REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into this
1st day of November, 2000, by and between eLot, Inc., a Virginia corporation
(the "Company"), and MDI Entertainment, Inc., a Delaware corporation ("MDI").
W I T N E S S E T H :
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WHEREAS, the Company and MDI entered into a Stock Exchange Agreement of
even date herewith (the "Stock Exchange Agreement") pursuant to which the
Company has issued to MDI 1,000,000 shares of the Company's Common Stock, par
value $.01 per share (the "Common Stock"); and
WHEREAS, the Company desires to grant to MDI, and MDI desires to accept,
certain registration rights concerning the shares of Common Stock, 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 MDI and its successors and assigns.
(b) Shares. "Shares" shall mean and include the shares of Common Stock
issued to MDI pursuant to the Stock Exchange Agreement, 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. Mandatory Registration. As soon as practicable after the Closing Date,
but no later than thirty (30) days after the Closing Date, the Company shall
prepare and file a Registration Statement on Form S-3, or other applicable form,
with the Securities and Exchange Commission (the "SEC"), registering the Shares
for resale.
2.2. Obligations of the Company. In connection with the Registration of the
Shares, the Company shall, as expeditiously as reasonably possible:
(a) Use its best efforts to cause the Registration Statement to become
effective and keep the Registration Statement effective at all times until
the earlier of (i) the date when the Holder may sell all of the Shares
without volume or manner of sale restrictions pursuant to Rule 144
promulgated under the Act or (ii) the date the Holder no longer owns any of
the Shares.
(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 it may reasonably request in order to facilitate the
disposition of Shares owned by it;
(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 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; and
(e) Immediately notify the Holder, 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 mis-
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leading, 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.
2.3. Sale of Shares by Holder. Once the Registration Statement becomes
effective, the Holder may not sell more than (i) 333,334 Shares during the
thirty-day period (the "First Sale Period") following effectiveness, (ii)
666,667 Shares, less any Shares sold during the First Sale Period, during the
thirty-day period following the First Sale Period (the "Second Sale Period") or
(iii) 1,000,000 Shares, less any Shares sold during the First Sale Period and
Second Sale Period, during the thirty-day period following the Second Sale
Period.
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 the Registration Statement, 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. Indemnification. (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 a
material fact required to be stated 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 2.6(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
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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 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 2.6
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 2.6, 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 2.6, 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
2.6.
(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 or 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.
2.7. 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
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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, 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.
2.8. Potential Material Event. 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. 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.
2.9. 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 2.8 or (ii) an
event of which the Company has knowledge, as a result of which the prospectus
included in 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 to the
registration statement covering the Shares until such Holder's receipt of the
copies of a supplemented or amended prospectus.
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SECTION 3
MISCELLANEOUS
3.1. 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.
3.2. 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.
3.3. 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.
3.4. Title and Subtitles. The titles of the sections of this Agreement are
for convenience and are not to be considered in construing this Agreement.
3.5. 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.
3.6. 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.
3.7. 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.
ELOT, INC.
By: /s/ Xxxxxx Xxxx
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Name: Xxxxxx Xxxx
Title: Executive Vice President
MDI ENTERTAINMENT, INC.
By: /s/ Xxxxxx X. Xxxxxxx
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Name: Xxxxxx X. Xxxxxxx
Title: President & Chief
Executive Officer
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