REGISTRATION RIGHTS AGREEMENT Exhibit 3.1
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into this
8th day of August, 1997, by and between MDI ENTERTAINMENT, INC., a Delaware
corporation ("Company") and XXXXXX X. XXXXXXX and XXXXXXXX X. XXXXXXXX.
WITNESSETH:
WHEREAS, Media Drop-In Productions, Inc., a Delaware Corporation ("MDI"),
the MDI Stockholders, the Company and certain related parties entered into an
Agreement and Plan of Reorganization of even date herewith (the "Merger
Agreement") pursuant to which the Company has issued to the MDI Stockholders
4,800,000 shares of the common stock of the Company, and;
WHEREAS, the Company desires to grant to the MDI Stockholders, and the MDI
Stockholders desires to accept, certain registration rights concerning such
shares 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:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following words and phrases
shall have the meanings set forth below:
(a) Holders. Holders shall mean the MDI Stockholders, their heirs,
personal representatives and assigns.
(b) Shares. Shares shall mean and include any and all shares of common
stock of the Company issued pursuant to the Merger 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 of the Company (the "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 Merger Agreement.
ARTICLE II
REGISTRATION RIGHTS
2.1 Requests for Registration.
(a) If at any time after the Closing Date, if at such time the Company
is a reporting company under the Securities Exchange Act of 1934, (but not
within ninety (90) days of a registration pursuant to Section 2.2), the
Holders of a majority of the then outstanding Shares request(s) that the
Company file a Registration Statement under the Act, the Company shall
promptly give written notice of the proposed registration to all other
Holders of Shares and shall use its best efforts to cause such Shares as are
specified in the original request and such Shares as are requested to be
included by Holders not initiating the request to be registered under the
Act for public sale in accordance with the disposition specified in the
notice from the requesting Holders.
(b) The Company is obligated to effect only two registrations under
Section 2.1. A demand for registration made pursuant to Section 2.1(a)
hereof must represent an aggregate minimum offering amount of $250,000 (the
"Minimum Offering Amount").
All stock certificates representing Shares shall bear a legend to the effect
that such shares represented thereby are subject to the registration rights set
forth in this Agreement.
The securities so registered shall be sold through underwriters acceptable
to the Company and the Holders of Shares, which acceptances shall not be
unreasonably withheld; and the Company and the Holders of Shares shall use their
best efforts to effect firm commitment underwriting arrangements. If the Holders
of Shares submit to the Company a list of potential underwriters, the Company
shall be deemed to have accepted all such underwriters unless within fourteen
(14) days after the receipt of such list, 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.
(a) 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
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such time, give each of the Holders of the then outstanding Shares written
notice of its intent to do so. Upon the written request of Holders of a
majority of the then outstanding Shares given within thirty (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 such Holders
requested to be registered; provided (i) the Holders agree (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 Holders'
Shares is likely to have a material adverse affect on the marketing of the
offering by the Company or the price it would receive, in which case the
rights of the Holders of the then outstanding Shares shall be as provided in
Section 2.6 hereof.
(b) The Company is obligated to effect only two registrations under
Section 2.2(a).
2.3 Obligations of the Company. Whenever required under Section 2.1 or 2.2
to use its best efforts to effect the registration of any of the Shares, or to
effect registration pursuant to Section 2.12, the Company shall, as
expeditiously as reasonably possible:
(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 and use its best efforts to cause such Registration Statement to
become 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 so called "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 Holders 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
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reasonably requested by the Holders 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;
(e) Immediately notify each selling Holder under the Registration
Statement 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 any such selling Holder, the Company will prepare a
supplement or amendment to such prospectus so that, as thereafter delivered
to the purchasers of such registerable 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 any selling 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 each selling Holder, to such effect as may reasonably be
requested by counsel for the underwriters or by the selling 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
each selling Holder, covering such financial matters with respect to the
registration as the underwriters or the selling Holders may reasonably
request;
(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; and
(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.
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2.4 Furnish Information. The selling Holders shall furnish to the Company
such information regarding them, the Shares held by them, 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.
(a) All expenses incurred in connection with any demand registration,
whether pursuant to Section 2.1 or 2.12, 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 Holders (if different from counsel
for the Company) (the "Registration Expenses") shall be borne by the
Company; provided, however, that the Company shall not be required to pay
for any expense incurred on account of any registration proceeding begun
pursuant to Section 2.1 or 2. 12, as the case may be (unless such expenses
would have been incurred by the Company if registration proceedings had not
been commenced) if the Registration Statement is withdrawn at the request of
the Holders, unless the Holders shall agree to forfeit their remaining right
to a demand registration pursuant to Section 2.1. Each selling Holder shall
bear the fees and costs of its own counsel (if different from counsel for
the Company or the one special counsel for the Holders referred to above).
(b) In the case of any registration effected pursuant to Section 2.2,
the Company shall bear the Registration Expenses arising from the inclusion
of the shares in such a registration. Notwithstanding the foregoing, each
selling Holder shall at all times bear the fees and cost of its own counsel
(if different from counsel for the Company or the one special counsel for
the Holders referred to above).
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 shall not be required under Section 2.2 to include any of the Holders'
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 such selling Holders of the Company request 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 of the selling shareholders as the underwriters
believe will not jeopardize the success of the offering (the Shares so included
to be apportioned pro rata among the selling Holders according to the total
number of shares of Common Stock requested to be included in such offering by
said selling Holders, or in such other proportions as shall mutually be agreed
to by such selling Holders), provided that no such reduction shall be made with
respect to any securities
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offered by the Company for its own account or any of the Shares being offered by
the Holders pursuant to a registration being effected pursuant to Section 2.1
herein.
2.7 Delay of Registration. So long as the Company has given any notice
required by Section 2.2 hereof, and except with respect to Section 2.3(e), no
Holder shall have any right to take any action to restrain, enjoin or otherwise
delay any registration as the result of any controversy which might arise with
respect to the interpretation or implementation of this Section 2.
2.8 Indemnification. In the event any of the Shares are included in a
Registration Statement under this Section 2:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Holder against any losses, claims, damages or liabilities,
joint or several, to which they 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 each such Holder for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this Section 2.8(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 any such Holder.
(b) To the extent permitted by law, each such 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 prospectus, or amendments or supplements thereto, in reliance
upon and in conformity with written information
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furnished by such Holder expressly for use in connection with such
registration; and each such 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
2.8 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 2.8, 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 2.8, 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 2.8.
(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 ll(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 staking 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 any Holder be
required to contribute an amount in excess of the original cost that the
Company incurred arising from the inclusion of 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.
2.9 No-Action Letter or Opinion of Counsel in Lieu of Registration. If, at
the request of the Holders of a majority of the then outstanding Shares, the
Company shall have obtained from the SEC a "no-action" letter in which the SEC
had indicated that it will take no action if, without registration under the
Act, the Holders dispose of the Shares in the manner in which they propose to
dispose of such Shares, or if in the opinion of counsel for any Holder concurred
in by counsel for the Company, no registration under Rule 144 of the Act is
required in connection with such disposition, then the Holders shall be free to
sell without affecting their rights under Section 2, except as provided below.
Any and all expenses incurred in connection with obtaining a "no-action" letter
from the SEC shall be borne by the Company; provided, however, that in the event
that an additional "no-action" letter is sought by the Company at the request of
the Holders, such expenses incurred in connection therewith shall be borne by
the Holders.
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In the event that any Shares are sold pursuant to this Section 2.9, the
Holders of the Shares shall be considered to have used a demand registration
right for purposes of Section 2.1(b).
2.10 Reports Under the Securities Exchange Act of 1934. With a view to
making available to the Holders, the benefits of Rule 144 promulgated under the
Act, at such time that the Company becomes a reporting company under the
Securities Exchange Act of 1934, 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 any 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 a
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.
2.11 Limitations on Subsequent Registration Rights. From and after the date
hereof, the Company will not, without the prior written consent of a majority in
interest of the Holders 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 Sections 2.1 or 2.2 hereof, unless under the terms of
such agreement, 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.
2.12 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 Holders of a majority of the outstanding Shares
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 any Holder shall specify; provided, however, that no more than two
(2) such Registration Statements need be filed in any twelve (12) month period,
that the anticipated aggregate minimum offering amount would exceed $500,000 and
that no registration of Shares shall be initiated under this Section 2.12 until
ninety (90) days after the effective date of a Registration Statement filed
pursuant to Sections 2.1, 2.2 or 2.12.
ARTICLE III
MISCELLANEOUS
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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 among 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 Delaware.
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 hereinafter shown below its signature or at
such other address as such party may designate by ten (10) days advance written
notice to the other party.
3.6 Finder's Fee. Each party hereto represents that it is not, and will not
be, obligated for any finder's fee or commission payable in cash in connection
with execution and delivery of this Agreement. Each of the Holders hereby agrees
to indemnify and to hold harmless the Company from any liability for any
commission or compensation in the nature of a finder's fee (and the costs and
expenses of defending against such liability or asserted liability) for which
any such Holders or any of its employees or representatives is responsible.
The Company agrees to indemnify and hold harmless the Holders from any
liability for any commission and compensation in the nature of a finder's fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company or any of its officers, employees or
representatives is responsible.
3.7 Amendment of Agreement. Except as expressly provided herein, any
provision of this Agreement may be amended or waived on behalf of the Holders by
a written instrument signed
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by the Company and by those Holders holding at least a majority of the aggregate
of the Shares issued to the Holders pursuant to the Agreement.
3.8 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.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first written above.
WITNESS/ATTEST MDI ENTERTAINMENT, INC.
/s/ Xxxxxx Xxxx /s/ Xxxxxx X. Xxxxxxx
By: (SEAL)
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President
/s/ Xxxxx Xxxxxxxx /s/ Xxxxxx X. Xxxxxxx
By: (SEAL)
------------------------- ------------------------------
XXXXXX X. XXXXXXX
/s/ Xxxxx Xxxxx /s/ Xxxxxxxx X. Xxxxxxxx
By: (SEAL)
------------------------- ------------------------------
XXXXXXXX X. XXXXXXX
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