-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M4UrxQbY7W0+jrBJ69BUp4GwoAgvQTvQeTTmigjPNdvdcjtbBvjqIqu6B3YUD0eU vQceQvoJ7i4wuVfn4crPBg== 0000883558-98-000010.txt : 19981228 0000883558-98-000010.hdr.sgml : 19981228 ACCESSION NUMBER: 0000883558-98-000010 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19981223 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLATINUM ENTERTAINMENT INC CENTRAL INDEX KEY: 0000883558 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-DURABLE GOODS, NEC [5099] IRS NUMBER: 363802328 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-69595 FILM NUMBER: 98774761 BUSINESS ADDRESS: STREET 1: 2001 BUTTERFIELD RD STREET 2: STE 1400 CITY: DOWNERS GROVE STATE: IL ZIP: 60515 BUSINESS PHONE: 7087690033 MAIL ADDRESS: STREET 1: 2001 BUTTERFIELD RD CITY: DOWNERS GROVE STATE: IL ZIP: 60515 S-3 1 As filed with the Securities and Exchange Commission on December 23, 1998 Registration No. 333- ________________________________________________________________________________ ________________________________________________________________________________ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM S-3 REGISTRATION STATEMENT Under The Securities Act of 1933 PLATINUM ENTERTAINMENT, INC. (Exact name of registrant as specified in its charter) Delaware 36-3802328 (State or other jurisdiction of (IRS Employer Identification of incorporation or organization) Number) 2001 Butterfield Road, Downers Grove Illinois 60515, (630) 769-0033 (Address of Principal Executive Offices including Zip Code) Steven Devick 2001 Butterfield Road, Downers Grove, Illinois 60515, (630) 769-0033 (Name, address and telephone number of agent for service) Copies to: Matthew S. Brown, Esq. Katten Muchin & Zavis 525 W. Monroe, Suite 1600 Chicago, IL 60661-3693 (312) 902-5200 Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this Registration Statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box: [_] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Actof 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box: [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [_] ____________ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] ____________ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] CALCULATION OF REGISTRATION FEE - -------------------------------------------------------------------------------- ________________________________________________________________________________
Title of securities Amount to be Proposed maximum Proposed Amount of to be registered registered offering price maximum registration per share(2) aggregate fee offering price (2) - -------------------------------------------------------------------------------- Common Stock, $.001 814,819 See Footnote 2 $5,220,138 $1,044 par value (1) Below - --------------------------------------------------------------------------------
(1) Pursuant to Rule 416 this Registration Statement also covers the number of shares issuable as a result of the antidilution adjustment provisions of the outstanding warrants. (2) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(c) under the Securities Act of 1933 on the basis of the average of the high and low prices of the Common Stock as reported on the Nasdaq National Market on December 17, 1998. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine. Preliminary Prospectus, dated December 23, 1998 ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ + The information in this prospectus is not complete and may be changed. + + We may not sell these securities until the registration statement is filed + + with the Securities and Exchange Commission is effective. This prospectus + + is not an offer to sell these securities and it is not soliciting an offer + + to buy these securities in any state where the offer or sale is not + + permitted. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ________________________________________________________________________________ P R O S P E C T U S ________________________________________________________________________________ 814,819 Shares Common Stock ______________ The 814,819 shares of common stock, $.001 par value, of Platinum Entertainment, Inc. covered by this prospectus may be sold from time to time by the stockholders listed in this prospectus under "Selling Stockholders," or their pledgees, donees, transferees or distributees, or their respective successors in interest. This prospectus relates to the shares that may be issued to the selling stockholders when they exercise their warrants and other certain shares of common stock held by certain selling stockholders that are currently restricted. We will not receive any proceeds from the sale of shares by the selling stockholders but we will receive the proceeds from the exercise of the warrants by the selling stockholders, unless the selling stockholders opt to exercise their warrants on a cashless basis. See "Use of Proceeds." PTET -- Nasdaq National Market INVESTING IN THE SHARES COVERED BY THIS PROSPECTUS INVOLVES A HIGH DEGREE OF RISK. CONSIDER CAREFULLY THE RISK FACTORS THAT BEGIN ON PAGE 4 IN THIS PROSPECTUS. Neither the Securities and Exchange Commission nor any State Securities Commission has approved or disapproved these securities,or determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense. _____________________ December 23, 1998 AVAILABLE INFORMATION We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance with the Exchange Act we file reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). You can read and copy such reports, proxy statements and other information at the Commission's Public Reference Room at 450 Fifth Street, N.W., Judiciary Plaza, Room 1024, Washington, D.C. 20549. You can obtain information on the operations of the Commission's Pubic Reference Room at 1-800-SEC-0330. The reports, proxy statements and other information that we file with the Commission electronically are available at the Commission's web site at http://www.sec.gov. Our common stock is traded on the Nasdaq National Market. Reports, proxy statements and other information about us also may be inspected at the offices of The Nasdaq Stock Market, 1735 K Street, N.W., Washington, D.C. 20006. We have filed with the Commission a registration statement on Form S-3 (which, together with all amendments and exhibits, is referred to in this prospectus as the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"). This prospectus is only a part of the Registration Statement. For further information, you should refer to the Registration Statement which you can inspect and copy in the manner and at the sources described above. Any statements we make in this prospectus or that we incorporate by reference concerning the provisions of any document filed as an exhibit to the Registration Statement or otherwise filed with the Commission are not necessarily complete and, in each instance, reference is made to the copy of such document so filed. Each such statement is qualified in its entirety by such reference. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents have been filed with the Commission by the Company and are made a part of this prospectus: 1. Our Annual Report on Form 10-K, as amended, for the fiscal year ended May 31, 1997. 2. Our Transition Report on Form 10-K, as amended, for the period June 1, 1997 to December 31, 1997; 3. Our Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1997, as amended, November 30, 1997, as amended, March 31, 1998, as amended, June 30, 1998 and September 30, 1998; 4. Our Current Reports on Form 8-K dated September 10, 1997, December 22, 1997 and March 13, 1998; and 5. The description of our common stock contained in our Registration Statement on Form 8-A filed pursuant to Section 12 of the Exchange Act and all amendments thereto and reports filed for the purpose of updating such description. All of the documents we have filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus and prior to the termination of the offering made by this prospectus is deemed to be incorporated by reference in this prospectus and to be a part hereof from the date of filing of such documents. Any statement contained in this prospectus or in a document incorporated or deemed to be incorporated herein by reference shall be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained herein or in any subsequently filed document which is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded,to constitute a part of this prospectus. We will provide, without charge, to each person to whom a copy of this prospectus is delivered, on the written or oral request of such person,a copy of any or all of the documents incorporated herein by reference (other than exhibits thereto, unless such exhibits are specifically incorporated by reference into the information that this prospectus incorporates). Written or telephone requests for such copies should be directed to our principal office: Platinum Entertainment, Inc., 2001 Butterfield Road, Downers Grove, Illinois 60515, Attention: Secretary (telephone: 630- 769-0033). RISK FACTORS Before you invest in our common stock, you should be aware that there are various risks, including those described below. You should carefully consider these risk factors, together with all of the other information included or incorporated by reference into this prospectus, before you decide whether to purchase shares of our common stock. Some of the information in this prospectus contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as "anticipate," "believe," "estimate" and "expect" or similar words. You should read statements that contain these words because they (1) discuss our future expectations, (2) contain projections of our future results of operations or of our financial condition, or (3) state other "forward-looking" information. We believe it is important to communicate our expectations to our investors. There may be events in the future,however, that we are not accurately able to predict or over which we have no control. The risk factors listed in this section, as well as any cautionary language in this prospectus,provide examples of risks,uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Before you invest in our common stock, you should be aware that the occurrence of any of the events described in these risk factors and elsewhere in this prospectus or incorporated by reference into this prospectus could have a material adverse effect on our business, financial condition and results of operation. In such case, the trading price of our common stock could decline and you may lose all or part of your investment. Historical Operating Losses We have experienced operating and net losses each fiscal year since inception. We may continue to incur operating and net losses. Our future operating results depend on many factors, including demand for our products, the level of competition, our ability to acquire,develop and market new artists and products and the ability of our officers and key employees to manage our business and control costs. Management of Growth We have grown rapidly and we intend to continue growing in the future. Our rapid growth presents numerous challenges and places significant additional pressure on our managerial, financial and other resources. To manage such growth it is necessary that we continue to implement and improve our operating systems, attract and train more qualified personnel, integrate acquired businesses and products, and expand our facilities. If we fail to effectively manage our growth, our business, operating results or financial condition could be materially adversely affected. Highly Competitive Market The recorded music industry is highly competitive. We face competition for discretionary consumer purchases of our products from other record companies and other entertainment companies, such as film and video companies. The market for pre-recorded music is dominated by five major record companies in the United States (Thorne EMI, Bertelsmann AG, Sony Corp., Time Warner, Inc. and Universal Music Group). Our ability to compete in this market depends largely on: . the skill and creativity of our employees and their relationships with artists; . our ability to sign new and established artists and songwriters; . the expansion and utilization of our catalog; . the acquisition of licenses to enable us to create compilation packages; . the effective and efficient distribution our products; and . our ability to build upon and maintain our reputation for producing, licensing, acquiring, marketing and distributing high quality music. Results and the future success of our sales and marketing efforts through the Internet will be affected by existing competition and by additional entrants to the electronic commerce market. Many of our competitors have significantly longer operating histories, greater financial resources and larger music catalogs. We cannot assure that we will continue to compete successfully with our competitors in the future. Risks Inherent in the Recorded Music Industry The recorded music industry, like other creative industries, involves a substantial degree of risk. Each recording is an individual artistic work, and its commercial success is primarily determined by consumer taste, which is unpredictable and constantly changing. As a result, we cannot assure the financial success of any particular release, the timing of success or the popularity of any particular artist. We may be unable to generate sufficient revenues from successful releases to cover the costs of unsuccessful releases. Fluctuations In Our Quarterly Operating Results and Seasonality Our results of operations are subject to seasonal variations. In particular, our revenues and operating income are affected by end-of-the-year holiday sales. In accordance with industry practice, we record revenues for music products when the products are shipped to retailers. In anticipation of holiday sales, retailers purchase products from us prior to December. As a result, our revenues and operating income typically decline during December, January and February. In addition, timing of a new release may materially affect our business, financial condition and results of operations. For example, if releases planned for the peak holiday season are delayed, our business, financial results and operating results could be materially adversely affected. Risks Related To Our Distribution Systems We distribute pre-recorded music in various formats through traditional retail distribution and through the Internet. We also serve as a distributor for various third party music labels located in the United States and Europe. Our traditional retail channels are: . Platinum Distribution (our proprietary distribution system, formerly named Intersound Distribution) . Universal Music and Video Distribution (formerly named PolyGram Group Distribution, Inc.) ("Universal") . Platinum Christian Distribution During the nine months ended September 30, 1998, sales generated by Platinum Distribution and Universal comprised 60% and 39%, respectively, of our total gross product sales. We cannot assure that we can maintain our relationship with Universal beyond the terms of our existing agreement, which will expire on December 31, 2002. We may be unable to establish a new agreement with Universal, or establish a substitute arrangement with one or more of the major distributors in the industry on favorable terms. In such event, our business, results of operation and financial condition may be materially adversely affected. We also sell our products through the Internet through our website PlatinumCD.com. Revenues from PlatinumCD.com are not currently a significant part of our business. The future success of on-line sales and marketing efforts cannot be adequately determined at this time, particularly due to the short history of the electric commerce market and the challenges to the protection of music files transmitted through the Internet. Results will also be affected by existing competition and by additional entrants to the market, many of whom may have substantially greater resources. Risks Associated with Product Returns Our products are sold on a returnable basis which is standard music industry practice. We set reserves for future returns of products estimated based on return policies and experience. We expect that our actual return experience will be within standard industry parameters. However, we may experience an increase in returns over our established reserves. If this occurs our business, results of operations and financial condition could be materially adversely affected. Risks Related To Our Licensing Activity We license the rights to numerous master recordings and compositions from third parties for recording and re-recording of music to produce compilations and to expand of our catalog. We also seek to license the rights to our master recordings and compositions to third parties for use in albums, films, and televisions programs for a royalty or a flat fee. These cross-licensing arrangements are generally made possible by existing industry practices based on reciprocity. If these practices change, we cannot assure that we will be able to obtain licenses from third parties on satisfactory terms, or at all, and our business, financial condition and operating results, particularly with respect to compilation products, could be materially and adversely affected. Risks Related To Our Acquisition Strategy While we are not currently a party to any agreements or understandings for any material acquisitions, we expect to continue to seek to acquire master recordings, music publishing rights and other record companies. Acquisitions involve risks that could cause our actual growth to differ from our expectations. For example: . We may not be successful in identifying attractive acquisitions. We compete with other companies to acquire master recordings, music publishing rights and other record companies. We expect that this competition will continue, which may inhibit our ability to complete suitable acquisitions on favorable terms. . We may issue equity securities in future acquisitions that could be dilutive to our shareholders. We also may incur additional debt and amortization expense related to music catalog, publishing rights and other intangible assets we may acquire. This additional debt and amortization expense may materially adversely affect our business, financial condition and results of operations. In addition, acquisitions will require the consent of our current lender and certain financial covenants in our credit agreement may limit our ability to incur debt in connection with acquisitions. . We may be unable to successfully integrate acquired businesses and realize anticipated economic, operational and other benefits in a timely manner. If we are unable to successfully integrate acquired businesses, product lines and personnel, we may incur substantial costs and delays or other operational, technical or financial problems. In addition, efforts to integrate or failure to successfully integrate acquisitions may divert management's attention from our existing business and may damage our relationships with our key employees and customers. Dependence on Key Personnel Our success depends largely on the skills, experience and efforts of our executive officers and key employees, especially our Chairman, President and Chief Executive Officer, Steven Devick. The loss of the services of Mr. Devick or other members of our senior management, could materially adversely affect our business, financial condition or results of operations. In addition, in large part, our success will depend on our ability to attract and retain qualified management, marketing and sales personnel. We experience competition for qualified personnel with other companies and organizations. Our inability to hire or retain qualified personnel could have a material adverse effect on our business, financial condition or results of operations. We have entered into employment agreements with certain members of our senior management team, including Mr. Devick, Douglas C. Laux, Chief Financial Officer, Thomas R. Leavens, General Counsel, Bryan Hadley,Executive Vice President and Lynne Hoffman-Engel, Executive Vice President. We also maintain a key man life insurance policy in the aggregate of $10 million on the life of Mr. Devick. Year 2000 Risks Many existing computer programs use only two digits (rather than four) to identify a year in the date field. These programs were designed and developed without considering the impact of the upcoming change in the century. If not corrected, many computer applications could fail or create erroneous results by or at the Year 2000. We are currently working to resolve, but have not completed, an assessment of our Year 2000 issues. Until we have completed our review of the significant software and equipment used in our business operations, and the operations of our key business partners, we cannot be sure that our efforts to address Year 2000 issues are appropriate, adequate or complete. Based on our current assessment of our Year 2000 issues, we may face the following concerns: . We are dependent on personal computer systems for internal electronic information processing. To bring our systems into Year 2000 compliance we have spent approximately $180,000 since January 1, 1998, and intend to spend an additional $20,000 by July 31, 1999, to replace existing hardware and software. . We are currently operating two independent financial accounting software packages - one in our Downers Grove, Illinois location and the other in our Alpharetta, Georgia location; our Alpharetta location also houses our distribution system. We upgraded the software package used in our Downers Grove location with software that is Year 2000 compliant. We intend to replace the financial and distribution software packages in our Alpharetta location with software that is Year 2000 compatible. We have spent approximately $216,000 on software since January 1, 1998 and expect to spend an additional $30,000 on software for our systems by July 31, 1999. We have also paid $387,000 in consulting services since January 1, 1998 and expect to spend an additional $200,000 on consulting services by July 31, 1999. If the new software in our Alpharetta location is not operational by March 31, 1999, we intend to use our existing financial software in our Downers Grove location for all of our financial accounting. We intend to modify our existing distribution software to be Year 2000 compatible at no material incremental cost. In either case, we are planning to be Year 2000 compliant by July 31, 1999. . We are currently assessing the state of readiness for Year 2000 of our material vendors, suppliers, customers and other material third parties. This assessment is not complete. We expect to have this assessment completed by March 31, 1999. If any of our material vendors, suppliers or customers, particularly our third party distributor Universal, has a serious Year 2000 problem, we could experience a loss of revenues from their operations and/or incur a significant amount of expenses. As a result of these Year 2000 issues, we may suffer the following consequences: . We may experience a significant number of operational inconveniences and inefficiencies for us and our customers that may divert our time and attention and financial and human resources from our ordinary business activities. . We may suffer serious systems failures that may require significant efforts by us or our customers to prevent or alleviate material business disruptions. . We may be in default of a number of agreements, including our credit agreement, if we fail to respond to our Year 2000 issues in a timely manner. . We may experience significant loss of revenues or incur a significant amount of unanticipated expenses. Anti-Takeover Considerations Our Certificate of Incorporation and Bylaws and Delaware law contain provisions that may delay, defer or inhibit a future acquisition of us not approved by the Board of Directors. This could occur even if our shareholders are offered an attractive value for their shares or if a substantial number or even a majority of our shareholders believe the takeover is in their best interest. These provisions are intended to encourage any person interested in acquiring us to negotiate with and obtain the consent of the Board of Directors. These provisions include: (1) limitations on our stockholders' ability to nominate directors or act by written consent, (2) a staggered Board of Directors and (3) the ability of the Board of Directors to issue shares of preferred stock with such designations, powers, preferences and rights as it determines, without any further vote or action by our shareholders. These provisions also could discourage bids for your shares of common stock at a premium and have a material adverse effect on the market price of your shares. Also, Section 203 of the Delaware General Corporation Law restricts certain business combinations with any "interested stockholder" as defined by such statute. Volatility of Our Stock Price Our common stock is traded on the Nasdaq National Market. The market price of our common stock has historically been volatile. We believe the market price of our common stock could fluctuate substantially, based on a variety of factors, including quarterly fluctuations in results of operations, timing of product releases, announcements of new products and acquisitions or acquisitions by our competitors, changes in earnings estimates by research analysts, and changes in accounting treatments or principles. The market price of our common stock may be affected by our ability to meet or exceed analysts' or "street" expectations, and any failure to meet or exceed such expectations could have a material adverse effect on the market price of our common stock. Furthermore, stock prices for many companies, particularly entertainment companies, fluctuate widely for reasons that may be unrelated to their operating results. These fluctuations and general economic, political and market conditions, such as recessions or international currency fluctuations and demand for our products, may adversely affect the market price of our common stock. THE COMPANY Overview Our primary business is the production, distribution, marketing and sale of music. Our pre-recorded music products include new releases, typically by artists established in a particular genre, as well as compilations featuring various artists and repackagings of previously recorded music from our master music catalog and under licenses from third party record companies. We sell music products, including compact discs, cassettes, and digital versatile discs (DVDs) mainly to retailers and wholesalers in the United States and through licensees internationally. We currently release pre-recorded music in a variety of genres including Classical, Urban, Adult Contemporary, Blues, Gospel and Country and on a variety of music labels including Intersound Classical, River North, House of Blues, CGI Records and Platinum. Expansion and exploitation of our music catalog and publishing rights is an integral part of our business and growth strategy. We currently own or control a music catalog with more than 13,000 master recordings and constantly add to the catalog through strategic and complementary acquisitions, as well as through the signing of established artists with a history of album sales and new artists. We also target the producers of film, television and video projects as potential licensees of our proprietary and controlled recordings. We have released music by established artists including, The Beach Boys, Peter Cetera, John Denver, Dionne Warwick, the Blues Brothers, The Band, Roger Daltry, Taylor Dayne, Juice Newton, Phoebe Snow, Taj Mahal, Luther Allison and Otis Rush. Through the acquisition of Intersound, Inc. in January 1997, we expanded our artist roster with artists such as the Bellamy Brothers, Eddie Rabbitt, Crystal Gayle, and Kansas, and established Classic R&B artists such as George Clinton, Lakeside, Cameo and the Dazz Band. We have also released Blues compilations that are products of our joint venture with House of Blues Records, Inc. and compilations in the Urban genre, including a Billboard Top 200 Best Selling Album. We have positioned our company as a market leader in the Gospel market with Top 10 albums by William Becton, James Hall and Vickie Winans (Billboard's Top Gospel Album chart), a genre that expanded its sales by more than 30% in 1996 and 1997. Our music catalog also contains master recordings by other best selling Gospel music acts such as The Winans, Andrae Crouch and Walter Hawkins. Through our acquisition of Intersound Inc., we expanded our Gospel roster to include Vickie Winans and the Mighty Clouds of Joy, each of whom earned nominations for a Grammy Award and a Stellar Award. Recent releases on our Gospel label include albums by artists such as Witness, Walt Whitman and the Soul Children of Chicago and GMWA Mass Choir. We have also enjoyed success in the Classical market. In 1998, Billboard named Intersound the No. 1 Top Budget Classical Label of the year and also named Intersound artist, John Bayless, as the No. 1 Top Budget Classical Artist of the year and The Nutcracker Christmas the No. 1 Top Budget Classical Album of the year. We distribute our products through traditional retail channels and through the Internet. On October 1, 1998, we launched our website www.PlatinumCD.com. which allows consumers to buy music in four distinct ways: . www.PlatinumCD.com allows customers to create customized CD compilations on a "burn and mail" basis, with consumers selecting individual tracks that will be recorded to their own unique compact disc and shipped to them within 48 hours through musicmaker.com, the first and largest custom CD and music download resource on the Internet. We have an equity interest, a licensing and profit-sharing arrangement with musicmaker.com for these sales. . www.PlatinumCD.com allows customers to create customized CD compilations through musicmaker.com by downloading "Liquid Tracks" created by Redwood City, California-based, Liquid Audio, to a customer's personal computers. These digital audio files can then be transferred from the computer to a customer's own CD-Recordable device. We have an equity interest, a licensing and profit-sharing arrangement with musicmaker.com for these sales. . www.PlatinumCD.com allows customers to purchase CDs manufactured by our various music labels for home delivery at discount prices. We fulfill these sales through Platinum Distribution, our proprietary distribution system. . www.PlatinumCD.com gives customers access to hundreds of thousands of commercially available titles, via our affiliation with Amazon.com. We receive referral revenues from the sale of such titles. The Company was incorporated in Delaware in 1991. Our principal executive offices are located at 2001 Butterfield Road, Suite 1400, Downers Grove, Illinois 60515, and our telephone number is (630) 769-0033. Recent Developments None. USE OF PROCEEDS We will not receive any of the proceeds from the sale of shares of common stock covered by this prospectus. All of the proceeds will be received by the selling stockholders. See "Selling Stockholders." If and when any of the warrants are exercised and the shares of common stock are issued to the selling stockholders, we will receive the proceeds from the exercise of their warrants, unless the selling stockholders opt to exercise their warrants on a cashless basis. If all of the selling stockholders exercise their warrants for cash, we will receive $2,815,086.00; provided, however, that the exercise price of warrants held by Platinum Venture Partners II,L.P. may be subject to change. The per share exercise price of the common stock underlying such warrants is equal to the lesser of (i) $6.25 and (ii) 82.5% of the average of the daily closing price per share of common stock of the Company for the 30 consecutive trading days following the public release by the Company of its consolidated earnings statement for the 1998 fiscal year. We will use such proceeds for working capital and other general corporate purposes. SELLING STOCKHOLDERS The following table sets forth, as of December 23, 1998, certain information regarding the beneficial ownership of the Company's common stock by each selling stockholder, both before this offering and as adjusted to reflect the sale of the shares of common stock. The shares offered hereby may be offered from time to time in whole or in part by the selling stockholders, their pledgees, donees, transferees or distributees, or their respective successors-in-interest. Except where otherwise noted, each person named in the following table has, to our knowledge, sole voting and investment power with respect to the shares shown as beneficially owned by such person.
Beneficial Ownership Prior Number Beneficial to Offering of Shares Ownership Offered (1) After Offering(2) ---------------------------- --------------- Number of Percent Number Percent Shares of Shares ---------- ------- ------- ------- ------- Bank of Montreal 235,366(3) 3.7 235,366 - - PPM America Special Investments Fund L.P. 23,206(3) * 23,206 - - Platinum Venture Partners II, L.P. 450,000(4)(5) 6.8 450,000 - - PLATINUM technology, inc. 53,192(6)(7) * 53,192 - - Tring International Plc 53,055(8) * 53,055 - -
__________________ * Less than 1%. (1) Represents the maximum number of shares that may be sold by each of the selling stockholders pursuant to this prospectus. (2) Assumes the selling stockholders sell all of their shares pursuant to this prospectus. The selling stockholders may sell all or part of their shares. (3) Represents shares issuable upon the exercise of vested warrants, which were issued to this selling stockholder in transactions exempt from the registration requirements of the Securities Act in connection with a loan made to the Company by the selling stockholder. A portion of the original warrant issued to Bank of Montreal dated January 31, 1997 was assigned to PPM of America Investments Fund, L.P. on April 23, 1997. (4) Represents shares issuable upon the exercise of vested warrants, which were issued to this selling stockholder in transactions exempt from the registration requirements of the Securities Act pursuant to an Investment Agreement, dated October 12, 1998 as amended October 28, 1997, October 30, 1997, and November 26, 1997. (5) Steven Devick, Chief Executive Officer and President of the Company, is an executive officer of the general partner Platinum Venture Partners II, L.P. ("PVP II"). In such capacity, Mr. Devick may be deemed a beneficial owner with respect to common stock of the Company held by PVP II. Mr. Devick claims beneficial ownership of 56,250 shares of common stock underlying the warrant to purchase common stock held by PVP II. Mr. Devick disclaims beneficial ownership of the remaining 337,500 shares of common stock underlying the warrant to purchase common stock held by PVP II. Andrew Filipowski, a director of the Company, is the President and Chief Executive Officer, a sole director and a stockholder of the general partner of PVP II. In such capacities, Mr., Filipowski may be deemed the beneficial owner with respect to common stock held by PVP II. Mr. Filipowski claims beneficial ownership of 56,250 shares of common stock underlying the warrant to purchase common stock held by PVP II. Mr. Filipowski disclaims beneficial ownership of the remaining 337,500 shares of common stock underlying the warrant to purchase common stock held by PVP II. (6) Represents shares issued to this selling stockholder in transactions exempt from the registration requirements of the Securities Act for consulting services rendered from February 28, 1998 through August 29, 1998. (7) Mr. Filipowski, a director of the Company, is the Chief Executive Officer and President of PLATINUM technology, inc. ("Platinum Tech"). In such capacity Mr. Filipowski may be deemed a beneficial owner of common stock held by Platinum Tech. Mr. Filipowski disclaims beneficial ownership of the common stock of the Company held by Platinum Tech. (8) Represents shares issued to this selling stockholder in transactions exempt from the registration requirements of the Securities Act pursuant to a Purchase Agreement, dated June 29, 1998, effective July 23, 1998 whereby we purchased certain assets from this selling stockholder. PLAN OF DISTRIBUTION Any or all of the shares covered by this prospectus may be sold from time to time by the selling stockholders, their pledgees, donees, transferees or distributees, or their respective successors-in-interest. The selling stockholders may sell all or a portion of the shares held by them from time to time while the registration statement of which this prospectus is a part remains effective. The aggregate proceeds to the selling stockholders from the sale of shares offered by the selling stockholders hereby will be the prices at which such securities are sold, less any commissions. There is no assurance that the selling stockholders will sell any or all of the shares offered hereby. The selling stockholders may sell the shares on the Nasdaq National Market, in privately negotiated transactions or otherwise, at fixed prices that may be changed, at market prices prevailing at the time of sale, at prices related to such market prices or at negotiated prices. The shares may be sold by the selling stockholders by one or more of the following methods, without limitation: (a) block trades in which the broker or dealer so engaged will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction, (b) purchases by a broker or dealer as principal and resale by such broker or dealer for its account pursuant to this prospectus, (c) ordinary brokerage transactions and transactions in which the broker solicits purchasers, (d) privately negotiated transactions and (e) a combination of any such methods of sale. In effecting sales, brokers and dealers engaged by selling stockholders may arrange for other brokers or dealers to participate. Brokers or dealers may receive commissions or discounts from selling stockholders (or, if any such broker or dealer acts as agent for the purchaser of such shares, from such purchaser) in amounts to be negotiated which are not expected to exceed those customary in the types of transactions involved. Brokers and dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share, and, to the extent such broker or dealer is unable to do so acting as agent for a selling stockholder, to purchase as principal any unsold shares at the price required to fulfill the broker's or dealer's commitment to such selling stockholder. Brokers and dealers who acquire shares as principal may thereafter resell such shares from time to time in transactions (which may involve block transactions and sales to and through other brokers and dealers, including transactions of the nature described above) in the over-the-counter market or otherwise at prices and on terms then prevailing at the time of sale, at prices then related to the then-current market price or in negotiated transactions and, in connection with such resales, may pay to or receive from the purchasers of such shares commissions as described above. The selling stockholders may also sell the shares in accordance with Rule 144 under the Securities Act rather than pursuant to this prospectus. In connection with distributions of the shares or otherwise, the selling stockholders may enter into hedging transactions with broker and dealers or other financial institutions. In connection with such transactions, broker and dealers or other financial institutions may engage in short sales of the Company's common stock in the course of hedging the positions they assume with selling stockholders. The selling stockholders may also sell our common stock short and redeliver the shares to close out such short positions. The selling stockholders may also enter into option or other transactions with brokers and dealers or other financial institutions which require the delivery to such broker or dealer or other financial institution of shares offered hereby, which shares such broker or dealer or other financial institution may resell pursuant to this prospectus. The selling stockholders may also pledge shares to a broker or dealer or other financial institution, and, upon a default, such broker or dealer or other financial institution may effect sales of the pledged shares pursuant to this prospectus. The selling stockholders and any broker or dealers or agents that participate with the selling stockholders in sales of the shares may be deemed to be "underwriters" within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker or dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the shares may not bid for or purchase shares of our common stock during a period which commences one business day prior to such person's participation in the distribution, subject to certain exceptions, including passive market making activities. The Company is responsible for the expenses incident to the offering and sale of the shares (other than commissions, discounts and fees of underwriters, dealers or agents) in accordance with the agreements pursuant to which registration rights were granted to the selling stockholders. We have agreed to indemnify the selling stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act. LEGAL MATTERS Certain legal matters with respect to the validity of the shares will be passed upon for us by Katten Muchin & Zavis, Chicago, Illinois. EXPERTS The consolidated financial statements of Platinum Entertainment, Inc., as of December 31, 1997 and May 31, 1997 and 1996, and the related seven month period ended December 31, 1997 and each of the three years ended May 31, 1997, incorporated by reference in this prospectus, have been audited by Ernst & Young LLP, independent certified public accountants, as set forth in their report thereon incorporated by reference herein. - ------------------------------------------- ------------------------------- - -------------------------------------------- ------------------------------- We have not authorized any dealer, salesman or other person to give any information or to make any representation 814,819 Shares not contained in or incorporated by reference to this prospectus. This prospectus does not constitute an offer, or a solicitation of an offer to buy the shares Common Stock by anyone in any jurisdiction in which such offer or solicitation is not authorized, or in which the person making the offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make such offer or solicitation. Under no circumstances shall the delivery of this prospectus or any sale made pursuant to this prospectus, create any implication that the information contained in this prospectus is correct as of any time subsequent to its date. ________________________ ________________ P R O S P E C T U S ________________________ TABLE OF CONTENTS Page AVAILABLE INFORMATION 2 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 3 RISK FACTORS 4 THE COMPANY 9 USE OF PROCEEDS 10 SELLING STOCKHOLDERS 11 PLAN OF DISTRIBUTION 13 LEGAL MATTERS 14 EXPERTS 14 December 23, 1998 - ----------------------------------------- --------------------------------- - ----------------------------------------- --------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution. Set forth below is an estimate of the approximate amount of fees and expenses payable in connection with the issuance and distribution of the Common Stock pursuant to the Prospectus contained in this Registration Statement. The Company will pay all of these expenses. Securities and Exchange Commission registration fee $1,044 Accountants fees and expenses $4,000 Legal fees and expenses $5,000 Miscellaneous expenses $1,000 ------- Total $11,044 ------- ------- Item 15. Indemnification of Directors and Officers. Article IX of the Company's Third Amended and Restated Certificate of Incorporation provides that we shall indemnify our directors to the full extent permitted by the Delaware General Corporation Law and may indemnify our officers to such extent, except that we shall not be obligated to indemnify any such person (i) with respect to proceedings, claims or actions initiated or brought voluntarily by any such person and not by way of defense, or (ii) for any amounts paid in settlement of an action indemnified against by us without our prior written consent. With the approval of our stockholders, we have entered into indemnity agreements with each of our directors and certain of our officers. These agreements may require us, among other things, to indemnify such officers and directors against certain liabilities that may arise by reason of their status or service as directors or officers, to advance expenses to them as they are incurred, provided that they undertake to repay the amount advanced if it is ultimately determined by a court that they are not entitled to indemnification, and to obtain directors' and officers' liability insurance if available on reasonable terms. In addition, Article X of the Company's Third Amended and Restated Certificate of Incorporation provides that a director of the Company shall not be personally liable to us or our stockholders for monetary damages for breach of his or her fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to us or our stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derives an improper personal benefit. Reference is made to Section 145 of the General Corporation Law of the State of Delaware which provides for indemnification of directors and officers in certain circumstances. Item 16. Exhibits. 4.1 Third Amended and Restated Certificate of Incorporation of the Company, as amended (Incorporated by reference to Exhibit 3.1 to our Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 1997 ("November 1997 10-Q"). 4.2 Amended and Restated By-laws of the Registrant, as amended (Incorporated by reference to Exhibit 3.2 to the November 1997 10-Q). 4.3 Specimen stock certificate representing Common Stock (Incorporated by reference to Exhibit 4.1 to our Registration Statement on Form S-1 SEC File No. 33-80357). 4.4 Warrant to purchase shares of common stock issued to Bank of Montreal dated January 31, 1997. (Incorporated by reference to the Current Report on Form 8-K filed with the Commission on February 18, 1997). 4.5 Warrant to purchase shares of common stock issued to PPM America Special Investments Fund L.P. dated April 23, 1997. 4.6 Warrant to purchase 315,000 shares of common stock issued to Platinum Venture Partners, II L.P. dated December 12, 1997. (Incorporated by reference to Exhibit 4.1 to the November Q). 4.7 Warrant to purchase 135,000 shares of common stock issued to Platinum Venture Partners, II L.P. dated December 12, 1997. (Incorporated by reference to Exhibit 4.1 to the November Q). 5 Opinion of Katten Muchin & Zavis as to the legality of the securities being registered (including consent). 23.1 Consent of Ernst & Young LLP. 23.2 Consent of Katten Muchin & Zavis (included in Exhibit 5). 24 Power of Attorney (included on the signature page to this Registration Statement). Item 17. Undertakings (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933 (the "Securities Act"), each filing of our annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (h) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and our controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or our controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, we certify that we have reasonable grounds to believe that we meet all of the requirements for filing on Form S-3 and we have duly caused this Amendment to the Registration Statement to be signed on our behalf by the undersigned, thereunto duly authorized, in the City of Downers Grove, State of Illinois, on December 23, 1998. Platinum Entertainment, Inc. By: /s/ STEVEN DEVICK Steven Devick Chairman, President and Chief Executive Officer POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Steven Devick and Douglas C. Laux, and both of them, his true and lawful attorneys-in-fact and agents, with full power of substitution, to sign on his behalf, individually and in each capacity stated below, all amendments and post- effective amendments to this Registration Statement on Form S-3 and to file the same, with all exhibits thereto and any other documents in connection therewith, with the Securities and Exchange Commission under the Securities Act of 1933, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully and to all intents and purposes as each might or could do in person, hereby ratifying and confirming each act that said attorneys-in-fact and agents may lawfully do or cause to be done by virtue thereof. In accordance with the requirements of the Securities Act of 1933, as amended, this Registration Statement was signed by the following persons in the capacities and on this 23rd day of December, 1998. Signature Title /s/ STEVEN DEVICK Chairman, President, and Chief Executive Officer Steven Devick Officer /s/ DOUGLAS C. LAUX Chief Financial Officer and a Director Douglas C. Laux /s/DAVID BAUMAN Director David Bauman /s/MICHAEL P. CULLINANE Director Michael P. Cullinane /s/CRAIG J. DUCHOSSOIS Director Craig J. Duchossois /s/ ANDREW J. FILIPOWSKI Director Andrew J. Filipowski /s/ CARL D. HARNICK Director Carl D. Harnick /s/GEOFFREY HOLMES Director Geoffrey Holmes Director Paul L. Humenansky /s/ROBERT J. MORGADO Director Robert J. Morgado /s/MARK J. SCHWARTZ Director Mark J. Schwartz EX-1 2 Exhibit 4.5 This Warrant and the Common Stock issuable upon exercise hereof have not been registered under the Securities Act of 1933, as amended, or any State securities laws and may not be sold, transferred, hypothecated or assigned in the absence of such registration or an exemption therefrom under said Act or any such State securities laws which may be applicable. No. 3 Warrant To Purchase Shares Of Common Stock Of Platinum Entertainment, Inc. Void after January 31, 2002 Table of Contents Section Heading Page Section 1. Exercise of Warrant 2 Section 2. Adjustment of Applicable Percentage. 2 Section 2.1. Adjustment of Applicable Percentage. 2 Section 2.2. Adjustment of Applicable Percentage. 3 Section 2.3. Notice of Adjustments 3 Section 3. Mergers, Consolidations, Sales 3 Section 4. Dissolution or Liquidation 4 Section 5. Notice of Extraordinary Dividends 4 Section 6. Fractional Shares 4 Section 7. Fully Paid Stock, Taxes. 4 Section 8. Closing of Transfer Books 5 Section 9. Restrictions on Transferability of Warrants and Shares, Compliance with Laws 5 Section 9.1. In General 5 Section 9.2. Restrictive Legends 5 Section 9.3. Notice of Proposed Transfer, Registration Not Required 6 Section 9.4. Demand Registration 6 Section 9.5. Participation in Registered Offerings ("Piggyback Rights") 8 Section 9.6. Obligations of Investors 8 Section 9.7. Registration Proceedings 9 Section 9.8. Expenses 11 Section 9.9. Indemnification of Investors 12 Section 9.10. Indemnification of Company 13 Section 9.11. Contribution 14 Section 9.12. Reporting Requirements under Securities Exchange Act of 1934 14 Section 10. Partial Exercise and Partial Assignment 14 Section 10.1. Partial Exercise. 14 Section 10.2. Assignment 15 Section 11. Definitions 15 Section 12. Lost, Stolen Warrants, etc 17 Section 13. Warrant Holder Not Shareholder 17 Section 14. Severability 17 Section 15. Index and Captions 18 Signature Page 19 Annex A Securities Act Representations This Warrant and the Common Stock issuable upon exercise hereof have not been registered under the Securities Act of 1933, as amended, or any State securities laws and may not be sold, transferred, hypothecated or assigned in the absence of such registration or an exemption therefrom under said Act or any such State securities laws which may be applicable. No. 3 Warrant To Purchase Shares Of Common Stock Of Platinum Entertainment, Inc. This Is To Certify that, for value received and subject to the provisions hereinafter set forth, PPM America Special Investments Fund L.P. or permitted assigns, is entitled to purchase from Platinum Entertainment, Inc., a Delaware corporation (the "Company"), at any time to and including 5:00 p.m. (Chicago time) on January 31, 2002 (the "Expiration Date"), that number of shares of Common Stock of the Company of the par value of $.001 per share which, after giving effect to such purchase, and prior to giving effect to any adjustments provided for under Section 2 hereof, represents 0.4487% (the "Applicable Percentage") of the number of shares of Common Stock of the Company outstanding at the time of such purchase (but without giving effect to such purchase) for an aggregate price of $232.06 (the "Aggregate Warrant Price"), all on and subject to the terms, provisions and conditions hereinafter set forth. The initial number of shares of Common Stock of the Company purchasable hereunder is 23,206. The terms which are capitalized herein shall have the meanings specified in Section 11 unless the context shall otherwise require. Section 1. Exercise of Warrant; Reservation. Subject to the conditions hereinafter set forth, this Warrant may be exercised in whole at any time or in part from time to time prior to the Expiration Date by the surrender of this Warrant (accompanied by (i) the subscription form at the end hereof duly executed and (ii) if this Warrant is not registered in the name of the purchaser, an assignment(s) in the form attached hereto evidencing the assignment of this Warrant to such purchaser, in which case the registered holder shall have complied with the provisions set forth in Section 9.3) at the principal office of the Company in Downers Grove, Illinois, and upon payment to the Company of the Aggregate Warrant Price (or, if exercised in part, upon payment to the Company of the applicable Proportionate Part of the Aggregate Warrant Price) for the shares so purchased in funds current in Chicago, Illinois. This Warrant and all rights and options hereunder shall expire on the Expiration Date, and shall be wholly null and void to the extent this Warrant is not exercised before it expires. Upon exercise of this Warrant, the holder shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the Underlying Shares so purchased are being acquired solely for the holder's own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale and that such holder is an Accredited Investor (as defined in Annex A hereto). If such holder cannot make such representations because they would be factually incorrect, it shall be a condition to such holder's exercise of this Warrant that the Company receive such other representations as the Company considers reasonably necessary to assure the Company that the issuance of its securities upon exercise of this Warrant shall not violate any United States or state securities laws. The Company shall pay all reasonable expenses, taxes and other charges payable in connection with the preparation, execution and delivery of stock certificates pursuant to this Section, regardless of the name or names in which such stock certificates shall be registered. The Company will at all times prior to the Expiration Date reserve and keep available such number of authorized shares of its Common Stock, solely for the purpose of issue upon the exercise of the rights represented by this Warrant as herein provided for, as may at any time be issuable (based upon the number of shares of Common Stock outstanding at any such time) upon the exercise of this Warrant and such shares issuable upon the exercise of this Warrant shall at no time have an aggregate par value which is in excess of the Aggregate Warrant Price then in effect. Section 2. Adjustment of Applicable Percentage. Section 2.1. Adjustment of Applicable Percentage. In the event that, on or prior to the Credit Agreement Termination Date, the Company shall at any time issue any Qualifying Additional Shares of Common Stock, the Applicable Percentage shall be adjusted as of the date of making by the Company of the related Qualifying Credit Agreement Payment to that percentage determined by multiplying the Applicable Percentage as in effect immediately prior to the making of such Qualifying Credit Agreement Payment by a fraction: (a) the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to the issuance of such Qualifying Additional Shares of Common Stock, and (b) the denominator of which shall be the number of shares of Common Stock outstanding immediately subsequent to the issuance of such Qualifying Additional Shares of Common Stock and giving effect to such issuance (but not to the issuance of any Common Stock not constituting Qualifying Additional Shares of Common Stock). Section 2.2. Adjustment of Applicable Percentage. In the event that, subsequent to the Credit Agreement Termination Date, the Company shall at any time issue any shares of Common Stock, the Applicable Percentage shall be adjusted as of the date of such issuance to that percentage expressing a fraction, the numerator of which shall be the number of shares of Common Stock (adjusted for intervening stock splits, stock dividends, reverse stock splits or other reclassifications) purchaseable by the holder hereof on the Credit Agreement Termination Date and the denominator of which shall be the total number of shares of Common Stock outstanding immediately subsequent to the issuance of said shares of Common Stock and giving effect to such issuance. Section 2.3. Notice of Adjustments. Whenever the Applicable Percentage shall be adjusted pursuant to this Section 2, the Company shall promptly prepare a certificate signed by the President or a Vice President and by the Treasurer or an Assistant Treasurer of the Company setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment and the method by which such adjustment was calculated, and shall promptly cause copies of such certificate to be mailed (by first class mail, postage prepaid) to the holder of this Warrant. Section 3. Mergers, Consolidations, Sales. In the case of any consolidation or merger of the Company with another entity, or the sale of all or substantially all of its assets to another entity, or any reorganization, recapitalization or reclassification of the Common Stock or other equity securities of the Company, then, as a condition of such consolidation, merger, sale, reorganization, recapitalization or reclassification, lawful and adequate provision shall be made whereby the holder of this Warrant shall thereafter have the right to receive upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore purchasable hereunder, such shares of stock, securities or assets as may (by virtue of such consolidation, merger, sale, reorganization or reclassification) be issued or payable with respect to or in exchange for a number of outstanding shares of Common Stock equal to the number of shares of Common Stock immediately theretofore so purchasable hereunder had such consolidation, merger, sale, reorganization, recapitalization or reclassification not taken place, and in any such case, appropriate provisions shall be made with respect to the rights and interests of the holder of this Warrant to the end that the provisions hereof shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities or assets thereafter deliverable upon exercise of this Warrant. The Company shall not effect any such consolidation, merger or sale, unless prior to or simultaneously with the consummation thereof, the successor entity (if other than the Company) resulting from such consolidation or merger or the entity purchasing such assets shall assume by written instrument executed and mailed or delivered to the holder of this Warrant, the obligation to deliver to such holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled to receive. Section 4. Dissolution or Liquidation. In the event of any proposed distribution of the assets of the Company in dissolution or liquidation except under circumstances when the foregoing Section 3 shall be applicable, the Company shall mail notice thereof to the holder of this Warrant and shall make no distribution to shareholders until the expiration of 30 days from the date of mailing of the aforesaid notice and, in any such case, the holder of this Warrant may exercise the purchase rights with respect to this Warrant within 30 days from the date of mailing such notice and all rights herein granted not so exercised within such 30- day period shall thereafter become null and void. Section 5. Notice of Extraordinary Dividends. If the Board of Directors of the Company shall declare any dividend or other distribution on its Common Stock except out of earned surplus or by way of a stock dividend payable on its Common Stock, the Company shall mail notice thereof to the holder of this Warrant not less than 30 days prior to the record date fixed for determining shareholders entitled to participate in such dividend or other distribution and the holder of this Warrant shall not participate in such dividend or other distribution or be entitled to any rights on account or as a result thereof unless and to the extent that this Warrant is exercised prior to such record date. The provisions of this paragraph shall not apply to distributions made in connection with transactions covered by Section 3. Section 6. Fractional Shares. Fractional shares may be issued upon the exercise of this Warrant in any case where the holder hereof would be entitled to receive a fractional share upon the exercise of this Warrant in order to receive the appropriate percentage of shares of Common Stock. Section 7. Fully Paid Stock, Taxes. The Company covenants and agrees that the shares of stock represented by each and every certificate for its Common Stock to be delivered on the exercise of the purchase rights herein provided for shall, at the time of such delivery, be validly issued and outstanding and be fully paid and nonassessable. The Company further covenants and agrees that it will pay when due and payable any and all Federal and State taxes (but not including income taxes) which may be payable in respect of this Warrant or any Common Stock or certificates therefor upon the exercise of the conversion rights provided for herein. The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the transfer and delivery of stock certificates in the name other than that of the holder exercising this Warrant, and any such tax shall be paid by such holder at the time of presentation. Section 8. Closing of Transfer Books. The right to exercise this Warrant shall not be suspended during any period that the stock transfer books of the Company for its Common Stock may be closed. The Company shall not be required, however, to deliver certificates of its Common Stock upon such exercise while such books are duly closed for any purpose, but the Company may postpone the delivery of the certificates for such Common Stock until the opening of such books, and they shall, in such case, be delivered forthwith upon the opening thereof, or as soon as practicable thereafter. Section 9. Restrictions on Transferability of Warrants and Shares, Compliance with Laws. Section 9.1. In General. This Warrant and the Common Stock issued upon the exercise hereof shall not be transferable except upon the conditions hereinafter specified, which conditions are intended to insure compliance with the provisions of the Securities Act and any applicable State securities laws in respect of the transfer of this Warrant or any such Common Stock. Section 9.2. Restrictive Legends. Each Warrant shall bear on the face thereof a legend substantially in the form of the notice endorsed on the first page of this Warrant. Each certificate for shares of Common Stock initially issued upon the exercise of any Warrant and each certificate for shares of Common Stock issued to a subsequent transferee of such certificate shall, unless otherwise permitted by the provisions of this Section 9.2, bear on the face thereof a legend reading substantially as follows: "The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, or any State securities laws and may not be sold, transferred, hypothecated or assigned in the absence of such registration or an exemption therefrom under said Act and any such State securities laws which may be applicable." In the event that a registration statement covering the Underlying Shares or the Restricted Stock shall become effective under the Securities Act and under any applicable State securities laws or in the event that the Company shall receive an opinion of its counsel that, in the opinion of such counsel, such legend is not, or is no longer, necessary or required (including, without limitation, because of the availability of the exemption afforded by Rule 144 of the General Rules and Regulations of the Securities and Exchange Commission), the Company shall, or shall instruct its transfer agents and registrars to, remove such legend from the certificates evidencing the Restricted Stock or issue new certificates without such legend in lieu thereof. Upon the written request of the holder or holders of any Warrant or of any Restricted Stock the Company covenants and agrees forthwith to request its counsel to render an opinion with respect to the matters covered by this Section 9.2 and to bear all expenses in connection with the same. Section 9.3. Notice of Proposed Transfer, Registration Not Required. The holder of each Warrant or any Restricted Stock, by acceptance thereof, agrees to give prior written notice to the Company of such holder's intention to transfer such Warrant or the Underlying Shares relating thereto or such Restricted Stock (or any portion thereof), describing briefly the manner and circumstances of the proposed transfer; provided, however, that no such notice shall be required for a transfer under a registration, qualification or filing for exemption requested in accordance with the provisions of Section 9.4 or for the transfer of this Warrant or any Underlying Shares in their entirety to any direct or indirect parent, subsidiary or corporate affiliate of the initial holder of this Warrant. In addition, in the event that such transfer is proposed to be made in compliance with an exemption from the registration requirements of the Securities Act, the availability of which exemption is dependent upon the accuracy of the representations set forth in Annex A hereto, the holder (or the proposed transferee) shall, as a precondition to such transfer, provide to the Company a certificate of the proposed transferee containing said representations. In the event that such transferee cannot make such representations because they would be factually incorrect, it shall be a condition to the transfer of this Warrant to such transferee that the Company receive such other representations as the Company considers reasonably necessary to assure the Company that the transfer of this Warrant shall not violate any United States or state securities laws. Such notice shall describe briefly the nature of such transfer, and no such transfer shall be made unless and until (i) the holder has supplied to the Company an opinion of counsel for the holder (which counsel shall be satisfactory to the Company) to the effect that no registration (or perfection of an exemption) under the Securities Act is required with respect to such transfer (which opinion may be conditioned upon the transferee's assuming the obligations of a holder of this Warrant under this Section 9.3) or (ii) an appropriate registration statement with respect to such sale or other disposition of the Warrant or Restricted Stock shall have been filed by the Company with the Commission and declared effective by the Commission. All fees and expenses of counsel (including counsel designated by any holder of Warrants or Restricted Stock) in connection with the rendition of the opinions provided for in this subparagraph shall be paid by the Company. As used in this Section 9.3, the term "transfer" includes an assignment pursuant to Section 10.2 hereof. Section 9.4. Demand Registration. At any time after the first to occur of (i) January 31, 1998 or (ii) in the event that an Event of Default shall have occurred and then be continuing, July 31, 1997, the Investors (or their permitted transferees) may demand registration under the Securities Act of any Underlying Shares issuable upon conversion of any Warrant or Restricted Stock of the Company obtained pursuant to the conversion of the Warrants (collectively, on a Common Stock equivalent basis, the "Registrable Securities"), or otherwise, on Form S-1 or any similar long-form registration ("Long-Form Registration") or Form S-2 or S-3 or any similar short-form registration ("Short-Form Registration"). The registration requested pursuant to this Section 9.4 is referred to herein as "Demand Registration." (A) Number of Registrations. The Investors shall be entitled to demand one Long-Form or Short-Form Registration. A registration will count as the Demand Registration when it has become effective, unless (i) the Investors are unable to register and sell at least 80% of any Registrable Securities demanded to be included in such registration or (ii) the registration is withdrawn prior to effectiveness at the request of the Investors (or by the underwriter selected by the Investors) as a consequence of the good faith determination by the underwriter selected by the Investors that a sale under then current market conditions of at least 80% of any Registrable Securities demanded to be included in such registration could not be effected under commercially reasonably terms; provided that in any event, the Company will pay all registration expenses in connection with any registration initiated as a Demand Registration as provided in Section 9.8 hereof. (B) Priority on Demand Registrations. If the Demand Registration is an underwritten offering and the managing underwriters advise the Company in writing that in their opinion the number of Registrable Securities requested to be included exceeds the number of Registrable Securities which, under then current market conditions, can be sold in such offering at the price expected to be obtained for such shares by the Investors in a commercially reasonable sale, the Company will include in such registration prior to the inclusion of any securities which are not Registrable Securities owned by the Investors the number of shares of Investors' Underlying Shares or Restricted Stock requested to be included which in the opinion of such underwriters can be sold, pro rated among the Investors based upon the number of Registrable Securities owned by them. In the event that the Demand Registration is an underwritten offering, and all Registrable Securities which the Investors requested to be included in such offering are to be so included, then, to the extent that the managing underwriter shall advise the Company and the Investors that the inclusion of additional shares of Common Stock in such offering will not materially and adversely affect the price or salability of the Registrable Securities being included in such offering, the Company may include such additional shares in the related registration (whether such shares are proposed to be sold by the Company or by other shareholders). (C) Restrictions on Demand Registration. Unless an Event of Default shall have occurred and be continuing, the Company may postpone for a reasonable period, not to exceed 90 days, the filing or the effectiveness of a registration statement for a Demand Registration, if the Company has been advised by legal counsel that such filing would require disclosure of a material fact that the Company reasonably and in good faith determines would have a material adverse effect on any proposal or plan by the Company or any of its subsidiaries to engage in any significant transaction. In addition, the Company will not be obligated to effect a Demand Registration unless it receives a written request to do so from the holders of at least 50% of the outstanding Registrable Securities, which request proposes to register not less than 50% of the then outstanding Registrable Securities. The Company will not be obligated to effect a Demand Registration within 180 days after the effective date of a registration in which the Investors were given "Piggyback Rights" pursuant to Section 9.5. (D) Selection of Underwriters. Selection of Underwriters. The Investors will have the right to select the investment banker(s) and manager(s) to administer the offering, subject to the Company's approval (which approval will not be unreasonably withheld); provided, that the fees and expenses payable by the Company to such persons are in accordance with industry standards. Section 9.5. Participation in Registered Offerings ("Piggyback Rights"). If the Company at any time or times proposes or is required to register any of its Common Stock or other equity securities (whether such Common Stock or other equity securities are owned by the Company or another holder entitled to demand registration) for public sale for cash under the Securities Act (other than on Forms S-4 or S-8 or similar registration forms), it will at each such time or times give written notice to the Investors of its intention to do so. Upon the written request of the Investors given within 20 days after receipt of any such notice, the Company shall use its best efforts to cause to be included in such registration any Registrable Securities held by the Investors (or their permitted transferees) or Underlying Shares or shares of Restricted Stock obtainable upon conversion of the Warrant and requested to be registered under the Securities Act and any applicable state securities laws; provided, that if such registration is a underwritten public offering and the managing underwriter advises that less than all of the shares and Registrable Securities to be registered should be offered for sale so as not materially and adversely to affect the price or salability of the offering, the Investors and any Qualifying Other Holders (but not the Company if such registration is a primary registration and not the holder originally demanding the registration if such registration is a secondary demand registration) shall reduce on a pro rata basis the number of their shares of Common Stock (as if exercised or converted, as the case may be) to be included in the registration statement as required by the managing underwriter to the extent requisite to permit the sale or other disposition (in accordance with the intended method of disposition thereof as aforesaid) by the prospective seller or sellers of the securities so registered. Section 9.6. Obligations of Investors. It shall be a condition precedent to the obligation of the Company to register any Registrable Securities pursuant to Section 9.4 and 9.5 hereof that the Investors shall (i) furnish to the Company such information regarding the Registrable Securities held and the intended method of disposition thereof and other information concerning the Investors as the Company shall reasonably request and as shall be required in connection with the registration statement to be filed by the Company; (ii) agree to abide by such additional or customary terms affecting the proposed offering as are applicable to shareholders (including holders of Warrants, Underlying Shares or shares of Restricted Stock) in any such registration as reasonably may be requested by the managing underwriter of such offering, including a requirement, if applicable, to withhold from the public market for a period of time requested by the managing underwriting not to exceed 180 days after any such offering, Warrants and any shares excluded from the offering at the request of the underwriter as permitted under Section 9.4 and 9.5 hereof; and (iii) agree in writing in form satisfactory to the Company to pay all underwriting discounts and commissions applicable to the securities being sold by the Investors. Section 9.7. Registration Proceedings. If and whenever the Company is required by the provisions of Section 9.4 or Section 9.5 hereof to effect the registration of the Registrable Securities under the Securities Act, until all of the securities covered by such registration statement have been sold or for nine months after effectiveness, whichever is the shorter period of time, the Company shall: (A) Prepare and file with the Commission a registration statement with respect to such securities and use its best efforts to cause such registration statement to become and remain effective; (B) Prepare and file with the Commission such amendments to such registration statement and supplements to the prospectus contained therein as may be necessary to keep such registration statement effective; (C) Furnish to the Investors participating in such registration (the "Participating Investors") and to the underwriters of the securities being registered such reasonable number of copies of the registration statement, preliminary prospectus, final prospectus and such other documents as such underwriters may reasonably request in order to facilitate the public offering of such securities; (D) Use its best efforts to register or qualify the securities covered by such registration statement under such state securities or "Blue Sky" laws of such jurisdictions as such Participating Investors may reasonably request within 20 days following the original filing of such registration statement, except that the Company shall not for any purpose be required to execute a general consent to service of process or to qualify to do business as a foreign corporation in any jurisdiction wherein it is not so qualified; (E) Notify the Participating Investors, promptly after it shall receive notice thereof, of the time when such registration statement has become effective or a supplement to any prospectus forming a part of such registration statement has been filed; (F) Notify such Participating Investors promptly of any request by the Commission for the amending or supplementing of such registration statement or prospectus or for additional information; (G) Prepare and file with the Commission, promptly upon the request of any such Participating Investors, any amendments or supplements to such registration statement or prospectus which, in the opinion of counsel for such Participating Investors, are required under the Securities Act or the rules and regulations thereunder in connection with the distribution of the Registrable Securities by such Participating Investors; (H) Prepare and promptly file with the Commission and promptly notify such Participating Investors of the filing of such amendment or supplement to such registration statement or prospectus as may be necessary to correct any statements or omissions if, at the time when a prospectus relating to such securities is required to be delivered under the Securities Act, any event shall have occurred as the result of which any such prospectus or any other prospectus as then in effect would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances in which they were made, not misleading; (I) In case any of such Participating Investors or any underwriter for any such Participating Investors is required to deliver a prospectus at a time when the prospectus then in circulation is not in compliance with the Securities Act, the Company will prepare and file such supplements or amendments to such registration statement and such prospectus or prospectuses as may be necessary to permit compliance with the requirements of the Securities Act; (J) Advise such Participating Investors, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the Commission suspending the effectiveness of such registration statement or the initiation or threatening of any proceeding for that purpose and promptly use its reasonable best efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued; (K) Not file any amendment or supplement to such registration statement or prospectus to which counsel selected by a majority in interest of such Participating Investors shall reasonably have objected on the grounds that such amendment or supplement does not comply in all material respects with the requirements of the Securities Act or the rules and regulations thereunder, after having been furnished with a copy thereof at least five business days prior to the filing thereof unless, in the case of an amendment or supplement, in the opinion of counsel for the Company, the filing of such amendment or supplement is reasonably necessary to protect the Company from any liabilities under any applicable Federal or state law and such filing will not violate applicable laws; and (L) At the request of any such Participating Investor, (i) use its best efforts to obtain and furnish on the effective date of the registration statement or, if such registration includes an underwritten public offering, at the closing provided for in the underwriting agreement, a customary opinion, dated such date, of the counsel representing the Company for the purposes of such registration, addressed to the underwriters, if any, and to the Participating Investors making such request, or, if the offering is not underwritten, shall state that such registration statement has become effective under the Securities Act and that: (a) to the best of such counsel's knowledge, no stop order suspending the effectiveness thereof has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the Securities Act; (b) the registration statement, related prospectus and each amendment or supplement thereto comply as to form in all material respects with the requirements of the Securities Act and applicable rules and regulations of the Commission thereunder (except that such counsel need express no opinion as to financial statements, financial data or schedules contained therein); (c) such counsel has no reason to believe that either the registration statement or the prospectus or any amendment or supplement thereto contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (d) the description in the registration statement or prospectus or any amendment or supplement thereto of all legal and governmental matters and all contracts and other legal documents or instruments described therein are accurate and fairly present the information required to be shown; and (e) such counsel does not know of any legal or governmental proceedings, pending or threatened, required to be described in the registration statement or prospectus or any amendment or supplement thereto which are not described as required, nor of any contracts or documents or instruments of the character required to be described in the registration statement or prospectus or amendment or supplement thereto or to be filed as exhibits to the registration statement, which are not described and filed as required; and (ii) in the case of an underwritten offering, use its best efforts to obtain customary letters dated such effective date, and such closing date, if any, from the independent certified public accountants of the Company, addressed to the underwriters, if any, and to the Participating Investor or Investors, stating that they are independent certified public accountants within the meaning of the Securities Act and dealing with such matters as the underwriters may request, or, if the offering is not underwritten, stating that in the opinion of such accountants, the financial statements and other financial data pertaining to the Company included in the registration statement or the prospectus or any amendment or supplement thereto comply in all material respects with the applicable accounting requirements of the Securities Act. Section 9.8. Expenses. With respect to each inclusion of Registrable Securities in a registration statement pursuant to Section 9.4 or 9.5 hereof, all registration expenses, fees, costs and expenses of and incidental to such registration, inclusion and public offering in connection therewith shall be borne by the Company (including the reasonable fees and disbursements of one counsel acting on behalf of the Participating Investors); provided, however, that the Participating Investors shall bear their pro rata share of the underwriting discount and commissions. The fees, costs and expenses of registration to be borne by the Company shall include, without limitation, all registration, filing and NASD fees, printing expenses, fees and disbursements of one counsel on behalf of the Participating Investors, fees and disbursements of counsel and accountants for the Company (including the cost of any special audit deemed necessary by counsel to the Company in order to effect such registration), fees and disbursements of counsel for the underwriter or underwriters of such securities (if the Company and/or Participating Investors are required to bear such fees and disbursements), all legal fees and disbursements and other expenses of complying with state securities or "Blue Sky" laws of any jurisdiction in which the securities to be offered are to be registered or qualified, and the premiums and other costs of policies of insurance against liability arising out of such public offering which the Company determines to obtain. Section 9.9. Indemnification of Investors. Subject to the conditions set forth below, in connection with any registration of Securities pursuant to Section 9.4 or Section 9.5 hereof, the Company agrees to indemnify and hold harmless (i) each Participating Investor and each director and officer of each Participating Investor, (ii) any underwriter for the Company or acting on behalf of any Participating Investor and (iii) each person, if any, who controls any such Participating Investor within the meaning of Section 15 of the Securities Act (hereinafter collectively referred to as "Company Indemnified Parties" and individually referred to as a "Company Indemnified Party") as follows: (A) Against any and all loss, claim, damage and expense whatsoever (including, but not limited to, any and all expense whatsoever reasonably incurred in investigating, preparing or defending any litigation, commenced or threatened), arising out of or based upon any untrue or alleged untrue statement of a material fact contained in any preliminary prospectus (if used prior to the effective date of the registration statement), the registration statement or the prospectus (as from time to time amended and supplemented), or in any application or other document executed by the Company or based upon written information furnished by the Company filed in any jurisdiction in order to qualify the Company's securities under the securities laws thereof; or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading; or any other violation of applicable federal or state statutory or regulatory requirements or limitations relating to action or inaction by the Company in the course of preparing, filing, or implementing such registered offering; provided, however, that the indemnity agreement contained in this Section 9.9(A) shall not apply to any loss, claim, damage, liability or action arising out of or based upon any untrue or alleged untrue statement or omission made in reliance upon and in conformity with any information furnished in writing to the Company by or on behalf of any Company Indemnified Party expressly for use in connection therewith or arising out of any action or inaction of any such Company Indemnified Party; (B) Subject to the proviso contained in Section 9.9(A) above, against any and all loss, liability, claim, damage and expense whatsoever to the extent of the aggregate amount paid in settlement of any litigation, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission or any such alleged untrue statement or omission (including, but not limited to, any and all expense whatsoever reasonably incurred in investigating, preparing or defending against any such litigation or claim, but subject to the provisions of Section 9.9(C)) if such settlement is effected with the written consent of the Company; (C) In no case shall the Company be liable under this Section 9.9 with respect to any claim made against any Company Indemnified Party unless the Company shall be notified in writing sent by overnight courier or by confirmed facsimile transmission followed by delivery of such notice by overnight air courier sent on the date of such facsimile communication, of any action commenced against such Company Indemnified Party, promptly after such Company Indemnified Party shall have been served with the summons or other legal process giving information as to the nature and basis of the claim. The failure to so notify the Company, if prejudicial in any material respect to the Company's ability to defend such claim, shall relieve the Company from its liability to the Company Indemnified Party under this Section 9.9, but only to the extent that the Company was so prejudiced, but the failure to so notify the Company shall not relieve the Company from any liability which it may have otherwise than on account of this Section 9.9. The Company shall be entitled to participate at its own expense in the defense of any suit brought to enforce any such claim, but if the Company elects to assume the defense, such defense shall be conducted by counsel chosen by it, provided that such counsel is reasonably satisfactory to the Company Indemnified Parties, defendants in any suit so brought. In the event the Company elects to assume the defense of any such suit and retain such counsel, the Company Indemnified Parties, defendants in the suit, shall, after the date they are notified of such election, bear the fees and expenses of any counsel thereafter retained by them as well as any other expenses thereafter incurred in connection with the defense thereof; provided, however, that if the Company Indemnified Parties reasonably believe that there may be available to them any defense or counterclaim different than those available to the Company or that representation of such Company Indemnified Parties by counsel for the Company presents a conflict of interest for such counsel, then such Company Indemnified Parties shall be entitled to defend such suit with counsel of their own choosing and the Company shall bear the fees, expenses and other costs of one counsel for all Company Indemnified Parties. Section 9.10. Indemnification of Company. Each Participating Investor severally and individually agrees to indemnify and hold harmless the Company, each underwriter for the offering, and each of their officers and directors and agents and each other person, if any, who controls the Company within the meaning of Section 15 of the Securities Act (hereinafter collectively referred to as "Investor Indemnified Parties" and individually referred to as an "Investor Indemnified Party") against any and all such losses, liabilities, claims, damages and expenses as are indemnified against by the Company under Section 9.9; provided, however, that such indemnification by such Participating Investors hereunder shall be limited to statements or omissions, if any, made (or in settlement of any litigation effected with the written consent of such Participating Investors, alleged to have been made) in any preliminary prospectus, registration statement or prospectus or any amendment or supplement thereof or any application or other document in reliance upon, and in conformity with, written information furnished in respect of such Participating Investors by or on behalf of such Participating Investors expressly for use in such preliminary prospectus, registration statement or prospectus or amendment or supplement thereof or in such application or other document or arising out of any action or inaction of such Participating Investors in implementing such registered offering. In case any action shall be brought against any Investor Indemnified Party, in respect of which indemnity may be sought against any Participating Investors, such Participating Investors shall have the rights and duties given to the Company, and the Company and each other Investor Indemnified Party shall have the rights and duties given to the Participating Investors, by the provisions of Section 9.9(c) hereof. The Investor Indemnified Party agrees to notify the Participating Investors promptly after the assertion of any claim against the Investor Indemnified Party in connection with the sale of the Registrable Securities. Section 9.11. Contribution. If the indemnification provided for in Section 9.9 and 9.10 are unavailable or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the indemnified party, on one hand, and such indemnifying party, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, or liabilities (or actions in respect thereof). The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fault relates to information supplied by the indemnified party, on one hand, or such indemnifying party, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Notwithstanding the provisions of this Section 9.11, the Participating Investors shall not be required to contribute any amount in excess of the amount of the total proceeds received by such Participating Investors from the sale pursuant to the registration with respect to which the registration statement, preliminary or final prospectus, or amendments or supplements thereto, containing such statement, omission or alleged omission (notwithstanding that the amount of damages which such Participating Investors would otherwise have been required to pay by reason of such statement, omission or alleged omission exceeds the amount of total proceeds). No person guilty of fraudulent misrepresentation (within the meaning of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this Section 9.11 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending and such action or claim. Section 9.12. Reporting Requirements under Securities Exchange Act of 1934. At all times during which the Company shall be subject to the reporting requirements of either Section 13 or Section 15(d) of the Securities Exchange Act of 1934 ("Exchange Act"), the Company shall, whenever requested by any Investor, notify such Investor in writing whether the Company has, as of any date specified in such request, complied with the Exchange Act reporting requirements as to which it is subject to a period prior to such date as may be specified in such request. In addition, in such event, the Company shall take such other measures and file such other information, documents and reports as shall hereafter be required by the Commission as a condition to the availability of Rule 144 under the Securities Act (or any corresponding rule hereafter in effect). Section 10. Partial Exercise and Partial Assignment Section 10.1. Partial Exercise. If this Warrant is exercised in part only, the holder hereof shall surrender this Warrant upon such exercise and shall receive a new Warrant, registered in the name of the holder or its nominee and setting forth a new Applicable Percentage and a new Aggregate Warrant Price in the first paragraph of page one hereof, which shall be proportionately adjusted to reflect such partial exercise. Section 10.2. Assignment. Subject to compliance with Section 9.3, this Warrant may be assigned either in whole or in part by surrender of this Warrant at the principal office of the Company in Downers Grove, Illinois (with the assignment or, as the case may be, partial assignment form at the end hereof duly executed). If this Warrant is being assigned in whole and the holder hereof previously has not partially exercised this Warrant, the assignee shall receive a new Warrant (registered in the name of such assignee or its nominee) which new Warrant shall have the same Aggregate Warrant Price and Applicable Percentage as this Warrant. If this Warrant is being assigned in part and the holder hereof previously has not partially exercised this Warrant, the assignor and assignee shall each receive a new Warrant (which, in the case of the assignee, shall be registered in the name of the assignee or its nominee), each of which new Warrants shall have a new Applicable Percentage and Aggregate Warrant Price proportionately adjusted to reflect such partial assignment. If this Warrant is being assigned in whole and the holder hereof previously has partially exercised this Warrant, the assignee shall receive a new Warrant (registered in the name of such assignee or its nominee), which new Warrant shall have the same Aggregate Warrant Price and Applicable Percentage as in effect immediately preceding such assignment. If this Warrant is being assigned in part and the holder hereof previously has partially exercised this Warrant, the assignor and assignee shall each receive a new Warrant (which, in the case of the assignee, shall be registered in the name of the assignee or its nominee), each of which new Warrants shall have a new Applicable Percentage and Aggregate Warrant Price proportionately adjusted to reflect such partial assignment Section 11. Definitions. In addition to the terms defined elsewhere in this Warrant, the following terms have the following respective meanings: "Aggregate Warrant Price" is as set forth in the first paragraph, subject to adjustment as provided in Section 2 hereof. "Applicable Percentage" shall mean, as of the date of any determination, the amount then so designated in the first paragraph of this Warrant, subject to adjustment as provided in Section 2 hereof. All determinations of the Applicable Percentage shall be expressed as a percentage carried out to four decimal places. "Business Day" shall mean a day, except Saturday, Sunday and legal holidays, on which banks are generally open for business in Chicago, Illinois. "Commission" shall mean the Securities and Exchange Commission, or any other Federal agency at the time administering the Securities Act. "Common Stock" as used herein shall include any class of capital stock of the Company now or hereafter authorized, the right of which to share in distributions either of earnings or assets of the Company is without limit as to any amount or percentage; provided, however, that the shares of Common Stock deliverable upon the exercise of the rights granted under this Warrant shall include only Common Stock of the Company having a par value of $.001 per share authorized at the date hereof and any class of Common Stock issued in substitution therefor. "Company Indemnified Party" shall have the meaning set forth in Section 9.6(C). "Credit Agreement" shall mean that certain Credit Agreement dated as of January 31, 1997 between the Company, Bank of Montreal (individually and agent) and any other banks which may at any time be parties thereto. "Credit Agreement Termination Date" shall mean the date on which all Term Credit Loans, Revolving Credit Loans and other obligations of the Company under the Credit Agreement shall have been paid in full, the Revolving Credit Commitments shall have been reduced to zero and the credit facility existing under the Credit Agreement shall have been terminated in its entirety. "Demand Registration" shall have the meaning set forth in Section 9.4. "Event of Default" shall have the meaning set forth in the Credit Agreement. "Investor" for purposes of Section 9 hereof shall mean any holder of any Warrant or any Underlying Shares or Restricted Stock issued pursuant thereto and "Investors" shall mean all of the holders of the Warrants or Underlying Shares or Restricted Stock issued pursuant thereto. "Investor Indemnified Party" shall have the meaning set forth in Section 9.7. "Proportionate Part of the Aggregate Warrant Price" shall mean that part of the Aggregate Warrant Price which bears the same ratio to the Aggregate Warrant Price: - in the case of any partial exercise of this Warrant--as the shares then being purchased bear to total number of shares then purchasable if this Warrant were exercised in whole; and - in the case of any partial assignment of this Warrant--as the percentage of shares of Common Stock assigned bears to the percentage of shares of Common Stock purchasable under this Warrant immediately prior to such assignment. "Qualifying Additional Shares of Common Stock" shall mean any shares of Common Stock issued by the Company in an arms-length transaction, the proceeds of which transaction are used by the Company to make a Qualifying Credit Agreement Payment. "Qualifying Credit Agreement Payment" shall mean a payment under the Credit Agreement applied in reduction of the Term Credit Loans until repayment in full thereof, and thereafter, in reduction of the Revolving Credit Loans, which reduction of the Revolving Credit Loans is accompanied by a concurrent and like reduction of the Revolving Credit Commitments (as such terms are defined in the Credit Agreement). "Qualifying Other Holders" shall mean the holders of any shares of Common Stock or other equity securities of the Company which shall have requested that such shares or other equity securities be included in a registration which is the subject of Section 9.5 hereof; provided, however, that the Company shall have provided to each of the Investors not less than 10 Business Day's notice of such request, together with such other related information as the Investors shall reasonably request. "Registrable Securities" shall have the meaning set forth in Section 9.4. "Restricted Stock" shall mean the shares of Common Stock of the Company issued upon the exercise of any of the Warrants and evidenced by a certificate required to bear the legend specified in Section 9.2. "Securities Act" shall mean the Securities Act of 1933, or any similar Federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Underlying Shares" shall mean the shares of Common Stock of the Company issuable upon exercise of any of the Warrants. "Warrants" as used herein shall mean this Warrant and all warrants hereafter issued in exchange or substitution for this Warrant. Section 12. Lost, Stolen Warrants, etc. In case this Warrant shall be mutilated, lost, stolen or destroyed, the Company may issue a new Warrant of like date, tenor and denomination and deliver the same in exchange and substitution for and upon surrender and cancellation of the mutilated Warrant, or in lieu of the Warrant lost, stolen or destroyed, upon receipt of evidence satisfactory to the Company of the loss, theft or destruction of such Warrant, and upon receipt of indemnity satisfactory to the Company. Section 13. Warrant Holder Not Shareholder. This Warrant does not confer upon the holder hereof any right to vote or to consent or to receive notice as a shareholder of the Company, as such, in respect of any matters whatsoever, or any other rights or liabilities as a shareholder, prior to the exercise hereof as hereinbefore provided. Section 14. Severability. Should any part of this Warrant for any reason be declared invalid, such decision shall not affect the validity of any remaining portion, which remaining portion shall remain in force and effect as if this Warrant had been executed with the invalid portion thereof eliminated, and it is hereby declared the intention of the parties hereto that they would have executed and accepted the remaining portion of this Warrant without including therein any such part, parts or portion which may, for any reason, be hereafter declared invalid. Section 15. Index and Captions. The index and the descriptive headings of the various sections of this Warrant are for convenience only and shall not affect the meaning or construction of the provisions hereof. In Witness Whereof, Platinum Entertainment, Inc. has caused this Warrant to be signed by its President or one of its Vice Presidents and attested by its Secretary or one of its Assistant Secretaries and this Warrant to be dated April 23, 1997. Platinum Entertainment, Inc. By /s/ STEVEN DEVICK Steven Devick President Attest: /s/ DOUGLAS C. LAUX __________________________________ Douglas C. Laux Secretary Subscription Re: Platinum Entertainment, Inc. The undersigned, _______________________________, pursuant to the provisions of the within Warrant, hereby elects to purchase _________________ shares of Common Stock of ______________________ covered by the within Warrant. Signature ________________________________________________________ Address ________________________________________________________ Dated: _______________________________ Assignment Re: Platinum Entertainment, Inc. For Value Received ________________ hereby sells, assigns and transfers unto _______________ the within Warrant and all rights evidenced thereby and does irrevocably constitute and appoint _______________________, attorney, to transfer the said Warrant on the books of the within named Company. _______________________________________ _______________________________ Dated: _______________________ Partial Assignment Re: Platinum Entertainment, Inc. For Value Received ____________________ hereby sells, assigns and transfers unto ____________________ that portion of the within Warrant and the rights evidenced thereby which will on the date hereof entitle the holder to purchase _______ shares of Common Stock of _______________________________, irrevocably constitute and appoint ____________________________, attorney, to transfer that part of the said Warrant on the books of the within named Company. _______________________________________ _______________________________ Dated: _______________________ Annex A The undersigned hereby represents that it is acquiring the subject Warrant or Warrant Shares for its own account for investment and not with a view to, or for sale in connection with, any distribution thereof or of any of the shares of Common Stock or other securities issuable upon the exercise thereof, and not with any present intention of distributing any of the same. The holder of this Warrant further represents that, as of this date, such holder is an "accredited investor" as such term is defined in Rule 501(a)(1) of Regulation D promulgated by the Securities and Exchange Commission under the Securities Act of 1933, as amended. Dated: ____________________ ____________________________ By _________________________ EX-2 3 EXHIBIT 5 KATTEN MUCHIN & ZAVIS 525 W. Monroe, Suite 1600 Chicago, Illinois 60661 December 23, 1998 (312) 902-5200 Platinum Entertainment, Inc. 2001 Butterfield Road Suite 1400 Downers Grove, Illinois 60515 Ladies and Gentlemen: We have acted as counsel for Platinum Entertainment, Inc., a Delaware corporation (the "Company"), in connection with the preparation and filing of a Registration Statement on Form S-3 (the "Registration Statement") for the registration for sale under the Securities Act of 1933, as amended, of a total of 814,819 shares of the Company's common stock, $.001 par value (the "Shares"). Certain of the Shares (the "Warrant Shares") may be issued by the Company upon the exercise of outstanding warrants (the "Warrants"). In connection with this opinion, we have examined and relied upon originals or copies of, certified or otherwise identified to our satisfaction, the following: 1. The Registration Statement; 2. The Third Amended and Restated Certificate of Incorporation of the Company, as amended; 3. The Amended By-Laws of the Company, as amended; 4. Resolutions duly adopted by the Board of Directors of the Company relating to the issuance of the Warrants and the Shares and the registration of the Shares; and 5. Such other instruments, documents, statements and records of the Company and others as we have deemed relevant and necessary to examine and rely upon for the purpose of this opinion. In connection with this opinion, we have assumed the accuracy and completeness of all documents and records that we have reviewed, the genuineness of all signatures, the authenticity of the documents submitted to us as originals and the conformity to authentic original documents of all documents submitted to us as certified, conformed or reproduced copies. We have further assumed that all natural persons involved in the transactions contemplated by the Registration Statement (the "Offering") have sufficient legal capacity to enter into and perform their respective obligations and to carry out their roles in the Offering. Based upon the foregoing, we are of the opinion that (i) the Shares other than the Warrant Shares are validly issued, fully paid and nonassessable and (ii) the Warrant Shares, when issued and delivered by the Company in accordance with the terms of the Warrants, will be validly issued, fully paid and nonassessable. Our opinion expressed above is limited to the laws of the State of Illinois, the laws of the United States of America and the General Corporation Law of the State of Delaware, and we do not express any opinion herein concerning any other law. In addition, we express no opinion herein concerning any statutes, ordinances, administrative decisions, rules or regulations of any county, town, municipality or special political subdivision (whether created or enabled through legislative action at the federal, state or regional level). This opinion is given as of the date hereof and we assume no obligation to advise you of changes that may hereafter be brought to our attention. This opinion is solely for the information of the addressee hereof and is not to be quoted in whole or in part or otherwise referred to, nor is it to be filed with any governmental agency or any other person without our prior written consent. In connection therewith, we hereby consent to the use of this opinion for filing as Exhibit 5 to the Registration Statement. No one other than the addressee hereof is entitled to rely on this opinion. This opinion is rendered solely for the purposes of the Offering and should not be relied upon for any other purpose. Very truly yours, /S/ KATTEN MUCHIN & ZAVIS Doc #:CH02 (65591-00001) 898435v1;12/22/1998/Time:14:08 EX-3 4 Exhibit 23.1 Consent of Independent Auditors We consent to the reference to our firm under the caption "Experts" in the Registration Statment and related Prospectus of Platinum Entetertainment, Inc. for the registration of 814,819 shares of its common stock, and to the incorporation by reference therein of our reports dated May 20, 1998 (exept for Note 9, as to which the date is July 31, 1998) and August 29, 1997 with respect to the consolidated financial statments and schedules of Platinum Entertainment, Inc. incorporated by reference in its Annual Report on Form 10-K/A and 10-K for the seven months ended December 31, 1997 and the year ended May 31, 1997, respectively, filed with the Securities and Exchange Commission. ERNST & YOUNG LLP Chicago, Illinois December 23, 1998 -----END PRIVACY-ENHANCED MESSAGE-----