REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT, dated as of January 9, 1997 by and
among PARADIGM MUSIC ENTERTAINMENT COMPANY, a Delaware corporation (the
"Company"), and PRODIGY SERVICES CORPORATION, a Delaware corporation ("Prodigy")
and SUNSHINE INTERACTIVE NETWORK, INC., a Delaware corporation ("Sunshine" and,
together with Prodigy, the "Holders").
RECITALS
WHEREAS, pursuant to a Stock Purchase Agreement dated as of
the date hereof, the Company is issuing to the Holders an aggregate of two
hundred thousand (200,000) shares (the "Shares") of its Class A Common Stock,
par value $0.01 per share ("Class A Common Stock") and Warrants (the "Warrants")
to purchase 100,000 shares of Class A Common Stock; and
WHEREAS, this Agreement sets forth the terms and conditions on
which the Company has agreed to grant certain registration rights to the Holders
with respect to the Shares and the Warrants.
NOW, THEREFORE, in consideration of the foregoing, of the
mutual promises and covenants herein contained and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
Company hereby agrees with the Holders, severally and not jointly, as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
"Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banks are authorized or required to be closed in New
York, New York; provided, however, that any determination of a Business Day
relating to a securities exchange shall mean a Business Day on which such
exchange is open for trading.
"Commission" shall mean the Securities and Exchange Commission
(or a successor thereto).
"Company" shall have the meaning given to such term in the
Preamble.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Person" shall mean and include any natural person, company,
partnership, joint venture, Company, business trust or unincorporated
organization.
"Piggyback Registration" shall have the meaning given to such
term in Section 2.1(a).
"Prospectus" means the Prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Securities
covered by such Registration Statement and all other amendments and supplements
to the Prospectus, including post-effective amendments, and all material
incorporated by reference in such Prospectus.
"Registrable Securities" means the Shares, the Warrants, the
Class A Warrants into which the Warrants may be converted pursuant to the terms
of Section 9 of the Warrant Agreement ("Class A Warrants"), any warrants issued
upon exercise of the Class A Warrants ("Class B Warrants"), and any shares of
Class A Common Stock issued or issuable upon exercise of the Warrants, the Class
A Warrants or the Class B Warrants; provided that such securities shall cease to
be Registrable Securities at such time as (a) they have been effectively
registered and publicly sold under the Securities Act, (b) they are distributed
to the public pursuant to Rule 144 (or any similar rule then in force) under the
Securities Act or (c) they have otherwise been transferred and a new certificate
therefor not bearing a restrictive legend and not subject to any stop transfer
order has been delivered by or on behalf of the Company and no other restriction
on transfer exists. References to the "Registrable Securities" herein include
any other securities issued as a dividend or other distribution on or as a
result of a subdivision, combination or reclassification of any Registrable
Securities.
"Registration Statement" means any registration statement of
the Company filed pursuant to the Securities Act and which covers any of the
Registrable Securities, including the Prospectus, amendments and supplements to
such Registration Statement, including post-effective amendments, and all
exhibits and all material incorporated by reference in such Registration
Statement.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Warrant Agreement" means the Warrant Agreement dated as of
the date hereof among the Company, American Stock Transfer & Trust Company, as
Warrant Agent, and the Holders, pursuant to which the Warrants are being issued.
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ARTICLE II
PIGGYBACK REGISTRATION RIGHTS
2.1 Registration Rights.
(a) Right to Include Registrable Securities. Whenever the
Company proposes to register any of its equity securities under the Securities
Act on Form X-0, X-0, X-0 or any similar form then in effect, whether or not for
its own account, other than in connection with the initial public offering by
the Company of its equity securities and any registration of securities
(including stock purchase warrants and securities underlying any such warrants)
issued in connection therewith, the Company shall give written notice thereof to
each holder of Registrable Securities as soon as practicable (but in any event
at least 30 days before such fil ing), offering such holder the opportunity to
register on such registration statement such number of Registrable Securities as
such holder may request in writing, subject to the provisions of Section 2.1(b),
not later than 20 days after the date of the giving of such notice (a "Piggyback
Registration"). Upon receipt by the Company of any such request, the Company
shall use reasonable efforts to, or in the case of an underwritten offering, to
cause the managing underwriter or underwriters to, include such Registrable
Securities in such registration statement (or in a separate registration
statement concurrently filed) and to cause such Registration Statement to become
effective with respect to such Registrable Securities in accordance with
applicable law. If the Company's registration is to be effected pursuant to an
underwritten offering, Registrable Securities registered pursuant to this
Section 2.1 shall be distributed in accordance with such offering.
Notwithstanding the foregoing, if at any time after giving written notice of its
intention to register its equity securities and before the effectiveness of the
Registration Statement filed in connection with such registration, the Company
determines for any reason either not to effect such registration or to delay
such registration, the Company may, at its election, by delivery of written
notice to each holder of Registrable Securities (A) in the case of a
determination not to effect registration, relieve itself of its obligation to
register the Registrable Securities in connection with such registration or (B)
in the case of a determination to delay registration, delay the registration of
such Registrable Securities for the same period as the delay in the registration
of such other equity securities. Each holder of Registrable Securities
requesting inclusion in a registration pursuant to this Section 2.1 may, at any
time before the effective date of the Registration Statement relating to such
registration, revoke such request by delivering written notice of such
revocation to the Company (which notice shall be effective only upon receipt by
the Company, notwithstanding the provisions of Section 4.2); provided, however,
that if the Company, in consultation with its financial and legal advisors,
determines that such revocation would materially delay the registration or
otherwise require a recirculation of the prospectus contained in the
registration statement, then such holder shall have no right to so revoke its
request.
(b) Priority in Piggyback Registration. (i) If any of the
Registrable Securities to be included in a Piggyback Registration are to be sold
in one or more underwritten offerings and the managing underwriter or
underwriters advise the Company that the total amount of
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securities requested to be included in such offering would exceed the maximum
amount of securities which can be marketed in an orderly manner in such offering
within a price range acceptable to the Company and without otherwise adversely
affecting such offering (the "Underwriters Maximum Number"), then the Company
will so notify all holders of Registrable Securities requesting inclusion in
such registration and will be required to include in such registration, to the
extent of the Underwriters Maximum Number: first, any equity securities that the
Company proposes to sell for its own account (including any overallotment
option); second, if the underwritten offering is a secondary offering on behalf
of holders of the Company's equity securities other than Registrable Securities,
the equity securities requested to be included therein by those holders; and
third, the Registrable Securities requested by holders of Registrable Securities
to be included in such registration and any equity securities requested to be
included in such registration by other holders of such securities (other than
those specified under second above, if applicable), allocated pro rata among all
such holders on the basis of the number of Registrable Securities and other
equity securities requested to be included therein by each such holder (without
regard as to whether such securities are Registrable Securities or other equity
securities).
(ii) If any of the Registrable Securities to be
included in a Piggyback Registration are to be sold in a non-underwritten
offering, but the Company, after consultation with its regular investment
bankers or with another investment banking firm of nationally recognized
standing (including a regional firm of recognized standing), reasonably
determines the amount of equity securities (including Registrable Securities) to
be included in such registration exceeds the amount of equity securities that
can be sold within a price range acceptable to the Company or the initiating
holders (in the case of a secondary offering) and without otherwise adversely
affecting such offering (and notifies all holders of Registrable Securities
requesting inclusion in such registration of such determination) (the "Company
Maximum Number"), then the Company will be required to include in such
registration, to the extent of the Company Maximum Number, Registrable
Securities and other equity securities in accordance with the priorities set
forth in Section 2.1(b)(i) above.
(c) Selection of Underwriters. If any Piggyback Registration
is in the form of an underwritten offering, the managing underwriter or
underwriters and any additional investment bankers and managers to be used in
connection with such registration shall be selected by the Company (subject to
any separate agreement with the holders on behalf of which a secondary
underwritten offering is being made).
(d) Compliance with Underwriting Requirements. Notwithstanding
anything herein to the contrary, no holder of Registrable Securities may
participate in any underwritten registration hereunder unless such holder (i)
agrees to sell its Registrable Securities on the same terms and conditions
provided in any underwriting arrangements approved by the Persons entitled
hereunder to approve such arrangement and (ii) accurately completes and executes
in a timely manner all questionnaires, powers of attorney, indemnities, custody
agreements, underwriting agreements and other documents required under the terms
of such underwriting arrangements.
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2.2 Holdback Agreement. Each holder of Registrable Securities
for which Piggyback Registration rights are available (or would be available but
for application of Section 2.1(b)) pursuant to Section 2.1 agrees not to effect
any sale or distribution of Registrable Securities, including a private sale or
a sale pursuant to Rule 144 or 144A (or any similar provision then in force)
under the Securities Act, during the 14-day period prior to, and during the
90-day period (or such other period as may be requested by the managing
underwriter of such underwritten offering but not to exceed 180 days) beginning
on, the effective date of such Registration Statement, except as part of such
underwritten offering or as otherwise permitted by the managing underwriter.
2.3 Registration Procedures.
(a) In connection with the Company's registration obligations
pursuant to Section 2.1, the Company will endeavor to effect the registration of
such Registrable Securities in accordance with the intended method or methods of
disposition thereof as quickly as practicable in accordance with applicable laws
and regulations. In connection with any such obligations, the Company:
(i) before filing a Registration Statement or
Prospectus or any amendments or supplements thereto, including
documents incorporated by reference after the initial filing of any
Registration Statement, will furnish to holders of Registrable
Securities requesting inclusion in such registration, their counsel and
the underwriters, if any, drafts of all such documents substantially as
proposed to be filed sufficiently in advance of filing to provide them
with a reasonable opportunity to review such documents and comment
thereon;
(ii) will notify the selling holders of Registrable
Securities, their counsel and the managing underwriter or underwriters,
if any, as soon as possible (x) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with
respect to any Registration Statement or post-effective amendment
thereto, when the same has become effective, and (y) of the happening
of any event as a result of which (A) the Registration Statement
contains 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 not misleading, (B) the Prospectus included in such
Registration Statement (as then in effect) includes an untrue statement
of a material fact or omits to state a material fact necessary in order
to make the statements therein in light of the circumstances under
which they were made, not misleading, (C) there is a stop order or
other suspension of effectiveness of the registration or (D) there is a
suspension of the qualification of the Registrable Securities for sale
in any jurisdiction or the initiation or threatening (in writing) of
any proceeding for such purpose;
(iii) upon the occurrence of any event contemplated
by clauses (A) and (B) of Section 2.3(a)(ii), will promptly prepare a
supplement or post-effective amendment to the Registration Statement or
related Prospectus or any document
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incorporated therein by reference or file any other required document
so that (A) such Registration Statement will not contain any 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, or (B) as thereafter delivered to the purchasers of the
Registrable Securities being sold thereunder, such Prospectus will not
include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein in
light of the circumstances under which they were made, not misleading;
(iv) will deliver to each selling holder of
Registrable Securities, their counsel and the underwriters, if any,
without charge, at least one signed copy of the Registration Statement
and such number of conformed copies thereof and such number of copies
of the Prospectus or Prospectuses (including each preliminary
Prospectus) and any amendment or supplement thereto as such Persons may
reasonably request and as promptly as practicable after the filing with
the Commission of any document which is incorporated by reference into
a Registration Statement, a copy of such document. The Company hereby
consents to the use of the Prospectus and any amendment or supplement
thereto by each of the selling holders and each of the managing
underwriters, if any, in connection with the offering and the sale of
the Registrable Securities covered by the Prospectus or any amendment
or supplement thereto; and
(v) will cooperate with the selling holders of
Registrable Securities and the managing underwriter or underwriters, if
any, to facilitate the timely preparation and delivery of certificates
(not bearing any restrictive legends, other than any legends indicating
that the holder thereof is an affiliate of the Company) representing
securities to be sold under the Registration Statement and enable such
securities to be in such denominations or amounts, as the case may be,
and registered in such names as the managing underwriter or
underwriters, if any, or such selling holders of Registrable Securities
may request.
(b) Each holder of Registrable Securities as to which any
registration is being effected shall furnish promptly to the Company such
information regarding such holder and the distribution of such securities as the
Company may from time to time reasonably request in writing.
(c) Each holder of Registrable Securities included in such
Registration Statement agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 2.3(a)(ii), such
holder will forthwith discontinue offering and disposition of any Registrable
Securities covered by such Registration Statement or Prospectus until such
holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 2.3(a)(iii), or until it is advised in writing by the
Company that the use of the applicable Prospectus may be resumed, and has
received copies of any additional or supplemental filings which are incorporated
by reference in such Prospectus and, if so directed by the Company, such holder
will, or will request the managing underwriter or underwriters, if any, to,
deliver to the Company (at the Company's expense) all copies, other than
permanent file
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copies then in such holder's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice.
2.4 Registration Expenses. Except as specified in the
following sentence, the Company shall bear all fees, costs and expenses in
connection with the Company's performance of or compliance with its registration
obligations for Piggyback Registrations pursuant to Section 2.1, including
without limitation all registration, filing, and NASD fees, printing expenses,
fees and disbursements of counsel and accountants for the Company, and all legal
fees and disbursements and other expenses of complying with state securities or
blue sky laws of any jurisdictions in which the securities to be offered are to
be registered and qualified (except as provided in 2(a) above). Underwriting
discounts and commissions and brokerage fees applicable to sales of the
Registrable Securities and fees and disbursements of counsel and accountants for
the selling holders of Registrable Securities and any other expenses incurred by
the selling holders of Registrable Securities not expressly included above shall
be borne by such selling holders.
ARTICLE III
INDEMNIFICATION
3.1 Indemnification by Company. The Company will indemnify and
hold harmless each holder of Registrable Securities which are included in a
registration statement pursuant to the provisions of Article I hereof, its
directors and officers, and any underwriter (as defined in the Act) for such
holder and each Person, if any, who controls such holder or such underwriter
within the meaning of the Act, from and against, and will reimburse such holder
and each such underwriter and controlling Person with respect to, any and all
loss, damage, liability, cost and expense to which such holder or any such
underwriter or controlling Person may become subject under the Act or otherwise,
insofar as such losses, damages, liabilities, costs or expenses are caused by
any untrue statement or alleged untrue statement of any material fact contained
in such registration statement, any prospectus contained therein or any
amendment or supplement 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 necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, however, that
the Company will not be liable in any such case to the extent that any such
loss, damage, liability, cost or expenses arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by such holder, such underwriter
or such controlling Person in writing specifically for use in the preparation
thereof.
3.2 Indemnification by Holders. Each holder of Registrable
Securities included in a registration pursuant to the provisions of Article I
hereof will indemnify and hold harmless the Company, its directors and officers,
any controlling Person and any underwriter from and against, and will reimburse
the Company, its directors and officers, any controlling Person and any
underwriter with respect to, any and all loss, damage, liability, cost or
expense to
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which the Company or any controlling Person and/or any underwriter may become
subject under the Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue statement or alleged
untrue statement of any material fact contained in such registration statement,
any prospectus contained therein or any amendment or supplement 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 necessary to make the
statements therein, in light of the circumstances in which they were made, 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 so
made in reliance upon and in strict conformity with written information
furnished by or on behalf of such holder specifically for use in the preparation
thereof.
3.3 Indemnification Procedures. Promptly after receipt by an
indemnified party pursuant to the provisions of Section 3.1 or 3.2 of notice of
the commencement of any action involving the subject matter of the foregoing
indemnity provisions such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of said Section
3.1 or 3.2, promptly notify the indemnifying party of the commencement thereof;
but the omission to so notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than
hereunder unless such failure to notify results in insufficient time being
available to permit the indemnifying party or its counsel to effectively defend
any such claim and to make a timely response thereto and thereby prejudice the
indemnifying party's ability to defend such claim. In case such action is
brought against any indemnified party and it notifies the indemnifying party of
the commencement thereof, the indemnifying party shall have the right to
participate in, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party, provided, however, if the
defendants in any action include both the indemnified party and the indemnifying
party and the indemnified party shall have reasonably concluded that there may
be legal defenses available to it and/or other indemnified parties which are
different from or in addition to those available to the indemnified party, or if
there is a conflict of interest which would prevent counsel for the indemnifying
party from also representing the indemnified party, the indemnified party or
parties have the right to select separate counsel to participate in the defense
of such action on behalf of such indemnified party or parties. After notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party pursuant to the provisions of said Section 2.1 or 2.2 for any
legal or other expense subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation, unless (i) the indemnified party shall have employed counsel in
accordance with the provisions of the preceding sentence, (ii) the indemnifying
party shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after the notice of the
commencement of the action or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party.
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3.4 Underwritten Offerings. Notwithstanding any of the
foregoing, if, in connection with an underwritten public offering of Registrable
Securities, the Company, the Holders and the underwriter(s) enter into an
underwriting or purchase agreement relating to such offering which contains
provisions covering indemnification and contribution among the parties, the
indemnification and contribution provisions of this Article III shall be deemed
inoperative for purposes of such offering.
ARTICLE IV
MISCELLANEOUS
4.1 Rule 144. From and after the date the Company has filed a
registration statement pursuant to the requirements of the Securities Act
relating to any class of its equity securities, it will file in a timely manner
all reports required to be filed by it pursuant to the Securities Act and the
Exchange Act and will take such further action as any holder of Registrable
Securities may reasonably request in order that such holder may effect sales of
Common Stock pursuant to Rule 144 (or any similar provision then in force) under
the Securities Act. The Company will furnish to any holder of Registrable
Securities such information as such holder may reasonably request to the extent
required from time to time to enable such holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (i) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (ii) any similar rule or regulation hereafter
adopted by the Commission. Notwithstanding the foregoing, the Company reserves
the right at any time to deregister any class of its equity securities under
Section 12 of the Exchange Act or suspend its duty to file reports with respect
to any class of its securities pursuant to Section 15(d) of the Exchange Act if
it is then permitted to do so pursuant to the Exchange Act and the rules and
regulations thereunder.
4.2 Notices. All notices, demands and requests of any kind to
be delivered to any party hereto in connection with this Agreement shall be in
writing (i) delivered personally, (ii) sent by nationally-recognized overnight
courier, (iii) sent by first class, registered or certified mail, return receipt
requested or (iv) sent by facsimile, in each case to such party at its address
as follows:
(a) if to the Company, to:
Paradigm Music Entertainment Company
00 Xxxxxx Xxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: President
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
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with a copy to:
Bachner, Tally, Xxxxxxx & Xxxxxx LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attn: Xxxxx X. Xxxx, Esq.
(b) if to Prodigy, to:
Prodigy Services Corporation
000 Xxxxxxxx Xxxxxx
Xxxxx Xxxxxx, Xxx Xxxx 00000
Attention: General Counsel
Telephone: (000) 000-0000
Telecopier:
with a copy to:
Xxxxxxxx Xxxxx Xxxxxxxx Xxxx & Ballon LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. XxXxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
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(c) if to Sunshine, to:
Sunshine Interactive Network, Inc.
000 Xxxxxxxx
0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Chief Financial Officer
Telephone:
Telecopier:
with a copy to:
Xxxxxxx & Beer
000 Xxxx Xxxxxx Xxxxx
0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx X. Xxxxxx, Esq.
Any notice, demand or request so delivered shall constitute valid notice under
this Agreement and shall be deemed to have been received (i) on the day of
actual delivery in the case of personal delivery, (ii) on the next Business Day
after the date when sent in the case of delivery by nationally-recognized
overnight courier, (iii) on the fifth Business Day after the date of deposit in
the U.S. mail in the case of mailing or (iv) upon receipt in the case of a
facsimile transmission. Any party hereto may from time to time by notice in
writing served upon the other as aforesaid designate a different mailing address
or a different Person to which all such notices, demands or requests thereafter
are to be addressed.
4.3 Amendments and Waivers. Any provision of this Agreement
may be amended or waived, but only pursuant to a written agreement signed by the
Company and the Holders.
4.4 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Company, each Holder and their respective successors
and assigns.
4.5 Counterparts. This Agreement may be executed in two or
more counterparts each of which shall constitute an original but all of which
when taken together shall constitute but one agreement.
4.6 Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York applicable to
agreements made and to be performed therein.
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4.7 Headings. Article, section and paragraph headings in this
Agreement have been inserted for convenience of reference only and shall not
affect the construction of, or be taken into consideration in interpreting, this
Agreement.
* * * *
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their authorized officers, all as
of the date and year first above written.
PARADIGM MUSIC ENTERAINMENT
COMPANY
By:__________________________
Name: Xxxxxx XxXxxxxxxx
Title: President
PRODIGY SERVICES CORPORATION
By:__________________________
Name:
Title:
SUNSHINE INTERACTIVE NETWORK, INC.
By:__________________________
Name:
Title:
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