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