1,666,666 Shares
MICROSOURCEONLINE INC.
COMMON STOCK
UNDERWRITING AGREEMENT
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May __, 2002
SIERRA BROKERAGE SERVICES, INC.
0000 Xxxxxx Xxxx
Xxxxxxxx, Xxxx 00000
Attention : President
Dear Sir:
Microsourceonline Inc., a Delaware corporation (the "Company"), proposes to
sell an aggregate of up to 1,666,666 shares (the "Shares") of the Company's
common stock, One Cent ($0.01) par value (the "Common Stock") pursuant to a
public offering of Shares (the "Offering"). This is to confirm the agreement
concerning the facilitation of the Offering of Shares of the Company by
Equitrade Securities Corporation ("Equitrade").
1. Representations, Warranties, and Agreements of the Company. The
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Company represents, warrants, and agrees that:
(a) A registration statement on Form SB-1 (the "SB-1") with respect
to the Company's proposed offering of the Shares (the "Offering") has (i) been
prepared by the Company in conformity with the requirements of the Securities
Act of 1933 (the "Securities Act") and the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder, (ii) been filed with the Commission under the Securities Act, and
(iii) become effective under the Securities Act. A true and correct copy of the
SB-1 has been delivered by the Company to Equitrade. As used in this Agreement,
"Effective Time" means with respect to the SB-1, the date and the time as of
which such registration statement, or the most recent post-effective amendment
thereto, if any, was declared effective by the Commission; "Effective Date"
means the date of the Effective Time of the SB-1; "Preliminary Prospectus" means
each prospectus included in the SB-1 or amendments thereof, before it became
effective under the Securities Act; "Primary Registration Statement" means the
SB-1 as filed with the Commission, including all information contained in the
final prospectus filed with the Commission pursuant to the Rules and Regulations
and deemed to be a part of the Registration Statement as of the Effective Time
of the SB-1 pursuant to paragraph (b) of Rule 430A of the Rules and Regulations;
and "Prospectus" means such final prospectus, as first filed with the Commission
pursuant to paragraph (1) or (4) of Rule 424(b) of the Rules and Regulations.
The Commission has not issued any order preventing or suspending the use of any
Preliminary Prospectus.
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(b) The SB-1 conforms (and the Prospectus and any further amendments
or supplements to the SB-1 or the Prospectus, when they become effective or are
filed with the Commission, as the case may be, will conform) in all respects to
the requirements of the Securities Act and the Rules and Regulations, and do not
and will not, as of the applicable effective date (as to the SB-1 and any
amendment thereto) and as of the applicable filing date (as to the Prospectus
and any amendment or supplement thereto) 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; provided that no
representation or warranty is made as to information contained in or omitted
from the SB-1 or the Prospectus in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Underwriter
specifically for inclusion therein.
(c) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of its jurisdiction of
incorporation, is duly qualified to do business, and is in good standing as a
foreign corporation in each jurisdiction, if any, in which its ownership or
lease of property or the conduct of its business requires such qualification,
and has all power and authority necessary to own or hold its properties and to
conduct the business in which it is engaged.
(d) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company have
been duly and validly authorized and issued, are fully paid and non-assessable,
and conform to the description thereof contained in the Prospectus.
(e) The unissued Shares to be issued and sold by the Company through
the efforts of Equitrade hereunder, and others, have been duly and validly
authorized and, when issued and delivered against payment therefor as provided
herein, will be duly and validly issued, fully paid, and non-assessable; and the
Shares will conform to the description thereof contained in the Prospectus.
(f) The execution, delivery, and performance of this Agreement by the
Company and the consummation of the transactions contemplated hereby will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Company is
bound or to which any of the properties or assets of the Company is subject, nor
will such actions result in any violation of the provisions of the charter or
bylaws of the Company or any statute or any order, rule, or regulation of any
court or governmental agency or body having jurisdiction over the Company or any
of its properties or assets; and except for the registration of the Shares under
the Securities Act and such consents, approvals, authorizations, registrations,
or qualifications as may be required under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") and applicable state securities laws in
connection with the purchase and distribution of the Shares, no consent,
approval, authorization, or order of, or filing or registration with, any such
court or governmental agency or body is required for the execution, delivery,
and performance of this Agreement by the Company and the consummation of the
transactions contemplated hereby.
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(g) There are no contracts, agreements, or understandings between the
Company and any person granting such person the right to require the Company to
file a registration statement under the Securities Act with respect to any
securities of the Company owned or to be owned by such person or to require the
Company to include such securities in the securities registered pursuant to the
SB-1.
(h) The Company has not sustained, since the date of the latest
audited financial statements included in the Prospectus, any material loss or
interference with its business from fire, explosion, flood, or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order, or decree, other than as set forth or contemplated
in the Prospectus; and, since such date, there has not been any change in the
capital stock or long-term debt of the Company or any material adverse change,
or any development involving a prospective material adverse change, in or
affecting the general affairs, management, financial position, stockholders
equity, or results of operations of the Company other than as set forth or
contemplated in the Prospectus.
(i) The financial statements (including the related notes and
supporting schedules) filed as part of the SB-1 or included in the Prospectus
present fairly the Company's financial condition and results of operations
purported to be shown thereby, at the dates and for the periods indicated, and
have been prepared in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods involved.
(j) Tailor Xxxxxx, L.L.P., who have certified certain financial
statements of the Company, whose report appears in the Prospectus, and who have
delivered the initial letter referred to in Section 7(e) hereof, are independent
public accountants as required by the Securities Act and the Rules and
Regulations.
(k) There are no legal or governmental proceedings pending to which
the Company is a party or of which any property or asset of the Company is the
subject which, if determined adversely to the Company, might have a material
adverse effect on the consolidated financial position, stockholders' equity,
results of operations, business, or prospects of the Company; and to the best of
the Company's knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others.
(l) There are no contracts or other documents which are required to
be described in the Prospectus or filed as exhibits to either of the
Registration Statements by the Securities Act or by the Rules and Regulations
which have not been described in the Prospectus or filed as exhibits to the SB-1
or incorporated therein by reference as permitted by the Rules and Regulations.
3. Offer of the Shares; Commission to Equitrade. On the basis of the
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representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, Equitrade agrees to use its best efforts to
facilitate the Company's sale of Shares at a price of Six Dollars ($6.00) per
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Share. In consideration of those efforts, Equitrade shall be entitled to a
commission of Eight and One-half Percent (8-1/2%) of the sales proceeds
receivable by the Company on all sales effected as a result of such efforts by
Equitrade.
4. Escrow of Share Sales Proceeds. Pursuant to a separate written
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agreement, a copy of which is attached as Exhibit "A", the Company has secured
the services of M&T Bank to serve as escrow holder ("Holder") for the escrow of
proceeds received from sales of Shares in the Offering. Said agreement provides,
in pertinent part, that all proceeds representing the consideration received for
purchases of Shares shall be deposited into, and held in, an escrow account
maintained by Holder, until such time as the total proceeds held in the account
aggregates Six Hundred Thousand Dollars ($600,000), at which time all proceeds
shall be delivered forthwith to the Company and the escrow shall terminate.
Equitrade agrees to take all reasonable steps to facilitate the deposit into
escrow of proceeds from the sale of Shares derived from its sales efforts
hereunder. If the Offering concludes without reaching the $600,000 ($600,000)
minimum figure, all proceeds shall be returned to the payors, and the escrow
shall terminate.
5. Further Agreements of the Company. The Company agrees:
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(a) To furnish promptly to Equitrade a signed copy of the
Registration Statement as originally filed with the Commission, and each
amendment thereto filed with the Commission, including all consents and exhibits
filed therewith;
(b) To deliver promptly to Equitrade the following documents as
Equitrade shall reasonably request: (i) copies of the Registration Statements as
originally filed with the Commission and each amendment thereto (in each case
excluding exhibits other than this Agreement and the computation of per share
earnings) (ii) each Preliminary Prospectus, the Prospectus, and any amended or
supplemented Prospectus in connection with the offering or sale of the Stock (or
any other securities relating thereto), and if any events shall have occurred as
a result of which the Prospectus as then amended or supplemented would include
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made when such Prospectus is delivered, not
misleading, or, if for any other reason it shall be necessary during such same
period to amend or supplement the Prospectus in order to comply with the
Securities Act, to notify Equitrade and, upon its request, to prepare and
furnish to Equitrade and to any dealer in securities copies of an amended or
supplemented Prospectus which will correct such statement or omission or effect
such compliance, and in case Equitrade is required to deliver a prospectus in
connection with sales of any of the Shares at any time after the Effective Time
of the Primary Registration Statement, upon the request of and at the expense of
Equitrade, to prepare and deliver to Equitrade a copy of an amended or
supplemented Prospectus complying with Section l0(a)(3) of the Securities Act;
(c) To file promptly with the Commission any amendment to the
Registration Statements or the Prospectus or any supplement to the Prospectus
that may, in the judgment of the Company, be required by the Securities Act or
requested by the Commission;
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(d) Prior to filing with the Commission any (i) amendment to either
of the Registration Statements or supplement to the Prospectus, or (ii) any
Prospectus pursuant to Rule 424 of the Rules and Regulations, to furnish a copy
thereof to Equitrade;
(e) As soon as practicable after the Effective Date of the Primary
Registration Statement, to make generally available to the Company's security
holders and to deliver Equitrade an earnings statement of the Company (which
need not be audited) complying with Section 11(a) of the Securities Act and the
Rules and Regulations (including, at the option of the Company, Rule 158);
(f) Promptly from time to time to take such action as may be
reasonably advisable to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as the Company may determine and to comply
with such laws so as to permit the continuance of sales and dealings therein in
such jurisdictions for as long as may be necessary to complete the distribution
of the Shares;
(g) To apply the net proceeds from the sale of the Shares being sold
by the Company as set forth in the Prospectus; and
(h) To take such steps as shall be necessary to ensure that the
Company shall not become an "investment company" within the meaning of such term
under the Investment Company Act of 1940 and the rules and regulations of the
Commission thereunder.
6. Expenses. The Company agrees to pay (a) the costs incident to the
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authorization, issuance, sale, and delivery of the Shares and any taxes payable
in that connection; (b) the costs incident to the preparation, printing and
filing under the Securities Act of the Registration Statements and any
amendments and exhibits thereto; (c) the costs of distributing the Registration
Statements as originally filed and each amendment thereto and any post-effective
amendments thereof (including, in each case, exhibits), any Preliminary
Prospectus, the Prospectus, and any amendment or supplement to the Prospectus,
all as provided in this Agreement; (d) the costs of reproducing and distributing
this Agreement; (e) the filing fees incident to securing any required review by
the National Association of Securities Dealers, Inc. of the terms of sale of the
Shares; (f) the fees and expenses of qualifying the Shares under the securities
laws of the several jurisdictions as provided in Section 5(g) and of preparing,
printing and distributing a Blue Sky Memorandum; and (g) all other costs and
expenses incident to the performance of the obligations of the Company; provided
that, except as provided in this Section 6, Equitrade shall pay its own costs
and expenses, including the costs and expenses of its counsel, any transfer
taxes on the Shares which it may sell, and the expenses of advertising any
offering of the Shares made by Equitrade. Notwithstanding the foregoing,
Equitrade shall be entitled to withhold an amount equal to One and One-half
Percent (1-1/2%) of the total proceeds realized by the Company from sales of
Shares effected by Equitrade, as and for reimbursement to Equitrade for its
expenses in connection with said sales.
7. Conditions of Equitrade's Obligations. The obligations of Equitrade
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hereunder are subject to the accuracy, when made and on each Delivery Date, of
the representations and warranties of the Company contained herein, to the
performance by the Company of its obligations hereunder, and to each of the
following additional terms and conditions:
(a) The Rule 462(b) Registration Statement, if any, and the
Prospectus shall have been timely filed with the Commission; no stop order
suspending the effectiveness of the Registration Statement or any part thereof
shall have been issued and no proceeding for that purpose shall have been
initiated or threatened by the Commission; and any request of the Commission for
inclusion of additional information in the Registration Statement or the
Prospectus, or otherwise, shall have been complied with.
(b) The Company shall not have discovered that the Registration
Statement or the Prospectus or any amendment or supplement thereto contains any
untrue statement of a fact which, in the opinion of counsel for the Company, is
material or omits to state any fact which, in the opinion of such counsel, is
material and is required to be stated therein or is necessary to made the
statements therein not misleading.
(c) All corporate proceedings and other legal matters incident to
'the authorization, form and validity of this Agreement, the Registration
Statement, and the Prospectus, and all other legal matters relating to this
Agreement and the transactions contemplated hereby, shall be reasonably
satisfactory in all respects, and the Company shall have furnished to Equitrade
all documents and information that Equitrade may reasonably request.
(d) Wasserman, Comden, Xxxxxxxxx & Xxxxxxx, LLP ("WCCP") shall have
furnished its written opinion, as counsel to the Company, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, is duly qualified to do business and is
in good standing as a foreign corporation in each jurisdiction in
which its ownership or lease of property or the conduct of its
businesses requires such qualification, and has all power and
authority necessary to own or hold its properties and conduct the
businesses in which it is engaged;
(ii) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of
the Company (including the Shares) have been duly and validly
authorized and issued, are fully paid and non-assessable, and conform
to the description thereof contained in the Prospectus;
(iii) There are no preemptive or other rights to subscribe for
or to purchase, nor any restriction upon the voting or transfer of,
any of the Shares pursuant to the Company's charter or by-laws or any
agreement or other instrument known to such counsel;
(iv) The Company has good and marketable title in fee simple to
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all real property owned by them, in each case free and clear of all
liens, encumbrances, and defects except such as are described in the
Prospectus or such as do not materially affect the value of such
property and do not materially interfere with the use made and
proposed to be made of such property by the Company; and all real
property and buildings held under lease by the Company are held by it
under valid, subsisting, and enforceable leases, with such exceptions
as are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the Company;
(v) To the best of such counsel's knowledge, there are no
legal or governmental proceedings pending to which the Company is a
party or of which any property or asset of the Company is the subject
which, if determined adversely to the Company, might have a material
adverse effect on the consolidated financial position, stockholders'
equity, results of operations, business, or prospects of the Company;
and, to the best of such counsel's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened
by others;
(vi) The Primary Registration Statement was declared effective
under the Securities Act as of the date and time specified in such
opinion, the Rule 462(b) Registration Statement, if any, was filed
with the Commission on the date specified therein, the Prospectus was
filed with the Commission pursuant to the subparagraph of Rule 424(b)
of the Rules and Regulations specified in such opinion on the date
specified therein and no stop order suspending the effectiveness of
any of the Registration Statements has been issued and, to the
knowledge of such counsel, no proceeding for that purpose is pending
or threatened by the Commission;
(vii) The Registration Statements, as of their respective
Effective Dates, and the Prospectus, as of its date, and any further
amendments or supplements thereto, as of their respective dates, made
by the Company (other than the financial statements and other
financial data contained therein, as to which such counsel need
express no opinion) complied as to form in all material respects with
the requirements of the Securities Act and the Rules and Regulations;
(viii) To the best of such counsel' s knowledge, there are no
contracts or other documents which are required to be described in the
Prospectus or filed as exhibits to the Registration Statements by the
Securities Act or by the Rules and Regulations which have not been
described or filed as exhibits to the Registration Statements or
incorporated therein by reference as permitted by the Rules and
Regulations;
(ix) This Agreement has been duly authorized, executed, and
delivered by the Company;
(x) The issue and sale of the Shares by the Company and the
compliance by the Company with all of the provisions of this Agreement
and the consummation of the transactions contemplated hereby will not
conflict with or result in a breach or violation of any of the terms
or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement, or other agreement or
instrument known to such counsel to which the Company is a party or by
which the Company is bound or to which any of the properties or assets
of the Company is subject, nor will such actions result in any
violation of the provisions of the charter or by-laws of the Company
or any statute or any order, rule, or regulation known to such counsel
of any court or governmental agency or body having jurisdiction over
the Company or any of its properties or assets; and, except for the
registration of the Shares under the Securities Act and such consents,
approvals, authorizations, registrations, or qualifications as may be
required under the Exchange Act and applicable state securities laws
in connection with the purchase and distribution of the Shares by
Equitrade, no consent, approval, authorization, or order of, or filing
or registration with, any such court or governmental agency or body is
required for the execution, delivery, and performance of this
Agreement by the Company and the consummation of the transactions
contemplated hereby; and
(xi) To the best of such counsel's knowledge, there are no
contracts, agreements, or understandings between the Company and any
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person granting such person the right to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company owned or to be owned by such person or to
require the Company to include such securities in the securities
registered pursuant to the Registration Statements or in any
securities being registered pursuant to any other registration
statement filed by the Company under the Securities Act.
In rendering such opinion, such counsel may (i) state that their
opinion is limited to matters governed by the Federal laws of the United States
of America, the laws of the State of California, and the General Corporation Law
of the State of Delaware, and that such counsel is not admitted in the States of
Delaware or New York, and (ii) in giving the opinion referred to here, state
that no examination of record titles for the purpose of such opinion has been
made, and that it is relying upon a general review of the titles of the Company,
upon any opinions of local counsel and abstracts, reports, and policies of title
companies rendered or issued at or subsequent to the time of acquisition of such
property by the Company, upon opinions of counsel to the lessors of such
property, and, in respect of matters of fact, upon certificates of officers of
the Company, provided that such counsel shall state that it believes that it is
justified in relying upon such opinions, abstracts, reports, policies, and
certificates. Such opinion shall also state that (x) such counsel has acted as
counsel to the Company on a regular basis and has acted as counsel to the
Company in connection with the preparation of the Registration Statement, and
(y) based on the foregoing, no facts have come to the attention of such counsel
which leads it to believe that the Registration Statement, as of its Effective
Date, contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order to make the
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statements therein not misleading, or that the Prospectus contains any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The foregoing
opinion and statement may be qualified by a statement to the effect that such
counsel does not assume any responsibility for the accuracy, completeness, or
fairness of the statements contained in the Registration Statement or the
Prospectus.
(e) With respect to the letter of Tailor Xxxxxx LLP ("TL") to be
delivered to Equitrade upon the execution of this Agreement (the "initial
letter"), the Company shall have furnished to Equitrade a letter (the
"bring-down letter") of such accountants, addressed to the Company's
underwriters, (i) confirming that TL are independent public accountants within
the meaning of the Securities Act and are in compliance with the applicable
requirements relating to the qualification of accountants under Rule 2-01 of
Regulation S-X of the Commission, (ii) stating, as of the date of the bring-down
letter (or, with respect to matters involving changes or developments since the
respective dates as of which specified financial information is given in the
Prospectus, as of a date not more than five days prior to the date of the
bring-down letter), the conclusions and findings of such firm with respect to
the financial information and other matters covered by the initial letter, and
(iii) confirming in all material respects the conclusions and findings set forth
in the initial letter.
(f) The Company shall have furnished to Equitrade a certificate,
dated such Delivery Date, of its Chairman of the Board, its President, or a Vice
President and its chief financial officer, stating that:
(i) The representations, warranties, and agreements of the
Company in Section 1 are true and correct as of such Delivery Date;
the Company has complied with all its agreements contained herein; and
the conditions set forth in Sections 7(a) and 7(g) have been
fulfilled; and
(ii) They have carefully examined the Registration Statement
and the Prospectus and, in their opinion, (A) the Registration
Statement, as of its Effective Date, and the Prospectus, as of each of
the Effective Dates, did not include any untrue statement of a
material fact and did not omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading, and (B) since the Effective Date of the Primary
Registration Statement, no event has occurred which should have been
set forth in a supplement or amendment to either the Registration
Statement or the Prospectus.
(g) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included in
the Prospectus any loss or interference with its business from fire, explosion,
flood, or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order, or decree, otherwise than as set
forth or contemplated in the Prospectus, or (ii) since such date there shall not
have been any change in the capital stock or long-term debt of the Company or
any change, or any development involving a prospective change, in or affecting
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the general affairs, management, financial position, stockholders' equity, or
results of operations of the Company, otherwise than as set forth or
contemplated in the Prospectus, the effect of which, in any such case described
in clause (i) or (ii), is so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the Shares on
the terms and in the manner contemplated in the Prospectus.
8. Indemnification and Contribution.
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(a) The Company shall indemnify and hold harmless Equitrade, its
officers, and employees, and each person, if any, who controls Equitrade within
the meaning of the Securities Act, from and against any loss, claim, damage, or
liability, joint or several, or any action in respect thereof (including, but
not limited to, any loss, claim, damage, liability, or action relating to
purchases and sales of Shares), to which Equitrade, or that officer, employee,
or controlling person may become subject, under the Securities Act or otherwise,
insofar as such loss, claim, damage, liability, or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained (A) in any Preliminary Prospectus, the Registration Statement or
the Prospectus, or in any amendment or supplement thereto, or (B) in any blue
sky application or other document prepared or executed by the Company (or based
upon any written information furnished by the Company) specifically for the
purpose of qualifying any or all of the Shares under the securities laws of any
state or other jurisdiction (any such application, document, or information
being hereinafter called a "Blue Sky Application"), or (ii) the omission or
alleged omission to state in any Preliminary Prospectus, the Registration
Statement, or the Prospectus, or in any amendment or supplement thereto, or in
any Blue Sky Application any material fact required to be stated therein or
necessarily to make the statements therein not misleading; and shall reimburse
Equitrade and each such officer, employee, and controlling person promptly upon
demand for any legal or other expenses reasonably incurred by Equitrade or that
officer, employee, or controlling person in connection with investigating or
defending or preparing to defend against any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability, or action arises out of, or is based upon, any untrue
statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Prospectus, the Registration Statement, or the Prospectus, or in
any such amendment or supplement, or in any Blue Sky Application in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of Equitrade; and provided further that the Company shall not be
liable in the case of any matter covered herein above to the extent that it is
determined in a final judgement by a court of competent jurisdiction that such
loss, claim, damage, liability, or action resulted directly from any act or
failure to act undertaken or omitted to be taken by Equitrade through its gross
negligence or wilful misconduct.
(b) Equitrade shall indemnify and hold harmless the Company, its
officers, and employees, each of its directors, and each person, if any, who
controls the Company within the meaning of the Securities Act, from and against
any loss, claim, damage, or liability, joint or several, or any action in
respect thereof, to which the Company or any such director, officer, or
controlling person may become subject, under the Securities Act or otherwise,
insofar as such loss, claim, damage, liability, or action arises out of, or is
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based upon (i) any untrue statement or alleged untrue statement of a material
fact contained (A) in any Preliminary Prospectus, the Registration Statement, or
the Prospectus, or in any amendment or supplement thereto, or (B) in any Blue
Sky Application; or (ii) the omission or alleged omission to state in any
Preliminary Prospectus, the Registration Statement, or the Prospectus, or in any
amendment or supplement thereto, or in any Blue Sky Application any material
fact required to be stated therein or necessary to make the statements therein
not misleading, but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company through
or by Equitrade, and shall reimburse the Company and any such director, officer,
or controlling person for any legal or other expenses reasonably incurred by the
Company or any such director, officer, or controlling person in connection with
investigating or defending or preparing to defend against any such loss, claim,
damage, liability, or action as such expenses are incurred. The foregoing
indemnity agreement is in addition to any liability which Equitrade may
otherwise have to the Company or any such director, officer, or controlling
person.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 8 except to the extent it has
been materially prejudiced by such failure and, provided further, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section 8.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation. Each indemnified party, as
a condition of the indemnity agreements contained in Sections 8(a) and 8(b),
shall use its best efforts to cooperate with the indemnifying party in the
defense of any such action or claim. No indemnifying party shall (i) without the
prior written consent of the indemnified parties (which consent shall not be
unreasonably withheld), 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 each indemnified party from all liability
arising out of such claim, action, suit, or proceeding, or (ii) be liable for
any settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its written
consent, or if there be a final judgment for the plaintiff in any such action,
the indemnifying party agrees to indemnify and hold harmless any indemnified
party from and against any loss of liability by reason of such settlement or
judgment.
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(d) If the indemnification provided for in this Section 8 shall for
any reason be unavailable to or insufficient to hold harmless an indemnified
party under Section 8(a) or (b) in respect of any loss, claim, damage, or
liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage, or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company, on the one hand, and Equitrade, on the other, from the
offering of the Shares, or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above, but also
the relative fault of the Company, on the one hand, and Equitrade on the other,
with respect to the statements or omissions which resulted in such loss, claim,
damage, or liability, or action in respect thereof, as well as any other
relevant equitable considerations. The relative benefits received by the
Company, on the one hand, and Equitrade, on the other, with respect to such
offering shall be deemed to be in the same proportion as the total net proceeds
from the offering of the Shares purchased under this Agreement (before deducting
expenses) received by the Company, on the one hand, and the total underwriting
discounts and commissions received by Equitrade with respect to the Shares
purchased under this Agreement, on the other hand, bear to the total gross
proceeds from the offering of the Shares under this Agreement, in each case as
set forth in the table on the cover page of the Prospectus. The relative fault
shall be determined by reference to whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company, or Equitrade, the intent of
the parties, and their relative knowledge, access to information, and
opportunity to correct or prevent such statement or omission. The Company and
Equitrade agree that it would not be just and equitable if contributions
pursuant to this Section 8(d) were to be determined by pro rata allocation or by
any other method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage, or liability, or action in respect
thereof, referred to above in this Section 8(d) shall be deemed to include, for
purposes of this Section 8(d), any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) Equitrade confirms that the statements with respect to the public
offering of the Shares set forth on the cover page of, and under the caption
"Underwriting" in, the Prospectus are correct and constitute the only
information furnished in writing to the Company by or on behalf of Equitrade
specifically for inclusion in the Registration Statement and the Prospectus.
9. Notices, etc. All statements, requests, notices, and agreements hereunder
------------
shall be in writing, and:
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(a) if to Equitrade, shall be delivered or sent by mail, telex, or
facsimile transmission to Equitrade Securities Corporation, Inc., 00000 Xxxxxxxx
Xxxxx, Xxxx Xxxxxx, Xxxxxxxxxx 00000, Attention: President; and
(b) if to the Company, shall be delivered or sent by mail, telex, or
facsimile transmission to the address of the Company set forth in the Primary
Registration Statement, Attention: President.
Any such statements, requests, notices, or agreements shall take effect at
the time of receipt thereof.
10. Persons Entitled to Benefit of Agreement. This Agreement shall inure
-----------------------------------------
to the benefit of and be binding upon the parties hereto and their respective
personal representatives and successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons, except that
(A) the representations, warranties, indemnities, and agreements of the Company
contained in this Agreement shall also be deemed to be for the benefit of the
officers and employees of Equitrade and the person or persons, if any, who
control Equitrade within the meaning of Section 15 of the Securities Act, and
(B) the indemnity agreement of Equitrade contained in Section 8(b) of this
Agreement shall be deemed to be for the benefit of directors, officers, and
employees of the Company and any person controlling the Company within the
meaning of Section 15 of the Securities Act. Nothing in this Agreement is
intended or shall be construed to give any person, other than the persons
referred to in this Section 15, any legal or equitable right, remedy, or claim
under or in respect of this Agreement or anything contained herein.
11. Survival. The respective indemnities, representations, warranties, and
--------
agreements of the parties contained in this Agreement, or made by or on behalf
of them, respectively, pursuant to this Agreement, shall survive the delivery of
and payment for the Shares, and shall remain in full force and effect,
regardless of any investigation made by or on behalf of any of them or any
person controlling any of them.
12. Definition of the Terms "Business Day" and "Subsidiary". For purposes
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of this Agreement, (a) "business day" means any day on which the New York Stock
Exchange, Inc. is open for trading, and (b) "subsidiary" has the meaning set
forth in Rule 405 of the Rules and Regulations.
13. Governing Law. This Agreement shall be governed by and construed in
--------------
accordance with the internal laws of the State of California.
14. Counterparts. This Agreement may be executed in one or more
------------
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument. Signatures received by
facsimile shall be deemed as originals.
15. Headings. The headings herein are inserted for convenience of
--------
13
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
16. Assignment. This Agreement is personal to the parties hereto, and may
----------
not be assigned without the prior written consent of the other party had and
received (which consent may be withheld by either party in its discretion). Any
purported assignment without such consent shall be null and void and of no force
or effect.
If the foregoing correctly sets forth the agreement among the Company and
Equitrade, please indicate your acceptance in the space provided for that
purpose below.
Very truly yours.
MICROSOURCEONLINE, INC.
By:_______________________________
Xxxxx Xxxxxxxx
President
Accepted:
SIERRA BROKERAGE SERVICES, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
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