-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R+hxAQnM6BlJLyReG/7VXvkp0G2z/qAh0Nv4LY6ozlDdcpNS7ZnNq8omurZW4lCE Wzh05oJQJSGpIrcBQLyKxg== /in/edgar/work/0000950162-00-001227/0000950162-00-001227.txt : 20001110 0000950162-00-001227.hdr.sgml : 20001110 ACCESSION NUMBER: 0000950162-00-001227 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20001109 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: MDI ENTERTAINMENT INC CENTRAL INDEX KEY: 0001045080 STANDARD INDUSTRIAL CLASSIFICATION: [7900 ] IRS NUMBER: 731515699 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-56025 FILM NUMBER: 757358 BUSINESS ADDRESS: STREET 1: 201 ANN ST STREET 2: SUITE 210 CITY: HARTFORD STATE: CT ZIP: 06103 BUSINESS PHONE: 8605275359 MAIL ADDRESS: STREET 1: 201 ANN ST CITY: HARTFORD STATE: CT ZIP: 06103 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: ELOT INC CENTRAL INDEX KEY: 0000725282 STANDARD INDUSTRIAL CLASSIFICATION: [7385 ] IRS NUMBER: 860449210 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 301 MERRITT 7 STREET 2: CORPORATE PARK 1ST FLOOR CITY: NORWALK STATE: CT ZIP: 06851 BUSINESS PHONE: 2038408600 MAIL ADDRESS: STREET 1: 301 MERRITT 7 STREET 2: CORPORATE PARK 1ST FLOOR CITY: NORWALK STATE: CT ZIP: 06851 FORMER COMPANY: FORMER CONFORMED NAME: EXECUTONE INFORMATION SYSTEMS INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: VODAVI TECHNOLOGY CORP DATE OF NAME CHANGE: 19880802 SC 13D 1 0001.txt SCHEDULE 13D SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 MDI ENTERTAINMENT, INC. (Name of Issuer) COMMON STOCK, par value $0.001 per share (Title of Class of Securities) 55268S109 (CUSIP Number) Barbara C. Anderson, Esq. eLot, Inc. 301 Merritt Corporate Park Norwalk, Connecticut 06851 (203) 840-8630 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) November 1, 2000 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of ss.ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. / / Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 240.13d-7 for other parties to whom copies are to be sent. The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). Page 1 of 10 Pages SCHEDULE 13D CUSIP No. 55268S109 1. NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) eLot, Inc. 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) (b) 3. SEC USE ONLY 4. SOURCE OF FUNDS (SEE INSTRUCTIONS) OO 5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) N/A 6. CITIZENSHIP OR PLACE OF ORGANIZATION Virginia 7. SOLE VOTING POWER NUMBER OF 1,000,000 SHARES BENEFICIALLY 8. SHARED VOTING POWER OWNED BY EACH None REPORTING PERSON WITH 9. SOLE DISPOSITIVE POWER 1,000,000 10. SHARED DISPOSITIVE POWER None 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,000,000 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) N/A 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 8.77% 14. TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) CO Page 2 of 10 Pages Item 1. Security and Issuer This Schedule 13D relates to the common stock (the "Common Stock") of MDI Entertainment, Inc. (the "Company"). The Company has indicated on its Annual Report on Form 10-K for its fiscal year ended May 31, 2000 that the Common Stock has been registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended. The Company's principal executive offices are located at 201 Ann Street, Hartford, Connecticut 06130. On November 1, 2000, eLot acquired 444 shares of the Company's Series B Preferred Stock (the "Preferred Stock"), which is convertible into 444,444 shares of the Company's Common Stock, and a Warrant (the "Warrant") to purchase 555,556 shares of the Company's Common Stock. Item 2. Identity and Background This Schedule 13D is filed by eLot, Inc. ("eLot" or the "Reporting Person"). eLot, a corporation incorporated under the laws of the Commonwealth of Virginia, has its principal offices at 301 Merritt Corporate Park, Norwalk, Connecticut 06851. The names, addressees, citizenships and principal occupations or employments of the directors and executive officers of eLot are set forth in Annex A attached hereto. Neither the Reporting Person, nor, to the best knowledge of the Reporting Person, any other person identified on Annex A during the past five years was (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or a finding of any violation with respect to such laws. Page 3 of 10 Pages Item 3. Source and Amount of Funds or Other Consideration The Reporting Person acquired the shares in exchange for 1,000,000 shares of its own common stock. Item 4. Purpose of Transaction The purpose of the Reporting Person's acquisition of the issuer's securities was to form the strategic alliance to develop internet lottery web sites and market eLot's products and to allow the parties to the strategic alliance to invest in each other. Other than as set forth above, the Reporting Person does not have any present plans or proposals which relate to or would result in any of the matters set forth in Sections (a)-(j) of Item 4 of Schedule 13D. Item 5. Interests in Securities of the Issuer (a) eLot is the beneficial owner of 1,000,000 shares of Common Stock, representing approximately 8.77% of the class of securities. eLot has a right to acquire 444,444 of these shares upon conversion of the Preferred Stock and 555,556 upon exercise of the Warrant. (b) eLot has sole power to vote and dispose of the 1,000,000 shares beneficially owned by it. (c) Not applicable. (d) Not applicable. (e) Not applicable. Item 6. Contracts, Arrangements, Understanding or Relationships with Respect to Securities of the Issuer On November 1, 2000, eLot and the Company entered into a Stock Exchange Agree- Page 4 of 10 Pages ment (the "Stock Exchange Agreement") pursuant to which eLot exchanged 1,000,000 shares of its common stock for the Preferred Stock and the Warrant. Each share of Preferred Stock is convertible at the holder's option into 1,001 shares of the Company's Common Stock, subject to customary anti-dilution provisions, and will automatically convert into 1,001 shares of the Company's Common Stock on November 1, 2001. The Warrant is exercisable for 555,556 shares of the Company's Common Stock, subject to customary anti-dilution provisions, at an exercise price of $3.50 per share of Common Stock. The Warrant expires on November 1, 2003. eLot and the Company also entered into Registration Rights Agreements pursuant to which eLot granted the Company rights to have registered under the Securities Act of 1933 (the "Securities Act") the shares of eLot common stock acquired by the Company pursuant to the Stock Exchange Agreement, and the Company granted eLot rights to have registered under the Securities Act the shares of the Company's Common Stock acquired upon conversion of the Preferred Stock or upon exercise of the Warrant. eLot and the Company also entered into a Strategic Alliance Agreement, dated as of November 1, 2000, pursuant to which the parties agreed that a subsidiary of eLot and the Company would form a joint venture and the Company would market certain products of eLot in return for commission compensation from eLot. Item 7. Material to be Filed as Exhibits Exhibit 1 - Stock Exchange Agreement, dated November 1, 2000, by and between MDI Entertainment, Inc. and eLot, Inc. Exhibit 2 - Warrant, dated November 1, 2000, issued by MDI Entertainment, Inc. to eLot, Inc. Exhibit 3 - Certificate of Description and Designation of Series B Preferred Stock. Exhibit 4 - Registration Rights Agreement, dated November 1, 2000, by and between MDI Entertainment, Inc. and eLot, Inc. Exhibit 5 - Registration Rights Agreement, dated November 1, 2000, by and between eLot, Inc. and MDI Entertainment, Inc. Exhibit 6 - Strategic Alliance Agreement, dated as of November 1, 2000, by and between MDI Entertainment, Inc. and eLot, Inc. Page 5 of 10 pages SIGNATURES The undersigned certifies that, after reasonable inquiry and to the best of her knowledge and belief, the information set forth in the Schedule 13D is true, complete and correct. eLot, Inc. By: /s/ Barbara Anderson --------------------------------------------- Name: Barbara Anderson Title: Senior Vice President, Law and Administration and Secretary Dated: November 8, 2000 Page 6 of 10 Pages ANNEX A Executive Officers and Directors of eLot, Inc. (1) NAME: Richard J. Fernandes RESIDENCE OR BUSINESS ADDRESS: Webloyalty.com 101 Merritt 7 Corporate Park Norwalk, CT 06851 PRINCIPAL OCCUPATION Webloyalty.com 101 Merritt 7 Corporate Park Norwalk, CT 06851 (a) Name: (b) Address: (c) Title: Chief Executive Officer CITIZENSHIP: USA (2) NAME: Philip Gunn RESIDENCE OR BUSINESS ADDRESS: Growth Capital Partners, Inc. 520 Madison Avenue 40th Floor New York, New York 10022 PRINCIPAL OCCUPATION (a) Name: Growth Capital Partners, Inc. (b) Address: 520 Madison Avenue 40th Floor New York, NY 10022 (c) Title: Managing Director CITIZENSHIP: USA (3) NAME: John P. Hectus RESIDENCE OR BUSINESS ADDRESS: 3897 Moreuo Drive Palm Harbor, Florida 34685 Page 7 of 10 Pages PRINCIPAL OCCUPATION (a) Name: Retired (b) Address: N/A (c) Title: N/A CITIZENSHIP: USA (4) NAME: Stanley J. Kabala RESIDENCE OR BUSINESS ADDRESS: 336 Moorings Line Drive Naples, Florida 34102 PRINCIPAL OCCUPATION (a) Name: eLot, Inc. (b) Address: 301 Merritt 7 Corporate Park Norwalk, Connecticut 06851 (c) Title: Chairman of the Board CITIZENSHIP: USA (5) NAME: Jerry M. Seslowe RESIDENCE OR BUSINESS ADDRESS: Resource Holdings, Inc. 520 Madison Avenue New York, New York 10022 PRINCIPAL OCCUPATION (a) Name: Resource Holdings, Inc. (b) Address: 520 Madison Avenue New York, New York 10022 (c) Title: Managing Director CITIZENSHIP: USA (6) NAME: Edwin J. McGuinn, Jr. RESIDENCE OR BUSINESS ADDRESS: eLot, Inc. 301 Merritt 7 Corporate Park Norwalk, Connecticut 06851 PRINCIPAL OCCUPATION Page 8 of 10 Pages (a) Name: eLot, Inc. (b) Address: 301 Merritt 7 Corporate Park Norwalk, Connecticut 06851 (c) Title: President and Chief Executive Officer CITIZENSHIP: USA (7) NAME: Robert C. Daum RESIDENCE OR BUSINESS ADDRESS: eLot, Inc. 301 Merritt 7 Corporate Park Norwalk, Connecticut 06851 PRINCIPAL OCCUPATION (a) Name: eLot, Inc. (b) Address 301 Merritt 7 Corporate Park Norwalk, Connecticut 06851 (c) Title: Executive Vice President, Finance and Strategic Development CITIZENSHIP: USA (8) NAME: Michael W. Yacenda RESIDENCE OR BUSINESS ADDRESS: eLot, Inc. 301 Merritt 7 Corporate Park Norwalk, Connecticut 06851 PRINCIPAL OCCUPATION (a) Name: eLot, Inc. (b) Address: 301 Merritt 7 Corporate Park Norwalk, Connecticut 06851 (c) Title: Executive Vice President and President, eLottery, Inc. CITIZENSHIP: USA (9) NAME: Barbara C. Anderson RESIDENCE OR BUSINESS ADDRESS: eLot, Inc. 301 Merritt 7 Corporate Park Norwalk, Connecticut 06851 PRINCIPAL OCCUPATION Page 9 of 10 Pages (a) Name: eLot, Inc. (b) Address: 301 Merritt 7 Corporate Park Norwalk, Connecticut 06851 (c) Title: Senior Vice President, Law and Administration and Secretary CITIZENSHIP: USA Page 10 of 10 Pages EX-1 2 0002.txt STOCK EXCHANGE AGREEMENT STOCK EXCHANGE AGREEMENT THIS STOCK EXCHANGE AGREEMENT is entered into as of the 1st day of November, 2000, by and between MDI Entertainment, Inc., a Delaware corporation ("MDI"), and eLot, Inc., a Virginia corporation ("eLot"). WHEREAS, on the terms and subject to the conditions set forth in this Agreement, eLot and MDI desire that eLot issue 1,000,000 shares (the "eLot Shares") of eLot's Common Stock, par value $.01 per share (the "eLot Common Stock"), to MDI in exchange for (1) 444 shares (the "MDI Preferred Shares") of MDI's Series B Preferred Stock (the "MDI Series B Preferred Stock") which shall have the rights and preferences set forth in the Certificate of Designation of Rights and Preferences of Series B Preferred Stock attached as Exhibit A hereto (the "Certificate of Designation") and (2) a Warrant (the "Warrant") to purchase 555,556 shares of MDI's Common Stock, par value $.001 per share (the "MDI Common Stock"), which shall have the terms and conditions set forth in the Form of Warrant attached as Exhibit B hereto; WHEREAS, eLot and MDI desire to enter into a Registration Rights Agreement with respect to certain shares of MDI Common Stock in the form set forth in Exhibit C hereto (the "eLot Registration Rights Agreement"); and WHEREAS, eLot and MDI desire to enter into a Registration Rights Agreement with respect to certain shares of eLot Common Stock in the form set forth in Exhibit D hereto (the "MDI Registration Rights Agreement"). NOW, THEREFORE, in consideration of the mutual covenants herein contained and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: SECTION 1. Filing of Certificate of Designation; Reservation of Shares of Common Stock. (a) Immediately prior to the execution and delivery of this Agreement, MDI filed with the Secretary of State of Delaware the Certificate of Designation (the Certificate of Incorporation of MDI, as amended by the Certificate of Designation and in effect on the date hereof, being hereinafter referred to as its "Certificate of Incorporation"). (b) MDI has authorized and reserved and covenants to continue to reserve, free and clear of preemptive and other preferential rights, a sufficient number of its previously authorized but unreserved shares of MDI Common Stock to satisfy the rights of conversion of the holders of the MDI Series B Preferred Stock and the exercise rights of the holders of the Warrant. SECTION 2. Exchange. Subject to the terms and conditions hereof, at the Closing (as defined below), eLot agrees to issue to MDI the eLot Shares in exchange for the MDI Preferred Shares and the Warrant, and MDI agrees to issue to eLot the MDI Preferred Shares and the Warrant in exchange for the eLot Shares. SECTION 3. Delivery of the eLot Shares, MDI Preferred Shares, Warrant and Other Documents. The closing hereunder with respect to the transactions contemplated hereby (the "Closing") shall take place at the offices of Cahill Gordon & Reindel, 80 Pine Street, New York, New York 10005, on November 1, 2000 at 10:00 a.m. New York time or at any other mutually agreed time and place (the "Closing Date"). At the Closing (1) eLot shall deliver to MDI a stock certificate, registered in the name of MDI, representing the eLot Shares, (2) MDI shall deliver to eLot a stock certificate, registered in the name of eLot, representing the MDI Preferred Shares and the Warrant, and (3) each of MDI and eLot shall execute and deliver the Registration Rights Agreement. SECTION 4. Representations and Warranties of MDI. MDI hereby represents and warrants to eLot as follows: 4.1. Organization. MDI is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own and lease its properties, to carry on its business as presently conducted and as proposed to be conducted and to carry out the transactions contemplated hereby. MDI is duly qualified as a foreign corporation and is in good standing in all such other jurisdictions in which the conduct of its business or its ownership or leasing of property requires such qualification and in which the failure so to qualify or so to be in good standing would have a material adverse effect on MDI's business, operations, financial condition or prospects (an "MDI Material Adverse Effect"). 4.2. Capitalization. The entire authorized capital stock of MDI consists of: (a) 25,000,000 shares of MDI Common Stock, of which (i) 10,405,872 shares have been duly and validly issued and are outstanding, fully paid and nonassessable, (ii) 444,444 shares have been reserved for issuance upon conversion of the MDI Series B Preferred Stock, (iii) 2,293,656 shares have been reserved for issuance upon exercise of outstanding warrants (including the Warrant), (iv) 375,000 shares have been reserved for issuance upon conversion of a convertible subordinated debenture, (v) 674,166 shares have been reserved for issuance under MDI's option plans, and (vi) no shares are held as treasury shares; (b) 5,000,000 shares of Preferred Stock, of which (i) 2,027 shares were designated Series A Preferred Stock, none of which remain outstanding; and (ii) 444 shares of Series B Preferred Stock, of which (A) prior to the Closing, no shares were issued and outstanding and (B) 444 shares will be held by eLot after the Closing and will, upon issuance in accordance with this Agreement, have been duly and validly issued and be outstanding, fully paid and non-assessable. -2- 4.3. Reporting Company Status. MDI has registered the MDI Common Stock pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the MDI Common Stock is listed and traded on the Nasdaq SmallCap Market. Except as set forth on Schedule A hereto, MDI has timely filed all material required to be filed pursuant to all reporting obligations under either Section 13(a) or 15(d) of the Exchange Act, and has received no notice, either oral or written, with respect to the continued eligibility of the MDI Common Stock for such listing. 4.4. SEC Filings. None of the documents filed by MDI with the Securities and Exchange Commission (the "SEC") pursuant to the Securities Act of 1933, as amended (the "Securities Act"), and the Exchange Act since May 31, 2000 (collectively, the "MDI SEC Documents"), at the time they were filed, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. MDI has timely filed all requisite forms, reports and exhibits thereto with the SEC. 4.5. Financial Statements. MDI has furnished to eLot the audited balance sheet of MDI as of May 31, 2000 and the related statements of operations, stockholders' equity and cash flow of MDI, together with related schedules and notes, if any, for the year ended May 31, 2000, and the unaudited balance sheet of MDI as of August 31, 2000 (the "MDI Balance Sheet") and the related unaudited statements of operations, stockholders' equity and cash flow of MDI for the three months then ended (the "MDI Statement of Operations"). The MDI Balance Sheet and the MDI Statement of Operations (the "MDI Financial Statements") have been prepared in accordance with generally accepted accounting principles consistently applied. The MDI Balance Sheet fairly presents, in all material respects, the financial position of MDI as of its date, and the MDI Statement of Operations fairly presents the results of operations of MDI for the period therein set forth. 4.6. Absence of Liabilities. Except as set forth in the MDI Balance Sheet or disclosed in the MDI SEC Documents and except for obligations and liabilities incurred since August 31, 2000 in the ordinary course of business, MDI has no material obligation or liability (absolute, accrued or contingent) as of the date hereof. 4.7. Absence of Changes. Except as disclosed in the MDI SEC Documents, since May 31, 2000 there has not been (a) any material adverse change in the financial condition, results of operations, assets, liabilities, business or prospects of MDI, (b) any material asset or property of MDI made subject to a lien of any kind, (c) any waiver of any valuable right of MDI, or the cancellation of any material debt or claim held by MDI, (d) any payment of dividends on, or other distribution with respect to, or any direct or indirect redemption or acquisition of, any shares of the capital stock of MDI, or any agreement or commitment therefor, (e) any mortgage, pledge or hypothecation of any tangible or intangible asset of MDI, except in the ordinary course of business, (f) any sale or assignment of any tangible asset of MDI having a book value in excess of $10,000, except in the ordinary course of business, (g) any loan by MDI to, or any loan to MDI from, any officer, director, employee or stockholder of MDI, or any agreement or commit- -3- ment therefor, (h) any damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting the assets, property or business of MDI or (i) any change in the accounting methods or practices followed by MDI. 4.8. Intellectual Property Rights. (a) MDI has the right to use the Intellectual Property Rights (as hereinafter defined) necessary or required for the conduct of its business as presently conducted; (b) To the best of MDI's knowledge, no product marketed or sold or proposed to be marketed or sold by MDI violates or will violate any license or infringes any Intellectual Property Rights of another; (c) MDI has not received any notice that any of such Intellectual Property Rights or the operation or proposed operation of MDI's business conflicts or will conflict with the rights of others, nor is MDI aware of any reasonable basis to believe that any such violation, infringement or conflict will or may exist; and (d) MDI has taken reasonable measures to protect and preserve the security, confidentiality and value of its Intellectual Property Rights, including its trade secrets and other confidential information. To the best knowledge of MDI, all trade secrets and other confidential information of MDI are presently valid and protectible and are not part of the public domain or knowledge nor, to the best knowledge of MDI, have they been used, divulged or appropriated for the benefit of any person other than MDI or otherwise to the detriment of MDI. As used herein, the term "Intellectual Property Rights" means all patents, trademarks, service marks, trade names, copyrights, inventions, trade secrets, proprietary processes and formulae, applications for patents, trademarks, service marks and copyrights, and other industrial and intellectual property rights. 4.9. Proprietary Information of Third Parties. To the best of MDI's knowledge, no third party has claimed or has reason to claim that any person employed by or affiliated with MDI has (a) violated or may be violating any of the terms or conditions of his or her employment, non-competition, nondisclosure or inventions agreement with such third party, (b) disclosed or may be disclosing or utilized or may be utilizing any trade secret or proprietary information or documentation of such third party or (c) interfered or may be interfering in the employment relationship between such third party and any of its present or former employees. No third party has requested information from MDI which suggests that such a claim might be contemplated. To the best of MDI's knowledge, no person employed by or affiliated with MDI has employed or proposes to employ any trade secret or any information or documentation proprietary to any former employer, and, to the best of MDI's knowledge, no person employed by or affiliated with MDI has violated any confidential relationship which such person may have had with any third party, in connection with the development, manufacture or sale of any product -4- or proposed product or the development or sale of any service or proposed service of MDI, and MDI has no reason to believe there will be any such employment or violation. 4.10. Litigation. Except as disclosed in the MDI SEC Documents, there is no action, suit, claim, proceeding or investigation, at law, in equity or otherwise, by or before any governmental instrumentality or other agency, now pending or, to MDI's knowledge, threatened against or affecting MDI, nor, to MDI's knowledge, does there exist any reasonable basis therefor, which in either case could reasonably be expected to have an MDI Material Adverse Effect. 4.11. No Defaults. Except as disclosed in the MDI SEC Documents and set forth on Schedule B, MDI is not in violation or breach of, or in default under, any provision of (a) its Certificate of Incorporation or its By-Laws or any note, indenture, mortgage, lease, contract, purchase order or other instrument, document or agreement to which MDI is a party or by which it or any of its property is bound or affected or (b) any ruling, writ, injunction, order, judgment or decree of any court, administrative agency or other governmental body, which breach could reasonably be expected to have an MDI Material Adverse Effect. To the best knowledge of MDI, there exists no condition, event or act which, after notice, lapse of time or both, could constitute a violation or breach of, or a default under, any of the foregoing. 4.12. Authorization of This Agreement, the Registration Rights Agreement and the Warrant. The execution, delivery and performance by MDI of this Agreement, the Registration Rights Agreement and the Warrant have been duly authorized by all requisite corporate action. This Agreement, the Registration Rights Agreement and the Warrant have been duly executed and delivered on behalf of MDI and constitute the valid and binding obligations of MDI, enforceable in accordance with their respective terms. The execution, delivery and performance of this Agreement, the Registration Rights Agreement and the Warrant, the issuance, sale and delivery of the MDI Preferred Shares and the Warrant, and the shares of MDI Common Stock issuable upon conversion of the MDI Series B Preferred Stock or upon exercise of the Warrant (the "Reserved Shares"), and compliance with the provisions hereof and thereof by MDI, do not and will not, with or without the passage of time or the giving of notice or both, (a) violate any provision of law, statute, ordinance, rule or regulation or any ruling, writ, injunction, order, judgment or decree of any court, administrative agency or other governmental body or (b) conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute a default (or give rise to any right of termination, cancellation or acceleration) under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the properties or assets of MDI under, its Certificate of Incorporation or By-Laws or any note, indenture, mortgage, lease, contract, purchase order or other instrument, document or agreement to which MDI is a party or by which it or any of its property is bound or affected. 4.13. Authorization of Shares. The issuance, sale and delivery hereunder by MDI of the MDI Preferred Shares have been duly authorized by all requisite corporate action of MDI, and when so issued, sold and delivered, the MDI Preferred Shares will be validly issued and outstanding, fully paid and nonassessable, and not subject to preemptive or any other similar rights of the stockholders of MDI or others. -5- 4.14. Authorization of Reserved Shares. The issuance, sale and delivery by MDI of the Reserved Shares have been duly authorized by all requisite corporate action of MDI, and the Reserved Shares have been duly reserved for issuance upon conversion of all or any of the shares of MDI Series B Preferred Stock or upon exercise of the Warrant, and when so issued and delivered upon conversion of any of the MDI Series B Preferred Stock or upon exercise of the Warrant, the Reserved Shares will be validly issued and outstanding, fully paid and nonassessable, and not subject to preemptive or any other similar rights of the stockholders of MDI or others. 4.15. No Governmental Consent or Approval Required. No authorization, consent, approval or other order of, declaration to, or filing with, any governmental agency or body is required for or in connection with the valid and lawful authorization, execution, delivery and performance by MDI of this Agreement, the Registration Rights Agreement or the Warrant, for or in connection with the valid and lawful authorization, issuance, sale and delivery of the MDI Preferred Shares or the Warrant or for or in connection with the valid and lawful authorization, reservation, issuance, sale and delivery of the Reserved Shares, except for SEC approvals and "blue sky" approvals and filings contemplated by the Registration Rights Agreement. 4.16. Exemptions from Securities Laws. Subject to the accuracy of the representations and warranties of eLot set forth in Section 5.18 hereof, the provisions of Section 5 of the Securities Act are inapplicable to the offering, issuance, sale and delivery of the MDI Preferred Shares, the Warrant and the Reserved Shares by virtue of the exemption afforded by Section 4(2) of the Securities Act, and no consent, approval, qualification or registration or filing under any state securities or blue sky laws is required in connection therewith. 4.17. Compliance. MDI has (a) complied in all material respects with all Federal, state, local or foreign laws, statutes, ordinances, rules, regulations and orders applicable to its business and (b) all Federal, state, local and foreign governmental licenses, registrations and permits material to or necessary for the conduct of its business, and such licenses, registrations and permits are in full force and effect, except for those as to which failure to comply would not have an MDI Material Adverse Effect. 4.18. Taxes. MDI has filed all Federal, state, local and foreign tax returns which are required to be filed by it and all such returns are true and correct in all material respects. MDI has paid all taxes pursuant to such returns or pursuant to any assessments received by it or which it is obligated to withhold from amounts owing to any employee, creditor or third party, except, in each case, for those which are not yet due and payable pursuant to such returns. 4.19. Securities Laws. (a) MDI is acquiring the eLot Shares for its own account, for investment and not for, with a view to or in connection with the distribution thereof. -6- (b) MDI understands that the eLot Shares have not been registered under the Securities Act or any state securities law, by reason of their issuance in a transaction exempt from the registration requirements of the Securities Act and such laws, and that the eLot Shares must be held indefinitely unless they are subsequently registered under the Securities Act and such laws or a subsequent disposition thereof is exempt from registration. The certificates for the eLot Shares shall bear a legend to such effect, and appropriate stock transfer instructions shall be issued. (c) MDI understands that the exemption from registration afforded by Rule 144 promulgated by the SEC under the Securities Act depends upon the satisfaction of various conditions and that, if applicable, Rule 144 affords the basis for sales only in limited amounts. (d) MDI (i) has sufficient knowledge and experience in business and financial matters and with respect to investment in securities of companies comparable to eLot so as to enable it to analyze and evaluate the merits and risks of the investment contemplated hereby and (ii) is able to bear the economic risk of such investment. (e) MDI and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of eLot and materials relating to the offer and sale of the eLot Shares which have been requested by MDI. MDI and its advisors, if any, have been afforded the opportunity to ask questions of eLot and have received complete and satisfactory answers to any such inquiries. SECTION 5. Representations and Warranties of eLot. eLot represents and warrants to MDI that: 5.1. Organization. eLot is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia and has all requisite corporate power and authority to own and lease its properties, to carry on its business as presently conducted and as proposed to be conducted and to carry out the transactions contemplated hereby. eLot is duly qualified as a foreign corporation and is in good standing in all such other jurisdictions in which the conduct of its business or its ownership or leasing of property requires such qualification and in which the failure so to qualify or so to be in good standing would have a material adverse effect on eLot's business, operations, financial condition or prospects (an "eLot Material Adverse Effect"). 5.2. Capitalization. The entire authorized capital stock of eLot consists of: (a) 130,000,000 shares of eLot Common Stock, of which (i) 65,696,043 shares have been duly and validly issued and are outstanding, fully paid and nonassessable, (ii) 1,537,882 shares have been reserved for issuance upon conversion of convertible subordinated debentures, (iii) 1,325,000 shares have been reserved for issuance upon exercise of outstanding warrants, (iv) 7,550, 461 shares have been reserved for issuance pursuant to eLot's option plans and (v) no shares are held as Treasury Shares; and -7- (b) 1,000,000 shares of preferred stock, par value $.01 per share, of which no shares are issued and outstanding. 5.3. Reporting Company Status. eLot has registered its Common Stock pursuant to Section 12 of the Exchange Act, and the Common Stock is listed and traded on the NASDAQ National Market System. eLot has timely filed all material required to be filed pursuant to all reporting obligations under either Section 13(a) or 15(d) of the Exchange Act, and has received no notice, either oral or written, with respect to the continued eligibility of the eLot Common Stock for such listing. 5.4. SEC Filings. None of the documents filed by eLot with the SEC pursuant to the Securities Act and the Exchange Act since January 1, 1999 (collectively, the "eLot SEC Documents"), at the time they were filed, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. eLot has timely filed all requisite forms, reports and exhibits thereto with the SEC. 5.5. Financial Statements. eLot has furnished to MDI the audited balance sheet of eLot as of December 31, 1999 and the related statements of operations, stockholders' equity and cash flow of eLot, together with related schedules and notes, if any, for the year ended December 31, 1999, and the unaudited balance sheet of eLot as of June 30, 2000 (the "eLot Balance Sheet") and the related unaudited statements of operations, stockholders' equity and cash flow of eLot for the six months then ended (the "eLot Statement of Operations"). The eLot Balance Sheet and the eLot Statement of Operations (the "eLot Financial Statements") have been prepared in accordance with generally accepted accounting principles consistently applied. The eLot Balance Sheet fairly presents, in all material respects, the financial position of eLot as of its date, and the eLot Statement of Operations fairly presents the results of operations of eLot for the period therein set forth. 5.6. Absence of Liabilities. Except as set forth in the eLot Balance Sheet or disclosed in the eLot SEC Documents and except for obligations and liabilities incurred since June 30, 2000 in the ordinary course of business, eLot has no material obligation or liability (absolute, accrued or contingent) as of the date hereof. 5.7. Absence of Changes. Except as disclosed in the eLot SEC Documents, since June 30, 2000 there has not been (a) any material adverse change in the financial condition, results of operations, assets, liabilities, business or prospects of eLot, (b) any material asset or property of eLot made subject to a lien of any kind, (c) any waiver of any valuable right of eLot, or the cancellation of any material debt or claim held by eLot, (d) any payment of dividends on, or other distribution with respect to, or any direct or indirect redemption or acquisition of, any shares of the capital stock of eLot, or any agreement or commitment therefor, (e) any mortgage, pledge or hypothecation of any tangible or intangible asset of eLot, except in the ordinary course of business, (f) any sale or assignment of any tangible asset of eLot having a book value in excess of $10,000, except in the ordinary course of business, (g) any loan by eLot to, or any loan to eLot -8- from, any officer, director, employee or stockholder of eLot, or any agreement or commitment therefor, (h) any damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting the assets, property or business of eLot or (i) any change in the accounting methods or practices followed by eLot. 5.8. Intellectual Property Rights. (a) eLot has the right to use the Intellectual Property Rights necessary or required for the conduct of its business as presently conducted or as proposed to be conducted; (b) To the best of eLot's knowledge, no product marketed or sold or proposed to be marketed or sold by eLot violates or will violate any license or infringes any Intellectual Property Rights of another; (c) eLot has not received any notice that any of such Intellectual Property Rights or the operation or proposed operation of eLot's business conflicts or will conflict with the rights of others, nor is eLot aware of any reasonable basis to believe that any such violation, infringement or conflict will or may exist; and (d) eLot has taken reasonable measures to protect and preserve the security, confidentiality and value of its Intellectual Property Rights, including its trade secrets and other confidential information. To the best knowledge of eLot, all trade secrets and other confidential information of eLot are presently valid and protectible and are not part of the public domain or knowledge nor, to the best knowledge of eLot, have they been used, divulged or appropriated for the benefit of any person other than eLot or otherwise to the detriment of eLot. 5.9. Proprietary Information of Third Parties. To the best of eLot's knowledge, no third party has claimed or has reason to claim that any person employed by or affiliated with eLot has (a) violated or may be violating any of the terms or conditions of his or her employment, non-competition, nondisclosure or inventions agreement with such third party, (b) disclosed or may be disclosing or utilized or may be utilizing any trade secret or proprietary information or documentation of such third party or (c) interfered or may be interfering in the employment relationship between such third party and any of its present or former employees. No third party has requested information from eLot which suggests that such a claim might be contemplated. To the best of eLot's knowledge, no person employed by or affiliated with eLot has employed or proposes to employ any trade secret or any information or documentation proprietary to any former employer, and, to the best of eLot's knowledge, no person employed by or affiliated with eLot has violated any confidential relationship which such person may have had with any third party, in connection with the development, manufacture or sale of any product or proposed product or the development or sale of any service or proposed service of eLot, and eLot has no reason to believe there will be any such employment or violation. 5.10. Litigation. Except as disclosed in the eLot SEC Documents, there is no action, suit, claim, proceeding or investigation, at law, in equity or otherwise, by or before any gov- -9- ernmental instrumentality or other agency, now pending or, to eLot's knowledge, threatened against or affecting eLot, nor, to eLot's knowledge, does there exist any reasonable basis therefor, which in either case could reasonably be expected to have an eLot Material Adverse Effect. 5.11. No Defaults. eLot is not in violation or breach of, or in default under, any provision of (a) its Certificate of Incorporation or its By-Laws or any note, indenture, mortgage, lease, contract, purchase order or other instrument, document or agreement to which eLot is a party or by which it or any of its property is bound or affected or (b) any ruling, writ, injunction, order, judgment or decree of any court, administrative agency or other governmental body, which breach could reasonably be expected to have an eLot Material Adverse Effect. To the best knowledge of eLot, there exists no condition, event or act which, after notice, lapse of time or both, could constitute a violation or breach of, or a default under, any of the foregoing. 5.12. Authorization of This Agreement and the Registration Rights Agreement. The execution, delivery and performance by eLot of this Agreement and the Registration Rights Agreement have been duly authorized by all requisite corporate action. This Agreement and the Registration Rights Agreement have been duty executed and delivered on behalf of eLot and constitute the valid and binding obligations of eLot, enforceable in accordance with their respective terms. The execution, delivery and performance of this Agreement and the Registration Rights Agreement, the issuance, sale and delivery of the eLot Shares, and compliance with the provisions hereof and thereof by eLot, do not and will not, with or without the passage of time or the giving of notice or both, (a) violate any provision of law, statute, ordinance, rule or regulation or any ruling, writ, injunction, order, judgment or decree of any court, administrative agency or other governmental body or (b) conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute a default (or give rise to any right of termination, cancellation or acceleration) under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the properties or assets of eLot under, its Certificate of Incorporation or By-Laws or any note, indenture, mortgage, lease, contract, purchase order or other instrument, document or agreement to which eLot is a party or by which it or any of its property is bound or affected. 5.13. Authorization of Shares. The issuance, sale and delivery hereunder by eLot of the eLot Shares have been duly authorized by all requisite corporate action of eLot, and when so issued, sold and delivered, the eLot Shares will be validly issued and outstanding, fully paid and nonassessable, and not subject to preemptive or any other similar rights of the stockholders of eLot or others. 5.14. No Governmental Consent or Approval Required. No authorization, consent, approval or other order of, declaration to, or filing with, any governmental agency or body is required for or in connection with the valid and lawful authorization, execution, delivery and performance by eLot of this Agreement or the Registration Rights Agreement or the valid and lawful authorization, issuance, sale and delivery of the eLot Shares. -10- 5.15. Exemptions from Securities Laws. Subject to the accuracy of the representations and warranties of MDI set forth in Section 4.19 hereof, the provisions of Section 5 of the Securities Act are inapplicable to the offering, issuance, sale and delivery of the eLot Shares by virtue of the exemption afforded by Section 4(2) of the Securities Act, and no consent, approval, qualification or registration or filing under any state securities or blue sky laws is required in connection therewith. 5.16. Compliance. eLot has (a) complied in all material respects with all Federal, state, local or foreign laws, statutes, ordinances, rules, regulations and orders applicable to its business and (b) all Federal, state, local and foreign governmental licenses, registrations and permits material to or necessary for the conduct of its business, and such licenses, registrations and permits are in full force and effect, except for those as to which failure to comply would not have an eLot Material Adverse Effect. 5.17. Taxes. eLot has filed all Federal, state, local and foreign tax returns which are required to be filed by it and all such returns are true and correct in all material respects. eLot has paid all taxes pursuant to such returns or pursuant to any assessments received by it or which it is obligated to withhold from amounts owing to any employee, creditor or third party, except, in each case, for those which are not yet due and payable pursuant to such returns. 5.18. Securities Laws. (a) eLot is acquiring the MDI Preferred Shares and Warrant, and, in the event eLot should acquire Reserved Shares upon conversion of the MDI Preferred Shares or Warrant, eLot will be acquiring the Reserved Shares, for its own account, for investment and not for, with a view to or in connection with the distribution thereof. (b) eLot understands that the MDI Preferred Shares and Warrant have not been registered under the Securities Act or any state securities law, by reason of their issuance in a transaction exempt from the registration requirements of the Securities Act and such laws, and that the MDI Preferred Shares and Warrant must be held indefinitely unless they are subsequently registered under the Securities Act and such laws or a subsequent disposition thereof is exempt from registration. The certificates for the MDI Preferred Shares and Warrant shall bear a legend to such effect, and appropriate stock transfer instructions shall be issued. (c) eLot understands that the exemption from registration afforded by Rule 144 promulgated by the SEC under the Securities Act depends upon the satisfaction of various conditions and that, if applicable, Rule 144 affords the basis for sales only in limited amounts. (d) eLot (i) has sufficient knowledge and experience in business and financial matters and with respect to investment in securities of companies comparable to MDI so as to enable it to analyze and evaluate the merits and risks of the investment contemplated hereby and (ii) is able to bear the economic risk of such investment. eLot is an "accredited investor" within the meaning of Regulation D under the Securities Act. -11- (e) eLot and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of MDI and materials relating to the offer and sale of the MDI Preferred Shares and Warrant which have been requested by eLot. eLot and its advisors, if any, have been afforded the opportunity to ask questions of MDI and have received complete and satisfactory answers to any such inquiries. SECTION 6. Conditions Precedent to Closing by eLot. The obligation of eLot to purchase and pay for the MDI Preferred Shares and Warrant being purchased by eLot is subject to satisfaction of the following conditions precedent at or before the Closing: 6.1. Corporate Proceedings. All corporate and other proceedings to be taken and all waivers and consents to be obtained in connection with the transactions contemplated by this Agreement shall have been taken or obtained and all documents incident to such transactions shall be satisfactory in form and substance to eLot and its counsel, who shall have received all such originals or certified or other copies of such documents as they may reasonably request. 6.2. Representations and Warranties Correct. The representations and warranties made by MDI in Section 4 hereof shall be true and correct when made, and shall be true and correct at the time of the Closing, with the same force and effect as if they had been made at and as of the time of the Closing. 6.3. Compliance with Covenants. MDI shall have duly complied with and performed all covenants and agreements of MDI herein which are required to be complied with and performed at or before the Closing. 6.4. Certificate. MDI shall have provided to eLot a certificate, signed by an executive officer of MDI and dated the date of the Closing, in form and substance reasonably satisfactory to eLot and its counsel, confirming compliance with the conditions set forth in Sections 6.1 through 6.3. 6.5. Registration Rights Agreements. At or before the Closing, MDI and eLot shall have executed and delivered the eLot Registration Rights Agreement and the MDI Registration Rights Agreement. SECTION 7. Conditions Precedent to Closing by eLot. The obligation of MDI to purchase and pay for the eLot Shares being purchased by MDI is subject to satisfaction of the following conditions precedent at or before the Closing: 7.1. Corporate Proceedings. All corporate and other proceedings to be taken and all waivers and consents to be obtained in connection with the transactions contemplated by this Agreement shall have been taken or obtained and all documents incident to such transactions shall be satisfactory in form and substance to MDI and its counsel, who shall have received all such originals or certified or other copies of such documents as they may reasonably request. -12- 7.2. Representations and Warranties Correct. The representations and warranties made by eLot in Section 5 hereof shall be true and correct when made, and shall be true and correct at the time of the Closing, with the same force and effect as if they had been made at and as of the time of the Closing. 7.3. Compliance with Covenants. eLot shall have duly complied with and performed all covenants and agreements of eLot herein which are required to be complied with and performed at or before the Closing. 7.4. Certificate. eLot shall have provided to MDI a certificate, signed by an executive officer of eLot and dated the date of the Closing, in form and substance reasonably satisfactory to MDI and its counsel, confirming compliance with the conditions set forth in Sections 7.1 through 7.3. 7.5. Registration Rights Agreements. At or before the Closing, eLot and MDI shall have executed and delivered the eLot Registration Rights Agreement and the MDI Registration Rights Agreement. SECTION 8. Additional Agreements of MDI. 8.1. Indemnification. The Certificate of Incorporation or By-Laws of MDI shall at all times provide for the indemnification of the members of the Board of Directors of MDI to the full extent provided by the law of the jurisdiction in which MDI is organized and MDI shall maintain, with a financially sound and responsible insurer, insurance coverage in an amount not less than $1 million for indemnification of the members of the Board of Directors. 8.2. Board Observer. So long as the sum of (i) the aggregate number of shares of Common Stock issuable upon conversion of MDI Series B Preferred Stock and (ii) MDI Common Stock owned by eLot and its subsidiaries is equal to or greater than 444,444, eLot shall have the right to designate from time to time one person as a "Board Observer." MDI will (i) deliver to the Board Observer notice of all meetings of the MDI Board of Directors and committees thereof in the same manner as delivered to MDI directors, (ii) deliver to the Board Observer any materials delivered to MDI directors in the same manner that such materials are delivered to MDI directors, (iii) permit the Board Observer to attend all meetings of the MDI Board of Directors and committees thereof and (iv) will grant the Board Observer reasonable access to MDI's offices and records during normal business hours. MDI may require the Board Observer to sign a confidentiality agreement and acknowledge that the Board Observer may, from time to time, possess material non-public information. SECTION 9. Fees and Expenses. Each of eLot and MDI shall pay all its own respective costs and other expenses incurred in connection with its performance of and compliance with all agreements and conditions contained herein on its part to be performed or complied with. -13- SECTION 10. Survival of Representations, Warranties and Agreements. The covenants, representations and warranties of eLot and MDI contained herein shall survive the Closing. eLot and MDI may rely on such covenants, representations and warranties, irrespective of any investigation made, or notice or knowledge held, by them or any other person. All statements contained in any certificate or other instrument delivered by MDI or eLot, pursuant to this Agreement or in connection with the transactions contemplated by this Agreement shall constitute representations and warranties by MDI or eLot, as the case may be, under this Agreement. SECTION 11. Indemnification. (a) MDI shall indemnify, defend and hold harmless eLot from and against all liabilities, losses and damages, together with all reasonable costs and expenses related thereto (including, without limitation, legal and accounting fees and expenses), which would not have been incurred if (i) all of the representations and warranties of MDI herein had been true and correct when made or (ii) all of the covenants and agreements of MDI herein had been duly and timely complied with and performed. (b) eLot shall indemnify, defend and hold harmless MDI from and against all liabilities, losses and damages, together with all reasonable costs and expenses related thereto (including, without limitation, legal and accounting fees and expenses), which would not have been incurred if (i) all of the representations and warranties of eLot herein had been true and correct when made or (ii) all of the covenants and agreements of eLot herein had been duly and timely complied with and performed. SECTION 12. Remedies. The parties agree and acknowledge that money damages are not an adequate remedy for any breach of the provisions of this Agreement and that, in addition to any other remedy a party may have for a breach of this Agreement, that party shall be entitled to an injunction restraining any such breach or threatened breach, or a decree of specific performance, without posting any bond or security. The remedy in this Section 12 is in addition to, and not in lieu of, any other rights or remedies a party may have. SECTION 13. Successors and Assigns. This Agreement shall be binding upon, and inure to the benefit of, each of the parties hereto, their respective successors and assigns; provided that neither party may assign any of its rights or obligations hereunder without the prior written consent of the other party. SECTION 14. Entire Agreement; Effect on Prior Documents. This Agreement and the other documents referred to herein or delivered pursuant hereto contain the entire agreement among the parties with respect to the transactions contemplated hereby and supersede all prior negotiations, commitments, agreements and understandings among them with respect thereto. SECTION 15. Notices. Any notice or communication given pursuant to this Agreement by any party to any other party shall be in writing and shall be sufficiently given if -14- personally delivered, sent by facsimile or other means of electronic transmission or sent by mail, postage prepaid, to the parties at the following addresses or to such other address as either party may hereafter designate to the others by like notice: (a) if to MDI, to: 201 Ann Street Suite 210 Hartford, CT 06103 Attention: President Telephone: (860) 527-5359 Telecopy: (860) 527-5920 with a copy to: Mintz Levin Cohn Ferris Glovsky and Popeo, P.C. 666 Third Avenue New York, NY 10017 Attention: Kenneth R. Koch, Esq. Telephone: (212) 935-3000 Telecopy: (212) 983-3115 (b) if to eLot: eLot, Inc. 301 Merritt Corporate Park Norwalk, CT 06851 Attention: Barbara Anderson, Esq. Telephone: (203) 840-8630 Telecopy: (203) 840-8639 with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Attention: Richard E. Farley, Esq. Telephone: (212) 701-3000 Telecopy: (212) 269-5420 SECTION 16. Amendments; Waivers. Except as otherwise provided herein, this Agreement may be amended, and compliance with any provision of this Agreement may be omitted or waived, only by the written agreement of MDI and eLot. -15- SECTION 17. Counterparts. This Agreement may be executed in any number of counterparts, each such counterpart shall be deemed to be an original instrument, and all such counterparts together shall constitute but one agreement. SECTION 18. Headings. The headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement. SECTION 19. Nouns and Pronouns. Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of names and pronouns shall include the plural and vice versa. SECTION 20. Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the substantive laws of the State of New York without regard to its principles of conflicts of laws. SECTION 21. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 22. Brokerage Fee. MDI and eLot each represent that, except for Venture Partners Capital, LLC (whose fees, commissions and expenses shall be paid solely by MDI), no broker has been involved in this transaction and each party agrees to indemnify and hold the others harmless from payment of any brokerage fee, finder's fee or commission claimed by any party who claims to have been involved because of association with such party. [Signature Pages Follow] -16- IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. 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 EX-2 3 0003.txt WARRANT TO PURCHASE NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THE WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NEITHER THIS WARRANT NOR SUCH SHARES MAY BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS PROVIDED IN SECTION 4 OF THIS WARRANT. Issued as of November 1, 2000 Void after November 1, 2003 WARRANT TO PURCHASE 555,556 SHARES OF COMMON STOCK OF MDI Entertainment, Inc. (Incorporated under the Laws of the State of Delaware) THIS TO CERTIFY THAT eLot, Inc. or its permitted registered assigns (eLot, Inc. and such permitted assigns sometimes hereinafter being referred to as the "Holder") is entitled, subject to the terms and conditions set forth herein, and further subject to adjustment as hereinafter provided, to purchase from MDI Entertainment, Inc., a Delaware corporation (the "Company"), an aggregate of 555,556 fully paid and nonassessable shares (the "Underlying Shares") of the common stock of the Company, $.001 par value ("Common Stock"), upon payment of the purchase price of $3.50 per Underlying Share (the "Purchase Price"), and also is entitled to exercise the other appurtenant rights, powers and privileges hereinafter set forth at any time from and after 9:00 a.m. (Eastern Standard Time) on November 1, 2000, and on or before 5:00 p.m. (Eastern Standard Time), on November 1, 2003. This Warrant (the "Warrant") entitles the Holder hereof to purchase up to an aggregate of 555,556 shares of Common Stock, which right shall vest in full on November 1, 2000. THE TRANSFER OF THE WARRANT AND UNDERLYING SHARES IS RESTRICTED BY THE PROVISIONS OF SECTION 3 HEREOF. -2- 1. Exercise of Warrant. The Warrant may be exercised, in whole or in part, during the Exercise Period, by the Holder hereof by delivery to the Company at its principal office at 201 Ann Street, Suite 210, Hartford, CT 06103 of (a) a written notice by the Holder, in substantially the form of the Subscription Notice attached hereto as Exhibit "A", of such Holder's election to exercise the Warrant, which notice shall specify the number of Underlying Shares to be purchased, (b) a check payable to the Company in an amount equal to the aggregate Purchase Price of the number of Underlying Shares of Common Stock being purchased and (c) the Warrant. The Company shall, as soon as reasonably practicable, execute and deliver or cause to be delivered to the Holder, in accordance with such notice, one or more certificates representing the aggregate number of shares of Common Stock specified in such notice. The stock certificate(s) so delivered shall be issued in the name of the Holder or, with the consent of the Company, such other name as shall be designated in such notice. Such certificate(s) shall be deemed to have been issued and the Holder or any other person so designated to be named therein shall be deemed for all purposes to have become a Holder of record of such Underlying Shares as of the date such notice is received by the Company. If the Warrant shall have been exercised only in part, the Company shall, at the time of delivery of said certificate(s), deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the remaining shares of Common Stock called for by the Warrant (stated in Underlying Shares), which new Warrant shall in all other respects be identical to the Warrant or, at the request of the Holder, appropriate notation may be made on the Warrant and the same returned to the Holder. 2. Fractional Shares. The Warrant is only exercisable with respect to whole Underlying Shares and not fractions thereof unless the Company otherwise agrees. Accordingly, the Company shall not be required to issue certificates representing fractions of Underlying Shares upon any exercise of the Warrant; provided, however, in respect of any final fraction of a share, it may, at its sole option, in lieu of delivering a fractional share, make a payment in cash based upon the then fair market value of such fraction of the Underlying Shares. 3. Restriction on Exercise and Transfer of Warrants and Transfer of Common Stock. Except as otherwise provided herein, the Warrant and the certificates representing the Underlying Shares shall be stamped or otherwise imprinted with a legend substantially in the following form: "Neither the Warrant nor the shares of Common Stock issuable upon exercise of the Warrant have been registered under the Securities Act of 1933, as amended (the "Act"). Neither the Warrant nor such Shares may be sold, trans- -3- ferred, pledged or hypothecated except as provided in Section 3 of the Warrant to purchase Common Stock of the Company expiring November 1, 2003, a copy of which is on file at the principal office of the Company." The Warrant shall be exercisable (1) only if the issue of Underlying Shares issuable upon exercise is exempt from the requirements of registration under the Securities Act of 1933, as amended (the "Act") (or any similar statute then in effect), and any applicable state securities law or (2) upon registration of such Underlying Shares in compliance therewith. The Warrant shall be transferable only if the Warrant is registered or the transfer is exempt from the requirements of registration under the Act (or any similar statute then in effect) and any applicable state securities law. 4. Acknowledgment by the Holder of Restrictions. The Holder of the Warrant and the Underlying Shares, by acceptance hereof and thereof, acknowledges and agrees that: (a) the Warrant and the Underlying Shares have not been registered under the Act in reliance upon exemptions from the registration provisions of the Act set forth therein, or in the rules and regulations promulgated thereunder; and (b) the Warrant and the Underlying Shares will not be freely tradeable. The Holder represents that it fully understands the restrictions on his ability to transfer the Warrant and the Underlying Shares. Without limiting the foregoing and by way of illustration only, the Holder understands that if it presently desired to sell Underlying Shares pursuant to the exemption from the registration provisions of the Act contained in Rule 144 (the "Rule") promulgated under the Act, as presently constituted, such Underlying Shares might be sold by it pursuant to the Rule only after a minimum holding period of one (1) year (computed in accordance with the Rule) and, thereafter, only in the limited amounts, in the manner and under the limited circumstances prescribed by the Rule. 5. Adjustments. In the event that the outstanding Common Stock of the Company is hereafter changed by reason of reorganization, merger, consolidation, recapitalization, reclassification, stock split-up, combination of shares of Common Stock, stock dividends or the like, an appropriate adjustment shall be made by the Board of Directors in the aggregate number of Underlying Shares available under the Warrant and in the price per Underlying Share under the Warrant. If the Company shall be reorganized, consolidated or merged with another corporation, or if all or substantially all of the assets of the Company shall be sold or exchanged, the Holder of the Warrant shall, at the time of issuance of the stock under such corporate event, be entitled to receive upon the exercise of the Holder's Warrant the same number and kind of shares of stock or the same amount of property, cash or securities as the Holder would have been entitled to receive upon the happening of any such corporate event as if the Holder had -4- been, immediately prior to such event, the Holder of the number of Underlying Shares covered by the Holder's Warrant. Any adjustment in the number of Underlying Shares shall apply proportionately to only the unexercised portion of the Warrant granted hereunder. If a fraction of a share would result from any such adjustment, the adjustment shall be revised to the next lower whole number of Underlying Shares. 6. Reservation of Shares. The Company covenants and agrees that (a) so long as the Warrant is outstanding, it has or will reserve and keep available out of its authorized but unissued Common Stock, solely for the purpose of issuing Underlying Shares from time to time upon the exercise of the Warrant, an adequate number of shares of Common Stock for delivery at the times and in the manner provided herein upon exercise of the Warrant; (b) the Underlying Shares delivered upon exercise of the Warrant shall be validly issued and outstanding and fully paid and nonassessable shares of Common Stock, free from any preemptive rights; and (c) it will pay when due any and all Federal and state original issue taxes which may be payable with respect to the issuance of the Warrant or of any shares of Common Stock upon exercise of the Warrant. The Company shall not, however, be required (i) to pay any transfer tax which may be payable with respect to any transfer of the Warrant, the issuance of certificates of Common Stock in a name other than that of the Holder or any transfer of Underlying Shares or (ii) to pay any Federal or state income taxes of Holder which may occur as a result of the exercise of the Warrant or (iii) to issue or deliver the Warrant or any certificate for Underlying Shares until any such taxes shall have been paid by the Holder. 7. No Rights of Shareholders; Limitation of Liability. No Holder shall, based on being a holder of the Warrant, be entitled to vote or receive dividends or be deemed the holder of Common Stock or any other security of the Company which may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the Holder, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issue of stock, reclassification of stock, change to or of par value, consolidation, merger, conveyance or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until the Warrant shall have been exercised in accordance with Section 1 hereof. No provisions hereof, in the absence of affirmative action by the Holder hereof to purchase shares of Common Stock, and no mere enumeration herein of rights or privileges of the Holder hereof, shall give rise to any liability of such Holder for the purchase price or as a shareholder of the Company, whether such liability is asserted by the Company, creditors of the Company or others. -5- 8. Replacement of Securities. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of any certificates evidencing ownership of the Warrant and in the event of any such loss, theft or destruction upon delivery of an indemnity agreement or, if the Holder so elects, a surety bond reasonably satisfactory to the Company or, in the case of any such mutilation, upon surrender and cancellation of any such certificate, the Company shall forthwith execute and deliver in lieu thereof a new Warrant of like tenor. 9. Change; Waiver; Applicable Law. The Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against whom enforcement of such change, waiver, discharge or termination is sought. The Warrant shall be construed and enforced in accordance with the laws of the State of New York. 10. Notices. Any notice to be given to the Company under the terms hereof shall be addressed to the Company in care of its President at 201 Ann Street, Suite 210, Hartford, CT 06103, and any notice to the Holder shall be addressed to its address as reflected on the records of the Company, or at such other address as the Company, the Holder and its permitted successors or assigns may hereafter designate in writing to the other. Any such notice shall have been deemed given upon personal delivery or on the third business day after being enclosed in a properly sealed envelope or wrapper properly addressed, registered or certified and deposited (postage and registry or certification fee prepaid) in a post office or branch post office regularly maintained by the United States Government. 11. Form of Election to Exercise Warrant. The form to be used in the event the Holder hereof desires to exercise the Warrant is attached hereto as Exhibit "A". -6- IN WITNESS WHEREOF, the Company has caused the Warrant to be signed in its name by its President or a duly authorized Vice President. DATED: November 1, 2000 COMPANY: MDI Entertainment, Inc., a Delaware corporation By: /s/ Steven M. Saferin ------------------------------------- Name: Steven M. Saferin Title: President and Chief Executive Officer [CORPORATE SEAL] ATTEST: /s/ Kenneth M. Przysiecki - ---------------------------- HOLDER: eLOT, INC. By: /s/ Robert Daum ------------------------------------ Name: Robert Daum Title: Executive Vice President EXHIBIT A SUBSCRIPTION NOTICE The undersigned, the Holder of the foregoing Warrant, hereby elects to exercise purchase rights represented by such Warrant for, and to purchase thereunder, __________________________________ (_____________________) shares of the Common Stock covered by such Warrant and herewith makes payment in full therefor in the amount of __________________________________________ Dollars ($________________) in cash or check made payable to the Company, and requests that one or more certificates for such shares (and any securities or property deliverable upon such exercise) be issued in the name of and delivered to the undersigned, whose address is __________________________________ _________________________________. The undersigned agrees that, in the absence of an effective registration statement with respect to Common Stock issued upon the exercise, the undersigned is acquiring such Common Stock for investment and not with a view to distribution thereof and that the certificate or certificates representing such Common Stock may bear a legend substantially as follows: "Neither the Warrant nor the shares of Common Stock issuable upon exercise of the Warrant have been registered under the Securities Act of 1933, as amended (the "Act"). Neither the Warrant nor such shares may be sold, transferred, pledged or hypothecated in the absence of an effective registration statement for the shares under the Act or otherwise in compliance with the Act." DATED: ____________________ [HOLDER] By: ----------------------------------- Name: Title: Address: ------------------------------ ------------------------------ EX-3 4 0004.txt CERTIFICATE OF DESCRIP. AND DESIGNATION DESCRIPTION AND DESIGNATION OF SERIES B PREFERRED STOCK 1. Designation and Definitions. (a) Designation. A total of 444 shares of the Corporation's previously undesignated Preferred Stock, $.001 par value, shall be designated as the "Series B Preferred Stock." The original issue price per share of the Series B Preferred Stock shall be deemed to be $3,003 (the "Original Issue Price"). (b) Certain Definitions. As used herein, the following terms, unless the context otherwise requires, have the following respective meanings: (i) "Common Stock" means the common stock, par value $.001 per share, of the Corporation. (ii) "Conversion Date" means each date on which the Corporation receives by telecopy written notice in accordance with Section 5(g) hereof from a holder of Series B Preferred Stock that such holder elects to convert shares of its Series B Preferred Stock. (iii) "Issue Date" means, with respect to each share of Series B Preferred Stock held by any holder, the date on which the Corporation originally issued such share to a holder (regardless of the number of times transfer of such share is made on the stock transfer books maintained by or for the Corporation, and regardless of the number of certificates which may be issued to evidence such share, and irrespective of any subsequent transfer or other disposition of such share to any other holder). 2. Dividends. (a) The Series B Preferred Stock shall not bear any dividends. (b) If the Board of Directors shall declare any dividend or distribution payable upon the then outstanding shares of Common Stock, the holders of the Series B Preferred Stock shall be entitled to the amount of dividends and distributions on the Series B Preferred Stock as would be declared payable on the largest number of whole shares of Common Stock into which the shares of Series B Preferred Stock held by each holder thereof could be converted pursuant to the provisions of Section 5 hereof, such number determined as of the record date for the determination of holders of Common Stock entitled to receive such dividend. Such determination of "whole shares" shall be based upon the aggregate number of shares of Series B Preferred Stock held by each holder, and not upon each share of Series B Preferred Stock so held by the holder. -2- (c) Subject to the foregoing provisions of this Section 2, the Board of Directors may declare and the Corporation may pay or set apart for payment, or cause the accrual of, stated or cumulative dividends and other distributions on any other series of preferred stock hereafter designated, and may purchase or otherwise redeem any of the same (or any warrants, rights, options or other securities exercisable therefor or convertible or exchangeable thereinto), and the holders of Series B Preferred Stock shall not be entitled to share therein. 3. Liquidation, Dissolution Or Winding Up. (a) Treatment At Liquidation, Dissolution or Winding Up. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, or in the event of its insolvency, before any distribution or payment is made to any holders of Common Stock or any other class or series of capital stock of the Corporation designated to be junior to the Series B Preferred Stock, and subject to the liquidation rights and preferences of any class or series of Preferred Stock designated by the Board of Directors in the future to be senior ("Senior Stock") to or on a parity ("Pari Passu Stock") with the Series B Preferred Stock with respect to liquidation preferences, the holder of each share of Series B Preferred Stock shall be entitled to be paid first out of the assets of the Corporation available for distribution to holders of the Corporation's capital stock of all classes, whether such assets are capital, surplus or earnings, an amount equal to $2252.25 per share (the "Liquidation Value"). If, upon liquidation, dissolution or winding up of the Corporation, the assets of the Corporation available for distribution to its stockholders after appropriate deduction is made for payment in full of the liquidation preference of all Senior Stock shall be insufficient to pay the holders of the Series B Preferred Stock and any Pari Passu Stock the full amount to which they otherwise would be entitled, the holders of Series B Preferred Stock and any Pari Passu Stock shall share ratably in any distribution of available assets pro rata in proportion to the respective liquidation preference amounts which would otherwise be payable upon liquidation with respect to the outstanding shares of the Series B Preferred Stock and any Pari Passu Stock if all liquidation preference amounts with respect to such shares were paid in full, based upon the aggregate Liquidation Value payable upon all shares of Series B Preferred Stock and Pari Passu Stock then outstanding. After such payment shall have been made in full to the holders of the Senior Stock, Series B Preferred Stock and any Pari Passu Stock, or funds necessary for such payment shall have been set aside by the Corporation in trust for the account of holders of the Series B Preferred Stock so as to be available for such payment, the remaining assets available for distribution shall be distributed ratably among the holders of the Common Stock and any class or series of capital stock designated to be junior to the Series B Preferred Stock (if any) in right of payment upon any liquidation, dissolution or winding up of the Corporation. -3- The amounts set forth above shall be subject to equitable adjustment by the Board of Directors whenever there shall occur a stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event involving a change in the capital structure of the Series B Preferred Stock. (b) Distributions Other Than Cash. Whenever the distributions provided for in this Section shall be payable in property other than cash, the value of such distribution shall be the fair market value of such property as determined in good faith by the Board of Directors. All distributions (including distributions other than cash) made hereunder shall be made pro rata to the holders of Series B Preferred Stock. (c) Merger. If any merger or consolidation of the Corporation into or with another corporation shall occur and in such merger or consolidation, the Corporation's Common Stock shall be converted or exchanged into stock, securities or other property, the Series B Preferred Stock shall be converted into the same such stock, securities or property in an amount per share equal to the largest number of whole shares of Common Stock into which such holder's shares of Series B Preferred Stock could be converted on the date of such transaction. 4. Voting Power. (a) General. Except as otherwise expressly provided in this Section 4 or as otherwise required by the General Corporation Law of the State of Delaware, each holder of Series B Preferred Stock shall be entitled to vote on all matters and shall be entitled to that number of votes equal to the largest number of whole shares of Common Stock into which such holder's shares of Series B Preferred Stock could be converted, pursuant to the provisions of Section 5 hereof, at the record date for the determination of stockholders entitled to vote on any matter or, if no such record date is established, at the date such vote is taken or any written consent of stockholders is solicited. Except as otherwise expressly required by law, the holders of shares of Series B Preferred Stock and Common Stock shall vote together (or render written consents in lieu of a vote) as a single class on all matters submitted to the stockholders of the Corporation. Such determination of "whole shares" shall be based upon the aggregate number of shares of Series B Preferred Stock held by each holder, and not upon each share of Series B Preferred Stock so held by the holder. (b) Amendments To Charter. For so long as there are any shares of Series B Preferred Stock outstanding, the Corporation shall not amend its Certificate of Incorporation or this Certificate of Designation in any manner adverse to the holders of Series B Preferred Stock (including, without limitation, pursuant to or as a result of any merger, consolidation or otherwise) without the approval, by vote or written consent, of the holders of at least -4- a majority of the then outstanding shares of Series B Preferred Stock, voting together as a class, each share of Series B Preferred Stock to be entitled to one vote in each instance. Without limiting the generality of the foregoing, the creation, or increase in the authorized number of shares, of any class or series of stock ranking prior to or on a parity with the Series B Preferred Stock either as to dividends or upon liquidation shall be deemed not to adversely affect the rights of the holders of Series B Preferred Stock for purposes of this Section 4(b). 5. Conversion Rights. (a) Conversion. Each holder of Series B Preferred Stock shall have the right, at such holder's option, to convert at any time any of the shares of Series B Preferred Stock held by such holder into such number of fully paid and nonassessable shares of Common Stock as shall be determined by multiplying the number of shares of Series B Preferred Stock to be converted by the Conversion Ratio (as defined below). (b) Conversion Ratio. The conversion ratio (the "Conversion Ratio") shall initially be 1001. The initial Conversion Price shall be subject to adjustment, in order to adjust the number of shares of Common Stock into which the Series B Preferred Stock is convertible, as hereinafter provided. (c) Automatic Conversion. Each share of Series B Preferred Stock shall automatically be converted into shares of Common Stock at the then effective Conversion Price on the first anniversary of the Issue Date. (d) Adjustment for Subdivisions, Combinations or Consolidations of Common Stock. In the event of a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), the Conversion Ratio in effect immediately prior to the record date or effectiveness, as the case may be, of such subdivision shall, concurrently with such record date or effectiveness, be proportionately increased. In the event the outstanding shares of Common Stock shall be combined or consolidated (by reclassification or otherwise) into a lesser number of shares of Common Stock, the Conversion Ratio in effect immediately prior to such combination or consolidation shall, concurrently with the effectiveness of such combination or consolidation, be proportionately decreased. (e) Adjustment For Reclassification, Exchange, or Substitution. In the event that at any time or from time to time after the Issue Date, the Common Stock issuable upon the conversion of the Series B Preferred Stock shall be changed into the same or a different number of shares of any class or classes of stock, whether by capital reorganization, reclassification, or otherwise (other than a subdivision or combination of shares provided for above or stock dividend, or a merger, consolidation, or sale of assets provided for below), then and in each such event the holder of each such share of Series B Preferred Stock shall have the right thereafter to convert such share into the kind and amount of shares of stock and other -5- securities and property receivable upon such reorganization, reclassification, or other change, by a holder of the number of shares of Common Stock into which such share of Series B Preferred Stock might have been converted immediately prior to such reorganization, reclassification or change, all subject to further adjustment as provided herein. (f) Certificate As To Adjustments; Notice By Corporation. In each case of an adjustment or readjustment of the Conversion Ratio, the Corporation at its expense will furnish each holder of Series B Preferred Stock so affected with a certificate prepared by an officer of the Corporation, showing such adjustment or readjustment, and stating in detail the facts upon which such adjustment or readjustment is based. (g) Exercise of Conversion Privilege. To exercise its conversion privilege, a holder of Series B Preferred Stock shall give written notice by telecopy to the Corporation at its principal office that such holder elects to convert shares of its Series B Preferred Stock and shall thereafter surrender the original certificate(s) representing the shares being converted to the Corporation at its principal office together with an originally executed copy of such notice. Such notice shall also state the name or names (with its address or addresses, as well as the address(es) for delivery) in which the certificate(s) for shares of Common Stock issuable upon such conversion shall be issued. The certificate(s) for the shares of Series B Preferred Stock surrendered for conversion shall be accompanied by proper assignment thereof to the Corporation or in blank. As promptly as practicable after the Corporation receives the original certificate(s) for the shares of Series B Preferred Stock surrendered for conversion, the proper assignment thereof to the Corporation or in blank and the original notice of conversion (collectively, the "Original Documentation"), but in no event more than three (3) business days after the Corporation's receipt of the Original Documentation, the Corporation shall issue and shall deliver to the holder of the shares of Series B Preferred Stock being converted, at the addresses set forth therefor by the holder, such certificate(s) as it may request for the number of whole shares of Common Stock issuable upon the conversion of such shares of Series B Preferred Stock in accordance with the provisions of this Section 5, and cash, as provided in Section 5(h), in respect of any fraction of a share of Common Stock issuable upon such conversion. Such conversion shall be deemed to have been effected immediately prior to the close of business on the Conversion Date, and at such time the rights of the holder as holder of the converted shares of Series B Preferred Stock shall cease and the person(s) in whose name(s) any certificate(s) for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holder(s) of record of the shares of Common Stock represented thereby. (h) Cash In Lieu of Fractional Shares. No fractional shares of Common Stock or scrip representing fractional shares shall be issued upon the conversion of shares of Series B Preferred Stock. Instead of any fractional shares of Common Stock that would otherwise be issuable upon conversion of Series B Preferred Stock, the Corporation shall pay to -6- the holder of the shares of Series B Preferred Stock being converted a cash adjustment in respect of such fractional shares in an amount equal to the same fraction of the market price per share of the Common Stock (as determined in a reasonable manner prescribed by the Board of Directors) at the close of business on the Conversion Date. The determination as to whether or not any fractional shares are issuable shall be based upon the aggregate number of shares of Series B Preferred Stock being converted at any one time by any holder thereof, not upon each share of Series B Preferred Stock being converted. (i) Partial Conversion. In the event some but not all of the shares of Series B Preferred Stock represented by a certificate(s) surrendered by a holder are converted, the Corporation shall execute and deliver to or on the order of the holder, at the expense of the Corporation, a new certificate representing the number of shares of Series B Preferred Stock which were not converted. Such new certificate shall be so delivered on or prior to the date set forth in Section 5(h) for the delivery of certificates for shares of Common Stock. (j) Reservation of Common Stock. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series B Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series B Preferred Stock (including any shares of Series B Preferred Stock represented by any warrants, options, subscription or purchase rights for the Series B Preferred Stock), and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series B Preferred Stock (including any shares of Series B Preferred Stock represented by any warrants, options, subscriptions or purchase rights for the Series B Preferred Stock), then the Corporation shall be deemed to be in breach and default of its obligations hereunder, and in addition to all charges, claims and rights at law or in equity that each holder shall be entitled to, the Corporation shall use all means reasonably available to it, and promptly take any and all actions as may be necessary, to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose. 6. Redemption and Repurchase Rights. The Corporation shall have no right to redeem, and holders of shares of Series B Preferred Stock shall have no right to cause the Corporation to redeem, any or all of the outstanding shares of Series B Preferred Stock. 7. Notices of Record Date. In the event of any: (a) taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of capital stock of any class or any other securities or property, or to receive any other right, or -7- (b) capital reorganization of the Corporation, any reclassification or recapitalization of the capital stock of the Corporation, any merger or consolidation of the Corporation, or any transfer of all or substantially all of the assets of the Corporation to any other Corporation, or any other entity or person, or (c) voluntary or involuntary dissolution, liquidation or winding up of the Corporation, then and in each such event the Corporation shall telecopy and thereafter mail or cause to be mailed to each holder of Series B Preferred Stock a notice specifying (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right and a description of such dividend, distribution or right, (ii) the date on which any such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding up is expected to become effective, and (iii) the time, if any, that is to be fixed, as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding up. Such notice shall be telecopied and thereafter mailed by first class mail, postage prepaid, or by express overnight courier service, at least ten (10) days prior to the date specified in such notice on which such action is to be taken. 8. General. (a) Replacement of Certificates. Upon the Corporation's receipt, from the holder of any certificate evidencing shares of Series B Preferred Stock, of evidence reasonably satisfactory to the Corporation (an affidavit of such holder will be satisfactory) of the ownership and the loss, theft, destruction or mutilation of such certificate, and in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Corporation, and in the case of any such mutilation, upon surrender of such certificate, the Corporation (at its expense) shall execute and deliver to such holder, in lieu of such certificate, a new certificate that represents the number of shares represented by, is dated the date of, is issued in the name of the holder of, and is substantially identical in form of, such lost, stolen, destroyed or mutilated certificate. (b) Payment of Taxes. The Corporation shall pay all taxes (other than taxes based upon income) and other governmental charges that may be imposed in connection with the issuance or delivery of any shares of Common Stock (or other of the Corporation's securities) that results from the conversion of shares of Series B Preferred Stock pursuant to this Certificate of Designation. Notwithstanding the foregoing, if the Corporation, pursuant to a notice from a holder of any shares of Series B Preferred Stock, effects the issuance or delivery of any shares of Common Stock (or other of the Corporation's securities) in any name(s) -8- other than such holder's name, then such holder shall deliver to the Corporation with the aforesaid notice (A) all transfer taxes and other governmental charges payable upon the issuance or delivery of securities in such other name(s) or (B) evidence satisfactory to the Corporation that such taxes and charges have been or shall be paid in full. (c) Status of Converted Shares. Shares of Series B Preferred Stock that are converted or otherwise acquired by the Corporation in any manner (including by purchase or exchange) shall be canceled and upon cancellation (i) shall no longer be deemed to be outstanding, (ii) shall become authorized but unissued shares of preferred stock undesignated as to series and (iii) may be reissued as part of another series of preferred stock. (d) Waiver. Any provision of the Certificate of Designations may be amended and observance thereof may be waived only with the written consent of the holders of not less than fifty-one percent (51%) of the outstanding shares of the Series B Preferred Stock. EX-4 5 0005.txt REGISTRATION RIGHTS AGREE. - MDI & ELOT 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: SECTION 1 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. SECTION 2 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 -2- 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; -3- (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; and (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. (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 -4- shall not be required under Section 2.2 to include any of the Holder's 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 -5- 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, -6- 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. -7- 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. SECTION 3 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 section any material consideration which is not -8- shared with each other seller in proportion to the number of shares of Common Stock sold by each. SECTION 4 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 between 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 Page Follows] -9- 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 -10- EX-5 6 0006.txt REGISTRATION RIGHTS AGREE. - ELOT & MDI 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: SECTION 1 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. SECTION 2 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 earlier 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 it may reasonably request in order to facilitate the disposition of Shares owned by it; (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; and (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 mis- -2- leading, 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 a material fact required to be stated 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 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 -3- 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. (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 or 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 -4- 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. Potential Material Event. 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 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 in 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 to the registration statement covering the Shares until such Holder's receipt of the copies of a supplemented or amended prospectus. -5- SECTION 3 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 between 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. 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 Page Follows] -6- 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 -7- EX-6 7 0007.txt STRATEGIC ALLIANCE AGREEMENT STRATEGIC ALLIANCE AGREEMENT THIS STRATEGIC ALLIANCE AGREEMENT (this "Agreement") is executed as of the 1st day of November, 2000, by and between MDI ENTERTAINMENT, INC., a Delaware corporation ("MDI"), and ELOT, INC., a Virginia corporation ("ELOT"). WITNESSETH: WHEREAS, MDI is engaged primarily in the business of securing the rights to and developing innovative and entertaining games and promotions for use in conjunction with lottery games (the "MDI Business"); WHEREAS, ELOT is engaged primarily in the business of providing a full range of Internet services and support services to legally licensed lotteries providing promotional games and related services and providing a variety of lottery information to the general public (the "ELOT Business"); WHEREAS, to further expand both the MDI Business and the ELOT Business to the general public, ELOT and MDI desire to form a strategic alliance (the "Alliance"); and WHEREAS, the Alliance shall provide that MDI will, on the terms and subject to the conditions hereinafter set forth, market the Products (as defined in Section 2 herein) to MDI's Customers (as defined in Section 2 herein) and others in the lottery industry in consideration of the payments to be made by ELOT to MDI as hereinafter set forth. NOW, THEREFORE, in consideration of the promises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto mutually agree as follows: 1. Recitals. The recitals are hereby incorporated into this Agreement and made a part hereof. 2. Scope of Duties. ELOT desires to utilize, and MDI desires to provide, MDI's marketing and sales force to market, on a non-exclusive basis, license and sell ELOT products and deliverables as described in Exhibit 1 attached hereto and made a part hereof and as such Exhibit is updated from time to time (the "Products") to MDI's Customers (as defined below). MDI shall use commercially reasonable efforts to market and sell the Products to its customers, which consist of the government-operated lotteries throughout the world ("MDI's Customers"). Additionally, MDI shall, to the extent required to perform its obligations under this Agreement, act as a liaison between ELOT and MDI's Customers. The terms of this Agreement shall be limited to the Products set forth in Exhibit 1 and shall not include any products it may market for itself, for Scientific Games or its parent, Autotote, or any other party. The terms of this Agreement shall specifically not include the marketing of Internet lottery games to MDI Customers and others. 3. Term. Subject to the provisions of termination as hereinafter provided, the term of this Agreement shall commence on October 20, 2000 and terminate on October 19, 2005; provided, however, that this Agreement shall automatically be renewed for successive one (1) year terms thereafter, unless either party gives the other notice to terminate the Agreement at the expiration of any term at least ninety (90) days prior to the expiration of said term. 4. Training/Literature. MDI and ELOT shall, to the extent required for each party to successfully perform its obligations hereunder, establish a training program to familiarize MDI's employees with the Products. Such training program shall be rendered at ELOT's expense in Norwalk or Hartford, Connecticut, or at such other location as the parties mutually agree. ELOT shall provide MDI and its employees, at ELOT's expense, with sufficient literature and samples of the Products to enable MDI to perform its obligations hereunder. 5. Commissions and Incentive Program. 5.1. Commissions. For the sale or license of Products and their related intellectual property rights to MDI's Customers or others in the lottery industry during each year of the term of this Agreement, per Customer, MDI shall be paid a commission according to the schedule contained in Exhibit 2. 5.2. Payment of Commissions. At such time as MDI reaches agreement for or as to the sale of a Product, MDI will promptly provide ELOT with a term sheet describing such sale. ELOT will be responsible for providing the necessary contract for the sale of the Product, and MDI and ELOT will mutually determine whether the contracting party shall be MDI or ELOT. If the contracting party is ELOT, ELOT shall pay MDI its commission. If the contracting party is MDI (whether under a new or existing contract), MDI shall retain its pro rata commission, if applicable, from the revenues and remit the balance to ELOT. ELOT shall maintain books and records for the foregoing receivables and payables, and ELOT shall notify MDI on a monthly basis of the account balances for each customer. This information shall be provided to MDI by the fifth working day of each month or as otherwise agreed by both parties. If any commissions are paid in ELOT stock, ELOT agrees to immediately register these shares for sale. 5.3. MDI's Incentive Program. MDI agrees to establish an incentive program which, among other things, provides for MDI's sales employees to receive an incentive bonus for each sale of the Products. Such incentive program shall be designed to motivate MDI's sales force to market, sell and promote the Products. MDI shall set the incentives in its sole discretion and nothing herein shall prohibit MDI from offering other incentive programs to its employees unrelated to ELOT. -2- 6. Customer Contracts/Pricing. 6.1. Customer Contacts. Within thirty (30) days of the commencement date of this Agreement, ELOT shall provide MDI with a report on the status of its contacts with MDI's Customers for the sale of Products. MDI shall use commercially reasonable efforts to keep ELOT informed of its contacts with MDI's Customers regarding the Products and invite ELOT to participate in meetings and presentations when the Products are discussed. 6.2. Reports/Updates. ELOT shall provide MDI with monthly updates setting forth any changes to the Products offered by ELOT. MDI shall provide ELOT with quarterly reports setting forth the marketing activities of MDI's employees, the Products sold by MDI and the terms of such sales. ELOT shall provide to MDI new marketing materials and training updates on all products. 7. Customers/Confidential Information. 7.1. Customers. Upon termination or expiration of this Agreement, ELOT may continue to sell the Products to MDI's Customers without having to pay any commission to MDI for Customer contracts entered into from and after the date of termination or expiration. All customer contracts entered into prior to the date of termination or expiration, and any non-competitive renewals or extensions of such contracts, shall be subject to payment of commissions. 7.2. Confidential Information. All confidential or proprietary pricing and customer information provided by either party to the other shall remain strictly confidential. Neither party shall sell, rent, transmit or otherwise give access to such information to any third person, except to their personnel, for the purposes of carrying out this Agreement or with the other party's written consent. The provisions of this paragraph shall not apply to information of either party which is (a) in the public domain; (b) already known to the party to whom it is disclosed at the time of such disclosure as documented by records in its possession prior to such disclosure; (c) subsequently received by the party in good faith from a third party having prior right to make such subsequent disclosure; (d) independently developed by the party without use of the information disclosed pursuant to this Agreement; (e) approved in writing for unrestricted release or unrestricted disclosure by the party owning or disclosing the information; or (f) produced or disclosed pursuant to applicable laws, regulations or court order. 8. Termination. This Agreement shall terminate immediately upon the occurrence of any of the following events: (i) the breach by either party of any material term of this Agreement, and the breaching party has failed to cure such breach following thirty (30) days' written notice thereof from the non-breaching party; -3- (ii) the appointment of a receiver or trustee to manage the assets of either party; (iii) the assignment for the benefit of creditors of the assets of either party; or (iv) the occurrence of any act of bankruptcy by either party. 9. General. 9.1. Force Majeure. Neither party shall be considered in default of this Agreement if the fulfillment of all or part of its obligations are delayed or prevented due to "force majeure." "Force majeure" is an external unforeseeable and irresistible event, making it absolutely impossible to fulfill an obligation. 9.2. Severability. If any section, paragraph or provision (in all or in part) in this Agreement is held invalid or unenforceable, it shall not, in any way, have any effect on any other section, paragraph or provision in this Agreement, nor on the remaining section, paragraph or provision unless otherwise clearly provided for under this Agreement. 9.3. Notices. Any notice intended for either party is deemed to be validly given if it is done in writing and sent certified mail, return receipt requested, or by courier service to such party's address as stated in this Agreement, or to any other address that the concerned party may have notified in writing to the other party in accordance with the provisions hereof. If to ELOT: ELottery, Inc. 301 Merritt 7 Corporate Park Norwalk, CT 06851 Telecopy Number: (203) 840-8639 Attention: Ed McGuinn, President & CEO With a copy to: Cahill, Gordon & Reindel 80 Pine Street New York, NY 10005 Telecopy Number: (212) 269-5420 Attention: Richard E. Farley, Esquire If to MDI: MDI Entertainment, Inc. 201 Ann Street Hartford, Connecticut 06103 Telecopy Number: (860) 527-5920 Attention: Mr. Steven M. Saferin, President and CEO -4- With a copy to: Mintz Levin Cohen Ferris Glovsky and Popeo, P.C. Chrysler Center, 666 Third Avenue New York, NY 10017 Telecopy Number: (212) 983-3115 Attention: Kenneth Koch 9.4. Headings. The headings in this Agreement are used only for reference and convenience purposes; they do not modify in any manner the significance or the object of the provisions they designate. 9.5. Schedules. Whenever the Exhibits, including updates, of this Agreement are duly initialed by both MDI and ELOT, such Exhibits shall be considered as an integral part of the Agreement. 9.6. Entire Agreement. This Agreement constitutes the entire agreement entered into between the parties concerning the subject matter hereof. Declarations, representations, promises or conditions other than those stated in this Agreement shall not be construed in any way as to contradict, modify or affect the provisions of this Agreement. 9.7. Amendment. This Agreement cannot be amended or modified except by another written document duly signed by both parties hereto. 9.8. Non-Transfer. Neither of the parties shall assign, transfer nor convey, in any way, its rights in this Agreement to any third party without first obtaining the written consent of the other. 9.9. Jurisdiction. This Agreement shall be construed in accordance with the laws of the State of New York, and any action brought in regard to this contract or matters arising as a result of this contract are exclusively within the jurisdiction of the State of New York. MDI and ELOT each represents to the other that it is qualified to do business in the State of New York and is amenable to service of process in the State of New York. 9.10. Waiver. The failure of any party at any time to require performance of any provision of this Agreement shall in no manner affect the right of that party at a later time to enforce that or any other provision. No waiver by any party of any condition or of any breach of any term, covenant, representation or warranty contained in this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of that or any other condition or breach. All waivers must be in writing. 9.11. Counterparts. This Agreement may be executed in counterparts, each of which when so executed shall be deemed to be an original and all of which shall together constitute one document. -5- IN WITNESS WHEREOF, the parties hereunder have duly caused this Agreement to be executed as of the day and year first above written. MDI ENTERTAINMENT, INC. ELOT, INC. By: /s/ Steven M. Saferin By: /s/ Edward McGuinn ----------------------------------- ------------------ Steven M. Saferin, President & CEO Edward McGuinn, President & CEO Date: November 1, 2000 Date: November 1, 2000 -6- -----END PRIVACY-ENHANCED MESSAGE-----