Document:

Exhibit
4.16

 

SUBSCRIPTION
AGREEMENT

 

This
SUBSCRIPTION AGREEMENT
(the “Subscription
Agreement”) is made as of the date set forth on the signature page
between MDU
COMMUNICATIONS INTERNATIONAL, INC., a Delaware corporation, with its
principal offices at 60-D Commerce Way, Totowa, New Jersey 07512  (including its two wholly-owned subsidiaries
as more fully described below, the “Company”), and the undersigned subscriber
(the
“Investor”).

 

WHEREAS, the Company desires to sell on a “best
efforts-no minimum” basis up to twenty-two (22) Units (the “Units”), each unit
consisting of 100,000 shares of the Company’s Common Stock, $.001 par value
(the “Common
Stock”), and 50,000 three-year warrants to purchase Common Stock at
$1.75 per share, subject to adjustment (the “Warrants”) in a private
placement (the “Private Placement”) to be conducted by the Company, the terms
of 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 to
Rule 506 of Regulation D promulgated under the Securities Act of 1933, as
amended (“Securities
Act”), to “accredited investors” only, as such term is defined in
Rule 501(a) of said Regulation D.

 

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

 

SECTION 1

SUBSCRIPTION
FOR UNITS

 

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

 

1.2                                     Purchase.

 

(a)                                  The Investor hereby tenders a check made payable
to the order of “MDU Communications International, Inc.” in the amount set
forth on the signature page hereof, or provides such funds by wire transfer pursuant
to the wire instructions contained on the signature page hereof.

 

(b)                                 The Investor also tenders herewith a completed
copy of this Subscription Agreement, including the Investor Qualification
Questionnaire and an executed signature page (included herewith).

 

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

 

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

 

1

 

termination
of the Private Placement. There is no minimum number of Units which must be
sold 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 as
follows:

 

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

 

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

 

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

 

(d)                                 The Investor understands and recognizes that the
purchase of the Units is highly speculative and involves a high degree of risk
and that only investors who can afford the loss of their entire investment
should 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 ended
September 30, 2002 and each of the quarters ended December 31, 2002,
March 31, 2003 and June 30, 2003, respectively, and (ii) the
Company has received a “qualified” auditor’s opinion from each of its
independent auditors, upon their review of the Company’s financial statements
for each of the fiscal years ended September 30, 2001 and 2002 and that
such opinions raise doubt about the Company’s ability to continue as a going
concern.   The Investor has also
reviewed the risk factors contained in Part I of the Form 10-KSB.

 

(e)                                  The Investor acknowledges that the Private
Placement will be conducted on a “best efforts” basis, and that there is no
minimum amount of Units which must be subscribed for in order to close any
purchase.  One or more Closings will be
held at such times as agreed to by the Company and the determination as to the
timing of Closing shall bear no relation to the aggregate amount of funds and
could 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 not
been reviewed by the SEC or any state securities regulators.  The Investor represents that the Units are
being purchased for his own account, for investment and not for distribution or
resale to others.  The Investor agrees
that he will

 

2

 

not
sell or otherwise transfer such securities unless they are registered under the
Securities Act or unless an exemption from such registration is available.

 

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

 

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

 

(i)                                     The Investor understands that pending an
effective registration under the Securities Act, if any, the Common Stock and
Warrants 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 period
prior to the resale (subject to certain volume limitations) of securities
acquired in a non-public offering without having to satisfy the registration
requirements of the Securities Act.  The
Investor understands that the Company must be current with respect to the
reporting requirements under the Exchange Act and its dissemination to the
public of any current financial or other information concerning the Company, as
required by Rule 144, as one of the conditions of its availability.  The Investor understands and hereby
acknowledges that the Company is under no obligation to register the Securities
under the Securities Act, with the exception of certain registration rights set
forth in Section 4 hereafter exclusively with respect to the Common Stock
comprising 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 for
transfer is accompanied by an opinion of counsel reasonably satisfactory to the
Company that the proposed transfer does not result in a violation of the
Securities Act or any applicable state “blue sky” laws.  The Investor agrees to hold the Company and
its directors, officers and controlling persons and their respective heirs,
representatives, successors and assigns harmless and to indemnify them against
all liabilities, costs and expenses incurred by them as a result of any
misrepresentation made by him contained herein or any sale or distribution by
the undersigned Investor in violation of any securities laws under the
Securities Act or under the securities laws of any state or other jurisdiction.

 

(j)                                     The Investor understands that the Company is
relying on the Investor’s representations herein and the information provided
by the Investor in the Investor Questionnaire attached hereto.  Any information which the Investor has
heretofore furnished to the Company in the Investor Qualification Questionnaire
or otherwise, including, without limitation, information with respect to his
financial position and business experience is correct and complete as of the
date of this Subscription Agreement, and if there should be any material change
in such information prior to the Closing he will immediately furnish such
revised or corrected information to the Placement Agent and Company.

 

3

 

(k)                                  The Investor understands the tax consequences of
this investment and that the contents of the Memorandum do not contain tax
advice or information. The Investor has had the opportunity to consult with the
Investor’s own legal, accounting, tax, investment and other advisors, who are
unaffiliated 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 the
Units.

 

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

 

(m)                               The Investor consents to the placement of a legend on any certificate
or other documents evidencing the Securities substantially in the following
form:

 

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

 

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

 

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

 

(p)                                 Except as set forth in the Memorandum, no
representations or warranties have been made to the Investor by the Company or
any agent, employee or affiliate of the Company and in entering into this
transaction, the Investor is not relying on any information, other than that
contained in the Memorandum and the results of independent investigation by the
Investor.

 

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

 

(r)                                    This Subscription Agreement constitutes the
legal, valid and binding agreement of the Investor, enforceable against the
Investor in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement 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 any indemnification provisions contained in this Subscription
Agreement may be limited by applicable Federal or state securities laws.

 

4

 

(s)                                  If the Investor is not a United States person, it
has satisfied itself as to the full observance of the laws of its jurisdiction
in connection with any invitation to subscribe for the Units or any use of this
Agreement, including (i) the legal requirements within its jurisdiction for the
purchase of the Units, Common Stock or Warrants, (ii) any foreign exchange
restrictions applicable to such purchase, (iii) any governmental or other
consents that may need to be obtained, and (iv) the income tax and other tax
consequences, 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 payment
for, and his or her continued beneficial ownership of the Units, Common Stock
or Warrants, will not violate any applicable securities or other laws of the
Investor’s jurisdiction.

 

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

 

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

 

2.2                                 Representations, Warranties and Covenants of the
Company.  The
Company hereby acknowledges, represents, warrants or covenants, as the case may
be, to the Investor as follows:

 

(a)                                  The Company and each of its subsidiaries is a
corporation duly organized, validly existing, and in good standing under the
laws of the state of incorporation, with full power and authority, and all
necessary 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 other
tribunals, to own, lease, license and use their properties and assets, and to
carry on its business or proposed business as required, except where the
failure to have obtained any of the foregoing would not have a material adverse
effect on the business, property or financial condition of the Company, when
taken as a whole. The Company and each of its subsidiaries is duly licensed and
qualified to do business and be in good standing in every jurisdiction in which
the ownership, leasing, licensing or use of property and assets or the conduct
of its business or proposed business makes such qualification necessary, except
where the failure to be so licensed or qualified would not have a material
adverse effect on the business, property or financial condition of the Company,
when taken as a whole.  The Company has
two wholly-owned subsidiaries, MDU Communications (USA) Inc. and MDU
Communications Inc.

 

(b)                                All corporate action on the part of the Company, its officers and
directors necessary for the authorization, execution and delivery of this
Subscription Agreement, the performance of all obligations of the Company
hereunder at the Closing(s) and the authorization, issuance, sale and delivery
of the Units, Common Stock, Warrants and Warrant Shares has been taken or will
be taken prior to the Closing, and this Subscription Agreement constitutes the
valid and legally binding obligations of the Company, enforceable in accordance
with its terms except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement 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 any
indemnification provisions contained in this Subscription

 

5

 

Agreement may be limited by
applicable Federal or state securities laws.

 

(c)                                  As of the date hereof, the Company’s authorized
and outstanding capitalization is not materially different than that set forth
in the Memorandum.  Each outstanding
share of the Company’s capital stock is duly authorized, validly issued, fully
paid and non-assessable and has not been issued and is not owned or held in
violation of any preemptive rights set forth in the Company’s Certificate of
Incorporation or any agreement to which the Company is a party.  There is no commitment, plan or arrangement
to issue, and no outstanding option, warrant or other right calling for the
issuance of, any share of capital stock of the Company which is not described
in the Memorandum and which, if not disclosed therein would cause the
Memorandum to be inaccurate in any material respect.  There is outstanding no security or other instrument which by its
terms is convertible into, exercisable for or exchangeable for any class of
capital stock of the Company which is not described in the Memorandum and
which, if not disclosed therein would cause the Memorandum to be inaccurate in
any material respect.

 

(d)                                 The Units, Common Stock, Warrants and Warrant
Shares conform in all material respects to all statements relating thereto
contained in the Memorandum.  The
Company as of the date of the Closing will have reserved a sufficient number of
shares of its Common Stock, including the shares of Common Stock issuable upon
exercise of the Warrants, for the issuance to all investors in the Private
Placement and upon issuance of the Common Stock and payment therefor, such
shares of Common Stock will be duly and validly issued, fully paid, and
nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer described or disclosed in the Memorandum and this
Subscription Agreement and under applicable Federal and state securities laws.

 

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

 

(f)                                    Except as may otherwise be described or referred
to 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 or
obligation, primary or contingent, for borrowed money; (ii) entered into any
transaction, except in the ordinary course of business, within the past twelve
(12) months or which otherwise would be required to be disclosed in the
Memorandum; or (iii) declared or paid any dividend or other distribution on its
capital stock.  The Company agrees, to
the extent material, to supplement the Memorandum to include information
relating to (i) the issuance of any securities, or the incurrence of any material
liability or obligation, primary or contingent, for borrowed money, (ii) the
Company’s entering into any transaction, except in the ordinary course of
business, or (iii) the declaration or payment of any dividend or other
distribution on its capital stock, in the event of the occurrence of any such
transactions from the date of the Memorandum until the date of the Closing (the
“Closing
Date”).

 

(g)                                       No consent, approval, qualification, order or
authorization of, or filing with, any local, state, or Federal governmental
authority is required on the part of the Company in connection with the
Company’s valid execution, delivery, or performance of this Subscription
Agreement, the offer, sale or issuance of the Units, Common Stock, Warrants or
Common Stock underlying the Warrants, except such filings as have been made
prior to the Closing, and any notices of sale required to be filed with the SEC
under Regulation D promulgated under the Securities Act, or such post-closing
filings 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 claim
or investigation pending against the Company or any subsidiary or, to the best
of the knowledge of the Company, threatened with respect to the Company,

 

6

 

relating
to any of its operations, businesses or proposed businesses, properties or
assets, (or to the best knowledge of the Company, any set of facts that would
give rise thereto) except as may be described or referred to in the
Memorandum.  The Company is not in
material 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 the
Company or any Subsidiary nor, to the knowledge of the Company, is any other
party in violation or breach of or in default with respect to, complying with
any 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 and
understanding is in full force and effect and is the legal, valid and binding
obligation of the Company or subsidiary, as the case may be, enforceable as to
the Company in accordance with its terms (subject to applicable bankruptcy,
insolvency and other laws affecting the enforceability of creditors’ rights
generally and to general equitable principles. 
Except as described in the Memorandum, the Company and each subsidiary
has good and marketable title to all properties and assets, owned by it, free
and clear of all liens, charges, encumbrances or restrictions, except such as
are not materially significant or important in relation to the business of the
Company, when taken as a whole; all of the material leases and subleases under
which the Company or any Subsidiary is the lessor or sublessor of properties or
assets or under which the Company or any Subsidiary, as the case may be, holds
properties or assets as lessee or sublessee are in full force and effect, and
neither the Company nor any subsidiary, as the case may be, is in default in
any material respect with respect to any of the terms or provisions of any of
such respective leases or subleases, and no material claim has been asserted by
anyone adverse to rights of the Company, or any Subsidiary, as lessor,
sublessor, lessee or sublessee under any of the leases or subleases mentioned
above, or affecting or questioning the right of the Company or any Subsidiary
to continued possession of the leased or subleased premises or assets under any
such lease or sublease.  The Company is
not in violation or breach of, or in default with respect to, any term of its
Certificate of Incorporation or By-Laws.

 

(j)                                     The financial statements of the Company, together
with related notes and schedules, as set forth in the Memorandum, present
fairly in all material respects the financial position and the results of
operations and cash flows of the Company, and at the indicated dates and for
the indicated periods.  Such financial
statements and related schedules have been prepared in accordance with
generally accepted accounting principles, consistently applied throughout the
periods involved, except as disclosed therein, and all adjustments necessary
for a fair presentation of results for such periods have been made.

 

(k)                                  Except as described in the Memorandum, since the
date of the most recent balance sheet contained in the Memorandum, the Company
has not incurred any liabilities or obligations, direct or contingent, not in
the ordinary course of business, or entered into any transaction not in the
ordinary course of business, which is material to the business of the Company
when taken as a whole, and there has not been any material change in the
capital stock of, or any incurrence of long-term debt by, the Company when
taken as a whole, or any material issuances of options, warrants or other
rights to purchase the capital stock of the Company, or any adverse change or
any development involving, so far as the Company can now reasonably foresee, a
prospective adverse change in the condition (financial or otherwise), net
worth, results of operations, business, key personnel or properties which would
be material to the business or financial condition of the Company when taken as
a whole, and the Company has not become a party to, and neither the business
nor the property of the Company has become the subject of, any material
litigation whether or not in the ordinary course of business.

 

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

 

7

 

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

 

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

 

SECTION 3

TERMS OF SUBSCRIPTION

 

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

 

3.2                                 Delivery of Certificates.  The
Investor hereby authorizes and directs the Company to deliver the certificates
for the Common Stock and the Warrants and, upon exercise of the Warrants, if at
all, the Warrant Shares to be issued to such Investor pursuant to this
Subscription Agreement to the address indicated in the Investor Qualification
Questionnaire included herein.

 

SECTION 4

REGISTRATION
RIGHTS

 

4.1                                 Definitions.  For purposes of this
Section 4:

 

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

 

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

 

(c)                                  The term “Registration Statement” means any
registration statement or comparable document of the Company under the
Securities Act through which a public sale or distribution of the Company’s
securities may be registered (except a form exclusively for the sale or
distribution of securities in connection with an employee or consultant stock
option or purchase plan or for use exclusively in connection with a business
combination), the prospectus contained therein and all amendments and
supplements to such Registration Statement, including post-effective
amendments, all exhibits and all material incorporated by reference in such
Registration Statement.

 

8

 

4.2                                 Shelf Registration.

 

(a)                                  The Company shall use its best efforts to prepare
and file a Registration Statement on Form SB-2 (“Shelf Registration”) with the
SEC as soon as possible after the final closing of the Private Placement (“Final
Closing Date”) to provide for the offer and sale of the Registrable
Securities and shall cause the Shelf Registration Statement to become effective
under the Act no later than one hundred and twenty (120) days after the Final
Closing Date (“Effective Date”).

 

(b)                                 In the event the Shelf Registration is not
declared effective by the Effective Date, the Company shall promptly, but no
later than ten (10) days from the Effective Date, issue to each then holder of
the Registrable Securities (“Holder”) a number of shares of Common Stock
equal to ten percent (10%) of the sum of (x) the number of shares of Common
Stock then held by the Holder and (y) the number of shares of Common Stock
issuable upon exercise of the Warrants then held by the Holder (such
calculation hereinafter referred to as the “Penalty Formula”).

 

4.3                                 Piggyback
Registration.   From and after
the Final Closing Date and until such time as the Registrable Securities are
freely saleable under Rule 144 promulgated under the Securities Act without
volume limitations, if the Company shall determine to proceed with the
preparation and filing of a Registration Statement in connection with the
proposed offer and sale of any of its securities by it or any of its security
holders (other than a registration statement on Form S-4, S-8 or other
limited purpose form), the Company will give written notice of its
determination to all record holders of the Registrable Securities.  Upon receipt of a written request from any
such holder within thirty (30) days after receipt of any such notice from the
Company, the Company will, except as herein provided, cause all the Registrable
Securities owned by such holders to be included in such Registration Statement,
all to the extent requisite to permit the sale or other disposition by the
prospective seller or sellers of the Registrable Securities to be so
registered.  If any registration
pursuant to this Section 4.3 shall be underwritten in whole or in part,
the Company may require that the Registrable Securities requested for inclusion
pursuant to this Section 4.3 be included in the underwriting on the same
terms and conditions as the securities otherwise being sold through the
underwriters.  The obligation of the
Company under this Section 4.3 shall be unlimited as to the number of
Registration Statements to which it applies.

 

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

 

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

 

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

 

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

 

9

 

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

 

(e)                                  in the event that a registration involves an
underwritten offering, enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter or such offering;

 

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

 

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

 

(h)                                 prepare and file with the SEC, promptly upon the
request of any such holders, any amendments or supplements to the Registration
Statement or prospectus which, in the opinion of counsel for such holders (and
concurred in by counsel for the Company), is required under the Securities Act
or the rules and regulations thereunder in connection with the distribution of the
Registrable Shares;

 

(i)                                     prepare and promptly file with the SEC and
promptly notify such holders of the filing of such amendment or supplement to
the Registration Statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Securities Act, any event
shall have occurred as the result of which any such prospectus or any other
prospectus as then in effect would include an untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances in which they were made, not
misleading;

 

(j)                                     advise such holders, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance of any stop order
by the SEC suspending the effectiveness of the Registration Statement or the
initiation or threatening of any proceeding for that purpose and promptly use
its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued;

 

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

 

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

 

10

 

Company,
and cause the Company’s officers, directors and employees to supply all information
reasonably 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 reported
on NASDAQ, to be reported on NASDAQ.  If
the Common Stock is not then listed on a national securities exchange or
reported on NASDAQ, facilitate the reporting of the Registrable Securities on
NASDAQ; and

 

(n)                                 provide a transfer agent and registrar, which may
be a single entity, for the Registrable Securities not later than the effective
date of the Registration Statement in which Registrable Securities are
included;

 

4.5                                 Expenses.  With respect to each
inclusion of Registrable Securities in a Registration Statement pursuant to
Sections 4.2 and 4.3 hereof, the fees, costs and expenses of registration
to be borne by the Company shall include, all registration, filing, and NASD
fees; printing expenses, fees and disbursements of counsel and accountants for
the Company; all legal fees and disbursements and other expenses of complying
with state securities or blue sky laws of any jurisdictions in which the
securities to be offered are to be registered and qualified. Fees and
disbursements of counsel and accountants for the selling security holders shall
be borne by the selling security holders, and security holders participating in
such registration shall bear their pro rata share of the underwriting discounts
and commissions and transfer taxes.

 

4.6                                 Indemnification.

 

(a)                                  The
Company will indemnify and hold harmless each holder of Registrable Securities
which are included in a Registration Statement pursuant to the provisions of
Sections 4.2 and 4.3 hereof, its directors and officers, and any
underwriter (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 the
Securities Act, from and against, and will reimburse such holder and each such
underwriter and controlling person with respect to, any and all loss, damage,
liability, cost and expense to which such holder or any such underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, damages, liabilities, costs or expenses are caused by any
untrue statement or alleged untrue statement of any material fact contained in
a Registration Statement, any prospectus contained therein or any amendment or
supplement 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
necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading; provided, however, that the Company will
not 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 statement
or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by such holder, such underwriter or such
controlling person in writing specifically for use in the preparation thereof.

 

(b)                                 Each holder of Registrable Securities included in
a registration pursuant to the provisions of Sections 4.2 and 4.3 hereof
will indemnify and hold harmless the Company, its directors and officers, any
controlling person and any underwriter from and against, and will reimburse the
Company, its directors and officers, any controlling person and any underwriter
with respect to, any and all loss, damage, liability, cost or expense to which
the Company or any controlling person and/or any underwriter may become subject
under the Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue statement or alleged
untrue statement of any material fact contained in the Registration Statement,
any prospectus contained therein or any amendment or supplement 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 necessary to make the
statements therein, in light of the circumstances in which they were made, not

 

11

 

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 so made in
reliance upon and in strict conformity with written information furnished by or
on behalf of such holder specifically for use in the preparation thereof and
provided further, that the maximum amount that may be recovered from any holder
shall be limited to the amount of proceeds received by such holder from the
sale of the Registrable Securities.

 

(c)                                  Promptly after receipt by an indemnified party
under this Section 4.7 of a notice of the commencement of any action
(including any governmental action) such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party hereunder, deliver
to the indemnifying party a written notice of the commencement thereof.  The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall relieve such indemnifying party of any liability to the indemnified
party under this Section 4.7 only to the extent prejudicial to its ability
to defend such action, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to an
indemnified party otherwise than under this Section 4.  The indemnifying party shall have the right
to participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume control
of the defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its
own counsel, with the reasonable fees and expenses to be paid by the
indemnifying party, if in the reasonable determination of counsel for the
indemnifying party, representation of such indemnified party by the counsel
obtained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding.  After notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying party
will not be liable to such indemnified party pursuant to the provisions of
paragraph (a) or (b) above for any legal or other expense subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation, unless (i) the indemnified party
shall have employed counsel in accordance with the provisions of the preceding
sentence, (ii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after the notice of the commencement of the
action or (iii) the indemnifying party has authorized the employment of
counsel for the indemnified party at the expense of the indemnifying party.

 

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

 

4.8                                 Assignable Rights.  The rights with respect to
the Registrable Securities under this Section 4 shall, in addition for the
benefit of the parties hereto, be for the benefit of and enforceable by an
transferee of the Registrable Securities. 
The obligations of the Company contained in this Section 4 shall be
binding upon any successor to the Company and continue to be in effect with
respect to any securities issued by any successor to the Company in
substitution or exchange for any Registrable Securities.

 

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

 

12

 

that
may at any time permit the holders of the Registrable Securities to sell
securities of the Parent to the public without registration, the Company agrees
to:

 

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

 

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

 

(c)                                  furnish
to each holder of Registrable Securities, forthwith upon request (i) a
written statement by the Company that it has complied with the reporting
requirements of SEC Rule 144, the Securities Act and the Exchange Act, (ii) a
copy of the most recent annual or quarterly report of the Company and such
other reports and documents so filed by the Company and (iii) such other
information as may be reasonably requested in availing the holders of any
Registrable Securities of any rule or regulation of the SEC which permits the
selling of any such securities without registration.

 

SECTION 5

CONDITIONS FOR
CLOSING

 

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

 

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

 

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

 

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

 

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

 

(b)                                 Payment of Purchase Price.  The
Investor shall have delivered the purchase price and other documents required
pursuant hereto.

 

SECTION 6

MISCELLANEOUS

 

6.1                                 Modification.  Neither
this Subscription Agreement nor any provisions hereof should be modified,
discharged or terminated except by an instrument in writing signed by the party
against whom any waiver, change, discharge or termination is sought.

 

6.2                                 Notices.  Any notice, demand or other communication
which any party hereto may be required, or may elect, to give to anyone
interested hereunder shall be sufficiently given if delivered

 

13

 

personally
or by nationally recognized overnight courier service or sent by registered or
certified mail, return receipt requested, addressed to such address as may be
given herein.  Notices delivered
personally shall be effective upon receipt by the party to which it is
addressed.  Notices delivered by
overnight courier service shall be effective the day after deposited with such
courier service.  Notices delivered by
mail shall be effective three (3) days after deposited with the United States
Postal Service.

 

6.3                                 Execution.  By the execution of the
signature page attached hereto, the parties hereby agree to be bound by all of
the terms and conditions of this Subscription Agreement, including, without
limitation, the registration rights contained herein.

 

6.4                                 Counterparts.  This
Subscription Agreement may by executed through the use of separate signature
pages 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.  Except
as otherwise provided herein, this Subscription Agreement shall be binding upon
and 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, the
obligation of the Investor shall be joint and several and the agreements,
representations, warranties and acknowledgments herein contained shall be
deemed 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 entire
agreement of the parties, and there are no representations, covenants or other
agreements except as stated or referred to herein.

 

6.7                                 Assignability.  This Subscription Agreement is not
transferable or assignable by the Investor.

 

6.8                                 Applicable Law; Jurisdiction.  This Subscription Agreement shall be
governed by and construed under the internal laws of the State of New York
without regard to conflict of law rules. 
The parties hereby submit to the exclusive jurisdiction of the courts of
the State of New York located in New York County and the Federal courts located
in the Southern District of New York, with respect to any action or legal
proceeding commenced by either party with respect to this Subscription
Agreement or the Shares.  Each party
irrevocably waives any objection it now has or hereafter may have respecting
the 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 or
proceeding in the manner set forth for the delivery of notices herein.

 

6.9                                 Waiver of Jury Trial.  The
parties hereby waive their rights to a trial by jury in any action or
proceeding involving any matter arising out of or relating to this Subscription
Agreement or to the Shares.

 

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

 

[signatures on following
page]

 

14

 

	
   

  	
   

  	
   

  
	
  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:

  	
   

  
					

 

*If Subscriber is a Registered
Representative

with an NASD member firm, have the following

acknowledgement signed by the appropriate party:

 

The undersigned NASD
member firm acknowledges

receipt of the notice required by Rule 3050 of the NASD

Conduct Rules.

 

	
   

  	
   

  	
   

  
	
  Name of NASD Member
  Firm

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Authorized Officer

  	
   

  	
   

  

 

Wire Instructions:

 

15Exhibit 10.1

Exhibit 10.1 

SKYWAY COMMUNICATIONS
HOLDING CORP. AND SUBSIDIARY 

[A Development Stage
Company] 

Employment Agreement with Mr. Lough

          	 	1. 	
               Duties. In your position as CFO, your duties and responsibilities shall
               include overseeing of the financial accounting operations of the Company and its
               affiliates, as well as such other duties and responsibilities for the Company
               and its affiliates as may be assigned to you by the President and/or CEO of the
               Company (the “CEO/President”) or by the Board of Directors of the
               Company (the “Board”) from time to time. 

               

          	 	2. 	
               Compensation. Salary shall be $100,000 per annum, subject to such
               increases as may be determined by the Board, President or CEO in its sole
               discretion, payable in accordance with the normal payroll policy of the Company
               as the same exists from time to time. 

               

          	 	3. 	
               Term. Your employment hereunder shall commence as of November 3, 2003.
               While your employment with the Company is for an indefinite term, the Company
               shall be entitled to terminate your employment “for cause” (as
               hereinafter defined) or without cause in the event such action is deemed to be
               in the best interest of the Company as determined by the Board. You shall build
               an entitlement to severance compensation in the event the Company terminates
               your employment without cause at the rate of one (1) week of base salary payable
               hereunder for each month you work your employment with the Company, up to a
               maximum severance allowance in the event your employment is terminated by the
               Company without cause of twelve (12) months base salary and benefits with a
               minimum payout of six (6) months of salary and benefits. 

               

          	 	4. 	
               Benefits. You shall be provided during the term of your employment with
               the benefits and insurance packages commensurate with those provided to
               executive management both now and in the future (subject to policy terms,
               waiting periods, etc.), and further subject to such changes in the generally
               applicable terms and conditions of any plan or policy as may be determined by
               the Board in its sole discretion from time to time. 

               

          	 	5. 	
               Stock Option. The Company further agrees to provide non-qualified stock
               options to Employee to enable Employee to acquire common stock of the Company in
               an amount equal to his first year salary, which option shall vest over a period
               of three (3) years with an option price of $0.16, which was the share price on
               November 3, 2003, first day of employment. Thus, one-third (1/3) of such shares
               shall vest on November 3, 2004, one-third (1/3) on November 3, 2005, and
               one-third (1/3) on November 3, 2006, all provided the Employee is employed by
               the Company on such respective dates. 

               

          	 	6. 	
               Relocation. It is contemplated that any relocation benefits paid to
               Employee shall be repaid to the Company in the event Employee terminates his
               employment with the Company prior to the end of one year of employment, November
               3, 2004. An itemized cost listing will be provided for reimbursement, but in no
               case will the costs to be reimbursed exceed $30,000, net of taxes.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00063-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00063-of-00352.parquet"}]]