As filed with the Securities and Exchange Commission on December 23, 1998
Registration No. 333-
________________________________________________________________________________
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
PLATINUM ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3802328
(State or other jurisdiction of (IRS Employer Identification
of incorporation or organization) Number)
2001 Butterfield Road, Downers Grove Illinois 60515, (630) 769-0033
(Address of Principal Executive Offices including Zip Code)
Steven Devick
2001 Butterfield Road, Downers Grove, Illinois 60515, (630) 769-0033
(Name, address and telephone number of agent for service)
Copies to:
Matthew S. Brown, Esq.
Katten Muchin & Zavis
525 W. Monroe, Suite 1600
Chicago, IL 60661-3693
(312) 902-5200
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box: [_]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the
Securities Actof 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [_] ____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
________________________________________________________________________________
<TABLE>
<CAPTION>
Title of securities Amount to be Proposed maximum Proposed Amount of
to be registered registered offering price maximum registration
per share(2) aggregate fee
offering
price (2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 814,819 See Footnote 2 $5,220,138 $1,044
par value (1) Below
- --------------------------------------------------------------------------------
</TABLE>
(1) Pursuant to Rule 416 this Registration Statement also covers the number
of shares issuable as a result of the antidilution adjustment provisions
of the outstanding warrants.
(2) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933 on the basis of
the average of the high and low prices of the Common Stock as reported
on the Nasdaq National Market on December 17, 1998.
<PAGE>
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to Section 8(a), may determine.
Preliminary Prospectus, dated December 23, 1998
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ The information in this prospectus is not complete and may be changed. +
+ We may not sell these securities until the registration statement is filed +
+ with the Securities and Exchange Commission is effective. This prospectus +
+ is not an offer to sell these securities and it is not soliciting an offer +
+ to buy these securities in any state where the offer or sale is not +
+ permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
________________________________________________________________________________
P R O S P E C T U S
________________________________________________________________________________
814,819 Shares
Common Stock
______________
The 814,819 shares of common stock, $.001 par value, of Platinum
Entertainment, Inc. covered by this prospectus may be sold from time to time
by the stockholders listed in this prospectus under "Selling Stockholders,"
or their pledgees, donees, transferees or distributees, or their respective
successors in interest. This prospectus relates to the shares that may be
issued to the selling stockholders when they exercise their warrants and
other certain shares of common stock held by certain selling stockholders that
are currently restricted. We will not receive any proceeds from the sale of
shares by the selling stockholders but we will receive the proceeds from the
exercise of the warrants by the selling stockholders, unless the selling
stockholders opt to exercise their warrants on a cashless basis. See "Use of
Proceeds."
PTET -- Nasdaq National Market
INVESTING IN THE SHARES COVERED BY THIS PROSPECTUS INVOLVES A HIGH
DEGREE OF RISK. CONSIDER CAREFULLY THE RISK FACTORS THAT BEGIN ON PAGE
4 IN THIS PROSPECTUS.
Neither the Securities and Exchange Commission nor any State Securities
Commission has approved or disapproved these securities,or determined if this
prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
_____________________
December 23, 1998
<PAGE>
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance with the
Exchange Act we file reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). You can read and copy
such reports, proxy statements and other information at the Commission's
Public Reference Room at 450 Fifth Street, N.W., Judiciary Plaza, Room 1024,
Washington, D.C. 20549. You can obtain information on the operations of the
Commission's Pubic Reference Room at 1-800-SEC-0330. The reports, proxy
statements and other information that we file with the Commission
electronically are available at the Commission's web site at
http://www.sec.gov. Our common stock is traded on the Nasdaq National
Market. Reports, proxy statements and other information about us also may be
inspected at the offices of The Nasdaq Stock Market, 1735 K Street, N.W.,
Washington, D.C. 20006.
We have filed with the Commission a registration statement on Form S-3
(which, together with all amendments and exhibits, is referred to in this
prospectus as the "Registration Statement") under the Securities Act of 1933,
as amended (the "Securities Act"). This prospectus is only a part of the
Registration Statement. For further information, you should refer to the
Registration Statement which you can inspect and copy in the manner and at
the sources described above. Any statements we make in this prospectus or
that we incorporate by reference concerning the provisions of any document
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission are not necessarily complete and, in each instance, reference is
made to the copy of such document so filed. Each such statement is qualified
in its entirety by such reference.
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission by the Company
and are made a part of this prospectus:
1. Our Annual Report on Form 10-K, as amended, for the fiscal year ended
May 31, 1997.
2. Our Transition Report on Form 10-K, as amended, for the period June 1,
1997 to December 31, 1997;
3. Our Quarterly Reports on Form 10-Q for the fiscal quarters ended
August 31, 1997, as amended, November 30, 1997, as amended, March 31,
1998, as amended, June 30, 1998 and September 30, 1998;
4. Our Current Reports on Form 8-K dated September 10, 1997, December 22,
1997 and March 13, 1998; and
5. The description of our common stock contained in our Registration
Statement on Form 8-A filed pursuant to Section 12 of the Exchange Act
and all amendments thereto and reports filed for the purpose of updating
such description.
All of the documents we have filed pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this prospectus and prior to the
termination of the offering made by this prospectus is deemed to be
incorporated by reference in this prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in this prospectus or
in a document incorporated or deemed to be incorporated herein by reference
shall be deemed to be modified or superseded for purposes of this prospectus to
the extent that a statement contained herein or in any subsequently filed
document which is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded,to constitute a part of this
prospectus.
We will provide, without charge, to each person to whom a copy of this
prospectus is delivered, on the written or oral request of such person,a copy
of any or all of the documents incorporated herein by reference (other than
exhibits thereto, unless such exhibits are specifically incorporated by
reference into the information that this prospectus incorporates). Written or
telephone requests for such copies should be directed to our principal office:
Platinum Entertainment, Inc., 2001 Butterfield Road, Downers Grove, Illinois
60515, Attention: Secretary (telephone: 630- 769-0033).
<PAGE>
RISK FACTORS
Before you invest in our common stock, you should be aware that there are
various risks, including those described below. You should carefully consider
these risk factors, together with all of the other information included or
incorporated by reference into this prospectus, before you decide whether to
purchase shares of our common stock.
Some of the information in this prospectus contains forward-looking
statements that involve substantial risks and uncertainties. You can identify
these statements by forward-looking words such as "anticipate," "believe,"
"estimate" and "expect" or similar words. You should read statements that
contain these words because they (1) discuss our future expectations, (2)
contain projections of our future results of operations or of our financial
condition, or (3) state other "forward-looking" information. We believe it is
important to communicate our expectations to our investors. There may be events
in the future,however, that we are not accurately able to predict or over which
we have no control. The risk factors listed in this section, as well as any
cautionary language in this prospectus,provide examples of risks,uncertainties
and events that may cause our actual results to differ materially from the
expectations we describe in our forward-looking statements. Before you invest
in our common stock, you should be aware that the occurrence of any of the
events described in these risk factors and elsewhere in this prospectus or
incorporated by reference into this prospectus could have a material adverse
effect on our business, financial condition and results of operation. In such
case, the trading price of our common stock could decline and you may lose all
or part of your investment.
Historical Operating Losses
We have experienced operating and net losses each fiscal year since
inception. We may continue to incur operating and net losses. Our future
operating results depend on many factors, including demand for our products,
the level of competition, our ability to acquire,develop and market new artists
and products and the ability of our officers and key employees to manage our
business and control costs.
Management of Growth
We have grown rapidly and we intend to continue growing in the future. Our
rapid growth presents numerous challenges and places significant additional
pressure on our managerial, financial and other resources. To manage such
growth it is necessary that we continue to implement and improve our operating
systems, attract and train more qualified personnel, integrate acquired
businesses and products, and expand our facilities. If we fail to effectively
manage our growth, our business, operating results or financial condition could
be materially adversely affected.
Highly Competitive Market
The recorded music industry is highly competitive. We face competition for
discretionary consumer purchases of our products from other record companies and
other entertainment companies, such as film and video companies. The market for
pre-recorded music is dominated by five major record companies in the United
States (Thorne EMI, Bertelsmann AG, Sony Corp., Time Warner, Inc. and Universal
Music Group). Our ability to compete in this market depends largely on:
. the skill and creativity of our employees and their relationships with
artists;
. our ability to sign new and established artists and songwriters;
. the expansion and utilization of our catalog;
. the acquisition of licenses to enable us to create compilation packages;
. the effective and efficient distribution our products; and
. our ability to build upon and maintain our reputation for producing,
licensing, acquiring, marketing and distributing high quality music.
Results and the future success of our sales and marketing efforts through
the Internet will be affected by existing competition and by additional entrants
to the electronic commerce market. Many of our competitors have significantly
longer operating histories, greater financial resources and larger music
catalogs. We cannot assure that we will continue to compete successfully with
our competitors in the future.
<PAGE>
Risks Inherent in the Recorded Music Industry
The recorded music industry, like other creative industries, involves a
substantial degree of risk. Each recording is an individual artistic work, and
its commercial success is primarily determined by consumer taste, which is
unpredictable and constantly changing. As a result, we cannot assure the
financial success of any particular release, the timing of success or the<PAGE>
popularity of any particular artist. We may be unable to generate sufficient
revenues from successful releases to cover the costs of unsuccessful releases.
Fluctuations In Our Quarterly Operating Results and Seasonality
Our results of operations are subject to seasonal variations. In
particular, our revenues and operating income are affected by end-of-the-year
holiday sales. In accordance with industry practice, we record revenues for
music products when the products are shipped to retailers. In anticipation of
holiday sales, retailers purchase products from us prior to December. As a
result, our revenues and operating income typically decline during December,
January and February. In addition, timing of a new release may materially
affect our business, financial condition and results of operations. For
example, if releases planned for the peak holiday season are delayed, our
business, financial results and operating results could be materially adversely
affected.
Risks Related To Our Distribution Systems
We distribute pre-recorded music in various formats through traditional
retail distribution and through the Internet. We also serve as a distributor
for various third party music labels located in the United States and Europe.
Our traditional retail channels are:
. Platinum Distribution (our proprietary distribution system, formerly named
Intersound Distribution)
. Universal Music and Video Distribution (formerly named PolyGram Group
Distribution, Inc.) ("Universal")
. Platinum Christian Distribution
During the nine months ended September 30, 1998, sales generated by
Platinum Distribution and Universal comprised 60% and 39%, respectively, of our
total gross product sales. We cannot assure that we can maintain our
relationship with Universal beyond the terms of our existing agreement, which
will expire on December 31, 2002. We may be unable to establish a new agreement
with Universal, or establish a substitute arrangement with one or more of the
major distributors in the industry on favorable terms. In such event, our
business, results of operation and financial condition may be materially
adversely affected.
We also sell our products through the Internet through our website
PlatinumCD.com. Revenues from PlatinumCD.com are not currently a significant
part of our business. The future success of on-line sales and marketing
efforts cannot be adequately determined at this time, particularly due to the
short history of the electric commerce market and the challenges to the
protection of music files transmitted through the Internet. Results will also
be affected by existing competition and by additional entrants to the market,
many of whom may have substantially greater resources.
Risks Associated with Product Returns
Our products are sold on a returnable basis which is standard music
industry practice. We set reserves for future returns of products estimated
based on return policies and experience. We expect that our actual return
experience will be within standard industry parameters. However, we may
experience an increase in returns over our established reserves. If this occurs
our business, results of operations and financial condition could be materially
adversely affected.
<PAGE>
Risks Related To Our Licensing Activity
We license the rights to numerous master recordings and compositions from
third parties for recording and re-recording of music to produce compilations
and to expand of our catalog. We also seek to license the rights to our master
recordings and compositions to third parties for use in albums, films, and
televisions programs for a royalty or a flat fee. These cross-licensing
arrangements are generally made possible by existing industry practices based on
reciprocity. If these practices change, we cannot assure that we will be able<PAGE>
to obtain licenses from third parties on satisfactory terms, or at all, and our
business, financial condition and operating results, particularly with respect
to compilation products, could be materially and adversely affected.
Risks Related To Our Acquisition Strategy
While we are not currently a party to any agreements or understandings for
any material acquisitions, we expect to continue to seek to acquire master
recordings, music publishing rights and other record companies. Acquisitions
involve risks that could cause our actual growth to differ from our
expectations. For example:
. We may not be successful in identifying attractive acquisitions. We
compete with other companies to acquire master recordings, music
publishing rights and other record companies. We expect that this
competition will continue, which may inhibit our ability to complete
suitable acquisitions on favorable terms.
. We may issue equity securities in future acquisitions that could be
dilutive to our shareholders. We also may incur additional debt and
amortization expense related to music catalog, publishing rights and
other intangible assets we may acquire. This additional debt and
amortization expense may materially adversely affect our business,
financial condition and results of operations. In addition,
acquisitions will require the consent of our current lender and certain
financial covenants in our credit agreement may limit our ability to
incur debt in connection with acquisitions.
. We may be unable to successfully integrate acquired businesses and
realize anticipated economic, operational and other benefits in a timely
manner. If we are unable to successfully integrate acquired businesses,
product lines and personnel, we may incur substantial costs and delays
or other operational, technical or financial problems. In addition,
efforts to integrate or failure to successfully integrate acquisitions
may divert management's attention from our existing business and may
damage our relationships with our key employees and customers.
Dependence on Key Personnel
Our success depends largely on the skills, experience and efforts of our
executive officers and key employees, especially our Chairman, President and
Chief Executive Officer, Steven Devick. The loss of the services of Mr. Devick
or other members of our senior management, could materially adversely affect our
business, financial condition or results of operations. In addition, in large
part, our success will depend on our ability to attract and retain qualified
management, marketing and sales personnel. We experience competition for
qualified personnel with other companies and organizations. Our inability to
hire or retain qualified personnel could have a material adverse effect on our
business, financial condition or results of operations. We have entered into
employment agreements with certain members of our senior management team,
including Mr. Devick, Douglas C. Laux, Chief Financial Officer, Thomas R.
Leavens, General Counsel, Bryan Hadley,Executive Vice President and Lynne
Hoffman-Engel, Executive Vice President. We also maintain a key man life
insurance policy in the aggregate of $10 million on the life of Mr. Devick.
Year 2000 Risks
Many existing computer programs use only two digits (rather than four) to
identify a year in the date field. These programs were designed and
developed without considering the impact of the upcoming change in the
century. If not corrected, many computer applications could fail or create
erroneous results by or at the Year 2000.
<PAGE>
We are currently working to resolve, but have not completed, an assessment
of our Year 2000 issues. Until we have completed our review of the
significant software and equipment used in our business operations, and the
operations of our key business partners, we cannot be sure that our efforts
to address Year 2000 issues are appropriate, adequate or complete.
Based on our current assessment of our Year 2000 issues, we may face the
following concerns:
. We are dependent on personal computer systems for internal electronic
information processing. To bring our systems into Year 2000 compliance
we have spent approximately $180,000 since January 1, 1998, and intend
to spend an additional $20,000 by July 31, 1999, to replace existing
hardware and software.
. We are currently operating two independent financial accounting software
packages - one in our Downers Grove, Illinois location and the other in
our Alpharetta, Georgia location; our Alpharetta location also houses
our distribution system. We upgraded the software package used in our
Downers Grove location with software that is Year 2000 compliant. We
intend to replace the financial and distribution software packages in
our Alpharetta location with software that is Year 2000 compatible. We
have spent approximately $216,000 on software since January 1, 1998 and
expect to spend an additional $30,000 on software for our systems by
July 31, 1999. We have also paid $387,000 in consulting services since
January 1, 1998 and expect to spend an additional $200,000 on consulting
services by July 31, 1999. If the new software in our Alpharetta
location is not operational by March 31, 1999, we intend to use our
existing financial software in our Downers Grove location for all of our
financial accounting. We intend to modify our existing distribution
software to be Year 2000 compatible at no material incremental cost. In
either case, we are planning to be Year 2000 compliant by July 31, 1999.
. We are currently assessing the state of readiness for Year 2000 of our
material vendors, suppliers, customers and other material third parties.
This assessment is not complete. We expect to have this assessment
completed by March 31, 1999. If any of our material vendors, suppliers
or customers, particularly our third party distributor Universal, has a
serious Year 2000 problem, we could experience a loss of revenues from
their operations and/or incur a significant amount of expenses.
As a result of these Year 2000 issues, we may suffer the following
consequences:
. We may experience a significant number of operational inconveniences and
inefficiencies for us and our customers that may divert our time and
attention and financial and human resources from our ordinary business
activities.
. We may suffer serious systems failures that may require significant
efforts by us or our customers to prevent or alleviate material business
disruptions.
. We may be in default of a number of agreements, including our credit
agreement, if we fail to respond to our Year 2000 issues in a timely
manner.
. We may experience significant loss of revenues or incur a significant
amount of unanticipated expenses.
<PAGE>
Anti-Takeover Considerations
Our Certificate of Incorporation and Bylaws and Delaware law contain<PAGE>
provisions that may delay, defer or inhibit a future acquisition of us not
approved by the Board of Directors. This could occur even if our shareholders
are offered an attractive value for their shares or if a substantial number or
even a majority of our shareholders believe the takeover is in their best
interest. These provisions are intended to encourage any person interested in
acquiring us to negotiate with and obtain the consent of the Board of Directors.
These provisions include: (1) limitations on our stockholders' ability to
nominate directors or act by written consent, (2) a staggered Board of Directors
and (3) the ability of the Board of Directors to issue shares of preferred stock
with such designations, powers, preferences and rights as it determines, without
any further vote or action by our shareholders. These provisions also could
discourage bids for your shares of common stock at a premium and have a material
adverse effect on the market price of your shares. Also, Section 203 of the
Delaware General Corporation Law restricts certain business combinations with
any "interested stockholder" as defined by such statute.
Volatility of Our Stock Price
Our common stock is traded on the Nasdaq National Market. The market price
of our common stock has historically been volatile. We believe the market price
of our common stock could fluctuate substantially, based on a variety of
factors, including quarterly fluctuations in results of operations, timing of
product releases, announcements of new products and acquisitions or acquisitions
by our competitors, changes in earnings estimates by research analysts, and
changes in accounting treatments or principles. The market price of our common
stock may be affected by our ability to meet or exceed analysts' or "street"
expectations, and any failure to meet or exceed such expectations could have a
material adverse effect on the market price of our common stock. Furthermore,
stock prices for many companies, particularly entertainment companies, fluctuate
widely for reasons that may be unrelated to their operating results. These
fluctuations and general economic, political and market conditions, such as
recessions or international currency fluctuations and demand for our products,
may adversely affect the market price of our common stock.
<PAGE>
THE COMPANY
Overview
Our primary business is the production, distribution, marketing and sale of
music. Our pre-recorded music products include new releases, typically by
artists established in a particular genre, as well as compilations featuring
various artists and repackagings of previously recorded music from our master
music catalog and under licenses from third party record companies. We sell
music products, including compact discs, cassettes, and digital versatile discs
(DVDs) mainly to retailers and wholesalers in the United States and through
licensees internationally. We currently release pre-recorded music in a variety
of genres including Classical, Urban, Adult Contemporary, Blues, Gospel and
Country and on a variety of music labels including Intersound Classical, River
North, House of Blues, CGI Records and Platinum.
Expansion and exploitation of our music catalog and publishing rights is an
integral part of our business and growth strategy. We currently own or control
a music catalog with more than 13,000 master recordings and constantly add to
the catalog through strategic and complementary acquisitions, as well as through
the signing of established artists with a history of album sales and new
artists. We also target the producers of film, television and video projects as
potential licensees of our proprietary and controlled recordings.
We have released music by established artists including, The Beach Boys, Peter
Cetera, John Denver, Dionne Warwick, the Blues Brothers, The Band, Roger Daltry,
Taylor Dayne, Juice Newton, Phoebe Snow, Taj Mahal, Luther Allison and Otis
Rush. Through the acquisition of Intersound, Inc. in January 1997, we expanded
our artist roster with artists such as the Bellamy Brothers, Eddie Rabbitt,<PAGE>
Crystal Gayle, and Kansas, and established Classic R&B artists such as George
Clinton, Lakeside, Cameo and the Dazz Band. We have also released Blues
compilations that are products of our joint venture with House of Blues Records,
Inc. and compilations in the Urban genre, including a Billboard Top 200 Best
Selling Album.
We have positioned our company as a market leader in the Gospel market with
Top 10 albums by William Becton, James Hall and Vickie Winans (Billboard's Top
Gospel Album chart), a genre that expanded its sales by more than 30% in 1996
and 1997. Our music catalog also contains master recordings by other best
selling Gospel music acts such as The Winans, Andrae Crouch and Walter Hawkins.
Through our acquisition of Intersound Inc., we expanded our Gospel roster to
include Vickie Winans and the Mighty Clouds of Joy, each of whom earned
nominations for a Grammy Award and a Stellar Award. Recent releases on our
Gospel label include albums by artists such as Witness, Walt Whitman and the
Soul Children of Chicago and GMWA Mass Choir.
We have also enjoyed success in the Classical market. In 1998, Billboard
named Intersound the No. 1 Top Budget Classical Label of the year and also named
Intersound artist, John Bayless, as the No. 1 Top Budget Classical Artist of the
year and The Nutcracker Christmas the No. 1 Top Budget Classical Album of the
year.
We distribute our products through traditional retail channels and through
the Internet. On October 1, 1998, we launched our website
www.PlatinumCD.com. which allows consumers to buy music in four distinct
ways:
. www.PlatinumCD.com allows customers to create customized CD compilations on a
"burn and mail" basis, with consumers selecting individual tracks that will
be recorded to their own unique compact disc and shipped to them within 48
hours through musicmaker.com, the first and largest custom CD and music
download resource on the Internet. We have an equity interest, a licensing
and profit-sharing arrangement with musicmaker.com for these sales.
. www.PlatinumCD.com allows customers to create customized CD compilations
through musicmaker.com by downloading "Liquid Tracks" created by Redwood
City, California-based, Liquid Audio, to a customer's personal computers.
These digital audio files can then be transferred from the computer to a
customer's own CD-Recordable device. We have an equity interest, a licensing
and profit-sharing arrangement with musicmaker.com for these sales.
<PAGE>
. www.PlatinumCD.com allows customers to purchase CDs manufactured by our
various music labels for home delivery at discount prices. We fulfill these
sales through Platinum Distribution, our proprietary distribution system.
. www.PlatinumCD.com gives customers access to hundreds of thousands of
commercially available titles, via our affiliation with Amazon.com. We
receive referral revenues from the sale of such titles.
The Company was incorporated in Delaware in 1991. Our principal executive
offices are located at 2001 Butterfield Road, Suite 1400, Downers Grove,
Illinois 60515, and our telephone number is (630) 769-0033.
Recent Developments
None.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares of common
stock covered by this prospectus. All of the proceeds will be received by the
selling stockholders. See "Selling Stockholders." If and when any of the
warrants are exercised and the shares of common stock are issued to the selling
stockholders, we will receive the proceeds from the exercise of their warrants,
unless the selling stockholders opt to exercise their warrants on a cashless
basis. If all of the selling stockholders exercise their warrants for cash, we
will receive $2,815,086.00; provided, however, that the exercise price of
warrants held by Platinum Venture Partners II,L.P. may be subject to change. The
per share exercise price of the common stock underlying such warrants is equal
to the lesser of (i) $6.25 and (ii) 82.5% of the average of the daily closing
price per share of common stock of the Company for the 30 consecutive trading
days following the public release by the Company of its consolidated earnings
statement for the 1998 fiscal year. We will use such proceeds for working
capital and other general corporate purposes.
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth, as of December 23, 1998, certain information
regarding the beneficial ownership of the Company's common stock by each selling
stockholder, both before this offering and as adjusted to reflect the sale of
the shares of common stock. The shares offered hereby may be offered from time
to time in whole or in part by the selling stockholders, their pledgees, donees,
transferees or distributees, or their respective successors-in-interest. Except
where otherwise noted, each person named in the following table has, to our
knowledge, sole voting and investment power with respect to the shares shown as
beneficially owned by such person.
<TABLE>
<CAPTION>
Beneficial Ownership Prior Number Beneficial
to Offering of Shares Ownership
Offered (1) After
Offering(2)
---------------------------- ---------------
Number of Percent Number Percent
Shares of
Shares
---------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Bank of Montreal 235,366(3) 3.7 235,366 - -
PPM America
Special Investments
Fund L.P. 23,206(3) * 23,206 - -
Platinum Venture
Partners II, L.P. 450,000(4)(5) 6.8 450,000 - -
PLATINUM
technology, inc. 53,192(6)(7) * 53,192 - -
Tring
International Plc 53,055(8) * 53,055 - -
</TABLE>
__________________
* Less than 1%.
(1) Represents the maximum number of shares that may be sold by each of the
selling stockholders pursuant to this prospectus.
(2) Assumes the selling stockholders sell all of their shares pursuant to this
prospectus. The selling stockholders may sell all or part of their shares.
(3) Represents shares issuable upon the exercise of vested warrants, which were
issued to this selling stockholder in transactions exempt from the
registration requirements of the Securities Act in connection with a loan
made to the Company by the selling stockholder. A portion of the original
warrant issued to Bank of Montreal dated January 31, 1997 was assigned to PPM
of America Investments Fund, L.P. on April 23, 1997.
(4) Represents shares issuable upon the exercise of vested warrants, which were
issued to this selling stockholder in transactions exempt from the
registration requirements of the Securities Act pursuant to an Investment
Agreement, dated October 12, 1998 as amended October 28, 1997, October 30,
1997, and November 26, 1997.
(5) Steven Devick, Chief Executive Officer and President of the Company, is an
executive officer of the general partner Platinum Venture Partners II, L.P.
("PVP II"). In such capacity, Mr. Devick may be deemed a beneficial owner
with respect to common stock of the Company held by PVP II. Mr. Devick
claims beneficial ownership of 56,250 shares of common stock underlying the
warrant to purchase common stock held by PVP II. Mr. Devick disclaims
beneficial ownership of the remaining 337,500 shares of common stock
underlying the warrant to purchase common stock held by PVP II. Andrew
Filipowski, a director of the Company, is the President and Chief Executive
Officer, a sole director and a stockholder of the general partner of PVP II.
In such capacities, Mr., Filipowski may be deemed the beneficial owner with
respect to common stock held by PVP II. Mr. Filipowski claims beneficial
ownership of 56,250 shares of common stock underlying the warrant to purchase
common stock held by PVP II. Mr. Filipowski disclaims beneficial ownership
of the remaining 337,500 shares of common stock underlying the warrant to
purchase common stock held by PVP II.
(6) Represents shares issued to this selling stockholder in transactions exempt
from the registration requirements of the Securities Act for consulting
services rendered from February 28, 1998 through August 29, 1998.
<PAGE>
(7) Mr. Filipowski, a director of the Company, is the Chief Executive Officer
and President of PLATINUM technology, inc. ("Platinum Tech"). In such
capacity Mr. Filipowski may be deemed a beneficial owner of common stock held
by Platinum Tech. Mr. Filipowski disclaims beneficial ownership of the
common stock of the Company held by Platinum Tech.
(8) Represents shares issued to this selling stockholder in transactions exempt
from the registration requirements of the Securities Act pursuant to a
Purchase Agreement, dated June 29, 1998, effective July 23, 1998 whereby we
purchased certain assets from this selling stockholder.
<PAGE>
PLAN OF DISTRIBUTION
Any or all of the shares covered by this prospectus may be sold from time
to time by the selling stockholders, their pledgees, donees, transferees or
distributees, or their respective successors-in-interest. The selling
stockholders may sell all or a portion of the shares held by them from time to
time while the registration statement of which this prospectus is a part remains
effective. The aggregate proceeds to the selling stockholders from the sale of
shares offered by the selling stockholders hereby will be the prices at which
such securities are sold, less any commissions. There is no assurance that the
selling stockholders will sell any or all of the shares offered hereby.
The selling stockholders may sell the shares on the Nasdaq National Market,
in privately negotiated transactions or otherwise, at fixed prices that may be
changed, at market prices prevailing at the time of sale, at prices related to
such market prices or at negotiated prices. The shares may be sold by the
selling stockholders by one or more of the following methods, without
limitation: (a) block trades in which the broker or dealer so engaged will
attempt to sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction, (b) purchases by a broker or
dealer as principal and resale by such broker or dealer for its account pursuant
to this prospectus, (c) ordinary brokerage transactions and transactions in
which the broker solicits purchasers, (d) privately negotiated transactions and
(e) a combination of any such methods of sale. In effecting sales, brokers and
dealers engaged by selling stockholders may arrange for other brokers or dealers
to participate. Brokers or dealers may receive commissions or discounts from
selling stockholders (or, if any such broker or dealer acts as agent for the
purchaser of such shares, from such purchaser) in amounts to be negotiated which
are not expected to exceed those customary in the types of transactions
involved. Brokers and dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share, and, to the
extent such broker or dealer is unable to do so acting as agent for a selling
stockholder, to purchase as principal any unsold shares at the price required to
fulfill the broker's or dealer's commitment to such selling stockholder. Brokers
and dealers who acquire shares as principal may thereafter resell such shares
from time to time in transactions (which may involve block transactions and
sales to and through other brokers and dealers, including transactions of the<PAGE>
nature described above) in the over-the-counter market or otherwise at prices
and on terms then prevailing at the time of sale, at prices then related to the
then-current market price or in negotiated transactions and, in connection with
such resales, may pay to or receive from the purchasers of such shares
commissions as described above. The selling stockholders may also sell the
shares in accordance with Rule 144 under the Securities Act rather than pursuant
to this prospectus.
In connection with distributions of the shares or otherwise, the selling
stockholders may enter into hedging transactions with broker and dealers or
other financial institutions. In connection with such transactions, broker and
dealers or other financial institutions may engage in short sales of the
Company's common stock in the course of hedging the positions they assume with
selling stockholders. The selling stockholders may also sell our common stock
short and redeliver the shares to close out such short positions. The selling
stockholders may also enter into option or other transactions with brokers and
dealers or other financial institutions which require the delivery to such
broker or dealer or other financial institution of shares offered hereby, which
shares such broker or dealer or other financial institution may resell pursuant
to this prospectus. The selling stockholders may also pledge shares to a broker
or dealer or other financial institution, and, upon a default, such broker or
dealer or other financial institution may effect sales of the pledged shares
pursuant to this prospectus.
The selling stockholders and any broker or dealers or agents that
participate with the selling stockholders in sales of the shares may be deemed
to be "underwriters" within the meaning of the Securities Act in connection with
such sales. In such event, any commissions received by such broker or dealers or
agents and any profit on the resale of the shares purchased by them may be
deemed to be underwriting commissions or discounts under the Securities Act.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the shares may not bid for or purchase shares of
our common stock during a period which commences one business day prior to such
person's participation in the distribution, subject to certain exceptions,
including passive market making activities.
The Company is responsible for the expenses incident to the offering and
sale of the shares (other than commissions, discounts and fees of underwriters,
dealers or agents) in accordance with the agreements pursuant to which
registration rights were granted to the selling stockholders. We have agreed to
indemnify the selling stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the validity of the shares will be
passed upon for us by Katten Muchin & Zavis, Chicago, Illinois.
EXPERTS
The consolidated financial statements of Platinum Entertainment, Inc., as
of December 31, 1997 and May 31, 1997 and 1996, and the related seven month
period ended December 31, 1997 and each of the three years ended May 31, 1997,
incorporated by reference in this prospectus, have been audited by Ernst & Young
LLP, independent certified public accountants, as set forth in their report
thereon incorporated by reference herein.
<PAGE>
- ------------------------------------------- -------------------------------
- -------------------------------------------- -------------------------------
We have not authorized any dealer,
salesman or other person to give any
information or to make any representation 814,819 Shares
not contained in or incorporated by
reference to this prospectus. This prospectus
does not constitute an offer, or a
solicitation of an offer to buy the shares Common Stock
by anyone in any jurisdiction in which such
offer or solicitation is not authorized, or
in which the person making the offer or
solicitation is not qualified to do so, or to
any person to whom it is unlawful to make such
offer or solicitation. Under no circumstances
shall the delivery of this prospectus or any
sale made pursuant to this prospectus, create
any implication that the information contained
in this prospectus is correct as of any time
subsequent to its date.
________________________
________________ P R O S P E C T U S
________________________
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION 2
INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE 3
RISK FACTORS 4
THE COMPANY 9
USE OF PROCEEDS 10
SELLING STOCKHOLDERS 11
PLAN OF DISTRIBUTION 13
LEGAL MATTERS 14
EXPERTS 14
December 23, 1998
- ----------------------------------------- ---------------------------------
- ----------------------------------------- ---------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Set forth below is an estimate of the approximate amount of fees and
expenses payable in connection with the issuance and distribution of the Common
Stock pursuant to the Prospectus contained in this Registration Statement. The
Company will pay all of these expenses.
Securities and Exchange Commission registration fee $1,044
Accountants fees and expenses $4,000
Legal fees and expenses $5,000
Miscellaneous expenses $1,000
-------
Total $11,044
-------
-------
Item 15. Indemnification of Directors and Officers.
Article IX of the Company's Third Amended and Restated Certificate of
Incorporation provides that we shall indemnify our directors to the full extent
permitted by the Delaware General Corporation Law and may indemnify our officers
to such extent, except that we shall not be obligated to indemnify any such
person (i) with respect to proceedings, claims or actions initiated or brought
voluntarily by any such person and not by way of defense, or (ii) for any
amounts paid in settlement of an action indemnified against by us without our
prior written consent. With the approval of our stockholders, we have entered
into indemnity agreements with each of our directors and certain of our
officers. These agreements may require us, among other things, to indemnify such
officers and directors against certain liabilities that may arise by reason of
their status or service as directors or officers, to advance expenses to them as
they are incurred, provided that they undertake to repay the amount advanced if
it is ultimately determined by a court that they are not entitled to
indemnification, and to obtain directors' and officers' liability insurance if
available on reasonable terms.
In addition, Article X of the Company's Third Amended and Restated
Certificate of Incorporation provides that a director of the Company shall not
be personally liable to us or our stockholders for monetary damages for breach
of his or her fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to us or our 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
derives an improper personal benefit.
Reference is made to Section 145 of the General Corporation Law of the
State of Delaware which provides for indemnification of directors and officers
in certain circumstances.
<PAGE>
Item 16. Exhibits.
4.1 Third Amended and Restated Certificate of Incorporation of the Company, as
amended (Incorporated by reference to Exhibit 3.1 to our Quarterly Report on
Form 10-Q for the fiscal quarter ended November 30, 1997 ("November 1997 10-Q").
4.2 Amended and Restated By-laws of the Registrant, as amended (Incorporated by
reference to Exhibit 3.2 to the November 1997 10-Q).
4.3 Specimen stock certificate representing Common Stock (Incorporated by
reference to Exhibit 4.1 to our Registration Statement on Form S-1 SEC File No.
33-80357).
4.4 Warrant to purchase shares of common stock issued to Bank of Montreal dated
January 31, 1997. (Incorporated by reference to the Current Report on Form 8-K<PAGE>
filed with the Commission on February 18, 1997).
4.5 Warrant to purchase shares of common stock issued to PPM America Special
Investments Fund L.P. dated April 23, 1997.
4.6 Warrant to purchase 315,000 shares of common stock issued to Platinum
Venture Partners, II L.P. dated December 12, 1997. (Incorporated by reference
to Exhibit 4.1 to the November Q).
4.7 Warrant to purchase 135,000 shares of common stock issued to Platinum
Venture Partners, II L.P. dated December 12, 1997. (Incorporated by reference
to Exhibit 4.1 to the November Q).
5 Opinion of Katten Muchin & Zavis as to the legality of the securities being
registered (including consent).
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Katten Muchin & Zavis (included in Exhibit 5).
24 Power of Attorney (included on the signature page to this Registration
Statement).
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to include
any material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material change
to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933 (the "Securities Act"), each
filing of our annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and our controlling
persons pursuant to the foregoing provisions, or otherwise, we have been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or our controlling person in the successful defense of any action, suit<PAGE>
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, we will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, we certify that
we have reasonable grounds to believe that we meet all of the requirements for
filing on Form S-3 and we have duly caused this Amendment to the Registration
Statement to be signed on our behalf by the undersigned, thereunto duly
authorized, in the City of Downers Grove, State of Illinois, on December 23,
1998.
Platinum Entertainment, Inc.
By: /s/ STEVEN DEVICK
Steven Devick
Chairman, President and Chief Executive
Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Steven Devick and Douglas C. Laux, and both of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution, to sign on his
behalf, individually and in each capacity stated below, all amendments and post-
effective amendments to this Registration Statement on Form S-3 and to file the
same, with all exhibits thereto and any other documents in connection therewith,
with the Securities and Exchange Commission under the Securities Act of 1933,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully and to all intents and purposes as each might
or could do in person, hereby ratifying and confirming each act that said
attorneys-in-fact and agents may lawfully do or cause to be done by virtue
thereof.
In accordance with the requirements of the Securities Act of 1933, as
amended, this Registration Statement was signed by the following persons in the
capacities and on this 23rd day of December, 1998.
Signature Title
/s/ STEVEN DEVICK Chairman, President, and Chief Executive Officer
Steven Devick Officer
/s/ DOUGLAS C. LAUX Chief Financial Officer and a Director
Douglas C. Laux
/s/DAVID BAUMAN Director
David Bauman
/s/MICHAEL P. CULLINANE Director
Michael P. Cullinane
/s/CRAIG J. DUCHOSSOIS Director
Craig J. Duchossois
/s/ ANDREW J. FILIPOWSKI Director
Andrew J. Filipowski
/s/ CARL D. HARNICK Director
Carl D. Harnick
/s/GEOFFREY HOLMES Director
Geoffrey Holmes
Director
Paul L. Humenansky
/s/ROBERT J. MORGADO Director
Robert J. Morgado
/s/MARK J. SCHWARTZ Director
Mark J. Schwartz
Exhibit 4.5
This Warrant and the Common Stock issuable upon exercise hereof have not been
registered under the Securities Act of 1933, as amended, or any State securities
laws and may not be sold, transferred, hypothecated or assigned in the absence
of such registration or an exemption therefrom under said Act or any such State
securities laws which may be applicable.
No. 3
Warrant To Purchase
Shares Of Common Stock
Of
Platinum Entertainment, Inc.
Void after January 31, 2002
Table of Contents
Section Heading Page
Section 1. Exercise of Warrant 2
Section 2. Adjustment of Applicable Percentage. 2
Section 2.1. Adjustment of Applicable Percentage. 2
Section 2.2. Adjustment of Applicable Percentage. 3
Section 2.3. Notice of Adjustments 3
Section 3. Mergers, Consolidations, Sales 3
Section 4. Dissolution or Liquidation 4
Section 5. Notice of Extraordinary Dividends 4
Section 6. Fractional Shares 4
Section 7. Fully Paid Stock, Taxes. 4
Section 8. Closing of Transfer Books 5
Section 9. Restrictions on Transferability of Warrants and Shares,
Compliance with Laws 5
Section 9.1. In General 5
Section 9.2. Restrictive Legends 5
Section 9.3. Notice of Proposed Transfer, Registration Not Required 6
Section 9.4. Demand Registration 6
Section 9.5. Participation in Registered Offerings ("Piggyback
Rights") 8
Section 9.6. Obligations of Investors 8
Section 9.7. Registration Proceedings 9
Section 9.8. Expenses 11
Section 9.9. Indemnification of Investors 12
Section 9.10. Indemnification of Company 13
Section 9.11. Contribution 14
Section 9.12. Reporting Requirements under Securities Exchange Act of
1934 14
Section 10. Partial Exercise and Partial Assignment 14
Section 10.1. Partial Exercise. 14
Section 10.2. Assignment 15
Section 11. Definitions 15
Section 12. Lost, Stolen Warrants, etc 17
Section 13. Warrant Holder Not Shareholder 17
Section 14. Severability 17
Section 15. Index and Captions 18
Signature Page 19<PAGE>
Annex A Securities Act Representations
This Warrant and the Common Stock issuable upon exercise hereof have not been
registered under the Securities Act of 1933, as amended, or any State securities
laws and may not be sold, transferred, hypothecated or assigned in the absence
of such registration or an exemption therefrom under said Act or any such State
securities laws which may be applicable.
No. 3
Warrant To Purchase
Shares Of Common Stock
Of
Platinum Entertainment, Inc.
This Is To Certify that, for value received and subject to the provisions
hereinafter set forth,
PPM America Special Investments Fund L.P.
or permitted assigns,
is entitled to purchase from Platinum Entertainment, Inc., a Delaware
corporation (the "Company"), at any time to and including 5:00 p.m. (Chicago
time) on January 31, 2002 (the "Expiration Date"), that number of shares of
Common Stock of the Company of the par value of $.001 per share which, after
giving effect to such purchase, and prior to giving effect to any adjustments
provided for under Section 2 hereof, represents 0.4487% (the "Applicable
Percentage") of the number of shares of Common Stock of the Company outstanding
at the time of such purchase (but without giving effect to such purchase) for an
aggregate price of $232.06 (the "Aggregate Warrant Price"), all on and subject
to the terms, provisions and conditions hereinafter set forth. The initial
number of shares of Common Stock of the Company purchasable hereunder is 23,206.
The terms which are capitalized herein shall have the meanings specified in
Section 11 unless the context shall otherwise require.
Section 1. Exercise of Warrant; Reservation.
Subject to the conditions hereinafter set forth, this Warrant may be
exercised in whole at any time or in part from time to time prior to the
Expiration Date by the surrender of this Warrant (accompanied by (i) the
subscription form at the end hereof duly executed and (ii) if this Warrant
is not registered in the name of the purchaser, an assignment(s) in the
form attached hereto evidencing the assignment of this Warrant to such
purchaser, in which case the registered holder shall have complied with the
provisions set forth in Section 9.3) at the principal office of the Company
in Downers Grove, Illinois, and upon payment to the Company of the
Aggregate Warrant Price (or, if exercised in part, upon payment to the
Company of the applicable Proportionate Part of the Aggregate Warrant
Price) for the shares so purchased in funds current in Chicago, Illinois.
This Warrant and all rights and options hereunder shall expire on the
Expiration Date, and shall be wholly null and void to the extent this
Warrant is not exercised before it expires.
Upon exercise of this Warrant, the holder shall, if requested by the
Company, confirm in writing, in a form satisfactory to the Company, that
the Underlying Shares so purchased are being acquired solely for the
holder's own account and not as a nominee for any other party, for
investment, and not with a view toward distribution or resale and that such
holder is an Accredited Investor (as defined in Annex A hereto). If such
holder cannot make such representations because they would be factually
incorrect, it shall be a condition to such holder's exercise of this
Warrant that the Company receive such other representations as the Company
considers reasonably necessary to assure the Company that the issuance of
its securities upon exercise of this Warrant shall not violate any United
States or state securities laws.<PAGE>
The Company shall pay all reasonable expenses, taxes and other charges
payable in connection with the preparation, execution and delivery of stock
certificates pursuant to this Section, regardless of the name or names in
which such stock certificates shall be registered.
The Company will at all times prior to the Expiration Date reserve and keep
available such number of authorized shares of its Common Stock, solely for
the purpose of issue upon the exercise of the rights represented by this
Warrant as herein provided for, as may at any time be issuable (based upon
the number of shares of Common Stock outstanding at any such time) upon the
exercise of this Warrant and such shares issuable upon the exercise of this
Warrant shall at no time have an aggregate par value which is in excess of
the Aggregate Warrant Price then in effect.
Section 2. Adjustment of Applicable Percentage.
Section 2.1. Adjustment of Applicable Percentage. In the event
that, on or prior to the Credit Agreement Termination Date, the Company shall at
any time issue any Qualifying Additional Shares of Common Stock, the Applicable
Percentage shall be adjusted as of the date of making by the Company of the
related Qualifying Credit Agreement Payment to that percentage determined by
multiplying the Applicable Percentage as in effect immediately prior to the
making of such Qualifying Credit Agreement Payment by a fraction:
(a) the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to the issuance of such
Qualifying Additional Shares of Common Stock, and
(b) the denominator of which shall be the number of shares of
Common Stock outstanding immediately subsequent to the issuance of such
Qualifying Additional Shares of Common Stock and giving effect to such
issuance (but not to the issuance of any Common Stock not constituting
Qualifying Additional Shares of Common Stock).
Section 2.2. Adjustment of Applicable Percentage. In the event
that, subsequent to the Credit Agreement Termination Date, the Company shall at
any time issue any shares of Common Stock, the Applicable Percentage shall be
adjusted as of the date of such issuance to that percentage expressing a
fraction, the numerator of which shall be the number of shares of Common Stock
(adjusted for intervening stock splits, stock dividends, reverse stock splits or
other reclassifications) purchaseable by the holder hereof on the Credit
Agreement Termination Date and the denominator of which shall be the total
number of shares of Common Stock outstanding immediately subsequent to the
issuance of said shares of Common Stock and giving effect to such issuance.
Section 2.3. Notice of Adjustments. Whenever the Applicable
Percentage shall be adjusted pursuant to this Section 2, the Company shall
promptly prepare a certificate signed by the President or a Vice President and
by the Treasurer or an Assistant Treasurer of the Company setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment and the method by which such adjustment was calculated, and shall
promptly cause copies of such certificate to be mailed (by first class mail,
postage prepaid) to the holder of this Warrant.
Section 3. Mergers, Consolidations, Sales.
In the case of any consolidation or merger of the Company with another
entity, or the sale of all or substantially all of its assets to another
entity, or any reorganization, recapitalization or reclassification of the
Common Stock or other equity securities of the Company, then, as a
condition of such consolidation, merger, sale, reorganization,
recapitalization or reclassification, lawful and adequate provision shall
be made whereby the holder of this Warrant shall thereafter have the right
to receive upon the basis and upon the terms and conditions specified
herein and in lieu of the shares of Common Stock immediately theretofore
purchasable hereunder, such shares of stock, securities or assets as may
(by virtue of such consolidation, merger, sale, reorganization or
reclassification) be issued or payable with respect to or in exchange for a
number of outstanding shares of Common Stock equal to the number of shares
of Common Stock immediately theretofore so purchasable hereunder had such
consolidation, merger, sale, reorganization, recapitalization or
reclassification not taken place, and in any such case, appropriate<PAGE>
provisions shall be made with respect to the rights and interests of the
holder of this Warrant to the end that the provisions hereof shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon exercise of this
Warrant. The Company shall not effect any such consolidation, merger or
sale, unless prior to or simultaneously with the consummation thereof, the
successor entity (if other than the Company) resulting from such
consolidation or merger or the entity purchasing such assets shall assume
by written instrument executed and mailed or delivered to the holder of
this Warrant, the obligation to deliver to such holder such shares of
stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to receive.
Section 4. Dissolution or Liquidation.
In the event of any proposed distribution of the assets of the Company in
dissolution or liquidation except under circumstances when the foregoing
Section 3 shall be applicable, the Company shall mail notice thereof to the
holder of this Warrant and shall make no distribution to shareholders until
the expiration of 30 days from the date of mailing of the aforesaid notice
and, in any such case, the holder of this Warrant may exercise the purchase
rights with respect to this Warrant within 30 days from the date of mailing
such notice and all rights herein granted not so exercised within such 30-
day period shall thereafter become null and void.
Section 5. Notice of Extraordinary Dividends.
If the Board of Directors of the Company shall declare any dividend or
other distribution on its Common Stock except out of earned surplus or by
way of a stock dividend payable on its Common Stock, the Company shall mail
notice thereof to the holder of this Warrant not less than 30 days prior to
the record date fixed for determining shareholders entitled to participate
in such dividend or other distribution and the holder of this Warrant shall
not participate in such dividend or other distribution or be entitled to
any rights on account or as a result thereof unless and to the extent that
this Warrant is exercised prior to such record date. The provisions of
this paragraph shall not apply to distributions made in connection with
transactions covered by Section 3.
Section 6. Fractional Shares.
Fractional shares may be issued upon the exercise of this Warrant in any
case where the holder hereof would be entitled to receive a fractional
share upon the exercise of this Warrant in order to receive the appropriate
percentage of shares of Common Stock.
Section 7. Fully Paid Stock, Taxes.
The Company covenants and agrees that the shares of stock represented by
each and every certificate for its Common Stock to be delivered on the
exercise of the purchase rights herein provided for shall, at the time of
such delivery, be validly issued and outstanding and be fully paid and
nonassessable. The Company further covenants and agrees that it will pay
when due and payable any and all Federal and State taxes (but not including
income taxes) which may be payable in respect of this Warrant or any Common
Stock or certificates therefor upon the exercise of the conversion rights
provided for herein. The Company shall not, however, be required to pay
any tax which may be payable in respect of any transfer involved in the
transfer and delivery of stock certificates in the name other than that of
the holder exercising this Warrant, and any such tax shall be paid by such
holder at the time of presentation.
Section 8. Closing of Transfer Books.
The right to exercise this Warrant shall not be suspended during any period
that the stock transfer books of the Company for its Common Stock may be
closed. The Company shall not be required, however, to deliver certificates
of its Common Stock upon such exercise while such books are duly closed for
any purpose, but the Company may postpone the delivery of the certificates
for such Common Stock until the opening of such books, and they shall, in
such case, be delivered forthwith upon the opening thereof, or as soon as
practicable thereafter.
Section 9. Restrictions on Transferability of Warrants and Shares, Compliance
with Laws.
Section 9.1. In General. This Warrant and the Common Stock
issued upon the exercise hereof shall not be transferable except upon the
conditions hereinafter specified, which conditions are intended to insure
compliance with the provisions of the Securities Act and any applicable State
securities laws in respect of the transfer of this Warrant or any such Common
Stock.
Section 9.2. Restrictive Legends. Each Warrant shall bear on
the face thereof a legend substantially in the form of the notice endorsed on
the first page of this Warrant.
Each certificate for shares of Common Stock initially issued upon the
exercise of any Warrant and each certificate for shares of Common Stock
issued to a subsequent transferee of such certificate shall, unless
otherwise permitted by the provisions of this Section 9.2, bear on the face
thereof a legend reading substantially as follows:
"The shares represented by this certificate have not
been registered under the Securities Act of 1933, as
amended, or any State securities laws and may not be sold,
transferred, hypothecated or assigned in the absence of such
registration or an exemption therefrom under said Act and
any such State securities laws which may be applicable."
In the event that a registration statement covering the Underlying Shares
or the Restricted Stock shall become effective under the Securities Act and
under any applicable State securities laws or in the event that the Company
shall receive an opinion of its counsel that, in the opinion of such
counsel, such legend is not, or is no longer, necessary or required
(including, without limitation, because of the availability of the
exemption afforded by Rule 144 of the General Rules and Regulations of the
Securities and Exchange Commission), the Company shall, or shall instruct
its transfer agents and registrars to, remove such legend from the
certificates evidencing the Restricted Stock or issue new certificates
without such legend in lieu thereof. Upon the written request of the holder
or holders of any Warrant or of any Restricted Stock the Company covenants
and agrees forthwith to request its counsel to render an opinion with
respect to the matters covered by this Section 9.2 and to bear all expenses
in connection with the same.
Section 9.3. Notice of Proposed Transfer, Registration Not
Required. The holder of each Warrant or any Restricted Stock, by acceptance
thereof, agrees to give prior written notice to the Company of such holder's
intention to transfer such Warrant or the Underlying Shares relating thereto or
such Restricted Stock (or any portion thereof), describing briefly the manner
and circumstances of the proposed transfer; provided, however, that no such
notice shall be required for a transfer under a registration, qualification or
filing for exemption requested in accordance with the provisions of Section 9.4
or for the transfer of this Warrant or any Underlying Shares in their entirety
to any direct or indirect parent, subsidiary or corporate affiliate of the
initial holder of this Warrant. In addition, in the event that such transfer is
proposed to be made in compliance with an exemption from the registration
requirements of the Securities Act, the availability of which exemption is
dependent upon the accuracy of the representations set forth in Annex A hereto,
the holder (or the proposed transferee) shall, as a precondition to such
transfer, provide to the Company a certificate of the proposed transferee
containing said representations. In the event that such transferee cannot make
such representations because they would be factually incorrect, it shall be a
condition to the transfer of this Warrant to such transferee that the Company
receive such other representations as the Company considers reasonably necessary
to assure the Company that the transfer of this Warrant shall not violate any
United States or state securities laws. Such notice shall describe briefly the
nature of such transfer, and no such transfer shall be made unless and until (i)
the holder has supplied to the Company an opinion of counsel for the holder
(which counsel shall be satisfactory to the Company) to the effect that no
registration (or perfection of an exemption) under the Securities Act is
required with respect to such transfer (which opinion may be conditioned upon
the transferee's assuming the obligations of a holder of this Warrant under this
Section 9.3) or (ii) an appropriate registration statement with respect to such
sale or other disposition of the Warrant or Restricted Stock shall have been
filed by the Company with the Commission and declared effective by the
Commission. All fees and expenses of counsel (including counsel designated by
any holder of Warrants or Restricted Stock) in connection with the rendition of
the opinions provided for in this subparagraph shall be paid by the Company. As
used in this Section 9.3, the term "transfer" includes an assignment pursuant to
Section 10.2 hereof.
Section 9.4. Demand Registration. At any time after the first
to occur of (i) January 31, 1998 or (ii) in the event that an Event of Default
shall have occurred and then be continuing, July 31, 1997, the Investors (or
their permitted transferees) may demand registration under the Securities Act of
any Underlying Shares issuable upon conversion of any Warrant or Restricted
Stock of the Company obtained pursuant to the conversion of the Warrants
(collectively, on a Common Stock equivalent basis, the "Registrable
Securities"), or otherwise, on Form S-1 or any similar long-form registration
("Long-Form Registration") or Form S-2 or S-3 or any similar short-form
registration ("Short-Form Registration"). The registration requested pursuant
to this Section 9.4 is referred to herein as "Demand Registration."
(A) Number of Registrations. The Investors shall be entitled to
demand one Long-Form or Short-Form Registration. A registration will count as
the Demand Registration when it has become effective, unless (i) the Investors
are unable to register and sell at least 80% of any Registrable Securities
demanded to be included in such registration or (ii) the registration is
withdrawn prior to effectiveness at the request of the Investors (or by the
underwriter selected by the Investors) as a consequence of the good faith
determination by the underwriter selected by the Investors that a sale under
then current market conditions of at least 80% of any Registrable Securities
demanded to be included in such registration could not be effected under
commercially reasonably terms; provided that in any event, the Company will pay
all registration expenses in connection with any registration initiated as a
Demand Registration as provided in Section 9.8 hereof.
(B) Priority on Demand Registrations. If the Demand Registration is
an underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities requested to
be included exceeds the number of Registrable Securities which, under then
current market conditions, can be sold in such offering at the price expected to
be obtained for such shares by the Investors in a commercially reasonable sale,
the Company will include in such registration prior to the inclusion of any
securities which are not Registrable Securities owned by the Investors the
number of shares of Investors' Underlying Shares or Restricted Stock requested
to be included which in the opinion of such underwriters can be sold, pro rated
among the Investors based upon the number of Registrable Securities owned by
them. In the event that the Demand Registration is an underwritten offering,
and all Registrable Securities which the Investors requested to be included in
such offering are to be so included, then, to the extent that the managing
underwriter shall advise the Company and the Investors that the inclusion of
additional shares of Common Stock in such offering will not materially and
adversely affect the price or salability of the Registrable Securities being
included in such offering, the Company may include such additional shares in the
related registration (whether such shares are proposed to be sold by the Company
or by other shareholders).
(C) Restrictions on Demand Registration. Unless an Event of Default
shall have occurred and be continuing, the Company may postpone for a reasonable
period, not to exceed 90 days, the filing or the effectiveness of a registration
statement for a Demand Registration, if the Company has been advised by legal
counsel that such filing would require disclosure of a material fact that the
Company reasonably and in good faith determines would have a material adverse
effect on any proposal or plan by the Company or any of its subsidiaries to
engage in any significant transaction. In addition, the Company will not be
obligated to effect a Demand Registration unless it receives a written request
to do so from the holders of at least 50% of the outstanding Registrable<PAGE>
Securities, which request proposes to register not less than 50% of the then
outstanding Registrable Securities. The Company will not be obligated to effect
a Demand Registration within 180 days after the effective date of a registration
in which the Investors were given "Piggyback Rights" pursuant to Section 9.5.
(D) Selection of Underwriters. Selection of Underwriters. The
Investors will have the right to select the investment banker(s) and manager(s)
to administer the offering, subject to the Company's approval (which approval
will not be unreasonably withheld); provided, that the fees and expenses payable
by the Company to such persons are in accordance with industry standards.
Section 9.5. Participation in Registered Offerings ("Piggyback
Rights"). If the Company at any time or times proposes or is required to
register any of its Common Stock or other equity securities (whether such Common
Stock or other equity securities are owned by the Company or another holder
entitled to demand registration) for public sale for cash under the Securities
Act (other than on Forms S-4 or S-8 or similar registration forms), it will at
each such time or times give written notice to the Investors of its intention to
do so. Upon the written request of the Investors given within 20 days after
receipt of any such notice, the Company shall use its best efforts to cause to
be included in such registration any Registrable Securities held by the
Investors (or their permitted transferees) or Underlying Shares or shares of
Restricted Stock obtainable upon conversion of the Warrant and requested to be
registered under the Securities Act and any applicable state securities laws;
provided, that if such registration is a underwritten public offering and the
managing underwriter advises that less than all of the shares and Registrable
Securities to be registered should be offered for sale so as not materially and
adversely to affect the price or salability of the offering, the Investors and
any Qualifying Other Holders (but not the Company if such registration is a
primary registration and not the holder originally demanding the registration if
such registration is a secondary demand registration) shall reduce on a pro rata
basis the number of their shares of Common Stock (as if exercised or converted,
as the case may be) to be included in the registration statement as required by
the managing underwriter to the extent requisite to permit the sale or other
disposition (in accordance with the intended method of disposition thereof as
aforesaid) by the prospective seller or sellers of the securities so registered.
Section 9.6. Obligations of Investors. It shall be a condition
precedent to the obligation of the Company to register any Registrable
Securities pursuant to Section 9.4 and 9.5 hereof that the Investors shall
(i) furnish to the Company such information regarding the Registrable Securities
held and the intended method of disposition thereof and other information
concerning the Investors as the Company shall reasonably request and as shall be
required in connection with the registration statement to be filed by the
Company; (ii) agree to abide by such additional or customary terms affecting the
proposed offering as are applicable to shareholders (including holders of
Warrants, Underlying Shares or shares of Restricted Stock) in any such
registration as reasonably may be requested by the managing underwriter of such
offering, including a requirement, if applicable, to withhold from the public
market for a period of time requested by the managing underwriting not to exceed
180 days after any such offering, Warrants and any shares excluded from the
offering at the request of the underwriter as permitted under Section 9.4 and
9.5 hereof; and (iii) agree in writing in form satisfactory to the Company to
pay all underwriting discounts and commissions applicable to the securities
being sold by the Investors.
Section 9.7. Registration Proceedings. If and whenever the
Company is required by the provisions of Section 9.4 or Section 9.5 hereof to
effect the registration of the Registrable Securities under the Securities Act,
until all of the securities covered by such registration statement have been
sold or for nine months after effectiveness, whichever is the shorter period of
time, the Company shall:
(A) Prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause
such registration statement to become and remain effective;
(B) Prepare and file with the Commission such amendments to such
registration statement and supplements to the prospectus contained therein<PAGE>
as may be necessary to keep such registration statement effective;
(C) Furnish to the Investors participating in such registration
(the "Participating Investors") and to the underwriters of the securities
being registered such reasonable number of copies of the registration
statement, preliminary prospectus, final prospectus and such other
documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities;
(D) Use its best efforts to register or qualify the securities
covered by such registration statement under such state securities or "Blue
Sky" laws of such jurisdictions as such Participating Investors may
reasonably request within 20 days following the original filing of such
registration statement, except that the Company shall not for any purpose
be required to execute a general consent to service of process or to
qualify to do business as a foreign corporation in any jurisdiction wherein
it is not so qualified;
(E) Notify the Participating Investors, promptly after it shall
receive notice thereof, of the time when such registration statement has
become effective or a supplement to any prospectus forming a part of such
registration statement has been filed;
(F) Notify such Participating Investors promptly of any request
by the Commission for the amending or supplementing of such registration
statement or prospectus or for additional information;
(G) Prepare and file with the Commission, promptly upon the
request of any such Participating Investors, any amendments or supplements
to such registration statement or prospectus which, in the opinion of
counsel for such Participating Investors, are required under the Securities
Act or the rules and regulations thereunder in connection with the
distribution of the Registrable Securities by such Participating Investors;
(H) Prepare and promptly file with the Commission and promptly
notify such Participating Investors of the filing of such amendment or
supplement to such registration statement or prospectus as may be necessary
to correct any statements or omissions if, at the time when a prospectus
relating to such securities is required to be delivered under the
Securities Act, any event shall have occurred as the result of which any
such prospectus or any other prospectus as then in effect would include an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading;
(I) In case any of such Participating Investors or any
underwriter for any such Participating Investors is required to deliver a
prospectus at a time when the prospectus then in circulation is not in
compliance with the Securities Act, the Company will prepare and file such
supplements or amendments to such registration statement and such
prospectus or prospectuses as may be necessary to permit compliance with
the requirements of the Securities Act;
(J) Advise such Participating Investors, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance of any stop
order by the Commission suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding for that
purpose and promptly use its reasonable best efforts to prevent the
issuance of any stop order or to obtain its withdrawal if such stop order
should be issued;
(K) Not file any amendment or supplement to such registration
statement or prospectus to which counsel selected by a majority in interest
of such Participating Investors shall reasonably have objected on the
grounds that such amendment or supplement does not comply in all material
respects with the requirements of the Securities Act or the rules and
regulations thereunder, after having been furnished with a copy thereof at
least five business days prior to the filing thereof unless, in the case of
an amendment or supplement, in the opinion of counsel for the Company, the
filing of such amendment or supplement is reasonably necessary to protect
the Company from any liabilities under any applicable Federal or state law
and such filing will not violate applicable laws; and<PAGE>
(L) At the request of any such Participating Investor, (i) use
its best efforts to obtain and furnish on the effective date of the
registration statement or, if such registration includes an underwritten
public offering, at the closing provided for in the underwriting agreement,
a customary opinion, dated such date, of the counsel representing the
Company for the purposes of such registration, addressed to the
underwriters, if any, and to the Participating Investors making such
request, or, if the offering is not underwritten, shall state that such
registration statement has become effective under the Securities Act and
that: (a) to the best of such counsel's knowledge, no stop order
suspending the effectiveness thereof has been issued and no proceedings for
that purpose have been instituted or are pending or contemplated under the
Securities Act; (b) the registration statement, related prospectus and each
amendment or supplement thereto comply as to form in all material respects
with the requirements of the Securities Act and applicable rules and
regulations of the Commission thereunder (except that such counsel need
express no opinion as to financial statements, financial data or schedules
contained therein); (c) such counsel has no reason to believe that either
the registration statement or the prospectus or any amendment or supplement
thereto contains any untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading; (d) the description in the registration
statement or prospectus or any amendment or supplement thereto of all legal
and governmental matters and all contracts and other legal documents or
instruments described therein are accurate and fairly present the
information required to be shown; and (e) such counsel does not know of any
legal or governmental proceedings, pending or threatened, required to be
described in the registration statement or prospectus or any amendment or
supplement thereto which are not described as required, nor of any
contracts or documents or instruments of the character required to be
described in the registration statement or prospectus or amendment or
supplement thereto or to be filed as exhibits to the registration
statement, which are not described and filed as required; and (ii) in the
case of an underwritten offering, use its best efforts to obtain customary
letters dated such effective date, and such closing date, if any, from the
independent certified public accountants of the Company, addressed to the
underwriters, if any, and to the Participating Investor or Investors,
stating that they are independent certified public accountants within the
meaning of the Securities Act and dealing with such matters as the
underwriters may request, or, if the offering is not underwritten, stating
that in the opinion of such accountants, the financial statements and other
financial data pertaining to the Company included in the registration
statement or the prospectus or any amendment or supplement thereto comply
in all material respects with the applicable accounting requirements of the
Securities Act.
Section 9.8. Expenses. With respect to each inclusion of
Registrable Securities in a registration statement pursuant to Section 9.4 or
9.5 hereof, all registration expenses, fees, costs and expenses of and
incidental to such registration, inclusion and public offering in connection
therewith shall be borne by the Company (including the reasonable fees and
disbursements of one counsel acting on behalf of the Participating Investors);
provided, however, that the Participating Investors shall bear their pro rata
share of the underwriting discount and commissions. The fees, costs and
expenses of registration to be borne by the Company shall include, without
limitation, all registration, filing and NASD fees, printing expenses, fees and
disbursements of one counsel on behalf of the Participating Investors, fees and
disbursements of counsel and accountants for the Company (including the cost of
any special audit deemed necessary by counsel to the Company in order to effect
such registration), fees and disbursements of counsel for the underwriter or
underwriters of such securities (if the Company and/or Participating Investors
are required to bear such fees and disbursements), all legal fees and
disbursements and other expenses of complying with state securities or "Blue
Sky" laws of any jurisdiction in which the securities to be offered are to be<PAGE>
registered or qualified, and the premiums and other costs of policies of
insurance against liability arising out of such public offering which the
Company determines to obtain.
Section 9.9. Indemnification of Investors. Subject to the
conditions set forth below, in connection with any registration of Securities
pursuant to Section 9.4 or Section 9.5 hereof, the Company agrees to indemnify
and hold harmless (i) each Participating Investor and each director and officer
of each Participating Investor, (ii) any underwriter for the Company or acting
on behalf of any Participating Investor and (iii) each person, if any, who
controls any such Participating Investor within the meaning of Section 15 of the
Securities Act (hereinafter collectively referred to as "Company Indemnified
Parties" and individually referred to as a "Company Indemnified Party") as
follows:
(A) Against any and all loss, claim, damage and expense
whatsoever (including, but not limited to, any and all expense whatsoever
reasonably incurred in investigating, preparing or defending any
litigation, commenced or threatened), arising out of or based upon any
untrue or alleged untrue statement of a material fact contained in any
preliminary prospectus (if used prior to the effective date of the
registration statement), the registration statement or the prospectus (as
from time to time amended and supplemented), or in any application or other
document executed by the Company or based upon written information
furnished by the Company filed in any jurisdiction in order to qualify the
Company's securities under the securities laws thereof; or the omission or
alleged omission therefrom of a material fact required to be stated therein
or necessary to make the statements therein not misleading; or any other
violation of applicable federal or state statutory or regulatory
requirements or limitations relating to action or inaction by the Company
in the course of preparing, filing, or implementing such registered
offering; provided, however, that the indemnity agreement contained in this
Section 9.9(A) shall not apply to any loss, claim, damage, liability or
action arising out of or based upon any untrue or alleged untrue statement
or omission made in reliance upon and in conformity with any information
furnished in writing to the Company by or on behalf of any Company
Indemnified Party expressly for use in connection therewith or arising out
of any action or inaction of any such Company Indemnified Party;
(B) Subject to the proviso contained in Section 9.9(A) above,
against any and all loss, liability, claim, damage and expense whatsoever
to the extent of the aggregate amount paid in settlement of any litigation,
commenced or threatened, or of any claim whatsoever based upon any such
untrue statement or omission or any such alleged untrue statement or
omission (including, but not limited to, any and all expense whatsoever
reasonably incurred in investigating, preparing or defending against any
such litigation or claim, but subject to the provisions of Section 9.9(C))
if such settlement is effected with the written consent of the Company;
(C) In no case shall the Company be liable under this
Section 9.9 with respect to any claim made against any Company Indemnified
Party unless the Company shall be notified in writing sent by overnight
courier or by confirmed facsimile transmission followed by delivery of such
notice by overnight air courier sent on the date of such facsimile
communication, of any action commenced against such Company Indemnified
Party, promptly after such Company Indemnified Party shall have been served
with the summons or other legal process giving information as to the nature
and basis of the claim. The failure to so notify the Company, if
prejudicial in any material respect to the Company's ability to defend such
claim, shall relieve the Company from its liability to the Company
Indemnified Party under this Section 9.9, but only to the extent that the
Company was so prejudiced, but the failure to so notify the Company shall
not relieve the Company from any liability which it may have otherwise than
on account of this Section 9.9. The Company shall be entitled to
participate at its own expense in the defense of any suit brought to
enforce any such claim, but if the Company elects to assume the defense,
such defense shall be conducted by counsel chosen by it, provided that such
counsel is reasonably satisfactory to the Company Indemnified Parties,
defendants in any suit so brought. In the event the Company elects to
assume the defense of any such suit and retain such counsel, the Company
Indemnified Parties, defendants in the suit, shall, after the date they are
notified of such election, bear the fees and expenses of any counsel
thereafter retained by them as well as any other expenses thereafter
incurred in connection with the defense thereof; provided, however, that if
the Company Indemnified Parties reasonably believe that there may be
available to them any defense or counterclaim different than those
available to the Company or that representation of such Company Indemnified
Parties by counsel for the Company presents a conflict of interest for such
counsel, then such Company Indemnified Parties shall be entitled to defend
such suit with counsel of their own choosing and the Company shall bear the
fees, expenses and other costs of one counsel for all Company Indemnified
Parties.
Section 9.10. Indemnification of Company. Each Participating
Investor severally and individually agrees to indemnify and hold harmless the
Company, each underwriter for the offering, and each of their officers and
directors and agents and each other person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act (hereinafter collectively
referred to as "Investor Indemnified Parties" and individually referred to as an
"Investor Indemnified Party") against any and all such losses, liabilities,
claims, damages and expenses as are indemnified against by the Company under
Section 9.9; provided, however, that such indemnification by such Participating
Investors hereunder shall be limited to statements or omissions, if any, made
(or in settlement of any litigation effected with the written consent of such
Participating Investors, alleged to have been made) in any preliminary
prospectus, registration statement or prospectus or any amendment or supplement
thereof or any application or other document in reliance upon, and in conformity
with, written information furnished in respect of such Participating Investors
by or on behalf of such Participating Investors expressly for use in such
preliminary prospectus, registration statement or prospectus or amendment or
supplement thereof or in such application or other document or arising out of
any action or inaction of such Participating Investors in implementing such
registered offering. In case any action shall be brought against any Investor
Indemnified Party, in respect of which indemnity may be sought against any
Participating Investors, such Participating Investors shall have the rights and
duties given to the Company, and the Company and each other Investor Indemnified
Party shall have the rights and duties given to the Participating Investors, by
the provisions of Section 9.9(c) hereof. The Investor Indemnified Party agrees
to notify the Participating Investors promptly after the assertion of any claim
against the Investor Indemnified Party in connection with the sale of the
Registrable Securities.
Section 9.11. Contribution. If the indemnification provided for
in Section 9.9 and 9.10 are unavailable or insufficient to hold harmless an
indemnified party in respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative fault of
the indemnified party, on one hand, and such indemnifying party, on the other
hand, in connection with the statements or omissions which resulted in such
losses, claims, damages, or liabilities (or actions in respect thereof). The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fault relates to information supplied by
the indemnified party, on one hand, or such indemnifying party, on the other
hand, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. Notwithstanding
the provisions of this Section 9.11, the Participating Investors shall not be
required to contribute any amount in excess of the amount of the total proceeds
received by such Participating Investors from the sale pursuant to the
registration with respect to which the registration statement, preliminary or
final prospectus, or amendments or supplements thereto, containing such
statement, omission or alleged omission (notwithstanding that the amount of
damages which such Participating Investors would otherwise have been required to
pay by reason of such statement, omission or alleged omission exceeds the amount
of total proceeds). No person guilty of fraudulent misrepresentation (within
the meaning of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The amount paid
or payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this
Section 9.11 shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
and such action or claim.
Section 9.12. Reporting Requirements under Securities Exchange
Act of 1934. At all times during which the Company shall be subject to the
reporting requirements of either Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 ("Exchange Act"), the Company shall, whenever requested by
any Investor, notify such Investor in writing whether the Company has, as of any
date specified in such request, complied with the Exchange Act reporting
requirements as to which it is subject to a period prior to such date as may be
specified in such request. In addition, in such event, the Company shall take
such other measures and file such other information, documents and reports as
shall hereafter be required by the Commission as a condition to the availability
of Rule 144 under the Securities Act (or any corresponding rule hereafter in
effect).
Section 10. Partial Exercise and Partial Assignment
Section 10.1. Partial Exercise. If this Warrant is exercised in
part only, the holder hereof shall surrender this Warrant upon such exercise and
shall receive a new Warrant, registered in the name of the holder or its nominee
and setting forth a new Applicable Percentage and a new Aggregate Warrant Price
in the first paragraph of page one hereof, which shall be proportionately
adjusted to reflect such partial exercise.
Section 10.2. Assignment. Subject to compliance with
Section 9.3, this Warrant may be assigned either in whole or in part by
surrender of this Warrant at the principal office of the Company in Downers
Grove, Illinois (with the assignment or, as the case may be, partial assignment
form at the end hereof duly executed). If this Warrant is being assigned in
whole and the holder hereof previously has not partially exercised this Warrant,
the assignee shall receive a new Warrant (registered in the name of such
assignee or its nominee) which new Warrant shall have the same Aggregate Warrant
Price and Applicable Percentage as this Warrant. If this Warrant is being
assigned in part and the holder hereof previously has not partially exercised
this Warrant, the assignor and assignee shall each receive a new Warrant (which,
in the case of the assignee, shall be registered in the name of the assignee or
its nominee), each of which new Warrants shall have a new Applicable Percentage
and Aggregate Warrant Price proportionately adjusted to reflect such partial
assignment. If this Warrant is being assigned in whole and the holder hereof
previously has partially exercised this Warrant, the assignee shall receive a
new Warrant (registered in the name of such assignee or its nominee), which new
Warrant shall have the same Aggregate Warrant Price and Applicable Percentage as
in effect immediately preceding such assignment. If this Warrant is being
assigned in part and the holder hereof previously has partially exercised this
Warrant, the assignor and assignee shall each receive a new Warrant (which, in
the case of the assignee, shall be registered in the name of the assignee or its
nominee), each of which new Warrants shall have a new Applicable Percentage and
Aggregate Warrant Price proportionately adjusted to reflect such partial
assignment
Section 11. Definitions.
In addition to the terms defined elsewhere in this Warrant, the following
terms have the following respective meanings:
"Aggregate Warrant Price" is as set forth in the first paragraph, subject
to adjustment as provided in Section 2 hereof.
"Applicable Percentage" shall mean, as of the date of any determination,
the amount then so designated in the first paragraph of this Warrant,<PAGE>
subject to adjustment as provided in Section 2 hereof. All determinations
of the Applicable Percentage shall be expressed as a percentage carried out
to four decimal places.
"Business Day" shall mean a day, except Saturday, Sunday and legal
holidays, on which banks are generally open for business in Chicago,
Illinois.
"Commission" shall mean the Securities and Exchange Commission, or any
other Federal agency at the time administering the Securities Act.
"Common Stock" as used herein shall include any class of capital stock of
the Company now or hereafter authorized, the right of which to share in
distributions either of earnings or assets of the Company is without limit
as to any amount or percentage; provided, however, that the shares of
Common Stock deliverable upon the exercise of the rights granted under this
Warrant shall include only Common Stock of the Company having a par value
of $.001 per share authorized at the date hereof and any class of Common
Stock issued in substitution therefor.
"Company Indemnified Party" shall have the meaning set forth in
Section 9.6(C).
"Credit Agreement" shall mean that certain Credit Agreement dated as of
January 31, 1997 between the Company, Bank of Montreal (individually and
agent) and any other banks which may at any time be parties thereto.
"Credit Agreement Termination Date" shall mean the date on which all Term
Credit Loans, Revolving Credit Loans and other obligations of the Company
under the Credit Agreement shall have been paid in full, the Revolving
Credit Commitments shall have been reduced to zero and the credit facility
existing under the Credit Agreement shall have been terminated in its
entirety.
"Demand Registration" shall have the meaning set forth in Section 9.4.
"Event of Default" shall have the meaning set forth in the Credit
Agreement.
"Investor" for purposes of Section 9 hereof shall mean any holder of any
Warrant or any Underlying Shares or Restricted Stock issued pursuant
thereto and "Investors" shall mean all of the holders of the Warrants or
Underlying Shares or Restricted Stock issued pursuant thereto.
"Investor Indemnified Party" shall have the meaning set forth in
Section 9.7.
"Proportionate Part of the Aggregate Warrant Price" shall mean that part of
the Aggregate Warrant Price which bears the same ratio to the Aggregate
Warrant Price:
- in the case of any partial exercise of this Warrant--as the
shares then being purchased bear to total number of shares then purchasable
if this Warrant were exercised in whole; and
- in the case of any partial assignment of this Warrant--as the
percentage of shares of Common Stock assigned bears to the percentage of
shares of Common Stock purchasable under this Warrant immediately prior to
such assignment.
"Qualifying Additional Shares of Common Stock" shall mean any shares of
Common Stock issued by the Company in an arms-length transaction, the
proceeds of which transaction are used by the Company to make a Qualifying
Credit Agreement Payment.
"Qualifying Credit Agreement Payment" shall mean a payment under the Credit
Agreement applied in reduction of the Term Credit Loans until repayment in
full thereof, and thereafter, in reduction of the Revolving Credit Loans,
which reduction of the Revolving Credit Loans is accompanied by a
concurrent and like reduction of the Revolving Credit Commitments (as such
terms are defined in the Credit Agreement).
"Qualifying Other Holders" shall mean the holders of any shares of Common
Stock or other equity securities of the Company which shall have requested
that such shares or other equity securities be included in a registration
which is the subject of Section 9.5 hereof; provided, however, that the
Company shall have provided to each of the Investors not less than 10
Business Day's notice of such request, together with such other related
information as the Investors shall reasonably request.<PAGE>
"Registrable Securities" shall have the meaning set forth in Section 9.4.
"Restricted Stock" shall mean the shares of Common Stock of the Company
issued upon the exercise of any of the Warrants and evidenced by a
certificate required to bear the legend specified in Section 9.2.
"Securities Act" shall mean the Securities Act of 1933, or any similar
Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Underlying Shares" shall mean the shares of Common Stock of the Company
issuable upon exercise of any of the Warrants.
"Warrants" as used herein shall mean this Warrant and all warrants
hereafter issued in exchange or substitution for this Warrant.
Section 12. Lost, Stolen Warrants, etc.
In case this Warrant shall be mutilated, lost, stolen or destroyed, the
Company may issue a new Warrant of like date, tenor and denomination and
deliver the same in exchange and substitution for and upon surrender and
cancellation of the mutilated Warrant, or in lieu of the Warrant lost,
stolen or destroyed, upon receipt of evidence satisfactory to the Company
of the loss, theft or destruction of such Warrant, and upon receipt of
indemnity satisfactory to the Company.
Section 13. Warrant Holder Not Shareholder.
This Warrant does not confer upon the holder hereof any right to vote or to
consent or to receive notice as a shareholder of the Company, as such, in
respect of any matters whatsoever, or any other rights or liabilities as a
shareholder, prior to the exercise hereof as hereinbefore provided.
Section 14. Severability.
Should any part of this Warrant for any reason be declared invalid, such
decision shall not affect the validity of any remaining portion, which
remaining portion shall remain in force and effect as if this Warrant had
been executed with the invalid portion thereof eliminated, and it is hereby
declared the intention of the parties hereto that they would have executed
and accepted the remaining portion of this Warrant without including
therein any such part, parts or portion which may, for any reason, be
hereafter declared invalid.
Section 15. Index and Captions.
The index and the descriptive headings of the various sections of this
Warrant are for convenience only and shall not affect the meaning or
construction of the provisions hereof.
In Witness Whereof, Platinum Entertainment, Inc. has caused this Warrant to
be signed by its President or one of its Vice Presidents and attested by
its Secretary or one of its Assistant Secretaries and this Warrant to be
dated April 23, 1997.
Platinum Entertainment, Inc.
By /s/ STEVEN DEVICK
Steven Devick
President
Attest:
/s/ DOUGLAS C. LAUX
__________________________________
Douglas C. Laux
Secretary
Subscription
Re: Platinum Entertainment, Inc.<PAGE>
The undersigned, _______________________________, pursuant to the
provisions of the within Warrant, hereby elects to purchase
_________________ shares of Common Stock of ______________________ covered
by the within Warrant.
Signature
________________________________________________________
Address
________________________________________________________
Dated: _______________________________
Assignment
Re: Platinum Entertainment, Inc.
For Value Received ________________ hereby sells, assigns and transfers
unto _______________ the within Warrant and all rights evidenced thereby
and does irrevocably constitute and appoint _______________________,
attorney, to transfer the said Warrant on the books of the within named
Company.
_______________________________________
_______________________________
Dated: _______________________
Partial Assignment
Re: Platinum Entertainment, Inc.
For Value Received ____________________ hereby sells, assigns and transfers
unto ____________________ that portion of the within Warrant and the rights
evidenced thereby which will on the date hereof entitle the holder to
purchase _______ shares of Common Stock of _______________________________,
irrevocably constitute and appoint ____________________________, attorney,
to transfer that part of the said Warrant on the books of the within named
Company.
_______________________________________
_______________________________
Dated: _______________________
Annex A
The undersigned hereby represents that it is acquiring the subject Warrant
or Warrant Shares for its own account for investment and not with a view
to, or for sale in connection with, any distribution thereof or of any of
the shares of Common Stock or other securities issuable upon the exercise
thereof, and not with any present intention of distributing any of the
same. The holder of this Warrant further represents that, as of this date,
such holder is an "accredited investor" as such term is defined in
Rule 501(a)(1) of Regulation D promulgated by the Securities and Exchange
Commission under the Securities Act of 1933, as amended.
Dated: ____________________
____________________________
By _________________________
EXHIBIT 5
KATTEN MUCHIN & ZAVIS
525 W. Monroe, Suite 1600
Chicago, Illinois 60661
December 23, 1998
(312) 902-5200
Platinum Entertainment, Inc.
2001 Butterfield Road
Suite 1400
Downers Grove, Illinois 60515
Ladies and Gentlemen:
We have acted as counsel for Platinum Entertainment, Inc., a Delaware
corporation (the "Company"), in connection with the preparation and filing
of a Registration Statement on Form S-3 (the "Registration Statement") for
the registration for sale under the Securities Act of 1933, as amended, of
a total of 814,819 shares of the Company's common stock, $.001 par value
(the "Shares"). Certain of the Shares (the "Warrant Shares") may be
issued by the Company upon the exercise of outstanding warrants (the
"Warrants").
In connection with this opinion, we have examined and relied upon originals
or copies of, certified or otherwise identified to our satisfaction, the
following:
1. The Registration Statement;
2. The Third Amended and Restated Certificate of Incorporation of the
Company, as amended;
3. The Amended By-Laws of the Company, as amended;
4. Resolutions duly adopted by the Board of Directors of the Company
relating to the issuance of the Warrants and the Shares and the
registration of the Shares; and
5. Such other instruments, documents, statements and records of the
Company and others as we have deemed relevant and necessary to examine
and rely upon for the purpose of this opinion.
In connection with this opinion, we have assumed the accuracy and
completeness of all documents and records that we have reviewed, the
genuineness of all signatures, the authenticity of the documents submitted
to us as originals and the conformity to authentic original documents of
all documents submitted to us as certified, conformed or reproduced
copies. We have further assumed that all natural persons involved in the
transactions contemplated by the Registration Statement (the "Offering") have
sufficient legal capacity to enter into and perform their respective obligations
and to carry out their roles in the Offering.
Based upon the foregoing, we are of the opinion that (i) the Shares other
than the Warrant Shares are validly issued, fully paid and nonassessable
and (ii) the Warrant Shares, when issued and delivered by the Company in
accordance with the terms of the Warrants, will be validly issued, fully
paid and nonassessable.
Our opinion expressed above is limited to the laws of the State of
Illinois, the laws of the United States of America and the General
Corporation Law of the State of Delaware, and we do not express any opinion
herein concerning any other law. In addition, we express no opinion herein
concerning any statutes, ordinances, administrative decisions, rules or
regulations of any county, town, municipality or special political
subdivision (whether created or enabled through legislative action at the
federal, state or regional level). This opinion is given as of the date
hereof and we assume no obligation to advise you of changes that may
hereafter be brought to our attention. This opinion is solely for the
information of the addressee hereof and is not to be quoted in whole or in
part or otherwise referred to, nor is it to be filed with any governmental
agency or any other person without our prior written consent. In
connection therewith, we hereby consent to the use of this opinion for
filing as Exhibit 5 to the Registration Statement. No one other than the
addressee hereof is entitled to rely on this opinion. This opinion is
rendered solely for the purposes of the Offering and should not be relied
upon for any other purpose.
Very truly yours,
/S/ KATTEN MUCHIN & ZAVIS
Doc #:CH02 (65591-00001) 898435v1;12/22/1998/Time:14:08
Exhibit 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statment and related Prospectus of Platinum Entetertainment,
Inc. for the registration of 814,819 shares of its common stock, and to the
incorporation by reference therein of our reports dated May 20, 1998 (exept
for Note 9, as to which the date is July 31, 1998) and August 29, 1997 with
respect to the consolidated financial statments and schedules of Platinum
Entertainment, Inc. incorporated by reference in its Annual Report on Form
10-K/A and 10-K for the seven months ended December 31, 1997 and the year
ended May 31, 1997, respectively, filed with the Securities and Exchange
Commission.
ERNST & YOUNG LLP
Chicago, Illinois
December 23, 1998
