REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered
into this 1st day of November, 2000, by and between eLot, Inc., a Virginia
corporation (the "Company"), and MDI Entertainment, Inc., a Delaware corporation
("MDI").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company and MDI entered into a Stock Exchange
Agreement of even date herewith (the "Stock Exchange Agreement") pursuant to
which the Company has issued to MDI 1,000,000 shares of the Company's Common
Stock, par value $.01 per share (the "Common Stock"); and
WHEREAS, the Company desires to grant to MDI, and MDI desires to
accept, certain registration rights concerning the shares of Common Stock, upon
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing, and other good
and valuable consideration, the parties hereto hereby agree as follows:
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 MDI and its successors and
assigns.
(b) Shares. Shares shall mean and include the shares of Common
Stock issued to MDI pursuant to the Stock Exchange Agreement, and any other
shares issued in respect of any stock split, stock dividend, reclassification,
recapitalization or similar event.
(c) Registration. "Register", "Registered", and "Registration"
shall mean a registration of shares of Common Stock effected by preparing and
filing a Registration Statement in compliance with the Securities Act of 1933,
as amended (the "Act"), and the order declaring the effectiveness of such
Registration Statement.
(d) Terms not otherwise defined in this Agreement shall have the
meaning ascribed to them in the Stock Exchange Agreement.
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ARTICLE II
REGISTRATION RIGHTS
2.1 Mandatory Registration. As soon as practicable after the
Closing Date, but no later than thirty (30) days after the Closing Date, the
Company shall prepare and file a Registration Statement on Form S-3, or other
applicable form, with the Securities and Exchange Commission (the "SEC"),
registering the Shares for resale.
2.2 Obligations of the Company. In connection with the
Registration of the Shares, the Company shall, as expeditiously as reasonably
possible:
(a) Use its best efforts to cause the Registration Statement to
become effective and keep the Registration Statement effective at all times
until the earliest of (i) the date when the Holder may sell all of the Shares
without volume or manner of sale restrictions pursuant to Rule 144 promulgated
under the Act or (ii) the date the Holder no longer owns any of the Shares.
(b) Prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to permit the disposition of all securities
covered by such Registration Statement for the period of distribution
contemplated thereby and to comply with regulations regarding the method of
distribution;
(c) Furnish to the Holder such number of copies of the
Registration Statement and prospectus, including the preliminary Registration
Statement and prospectus, in conformity with the requirements of the Act, and
such other documents as 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 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;
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(e) Immediately notify the Holder, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus contained in the
Registration Statement, as then in effect, would include an untrue statement of
a material fact or would omit to state a material fact required to be stated
therein or necessary to make the statements therein not 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.
2.3 Sale of Shares by Holder. Once the Registration Statement
becomes effective, the Holder may not sell more than (i) 333,334 Shares during
the thirty-day period (the "First Sale Period") following effectiveness, (ii)
666,667 Shares, less any Shares sold during the First Sale Period, during the
thirty-day period following the First Sale Period (the "Second Sale Period") or
(iii) 1,000,000 Shares, less any Shares sold during the First Sale Period and
Second Sale Period, during the thirty-day period following the Second Sale
Period.
2.4 Furnish Information. The Holder shall furnish to the Company
such information regarding it, the Shares held by it, and the intended method of
disposition thereof as the Company shall reasonably request to assure compliance
with Federal and applicable state securities laws.
2.5 Expenses of Demand Registration. All expenses incurred in
connection with the Registration Statement, including without limitation all
registration and qualification fees, printing and accounting fees, fees and
disbursements of counsel for the Company, and fees and disbursements of one
special counsel selected by and for the Holder (if different from counsel for
the Company) shall be borne by the Company.
2.6 Indemnification.
(a) The Company will indemnify and hold harmless the Holder
against any losses, claims, damages or liabilities, joint or several, to which
it may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities or actions in respect thereof arise out of or are
based upon any untrue or alleged untrue statement of any material fact contained
in such Registration Statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, or arise
out of or are based upon the omission or alleged omission to state therein, or
allegedly necessary to make the statements therein not misleading; and will
reimburse the Holder for any legal or other expenses reasonably incurred by it
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however , that the indemnity agreement contained
in this Section 2.6(a) shall not apply to amounts paid in settlement of any such
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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 2.6 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying party
under this Section 2.6, notify the indemnifying party in writing of the
commencement thereof and the indemnifying party shall have the right to
participate in and to assume the defense thereof with counsel mutually
satisfactory to the parties. The failure to notify an indemnifying party
promptly of the commencement of any such action, if prejudicial to the ability
to defend such action, shall relieve such indemnifying party under this Section
2.6, but the omission so to notify the indemnifying party will not relieve such
party of any liability which such party may have to any indemnified party
otherwise other than under this Section 2.6.
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(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.
2.7 Reports Under the Securities Exchange Act of 1934. With a
view to making available to the Holder the benefits of Rule 144 promulgated
under the Act, the Company shall (i) file with the SEC in a timely manner all
reports and other documents required to be filed by an issuer of securities
registered under the Act or the Securities Exchange Act of 1934, as amended,
(ii) maintain in effect the registration of its Common Stock under Section 12 of
the Securities Exchange Act of 1934, as amended, and (iii) so long as the Holder
owns any of the Shares, furnish in writing upon such Holder's request the
following information: (A) the Company's name, address and telephone number, (B)
the Company's Internal Revenue Service identification number, (C) the Company's
SEC file number, (D) the number of shares of Common Stock outstanding as shown
by the most recent report or statement published by the Company, (E) the average
weekly volume of trading in such shares reported on all national securities
exchanges during the four calendar weeks preceding the date of receipt of
request by the Holder, and (F) whether the Company has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months. With respect to a rule or regulation of
the SEC (other than Rule 144) which may at any time permit the Holder to sell
Common Stock to the public without registration, the Company agrees to take such
action as is reasonable to enable utilization of such rule.
2.8 Notwithstanding the foregoing, if at any time or from time to
time after the date of effectiveness of a registration statement covering the
Shares, the Company notifies the Holder in writing of the existence of a
Potential Material Event, the Holder shall not offer to sell any Shares, or
engage in any other transaction involving or relating to the Shares, from the
time of the giving of notice with respect to a Potential Material Event until
such Holder receives written notice from the Company that such Potential
Material Event either has been disclosed to the public or no longer constitutes
a Potential Material Event; provided that the restrictions set forth in this
sentence shall not apply for more than 90 days in any twelve month period. A
"Potential Material Event" means any of the following: (a) the possession by the
Company of material information not ripe for disclosure in a registration
statement, which shall be evidenced by determinations in good faith by the Board
of Directors of the Company that disclosure of such information in the
registration statement would be detrimental to the business and affairs of the
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Company; or (b) any material engagement or activity by the Company which would,
in the good faith determination of the Board of Directors of the Company, be
adversely affected by disclosure in a registration statement at such time, which
determination shall be accompanied by a good faith determination by the Board of
Directors of the Company that the registration statement would be materially
misleading absent the inclusion of such information.
2.9 The Holder agrees that, upon receipt of any notice from the
Company of the happening of (i) any event of the kind described in Section 2.8
or (ii) an event of which the Company has knowledge, as a result of which the
prospectus included 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.
ARTICLE III
MISCELLANEOUS
3.1 Agreement is Entire Contract. Except as specifically
referenced herein, this Agreement constitutes the entire contract between the
parties hereto concerning the subject matter hereof and no party shall be liable
or bound to the other in any manner by any warranties, representations or
covenants except as specifically set forth herein. Any previous agreement 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 New York, without regard to principles
of conflicts of law.
3.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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3.4 Title and Subtitles. The titles of the sections of this
Agreement are for convenience and are not to be considered in construing this
Agreement.
3.5 Notices. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery or
upon deposit in the United States Post Office, by registered or certified mail,
addressed to a party at its address provided in the Stock Exchange Account or at
such other address as such party may designate by ten (10) days advance written
notice to the other party.
3.6 Amendment of Agreement. Except as expressly provided herein,
any provision of this Agreement may be amended or waived by a written instrument
signed by the Company and the Holder.
3.7 Changes in Stock. If, and as often as, there are any changes
in the common stock of the Company by way of a stock split, stock dividend,
combination or reclassification, or through merger, consolidation,
reorganization or recapitalization or by any other means, appropriate adjustment
shall be made in the provisions hereof, as may be required, so that the rights
and privileges granted hereby shall continue with respect to the Common Stock
also changed.
[Signature Pages Follow]
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of the day and year first written above.
ELOT, INC.
By: /s/ Robert Daum
---------------------
Name: Robert Daum
Title: Executive Vice President
MDI ENTERTAINMENT, INC.
By: /s/ Steven M. Saferin
---------------------------
Name: Steven M. Saferin
Title:President & Chief Executive
Officer
