STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT, dated as of January 26, 2000 (the
"Agreement"), is made and entered into by MDI ENTERTAINMENT, INC., a Delaware
corporation ("Parent"), MDI ACQUISITION, INC., a Delaware corporation and a
wholly-owned subsidiary of the Parent ("Merger Sub"), and the parties listed on
Schedule A (each party on Schedule A shall be referred to individually as a
"Stockholder" and collectively as the "Stockholders").
WITNESSETH:
WHEREAS, on the date hereof, Parent, Merger Sub and The Lottery Channel,
Inc., a Delaware corporation ("Lottery"), entered into an Agreement and Plan of
Merger (as such agreement may hereafter be amended, restated or otherwise
modified from time to time, the ("Merger Agreement"), pursuant to which each
outstanding share of Lottery Stock will be converted into and represent the
right to receive one share of Parent Common Stock, and Lottery will be merged
with and into Merger Sub;
WHEREAS, set forth opposite each Stockholder's name on Schedule A is the
number of shares of Lottery Stock or Series A Preferred Stock owned by such
Stockholder; and
WHEREAS, the Stockholders are executing this Agreement as an inducement
to Parent and Merger Sub to facilitate the Merger.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. DEFINITIONS. Capitalized terms used and not defined herein shall have
the respective meanings ascribed to them in the Merger Agreement. For purposes
of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to
any securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), including pursuant to any agreement, arrangement
or understanding, whether or not in writing but excluding any shares deemed to
be beneficially owned by a Person as a result of the participation of such
Person in a "group" within the meanings of Section 13(d)(3) of the Exchange Act.
(b) "Merger" shall mean the merger contemplated by the Merger
Agreement.
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(c) "Person" shall mean an individual, corporation, partnership,
joint venture, association, trust, unincorporated organization or other entity.
(d) "Termination Event " shall mean the termination of the Merger
Agreement in accordance with its terms.
2. STOCKHOLDER APPROVAL.
(a) Provided that a Termination Event has not occurred, each of
the Stockholders hereby, severally and not jointly and severally, agrees:
(i) as soon as practical following the date hereof, to use
such influence as he may have by reason of his Beneficial Ownership of shares of
Lottery Stock ("Shares") to call a meeting of the Stockholders of Lottery or
arrange for the execution of a consent by the holders of the requisite majority
of Shares (a "Stockholder Vote") in order to approve and adopt the Merger
Agreement and the Merger;
(ii) to exercise any vote he may have as a Beneficial
Owner of Shares in a Stockholder Vote to approve the Merger Agreement and the
Merger;
(iii) to vote against any Alternative Proposal, including
a Lottery Superior Proposal; and
(iv) to use best efforts to cause the consummation of the
transactions contemplated by the Merger Agreement.
3. TERMINATION. All obligations of the Stockholders under this Agreement
shall terminate upon a Termination Event; provided that the foregoing shall not
affect the rights of Parent or Merger Sub arising out of any breach prior to
such Termination Event.
4. COVENANTS, REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER. Each
Stockholder hereby, severally and not jointly and severally, represents and
warrants to Parent and Merger Sub as follows:
(a) OWNERSHIP BY SHARES. Such Stockholder is (i) the record and
Beneficial Owner of, or (ii) the Beneficial Owner but not the record holder of,
the number of Shares in each such category set forth opposite the Stockholder's
name on Schedule A. As of the date hereof, the Shares set forth opposite such
Stockholder's name on Schedule A constitute all of the Shares owned of record or
Beneficially Owned by such Stockholder. Such Stockholder has sole power to issue
instructions with respect to the matters set forth in Section 2 hereof, sole
power of disposition, sole power of conversion, sole power to elect to dissent
to the Merger and sole power to agree to all of the matters set forth in this
Agreement, in each case with respect to all of the Shares set forth opposite
such Stockholder's name on Schedule A, as the case may be, with no material
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limitations, qualifications or restrictions on such rights, subject to
applicable securities laws and the terms of this Agreement.
(b) POWER; BINDING AGREEMENT. Such Stockholder has the legal
capacity, power and authority to enter into and perform all of such
Stockholder's obligations under this Agreement. The execution, delivery and
performance of this Agreement by such Stockholder will not violate any other
agreement to which such Stockholder is a party, including, without limitation,
any voting agreement, stockholder's agreement or voting trust. This Agreement
has been duly and validly executed and delivered by such Stockholder and
constitutes a valid and binding agreement of such Stockholder, enforceable
against such Stockholder in accordance with its terms. There is no beneficiary
or holder of a voting trust certificate or other interest of any trust of which
such Stockholder is trustee whose consent is required for the execution and
delivery of this Agreement or the consummation by such Stockholder of the
transactions contemplated hereby. If such Stockholder is married and such
Stockholder's Shares constitute community property, this Agreement has been duly
authorized, executed and delivered by, and constitutes a valid and binding
agreement of, such Stockholder's spouse with the same effect and to the same
extent as is applicable with respect to such Stockholder, enforceable against
such person in accordance with its terms.
(c) NO CONFLICTS. Except for filings under the Exchange Act (i)
no filing with, and no permit, authorization, consent or approval of, any state
or federal public body or authority is necessary for the execution of this
Agreement by the Stockholder and the consummation by such Stockholder of the
transactions contemplated hereby, except where the failure to obtain such
consent, permit, authorization, approval or filing would not interfere with such
Stockholder's ability to perform its obligations hereunder, and (ii) none of the
execution and delivery of this Agreement by such Stockholder, the consummation
by such Stockholder of the transactions contemplated hereby or compliance by
such Stockholder with any of the provisions hereof shall (A) conflict with or
result in any breach of any applicable organizational documents applicable to
such Stockholder, (B) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any third
party right of termination, cancellation, material modification or acceleration)
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, commitment, arrangement, understanding, agreement
or other instrument or obligation of any kind to which such Stockholder is a
party or by which such Stockholder or any of such Stockholder's properties or
assets may be bound, or (C) violate any order, writ, injunction, decree,
judgment, order, statute, rule or regulation applicable to such Stockholder or
any of such Stockholder's properties or assets, in each such case except to the
extent that any conflict, breach, default or violation would not interfere with
the ability of such Stockholder to perform its obligations hereunder.
(d) NO ENCUMBRANCES. Except as required or permitted by Sections
2 and 4, the Shares of such Stockholder and the certificates representing such
Shares are now, and at all times during the term hereof will be, held by such
Stockholder, or by a nominee or custodian for the benefit of such Stockholder,
free and clear of all liens, claims, security interests, proxies, voting trusts
or agreements, understandings or arrangements or any other encumbrances
whatsoever.
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(e) NO FINDER'S FEES. No broker, investment banker, financial
adviser or other person is entitled to any broker's, finder's, financial
adviser's or other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of such
Stockholder.
(f) RESTRICTION ON TRANSFER, PROXIES AND NON-INTERFERENCE. Prior
to the occurrence of a Termination Event, except as required by this Agreement,
the Stockholder shall not directly or indirectly without the consent of Parent:
(i) offer for sale, sell, transfer, tender, pledge, encumber, assign or
otherwise dispose of, or enter into any contract, option or other arrangement or
understanding with respect to the offer for sale, sale, transfer, tender,
pledge, encumbrance, assignment or other disposition of, any or all of such
Stockholder's Shares, or any interest therein, unless such Stockholder first
obtains from the assignee a proxy giving the Stockholder the right to vote such
Shares in favor of the Merger (ii) grant any proxies or powers of attorney,
deposit any shares into a voting trust or enter into a voting agreement with
respect to any Shares, or (iii) take any action that could have the effect of
preventing or disabling such Stockholder from performing such Stockholder's
obligations under this Agreement. Each of the Stockholders and Lottery agree
that any purported transfer of such Stockholder's Shares or any interest therein
in violation of the Agreement shall be void ab initio and shall not be effected
on the books and records of Lottery and that, in the event of any inquiry by
Parent, Merger Sub or Lottery, or any related proceeding, the Stockholder shall
have the burden of proving that any action described in this Section 4(f) is in
compliance with this Agreement.
(g) WAIVER OF APPRAISAL RIGHTS. The Stockholder hereby waives any
rights of appraisal or rights to dissent from the Merger that the Stockholder
may have under the Delaware General Corporation Law or otherwise.
(h) STOCKHOLDER INTENTION TO RETAIN SHARES. Following his receipt
of Parent Common Stock in accordance with the Merger Agreement, the Stockholder
has no present plan to sell, exchange or otherwise dispose of such number of
Parent Common Stock as would cause the Merger to fail to qualify as a
reorganization under Section 368(a) of the Code.
5. STOP TRANSFER. Each Stockholder agrees with, and covenants to, Parent
that prior to a Termination Event such Stockholder shall not request that
Lottery register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of such Stockholder's Shares, unless
such transfer is made in compliance with this Agreement.
6. ADJUSTMENT OF EXCHANGE RATIO. In the event that, subsequent to the
date of this Agreement, but prior to the Effective Time, the Shares shall have
been changed into a different number or a different class of shares as a result
of a stock split, reverse stock split, stock dividend, subdivision,
reclassification split, combination exchange, recapitalization or other similar
transaction, the Exchange Ratio shall be appropriately adjusted and the term
"Shares" shall be deemed to refer and include the Shares and any shares into
which or for which any or all of the Shares may be changed.
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7. STOCKHOLDER CAPACITY. Except as the Agreement expressly provides
otherwise, no person executing this Agreement who is or becomes during the term
hereof a director or officer of Lottery makes any agreement or understanding
herein in his or her capacity as such director or officer and nothing herein
shall limit or affect any action taken by such person in his or her capacity as
a director or officer. Each Stockholder signs solely in his or her capacity as
the record and beneficial owner of, or the trustee of a trust whose
beneficiaries are the beneficial owners of, such Stockholder's Shares.
8. STOCKHOLDERS' OBLIGATIONS. All obligations and liabilities of each
Stockholder under this Agreement shall be several and not joint and no
Stockholder shall have any liability for any obligations or liabilities under
this Agreement of any other Stockholder.
9. FURTHER ASSURANCES. From time to time, at the other parties'
reasonable request and without further consideration, each Stockholder and
Merger Sub and Parent shall execute and deliver such additional documents and
take such other action as may be reasonably necessary or desirable to consummate
and make effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement.
10. MISCELLANEOUS.
(a) NOTICES. Any notice or other communication required or which
may be given hereunder shall be in writing and shall be delivered personally, by
facsimile transmission, telegraphed or telexed, or sent by certified,
registered, or express mail, postage prepaid, and shall be deemed given when so
delivered personally, successfully faxed, telegraphed or telexed, or if mailed,
two days after the date of mailing, as follows:
(i)if to Parent or Merger Sub, to:
MDI Entertainment, Inc.
201 Ann Street
Hartford, CT 06103
Facsimile: (860) 527-5920
Attention: Steven M. Saferin
with a copy to:
Squadron, Ellenoff, Plesent
& Sheinfeld, LLP
551 Fifth Avenue
New York, NY 10176
Facsimile: (212) 697-6686
Attention: Kenneth R. Koch, Esq.
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(ii) if to Lottery or to any of the Stockholders, to:
The Lottery Channel, Inc.
425 Walnut Street, Suite 2300
Cincinnati, OH 45202
Facsimile: (513) 712-6035
Attention: Roger Ach, II
with a copy to:
Dinsmore & Shohl LLP
255 East Fifth Street
Cincinnati, OH 45202
Facsimile: (513) 977-8141
Attention: Charles F. Hertlein, Jr., Esq.
(b) ENTIRE AGREEMENT. This Agreement (including the Schedules
hereto) contains the entire agreement among the parties with respect to the
subject matter hereof and supersedes all prior agreements, written or oral, with
respect thereto.
(c) WAIVER; AMENDMENTS; SEPARABILITY. This Agreement may be
amended, modified, superseded, canceled, renewed or extended, and the terms and
conditions hereof may be waived, only by a written instrument signed by the
parties or, in the case of a waiver, by the party waiving compliance. No delay
on the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any right, power or privilege hereunder, nor any single or partial exercise
of any right, power or privilege hereunder, preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder. The rights and remedies herein provided are cumulative and are not
exclusive of any rights or remedies which any party may otherwise have at law or
in equity. If any provision of this Agreement is held to be invalid or
unenforceable, the balance of this Agreement shall remain in effect.
(d) SURVIVAL. None of the representations and warranties of the
Stockholders contained in this Agreement shall survive the Closing. Except as
specifically set forth in this Agreement and the agreements and documents
specifically referred to herein, there are no representations or warranties,
express or implied, made by any party in connection with the transactions
contemplated by this Agreement.
(e) GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware applicable to agreements
made and to be performed entirely within such State.
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(f) NO ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective permitted successors and assigns.
(g) 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.
(h) SCHEDULE. Schedule A to this Agreement is a part of this
Agreement as if set forth in full herein.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the date first written above.
MDI ENTERTAINMENT, INC.
By: /s/ Steven M. Saferin
---------------------------
Name: Steven M. Saferin
Title: President and Chief Executive
Officer
MDI ACQUISITION, INC.
By: /s/ Steven M. Saferin
-----------------------------
Name: Steven M. Saferin
Title: President
CHICAGO WEST PULLMAN
By: /s/ Roger W. Ach, II
----------------------------
Roger W. Ach, II
Title: Member
/s/ Roger W. Ach, II
--------------------
Roger W. Ach, II
/s/ Carol A. Meinhardt
----------------------
Carol A. Meinhardt
The undersigned hereby
acknowledges and agrees
to be bound by the provisions
of Section 4(f) of the foregoing
Agreement, as of the date
written above:
THE LOTTERY CHANNEL, INC.
By: /s/ Roger W. Ach, II
- - - -------------------------
Name: Roger W. Ach, II
Title: President and Chief Executive Officer
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SCHEDULE A
STOCKHOLDER NO. OF SHARES
Chicago West Pullman 1,000 Series A Preferred (3,042,000 votes)
Roger W. Ach 1,393,150 Common Stock
Carol A. Meinhardt 75,000 Common Stock
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