EXHIBIT 10.5
MDU COMMUNICATIONS INTERNATIONAL, INC.
Series A Convertible Preferred Stock
REGISTRATION AGREEMENT
January 28, 2000
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AS AGENT FOR THE SUBSCRIBERS LISTED ON EXHIBIT A
Ladies and Gentlemen:
MDU Communications International, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell (such issuance and sale, the "Initial
Placement") to the parties listed on the attached EXHIBIT A (the "Holders") for
whom you are acting as agent (the "Agent") in connection with the purchase and
sale of an aggregate of 3,090,000 shares of the Company's Series A Convertible
Preferred Stock, par value $0.001 ("Series A Shares"). The Series A Shares will
be convertible into shares of the Company's Common Stock pursuant to the
Certificate of Designations (the "Certificate of Designations") with respect to
the Series A Shares attached hereto as EXHIBIT B. As consideration for your
agreement to act as the Agent, the Company has also agreed to issue you Series A
Shares (the "Agent Shares") and warrants (the "Agent Warrants") which are
convertible into the Company's Common Stock. As an inducement to you to purchase
the Series A Shares on behalf of the Holders and to accept the Agent Shares and
the Agent Warrants, the Company agrees with you, (i) for your benefit, and (ii)
for the benefit of the Holders as to the Series A Shares and the Common Stock
issuable upon conversion of the Series A Shares, as follows:
1. DEFINITIONS. Capitalized terms used herein without definition shall have
the respective meanings set forth in the Purchase Agreement. As used in this
Agreement, the following capitalized terms shall have the following meanings:
"ACT" means the Securities Act of 1933, as amended, and the rules and
regulations of the SEC promulgated thereunder.
"AFFILIATE" of any specified person means any other person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling",
"controlled by" and "under common control with"), as used with respect to any
person, shall mean the possession, directly or indirectly, of the power to
direct or cause the
D-▇
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ownership of voting securities or by agreement or otherwise.
"AGENT" has the meaning set forth in the preamble hereto.
"AGENT SHARES" has the meaning set forth in the preamble hereto.
"AGENT WARRANTS" has the meaning set forth in the preamble hereto.
"CERTIFICATE OF DESIGNATIONS" has the meaning set forth in the preamble
hereto.
"CLOSING DATE" means January 31, 2000.
"COMMON STOCK" means the Common Stock, par value $0.001 per share, of the
Company, as it exists on the date of this Agreement and any other shares of
capital stock or other securities of the Company into which such Common Stock
may be reclassified or changed, together with any and all other securities which
may from time to time be issuable upon conversion of Series A Shares. Unless the
context otherwise requires, "Common Stock" as used herein refers to the Common
Stock issuable upon conversion of the Series A Shares and the Agent Shares, and
upon exercise of the Agent Warrants.
"DTC" has the meaning set forth in Section 3(k) hereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"HOLDER" means the persons listed on EXHIBIT A, the Agent and their
permitted transferees.
"MAJORITY HOLDERS" means the Holders of a majority of the then outstanding
aggregate principal amount of Common Stock registered under a Shelf Registration
Statement; provided that Common Stock which has been sold or otherwise
transferred pursuant to the Shelf Registration Statement shall not be included
in the calculation of Majority Holders.
"NOTICE AND QUESTIONNAIRE" means a Notice of Registration Statement and
Selling Securityholder Questionnaire substantially in the form of EXHIBIT C
hereto.
"PROSPECTUS" means the prospectus included in any Shelf Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Common Stock covered by such Shelf Registration
Statement, and all amendments and supplements to such prospectus, including all
documents incorporated or deemed to be incorporated by reference in such
prospectus.
"RULE 144" means Rule 144 (or any successor provision) under the Act.
"SEC" means the Securities Exchange Commission.
"SERIES A SHARES" has the meaning set forth in the preamble hereto.
"SHELF REGISTRATION" means a registration effected pursuant to Section 2
hereof.
"SHELF REGISTRATION PERIOD" has the meaning set forth in Section 2(c)
hereof.
"SHELF REGISTRATION STATEMENT" means a "shelf" registration statement of
the Company pursuant to the provisions of Section 2 hereof which covers all of
the Common Stock issuable upon conversion of the Series A Shares and the Agent
Shares, and upon exercise of the Agent Warrants, on an appropriate form for an
offering to be made on a delayed or continuous basis pursuant to Rule 415 under
the Act, or any similar rule that may be adopted by the SEC, and all amendments
and supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all documents incorporated or deemed to be incorporated by
reference therein.
"SUSPENSION PERIOD" has the meaning set forth in Section 2(d) hereof.
All references in this Agreement to financial statements and schedules and
other information which is "contained", "included", or "stated" in the Shelf
Registration Statement, any preliminary Prospectus or Prospectus (and all other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
or deemed to be incorporated by reference in such Shelf Registration Statement,
preliminary Prospectus or Prospectus, as the case may be; and all references in
this Agreement to amendments or supplements to the Shelf Registration Statement,
any preliminary Prospectus or Prospectus shall be deemed to mean and include the
filing of any document under the Exchange Act, after the date of such Shelf
Registration Statement, preliminary Prospectus or Prospectus, as the case may
be, which is incorporated or deemed to be incorporated by reference therein.
2. CANADIAN REGISTRATION AND U.S. SHELF REGISTRATION STATEMENT. (a) As soon
as practicable following the Closing Date, the Company shall (a) prepare and
file a preliminary prospectus and a (final) prospectus, and use reasonable
commercial efforts to obtain receipts for each such prospectus, in British
Columbia and all other provinces of Canada in which persons purchasing the
Series A Shares on the Closing Date are resident, to qualify for distribution,
and (b) file with the SEC, and thereafter use reasonable commercial efforts to
obtain effectiveness of, the Shelf Registration Statement under the Act covering
resales of the Common Stock. The Company shall supplement or amend the Shelf
Registration Statement if required by the rules, regulations or instructions
applicable to the registration form used by the Company for the Shelf
Registration Statement, if required by the Act, the Exchange Act or the SEC.
(b) (1) Not less than 30 calendar days prior to the effectiveness of
the Shelf Registration Statement, the Company shall mail the Notice and
Questionnaire to the Holders of Common Stock issuable upon conversion of the
Series A Shares. No Holder shall be entitled to be named as a selling
securityholder in the Shelf Registration Statement, and no Holder shall be
entitled to use the Prospectus forming a part thereof for resales of Common
Stock at any time, unless such Holder has returned a completed and signed Notice
and Questionnaire to the Company by the deadline for responses set forth
therein; PROVIDED, HOWEVER, that Holders shall
have at least 20 calendar days from the date on which the Notice and
Questionnaire is first mailed to such Holders to return a completed and
signed Notice and Questionnaire to the Company.
(2) After the Shelf Registration Statement has become effective,
the Company shall, upon the request of any Holder of Common Stock that has not
returned a completed Notice and Questionnaire, promptly send a Notice and
Questionnaire to such Holder. The Company shall not be required to take any
action to name such Holder as a selling securityholder in the Shelf Registration
Statement or to enable such Holder to use the Prospectus forming a part thereof
for resales of Common Stock until such Holder has returned a completed and
signed Notice and Questionnaire to the Company and the Company is otherwise
amending the Shelf Registration Statement. In such case the Company will include
such Holder as a selling shareholder in the amendment to the Shelf Registration
Statement.
(c) The Company shall keep the Shelf Registration Statement
continuously effective under the Act, in order to permit the Prospectus forming
part thereof to be usable by all Holders until the earliest of (i) one year from
the Qualification Date (as defined in the Certificate of Designations), (ii) the
date on which all the Common Stock issuable upon conversion of the Series A
Shares may be sold by non-affiliates ("affiliates" for such purpose having the
meaning set forth in Rule 144) of the Company pursuant to paragraph (k) of Rule
144 (or any successor provision) promulgated by the SEC under the Act, and (iii)
the date as of which all the Common Stock has been transferred pursuant to Rule
144 under the Securities Act (or any similar provision then in force) or sold
pursuant to the Shelf Registration Statement (in any such case, such period
being called the "Shelf Registration Period"). The Company will, subject to
Section 2(d), prepare and file with the SEC such amendments and post-effective
amendments to the Shelf Registration Statement as may be necessary to keep the
Shelf Registration Statement continuously effective for the Shelf Registration
Period; subject to Section 2(d), cause the related Prospectus to be supplemented
by any required supplement, and as so supplemented to be filed pursuant to Rule
424 (or any similar provisions then in force) under the Act; and, comply in all
material respects with the provisions of the Act with respect to the disposition
of all securities covered by the Shelf Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
sellers thereof set forth in such Shelf Registration Statement as so amended or
such Prospectus as so supplemented.
(d) The Company may suspend the use of the Prospectus for a period not
to exceed 60 days in any three-month period or for three periods not to exceed
an aggregate of 90 days in any twelve-month period (the "Suspension Period") for
valid business reasons, to be determined by the Company in its sole reasonable
judgment (not including avoidance of the Company's obligations hereunder),
including, without limitation, the acquisition or divestiture of assets, public
filings with the SEC, pending corporate developments and similar events;
provided that the Company promptly thereafter complies with the requirements of
Section 3(j) hereof, if applicable. The Company shall provide notice to the
Holders of a Suspension Period as required under Section 3(c)(1)(iv) hereof.
3. REGISTRATION PROCEDURES. In connection with any Shelf Registration
Statement, the following provisions shall apply:
(a) The Company shall furnish to you, not less than 5 business days
prior to the filing thereof with the SEC, a copy of any Shelf Registration
Statement, and each amendment thereof (including amendments caused by the filing
by the Company with the SEC of a report required by the Exchange Act), a copy of
any Prospectus, and each amendment or supplement, if any, to the Prospectus
included therein and shall use its best efforts to reflect in each such
document, when so filed with the SEC, such comments as you or counsel designated
by you reasonably may propose if such comments are received by the Company not
more than three business days after to your receipt of such Shelf Registration
Statement, Prospectus or amendment or supplement thereto.
(b) The Company shall ensure that (i) any Shelf Registration Statement
and any amendment thereto and any Prospectus forming part thereof and any
amendment or supplement thereto comply in all material respects with the Act and
the rules and regulations thereunder, (ii) any Shelf Registration Statement and
any amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) any Prospectus forming part of any Shelf Registration Statement, and any
amendment or supplement to such Prospectus, does not include an untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided that the Company makes no representation or
agreement with respect to information with respect to any Holder provided or
required to be included in any Shelf Registration or Prospectus pursuant to the
Act or the rules and regulations thereunder and which information is included
therein in reliance upon and in conformity with information furnished to the
Company in writing by or on behalf of any such Holder.
(c) (1) The Company, as promptly as reasonably practicable, shall
advise you, each Holder that has returned a completed and signed Notice and
Questionnaire to the Company and the transfer agent for the Common Stock (the
"Transfer Agent") and, if requested by you or any such Holder, confirm such
advice in writing:
(i) when a Shelf Registration Statement and any amendment thereto
has been filed with the SEC and when the Shelf Registration Statement
or any post-effective amendment thereto has become effective;
(ii) of any request by the SEC for amendments or supplements to
the Shelf Registration Statement or the Prospectus or for additional
information;
(iii) of the determination by the Company that a post-effective
amendment to the Shelf Registration Statement would be appropriate;
and
(iv) of the commencement or termination of any Suspension Period
(which advice in the case of clauses 3(c)(ii)-(iv) shall be accompanied by
an instruction to suspend the use of the Prospectus until the requisite
changes have been made).
(2) The Company shall advise you, each Holder that has returned a
completed and signed Notice and Questionnaire to the Company and the
Transfer Agent and, if requested by you or any such Holder, confirm
such advice in writing:
(i) of the issuance by the SEC of any stop order suspending the
effectiveness of the Shelf Registration Statement or the initiation of
any proceedings for that purpose;
(ii) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Common Stock
included in any Shelf Registration Statement for sale in any
jurisdiction or the initiation or threat of any proceeding for such
purpose; and
(iii) of the suspension of the use of the Prospectus pursuant to
Section 2(d) hereof or of the happening of any event that requires the
making of any changes in the Shelf Registration Statement or the
Prospectus so that, as of such date, the statements therein are not
misleading and the Shelf Registration Statement or the Prospectus, as
the case may be, does not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein (in the case of the
Prospectus, in light of the circumstances under which they were made)
not misleading
(which advice shall be accompanied by an instruction to suspend the use of
the Prospectus until the requisite changes have been made).
(d) The Company shall use its best efforts to obtain the withdrawal of
any order suspending the effectiveness of any Shelf Registration Statement or
the lifting of any suspension of the qualification (or exemption from
qualification) of the Common Stock for offer or sale in any jurisdiction at the
earliest possible time.
(e) The Company shall furnish to each Holder of Common Stock included
within the coverage of any Shelf Registration Statement, without charge, at
least one copy of such Shelf Registration Statement and any post-effective
amendment thereto, including financial statements and schedules and all
materials incorporated therein by reference, and, if the Holder so requests in
writing, all exhibits (including those incorporated by reference).
(f) The Company shall, during the Shelf Registration Period, deliver
to each Holder of Common Stock included within the coverage of any Shelf
Registration Statement, without charge, as many copies of the Prospectus
(including each preliminary Prospectus) included in such Shelf Registration
Statement and any amendment or supplement thereto as such Holder may reasonably
request; and, except during the continuance of any Suspension Period, the
Company consents to the use of the Prospectus or any amendment or supplement
thereto by each of the selling Holders in connection with the offering and sale
of the Common Stock covered by the Prospectus or any amendment or supplement
thereto.
(g) Prior to any offering of Common Stock pursuant to any Shelf
Registration Statement, the Company shall register or qualify or cooperate with
the Holders of Common
Stock included therein in connection with the registration or qualification
(or exemption from such registration or qualification) of such Common Stock
for offer and sale, as the case may be, under the securities or blue sky laws
of such jurisdictions as any such Holders reasonably request in writing and
do any and all other acts or things necessary or advisable to enable the
offer and sale in such jurisdictions of the Common Stock covered by such
Shelf Registration Statement; PROVIDED, HOWEVER, that the Company will not be
required to (A) qualify generally to do business in any jurisdiction where it
is not then so qualified or to (B) take any action which would subject it to
general service of process in any such jurisdiction where it is not then so
subject.
(h) The Company shall, and shall use its best efforts to cause the
Transfer Agent to, cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Common Stock to be sold
pursuant to any Shelf Registration Statement to third-party buyers of such
Common Stock, free of any restrictive legends and in such denominations and
registered in such buyers' names as Holders may request prior to sales of Common
Stock pursuant to such Shelf Registration Statement. Prior to any such sale, the
Holders shall deliver to the Transfer Agent for cancellation legended
Certificates representing a number of shares of Common Stock corresponding to
the number of shares of Common Stock to be sold, and shall include in such
delivery a signed Request for Issuance of Unlegended Stock Certificate Upon
Sale, in the form of EXHIBIT D hereto, to the Company and to the Transfer Agent.
(i) Subject to the exceptions contained in (A) and (B) of paragraph
(g) hereof, the Company shall use its best efforts to cause the Common Stock
covered by the applicable Shelf Registration Statement to be registered with or
approved by such other federal, state and local governmental agencies or
authorities, and self-regulatory organizations in the United States as may be
necessary to enable the Holders to consummate the disposition of such Common
Stock as contemplated by the Shelf Registration Statement; without limitation to
the foregoing, the Company shall make all filings and provide all such
information as may be required by the National Association of Securities
Dealers, Inc. (the "NASD") in connection with the offering under the Shelf
Registration Statement of the Common Stock and shall cooperate with each Holder
in connection with any filings required to be made with the NASD by such Holder
in that regard.
(j) Upon the occurrence of any event contemplated by Section 3(c)(2)
above and subject to Section 3(a) hereof, the Company shall promptly prepare and
file with the SEC a post-effective amendment to any Shelf Registration Statement
or an amendment or supplement to the related Prospectus or any document
incorporated therein by reference or file a document which is incorporated or
deemed to be incorporated by reference in such Shelf Registration Statement or
Prospectus, as the case may be, so that, as thereafter delivered to purchasers
of the Common Stock included therein, the Shelf Registration Statement and the
Prospectus, in each case as then amended or supplemented, will not include an
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein (in
the case of the Prospectus in light of the circumstances under which they were
made) not misleading and in the case of a post-effective amendment, cause it to
become effective as promptly as practicable; provided that the Company's
obligations under this paragraph (j) shall be suspended if the Company has
suspended the use of the Prospectus in
accordance with Section 2(d) hereof and given notice of such suspension to
the Holders, it being understood that the Company's obligations under this
Subsection (j) shall be automatically reinstated at the end of such
Suspension Period.
(k) The Company shall use its reasonable best efforts to cause The
Depository Trust Company ("DTC") on the first business day following the
effective date of any Shelf Registration Statement hereunder or as soon as
possible thereafter to remove (i) from any existing CUSIP number assigned to the
Common Stock any designation indicating that the Common Stock are "restricted
securities", which efforts shall include delivery to DTC of a letter executed by
the Company substantially in the form of EXHIBIT E hereto and (ii) any other
stop or restriction on DTC's system with respect to the Common Stock.
(l) The Company shall use its best efforts to comply with all
applicable rules and regulations of the SEC and shall make generally available
to its security holders as soon as practicable but in any event not later than
15 months after (i) the effective date of the applicable Shelf Registration
Statement, (ii) the effective date of each post-effective amendment to any Shelf
Registration Statement, and (iii) the date of each filing by the Company with
the SEC of an Annual Report on Form 10-K or 10KSB that is incorporated by
reference or deemed to be incorporated by reference in the Shelf Registration
Statement, an earnings statement satisfying the provisions of Section 11(a) of
the Act and Rule 158 promulgated by the SEC thereunder.
(m) The Company shall cause all Common Stock issued upon conversion of
the Series A Shares to be listed on each quotation system or securities exchange
on which the Common Stock is then listed no later than the date the applicable
Shelf Registration Statement is declared effective and, in connection therewith,
to make such filings as may be required under the Exchange Act and to have such
filings declared effective as and when required thereunder.
(n) If requested in writing by a Holder and at the Holder's expense,
the Company shall use its best efforts to promptly incorporate in a Prospectus
supplement or post-effective amendment to a Shelf Registration Statement such
information as a Holder may provide from time to time to the Company in writing
for inclusion in a Prospectus or any Shelf Registration Statement concerning
such Holder and the distribution of such Holder's Common Stock and shall make
all required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after being notified in writing of the matters to be
incorporated in such Prospectus supplement or post-effective amendment, provided
that the Company shall not be required to take any action under this Section
3(n) that is not, in the reasonable opinion of counsel for the Company, in
compliance with applicable law.
(o) Each Holder agrees that, upon receipt of notice of the happening
of an event described in Sections 3(c)(1)(ii) through and including 3(c)(1)(iv)
and Sections 3(c)(2)(i) through and including 3(c)(2)(iii), each Holder shall
forthwith discontinue (and shall cause its agents and representatives to
discontinue) disposition of Common Stock and will not resume disposition of such
Common Stock until such Holder has received copies of an amended or supplemented
Prospectus contemplated by Section 3(j) hereof, or until such Holder is advised
in writing by the Company that the use of the Prospectus may be resumed or that
the relevant Suspension Period has been terminated, as the case may be, provided
that, the foregoing shall not
prevent the sale, transfer or other disposition of Common Stock by a Holder
in a transaction which is exempt from, or not subject to, the registration
requirements of the Act, so long as such Holder does not and is not required
to deliver the applicable Prospectus or Shelf Registration Statement in
connection with such sale, transfer or other disposition, as the case may be.
4. REGISTRATION EXPENSES. The Company shall bear its and the Agent's
legal and other expenses incurred in connection with the negotiation,
preparation and performance of this Agreement. The Holders shall each bear such
legal and other expenses as they shall incur.
5. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each Holder of
Common Stock covered by any Shelf Registration Statement, the directors,
officers, employees and agents of each such Holder and each person who controls
any such Holder within the meaning of either the Act or the Exchange Act against
any and all losses, claims, damages or liabilities, joint or several, to which
they or any of them may become subject under the Act, the Exchange Act or other
Federal or state law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Shelf Registration Statement as originally filed
or in any amendment thereof, or in any preliminary Prospectus or Prospectus, or
in any amendment thereof 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 the light
of the circumstances under which they were made, not misleading, and agrees to
reimburse each such indemnified party, as incurred, for any legal or other
expenses reasonably incurred by any of them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Company by or on behalf of any such Holder specifically for inclusion
therein. This indemnity agreement will be in addition to any liability which the
Company may otherwise have.
(b) Each Holder of Common Stock covered by a Shelf Registration
Statement, by execution and delivery of a Notice and Questionnaire, severally
and not jointly agrees to indemnify and hold harmless (i) the Company, (ii) each
of its directors, (iii) each of its officers who signs such Shelf Registration
Statement and (iv) each person who controls the Company within the meaning of
either the Act or the Exchange Act to the same extent as the foregoing indemnity
from the Company to each such Holder, but only with reference to written
information relating to such Holder furnished to the Company by or on behalf of
such Holder specifically for inclusion in the documents referred to in the
foregoing indemnity. This indemnity agreement will be in addition to any
liability which any such Holder may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
5 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 5, notify the
indemnifying party in writing of the commencement thereof; but the failure so
to notify the indemnifying party (i) will not relieve it from liability under
paragraph (a) or (b) above unless and to the extent it did not otherwise
learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses; and (ii) will not, in
any event, relieve the indemnifying party from any obligations to any
indemnified party other than the indemnification obligation provided in
paragraph (a) or (b) above. The indemnifying party shall be entitled to
appoint counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to
appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel (including
local counsel), and the indemnifying party shall bear the reasonable fees,
costs and expenses of such separate counsel (and local counsel) if (i) the
use of counsel chosen by the indemnifying party to represent the indemnified
party would present such counsel with a conflict of interest; (ii) the actual
or potential defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available
to the indemnifying party; (iii) the indemnifying party shall not have
employed counsel reasonably satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of the
institution of such action; or (iv) the indemnifying party shall authorize
the indemnified party to employ separate counsel at the expense of the
indemnifying party. An indemnifying party will not, without the prior written
consent of the indemnified party, settle or compromise or consent to the
entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified parties
are actual or potential parties to such claim or action) unless such
settlement, compromise or consent includes an unconditional release of such
indemnified party from all liability arising out of such claim, action, suit
or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 5 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have an obligation to
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating or
defending same) (collectively "Losses"), as incurred, to which such indemnified
party may be subject in such proportion as is appropriate to reflect the
relative benefits received by such indemnifying party, on the one hand, and such
indemnified party, on the other hand, from the Initial Placement and the Shelf
Registration Statement which resulted in such Losses. If the allocation provided
by the immediately preceding sentence is unavailable for any reason, the
indemnifying party and the indemnified party shall contribute in such proportion
as is appropriate to reflect not only such relative benefits but also the
relative fault of such indemnifying party, on the one hand, and such indemnified
party, on the other hand, in connection with the statements or omissions which
resulted in such Losses as well as any other relevant equitable considerations.
Benefits received by the Company shall be deemed to be
equal to the total net proceeds from the sale of the Series A Shares (before
deducting expenses). Benefits received by the Holders shall be deemed to be
equal to the value of receiving Common Stock registered under the Act. The
parties agree that it would not be just and equitable if contribution were
determined by pro rata allocation or any other method of allocation which
does not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (d), no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 5, each person who
controls a Holder within the meaning of either the Act or the Exchange Act
and each director, officer, employee and agent of such Holder shall have the
same rights to contribution as such Holder, and each person who controls the
Company within the meaning of either the Act or the Exchange Act, each
officer of the Company who shall have signed the Shelf Registration Statement
and each director of the Company shall have the same rights to contribution
as the Company, subject in each case to the applicable terms and conditions
of this paragraph (d).
(e) The provisions of this Section 5 will remain in full force and
effect, regardless of any investigation made by or on behalf of any Holder, or
the Company or any of the officers, directors or controlling persons referred to
in Section 5 hereof, and will survive the sale by a Holder of shares of Common
Stock covered by a Shelf Registration Statement.
6. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company has not, as of the date
hereof, entered into nor shall it, on or after the date hereof, enter into, any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders herein or otherwise conflicts with the provisions hereof.
(b) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company has obtained the written
consent of the Majority Holders. Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders whose Common Stock are being sold
pursuant to a Shelf Registration Statement and that does not directly or
indirectly affect the rights of other Holders may be given by the Majority
Holders, determined on the basis of Common Stock being sold rather than
registered under such Shelf Registration Statement.
(c) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telecopier, or air courier guaranteeing overnight delivery:
(1) if to you, initially at the address set forth in the
Subscription Agreements;
(2) if to any Holder, at the most current address given by such
Holder to the Company in accordance with the provisions of this
Section 6(c), which address
initially is, with respect to each Holder, the address of such Holder
maintained by the registrar of the Common Stock, with a copy in like
manner to you; and
(3) if to the Company, initially at its address set forth in the
Subscription Agreements.
All such notices and communications shall be deemed to have been duly
given when received, if delivered by hand or air courier, and when sent, if sent
by first-class mail or telecopier with receipt confirmed.
You, the Holders or the Company by notice to the other may designate
additional or different addresses for subsequent notices or communications.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including, without the need for an express assignment or any consent by the
Company thereto, subsequent Holders. The Company hereby agrees to extend the
benefits of this Agreement to any Holder and any such Holder may specifically
enforce the provisions of this Agreement as if an original party hereto. In the
event that any other person shall succeed to the Company by merger,
consolidation or purchase of assets, then such successor shall enter into an
agreement, in form and substance reasonably satisfactory to the Holders, whereby
such successor shall assume all of the Company's obligations under this
Agreement.
(e) COUNTERPARTS. This agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) HEADINGS. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF DELAWARE.
(h) SEVERABILITY. In the event that any one of more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.
(i) COMMON STOCK OR SERIES A SHARES HELD BY THE COMPANY, ETC.
Whenever the consent or approval of Holders of a specified percentage of Common
Stock is required hereunder, Common Stock or Series A Shares held by the Company
or its Affiliates shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.
Please confirm that the foregoing correctly sets forth the agreement
between the Company and you.
Very truly yours,
MDU COMMUNICATIONS INTERNATIONAL, INC.
By /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
▇▇▇▇▇▇▇ SECURITIES, INC.,
As Agent for the Holders
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title:
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