**Exhibit4.16**

 

**SUBSCRIPTIONAGREEMENT**

 

**ThisSUBSCRIPTION AGREEMENT**(the **“SubscriptionAgreement”**) is made as of the date set forth on the signature pagebetween **MDUCOMMUNICATIONS INTERNATIONAL, INC.,**a Delaware corporation, with itsprincipal offices at 60-D Commerce Way, Totowa, New Jersey 07512  (including its two wholly-owned subsidiariesas more fully described below, the **“Company”**), and the undersigned subscriber(the**“Investor”**).

 

**WHEREAS**, the Company desires to sell on a “bestefforts-no minimum” basis up to twenty-two (22) Units (the **“Units”**), each unitconsisting of 100,000 shares of the Company’s Common Stock, $.001 par value(the **“CommonStock”**), and 50,000 three-year warrants to purchase Common Stock at$1.75 per share, subject to adjustment (the **“Warrants”)** in a privateplacement (the **“Private Placement”**) to be conducted by the Company, the termsof which are set forth in a Confidential Term Sheet dated November 14,2003, including all exhibits and attachments thereto (the **“Memorandum”**).

 

**WHEREAS,**the Company is offering the Units pursuant toRule 506 of Regulation D promulgated under the Securities Act of 1933, asamended (“**SecuritiesAct**”), to “accredited investors” only, as such term is defined inRule 501(a) of said Regulation D.

 

**NOW, THEREFORE**, for and in consideration of the premises andthe mutual covenants hereinafter set forth, the parties hereto do hereby agreeas follows:

 

**SECTION 1**

**SUBSCRIPTIONFOR UNITS**

 

1.1**                                 Subscription.**  The Investor, intending to be legally bound,hereby subscribes for and agrees to purchase the number of Units set forth uponthe signature page hereof, at a purchase price of $150,000 per Unit, on theterms and conditions described herein and in the Memorandum and the Companyagrees to sell such Units to the Investor, upon such terms and conditions.

 

1.2                                     **Purchase.**

 

(a)                                  The Investor hereby tenders a check made payableto the order of **“MDU Communications International, Inc.”**in the amount setforth on the signature page hereof, or provides such funds by wire transfer pursuantto the wire instructions contained on the signature page hereof.

 

(b)                                 The Investor also tenders herewith a completedcopy of this Subscription Agreement, including the Investor QualificationQuestionnaire and an executed signature page (included herewith).

 

(c)                                  All subscriptions for Units in the PrivatePlacement are irrevocable when delivered, subject to acceptance by the Companyand certain other conditions described in this Subscription Agreement and theMemorandum.  The Company has the rightto accept or reject any subscription, in whole or in part.  Funds relating to all subscriptions rejectedby the Company shall be returned promptly to the applicable subscriber, withoutinterest and without any deduction.

 

(d)                                 The Offering is on a “best efforts – no minimum”basis.  Subscription funds will bemaintained by the Company pending a determination to close on such funds. Theclosing (“**Closing**”)may be held at any time for any amount of the subscription funds prior to the

 

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terminationof the Private Placement. There is no minimum number of Units which must besold in order to conduct a Closing.

###### ** **

###### **SECTION 2**

**REPRESENTATIONS,WARRANTIES AND COVENANTS**

 

2.1**                                 Investor Representations, Warranties and Covenants.**  The Investor hereby acknowledges,represents, warrants or covenants, as the case may be, to the Company asfollows:

 

(a)                                  The Investor is an “accredited investor” as suchterm is defined in Rule 501 of Regulation D promulgated under the SecuritiesAct, as indicated by his response set forth in the Investor Questionnaireattached hereto, and that he is able to bear economic risk of an investment inthe Units.

 

(b)                                 The Investor has prior investment experience,including investment in non-listed and non-registered securities, or he hasemployed the services of an investment advisor, attorney or accountant to readall of the documents furnished or made available by the Company both to him andto all other prospective investors in the Units, including the documents filedwith the Securities and Exchange Commission (**“SEC”**) pursuant to theSecurities Act of 1934, as amended (the **“Exchange Act”**), and to evaluate the meritsand risks of such an investment on his behalf, and that he recognizes thehighly speculative nature of this investment.

 

(c)                                  The Investor acknowledges receipt and carefulreview of the Memorandum, including, but not limited to, the attachments andexhibits thereto, including the Company’s (i) Form 10-KSB for the fiscal yearended September 30, 2002 (“Form 10-KSB”), and (ii) Forms 10-QSB for thequarters ended December 31, 2002, March 31, 2003 and June 30,2003, and hereby represents that he has been furnished by the Company duringthe course of this transaction with all other information regarding the Companywhich he had requested or desired to know, that all documents which could bereasonably provided have been made available for his inspection and review,that he has been afforded the opportunity to ask questions of and receiveanswers from duly authorized officers or other representatives of the Companyconcerning the terms and conditions of the Private Placement, and anyadditional information which he had requested.

 

(d)                                 The Investor understands and recognizes that thepurchase of the Units is highly speculative and involves a high degree of riskand that only investors who can afford the loss of their entire investmentshould consider investing in the Company. The Investor understands all the risks of investing in the Company,including, without limitation, that (i) the Company has incurred losses of$2,988,035, $220,347, $487,753 and $641,124, for the fiscal year endedSeptember 30, 2002 and each of the quarters ended December 31, 2002,March 31, 2003 and June 30, 2003, respectively, and (ii) theCompany has received a “qualified” auditor’s opinion from each of itsindependent auditors, upon their review of the Company’s financial statementsfor each of the fiscal years ended September 30, 2001 and 2002 and thatsuch opinions raise doubt about the Company’s ability to continue as a goingconcern.   The Investor has alsoreviewed the risk factors contained in Part I of the Form 10-KSB.

 

(e)                                  The Investor acknowledges that the PrivatePlacement will be conducted on a “best efforts” basis, and that there is nominimum amount of Units which must be subscribed for in order to close anypurchase.  One or more Closings will beheld at such times as agreed to by the Company and the determination as to thetiming of Closing shall bear no relation to the aggregate amount of funds andcould be with respect to one or more subscriptions.   The Company may find it necessary to raise additional capital,of which there can be no assurance.

 

(f)                                    The Investor acknowledges the Memorandum has notbeen reviewed by the SEC or any state securities regulators.  The Investor represents that the Units arebeing purchased for his own account, for investment and not for distribution orresale to others.  The Investor agreesthat he will

 

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notsell or otherwise transfer such securities unless they are registered under theSecurities Act or unless an exemption from such registration is available.

 

(g)                                 The Investor understands that the Common Stockand Warrants comprising the Units and Common Stock underlying the Warrants (“**WarrantShares**”) have not been registered under the Securities Act by reasonof a claimed exemption under the provisions of the Securities Act whichdepends, in part, upon his investment intention.  In this connection, the Investor understands that it is theposition of the SEC that the statutory basis for such exemption would not bepresent if his representation merely meant that his present intention was tohold such securities for a short period, such as the capital tax gains periodof tax statutes, for a deferred sale, for a market rise, assuming that a marketexists, or for any other fixed period. The Investor realizes that, in the view of the SEC, a purchase now withan intent to resell would represent a purchase with an intent inconsistent withhis representation to the Company, and the SEC might regard such a sale ordisposition as a deferred sale to which such exemptions are not available.

 

(h)                                 The Investor understands that he may never beable to liquidate his investment in the Company.  Although the Company has undertaken to register under theSecurities Act the Common Stock comprising Units and the Warrant Shares, therecan be no assurance that such registration will ever be effective or remaineffective, or that there will be any liquidity with respect to the sale of suchsecurities, if and when registered.  TheInvestor understands that although the Company’s Common Stock is traded on theOTC Bulletin Board, there currently is a limited public market for suchsecurities.

 

(i)                                     The Investor understands that pending aneffective registration under the Securities Act, if any, the Common Stock andWarrants comprising the Units and the Warrant Shares (collectively, “**Securities**”)will be restricted securities as such term is defined under Rule 144 (**“Rule 144”**)promulgated under the Securities Act. Rule 144 requires, among other conditions, a one year holding periodprior to the resale (subject to certain volume limitations) of securitiesacquired in a non-public offering without having to satisfy the registrationrequirements of the Securities Act.  TheInvestor understands that the Company must be current with respect to thereporting requirements under the Exchange Act and its dissemination to thepublic of any current financial or other information concerning the Company, asrequired by Rule 144, as one of the conditions of its availability.  The Investor understands and herebyacknowledges that the Company is under no obligation to register the Securitiesunder the Securities Act, with the exception of certain registration rights setforth in Section 4 hereafter exclusively with respect to the Common Stockcomprising the Units and the Warrant Shares The Investor further understands that the Company may, if it desires,permit the transfer of the Securities out of his name only when his request fortransfer is accompanied by an opinion of counsel reasonably satisfactory to theCompany that the proposed transfer does not result in a violation of theSecurities Act or any applicable state “blue sky” laws.  The Investor agrees to hold the Company andits directors, officers and controlling persons and their respective heirs,representatives, successors and assigns harmless and to indemnify them againstall liabilities, costs and expenses incurred by them as a result of anymisrepresentation made by him contained herein or any sale or distribution bythe undersigned Investor in violation of any securities laws under theSecurities Act or under the securities laws of any state or other jurisdiction.

 

(j)                                     The Investor understands that the Company isrelying on the Investor’s representations herein and the information providedby the Investor in the Investor Questionnaire attached hereto.  Any information which the Investor hasheretofore furnished to the Company in the Investor Qualification Questionnaireor otherwise, including, without limitation, information with respect to hisfinancial position and business experience is correct and complete as of thedate of this Subscription Agreement, and if there should be any material changein such information prior to the Closing he will immediately furnish suchrevised or corrected information to the Placement Agent and Company**.**

 

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(k)                                  The Investor understands the tax consequences ofthis investment and that the contents of the Memorandum do not contain taxadvice or information. The Investor has had the opportunity to consult with theInvestor’s own legal, accounting, tax, investment and other advisors, who areunaffiliated with the Company or any affiliate or selling agent of the Company,with respect to the tax treatment of an investment by the Investor in theUnits.

 

(l)                                     If the Investor is a corporation, trust,partnership or other entity, it is authorized to purchase the Units and theperson signing this Subscription Agreement on behalf of such entity has beenduly authorized by such entity to do so.

 

(m)                               The Investor consents to the placement of a legend on any certificateor other documents evidencing the Securities substantially in the followingform:

 

**“THE SECURITIESREPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIESACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWSAND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVEREGISTRATION STATEMENT UNDER SUCH ACT OR SUCH LAWS OR AN EXEMPTION FROMREGISTRATION UNDER SUCH ACT AND SUCH LAWS WHICH, IN THE OPINION OF COUNSEL FORTHIS CORPORATION, IS AVAILABLE.”**

 

(n)                                 The address of the Investor furnished by him atthe end of this Subscription Agreement is the undersigned’s principal residenceif he is an individual or its principal business address if it is a corporationor other entity.

 

(o)                                 The Investor acknowledges that if he is aRegistered Representative of an NASD member firm, he must give such firm thenotice required by the NASD’s Rules of Fair Practice, receipt of which must beacknowledged by such firm on the signature page hereof.

 

(p)                                 Except as set forth in the Memorandum, norepresentations or warranties have been made to the Investor by the Company orany agent, employee or affiliate of the Company and in entering into thistransaction, the Investor is not relying on any information, other than thatcontained in the Memorandum and the results of independent investigation by theInvestor.

 

(q)                                 Such Investor either has a preexisting personalor business relationship with the Company or any of its partners, officers,directors or controlling persons, or by reason of such Investor’s business orfinancial experience or the business or financial experience of such Investor’sprofessional advisors, who are unaffiliated with and who are not compensated bythe Company, or any affiliate or selling agent of the Company, directly orindirectly, such Investor could be reasonably assumed to have the capacity toprotect such Investor’s own interests in connection with the transaction.

 

(r)                                    This Subscription Agreement constitutes thelegal, valid and binding agreement of the Investor, enforceable against theInvestor in accordance with its terms, except (i) as limited by applicablebankruptcy, insolvency, reorganization, moratorium and other laws of generalapplication affecting enforcement of creditors’ rights generally and by generalequitable principles, (ii) as limited by laws relating to the availability ofspecific performance, injunctive relief, or other equitable remedies, and (iii)to the extent any indemnification provisions contained in this SubscriptionAgreement may be limited by applicable Federal or state securities laws.

 

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(s)                                  If the Investor is not a United States person, ithas satisfied itself as to the full observance of the laws of its jurisdictionin connection with any invitation to subscribe for the Units or any use of thisAgreement, including (i) the legal requirements within its jurisdiction for thepurchase of the Units, Common Stock or Warrants, (ii) any foreign exchangerestrictions applicable to such purchase, (iii) any governmental or otherconsents that may need to be obtained, and (iv) the income tax and other taxconsequences, if any, that may be relevant to the purchase, holding,redemption, sale or transfer of the Units, Common Stock or Warrants.  Such Investor’s subscription and paymentfor, and his or her continued beneficial ownership of the Units, Common Stockor Warrants, will not violate any applicable securities or other laws of theInvestor’s jurisdiction.

 

(t)                                    The Investor also understands and agrees that,although the Company will use its best efforts to keep confidential theinformation provided herein, the Company may present the information providedherein to such parties as it deems advisable (a) if called upon to establisheither the availability under any Federal or state securities laws of anexemption from registration of the Private Placement or compliance with anyother legal requirement, or (b) if the contents hereof are relevant to anyissue in any action, investigation, suit or proceeding to which the Company isa party, is subject, or by which it is or may be bound.  Further, the Investor understands that thePrivate Placement may be reported to the SEC pursuant to the requirements ofapplicable Federal law and to various state securities or blue skycommissioners pursuant to applicable laws.

 

(u)                                 The foregoing acknowledgments, representations,warranties and covenants shall survive the Closing.

 

2.2**                                 Representations, Warranties and Covenants of theCompany.**  TheCompany hereby acknowledges, represents, warrants or covenants, as the case maybe, to the Investor as follows:

 

(a)                                  The Company and each of its subsidiaries is acorporation duly organized, validly existing, and in good standing under thelaws of the state of incorporation, with full power and authority, and allnecessary consents, authorizations, approvals, orders, licenses, certificates,and permits of and from, and declarations and filings with all Federal, state,local, foreign, and other governmental authorities and all courts and othertribunals, to own, lease, license and use their properties and assets, and tocarry on its business or proposed business as required, except where thefailure to have obtained any of the foregoing would not have a material adverseeffect on the business, property or financial condition of the Company, whentaken as a whole. The Company and each of its subsidiaries is duly licensed andqualified to do business and be in good standing in every jurisdiction in whichthe ownership, leasing, licensing or use of property and assets or the conductof its business or proposed business makes such qualification necessary, exceptwhere the failure to be so licensed or qualified would not have a materialadverse effect on the business, property or financial condition of the Company,when taken as a whole.  The Company hastwo wholly-owned subsidiaries, MDU Communications (USA) Inc. and MDUCommunications Inc.

 

(b)                                All corporate action on the part of the Company, its officers anddirectors necessary for the authorization, execution and delivery of thisSubscription Agreement, the performance of all obligations of the Companyhereunder at the Closing(s) and the authorization, issuance, sale and deliveryof the Units, Common Stock, Warrants and Warrant Shares has been taken or willbe taken prior to the Closing, and this Subscription Agreement constitutes thevalid and legally binding obligations of the Company, enforceable in accordancewith its terms except (i) as limited by applicable bankruptcy, insolvency,reorganization, moratorium and other laws of general application affectingenforcement of creditors’ rights generally and by general equitable principles,(ii) as limited by laws relating to the availability of specific performance,injunctive relief, or other equitable remedies and (iii) to the extent anyindemnification provisions contained in this Subscription

 

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Agreement may be limited byapplicable Federal or state securities laws.

 

(c)                                  As of the date hereof, the Company’s authorizedand outstanding capitalization is not materially different than that set forthin the Memorandum.  Each outstandingshare of the Company’s capital stock is duly authorized, validly issued, fullypaid and non-assessable and has not been issued and is not owned or held inviolation of any preemptive rights set forth in the Company’s Certificate ofIncorporation or any agreement to which the Company is a party.  There is no commitment, plan or arrangementto issue, and no outstanding option, warrant or other right calling for theissuance of, any share of capital stock of the Company which is not describedin the Memorandum and which, if not disclosed therein would cause theMemorandum to be inaccurate in any material respect.  There is outstanding no security or other instrument which by itsterms is convertible into, exercisable for or exchangeable for any class ofcapital stock of the Company which is not described in the Memorandum andwhich, if not disclosed therein would cause the Memorandum to be inaccurate inany material respect.

 

(d)                                 The Units, Common Stock, Warrants and WarrantShares conform in all material respects to all statements relating theretocontained in the Memorandum.  TheCompany as of the date of the Closing will have reserved a sufficient number ofshares of its Common Stock, including the shares of Common Stock issuable uponexercise of the Warrants, for the issuance to all investors in the PrivatePlacement and upon issuance of the Common Stock and payment therefor, suchshares of Common Stock will be duly and validly issued, fully paid, andnonassessable, and will be free of restrictions on transfer other thanrestrictions on transfer described or disclosed in the Memorandum and thisSubscription Agreement and under applicable Federal and state securities laws.

 

(e)                                  The Company is in material compliance with theSarbanes-Oxley Act of 2002 and all requirements under the Exchange Act.

 

(f)                                    Except as may otherwise be described or referredto in the Memorandum, as of the date of the Memorandum, the Company has not (i)in any material respect issued any securities, or incurred any liability orobligation, primary or contingent, for borrowed money; (ii) entered into anytransaction, except in the ordinary course of business, within the past twelve(12) months or which otherwise would be required to be disclosed in theMemorandum; or (iii) declared or paid any dividend or other distribution on itscapital stock.  The Company agrees, tothe extent material, to supplement the Memorandum to include informationrelating to (i) the issuance of any securities, or the incurrence of any materialliability or obligation, primary or contingent, for borrowed money, (ii) theCompany’s entering into any transaction, except in the ordinary course ofbusiness, or (iii) the declaration or payment of any dividend or otherdistribution on its capital stock, in the event of the occurrence of any suchtransactions from the date of the Memorandum until the date of the Closing (the**“ClosingDate”**).

 

(g)                                       No consent, approval, qualification, order orauthorization of, or filing with, any local, state, or Federal governmentalauthority is required on the part of the Company in connection with theCompany’s valid execution, delivery, or performance of this SubscriptionAgreement, the offer, sale or issuance of the Units, Common Stock, Warrants orCommon Stock underlying the Warrants, except such filings as have been madeprior to the Closing, and any notices of sale required to be filed with the SECunder Regulation D promulgated under the Securities Act, or such post-closingfilings as may be required under applicable state securities laws.

 

(h)                                 There is no material litigation, arbitration,governmental action, hearing or other proceeding (formal or informal) or claimor investigation pending against the Company or any subsidiary or, to the bestof the knowledge of the Company, threatened with respect to the Company,

 

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relatingto any of its operations, businesses or proposed businesses, properties orassets, (or to the best knowledge of the Company, any set of facts that wouldgive rise thereto) except as may be described or referred to in theMemorandum.  The Company is not inmaterial violation of any law, rule, regulation, order, judgment or decree,except as may be described in the Memorandum.

 

(i)                                     Except as described in the Memorandum, neither theCompany or any Subsidiary nor, to the knowledge of the Company, is any otherparty in violation or breach of or in default with respect to, complying withany material provision of any contract, agreement, instrument, lease, license,arrangement or understanding to which the Company or any subsidiary is a party,and each such contract, agreement, instrument, lease, license, arrangement andunderstanding is in full force and effect and is the legal, valid and bindingobligation of the Company or subsidiary, as the case may be, enforceable as tothe Company in accordance with its terms (subject to applicable bankruptcy,insolvency and other laws affecting the enforceability of creditors’ rightsgenerally and to general equitable principles. Except as described in the Memorandum, the Company and each subsidiaryhas good and marketable title to all properties and assets, owned by it, freeand clear of all liens, charges, encumbrances or restrictions, except such asare not materially significant or important in relation to the business of theCompany, when taken as a whole; all of the material leases and subleases underwhich the Company or any Subsidiary is the lessor or sublessor of properties orassets or under which the Company or any Subsidiary, as the case may be, holdsproperties or assets as lessee or sublessee are in full force and effect, andneither the Company nor any subsidiary, as the case may be, is in default inany material respect with respect to any of the terms or provisions of any ofsuch respective leases or subleases, and no material claim has been asserted byanyone adverse to rights of the Company, or any Subsidiary, as lessor,sublessor, lessee or sublessee under any of the leases or subleases mentionedabove, or affecting or questioning the right of the Company or any Subsidiaryto continued possession of the leased or subleased premises or assets under anysuch lease or sublease.  The Company isnot in violation or breach of, or in default with respect to, any term of itsCertificate of Incorporation or By-Laws.

 

(j)                                     The financial statements of the Company, togetherwith related notes and schedules, as set forth in the Memorandum, presentfairly in all material respects the financial position and the results ofoperations and cash flows of the Company, and at the indicated dates and forthe indicated periods.  Such financialstatements and related schedules have been prepared in accordance withgenerally accepted accounting principles, consistently applied throughout theperiods involved, except as disclosed therein, and all adjustments necessaryfor a fair presentation of results for such periods have been made.

 

(k)                                  Except as described in the Memorandum, since thedate of the most recent balance sheet contained in the Memorandum, the Companyhas not incurred any liabilities or obligations, direct or contingent, not inthe ordinary course of business, or entered into any transaction not in theordinary course of business, which is material to the business of the Companywhen taken as a whole, and there has not been any material change in thecapital stock of, or any incurrence of long-term debt by, the Company whentaken as a whole, or any material issuances of options, warrants or otherrights to purchase the capital stock of the Company, or any adverse change orany development involving, so far as the Company can now reasonably foresee, aprospective adverse change in the condition (financial or otherwise), networth, results of operations, business, key personnel or properties which wouldbe material to the business or financial condition of the Company when taken asa whole, and the Company has not become a party to, and neither the businessnor the property of the Company has become the subject of, any materiallitigation whether or not in the ordinary course of business.

 

(l)                                     The Memorandum delivered to the Investor, at alltimes during the period from the date of the Memorandum, as may be amended andsupplemented from time to time, to and including

 

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thelater of (i) the Closing Date, and (ii) the Termination Date (as defined inSection 3.1 hereafter), does not, and during such period will not, containany untrue statement of a material fact or omit to state any material factrequired to be stated therein or necessary to make the statements therein notmisleading, all in light of the circumstances under which they were made,except to the extent that the Memorandum has been amended and/or supplementedby the Company in a timely manner.

 

(m)                               The foregoing acknowledgments, representations, warranties andcovenants shall survive the Closing.

 

**SECTION 3**

##### **TERMS OF SUBSCRIPTION**

 

3.1**                                 Subscription**.  Thesubscription period will begin on November 14, 2003 (the “**CommencementDate**”) and shall continue until the earlier of: (i) the sale of allof the Units offered in the Memorandum, or (ii) sixty****(60)****days after the CommencementDate, unless extended, at the Company’s sole discretion, for up to anadditional thirty (30) days (the “**Termination Date**”). The Units will beoffered on a “best efforts-no minimum” basis, as more particularly set forth inthe Memorandum.  The minimumsubscription per subscriber shall be ($150,000); provided, however, that theCompany may, in its sole discretion, accept subscriptions for fractionalamounts.

 

3.2**                                 Delivery of Certificates**.  TheInvestor hereby authorizes and directs the Company to deliver the certificatesfor the Common Stock and the Warrants and, upon exercise of the Warrants, if atall, the Warrant Shares to be issued to such Investor pursuant to thisSubscription Agreement to the address indicated in the Investor QualificationQuestionnaire included herein.

 

**SECTION 4**

**REGISTRATIONRIGHTS**

 

4.1**                                 Definitions**.  For purposes of thisSection 4:

 

(a)                                  The terms **“register,”****“registered”** and **“registration”**refer to a registration effected by preparing and filing a registrationstatement or statements or similar documents in compliance with the SecuritiesAct and pursuant to Rule 415 under the Securities Act or any successor ruleproviding for offering securities on a continuous basis (**“Rule 415”**), and thedeclaration or ordering of effectiveness of such registration statement ordocument by the SEC.

 

(b)                                 The term **“Registrable Securities”** means (i) theCommon Stock comprising the Units and the Warrant Shares sold to the Investor(or any assignee thereof) and all other subscribers pursuant to the terms ofthe Memorandum and any securities issued or issuable in respect thereof inconnection with, among other things, a dividend, distribution or split,recapitalization, merger, consolidation, any reorganization or otherdistribution with respect to or in exchange for or in replacement of the CommonStock comprising the Units and Warrant Shares and (ii) any Common Stock issuedpursuant to the provisions of Section 4.2(b).

 

(c)                                  The term **“Registration Statement”** means anyregistration statement or comparable document of the Company under theSecurities Act through which a public sale or distribution of the Company’ssecurities may be registered (except a form exclusively for the sale ordistribution of securities in connection with an employee or consultant stockoption or purchase plan or for use exclusively in connection with a businesscombination), the prospectus contained therein and all amendments andsupplements to such Registration Statement, including post-effectiveamendments, all exhibits and all material incorporated by reference in suchRegistration Statement.

 

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4.2**                                 Shelf Registration**.

 

(a)                                  The Company shall use its best efforts to prepareand file a Registration Statement on Form SB-2 (“**Shelf Registration**”) with theSEC as soon as possible after the final closing of the Private Placement (“**FinalClosing Date**”) to provide for the offer and sale of the RegistrableSecurities and shall cause the Shelf Registration Statement to become effectiveunder the Act no later than one hundred and twenty (120) days after the FinalClosing Date (“**Effective Date**”).

 

(b)                                 In the event the Shelf Registration is notdeclared effective by the Effective Date, the Company shall promptly, but nolater than ten (10) days from the Effective Date, issue to each then holder ofthe Registrable Securities (“**Holder**”) a number of shares of Common Stockequal to ten percent (10%) of the sum of (x) the number of shares of CommonStock then held by the Holder and (y) the number of shares of Common Stockissuable upon exercise of the Warrants then held by the Holder (suchcalculation hereinafter referred to as the “**Penalty Formula**”).

 

4.3**                                 PiggybackRegistration.**   From and afterthe Final Closing Date and until such time as the Registrable Securities arefreely saleable under Rule 144 promulgated under the Securities Act withoutvolume limitations, if the Company shall determine to proceed with thepreparation and filing of a Registration Statement in connection with theproposed offer and sale of any of its securities by it or any of its securityholders (other than a registration statement on Form S-4, S-8 or otherlimited purpose form), the Company will give written notice of itsdetermination to all record holders of the Registrable Securities.  Upon receipt of a written request from anysuch holder within thirty (30) days after receipt of any such notice from theCompany, the Company will, except as herein provided, cause all the RegistrableSecurities owned by such holders to be included in such Registration Statement,all to the extent requisite to permit the sale or other disposition by theprospective seller or sellers of the Registrable Securities to be soregistered.  If any registrationpursuant to this Section 4.3 shall be underwritten in whole or in part,the Company may require that the Registrable Securities requested for inclusionpursuant to this Section 4.3 be included in the underwriting on the sameterms and conditions as the securities otherwise being sold through theunderwriters.  The obligation of theCompany under this Section 4.3 shall be unlimited as to the number ofRegistration Statements to which it applies.

 

4.4**                                 Registration Procedures**.  If andwhenever the Company is required by the provisions of Sections 4.2 or 4.3to effect the registration of Registrable Securities under the Securities Act,the Company will:

 

(a)                                  Use its best efforts to cause such a RegistrationStatement to become and remain effective (i) for a period of eighteen (18)months; provided, however, that any Registration Statement filed pursuant toSection 4.3 may be kept effective for such lesser period of time untilwhich all Registrable Securities included thereunder are freely salable(without restriction, except with regard to Registrable Securities held bypersons deemed to be “affiliates” of the Company) under Rule 144, ifapplicable.

 

(b)                                 prepare and file with the SEC such amendments tosuch Registration Statement and supplements to the prospectus contained thereinas may be necessary to keep such Registration Statement effective for theperiod of time described in paragraph (a) above;

 

(c)                                  furnish to the security holders participating insuch registration and to the underwriters of the securities being registeredsuch reasonable number of copies of such Registration Statement, preliminaryprospectus, final prospectus and such other documents as such underwriters may reasonablyrequest in order to facilitate the public offering of such securities;

 

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(d)                                 use its best efforts to register or qualify thesecurities covered by the Registration Statement under such state securities orblue sky laws of such jurisdictions as such participating holders mayreasonably request in writing within twenty (20) days following the originalfiling of such Registration Statement, except that the Company shall not forany purpose be required to execute a general consent to service of process orto qualify to do business as a foreign corporation in any jurisdiction whereinit is not so qualified;

 

(e)                                  in the event that a registration involves anunderwritten offering, enter into and perform its obligations under anunderwriting agreement, in usual and customary form, including, withoutlimitation, customary indemnification and contribution obligations, with themanaging underwriter or such offering;

 

(f)                                    notify the security holders participating in suchregistration, promptly after it shall receive notice thereof, of the time whenthe Registration Statement has become effective or a supplement to anyprospectus forming a part of the Registration Statement has been filed;

 

(g)                                 notify such holders promptly of any request bythe SEC for the amending or supplementing the Registration Statement orprospectus or for additional information;

 

(h)                                 prepare and file with the SEC, promptly upon therequest of any such holders, any amendments or supplements to the RegistrationStatement or prospectus which, in the opinion of counsel for such holders (andconcurred in by counsel for the Company), is required under the Securities Actor the rules and regulations thereunder in connection with the distribution of theRegistrable Shares;

 

(i)                                     prepare and promptly file with the SEC andpromptly notify such holders of the filing of such amendment or supplement tothe Registration Statement or prospectus as may be necessary to correct anystatements or omissions if, at the time when a prospectus relating to suchsecurities is required to be delivered under the Securities Act, any eventshall have occurred as the result of which any such prospectus or any otherprospectus as then in effect would include an untrue statement of a materialfact or omit to state any material fact necessary to make the statementstherein, in the light of the circumstances in which they were made, notmisleading;

 

(j)                                     advise such holders, promptly after it shallreceive notice or obtain knowledge thereof, of the issuance of any stop orderby the SEC suspending the effectiveness of the Registration Statement or theinitiation or threatening of any proceeding for that purpose and promptly useits best efforts to prevent the issuance of any stop order or to obtain itswithdrawal if such stop order should be issued;

 

(k)                                        at the request of holders of a majority of theRegistrable Securities included in the Registration Statement, furnish to theunderwriters on the date that the Registrable Securities are delivered tounderwriters for sale in connection with a registration pursuant to thisSection 4 (i) an opinion, dated such date, of the counsel representing theCompany for the purposes of such registration, in form and substance as iscustomarily given to underwriters in an underwritten public offering, addressedto the underwriters and (ii) a letter dated such date, from the independentcertified accountants of the Company, in form an substance as is customarilygiven by independent certified public accountants to underwriters in anunderwritten public offering, addressed to the underwriters;

 

(l)                                     make available for inspection by any underwritersparticipating in an offering covering Registrable Securities, and the counsel,accountants or other agents retained by any such underwriter, all pertinentfinancial and other records, corporate documents, and properties of the

 

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Company,and cause the Company’s officers, directors and employees to supply all informationreasonably requested by any such underwriters in connection with such offering;

 

(m)                               if the Common Stock is then listed on a national securities exchange,cause the Registrable Securities to be listed on such exchange, or if reportedon NASDAQ, to be reported on NASDAQ.  Ifthe Common Stock is not then listed on a national securities exchange orreported on NASDAQ, facilitate the reporting of the Registrable Securities onNASDAQ; and

 

(n)                                 provide a transfer agent and registrar, which maybe a single entity, for the Registrable Securities not later than the effectivedate of the Registration Statement in which Registrable Securities areincluded;

 

4.5**                                 Expenses**.  With respect to eachinclusion of Registrable Securities in a Registration Statement pursuant toSections 4.2 and 4.3 hereof, the fees, costs and expenses of registrationto be borne by the Company shall include, all registration, filing, and NASDfees; printing expenses, fees and disbursements of counsel and accountants forthe Company; all legal fees and disbursements and other expenses of complyingwith state securities or blue sky laws of any jurisdictions in which thesecurities to be offered are to be registered and qualified. Fees anddisbursements of counsel and accountants for the selling security holders shallbe borne by the selling security holders, and security holders participating insuch registration shall bear their pro rata share of the underwriting discountsand commissions and transfer taxes.

 

4.6**                                 Indemnification**.

 

(a)                                  TheCompany will indemnify and hold harmless each holder of Registrable Securitieswhich are included in a Registration Statement pursuant to the provisions ofSections 4.2 and 4.3 hereof, its directors and officers, and anyunderwriter (as defined in the Securities Act) for such holder and each person,if any, who controls such holder or such underwriter within the meaning of theSecurities Act, from and against, and will reimburse such holder and each suchunderwriter and controlling person with respect to, any and all loss, damage,liability, cost and expense to which such holder or any such underwriter orcontrolling person may become subject under the Securities Act or otherwise,insofar as such losses, damages, liabilities, costs or expenses are caused by anyuntrue statement or alleged untrue statement of any material fact contained ina Registration Statement, any prospectus contained therein or any amendment orsupplement thereto, or arise out of or are based upon the omission or allegedomission to state therein a material fact required to be stated therein ornecessary to make the statements therein, in light of the circumstances inwhich they were made, not misleading; provided, however, that the Company willnot be liable in any such case to the extent that any such loss, damage,liability, cost or expenses arises out of or is based upon an untrue statementor alleged untrue statement or omission or alleged omission so made inconformity with information furnished by such holder, such underwriter or suchcontrolling person in writing specifically for use in the preparation thereof.

 

(b)                                 Each holder of Registrable Securities included ina registration pursuant to the provisions of Sections 4.2 and 4.3 hereofwill indemnify and hold harmless the Company, its directors and officers, anycontrolling person and any underwriter from and against, and will reimburse theCompany, its directors and officers, any controlling person and any underwriterwith respect to, any and all loss, damage, liability, cost or expense to whichthe Company or any controlling person and/or any underwriter may become subjectunder the Securities Act or otherwise, insofar as such losses, damages,liabilities, costs or expenses are caused by any untrue statement or allegeduntrue statement of any material fact contained in the Registration Statement,any prospectus contained therein or any amendment or supplement thereto, orarise out of or are based upon the omission or alleged omission to statetherein a material fact required to be stated therein or necessary to make thestatements therein, in light of the circumstances in which they were made, not

 

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misleading,in each case to the extent, but only to the extent, that such untrue statementor alleged untrue statement or omission or alleged omission was so made inreliance upon and in strict conformity with written information furnished by oron behalf of such holder specifically for use in the preparation thereof andprovided further, that the maximum amount that may be recovered from any holdershall be limited to the amount of proceeds received by such holder from thesale of the Registrable Securities.

 

(c)                                  Promptly after receipt by an indemnified partyunder this Section 4.7 of a notice of the commencement of any action(including any governmental action) such indemnified party will, if a claim inrespect thereof is to be made against any indemnifying party hereunder, deliverto the indemnifying party a written notice of the commencement thereof.  The failure to deliver written notice to theindemnifying party within a reasonable time of the commencement of any suchaction shall relieve such indemnifying party of any liability to the indemnifiedparty under this Section 4.7 only to the extent prejudicial to its abilityto defend such action, but the omission so to deliver written notice to theindemnifying party will not relieve it of any liability that it may have to anindemnified party otherwise than under this Section 4.  The indemnifying party shall have the rightto participate in, and, to the extent the indemnifying party so desires,jointly with any other indemnifying party similarly noticed, to assume controlof the defense thereof with counsel mutually satisfactory to the parties; provided,however, that an indemnified party shall have the right to retain itsown counsel, with the reasonable fees and expenses to be paid by theindemnifying party, if in the reasonable determination of counsel for theindemnifying party, representation of such indemnified party by the counselobtained by the indemnifying party would be inappropriate due to actual orpotential differing interests between such indemnified party and any otherparty represented by such counsel in such proceeding.  After notice from the indemnifying party to such indemnifiedparty of its election so to assume the defense thereof, the indemnifying partywill not be liable to such indemnified party pursuant to the provisions ofparagraph (a) or (b) above for any legal or other expense subsequentlyincurred by such indemnified party in connection with the defense thereof otherthan reasonable costs of investigation, unless (i) the indemnified partyshall have employed counsel in accordance with the provisions of the precedingsentence, (ii) the indemnifying party shall not have employed counselreasonably satisfactory to the indemnified party to represent the indemnifiedparty within a reasonable time after the notice of the commencement of theaction or (iii) the indemnifying party has authorized the employment ofcounsel for the indemnified party at the expense of the indemnifying party.

 

4.7**                                 Contribution.**  To the extent any indemnification by anindemnifying party is prohibited or limited by law, the indemnifying party agreesto make the maximum contribution with respect to any amounts for which it wouldotherwise be liable under Section 4.6 hereof to the extent permitted bylaw, provided that (i) no contribution shall be made under circumstances wherethe maker would not have been liable for indemnification pursuant to theprovisions of Section 4.6 hereof, (ii) no seller of Registrable Securitiesguilty of fraudulent misrepresentation (within the meaning ofSection 11(f) of the Securities Act) shall be entitled to contributionfrom any seller of Registrable Securities who was not guilty of such fraudulentmisrepresentation, and (iii) contribution by any seller of RegistrableSecurities shall be limited to the net amount of proceeds received by suchseller from the sale of such Registrable Securities.

 

4.8                                 **Assignable Rights**.  The rights with respect tothe Registrable Securities under this Section 4 shall, in addition for thebenefit of the parties hereto, be for the benefit of and enforceable by antransferee of the Registrable Securities. The obligations of the Company contained in this Section 4 shall bebinding upon any successor to the Company and continue to be in effect withrespect to any securities issued by any successor to the Company insubstitution or exchange for any Registrable Securities.

 

4.9                                 **Reports Under Securities Exchange Act**.  With aview to making available to the holders of Registrable Securities the benefitsof SEC Rule 144 and any other rule or regulation of the SEC

 

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thatmay at any time permit the holders of the Registrable Securities to sellsecurities of the Parent to the public without registration, the Company agreesto:

 

(a)                                  makeand keep public information available, as those terms are understood anddefined in SEC Rule 144, at all times;

 

(b)                                 file with the SEC in a timely manner all reportsand other documents required of the Company under the Securities Act and theExchange Act; and

 

(c)                                  furnishto each holder of Registrable Securities, forthwith upon request (i) awritten statement by the Company that it has complied with the reportingrequirements of SEC Rule 144, the Securities Act and the Exchange Act, (ii) acopy of the most recent annual or quarterly report of the Company and suchother reports and documents so filed by the Company and (iii) such otherinformation as may be reasonably requested in availing the holders of anyRegistrable Securities of any rule or regulation of the SEC which permits theselling of any such securities without registration.

 

**SECTION 5**

**CONDITIONS FORCLOSING**

 

5.1**                                 Conditions of Investor’s Obligations at Closing.**  The obligations of the Investor under thisSubscription Agreement are subject to the Company’s fulfillment on or beforeClosing of each of the following conditions:

 

(a)                                  Representations and Warranties.  Therepresentations and warranties of the Company contained in Section 2.2shall be true on and as of the Closing with the same effect as though suchrepresentations and warranties had been made on and as of the date of suchClosing.

 

(b)                                 Performance.  The Company shall haveperformed and complied with all agreements, obligations and conditionscontained in this Subscription Agreement that are required to be performed orcomplied with by it on or before the Closing.

 

5.2**                                 Conditions of the Company’s Obligations atClosing**.  The obligations of the Company to theInvestor under this Subscription Agreement are subject to the Investor’sfulfillment on or before the Closing of each of the following conditions by theInvestor:

 

(a)                            Representations and Warranties.  The representations andwarranties of the Investor contained in Section 2.1 shall be true on andas of the Closing with the same effect as though such    representations and warranties had been made on and as of thedate of the Closing.

 

(b)                                 Payment of Purchase Price.  TheInvestor shall have delivered the purchase price and other documents requiredpursuant hereto.

 

# **SECTION 6**

**MISCELLANEOUS**

 

6.1**                                 Modification**.  Neitherthis Subscription Agreement nor any provisions hereof should be modified,discharged or terminated except by an instrument in writing signed by the partyagainst whom any waiver, change, discharge or termination is sought.

 

6.2**                                 Notices.**  Any notice, demand or other communicationwhich any party hereto may be required, or may elect, to give to anyoneinterested hereunder shall be sufficiently given if delivered

 

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personallyor by nationally recognized overnight courier service or sent by registered orcertified mail, return receipt requested, addressed to such address as may begiven herein.  Notices deliveredpersonally shall be effective upon receipt by the party to which it isaddressed.  Notices delivered byovernight courier service shall be effective the day after deposited with suchcourier service.  Notices delivered bymail shall be effective three (3) days after deposited with the United StatesPostal Service.

 

6.3**                                 Execution**.  By the execution of thesignature page attached hereto, the parties hereby agree to be bound by all ofthe terms and conditions of this Subscription Agreement, including, withoutlimitation, the registration rights contained herein.

 

6.4**                                 Counterparts**.  ThisSubscription Agreement may by executed through the use of separate signaturepages or in any number of counterparts, and each of such counterparts shall,for all purposes, constitute one agreement binding on all the parties,notwithstanding that all parties are not signatories to the same counterpart.

 

6.5**                                 Binding Effect**.  Exceptas otherwise provided herein, this Subscription Agreement shall be binding uponand inure to the benefit of the parties and their heirs executors,administrators, successors, legal representatives and assigns.  If the Investor is more than one person, theobligation of the Investor shall be joint and several and the agreements,representations, warranties and acknowledgments herein contained shall bedeemed to be made by and be binding upon each such person and his heirs,executors, administrators and successors.

 

6.6**                                 Entire Agreement.**  This instrument contains the entireagreement of the parties, and there are no representations, covenants or otheragreements except as stated or referred to herein.

 

6.7**                                 Assignability.**  This Subscription Agreement is nottransferable or assignable by the Investor.

 

6.8**                                 Applicable Law; Jurisdiction.**  This Subscription Agreement shall begoverned by and construed under the internal laws of the State of New Yorkwithout regard to conflict of law rules. The parties hereby submit to the exclusive jurisdiction of the courts ofthe State of New York located in New York County and the Federal courts locatedin the Southern District of New York, with respect to any action or legalproceeding commenced by either party with respect to this SubscriptionAgreement or the Shares.  Each partyirrevocably waives any objection it now has or hereafter may have respectingthe venue of any such action or proceeding or the inconvenience of such forum,and each party consents to the service of process in any such action orproceeding in the manner set forth for the delivery of notices herein.

 

6.9**                                 Waiver of Jury Trial**.  Theparties hereby waive their rights to a trial by jury in any action orproceeding involving any matter arising out of or relating to this SubscriptionAgreement or to the Shares.

 

**IN WITNESS WHEREOF,**the parties have executed this Subscription Agreement as of the acceptance dateby the Company indicated below:

 

*[signatures on followingpage]*

 

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|                                 |   |                                        |
|--------------------------------------|--------|---------------------------------------------|
| Signature of Subscriber              |   | Signature of  Co-Subscriber                 |
|                                 |   |                                        |
|                                 |   |                                        |
|                                 |   |                                        |
| Name of Subscriber                   |   | Name of Co-Subscriber                       |
| [please print]                       |   |                                        |
|                                 |   |                                        |
|                                 |   |                                        |
|                                 |   |                                        |
| Address of Subscriber                |   | Address of  Co-Subscriber                   |
|                                 |   |                                        |
|                                 |   |                                        |
|                                 |   |                                        |
| Social Security or Taxpayer          |   | Social Security or  Taxpayer Identification |
| Identification Number  of Subscriber |   | Number of Co-Subscriber                     |
|                                 |   |                                        |
|                                 |   |                                        |
|                                 |   | Subscription Accepted:                      |
| Number of Units  Subscribed          |   | MDU Communication  International, Inc.      |
| for at $75,000 per Unit              |   |                                        |
|                                 |   |                                        |
|                                 |   | By:                                         |   |
|                                 |   |                                        |   |
|                                 |   | Title:                                      |   |
| Total Subscription  Amount           |   | Date:                                       |   |
|                                      |        |                                             |  |  |

 

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***If Subscriber is a RegisteredRepresentativewith an NASD member firm, have the followingacknowledgement signed by the appropriate party:**

 

The undersigned NASDmember firm acknowledgesreceipt of the notice required by Rule 3050 of the NASDConduct Rules.

 
|                      |               |   |
|---------------------------|--------------------|--------|
| Name of NASD Member  Firm |               |
|                      |               |
|                      |               |
| By:                       |               |   |   |
|                      | Authorized Officer |   |   |

 

**Wire Instructions:**

 

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