<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
PLATINUM ENTERTAINMENT, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 8, 1999
------------------------
To the Stockholders of
Platinum Entertainment, Inc.:
The Annual Meeting of Stockholders of Platinum Entertainment, Inc. (the
"Company") will be held at 10:00 a.m., Chicago time, on June 8, 1999 at the
offices of the Company, 2001 Butterfield Road, Suite 1400, Downers Grove,
Illinois 60515, for the following purposes:
(1) To elect three Class III directors to the Company's Board of Directors
for a term of two years and to elect four Class I directors to the
Company's Board of Directors for a term of three years;
(2) To ratify the appointment by the Board of Directors of Ernst & Young LLP
as the independent auditors of the Company's financial statements for the
fiscal year ending December 31, 1999; and
(3) To transact such other business as may properly come before the meeting
or any adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the closed of business on April 21, 1999 as
the record date for determining stockholders entitled to notice of, and to vote
at, the meeting.
By order of the Board of Directors,
[LOGO]
Steven Devick
CHAIRMAN OF THE BOARD
Downers Grove, Illinois
May 17, 1999
ALL STOCKHOLDERS ARE URGED TO ATTEND THE MEETING IN PERSON OR BY PROXY.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE PAID ENVELOPE FURNISHED FOR THAT PURPOSE. YOUR PROXY CAN BE WITHDRAWN
AT ANY TIME BEFORE IT IS VOTED.
<PAGE>
PLATINUM ENTERTAINMENT, INC.
2001 BUTTERFIELD ROAD, SUITE 1400
DOWNERS GROVE, ILLINOIS 60515
(630) 769-0033
------------------------
PROXY STATEMENT
---------------------
The accompanying proxy is solicited by the Board of Directors (the "Board of
Directors" or "Board") of Platinum Entertainment, Inc., a Delaware corporation
(the "Company"), for use at the Annual Meeting of Stockholders (the "Annual
Meeting") to be held at 10:00 a.m., Chicago time, Tuesday, June 8, 1999, at the
offices of the Company, 2001 Butterfield Road, Suite 1400, Downers Grove,
Illinois 60515, and any adjournments thereof. This Proxy Statement and
accompanying form of proxy were first released to stockholders on or about May
17, 1999.
RECORD DATE AND OUTSTANDING SHARES--The Board of Directors has fixed the
close of business on April 21, 1999 as the record date (the "Record Date") for
the determination of stockholders entitled to notice of, and to vote at, the
Annual Meeting or any adjournments thereof. As of the Record Date, the Company
had outstanding 6,791,485 shares of Common Stock, par value $.001 per share
("Common Stock"). Each of the outstanding shares of Common Stock is entitled to
one vote on all matters coming before the Annual Meeting.
VOTING OF PROXIES--Steven Devick and Douglas C. Laux, the persons named as
proxies on the proxy card accompanying this Proxy Statement, were selected by
the Board of Directors of the Company to serve in such capacity. Each of Messrs.
Devick and Laux is an officer and director of the Company. The shares
represented by each executed and returned proxy will be voted and such vote will
be in accordance with the directions indicated thereon or, if no direction is
indicated, in accordance with the recommendations of the Board of Directors
contained in this Proxy Statement. The Board of Directors does not presently
intend to bring any business before the Annual Meeting other than the specific
proposals referred to in this Proxy Statement and specified in the Notice of
Annual Meeting, and so far as is known to the Board of Directors, no other
matters are to be brought before the Annual Meeting. As to any other business
that may properly come before the Annual Meeting, however, it is intended that
proxies, in the form enclosed, will be voted in respect thereof in accordance
with the judgment of the persons voting such proxies. Each stockholder giving a
proxy has the power to revoke it at any time before the shares it represents are
voted. Revocation of a proxy is effective upon receipt by the Secretary of the
Company of either (i) an instrument revoking the proxy or (ii) a duly executed
proxy bearing a later date. Additionally, a stockholder may revoke a previously
executed proxy by voting in person at the Annual Meeting (although attendance at
the Annual Meeting will not, by itself, revoke a proxy).
REQUIRED VOTE--A plurality of the shares voted in person or by proxy is
required to elect the nominees for directors. Stockholders will not be allowed
to cumulate their votes in the election of directors. The affirmative vote of a
majority of the shares voted affirmatively or negatively in person or by proxy
is required to ratify the appointment of Ernst & Young LLP as the independent
auditors of the Company's financial statements for the fiscal year ending
December 31, 1999.
QUORUM; ABSTENTIONS AND BROKER NON-VOTES--The required quorum for the
transaction of business at the Annual Meeting will be a majority of the shares
of Common Stock issued and outstanding on the Record Date. Abstentions and
broker non-votes will be included in determining the presence of a quorum.
Neither abstentions nor broker non-votes will have any effect on the voting on
the proposals to elect directors and to ratify the appointment of the Company's
independent auditors.
ANNUAL REPORT TO STOCKHOLDERS--The Company's Annual Report to Stockholders
for the fiscal year ended December 31, 1998, containing financial and other
information pertaining to the Company, is being furnished to stockholders
simultaneously with this Proxy Statement.
2
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Board of Directors consists of eleven directors. Article Six
of the Company's Third Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") provides that the Board of Directors shall be
classified with respect to the terms for which its members shall hold office by
dividing the members into three classes. At the Annual Meeting, three directors
of Class III will be elected, each to be elected for a term of two years
expiring at the 2001 Annual Meeting of Stockholders and four directors of Class
I will be elected, each to be elected for a term of three years expiring at the
2002 Annual Meeting. All of the nominees are presently serving as directors of
the Company.
Two classes of directors are being elected at this Annual Meeting because
during February 1998, the Company changed its fiscal year, formerly May 31, to a
calendar year, effective December 31, 1997. As a result, the Company did not
hold an Annual Meeting of Stockholders in 1998. The three directors of Class III
who would have been up for election had the Company held an Annual Meeting in
1998 are being elected at this Annual Meeting.
The Board of Directors recommends that the stockholders vote in favor of the
election of the seven nominees named in this Proxy Statement to serve as
directors of the Company.
The four directors whose terms of office are not expiring will continue to
serve after the Annual Meeting until such time as their respective terms of
office expire or their successors are duly elected and qualified. See "Other
Directors" below.
If at the time of the Annual Meeting any of the nominees should be unable or
decline to serve, the persons named in the proxy will vote for such substitute
nominee or nominees as the Board of Directors recommends, or vote to allow the
vacancy created thereby to remain open until filled by the Board, as the Board
recommends. The Board of Directors has no reason to believe that any nominee
will be unable or will decline to serve as a director if elected.
NOMINEES
The names of the nominees for director, together with certain information
concerning such nominees, are set forth below:
<TABLE>
<CAPTION>
SERVED AS
NAME CLASS AGE POSITION WITH COMPANY DIRECTOR SINCE
- ---------------------------------------- ----- --- ------------------------------------------- ---------------
<S> <C> <C> <C> <C>
Steven Devick(1)........................ III 47 Chief Executive Officer, President and 1992
Director
Craig J. Duchossois(1) (2).............. III 54 Director 1994
Robert J. Morgado(1).................... III 56 Director 1997
Douglas C. Laux......................... I 46 Chief Operating Officer, Chief Financial 1996
Officer and Director
David S. Bauman(2)...................... I 39 Director 1998
Paul L. Humenansky...................... I 41 Director 1992
Mark J. Schwartz(1)..................... I 41 Director 1997
</TABLE>
- ------------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Steven Devick is the founder of the Company and has served as its Chairman
of the Board and Chief Executive Officer since January 1992. On January 1, 1996,
Mr. Devick assumed the additional office of President. Mr. Devick is also a
director of Platinum technology International, inc. (Nasdaq: PLAT), a
publicly-held software company not affiliated with the Company ("PTI"), of Blue
Rhino Corporation (Nasdaq: RINO), a national cylinder exchange propane
distribution company ("Blue Rhino"), and an
3
<PAGE>
officer and director of several privately-held companies. See "Compensation
Committee Interlocks and Insider Participation."
Craig Duchossois has been a Director of the Company since April 1994. Mr.
Duchossois has been President and Chief Executive Officer of Duchossois
Industries, Inc., a privately-held diversified manufacturing and service
organization with headquarters in Elmhurst, Illinois, since 1986, and also
serves as Chairman and Chief Executive Officer of Thrall Car Manufacturing
Company, a privately-held company. Mr. Duchossois also serves as a director of
Blue Rhino and as Chairman of the Board and a director of Bissell, Inc., a
privately-held company, and as a director of LaSalle Bank N.A.
Robert A. Morgado has been a Director of the Company since December 1997.
Mr. Morgado is the Chairman of Maroley Media Group LLC, a private equity firm he
founded in 1995. Maroley Media focuses on global media and entertainment
investments. A music industry veteran, Mr. Morgado joined Warner Communications,
Inc. in 1982. In January 1990, with the creation of Time Warner, Inc., he became
the Chairman and Chief Executive Officer Executive Officer of the Warner Music
Group, a position he held until June 1995. Mr. Morgado serves as a director of
Activision, a publicly-held company (Nasdaq: ATVI), and serves on the boards of
several privately-held companies.
Douglas C. Laux has served the Company as Chief Financial Officer and as a
Director since September 1995, and as Chief Operating Officer since January
1999. From October 1986 until he joined the Company, Mr. Laux was a partner in
the accounting firm of Ernst & Young, LLP.
David S. Bauman has been a Director of the Company since August 1998. Mr.
Bauman is the President, Chief Executive Officer and a Director of Vcall, Inc.,
an internet broadcasting company, located in Philadelphia, PA, where he has
worked since October 1997. Mr. Bauman also presently serves as a principal of
Palladin Capital Group, Inc. From August 1992 until June 1997, Mr. Bauman served
as Senior Vice President, and former Vice President of American Express Company.
He also serves on the board of a privately-held company.
Paul L. Humenansky has been a Director of the Company since March 1992. Mr.
Humenansky is a founder and director of PTI, and was appointed Chief Operations
Officer of PTI in January 1993. Mr. Humenansky also served as PTI's Executive
Vice President, Product Development from 1987 until 1992. Before co-founding
PTI, Mr. Humenansky served as the product manager for DBMS, Inc., a major
international software enterprise. His previous experience also includes the
position of vice president of FMG, Inc., a personal computer products company.
Mr. Humenansky is also the co-founder of The Digital Schoolhouse Foundation and
the Platinum Wildlife Foundation. Mr. Humenansky serves on the boards of two
privately-held companies.
Mark J. Schwartz has been a Director of the Company since December 1997. Mr.
Schwartz is President and Chief Executive Officer of Palladin Capital Group,
Inc., a position he has held since August 1997. Mr. Schwartz previously served
as the President since March 1997, and a Managing Director, since April 1994, of
Rosecliff, Inc. Mr. Schwartz was a member of the Investment Banking Division of
Merrill Lynch & Co. from August 1985 to March 1994. Mr. Schwartz is a director
of Jones Apparel Group, Inc. (NYSE: JNY) and an officer and a director of a
number of privately-held companies. In March 1999, Jones Apparel Group, Inc.
agreed to purchase Nine West Group, Inc. Upon completion of the acquisition, Mr.
Schwartz will become the Chairman and Chief Executive Officer of Nine West
Group, Inc.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR ALL OF THE
NOMINEES FOR ELECTION AS CLASS I AND CLASS III DIRECTORS.
4
<PAGE>
OTHER DIRECTORS
The following persons will continue to serve as directors of the Company
after the Annual Meeting until their terms of office expire (as indicated below)
or until their successors are elected and qualified.
<TABLE>
<CAPTION>
SERVED AS TERM
NAME AGE POSITION WITH COMPANY DIRECTOR SINCE EXPIRES
- ------------------------------------------------------------ ----------- --------------------- --------------- -----------
<S> <C> <C> <C> <C>
Michael P. Cullinane(1)(2).................................. 49 Director 1992 2000
Andrew J. Filipowski(1)..................................... 48 Director 1992 2000
Carl D. Harnick(2).......................................... 64 Director 1997 2000
Geoffrey W. Holmes.......................................... 53 Director 1998 2000
</TABLE>
- ------------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Michael P. Cullinane has been a Director of the Company since March 1992.
Mr. Cullinane joined PTI in 1988 as Senior Vice President and Chief Financial
Officer, and was named Executive Vice President in March 1995. He has also
served as PTI's Treasurer from April 1989 to October 1995 and as a Director
since 1989. Mr. Cullinane serves as a director of Vasco Data Security
International, Inc. (Nasdaq: VASCO) and Made2Manage Systems, Inc., a leading
manufacturing software solutions developer (Nasdaq: MTMS), both publicly-held
companies. See "Compensation Committee Interlocks and Insider Participation."
Andrew J. Filipowski has served as a Director since January 1992. Mr.
Filipowski is a co-founder of PTI and has been Chairman of the Board of
Directors, President and Chief Executive Officer of PTI since its formation in
April 1987. Mr. Filipowski serves as a director of Blue Rhino and System
Software Associates, Inc. (Nasdaq: SSAX), a software services technology
company, both publicly-held companies. Mr. Filipowski is also a director of
several privately-held companies. See "Compensation Committee Interlocks and
Insider Participation."
Carl D. Harnick has been a Director of the Company since April 1998. Mr.
Harnick is a consultant for Alpine Equity Partners, L.P., a service he has
provided since October 1997. Mr. Harnick was previously a partner of the
accounting firm Ernst & Young LLP since 1957, where he provided auditing and
other accounting services to clients in the entertainment and venture capital
industries.
Geoffrey W. Holmes has been a Director of the Company since November 1998.
He is the President of Summit Properties International, Inc., where he has been
employed since 1996. From 1993 to 1996, Mr. Holmes was Senior Vice
President/Technology of Time Warner, Inc. and Chairman and Chief Executive
Officer of Time Warner Interactive.
DIRECTOR COMPENSATION
The Company's non-employee Directors do not receive any cash compensation
for their services; however, the Company reimburses such Directors for travel
expenses incurred in connection with their activities on behalf of the Company.
In June 1994, Messrs. Cullinane, Duchossois and Humenansky were each granted
options to purchase 4,000 shares of Common Stock pursuant to the Company's 1995
Directors Stock Option Plan (the "Directors Plan"). In April 1995 and March
1996, Messrs. Cullinane, Duchossois, Filipowski and Humenansky were each granted
options to purchase 4,000 and 15,000 shares of Common Stock, respectively,
pursuant to the Company's 1995 Employee Incentive Compensation Plan (the
"Compensation Plan"). In January 1997, Messrs. Cullinane, Duchossois, Filipowski
and Humenansky were each granted options to purchase 15,000 shares of Common
Stock pursuant to the Directors Plan. In August 1998, Messrs. Bauman, Cullinane,
Duchossois Filipowski, Harnick, Humenansky, Morgado and Schwartz were each
granted 8,700 options to purchase Common Stock pursuant to the Directors Plan.
5
<PAGE>
MEETINGS
During the year ended December 31, 1998, the Board of Directors held seven
formal meetings. Each current Director attended at least 75% of the aggregate of
the number of board meetings held during his term of office, and the total
number of meetings of committees on which he or she served that were held during
the fiscal year ended December 31, 1998.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established an Audit Committee and a Compensation
Committee. The Audit Committee currently consists of Messrs. Bauman, Cullinane,
Duchossois and Harnick. The Compensation Committee currently consists of Messrs.
Devick, Cullinane, Duchossois, Filipowski, Morgado and Schwartz. The Board of
Directors may establish such other committees as deemed necessary and
appropriate from time to time. The Company does not have a nominating committee.
The Audit Committee makes recommendations concerning the engagement of
independent public accountants, reviews with the independent public accountants
the plans and results of the audit engagement, approves professional services
provided by the independent public accountants, reviews the independence of the
independent public accounts, considers the range of audit and non-audit fees and
reviews the adequacy of the Company's internal accounting controls. The Audit
Committee held one formal meeting in fiscal 1998.
The Compensation Committee determines the compensation of the Company's
executive officers and the members of the Compensation Committee who are not
employees of the Company make determinations as to the grant of options to
purchase shares of the Company's stock under the Company's stock option plans.
The Compensation Committee held one formal meeting in fiscal 1998.
6
<PAGE>
EXECUTIVE OFFICERS
Set forth below is a table identifying executive officers of the Company who
are not identified in the tables entitled "Election of Directors--Nominees" or
"--Other Directors."
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------------- ----------- ------------------------------------------------------------------
<S> <C> <C>
Thomas R. Leavens..................... 50 Chief General Counsel and Senior Executive Vice President
Lynne Hoffman-Engel................... 46 Executive Vice President, Sales and Marketing
Michael Olsen......................... 41 Executive Vice President
</TABLE>
Mr. Leavens has been the Chief General Counsel of the Company since
September 1992 and Senior Vice President of the Company since January 1999 and
was also the Chief Operating Officer until January 1999. From December 1986
until he joined the Company, Mr. Leavens was a partner in the law firm McBride,
Baker & Coles.
Ms. Hoffman-Engel joined the Company as its Senior Vice President, Sales and
Marketing in June 1996. In September 1997, Ms. Hoffman-Engel was promoted to
Executive Vice President, Sales and Marketing. Prior to joining the Company,
from 1993 to 1996, Ms. Hoffman-Engel served as Senior Vice President, Sales and
Marketing, Classics and Jazz for PolyGram, and from 1987 to 1993 as Vice
President for London Records, a PolyGram label.
Mr. Olsen has been Executive Vice President of the Company since January
1997 when the Company purchased the assets of Intersound, Inc. Mr. Olsen joined
Intersound, Inc. in December 1988. Prior to joining Intersound, Inc., Mr. Olsen
worked as Vice President and General Manager of the Denver Symphony Orchestra
and was previously on the faculty of Yale University.
The Board of Directors elects officers annually and such officers serve at
the discretion of the Board. Each of Messrs. Devick, Laux, Leavens, Olsen and
Ms. Hoffman-Engel has an employment agreement with the Company. See "Executive
Compensation--Employment Agreements." There are no family relationships among
any of the directors or officers of the Company.
SECTION 16(A) COMPLIANCE
Section 16 of the Securities Exchange Act of 1934, as amended (the "1934
Act"), requires the Company's officers and directors and persons who own greater
than 10% of a registered class of the Company's equity securities to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission (the "Commission") and The Nasdaq Stock Market. Based solely on a
review of the forms it has received and on written representations from certain
reporting persons that no such forms were required for them, the Company
believes that, during fiscal 1998 all Section 16 filing requirements applicable
to its officers, directors and greater than 10% beneficial owners were complied
with by such persons, except that Messrs. Bauman and Holmes were delinquent in
timely filing a Form 3. Such filings have since been completed.
7
<PAGE>
EXECUTIVE COMPENSATION AND CERTAIN TRANSACTIONS
The following table provides information concerning the annual and long-term
compensation for services rendered to the Company during the fiscal year ended
December 31, 1998 to its chief executive officer and the four most highly
compensated executive officers of the Company whose total annual salary and
bonus exceeded $100,000 during such period (each, a "Named Executive Officer").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
---------------------- UNDERLYING
NAME AND PRINCIPAL POSITION PERIOD SALARY ($) BONUS ($) OPTIONS (#)
- ------------------------------------------------------------------------- ----------------- ---------- --------- ------------
<S> <C> <C> <C> <C>
Steven Devick............................................................ Fiscal 1998 625,000 156,250(1) 350,000(3)
President and Chief Executive Officer 06/01/97-12/31/97 329,399 156,250(2) 401,734
06/01/96-05/31/97 570,263 -- 200,000(4)
268,044
06/01/95-05/31/96 275,000(5) -- 200,000
Douglas C. Laux.......................................................... Fiscal 1998 300,000 75,000(1) 150,000(2)
Chief Financial Officer, 06/01/97-12/31/97 146,775 62,500(2) 125,000
Chief Operating Officer 39,000(7)
and Secretary(6) 117,300(8)
06/01/96-05/31/97 252,911 -- 125,000
06/01/95-05/31/96 139,055 -- 156,300
Thomas R. Leavens........................................................ Fiscal 1998 250,000 62,500(1) 55,000(3)
Chief General Counsel 06/01/97-12/31/97 134,615 50,000(2) 75,000
and Senior Executive 06/01/96-05/31/97 200,483 -- 55,000
Vice President 06/01/95-05/31/96 161,198 -- 40,000
Lynne Hoffman-Engel...................................................... Fiscal 1998 250,000 50,000 2,320
Executive Vice President(9) 06/01/97-12/31/97 134,615 25,000 20,000
06/01/96-05/31/97 245,192 25,000 20,000
Mike Olsen............................................................... Fiscal 1998 175,000 -- 11,600
Executive Vice President(10) 06/01/97-12/31/97 79,498 -- 20,000
06/01/96-05/31/97 55,684 -- --
</TABLE>
- ------------------------
(1) This amount represents a bonus for the twelve months ended May 31, 1998. In
order to align payment of bonuses with the Company's new fiscal year end, a
bonus for the period from May 31, 1998, through December 31, 1998, will be
prorated for such seven month period.
(2) This amount represents a bonus for the twelve months ended May 31, 1997.
(3) This option becomes exercisable in full in the event that the daily closing
trading price per share of Common Stock is equal to or greater than $15.00
per share for 30 consecutive or nonconsecutive days prior to February 7,
2000.
(4) Options to purchase 200,000 shares of Common Stock granted to Mr. Devick
during April 1996 were cancelled and replaced with options to purchase
200,000 shares of Common Stock during February 1997 in connection with a
repricing transaction effected in consideration of a personal guaranty of
Mr. Devick of borrowings made by the Company.
(5) Effective January 1, 1996, Mr. Devick assumed the additional office of
President and his annual salary was set at $275,000. Of this amount,
$227,038 was paid in shares of Common Stock, valued based on the closing
trading price of the Common Stock on the Nasdaq National Market on May 14,
1996 which was $13.00 per share.
8
<PAGE>
(6) Mr. Laux joined the Company in September 1995.
(7) Options to purchase 39,000 shares of Common Stock granted to Mr. Laux during
September 1995 were cancelled and replaced with options to purchase 39,000
shares of Common Stock during June 1997 in connection with a repricing
transaction effected in consideration of financial assistance provided by
Mr. Laux to the Company. Upon exercise of these stock options, Mr. Laux will
receive a cash bonus equal to the exercise price which is $6.00 per share.
(8) Options to purchase 117,300 shares of Common Stock granted to Mr. Laux
during April 1996 were cancelled and replaced with options to purchase
117,300 shares of Common Stock during June 1997 in connection with a
repricing transaction effected in consideration of financial assistance
provided by Mr. Laux to the Company.
(9) Ms. Hoffman-Engel joined the Company on July 1, 1996.
(10) Mr. Olsen joined the Company on January 31, 1997.
OPTION GRANTS IN LAST FISCAL YEAR--The following table provides information
on grants of stock options during the fiscal year ended December 31, 1998, to
the Named Executive Officers. No stock appreciation rights were granted to the
Named Executive Officers during fiscal 1998.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE
NUMBER OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO PRICE APPRECIATION FOR
OPTIONS EMPLOYEES EXERCISE OR OPTION TERM(3)
GRANTED IN FISCAL BASE PRICE EXPIRATION ----------------------
NAME (#)(1) YEAR(2) ($/SH) DATE 5% ($) 10% ($)
- ------------------------------------- ------------ ----------- ------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Steven Devick........................ 350,000(4) 53.6% 6.875 8/6/08 1,513,278 3,834,943
Douglas C. Laux...................... 150,000(4) 23.0% 6.875 8/6/08 648,548 1,643,547
Thomas R. Leavens.................... 55,000(4) 8.4% 6.875 8/6/08 237,801 602,634
Lynne Hoffman-Engel.................. 2,320(5) 0.4% 6.875 8/6/08 10,031 25,420
Michael Olsen........................ 11,600(5) 1.8% 6.875 8/6/08 50,154 127,101
</TABLE>
- ------------------------
(1) Each of these options was granted pursuant to the 1995 Employee Incentive
Compensation Plan and is subject to the terms of such plan as described
below. All options were granted at an exercise price equal to the fair
market value of the Company's Common Stock on the date of grant as
determined by the Compensation Committee of the Board of Directors of the
Company.
(2) Does not include the grant of options to purchase 78,300 shares of Common
Stock to non-employee directors under the 1995 Employee Incentive
Compensation Plan.
(3) In accordance with the rules of the Securities and Exchange Commission (the
"Commission"), shown are the hypothetical gains or "option spreads" that
would exist for the respective options. These gains are based on assumed
rates of annual compounded stock price appreciation of 5% and 10% from the
date the option was granted over the full option term of ten years. The 5%
and 10% assumed rates of appreciation are mandated by the rules of the
Commission and do not represent the Company's estimate or projection for
future increases in the price of its Common Stock.
(4) This option becomes exercisable in full in the event that the daily closing
trading price per share of Common Stock is equal to or greater than $15.00
per share for 30 consecutive or nonconsecutive days prior to February 7,
2000.
(5) One third of these options become exercisable annually beginning on August
6, 1999.
9
<PAGE>
FISCAL YEAR-END OPTION VALUES--The following table sets forth for the Named
Executive Officers information concerning the value of unexercised stock options
at December 31, 1998. No stock options were exercised during the fiscal year
ended December 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY
FISCAL OPTIONS AT FISCAL
YEAR-END (#) YEAR-END (1)($)
--------------------------- -------------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---------------------------------------------------- --------------------------- -------------------------------
<S> <C> <C>
Steven Devick....................................... 894,744/533,334 349,861/206,251
Douglas C. Laux..................................... 200,533/355,767 146,166/170,271(2)
Thomas R. Leavens................................... 110,000/155,000 204,583/79,167
Lynne Hoffman-Engel................................. 20,000/22,320 19,167/25,833
Michael Olsen....................................... 6,667/24,933 4,167/8,333
</TABLE>
- ------------------------
(1) The value per option is calculated by subtracting the exercise price from
the closing trading price of the Common Stock on the Nasdaq National Market
on December 31, 1998 of $6.625 per share.
(2) Upon exercise of certain of these options (exercisable for 39,000 shares of
Common Stock at an exercise price of $6.00 per share), Mr. Laux will receive
a cash bonus equal to the exercise price.
EMPLOYMENT AGREEMENTS
On June 1, 1997, the Company entered into a three year employment agreement
with Steven Devick, for the position of Chief Executive Officer of the Company.
Unless terminated or not renewed by the Company or Mr. Devick, the term of the
agreement will continue after the initial three-year term on a year-to-year
basis. The agreement provides for an annual base salary of $625,000 plus certain
bonus compensation. A bonus is payable to Mr. Devick during each fiscal year
equal to the sum of (i) a base bonus equal to 25% of his base salary for such
fiscal year; provided, however, that the base bonus shall be payable only if the
Company's revenues for such fiscal year are greater than or equal to 125% of
revenues for the previous fiscal year and (ii) an additional bonus equal to the
product of (A) his base salary for such fiscal year and (B) the amount obtained
by dividing (x) the amount by which revenues for such fiscal year exceed
revenues for the previous fiscal year by (y) revenues for the previous fiscal
year; provided, however, that the additional bonus shall only be payable if the
Company achieves earnings before interest, taxes, depreciation and amortization
(EBITDA) in such fiscal year greater than or equal to the plan approved by the
Board of Directors for such fiscal year and the Company's earnings per share in
such year are greater than or equal to those projected by the Company's primary
outside analyst, as adjusted for material events occurring in such year. Mr.
Devick's employment agreement also provides for continuation of his salary,
bonus and fringe benefits for three years following termination of employment if
Mr. Devick (i) is terminated by the Company without Good Cause (as defined
below), (ii) terminates his employment for Good Reason (as defined below) or
(iii) is notified by the Company of its intent not to extend the agreement
beyond its initial term. Termination of Mr. Devick shall be deemed to have been
for Good Cause only if the termination was as a result of an act or acts of
dishonesty by Mr. Devick which the Board of Directors reasonably believes
constitute a felony which resulted directly or indirectly in gain to or personal
enrichment of Mr. Devick at the Company's expense, or (b) an act or acts by Mr.
Devick which the Board of Directors reasonably believes constitute a felony and
as a result of which the continued employment of Mr. Devick by the Company will
have an adverse effect on the Company's business. So long as Mr. Devick does not
engage in conduct giving rise to the right to terminate employment for Good
Cause, Good Reason includes (i) the failure to elect the executive to the office
previously held, the removal of the executive of any additional duties or
responsibilities or a reduction in the executive's duties or responsibilities
which, in either case, are inconsistent with those customarily associated with
such position; (ii) a relocation by the Company of the executive's place of
employment beyond a specified area; (iii) material breach by the Company of the
agreement; (iv) a purported termination of executive's
10
<PAGE>
employment in contravention of the notice provisions of the agreement and (v)
the occurrence of a change in control of the Company.
On June 1, 1997, the Company entered into employment agreements with Douglas
C. Laux, for the position of Chief Financial Officer, and Thomas R. Leavens, for
the position of General Counsel. Each of the agreements is for a three-year
term, subject to renewal on a year-to-year basis unless terminated or not
renewed by the Company or the executive. The agreements provide for annual
salaries of $300,000 for Mr. Laux and $250,000 for Mr. Leavens, plus certain
bonus compensation. A bonus and an additional bonus may be payable to each of
Mr. Laux and Mr. Leavens based on the identical terms as described above in Mr.
Devick's agreement. The employment agreements contain severance provisions
substantially identical to those contained in Mr. Devick's agreement except that
the severance periods for Messrs. Laux and Leavens extend until the later of (i)
the end of the term of employment agreement and (ii) the first anniversary of
the date of executive's termination.
In addition, under a previous employment agreement with the Company, Mr.
Laux was granted options to purchase 39,000 shares of Common Stock at an
exercise price of $6.00 per share of Common Stock, becoming exercisable in three
equal annual increments beginning July 25, 1996. Such agreement further provides
that upon the exercise by Mr. Laux of any such options, he will be entitled to
receive a cash bonus equal to the exercise price.
During February 1998, the Board of Directors resolved by unanimous consent
to change the Company's fiscal year, formerly May 31, to a calendar year,
effective December 31, 1997. Accordingly, a bonus was paid to each of Messrs.
Devick, Laux and Leavens for the twelve month periods ended May 31, 1997 and May
31, 1998. Bonuses for the period from May 31, 1998, through December 31, 1998,
will be prorated for such seven month period.
On December 12, 1997, Messrs. Devick, Laux and Leavens' employment
agreements were amended to amend the definition of Change of Control such that a
Change in Control would not be deemed to have occurred upon or as a result of
(i) the issuance of Series B Preferred Stock of the Company or warrants to
purchase Common Stock of the Company in connection with the Investment Agreement
dated October 12, 1997, and amended by letter amendments dated October 28, 1997,
October 30, 1997, and November 26, 1997 (the "Investment Agreement"), between
the Company and the purchasers named therein (the "Purchasers"), (ii) upon the
acquisition of any shares of Common Stock of the Company pursuant to the
Investment Agreement, (iii) upon the exercise of any of the rights and
privileges granted to each of the Purchasers pursuant to the Investment
Agreement, (iv) upon the exercise of any rights and privileges granted to the
holders of the Series B Preferred Stock pursuant to the Certificate of
Designations creating the terms of the Series B Preferred Stock, or (v)
otherwise as a result of the equity ownership or designation of directors by the
Purchasers or their affiliates, employees, partners or members.
The Company entered into an employment agreement on July 1, 1996, with Lynne
Hoffman-Engel pursuant to which Ms. Hoffman-Engel became Senior Vice President,
Sales and Marketing of the Company. In September 1997, she was promoted to
Executive Vice President, Sales and Marketing. The term of Ms. Hoffman-Engel's
employment is for a period of three years and four months. The agreement
provides for an annual base salary of $250,000 plus a bonus in the amount of
$25,000 and further incentive compensation (determined and based on an annual
basis) for achieving sales results that meet performance goals established from
time to time by the Company. Under the agreement, the Company also granted Ms.
Hoffman-Engel an option to purchase 20,000 shares of Common Stock pursuant to
the Company's Compensation Plan.
Mr. Olsen has an employment agreement with the Company dated February 1,
1997 and amended effective June 29, 1998, pursuant to which Mr. Olsen is an
Executive Vice President of the Company. The term of Mr. Olsen's employment is
for a period of three years. The agreement provides for an annual base salary of
$200,000. Under the agreement, the Company granted Mr. Olsen an option to
purchase 20,000 shares of Common Stock ("Purchase Option") pursuant to the
Company's Compensation Plan.
11
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors sets and administers
the policies that govern the annual and long-term compensation of executive
officers of the Company. The non-employee members of the Compensation Committee
(the "Incentive Plan Committee"), based in part on recommendations by Mr.
Devick, make all decisions concerning awards of stock options under the
Company's stock option plans, except the non-discretionary plan for non-employee
directors. Mr. Devick does not participate in the Compensation Committee's
determinations with respect to his own compensation.
COMPENSATION POLICIES TOWARD EXECUTIVE OFFICERS
The Compensation Committee aims to provide competitive levels of
compensation that relate compensation with the Company's annual and long-term
performance goals, reward outstanding corporate performance, recognize
individual initiative and achievements, and assist the Company in attracting and
retaining qualified executives. The Compensation Committee attempts to achieve
these objectives through a combination of base salary, stock options, and cash
bonus awards. In making its determination, the Compensation Committee utilizes
outside information to obtain compensation information concerning comparable
companies in the entertainment industry.
BASE SALARIES
The base salaries for Messrs. Devick, Laux, Leavens, Olsen and Ms.
Hoffman-Engel were determined by the Compensation Committee and are governed by
the terms of their respective employment agreements with the Company. See
"Executive Compensation--Employment Agreements." In establishing the terms of
the employment agreements for these officers, the Compensation Committee
discussed and considered the significant contributions made to the Company by
these key officers, including the signing of new artists to the Company's
labels, sales accomplishments, contributions to the Company's acquisition of
capital financing, the importance of such contributions to the Company, and the
compensation packages of other executive officers in the record industry.
INCENTIVE STOCK OPTIONS
Stock options are granted to executive officers and other employees of the
Company as a means of providing long-term incentives. The Compensation Committee
believes that stock options encourage improved performance by the Company's
employees, including its officers, and align the interests of the Company's
employees with the interests of the Company's stockholders. Stock options were
granted to Messrs. Devick, Laux, Leavens, Olsen and Ms. Hoffman-Engel based on
their employment classification in the Company and the same criteria as were
used for setting base salaries.
CASH BONUS AWARDS
In addition to bonuses, if any, payable under employment agreements, the
Compensation Committee considers on an annual basis whether to pay discretionary
cash bonuses to some or all of the Company's employees, including the Company's
executive officers. In fiscal 1998, a discretionary bonus of $25,000, which was
accrued from fiscal 1997, was paid to Ms. Hoffman-Engel to compensate her for
achieving sales results that exceeded her performance goals established by the
Company.
CHIEF EXECUTIVE OFFICER COMPENSATION
The base salary and bonus for Mr. Devick for fiscal 1998 was governed by the
term of his employment agreement dated June 1, 1997. Pursuant to such agreement,
Mr. Devick's annual salary was set at $625,000 plus an annual bonus subject to
the terms of the agreement. See "Executive Compensation--Employment Agreements."
Mr. Devick was awarded a $156,250 cash bonus during fiscal 1998. Mr. Devick was
granted certain stock options to recognize fully his contributions, including
the development of strategic business
12
<PAGE>
alliances and equity investments such as, musicmaker.com, Mr. Devick's
contribution to the Company's A&R efforts, particularly his contributions to
signing new artists to the Company's labels, the successful completion of equity
financings, and to provide him with sufficient incentives to continue his
efforts as Chief Executive Officer.
COMPLIANCE WITH SECTION 162(M)
The Compensation Committee currently intends for any compensation paid to
the Named Executive Officers to be tax deductible to the Company pursuant to
Section 162(m) ("Section 162(m)") of the Code. Section 162(m) provides that
compensation paid to the Named Executive Officers in excess of $1,000,000 cannot
be deducted by the Company for Federal income tax purposes unless, in general,
such compensation is performance based, is established by a committee of outside
directors and is objective and the plan or agreement providing for such
performance-based compensation has been approved in advance by stockholders.
Consistent with this intention, the Compensation Plan was approved by the
stockholders in 1996 and the Compensation Committee made all stock option awards
to the Named Executive Officers for fiscal 1998 pursuant to the Compensation
Plan. In the future, however, the Board may determine to adopt a compensation
program that does not satisfy the conditions of Section 162(m) if in the Board's
judgement, after considering the additional costs of not satisfying 162(m), such
program is appropriate.
COMPENSATION COMMITTEE
Steven Devick
Michael P. Cullinane
Craig Duchossois
Andrew J. Filipowski
Robert J. Morgado
Mark J. Schwartz
13
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Devick, Cullinane, Duchossois, Filipowski, Morgado and Schwartz are
the members of the Company's Compensation Committee. Mr. Devick serves on the
Compensation Committee of PTI, of which Mr. Filipowski is Chairman and Chief
Executive Officer and Mr. Cullinane is Executive Vice President, Chief Financial
Officer and Treasurer.
PERFORMANCE GRAPH
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PLATINUM ENTERTAINMENT, INC. PEER GROUP NASDAQ STOCK MARKET (U.S.)
<S> <C> <C> <C>
3/96 $100 $100 $100
5/96 129 97 116
8/96 115 88 107
11/96 65 91 121
2/97 46 89 122
5/97 43 100 131
8/97 43 111 149
11/97 50 121 151
12/97 52 125 148
3/98 56 140 173
6/98 57 163 178
9/98 55 169 161
12/98 51 230 208
</TABLE>
14
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth, as of April 15, 1999, certain information
with respect to the beneficial ownership of the Company's Common Stock by (i)
each person known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) each Company director, (iii) each of
the Named Executive Officers and (iv) all Company executive officers and
directors as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS BENEFICIAL OWNERSHIP(1) CLASS
- --------------------------------------------------------------------- ----------------------- ------------
<S> <C> <C>
Steven Devick (2).................................................... 1,743,534 21.0
MAC Music LLC (3).................................................... 2,016,000 22.9
SK-Palladin Partners, L.P. (4)....................................... 2,016,000 22.9
Andrew J. Filipowski (5)............................................. 1,058,347 14.5
Craig Duchossois (6)................................................. 484,667 6.9
Special Situations (7)............................................... 416,665 6.1
Douglas Laux (8)..................................................... 302,233 4.3
Geoffrey W. Holmes (9)............................................... 245,600 3.6
Thomas R. Leavens (10)............................................... 154,167 2.2
Robert A. Morgado (3)................................................ 101,000 1.5
Carl D. Harnick (11)................................................. 50,000 *
Michael P. Cullinane (12)............................................ 39,000 *
Paul Humenansky (12)................................................. 39,000 *
Lynne Hoffman-Engel (13)............................................. 20,000 *
Mike Olsen (14)...................................................... 13,333 *
Mark J. Schwartz (4)................................................. -- --
David Bauman......................................................... -- --
All Executive Officers and Directors as a Group
(14 Persons)(2)(3)(4)(5)(6)(8)(9)(10)(11)(12)(13)(14) 4,250,881 43.7
</TABLE>
- ------------------------
* Less than one percent
(1) Unless otherwise indicated below, the persons in the above table have sole
voting and investment power with respect to all shares shown as
beneficially owned by them.
(2) Includes 56,250 shares of Common Stock underlying a warrant to purchase
Common Stock held in the name of Platinum Venture Partners II, L.P. ("PVP
II") which is currently exercisable. Mr. Devick is an executive officer of
the general partner of PVP II and in such capacity may be deemed to be a
beneficial owner with respect to Common Stock of the Company held by PVP
II. Includes 504,167 shares of Common Stock underlying a warrant to
purchase Common Stock which is currently exercisable. Also includes 940,578
shares underlying stock options that are exercisable within 60 days. The
address of Mr. Devick is c/o Platinum Entertainment, Inc., 2001 Butterfield
Road, Downers Grove, Illinois 60515.
(3) MAC Music L.L.C. ("MAC") shares voting and investment power with respect to
2,016,000 shares of Common Stock underlying a warrant to purchase Common
Stock issued by the Company to MAC which is currently exercisable. 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. The executive officers
of AEP, LLC (the "AEP Executive Officers") are Oded Aboodi, Chairman,
President and Chief Executive Officer, Richard D. Goldstein, Executive Vice
President and Senior Managing Director, and Bruce M. Greenwald, Executive
Vice President and Senior Managing Director. Messrs. Aboodi, Goldstein, and
Greenwald, by virtue of their respective capacities as Chairman, Executive
Vice President, and Executive Vice President,
15
<PAGE>
collectively have the ability to direct the investment and voting decisions
of AEP, LLC and as such they may be deemed to have shared investment and
voting discretion with respect to securities beneficially owned by AEP, LLC
through AEP, LP. Accordingly, AEP, LP, AEP, LLC and Messrs. Aboodi,
Goldstein and Greenwald, in their capacities as the AEP Executive Officers
of AEP, LLC, each may be deemed a beneficial owner of the Common Stock
beneficially owned by MAC. The principal business and principal offices of
MAC, AEP, LP, AEP, LLC, Messrs. Aboodi, Goldstein and Greenwald is 1285
Avenue of the Americas, 21st Floor, New York, New York 10019. Mr. Morgado
is the Chairman of Maroley. Mr. Morgado, by virtue of his capacity as a
managing member of Maroley, has the ability to direct the investment and
voting decisions of Maroley and as such Mr. Morgado may be deemed to have
shared investment and voting discretion with respect to securities
beneficially owned by Maroley. Accordingly, Maroley and Mr. Morgado each
may be deemed a beneficial owner of Common Stock beneficially owned by MAC.
In addition to the 2,016,000 shares of Common Stock over which Morgado and
Maroley share voting and investment discretion as described above, each of
Mr. Morgado and Maroley, respectively, has sole power to direct the voting
and disposition of 101,000 shares and 100,000 shares, respectively, of
Common Stock. The address of the principal business and principal offices
of Maroley and Mr. Morgado is 70 East 55th Street, 26th Floor, New York,
New York 10022.
(4) SK-Palladin Partners, L.P. ("Palladin") shares voting and investment power
with respect to 1,800,000 shares of Common Stock underlying a warrant to
purchase Common Stock issued by the Company to Palladin which is currently
exercisable. SK-Palladin Holdings, L.P. ("Palladin Holdings") is the
general partner of SK-Palladin Partners, L.P. ("Palladin"). SK-Palladin Gen
Par, Inc. ("Palladin Gen Par") is the general partner of Palladin Holdings.
Mr. Schwartz 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 and as such Mr. Schwartz may be deemed
to have shared investment and voting discretion with respect to securities
beneficially owned by Palladin Gen Par through Palladin Holdings and
Palladin. Accordingly, Palladin Holdings, Palladin Gen Par and Mr. Schwartz
in his capacity as the sole executive officer and controlling stockholder
of Palladin Gen Par, each may be deemed a beneficial owner of the Common
Stock owned by Palladin. The principal business and principal offices of
Palladin, Palladin Holdings, Palladin Gen Par and Mr. Schwartz is One
Rockefeller Plaza, 10th Floor, New York, New York 10020.
(5) 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. Also includes
56,250 shares of Common Stock underlying a warrant to purchase Common Stock
held in the name of 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. Includes
337,500 shares of Common Stock underlying a warrant to purchase Common
Stock held in the name of PVP II, which is currently exercisable. Mr.
Filipowski disclaims beneficial ownership of such shares. Includes 88,330
shares of Common Stock underlying a warrant to purchase Common Stock which
is currently exercisable. Also includes 29,000 shares underlying stock
options that are currently exercisable. The address of Mr. Filipowski is
c/o Platinum technology International, inc., 1815 South Meyers Road, Oak
Brook Terrace, Illinois 60181.
(6) Includes 201,667 shares of Common Stock underlying a warrant to purchase
Common Stock which is currently exercisable. Also includes 33,000 shares
underlying stock options that are exercisable within 60 days.
16
<PAGE>
(7) Based on a Schedule 13-G dated January 4, 1999, filed on behalf of (i)
Special Situations Fund III, L.P. ("SSF III"), (ii) Special Situations
Private Equity Fund, L.P. ("SSPE"), (iii) Special Situations Cayman Fund,
L.P. (the "Cayman Fund"), (iv) Special Situations Technology Fund, L.P.
("SST") (SSF III, SSPE, SST and the Cayman Fund are referred to
individually, as a "Fund" and, collectively, as the "Funds"), (v) MGP
Advisers Limited Partnership, general partner of and investment adviser to
SSF III ("MGP"), (vi) MG Advisers L.L.C., general partner of and investment
adviser to SSPE ("MG"), (vii) AWM Investment Company, Inc., general partner
of MGP and general partner of and investment adviser to the Cayman Fund
("AWM"), (viii) SST Advisers L.L.C., general partner of and investment
adviser to SST ("SSTA") (MGP, MG, SSTA and AWM are referred to
individually, as an "Adviser" and collectively, as the "Advisers"), (ix)
Austin W. Marxe and (x) David Greenhouse. 416,665 shares of Common Stock
are beneficially owned by Mr. Marxe and Mr. Greenhouse; of which 200,000
shares of Common Stock are owned by SSF III, 116,666 shares of Common Stock
are owned by SSPE, 66,666 shares of Common Stock are owned by the Cayman
Fund, and 33,333 shares of Common Stock are owned by SST. SSF III, SSPE,
the Cayman Fund, SST, MGP, MG, AWM and SSTA have sole power to vote or to
direct the vote and to dispose or to direct the disposition of all of the
shares of Common Stock which are respectively beneficially owned by each
Fund and its Adviser. Mr. Marxe and Mr. Greenhouse have shared power to
vote or to direct the vote of and to dispose or to direct the disposition
of the Common Stock beneficially owned by them by virtue of being executive
officers and members or principal shareholders of the Advisers. The
principal office and business address of the Funds (other than the Cayman
Fund), the Advisers and Mr. Marxe and Mr. Greenhouse is 153 East 53 Street,
New York, NY 10022. The principal office and business address of the Cayman
Fund is c/o CIBC Bank and Trust Company (Cayman) Limited, CIBC Bank
Building, P.O. Box 694, Grand Cayman, Cayman Islands, British West Indies.
(8) Includes 302,133 shares underlying stock options that are exercisable
within 60 days.
(9) Includes an aggregate of 100,000 shares of Common Stock underlying warrants
to purchase Common Stock issued to GWH & Associates, LLC, ("GWH"). In his
capacity as President of GWH, Mr. Holmes may be deemed a beneficial owner
of the Common Stock held by GWH.
(10) Such 154,167 shares consist of shares underlying stock options that are
exercisable within 60 days.
(11) Includes 50,000 shares of Common Stock underlying a warrant to purchase
Common Stock issued to Mr. Harnick by the Company which is currently
exercisable.
(12) Includes 33,000 shares underlying stock options that are exercisable
within 60 days.
(13) Such 20,000 shares consist of shares underlying stock options that are
exercisable within 60 days.
(14) Such 13,333 shares consist of shares underlying stock options that are
exercisable within 60 days.
17
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company entered a distribution agreement, dated August 20, 1998, with
Envisage Multimedia LLC pursuant to which the Company is the exclusive
distributor of Envisage recorded music products in certain territories for a
period of three years. For such services, the Company receives a distribution
fee from Envisage currently equal to 27% of net sales. As of December 31, 1998,
the Company owed Envisage a net of approximately $115,000, which is reflected in
royalties payable on the Company's balance sheet. Envisage is related to three
of the Company's directors or their affiliates, namely, Carl Harnick, Geoffrey
Holmes and Robert Morgado.
The Company entered into Consulting Agreements, each dated as of December
12, 1997, between with the Company and each of MAC Music LLC and Palladin
Capital Group, Inc. The Company pays each consulting group an annual fee in the
amount of $200,000 for its services. Each consulting group has agreed to render
consulting services to the Company in connection with (i) management and
strategic planning, (ii) the identification of financing, acquisition,
divestiture, joint venture and licensing opportunities for the Company and (iii)
other matters relating to the day-to-day business and operations of the Company,
or any of its subsidiaries or affiliated companies, as the Chief Executive
Officer or the Board of Directors of the Company may from time to time
reasonably request. The term of each agreement is for five years.
During June 1998, the Company issued 100,000 shares of Common Stock to each
of Robert Morgado and Geoffrey Holmes, members of the Board of Directors, at a
per share price of $6.75, which price equaled the closing trading price of the
Common Stock as reported by the Nasdaq National Market on the date of sale. The
Company received $1,350,000 in consideration during July 1998 for this sale.
The Company engaged Platinum technology International, Inc. ("PTI") to
provide consultation for the upgrade of the Company's computer systems. During
fiscal 1998, we issued PTI 53,192 shares of Common Stock in consideration for
$375,000 of consulting services. An additional $275,000 of consulting services
were provided to the Company prior to December 31, 1998. These services will
continue during 1999. Mr. Devick is a director and stockholder of PTI and
Messrs. Filipowski, Cullinane and Humenansky are directors, executive officers
and stockholders of PTI.
18
<PAGE>
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF AUDITORS
The Company's Board of Directors, upon the recommendation of the Company's
Audit Committee, has appointed Ernst & Young LLP, independent certified public
accountants, as auditors of the Company's financial statements for the fiscal
year ending December 31, 1999. Ernst & Young LLP has acted as auditors for the
Company since 1991.
The Board has determined to afford stockholders the opportunity to express
their opinions on the matter of auditors, and, accordingly, is submitting to the
stockholders at the Annual Meeting a proposal to ratify the Board's appointment
of Ernst & Young LLP. If a majority of the shares voted affirmatively or
negatively at the Annual Meeting, in person or by proxy, are not voted in favor
of the ratification of the appointment of Ernst & Young LLP, the Board of
Directors will interpret this as an instruction to seek other auditors.
It is expected that representatives of Ernst & Young LLP will be present at
the meeting and will be available to respond to questions. They will be given an
opportunity to make a statement if they desire to do so.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE INDEPENDENT AUDITORS
OF THE COMPANY'S FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDING DECEMBER 31,
1999.
19
<PAGE>
MISCELLANEOUS MATTERS
SOLICITATION--The cost of this proxy solicitation will be borne by the
Company. The Company has engaged its transfer agent, American Stock Transfer and
Trust Company LLP, to assist in the required search for beneficial owners of the
Company's Common Stock and in the distribution of proxy materials. The Company
may also request banks, brokers, fiduciaries, custodians, nominees and certain
other record holders to send proxies, proxy statements and other materials to
their principals at the Company's expense. Such banks, brokers, fiduciaries,
custodians, nominees and other record holders will be reimbursed by the Company
for their reasonable out-of-pocket expenses of solicitation. The Company does
not anticipate that costs and expenses incurred in connection with this proxy
solicitation will exceed an amount normally expended for a proxy solicitation
for an election of directors in the absence of a contest.
PROPOSALS OF STOCKHOLDERS--Proposals of stockholders intended to be
considered at the Annual Meeting of Stockholders to be held in 2000 must be
received by the Secretary of the Company not less than 120 days nor more than
150 days prior to May 17, 2000.
ADDITIONAL INFORMATION--The Company will furnish, without charge, a copy of
its Annual Report on Form 10-K for its fiscal year ended December 31, 1998, as
filed with the Commission, upon the written request of any person who is a
stockholder as of the Record Date. Requests for such materials should be
directed to Platinum Entertainment, Inc., 2001 Butterfield Road, Suite 1400,
Downers Grove, Illinois 60515, Attention: Douglas C. Laux.
By order of the Board of Directors
[LOGO]
Steven Devick
CHAIRMAN OF THE BOARD
Downers Grove, Illinois
May 17, 1999
20
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PLATINUM ENTERTAINMENT, INC.
2001 BUTTERFIELD ROAD
DOWNERS GROVE, ILLINOIS 60515
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 8, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder(s) hereby appoints Steven Devick and Douglas
C. Laux, and each of them, with full power of substitution, as attorneys and
proxies for and in the name and place of the undersigned, and hereby
authorizes each of them to represent and to vote all of the shares of Common
Stock of Platinum Entertainment, Inc. ("Platinum") held of record by the
undersigned as of April 21, 1999 which the undersigned is entitled to vote at
the Annual Meeting of Stockholders to be held on June 8, 1999, at the offices
of Platinum, 2001 Butterfield Road, Suite 1400, Downers Grove, Illinois 60515
at 10:00 a.m., Chicago time, and at any adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED AND RETURNED IN A TIMELY MANNER, WILL
BE VOTED AT THE ANNUAL MEETING AND AT ANY ADJOURNMENT THEREOF IN THE MANNER
DESCRIBED HEREIN. IF NO CONTRARY INDICATION IS MADE THE PROXY WILL BE VOTED
FOR PROPOSALS 1 AND 2 AND IN ACCORDANCE WITH THE JUDGMENT OF THE PERSONS
NAMED AS PROXIES HEREIN ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE
THE ANNUAL MEETING.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
CONTINUED AND TO BE SIGNED AND DATED ON REVERSE SIDE.
SEE REVERSE SIDE
<PAGE>
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE USING
DARK INK ONLY.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR PROPOSALS 1
AND 2.
1. Proposal to elect three Class III and four Class I directors as described
in the Company's Proxy Statement:
FOR WITHHELD FOR ALL EXCEPT
/ / / / / /
Class III directors to serve until the Annual Meeting of Stockholders in
2001, as provided in the By-laws of the Company.
Steven Devick, Craig J. Duchossois, and Robert J. Morgado
Class I directors to serve until the Annual Meeting of Stockholders in
2002, as provided in the By-laws of the Company.
Douglas C. Laux, David S. Bauman, Paul L. Humenansky, and Mark J. Schwartz
(INSTRUCTION: To withhold authority to vote for any nominee[s], mark the
"For All Except" box above and write the nominee name[s] on the line
below.)
___________________________________________________________________________
2. Proposal to ratify the appointment by the Board of Directors of Ernst &
Young LLP as the independent auditors of the Company's financial statements
for the fiscal year ending December 31, 1999
FOR AGAINST ABSTAIN
/ / / / / /
Each of the persons named as proxies herein are authorized, in such
person's discretion, to vote upon such other matters as may properly come
before the Annual Meeting.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
- -----------------------------------------------------------------
Signature (title, if any)
- -----------------------------------------------------------------
Signature, if held jointly
Date: -----------------------------------------------------, 1999
This Proxy must be signed exactly as your name appears hereon. When shares
are held by joint tenants, both should sign. Attorneys, executors,
administrators, trustees and guardians should indicate their capacities. If
the signer is a corporation, please print full corporate name and indicate
capacity of duly authorized officer executing on behalf of the corporation.
If the signer is a partnership, please print full partnership name and
indicate capacity of duly authorized person executing on behalf of the
partnership.
