equity securities (except pursuant to registrations on Form S-4 or S-8 or any
successor or other forms not available for registering equity securities for
sale to the public) during the ten (10) Business Days prior to, and during the
ninety (90) day period beginning on, the later of (i) the effective date of any
registration statement in which the holders of Registrable Securities are
participating and (ii) the commencement of a public distribution of the
Registrable Securities pursuant to such registration statement.
<PAGE>
4
5. REGISTRATION PROCEDURES.
5.1. OBLIGATIONS OF THE COMPANY. Whenever registration of
Registrable Securities has been requested pursuant to Section 3 of this
Agreement, the Company shall use reasonable efforts to effect the registration
and sale of such Registrable Securities in accordance with the intended method
of distribution thereof, and in connection with any such request, the Company
shall, as soon as reasonably practicable:
(a) prepare and file with the SEC (in any event not later than
thirty (30) business days after receipt of a request to file a registration
statement with respect to Registrable Securities) a registration statement
on any form for which the Company then qualifies which counsel for the
Company shall deem appropriate and which form shall be available for the
sale of such Registrable Securities in accordance with the intended method
of distribution thereof, and use its best efforts to cause such
registration statement to become effective under the Act; provided,
however, that before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company shall (A) provide counsel
selected by the holders of a majority of the Registrable Securities being
registered in such registration ("HOLDERS' COUNSEL") with an opportunity to
participate in the preparation of such registration statement and each
prospectus included therein (and each amendment or supplement thereto) to
be filed with the SEC, which documents shall be subject to the review of
Holders' Counsel, and (B) notify the Holders' Counsel and each seller of
Registrable Securities of any stop order issued or threatened by the SEC
and take all reasonable action required to prevent the entry of such stop
order or to remove it if entered;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period which will terminate when all Registrable
Securities covered by such registration statement have been sold (but not
before the expiration of the ninety (90) day period referred to in
Section 4(3) of the Act and Rule 174 thereunder, if applicable), and comply
with the provisions of the Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof
set forth in such registration statement;
(c) furnish to each seller of Registrable Securities, prior to
filing a registration statement, copies of such registration statement as
is proposed to be filed, and thereafter such number of copies of such
registration statement, each amendment and supplement thereto (in each case
including all exhibits
<PAGE>
5
thereto), the prospectus included in such registration statement (including
each preliminary prospectus) and such other documents as each such seller
may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such seller;
(d) use reasonable efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller of Registrable Securities requests, and to
continue such qualification in effect in such jurisdiction for as long as
is permissible pursuant to the laws of such jurisdiction, or for as long as
any such seller requests or until all of such Registrable Securities are
sold, whichever is shortest, and do any and all other acts and things which
may be reasonably necessary or advisable to enable any such seller to
consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller; provided, however, that the Company shall
not be required to (A) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this Section
5.1(d), (B) subject itself to taxation in any such jurisdiction or (C)
consent to general service of process in any such jurisdiction;
(e) use reasonable efforts to cause the Registrable Securities
covered by such registration statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary by
virtue of the business and operations of the Company to enable the seller
or sellers of Registrable Securities to consummate the disposition of such
Registrable Securities;
(f) notify each seller of Registrable Securities at any time
when a prospectus relating thereto is required to be delivered under the
Act, upon discovery that, or upon the happening of any event as a result of
which, the prospectus included in such registration statement contains an
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances under which they were made,
and the Company shall promptly prepare a supplement or amendment to such
prospectus and furnish to each seller a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so
that, after delivery to the purchasers of such Registrable Securities, such
prospectus shall not contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances
under which they were made;
(g) enter into and perform customary agreements (including an
underwriting agreement in customary form with the Underwriter, if any,
<PAGE>
6
selected as provided in Section 3) and take such other actions as are
reasonably required in order to facilitate the disposition of such
Registrable Securities;
(h) make available for inspection by any seller of Registrable
Securities, any managing underwriter participating in any disposition
pursuant to such registration statement, Holders' Counsel and any attorney,
accountant or other agent retained by any such seller or any managing
underwriter (each, an "INSPECTOR" and collectively, the "INSPECTORS"), all
financial and other records, pertinent corporate documents and properties
of the Company and its subsidiaries (collectively, the "RECORDS") as shall
be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's and its subsidiaries' officers,
directors and employees, and the independent public accountants of the
Company, to supply all information reasonably requested by any such
Inspector in connection with such registration statement;
(i) if such sale is pursuant to an underwritten offering,
obtain a "cold comfort" letter from the Company's independent public
accountants in customary form and covering such matters of the type
customarily covered by "cold comfort" letters as Holders' Counsel or the
managing underwriter reasonably requests;
(j) furnish, at the request of any seller of Registrable
Securities on the date such securities are delivered to the underwriters
for sale pursuant to such registration or, if such securities are not being
sold through underwriters, on the date the registration statement with
respect to such securities becomes effective, an opinion, dated such date,
of counsel representing the Company for the purposes of such registration,
addressed to the underwriters, if any, and to the seller making such
request, covering such legal matters with respect to the registration in
respect of which such opinion is being given as such seller may reasonably
request and are customarily included in such opinions;
(k) otherwise use reasonable efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable but no later than
fifteen (15) months after the effective date of the registration statement,
an earnings statement covering a period of twelve (12) months beginning
after the effective date of the registration statement, in a manner which
satisfies the provisions of Section 11(a) of the Act;
(l) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are
then
<PAGE>
7
listed (including NASDAQ), provided, that the applicable listing
requirements are satisfied;
(m) provide officers' certificates and other customary closing
documents;
(n) cooperate with each seller of Registrable Securities and
each underwriter participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings
required to be made with the National Association of Securities Dealers,
Inc. (the "NASD"); and
(o) use reasonable efforts to take all other steps necessary
to effect the registration of the Registrable Securities contemplated
hereby.
5.2. NOTICE TO DISCONTINUE. Each holder of Registrable Securities
agrees that, upon receipt of any notice from the Company of the happening of any
event of the kind described in Section 5.1(f), such holder shall forthwith
discontinue disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until such holder's receipt of
the copies of the supplemented or amended prospectus contemplated by
Section 5.1(f) and, if so directed by the Company, such holder shall deliver to
the Company (at the Company's expense) all copies, other than permanent file
copies then in such holder's possession, of the prospectus covering such
Registrable Securities which is current at the time of receipt of such notice.
If the Company shall give any such notice, the Company shall extend the period
during which such registration statement shall be maintained effective pursuant
to this Agreement (including without limitation the period referred to in
Section 5.1(b)) by the number of days during the period from and including the
date of the giving of such notice pursuant to Section 5.1(f) to and including
the date when the holder shall have received the copies of the supplemented or
amended prospectus contemplated by and meeting the requirements of
Section 5.1(f).
6. REGISTRATION EXPENSES. The Company shall pay all expenses (other than
underwriting discounts and commissions) arising from or incident to the
performance of, or compliance with, this Agreement, including without
limitation, (i) SEC, stock exchange, NASDAQ and NASD registration and filing
fees, (ii) all fees and expenses incurred in complying with securities or blue
sky laws (including reasonable fees, charges and disbursements of counsel in
connection with blue sky qualifications of the Registrable Securities),
(iii) all printing, messenger and delivery expenses, (iv) the fees, charges and
disbursements of counsel to the Company and of its independent public
accountants and any other accounting and legal fees, charges and expenses
incurred by the Company (including without limitation any expenses arising from
any special audits incident to or required by any registration or
qualification), and (v) any liability insurance or other premiums for insurance
obtained by the Company and the
<PAGE>
8
reasonable fees, charges and expenses of any special experts retained by the
Company in connection with any piggy-back registration pursuant to the terms of
this Agreement, regardless of whether such registration statement is declared
effective. In connection with each registration hereunder, the Company shall
reimburse the holders of Registrable Securities being registered in such
registration for the reasonable fees, charges and disbursements of not more than
one counsel chosen by the holders of a majority of Registrable Securities being
registered in such registration. All of the expenses described in this
Section 6 are referred to herein as "REGISTRATION EXPENSES."
7. INDEMNIFICATION; CONTRIBUTION.
7.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify, to the fullest extent permitted by law, each holder of Registrable
Securities, its officers, directors, partners, employees, advisors and agents
and each Person who controls (within the meaning of the Act or the Exchange Act)
such holder from and against any and all losses, claims, damages, liabilities
and expenses (including reasonable costs of investigation) arising out of or
based upon any untrue, or alleged untrue, statement of a material fact contained
in any registration statement, prospectus or preliminary prospectus or
notification or offering circular (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) or arising out of or
based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such holder expressly for use
therein and provided further that the Company will not be liable to any holder
of Registrable Securities or any person controlling such holder with respect to
any loss, claim, liability, expense, charge or damage arising out of or based on
any untrue statement or alleged untrue statement or omission or alleged omission
to state a material fact in any preliminary prospectus which is corrected in the
prospectus. The Company shall also indemnify any underwriters of the
Registrable Securities, their officers, directors and employees and each Person
who controls such underwriters (within the meaning of the Act and the Exchange
Act) to the same extent as provided above with respect to the indemnification of
the holders of Registrable Securities.
7.2. INDEMNIFICATION BY HOLDERS. In connection with any
registration statement in which a holder of Registrable Securities is
participating pursuant to Section 3 hereof, each such holder shall furnish to
the Company in writing such information with respect to such holder as the
Company may reasonably request or as may be required by law for use in
connection with any such registration statement or prospectus and each holder,
by its participation in such registration, agrees to indemnify, to the extent
permitted by law, the Company, any underwriter retained by the Company and their
respective directors, officers, employees and each Person who controls the
Company or such underwriter (within the meaning of the Act and the
<PAGE>
9
Exchange Act) to the same extent as the foregoing indemnity from the Company to
the holders of Registrable Securities, but only with respect to any such
information furnished in writing by or on behalf of such holder.
7.3. CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person entitled to
indemnification hereunder (the "REGISTRATION RIGHTS INDEMNIFIED PARTY") agrees
to give prompt written notice to the indemnifying party (the "REGISTRATION
RIGHTS INDEMNIFYING PARTY") after the receipt by the Registration Rights
Indemnified Party of any written notice of the commencement of any action, suit,
proceeding or investigation or threat thereof made in writing for which the
Registration Rights Indemnified Party intends to claim indemnification or
contribution pursuant to this Agreement; provided, that the failure so to notify
the Registration Rights Indemnifying Party shall not relieve the Registration
Rights Indemnifying Party of any liability that it may have to the Registration
Rights Indemnified Party hereunder unless, and only to the extent that, such
failure results in the Registration Rights Indemnifying Party's forfeiture of
substantial rights or defenses. If notice of commencement of any such action is
given to the Registration Rights Indemnifying Party as above provided, the
Registration Rights Indemnifying Party shall be entitled to participate in and,
to the extent it may wish, jointly with any other Registration Rights
Indemnifying Party similarly notified, to assume the defense of such action at
its own expense, with counsel chosen by it and satisfactory to such Registration
Rights Indemnified Party. The Registration Rights Indemnified Party shall have
the right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel (other than
reasonable costs of investigation) shall be paid by the Registration Rights
Indemnified Party unless (i) the Registration Rights Indemnifying Party agrees
to pay the same, (ii) the Registration Rights Indemnifying Party fails to assume
the defense of such action with counsel satisfactory to the Registration Rights
Indemnified Party in its reasonable judgment, (iii) the named parties to any
such action (including any impleaded parties) have been advised by such counsel
that either (A) representation of such Registration Rights Indemnified Party and
the Registration Rights Indemnifying Party by the same counsel would be
inappropriate under applicable standards of professional conduct or (B) there
may be one or more legal defenses available to the Registration Rights
Indemnified Party which are different from or additional to those available to
the Registration Rights Indemnifying Party. No Registration Rights Indemnifying
Party shall, without the prior written consent of each Registration Rights
Indemnified Party, settle, compromise or consent to the entry of any judgment
unless such settlement, compromise or consent includes an unconditional release
of the Registration Rights Indemnified Party from all liability relating
thereto. In either of such cases the Registration Rights Indemnifying Party
shall not have the right to assume the defense of such action on behalf of such
Registration Rights Indemnified Party. No Registration Rights Indemnifying
Party shall be liable for any settlement entered into without its written
consent, which consent shall not be unreasonably withheld, conditioned or
delayed.
<PAGE>
10
7.4. CONTRIBUTION. If the indemnification provided for in this
Section 7 from the Indemnifying Party is unavailable to a Registration Rights
Indemnified Party hereunder in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then the Indemnifying Party, in
lieu of indemnifying such Registration Rights Indemnified Party, shall
contribute to the amount paid or payable by such Registration Rights Indemnified
Party as a result of such losses, claims, damages, liabilities or expenses in
such proportion as is appropriate to reflect the relative fault of the
Registration Rights Indemnifying Party and Registration Rights Indemnified Party
in connection with the actions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative faults of such Registration Rights Indemnifying Party and
Registration Rights Indemnified Party shall be determined by reference to, among
other things, whether any action in question, including any untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact, has been made by, or relates to information supplied by, such
Registration Rights Indemnifying Party or Registration Rights Indemnified Party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in Sections 7.1, 7.2 and 7.3, any legal or other fees, charges or expenses
reasonably incurred by such party in connection with any investigation or
proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7.4 were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person.
8. RULE 144. The Company covenants that it shall file any reports
required to be filed by it under the Exchange Act and the rules and regulations
adopted by the Commission thereunder; and that it shall take such further action
as each holder of Registrable Securities may reasonably request (including
providing any information necessary to comply with Rules 144 and 144A under the
Securities Act), all to the extent required from time to time to enable such
holder to sell Registrable Securities without registration under the Act within
the limitation of the exemptions provided by (a) Rule 144 or Rule 144A under the
Act, as such rules may be amended from time to time, or (b) any similar rules or
regulations hereafter adopted by the SEC. The Company shall, upon the request
of any holder of Registrable Securities, deliver to such holder a written
statement as to whether it has complied with such requirements.
9. MISCELLANEOUS.
<PAGE>
11
9.1. PERFORMANCE; WAIVER. The provisions of this Agreement may be
modified or amended, and waivers and consents to the performance and observance
of the terms hereof may be given by written instrument executed and delivered by
the Company and the Purchasers. The failure at any time to require performance
of any provision hereof shall in no way affect the full right to require such
performance at any time thereafter (unless performance thereof has been waived
in accordance with the terms hereof for all purposes and at all times by the
parties to whom the benefit of such performance is to be rendered). The waiver
by any party to this Agreement of a breach of any provision hereof shall not be
taken or held to be a waiver of any succeeding breach of such provision of any
other provision or as a waiver of the provision itself.
9.2. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of the
parties hereto. The Company may not assign any of its rights under this
Agreement, except to a successor-in-interest to the Company, without the written
consent of Harnick. No Person other than the parties hereto and their
successors and permitted assigns is intended to be a beneficiary of this
Agreement.
9.3. NOTICES. All notices or other communications given or made
hereunder shall be validly given or made if in writing and delivered by
facsimile transmission or in Person at, mailed by registered or certified mail,
return receipt requested, postage prepaid, or sent by a reputable overnight
courier to, the following addresses (and shall be deemed effective at the time
of receipt thereof).
If to the Company:
Platinum Entertainment, Inc.
20001 Butterfield Road, Suite 1400
Downers Grove, Illinois 60515
Telecopy: (630) 769-0049
Attention: Chief Executive Officer
with a copies to:
Katten, Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois
Telecopy: (312) 902-1061
Attention: Matthew S. Brown, Esq.
<PAGE>
12
If to the holders of Registrable Securities, to the addresses set
forth on on the stock record books of the Company.
or to such other address as the party to whom notice is to be given may have
previously furnished notice in writing to the other in the manner set forth
above.
9.4. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND PERFORMED ENTIRELY WITHIN SUCH STATE. EACH OF THE PARTIES HERETO
AGREES TO SUBMIT TO THE JURISDICTION OF THE STATE AND FEDERAL COURTS IN THE
STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT.
9.5. SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, each of the Company and Harnick directs that such court
interpret and apply the remainder of this Agreement in the manner that it
determines most closely effectuates their intent in entering into this
Agreement, and in doing so particularly take into account the relative
importance of the term, provision, covenant or restriction being held invalid,
void or unenforceable.
9.6. HEADINGS; INTERPRETATION. The index and section headings herein
are for convenience only and shall not affect the construction hereof.
References to sections means sections of this Agreement unless the context
otherwise requires. References to herein or hereof mean this Agreement.
9.7. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
between the parties relating to the subject matter hereof and supersedes any and
all prior oral or written agreements, representations or warranties, contracts,
understandings, correspondence, conversations, and memoranda, whether written or
oral, between the Company and Harnick, or between or among any agents,
representatives, parents, predecessors in interest or successors in interest,
with respect to the subject matter hereof.
9.8. NO THIRD PARTY RIGHTS. Except for the indemnified parties, this
Agreement is intended solely for the benefit of the parties hereto and is not
intended to confer any benefits upon, or create any rights in favor of, any
Person (including, without limitation, any stockholder or debtholder of the
Company) other than the parties hereto.
<PAGE>
13
9.9. REMEDIES FOR BREACH. The parties agree that in addition to any
other rights or remedies which may be available at law or equity, the parties
shall be entitled to seek specific performance of any obligation of any party
hereto.
<PAGE>
14
9.10. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original and both of which together shall
be deemed to be one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
PLATINUM ENTERTAINMENT, INC.
By: /s/ Steven Devick
----------------------------
Name: Steven Devick
Title: Chief Executive Officer
CARL D. HARNICK
/s/ Carl D. Harnick
-------------------------------
<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: /s/ Steven Devick
--------------------------------------
Its: President
-------------------------------------
PLATINUM VENTURE PARTNERS I, L.P.
By: /s/ Steven Devick
--------------------------------------
Its: For Platinum Venture Partners, Inc.,
its General Partner
-------------------------------------
PLATINUM VENTURE PARTNERS II, L.P.
By: /s/ Steven Devick
--------------------------------------
Its: For Platinum Venture Partners, Inc.,
its General Partner
-------------------------------------
<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
<PAGE>
AMENDMENT NO. 1
DATED AS OF DECEMBER 12, 1997
TO THE
EMPLOYMENT AGREEMENT
DATED JUNE 1, 1997
This Amendment No. 1 (this "Amendment"), dated as of December 12, 1997, is
by and between Platinum Entertainment, Inc., a Delaware corporation (the
"Company"), and Steven Devick ("Executive").
RECITALS
A. The Company and Executive are parties to that certain Employment
Agreement, dated as of June 1, 1997 (the "Employment Agreement"). Capitalized
terms used herein and not otherwise defined herein shall have the meanings
ascribed to them in the Employment Agreement.
B. Pursuant to Section 11(e) of the Employment Agreement, the Employment
Agreement may be amended by written agreement of the Company and Executive.
C. The Company and Executive desire to amend the Employment Agreement as
set forth below.
AGREEMENTS
In consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. AMENDMENT TO EMPLOYMENT AGREEMENT. Section 7 of the
Employment Agreement is hereby amended to add a new subparagraph 5 at the end
thereof, such subparagraph to read in its entirety as follows:
"(5) Notwithstanding the foregoing, no Change of Control shall be
deemed to have occurred upon or as a result of (i) the issuance of
Series B Convertible Preferred Stock of the Company or warrants to
purchase shares of Common Stock of the Company in connection with that
certain Investment Agreement, dated October 12, 1997, as amended by
letters dated October 28, 1997, October 30, 1997 and November 26, 1997
(the "Investment Agreement"), between the Company and the purchasers
named therein (the "Purchasers"), (ii) 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, (iii) upon the
exercise of any of the rights and privileges granted to each of the
Purchasers pursuant to Section 6.2.5 of the Investment Agreement, (iv)
upon the exercise of any rights and privileges granted to the holders of
the Company's Series B Preferred Stock pursuant to Section 5.1 of the
Certificate of Designations creating the terms of the Series B Preferred
Stock, or (v) otherwise as a result of the equity ownership or
<PAGE>
designation of directors by the Purchasers or their Affiliates (as defined
in the Investment Agreement), employees, partners or members."
SECTION 2. REFERENCE TO AND EFFECT ON THE EMPLOYMENT AGREEMENT.
2.01. Each reference in the Employment Agreement to "this Agreement",
"hereunder", "hereof", "herein", or words of like import shall mean and be a
reference to the Employment Agreement as amended hereby, and each reference
to the Employment Agreement in any other document, instrument or agreement
shall mean and be a reference to such Employment Agreement as amended hereby.
2.02. Except as specifically amended above, the Employment Agreement
shall remain in full force and effect and is hereby ratified and confirmed.
SECTION 3. EXECUTION IN COUNTERPARTS. This Amendment may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute one and the same
instrument.
SECTION 4. HEADINGS. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1
as of the date first above written.
PLATINUM ENTERTAINMENT, INC.
By: /s/ Steven Devick
-----------------------
its: President
-----------------------
/s/ Steven Devick
--------------------------
STEVEN DEVICK
-2-
<PAGE>
AMENDMENT NO. 1
DATED AS OF DECEMBER 12, 1997
TO THE
EMPLOYMENT AGREEMENT
DATED JUNE 1, 1997
This Amendment No. 1 (this "Amendment"), dated as of December 12, 1997, is
by and between Platinum Entertainment, Inc., a Delaware corporation (the
"Company"), and Douglas C. Laux ("Executive").
RECITALS
A. The Company and Executive are parties to that certain Employment
Agreement, dated as of June 1, 1997 (the "Employment Agreement"). Capitalized
terms used herein and not otherwise defined herein shall have the meanings
ascribed to them in the Employment Agreement.
B. Pursuant to Section 11(e) of the Employment Agreement, the Employment
Agreement may be amended by written agreement of the Company and Executive.
C. The Company and Executive desire to amend the Employment Agreement as
set forth below.
AGREEMENTS
In consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. AMENDMENT TO EMPLOYMENT AGREEMENT. Section 7 of the
Employment Agreement is hereby amended to add a new subparagraph 5 at the end
thereof, such subparagraph to read in its entirety as follows:
"(5) Notwithstanding the foregoing, no Change of Control shall be deemed to
have occurred upon or as a result of (i) the issuance of Series B
Convertible Preferred Stock of the Company or warrants to purchase shares
of Common Stock of the Company in connection with that certain Investment
Agreement, dated October 12, 1997, as amended by letters dated October 28,
1997, October 30, 1997 and November 26, 1997 (the "Investment Agreement"),
between the Company and the purchasers named therein (the "Purchasers"),
(ii) 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, (iii) upon the exercise of any of the rights and privileges
granted to each of the Purchasers pursuant to Section 6.2.5 of the
Investment Agreement, (iv) upon the exercise of any rights and privileges
granted to the holders of the Company's Series B Preferred Stock pursuant
to Section 5.1 of the Certificate of Designations creating the terms of the
Series B Preferred Stock, or (v) otherwise as a result of the equity
ownership or
<PAGE>
designation of directors by the Purchasers or their Affiliates (as defined
in the Investment Agreement), employees, partners or members."
SECTION 2. REFERENCE TO AND EFFECT ON THE EMPLOYMENT AGREEMENT.
2.01. Each reference in the Employment Agreement to "this Agreement",
"hereunder", "hereof", "herein", or words of like import shall mean and be a
reference to the Employment Agreement as amended hereby, and each reference to
the Employment Agreement in any other document, instrument or agreement shall
mean and be a reference to such Employment Agreement as amended hereby.
2.02. Except as specifically amended above, the Employment Agreement
shall remain in full force and effect and is hereby ratified and confirmed.
SECTION 3. EXECUTION IN COUNTERPARTS. This Amendment may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute one and the same
instrument.
SECTION 4. HEADINGS. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1
as of the date first above written.
PLATINUM ENTERTAINMENT, INC.
By: /s/ Steven Devick
----------------------
its: President
---------------------
/s/ Douglas C. Laux
-------------------------
DOUGLAS C. LAUX
-2-
<PAGE>
AMENDMENT NO. 1
DATED AS OF DECEMBER 12, 1997
TO THE
EMPLOYMENT AGREEMENT
DATED JUNE 1, 1997
This Amendment No. 1 (this "Amendment"), dated as of December 12, 1997, is
by and between Platinum Entertainment, Inc., a Delaware corporation (the
"Company"), and Thomas R. Leavens ("Executive").
RECITALS
A. The Company and Executive are parties to that certain Employment
Agreement, dated as of June 1, 1997 (the "Employment Agreement"). Capitalized
terms used herein and not otherwise defined herein shall have the meanings
ascribed to them in the Employment Agreement.
B. Pursuant to Section 11(e) of the Employment Agreement, the Employment
Agreement may be amended by written agreement of the Company and Executive.
C. The Company and Executive desire to amend the Employment Agreement as
set forth below.
AGREEMENTS
In consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. AMENDMENT TO EMPLOYMENT AGREEMENT. Section 7 of the
Employment Agreement is hereby amended to add a new subparagraph 5 at the end
thereof, such subparagraph to read in its entirety as follows:
"(5) Notwithstanding the foregoing, no Change of Control shall be deemed to
have occurred upon or as a result of (i) the issuance of Series B
Convertible Preferred Stock of the Company or warrants to purchase shares
of Common Stock of the Company in connection with that certain Investment
Agreement, dated October 12, 1997, as amended by letters dated October 28,
1997, October 30, 1997 and November 26, 1997 (the "Investment Agreement"),
between the Company and the purchasers named therein (the "Purchasers"),
(ii) 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, (iii) upon the exercise of any of the rights and privileges
granted to each of the Purchasers pursuant to Section 6.2.5 of the
Investment Agreement, (iv) upon the exercise of any rights and privileges
granted to the holders of the Company's Series B Preferred Stock pursuant
to Section 5.1 of the Certificate of Designations creating the terms of the
Series B Preferred Stock, or (v) otherwise as a result of the equity
ownership or
<PAGE>
designation of directors by the Purchasers or their Affiliates (as defined
in the Investment Agreement), employees, partners or members."
SECTION 2. REFERENCE TO AND EFFECT ON THE EMPLOYMENT AGREEMENT.
2.01. Each reference in the Employment Agreement to "this Agreement",
"hereunder", "hereof", "herein", or words of like import shall mean and be a
reference to the Employment Agreement as amended hereby, and each reference to
the Employment Agreement in any other document, instrument or agreement shall
mean and be a reference to such Employment Agreement as amended hereby.
2.02. Except as specifically amended above, the Employment Agreement
shall remain in full force and effect and is hereby ratified and confirmed.
SECTION 3. EXECUTION IN COUNTERPARTS. This Amendment may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute one and the same
instrument.
SECTION 4. HEADINGS. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1
as of the date first above written.
PLATINUM ENTERTAINMENT, INC.
By: /s/ Steven Devick
----------------------
its: President
---------------------
/s/ Thomas R. Leavens
-------------------------
THOMAS R. LEAVENS
<PAGE>
CREDIT AGREEMENT
DATED AS OF DECEMBER 12, 1997
AMONG
PLATINUM ENTERTAINMENT, INC.
INTERSOUND, INC.,
THE LENDERS
PARTY HERETO,
AND
BANK OF MONTREAL,
AS ADMINISTRATIVE AGENT
AND
BANK OF MONTREAL,
AS SYNDICATION AGENT
<PAGE>
TABLE OF CONTENTS
SECTION DESCRIPTION PAGE
SECTION 1. THE CREDITS ......................................... 1
Section 1.1. Revolving Credit................................... 1
Section 1.2. Revolving Credit Loans............................. 2
Section 1.3. Letters of Credit ................................. 3
Section 1.4. Term Credit ....................................... 6
Section 1.5. Manner and Disbursement of Loans................... 7
Section 1.6. Late Payment By Lender............................. 8
Section 1.7. Appointment of Company as Agent for Borrowers;
Reliance by Administrative Agent................... 9
(a) Appointment........................................ 9
(b) Reliance........................................... 9
SECTION 2. INTEREST, FEES, PREPAYMENTS AND TERMINATIONS........... 9
Section 2.1. Interest Rate Options.............................. 9
Section 2.2. Commitment Fee..................................... 11
Section 2.3. Letter of Credit Fees.............................. 11
Section 2.4. Administrative Agent's Fees........................ 12
Section 2.5. Audit Fees......................................... 12
Section 2.6. Voluntary Prepayments.............................. 12
Section 2.7. Mandatory Prepayments.............................. 12
Section 2.8. Voluntary Terminations............................. 15
SECTION 3. PLACE AND APPLICATION OF PAYMENTS...................... 15
Section 3.1. Generally.......................................... 15
Section 3.2. Application of Collateral Proceeds Before Default.. 16
Section 3.3. Application After Default.......................... 17
Section 3.4. Overfunded Commitments............................. 18
Section 3.5. Borrower's Right to Direct Application............. 18
Section 3.6. Weekly Settlement.................................. 19
Section 3.7. Computation of Obligations Outstanding............. 21
Section 3.8. Notations.......................................... 22
SECTION 4. THE COLLATERAL AND GUARANTIES.......................... 22
Section 4.1. Collateral........................................ 22
Section 4.2. Collateral Proceeds............................... 23
Section 4.3. Further Assurances................................ 24
Section 4.4. Guaranties from Subsidiaries...................... 24
Section 4.5. Collateral Assignment of Life Insurance........... 24
SECTION 5. DEFINITIONS; INTERPRETATION............................ 24
-i-
<PAGE>
Section 5.1. Definitions....................................... 24
Section 5.2. Interpretation.................................... 43
Section 5.3. Accounting Terms.................................. 44
SECTION 6. REPRESENTATIONS AND WARRANTIES......................... 44
Section 6.1. Organization and Power............................ 44
Section 6.2. Corporate Authority and Validity of Obligations... 45
Section 6.3. Subsidiaries...................................... 45
Section 6.4. Use of Proceeds; Regulation U..................... 45
Section 6.5. Financial Statements.............................. 46
Section 6.6. Litigation, Taxes and Approvals................... 46
Section 6.7. Burdensome Contracts with Affiliates.............. 46
Section 6.8. ERISA............................................. 47
Section 6.9. Full Disclosure................................... 47
Section 6.10. Compliance with Law............................... 47
Section 6.11. Solvency, etc..................................... 48
SECTION 7. CONDITIONS PRECEDENT................................... 48
Section 7.1. All Advances...................................... 48
Section 7.2. Initial Advance................................... 49
Section 7.3. Legal Matters..................................... 51
SECTION 8. COVENANTS.............................................. 52
Section 8.1. Maintenance of Business........................... 52
Section 8.2. Maintenance....................................... 52
Section 8.3. Taxes............................................. 52
Section 8.4. Insurance......................................... 52
Section 8.5. Financial Reports................................. 53
Section 8.6. Compliance with Laws.............................. 55
Section 8.7. Liens............................................. 55
Section 8.8. Indebtedness...................................... 57
Section 8.9. Consolidated Net Worth............................ 58
Section 8.10. Leverage Ratio.................................... 59
Section 8.11. Consolidated Working Capital...................... 59
Section 8.12. Interest Coverage Ratio........................... 59
Section 8.13. Fixed Charge Coverage Ratio....................... 59
Section 8.14. Capital Expenditures.............................. 60
Section 8.15. Acquisitions, Investments, Loans, Advances and
Guaranties........................................ 60
Section 8.16. Dividends and Certain Other Restricted Payments... 63
Section 8.17. Mergers........................................... 64
Section 8.18. Sale of Assets.................................... 64
Section 8.19. Sales and Leasebacks.............................. 66
Section 8.20. Operating Leases.................................. 66
Section 8.21. Burdensome Contracts with Affiliates.............. 66
-ii-
<PAGE>
Section 8.22. No Change in Fiscal Year........................... 66
Section 8.23. Formation of Subsidiaries.......................... 66
Section 8.24. Maintenance of Subsidiaries........................ 67
Section 8.25. Nature of Business................................. 67
Section 8.26. Subordinated Debt.................................. 67
Section 8.27. Double Negative Pledge............................. 68
Section 8.28. Intersound......................................... 68
Section 8.29. Interest Rate Protection........................... 69
SECTION 9. EVENTS OF DEFAULT AND REMEDIES.......................... 69
Section 9.1. Events of Default.................................. 69
Section 9.2. Remedies Generally................................. 72
Section 9.3. Remedies Upon Insolvency........................... 72
SECTION 10. THE ADMINISTRATIVE AGENT................................ 72
Section 10.1. Appointment and Authorization...................... 72
Section 10.2. Rights as a Lender................................. 73
Section 10.3. Standard of Care................................... 73
Section 10.4. Costs and Expenses................................. 74
Section 10.5. Indemnity.......................................... 74
Section 10.6. Syndication Agent.................................. 75
SECTION 11. JOINT AND SEVERAL LIABILITY AND GUARANTEES.............. 75
Section 11.1. Joint and Several Liability and Guarantees......... 75
Section 11.2. Guarantee Unconditional............................ 75
Section 11.3. Discharge Only Upon Payment in Full; Reinstatement
in Certain Circumstances........................... 76
Section 11.4. Waivers............................................ 76
Section 11.5. Limit on Recovery.................................. 77
Section 11.6. Stay of Acceleration............................... 77
Section 11.7. Benefit to Guarantors.............................. 77
Section 11.8. Guarantor Covenants................................ 77
SECTION 12. CHANGE IN CIRCUMSTANCE.................................. 77
Section 12.1. Change of Law...................................... 77
Section 12.2. Unavailability of Deposits or Inability to
Ascertain Adjusted LIBOR........................... 78
Section 12.3. Taxes and Increased Costs.......................... 78
Section 12.4. Capital Adequacy................................... 79
Section 12.5. Funding Indemnity.................................. 80
Section 12.6. Lending Branch..................................... 80
Section 12.7. Discretion of Lenders as to Manner of Funding...... 81
Section 12.8. Replacement of Lender.............................. 81
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SECTION 13. MISCELLANEOUS........................................... 82
Section 13.1. Withholding Taxes.................................. 82
Section 13.2. Documentary Taxes.................................. 84
Section 13.3. Waivers, Modifications and Amendments.............. 84
Section 13.4. Costs and Expenses................................. 84
Section 13.5. Survival of Representations and Indemnities........ 85
Section 13.6. Waiver of Rights................................... 85
Section 13.7 Non-Business Day................................... 85
Section 13.8. Notices............................................ 85
Section 13.9. Counterparts....................................... 86
Section 13.10. Successors and Assigns............................. 86
Section 13.11. Participations..................................... 87
Section 13.12. Assignment Agreements.............................. 87
Section 13.13. Construction....................................... 88
Section 13.14. Entire Agreement................................... 88
Section 13.15. Headings........................................... 88
Section 13.16. Confidentiality.................................... 88
Section 13.17. Exclusive Jurisdiction............................. 88
Section 13.18. Waiver of Jury Trial............................... 89
Section 13.19. Governing Law...................................... 89
Exhibit A - Revolving Credit Note
Exhibit B - Term Credit Note
Exhibit C - Borrowing Base Certificate
Exhibit D - Compliance Certificate
Exhibit E - Approved Collateral Locations
Exhibit F - Guaranty Agreement
Exhibit G - Assignment and Acceptance
Schedule 6.3 - Subsidiaries
Schedule 6.6 - Litigation
Schedule 6.7 - Affiliate Transactions
Schedule 8.7 - Permitted Liens
Schedule 8.8 - Existing Indebtedness
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CREDIT AGREEMENT
To:
Bank of Montreal
Chicago, Illinois
and its from time to time assigns
Ladies and Gentlemen:
The undersigned, Platinum Entertainment, Inc., a Delaware corporation (the
"COMPANY"), and Intersound, Inc., a Delaware corporation ("INTERSOUND"), (the
Company and Intersound being hereinafter referred to collectively as the
"BORROWERS" and individually as a "BORROWER"), each applies to you for your
several commitments, subject to the terms and conditions hereof and on the basis
of the representations and warranties hereinafter set forth, to extend credit to
the Borrowers, all as more fully hereinafter set forth. Each of you is
hereinafter referred to as a "LENDER", all of you are hereinafter referred to
collectively as the "LENDERS" and Bank of Montreal ("BMO") in its capacity as
Administrative Agent hereunder is hereinafter referred to as the "ADMINISTRATIVE
AGENT", and Bank of Montreal in its capacity as syndication agent hereunder is
hereinafter referred to as the "SYNDICATION AGENT".
SECTION 1. THE CREDITS.
SECTION 1.1. REVOLVING CREDIT. Subject to the terms and conditions
hereof, each Lender severally agrees to extend a revolving credit (the
"REVOLVING CREDIT") to the Borrowers which may be availed of by each Borrower
from time to time during the period from and including the date hereof to but
not including the Revolving Credit Termination Date, at which time the
commitments of the Lenders to extend credit under the Revolving Credit shall
expire. The maximum amount of the Revolving Credit which each Lender agrees to
extend to the Borrowers taken together, shall be such Lender's Revolving Credit
Commitment. The Revolving Credit may be utilized by each Borrower in the form
of Revolving Loans and Letters of Credit, all as more fully hereinafter set
forth; PROVIDED, HOWEVER, that:
(i) the aggregate principal amount of Revolving Loans and Letters of
Credit outstanding at any one time from the Borrowers, taken together,
shall not exceed the lesser of (x) the aggregate of the Revolving Credit
Commitments and (y) the Borrowing Base, in each case as then determined and
computed for all the Borrowers, taken together; and
(ii) notwithstanding anything in this Agreement to the contrary,
Intersound shall not be entitled to any additional credit under the
Revolving Credit after the merger as required by Section 8.17(b) hereof.
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During the period from and including the date hereof to but not including the
Revolving Credit Termination Date, each Borrower may use the Revolving Credit
Commitments by borrowing, repaying and reborrowing Revolving Loans in whole or
in part and/or by having the Administrative Agent issue Letters of Credit,
having such Letters of Credit expire or otherwise terminate without having been
drawn upon or, if drawn upon, reimbursing the Administrative Agent for each such
drawing, and having the Administrative Agent issue new Letters of Credit, all in
accordance with the terms and conditions of this Agreement. For purposes of
this Agreement, where a determination of the unused or available amount of the
Revolving Credit Commitments is necessary, the Revolving Loans and Letters of
Credit shall be deemed to utilize the Revolving Credit Commitments. The
obligations of the Lenders hereunder are several and not joint, and no Lender
shall under any circumstances be obligated to extend credit under the Revolving
Credit in excess of its Revolving Credit Commitment. Notwithstanding any other
provision of this Agreement to the contrary, the Administrative Agent (x) is
imposing the Initial Reserves and (y) may, in its reasonable discretion (based
on its analysis of material changes in the relevant Borrower's credit and
collection policies or practices arising after the Closing Date that cause
dilution of the value of Eligible Accounts, or on any other factors that change
in any material respect the credit risk of lending to the Borrowers on the
security of the Accounts and the inventory), from time to time establish
additional reserves against the amount of availability under the Revolving
Credit which the Borrowers may otherwise request hereunder in such amounts as
the Administrative Agent shall deem necessary or appropriate in its reasonable
judgment. The amount of such Initial Reserves and additional reserves shall be
subtracted from what would otherwise be the Borrowing Base when calculating the
amount of availability under the Revolving Credit Commitments. The
Administrative Agent agrees to give the Company ten (10) Business Days' prior
notice of the establishment of any such additional reserve. Without limiting
the Administrative Agent's discretion with respect to eligibility of the
Collateral, the Administrative Agent intends to review on a periodic basis the
standards for advances against accounts and inventory and impose reserves
against such collateral pursuant to the foregoing provisions.
SECTION 1.2. REVOLVING CREDIT LOANS. Subject to the terms and conditions
hereof, the Revolving Credit may be availed of by any Borrower in the form of
loans (individually a "REVOLVING LOAN" and collectively the "REVOLVING LOANS").
Each Revolving Loan to a Borrower shall be in a minimum amount of $100,000
(except to the extent Section 2 hereof shall require a larger amount for LIBOR
Portions). Each Revolving Loan shall be made pro rata by the Lenders in
accordance with the amounts of their Revolving Credit Commitments. Each
Revolving Loan shall initially constitute part of the Domestic Rate Portion
except to the extent the Company has timely elected at any time after the LIBOR
Condition has been satisfied that such Revolving Loan, or any part thereof,
constitutes part of a LIBOR Portion as provided in Section 2.1 hereof. Each and
every advance made by a Lender of its pro rata share of a Revolving Loan shall
be made against and evidenced by a single Revolving Credit Note of the Borrowers
(individually a "REVOLVING CREDIT NOTE" and collectively the "REVOLVING CREDIT
NOTES"), jointly and severally, payable to the order of such Lender in the
amount of its Revolving Credit Commitment, with each Revolving Credit Note to be
in the form (with appropriate insertions) attached hereto as Exhibit A. Each
Revolving Credit Note shall be dated the date of issuance thereof, be expressed
to bear interest as set forth in
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Section 2.1 hereof, and be expressed to mature on the Revolving Credit
Termination Date. Without regard to the principal amount of each Revolving
Credit Note stated on its face, the actual principal amount at any time
outstanding and owing by the Borrowers on account thereof shall be the sum of
all advances then or theretofore made thereon less all payments of principal
actually received.
SECTION 1.3. LETTERS OF CREDIT.
(a) GENERAL TERMS. Subject to the terms and conditions hereof, the
Revolving Credit may be availed of by any Borrower in the form of commercial or
standby letters of credit issued by the Administrative Agent for the account of
any one or more of the Borrowers (individually a "LETTER OF CREDIT" and
collectively the "LETTERS OF CREDIT"), provided that the aggregate amount of
Letters of Credit issued and outstanding hereunder shall not at any time exceed
$1,000,000 (such amount, as the same may be reduced pursuant to Section 2.8
hereof, being hereinafter referred to as the "L/C COMMITMENT"). For purposes of
this Agreement, a Letter of Credit shall be deemed outstanding as of any time in
an amount equal to the maximum amount which could be drawn thereunder under any
circumstances and over any period of time plus any unreimbursed drawings then
outstanding with respect thereto. If and to the extent any Letter of Credit
expires or otherwise terminates without having been drawn upon, the availability
under the Revolving Credit Commitments shall to such extent be reinstated. The
Letters of Credit shall be issued by the Administrative Agent, but each Lender
shall be obligated to reimburse the Administrative Agent for such Lender's pro
rata share of the amount of each draft drawn under a Letter of Credit in
accordance with this Section 1.3 and, accordingly, each Letter of Credit shall
be deemed to utilize the Revolving Credit Commitments of all Lenders pro rata in
accordance with the amounts of their Revolving Credit Commitments.
(b) TERM. Each Letter of Credit issued hereunder shall expire not later
than the earlier of (i) twelve (12) months from the date of issuance (or be
cancelable not later than twelve (12) months from the date of issuance and each
renewal) or (ii) the Revolving Credit Termination Date. In the event the
Administrative Agent issues any Letter of Credit with an expiration date that is
automatically extended unless the Administrative Agent gives notice that the
expiration date will not so extend beyond its then scheduled expiration date,
the Administrative Agent will give such notice of non-renewal before the time
necessary to prevent such automatic extension if before such required notice
date (i) the expiration date of such Letter of Credit if so extended would be
after the Revolving Credit Termination Date, (ii) the Revolving Credit
Commitments have terminated or (iii) an Event of Default exists and the Required
Lenders have given the Administrative Agent instructions not to so permit the
extension of the expiration date of such Letter of Credit.
(c) GENERAL CHARACTERISTICS. Each Letter of Credit issued hereunder shall
be payable in U.S. Dollars, conform to the general requirements of the
Administrative Agent for the issuance of commercial or standby letters of
credit, as the case may be, as to form and substance, and be a letter of credit
which the Administrative Agent may lawfully issue. The Administrative Agent
agrees to issue amendments to the Letter(s) of Credit increasing the amount, or
extending the expiration date thereof at the request of the Company (which is
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acting on behalf of the Borrowers pursuant to Section 1.7 hereof), subject to
the conditions of Section 7 and the other terms of this Section 1.3. Without
limiting the generality of the foregoing, the Administrative Agent's obligation
to issue, amend or extend the expiration date of a Letter of Credit is subject
to the conditions of Section 7 and the other terms of this Section 1.3 and the
Administrative Agent will not issue, amend or extend the expiration date of any
Letter of Credit if any Lender notifies the Administrative Agent of any failure
to satisfy or otherwise comply with such conditions and terms and directs the
Administrative Agent not to take such action.
(d) APPLICATIONS. At the time the Company (which is acting on behalf of
the Borrowers pursuant to Section 1.7 hereof) requests each Letter of Credit to
be issued (or prior to the first issuance of a Letter of Credit in the case of a
continuing application), the Borrower for whose account such Letter of Credit is
to be issued shall execute and deliver to the Administrative Agent an
application for such Letter of Credit in the form then customarily prescribed by
the Administrative Agent (individually an "APPLICATION" and collectively the
"APPLICATIONS"). Subject to the other provisions of this subsection, the
obligation of a Borrower to reimburse the Administrative Agent for drawings
under a Letter of Credit issued for such Borrower's account shall be governed by
the Application for such Letter of Credit. Anything contained in the
Applications to the contrary notwithstanding, (i) in the event the
Administrative Agent is not reimbursed by a Borrower for the amount the
Administrative Agent pays on any draft drawn under a Letter of Credit issued
hereunder issued for such Borrower's account by 11:00 a.m. (Chicago time) on the
date when such drawing is paid, the obligation of such Borrower to reimburse the
Administrative Agent for the amount of such draft paid shall bear interest
(which such Borrower hereby promises to pay on demand) from and after the date
the draft is paid until payment in full thereof at a fluctuating rate per annum
determined by adding 2% to the Domestic Rate as from time to time in effect,
(ii) the Borrowers shall pay fees in connection with each Letter of Credit as
set forth in Section 2.3 hereof, (iii) except as otherwise provided in Section
2.7 hereof, prior to the occurrence of a Default or an Event of Default the
Administrative Agent will not call for additional collateral security for the
obligations of the Borrowers under the Applications other than the collateral
security contemplated by this Agreement and the Collateral Documents and
collateral security consisting of rights in goods (or documents of title
covering the same) financed under such Applications, and (iv) except as
otherwise provided in Section 2.7 hereof, prior to the occurrence of a Default
or an Event of Default the Administrative Agent will not call for the funding of
a Letter of Credit by any Borrower prior to being presented with a draft drawn
thereunder (or, in the event the draft is a time draft, prior to its due date).
Each Borrower hereby irrevocably authorizes the Administrative Agent to charge
any of such Borrowers' deposit accounts maintained with the Administrative Agent
for the amount necessary to reimburse the Administrative Agent for any drafts
drawn under Letters of Credit issued hereunder.
(e) CHANGE IN LAWS. If the Administrative Agent or any Lender shall
reasonably determine that any change after the Closing Date in any applicable
law, regulation or guideline (including, without limitation, Regulation D of the
Board of Governors of the Federal Reserve System) or the adoption after the
Closing Date of any new law, regulation or guideline, or any interpretation of
any of the foregoing by any governmental authority
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charged with the administration thereof or any central bank or other fiscal,
monetary or other authority having jurisdiction over the Administrative Agent
or such Lender (whether or not having the force of law), shall:
(i) impose, modify or deem applicable any reserve, special deposit or
similar requirement against the Letters of Credit, or the Administrative
Agent's or such Lender's or any Borrower's liability with respect thereto;
or
(ii) impose on the Administrative Agent or such Lender any penalty
with respect to the foregoing or any other condition regarding the
Applications or the Letters of Credit;
and the Administrative Agent or such Lender shall determine in good faith that
the result of any of the foregoing is to increase the cost (whether by incurring
a cost or adding to a cost) to the Administrative Agent or such Lender of
issuing, maintaining or participating in the Letters of Credit hereunder
(without benefit of, or credit for, any prorations, exemptions, credits or other
offsets available under any such laws, regulations, guidelines or
interpretations thereof), then the relevant Borrower shall within fifteen (15)
days after demand by the Administrative Agent or such Lender pay the
Administrative Agent or such Lender such additional amounts as the
Administrative Agent or such Lender shall reasonably determine are sufficient to
compensate and indemnify it for such increased cost. If the Administrative
Agent or any Lender makes such a claim for compensation, it shall provide the
Company (with a copy to the Administrative Agent in the case of any Lender) a
certificate setting forth the computation of the increased cost as a result of
any event mentioned herein in reasonable detail and such certificate shall be
deemed PRIMA FACIE correct. In determining such amount, such Lender may use
reasonable averaging and attribution methods. A Lender shall not be entitled to
compensation under this Section 1.3(e) with respect to any adoption or change
for any period prior to the earlier of (i) the date it notifies any Borrower of
the adoption or change giving rise to the request for compensation or (ii) the
date which is thirty (30) days prior to the date it becomes aware of the
adoption or change giving rise to the request for compensation if any Borrower
is notified of the adoption or change prior to the lapse of such 30-day period.
(f) PARTICIPATIONS IN LETTERS OF CREDIT. Each Lender shall participate on
a pro rata basis in the Letters of Credit issued by the Administrative Agent,
which participation shall automatically arise upon the issuance of each Letter
of Credit. Each Lender unconditionally agrees that in the event the
Administrative Agent is not immediately reimbursed by a Borrower for the amount
paid by the Administrative Agent on any draft presented under a Letter of Credit
issued for such Borrower's account, then in that event such Lender shall pay to
the Administrative Agent such Lender's pro rata share of the amount of each
draft so paid based on the percentage which its Revolving Credit Commitment
bears to the aggregate of the Revolving Credit Commitments and in return such
Lender shall automatically receive an equivalent percentage participation in the
rights of the Administrative Agent to obtain reimbursement from such Borrower
for the amount of such draft, together with interest thereon as provided for
herein. The obligations of the Lenders to the Administrative Agent under this
subsection shall be absolute, irrevocable and unconditional under any and all
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circumstances whatsoever and shall not be subject to any set-off,
counterclaim or defense to payment which any Lender may have or have had
against any Loan Party, the Administrative Agent, any other Lender or any
other party whatsoever. In the event that any Lender fails to honor its
obligation to reimburse the Administrative Agent for its pro rata share of
the amount of any such draft, then in that event (i) each other Lender shall
pay to the Administrative Agent its pro rata share of the payment due the
Administrative Agent from the defaulting Lender, (ii) the defaulting Lender
shall have no right to participate in any recoveries from the Loan Parties in
respect of such draft and (iii) all amounts to which the defaulting Lender
would otherwise be entitled under the terms of this Agreement or any of the
other Loan Documents shall first be applied to reimbursing the Lenders for
their respective pro rata shares of the defaulting Lender's portion of the
draft, together with interest thereon as provided for herein. Upon
reimbursement to the other Lenders (pursuant to clause (iii) above or
otherwise) of the amount advanced by them to the Administrative Agent in
respect of the defaulting Lender's share of the draft together with interest
thereon, the defaulting Lender shall thereupon be entitled to its
participation in the Administrative Agent's right of recovery against the
Loan Parties in respect of the draft paid by the Administrative Agent.
(g) MANNER OF OBTAINING LETTERS OF CREDIT. The Company (which is
acting on behalf of the Borrowers pursuant to Section 1.7 hereof) shall
provide at least three (3) Business Days' advance written notice to the
Administrative Agent of each Borrower's request for the issuance for such
Borrower's account of a Letter of Credit which is a standby Letter of Credit
and shall provide the Administrative Agent notice of each Borrower's request
for the issuance for such Borrower's account of a Letter of Credit which is a
commercial Letter of Credit not later than 11:00 a.m. (Chicago time) on the
first Business Day preceding the Business Day on which such Letter of Credit
is to be issued, such notice in each case to be accompanied by an Application
for such Letter of Credit properly completed and executed by the Company or
such Borrower together with the fees called for by this Agreement. In the
case of an extension or an increase in the amount of a Letter of Credit, the
Company (which is acting on behalf of the Borrowers pursuant to Section 1.7
hereof) shall provide the Administrative Agent a written request therefor, in
a form acceptable to the Administrative Agent, in each case together with the
fees called for by this Agreement at least three (3) Business Days in advance
of such extension of or increase in a Letter of Credit which is a standby
Letter of Credit and in the case of a request for such an extension of or
increase in a Letter of Credit which is a commercial Letter of Credit, not
later than 11:00 a.m. (Chicago time) on the first Business Day preceding the
effective date of such extension or increase. The Administrative Agent shall
promptly notify each Lender of the Administrative Agent's receipt of each
notice for such an issuance, extension or increase and the Administrative
Agent's issuance, extension or increase of the Letter of Credit so requested.
SECTION 1.4. TERM CREDIT. Subject to all of the terms and conditions
hereof, each Lender agrees to make a loan to the Company in the amount of its
Term Credit Commitment (the credit facility under which such loans are made
being hereinafter referred to as the "TERM CREDIT") (the loans from all the
Lenders under the Term Credit being hereinafter referred to collectively as the
"TERM LOAN"). The Term Loan shall be
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made pro rata by the Lenders in accordance with the amount of their Term
Credit Commitments. The Term Loan shall initially constitute part of the
Domestic Rate Portion except to the extent the Company has timely elected at
any time after the LIBOR Condition has been satisfied that the Term Loan, or
any part thereof, constitutes part of a LIBOR Portion as provided in Section
2.1 hereof. The Lenders' advances of the Term Loan shall be made
concurrently and the Term Loan shall be disbursed in a single advance made,
if at all, on or before December 15, 1997, at which time the commitments of
the Lenders to make the Term Loan shall expire. Each Lender's pro rata share
of the Term Loan shall be evidenced by a Term Credit Note of the Company
(individually a "TERM CREDIT NOTE" and collectively the "TERM CREDIT NOTES")
payable to the order of such Lender in the amount of its Term Credit
Commitment, each Term Credit Note to be in the form (with appropriate
insertions) attached hereto as Exhibit B. Each Term Credit Note shall be
expressed to mature in eleven (11) consecutive quarterly installments
(commencing on June 1, 1998 and continuing on the first day of each
September, December, March and June occurring thereafter to and including
December 1, 2000, with all such installments (except the last such
installment) on all Term Credit Notes to aggregate $1,000,000 per installment
and the last such installment on all Term Credit Notes to aggregate
$10,000,000 for such last installment and with the amount of each installment
due on the Term Credit Note held by each Lender to be a pro rata part (based
on the relationship which its Term Credit Commitment bears to the total Term
Credit Commitments) of each such aggregate amount. No amount repaid on the
Term Credit Notes may be reborrowed.
SECTION 1.5. MANNER AND DISBURSEMENT OF LOANS. (a) The Company (which is
acting on behalf of the Borrowers pursuant to Section 1.7 hereof) shall give
written or telephonic notice to the Administrative Agent (which notice shall be
irrevocable once given and, if given by telephone, shall be promptly confirmed
in writing) by no later than 11:00 a.m. (Chicago time) of the date any Borrower
requests that any Revolving Loan be made to it under the Revolving Credit
Commitments and of the date it requests the Term Loan to be made to it under the
Term Credit, and the Administrative Agent shall promptly notify each Lender of
the Administrative Agent's receipt of each such notice. Each such notice shall
specify the name of the Borrower to whom the Loan requested is to be made (in
the case of a Revolving Loan), the date of the Loan requested (which must be a
Business Day), whether such Loan is a Revolving Loan or Term Loan and the amount
of such Loan. The Borrowers agree that the Administrative Agent may rely upon
any written or telephonic notice given by any person the Administrative Agent
reasonably and in good faith believes is an Authorized Representative without
the necessity of independent investigation and, in the event any telephonic
notice conflicts with the written confirmation, such telephonic notice shall
govern if the Administrative Agent and the Lenders have acted in reliance
thereon.
(b) The Borrowers hereby irrevocably authorize the Lenders to make
Revolving Loans from time to time hereunder for reimbursement of a drawing paid
by the Administrative Agent on a Letter of Credit, any such Revolving Loan may
be made without regard to the provisions of Section 7 hereof. The Borrowers
acknowledge and agree, however, that the Lenders shall not be under any
obligation to make a Revolving Loan under
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this Section 1.5(b), and the Lenders shall incur no liability to any Borrower
or any other Person for refusing to make a Revolving Loan under this
Section 1.5(b).
(c) Not later than 1:00 p.m. (Chicago time) on the date specified for any
Loan to be made by a Lender hereunder, such Lender shall make the proceeds of
its pro rata share of such Loan available to the Administrative Agent in
Chicago, Illinois in immediately available funds. Subject to the provisions of
Section 7 hereof, the proceeds of each Loan shall be made available to the
relevant Borrower at the principal office of the Administrative Agent in
Chicago, Illinois, in immediately available funds, upon receipt by the
Administrative Agent from each Lender of its pro rata share of such Loan.
Unless the Administrative Agent shall have been notified by a Lender prior to
12:30 p.m. (Chicago time) on the date a Loan is to be made hereunder that such
Lender does not intend to make its pro rata share of such Loan available to the
Administrative Agent, the Administrative Agent may assume that such Lender has
made such share available to the Administrative Agent on such date and the
Administrative Agent may in reliance upon such assumption make available to the
relevant Borrower a corresponding amount.
SECTION 1.6. LATE PAYMENT BY LENDER. If an amount due the Administrative
Agent from a Lender (x) to fund such Lender's pro rata share of a Loan as
required by Section 1.5, or (y) to effect the Settlement (as hereinafter
defined) of any Loan as required of Section 3.6 hereof, in the case of each of
clause (x) and (y), is not in fact made available to the Administrative Agent by
such Lender and the Administrative Agent has made the corresponding amount
available to such Borrower, the Administrative Agent shall be entitled to
receive such amount from such Lender forthwith upon the Administrative Agent's
demand, together with interest thereon in respect of each day during the period
commencing on the date such amount was made available to such Borrower and
ending on but excluding the date the Administrative Agent recovers such amount
at a rate per annum equal to the effective rate charged to the Administrative
Agent for overnight federal funds transactions with member banks of the federal
reserve system for each day as determined by the Administrative Agent (or in the
case of a day which is not a Business Day, then for the preceding day). If such
amount is not received from such Lender by the Administrative Agent within five
(5) days after demand, the relevant Borrower will, on demand, repay to the
Administrative Agent the proceeds of the Loan attributable to such defaulting
Lender with interest thereon at a rate per annum equal to the interest rate
applicable to the relevant Loan, but (i) without such payment being considered a
payment or prepayment of a LIBOR Portion (so that the Company will have no
liability under Section 12.5 hereof with respect to such payment) and (ii)
without such payment impairing or otherwise prejudicing the relevant Borrower's
claims and other rights against such defaulting Lender. The failure of any
Lender to make its share of a Loan to be made by it as required by Section 1.5
shall not relieve any other Lender of its obligations, if any, hereunder to make
its share of a Loan, or relieve the Lender who failed to make such amount
available to subsequently fund such amount, or relieve any Lender (including the
Lender that failed to make such amount available) of its obligation hereunder to
fund its ratable portion of any subsequent Revolving Loans.
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SECTION 1.7. APPOINTMENT OF COMPANY AS AGENT FOR BORROWERS; RELIANCE BY
ADMINISTRATIVE AGENT.
(a) APPOINTMENT. Each Borrower irrevocably appoints the Company as its
agent hereunder to make requests on such Borrower's behalf under Section 1
hereof for Loans to be made by such Borrower or Letters of Credit to be issued
for such Borrower's account, to select (after the LIBOR Condition has been
satisfied) the interest rate to be applicable to the Loans, to terminate the
Revolving Credit Commitments and to take any other action contemplated by the
Loan Documents with respect to credit extended hereunder to such Borrower. The
Administrative Agent and the Lenders shall be entitled to conclusively presume
that any action by the Company under the Loan Documents is taken on behalf of
any one or more of the Borrowers whether or not the Company so indicates.
(b) RELIANCE. All requests for Loans and Letters of Credit may be written
or oral, including by telephone or telecopy. The Borrowers agree that the
Administrative Agent may rely on any such notice given by any person the
Administrative Agent reasonably and in good faith believes is an Authorized
Representative without the necessity of independent investigation (the Borrowers
hereby indemnifying the Administrative Agent and Lenders from any liability or
loss ensuing from such reliance), and in the event any such telephonic or other
oral notice conflicts with any written confirmation, such oral or telephonic
notice shall govern if the Administrative Agent has acted in reliance thereon.
SECTION 2. INTEREST, FEES, PREPAYMENTS AND TERMINATIONS
SECTION 2.1. INTEREST RATE OPTIONS.
(a) PORTIONS. Subject to the terms and conditions of this Section 2,
portions of the principal indebtedness evidenced by the Notes (all of the
indebtedness evidenced by the Notes bearing interest at the same rate for the
same period of time being hereinafter referred to as a "PORTION") may, at the
option of the Company (which is acting on behalf of the Borrowers pursuant to
Section 1.7 hereof), bear interest with reference to the Domestic Rate
("DOMESTIC RATE PORTIONS") or with reference to the Adjusted LIBOR ("LIBOR
PORTIONS"), and Portions may be converted from time to time from one basis to
another. All of the indebtedness evidenced by the Notes which is not part of a
LIBOR Portion shall constitute a single Domestic Rate Portion. Prior to
satisfaction of the LIBOR Condition, all of the indebtedness evidenced by the
Notes shall constitute a single Domestic Rate Portion. All of the indebtedness
evidenced by the Notes which bears interest with reference to a particular
Adjusted LIBOR for a particular Interest Period shall constitute a single LIBOR
Portion. There shall not be more than ten (10) LIBOR Portions applicable to the
Notes outstanding at any one time, and each Lender shall have a ratable interest
in each Portion. Anything contained herein to the contrary notwithstanding, (i)
no LIBOR Portion shall be created prior to satisfaction of the LIBOR Condition
and (ii) the obligation of the Lenders to create, continue or effect by
conversion any LIBOR Portion shall be conditioned upon the fact that at the time
of each such creation, continuance or conversion into a LIBOR Portion, as the
case may be, no Default or Event of Default shall have occurred and be
continuing. The
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Company hereby promises to pay interest on each Portion at the rates and
times specified in this Section 2.1.
(b) DOMESTIC RATE PORTION. Each Domestic Rate Portion shall bear
interest at the rate per annum determined by adding the Applicable Domestic
Rate Margin to the Domestic Rate as in effect from time to time, provided
that if and so long as any Default or Event of Default under Section 9.1(a)
hereof (a "PAYMENT DEFAULT") shall have occurred and be continuing such
Portion shall bear interest until payment in full thereof at the rate per
annum determined by adding 2% to the interest rate which would otherwise be
applicable thereto from time to time. Interest on each Domestic Rate Portion
shall be payable monthly in arrears on the first Business Day of each month
(commencing on January 1, 1998) and at maturity of the Notes, and interest
after maturity (whether by lapse of time, acceleration or otherwise) shall be
due and payable upon demand. Any change in the interest rate on the Domestic
Rate Portions resulting from a change in the Domestic Rate shall be effective
on the date of the relevant change in the Domestic Rate.
(c) LIBOR PORTIONS. Each LIBOR Portion shall bear interest for each
Interest Period selected therefor at a rate per annum determined by adding the
Applicable LIBOR Margin to the Adjusted LIBOR for such Interest Period, provided
that if and so long as any Payment Default shall have occurred and be continuing
such LIBOR Portion shall bear interest until such Payment Default no longer
exists (or, if earlier, the end of the Interest Period then applicable to such
LIBOR Portion) at the rate per annum determined by adding 2% to the interest
rate which would otherwise be applicable thereto, and effective at the end of
such Interest Period, if such Payment Default is then continuing, such LIBOR
Portion shall automatically be converted into and added to the applicable
Domestic Rate Portion and shall thereafter bear interest until such Payment
Default no longer exists at the interest rate applicable to such Domestic Rate
Portion during the continuance of a Payment Default. Interest on each LIBOR
Portion shall be due and payable on the last day of each Interest Period
applicable thereto and, with respect to any Interest Period applicable to a
LIBOR Portion in excess of three (3) months, on the Business Day three (3)
calendar months following the date such Interest Period commenced and at the end
of such Interest Period, and interest after maturity (whether by lapse of time,
acceleration or otherwise) shall be due and payable upon demand. The Company
(which is acting on behalf of the Borrowers pursuant to Section 1.7 hereof)
shall notify the Administrative Agent on or before 11:00 a.m. (Chicago time) on
the third Business Day preceding the end of an Interest Period applicable to a
LIBOR Portion whether such LIBOR Portion is to continue as a LIBOR Portion, in
which event the Company shall notify the Administrative Agent of the new
Interest Period selected therefor, and in the event the Company shall fail to so
notify the Administrative Agent, such LIBOR Portion shall automatically be
converted into and added to the applicable Domestic Rate Portion as of and on
the last day of such Interest Period. The Administrative Agent shall promptly
notify each Lender of each notice received from the Company pursuant to the
foregoing provision.
(d) MINIMUM LIBOR PORTION AMOUNTS. Each LIBOR Portion shall be in an
amount equal to $1,000,000 or such greater amount which is an integral multiple
of $100,000.
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(e) COMPUTATION OF INTEREST. All interest on the Domestic Rate Portion of
the Notes shall be computed on the basis of a year of 365 or 366 days, as the
case may be, for the actual number of days elapsed. All interest on LIBOR
Portions of the Notes shall be computed on the basis of a year of 360 days for
the actual number of days elapsed.
(f) MANNER OF RATE SELECTION. The Company (which is acting on behalf of
the Borrowers pursuant to Section 1.7 hereof) shall notify the Administrative
Agent by 11:00 a.m. (Chicago time) at least three (3) Business Days prior to the
date upon which the Company requests that any LIBOR Portion be created or that
any part of the applicable Domestic Rate Portion be converted into a LIBOR
Portion (each such notice to specify in each instance the amount thereof and the
Interest Period selected therefor). The Administrative Agent shall promptly
notify each Lender of each notice received from the Company pursuant to the
foregoing provision. If any request is made to convert a LIBOR Portion into the
Domestic Rate Portion, such conversion shall only be made so as to become
effective as of the last day of the Interest Period applicable thereto. All
requests for the creation, continuance and conversion of Portions under this
Agreement shall be irrevocable. Such requests may be written or oral and the
Administrative Agent is hereby authorized to honor telephonic requests for
creations, continuances and conversions received by it from any person the
Administrative Agent in good faith believes to be an Authorized Representative
without the necessity of independent investigation, the Borrowers hereby
indemnifying the Administrative Agent and the Lenders from any liability or loss
ensuing from so acting.
SECTION 2.2. COMMITMENT FEE. For the period from and including the date
hereof to but not including the Revolving Credit Termination Date, the Borrowers
shall pay to the Administrative Agent for the account of the Lenders a
commitment fee at the rate of 1/2 of 1% per annum (computed on the basis of a
year of 360 days for the actual number of days elapsed) on the average daily
unused portion of the Revolving Credit Commitments (whether or not available by
reason of, among other things, the Borrowing Base requirements hereof). Such
commitment fee shall be payable monthly in arrears on the first Business Day of
each calendar month in each year (commencing January 1, 1998) and on the
Revolving Credit Termination Date.
SECTION 2.3. LETTER OF CREDIT FEES. (i) SHARED FEES. On the first
Business Day of each calendar quarter (commencing on January 1, 1998) to and
including, and on, the Revolving Credit Termination Date, the Borrowers shall
pay to the Administrative Agent for the ratable account of the Lenders a fee at
the rate of 1/2 of 1% per annum (computed on the basis of a year of 360 days for
the actual number of days elapsed) on the average daily outstanding amounts
during the preceding quarter (or such shorter period) of the Letters of Credit.
(ii) GENERALLY. In addition to the letter of credit fees called for
above, the Borrowers further agree to pay to the Administrative Agent for its
own account such processing and transaction fees and charges as the
Administrative Agent from time to time customarily imposes in connection with
any amendment, cancellation, negotiation and/or payment of letters of credit and
drafts drawn thereunder.
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SECTION 2.4. ADMINISTRATIVE AGENT'S FEES. The Company shall
pay to the Administrative Agent the fees agreed to in a letter exchanged
between them.
SECTION 2.5. AUDIT FEES. The Borrowers shall pay to the
Administrative Agent for its own use and benefit charges for audits of the
Collateral performed by the Administrative Agent or its agents or
representatives in such amounts as the Administrative Agent may from time to
time reasonably request (the Administrative Agent acknowledging and agreeing
that such charges shall be computed in the same manner as the Administrative
Agent at the time customarily uses for the assessment of charges for similar
collateral audits); PROVIDED, HOWEVER, that in the absence of any Event of
Default, (i) the Borrowers shall not be required to reimburse the
Administrative Agent for its costs of conducting more than two (2) audits in
any one (1) calendar year and (ii) the Borrowers shall not be liable during
any one calendar year for more than $12,500 in charges for such audits plus
reasonable out-of-pocket costs and expenses.
SECTION 2.6. VOLUNTARY PREPAYMENTS. In addition to such
other prepayments of the Notes as result from the application of proceeds of
the Collateral required by Section 4.2 hereof after the Loan Mechanization
Date, each Borrower shall have the privilege of making additional prepayments
of the Notes on which such Borrower is directly obligated, in whole or in
part (but if in part, then in a minimum amount of $10,000), at any time upon
one (1) Business Day's prior notice from the Company to the Administrative
Agent (such notice if received subsequent to 11:00 a.m. (Chicago time) on a
given day to be treated as though received at the opening of business on the
next Business Day), which shall promptly so notify the Lenders, by paying to
the Administrative Agent for the account of the Lenders (i) the principal
amount to be prepaid, (ii) if such a prepayment prepays a Class of Notes in
full, accrued interest on such Class of Notes to the date of prepayment plus
(in the case such a prepayment in full of the Revolving Credit Notes is
accompanied by the termination in whole of the Revolving Credit Commitments)
any commitment fee which has accrued and is unpaid and (iii) any amounts due
to the Lenders under Section 12.5 hereof.
SECTION 2.7. MANDATORY PREPAYMENTS.
(a) REVOLVING CREDIT COMMITMENT OR BORROWING BASE DEFICIENCY.
The Borrowers covenant and agree that if at any time the then unpaid
principal balance of the Revolving Loans and outstanding Letters of Credit
for all the Borrowers, taken together, shall be in excess of the lesser of
(i) the Revolving Credit Commitments as then in effect or (ii) the Borrowing
Base of all the Borrowers, taken together, as then determined and computed,
the Borrowers shall immediately and without notice or demand pay the amount
of the excess to the Administrative Agent for the account of the Lenders as
and for a mandatory prepayment on such Obligations, with each such prepayment
first to be applied to the Revolving Loans until payment in full thereof and
any remaining balance of the payment so made to be applied against or held by
the Administrative Agent as collateral security for the Obligations owing
under the Applications.
(b) PREPAYMENTS DUE TO EXCESS CASH FLOW. Within forty-five
(45) days after the close of each semi-annual accounting period of the
Company ending in February and August
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of each year (commencing with the accounting period ending on or about
February 28, 1998), the Borrowers shall pay over to the Administrative Agent
for the account of the Lenders as and for a mandatory prepayment on the Term
Loan an amount equal to 66-2/3% of Consolidated Excess Cash Flow for such
six-month accounting period; PROVIDED, HOWEVER, that no such prepayment is
required if the Consolidated Excess Cash Flow for such six-month period is
less than or equal to $150,000. Each such prepayment shall be applied to the
several installments due on the outstanding principal balance of the Term
Loan in the inverse order of their maturity.
(c) CHANGE OF CONTROL MANAGEMENT EVENT. If, no later than
sixty (60) days after receiving notice under Section 8.5(i) of a Change of
Control/Management Event, the Required Lenders notify the Company that they
require prepayment of the Notes, on the date set forth in such notice (which
date shall be no earlier than (i) three (3) days after such notice is given
or (ii) the day on which any Borrower repays any other Indebtedness for
Borrowed Money aggregating $200,000 or more before its original scheduled due
date, whichever day is earlier), the Borrowers shall pay in full all
Obligations then outstanding, and the Commitments shall terminate in full.
(d) DISPOSITION PROCEEDS. Any and all net proceeds (net
proceeds for purposes of this Section and Section 8.18 hereof to mean gross
proceeds net only of customary out-of-pocket fees, costs and expenses
incurred in effecting the relevant sale or other disposition and taxes (other
than income taxes) incurred and payable as a result of such disposition)
derived from (x) the sale or disposition (whether voluntary or involuntary),
or on account of the damage or destruction, of the real estate, furniture,
fixtures, equipment or other fixed or capital assets of any Loan Party
(collectively, "FIXED ASSETS") or (y) the sale or other disposition of any
intellectual property (such as Music Rights) or other Property (other than
fixed assets) permitted by Section 8.18 hereof to the extent such Section
requires a prepayment under this Section shall, promptly but in any event
within three (3) Business Days after receipt by any Loan Party or the
Administrative Agent, be paid over to the Administrative Agent for the
account of the Lenders as and for a mandatory prepayment on the Term Credit
Notes (each such prepayment to be applied to the several installments due on
the outstanding principal balance of the Term Loan in the inverse order of
their maturity); PROVIDED, HOWEVER, that:
(i) No prepayment shall be required with respect to proceeds received
from the sale, damage or destruction of any fixed assets subject to liens
permitted by Sections 8.7(c) and 8.7(d) hereof which are prior to the liens
of the Collateral Documents to the extent such proceeds are applied in
reduction of the indebtedness permitted by Section 8.8(b) hereof;
(ii) So long as no Default or Event of Default has occurred or is
continuing, the relevant Loan Party may retain the proceeds (including any
insurance proceeds) derived from the sale, damage or destruction of fixed
assets (collectively, "RETAINED PROCEEDS") if and to the extent that the
fixed assets sold, damaged or destroyed have been (or, within 180 days of
such sale, damage or destruction, will be) replaced (or repaired in the
case of damaged property) with new fixed assets or other assets useful
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in the business of such Loan Party of similar value and utility which are
subject to a first lien in favor of the Administrative Agent to secure the
Obligations;
(iii) So long as no Default or Event of Default has occurred or is
continuing, the relevant Loan Party may retain the proceeds of any sale or
other disposition of any Music Rights or other intellectual property
(collectively, "LICENSE PROCEEDS") if and to the extent that (x) the
intellectual property sold or otherwise disposed of is replaced within 270
days of such sale or other disposition or (y) if a binding contract to
replace such intellectual property has been entered into within 270 days of
such sale or disposition, such intellectual property is replaced within 360
days of such sale or disposition, in each case with similar intellectual
property useful in the business of such Loan Party which is subject to a
first lien in favor of the Administrative Agent to secure the Obligations;
(iv) So long as no Default or Event of Default has occurred or is
continuing, the relevant Loan Party may retain the proceeds of any sale or
other disposition of any interest in the House of Blues Venture
(collectively, "HOB PROCEEDS") if and to the extent that (x) the net
proceeds of the interest sold or otherwise disposed of are reinvested
within 270 days of such sale or other disposition or (z) if a binding
contract to reinvest such net proceeds has been entered into within 270
days of such sale or disposition, such net proceeds are reinvested within
360 days of such sale or disposition, in each case in the business of such
Loan Party in a form which is subject to a first lien in favor of the
Administrative Agent to secure the Obligations;
(v) no prepayment shall be required with respect to up to $100,000 of
net proceeds received in any calendar year from the sale or other
disposition of fixed assets which are worn out, obsolete or, in the
reasonable judgment of the Company, no longer necessary to the conduct of
the business of the Company and its Subsidiaries as then conducted; and
(vi) no prepayment shall be required with respect to any sales,
transfers or other dispositions permitted pursuant to clauses (i), (ii),
(iv) and (x) of Section 8.18 hereof.
Any retained proceeds, license proceeds or HOB proceeds not used for such
replacement, repair or reinvestment must be prepaid on the Term Loan as
provided above in this Section. Pending application of such retained
proceeds to such replacement or repair or application of such license
proceeds to such replacement or reinvestment of such HOB proceeds, as the
case may be, the Company shall not later than the time at which prepayment
would have been (in the absence of its election to make such repair,
replacement or reinvestment) required above, deposit (or cause the relevant
Loan Party to deposit) such retained proceeds or license proceeds or HOB
proceeds in an account of the Company maintained with the Administrative
Agent pursuant to agreements in form, scope and substance reasonably
satisfactory to the Administrative Agent. The amount so held on deposit (the
"SPECIAL DEPOSIT"), together with all earnings on the Special Deposit, shall
be available to the Company (for its disbursement to the relevant Loan Party)
solely for the applicable
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replacement or repair. The Company hereby grants, and each other relevant
Loan Party (by its execution of this Agreement or a Guaranty) thereby grants,
a lien on the Special Deposit and such earnings as collateral security for
the Obligations, it being understood and agreed that at such time as any
Default or Event of Default shall occur, the balance of the Special Deposit
and earnings thereon may be applied by the Administrative Agent to the
Obligations as provided in Section 3 below. The Administrative Agent shall
be entitled to require reasonable assurances, as a condition to the making of
any withdrawal from the Special Deposit, that the proceeds of such withdrawal
are being used for the purposes permitted hereunder (it being understood and
agreed that a certificate from the chief executive officer, chief operating
officer or chief financial officer of the Company to the effect that such
proceeds will be so used shall be sufficient for such purposes).
SECTION 2.8. VOLUNTARY TERMINATIONS. The Company (which is
acting on behalf of the Borrowers pursuant to Section 1.7 hereof) shall have
the privilege upon two (2) Business Days' prior notice from the Company
(which need not be joined in by any other Borrower) to the Administrative
Agent (which shall promptly notify the Lenders) to ratably terminate the
Revolving Credit Commitments in whole or in part (but if in part then in the
amount of $1,000,000 or such greater amount which is an integral multiple of
$100,000); PROVIDED that the Revolving Credit Commitments may not be reduced
to an amount less then the sum of the Revolving Loans and Letters of Credit
then outstanding. All partial terminations of the Revolving Credit
Commitments hereunder shall automatically reduce the L/C Commitment hereof in
each case as from time to time in effect hereunder, by the same percentage as
the percentage termination in the Revolving Credit Commitments. Not later
than the termination date stated in such notice, there shall be made such
payments to the Administrative Agent as may be necessary to reduce the sum of
the aggregate outstanding Revolving Loans and Letters of Credit to the amount
to which the Revolving Credit Commitments have been reduced, together with in
the case of a termination in whole, all interest, fees and other amounts due
on the Obligations. The foregoing to the contrary notwithstanding, (i) no
termination of the Revolving Credit may be effected hereunder if as a result
thereof the outstanding aggregate amount of Letters of Credit would exceed
the L/C Commitment as reduced by such termination and (ii) the Revolving
Credit Commitments may not be terminated below $100,000 except concurrently
with their termination in whole. No termination of the Revolving Credit
Commitments may be reinstated.
SECTION 3. PLACE AND APPLICATION OF PAYMENTS.
SECTION 3.1. GENERALLY. All payments of principal,
interest, fees and all other Obligations payable hereunder and under the
other Loan Documents shall be made to the Administrative Agent at its office
at 115 South LaSalle Street, Chicago, Illinois (or at such other place as the
Administrative Agent may specify) on the date any such payment is due and
payable. Payments received by the Administrative Agent after 12:00 noon
(Chicago time) shall be deemed received as of the opening of business on the
next Business Day. All such payments shall be made in lawful money of the
United States of America, in immediately available funds at the place of
payment, without set-off or counterclaim. Except as herein provided, all
payments shall be received by the Administrative Agent for the ratable
account of the Lenders and shall be promptly distributed by the
Administrative
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Agent ratably to the Lenders. Unless the Company otherwise directs, and
subject in any event to the other provisions of this Section 3, principal
payments on any Class of Notes shall be first applied in reduction of Loans
against such Class of Notes of the Borrower making the payment and in
reduction of borrowings in the direct order in which such Loans were
disbursed. Any amount paid or prepaid on the Revolving Credit Notes may,
subject to all of the terms and conditions hereof, be borrowed, repaid and
borrowed again. No amount paid or prepaid on the Term Credit Notes may be
reborrowed; and except to the extent otherwise provided in this Agreement,
partial prepayments of the Term Credit Notes shall be applied to the several
installments thereof in the direct order of their maturities. Unless the
Company directs otherwise or this Agreement provides otherwise, principal
payments on a given Class of Notes (including payments made by virtue of the
application of proceeds of Collateral under Section 3.2 hereof) shall be
first applied to the Domestic Rate Portion of such Notes until payment in
full thereof, with any balance applied to the LIBOR Portions of the same
Class of Notes in the order in which their Interest Periods expire. All
payments (whether voluntary or required) shall be accompanied by any amount
due the Lenders under Section 12.5 hereof, but no acceptance of such a
payment without requiring payment of amounts due under Section 12.5 shall
preclude a later demand by the Lenders for any amount due them under Section
12.5 in respect of such payment. Notwithstanding the foregoing, if and so
long as no Default or Event of Default has occurred and is continuing, if and
to the extent a mandatory prepayment required by Sections 2.7(b) or 2.7(d)
hereof would otherwise be applied against any LIBOR Portion of the relevant
Notes, the Company may direct that such prepayment be held in a cash
collateral account maintained by the Company with the Administrative Agent
pursuant to agreements in form, scope and substance reasonably satisfactory
to the Administrative Agent (the "CASH COLLATERAL ACCOUNT") and not applied
to any LIBOR Portion of such Notes until the earlier of (i) the last day of
the Interest Period then applicable to such LIBOR Portion or (ii) the
occurrence of any Default or Event of Default. The Company hereby grants,
and each other relevant Loan Party (by its execution of this Agreement or a
Guaranty) thereby grants, a lien on the Cash Collateral Account and all
earnings thereon as collateral security for the Obligations, it being
understood and agreed that at such time as any Default or Event of Default
shall occur, the balance of the Cash Collateral Account and earnings thereon
may be applied by the Administrative Agent to the Obligations as provided in
this Agreement.
SECTION 3.2. APPLICATION OF COLLATERAL PROCEEDS BEFORE
DEFAULT. Except upon the occurrence and during the continuation of an Event
of Default, all proceeds of Collateral received in a Restricted Account (as
hereinafter defined) on and after the Loan Mechanization Date shall (subject
to the other terms of this Agreement) be applied by the Administrative Agent
against the outstanding Obligations as follows:
(i) first, to outstanding interest charges then due and payable in
respect of the Obligations;
(ii) second, to the outstanding principal balance of the Revolving
Loans and any liabilities in respect of unpaid drawings under Letters of
Credit; and
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(iii) finally, to be applied to, or held as collateral security
for, any remaining unpaid or unsatisfied Obligations to the extent then due
and payable.
SECTION 3.3. APPLICATION AFTER DEFAULT. Anything contained
herein to the contrary notwithstanding, but in any event subject to Section
3.4 hereof, all payments and collections received in respect of the
Obligations and all proceeds of the Collateral received, in each instance, by
the Administrative Agent or any of the Lenders upon the occurrence and during
the continuation of an Event of Default shall be remitted to the
Administrative Agent and distributed as follows:
(i) first, to the payment of any outstanding and reasonable
out-of-pocket costs and expenses incurred by the Administrative Agent in
monitoring, verifying, protecting, preserving or enforcing the Liens on the
Collateral, and in protecting, preserving or enforcing rights under this
Agreement or any of the other Loan Documents, and in any event including
all costs and expenses of a character which the Borrowers have agreed to
pay under Section 13.4 hereof (such funds to be retained by the
Administrative Agent for its own account unless it has previously been
reimbursed for such costs and expenses by the Lenders, in which event such
amounts shall be remitted to the Lenders to reimburse them for payments
theretofore made to the Administrative Agent);
(ii) second, to the payment of any outstanding interest or other fees
or amounts due under this Agreement or any of the other Loan Documents
other than for principal, pro rata as among the Administrative Agent and
the Lenders in accord with the amount of such interest and other fees or
amounts owing each;
(iii) third, to the payment of the principal of the Notes and any
liabilities in respect of unpaid drawings under the outstanding Letters of
Credit, pro rata as among the Lenders in accord with the then respective
unpaid principal balances of the Notes and the then unpaid liabilities in
respect of unpaid drawings under the Letters of Credit;
(iv) fourth, to the Administrative Agent for the cash
collateralization of the entire amount undrawn on the outstanding Letters
of Credit, with amounts to be so remitted on account of such undrawn
Letters of Credit until the Administrative Agent is holding an amount of
cash equal to the then outstanding undrawn amount of all such Letters of
Credit;
(v) fifth, to the Administrative Agent and the Lenders pro rata in
accord with the amounts of any other indebtedness, obligations or
liabilities of the Borrowers owing to them (other than the Hedging
Liability) which bear interest and are secured by the Collateral Documents
unless and until all such indebtedness, obligations and liabilities have
been fully paid and satisfied;
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(vi) sixth, to the Administrative Agent and the Lenders pro rata in
accord with the amounts of any Hedging Liability owing to them unless and
until all such Hedging Liability has been fully paid and satisfied; and
(vii) seventh, to the Company on behalf of the Borrowers (each
Borrower hereby agreeing that its recourse for its share of such payment
shall be to the Company and not the Administrative Agent or any Lender) or
to whoever the Administrative Agent reasonably determines to be lawfully
entitled thereto.
In the event that such payments and collections are insufficient to pay the
entire amount of Obligations described in any one clause above, then such
payments and collections shall be applied to the payment of the Obligations
so described in such order of application as between the different items of
such Obligations as the Lenders shall elect, pro rata as among the Lenders in
accord with the amounts of such items owing to them. In the event that the
amount of any Hedging Liability is not fixed and determined at the time
proceeds of Collateral are received which are to be allocated thereto, the
proceeds of Collateral so allocated shall be held by the Administrative Agent
as collateral security until such Hedging Liability is fixed and determined
and then the same shall (if and when, and to the extent that, payment of such
Hedging Liability is required by the terms of the relevant Hedging
Arrangements) be applied to the Hedging Liability, with any surplus applied
to the Notes and Letter of Credit liabilities and with other Collateral
applications to be reallocated among the Lenders to cover any deficiency
which would not have existed had the exact amount of the Hedging Liability
been known at the time Collateral proceeds were originally distributed.
SECTION 3.4. OVERFUNDED COMMITMENTS. The foregoing Section
3.3 hereof to the contrary notwithstanding, if upon the occurrence of an
Event of Default the percentages of the Revolving Credit Commitments and Term
Credit Commitments in use from all the Lenders are not identical (whichever
of such Commitments has the highest utilization being herein referred to as
the "OVERFUNDED COMMITMENT" and each such Commitment which has a lower
utilization being hereinafter referred to as an "UNDERFUNDED COMMITMENT") (i)
payments which pursuant to the foregoing paragraph are to be allocated to the
principal of the Notes shall first be applied to the Notes issued under the
Overfunded Commitments until the utilization percentages of the Revolving
Credit Commitments and Term Credit Commitments are identical and (ii) at the
request of either the Administrative Agent or the Required Lenders (with the
Required Lenders computed solely for this purpose as though the
Administrative Agent had no Revolving Credit Commitment hereunder) the Lender
or Lenders holding the Underfunded Commitment shall purchase from the Lender
or Lenders holding the Overfunded Commitment participations in the overfunded
Lenders' Loans (and reimbursement obligations under the Applications, if
applicable) in an amount such that after giving effect thereto, the
percentages of the Revolving Credit Commitments and Term Credit Commitments
in use from all the Lenders are identical. All of the foregoing principles
shall be applied as though the Revolving Credit Commitments and Term Credit
Commitments had not terminated, whether or not such is in fact the case.
SECTION 3.5. BORROWER'S RIGHT TO DIRECT APPLICATION. Except
as otherwise specifically provided for in this Agreement (including without
limitation Section 3.1
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hereof), the Borrowers hereby irrevocably waive the right to direct the
application of payments and collections at any time received by the
Administrative Agent or any of the Lenders from or on behalf of the
Borrowers, and the Borrowers hereby irrevocably agree that the Administrative
Agent shall have the continuing exclusive right to apply and reapply any and
all such payments and collections received at any time by the Administrative
Agent or any of the Lenders against the Obligations in the manner described
above.
SECTION 3.6. WEEKLY SETTLEMENT. (a) If and to the extent
the Administrative Agent so elects and provides the Company and Lenders at
least five (5) Business Days' prior written notice, (i) advances and
repayments of Revolving Loans (not the Term Loan) will then begin to be
settled according to the procedures described in this Section 3.6 (the date
on which such settlement shall so begin being hereinafter referred to as the
"LOAN MECHANIZATION DATE"), and (ii) the Lenders' obligations hereunder with
respect to unreimbursed drawings on Letters of Credit will also be settled
according to such procedures by deeming (x) an unreimbursed drawing paid by
the Administrative Agent to constitute an advance by the Administrative Agent
of a Revolving Loan of like principal amount and (y) each payment or other
collection in reimbursement of such drawing (other than from the Lenders) to
be a repayment on such deemed Revolving Loan (with all references in this
Section to Revolving Loans to include each such deemed Revolving Loan). This
Section shall not be applicable until the Loan Mechanization Date. The
Administrative Agent shall, once every seven (7) days, or sooner, if so
elected by the Administrative Agent in its discretion, but in each case on a
Business Day, (each such day being a "SETTLEMENT DATE"), distribute to each
Lender a statement (the "ADMINISTRATIVE AGENT'S REPORT") disclosing as of the
immediately preceding Business Day, the aggregate unpaid principal balance of
Revolving Loans outstanding as of such date (including Revolving Loans made
by the Administrative Agent under Section 3.6(e) hereof), repayments and
prepayments of principal received from the Borrowers with respect to the
Revolving Loans since the immediately preceding Administrative Agent's
Report, additional Revolving Loans made to the Borrowers since the date of
the immediately preceding Administrative Agent's Report and each Borrower's
Borrowing Base as of the most recent determination thereof. Each
Administrative Agent's Report shall disclose the net amount (the "SETTLEMENT
AMOUNT") due to or due from the Lenders to effect a Settlement of any
Revolving Loan. The Administrative Agent's Report submitted to a Lender
shall be prima facie evidence of the amount due to or from such Lender to
effect a Settlement of any Revolving Loan. If the Administrative Agent's
Report discloses a net amount due from the Administrative Agent to any Lender
to effect the Settlement of a Revolving Loan, the Administrative Agent,
concurrently with the delivery of the Administrative Agent's Report to the
Lenders, shall transfer, by wire transfer or otherwise, such amount to such
Lender in funds immediately available to such Lender, in accordance with such
Lender's instructions. If the Administrative Agent's Report discloses a net
amount due to the Administrative Agent from any Lender to affect the
Settlement of any Revolving Loan, then such Lender shall wire transfer such
amount, in funds immediately available to the Administrative Agent, as
instructed by the Administrative Agent. Such net amount due from a Lender to
the Administrative Agent shall be due on the Settlement Date if such
Administrative Agent's Report is received before 12:00 noon (Chicago time)
and such net amount shall be due on the first Business Day following the
Settlement Date if such Administrative Agent's Report is received after 12:00
noon (Chicago time).
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Notwithstanding the foregoing, payments actually received by the
Administrative Agent with respect to the following items shall be distributed
by the Administrative Agent to each Lender as follows:
(i) any principal payment of a LIBOR Portion that is not converted or
continued will be paid to the Lenders by the Administrative Agent on the
same day as received;
(ii) as soon as possible, but in any event, within one Business Day
after receipt thereof by the Administrative Agent, payments applicable to
interest on the Revolving Loans shall be paid to each Lender in proportion
to its pro rata share of such Revolving Loans, subject to any adjustments
for any Revolving Loans made by the Administrative Agent under Section 1.6
hereof so that the Administrative Agent alone shall receive interest on the
Revolving Loans so made until Settlement with such Lender on such Revolving
Loans and each Lender shall only receive interest on the amount of funds
actually advanced by such Lender. Each Lender's share of interest accruing
each day on the Revolving Loans shall be based on such Lender's Daily Loan
Balance. For purposes hereof, the term "DAILY LOAN BALANCE" shall mean as
of any day for any Lender, an amount calculated as of the end of that day
by subtracting (a) the cumulative principal amount paid by the
Administrative Agent to such Lender on account of Revolving Loans from the
date of the initial extension of credit under this Agreement (the "CLOSING
DATE") through and including the date as of which the Daily Loan Balance is
being determined from (b) the cumulative principal amount advanced by such
Lender to the Administrative Agent for the benefit of a Borrower to fund
Revolving Loans made on and after the Closing Date through and including
such date of determination; and
(iii) as soon as possible, but in any event, within one Business
Day after receipt thereof by the Administrative Agent, payments applicable
to principal of and interest on the Term Loan, the fees set forth in
Sections 2.2, 2.3 and 2.4 hereof and expenses payable under this Agreement,
shall in each case be paid to each Lender as set forth in the applicable
Section hereof.
(b) All funds advanced to a Borrower by the Administrative
Agent or a Lender pursuant to this Section 3.6 shall for all purposes be
treated as a Revolving Loan or Term Loan, as appropriate, made by such Lender
against the appropriate Note of such Lender and all funds received by any
Lender pursuant to this Section 3.6 for all purposes be treated as a
repayment of amounts owed with respect to Loans made by such Lender against
the appropriate Note of such Lender.
(c) In the event that any bankruptcy, reorganization,
liquidation, receivership or similar cases or proceedings in which any
Borrower is a debtor, prevent the Administrative Agent or any Lender from
making any Loan to effect a Settlement contemplated hereby, the
Administrative Agent or such Lender, as the case may be, will make such
dispositions and arrangements with the other Lenders with respect to such
Loans, either by way of purchase of participations, distribution, PRO TANTO
assignment of claims, subrogation or otherwise, as
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shall result in each Lender's share of the outstanding Loans being equal, as
nearly as may be, to the percentage which such Lender's Revolving Credit
Commitment and Term Credit Commitment bears to the Revolving Credit
Commitments and Term Credit Commitments of all the Lenders.
(d) Payments to effect a Settlement shall be made without
set-off, counterclaim or reduction of any kind. The failure or refusal of
any Lender to make available to the Administrative Agent at the aforesaid
time and place the amount of the Settlement Amount due from such Lender (i)
shall not relieve any other Lender from its several obligation hereunder to
make available to the Administrative Agent the amount of such other Lender's
Settlement Amount and (ii) shall not impose upon such other Lender any
liability with respect to such failure or refusal or otherwise increase the
Revolving Credit Commitment or Term Credit Commitment of such other Lender.
(e) Notwithstanding the notice requirements set forth in
Section 1.5 above, but otherwise in accordance with the terms and conditions
of this Agreement, the Administrative Agent may, in its sole discretion
without conferring with the Lenders but on their behalf, make Loans to each
Borrower in an amount requested by the Company. Any such Loans so funded by
the Administrative Agent shall be deemed Loans made by the Administrative
Agent under its Revolving Credit Commitment, except for purposes of Section
2.2 hereof. Each Lender's obligation to fund its portion of any such Loan
made by the Administrative Agent will commence on the date such Loan is
actually so made by the Administrative Agent. However, until the date on
which the Settlement of such Loan is required in accordance with this Section
3.6 above, such obligation of the Lender shall be satisfied by the
Administrative Agent's making of such Loan. The Borrowers acknowledge and
agree that the making of such Loans by the Administrative Agent under this
Section 3.6(e) shall, in each case, be subject in all respects to the
provisions of this Agreement as if each such Loan were made in response to a
notice requesting such Loan made in accordance with Section 1.5 hereof,
including without limitation the limitations set forth in Section 1.1 hereof
and the requirements of Section 2.7 hereof. All actions taken by the
Administrative Agent pursuant to the provisions of this Section 3.6(e) shall
be conclusive and binding on the Borrowers in the absence of manifest error.
Notwithstanding anything herein to the contrary, prior to the Settlement with
any Lender of any Loan funded by the Administrative Agent under this Section,
interest payable on such Loan otherwise allocable to such Lender shall be for
the sole account of the Administrative Agent and payment of principal on such
Loan otherwise allocable to such Lender shall be for the sole account of the
Administrative Agent.
SECTION 3.7. COMPUTATION OF OBLIGATIONS OUTSTANDING. For
the purpose of calculating the aggregate principal balance of Obligations
outstanding hereunder, Obligations shall be deemed to be paid on the date
payments or collections, as the case may be, are deemed received under
Section 3.1 hereof; PROVIDED, HOWEVER, for purposes of calculating interest
accruing on the Obligations on and after the Loan Mechanization Date, any
payment of the Obligations by virtue of the application of proceeds of
Collateral pursuant to Section 3.2 hereof shall be deemed to be applied to
the Obligations on the first Business Day following the date of the
Administrative Agent's receipt (in the relevant lockbox established for a
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Restricted Account pursuant to Section 4.2 hereof) of the item representing
such payment (any additional amount payable by the Borrowers solely by virtue
of this deemed application to be paid to and retained by the Administrative
Agent for its sole account as an administrative fee, with the Lenders to have
no right to any share thereof); FURTHER PROVIDED, HOWEVER, that each payment
or collection received by wire or ACH transfer directly to the Restricted
Account maintained with the Administrative Agent as contemplated by Section
4.2 hereof shall be deemed applied on the date of the Administrative Agent's
receipt of such transfer. Notwithstanding the foregoing, if any item
presented for collection by the Administrative Agent is not honored, the
Administrative Agent may reverse any provisional credit which has been given
for the item and make appropriate adjustments to the amount of interest and
principal otherwise due hereunder.
SECTION 3.8. NOTATIONS. All Loans made against a Note, the
Borrower to which each Loan was disbursed, the status of all amounts
evidenced by a Note as constituting part of the Domestic Rate Portion or a
LIBOR Portion, and, in the case of any LIBOR Portion, the rates of interest
and Interest Periods applicable to such Portions shall be recorded by each
Lender on its books and records or, at its option in any instance, endorsed
on a schedule to its Note and the unpaid principal balance and status,
Borrower, rates and Interest Periods so recorded or endorsed by such Lender
shall be prima facie evidence in any court or other proceeding brought to
enforce such Note of the principal amount remaining unpaid thereon, the
status of the Loans evidenced thereby, the Borrower to which each Loan was
disbursed and the interest rates and Interest Periods applicable thereto;
PROVIDED that the failure of a Lender to record any of the foregoing shall
not limit or otherwise affect the obligation of the Company to repay the
outstanding principal amount of each Note together with accrued interest
thereon. Prior to any negotiation of a Note, a Lender shall record on a
schedule thereto the status of all amounts evidenced thereby as constituting
part of the applicable Domestic Rate Portion or a LIBOR Portion and, in the
case of any LIBOR Portion, the rates of interest and the Interest Periods
applicable thereto.
SECTION 4. THE COLLATERAL AND GUARANTIES.
SECTION 4.1. COLLATERAL. The Notes and the other
Obligations, as well as any Hedging Liability, shall be secured by (a) valid,
perfected and enforceable liens in all right, title and interest of each
Borrower and of each Subsidiary in all capital stock or other equity interest
in each Subsidiary, in each instance whether now owned or hereafter acquired,
and all proceeds thereof and (b) valid, perfected (subject to the proviso
appearing at the end of this sentence) and enforceable liens in all right,
title and interest of each Borrower and of each Subsidiary in all accounts,
chattel paper, general intangibles, instruments, investment property,
documents, contract rights, inventory and equipment of every kind and
description, whether now owned or hereafter acquired, and all proceeds
thereof; PROVIDED, HOWEVER, that until an Event of Default has occurred and
is continuing and thereafter until otherwise required by the Required Lenders
or the Administrative Agent, (i) liens need not be perfected on copyrights,
trademarks, patents and licenses thereof that arise subsequent to the most
recent date on which the relevant Collateral Document requires a lien to be
granted on Collateral of such type, (ii) liens need not be perfected on notes
receivable having a fair market value of less than $10,000 in any instance
and $50,000 in the aggregate, (iii) fixture
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financing statements need not be filed, and (iv) liens on vehicles which are
subject to a certificate of title law need not be noted on the certificate of
title. The liens in the Collateral shall be granted to the Administrative
Agent for the ratable account of the Lenders and shall be valid and perfected
first liens subject, however, to the proviso appearing at the end of the
immediately preceding sentence, Permitted Liens and the rights of lessors
under permitted leases and Purchase Money Liens held by vendors providing
purchase money financing. Notwithstanding anything to the contrary contained
herein, in no event will any of the Collateral described above be deemed to
include (a) any interest in copyrights, trademarks, patents or similar
intangibles licensed to any Borrower or any Subsidiary from any third party
(other than any Borrower or any of its Affiliates) to the extent that the
granting of a security interest or lien therein is prohibited by the license
or other agreement(s) pursuant to which such Borrower or Subsidiary holds
such interest and such prohibition has not been or is not waived or the
consent of the applicable party has not been or is not obtained, (b) any
interest in contracts and contracts rights thereunder (other than Accounts
arising therefrom) to the extent that the granting of a security interest or
lien therein is prohibited by such contract and such prohibition has not been
or is not waived or the consent of the applicable party has not been or is
not obtained, (c) any interests in equipment owned by any Borrower or any
Subsidiary which is subject to a Purchase Money Lien in favor of any third
party (other than any Borrower or any of its Affiliates) to the extent the
granting of a security interest or lien therein is prohibited by the
agreement(s) pursuant to which such equipment is financed and such
prohibition has not been or is not waived or the consent of the applicable
party has not been or is not obtained and (d) any interests in any leases or
licenses to use property under which any Borrower or any Subsidiary is lessee
or licensee and a Person other than any Borrower or an Affiliate of such
Borrower is lessor or licensor to the extent the granting of a security
interest or lien therein is prohibited by the agreement(s) pursuant to which
such property is leased and such prohibition has not been or is not waived or
the consent of the applicable party has not been or is not obtained.
SECTION 4.2. COLLATERAL PROCEEDS. Each Borrower agrees to
make such arrangements as shall be necessary or appropriate to assure
(through the use of a lockbox under the sole control of the Administrative
Agent) that all proceeds of the Collateral provided by such Borrower, subject
to Sections 2.7(d) and 8.18 of this Agreement, are deposited (in the same
form as received) in a separate remittance account maintained by such
Borrower with and under the control of the Administrative Agent, each such
account to constitute a special restricted account (each, a "RESTRICTED
ACCOUNT"); PROVIDED, HOWEVER, that the Company and Intersound may use the
same lockbox and same Restricted Account for such purposes. Any proceeds of
Collateral received by any Borrower shall be held by such Borrower in trust
for the Administrative Agent and the Lenders in the same form in which
received, shall not be commingled with any assets of such Borrower, and shall
be delivered promptly to the Administrative Agent (together with any
necessary endorsements thereto) for deposit into the Restricted Account of
such Borrower. The Borrowers acknowledge that the Administrative Agent has
(and is hereby granted to the extent it does not already have) a lien on each
Restricted Account and all funds contained therein for the ratable benefit of
the Lenders to secure the Obligations. Prior to the Loan Mechanization Date,
the Lenders agree with the Borrowers that if and so long as no Event of
Default has occurred and is continuing hereunder, amounts on deposit in each
Restricted Account will (subject to the rules and
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regulations of the relevant depository as from time to time in effect
applicable to demand deposit accounts) be made available to the Borrowers for
use in conduct of their respective businesses; PROVIDED, HOWEVER, upon the
occurrence and during the continuation of any Event of Default hereunder, the
Administrative Agent may apply the funds on deposit in any one or more of the
Restricted Accounts as set forth in Section 3.3 hereof, and the
Administrative Agent shall notify the Company of any such application. On and
after the Loan Mechanization Date, no amounts deposited in the Restricted
Accounts shall be released to the Borrowers, but shall instead be applied to,
or otherwise held as collateral security for, the outstanding Obligations as
set forth in Section 3 hereof, it being understood and agreed that
notwithstanding such application, the Borrowers shall have the right to
obtain additional Loans and Letters of Credit under this Agreement subject to
the terms and conditions hereof.
SECTION 4.3. FURTHER ASSURANCES. Each Borrower covenants
and agrees that it shall, and shall cause each Subsidiary to, comply with all
terms and conditions of each of the Collateral Documents and at any time and
from time to time at the request of the Administrative Agent or the Required
Lenders execute and deliver such instruments and documents and do such acts
and things as the Administrative Agent or the Required Lenders may reasonably
request in order to provide for or protect or perfect the lien of the
Administrative Agent in the Collateral, subject to the terms of Section 4.1
above.
SECTION 4.4. GUARANTIES FROM SUBSIDIARIES. Payment of the
Notes and the other Obligations, as well as any Hedging Liability, shall at
all times be jointly and severally guaranteed by each Subsidiary pursuant
hereto or pursuant to a Guaranty issued by such Subsidiary. In the event any
Subsidiary is hereafter acquired or formed, the Company shall also cause such
Subsidiary to execute such Collateral Documents (having terms and conditions
substantially similar to those executed by the Company and its Subsidiaries
in connection with the initial Loans under this Agreement) as the
Administrative Agent may then require granting the Administrative Agent for
the benefit of the Lenders a security interest in and lien on the assets of
such Subsidiary as collateral security for the Notes and the other
Obligations and any Hedging Liability, together with such other instruments,
documents, certificates and opinions required by the Administrative Agent in
connection therewith.
SECTION 4.5. COLLATERAL ASSIGNMENT OF LIFE INSURANCE.
Payment of the Notes and the other Obligations, as well as any Hedging
Liability, shall also be secured by a collateral assignment of a life
insurance policy owned and maintained by the Company on the life of Devick in
an amount of at least $10,000,000 pursuant to a written assignment in form
and substance satisfactory to the Administrative Agent (the "LIFE INSURANCE
ASSIGNMENT").
SECTION 5. DEFINITIONS; INTERPRETATION.
SECTION 5.1. DEFINITIONS. The following terms when used
herein shall have the following meanings:
"ACCOUNTS" shall mean, with respect to any Person, all present
and future accounts, contract rights and other rights to payment (i) for
goods such Person has sold or leased
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(whether or not delivered), (ii) for services such Person has rendered,
whether or not they have been earned by performance or (iii) for such
Person's license of master recordings and compositions to third parties.
"ADJUSTED LIBOR" means a rate per annum determined by the
Administrative Agent in accordance with the following formula:
Adjusted LIBOR = LIBOR
-----------------------
100%-Reserve Percentage
"RESERVE PERCENTAGE" means, for the purpose of computing Adjusted LIBOR, the
maximum rate of all reserve requirements (including, without limitation, any
marginal, emergency, supplemental or other special reserves) imposed by the
Board of Governors of the Federal Reserve System (or any successor) under
Regulation D on Eurocurrency liabilities (as such term is defined in
Regulation D) for the applicable Interest Period as of the first day of such
Interest Period, but subject to any amendments to such reserve requirement by
such Board or its successor, and taking into account any transitional
adjustments thereto becoming effective during such Interest Period. For
purposes of this definition, LIBOR Portions shall be deemed to be
Eurocurrency liabilities as defined in Regulation D without benefit of or
credit for prorations, exemptions or offsets under Regulation D. "LIBOR"
means, for each Interest Period, (a) the LIBOR Index Rate for such Interest
Period, if such rate is available, and (b) if the LIBOR Index Rate cannot be
determined, the arithmetic average of the rates of interest per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%) at which
deposits in U.S. Dollars in immediately available funds are offered to the
Administrative Agent at 11:00 a.m. (London, England time) two Business Days
before the beginning of such Interest Period by three (3) or more major banks
in the interbank eurodollar market selected by the Administrative Agent for a
period equal to such Interest Period and in an amount equal or comparable to
the applicable LIBOR Portion scheduled to be outstanding from the
Administrative Agent during such Interest Period. "LIBOR INDEX RATE" means,
for any Interest Period, the rate per annum (rounded upwards, if necessary,
to the next higher one hundred-thousandth of a percentage point) for deposits
in U.S. Dollars for a period equal to such Interest Period which appears on
the Telerate Page 3750 as of 11:00 a.m. (London, England time) on the date
two Business Days before the commencement of such Interest Period. "TELERATE
PAGE 3750" means the display designated as "Page 3750" on the Telerate
Service (or such other page as may replace Page 3750 on that service or such
other service as may be nominated by the British Bankers' Association as the
information vendor for the purpose of displaying British Banker's Association
Interest Settlement Rates for U.S. Dollar deposits). Each determination of
LIBOR made by the Administrative Agent shall be conclusive and binding on the
Borrowers and the Lenders absent manifest error.
"ADMINISTRATIVE AGENT" means Bank of Montreal and any
successor thereto appointed pursuant to Section 10.1 hereof.
"AFFILIATE" shall mean any Person (i) which directly or
indirectly through one or more intermediaries controls, or is controlled by,
or is under common control with, another Person, (ii) which beneficially owns
or holds 10% or more of any class of the Voting Stock
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of another Person, or (iii) more than 10% of the Voting Stock (or in the case
of a Person which is not a corporation, 10% or more of the equity interest)
of which is beneficially owned or held by another Person. The term "CONTROL"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of Voting Stock, by contract or otherwise. Notwithstanding the
foregoing, (i) no individual shall be deemed to be an Affiliate of the
Company or any of its Subsidiaries solely by reason of his or her being a
director, officer or employee of the Company or any of its Subsidiaries, (ii)
the Company shall not be deemed an Affiliate of any of its Wholly-Owned
Subsidiaries, (iii) no Wholly-Owned Subsidiary shall be deemed an Affiliate
of any other Wholly-Owned Subsidiary or the Company and (iv) for purposes of
computing the eligibility of Accounts, no limited partners, members,
employees or Affiliates of the Purchasers or their respective portfolio
companies shall be deemed Affiliates of the Company or any Subsidiary.
"AFFILIATE PREFERRED STOCK" means an aggregate of 2,500 shares
of Series C Convertible Preferred Stock of the Company, par value $.001 per
share, to be purchased by certain officers and directors of the Company and
their Affiliates, on the closing of the Investment Agreement and any and all
dividends thereon.
"AFFILIATE WARRANTS" means the warrants to purchase an
aggregate of 450,000 shares of common stock of the Company, par value $.001
per share, to be purchased by certain officers and directors of the Company
and their Affiliates on the closing of the Investment Agreement.
"AGREEMENT" means this Credit Agreement, as the same may be
amended, modified or restated from time to time in accordance with the terms
hereof.
"APPLICABLE DOMESTIC RATE MARGIN" means 1/2 of 1% for the
Revolving Loans and 1.0% for the Term Loan.
"APPLICABLE LIBOR MARGIN" means 2-1/4% for the Revolving Loans
and 2-3/4% for the Term Loan.
"APPLICATION" is defined in Section 1.3(d) hereof.
"ASSIGNMENT AGREEMENT" means an Assignment and Acceptance
entered into by a Lender and an assignee in accordance with Section 13.12
hereof substantially in the form of Exhibit G hereto.
"AUTHORIZED REPRESENTATIVE" means those persons shown on the
list of officers provided by the Company pursuant to Section 7.2(a) hereof or
on any update of any such list provided by the Company to the Administrative
Agent, or any further or different officer of the Company so named by any
Authorized Representative of the Company in a written notice to the
Administrative Agent.
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"AVAILABILITY" shall mean, as of any time, the amount (if any)
by which (x) the Borrowing Base as then determined and computed exceeds (y)
the aggregate principal amount of Revolving Loans and Letters of Credit then
outstanding from the Borrowers, taken together.
"BMO BRIDGE LOANS" means the credit extended of Bank of
Montreal to the Company under its January 31, 1997 Credit Agreement with such
Bank as heretofore amended from time to time.
"BORROWERS" is defined in the introductory paragraph hereof,
with (i) the term "BORROWERS" to mean the Borrowers, collectively, and, also,
each individually, and (ii) all promises and covenants (including promises to
pay) and representations and warranties of and by the Borrowers made in the
Loan Documents or any instruments or documents delivered pursuant thereto to
be and constitute the joint and several promises, covenants, representations
and warranties of and by each and all of such corporations. The term
"BORROWER" appearing in such singular form shall be deemed a reference to any
of the Borrowers unless the context in which such term is used shall
otherwise require.
"BORROWING BASE" means, as of any time for which the same is
to be determined, the amount (if any) by which (x) the sum of the Initial
Reserves and any additional reserves imposed on availability under the
Revolving Credit pursuant to Section 1.1 hereof is exceeded by (y) the sum of:
(i) 85% of the then outstanding unpaid amount of Eligible Accounts;
plus
(ii) 50% of the value (computed at the lower of market or cost using
the first-in/first-out method of inventory valuation applied by the Company
in accordance with GAAP) of Eligible Inventory;
PROVIDED that the Borrowing Base shall be computed only as against and on so
much of the Collateral as is included on the certificates to be furnished
from time to time by each Borrower pursuant to Section 8.5(a) hereof and, if
required by the Administrative Agent or the Required Lenders pursuant to any
of the terms hereof or any Collateral Document, as verified by such other
evidence required to be furnished to the Administrative Agent pursuant hereto
or pursuant to any such Collateral Document.
"BUSINESS DAY" means any day other than a Saturday or Sunday
on which the Administrative Agent is not authorized or required to close in
Chicago, Illinois and, when used with respect to LIBOR Portions, a day on
which the Administrative Agent is also dealing in United States Dollar
deposits in London, England and Nassau, Bahamas.
"CAPITAL EXPENDITURES" means for any period capital
expenditures (as defined and classified in accordance with GAAP) during such
period by the Company and its Subsidiaries on a consolidated basis, but in
any event excluding (i) advances to artists, reimbursement of costs incurred
by artists and any costs incurred by the Company on behalf of artists, in
each case in the ordinary course of business pursuant to contractual
obligations, (ii) expenditures
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for normal replacement and maintenance programs properly charged to current
operations in accordance with GAAP and (iii) expenditures to restore, repair
or replace real estate, furniture, fixtures, equipment or other fixed assets
lost, damaged or destroyed as a result of a casualty loss.
"CAPITAL LEASE" means any lease of Property which in
accordance with GAAP is required to be capitalized on the balance sheet of
the lessee.
"CAPITALIZED LEASE OBLIGATION" means the amount of the
liability shown on the balance sheet of any Person in respect of a Capital
Lease determined in accordance with GAAP.
"CASH EQUIVALENTS" means all investments of the type permitted
by Sections 8.15(a) through 8.15(g) hereof, inclusive.
"CASH INTEREST EXPENSE" shall mean, with respect to any Person
for any period, the Interest Expense of such Person for such period less all
non-cash items constituting Interest Expense during such period (including
without limitation, amortization of debt discounts and payments of interest
on indebtedness by issuance of indebtedness, and in any event excluding
accruals of interest during such period subsequently payable in cash).
"CHANGE OF CONTROL/MANAGEMENT EVENT" means the occurrence of
any of the following circumstances:
(a) any Person or two or more Persons (other than each of the
Purchasers or their respective Affiliates, employees, partners or members
[the Purchasers and such other parties being hereinafter referred to as the
"PURCHASER GROUP"]) acting in concert acquire beneficial ownership (within
the meaning of Rule 13d-3 of the SEC under the Securities Exchange Act of
1934), directly or indirectly, of Securities of any Borrower (or other
Securities convertible into such Securities) representing 25% or more of
the combined voting power of all securities of any Borrower entitled to
vote in the election of directors (except to the extent such acquisition
results from any Person's conversion of preferred stock acquired by such
Person prior to the Closing Date in such stock's initial public offering,
to common stock of the Company having such voting power; or
(b) during any period of up to 12 consecutive months, whether
commencing before or after the date hereof, the membership of the Board of
Directors of any Borrower changes for any reason (other than by reason of
death, disability, or scheduled retirement) so that the majority of the
Board of Directors is made up of Persons who were not directors at the
beginning of such 12 month period (except to the extent that such change in
the membership of the Board of Directors is the result of (i) the exercise
by any of the Purchaser Group of their voting rights pursuant to Section 5
of the Certificate of the Powers, Designations, Preferences and Rights
governing the Series B Preferred Stock, (ii) the exercise by any of the
Purchaser Group of their rights and privileges pursuant to Section 6.2.5 of
the Investment
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Agreement and (iii) the election or designation by any of the Purchaser
Group of any director to the Board of Directors of the Company).
"CLASS OF NOTES" shall mean the Revolving Credit Notes (taken
as a group) and the Term Credit Notes (taken as a group).
"CLOSING DATE" means December 12, 1997.
"CODE" means the Internal Revenue Code of 1986, as amended,
and any successor statute thereto.
"COLLATERAL" means all properties, rights, interests and
privileges from time to time subject to the Liens granted to the
Administrative Agent for the benefit of the Lenders by the Collateral
Documents.
"COLLATERAL DOCUMENTS" means the Initial Collateral Documents
and all other mortgages, deeds of trust, security agreements, assignments,
financing statements and other documents as shall from time to time secure
the Obligations.
"COMMITMENTS" shall mean the Revolving Credit Commitments and
the Term Credit Commitments.
"COMPANY" is defined in the introductory paragraph hereof.
"CONSOLIDATED EBITDA" shall mean, with reference to any
period, (a) Consolidated Net Income for such period PLUS (b) all amounts
(without duplication) deducted in arriving at such Consolidated Net Income in
respect of (i) Cash Interest Expense, (ii) taxes imposed on or measured by
income or excess profits (including reserves for deferred taxes not payable
currently), (iii) charges for depreciation expense and amortization expense
(including, but not limited to, amortization of intangibles and goodwill),
(iv) debt issuance costs in connection with the Loan Documents, (v)
extraordinary losses, (vi) reserves or charges aggregating not more than
$1,750,000 taken prior to May 31, 1998 in connection with the dispute
regarding the funds escrowed by the Company pursuant to the purchase and sale
agreement between K-tel International, Inc. and River North Studios, Inc.
(which has since changed its name to Intersound, Inc.) referenced in
paragraph 10 of Schedule 6.6 hereto and (vii) all other non-recurring,
non-cash charges LESS (c) all extraordinary gains included in arriving at
such Consolidated Net Income, all determined in accordance with GAAP.
"CONSOLIDATED EXCESS CASH FLOW" for any period shall mean the
amount (if any) by which (x) Consolidated Operating Cash Flow for such period
exceeds (y) the sum (without duplication) of (i) Debt Service during such
period plus (ii) Cash Interest Expense during such period plus (iii) accrued
taxes on or measured by income or excess profits (including reserves for
deferred taxes not payable currently) of the Company or any Subsidiary
payable (or, in the case of a reserve, established) by the Company or any
Subsidiary within twelve months of the close of such period plus (iv) Capital
Expenditures during such period plus
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(v) artist advances made during such period by the Company and its
Subsidiaries in the ordinary course of business to the extent so deducted as
an expense or capitalized by such Persons in accordance with GAAP.
"CONSOLIDATED FUNDED DEBT" means, at any time the same is to
be determined, the aggregate of all Indebtedness for Borrowed Money which
would be listed as a liability on a balance sheet of the Company and its
Subsidiaries determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" for any period shall mean the gross
revenues from any source of the Company and its Subsidiaries for such period
less all expenses and other proper charges (including taxes on income),
determined for the Company and its Subsidiaries on a consolidated basis in
accordance with GAAP.
"CONSOLIDATED NET WORTH" shall mean, as of any date,
consolidated net worth as computed in accordance with GAAP for the Company
and its Subsidiaries on a consolidated basis.
"CONSOLIDATED OPERATING CASH FLOW" for any period shall mean
the amount (if any) by which (x) the sum (without duplication) of (i)
Consolidated Net Income for such period plus (ii) all amounts deducted in
arriving at such Consolidated Net Income in respect of (1) charges during
such period for depreciation expense and amortization expense (including but
not limited to amortization of intangibles and goodwill), (2) Cash Interest
Expense during such period, (3) taxes during such period on or measured by
income or excess profits (including reserves for deferred taxes not payable
currently), (4) artist advances made during such period by the Company and
its Subsidiaries in the ordinary course of business to the extent so deducted
as an expense, (5) debt issuance costs in connection with the Loan Documents
to the extent such costs were capitalized by such Persons in accordance with
GAAP and amortized during such period, (6) losses during such period on the
sale or other disposition of fixed or capital assets and (7) all other
non-cash charges during such period exceeds (y) all amounts included in
arriving at such Consolidated Net Income in respect of (i) profits during
such period upon the sale of fixed or capital assets or liquidation of
investments, (ii) proceeds during such period from casualty losses, (iii) any
other extraordinary gains during such period and (iv) interest income during
such period.
"CONSOLIDATED WORKING CAPITAL" means, at any time the same is
to be determined, the excess, if any, of current assets of the Company and
its Subsidiaries minus current liabilities of the Company and its
Subsidiaries, all as determined on a consolidated basis in accordance with
GAAP, except that there should be excluded from current liabilities Current
Maturities on the Notes.
"CONTROLLED GROUP" means all members of a controlled group of
corporations, partnerships, and all trades or businesses (whether or not
incorporated) under common control which, together with any Borrower or any
Subsidiary, are treated as a single employer under Section 414 of the Code.
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"CURRENT ACCOUNT" means an account receivable of a Borrower
with terms requiring payment within thirty (30) days of the original invoice
date (which shall not be more than five (5) days subsequent to the shipment
date or the date services were fully performed by such Borrower) or the
shipment of the goods or rendition of the services giving rise thereto.
"CURRENT MATURITIES" means, as at any date of determination,
all payments of principal due under terms of any Indebtedness for Borrowed
Money within three calendar months after that date.
"DATED ACCOUNT" means an account receivable of a Borrower with
terms requiring payment in more than thirty (30), but not more than ninety
(90), days from the original invoice date (which shall not be more than five
(5) days subsequent to the shipment date or the date services were fully
performed by such Borrower).
"DEBT SERVICE" means, with reference to any period, the sum of
the aggregate amount of payments required to be made by the Company and its
Subsidiaries during such period in respect of principal on all Indebtedness
for Borrowed Money (whether at maturity, as a result of mandatory sinking
fund redemption, mandatory prepayment, acceleration or otherwise).
"DEFAULT" means any event or condition the occurrence of which
would, with the passage of time or the giving of notice, or both, constitute
an Event of Default.
"DEVICK" means Steven Devick, an individual who is as of the
date hereof the chairman of the Board of Directors and Chief Executive
Officer of the Company.
"DOMESTIC RATE" means a fluctuating interest rate per annum
equal at all times to the greater of:
(a) the rate of interest announced by the Administrative Agent from
time to time as its prime commercial rate as in effect on such day, with
any change in such rate resulting from a change in said prime commercial
rate to be effective as to the Borrowers as of the date of the relevant
change in said prime commercial rate; or
(b) the sum of (x) the rate per annum (rounded upward, if necessary,
to the nearest 1/100th of 1%) equal to the weighted average of the rates on
overnight Federal funds transactions with member banks of the Federal
Reserve System arranged by Federal funds brokers on such day, as set forth
opposite the caption "FEDERAL FUND (EFFECTIVE)" in the daily statistical
release designated as "COMPOSITE 3:30 P.M. QUOTATIONS FOR U.S. GOVERNMENT
SECURITIES", or any successor publication, published by the Federal Reserve
Bank of New York on the Business Day next succeeding such day, PROVIDED
THAT (i) if such day is not a Business Day, the rate for such day shall be
such rate on such transactions on the immediately preceding Business Day as
so published on the next succeeding Business Day, and (ii) if no such rate
is so published on any such next succeeding Business Day, the rate for such
day shall be the average of the rates quoted to the Administrative Agent by
three or more New York or
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Chicago Federal funds brokers on such day for such transactions as
determined by the Administrative Agent, and (y) 1/2 of 1% (0.50%).
"DOMESTIC RATE PORTION" is defined in Section 2.1(a) hereof.
"ELIGIBLE ACCOUNTS" means the aggregate of all Accounts of
each Borrower if and so long as:
(a) all representations and warranties set forth in the Collateral
Documents with respect to such Account are true and correct in all material
respects;
(b) (i) such Account arises out of the sale by such Borrower of
inventory which has been delivered to or accepted by the account debtor on
such Account or out of the rendition of services fully performed by such
Borrower and accepted by such account debtor, and in each case such Account
otherwise represents a final sale (subject to a right of return granted the
account debtor in accordance with the then current prevailing industry
practice) or (ii) such Account (a "LICENSE RECEIVABLE") represents the
Borrower's claim to royalties earned by virtue of its license in the
ordinary course of its business of master recordings or compositions to a
third party pursuant to a binding written contract requiring at least
semiannual cash royalty payments and such Account represents an amount due
from such account debtor for a completed semiannual (or shorter) license
period subject to no future performance from the Borrower and in excess of
any advance royalty such account debtor may have paid;
(c) the account debtor on such Account is (i) located within the
United States of America or Canada (excluding Quebec) or (ii) located in
Quebec or otherwise outside of the United States and Canada so long as (x)
the account debtor with respect to such Account is either EMI, Sony, WEA,
BMG, UNI, Polygram or another distributor reasonably approved by the
Administrative Agent (provided that not more than 10% of the Borrowing Base
is at any time attributable to the Accounts described in this clause (x))
or (y) the Account is supported by insurance acceptable in form and
substance to the Administrative Agent, or the account debtor thereon has
supplied the Company with an irrevocable letter of credit in form and
substance satisfactory to the Administrative Agent, issued by an insurance
company or financial institution, as the case may be, satisfactory to the
Administrative Agent and which has been duly pledged to the Administrative
Agent;
(d) such Account is the valid, binding and legally enforceable
obligation of the account debtor obligated thereon and such account debtor
is not (i) a Subsidiary or an Affiliate of such Borrower, (ii) a
shareholder, director, officer or employee of such Borrower or its
Subsidiary, (iii) the United States of America, or any state or political
subdivision thereof, or any department, agency or instrumentality of any of
the foregoing unless such Borrower has complied with the Assignment of
Claims Act of 1940, as amended, or any similar state or local statute, as
the case may be, to the satisfaction of the Administrative Agent, (iv) a
debtor under any proceeding under the
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United States Bankruptcy Code, as amended, or any other comparable
bankruptcy or insolvency law, or (v) an assignor for the benefit of
creditors;
(e) such Account is not evidenced by an instrument or chattel paper
unless the same has been endorsed and delivered to the Administrative
Agent;
(f) such Account is owned by such Borrower is freely assignable, is
subject to a perfected, first priority Lien in favor of the Administrative
Agent for the benefit of the Lenders, and is free and clear of any other
Lien other than Liens permitted by Section 8.7(a) hereof;
(g) such Account is not owing from an account debtor who is also a
creditor (other than Polygram) or supplier of such Borrower, is not subject
to any offset, counterclaim or other defense with respect thereto and, with
respect to said account receivable or the contract or purchase order out of
which the same arose, no surety bond was required or given in connection
therewith;
(h) such Account is either a Current Account or a Dated Account or a
License Receivable;
(i) if such Account is a Current Account, such Account is not unpaid
more than ninety (90) days after the original invoice date (which must be
not more than five (5) days subsequent to the shipment date or the date
services were fully performed by such Borrower), or, if a Dated Account,
such Account is not more than thirty (30) days past due from the original
due date of the relevant invoice, or, if such Account is a License
Receivable, such Account is not unpaid more than ninety (90) days past the
close of the relevant semiannual (or shorter) license period;
(j) such Account is not owed by an account debtor who is obligated on
Accounts owed to the Borrowers (taken together) more than 25% of the
aggregate unpaid balance of which has been past due for longer than the
relevant period specified in subsection (i) above unless the Administrative
Agent has approved the continued eligibility thereof;
(k) such Account would not cause the total Accounts owing from any
one account debtor and its Affiliate to exceed any credit limit established
for purposes of determining eligibility hereunder by the Administrative
Agent in its reasonable judgment for such account debtor and for which the
Administrative Agent has given the Company at least ten (10) Business Day's
prior notice of the establishment of any such credit limit;
(l) such Account does not arise from a sale to an account debtor on
(i) a bill-and-hold basis or (ii) on a consignment basis (except for such
inventory as is on consignment to Polygram under the terms of its
distribution arrangements with the Company) or (iii) (except to the extent
consistent with the then current prevailing
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industry practice) on a guaranteed sale, sale-or-return, sale-on-approval
or any other repurchase or return basis; and
(m) the Administrative Agent, in the reasonable exercise of its
discretion (including consideration in good faith of any relevant
information provided by the Company), does not believe that the prospect
for payment or performance by the account debtor on such Account, or the
collateral value of such Account, or the Administrative Agent's ability to
realize on such value, is or will be impaired in any material respect
(provided that no Account shall be ineligible solely by virtue of this
clause (m) unless the Administrative Agent shall have first provided the
Company at least thirty (30) Business Days' prior notice of its intent to
classify such Account as ineligible under this clause).
"ELIGIBLE INVENTORY" means all inventory of the Company and
its Subsidiaries (other than packaging, crating and supplies inventory)
constituting finished goods consisting of recorded and packaged CD's, videos,
DVD's, tapes and blank jewel cases or any other recognized commercially
available and distributable music media format or configuration (which, in
the case of such other music media format or configuration, the
Administrative Agent, in its reasonable judgment, deems to be Eligible
Inventory) in each case if and so long as:
(a) all representations and warranties set forth in the Collateral
Documents with respect to such inventory are true and correct in all
material respects;
(b) such inventory is an asset of such Borrower which is freely
assignable, is subject to a perfected, first priority Lien in favor of the
Administrative Agent for the benefit of the Lenders, and is free and clear
of any other Liens other than Liens permitted by Section 8.7(a) and (b)
hereof;
(c) such inventory is located at a Permitted Collateral Location for
such Borrower;
(d) such inventory is not obsolete or slow moving, and is of good and
merchantable quality free from any defects which might adversely affect the
market value thereof; and
(e) the Administrative Agent, in the reasonable exercise of its
discretion (including consideration in good faith of any relevant
information provided by the Company), does not believe that the collateral
value of such inventory, or the Administrative Agent's ability to realize
on such value, is or will be impaired in any material respect (provided
that no inventory shall be ineligible solely by virtue of this clause (e)
unless the Administrative Agent shall have first provided the Company at
least thirty (30) Business Days' prior notice of its intent to classify
such inventory as ineligible under this clause).
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"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, or any successor statute thereto.
"EVENT OF DEFAULT" means any event or condition identified as
such in Section 9.1 hereof.
"EXCLUDED TAXES" means, with respect to the Administrative
Agent and any Lender, (a) income or franchise taxes imposed on (or measured
by) its net income, assets or net worth by the United States, by the
jurisdiction under the laws of which such Lender or Administrative Agent is
organized or in which its principal office is located or in which its
applicable lending office is located, or by any political subdivision of any
of the foregoing, (b) any branch profits tax imposed on such Lender or
Administrative Agent by the United States or any similar tax imposed on such
Lender or Administrative Agent by any other jurisdiction in which any of the
Loan Parties is located and (c) in the case of a Foreign Lender, any
withholding tax that is imposed on amounts payable to such Foreign Lender at
the time such Foreign Lender becomes a party to this Agreement (or designates
a new lending office) or is attributable to such Foreign Lender's failure to
comply with Sections 13.1(b) and (c), except to the extent that such Foreign
Lender (or its assignor, if any) was entitled, at the time of designation of
a new lending office (or assignment), to receive additional amounts from any
Borrower with respect to such withholding tax pursuant to Section 13.1(a)
hereof.
"FINANCIAL COVENANTS means Sections 8.9 through 8.14 hereof,
inclusive, as any of the foregoing may from time to time be modified or
amended, and each replacement to any of such Sections.
"FIXED CHARGE COVERAGE RATIO" is defined in Section 8.13 hereof.
"FOREIGN LENDER" means any Lender that is not a United States
person (as such term is defined in Section 7701(a)(30) of the Code).
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board that are
applicable to the circumstances as of the date of determination and
consistently applied.
"GOVERNMENTAL BODY" shall mean the United States of America or
any state or political subdivision thereof, and any other nation or political
subdivision thereof or any agency, department, commission, board, bureau or
instrumentality of any of the foregoing which exercises jurisdiction over the
Company or any of its Subsidiaries or any of their assets or the conduct of
the business of the Company or any of its Subsidiaries or any of their assets
in any such jurisdiction.
"GOVERNMENTAL REQUIREMENTS" shall mean any law, ordinance,
order, rule or regulation of a Governmental Body.
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"GUARANTOR" means each Subsidiary of the Company (other than
Intersound) that is a signatory hereto or that executes and delivers to the
Administrative Agent a Guaranty along with the accompanying closing documents
required by Section 8.23 hereof.
"GUARANTY" means a letter to the Administrative Agent in the
form of Exhibit F hereto executed by a Subsidiary (other than Intersound)
whereby it acknowledges it is party hereto as a Guarantor under Section 11
hereof and also in the case of any Subsidiary not organized under the laws of
the United States or any State thereof, such other form of guaranty as shall
be reasonably acceptable to the Administrative Agent and the Required Lenders.
"HARNICK WARRANT" means the warrant to purchase 50,000 shares
of common stock of the Company, par value $.001 per share, to be issued to
Carl D. Harnick at the closing of the Investment Agreement.
"HEDGING ARRANGEMENTS" is defined in Section 8.29 hereof.
"HEDGING LIABILITY" shall mean liabilities of the Company to
the Lenders or any of them or to any of their Affiliates arising in
connection with any Hedging Arrangements entered into by the Company or any
Subsidiary with any Lender or any Affiliate of any Lender. Unless and until
the amount of the Hedging Liability is fixed and determined, the Hedging
Liability shall be deemed to be 4% per annum of the notional amount of the
hedge from the date of computation to the date the hedge expires.
"HOUSE OF BLUES VENTURE" means that certain joint venture of
the Company with subsidiaries of HOB Entertainment, Inc. under a joint
venture agreement, dated August 26, 1996.
"IMPERMISSIBLE QUALIFICATION" means, relative to the opinion
or certification of any independent public accountant as to any financial
statement of the Company, any qualification or exception to such opinion or
certification:
(a) which is of a "GOING CONCERN" nature; or
(b) which relates to the limited scope of examination of matters
relevant to such financial statement.
"INDEBTEDNESS FOR BORROWED MONEY" means for any Person
(without duplication) (i) all indebtedness created, assumed or incurred in
any manner by such Person representing money borrowed (including by the
issuance of debt securities), (ii) all indebtedness for the deferred purchase
price of property or services (other than trade accounts payable arising in
the ordinary course of business), (iii) all indebtedness secured by any Lien
upon Property of such Person, whether or not such Person has assumed or
become liable for the payment of such indebtedness, (iv) all Capitalized
Lease Obligations of such Person, (v) all obligations of such Person on or
with respect to letters of credit, bankers' acceptances and other extensions
of credit whether or not representing obligations for borrowed money and (vi)
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Hedging Liability to the extent the same is then due and payable pursuant to
the terms of the relevant Hedging Arrangements. The parties to the Agreement
acknowledge and agree that the following shall not be considered Indebtedness
for Borrowed Money: (i) any or all shares of outstanding Series B Preferred
Stock or Affiliate Preferred Stock, (ii) any dividends (whether or not
declared) payable on Series B Preferred Stock and Affiliate Preferred Stock,
(iii) any interest payable by the Company to the holders of Series B
Preferred Stock or Affiliate Preferred Stock due to the Company's failure to
pay the repurchase price for such preferred stock when such stock is properly
tendered for redemption, (iv) any interest payable by the Company to the
holders of the Purchaser Warrants, the Affiliate Warrants or the Harnick
Warrant due to the Company's failure to pay the put price for such warrant
when such warrant is properly put to the Company for mandatory purchase
pursuant to its terms by virtue of such holder's exercise of such put and (v)
any Hedging Liability to the extent the same is not then due and payable
pursuant to the terms of the relevant Hedging Arrangements.
"INDEMNIFIED TAXES" means any and all present or future taxes
(including, without limitation, any United States interest equalization tax
or similar tax however named applicable to the acquisition or holding of debt
obligations and any interest or penalties with respect thereto), levies,
imposts, duties, fees, charges, stamp taxes, deductions, withholdings,
restrictions and conditions of any nature imposed by any government or any
political subdivision or taxing authority thereof (but excluding any Excluded
Taxes).
"INITIAL COLLATERAL DOCUMENTS" means the Security Agreement,
the Stock Pledge Agreement, the Security Agreement Re: Intellectual Property
and the Life Insurance Assignment.
"INITIAL RESERVES" means, as of any time, the reserves
commencing on the Closing Date imposed for returns, discounts and similar
allowances and aggregating not in excess of 20% of the then unpaid amount of
the Eligible Accounts.
"INTEREST COVERAGE RATIO" is defined in Section 8.12 hereof.
"INTEREST EXPENSE" means the sum of all interest charges
(including accruals of interest during such period subsequently payable in
cash and including imputed interest charges with respect to Capitalized Lease
Obligations and all amortization of debt discount and expense) of the Company
and its Subsidiaries for such period determined in accordance with GAAP.
"INTEREST PERIOD" means, with respect to any LIBOR Portion,
the period commencing on, as the case may be, the creation, continuation or
conversion date with respect to such LIBOR Portion and ending one (1), two
(2), three (3) or six (6) months thereafter as selected by the Company in its
notice as provided herein; provided that all of the foregoing provisions
relating to Interest Periods are subject to the following:
(i) if any Interest Period would otherwise end on a day which is not
a Business Day, that Interest Period shall be extended to the next
succeeding Business Day, unless in the case of an Interest Period the
result of such extension would be to
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carry such Interest Period into another calendar month in which event such
Interest Period shall end on the immediately preceding Business Day;
(ii) no Interest Period may extend beyond the final maturity date of
the relevant Notes;
(iii) the interest rate to be applicable to each Portion for each
Interest Period shall apply from and including the first day of such
Interest Period to but excluding the last day thereof; and
(iv) no Interest Period may be selected if after giving effect thereto
any Borrower will be unable to make a principal payment scheduled to be
made during such Interest Period without paying part of a LIBOR Portion on
a date other than the last day of the Interest Period applicable thereto.
For purposes of determining an Interest Period, a month means a period
starting on one day in a calendar month and ending on a numerically
corresponding day in the next calendar month, PROVIDED, HOWEVER, if an
Interest Period begins on the last day of a month or if there is no
numerically corresponding day in the month in which an Interest Period is to
end, then such Interest Period shall end on the last Business Day of such
month.
"INTERSOUND" is defined in the introductory paragraph hereof.
"INTERSOUND SUB DEBT" means the $5,000,000 in aggregate
principal amount of Subordinated Debt evidenced by those two certain
Convertible Promissory Notes of the Company dated as of January 31, 1997
payable to the order of Intersound, Inc. in the face principal amounts of
$3,125,000 and $1,875,000, respectively, and accrued interest thereon.
"INVESTMENT AGREEMENT" means that certain Investment Agreement
dated as of October 12, 1997 by and among the Company and the Purchasers, as
amended by amendments thereto dated October 28, 1997, October 30, 1997 and
November 25, 1997 and as the same may from time to time be further modified
or otherwise amended in each case without any adverse effect on the ability
of the Company or any Subsidiary to perform its obligations under the Loan
Documents or the rights and benefits of the Administrative Agent or of the
Lenders under the Loan Documents.
"LENDER" means Bank of Montreal, the other signatories hereto
(other than the Loan Parties) and all other lenders becoming parties hereto
pursuant to Section 13.12 hereof.
"LEVERAGE RATIO" means, as of any time the same is to be
determined, the ratio of Consolidated Funded Debt at such time to
Consolidated EBITDA for the then four most recently completed fiscal quarters
of the Company; PROVIDED, HOWEVER, that:
(a) the Leverage Ratio as of the Closing Date shall mean the ratio of
(x) Consolidated Funded Debt at such time to (y) the quotient which results
by dividing (i)
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Consolidated EBITDA for the two fiscal quarters of the Company ended on
or about November 30, 1997 by (ii) 0.50;
(b) the Leverage Ratio as of the close of the fiscal quarter of the
Company ending on or about February 28, 1998 shall mean the ratio of (x)
Consolidated Funded Debt at such time to (y) the quotient which results by
dividing (i) Consolidated EBITDA for the three fiscal quarters of the
Company ended on or about such date by (ii) 0.75.
"LETTERS OF CREDIT" is defined in Section 1.3 hereof.
"LIBOR CONDITION" shall mean the satisfaction on or at any
time after the close of the Company's quarterly accounting period ending on
or about August 31, 1998 of all of the following conditions:
(a) the Leverage Ratio for the two most recently completed
consecutive fiscal quarters of the Company shall be less than 3.00 to 1;
(b) the Interest Coverage Ratio shall have been at least 3.00 to 1 as
of the close of the same two fiscal quarters;
(c) no Default or Event of Default shall exist as of the date on
which the other conditions have been satisfied; and
(d) the Administrative Agent and the Lenders shall have received such
assurances as they may reasonably require to confirm the satisfaction of
the above conditions (it being understood and agreed that a certificate of
the chief financial officer of the Company to the effect that the foregoing
conditions have been satisfied, together with the computations confirming
such satisfaction, shall be sufficient for the foregoing purposes).
The LIBOR Condition shall be deemed satisfied permanently once the above
conditions have been met.
"LIEN" means any mortgage, lien, security interest, pledge,
charge or encumbrance of any kind in respect of any Property, including the
interests of a vendor or lessor under any conditional sale, Capital Lease or
other title retention arrangement.
"LIFE INSURANCE ASSIGNMENT" is defined in Section 4.5 hereof.
"LOAN DOCUMENTS" means this Agreement, the Notes, the
Applications, the Guaranties and the Collateral Documents and each
contractual agreement purporting to amend or modify any of the foregoing.
"LOAN PARTIES" means the Borrowers and the Guarantors, unless
the context in which such term is used shall otherwise require.
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"LOANS" means and includes Revolving Loans and the Term Loan,
unless the context in which such term is used shall otherwise require.
"MAC MUSIC" means MAC Music LLC, a Delaware limited liability
company.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect
on (i) the business, property, condition (financial or otherwise), or results
of operations, or prospects, of the Company and its Subsidiaries taken as a
whole, (ii) the ability of the Company or any Subsidiary to perform its
obligations under the Loan Documents, or (iii) the validity or enforceability
of any of the Loan Documents or the rights or remedies of the Administrative
Agent or of the Lenders thereunder.
"MUSIC RIGHTS" is defined in Section 8.18 hereof.
"NOTES" means and includes the Revolving Credit Notes and the
Term Credit Notes, unless the context in which such term is used shall
otherwise require.
"OBLIGATIONS" means all obligations of each Borrower to pay
principal and interest on the Loans, all reimbursement obligations owing
under the Applications, all fees and charges payable hereunder, and all other
payment obligations of each Borrower arising under or in relation to any Loan
Document, in each case whether now existing or hereafter arising, due or to
become due, direct or indirect, absolute or contingent, and howsoever
evidenced, held or acquired.
"PBGC" means the Pension Benefit Guaranty Corporation or any
Person succeeding to any or all of its functions under ERISA.
"PERMITTED COLLATERAL LOCATION" shall mean for each Borrower,
(i) the locations set forth for such Borrower on Exhibit E hereto, (ii)
locations in the continental United States and Canada (other than Quebec)
which the Company notifies the Administrative Agent in writing are locations
of Collateral and (iii) such other locations as are approved for such
Borrower by the Administrative Agent and the Required Lenders in their
discretion; PROVIDED, HOWEVER, that unless and to the extent the
Administrative Agent and the Required Lenders agree otherwise, such a
location which is not owned by a Borrower (each, a "LEASED LOCATION"), and
such a location which is owned by a Borrower but subject to a mortgage or
similar lien in favor of a third party (each a "MORTGAGED LOCATION"), shall
in no event constitute a Permitted Collateral Location unless each Person
owning or controlling such leased location or holding a lien on such
mortgaged location shall have waived all of its right, title and interest in
and to any inventory located thereon in writing in form and substance
reasonably satisfactory to the Administrative Agent and the Required Lenders;
FURTHER PROVIDED, HOWEVER, that if and so long as no Event of Default has
occurred and is continuing, no such agreement need be obtained for (i)
locations owned or leased by Polygram or (ii) leased locations where
inventory for all the Borrowers aggregating at all such locations (all such
locations taken together) of not more than $500,000 in value is located in
the ordinary course of a Borrower's business for delivery to purchasers
thereof.
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"PERMITTED LIENS" is defined in Section 8.7 hereof.
"PERSON" means an individual, partnership, corporation,
association, trust, unincorporated organization or any other entity or
organization, including a government or agency or political subdivision
thereof.
"PLAN" means any employee pension benefit plan covered by
Title IV of ERISA or subject to the minimum funding standards under Section
412 of the Code that either (i) is maintained by a member of the Controlled
Group for employees of a member of the Controlled Group, or (ii) is
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to
which a member of the Controlled Group is then making or accruing an
obligation to make contributions or has within the preceding five plan years
made contributions.
"POLYGRAM" means Polygram Group Distribution, Inc., a
corporation.
"POLYGRAM DISTRIBUTION AGREEMENT" means that certain
Distribution Agreement dated as of May 14, 1993 by and between Polygram and
the Company as amended prior to the Closing Date by amendments thereto dated
November 1, 1995, December 18, 1996 and July 25, 1997 and as the same may
from time to time be further amended after the Closing Date.
"PROPERTY" means any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"PURCHASE MONEY LIENS" is defined in Section 8.7(c) hereof.
"PURCHASERS" means SK-Palladin Partners and MAC Music.
"PURCHASER WARRANTS" means the warrants to purchase an
aggregate of 3,600,000 shares of common stock of the Company, par value $.001
per share, to be purchased by the Purchasers on the closing of the Investment
Agreement.
"REQUIRED LENDERS" means, as of the date of determination
thereof, those Lenders (which may include the Lender then acting as the
Administrative Agent) holding at least 66-2/3% of the Commitments or, in the
event that no Commitments are outstanding hereunder, the Administrative Agent
and those Lenders (which may include the Lender then acting as the
Administrative Agent) holding at least 66-2/3% in aggregate unpaid principal
amount of the Loans and credit risk on the Letters of Credit outstanding
hereunder.
"RESTRICTED ACCOUNT" is defined in Section 4.2 hereof.
"RESTRICTED PAYMENTS" is defined in Section 8.16(a) hereof.
"REVOLVING CREDIT" is defined in Section 1.1 hereof.
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"REVOLVING CREDIT COMMITMENTS" means the commitments of the
Lenders to extend credit under the Revolving Credit in the amounts set forth
opposite their signatures hereto under the heading "REVOLVING CREDIT
COMMITMENT" and opposite their signatures on Assignment Agreements delivered
pursuant to Section 13.12 hereof under the heading "REVOLVING CREDIT
COMMITMENT", as such amounts may be reduced pursuant hereto. As of the date
hereof, the aggregate amount of Revolving Credit Commitments is $10,000,000.
"REVOLVING LOANS" is defined in Section 1.2 hereof.
"REVOLVING CREDIT TERMINATION DATE" means December 1, 2000, or
such earlier date on which the Revolving Credit Commitments are terminated in
whole pursuant to Section 2.9, 9.2 or 9.3 hereof.
"SEC" means the federal Securities and Exchange Commission,
and any successor thereto.
"SECURITIES ACT" means the federal Securities Act of 1933, as
amended.
"SECURITY AGREEMENT" means the Security Agreement dated as of
even date herewith being executed and delivered by the Company and its
current Subsidiaries substantially concurrent with the execution hereof.
"SECURITY AGREEMENT RE: INTELLECTUAL PROPERTY" means the
Security Agreement Re: Intellectual Property dated as of even date herewith
being executed by the Company and its Subsidiaries substantially concurrent
with the execution hereof.
"SERIES B PREFERRED STOCK" means an aggregate of 20,000 shares
of Series B Convertible Preferred Stock of the Company, par value $.001 per
share, to be purchased by SK-Palladin Partners and MAC Music pursuant to the
Investment Agreement and any and all dividends thereon.
"S-K PALLADIN PARTNERS" means S-K Palladin Partners LP, a
Delaware limited partnership.
"STOCK PLEDGE AGREEMENT" means the Pledge Agreement dated as
of even date herewith to be executed by the Company and its current
Subsidiaries substantially concurrent with the execution hereof.
"SUBORDINATED INDEBTEDNESS" means any Indebtedness for
Borrowed Money which is subordinated in right of payment to the prior payment
of the Obligations pursuant to subordination provisions approved in writing
by the Administrative Agent and Required Lenders, pursuant to documentation,
containing interest rates, payment terms, maturities, amortization schedules,
covenants, defaults, remedies, subordination provisions and other material
terms in each case in form and substance satisfactory to the Administrative
Agent and Required Lenders in their reasonable discretion.
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The term "SUBSIDIARY" shall mean, as to any particular parent
corporation, any other corporation more than 50% of the outstanding Voting
Stock of which is at the time directly or indirectly owned by such parent
corporation or by any one or more other corporations or other entities which
are themselves subsidiaries of such parent corporation. The term
"SUBSIDIARY" shall mean, when used with reference to a Borrower, a subsidiary
of, respectively, the Company or Intersound.
"SYNDICATION AGENT" is defined in the introductory paragraph
hereof.
"TERM CREDIT" is defined in Section 1.4 hereof.
"TERM CREDIT COMMITMENTS" means the commitments of the Lenders
to make loans under the Term Credit in the amounts set forth opposite their
signatures hereto under the heading "TERM CREDIT COMMITMENT" and opposite
their signatures on Assignment Agreements delivered pursuant to Section 13.12
hereof under the heading "TERM CREDIT COMMITMENT", as such amounts may be
reduced pursuant hereto. As of the date hereof, the aggregate amount of Term
Credit Commitments is $20,000,000.
"TERM LOANS" is defined in Section 1.4 hereof.
"TERM CREDIT NOTES" is defined in Section 1.4 hereof.
"TRANSACTION SECURITIES" means the Series B Preferred Stock,
the Affiliate Preferred Stock, the Purchaser Warrants, the Affiliate Warrants
and the Harnick Warrant.
"UNFUNDED VESTED LIABILITIES" means, for any Plan at any time,
the amount (if any) by which the present value of all vested nonforfeitable
accrued benefits under such Plan exceeds the fair market value of all Plan
assets allocable to such benefits, all determined as of the then most recent
valuation date for such Plan, but only to the extent that such excess
represents a potential liability of a member of the Controlled Group to the
PBGC or the Plan under Title IV of ERISA.
"VOTING STOCK" shall mean securities of any class or classes
membership interests or other ownership rights of or in a Person, the holders
of which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the board of directors or managers of such Person (or Persons
performing similar functions).
"WELFARE PLAN" means a "welfare plan" as defined in Section
3(1) of ERISA.
"WHOLLY-OWNED SUBSIDIARY" means a Subsidiary of which all of
the issued and outstanding shares of capital stock (other than directors'
qualifying shares as required by law) or other equity interests are owned by
any Borrower and/or one or more Wholly-Owned Subsidiaries within the meaning
of this definition.
SECTION 5.2. INTERPRETATION. The foregoing definitions are
equally applicable to both the singular and plural forms of the terms
defined. The words "HEREOF", "HEREIN", and "
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HEREUNDER" and words of like import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. All references to time of day herein are references to Chicago,
Illinois time unless otherwise specifically provided. Where the character or
amount of any asset or liability or item of income or expense is required to
be determined or any consolidation or other accounting computation is
required to be made for the purposes of this Agreement, it shall be done in
accordance with GAAP except where such principles are inconsistent with the
specific provisions of this Agreement.
SECTION 5.3. ACCOUNTING TERMS. For purposes of this Agreement, all
accounting terms not otherwise defined herein shall have the meanings
assigned to such terms in conformity with GAAP. Financial statements and
other information furnished to the Administrative Agent pursuant to Section
8.5 shall be prepared in accordance with GAAP (as in effect at the time of
such preparation) on a consistent basis. In the event any "Accounting
Changes" (as defined below) shall occur and such changes affect financial
covenants, standards or terms in this Agreement, then the Company, the
Administrative Agent and the Lenders agree to enter into negotiations in
order to amend such provisions of this Agreement so as to equitably reflect
such Accounting Changes with the desired result that the criteria for
evaluating the financial condition of the Company and its Subsidiaries shall
be the same after such Accounting Changes as if such Accounting Changes had
not been made, and until such time as such an amendment shall have been
executed and delivered by the Borrowers, the Administrative Agent and the
Required Lenders, (A) all financial covenants, standards and terms in this
Agreement shall be calculated and/or construed as if such Accounting Changes
had not been made, and (B) the Company shall prepare footnotes to each
compliance certificate and the financial statements required to be delivered
hereunder that show the differences between the financial statements
delivered (which reflect such Accounting Changes) and the basis for
calculating financial covenant compliance (without reflecting such Accounting
Changes). "ACCOUNTING CHANGES" means: (a) changes in accounting principles
required by GAAP and implemented by the Company and any of its Subsidiaries;
(b) changes in accounting principles recommended by certified public
accountants of the Company or any of its Subsidiaries; or (c) changes in
carrying value of the Company's (or any of its Subsidiaries') assets,
liabilities or equity accounts resulting from the application of purchase
accounting principles.
SECTION 6. REPRESENTATIONS AND WARRANTIES.
Each Borrower represents and warrants to the Administrative Agent and
the Lenders as follows:
SECTION 6.1. ORGANIZATION AND POWER. Each Borrower is duly organized
and existing under the laws of the state of its organization, and is duly
licensed or qualified to do business in each state where the nature of the
assets owned or leased by it or business conducted by it requires such
licensing or qualification and in which the failure to be so licensed or
qualified would have a Material Adverse Effect and has all necessary power to
carry on its contemplated business.
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SECTION 6.2. CORPORATE AUTHORITY AND VALIDITY OF OBLIGATIONS. Each
Borrower has full right, power and authority to enter into this Agreement, to
make the borrowings herein provided for, to issue the Notes in evidence
thereof, to execute and deliver the other Loan Documents executed and
delivered or to be executed and delivered by it, and to perform each and all
of the matters and things herein and therein provided for. Each Subsidiary
has full right, power and authority to enter into the Loan Documents executed
by it and to perform each and all of the matters and things therein provided
for. The Loan Documents do not, nor will the performance or observance by
the Company or any Subsidiary of any of the matters and things herein or
therein provided for, contravene any provision of law or any charter, by-law,
operating agreement or similar agreement of the Company or any such
Subsidiary or constitute a breach or default under any covenant, indenture or
agreement of or affecting the Company or any such Subsidiary where such
breach or default would have a Material Adverse Effect.
SECTION 6.3. SUBSIDIARIES. Each Subsidiary is duly organized and
existing under the laws of the jurisdiction of its organization, and duly
licensed or qualified to do business in each state or other jurisdiction
where the nature of the assets owned or leased by it or business conducted by
it requires such licensing or qualification and in which the failure to be so
licensed or qualified would have a Material Adverse Effect and has all
necessary corporate power to carry on its present business. Schedule 6.3
hereto identifies each Subsidiary, the jurisdiction of its organization, the
percentage of issued and outstanding shares of each class of its capital
stock or other equity interest owned by the Company and the Subsidiaries and,
if such percentage is not 100% (excluding directors' qualifying shares as
required by law), a description of each class of its authorized capital stock
or other equity interest and the number of shares of each class issued and
outstanding. All of the outstanding shares of capital stock of or other
equity interest in each Subsidiary are validly issued and outstanding and
fully paid and nonassessable, and all shares or other equity interests in
each Subsidiary indicated on Schedule 6.3 as owned by the Company or a
Subsidiary are owned, beneficially and of record, by the Company or such
Subsidiary free and clear of all Liens other than the Lien of the
Administrative Agent on the shares and other equity interests of each
Subsidiary. There are no outstanding commitments or other obligations of any
Subsidiary to issue, and no options, warrants or other rights of any Person
to acquire, any shares of any class of capital stock of or other equity
interest in any Subsidiary.
SECTION 6.4. USE OF PROCEEDS; REGULATION U. The Borrowers shall use
proceeds of the Loans and other extensions of credit made available hereunder
solely for the purpose of refinancing the BOM Bridge Loans and repaying
(prior to May 31, 1998) all or a portion of the Intersound Sub Debt and
funding their working capital needs. Neither the Company nor any Subsidiary
is engaged in the business of extending credit for the purpose of purchasing
or carrying margin stocks (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System), and no part of the proceeds of any
loan or extension of credit hereunder will be used to purchase or carry any
margin stock or extend credit to others for the purpose of purchasing or
carrying any margin stock if as a result thereof such loan or other extension
of credit would violate Regulation U or any interpretation thereof.
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SECTION 6.5. FINANCIAL STATEMENTS. (a) COMPANY. The consolidated
balance sheet of the Company and its Subsidiaries as at May 31, 1997 and the
related consolidated statements of income and cash flows of the Company and its
Subsidiaries for the fiscal year then ended, and accompanying notes thereto,
which financial statements are accompanied by the audit report of Ernst & Young
LLP, independent public accountants, and the unaudited interim consolidated
balance sheet of the Company and its Subsidiaries as at July 31, 1997 and the
related consolidated statements of income and cash flows of the Company and its
Subsidiaries for the two (2) months then ended, heretofore furnished to the
Administrative Agent, fairly present the consolidated financial condition of the
Company and its Subsidiaries as at said dates and the consolidated results of
their operations and cash flows for the periods then ended in conformity with
generally accepted accounting principles applied on a consistent basis (subject
in the case of such interim statements, to normal year-end audit adjustments).
Neither the Company nor any Subsidiary has contingent liabilities which are
material to it other than as indicated on such financial statements or, with
respect to future periods, on the financial statements furnished pursuant to
Section 8.5 hereof. Since July 31, 1997, there has been no change in the
condition (financial or otherwise) or business prospects of any Borrower or the
Company and its Subsidiaries taken as a whole except those occurring in the
ordinary course of business, none of which individually or in the aggregate have
been materially adverse.
(b) GOOD TITLE. The Company and its Subsidiaries have good and
defensible title to their assets as reflected on the most recent consolidated
balance sheet of the Company and its Subsidiaries furnished to the Lenders
(except for sales of assets by the Company and its Subsidiaries in the
ordinary course of business), subject to no Liens other than such thereof as
are permitted by Section 8.7 hereof.
SECTION 6.6. LITIGATION, TAXES AND APPROVALS. Except as set forth in
Schedule 6.6 hereto, there is no litigation or governmental proceeding
pending, nor to the knowledge of any Borrower threatened, against the Company
or any Subsidiary or for which any of them are liable which if adversely
determined would result in a Material Adverse Effect. The United States
federal income tax returns of the Company and its Subsidiaries for the
taxable year ended May 31, 1996 and for all taxable years ended prior to said
date have been filed with the Internal Revenue Service, and any additional
assessments in connection with any such years have been paid or the
applicable statute of limitations therefor has expired. No objections to or
controversies in respect of the United States federal income tax returns of
the Company or any Subsidiary are pending or threatened which, if adversely
determined, would have a Material Adverse Effect. No authorization, consent,
license, or exemption from, or filing or registration with, any court or
governmental department, agency or instrumentality, is or will be necessary
to the valid execution, delivery or performance by the Company or any
Subsidiary of any Loan Document to be executed and delivered by it, except
for filing of financing statements and other documents evidencing the
Administrative Agent's lien in the Collateral.
SECTION 6.7. BURDENSOME CONTRACTS WITH AFFILIATES. Except as
disclosed on Schedule 6.7 hereto, as the same may be updated from time to
time with the consent of the Agent and Required Lenders, all material
contracts and agreements between the Company or
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any of its Subsidiaries and their Affiliates are on terms and conditions
which are no less favorable to the Company or such Subsidiary than would be
usual and customary in similar contracts or agreements between Persons not
affiliated with each other.
SECTION 6.8. ERISA. The Company and each Subsidiary are each in
compliance in all material respects with the Employee Retirement Income
Security Act of 1974 ("ERISA") to the extent applicable to it and has
received no notice to the contrary from the Pension Benefit Guaranty
Corporation ("PBGC"), and, in the event of the Company's or any Subsidiary's
partial or total withdrawal from any pension plans, multi-employer pension
plans or non-payment by other employer participants therein, the liability of
the Company and its Subsidiaries for any unfunded vested benefits thereunder
would not result in a Material Adverse Effect.
SECTION 6.9. FULL DISCLOSURE. The statements and information
furnished in writing by the Borrowers to either the Administrative Agent or
the Lenders in connection with the negotiation of this Agreement and the
commitments by the Lenders to provide all or part of the financing
contemplated hereby do not, taken as a whole, contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
material statements contained therein or herein not misleading, except for
such thereof as were corrected in subsequent written statements furnished the
Lenders prior to the initial extension of credit hereunder (the Lenders
acknowledging that as to any projections furnished to the Lenders, the
Company only represents that the same were prepared on the basis of
information and estimates it believes to be reasonable). There is no fact
peculiar to the Company or any Subsidiary which the Company has not disclosed
to the Lenders in writing which materially adversely affects nor, so far as
the Borrowers now can reasonably foresee, is reasonably likely to have a
Material Adverse Effect.
SECTION 6.10. COMPLIANCE WITH LAW. (a) Neither the Company nor any
Subsidiary is (i) in default with respect to any order, writ, injunction or
decree or (ii) in default in any material respect under any Governmental
Requirement (including ERISA, the Occupational Safety and Health Act of 1970
and laws and regulations establishing quality criteria and standards for air,
water, land and toxic waste) of any Governmental Body default with respect to
or under which is reasonably likely to result in a Material Adverse Effect;
and (b) without limiting the generality of the foregoing, the Company and
each Subsidiary are each in compliance with all applicable state and federal
environmental, health and safety statutes and regulations, including, without
limitation, regulations promulgated under the Resource Conservation and
Recovery Act of 1976, 42 U.S.C. Sections 6901 ET SEQ., except where failure
to be in compliance is reasonably likely not to have a Material Adverse
Effect, and, to the Borrowers' knowledge, neither the Company nor any
Subsidiary will have acquired, incurred or assumed, directly or indirectly,
any contingent liability in connection with the release of any toxic or
hazardous waste or substance into the environment which is reasonably likely
to have a Material Adverse Effect. Insofar as known to the responsible
officers of each Borrower, neither the Company nor any Subsidiary is liable,
in whole or in part, for, nor are any of the assets or property of the
Company or any Subsidiary subject to a lien in favor of any Governmental Body
for any material liability arising from or in any way relating to, the costs
of cleaning up, remediating or responding to a release of hazardous
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substances (including, without limitation, petroleum, its by-products or
derivatives, or other hydrocarbons).
SECTION 6.11. SOLVENCY, ETC. (a) On the date of the initial Loan
hereunder, after giving effect to the credit extended hereunder on such date,
(i) the assets of each Borrower, at a fair valuation, will exceed its
liabilities, including contingent liabilities, (ii) the remaining capital of
the each Borrower will not be unreasonably small to conduct or in relation to
its business or any transaction in which it intends to engage, and (iii) each
Borrower will not have incurred debts, and does not intend to incur debts,
beyond its ability to pay such debts as they mature.
(b) On the date of the initial Loan hereunder, after giving effect to
the credit extended hereunder on such date, (i) the assets of the Company and
its Subsidiaries, taken as a whole, at a fair valuation, will exceed their
liabilities, including contingent liabilities, (ii) the remaining capital of
the Company and its Subsidiaries, taken as a whole, will not be unreasonably
small to conduct or in relation to its business or any transaction in which
they intend to engage, and (iii) the Company and its Subsidiaries, taken as a
whole, will not have incurred debts, and do not intend to incur debts, beyond
their ability to pay such debts as they mature.
(c) For purposes of this Section, "DEBT" means any liability on a
claim, and "CLAIM" means (i) right to payment, whether or not such right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured, or unsecured, or
(ii) right to an equitable remedy for breach of performance if such breach
gives rise to a payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured, or unsecured.
SECTION 7. CONDITIONS PRECEDENT.
SECTION 7.1. ALL ADVANCES. The obligation of the Lenders to make any
Revolving Loan or issue any Letter of Credit under the Revolving Credit or
make the Term Loan under the Term Credit (including the first such extension
of credit) shall be subject to the satisfaction of the following conditions
precedent at the time of the extension of such credit:
(a) each of the representations and warranties set forth herein
and in the other Loan Documents shall be true and correct in all
material respects as of the date of such advance or issuance (except
(i) in the case of the initial credit extension, the representations
and warranties made in Section 6.5 hereof shall be deemed to refer to
the most recent financial statements delivered to the Lenders pursuant
to Section 8.5 hereof and (ii) to the extent that such representations
and warranties expressly relate to an earlier date (in which case such
representations and warranties shall have been true and accurate on and
as of such earlier date));
(b) no material adverse change shall have occurred in the
condition (financial or otherwise) of the Company and its Subsidiaries
taken as a whole since the date of
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the most recent monthly financial statements furnished to the Lenders
pursuant to Sections 8.5(b) hereof;
(c) no Default or Event of Default shall have occurred and be
continuing;
(d) in the case of each request for a Revolving Loan or Letter of
Credit, after giving effect to such extension of credit, the aggregate
principal amount of all Revolving Loans and Letters of Credit
outstanding under this Agreement shall not exceed the lesser of (1) the
Revolving Credit Commitments or (2) the Borrowing Base; and
(e) in the case of the issuance of each Letter of Credit, the
Administrative Agent shall have received a properly completed
Application therefor and, in the case of an extension or increase in
the amount of the Letter of Credit, the Administrative Agent shall have
received a written request therefor, in a form acceptable to the
Administrative Agent, with such Application or written request, in each
case to be accompanied by the fees called for hereby.
Any request made by any Borrower to the Administrative Agent for a Loan or
Letter of Credit hereunder shall be deemed to constitute a representation and
warranty that the applicable conditions specified above exist as of such date.
Upon the request of the Administrative Agent, each Borrower so requested shall
furnish a certificate executed by its chief financial officer to confirm the
foregoing.
SECTION 7.2. INITIAL ADVANCE. At or prior to the time of the initial
Loan under the Revolving Credit or Term Credit, the following conditions
precedent shall also have been satisfied:
(a) The Administrative Agent shall have received the following for
the account of the Lenders (each to be properly executed and completed)
and the same shall have been approved as to form and substance by the
Administrative Agent:
(i) this Agreement and the Notes;
(ii) a Guaranty from each Subsidiary not a party hereto;
(iii) the Initial Collateral Documents and any documentation
necessary to perfect the liens thereby created (including, without
limitation, all certificates of capital stock of the Subsidiaries
which are corporations together with executed blank stock powers
therefor, and all financing statements requested by the
Administrative Agent in connection with the Initial Collateral
Documents) to the extent required by Section 4.1 hereof;
(iv) (x) certified copies of resolutions of the board of
directors of each Borrower authorizing the execution, delivery and
performance of this Agreement and such Borrower's Notes,
indicating the authorized signers of this
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Agreement and the Borrower's Notes and all other documents
relating thereto and the specimen signatures of such signers and
(y) copies of such Borrower's certificate or articles of
incorporation and by-laws certified by the secretary or other
appropriate officer of such Borrower together with a certificate
of good standing certified by the appropriate governmental officer
in the jurisdiction of such Borrower's incorporation;
(v) (x) certified copies of resolutions of the board of
directors of each Guarantor authorizing the execution, delivery
and performance of this Agreement, indicating the authorized
signers of this Agreement and all other documents relating thereto
and the specimen signatures of such signers and (y) copies of such
Guarantor's certificate or articles of incorporation and by-laws
certified by the Secretary or other appropriate officer of such
Guarantor together with a certificate of good standing certified
by the appropriate governmental officer in the jurisdiction of
such Guarantor's incorporation;
(vi) evidence of the maintenance of insurance as required
hereby or by the Initial Collateral Documents;
(vii) copies of all instruments evidencing or setting
forth terms and conditions applicable to the Intersound Sub Debt;
and
(viii) a written consent from the venture partner of the
Company in the House of Blues Venture to the collateral assignment
of the Company's equity interest in the House of Blues Venture
pursuant to the Stock Pledge Agreement as security for the
Obligations;
(b) The Administrative Agent shall have received evidence
reasonably satisfactory to it that the Company shall have received on
at any time after November 20, 1997 net cash proceeds of at least
$20,700,000 as a result of (i) capital contributions from existing
shareholders in the Company or (ii) from the Company's issuance and
sale, whether by public offering or private placement, of equity
securities (in the case of any such public offering or private
placement, net only of reasonable underwriting discounts and
commissions and other ordinary out-of-pocket expenses incurred by the
Company directly incurred and payable as a result of such issuance) or
(iii) a combination of the foregoing;
(c) All reasonable legal fees charged, and reasonable costs and
expenses incurred, by counsel to the Administrative Agent prior to the
Closing Date in connection with the preparation of the Loan Documents
shall have been paid;
(d) The Administrative Agent shall have received for its own
account the fees to be received by it at such time by agreement with
the Company; and
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(e) The Administrative Agent shall have received for the account
of the Lenders such other agreements, instruments, documents and
certificates as the Administrative Agent may reasonably request.
SECTION 7.3. LEGAL MATTERS. The Lenders shall have received the
written opinions of acceptable counsel for the Company and each Subsidiary
party to the Loan Documents, in form and substance satisfactory to the
Administrative Agent and its counsel, with respect to:
(a) the due organization and existence of the Company and each
such Subsidiary and the due licensing or qualification of the Company
and each such Subsidiary in all jurisdictions where the nature of the
assets owned or leased by them or business conducted by them requires
such licensing or qualification and in which the failure to be so
licensed or qualified would materially and adversely affect the
business, properties or operations of the Company and its Subsidiaries
taken as a whole;
(b) the power and authority of each Loan Party, to enter into the
Loan Documents and to perform and observe all the matters and things
therein provided for and the fact that the execution and delivery of
the Loan Documents will not, nor will the observance or performance of
any of the matters or things therein or herein provided for, contravene
any provision of law (including federal securities laws) or of the
charter or by-laws, operating agreement or management agreement of the
Company or any such Subsidiary or constitute a material breach of or
default under any provision of any material covenant, indenture or
agreement binding upon the Company or any such Subsidiary or affecting
any of their properties or assets;
(c) the due authorization for and the validity and enforceability
of the Loan Documents;
(d) the fact that no governmental authorization, consent,
exemption or withholding of objection is required with respect to the
lawful execution, delivery and performance of the Loan Documents other
than such thereof as have been obtained and are in full force and
effect;
(e) the lack, to the knowledge of such counsel, of any legal or
administrative proceedings pending or threatened against the Company or
any Subsidiary which, if adversely determined, would result in a
Material Adverse Effect; and
(f) such other matters as the Administrative Agent or its counsel
may reasonably require.
SECTION 7.4. INITIAL LOANS; AMENDMENT AND RESTATEMENT. The
Term Loan, together with the proceeds received by the Company on the Closing
Date upon the closing of the Investment Agreement, shall be in an amount
sufficient to, and the Borrowers shall (on the Closing Date) apply such Loans
to, repay the BMO Bridge Loans, all of which will then be held by BMO.
Simultaneously with and effective immediately upon the disbursement of such
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initial Loans, (i) the loan agreement under which the BMO Bridge Loans were
originally extended (the "PRIOR LOAN AGREEMENT") shall terminate and be
superseded by this Agreement, (ii) this Agreement shall be deemed to amend
and restate the Prior Loan Agreement in its entirety, with the Notes issued
hereunder to be issued in substitution and replacement for the notes
previously evidencing the BMO Bridge Loans and (iii) the security agreements
entered into in connection with the Prior Loan Agreement to secure the BMO
Bridge Loans shall terminate and be superseded by the Initial Collateral
Documents.
SECTION 8. COVENANTS.
Each Borrower agrees that, so long as any credit is available to or in
use by any Borrower hereunder, except to the extent compliance in any case or
cases is waived in writing by the Required Lenders (except that each Borrower
other than the Company is making such agreements only as to itself and its
subsidiaries):
SECTION 8.1. MAINTENANCE OF BUSINESS. The Company will, and will
cause each Subsidiary to, preserve and keep in force and effect all licenses
and permits necessary to the proper conduct of their respective businesses
except where the failure to do so would not result in a Material Adverse
Effect.
SECTION 8.2. MAINTENANCE. The Company will, and will cause each
Subsidiary to, maintain, preserve and keep their plant, properties and
equipment (other than obsolete or worn out equipment held for sale or
disposition) in good repair, working order and condition (ordinary wear and
tear excepted) and the Company will, and will cause each Subsidiary to, from
time to time make all needful and proper repairs, renewals, replacements,
additions and betterments thereto so that at all times the efficiency thereof
shall be substantially preserved and maintained, in each case where the
failure to do so is reasonably likely to have a Material Adverse Effect.
SECTION 8.3. TAXES. The Company will, and will cause each Subsidiary
to, duly pay and discharge all taxes, rates, assessments, fees and
governmental charges upon or against any of them or against their respective
properties, in each case before the same become delinquent and before
penalties accrue thereon, unless and to the extent that the same are being
contested in good faith and by appropriate proceedings, in each case where
the failure to do so is reasonably likely to have a Material Adverse Effect.
SECTION 8.4. INSURANCE. The Company will, and will cause each
Subsidiary to, insure and keep insured, with good and responsible insurance
companies, all insurable property owned by them which is of a character
usually insured by companies similarly situated and operating like
properties; and the Company will, and will cause each Subsidiary to, insure
such other hazards and risks (including employers' and public liability
risks) with good and responsible insurance companies as and to the extent
usually insured by companies similarly situated and conducting similar
businesses. The Company shall in any event maintain insurance on the
Collateral to the extent required by the Collateral Documents. The Company
will upon request of the Administrative Agent furnish a certificate setting
forth in summary form the nature and extent of the insurance maintained
pursuant to this Section.
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SECTION 8.5. FINANCIAL REPORTS. The Company will, and will cause each
Subsidiary to, maintain a standard and modern system of accounting in
accordance with sound accounting practice and will furnish to the Lenders and
their duly authorized representatives such information respecting the
business and financial condition of the Company and its Subsidiaries as any
Lender or the Administrative Agent may reasonably request; and without any
request, will furnish to the Lenders:
(a) as soon as available, and in any event no later than thirty
(30) days after the close of each monthly accounting period of the
Company, a Borrowing Base certificate for the Borrowers in the form
attached hereto as Exhibit C showing a separate computation of each
Borrower's Borrowing Base in reasonable detail as of the close of
business on the last day of the immediately preceding month, together
with such other information as is therein required, each prepared by
the Company and certified to by the President or chief financial
officer of the Company (it being understood and agreed that absent any
Event of Default, the information on such certificate regarding
inventory need only be updated for the certificate most closely
corresponding to the close of a monthly accounting period of such
Borrower);
(b) as soon as available, and in any event within thirty (30)
days after the close of each monthly accounting period of the Company,
a copy of the consolidated balance sheet of the Company and its
Subsidiaries as of the last day of such period and the consolidated
statements of income, retained earnings and cash flows of the Company
and its Subsidiaries for the month and for the fiscal year-to-date
period then ended, each in reasonable detail showing in comparative
form the figures for the corresponding date and period in the previous
fiscal year, prepared by the Company in accordance with GAAP (subject
to year end audit adjustments, none of which are material) and
certified to by the President or chief financial officer of the Company;
(c) as soon as available, and in any event within thirty (30)
days after the close of each monthly accounting period of the Company,
an accounts receivable and accounts payable aging, an accounts
receivable concentration and reconciliation report and an inventory
report (broken down by category), one for each Borrower separately and
each as of the close of such period and in reasonable detail prepared
by the Company and certified to by the President or chief financial
officer of the Company;
(d) as soon as available, and in any event within ninety (90)
days after the close of each annual accounting period of the Company, a
copy of the consolidated balance sheet of the Company and its
Subsidiaries as of the last day of the period then ended and the
consolidated statements of income, retained earnings and cash flows of
the Company and its Subsidiaries for the period then ended, and
accompanying notes thereto, each in reasonable detail showing in
comparative form the figures for the previous fiscal year, accompanied
by an opinion without any Impermissible Qualifications thereon of Ernst
& Young LLP or another firm of independent public accountants of
recognized national standing, selected by the Company and satisfactory
to the Required Lenders, to the effect that the financial statements
have been prepared
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in accordance with GAAP and present fairly in accordance with GAAP the
consolidated financial condition of the Company and its Subsidiaries as
of the close of such fiscal year and the results of their operations
and cash flows for the fiscal year then ended and that an examination
of such accounts in connection with such financial statements has been
made in accordance with generally accepted auditing standards;
(e) within the period provided in subsection (d) above, the
written statement of the accountants who certified the audit report
thereby required that in the course of their audit they have obtained
no knowledge of any Default or Event of Default with respect to any of
the Financial Covenants, or, if such accountants have obtained
knowledge of any such Default or Event of Default, they shall disclose
in such statement the nature and period of the existence thereof;
(f) as soon as available, and in any event within forty-five (45)
days after the close of each quarterly accounting period of the
Company, a certificate of an authorized financial officer of the
Company stating that such officer has reviewed the provisions of this
Agreement and setting forth: (aa) the information and computations (in
sufficient detail) required in order to establish whether the Company
was in compliance with the Financial Covenants at the end of the period
covered by the financial statements then being furnished, and (ab) to
the best such officer's knowledge, whether there exists on the date of
the certificate or existed at any time during the period covered by
such financial statement any Default or Event of Default and, if any
such condition or event exists on the date of the certificate or
existed during such period, specifying the nature and period of
existence thereof and the action the Borrowers are taking, have taken
or propose to take with respect thereto;
(g) promptly after the sending or filing thereof, copies of all
proxy statements, financial statements and reports any Borrower sends
generally to its shareholders, and copies of all other regular,
periodic and special reports and all registration statements any
Borrower files with the SEC or any successor thereto (including without
limitation Forms 10-Q and 10-K), or with any national securities
exchanges;
(h) as soon as available, and in any event within sixty (60) days
after the close of each fiscal year of the Company, a copy of each
Borrower's and its subsidiaries' consolidated business plan for the
following fiscal year, such business plan to show each Borrower's and
its subsidiaries' projected consolidated revenues, expenses, and
balance sheet on month-by-month basis, such business plan to be in
reasonable detail prepared by the Company and in form reasonably
satisfactory to Administrative Agent and the Required Lenders; and
(i) promptly after knowledge thereof shall have come to the
attention of any responsible officer of any Borrower, written notice of
(i) any threatened or pending litigation or governmental proceeding or
assessment against the Company or any Subsidiary which if adversely
determined would result in a Material Adverse Effect,
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(ii) any Default or Event of Default and (iii) any pending or actual
Change of Control/Management Event.
The Company shall, and shall cause each Subsidiary to, permit the
Administrative Agent and (if accompanying the Administrative Agent) each
Lender and each of their duly authorized representatives and agents, upon
reasonable prior notice, to visit and inspect any of the Properties,
corporate books and financial records of the Company and its Subsidiaries, to
examine and make copies of the books of accounts and other financial records
of the Company and its Subsidiaries, and to discuss the affairs, finances and
accounts of the Company and its Subsidiaries, with, and to be advised as to
the same by, its officers, employees and (if and so long as a representative
of the Company is present) independent public accountants (and by this
provision each Borrower hereby authorizes such accountants to discuss with
the Administrative Agent and such Lenders the finances and affairs of such
Borrower and its Subsidiaries if and so long as such a representative is
present) at such reasonable times and reasonable intervals as the
Administrative Agent may designate; PROVIDED, HOWEVER, that so long as no
Event of Default has occurred and is continuing, the Borrowers shall only be
liable for the expenses of the Administrative Agent (and any Lenders
accompanying it) of two (2) such visits each calendar year. Unless any
Default or Event of Default has occurred and is continuing or the
Administrative Agent or the Required Lenders in good faith believe such is
the case, then neither the Administrative Agent nor any Lender may exercise
its rights under this Section to gain access to a Borrower's premises outside
of normal business hours or to gain such access or to engage in such
discussion without first giving any Borrower at least three (3) days' advance
notice (which may be written or oral) of its intent to take such action.
The Administrative Agent and each Lender agree to maintain in confidence
and not disclose to any Person any non-public information relating to the
Company or its Subsidiaries made available to the Administrative Agent or
such Lender pursuant to this Section 8.5; PROVIDED, HOWEVER, that the
Administrative Agent and each Lender may make such disclosures as are
permitted by Section 13.16 hereof.
SECTION 8.6. COMPLIANCE WITH LAWS. The Company will, and will cause
each Subsidiary to, comply with all Governmental Requirements to which they
are subject, including, without limitation, the Occupational Safety and
Health Act of 1970, as amended, ERISA, and all laws, ordinances, governmental
rules and regulations relating to environmental protection in all applicable
jurisdictions, the violation of which is reasonably likely to have a Material
Adverse Effect.
SECTION 8.7. LIENS. The Company will not, nor will it permit any
Subsidiary to, pledge, mortgage or otherwise encumber or subject to, or
permit to exist upon or be subjected to, any lien, security interest or
charge upon, any assets or any Subsidiary; PROVIDED, HOWEVER, that nothing in
this Section contained shall operate to prevent any of the following
(collectively, "PERMITTED LIENS"):
(a) liens, pledges or deposits in connection with workmen's
compensation, unemployment insurance, social security obligations,
taxes, assessments, statutory
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obligations or other similar charges, good faith deposits in connection
with tenders, bids, contracts (other than contracts for the payment of
money) or leases to which the Company or any of its Subsidiaries is a
party or other deposits required to be made in the ordinary course of
business and not in connection with borrowing money or obtaining
advances or credit, provided in each case that the obligation or
liability arises in the ordinary course of business and is not overdue,
or if overdue, is being contested in good faith by appropriate
proceedings which prevent enforcement of the matter under contest and
adequate reserves have been established therefor to the extent required
by GAAP;
(b) inchoate statutory, construction, common carrier's,
materialmen's, landlord's, warehousemen's, mechanics' or other similar
liens in each case arising in the ordinary course of business and
securing obligations not overdue, or if overdue, being contested in
good faith by appropriate proceedings which prevent enforcement of the
matter under contest and adequate reserves have been established
therefor to the extent required by GAAP;
(c) liens given to secure the payment of the purchase price or
the financing thereof incurred in connection with the acquisition of
equipment, including liens of such type existing on such assets at the
time of acquisition thereof by the Company or any Subsidiary, provided
that (i) the lien shall attach solely to the property acquired or
purchased (ii) the indebtedness secured by such lien does not exceed
100% of the lesser of the cost or fair value of the property financed
and (iii) the indebtedness secured thereby is permitted by Section
8.8(b) hereof (collectively, "PURCHASE MONEY LIENS");
(d) Liens arising from Capital Leases permitted by Section
8.8(b) hereof;
(e) the liens created by the Collateral Documents;
(f) attachment or judgment liens individually or in the aggregate
not in excess of $500,000 (exclusive of (i) any amounts that are duly
bonded to the reasonable satisfaction of the Administrative Agent, (ii)
any amount adequately covered by insurance as to which the insurance
company has not disclaimed or disputed in writing its obligations for
coverage or has not otherwise failed to pay when due, and (iii) the
judgment rendered on April 23, 1997 in favor of Dan Finley and Rick Eby
against River North Records, Inc. and Entertainment Artists, Inc. by
the United States District Court, Western District of Arkansas,
Fayetteville Division, in the amount of $95,182);
(g) liens for taxes, assessments or other governmental charges
not yet due and payable or which are being diligently contested in good
faith by the Company or its applicable Subsidiary by appropriate
proceedings, provided that in any such case an adequate reserve is
being maintained by the Company or such Subsidiary for the payment of
same;
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(h) the pledge of assets for the purpose of securing an appeal,
stay or discharge in the course of any legal proceeding, provided that
the aggregate amount of liabilities of the Company and its Subsidiaries
secured by a pledge of assets permitted under this subsection,
including interest and penalties thereon, if any, shall not be in
excess of $500,000 at any one time outstanding;
(i) easements, licenses, permits, rights-of-way, rights of entry
or passage, rights of lessees, restrictions and other similar
encumbrances incurred in the ordinary course of business of the type
generally applicable to leased property which do not secure debt for
money borrowed or its equivalent, and which do not materially detract
from the value of the property subject thereto or materially interfere
with the ordinary conduct of the business of the Company or any
Subsidiary or use of the assets in question for purposes producing and
distributing recorded music;
(j) the lien granted in favor of Polygram prior to the Closing
Date on inventory from time to time in Polygram's possession to secure
amounts due and to become due from the Company to Polygram under the
distribution arrangements between the Company and Polygram, provided
such arrangements are not modified after the Closing Date to encumber
any other inventory or secure any other obligations;
(k) liens in existence on the date hereof and set forth on
Schedule 8.7 hereto;
(l) liens existing on specific assets at the time acquired by the
Company or any Subsidiary or on assets of a Person at the time such
Person first becomes a Subsidiary or was merged into the Company or any
Subsidiary provided that (i) any such liens were not created at the
time of or in contemplation of the acquisition of such assets or Person
by the Company or such Subsidiary, (ii) in the case of any such
acquisition of a Person, any such lien attaches only to specific assets
of such Person and not assets of such Person generally and (iii) such
lien is not (x) a lien on shares of stock in any Subsidiary, (y) a
blanket lien on receivables, inventory or similar working capital
assets or (z) a blanket lien on patents, trademarks or similar
intangibles;
(m) liens securing any Hedging Arrangements with the Lenders or
their Affiliates; and
(n) extensions and renewals of the foregoing Permitted Liens,
provided that the aggregate amount of such liabilities secured by such
extended or renewed lien is not increased and such extended or renewed
liabilities secured by such lien are on terms and conditions no more
restrictive than the terms and conditions of the same being extended or
renewed.
SECTION 8.8. INDEBTEDNESS. The Company will not, nor will it permit
any Subsidiary to, issue, incur, assume, create, or have outstanding any
Indebtedness for Borrowed Money; PROVIDED, HOWEVER, that the foregoing
provisions shall not restrict nor operate to prevent:
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(a) the Obligations;
(b) Capitalized Leases and purchase money indebtedness secured by
Purchase Money Liens permitted by Sections 8.7(c) and (d) hereof and
aggregating not more than $1,000,000 at any one time outstanding;
(c) obligations on leases which are not Capitalized Leases;
(d) guaranties permitted by Section 8.15 hereof;
(e) indebtedness of (x) any Wholly-Owned Subsidiary owing to the
Company or any other Wholly-Owned Subsidiary as a result of loans and
advances by the Company or such Wholly-Owned Subsidiary to such
Subsidiary permitted by Section 8.15 hereof and (y) the Company owing
to any Wholly-Owned Subsidiary as a result of loans and advances made
by such Wholly-Owned Subsidiary to the Company permitted by Section
8.15 hereof;
(f) Indebtedness existing on the date hereof and set forth on
Schedule 8.8 hereto;
(g) unsecured Subordinated Indebtedness incurred and used to (i)
purchase, redeem or otherwise acquire any outstanding Series B
Preferred Stock or Affiliate Preferred Stock or (ii) purchase any
Purchaser Warrants, Affiliate Warrants or the Harnick Warrant to the
extent such warrant has been properly put to the issuer for mandatory
purchase pursuant to its terms by virtue of the holder's exercise of
such put, provided in each case that the Company can demonstrate that
on a PRO FORMA basis after giving effect to the incurrence of such
Subordinated Indebtedness, the Company will be in compliance with all
the Financial Covenants as of (and after giving effect to) the
incurrence in question (compliance to be determined on a PRO FORMA
basis as if the incurrence in question took place on the first day of
any accounting period with reference to which compliance is being
determined);
(h) the Intersound Sub Debt if and so long as the same
constitutes Subordinated Indebtedness;
(i) liabilities in respect of Hedging Arrangements; and
(j) indebtedness not otherwise permitted by this Section 8.8
aggregating not more than $1,000,000 at any one time outstanding.
SECTION 8.9. CONSOLIDATED NET WORTH. The Company will, as of the
close of each semiannual accounting period of the Company ending in May and
November of each year, maintain Consolidated Net Worth of not less than the
Minimum Required Amount. For purposes thereof, the term "MINIMUM REQUIRED
AMOUNT" shall mean (a) $22,000,000 through the close of the monthly
accounting period of the Company ending on or about January 31, 1998, and (b)
shall increase (but never decrease) as of the close of the monthly
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accounting period of the Company ending on or about February 28, 1998 and as
of the close of each monthly accounting period of the Company occurring
thereafter, in each case by an amount equal to 50% of Net Income (if
positive) for the monthly accounting period then ended.
SECTION 8.10. LEVERAGE RATIO. The Company shall, as of the Closing
Date and the close of each subsequent fiscal quarter of the Company specified
below, maintain the Leverage Ratio so as not to be more than the amount set
forth below:
FROM AND INCLUDING: TO AND INCLUDING: LEVERAGE
RATIO SHALL NOT BE
MORE THAN:
Closing Date and 3rd fiscal 4th fiscal quarter of fiscal 4.50 to 1
quarter of fiscal year ending year ending in 1998
in 1998
1st fiscal quarter of fiscal 4th fiscal quarter of fiscal 3.50 to 1
year ending in 1999 year ending in 1999
1st fiscal quarter of fiscal Each fiscal quarter thereafter 2.75 to 1
year ending in 2000
SECTION 8.11. CONSOLIDATED WORKING CAPITAL. The Company shall not at
any time permit Consolidated Working Capital to be less than $1,000,000.
SECTION 8.12. INTEREST COVERAGE RATIO. The Company shall, as of the
close of each fiscal quarter of the Company specified below, maintain the
ratio of Consolidated EBITDA for the fiscal quarter of the Company then ended
to Cash Interest Expense for the same fiscal quarter then ended (the
"INTEREST COVERAGE RATIO") so as not to be less than the amount set forth
below:
FROM AND TO AND INTEREST COVERAGE
INCLUDING INCLUDING RATIO SHALL NOT BE
LESS THAN:
2nd fiscal quarter of fiscal 4th fiscal quarter of fiscal 2.00 to 1.00
year ending in 1998 year ending in 1998
1st fiscal quarter of fiscal 4th fiscal quarter of fiscal 2.25 to 1
year ending in 1999 year ending in 1999
1st fiscal quarter of fiscal Each fiscal quarter thereafter 2.50 to 1.00
year ending in 2000
SECTION 8.13. FIXED CHARGE COVERAGE RATIO. The Company shall, as of
the close of each fiscal quarter of the Company specified below, maintain the
ratio (the "FIXED CHARGE
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COVERAGE RATIO") of (x) Consolidated EBITDA for the fiscal quarter ended such
date to (y) the sum of (i) Cash Interest Expense for such fiscal quarter,
(ii) Current Maturities as of the close of such fiscal quarter but excluding,
however, to the extent otherwise included, the final installment on the Term
Notes, (iii) Capital Expenditures during the same such fiscal quarter and
(iv) taxes on or measured by income or excess profits payable in cash during
the same fiscal quarter by the Company and its Subsidiaries so as not to be
less than the amount set forth below:
<TABLE>
<CAPTION>
FIXED CHARGE COVERAGE
FROM AND TO AND RATIO SHALL NOT BE
INCLUDING INCLUDING LESS THAN:
<S> <C> <C>
2nd fiscal quarter of fiscal 2nd fiscal quarter of fiscal 1.05 to 1.00
year ending in 1998 year ending in 1999
3rd fiscal quarter of fiscal Each fiscal quarter thereafter 1.25 to 1.00
year ending in 1999
</TABLE>
SECTION 8.14. CAPITAL EXPENDITURES. The Company shall not and
shall not permit its Subsidiaries to expend or become obligated for Capital
Expenditures during any fiscal year of the Company for the Company and its
Subsidiaries taken together in excess of the amount set forth for such fiscal
year below:
DURING FISCAL YEAR CAPITAL EXPENDITURES SHALL NOT
EXCEED:
Ending on or about May 31, 1998 $1,250,000
Each fiscal year thereafter Maximum Permitted Amount
For purposes thereof, the term "MAXIMUM PERMITTED AMOUNT" shall mean (i) for
the fiscal year of the Company ending on or about May 31, 1999, the sum of
(x) $500,000 plus (y) the amount (if any) by which the actual Capital
Expenditures for the immediately preceding fiscal year of the Company were
less than $1,250,000; (ii) for the fiscal year of the Company ending on or
about May 31, 2000, the sum of (x) $500,000 plus (y) the amount (if any) by
which the actual Capital Expenditures for the immediately preceding two
fiscal years of the Company, taken together, were less than $1,750,000; (iii)
for the fiscal year of the Company ending on or about May 31, 2001, the sum
of (x) $500,000 plus (y) the lesser of $500,000 or the amount (if any) by
which the actual Capital Expenditures for the fiscal year of the Company
ending on or about May 31, 2000 were less than the Maximum Permitted Amount
for such fiscal year ending in 2000; and (iv) for each fiscal year
thereafter, the sum of (x) $500,000 plus (y) the amount (if any) by which the
actual Capital Expenditures for the immediately preceding fiscal year of the
Company were less than $500,000.
SECTION 8.15. ACQUISITIONS, INVESTMENTS, LOANS, ADVANCES AND
GUARANTIES. The Company will not, nor will it permit any Subsidiary to,
directly or indirectly, make, retain
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or have outstanding any interest or investments (whether through purchase of
stock or obligations or otherwise) in, or loans or advances to, any other
Person, or acquire all or any substantial part of the assets or business of
any other Person, or guarantee any indebtedness, obligation or liability of
any other Person or otherwise enter into any arrangement designed to assure
another Person against loss; PROVIDED, HOWEVER, that the foregoing provisions
shall not apply to nor operate to prevent:
(a) investments by the Company or any Subsidiary in direct
obligations of the United States of America or of any agency or
instrumentality thereof whose obligations constitute full faith and
credit obligations of the United States of America, provided that any
such obligations shall mature within fifteen months from the date the
same are acquired by the Company or such Subsidiary;
(b) investments by the Company or any Subsidiary in certificates of
deposit or time deposits issued by any Lender, or by any United States
commercial bank having capital and surplus of not less than $100,000,000
and having a maturity of fifteen months or less;
(c) investments by the Company or any Subsidiary in commercial
paper maturing 270 days or less from the date of issuance which at the
time of acquisition is rated A-2 or better by Standard & Poor's Ratings
Services Group, a division of the McGraw-Hill Companies and P-2 or
better by Moody's Investors Service, Inc.;
(d) investments by the Company or any Subsidiary in debt
securities issued by U.S. corporations or states of the United States
maturing within fifteen months from the date of acquisition thereof if
at the time of acquisition the investment in question has a rating of
not less than BBB from Standard & Poor's Ratings Services Group, a
division of The McGraw-Hill Companies, Inc. and/or Baa2 from Moody's
Investors Services, Inc.;
(e) investments by the Company or any Subsidiary in preferred
stock of any corporation organized under the laws of any state of the
United States which is subject to a remarketing undertaking at intervals
not exceeding fifteen months issued by any substantial broker and which
is rated BBB or better by Standard & Poor's Ratings Services Group, a
division of The McGraw-Hill Companies, Inc. and/or Baa2 or better by
Moody's Investors Services, Inc.;
(f) investments in repurchase agreements with respect to, and
which are fully secured by a perfected security interest in, government
obligations of a type described in clause (a) or (c) above and are with
any commercial bank described in clause (b) above;
(g) investments in any mutual fund that has its assets invested
continuously in the types of investments referred to in clauses (a)-(f)
above and has net assets of not less than $500,000,000;
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(h) loans, advances and capital contributions by the Company to
Wholly-Owned Subsidiaries, and by Wholly-Owned Subsidiaries to the
Company, in each case to fund their ordinary working capital needs
arising in the ordinary course of business;
(i) loans and royalty advances to recording artists in the
ordinary course of business provided that the aggregate amount of such
loans and advances made during each quarterly accounting period of the
Company ending does not exceed $3,000,000 on a cumulative basis for such
quarterly period;
(j) the Company's equity investment in the House of Blues Venture;
(k) the Guaranties;
(l) loans and advances to employees, officers and directors in the
ordinary course of business and in aggregate principal amount not to
exceed $500,000 at any time outstanding;
(m) investments, loans, advances and guaranties existing on the
Closing Date and listed on Schedule 8.15 hereto without giving effect to
any additions thereto or replacements thereof;
(n) acquisitions of all or any substantial part of the assets or
business of any other Person or division thereof engaged in the music or
related entertainment business, or of a majority of the voting stock of
such a Person, or of equity interests in any Person which does not
become a Subsidiary as a result of such acquisition but is engaged (or
promptly after such acquisition will be engaged) in the music or related
entertainment business, provided that (i) no Default or Event of Default
exists or would exist after giving effect to such acquisition, (ii) the
board of directors or other governing body of such Person whose
Property, or voting stock or other interests in which, are being so
acquired has approved the terms of such acquisition, (iii) the Borrower
shall have delivered to the Lenders an updated Schedule 6.3 hereof to
reflect any new Subsidiary resulting from such acquisition, (iv) the sum
of (1) the aggregate amount expended by the Borrower and its
Subsidiaries as consideration for such acquisition (and in any event (x)
including as such consideration, any Indebtedness for Borrowed Money
assumed or incurred as a result of such acquisition, and (y) excluding
as such consideration, any equity securities issued by the Company as
consideration for such acquisition) and (2) the aggregate amount
expended as consideration (including Indebtedness for Borrowed Money and
excluding equity securities as aforesaid) for all other acquisitions
permitted under this Section 8.15(n) after the Closing Date on a
cumulative basis does not exceed $10,000,000, (v) the sum of (1) the
aggregate amount expended by the Borrower and its Subsidiaries as
consideration for such acquisition (and in any event including
Indebtedness for Borrowed Money and excluding equity securities as
aforesaid) and (2) the aggregate amount expended as consideration
(including Indebtedness for Borrowed Money and excluding equity
securities as aforesaid) for all acquisitions permitted under this
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Section 8.15(n) within the immediately preceding twelve calendar months
does not exceed $5,000,000 and (vi) the Company can demonstrate that on
a PRO FORMA basis after giving effect to the subject acquisition, the
Company will be in compliance with all the Financial Covenants as of
(and after giving effect to) the acquisition in question (compliance to
be determined on a PRO FORMA basis as if the acquisition in question
took place on the first day of any accounting period with reference to
which such compliance is being determined);
(o) investments (including debt obligations) received by the
Borrower or any Subsidiary in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of
delinquent obligations of, and other disputes with, customers and
suppliers arising in the ordinary course of business; and
(p) investments in, loans and advances to, and guaranties of the
obligations of Persons, in each case not otherwise permitted by this
Section, provided (1) the aggregate amount of such investments, loans,
advances and guaranties on a cumulative basis during each period of
twelve (12) consecutive calendar months, when taken together with the
aggregate amount of investments, loans and advances permitted by
subsections (h), (i) and (l) above on a cumulative basis during the same
such period, does not exceed $5,000,000 and (2) no such investment,
loan, advance or guaranty is made if at the time thereof or immediately
after giving effect thereto, any Default or Event of Default would occur
or be continuing.
In determining the amount of investments, loans and advances permitted under
this Section, investments shall always be taken at the original cost thereof,
regardless of any subsequent appreciation (including retained earnings) or
depreciation therein, loans and advances shall be taken at the principal
amount thereof then remaining unpaid and guaranties shall be taken at the
amount of the obligation guaranteed.
SECTION 8.16. DIVIDENDS AND CERTAIN OTHER RESTRICTED
PAYMENTS. (a) BY THE COMPANY. The Company will not (i) declare or pay any
dividends on or make any other distributions in respect of any class of its
capital stock or any warrant to acquire any such capital stock (other than
dividends payable solely in its capital stock and other than dividends paid
directly out of the proceeds of a substantially concurrent issue and sale of
its capital stock) or (ii) directly or indirectly or through any Subsidiary
purchase, redeem or otherwise acquire or retire any of its capital stock or
any warrant to acquire any such capital stock (except out of the proceeds of,
or in exchange for, a substantially concurrent issue and sale of its capital
stock) (such non-excepted dividends, distributions, purchases, redemptions,
acquisitions or retirements being herein collectively called "RESTRICTED
PAYMENTS"); PROVIDED, HOWEVER, this Section shall not prevent the Company
from:
(1) repurchasing common capital stock of the Company from officers
and employees of the Company if, at the time of and immediately after
giving effect to each such repurchase, (i) the aggregate amount expended
for such repurchases does not exceed $100,000 in any given fiscal year
of the Company and (ii) no Default or Event of Default shall occur or be
continuing; or
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(2) repurchasing any or all outstanding Transaction Securities out
of the proceeds of unsecured Subordinated Indebtedness of the Company
incurred in compliance with Section 8.8(g) hereof and the Financial
Covenants if, at the time of and immediately after giving effect to each
such repurchase, no Default or Event of Default shall occur or be
continuing; or
(3) repurchasing any Transaction Securities properly tendered by
the holders thereof to the Company for mandatory purchase pursuant to
the terms of such securities if, at the time of and immediately after
giving effect to each such purchase, no Default or Event of Default
shall occur or be continuing.
(b) NO RESTRICTION ON SUBSIDIARY DIVIDENDS. Neither the
Company nor any Subsidiary is a party to, nor will the Company or any
Subsidiary become a party to, any agreement prohibiting or otherwise
restricting the declaration or payment of any dividends or equity
distributions by any such Subsidiary.
SECTION 8.17. MERGERS. (a) GENERALLY. The Company will not,
nor will it permit any Subsidiary to, consolidate or be a party to a merger
or consolidation with any other Person, except that so long as no Default or
Event of Default has occurred and is continuing or would arise as a result
thereof any Subsidiary of the Company may merge with and into the Company or
any Wholly-Owned Subsidiary if the Company or such Wholly-Owned Subsidiary is
the surviving corporation.
(b) INTERSOUND. No later than February 28, 1998, Intersound
shall merge with and into the Company, with the Company being the corporation
surviving such merger.
SECTION 8.18. SALE OF ASSETS. The Company will not, nor will
it permit any Subsidiary to, sell, lease or otherwise dispose of all or any
Collateral or any substantial part of its other Property, or in any event
sell or discount (with or without recourse) any of its notes or accounts
receivable; PROVIDED, HOWEVER, that nothing contained herein or any
Collateral Document shall prohibit:
(i) sales, leases and other dispositions of inventory in the
ordinary course of business;
(ii) licenses (or similar arrangements) of inventory and
intellectual property (including without limitation, master recordings and
compositions) in the ordinary course of business;
(iii) sales or other dispositions for fair value, or abandonment,
of obsolete, excess or worn out Property consisting of fixed or capital
assets or inventory in the ordinary course of business;
(iv) leases, sales transfers or other disposition of all or any
part of the business or Property of any Subsidiary to the Borrower or any
Wholly-Owned Subsidiary, whether effected by merger or otherwise;
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(v) the abandonment or disposition for fair value of Property
that is, in the reasonable judgment of the Company, no longer economically
practicable to maintain or no longer useful in the conduct of the business
of the Company;
(vi) the loss or destruction of Property as a result of a
casualty loss (whether or not insured);
(vii) the bona fide sale by the Company or any Subsidiary at fair
value of any part of the Company's (or any Subsidiary's) master catalogs of
music rights consisting of, without limitation, master recordings,
compositions, recording agreements, publishing agreements and underlying
copyrights and trademarks (collectively, "MUSIC RIGHTS") of the Company or
such Subsidiary if, in the reasonable judgment of the Company, the
exploitation of such Music Rights so sold is no longer profitable to the
Company or any Subsidiary in the ordinary course of its business and such
sale is advantageous to the Company;
(viii) sales, subleases or other dispositions for fair value of
rights of the Company or any Subsidiary as lessee under operating leases
of Property in the ordinary course of business;
(ix) the sale or return of tangible assets which the Company and
its Subsidiaries customarily replace periodically with substitute
tangible assets of at least equal value (including, without limitation,
vehicles) in the ordinary course of business;
(x) the sale or other transfer of the capital stock of any
Subsidiary of the Borrowers as permitted by Section 8.17 hereof;
(xi) the sale or other disposition of the Company's interest, in
whole or in part, as a joint venturer in the House of Blues Venture to
the extent permitted by Section 8.24(b) hereof; and
(xii) the sale or other disposition for fair value of any
Property (other than Music Rights), whether now owned or hereafter
acquired, provided that the aggregate value of all such Property so sold
or disposed of shall not exceed $1,000,000 on a cumulative basis after
the Closing Date.
Any sale, lease or other disposition of Property (other than Music Rights and
other intellectual property) constituting five percent (5%) or more of the
total assets of the Company and its Subsidiaries on a consolidated basis
shall be deemed "SUBSTANTIAL" for the foregoing purposes. Any sale, lease or
other disposition of Music Rights and other intellectual property to which is
attributable five percent (5%) or more of the total annual gross revenues of
the Company and its Subsidiaries on a consolidated basis for the then most
recently completed fiscal year of the Company shall be deemed "SUBSTANTIAL"
for the foregoing purposes. Notwithstanding anything herein or in the
Collateral Documents to the contrary, the lien of the Administrative Agent
pursuant to the Collateral Documents on any Property sold or otherwise
disposed of in accordance with this Section 8.18 (other than
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clauses (ii), (iv), (vi) and (x) above) shall be automatically released;
PROVIDED, HOWEVER, that: (A) at the time of such sale or other disposition
and immediately after giving effect thereto, no Default or Event of Default
shall occur or be continuing and (B) in the case of each sale or other
disposition permitted exclusively by any of clauses (iii), (v), (vi) through
(ix) inclusive, (xi) or (xii) above, the net proceeds of such sale or other
disposition are paid to the Administrative Agent for application in reduction
of the Obligations if and to the extent required by Section 2.7(d) hereof.
The Administrative Agent shall, at the Company's expense, execute and deliver
such instruments (including UCC termination statements) as the Company may
from time to time reasonably request to confirm such release made pursuant to
the immediately preceding sentence.
SECTION 8.19. SALES AND LEASEBACKS. The Company will not,
nor will it permit any Subsidiary to, enter into any arrangement with any
bank, insurance company or other lender or investor providing for the leasing
by the Company or any Subsidiary of any real or personal property theretofore
owned by it and which has been or is to be sold or transferred by such owner
to such lender or investor.
SECTION 8.20. OPERATING LEASES. The Company shall not, nor
shall it permit any Subsidiary to, acquire the use or possession of any real
or personal property under a lease or similar arrangement, whether or not the
Company or any Subsidiary has the express or implied right to acquire title
to or purchase such property, at any time if, after giving effect thereto,
the aggregate amount of fixed rentals and other consideration payable by the
Company and its Subsidiaries under all such leases and similar arrangements
would exceed $1,250,000 during any fiscal year of the Company. Capital
Leases shall not be included in computing compliance with this Section to the
extent the Company's and its Subsidiaries' liability in respect of the same
is permitted by Section 8.8(b) hereof.
SECTION 8.21. BURDENSOME CONTRACTS WITH AFFILIATES. Except
as set forth on Schedule 6.7, as the same may from time to time be updated
with the consent of the Agent and Required Lenders, the Company will not, nor
will it permit any Subsidiary to, enter into or be a party to any contract or
agreement with an Affiliate on terms and conditions materially less favorable
to the Company or such Subsidiary than would be usual and customary in
similar contracts or agreements between Persons not affiliated with each
other.
SECTION 8.22. NO CHANGE IN FISCAL YEAR. The Company will
not, nor will it permit any Subsidiary to, change its fiscal year from a year
ended May 31.
SECTION 8.23. FORMATION OF SUBSIDIARIES. In the event any
Subsidiary is formed or acquired after the date hereof, the Company shall
within thirty (30) Business Days thereof (x) furnish an update to Schedule
6.3 hereof to reflect such new Subsidiary and (y) cause such newly-form or
acquired Subsidiary to execute a Guaranty and execute such Collateral
Documents to the extent required by Section 4 hereof (on terms substantially
similar to those executed in connection with this Agreement) as the
Administrative Agent may then require granting the Administrative Agent for
the benefit of the Lenders a security interest in and lien on the personal
property of such Subsidiary as collateral security for the Notes and the
other Obligations, together with documentation (including a legal opinion)
similar to
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that described in Section 7.3 hereof relating to the authorization for,
execution and delivery of, and validity of such Subsidiary's obligations as a
Guarantor hereunder and under its Guaranty in form and substance satisfactory
to the Administrative Agent and such other instruments, documents,
certificates and opinions as are reasonably required by the Administrative
Agent in connection therewith.
SECTION 8.24. MAINTENANCE OF SUBSIDIARIES. (A) GENERALLY.
The Company shall not assign, sell or transfer, or permit any Subsidiary to
issue, assign, sell or transfer, any shares of capital stock of a Subsidiary;
PROVIDED, HOWEVER, that the foregoing shall not operate to prevent:
(i) the merger of any Subsidiary into the Company or another
Wholly-Owned Subsidiary in each case as permitted by Section 8.17
hereof; and
(ii) the issuance, sale and transfer to any Person of any shares of
capital stock of a Subsidiary solely for the purpose of qualifying, and
to the extent legally necessary to qualify, such Person as a director of
such Subsidiary.
(b) HOUSE OF BLUES. The Company shall not consent to any
termination of its interest as a joint venturer in the House of Blues Venture
and shall not reduce its equity interest in the House of Blues Venture below
50%; PROVIDED, HOWEVER, that nothing herein nor in any Collateral Document
shall operate to prevent:
(i) termination of the Company's interest as a joint venturer in
the House of Blues Venture as the result of the exercise by the
Company's joint venture partner of such partner's purchase option in
accordance with the terms of the agreement governing the House of Blues
Venture; or
(ii) reduction or termination of the Company's interest as a joint
venturer in the House of Blues Venture if and to the extent that such
reduction or termination will not have any Material Adverse Effect and,
in the reasonable judgment of the Company, is advantageous to the
Company; or
(iii) reduction of the Company's interest as a joint venturer
in the House of Blues Venture as the result of the admission of a new
joint venturer to the House of Blues Joint Venture who succeeds to the
Company's former interest as a joint venturer therein if and to the
extent that such reduction will not have any Material Adverse Effect
and, in the reasonable judgment of the Company, the admission of such
new venturer will be advantageous to the Company.
SECTION 8.25. NATURE OF BUSINESS. The Company will not, nor
will it permit any Subsidiary to, engage in any business or activity if, as a
result, the business which would then be engaged in by the Company and its
Subsidiaries taken as a whole would be materially different from the business
in which they are engaged as of the date hereof.
SECTION 8.26. SUBORDINATED DEBT. The Company will not, and
will not permit any Subsidiary to, amend or modify the terms and conditions
applicable to any Subordinated
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Debt, except that the Company may agree to a decrease in the interest rate or
premium applicable thereto or to a deferral of repayment of any of principal
of or interest or premium on any Subordinated Debt beyond the due date
applicable thereto as of the date such indebtedness is initially approved by
the Administrative Agent and Required Lenders. The Company will not, and
will not permit any Subsidiary to, make any payment of principal, interest or
premium, if any, on or in respect of any Subordinated Debt or otherwise
acquire, prepay or retire any such Subordinated Debt prior to the maturities
thereof or prior to any other times required for payment thereof as are in
force and effect as of the date such indebtedness is initially approved by
the Administrative Agent and Required Lenders; PROVIDED, HOWEVER, that (i)
the Company may prepay the Intersound Sub Debt in whole or part at any time
prior to May 31, 1998 if at the time of each such prepayment and immediately
after giving effect thereto, no Default or Event of Default shall occur or be
continuing and (ii) the Company may make such payment as will settle (with
prejudice) litigation by the holder of the Intersound Sub Debt to enforce its
collection if at the time of each such payment and immediately after giving
effect thereto, (1) no Default or Event of Default shall occur or be
continuing and (2) the Company can demonstrate that on a PRO FORMA basis
after giving effect to the subject payment, (x) the Company will be in
compliance with all the Financial Covenants as of (and after giving effect
to) the payment in question (compliance to be determined on a PRO FORMA basis
as if the payment in question took place on the first day of any accounting
period with reference to which such compliance is being determined) and (y)
Availability will be positive at all times during the twelve (12) calendar
months following such payment.
SECTION 8.27. DOUBLE NEGATIVE PLEDGE. The Company will not,
and will not permit any Subsidiary to, agree (other than in the Loan
Documents) with another party not to pledge, mortgage or otherwise encumber
or subject to, or not to permit to exist upon or be subjected to, any lien,
security interest or charge upon, any assets or property of any kind or
character at any time owned by the Company (including its stock in the
Subsidiaries) or any Subsidiary, other than (i) customary provisions
restricting subletting or assignment of any lease governing a leasehold
interest of the Borrower or any of its Subsidiaries, (ii) customary
provisions in contracts (including without limitation the licenses, leases
and agreements described in the last sentence of Section 4.1 hereof)
restricting the assignment of, or granting of a lien or security interest in,
such contracts, the rights therein or in the interest or Property conveyed
thereby, (iii) restrictions on a Subsidiary's Property imposed under
agreements relating to indebtedness incurred by such Subsidiary prior to the
date on which such Subsidiary was acquired by a Borrower and outstanding on
such acquisition date but not incurred in contemplation of such acquisition,
(iv) restrictions in the agreement creating the House of Blues Venture
restricting the Company's disposition of its equity interest therein and (v)
agreements governing purchase money indebtedness and Capitalized Lease
Obligations permitted by Section 8.8 hereof not to take any such action with
respect to the Property to such purchase money lien or Capitalized Lease.
SECTION 8.28. INTERSOUND. Intersound shall take such action
as the Company is required by this Agreement to cause Intersound to take, and
shall refrain from taking such action as the Company is required by this
Agreement to prohibit Intersound from taking.
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SECTION 8.29. INTEREST RATE PROTECTION. On or before
February 28, 1998, the Borrowers will hedge their interest rate risk on at
least $10,000,000 in principal amount of the Term Loan, or if less, the
principal amount outstanding on the Term Loan, through the use of one or more
interest rate swaps, interest rate caps, interest rate collars or other
recognized interest rate hedging arrangements (collectively, "HEDGING
ARRANGEMENTS"), with all of the foregoing to effectively limit the amount of
interest that the Borrowers must pay on notional amounts of not less than
such portion of the Term Loan to not more than the rate of 11% per annum for
a period ending no earlier than June 30, 1999 and to be with the Lenders,
their respective Affiliates or with other parties reasonably acceptable to
the Required Lenders. If the Company enters into any Hedging Arrangements
with any Lender, the Company's obligations to such Lender in connection with
such Hedging Arrangements do not constitute usage of the Commitments of such
Lender.
SECTION 9. EVENTS OF DEFAULT AND REMEDIES.
SECTION 9.1. EVENTS OF DEFAULT. Any one or more of the
following shall constitute an "EVENT OF DEFAULT" hereunder:
(a) default in the payment of any amount of the principal of or
interest on any Note or any reimbursement obligation owing under any
Application in each case when due, whether at the stated maturity
thereof or at any other time provided for in this Agreement and the
continuance of such default for two (2) Business Days in the case of
principal and five (5) Business Days in the case of interest, or default
in the payment when due of any fee, charge or other amount payable by
any Borrower hereunder or under any other Loan Document and the
continuance of such default for five (5) Business Days, in each case,
after notice thereof to any Borrower from the Administrative Agent or
any Lender; or
(b) default in the observance or performance of any covenant set
forth in Sections 2.7, 8.7, 8.8, 8.9, 8.10, 8.11, 8.12, 8.13, 8.14,
8.15, 8.16, 8.17, 8.18, 8.19, 8.20, 8.23, 8.24, 8.26 or 8.27 hereof or
of any Collateral Document dealing with the use, disposition or
remittance of the proceeds of Collateral or the maintenance of insurance
thereon or default after notice to any Borrower in the observance or
performance of any covenant set forth in Section 8.5(i) hereof; or
(c) default in the observance or performance of any other
provision hereof or any of the other Loan Documents which is not
remedied within thirty (30) days after written notice thereof to any
Borrower by any Lender or by the holder of any Note; or
(d) any representation or warranty made herein or in any of the
other Loan Documents or in any statement or certificate furnished
pursuant hereto or thereto, or in connection with any advance or
issuance made hereunder or by any person in connection with the
transactions contemplated hereby, proves untrue in any material respect
as of the date of the issuance or making thereof, and shall not be made
good
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within thirty (30) days after notice thereof to any Borrower by any
Lender or by the holder of any Note; or
(e) any event occurs or condition exists (other than those
described in subsections (a) through (d) above) which is specified as an
event of default under any of the other Loan Documents (with any grace
period applicable to such event having expired), or any of the Loan
Documents shall for any reason not be or shall cease to be in full force
and effect, or any of the Loan Documents is declared to be null and
void, or any of the Collateral Documents shall for any reason fail to
create a valid and perfected first priority Lien in favor of the
Administrative Agent in any Collateral purported to be covered thereby
aggregating in excess of $250,000 except as expressly permitted by the
terms thereof, or any Borrower or Guarantor takes any action for the
purpose of repudiating or rescinding any Loan Document executed by it;
or
(f) default shall occur in the payment when due (whether by lapse
of time, acceleration or otherwise) of any Indebtedness for Borrowed
Money aggregating in excess of $500,000 issued, assumed or guaranteed by
the Company or any Subsidiary or any other event of default shall occur
with respect to any such Indebtedness for Borrowed Money beyond any
period of grace provided therefor if the effect thereof (in each case)
is to permit the maturity of such Indebtedness for Borrowed Money to be
accelerated or to permit the holders thereof to elect a majority of the
Board of Directors of the Company (provided that any such default in
respect of the Intersound Sub Debt shall not constitute an Event of
Default under this subsection (f) if and so long as (i) no judgment has
been rendered against the Company or any Subsidiary for an amount more
than $1,000,000 in excess of the principal of and accrued interest owing
on the Intersound Sub Debt, (ii) no action has been taken by the
judgment creditor to execute upon or similarly enforce such judgment and
within ten (10) calendar days after its entry, action to enforce such
judgment has been lawfully stayed and (iii) at all times after the tenth
calendar day following the entry of such judgment, the sum of (A)
Availability under the Revolving Credit and (B) the cash and Cash
Equivalents of the Company and its Subsidiaries taken as a whole exceeds
the amount of such judgment, both for principal and interest thereon by
at least $50,000); or
(g) any judgment or judgments, writ or writs or warrant or
warrants or attachment, or any similar process or processes in an
aggregate amount in excess of $500,000 more than the amount, if any,
covered by insurance (as to which the insurer has not disclaimed or
disputed in writing its obligations for coverage or otherwise failed to
pay when due) shall be entered or filed against the Company or any
Subsidiary or against any of the property or assets of any of them and
remains undischarged, unvacated, unbonded or unstayed for a period of
sixty (60) days; or
(h) any event occurs or condition exists which is specified as an
event of default under any of the other Loan Documents after the
expiration of any applicable notice or grace periods; or
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(i) any agreement purporting to subordinate payment of any
Subordinated Debt to the prior payment of any Loan or any other
Obligations shall purport to be terminated or shall cease to have any
force or effect; or
(j) the Company or any Subsidiary makes any payment or other
distribution on account of the principal of or interest on any
Subordinated Debt or any other indebtedness, which payment or
distribution is prohibited under the terms of any instrument
subordinating such indebtedness to the prior payment of the Loans or any
of the other Obligations (provided that the payment permitted by this
Agreement of the Intersound Sub Debt shall not constitute an Event of
Default under this subsection (j)); or
(k) Intersound shall cease at any time and for any reason to be a
Wholly-Owned Subsidiary of the Company (except as the result of its
merger into the Company as permitted or required by Section 8.17
hereof); or
(l) the Polygram Distribution Agreement shall be terminated prior
to December 31, 2002 and shall have not been replaced by a binding
written contract with Polygram or any other similarly situated
distribution company (it being understood and agreed that EMI, Sony,
WEA, BMG and UNI are each such a company as of the Closing Date) on
substantially similar terms and conditions for substantially similar
services (except that such replacement contract shall not prohibit
blanket liens on assets to secure credit extended to the Company and its
Subsidiaries for general corporate purposes); or
(m) any Borrower or any Subsidiary shall (i) have entered
involuntarily against it an order for relief under the United States
Bankruptcy Code, as amended, (ii) not pay, or admit in writing its
inability to pay, its debts generally as they become due, (iii) make an
assignment for the benefit of creditors, (iv) apply for, seek, consent
to, or acquiesce in, the appointment of a receiver, custodian, trustee,
examiner, liquidator or similar official for it or any substantial part
of its Property, (v) institute any proceeding seeking to have entered
against it an order for relief under the United States Bankruptcy Code,
as amended, to adjudicate it insolvent, or seeking dissolution, winding
up, liquidation, reorganization, arrangement, adjustment or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fail to file an answer or other
pleading denying the material allegations of any such proceeding filed
against it, (vi) take any corporate action in furtherance of any matter
described in parts (i) through (v) above, or (vii) fail to contest in
good faith any appointment or proceeding described in Section 9.1(n)
hereof; or
(n) a custodian, receiver, trustee, examiner, liquidator or
similar official shall be appointed for any Borrower or any Subsidiary
or any substantial part of any of their Property, or a proceeding
described in Section 9.1(m)(v) shall be instituted against any Borrower
or any Subsidiary, and such appointment continues undischarged or such
proceeding continues undismissed or unstayed for a period of sixty (60)
days.
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SECTION 9.2. REMEDIES GENERALLY. When any Event of Default
described in subsections 9.1(a) to 9.1(l), both inclusive, has occurred and
is continuing, the Administrative Agent may (and shall, upon request of the
Required Lenders), by notice to any Borrower, take any or all of the
following actions:
(a) terminate the obligation of the Lenders to extend any further
credit hereunder on the date (which may be the date thereof) stated in
such notice (such termination shall be effective upon verbal
notification, the Administrative Agent hereby agreeing to provide
written notification thereof to any Borrower as soon as practical
thereafter);
(b) declare the principal of and the accrued interest on the Notes
to be forthwith due and payable and thereupon the Notes, including both
principal and interest, and all fees, charges and commissions payable
hereunder, shall be and become immediately due and payable without
further demand, presentment, protest or notice of any kind; and
(c) enforce any and all rights and remedies available under the
Loan Documents or applicable law.
SECTION 9.3. REMEDIES UPON INSOLVENCY. When any Event of
Default described in subsections 9.1(m) or (n) has occurred and is
continuing, then (a) the then unpaid balance of the Notes, including both
principal and interest, and all fees, charges and commissions and other
Obligations payable hereunder, shall immediately become due and payable
without presentment, demand, protest or notice of any kind, (b) the
obligation of the Lenders to extend further credit pursuant to any of the
terms hereof shall immediately and automatically terminate, and (c) the
Administrative Agent may exercise all remedies available to it under the Loan
Documents or applicable law.
SECTION 9.4. COLLATERAL FOR UNDRAWN LETTERS OF CREDIT. When
any Event of Default, other than an Event of Default described in subsection
(m) or (n) of Section 9.1, has occurred and is continuing, the Borrowers
shall, upon demand of the Administrative Agent (which demand shall be made
upon the request of the Required Lenders), and when any Event of Default
described in subsection (m) or (n) of Section 9.1 has occurred the Borrowers
shall, without notice or demand from the Administrative Agent, immediately
pay to the Administrative Agent the full amount of each Letter of Credit then
outstanding, the Borrowers agreeing to immediately make such payment and
acknowledging and agreeing that the Administrative Agent and the Lenders
would not have an adequate remedy at law for failure of the Borrowers to
honor any such demand and that the Administrative Agent and the Lenders shall
have the right to require the Borrowers to specifically perform such
undertaking whether or not any draws have been made under any such Letters of
Credit.
SECTION 10. THE ADMINISTRATIVE AGENT.
SECTION 10.1. APPOINTMENT AND AUTHORIZATION. Each Lender
hereby appoints and authorizes the Administrative Agent to take such action
as Administrative Agent on its behalf
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and to exercise such powers hereunder and under the Loan Documents as are
designated to the Administrative Agent by the terms hereof and thereof
together with such powers as are reasonably incidental thereto. The Lenders
acknowledge and agree that the Administrative Agent is not a trustee or other
fiduciary for them. The Administrative Agent may resign at any time by
sending twenty (20) days' prior written notice to the Company and the Lenders
and may be removed by the Required Lenders upon twenty (20) days' prior
written notice to the Company and the Lenders. In the event of any such
resignation or removal the Required Lenders may, with written consent by the
Company (which consent shall not be unreasonably withheld), appoint a new
agent, which shall succeed to all the rights, powers and duties of the
Administrative Agent hereunder and under the Loan Documents; PROVIDED,
HOWEVER, that no such consent from the Company shall be required for any such
resignation or removal made during the continuance of any Event of Default.
Any resigning or removed Administrative Agent shall be entitled to the
benefit of all the protective provisions hereof with respect to its acts as
an agent hereunder, but no successor Administrative Agent shall in any event
be liable or responsible for any actions of its predecessor. If the
Administrative Agent resigns or is removed and no successor is appointed, the
rights and obligations of such Administrative Agent shall be automatically
assumed by the Required Lenders and (i) the Borrowers shall be directed to
make all payments due each Lender hereunder directly to such Lender and (ii)
the Administrative Agent's rights in the Loan Documents shall be assigned
without representation, recourse or warranty to the Lenders as their
interests may appear.
SECTION 10.2. RIGHTS AS A LENDER. The Administrative Agent
has and reserves all of the rights, powers and duties hereunder and under the
other Loan Documents as any Lender may have and may exercise the same as
though it were not the Administrative Agent and the terms "LENDER" or
"LENDERS" as used herein and in all of such documents shall, unless the
context otherwise expressly indicates, include the Administrative Agent in
its individual capacity as a Lender. The Administrative Agent reserves the
right to engage in other business transactions with the Borrowers, the
Subsidiaries and their Affiliates.
SECTION 10.3. STANDARD OF CARE. The Lenders acknowledge that
they have received and approved copies of the Loan Documents, and such other
information and documents concerning the transactions contemplated and
financed hereby as they have requested to receive and/or review. The
Administrative Agent makes no representations or warranties of any kind or
character to the Lenders with respect to the validity, enforceability,
genuineness, perfection, value, worth or collectibility hereof or of the
other Loan Documents or of the liens provided for thereby or of any other
documents called for hereby or thereby or of the Collateral. The
Administrative Agent need not verify the worth or existence of the Collateral
and may rely exclusively on reports of any Borrower in computing the
Borrowing Base, provided that the Administrative Agent agrees to furnish the
Lenders with copies of any field audit reports made in connection with
inspections which it may make pursuant to Sections 2.5 or 8.5 hereof but the
Administrative Agent makes no representations or warranties of any kind in
connection therewith nor shall the Administrative Agent have any liability in
connection therewith except for its own gross negligence or willful
misconduct. The Lenders agree that neither the Administrative Agent nor any
director, officer employee, agent or representative thereof (including any
security trustee therefor) shall in any event be liable for any clerical
errors or errors in judgment,
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inadvertence or oversight, or for action taken or omitted to be taken by it
or them hereunder or under the Loan Documents or in connection herewith or
therewith except for its or their own gross negligence or willful misconduct.
The Administrative Agent shall incur no liability under or in respect of
this Agreement or the other Loan Documents by acting upon any notice,
certificate, warranty, instruction or statement (oral or written) of anyone
(including anyone in good faith believed by it to be authorized to act on
behalf of any Borrower), unless it has actual knowledge of the untruthfulness
of same. The Administrative Agent shall be entitled to assume that no Default
or Event of Default exists, absent actual knowledge thereof, unless notified
to the contrary by a Lender. The Administrative Agent shall in all events be
fully protected in acting or failing to act in accord with the instructions
of the Required Lenders. Upon the occurrence of an Event of Default
hereunder, the Administrative Agent shall take such action with respect to
the enforcement of its liens on the Collateral and the preservation and
protection thereof as it shall be directed to take by the Required Lenders
but unless and until the Required Lenders have given such direction the
Administrative Agent shall take or refrain from taking such actions as it
deems appropriate and in the best of interest of all Lenders. The
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder unless it shall be indemnified to its reasonable
satisfaction by the Lenders against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such
action. The Administrative Agent may treat the owner of any Note as the
holder thereof until written notice of transfer shall have been furnished to
it as contemplated by Section 13.12 hereof. Each Lender acknowledges that it
has independently and without reliance on the Administrative Agent or any
other Lender and based upon such information, investigations and inquiries as
it deems appropriate made its own credit analysis and decision to extend
credit to the Borrowers. It shall be the responsibility of each Lender to
keep itself informed as to the creditworthiness of the Borrowers and each
Subsidiary and the Administrative Agent shall have no liability to any Lender
with respect thereto.
SECTION 10.4. COSTS AND EXPENSES. Each Lender agrees to
reimburse the Administrative Agent for all out-of-pocket costs and expenses
suffered or incurred by the Administrative Agent or any security trustee in
performing its duties hereunder and under the other Loan Documents or in the
exercise of any right or power imposed or conferred upon the Administrative
Agent hereby or thereby, to the extent that the Administrative Agent is not
promptly reimbursed for same by the Borrowers or out of the Collateral, all
such costs and expenses to be borne by the Lenders ratably in accordance with
the amounts of their respective Commitments.
SECTION 10.5. INDEMNITY. The Lenders shall ratably indemnify
and hold the Administrative Agent, and its directors, officers, employees,
agents or representatives (including as such any security trustee therefor)
harmless from and against any liabilities, losses, costs or expenses suffered
or incurred by them under this Agreement or any of the other Loan Documents
or in connection with the transactions contemplated hereby or thereby,
regardless of when asserted or arising, except to the extent they are
promptly reimbursed for the same by the Borrowers or out of the Collateral
and except to the extent that any event giving rise to a claim was caused by
the gross negligence or willful misconduct of the party seeking to be
indemnified.
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SECTION 10.6. SYNDICATION AGENT. Nothing in this Agreement
shall impose any obligation on Bank of Montreal in its capacity as
Syndication Agent. The Administrative Agent hereby irrevocably appoints Bank
of Montreal as the Syndication Agent for the Lenders under the Loan Documents
and hereby authorizes the Syndication Agent to take such action as the
Syndication Agent on its behalf and to exercise such powers under the Loan
Documents as are delegated to the Syndication Agent by the terms thereof,
together with such powers as are reasonably incidental thereto.
SECTION 11. JOINT AND SEVERAL LIABILITY AND GUARANTEES.
SECTION 11.1. JOINT AND SEVERAL LIABILITY AND GUARANTEES. To
induce the Lenders to provide the credits described herein and in
consideration of benefits expected to accrue to each Guarantor by reason of
the Commitments and for other good and valuable consideration, receipt of
which is hereby acknowledged, each Subsidiary party hereto or to a Guaranty
(together with the Borrowers, individually a "GUARANTOR" and collectively the
"GUARANTORS") hereby unconditionally and irrevocably guarantees jointly and
severally to the Administrative Agent, the Lenders and each other holder of
any of the Obligations, and each Borrower hereby unconditionally and
irrevocably agrees to be jointly and severally liable to the Administrative
Agent, the Lenders and such holders for, the due and punctual payment of all
present and future indebtedness of the Borrowers evidenced by or arising out
of the Loan Documents, including, but not limited to, the due and punctual
payment of principal of and interest on the Notes and the due and punctual
payment of all other Obligations now or hereafter owed by the Borrowers under
the Loan Documents as and when the same shall become due and payable, whether
at stated maturity, by acceleration or otherwise, according to the terms
hereof and thereof. In case of failure by the Borrowers punctually to pay
any indebtedness or other Obligations guaranteed hereby or for which the
Borrowers agree hereby to be jointly and severally liable, each Guarantor
hereby unconditionally agrees jointly and severally to make such payment or
to cause such payment to be made punctually as and when the same shall become
due and payable, whether at stated maturity, by acceleration or otherwise,
and as if such payment were made by the Borrowers.
SECTION 11.2. GUARANTEE UNCONDITIONAL. The obligations of
each Guarantor as a guarantor or joint and several obligor under the Loan
Documents, including this Section 11, shall be unconditional and absolute
and, without limiting the generality of the foregoing, shall not be released,
discharged or otherwise affected by:
(a) any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of any Borrower or of any other
Guarantor under this Agreement or any other Loan Document or by
operation of law or otherwise;
(b) any modification or amendment of or supplement to this
Agreement or any other Loan Document;
(c) any change in the corporate existence, structure or ownership
of, or any insolvency, bankruptcy, reorganization or other similar
proceeding affecting, the Borrowers, any other Guarantor, or any of
their respective assets, or any resulting
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release or discharge of any obligation of any Borrower or of any other
Guarantor contained in any Loan Document;
(d) the existence of any claim, set-off or other rights which the
Guarantor may have at any time against the Administrative Agent, any Lender
or any other Person, whether or not arising in connection herewith;
(e) any failure to assert, or any assertion of, any claim or demand
or any exercise of, or failure to exercise, any rights or remedies against
any Borrower, any other Guarantor or any other Person or Property;
(f) any application of any sums by whomsoever paid or howsoever
realized to any obligation of any Borrower, regardless of what obligations
of the Borrowers remain unpaid;
(g) any invalidity or unenforceability relating to or against any
Borrower or any other Guarantor for any reason of this Agreement or of any
other Loan Document or any provision of applicable law or regulation
purporting to prohibit the payment by the Borrowers or any other Guarantor
of the principal of or interest on any Note or any other amount payable by
them under the Loan Documents; or
(h) any other act or omission to act or delay of any kind by the
Administrative Agent, any Lender or any other Person or any other
circumstance whatsoever that might, but for the provisions of this
paragraph, constitute a legal or equitable discharge of the obligations of
the Guarantors under the Loan Documents.
SECTION 11.3. DISCHARGE ONLY UPON PAYMENT IN FULL;
REINSTATEMENT IN CERTAIN CIRCUMSTANCES. Each Guarantor's obligations under
this Section 11 shall remain in full force and effect until the Commitments
are terminated and the principal of and interest on the Notes and all other
amounts payable by the Borrowers under this Agreement and all other Loan
Documents shall have been paid in full at which time the Guarantors'
obligations hereunder shall, subject to the following sentence, terminate.
If at any time any payment of the principal of or interest on any Note or any
other amount payable by the Borrowers under the Loan Documents is rescinded
or must be otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of any Borrower or of any Guarantor, or otherwise, each
Guarantor's obligations under this Section 11 with respect to such payment
shall be reinstated at such time as though such payment had become due but
had not been made at such time.
SECTION 11.4. WAIVERS. (a) GENERAL. Each Guarantor
irrevocably waives acceptance hereof, presentment, demand, protest and any
notice not provided for herein, as well as any requirement that at any time
any action be taken by the Administrative Agent, any Lender or any other
Person against the Borrowers, another Guarantor or any other Person.
(b) SUBROGATION AND CONTRIBUTION. Each Guarantor hereby
agrees not to exercise or enforce any right of exoneration, contribution,
reimbursement, recourse or subrogation
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available to such Guarantor against any Person liable for payment of the
Obligations, or as to any security therefor, unless and until the full amount
owing on the Obligations has been paid and the Commitments have terminated;
and the payment by such Guarantor of any amount pursuant to any of the Loan
Documents on account of credit extended to any other Borrower shall not in
any way entitle such Guarantor to any right, title or interest (whether by
way of subrogation or otherwise) in and to any of the Obligations or any
proceeds thereof or any security therefor unless and until the full amount
owing on the Obligations has been paid and the Commitments have terminated.
SECTION 11.5. LIMIT ON RECOVERY. Notwithstanding any other
provision hereof or of the Notes, the right of recovery against each
Guarantor under this Section 11 or against a Borrower on the Notes issued by
it shall not (to the extent required by or as may be necessary or desirable
to ensure the enforceability against such Guarantor of its obligations
hereunder or thereunder in accordance with the laws of the jurisdiction of
its incorporation or where it carries on business) exceed $1.00 less than the
amount which would render such Guarantor's obligations under this Section 11
and the Notes void or voidable under applicable law, including without
limitation fraudulent conveyance law.
SECTION 11.6. STAY OF ACCELERATION. If acceleration of the
time for payment of any amount payable by the Borrowers under this Agreement
or any other Loan Document is stayed upon the insolvency, bankruptcy or
reorganization of any of the Borrowers, all such amounts otherwise subject to
acceleration under the terms of this Agreement or the other Loan Documents
shall nonetheless be payable jointly and severally by the Guarantors
hereunder forthwith on demand by the Administrative Agent made at the request
of the Required Lenders.
SECTION 11.7. BENEFIT TO GUARANTORS. All of the Guarantors
are engaged in related businesses and integrated to such an extent that the
financial strength and flexibility of each Guarantor has a direct impact on
the success of each other Guarantor. Each Guarantor will derive substantial
direct and indirect benefit from the extension of credit hereunder.
SECTION 11.8. GUARANTOR COVENANTS. Each Guarantor shall take
such action as the Company is required by this Agreement to cause such
Guarantor to take, and shall refrain from taking such action as the Company
is required by this Agreement to prohibit such Guarantor from taking.
SECTION 12. CHANGE IN CIRCUMSTANCE.
SECTION 12.1. CHANGE OF LAW. Notwithstanding any other
provisions of this Agreement or any Note, if at any time any Lender shall
determine in good faith that any change in applicable laws, treaties or
regulations or in the interpretation thereof makes it unlawful for such
Lender to create or continue to maintain any LIBOR Portion, it shall promptly
so notify the Administrative Agent (which shall in turn promptly notify the
Company and the other Lenders) and the obligation of such Lender to create,
continue or maintain any such LIBOR Portion under this Agreement shall
terminate until it is no longer unlawful for such Lender to create, continue
or maintain such LIBOR Portion. The
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Borrowers, on demand, shall, if the continued maintenance of any such LIBOR
Portion is unlawful, thereupon prepay the outstanding principal amount of the
affected LIBOR Portion, together with all interest accrued thereon and all
other amounts payable to such affected Lender with respect thereto under this
Agreement; PROVIDED, HOWEVER, that the Company (which is acting on behalf of
the Borrowers pursuant to Section 1.7 hereof) may elect to convert the
principal amount of the affected Portion into the Domestic Rate Portion,
subject to the terms and conditions of this Agreement. Such payment or
conversion of a LIBOR Portion shall be effective, if lawful, on the last day
of the Interest Period then applicable thereto; otherwise, such payment or
conversion must be made on the date of such demand.
SECTION 12.2. UNAVAILABILITY OF DEPOSITS OR INABILITY TO
ASCERTAIN ADJUSTED LIBOR. Notwithstanding any other provision of this
Agreement or any Note, if prior to the commencement of any Interest Period,
the Required Lenders shall determine in good faith that deposits in the
amount of any LIBOR Portion of a Loan requested to be made, continued or
effected by conversion for such Interest Period are not readily available to
such Lenders in the relevant market or, by reason of circumstances affecting
the relevant market, adequate and reasonable means do not exist for
ascertaining Adjusted LIBOR, then such Lenders shall promptly give notice
thereof to the Administrative Agent (which shall in turn promptly notify the
Company and the other Lenders) and the obligations of the Lenders to create,
continue or effect by conversion any such LIBOR Portion in such amount and
for such Interest Period shall terminate until deposits in such amount and
for the Interest Period selected by the Company (which is acting on behalf of
the Borrowers pursuant to Section 1.7 hereof) shall again be readily
available in the relevant market and adequate and reasonable means exist for
ascertaining Adjusted LIBOR.
SECTION 12.3. TAXES AND INCREASED COSTS. With respect to any
LIBOR Portion, if any Lender shall reasonably determine that any change after
the Closing Date in any applicable law, treaty, regulation or guideline
(including, without limitation, Regulation D of the Board of Governors of the
Federal Reserve System) or any new law, treaty, regulation or guideline
adopted after the Closing Date, or any interpretation of any of the foregoing
by any governmental authority charged with the administration thereof or any
central bank or other fiscal, monetary or other authority having jurisdiction
over such Lender or its lending branch or the LIBOR Portions contemplated by
this Agreement (whether or not having the force of law), shall:
(i) impose, increase, or deem applicable any reserve, special deposit
or similar requirement against assets held by, or deposits in or for the
account of, or loans by, or any other acquisition of funds or disbursements
by, such Lender which is not in any instance already accounted for in
computing the interest rate applicable to such LIBOR Portion;
(ii) subject such Lender, any LIBOR Portion or a Note to the extent it
evidences such a Portion to any Indemnified Taxes;
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(iii) change the basis of taxation of payments of principal and
interest due from any Borrower to such Lender hereunder or under a Note to
the extent it evidences any LIBOR Portion (other than by a change in
Excluded Taxes); or
(iv) impose on such Lender any penalty with respect to the foregoing
or any other condition regarding this Agreement, any LIBOR Portion, or its
disbursement, or a Note to the extent it evidences any LIBOR Portion;
and such Lender shall determine in good faith that the result of any of the
foregoing is to increase in any material respect the cost (whether by
incurring a cost or adding to a cost) to such Lender of creating or
maintaining any LIBOR Portion hereunder or to reduce the amount of principal
or interest received or receivable by such Lender (without benefit of, or
credit for, any prorations, exemption, credits or other offsets available
under any such laws, treaties, regulations, guidelines or interpretations
thereof), then within fifteen (15) days of demand by such Lender the
Borrowers shall pay to the Administrative Agent for the account of such
Lender such additional amounts as such Lender shall reasonably determine are
sufficient to compensate and indemnify it for such increased cost or reduced
amount. If a Lender makes such a claim for compensation, it shall provide to
the Company (with a copy to the Administrative Agent) a certificate setting
forth the computation of the increased cost or reduced amount as a result of
any event mentioned herein in reasonable detail and such certificate shall be
deemed prima facie correct if reasonably determined.
SECTION 12.4. CAPITAL ADEQUACY. If any Lender shall
reasonably determine that the adoption, after the Closing Date, of any
applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof or compliance by such Lender (or its
lending office) with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank
or comparable agency, has or would have the effect of reducing the rate of
return on such Lender's capital as a consequence of its obligations hereunder
or credit extended by it hereunder to a level below that which such Lender
could have achieved but for such law, rule, regulation, change or compliance
(taking into consideration such Lender's policies with respect to capital
adequacy) by an amount deemed by such Lender to be material, then, within 15
days after demand by such Lender, the Borrowers shall pay such additional
amount or amounts as will compensate such Lender for such reduction in rate
of return. A certificate of any Lender claiming compensation under this
Section and setting forth the additional amount or amounts to be paid to it
hereunder in reasonable detail shall be deemed PRIMA FACIE correct if
reasonably determined. In determining such amount, such Lender may use any
reasonable averaging and attribution methods. A Lender shall not be entitled
to compensation under this Section with respect to any change, adoption or
interpretation (a "CHANGE") for any period prior to the earlier of (i) the
date it notifies any Borrower of the Change or (ii) the date which is thirty
(30) days prior to the date such Lender obtains actual knowledge of the
Change giving rise to the request for compensation if any Borrower is
notified of the Change prior to the lapse of such 30-day period. Each Lender
and the Administrative Agent shall use reasonable efforts to minimize the
cost imposed on any Borrower in respect of any such
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increased capital requirement and shall compute the assessment of any such
cost related to such increased capital on a nondiscriminatory basis among the
Borrowers, on the one hand, and other borrowers to which it applies, on the
other hand, and neither such Lender nor any corporation controlling such
Lender nor the Administrative Agent shall be entitled to demand compensation
or be compensated for any increased capital requirement from the Borrowers
hereunder in excess of the amount so computed.
SECTION 12.5. FUNDING INDEMNITY. In the event any Lender
shall incur any loss, cost or expense (including, without limitation, any
loss (including loss of profit), cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired or contracted
to be acquired by such Lender to fund or maintain its part of any LIBOR
Portion or the relending or reinvesting of such deposits or other funds or
amounts paid or prepaid to such Lender) as a result of:
(i) any payment of a LIBOR Portion on a date other than the last day
of the then applicable Interest Period for any reason, whether before or
after default, and whether or not such payment is required by any
provisions of this Agreement; or
(ii) any failure by any Borrower to create, borrow, continue or effect
by conversion a LIBOR Portion on the date specified in a notice given
pursuant to this Agreement;
then, upon the demand of such Lender, the Borrowers shall pay to the
Administrative Agent for the account of such Lender such amount as will
reimburse such Lender for such loss, cost or expense. If a Lender requests
such a reimbursement, it shall provide to any of the Borrowers (with a copy
to the Administrative Agent) a certificate setting forth the computation of
the loss, cost or expense giving rise to the request for reimbursement in
reasonable detail and such certificate shall be deemed prima facie correct if
reasonably determined.
SECTION 12.6. LENDING BRANCH. Each Lender may, at its
option, elect to make, fund or maintain its pro rata share of the Loans
hereunder at the branches or offices specified on the signature pages hereof
or on any Assignment Agreement executed and delivered pursuant to Section
13.12 hereof or at such of its branches or offices as such Lender may from
time to time elect. To the extent reasonably possible, a Lender shall
designate an alternate branch or funding office with respect to its pro rata
share of the LIBOR Portions to reduce any liability of any of the Borrowers
to such Lender under Section 12.3 hereof or to avoid the unavailability of an
interest rate option under Section 12.2 hereof, so long as such designation
is not otherwise disadvantageous to the Lender. To the event reasonably
possible, a Lender shall designate an alternate branch or funding office with
respect to its pro rata share of any Revolving Loans or Letters of Credit
affected by the occurrence of any event giving rise to the operations of
Sections 1.3(e) or 12.4 hereof, provided that such designation is made on
such terms that such Lender and its lending office suffer no economic, legal
or regulatory disadvantage, with the object of avoiding the consequence of
the event giving rise to the operation of such Sections.
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SECTION 12.7. DISCRETION OF LENDERS AS TO MANNER OF FUNDING.
Notwithstanding any provision of this Agreement to the contrary, each Lender
shall be entitled to fund and maintain its funding of all or any part of its
Note in any manner it sees fit, it being understood, however, that for the
purposes of this Agreement all determinations hereunder (including, without
limitation, determinations under Sections 12.3, 12.4 and 12.5 hereof) shall
be made as if each Lender had actually funded and maintained each LIBOR
Portion during each Interest Period applicable thereto through the purchase
of deposits in the relevant market in the amount of its pro rata share of
such LIBOR Portion, having a maturity corresponding to such Interest Period,
and bearing an interest rate equal to the LIBOR for such Interest Period.
SECTION 12.8. REPLACEMENT OF LENDER. (a) In the event that
the Company receives from a Lender a certificate requesting an amount be paid
to such Lender under Section 12.3, 12.4 or 12.5 hereof and the Required
Lenders have not similarly made requests for payment arising out of the same
circumstances, then the Company may request other Lenders hereunder to assume
in full the Revolving Credit Commitment and Term Credit Commitment then in
effect of the Lender requesting such amount be paid (such Lender in each case
being herein referred to as the "REPLACEABLE LENDER"), and to purchase the
Notes issued to the Replaceable Lender and its participation in the L/C
Obligations at a price equal to the outstanding principal amount of such
Notes and such participation and the Replaceable Lender's share of any
accrued and unpaid interest on such Notes and participation plus accrued and
unpaid commitment fees owed to the Replaceable Lender, and if any Lender or
Lenders in their sole discretion agree so to assume in full the Revolving
Credit Commitment and Term Credit Commitment of the Replaceable Lender (each
an "ASSUMING LENDER"), and after payment by the Borrowers to the Replaceable
Lender of all amounts due under this Agreement to such Lender (including any
amount specified as due in a certificate submitted under Section 12.3, 12.4
or 12.5 hereof) not so paid by the Assuming Lender, then such assumption
shall take place in the manner set forth in subsection (b) below. In the
event no Lender or Lenders agrees to assume in full the Revolving Credit
Commitment and Term Credit Commitment of the Replaceable Lender, then the
Company (which is acting on behalf of the Borrowers pursuant to Section 1.7
hereof) may nominate one or more banks or other financial institutions not
then party to this Agreement so to assume in full the Revolving Credit
Commitment and Term Credit Commitment of the Replaceable Lender, and if such
nominated banks or other financial institutions are acceptable to the
Administrative Agent and the Required Lenders in their sole discretion
(excluding the Replaceable Lender), such assumption shall take place in the
manner set forth in subsection (b) below and each such bank or other
financial institution shall become a Lender hereunder (each a "NEW LENDER")
and the Replaceable Lender shall no longer be a party hereto or have any
rights hereunder.
(b) In the event a Replaceable Lender's Revolving Credit
Commitment is to be assumed in full by an Assuming Lender or a New Lender,
then such assumption shall take place on a date acceptable to the Company
(which is acting on behalf of the Borrowers pursuant to Section 1.7 hereof),
the Replaceable Lender and the Assuming Lender or New Lender, as the case may
be, and such assumption shall take place through the payment of all amounts
due under this Agreement to the Replaceable Lender and the execution of such
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instruments and documents as shall, in the reasonable opinion of the
Administrative Agent, be reasonably necessary or appropriate for the Assuming
Lender or New Lender to assume in full the Revolving Credit Commitment and
Term Credit Commitment of the Replaceable Lender (including, without
limitation, the issuance of a new Note and the execution of an appropriate
Assignment Agreement making any New Lender a party hereto) and for the
Borrower's obligations to such Assuming or New Lender to be secured with the
Collateral. In the event no Assuming Lender or New Lender agrees to assume
in full the Revolving Credit Commitment of the Replaceable Lender, then such
Replaceable Lender shall remain a Lender party hereto and its Revolving
Credit Commitment and Term Credit Commitment shall remain in effect.
SECTION 13. MISCELLANEOUS.
SECTION 13.1. WITHHOLDING TAXES. (a) PAYMENTS FREE OF
WITHHOLDING. Except as otherwise required by law and subject to Section
13.1(b) hereof, each payment by each Borrower and each Guarantor under this
Agreement or the other Loan Documents shall be made without withholding for
or on account of any present or future Indemnified Taxes. If any such
withholding is so required, the relevant Borrower or Guarantor shall make
the withholding, pay the amount withheld to the appropriate governmental
authority before penalties attach thereto or interest accrues thereon and
forthwith pay such additional amount as may be necessary to ensure that the
net amount actually received by each Lender and the Administrative Agent free
and clear of such Indemnified Taxes (including any Indemnified Taxes on such
additional amount) is equal to the amount which that Lender or the
Administrative Agent (as the case may be) would have received had such
withholding not been made. If the Administrative Agent or any Lender pays
any amount in respect of any such Indemnified Taxes, penalties or interest,
the Borrowers shall reimburse the Administrative Agent or that Lender for
that payment on demand in the currency in which such payment was made. If
any Borrower or any Guarantor pays any such Indemnified Taxes, penalties or
interest, it shall deliver official tax receipts evidencing that payment or
certified copies thereof to the Lender or Administrative Agent on whose
account such withholding was made (with a copy to the Administrative Agent if
not the recipient of the original) on or before the thirtieth day after
payment. If any Lender or the Administrative Agent determines it has
received or been granted a credit against or relief or remission for, or
repayment of, any Indemnified Taxes paid or payable by it because of any
Indemnified Taxes, penalties or interest paid by any Borrower or any
Guarantor and evidenced by such a tax receipt, such Lender or Administrative
Agent shall, to the extent it can do so without prejudice to the retention of
the amount of such credit, relief, remission or repayment, pay to such
Borrower or Guarantor, as applicable, such amount as such Lender or
Administrative Agent determines is attributable to such deduction or
withholding and which will leave such Lender or Administrative Agent (after
such payment) in no better or worse position than it would have been in if
the Borrower or Guarantor had not been required to make such deduction or
withholding. Nothing in this Agreement shall interfere with the right of
each Lender and the Administrative Agent to arrange its tax affairs in
whatever manner it thinks fit nor oblige any Lender or the Administrative
Agent to disclose any information relating to its tax affairs or any
computations in connection with such taxes.
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(b) U.S. WITHHOLDING TAX EXEMPTIONS. Each Foreign Lender
shall submit to the Company and the Administrative Agent on or before the
earlier of the date the initial Loan is made hereunder and thirty (30) days
after the date hereof, two duly completed and signed copies of either Form
1001 (relating to such Lender and entitling it to a complete exemption from
withholding under the Code on all amounts to be received by such Lender,
including fees, pursuant to the Loan Documents and the Loans) or Form 4224
(relating to all amounts to be received by such Lender, including fees,
pursuant to the Loan Documents and the Loans) of the United States Internal
Revenue Service. Thereafter and from time to time, each Lender shall submit
to the Company and the Administrative Agent such additional duly completed
and signed copies of one or the other of such Forms (or such successor forms
as shall be adopted from time to time by the relevant United States taxing
authorities) as may be (i) requested by the Company in a written notice,
directly or through the Administrative Agent, to such Lender and (ii)
required under then-current United States law or regulations to avoid or
reduce United States withholding taxes on payments in respect of all amounts
to be received by such Lender, including fees, pursuant to the Loan Documents
or the Loans.
(c) INABILITY OF LENDER TO SUBMIT FORMS. If any Lender
determines, as a result of any change in applicable law, regulation or
treaty, or in any official application or interpretation thereof, that it is
unable to submit to the Company or Administrative Agent any form or
certificate that such Lender is obligated to submit pursuant to subsection
(b) of this Section 13.1, or that such Lender is required to withdraw or
cancel any such form or certificate previously submitted or any such form or
certificate otherwise becomes ineffective or inaccurate, such Lender shall
promptly notify the Company and the Administrative Agent of such fact and the
Lender shall to that extent not be obligated to provide any such form or
certificate and will be entitled to withdraw or cancel any affected form or
certificate, as applicable.
(d) LENDER REPLACEMENT. (i) If any Borrower or Guarantor is
required to make any reduction or withholding with respect to any payment due
any Lender under this Section 13.1, then such Lender shall use reasonable
efforts to designate a different lending office for funding or booking its
Loans hereunder or to assign its rights and obligations hereunder to another
of its offices, branches or affiliates, if, in the judgment of such Lender,
such designation or assignment (x) would eliminate or reduce amounts payable
pursuant to Section 13.1(a) in the future and (y) would not subject such
Lender to any unreimbursed cost or expense and would not otherwise be
disadvantageous to such Lender.
(ii) If any Borrower or Guarantor is required to make any
reduction or withholding with respect to any payment due any Lender under
this Section 13.1 (in any such case a "REPLACEABLE LENDER"), the Company may
require that another bank (a "REPLACEMENT LENDER"), which bank may be an
existing Lender, be substituted for and replace the Replaceable Lender for
purposes of this Agreement. If a Replacement Lender is so substituted for
the Replaceable Lender, the Replaceable Lender shall enter into an Assignment
Agreement with the Replacement Lender, the Borrowers and the Administrative
Agent to assign and transfer to the Replacement Lender the Replaceable
Lender's Commitments, Loans and participations in the credit risk with
respect to the Letters of Credit hereunder pursuant to and in accordance with
the provisions and requirements of
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Section 13.12 hereof and, as a condition to its execution thereof, the
Replaceable Lender shall concurrently receive the full amount of its Loans,
interest thereon, and all accrued fees and other amounts to which it is
entitled under the Loan Documents.
SECTION 13.2. DOCUMENTARY TAXES. The Borrowers agree to pay
any documentary, stamp or similar taxes payable in respect to this Agreement
or any other Loan Document, including interest and penalties, in the event
any such taxes are assessed irrespective of when such assessment is made and
whether or not any credit is then in use or available hereunder.
SECTION 13.3. WAIVERS, MODIFICATIONS AND AMENDMENTS. Any
provision hereof or of any of the other Loan Documents may be amended,
modified, waived or released upon the written consent of the Borrower and the
Required Lenders and any Default or Event of Default and its consequences may
be rescinded and annulled upon the written consent of the Required Lenders;
PROVIDED, HOWEVER, that without the consent of each Lender no such amendment,
modification or waiver shall increase the amount or extend the term of any
Commitment of such Lender or increase the dollar limit on Letters of Credit
available hereunder or reduce the interest rate applicable to or extend the
maturity (including any scheduled installment of a specified amount) of any
principal, interest or fees owed to such Lender or reduce the amount of any
principal, interest or fees to which such Lender is entitled hereunder or
advance rate used in determining the Borrowing Base or release any
substantial (in value) part of the collateral security afforded by the
Collateral Documents (except in connection with a sale or other disposition
required or permitted to be effected by the provisions hereof or of the
Collateral Documents) or release any Guarantor or change this Section 13.3 or
change the definition of "REQUIRED LENDERS" or change the number of Lenders
required to take any action hereunder or under any of the other Loan
Documents, it being understood that waivers or modifications of covenants,
Defaults or Events of Default (other than those set forth in Section 9.1(m)
and (n) hereof) or of a mandatory prepayment may be made at the discretion of
the Required Lenders and shall not constitute an increase of a Commitment of
any Lender. No amendment, modification or waiver of the Administrative
Agent's protective provisions shall be effective without the prior written
consent of the Administrative Agent.
SECTION 13.4. COSTS AND EXPENSES. The Borrowers agree to pay
within ten (10) days of demand therefor the reasonable costs and expenses of
the Administrative Agent in connection with the negotiation, preparation,
execution and delivery of this Agreement, the other Loan Documents and the
other instruments and documents to be delivered hereunder or thereunder, and
the reasonable costs and expenses of the Administrative Agent and the Lenders
in connection with the recording or filing of any of the foregoing, and in
connection with the transactions contemplated hereby or thereby, and the
reasonable costs and expenses of the Administrative Agent and the Lenders in
connection with any consents hereunder or waivers or amendments hereto or
thereto, including in each case the reasonable fees and expenses of Chapman
and Cutler, counsel for the Administrative Agent, with respect to all of the
foregoing (whether or not the transactions contemplated hereby are
consummated). The Borrowers further agree to pay to Administrative Agent and
the Lenders and any other holders of the Obligations all reasonable costs and
expenses (including court costs and reasonable attorneys' fees, but excluding
the allocated costs of inhouse
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counsel), if any, incurred or paid by the Administrative Agent, the Lenders
or any other holders of the Obligations in connection with any Default or
Event of Default or in connection with the enforcement of this Agreement or
any of the other Loan Documents or any other instrument or document delivered
hereunder or thereunder. The Borrowers further agree to indemnify and save
the Lenders, the Administrative Agent and any security trustee for the
Lenders harmless from any and all liabilities, losses, costs and expenses
incurred by the Lenders or the Administrative Agent in connection with any
action, suit or proceeding brought against the Administrative Agent, or any
security trustee or any Lender by any Person (but excluding attorneys' fees
for litigation solely between the Lenders to which no Borrower is a party)
which arises out of the transactions contemplated or financed hereby or by
any of the other Loan Documents or out of any action or inaction by the
Administrative Agent, any security trustee or any Lender hereunder or
thereunder or in connection with the Collateral, except for such thereof as
is caused by the negligence or willful misconduct of the party seeking to be
indemnified. The provisions of this Section 13.4 and the protective
provisions of Section 2 and Section 12 hereof shall survive payment of the
Obligations.
SECTION 13.5. SURVIVAL OF REPRESENTATIONS AND INDEMNITIES.
All representations and warranties made in the Loan Documents or pursuant
thereto or in certificates given pursuant hereto or thereto shall survive the
execution and delivery of this Agreement and of the other Loan Documents, and
shall continue in full force and effect with respect to the date as of which
they were made as long as any credit is in use or available hereunder. All
indemnities and other provisions relative to reimbursement to any Lender of
amounts sufficient to protect the yield of such Lender with respect to the
Loans, including, but not limited to, Sections 12.3 and 12.4 hereof, shall
survive the termination of this Agreement and the payment of the Notes.
SECTION 13.6. WAIVER OF RIGHTS. No delay or failure on the
part of any Lender or the holder or holders of any Note in the exercise of
any power or right shall operate as a waiver thereof or as an acquiescence in
any default, nor shall any single or partial exercise thereof, or the
exercise of any other power or right, preclude any other right or the further
exercise of any other rights. The rights and remedies hereunder of the
Borrowers, the Administrative Agent, the Lenders and of the holder or holders
of any Note are cumulative to, and not exclusive of, any rights or remedies
which any of them would otherwise have.
SECTION 13.7 NON-BUSINESS DAY. If any payment of principal
shall fall due on a day which is not a Business Day, interest at the rate
such principal bears for the period prior to maturity shall continue to
accrue on such principal from the stated due date thereof to and including
the next succeeding Business Day on which the same is payable.
SECTION 13.8. NOTICES. All communications provided for
herein shall be in writing or by telex or by telegraph, except as otherwise
specifically provided for hereinabove, addressed, if to any Borrower at:
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Platinum Entertainment, Inc.
2001 Butterfield Road, Suite 1400
Downers Grove, Illinois 60515
Attention: Chief Financial Officer
Telecopy: 630-769-0049
Telephone: 630-769-0033
with a copy (in case of notices of default) to:
SK-Palladin Partners, LP
c/o Alpine Capital Group
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopy: (212) 641-5065
Attention: Mark J. Schwartz
and
MAC Music LLC
c/o Alpine Capital Group
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopy: (212) 641-5148
Attention: Lorraine Jackson
or if to the Administrative Agent or Lenders at their respective addresses
set forth opposite their respective signatures hereto, or at such other
address as shall be designated by any party hereto in a written notice to
each other party pursuant to this Section 13.8. Any notice in writing shall
be deemed to have been given or made when served personally or when received
if sent by United States mail, and any notice given by telex, or telegraphic
or means shall be deemed given when transmitted (answer back confirmed);
provided that any notice to the Administrative Agent or any Lender under
Section 1 or Section 2 hereof shall only be effective upon receipt.
SECTION 13.9. COUNTERPARTS. This Agreement may be executed
in any number of counterparts, and by the different parties on different
counterparts, each of which when executed shall be deemed an original, but
all such counterparts taken together shall constitute one and the same
instrument.
SECTION 13.10. SUCCESSORS AND ASSIGNS. This Agreement shall
be binding upon the Borrowers and their successors and assigns, and shall be
binding upon and inure to the benefit of the Administrative Agent and the
Lenders and their successors and assigns, including any subsequent holder of
any Note. No Borrower may assign its rights or obligations hereunder without
the prior written consent of the Lenders.
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SECTION 13.11. PARTICIPATIONS. Any Lender may grant
participations in its extensions of credit hereunder to any other Lender or
other lending institution (a "PARTICIPANT"), provided that (i) no Participant
shall thereby acquire any direct rights under this Agreement, (ii) the
Administrative Agent must consent, which consent shall not be unreasonably
withheld, to a Participant which is neither an original signatory of this
Agreement nor an Affiliate of such a signatory, (iii) no Lender shall agree
with a Participant that such Lender will not exercise any of its rights
hereunder without the consent of such Participant except for rights which
under the terms hereof may only be exercised by all Lenders, (iv) no sale of
a participation in extensions of credit shall in any manner relieve the
selling Lender of its obligations hereunder and such Lender shall remain a
"LENDER" for all purposes of this Agreement and (v) no Participant may be a
competitor or customer of the Company or any of its Affiliates unless the
Company consents in writing to such participation.
SECTION 13.12. ASSIGNMENT AGREEMENTS. Each Lender may, from
time to time upon at least five (5) Business Days' prior written notice to
the Administrative Agent and the Company, assign to other commercial lenders
all or part of its rights and obligations under this Agreement (including
without limitation the indebtedness evidenced by the Notes then owned by such
assigning Lender, together with an equivalent proportion of its Commitments
to make Loans or participate in the credit risk on Letters of Credit
hereunder) pursuant to an Assignment Agreement; PROVIDED, HOWEVER, that (i)
each such assignment shall be of a constant, and not a varying, percentage of
the assigning Lender's rights and obligations under this Agreement and the
assignment shall cover the same percentage of such Lender's Commitments,
Loans, Notes and credit risk with respect to Letters of Credit; (ii) unless
the Administrative Agent otherwise consents, the aggregate amount of the
Revolving Credit Commitment Term Loan of the assigning Lender being assigned
pursuant to each such assignment (determined as of the effective date of the
relevant Assignment Agreement) (x) in the case of assignments to Lender or an
Affiliate of a Lender, shall in no event be less than $1,000,000 and shall be
an integral multiple of $1,000,000 and (y) in the case of an assignment to
any other Person, shall in no event be less than $5,000,000 and shall be an
integral multiple of $1,000,000; (iii) the Administrative Agent and (except
if made during the continuance of any Event of Default hereunder) the Company
must each consent, which consent shall not be unreasonably withheld, to each
such assignment to a party which was neither an original signatory of this
Agreement nor an Affiliate of such a signatory (it being understood and
agreed that the Company's decision to withhold its consent to an assignee
which is a customer or competitor of a Borrower or an Affiliate thereof is
reasonable); and (iv) the assigning Lender must pay to the Administrative
Agent a processing and recordation fee of $3,500 and any out-of-pocket
attorneys' fees and expenses incurred by the Administrative Agent in
connection with such Assignment Agreement. Upon the execution of each
Assignment Agreement by the assigning Lender thereunder, the assignee lender
thereunder, the Company and the Administrative Agent and payment to such
assigning Lender by such assignee lender of the purchase price for the
portion of the indebtedness of the Borrowers being acquired by it, (i) such
assignee lender shall thereupon become a "LENDER" for all purposes of this
Agreement with Commitments in the amounts set forth in such Assignment
Agreement and with all the rights, powers and obligations afforded a Lender
hereunder, (ii) such assigning Lender shall have no further liability for
funding the portion of its Commitments assumed by such other Lender and (iii)
the address for notices to
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such assignee Lender shall be as specified in the Assignment Agreement
executed by it. Concurrently with the execution and delivery of such
Assignment Agreement, the Borrowers shall execute and deliver new Notes to
the assignee Lender in the respective amounts of its Revolving Credit
Commitment and its share of the Term Loan and new Notes to the assigning
Lender in the respective amount of its Revolving Credit Commitment and its
share of the Term Loan after giving effect to the reduction occasioned by
such assignment, all such Notes to constitute "NOTES" for all purposes of
this Agreement and of the other Loan Documents. Upon its receipt of such new
Notes, the assigning Lender shall return to the Company the old Notes so
replaced.
SECTION 13.13. CONSTRUCTION. The parties hereto acknowledge
and agree that this Agreement shall not be construed more favorably in favor
of one than the other based upon which party drafted the same, it being
acknowledged that all parties hereto contributed substantially to the
negotiation of this Agreement.
SECTION 13.14. ENTIRE AGREEMENT. This Agreement and the Loan
Documents and any separate agreement concerning fees constitutes the entire
understanding of the parties with respect to the subject matter hereof and
any prior agreements, whether written or oral, with respect thereto are
superseded hereby.
SECTION 13.15. HEADINGS. Section headings used in this
Agreement are for reference only and shall not affect the construction of
this Agreement.
SECTION 13.16. CONFIDENTIALITY. Any information disclosed by
the Company or any of its Subsidiaries to the Administrative Agent or any of
the Lenders shall be used solely for purposes of this Agreement and for the
purpose of determining whether or not to extend other credit or financial
accommodations to the Company or its Subsidiaries and, if such information is
not otherwise in the public domain, shall not be disclosed by the
Administrative Agent or such Lender to any other Person except (i) to its
independent accountants and legal counsel (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential
nature of such information and instructed to keep such information
confidential), (ii) pursuant to statutory and regulatory requirements, (iii)
pursuant to any mandatory court order, subpoena or other legal process, (iv)
to the Administrative Agent or any other Lender, (v) pursuant to any
agreement heretofore or hereafter made between such Lender and the Company
which permits such disclosure, (vi) in connection with the exercise of any
right or remedy under the Loan Documents, provided that such Lender or the
Administrative Agent, as applicable, shall give a Borrower prior written
notice of any such disclosure if lawful or (vii) subject to an agreement
containing provisions substantially the same as those of this Section, to any
participant in or assignee of, or prospective participant in or assignee of,
any obligation or Commitment.
SECTION 13.17. EXCLUSIVE JURISDICTION. (A) EXCEPT AS
PROVIDED IN SUBSECTION (B), THE LOAN PARTIES, THE LENDERS AND THE
ADMINISTRATIVE AGENT AGREE THAT ALL DISPUTES BETWEEN OR AMONG THEM ARISING
OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS, AND WHETHER
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ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED ONLY BY
STATE OR FEDERAL COURTS LOCATED IN COOK COUNTY, ILLINOIS, BUT EACH OF THE
LOAN PARTIES, THE LENDERS AND THE ADMINISTRATIVE AGENT ACKNOWLEDGE THAT ANY
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF
COOK COUNTY, ILLINOIS. EACH LOAN PARTY WAIVES IN ALL DISPUTES ANY OBJECTION
THAT IT MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.
(B) OTHER JURISDICTIONS. EACH LOAN PARTY AGREES THAT THE
ADMINISTRATIVE AGENT AND THE LENDERS SHALL EACH HAVE THE RIGHT TO PROCEED
AGAINST ANY LOAN PARTY OR ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE
THE ADMINISTRATIVE AGENT OR ANY LENDER TO REALIZE ON SUCH PROPERTY, OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE
ADMINISTRATIVE AGENT OR ANY LENDER. EACH LOAN PARTY WAIVES ANY OBJECTION THAT
IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE ADMINISTRATIVE AGENT OR
ANY LENDER HAS COMMENCED A PROCEEDING DESCRIBED IN THIS SUBSECTION.
SECTION 13.18. WAIVER OF JURY TRIAL. THE LOAN PARTIES, THE
ADMINISTRATIVE AGENT AND THE LENDERS EACH WAIVE ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE, BETWEEN THE AGENTS OR EITHER OF THEM OR ANY LENDER AND ANY LOAN
PARTY ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
THEREWITH OR THE TRANSACTIONS RELATED THERETO. THE LOAN PARTIES, THE
ADMINISTRATIVE AGENT AND THE LENDERS EACH HEREBY AGREE AND CONSENT THAT ANY
SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY AND THAT ANY OF THEM MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
SECTION 13.19. GOVERNING LAW. This Agreement and the Notes,
and the rights and duties of the parties hereto, shall be construed and
determined in accordance with the laws of the State of Illinois.
[SIGNATURE PAGES TO FOLLOW]
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Upon your acceptance hereof in the manner hereinafter set
forth, this Agreement shall be a contract between us for the purposes
hereinabove set forth.
Executed and delivered as of this 12th day of December, 1997.
PLATINUM ENTERTAINMENT, INC.
By: /s/ Steven Devick
--------------------------------
Name: Steven Devick
Title: President
INTERSOUND, INC.
By: /s/ Steven Devick
--------------------------------
Name: Steven Devick
Title: President
RIVER NORTH RECORDS, INC.
By: /s/ Steven Devick
--------------------------------
Name: Steven Devick
Title: President
CGI RECORDS, INC.
By: /s/ Steven Devick
--------------------------------
Name: Steven Devick
Title: President
LEXICON MUSIC, INC.
By: /s/ Steven Devick
--------------------------------
Name: Steven Devick
Title: President
LIGHT RECORDS, INC.
By: /s/ Steven Devick
--------------------------------
Name: Steven Devick
Title: President
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THE RECORDING EXPERIENCE, INC.
By: /s/ Steven Devick
--------------------------------
Name: Steven Devick
Title: President
JUSTMIKE MUSIC, INC.
By: /s/ Steven Devick
--------------------------------
Name: Steven Devick
Title: President
PEG PUBLISHING, INC.
By: /s/ Steven Devick
--------------------------------
Name: Steven Devick
Title: President
ROYCE PUBLISHING, INC.
By: /s/ Steven Devick
--------------------------------
Name: Steven Devick
Title: President
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Accepted and agreed to in Chicago, Illinois as of the day and
year last above written.
Each of the Lenders hereby agrees with each other Lender that
if it should receive or obtain any payment (whether by voluntary payment, by
realization upon collateral, by the exercise of rights of set-off or banker's
lien, by counterclaim or cross action, or by the enforcement of any rights
under this Agreement, any of the other Loan Documents or otherwise) in
respect of the Obligations in a greater amount than such Lender would have
received had such payment been made to the Administrative Agent and been
distributed among the Lenders as contemplated by Section 3.2 or 3.3 hereof,
as applicable, then in that event the Lender receiving such disproportionate
payment shall purchase for cash without recourse from the other Lenders an
interest in the Obligations of the Borrowers to such Lenders in such amount
as shall result in a distribution of such payment as contemplated by Section
3.2 or 3.3 hereof, as applicable. In the event any payment made to a Lender
and shared with the other Lenders pursuant to the provisions hereof is ever
recovered from such Lender, the Lenders receiving a portion of such payment
hereunder shall restore the same to the payor Lender, but without interest.
Amount and Percentage of Commitments:
Revolving Credit Commitment:
$10,000,000 (100.0%)
Term Credit Commitment:
$20,000000 (100.0%)
BANK OF MONTREAL, individually and as
Administrative Agent
By: /s/ Jeffrey Titus
--------------------------------
Name: Jeffrey Titus
---------------------------
Title: Director
-------------------------
Mailing Address:
115 South LaSalle Street
Chicago, Illinois 60603
Attention: Global Distribution
Telephone: 312-750-6046
Telecopy: 312-750-3834
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EXHIBIT A
PLATINUM ENTERTAINMENT, INC.
REVOLVING CREDIT NOTE
$______________ ______________, 1997
For value received on the Revolving Credit Termination Date,
the undersigned, Platinum Entertainment, Inc., a Delaware corporation (the
"COMPANY"), and Intersound, Inc., a Delaware corporation ("INTERSOUND") (the
Company and Intersound being hereinafter referred to collectively as the
"BORROWERS"), hereby jointly and severally promise to pay to the order of
____________________________ (the "LENDER"), at the principal office of Bank
of Montreal in Chicago, Illinois (i) the principal sum of
____________________________ Dollars ($_________), or (ii) such lesser amount
as may at the time of the maturity hereof, whether by acceleration or
otherwise, be the aggregate unpaid principal amount of all Revolving Loans
owing from the Borrowers to the Lender under the Revolving Credit provided
for in the Credit Agreement hereinafter mentioned.
This Note evidences indebtedness constituting the "DOMESTIC
RATE PORTION" and "LIBOR PORTIONS" as such terms are defined in that certain
Credit Agreement dated as of December 12, 1997, by and among the Borrowers,
certain Subsidiaries of the Company, Bank of Montreal individually and as
Administrative Agent and certain lenders which are or may from time to time
become parties thereto (the "CREDIT AGREEMENT") made and to be made to the
Borrowers by the Lender under the Revolving Credit provided for under the
Credit Agreement and the Borrowers hereby jointly and severally promise to
pay interest at the office specified above on each loan evidenced hereby at
the rates and times specified therefor in the Credit Agreement. Capitalized
terms used herein without definition shall have the meanings ascribed to them
in the Credit Agreement, and this Note is subject to the terms of the Credit
Agreement.
Each loan made under the Revolving Credit provided for in the
Credit Agreement by the Lender to a Borrower against this Note, any repayment
of principal hereon, the status of each such loan from time to time as part
of the Domestic Rate Portion or a LIBOR Portion and the interest rates and
interest periods applicable thereto shall be endorsed by the holder hereof on
the reverse side of this Note or recorded on the books and records of the
holder hereof (provided that such entries shall be endorsed on the reverse
side hereof prior to any negotiation hereof) and the Borrowers agree that in
any action or proceeding instituted to collect or enforce collection of this
Note, the entries so endorsed on the reverse side hereof or recorded on the
books and records of the Lender shall be PRIMA FACIE evidence of the unpaid
balance of this Note and the status of each such loan from time to time as
part of the Domestic Rate Portion or a LIBOR Portion and the interest rates
and interest periods applicable thereto.
<PAGE>
This Note is issued by the Borrowers under the terms and
provisions of the Credit Agreement and is secured, inter alia, by certain
security agreements and other instruments and documents from the Company and
certain of its Subsidiaries, and this Note and the holder hereof are entitled
to all of the benefits and security provided for thereby or referred to
therein, equally and ratably with all other indebtedness thereby secured, to
which reference is hereby made for a statement thereof. This Note may be
declared to be, or be and become, due prior to its expressed maturity upon
the occurrence of an Event of Default specified in the Credit Agreement,
voluntary prepayments may be made hereon, and certain prepayments are
required to be made hereon, all in the events, on the terms and with the
effects provided in the Credit Agreement.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED
BY, THE INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO PRINCIPLES
OF CONFLICT OF LAW.
The Borrowers hereby waive presentment for payment.
PLATINUM ENTERTAINMENT, INC.
By
___________________________
Name: Steven Devick
Title: President
INTERSOUND, INC.
By
___________________________
Name: Steven Devick
Title: President
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EXHIBIT B
PLATINUM ENTERTAINMENT, INC.
TERM CREDIT NOTE
$______________ _____________, 1997
For value received, the undersigned, Platinum Entertainment,
Inc., a Delaware corporation (the "COMPANY") and Intersound, Inc., a Delaware
corporation ("INTERSOUND"; the Company and Intersound being hereinafter
referred to collectively as the "BORROWERS"), hereby jointly and severally
promise to pay to the order of __________________________ (the "LENDER"), at
the principal office of Bank of Montreal in Chicago, Illinois the principal
sum of _______________________________ Dollars ($_________), in installments
as follows: eleven (11) consecutive quarterly installments (commencing on
June 1, 1998 and continuing on the first day of each September, December,
March and June occurring thereafter to and including December 1, 2000) with
all such installments (except the last such installment) to be in an amount
equal to $_____________ per installment and the last such installment to be
in an amount equal to $______________ which shall be the full amount of the
then unpaid principal balance of this Note.
This Note evidences indebtedness constituting the "DOMESTIC
RATE PORTION" and "LIBOR PORTIONS" as such terms are defined in that certain
Credit Agreement dated as of December 12, 1997, by and among the Borrowers,
certain Subsidiaries of the Company, Bank of Montreal individually and as
Administrative Agent and certain lenders which are or may from time to time
become parties thereto (the "CREDIT AGREEMENT") made or to be made to the
Borrowers by the Lender under the Term Credit provided for under the Credit
Agreement and the Borrowers hereby jointly and severally promise to pay
interest at the office specified above on the loan evidenced hereby at the
rates and times specified therefor in the Credit Agreement. Capitalized
terms used herein without definition shall have the meanings ascribed to them
in the Credit Agreement, and this Note is subject to the terms of the Credit
Agreement.
Any repayment of principal hereon, the status of indebtedness
evidenced hereby from time to time as part of the Domestic Rate Portion or a
LIBOR Portion and the interest rates and interest periods applicable thereto
shall be endorsed by the holder hereof on the reverse side of this Note or
recorded on the books and records of the holder hereof (provided that such
entries shall be endorsed on the reverse side hereof prior to any negotiation
hereof) and the Borrowers agree that in any action or proceeding instituted
to collect or enforce collection of this Note, the entries so endorsed on the
reverse side hereof or recorded on the books and records of the Lender shall
be PRIMA FACIE evidence of the unpaid balance of this Note and the status of
indebtedness evidenced hereby from time to time as part of the
<PAGE>
Domestic Rate Portion or a LIBOR Portion and the interest rates and interest
periods applicable thereto.
This Note is issued by the Borrowers under the terms and
provisions of the Credit Agreement and is secured, inter alia, by certain
security agreements and other instruments and documents from the Company and
certain of its Subsidiaries, and this Note and the holder hereof are entitled
to all of the benefits and security provided for thereby or referred to
therein, equally and ratably with all other indebtedness thereby secured, to
which reference is hereby made for a statement thereof. This Note may be
declared to be, or be and become, due prior to its expressed maturity upon
the occurrence of an Event of Default specified in the Credit Agreement,
voluntary prepayments may be made hereon, and certain prepayments are
required to be made hereon, all in the events, on the terms and with the
effects provided in the Credit Agreement.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED
BY, THE INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO PRINCIPLES
OF CONFLICT OF LAW.
The Borrowers hereby waive presentment for payment.
PLATINUM ENTERTAINMENT, INC.
By
---------------------------------
Name: Steven Devick
Title: President
INTERSOUND, INC.
By
---------------------------------
Name: Steven Devick
Title: President
-2-
<PAGE>
EXHIBIT C
BORROWING BASE CERTIFICATE
TO: Bank of Montreal as Administrative Agent under, and the Lenders
party to, the Credit Agreement described below
Pursuant to the terms of the Credit Agreement dated as of
December 12, 1997 among the undersigned and you (the "CREDIT AGREEMENT"), we
submit this Borrowing Base Certificate to you and certify that the
information set forth below and on any attachments to this Certificate is
true, correct and complete as of the date of this Certificate. Any
capitalized terms used herein without definition shall have the same meanings
as such terms have in the Credit Agreement.
I. BORROWING BASE CALCULATIONS FOR PLATINUM ENTERTAINMENT, INC.
(THE "COMPANY")
A. ACCOUNTS OF COMPANY IN BORROWING BASE
1. Gross Accounts of Company _____________
IA1
2. Less:
(a) Ineligible sales _____________
(I.E., foreign
accounts unless exempted)
(b) Owed by an account _____________
debtor who is an Affiliate or Subsidiary
(c) Owed by an account _____________
debtor who is in an
insolvency or reorganization
proceeding
(d) Unpaid more than _____________
(i) 90 days past invoice date
for a Current Account or
(ii) 30 days past due date for
a Dated Account or (iii) 90 days
past relevant period for a
License Receivable
<PAGE>
(e) Ineligible because of _____________
25% taint factor
(f) Otherwise ineligible _____________
Total Deductions _____________
(sum of lines IA2a - IA2f) IA2
3. Eligible Accounts _____________
(line A1 minus line IA2) IA3
4. Accounts in Borrowing Base _____________
(line IA3 x .85) _____________
IA4
B. FINISHED GOODS INVENTORY OF COMPANY IN
BORROWING BASE
1. Gross inventory of Finished Goods _____________
of Company IB1
2. Less:
(a) Finished goods of _____________
Company not located
at approved locations
(b) Obsolete, slow moving, _____________
not merchantable
(c) Subject to Polygram
lien _____________
(d) Otherwise ineligible _____________
Total Deductions (sum of lines IB2a - IB2d)____________
IB2
3. Eligible Inventory of Finished _____________
Goods (line IB1 minus line IB2) IB3
4. Eligible Inventory of Finished Goods _____________
included in Borrowing Base determination _____________
(line IB3 x .50) IB4
-2-
<PAGE>
C. RAW MATERIALS INVENTORY OF COMPANY IN
BORROWING BASE
1. Gross inventory of raw materials of Company____________
IC1
2. Less:
(a) Raw materials of _____________
Company not located
at approved locations
(b) Obsolete, not _____________
merchantable
(c) Subject to Polygram
lien _____________
(d) Otherwise ineligible _____________
Total Deductions (sum of lines ____________
IC2a - IC2d) IC2
3. Eligible Inventory of raw materials ____________
(line IC1 minus line IC2) IC3
4. Eligible Inventory of raw materials ____________
included in Borrowing Base determination ____________
(line IC3 x .50) IC4
D. INVENTORY OF COMPANY IN BORROWING BASE
1. Eligible Inventory of Company in Borrowing ____________
Base (sum of Lines IB4 and IC4) ID1
II. BORROWING BASE CALCULATIONS FOR INTERSOUND, INC.
("INTERSOUND")
A. ACCOUNTS OF INTERSOUND IN BORROWING BASE
1. Gross Accounts of Intersound ____________
IIA1
2. Less:
(a) Ineligible sales _____________
(I.E., foreign accounts
unless exempted)
-3-
<PAGE>
(b) Owed by an account _____________
debtor who is an Affiliate or Subsidiary
(c) Owed by an account _____________
debtor who is in an
insolvency or reorganization
proceeding
(d) Unpaid more than _____________
(i) 90 days past invoice date
for a Current Account or (ii) 30
days past due date for a Dated
Account or (iii) 90 days past relevant
period for a License Receivable
(e) Ineligible because of _____________
25% taint factor
(f) Otherwise ineligible _____________
Total Deductions _____________
(sum of lines IIA2a - IIA2f) IIA2
3. Eligible Accounts of Intersound _____________
(line IIA1 minus line IIA2) IIA3
4. Accounts in Borrowing Base _____________
(line IIA3 x .85) _____________
IIA4
B. FINISHED GOODS INVENTORY OF INTERSOUND IN
BORROWING BASE
1. Gross inventory of finished goods _____________
of Intersound IIB1
2. Less:
(a) Finished goods of _____________
Intersound not located
at approved locations
(b) Obsolete, slow moving, _____________
not merchantable
-4-
<PAGE>
(c) Subject to Polygram
lien _____________
(d) Otherwise ineligible _____________
Total Deductions (sum of lines _____________
IIB2a - IIB2d) IIB2
3. Eligible Inventory of finished _____________
goods of Intersound (line II B1 IIB3
minus line II B2)
4. Eligible Inventory of finished goods of _____________
Intersound included in Borrowing Base _____________
determination (line IIB3 x .50) IIB4
C. RAW MATERIALS INVENTORY OF INTERSOUND IN
BORROWING BASE
1. Gross inventory of raw materials _____________
of Intersound IIC1
2. Less:
(a) Raw materials of _____________
Intersound not located
at approved locations
(b) Obsolete, not _____________
merchantable
(c) Otherwise ineligible _____________
(d) Subject to Polygram
lien _____________
Total Deductions (sum of lines _____________
IIC2a - IIC2d) IIC2
3. Eligible Inventory of Raw Materials of _____________
Intersound (line IIC1 minus line IIC2) IIC3
4. Eligible Inventory of raw materials of _____________
Intersound included in Borrowing Base _____________
determination (line IIC3 x .50) IIC4
-5-
<PAGE>
D. INVENTORY OF INTERSOUND IN BORROWING BASE
1. Eligible Inventory of Intersound in _____________
Borrowing Base (sum of Lines IIB4 and IIC4) IID1
III. BORROWING BASE
1. Gross Borrowing Base
(the sum of lines IA4, ID1, IIA4 _____________
and IID1) _____________
III
2. Initial Reserves _____________
3. Additional Reserves _____________
4. Total Reserves (line III2 plus line III3) _____________
III4
5. Borrowing Base (line III1 less line III4) _____________
_____________
III
IV. REVOLVING CREDIT OUTSTANDING TO THE COMPANY AND INTERSOUND
A. Loans to the Company _____________
and Intersound
B. Letters of Credit for benefit
of the Company and Intersound _____________
Total Revolving Credit Outstanding _____________
(line IV A plus IV B) _____________
IV
V. UNUSED AVAILABILITY _____________
_____________
(line III minus line IV)
-6-
<PAGE>
Dated as of this ___________ day of __________________, 19____.
PLATINUM ENTERTAINMENT, INC.
By________________________________
Its_______________________________
-7-
<PAGE>
EXHIBIT D
COMPLIANCE CERTIFICATE
This Compliance Certificate is furnished to Bank of Montreal,
as Administrative Agent (the "ADMINISTRATIVE AGENT") pursuant to that certain
Credit Agreement dated as of December 12, 1997, by and between Platinum
Entertainment, Inc. (the "BORROWER"), certain of its Subsidiaries, the
Administrative Agent and the Lenders party thereto (the "CREDIT AGREEMENT").
Unless otherwise defined herein, the terms used in this Compliance
Certificate have the meanings ascribed thereto in the Credit Agreement.
THE UNDERSIGNED ON BEHALF OF THE COMPANY HEREBY CERTIFIES THAT:
1. I am the duly elected _____________________________________ of
the Company;
2. I have reviewed the terms of the Credit Agreement and I have
made, or have caused to be made under my supervision, a detailed review of
the transactions and conditions of the Company and its Subsidiaries during
the accounting period covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and I
have no knowledge of, the existence of any condition or the occurrence of
any event which constitutes a Default or Event of Default during or at the
end of the accounting period covered by the attached financial statements
or as of the date of this Certificate, except as set forth below;
4. The financial statements required by Section 8.5 of the Credit
Agreement and being furnished to you concurrently with this certificate
are, to the best of my knowledge, true, correct and complete as of the
dates and for the periods covered thereby; and
5. The Attachment hereto sets forth financial data and computations
evidencing the Borrower's compliance with certain covenants of the Credit
Agreement, all of which data and computations are, to the best of my
knowledge, true, complete and correct and have been made in accordance with
the relevant Sections of the Credit Agreement.
Described below are the exceptions, if any, to paragraph 3 by
listing, in detail, the nature of the condition or event, the period during
which it has existed and the action which the Borrowers have taken, are
taking, or propose to take with respect to each such condition or event:
______________________________________________________________________
______________________________________________________________________
<PAGE>
______________________________________________________________________
______________________________________________________________________
The foregoing certifications, together with the computations
set forth in the Attachment hereto and the financial statements delivered
with this Certificate in support hereof, are made and delivered this
_________ day of __________________ 19___.
PLATINUM ENTERTAINMENT, INC.
By
-------------------------------------
Name:
----------------------------------
Title:
---------------------------------
-2-
<PAGE>
ATTACHMENT TO COMPLIANCE CERTIFICATE
PLATINUM ENTERTAINMENT, INC.
INTERSOUND, INC.
Compliance Calculations for Credit Agreement
Dated as of December 12, 1997
Calculations as of _____________, 19___
___________________________________________________________________________
A. CONSOLIDATED NET WORTH (SECTION 8.9)
1. Consolidated Net Worth (as defined) for __________
Company and Subsidiaries
2. As listed in Section 8.9, Consolidated Net
Worth must be in an amount not less than $_________
3. Company is in compliance?
(Circle yes or no) Yes/No
__________
__________
B. LEVERAGE RATIO (SECTION 8.10)
1. Total Debt, as defined __________
2. Consolidated Net Income, as defined,
for relevant period __________
3. Amounts deducted in arriving at
Consolidated Net Income from
Line B2 in respect of
(a) Cash Interest Expense,
as defined __________
(b) Taxes imposed on or
measured by income on
excess profits __________
(c) Depreciation of fixed assets __________
(d) Amortization of intangibles __________
(e) Debt issuance costs __________
(f) K-tel reserve __________
(g) Other non-cash charges __________
<PAGE>
4. Sum of Lines 2, 3(a), (b), (c), (d),
(e), (f) and (g) ("CONSOLIDATED
EBITDA") __________
5. Ratio of Total Debt (Line 1)
to Consolidated EBITDA (Line 4)
("LEVERAGE RATIO") :1
__________
__________
6. As listed in Section 8.10 as of the
date of this Certificate, the Leverage
Ratio shall not be greater than :1
__________
__________
7. Company is in compliance?
(Circle yes or no) Yes/No
__________
__________
C. CONSOLIDATED WORKING CAPITAL (SECTION 8.11)
1. Consolidated current assets ("CURRENT ASSETS") __________
2. Consolidated current liabilities
("CURRENT LIABILITIES") __________
3. Current Maturities, as defined,
on the Notes __________
4. Current Assets (Line 1) minus
Current Liabilities (Line 2)
plus Line 3 ("CONSOLIDATED WORKING
CAPITAL") $
__________
5. As listed in Section 8.11, Consolidated
Working Capital must not be less than $1,000,000
__________
__________
6. Company is in compliance?
(Circle yes or no) Yes/No
__________
__________
D. INTEREST COVERAGE (SECTION 8.12)
1. Consolidated EBITDA for most
recent quarter (from
Line B4 above) __________
2. Cash Interest Expense for
same quarter (from Line B3a) __________
-2-
<PAGE>
3. Ratio of Consolidated EBITDA (Line 1)
to Cash Interest Expense (Line 2)
("INTEREST COVERAGE RATIO") :1
__________
__________
4. As listed in Section 8.12, for
the date of this Certificate,
the Interest Coverage Ratio must
be in an amount not less than :1
__________
__________
5. Company is in compliance?
(Circle yes or no) Yes/No
__________
__________
E. FIXED CHARGE RATIO (SECTION 8.13)
1. Consolidated EBIDTA (from
Line D1 above) __________
2. Cash Interest Expense (from
Line D2 above __________
3. Current Maturities, (from
Line C3 above) __________
4. Capital Expenditures, as defined __________
5. Taxes on or measured by income
payable in cash __________
6. Restricted Payments, as defined __________
7. Sum of Lines 2, 3, 4, 5 and 6
("FIXED CHARGES") __________
8. Ratio of Consolidated EBITDA
(Line 1) to Fixed Charges
(Line 7) ("FIXED CHARGE
COVERAGE RATIO") :1
__________
__________
9. As of the date of this Certificate,
as listed in Section 8.13, Fixed
Charge Coverage Ratio must not
be less than :1
__________
__________
10. Company is in compliance?
(Circle yes or no) Yes/No
__________
__________
-3-
<PAGE>
EXHIBIT E
APPROVED COLLATERAL LOCATIONS
FOR COMPANY
1. 2001 Butterfield Road
Downers Grove, Illinois 60515
2. 5020 Chase Street
Downers Grove, Illinois 60515
3. 1227 16th Avenue South
Nashville, TN 37212
4. Federal Whalen Moving & Storage
920 Larch Avenue
Elmhurst, Illinois 60126
FOR INTERSOUND
(For Company as well after merger of Intersound into Company)
1. 2001 Butterfield Road
Downers Grove, Illinois 60575
2. 11810 Wills Road
Suite 110
Alpharetta, GA 30201
3. 4100 Spring Valley Road
Suite 800
Dallas, Texas 75244
4. 10 Columbus Blvd.
Suite 219
Hartford, CT 06106
5. 333 Washington Ave. No.
Suite 306 & 308
Minneapolis, MN 55401
6. Polygram Group Distribution, Inc.
9999 E. 121st Street
Fishers, IN 46038
<PAGE>
EXHIBIT F
GUARANTY AGREEMENT
_____________, 19___
Bank of Montreal,
as Administrative Agent for the Lenders party
to the Credit Agreement referred to below
115 South LaSalle Street
Chicago, Illinois 60603
Dear Sirs:
Reference is made to the Credit Agreement, dated as of
December 12, 1997 (the "CREDIT AGREEMENT") among Platinum Entertainment,
Inc., certain of its Subsidiaries, the Lenders named therein, Bank of
Montreal as Administrative Agent for the Lenders. Capitalized terms used and
not defined herein have the meanings assigned to them in the Credit Agreement.
The undersigned, [name of Guarantor], a [jurisdiction of
incorporation] corporation, hereby elects to be a "GUARANTOR" for all purposes
of the Credit Agreement, effective from the date hereof and the undersigned
hereby agrees to perform all the obligations of a Guarantor under, and to be
bound in all respects by the terms of, the Credit Agreement, including without
limitation Sections 2.7, 11, 13.17 and 13.18 thereof, as if the undersigned
were a direct signatory party thereto.
The undersigned confirms that (i) it is a Subsidiary of the
Company, (ii) the execution, delivery and performance by it of this Guaranty
is within its corporate powers, have been duly authorized by all necessary
corporate action, requires no action by or in respect of, or filing with, any
governmental body, agency or official and do not contravene, or constitute a
default under, any provision of applicable law or regulation or of its
charter or by-laws or of any agreement or instrument to which the Company or
the undersigned is a party or is subject, or by which the Company or the
undersigned, or the Company's or the undersigned's property, is bound, or of
any judgment, injunction, order, decree or other instrument binding upon it
or result in the creation or imposition of any lien on any asset of the
Company or any of its Subsidiaries and (iii) the representations and
warranties set forth in Section 6 of the Credit Agreement are true and
correct as to the undersigned and its subsidiaries as of the date hereof.
<PAGE>
This Agreement shall be construed in accordance with and
governed by the internal laws of the State of Illinois.
Very truly yours,
[NAME OF GUARANTOR]
By
-------------------------------------
Name:
----------------------------------
Title:
---------------------------------
-2-
<PAGE>
EXHIBIT G
ASSIGNMENT AND ACCEPTANCE
Dated _____________, 19_____
Reference is made to the Credit Agreement dated as of December
12, 1997 (the "CREDIT AGREEMENT") among Platinum Entertainment, Inc.
("PLATINUM") and Intersound, Inc.("INTERSOUND"; Platinum and Intersound
collectively referred to herein as the "BORROWERS" and individually as a
"BORROWER") the Lenders (as defined in the Credit Agreement) and Bank of
Montreal, as Administrative and Syndication Agent for the Lenders (the
"AGENT"). Terms defined in the Credit Agreement are used herein with the
same meaning.
_____________________________________________________ (the
"ASSIGNOR") and _________________________ (the "ASSIGNEE") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee,
and the Assignee hereby purchases and assumes from the Assignor, a _______%
interest in and to all of the Assignor's rights and obligations under the
Credit Agreement as of the Effective Date (as defined below), including,
without limitation, such percentage interest in the Assignor's Revolving
Credit Commitment as in effect on the Effective Date and the Revolving and
Term Loans, if any, owing to the Assignor on the Effective Date and the
Assignor's Percentage of any outstanding L/C Commitments, if any.
2. The Assignor (i) represents and warrants that as of the
date hereof (A) its Revolving Credit Commitment is $____________, (B) the
aggregate outstanding principal amount of Assignor's Revolving Loans under
the Credit Agreement that have not been repaid is $____________ and a
description of the interest rates and interest periods for such Revolving
Loans is attached as Schedule 1 hereto, (C) the aggregate principal amount of
Assignor's outstanding L/C Commitment is $___________, and (D) the
outstanding principal amount of Assignor's Term Loan is $__________; (ii)
represents and warrants that it is the legal and beneficial owner of the
interest being assigned by it hereunder and that such interest is free and
clear of any adverse claim, lien, or encumbrance of any kind; (iii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or any other
instrument or document furnished pursuant thereto; and (iv) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of any Borrower, or any Guarantor or the performance or
observance by any Borrower, or any Guarantor of any of their respective
obligations under the Credit Agreement or any other instrument or document
furnished pursuant thereto.
3. The Assignee (i) confirms that it has received a copy of
the Credit Agreement, together with copies of the most recent financial
statements delivered to the Lenders
<PAGE>
pursuant to in Sections 8.5(b) and 8.5(c) thereof and such other documents
and information as it has deemed appropriate to make its own credit analysis
and decision to enter into this Assignment and Acceptance; (ii) agrees that
it will, independently and without reliance upon the Administrative Agent,
the Assignor or any other Lender and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under the Credit Agreement; (iii)
appoints and authorizes the Administrative Agent to take such action as
Administrative Agent on its behalf and to exercise such powers under the
Credit Agreement as are delegated to the Administrative Agent by the terms
thereof, together with such powers as are reasonably incidental thereto; (iv)
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Lender; and (v) specifies as its lending offices (and
address for notices) the offices set forth beneath its name on the signature
pages hereof.
4. As consideration for the assignment and sale contemplated
in Section 1 hereof, the Assignee shall pay to the Assignor on the date
hereof in Federal funds an amount equal to $________________*. It is
understood that commitment and/or Letter of Credit fees accrued to the date
hereof with respect to the interest assigned hereby are for the account of
the Assignor and such fees accruing from and including the date hereof are
for the account of the Assignee. Each of the Assignor and the Assignee hereby
agrees that if it receives any amount under the Credit Agreement which is for
the account of the other party hereto, it shall receive the same for the
account of such other party to the extent of such other party's interest
therein and shall promptly pay the same to such other party.
5. The effective date for this Assignment and Acceptance
shall be _____________, ______ (the "EFFECTIVE DATE"). Following the
execution of this Assignment and Acceptance, it will be delivered to the
Company for its acceptance and to the Administrative Agent for acceptance and
recording by the Administrative Agent.
6. Upon such acceptance and recording, as of the Effective
Date, (i) the Assignee shall be a party to the Credit Agreement and, to the
extent provided in this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.
7. Upon such acceptance and recording, from and after the
Effective Date, the Agent shall make all payments under the Credit Agreement
in respect of the interest assigned hereby (including, without limitation,
all payments of principal, interest and commitment fees with respect thereto)
to the Assignee. The Assignor and Assignee shall make all appropriate
adjustments in payments under the Credit Agreement for periods prior to the
Effective Date directly between themselves.
- -------------------
* Amount should combine principal together with accrued interest and breakage
compensation, if any, to be paid by the Assignee, net of any portion of any
upfront fee to be paid by the Assignor to the Assignee. It may be preferable
in an appropriate case to specify these amounts generically or by formula
rather than as a fixed sum.
-2-
<PAGE>
8. In accordance with Section 13.12 of the Credit Agreement,
the Assignor and the Assignee request and direct that the Administrative
Agent prepare and cause the Borrowers to execute and deliver to the Assignee
a Revolving Credit Note payable to the Assignee in the amount of its
Revolving Credit Commitment and a Term Credit Note in the amount of its share
of the Term Loan and to the Assignor a new Revolving Credit Note payable to
the Assignor in the amount of its Commitment after giving effect to the
assignment hereunder, a new Term Credit Note in the amount of its share of
the Term Loan.
9. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of Illinois.
-3-
<PAGE>
[ASSIGNOR LENDER]
By:
-------------------------------------
Title:
[ASSIGNEE LENDER]
By:
-------------------------------------
Title:
Lending Office (and
address for notices):
LIBOR Funding Office:
Accepted and consented this
____ day of ___________, 19__
PLATINUM ENTERTAINMENT, INC.
By:
-------------------------------------
Title:
----------------------------------
Accepted and consented to by the Agent this
_______ day of ___________, 19__
[AGENT]
By
-------------------------------------
Title:
---------------------------------
-4-
<PAGE>
SCHEDULE 6.3
SUBSIDIARIES
<TABLE>
<CAPTION>
JURISDICTION OF INCORPORATION
OR ORGANIZATION PERCENTAGE
NAME OWNERSHIP
<S> <C> <C>
River North Records, Inc. Delaware 100%
CGI Records, Inc. Delaware 100%
Lexicon Music, Inc. Delaware 100%
Light Records, Inc. Delaware 100%
The Recording Experience, Inc. Delaware 100%
JustMike Music, Inc. Delaware 100%
Peg Publishing, Inc. Delaware 100%
Royce Publishing, Inc. Delaware 100%
Intersound, Inc. Delaware 100%
</TABLE>
<PAGE>
SCHEDULE 6.6
LITIGATION
1. FINLEY -V- ENTERTAINMENT ARTISTS, INC. AND RIVER NORTH RECORDS, INC., Civil
Action No. 95-5258 (United States District Court, Western District of
Arkansas, Fayetteville Division).
On April 23, 1997 judgment was entered against River North Records, Inc. in
the amount of $95,182.00 in this matter. Enforcement of this judgment was
stayed by order of the court entered July 9, 1997, upon approval of River
North's appeal bond. The judgment is on appeal to the United States Court
of Appeals for the Eighth Circuit, Case No. 97-298WAF. The plaintiff's
original claims sought recovery for damages sustained on account of alleged
misrepresentations concerning the appearance of Crystal Bernard at a Peter
Cetera concert in Fayetteville, Arkansas. The Company believes it will be
successful on appeal or, if unsuccessful, that the matter can be
successfully compromised, with some recovery obtained from the Company's
co-defendant in a contribution action. The Company is being defended in
the appeal by William Putman of Mashburn & Taylor, Fayetteville, Arkansas.
2. GLAD, INC. DON NALLE, AND ED NALLE -V- LIGHT RECORDS, INC. CGI RECORDS,
INC., RIVER NORTH RECORDS, INC., PLATINUM ENTERTAINMENT, INC., JUSTMIKE
MUSIC, INC., AND JOSTE PUBLISHING, Civil Action No. 97 C 5721 (Northern
District of Illinois, Eastern Division).
The plaintiffs allege breach of contract, unjust enrichment, breach of
implied covenant of good faith and fair dealing, conversion, and for
declaratory relief and an accounting. The claims essentially arise out of
recording and producing agreements with the group Glad, which the Company
has sought to terminate on the grounds that recordings by the group lack
commercial potential. The company believes most of the claims made in the
complaint are without merit and believes its overall exposure in this
matter lies in the range of $0 to $200,000. The company further believes a
successful settlement may be obtained in this matter that does not involve
significant cash payment. The Company is being defended in this action by
Katten, Muchin & Zavis, Chicago, Illinois.
3. CRT CUSTOM PRODUCTS, INC. -V- R.E.X. MUSIC, INC. AND PLATINUM
ENTERTAINMENT, INC. (Chancery Court, Williamson County, Tennessee, Case
No. 24035).
The claims made by the plaintiff seek recovery from the Company of an
indebtedness incurred by R.E.X. Music, Inc. on the grounds that the Company
caused R.E.X. to fail as a business for the purpose of acquiring its assets
at foreclosure. R.E.X. has filed a cross-complaint against the Company
asserting essentially the same claims. The Company has filed a counter-
claim against CRT seeking recovery of certain artwork and film materials,
together with damages for the loss of such materials. The
<PAGE>
Company believes the claims of CRT and R.E.X. are without merit and that
the matter will be successfully resolved without exposure. The Company is
being defended in this action by Grant Glassford.
4. PLATINUM ENTERTAINMENT, INC. -V- TODD THOMAS OLSEN, BRAD CURTIS OLSEN, AND
EMI CHRISTIAN MUSIC GROUP, INC. (Chancery Court, Davidson County,
Tennessee, Case No. 97-602-I).
The claims made by the Company seek enforcement of a distribution agreement
entered with Messrs. Olsen and damages for the breach of that agreement
arising out of the distribution of recordings by EMI. EMI has filed a
counter-claim against the Company seeking damages for the Company's
distribution of a recording by Messrs. Olsen that EMI claims it now
controls. The Company believes the matter will be settled with a cash
payment made to the Company. The Company is being represented in this
matter by Grant Glassford.
5. WELLS -V- SCOTT ENTERTAINMENT, INC. (Chancery Court, Davidson County,
Tennessee, Case No. 96-1326-I).
The plaintiff is seeking a recision of a songwriting agreement between him
and Scott Entertainment, Inc. and for the return of his interests in all
songs previously conveyed to Scott Entertainment, Inc. under the agreement,
including the song "Check Yes Or No." The assets of Scott Entertainment,
Inc. were acquired in 1996 by the Company. The plaintiff has sought to
join the Company as a defendant in the lawsuit but to date has been
unsuccessful. The Company is indemnified by Scott Entertainment, Inc.
under the terms of the asset purchase agreement against all costs incurred
in this matter. The Company does not believe there is any risk of recision
of the songwriting agreement. The Company is being defended by Grant
Glassford.
6. POINT CLASSICS -V- DISKY.
Intersound has received notice of, and assisted in the defense of, a claim
in Germany against Intersound's European distributor, Disky, that three of
its classical titles do not have clear title. The claim is the result of a
breakup of the partnership which created the original masters. Management
does not believe there is any significant liability.
7. TUPAC SHUKUR -V- INTERSOUND.
Intersound has received several demand letters from the estate of Tupac
Shukur disputing Intersound's right to market and promote the album "Stop
the Gunfight" by Trapp featuring Tupac Shukur and Notorious B.I.G.
Intersound believes the claim will be settled by paying a pro rata share of
royalties to the estate of Mr. Shakur. Additionally, Intersound is fully
indemnified by John Parker aka "Trapp." Intersound is being represented in
this matter by Katten, Muchin & Zavis, Chicago, Illinois.
-2-
<PAGE>
8. CHRISTOPHER WALLACE AKA "NOTORIOUS B.I.G." -V- INTERSOUND.
Intersound has received several demand letters from the estate of
Christopher Wallace aka "Notorious B.I.G." Intersound believes the claim
will be settled by paying a pro rata share of royalties to the estate of
Mr. Wallace. Additionally, Intersound is fully indemnified by John Parker
aka "Trapp." Intersound is being represented in this matter by Katten,
Muchin & Zavis, Chicago, Illinois.
9. BOB CARLISLE PACKAGING.
The Company has received correspondence from counsel for Benson Records,
Inc. d/b/a Diadem Records complaining of the use of a photograph of a
butterfly on the packaging used in connection with a recent album featuring
performances of the artist Bob Carlisle as a member of the group The Allies
that was released and distributed by the Company through the Intersound
distribution system. The Company has replied to the effect that the
packaging is proper, but that we will change the packaging of the album in
various ways to meet their concerns. The Company has not received a
response from Diadem to date.
10. K-TEL LITIGATION.
On October 3, 1997, the Company filed suit against K-tel International,
Inc. ("K-TEL") in the United States District Court for the Northern
District of Illinois, alleging that K-tel (a) materially failed to comply
with its covenant to conduct business in the ordinary course when it
deviated from the release schedule provided to the company; (b) neglected
its business, shifted its focus to its successor business and failed to
maintain the assets of its subsidiaries; and (c) breached its
representation and warranty that there was no material adverse change in
the business and operations of its subsidiaries. In addition to the
escrowed funds, the Company is seeking a buyer's reimbursement under the
purchase and sale agreement between K-tel International, Inc. and River
North Studios, Inc. (which has since changed its name to Intersound, Inc.)
dated as of March 3, 1997 of $1,750,000. On September 12, 1997, K-tel
filed suit against the Company in the United States District Court for the
District of Minnesota, claiming that it is entitled to the escrowed funds
because it terminated the K-tel Agreement when the transaction was not
consummated within the agreed time limits, asserting that the Company
committed fraud when it represented to K-tel it had the financial ability
to complete the transaction. K-tel has also asserted a claim for
promissory estoppel on the grounds that it incurred expenses in connection
with the transaction in reliance on the Company's assurances it had the
financial ability to close the transaction. Further, K-tel seeks damages
for defamation and alleges that the Company breached a confidentiality and
non-solicitation agreement between the parties. The outcome of such claims
is uncertain. The Company intends to prosecute vigorously its action
against K-tel and defend vigorously K-tel's action.
-3-
<PAGE>
11. INTERSOUND LITIGATION.
On November 7, 1997, JCSHO, Inc., a Minnesota corporation, formerly known
as Intersound, Inc. ("JCSHO") whose assets were purchased by the Company,
filed a complaint against the Company in the District Court of Minnesota,
Fourth Division. The case is captioned JCSHO, INC. F/K/A INTERSOUND, INC.
-V- PLATINUM ENTERTAINMENT, INC., Case No. 97-2479 MJD/AJB. JCSHO alleges
breach of contract by the Company with regard to the convertible
subordinated debentures in the aggregate principal amount of $5,000,000
(the "CONVERTIBLE SUBORDINATED DEBENTURES") issued to JCSHO under the
purchase and sale agreement. JCSHO alleges that the Company is in default
on its obligations under the Convertible Subordinated Debentures due to
failure to make certain payments under such debentures at a defined default
interest rate. JCSHO is seeking damages in the amount of $5,000,000 and
costs, disbursements and attorneys' fees. The Company believes that
JCSHO's allegations are without merit and intends to vigorously defend this
litigation.
12. On November 12, 1997, Donald Johnson, the former president of Intersound,
Inc., sued Intersound, Inc. in the Superior Court of Fulton County, State
of Georgia. The case is captioned DONALD R. JOHNSON -V- INTERSOUND, INC.,
Case No. E-64885. Johnson alleges that he was wrongfully terminated from
his employment as president of Intersound, Inc. and seeks damages and
attorneys' fees. The Company intends to defend this suit on the grounds
that Johnson was terminated for cause and that no additional compensation
is owed to him.
-4-
<PAGE>
SCHEDULE 6.7
AFFILIATE TRANSACTIONS
1. The transactions contemplated by the Investment Agreement,
including, without limitation, (i) the issuance and sale by the Company of
the Series B Preferred Stock, the Affiliate Preferred Stock, the Purchaser
Warrants and the Affiliate Warrants, (ii) the rights and privileges granted
to the Purchasers pursuant to the Investment Agreement in connection with
their purchase of Series B Preferred Stock and Purchaser Warrants, (iii) the
rights and privileges granted to the holders of the Series B Preferred Stock,
the Affiliate Preferred Stock, the Purchaser Warrants and the Affiliate
Warrants in accordance with the terms of such securities, (iv) the Consulting
Agreements to be entered into between SK-Palladin Partners, LP and the
Company and between MAC Music LLC and the Company (substantially in the form
of Exhibit D to the Investment Agreement) and any fees payable thereunder to
the Purchasers and their respective Affiliates, (v) the side letter agreement
between MAC Music LLC and the Company relating to certain foreign licensing
rights (substantially in the form of Exhibit E to the Investment Agreement)
and (vi) the transaction fees and expenses to be paid to the Purchasers and
their respective Affiliates by the Company pursuant to Section 2.3 of the
Investment Agreement.
2. The employment agreement between Steven Devick and the Company,
dated as of June 1, 1997, as amended.
3. The employment agreement between Douglas Laux and the Company,
dated as of June 1, 1997, as amended.
4. The employment agreement between Thomas Leavens and the Company,
dated as of June 1, 1997, as amended.
5. Outstanding stock options, whether or not vested, granted to any
current or former officers or directors of the Company, including, without
limitation, stock options granted to Steven Devick, Douglas Laux or Thomas
Leavens.
6. The House of Blues Venture.
<PAGE>
SCHEDULE 8.7
PERMITTED LIENS
None
<PAGE>
SCHEDULE 8.8
EXISTING INDEBTEDNESS
1. $910,000 plus accrued interest payable to Steven Devick pursuant to a loan
made by Mr. Devick to Platinum Entertainment, Inc.
2. $900,000 plus accrued interest payable to William Ellis pursuant to a loan
made by Mr. Ellis to Platinum Entertainment, Inc.
3. Capitalized Leases:
<TABLE>
<CAPTION>
<S> <C>
Harmony/Counterpoint Systems (royalty software) $ 3,050.66
Dana Commercial Credit (computer hardware) $ 2,258.54
Steelcase Financial $ 1,202.42
Bellsouth $ 7,311.68
GE Capital $ 55.63
----------
$13,878.93
</TABLE>
<PAGE>
PLATINUM ENTERTAINMENT, INC.
TERM CREDIT NOTE
$20,000,000 December 12, 1997
For value received, the undersigned, Platinum Entertainment, Inc., a
Delaware corporation (the "COMPANY") and Intersound, Inc., a Delaware
corporation ("INTERSOUND"; the Company and Intersound being hereinafter
referred to collectively as the "BORROWERS"), hereby jointly and severally
promise to pay to the order of Bank of Montreal (the "LENDER"), at the
principal office of Bank of Montreal in Chicago, Illinois the principal sum
of Twenty Million Dollars ($20,000,000), in installments as follows: eleven
(11) consecutive quarterly installments (commencing on June 1, 1998 and
continuing on the first day of each September, December, March and June
occurring thereafter to and including December 1, 2000) with all such
installments (except the last such installment) to be in an amount equal to
$1,818,181.82 per installment and the last such installment to be in an
amount equal to $1,818,181.80 which shall be the full amount of the then
unpaid principal balance of this Note.
This Note evidences indebtedness constituting the "DOMESTIC RATE
PORTION" and "LIBOR PORTIONS" as such terms are defined in that certain
Credit Agreement dated as of December 12, 1997, by and among the Borrowers,
certain Subsidiaries of the Company, Bank of Montreal individually and as
Administrative Agent and certain lenders which are or may from time to time
become parties thereto (the "CREDIT AGREEMENT") made or to be made to the
Borrowers by the Lender under the Term Credit provided for under the Credit
Agreement and the Borrowers hereby jointly and severally promise to pay
interest at the office specified above on the loan evidenced hereby at the
rates and times specified therefor in the Credit Agreement. Capitalized
terms used herein without definition shall have the meanings ascribed to them
in the Credit Agreement, and this Note is subject to the terms of the Credit
Agreement.
Any repayment of principal hereon, the status of indebtedness evidenced
hereby from time to time as part of the Domestic Rate Portion or a LIBOR
Portion and the interest rates and interest periods applicable thereto shall
be endorsed by the holder hereof on the reverse side of this Note or recorded
on the books and records of the holder hereof (provided that such entries
shall be endorsed on the reverse side hereof prior to any negotiation hereof)
and the Borrowers agree that in any action or proceeding instituted to
collect or enforce collection of this Note, the entries so endorsed on the
reverse side hereof or recorded on the books and records of the Lender shall
be PRIMA FACIE evidence of the unpaid balance of this Note and the status of
indebtedness evidenced hereby from time to time as part of the Domestic Rate
Portion or a LIBOR Portion and the interest rates and interest periods
applicable thereto.
<PAGE>
This Note is issued by the Borrowers under the terms and provisions of
the Credit Agreement and is secured, inter alia, by certain security
agreements and other instruments and documents from the Company and certain
of its Subsidiaries, and this Note and the holder hereof are entitled to all
of the benefits and security provided for thereby or referred to therein,
equally and ratably with all other indebtedness thereby secured, to which
reference is hereby made for a statement thereof. This Note may be declared
to be, or be and become, due prior to its expressed maturity upon the
occurrence of an Event of Default specified in the Credit Agreement,
voluntary prepayments may be made hereon, and certain prepayments are
required to be made hereon, all in the events, on the terms and with the
effects provided in the Credit Agreement.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE
INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAW.
The Borrowers hereby waive presentment for payment.
PLATINUM ENTERTAINMENT, INC.
By /s/ Steven Devick
----------------------------------------
Name: Steven Devick
Title: President
INTERSOUND, INC.
By /s/ Steven Devick
----------------------------------------
Name: Steven Devick
Title: President
-2-
<PAGE>
PLATINUM ENTERTAINMENT, INC.
REVOLVING CREDIT NOTE
$10,000,000 December 12, 1997
For value received on the Revolving Credit Termination Date, the
undersigned, Platinum Entertainment, Inc., a Delaware corporation (the
"COMPANY"), and Intersound, Inc., a Delaware corporation ("INTERSOUND") (the
Company and Intersound being hereinafter referred to collectively as the
"BORROWERS"), hereby jointly and severally promise to pay to the order of
Bank of Montreal (the "LENDER"), at the principal office of Bank of Montreal
in Chicago, Illinois (i) the principal sum of Ten Million Dollars
($10,000,000), or (ii) such lesser amount as may at the time of the maturity
hereof, whether by acceleration or otherwise, be the aggregate unpaid
principal amount of all Revolving Loans owing from the Borrowers to the
Lender under the Revolving Credit provided for in the Credit Agreement
hereinafter mentioned.
This Note evidences indebtedness constituting the "DOMESTIC RATE
PORTION" and "LIBOR PORTIONS" as such terms are defined in that certain
Credit Agreement dated as of December 12, 1997, by and among the Borrowers,
certain Subsidiaries of the Company, Bank of Montreal individually and as
Administrative Agent and certain lenders which are or may from time to time
become parties thereto (the "CREDIT AGREEMENT") made and to be made to the
Borrowers by the Lender under the Revolving Credit provided for under the
Credit Agreement and the Borrowers hereby jointly and severally promise to
pay interest at the office specified above on each loan evidenced hereby at
the rates and times specified therefor in the Credit Agreement. Capitalized
terms used herein without definition shall have the meanings ascribed to them
in the Credit Agreement, and this Note is subject to the terms of the Credit
Agreement.
Each loan made under the Revolving Credit provided for in the Credit
Agreement by the Lender to a Borrower against this Note, any repayment of
principal hereon, the status of each such loan from time to time as part of
the Domestic Rate Portion or a LIBOR Portion and the interest rates and
interest periods applicable thereto shall be endorsed by the holder hereof on
the reverse side of this Note or recorded on the books and records of the
holder hereof (provided that such entries shall be endorsed on the reverse
side hereof prior to any negotiation hereof) and the Borrowers agree that in
any action or proceeding instituted to collect or enforce collection of this
Note, the entries so endorsed on the reverse side hereof or recorded on the
books and records of the Lender shall be PRIMA FACIE evidence of the unpaid
balance of this Note and the status of each such loan from time to time as
part of the Domestic Rate Portion or a LIBOR Portion and the interest rates
and interest periods applicable thereto.
<PAGE>
This Note is issued by the Borrowers under the terms and provisions of
the Credit Agreement and is secured, inter alia, by certain security
agreements and other instruments and documents from the Company and certain
of its Subsidiaries, and this Note and the holder hereof are entitled to all
of the benefits and security provided for thereby or referred to therein,
equally and ratably with all other indebtedness thereby secured, to which
reference is hereby made for a statement thereof. This Note may be declared
to be, or be and become, due prior to its expressed maturity upon the
occurrence of an Event of Default specified in the Credit Agreement,
voluntary prepayments may be made hereon, and certain prepayments are
required to be made hereon, all in the events, on the terms and with the
effects provided in the Credit Agreement.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE
INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAW.
The Borrowers hereby waive presentment for payment.
PLATINUM ENTERTAINMENT, INC.
By /s/ Steven Devick
---------------------------------------------
Name: Steven Devick
Title: President
INTERSOUND, INC.
By /s/ Steven Devick
---------------------------------------------
Name: Steven Devick
Title: President
-2-
<PAGE>
SECURITY AGREEMENT
This Security Agreement (the "AGREEMENT") is dated as of December 12,
1997, by and among the parties executing this Agreement under the heading
"Debtors" (such parties, together with any additional parties who execute and
deliver to the Agent an agreement in the form attached hereto as Schedule D,
being herein referred to collectively as the "DEBTORS" and individually a
"DEBTOR"), each with its mailing address at 2001 Butterfield Road, Suite
1400, Downers Grove, Illinois 60515, and BANK OF MONTREAL ("BOM"), with its
mailing address at 115 South LaSalle Street, Chicago, Illinois 60603, acting
as agent hereunder for the Lenders hereinafter identified and defined (BOM
acting as such agent and any successor or successors to BOM acting in such
capacity being hereinafter referred to as the "AGENT");
PRELIMINARY STATEMENTS
A. Platinum Entertainment, Inc., a Delaware corporation (the
"COMPANY"), Intersound, Inc., a Delaware corporation ("INTERSOUND"), (the
Company and Intersound being hereinafter referred to collectively as the
"BORROWERS" and individually as a "BORROWER"), Lexicon Music, Inc., a
Delaware corporation ("LEXICON"), CGI Records, Inc., a Delaware corporation
("CGI"), River North Records, Inc., a Delaware corporation ("NORTH RECORDS"),
Light Records, Inc., a Delaware corporation ("LIGHT"), The Recording
Experience, Inc., a Delaware corporation ("EXPERIENCE"), Peg Publishing, Inc.
a Delaware corporation ("PEG"), JustMike Music, Inc., a Delaware corporation
("JUSTMIKE"), Royce Publishing, Inc., a Delaware corporation ("ROYCE")
(Lexicon, CGI, North Records, Light, Experience, Peg, JustMike and Royce
being hereinafter referred to collectively as the "GUARANTORS" and
individually as a "GUARANTOR"), BOM, individually and as agent, and certain
lenders have entered into a Credit Agreement dated as of even date herewith
(such Credit Agreement, as the same may be amended or modified from time to
time, including amendments and restatements thereof in its entirety, being
hereinafter referred to as the "CREDIT AGREEMENT"), pursuant to which BOM and
other lenders from time to time party to the Credit Agreement (BOM and the
other lenders which are now or from time to time hereafter become party to
the Credit Agreement, together with any affiliates of such lenders to which
is owed any Hedging Liability, being hereinafter referred to collectively as
the "LENDERS" and individually as a "LENDER") have agreed, subject to certain
terms and conditions, to extend credit and make certain other financial
accommodations available to the Borrowers.
B. Pursuant to the Credit Agreement, the Guarantors guarantee all of
the indebtedness, obligations, and liabilities of the Borrowers to the Agent
and the Lenders under the Credit Agreement.
C. The Borrowers, or any of them individually, may from time to time
enter into one or more interest rate exchange, cap, collar, floor or other
agreements with one or more of the Lenders party to the Credit Agreement or
their affiliates for the purpose of hedging or otherwise protecting the
Borrowers, or any of them individually, against changes in
<PAGE>
interest rates on the Revolving Loans and the Term Loans (the liability of
the Borrowers, or any of them individually, in respect of such agreements
with such Lenders or their affiliates being hereinafter referred to as the
"HEDGING LIABILITY").
D. As a condition precedent to extending credit or otherwise making
financial accommodations available to the Borrowers under the Credit
Agreement, the Lenders have required, among other things, that each Debtor
grant to the Agent for the benefit of the Lenders a lien on and security
interest in certain personal property of such Debtor pursuant to this
Agreement.
E. The Company owns, directly or indirectly, all or substantially all
of the equity interests in each Guarantor and the Company provides each
Guarantor with financial, management, administrative, and technical support
which enables such Guarantor to conduct its business in an orderly and
efficient manner in the ordinary course.
F. Each Guarantor will benefit, directly or indirectly, from credit
and other financial accommodations extended by the Lenders to the Borrowers.
NOW, THEREFORE, for and in consideration of the execution and delivery
by the Lenders of the Credit Agreement, and other good and valuable
consideration, receipt whereof is hereby acknowledged, the parties hereto
hereby agree as follows:
SECTION 1. TERMS DEFINED IN CREDIT AGREEMENT. All capitalized terms
used herein without definition shall have the same meanings herein as such
terms have in the Credit Agreement. The term "Debtor" and "Debtors" as used
herein shall mean and include the Debtors collectively and also each
individually, with all grants, representations, warranties and covenants of
and by the Debtors, or any of them, herein contained to constitute joint and
several grants, representations, warranties and covenants of and by the
Debtors; PROVIDED, HOWEVER, that unless the context in which the same is used
shall otherwise require, any grant, representation, warranty or covenant
contained herein related to the Collateral shall be made by each Debtor only
with respect to the Collateral owned by it or represented by such Debtor as
owned by it.
SECTION 2. GRANT OF SECURITY INTEREST IN THE COLLATERAL; OBLIGATIONS
SECURED. (a) Each Debtor hereby grants to the Agent for the benefit of the
Lenders a lien on and security interest in, and right of set-off against, and
acknowledges and agrees that the Agent has and shall continue to have for the
benefit of the Lenders a continuing lien on and security interest in, and
right of set-off against, any and all right, title and interest of each
Debtor, whether now owned or existing or hereafter created, acquired or
arising, in and to the following:
(i) RECEIVABLES. Receivables, whether now owned or existing or
hereafter created, acquired or arising, and however evidenced or acquired,
or in which such Debtor now has or hereafter acquires any rights (the term
"RECEIVABLES" means and includes all accounts, accounts receivable,
contract rights, instruments, notes, drafts, acceptances, documents,
chattel paper, any right of such Debtor to payment for goods
-2-
<PAGE>
sold or leased or for services rendered, whether arising out of the sale
of Inventory (as hereinafter defined) or otherwise and whether or not
earned by performance, and all other forms of obligations owing to such
Debtor, and all of such Debtor's rights to any merchandise and other goods
(including without limitation any returned or repossessed goods and the
right of stoppage in transit) which is represented by, arises from or is
related to any of the foregoing);
(ii) GENERAL INTANGIBLES. All general intangibles, whether now owned
or existing or hereafter created, acquired or arising, or in which such
Debtor now has or hereafter acquires any rights, including, without
limitation all patents, patent applications, patent licenses, trademarks,
trademark registrations, trademark licenses, trade styles, trade names,
copyrights, copyright registrations, copyright licenses and other licenses
and similar intangibles and all customer, client and supplier lists (in
whatever form maintained) and all rights in leases and other agreements
relating to real or personal property, all causes of action and tax refunds
of every kind and nature, all privileges, franchises, immunities, licenses,
permits and similar intangibles, all rights to receive payments in
connection with the termination of any pension plan or employee stock
ownership plan or trust established for the benefit of employees of such
Debtor and all other personal property (including things in action) not
otherwise covered by this Agreement;
(iii) INVENTORY. Inventory, whether now owned or existing or
hereafter created, acquired or arising, or in which such Debtor now has or
hereafter acquires any rights and all documents of title at any time
evidencing or representing any part thereof (the term "INVENTORY" means and
includes all goods which are held for sale or lease or are to be furnished
under contracts of service or consumed in such Debtor's business, and all
goods which are raw materials, work-in-process, finished goods, materials
and supplies of every kind and nature, in each case used or usable in
connection with the acquisition, manufacture, processing, supply,
servicing, storing, packing, shipping, advertising, selling, leasing or
furnishing of such goods, and any constituents or ingredients thereof, and
all goods which are returned or repossessed goods) including, without
limitation, Inventory consisting of records, albums and music videos;
(iv) EQUIPMENT. Equipment, whether now owned or existing or
hereafter created, acquired or arising, or in which such Debtor now has
or hereafter acquires any rights (the term "EQUIPMENT" means and includes
all equipment, machinery, tools, trade fixtures, furniture, furnishings,
office equipment and vehicles (including vehicles subject to a certificate
of title law) and all other goods, in each case now or hereafter used or
usable in connection with such Debtor's business, together with all parts,
accessories and attachments relating to any of the foregoing), including,
without limitation, Equipment consisting of recording equipment;
(v) INVESTMENT PROPERTY. All Investment Property, whether now owned
or existing or hereafter created, acquired or arising, or in which such
Debtor now has or hereafter acquires any rights (the term "INVESTMENT
PROPERTY" means and includes all
-3-
<PAGE>
investment property and any other securities (whether certificated or
uncertificated), security entitlements, securities accounts, commodity
contracts and commodity accounts, including all substitutions and
additions thereto, all dividends, distributions and sums distributable
or payable from, upon, or in respect of such property, and all rights
and privileges incident to such property);
(vi) RECORDS AND CABINETS. Supporting evidence and documents
relating to any of the above-described property, including without
limitation, computer programs, disks, tapes and related electronic
data processing media, rights of such Debtor to retrieve the same from
third parties, written applications, credit information, account cards,
payment records, correspondence, delivery and installation certificates,
invoice copies, delivery receipts, notes and other evidences of
indebtedness, insurance certificates and the like, together with all
books of account, ledgers and cabinets in which the same are reflected or
maintained, all whether now existing or hereafter arising;
(vii) DEPOSITS AND PROPERTY IN POSSESSION. All deposit accounts
(whether general, special or otherwise) maintained with the Agent or any of
the Lenders and all sums now or hereafter on deposit therein or payable
thereon, and any and all other property or interests in property which now
is or may from time to time hereafter come into the possession, custody or
control of the Agent or any of the Lenders, or any agent or affiliate of
the Agent or any of the Lenders, in any way and for any purpose (whether
for safekeeping, custody, pledge, transmission, collection or otherwise);
(viii) ACCESSIONS AND ADDITIONS. All accessions and additions to
and substitutions and replacements of any of the foregoing, whether now
existing or hereafter arising; and
(ix) PROCEEDS AND PRODUCTS. All proceeds and products of the
foregoing and all insurance of the foregoing and proceeds thereof, whether
now existing or hereafter arising;
all of the foregoing being herein sometimes referred to as the "COLLATERAL."
(b) This Agreement is made and given to secure, and shall secure, the
payment and performance of (i) (x) any and all indebtedness, obligations and
liabilities of the Borrowers, or any of them individually, to the Agent, the
Lenders, or any of them individually, evidenced by or otherwise arising out of
or relating to the Credit Agreement or any promissory note of the Borrowers, or
any of them individually, issued at any time under the Credit Agreement
(including all notes issued in extension or renewal thereof or in substitution
or replacement therefor), (y) any and all Hedging Liability of the Borrowers, or
any of them individually, to the Lenders, or any of them individually, and
(z) any liability of the Guarantors, or any of them individually, arising out of
the Credit Agreement, as well as for any and all other indebtedness, obligations
and liabilities of the Debtors, or any of them individually, to the Agent, the
Lenders, or any of them individually, evidenced by
-4-
<PAGE>
or otherwise arising out of or relating to this Agreement or any other Loan
Document, in each case, whether now existing or hereafter arising (and
whether arising before or after the filing of a petition in bankruptcy), due
or to become due, direct or indirect, absolute or contingent, and howsoever
evidenced, held or acquired, and (ii) any and all expenses and charges, legal
or otherwise, suffered or incurred by the Agent, the Lenders, or any of them
individually, in collecting or enforcing any of such indebtedness,
obligations or liabilities or in realizing on or protecting or preserving any
security therefor, including, without limitation, the lien and security
interest granted hereby (all of the foregoing being hereinafter referred to
as the "OBLIGATIONS"). Notwithstanding anything in this Agreement to the
contrary, the right of recovery against any Debtor (other than the Borrowers,
to which this limitation shall not apply) under this Agreement shall not
exceed $1 less than the amount which would render such Debtor's obligations
under this Agreement void or voidable under applicable law, including
fraudulent conveyance law.
(c) Notwithstanding anything herein to the contrary, the lien of this
Agreement on the Collateral shall be released as and to the extent required
by Section 8.18 of the Credit Agreement.
SECTION 3. COVENANTS, AGREEMENTS, REPRESENTATIONS AND WARRANTIES.
Each Debtor hereby covenants and agrees with, and represents and warrants to
the Agent and the Lenders that:
(a) Such Debtor is duly organized and existing under the laws of the
state of its organization, is the sole and lawful owner of its Collateral
and has full right, power and authority to enter into this Agreement and to
perform each and all of the matters and things herein provided for; and the
execution and delivery of this Agreement, and the observance and
performance of any of the matters and things herein set forth, will not
violate or contravene any provision of law or of the articles of
incorporation, by-laws or operating agreement of such Debtor, as
applicable, or of any indenture where such violation or contravention would
have a Material Adverse Effect, loan agreement or other agreement of or
affecting such Debtor or any of its properties, or result in the creation
or imposition of any liens or encumbrance on any property of such Debtor.
(b) The Collateral is in each Debtor's possession at the locations
listed under Column 1 on Schedule A attached hereto. Each Debtor's
respective chief executive office and chief place of business is listed
opposite its name on Schedule A attached hereto and the Debtors have no
other places of business other than those listed under Column 4 on
Schedule A attached hereto. No Debtor will, without the Agent's prior
written consent, remove its Collateral from the locations specified in the
first sentence of this Section 3(b) other than temporarily in the normal
course of business or to deliver the Collateral to any purchaser thereof in
connection with any sale or other disposition of such Collateral expressly
permitted by the Credit Agreement (provided that if for any reason
Collateral is at any time kept or located at locations other than its
present location or locations hereafter consented to by the Agent shall
nevertheless
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have and retain a security interest therein). The aggregate value of
all Debtors' Collateral located in the State of Tennessee shall not at
any time exceed $5,000.
(c) The Collateral and every part thereof is and will be free and
clear of all security interests, liens (including, without limitation,
mechanic's, laborer's and statutory liens), attachments, levies and
encumbrances of every kind, nature and description and whether voluntary or
involuntary except for the security interest of the Agent, the Agent
therein and as otherwise provided in the Credit Agreement (including
without limitation, Permitted Liens), and each Debtor will warrant and
defend its Collateral against any claims and demands of all persons at any
time claiming the same or any interest therein adverse to the Agent or any
Lender.
(d) Each Debtor will pay promptly when due all taxes, assessments,
and governmental charges and levies upon or against its Collateral in each
case before the same become delinquent and before penalties accrue thereon,
unless and to the extent that the same are being contested in good faith by
appropriate proceedings.
(e) Each Debtor at its own cost and expense will maintain, keep and
preserve its Collateral in good repair and condition and will not waste or
destroy such Collateral or any part thereof except as expressly permitted
by the Credit Agreement and will not be negligent in the care and use of
any Collateral and will not use or permit to be used any Collateral in
violation of any statute, ordinance or other governmental requirement.
Each Debtor will perform its obligations under any contract or other
agreement constituting part of the Collateral, it being understood and
agreed that the Agent and the Lenders have no responsibility to perform
such obligations.
(f) Except for Permitted Liens or as expressly permitted by the
Credit Agreement, and subject to Sections 5(a), 7(b) and 7(c) hereof, no
Debtor will, without the Agent's prior written consent, sell, assign,
mortgage, lease or otherwise dispose of its Collateral or any interest
therein.
(g) Each Debtor will insure its Collateral which is insurable against
such risks and hazards as other companies similarly situated insure
against, and including in any event loss or damage by fire, theft,
burglary, pilferage, loss in transit and such other hazards as the Agent
may specify, in amounts and under policies containing loss payable clauses
to the Agent as its interest may appear (and, if the Agent requests, naming
the Agent and the Lenders as additional insureds therein) by insurers
acceptable to the Agent. In case of any material loss, damage to or
destruction of its Collateral or any part thereof, the appropriate Debtor
shall promptly give written notice thereof to the Agent generally
describing the nature and extent of such damage or destruction. In the
event any Debtor shall receive any proceeds of such insurance, such Debtor
will immediately pay over such proceeds to the Agent. Net insurance
proceeds received by the Agent under the provisions hereof or under any
policy or policies of insurance covering the Collateral or any part thereof
shall be applied to the reduction of the Obligations (whether or not then
due); as and to the extent provided
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in the Credit Agreement. All insurance proceeds shall be subject to the
lien and security interest of the Agent hereunder.
UNLESS THE DEBTORS PROVIDE THE AGENT WITH EVIDENCE OF THE INSURANCE
COVERAGE REQUIRED BY THIS AGREEMENT, THE AGENT MAY PURCHASE INSURANCE AT
THE DEBTORS' EXPENSE TO PROTECT THE AGENT'S INTERESTS IN THE COLLATERAL.
THIS INSURANCE MAY, BUT NEED NOT, PROTECT ANY DEBTOR'S INTERESTS IN THE
COLLATERAL. THE COVERAGE PURCHASED BY THE AGENT MAY NOT PAY ANY CLAIMS
THAT ANY DEBTOR MAKES OR ANY CLAIM THAT IS MADE AGAINST SUCH DEBTOR IN
CONNECTION WITH THE COLLATERAL. THE DEBTORS MAY LATER CANCEL ANY SUCH
INSURANCE PURCHASED BY THE AGENT, BUT ONLY AFTER PROVIDING THE AGENT WITH
EVIDENCE THAT THE DEBTORS HAVE OBTAINED INSURANCE AS REQUIRED BY THIS
AGREEMENT. IF THE AGENT PURCHASES INSURANCE FOR THE COLLATERAL, THE
DEBTORS WILL BE RESPONSIBLE FOR THE COSTS OF THAT INSURANCE, INCLUDING
INTEREST AND ANY OTHER CHARGES THAT THE AGENT MAY IMPOSE IN CONNECTION WITH
THE PLACEMENT OF THE INSURANCE, UNTIL THE EFFECTIVE DATE OF THE
CANCELLATION OR EXPIRATION OF THE INSURANCE. THE COSTS OF THE INSURANCE
MAY BE ADDED TO THE OBLIGATIONS SECURED HEREBY. THE COSTS OF THE INSURANCE
MAY BE MORE THAN THE COST OF INSURANCE THE DEBTORS MAY BE ABLE TO OBTAIN ON
THEIR OWN.
(h) Each Debtor will at all times allow the Agent, any Lender or
their respective representatives free access to and right of inspection of
the Collateral. Each Debtor will, to the extent it is within its power so
to do, authorize and instruct all bailees and other parties at any time
holding, storing, shipping or transferring all or any part of such Debtor's
Collateral to permit the Agent, any Lender or their respective or its
designees to examine and inspect any of such Collateral then in such
party's possession and to verify from such party's own books and records
any information concerning such Collateral or any part thereof which the
Agent or such Lender may seek to verify. As to any premises not owned by
any of the Debtors wherein any of the Collateral is located, if any, the
appropriate Debtor shall, unless the Agent requests otherwise, cause each
Person having any right, title or interest in, or lien on, any of such
premises to enter into an agreement (any such agreement to contain a legal
description of such premises) whereby such party disclaims any right, title
and interest in, and lien on, the Collateral, allowing the removal of such
Collateral by the Agent or its designee and otherwise in form and substance
acceptable to the Agent; PROVIDED, HOWEVER, that if and so long as no Event
of Default has occurred and is continuing, no such agreement need be
obtained for (i) locations owned or leased by Polygram or (ii) leased
locations where inventory for all the Debtors aggregating at all such
locations (all such locations taken together) of not more than $500,000 in
value is located in the ordinary course of a Borrower's business for
delivery to purchasers thereof.
(i) Each Debtor agrees from time to time to deliver to the Agent and
any Lender such evidence of the existence and identity of such Debtor's
Collateral and of its availability as collateral security pursuant hereto
(including, without limitation, schedules describing all Receivables
created or acquired by such Debtor, copies of customer invoices or the
equivalent and original shipping or delivery receipts for all
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merchandise and other goods sold or leased or services rendered, together
with such Debtor's warranty of the genuineness thereof, and reports stating
the book value of Inventory and Equipment by major category and location),
as the Agent or such Lender may request. Each Debtor will promptly notify
the Agent and each Lender of any Collateral which such Debtor has
determined to have been rendered obsolete, stating the prior book value of
such Collateral, its type and location.
(j) Each Debtor will comply with the terms and conditions of any
leases, easements, right-of-way agreements or other agreements covering the
premises wherein its Collateral is located and any orders, ordinances, laws
or statutes of any city, state or other governmental entity, department or
agency having jurisdiction with respect to such premises or the conduct of
business thereon for which any such non-compliance would have a Material
Adverse Effect.
(k) On failure of any Debtor to perform any of the covenants and
agreements herein contained, the Agent may, at its option, perform the same
and in so doing may expend such sums as the Agent may deem advisable in the
performance thereof, including without limitation the payment of any
insurance premiums, the payment of any taxes, liens and encumbrances,
expenditures made in defending against any adverse claim and all other
expenditures which the Agent may be compelled to make by operation of law
or which the Agent may make by agreement or otherwise for the protection of
the security hereof. All such sums and amounts so expended shall be
repayable by the Debtors immediately without notice or demand, shall
constitute so much additional Obligations hereby secured and shall bear
interest from the date said amounts are expended at the rate per annum
(computed on the basis of a 360-day year for the actual number of days
elapsed) determined by adding 3% to the Domestic Rate (such rate per annum
as so determined being hereinafter referred to as the "DEFAULT RATE"). No
such performance of any covenant or agreement by the Agent on behalf of any
Debtor and no such advancement or expenditure therefor, shall relieve any
Debtor of any default under the terms of this Agreement or in any way
obligate the Agent or any Lender to take any further or future action with
respect thereto. The Agent, in making any payment hereby authorized, may
do so according to any bill, statement or estimate procured from the
appropriate public office or holder of the claim to be discharged without
inquiry into the accuracy of such bill, statement or estimate or into the
validity of any tax assessment, sale, forfeiture, tax lien or title or
claim. The Agent, in performing any act hereunder, shall be the sole judge
of whether the relevant Debtor is required to perform same under the terms
of this Agreement. The Agent is authorized to charge any depository
account of any Debtor maintained with the Agent for the amount of such sums
and amounts so expended.
(l) Each Debtor warrants that such Debtor has not transacted
business, and does not transact business, under any trade names except as
set forth on Schedule B. Each Debtor agrees that it will not change its
name or transact business under any trade names without first giving the
Agent 30 days' prior written notice of its intent to do so.
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(m) Each Debtor agrees to execute and deliver to the Agent such
further agreements and assignments or other instruments and to do all such
other things as the Agent may deem necessary or appropriate to assure the
Agent its security interest hereunder, including such financing statement
or statements or amendments thereof or supplements thereto or other
instruments as the Agent or the Required Lenders may from time to time
require in order to comply with the Uniform Commercial Code as enacted in
the State of Illinois and any successor statute(s) thereto (the "CODE").
Each Debtor hereby agrees that a carbon, photographic or other reproduction
of this Agreement or any such financing statement is sufficient for filing
as a financing statement by the Agent without notice thereof to any Debtor
wherever the Agent in its sole discretion desires to file the same. In the
event for any reason the law of any other jurisdiction than Illinois
becomes or is applicable to the Collateral or any part thereof, or to any
of the Obligations, each Debtor agrees to execute and deliver all such
instruments and to do all such other things as the Agent in its sole
discretion deems necessary or appropriate to preserve, protect and enforce
the security interests of the Agent under the law of such other
jurisdiction to at least the same extent as such security interests would
be protected under the Code. If any Collateral is in the possession or
control of any Debtor's agents or processors and unless the Agent requests
otherwise, such Debtor agrees to notify such agents or processors in
writing of the Agent's security interests therein, and upon the Agent's
request instruct them to hold all such Collateral for the Agent's account
and subject to the Agent's instructions. The Debtors agree to mark their
books and records to reflect the security interests of the Agent in the
Collateral.
SECTION 4. SPECIAL PROVISIONS RE: RECEIVABLES. (a) As of the time any
Receivable becomes subject to the security interest provided for hereby and at
all times thereafter, each Debtor shall be deemed to have warranted as to each
and all of such Receivables that all warranties of such Debtor set forth in this
Agreement are true and correct with respect to such Receivable constituting an
Eligible Account; that each Receivable and all papers and documents relating
thereto are genuine and in all respects what they purport to be; that each
Receivable is valid and subsisting and, if such Receivable is an account, arises
out of a bona fide sale of goods sold and delivered (or intellectual property
licensed) by such Debtor to, or in the process of being delivered (or, in the
case of intellectual property, licensed) to, or out of and for services
theretofore actually rendered by such Debtor to, the account debtor named
therein; that no such Receivable is evidenced by any instrument or chattel paper
unless such instrument or chattel paper has theretofore been endorsed by such
Debtor and delivered to the Agent (except to the extent the Agent specifically
requests such Debtor not to do so with respect to any such instrument or
chattel paper); that no surety bond was required or given in connection with
said Receivable or the contracts or purchase orders out of which the same arose;
that the amount of the Receivable represented as owing is the correct amount
actually and unconditionally owing, except for normal cash discounts on normal
trade terms in the ordinary course of business if such Receivable is an account
and that the amount of such Receivable represented as owing is not disputed and
is not subject to any set-offs, credits, deductions or countercharges other than
those arising in the ordinary course of such Debtor's business which are
disclosed to the Agent in writing promptly upon such Debtor becoming aware
thereof. Without limiting the foregoing, if any Receivable
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arises out of a contract with the United States of America or any of its
departments, agencies or instrumentalities, each Debtor agrees to notify the
Agent and execute whatever instruments and documents are required by the
Agent in order that such Receivable shall be assigned to the Agent and that
proper notice of such assignment shall be given under the federal Assignment
of Claims Act (or any successor statute).
(b) Each Debtor shall keep all of its books and records relating to the
Receivables only at its chief executive office described in Section 3(b)
hereof.
(c) Unless and until an Event of Default occurs, any merchandise which
is returned by a customer or account debtor or otherwise recovered may be
resold by the Debtors in the ordinary course of their respective businesses
in accordance with Section 5(b) hereof; after an Event of Default occurs,
such merchandise shall be set aside and held by each of the Debtors as
trustee for the Agent and the Lenders and shall remain part of the Agent's
Collateral. Unless and until an Event of Default occurs, each Debtor may
settle and adjust disputes and claims with its customers and account debtors,
handle returns and recoveries and grant discounts, credits and allowances in
the ordinary course of its business and otherwise for amounts and on terms
which such Debtor considers advisable. However, after an Event of Default has
occurred and unless the Agent requests otherwise, each Debtor shall notify
the Agent promptly of all returns and recoveries and on request deliver the
merchandise to the Agent. After an Event of Default has occurred and unless
the Agent requests otherwise, each Debtor shall also notify the Agent
promptly of all disputes and claims and settle or adjust them at no expense
to the Agent or the Lenders, but no discount, credit or allowance other than
on normal trade terms in the ordinary course of business shall be granted to
any customer or account debtor and no returns of merchandise shall be
accepted by such Debtor without the Agent's consent. The Agent may, at all
times after such an Event of Default has occurred, settle or adjust disputes
and claims directly with customers or account debtors for amounts and upon
terms which the Agent considers advisable.
(d) From time to time, as the Agent may request of any Debtor, such
Debtor shall provide the Agent with schedules describing all Receivables
created or acquired by such Debtor, provided, however, that the failure of
such Debtor to execute and deliver such schedules shall not affect or limit
the Agent's security interest or other rights in and to any such Receivables.
Together with each schedule, each Debtor shall if requested by the Agent,
furnish copies of customers' invoices or the equivalent, and original
shipping or delivery receipts, for all merchandise sold, and each Debtor
warrants the genuineness thereof.
SECTION 5. COLLECTION OF RECEIVABLES. (a) Except as otherwise
provided in this Agreement or the Credit Agreement each Debtor shall make
collection of all of its Receivables and may use the same to carry on its
business in accordance with sound business practice and otherwise subject to
the terms hereof.
(b) Whether or not the Agent has exercised any or all of its rights
under other provisions of this Section 5 and whether or not any Event of
Default has occurred, at the request of the Agent, such Debtor shall instruct
all account debtors to remit all payments in
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respect of its Receivables to a lockbox or lockboxes under the sole custody
and control of the Agent and which are maintained at post offices in Chicago,
Illinois selected by the Agent.
(c) Whether or not any Event of Default has occurred and whether or not
the Agent has exercised any or all of its rights under other provisions of
this Section 5, in the event the Agent requests any Debtor to do so, all
instruments and chattel paper at any time constituting part of the
Receivables (including any postdated checks) shall, upon receipt by such
Debtor, be immediately endorsed to and deposited with the Agent.
(d) Upon the occurrence and during the continuance of an Event of
Default, the Agent or its designee may notify any Debtor's customers or
account debtors that Receivables have been assigned to the Agent or of the
Agent's security interest therein and either in its own name, or such
Debtor's or both, demand, collect (including without limitation through a
lockbox analogous to that described in Section 5(b) hereof), receive, receipt
for, sue for, compound and give acquittance for any or all amounts due or to
become due on Receivables, and in the Agent's discretion file any claim or
take any other action or proceeding which the Agent may deem necessary or
appropriate to protect and realize upon the security interest of the Agent in
the Receivables.
(e) Any proceeds of Receivables or other Collateral transmitted to or
otherwise received by the Agent pursuant to any of the provisions of Sections
5(b), 5(c) or 5(d) hereof shall be handled and administered by the Agent in
and through a remittance account maintained at the Agent (such remittance
account to constitute a special restricted account for purposes of Section
4.2 of the Credit Agreement), and each Debtor acknowledges that the
maintenance of such remittance account by the Agent is solely for the Agent's
own convenience and that such Debtor does not have any right, title or
interest in such remittance account or any amounts at any time standing to
the credit thereof. The Agent may apply all or any part of any proceeds of
Receivables or other Collateral received by it from any source to the payment
of the Obligations (whether or not then due and payable), such applications
to be made in accordance with Section 3 of the Credit Agreement. Except for
purposes of computing interest on the Obligations in accordance with Section
3.7 of the Credit Agreement, the Agent need not apply or give credit for any
item included in proceeds of Receivables or other Collateral until the Agent
has received final payment therefor at its office in cash or final solvent
credits current in Chicago, Illinois, acceptable to the Agent as such.
However, if the Agent does give credit for any item prior to receiving final
payment therefor and the Agent fails to receive such final payment or an item
is charged back to the Agent for any reason, the Agent may at its election in
either instance charge the amount of such item back against the remittance
account, together with interest thereon at the Default Rate. Each Debtor
shall accompany each transmission of any proceeds of Receivables or other
Collateral to the Agent with a report in such form as the Agent shall require
identifying the particular Receivable or other Collateral from which the same
arises or relates. The Debtors hereby jointly and severally indemnify the
Agent and the Lenders from and against all liabilities, damages, losses,
actions, claims, judgments, costs, expenses, charges and attorney's fees
suffered or incurred by the Agent or the Lenders because of the maintenance
of the foregoing arrangements. The Agent and the Lenders shall have no
liability or responsibility to any Debtor for accepting any check, draft or
other order for
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payment of money bearing the legend "PAYMENT IN FULL" or words of similar
import or any other restrictive legend or endorsement whatsoever or be
responsible for determining the correctness of any remittance.
SECTION 6. SPECIAL PROVISIONS RE: INVESTMENT PROPERTY. (a) Unless
and until an Event of Default has occurred and is continuing and thereafter
until notified to the contrary by the Agent pursuant to Section 9(e) hereof:
(i) Each Debtor shall be entitled to exercise all voting and/or
consensual powers pertaining to the Investment Property or any part thereof
owned or held by it, for all purposes not inconsistent with the terms of
this Agreement, the Credit Agreement or any other document evidencing or
otherwise relating to any Obligations; and
(ii) Each Debtor shall be entitled to receive and retain all cash
dividends paid upon or in respect of the Investment Property owned or held
by it.
(b) Certificates for all securities now or at any time constituting
Investment Property hereunder shall be promptly delivered by the relevant
Debtor to the Agent duly endorsed in blank for transfer or accompanied by an
appropriate assignment or assignments or an appropriate undated stock power
or powers, in every case sufficient to transfer title thereto, and, with
respect to any Investment Property held by a securities intermediary,
commodity intermediary, or other financial intermediary of any kind, the
relevant Debtor shall execute and deliver, and shall cause any such
intermediary to execute and deliver, an agreement among such Debtor, the
Agent, and such intermediary in form and substance satisfactory to the Agent
which provides, among other things, for the intermediary's agreement that it
will comply with entitlement orders, and apply any value distributed on
account of any Investment Property maintained in an account with such
intermediary, as directed by the Agent without further consent by such Debtor
at any time after the occurrence of any Event of Default; PROVIDED, HOWEVER,
that, prior to the existence of an Event of Default and thereafter until
otherwise required by the Agent or the Required Lenders, a Debtor shall not
be required to deliver any such certificates or cause any such agreement to
be entered into with the relevant financial intermediary if and so long as
(i) the fair market value of any such Investment Property held by such Debtor
is less than $50,000 and (ii) the aggregate fair market value of all such
Investment Property held by the Debtors and not subject to the control (as
such term is defined in the Code) of the Agent under the Collateral Documents
is less than $250,000 at any one time outstanding. The Agent may at any time
after the occurrence of an Event of Default cause to be transferred into its
name or the name of its nominee or nominees any and all of the Investment
Property hereunder.
(c) Unless and until an Event of Default has occurred and is
continuing, each Debtor may sell or otherwise dispose of any Investment
Property to the extent permitted by the Credit Agreement, PROVIDED that no
Debtor shall sell or otherwise dispose of any capital stock or other equity
interests in any other Debtor or any direct or indirect Subsidiary of any
Debtor without the Agent's prior written consent except as expressly
permitted by the
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Credit Agreement. During the existence of any Event of Default, no Debtor
shall sell or otherwise dispose of all or any part of the Investment Property
without the prior written consent of the Agent.
(d) Each Debtor represents that on the date of this Agreement, none of
the Investment Property consists of margin stock (as such term is defined in
Regulation U of the Board of Governors of the Federal Reserve System) except
to the extent such Debtor has delivered to the Agent a duly executed and
completed Form U-1 with respect to such stock. If at any time the Investment
Property or any part thereof consists of margin stock, the relevant Debtor
shall promptly so notify the Agent and deliver to the Agent a duly executed
and completed Form U-1 and such other instruments and documents reasonably
requested by the Agent in form and substance satisfactory to the Agent.
(e) Notwithstanding anything to the contrary contained herein, in the
event any Investment Property is subject to the terms of a separate security
agreement (including, without limitation, the Pledge Agreement bearing even
date herewith relating to the equity interests issued by certain of the
Debtors hereunder) in favor of the Agent, the terms of such separate security
agreement shall govern and control unless otherwise expressly stated therein
or agreed to in writing by the Agent and the Lenders.
(f) In the event of any irreconcilable inconsistencies between this
Agreement and the Credit Agreement regarding the administration of
collections on Receivables, the provisions of the Credit Agreement shall
govern.
SECTION 7. SPECIAL PROVISIONS RE: INVENTORY AND EQUIPMENT. (a) Except
as expressly permitted by the Credit Agreement, each Debtor will at its own
cost and expense maintain, keep and preserve its Inventory in good and
merchantable condition and keep and preserve its Equipment in good repair,
working order and condition, ordinary wear and tear excepted, and without
limiting the foregoing make all necessary and proper repairs, replacements
and additions to the Equipment so that the efficiency thereof shall be fully
preserved and maintained.
(b) Each Debtor may, until an Event of Default has occurred and is
continuing and thereafter until otherwise notified by the Agent, use, consume
and sell its Inventory in the ordinary course of its business as presently
conducted, but a sale in the ordinary course of business shall not under any
circumstance include any transfer or sale in satisfaction, partial or
complete, of a debt owing by any Debtor.
(c) Each Debtor may, until an Event of Default has occurred and is
continuing and thereafter until otherwise notified by the Agent, sell or
otherwise dispose of Equipment as and to the extent permitted by Section 8.18
of the Credit Agreement.
(d) As of the time any Inventory or Equipment becomes subject to the
security interest provided for hereby and at all times thereafter, each
Debtor shall be deemed to have warranted as to any and all of its Inventory
and Equipment that all warranties of such Debtor set forth in this Agreement
are true and correct with respect to such Inventory and
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Equipment and that all of such Inventory and Equipment is located at a
location set forth pursuant to Section 3(b) hereof. Each Debtor warrants and
agrees that no Inventory is or will be consigned to any other person without
the Agent's prior written consent.
(e) Each Debtor shall at its own cost and expense cause the lien of the
Agent in and to any portion of its Collateral subject to a certificate of
title law to be duly noted on such certificate of title or to be otherwise
filed in such manner as is prescribed by law in order to perfect such lien
and shall cause all such certificates of title and evidences of lien to be
deposited with the Agent unless otherwise permitted by the Required Lenders
in their sole discretion; PROVIDED THAT no Debtor shall be obligated to cause
the Agent's lien to be so noted or to deliver any such certificate of title
to the Agent to the extent such certificate is held by another Lender with a
purchase money security interest permitted by the Credit Agreement on the
Collateral represented by such certificate.
(f) Each Debtor shall at its own cost and expense cause any certificate
of title evidencing any of the Collateral to be amended to reflect the
current and correct name of such Debtor as and when required by applicable
law, but in any event no later than such date on which such Debtor must renew
its registration of such Collateral under applicable law. Each Debtor shall
cause the lien of the Agent in such Collateral to continue to be duly noted
on such amended or reissued certificate of title.
(g) Except for Equipment from time to time located on the real estate
described on Schedule C attached hereto and as otherwise disclosed to the
Agent in writing, none of the Equipment is or will be attached to real estate
in such a manner that the same may become a fixture.
(h) If any of its Inventory is at any time evidenced by a document of
title, such document shall be promptly delivered by the appropriate Debtor to
the Agent.
SECTION 8. POWER OF ATTORNEY. In addition to any other powers of
attorney contained herein, each Debtor appoints the Agent, its nominee, or
any other person whom the Agent may designate as such Debtor's attorney in
fact, with full power to endorse such Debtor's names on any checks, notes,
acceptances, money orders, drafts or other forms of payment or security that
may come into the Agent's possession, to sign such Debtor's names on any
invoice or bill of lading relating to any Receivables, on drafts against
customers, on schedules and assignments of Receivables, on notices of
assignment, on public records, on verifications of accounts and on notices to
customers, to send requests for verification of Receivables to customers or
account debtors, to notify the post office authorities to change the address
for delivery of such Debtor's mail to an address designated by the Agent and
to receive, open and dispose of all mail addressed to such Debtor and to do
all other things necessary to carry out this Agreement. Each Debtor hereby
ratifies and approves all acts of any such attorney and agree that neither
the Agent nor any such attorney nor any Lender will be liable for any acts or
omissions nor for any error of judgment or mistake of fact or law other than
their own gross negligence or willful misconduct. The foregoing power of
attorney, being coupled with an interest, is irrevocable until the
Obligations have been fully satisfied and any commitment of the Lenders to
extend credit constituting Obligations has
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terminated. The Agent may file one or more financing statements disclosing
its security interest in any or all of the Collateral without any Debtor's
signature appearing thereon. Each Debtor also hereby grants the Agent a
power of attorney to execute any such financing statement, or amendments and
supplements to financing statements, on behalf of such Debtor without notice
thereof to any Debtor, which power of attorney is coupled with an interest
and is irrevocable until the Obligations have been fully satisfied and any
commitment of the Lenders to extend credit constituting Obligations to the
Borrowers, or any of them individually, has terminated. Agent agrees that it
will not exercise the power of attorney hereby granted in a manner
inconsistent with the provisions of the Credit Agreement.
SECTION 9. DEFAULTS AND REMEDIES. (a) The occurrence of any event
or the existence of any condition which is specified as an Event of Default
under the Credit Agreement shall constitute an "EVENT OF DEFAULT" hereunder.
(b) Upon the occurrence of any Event of Default, the Agent shall have,
in addition to all other rights provided herein or by law, the rights and
remedies of a secured party under the Code (regardless of whether the Code is
the law of the jurisdiction where the rights or remedies are asserted and
regardless of whether the Code applies to the affected Collateral), and
further the Agent may, without demand and without advertisement, notice,
hearing or process of law, all of which each Debtor hereby waives to the
extent permitted by law, at any time or times, sell and deliver any or all
Collateral held by or for it at public or private sale, for cash, upon credit
or otherwise, at such prices and upon such terms as the Agent deems
advisable, in its sole discretion. In addition to all other sums due the
Agent and the Lenders hereunder, the Debtors jointly and severally agree to
pay to the Agent and the Lenders all costs and expenses incurred by the Agent
and the Lenders, including reasonable attorneys' fees and court costs, in
obtaining, liquidating or enforcing payment of Collateral or Obligations or
in the prosecution or defense of any action or proceeding by or against the
Agent or such Lender or the Debtors or any of them concerning any matter
arising out of or connected with this Agreement or the Collateral or
Obligations, including without limitation any of the foregoing arising in,
arising under or related to a case under the Bankruptcy Code. Any
requirement of reasonable notice to any Debtor shall be met if such notice
made to the Company in accordance with Section 13.8 of the Credit Agreement.
The Agent shall not be obligated to make any sale or other disposition of the
Collateral regardless of notice having been given. The Agent or any Lender
may be the purchaser at any such sale. Each Debtor hereby waives all of its
rights of redemption from any such sale. Subject to the provisions of
applicable law, the Agent may postpone or cause the postponement of the sale
of all or any portion of the Collateral by announcement at the time and place
of such sale, and such sale may, without further notice, be made at the time
and place to which the sale was postponed or the Agent may further postpone
such sale by announcement made at such time and place.
(c) Without in any way limiting the foregoing, during the existence of
any Event of Default, the Agent shall have the right, in addition to all
other rights provided herein or by law, to take physical possession of any
and all of the Collateral and anything found therein, the right for that
purpose to enter without legal process any premises where the Collateral may
be found (provided such entry be done lawfully), and the right to maintain
such
-15-
<PAGE>
possession on each Debtor's premises (each Debtor hereby agreeing to lease
warehouses without cost or expense to the Agent or its designee if the Agent
so requests) or to remove its Collateral or any part thereof to such other
places as the Agent may desire. During the existence of any Event of Default,
the Agent shall have the right to exercise any and all rights with respect to
deposit accounts of any Debtor maintained with the Agent or any Lender,
including, without limitation, the right to collect, withdraw and receive all
amounts due or to become due or payable under each such deposit account.
During the existence of any Event of Default, each Debtor shall, upon the
Agent's demand, assemble its Collateral and make it available to the Agent at
a place designated by the Agent. If the Agent exercises its right to take
possession of the Collateral, each Debtor shall also at its expense perform
any and all other steps requested by the Agent to preserve and protect the
security interest hereby granted in the Collateral, such as placing and
maintaining signs indicating the security interest of the Agent, appointing
overseers for the Collateral and maintaining stock records.
(d) Without in any way limiting the foregoing, each Debtor hereby
grants to the Agent and the Lenders a royalty-free irrevocable license and
right to use all of such Debtor's patents, patent applications, patent
licenses, trademarks, trademark registrations, trademark licenses, trade
names, trade styles, and similar intangibles in connection with any
foreclosure or other realization by the Agent or the Lenders on all or any
part of the Collateral, provided that the license granted hereunder shall not
include any rights in any license agreement under which the relevant Debtor
is licensee which, by its terms, prohibits the license contemplated by this
Section. The license and right granted the Agent and the Lenders hereby
shall be without any royalty or fee or charge whatsoever.
(e) Without in any way limiting the foregoing, during the existence of
any Event of Default, all rights of a Debtor to exercise the voting and/or
consensual powers which it is entitled to exercise pursuant to Section
6(a)(i) hereof and/or to receive and retain the distributions which it is
entitled to receive and retain pursuant to Section 6(a)(ii) hereof, shall, at
the option of the Agent, cease and thereupon become vested in the Agent,
which, in addition to all other rights provided herein or by law, shall then
be entitled solely and exclusively to exercise all voting and other
consensual powers pertaining to the Investment Property and/or to receive and
retain the distributions which such Debtor would otherwise have been
authorized to retain pursuant to Section 6(a)(ii) hereof and shall then be
entitled solely and exclusively to exercise any and all rights of conversion,
exchange or subscription or any other rights, privileges or options
pertaining to any Investment Property as if the Agent were the absolute owner
thereof including, without limitation, the rights to exchange, at its
discretion, any and all of the Investment Property upon the merger,
consolidation, reorganization, recapitalization or other readjustment of the
respective issuer thereof or upon the exercise by or on behalf of any such
issuer or the Agent of any right, privilege or option pertaining to any
Investment Property and, in connection therewith, to deposit and deliver any
and all of the Investment Property with any committee, depositary, transfer
Agent, registrar or other designated agency upon such terms and conditions as
the Agent may determine. Without limiting the foregoing, during the
existence of any Event of Default, the Agent may, by written demand, direct
any securities intermediary, commodities intermediary, or other financial
intermediary at any time holding any Investment Property, or any issuer
thereof, to deliver such Collateral, or any part thereof, and/or liquidate
such
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<PAGE>
Collateral, or any party thereof, and deliver the proceeds therefrom to the
Agent. In the event the Agent in good faith believes any of the Collateral
constitutes restricted securities within the meaning of any applicable
securities laws, any disposition thereof in compliance with such laws shall
not render the disposition commercially unreasonable.
(f) The powers conferred upon the Agent hereunder are solely to protect
its interest in the Collateral and shall not impose on it any duty to
exercise such powers. The Agent shall be deemed to have exercised reasonable
care in the custody and preservation of Investment Property in its possession
if such Collateral is accorded treatment substantially equivalent to that
which the Agent accords its own property consisting of similar type assets,
it being understood, however, that the Agent shall have no responsibility for
ascertaining or taking any action with respect to calls, conversions,
exchanges, maturities, tenders, or other matters relating to any such
Collateral, whether or not the Agent has or is deemed to have knowledge of
such matters. This Agreement constitutes an assignment of rights only and
not an assignment of any duties or obligations of any Debtor in any way
related to the Collateral, and the Agent shall have no duty or obligation to
discharge any such duty or obligation. The Agent shall have no
responsibility for taking any necessary steps to preserve rights against any
parties with respect to any Collateral or initiating any action to protect
the Collateral against the possibility of a decline in market value. Neither
the Agent or any Lender, nor any party acting as attorney for the Agent or
any Lender, shall be liable for any acts or omissions or for any error of
judgment or mistake of fact or law other than such person's gross negligence
or willful misconduct.
(g) Failure by the Agent or any Lender to exercise any right, remedy or
option under this Agreement or any other agreement between the Debtors or any
of them and the Agent or any Lender or Lenders or provided by law, or delay
by the Agent or any Lender in exercising the same, shall not operate as a
waiver; no waiver shall be effective unless it is in writing, signed by the
party against whom enforcement of the waiver is sought and then only to the
extent specifically stated. Neither the Agent, any Lender nor any party
acting as attorney for the Agent or such Lender, shall be liable for any acts
or omissions or for any error of judgment or mistake of fact or law other
than their gross negligence or willful misconduct. The rights and remedies
of the Agent and the Lenders under this Agreement shall be cumulative and not
exclusive of any other right or remedy which the Agent or any Lender may
have. For purposes of this Agreement, an Event of Default shall be construed
as continuing after its occurrence until the same is waived in writing by the
Lenders or the Required Lenders, as the case may be, in accordance with the
Credit Agreement.
SECTION 10. APPLICATION OF PROCEEDS. The proceeds and avails of the
Collateral at any time received by the Agent upon the occurrence and during
the continuation of any Event of Default shall, when received by the Agent in
cash or its equivalent, be applied by the Agent in reduction of the
Obligations in accordance with the terms of the Credit Agreement. The
Debtors shall remain liable to the Agent and the Lenders for any deficiency.
Any surplus remaining after the full payment and satisfaction of the
Obligations shall be returned to the Debtors or to whomsoever the Agent
reasonably determines is lawfully entitled thereto.
-17-
<PAGE>
SECTION 11. CONTINUING AGREEMENT. This Agreement shall be a
continuing agreement in every respect and shall remain in full force and
effect until all of the Obligations, both for principal and interest, have
been fully paid and satisfied and any commitment to extend any credit
constituting Obligations to the Borrowers, or any of them individually, shall
have terminated. Upon such termination of this Agreement, the Agent shall,
upon the request of the Debtors, execute and deliver to such Debtors a proper
instrument or instruments (including Uniform Commercial Code termination
statements on form UCC-3) acknowledging the satisfaction and termination of
this Agreement, and will duly assign, transfer and deliver to such Debtors,
against receipt and without recourse to the Agent, such of the Collateral as
may be in the possession of the Agent and as has not theretofore been sold or
otherwise applied or released pursuant to this Agreement or the Credit
Agreement.
SECTION 12. PRIMARY SECURITY; OBLIGATIONS ABSOLUTE. The lien and
security herein created and provided for stand as direct and primary security
for the Obligations. No application of any sums received by the Agent in
respect of the Collateral or any disposition thereof to the reduction of the
Obligations or any portion thereof shall in any manner entitle any Debtor to
any right, title or interest in or to the Obligations or any collateral
security therefor, whether by subrogation or otherwise, unless and until all
Obligations have been fully paid and satisfied and any commitment to extend
credit constituting Obligations to the Borrowers, or any of them
individually, shall have terminated. Each Debtor acknowledges and agrees
that the lien and security hereby created and provided for are absolute and
unconditional and shall not in any manner be affected or impaired by any acts
or omissions whatsoever of the Agent, any Lender or any other holder of any
of the Obligations, and without limiting the generality of the foregoing, the
lien and security hereof shall not be impaired by any acceptance by the
Agent, any Lender or any holder of any of the Obligations of any other
security for or guarantors upon any of the Obligations or by any failure,
neglect or omission on the part of the Agent, any Lender or any other holder
of any of the Obligations to realize upon or protect any of the Obligations
or any collateral security therefor. The lien and security hereof shall not
in any manner be impaired or affected by (and the Agent and the Lenders,
without notice to anyone, are hereby authorized to make from time to time)
any sale, pledge, surrender, compromise, settlement, release, renewal,
extension, indulgence, alteration, substitution, exchange, change in,
modification or disposition of any of the Obligations, or of any collateral
security therefor, or of any guaranty thereof or of any obligor thereon. The
Lenders may at their discretion at any time grant credit to the Borrowers, or
any of them individually, without notice to any Debtor in such amounts and on
such terms as the Lenders may elect (all of such to constitute additional
Obligations) without in any manner impairing the lien and security hereby
created and provided for. No release, compromise or discharge of any Debtor
hereunder or with respect to any of the Obligations or any Collateral
provided by such Debtor shall release or discharge, or impair the agreements
of, any other Debtor hereunder or in any manner impair the liens and security
interests granted by any other Debtor hereunder; and the Agent may proceed
against the Collateral provided hereunder by any one or more of the Debtors
without proceeding against any or all of the other Debtors, their respective
properties or any other security or guaranty whatsoever. Without limiting
the generality of the foregoing, the Agent (acting at the direction of the
Lenders) may at any time or from time to time release
-18-
<PAGE>
any Debtor from its obligations hereunder or release any Collateral or effect
any compromise with any Debtor, and no such release or compromise shall in
any manner impair or otherwise effect the liens granted by, or the
obligations of, the other Debtors hereunder. In order to foreclose or
otherwise realize hereon and to exercise the rights granted the Agent
hereunder and under applicable law as against any Debtor or any Collateral in
which such Debtor has rights, there shall be no obligation on the part of the
Agent, any Lender or any other holder of any of the Obligations at any time
to first resort for payment to the Borrowers, or any of them individually, or
any other Debtor or any other Person, its property or estate or to any
guaranty of the Obligations or any portion thereof or to resort to any other
collateral security, property, liens or any other rights or remedies
whatsoever, and the Agent shall have the right to enforce this instrument as
against any Debtor or any Collateral in which such Debtor has rights,
irrespective of whether or not other proceedings or steps are pending seeking
resort to or realization upon or from any of the foregoing.
SECTION 13. THE AGENT. In acting under or by virtue of this
Agreement, the Agent shall be entitled to all the rights, authority,
privileges and immunities provided in Section 10 of the Credit Agreement, all
of which provisions of said Section 10 are incorporated by reference herein
with the same force and effect as if set forth herein in their entirety. The
Agent hereby disclaims any representation or warranty to the Lenders
concerning the perfection of the security interest granted hereunder or in
the value of any of the Collateral.
SECTION 14. MISCELLANEOUS. (a) This Agreement cannot be changed or
terminated orally. All of the rights, privileges, remedies and options given
to the Agent and the Lenders hereunder shall inure to the benefit of their
respective successors and assigns, and all the terms, conditions, promises,
covenants, representations and warranties of and in this Agreement shall bind
each Debtor and its legal representatives, successors and assigns, provided
that no Debtor may assign its rights or delegate its duties hereunder without
the Agent's prior written consent. Without limiting the generality of the
foregoing, and subject to the provisions of Sections 13.11 and 13.12 of the
Credit Agreement, any Lender may assign or otherwise transfer any
indebtedness held by it secured by this Agreement to any other person or
entity, and such other person or entity shall thereupon become vested with
all the benefits in respect thereof granted to such Lender herein or
otherwise, subject, however, to the provisions of the Credit Agreement. Each
Debtor hereby releases the Agent and each Lender from any liability for any
act or omission relating to its Collateral or this Agreement, except the
Agent's or such Lender's gross negligence or willful misconduct.
(b) All communications provided for herein shall be in writing, except
as otherwise specifically provided for hereinabove, and shall be deemed to
have been given or made, if to any Debtor when given to the Borrowers in
accordance with Section 13.8 of the Credit Agreement, or if to the Agent or
any Lender, when given to such party in accordance with Section 13.8 of the
Credit Agreement.
(c) No Lender shall have the right to institute any suit, action or
proceeding in equity or at law for the foreclosure against any Collateral
subject to this Agreement or for the execution of any trust or power hereof
or for the appointment of a receiver, or for the
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<PAGE>
enforcement of any other remedy under or upon this Agreement; it being
understood and intended that no one or more of the Lenders shall have any
right in any manner whatsoever to affect, disturb or prejudice the lien and
security interest of this Agreement by its or their action or to enforce any
right hereunder, and that all proceedings at law or in equity shall be
instituted, had and maintained by the Agent in the manner herein provided for
the ratable benefit of the Lenders.
(d) In the event that any provision hereof shall be deemed to be
invalid by reason of the operation of any law or by reason of the
interpretation placed thereon by any court, this Agreement shall be construed
as not containing such provision, but only as to such locations where such
law or interpretation is operative, and the invalidity of such provision
shall not affect the validity of any remaining provision hereof, and any and
all other provisions hereof which are otherwise lawful and valid shall remain
in full force and effect. Without limiting the generality of the foregoing,
in the event that this Agreement shall be deemed to be invalid or otherwise
unenforceable with respect to any Debtor, such invalidity or unenforceability
shall not affect the validity of this Agreement with respect to the other
Debtors.
(e) This Agreement shall be deemed to have been made in the State of
Illinois and shall be governed by the internal laws of the State of Illinois
(without regard to the principles of conflicts of law). All terms which are
used in this Agreement which are defined in the Code shall have the same
meanings herein as said terms do in the Code unless this Agreement shall
otherwise specifically provide. The headings in this instrument are for
convenience of reference only and shall not limit or otherwise affect the
meaning of any provision hereof.
(f) This Agreement may be executed in any number of counterparts, each
constituting an original, but all together one and the same instrument. Each
Debtor acknowledges that this Agreement is and shall be effective upon its
execution and delivery by such Debtor to the Agent, and it shall not be
necessary for the Agent to execute this Agreement or any other acceptance
hereof or otherwise to signify or express its acceptance hereof.
(g) THE AGENT AND THE DEBTORS AGREE THAT ALL DISPUTES AMONG THEM
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT, AND WHETHER ARISING
IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE OR
FEDERAL COURTS LOCATED IN COOK COUNTY, ILLINOIS, BUT EACH OF THE AGENT AND
THE DEBTORS ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE
HEARD BY A COURT LOCATED OUTSIDE OF COOK COUNTY, ILLINOIS. EACH OF THE
DEBTORS WAIVES IN ALL DISPUTES ANY OBJECTION THAT SUCH DEBTOR MAY HAVE TO THE
LOCATION OF THE COURT CONSIDERING THE DISPUTE OR ANY OBJECTION THAT SUCH
DEBTOR MAY HAVE THAT ANY OTHER PARTY HAS NOT BEEN JOINED IN SUCH PROCEEDING.
EACH OF THE DEBTORS AGREES THAT THE AGENT SHALL HAVE THE RIGHT TO PROCEED
AGAINST EACH AND ANY OF THE DEBTORS OR THEIR COLLATERAL IN A COURT IN ANY
LOCATION TO ENABLE THE AGENT TO REALIZE ON THE COLLATERAL, OR TO ENFORCE A
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<PAGE>
JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE AGENT, WHETHER OR NOT
PROCEEDING SEPARATELY AGAINST ANY DEBTOR AND ITS PROPERTY OR JOINTLY AGAINST
THE BORROWER AND ANY ONE OR MORE OF THE DEBTORS AND THEIR PROPERTY. EACH OF
THE DEBTORS WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE
COURT IN WHICH THE AGENT HAS COMMENCED A PROCEEDING DESCRIBED IN THIS
PARAGRAPH.
[SIGNATURE PAGES TO FOLLOW]
-21-
<PAGE>
IN WITNESS WHEREOF, the Debtors have caused this Agreement to be duly
executed as of the date first above written.
DEBTORS:
PLATINUM ENTERTAINMENT, INC.
By /s/ Steven Devick
------------------------------------
Its: President
INTERSOUND, INC.
By /s/ Steven Devick
------------------------------------
Its: President
LEXICON MUSIC, INC.
By /s/ Steven Devick
------------------------------------
Its: President
CGI RECORDS, INC.
By /s/ Steven Devick
------------------------------------
Its: President
RIVER NORTH RECORDS, INC.
By /s/ Steven Devick
------------------------------------
Its: President
LIGHT RECORDS, INC.
By /s/ Steven Devick
------------------------------------
Its: President
-22-
<PAGE>
THE RECORDING EXPERIENCE, INC.
By /s/ Steven Devick
------------------------------------
Its: President
PEG PUBLISHING, INC.
By /s/ Steven Devick
------------------------------------
Its: President
JUSTMIKE MUSIC, INC.
By /s/ Steven Devick
------------------------------------
Its: President
ROYCE PUBLISHING, INC.
By /s/ Steven Devick
------------------------------------
Its: President
-23-
<PAGE>
Accepted and agreed to as of the date first above written.
BANK OF MONTREAL, as Agent as aforesaid
for the Lenders
By /s/ Jeffrey Titus
------------------------------------
Its /s/ Director
---------------------------------
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<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
COLUMN 1 COLUMN 2 COLUMN 3 COLUMN 4
NAME OF DEBTOR CHIEF ADDITIONAL PLACES LOCATION OF
(AND FEDERAL TAX EXECUTIVE OF BUSINESS COLLATERAL
I.D. NUMBER) OFFICE OR DEBTOR
<S> <C> <C> <C>
Platinum Entertainment, 2001 Butterfield Road None 2001 Butterfield Road
Inc. Suite 1400 Suite 1400
Tax ID #36-3802328 Downers Grove, IL 60515 Downers Grove, IL 60515
5020 Chase Street
Downers Grove, IL 60515
Federal Whalen Moving
and Storage
920 Larch Avenue
Elmhurst, IL 60126
1227 16th Avenue South
Nashville, TN 37212
Lexicon Music, Inc. 2001 Butterfield Road None 2001 Butterfield Road
Tax ID #36-3883507 Suite 1400 Suite 1400
Downers Grove, IL 60515 Downers Grove, IL 60515
Intersound, Inc. 2001 Butterfield Road None 2001 Butterfield Road
Tax ID #36-3811050 Suite 1400 Suite 1400
Downers Grove, IL 60515 Downers Grove, IL 60515
4100 Spring Valley Road
Suite 800
Dallas, TX 75244
1 Select Avenue, Unit 10
Scarborough, Ontario
M1V 5J3
11810 Wills Road
Suite 110
Alpharetta, GA 30201
10 Columbus Blvd.
Suite 219
Hartford, CT 06106
<PAGE>
COLUMN 1 COLUMN 2 COLUMN 3 COLUMN 4
NAME OF DEBTOR CHIEF ADDITIONAL PLACES LOCATION OF
(AND FEDERAL TAX EXECUTIVE OF BUSINESS COLLATERAL
I.D. NUMBER) OFFICE OR DEBTOR
333 Washington Ave. No.
Suite 306 & 308
Minneapolis, MN 55401
CGI Records, Inc. 2001 Butterfield Road None 2001 Butterfield Road
Tax ID #36-3811049 Suite 1400 Suite 1400
Downers Grove, IL 60515 Downers Grove, IL 60515
River North Records, 2001 Butterfield Road None 2001 Butterfield Road
Inc. Suite 1400 Suite 1400
Tax ID #36-3812687 Downers Grove, IL 60515 Downers Grove, IL 60515
Light Records, Inc. 2001 Butterfield Road None 2001 Butterfield Road
Tax ID #36-3811041 Suite 1400 Suite 1400
Downers Grove, IL 60515 Downers Grove, IL 60515
The Recording 2001 Butterfield Road None 2001 Butterfield Road
Experience, Inc. Suite 1400 Suite 1400
Tax ID #36-3811040 Downers Grove, IL 60515 Downers Grove, IL 60515
Peg Publishing, Inc. 2001 Butterfield Road None 2001 Butterfield Road
Tax ID #36-3811043 Suite 1400 Suite 1400
Downers Grove, IL 60515 Downers Grove, IL 60515
JustMike Music, Inc. 2001 Butterfield Road None 2001 Butterfield Road
Tax ID #36-3811046 Suite 1400 Suite 1400
Downers Grove, IL 60515 Downers Grove, IL 60515
Royce Publishing, Inc. 2001 Butterfield Road None 2001 Butterfield Road
Tax ID #36-3811044 Suite 1400 Suite 1400
Downers Grove, IL 60515 Downers Grove, IL 60515
</TABLE>
-2-
<PAGE>
SCHEDULE B
TRADENAMES
DEBTOR TRADENAMES
Platinum Entertainment, Inc. none
Intersound, Inc. none
Lexicon Music, Inc. none
CGI Records, Inc. none
River North Records, Inc. none
Light Records, Inc. none
The Recording Experience, Inc. none
Peg Publishing, Inc. none
JustMike Music, Inc. none
Royce Publishing, Inc. none
<PAGE>
SCHEDULE C
REAL ESTATE LEGAL DESCRIPTIONS
NONE
<PAGE>
SCHEDULE D
ASSUMPTION AND SUPPLEMENTAL SECURITY AGREEMENT
This Agreement dated as of this 12th day of December, 1997 from
[NEW DEBTOR], a ______________ corporation (the "NEW DEBTOR"), to Bank of
Montreal ("BMO"), a chartered bank of Canada, as Agent for the Lenders
(defined in the Security Agreement hereinafter identified and defined) (BMO
acting as such Agent and any successor or successors to BMO in such capacity
being hereinafter referred to as the "AGENT");
WITNESSETH THAT:
WHEREAS, certain parties have executed and delivered to the Agent that
certain Security Agreement dated as of December 12, 1997 or supplements
thereto (such Security Agreement, as the same may from time to time be
modified or amended, including supplements thereto which add additional
parties as Debtors thereunder, being hereinafter referred to as the "SECURITY
AGREEMENT") pursuant to which such parties (the "EXISTING DEBTORS") have
granted to the Agent for the ratable benefit of the Lenders a security
interest in such Existing Debtor's accounts, inventory, general intangibles,
equipment and certain other properties, rights, interests and privileges to
secure, among other things, any and all indebtedness, obligations and
liabilities of Platinum Entertainment, Inc. (the "COMPANY") and Intersound,
Inc. ("INTERSOUND"; the Company and Intersound collectively referred to
herein as the "BORROWERS") to the Agent and the Lenders; and
WHEREAS, the Company provides the New Debtor with substantial financial,
managerial, administrative, technical and design support and the New Debtor
will directly and substantially benefit from credit and other financial
accommodations extended and to be extended by the Lenders to the Borrowers;
NOW, THEREFORE, FOR VALUE RECEIVED, and in consideration of advances
made or to be made, or credit accommodations given or to be given, to the
Borrowers by the Lenders from time to time, the New Debtor hereby agrees as
follows:
1. The New Debtor acknowledges and agrees that it shall become a
"Debtor" party to the Security Agreement effective upon the New Debtors'
execution of this Agreement and the delivery of this Agreement to the Agent,
and that upon such execution and delivery, all references in the Security
Agreement to the terms "Debtor" or "Debtors" shall be deemed to include the
New Debtor. Without limiting the generality of the foregoing, the New Debtor
hereby repeats and reaffirms all grants (including the grant of a security
interest), covenants, agreements, representations and warranties contained in
the Security Agreement as amended hereby, each and all of which are and shall
remain applicable to the Collateral from time to time owned by the New Debtor
or in which the New Debtor from time to time has any rights. Without
limiting the foregoing, in order to secure payment of the Obligations, the
New Debtor does hereby grant to the Agent for the ratable benefit of the
Lenders, and hereby agrees that the Agent has and shall continue to have for
the ratable benefit of the
<PAGE>
Lenders a continuing security interest in, among other things, all of the New
Debtor's Receivables, general intangibles, Inventory, Equipment and all of
the other Collateral described in the granting clauses of Section 1 of the
Security Agreement, each and all of such granting clauses being incorporated
herein by reference with the same force and effect as if set forth in their
entirety except that all references in such clauses to the Existing Debtors
or any of them shall be deemed references to the New Debtor. Nothing
contained herein shall in any manner impair the priority of the liens and
security interests heretofore granted in favor of the Agent under the
Security Agreement.
2. Schedule A of the Security Agreement shall be amended by adding the
following information thereto:
ADDITIONAL
LOCATIONS OF CHIEF EXECUTIVE CHIEF PLACE OF PLACES OF
DEBTOR COLLATERAL OFFICE BUSINESS BUSINESS
[NEW DEBTOR].
------------- --------------- -------------- ------------
3. The New Debtor hereby acknowledges and agrees that the Obligations
are secured by all of the Collateral according to, and otherwise on and
subject to, the terms and conditions of the Security Agreement to the same
extent and with the same force and effect as if the New Debtor had originally
been one of the Existing Debtors under the Security Agreement and had
originally executed the same as such an Existing Debtor.
4. All capitalized terms used in this Agreement without definition
shall have the same meaning herein as such terms have in the Security
Agreement, except that any reference to the term "Debtor" or "Debtors" and
any provision of the Security Agreement providing meaning to such term shall
be deemed a reference to the Existing Debtors and the New Debtor. Except as
specifically modified hereby, all of the terms and conditions of the Security
Agreement shall stand and remain unchanged and in full force and effect.
5. The New Debtor agrees to execute and deliver such further
instruments and documents and do such further acts and things as the Agent
may deem necessary or proper to carry out more effectively the purposes of
this Agreement.
6. No reference to this Agreement need be made in the Security
Agreement or in any other document or instrument making reference to the
Security Agreement, any reference to the Security Agreement in any of such to
be deemed a reference to the Security Agreement as modified hereby.
-2-
<PAGE>
7. This Agreement shall be governed by and construed in accordance
with the State of Illinois (without regard to principles of conflicts of law)
in which state it shall performed by the New Debtor.
[NEW DEBTOR]
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
-3-
<PAGE>
SECURITY AGREEMENT RE: INTELLECTUAL PROPERTY
This Security Agreement Re: Intellectual Property (the "AGREEMENT") is
dated as of December 12, 1997, by and among the parties executing this Agreement
under the heading "Debtors" (such parties being hereinafter referred to
collectively as the "DEBTORS" and individually as a "DEBTOR"), each with its
mailing address at 2001 Butterfield Road, Suite 1400, Downers Grove, Illinois
60515, and BANK OF MONTREAL, a Canadian chartered bank acting through its
Chicago branch ("BOM"), with its mailing address at 115 South LaSalle Street,
Chicago, Illinois 60603, acting as agent hereunder for the Lenders hereinafter
identified and defined (BOM acting as such agent and any successor or successors
to BOM acting in such capacity being hereinafter referred to as the "AGENT");
PRELIMINARY STATEMENTS:
A. Platinum Entertainment, Inc., a Delaware corporation (the "COMPANY")
and Intersound, Inc., a Delaware corporation ("INTERSOUND"), (the Company and
Intersound being hereinafter referred to collectively as the "BORROWERS" and
individually as a "BORROWER"), Lexicon Music, Inc., a Delaware corporation
("LEXICON"), CGI Records, Inc., a Delaware corporation ("CGI"), River North
Records, Inc., a Delaware corporation ("NORTH RECORDS"), Light Records, Inc., a
Delaware corporation ("LIGHT"), The Recording Experience, Inc., a Delaware
corporation ("EXPERIENCE"), Peg Publishing, Inc. a Delaware corporation ("PEG"),
JustMike Music, Inc., a Delaware corporation ("JUSTMIKE"), Royce Publishing,
Inc., a Delaware corporation ("ROYCE") (Lexicon, CGI, North Records, Light,
Experience, Peg, JustMike and Royce being hereinafter referred to collectively
as the "GUARANTORS" and individually as a "GUARANTOR"), BOM, individually and as
agent, and certain lenders have entered into a Credit Agreement dated as of even
date herewith (such Credit Agreement, as the same may be amended or modified
from time to time, including amendments and restatements thereof in its
entirety, being hereinafter referred to as the "CREDIT AGREEMENT"), pursuant to
which BOM and other lenders from time to time party to the Credit Agreement (BOM
and the other lenders which are now or from time to time hereafter become party
to the Credit Agreement, together with any affiliates of such lenders to which
is owed any Hedging Liability, being hereinafter referred to collectively as the
"LENDERS" and individually as a "LENDER") have agreed, subject to certain terms
and conditions, to extend credit and make certain other financial accommodations
available to the Borrowers.
B. Pursuant to the Credit Agreement, the Guarantors guarantee all of the
indebtedness, obligations, and liabilities of the Borrowers to the Agent and the
Lenders under the Credit Agreement.
C. The Borrowers, or any of them individually, may from time to time
enter into one or more interest rate exchange, cap, collar, floor or other
agreements with one or more of the Lenders party to the Credit Agreement or
their affiliates for the purpose of hedging or otherwise protecting the
Borrowers, or any of them individually, against changes in interest rates on the
Revolving Loans and the Term Loans (the liability of the Borrowers, or
<PAGE>
any of them individually, in respect of such agreements with such Lenders or
their affiliates being hereinafter referred to as the "HEDGING LIABILITY").
D. As a condition precedent to extending credit or otherwise making
financial accommodations available to the Borrowers under the Credit Agreement,
the Lenders have required, among other things, that each Debtor grant to the
Agent for the benefit of the Lenders a lien on and security interest in certain
personal property of such Debtor pursuant to this Agreement.
E. The Company owns, directly or indirectly, all or substantially all of
the equity interests in each Guarantor and the Company provides each Guarantor
with financial, management, administrative, and technical support which enables
such Guarantor to conduct its business in an orderly and efficient manner in the
ordinary course.
F. Each Guarantor will benefit, directly or indirectly, from credit and
other financial accommodations extended by the Lenders to the Borrowers.
NOW, THEREFORE, for and in consideration of the execution and delivery by
the Lenders of the Credit Agreement, and other good and valuable consideration,
receipt whereof is hereby acknowledged, the parties hereto hereby agree as
follows:
SECTION 1. TERMS DEFINED IN CREDIT AGREEMENT.
All capitalized terms used herein without definition shall have the same
meanings herein as such terms have in the Credit Agreement. The term "Debtor"
and "Debtors" as used herein shall mean and include the Debtors collectively and
also each individually, with all grants, representations, warranties and
covenants of and by the Debtors, or any of them, herein contained to constitute
joint and several grants, representations, warranties and covenants of and by
the Debtors; PROVIDED, HOWEVER, that unless the context in which the same is
used shall otherwise require, any grant, representation, warranty or covenant
contained herein related to the Collateral shall be made by each Debtor only
with respect to the Collateral owned by it or represented by such Debtor as
owned by it.
SECTION 2. GRANT OF SECURITY INTEREST IN THE COLLATERAL; OBLIGATIONS
SECURED.
(a) Subject to Section 2(c) hereof, each Debtor hereby grants, bargains,
sells, transfers, conveys, assigns, mortgages and pledges to the Agent for the
ratable benefit of the Lenders, and grants to the Agent for the ratable benefit
of the Lenders a security interest in, and acknowledges and agrees that the
Agent has and shall continue to have for the ratable benefit of the Lenders a
continuing security interest in, any and all right, title and interest of each
Debtor, whether now existing or hereafter acquired or arising, in and to the
following:
(i) PATENTS. Patents, whether now owned or hereafter acquired, or in
which such Debtor now has or hereafter acquires any rights (the term
"PATENTS" means and
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includes (i) all letters patent of the United States of America or any
other country or any political subdivision thereof, all registrations
and recordings thereof, and all applications for letters patent of the
United States of America or any other country or any political
subdivision thereof, including, without limitation, registrations,
recordings and applications in the United States Patent and Trademark
Office or in any similar office or agency of the United States of
America, any state thereof or any other country or any political
subdivision thereof and (ii) all reissues, continuations,
continuations-in-part or extensions thereof), including, without
limitation, each Patent listed on Schedule A-1 hereto, and all of the
inventions now or hereafter described and claimed in such Debtor's
Patents;
(ii) PATENT LICENSES. Patent Licenses, whether now owned or
hereafter acquired, or in which such Debtor now has or hereafter
acquires any rights (the term "PATENT LICENSES" means and includes any
written agreement granting to any person any right to exploit, use or
practice any invention on which a Patent is owned by another person),
including, without limitation, each Patent License listed on Schedule
A-2 hereto, and all royalties and other sums due or to become due
under or in respect of such Debtor's Patent Licenses, together with
the right to sue for and collect all such royalties and other sums;
(iii) TRADEMARKS. Trademarks and Trademark registrations,
whether now owned or hereafter adopted or acquired, or in which such
Debtor now has or hereafter acquires any rights (the term "TRADEMARKS"
means and includes (i) all trademarks, trade names, trade styles,
service marks and logos, all prints and labels on which said
trademarks, trade names, trade styles, service marks and logos have
appeared or appear and all designs and general intangibles of like
nature, all registrations and recordings thereof, and all applications
in connection therewith, including, without limitation, registrations,
recordings and applications in the United States Patent and Trademark
Office or in any similar office or agency of the United States of
America, any state thereof or any other country or any political
subdivision thereof and (ii) all reissues, extensions or renewals
thereof), including, without limitation, each Trademark registration
listed on Schedule B-1 hereto, and all of the goodwill of the business
connected with the use of, and symbolized by, each Trademark and
Trademark registration and all customer lists and other records of
such Debtor relating to the distribution of products bearing, or
rendition of services otherwise relating to, a Trademark;
(iv) TRADEMARK LICENSES. Trademark Licenses, whether now owned
or hereafter acquired, or in which such Debtor now has or hereafter
acquires any rights (the term "TRADEMARK LICENSES" means and includes
any written agreement granting to any person any right to use or
exploit any Trademark or Trademark registration of another person),
including, without limitation, the agreements described in Schedule
B-2 hereto, and all of the goodwill of the business connected with the
use of, and symbolized by, each Trademark licensed and all royalties
and other sums due or to become due under or in respect of such
Debtor's Trademark Licenses, together with the right to sue for and
collect all such royalties and other sums;
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<PAGE>
(v) COPYRIGHTS. Copyrights and Copyright registrations, whether
now owned or hereafter adopted or acquired, or in which such Debtor
now has or hereafter acquires any rights (the term "COPYRIGHTS" means
and includes (i) all copyrights, whether or not published or
registered, and all works of authorship and other intellectual
property and the rights therein, including, without limitation,
copyrights for computer programs and data bases, copyrightable
materials, and all tangible property embodying such copyrights or
copyrightable materials, all registrations and recordings thereof, and
all applications in connection therewith, including, without
limitation, registrations, recordings and applications in the United
States Copyright Office or in any similar office or agency of the
United States of America, any state thereof or any other country or
any political subdivision thereof, and (ii) all renewals, derivative
works, enhancements, modifications, new releases and other revisions
thereof, and (iii) all accounts receivable, income, royalties, damages
and payments now or hereafter due and/or payable with respect thereto,
including, without limitation, payments under all licenses entered
into in connection therewith, and (iv) all rights corresponding
thereto throughout the world), including, without limitation, each
Copyright registration listed on Schedule C-1 hereto;
(vi) COPYRIGHT LICENSES. Copyright Licenses, whether now owned
or hereafter acquired, or in which such Debtor now has or hereafter
acquires any rights (the term "COPYRIGHT LICENSES" means and includes
any written agreement granting to any person the right to use or
exploit any Copyright or Copyright registration of another person,
including, without limitation, the right to use the foregoing to
prepare for sale or distribution and sell or distribute any and all
inventory now or hereafter owned by such Debtor and now or hereafter
covered by such licenses), including, without limitation, the license
and subscription agreements listed on Schedule C-2 hereto, and all
royalties and other sums due or to become due under or in respect of
such Debtor's Copyright Licenses, together with the right to sue for
and collect all such royalties and other sums;
(vii) KNOW-HOW AND TRADE SECRET COLLATERAL. All know-how,
inventions, processes, methods, information, data, plans, blueprints,
specifications, designs, drawings, engineering reports, test reports,
material standards, processing standards and performance standards, to
the extent that the foregoing pertain to manufacturing, production or
processing operations of such Debtor and constitute trade secrets of
such Debtor, and all licenses or other similar agreements granted to
or by such Debtor with respect to any of the foregoing;
(viii) GENERAL INTANGIBLES AND RECORDS AND CABINETS. General
intangibles relating to any of the above-described property and
supporting evidence and documents relating to any of the
above-described property, including, without limitation, written
applications, correspondence, delivery receipts and notes, together
with all books of account, ledgers and cabinets in which the same are
reflected or maintained, all whether now existing or hereafter arising;
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<PAGE>
(ix) ACCESSIONS AND ADDITIONS. All accessions and additions to, and
substitutions and replacements of, any and all of the foregoing, whether
now existing or hereafter arising; and
(x) PROCEEDS AND PRODUCTS. All proceeds and products of the
foregoing and all insurance of the foregoing and proceeds thereof,
whether now existing or hereafter arising, including, without
limitation, (i) any claim of such Debtor against third parties for
damages by reason of past, present or future infringement of any
Patent or any Patent licensed under any Patent License, (ii) any claim
by such Debtor against third parties for damages by reason of past,
present or future infringement or dilution of any Trademark or
Trademark registration or of any Trademark licensed under any
Trademark License, or for injury to the goodwill of the business
connected with the use of, or symbolized by, any Trademark or
Trademark registration or of any Trademark licensed under any
Trademark License, (iii) any claim of such Debtor against third
parties for damages by reason of past, present or future infringements
of any Copyright or Copyright registration or of any Copyright
licensed under any Copyright License, and (iv) any claim by such
Debtor against third parties for damages by reason of past, present or
future misappropriation or wrongful use or disclosure of any trade
secret or other property or right described above or of any such trade
secret or other property or right licensed under any license agreement
described above, and together with the right to sue for and collect
the damages described in the immediately preceding clauses (i), (ii),
(iii) and (iv);
all of the foregoing being herein sometimes referred to as the "COLLATERAL";
provided that the Collateral shall not include any license agreement under which
any Debtor is licensee which, by its terms, prohibits the security interest
contemplated by this Agreement.
(b) This Agreement is made and given to secure, and shall secure, the
payment and performance of (i) (x) any and all indebtedness, obligations and
liabilities of the Borrowers, or any of them individually, to the Agent, the
Lenders, or any of them individually, evidenced by or otherwise arising out of
or relating to the Credit Agreement or any promissory note of the Borrowers, or
any of them individually, issued at any time under the Credit Agreement
(including all notes issued in extension or renewal thereof or in substitution
or replacement therefor), (y) any and all Hedging Liability of the Borrowers, or
any of them individually, to the Lenders, or any of them individually, and (z)
any liability of the Guarantors, or any of them individually, arising out of the
Credit Agreement, as well as for any and all other indebtedness, obligations and
liabilities of the Debtors, or any of them individually, to the Agent, the
Lenders, or any of them individually, evidenced by or otherwise arising out of
or relating to this Agreement or any other Loan Document, in each case, whether
now existing or hereafter arising (and whether arising before or after the
filing of a petition in bankruptcy), due or to become due, direct or indirect,
absolute or contingent, and howsoever evidenced, held or acquired, and (ii) any
and all expenses and charges, legal or otherwise, suffered or incurred by the
Agent, the Lenders, or any of them individually, in collecting or enforcing any
of such indebtedness, obligations or liabilities or in realizing on or
protecting or preserving any security therefor, including, without limitation,
the lien and security interest granted hereby (all of the foregoing being
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<PAGE>
hereinafter referred to as the "SECURED OBLIGATIONS"). Notwithstanding anything
in this Agreement to the contrary, the right of recovery against any Debtor
(other than the Borrowers to which this limitation shall not apply) under this
Agreement shall not exceed $1 less than the amount which would render such
Debtor's obligations under this Agreement void or voidable under applicable law,
including fraudulent conveyance law.
(c) Notwithstanding anything herein to the contrary, this Agreement shall
not operate as a sale, transfer, conveyance or other assignment to the Agent of
any applications by a Debtor for a Trademark based on an intent to use the same
if and so long as such application is pending and not matured into a registered
Trademark (such pending applications which are based on intent to use being
hereinafter referred to collectively as "INTENT-TO-USE APPLICATIONS"), but
rather, if and so long as Debtor's Intent-To-Use Application is pending this
Agreement shall operate only to create a security interest for collateral
purposes in favor of the Agent for the ratable benefit of the Lenders, on such
Intent-To-Use Application as collateral security for the Secured Obligations.
(d) Notwithstanding anything herein to the contrary, the lien of this
Agreement on the Collateral shall be released as and to the extent required by
Section 8.18 of the Credit Agreement.
SECTION 3. NO RELEASE.
Nothing set forth in this Agreement shall relieve any Debtor from the
performance of any term, covenant, condition or agreement on the part of such
Debtor to be performed or observed under or in respect of any of the Collateral
or from any liability to any party under or in respect of any of the Collateral
or impose any obligation on the Agent or any Lender to perform or observe any
such term, covenant, condition or agreement on the part of such Debtor to be so
performed or observed or impose any liability on the Agent or any Lender for any
act or omission on the part of such Debtor relative thereto or for any breach of
any representation or warranty on the part of such Debtor contained in this
Agreement or under or in respect of the Collateral or made in connection
herewith or therewith.
SECTION 4. USE OF COLLATERAL.
Notwithstanding anything to the contrary contained in this Agreement, until
an Event of Default hereunder has occurred and is continuing and thereafter
until otherwise notified by the Agent, each Debtor may continue to exploit,
license, use, enjoy and protect the Collateral throughout the world in the
ordinary course of its business as presently conducted and the Agent shall from
time to time execute and deliver, upon written request of the relevant Debtor,
any and all instruments, certificates or other documents, in the form so
requested, necessary or appropriate in the reasonable judgment of such Debtor to
enable such Debtor to continue to exploit, license, use, enjoy and protect the
Collateral throughout the world in the ordinary course of its business as
presently conducted.
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<PAGE>
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE DEBTORS.
Each Debtor hereby represents and warrants to the Agent and the Lenders as
follows:
(a) Such Debtor is, and, as to the Collateral acquired by it from
time to time after the date hereof, such Debtor will be, the owner or, as
applicable, licensee of its Collateral. Each Debtor's rights in its
Collateral are and shall remain free and clear of any lien, pledge,
security interest, encumbrance, license, assignment, collateral assignment
or charge of any kind, including, without limitation, any filing of or
agreement to file a financing statement as debtor under the Uniform
Commercial Code or any similar statute, except for (i) the lien and
security interest created by this Agreement, (ii) the Permitted Licenses
(as hereinafter defined) and (iii) the Liens expressly permitted by the
Credit Agreement (collectively, the "PERMITTED ENCUMBRANCES"). No Debtor
has made any previous assignment, conveyance, transfer or agreement in
conflict herewith. Each Debtor further represents and warrants to the
Agent and each Lender that Schedules A-1, A-2, B-1, B-2, C-1 and C-2
hereto, respectively, are true and correct lists of all Patents, Patent
Licenses, Trademarks, Trademark Licenses, Copyrights and Copyright Licenses
owned or used by the Debtors as of the date hereof and that Schedules A-1,
A-2, B-1, B-2, C-1 and C-2 are true and correct with respect to the matters
set forth therein as of the date hereof.
(b) Each Debtor has full corporate power to pledge and grant a
security interest in all the Collateral pursuant to this Agreement.
(c) No authorization, consent, approval, license, qualification or
exemption from, nor any filing, declaration or registration with, any
court, governmental agency or regulatory authority, or with any securities
exchange or any other party, is required in connection with (i) each
Debtor's execution, delivery or performance of this Agreement, (ii) each
Debtor's grant of a security interest (including the priority thereof when
the appropriate filings have been made and accepted) in the Collateral in
the manner and for the purpose contemplated by this Agreement or (iii) the
rights of the Agent and Lenders created hereby, except those that have
already been obtained or made and those referred to in paragraph (f) of
this Section 5.
(d) Each Debtor has made all necessary filings and recordations to
protect its interests in the Collateral.
(e) Each Debtor owns directly or has rights to use all the Collateral
and all rights with respect to any of the foregoing used in, necessary for
or of importance to the business of such Debtor in the ordinary course as
presently conducted. The use of the Collateral and all rights with respect
to the foregoing by such Debtor does not, to the best of such Debtor's
knowledge after due inquiry, infringe on the rights of any party, nor has
any claim of such infringement been made.
(f) Upon filings and the acceptance thereof in the appropriate
offices under the Uniform Commercial Code and in the United States Patent
and Trademark Office
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<PAGE>
and the United States Copyright Office, this Agreement will create a valid
and duly perfected first priority lien and security interest in the
Collateral located in the United States of America subject to no prior
liens or encumbrances.
(g) To the best of each Debtor's knowledge after due inquiry, no
claim has been made and remains outstanding that such Debtor's use of any
of the Collateral does or may violate the rights of any third person.
SECTION 6. COVENANTS AND AGREEMENTS OF THE DEBTORS.
Each Debtor hereby covenants and agrees with the Agent and the Lenders as
follows:
(a) On a continuing basis, each Debtor will, at its own expense,
subject to any prior licenses, encumbrances and restrictions and
prospective licenses, encumbrances and restrictions permitted hereunder,
make, execute, acknowledge and deliver, and file and record in the proper
filing and recording places within the United States of America, all such
instruments, including, without limitation, appropriate financing and
continuation statements and collateral agreements, and take all such
action, as may be deemed necessary or advisable by the Agent (i) to carry
out the intent and purposes of this Agreement, (ii) to assure and confirm
to the Agent the grant and perfection of a first priority security interest
in the Collateral for the benefit of the Lenders or (iii) to enable the
Agent to exercise and enforce its rights and remedies hereunder with
respect to any Collateral.
(b) Without limiting the generality of the foregoing paragraph (a) of
this Section 6, each Debtor (i) will not, except as expressly permitted by
the Credit Agreement, enter into any agreement that would impair or
conflict with such Debtor's obligations hereunder; (ii) will, except as
expressly permitted by the Credit Agreement, promptly following its
becoming aware thereof, notify the Agent and the Lenders of (x) any final
adverse determination in any proceeding in the United States Patent and
Trademark Office or United States Copyright Office with respect to any of
the Collateral or (y) the institution of any proceeding or any adverse
determination in any federal, state, local or foreign court or
administrative bodies regarding such Debtor's claim of ownership in or
right to use any of the Collateral, its right to register any such
Collateral or its right to keep and maintain such registration; (iii) will,
except as expressly permitted by the Credit Agreement, properly maintain
and care for the Collateral to the extent necessary for the conduct of the
business of such Debtor in the ordinary course as presently conducted and
consistent with such Debtor's current practice; (iv) will not grant or
permit to exist any lien or encumbrance upon or with respect to the
Collateral or any portion thereof except the Permitted Encumbrances and
will not execute any security agreement or financing statement covering any
of the Collateral except in the name of the Agent; (v) will not, except as
expressly permitted by the Credit Agreement, permit to lapse or become
abandoned, settle or compromise any pending or future material litigation
or material administrative proceeding with respect to any Collateral
without the prior written consent of the Agent or contract for sale or
otherwise sell, convey, assign or dispose
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<PAGE>
of, or grant any option with respect to, the Collateral or any portion
thereof; (vi) upon any responsible officer of the such Debtor obtaining
knowledge thereof, will promptly notify the Agent and the Lenders in
writing of any event which may reasonably be expected to materially and
adversely affect the value of any of the Collateral, the ability of such
Debtor or the Agent to dispose of any such Collateral or the rights and
remedies of the Agent in relation thereto, including, without limitation, a
levy or threat of levy or any legal process against any such Collateral;
(vii) will diligently keep reasonable records respecting the Collateral;
(viii) hereby authorizes the Agent, in its sole discretion, to file one or
more financing or continuation statements relative to all or any part of
the Collateral without the signature of such Debtor where permitted by law;
(ix) will furnish to the Agent and any Lender no less frequently than once
every three (3) months from the date hereof statements and schedules
further identifying and describing the Collateral and such other materials
evidencing or reports pertaining to the Collateral as the Agent or such
Lender may request, all in reasonable detail; (PROVIDED, HOWEVER, that no
such information need be furnished relating to any items of Collateral that
arise subsequent to the most recent date on which the relevant Collateral
Document requires a lien to be granted on Collateral of such type)
(x) will, except as expressly permitted by the Credit Agreement, pay when
due any and all taxes, levies, maintenance fees, charges, assessments,
licenses fees and similar taxes or impositions payable in respect of the
Collateral except to the extent being contested in good faith by
appropriate proceedings which prevent the enforcement of the matter being
contested (and such Debtor has established adequate reserves therefor) and
preclude interference with the operation of the business of such Debtor in
the ordinary course; and (xi) comply in all material respects with all
laws, rules and regulations applicable to the Collateral if such non-
compliance would result in a Material Adverse Effect or result in the
creation or imposition of any liens or encumbrance on any Collateral of
such Debtor. Notwithstanding anything in the immediately preceding
sentence, the foregoing provisions of this paragraph (b) shall not operate
to prohibit any Permitted Licenses entered into prior to the occurrence of
an Event of Default hereunder. For purposes of this Section 6, the term
"PERMITTED LICENSES" shall mean (i) licenses granted by any Debtor at arm's
length to unaffiliated third parties in the ordinary course of such
Debtor's business for consideration which such Debtor in good faith deems
adequate and (ii) such other licenses as to which the Required Lenders in
their discretion may consent in writing.
(c) If any Debtor shall (i) obtain any rights to any new invention
(whether or not patentable), know-how, trade secret, design, process,
procedure, formula, diagnostic test, service mark, trademark, trademark
registration, trade name, copyright, copyright registration, or license or
(ii) become entitled to the benefit of any patent, patent application,
service mark, trademark, trademark application, trademark registration,
copyright, copyright application, copyright registration, license renewal
or copyright renewal or extension, or patent for any reissue, division,
continuation, renewal, extension, or continuation-in-part of any Patent or
any improvement on any Patent, the provisions of this Agreement shall
automatically apply thereto and the same shall automatically constitute
Collateral and be and become
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<PAGE>
subject to the assignment, lien and security interest created hereby
without further action by any party, all to the same extent and with the
same force and effect as if the same had originally been Collateral
hereunder. If any Debtor so obtains or becomes entitled to any of the
foregoing rights described in clauses (i) and (ii) above, such Debtor shall
no less frequently than once every three (3) months from the date hereof
(x) give written notice thereof to the Agent and (y) amend Schedules A-1,
A-2, B-1, B-2, C-1 and C-2 hereto, as applicable, to include such rights;
PROVIDED, HOWEVER, the Debtors shall not be required to give such notice
and amend such schedules for any items of Collateral that arise subsequent
to the most recent date on which the relevant Collateral Document requires
a lien to be granted on Collateral of such type. Each Debtor agrees,
promptly following written request therefor by the Agent, to confirm the
attachment of the lien and security interest created hereby to any such
rights described in clauses (i) and (ii) above by execution of an
instrument in form and substance acceptable to the Agent.
(d) Each Debtor will if the Agent so requests and in any event hereby
authorizes the Agent to modify this Agreement by amending Schedules A-1,
A-2, B-1, B-2, C-1 and C-2 hereto to include any future Collateral.
(e) The Debtors shall promptly furnish to the Agent a list of
Permitted Licenses entered into by the Debtors after the date hereof;
PROVIDED HOWEVER, the Debtors need not provide such list for any license
agreements aggregating less than $10,000 in value for all Debtors and in
any event, such list need not be provided not more than once per calendar
month.
(f) Each Debtor shall prosecute diligently applications for the
Patents, Trademarks and Copyrights now or hereafter pending that in such
Debtor's reasonable judgment would be materially beneficial to the business
of such Debtor in the ordinary course, make application on unpatented but
patentable inventions and registrable but unregistered Trademarks and
Copyrights that in such Debtor's reasonable judgment would be materially
beneficial to the business of such Debtor in the ordinary course, file and
prosecute opposition and cancellation proceedings and do all acts necessary
to preserve and maintain all its rights in the Collateral, unless as to any
Patent, Trademark or Copyright, in the reasonable judgment of such Debtor,
such Patent, Trademark or Copyright has become obsolete to the business of
such Debtor. Any expenses incurred in connection with such actions shall
be borne by the Debtors.
SECTION 7. GRANT OF LICENSE TO PATENTS, TRADEMARKS, COPYRIGHTS, ETC.
Without in any way limiting the scope of the lien and security interest
created hereby, each Debtor hereby grants to the Agent for the ratable benefit
of the Lenders an irrevocable, nonexclusive license and right to use all of such
Debtor's Patents, Patent applications, Patent Licenses, Trademarks, Trademark
registrations, Trademark Licenses, trade names, trade styles, Copyrights,
Copyright registrations, Copyright Licenses and similar intangibles in the
processing, production, marketing, distribution or sale by the Agent of all or
any part of its collateral for the Secured Obligations in connection with and
solely in connection with any
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<PAGE>
foreclosure or other realization on such collateral. The license and rights
granted the Agent hereby shall be exercisable without the payment of any
royalty, fee, charge or any other compensation to any Debtor or any other party.
Such license and rights shall include reasonable access to all records in which
any of the licensed items may be recorded or stored. Such license and rights
shall be absolute and unconditional to the extent used for the purpose stated
above.
SECTION 8. SUPPLEMENTS; FURTHER ASSURANCES.
Each Debtor (i) agrees that it will join with the Agent in executing and,
at such Debtor's own expense, file and refile, or permit the Agent to file and
refile, such financing statements, continuation statements and other instruments
and documents (including without limitation this Agreement) in such offices
(including, without limitation, the United States Patent and Trademark Office
and the United States Copyright Office) as the Agent may deem necessary or
appropriate in order to perfect and preserve the rights and interests granted to
the Agent hereunder and (ii) hereby authorizes the Agent to file and refile such
instruments and documents and any other instruments or documents related thereto
without the signature of such Debtor where permitted by law and (iii) agrees to
do such further acts and things, and to execute and deliver to the Agent such
additional instruments and documents, as the Agent may require to carry into
effect the purposes of this Agreement or to better assure and confirm unto the
Agent its respective rights, powers and remedies hereunder. All of the
foregoing are to be at the sole cost of the Debtors. Any costs of the foregoing
incurred by the Agent shall be payable by the Debtors upon demand, together with
interest thereon from the date of incurrence at the Default Rate (as hereinafter
defined) until so paid, and shall constitute additional Secured Obligations
hereunder.
SECTION 9. THE AGENT MAY PERFORM.
If any Debtor fails to perform any agreement contained herein after receipt
of a written request to do so from the Agent, the Agent may itself perform, or
cause performance of, such agreement, and the expenses of the Agent, including
the fees and expenses of its counsel, so incurred in connection therewith shall
be payable by the Debtors under Section 14 hereof.
SECTION 10. REMEDIES UPON DEFAULT.
(a) The occurrence of any event or the existence of any condition which is
specified as an Event of Default under the Credit Agreement shall constitute an
"EVENT OF DEFAULT" hereunder.
(b) Upon the occurrence of any Event of Default hereunder, the Agent shall
have, in addition to all other rights provided herein or by law, the rights and
remedies of a secured party under the Uniform Commercial Code as enacted in the
State of Illinois and any successor statute(s) thereto (regardless of whether
such Uniform Commercial Code is the law of the jurisdiction where the rights or
remedies are asserted and regardless of
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<PAGE>
whether such Uniform Commercial Code applies to the affected Collateral), and
further the Agent may, without demand and without advertisement, notice, hearing
or process of law, all of which each Debtor hereby waives to the extent
permitted by law, at any time or times, sell and deliver any or all of the
Collateral at public or private sale, for cash, upon credit or otherwise, at
such prices and upon such terms as the Agent deems advisable, in its sole
discretion. In addition to all other sums due the Agent or any Lender
hereunder, the Debtors jointly and severally shall pay the Agent and any Lender
all costs and expenses incurred by the Agent or such Lender, including
attorneys' fees and court costs, in obtaining, liquidating or enforcing payment
of the Collateral or the Secured Obligations or in the prosecution or defense of
any action or proceeding by or against the Agent, such Lender or Debtors or any
of them concerning any matter arising out of or connected with this Agreement or
the Collateral or the Secured Obligations, including, without limitation, any of
the foregoing arising in, arising under or related to a case under the United
States Bankruptcy Code, as amended (or any successor statute). Any requirement
of reasonable notice shall be met if such notice is personally served on or
mailed, postage prepaid, to the Debtors in accordance with Section 18(b) hereof
at least ten days before the time of sale or other event giving rise to the
requirement of such notice; HOWEVER, no notification need be given to a Debtor
if that Debtor has signed, after an Event of Default hereunder has occurred, a
statement renouncing any right to notification of sale or other intended
disposition. The Agent shall not be obligated to make any sale or other
disposition of the Collateral regardless of notice having been given. The Agent
or any Lender may be the purchaser at any such sale. Each Debtor hereby waives
all of its rights of redemption from any such sale. Subject to the provisions
of applicable law, the Agent may postpone or cause the postponement of the sale
of all or any portion of the Collateral by announcement at the time and place of
such sale, and such sale may, without further notice, be made at the time and
place to which the sale was postponed or the Agent may further postpone such
sale by announcement made at such time and place.
(c) Without in any way limiting the foregoing, upon the occurrence and
during the continuation of any Event of Default hereunder, the Agent may,
without demand, and without advertisement, notice, hearing or process of law,
all of which each Debtor hereby waives to the extent permitted by law,
(i) exercise any and all rights as beneficial and legal owner of the Collateral,
including, without limitation, any and all consensual rights and powers with
respect to the Collateral and (ii) sell or assign or grant a license to use, or
cause to be sold or assigned or granted a license to use, any or all of the
Collateral or any part hereof, in each case free of all rights and claims of any
Debtor therein and thereto. In that connection, the Agent shall have the right
to cause any or all of the Collateral to be transferred of record into the name
of the Agent or its nominee as well as the right to impose (i) such limitations
and restrictions on the sale or assignment of the Collateral as the Agent may
deem to be necessary or appropriate to comply with any law, rule or regulation,
whether federal, state or local, having applicability to the sale or assignment
and (ii) requirements for any necessary governmental approvals.
(d) In the event the Agent shall have instituted any proceeding to enforce
any right, power or remedy under this Agreement by foreclosure, sale, entry or
otherwise, and such proceeding shall have been discontinued or abandoned for any
reason or shall have been
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<PAGE>
determined adversely to the Agent, then and in every such case the Debtors, the
Agent and each Lender shall be restored to their respective former positions and
rights hereunder with respect to the Collateral, and all rights, remedies and
powers of the Agent and the Lenders shall continue as if no such proceeding had
been instituted.
(e) Failure by the Agent to exercise any right, remedy or option under
this Agreement or any other agreement between the Debtors or any of them and the
Agent or provided by law, or delay by the Agent in exercising the same, shall
not operate as a waiver; no waiver shall be effective unless it is in writing,
signed by the party against whom such waiver is sought to be enforced and then
only to the extent specifically stated. For purposes of this Agreement, an
Event of Default shall be construed as continuing after its occurrence until the
same is waived in writing by the Lenders or the Required Lenders, as the case
may be, in accordance with the terms of the Credit Agreement. Neither the
Agent, nor any Lender, nor any party acting as attorney for the Agent or any
Lender, shall be liable hereunder for any acts or omissions or for any error of
judgment or mistake of fact or law other than their gross negligence or willful
misconduct. The rights and remedies of the Agent under this Agreement shall be
cumulative and not exclusive of any other right or remedy which the Agent or the
Lenders may have.
SECTION 11. THE AGENT APPOINTED ATTORNEY-IN-FACT.
Each Debtor hereby irrevocably appoints the Agent, its nominee, or any
other person whom the Agent may designate as such Debtor's attorney-in-fact,
with full authority in the place and stead of such Debtor and in the name of
such Debtor, the Agent or otherwise, upon the occurrence and during the
continuation of any Event of Default hereunder, or if such Debtor fails to
perform any agreement contained herein, then to the extent necessary to enable
the Agent to perform such agreement itself, from time to time in the Agent's
discretion, to take any action and to execute any instrument which the Agent may
deem necessary or advisable to accomplish the purposes of this Agreement,
including, without limitation, to prosecute diligently any patent, trademark or
copyright or any application for Patents, Trademarks or Copyrights pending as of
the date of this Agreement or thereafter until the Secured Obligations have been
fully paid and satisfied and any commitment to extend any credit constituting
Secured Obligations to the Borrowers, or any of them individually, shall have
terminated, to make application on unpatented but patentable inventions and
registrable but unregistered Trademarks and Copyrights, to file and prosecute
opposition and cancellation proceedings, to do all other acts necessary or
desirable to preserve all rights in Collateral and otherwise to file any claims
or take any action or institute any proceedings which the Agent may deem
necessary or desirable to enforce the rights of the Agent and the Lenders with
respect to any of the Collateral. Each Debtor hereby ratifies and approves all
acts of any such attorney and agrees that neither the Agent nor any such
attorney will be liable for any acts or omissions nor for any error of judgment
or mistake of fact or law other than their gross negligence or willful
misconduct. The foregoing power of attorney, being coupled with an interest, is
irrevocable until the Secured Obligations have been fully paid and satisfied and
any commitment to extend any credit constituting Secured Obligations to the
Borrowers, or any of them individually, shall have terminated.
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<PAGE>
SECTION 12. APPLICATION OF PROCEEDS.
The proceeds and avails of the Collateral at any time received by the Agent
upon the occurrence and during the continuation of any Event of Default shall,
when received by the Agent in cash or its equivalent, be applied by the Agent in
reduction of the Secured Obligations in accordance with the terms of the Credit
Agreement. The Debtors shall remain liable to the Agent and the Lenders for any
deficiency. Any surplus remaining after the full payment and satisfaction of
the Secured Obligations shall be returned to the Debtors or to whomsoever the
Agent reasonably determines is lawfully entitled thereto.
SECTION 13. INDEMNIFICATION; LITIGATION.
(a) Each Debtor shall have the right to commence and prosecute in its own
name, as real party in interest, for its own benefit and at its own expense,
such applications for protection of the Collateral, suits, proceedings or other
actions for infringement, unfair competition, dilution or other damage as are in
its reasonable business judgment necessary to protect the Collateral. To the
extent required by Section 6(b)(ii), each Debtor shall promptly notify the Agent
and the Lenders in writing as to the commencement and prosecution of any such
actions, or threat thereof, relating to the Collateral and shall provide to the
Agent and the Lenders such information with respect thereto as may be reasonably
requested. The Agent and the Lenders shall provide all reasonable and necessary
cooperation in connection with any such suit, proceeding or action, including,
without limitation, joining as a necessary party. Each Debtor shall indemnify
and hold harmless the Agent and the Lenders for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, expenses or
disbursements (including attorneys' fees) of any kind and nature whatsoever
which may be imposed on, incurred by or asserted against the Agent or any Lender
in connection with or in any way arising out of such suits, proceedings or other
actions; PROVIDED, HOWEVER, that the Debtors shall not be liable for any of the
foregoing to the extent they arise from the gross negligence or willful
misconduct of the party to be indemnified hereunder.
(b) Upon the occurrence and during the continuation of any Event of
Default hereunder, the Agent shall have the right, but shall in no way be
obligated, to file applications for protection of the Collateral or bring suit
in the name of any Debtor, the Agent or the Lenders to enforce the Collateral.
In the event of such suit, the relevant Debtor shall, at the request of the
Agent, do any and all lawful acts and execute any and all documents required by
the Agent in aid of such enforcement and the Debtors shall promptly, upon
demand, reimburse and indemnify the Agent, as the case may be, for all costs and
expenses incurred by the Agent in the exercise of its rights under this Section.
In the event that the Agent shall elect not to bring suit to enforce the
Collateral, each Debtor agrees, to the extent required by Section 6, to use all
reasonable measures, whether by action, suit, proceeding or otherwise, to
prevent the infringement of any of the Collateral by others and for that purpose
agrees to diligently maintain any action, suit or proceeding against any person
so infringing necessary to prevent such infringement.
-14-
<PAGE>
SECTION 14. EXPENSES.
The Debtors jointly and severally shall, upon demand, pay to the Agent the
amount of any and all costs and expenses, including the fees and expenses of its
counsel and the fees and expenses of any experts and agents, which the Agent or
any Lender may incur in connection with (i) the enforcement and administration
of this Agreement (including, without limitation, the filing or recording of any
documents), (ii) the custody or preservation of, or the sale of, collection
from, or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of the Agent or any Lender hereunder or
(iv) the failure by any Debtor to perform or observe any of the provisions
hereof. All amounts payable by the Debtors under this Section shall be due from
the Debtors upon demand and shall bear interest from the date incurred by the
Agent or Lender, as appropriate, at the rate per annum (computed on the basis of
a 360-day year for the actual number of days elapsed) determined by adding 3% to
the Domestic Rate (such rate per annum as so determined being hereinafter
referred to as the "DEFAULT RATE"). All amounts so payable, together with such
interest thereon, shall be part of the Secured Obligations. The Debtors'
obligations under this Section shall survive the termination of this Agreement
and the discharge of the Debtors' other obligations hereunder.
SECTION 15. TERMINATION AND RELEASE.
This Agreement is made for collateral purposes only. This Agreement shall
be a continuing agreement in every respect and shall remain in full force and
effect until all of the Secured Obligations, both for principal and interest,
have been fully paid and satisfied and any commitment to extend any credit
constituting Secured Obligations to the Borrowers, or any of them individually,
shall have terminated. Upon such termination of this Agreement, the Agent
shall, upon the request and at the expense of the Debtors, forthwith assign,
transfer and deliver, against receipt and without recourse to the Agent, such of
the Collateral as may then be in the possession of the Agent and as shall not
have been sold or otherwise applied or released pursuant to the terms hereof or
the terms of the Credit Agreement to or on the order of the relevant Debtor.
Said assignment, transfer and delivery shall include an instrument in form
recordable in the United States Patent and Trademark Office or the United States
Copyright Office, as the case may be, by which the Agent shall terminate,
release and, without representation, recourse or warranty, reassign to the
relevant Debtor all rights in each Patent, Patent License, Trademark, Trademark
License, Copyright and Copyright License, including each registration thereof
and application therefor, conveyed and transferred to the Agent pursuant to this
Agreement.
SECTION 16. THE AGENT.
In acting under or by virtue of this Agreement, the Agent shall be entitled
to all the rights, authority, privileges and immunities provided in Section 10
of the Credit Agreement, all of which provisions of said Section 10 are
incorporated by reference herein with the same force and effect as if set forth
herein in their entirety. The Agent hereby
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<PAGE>
disclaims any representation or warranty to the Lenders concerning the
perfection of the security interest granted hereunder or in the value of any of
the Collateral.
SECTION 17. PRIMARY SECURITY; OBLIGATIONS ABSOLUTE.
The lien and security herein created and provided for stand as direct and
primary security for the Secured Obligations. No application of any sums
received by the Agent in respect of the Collateral or any disposition thereof to
the reduction of the Secured Obligations or any portion thereof shall in any
manner entitle any Debtor to any right, title or interest in or to the Secured
Obligations or any collateral security therefor, whether by subrogation or
otherwise, unless and until all Secured Obligations have been fully paid and
satisfied and any commitment to extend credit constituting Secured Obligations
to the Borrowers, or any of them individually, shall have terminated. Each
Debtor acknowledges and agrees that the lien and security hereby created and
provided for are absolute and unconditional and shall not in any manner be
affected or impaired by any acts or omissions whatsoever of the Agent, any
Lender or any other holder of any of the Secured Obligations, and without
limiting the generality of the foregoing, the lien and security hereof shall not
be impaired by any acceptance by the Agent, any Lender or any holder of any of
the Secured Obligations of any other security for or guarantors upon any of the
Secured Obligations or by any failure, neglect or omission on the part of the
Agent, any Lender or any other holder of any of the Secured Obligations to
realize upon or protect any of the Secured Obligations or any collateral
security therefor. The lien and security hereof shall not in any manner be
impaired or affected by (and the Agent and the Lenders, without notice to
anyone, are hereby authorized to make from time to time) any sale, pledge,
surrender, compromise, settlement, release, renewal, extension, indulgence,
alteration, substitution, exchange, change in, modification or disposition of
any of the Secured Obligations, or of any collateral security therefor, or of
any guaranty thereof or of any obligor thereon. The Lenders may at their
discretion at any time grant credit to the Borrowers, or any of them
individually, without notice to any Debtor in such amounts and on such terms as
the Lenders may elect (all of such to constitute additional Secured Obligations)
without in any manner impairing the lien and security hereby created and
provided for. No release, compromise or discharge of any Debtor hereunder or
with respect to any of the Secured Obligations or any Collateral provided by
such Debtor shall release or discharge, or impair the agreements of, any other
Debtor hereunder or in any manner impair the liens and security interests
granted by any other Debtor hereunder; and the Agent may proceed against the
Collateral provided hereunder by any one or more of the Debtors without
proceeding against any or all of the other Debtors, their respective properties
or any other security or guaranty whatsoever. Without limiting the generality
of the foregoing, the Agent (acting at the direction of the Lenders) may at any
time or from time to time release any Debtor from its obligations hereunder or
release any Collateral or effect any compromise with any Debtor, and no such
release or compromise shall in any manner impair or otherwise effect the liens
granted by, or the obligations of, the other Debtors hereunder. In order to
foreclose or otherwise realize hereon and to exercise the rights granted the
Agent hereunder and under applicable law as against any Debtor or any Collateral
in which such Debtor has rights, there shall be no obligation on the part of the
Agent, any Lender or any other holder of any of the Secured Obligations at any
time to first resort for payment to the Borrowers, or any of them
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<PAGE>
individually, or any other Debtor or any other Person, its property or estate or
to any guaranty of the Secured Obligations or any portion thereof or to resort
to any other collateral security, property, liens or any other rights or
remedies whatsoever, and the Agent shall have the right to enforce this
instrument as against any Debtor or any Collateral in which such Debtor has
rights, irrespective of whether or not other proceedings or steps are pending
seeking resort to or realization upon or from any of the foregoing.
SECTION 18. MISCELLANEOUS.
(a) This Agreement cannot be changed or terminated orally. This Agreement
shall create a continuing security interest in the Collateral and shall be
binding upon the Debtors, their successors and assigns and shall inure, together
with the rights and remedies of the Agent and the Lenders hereunder, to the
benefit of the Agent, the Lenders and their successors and assigns; PROVIDED,
HOWEVER, that no Debtor may assign its rights or delegate its duties hereunder
without the Agent's prior written consent. Without limiting the generality of
the foregoing, and subject to the provisions of Sections 13.11 and 13.12 of the
Credit Agreement, any Lender may assign or otherwise transfer any indebtedness
held by it secured by this Agreement to any other person or entity, and such
other person or entity shall thereupon become vested with all the benefits in
respect thereof granted to such Lender herein or otherwise, subject, however, to
the provisions of the Credit Agreement. Each Debtor hereby releases the Agent
from any liability for any act or omission relating to the Collateral or this
Agreement, except the Agent's gross negligence or willful misconduct.
(b) All communications provided for herein shall be in writing, except as
otherwise specifically provided for hereinabove, and shall be deemed to have
been given or made, if to any Debtor when given to the Borrowers in accordance
with Section 13.8 of the Credit Agreement, or if to the Agent or any Lender,
when given to such party in accordance with Section 13.8 of the Credit
Agreement.
(c) No Lender shall have the right to institute any suit, action or
proceeding in equity or at law for the foreclosure against any Collateral
subject to this Agreement or for the execution of any trust or power hereof or
for the appointment of a receiver, or for the enforcement of any other remedy
under or upon this Agreement; it being understood and intended that no one or
more of the Lenders shall have any right in any manner whatsoever to affect,
disturb or prejudice the lien of this Agreement by its or their action or to
enforce any right hereunder, and that all proceedings at law or in equity shall
be instituted, had and maintained by the Agent in the manner herein provided and
for the ratable benefit of the Lenders.
(d) In the event that any provision hereof shall be deemed to be invalid
by reason of the operation of any law or by reason of the interpretation placed
thereon by any court, this Agreement shall be construed as not containing such
provision, but only as to such jurisdictions where such law or interpretation is
operative, and the invalidity of such provision shall not affect the validity of
any remaining provision hereof, and any and all other provisions hereof which
are otherwise lawful and valid shall remain in full force and effect. Without
limiting the generality of the foregoing, in the event that this Agreement
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<PAGE>
shall be deemed to be invalid or otherwise unenforceable with respect to any
Debtor, such invalidity or unenforceability shall not affect the validity of
this Agreement with respect to the other Debtors.
(e) This Agreement shall be deemed to have been made in the State of
Illinois and shall be governed by and construed in accordance with the laws of
the State of Illinois, without regard to principles of conflicts of law, except
as required by mandatory provisions of law and except to the extent that the
validity or perfection of the security interest hereunder, or remedies
hereunder, in respect of any particular Collateral are governed by the laws of a
jurisdiction other than the State of Illinois. The headings in this Agreement
are for convenience of reference only and shall not limit or otherwise affect
the meaning of any provision hereof.
(f) This Agreement may be executed in any number of counterparts and by
different parties hereto on separate counterpart signature pages, each
constituting an original, but all together one and the same instrument. Each
Debtor acknowledges that this Agreement is and shall be effective upon its
execution and delivery by such Debtor to the Agent, and it shall not be
necessary for the Agent to execute this Agreement or any other acceptance hereof
or otherwise to signify or express its acceptance hereof.
(g) THE AGENT AND THE DEBTORS AGREE THAT ALL DISPUTES AMONG THEM ARISING
OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT, AND WHETHER ARISING IN
CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE OR FEDERAL
COURTS LOCATED IN COOK COUNTY, ILLINOIS, BUT EACH OF THE AGENT AND THE DEBTORS
ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT
LOCATED OUTSIDE OF COOK COUNTY, ILLINOIS. EACH OF THE DEBTORS WAIVES IN ALL
DISPUTES ANY OBJECTION THAT SUCH DEBTOR MAY HAVE TO THE LOCATION OF THE COURT
CONSIDERING THE DISPUTE OR ANY OBJECTION THAT SUCH DEBTOR MAY HAVE THAT ANY
OTHER PARTY HAS NOT BEEN JOINED IN SUCH PROCEEDING. EACH OF THE DEBTORS AGREES
THAT THE AGENT SHALL HAVE THE RIGHT TO PROCEED AGAINST EACH AND ANY OF THE
DEBTORS OR THEIR COLLATERAL IN A COURT IN ANY LOCATION TO ENABLE THE AGENT TO
REALIZE ON THE COLLATERAL, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED
IN FAVOR OF THE AGENT, WHETHER OR NOT PROCEEDING SEPARATELY AGAINST ANY DEBTOR
AND ITS PROPERTY OR JOINTLY AGAINST THE BORROWER AND ANY ONE OR MORE OF THE
DEBTORS AND THEIR PROPERTY. EACH OF THE DEBTORS WAIVES ANY OBJECTION THAT IT
MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE AGENT HAS COMMENCED A
PROCEEDING DESCRIBED IN THIS PARAGRAPH.
[SIGNATURE PAGES TO FOLLOW]
-18-
<PAGE>
In WITNESS WHEREOF, the Debtors have caused this Agreement to be duly
executed as of the date first above written.
DEBTORS:
PLATINUM ENTERTAINMENT, INC.
By: /s/ Steven Devick
--------------------------
Its: President
INTERSOUND, INC.
By: /s/ Steven Devick
--------------------------
Its: President
LEXICON MUSIC, INC.
By: /s/ Steven Devick
--------------------------
Its: President
CGI RECORDS, INC.
By: /s/ Steven Devick
--------------------------
Its: President
RIVER NORTH RECORDS, INC.
By: /s/ Steven Devick
--------------------------
Its: President
-19-
<PAGE>
LIGHT RECORDS, INC.
By: /s/ Steven Devick
----------------------------
Its: President
THE RECORDING EXPERIENCE, INC.
By: /s/ Steven Devick
----------------------------
Its: President
PEG PUBLISHING, INC.
By: /s/ Steven Devick
----------------------------
Its: President
JUSTMIKE MUSIC, INC.
By: /s/ Steven Devick
----------------------------
Its: President
ROYCE PUBLISHING, INC.
By: /s/ Steven Devick
----------------------------
Its: President
-20-
<PAGE>
Accepted and agreed to in Chicago, Illinois as of the date first above
written.
BANK OF MONTREAL, as Agent as aforesaid
for the Lenders
By: Jeffrey Titus
--------------------------------------
Its: Director
------------------------------------
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<PAGE>
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Lisa Brenza, a Notary Public in and for said County, in the State
aforesaid, do hereby certify that Steven Devick, President of Platinum
Entertainment, Inc., a Delaware corporation, who is personally known to me to be
the same person whose name is subscribed to the foregoing instrument as such
President , appeared before me this day in person and acknowledged that he
signed and delivered the said instrument as his own free and voluntary act and
as the free and voluntary act and deed of said corporation for the uses and
purposes therein set forth.
Given under my hand and notarial seal, this 12th day of December, 1997.
/s/ Lisa Brenza
----------------------------------
Notary Public
(NOTARIAL SEAL)
[SEAL]
/s/ LISA BRENZA
----------------------------------
(Type or Print Name)
My Commission Expires:
- ------------------------------------
<PAGE>
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Lisa Brenza, a Notary Public in and for said County, in the State
aforesaid, do hereby certify that Steven Devick, President of Intersound, Inc.,
a Delaware corporation, who is personally known to me to be the same person
whose name is subscribed to the foregoing instrument as such President, appeared
before me this day in person and acknowledged that he signed and delivered the
said instrument as his own free and voluntary act and as the free and voluntary
act and deed of said corporation for the uses and purposes therein set forth.
Given under my hand and notarial seal, this 12th day of December, 1997.
/s/ Lisa Brenza
-------------------------------
Notary Public
(NOTARIAL SEAL)
[SEAL]
/s/ LISA BRENZA
--------------------------------
(Type or Print Name)
My Commission Expires:
- ------------------------------------
<PAGE>
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Lisa Brenza, a Notary Public in and for said County, in the State
aforesaid, do hereby certify that Steven Devick, President of Lexicon Music,
Inc., a Delaware corporation, who is personally known to me to be the same
person whose name is subscribed to the foregoing instrument as such President,
appeared before me this day in person and acknowledged that he signed and
delivered the said instrument as his own free and voluntary act and as the free
and voluntary act and deed of said corporation for the uses and purposes therein
set forth.
Given under my hand and notarial seal, this 12th day of December, 1997.
/s/ Lisa Brenza
------------------------------------
Notary Public
(NOTARIAL SEAL)
[SEAL]
/s/ LISA BRENZA
------------------------------------
(Type or Print Name)
My Commission Expires:
- ------------------------------------
<PAGE>
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Lisa Brenza, a Notary Public in and for said County, in the State
aforesaid, do hereby certify that Steven Devick, President of CGI Records, Inc.,
a Delaware corporation, who is personally known to me to be the same person
whose name is subscribed to the foregoing instrument as such President, appeared
before me this day in person and acknowledged that he signed and delivered the
said instrument as his own free and voluntary act and as the free and voluntary
act and deed of said corporation for the uses and purposes therein set forth.
Given under my hand and notarial seal, this 12th day of December, 1997.
/s/ Lisa Brenza
--------------------------------------
Notary Public
(NOTARIAL SEAL)
[SEAL]
/s/ LISA BRENZA
--------------------------------------
(Type or Print Name)
My Commission Expires:
- ------------------------------------
<PAGE>
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Lisa Brenza, a Notary Public in and for said County, in the State
aforesaid, do hereby certify that Steven Devick, President of River North
Records, Inc., a Delaware corporation, who is personally known to me to be the
same person whose name is subscribed to the foregoing instrument as such
President, appeared before me this day in person and acknowledged that he signed
and delivered the said instrument as his own free and voluntary act and as the
free and voluntary act and deed of said corporation for the uses and purposes
therein set forth.
Given under my hand and notarial seal, this 12th day of December, 1997.
/s/ Lisa Brenza
------------------------------------
Notary Public
(NOTARIAL SEAL)
[SEAL]
/s/ LISA BRENZA
-------------------------------------
(Type or Print Name)
My Commission Expires:
- ------------------------------------
<PAGE>
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Lisa Brenza, a Notary Public in and for said County, in the State
aforesaid, do hereby certify that Steven Devick, President of Light Records,
Inc., a Delaware corporation, who is personally known to me to be the same
person whose name is subscribed to the foregoing instrument as such President,
appeared before me this day in person and acknowledged that he signed and
delivered the said instrument as his own free and voluntary act and as the free
and voluntary act and deed of said corporation for the uses and purposes therein
set forth.
Given under my hand and notarial seal, this 12th day of December, 1997.
/s/ Lisa Brenza
----------------------------------
Notary Public
(NOTARIAL SEAL)
[SEAL]
/s/ LISA BRENZA
---------------------------------
(Type or Print Name)
My Commission Expires:
- ------------------------------------
<PAGE>
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Lisa Brenza, a Notary Public in and for said County, in the State
aforesaid, do hereby certify that Steven Devick, President of The Recording
Experience, Inc., a Delaware corporation, who is personally known to me to be
the same person whose name is subscribed to the foregoing instrument as such
President, appeared before me this day in person and acknowledged that he signed
and delivered the said instrument as his own free and voluntary act and as the
free and voluntary act and deed of said corporation for the uses and purposes
therein set forth.
Given under my hand and notarial seal, this 12th day of December, 1997.
/s/ Lisa Brenza
---------------------------------------
Notary Public
(NOTARIAL SEAL)
[SEAL]
/s/ LISA BRENZA
---------------------------------------
(Type or Print Name)
My Commission Expires:
- ------------------------------------
<PAGE>
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Lisa Brenza, a Notary Public in and for said County, in the State
aforesaid, do hereby certify that Steven Devick, President of Peg Publishing,
Inc., a Delaware corporation, who is personally known to me to be the same
person whose name is subscribed to the foregoing instrument as such President,
appeared before me this day in person and acknowledged that he signed and
delivered the said instrument as his own free and voluntary act and as the free
and voluntary act and deed of said corporation for the uses and purposes therein
set forth.
Given under my hand and notarial seal, this 12th day of December, 1997.
/s/ Lisa Brenza
---------------------------------
Notary Public
(NOTARIAL SEAL)
[SEAl]
/s/ LISA BRENZA
---------------------------------
(Type or Print Name)
My Commission Expires:
- ------------------------------------
<PAGE>
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Lisa Brenza, a Notary Public in and for said County, in the State
aforesaid, do hereby certify that Steven Devick, President of JustMike Music,
Inc., a Delaware corporation, who is personally known to me to be the same
person whose name is subscribed to the foregoing instrument as such President,
appeared before me this day in person and acknowledged that he signed and
delivered the said instrument as his own free and voluntary act and as the free
and voluntary act and deed of said corporation for the uses and purposes therein
set forth.
Given under my hand and notarial seal, this 12th day of December, 1997.
/s/ Lisa Brenza
-----------------------------------
Notary Public
(NOTARIAL SEAL)
[SEAL]
/s/ LISA BRENZA
-----------------------------------
(Type or Print Name)
My Commission Expires:
- ------------------------------------
<PAGE>
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Lisa Brenza, a Notary Public in and for said County, in the State
aforesaid, do hereby certify that Steven Devick, President of Royce Publishing,
Inc., a Delaware corporation, who is personally known to me to be the same
person whose name is subscribed to the foregoing instrument as such President,
appeared before me this day in person and acknowledged that he signed and
delivered the said instrument as his own free and voluntary act and as the free
and voluntary act and deed of said corporation for the uses and purposes therein
set forth.
Given under my hand and notarial seal, this 12th day of December, 1997.
/s/ Lisa Brenza
---------------------------------
Notary Public
(NOTARIAL SEAL)
[SEAL]
/s/ LISA BRENZA
---------------------------------
(Type or Print Name)
My Commission Expires:
- ------------------------------------
<PAGE>
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Lisa Brenza, a Notary Public in and for said County, in the State
aforesaid, do hereby certify that Jeffrey Titus, of Bank of Montreal, an
Illinois banking corporation, who is personally known to me to be the same
person whose name is subscribed to the foregoing instrument as such Director,
appeared before me this day in person and acknowledged that she/he signed and
delivered the said instrument as her/his own free and voluntary act and as the
free and voluntary act and deed of said Bank for the uses and purposes therein
set forth.
Given under my hand and notarial seal, this 12th day of December, 1997.
/s/ Lisa Brenza
------------------------------
Notary Public
(NOTARIAL SEAL)
[SEAL]
/s/ LISA BRENZA
-----------------------------
(Type or Print Name)
My Commission Expires:
- ------------------------------------
<PAGE>
SCHEDULE A-1
TO SECURITY AGREEMENT
RE: INTELLECTUAL PROPERTY
U.S. PATENT NUMBERS
AND PENDING U.S. PATENT APPLICATION NUMBERS
-------------------------------------------
-------------------------------------------
Title of Date Expiration
U.S. Patent Number Patent Inventor(s) Issued Date
Pending U.S. Patent Title of Filing
Application Nos. Application Inventor Date
<PAGE>
SCHEDULE A-2
TO SECURITY AGREEMENT
RE: INTELLECTUAL PROPERTY
PATENT LICENSES
---------------
---------------
U.S. PATENT NUMBER DATE ISSUED LICENSE AGREEMENT
<PAGE>
SCHEDULE B-1
TO SECURITY AGREEMENT
RE: INTELLECTUAL PROPERTY
REGISTERED U.S. TRADEMARKS
AND TRADEMARK APPLICATIONS
--------------------------
--------------------------
REGISTERED U.S.TRADEMARKS REGISTRATION REG. NO. DATE
After Hours 1793475 09/21/93
America's `Pops' 1535955 04/18/89
Audio + 1552655 08/22/89
Branson Entertainment 1776112 06/08/93
(Suppl. Register)
CGI Records, Inc. 1838585
Cinedisc 1513405 11/22/88
Classical Heritage 1790951 08/31/93
Classics for Joy (Stylized) 1102560 09/19/78
Counter Culture 1856632 10/04/94
Design of Clef 1075865 12/25/77
Direct to Digital 1548067 07/18/89
First Choice & Design 1811457 12/14/93
Intersound 1803152 11/09/93
Intersound Entertainment 1888285 04/11/95
Light Records, Inc. 1932514
Maxiplay 1457272 09/15/87
Musicmate 1472957 01/19/88
Nobody's Gonna Knock My Socks Off 1956751 02/13/2006
Orchestra of the Americas 1783707 07/20/93
Pro-Arte 1198554 06/22/82
Projazz (Stylized) 1465290 11/17/87
Quintessence & Design 1096575 07/18/78
Reflections 1858398 10/18/94
River North 1814760 02/13/2006
PENDING U.S.
TRADEMARK
APPLICATIONS FILING NO. FILING DATE
So-Lo Jam 74/588567 11/17/94
<PAGE>
REGISTERED STATE TRADEMARKS
AND TRADEMARK APPLICATIONS
===========================
STATE REGISTERED STATE REGISTRATION NO. DATE
TRADEMARKS
Minnesota America's `Pops' 13330 02/25/88
Minnesota Audio + and Design 14024 10/27/88
Minnesota Direct to Digital 13991 10/12/88
Minnesota Musicmate & Design 12350 05/27/87
PENDING STATE
STATE TRADEMARK FILING NO. FILING DATE
APPLICATIONS
FOREIGN TRADEMARKS AND TRADEMARK APPLICATIONS
=============================================
COUNTRY REGISTERED REGISTRATION NO. DATE
TRADEMARK
Canada Branson Entertainment 422280 01/21/94
Canada Cinedisc 351987 02/24/89
Canada Classics for Joy 303754 06/14/85
Canada Intersound 425431 03/18/94
Canada Intersound Entertainment TMA 426,545 04/22/94
Canada Pro-Art 268632 04/30/82
Japan Pro-Arte 1991188 10/27/87
PENDING TRADEMARK
COUNTRY APPLICATION FILING NO. FILING
DATE
Canada So-Lo Jam 766500 10/18/94
B-1-2
<PAGE>
SCHEDULE B-2
TO SECURITY AGREEMENT
RE: INTELLECTUAL PROPERTY
TRADEMARK LICENSES
==================
<PAGE>
SCHEDULE C-1
TO SECURITY AGREEMENT
RE: INTELLECTUAL PROPERTY
REGISTERED COPYRIGHTS
=====================
U.S. YEAR
SONG COPYRIGHT OF
TITLE REGIS. NO. REGIS. COMPOSER ARTIST
<PAGE>
<TABLE>
<CAPTION>
Schedule C-1
Registered Copyrights
- ----------------------------------------------------------------------------------------------------------------------------------
REVERSION
SELECTION # PRJ # TITLE ARTIST SR # SR DATE DATE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
8530 807 Tribute To James Cleveland Various 175494 1991 2066
8536 806 In God's Own Time Turrentine - Agee, Evelyn 144534 1992 2067
8537 774 Designer's Original Hall, Danniebelle 144530 1992 2067
40024 951 Demolition (REX) Various 223852 1992 2067
40042 900 Dimensions (REX) Believer 225306 1993 2068
40047 940 Ticklewigglejigglepickle (REX) Hot Pink Turtle 220156 1993 2068
41004 924 I Predict A Clone (REX) Various 224674 1994 2069
41005 947 Exhumed of the Earth (REX) Paramaecium 226067 1994 2069
41008 904 Speckled Bird (REX) Choir 226035 1994 2069
41009 928 Unveiled (REX) Whitecross 223853 1994 2069
41011 899 Psalm 1 (REX) Ballard, Jack 201210 1994 2069
41012 931 Bliss Bliss (REX) Bliss Bliss 224664 1994 2069
41015 955 Sane (REX) Velocipede 224700 1994 2069
41017 898 Misguided (REX) Argyle Park 232956 1995 2070
41022 927 Equilibrium (REX) Whitecross 223835 1995 2070
41023 911 Language Of Fools (REX) Love Coma 224667 1995 2070
41030 923 Are We Not Men? (REX) Various 231081 1995 2070
41031 932 Unearthed (REX) Crimson Thorn 224669 1995 2070
41032 953 Electro Shock Therapy (REX) Various 227327 1995 2070
45002 937 Center of the Earth (REX) Gianconia, Nic 224942 1994 2069
46002 948 Passafist (REX) Passafist 223834 1994 2069
410282 919 Tickets For A Prayer Wheel (REX) Sixpence None The Richer 223851 1995 2070
511592 770 The Light Years Commissioned 171098 1995 2070
540038 779 Keep Love Alive Heaven Sent 172312 1992 2067
540076 776 Herman Harris & The Voices... Harris, Herman 170419 1993 2068
610002 765 The Vision Becomes Clearer Christianaires 169640 1993 2068
610024 783 Love Can Heal The World Madgett, John 189632 1994 2069
610034 769 Totally Committed Committed 175455 1993 2068
610254 808 A Salute To The Caravans Various 172306 1992 2067
610282 759 A Gift To You Angelic Voices Of Faith 152712 1993 2068
610294 809 Tribute To James Cleveland #2 Various 581577 1993 2068
610304 784 Everything Will Be Alright Malloy, Donald 170423 1993 2068
610314 789 Victory Miller, Douglas 169629 1993 2068
610322 800 It's In The Praise Rhone, Calvin Bernard 175645 1992 2067
610334 824 Standard Witness 169628 1993 2068
610742 761 Please Don't Leave Me Chicago Mass Choir 157821 1993 2068
610764 804 Born To Worship Smith, Esther 183457 1994 2069
1
- ----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
- ----------------------------------------------------------------------------------------------------------------------------------
REVERSION
SELECTION # PRJ # TITLE ARTIST SR # SR DATE DATE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
610772 755 Allen & Allen Allen & Allen 183461 1994 2069
610812 793 Let's Magnify The Lord N C Mass Choir 184376 1994 2069
610822 786 New Life McFarland, Kim 198096 1994 2069
610862 821 Power Williams, Beau 200767 1994 2069
610892 853 Forever Dance Taylor, S. Alan 198070 1994 2069
610902 810 Gospel's Greatest Hits Various 193991 1994 2069
610922 801 Live...I'a A Winner Rhone, Calvin Bernard 198106 1994 2069
610932 791 Refreshing Moody Jr., Carlis 200738 1994 2069
610942 772 The Sun Will Shine Again Greater Emmanual Mass Choir 198075 1994 2069
610982 854 Steve Kolander Kolander, Steve 198194 1994 2069
611002 868 Heart Of The City Colby/Caruso 200735 1994 2069
611012 825 He Can Do The Impossible Witness 191200 1994 2069
611022 790 Live In Houston Miller, Douglas 200996 1995 2070
611032 862 Spirit Dancer Kapono, Henry 210564 1995 2070
611042 775 The Best Gets Better Hall, Danniebelle 210570 1995 2070
611052 811 Gentlemen Of Gospel, Vol 3 Various 200766 1994 2069
611062 812 Choirs En Masse Various 200768 1994 2069
611072 785 Hold On.. To The Promise Malloy, Donald 200757 1994 2069
611092 766 Reaching Out Christianaires 173325 1995 2070
611102 863 One Clear Voice Cetera, Peter 210180 1995 2070
611122 768 Miracles Clayton, Merry 201703 1994 2069
611132 792 Brothers & Sisters... Moore, James 29530 1981 2056
611222 762 I'm So Grateful Chicago Mass Choir 200684 1994 2069
611242 756 A-Blazing Grace Allen & Allen 211627 1995 2070
611252 813 Gospel's Greatest Hits, Vol 2 Various 209775 1995 2070
611272 773 Honor His Name Greater Emmanual Mass Choir 178794 1995 2070
611332 760 Getting Ready Angelic Voices Of Faith 178810 1995 2070
611402 855 Life & Love & All The Stages Dunn, Holly 191245 1995 2070
611412 794 He's All That N C Mass Choir 210572 1995 2070
611422 857 After The Dance Reeves, Ronna 215829 1995 2070
611432 778 Hawkins Family Collection Hawkins, Walter 198398 1995 2070
611462 798 Keep Pressin' On Powell, Hubert 200946 1995 2070
611472 822 Best Of Williams, Beau 169506 1995 2070
611482 802 Yesterday, Today, Forever Rhone, Calvin Bernard 213732 1995 2070
611492 817 Essential Blues Various 210088 1995 2070
611502 757 Christmas Like Never Before Allen & Allen 213748 1995 2070
611512 787 Amazing McFarland, Kim 220127 1996 2071
2
- ----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
- ----------------------------------------------------------------------------------------------------------------------------------
REVERSION
SELECTION # PRJ # TITLE ARTIST SR # SR DATE DATE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
611562 771 The Light Years Crouch, Andrae 213750 1995 2070
611572 823 Light Years Winans 213730 1995 2070
611582 777 The Light Years Hawkins, Walter 213731 1995 2070
611602 796 God Is Able Nu City Mass Choir 217906 1996 2071
611612 781 Unconditional Love L A Mass Choir 215218 1995 2070
611622 858 Starting Now Crosby, Rob 170928 1995 2070
611652 763 Best Of Chicago Mass Choir 221616 1995 2070
611722 859 Heartbreak Town Azar, Steve 223687 1996 2071
611762 764 Hold On, Don't Give Up Chicago Mass Choir 219976 1996 2071
611772 816 Gospel Jubilee, Vol 2 Various 225804 1996 2071
611792 819 Essential Gospel Various 218044 1996 2071
611832 818 Essential Blues, Vol 2 Various 188413 1996 2071
611852 826 A Song In The Night Witness 219977 1996 2071
611952 758 Come Sunday Allen & Allen 188628 1996 2071
612032 820 Growing Up Walt Whitman 220125 1996 2071
612042 876 Pieces Of A Puzzle Kolander, Steve 188595 1996 2071
612052 860 Stars & Stripes Beach Boys 218063 1996 2071
612062 788 Choice To Rejoice Michael Brooks & Nation 220123 1996 2071
612072 877 The Girl Next Door Bernard, Crystal 227955 1996 2071
612082 803 Joy Will Come Rhone, Calvin Bernard 224720 1996 2071
612112 782 Best Of L A Mass Choir 226528 1996 2071
612122 856 Leave One Bridge Standing Dunn, Holly 238652 1997 2072
612132 767 Saints Hold On Christianaires 205625 1997 2072
612152 805 A Silver Lining Totally Committed 220230 1996 2071
612402 875 Let's Go To Church National Baptist Convention 205611 1997 2072
612502 864 A Collection Cetera, Peter 238598 1997 2072
612512 984 Songs Of Janis Joplin, Blues Down Deep Various 236166 1997 2072
612572 968 Essential Women In Blues Various 201356 1997 2072
612582 915 Road Less Traveled (REX) Six Feet Deep 224719 1996 2071
612612 1001 You Have My Heart Trent, Tammy 205622 1997 2072
612642 996 Essential Smokey Blues Various 232906 1997 2072
612652 995 Essential Roadhouse Blues Various 220439 1997 2072
612672 889 You Love Me Chicago Mass Choir 363622 1997 2072
612732 998 Live At House Of Blues Chicago Blues Brothers & Friends 240309 1997 2072
612762 1023 Cover Me Candi Staton 241019 1997 2072
612802 1020 Essential Chicago Blues Various 236165 1997 2072
612862 1029 Essential Texas Blues Various 240310 1997 2072
3
- ----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
- ----------------------------------------------------------------------------------------------------------------------------------
REVERSION
SELECTION # PRJ # TITLE ARTIST SR # SR DATE DATE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
612952 986 Tribute To Jim Croce Various 240341 1997 2072
613012 1032 Essential Guitar Blues Various 240735 1997 2072
613032 1042 A New Vision Imani Project 188880 1997 2072
613112 1037 Holdin' On Blind Boys of Alabama 240733 1997 2072
613132 1031 Essential Piano Blues Various 240111 1997 2072
650842 841 Debby Lytton Lloyd Lloyd, Debby Lytton 207236 1995 2070
651162 830 Captured In Time Glad 43203 1982 2057
651182 832 No Less Than All Glad 62609 1983 2058
651192 833 Live At The Kennedy Center Glad 59362 1984 2059
651262 835 Color Outside The Lines Glad 200935 1995 2070
651442 840 Ron Larson Larson, Ron 213733 1995 2070
651522 843 Light Years Sweet Comfort Band 213754 1995 2070
651532 842 Light Years Resurrection Band 171106 1995 2070
651542 827 Light Years Allies 197892 1995 2070
651552 829 Light Years Duncan, Bryan 213865 1995 2070
651662 836 A Cappella Gershwin Glad 169516 1995 2070
651802 837 The A Capella Project 3 Glad 188621 1996 2071
651812 849 Live Gospel Experience, Vol 1 Various 217650 1996 2071
651822 850 Live Gospel Experience, Vol 2 Various 217641 1996 2071
651842 828 Classic Carmichael Carmichael, Ralph 223542 1996 2071
651862 851 Live Gospel Experience, Vol 3 Various 232653 1996 2071
651872 852 Live Gospel Experience, Vol 4 Various 232652 1996 2071
651902 844 Hour Of Classic Hymns Various 188416 1996 2071
651912 845 Hour Of Gospel Hymns Various 222946 1996 2071
651962 846 Hour Of A Cappella Hymns Various 226448 1996 2071
651972 847 Hour Of Old Fashioned Hymns Various 226449 1996 2071
652102 848 Hour Of Christmas Hymns Various 224968 1996 2071
652412 888 Flytrap Whitecross 230023 1996 2071
652422 981 Starball Contribution (Flying) Various 205612 1997 2072
652432 974 Lovelife ep (Flying Tart) Julies 227204 1996 2071
652442 973 Pride Kills (Flying Tart) Left Out 188660 1996 2071
652452 982 Christmas In Heaven (Flying) Various 230024 1996 2071
652702 960 More Than You'll Ever Know Page, Lisa 188825 1997 2072
690083 871 Gospel's Greatest Hits (Video) Various PA699349 1994 2069
690103 873 Live In Florida (Video) Allen & Allen PA764330 1995 2070
690113 874 Essential Gospel (Video) Various PA803925 1996 2071
870032 987 I Brought Him With Me (HOB) Blind Boys of Alabama 345171 1996 2071
4
- ----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
- ----------------------------------------------------------------------------------------------------------------------------------
REVERSION
SELECTION # PRJ # TITLE ARTIST SR # SR DATE DATE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
870042 988 Way Past Blue (HOB) Ripp, Jimmy 344943 1996 2071
870052 989 Left Hand Brand (HOB) Gales Brothers 344956 1996 2071
870062 990 Against The Wall (HOB) Mooney, John 344954 1996 2071
870072 991 Face To Face (HOB) Houston, Cissy 344944 1996 2071
870082 992 Hot Biscuits (HOB) Various 224997 1996 2071
870092 993 King Dollar (HOB) Black, Paul 344955 1996 2071
708924 588 Totally Committed Smith, Howard 86617 1985 2060
708967 597 Little Foxes Barnabas 82219 1986 2061
708991 706 Grateful for Your Love King James Version 86615 1986 2061
709068 614 This Town Fraizer, Rob 71690 1986 2061
709122 616 Holy Rollin' Duncan, Bryan 78801 1986 2061
709157 617 Virtues Allies 82220 1986 2061
709440 619 I Must Go On Miller, Shirley 82223 1986 2061
711097 701 Look Up And Live NJ Mass Choir 98682 1986 2061
711488 709 Go Tell Somebody Commissioned 82221 1986 2061
730016 704 Be Encouraged Winans, Vickie 83955 1987 2062
730024 613 Scrimshaw DiGesare, Nathan 90201 1987 2062
730032 708 This Joy New King James Version 91354 1987 2062
730059 710 On The Winning Side Commissioned 92349 1988 2063
730067 705 Amazing Kingdom 90966 1987 2062
730113 711 Hold Up The Light NJ Mass Choir 91351 1988 2063
730121 716 All Time Gospel Classic 1 Voices of Light 92873 1988 2063
730148 724 Back To The Cross Williams, Melvin 93698 1988 2063
730164 716 All Time Gospel Classic 2 Voices of Light 109334 1989 2064
730172 737 Live! Give Him The Glory L A Mass Choir 100401 1988 2063
730180 700 I'll Be With You Coley, Daryl 129997 1988 2063
730199 702 Will You Be Ready Commissioned 122212 1988 2063
730202 703 Total Victory Winans, Vickie 105823 1989 2064
730210 707 Wonderful Williams, Beau 103323 1989 2064
730237 725 Hero's NJ Mass Choir 110654 1989 2064
730261 736 Ordinary Just Won't Do Commissioned 116714 1989 2064
730288 713 Can't Hold Back L A Mass Choir 112224 1989 2064
730296 715 Worth The Wait Futrel 115442 1989 2064
730318 726 Higher Williams, Beau 130036 1990 2065
730342 717 Heaven Sent Heaven Sent 120177 1990 2065
730350 718 As One As One 142939 1991 2066
730377 745 Parkes Stewart, Parkes 135636 1991 2066
5
- ----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
- ----------------------------------------------------------------------------------------------------------------------------------
REVERSION
SELECTION # PRJ # TITLE ARTIST SR # SR DATE DATE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
730423 723 The Vision Howard, Pattie 135636 1991 2066
730431 729 Together Kurt Carr Singers 134679 1991 2066
730458 727 From The Inside Out Strickling-Jones, Arvis 126305 1990 2065
730466 728 The Only Hope Viale, Gene 127190 1991 2066
730482 730 Right Now "If You Believe" Chicago Mass Choir 135634 1991 2066
730555 733 Come As You Are L A Mass Choir 146355 1992 2067
730652 746 Live! In Atlanta Nero-Butler, Wanda 135638 1991 2066
730687 749 Back Home Where You Belong Strickling-Jones, Arvis 141206 1991 2066
730733 748 Call Him Up Chicago Mass Choir 141210 1992 2067
730768 754 He That Believeth Chicago Mass Choir 149523 1992 2067
730776 750 This Is Gospel War On Sin 142936 1992 2067
730806 753 Love Williams, Beau 146501 1992 2067
730830 752 Sing In The Spirit N C Mass Choir 147559 1992 2067
LS5554 208 All My Life Crisswell Jackson, Ann N438 1971 2046
LS5581 201 Soulfully Crouch, Andrae N1594 1972 2047
LS5598 215 Just Andrae Crouch, Andrae N2537 1972 2047
LS5601 221 The Living Sound Dalton, Larry N474 1972 2047
LS5602 225 Live At Carnegie Hall Crouch, Andrae N5852 1973 2048
LS5613 244 Christmas w/ Richard&Patti Roberts, Richard & Patti N3256 1972 2047
LS5634 281 Sounds Of Peace Sounds of Peace N10215 1973 2048
LS5673 342 Richard & Patti Roberts, Richard & Patti N25680 1975 2050
LS5680 350 R C & The Family of Light Carmichael, Ralph N32019 1975 2050
LS5683 359 This Is Another Day Crouch, Andrae N36899 1976 2051
LS5690 366 Where The Spirit of the Roberts, Richard & Patti N29319 1975 2050
LS5691 367 Outer Space/Inner Space Irwin/Mann N32871 1976 2051
LS5698 379 Christmas Joys Carmichael, Ralph N37580 1976 2051
LS5705 383 Jesus Christ Is The Way Hawkins, Walter N40714 1977 2052
LS5716 395 Christmas Children of the Day C34822 1975 2050
LS5717 396 Live in London Crouch, Andrae S377 1978 2053
LS5731 409 Circles Of Praise Good News Circle/Sunshine N45072 1977 2052
LS5732 414 Keep Singing That Love So Chere, Tami N47492 1977 2052
LS5738 419 Bringin' The Message Messenger 2566 1978 2053
LS5741 422 Brass, String and Ivory Dalton, Larry 2280 1978 2053
LS5745 427 Grass Roots Music Zion Mountain Folk 4009 1978 2053
LS5749 432 Jesus Makes Me Happy Wacker, Jana 8665 1978 2053
LS5751 435 Breakin' The Ice Sweet Comfort Band 6442 1978 2053
LS5753 436 I Love You With the Love Gilbert, Jim 5000 1978 2053
6
- ----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
- ----------------------------------------------------------------------------------------------------------------------------------
REVERSION
SELECTION # PRJ # TITLE ARTIST SR # SR DATE DATE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LS5754 438 He's Everything To Me Chere, Tami 7140 1979 2054
LS5758 443 Portrait Of Love Byron, Jon 12078 1979 2054
LS5759 444 Butterfly Children of the Day 9028 1979 2054
LS5760 474 Tramaine Hawkins, Tramaine 20924 1979 2054
LS5762 451 Hold On Tight Sweet Comfort Band 14432 1979 2054
LS5763 459 I'll Be Thinking Of You Crouch, Andrae 14431 1979 2054
LS5764 452 Look By Faith Ugartechea, Becky 15269 1979 2054
LS5765 453 Kristle Murden Murden-Edwards, Kristle 21402 1980 2055
LS5766 454 White As Snow Felix, James 24215 1980 2055
LS5770 461 The Hawkins Family Hawkins, Walter 25482 1980 2055
LS5777 468 Confessions Rambo, Reba 23407 1980 2055
LS5781 473 Daniel Hawkins, Daniel 25526 1980 2055
LS5782 475 Rebel To The Wrong Agajanian, Dennis 28144 1981 2056
LS5783 476 Colours Resurrection Band 23568 1980 2055
LS5785 478 Gospel Gold, Vol. 1 Various 28664 1980 2055
LS5789 485 I Feel Like Singing Hawkins, Walter 35564 1982 2057
LS5792 488 Introducing the Winans Winans 28672 1981 2056
LS5794 490 Hearts of Fire Sweet Comfort Band 29175 1981 2056
LS5795 491 More of the Best Crouch, Andrae 28586 1981 2056
LS5799 495 Lady Live Rambo, Reba 34492 1982 2057
LS5800 497 The Number of the Lord Jubilant Sykes 31880 1981 2056
LS5803 499 Mommy Don't Love Daddy Resurrection Band 31340 1981 2056
LS5807 504 Cutting Edge Sweet Comfort Band 42974 1982 2057
LS5816 515 D.M.Z. Resurrection Band 866 1982 2057
LS5817 517 Together World Vision 188 1982 2057
LS5821 521 Determined Hawkins, Tramaine 50383 1983 2058
LS5825 526 We Sing Praises Crouch, Sandra 46737 1983 2058
LS5826 527 Long Time Comin' Winans 51748 1983 2058
LS5829 532 Approaching Light Speed Barnabas 50217 1983 2058
LS5831 534 Perfect Timing Sweet Comfort Band 59954 1984 2059
LS5843 546 Face To Face Smith, Scott 57348 1984 2059
LS5853 559 Tomorrow Winans 62607 1984 2059
LS5855 560 We're Waiting On You Crouch, Sandra 68773 1985 2060
LS5858 557 Christmas Spirit Carmichael, Ralph 58858 1984 2059
LS5859 566 Cut It Away Fraizer, Rob 59953 1984 2059
LS5860 565 Feel The Fire Barnabas 67351 1984 2059
LS5864 569 The Allies Allies 65778 1985 2060
7
- ----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
- ----------------------------------------------------------------------------------------------------------------------------------
REVERSION
SELECTION # PRJ # TITLE ARTIST SR # SR DATE DATE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LS5872 580 Another Time Jones, Bobby 67604 1985 2060
LS5876 584 Unspeakable Joy Miller, Douglas 67756 1985 2060
- ----------------------------------------------------------------------------------------------------------------------------------
8
</TABLE>
<PAGE>
SCHEDULE C-1
REGISTERED COPYRIGHTS
PLATINUM ENTERTAINMENT
SONG FILE
<TABLE>
<CAPTION>
TITLE C # YEAR COMPOSER PUBLISHER ARTIST CODE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
JOSTE PUBLISHING (ASCAP)
Owned
A SONG IN THE NIGHT PA788197 1996 MICHAEL BROOKS JOSTE PUBLISHING WITNESS GO
(AIN'T NO DEVIL IN HELL) GONNA WALK ON PA572223 1992 DANNIEBELLE HALL JOSTE PUBLISHING DANNIEBELLE HALL GO
AFTER THE STORM IS GONE PA748278 1994 MICHAEL BROOKS JOSTE PUBLISHING WITNESS GO
ANOTHER CHANCE PA856569 1997 MICHAEL BROOKS JOSTE PUBLISHING LISA PAGE GO
ASK OF ME PA788206 1996 MICHAEL BROOKS JOSTE PUBLISHING WITNESS GO
BEGINNING PA625280 1993 MICHAEL BROOKS JOSTE PUBLISHING WITNESS GO
BELIEVE PA625278 1993 MICHAEL BROOKS JOSTE PUBLISHING WITNESS GO
BLESS HIS NAME PA856567 1997 MICHAEL BROOKS JOSTE PUBLISHING LISA PAGE GO
BORN AGAIN PA788315 1996 MICHAEL BROOKS JOSTE PUBLISHING MICHAEL BROOKS AND THE GO
NATION
BROTHERLY LOVE PA788313 1996 MICHAEL BROOKS JOSTE PUBLISHING MICHAEL BROOKS AND THE GO
NATION
COME HOLY SPIRIT PA646476 1993 HERMAN HARRIS JOSTE PUBLISHING HERMAN HARRIS GO
COME TO THE ALTAR PA663314 1995 MICHAEL BROOKS JOSTE PUBLISHING GREATER EMMANUEL GO
DEEPER THE VALLEY, THE PA759792 1995 DANNIEBELLE HALL JOSTE PUBLISHING DANNIEBELLE HALL GO
DESIGNER'S ORIGINAL PA572225 1992 DANNIEBELLE HALL JOSTE PUBLISHING DANNIEBELLE HALL GO
DESTROY EVERY YOKE PA722077 1994 MICHAEL BROOKS JOSTE PUBLISHING GREATER EMMANUEL GO
DO IT AGAIN PA856561 1997 MICHAEL BROOKS JOSTE PUBLISHING GREATER EMMANUEL GO
DON'T TAKE IT AWAY PA625283 1993 MICHAEL BROOKS JOSTE PUBLISHING WITNESS GO
EVERYTHING'S GONNA BE ALRIGHT PA663306 1995 MICHAEL BROOKS JOSTE PUBLISHING GREATER EMMANUEL GO
FIND A WAY PA722072 1994 MICHAEL BROOKS JOSTE PUBLISHING GREATER EMMANUEL GO
FREEDOM BELLS (P.D. ARR) PA572224 1992 DANNIEBELLE HALL JOSTE PUBLISHING DANNIEBELLE HALL GO
GET IN THE WAY PA625282 1993 MICHAEL BROOKS JOSTE PUBLISHING WITNESS GO
GET THE GLORY PA722074 1994 MICHAEL BROOKS JOSTE PUBLISHING GREATER EMMANUEL GO
GIVE IT TO HIM PA788199 1996 MICHAEL BROOKS JOSTE PUBLISHING WITNESS GO
GREATER EMMANUEL PA722071 1994 MICHAEL BROOKS JOSTE PUBLISHING GREATER EMMANUEL GO
HE CAN DO THE IMPOSSIBLE (IN YOUR LIFE) PA748274 1994 MICHAEL BROOKS JOSTE PUBLISHING WITNESS GO
HE CARES PA663311 1995 MICHAEL BROOKS JOSTE PUBLISHING GREATER EMMANUEL GO
HE KNOWS BEST PA628908 1993 DANNIEBELLE HALL JOSTE PUBLISHING DANNIEBELLE HALL GO
HE LOVES ME PA788318 1996 MICHAEL BROOKS JOSTE PUBLISHING MICHAEL BROOKS AND THE GO
NATION
HELP ME TO FIGHT PA788310 1996 MICHAEL BROOKS JOSTE PUBLISHING MICHAEL BROOKS AND THE GO
NATION
HE'S COMING BACK REAL SOON PA722073 1994 MICHAEL BROOKS JOSTE PUBLISHING GREATER EMMANUEL GO
HE'S MY KING PA646481 1993 HERMAN HARRIS JOSTE PUBLISHING HERMAN HARRIS GO
HE'S REAL PA663313 1995 MICHAEL BROOKS JOSTE PUBLISHING GREATER EMMANUEL GO
HIGHEST PRAISE PA788314 1996 MICHAEL BROOKS JOSTE PUBLISHING MICHAEL BROOKS AND THE GO
NATION
HONOR HIS NAME PA663309 1995 MICHAEL BROOKS JOSTE PUBLISHING GREATER EMMANUEL GO
I WILL SING HOLY PA628909 1993 DANNIEBELLE HALL JOSTE PUBLISHING DANNIEBELLE HALL GO
I'LL GIVE MY ALL TO YOU (50%) PA767556 1995 TAYLOR/BOWERS JOSTE PUBLISHING LOS ANGELES MASS CHOIR GO
I'M BLESSED PA836241 1995 MICHAEL BROOKS JOSTE PUBLISHING GREATER EMMANUEL GO
IN HIS PRESENCE PA815461 1996 MICHAEL BROOKS JOSTE PUBLISHING TOTALLY COMMITTED GO
IN THE ROOM PA663308 1995 MICHAEL BROOKS JOSTE PUBLISHING GREATER EMMANUEL GO
INTERLUDE PA572230 1992 J THOMAS/E TOSSING JOSTE PUBLISHING DANNIEBELLE HALL GO
IT WILL BE WORTH IT ALL PA646477 1993 HERMAN HARRIS JOSTE PUBLISHING HERMAN HARRIS GO
IT'S RAINING IN MY LIFE AGAIN PA748277 1994 MICHAEL BROOKS JOSTE PUBLISHING WITNESS GO
IT'S YOUR TIME PA748279 1994 MICHAEL BROOKS JOSTE PUBLISHING WITNESS GO
JESUS KNOWS ME PA572229 1992 DANNIEBELLE HALL JOSTE PUBLISHING DANNIEBELLE HALL GO
JESUS WILL ANSWER YOUR PRAYER PA788203 1996 MICHAEL BROOKS JOSTE PUBLISHING WITNESS GO
JESUS WILL SEE YOU THROUGH PA856563 1997 MICHAEL BROOKS JOSTE PUBLISHING LISA PAGE GO
JUST AS YOU ARE PA748276 1994 MICHAEL BROOKS JOSTE PUBLISHING WITNESS GO
LATTER, THE PA625286 1993 MICHAEL BROOKS JOSTE PUBLISHING WITNESS GO
LEARN HOW TO TRUST HIM PA856562 1997 MICHAEL BROOKS JOSTE PUBLISHING LISA PAGE GO
LET HIM BE EXALTED PA722079 1994 MICHAEL BROOKS JOSTE PUBLISHING GREATER EMMANUEL GO
LORD IS BLESSING ME, THE PA646480 1993 HERMAN HARRIS JOSTE PUBLISHING HERMAN HARRIS GO
MAGNIFY PA625284 1993 MICHAEL BROOKS JOSTE PUBLISHING WITNESS GO
MEDLEY OF CHANGE PA572228 1992 DANNIEBELLE HALL JOSTE PUBLISHING DANNIEBELLE HALL GO
MORE THAN A CONQUEROR PA788202 1996 MICHAEL BROOKS JOSTE PUBLISHING WITNESS GO
</TABLE>
<PAGE>
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SONG FILE
<TABLE>
<CAPTION>
TITLE C # YEAR COMPOSER PUBLISHER ARTIST CODE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MORE THAN THE WORLD AGAINST YOU PA748275 1994 MICHAEL BROOKS JOSTE PUBLISHING WITNESS GO
MORE THAN YOU'LL EVER KNOW PA856560 1997 MICHAEL BROOKS JOSTE PUBLISHING LISA PAGE GO
MY SOUL LOVES JESUS PA572227 1992 DANNIEBELLE HALL JOSTE PUBLISHING DANNIEBELLE HALL GO
NEVER CHANGE PA788201 1996 MICHAEL BROOKS JOSTE PUBLISHING WITNESS GO
NEVER LEAVE PA788311 1996 MICHAEL BROOKS JOSTE PUBLISHING MICHAEL BROOKS AND THE GO
NATION
NO OTHER GOD PA856564 1997 CHARLES OLLIE JOSTE PUBLISHING LISA PAGE GO
HARRIS
O SE BABA (NIGERIAN PRAISE) PA572226 1992 DANNIEBELLE HALL JOSTE PUBLISHING DANNIEBELLE HALL GO
OH WHAT LOVE PA788200 1996 MICHAEL BROOKS JOSTE PUBLISHING WITNESS GO
ONLY JESUS CAN SAVE YOUR SOUL (40%) PA767559 1995 WILKINS/TAYLOR JOSTE PUBLISHING LOS ANGELES MASS CHOIR GO
PEOPLE PA646478 1993 HERMAN HARRIS JOSTE PUBLISHING HERMAN HARRIS GO
PRAISE HIS NAME PA788317 1996 MICHAEL BROOKS JOSTE PUBLISHING MICHAEL BROOKS AND THE GO
NATION
PRAISE SONG PA663305 1995 MICHAEL BROOKS JOSTE PUBLISHING GREATER EMMANUEL GO
PRELUDE PA788198 1996 MICHAEL BROOKS JOSTE PUBLISHING GO
PSALMS 34 PA646473 1993 HERMAN HARRIS JOSTE PUBLISHING HERMAN HARRIS GO
SAFETY PA625281 1993 MICHAEL BROOKS JOSTE PUBLISHING WITNESS GO
SAVED (50%) PA767561 1995 WILKINS/ERVIN JOSTE PUBLISHING LOS ANGELES MASS CHOIR GO
SAVED AND SANCTIFIED PA815459 1996 MICHAEL BROOKS JOSTE PUBLISHING TOTALLY COMMITTED GO
SINCE HE CAME PA625279 1993 MICHAEL BROOKS JOSTE PUBLISHING WITNESS GO
SO MUCH PA788316 1996 MICHAEL BROOKS JOSTE PUBLISHING MICHAEL BROOKS AND THE GO
NATION
SOONER PA788312 1996 MICHAEL BROOKS JOSTE PUBLISHING MICHAEL BROOKS AND THE GO
NATION
STANDING ON HIS PROMISE PA856566 1997 MICHAEL BROOKS JOSTE PUBLISHING MICHAEL BROOKS GO
STANDARD PA625277 1993 MICHAEL BROOKS JOSTE PUBLISHING WITNESS GO
SUN WILL SHINE AGAIN, THE PA722070 1994 MICHAEL BROOKS JOSTE PUBLISHING GREATER EMMANUEL GO
TAKE ALL YOUR PAIN AWAY PA663307 1995 MICHAEL BROOKS JOSTE PUBLISHING GREATER EMMANUEL GO
TAKE THE TIME TO WAIT PA788205 1996 MICHAEL BROOKS JOSTE PUBLISHING WITNESS GO
THANK YOU JESUS PA856570 1997 MICHAEL BROOKS JOSTE PUBLISHING LISA PAGE GO
THAT'S WHAT YOU MEAN TO ME PA788204 1996 MICHAEL BROOKS JOSTE PUBLISHING WITNESS GO
THE BLOOD PA788196 1996 MICHAEL BROOKS JOSTE PUBLISHING WITNESS GO
THE TRUTH PA856565 1997 MICHAEL BROOKS JOSTE PUBLISHING LISA PAGE GO
UNCONDITIONAL LOVE (40%) PA806584 1995 WILKINS/TAYLOR JOSTE PUBLISHING LOS ANGELES MASS CHOIR GO
WALK IN THE FREEDOM PA663310 1995 MICHAEL BROOKS JOSTE PUBLISHING GREATER EMMANUEL GO
WE GIVE THANKS PA748283 1994 MICHAEL BROOKS JOSTE PUBLISHING WITNESS GO
WE MUST BE BORN AGAIN (50%) PA681981 1994 WHITSETT/IVEY JOSTE PUBLISHING ESTHER SMITH GO
WE WORSHIP CHRIST, OUR LORD PA646479 1993 HERMAN HARRIS JOSTE PUBLISHING HERMAN HARRIS GO
WHAT A WONDERFUL CHANGE PA722075 1994 MICHAEL BROOKS JOSTE PUBLISHING GREATER EMMANUEL GO
WHEN I PRAY PA748281 1994 MICHAEL BROOKS JOSTE PUBLISHING WITNESS GO
WHERE WOULD I BE PA748282 1994 MICHAEL BROOKS JOSTE PUBLISHING WITNESS GO
WORKING TOGETHER PA856568 1997 MICHAEL BROOKS JOSTE PUBLISHING LISA PAGE GO
YOU DESERVE THE BEST PA759793 1995 DANNIEBELLE HALL JOSTE PUBLISHING DANNIEBELLE HALL GO
YOU'LL NEVER WALK ALONE PA748280 1994 MICHAEL BROOKS JOSTE PUBLISHING WITNESS GO
YOUR NAME PA815460 1996 MICHAEL BROOKS JOSTE PUBLISHING TOTALLY COMMITTED GO
Co-Owned
ALWAYS PA762245 1995 RON LARSON JOSTE PUB/CHAMPION RON LARSON CH
OF LOVE MUSIC
AVAILABLE TO YOU PA736325 1994 CARLIS MOODY, JR. JOSTE PUB/MOODEASY CARLIS MOODY, JR. GO
MUSIC
BUSTER & RUBY PA759772 1995 HENRY KAPONO JOSTE PUB/ISLAND HENRY KAPONO AC
PEARL MUSIC
COME UNTO HIM PA603013 1993 KEITH CHILDRESS JOSTE PUB/KE-KIM HEAVEN SENT GO
MUSIC
COUNT ON ME PA736318 1994 CARLIS MOODY, JR. JOSTE PUB/MOODEASY CARLIS MOODY, JR. GO
MUSIC
CRY NOT REL 1995 REEVES/CRAIG JOSTE PUB/BRUCE RONNA REEVES CR
CRAIG PUB
ETERNITY IN MY HEART PA762243 1995 RON LARSON JOSTE PUB/CHAMPION RON LARSON CH
OF LOVE MUSIC
FAMOUS LAST WORDS PA762248 1995 RON LARSON JOSTE PUB/CHAMPION RON LARSON CH
OF LOVE MUSIC
FATHER I STRETCH MY HANDS TO THEE PAU1728379 1993 HERMAN HARRIS JOSTE PUB/HERMANDO COMMITTED GO
PUBLISHING
FIRST LOVE PA736326 1994 MOODY/JACKSON/ JOSTE PUB/ CARLIS MOODY, JR. GO
CLARK MOODEASY/SEED
GARMENT OF PRAISE PA759791 1995 CHARLES SMITH JOSTE PUB/CHARLES DANNIEBELLE HALL GO
SMITH MUSIC
GET YOUR PEOPLE READY PA736322 1994 CARLIS MOODY, JR. JOSTE PUB/ CARLIS MOODY, JR. GO
MOODEASY MUSIC
HEAVEN PA767554 1995 TAYLOR/JONES JOSTE PUB/2 G'S LA MASS CHOIR GO
& a J MUSIC
HE'LL BE THERE PAU1728335 1993 HERMAN HARRIS JOSTE PUB/HERMANDO COMMITTED GO
PUBLISHING
HOPE FOR THE HURTING HEART PA762249 1995 RON LARSON JOSTE PUB/CHAMPION RON LARSON CH
OF LOVE MUSIC
</TABLE>
<PAGE>
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SONG FILE
<TABLE>
<CAPTION>
TITLE C # YEAR COMPOSER PUBLISHER ARTIST CODE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
HOPEFUL PA762246 1995 RON LARSON JOSTE PUB/CHAMPION RON LARSON CH
OF LOVE MUSIC
HOW GRACIOUS YOU ARE PA646474 1993 ORTEGA SMITH JOSTE PUB/ORTEGA HERMAN HARRIS GO
SMITH MUSIC
HOW MUCH IS WHEN? PA762244 1995 RON LARSON JOSTE PUB/CHAMPION RON LARSON CH
OF LOVE MUSIC
I CANNOT TELL IT ALL PA603010 1993 HERMAN HARRIS JOSTE PUB/HERMANDO HEAVEN SENT GO
PUBLISHING
I WILL ALWAYS REMEMBER PA759773 1995 HENRY KAPONO JOSTE PUB/ISLAND HENRY KAPONO AC
PEARL MUSIC
I WILL BLESS THE LORD PA681982 1994 GEOFFREY DAVIS JOSTE PUB/PSUCHE' ESTHER SMITH GO
PUB
IF YOU LOOK PA760554 1995 JEFF HAMLIN JOSTE PUB/CHAMPION GLAD CH
OF LOVE MUSIC
I'M PERSUADED PA603012 1993 HERMAN HARRIS JOSTE PUB/HERMANDO HEAVEN SENT GO
PUBLISHING
I'M READY FOR MY CHANGE PA736319 1994 CARLIS MOODY, JR. JOSTE PUB/ CARLIS MOODY, JR. GO
MOODEASY MUSIC
JESUS PA736323 1994 CARLIS MOODY, JR. JOSTE PUB/ CARLIS MOODY, JR. GO
MOODEASY MUSIC
JESUS PA646475 1993 RENEE WILLIAMS JOSTE PUB/RENEE HERMAN HARRIS GO
SMITH SMITH MUSIC
JUDGMENT PA736320 1994 CARLIS MOODY, JR. JOSTE PUB/ CARLIS MOODY, JR. GO
MOODEASY MUSIC
KEEP ON MOVIN' PA603009 1993 PAM DAVIS JOSTE PUB/THE HEAVEN SENT GO
MUSIC IN ME
LAST OF ALL AND THE LEAST OF THESE, THE PA762251 1995 RON LARSON JOSTE PUB/CHAMPION RON LARSON CH
LORD I KNOW I'VE BEEN CHANGED OF LOVE MUSIC
(P.D. ARR.) PA767562 1995 GREG JONES JOSTE PUB/2 G'S & LOS ANGELES MASS CHOIR GO
a J MUSIC
LOVE SAYS GOODBYE PA759770 1995 HENRY KAPONO JOSTE PUB/ISLAND HENRY KAPONO AC
PEARL MUSIC
MATTER OF TIME PA759771 1995 HENRY KAPONO JOSTE PUB/ISLAND HENRY KAPONO AC
PEARL MUSIC
MY GOD I LOVE YOU (P.D.) PA784270 1996 PAUL LANGFORD JOSTE PUBLISHING/ GLAD CH
CHAMPION OF LOVE
MUSIC
NATIVE GIRL PA759774 1995 HENRY KAPONO JOSTE PUB/ISLAND HENRY KAPONO AC
PEARL MUSIC
ONCE AGAIN PA736432 1994 OLIVER SCOTT JOSTE PUB/OLIGUS BEAU WILLIAMS GO
PUBLISHING
ONE WAY TICKET PA768042 1995 REEVES/GRUBBS JOSTE PUB/JIMMY RONNA REEVES CR
GRUBBS MUSIC
OVER PA641604 1993 K TRIBITT/ JOSTE PUB/E DONALD MALLOY GO
P TRIBITT TRIBITT
PUBLISHING
PRAISE YE THE LORD PA681985 1994 DANA DAVIS JOSTE PUB/ ESTHER SMITH GO
PSUCHE' PUB
REFRESHING PA736321 1994 CARLIS MOODY, JR. JOSTE PUB/ CARLIS MOODY, JR. GO
MOODEASY MUSIC
REMEMBER PA625285 1993 L PAGE/C HARRIS JOSTE PUB/YOUNG WITNESS GO
ARTISTS FOR
CHRIST MUSIC
RIVERBOAT, THE PA762247 1995 RON LARSON JOSTE PUB/ RON LARSON C
CHAMPION OF LOVE
MUSIC
- ------------------------------ -------- ---- ------------------DIAMOND SRUCK ----------------------- --
MUSIC/BREAKER
MAKER MUSIC
SO FAR ABOVE PA762250 1995 RON LARSON JOSTE PUB/ RON LARSON CH
CHAMPION OF LOVE
MUSIC
SOLID ROCK, THE (P.D.) PA784271 1996 DON HART JOSTE PUBLISHING/ GLAD CH
CHAMPION OF LOVE
MUSIC
STONE LOVE PA767560 1995 BRENT JONES JOSTE PUB/SANG LOS ANGELES MASS CHOIR GO
BOY MUSIC
STORMS KEEP COMING PA736394 1994 DAVID FRAIZER JOSTE PUB/LI'L
DAVE'S MUSIC/ DONALD MALLOY GO
GOD'S MUSIC
TAKE UP YOUR CROSS PA736395 1994 DAVID FRAIZER JOSTE PUB/LI'L DONALD MALLOY GO
DAVE'S MUSIC/
GOD'S MUSIC
TELL IT LIKE IT IS PA784266 1996 RON LARSON JOSTE PUBLISHING/ GLAD C
CHAMPION OF LOVE
MUSIC
THAT'S WHY I SING PA736427 1994 JACKSON/GILLMAN JOSTE PUB/NJMJ BEAU WILLIAMS GO
MUSIC/DAVAH/
GILLMAN
THERE'S NO FRIEND LIKE HIM PA640081 1993 DOUGLAS MILLER JOSTE PUB/MILJO DOUGLAS MILLER GO
MUSIC
USE ME PA736324 1994 MOODY/JACKSON JOSTE PUB/ CARLIS MOODY, JR. GO
MOODEASY MUSIC
WE GATHER TOGETHER (P.D.) PA784264 1996 DON HART JOSTE PUB/ GLAD CH
CHAMPION OF LOVE
MUSIC
WORTHY IS THE LAMB PA730460 1994 ADRIAN B. KING JOSTE PUB/A NEW CHICAGO MASS CHOIR GO
REVELATION PUB
YOU MUST LIVE WHAT YOU SING ABOUT PA767557 1995 TAYLOR/JONES JOSTE PUB/2 G'S & LOS ANGELES MASS CHOIR GO
a J MUSIC
JUSTMIKE MUSIC (BMI)
Owned
EVERYTHING WILL BE ALRIGHT PA646491 1993 ROBERT GULETTE JUSTMIKE MUSIC DONALD MALLOY GO
GOD'S LOVE PA603015 1993 BENJAMIN LOVE JUSTMIKE MUSIC HEAVEN SENT GO
GREAT DAY PA617386 1993 BILLY RIVERS JUSTMIKE MUSIC ANGELIC VOICES OF FAITH GO
HE KNOWS (P.D. ARR) PA617383 1993 BILLY RIVERS JUSTMIKE MUSIC ANGELIC VOICES OF FAITH GO
HERE COME THE BLACKHAWKS PAU1841419 1994 THOMAS/DAHL JUSTMIKE MUSIC STEVE DAHL AC
I'M ON MY WAY PA646492 1993 J LAVALLEY JUSTMIKE MUSIC DONALD MALLOY GO
KEEP ME PA617387 1993 BILLY RIVERS JUSTMIKE MUSIC ANGELIC VOICES OF FAITH GO
MAKE ME WHOLE PA617384 1993 BILLY RIVERS JUSTMIKE MUSIC ANGELIC VOICES OF FAITH GO
WE MUST BE BORN AGAIN (50%) PA681981 1994 M WHITSETT/ D JUSTMIKE MUSIC ESTHER SMITH GO
IVEY
WE SHALL OVERCOME (P.D. ARR) PA617389 1993 BILLY RIVERS JUSTMIKE MUSIC ANGELIC VOICES OF FAITH GO
Co-Owned
A-BLAZING GRACE PA748007 1995 ALLEN/WIGGINS JUSTMIKE MUSIC/ ALLEN & ALLEN GO
BRU-NITE/RUSSAX
ALL HE WANTS IS PRAISE PA646634 1995 RALPH LOFTON JUSTMIKE MUSIC/ CHRISTIANAIRES GO
RAPHTON MUSIC
</TABLE>
<PAGE>
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SONG FILE
<TABLE>
<CAPTION>
TITLE C # YEAR COMPOSER PUBLISHER ARTIST CODE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ALLELUJAH, PRAISE JEHOVAH PA722207 1994 CALVIN RHONE JUSTMIKE MUSIC/ CALVIN RHONE GO
CALVIN RHONE
PUBLISHING
ALRIGHT PA759807 1995 CHRIS GRAY JUSTMIKE MUSIC/ NORTH CAROLINA MASS CHOIR GO
CHRIS GRAY MUSIC
AMAZING PA788337 1996 CHRIS ANDERSON JUSTMIKE MUSIC/ KIM McFARLAND GO
LILL C.A.K.M.
ANDERSONG
ANGELS PA646638 1995 CHARLES PORTER JUSTMIKE MUSIC/ CHRISTIANAIRES GO
PORTACALL MUSIC
ANYWAY YOU BLESS ME (P.D. ARR) PA685645 1994 ALLEN/WIGGINS JUSTMIKE MUSIC/ ALLEN & ALLEN GO
BRU-NITE/RUSSAX
ARISE MY SOUL, ARISE (P.D.) PA784268 1996 BOB KAUFLIN JUSTMIKE MUSIC/ GLAD CH
AUX SEND MUSIC
ASK ANYTHING IN MY NAME PA685621 1994 CHRIS GRAY JUSTMIKE MUSIC/ NORTH CAROLINA MASS CHOIR GO
CHRIS GRAY MUSIC
AT THE GATE PA759806 1995 CHRIS GRAY JUSTMIKE MUSIC/ NORTH CAROLINA MASS CHOIR GO
CHRIS GRAY MUSIC
AT THE RIVER PA646629 1995 PAUL PORTER JUSTMIKE MUSIC/ CHRISTIANAIRES GO
LUAP RETROP'S
MUSIC
AWAY IN A MANGER (P.D. ARR.) PA774235 1995 ALLEN/WIGGINS JUSTMIKE MUSIC/ ALLEN & ALLEN GO
BRU-NITE/RUSSAX
BE NOT WEARY PA811772 1996 CALVIN B. RHONE JUSTMIKE MUSIC/ CALVIN BERNARD RHONE GO
CALVIN RHONE
PUBLISHING
BEHIND EVERY DARK CLOUD PA815458 1996 M. COTTRELL/ JUSTMIKE MUSIC/ TOTALLY COMMITTED GO
G. COLLIER COTTRELL/COLLIER
BETTER WAY PA663347 1995 MICHAEL DODSON JUSTMIKE MUSIC/ ANGELIC VOICES OF FAITH GO
OTIS STAR
PUBLISHING
BLACK DRESSES PA722326 1994 STEVE KOLANDER JUSTMIKE MUSIC/ STEVE KOLANDER CR
BALOO MUSIC
BLACK & WHITE PA722037 1994 ANTELIS/TAYLOR JUSTMIKE MUSIC/ S. ALAN TAYLOR CR
SILENTA/JOSTE/
S-MEISTER
BLESSED BE THE NAME PA801052 1996 DAVID A. BROCK JUSTMIKE MUSIC/ NU CITY MASS CHOIR GO
DAVIDS
COLLECTIONS
BLUE O'CLOCK PA784160 1996 HOOKER/KOLANDER JUSTMIKE MUSIC/ STEVE KOLANDER CR
BALOO PUB/GARY
MORRIS MUSIC
BROKEN VESSEL PA685620 1994 CHRIS GRAY JUSTMIKE MUSIC/ NORTH CAROLINA MASS CHOIR GO
CHRIS GRAY MUSIC
BY MY WORD PA722209 1994 CALVIN RHONE JUSTMIKE MUSIC/ CALVIN RHONE GO
CALVIN RHONE
PUBLISHING
CAN'T NOBODY DO ME LIKE JESUS (P.D. ARR) PA685646 1994 ALLEN/WIGGINS JUSTMIKE MUSIC/ ALLEN & ALLEN GO
BRU-NITE/RUSSAX
CAN'T SAY THANK YOU ENOUGH PA722210 1994 CALVIN RHONE JUSTMIKE MUSIC/ CALVIN RHONE GO
CALVIN RHONE
PUBLISHING
CAN'T TAME YOUR LOVE PA722329 1994 STEVE KOLANDER JUSTMIKE MUSIC/ STEVE KOLANDER CR
BALOO MUSIC
CAN'T UNDO WHAT'S BEEN DONE (50%) PA722335 1994 KOLANDER/RICHIE JUSTMIKE/BALOO STEVE KOLANDER CR
MUSIC/MIGHTY
NICE MUSIC
COME LET US WORSHIP HIM PA722076 1994 GREGG PEARSON JUSTMIKE MUSIC/ GREATER EMMANUEL GO
GREGGIE G'S MUSIC
CROWN HIM PA811768 1996 CALVIN B. RHONE JUSTMIKE MUSIC/ CALVIN BERNARD RHONE GO
CALVIN RHONE
PUBLISHING
CROWN HIM WITH MANY CROWNS (P.D.) PA784265 1996 BOB KAUFLIN JUSTMIKE MUSIC/ GLAD CH
AUX SEND MUSIC
DEEP IN MY HEART PA642705 1993 ERIC SHARPER JUSTMIKE MUSIC/ CHRISTIANAIRES GO
LIL' ERIC'S MUSIC
DOER OF YOUR WORD PA784267 1996 BOB KAUFLIN JUSTMIKE MUSIC/ GLAD CH
AUX SEND MUSIC
DON'T BE AFRAID TO DREAM PA762746 1995 CALVIN RHONE JUSTMIKE MUSIC/ CALVIN RHONE GO
CALVIN RHONE
PUBLISHING
DON'T LEAVE ME PA642702 1993 PAUL PORTER JUSTMIKE MUSIC/ CHRISTIANAIRES GO
LUAP RETROP'S
MUSIC
DROWNING MAN PA722331 1994 KOLAND/MURK/ JUSTMIKE MUSIC/ STEVE KOLANDER CR
HALL/MCDUFF MURKOLMAN/
GROOVEOLATOR/
ROCK COUNTRY
DRUNK ON HER LOVE PA722043 1994 ANTELIS/TAYLOR JUSTMIKE MUSIC/ S. ALAN TAYLOR CR
SILENTA/JOSTE/
S-MEISTER
EVERY SINGLE ONE PA760556 1995 BOB KAUFLIN JUSTMIKE MUSIC/ GLAD CH
ORGANON KEY MUSIC
EVERYTHING'S GONNA BE ALRIGHT PA836309 1997 P. PORTER/BROWN/ JUSTMIKE MUSIC/ CHRISTIANAIRES GO
T. PORTER/CARTER LUAP RETROP'S
MUSIC/RON'S ON
PUB./PORTACALL
MUSIC/GAC PUBL.
FAITH'S EYES PA788338 1996 ANDERSON/BATES JUSTMIKE MUSIC/ KIM McFARLAND GO
LILL C.A.K.M.
ANDERSONG
FILL ME PA685612 1994 CHRIS GRAY JUSTMIKE MUSIC/ NORTH CAROLINA MASS CHOIR GO
CHRIS GRAY MUSIC
FILL MY CUP PA646489 1993 PEPE EPTING JUSTMIKE MUSIC/ DONALD MALLOY GO
PEPSKI'S MUSIC
FOREVER DANCE PA738898 1993 ANTELIS/TAYLOR JUSTMIKE MUSIC/ S. ALAN TAYLOR CR
SILENTA/JOSTE/
S-MEISTER
FOREVER MY LORD PA642085 1994 JOHN MADGETT JUSTMIKE MUSIC/ JOHN MADGETT GO
MADGETT MUSIC
FORGIVE ME PA646637 1995 ERIC SHARPER JUSTMIKE MUSIC/ CHRISTIANAIRES GO
LIL ERIC'S
PUBLISHING
FULL MOON FEVER PA784163 1996 MAX D.BARNES/BUDDY JUSTMIKE/BALOO STEVE KOLANDER CR
CANNON/STEVE PUB/HARDSCRATCH/
KOLANDER WARNER-TAMERLANE
PUB/MADISON CREEK
GET ON UP PA642704 1993 G CARTER/R KENNY JUSTMIKE MUSIC/ CHRISTIANAIRES GO
LUAP RETROP'S
MUSIC
GETTING READY PA663343 1995 PAUL REED JUSTMIKE MUSIC/ ANGELIC VOICES OF FAITH GO
DSBB MUSIC
GIFT OF YOU, THE PA617390 1993 KURT CLAYTON JUSTMIKE MUSIC/ ANGELIC VOICES OF FAITH GO
IVORY DREAMS
MUSIC
GIVE HIM A CHANCE PA856511 1997 CHRISTOPHER L. JUSTMIKE MUSIC/ NORTH CAROLINA MASS CHOIR GO
GRAY CHRIS GRAY MUSIC
GIVE IT TO GOD PA788331 1996 DARRYL WALKER JUSTMIKE MUSIC/ WALT WHITMAN GO
WALKMAN MUSIC
GIVING MY PROBLEMS TO YOU PA722182 1994 EPTING/ JUSTMIKE MUSIC/ KIM McFARLAND GO
WEATHERSPOON PEPSKI'S MUSIC
GLORIA (P.D. ARR.) PA774237 1995 ALLEN/WIGGINS JUSTMIKE MUSIC/ ALLEN & ALLEN GO
BRU-NITE/RUSSAX
GLORIA (RAP VERSION) PA774231 1995 ALLEN/WIGGINS JUSTMIKE MUSIC/ ALLEN & ALLEN GO
BRU-NITE/RUSSAX
GOD CAN MAKE IT BETTER PA646636 1995 GEORGE CARTER JUSTMIKE MUSIC/ CHRISTIANAIRES GO
GAC PUBLISHING
GOD CARES PA642698 1993 R BROWN/A BROWN JUSTMIKE MUSIC/ CHRISTIANAIRES GO
RON ON PUBLISHING
GOD IS ABLE PA801045 1996 BRYANT L. JUSTMIKE MUSIC/ NU CITY MASS CHOIR GO
JONES, SR. NESOHC MUZIK
GOD IS ON HIS THRONE PA760553 1995 BOB KAUFLIN JUSTMIKE MUSIC/ GLAD CH
AUX SEND MUSIC
GOD REST YE MERRY GENTLEMEN (P.D. ARR) PA774229 1995 HAMPTON/ORTEGA JUSTMIKE MUSIC/ ALLEN & ALLEN GO
SONSEARE MUSIC
GOD WILL FIX IT PA788191 1996 REV. JOSEPH DAVIS JUSTMIKE MUSIC/ CHICAGO MASS CHOIR GO
RUN-DOWN MUSIC
GOD'S LOVE PA788339 1996 KELVIN LENOX JUSTMIKE MUSIC/ KIM McFARLAND GO
OXLEN PUBLISHING
GOD'S SPEED PA784287 1996 ALLEN/WIGGINS JUSTMIKE MUSIC/ ALLEN & ALLEN GO
BRU-NITE MUSIC/
RUSSAX MUSIC
GOING HOME TO LIVE WITH GOD PA730452 1994 BRYANT JONES SR JUSTMIKE MUSIC/ CHICAGO MASS CHOIR GO
NESOHC MUZIK
GOOD MORNING PA748004 1994 ALLEN/WIGGINS JUSTMIKE MUSIC/ ALLEN & ALLEN GO
BRU-NITE/RUSSAX
</TABLE>
<PAGE>
PLATINUM ENTERTAINMENT
SONG FILE
<TABLE>
<CAPTION>
TITLE C # YEAR COMPOSER PUBLISHER ARTIST CODE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
GOODNESS AND MERCY PA617385 1993 LEROY HAMPTON JUSTMIKE MUSIC/ ANGELIC VOICES & D. MALLOY GO
SONSEARE MUSIC
GREAT DAY PA788188 1996 PERCY GRAY, JR. JUSTMIKE MUSIC/ CHICAGO MASS CHOIR GO
SAVED CHILDREN'S
MUSIC
GREAT DAY PA801049 1996 JACKY JOSEPH JUSTMIKE MUSIC/ NU CITY MASS CHOIR GO
JUST JACK MUSIC
GREAT THINGS PA856515 1997 CHRISTOPHER L. JUSTMIKE MUSIC/ NORTH CAROLINA MASS CHOIR GO
GRAY CHRIS GRAY MUSIC
GROWING UP PA788329 1996 CALVIN WATKINS JUSTMIKE MUSIC/ WALT WHITMAN GO
J.B. WATKINS
MUSIC
HAPPY IN MY SOUL PA760581 1995 HUBERT POWELL JUSTMIKE MUSIC/ HUBERT POWELL GO
POWELL POWER
MUSIC
HAVE A TALK PA642080 1994 JOHN MADGETT JUSTMIKE MUSIC/ JOHN MADGETT GO
MADGETT MUSIC
HAVE YOU TAKEN THE TIME PA801047 1996 KEVIN HARRIS JUSTMIKE MUSIC/ NU CITY MASS CHOIR GO
NESOHC MUZIK
HE ANSWERS PRAYERS PA801051 1996 MICHAEL STOKES JUSTMIKE MUSIC/ NU CITY MASS CHOIR GO
MICHAEL D. STOKES
MUSIC
HE CAN PA685616 1994 CHRIS GRAY JUSTMIKE MUSIC/ NORTH CAROLINA MASS CHOIR GO
CHRIS GRAY MUSIC
HE WILL COME THROUGH PA811770 1996 CALVIN B. RHONE JUSTMIKE MUSIC/ CALVIN BERNARD RHONE GO
CALVIN RHONE
PUBLISHING
HE WILL MAKE A WAY PA856512 1997 CHRISTOPHER L. JUSTMIKE MUSIC/ NORTH CAROLINA MASS CHOIR GO
GRAY CHRIS GRAY MUSIC
HE'LL BE RIGHT THERE PA642701 1993 P PORTER/E SHARPER JUSTMIKE MUSIC/ CHRISTIANAIRES GO
LUAP RETROP'S/
LIL' ERIC'S
MUSIC
HE'LL BE STANDING THERE FOR YOU PA646494 1993 O ROBINSON/M JUSTMIKE MUSIC/ DONALD MALLOY GO
CHARLES DUSTIN ROBB
MUSIC
HE'LL BRING YOU OUT PA663350 1995 DARREN LUELLEN JUSTMIKE MUSIC/ ANGELIC VOICES OF FAITH GO
DARREN LUELLEN
PUBLISHING
HE'LL MAKE A WAY PA642700 1993 PAUL PORTER JUSTMIKE MUSIC/ CHRISTIANAIRES GO
LUAP RETROP'S
MUSIC
HE'S ALL THAT PA759799 1995 CHRIS GRAY JUSTMIKE MUSIC/ NORTH CAROLINA MASS CHOIR GO
CHRIS GRAY
MUSIC
HE'S ALRIGHT PA788195 1996 MICHAEL GODFREY JUSTMIKE MUSIC/ CHICAGO MASS CHOIR GO
GRAY BOY MUSIC
HE'S BEEN GOOD PA685618 1994 CHRIS GRAY JUSTMIKE MUSIC/ NORTH CAROLINA MASS CHOIR GO
CHRIS GRAY
MUSIC
HE'S MY EVERYTHING PA788193 1996 GRAY, SR./ JUSTMIKE MUSIC/ CHICAGO MASS CHOIR GO
GRAY, JR. SAVED CHILDREN'S
MUSIC
HE'S THE SAME PA856518 1997 CHISTOPHER L. JUSTMIKE MUSIC/ NORTH CAROLINA MASS CHOIR GO
GRAY CHRIS GRAY MUSIC
HE'S THE WAY PA685619 1994 CHRIS GRAY JUSTMIKE MUSIC/ NORTH CAROLINA MASS CHOIR GO
CHRIS GRAY
MUSIC
HE'S WAITING PA736399 1994 JOE FORBES JUSTMIKE MUSIC/ DONALD MALLOY GO
TOTAL PRAISE
MUSIC
HIGH PLACES PA681983 1994 W DUNCAN/R BROWN JUSTMIKE MUSIC/ ESTHER SMITH & H. POWELL GO
BRO-DUNCA MUSIC
HIGHER PA784289 1996 HAMPTON/BUCKNER JUSTMIKE MUSIC/ ALLEN & ALLEN GO
BRU-NITE/RUSSAX/
SONSEARE MUSIC
HIS NAME PA722206 1994 CALVIN RHONE JUSTMIKE MUSIC/ CALVIN RHONE GO
CALVIN RHONE
PUBLISHING
HOLD ON PA788335 1996 CHRIS ANDERSON JUSTMIKE MUSIC/ KIM McFARLAND GO
LILL C.A.K.M.
ANDERSONG
HOLD ON (DON'T GIVE UP) PA788187 1996 PERCY GRAY, JR. JUSTMIKE MUSIC/ CHICAGO MASS CHOIR GO
SAVED CHILDREN'S
MUSIC
HOLD ON...TO THE PROMISE PA736393 1994 ROBERT GULLETTE JUSTMIKE MUSIC/ DONALD MALLOY GO
ROBGU MUSIC
HOLY CITY, THE PA730456 1994 ERIC THOMAS JUSTMIKE MUSIC/ CHICAGO MASS CHOIR GO
ERIC THOMAS
PUBLISHING
HOLY GHOST POWER PA856513 1997 JONATHAN DUBOSE, JUSTMIKE MUSIC/ NORTH CAROLINA MASS CHOIR GO
JR./CHRISTOPHER JOBO PUBL. CHRIS
L. GRAY GRAY MUSIC
HOLY MEDLEY: HOLY, HOLY, HOLY; GREAT IS PA784290 1996 arr. ALLEN/WIGGINS JUSTMIKE MUSIC/ ALLEN & ALLEN GO
THY FAITHFULNESS BRU-NITE MUSIC/
RUSSAX MUSIC
HOME PA856509 1997 CHRISTOPHER L. JUSTMIKE MUSIC/ NORTH CAROLINA MASS CHOIR GO
GRAY CHRIS GRAY MUSIC
HOOK IN ME PA836305 1997 PAHRIS EVANS, JR./ JUSTMIKE MUSIC/ CHRISTIANAIRES GO
PAUL PORTER LUAP RETROP'S
MUSIC/PHARO'S
MUSIC/PHARIS
JR'S PUBL.
HOW EXCELLENT PA788332 1996 REV. WENDELL H. JUSTMIKE MUSIC/ WALT WHITMAN GO
LOWE LOWEBOYS MUSIC
HOW I GOT OVER PA856510 1997 CHRISTOPHER L. JUSTMIKE MUSIC/ NORTH CAROLINA MASS CHOIR GO
GRAY CHRIS GRAY MUSIC
I CALL ON JESUS PA853383 1997 JERAL GRAY/ JUSTMIKE MUSIC/ CHICAGO MASS CHOIR GO
PERCY GRAY SAVED CHILDREN'S
MUSIC
I COME TO PRAISE HIS NAME PA801044 1996 BRYANT L. JUSTMIKE MUSIC/ NU CITY MASS CHOIR GO
JONES, SR. NESOHC MUZIK
I FOUND JESUS PA853384 1997 WILLIAM R. JUSTMIKE MUSIC/ CHICAGO MASS CHOIR GO
HAMILTON WILHAM MUSIC
I JUST CAN'T GO ON PA836308 1997 PHARIS EVANS, JUSTMIKE MUSIC/ CHRISTIANAIRES GO
JR./PAUL PORTER LUAP RETROP'S
MUSIC/PHARO'S
MUSIC/PHARIS
JR'S PUBL.
I LOVE YOU PA759800 1995 CHRIS GRAY JUSTMIKE MUSIC/ NORTH CAROLINA MASS CHOIR GO
CHRIS GRAY MUSIC
I REALLY LOVE YOU PA762742 1995 CALVIN RHONE JUSTMIKE MUSIC/ CALVIN RHONE GO
CALVIN RHONE
PUBLISHING
I SAY YES PA722212 1994 CALVIN RHONE JUSTMIKE MUSIC/ CALVIN RHONE GO
CALVIN RHONE
PUBLISHING
I SHALL WEAR A CROWN (P.D. ARR) PA685643 1994 ALLEN/WIGGINS/ JUSTMIKE MUSIC/ ALLEN & ALLEN GO
TANKARD BRU-NITE/RUSSAX/
BENOTE
I SURRENDER ALL PA663342 1995 KURT CLAYTON JUSTMIKE MUSIC/ ANGELIC VOICES OF FAITH GO
IVORY DREAMS
MUSIC
I WANT TO BE MORE LIKE JESUS PA641847 1993 HARRIS/GRAY JUSTMIKE MUSIC/ CHICAGO MASS CHOIR GO
JAMES N. HARRIS
MUSIC
I WANT TO BE TOUCHED PAU1949616 1995 ALEX GOODWIN JUSTMIKE MUSIC/ ANGELIC VOICES OF FAITH GO
QUE PSI
PUBLISHING
I WANT TO KNOW LOVE PA722038 1993 ANTELIS/TAYLOR JUSTMIKE MUSIC/ S. ALAN TAYLOR CR
SILENTA/JOSTE/
S-MEISTER
I WILL TRUST IN THE LORD (P.D. ARR.) PA762745 1995 CALVIN RHONE JUSTMIKE MUSIC/ CALVIN RHONE GO
CALVIN RHONE
PUBLISHING
I WORSHIP PA856514 1997 CHRISTOPHER L. JUSTMIKE MUSIC/ NORTH CAROLINA MASS CHOIR GO
GRAY CHRIS GRAY MUSIC
IF YOU ONLY KNEW PA760583 1995 H DOOBIE POWELL JUSTMIKE MUSIC/ HUBERT POWELL GO
POWELL POWER
MUSIC
I'LL GO PA736431 1994 WILLIAMS/BALL JUSTMIKE/BEAU BEAU WILLIAMS GO
WILLIAMS PUB/
BROBALL PUB
I'LL GO PA836239 1997 RICHARD GIBBS/ JUSTMIKE MUSIC/ NAT'L BAPTIST MASS CHOIR GO
KEVIN YANCY GIBBSONG
I'LL GO (P.D. ARR) PA736431 1994 WILLIAMS/BALL JUSTMIKE MUSIC/ BEAU WILLIAMS GO
BEAU WILLIAMS
PUB
I'M A WINNER PA722211 1994 CALVIN RHONE JUSTMIKE MUSIC/ CALVIN RHONE GO
CALVIN RHONE
PUBLISHING
I'M GLAD I'M SAVED PA646633 1995 RALPH LOFTON JUSTMIKE MUSIC/ CHRISTIANAIRES GO
RAPHTON MUSIC
I'M GOING TO PRAISE THE LORD PA642699 1993 TYRONE PORTER JUSTMIKE MUSIC/ CHRISTIANAIRES & M. CLAYTON GO
PORTACALL MUSIC
I'M IN LOVE PA685647 1994 BRUCE ALLEN JUSTMIKE MUSIC/ ALLEN & ALLEN GO
BRU-NITE
I'M SO GRATEFUL PA730454 1994 BRYANT JONES SR JUSTMIKE MUSIC/ CHICAGO MASS CHOIR GO
NESOHC MUZIK
</TABLE>
<PAGE>
PLATINUM ENTERTAINMENT
SONG FILE
<TABLE>
<CAPTION>
TITLE C # YEAR COMPOSER PUBLISHER ARTIST CODE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
I'M WORKING FOR THE MASTER PA730455 1994 REV BILLY JONES JUSTMIKE MUSIC/ CHICAGO MASS CHOIR GO
NESOHC MUZIK
IN HIS HANDS PA836311 1997 PHARIS EVANS, JUSTMIKE MUSIC/ CHRISTIANAIRES GO
JR./PAUL PORTER LUAP RETROP'S
MUSIC/PHARO'S
MUSIC/PHARIS
JR'S PUBL.
IN OUR HEARTS PA642082 1994 JOHN MADGETT JUSTMIKE MUSIC/ JOHN MADGETT GO
MADGETT MUSIC
IN THIS PLACE PA722208 1994 CALVIN RHONE JUSTMIKE MUSIC/ CALVIN RHONE GO
CALVIN RHONE
PUBLISHING
IN YOUR PRESENCE PA762743 1995 CALVIN RHONE JUSTMIKE MUSIC/ CALVIN RHONE GO
CALVIN RHONE
PUBLISHING
INSTRUMENT OF PRAISE PA788328 1996 EDDIE HOWARD, JR. JUSTMIKE MUSIC/ WALT WHITMAN GO
EDDIE HOWARD
MUSIC
IT'S GOOD TO GIVE THANKS PA762740 1995 CALVIN RHONE JUSTMIKE MUSIC/ CALVIN RHONE GO
CALVIN RHONE
PUBLISHING
IT'S JUST NOT ENOUGH PA646490 1993 KELVIN LENNOX JUSTMIKE MUSIC/ DONALD MALLOY GO
OXLEN MUSIC
IT'S REAL (P.D. - ARR.) PAu2129130 1996 DAVID BROCK JUSTMIKE MUSIC/ CHICAGO MASS CHOIR GO
DAVID'S
COLLECTIONS
IT'S TIME FOR THE ANOINTING PA685617 1994 CHRIS GRAY JUSTMIKE MUSIC/ NORTH CAROLINA MASS CHOIR GO
CHRIS GRAY MUSIC
I'VE BEEN BORN AGAIN PA730457 1994 ERIC THOMAS JUSTMIKE MUSIC/ CHICAGO MASS CHOIR GO
ERIC THOMAS
PUBLISHING
I'VE BEEN CHANGED PA853385 1997 JOEY WOOLFALK JUSTMIKE MUSIC/ CHICAGO MASS CHOIR GO
FALKSTER MUSIC
JESUS IS CALLING PA646631 1995 TYRONE PORTER JUSTMIKE MUSIC/ CHRISTIANAIRES GO
PORTACALL MUSIC
JESUS IS THE ONE PA788336 1996 ANDERSON/DRAIN JUSTMIKE MUSIC/ KIM McFARLAND GO
LILL C.A.K.M.
ANDERSONG
JESUS IS WHY I AIN'T GOT THE BLUES PA642081 1994 JOHN MADGETT JUSTMIKE MUSIC/ JOHN MADGETT GO
MADGETT MUSIC
JESUS LOVES ME (P.D. ARR.) PA760584 1995 HUBERT POWELL JUSTMIKE MUSIC/ HUBERT POWELL GO
POWELL POWER
MUSIC
JESUS NEVER FAILS PA759803 1995 CHRIS GRAY JUSTMIKE MUSIC/ NORTH CAROLINA MASS CHOIR GO
CHRIS GRAY MUSIC
JESUS THAT'S MY KING (P.D.) PA788340 1996 KIM MCFARLAND JUSTMIKE MUSIC/ KIM MCFARLAND GO
LILL C.A.K.M.
ANDERSONG
JESUS WILL FIX IT PA685613 1994 CHRIS GRAY JUSTMIKE MUSIC/ NORTH CAROLINA MASS CHOIR GO
CHRIS GRAY MUSIC
JESUS WITH ME PA836307 1997 PHARIS EVANS, JR. JUSTMIKE MUSIC/ CHRISTIANAIRES GO
PHARO'S MUSIC/
PHARIS JR.'S
PUBL.
JESUS, HE'S MY WAY MAKER PA801046 1996 MICHAEL STOKES JUSTMIKE MUSIC/ NU CITY MASS CHOIR GO
MICHAEL D.
STOKES MUSIC
JOY WILL COME PA811765 1996 CALVIN B. RHONE JUSTMIKE MUSIC/ CALVIN BERNARD RHONE GO
CALVIN RHONE
PUBLISHING
JUST ANOTHER DAY PA722205 1994 CALVIN RHONE JUSTMIKE MUSIC/ CALVIN RHONE GO
CALVIN RHONE
PUBLISHING
JUST HOW GOOD HE'S BEEN PA730459 1994 BRENDA J MOORE JUSTMIKE MUSIC/ CHICAGO MASS CHOIR GO
BALUTIKS MUSIC
JUSTICE FOR ALL PA760555 1995 LARSON/KAUFLIN JUSTMIKE MUSIC/ GLAD CH
AUX SEND MUSIC
(SEE JOSTE)
KEEP LOVE ALIVE PA603014 1992 R GIBBS/T DYSON JUSTMIKE MUSIC/ ANGELIC VOICES OF FAITH GO
GIBBSONGS/LITTLE
TONY MUSIC
KEEP ON PRESSING PA726848 1994 ANDERSON/HUFF JUSTMIKE MUSIC/ KIM McFARLAND GO
SCA/LILL CA KM
ANDERSONG
KEEP PRESSIN' ON PA760585 1995 H DOOBIE POWELL JUSTMIKE MUSIC/ HUBERT POWELL GO
POWELL POWER
MUSIC
LAY IT TO REST PA784286 1996 ALLEN/WIGGINS JUSTMIKE MUSIC/ ALLEN & ALLEN GO
BRU-NITE MUSIC/
RUSSAX MUSIC
LEANING ON YOU PA811769 1996 CALVIN B. RHONE JUSTMIKE MUSIC/ CALVIN BERNARD RHONE GO
CALVIN RHONE
PUBLISHING
LET GOD DO IT PA788192 1996 BRENDA MOORE JUSTMIKE MUSIC/ CHICAGO MASS CHOIR GO
BALUTIK'S MUSIC
LET IT SHINE PA853386 1997 GREGORY BOOTH JUSTMIKE MUSIC/G CHICAGO MASS CHOIR GO
SHARP SCALES
LET'S DANCE PA784165 1996 WEATHERLY/ JUSTMIKE MUSIC/ STEVE KOLANDER CR
KOLANDER BALOO PUB/BRIGHT
LEAF MUSIC/
- ------------------------------ -------- ---- ------------------ CHARLIE MONK ----------------------- --
MUSIC
LET'S GO TO CHURCH PA836238 1997 C.L. FAIRCHILD JUSTMIKE MUSIC/ NAT'L BAPTIST MASS CHOIR GO
GREATER FAITH
MUSIC
LET'S MAGNIFY THE LORD PA685614 1994 CHRIS GRAY JUSTMIKE MUSIC/ NORTH CAROLINA MASS CHOIR GO
CHRIS GRAY MUSIC
LIFT THE SAVIOR UP PA788190 1996 TIDWELL/GRAY JUSTMIKE MUSIC/ CHICAGO MASS CHOIR GO
SAVED CHILDREN'S
MUSIC
LISTEN TO WHAT I HEAR PA748006 1994 ALLEN/WIGGINS JUSTMIKE MUSIC/ ALLEN & ALLEN GO
BRU-NITE/RUSSAX
LISTEN TO YOUR WOMAN PA722334 1994 KOLANDER/TREE JUSTMIKE/BALOO STEVE KOLANDER CR
MUSIC/EXTRA
MEASURE MUSIC
LORD HAVE MERCY PA836310 1997 T. PORTER/BROWN/ JUSTMIKE MUSIC/ CHRISTIANAIRES GO
CARTER/EVANS PORTACALL MUSIC/
RON'S ON PUBL./
GAC PUBL./PHARO'S
MUSIC/PHARIS
JR.'S PUBL.
LORD IS MY LIGHT, THE PA730453 1994 MICHAEL STOKES JUSTMIKE MUSIC/ CHICAGO MASS CHOIR GO
MICHAEL D STOKES
MUSIC
LORD MOST HIGH PA628903 1993 WOOLA LAFLORA JUSTMIKE MUSIC/ COMMITTED GO
IMANI PUBLISHING
LORD OF YOUR LIFE PA811771 1996 CALVIN B. RHONE JUSTMIKE MUSIC/ CALVIN BERNARD RHONE GO
CALVIN RHONE
PUBLISHING
LORD WE PRAISE YOU PA681987 1994 TIM BOWMAN JUSTMIKE MUSIC/ ESTHER SMITH GO
TIM BOWMAN PUB
LORD, I WANT TO BE HOLY PA760714 1995 DERRICK HORNE JUSTMIKE MUSIC/ DOUGLAS MILLER GO
BN READY MUSIC
LOVE CAN HEAL THE WORLD PA642078 1994 JOHN MADGETT JUSTMIKE MUSIC/ JOHN MADGETT GO
MADGETT MUSIC
MARIA PA722328 1994 KOLANDER/MURNANE JUSTMIKE MUSIC/ STEVE KOLANDER CR
MURKOLMAN MUSIC
MAYBE PA722327 1994 STEVE KOLANDER JUSTMIKE MUSIC/ STEVE KOLANDER CR
BALOO MUSIC
MEDLEY: CHRISTMAS SONGS (P.D. ARR) PA685649 1994 ALLEN/WIGGINS JUSTMIKE MUSIC/ ALLEN & ALLEN GO
BRU-NITE/RUSSAX
MEDLEY: CHRISTMAS SONGS (P.D. ARR) PA774233 1995 ALLEN/WIGGINS JUSTMIKE MUSIC/ ALLEN & ALLEN GO
BRU-NITE/RUSSAX
MERRY CHRISTMAS JESUS PA774230 1995 ALLEN/WIGGINS JUSTMIKE MUSIC/ ALLEN & ALLEN GO
BRU-NITE/RUSSAX
MORE THAN A CONQUEROR PA617388 1993 CLAYTON/RIVERS/ JUSTMIKE MUSIC/ ANGELIC VOICES OF FAITH GO
PEEPLES IVORY DREAMS/
RIVER OF PRAISE
MY HEART IS YOURS PA760582 1995 HUBERT POWELL JUSTMIKE MUSIC/ HUBERT POWELL GO
POWELL POWER
MUSIC
MY LOVE PA784162 1996 NEWMAN/KOLANDER JUSTMIKE MUSIC/ STEVE KOLANDER CR
BALOO PUB/MONK
FAMILY PUB.
MY PEACE PA722183 1994 HUFF/BRUNSON JUSTMIKE MUSIC/ KIM McFARLAND GO
SCA/DECHE'
MY STRENGTH PA760713 1995 ED TUCKER JUSTMIKE MUSIC/ DOUGLAS MILLER GO
COEE MUSIC
NEAR THE CROSS (P.D. ARR.) PA748001 1994 ALLEN/WIGGINS JUSTMIKE MUSIC/ ALLEN & ALLEN GO
BRU-NITE/RUSSAX
NEVER ALONE PA801050 1996 JACKY JOSEPH JUSTMIKE MUSIC/ NU CITY MASS CHOIR GO
JUST JACK MUSIC
NEVER ALONE PA836242 1997 CHRIS ANDERSON JUSTMIKE MUSIC/ NAT'L BAPTIST MASS CHOIR GO
KMCA ANDERSONG
</TABLE>
<PAGE>
PLATINUM ENTERTAINMENT
SONG FILE
<TABLE>
<CAPTION>
TITLE C # YEAR COMPOSER PUBLISHER ARTIST CODE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NEVER SAY GOOD-BYE PA815463 1996 M. COTTRELL/ JUSTMIKE MUSIC/ TOTALLY COMMITTED GO
G. COLLIER COTTRELL/COLLIER
NEW NAME PA788186 1996 MARLOWE CRIBBS JUSTMIKE MUSIC/ CHICAGO MASS CHOIR GO
SAVED CHILDREN'S
MUSIC
NEXT STAGE PA815462 1996 M. COTTRELL/ JUSTMIKE MUSIC/ TOTALLY COMMITTED GO
G. COLLIER COTTRELL/COLLIER
NIGHT AFTER NIGHT PA722325 1994 STEVE KOLANDER JUSTMIKE MUSIC/ STEVE KOLANDER CR
BALOO MUSIC
NOBODY LIKE JESUS PA853387 1997 MARLOWE CRIBBS JUSTMIKE MUSIC/ CHICAGO MASS CHOIR GO
SAVED CHILDREN'S
MUSIC
NOBODY'S GONNA KNOCK MY SOX OFF PA725217 1994 STEVE DAHL JUSTMIKE MUSIC/ STEVE DAHL AC
BLOWHOLE
NO, NOT ONE (P.D. ARR) PA685641 1994 ALLEN/WIGGINS/ JUSTMIKE MUSIC/ ALLEN & ALLEN GO
TANKARD BRU-NITE/RUSSAX/
BENOTE
NO, NOT ONE (P.D. ARR) PA856516 1997 CHRISTOPHER L. JUSTMIKE MUSIC/ NORTH CAROLINA MASS CHOIR GO
GRAY CHRIS GRAY MUSIC
NOT FOR HIMSELF PA836240 1997 CHEYNEE MCCREE JUSTMIKE MUSIC/ NAT'L BAPTIST MASS CHOIR GO
MCCREE PUBL. CO
O CHRISTMAS TREE (P.D. ARR.) PA774236 1995 ALLEN/WIGGINS JUSTMIKE MUSIC/ ALLEN & ALLEN GO
BRU-NITE/RUSSAX
O CHRISTMAS TREE (RAP VERSION) PA774232 1995 ALLEN/WIGGINS JUSTMIKE MUSIC/ ALLEN & ALLEN GO
BRU-NITE/RUSSAX
OH HOW I LOVE JESUS PA801053 1996 BRYANT L. JUSTMIKE MUSIC/ NU CITY MASS CHOIR GO
JONES, SR. NESOHC MUZIK
ON MY SIDE PAU2109948 CALVIN B. RHONE JUSTMIKE MUSIC/ GO
CALVIN RHONE
PUBLISHING
ONE WAY TICKET PA768042 1995 REEVES/GRUBBS JIMMY GRUBBS MUSIC RONNA REEVES CR
ORDINARY PRAYER P811767 1996 CALVIN B. RHONE JUSTMIKE MUSIC/ CALVIN BERNARD RHONE GO
CALVIN RHONE
PUBLISHING
PATH, THE PA815457 1996 M. COTTRELL/ JUSTMIKE MUSIC/ TOTALLY COMMITTED GO
G. COLLIER COTTRELL/COLLIER
PEACE OF MIND PA663344 1995 KURT CLAYTON JUSTMIKE MUSIC/ ANGELIC VOICES OF FAITH GO
IVORY DREAMS
MUSIC
PERFECT PEACE PA685615 1994 CHRIS GRAY JUSTMIKE MUSIC/ NORTH CAROLINA MASS CHOIR GO
CHRIS GRAY MUSIC
PICKED ME UP PA784293 1996 LATTIMORE/ JUSTMIKE MUSIC/ ALLEN & ALLEN GO
COLLINS, JR./ BRU-NITE MUSIC/
ALLEN/WIGGINS RUSSAX MUSIC/
NU-RO PUBL.
PIECES OF A PUZZLE PA784159 1996 TORROLL/KOLANDER JUSTMIKE MUSIC/ STEVE KOLANDER CR
BALOO PUBLISHING/
DANNY TORROLL
POWER PA736428 1994 BEAU WILLIAMS JUSTMIKE MUSIC/ BEAU WILLIAMS GO
BEAU WILLIAMS
PUB
POWER OF THE HOLY GHOST PA736400 1994 PHILIP WILLIAMS JUSTMIKE MUSIC/ DONALD MALLOY GO
CARCAN MUSIC
PRAISE THE LORD PA856519 1997 CHRISTOPHER L. JUSTMIKE MUSIC/ NORTH CAROLINA MASS CHOIR GO
GRAY CHRIS GRAY MUSIC
PRAY ON IT PA642703 1993 GERRY STINSON JUSTMIKE MUSIC/ CHRISTIANAIRES GO
GETEL MUSIC
RADIO ANGELS PA642706 1993 PAUL PORTER JUSTMIKE MUSIC/ CHRISTIANAIRES GO
LUAP RETROP'S
MUSIC
RAISE ME, SAVE ME, FILL ME PA736426 1994 BEAU WILLIAMS JUSTMIKE MUSIC/ BEAU WILLIAMS GO
BEAU WILLIAMS
PUB
RESTORE PA853388 1997 MARVIN WOOTEN JUSTMIKE MUSIC/ CHICAGO MASS CHOIR GO
SAVED CHILDREN'S
MUSIC
RIGHT HERE PA748005 1994 BRUCE ALLEN JUSTMIKE MUSIC/ ALLEN & ALLEN GO
BRU-NITE/RUSSAX
RIVER ROAD PA722039 1993 ANTELIS/TAYLOR JUSTMIKE MUSIC/ S. ALAN TAYLOR CR
SILENTA/JOSTE/
S-MEISTER
ROMEO PA784166 1996 STEVE KOLANDER JUSTMIKE MUSIC/ STEVE KOLANDER CR
BALOO MUSIC
ROUND 'BOUT MIDNIGHT PA784164 1996 CANNON/KOLANDER JUSTMIKE MUSIC/ STEVE KOLANDER CR
BALOO PUB/WARNER-
TAMERLANE/
- ------------------------------ -------- ---- ------------------ MADISON CREEK ----------------------- --
MUSIC
SATISFIED WITH JESUS PA759801 1995 CHRIS GRAY JUSTMIKE MUSIC/ NORTH CAROLINA MASS CHOIR GO
CHRIS GRAY MUSIC
SCOOT OVER, MOVE CLOSER PA722330 1994 STEVE KOLANDER JUSTMIKE MUSIC/ STEVE KOLANDER CR
BALOO MUSIC
SCOOT OVER, MOVE SAME???? 1996 STEVE KOLANDER JUSTMIKE MUSIC/ STEVE KOLANDER CR
CLOSER????????????????????? BALOO PUBLISHING
SEE HIS FACE PA759804 1995 CHRIS GRAY JUSTMIKE MUSIC/ NORTH CAROLINA MASS CHOIR GO
CHRIS GRAY MUSIC
SEND IT ON DOWN PA663349 1995 MICHAEL DODSON JUSTMIKE MUSIC/ ANGELIC VOICES OF FAITH GO
OTIS STAR
PUBLISHING
SEND ME, I'LL GO PA736397 1994 ROBERT GULLETTE JUSTMIKE MUSIC/ DONALD MALLOY GO
ROBGU MUSIC
SHE'S GOT A WAY PA722044 1994 ANTELIS/TAYLOR JUSTMIKE MUSIC/ S. ALAN TAYLOR CR
SILENTA/JOSTE/
S-MEISTER
SHE'S SO BAD PA722333 1994 STEVE KOLANDER JUSTMIKE MUSIC/ STEVE KOLANDER CR
BALOO MUSIC
SILENT NIGHT (P.D. ARR.) PA774234 1995 ALLEN/WIGGINS JUSTMIKE MUSIC/ ALLEN & ALLEN GO
BRU-NITE/RUSSAX
SIMPLY AMAZING PA736429 1994 BEAU WILLIAMS JUSTMIKE MUSIC/ BEAU WILLIAMS GO
BEAU WILLIAMS PUB
SO MUCH HE'S DONE PA663345 1995 BILLY RIVERS JUSTMIKE MUSIC/ ANGELIC VOICES OF FAITH GO
RIVER OF PRAISE
MUSIC
SOMEDAY PA788194 1996 GREGORY BOOTH JUSTMIKE MUSIC/G CHICAGO MASS CHOIR GO
SHARP SCALES
SOMETHING WORTH KEEPING PA722042 1993 ANTELIS/TAYLOR JUSTMIKE MUSIC/ S. ALAN TAYLOR CR
SILENTA/JOSTE/
S-MEISTER
SOON AND VERY SOON PA722078 1994 PEARSON/PEARSON JUSTMIKE MUSIC/ GREATER EMMANUEL GO
GREGGIE G'S
MUSIC
STARS IN THE UNIVERSE PA784269 1996 BOB KAUFLIN JUSTMIKE MUSIC/ GLAD CH
AUX SEND MUSIC
STILL CRAZY 'BOUT YOU PA784158 1996 JIM WEATHERLY/ JUSTMIKE MUSIC/ STEVE KOLANDER CR
STEVE KOLANDER BALOO PUBLISHING/
BRIGHT LEAF
- ------------------------------ -------- ---- ------------------ MUSIC/CHARLIE ----------------------- CR
MONK MUSIC
SWEEPSTAKES PA646635 1995 PAUL PORTER JUSTMIKE MUSIC/ CHRISTIANAIRES GO
LUAP RETROP'S
MUSIC
SWEET BY & BY (P.D. ARR.) PA762749 1995 CALVIN RHONE JUSTMIKE MUSIC/ CALVIN RHONE GO
CALVIN RHONE
PUBLISHING
SWEET HOLY SPIRIT PA759802 1995 CHRIS GRAY JUSTMIKE MUSIC/ NORTH CAROLINA MASS CHOIR GO
CHRIS GRAY MUSIC
TAKE ME BACK PA681986 1994 TIM BOWMAN JUSTMIKE MUSIC/ ESTHER SMITH GO
TIM BOWMAN PUB
TAKE ME TO THE WATER (P.D. ARR.) PA762744 1995 CALVIN RHONE JUSTMIKE MUSIC/ CALVIN RHONE GO
CALVIN RHONE
PUBLISHING
TAKE OVER LORD PA853389 1997 TONY TIDWELL JUSTMIKE MUSIC/ CHICAGO MASS CHOIR GO
SAVED CHILDREN'S
MUSIC
TAKEN FOR GRANTED PA722332 1994 STEVE KOLANDER JUSTMIKE MUSIC/ STEVE KOLANDER GO
BALOO MUSIC
TEARS OF JOY PA784288 1996 ALLEN/WIGGINS JUSTMIKE MUSIC/ ALLEN & ALLEN GO
BRU-NITE MUSIC/
RUSSAX MUSIC
TELL IT! PA811773 1996 CALVIN B. RHONE JUSTMIKE MUSIC/ CALVIN BERNARD RHONE GO
CALVIN RHONE
PUBLISHING
TELL IT OVER PA853390 1997 BRENDA JOYCE MOORE JUSTMIKE MUSIC/ CHICAGO MASS CHOIR GO
BALUTIK'S MUSIC
</TABLE>
<PAGE>
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SONG FILE
<TABLE>
<CAPTION>
TITLE C # YEAR COMPOSER PUBLISHER ARTIST CODE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
THANK GOD FOR SAVING ME PA663348 1995 BILLY RIVERS JUSTMIKE MUSIC/ ANGELIC VOICES OF FAITH GO
RIVER OF PRAISE
MUSIC
THEN CAME YOU PA663346 1995 KURT CLAYTON JUSTMIKE MUSIC/ ANGELIC VOICES OF FAITH GO
IVORY DREAMS
MUSIC
THERE IS NO ONE LIKE YOU PA722203 1994 CALVIN RHONE JUSTMIKE MUSIC/ CALVIN RHONE GO
CALVIN RHONE
PUBLISHING
THERE'S A WORD FOR THAT PA722040 1994 ANTELIS/TAYLOR JUSTMIKE MUSIC/ S. ALAN TAYLOR CR
SILENTA/JOSTE/
S-MEISTER
THREE KINGS (WE) (P.D. ARR.) PA748002 1994 ALLEN/WIGGINS JUSTMIKE MUSIC/ ALLEN & ALLEN GO
BRU-NITE/RUSSAX
TROUBLE IN MY WAY (P.D. ARR) PA685642 1994 ALLEN/WIGGINS JUSTMIKE MUSIC/ ALLEN & ALLEN GO
BRU-NITE/RUSSAX
TURN IT OVER PA722204 1994 CALVIN RHONE JUSTMIKE MUSIC/ CALVIN RHONE GO
CALVIN RHONE
PUBLISHING
UNCLOUDED DAY (P.D.) PA811766 1996 arr. CALVIN B. JUSTMIKE MUSIC/ CALVIN BERNARD RHONE GO
RHONE CALVIN RHONE
PUBLISHING
UNTIL I FOUND THE LORD PA646630 1995 TYRONE PORTER JUSTMIKE MUSIC/ CHRISTIANAIRES GO
PORTACALL MUSIC
WALK WITH ME LORD PA759809 1995 CHRIS GRAY JUSTMIKE MUSIC/ NORTH CAROLINA MASS CHOIR GO
CHRIS GRAY MUSIC
WALK WITH ME LORD (P.D. ARR) PA685644 1994 ALLEN/WIGGINS/ JUSTMIKE MUSIC/ ALLEN & ALLEN GO
STEVENSON BRU-NITE/RUSSAX/
SAME NAME
WE BOW TO WORSHIP THEE PA762741 1995 CALVIN RHONE JUSTMIKE MUSIC/ CALVIN RHONE GO
CALVIN RHONE
PUBLISHING
WE COME TO PRAISE PA736430 1994 BEAU WILLIAMS JUSTMIKE MUSIC/ BEAU WILLIAMS GO
BEAU WILLIAMS
PUB
WE NEED A MIRACLE PA759805 1995 CHRIS GRAY JUSTMIKE MUSIC/ NORTH CAROLINA MASS CHOIR GO
CHRIS GRAY MUSIC
WE NEED JESUS PA646632 1995 BROWN/BROWN JUSTMIKE MUSIC/ CHRISTIANAIRES GO
RON ON
PUBLISHING
WE SHOULD'VE JUST STAYED FRIENDS PA784161 1996 HANK COCHRAN/ JUSTMIKE MUSIC/ STEVE KOLANDER CR
BUDDY CANNON/ BALOO PUB/
STEVE KOLANDER CO-HEART MUSIC/
- ------------------------------ -------- ---- WARNER-TAMERLANE -----------------------
PUB/MADISON
CREEK MUSIC
WE WORSHIP YOU PA853391 1997 TIMOTHY BYRON JUSTMIKE MUSIC/ CHICAGO MASS CHOIR GO
MCGHEE GLORY CLOUD
MUSIC
WHAT A FRIEND PA856517 1997 CHRISTOPHER L. JUSTMIKE MUSIC/ NORTH CAROLINA MASS CHOIR GO
GRAY CHRIS GRAY MUSIC
WHAT CAN I GIVE PA681984 1994 ADAM WHITE III JUSTMIKE MUSIC/ ESTHER SMITH GO
TIM BOWMAN PUB
WHATEVER YOU NEED PA788330 1996 EDDIE HOWARD, JR. JUSTMIKE MUSIC/ WALT WHITMAN GO
EDDIE HOWARD
MUSIC
WHO IS THIS JESUS (P.D. ARR.) PA836243 1997 ARR: C.L. JUSTMIKE MUSIC/ NAT'L BAPTIST MASS CHOIR GO
FAIRCHILD GREATER FAITH
MUSIC
WINTER LOVE PA736306 1994 CARUSO/BRADLEY JUSTMIKE MUSIC/ COLBY/CARUSO AC
RADIANCE PUBLING
WOMAN IN BLACK PA722041 1993 ANTELIS/TAYLOR JUSTMIKE MUSIC/ S. ALAN TAYLOR CR
SILENTA/JOSTE/
S-MEISTER
WONDERFUL GOD PA853392 1997 NELSON B. JUSTMIKE MUSIC/ CHICAGO MASS CHOIR GO
SMITH II SAVED CHILDREN'S
MUSIC
WORK DONE, CAUGHT UP AND FREE PA815456 1996 M. COTTRELL/ JUSTMIKE MUSIC/ TOTALLY COMMITTED GO
G. COLLIER COTTRELL/COLLIER
WORK IN ME JESUS PA788341 1996 CALVIN B. RHONE JUSTMIKE MUSIC/ KIM McFARLAND GO
CALVIN RHONE
PUBLISHING
WORK THAT THANG OUT PA836244 1997 TERRY GARMON JUSTMIKE MUSIC/ NAT'L BAPTIST MASS CHOIR GO
PECULIAR PEOPLES
MINISTRIES PUBL.
WORSHIP THE LORD PA788189 1996 REV. TIMOTHY B. JUSTMIKE MUSIC/ CHICAGO MASS CHOIR GO
McGHEE WORSHIP SONG
MUSIC
WORTHY OF THE PRAISE PA801048 1996 ERIC THOMAS JUSTMIKE MUSIC/ NU CITY MASS CHOIR GO
ERIC THOMAS
PUBLISHING
WOUNDED FOR ME (P.D. ARR) PA685648 1994 ALLEN/WIGGINS JUSTMIKE MUSIC/ ALLEN & ALLEN GO
BRU-NITE/RUSSAX
WRAPPED UP PA836306 1997 PAUL PORTER JUSTMIKE MUSIC/ CHRISTIANAIRES GO
LUAP RETROP'S
MUSIC
WRITTEN BY TIME PAU2109947 CALVIN B. RHONE JUSTMIKE MUSIC/ GO
CALVIN RHONE
PUBLISHING
YESTERDAY, TODAY, FOREVER PA762748 1995 CALVIN RHONE JUSTMIKE MUSIC/ CALVIN RHONE GO
CALVIN RHONE
PUBLISHING
YIELD YOURSELF PA726847 1994 STEPHEN HUFF JUSTMIKE MUSIC/ KIM McFARLAND GO
SCA MUSIC
YOU ARE MY SONG PA642084 1994 JOHN MADGETT JUSTMIKE MUSIC/ JOHN MADGETT GO
MADGETT MUSIC
YOU CAN GO HOME PA642077 1994 J MADGETT/B MASON JUSTMIKE MUSIC/ JOHN MADGETT GO
MADGETT MUSIC/
MAY SUN MUSIC
YOU CAN MAKE IT PA642083 1994 J MADGETT/J ROGERS JUSTMIKE MUSIC/ JOHN MADGETT GO
MADGETT MUSIC/
B ROGERS PUB
YOU DON'T KNOW WHAT THE LORD HAS PA784291 1996 arr. ALLEN/ JUSTMIKE MUSIC/ ALLEN & ALLEN GO
DONE FOR WIGGINS BRU-NITE MUSIC/
RUSSAX MUSIC
YOU LOVE ME PA853393 1997 JERAL GRAY/ JUSTMIKE MUSIC/ CHICAGO MASS CHOIR GO
PERCY GRAY SAVED CHILDREN'S
MUSIC
YOU MADE IT RIGHT PA784292 1996 ALLEN/WIGGINS/ JUSTMIKE MUSIC/ ALLEN & ALLEN GO
HENDERSON BRU-NITE MUSIC/
RUSSAX MUSIC
YOUR AMAZING GRACE PA642079 1994 J MADGETT/ JUSTMIKE MUSIC/ JOHN MADGETT GO
J ROGERS MADGETT MUSIC/B
ROGERS PUB
YOUR LOVE PA815455 1996 M. COTTRELL/ JUSTMIKE MUSIC/ TOTALLY COMMITTED GO
G. COLLIER COTTRELL/COLLIER
YOUR LOVE COMES SHINING THROUGH PA811774 1996 CALVIN B. RHONE JUSTMIKE MUSIC/ CALVIN BERNARD RHONE GO
CALVIN RHONE
PUBLISHING
YOU'RE MY EVERYTHING PA730458 1994 BRENDA MOORE JUSTMIKE MUSIC/ CHICAGO MASS CHOIR GO
BALUTIK'S MUSIC
YOU'RE WITH ME PA762747 1995 CALVIN RHONE JUSTMIKE MUSIC/ CALVIN RHONE GO
CALVIN RHONE
PUBLISHING
YULETIDE PRELUDE PA774238 1995 ALLEN/WIGGINS JUSTMIKE MUSIC/ ALLEN & ALLEN GO
BRU-NITE/RUSSAX
DETHOM PUBLISHING (SESAC)
Owned
BLUE SKIES PA812695 1994 DANN GUNN DETHOM PUBLISHING VELOCIPEDE CH
DON'T GIVE UP, HOLD ON PAU1721315 1993 GLOSTER DETHOM PUBLISHING NOT RECORDED GO
WILLIAMS
DON'T YOU LOSE IT PA812696 1994 DANN GUNN DETHOM PUBLISHING VELOCIPEDE CH
HE'S ABLE PA767555 1995 EDWARD TATE DETHOM PUBLISHING LOS ANGELES MASS CHOIR GO
HE'S GOT HIS EYES ON YOU (P.D. ARR) PA604807 1993 GLOSTER DETHOM PUBLISHING JESSY DIXON GO
WILLIAMS
HIS EYE IS ON THE SPARROW (P.D. ARR) PA603011 1993 GLOSTER DETHOM PUBLISHING HEAVEN SENT GO
WILLIAMS
I CATCH MYSELF/I LET IT GO PA812693 1994 DANN GUNN DETHOM PUBLISHING VELOCIPEDE CH
</TABLE>
<PAGE>
PLATINUM ENTERTAINMENT
SONG FILE
<TABLE>
<CAPTION>
TITLE C # YEAR COMPOSER PUBLISHER ARTIST CODE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
I'LL DO YOUR WILL PA646493 1993 GLOSTER DETHOM PUBLISHING DONALD MALLOY GO
WILLIAMS
JESUS IS JUST ALRIGHT WITH ME (P.D. ARR) PA641458 1993 GLOSTER DETHOM PUBLISHING ESTHER SMITH (JC VOL 2) GO
WILLIAMS
JUST LIKE YOU PA812689 1994 DANN GUNN DETHOM PUBLISHING VELOCIPEDE CH
KEEP ON BLESSING ME PA570170 1992 GLOSTER DETHOM PUBLISHING EVELYN TURRENTINE-AGEE GO
WILLIAMS
LOST WORLD, THE PA812694 1994 DANN GUNN DETHOM PUBLISHING VELOCIPEDE CH
MAKE YOUR MIND UP PA640082 1993 GLOSTER DETHOM PUBLISHING DOUGLAS MILLER GO
WILLIAMS
NEVER, NEVER, NEVER PA812687 1994 DANN GUNN DETHOM PUBLISHING VELOCIPEDE CH
OLD TIME RELIGION (P.D. ARR) PA598214 1993 GLOSTER DETHOM PUBLISHING COMMITTED (JC VOL 2) GO
WILLIAMS
ONE MORE TIME PA812690 1994 DANN GUNN DETHOM PUBLISHING VELOCIPEDE CH
SANE PA812688 1994 DANN GUNN DETHOM PUBLISHING VELOCIPEDE CH
THIS MATCHLESS LOVE PA669956 1993 THEODORE DETHOM PUBLISHING EVELYN TURRENTINE-AGEE GO
MATLOCK
THIS WAY PA812692 1994 DANN GUNN DETHOM PUBLISHING VELOCIPEDE CH
WHITER THAN SNOW (P.D. ARR) PA641457 1993 GLOSTER DETHOM PUBLISHING COMMITTED GO
WILLIAMS
WHY NOT NOW PA812691 1994 DANN GUNN DETHOM PUBLISHING VELOCIPEDE CH
Co-Owned
GOD'S GONNA MAKE IT ALRIGHT PA736396 1994 DONNIE HARPER DETHOM/MY DONALD MALLOY GO
AFTER AWHILE DITTY MUSIC
HE'S EVERYTHING I NEED PA722181 1994 CARNELL DETHOM/CARMAC KIM McFARLAND GO
MURRELL MUSIC
HIS NAME SHALL ENDURE FOREVER PA736392 1994 DONNIE HARPER DETHOM/MY DONALD MALLOY GO
AFTER AWHILE DITTY MUSIC
JOY COMETH IN THE MORNING PA760716 1995 ROBERT BAXTER DETHOM/DOMIL DOUGLAS MILLER GO
LORD, HAVE YOUR WAY PA640080 1993 ROBERT BAXTER DETHOM/DOMIL DOUGLAS MILLER GO
NIGERIAN CHANT (HOLY SPIRIT) PA736398 1994 DONNIE HARPER DETHOM/MY DONALD MALLOY GO
AFTER AWHILE DITTY MUSIC
THAT'S JUST LIKE JESUS PA760715 1995 DOUGLAS MILLER DETHOM/DOMIL DOUGLAS MILLER GO
USE ME LORD PA674812 1993 HENDERSON DETHOM/SILENT COMMITTED GO
WILLIAMS SPRING MUSIC
LEXICON MUSIC
Owned
THINK ON THESE THINGS PA583745 1992 TONY WILKINS LEXICON MUSIC LOS ANGELES MASS CHOIR GO
Co-Owned
A LIFE THAT SHOWS (50%) PA466810 1990 FRED HAMMOND LEXICON/PARAGON COMMISSIONED GO
A PRAISE FOR YOU (50%) PA445245 1989 HAMMOND/BROOKS LEXICON/PARAGON COMMISSIONED GO
A PRAYER FOR LOVE PA508877 1991 GENE VIALE LEXICON/B FLAT GENE VIALE GO
MUSIC
AT THE CROSS (GC PD ARR) (50%) PA375298 1988 LAYTHAN ARMOR LEXICON/MORAL VOICES OF LIGHT GO
BACK IN THE SADDLE (50%) PA466806 1990 MICHAEL BROOKS LEXICON/PARAGON COMMISSIONED GO
BACK TO THE CROSS PA466806 1991 WILLIAMS BROTHERS LEXICON/MELENDO MELVIN WILLIAMS GO
BE ENCOURAGED PA583751 1992 MONTOUTE/ARMOR/ LEXICON/SHAWN RAI LOS ANGELES MASS CHOIR GO
TAYLOR ETC
CAN'T HOLD BACK, I (50%) PA451683 1989 ARMOR/TAYLOR LEXICON/MORAL LOS ANGELES MASS CHOIR GO
COME AS YOU ARE (33.3%) PA583746 1992 ARMOR/BLACK/TAYLOR LEXICON/SHAWN RAI LOS ANGELES MASS CHOIR GO
ETC
COME TO ME (50%) PA462368 1990 ARMOR/FUTREL LEXICON/MORAL FUTREL GO
CRY NO MORE (25%) PA543323 1991 STEWART/JONES LEXICON/STEWART/ PARKES STEWART GO
PARAGON
DANCE WITH ALL OUR MIGHT PA572407 1992 HOWARD/GOSSETT LEXICON/SONG OF PATTIE HOWARD GO
TRIUMPH
DON'T WORRY PA445248 1989 STEWART/BRICE LEXICON/BRICE/ COMMISSIONED GO
STEWART
EVERY KNEE SHALL BOW PA583749 1992 WILKINS/TAYLOR LEXICON/SHAWN RAI LOS ANGELES MASS CHOIR GO
ETC
FEAR NO EVIL PA518703 1991 WILLIAMS BROTHERS LEXICON/DALF MELVIN WILLIAMS GO
GIVE HIM THE GLORY (50%) PA399048 1988 TONY WILKINS LEXICON/MORAL LOS ANGELES MASS CHOIR GO
GLAD I MET YOU PA518705 1991 WILLIAMS BROTHERS LEXICON/LEVARN MELVIN WILLIAMS GO
GOD HAS PROMISED PA567408 1992 TYRONE DICKERSON LEXICON/SECRET PUB CHICAGO MASS CHOIR GO
GOODNESS AND MERCY (50%) PA419476 1989 WILKENS/TAYLOR LEXICON/MORAL LOS ANGELES MASS CHOIR GO
MUSIC
GRACE (50%) PA399049 1988 TONY WILKINS LEXICON/MORAL LOS ANGELES MASS CHOIR GO
MUSIC
GREAT HEALER PA472409 1992 HOWARD/GOSSETT LEXICON/SONGS OF PATTIE HOWARD GO
TRIUMPH
HE THAT BELIEVETH (P.D. ARR.) PA598752 1992 JAMES CHAMBERS/ LEXICON/BLACK & CHICAGO MASS CHOIR GO
MARK TAYLOR WHITE MUSIC
HEART OF MINE (50%) PA466809 1990 FRED HAMMOND LEXICON/PARAGON COMMISSIONED GO
MUSIC
HE'LL BE THERE PA583743 1992 DONALD TAYLOR LEXICON/SHAWN RAI LOS ANGELES MASS CHOIR GO
ETC
HE'LL MAKE A CHANGE (50%) PA473730 1990 WILKINS/TAYLOR LEXICON/MORAL LOS ANGELES MASS CHOIR GO
</TABLE>
<PAGE>
PLATINUM ENTERTAINMENT
SONG FILE
<TABLE>
<CAPTION>
TITLE C # YEAR COMPOSER PUBLISHER ARTIST CODE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
HERE I AM (MORE THAN A CONQUERER) (50%) PA466814 1990 MICHAEL BROOKS LEXICON/PARAGON COMMISSIONED GO
HOLD ON UNTIL YOU BLESS ME PA518650 1990 COLEY/SMITH LEXICON/COLEY'S DARYL COLEY GO
PEN
HOSANNA (33.3%) PA583747 1992 MONTOUTE/TAYLOR/ LEXICON/SHAWN RAI LOS ANGELES MASS CHOIR GO
ARMOR ETC
HOW CAN WE SING (IN A STRANGE LAND) (50%)PA370976 1988 MICHAEL BROOKS LEXICON/PARAGON COMMISSIONED GO
I CAN'T IMAGINE (25%) PA543322 1991 STEWART/JONES LEXICON/STEWART/ PARKES STEWART GO
PARAGON
I DIED FOR YOU (37.5%) PA462370 1990 ARMOR/BATES LEXICON/MORAL/ FUTREL GO
PAPER BOY
I FEEL BETTER NOW PA518700 1991 WILLIAMS BROTHERS LEXICON/LEVARN/ MELVIN WILLIAMS GO
PERCY'S TWINS
I MUST TELL JESUS (50%) PA419477 1989 WILKENS/TAYLOR LEXICON/MORAL LOS ANGELES MASS CHOIR GO
MUSIC
IF MY PEOPLE (50%) PA466808 1990 MICHAEL BROOKS LEXICON/PARAGON COMMISSIONED GO
I'LL REACH, I'LL TELL PA572412 1992 REBA RAMBO LEXICON/NEW PATTIE HOWARD GO
KINGDOM MUSIC
I'M GONNA LET MY LOVE FLOW (50%) PA370977 1988 MICHAEL BROOKS LEXICON/PARAGON COMMISSIONED GO
IT WAS YOU PA466813 1991 KARL REID LEXICON/KARL REID COMMISSIONED GO
MUSIC
I'VE GOT THE VICTORY PA462364 1990 DARLENE FUTREL LEXICON/MORAL FUTREL GO
JESUS CARES (50%) PA370988 1988 MICHAEL BROOKS LEXICON/PARAGON COMMISSIONED GO
JESUS CHRIST SACRIFICED PA583744 1992 LANIAR/TAYLOR LEXICON/SHAWN RAI LOS ANGELES MASS CHOIR GO
ETC
JESUS IS THE REAL THING PA518649 1990 DARYL COLEY LEXICON/COLEY'S DARYL COLEY GO
PEN
JESUS LOVES ME (GC P.D. ARR) (50%) PA375300 1988 LAYTHAN ARMOR LEXICON/MORAL VOICES OF LIGHT GO
JESUS NEVER FAILS (50%) PA451684 1989 ARMOR/TAYLOR LEXICON/MORAL LOS ANGELES MASS CHOIR GO
JESUS, PRECIOUS KING (GC PD) (50%) PA375287 1988 LAYTHAN ARMOR LEXICON/MORAL VOICES OF LIGHT GO
JUST A CLOSER WALK WITH THEE (PD) (50%) PA373164 1988 LAYTHAN ARMOR LEXICON/MORAL VOICES OF LIGHT GO
LEANING ON THE EVERLASTING ARMS PA375295 1988 LAYTHAN ARMOR LEXICON/MORAL VOICES OF LIGHT GO
(PD) (50%)
LET MY LOVE FLOW (50%) PA370977 1988 MICHAEL BROOKS LEXICON/PARAGON COMMISSIONED GO
LET US BREAK BREAD TOGETHER (PD) (50%) PA375306 1988 LAYTHAN ARMOR LEXICON/MORAL VOICES OF LIGHT GO
LET'S NOT CRUCIFY HIM AGAIN (50%) PA445242 1989 MICHAEL BROOKS LEXICON/PARAGON COMMISSIONED GO
LORD JESUS HELP ME (HELP SOMEBODY) PA445241 1989 MITCHELL JONES LEXICON/CARLENE COMMISSIONED GO
JONES
LOVE IS JUST WHAT WE NEED PA508878 1991 RICH LITTLEJOHN LEXICON/B-FLAT GENE VIALE GO
MUSIC
LOVE LIFTED ME (50%) PA448938 1989 TONY WILKINS LEXICON/MORAL COMMISSIONED GO
LOVE ME RIGHT (25%) PA543321 1991 STEWART/JONES LEXICON/STEWART/ PARKES STEWART GO
PARAGON
MAKE A WAY (50%) PA451682 1989 JEFF RICHARDSON LEXICON/MORAL LOS ANGELES MASS CHOIR GO
MORE LIKE JESUS PA518648 1990 COLEY/ALLEN LEXICON/COLEY'S DARYL COLEY GO
PEN
MORE THAN YOU'LL EVER KNOW (50%) PA445243 1989 MICHAEL BROOKS LEXICON/PARAGON COMMISSIONED GO
MOVE RIGHT NOW (50%) PA399046 1988 TONY WILKINS LEXICON/MORAL LOS ANGELES MASS CHOIR GO
NEAR THE CROSS (PD) (50%) PA375296 1988 LAYTHAN ARMOR LEXICON/MORAL LOS ANGELES MASS CHOIR GO
NEVER (25%) PA462367 1990 ARMOR/KASHA/HIRSH LEXICON/MORAL/ FUTREL GO
SISC/FIRE
NO MORE LONELINESS PA466811 1990 JONES/STEWART LEXICON/JONES/ COMMISSIONED GO
STEWART
OH GIVE THANKS PA598748 1992 LAVELLE LACEY LEXICON/B-FLAT CHICAGO MASS CHOIR GO
MUSIC
OH HOW I NEED YOU PA518706 1991 WILLIAMS BROTHERS LEXICON/DALF MELVIN WILLIAMS GO
ONLY JESUS WILL (25%) PA543325 1991 STEWART/JONES LEXICON/STEWART/ PARKES STEWART GO
PARAGON
ONLY WHAT YOU DO FOR CHRIST WILL LAST PA370984 1988 MITCHEL JONES LEXICON/CARLENE COMMISSIONED GO
JONES
ORDINARY JUST WON'T DO PA466807 1990 JONES/STEWART LEXICON/JONES/ COMMISSIONED GO
STEWART
PASS ME NOT (GC PD ARR) (50%) PA373160 1988 LAYTHAN ARMOR LEXICON/MORAL VOICES OF LIGHT GO
MUSIC
PEACE BE STILL (GC PD ARR) (50%) PA373161 1988 LAYTHAN ARMOR LEXICON/MORAL VOICES OF LIGHT GO
MUSIC
PEACE IN MY HEART PA518701 1991 WILLIAMS BROTHERS LEXICON/LEVARN/ MELVIN WILLIAMS GO
DALF
PERILOUS TIMES (50%) PA370987 1988 FRED HAMMOND LEXICON/PARAGON COMMISSIONED GO
PRAISE THE LORD PA583750 1992 ARMOR/TAYLOR/BLACK LEXICON/SHAWN RAI LOS ANGELES MASS CHOIR GO
ETC
REVIVE US AGAIN (PD) (50%) PA399047 1988 TONY WILKINS LEXICON/MORAL LOS ANGELES MASS CHOIR GO
RISE UP MY CHILD (50%) PA462369 1990 ARMOR/FUTREL LEXICON/MORAL FUTREL GO
ROMANS 10 PA518647 1990 COLEY/KEE LEXICON/COLEY'S DARYL COLEY GO
PEN
SAVE ME NOW (50%) PA445249 1989 FRED HAMMOND LEXICON/PARAGON COMMISSIONED GO
SAY NO PA518704 1991 WILLIAMS BROTHERS LEXICON/LEVARN/ MELVIN WILLIAMS GO
PERCY'S TWINS
SEE YOU WHEN I GET THERE (50%) PA462363 1990 ARMOR/FUTREL LEXICON/MORAL FUTREL GO
SO GOOD TO KNOW (THE SAVIOR) (50%) PA445246 1989 MICHAEL BROOKS LEXICON/PARAGON COMMISSIONED GO
SPEND SOME TIME (25%) PA543328 1991 STEWART/JONES LEXICON/STEWART/ STEWART PARKES GO
PARAGON
START ALL OVER (25%) PA543329 1991 STEWART/JONES LEXICON/STEWART/ STEWART PARKES GO
PARAGON
STRANGE LAND, HOW CAN WE SING (50%) PA370976 1988 MICHAEL BROOKS LEXICON/PARAGON COMMISSIONED GO
SWEET HOUR OF PRAYER (GC PD) (50%) PA375297 1988 LAYTHAN ARMOR LEXICON/MORAL VOICES OF LIGHT GO
TAKE ME HIGHER (25%) PA543326 1991 STEWART/JONES/ LEXICON/STEWART/ PARKES STEWART GO
WRIGHT WRIGHT/PARAGON
TAKE UP YOUR CROSS (50%) PA399043 1988 TONY WILKINS LEXICON/MORAL LOS ANGELES MASS CHOIR GO
</TABLE>
<PAGE>
PLATINUM ENTERTAINMENT
SONG FILE
<TABLE>
<CAPTION>
TITLE C # YEAR COMPOSER PUBLISHER ARTIST CODE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TAKE YOUR BURDENS (TO THE LORD) PA445244 1989 STEWART/WRIGHT LEXICON/WRIGHT/ COMMISSIONED GO
STEWART
TEAR YOUR KINGDOM DOWN (PD) PA572406 1992 HOWARD/GOSSETT LEXICON/SONG OF PATTIE HOWARD GO
TRIUMPH
THAT'S WHAT YOU'VE DONE FOR ME PA518646 1990 DARYL COLEY LEXICON/COLEY'S DARYL COLEY GO
PEN
THE GOOD LIFE PA572411 1992 HOWARD/GOSSETT LEXICON/SONG OF PATTIE HOWARD GO
TRIUMPH
THE LORD IS HOLY (BLESS YE THE LORD) PA399044 1989 WILKINS/TAYLOR LEXICON/MORAL LOS ANGELES MASS CHOIR GO
THE LORD'S NAME IS TO BE PRAISED PA518645 1990 DARYL COLEY LEXICON/COLEY'S DARYL COLEY GO
PEN
THE VISION PA572405 1992 PATTIE HOWARD LEXICON/SONG OF PATTIE HOWARD GO
TRIUMPH
THERE IS A FOUNTAIN FILLED (PD) (50%) PA373163 1988 LAYTHAN ARMOR LEXICON/MORAL VOICES OF LIGHT GO
THERE'S NO EXCUSE (50%) PA466812 1990 MICHAEL BROOKS LEXICON/PARAGON COMMISSIONED GO
TO EACH HIS OWN (50%) PA543324 1991 STEWART/WRIGHT LEXICON/STEWART/ PARKES STEWART GO
WRIGHT
TRUE LOVE (25%) PA543327 1991 STEWART/JONES LEXICON/STEWART/ STEWART PARKES GO
PARAGON
TRY LOVE AGAIN PA572410 1992 ALAN GLASS LEXICON MUSIC/BMG PATTIE HOWARD GO
USE ME PA572408 1992 HOWARD/LANIER LEXICON/SONG OF PATTIE HOWARD GO
TRIUMPH
WAITING TO HEAR FROM YOU (50%) PA445247 1989 MICHAEL BROOKS LEXICON/PARAGON COMMISSIONED GO
WATCH THEM DOGS PA518702 1991 WILLIAMS BROTHERS LEXICON/LEVARN MELVIN WILLIAMS GO
WE'LL UNDERSTAND IT BETTER BY & BY PA373162 1988 LAYTHAN ARMOR LEXICON/MORAL VOICES OF LIGHT GO
(PD) (50%)WHAT A FELLOWSHIP (PD) PA573748 1992 WILKINS/TAYLOR/ LEXICON/SHAWN RAI LOS ANGELES MASS CHOIR GO
ARMOR ETC
WHAT WILL YOU SAY? PA370985 1988 FRED HAMMOND LEXICON/PARAGON COMMISSIONED GO
WHAT WOULD YOU DO (50%) PA462366 1990 ARMOR/FUTREL LEXICON/MORAL FUTREL GO
WHEN JESUS SINGS (50%) PA370986 1988 FRED HAMMOND LEXICON/PARAGON COMMISSIONED GO
WILL YOU BE READY (50%) PA445240 1989 MICHAEL BROOKS LEXICON/PARAGON COMMISSIONED GO
WORTH THE WAIT (50%) PA462365 1990 ARMOR/FUTREL LEXICON/MORAL FUTREL GO
YOU BLESSED ME STILL PA809463 1991 WILLIAMS BROTHERS LEXICON/MELENDO MELVIN WILLIAMS GO
YOU BROUGHT ME OUT PA451680 1989 TAYLOR/LEWIS LEXICON/MORAL LOS ANGELES MASS CHOIR GO
YOU CAN DEPEND ON JESUS PA370978 1988 STEWART/BRICE LEXICON/WENDY COMMISSIONED GO
STEWART
YOU KEEP ON BLESSING ME (50%) PA370975 1988 MICHAEL BROOKS LEXICON/PARAGON COMMISSIONED GO
LIBRIS MUSIC
Owned
I'VE FOUND GOD PA572462 1992 HENRY McKENZIE LIBRIS MUSIC WAR ON SIN GO
DAVIS
I'VE GOT THE JOY (PD ARR) PA584895 1992 WILLIAMS/BALL LIBRIS MUSIC BEAU WILLIAMS GO
THAT'S THE KIND OF GOD THAT I SERVE PA584894 1992 WILLIAMS/BALL LIBRIS MUSIC BEAU WILLIAMS GO
(PD ARR)
Co-Owned
ALL RIGHT PA523742 1991 KURT CARR LIBRIS/CARTUNES KURT CARR GO
AMAZING PA379151 1988 SONG/HARRIS LIBRIS/KHARI KINGDOM GO
AS ONE PA379155 1988 SONG/HARRIS LIBRIS/KHARI KINGDOM GO
BACK WHERE YOU BELONG PA567381 1992 ARVIS STRICKLING LIBRIS/BLACK & ARVIS STRICKLING-JONES GO
-JONES WHITE IVORY
CAUGHT UP PA543337 1991 TIMOTHY McGHEE LIBRIS/BLACK & CHICAGO MASS CHOIR GO
WHITE IVORY
COME HOME PA539549 1991 KURT CARR LIBRIS/CARTUNES KURT CARR GO
COME LET US WORSHIP PA539550 1991 KURT CARR LIBRIS/CARTUNES KURT CARR GO
DON'T BE AFRAID PA379153 1988 RAHNI SONG LIBRIS/KHARI KINGDOM GO
DON'T COMPLAIN ABOUT YOUR PROBLEMS PA506614 1991 ARVIS STRICKLING LIBRIS/BLACK & ARVIS STRICKLING-JONES GO
-JONES WHITE IVORY
EVEN ME (PD) PA543341 1991 DAVID BROCK LIBRIS/BLACK & CHICAGO MASS CHOIR GO
WHITE IVORY
EVERY TIME I FEEL THE SPIRIT (P.D.) PA520772 1991 WILLIAMS/ARMOR LIBRIS/WILLIAMS/ BEAU WILLIAMS GO
(50%) LEIGHARM
EVERYBODY LET'S PRAISE THE LORD PA543336 1991 PERCY GRAY LIBRIS/BLACK & CHICAGO MASS CHOIR GO
WHITE IVORY
FROM THE INSIDE OUT PA506617 1991 ARVIS STRICKLING LIBRIS/BLACK & ARVIS STRICKLING-JONES GO
-JONES WHITE IVORY
FULLY COMMITTED PA379149 1988 RAHNI SONG LIBRIS/KHARI KINGDOM GO
GLAD I FOUND YOUR LOVE PA584896 1992 GIVENS/TURNER LIBRIS/BEAU/ BEAU WILLIAMS GO
GIVENSGOOD/CHOC
GOD HAS BEEN SO GOOD TO ME PA598751 1992 P. GRAY/J. GRAY LIBRIS/BLACK & CHICAGO MASS CHOIR GO
WHITE IVORY
GOD IS REAL TO ME PA567404 1992 PERCY GRAY LIBRIS/BLACK & CHICAGO MASS CHOIR GO
WHITE IVORY
GOD'S GOT IT PA543315 1991 ISAIAH HEYWARD LIBRIS/BLACK & WANDA NERO BUTLER GO
WHITE IVORY
GOD'S GOT THE POWER PA543339 1991 LAVELLE LACY LIBRIS/BLACK & CHICAGO MASS CHOIR GO
WHITE IVORY
GREAT AND MARVELOUS PA543312 1991 JEREMIAH NERO LIBRIS/BLACK & WANDA NERO BUTLER GO
WHITE IVORY
HAVE THINE OWN WAY PA543313 1991 ISAIAH HEYWARD LIBRIS/BLACK & PATTIE HOWARD GO
WHITE IVORY
HE IS MINE PA567405 1992 MARK TAYLOR LIBRIS/BLACK & CHICAGO MASS CHOIR GO
WHITE IVORY
HE SHALL HEAR MY VOICE PA506619 1991 ARVIS STRICKLING LIBRIS/BLACK & ARVIS STRICKLING-JONES GO
-JONES WHITE IVORY
</TABLE>
<PAGE>
PLATINUM ENTERTAINMENT
SONG FILE
<TABLE>
<CAPTION>
TITLE C # YEAR COMPOSER PUBLISHER ARTIST CODE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
HEART OF MY SOUL PA539548 1991 KURT CARR LIBRIS/CARTUNES KURT CARR GO
HE'S COMING BACK PA567410 1992 ROSE HARPER LIBRIS/BLACK & CHICAGO MASS CHOIR GO
WHITE IVORY
HE'S THE LOVER OF MY SOUL PA543340 1991 ABE COOK LIBRIS/BLACK & CHICAGO MASS CHOIR GO
WHITE IVORY
HIGHER PA379148 1988 RAHNI SONG LIBRIS/KHARI KINGDOM GO
HOLY, HOLY, HOLY (PD) PA539551 1991 KURT CARR LIBRIS/CARTUNES KURT CARR GO
I AM PRAYING FOR YOU PA567385 1992 ARVIS STRICKLING- LIBRIS/BLACK & ARVIS STRICKLING-JONES GO
JONES WHITE IVORY
I AM WITNESS PA520776 1988 BEAU WILLAMS LIBRIS/WILLIAMS BEAU WILLAMS GO
I CAN FEEL HIS SPIRIT PA567411 1992 ARVIS STRICKLING- LIBRIS/BLACK & ARVIS STRICKLING-JONES GO
JONES WHITE IVORY
I CAN GO TO THE ROCK PA567407 1992 PERCY GRAY LIBRIS/BLACK & CHICAGO MASS CHOIR GO
WHITE IVORY
I THANK GOD PA591354 1992 CHRIS GRAY LIBRIS/CHRIS NORTH CAROLINA MASS CHOIR GO
GRAY MUSIC
I WANT TO WALK LIKE JESUS (50%) PA520773 1990 WILLIAMS/ARMOR LIBRIS/WILLIAMS/ BEAU WILLIAMS GO
LEIGHARM
I WILL BE ALRIGHT PA506622 1991 ARVIS STRICKLING- LIBRIS/BLACK & ARVIS STRICKLING-JONES GO
JONES WHITE IVORY
I'M GOING HOME PA598755 1992 PERCY GRAY LIBRIS/BLACK & COMMISSIONED GO
WHITE IVORY
I'M NOT ASHAMED PA539547 1991 KURT CARR LIBRIS/CARTUNES KURT CARR GO
I'M SAVED PA506620 1991 ARVIS STRICKLING- LIBRIS/BLACK & ARVIS STRICKLING-JONES GO
JONES WHITE IVORY
I'M WAITING PA567384 1992 ARVIS STRICKLING- LIBRIS/BLACK & ARVIS STRICKLING-JONES GO
JONES WHITE IVORY
IN JESUS' NAME PA506615 1990 ARVIS STRICKLING- LIBRIS/BLACK & ARVIS STRICKLING-JONES GO
JONES WHITE IVORY
IN THE MIDNIGHT HOUR PA567387 1991 ARVIS STRICKLING- LIBRIS/BLACK & ARVIS STRICKLING-JONES GO
JONES WHITE IVORY
IT IS WELL WITH MY SOUL (PD) (50%) PA520771 1992 WILLIAMS/ARMOR LIBRIS/WILLIAMS/ BEAU WILLIAMS GO
LEIGHARM
IT'S A GOOD THING PA567386 1990 ARVIS STRICKLING- LIBRIS/BLACK & ARVIS STRICKLING-JONES GO
JONES WHITE IVORY
I'VE LEARNED TO TRUST PA567383 1992 ARVIS STRICKLING- LIBRIS/BLACK & ARVIS STRICKLING-JONES GO
JONES WHITE IVORY
JESUS IS COMING PA591356 1992 GRAY/HILL LIBRIS/CHRIS NORTH CAROLINA MASS CHOIR GO
GRAY MUSIC
JESUS IS LORD PA598749 1992 KENNETH CAMPBELL LIBRIS/BLACK & CHICAGO MASS CHOIR GO
WHITE IVORY
JESUS UNDERSTANDS PA543314 1991 BUTLER/SEALS LIBRIS/BLACK & WANDA NERO BUTLER GO
WHITE IVORY
JESUS, I LOVE YOU PA591357 1992 GRAY/GRAY LIBRIS/CHRIS NORTH CAROLINA MASS CHOIR GO
GRAY MUSIC
JESUS, I LOVE YOU SO PA584893 1992 MONTY JACKSON LIBRIS/BEAU BEAU WILLIAMS GO
WILLIAMS/MIGHTY
JUST A MOMENT PA584892 1992 BEAU WILLIAMS LIBRIS/BEAU BEAU WILLIAMS GO
WILLIAMS MUSIC
JUST AS SOON AS I GET THERE PA598756 1992 PERCY GRAY LIBRIS/BLACK & CHICAGO MASS CHOIR GO
WHITE IVORY
JUST WHEN I NEEDED HIM MOST (PD ARR) PA543318 1991 VICTOR BEAUCHAMP LIBRIS/BLACK & CHICAGO MASS CHOIR GO
WHITE IVORY
KING'S KIDS PA379152 1988 RAHNI SONG LIBRIS/KHARI KINGDOM GO
LET THE PEOPLE PRAISE THEE PA567380 1992 ARVIS STRICKLING- LIBRIS/BLACK & ARVIS STRICKLING-JONES GO
JONES WHITE IVORY
LOOK UP PA567379 1992 ARVIS STRICKLING- LIBRIS/BLACK & ARVIS STRICKLING-JONES GO
JONES WHITE IVORY
LORD MAKE ME A VESSEL PA598754 1992 MARVIN WOOTEN LIBRIS/BLACK & CHICAGO MASS CHOIR GO
WHITE IVORY
LOVER OF MY SOUL PA543338 1991 BRENDA MOORE LIBRIS/BLACK & CHICAGO MASS CHOIR GO
WHITE IVORY
MY HEART NEEDS TO KNOW PA414987 1989 BEAU WILLIAMS LIBRIS/BEAU BEAU WILLIAMS GO
WILLIAMS
NEVERTHELESS PA379154 1988 SONG/WHITE LIBRIS/KHARI KINGDOM GO
NOT ALONE PA379150 1988 RAHNI SONG LIBRIS/KHARI KINGDOM GO
PEACE IN THE MIDST OF YOUR STORM PA539546 1991 KURT CARR LIBRIS/CARTUNES KURT CARR GO
PEACE, JOY & HAPPINESS PA414988 1989 BEAU WILLIAMS LIBRIS/BEAU BEAU WILLIAMS GO
WILLIAMS
RIGHT NOW PA543343 1991 BISHOP J C WHITE LIBRIS/BLACK & CHICAGO MASS CHOIR GO
WHITE IVORY
SEND THE HOLY GHOST PA539545 1991 KURT CARR LIBRIS/CARTUNES KURT CARR GO
SHOW ME THE WAY (80%) PA520775 1991 WILLIAMS/ARMOR/ LIBRIS/WILLIAMS BEAU WILLIAMS GO
GOUCHE
TELL JESUS PA543342 1991 BRENDA MOORE LIBRIS/BLACK & CHICAGO MASS CHOIR GO
WHITE IVORY
TELL JESUS PA591355 1992 CHRIS GRAY LIBRIS/CHRIS NORTH CAROLINA MASS CHOIR GO
GRAY MUSIC
TESTIMONY PA598757 1992 WILLIE ROGERS LIBRIS/BLACK & CHICAGO MASS CHOIR GO
WHITE IVORY
THANK YOU JESUS (50%) PA471948 1990 ARMOR/WILLIAMS LIBRIS/WILLIAMS/ BEAU WILLIAMS GO
MORAL
TOO CLOSE PA543316 1991 ALEX BRADFORD LIBRIS/BLACK & CHICAGO MASS CHOIR GO
WHITE IVORY
UP ABOVE THE CLOUDS PA543317 1991 RICK WATSON LIBRIS/BLACK & CHICAGO MASS CHOIR GO
WHITE IVORY
VICTORY IN PRAISING GOD PA598750 1992 BRENDA MOORE LIBRIS/BLACK & CHICAGO MASS CHOIR GO
WHITE IVORY
WAITING ON GOD PA567406 1992 WILLIE ROGER LIBRIS/BLACK & CHICAGO MASS CHOIR GO
WHITE IVORY
WAY OF A CHRISTIAN, THE PA506621 1991 ARVIS STRICKLING- LIBRIS/BLACK & ARVIS STRICKLING-JONES GO
JONES WHITE IVORY
WE GOTTA TELL PA520774 1991 BEAU WILLIAMS LIBRIS/WILLIAMS BEAU WILLIAMS GO
WE'RE GONNA HAVE A GOOD TIME PA506618 1991 ARVIS STRICKLING- LIBRIS/BLACK & ARVIS STRICKLING-JONES GO
JONES WHITE IVORY
WHAT WILL YOU DO PA506616 1991 ARVIS STRICKLING- LIBRIS/BLACK & ARVIS STRICKLING-JONES GO
JONES WHITE IVORY
WHEN THE PRAISES GO UP PA598753 1992 BRYANT JONES LIBRIS/BLACK & CHICAGO MASS CHOIR GO
WHITE IVORY
WONDERFUL, MARVELOUS PA567409 1992 BRENDA MOORE LIBRIS/BLACK & CHICAGO MASS CHOIR GO
WHITE IVORY
YOU'VE BEEN BLESSING ME PA567382 1992 ARVIS STRICKLING- LIBRIS/BLACK & ARVIS STRICKLING-JONES GO
JONES WHITE IVORY
YOU'VE GOT TO STAND PA543319 1991 ARVIS STRICKLING- LIBRIS/BLACK & ARVIS STRICKLING-JONES GO
JONES WHITE IVORY
</TABLE>
<PAGE>>
PLATINUM ENTERTAINMENT
SONG FILE
<TABLE>
<CAPTION>
TITLE C # YEAR COMPOSER PUBLISHER ARTIST CODE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LUMINAR MUSIC
Owned
AFRICAN PRAISE (HOLY, HOLY) PA445319 1989 DONNIE HARPER LUMINAR MUSIC NEW JERSEY MASS CHOIR GO
DELIVERANCE PA455314 1989 DONNIE HARPER LUMINAR MUSIC NEW JERSEY MASS CHOIR GO
HEROS PA445317 1989 DONNIE HARPER LUMINAR MUSIC NEW JERSEY MASS CHOIR GO
HE'S WORTHY PA367093 1988 DONNIE HARPER LUMINAR MUSIC NEW JERSEY MASS CHOIR GO
HIS EYE IS ON THE SPARROW (PD) PA478082 1990 GLOSTER WILLIAMS LUMINAR MUSIC HEAVEN SENT GO
HOLD UP THE LIGHT PA367097 1988 DONNIE HARPER LUMINAR MUSIC NEW JERSEY MASS CHOIR GO
HOLY SPIRIT PA367095 1988 DONNIE HARPER LUMINAR MUSIC NEW JERSEY MASS CHOIR GO
I WILL SING HALLELUJAH PA445313 1989 DONNIE HARPER LUMINAR MUSIC NEW JERSEY MASS CHOIR GO
LET JESUS LEAD YOU PA367098 1988 DONNIE HARPER LUMINAR MUSIC NEW JERSEY MASS CHOIR GO
NO WAY PA367107 1988 GLOSTER WILLIAMS LUMINAR MUSIC THE NEW KING JAMES VERSION GO
O THE BLOOD PA367092 1988 DONNIE HARPER LUMINAR MUSIC NEW JERSEY MASS CHOIR GO
OH BLESS THE NAME PA445315 1989 DONNIE HARPER LUMINAR MUSIC NEW JERSEY MASS CHOIR GO
REDEEMED PA367099 1988 DONNIE HARPER LUMINAR MUSIC NEW JERSEY MASS CHOIR GO
THERE IS NO FAILURE IN GOD PA445318 1989 DONNIE HARPER LUMINAR MUSIC NEW JERSEY MASS CHOIR GO
THESE ARE THE PROMISES PA445320 1989 DONNIE HARPER LUMINAR MUSIC NEW JERSEY MASS CHOIR GO
THIS JOY PA367108 1988 WILLIAMS/BADY LUMINAR MUSIC THE NEW KING JAMES VERSION GO
WHAT WOULD I DO (WITHOUT THE LORD) PA367094 1988 DONNIE HARPER LUMINAR MUSIC NEW JERSEY MASS CHOIR GO
YES THERE IS AN ANSWER PA445316 1989 DONNIE HARPER LUMINAR MUSIC NEW JERSEY MASS CHOIR GO
YOU CAN CALL GOD PA445312 1989 DONNIE HARPER LUMINAR MUSIC NEW JERSEY MASS CHOIR GO
YOUR CHANGE WILL COME PA367100 1988 DONNIE HARPER LUMINAR MUSIC NEW JERSEY MASS CHOIR GO
Co-Owned
AT THE CROSS (PD ARR) PA572471 1991 GLOSTER WILLIAMS LUMINAR/GLOSSIAM AS ONE GO
CALL HIM UP PA567403 1992 LAVELLE LACY LUMINAR/B-FLAT CHICAGO MASS CHOIR GO
MUSIC
GIVE IT TO ME PA572470 1991 GLOSTER WILLIAMS LUMINAR/GLOSSIAM AS ONE GO
GOD CAN DO ANYTHING (50%) PA3670996 1988 DONNIE HARPER LUMINAR/LEIGHARM NEW JERSEY MASS CHOIR GO
GOD WILL TAKE CARE OF YOU (P.D. ARR) PA574474 1991 BATTLE/WILLIAMS LUMINAR/GLOSSIAM/ AS ONE GO
PEACE-O-MIND MUSIC
IN HIS HANDS PA572460 1992 GLOSTER WILLIAMS LUMINAR/GLOSSIUM WAR ON SIN GO
NEVER ALONE (PD ARR) PA572473 1991 GLOSTER WILLIAMS LUMINAR/GLOSSIAM/ AS ONE GO
HERMANDO
NOTHING BUT THE BLOOD (PD ARR) PA572472 1991 GLOSTER WILLIAMS LUMINAR/GLOSSIAM AS ONE GO
WALK IN THE LIGHT (PD) PA572461 1992 GLOSTER WILLIAMS LUMINAR/GLOSSIUM WAR ON SIN GO
JOHN JUAN MUSIC
Owned
CUSTOM-MADE PA812006 1997 MICHAEL/HARRIS JOHN JUAN MUSIC CR
I BELIEVE PA814401 1997 DONAHUE/BARTLEY JOHN JUAN MUSIC CR
Co-Owned
FINISHING TOUCH (50) PA860077 1997 JODY HARRIS/KEN JOHN JUAN MUSIC/ CR
MCGOVERN SACK FULL OF SONGS
HERE'S THE DEAL (50) 863862 1997 JODY HARRIS/BOBBY JOHN JUAN MUSIC CR
TAYLOR
IT'S ALL THE SAME TO ME (50) PA853411 1997 JERRY LASETER/KARI JOHN JUAN MUSIC/ CR
K. PHILIPS DON'T TELL MAMA MUSIC/
API MUSIC
SHE'S PLAYIN' HARD TO FORGET(66.6) PA812011 1997 MICHAEL/DONAHUE/ JOHN JUAN MUSIC CR
WILLIAMS
VICTORIA KAY MUSIC
Owned
EVERY TIME I FEEL MY HEART BREAK PA812390 1997 CLARK/HUFFMAN/KEES VICTORIA KAY MUSIC CR
</TABLE>
<PAGE>
PLATINUM ENTERTAINMENT
SONG FILE
<TABLE>
<CAPTION>
TITLE C # YEAR COMPOSER PUBLISHER ARTIST CODE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Co-Owned
LAST LOVE IN THIS TOWN (33.3) PA863107 1997 DON ELLIS/BILLY VICTORIA KAY MUSIC CR
MONTANA/STEVE
DEAN
NATURAL BORN LOSER PA811958 1997 STEVE LEWIS CLARK VICTORIA KAY MUSIC CR
JAMBOX MUSIC PUBLISHING
Owned
BEST FRIEND PA861278 1997 LEFT OUT JAMBOX LEFT OUT CH
CHEWING ON HATE PA836251 1997 SITUATION TABOO JAMBOX SITUATION TABOO CH
CLIQUE ROCK PA861283 1997 BRIAN GRAY/JAKE JAMBOX LEFT OUT CH
LANDRAU
DEAD HORSE GRIN PA836245 1997 CHRIS COLBERT/ JAMBOX DURALUXE CH
NATHAN PELLEGRIN
DURA-LUX PA836250 1997 CHRIS COLBERT JAMBOX DURALUXE CH
FEED US PA861285 1997 BRIAN GRAY/JAKE JAMBOX LEFT OUT CH
LANDRAU
HANDICAP SONG PA861277 1997 BRIAN GRAY/JAKE JAMBOX LEFT OUT CH
LANDRAU
I REALLY DON'T LIKE IT PA836246 1997 MIKE HOLT/THE JAMBOX THE HUNTINGTONS CH
HUNTINGTONS
J.I.S. PA836247 1997 ONE 21 JAMBOX ONE 21 CH
MAKE IT HAPPEN PA861287 1997 BRYAN GRAY/JAKE JAMBOX LEFT OUT CH
LANDRAU
PRIDE KILLS PA861279 1997 BRYAN GRAY/JAKE JAMBOX LEFT OUT CH
LANDRAU
SUBSTANCE PA861282 1997 BRIAN GRAY/JAKE JAMBOX LEFT OUT CH
LANDRAU
TWO GIRLS AND A GUY PA836248 1997 BRIAN GREY JAMBOX LEFT OUT CH
VERBAL HOMICIDE PA861280 1997 BRIAN GRAY/JAKE JAMBOX LEFT OUT CH
LANDRAU
WHAT I WOULDN'T DO FOR YOU IF I WERE YOU PA861284 1997 BRIAN GRAY/JAKE JAMBOX LEFT OUT CH
LANDRAU
WHEN WE ARE TOGETHER PA861281 1997 BRIAN GRAY/JAKE JAMBOX LEFT OUT CH
LANDRAU
WHEN YOU ASSUME PA861286 1997 BRIAN GRAY/JAKE JAMBOX LEFT OUT CH
LANDRAU
YOU'RE SPECIAL TO ME PA836249 1997 GRESHAM/HOLBROOK/ JAMBOX JOE CHRISTMAS CH
WEAVER
Co-Owned
YOU HAVE MY HEART(15%) PA836302 1997 HAMMOND/ JAMBEAUX/TAMMY B TAMMY TRENT CH
RUTHERFORD/ MUSIC/PARAGON
TRENT MUSIC CORP./
SCA MUSIC
SONIC CHAOS
Owned
AGONY PA849074 1995 ALBERT/MARTELLO SONIC CHAOS ARGYLE PARK CH
ANGRY SON PA812788 1996 SHAFFER/WOHLFIELD/ SONIC CHAOS SIX FEET DEEP CH
SIMMONS/PORTER
APATHETIC PA856318 1997 SIX FEET DEEP SONIC CHAOS SIX FEET DEEP CH
ASTRONAUT PA812749 1995 TAYLOR/DODDS/ SONIC CHAOS LOVE COMA CH
DUNCAN/MATTINGLY
BANANA PA788414 1993 MORA/RATHBUN/ SONIC CHAOS HOT PINK TURTLE CH
TYLER/CLEEM
BETWEEN HE AND SHE PA812755 1995 TAYLOR/DODDS/ SONIC CHAOS LOVE COMA CH
DUNCAN/MATTINGLY
BOY AND HIS BOAT, A PA788413 1993 MORA/RATHBUN/ SONIC CHAOS HOT PINK TURTLE CH
TYLER/CLEEM
BROKEN TREE PA856313 1997 SIX FEET DEEP SONIC CHAOS SIX FEET DEEP CH
BURDEN'S FOLLY, A PA849077 1995 ALBERT/MARTELLO SONIC CHAOS ARGYLE PARK CH
CIRCLE PA849078 1995 SCOTT ALBERT SONIC CHAOS ARGYLE PARK CH
CONDEMNATION PA812784 1994 SHAFFER/WOHLFIELD/ SONIC CHAOS SIX FEET DEEP CH
SIMMONS/PORTER
CONGRUENT PA856321 1997 SIX FEET DEEP SONIC CHAOS SIX FEET DEEP CH
DIE TO THE FLESH PA812798 1995 RANDY ROSE SONIC CHAOS ROSE CH
DIESEL PA849081 1995 SCOTT ALBERT SONIC CHAOS ARGYLE PARK CH
DIMENTIA PA833051 1993 BACHMAN/DAUB/ SONIC CHAOS BELIEVER CH
WINTERS/MANN
DO YOU KNOW MY NAME? PA812797 1995 RANDY ROSE SONIC CHAOS ROSE CH
ENTERTAINMENT TONIGHT PA812746 1995 TAYLOR/DODDS/ SONIC CHAOS LOVE COMA CH
DUNCAN/MATTINGLY
FADE AWAY PA812796 1995 RANDY ROSE SONIC CHAOS ROSE CH
FLOURESCENT FUNK PA788410 1993 MORA/RATHBUN/ SONIC CHAOS HOT PINK TURTLE CH
TYLER/CLEEM
FRONT PA812787 1994 SHAFFER/WOHLFIELD/ SONIC CHAOS SIX FEET DEEP CH
SIMMONS/PORTER
FUTILE PA849075 1995 SCOTT ALBERT SONIC CHAOS CIRCLE OF DUST CH
FUTURE MIND PA833050 1993 BACHMAN/DAUB/ SONIC CHAOS BELIEVER CH
WINTERS
</TABLE>
<PAGE>
PLATINUM ENTERTAINMENT
SONG FILE
<TABLE>
<CAPTION>
TITLE C # YEAR COMPOSER PUBLISHER ARTIST CODE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
GONE PA833053 1993 BACHMAN/DAUB SONIC CHAOS BELIEVER CH
/WINTERS
GRASS PA812795 1995 RANDY ROSE SONIC CHAOS ROSE CH
GUNTISTHA GARDEN PA788416 1993 MORA/RATHBUN/ SONIC CHAOS HOT PINK TURTLE CH
TYLER/CLEEM
GUTTERBOY PA849082 1995 MARTELLO/ALBERT SONIC CHAOS ARGYLE PARK CH
HAEMORRHAGE OF HATRED PA812770 1994 SHERLOCK/DE RON/ SONIC CHAOS PARAMAECIUM CH
THOMPKINS
HEADSCREW PA849073 1995 MARTELLO/ALBERT SONIC CHAOS ARGYLE PARK CH
HIDEOUS PA788409 1993 MORA/RATHBUN/ SONIC CHAOS HOT PINK TURTLE CH
TYLER/CLEEM
HOMELESS PA812781 1994 SHAFFER/WOHLFIELD/ SONIC CHAOS SIX FEET DEEP CH
SIMMONS/PORTER
IN HAIR BRAIN PA788415 1993 MORA/RATHBUN/TYLER SONIC CHAOS HOT PINK TURTLE CH
/CLEEM
INJUDICIAL PA812771 1994 SHERLOCK/DE RON/ SONIC CHAOS PARAMAECIUM CH
TOMPKINS
INTO THE UNKNOWN PA812794 1995 RANDY ROSE SONIC CHAOS ROSE CH
JIGSAW MAN PA812750 1995 TAYLOR/DODDS/ SONIC CHAOS LOVE COMA CH
DUNCAN/MATTINGLY
KILL MY INSPIRATION PA812753 1995 TAYLOR/DODDS/ SONIC CHAOS LOVE COMA CH
DUNCAN/MATTINGLY
KILLING, THE PA812772 1994 SHERLOCK/DE RON/ SONIC CHAOS PARAMAECIUM CH
TOMPKINS
LAND OF THE BLIND PA812780 1994 SHAFFER/WOHLFIELD/ SONIC CHAOS SIX FEET DEEP CH
SIMMONS/PORTER
LIL' GROOVE, A PA788412 1993 MORA/RATHBUN/ SONIC CHAOS HOT PINK TURTLE CH
TYLER/CLEEM
MEANINGLESS PA856314 1997 SIX FEET DEEP SONIC CHAOS SIX FEET DEEP CH
MISANTHROPE PA849083 1995 MARTELLO/ALBERT SONIC CHAOS ARGYLE PARK CH
MORE IN SORROW PA856316 1997 SIX FEET DEEP SONIC CHAOS SIX FEET DEEP CH
MYISCI PA788411 1993 MORA/RATHBUN/ SONIC CHAOS HOT PINK TURTLE CH
TYLER/CLEEM
NARROW PA856317 1997 SIX FEET DEEP SONIC CHAOS SIX FEET DEEP CH
NEMESIS PA812783 1994 SHAFFER/WOHLFIELD/ SONIC CHAOS SIX FEET DEEP CH
SIMMONS/PORTER
NO APOLOGY PA833048 1993 BACHMAN/DAUB/ SONIC CHAOS BELIEVER CH
BADDORF/WINTERS/
MANN
PAST PA812793 1995 RANDY ROSE SONIC CHAOS ROSE CH
PAST GONE PA812792 1995 RANDY ROSE SONIC CHAOS ROSE CH
PICKIN' BERRIES PA788417 1993 MORA/RATHBUN/ SONIC CHAOS HOT PINK TURTLE CH
TYLER/CLEEM
PSALM 1 PA801122 1994 JACK BALLARD SONIC CHAOS JACK BALLARD CH
PSALM 100 PA801125 1994 JACK BALLARD SONIC CHAOS JACK BALLARD CH
PSALM 117 PA801117 1994 JACK BALLARD SONIC CHAOS JACK BALLARD CH
PSALM 148 PA801123 1994 JACK BALLARD SONIC CHAOS JACK BALLARD CH
PSALM 150 PA801127 1994 JACK BALLARD SONIC CHAOS JACK BALLARD CH
PSALM 2 PA801118 1994 JACK BALLARD SONIC CHAOS JACK BALLARD CH
PSALM 22 PA801119 1994 JACK BALLARD SONIC CHAOS JACK BALLARD CH
PSALM 23 PA801120 1994 JACK BALLARD SONIC CHAOS JACK BALLARD CH
PSALM 61 PA801124 1994 JACK BALLARD SONIC CHAOS JACK BALLARD CH
PSALM 67 PA801121 1994 JACK BALLARD SONIC CHAOS JACK BALLARD CH
PURIFY PA856320 1997 SIX FEET DEEP SONIC CHAOS SIX FEET DEEP CH
QUICK TIME PA856312 1997 SIX FEET DEEP SONIC CHAOS SIX FEET DEEP CH
REFUGE PA849072 1995 ALBERT/MARTELLO SONIC CHAOS ARGYLE PARK CH
REGRET PA812785 1994 SHAFFER/WOHLFIELD/ SONIC CHAOS SIX FEET DEEP CH
SIMMONS/PORTER
RELEASE PA812779 1994 SHAFFER/WOHLFIELD/ SONIC CHAOS SIX FEET DEEP CH
SIMMONS/PORTER
REMOVED OF THE GRAVE PA812766 1994 SHERLOCK/DE RON/ SONIC CHAOS PARAMAECIUM CH
TOMPKINS
SATAN'S CALLING PA812791 1995 RANDY ROSE SONIC CHAOS ROSE CH
SCARRED FOR LIFE PA849076 1995 SCOTT ALBERT SONIC CHAOS ARGYLE PARK CH
SEASON OF PAIN PA812790 1995 RANDY ROSE SONIC CHAOS ROSE CH
SELFLESS PA812748 1995 TAYLOR/DODDS/ SONIC CHAOS LOVE COMA CH
DUNCAN/MATTINGLY
SHE WAS PA812751 1995 TAYLOR/DODDS/ SONIC CHAOS LOVE COMA CH
DUNCAN/MATTINGLY
SINGULARITY PA833049 1993 BACHMAN/DAUB/ SONIC CHAOS BELIEVER CH
WINTERS/MANN
SLIP PA856319 1997 SIX FEET DEEP SONIC CHAOS SIX FEET DEEP CH
SPEAK OF THE DEVIL PA812754 1995 TAYLOR/DODDS/ SONIC CHAOS LOVE COMA CH
DUNCAN/MATTINGLY
STEADFAST PA856315 1997 SIX FEET DEEP SONIC CHAOS SIX FEET DEEP CH
STRUGGLE PA812786 1994 SHAFFER/WOHLFIELD/ SONIC CHAOS SIX FEET DEEP CH
SIMMONS/PORTER
SUMMER WIND PA812752 1995 TAYLOR/DODDS/ SONIC CHAOS LOVE COMA CH
DUNCAN/MATTINGLY
TOMORROW TAKES TOO LONG PA812757 1995 TAYLOR/DODDS/ SONIC CHAOS LOVE COMA CH
DUNCAN/MATTINGLY
TRILOGY OF KNOWLEDGE PA833052 1993 BACHMAN/DAUB/ SONIC CHAOS BELIEVER CH
BADDORF/LAIRD
UFFREN PA849085 1995 SCOTT ALBERT SONIC CHAOS CIRCLE OF DUST CH
UNNATURAL CONCEPTION, THE PA812767 1994 SHERLOCK/DE RON/ SONIC CHAOS PARAMAECIUM CH
TOMPKINS
UNTOMBED PA812768 1994 SHERLOCK/DE RON/ SONIC CHAOS PARAMAECIUM CH
TOMPKINS
VALLEY OF SALT PA812782 1994 SHAFFER/WOHLFIELD/ SONIC CHAOS SIX FEET DEEP CH
SIMMONS/PORTER
</TABLE>
<PAGE>
PLATINUM ENTERTAINMENT
SONG FILE
<TABLE>
<CAPTION>
TITLE C # YEAR COMPOSER PUBLISHER ARTIST CODE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
VIOLENT PA849080 1995 MARTELLO/ALBERT SONIC CHAOS ARGYLE PARK CH
VOYAGE OF THE SEVERED, THE PA812769 1994 SHERLOCK/DE RON/ SONIC CHAOS PARAMAECIUM CH
TOMPKINS
WALK IN THE RAIN PA812747 1995 TAYLOR/DODDS/ SONIC CHAOS LOVE COMA CH
DUNCAN/MATTINGLY
WALKING FOR MILES PA812789 1995 RANDY ROSE SONIC CHAOS ROSE CH
WEDNESDAY PA812756 1995 TAYLOR/DODDS/ SONIC CHAOS LOVE COMA CH
DUNCAN/MATTINGLY
WHAT IS BUT CANNOT BE PA833047 1993 BACHMAN/DAUB/ SONIC CHAOS BELIEVER CH
BADDORF/ROBERTSON
Co-Owned
DOOMSAYER(40) PA849086 1995 ALBERT/SALOMON/ SONIC CHAOS ARGYLE PARK CH
VICTOR
LEAVE ME ALONE(85) PA849079 1995 ALBERT/BOQUETTE SONIC CHAOS ARGYLE PARK CH
SKIN SHED(75) PA849084 1995 SCOTT ALBERT/ SONIC CHAOS ARGYLE PARK CH
TOMMY VICTOR
RAPPEL MUSIC
Owned
CONSTANT CRAVING PA840243 1997 ALBERT CABRERA/ RAPPEL MUSIC UB
C. AYALA
ONE AND ONLY PA840244 1997 ALBERT CABRERA/ RAPPEL MUSIC UB
JOEY KIDD
ONLY LOVE PA840242 1997 ALBERT CABRERA/ RAPPEL MUSIC UB
BRENDA STARR
Co - Owned
CHANGED PA856741 1997 BRIAN K. COOK RAPPEL MUSIC/RIGHT IMANI GO
STATE OF MIND
PUBLISHING
DON'T GIVE UP (50) PA856734 1997 BRIAN K. COOK/ RAPPEL MUSIC/RIGHT IMANI GO
ERIC SMITH STATE OF MIND
PUBLISHING
FALLING IN LOVE (50) PA856740 1997 BRIAN K. COOK/ RAPPEL MUSIC/RIGHT IMANI GO
ERIC SMITH STATE OF MIND
PUBLISHING
HE IS ALIVE (50) PA856737 1997 CRAIG JOHNSON/ RAPPEL MUSIC/RIGHT IMANI GO
MARK MABSON STATE OF MIND
PUBLISHING
I AM PERSUADED (50) PA856735 1997 KERWIN MANNING RAPPEL MUSIC/RIGHT IMANI GO
STATE OF MIND
PUBLISHING
I SURRENDER ALL (50) PA856733 1997 KERWIN MANNING RAPPEL MUSIC/RIGHT IMANI GO
STATE OF MIND
PUBLISHING
I'M BLESSED (50) PA856738 1997 TERRANCE COOK RAPPEL MUSIC/RIGHT IMANI GO
STATE OF MIND
PUBLISHING
I'VE GOT TO PRAISE HIM (50) PA856732 1997 MARK WILLIAMS RAPPEL MUSIC/RIGHT IMANI GO
STATE OF MIND
PUBLISHING
PSALM 107:31 (50) PA856736 1997 KERWIN MANNING RAPPEL MUSIC/RIGHT IMANI GO
STATE OF MIND
PUBLISHING
SOLID ROCK (50) PA856739 1997 CRAIG JOHNSON/ RAPPEL MUSIC/RIGHT IMANI GO
DWIGHT STEELE STATE OF MIND
PUBLISHING
RED REWMAR MUSIC
Owned
ANOINT ME LORD PA812584 1995 BRIAN CHASE RED REWMAR MUSIC GO
WILLIAMS/TYRONE
GREGG
BE ENCOURAGED PA812599 1995 WILLIAM BECTON RED REWMAR MUSIC GO
BURDEN BEARER PA813142 1995 DERRICK HANNA RED REWMAR MUSIC GO
CLOSER TO YOU PA811807 1995 WILLIAM BECTON/ RED REWMAR MUSIC WILLIAM BECTON GO
SAM KENDRICK, JR.
COURAGE TO JOURNEY ON PA812593 1995 WILLIAM BECTON RED REWMAR MUSIC WILLIAM BECTON GO
DON'T GIVE UP, HOLD ON PA813582 1995 GLOSTER WILLIAMS RED REWMAR MUSIC GO
FALL AFRESH PA811808 1995 WILLIAM BECTON RED REWMAR MUSIC WILLIAM BECTON GO
GOD WILL MAKE A WAY PA812939 1995 VERONICA FULTON RED REWMAR MUSIC GO
HEAVEN PA812591 1995 MICHAEL SCOTT RED REWMAR MUSIC GO
HOLD ON PA812592 1995 KEVIN WILKINS RED REWMAR MUSIC GO
HOLY GHOST ABIDE PA813140 1995 KEVIN WILKINS RED REWMAR MUSIC GO
IN THE ARMS OF LOVE PA812596 1995 WILLIAM BECTON RED REWMAR MUSIC WILLIAM BECTON GO
JUST BECAUSE PA813141 1995 M. YOUNG/LILLIAN RED REWMAR MUSIC GO
E. SMITH/
G. JACKSON
LET THE HEALING BEGIN PA813573 1995 WILLIAM BECTON/ RED REWMAR MUSIC WILLIAM BECTON GO
CHERYL PHILLIPS
NO TURNING BACK PA812598 1995 WILLIAM BECTON RED REWMAR MUSIC WILLIAM BECTON GO
PICK IT UP PA813139 1995 GARLAND WALLER RED REWMAR MUSIC GO
SINCE THE LORD CHANGED MY LIFE PA811787 1995 WILLIAM BECTON RED REWMAR MUSIC WILLIAM BECTON GO
STILL IN LOVE WITH YOU PA812597 1995 WILLIAM BECTON RED REWMAR MUSIC WILLIAM BECTON GO
SURE WON'T FORGET PA812594 1995 WILLIAM BECTON RED REWMAR MUSIC WILLIAM BECTON GO
TAKE A TRIP PA812583 1995 BRIAN CHASE RED REWMAR MUSIC GO
WILLIAMS/
TYRONE GREGG
TILL THE END PA813572 1995 WILLIAM BECTON RED REWMAR MUSIC WILLIAM BECTON GO
TIL THE END (JAZZ VERSION) PA813574 1995 WILLIAM BECTON RED REWMAR MUSIC WILLIAM BECTON GO
TIL YOU TAKE THE PAIN AWAY PA812595 1995 WILLIAM BECTON RED REWMAR MUSIC WILLIAM BECTON GO
TRUST IN JESUS PA813143 1995 MICHAEL SCOTT RED REWMAR MUSIC GO
</TABLE>
<PAGE>
PLATINUM ENTERTAINMENT
SONG FILE
<TABLE>
<CAPTION>
TITLE C # YEAR COMPOSER PUBLISHER ARTIST CODE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
UNFAILING GOD PA812588 1995 ANTHONY D. HILL RED REWMAR MUSIC GO
WE WORSHIP CHRIST PA811786 1995 BRYANT PHILLIPS RED REWMAR MUSIC GO
Co - Owned
CAUSE MY JESUS DID (50) PA813545 1994 THEODORE MATLOCK RED REWMAR MUSIC/ GO
GLOSSIAM MUSIC
I NEED THEE (50) PA811810 1994 GLOSTER WILLIAMS/ RED REWMAR/ GO
MARCUS DEVINE GLOSSIAM MUSIC
JESUS PRECIOUS KING (50) PA812590 1996 ANTHONY D. HILL RED REWMAR/ GO
JANTINA MUSIC
PUBLISHING
MESSAGE TO JESUS (50) PA812960 1996 ANTHONY HILL RED REWMAR/ GO
JANTINA MUSIC
PUBLISHING
MESSAGE TO JESUS - REPRISE (50) PA812589 1996 ANTHONY HILL RED REWMAR/ GO
JANTINA MUSIC
PUBLISHING
NO TURNING BACK (50) PA812598 1995 GLOSTER WILLIAMS RED REWMAR/ GO
GLOSSIAM MUSIC
OH! (50) PA813581 1994 GLOSTER WILLIAMS/ RED REWMAR/ GO
M. DEVINE/KEIR GLOSSIAM MUSIC
WARD
REJOICE (50) PA812585 1995 B. CHASE WILLIAMS/ RED REWMAR/SUGAR B. CHASE WILLIAMS & SHABACH GO
GREGG TYRONE BEAR PRODOS
WHAT HE'S DONE FOR ME (50) PA813580 1994 GLOSTER WILLIAMS RED REWMAR/ GO
GLOSSIAM MUSIC
SPEC TWELVE MUSIC
Owned
A MOTHER IN ZION PA810454 1995 HOWARD HUNT, JR. SPEC TWELVE MUSIC GO
FILL MY CUP PA810452 1995 HOWARD HUNT, JR. SPEC TWELVE MUSIC GO
I'VE COME ALL THE WAY PA810473 1995 HOWARD HUNT, JR. SPEC TWELVE MUSIC GO
LORD IS BLESSING ME, THE PA826838 1995 HOWARD HUNT, JR. SPEC TWELVE MUSIC GO
PEOPLE DON'T DO PA810469 1995 HOWARD HUNT, JR. SPEC TWELVE MUSIC GO
SAINTS IN PRAISE PA810453 1995 HOWARD HUNT, JR. SPEC TWELVE MUSIC GO
STAY UNDER THE BLOOD PA810432 1995 HOWARD HUNT, JR. SPEC TWELVE MUSIC GO
</TABLE>
<PAGE>
Schedule C-1
Unregistered Copyrights
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
REVERSION
SELECTION # PRJ # TITLE ARTIST SR # SR DATE DATE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
710023 621 Treasury Hawkins, Tramaine COMPILATION 1986 2061
710740 742 Autograph Crouch, Andrae COMPILATION 1986 2061
712379 741 Love Alive Reunion Hawkins, Walter COMPILATION 1987 2062
730083 740 Ladies of Gospel Various COMPILATION 1987 2062
730091 739 Now and Then Duncan, Bryan COMPILATION 1987 2062
730326 714 Gentlemen of Gospel Various COMPILATION 1990 2065
730407 722 Best of New Jersey Mass NJ Mass Choir COMPILATION 1991 2066
730563 735 A Collection Commissioned COMPILATION 1991 2066
730571 738 Best Of Vickie Winans Winans, Vickie COMPILATION 1991 2066
730598 744 Gentlemen Of Gospel, Vol 2 Various COMPILATION 1991 2066
730601 743 The Classics Crouch, Andrae COMPILATION 1991 2066
730628 743 We Sing Praises Crouch, Andrae COMPILATION 1991 2066
730636 743 The Contemporary Man Crouch, Andrae COMPILATION 1991 2066
LS5500 7 The Searching Generation Nachtagall, Rosemary N/A 1967 2042
LS5501 754G I Know Who Holds Tomorrow Ehret, Bob N/A 1968 2043
LS5502 754H ORU Choir-The Collegians ORU Choir N/A 1968 2043
LS5503 ORU Choir-The Collegians ORU Choir N/A 1968 2043
LS5504 0 Take The Message Everywhere Crouch, Andrae N/A 1968 2043
LS5507 21 My Father's Favorite Songs Roberts, Richard N/A 1968 2043
LS5510 20 I Looked For Love Carmichael, R/Young People N/A 1968 2043
LS5511 123 Songs My Father Taught Me Carmichael, Carol N/A 1970 2045
LS5513 A Quiet Place Shepherd, Bob&Blue Meadow N/A 1968 2043
LS5514 28 Sunday w/ the King Family King Family N/A 1970 2045
LS5518 Songs To Live By World Action Singers N/A 1969 2044
LS5520 Oral Roberts Presents/ World Action Singers N/A 1969 2044
LS5522 129 Something Good Is Going Roberts, Richard & Patti N/A 1969 2044
LS5524 114 Piano 1 Remember, Vol. 2 Carmichael, Ralph N/A 1970 2045
LS5525 118 Walkin' In God's Country Swordesmen N/A 1969 2044
LS5529 120 Ravenscroft Ravenscroft, Thurl N/A 1969 2044
LS5532 100 His Land Richard, Cliff N/A 1969 2044
LS5535 257 On A Rugged Hill Owens, Jimmy * 1973 2048
LS5538 124 A New Way Of Living Dalton, Larry N/A 1969 2044
LS5540 122 Searching Questions Roberts, Richard N/A 1969 2044
LS5541 130 Electric Symphony Gassman, Clark N/A 1970 2045
LS5542 116 Sometimes I Just Feel It This Way Carmichael, Ralph N/A 1970 2045
LS5544 Love Is Surrender Fischer, Clare N/A 1970 2045
LS5545 25 Right Now Cole, Bill N/A 1970 2045
- -----------------------------------------------------------------------------------------------------------------------
<PAGE>
PLATINUM MASTERS
- -----------------------------------------------------------------------------------------------------------------------
REVERSION
SELECTION # PRJ # TITLE ARTIST SR # SR DATE DATE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LS5546 138 Keep On Singin'/Misc. Masters Crouch, Andrae N/A 1971 2046
LS5549 Old Gems-New Settings World Action Singers N/A 1969 2044
LS5550 143 The Cross & Switchblade Carmichael, Ralph N/A 1970 2045
LS5551 146 A New Day Certain Sound N/A 1970 2045
LS5555 157 My Little World Carmichael, Ralph N/A 1970 2045
LS5559 147 Edge of Drifting Spradlin/Stanley N/A 1970 2045
LS5563 167 Love Is... World Action Singers N/A 1970 2045
LS5564 172 Family Valley, Jim N/A 1971 2046
LS5567 170 Ralph Carmichael Brass Choir Carmichael, Ralph N/A 1971 2046
LS5568 176 Let's Build a Bridge Dalton, Larry N/A 1971 2046
LS5569 180 Amazing Grace Roberts, Richard & Patti N/A 1971 2046
LS5570 197 Jimmy Owens Conducts Owens, Jimmy N/A 1971 2046
LS5573 182 The Sure Foundation Johnson, Paul N/A 1971 2046
LS5575 193 ORU Hawaii Roberts, Oral N/A 1971 2046
LS5578 214 A Quiet Place Roberts, Richard & Patti N/A 1972 2047
LS5579 213 Oh Great God Roberts, Richard N/A 1972 2047
LS5580 198 Carol Carmichael Songbook Carmichael, Carol N/A 1971 2046
LS5587 205 Sue Raney's People Tree Raney, Sue N/A 1972 2047
LS5591 211 Reaching Out James, Homes N/A 1971 2046
LS5593 210 Back Home Price, Flo N/A 1971 2046
LS5594 212 Hymns at Sunset Carmichael, Ralph N/A 1971 2046
LS5595 258 Treasures in Heaven Blanchard, Richard * 1973 2048
LS5596 137 Tell It Like It Is Fischer, Clare N/A 1970 2045
LS5599 Sunday A.M. Carmichael, Ralph N/A 1972 2047
LS5603 223 OR Country Roads World Action Singers COMPILATION 1972 2047
LS5605 228 Sunshine Day Mc Creary N/A 1972 2047
LS5607 234 Moving With The Brooks The Brooks N/A 1972 2047
LS5609 242 Patti Roberts, Patti N/A 1972 2047
LS5610 213 It's Our World Roberts, Richard N/A 1972 2047
LS5611 241 Mini Musicals World Action Singers N/A 1972 2047
LS5612 245 Sonlight Sonlight N/A 1972 2047
LS5622 260 Tell The World Owens, Jimmy * 1973 2048
LS5623 262 Vision Vision * 1973 2048
LS5628 266 The Church is Singing Again World Action Singers * 1974 2049
LS5637 286 Take Me Back Crouch, Andrae * 1975 2050
LS5641 290 The Sixth Day Sixth Day * 1974 2049
LS5642 291 It's About Time Johnson, Paul N/A 1972 2047
- -----------------------------------------------------------------------------------------------------------------------
<PAGE>
PLATINUM MASTERS
- -----------------------------------------------------------------------------------------------------------------------
REVERSION
SELECTION # PRJ # TITLE ARTIST SR # SR DATE DATE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LS5646 300 Growing Together Good News Circle * 1974 2049
LS5650 362 R C Nashville Style Spurr, Thurlow * 1976 2051
LS5652 309 Sing Around The World Dalton, Larry * 1974 2049
LS5656 318 The Church's 1 Foundation Mann, Johnnie * 1974 2049
LS5660 324 We're His Church Master Design * 1974 2049
LS5662 326 Thank You Lord Burgess, Dan * 1974 2049
LS5663 329 New Song in the Morning Monk, Doug * 1974 2049
LS5665 330 Think About Livin' Sixth Day * 1975 2050
LS5670 337 A Simple Song of Love Sonshine Circle * 1975 2050
LS5671 339 Doug Lawrence Lawrence, Doug * 1975 2050
LS5672 340 Double Vision Roberts, Richard * 1975 2050
LS5674 343 The Savior Is Waiting Carmichael, Ralph * D
LS5677 352 Old RC Quartet Ty Brothers * 1976 2051
LS5678 346 Best of Andrae Crouch Crouch, Andrae * 1975 2050
LS5682 374 The Greyhound 4 Freedoms Mann, Johnnie * 1975 2050
LS5686 364 Love Alive Hawkins, Walter * 1975 2050
LS5687 363 Thank Heaven For Love Archer, Gary & Sharon * 1975 2050
LS5689 365 Kolenda Family Kolenda Family * 1976 2051
LS5692 368 God's Quiet Love Mann, Lynn * 1976 2051
LS5695 373 Jana Wacker, Jana * 1976 2051
LS5697 371 Great Praise Meeting Dalton, Larry * 1976 2051
LS5699 375 Majesty & Glory Continentals * 1976 2051
LS5701 361 We Are His People Good News Circle * 1976 2051
LS5703 381 The New Has Come Messenger * 1976 2051
LS5706 384 Bowl Souvenir Album Various COMPILATION 1976 2051
LS5712 391 Never Felt So Free Children of the Day * 1977 2052
LS5713 392 Come To The Waters Children of the Day * 1974 2049
LS5714 393 With All Our Love Children of the Day * 1973 2048
LS5715 394 Where Else Would I Go Children of the Day * 1975 2050
LS5726 405 Portrait Carmichael, Ralph * 1977 2052
LS5730 410 Songs You'll Want To Sing Burgess, Dan * 1977 2052
LS5735 428 Love Alive 11 Hawkins, Walter * 1978 2053
LS5744 426 Revive Us Again Revivaltime Choir * 1978 2053
LS5748 429 Johnny Mann arr. Andrae Mann, Johnnie * 1978 2053
LS5750 434 Celebrate His Love Burgess, Dan * 1978 2053
LS5774 465 Fill My Life Burgess, Dan * 1980 2055
LS5784 477 Finally Crouch, Andrae * 1982 2057
- -----------------------------------------------------------------------------------------------------------------------
<PAGE>
- -----------------------------------------------------------------------------------------------------------------------
REVERSION
SELECTION # PRJ # TITLE ARTIST SR # SR DATE DATE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LS5791 487 Beyond Words Allreds * 1981 2056
LS5798 494 The Best/Ralph Carmichael Carmichael, Ralph COMPILATION 1981 2056
LS5814 513 It's Christmas De Azevedo, Lex * 1982 2057
LS5818 518 Son/Thunder,Daughter/Lite Rambo, Buck & Dottie * 1983 2058
LS5834 537 Best Of Walter Hawkins Hawkins, Walter COMPILATION 1984 2059
LS5838 541 Best Of Resurrection Band COMPILATION 1984 2059
LS5856 574 Prime Time Sweet Comfort Band COMPILATION 1985 2060
LS5857 567 Love Alive 111 Hawkins, Walter * 1984 2059
LS5867 573 Dreams, Tales & Lullabyes Edwards, Dave * 1985 2060
LS5871 579 Have Yourself Committed Duncan, Bryan * 1985 2060
LS5875 583 Serenity Various COMPILATION 1985 2060
LS5881 589 Hot Fudge Sunday Various COMPILATION 1985 2060
LS5894 602 Yesterday, Today/Tomorrow Winans COMPILATION 1985 2060
LS5902 611 A Gift For All Seasons Various COMPILATION 1985 2060
LS7501 754A Infinity Infinity * 1981 2056
LS7502 754B The Gift Of God New Bethel Mass Choir * 1981 2056
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
N/A - Prior to 1973 the Copyright Office did not accept Form SR
* - File is in Nashville and unable to recover (copies will be
obtained from Copyright Office)
<PAGE>
Schedule C-1
Unregistered Copyrights Cont.
Masters Status
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
item item release Master Status Reverts Territory
number description date
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
101091 BERNSTEIN,ANNIV;TOCCO,PIANO 7/15/84 Owned 2065 World
101211 TCHAIKOVSKY-NUTCRACKER SUITE DELETE Owned 2065 World
101401 APPALACHIAN SPRING SHORT SYM DELETE Owned 2065 World
101531 BACH:OBOE CONC;RIFKIN 4/15/86 Owned 2065 World
101761 BEETHOVEN-PIANO CONCERTO NO.2 DELETE Owned 2065 World
101851 BACH,MAGNIFICAT IN D;BACH ENSB 1/15/85 Owned 2065 World
101951 MOZART:BASSOON CON:MILLER/MAR 5/15/86 Owned 2065 World
102111 'BACH MEETS BEATLES';BAYLESS 9/15/84 Owned 2060 World
102201 'XMAS AT THE POPS';ROCHESTER/K 8/15/85 Owned 2065 World
102241 'VIENESSE SOMMERFEST';MINN ORC 9/15/85 Owned 2065 World
102281 BEETHOVEN-VIOLIN CONCERTO-SILV DELETE Owned 2065 World
102331 MOZART-SYMPHONY NO.40 DELETE Owned 2065 World
102351 3 GUITARS 3 DELETE Owned 2065 World
102381 DOHNANYI-SERENADE DELETE Owned 2065 World
102391 DOHNANYI-SONATAS DELETE Owned 2065 World
102411 BARBER-VIOLIN CONCERTO DELETE Owned 2065 World
102431 GRIEG-SCHUMANN/RUSSELL SHERMAN DELETE Owned 2065 World
102461 CHOPIN,MAZURKAS,WALTZES/SERKIN 7/15/86 Owned 2065 World
102471 MOXART SONATAS-SERKIN DELETE Owned 2065 World
102481 C.P.E. BACH-SONATAS-LEONHARDT DELETE Owned 2065 World
102501 'SABRE DANCE':HOUSTON/COMMIS 4/15/86 Owned 2065 World
102511 TCHAIKOVSKY WALTES HOUSTON S.O DELETE Owned 2065 World
102591 BEETHOVEN PIANO CONTEROS 1&4 DELETE Owned 2065 World
102601 BEETHOVEN PIANO CONCERTOS 2&3 DELETE Owned 2065 World
102611 BEETHOVEN PIANO CONCERTO NO.5 DELETE Owned 2065 World
102621 DUKES OF DIXIELAND 10/15/85 Owned 2060 World
102631 'CELEBRATE AMERICA!';HOUSTON/C 2/15/86 Owned 2065 World
102641 'SYNCOPATED CLOCK':ROCHESTER/K 5/15/86 Owned 2065 World
102661 BRAHMS,PIANO CONCERTO#1/SERKIN 7/15/86 Owned 2065 World
102671 POMP ON PARADE-COMISSIONA DELETE Owned 2065 World
102681 VIOLIN ENCORES-SILVERSTEIN DELETE Owned 2065 World
102711 BRAHMS:VIOLIN CONCERTO;UTAH/SL 9/15/86 Owned 2065 World
102731 VIVALDI;BASSOON CONCERTO;MILLR 8/15/86 Owned 2065 World
102761 'TIES AND TAILS';ELLING/GERSH; 10/15/86 Owned 2065 World
102771 MOZART-SERKIN-SILVERSTEIN DELETE Owned 2065 World
102781 EPISODES-SUMMIT BRASS DELETE Owned 2065 World
102791 FESTIVAL OF BAROQUE DELETE Owned 2065 World
102801 'FILM TRACKS', PARA THEATRE OR 7/15/86 Owned 2065 World
102811 'UP AND AWAY';PARAMONT THEATRE 9/15/86 Owned 2060 World
102821 'PIPES OF CHRISTMAS';PARAMOUNT 5/15/86 Owned 2060 World
102831 HANDEL:MESSIAH HIGH;MARYLAND 5/15/86 Owned 2065 World
103111 CHOPIN:24 PRELUDES OP.28;SHERM 11/15/86 Owned 2065 World
103121 BRAZILIAN DANCES-LIMA DELETE Owned 2065 World
103151 DUELING ORGANS; LARSEN/CURLEY 8/15/87 Owned 2060 World
103161 TCHAIKOVSKY:VIOLIN CONCERTO/SL 8/15/87 Owned 2065 World
103181 ALL AMERICAN BRASS-SUMMIT BRAS DELETE Owned 2065 World
103191 HOLST-THE PLANETS-MATA DELETE Owned 2065 World
103201 SIBELIUS-SYMPHONY NO.2 DALLAS DELETE Owned 2065 World
103221 'UPTOWN-DOWNTOWN',KUNZEL:ROCHS 7/15/87 Owned 2065 World
103251 ROMAN FESTIVAL-PACIFIC S.O. DELETE Owned 2065 World
103311 BACH:GOLBERG VARIATIONS DELETE Owned 2065 World
103331 ARTISTRY OF ANDREW DAVIS 5/15/88 Owned 2065 World
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE>
Masters Status
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
item item release Master Status Reverts Territory
number description date
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
101091 BERNSTEIN,ANNIV;TOCCO,PIANO 7/15/84 Owned 2065 World
103361 BRAHMS:PINO CON#2;SERK/ALANTA 3/15/87 Owned 2065 World
103381 SWITCHED ON CLASSICS DELETE Owned 2065 World
103391 'GIVE MY REGARDS';PARAMOUNT/LA 2/15/87 Owned 2060 World
103401 CARNIVAL FOR BRASS-ST.LOUIS BS DELETE Owned 2065 World
103411 BAROQUE BRASS-ST. LOUIS BRASS DELETE Owned 2065 World
103421 GREAT MELODIES FROM THE CLASSI DELETE Owned 2065 World
103441 HERE COMES THE BRIDE-LYN LARSN DELETE Owned 2065 World
103451 DVORAK-SLOVIC DANCES DELETE Owned 2065 World
103461 'BACH ON ABBEY ROAD'-BAYLESS 8/15/87 Owned 2060 World
103471 AN ENGLISH CHRISTMAS DELETE Owned 2065 World
103481 'A CLASSIC CHRISTMAS',VARIOUS 6/15/87 Owned 2065 World
103501 'POP GO THE BEATLES';WAYLAND 10/15/87 Owned 2065 World
103511 'AMERICA SWINGS'HOUSTON/WAYLA 8/15/87 Owned 2065 World
103521 GERSHWIN:RHAPSODY IN BLUE;DENV 11/15/87 Owned 2065 World
103531 THE FINEST HOUR-CURLEY DELETE Owned 2065 World
103541 CARLO CURLEY AT ROYAL FESTIVAL DELETE Owned 2065 World
103581 SCHUBERT DANCES:SERKIN 6/15/87 Owned 2065 World
103591 'A NIGHT AT THE POPS';KUNZEL 10/15/87 Owned 2065 World
103601 'JOY OF CHRISTMAS',VARIOUS 6/15/87 Owned 2065 World
103611 BOLERO;DENVER SYMPHONY 9/15/87 Owned 2065 World
103621 BEETHOVEN PIANO SONATAS-SERKIN DELETE Owned 2065 World
103641 DANCE TO YOUR DADDY DELETE Owned 2065 World
103891 DVORAK:SILVERSTEIN DELETE Owned 2065 World
103911 MISTY:JOHN DANKWORTH DELETE Owned 2065 World
103931 SCHUMANN:SYM1#4/HOUSTON,COMISS 5/15/88 Owned 2065 World
103941 SCHUMANN:SYM2&3/HOUSTON,COMISS 5/15/88 Owned 2065 World
104031 THE THREE HEROES DELETE Owned 2065 World
104071 FROM LONDON WITH LOVE Owned 2065 World
104081 ERICH KUNZEL'S GERSHWIN DELETE Owned 2065 World
104091 TCHAIKOVSKY:1812 AUDIO+/DALLAS 7/15/88 Owned 2065 World
104101 VIVE LA FRANCE DELETE Owned 2065 World
104131 BACH,BAYLESS & BEATLES:BAYLESS 1/15/89 Owned 2060 World
104141 CLASSICAL JUKEBOX DELETE Owned 2065 World
104171 AMAZING GRACE;CARLO CURLEY 10/15/88 Owned 2060 World
104191 SWITCHED ON BEATLES;CHASE/RUKR 10/15/88 Owned 2065 World
104201 STOMPIN AT THE SAVOY DELETE Owned 2065 World
104211 SOPHISTICATED LADIES DELETE Owned 2065 World
104281 SWITCHED ON XMAS;CHASE/RUKER 9/15/88 Owned 2065 World
104341 NO BUSINESS LIKE SHOW BUSINESS 10/15/88 Owned 2060 World
104351 PIPES OF HOLLYWOOD:HAZELTON 1/15/89 Owned 2060 World
104421 RACHMANINOFF:CON #2, VIARDO/DL 2/15/89 Owned 2065 World
104431 STRAVINSKY: FIREBIRD/DALLAS/MA 2/15/89 Owned 2065 World
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 2
<PAGE>
Masters Status
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
item item release Master Status Reverts Territory
number description date
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
101091 BERNSTEIN,ANNIV;TOCCO,PIANO 7/15/84 Owned 2065 World
104441 SERENADE - UTAH SYMPHONY AUDIO 2/15/89 Owned 2065 World
104451 RAGTIMES GREATEST HITS-HAZELTO 8/15/89 Owned 2060 World
104471 BEETHOVEN: VARIATIONS SERKIN DELETE Owned 2065 World
104491 GREATEST HITS OF THE BIG BANDS 5/15/89 Owned 2065 World
104521 A TOUCH OF FIEDLER DELETE Owned 2065 World
104531 MUSSORGSKY:PICTURES ENTREMONT 5/15/89 Owned 2065 World
104541 LEROY ANDERSON G HITS;KUNZEL 5/15/89 Owned 2065 World
104611 'BEST OF THE MILLS BROTHERS' 6/15/89 Owned 2065 World
104621 PRIME TIME - TV THEMES 6/15/89 Owned 2060 World
104701 SCHUBERT:TROUT-ENTREMONT 1/15/90 Owned 2065 World
104751 'PHANTOM' FLORIDA POPS/CACAVAS 9/15/89 Owned 2060 World
104771 GREIG/RACHMANINOFF:SYM DANCES 10/15/89 Owned 2065 World
104781 'TODAYS BRIDE'FLORIDA POPS 4/15/90 Owned 2060 World
104791 MAHLER:2ND SYMP;MATA/DALLAS 10/15/89 Owned 2065 World
104881 ANTHEM-DESOLATION ANGELS 9/15/89 Owned 2065 World
104921 'ANTHEMS OF THE WORLD'/ROYAL G 10/15/89 Owned 2060 World
104951 KUNZEL'S GREATEST HITS 2/15/90 Owned 2065 World
104981 MOZART: PIANO SONATAS ENTREMON 5/15/90 Owned 2065 World
104991 MOZART: PIANO SONATAS 2 ENTREM 5/15/90 Owned 2065 World
105001 CELLO 2/15/94 Owned 2065 World
105041 HOLLYWOOD MARCHES-SCHIFFRIN 6/15/90 Owned 2060 World
105101 THEMES OF OUR LIVES 7/15/90 Owned 2065 World
105111 TOUCHDOWN USA:FLORIDA MARCHING 8/15/90 Owned 2060 World
105121 BRAZILIAN NIGHTS:ARTHUR LIMA 8/15/90 Owned 2065 World
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 3
<PAGE>
Masters Status
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
item item release Master Status Reverts Territory
number description date
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
101091 BERNSTEIN,ANNIV;TOCCO,PIANO 7/15/84 Owned 2065 World
105221 ON MY OWN - PETER NERO 9/15/90 Owned 2060 World
105241 MUSIC FOR MURDER (SURROUND) 10/15/90 Owned 2060 World
105271 FIREWORKS FOR ORCHESTRA 10/15/90 Owned 2060 World
105281 BROADWAY (SURROUND) 10/15/90 Owned 2060 World
105391 TCHAIK: 1812, CASSOCK MATA 8/15/91 Owned 2060 World
105411 VIVE LA LIBERTE:DENVER/ENTREMO 8/15/91 Owned 2060 World
105421 HOLST: THE PLANETS 3/15/91 Owned 2060 World
105431 ROMAN CARNIVAL 4/15/91 Owned 2060 World
105441 MUSSORSKY:PICTURE AT AN EXHIBI 8/15/91 Owned 2060 World
105451 AMERICAN'S WE - HENRY FILMORE 1/15/91 Owned 2060 World Extendable at Intersound's Option
105461 SHALOM-MUSIC OF THE JEWISH PEO 1/15/91 Owned 2060 World
105471 LEGENDS - JUDY GARLAND 2/15/91 Owned 2060 World
105561 THE NAME IS BOND...JAMES BOND 4/15/91 Owned 2060 World
105601 GRAND OLD FLAG 4/15/91 Owned 2060 World
105631 CAROL FOR THE PLANET 8/15/91 Owned 2065 World
105641 BRIDES BOOK - SURROUND 2/15/92 Owned 2060 World
105691 WEDDING DAY 5/15/91 Owned 2060 World
105701 SNAPSHOTS OF AMERICA 5/15/91 Owned 2060 World
105731 AFTER HOURS 8/15/91 Owned 2060 World
105741 GERSHWIN:RHAPSODY IN BLUE:DENV 2/15/92 Owned 2060 World
105761 CLASSIC CONNECTIONS;NERO 9/15/91 Owned 2060 World
105771 OSCAR! - LALO SCHIFRIN 2/15/92 Owned 2060 World
105781 MOZART:SYMPHONY 40 & 41 8/15/91 Owned 2060 World
105791 MOZART:EINE KLIENE NACHT MUSIC 9/15/91 Owned 2060 World
105801 THE TEMPEST:MUSIC OF THE STORM 8/15/91 Owned 2060 World
105811 DE FALLA:THREE CORNERED HAT 8/15/91 Owned 2060 World
105821 THE NUTCRACKER 8/15/91 Owned 2065 World
105841 TCHAIKOVSKY WALTZES:HOUSTON 2/24/92 Owned 2060 World
105861 GRAND SALON ARPIN 2/15/92 Owned 2060 World
105871 STRAVINSKY:THE FIREBIRD:DSO 2/24/92 Owned 2060 World
105881 BEETHOVEN:VIOLIN CONCERTO 3/23/92 Owned 2060 World
105891 GLIERE SYMPHONY #3:SAN DIEGO 9/15/91 Owned 2065 World
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 4
<PAGE>
Masters Status
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
item item release Master Status Reverts Territory
number description date
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
101091 BERNSTEIN,ANNIV;TOCCO,PIANO 7/15/84 Owned 2065 World
105941 NEW YORK, NEW YORK:NYCGMC 2/15/92 Owned 2060 World Extendable at Intersound's Option
105961 STRAVINSKY:PETROUSHKA-DALLAS 9/15/91 Owned 2060 World
106181 WOLVERINES:SHANGHAI SHUFFLE DELETE Owned 2065 World
106201 TIGER RAG;DUKES OF DIXIELAND 9/15/86 Owned 2060 World
106211 LIVE FROM SATURDAY NIGHT LIVE DELETE Owned 2065 World
106221 RIO NIDO:VOICINGS DELETE Owned 2065 World
106281 LOVE YOU MADLY:ESTREM/HOLMQUIS DELETE Owned 2065 World
106351 MYSTERY WALK:JOE TAYLOR DELETE Owned 2065 World
106441 BEST OF THE DUKES OF DIXIELAND 9/15/87 Owned 2060 World
106451 SAMOA:NO BAND IS AN ISLAND DELETE Owned 2065 World
106581 JOE TAYLOR:DARKEN GARDEN DELETE Owned 2065 World
106591 AL HIRT: THAT A PLENTY Owned 2060 World
106661 A CLOSER WALK-ALLIANCE HALL 2/15/94 Owned 2060 World
106671 JUMP START:RICK STRAUSS DELETE Owned 2065 World
106701 COTTON CANDY; AL HIRT 2/15/89 Owned 2060 World
106781 BOSSA:ESTREM/HOLMQUIST DELETE Owned 2065 World
106791 ECHOES OF HARLEM;DANKWORTH/ROC 10/15/88 Owned 2065 World
106821 NEW ORLEANS - ALLIANCE HALL 2/15/89 Owned 2060 World
106861 MOZART FOR A NEW AGE/CHASE 4/15/89 Owned 2065 World
106871 JAZZIN' THE POPS'-AL HIRT 8/15/89 Owned 2060 World
106901 BODYLINES:RICK STRAUSS 6/15/89 Owned 2065 World
106931 'AIN'T MISBEHAVIN'-ALLIANCE HA 9/15/89 Owned 2060 World Extendable at Intersound's Option
106941 BEST OF BOURBON STREET:VARIOUS 6/15/89 Owned 2060 World
106971 'RIDIN THE TIDE'-OCEANS 6/15/89 Owned 2065 World
106981 'SYMPHONY SESSIONS' GILLESPIE 9/15/89 Owned 2065 World
107021 KINGSTON TRIO;BEST OF THE BEST 7/15/86 Owned 2060 World
107031 SYMPHONIC DREAMS-MULLIGAN 9/15/87 Owned 2065 World
107271 AL HIRT'S GREATEST HITS 7/15/90 Owned 2060 World Extendable at Intersound's Option
107291 BACH FOR A NEW AGE:EARNEST 8/15/90 Owned 2065 World
107301 LULLABIES FOR A NEW AGE 8/15/90 Owned 2065 World Extendable at Intersound's Option
107321 BASIN STREET BLUES;OLYMPIA 8/15/90 Owned 2060 World
107341 ON BOURBON STREET:OLYMPIA BRAS 4/15/91 Owned 2060 World
107351 LIVE AT PRESERVATION HALL-OLY 7/15/91 Owned 2060 World
107361 FUNERAL PARADE 1/15/92 Owned 2065 World
107371 SANTA FE SUNSET 2/24/92 Owned 2065 World
107391 SAINTS:NEW ORLEANS ALL STARS 1/15/94 Owned 2060 World
107401 PARTNERS IN TIME 9/6/94 Owned 2070 World
108051 FIREWORKS BRASS;CHI BRAS/MAXI 1/15/86 Owned 2060 World
108401 MESSIAH HIGHLIGHTS 6/15/89 Owned 2065 World
108411 CHRISTMAS AT THE POPS 6/15/89 Owned 2065 World
108421 WORLDS GREATEST CAROLS 6/15/89 Owned 2065 World
108431 NEW AGE NOEL 6/15/89 Owned 2065 World
108461 'COPLANDS GREATEST HITS' 6/15/89 Owned 2055 World
109921 O HOLY NIGHT (2DISC SET) 7/15/92 Owned 2055 World
109931 CHRISTMAS TREASURES 2 DISC 7/15/92 Owned 2055 World
110211 AL HIRT'S GREATEST HITS 7/15/92 Owned 2060 World
110301 ROMANCE & ROSES: 4 DISC SET 12/15/96 Owned 2060 World
110311 CLASSIC INTERLUDES 6/16/96 Owned 2055 World
110551 BROADWAY - 4 DISC 12/15/92 Owned 2070 World
110651 INTERLUDES;VAN KRAVEN 4DISC 12/15/96 Owned 2065 World
110701 IMPRESSIONS - 4 DISC SLEEVE 9/15/93 Owned 2065 World
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 5
<PAGE>
Masters Status
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
item item release Master Status Reverts Territory
number description date
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
101091 BERNSTEIN,ANNIV;TOCCO,PIANO 7/15/84 Owned 2065 World
110801 MUSIC OF THE BEATLES: 4 CD 2/15/94 Owned 2065 World
110851 DIXIELANDS GREATEST;4DISC 12/15/93 Owned 2065 World
110961 BEATLES,BAYLESS,BACH: 2 DISC 1/15/93 Owned 2065 World
111001 PASSION:4 DISC SET 12/15/96 Owned 2065 World
111151 BEST OF BRANSON:4 DISC SET 8/15/94 Owned 2055 World
111201 BEST OF BROADWAY:4 DISC SET 8/15/94 Owned 2065 World
111251 BEST OF HOLLYWOOD:4 DISC SET 8/15/94 Owned 2065 World
111301 CHRISTMAS TREASURES:4 DISC SET 9/15/94 Owned 2055 World
111351 A HOLIDAY SONGBOOK:4 DISC SET 9/15/94 Owned 2055 World
111401 SEASONS GREETINGS:4 DISC SET 9/15/94 Owned 2055 World
111651 JOY TO THE WORLD: 4 DISC SET 8/15/95 Owned 2055 World
111701 SOUNDS OF THE SEASON:4 DISC 8/15/95 Owned 2055 World
111751 VAN CRAVEN:LA AMOUR 4 DISC 12/15/96 Owned 2065 World
111801 PARTY SET:4 DISC 6/15/96 Owned 2055 World
111851 CLASSIC COUNTRY HITS:4 DISC 6/15/96 Owned 2055 World
111901 ALL TIME FAVORITES:4 DISC 8/15/96 Owned 2055 World
111951 CLASSIC COUNTRY HYMNS:4 DISC 8/15/96 Owned 2055 World
115011 A COUNTRY CHRISTMAS 7/15/91 Owned 2055 World
115021 HOME FOR THE HOLIDAYS 7/15/91 Owned 2055 World
115031 SILENT NIGHT 7/15/91 Owned 2055 World
115041 THE FIRST NOEL 7/15/91 Owned 2055 World
115051 SOUNDS OF CHRISTMAS 7/15/91 Owned 2055 World
115061 DECK THE HALLS 7/15/91 Owned 2055 World
115071 WHITE CHRISTMAS 7/15/91 Owned 2055 World
115081 A CHRISTMAS ALBUM 7/15/91 Owned 2055 World
115091 JOY TO THE WORLD 7/15/91 Owned 2055 World
115101 CHRISTMAS MAGIC 7/15/91 Owned 2055 World
115111 HOLLY AND THE IVY 7/15/91 Owned 2055 World
115121 THE NUTCRACKER 7/15/91 Owned 2055 World
115131 CHRISTMAS IN AMERICA 7/15/91 Owned 2055 World
115141 HOLIDAY CLASSICS 7/15/91 Owned 2055 World
115151 CAROLS FOR CHRISTMAS 7/15/91 Owned 2055 World
115161 THE FIRST NOEL 7/15/91 Owned 2055 World
115171 SLEIGH RIDE 7/15/91 Owned 2055 World
115181 A CLASSIC CHRISTMAS 7/15/91 Owned 2055 World
115191 MESSIAH HIGHLIGHTS 7/15/91 Owned 2055 World
115201 O HOLY NIGHT 7/15/91 Owned 2055 World
115211 NUTCRACKER 7/15/92 Owned 2055 World
115215 REDEEM THE TIME 11/15/92 Owned 2055 World
115221 O HOLY NIGHT 7/15/92 Owned 2055 World
115231 A FAMILY CHRISTMAS 8/15/92 Owned 2055 World
115241 THE FIRST NOEL 8/15/92 Owned 2055 World
115251 CHRISTMAS MELODIES 8/15/92 Owned 2055 World
115261 JOYFUL TIDINGS 8/15/92 Owned 2055 World
115271 STEVEN DE GROOTE IN RECITAL 4/15/93 Owned 2055 World
115295 GSE 1529 Owned 2055 World
115305 FRANCOIS DU TOIT 2/15/94 Owned 2055 World
115311 CHRISTMAS AT THE POPS 6/15/94 Owned 2055 World
115321 A NUTCRACKER CHRISTMAS 6/15/94 Owned 2055 World
115331 CAROLS OF CHRISTMAS 6/15/94 Owned 2055 World
115341 CHRISTMAS IN AMERICA 6/15/94 Owned 2055 World
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 6
<PAGE>
Masters Status
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
item item release Master Status Reverts Territory
number description date
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
101091 BERNSTEIN,ANNIV;TOCCO,PIANO 7/15/84 Owned 2065 World
115351 SILENT NIGHT 6/15/94 Owned 2055 World
115361 A CLASSIC CHRISTMAS 6/15/94 Owned 2055 World
115371 JOY TO THE WORLD 6/15/94 Owned 2055 World
115381 HOME FOR THE HOLIDAYS 6/15/94 Owned 2055 World
115391 SONGS FOR THE SEASON 6/15/94 Owned 2055 World
115401 TWELVE DAYS IN DECEMBER 6/15/94 Owned 2055 World
115421 CHRISTMAS POPS 6/25/96 Owned 2055 World
115431 HOLIDAY CLASSICS 6/25/96 Owned 2055 World
115441 CHRISTMAS CHORUS 6/25/96 Owned 2055 World
115451 SILENT NIGHT 6/25/96 Owned 2055 World
115461 THE NUTCRACKER 6/25/96 Owned 2055 World
115471 CHRISTMAS COUNTRY 6/25/96 Owned 2055 World
115481 CHRISTMAS BRASS 6/25/96 Owned 2055 World
115491 NOEL 6/25/96 Owned 2055 World
115501 HANDEL'S MESSIAH 6/25/96 Owned 2055 World
115511 CAROLS 6/25/96 Owned 2055 World
115701 WINTER WONDERLAND:4 DISC SET 9/16/96 Owned 2055 World
115751 CHRISTMAS TREASURES:4 DISC SET 9/16/96 Owned 2055 World
115801 CHRISTMAS CLASSICS 9/16/96 Owned 2055 World
115851 SEASONS GREETINGS:4 DISC SET 9/16/96 Owned 2055 World
115901 JOY TO THE WORLD:4 DISC SET 7/16/97 Owned 2055 World
116011 SEASON'S GREETINGS 7/15/93 Owned 2055 World
116021 YULETIDE CLASSICS 7/15/93 Owned 2055 World
116031 CHRISTMAS AT THE POPS 7/15/93 Owned 2055 World
116041 CHRISTMAS JOURNEY 7/15/93 Owned 2055 World
116051 A SWINGIN' CHRISTMAS 7/15/93 Owned 2055 World
116061 A HOLIDAY SONGBOOK 7/15/93 Owned 2055 World
116211 NUTCRACKER 9/15/94 Owned 2055 World
116221 XMAS AT THE POPS 9/15/94 Owned 2055 World
116231 12 DAYS IN DECEMBER 9/15/94 Owned 2055 World
116241 CAROLS OF XMAS 9/15/94 Owned 2055 World
116251 WINTER WONDERLAND 9/15/94 Owned 2055 World
116261 XMAS CLASSICS 9/15/94 Owned 2055 World
116271 SLEIGH BELLS 9/15/94 Owned 2055 World
116281 O HOLY NIGHT 9/15/94 Owned 2055 World
116311 A NUTCRACKER CHRISTMAS 6/25/96 Owned 2055 World
116321 CHRISTMAS AT THE POPS 6/25/96 Owned 2055 World
116331 CHRISTMAS IN AMERICA 6/25/96 Owned 2055 World
116341 A HOLIDAY SONGBOOK 6/25/96 Owned 2055 World
116351 CHRISTMAS CLASSICS 6/25/96 Owned 2055 World
116361 SILENT NIGHT 6/25/96 Owned 2055 World
116371 SOUNDS OF THE SEASON 6/25/96 Owned 2055 World
116381 SLEIGH RIDE 6/25/96 Owned 2055 World
116391 CAROLS OF CHRISTMAS 6/25/96 Owned 2055 World
116401 CHRISMTAS JOURNEY 6/25/96 Owned 2055 World
116511 SLEIGHRIDE 8/16/97 Owned 2055 World
116521 JINGLE BELLS 8/16/97 Owned 2055 World
116531 AWAY IN A MANAGER 8/16/97 Owned 2055 World
116541 DECK THE HALLS 8/16/97 Owned 2055 World
116551 LET IT SNOW 8/16/97 Owned 2055 World
116561 GREENSLEEVES 8/16/97 Owned 2055 World
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 7
<PAGE>
Masters Status
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
item item release Master Status Reverts Territory
number description date
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
101091 BERNSTEIN,ANNIV;TOCCO,PIANO 7/15/84 Owned 2065 World
116571 JOY TO THE WORLD 8/16/97 Owned 2055 World
116581 THE FIRST NOEL 8/16/97 Owned 2055 World
116591 CAROL OF THE BELLS 8/16/97 Owned 2055 World
116601 SILENT NIGHT 8/16/97 Owned 2055 World
116611 A NUTCRACKER CHRISTMAS 8/16/97 Owned 2055 World
116621 CHRISTMAS CLASSICS 8/16/97 Owned 2055 World
116631 THE FIRST NOEL 8/16/97 Owned 2055 World
116641 JOY TO THE WORLD 8/16/97 Owned 2055 World
116651 A CHRISTMAS SONGBOOK 8/16/97 Owned 2055 World
116661 DECK THE HALLS 8/16/97 Owned 2055 World
116671 THIS CHRISTMAS 8/16/97 Owned 2055 World
116681 CAROL OF THE BELLS 8/16/97 Owned 2055 World
116691 GREENSLEEVES 8/16/97 Owned 2055 World
116701 JINGLE BELLS 8/16/97 Owned 2055 World
116751 SILENT NIGHT:4 DISC SET Owned 2055 World
116801 A HOLIDAY SONGBOOK:4 DISC SET Owned 2055 World
116851 CHRISTMAS CLASSICS:4 DISC SET Owned 2055 World
116901 SOUNDS OF THE SEASON:4 DISC SE Owned 2055 World
117001 MOVIES:4 DISC SET 10/15/96 Owned 2055 World
117101 ROMANCE & ROSES:VOL 2 4DISC 12/15/96 Owned 2055 World
117151 SCOTT JOPLIN: 4 DISC SET 1/15/97 Owned 2055 World
117201 MARTINI'S & MEMORIES:4 DISC SE 1/15/97 Owned 2055 World
117291 *PIANO INTERLUDES:4 DISC SET 8/15/97 Owned 2055 World
134101 MOZART:SONATA VOL3-ENTREMONT 7/15/90 Owned 2055 World
134111 MOZART:SONATAS VOL4,ENTREMONT 4/15/92 Owned 2055 World
134351 MAGICAL, MYSTICAL, MOUSE 10/15/92 Owned 2065 World
134361 COPLAND PORTRAIT -STRAKS 10/15/92 Owned 2065 World
134371 CARPE DIEM 1/15/93 Owned 2065 World
134401 LOOK OF LOVE - WEDDING MUSIC 3/15/93 Owned 2065 World
134501 RACHMANINOFF'S ISLE OF THE DEA 8/15/93 Owned 2065 World
134551 NERO: MY WAY 9/15/93 Owned 2065 World
134571 DALLAS:THREE HEROES,RACHMANINO 8/15/93 Owned 2065 World
134581 BOLERO:DENVER SYMPHONY ORCH 8/15/93 Owned 2065 World
134591 BRAHMS PIANO CONCERTOS:ATLANTA 8/15/93 Owned 2065 World Extendable at Intersound's Option
134771 O PERFECT LOVE-WEDDING HARP 2/15/94 Owned 2065 World
134781 JEWISH WEDDING ALBUM 2/15/94 Owned 2065 World Extendable at Intersound's Option
134901 FIRE & ICE: FRANK PELLICO 4/15/94 Owned 2065 World
134951 PHANTOM OF THE ORGAN 4/15/94 Owned 2065 World Extendable at Intersound's Option
135001 CELEBRATE AMERICA:HOUSTON,SAN 5/15/94 Owned 2065 World Extendable at Intersound's Option
135021 AMERICAN FESTIVAL:MILWAUKEE 5/15/94 Owned 2065 World Extendable at Intersound's Option
135051 PETER NERO AND FRIENDS 10/15/94 Owned 2065 World
135161 POMP ON PARADE:HOUSTON 10/15/94 Owned 2065 World
135191 *PELLICO:BEGIN THE BEQUINE 12/15/94 Owned 2055 World Extendable at Intersound's Option
135231 CHRISTMAS PIANO ROLL 4/15/95 Owned 2055 World Extendable at Intersound's Option
135241 PIANO ROLL:AMERICAN PATROL 4/15/95 Owned 2065 World
135251 PIANO ROLL:AMERICAN SALUTE 4/15/95 Owned 2055 World
135261 PIANO ROLL:SENTIMENTAL YOU 4/15/95 Owned 2055 World
135271 PIANO ROLL:WALTZ YOU SAVED FOR 4/15/95 Owned 2055 World
135281 XMAS SWING:LEAGUE OF DECENCY 6/25/96 Owned 2055 World
135421 LOVE IS:ENHANCED 10/15/95 Owned 2065 World
135441 WEDDING DAY:A BRIDES BOOK 2/15/96 Owned 2065 World
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 8
<PAGE>
Masters Status
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
item item release Master Status Reverts Territory
number description date
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
101091 BERNSTEIN,ANNIV;TOCCO,PIANO 7/15/84 Owned 2065 World
135451 BEETHOVEN:SYM #9 ATLANTA:2 DIS 1/15/95 Owned 2055 World Extendable at Intersound's Option
135461 MESSIAH: 2 DISC 6/25/96 Owned 2055 World Extendable at Intersound's Option
135471 VAN CRAVEN: OUR LOVE 1/15/96 Owned 2055 World
135571 CELEBRATE AMERICA 3/15/96 Owned 2055 World Extendable at Intersound's Option
135591 AMERICAN PARADE 3/15/96 Owned 2055 World
135611 SPACE AND BEYOND 3/15/96 Owned 2055 World
135621 XMAS WITH JOHN ARPIN 6/25/96 Owned 2055 World
135631 CHRISTMAS UNPLUGGED:ED SWEENEY 9/16/96 Owned 2055 World
135641 OLDE FASHIONED CHRISTMAS 9/16/96 Owned 2055 World
135661 ORINOCO FLOW:TALIESIN ORCHEST 972015 Owned 2071 World
135671 PETER NERO:LOVE SONGS RAINY DA 11/15/96 Owned 2055 World
135721 ARPIN AT THE OPERA 9/15/96 Owned 2055 World
135731 TANGO 9/15/96 Owned 2055 World
135741 BROADWAY FOR LOVERS 11/15/96 Owned 2055 World
135751 FORBIDDEN FOREST 5/15/97 Owned 2055 World Extendable at Intersound's Option
135831 PETER NERO:MORE IN LOVE Owned 2055 World
135841 ECHOES OF ELLINGTON 8/15/97 Owned 2055 World Extendable at Intersound's Option
135851 ECHOES OF ELLA Owned 2055 World Extendable at Intersound's Option
135871 BROADWAY GREATEST HITS:2 DISC 8/15/97 Owned 2055 World Extendable at Intersound's Option
135881 HOLLYWOOD'S GREATEST HITS:2 DI 8/15/97 Owned 2055 World Extendable at Intersound's Option
135901 PETER NERO:MORE IN LOVE 9/15/97 Owned 2055 World Extendable at Intersound's Option
135911 M GINRAS:KLEZMER CINCY 9/23/97 Owned 2055 World Extendable at Intersound's Option
135931 JOHN ARPIN:MY FAVORITE REQUEST 9/15/97 Owned 2055 World
135941 ANTHEM: TALESIN 10/15/97 Owned 2065 World
136151 AT THE MOVIES:REFERENCE GOLD 11/15/95 Owned 2060 World
136161 LOVERS ONLY:REFERENCE GOLD 11/15/95 Owned 2060 World
136511 HOLLYWOOD: THE GREATEST HITS 4/15/94 Owned 2060 World
136521 THE BEST OF BROADWAY 4/15/94 Owned 2060 World
136531 ENCORES! THE BEST OF THE POPS 4/15/94 Owned 2060 World
136541 BEATLES: CLASSIC HITS 4/15/94 Owned 2060 World
136551 DIXIELAND:THE GREATEST HITS 2/15/94 Owned 2060 World
136561 ROMANCE:MUSIC OF LOVE 4/15/94 Owned 2060 World
136571 MOVIES:HOLLYWOOD 10/15/96 Owned 2055 World
136581 PARTY SET 8/15/96 Owned 2055 World
136701 BIZET:CARMEN,FAUST,SAMSUNET DI 1/15/95 Owned 2065 World
136711 PUCCINI:M.BUTTERFLY,LA BOHEME 1/15/95 Owned 2065 World
136721 VERDI:RIGALETTO,LA TRAVIATA 1/15/95 Owned 2065 World
136731 WAGNER:TRISTAN & ISOLDE,DIE ME 1/15/95 Owned 2065 World
140001 HAWAIIAN HOLIDAY 10/15/90 Owned 2065 World
140011 HOLIDAY IN FRANCE 10/15/90 Owned 2065 World
140021 HOLIDAY IN ITALY 10/15/90 Owned 2065 World
140031 OKTOBERFEST 10/15/90 Owned 2065 World
140041 HOLIDAY IN SPAIN 10/15/90 Owned 2065 World
140051 HOLIDAY IN MEXICO 1/15/91 Owned 2065 World
140061 CARRIBEAN HOLIDAY 1/15/91 Owned 2065 World
140071 HOLIDAY IN RIO 1/15/91 Owned 2065 World
140081 BELLY DANCE UNTITLED 1/15/91 Owned 2065 World
140091 HOLIDAY IN IRELAND 4/15/91 Owned 2065 World
140101 HOLIDAY GYPSY 4/15/91 Owned 2065 World
140111 HOLIDAY IN GREECE 4/15/91 Owned 2065 World
140121 POLKA HOLIDAY 4/15/91 Owned 2065 World
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 9
<PAGE>
Masters Status
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
item item release Master Status Reverts Territory
number description date
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
101091 BERNSTEIN,ANNIV;TOCCO,PIANO 7/15/84 Owned 2065 World
140131 SOUTH AMERICAN HOLIDAY 9/15/91 Owned 2065 World
140141 BAVARIAN HOLIDAY 9/15/91 Owned 2065 World
140151 HOLIDAY IN ISRAEL 9/15/91 Owned 2065 World
140161 HOLIDAY IN SCOTLAND 9/15/91 Owned 2065 World
140171 JAMACIAN HOLIDAY 1/13/92 Owned 2065 World
140181 SWISS HOLIDAY 1/13/92 Owned 2065 World
140191 SCANDAVIAN HOLIDAY 1/13/92 Owned 2065 World
140201 JAPANESSE HOLIDAY 1/13/92 Owned 2065 World
140211 CALYPSO HOLIDAY 4/15/92 Owned 2065 World
140221 MAMBO HOLIDAY 4/15/92 Owned 2065 World
140231 RUSSIAN HOLIDAY 4/15/92 Owned 2065 World
140241 DELETE Owned 2065 World
140251 HOLIDAY IN INDIA 2/15/93 Owned 2065 World
140261 MARIACHI HOLIDAY 2/15/93 Owned 2065 World
141011 TASTE OF FRANCE 8/15/92 Owned 2065 World
141021 TASTE OF GERMANY 8/15/92 Owned 2065 World
141031 TASTE OF ITALY 8/15/92 Owned 2065 World
141041 TASTE OF GREECE 8/15/92 Owned 2065 World
141051 TASTE OF SPAIN 8/15/92 Owned 2065 World
141061 TASTE OF THE CARIBBEAN 8/15/92 Owned 2065 World Extendable at Intersound's Option
141071 TASTE OF MEXICO 2/15/94 Owned 2065 World
141081 TASTE OF ISREAL 2/15/94 Owned 2065 World
141601 PETER NERO DIGITAL CLASSICS 1/15/92 Owned 2055 World
142111 BACH MEETS THE BEATLES 2/15/89 Owned 2055 World
142521 BEST OF BROADWAY 2/15/89 Owned 2055 World
142761 TIES AND TAILS 2/15/89 Owned 2055 World
142811 UP AND AWAY 2/15/89 Owned 2055 World
143221 UPTOWN DOWNTOWN 2/15/89 Owned 2055 World
143511 AMERICA SWINGS HOUSTON 2/15/89 Owned 2055 World
143591 A NIGHT AT THE POPS 2/15/89 Owned 2055 World
143711 GRAND NIGHT FOR SINGING 2/15/89 Owned 2055 World
143821 MY FAIR LADY 2/15/89 Owned 2055 World
144011 STRIKE UP THE BAND 2/15/89 Owned 2055 World
145011 GERRY MULLIGAN-SAXOPHONE DREAM 12/15/91 Owned 2055 World
145021 DIZZY GILLESPIE-NIGHT IN TUNES 12/15/91 Owned 2065 World
145031 AL HIRT - BOURBON STREET 12/15/91 Owned 2065 World
145041 BROADWAY'S GREATEST HITS 12/15/91 Owned 2065 World
145051 GOLDFINGER - JOHN CACAVAS 12/15/91 Owned 2065 World
145061 A NIGHT AT THE POPS - KUNZEL 12/15/91 Owned 2065 World
145071 TOM DOOLEY - KINGSTON TRIO 12/15/91 Owned 2065 World
145081 SPENCER DAVIS - GREATEST HITS 12/15/91 Owned 2055 World
145091 STRING OF PEARLS - WOLVERINES 12/15/91 Owned 2065 World
145101 IN THE MOOD - WOLVERINES 12/15/91 Owned 2065 World
145111 BEST OF SATURDAY NIGHT LIVE 12/15/91 Owned 2055 World
145121 DIXIELAND'S GREATEST HITS 12/15/91 Owned 2065 World
145131 COTTON EYED JOE 12/15/91 Owned 2055 World
145141 *COUNTRY BANJOS 12/15/91 Owned 2055 World
145151 *COUNTRY FIDDLES 12/15/91 Owned 2055 World
145191 *ET AND OTHER JOHN WILLIAM HIT 12/15/91 Owned 2055 World
145201 *THE TERMINATOR & OTHER MOVIE 12/15/91 Owned 2055 World
145211 *TELEVISIONS GREATEST HITS 12/15/91 Owned 2055 World
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 10
<PAGE>
Masters Status
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
item item release Master Status Reverts Territory
number description date
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
101091 BERNSTEIN,ANNIV;TOCCO,PIANO 7/15/84 Owned 2065 World
145221 *HITS OF THE SOAPS 12/15/91 Owned 2055 World
145241 *SWITCHED ON BEATLES 12/15/91 Owned 2055 World
145251 *I GET A KICK OUT OF YOU-ESTRE 12/15/91 Owned 2055 World
145261 *SOPHISTICATED LADY-ESTREM/HOL 12/15/91 Owned 2055 World
145271 AMAZING GRACE - CARLO CURLEY 12/15/91 Owned 2055 World
145281 FANFARES - DOC SEVERINSEN 12/15/91 Owned 2055 World
145291 TOUCHDOWN! 12/15/91 Owned 2065 World
145301 HAWAIIAN HOLIDAY 12/15/91 Owned 2065 World
145311 A TRIP TO OCTOBERFEST 12/15/91 Owned 2065 World
145321 CARIBBEAN HOLIDAY 12/15/91 Owned 2065 World
145331 MARIACHI 12/15/91 Owned 2065 World
145341 *SOUSA'S GREATEST HITS 12/15/91 Owned 2055 World
145351 LA BAMBA 12/15/91 Owned 2055 World
145361 MEDITATIONS - TRAMMELL STARKS 12/15/91 Owned 2055 World
145371 6ISIONS - ROBERT STRICKLAND 12/15/91 Owned 2055 World
145381 *HITS OF PHIL COLLINS 12/15/91 Owned 2055 World
145391 COUNTRY GOLD 2/15/92 Owned 2055 World
145401 COUNTRY GOLD VOL 2 2/15/92 Owned 2055 World
145421 CELEBRATE AMERICA 2/15/92 Owned 2055 World
145431 BEST OF MY LOVE 2/15/92 Owned 2065 World
145441 MAGIC, MICE & MERMAIDS 2/15/92 Owned 2055 World
145471 ET AND OTHER JOHN WILLIAM HITS 6/15/92 Owned 2065 World
145481 THE TERMINATOR & OTHER MOVIE 6/15/92 Owned 2065 World
145491 TELEVISIONS GREATEST HITS 6/15/02 Owned 2065 World
145501 HITS OF THE SOAPS 6/15/92 Owned 2055 World
145511 SWITCHED ON BEATLES 6/15/92 Owned 2065 World
145521 I GET A KICK OUT OF YOU 6/15/92 Owned 2065 World
145531 SOPHISTICATED LADY;D.ELLINGTON 6/15/92 Owned 2065 World
145541 SOUSA'S GREATEST HITS 6/15/92 Owned 2065 World
145551 HITS OF PHIL COLLINS;SPECTRUM 6/15/92 Owned 2065 World
145601 LET'S DANCE 9/15/92 Owned 2065 World
145661 GARTH BROOKS' GREATEST HITS 9/15/93 Owned 2065 World
145671 HYMNS FROM THE OLD COUNTRY CHU 9/15/93 Owned 2065 World
145681 GREATEST HITS OF ELTON JOHN 9/15/93 Owned 2065 World
145691 LOUISIANA MAN 9/15/93 Owned 2065 World
145701 CLASSIC COUNTRY DANCIN' 9/15/93 Owned 2065 World
145711 MOVIES GREATEST HITS 12/15/93 Owned 2065 World
145751 HOLIDAY IN FRANCE 12/15/93 Owned 2065 World
145761 AN IRISH HOLIDAY 1/15/94 Owned 2065 World
145771 THE EAGLES 8/15/94 Owned 2065 World
145781 BILLY JOEL 8/15/94 Owned 2065 World
145791 NEIL DIAMOND 8/15/94 Owned 2065 World
145801 WHITNEY HOUSTON 8/15/94 Owned 2065 World
145811 HALLOWEEN 8/15/94 Owned 2065 World
145821 FLEETWOOD MAC 2/15/95 Owned 2065 World
145831 UNFORGETTABLE:ROD STEWART 2/15/95 Owned 2065 World
145841 JAMES TAYLOR 2/15/95 Owned 2065 World
145851 MOVIE THEMES 94 2/15/95 Owned 2065 World
145861 HOUSE DISCO GREATEST HITS 2/15/95 Owned 2065 World
145971 CARPENTERS 7/15/95 Owned 2065 World
145981 GENESIS 7/15/95 Owned 2065 World
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 11
<PAGE>
Masters Status
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
item item release Master Status Reverts Territory
number description date
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
101091 BERNSTEIN,ANNIV;TOCCO,PIANO 7/15/84 Owned 2065 World
145991 HOUSE DISCO VOL. 2 7/15/95 Owned 2065 World
146001 JACKSON BROWNE 7/15/95 Owned 2065 World
146011 WAITING TO EXHALE & MORE 3/26/96 Owned 2055 World
146021 TOY STORY AND MORE 3/26/96 Owned 2055 World
146031 SHADOW OF YOUR SMILE 3/26/96 Owned 2055 World
146041 BEHIND THE MOON 3/26/96 Owned 2055 World
146091 MUSIC OF BARRY MANILOW 7/15/96 Owned 2055 World
146101 MUSIC OF ABBA 7/15/96 Owned 2055 World
146111 MUSIC OF CAROLE KING 7/15/96 Owned 2055 World
146121 MUSIC OF LINDA RONSTADT 7/15/96 Owned 2055 World
146131 SCREEN THEMES:MISSION IMPOSSIB 1/15/97 Owned 2055 World
146141 COUNTRY DANCE MIX 1/15/97 Owned 2055 World
146151 MUSIC OF STING 1/15/97 Owned 2055 World
146171 COUNTRY WEDDING 4/15/97 Owned 2055 World
146181 A TIME FOR US 4/15/97 Owned 2055 World
147001 COUNTRY GREATS 5/15/95 Owned 2065 World
147011 COUNTRY GREATS VOL 1 4/16/97 Owned 2055 World
147021 BABY'S GOT HER BLUE JEANS ON 12/15/95 Owned 2055 World
147031 COUNTRY GREATS VOL 3 4/16/97 Owned 2055 World
147041 DIXIELAND PARADE 5/15/95 Owned 2065 World
147051 SWEET GEORGIA BROWN 12/15/95 Owned 2055 World
147061 TIGER RAG 12/15/95 Owned 2055 World
147071 DIXIELAND VOL 3 4/16/97 Owned 2055 World
147081 HOLLYWOOD MAGIC 5/15/95 Owned 2065 World
147091 HOLLYWOOD MAGIC VOL 1 4/16/97 Owned 2055 World
147101 HLWD MAGIC:CASABLANCA & OTHER 12/15/95 Owned 2055 World
147111 HOLLYWOOD MAGIC VOL 3 4/16/97 Owned 2055 World
147121 BIG BAND SALUTE 5/15/95 Owned 2065 World
147131 BIG BAND SALUTE:MOOD INDIGO 12/15/95 Owned 2055 World
147141 BIG BAND SALUTE:IN THE MOOD 12/15/95 Owned 2055 World
147151 BIG BAND SALUTE:MOONLIGHT SERE 12/15/95 Owned 2055 World
147161 BROADWAY OPENING NIGHT 5/15/95 Owned 2065 World
147171 BROADWAY VOL 1 4/16/97 Owned 2055 World
147181 ON BROADWAY:OPENING NIGHT 12/15/95 Owned 2055 World
147191 MUSIC OF THE NIGHT:OPENING NIG 12/15/95 Owned 2055 World
147201 COCKTAIL CLASSICS 5/15/95 Owned 2065 World
147211 COCKTAIL CLASSICS:PACHELBEL CA 12/15/95 Owned 2055 World
147221 COCKTAIL CLASSICS:BEETHOVENS 5 12/15/95 Owned 2055 World
147231 COCKTAIL CLASSICS:NUTCRACKER 12/15/95 Owned 2055 World
147241 AMERICAN SALUTE 5/15/95 Owned 2065 World
147281 SOLITUDE 5/15/95 Owned 2065 World
147291 SOLSTICE SUNSET 12/15/95 Owned 2055 World
147321 CLASSIC COUNTRY HYMNS 5/15/95 Owned 2065 World
147331 CLASSIC COUNTRY VOL 1 4/16/97 Owned 2055 World
147341 CLASSIC COUNTRY VOL 2 4/16/97 Owned 2055 World
147351 CLASSIC COUNTRY VOL 3 4/16/97 Owned 2055 World
147361 FOR LOVERS ONLY 5/15/95 Owned 2065 World
147371 LOVERS ONLY:CLAIR DE LUNA 12/15/95 Owned 2055 World
147381 LOVERS ONLY 12/15/95 Owned 2055 World
147391 LOVERS ONLY: MISTY 12/15/95 Owned 2055 World
147401 YOUR IN MY HEART-SPECTRUM 5/15/95 Owned 2065 World
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 12
<PAGE>
Masters Status
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
item item release Master Status Reverts Territory
number description date
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
101091 BERNSTEIN,ANNIV;TOCCO,PIANO 7/15/84 Owned 2065 World
147441 SAY YOU LOVE ME-SPECTRUM 5/15/95 Owned 2065 World
147481 GREATEST LOVE OF ALL-SPECTRUM 5/15/95 Owned 2065 World
147521 MAGIC OF THE MOVIES-SPECTRUM 5/15/95 Owned 2065 World
147561 ENDLESS LOVE: 3 DISC SET 11/15/95 Owned 2065 World
147601 ONLY LOVE:3 DISC SET 11/15/95 Owned 2065 World
147641 BREEZIN:3 DISC SET 11/15/95 Owned 2065 World
147681 GET LUCKY:3 DISC SET 11/15/95 Owned 2065 World
147721 CARRIBEAN MON! 3 DISC SET 11/15/95 Owned 2065 World
147761 NIGHT AT THE POPS:3 DISC SET 11/15/95 Owned 2065 World
152041 MESSIN AROUND 5/15/95 Owned 2065 World
152051 SOUL MAN 5/15/95 Owned 2065 World
152061 LET'S GO 5/15/95 Owned 2065 World
152071 STOMPIN 145021 Owned 2065 World
155011 DND:RENDEVOUS 10/15/96 Owned 2060 World
155021 DND:SEDUCTION 10/15/96 Owned 2060 World
155031 DND:PASSION 10/15/96 Owned 2060 World
155041 DND:AFTERGLOW 10/15/96 Owned 2060 World
160011 TALES FROM THE MESA 10/15/90 Owned 2060 World
160021 SOLSTICE SUNSET 10/15/90 Owned 2060 World
160031 FIRST LIGHT 10/15/90 Owned 2060 World
160041 NORTHERN LIGHTS 10/15/90 Owned 2060 World
160051 SEPTEMBER VISION 10/15/90 Owned 2060 World
160061 MEDITATION 10/15/90 Owned 2060 World
160071 MOUNTAIN SHADOWS 3/15/93 Owned 2060 World
160081 ENCHANTED PATHWAYS 3/15/93 Owned 2060 World
160091 MYSTIC SHORES 3/15/93 Owned 2060 World
160101 EVENING STORMS 3/15/93 Owned 2060 World
160121 EVENING SHADOWS 1/15/96 Owned 2065 World
160131 MOUNTAIN SHADOWS 1/15/96 Owned 2065 World
160141 RAINFOREST 1/15/96 Owned 2065 World
160151 OCEAN MAJESTY 1/15/96 Owned 2065 World
161011 CHILD TO CHILD 5/15/92 Owned 2065 World
161031 CITY OF THE SEA 5/15/92 Owned 2060 World
161041 SOLITUDE 5/15/92 Owned 2060 World
161051 NORTHERN LIGHTS 5/15/92 Owned 2060 World
161061 SANTA FE SUNSET 5/15/92 Owned 2060 World
161071 TWILIGHT SHADOWS 5/15/92 Owned 2060 World
161081 SCOTT JOPLIN 5/15/92 Owned 2060 World
161091 BACH FOR A NEW AGE 5/15/92 Owned 2060 World
161101 MOZART FOR A NEW AGE 5/15/92 Owned 2060 World
161151 COMMON PRAYER 9/15/92 Owned 2060 World
161161 CHRISTMAS TIDINGS 9/15/92 Owned 2060 World
161171 BAROLK FOLK 12/15/92 Owned 2060 World
161201 ACOUSTIC GUITAR 12/15/92 Owned 2060 World
162161 STARS & STRIPES 3/15/97 Owned 2060 World
162171 HOLST:THE PLANETS 3/15/97 Owned 2060 World
162181 LIGHT CALVARY & OTHER OVERTURE 3/15/97 Owned 2060 World
162191 VIVA LA FRANCE 3/15/97 Owned 2060 World
162201 FROM LONDON WITH LOVE 3/15/97 Owned 2060 World
162211 ROMANCING THE FILM 3/15/97 Owned 2060 World
162221 POP GO THE BEATLES 3/15/97 Owned 2060 World
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 13
<PAGE>
Masters Status
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
item item release Master Status Reverts Territory
number description date
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
101091 BERNSTEIN,ANNIV;TOCCO,PIANO 7/15/84 Owned 2065 World
162231 ON MY OWN 3/15/97 Owned 2060 World
162241 A NIGHT AT THE POPS 3/15/97 Owned 2060 World
162251 PHANTOM OF THE OPERA & OTHER 3/15/97 Owned 2060 World
162261 AN ENCHANTED EVENING:MUSIC OF 3/15/97 Owned 2060 World
162271 LEROY ANDERSON'S GREATEST HITS 3/15/97 Owned 2060 World
162281 MASTERS OF MAYHEM 3/15/97 Owned 2060 World
162291 SATIN DOLL 3/15/97 Owned 2060 World
162301 RACHMANINOFF:PIANO CONCERTO #3 3/15/97 Owned 2060 World
165011 CHRISTMAS BRASS 5/15/92 Owned 2060 World Extendable at Intersound's Option
165021 CHRISTMAS LANDSCAPES 5/15/92 Owned 2060 World
165031 12 DAYS IN DECEMBER 5/15/92 Owned 2060 World
165041 A DICKENS CHRISTMAS 5/15/92 Owned 2060 World
165051 CHRISTMAS IN THE CITY 5/15/92 Owned 2060 World
166011 CHRISTMAS MELODIES:VAN CRAVEN 6/25/96 Owned 2060 World
166021 ACOUSTIC CHRISTMAS 6/25/96 Owned 2060 World
166031 CHRISTMAS SAX:TODD NYSTROM 6/25/96 Owned 2060 World
166041 CHRISTMAS CAROLING 6/25/96 Owned 2060 World
166051 CHRISTMAS KEYBOARD:KELLER/WELL 6/25/96 Owned 2060 World
166061 A CHRISTMAS HARP 6/25/96 Owned 2060 World
170031 CLASSIC COUNTRY HYMNS 7/15/92 Owned 2065 World
170041 HYMNS FROM THE BAYOU 7/15/92 Owned 2065 World
170051 OH HAPPY DAY REUNION-EDWIN HAW 8/15/92 Owned 2065 World
170061 VOICES OF PRAISE 10/15/92 Owned 2065 World
170071 SEASONS OF PRAISE 10/15/92 Owned 2065 World
170081 ONLY LOVE- KARYN LIST 10/15/92 Owned 2065 World
170091 BAYOU HYMNS II 1/15/93 Owned 2065 World
170101 COUNTRY HYMNS II 1/15/93 Owned 2065 World
170211 ACOUSTIC PRAISE:CLASSICAL GUIT 2/15/94 Owned 2065 World
170221 ACOUSTIC PRAISE:STRING QUART 2/15/94 Owned 2065 World
170231 PAUL SMITH 2/15/94 Owned 2065 World
170291 DANNY CHAMBERS 2/15/94 Owned 2065 World
170301 HYMNS FROM THE HEART;SMOKY MTN 1/15/94 Owned 2065 World
170311 20/20 BLIND 2/15/94 Owned 2065 World
170371 8:TERRI LYNN:THE ONLY LIFE FOR 10/15/94 Owned 2065 World
170381 8:MAIA AMADA:FAITH REMAINS 10/15/94 Owned 2065 World
170411 8:CRAIG DUNCAN:DEEP RIVER 8/15/94 Owned 2065 World
170431 A HOMETOWN WEDDING 2/15/95 Owned 2065 World
175501 VICKIE WINANS 8/15/94 Owned 2060 World
175511 SALT OF THE EARTH:ORDER MYSTEP 9/15/94 Owned 2060 World
175521 JENNIFER HOLLIDAY:ON & ON 10/15/94 Owned 2060 World
175531 IONA LOCKE:LETS GET IT ON 10/15/94 Owned 2060 World
175551 FLORIDA MASS CHOIR:HOLY 10/15/94 Owned 2060 World
175581 PAUL SMITH:EXTRA MEASURE 2/15/94 Owned 2060 World
175591 20/20 BLIND 2/15/94 Owned 2060 World
175611 MAIA AMADA:FAITH REMAINS 10/15/94 Owned 2060 World
175621 1 WAY:DESTINATION UNKNOWN 10/15/94 Owned 2060 World
175631 CRAIG DUNCAN:DEEP RIVER 10/15/94 Owned 2060 World
175641 HOME TOWN WEDDING:C. DUNCAN 2/15/95 Owned 2060 World
175651 MICHAEL SCOTT & OUTREACH CHOIR 3/15/95 Owned 2060 World
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 14
<PAGE>
Masters Status
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
item item release Master Status Reverts Territory
number description date
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
101091 BERNSTEIN,ANNIV;TOCCO,PIANO 7/15/84 Owned 2065 World
175661 SLIM & THE SUPREME ANGELS 3/15/95 Owned 2060 World
175671 WILLIAM BECTON 4/15/95 Owned 2060 World
175701 MIGHTY CLOUDS OF JOY 4/15/95 Owned 2060 World
175711 JAMES HALL COMMUNITY CHOIR 9/15/95 Owned 2060 World
175731 LEAD ME:DALLAS FT WORTH 7/15/95 Owned 2060 World
175741 DONNIE HARPER 8/15/95 Owned 2060 World
175761 A GOSPEL CHRISTMAS 8/15/95 Owned 2060 World
175781 B CHASE WILLIAMS 8/15/95 Owned 2060 World
175801 KATHY MYERS 3/16/96 Owned 2060 World
175811 I FEEL GOOD:FREEDOM CHOIR 7/15/95 Owned 2060 World
175821 MY TRIBUTE:FREEDOM CHOIR 7/15/95 Owned 2060 World
176071 GMWA COMPILATION 1/16/96 Owned 2060 World
176081 DELEON RICHARDS:MY LIFE 4/14/96 Owned 2060 World
176091 SUNDAY MORNING COUNTRY 3/26/96 Owned 2060 World
180011 'VICTORY AT SEA' 9/15/89 Owned 2065 World
180021 'GREAT BIG BAND HITS 9/15/89 Owned 2065 World
180031 'SOUND OF MUSIC' 9/15/89 Owned 2065 World
180051 'BROADWAY'S GREATEST HITS' 9/15/89 Owned 2065 World
180061 'WORLD'S GREATEST LOVE SONGS' 9/15/89 Owned 2065 World
180081 'BEATLE'S GREATEST HITS' 9/15/89 Owned 2065 World
180091 'YANKEE DOODLE DANDY' 9/15/89 Owned 2065 World
180101 'DUKE ELLINGTON'S GREATEST HIT 9/15/89 Owned 2065 World
180111 BLUE TANGO-ANDERSON, LEROY 4/15/90 Owned 2065 World
180121 FIEDLERS FAVORITES 4/15/90 Owned 2065 World
180131 JAMES BONDS GREATEST HITS 8/15/90 Owned 2065 World
180141 HALLELUJAH HOLLYWOOD 4/15/90 Owned 2065 World
180151 GOTHAMS GREATEST:THEMES 6/15/89 Owned 2060 World
180171 'BEST OF LAMBADA'-PARA CARIMBO 2/15/90 Owned 2065 World
180181 DIXIELAND'S GREATEST HITS 8/15/90 Owned 2065 World
180201 GERSHWIN/ELLINGTON GREATST HIT 8/15/90 Owned 2065 World
180211 DANCE, DANCE, DANCE 1/15/91 Owned 2065 World
180221 GERSHWIN AT THE MOVIES 1/15/91 Owned 2065 World
181011 TEMPLE OF BOOM 4/15/94 Owned 2065 World
181021 BASS ZONE 4/15/94 Owned 2065 World
181031 BACK 2 BASS X 9/15/94 Owned 2065 World
181081 WAY 2 REAL:38TH STREET 11/15/94 Owned 2065 World
181101 MENTALLY DISTURBED 4/15/95 Owned 2065 World
181111 BACK 2 BASS X:PG 2/15/95 Owned 2065 World
181141 (PG)WAY 2 REAL:38TH ST 2/15/95 Owned 2065 World
181161 BASS DREAMS 4/15/95 Owned 2065 World
181171 THREE STEPS FROM NOWHERE 4/15/95 Owned 2065 World
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</TABLE>
Page 15
<PAGE>
Masters Status
<TABLE>
<CAPTION>
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item item release Master Status Reverts Territory
number description date
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<S> <C> <C> <C> <C> <C>
101091 BERNSTEIN,ANNIV;TOCCO,PIANO 7/15/84 Owned 2065 World
181441 *BACK 2 THA OLD SCHOOL:V2 7/15/96 Owned 2060 World
181451 *BASS CRIMES 7/15/96 Owned 2060 World
181461 *GHOSTTOWN DJ'S FRANTIC 10/15/96 Owned 2060 World
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181501 BASS HEADZ:2 DISC 3/15/97 Owned 2060 World
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- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 16
<PAGE>
Masters Status
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
item item release Master Status Reverts Territory
number description date
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<S> <C> <C> <C> <C> <C>
101091 BERNSTEIN,ANNIV;TOCCO,PIANO 7/15/84 Owned 2065 World
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191241 EDWIN HAWKINS:KINGS & KINGDOMS 5/15/94 Owned 2065 World
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Page 17
<PAGE>
Masters Status
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
item item release Master Status Reverts Territory
number description date
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<S> <C> <C> <C> <C> <C>
101091 BERNSTEIN,ANNIV;TOCCO,PIANO 7/15/84 Owned 2065 World
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</TABLE>
Page 18
<PAGE>
SCHEDULE C-2
TO SECURITY AGREEMENT
RE: INTELLECTUAL PROPERTY
COPYRIGHT LICENSES
==================
U.S. COPYRIGHT LICENSE
REG. NO. (AUTHOR) TITLE DATE OF REG. AGREEMENT REFERENCE
<PAGE>
<TABLE>
<CAPTION>
PLATINUM MASTERS
- ----------------------------------------------------------------------------------------------------------------------------------
REVERSION LICENSE
SELECTION PRJ # TITLE ARTIST SR # SR DATE DATE REVERSION DATE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2022 1010 Christmas Gift of Love Various EXCLUSIVE LICENSE 2004
41014 909 Songs From Ablion 3 (lease)(REX) Johnson, Jeff EXCLUSIVE LICENSE 1998
42000 926 Blue Belly Sky (lease) (REX) Waiting EXCLUSIVE LICENSE 1998
43001 908 Songs From Ablion 2 (lease)(REX) Johnson, Jeff EXCLUSIVE LICENSE 1998
45010 905 Isle of Dreams (lease) (REX) Johnson, Jeff EXCLUSIVE LICENSE 1999
611452 814 Back To Gospel Various EXCLUSIVE LICENSE 1998
611752 865 Watching The River Run Messina, Jim EXCLUSIVE LICENSE 2001
612192 881 This Is The Day (lease) Whitman, Walt EXCLUSIVE LICENSE 2001
612202 883 Live And Blessed (lease) Whitman, Walt EXCLUSIVE LICENSE 2001
612212 882 We Are One (lease) Whitman, Walt EXCLUSIVE LICENSE 2001
690053 870 Saturday Nite Sing (Video) Various EXCLUSIVE LICENSE (OPEN)
6519921 Holy Bible - Old Testament Statler Brothers EXCLUSIVE LICENSE 1998
6520021 Holy Bible - New Testament Statler Brothers EXCLUSIVE LICENSE 1998
997 Untitled (HOB) Barksdale, Becky EXCLUSIVE LICENSE 2001
885 Undivided Soul Emit Ridge EXCLUSIVE LICENSE 2001
907 Songs From Ablion 1 (lease)(REX) Johnson, Jeff EXCLUSIVE LICENSE 1998
894 On Air Parsons, Alan EXCLUSIVE LICENSE 2003
884 Sing Children Sing (Lease) Whitman, Walt EXCLUSIVE LICENSE 2001
878 One Way Wiggins, Allen EXCLUSIVE LICENSE 2002
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Masters Status
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
item item release Master Status Reverts Territory
number description date
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<S> <C> <C> <C> <C> <C>
103971 SCOTT JOPLINS GREATEST HITS 5/15/88 Exclusive License 8/31/97 World
104311 'CHEEK TO CHEEK' ASTAIRE 7/15/88 Non-Exclusive License 2055 World
104321 'PENNIES FROM HEAVEN' CROSBY 7/15/88 Non-Exclusive License 2055 World
104331 S'WONDERFUL-GEORGE GERSHWIN 10/15/88 Non-Exclusive License 2055 World
104361 MAMMY AL JOLSON 10/15/88 Non-Exclusive License 2055 World
104371 PAPER MOON PAUL WHITEMAN 10/15/88 Non-Exclusive License 2055 World
104381 'MA CHERIE' - CHEVALIER 2/15/89 Non-Exclusive License 2055 World
104391 I WISH YOU WERE - ARMSTRONG 2/15/89 Non-Exclusive License 2055 World
104401 BOO BOO BE DOOP - BETTY BOOP 10/15/88 Non-Exclusive License 2055 World
104461 THE BEATLES BOOK-HARNOY 8/15/89 Exclusive License Sell Off World
104511 'BROADWAY BAROQUE'-JOHN ARPIN 2/15/90 Exclusive License 8/31/97 World
104551 AMAZING GRACE-40TH HIGHLANDERS 5/15/89 Exclusive License 8/31/97 World
104571 POCKETFUL OF DREAMS - CROSBY 10/15/89 Non-Exclusive License 2065 World
104581 'A FINE ROMANCE'-ASTAIRE 6/15/89 Non-Exclusive License 2065 World
104591 'VAGABOND LOVER' - RUDI VALLE 10/15/89 Non-Exclusive License 2065 World
104601 'MAKIN WHOOPEE'-CANTOR/BRICE 6/15/89 Non-Exclusive License 2065 World
104731 'YOU'RE THE TOP' - MERMAN 1/15/90 Non-Exclusive License 2065 World
104761 'IRELAND MY IRELAND'-MCCORMACK 1/15/90 Non-Exclusive License 2065 World
104811 MARIA CALLAS LIVE 5/15/90 Exclusive License 8/31/97 World
104821 'MOOD INDIGO'-ELLINGTON 6/15/89 Non-Exclusive License 2065 World
104831 'LEGENDARY ENTERTAINERS' 9/15/89 Non-Exclusive License 2065 World
104841 'LEGENDARY BANDS OF THE 20'S' 9/15/89 Non-Exclusive License 2065 World
104851 'LEGENDARY BANDS OF THE 30'S' 9/15/89 Non-Exclusive License 2065 World
104861 'BROTHER CAN YOU SPARE A DIME' 9/15/89 Non-Exclusive License 2065 World
104871 KINGS OF RAGTIME-ARPIN 8/15/89 Exclusive License 8/31/97 World
104891 20 LEGENDARY TENORS 5/15/90 Exclusive License 8/31/97 World
104901 'JAZZ ME BLUES'/BIX BIEDERBECK 10/15/89 Non-Exclusive License 2065 World
104911 'ROSE MARIE' - NELSON EDDY 10/15/89 Non-Exclusive License 2065 World
105031 ASPECTS OF WEBBER:BBC CONCERT 6/15/89 Exclusive License Sell Off US
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105061 ANDREW SISTERS;VARIOUS 7/15/90 Non-Exclusive License 2065 World
105071 HARRY JAMES;VARIOUS 7/15/90 Non-Exclusive License 2065 World
105081 DORSEY BROTHERS;VARIOUS 7/15/90 Non-Exclusive License 2065 World
105091 HOLLYWOOD SINGS;VARIOUS 7/15/90 Non-Exclusive License 2065 World
105151 MUSIC OF CAKEWALK:JOHN ARPIN 8/15/90 Exclusive License 8/31/97 World
105161 SPIKE JONES; VARIOUS 9/15/90 Non-Exclusive License 2065 World
105171 MARLENE DIETRICH; VARIOUS 9/15/90 Non-Exclusive License 2065 World
105181 KATE SMITH; VARIOUS 9/15/90 Non-Exclusive License 2065 World
105191 CLASSICS AND ALL THE JAZZ 9/15/90 Non-Exclusive License 2065 World
105251 BACH ON BROADWAY 10/15/90 Exclusive License 8/31/97 World
105481 LEGENDS-STARS OF THE 30'S 2/15/91 Exclusive License 8/31/97 World
105491 LEGENDS - DJANGO RHEINHART 2/15/91 Non-Exclusive License 2065 World
105501 LEGENDS - BOSWELL SISTERS 2/15/91 Non-Exclusive License 2065 World
105511 SHOSTAKOVITCH FILM MUSIC 2/15/91 Exclusive License 8/31/97 World
105531 LEGENDS - HAL KEMP 6/15/91 Non-Exclusive License 2065 World
105541 LEGENDS - BUNNY BERIGAN 6/15/91 Non-Exclusive License 2065 World
105551 LEGENDS - INK SPOTS 6/15/91 Non-Exclusive License 2065 World
105571 TOUCH OF ART-ART FERRANTE 2/15/91 Exclusive License Sell Off World
105581 LEGENDS - KING COLE TRIO 6/15/91 Non-Exclusive License 2065 World
105591 CONEY ISLAND BABY 4/15/91 Exclusive License 1/1/01 World
105621 JOPLIN:KING OF RAGTIME;ARPIN 1/13/92 Exclusive License 8/31/97 World
105651 CATHERINE WILSON 9/15/91 Exclusive License 8/30/01 World
105661 AMERICAN SPEECHES 6/15/91 Exclusive License 8/31/97 World
105671 SPEECHES OF WINSTON CHURCHILL 6/15/91 Exclusive License 8/31/97 World
105681 PROJECTIONS - MAC FRAMPTON 6/15/91 Exclusive License Sell Off World
105851 FRENCH CONNECTION 1/15/92 Exclusive License 8/31/97 World
105901 GLENN MILLER:IN THE MOOD 9/15/91 Non-Exclusive License 2065 World
105911 TOMMY DORSEY:BOOGIE WOOGIE 9/15/91 Non-Exclusive License 2065 World
105921 GUY LOMBARDO:AULD LANG SYNE 9/15/91 Non-Exclusive License 2065 World
105951 THE ENGLISH TUBA 3/15/92 Exclusive License 8/31/97 World
107381 WARM VALLEY - JOE HENDERSON 1/15/94 Exclusive License 10/15/96 World
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108011 BACH'S GREATEST HITS:MAXIPLAY 1/15/86 Non-Exclusive License 2055 World
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108071 MOZART'S GREATEST HITS:MAXIPLY 2/15/86 Non-Exclusive License 2055 World
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108111 GREIG'S GREATEST HITS:MAXIPLAY 1/15/87 Non-Exclusive License 2055 World
108121 BEST OF THE RUSSIANS:MAXIPLAY 1/15/87 Non-Exclusive License 2055 World
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Page 1
<PAGE>
Masters Status
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
item item release Master Status Reverts Territory
number description date
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<S> <C> <C> <C> <C> <C>
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108151 MENDELSSOHNS GREATEST HITS 7/15/87 Non-Exclusive License 2055 World
108161 VIVALDI'S GREATEST HITS 7/15/87 Non-Exclusive License 2055 World
108171 GREATEST HITS OF 1750 7/15/87 Non-Exclusive License 2055 World
108181 MOSTLY MOZART;GREATEST HITS 7/15/87 Non-Exclusive License 2055 World
108191 WORLD'S GREATEST WALTZES 2/15/88 Non-Exclusive License 2055 World
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108211 WORLD'S GREATEST MARCHES 7/15/86 Non-Exclusive License 2055 World
108221 WORLD'S GREATEST DANCES 2/15/88 Non-Exclusive License 2055 World
108231 BRAHM'S GREATEST HITS 2/15/88 Non-Exclusive License 2055 World
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108251 WAGNERS GREATEST HITS 6/15/88 Non-Exclusive License 2055 World
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108271 WORLDS GREATEST PIANO CONCERTO 6/15/88 Non-Exclusive License 2055 World
108281 DVORAKS GREATESTHITS 5/15/88 Non-Exclusive License 2055 World
108301 WORLDS GREATEST MELODIES 9/15/88 Non-Exclusive License 2055 World
108311 GREATEST HITS OF TRUMPET 9/15/88 Non-Exclusive License 2055 World
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108331 GREATEST HITS OF THE ORGAN 9/15/88 Non-Exclusive License 2055 World
108341 CLASSICAL MUSIC FOR PEOPLE 9/15/88 Non-Exclusive License 2055 World
108351 GREATEST HITS OF ALL 9/15/88 Non-Exclusive License 2055 World Extendable at Intersound's Option
108361 AMERICA'S GREATEST HITS 3/15/89 Non-Exclusive License 2055 World
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108381 AT THE MOVIES 3/15/89 Non-Exclusive License 2055 World
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108521 BIZET'S GREATEST HITS 0/15/89 Non-Exclusive License 2055 World
108531 WORLD'S GREATEST ENCORES 0/15/89 Non-Exclusive License 2055 World
108541 WORLD'S GREATEST SYMPHONIES 0/15/89 Non-Exclusive License 2055 World
108551 GERMANY'S GREATEST HITS 2/15/90 Non-Exclusive License 2055 World
108561 GREATEST HITS FROM AIDA 2/15/90 Non-Exclusive License 2055 World
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108651 CLASSICS FOR LOVERS 9/15/90 Non-Exclusive License 2055 World
108661 STRAVINSKY'S GREATEST HITS 9/15/90 Non-Exclusive License 2055 World
108671 SHAKESPERE'S GREATEST HITS 9/15/90 Non-Exclusive License 2055 World
108681 GREATEST HITS OF THE BAROQUE 1/15/91 Non-Exclusive License 2055 World
108691 ENGLAND'S GREATEST HITS 1/15/91 Non-Exclusive License 2055 World
108701 SCHUBERT'S GREATEST HITS 6/15/91 Non-Exclusive License 2055 World
108711 HAYDN'S GREATEST HITS 6/15/91 Non-Exclusive License 2055 World
108721 LISZT'S GREATEST HITS 6/15/91 Non-Exclusive License 2055 World
108731 OPERA AT THE MOVIES 6/15/91 Non-Exclusive License 2055 World
108741 SCOTT JOPLIN:ROBERT STRICKLAND 6/15/91 Non-Exclusive License 2055 World
108751 OPERA FOR PEOPLE WHO HATE OPERA 2/15/92 Non-Exclusive License 2055 World
108761 SALONS GREATEST HITS 2/15/92 Non-Exclusive License 2055 World
108771 VERDI'S GREATEST HITS 2/15/92 Non-Exclusive License 2055 World Extendable at Intersound's Option
108781 RACHMANINOFF GREATEST HITS 2/15/92 Non-Exclusive License 2055 World
108791 WORLD'S GREATEST LOVE THEMES 7/15/92 Non-Exclusive License 2055 World
108801 WORLD'S GREATEST HERORS 7/15/92 Non-Exclusive License 2055 World
108811 RAVEL'S GREATEST HITS 7/15/92 Non-Exclusive License 2055 World
108821 PROKOVIEF'S GREATEST HITS 7/15/92 Non-Exclusive License 2055 World
109011 THE BASIC BAROQUE 3/15/89 Non-Exclusive License 2055 World
109021 THE BASIC GERSHWIN 3/15/89 Non-Exclusive License 2055 World
109031 THE BASIC TCHAIKOVSKY 3/15/89 Non-Exclusive License 2055 World
109041 THE BASIC STRAUSS 3/15/89 Non-Exclusive License 2055 World
109051 THE BASIC OVERTURES 3/15/89 Non-Exclusive License 2055 World
109061 THE BASIC MOZART 3/15/89 Non-Exclusive License 2055 World
109071 THE BASIC BEETHOVEN 3/15/89 Non-Exclusive License 2055 World
109081 THE BASIC MARCHES 3/15/89 Non-Exclusive License 2055 World
109091 THE BASIC BACH 3/15/89 Non-Exclusive License 2055 World
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 2
<PAGE>
Masters Status
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
item item release Master Status Reverts Territory
number description date
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<S> <C> <C> <C> <C> <C>
109101 BACH:BRANDENBURG CONCERTI 3/15/89 Non-Exclusive License 2055 World
109111 THE BASIC HANDEL 1/15/90 Non-Exclusive License 2055 World
109121 THE BASIC DANCES 1/15/90 Non-Exclusive License 2055 World
109131 THE BASIC BRAHMS 1/15/90 Non-Exclusive License 2055 World
109141 THE BASIC DVORAK 1/15/90 Non-Exclusive License 2055 World
109151 THE BASIC PIANO CONCERTOS 1/15/90 Non-Exclusive License 2055 World
109161 THE BASIC VIOLIN CONCERTOS 1/15/90 Non-Exclusive License 2055 World
109171 THE BASIC TCHAIKOVSKY BALLETS 1/15/90 Non-Exclusive License 2055 World
109181 THE BASIC CHOPIN 1/15/90 Non-Exclusive License 2055 World
109191 THE ESSENTIAL BRAHMS 5/15/90 Non-Exclusive License 2055 World
109201 ESSENTIAL OPERA OVERTURES 5/15/90 Non-Exclusive License 2055 World
109211 THE BASIC MENDELSSOHN 5/15/90 Non-Exclusive License 2055 World
109221 MOZART - BASIC STRING SERENADE 5/15/90 Non-Exclusive License 2055 World
109231 BEETH:SYM 4/7:ENGLISH PHILHARM 7/15/90 Non-Exclusive License 2055 World
109241 MOZART CONCERTOS 7/15/90 Non-Exclusive License 2055 World
109251 BEETH:PIANO CONCERTOS 3/5 7/15/90 Non-Exclusive License 2055 World
109261 BRAHMS SYM 2/3, ACADEMIC 7/15/90 Non-Exclusive License 2055 World
109271 MENDELSSOHN/BRAHMS VIOLIN CONC 7/15/90 Non-Exclusive License 2055 World
109281 TCHAIK:SYM 4/PIANO CON 1/1812 7/15/90 Non-Exclusive License 2055 World
109291 THE BASIC GRIEG;ENGLISH PHIL 7/15/90 Non-Exclusive License 2055 World
109301 THE BASIC HAYDN;ENGLISH PHIL 7/15/90 Non-Exclusive License 2055 World
109311 ROSSINI OVERTURES 3/15/91 Non-Exclusive License 2055 World
109321 BEETHOVEN SONATAS 3/15/91 Non-Exclusive License 2055 World
109331 STRAVINSKY 3/15/91 Non-Exclusive License 2055 World
109341 BEETHOVEN SYMPHONIES 6 & 7 3/15/91 Non-Exclusive License 2055 World
109361 BASIC WAGNER 7/15/91 Non-Exclusive License 2055 World
109371 THE BASIC BIZET 7/15/91 Non-Exclusive License 2055 World
109381 THE BASIC BALLET 7/15/91 Non-Exclusive License 2055 World
109391 THE BASIC RAVEL 11/15/91 Non-Exclusive License 2055 World
109401 THE BASIC MOZART SYMPHONIES 11/15/91 Non-Exclusive License 2055 World
109411 THE BASIC SEASONS 11/15/91 Non-Exclusive License 2055 World
109421 THE BASIC DANCES OF EUROPE 11/15/91 Non-Exclusive License 2055 World
109431 THE BASIC LISZT 6/15/92 Non-Exclusive License 2055 World
109441 THE BASIC BRAHMS PIANO CONCERT 6/15/92 Non-Exclusive License 2055 World
109451 THE BASIC TCHAIK SYM. 2 & 4 6/15/92 Non-Exclusive License 2055 World
109461 THE BASIC SCHUBERT 6/15/92 Non-Exclusive License 2055 World
109471 THE BASIC SYMPHONIES 4/15/93 Non-Exclusive License 2055 World
109481 THE BASIC CHORUSES 4/15/93 Non-Exclusive License 2055 World
109901 DECK THE HALLS 2 DISC SET 7/15/92 Non-Exclusive License 2055 World
109911 WORLD'S GREATEST CAROLS (2DISC 7/15/92 Non-Exclusive License 2055 World
110111 SENTIMENTAL JOURNEY 2 DISC SET 8/15/91 Non-Exclusive License 2055 World
110121 ROARING 20'S 2 DISC SET 8/15/91 Non-Exclusive License 2055 World
110131 FABULOUS 30'S 2 DISC SET 8/15/91 Non-Exclusive License 2055 World
110141 BIG BAND THEMES 2 DISC SET 8/15/91 Non-Exclusive License 2055 World
110171 FERANTE AND TEICHER SET Exclusive License 7/1/96 World
110241 GLENN MILLER: 2 DISC SET 3/15/93 Non-Exclusive License 2055 World
110251 BENNY GOODMAN: 2 DISC SET 3/15/93 Non-Exclusive License 2055 World
110261 TOMMY DORSEY: 2 DISC SET 3/15/93 Non-Exclusive License 2055 World
110321 CLASSICS FOR LOVERS 11/16/96 Non-Exclusive License 2055 World
110351 THE KINGS OF SWING (4 DISC) 1/15/96 Non-Exclusive License 2055 World
110401 THE BIG BANDS (4 DISC SET) 1/15/96 Non-Exclusive License 2047 World
110451 THE WAR YEARS (4 DISC SET) 1/15/96 Non-Exclusive License 2047 World
110501 THE GREAT ENTERTAINERS (4 DISC 8/15/93 Non-Exclusive License 2055 World
110751 CLASSICAL MUSIC FOR PEOPLE WHO 12/15/93 Non-Exclusive License 2065 World
110901 THE GREAT ENTERTAINERS:4 DISC 1/15/96 Non-Exclusive License 2047 World
111051 BELLAMY BROS:20 YEARS 8/15/94 Exclusive License 8/14/96 U.S. & Canada
112011 COMPLETE BEETHOVEN SYMPHONIES 5/15/92 Non-Exclusive License 2055 World
112021 MOZART FESTIVAL 5/15/92 Non-Exclusive License 2055 World
112031 TCHAIKOVSKY FESTIVAL 5/15/92 Non-Exclusive License 2055 World
112041 MELODIES OF THE CLASSICS 6/15/92 Non-Exclusive License 2055 World
112051 HANDEL'S GREATEST HITS 4 DISC 8/15/92 Non-Exclusive License 2055 World
112061 PIANO MASTERPIECES 4 DISC SET 8/15/92 Non-Exclusive License 2055 World
112071 JOY TO THE WORLD(5 DISC SET) 8/15/92 Non-Exclusive License 2055 World
112081 BAROQUE FESTIVAL:4 DISC SET 12/15/92 Non-Exclusive License 2055 World
112091 BRAHMS FESTIVAL: 4 DISC SET 12/15/92 Non-Exclusive License 2055 World
112101 CLASSICS FOR LOVERS 5/15/93 Non-Exclusive License 2055 World
112111 CLASSICS GO TO THE MOVIES 5/15/93 Non-Exclusive License 2055 World
112121 CLASSICAL MUSIC FOR PEOPLE:4CD 2/15/94 Non-Exclusive License 2055 World
112131 OPERA FOR PEOPLE WHO HATE:4 CD 2/15/94 Non-Exclusive License 2055 World
112141 CHOPIN: 4 DISC SET 4/15/95 Non-Exclusive License 2055 World
112151 GREAT ORCHESTRAL MASTERPIECES 4/15/95 Non-Exclusive License 2055 World
112161 WORLD'S GREATEST CONCERTOS:5 D 6/15/96 Non-Exclusive License 2055 World
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</TABLE>
Page 3
<PAGE>
Masters Status
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
item item release Master Status Reverts Territory
number description date
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<S> <C> <C> <C> <C> <C>
112171 WORLD'S GREATEST SYMPHONIES:5D 6/15/96 Non-Exclusive License 2055 World
112181 GREAT MELODIES OF CLASSICS:4 D 6/15/97 Non-Exclusive License 2055 World
112191 ROMANTIC MELODIES CLASSICS:4 D 6/15/97 Non-Exclusive License 2055 World
112201 CLASSICAL BRUNCH:4 DISC SET 6/17/97 Non-Exclusive License 2055 World
112211 COFFEEHOUSE CLASSICS:4 DISC SE 6/17/97 Non-Exclusive License 2055 World
112261 BACHS GREATEST HITS 11/15/92 Non-Exclusive License 2055 World
112271 STRAUSS GREATEST HITS 11/15/92 Non-Exclusive License 2055 World
112281 TCHAIKOVSKY'S GREATEST HITS 11/15/92 Non-Exclusive License 2055 World
112291 VIVALDI'S GREATEST HITS 11/15/92 Non-Exclusive License 2055 World
112301 BEETHOVEN'S GREATEST HITS 11/15/92 Non-Exclusive License 2055 World
112311 WORLD'S GREATEST MARCHES 11/15/92 Non-Exclusive License 2055 World
112321 BRAHMS GREATEST HITS 11/15/92 Non-Exclusive License 2055 World
112331 BIZET'S GREATEST HITS 11/15/92 Non-Exclusive License 2055 World
112341 GREAT CHORUSES 11/15/92 Non-Exclusive License 2055 World
112351 MOZART & THE MOVIES 11/15/92 Non-Exclusive License 2055 World
112361 GREAT LOVE THEMES 11/15/92 Non-Exclusive License 2055 World
112371 HAYDN'S GREATEST HITS 11/15/92 Non-Exclusive License 2055 World
112381 VERDI'S GREATEST HITS 11/15/92 Non-Exclusive License 2055 World
112391 1812 OVERTURE - TCHAIKOVSKY 11/15/92 Non-Exclusive License 2055 World
112401 RAVEL: BOLERO 11/15/92 Non-Exclusive License 2055 World
112411 MOZART'S GREATEST HITS 11/15/92 Non-Exclusive License 2055 World
112421 WORLD'S GREATEST ENCORES 11/15/92 Non-Exclusive License 2055 World
112431 GREAT ORCHESTRAL MARCHES 11/15/92 Non-Exclusive License 2055 World
112441 BEETHOVEN SYMPHONY #9 11/15/92 Non-Exclusive License 2055 World
112451 TCHAIKOVSKY: NUTCRACKER,SWAN 11/15/92 Non-Exclusive License 2055 World
112501 MUSICAL ODYSSEY 8/11/95 Non-Exclusive License 2055 World
112511 BACH:MAN & HIS MUSIC 7/15/95 Non-Exclusive License 2055 World
112521 BEETHOVEN:MAN & HIS MUSIC:ENHA 8/11/95 Non-Exclusive License 2055 World
112531 BAROQUE:MAN & HIS MUSIC:ENHANC 8/11/95 Non-Exclusive License 2055 World
112541 CHOPIN:MAN & HIS MUSIC:ENHANCE 8/11/95 Non-Exclusive License 2055 World
112551 CLASSICS FOR LOVERS:ENHANCED 8/11/95 Non-Exclusive License 2055 World
112561 TCHAIK:MAN & HIS MUSIC:ENHANCE 8/11/95 Non-Exclusive License 2055 World
112571 MOZART-MAN & MUSIC-ENHANCED CD 8/11/95 Non-Exclusive License 2055 World
112581 PIANO MASTERPIECES:ENHANCED 8/11/95 Non-Exclusive License 2055 World
112591 PUCCINI:MAN & HIS MUSIC:ENHANC 8/11/95 Non-Exclusive License 2055 World
112601 STRAUSS:MAN & HIS MUSIC:ENHANC 8/11/95 Non-Exclusive License 2055 World
113011 BEETHOVEN SYMPHONIES (FRENCH) 9/15/92 Non-Exclusive License 2055 World
113021 MOZART FESTIVAL (FRENCH) 9/15/92 Non-Exclusive License 2055 World
113031 TCHAIKOVSKY FESTIVAL (FRENCH) 9/15/92 Non-Exclusive License 2055 World
113041 CLASSIQUE MELODIES (FRENCH) 9/15/92 Non-Exclusive License 2055 World
113051 HANDEL FESTIVAL (FRENCH) 9/15/92 Non-Exclusive License 2055 World
113061 PIANO MASTERPIECES (FRENCH) 9/15/92 Non-Exclusive License 2055 World
113071 JOY TO THE WORLD (5)(FRENCH) 9/15/92 Non-Exclusive License 2055 World
113081 FIRST NOEL (FRENCH) 9/15/92 Non-Exclusive License 2055 World
113091 DECK THE HALLS (FRENCH) 9/15/92 Non-Exclusive License 2055 World
113101 WHITE CHRISTMAS (FRENCH) 9/15/92 Non-Exclusive License 2055 World
113111 THE NUTCRACKER (FRENCH) 9/15/92 Non-Exclusive License 2055 World
113121 SLEIGH RIDE (FRENCH) 9/15/92 Non-Exclusive License 2055 World
113131 HOLIDAY CLASSICS (FRENCH) 9/15/92 Non-Exclusive License 2055 World
113141 MESSIAH HIGHLIGHTS (FRENCH) 9/15/92 Non-Exclusive License 2055 World
113151 JOY TO THE WORLD (FRENCH) 9/15/92 Non-Exclusive License 2055 World
113161 BAROQUE FESTIVAL (FRENCH) 2/15/93 Non-Exclusive License 2055 World
113171 BRAHMS FESTIVAL (FRENCH) 2/15/93 Non-Exclusive License 2055 World
113181 CLASSICS FOR LOVERS-FRENCH 9/15/93 Non-Exclusive License 2055 World
113191 CLASSICS GO TO THE MOVIES-FREN 9/15/93 Non-Exclusive License 2055 World
113261 BACH'S GREATEST HITS-FRENCH 12/15/92 Non-Exclusive License 2055 World
113271 STRAUSS GREATEST HITS-FRENCH 12/15/92 Non-Exclusive License 2055 World
113281 TCHAIKOVSKY'S GREATEST HITS/FR 12/15/92 Non-Exclusive License 2055 World
113291 VIVALDI'S GREATEST HITS-FRENCH 12/15/92 Non-Exclusive License 2055 World
113301 BEETHOVEN'S GREATEST HITS-FREN 12/15/92 Non-Exclusive License 2055 World
113311 WORLD'S GREATEST MARCHES-FRENC 12/15/92 Non-Exclusive License 2055 World
113321 BRAHMS GREATEST HITS-FRENCH 12/15/92 Non-Exclusive License 2055 World
113331 BIZETS GREATEST HITS 2/15/93 Non-Exclusive License 2055 World
113341 GREAT CHORUSES-FRENCH 12/15/92 Non-Exclusive License 2055 World
113351 MOZART & THE MOVIES-FRENCH 12/15/92 Non-Exclusive License 2055 World
113361 GREAT LOVE THEMES-FRENCH 12/15/92 Non-Exclusive License 2055 World
113371 HAYDN'S GREATEST HITS-FRENCH 12/15/92 Non-Exclusive License 2055 World
113381 VERDI'S GREATEST HITS-FRENCH 12/15/92 Non-Exclusive License 2055 World
113391 1812 OVERTURE - FRENCH 12/15/92 Non-Exclusive License 2055 World
113401 RAVEL: BOLERO - FRENCH 12/15/92 Non-Exclusive License 2055 World
113411 MOZART'S GREATEST HITS 12/15/92 Non-Exclusive License 2055 World
113421 WORLD'S GREATEST ENCORES-FRENC 12/15/92 Non-Exclusive License 2055 World
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 4
<PAGE>
Masters Status
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
item item release Master Status Reverts Territory
number description date
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<S> <C> <C> <C> <C> <C>
113431 GREAT ORCHESTRAL MARCHES-FRENC 12/15/92 Non-Exclusive License 2055 World
113441 BEETHOVEN SYM #9 - FRENCH 12/15/92 Non-Exclusive License 2055 World
113451 TCHAIKOVSKY: NUTCRACKER-FRENCH 12/15/92 Non-Exclusive License 2055 World
113481 CELEBRATION - FRENCH 12/15/92 Non-Exclusive License 2055 World
113491 PACHELBEL: CANON - FRENCH 12/15/92 Non-Exclusive License 2055 World
113501 VIVALDI'S FOUR SEASONS - FRENC 12/15/92 Non-Exclusive License 2055 World
113511 BOLERO & OTHER FRENCH FAV-FREN 12/15/92 Non-Exclusive License 2055 World
113521 MOZART'S EINE KLEINE NACH-FREN 12/15/92 Non-Exclusive License 2055 World
113531 BEETHOVEN'S FIFTH - FRENCH 12/15/92 Non-Exclusive License 2055 World
113541 MUSIC OF THE STRAUSS FAMILY-FR 12/15/92 Non-Exclusive License 2055 World
113551 CLASSIC FILM MUSIC-FRENCH 12/15/92 Non-Exclusive License 2055 World
113561 MOZART'S PIANO CONCERTO-FRENCH 12/15/92 Non-Exclusive License 2055 World
113571 BERLIOZ'S SYMPHONIE FANTAS-FRN 12/15/92 Non-Exclusive License 2055 World
113581 TCHAIK: PIANO CONCERTO 1-FRENC 12/15/92 Non-Exclusive License 2055 World
113591 CHOPIN'S 2ND PIANO CON-FRENCH 12/15/92 Non-Exclusive License 2055 World
113601 BRAHMS 4TH SYM - FRENCH 12/15/92 Non-Exclusive License 2055 World
113611 BEETHOVEN'S 9TH - FRENCH 12/15/92 Non-Exclusive License 2055 World
113621 ORFF'S CARMINA BURANA-FRENCH 12/15/92 Non-Exclusive License 2055 World
113631 DEBUSSY'S LA MER - FRENCH 12/15/92 Non-Exclusive License 2055 World
113641 STRAVINSKY'S RITE OF SPRING-FR 12/15/92 Non-Exclusive License 2055 World
113651 DVORAK'S 9TH SYM-FRENCH 12/15/92 Non-Exclusive License 2055 World
113661 RACHMANINOFF PIANO CON-FRENCH 12/15/92 Non-Exclusive License 2055 World
113671 CLASSICS FOR LOVERS-FRENCH 12/15/92 Non-Exclusive License 2055 World
113681 A NIGHT ON BALD MOUNTAIN-FRENC 12/15/92 Non-Exclusive License 2055 World
113691 CHOPIN'S GREATEST HITS-FRENCH 12/15/92 Non-Exclusive License 2055 World
113701 GREAT ROMANTIC OVERTURES 4/15/93 Non-Exclusive License 2055 World
113711 TCHAIKOVSKY 1812 OVERTURE 4/15/93 Non-Exclusive License 2055 World
114001 ROARING TWENTIES:4 DISC SET 6/15/97 Non-Exclusive License 2055 World
114051 FABULOUS FORTIES:4 DISC SET 6/15/97 Non-Exclusive License 2055 World
114101 SUNDAY MORNING W/THE TIMES:3 D 8/16/97 Non-Exclusive License 2055 World
114181 CLASSICS FOR KIDS:3 DISC SET 6/15/97 Non-Exclusive License 2055 World
114221 BEST OF BARBERSHOP:3 DISC 7/15/97 Non-Exclusive License 2055 World
114261 ROMANTIC MELODIES PIANO:4 DISC 1/15/98 Non-Exclusive License 2055 World
117051 LEGENDS:4 DISC SET 10/15/96 Non-Exclusive License 2055 World
117251 *WEEKEND CLASSICS:4 DISC SET 8/15/97 Non-Exclusive License 2055 World
117261 *COFFEHOUSE CLASSICS:4 DISC SE 8/15/97 Non-Exclusive License 2055 World
117271 *SUNDAY WITH THE TIMES:4 DISC 8/15/97 Non-Exclusive License 2055 World
117281 *CLASSICS FOR LOVERS:4 DISC SE 8/15/97 Non-Exclusive License 2055 World
117301 *MUSIC OF THE SEASONS:4 DISC S 8/15/97 Non-Exclusive License 2055 World
117311 *DRIVE TIME CLASSICS:4 DISC SE 8/15/97 Non-Exclusive License 2055 World
117321 *BACH AND BAGELS:4 DISC SET 8/15/97 Non-Exclusive License 2055 World
117331 *JOYEAUX NOEL:4 DISC SET 8/15/97 Non-Exclusive License 2055 World
120011 *TCHAIKOVSKY:SYMPHONY #5 12/15/87 Non-Exclusive License 2055 World
120021 WAGNER:OVERTURES 12/15/87 Non-Exclusive License 2055 World
120031 STRAUSS:WALTZES 12/15/87 Non-Exclusive License 2055 World
120041 GERSHWIN:AN AMERICAN IN PARIS 12/15/87 Non-Exclusive License 2055 World
120051 *HANDEL:WATER MUSIC 12/15/87 Non-Exclusive License 2055 World
120061 RIMSKY KORSAKOFF:SCHEREZADE 12/15/87 Non-Exclusive License 2055 World
120071 GREIG:PEER GYNT;HOLBERG 12/15/87 Non-Exclusive License 2055 World
120081 SCHUBERT:SYMPHONY #8 12/15/87 Non-Exclusive License 2055 World
120091 ST SAENS:ORGAN SYMPHONY 12/15/87 Non-Exclusive License 2055 World
120101 BRAHMS:SYMPHONY #2 12/15/87 Non-Exclusive License 2055 World
120111 BEETHOVEN SYMPHONY # 7 12/15/87 Non-Exclusive License 2055 World
120121 TCHAIKOVSKY:SYMPHONY #6 12/15/87 Non-Exclusive License 2055 World
120131 TCHAIKOVSKY:1812 OVERTURE/DA 12/15/87 Non-Exclusive License 2055 World
120141 MOZART:SYMPHONY #40/41 12/15/87 Non-Exclusive License 2055 World
120151 SCHUMANN/CHOPIN:CONCERTOS 12/15/87 Non-Exclusive License 2055 World
120161 ON PARADE:GREAT MARCHES 12/15/87 Non-Exclusive License 2055 World
120171 PACHELBEL:KANON AND OTHER BAR 4/15/88 Non-Exclusive License 2055 World
120181 J.S.BAH:JESU JOY OF MAN'S DE 4/15/88 Non-Exclusive License 2055 World
120191 THE ENTERTAINER-PIANO RAGS BY 4/15/88 Non-Exclusive License 2055 World
120201 BACH ORGAN BOOK;BRUNELLE 4/15/88 Non-Exclusive License 2055 World
120211 VIVALDI:FOUR SEASONS;JAPP SCH 4/15/88 Non-Exclusive License 2055 World
120221 *RAVEL:BOLERO;OFFENBACH:ORPHEU 4/15/88 Non-Exclusive License 2055 World
120231 *TCHAIKOVSKY:ROMEO AND JULIET 4/15/88 Non-Exclusive License 2055 World
120241 MOZART:EINE KLEINE NACTMUSICK 4/15/88 Non-Exclusive License 2055 World
120251 *BEETHOVEN:SYM #5;ROYAL PROMEN 4/15/88 Non-Exclusive License 2055 World
120261 CLASSIC OVERATURES:WILLIAM TE 4/15/88 Non-Exclusive License 2055 World
120271 *TCHAIKOVSKY-NUTCRACKER SUITE 8/15/88 Non-Exclusive License 2055 World
120281 MUSIC OF THE STRAUSS FAMILY 8/15/88 Non-Exclusive License 2055 World
120291 *GREIG:PIANO CONCERTO,HOLBERG 8/15/88 Non-Exclusive License 2055 World
120301 HAYDN:SURPRISE SYMPHONY;MOZART 8/15/88 Non-Exclusive License 2055 World
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 5
<PAGE>
Masters Status
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
item item release Master Status Reverts Territory
number description date
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<S> <C> <C> <C> <C> <C>
120311 *WALTZFEST WALTZES BY TCHAIK,S 8/15/88 Non-Exclusive License 2055 World
120321 GREAT MELODIES FROM THE CLASS 8/15/88 Non-Exclusive License 2055 World
120331 *MASTER OF THE BAROQUE:BACH/HA 8/15/88 Non-Exclusive License 2055 World
120341 GREAT OPERA OVERTURES&MARCHES 8/15/88 Non-Exclusive License 2055 World
120351 BRAHMS:TRAGIC OVERTURE 8/15/88 Non-Exclusive License 2055 World
120361 *GREAT ORCHESTRAL DANCES:BRAHM 8/15/88 Non-Exclusive License 2055 World
120371 BACH FAMILY NOTEBOOK 1/15/89 Non-Exclusive License 2055 World
120381 *THE BAROQUE TRUMPET:BACH,TELE 1/15/89 Non-Exclusive License 2055 World
120391 HANDEL:CONCERTI GROSSI OP 6 1/15/89 Non-Exclusive License 2055 World
120401 A LITTLE NIGHT MUSIC 1/15/89 Non-Exclusive License 2055 World
120411 BEETHOVEN:SYM 2;PIANO CONC 2 1/15/89 Non-Exclusive License 2055 World
120421 CONCERT ENCORES:STRAUSS,GREIG, 1/15/89 Non-Exclusive License 2055 World
120431 *GREAT ORCHESTRAL MARCHES 1/15/89 Non-Exclusive License 2055 World
120441 CLASSIC FILM MUSIC;2001,AMADE 1/15/89 Non-Exclusive License 2055 World
120451 MEMORIES OF OLD VIENNA:STRAUS 1/15/89 Non-Exclusive License 2055 World
120461 *BAROQUE BRASS FESTIVAL:VIVALD 1/15/89 Non-Exclusive License 2055 World
120471 MOZART:PIANO CONCERTO #21 8/15/89 Non-Exclusive License 2055 World
120481 *GERSHWIN 'PORGY AND BESS' 8/15/89 Non-Exclusive License 2055 World
120491 MENDELSSOHN:SYMPHONY NO.4 8/15/89 Non-Exclusive License 2055 World
120501 BERLIOZ:SYMPHONY FASTASTIQUE 8/15/89 Non-Exclusive License 2055 World
120511 TCHAIKOVSKY:PIANO CONCERTO #1 8/15/89 Non-Exclusive License 2055 World
120521 *BIZET:CARMEN SUITES 8/15/89 Non-Exclusive License 2055 World
120531 BEETHOVEN:SYMPHONY NO. 3 8/15/89 Non-Exclusive License 2055 World
120541 *WORLD'S GREATEST MARCHES 8/15/89 Non-Exclusive License 2055 World
120551 *LIGHT CAVALRY/GREAT ROMANTIC 8/15/89 Non-Exclusive License 2055 World
120561 BRAHM'S SYMPHONY #4 8/15/89 Non-Exclusive License 2055 World
120581 TCHAIKOVSKY: SYMPHONY #4 8/15/90 Non-Exclusive License 2055 World
120591 MOZART: SYMPHONIES 35 & 40 8/15/90 Non-Exclusive License 2055 World
120611 *BEETHOVEN: SYMPHONY #9 8/15/90 Non-Exclusive License 2055 World
120641 *BRAHMS VIOLIN CONCERTO 8/15/90 Non-Exclusive License 2055 World
120651 BEETHOVEN PIANO CONCERTO 5 8/15/90 Non-Exclusive License 2055 World
120661 TWELVE DAYS IN DECEMBER 8/15/90 Non-Exclusive License 2055 World
120671 A CLASSIC CHRISTMAS 8/15/90 Non-Exclusive License 2055 World
120681 SILENT NIGHT 8/15/90 Non-Exclusive License 2055 World
120691 'HALLELUJAH' 8/15/90 Non-Exclusive License 2055 World
120701 CHRISTMAS BRASS 8/15/90 Non-Exclusive License 2055 World
120711 CAROLS FOR CHRISTMAS 8/15/90 Non-Exclusive License 2055 World
120721 BEETHOVEN: SYMPHONY 4 & 8 2/15/91 Non-Exclusive License 2055 World
120731 MENDELSSOHN VIOLIN CONCERTO 2/15/91 Non-Exclusive License 2055 World
120741 *ORFF - CARMINA BURANA 2/15/91 Non-Exclusive License 2055 World
120751 DVORAK SLAVONIC DANCES 2/15/91 Non-Exclusive License 2055 World
120761 *DEBUSSY LA MER, PRELUDE FAUN 2/15/91 Non-Exclusive License 2055 World
120771 STRAVINSKY:LA SACRE DU PRINTEM 5/15/91 Non-Exclusive License 2055 World
120781 *TRUMPET CONCERTOS 5/15/91 Non-Exclusive License 2055 World
120791 MOZART: SYMPHONIES 36 & 39 5/15/91 Non-Exclusive License 2055 World
120801 MOZART: HORN CONCERTOS 5/15/91 Non-Exclusive License 2055 World
120811 BEETHOVEN: SYM 6, EGMONT 5/15/91 Non-Exclusive License 2055 World
120821 *PASS IN REVIEW 5/15/91 Non-Exclusive License 2055 World
120831 *BACH:BRANDENBERG CON 1-3 11/15/91 Non-Exclusive License 2055 World
120841 *BACH:BRANDENBERGH CON 4-6 11/15/91 Non-Exclusive License 2055 World
120851 *DVORAK'S NINTH 11/15/91 Non-Exclusive License 2055 World
120861 *RACHMANINOFF'S 2ND PIANO CON 11/15/91 Non-Exclusive License 2055 World
120871 BRAHMS SYMPHONY NO. 1 11/15/91 Non-Exclusive License 2055 World
120881 *CLASSICS FOR LOVERS 11/15/91 Non-Exclusive License 2055 World
120891 *A NIGHT ON BALD MOUNTAIN 11/15/91 Non-Exclusive License 2055 World
120901 CHOPIN'S PIANO CONCERTO NO. 1 11/15/91 Non-Exclusive License 2055 World
120911 *HIGHLIGHTS FROM AIDA 11/15/91 Non-Exclusive License 2055 World
120921 *WORLD'S GREATEST CHORUSES 11/15/91 Non-Exclusive License 2055 World
120931 DEBUSSY: FRANCK 3/23/92 Non-Exclusive License 2055 World
120941 MOZART: SINFONIA CONCERTANTE 3/23/92 Non-Exclusive License 2055 World
120951 SERENADE FOR STRINGS 3/23/92 Non-Exclusive License 2055 World
120961 *ROMEO & JULIET 3/23/92 Non-Exclusive License 2055 World
120971 *VIVE LA FRANCE 3/23/92 Non-Exclusive License 2055 World
120981 *BEETHOVEN - SONATAS 3/23/92 Non-Exclusive License 2055 World
120991 BARTOK - PETROUSKA 8/15/92 Non-Exclusive License 2055 World
121001 WORLDS GREAT BALLETS 8/15/92 Non-Exclusive License 2055 World
121011 *CELEBRATION! 8/15/92 Non-Exclusive License 2055 World
121021 HAYDN 8/15/92 Non-Exclusive License 2055 World
121031 MOZART: SYM 40 & 41 4/15/93 Non-Exclusive License 2055 World
121041 *OPERA AT THE MOVIES 4/15/93 Non-Exclusive License 2055 World
121051 LISZT:GREIG - PIANO CONCERTOS 4/15/93 Non-Exclusive License 2055 World
122011 ART OF THE BAROQUE 1/15/93 Non-Exclusive License 2055 World
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Page 6
<PAGE>
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<TABLE>
<CAPTION>
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<S> <C> <C> <C> <C> <C>
122021 ART OF BACH 1/15/93 Non-Exclusive License 2055 World
122031 ART OF MOZART 1/15/93 Non-Exclusive License 2055 World
122041 ART OF BEETHOVEN 1/15/93 Non-Exclusive License 2055 World
122051 ART OF SYMPHONY 1/15/93 Non-Exclusive License 2055 World
122061 ART OF THE CONCERTO 1/15/93 Non-Exclusive License 2055 World
122071 ART OF TCHAIKOVSKY 1/15/93 Non-Exclusive License 2055 World
122081 ART OF BRAHMS 3/15/93 Non-Exclusive License 2055 World
122091 ART OF DANCE 3/15/93 Non-Exclusive License 2055 World
122101 ART OF THE OVERTURE 3/15/93 Non-Exclusive License 2055 World
122131 MENUS: FRANCE 10/15/93 Non-Exclusive License 2055 World
122141 MENUS: GERMANY 11/15/93 Non-Exclusive License 2055 World
122151 MENUS: ITALY 10/15/93 Non-Exclusive License 2055 World
122161 MENUS: GREECE 11/15/93 Non-Exclusive License 2055 World
122171 MENUS: SPAIN 11/15/93 Non-Exclusive License 2055 World
122181 MENUS: CARIBBEAN 11/15/93 Non-Exclusive License 2055 World
122191 MENUS: CHINA 11/15/93 Non-Exclusive License 2055 World
122201 MENUS: SWITZERLAND 11/15/93 Non-Exclusive License 2055 World
122211 MENUS: MEXICO 11/15/93 Non-Exclusive License 2055 World
122221 MENUS: ISRAEL 11/15/93 Non-Exclusive License 2055 World
125001 CLASSICAL TREASURY:20 CD'S 7/15/95 Non-Exclusive License 2055 World
125011 GREGORIAN CHANT:RENAISSANCE MU 9/16/96 Non-Exclusive License 2055 World
125021 BAROQUE:HANDEL MESSIAH 9/16/96 Non-Exclusive License 2055 World
125031 BAROQUE:BACH:TOCATA & FUGUE 9/16/96 Non-Exclusive License 2055 World
125041 BAROQUE:VIVADLI:THE FOUR SEASO 9/16/96 Non-Exclusive License 2055 World
125051 MOZART EINE KLEINE NACTMUSIC 9/16/96 Non-Exclusive License 2055 World
125061 MOZART:THE MARRIAGE OF FIGARO 9/16/96 Non-Exclusive License 2055 World
125071 MOZART:PIANO CONCERTO #21 9/16/96 Non-Exclusive License 2055 World
125081 BEETHOVEN:EGMONT OVERTURE 9/16/96 Non-Exclusive License 2055 World
125091 BEETHOVEN:MOONLIGHT SONATA 9/16/96 Non-Exclusive License 2055 World
125101 BEETHOVEN:EMPEROR CONCERTO 9/16/96 Non-Exclusive License 2055 World
125111 HAYDN:SYMPHONY NOS 94,100,104 9/16/96 Non-Exclusive License 2055 World
125121 SCHUBERT:SYM #8 9/16/96 Non-Exclusive License 2055 World
125131 ROSSINI:THE BARBER OF SEVILLE 9/16/96 Non-Exclusive License 2055 World
125141 WAGNER;RIDE OF THE VALKYRIES 9/16/96 Non-Exclusive License 2055 World
125151 BIZET:CARMEN SUITE 9/16/96 Non-Exclusive License 2055 World
125161 TCHAIKOVSKY:THE NUTCRACKER SUI 9/16/96 Non-Exclusive License 2055 World
125171 DVORAK:SYMPHONY NO. 9 9/16/96 Non-Exclusive License 2055 World
125181 STRAUSS:RACHMANINOFF 9/16/96 Non-Exclusive License 2055 World
125191 RAVEL:BOLERO DEBUSSY 9/16/96 Non-Exclusive License 2055 World
125201 COPLAND & BERNSTEIN 9/16/96 Non-Exclusive License 2055 World
125211 MOZART:REQUIEM MASS HIGHLIGHTS 9/16/96 Non-Exclusive License 2055 World
125221 BEETHOVEN:SYMPHONY NO. 5 9/16/96 Non-Exclusive License 2055 World
125231 CHOPIN:HIGHLIGHTS 24 PRELUDES 9/16/96 Non-Exclusive License 2055 World
125241 VERDI:RIGOLETTO,AIDA,TROVATORE 9/16/96 Non-Exclusive License 2055 World
125251 STRAUSS JR:BLUE DANUBE,EMPEROR 9/16/96 Non-Exclusive License 2055 World
125261 BRAHMS:SYMPHONY NO. 3 9/16/96 Non-Exclusive License 2055 World
125271 MOUSSORGSKY:PROKOFIEV 9/16/96 Non-Exclusive License 2055 World
125281 TCHAIKOVSKY:SERENADE FOR STRIN 9/16/96 Non-Exclusive License 2055 World
125291 BARTOK/STRAVINSKY/GERSHWIN 9/16/96 Non-Exclusive License 2055 World
125301 ORFF:CARMINA BURANA 9/16/96 Non-Exclusive License 2055 World
125311 BEETHOVEN:SYM NO. 6 8/15/97 Non-Exclusive License 2055 World
125321 NIKOLAI RIMSKY-KORSAKOFF 8/15/97 Non-Exclusive License 2055 World
125331 TCHAIK:ROMEO & JULIET 8/15/97 Non-Exclusive License 2055 World
125341 GRIEG:PIANO CONCERTO 8/15/97 Non-Exclusive License 2055 World
130001 MASTERS-MOZART Non-Exclusive License 2055 World
130051 MASTERS-BACH Non-Exclusive License 2055 World
130101 MASTERS-BEETHOVEN Non-Exclusive License 2055 World
130151 MASTERS-TCHAIKOVSKY Non-Exclusive License 2055 World
130191 MOZART VIOLIN CONCERTOS 4&5 DELETE Non-Exclusive License 2055 World
130201 MASTER-BAROQUE Non-Exclusive License 2055 World
130251 MASTERS-VARIOUS Non-Exclusive License 2055 World
130301 MASTER-VARIOUS Non-Exclusive License 2055 World
130351 MASTERS-MOVIES Non-Exclusive License 2055 World
130601 MASTERS-SYMPHONIES 7/15/91 Non-Exclusive License 2055 World
130651 MUSIC'S MAGICAL MOMENTS 4 DISC 7/15/91 Non-Exclusive License 2055 World
130701 GREAT ORCHESTRAL DANCES 4 DISC 7/15/91 Non-Exclusive License 2055 World
130751 WORLD'S GREAT OVERTURE 4 DISC 7/15/91 Non-Exclusive License 2055 World
130801 WORLD'S GRT COMPOSERS-10 DISC 9/15/93 Non-Exclusive License 2055 World
130911 WORLD'S GRT SYMPHONIES-10 DISC 9/15/93 Non-Exclusive License 2055 World
131021 AMERICAN FESTIVAL DELETE Non-Exclusive License 2055 World
131091 BERNSTEIN-COMPLETE SOLO PIANO DELETE Non-Exclusive License 2055 World
131771 CHOPIN-WALTZES-ARTHUR LIMA DELETE Non-Exclusive License 2055 World
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Page 7
<PAGE>
Masters Status
<TABLE>
<CAPTION>
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item item release Master Status Reverts Territory
number description date
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<S> <C> <C> <C> <C> <C>
131831 COPLAND-PIANO MUSIC-JAMES TOCO DELETE Non-Exclusive License 2055 World
131981 NEW YORK, NEW YORK-NYCGMC DELETE Non-Exclusive License 2055 World
132131 BACH-BRANDENBURG CONCERTOS456 DELETE Non-Exclusive License 2055 World
132141 VIVALDI-FOUR SEASONS DELETE Non-Exclusive License 2055 World
132181 GREAT BAROQUE ALLEGROS DELETE Non-Exclusive License 2055 World
132251 MOZART-SONATAS-KUIJKEN DELETE Non-Exclusive License 2055 World
132371 DVRAK-AMERICAN QUARTET DELETE Non-Exclusive License 2055 World
132441 GERSHWIN PIANO CONCERTO DELETE Non-Exclusive License 2055 World
132491 COUPERIN-CONCERTS ROYAUX DELETE Non-Exclusive License 2055 World
132541 COUPERIN-APOTHEOSE LULLY-COREL DELETE Non-Exclusive License 2055 World
132871 GREGORIAN CHANTS-RUHLAND DELETE Non-Exclusive License 2055 World
132891 SCARLATTI-SONATAS-LEONHARDT DELETE Non-Exclusive License 2055 World
133021 TANEYEV-SUITE DE CONCERT DELETE Non-Exclusive License 2055 World
133211 I GOT PLENTY OF GERSHWIN DELETE Non-Exclusive License 2055 World
134001 TUNES FROM THE TOONS 10/15/91 Non-Exclusive License 2055 World
134011 THE JOSEPHINE BAKER STORY 1/15/92 Non-Exclusive License 2055 World
134031 AND GOD SING PRAISE 3/15/92 Non-Exclusive License 2055 World
134041 OLD MILL STREAM-BARBERSHOP WIN 3/15/92 Exclusive License 1/1/01 World
134051 BEGIN THE BEGUINE-ARTIE SHAW 3/23/92 Non-Exclusive License 2055 World
134061 ADIOS MUCHACHOS-XAVIER CUGAT 3/23/92 Non-Exclusive License 2055 World
134071 GAY CABALLERO-FRANK CRUMIT 3/23/92 Non-Exclusive License 2055 World
134081 MOTEN SWING - ANDY KIRK 3/15/92 Non-Exclusive License 2055 World
134121 MACDOWELL CONCERTOS 4/15/92 Exclusive License 8/31/97 World
134131 COPLAND & DISCIPLES 4/15/92 Exclusive License 8/31/97 World
134141 DANIEL DOMB CELLO PROJECT 3/23/92 Exclusive License 8/31/97 World
134161 GILBERT/SULLIVAN: MIKADO 7/15/92 Non-Exclusive License 2055 World
134171 GILBERT/SULLIVAN:YEOMAN OF GUA 7/15/92 Non-Exclusive License 2055 World
134181 BENNY GOODMAN 8/15/92 Non-Exclusive License 2055 World
134191 FAT WALLER 8/15/92 Non-Exclusive License 2055 World
134201 JELLY ROLL MORTON 8/15/92 Non-Exclusive License 2055 World
134211 BILLIE HOLIDAY 8/15/92 Non-Exclusive License 2055 World
134221 BEST OF THE HONKY TONK PIANO 8/15/92 Exclusive License 8/31/97 World
134231 BAROQUE BEATLES 8/15/92 Exclusive License 8/31/97 World
134241 ART FERRANTE-MUSICAL JEMS 10/15/92 Exclusive License Sell Off World
134251 MY FAIR LADY 8/15/92 Exclusive License 8/31/97 World
134341 MOZART:PIANO CONERTOS VOL 2 10/15/92 Exclusive License 8/31/97 World
134391 SATIES GREATEST HITS 4/15/93 Exclusive License 8/31/97 World
134411 TCHAIKOVSKY: PIANO CON 1&2 HAN 4/15/93 Exclusive License 8/31/97 World
134421 PROKOFIEV:VIOLIN CONC;KIM-FREE 4/15/93 Exclusive License 8/31/97 World
134431 SPIRITUALS(WARFIELD/ARPIN) 5/15/93 Exclusive License 8/31/97 World
134441 BEST OF BAGPIPES (VARIOUS) 5/15/93 Exclusive License 8/31/97 World
134451 MOZART:PIANO CON.V.3 HAN/FREE 5/15/93 Exclusive License 8/31/97 World
134471 MARIAN ANDERSON - TRIBUTE TO 5/15/93 Exclusive License 8/31/97 World
134481 HAYDN:KEYBOARD CONCERTOS VOL 1 8/15/93 Exclusive License 8/31/97 World
134491 RACHMANINOFF: SYM NO.2 8/15/93 Exclusive License 8/31/97 World
134511 GILBERT & SULLIVAN:IOLANTHE 8/15/93 Non-Exclusive License 2055 World
134521 GILBERT & SULLIVAN:THE GONDOLI 8/15/93 Non-Exclusive License 2055 World
134531 SWEET GEORGIA BROWN 8/15/93 Exclusive License 1/1/01 World
134541 MAZELTOV 8/15/93 Exclusive License 8/31/97 World
134601 GILBERT&SULLIVAN GH:ROCHESTER 8/15/93 Non-Exclusive License 2055 World
134611 HAYDN:LORD NELSON MASS 9/15/93 Exclusive License 8/31/97 World
134621 MOZART: REQUIEM 9/15/93 Exclusive License 8/31/97 World
134631 PROKOFIEV & TCHAIK:PIANO CONCE 9/15/93 Exclusive License 8/31/97 World
134641 SCHUMANN:PIANO CONCERTO & CARN 9/15/93 Exclusive License 8/31/97 World Extendable at Intersound's Option
134661 BEETHOVEN:PIANO CON. 1 & 2 9/15/93 Exclusive License 5/1/98 World Extendable at Intersound's Option
134671 BEETHOVEN:PIANO CON. 3 & 4 9/15/93 Exclusive License 5/1/98 World
134681 BEETHOVEN: PIANO CON. 5 9/15/93 Exclusive License 5/1/98 World Extendable at Intersound's Option
134711 MOZART:PIANO CONCERTOS VOL IV 1/15/94 Exclusive License 8/31/97 World
134721 LIZST:SCHUBERT LIEDER,VOL. 1 10/15/93 Exclusive License 8/31/97 World
134731 MOZART:HAYDN:HANDEL:OBOE CONCE 1/15/94 Exclusive License 8/31/97 World
134751 MOZART:COMPLETE WORKS FOR TWO 2/15/94 Exclusive License 8/31/97 World
134761 STARS & STRIPES: BARBERSHOP 2/15/94 Exclusive License 1/1/97 World
134791 PROKOFIEV VIOLIN CONCERTO NO.1 2/15/94 Exclusive License 8/31/97 World
134861 20 LEGENDARY SOPRANOS 2/15/94 Exclusive License 8/31/97 World
134871 MOZART:VIOLIN PIANO CON #27 4/15/94 Exclusive License 8/31/97 World
134881 BRAHMS:PIANO CONCERTO NO. 1 4/15/94 Exclusive License 8/31/97 World Extendable at Intersound's Option
134911 FRENCH PIANO ALBUM 4/15/94 Exclusive License 8/31/97 World Extendable at Intersound's Option
134971 GREGORIAN CHANTS 4/15/94 Exclusive License 8/31/97 World Extendable at Intersound's Option
134981 HYMNS OF FAITH:MORMAN TABERNAC 5/15/94 Exclusive License Sell Off United States Extendable at Intersound's Option
134991 2 STEINWAYS ON BROADWAY 4/15/94 Exclusive License 8/31/97 World Extendable at Intersound's Option
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Page 8
<PAGE>
Masters Status
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
item item release Master Status Reverts Territory
number description date
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<S> <C> <C> <C> <C> <C>
135031 SUNSET BLVD:ARPIN,LONDON POPS 6/15/94 Exclusive License 8/31/97 World Extendable at Intersound's Option
135041 48TH HIGHLANDERS:WORLDS GRT HY 7/15/94 Exclusive License 8/31/97 World
135071 MENDELSSOHN:PIANO CONCERTOS 10/15/94 Non-Exclusive License 2055 World
135081 MOZART:PIANO CONCERTO VOL.5 10/15/94 Non-Exclusive License 2055 World
135091 MENDELSSOHN:VIOLIN CONCERTO 10/15/94 Non-Exclusive License 2055 World Extendable at Intersound's Option
135101 MORMON TAB:LIVE IN JERUSALEM 9/15/94 Exclusive License 8/31/97 World
135151 PINES OF ROME:PACIFIC SYMPHONY 10/15/94 Exclusive License 8/31/97 World
135171 VIOLIN ENCORES:SILVERSTEIN 10/15/94 Exclusive License Sell Off United States
135181 MY ROMANCE:JOHN ARPIN 10/15/94 Exclusive License 8/31/97 World
135211 RARE RUSSIAN:MORMON TAB 3/15/95 Exclusive License Sell Off World Extendable at Intersound's Option
135221 LOVE SWEET SONG 1993 4/15/95 Exclusive License 1/1/01 World Extendable at Intersound's Option
135301 ARPIN:SOMEBODY LOVES ME 6/15/95 Exclusive License 8/31/97 World Extendable at Intersound's Option
135311 JOPLIN RARITIES 6/15/95 Exclusive License 8/31/97 World Extendable at Intersound's Option
135321 BARBERSHOP VOL. 1994 7/15/95 Exclusive License 1/1/01 World Extendable at Intersound's Option
135341 VIETNAM TRIOLOGY: CHICAGO 9/15/95 Exclusive License 8/31/97 World Extendable at Intersound's Option
135351 GAIDZUNOV TCHIAKOVKSY:VIOLIN 9/15/95 Exclusive License 8/31/97 World
135361 WHILE MY GUITAR GENTLY WEEPS 9/15/95 Exclusive License 8/31/97 World
135371 MOZART:PIANO CONCERTO VOL. 6 9/15/95 Exclusive License 8/31/97 World
135381 DVORAK: VIOLIN CONCERTO 9/15/95 Exclusive License 8/31/97 World Extendable at Intersound's Option
135391 GREIG: PIANO CONCERTO 9/15/95 Exclusive License 8/31/97 World
135401 RACHMANIOFF:3RD PIANO CONCERTO 9/15/95 Exclusive License 8/31/97 World Extendable at Intersound's Option
135411 HAYDN:PIANO CONCERTO VOL. 4 9/15/95 Exclusive License 8/31/97 World
135511 BENNY GOODMAN 2/15/96 Non-Exclusive License 2047 World
135521 HARRY JAMES 2/15/96 Non-Exclusive License 2047 World
135531 KATE SMITH 2/15/96 Non-Exclusive License 2047 World
135541 AL JOLSON 2/15/96 Non-Exclusive License 2047 World
135551 BANDS OF THE 20'S 2/15/96 Non-Exclusive License 2047 World
135561 BANDS OF THE 30'S 2/15/96 Non-Exclusive License 2047 World
135761 BARBERSHOP 2/15/97 Exclusive License 2006 World Extendable at Intersound's Option
135771 FULL MOON 972015 Non-Exclusive License 1999 World
135891 BARBERSHOP 96 9/23/97 Exclusive License 2001 World Extendable at Intersound's Option
135921 AL JOLSON:ON BDWAY:2 DISC 9/15/97 Non-Exclusive License 2055 World Extendable at Intersound's Option
135951 LOWEN & NAVARRO: LIVE WIRE 10/15/97 Exclusive License 2002 World
136011 BACH'S GREATEST HITS 8/15/93 Non-Exclusive License 2055 World
136021 BEETHOVEN'S GREATEST HITS 8/15/93 Non-Exclusive License 2055 World
136031 MOZART'S GREATEST HITS 8/15/93 Non-Exclusive License 2055 World
136041 HANDEL'S GREATEST HITS 8/15/93 Non-Exclusive License 2055 World
136051 TCHAIKOVSKY'S GREATEST HITS 8/15/93 Non-Exclusive License 2055 World
136061 GREATEST HITS OF THE BAROQUE 8/15/93 Non-Exclusive License 2055 World
136071 STRAUSS' GREATEST HITS 8/15/93 Non-Exclusive License 2055 World
136081 RAVEL'S GREATEST HITS 8/15/93 Non-Exclusive License 2055 World
136091 CHOPIN'S GREATEST HITS 8/15/93 Non-Exclusive License 2055 World
136101 DVORAK'S GREATEST HITS 8/15/93 Non-Exclusive License 2055 World
136111 WORLDS GREATEST OVERTURES 8/15/93 Non-Exclusive License 2055 World
136121 WORLDS GREATEST MARCHES 8/15/93 Non-Exclusive License 2055 World
136131 OPERETTA 11/15/94 Non-Exclusive License 2055 World
136141 CHORUSES 11/15/94 Non-Exclusive License 2055 World
136171 BRAHMS:REFERENCE GOLD 2 DISC 3/15/96 Non-Exclusive License 2055 World
136181 ENCORES:REFERENCE GOLD 2 DISC 3/15/96 Non-Exclusive License 2055 World
136191 GERSHWIN-REF GOLD 7/15/97 Non-Exclusive License 2055 World
136201 JOPLIN - REF GOLD 7/15/97 Non-Exclusive License 2055 World
136591 CONCERT GOLD:INTERLUDES 2/15/97 Non-Exclusive License 2055 World
136601 CONCERT GOLD:STARS & STRIPES 2/15/97 Non-Exclusive License 2055 World
136741 ROSSINI:OPERA FOR ORCHESTRA 5/15/96 Non-Exclusive License 2055 World
136751 MOZART;OPERA FOR ORCHESTRA 5/15/96 Non-Exclusive License 2055 World
138001 BEST OF THE BAROQUE:3 DISC SET 8/15/95 Non-Exclusive License 2055 World
138041 THE MAGIC OF MOZART:3 DISC SET 8/15/95 Non-Exclusive License 2055 World
138081 THE GREAT SYMPHONIES:3 DISC SE 8/15/95 Non-Exclusive License 2055 World
138121 PIANO MASTERPIECES 8/15/95 Non-Exclusive License 2055 World
138161 VIVE LA FRANCE 8/15/95 Non-Exclusive License 2055 World
138201 WORLDS GREAT OVERTURES:3 DISC 8/15/95 Non-Exclusive License 2055 World
138241 THE GREAT ROMANTICS 8/15/95 Non-Exclusive License 2055 World
138281 WORLDS GREATEST MARCHES:3 DISC 8/15/95 Non-Exclusive License 2055 World
138321 RUSSIAN FANTASY: 3 DISC SET 8/15/95 Non-Exclusive License 2055 World
138361 BEETHOVEN: CONCERTOS 3 DISC 8/15/95 Exclusive License 8/31/97 World
138401 GREAT MELODIES CLASSICS 3-DISC 10/16/97 Non-Exclusive License 2055 World
138411 WORLDS'GREATEST CLASSICS 3-DIS 10/16/97 Non-Exclusive License 2055 World
138421 ORCHESTRAL MELODIES 3-DISC 10/16/97 Non-Exclusive License 2055 World
138431 ROMANTIC MELODIES 3-DISC 10/16/97 Non-Exclusive License 2055 World
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Page 9
<PAGE>
Masters Status
<TABLE>
<CAPTION>
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item item release Master Status Reverts Territory
number description date
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<S> <C> <C> <C> <C> <C>
138441 CLASSICAL MASTERPIECES 3-DISC 10/16/97 Non-Exclusive License 2055 World
138451 MELODIES FOR ORCHESTRA 3-DISC 10/16/97 Non-Exclusive License 2055 World
138461 CLASSICS FOR LOVERS 3-DISC 10/16/97 Non-Exclusive License 2055 World
138471 GREAT ROMANTICS 3-DISC 10/16/97 Non-Exclusive License 2055 World
145161 THE MUSIC OF ABBA-LONDON SYMPH 12/15/91 Exclusive License 12/15/97 U.S. & Canada
145171 BEATLES GREATEST HITS-LONDON 12/15/91 Exclusive License 12/15/97 U.S. & Canada
145181 HOT LATIN NIGHTS-FERRANTE&TEIH 12/15/91 Exclusive License 7/1/96 World
145451 COUNTRY BANJOS 6/15/92 Exclusive License Sell Off World
145461 COUNTRY FIDDLES 6/15/92 Exclusive License Sell Off World
145611 NAT KING COLE 9/15/92 Non-Exclusive License 2047 World
145631 TOMMY DORSEY 8/15/92 Non-Exclusive License 2047 World
145641 GLENN MILLER 9/15/92 Non-Exclusive License 2047 World
145651 ALL THAT JAZZ 9/15/92 Non-Exclusive License 2047 World
145721 AMAZING GRACE & OTHER BAGPIPE 1/15/94 Exclusive License 8/31/97 World
147731 CARRIBBEAN MON 6/16/97 Non-Exclusive License 2055 World
147741 CARRIBBEAN MON 6/16/97 Non-Exclusive License 2055 World
152001 HORAS & MORE 5/15/95 Exclusive License 2/28/00 World
152011 JEWISH PARTY FAVORITES 5/15/95 Exclusive License 2/28/00 World
152021 LETS DANCE 5/15/95 Exclusive License 2/28/00 World
152031 TO LIFE 5/15/95 Exclusive License 2/28/00 World
161111 CLASSICAL MUSIC PEOPLE WHO HAT 5/15/92 Non-Exclusive License 2060 World
161121 CLASSICS FOR LOVERS 5/15/92 Non-Exclusive License 2060 World
161181 CLASSICAL PIANO (COMPILATION) 12/15/92 Non-Exclusive License 2060 World
161191 SOMEONE TO WATCH OVER ME:ARPIN 12/15/92 Exclusive License 8/31/97 World
162011 WHAT DOES A DEAF GUY-BEETHOVE 5/15/93 Non-Exclusive License 2060 World
162021 PROLIFIC IN EVERY RESP.-BACH 5/15/93 Non-Exclusive License 2060 World
162031 NOT BAD FOR A KID - MOZART 5/15/93 Non-Exclusive License 2060 World
162041 DON'T GIVE UP - TCHAIKOVSKY 5/15/93 Non-Exclusive License 2060 World
162051 INSTRUMENTAL STRATEGY-OVERTUR 5/15/93 Non-Exclusive License 2060 World
162061 LONG HAIR LOUD MUSIC-SYMPHONY 5/15/93 Non-Exclusive License 2060 World
162101 TCHAIK:1812 OVERTURE & OTHER H 3/15/97 Non-Exclusive License 2060 World
162111 BRAHMS:PIANO CONCERTO NO 1 3/15/97 Non-Exclusive License 2060 World
162121 MOZART:SYMPHONIES 40 & 41 3/15/97 Non-Exclusive License 2060 World
162131 BOLERO & OTHER FRENCH MASTERPI 3/15/97 Non-Exclusive License 2060 World
162141 HANDEL:MESSIAH HIGHLIGHTS 3/15/97 Non-Exclusive License 2060 World
162151 GERSHWIN PLAYS RHAPSODY IN BLU 3/15/97 Non-Exclusive License 2060 World
170011 MY FATHERS HOUSE 4/15/92 Exclusive License Sell Off World
170021 HYMNS FROM THE HILLS-LYNN 4/15/92 Exclusive License 12/31/97 World
170111 TERRI LYNN - INSIDE A TEAR 3/15/93 Exclusive License 6/20/01 World
170191 PRAISE IN STREETS-BLUESTONE 5/15/93 Exclusive License Sell Off World
170241 JI LIM:THROUGH IRON WALLS 2/15/93 Exclusive License Sell Off World
170321 HEAVEN'S METAL 6/15/94 Exclusive License Sell Off World
170391 9:1 WAY:DESTINATION UNKNOWN 9/15/94 Exclusive License 6/6/97 World
174011 VIVALDI'S GREATEST HITS 5/15/92 Non-Exclusive License 2060 World
174021 BACH'S GREATEST HITS 5/15/92 Non-Exclusive License 2060 World
174031 HANDEL'S GREATEST HITS 5/15/92 Non-Exclusive License 2060 World
174041 MOZART'S GREATEST HITS 5/15/92 Non-Exclusive License 2060 World
174051 BEETHOVEN'S GREATEST HITS 5/15/92 Non-Exclusive License 2060 World
174061 TCHAIKOVSKY'S GREATEST HITS 5/15/92 Non-Exclusive License 2060 World
174071 CHOPIN'S GREATEST HITS 5/15/92 Non-Exclusive License 2060 World
174081 GREATEST HITS OF THE ORGAN 5/15/92 Non-Exclusive License 2060 World
174091 WORLD'S GREATEST OVERTURES 5/15/92 Non-Exclusive License 2060 World
174101 WORLD'S GREATEST CHORUSES 5/15/92 Non-Exclusive License 2060 World
174111 WORLD'S GREATEST WALTZES 5/15/92 Non-Exclusive License 2060 World
174121 GREAT HITS OF THE BAROQUE 5/15/92 Non-Exclusive License 2060 World
174131 PIANO MASTERPIECES 3/15/93 Non-Exclusive License 2060 World
174141 GREAT CONCERTOS 3/15/93 Non-Exclusive License 2060 World
174151 BRAHMS GREATEST HITS 12/15/93 Non-Exclusive License 2060 World
174161 WORLDS GREATEST SYMPHONIES 12/15/93 Non-Exclusive License 2060 World
175541 JAMES HALL:GOD IS IN CONTROL 9/15/94 Exclusive License 1999 World
175681 CRYSTAL GAYLE: COUNTRY HYMNS 4/15/95 Exclusive License 1998 United States
180041 'WEST SIDE STORY' 9/15/89 Non-Exclusive License 2065 World
180071 'HOLLYWOOD'S GREATEST HITS' 9/15/89 Exclusive License 8/31/97 World
181041 BASS FREAKS 7/15/94 Exclusive License 6/5/99 World
181051 CRTOON:BASS FREAKS 11/15/94 Exclusive License 6/5/99 World
181151 BASS CREATIONS 4/15/95 Exclusive License 3/28/00 World
181241 KC & THE SUNSHINE BAND 5/15/95 Exclusive License 3/1/00 U.S. & Canada
189131 HOLIDAY IN RUSSIA 4/15/96 Non-Exclusive License 2060 World
189141 HOLIDAY IN JAMAICA 4/15/96 Non-Exclusive License 2060 World
190041 CHUCK MANGIONE GREATEST HITS 2/15/91 Exclusive License Sell Off United States
191071 KANSAS LIVE AT THE WHISKY 5/15/92 Exclusive License 6/23/97 United States & Canada
191081 LATEST & GREATEST BELLAMY BROS 6/15/92 Exclusive License 6/1/98 United States & Canada
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 10
<PAGE>
Masters Status
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
item item release Master Status Reverts Territory
number description date
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
191091 BELLAMY BROS - RIP OFF THE KNB 7/15/93 Exclusive License 5/30/97 United States & Canada
191201 BECKY HOBBS 3/15/94 Exclusive License 3/1/97 World
191251 EDGAR WINTER-I'M NOT A KID ANY 5/15/94 Exclusive License 5/1/97 U.S. & Canada
191311 JAMES HALL - GOD IS IN CONTROL 10/15/94 Exclusive License 8/15/99 World
191401 LEWIS GRIZZARD:ALIMONY 11/15/94 Exclusive License 10/15/96 World
191421 JONATHAN CAIN 4/7/95 Exclusive License 6/30/99 World except Scandanavia
191511 JEFFERSON STARSHIP:NEXT GENERA 5/15/95 Exclusive License 6/30/97 U.S. & Canada
191521 A GOSPEL CHRISTMAS 7/15/95 Exclusive License 4/26/00 World
191541 PAUL MORTON 6/15/95 Exclusive License 6/30/00 U.S. & Canada
191581 GUESS WHO: LIBERTY 6/15/95 Exclusive License 6/5/00 World except Canada
191601 CANDI STATON 7/15/95 Exclusive License 6/30/98 World
191651 SKELETON CREW:ENHANCED 9/15/95 Exclusive License 5/30/00 World
191711 AMAZING GRACE 1/16/97 Non-Exclusive License 1/31/01 World
191721 IN THE SPIRIT 1/15/96 Non-Exclusive License 1/31/01 World
191731 HIGHWAY 101:REUNITED 2/15/96 Exclusive License 1/8/00 World
191751 *BETTY:LIMBOLAND 3/15/96 Exclusive License 1/11/99 World
191841 BELLAMY BROS:TROPICAL CHRISTMA 6/14/96 Exclusive License 2000 US / Canada
191851 A CRYSTAL CHRISTMAS:CRYSTAL GA 4/14/96 Exclusive License 2000 US / Canada
191861 *BELLAMY BROS:DANCIN 7/15/96 Exclusive License 2000 US / Canada
191871 *SINBAD:SUMMER JAM VOL 1 5/15/96 Exclusive License 7/1/01 World
192102 EDWIN HAWKINS SEMINAR 91 1/15/93 Exclusive License Sell-Off United States
192112 EDWIN HAWKINS: IF YOU LOVE ME 8/15/93 Exclusive License Sell-Off United States
192251 *SUMMER JAM 2 10/15/96 Exclusive License 2001 World
192321 *EDDIE JAMES:GRACE 10/15/96 Exclusive License 1999 World
192331 HIGHER:EDDIE JAMES/PHOENIX MAS 10/15/96 Exclusive License 1999 World
192581 HWY 101:LATEST & GREATEST 2/15/97 Exclusive License 2000 World
192751 THE HIT LIST:PG 7/15/97 Non-Exclusive License 2000 World
192781 RADIO FREE MUSIC:VOL 1 7/15/97 Exclusive License 2000 United States
192791 BELLAMY BROS:OVER THE LINE 7/15/97 Exclusive License 2000 United States
192851 THE HIT LIST 7/15/97 Non-Exclusive License 2000 World
193071 CRYSTAL GAYLE 4/15/93 Exclusive License 1/1/98 U.S. & Canada
193101 GATLIN BROS GREATEST HITS 1/15/94 Exclusive License Sell Off World
193111 BELLAMY BROS:TAKE ME HOME 3/15/94 Exclusive License 3/1/97 U.S. & Canada
193131 MOE BANDY: GREATEST HITS 11/15/94 Exclusive License 3/1/97 World
193141 TONY ORLANDO GREATEST HITS 11/15/94 Exclusive License 12/29/96 U.S. & Canada
193151 CRYSTAL GAYLE:SOMEDAY 4/15/95 Exclusive License 5/1/98 U.S. & Canada
193161 MOE BANDY COUNTRY HYMNS 4/15/95 Exclusive License 3/1/97 World
193181 MOE BANDY:A COWBOY CHRISTMAS 6/25/96 Exclusive License 3/1/97 World
193191 PATRICIA CONROY 2/15/96 Exclusive License 9/30/98 United States
193231 ONE WAY LOVE:BELLAMY BROTHERS 3/15/96 Exclusive License 2000 United States
195001 *CANT GET THIS NO MORE 4/15/96 Non-Exclusive License 1999 United States
195011 *BETTER GET THIS NOW 4/15/96 Non-Exclusive License 1999 United States
195021 *CANT GET THIS NO MORE VOL 2 10/15/96 Non-Exclusive License 1999 United States
195031 BETTER GET THIS NOW VOL 2 9/15/96 Non-Exclusive License 1999 United States
195041 *BOOTY MIX 96 9/15/96 Non-Exclusive License 1999 United States
195051 EURO MIX 97 11/15/96 Non-Exclusive License 2000 United States
195061 PG:CANT GET THIS NO MORE V2 10/15/96 Non-Exclusive License 2000 United States
195071 PG:BETTER GET THIS NOW V2 10/15/96 Non-Exclusive License 2000 United States
195081 GROOOVE MIX 97 1/15/97 Non-Exclusive License 2000 United States
195101 BOOTY MIX 2:THE NEXT BOUNCE 972015 Non-Exclusive License 2000 United States
195161 ELEKTRONIKA-CHEMISTRY 5/15/97 Non-Exclusive License 2000 United States
195171 BOOTLEG BOOTY: 8/15/97 Non-Exclusive License 2000 United States
195191 INDIGO MOODS:NEW AGE 9/23/97 Non-Exclusive License 2000 United States
195201 FLAVORS OF JAZZ 9/15/97 Non-Exclusive License 2000 United States
195211 RETRO LUNCH BOX:SQUEEZE THE CH 9/15/97 Non-Exclusive License 2000 United States
195221 CHEMICAL DANCE RAVE V2 9/23/97 Non-Exclusive License 2000 United States
195231 NASTY 9/15/97 Non-Exclusive License 2000 United States
195241 BEFORE X 10/15/97 Non-Exclusive License 2000 United States
196041 AQUARIUM RESCUE UNIT ALB 10/15/94 Exclusive License 7/6/99 World
196051 AQUARIUM RESCUE UNIT EP 8/15/94 Exclusive License 7/6/99 World
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 11
<PAGE>
SCHEDULE D
PERMITTED LICENSES
<PAGE>
PLEDGE AGREEMENT
This Pledge Agreement (the "AGREEMENT") is dated as of December 12, 1997,
by and among the parties executing this Agreement under the heading "Pledgors"
(such parties, along with any parties who execute and deliver to the Agent an
agreement in the form attached hereto as Schedule E, being hereinafter referred
to collectively as the "PLEDGORS" and individually as a "PLEDGOR"), each with
its mailing address as set forth on the signature page hereto and BANK OF
MONTREAL, a Canadian chartered bank acting through its Chicago Branch ("BOM"),
with its mailing address at 115 South LaSalle Street, Chicago, Illinois 60603,
acting as agent hereunder for the Secured Creditors hereinafter identified and
defined (BOM acting as such agent and any successor or successors to BOM acting
in such capacity being hereinafter referred to as the "AGENT");
PRELIMINARY
STATEMENTS
A. Platinum Entertainment, Inc., a Delaware corporation (the "COMPANY")
and Intersound, Inc. ("INTERSOUND"; the Company and Intersound collectively
referred to herein as the "BORROWERS" and individually as a "BORROWER"), Lexicon
Music, Inc., a Delaware corporation ("LEXICON"), ("CGI"), River North Records,
Inc., a Delaware corporation ("NORTH RECORDS"), Light Records, Inc., a Delaware
corporation ("LIGHT"), The Recording Experience, Inc., a Delaware corporation
("EXPERIENCE"), Peg Publishing, Inc. a Delaware corporation ("PEG"), JustMike
Music, Inc., a Delaware corporation ("JUSTMIKE"), Royce Publishing, Inc., a
Delaware corporation ("ROYCE") (Lexicon, CGI, North Records, Light Experience,
PEG, JustMike and Royce being hereinafter referred to collectively as the
"GUARANTORS" and individually as a "GUARANTOR"), BOM, individually and as agent,
and certain lenders have entered into a Credit Agreement dated as of even date
herewith (such Credit Agreement, as the same may be amended or modified from
time to time, including amendments and restatements thereof in its entirety,
being hereinafter referred to as the "CREDIT AGREEMENT"), pursuant to which BOM
and other lenders from time to time party to the Credit Agreement (BOM and the
other lenders which are now or from time to time hereafter become party to the
Credit Agreement, together with any affiliates of such lenders to which is owed
any Hedging Liability, being hereinafter referred to collectively as the
"LENDERS" and individually as a "LENDER") have agreed, subject to certain terms
<PAGE>
and conditions, to extend credit and make certain other financial accommodations
available to the Borrowers identified therein.
B. Pursuant to the Credit Agreement, the Guarantors guarantee all of the
indebtedness, obligations, and liabilities of the Borrowers to the Agent and the
Lenders under the Credit Agreement.
C. The Borrowers, or any of them individually, may from time to time
enter into one or more interest rate exchange, cap, collar, floor or other
agreements with one or more of the Lenders party to the Credit Agreement or
their affiliates for the purpose of hedging or otherwise protecting the
Borrowers, or any of them individually, against changes in interest rates on the
Revolving Credit Loans and the Term Credit Loans (the liability of the
Borrowers, or any of them individually, in respect of such agreements with such
Lenders or their affiliates being hereinafter referred to as the "HEDGING
LIABILITY").
D. As a condition precedent to extending credit or otherwise making
financial accommodations available to the Borrowers under the Credit Agreement,
the Lenders have required, among other things, that each Pledgor grant to the
Agent for the benefit of the Lenders a lien on and security interest in certain
personal property of such Pledgor pursuant to this Agreement.
E. The Company owns, directly or indirectly, all or substantially all of
the equity interests in each Guarantor and the Company provides each Guarantor
with financial, management, administrative, and technical support which enables
such Guarantor to conduct its business in an orderly and efficient manner in the
ordinary course.
F. Each Guarantor will benefit, directly or indirectly, from credit and
other financial accommodations extended by the Lenders to the Borrowers.
Now, Therefore, for and in consideration of the execution and delivery by
the Lenders of the Credit Agreement, and other good and valuable consideration,
receipt whereof is hereby acknowledged, the parties hereto hereby agree as
follows:
SECTION 1. TERMS DEFINED IN CREDIT AGREEMENT. All capitalized terms
used herein without definition shall have the same meanings herein as such terms
have in the Credit Agreement. The term "Pledgor" and "Pledgors" as used herein
shall mean and include the Pledgors collectively and also each individually,
with all grants, representations, warranties and covenants of and by the
Pledgors, or any of them, herein contained to constitute joint and several
grants, representations, warranties and
-2-
<PAGE>
covenants of and by the Pledgors; PROVIDED, HOWEVER, that unless the context in
which the same is used shall otherwise require, any grant, representation,
warranty or covenant contained herein related to the Collateral shall be made by
each Pledgor only with respect to the Collateral owned by it or represented by
such Pledgor as owned by it.
SECTION 2. GRANT OF SECURITY INTEREST IN THE COLLATERAL. Each Pledgor
hereby grants to the Agent a security interest in, in each case for the ratable
benefit of the Lenders and the Hedging Creditors, and acknowledges and agrees
that the Agent has and shall continue to have for the ratable benefit of the
Lenders a continuing security interest in, any and all right, title and interest
of each Pledgor, whether now owned or existing or hereafter created, acquired or
arising, in and to the following (collectively, the "COLLATERAL"):
(a) STOCK COLLATERAL. (i) All shares of the capital stock of each of
the issuers listed and described on Schedule A attached hereto owned or
held by such Pledgor, whether now owned or hereafter acquired (those shares
delivered to and deposited with the Agent on the date hereof being listed
and described on Schedule A attached hereto), and all substitutions and
additions to such shares (herein, the "PLEDGED SECURITIES"), (ii) all
dividends, distributions and sums distributable or payable from, upon or in
respect of the Pledged Securities and (iii) all other rights and privileges
incident to the Pledged Securities (all of the foregoing being hereinafter
referred to collectively as the "STOCK COLLATERAL");
(b) PARTNERSHIP INTEREST COLLATERAL. (i) Each partnership identified
on Schedule B attached hereto and made a part hereof (such partnerships
being hereinafter referred to collectively as the "PARTNERSHIPS" and
individually as a "PARTNERSHIP") and (ii) any and all payments and
distributions of whatever kind or character, whether in cash or other
property, at any time made, owing or payable to such Pledgor in respect of
or on account of its present or hereafter acquired interests in the
Partnerships, whether due or to become due and whether representing
profits, distributions pursuant to complete or partial liquidation or
dissolution of any such Partnership, distributions representing the
complete or partial redemption of such Pledgor's interest in any such
Partnership or the complete or partial withdrawal of such Pledgor from any
such Partnership, repayment of capital contributions, payment of management
fees or commissions, or otherwise, and the right to receive, receipt for,
use and enjoy all such payments and distributions (all of the foregoing
being hereinafter collectively called the "PARTNERSHIP INTEREST
COLLATERAL"); and
-3-
<PAGE>
(c) PROCEEDS. All proceeds of the foregoing.
All terms which are used in this Agreement which are defined in the Uniform
Commercial Code of the State of Illinois ("UCC") shall have the same meanings
herein as such terms are defined in the UCC, unless this Agreement shall
otherwise specifically provide.
SECTION 3. OBLIGATIONS HEREBY SECURED. (a) This Agreement is made and
given to secure, and shall secure, the payment and performance of (i) (x) any
and all indebtedness, obligations and liabilities of the Borrowers, or any of
them individually, to the Agent, the Lenders, or any of them individually,
evidenced by or otherwise arising out of or relating to the Credit Agreement or
any promissory note of the Borrowers, or any of them individually issued at any
time under the Credit Agreement (including all notes issued in extension or
renewal thereof or in substitution or replacement therefor), (y) any and all
Hedging Liability of the Borrowers, or any of them individually, to the Lenders
or any of them individually, and (z) any liability of the Guarantors, or any of
them individually, arising out of the Credit Agreement, as well as for any and
all other indebtedness, obligations and liabilities of the Debtors, or any of
them individually, to the Agent, the Lenders, or any of them individually,
evidenced by or otherwise arising out of or relating to this Agreement or any
other Loan Document, in each case, whether now existing or hereafter arising
(and whether arising before or after the filing of a petition in bankruptcy),
due or to become due, direct or indirect, absolute or contingent, and howsoever
evidenced, held or acquired, and (ii) any and all expenses and charges, legal or
otherwise, suffered or incurred by the Agent, the Lenders, or any of them
individually, in collecting or enforcing any of such indebtedness, obligations
or liabilities or in realizing on or protecting or preserving any security
therefor, including, without limitation, the lien and security interest granted
hereby (all of the foregoing being hereinafter referred to as the
"OBLIGATIONS"). Notwithstanding anything in this Agreement to the contrary, the
right of recovery against any Pledgor (other than the Borrowers to which this
limitation shall not apply) under this Agreement shall not exceed $1 less than
the amount which would render such Pledgor's obligations under this Agreement
void or voidable under applicable law, including fraudulent conveyance law.
(b) Notwithstanding anything herein to the contrary, the lien of this
Agreement on the Collateral shall be released as and to the extent required
by Section 8.18 of the Credit Agreement.
SECTION 4. COVENANTS, AGREEMENTS, REPRESENTATIONS AND WARRANTIES. Each
Pledgor hereby covenants and agrees with, and represents and warrants to, the
Agent
-4-
<PAGE>
and the Lenders that:
(a) Each Pledgor is and shall be the sole and lawful legal, record
and beneficial owner of its Collateral. Each Pledgor's chief executive
office or place of business at the address listed under such Pledgor's name
on Schedule A and Schedule B hereto, as applicable. Each Pledgor agrees
that it will not change any location set forth on the applicable Schedule
hereto without the Agent's prior written consent. No Pledgor shall,
without the Agent's prior written consent, sell, assign, or otherwise
dispose of the Collateral or any interest therein. The Collateral, and
every part thereof, is and shall be free and clear of all security
interests, liens, rights, claims, attachments, levies and encumbrances of
every kind, nature and description and whether voluntary or involuntary,
except for the security interest of the Agent hereunder and for other Liens
which are expressly permitted by the Credit Agreement. Each Pledgor shall
warrant and defend the Collateral against any claims and demands of all
persons at any time claiming the same or any interest in the Collateral
adverse to the Agent and the Lenders.
(b) Each Pledgor agrees to execute and deliver to the Agent such
further agreements, assignments, instruments and documents and to do all
such other things as the Agent may deem necessary or appropriate to assure
the Agent its lien and security interest hereunder, including such
assignments, acknowledgments (including acknowledgments of assignment in
the form attached hereto as Schedule C) stock powers, financing statements,
instruments and documents as the Agent may from time to time require in
order to comply with the Uniform Commercial Code as enacted in the State of
Illinois and any successor statute(s) thereto (the "UCC"). Each Pledgor
hereby agrees that a carbon, photographic or other reproduction of this
Agreement or any such financing statement is sufficient for filing as a
financing statement by the Agent without notice thereof to such Pledgor
wherever the Agent in its discretion desires to file the same. In the
event for any reason the law of any jurisdiction other than Illinois
becomes or is applicable to the Collateral or any part thereof, or to any
of the Obligations, each Pledgor agrees to execute and deliver all such
agreements, assignments, instruments and documents and to do all such other
things as the Agent in its sole discretion deems necessary or appropriate
to preserve, protect and enforce the lien and security interest of the
Agent under the law of such other jurisdiction to at least the same extent
as such security interests would be protected under the UCC.
(c) If, as and when any Pledgor (x) delivers any securities for
pledge hereunder in addition to those listed on Schedule A hereto or
(y) pledges
-5-
<PAGE>
interests in any Partnership in addition to those listed on Schedule B
hereto, the Pledgors shall furnish to the Agent a duly completed and
executed amendment to such Schedule in substantially the form (with
appropriate insertions) of Schedule D hereto reflecting the securities
pledged hereunder after giving effect to such addition.
(d) None of the Collateral constitutes margin stock (within the
meaning of Regulation U of the Board of Governors of the Federal Reserve
System).
(e) On failure of any Pledgor to perform any of the agreements and
covenants herein contained, the Agent may, at its option, perform the same
and in so doing may expend such sums as the Agent may deem advisable in the
performance thereof, including, without limitation, the payment of any
taxes, liens and encumbrances, expenditures made in defending against any
adverse claim, and all other expenditures which the Agent may be compelled
to make by operation of law or which Agent may make by agreement or
otherwise for the protection of the security hereof. All such sums and
amounts so expended shall be repayable by the Pledgors immediately without
notice or demand, shall constitute additional Obligations secured
hereunder and shall bear interest from the date said amounts are expended
at the rate per annum (computed on the basis of a 360-day year for the
actual number of days elapsed) determined by adding 3% to the Domestic Rate
(such rate per annum as so determined being hereinafter referred to as the
"DEFAULT RATE"). No such performance of any covenant or agreement by the
Agent on behalf of such Pledgor, and no such advancement or expenditure
therefor, shall relieve such Pledgor of any default under the terms of this
Agreement or in any way obligate the Agent or any Lender to take any
further or future action with respect thereto. The Agent, in making any
payment hereby authorized, may do so according to any bill, statement or
estimate procured from the appropriate public office or holder of the claim
to be discharged without inquiry into the accuracy of such bill, statement
or estimate, or into the validity of any tax assessment, sale, forfeiture,
tax lien or title or claim. The Agent, in performing any act hereunder,
shall be the sole judge of whether the relevant Pledgor is required to
perform the same under the terms of this Agreement. The Agent is hereby
authorized to charge any depository or other account of any Pledgor
maintained with the Agent for the amount of such sums and amounts so
expended.
SECTION 5. SPECIAL PROVISIONS RE: STOCK COLLATERAL.
(a) Each Pledgor has the right to vote the Pledged Securities and
there
-6-
<PAGE>
are no restrictions upon the voting rights associated with, or the transfer
of, any of the Pledged Securities, except as provided by federal and state
laws applicable to the sale of securities generally.
(b) The certificates for all shares of the Pledged Securities shall
be delivered by the relevant Pledgor to the Agent duly endorsed in blank
for transfer or accompanied by an appropriate assignment or assignments or
an appropriate undated stock power or powers, in every case sufficient to
transfer title thereto. The Agent may at any time after the occurrence of
an Event of Default cause to be transferred into its name or into the name
of its nominee or nominees any and all of the Pledged Securities. The
Agent shall at all times have the right to exchange the certificates
representing the Pledged Securities for certificates of smaller or larger
denominations.
(c) The Pledged Securities have been validly issued and are fully
paid and non-assessable. There are no outstanding commitments or other
obligations of the issuers of any of the Pledged Securities to issue, and
no options, warrants or other rights of any individual or entity to
acquire, any share of any class or series of capital stock of such issuers
except for the Purchaser Warrants, the Affiliate Warrants and the Harnick
Warrant. The Pledged Securities listed and described on Schedule A
attached hereto constitute the percentage of the issued and outstanding
capital stock of each series and class of the issuers thereof as set forth
thereon owned by the relevant Pledgor. Each Pledgor further agrees that in
the event any such issuer shall issue any additional capital stock of any
series or class (whether or not entitled to vote) to such Pledgor or
otherwise on account of its ownership interest therein, each Pledgor will
forthwith pledge and deposit hereunder, or cause to be pledged and
deposited hereunder, all such additional shares of such capital stock.
SECTION 6. SPECIAL PROVISIONS RE: PARTNERSHIP INTEREST COLLATERAL.
(a) Each Pledgor further warrants to and agrees with the Agent and
the Lenders as follows:
(i) that said Partnerships are valid and existing entities of
the type listed on Schedule B and are duly organized and existing
under applicable law;
(ii) that the Partnership Interest Collateral listed and
described on Schedule B attached hereto constitutes the percentage of
the equity
-7-
<PAGE>
interest in each Partnership set forth thereon owned by the relevant
Pledgor;
(iii) that the copies of the partnership agreements (each such
agreement being hereinafter referred to as "ORGANIZATIONAL AGREEMENT")
for the Partnerships heretofore delivered to the Agent are true and
correct copies thereof and have not been amended or modified in any
respect, except for such amendments or modifications as are attached
to the copies thereof delivered to the Agent; and
(iv) that the Partnerships have no loans outstanding to the
Pledgors, and no Pledgor will borrow money from the Partnerships.
(b) Except as expressly permitted by Sections 8.18 and 8.24 of the
Credit Agreement, the Pledgors shall not, without the prior written consent
of the Agent, consent to any amendment or modification to any of the
Organizational Agreements which would in any manner adversely affect or
impair the Partnership Interest Collateral or reduce or dilute the rights
of the Pledgor with respect to any of the Partnerships, any of such done
without such prior written consent to be null and void. The Pledgors shall
promptly send to the Agent copies of all notices and communications with
respect to each Partnership alleging the existence of a default by an
Pledgor in the performance of any of its obligations under any
Organizational Agreement. Each Pledgor agrees that it will promptly notify
the Agent of any litigation which might adversely affect such Pledgor or a
Partnership or any of their respective properties and of any material
adverse change in the operations, business properties, assets or
conditions, financial or otherwise, of any Pledgor or any Partnership.
Each Pledgor shall promptly perform all of its obligations under each
Organizational Agreement. In the event any Pledgor fails to pay or perform
any obligation arising under any Organizational Agreement or otherwise
related to any Partnership, the Agent may, but need not, pay or perform
such obligation at the expense and for the account of the Pledgors and all
funds expended for such purposes shall constitute Obligations secured
hereby which the Pledgors promise to pay to the Agent together with
interest thereon at the Default Rate.
SECTION 7. VOTING RIGHTS AND DIVIDENDS. Unless and until an Event of
Default hereunder has occurred and thereafter until notified by the Agent
pursuant to Section 9(b) hereof:
(a) Each Pledgor shall be entitled to exercise all voting and/or
-8-
<PAGE>
consensual powers pertaining to the Collateral of such Pledgor, or any part
thereof, for all purposes not inconsistent with the terms of this Agreement
or any other document evidencing or otherwise relating to any of the
Obligations.
(b) Each Pledgor shall be entitled to receive and retain all
dividends and distributions in respect of the Collateral which are paid in
cash of whatsoever nature; PROVIDED, HOWEVER, that such dividends and
distributions representing:
(i) stock or liquidating dividends or a distribution or return
of capital upon or in respect of the Pledged Securities or any part
thereof or resulting from a split-up, revision or reclassification of
the Pledged Securities or any part thereof or received in addition to,
in substitution of or in exchange for the Pledged Securities or any
part thereof as a result of a merger, consolidation or otherwise, or
(ii) distributions in complete or partial liquidation of any
Partnership or the interest of such Pledgor therein,
in each case, shall be paid, delivered or transferred, as appropriate,
directly to the Agent immediately upon the receipt thereof by such Pledgor
and shall, in the case of cash, be applied by the Agent to the satisfaction
of Obligations in accordance with the provisions of Section 10 hereof,
whether or not the same may then be due or otherwise adequately secured and
shall, in the case of all other property, together with any cash received
by the Agent and not applied as aforesaid, be held by the Agent pursuant
hereto as part of the Pledged Securities as additional Pledged Securities
pledged under and subject to the terms of this Agreement; or
(c) In order to permit each Pledgor to exercise such voting and/or
consensual powers which it is entitled to exercise under subsection (a)
above and to receive such distributions which such Pledgor is entitled to
receive and retain under subsection (b) above, the Agent will, if
necessary, upon the written request of such Pledgor, from time to time
execute and deliver to such Pledgor appropriate proxies and dividend
orders.
SECTION 8. POWER OF ATTORNEY. Each Pledgor hereby appoints the Agent,
and each of its nominees, officers, agents, attorneys, and any other person whom
the Agent may designate, as such Pledgor's attorney-in-fact, with full power and
authority to ask, demand, collect, receive, receipt for, sue for, compound and
give acquittance for any and all sums or properties which may be or become due,
payable or distributable in
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<PAGE>
respect of the Collateral or any part thereof, with full power to settle, adjust
or compromise any claim thereunder or therefor as fully as such Pledgor could
itself do, to endorse or sign the Pledgor's name on any assignments, stock
powers, or other instruments of transfer and on any checks, notes, acceptances,
money orders, drafts, and any other forms of payment or security that may come
into the Agent's possession and on all documents of satisfaction, discharge or
receipt required or requested in connection therewith, and, in its discretion,
to file any claim or take any other action or proceeding, either in its own name
or in the name of such Pledgor, or otherwise, which the Agent may deem necessary
or appropriate to collect or otherwise realize upon all or any part of the
Collateral, or effect a transfer thereof, or which may be necessary or
appropriate to protect and preserve the right, title and interest of the Agent
in and to such Collateral and the security intended to be afforded hereby. Each
Pledgor hereby ratifies and approves all acts of any such attorney and agrees
that neither the Agent nor any such attorney will be liable for any such acts or
omissions nor for any error of judgment or mistake of fact or law other than
such person's gross negligence or willful misconduct. The Agent may file one or
more financing statements disclosing its security interest in all or any part of
the Collateral without any Pledgor's signature appearing thereon, and each
Pledgor also hereby grants the Agent a power of attorney to execute any such
financing statements, and any amendments or supplements thereto, on behalf of
such Pledgor without notice thereof to such Pledgor. The foregoing powers of
attorney, being coupled with an interest, are irrevocable until the Obligations
have been fully satisfied and any commitment of the Lenders to extend credit
constituting Obligations to the Borrowers, or any of them individually has
terminated; PROVIDED, HOWEVER, that the Agent agrees, as a personal covenant to
the relevant Pledgor, not to exercise the powers of attorney set forth in this
Section unless an Event of Default exists.
SECTION 9. DEFAULTS AND REMEDIES. (a) The occurrence of any event or
the existence of any condition which is specified as an "Event of Default" under
the Credit Agreement shall constitute an "EVENT OF DEFAULT" hereunder.
(b) Upon the occurrence of any Event of Default, all rights of the
Pledgors to receive and retain the distributions which they are entitled to
receive and retain pursuant to Section 7(b) hereof shall, at the option of
the Agent cease and thereupon become vested in the Agent which, in addition
to all other rights provided herein or by law, shall then be entitled solely
and exclusively to receive and retain the distributions which the Pledgors
would otherwise have been authorized to retain pursuant to Section 7(b)
hereof and all rights of the Pledgors to exercise the voting and/or
consensual powers which they are entitled to exercise pursuant to Section
7(a) hereof shall, at the option of the Agent, cease and thereupon become
vested in the Agent
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<PAGE>
which, in addition to all other rights provided herein or by law, shall then
be entitled solely and exclusively to exercise all voting and other
consensual powers pertaining to the Collateral and to exercise any and all
rights of conversion, exchange or subscription and any other rights,
privileges or options pertaining thereto as if the Agent were the absolute
owner thereof including, without limitation, the right to exchange, at its
discretion, the Collateral or any part thereof upon the merger,
consolidation, reorganization, recapitalization or other readjustment of the
respective issuer thereof or upon the exercise by or on behalf of any such
issuer or the Agent of any right, privilege or option pertaining to the
Collateral or any part thereof and, in connection therewith, to deposit and
deliver the Collateral or any part thereof with any committee, depositary,
transfer agent, registrar or other designated agency upon such terms and
conditions as the Agent may determine. In the event the Agent in good faith
believes any of the Collateral constitutes restricted securities within the
meaning of any applicable securities law, any disposition thereof in
compliance with such laws shall not render the disposition commercially
unreasonable.
(c) Upon the occurrence of any Event of Default, the Agent shall
have, in addition to all other rights provided herein or by law, the rights
and remedies of a secured party under the UCC (regardless of whether the UCC
is the law of the jurisdiction where the rights or remedies are asserted and
regardless of whether the UCC applies to the affected Collateral), and
further the Agent may, without demand and without advertisement, notice,
hearing or process of law, all of which each Pledgor hereby waives to the
extent permitted by law, at any time or times, sell and deliver any or all of
the Collateral held by or for it at public or private sale, at any securities
exchange or broker's board or at any of the Agent's offices or elsewhere, for
cash, upon credit or otherwise, at such prices and upon such terms as the
Agent deems advisable, in its sole discretion. In the exercise of any such
remedies, the Agent may sell the Collateral as a unit even though the sales
price thereof may be in excess of the amount remaining unpaid on the
Obligations. Also, if less than all the Collateral is sold, the Agent shall
have no duty to marshal or apportion the part of the Collateral so sold as
between the Pledgors, or any of them, but may sell and deliver any or all of
the Collateral without regard to which of the Pledgors are the owners
thereof. In addition to all other sums due the Agent or any Lender
hereunder, each Pledgor shall pay the Agent and the Lenders all costs and
expenses incurred by the Agent and such Lenders, including reasonable
attorneys' fees and court costs, in obtaining, liquidating or enforcing
payment of Collateral or the Obligations or in the prosecution or defense of
any action or proceeding by or against the Agent, such Lenders or any Pledgor
concerning any matter arising out of or connected with this Agreement or the
Collateral or the Obligations including, without limitation, any of the
foregoing arising in, arising under or related to a case under the United
States Bankruptcy Code (or any successor
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statute). Any requirement of reasonable notice shall be met if such notice is
personally served on or mailed, postage prepaid, to the Pledgors in accordance
with Section 14(b) hereof at least ten days before the time of sale or other
event giving rise to the requirement of such notice; PROVIDED, HOWEVER, no
notification need be given to a Pledgor if such Pledgor has signed, after an
Event of Default has occurred, a statement renouncing any right to notification
of sale or other intended disposition. The Agent shall not be obligated to make
any sale or other disposition of the Collateral regardless of notice having been
given. The Agent or any Lender may be the purchaser at any sale or other
disposition of the Collateral or any part thereof. Each Pledgor hereby waives
all of its rights of redemption from any sale or other disposition of the
Collateral or any part thereof. The Agent may postpone or cause the
postponement of the sale of all or any portion of the Collateral by announcement
at the time and place of such sale, and such sale may, without further notice,
be made at the time and place to which the sale was postponed or the Agent may
further postpone such sale by announcement made at such time and place.
Each Pledgor agrees that if any part of the Collateral is sold at any
public or private sale, the Agent may elect to sell only to a buyer who will
give further assurances, satisfactory in form and substance to the Agent,
respecting compliance with the requirements of the Federal Securities Act of
1933, as amended, and a sale subject to such condition shall be deemed
commercially reasonable.
Each Pledgor further agrees that in any sale of any part of the
Collateral, the Agent is hereby authorized to comply with any limitation or
restriction in connection with such sale as it may be advised by counsel is
necessary in order to avoid any violation of applicable law (including,
without limitation, compliance with such procedures as may restrict the
number of prospective bidders and purchasers and/or further restrict such
prospective bidders or purchasers to persons who will represent and agree
that they are purchasing for their own account for investment and not with a
view to the distribution or resale of such Collateral ), or in order to
obtain any required approval of the sale or of the Purchaser by any
governmental regulatory authority or official, and each Pledgor further
agrees that such compliance shall not result in such sale being considered or
deemed not to have been made in a commercially reasonable manner, nor shall
the Agent be liable or accountable to any Pledgor for any discount allowed by
reason of the fact that such collateral is sold in compliance with any such
limitation or restriction.
(d) In the event the Agent shall sell any part of the Partnership
Interest Collateral at a foreclosure sale, each Pledgor hereby grants the
purchaser of such portion of the Partnership Interest Collateral to the
fullest extent of its capacity, the
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<PAGE>
ability (but not the obligation) to become a partner in the relevant
Partnership (subject to the approval of the general partner of the relevant
Partnership, in the exercise of its sole discretion), in the place and stead
of such Pledgor. To exercise such right, the purchaser shall give written
notice to the relevant Partnership of its election to become a partner in
such Partnership. Following such election and giving of consent by all
necessary partners of the relevant Partnership as to the purchaser becoming a
partner, the purchaser shall have the right and powers and be subject to the
liabilities of a partner under the relevant Organizational Agreement and the
partnership act governing the Partnership.
(e) Upon the occurrence and during the continuation of any Event of
Default, in addition to all other rights provided herein or by law, the Agent
shall have the right to cause all or any part of the Partnership Interest
Collateral of any of the Pledgors in any one or more of the Partnerships to
be redeemed and to cause a withdrawal, in whole or in part, of any Pledgor
from any Partnership or any of its Partnership Interest Collateral therein.
(f) The powers conferred upon the Agent hereunder are solely to
protect its interest in the Collateral and shall not impose on it any duties
to exercise such powers. The Agent shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment substantially equivalent
to that which the Agent accords its own property, consisting of similar types
securities, it being understood, however, that the Agent shall have no
responsibility for (i) ascertaining or taking any action with respect to
calls, conversions, exchanges, maturities, tenders or other matters relating
to any Collateral, whether or not the Agent has or is deemed to have
knowledge of such matters, (ii) taking any necessary steps to preserve rights
against any parties with respect to any Collateral, or (iii) initiating any
action to protect the Collateral or any part thereof against the possibility
of a decline in market value. This Agreement constitutes an assignment of
rights only and not an assignment of any duties or obligations of the
Pledgors in any way related to the Collateral, and the Agent shall have no
duty or obligation to discharge any such duty or obligation. By its
acceptance hereof, the Agent does not undertake to perform or discharge and
shall not be responsible or liable for the performance or discharge of any
such duties or responsibilities and shall not in any event become a
"SUBSTITUTED LIMITED PARTNER" or words of like import (as defined in the
relevant Organizational Agreement) in the relevant Partnership. Neither the
Agent or any Lender, nor any party acting as attorney for the Agent or any
Lender, shall be liable hereunder for any acts or omissions or for any error
of judgment or mistake of fact or law other than such person's gross
negligence or willful misconduct.
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<PAGE>
(g) Failure by the Agent to exercise any right, remedy or option under
this Agreement or any other agreement between any Pledgor and the Agent or
provided by law, or delay by the Agent in exercising the same, shall not
operate as a waiver; and no waiver shall be effective unless it is in
writing, signed by the party against whom such waiver is sought to be
enforced and then only to the extent specifically stated. The rights and
remedies of the Agent and the Lenders under this Agreement shall be
cumulative and not exclusive of any other right or remedy which the Agent or
the Lenders may have. For purposes of this Agreement, an Event of Default
shall be construed as continuing after its occurrence until the same is
waived in writing by the Lenders or the Required Lenders, as the case may be,
in accordance with the Credit Agreement.
SECTION 10. APPLICATION OF PROCEEDS. The proceeds and avails of the
Collateral at any time received by the Agent during the existence of any
Event of Default shall, when received by the Agent in cash or its equivalent,
be applied by the Agent in reduction of, or as collateral security for, the
Obligations in accordance with the terms of the Credit Agreement. The
Pledgors shall remain liable to the Agent and the Lenders for any deficiency.
Any surplus remaining after the full payment and satisfaction of the
Obligations shall be returned to the Pledgors, or to whomsoever the Agent
reasonably determines is lawfully entitled thereto.
SECTION 11. CONTINUING AGREEMENT. This Agreement shall be a
continuing agreement in every respect and shall remain in full force and
effect until all of the Obligations, both for principal and interest, have
been fully paid and satisfied and any commitment to extend constituting
Obligations to the Borrowers, or any of them individually shall have
terminated. Upon such termination of this Agreement, the Agent shall, upon
the request of the Pledgors, execute and deliver to such Pledgors a proper
instrument or instruments (including Uniform Commercial Code termination
statements on form UCC-3) acknowledging the satisfaction and termination of
this Agreement, and will duly assign, transfer and deliver to such Pledgors,
against receipt and without recourse to the Agent, such of the Collateral as
may be in the possession of the Agent and as has not theretofore been sold or
otherwise applied or released pursuant to this Agreement or the Credit
Agreement.
SECTION 12. PRIMARY SECURITY; OBLIGATIONS ABSOLUTE. The lien and
security herein created and provided for stand as direct and primary security
for the Obligations. No application of any sums received by the Agent in
respect of the Collateral or any disposition thereof to the reduction of the
Obligations or any portion thereof shall in any manner entitle any Pledgor to
any right, title or interest in or to the Obligations or any collateral
security therefor, whether by subrogation or otherwise, unless and until all
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<PAGE>
Obligations have been fully paid and satisfied and any commitments to extend
credit constituting Obligations to the Borrowers, or any of them individually
shall have terminated. Each Pledgor acknowledges and agrees that the lien
and security hereby created and provided for are absolute and unconditional
and shall not in any manner be affected or impaired by any acts or omissions
whatsoever of the Agent, any Lender or any other holder of any of the
Obligations, and without limiting the generality of the foregoing, the lien
and security hereof shall not be impaired by any acceptance by the Agent, any
Lender or any other holder of any of the Obligations of any other security
for or guarantors upon any Obligations or by any failure, neglect or omission
on the part of the Agent, any Lender or any other holder of any of the
Obligations to realize upon or protect any of the Obligations or any
collateral security therefor. The lien and security hereof shall not in any
manner be impaired or affected by (and the Agent and the Lenders, without
notice to anyone, are hereby authorized to make from time to time) any sale,
pledge, surrender, compromise, settlement, release, renewal, extension,
indulgence, alteration, substitution, exchange, change in, modification or
disposition of any of the Obligations, or of any collateral security
therefor, or of any guaranty thereof, or of any instrument or agreement
setting forth the terms and conditions pertaining to any of the foregoing.
The Lenders may at their discretion at any time grant credit to the
Borrowers, or any of them individually without notice to any Pledgor in such
amounts and on such terms as the Lenders may elect without in any manner
impairing the lien and security hereby created and provided for. In order to
realize hereon and to exercise the rights granted the Agent hereunder and
under applicable law as against any Pledgor or any portion of the Collateral
in which any such Pledgor has rights, there shall be no obligation on the
part of the Agent, any Lender or any other holder of any of the Obligations
at any time to first resort for payment to the Borrowers, or any of them
individually or any other Pledgor or any other Person, its property or estate
or to any guaranty of the Obligations or any portion thereof or to resort to
any other collateral security, property, liens or any other rights or
remedies whatsoever, and the Agent shall have the right to enforce this
Agreement as against any Pledgor or any portion of the Collateral in which
any such Pledgor has rights, irrespective of whether or not other proceedings
or steps are pending seeking resort to or realization upon or from any of the
foregoing.
SECTION 13. THE AGENT. In acting under or by virtue of this
Agreement, Agent shall be entitled to all the rights, authority, privileges
and immunities provided in Section 10 of the Credit Agreement, all of which
provisions of said Section 10 are incorporated by reference herein with the
same force and effect as if set forth herein in their entirety. The Agent
hereby disclaims any representation or warranty to the Lenders or any other
holders of the Obligations concerning the perfection of the liens and
security interests granted hereunder or in the value of the Collateral.
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<PAGE>
SECTION 14. MISCELLANEOUS. (a) This Agreement cannot be changed or
terminated orally. This Agreement shall create a continuing lien on and
security interest in the Collateral and shall be binding upon each Pledgor,
its successors and assigns, and shall inure, together with the rights and
remedies of the Agent and the Lenders hereunder, to the benefit of the Agent
and the Lenders, and their successors and assigns; PROVIDED, HOWEVER, that no
Pledgor may assign its rights or delegate its duties hereunder without the
Agent's prior written consent. Without limiting the generality of the
foregoing, and subject to the provisions of the Credit Agreement, any Lender
may assign or otherwise transfer any indebtedness held by it secured by this
Agreement to any other person, and such other person shall thereupon become
vested with all the benefits in respect thereof granted to such Lender herein
or otherwise.
(b) All communications provided for herein shall be in writing, except
as otherwise specifically provided for hereinabove, and shall be deemed to
have been given or made, if to any Pledgor when given to any Borrower in
accordance with Section 13.8 of the Credit Agreement, or if to the Agent or
any Lender, when given to such party in accordance with Section 13.8 of the
Credit Agreement.
(c) No Lender shall have the right to institute any suit, action or
proceeding in equity or at law for the foreclosure or other realization upon
any Collateral subject to this Agreement or for the execution of any trust or
power hereof or for the appointment of a receiver, or for the enforcement of
any other remedy under or upon this Agreement; it being understood and
intended that no one or more of the Lenders shall have any right in any
manner whatsoever to affect, disturb or prejudice the lien and security
interest of this Agreement by its or their action or to enforce any right
hereunder, and that all proceedings at law or in equity shall be instituted,
had and maintained by the Agent in the manner herein provided for the benefit
of the Lenders.
(d) In the event that any provision hereof shall be deemed to be
invalid by reason of the operation of any law or by reason of the
interpretation placed thereon by any court, this Agreement shall be construed
as not containing such provision, but only as to such locations where such
law or interpretation is operative, and the invalidity of such provision
shall not affect the validity of any remaining provision hereof, and any and
all other provisions hereof which are otherwise lawful and valid shall remain
in full force and effect. Without limiting the generality of the foregoing,
in the event that this Agreement shall be deemed to be invalid or otherwise
unenforceable with respect to any Pledgor, such invalidity or
unenforceability shall not affect the validity of this Agreement with respect
to the other Pledgors.
(e) This Agreement shall be deemed to have been made in the State of
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Illinois and shall be governed by, and construed in accordance with, the laws of
the State of Illinois. All terms which are used in this Agreement which are
defined in the UCC shall have the same meanings herein as said terms do in the
UCC unless this Agreement shall otherwise specifically provide. The headings in
this Agreement are for convenience of reference only and shall not limit or
otherwise affect the meaning of any provision hereof.
(f) This Agreement may be executed in any number of counterparts and by
different parties hereto on separate counterpart signature pages, each
constituting an original, but all together one and the same instrument. Each
Pledgor acknowledges that this Agreement is and shall be effective upon its
execution and delivery by such Pledgor to the Agent, and it shall not be
necessary for the Agent to execute this Agreement or any other acceptance
hereof or otherwise to signify or express its acceptance hereof.
(g) In the event the Agent and the Lenders shall at any time in their
discretion permit a substitution of Pledgors hereunder or a party shall wish
to become a Pledgor hereunder, such substituted or additional Pledgor shall,
upon executing an agreement in the form attached hereto as Schedule E, become
a party hereto and be bound by all the terms and conditions hereof to the
same extent as though such Pledgor had originally executed this Agreement
and, in the case of a substitution, in lieu of the Pledgor being replaced.
No such substitution shall be effective absent the written consent of Agent
and the Lenders nor shall it in any manner affect the obligations of the
other Pledgors hereunder.
(h) The Agent and the Pledgors agree that all disputes among them
arising out of, connected with, related to, or incidental to the relationship
established among them in connection with this Agreement, and whether arising
in contract, tort, equity, or otherwise, shall be resolved only by state or
federal courts located in Cook County, Illinois, but each of the Agent and
the Pledgors acknowledge that any appeals from those courts may have to be
heard by a court located outside of Cook County, Illinois. Each of the
Pledgors waives in all disputes any objection that such Pledgor may have to
the location of the court considering the dispute or any objection that such
Pledgor may have that any other party has not been joined in such proceeding.
Each of the Pledgors agrees that the Agent shall have the right to proceed
against each and any of the Pledgors or their Collateral in a court in any
location to enable the Agent to realize on the Collateral, or to enforce a
judgment or other court order entered in favor of the Agent, whether or not
proceeding separately against any Pledgor and its property or jointly against
the Borrower and any one or more of the Pledgors and their property. Each of
the Pledgors waives any objection that it may have to the location of the
court
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in which the agent has commenced a proceeding described in this paragraph.
[Signature Pages to Follow]
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In Witness Whereof, each Pledgor has caused this Agreement to be duly
executed and delivered as of the date first above written.
PLEDGORS:
PLATINUM ENTERTAINMENT, INC.
By /s/ Steven Devick
--------------------------
Name: Steven Devick
Its: President
Acknowledged and agreed to as of the date first above written.
Bank of Montreal, as Agent as
aforesaid for the Lenders
By /s/ Jeffrey Titus
--------------------------
Its: Director
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SCHEDULE A TO PLEDGE AGREEMENT
THE PLEDGED SECURITIES
<TABLE>
<CAPTION>
Name and Percentage
Location of Name of Jurisdiction of No. of Certificate of Issuer's
Pledgor Issuer Incorporation Shares Class No. Stock
<S> <C> <C> <C> <C> <C> <C>
Platinum Entertainment, Inc. Lexicon Music, INC. Delaware 3,000 Common 1 100%
2001 Butterfield Rd.
Suite 1400, Downers Grove, Intersound, Inc. Delaware 450 Common 6 100%
IL 60515
CGI Records, Inc. Delaware 3,000 Common 1 100%
River North Records, Delaware 3,000 Common 4 100%
Inc.
Light Records, Inc. Delaware 3,000 Common 1 100%
The Recording Delaware 3,000 Common 1 100%
Experience, Inc.
Peg Publishing, Inc. Delaware 3,000 Common 1 100%
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Justmike Music, Inc. Delaware 3,000 Common 1 100%
Royce Publishing, Inc. Delaware 3,000 Common 1 100%
</TABLE>
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<PAGE>
SCHEDULE B TO PLEDGE AGREEMENT
PARTNERSHIP INTERESTS
<TABLE>
<CAPTION>
Relevant Pledgor and Location Name of Type of Jurisdiction Percent of
Partnership Organization of Organization Ownership
<S> <C> <C> <C> <C>
Platinum Entertainment, Inc. House of Blues Music Joint Venture California 50%
2001 Butterfield Rd. Company
Suite 1400
Downers Grove, IL 60515
</TABLE>
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SCHEDULE C TO PLEDGE AGREEMENT
ACKNOWLEDGMENT OF COLLATERAL ASSIGNMENT
December 12, 1997
_________________________________
_________________________________
_________________________________
_________________________________
Attention:_______________________
Ladies and Gentlemen:
Platinum Entertainment, Inc. and ___________________ (each a "PLEDGOR" and
collectively the "PLEDGORS") executed a Pledge Agreement dated as of
December 12, 1997 (the "SECURITY AGREEMENT") in favor of Bank of Montreal (the
"AGENT"), a copy of which you have received. Pursuant to the Security
Agreement, each Pledgor whose signature appears below (each a "RELEVANT PLEDGOR"
and collectively the "RELEVANT PLEDGORS") assigned its partnership interests in
___________________ (the "PARTNERSHIP") as collateral security for, among other
things, indebtedness and obligations of Platinum Entertainment, Inc. (the
"COMPANY") and Intersound, Inc. ("INTERSOUND"; the Company and Intersound
collectively referred to herein as the "BORROWERS" and individually as a
"BORROWER") now or from time to time owing pursuant to that certain Credit
Agreement dated as of December 12, 1997 (such Credit Agreement as the same may
be amended, modified or restated from time to time being hereinafter referred to
as the "CREDIT AGREEMENT") among the Borrowers, certain affiliates of the
Company, the Agent and various other lenders party thereto.
We ask you, by accepting this letter below on behalf of the Partnership and
as its general partner, to confirm the following:
1. Each Relevant Pledgor is a partner in the Partnership.
2. You consent to the collateral assignment of each Relevant
Pledgor's interest in the Partnership to the Agent, notwithstanding
anything to the contrary contained in the Partnership Agreement. This
letter will serve to evidence the consent to this collateral assignment
from the Partnership and its general partner.
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3. All parties required by the terms of the Partnership Agreement to
approve the collateral assignment made by the Security Agreement have done
so, and the interest of the Agent by virtue of that assignment has been
reflected on the books and records of the Partnership.
4. The Partnership has been formed under the ______________
Partnership Agreement dated as of ________________, 19___ (the "PARTNERSHIP
AGREEMENT"), and the Partnership Agreement has not subsequently been
modified or amended and continues in full force and effect. The
Partnership Agreement shall not be amended without the consent of the
Agent. The Agent agrees with the Partnership that the Agent will not
unreasonably withhold its consent to modifications or amendments to the
Partnership's Partnership Agreement which do not adversely affect the
interests of the Agent or any of the Lenders identified and defined in the
Pledge Agreement.
5. All payments and distributions due and to become due to any
Relevant Pledgor pursuant to the Partnership Agreement shall continue to be
paid directly to such Relevant Pledgor, unless and until the Agent notifies
the Partnership in writing to do otherwise. If the Agent so notifies the
Partnership, the Partnership will immediately cease making such payments
and distributions to the Relevant Pledgors and will as soon as possible,
but in any event within five days after receiving such notice, remit all
such payments and distributions directly to the Agent at 115 South LaSalle
Street, Chicago, Illinois 60603.
6. By virtue of the Security Agreement, the Agent has the right at
its option to exercise each Relevant Pledgor's right (if any) to withdraw
all or any part of such Relevant Pledgor's interest in the Partnership by
so notifying the Partnership in writing no less than ten days prior to the
proposed withdrawal date. All payments or distributions due or to become
due under the Partnership Agreement to the Relevant Pledgors as a result of
such withdrawal shall be remitted directly to the Agent as stated above.
If given at all, the notice provided pursuant to this paragraph may (but
need not) be given concurrently with any notice provided pursuant to the
immediately preceding paragraph.
7. Each Relevant Pledgor agrees that any such payment to the Agent
shall be a good receipt and acquittance as against it -- that is to say,
the Partnership should make the payment directly to the Agent and in so
doing, the Partnership discharges any liability to such Relevant Pledgor
for that payment.
8. The Relevant Pledgors have no currently outstanding loans from
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<PAGE>
the Partnership and the Partnership shall not extend any loans to any
Relevant Pledgor.
9. The terms of the Security Agreement prohibit any Relevant Pledgor
from making any transfer of its interest in the Partnership without the
Agent's prior written consent. You agree not to honor any transfer of any
Relevant Pledgor's interest without such consent.
The agreements in this letter shall be modified only in a writing signed by
the Agent, each Pledgor and the Partnership. We acknowledge that the
Partnership shall be entitled to assume that the Security Agreement continues in
full force and effect unless and until the Partnership receives actual written
notice of a termination of same from the Agent .
Very truly yours,
BANK OF MONTREAL, as Agent
By
Its
-25-
<PAGE>
Accepted and Agreed.
[PLATINUM ENTERTAINMENT, INC.]
By
Name: Steven Devick
Its: President
The undersigned, both as the general partner of the Partnership and on
behalf of the Partnership, join in this letter to evidence their acknowledgment
and agreement to the same.
[PARTNERSHIP]
By
Its
[GENERAL PARTNER OF PARTNERSHIP]
By
Its
-26-
<PAGE>
SCHEDULE D TO PLEDGE AGREEMENT
AMENDMENT TO PLEDGE AGREEMENT
Reference is hereby made to that certain Pledge Agreement dated as of
December 12, 1997 (as the same may be amended, the "PLEDGE AGREEMENT"), from
the Pledgors which are signatories thereto to Bank of Montreal, as Agent.
Capitalized terms not otherwise defined herein shall have the meaning set
forth in the Pledge Agreement.
Subsequent to the Pledgors' delivery of the Pledge Agreement, certain
shares of stock or partnership interests have been added as Collateral under
the Pledge Agreement. As a result of such addition, Schedule A of the Pledge
Agreement does not accurately describe the shares of capital stock and/or
Schedule B does not accurately describe the partnership interests, currently
held by the Agent as collateral under the Pledge Agreement.
The Pledgors now desire to amend Schedule A and/or Schedule B to the
Pledge Agreement to reflect such addition, and this instrument shall
constitute an agreement between the Pledgors and the Agent amending the
Pledge Agreement in the respects, but only in the respects, hereinafter set
forth:
1. If an Annex A is attached hereto, Schedule A of the Pledge
Agreement shall be and hereby is amended and as so amended shall be
restated in its entirety to read as Annex A attached hereto.
2. If an Annex B is attached hereto, Schedule B of the Pledge
Agreement shall be and hereby is amended and as so amended shall be
restated in its entirety to read as Annex B attached hereto.
3. As collateral security for the Obligations, each Pledgor hereby
grants to the Agent a continuing security interest in, and acknowledges and
agrees that the Agent has and shall continue to have a continuing security
interest in, all the shares of capital stock of each issuer listed and
described on Annex A attached hereto (if attached) and all of the
partnership interests listed and described on Annex B attached hereto (if
attached) and all the other properties, rights, interests and privileges
comprising the Collateral (as such term is defined in the Pledge Agreement
after giving effect to this Amendment), to the same extent and with the
same force and effect as if (i) the shares of stock described on Annex A
had originally been included on Schedule A to the Pledge Agreement and
(ii) the partnership interests described on Annex B had been
-27-
<PAGE>
originally included on Schedule B to the Pledge Agreement. The foregoing
granting clause is in addition to and supplemental of and not in
substitution for the granting clause contained in the Pledge Agreement.
Neither the Pledgors nor the Agent intend by this Amendment to in any way
impair or otherwise affect the lien of the Pledge Agreement on such of
the Collateral which was subject to the Pledge Agreement prior to giving
effect to this Amendment.
4. Each Pledgor hereby repeats and reaffirms all of its covenants,
agreements, representations and warranties contained in the Pledge
Agreement, each and all of which shall be applicable to all of the
properties, rights, interests and privileges subject to the lien of the
Pledge Agreement after giving effect to this Amendment. Each Pledgor
hereby certifies that no Event of Default or event which, with notice or
lapse of time or both, would constitute an Event of Default exists under
the Pledge Agreement after giving effect to this Amendment.
5. No reference to this Amendment need be made in any note,
instrument or other document at any time referring to the Pledge
Agreement, any reference in any of such to the Pledge Agreement to be
deemed to reference to the Pledge Agreement as modified hereby. All
references in the Pledge Agreement to the term "Pledged Securities" shall
be deemed a reference to such term as defined in the Pledge Agreement
after giving effect to this Amendment.
6. Except as specifically modified hereby, all the terms and
conditions of the Pledge Agreement shall stand and remain unchanged and
in full force and effect. This Amendment shall be effective upon the
Pledgors' execution and delivery thereof to the Agent, no acceptance by
the Agent being required.
Pledgor(s):
[NAME OF RELEVANT PLEDGOR}
By
Its
[NAME OF RELEVANT PLEDGOR}
By
Its
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<PAGE>
Acknowledged and agreed to as of the date first above written.
BANK OF MONTREAL, as Agent
By
Its
-29-
<PAGE>
ANNEX A
TO AMENDMENT TO PLEDGE AGREEMENT
THE PLEDGED SECURITIES
<TABLE>
<CAPTION>
Percentage
Name and Name of Jurisdiction of No. of Certificate of Issuer's
Location of Issuer Incorporation Shares Class No. Stock
Pledgor
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
-30-
<PAGE>
ANNEX B
TO AMENDMENT TO PLEDGE AGREEMENT
PARTNERSHIP INTERESTS
<TABLE>
<CAPTION>
Name of Type of Jurisdiction Percent of
Partnership Organization of Organization Relevant Pledgor Ownership
<S> <C> <C> <C> <C>
</TABLE>
-31-
<PAGE>
SCHEDULE E TO PLEDGE AGREEMENT
ASSUMPTION AND SUPPLEMENTAL PLEDGE AGREEMENT
THIS AGREEMENT dated as of this 12th day of December, 1997 from [NEW
PLEDGOR], a __________ corporation (the "NEW PLEDGOR"), to Bank of Montreal
("BOM"), as agent for the Lenders (defined in the Pledge Agreement hereinafter
identified and defined) (BOM acting as such agent and any successor or
successors to Bank of Montreal in such capacity being hereinafter referred to as
the "AGENT");
WITNESSETH THAT:
WHEREAS, certain Pledgors have executed and delivered to the Agent that
certain Pledge Agreement dated as of December 12, 1997 (such Pledge Agreement,
as the same may from time to time be modified or amended, including supplements
thereto which add additional parties as Pledgors thereunder, being hereinafter
referred to as the "PLEDGE AGREEMENT") pursuant to which such parties (the
"EXISTING PLEDGORS") have granted to the Agent for the benefit of the Lenders a
lien on and security interest in such Existing Pledgors' Collateral (as such
term is defined in the Pledge Agreement) to secure the Obligations (as such term
is defined in the Pledge Agreement);
WHEREAS, each Pledgor will benefit, directly and indirectly, from credit
and other financial accommodations extended by the Lenders to the Borrowers.
NOW, THEREFORE, FOR VALUE RECEIVED, and in consideration of advances made
or to be made, or credit accommodations given or to be given, to the Borrowers
by the Lenders from time to time, the New Pledgor hereby agrees as follows:
1. The New Pledgor acknowledges and agrees that it shall become a
"Pledgor" party to the Pledge Agreement effective upon the date the New
Pledgor's execution of this Agreement and the delivery of this Agreement to the
Agent, and that upon such execution and delivery, all references in the Pledge
Agreement to the terms "Pledgor" or "Pledgors" shall be deemed to include the
New Pledgor. Without limiting the generality of the foregoing, the New Pledgor
hereby repeats and reaffirms all grants (including the grant of a lien and
security interest), covenants, agreements, representations and warranties
contained in the Pledge Agreement as amended hereby, each and all of which are
and shall remain applicable to the Collateral from time to time owned by the New
Pledgor or in which the New Pledgor from time to time has any rights. Without
limiting the foregoing, in order to secure payment of the Obligations, whether
now existing or hereafter arising, the New Pledgor does hereby
-32-
<PAGE>
grant to the Agent for the benefit of the Lenders, and hereby agrees that the
Agent has and shall continue to have for the benefit of the Lenders a continuing
security interest in, among other things, all of the New Pledgor's Collateral
(as such term is defined in the Pledge Agreement) described in Section 2 of the
Pledge Agreement, each and all of such granting clauses being incorporated
herein by reference with the same force and effect as if set forth in their
entirety except that all references in such clauses to the Existing Pledgor or
any of them shall be deemed to include references to the New Pledgor. Nothing
contained herein shall in any manner impair the priority of the liens and
security interests heretofore granted in favor of the Agent under the Pledge
Agreement.
2. The following information shall be added to Schedules A and/or B to
the Pledge Agreement, as applicable:
SCHEDULE A
THE PLEDGED SECURITIES
<TABLE>
<CAPTION>
Percentage
Name and Name of Jurisdiction of No. of Certificate of Issuer's
Location of Issuer Incorporation Shares Class No. stock
Pledgor
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
OR
SCHEDULE B
PARTNERSHIP INTERESTS
<TABLE>
<CAPTION>
Name of Type of Jurisdiction Percent of
Partnership Organization of Organization Relevant Pledgor Ownership
<S> <C> <C> <C> <C>
</TABLE>
3. The New Pledgor hereby acknowledges and agrees that the Obligations
are secured by all of the Collateral according to, and otherwise on and subject
to, the terms and conditions of the Pledge Agreement to the same extent and with
the same force and effect as if the New Pledgor had originally been one of the
Existing Pledgors
-33-
<PAGE>
under the Pledge Agreement and had originally executed the same as such an
Existing Pledgor.
4. All capitalized terms used in this Agreement without definition shall
have the same meaning herein as such terms have in the Pledge Agreement, except
that any reference to the term "Pledgor" or "Pledgors" and any provision of the
Pledge Agreement providing meaning to such term shall be deemed a reference to
the Existing Pledgors and the New Pledgor. Except as specifically modified
hereby, all of the terms and conditions of the Pledge Agreement shall stand and
remain unchanged and in full force and effect.
5. The New Pledgor agrees to execute and deliver such further instruments
and documents and do such further acts and things as the Agent may reasonably
deem necessary or proper to carry out more effectively the purposes of this
Agreement.
6. No reference to this Agreement need be made in the Pledge Agreement or
in any other document or instrument making reference to the Pledge Agreement,
any reference to the Pledge Agreement in any of such to be deemed a reference to
the Pledge Agreement as modified hereby.
7. This Agreement shall be governed by and construed in accordance with
the State of Illinois (without regard to principles of conflicts of law).
[NEW PLEDGOR]
By
-----------------------,
(Print or Type Name) (Title)
-34-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED BALANCE SHEET AT NOVEMBER 30, 1997, THE UNAUDITED
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED NOVEMBER 30,
1997 AND THE UNAUDITED NOTES THERETO FOR PLATINUM ENTERTAINMENT, INC. AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> NOV-30-1997
<CASH> 226
<SECURITIES> 0
<RECEIVABLES> 22,407
<ALLOWANCES> (3,312)<F1>
<INVENTORY> 5,846
<CURRENT-ASSETS> 27,854
<PP&E> 1,844
<DEPRECIATION> (775)
<TOTAL-ASSETS> 66,395<F2>
<CURRENT-LIABILITIES> 57,047
<BONDS> 5,000
0
0
<COMMON> 5
<OTHER-SE> 4,343
<TOTAL-LIABILITY-AND-EQUITY> 66,395
<SALES> 14,912
<TOTAL-REVENUES> 20,049
<CGS> 7,163
<TOTAL-COSTS> 7,401
<OTHER-EXPENSES> 7,748<F3>
<LOSS-PROVISION> 200
<INTEREST-EXPENSE> 1,450
<INCOME-PRETAX> (1,871)<F4>
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,871)<F4>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,871)<F4>
<EPS-PRIMARY> (0.35)<F4>
<EPS-DILUTED> 0
<FN>
<F1>$2,525 ALLOWANCE FOR DOUBTFUL ACCOUNTS AND $787 RESERVE FOR CO-OP ADVERTISING
<F2>INCLUDES $18,885 MUSIC CATALOG AND $3,529 MUSIC PUBLISHING RIGHTS, BOTH
NET OF ACCUMULATED AMORTIZATION
<F3>INCLUDES $1,964 OF NON-RECURRING CHARGES
<F4>INCLUDES $2,327 OF NON-RECURRING CHARGES
</FN>
</TABLE>
