REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into this
1st day of November, 2000, by and between MDI Entertainment, Inc., a Delaware
corporation (the "Company"), and eLot, Inc., a Virginia corporation ("eLot").
W I T N E S S E T H :
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WHEREAS, eLot and the Company entered into a Stock Exchange Agreement of
even date herewith (the "Stock Exchange Agreement") pursuant to which the
Company has issued to eLot 444 shares of the Company's Series B Preferred Stock
(the "Series B Preferred Stock") and a Warrant (the "Warrant") to purchase
555,556 shares of the Company's Common Stock, par value $.001 per share (the
"Common Stock"); and
WHEREAS, the Company desires to grant to eLot, and eLot desires to accept,
certain registration rights concerning the shares of Common Stock into which the
Series B Preferred Stock may be converted and for which the Warrant may be
exercised, upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing, and other good and
valuable consideration, the parties hereto hereby agree as follows:
SECTION 1
DEFINITIONS
1.1. Definitions. As used in this Agreement, the following words and
phrases shall have the meanings set forth below:
(a) Holder. "Holder" shall mean eLot and its successors and assigns.
(b) Shares. "Shares" shall mean and include any and all shares of
Common Stock issued upon conversion of the Series B Preferred Stock or upon
exercise of the Warrant, and any other shares issued in respect of any
stock split, stock dividend, reclassification, recapitalization or similar
event.
(c) Registration. "Register", "Registered" and "Registration" shall
mean a registration of shares of Common Stock effected by preparing and
filing a Registration Statement in compliance with the Securities Act of
1933, as amended (the "Act"), and the order declaring the effectiveness of
such Registration Statement.
(d) Terms not otherwise defined in this Agreement shall have the
meaning ascribed to them in the Stock Exchange Agreement.
SECTION 2
REGISTRATION RIGHTS
2.1. Requests for Registration.
(a) If at any time after the Closing Date, (but not within 120) days of a
registration pursuant to Section 2.2), the Holder requests that the Company file
a Registration Statement under the Act, the Company shall use its best efforts
to cause such Shares as are specified in the request to be registered under the
Act for public sale in accordance with the disposition specified in the notice
from the Holder.
(b) The Company is obligated to effect only one registration under Section
2.1(a).
If the Shares are proposed to be sold in an underwritten offering, the
Shares so registered shall be sold through underwriters acceptable to the
Company and the Holder, which acceptances shall not be unreasonably withheld;
and the Company and the Holder shall use their best efforts to effect firm
commitment underwriting arrangements. If the Holder submits to the Company a
list of potential underwriters, the Company shall be deemed to have accepted all
or any such underwriters unless within fourteen (14) days after the receipt of
such list, unless the Company shall have objected in writing to any such
underwriters and set forth its reasons therefor.
(c) If at the time of receipt of the request under this Section 2.1 the
Company has publicly announced its intention to register any of its securities
for a public offering under the Act, no registration of Shares shall be
initiated under this Section 2.1 until ninety (90) days after the effective date
of such registration unless the Company is no longer proceeding diligently to
effect such registration, whether such registration is for the sale of
securities for the Company's account or for the account of others.
2.2. Company Registration. Whenever the Company proposes to register any of
its Common Stock under the Act for a public offering for cash, whether as a
primary or secondary offering (or pursuant to registration rights granted to
holders of other securities of the Company), the Company shall, each such time,
give the Holder written notice of its intent to do so. Upon the written request
of the Holder given within (30) days after receipt of any such notice, the
Company shall use its best efforts to cause to be included in such registration
all of the Shares which the Holder requested to be registered; provided (i) the
Holder agrees (A) to sell the Shares in the same manner and on the same terms
and conditions as the other Common Stock which the Company proposes to register
if in connection with a sale of such shares through underwriters, or (B) on
terms and conditions comparable to those normally applicable to offerings of
common stock in reasonably similar circumstances if sold in the open market
without any underwriters, and (ii) if the registration is to include Common
Stock to be sold for the account of the Company, the proposed managing
underwriter does not advise the Company that in its opinion the inclusion of the
Holder's Shares is likely to have a material adverse affect on the marketing of
the offering
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by the Company or the price it would receive, in which case the rights of the
Holder shall be as provided in Section 2.6 hereof.
2.3. Obligations of the Company. Whenever required under Section 2.1 to use
its best efforts to effect the registration of any of the Shares, or to effect
registration pursuant to Section 2.10, the Company shall, as expeditiously as
reasonably possible, take the actions set forth in the paragraphs below.
Whenever required under Section 2.2 to use its best efforts to effect the
registration of any of the Shares, or to effect registration pursuant to Section
2.10, the Company shall, as expeditiously as reasonably possible, take the
actions set forth in paragraphs (c), (d) and (e) below;
(a) Prepare and file with the Securities and Exchange Commission (the
"SEC") a Registration Statement (which, in the case of all underwritten
public offerings, shall be on Form S-1 or other form of general
applicability satisfactory to the managing underwriter) with respect to
such Shares (not later than 60 days after the request of the Holder, in the
case of a registration pursuant to Section 2.1) and use its best efforts to
cause such Registration Statement to become effective as promptly as
possible and remain effective for the period of distribution contemplated
thereby; provided, however, that in connection with any proposed
registration intended to permit an offering of any securities from time to
time (i.e., a "shelf registration"), the Company shall in no event be
obligated to cause any such registration to remain effective for more than
one hundred eighty (180) days;
(b) Prepare and file with the SEC such amendments and supplements to
such Registration Statement and the prospectus used in connection therewith
as may be necessary to permit the disposition of all securities covered by
such Registration Statement for the period of distribution contemplated
thereby and to comply with regulations regarding the method of
distribution;
(c) Furnish to the Holder such number of copies of the Registration
Statement and prospectus, including the preliminary Registration Statement
and prospectus, in conformity with the requirements of the Act, and such
other documents as they may reasonably request in order to facilitate the
disposition of Shares owned by them;
(d) Use its best efforts to register and qualify the securities
covered by such Registration Statement under such other securities or Blue
Sky laws of such jurisdictions as shall be reasonably requested by the
Holder or the managing underwriter for the distribution of the securities
covered by the Registration Statement, provided that the Company shall not
be required in connection therewith or as a condition thereto to qualify
generally to do business as a foreign corporation or to file a general
consent to service of process in any such states or jurisdictions, and
further provided that (anything herein to the contrary notwithstanding with
respect to the bearing of expenses) if any jurisdiction in which the
securities shall be qualified shall require that expenses incurred in
connection with the qualification therein of the securities be borne by
selling shareholders, then such expenses shall be payable by selling
shareholders pro rata, to the extent required by such jurisdiction;
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(e) Immediately notify the Holder and each underwriter, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus contained in the Registration Statement, as then in effect,
would include an untrue statement of a material fact or would omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and, at the request of the Holder, the
Company will prepare a supplement or amendment to such prospectus so that,
as thereafter delivered to the purchasers of such registrable securities,
such prospectus will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading;
(f) Use its best efforts (if the offering is underwritten) to furnish,
at the request of the Holder, on the date that Shares are delivered to the
underwriters for sale pursuant to such registration: (i) an opinion dated
such date of counsel representing the Company, addressed to the
underwriters and to the Holder, to such effect as may reasonably be
requested by counsel for the underwriters or by the Holder or its counsel,
and (ii) a letter dated such date from the independent public accountants
retained by the Company, addressed to the underwriters and to the Holder,
covering such financial matters with respect to the registration as the
underwriters or the Holder may reasonably request; and
(g) Make available for inspection by any underwriter participating in
any distribution pursuant to the Registration Statement, and any attorney,
accountant or other agent retained by an underwriter, all financial and
other records, pertinent corporate documents and properties of the Company,
and cause the Company's officers, directors and employees to supply all
information reasonably requested by such underwriter or attorney,
accountant or agent in connection with the Registration Statement.
(h) The period of distribution of Shares in a firm commitment or best
efforts underwritten public offering shall be deemed to extend until each
underwriter has completed the distribution of all securities purchased by
it, and the period of distribution of Shares in any other registration
shall be deemed to extend until the sale of all Shares covered thereby.
2.4. Furnish Information. The Holder shall furnish to the Company such
information regarding it, the Shares held by it, and the intended method of
disposition thereof as the Company shall reasonably request to assure compliance
with Federal and applicable state securities laws.
2.5. Expenses of Demand Registration. All expenses incurred in connection
with any registration, whether pursuant to Section 2.1, 2.2 or 2.10, including
without limitation all registration and qualification fees, printing and
accounting fees, fees and disbursements of counsel for the Company, and fees and
disbursements of one special counsel selected by and for the Holder (if
different from counsel for the Company), shall be borne by the Company.
2.6. Underwriting Requirements. In connection with any offering involving
an underwriting of Common Stock being issued by the Company under Section 2.2,
the Company
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shall not be required under Section 2.2 to include any of the Holder's
securities therein unless they accept and agree to the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it, and then
only in such quantity as will not, in the opinion of the underwriters,
materially adversely affect the marketing of the offering by the Company. If the
total number of Shares which the Holder requests to be included in any offering
exceeds the number of such Shares which the underwriters reasonably believe
would not materially adversely affect the marketing of the offering, the Company
shall only be required to include in the offering so many of the Shares as the
underwriters believe will not jeopardize the success of the offering.
2.7. Indemnification. In the event any of the Shares are included in a
Registration Statement under this Section 2:
(a) The Company will indemnify and hold harmless the Holder against
any losses, claims, damages or liabilities, joint or several, to which it
may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities or actions in respect thereof arise out of
or are based upon any untrue or alleged untrue statement of any material
fact contained in such Registration Statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, or arise out of or are based upon the omission or
alleged omission to state therein, or allegedly necessary to make the
statements therein not misleading; and will reimburse the Holder for any
legal or other expenses reasonably incurred by it in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the indemnity agreement contained in this
Section 2.7(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected
without the consent of the Company nor shall the Company be liable in any
such case for any such loss, claim, damage, liability or action to the
extent that it arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in connection
with such Registration Statement, preliminary prospectus, final prospectus,
or amendments or supplements thereto, in reliance upon and in conformity
with written information furnished expressly for use in connection with
such registration by the Holder.
(b) To the extent permitted by law, the Holder will indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed such Registration Statement, each person, if any, who controls the
Company within the meaning of the Act, and any underwriter for the Company
(within the meaning of the Act) against any losses, claims, damages or
liabilities to which the Company or any such director, officer, controlling
person or underwriter may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any untrue or alleged
untrue statement of any material fact contained in such Registration
Statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, or arise out of
or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or allegedly necessary to make
the statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in such Registration Statement,
preliminary
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prospectus, or amendments or supplements thereto, in reliance upon and in
conformity with written information furnished by the Holder expressly for
use in connection with such registration; and the Holder will reimburse any
legal or other expenses reasonably incurred by the Company or any such
director, officer, controlling person or underwriter in connection with
investigating or defending any such loss, claim, damage, liability or
action if it is judicially determined that there were material
misstatements or omissions.
(c) Promptly after receipt by an indemnified party under this Section
2.7 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying
party under this Section 2.7, notify the indemnifying party in writing of
the commencement thereof and the indemnifying party shall have the right to
participate in and to assume the defense thereof with counsel mutually
satisfactory to the parties. The failure to notify an indemnifying party
promptly of the commencement of any such action, if prejudicial to the
ability to defend such action, shall relieve such indemnifying party under
this Section 2.7, but the omission so to notify the indemnifying party will
not relieve such party of any liability which such party may have to any
indemnified party otherwise other than under this Section 2.7.
(d) If recovery is not available under the foregoing indemnification
provisions of this section, for any reason other than as specified therein,
the parties entitled to indemnification by the terms thereof shall be
entitled to contribution to liabilities and expenses, except to the extent
that contribution is not permitted under Section 11(d) of the Act. In
determining the amount of contribution to which the respective parties are
entitled, there shall be considered the relative benefits received by each
party from the offering of the securities (taking into account the portion
of the proceeds of the offering realized by each), the parties' relative
knowledge and access to information concerning the matter with respect to
which the claim was asserted, the opportunity to correct and prevent any
statement of omission, and any other equitable considerations appropriate
under the circumstances; provided that in no event will the Holder be
required to contribute an amount in excess of the original cost that the
Company incurred arising from the inclusion of the Holder's Shares in that
offering. The Company and the underwriters agree that it would not be
equitable if the amount of such contribution were determined by pro rata or
per capita allocation.
2.8. Reports Under the Securities Exchange Act of 1934. With a view to
making available to the Holder the benefits of Rule 144 promulgated under the
Act, the Company shall (i) file with the SEC in a timely manner all reports and
other documents required to be filed by an issuer of securities registered under
the Act or the Securities Exchange Act of 1934, as amended, (ii) maintain in
effect the registration of its Common Stock under Section 12 of the Securities
Exchange Act of 1934, as amended, and (iii) so long as the Holder owns any of
the Shares, furnish in writing upon such Holder's request the following
information: (A) the Company's name, address and telephone number, (B) the
Company's Internal Revenue Service identification number, (C) the Company's SEC
file number, (D) the number of shares of Common Stock outstanding as shown by
the most recent report or statement published by the Company, (E) the average
weekly volume of trading in such shares reported on all national securities
exchanges during the four calendar weeks preceding the date of receipt of
request by the Holder,
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and (F) whether the Company has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
twelve months. With respect to a rule or regulation of the SEC (other than Rule
144) which may at any time permit the Holder to sell Common Stock to the public
without registration, the Company agrees to take such action as is reasonable to
enable utilization of such rule.
2.9. Limitations on Subsequent Registration Rights. From and after the date
hereof, the Company will not, without the prior written consent of the Holder,
enter into any agreement with any holder or prospective holder of any securities
of the Company which allows such holder or prospective holder of any securities
of the Company to include such securities in any registration filed under
Section 2.1 hereof, unless the terms of such agreement provide that such holder
or prospective holder may include such securities in any such registration only
to the extent that the inclusion of his securities will not diminish the amount
of Shares which are included.
2.10. Registration on Form S-3. In addition to the rights provided to the
Holders pursuant to Section 2.1 hereof, if the Company is then qualified for the
registration of Shares under the Act on Form S-3 (or any similar form
promulgated by the SEC), the Holder will have the right to request registration
of Shares on Form S-3. In such event, the Company, as expeditiously as possible,
will use its best efforts to effect qualification and registration on said Form
S-3 of all or such portion of the Shares as the Holder shall specify; provided,
however, that no more than two (2) such Registration Statements need be filed in
any twelve (12) month period and that no registration of Shares shall be
initiated under this Section 2.10 until 120 days after the effective date of a
Registration Statement filed pursuant to Section 2.1, 2.2 or 2.10.
2.11. Notwithstanding the foregoing, if at any time or from time to time
after the date of effectiveness of a registration statement covering the Shares,
the Company notifies the Holder in writing of the existence of a Potential
Material Event, the Holder shall not offer to sell any Shares, or engage in any
other transaction involving or relating to the Shares, from the time of the
giving of notice with respect to a Potential Material Event until such Holder
receives written notice from the Company that such Potential Material Event
either has been disclosed to the public or no longer constitutes a Potential
Material Event; provided that the restrictions set forth in this sentence shall
not apply for more than 90 days in any twelve month period and the 180 day
effective period set forth in Section 2.3(a) shall be extended for each day
during which such restriction applies. A "Potential Material Event" means any of
the following: (a) the possession by the Company of material information not
ripe for disclosure in a registration statement, which shall be evidenced by
determinations in good faith by the Board of Directors of the Company that
disclosure of such information in the registration statement would be
detrimental to the business and affairs of the Company; or (b) any material
engagement or activity by the Company which would, in the good faith
determination of the Board of Directors of the Company, be adversely affected by
disclosure in a registration statement at such time, which determination shall
be accompanied by a good faith determination by the Board of Directors of the
Company that the registration statement would be materially misleading absent
the inclusion of such information.
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2.12. The Holder agrees that, upon receipt of any notice from the Company
of the happening of (i) any event of the kind described in Section 2.11 or (ii)
an event of which the Company has knowledge, as a result of which the prospectus
included the registration statement covering the Shares, as then in effect,
includes an 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,
in light of the circumstances under which they were made, not misleading, such
Holder will immediately discontinue disposition of the Shares pursuant the
registration statement covering the Shares until such Holder's receipt of the
copies of a supplemented or amended prospectus.
2.13. The Company's obligation to register the Shares terminates (i) on the
date when the Holder may sell all of the Shares without volume or manner of sale
restrictions pursuant to Rule 144 of the Securities Act or (ii) the date the
Holder no longer owns any of the Shares.
SECTION 3
TAG ALONG RIGHTS
On the date of this Agreement, Xxxxxx X. Xxxxxxx owns 3,870,169 shares of
Common Stock of the Company. If Xx. Xxxxxxx (the "Selling Investor") shall
receive and determine to accept any bona fide written offer (a "Notice of
Offer") from a buyer (which shall include any person and its affiliates) to
purchase or otherwise transfer for value, in one transaction or a series of
related transactions, a number of shares equal to or greater than 5% of the
Common Stock owned by him as of the date of this Agreement, eLot shall have the
right to participate in such transaction in the manner set forth in this
Section; provided that this section shall not apply if all sales of Common Stock
by the Selling Investor on or after the date of this Agreement amount in the
aggregate to less than 1,000,000 shares of Common Stock (adjusted for stock
dividends, stock splits, reverse stock splits, combinations, recapitalizations
and reclassifications and other similar events affecting the Common Stock). The
Selling Investor shall, promptly after its receipt of a Notice of Offer, send a
copy thereof to the Company and eLot. eLot shall have the right to cause the
Selling Investor to condition its sale to the buyer of any Common Stock owned by
the Selling Investor on the simultaneous purchase by the buyer of such number of
shares of Common Stock owned by eLot as eLot may designate by written notice
delivered to the Selling Investor within 5 days following the date on which the
Notice of Offer is received; provided, however, that eLot may not so designate
for purchase a number of shares of the Company's Common Stock greater than that
number owned by it (giving effect to conversion of Series B Preferred Stock and
the exercise of the Warrant as of such date), multiplied by a fraction the
numerator of which is the number of shares of the Company's Common Stock owned
by the Selling Investor which are subject to the offer of the Buyer and the
denominator of which is the total number of shares of the Company's Common Stock
then owned by the Selling Investor as of the date of this Agreement. The
purchase price for each share of the Company's Common Stock subject to the
Notice of Offer and the terms of such purchase shall be the same as are
applicable to the Selling Investor's sale and shall be set forth in such Notice
of Offer. No seller shall receive in connection with sales pursuant to this
section any material consideration which is not
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shared with each other seller in proportion to the number of shares of Common
Stock sold by each.
SECTION 4
MISCELLANEOUS
4.1. Agreement is Entire Contract. Except as specifically referenced
herein, this Agreement constitutes the entire contract between the parties
hereto concerning the subject matter hereof and no party shall be liable or
bound to the other in any manner by any warranties, representations or covenants
except as specifically set forth herein. Any previous agreement between the
parties related to the transactions described herein is superseded hereby. The
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties hereto.
Nothing in this Agreement, express or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
4.2. Governing Law. This Agreement shall be governed by and construed under
the laws of the State of New York, without regard to principles of conflicts of
law.
4.3. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
4.4. Title and Subtitles. The titles of the sections of this Agreement are
for convenience and are not to be considered in construing this Agreement.
4.5. Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail,
addressed to a party at its address provided in the Stock Exchange Account or at
such other address as such party may designate by ten (10) days' advance written
notice to the other party.
4.6. Amendment of Agreement. Except as expressly provided herein, any
provision of this Agreement may be amended or waived by a written instrument
signed by the Company and the Holder.
4.7. Changes in Stock. If, and as often as, there are any changes in the
Common Stock of the Company by way of a stock split, stock dividend, combination
or reclassification, or through merger, consolidation, reorganization or
recapitalization or by any other means, appropriate adjustment shall be made in
the provisions hereof, as may be required, so that the rights and privileges
granted hereby shall continue with respect to the Common Stock also changed.
[Signature Page Follows]
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IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the day and year first written above.
MDI ENTERTAINMENT, INC.
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: President & Chief Executive
Officer
ELOT, INC.
By: /s/ Xxxxxx Xxxx
------------------------------------------
Name: Xxxxxx Xxxx
Title: Executive Vice President
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