As filed with the Securities and Exchange Commission on January 21, 2000
Registration No. 333- _______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
PLATINUM ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3802328
(State or other jurisdiction of (IRS Employer
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: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [_]
____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
_______________________________________________________________________________
<TABLE>
<CAPTION>
Title of securities Amount to be Proposed Proposed Amount of
to be registered registered maximum maximum registration
offering price aggregate fee
per share (1) offering
price(1)
_______________________________________________________________________________
<S> <C> <C> <C> <C>
Common Stock, $.001 433,958 See Footnote 1 $1,295,148 $342
par value shares Below
_______________________________________________________________________________
</TABLE>
(1) 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 January 14, 2000.
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>
Preliminary Prospectus Dated January 21, 2000
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The infromation in this prospectus is not complete and may be changed. We +
+may not sell these securities until the registration statment filed with the +
+Securities and Exchange Commision 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 is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
_______________________________________________________________________________
P R O S P E C T U S
- -------------------------------------------------------------------------------
433,958 shares
Common Stock
____________________
The 433,958 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 of common stock
held by selling stockholders that are currently restricted. We will not
receive any proceeds from the sale of shares by the selling stockholders.
See "Use of Proceeds."
Our common stock is traded on the Nasdaq National Market under the symbol "PTET"
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.
________________________
January __, 2000
<PAGE>
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934, and in accordance with the
Exchange Act we file reports, proxy statements and other information with the
Securities and Exchange 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://PlatinumCd.com and http://www.HearOn.com.
We have filed with the Commission a registration statement on Form S-3
under the Securities Act of 1933. 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 Reports on Form 10-Q for the fiscal quarters ended
March 31, 1999, June 30, 1999 and September 30, 1999;
4. Our Current Reports on Form 8-K filed on July 1, 1999, July 19,
1999; and October 13, 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 are deemed to be
incorporated by reference in this prospectus and to be a part of this prospectus
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 discuss our future expectations, contain projections
of our future results of operations or of our financial condition, or 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.
Risks of Inadequate Liquidity and Capital Resources
We have inccured negitive cash flows from operations since our inception.
Historically, we have funded our operations and other activities from a variety
of capital sources, including debt and equity financing, and more recently
through other transactions. As of January 14, we had borrowed $31,878,081 under
our bank credit facility, and approximately $ 1,100,000 remained available for
current working capital and other needs. We anticipate borrowing all remaining
available amounts under the facility, and using our other cash on hand, to
satisfy near-term working capital needs. There can be no assurance
that any necessary financing from sources other than our bank will be available
on satisfactory terms, if at all.
We have implemented certain measures within the last six months in order to
improve cash flows and enable us to continue in existence without a significant
curtailment of operations. These measures included:
* the sale of certain assets,
* the consolidation of facilities,
* the use of our common stock, rather than cash, for payment of services
rendered to us by artists, producers and others, and
* entering into licensing and other agreements that exploit the digital
rights to our music catalog.
In order to enhance our cash position, we are closely managing our working
capital and exploring the sale of certain assets. However, if we do not achieve
our current operating and financial forecast and effect the cash rasing
transactions currently being pursued, neither which can be assured, we belive
that the funding available to the Company will be insufficient to meet
anticipted requirments for capital expenditures, working capital and other
needs throught March 31, 2000. The failure to satisfy such requirments would
have a material adverse effect on the Company's business, results of operations
and financial condition.
Our bank credit agreement will terminate on March 31, 2000 and the entire
outstanding balance under the agreement will become due on that date. We will
not be albe to repay such amount without obtaining additional funds.
We are currently pursuing a number of alternatives to enable us to
satisfy our obligations to our lenders. There can be no assurance, however,
that we will be able to consummate any transaction which would provide funds
sufficient to satisy such obligations. In addition, it is likely that we have
not met certain financial covenants under the credit agreement as of November
30, 1999, and there can be no assurance that we will be able, prior to the
termination date, to satisfy certain financial covenants determined subsequent
to November 30, 1999. If we default under the credit agreement, the lenders
would have the right to pursue the remedies available to them, including
foreclosing on the assets that secured its obligations. Failure to satisfy our
obligations to the lenders would have a material adverse effect on our business,
results of operations and financial condition.
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:
* 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, and
* the acquisition of licenses to enable us to create compilation packages,
<PAGE>
* 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 results 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 results 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 our products through a multi-channel distribution system
comprised of:
* PED Corp. our proprietary distribution system, located in Alpharetta,
Georgia, a suburb of Atlanta's,
* international licensing agreements as well as production and distribution
agreements on a territory-by-territory basis, and
* Internet distribution.
We had a distribution agreement with PolyGram Group Distribution, Inc. through
July 1999, at which time we notified PolyGram we were terminating the agreement.
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 PED, which generated 70% and 89% of our total gross product sales
during fiscal 1998 and the nine months ended September 30, 1999, respectively.
We completed the opening of a new, larger and more efficient distribution
facility in Alpharetta at the end of October 1999. In addition we are
consolidating our label and distribution activities currently located in Downers
Grove, Illinois and Nashville, Tennessee. We believe our new distribution
facility will provide us with distribution capabilities which could potentially
offset the termination of the PolyGram distribution services and grow the
business substantially. However, 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 and HeardOn.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.
<PAGE>
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.
<PAGE>
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 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
We did not experience any systems failures or material compliance problems
related to our computer programs due to the change in the century. We cannot
be sure that our efforts to address Year 2000 issues will continue to be
adequate or complete. We have not been affected by systems failures or other
compliance problems related to the turn of the century with respect to our
vendors, distributors or key business partners. Any Year 2000 compliance
problems 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: limitations on our
stockholders' ability to nominate directors or act by written consent, a
staggered Board of Directors and 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, including 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 strategy is to fully utilize our distribution capabilities
through predictable releases, hit releases from our urban division, catalog
compilations, and distribution contracts with third parties. Expansion and
exploitation of our expansive music catalog and publishing rights is also an
integral part of our business and growth strategy. We currently own or control
a music catalog with more than 13,000 master recordings. Our music products
include new releases, typically by artists established in a particular genre,
compilations featuring various artists and repackagings of previously recorded
music from our master music catalog and licenses from third party record
companies. We release music in a variety of genres including classical, urban,
adult contemporary, blues, gospel and country through our Intersound Classical,
Platinum, River North, House of Blues, CGI Platinum and Platinum Nashville
labels.
Our catalog contains releases by many other established artists including
those listed below.
The Beach Boys Peter Cetera John Denver Dionne Warwick
The Blues Brothers The Band Roger Daltrey Taylor Dayne
Oak Ridge Boys Pete Townshend Suzy Bogguss Cameo
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
Dazz Band Vickie Winans Andrae Crouch
Sixpence None The Richer
Our headquarters are located in Downers Grove, Illinois, our primary
distribution facility is located in Alpharetta, Georgia, a suburb of Atlanta,
and we have a promotional office in Nashville, Tennessee.
We distribute our product mainly to retailers and wholesalers in the United
States through our wholly owned subsidiary, PED Corp., based in Alpharetta.
At the end of October 1999, we completed the opening of a new, larger, more
efficient facility in Alpharetta. Unlike most of our independent
label peers, we maintain our own proprietary distribution network, not relying
on a distribution arm of a major label or independent distributor. Handling our
own distribution allows us, like a major label, to maintain more controls over
the marketing and promotions of our products. In addition, we believe our
distribution infrastructure allows us to achieve higher margins than other
independent labels. Due to our significant distribution capacity, we also
serve as a distributor for various third party music labels located in the
United States and Europe, generally small independent record labels specializing
in particular genres of music, including those listed below:
Ruf Records Ichiban Records Brooklyn Music
Power Records Gator Records
Loose Leaf Records House of Blues
We distribute product internationally in three ways. We distribute products
to international customers directly from PED, via licensing agreements, and
most recently, via production and distribution arrangements on a territory-by-
territory basis. We believe that such means of international distribution allow
us to maximize revenues from existing international licensing relationships,
electronic media, and overseas manufacturing. We also believe that these
relationships give us a greater sales presence in the European marketplace.
We distribute via the Internet through our website, www.PlatinumCD.com and
www.HeardOn.com, our promotional download website, and our income sharing
arrangement with musicmaker.com, Inc. (musicmaker.com), the first and largest
digital download and "burn and mail" company. Through musicmaker.com our
customers can create custom compilation CDs or download songs onto the hard
drive of their own computers using Liquid Audio and Secure-MP3, two
downloading formats used to protect the copyrights of the record label and the
recording artist. Through our affiliation with Amazon.com, a leader in the
Internet commerce industry, customers who visit our website access
to hundreds of thousands of commercially available titles. We receive referral
fees through such arrangement. We have retained the rights to our music catalog
for promotional Internet downloads.
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.
<PAGE>
RECENT DEVELOPMENTS
On November 12, 1999, we signed an exclusive distribution agreement with
Brooklyn Music Ltd. (BML) which boasts releases of some of electronic
music's top talent worldwide. Releases slated for the year 2000 include
releases by artists such as Fatboy Slim, Atomic Babies, Frankie Bones, and Joey
Beltram & Simply Jeff. Also slated for release is the continuation of the
Digital Empire series and several remix projects such as Digital Empire
- - The Remixes, consisting of Prodigy, Propellarheads, Crystal Method,
Atomic Babies, Chemical Brothers and Fatboy Slim. BML's releases will be
distributed by PED Corp. in the United States and Canada for a customary
distribution fee. The initial term of the agreement is until December 31, 2002,
with an option to renew exercisable at our option for an additional two years.
On December 30, 1999, we signed a license agreement with LiveOnTheNet.com,
Inc., (LiveOnTheNet) a leading entertainment network hosting a variety of
video and audio programming showcasing local and national advertisers. The
arragement creates an alliance between our digital download website HeardOn.com
and LiveOnTheNet.com. Under the terms of the agreement, we agreed to license
LiveOnTheNet the right to reproduce, advertise, market, promote and distribute
our catalog of master recordings for promotional digital downloads through
LiveOnTheNet.com. HeardOn.com will be linked to LiveOnTheNet.com as a
sub-domain. The site will also feature streaming audio, video, graphics and
photos of live performances, interviews, recording sessions, and other events,
collectively termed "webcasting". Information concerning visitors to
HeardOn.com and LiveOnTheNet.com who download master recordings will be
jointly owned by the parties. The initial term and any renewal term of the
agreement extends for the period of time it takes to achieve both 20,000,000
page views and 500,000 qualified visitors for the combined sites. The initial
term or any renewal term may be terminated at our option at any time 3 years
after the effective date of the agreement. The agreement may be renewed at
the option of LiveOnTheNet, for two additional terms, subject to certain
limitations. We received $2,000,000 for the grant of rights during the initial
term of which $200,000 will be held in escrow and is payable within 10 days of
the end of the initial term of the agreement provided we fulfill our obligations
under the agreement. An additional $2,000,000 shall be payable at the
commencement of each renewal term, if any. Divine interVentures has a greater
than 50% ownership interest in LiveOnTheNet. Three of our directors, Andrew
Filipowski, Michael Cullinane and Paul Humenansky, are executive officers and
shareholders of divine interVentures, an Internet operating company engaged in
business-to-business e-commerce through a community of partner companies.
The Harry Fox Agency, Inc. has submitted a report to us asserting
underpayments by the Company of royalties. Such alleged underpayments were
identified by the Agency during the course of its audit of the Company's sales
(other than sales throug Intersound, Inc.) for the period July 1, 1993 through
March 31, 1998. The amount of the claim was $704,204. We have reviewed the
claim and admit that we owe $17,606, but we dispute the balance claimed. In
addition, the Agency has alleged underpaymnets by the Company of royalties based
on its audit of the Company's sales through Intersound for the period January
1, 1997, through March 31,1998. The amount of the claim was $2,087,644. We are
reviewing the claim and while we have not reached any definitive conclusions
concerning the validity of the claim, we believe the amount of the claim is
substantially overstated. On January 13, 2000, we met with representatives of
the Agency in an effort, among other things, to resolve the disputed audit
claims. We were unable to reach a settlement. We believe the audit claims of
the Agency can be resolved and we will continue in our settlement efforts.
However, if we are unsuccessful in such efforts, and if the Agency is able to
substantiate a significant amount of its claims, the Company's results of
operations and fiancial condition may be materially adversely affected.
In the meeting with the Agency on January 13, 2000, the Agency also informed
the Company that in the Agency's view, the Company is required to obtain
licenses in order to offer promotional downloads of its master recordings via
the Internet. In order to avoid further disputes with and claims by the Agency,
the Company has elected to obtain compulsory licenses, if and as required,
in connection with its Internet activities.
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."
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth, as January 10, 2000, 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 Number Beneficial Ownership
Ownership Prior of shares After Offering (2)
to Offering Offered (1)
___________________ ____________________
Number of Percent Number of Percent
Shares Shares
__________ _______ ___________ _________ ________
<S> <C> <C> <C> <C> <C>
Brooklyn Music Ltd. 325,478(3) 4.2 325,478 - -
Diezel Muzick, Inc. 108,480(4) 1.4 108,480 - -
__________________
</TABLE>
(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) Includes shares issued to this selling stockholder in transactions exempt
from the registration requirements of the Securities Act pursuant to a
distribution agreement, dated November 12, 1999, between the Registrant and
this selling stockholder.
(4) Includes shares issued to this selling stockholder in transactions exempt
from the registration requirements of the Securities Act pursuant to
agreements for the exclusive recording services of certain urban music
artists, dated August 30, 1999, and August 31, 1999, as amended, between
the Registrant and this selling stockholder.
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:
* 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,
* purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant to this prospectus,
* ordinary brokerage transactions and transactions in which the broker solicits
purchasers,
* privately negotiated transactions and
* 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
<PAGE>
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
shares that qualify for sale under Rule 144 under the Securities Act in
accordance with that rule 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 "under
writers" within the meaning of the Securities Act in connection with such sales.
In such event, any commissions received by such broker or dealers or agents and
any profit on the resale of the shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the shares may not bid for or purchase shares of
our common stock during a period which commences one business day prior to
such person's participation in the distribution, subject to certain exceptions,
including passive market making activities.
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 herein by reference. 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 433,958 Shares
in or incorporated by reference to
this prospectus. This prospectus
does not constitute an offer, or a
solicitation of an offer to buy Common Stock
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.
____________________________
____________________ PROSPECTUS
____________________________
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION...............2
INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE........................3
RISK FACTORS........................4
THE COMPANY.........................8
MATERIAL CHANGES....................9
USE OF PROCEEDS.....................9
SELLING STOCKHOLDERS...............10
PLAN OF DISTRIBUTION...............10
LEGAL MATTERS......................11
EXPERTS............................11
January __, 2000
================================== =========================================
<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.
Securities and Exchange Commission registration fee.... $342.00
Accountants fees and expenses.......................... $1,000.00
Legal fees and expenses................................ $1,000.00
Miscellaneous expenses................................. $ -
___________
Total.................................. $2,342.00
===========
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.
5. Opinion of Katten Muchin Zavis as to the legality of the securities to be
registered.
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 of this registration
statment).
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 withthe 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 Registration Statement to be
signed on our behalf by the undersigned, thereunto duly authorized, in the
City of Downers Grove, State of Illinois, on January 21, 2000.
Platinum Entertainment, Inc.
By:/S/ STEVEN DEVICK
Steven Devick
Chairman, President and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Steven Devick and Douglas C. Laux and each of them his true and lawful
attorney-in-fact and agent, with full power of substitution, to sign on his
behalf, individually and in each capacity stated below, all amendments and
post-effective amendments to this Registration Statement on Form S-3 and to
file the same, with all exhibits thereto and any other documents in connection
therewith, with the Commission under the Securities Act, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully and to all intents and purposes as each might or could do
in person, hereby ratifying and confirming each act that said attorneys-in-
fact and agents may lawfully do or cause to be done by virtue thereof.
In accordance with the requirements of the Securities Act of 1933, as
amended, this Registration Statement was signed by the following persons in the
capacities on January 21, 2000.
Signature Title
/S/ STEVEN DEVICK Chairman, President, and Chief Executive
__________________ Officer
Steven Devick
/S/ DOUGLAS C. LAUX Chief Financial Officer and a Director
___________________
Douglas C. Laux
/S/ DAVID S. BAUMAN 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
/S/ CARL D. HARNICK Director
________________________
Carl D. Harnick
/S/ GEOFFREY HOLMES Director
________________________
Geoffrey Holmes
/S/ PAUL L. HUMENANSKY Director
________________________
Paul L. Humenansky
/S/ ROBERT J. MORGADO Director
_________________________
Robert J. Morgado
/S/ MARK J. SCHWARTZ Director
_________________________
Mark J. Schwartz
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 433,958 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
January 21 , 2000
EXHIBIT 5
KATTEN MUCHIN ZAVIS
525 W. Monroe, Suite 1600
Chicago, Illinois 60661
January 21, 2000
(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 433,958 shares (the AShares@) of the Company's common stock, $.001 par value
(the "Common Stock").
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 By-Laws of the Company, as amended;
4. Resolutions duly adopted by the Board of Directors of the Company
relating to the original issuance of the Shares;
5. Certificates of public officials and officers, representatives and
agents of the Company; and
6. Such other instruments, documents, statements and records of the Company
and others as we have deemed relevant and necessary to examine and rely
upon for the purpose of this opinion.
In connection with this opinion, we have assumed the accuracy and completeness
of all documents and records that we have reviewed, the genuineness of all
signatures, the authenticity of the documents submitted to us as originals and
the conformity to authentic original documents of all documents submitted to us
as certified, conformed or reproduced copies. We have further assumed that all
natural persons involved in the transactions contemplated by the Registration
Statement (the "Offering") have sufficient legal capacity to enter into and
perform their respective obligations and to carry out their roles in the
Offering.
Based upon the foregoing, we are of the opinion that the Shares are validly
issued, fully paid and nonassessable securities of the Company.
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
