<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 23, 1999
REGISTRATION NO. 333-
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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
of incorporation or organization) Identification 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 Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box:
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
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<TABLE>
<CAPTION>
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TITLE OF SECURITIES TO AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
BE REGISTERED REGISTERED OFFERING PRICE AGGREGATE OFFERING REGISTRATION FEE
PER SHARE (2) PRICE (2)
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<S> <C> <C> <C> <C>
Common Stock, $.001 5,362,786 See Footnote 2 $35,193,283 $9,784
par value (1) shares Below
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</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 warrants and the Stock Purchase Agreements.
(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 July 22, 1999.
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.
<PAGE>
The information contained 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.
Preliminary Prospectus Dated July 23, 1999
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P R O S P E C T U S
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5,362,786 shares
COMMON STOCK
The 5,362,786 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 certain selling stockholders upon exercise of warrants and certain
other shares of common stock held by other 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.
------------------------
July__, 1999
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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 by calling 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 also maintain a website at
http://www.PlatinumCD.com.
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 for the fiscal year ended December
31, 1998;
2. Our Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1999;
4. Our Current Reports on Form 8-K dated July 1, 1999, and July 19,
1999; 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, including any beneficial
owner, 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 and adversely from the expectations we describe in our
forward-looking statements. 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. There can be
no assurance that we will ever achieve profitable operations or generate
significant revenue with our current products and strategy. 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 our strategy
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,
results of operation and financial condition may be materially adversely
affected.
RISKS OF INADEQUATE FINANCING
Successful implementation of our strategy will require continued access
to capital. If we do not have sufficient cash resources, our growth could be
limited unless we are able to obtain capital through additional debt or
equity financings. We cannot assure that such debt or equity financings will
be obtained or that, if obtained, such financing will be on terms that are
more favorable to us or sufficient for our needs.
With respect to our acquisition strategy, we currently intend to finance
future acquisitions by using our common stock for all or a portion of the
consideration to be paid. In the event that our common stock does not
maintain sufficient value, or potential acquisition candidates are unwilling
to accept common stock as consideration for the sale of their businesses, we
may be required to utilize more of our cash resources or obtain other
financing. If we are unable to obtain sufficient financing, we may be unable
to fully implement our acquisition or other strategies.
HIGHLY COMPETITIVE MARKET
The recorded music industry is highly competitive. We face competition
for discretionary consumer purchases of our products from other record
companies, entertainment companies and multimedia companies that seek to
offer recorded music to the public. The market for pre-recorded music is
dominated by five major record companies in the United States (BMG
Entertainment, EMI Recorded Music, Sony Music Group, Universal Music Group
and Warner Music). Our ability to compete in this market depends largely on:
<PAGE>
- 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 of 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.
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
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 to traditional
retail through Platinum Distribution, one of our proprietary distribution
systems, and through the Internet. We distribute our Christian music
products through Platinum Christian Distribution, also one of our proprietary
distribution systems. We also serve as a distributor for various third party
music labels located in the United States and Europe.
We are significantly dependent on our existing distribution systems,
particularly Platinum Distribution, which generated 70% and 83% of our total
gross product sales during fiscal 1998 and the quarter ended March 31, 1999,
recpectively. We also distributed some of our music products through
Universal Music and Video Distribution, however, we have provided Universal
with a notification of termination of our distribution agreement. See
"Material Changes." Should we encounter difficulty with our existing
distribution methods, or are unable to further develop our proprietary
distribution systems successfully in the future, 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.
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RISKS ASSOCIATED WITH HAVING OUR INTELLECTUAL PROPERTY RIGHTS INFRINGED UPON
We consider our trademarks, copyrights and other similar intellectual
property to be a valuable part of our business. To protect our intellectual
property rights, we rely upon copyright and trademark laws, as well as
confidentiality agreements with our employees and consultants. There can be
no assurance that our use of these contracts and the application of existing
law will provide sufficient protection from misappropriation or infringement
of our intellectual property rights. There can also be no assurance that
third parties will not claim infringement by us with respect to others'
current or future intellectual property rights. It is also possible that
third parties will obtain and use our content or technology without
authorization.
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.
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 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 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. The loss of the services of Mr. Devick
or other members of our senior management, could materially
<PAGE>
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 Operations Officer and Chief Financial Officer, and Thomas R.
Leavens, Senior General Counsel and 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.
We cannot be sure that our efforts to address Year 2000 issues are
appropriate, adequate or complete. We have not verified that all of our key
business partners are Year 2000 compliant. Any Year 2000 compliance problem
of our business operations, our current and any future vendors, distributors
or other key business partners could have a material adverse effect on our
business, results of operations and financial condition.
ANTI-TAKEOVER CONSIDERATIONS
Our Certificate of Incorporation and Bylaws and Delaware law contain
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
Our primary business is the production, distribution, marketing and sale
of music. Our 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 in the form of compact discs, tape cassettes and digital versatile
discs (DVDs) mainly to retailers and wholesalers in the United States and
internationally. We release music in a variety of genres including classical,
urban, adult contemporary, blues, gospel and country on our Intersound
Classical, Platinum, River North, House of Blues, CGI Platinum and Platinum
Nashville labels.
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 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.
Our catalog contains releases by many established artists including those
listed below.
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<S> <C> <C> <C>
The Beach Boys Peter Cetera John Denver Dionne Warwick
The Blues Brothers The Band Roger Daltrey Taylor Dayne
Juice Newton Phoebe Snow Rick Springfield Mighty Clouds of Joy
Otis Rush The Bellamy Brothers Eddie Rabbitt Crystal Gayle
Kansas T. Graham Brown George Clinton Lakeside
Cameo Dazz Band Vickie Winans Andrae Crouch
</TABLE>
We distribute our products to traditional retail through Platinum
Distribution and Platinum Christian Distribution, our proprietary
distribution systems, and the Internet. We also serve as a distributor for
various third party music labels located in the United States and Europe. We
have also increased our international sales efforts by establishing
additional licensing agreements as well as production and distribution
agreements on a territory-by-territory basis.
We believe that continued consolidation in the entertainment industry,
particularly the largest merger in music history between MCA/Universal and
PolyGram, presents significant opportunities for growth for niche music
companies like ours, as established artists become available to sign to our
labels. We believe that our artist roster of both established and new
artists, our music catalog and our expanding proprietary and Internet
distribution capabilities positions us to take advantage of the opportunities
that may become available due to changes in the music business.
We were 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.
MATERIAL CHANGES
On May 28, 1999, PolyGram Group Distribution, Inc. filed an action
against Platinum Entertainment, Inc. in the Superior Court of the State of
California for the County of Los Angeles captioned POLYGRAM GROUP
DISTRIBUTION, INC. -V- PLATINUM ENTERTAINMENT, INC., Case No. B C211091,
seeking injunctive relief, restitution, and disgorgement of profits arising
out of PolyGram's claim that the distribution agreement between us and
PolyGram Group Distribution bars the distribution of our recordings through
our own distribution facilities and requires that they be distributed by
PolyGram. On June 25, 1999, PolyGram filed an amended complaint that
additionally seeks the recovery of an unspecified amount of damages. We have
not filed an answer to this complaint. In addition, on July 19, 1999,
PolyGram filed an application for a writ of attachment to recover payments
claimed due under the distribution agreement. We have rejected earlier
demands to cease and desist selling our recording through our own
distribution facilities on the grounds that an amendment to the distribution
agreement with PolyGram Group Distribution specifically allows us to
distribute records through our own distribution company. We will also pursue
<PAGE>
claims against PolyGram concerning damages incurred in connection with the
production of a compilation album by PolyGram entitled "Essential Southern
Rock" and for the failure of PolyGram's successor, Universal Music, to
properly pay royalties to us pursuant to the terms of a foreign licensing
agreement between us and Universal. We have also provided PolyGram with
notice of PolyGram's breach of the distribution agreement. In addition, on
July 21, 1999, we provided Polygram with a notification of termination of the
distribution agreement. Because this litigation is at a very early stage, we
are unable to predict its outcome with any accuracy, however, we believe
PolyGram's claims are without merit and we intend to vigorously defend this
action and pursue our claims against PolyGram.
For the quarter ended June 30, 1999, we were in violation of one of the
financial covenants contained in our bank credit agreement. This violation
was waived by the bank in July 1999. Our fiscal 1999 plan, if achieved,
would allow us to comply with our financial covenants. However, under the
current provisions of the bank credit agreement and based on actual results
to date, it is likely that we will be in violation of the same financial
covenant for the third and fourth quarters of fiscal 1999. We are currently
in negotiations with our lender to amend the bank credit agreement. We
believe that based on the increase in value of our investment in
musicmaker.com it is likely that we will be able to amend the bank credit
agreement on satisfactory terms. Musicmaker.com completed its initial public
offering on July 7, 1999, and accordingly, the value of our investment in
musicmaker.com increased from $750,000 to $11,184,000 based on the initial
offering price of $14.00 per share. The closing trading price of
musicmaker.com common stock on July 22, 1999 was $16.50. If an agreement to
amend the bank credit agreement is reached on satisfactory terms, we believe
we will not be in violation of any financial covenants for the third and
fourth quarters of fiscal 1999.
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 all or
a part 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 the warrants by the selling stockholders, unless the selling
stockholders opt to exercise their warrants on a cashless basis. Assuming
the selling stockholders exercise all of their warrants for cash, we will
receive $35,193,283. We will use such proceeds for working capital and other
general corporate purposes.
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth, as of July 22, 1999, 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 TO BENEFICIAL OWNERSHIP
OFFERING AFTER OFFERING (2)
------------------------------ NUMBER OF ------------------------------
NUMBER OF SHARES
NUMBER OF SHARES PERCENT OFFERED (1) SHARES PERCENT
---------------- ------- ----------- --------- -------
<S> <C> <C> <C> <C> <C>
MAC Music L.L.C. 2,016,000(3) 21.6 2,016,000 - -
SK-Palladin Partners, L.P 2,016,000(4) 21.6 2,016,000 - -
Steven D. Devick 1,771,659(5) 20.0 504,167 1,267,492 15.2
Andrew J. Filipowski 1,033,122(6) 13.2 88,330 944,792 12.3
Craig J. Duchossois 487,567(7) 6.5 201,667 285,900 3.9
Special Situations Fund III, L.P. 363,563(8) 5.0 236,863 126,700 1.7
Special Situations Private Equity 210,116(8) 2.9 111,450 98,666 1.3
Fund, L.P.
Special Situations Cayman Fund, L.P. 120,420(8) 1.6 78,954 41,466 *
Special Situations Technology Fund, 70,899(8) 1.0 46,356 24,533 *
L.P.
Carl D. Harnick 52,900(9) * 50,000 2,900 *
William J. Benedict, Jr. 6,666(10) * 6,666 - -
Michael Lloyd 3,333(11) * 3,333 - -
Web Solutions Technology, Inc. 2,400(12) * 2,400 - -
Robert D. Pappas 450(12) * 450 - -
Michael L. Vena 150(12) * 150 - -
__________________
</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 MAC Music L.L.C. ("MAC") in transactions exempt from the
registration requirements of the Securities Act. Alpine Equity Partners,
L.P. ("AEP, LP") and Maroley Media Group, L.L.C. ("Maroley") are the
managing members of MAC. Alpine Equity Partners L.L.C. ("AEP, L.L.C.") is
the general partner of AEP, L.P. Robert J. Morgado, a director of the
Company is a managing member of Maroley and has the ability to direct the
investment and voting decisions of Maroley. As such Mr. Morgado may be
deemed to have shared investment and voting discretion with respect to
securities beneficially owned by Maroley.
(4) Represents shares issuable upon the exercise of vested warrants, which were
issued to SK-Palladin Partners, L.P. ("Palladin") in transactions exempt
from the registration requirements of the Securities Act. SK-Palladin
Holdings, L.P. ("Palladin Holdings") is the general partner of SK-Palladin
Partners, L.P. ("Palladin"). SK-
<PAGE>
Palladin Gen Par, Inc. ("Palladin Gen Par") is the general partner of
Palladin Holdings. Mark Schwartz, a director of the Company, is the
sole executive officer of Palladin Gen Par in his capacity as Chief
Executive Officer, President, Secretary and Treasurer. Mr. Schwartz,
in his capacity as the sole executive officer and controlling stockholder
of Palladin Gen Par, has discretion to direct the investment and voting
decisions of Palladin Gen Par. As such Mr. Schwartz may have shared
investment and voting discretion with respect to securities beneficially
owned by Palladin Gen Par through Palladin Holdings and Palladin.
(5) Includes 504,167 shares issuable upon the exercise of a vested warrant,
which was issued to this selling stockholder in transactions exempt from
the registration requirements of the Securities Act; if the Company's
Series D Preferred Stock is redeemed prior to April 15, 2000, Mr. Devick
will be required to return a prorata portion of such warrant (or the
equivalent shares of common stock representing shares received upon
exercise of such warrant), but in no event shall Mr. Devick be required
to return greater than that portion of such warrant exercisable into an
aggregate 60,500 shares of common stock. Includes 84,375 shares of
common stock underlying a warrant which is currently exercisable. Also
includes 940,578 shares underlying stock options that are exercisable
within 60 days. Mr. Devick is Chairman of the Board, Chief Executive
Officer and President of the Company.
(6) Includes 88,330 shares issuable upon the exercise of a vested warrant,
which was issued to this selling stockholder in transactions exempt from
the registration requirements of the Securities Act; if the Company's
Series D Preferred Stock is redeemed prior to April 15, 2000, Mr.
Filipowski will be required to return a prorata portion of such warrant
(or the equivalent shares of common stock representing shares received
upon exercise of such warrant), but in no event shall Mr. Filipowski be
required to return greater than that portion of such warrant exercisable
into an aggregate 10,600 shares of common stock. Includes 99,067 shares
held by Platinum Venture Partners I, L.P. ("PVP I"). Mr. Filipowski is
the President, Chief Executive Officer and a stockholder of the general
partner of PVP I, and in such capacities may be deemed to have voting
and investment power with respect to shares held by PVP I. Mr.
Filipowski disclaims beneficial ownership of such shares. Includes
365,625 shares of Common Stock underlying a warrant held in the name of
Platinum Venture Partners II, L.P. ("PVP II"), which is currently
exercisable. Mr. Filipowski is the President and Chief Executive
Officer, a sole director, and a stockholder of the general partner of
PVP II and in such capacities may be deemed the beneficial owner with
respect to shares held by PVP II. Mr. Filipowski disclaims beneficial
ownership of such shares. Also includes 31,900 shares underlying stock
options that are exercisable within 60 days. Mr. Filipowski is a
director of the Company.
(7) Includes 201,667 shares issuable upon the exercise of a vested warrant,
was was issued in transactions exempt from the registration requirements
of the Securities Act to this selling stockholder; if the Company's
Series D Preferred Stock is redeemed prior to April 15, 2000, Mr.
Duchossois will be required to return a prorata portion of such warrant
(or the equivalent shares of common stock representing shares received
upon exercise of such warrant), but in no event shall Mr. Duchossois be
required to return greater than that portion of such warrant exercisable
into an aggregate 24,200 shares of common stock. Also includes 35,900
shares underlying stock options that are exercisable within 60 days.
Mr. Duchossois is a director of the Company.
(8) Includes shares issued to this selling stockholder in transactions exempt
from the registration requirements of the Securities Act pursuant to a
Stock Purchase Agreement, dated December 31, 1998 and a Stock Purchase
Agreement, dated May 18, 1999.
(9) Includes shares issuable upon the exercise of a vested warrant, which
was issued to this selling stockholder in transactions exempt from the
registration requirements of the Securities Act. Also includes 2,900
shares underlying stock options that are exercisable within 60 days.
Carl Harnick is a director of the Company.
(10) Represents shares issued to this selling stockholder in transactions exempt
from the registration requirements of the Securities Act pursuant to an
agreement for professional services.
(11) Represents shares issued to this selling stockholder in transactions exempt
from the registration requirements of the Securities Act pursuant to an
agreement for production services.
<PAGE>
(12) Represents shares issued to this selling stockholder in transactions exempt
from the registration requirements of the Securities Act pursuant to an
agreement for website consulting services.
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, including, 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.
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 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 our 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
<PAGE>
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.
We are 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.
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.
appearing in the Platinum Entertainment, Inc. Annual Report on Form 10-K for
the year ended December 31, 1998, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon (which contains an
explanatory paragraph describing conditions that raise substantial doubt
about Platinum Entertainment, Inc.'s ability to continue as a going concern
as described in Note 1 to the consolidated financial statements) included
therein and incorporated by reference herein. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given on the authority of such firm as experts in accounting and auditing.
<PAGE>
We have not authorized any dealer, salesman or other person to give any
information or to make any representation 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 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.
- -----------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <S>
AVAILABLE INFORMATION 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 3
RISK FACTORS 4
THE COMPANY 8
USE OF PROCEEDS 8
SELLING STOCKHOLDERS 9
PLAN OF DISTRIBUTION 10
LEGAL MATTERS 11
EXPERTS 11
</TABLE>
5,362,786 SHARES
COMMON STOCK
-----------------------------------
P R O S P E C T U S
-----------------------------------
July __, 1999
<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. We
will pay all of these expenses.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee $7,039
Accountants fees and expenses $1,000
Legal fees and expenses $1,000
Miscellaneous expenses $ -
------
Total $9,039
------
------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article IX of our 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 our Third Amended and Restated Certificate of
Incorporation provides that our directors 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.
<TABLE>
<S> <C>
1.1 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 (the "November 1997 10-Q").
1.2 Amended and Restated By-laws of the Company, as amended (Incorporated
by reference to Exhibit 3.2 to the November 1997 10-Q).
1.3 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).
1.4 Warrant to purchase common stock issued to MAC Music L.L.C., dated
December 12, 1997 (Incorporated by reference to Exhibit 4.4 to the
November 10-Q).
1.5 Warrant to purchase common stock issued to SK-Palladin Partners, L.P.,
dated December 12, 1997 (Incorporated by reference to Exhibit 4.3 to
the November 10-Q).
1.6 Warrant to purchase common stock issued to Carl D. Harnick, dated
December 12, 1997 (Incorporated by reference to Exhibit 4.5 to the
November 10-Q).
1.7 Warrant to purchase common stock issued to Steven D. Devick, dated
April 15, 1999.
1.8 Warrant to purchase common stock issued to Craig J. Duchossois, dated
April 15, 1999.
1.9 Warrant to purchase common stock issued to Andrew J. Filipowski, dated
April 15, 1999.
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).
</TABLE>
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.
(c) 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
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 July 23, 1999.
Platinum Entertainment, Inc.
By: /s/ STEVEN DEVICK
-----------------------------------------
Steven Devick
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE
OFFICER
POWER OF ATTORNEY
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 on July 23, 1999.
<TABLE>
<CAPTION>
Signature Title
- --------------------------------- -----------------------------------
<S> <C>
/s/ STEVEN DEVICK Chairman, President, and Chief
- --------------------------------- Executive Officer) and Director
Steven Devick
/s/ DOUGLAS C. LAUX Chief Financial Officer and a
- ---------------------------------- Director
Douglas C. Laux
Director
- ----------------------------------
David S. 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
Director
- ----------------------------------
Carl D. Harnick
/s/ GEOFFREY HOLMES Director
- ----------------------------------
Geoffrey Holmes
/s/ PAUL L. HUMENANSKY Director
- ----------------------------------
Paul L. Humenansky
Director
- ----------------------------------
Robert J. Morgado
/s/ MARK J. SCHWARTZ Director
- ----------------------------------
Mark J. Schwartz
</TABLE>
<PAGE>
NEITHER THIS WARRANT NOR ANY SECURITIES ACQUIRED UPON THE EXERCISE OF
THIS WARRANT (THE "SECURITIES") HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND
NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS AS
EVIDENCED BY AN OPINION OF COUNSEL DELIVERED AND REASONABLY ACCEPTABLE TO THE
COMPANY.
______________________________________________
PLATINUM ENTERTAINMENT, INC.
COMMON STOCK PURCHASE WARRANT
_______________________________________________
This certifies that, for good and valuable consideration, Platinum
Entertainment, Inc., a Delaware corporation (the "Company"), grants to Steven
Devick, his successors and permitted assigns (the "Warrantholder"), the right to
subscribe for and purchase from the Company Five Hundred Four Thousand One
Hundred Sixty-Six and One Sixty-Fifth (504,166.65) validly issued, fully paid
and nonassessable shares (the "Warrant Shares") of the Company's Common Stock,
par value $.001 per share (the "Common Stock"), at the purchase price per share
equal to the Exercise Price, as defined herein, at any time prior to 5:00 p.m.,
Central Standard Time, on April 15, 2009 (the "Expiration Date"), subject to the
terms, conditions and adjustments herein set forth. References herein to
"Warrants" or "Warrant" shall mean this Warrant.
The "Exercise Price" shall mean $6.126; which price is equal to the
average of the daily Closing Price per share of Common Stock for the trailing 30
consecutive trading days from and including April 9, 1999. The Exercise Price
as determined in accordance with the foregoing shall be adjusted from time to
time in accordance with the provisions of Section 6.
<PAGE>
1. EXERCISE OF WARRANTS.
1.1 EXERCISE OF WARRANT. This Warrant may be exercised, in
whole or in part, at any time or from time to time prior to the Expiration
Date, by surrendering to the Company at its principal office this Warrant,
with an Exercise Form (as defined herein) duly executed by the Warrantholder
and accompanied by payment of the Exercise Price for the number of shares of
Common Stock specified in such Exercise Form.
1.2 CASHLESS EXERCISE. In lieu of the payment of the
Exercise Price, the Warrantholder shall have the right (but not the
obligation) to require the Company to convert this Warrant, in whole or in
part, into shares of Common Stock (the "Conversion Right") as provided for in
this Section 1.2. Upon exercise of the Conversion Right, the Company shall
deliver to the Warrantholder (without payment by the Warrantholder of any of
the Exercise Price) that number of shares of Common Stock equal to the
quotient obtained by dividing (x) the value of the Warrant or portion thereof
being exercised at the time the Conversion Right is exercised (determined by
subtracting the aggregate Exercise Price in effect immediately prior to the
exercise of the Conversion Right for the number of shares for which the
Warrant is being exercised from the aggregate Current Market Price (as
defined herein) of the shares of Common Stock issuable upon exercise of the
Warrant for the number of shares for which the Warrant is being exercised
immediately prior to the exercise of the Conversion Right) by (y) the Current
Market Price of one share of Common Stock immediately prior to the exercise
of the Conversion Right. The Conversion Right may be exercised at any time
or from time to time prior to the Expiration Date by surrendering to the
Company at its principal office this Warrant, with an Exercise Form duly
executed by the Warrantholder and indicating that the Warrantholder wishes to
exercise the Conversion Right and specifying the total number of shares of
Common Stock for which the Warrant is being exercised.
1.3 DELIVERY OF WARRANT SHARES; EFFECTIVENESS OF EXERCISE.
(a) DELIVERY OF WARRANT SHARES. A stock certificate or
certificates for the Warrant Shares specified in the Exercise Form along with
a check for the amount of cash to be paid in lieu of fractional shares, if
any, shall be delivered to the Warrantholder within 10 Business Days after
the Exercise Date (as defined herein); PROVIDED, HOWEVER, that if the
Conversion Right is exercised in accordance with Section 1.2 and a
determination by the Board of Directors is required to determine the Current
Market Price of the Common Stock, such delivery shall be made promptly after
such determination is made. If this Warrant shall have been exercised only
in part, the Company shall, at the time of delivery of the stock certificate
or
<PAGE>
certificates and cash in lieu of fractional shares, if any, deliver to the
Warrantholder a new Warrant evidencing the rights to purchase the remaining
Warrant Shares, which new Warrant shall in all other respects be identical
with this Warrant.
(b) EFFECTIVENESS OF EXERCISE. The exercise of this
Warrant shall be deemed to have been effective immediately prior to the close of
business on the Business Day on which this Warrant is exercised in accordance
with Section 1.1 or 1.2 (the "Exercise Date"). The Person in whose name any
certificate for shares of Common Stock shall be issuable upon such exercise
shall be deemed to be the record holder of such shares of Common Stock for all
purposes on the Exercise Date.
1.4 PAYMENT OF TAXES. The issuance of certificates for
Warrant Shares shall be made without charge to the Warrantholder for any stock
transfer or other issuance tax in respect thereof; PROVIDED, HOWEVER, that the
Warrantholder shall be required to pay any and all taxes that may be payable in
respect of any transfer involved in the issuance and delivery of any certificate
in a name other than that of the then Warrantholder as reflected upon the books
of the Company.
2. RESTRICTIVE LEGENDS.
2.1 WARRANTS. Except as otherwise permitted by this
Section 2, each Warrant (and each Warrant issued in substitution for any Warrant
pursuant to Section 4) shall be stamped or otherwise imprinted with a legend in
substantially the following form:
NEITHER THIS WARRANT NOR ANY SECURITIES ACQUIRED UPON THE EXERCISE OF
THIS WARRANT (THE "SECURITIES") HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED,
SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER
SUCH ACT AND SUCH LAWS AS EVIDENCED BY AN OPINION OF COUNSEL DELIVERED AND
REASONABLY ACCEPTABLE TO THE COMPANY.
2.2 WARRANT SHARES. Except as otherwise permitted by this
Section 2, each stock certificate for Warrant Shares issued upon the exercise of
any Warrant and each stock certificate issued upon the direct or indirect
transfer of any
<PAGE>
such Warrant Shares shall be stamped or otherwise imprinted with a legend in
substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT AND SUCH LAWS AS EVIDENCED BY AN OPINION OF COUNSEL
DELIVERED AND REASONABLY ACCEPTABLE TO THE COMPANY.
2.3 REMOVAL OF LEGENDS. Notwithstanding the foregoing, the
Warrantholder may require the Company to issue a Warrant or a stock certificate
for Warrant Shares, in each case without a legend, if either (i) such Warrant or
such Warrant Shares, as the case may be, have been registered for resale under
the Securities Act and sold pursuant to such registration or (ii) if reasonably
requested by the Company, the Warrantholder has delivered to the Company an
opinion of legal counsel (from a firm reasonably satisfactory to the Company)
which opinion shall be addressed to the Company and be reasonably satisfactory
in form and substance to the Company's counsel, to the effect that such
registration is not required with respect to such Warrant or such Warrant
Shares, as the case may be.
3. RESERVATION AND REGISTRATION OF SHARES, ETC.
The Company covenants and agrees as follows:
(a) All Warrant Shares that are issued upon the
exercise of this Warrant will, upon issuance, be validly issued, fully paid and
nonassessable, not subject to any preemptive rights, and free from all taxes,
liens, security interests, charges, and other encumbrances with respect to the
issuance thereof, other than taxes in respect of any transfer occurring
contemporaneously with such issue.
(b) During the period within which this Warrant may be
exercised, the Company will at all times have authorized and reserved, and keep
available free from preemptive rights, a sufficient number of shares of Common
Stock to provide for the exercise of the rights represented by this Warrant.
<PAGE>
4. LOSS OR DESTRUCTION OF WARRANT.
Subject to the terms and conditions hereof, upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant and, in the case of loss, theft or
destruction, of such bond or indemnification as the Company may reasonably
require, and, in the case of mutilation, upon surrender and cancellation of
this Warrant, the Company will execute and deliver a new Warrant of like tenor.
5. OWNERSHIP OF WARRANT.
The Company may deem and treat the Person in whose name this Warrant
is registered as the holder and owner hereof (notwithstanding any notations of
ownership or writing hereon made by anyone other than the Company) for all
purposes and shall not be affected by any notice to the contrary, until
presentation of this Warrant for registration of transfer.
6. CERTAIN ADJUSTMENTS.
6.1 The number of Warrant Shares purchasable upon the exercise
of this Warrant and the Exercise Price shall be subject to adjustment as
follows:
(a) STOCK DIVIDENDS, SUBDIVISION, COMBINATION OR
RECLASSIFICATION OF COMMON STOCK. If at any time after the date of the
issuance of this Warrant the Company shall (i) declare a stock dividend on
the Common Stock payable in shares of its capital stock (including Common
Stock), (ii) increase the number of shares of Common Stock outstanding by a
subdivision or split-up of shares of Common Stock, (iii) decrease the number
of shares of Common Stock outstanding by a combination of shares of Common
Stock or (iv) issue any shares of its capital stock in a reclassification of
the Common Stock, then, on the record date for such dividend or the effective
date of such subdivision or split-up, combination or reclassification, as the
case may be, the number and kind of shares to be delivered upon exercise of
this Warrant will be adjusted so that the Warrantholder will be entitled to
receive the number and kind of shares of capital stock that such
Warrantholder would have owned or been entitled to receive upon or by reason
of such event had this Warrant been exercised immediately prior thereto, and
the Exercise Price will be adjusted as provided below in paragraph (i).
(b) REORGANIZATION, ETC. If at any time after the date
of issuance of this Warrant any consolidation of the Company with or merger
of the
<PAGE>
Company with or into any other Person (other than a merger or consolidation
in which the Company is the surviving or continuing corporation and which
does not result in any reclassification of, or change (other than a change in
par value or from par value to no par value or from no par value to par
value, or as a result of a subdivision or combination) in, outstanding shares
of Common Stock) or any sale, lease or other transfer of all or substantially
all of the assets of the Company to any other person (each, a "Reorganization
Event"), shall be effected in such a way that the holders of Common Stock
shall be entitled to receive cash, stock, other securities or assets (whether
such cash, stock, other securities or assets are issued or distributed by the
Company or another Person) with respect to or in exchange for Common Stock,
then, upon exercise of this Warrant the Warrantholder shall have the right to
receive the kind and amount of cash, stock, other securities or assets
receivable upon such Reorganization Event by a holder of the number of shares
of Common Stock that such Warrantholder would have been entitled to receive
upon exercise of this Warrant had this Warrant been exercised immediately
before such Reorganization Event, subject to adjustments that shall be as
nearly equivalent as may be practicable to the adjustments provided for in
this Section 6.1. Notwithstanding the foregoing, if more than 20% in
aggregate value of the cash, stock, other securities or assets deliverable to
such holder in accordance with the foregoing provisions of this Section 6(b)
would consist of cash or debt securities, then the Warrantholder shall have
the right (the "Special Reorganization Right") at its election, exercisable
by giving written notice to the Company prior to 120 days following the
consummation of such Reorganization Event to receive from the Company, and
the Company shall pay to the Warrantholder promptly after the exercise by the
Warrantholder of the Special Reorganization Right, instead of the cash,
stock, other securities or assets otherwise deliverable to such holder, an
amount of cash equal to the fair market value of this Warrant immediately
prior to the announcement of such Reorganization Event, to be determined by
an Independent Financial Expert giving due consideration to such factors as
the financial condition and prospects of the Company, the remaining unexpired
term of the Warrant and the market price of the Common Stock of the Company
after announcement of such Reorganization Event. The Company shall not enter
into any of the transactions referred to in this Section 6.1(b) unless
effective provision shall be made so as to give effect to the provisions set
forth in this Section 6.1(b).
(c) CERTAIN ISSUANCES OF COMMON STOCK. If at any time
after the date of issuance of this warrant the Company shall issue or sell,
or fix a record date for the issuance of, (A) Common Stock (or securities
convertible into or exchangeable or exercisable for Common Stock) (other than
Excluded Securities) or (B) rights, options or warrants entitling the holders
thereof to subscribe for or purchase Common Stock (or securities convertible
into or exchangeable or exercisable for Common Stock) (other than Excluded
Securities), in any such case, at a price per share (treating the price per
share of the securities convertible into or exchangeable or
<PAGE>
exercisable for Common Stock as equal to (x) the sum of (i) the price for a
unit of the security convertible into or exchangeable or exercisable for
Common Stock plus (ii) any additional consideration initially payable upon
the conversion of such security into Common Stock or the exchange or exercise
of such security for Common Stock divided by (y) the number of shares of
Common Stock initially underlying such convertible, exchangeable or
exercisable security) that is less than the greater of the Current Market
Price of the Common Stock and the Exercise Price on the date of such issuance
or such record date (the "Measuring Price") then, immediately after the date
of such issuance or sale or on such record date, the number of shares of
Common Stock to be delivered upon exercise of this Warrant shall be increased
so that the Warrantholder thereafter shall be entitled to receive the number
of shares of Common Stock determined by multiplying the number of shares of
Common Stock such Warrantholder would have been entitled to receive
immediately before the date of such issuance or sale or such record date by a
fraction, the denominator of which shall be the number of shares of Common
Stock outstanding (calculated to include the shares of Common Stock
underlying the Warrants, the Investor Warrants, the Affiliate Warrants, the
Harnick Warrant and all then currently exerciseable, convertible and
exchangeable securities that are "in the money") on such date plus the number
of shares of Common Stock that the aggregate offering price of the total
number of shares so offered for subscription or purchase (or the aggregate
purchase price of the convertible, exchangeable or exerciseable securities so
offered plus the aggregate of amount of any additional consideration
initially payable upon conversion into Common Stock or exchange or exercise
for Common Stock) would purchase at the Measuring Price and the numerator of
which shall be the number of shares of Common Stock outstanding (calculated
to include the shares of Common Stock underlying the Warrants, the Investor
Warrants, Affiliate Warrants, the Harnick Warrant and all then currently
exerciseable, convertible and exchangeable securities that are "in the money")
on such date plus the number of additional shares of Common Stock offered for
subscription or purchase (or into or for which the convertible or
exchangeable securities or rights, options or warrants so offered are
initially convertible or exchangeable or exercisable, as the case may be),
and the Exercise Price shall be adjusted as provided below in paragraph (i).
"Excluded Securities" means (A) shares of Common Stock issued upon conversion
or exercise of convertible securities, warrants and options of the Company,
outstanding on the date this Warrant is originally issued, (B) shares of
Common Stock, and options to purchase such shares, issued to officers,
directors, employees or former employees of, or consultants to, the Company
or any of its subsidiaries pursuant to any equity incentive plan, agreement
or other arrangement which has been approved by a vote of at least two-thirds
(2/3) of the Board of Directors of the Company, (C) shares of Common Stock
issued upon conversion of shares of the Company's Series B Convertible
Preferred Stock, par value $.001 per share (the "Series B Preferred Stock"),
(D) shares of Common Stock issued upon exercise of the Investor Warrants,
including any increase in the number of shares of Common Stock issuable under
such Investor Warrants as a result of the conditional annual increase
provision included therein, (E) shares of Common
<PAGE>
Stock issued upon conversion of shares of the Company's Series C Convertible
Preferred Stock, par value $.001 per share (the "Series C Preferred Stock"),
(F) shares of Common Stock issued upon exercise of the Affiliate Warrants,
(G) shares of Common Stock issued upon exercise of the Harnick Warrant, (H)
shares of Common Stock issuable upon conversion of shares of the Company's
Series D Preferred Stock, and (I) shares of Common Stock issued upon exercise
of any Warrant.
(d) EXTRAORDINARY DISTRIBUTIONS. If at any time after
the date of issuance of this Warrant the Company shall distribute to all
holders of its Common Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the
continuing or surviving corporation and the Common Stock is not changed or
exchanged) cash, evidences of indebtedness, securities or other assets
(excluding (i) ordinary course cash dividends to the extent such dividends do
not exceed the Company's retained earnings and (ii) dividends payable in
shares of capital stock for which adjustment is made under Section 6.1(a)) or
rights, options or warrants to subscribe for or purchase securities of the
Company (excluding those for which adjustment is made under Section 6.1(c)),
then the number of shares of Common Stock to be delivered to such
Warrantholder upon exercise of this Warrant shall be increased so that the
Warrantholder thereafter shall be entitled to receive the number of shares of
Common Stock determined by multiplying the number of shares such
Warrantholder would have been entitled to receive immediately before such
record date by a fraction, the denominator of which shall be the Current
Market Price per share of Common Stock on such record date minus the then
fair market value (as reasonably determined by the Board of Directors of the
Company in good faith) of the portion of the cash, evidences of indebtedness,
securities or other assets so distributed or of such rights or warrants
applicable to one share of Common Stock (provided that such denominator shall
in no event be less than $.01) and the numerator of which shall be the
Current Market Price per share of the Common Stock, and the Exercise Price
shall be adjusted as provided below in paragraph (h).
(e) PRO RATA REPURCHASES. If at any time after the date
of issuance of this Warrant, the Company or any subsidiary thereof shall make
a Pro Rata Repurchase, then the number of shares of Common Stock to be
delivered to such Warrantholder upon exercise of this Warrant shall be
increased so that the Warrantholder thereafter shall be entitled to receive
the number of shares of Common Stock determined by multiplying the number of
shares of Common Stock such Warrantholder would have been entitled to receive
immediately before such Pro Rata Repurchase by a fraction (which in no event
shall be less than one) the denominator of which shall be (i) the product of
(x) the number of shares of Common Stock outstanding immediately before such
Pro Rata Repurchase and (y) the Current Market Price of the Common Stock as
of the day immediately preceding the first public announcement by the Company
of the intent to effect such Pro Rata Repurchase minus (ii) the aggregate
<PAGE>
purchase price of the Pro Rata Repurchase (provided that such denominator
shall never be less than $.01), and the numerator of which shall be the
product of (i) the number of shares of Common Stock outstanding immediately
before such Pro Rata Repurchase minus the number of shares of Common Stock
repurchased in such Pro Rata Repurchase and (ii) the Current Market Price of
the Common Stock as of the day immediately preceding the first public
announcement by the Company of the intent to effect such Pro Rata Repurchase.
(f) FRACTIONAL SHARES. No fractional shares of Common
Stock or scrip shall be issued to any Warrantholder in connection with the
exercise of this Warrant. Instead of any fractional shares of Common Stock that
would otherwise be issuable to such Warrantholder, the Company will pay to such
Warrantholder a cash adjustment in respect of such fractional interest in an
amount equal to that fractional interest of the then Current Market Price per
share of Common Stock.
(g) CARRYOVER. Notwithstanding any other provision of
this Section 6.1, no adjustment shall be made to the number of shares of Common
Stock to be delivered to the Warrantholder (or to the Exercise Price) if such
adjustment represents less than .05% of the number of shares to be so delivered,
but any lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment that together with any
adjustments so carried forward shall amount to .05% or more of the number of
shares to be so delivered.
(h) EXERCISE PRICE ADJUSTMENT. Whenever the number of
Warrant Shares purchasable upon the exercise of the Warrant is adjusted as
provided pursuant to this Section 6.1, the Exercise Price per share payable upon
the exercise of this Warrant shall be adjusted by multiplying such Exercise
Price immediately prior to such adjustment by a fraction, of which the numerator
shall be the number of Warrant Shares purchasable upon the exercise of the
Warrant immediately prior to such adjustment, and of which the denominator shall
be the number of Warrant Shares purchasable immediately thereafter; PROVIDED,
HOWEVER, that the Exercise Price for each Warrant Share shall in no event be
less than the par value of such Warrant Share.
(i) MULTIPLE ADJUSTMENTS. If any action or
transaction would require adjustment of the number of shares of Common Stock to
be delivered to the Warrantholder upon exercise of this Warrant pursuant to more
than one paragraph of this Section 6.1, only one adjustment shall be made and
each such adjustment shall be the amount of adjustment that has the highest
absolute value.
6.2 NOTICE OF ADJUSTMENT. Whenever the number of Warrant
Shares or the Exercise Price of such Warrant Shares is adjusted, as herein
provided, the
<PAGE>
Company shall promptly mail by first class mail, postage prepaid, to the
Warrantholder, notice of such adjustment or adjustments and a certificate of
a firm of independent public accountants of recognized national standing
selected by the Board of Directors of the Company (who shall be appointed at
the Company's expense and who may be the independent public accountants
regularly employed by the Company) setting forth the number of Warrant Shares
and the Exercise Price of such Warrant Shares after such adjustment, setting
forth a brief statement of the facts requiring such adjustment and setting
forth the computation by which such adjustment was made.
7. PUT RIGHTS. The Warrantholder shall have the following Put
Rights:
(a) At the earlier of (i) the fifth anniversary of the
date hereof and (ii) a Change of Control, the Warrantholder may notify the
Company in writing (the "PUT NOTICE") of the Warrantholder's desire to cause
the Company to repurchase, in the case of clause (i) above, all (but not less
than all) of the Warrant Shares (issued or represented by the Warrant) at a
price per share equal to the Repurchase Price (the "Five-Year Put"), or, in
the case of clause (ii) above, the Warrant at the Change of Control
Repurchase Price (the "Change of Control Put").
(b) If the Company receives a Put Notice pursuant to
Section 7(a), it shall deliver to the Warrantholder, by first class mail,
postage prepaid, mailed as soon as practicable and if possible within thirty
(30) days of the receipt by the Company of the Put Notice, a notice stating:
(i) the date as of which such repurchase shall occur (which date (the "Put
Closing") shall be not less than ten (10) nor more than thirty (30) days
following the date of such notice, but in any event prior to the Expiration
Date); (ii) in the case of a Five-Year Put, the number of Warrant Shares
(issued or represented by this Warrant) to be purchased from the
Warrantholder and the Repurchase Price (which shall be calculated as of the
date of the Put Notice) or, in the case of a Change of Control Put, the
Change of Control Repurchase Price; and (iii) the place or places where
certificate or certificates representing this Warrant or Warrant Shares are
to be surrendered for payment; PROVIDED, HOWEVER, that the Company shall have
no obligation to send the notice set forth above or to repurchase the
Warrants and Warrant Shares following the exercise of the Five Year Put (and
the provisions of paragraph (c) below shall not be applicable to any failure
by the Company to repurchase the Warrants and the Warrant Shares following
the exercise of the Five Year Put), unless the holders of not less than a
majority of the shares of Common Stock issued or issuable upon exercise of
the Investor Warrants (the "Investor Warrant Shares") shall also have
exercised the "five year put" provided for in the Investor Warrants.
(c) With respect to Warrants and Warrant Shares
<PAGE>
properly tendered for repurchase, if the Company fails to pay the Repurchase
Price or the Change of Control Repurchase Price on the date fixed for
repurchase, the Corporation shall also pay interest thereon at the rate of
12% per annum, compounded on a quarterly basis, until such time as such
satisfaction shall have occurred.
(d) At the Put Closing, the Warrantholder shall deliver
to the Company the certificate or certificates representing the
Warrantholder's Warrant or Warrant Shares and the Company shall deliver to
the Warrantholder an amount equal to, in the case of a Five-Year Put, the
product obtained by multiplying (i) the number of such Warrant Shares (issued
or represented by this Warrant) by (ii) the Repurchase Price or, in the case
of a Change of Control Put, the Change of Control Repurchase Price, by
cashier's or certified check payable to the Warrantholder or by wire transfer
of immediately available funds to an account designated by the Warrantholder.
(e) The Company shall not (and shall not permit any
Affiliate of the Company to) enter into any contract or other consensual
arrangement that by its terms restricts the Company's ability to honor the
Put.
8. AMENDMENTS. Any provision of this Warrant may be amended and
the observance thereof waived only with the written consent of the Company
and the Warrantholder.
9. NOTICES OF CORPORATE ACTION. So long as this Warrant has not
been exercised in full, in the event of:
(a) any consolidation or merger involving the Company
and any other party or any transfer of all or substantially all the assets of
the Company to any other party, or
(b) any voluntary or involuntary dissolution,
liquidation or winding-up of the Company,
the Company will mail, by first class mail, postage prepaid, to the
Warrantholder a notice specifying (i) the date or expected date on which any
such record is to be taken for the purpose of a dividend, distribution or
right and the amount and character of any such dividend, distribution or
right and (ii) the date or expected date on which a reorganization,
reclassification, recapitalization, consolidation, merger, transfer,
dissolution, liquidation or winding-up is to take place and the time, if any
such time is to be fixed, as of which the holders of record of Common Stock
(or other securities) shall be entitled to exchange their shares of Common
Stock (or other securities) for the securities or other property deliverable
upon such reorganization, reclassification,
<PAGE>
recapitalization, consolidation, merger, transfer, dissolution, liquidation
or winding-up. Such notice shall be delivered as soon as practicable and if
possible at least 20 days prior to the date therein specified in the case of
any date referred to in the foregoing subdivisions (i) and (ii). Failure to
give the notice specified hereunder shall have no effect on the status or
effectiveness of the action to which the required notice relates.
10. DEFINITIONS.
As used herein, unless the context otherwise requires, the
following terms have the following meanings:
"AFFILIATE" means, with respect to any Person, any other Person
that, directly or indirectly, controls, is controlled by, or is under common
control with such first Person. For the purpose of this definition,
"control" shall mean, as to any Person, the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"AFFILIATE WARRANTS" mean the warrants issued in connection with
the issue and sale by the Company of shares of its Series C Preferred Stock
on the Closing Date (as defined in the Investment Agreement).
"BUSINESS DAY" means any day other than a Saturday, Sunday or a day
on which national banks are authorized by law or executive order to close in
the State of New York.
"CHANGE OF CONTROL" shall mean (i) the direct or indirect sale,
lease, exchange or other transfer of all or substantially all of the assets
of the Company to any Person or entity or group of Persons or entities acting
in concert as a partnership or other group within the meaning of Rule 13d-5
under the Exchange Act (a "GROUP OF PERSONS"), (ii) the merger or
consolidation of the Company with or into another corporation with the effect
that the then existing stockholders of the Company hold less than 50% of the
combined voting power of the then outstanding securities of the surviving
corporation of such merger or the corporation resulting from such
consolidation ordinarily (and apart from rights accruing under special
circumstances) having the right to vote in the election of directors, (iii)
the replacement of a majority of the Board of Directors of the Company, over
a two-year period, from the directors who constituted the Board of Directors
at the beginning of such period, and such replacement shall not have been
approved by the Board of Directors of the Company (or its replacements
approved by the Board of Directors of the Company) as constituted at the
beginning of such period, (iv) a Person or Group of Persons (other than the
Investors and their Affiliates, employees, partners or members) shall, as a
result of a tender or
<PAGE>
exchange offer, open market purchases, privately negotiated purchases or
otherwise, have become the beneficial owner (within the meaning of Rule 13d-3
under the Exchange Act) of securities of the Company representing 49% or more
of the combined voting power of the then outstanding securities of the
Company ordinarily (and apart from rights accruing under special
circumstances) having the right to vote in the election of directors.
Notwithstanding the foregoing, no Change in Control shall be deemed to have
occurred (a) upon the acquisition of any shares of Common Stock of the
Company pursuant to the exercise of the Investor Warrants, (b) upon the
exercise of any of the rights and privileges granted to each of the Investors
pursuant to Section 6.2.5 of the Investment Agreement, (c) upon the exercise
of any rights and privileges granted to the holders of the Series B Preferred
Stock pursuant to the Certification of the Powers, Designations, Preferences
and Rights of the Series B Preferred Stock or (d) otherwise as a result of
the equity ownership or designation of directors by the Investors or their
Affiliates, employees, partners or members.
"CHANGE OF CONTROL REPURCHASE PRICE" means (i) if any Investor
Warrants are then outstanding, an amount in cash, on a per Warrant Share
basis, equal to the "Change of Control Repurchase Price" (on a per Investor
Warrant Share basis) for the Investor Warrants, or (ii) if no Investor
Warrants are then outstanding, an amount of cash equal to the fair market
value of this Warrant immediately prior to the announcement of a Change of
Control, to be determined by an Independent Financial Expert selected by the
Company and a majority in interest of the Warrant Shares, giving due
consideration to such factors as the financial condition and prospects of the
Company, the remaining unexpired term of this Warrant and the market price of
the Common Stock of the Company after announcement of such Change of Control.
"CLOSING PRICE" of the Common Stock as of any day, means (a) the
last reported sale price of such stock (regular way) or, in case no such sale
takes place on such day, the average of the closing bid and asked prices, in
either case as reported on the principal national securities exchange on
which the Common Stock is listed or admitted to trading or (b) if the Common
Stock is not listed or admitted to trading on any national securities
exchange, the last reported sale price or, in case no such sale takes place
on such day, the average of the highest reported bid and lowest reported
asked quotation for the Common Stock, in either case reported on the National
Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ"), or a similar service if NASDAQ is no longer reporting such
information.
"COMMON STOCK" has the meaning specified on the cover of this
Warrant.
"COMPANY" has the meaning specified on the cover of this Warrant.
<PAGE>
"CURRENT MARKET PRICE" means, with respect to each share of Common
Stock as of any date, the average of the daily Closing Prices per share of
Common Stock for the 10 consecutive trading days commencing 15 trading days
prior to such date; provided that if on any such date the shares of Common
Stock are not listed or admitted for trading on any national securities
exchange or quoted by NASDAQ or a similar service, the Current Market Price
for a share of Common Stock shall be the fair market value of such share as
determined in good faith by the Board of Directors of the Company; provided
that if the holders of a majority in interest of the Investor Warrant Shares
disagree with the Board of Director's determination of fair market value for
purposes of the Investor Warrants, the fair market value for purposes of this
Warrant shall be the same as the fair market value determined for purposes of
the Investor Warrants.
"EXERCISE FORM" means an Exercise Form in the form annexed hereto
as Exhibit A.
"EXPIRATION DATE" has the meaning specified on the cover of this
Warrant.
"HARNICK WARRANT" means the warrant to purchase 50,000 shares of
Common Stock issued to Carl D. Harnick at the closing of the Investment
Agreement.
"INDEPENDENT FINANCIAL EXPERT" means an independent nationally
recognized investment banking firm.
"INVESTMENT AGREEMENT" means the Investment Agreement, dated as of
October 12, 1997, as amended and as hereafter amended, among the Investors
and the Company.
"INVESTORS" means MAC Music LLC, a Delaware limited liability
company, and SK-Palladin Partners, LP, a Delaware limited partnership.
"INVESTOR WARRANTS" mean the warrants issued to the Investors
pursuant to the Investment Agreement.
"INVESTOR WARRANT SHARES" mean the shares of Common Stock issued or
issuable upon exercise of the Investor Warrants.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, limited liability company,
unincorporated organization, estate, other entity or government or any agency
or political subdivision thereof.
<PAGE>
"PRO RATA REPURCHASE" means any purchase of shares of Common Stock by
the Company or by any of its subsidiaries whether for cash, shares of capital
stock of the Company, other securities of the Company, evidences of indebtedness
of the Company or any other Person or any other property (including, without
limitation, shares of capital stock, other securities or evidences of
indebtedness of a subsidiary of the Company), or any combination thereof, which
purchase is subject to Section 13(e) of the Securities Exchange Act of 1934, as
amended, or is made pursuant to an offer made available to all holders of Common
Stock.
"REPURCHASE PRICE" means, on any date, the Current Market Price per
share of Common Stock as of such date, less the per share Exercise Price;
PROVIDED, that if at the time of determination of the Repurchase Price, the
Warrantholder shall be entitled to receive any securities or property other than
Common Stock, the Repurchase Price shall include a cash amount per Warrant Share
equal to that portion of the fair value of such securities or property allocable
to each Warrant Share.
"SECURITIES ACT" has the meaning specified on the cover of this
Warrant.
"WARRANTHOLDER" has the meaning specified on the cover of this
Warrant.
"WARRANT SHARES" has the meaning specified on the cover of this
Warrant; provided, however, that Warrant Shares shall not include shares sold to
the public pursuant to Rule 144 under the Securities Act of 1933, as amended, or
pursuant to an effective registration statement under the Securities Act.
11. MISCELLANEOUS.
11.1 ENTIRE AGREEMENT. This Warrant constitutes the entire
agreement between the Company and the Warrantholder with respect to this
Warrant.
11.2 BINDING EFFECT; BENEFITS. This Warrant shall inure to the
benefit of and shall be binding upon the Company and the Warrantholder and their
respective successors and assigns. Nothing in this Warrant, expressed or
implied, is intended to or shall confer on any person other than the Company and
the Warrantholder, or their respective successors or assigns, any rights,
remedies, obligations or liabilities under or by reason of this Warrant.
11.3 SECTION AND OTHER HEADINGS. The section and other headings
contained in this Warrant are for reference purposes only and shall not be
deemed to be a part of this Warrant or to affect the meaning or interpretation
of this Warrant.
11.4 NOTICES. All notices and other communications required or
<PAGE>
permitted hereunder shall be in writing and shall be delivered personally,
telecopied or sent by certified, registered or express mail, postage prepaid.
Any such notice shall be deemed given when so delivered personally,
telecopied or sent by certified, registered or express mail, as follows:
(a) if to the Company, addressed to:
Platinum Entertainment, Inc.
2001 Butterfield Road
Downers Grove, Illinois 60515
Telecopy: (630) 769-0049
Attention: Chief Executive Officer
with a copy to:
Katten, Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661
Telecopy: (312) 902-1061
Attention: Matthew S. Brown, Esq.
(b) if to the Warrantholder, addressed to:
Telecopy:
Any party may by notice given in accordance with this Section 11.4 designate
another address or person for receipt of notices hereunder.
11.5 SEVERABILITY. Any term or provision of this Warrant
which is invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the terms and
provisions of this Warrant or affecting the validity or enforceability of any
of the terms or provisions of this Warrant in any other jurisdiction.
<PAGE>
11.6 GOVERNING LAW. This Warrant shall be deemed to be a
contract made under the laws of the State of Delaware and for all purposes
shall be governed by and construed in accordance with the laws of such State
applicable to such agreements made and to be performed entirely within such
State.
11.7 CERTAIN REMEDIES. The Warrantholder shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Warrant and to enforce specifically the terms and provisions of this Warrant
in any court of the United States or any court of any state having
jurisdiction, this being in addition to any other remedy to which the
Warrantholder may be entitled at law or in equity.
11.8 NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing
contained in this Warrant shall be deemed to confer upon the Warrantholder
any rights as a stockholder of the Company or as imposing any liabilities on
the Warrantholder to purchase any securities whether such liabilities are
asserted by the Company or by creditors or stockholders of the Company or
otherwise.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its duly authorized officer.
PLATINUM ENTERTAINMENT, INC.
By: /s/ Douglas C. Laux
----------------------------------
Name: Douglas C. Laux
Title: Chief Operating Officer and
Chief Financial Officer
Dated: April 15, 1999
<PAGE>
EXHIBIT A
EXERCISE FORM
(To be executed upon exercise of this Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant, to purchase __________ of the Warrant Shares and
[herewith tenders payment for such Warrant Shares to the order of Platinum
Entertainment, Inc. in the amount of $__________] [hereby exercises its
Conversion Right] in accordance with the terms of this Warrant. The undersigned
requests that a certificate for [such Warrant Shares] [that number of Warrant
Shares to which the undersigned is entitled as calculated pursuant to
Section 1.2] be registered in the name of the undersigned and that such
certificates be delivered to the undersigned's address below.
Dated:__________________________
Signature____________________________
____________________________
(Print Name)
____________________________
(Street Address)
____________________________
(City) (State) (Zip Code)
<PAGE>
NEITHER THIS WARRANT NOR ANY SECURITIES ACQUIRED UPON THE EXERCISE OF
THIS WARRANT (THE "SECURITIES") HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND
NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS AS
EVIDENCED BY AN OPINION OF COUNSEL DELIVERED AND REASONABLY ACCEPTABLE TO THE
COMPANY.
______________________________________________
PLATINUM ENTERTAINMENT, INC.
COMMON STOCK PURCHASE WARRANT
_______________________________________________
This certifies that, for good and valuable consideration, Platinum
Entertainment, Inc., a Delaware corporation (the "Company"), grants to Craig J.
Duchossois, his successors and permitted assigns (the "Warrantholder"), the
right to subscribe for and purchase from the Company Two Hundred One Thousand
Six Hundred and Sixty-Six and One Sixty-Fifth (201,666.65) validly issued, fully
paid and nonassessable shares (the "Warrant Shares") of the Company's Common
Stock, par value $.001 per share (the "Common Stock"), at the purchase price per
share equal to the Exercise Price, as defined herein, at any time prior to
5:00 p.m., Central Standard Time, on April 15, 2009 (the "Expiration Date"),
subject to the terms, conditions and adjustments herein set forth. References
herein to "Warrants" or "Warrant" shall mean this Warrant.
The "Exercise Price" shall mean $6.126; which price is equal to the
average of the daily Closing Price per share of Common Stock for the trailing 30
consecutive trading days from and including April 9, 1999. The Exercise Price
as determined in accordance with the foregoing shall be adjusted from time to
time in accordance with the provisions of Section 6.
<PAGE>
1. EXERCISE OF WARRANTS.
1.1 EXERCISE OF WARRANT. This Warrant may be exercised, in
whole or in part, at any time or from time to time prior to the Expiration Date,
by surrendering to the Company at its principal office this Warrant, with an
Exercise Form (as defined herein) duly executed by the Warrantholder and
accompanied by payment of the Exercise Price for the number of shares of Common
Stock specified in such Exercise Form.
1.2 CASHLESS EXERCISE. In lieu of the payment of the Exercise
Price, the Warrantholder shall have the right (but not the obligation) to
require the Company to convert this Warrant, in whole or in part, into shares of
Common Stock (the "Conversion Right") as provided for in this Section 1.2. Upon
exercise of the Conversion Right, the Company shall deliver to the Warrantholder
(without payment by the Warrantholder of any of the Exercise Price) that number
of shares of Common Stock equal to the quotient obtained by dividing (x) the
value of the Warrant or portion thereof being exercised at the time the
Conversion Right is exercised (determined by subtracting the aggregate Exercise
Price in effect immediately prior to the exercise of the Conversion Right for
the number of shares for which the Warrant is being exercised from the aggregate
Current Market Price (as defined herein) of the shares of Common Stock issuable
upon exercise of the Warrant for the number of shares for which the Warrant is
being exercised immediately prior to the exercise of the Conversion Right) by
(y) the Current Market Price of one share of Common Stock immediately prior to
the exercise of the Conversion Right. The Conversion Right may be exercised at
any time or from time to time prior to the Expiration Date by surrendering to
the Company at its principal office this Warrant, with an Exercise Form duly
executed by the Warrantholder and indicating that the Warrantholder wishes to
exercise the Conversion Right and specifying the total number of shares of
Common Stock for which the Warrant is being exercised.
1.3 DELIVERY OF WARRANT SHARES; EFFECTIVENESS OF EXERCISE.
(a) DELIVERY OF WARRANT SHARES. A stock certificate
or certificates for the Warrant Shares specified in the Exercise Form along with
a check for the amount of cash to be paid in lieu of fractional shares, if any,
shall be delivered to the Warrantholder within 10 Business Days after the
Exercise Date (as defined herein); PROVIDED, HOWEVER, that if the Conversion
Right is exercised in accordance with Section 1.2 and a determination by the
Board of Directors is required to determine the Current Market Price of the
Common Stock, such delivery shall be made promptly after such determination is
made. If this Warrant shall have been exercised
<PAGE>
only in part, the Company shall, at the time of delivery of the stock
certificate or certificates and cash in lieu of fractional shares, if any,
deliver to the Warrantholder a new Warrant evidencing the rights to purchase
the remaining Warrant Shares, which new Warrant shall in all other respects
be identical with this Warrant.
(b) EFFECTIVENESS OF EXERCISE. The exercise of this
Warrant shall be deemed to have been effective immediately prior to the close of
business on the Business Day on which this Warrant is exercised in accordance
with Section 1.1 or 1.2 (the "Exercise Date"). The Person in whose name any
certificate for shares of Common Stock shall be issuable upon such exercise
shall be deemed to be the record holder of such shares of Common Stock for all
purposes on the Exercise Date.
1.4 PAYMENT OF TAXES. The issuance of certificates for
Warrant Shares shall be made without charge to the Warrantholder for any stock
transfer or other issuance tax in respect thereof; PROVIDED, HOWEVER, that the
Warrantholder shall be required to pay any and all taxes that may be payable in
respect of any transfer involved in the issuance and delivery of any certificate
in a name other than that of the then Warrantholder as reflected upon the books
of the Company.
2. RESTRICTIVE LEGENDS.
2.1 WARRANTS. Except as otherwise permitted by this
Section 2, each Warrant (and each Warrant issued in substitution for any Warrant
pursuant to Section 4) shall be stamped or otherwise imprinted with a legend in
substantially the following form:
NEITHER THIS WARRANT NOR ANY SECURITIES ACQUIRED UPON THE EXERCISE OF
THIS WARRANT (THE "SECURITIES") HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED,
SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER
SUCH ACT AND SUCH LAWS AS EVIDENCED BY AN OPINION OF COUNSEL DELIVERED AND
REASONABLY ACCEPTABLE TO THE COMPANY.
<PAGE>
2.2 WARRANT SHARES. Except as otherwise permitted by this
Section 2, each stock certificate for Warrant Shares issued upon the exercise of
any Warrant and each stock certificate issued upon the direct or indirect
transfer of any such Warrant Shares shall be stamped or otherwise imprinted with
a legend in substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT AND SUCH LAWS AS EVIDENCED BY AN OPINION OF COUNSEL
DELIVERED AND REASONABLY ACCEPTABLE TO THE COMPANY.
2.3 REMOVAL OF LEGENDS. Notwithstanding the foregoing, the
Warrantholder may require the Company to issue a Warrant or a stock certificate
for Warrant Shares, in each case without a legend, if either (i) such Warrant or
such Warrant Shares, as the case may be, have been registered for resale under
the Securities Act and sold pursuant to such registration or (ii) if reasonably
requested by the Company, the Warrantholder has delivered to the Company an
opinion of legal counsel (from a firm reasonably satisfactory to the Company)
which opinion shall be addressed to the Company and be reasonably satisfactory
in form and substance to the Company's counsel, to the effect that such
registration is not required with respect to such Warrant or such Warrant
Shares, as the case may be.
3. RESERVATION AND REGISTRATION OF SHARES, ETC.
The Company covenants and agrees as follows:
(a) All Warrant Shares that are issued upon the
exercise of this Warrant will, upon issuance, be validly issued, fully paid and
nonassessable, not subject to any preemptive rights, and free from all taxes,
liens, security interests, charges, and other encumbrances with respect to the
issuance thereof, other than taxes in respect of any transfer occurring
contemporaneously with such issue.
<PAGE>
(b) During the period within which this Warrant may be
exercised, the Company will at all times have authorized and reserved, and
keep available free from preemptive rights, a sufficient number of shares of
Common Stock to provide for the exercise of the rights represented by this
Warrant.
4. LOSS OR DESTRUCTION OF WARRANT.
Subject to the terms and conditions hereof, upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant and, in the case of loss, theft or
destruction, of such bond or indemnification as the Company may reasonably
require, and, in the case of mutilation, upon surrender and cancellation of
this Warrant, the Company will execute and deliver a new Warrant of like
tenor.
5. OWNERSHIP OF WARRANT.
The Company may deem and treat the Person in whose name this
Warrant is registered as the holder and owner hereof (notwithstanding any
notations of ownership or writing hereon made by anyone other than the
Company) for all purposes and shall not be affected by any notice to the
contrary, until presentation of this Warrant for registration of transfer.
6. CERTAIN ADJUSTMENTS.
6.1 The number of Warrant Shares purchasable upon the
exercise of this Warrant and the Exercise Price shall be subject to
adjustment as follows:
(a) STOCK DIVIDENDS, SUBDIVISION, COMBINATION OR
RECLASSIFICATION OF COMMON STOCK. If at any time after the date of the
issuance of this Warrant the Company shall (i) declare a stock dividend on
the Common Stock payable in shares of its capital stock (including Common
Stock), (ii) increase the number of shares of Common Stock outstanding by a
subdivision or split-up of shares of Common Stock, (iii) decrease the number
of shares of Common Stock outstanding by a combination of shares of Common
Stock or (iv) issue any shares of its capital stock in a reclassification of
the Common Stock, then, on the record date for such dividend or the effective
date of such subdivision or split-up, combination or reclassification, as the
case may be, the number and kind of shares to be delivered upon exercise of
this Warrant will be adjusted so that the Warrantholder will be entitled to
receive the number and kind of shares of capital stock that such
Warrantholder would have owned or been entitled to receive upon or by reason
of such event had this Warrant been
<PAGE>
exercised immediately prior thereto, and the Exercise Price will be adjusted
as provided below in paragraph (i).
(b) REORGANIZATION, ETC. If at any time after the date
of issuance of this Warrant any consolidation of the Company with or merger
of the Company with or into any other Person (other than a merger or
consolidation in which the Company is the surviving or continuing corporation
and which does not result in any reclassification of, or change (other than a
change in par value or from par value to no par value or from no par value to
par value, or as a result of a subdivision or combination) in, outstanding
shares of Common Stock) or any sale, lease or other transfer of all or
substantially all of the assets of the Company to any other person (each, a
"Reorganization Event"), shall be effected in such a way that the holders of
Common Stock shall be entitled to receive cash, stock, other securities or
assets (whether such cash, stock, other securities or assets are issued or
distributed by the Company or another Person) with respect to or in exchange
for Common Stock, then, upon exercise of this Warrant the Warrantholder shall
have the right to receive the kind and amount of cash, stock, other
securities or assets receivable upon such Reorganization Event by a holder of
the number of shares of Common Stock that such Warrantholder would have been
entitled to receive upon exercise of this Warrant had this Warrant been
exercised immediately before such Reorganization Event, subject to
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 6.1. Notwithstanding the foregoing,
if more than 20% in aggregate value of the cash, stock, other securities or
assets deliverable to such holder in accordance with the foregoing provisions
of this Section 6(b) would consist of cash or debt securities, then the
Warrantholder shall have the right (the "Special Reorganization Right") at
its election, exercisable by giving written notice to the Company prior to
120 days following the consummation of such Reorganization Event to receive
from the Company, and the Company shall pay to the Warrantholder promptly
after the exercise by the Warrantholder of the Special Reorganization Right,
instead of the cash, stock, other securities or assets otherwise deliverable
to such holder, an amount of cash equal to the fair market value of this
Warrant immediately prior to the announcement of such Reorganization Event,
to be determined by an Independent Financial Expert giving due consideration
to such factors as the financial condition and prospects of the Company, the
remaining unexpired term of the Warrant and the market price of the Common
Stock of the Company after announcement of such Reorganization Event. The
Company shall not enter into any of the transactions referred to in this
Section 6.1(b) unless effective provision shall be made so as to give effect
to the provisions set forth in this Section 6.1(b).
(c) CERTAIN ISSUANCES OF COMMON STOCK. If at any time
after the date of issuance of this warrant the Company shall issue or sell, or
fix a
<PAGE>
record date for the issuance of, (A) Common Stock (or securities convertible
into or exchangeable or exercisable for Common Stock) (other than Excluded
Securities) or (B) rights, options or warrants entitling the holders thereof
to subscribe for or purchase Common Stock (or securities convertible into or
exchangeable or exercisable for Common Stock) (other than Excluded
Securities), in any such case, at a price per share (treating the price per
share of the securities convertible into or exchangeable or exercisable for
Common Stock as equal to (x) the sum of (i) the price for a unit of the
security convertible into or exchangeable or exercisable for Common Stock
plus (ii) any additional consideration initially payable upon the conversion
of such security into Common Stock or the exchange or exercise of such
security for Common Stock divided by (y) the number of shares of Common Stock
initially underlying such convertible, exchangeable or exercisable security)
that is less than the greater of the Current Market Price of the Common Stock
and the Exercise Price on the date of such issuance or such record date (the
"Measuring Price") then, immediately after the date of such issuance or sale
or on such record date, the number of shares of Common Stock to be delivered
upon exercise of this Warrant shall be increased so that the Warrantholder
thereafter shall be entitled to receive the number of shares of Common Stock
determined by multiplying the number of shares of Common Stock such
Warrantholder would have been entitled to receive immediately before the date
of such issuance or sale or such record date by a fraction, the denominator
of which shall be the number of shares of Common Stock outstanding
(calculated to include the shares of Common Stock underlying the Warrants,
the Investor Warrants, the Affiliate Warrants, the Harnick Warrant and all
then currently exerciseable, convertible and exchangeable securities that are
"in the money") on such date plus the number of shares of Common Stock that
the aggregate offering price of the total number of shares so offered for
subscription or purchase (or the aggregate purchase price of the convertible,
exchangeable or exerciseable securities so offered plus the aggregate of
amount of any additional consideration initially payable upon conversion into
Common Stock or exchange or exercise for Common Stock) would purchase at the
Measuring Price and the numerator of which shall be the number of shares of
Common Stock outstanding (calculated to include the shares of Common Stock
underlying the Warrants, the Investor Warrants, Affiliate Warrants, the
Harnick Warrant and all then currently exerciseable, convertible and
exchangeable securities that are "in the money") on such date plus the number
of additional shares of Common Stock offered for subscription or purchase (or
into or for which the convertible or exchangeable securities or rights,
options or warrants so offered are initially convertible or exchangeable or
exercisable, as the case may be), and the Exercise Price shall be adjusted as
provided below in paragraph (i). "Excluded Securities" means (A) shares of
Common Stock issued upon conversion or exercise of convertible securities,
warrants and options of the Company, outstanding on the date this Warrant is
originally issued, (B) shares of Common Stock, and options to purchase such
shares, issued to officers, directors, employees or former employees of, or
consultants to, the Company or any of its subsidiaries pursuant to any equity
incentive plan, agreement or other arrangement which
<PAGE>
has been approved by a vote of at least two-thirds (2/3) of the Board of
Directors of the Company, (C) shares of Common Stock issued upon conversion
of shares of the Company's Series B Convertible Preferred Stock, par value
$.001 per share (the "Series B Preferred Stock"), (D) shares of Common Stock
issued upon exercise of the Investor Warrants, including any increase in the
number of shares of Common Stock issuable under such Investor Warrants as a
result of the conditional annual increase provision included therein, (E)
shares of Common Stock issued upon conversion of shares of the Company's
Series C Convertible Preferred Stock, par value $.001 per share (the "Series
C Preferred Stock"), (F) shares of Common Stock issued upon exercise of the
Affiliate Warrants, (G) shares of Common Stock issued upon exercise of the
Harnick Warrant, (H) shares of Common Stock issuable upon conversion of
shares of the Company's Series D Preferred Stock, and (I) shares of Common
Stock issued upon exercise of any Warrant.
(d) EXTRAORDINARY DISTRIBUTIONS. If at any time after
the date of issuance of this Warrant the Company shall distribute to all
holders of its Common Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the
continuing or surviving corporation and the Common Stock is not changed or
exchanged) cash, evidences of indebtedness, securities or other assets
(excluding (i) ordinary course cash dividends to the extent such dividends do
not exceed the Company's retained earnings and (ii) dividends payable in
shares of capital stock for which adjustment is made under Section 6.1(a)) or
rights, options or warrants to subscribe for or purchase securities of the
Company (excluding those for which adjustment is made under Section 6.1(c)),
then the number of shares of Common Stock to be delivered to such
Warrantholder upon exercise of this Warrant shall be increased so that the
Warrantholder thereafter shall be entitled to receive the number of shares of
Common Stock determined by multiplying the number of shares such
Warrantholder would have been entitled to receive immediately before such
record date by a fraction, the denominator of which shall be the Current
Market Price per share of Common Stock on such record date minus the then
fair market value (as reasonably determined by the Board of Directors of the
Company in good faith) of the portion of the cash, evidences of indebtedness,
securities or other assets so distributed or of such rights or warrants
applicable to one share of Common Stock (provided that such denominator shall
in no event be less than $.01) and the numerator of which shall be the
Current Market Price per share of the Common Stock, and the Exercise Price
shall be adjusted as provided below in paragraph (h).
(e) PRO RATA REPURCHASES. If at any time after the date
of issuance of this Warrant, the Company or any subsidiary thereof shall make
a Pro Rata Repurchase, then the number of shares of Common Stock to be
delivered to such Warrantholder upon exercise of this Warrant shall be
increased so that the
<PAGE>
Warrantholder thereafter shall be entitled to receive the number of shares of
Common Stock determined by multiplying the number of shares of Common Stock
such Warrantholder would have been entitled to receive immediately before
such Pro Rata Repurchase by a fraction (which in no event shall be less than
one) the denominator of which shall be (i) the product of (x) the number of
shares of Common Stock outstanding immediately before such Pro Rata
Repurchase and (y) the Current Market Price of the Common Stock as of the day
immediately preceding the first public announcement by the Company of the
intent to effect such Pro Rata Repurchase minus (ii) the aggregate purchase
price of the Pro Rata Repurchase (provided that such denominator shall never
be less than $.01), and the numerator of which shall be the product of (i)
the number of shares of Common Stock outstanding immediately before such Pro
Rata Repurchase minus the number of shares of Common Stock repurchased in
such Pro Rata Repurchase and (ii) the Current Market Price of the Common
Stock as of the day immediately preceding the first public announcement by
the Company of the intent to effect such Pro Rata Repurchase.
(f) FRACTIONAL SHARES. No fractional shares of Common
Stock or scrip shall be issued to any Warrantholder in connection with the
exercise of this Warrant. Instead of any fractional shares of Common Stock
that would otherwise be issuable to such Warrantholder, the Company will pay
to such Warrantholder a cash adjustment in respect of such fractional
interest in an amount equal to that fractional interest of the then Current
Market Price per share of Common Stock.
(g) CARRYOVER. Notwithstanding any other provision of
this Section 6.1, no adjustment shall be made to the number of shares of
Common Stock to be delivered to the Warrantholder (or to the Exercise Price)
if such adjustment represents less than .05% of the number of shares to be so
delivered, but any lesser adjustment shall be carried forward and shall be
made at the time and together with the next subsequent adjustment that
together with any adjustments so carried forward shall amount to .05% or more
of the number of shares to be so delivered.
(h) EXERCISE PRICE ADJUSTMENT. Whenever the number of
Warrant Shares purchasable upon the exercise of the Warrant is adjusted as
provided pursuant to this Section 6.1, the Exercise Price per share payable
upon the exercise of this Warrant shall be adjusted by multiplying such
Exercise Price immediately prior to such adjustment by a fraction, of which
the numerator shall be the number of Warrant Shares purchasable upon the
exercise of the Warrant immediately prior to such adjustment, and of which
the denominator shall be the number of Warrant Shares purchasable immediately
thereafter; PROVIDED, HOWEVER, that the Exercise Price for each Warrant Share
shall in no event be less than the par value of such Warrant Share.
<PAGE>
(i) MULTIPLE ADJUSTMENTS. If any action or transaction
would require adjustment of the number of shares of Common Stock to be
delivered to the Warrantholder upon exercise of this Warrant pursuant to more
than one paragraph of this Section 6.1, only one adjustment shall be made and
each such adjustment shall be the amount of adjustment that has the highest
absolute value.
6.2 NOTICE OF ADJUSTMENT. Whenever the number of Warrant
Shares or the Exercise Price of such Warrant Shares is adjusted, as herein
provided, the Company shall promptly mail by first class mail, postage
prepaid, to the Warrantholder, notice of such adjustment or adjustments and a
certificate of a firm of independent public accountants of recognized
national standing selected by the Board of Directors of the Company (who
shall be appointed at the Company's expense and who may be the independent
public accountants regularly employed by the Company) setting forth the
number of Warrant Shares and the Exercise Price of such Warrant Shares after
such adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was
made.
7. PUT RIGHTS. The Warrantholder shall have the following Put
Rights:
(a) At the earlier of (i) the fifth anniversary of the
date hereof and (ii) a Change of Control, the Warrantholder may notify the
Company in writing (the "PUT NOTICE") of the Warrantholder's desire to cause
the Company to repurchase, in the case of clause (i) above, all (but not less
than all) of the Warrant Shares (issued or represented by the Warrant) at a
price per share equal to the Repurchase Price (the "Five-Year Put"), or, in
the case of clause (ii) above, the Warrant at the Change of Control
Repurchase Price (the "Change of Control Put").
(b) If the Company receives a Put Notice pursuant to
Section 7(a), it shall deliver to the Warrantholder, by first class mail,
postage prepaid, mailed as soon as practicable and if possible within thirty
(30) days of the receipt by the Company of the Put Notice, a notice stating:
(i) the date as of which such repurchase shall occur (which date (the "Put
Closing") shall be not less than ten (10) nor more than thirty (30) days
following the date of such notice, but in any event prior to the Expiration
Date); (ii) in the case of a Five-Year Put, the number of Warrant Shares
(issued or represented by this Warrant) to be purchased from the
Warrantholder and the Repurchase Price (which shall be calculated as of the
date of the Put Notice) or, in the case of a Change of Control Put, the
Change of Control Repurchase Price; and (iii) the place or places where
certificate or certificates representing this Warrant or Warrant Shares are
to be surrendered for payment; PROVIDED, HOWEVER, that the Company shall have
no obligation to send the notice set forth above or to repurchase the
Warrants and
<PAGE>
Warrant Shares following the exercise of the Five Year Put (and the
provisions of paragraph (c) below shall not be applicable to any failure by
the Company to repurchase the Warrants and the Warrant Shares following the
exercise of the Five Year Put), unless the holders of not less than a
majority of the shares of Common Stock issued or issuable upon exercise of
the Investor Warrants (the "Investor Warrant Shares") shall also have
exercised the "five year put" provided for in the Investor Warrants.
(c) With respect to Warrants and Warrant Shares properly
tendered for repurchase, if the Company fails to pay the Repurchase Price or
the Change of Control Repurchase Price on the date fixed for repurchase, the
Corporation shall also pay interest thereon at the rate of 12% per annum,
compounded on a quarterly basis, until such time as such satisfaction shall
have occurred.
(d) At the Put Closing, the Warrantholder shall deliver
to the Company the certificate or certificates representing the
Warrantholder's Warrant or Warrant Shares and the Company shall deliver to
the Warrantholder an amount equal to, in the case of a Five-Year Put, the
product obtained by multiplying (i) the number of such Warrant Shares (issued
or represented by this Warrant) by (ii) the Repurchase Price or, in the case
of a Change of Control Put, the Change of Control Repurchase Price, by
cashier's or certified check payable to the Warrantholder or by wire transfer
of immediately available funds to an account designated by the Warrantholder.
(e) The Company shall not (and shall not permit any
Affiliate of the Company to) enter into any contract or other consensual
arrangement that by its terms restricts the Company's ability to honor the
Put.
8. AMENDMENTS. Any provision of this Warrant may be amended and
the observance thereof waived only with the written consent of the Company
and the Warrantholder.
9. NOTICES OF CORPORATE ACTION. So long as this Warrant has not
been exercised in full, in the event of:
(a) any consolidation or merger involving the Company
and any other party or any transfer of all or substantially all the assets of
the Company to any other party, or
(b) any voluntary or involuntary dissolution,
liquidation or winding-up of the Company,
the Company will mail, by first class mail, postage prepaid, to the
Warrantholder a
<PAGE>
notice specifying (i) the date or expected date on which any such record is
to be taken for the purpose of a dividend, distribution or right and the
amount and character of any such dividend, distribution or right and (ii) the
date or expected date on which a reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution, liquidation
or winding-up is to take place and the time, if any such time is to be fixed,
as of which the holders of record of Common Stock (or other securities) shall
be entitled to exchange their shares of Common Stock (or other securities)
for the securities or other property deliverable upon such reorganization,
reclassification, recapitalization, consolidation, merger, transfer,
dissolution, liquidation or winding-up. Such notice shall be delivered as
soon as practicable and if possible at least 20 days prior to the date
therein specified in the case of any date referred to in the foregoing
subdivisions (i) and (ii). Failure to give the notice specified hereunder
shall have no effect on the status or effectiveness of the action to which
the required notice relates.
10. DEFINITIONS.
As used herein, unless the context otherwise requires, the
following terms have the following meanings:
"AFFILIATE" means, with respect to any Person, any other Person
that, directly or indirectly, controls, is controlled by, or is under common
control with such first Person. For the purpose of this definition,
"control" shall mean, as to any Person, the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"AFFILIATE WARRANTS" mean the warrants issued in connection with
the issue and sale by the Company of shares of its Series C Preferred Stock
on the Closing Date (as defined in the Investment Agreement).
"BUSINESS DAY" means any day other than a Saturday, Sunday or a day
on which national banks are authorized by law or executive order to close in
the State of New York.
"CHANGE OF CONTROL" shall mean (i) the direct or indirect sale,
lease, exchange or other transfer of all or substantially all of the assets
of the Company to any Person or entity or group of Persons or entities acting
in concert as a partnership or other group within the meaning of Rule 13d-5
under the Exchange Act (a "GROUP OF PERSONS"), (ii) the merger or
consolidation of the Company with or into another corporation with the effect
that the then existing stockholders of the Company hold less than 50% of the
combined voting power of the then outstanding securities of the surviving
corporation of such merger or the corporation resulting from such
<PAGE>
consolidation ordinarily (and apart from rights accruing under special
circumstances) having the right to vote in the election of directors, (iii)
the replacement of a majority of the Board of Directors of the Company, over
a two-year period, from the directors who constituted the Board of Directors
at the beginning of such period, and such replacement shall not have been
approved by the Board of Directors of the Company (or its replacements
approved by the Board of Directors of the Company) as constituted at the
beginning of such period, (iv) a Person or Group of Persons (other than the
Investors and their Affiliates, employees, partners or members) shall, as a
result of a tender or exchange offer, open market purchases, privately
negotiated purchases or otherwise, have become the beneficial owner (within
the meaning of Rule 13d-3 under the Exchange Act) of securities of the
Company representing 49% or more of the combined voting power of the then
outstanding securities of the Company ordinarily (and apart from rights
accruing under special circumstances) having the right to vote in the
election of directors. Notwithstanding the foregoing, no Change in Control
shall be deemed to have occurred (a) upon the acquisition of any shares of
Common Stock of the Company pursuant to the exercise of the Investor
Warrants, (b) upon the exercise of any of the rights and privileges granted
to each of the Investors pursuant to Section 6.2.5 of the Investment
Agreement, (c) upon the exercise of any rights and privileges granted to the
holders of the Series B Preferred Stock pursuant to the Certification of the
Powers, Designations, Preferences and Rights of the Series B Preferred Stock
or (d) otherwise as a result of the equity ownership or designation of
directors by the Investors or their Affiliates, employees, partners or
members.
"CHANGE OF CONTROL REPURCHASE PRICE" means (i) if any Investor
Warrants are then outstanding, an amount in cash, on a per Warrant Share
basis, equal to the "Change of Control Repurchase Price" (on a per Investor
Warrant Share basis) for the Investor Warrants, or (ii) if no Investor
Warrants are then outstanding, an amount of cash equal to the fair market
value of this Warrant immediately prior to the announcement of a Change of
Control, to be determined by an Independent Financial Expert selected by the
Company and a majority in interest of the Warrant Shares, giving due
consideration to such factors as the financial condition and prospects of the
Company, the remaining unexpired term of this Warrant and the market price of
the Common Stock of the Company after announcement of such Change of Control.
"CLOSING PRICE" of the Common Stock as of any day, means (a) the
last reported sale price of such stock (regular way) or, in case no such sale
takes place on such day, the average of the closing bid and asked prices, in
either case as reported on the principal national securities exchange on
which the Common Stock is listed or admitted to trading or (b) if the Common
Stock is not listed or admitted to trading on any national securities
exchange, the last reported sale price or, in case no such sale
<PAGE>
takes place on such day, the average of the highest reported bid and lowest
reported asked quotation for the Common Stock, in either case reported on the
National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ"), or a similar service if NASDAQ is no longer reporting such
information.
"COMMON STOCK" has the meaning specified on the cover of this
Warrant.
"COMPANY" has the meaning specified on the cover of this Warrant.
"CURRENT MARKET PRICE" means, with respect to each share of Common
Stock as of any date, the average of the daily Closing Prices per share of
Common Stock for the 10 consecutive trading days commencing 15 trading days
prior to such date; provided that if on any such date the shares of Common
Stock are not listed or admitted for trading on any national securities
exchange or quoted by NASDAQ or a similar service, the Current Market Price
for a share of Common Stock shall be the fair market value of such share as
determined in good faith by the Board of Directors of the Company; provided
that if the holders of a majority in interest of the Investor Warrant Shares
disagree with the Board of Director's determination of fair market value for
purposes of the Investor Warrants, the fair market value for purposes of this
Warrant shall be the same as the fair market value determined for purposes of
the Investor Warrants.
"EXERCISE FORM" means an Exercise Form in the form annexed hereto
as Exhibit A.
"EXPIRATION DATE" has the meaning specified on the cover of this
Warrant.
"HARNICK WARRANT" means the warrant to purchase 50,000 shares of
Common Stock issued to Carl D. Harnick at the closing of the Investment
Agreement.
"INDEPENDENT FINANCIAL EXPERT" means an independent nationally
recognized investment banking firm.
"INVESTMENT AGREEMENT" means the Investment Agreement, dated as of
October 12, 1997, as amended and as hereafter amended, among the Investors
and the Company.
"INVESTORS" means MAC Music LLC, a Delaware limited liability
company, and SK-Palladin Partners, LP, a Delaware limited partnership.
"INVESTOR WARRANTS" mean the warrants issued to the Investors
pursuant to
<PAGE>
the Investment Agreement.
"INVESTOR WARRANT SHARES" mean the shares of Common Stock issued or
issuable upon exercise of the Investor Warrants.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, limited liability company,
unincorporated organization, estate, other entity or government or any agency
or political subdivision thereof.
"PRO RATA REPURCHASE" means any purchase of shares of Common Stock
by the Company or by any of its subsidiaries whether for cash, shares of
capital stock of the Company, other securities of the Company, evidences of
indebtedness of the Company or any other Person or any other property
(including, without limitation, shares of capital stock, other securities or
evidences of indebtedness of a subsidiary of the Company), or any combination
thereof, which purchase is subject to Section 13(e) of the Securities
Exchange Act of 1934, as amended, or is made pursuant to an offer made
available to all holders of Common Stock.
"REPURCHASE PRICE" means, on any date, the Current Market Price per
share of Common Stock as of such date, less the per share Exercise Price;
PROVIDED, that if at the time of determination of the Repurchase Price, the
Warrantholder shall be entitled to receive any securities or property other
than Common Stock, the Repurchase Price shall include a cash amount per
Warrant Share equal to that portion of the fair value of such securities or
property allocable to each Warrant Share.
"SECURITIES ACT" has the meaning specified on the cover of this
Warrant.
"WARRANTHOLDER" has the meaning specified on the cover of this
Warrant.
"WARRANT SHARES" has the meaning specified on the cover of this
Warrant; provided, however, that Warrant Shares shall not include shares sold
to the public pursuant to Rule 144 under the Securities Act of 1933, as
amended, or pursuant to an effective registration statement under the
Securities Act.
11. MISCELLANEOUS.
11.1 ENTIRE AGREEMENT. This Warrant constitutes the entire
agreement between the Company and the Warrantholder with respect to this
Warrant.
11.2 BINDING EFFECT; BENEFITS. This Warrant shall inure to
the
<PAGE>
benefit of and shall be binding upon the Company and the Warrantholder and
their respective successors and assigns. Nothing in this Warrant, expressed
or implied, is intended to or shall confer on any person other than the
Company and the Warrantholder, or their respective successors or assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Warrant.
11.3 SECTION AND OTHER HEADINGS. The section and other
headings contained in this Warrant are for reference purposes only and shall
not be deemed to be a part of this Warrant or to affect the meaning or
interpretation of this Warrant.
11.4 NOTICES. All notices and other communications required
or permitted hereunder shall be in writing and shall be delivered personally,
telecopied or sent by certified, registered or express mail, postage prepaid.
Any such notice shall be deemed given when so delivered personally,
telecopied or sent by certified, registered or express mail, as follows:
(a) if to the Company, addressed to:
Platinum Entertainment, Inc.
2001 Butterfield Road
Downers Grove, Illinois 60515
Telecopy: (630) 769-0049
Attention: Chief Executive Officer
with a copy to:
Katten, Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661
Telecopy: (312) 902-1061
Attention: Matthew S. Brown, Esq.
(b) if to the Warrantholder, addressed to:
<PAGE>
Telecopy:
Any party may by notice given in accordance with this Section 11.4 designate
another address or person for receipt of notices hereunder.
11.5 SEVERABILITY. Any term or provision of this Warrant
which is invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the terms and
provisions of this Warrant or affecting the validity or enforceability of any
of the terms or provisions of this Warrant in any other jurisdiction.
11.6 GOVERNING LAW. This Warrant shall be deemed to be a
contract made under the laws of the State of Delaware and for all purposes
shall be governed by and construed in accordance with the laws of such State
applicable to such agreements made and to be performed entirely within such
State.
11.7 CERTAIN REMEDIES. The Warrantholder shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Warrant and to enforce specifically the terms and provisions of this Warrant
in any court of the United States or any court of any state having
jurisdiction, this being in addition to any other remedy to which the
Warrantholder may be entitled at law or in equity.
11.8 NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing
contained in this Warrant shall be deemed to confer upon the Warrantholder
any rights as a stockholder of the Company or as imposing any liabilities on
the Warrantholder to purchase any securities whether such liabilities are
asserted by the Company or by creditors or stockholders of the Company or
otherwise.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its duly authorized officer.
PLATINUM ENTERTAINMENT, INC.
By: /s/ DOUGLAS C. LAUX
---------------------------------------
Name: Douglas C. Laux
Title: Chief Operating Officer and
Chief Financial Officer
Dated: April 15, 1999
<PAGE>
EXHIBIT A
EXERCISE FORM
(To be executed upon exercise of this Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant, to purchase __________ of the Warrant Shares and
[herewith tenders payment for such Warrant Shares to the order of Platinum
Entertainment, Inc. in the amount of $__________] [hereby exercises its
Conversion Right] in accordance with the terms of this Warrant. The undersigned
requests that a certificate for [such Warrant Shares] [that number of Warrant
Shares to which the undersigned is entitled as calculated pursuant to
Section 1.2] be registered in the name of the undersigned and that such
certificates be delivered to the undersigned's address below.
Dated:__________________________
Signature____________________________
____________________________
(Print Name)
____________________________
(Street Address)
____________________________
(City) (State) (Zip Code)
<PAGE>
NEITHER THIS WARRANT NOR ANY SECURITIES ACQUIRED UPON THE EXERCISE OF
THIS WARRANT (THE "SECURITIES") HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND
NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS AS
EVIDENCED BY AN OPINION OF COUNSEL DELIVERED AND REASONABLY ACCEPTABLE TO THE
COMPANY.
______________________________________________
PLATINUM ENTERTAINMENT, INC.
COMMON STOCK PURCHASE WARRANT
_______________________________________________
This certifies that, for good and valuable consideration, Platinum
Entertainment, Inc., a Delaware corporation (the "Company"), grants to Andrew J.
Filipowski, his successors and permitted assigns (the "Warrantholder"), the
right to subscribe for and purchase from the Company Eighty-Eight Thousand Three
Hundred and Thirty (88,330) validly issued, fully paid and nonassessable shares
(the "Warrant Shares") of the Company's Common Stock, par value $.001 per share
(the "Common Stock"), at the purchase price per share equal to the Exercise
Price, as defined herein, at any time prior to 5:00 p.m., Central Standard Time,
on April 15, 2009 (the "Expiration Date"), subject to the terms, conditions and
adjustments herein set forth. References herein to "Warrants" or "Warrant"
shall mean this Warrant.
The "Exercise Price" shall mean $6.126; which price is equal to the
average of the daily Closing Price per share of Common Stock for the trailing 30
consecutive trading days from and including April 9, 1999. The Exercise Price
as determined in accordance with the foregoing shall be adjusted from time to
time in accordance with the provisions of Section 6.
<PAGE>
1. EXERCISE OF WARRANTS.
1.1 EXERCISE OF WARRANT. This Warrant may be exercised, in
whole or in part, at any time or from time to time prior to the Expiration
Date, by surrendering to the Company at its principal office this Warrant,
with an Exercise Form (as defined herein) duly executed by the Warrantholder
and accompanied by payment of the Exercise Price for the number of shares of
Common Stock specified in such Exercise Form.
1.2 CASHLESS EXERCISE. In lieu of the payment of the
Exercise Price, the Warrantholder shall have the right (but not the
obligation) to require the Company to convert this Warrant, in whole or in
part, into shares of Common Stock (the "Conversion Right") as provided for in
this Section 1.2. Upon exercise of the Conversion Right, the Company shall
deliver to the Warrantholder (without payment by the Warrantholder of any of
the Exercise Price) that number of shares of Common Stock equal to the
quotient obtained by dividing (x) the value of the Warrant or portion thereof
being exercised at the time the Conversion Right is exercised (determined by
subtracting the aggregate Exercise Price in effect immediately prior to the
exercise of the Conversion Right for the number of shares for which the
Warrant is being exercised from the aggregate Current Market Price (as
defined herein) of the shares of Common Stock issuable upon exercise of the
Warrant for the number of shares for which the Warrant is being exercised
immediately prior to the exercise of the Conversion Right) by (y) the Current
Market Price of one share of Common Stock immediately prior to the exercise
of the Conversion Right. The Conversion Right may be exercised at any time
or from time to time prior to the Expiration Date by surrendering to the
Company at its principal office this Warrant, with an Exercise Form duly
executed by the Warrantholder and indicating that the Warrantholder wishes to
exercise the Conversion Right and specifying the total number of shares of
Common Stock for which the Warrant is being exercised.
1.3 DELIVERY OF WARRANT SHARES; EFFECTIVENESS OF EXERCISE.
(a) DELIVERY OF WARRANT SHARES. A stock certificate or
certificates for the Warrant Shares specified in the Exercise Form along with
a check for the amount of cash to be paid in lieu of fractional shares, if
any, shall be delivered to the Warrantholder within 10 Business Days after
the Exercise Date (as defined herein); PROVIDED, HOWEVER, that if the
Conversion Right is exercised in accordance with Section 1.2 and a
determination by the Board of Directors is required to determine the Current
Market Price of the Common Stock, such delivery shall be made promptly after
such determination is made. If this Warrant shall have been exercised only
in part, the Company shall, at the time of delivery of the stock certificate
or
<PAGE>
certificates and cash in lieu of fractional shares, if any, deliver to the
Warrantholder a new Warrant evidencing the rights to purchase the remaining
Warrant Shares, which new Warrant shall in all other respects be identical
with this Warrant.
(b) EFFECTIVENESS OF EXERCISE. The exercise of this
Warrant shall be deemed to have been effective immediately prior to the close
of business on the Business Day on which this Warrant is exercised in
accordance with Section 1.1 or 1.2 (the "Exercise Date"). The Person in
whose name any certificate for shares of Common Stock shall be issuable upon
such exercise shall be deemed to be the record holder of such shares of
Common Stock for all purposes on the Exercise Date.
1.4 PAYMENT OF TAXES. The issuance of certificates for
Warrant Shares shall be made without charge to the Warrantholder for any
stock transfer or other issuance tax in respect thereof; PROVIDED, HOWEVER,
that the Warrantholder shall be required to pay any and all taxes that may be
payable in respect of any transfer involved in the issuance and delivery of
any certificate in a name other than that of the then Warrantholder as
reflected upon the books of the Company.
2. RESTRICTIVE LEGENDS.
2.1 WARRANTS. Except as otherwise permitted by this Section
2, each Warrant (and each Warrant issued in substitution for any Warrant
pursuant to Section 4) shall be stamped or otherwise imprinted with a legend
in substantially the following form:
NEITHER THIS WARRANT NOR ANY SECURITIES ACQUIRED UPON THE EXERCISE OF
THIS WARRANT (THE "SECURITIES") HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED,
SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER
SUCH ACT AND SUCH LAWS AS EVIDENCED BY AN OPINION OF COUNSEL DELIVERED AND
REASONABLY ACCEPTABLE TO THE COMPANY.
2.2 WARRANT SHARES. Except as otherwise permitted by this
Section 2, each stock certificate for Warrant Shares issued upon the exercise of
any Warrant and each stock certificate issued upon the direct or indirect
transfer of any
<PAGE>
such Warrant Shares shall be stamped or otherwise imprinted with a legend in
substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT AND SUCH LAWS AS EVIDENCED BY AN OPINION OF COUNSEL
DELIVERED AND REASONABLY ACCEPTABLE TO THE COMPANY.
2.3 REMOVAL OF LEGENDS. Notwithstanding the foregoing, the
Warrantholder may require the Company to issue a Warrant or a stock
certificate for Warrant Shares, in each case without a legend, if either (i)
such Warrant or such Warrant Shares, as the case may be, have been registered
for resale under the Securities Act and sold pursuant to such registration or
(ii) if reasonably requested by the Company, the Warrantholder has delivered
to the Company an opinion of legal counsel (from a firm reasonably
satisfactory to the Company) which opinion shall be addressed to the Company
and be reasonably satisfactory in form and substance to the Company's
counsel, to the effect that such registration is not required with respect to
such Warrant or such Warrant Shares, as the case may be.
3. RESERVATION AND REGISTRATION OF SHARES, ETC.
The Company covenants and agrees as follows:
(a) All Warrant Shares that are issued upon the exercise
of this Warrant will, upon issuance, be validly issued, fully paid and
nonassessable, not subject to any preemptive rights, and free from all taxes,
liens, security interests, charges, and other encumbrances with respect to
the issuance thereof, other than taxes in respect of any transfer occurring
contemporaneously with such issue.
(b) During the period within which this Warrant may be
exercised, the Company will at all times have authorized and reserved, and
keep available free from preemptive rights, a sufficient number of shares of
Common Stock to provide for the exercise of the rights represented by this
Warrant.
<PAGE>
4. LOSS OR DESTRUCTION OF WARRANT.
Subject to the terms and conditions hereof, upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant and, in the case of loss, theft or
destruction, of such bond or indemnification as the Company may reasonably
require, and, in the case of mutilation, upon surrender and cancellation of
this Warrant, the Company will execute and deliver a new Warrant of like
tenor.
5. OWNERSHIP OF WARRANT.
The Company may deem and treat the Person in whose name this
Warrant is registered as the holder and owner hereof (notwithstanding any
notations of ownership or writing hereon made by anyone other than the
Company) for all purposes and shall not be affected by any notice to the
contrary, until presentation of this Warrant for registration of transfer.
6. CERTAIN ADJUSTMENTS.
6.1 The number of Warrant Shares purchasable upon the
exercise of this Warrant and the Exercise Price shall be subject to
adjustment as follows:
(a) STOCK DIVIDENDS, SUBDIVISION, COMBINATION OR
RECLASSIFICATION OF COMMON STOCK. If at any time after the date of the
issuance of this Warrant the Company shall (i) declare a stock dividend on
the Common Stock payable in shares of its capital stock (including Common
Stock), (ii) increase the number of shares of Common Stock outstanding by a
subdivision or split-up of shares of Common Stock, (iii) decrease the number
of shares of Common Stock outstanding by a combination of shares of Common
Stock or (iv) issue any shares of its capital stock in a reclassification of
the Common Stock, then, on the record date for such dividend or the effective
date of such subdivision or split-up, combination or reclassification, as the
case may be, the number and kind of shares to be delivered upon exercise of
this Warrant will be adjusted so that the Warrantholder will be entitled to
receive the number and kind of shares of capital stock that such
Warrantholder would have owned or been entitled to receive upon or by reason
of such event had this Warrant been exercised immediately prior thereto, and
the Exercise Price will be adjusted as provided below in paragraph (i).
(b) REORGANIZATION, ETC. If at any time after the date
of issuance of this Warrant any consolidation of the Company with or merger
of the
<PAGE>
Company with or into any other Person (other than a merger or consolidation
in which the Company is the surviving or continuing corporation and which
does not result in any reclassification of, or change (other than a change in
par value or from par value to no par value or from no par value to par
value, or as a result of a subdivision or combination) in, outstanding shares
of Common Stock) or any sale, lease or other transfer of all or substantially
all of the assets of the Company to any other person (each, a "Reorganization
Event"), shall be effected in such a way that the holders of Common Stock
shall be entitled to receive cash, stock, other securities or assets (whether
such cash, stock, other securities or assets are issued or distributed by the
Company or another Person) with respect to or in exchange for Common Stock,
then, upon exercise of this Warrant the Warrantholder shall have the right to
receive the kind and amount of cash, stock, other securities or assets
receivable upon such Reorganization Event by a holder of the number of shares
of Common Stock that such Warrantholder would have been entitled to receive
upon exercise of this Warrant had this Warrant been exercised immediately
before such Reorganization Event, subject to adjustments that shall be as
nearly equivalent as may be practicable to the adjustments provided for in
this Section 6.1. Notwithstanding the foregoing, if more than 20% in
aggregate value of the cash, stock, other securities or assets deliverable to
such holder in accordance with the foregoing provisions of this Section 6(b)
would consist of cash or debt securities, then the Warrantholder shall have
the right (the "Special Reorganization Right") at its election, exercisable
by giving written notice to the Company prior to 120 days following the
consummation of such Reorganization Event to receive from the Company, and
the Company shall pay to the Warrantholder promptly after the exercise by the
Warrantholder of the Special Reorganization Right, instead of the cash,
stock, other securities or assets otherwise deliverable to such holder, an
amount of cash equal to the fair market value of this Warrant immediately
prior to the announcement of such Reorganization Event, to be determined by
an Independent Financial Expert giving due consideration to such factors as
the financial condition and prospects of the Company, the remaining unexpired
term of the Warrant and the market price of the Common Stock of the Company
after announcement of such Reorganization Event. The Company shall not enter
into any of the transactions referred to in this Section 6.1(b) unless
effective provision shall be made so as to give effect to the provisions set
forth in this Section 6.1(b).
(c) CERTAIN ISSUANCES OF COMMON STOCK. If at any time
after the date of issuance of this warrant the Company shall issue or sell,
or fix a record date for the issuance of, (A) Common Stock (or securities
convertible into or exchangeable or exercisable for Common Stock) (other than
Excluded Securities) or (B) rights, options or warrants entitling the holders
thereof to subscribe for or purchase Common Stock (or securities convertible
into or exchangeable or exercisable for Common Stock) (other than Excluded
Securities), in any such case, at a price per share (treating the price per
share of the securities convertible into or exchangeable or
<PAGE>
exercisable for Common Stock as equal to (x) the sum of (i) the price for a
unit of the security convertible into or exchangeable or exercisable for
Common Stock plus (ii) any additional consideration initially payable upon
the conversion of such security into Common Stock or the exchange or exercise
of such security for Common Stock divided by (y) the number of shares of
Common Stock initially underlying such convertible, exchangeable or
exercisable security) that is less than the greater of the Current Market
Price of the Common Stock and the Exercise Price on the date of such issuance
or such record date (the "Measuring Price") then, immediately after the date
of such issuance or sale or on such record date, the number of shares of
Common Stock to be delivered upon exercise of this Warrant shall be increased
so that the Warrantholder thereafter shall be entitled to receive the number
of shares of Common Stock determined by multiplying the number of shares of
Common Stock such Warrantholder would have been entitled to receive
immediately before the date of such issuance or sale or such record date by a
fraction, the denominator of which shall be the number of shares of Common
Stock outstanding (calculated to include the shares of Common Stock
underlying the Warrants, the Investor Warrants, the Affiliate Warrants, the
Harnick Warrant and all then currently exerciseable, convertible and
exchangeable securities that are "in the money") on such date plus the number
of shares of Common Stock that the aggregate offering price of the total
number of shares so offered for subscription or purchase (or the aggregate
purchase price of the convertible, exchangeable or exerciseable securities so
offered plus the aggregate of amount of any additional consideration
initially payable upon conversion into Common Stock or exchange or exercise
for Common Stock) would purchase at the Measuring Price and the numerator of
which shall be the number of shares of Common Stock outstanding (calculated
to include the shares of Common Stock underlying the Warrants, the Investor
Warrants, Affiliate Warrants, the Harnick Warrant and all then currently
exerciseable, convertible and exchangeable securities that are "in the money")
on such date plus the number of additional shares of Common Stock offered for
subscription or purchase (or into or for which the convertible or
exchangeable securities or rights, options or warrants so offered are
initially convertible or exchangeable or exercisable, as the case may be),
and the Exercise Price shall be adjusted as provided below in paragraph (i).
"Excluded Securities" means (A) shares of Common Stock issued upon conversion
or exercise of convertible securities, warrants and options of the Company,
outstanding on the date this Warrant is originally issued, (B) shares of
Common Stock, and options to purchase such shares, issued to officers,
directors, employees or former employees of, or consultants to, the Company
or any of its subsidiaries pursuant to any equity incentive plan, agreement
or other arrangement which has been approved by a vote of at least two-thirds
(2/3) of the Board of Directors of the Company, (C) shares of Common Stock
issued upon conversion of shares of the Company's Series B Convertible
Preferred Stock, par value $.001 per share (the "Series B Preferred Stock"),
(D) shares of Common Stock issued upon exercise of the Investor Warrants,
including any increase in the number of shares of Common Stock issuable under
such Investor Warrants as a result of the conditional annual increase
provision included therein, (E) shares of Common
<PAGE>
Stock issued upon conversion of shares of the Company's Series C Convertible
Preferred Stock, par value $.001 per share (the "Series C Preferred Stock"),
(F) shares of Common Stock issued upon exercise of the Affiliate Warrants,
(G) shares of Common Stock issued upon exercise of the Harnick Warrant, (H)
shares of Common Stock issuable upon conversion of shares of the Company's
Series D Preferred Stock, and (I) shares of Common Stock issued upon exercise
of any Warrant.
(d) EXTRAORDINARY DISTRIBUTIONS. If at any time after
the date of issuance of this Warrant the Company shall distribute to all
holders of its Common Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the
continuing or surviving corporation and the Common Stock is not changed or
exchanged) cash, evidences of indebtedness, securities or other assets
(excluding (i) ordinary course cash dividends to the extent such dividends do
not exceed the Company's retained earnings and (ii) dividends payable in
shares of capital stock for which adjustment is made under Section 6.1(a)) or
rights, options or warrants to subscribe for or purchase securities of the
Company (excluding those for which adjustment is made under Section 6.1(c)),
then the number of shares of Common Stock to be delivered to such
Warrantholder upon exercise of this Warrant shall be increased so that the
Warrantholder thereafter shall be entitled to receive the number of shares of
Common Stock determined by multiplying the number of shares such
Warrantholder would have been entitled to receive immediately before such
record date by a fraction, the denominator of which shall be the Current
Market Price per share of Common Stock on such record date minus the then
fair market value (as reasonably determined by the Board of Directors of the
Company in good faith) of the portion of the cash, evidences of indebtedness,
securities or other assets so distributed or of such rights or warrants
applicable to one share of Common Stock (provided that such denominator shall
in no event be less than $.01) and the numerator of which shall be the
Current Market Price per share of the Common Stock, and the Exercise Price
shall be adjusted as provided below in paragraph (h).
(e) PRO RATA REPURCHASES. If at any time after the date
of issuance of this Warrant, the Company or any subsidiary thereof shall make
a Pro Rata Repurchase, then the number of shares of Common Stock to be
delivered to such Warrantholder upon exercise of this Warrant shall be
increased so that the Warrantholder thereafter shall be entitled to receive
the number of shares of Common Stock determined by multiplying the number of
shares of Common Stock such Warrantholder would have been entitled to receive
immediately before such Pro Rata Repurchase by a fraction (which in no event
shall be less than one) the denominator of which shall be (i) the product of
(x) the number of shares of Common Stock outstanding immediately before such
Pro Rata Repurchase and (y) the Current Market Price of the Common Stock as
of the day immediately preceding the first public announcement by the Company
of the intent to effect such Pro Rata Repurchase minus (ii) the aggregate
<PAGE>
purchase price of the Pro Rata Repurchase (provided that such denominator
shall never be less than $.01), and the numerator of which shall be the
product of (i) the number of shares of Common Stock outstanding immediately
before such Pro Rata Repurchase minus the number of shares of Common Stock
repurchased in such Pro Rata Repurchase and (ii) the Current Market Price of
the Common Stock as of the day immediately preceding the first public
announcement by the Company of the intent to effect such Pro Rata Repurchase.
(f) FRACTIONAL SHARES. No fractional shares of Common
Stock or scrip shall be issued to any Warrantholder in connection with the
exercise of this Warrant. Instead of any fractional shares of Common Stock
that would otherwise be issuable to such Warrantholder, the Company will pay
to such Warrantholder a cash adjustment in respect of such fractional
interest in an amount equal to that fractional interest of the then Current
Market Price per share of Common Stock.
(g) CARRYOVER. Notwithstanding any other provision of
this Section 6.1, no adjustment shall be made to the number of shares of
Common Stock to be delivered to the Warrantholder (or to the Exercise Price)
if such adjustment represents less than .05% of the number of shares to be so
delivered, but any lesser adjustment shall be carried forward and shall be
made at the time and together with the next subsequent adjustment that
together with any adjustments so carried forward shall amount to .05% or more
of the number of shares to be so delivered.
(h) EXERCISE PRICE ADJUSTMENT. Whenever the number of
Warrant Shares purchasable upon the exercise of the Warrant is adjusted as
provided pursuant to this Section 6.1, the Exercise Price per share payable
upon the exercise of this Warrant shall be adjusted by multiplying such
Exercise Price immediately prior to such adjustment by a fraction, of which
the numerator shall be the number of Warrant Shares purchasable upon the
exercise of the Warrant immediately prior to such adjustment, and of which
the denominator shall be the number of Warrant Shares purchasable immediately
thereafter; PROVIDED, HOWEVER, that the Exercise Price for each Warrant Share
shall in no event be less than the par value of such Warrant Share.
(i) MULTIPLE ADJUSTMENTS. If any action or transaction
would require adjustment of the number of shares of Common Stock to be
delivered to the Warrantholder upon exercise of this Warrant pursuant to more
than one paragraph of this Section 6.1, only one adjustment shall be made and
each such adjustment shall be the amount of adjustment that has the highest
absolute value.
6.2 NOTICE OF ADJUSTMENT. Whenever the number of Warrant
Shares or the Exercise Price of such Warrant Shares is adjusted, as herein
provided, the
<PAGE>
Company shall promptly mail by first class mail, postage prepaid, to the
Warrantholder, notice of such adjustment or adjustments and a certificate of
a firm of independent public accountants of recognized national standing
selected by the Board of Directors of the Company (who shall be appointed at
the Company's expense and who may be the independent public accountants
regularly employed by the Company) setting forth the number of Warrant Shares
and the Exercise Price of such Warrant Shares after such adjustment, setting
forth a brief statement of the facts requiring such adjustment and setting
forth the computation by which such adjustment was made.
7. PUT RIGHTS. The Warrantholder shall have the following Put
Rights:
(a) At the earlier of (i) the fifth anniversary of the
date hereof and (ii) a Change of Control, the Warrantholder may notify the
Company in writing (the "PUT NOTICE") of the Warrantholder's desire to cause
the Company to repurchase, in the case of clause (i) above, all (but not less
than all) of the Warrant Shares (issued or represented by the Warrant) at a
price per share equal to the Repurchase Price (the "Five-Year Put"), or, in
the case of clause (ii) above, the Warrant at the Change of Control
Repurchase Price (the "Change of Control Put").
(b) If the Company receives a Put Notice pursuant to
Section 7(a), it shall deliver to the Warrantholder, by first class mail,
postage prepaid, mailed as soon as practicable and if possible within thirty
(30) days of the receipt by the Company of the Put Notice, a notice stating:
(i) the date as of which such repurchase shall occur (which date (the "Put
Closing") shall be not less than ten (10) nor more than thirty (30) days
following the date of such notice, but in any event prior to the Expiration
Date); (ii) in the case of a Five-Year Put, the number of Warrant Shares
(issued or represented by this Warrant) to be purchased from the
Warrantholder and the Repurchase Price (which shall be calculated as of the
date of the Put Notice) or, in the case of a Change of Control Put, the
Change of Control Repurchase Price; and (iii) the place or places where
certificate or certificates representing this Warrant or Warrant Shares are
to be surrendered for payment; PROVIDED, HOWEVER, that the Company shall have
no obligation to send the notice set forth above or to repurchase the
Warrants and Warrant Shares following the exercise of the Five Year Put (and
the provisions of paragraph (c) below shall not be applicable to any failure
by the Company to repurchase the Warrants and the Warrant Shares following
the exercise of the Five Year Put), unless the holders of not less than a
majority of the shares of Common Stock issued or issuable upon exercise of
the Investor Warrants (the "Investor Warrant Shares") shall also have
exercised the "five year put" provided for in the Investor Warrants.
<PAGE>
(c) With respect to Warrants and Warrant Shares properly
tendered for repurchase, if the Company fails to pay the Repurchase Price or
the Change of Control Repurchase Price on the date fixed for repurchase, the
Corporation shall also pay interest thereon at the rate of 12% per annum,
compounded on a quarterly basis, until such time as such satisfaction shall
have occurred.
(d) At the Put Closing, the Warrantholder shall deliver
to the Company the certificate or certificates representing the
Warrantholder's Warrant or Warrant Shares and the Company shall deliver to
the Warrantholder an amount equal to, in the case of a Five-Year Put, the
product obtained by multiplying (i) the number of such Warrant Shares (issued
or represented by this Warrant) by (ii) the Repurchase Price or, in the case
of a Change of Control Put, the Change of Control Repurchase Price, by
cashier's or certified check payable to the Warrantholder or by wire transfer
of immediately available funds to an account designated by the Warrantholder.
(e) The Company shall not (and shall not permit any
Affiliate of the Company to) enter into any contract or other consensual
arrangement that by its terms restricts the Company's ability to honor the
Put.
8. AMENDMENTS. Any provision of this Warrant may be amended and
the observance thereof waived only with the written consent of the Company
and the Warrantholder.
9. NOTICES OF CORPORATE ACTION. So long as this Warrant has not
been exercised in full, in the event of:
(a) any consolidation or merger involving the Company
and any other party or any transfer of all or substantially all the assets of
the Company to any other party, or
(b) any voluntary or involuntary dissolution,
liquidation or winding-up of the Company,
the Company will mail, by first class mail, postage prepaid, to the
Warrantholder a notice specifying (i) the date or expected date on which any
such record is to be taken for the purpose of a dividend, distribution or
right and the amount and character of any such dividend, distribution or
right and (ii) the date or expected date on which a reorganization,
reclassification, recapitalization, consolidation, merger, transfer,
dissolution, liquidation or winding-up is to take place and the time, if any
such time is to be fixed, as of which the holders of record of Common Stock
(or other securities) shall be entitled to exchange their shares of Common
Stock (or other securities) for the securities or other property deliverable
upon such reorganization, reclassification,
<PAGE>
recapitalization, consolidation, merger, transfer, dissolution, liquidation
or winding-up. Such notice shall be delivered as soon as practicable and if
possible at least 20 days prior to the date therein specified in the case of
any date referred to in the foregoing subdivisions (i) and (ii). Failure to
give the notice specified hereunder shall have no effect on the status or
effectiveness of the action to which the required notice relates.
10. DEFINITIONS.
As used herein, unless the context otherwise requires, the
following terms have the following meanings:
"AFFILIATE" means, with respect to any Person, any other Person
that, directly or indirectly, controls, is controlled by, or is under common
control with such first Person. For the purpose of this definition,
"control" shall mean, as to any Person, the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"AFFILIATE WARRANTS" mean the warrants issued in connection with
the issue and sale by the Company of shares of its Series C Preferred Stock
on the Closing Date (as defined in the Investment Agreement).
"BUSINESS DAY" means any day other than a Saturday, Sunday or a day
on which national banks are authorized by law or executive order to close in
the State of New York.
"CHANGE OF CONTROL" shall mean (i) the direct or indirect sale,
lease, exchange or other transfer of all or substantially all of the assets
of the Company to any Person or entity or group of Persons or entities acting
in concert as a partnership or other group within the meaning of Rule 13d-5
under the Exchange Act (a "GROUP OF PERSONS"), (ii) the merger or
consolidation of the Company with or into another corporation with the effect
that the then existing stockholders of the Company hold less than 50% of the
combined voting power of the then outstanding securities of the surviving
corporation of such merger or the corporation resulting from such
consolidation ordinarily (and apart from rights accruing under special
circumstances) having the right to vote in the election of directors, (iii)
the replacement of a majority of the Board of Directors of the Company, over
a two-year period, from the directors who constituted the Board of Directors
at the beginning of such period, and such replacement shall not have been
approved by the Board of Directors of the Company (or its replacements
approved by the Board of Directors of the Company) as constituted at the
beginning of such period, (iv) a Person or Group of Persons (other than the
Investors and their Affiliates, employees, partners or members) shall, as a
result of a tender or
<PAGE>
exchange offer, open market purchases, privately negotiated purchases or
otherwise, have become the beneficial owner (within the meaning of Rule 13d-3
under the Exchange Act) of securities of the Company representing 49% or more
of the combined voting power of the then outstanding securities of the
Company ordinarily (and apart from rights accruing under special
circumstances) having the right to vote in the election of directors.
Notwithstanding the foregoing, no Change in Control shall be deemed to have
occurred (a) upon the acquisition of any shares of Common Stock of the
Company pursuant to the exercise of the Investor Warrants, (b) upon the
exercise of any of the rights and privileges granted to each of the Investors
pursuant to Section 6.2.5 of the Investment Agreement, (c) upon the exercise
of any rights and privileges granted to the holders of the Series B Preferred
Stock pursuant to the Certification of the Powers, Designations, Preferences
and Rights of the Series B Preferred Stock or (d) otherwise as a result of
the equity ownership or designation of directors by the Investors or their
Affiliates, employees, partners or members.
"CHANGE OF CONTROL REPURCHASE PRICE" means (i) if any Investor
Warrants are then outstanding, an amount in cash, on a per Warrant Share
basis, equal to the "Change of Control Repurchase Price" (on a per Investor
Warrant Share basis) for the Investor Warrants, or (ii) if no Investor
Warrants are then outstanding, an amount of cash equal to the fair market
value of this Warrant immediately prior to the announcement of a Change of
Control, to be determined by an Independent Financial Expert selected by the
Company and a majority in interest of the Warrant Shares, giving due
consideration to such factors as the financial condition and prospects of the
Company, the remaining unexpired term of this Warrant and the market price of
the Common Stock of the Company after announcement of such Change of Control.
"CLOSING PRICE" of the Common Stock as of any day, means (a) the
last reported sale price of such stock (regular way) or, in case no such sale
takes place on such day, the average of the closing bid and asked prices, in
either case as reported on the principal national securities exchange on
which the Common Stock is listed or admitted to trading or (b) if the Common
Stock is not listed or admitted to trading on any national securities
exchange, the last reported sale price or, in case no such sale takes place
on such day, the average of the highest reported bid and lowest reported
asked quotation for the Common Stock, in either case reported on the National
Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ"), or a similar service if NASDAQ is no longer reporting such
information.
"COMMON STOCK" has the meaning specified on the cover of this
Warrant.
"COMPANY" has the meaning specified on the cover of this Warrant.
<PAGE>
"CURRENT MARKET PRICE" means, with respect to each share of Common
Stock as of any date, the average of the daily Closing Prices per share of
Common Stock for the 10 consecutive trading days commencing 15 trading days
prior to such date; provided that if on any such date the shares of Common
Stock are not listed or admitted for trading on any national securities
exchange or quoted by NASDAQ or a similar service, the Current Market Price
for a share of Common Stock shall be the fair market value of such share as
determined in good faith by the Board of Directors of the Company; provided
that if the holders of a majority in interest of the Investor Warrant Shares
disagree with the Board of Director's determination of fair market value for
purposes of the Investor Warrants, the fair market value for purposes of this
Warrant shall be the same as the fair market value determined for purposes of
the Investor Warrants.
"EXERCISE FORM" means an Exercise Form in the form annexed hereto
as Exhibit A.
"EXPIRATION DATE" has the meaning specified on the cover of this
Warrant.
"HARNICK WARRANT" means the warrant to purchase 50,000 shares of
Common Stock issued to Carl D. Harnick at the closing of the Investment
Agreement.
"INDEPENDENT FINANCIAL EXPERT" means an independent nationally
recognized investment banking firm.
"INVESTMENT AGREEMENT" means the Investment Agreement, dated as of
October 12, 1997, as amended and as hereafter amended, among the Investors
and the Company.
"INVESTORS" means MAC Music LLC, a Delaware limited liability
company, and SK-Palladin Partners, LP, a Delaware limited partnership.
"INVESTOR WARRANTS" mean the warrants issued to the Investors
pursuant to the Investment Agreement.
"INVESTOR WARRANT SHARES" mean the shares of Common Stock issued or
issuable upon exercise of the Investor Warrants.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, limited liability company,
unincorporated organization, estate, other entity or government or any agency
or political subdivision thereof.
<PAGE>
"PRO RATA REPURCHASE" means any purchase of shares of Common Stock
by the Company or by any of its subsidiaries whether for cash, shares of
capital stock of the Company, other securities of the Company, evidences of
indebtedness of the Company or any other Person or any other property
(including, without limitation, shares of capital stock, other securities or
evidences of indebtedness of a subsidiary of the Company), or any combination
thereof, which purchase is subject to Section 13(e) of the Securities
Exchange Act of 1934, as amended, or is made pursuant to an offer made
available to all holders of Common Stock.
"REPURCHASE PRICE" means, on any date, the Current Market Price per
share of Common Stock as of such date, less the per share Exercise Price;
PROVIDED, that if at the time of determination of the Repurchase Price, the
Warrantholder shall be entitled to receive any securities or property other
than Common Stock, the Repurchase Price shall include a cash amount per
Warrant Share equal to that portion of the fair value of such securities or
property allocable to each Warrant Share.
"SECURITIES ACT" has the meaning specified on the cover of this
Warrant.
"WARRANTHOLDER" has the meaning specified on the cover of this
Warrant.
"WARRANT SHARES" has the meaning specified on the cover of this
Warrant; provided, however, that Warrant Shares shall not include shares sold
to the public pursuant to Rule 144 under the Securities Act of 1933, as
amended, or pursuant to an effective registration statement under the
Securities Act.
11. MISCELLANEOUS.
11.1 ENTIRE AGREEMENT. This Warrant constitutes the entire
agreement between the Company and the Warrantholder with respect to this
Warrant.
11.2 BINDING EFFECT; BENEFITS. This Warrant shall inure to
the benefit of and shall be binding upon the Company and the Warrantholder
and their respective successors and assigns. Nothing in this Warrant,
expressed or implied, is intended to or shall confer on any person other than
the Company and the Warrantholder, or their respective successors or assigns,
any rights, remedies, obligations or liabilities under or by reason of this
Warrant.
11.3 SECTION AND OTHER HEADINGS. The section and other
headings contained in this Warrant are for reference purposes only and shall
not be deemed to be a part of this Warrant or to affect the meaning or
interpretation of this Warrant.
11.4 NOTICES. All notices and other communications required
or
<PAGE>
permitted hereunder shall be in writing and shall be delivered personally,
telecopied or sent by certified, registered or express mail, postage prepaid.
Any such notice shall be deemed given when so delivered personally,
telecopied or sent by certified, registered or express mail, as follows:
(a) if to the Company, addressed to:
Platinum Entertainment, Inc.
2001 Butterfield Road
Downers Grove, Illinois 60515
Telecopy: (630) 769-0049
Attention: Chief Executive Officer
with a copy to:
Katten, Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661
Telecopy: (312) 902-1061
Attention: Matthew S. Brown, Esq.
(b) if to the Warrantholder, addressed to:
Telecopy:
Any party may by notice given in accordance with this Section 11.4 designate
another address or person for receipt of notices hereunder.
11.5 SEVERABILITY. Any term or provision of this Warrant
which is invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the terms and
provisions of this Warrant or affecting the validity or enforceability of any
of the terms or provisions of this Warrant in any other jurisdiction.
<PAGE>
11.6 GOVERNING LAW. This Warrant shall be deemed to be a
contract made under the laws of the State of Delaware and for all purposes
shall be governed by and construed in accordance with the laws of such State
applicable to such agreements made and to be performed entirely within such
State.
11.7 CERTAIN REMEDIES. The Warrantholder shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Warrant and to enforce specifically the terms and provisions of this Warrant
in any court of the United States or any court of any state having
jurisdiction, this being in addition to any other remedy to which the
Warrantholder may be entitled at law or in equity.
11.8 NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing
contained in this Warrant shall be deemed to confer upon the Warrantholder
any rights as a stockholder of the Company or as imposing any liabilities on
the Warrantholder to purchase any securities whether such liabilities are
asserted by the Company or by creditors or stockholders of the Company or
otherwise.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its duly authorized officer.
PLATINUM ENTERTAINMENT, INC.
By: /s/ DOUGLAS C. LAUX
---------------------------------------
Name: Douglas C. Laux
Title: Chief Operating Officer and
Chief Financial Officer
Dated: April 15, 1999
<PAGE>
EXHIBIT A
EXERCISE FORM
(To be executed upon exercise of this Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant, to purchase __________ of the Warrant Shares and
[herewith tenders payment for such Warrant Shares to the order of Platinum
Entertainment, Inc. in the amount of $__________] [hereby exercises its
Conversion Right] in accordance with the terms of this Warrant. The undersigned
requests that a certificate for [such Warrant Shares] [that number of Warrant
Shares to which the undersigned is entitled as calculated pursuant to
Section 1.2] be registered in the name of the undersigned and that such
certificates be delivered to the undersigned's address below.
Dated:__________________________
Signature____________________________
____________________________
(Print Name)
____________________________
(Street Address)
____________________________
(City) (State) (Zip Code)
<PAGE>
July 19, 1999
(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 5,362,786 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
<PAGE>
Platinum Entertainment, Inc.
July 19, 1999
Page 2
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
_____________________________________
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in a
Registration Statement Form S-3 and related Prospectus of Platinum
Entertainment, Inc. for the registration of 5,362,786 shares of its common
stock and to the incorporation by reference therein of our report dated April
14, 1999, with respect to the consolidated financial statements of Platinum
Entertainment, Inc. included in its Annual Report on Form 10-K for the year
ended December 31, 1998, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Chicago, Illinois
July 23, 1999
