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EXHIBIT 1.2
FORM OF UNDERWRITER'S OPTION AGREEMENT
THE SHARES ISSUABLE UPON EXERCISE OF THE OPTION
REPRESENTED BY THIS CERTIFICATE HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, PURSUANT TO A
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION (THE "REGISTRATION STATEMENT").
HOWEVER, NEITHER THIS OPTION NOR SUCH SHARES MAY BE
OFFERED OR SOLD EXCEPT PURSUANT TO (i) A POST-EFFECTIVE
AMENDMENT TO SUCH REGISTRATION STATEMENT, (ii) A SEPARATE
REGISTRATION STATEMENT UNDER SUCH ACT, OR (iii) AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
THE TRANSFER OF THIS
OPTION IS RESTRICTED AS
DESCRIBED HEREIN.
U.S. ONLINE COMMUNICATIONS, INC.
Option for the Purchase of
Common Stock
No. __ _______ Shares
THIS CERTIFIES that, for receipt in hand of $_____ and other value
received, __________, ___________ (the "Holder"), is entitled to subscribe for
and purchase from U.S. OnLine Communications, Inc., a Delaware corporation (the
"Company"), upon the terms and conditions set forth herein, at any time or from
time to time after the date hereof, and before 5:00 P.M. on _______, 2003 New
York time (the "Exercise Period"), up to _______ shares (the "Option Shares")
of the Company's common stock, par value $.001 per share ("Common Stock"), at a
price of $____ (120% of the public offering price) per Option Share (the
"Exercise Price"). This Option is the option or one of the options
(collectively, including any options issued upon the exercise or transfer of
any such options in whole or in part, the "Options") issued pursuant
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to the Underwriting Agreement, dated ________, 1998 among the Company and
Barington Capital Group, L. P. and Cruttenden Roth Incorporated, as
Representatives of the several underwriters (the "Underwriting Agreement"). As
used herein the term "this Option" shall mean and include this Option and any
Option or Options hereafter issued as a consequence of the exercise or transfer
of this Option in whole or in part. This Option may not be sold, transferred,
assigned or hypothecated until one year after the effective date of the
Registration Statement (the "Effective Date") except that it may be transferred,
in whole or in part, to (i) one or more officers or partners of the Holder (or
the officers or partners of any such partner); (ii) any other underwriting firm
or member of the selling group which participated in the public offering of
_________ shares of the Company's Common Stock which commenced on ________, 1998
(or the officers or partners of any such firm); (iii) a successor to the Holder,
or the officers or partners of such successor; (iv) a purchaser of substantially
all of the assets of the Holder; or (v) by operation of law; and the term the
"Holder" as used herein shall include any transferee to whom this Option has
been transferred in accordance with the above.
1. (a) This Option may be exercised during the Exercise Period, as to
the whole or any lesser number of whole Option Shares, by the surrender of this
Option (with the election at the end hereof duly executed) to the Company at its
office at 10300 Metric Boulevard, Austin, Texas 78758,or at such other place as
is designated in writing by the Company, together with a certified or bank
cashier's check payable to the order of the Company in an amount equal to the
Exercise Price multiplied by the number of Option Shares for which this Option
is being exercised.
(b) All or any part of this Option may be exercised on a
"cashless" basis, by stating in the exercise notice such intention, and the
maximum number (the "Maximum Number") of shares of Common Stock the Holder
elects to purchase pursuant to such exercise. The number of shares of Common
Stock the Holder shall receive (the "Cashless Exercise Number") shall equal the
Maximum Number minus the quotient that is obtained when the product of the
Maximum Number and the then current Exercise Price is divided by the then
Current Market Price per share (as hereinafter defined).
2. Upon each exercise of the Holder's rights to purchase Option Shares
and the payment of the Exercise Price in accordance with the terms of this
Option, the Holder shall be deemed to be the holder of record of the Option
Shares issuable upon such exercise, notwithstanding that the transfer books of
the Company shall then be closed or certificates representing such Option Shares
shall not then have been actually delivered to the Holder. As soon as
practicable after each such exercise of this Option, the Company shall issue and
deliver to the Holder a certificate or certificates for the Option Shares
issuable upon such
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exercise, registered in the name of the Holder or its designee. If this Option
should be exercised in part only, the Company shall, upon surrender of this
Option for cancellation, execute and deliver a new Option evidencing the right
of the Holder to purchase the balance of the Option Shares (or portions thereof)
subject to purchase hereunder.
3. Any Options issued upon the transfer or exercise in part of this
Option shall be numbered and shall be registered in an Option Register as they
are issued. The Company shall be entitled to treat the registered holder of any
Option on the Option Register as the owner in fact thereof for all purposes and
shall not be bound to recognize any equitable or other claim to or interest in
such Option on the part of any other person, and shall not be liable for any
registration or transfer of Options which are registered or to be registered in
the name of a fiduciary or the nominee of a fiduciary unless made with the
actual knowledge that a fiduciary or nominee is committing a breach of trust in
requesting such registration or transfer, or with the knowledge of such facts
that its participation therein amounts to bad faith. This Option shall be
transferable only on the books of the Company upon delivery thereof duly
endorsed by the Holder or by his duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment, or authority to
transfer. In all cases of transfer by an attorney, executor, administrator,
guardian, or other legal representative, duly authenticated evidence of his or
its authority shall be produced. Upon any registration of transfer, the Company
shall deliver a new Option or Options to the person entitled thereto. This
Option may be exchanged, at the option of the Holder thereof, for another
Option, or other Options of different denominations, of like tenor and
representing in the aggregate the right to purchase a like number of Option
Shares (or portions thereof), upon surrender to the Company or its duly
authorized agent. Notwithstanding the foregoing, the Company shall have no
obligation to cause Options to be transferred on its books to any person if, in
the opinion of counsel to the Company, such transfer does not comply with the
provisions of the Securities Act of 1933, as amended (the "Act"), and the rules
and regulations thereunder.
4. The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of providing for
the exercise of the Options, such number of shares of Common Stock as shall,
from time to time, be sufficient therefor. The Company covenants that all shares
of Common Stock issuable upon exercise of this Option, upon receipt by the
Company of the Exercise Price, shall be validly issued, fully paid,
nonassessable, and free of preemptive rights.
5. (a) Subject to the provisions of this Section 5, the Exercise Price
in effect from time to time shall be subject to adjustment, as follows:
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In case the Company shall at any time after the date hereof (A)
declare a dividend on the outstanding Common Stock payable in shares of
its capital stock, (B) subdivide the outstanding Common Stock, (C)
combine the outstanding Common Stock into a smaller number of shares, or
(D) issue any shares of its capital stock by reclassification of the
Common Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing
corporation), then, in each case, the Exercise Price, and the number of
shares of Common Stock issuable upon exercise of the Options in effect
at the time of the record date for such dividend or of the effective
date of such subdivision, combination, or reclassification, shall be
proportionately adjusted so that the Exercise Price shall equal the
price determined by multiplying the Exercise Price in effect prior to
such action by a fraction, the denominator of which shall be the number
of shares of Common Stock outstanding after giving effect to such
action, and the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such action. Such
adjustment shall be made successively whenever any event listed above
shall occur. Whenever the Exercise Price is adjusted as set forth above,
the number of shares of Common Stock issuable upon exercise of the
Options in effect at such time shall simultaneously be adjusted by
multiplying the number of shares of Common Stock initially issuable upon
exercise of the Options by the Exercise Price in effect prior to such
action and dividing the product so obtained by the Exercise Price, as
adjusted.
(b) No adjustment in the Exercise Price shall be required if such
adjustment is less than $.05; provided, however, that any adjustments which by
reason of this Section 5 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Section 5 shall be made to the nearest cent or to the nearest one thousandth of
a share, as the case may be.
(c) In any case in which this Section 5 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer, until the occurrence of such
event, issuing to the Holder of the Option, if any Holder has exercised an
Option after such record date, the shares of Common Stock, if any, issuable upon
such exercise over and above the shares of Common Stock, if any, issuable upon
such exercise on the basis of the Exercise Price in effect prior to such
adjustment; provided, however, that the Company shall deliver to such exercising
Holder a due bill or other appropriate instrument evidencing such Holder's right
to receive such additional shares upon the occurrence of the event requiring
such adjustment.
(d) In case of any capital reorganization, other than in the
cases referred to in Section 5(a) hereof, or the consoli-
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dation or merger of the Company with or into another corporation (other than a
merger or consolidation in which the Company is the continuing corporation and
which does not result in any reclas- sification of the outstanding shares of
Common Stock or the conversion of such outstanding shares of Common Stock into
shares of other stock or other securities or property), or the sale of the
property of the Company as an entirety or substantially as an entirety
(collectively such actions being hereinafter referred to as "Reorganizations"),
there shall thereafter be deliverable upon exercise of any Option (in lieu of
the number of shares of Common Stock theretofore deliverable) the number of
shares of stock or other securities or property to which a holder of the number
of shares of Common Stock which would otherwise have been deliverable upon the
exercise of such Option would have been entitled upon such Reorganization if
such Option had been exercised in full immediately prior to such Reorganization.
In case of any Reorganization, appropriate adjustment, as determined in good
faith by the board of directors of the Company, shall be made in the application
of the provisions herein set forth with respect to the rights and interests of
Holders so that the provisions set forth herein shall thereafter be applicable,
as nearly as possible, in relation to any shares or other property thereafter
deliverable upon exercise of Options. Any such adjustment shall be made by and
set forth in a supplemental agreement between the Company, or any successor
thereto, and Continental Stock Transfer & Trust Company, New York, New York and
shall for all purposes hereof conclusively be deemed to be an appropriate
adjustment. The Company shall not effect any such Reorganization, unless upon or
prior to the consummation thereof the successor corporation, or if the Company
shall be the surviving corporation in any such Reorganization and is not the
issuer of the shares of stock or other securities or property to be delivered to
holders of shares of the Common Stock outstanding at the effective time thereof,
then such issuer, shall assume by written instrument the obligation to deliver
to the registered Holder of the Options such shares of stock, securities, cash
or other property as such Holder shall be entitled to purchase in accordance
with the foregoing provisions. In the event of sale or conveyance or other
transfer of all or substantially all of the assets of the Company as a part of a
plan for liquidation of the Company, all rights to exercise any Option shall
terminate 30 days after the Company gives written notice to each registered
Holder of an Option that such sale or conveyance of other transfer has been
consummated.
(e) Whenever the Exercise Price is adjusted as provided in this
Section 5, the Company will promptly obtain a certificate of a firm of
independent public accountants of recognized standing selected by the board of
directors of the Company (who may be the regular auditors of the Company)
setting forth the exercise price as so adjusted and a brief statement of the
facts accounting for such adjustment, and will make available a brief summary
thereof to the Holders of the Options, at their
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addresses listed on the register maintained for the purpose by
the Company.
(f) Whenever any adjustment is made pursuant to Section 5 or 6,
the Company shall cause notice of such adjustment to be mailed to each
registered Holder of an Option within 15 Business Days (as hereinafter defined)
thereafter, such notice to include in reasonable detail (i) the events
precipitating the adjustment, (ii) the computation of any adjustments, and (iii)
the Exercise Price, the number of shares or the securities or other property
purchasable upon exercise of each Option after giving effect to such adjustment.
For purposes hereof, "Business Day" shall mean any day other than a Saturday, a
Sunday, or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
(g) Irrespective of any adjustments pursuant to Section 5 or 6,
Options theretofore or thereafter issued need not be amended or replaced, but
Options thereafter issued shall bear an appropriate legend or other notice of
any adjustments.
(h) The Company shall not be required upon the exercise of any
Option to issue fractional shares of Common Stock which may result from
adjustments in accordance with this Section 5 to the Exercise Price or number of
shares of Common Stock purchasable under each Option. If more than one Option is
exercised at one time by the same registered Holder, the number of full shares
of Common Stock which shall be deliverable shall be computed based on the number
of shares deliverable in exchange for the aggregate number of Options exercised.
With respect to any final fraction of a share called for upon the exercise of
any Option or Options, the Company shall pay a cash adjustment in respect of
such final fraction in an amount equal to the same fraction of the Current
Market Price of a share of Common Stock calculated in accordance with Subsection
5(i).
(i) For the purpose of any computation under this Section 5 the
Current Market Price per share of Common Stock on any date shall be deemed to be
the average of the daily closing prices for the 30 consecutive trading days
immediately preceding the date in question. The closing price for each day shall
be the last reported sales price regular way or, in case no such reported sale
takes place on such day, the closing bid price regular way, in either case on
the principal national securities exchange (including, for purposes hereof, the
Nasdaq National Market ("Nasdaq") or The Nasdaq SmallCap Market) on which the
Common Stock is listed or admitted to trading or, if the Common Stock is not
listed or admitted to trading on any national securities exchange, the highest
reported bid price for the Common Stock as furnished by the National Association
of Securities Dealers, Inc. through Nasdaq or a similar organization if Nasdaq
is no longer reporting such information. If on any such date the Common Stock is
not listed or admitted to trading on any national securities exchange and is not
quoted by Nasdaq
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or any similar organization, the fair value of a share of Common Stock on such
date shall be as determined in good faith by the board of directors of the
Company, excluding any director(s) nominated by Barington Capital Group, L.P.,
whose determination shall be conclusive absent manifest error.
6. (a) In case of any reclassification or change of the shares of Common
Stock issuable upon exercise of the Options (other than a change in par value or
from no par value to a specified par value, or as a result of a subdivision or
combination, but including any change in the shares into two or more classes or
series of shares), or in case of any consolidation with or merger of the Company
with or into another corporation (other than a merger or consolidation in which
the Company is the surviving or continuing corporation), or in case of any sale,
lease, or conveyance to another corporation of the property and assets of any
nature of the Company as an entirety or substantially as an entirety, such
successor, leasing, or purchasing corporation, as the case may be, shall (i)
execute with the Holder an agreement providing that the Holder shall have the
right thereafter to receive upon exercise of this Option solely the kind and
amount of shares of stock and other securities, property, cash, or any
combination thereof receivable upon such consolidation, merger, sale, lease, or
conveyance by a holder of the number of shares of Common Stock for which this
Option might have been exercised immediately prior to such consolidation,
merger, sale, lease, or conveyance and (ii) make effective provision in its
certificate of incorporation or otherwise, if necessary, to effect such
agreement. Such agreement shall provide for adjustments which shall be as nearly
equivalent as practicable to the adjustments provided for in Section 5.
(b) In case of any consolidation or merger of another corporation
into the Company in which the Company is the continuing corporation and in which
there is a reclassification or change (including a change to the right to
receive cash or other property) of the shares of Common Stock (other than a
change in par value, or from no par value to a specified par value, or as a
result of a subdivision or combination, but including any change in the shares
into two or more classes or series of shares), the Holder shall have the right
thereafter to receive upon exercise of this Option solely the kind and amount of
shares of stock and other securities, property, cash, or any combination thereof
receivable upon such reclassification, change, consolidation, or merger by a
holder of the number of shares of Common Stock for which this Option might have
been exercised immediately prior to such reclassification, change,
consolidation, or merger. Thereafter, appropriate provision shall be made for
adjustments which shall be as nearly equivalent as practicable to the
adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly apply
to successive reclassifications and changes of
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shares of Common Stock and to successive consolidations, mergers,
sales, leases, or conveyances.
7. In case at any time the Company shall propose:
(a) to pay any dividend or make any distribution on shares of
Common Stock in shares of Common Stock or make any other distribution (other
than regularly scheduled cash dividends which are not in a greater amount per
share than the most recent such cash dividend) to all holders of Common Stock;
or
(b) to issue any rights, warrants, or other securities to all
holders of Common Stock entitling them to purchase any additional shares of
Common Stock or any other rights, warrants, or other securities; or
(c) to effect any reclassification or change of outstanding
shares of Common Stock, or any consolidation, merger, sale, lease, or conveyance
of property, described in Section 6; or
(d) to effect any liquidation, dissolution, or
winding-up of the Company; or
(e) to take any other action which would cause an adjustment to
the Exercise Price;
then, and in any one or more of such cases, the Company shall give written
notice thereof, by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Option Register, mailed at least 15
days prior to (i) the date as of which the holders of record of shares of Common
Stock entitled to receive any such dividend, distribution, rights, warrants, or
other securities are to be determined, (ii) the date on which any such
reclassification, change of outstanding shares of Common Stock, consolidation,
merger, sale, lease, conveyance of property, liquidation, dissolution, or
winding-up is expected to become effective, and the date as of which it is
expected that holders of record of shares of Common Stock shall be entitled to
exchange their shares for securities or other property, if any, deliverable upon
such reclassification, change of outstanding shares, consolidation, merger,
sale, lease, conveyance of property, liquidation, dissolution, or winding-up, or
(iii) the date of such action which would require an adjustment to the Exercise
Price pursuant to Section 5 hereof.
8. The issuance of any shares or other securities upon the exercise of
this Option, and the delivery of certificates or other instruments representing
such shares or other securities, shall be made without charge to the Holder for
any tax or other charge in respect of such issuance. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of any certificate in a name other
than that of the Holder and the
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Company shall not be required to issue or deliver any such certificate unless
and until the person or persons requesting the issue thereof shall have paid to
the Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid.
9. (a) If, at any time prior to ________, 2005 (seven years from the
Effective Date), the Company shall file a registration statement (other than on
Form S-4, Form S-8, or any successor form) with the Securities and Exchange
Commission (the "Commission") while this Option or any Underwriter's Securities
(as hereinafter defined) are outstanding, the Company shall give all the then
Holders of this Option or any Underwriter's Securities (collectively, the
"Eligible Holders") at least 45 days prior written notice of the filing of such
registration statement. If requested by any Eligible Holder in writing within 30
days after receipt of any such notice, the Company shall, at the Company's sole
expense (other than the fees and disbursements of counsel for the Eligible
Holders and the underwriting discounts, if any, payable in respect of the
Underwriter's Securities sold by any Eligible Holder), register or qualify all
or, at each Eligible Holder's option, any portion of the Underwriter's
Securities of any Eligible Holders who shall have made such request,
concurrently with the registration of such other securities, all to the extent
requisite to permit the public offering and sale of the Underwriter's Securities
through the facilities of all appropriate securities exchanges and the
over-the-counter market, and will use its best efforts through its officers,
directors, auditors, and counsel to cause such registration statement to become
effective as promptly as practicable. Notwithstanding the foregoing, if the
managing underwriter of any such offering shall advise the Company in writing
that, in its opinion, the distribution of all or a portion of the Underwriter's
Securities requested to be included in the registration concurrently with the
securities being registered by the Company would materially adversely affect the
distribution of such securities by the Company for its own account, then any
Eligible Holder who shall have requested registration of his or its
Underwriter's Securities shall delay the offering and sale of such Underwriter's
Securities (or the portions thereof so designated by such managing underwriter)
for such period, not to exceed 90 days (the "Delay Period"), as the managing
underwriter shall request, provided that no such delay shall be required as to
any Underwriter's Securities if any securities of the Company are included in
such registration statement and eligible for sale during the Delay Period for
the account of any person other than the Company and any Eligible Holder unless
the securities included in such registration statement and eligible for sale
during the Delay Period for such other person shall have been reduced pro rata
to the reduction of the Underwriter's Securities which were requested to be
included and eligible for sale during the Delay Period in such registration. As
used herein, "Underwriter's Securities" shall mean the Option Shares which have
not been previously sold
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pursuant to a registration statement or Rule 144 promulgated
under the Act.
(b) If, at any time during the five-year period commencing one
year after the Effective Date, the Company shall receive a written request, from
Eligible Holders who in the aggregate own (or upon exercise of all Options then
outstanding would own) a majority of the total number of shares of Common Stock
then included (or upon such exercises that would be included) in the
Underwriter's Securities (the "Majority Holders"), to register the sale of all
or part of such Underwriter's Securities, the Company shall, as promptly as
practicable, prepare and file with the Commission a registration statement
sufficient to permit the public offering and sale of the Underwriter's
Securities through the facilities of all appropriate securities exchanges and
the over-the-counter market, and will use its best efforts through its officers,
directors, auditors, and counsel to cause such registration statement to become
effective as promptly as practicable; provided, however, that the Company shall
only be obligated to file one such registration statement for which all expenses
incurred in connection with such registration (other than the fees and
disbursements of counsel for the Eligible Holders and underwriting discounts, if
any, payable in respect of the Under- writer's Securities sold by the Eligible
Holders) shall be borne by the Company and one additional such registration
statement for which all such expenses shall be paid by the Eligible Holders.
Within three business days after receiving any request contemplated by this
Section 9(b), the Company shall give written notice to all the other Eligible
Holders, advising each of them that the Company is proceeding with such
registration and offering to include therein all or any portion of any such
other Eligible Holder's Underwriter's Securities, provided that the Company
receives a written request to do so from such Eligible Holder within 30 days
after receipt by him or it of the Company's notice.
(c) In the event of a registration pursuant to the provisions of
this Section 9, the Company shall use its best efforts to cause the
Underwriter's Securities so registered to be registered or qualified for sale
under the securities or blue sky laws of such jurisdictions as the Holder or
such holders may reasonably request; provided, however, that the Company shall
not be required to qualify to do business in any state by reason of this Section
9(c) in which it is not otherwise required to qualify to do business.
(d) The Company shall keep effective any registration or
qualification contemplated by this Section 9 and shall from time to time amend
or supplement each applicable registration statement, preliminary prospectus,
final prospectus, application, document, and communication for such period of
time as shall be required to permit the Eligible Holders to complete the offer
and sale of the Underwriter's Securities covered thereby. The
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Company shall in no event be required to keep any such registration or
qualification in effect for a period in excess of nine months from the date on
which the Eligible Holders are first free to sell such Underwriter's Securities;
provided, however, that, if the Company is required to keep any such
registration or qualification in effect with respect to securities other than
the Underwriter's Securities beyond such period, the Company shall keep such
registration or qualification in effect as it relates to the Underwriter's
Securities for so long as such registration or qualification remains or is
required to remain in effect in respect of such other securities.
(e) In the event of a registration pursuant to the provisions of
this Section 9, the Company shall furnish to each Eligible Holder such number of
copies of the registration statement and of each amendment and supplement
thereto (in each case, including all exhibits), such reasonable number of copies
of each prospectus contained in such registration statement and each supplement
or amendment thereto (including each preliminary prospectus), all of which shall
conform to the requirements of the Act and the rules and regulations thereunder,
and such other documents, as any Eligible Holder may reasonably request to
facilitate the disposition of the Underwriter's Securities included in such
registration.
(f) In the event of a registration pursuant to the provisions of
this Section 9, the Company shall furnish, at the request of the Eligible Holder
of any Underwriter's Securities so registered, on the date that such
Underwriter's Securities are delivered for sale in connection with a
registration pursuant to an underwritten public offering, if such securities are
being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement, with respect
to such securities, becomes effective, (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, if any, and to the Eligible Holder and
(ii) a letter dated such date, from the independent certified public accountants
of the Company, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Eligible Holder. Any opinion or letter given shall be subject to all of the
qualifications, exceptions and conditions appropriate to the then existing
circumstances.
(g) In the event of a registration pursuant to the provision of
this Section 9, the Company shall enter into a cross-indemnity agreement and a
contribution agreement, each in customary form, with each underwriter, if any,
and, if requested, enter into an underwriting agreement containing conventional
representations, warranties, allocation of expenses, and customary closing
conditions, including, but not limited to,
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opinions of counsel and accountants' cold comfort letters, with any underwriter
who acquires any Underwriter's Securities.
(h) The Company agrees that until all the Under- writer's
Securities have been sold under a registration statement or pursuant to Rule 144
under the Act, it shall keep current in filing all reports, statements and other
materials required to be filed with the Commission to permit holders of the
Underwriter's Securities to sell such securities under Rule 144.
(i) Except for rights granted to Holders of the Options and
rights existing prior to the issuance of the Options, the Company will not,
without the written consent of the Majority Holders, grant to any persons the
right to request the Company to register any securities of the Company, provided
that the Company may grant such registration rights to other persons so long as
such rights are subordinate to the rights of the Eligible Holders.
10. (a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless each Eligible Holder, its officers, directors,
partners, employees, agents, and counsel, and each person, if any, who controls
any such person within the meaning of Section 15 of the Act or Section 20(a) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and
against any and all loss, liability, charge, claim, damage, and expense
whatsoever (which shall include, for all purposes of this Section 10, but not be
limited to, attorneys' fees and any and all reasonable expense whatsoever
incurred in investigating, preparing, or defending against any litigation,
commenced or threatened, or any claim whatsoever, and any and all amounts paid
in settlement of any claim or litigation), as and when incurred, arising out of,
based upon, or in connection with (i) any untrue statement or alleged untrue
statement of a material fact contained (A) in any registration statement,
preliminary prospectus, or final prospectus (as from time to time amended and
supplemented), or any amendment or supplement thereto, relating to the sale of
any of the Underwriter's Securities, or (B) in any application or other document
or communication (in this Section 10 collectively called an "application")
executed by or on behalf of the Company or based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in order to
register or qualify any of the Underwriter's Securities under the securities or
blue sky laws thereof or filed with the Commission or any securities exchange;
or any omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon and in conformity
with written information furnished to the Company with respect to such Eligible
Holder by or on behalf of such person expressly for inclusion in any
registration statement, preliminary prospectus, or final prospectus, or any
amendment or supplement thereto, or in any application, as the case may be, or
(ii) any breach of any
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representation, warranty, covenant, or agreement of the Company contained in
this Option. The foregoing agreement to indemnify shall be in addition to any
liability the Company may otherwise have, including liabilities arising under
this Option. The Company shall not be liable for losses based on untrue
statements or omissions contained in Preliminary Prospectuses if an Underwriter
failed to deliver a final Prospectus prior to or simultaneously with the
delivery of written confirmation of any public sale of the Underwriter's
Securities and a court of competent jurisdiction in a judgment not subject to
appeal or final review shall have determined that such final Prospectus would
have corrected such untrue statement or omission.
If any action is brought against any Eligible Holder or any of its
officers, directors, partners, employees, agents, or counsel, or any controlling
persons of such person (an "indemnified party") in respect of which indemnity
may be sought against the Company pursuant to the foregoing paragraph, such
indemnified party or parties shall promptly notify the Company in writing of the
institution of such action (but the failure so to notify shall not relieve the
Company from any liability other than pursuant to this Section 10(a)) and the
Company shall promptly assume the defense of such action, including the
employment of counsel (reasonably satisfactory to such indemnified party or
parties) and payment of expenses. Such indemnified party or parties shall have
the right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless the employment of such counsel shall have been authorized in
writing by the Company in connection with the defense of such action or the
Company shall not have in a timely manner employed counsel reasonably
satisfactory to such indemnified party or parties to have charge of the defense
of such action or such indemnified party or parties shall have reasonably
concluded that there may be one or more legal defenses available to it or them
or to other indemnified parties which are different from or additional to those
available to the Company, in any of which events such fees and expenses shall be
borne by the Company and the Company shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties. Anything
in this Section 10 to the contrary notwithstanding, the Company shall not be
liable for any settlement of any such claim or action effected without its
written consent, which shall not be unreasonably withheld. The Company shall
not, without the prior written consent of each indemnified party that is not
released as described in this sentence, settle or compromise any action, or
permit a default or consent to the entry of judgment in or otherwise seek to
terminate any pending or threatened action, in respect of which indemnity may be
sought hereunder (whether or not any indemnified party is a party thereto),
unless such settlement, compromise, consent, or termination includes an
unconditional release of each indemnified party from all liability in respect of
such action. The Company agrees promptly to notify the Eligible Holders of the
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14
commencement of any litigation or proceedings against the Company or any of its
officers or directors in connection with the sale of any Underwriter's
Securities or any preliminary prospectus, prospectus, registration statement, or
amendment or supplement thereto, or any application relating to any sale of any
Underwriter's Securities.
(b) The Holder agrees to indemnify and hold harmless the Company,
each director of the Company, each officer of the Company who shall have signed
any registration statement covering Underwriter's Securities held by the Holder,
each other person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, and its or their
respective counsel, to the same extent as the foregoing indemnity from the
Company to the Holder in Section 10(a), but only with respect to statements or
omissions, if any, made in any registration statement, preliminary prospectus,
or final prospectus (as from time to time amended and supplemented), or any
amendment or supplement thereto, or in any application, in reliance upon and in
conformity with written information furnished to the Company with respect to the
Holder by or on behalf of the Holder expressly for inclusion in any such
registration statement, preliminary prospectus, or final prospectus, or any
amendment or supplement thereto, or in any application, as the case may be. If
any action shall be brought against the Company or any other person so
indemnified based on any such registration statement, preliminary prospectus, or
final prospectus, or any amendment or supplement thereto, or in any application,
and in respect of which indemnity may be sought against the Holder pursuant to
this Section 10(b), the Holder shall have the rights and duties given to the
Company, and the Company and each other person so indemnified shall have the
rights and duties given to the indemnified parties, by the provisions of Section
10(a).
(c) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 10(a) or
10(b) (subject to the limitations thereof) but it is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Agreement expressly provides for
indemnification in such case, or (ii) any indemnified or indemnifying party
seeks contribution under the Act, the Exchange Act or otherwise, then the
Company (including for this purpose any contribution made by or on behalf of any
director of the Company, any officer of the Company who signed any such
registration statement, any controlling person of the Company, and its or their
respective counsel), as one entity, and the Eligible Holders of the
Underwriter's Securities included in such registration in the aggregate
(including for this purpose any contribution by or on behalf of an indemnified
party), as a second entity, shall contribute to the losses, liabilities, claims,
damages, and expenses whatsoever to which any of them may be subject, on the
basis of relevant equitable considerations
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15
such as the relative fault of the Company and such Eligible Holders in
connection with the facts which resulted in such losses, liabilities, claims,
damages, and expenses. The relative fault, in the case of an untrue statement,
alleged untrue statement, omission, or alleged omission, shall be determined by,
among other things, whether such statement, alleged statement, omission, or
alleged omission relates to information supplied by the Company or by such
Eligible Holders, and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement, alleged
statement, omission, or alleged omission. The Company and the Holder agree that
it would be unjust and inequitable if the respective obligations of the Company
and the Eligible Holders for contribution were determined by pro rata or per
capita allocation of the aggregate losses, liabilities, claims, damages, and
expenses (even if the Holder and the other indemnified parties were treated as
one entity for such purpose) or by any other method of allocation that does not
reflect the equitable considerations referred to in this Section 10(c). In no
case shall any Eligible Holder be responsible for a portion of the contribution
obligation imposed on all Eligible Holders in excess of its pro rata share based
on the number of shares of Common Stock owned (or which would be owned upon
exercise of all Underwriter's Securities) by it and included in such
registration as compared to the number of shares of Common Stock owned (or which
would be owned upon exercise of all Underwriter's Securities) by all Eligible
Holders and included in such registration. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 10(c), each person, if any, who
controls any Eligible Holder within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act and each officer, director, partner, employee,
agent, and counsel of each such Eligible Holder or control person shall have the
same rights to contribution as such Eligible Holder or control person and each
person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, each officer of the Company who shall
have signed any such registration statement, each director of the Company, and
its or their respective counsel shall have the same rights to contribution as
the Company, subject in each case to the provisions of this Section 10(c).
Anything in this Section 10(c) to the contrary notwithstanding, no party shall
be liable for contribution with respect to the settlement of any claim or action
effected without its written consent. This Section 10(c) is intended to
supersede any right to contribution under the Act, the Exchange Act or
otherwise.
11. Unless registered pursuant to the provisions of Section 9 hereof,
the Option Shares issued upon exercise of the Options shall be subject to a stop
transfer order and the certificate or certificates evidencing such securities
shall bear the following legend:
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16
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, PURSUANT
TO A REGISTRATION STATEMENT FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION. HOWEVER, SUCH SHARES MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO (i) A POST-EFFECTIVE AMENDMENT TO SUCH
REGISTRATION STATEMENT, (ii) A SEPARATE REGISTRATION STATEMENT
UNDER SUCH ACT, OR (iii) AN EXEMPTION FROM REGISTRATION UNDER
SUCH ACT."
12. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction, or mutilation of any Option (and upon surrender of any
Option if mutilated), and upon reimbursement of the Company's reasonable
incidental expenses, the Company shall execute and deliver to the Holder thereof
a new Option of like date, tenor, and denomination.
13. The Holder of any Option shall not have, solely on account of such
status, any rights of a stockholder of the Company, either at law or in equity,
or to any notice of meetings of stockholders or of any other proceedings of the
Company, except as provided in this Option.
14. This Option shall be construed in accordance with the laws of the
State of New York applicable to contracts made and performed within such State,
without regard to principles of conflicts of law.
15. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and, if sent to the
Underwriters, shall be mailed, delivered, or telexed or telegraphed and
confirmed by letter, to Barington Capital Group, L.P., 888 Seventh Avenue, New
York, New York 10019, Attention: Carl G. Kleidman; or if sent to the Company,
shall be mailed, delivered, or telexed or telegraphed and confirmed by letter,
to the Company, 10300 Metric Boulevard, Austin, Texas 78758, Attention: Chief
Executive Officer. All notices hereunder shall be effective upon receipt by the
party to which it is addressed.
16. The Company irrevocably consents to the jurisdiction of the courts
of the State of New York and of any federal court located in such State in
connection with any action or proceeding arising out of or relating to this
Option, any document or instrument delivered pursuant to, in connection with or
simultaneously with this Option, or a breach of this Option or any such document
or instrument. In any such action or proceeding, the Company waives personal
service of any summons, complaint or other process and agrees that service
thereof may be made in accordance with Section 12 of the Underwriting Agreement.
Within 30 days after such service, or such other time as may be mutually agreed
upon in writing by the attorneys for the parties
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17
to such action or proceeding, the Company shall appear to answer such summons,
complaint or other process.
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18
Dated: _______, 1998
U.S. ONLINE COMMUNICATIONS, INC.
By: ________________________
Robert G. Solomon
Chief Executive Officer
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Secretary
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FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Option.)
FOR VALUE RECEIVED, ______________________ hereby sells, assigns, and
transfers unto _________________ an Option to purchase __________ shares of
common stock, par value $0.001 per share, of the Company together with all
right, title, and interest therein, and does hereby irrevocably constitute and
appoint ___________ attorney to transfer such Option on the books of the
Company, with full power of substitution.
Dated: _________________
Signature_______________________
20
NOTICE
The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Option in every particular, without alteration or
enlargement or any change whatsoever.
To: U.S. OnLine Communications, Inc.
10300 Metric Boulevard
Austin, TX 78758