EXHIBIT 10.9
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Corporation: Salon Internet, Inc., a California Corporation
Number of Shares: 7,746 (subject to Section 1.8 and 1.9)
Class of Stock: Series C Preferred (subject to Section 1.9)
Initial Exercise Price: $2.63 per share (subject to Section 1.9)
Issue Date: December 17, 1998
Expiration Date: December 17, 2005 (Subject to Article 4.1)
THIS WARRANT CERTIFIES THAT, in consideration of the payment of $1.00 and
for other good and valuable consideration, IMPERIAL BANCORP or registered
assignee ("Holder") is entitled to purchase the number of fully paid and
nonassessable shares of the class of securities (the "Shares") of the
corporation (the "Company") at the initial exercise price per Share (the
"Warrant Price") all as set forth above and as adjusted pursuant to Article 2 of
this Warrant, subject to the provisions and upon the terms and conditions set
forth of this Warrant.
ARTICLE 1. EXERCISE
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1.1 Method of Exercise. Holder may exercise this Warrant by delivering
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this Warrant and a duly executed Notice of Exercise in substantially the form
attached as Appendix 1 to the principal office of the Company. Unless Holder is
exercising the conversion right set forth in Section 1.2, Holder shall also
deliver to the Company a check for the aggregate Warrant Price for the Shares
being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as specified in
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Section 1.1, Holder may from time to time convert this Warrant, in whole or in
part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant to Section 1.4.
1.3 No Fractional Shares. No fractional shares shall be issued upon
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exercise or conversion of this Warrant. The Company shall, in lieu of issuing
any fractional share, pay the Holder entitled to such fraction a sum in cash
equal to the fair market value of a Share (as determined pursuant to Section
1.4) multiplied by such fraction.
1.4 Fair Market Value. If the Shares are traded regularly in a public
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market, the fair market value of the Shares shall be the closing price of the
Shares (or the closing price of the
Company's stock into which the Shares are convertible) reported for the business
day immediately before Holder delivers its Notice of Exercise to the Company. If
the Shares are not regularly traded in a public market, the Board of Directors
of the Company shall determine fair market value in its reasonable good faith
judgment. The foregoing notwithstanding, if Holder advises the Board of
Directors in writing that Holder disagrees with such determination, then the
Company and Holder shall promptly agree upon a reputable investment banking firm
to undertake such valuation. If the valuation of such investment banking firm is
greater than that determined by the Board of Directors by an amount equal to or
greater than the lesser of (i) 10% of the valuation made by the Board of
Directors or (ii) $0.50 per share, then all fees and expenses of such investment
banking firm shall be paid by the Company. In all other circumstances, such fees
and expenses shall be paid by Holder.
1.5 Delivery of Certificate and New Warrant. Promptly after Holder
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exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6 Replacement of Warrants. On receipt of evidence reasonably
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satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.7 Repurchase on Sale, Merger, or Consolidation of the Company.
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1.7.1 "Acquisition." For the purpose of this Warrant, "Acquisition"
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means any sale, license, or other disposition of all or substantially all of the
assets (including intellectual property) of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
1.7.2 Assumption of Warrant. If after the date hereof the Company
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shall enter into any Acquisition, then, as a condition of such Acquisition,
lawful provisions shall be made, and duly executed documents evidencing the same
from the Company or its successor shall be delivered to Holder, so that Holder
shall thereafter have the right to purchase, at a total price not to exceed that
payable upon the exercise of this Warrant in full, the kind and amount of shares
of stock and other securities and property receivable upon such Acquisition by a
holder of the number of Shares which might have been purchased by the Holder
immediately prior to such Acquisition, and in any such case appropriate
provisions shall be made with respect to the rights and interest of Holder to
the end that the provisions hereof (including without limitation, provisions for
the adjustment of the Warrant Price and the number of shares issuable hereunder)
shall thereafter be applicable in relation to any shares of stock or other
securities and property thereafter deliverable upon exercise hereof.
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1.7.3 Purchase Price. Notwithstanding the foregoing, at the election
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of Holder, the Company shall purchase the unexercised portion of this Warrant
for cash upon the closing of any Acquisition for an amount equal to (a) the fair
market value of any consideration that would have been received by Holder in
consideration of the Shares had Holder exercised the unexercised portion of this
Warrant immediately before the record date for determining the shareholders
entitled to participate in the proceeds of the Acquisition, less (b) the
aggregate Warrant Price of the Shares, but in no event less than zero; provided,
however, that the purchase right under this Section 1.7.3 shall not be effective
if the accountants for the Company determine that it would result in the
disallowance of pooling of interest treatment.
1.8 Adjustment in Underlying Number of Shares. If the Company does not
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present to Bank a term sheet acceptable to Bank from a lead investor for a
minimum round of $5,000,000 of new equity prior to January 31, 1999, then the
number of such shares subject to this Warrant shall be adjusted to 12,910. If
the Company does not close a round of at least $5,000,000 of new equity prior to
February 28, 1999, then the number of such shares subject to this Warrant shall
be increased to 19,365. For each month thereafter that the Company fails to
close a round of at least $5,000,000 of new equity and there remain any amounts
outstanding to Holder under its credit facility to Company, then the number of
such shares subject to this Warrant shall be increased by ten percent (10.00%)
per month.
1.9 Adjustment in Underlying Preferred Stock Price and Exercise Price. If
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on or before February 28, 1999, the Company sells and issues to any investors,
equity securities with aggregate gross proceeds to the Company of at least
$5,000,000, this Warrant shall concurrent with the issuance of such securities
automatically be adjusted to instead be exercisable for shares of the same
series and class and bearing the same rights, preferences, and privileges, of
such shares of stock, with the Warrant Price hereunder adjusted to equal the per
share purchase price of such security and the number of shares subject to this
Warrant shall be adjusted to equal the result of the total number of shares
times the initial exercise price divided by the new Warrant Price.
ARTICLE 2. ADJUSTMENTS TO THE SHARES
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2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
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dividend on its common stock (or the Shares if the Shares are securities other
than common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record
as of the date the dividend or subdivision occurred.
2.2 Reclassification, Exchange or Substitution. Upon any
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reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that
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Holder would have received for the Shares if this Warrant had been exercised
immediately before such reclassification, exchange, substitution, or other
event. Such an event shall include any automatic conversion of the outstanding
or issuable securities of the Company of the same class or series as the Shares
to common stock pursuant to the terms of the Company's Articles of Incorporation
upon the closing of a registered public offering of the Company's common stock.
The Company or its successor shall promptly issue to Holder a new Warrant for
such new securities or other property. The new Warrant shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 2 including, without limitation,
adjustments to the Warrant Price and to the number of securities or property
issuable upon exercise of the new Warrant. The provisions of this Section 2.2
shall similarly apply to successive reclassifications, exchanges, substitutions,
or other events.
2.3 Adjustments for Combinations, Etc. If the outstanding Shares are
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combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
2.4 Adjustments for Diluting Issuances. The Warrant Price and the number
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of Shares issuable upon exercise of this Warrant or, if the shares are Preferred
Stock, the number of shares of common stock issuable upon conversion of the
Shares, shall be subject to adjustment, from time to time, in the manner set
forth on Exhibit A attached hereto in the event of Diluting Issuances (as
defined on Exhibit A).
2.5 No Impairment. The Company shall not, by amendment of its Articles of
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Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out all the provisions of this Article 2 and in
taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment. If the Company takes any action
affecting the Shares or its common stock other than as described above that
adversely affects Holder's rights under this Warrant, the Warrant Price shall be
adjusted downward and the number of Shares issuable upon exercise of this
Warrant shall be adjusted upward in such a manner that the aggregate Warrant
Price of this Warrant is unchanged.
2.6 Certificate as to Adjustments. Upon each adjustment of the Warrant
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Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY
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3.1 Representations and Warranties. The Company hereby represents and
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warrants to the Holder as follows:
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(a) The initial Warrant Price referenced on the first page of this
Warrant is not greater than the price per share at which the Shares were last
issued in an arms length transaction in which at least $500,000 of the shares
were sold.
(b) All Shares which may be issued upon the exercise of the purchase
right represented by this Warrant, and all securities, if any, issuable upon
conversion of the Shares, shall, upon issuance in accordance with the terms of
this Warrant, be duly authorized, validly issued, fully paid and nonassessable,
and free of any liens and encumbrances except for restrictions on transfer
provided for herein or under applicable federal and state securities laws.
During the period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized, and reserved for the
purpose of the issue upon exercise of the purchase rights evidenced by this
Warrant, a sufficient number of shares of its Series C Preferred Stock (subject
to Article 1.8) to provide for the exercise of the rights represented by this
Warrant and a sufficient number of shares of its Common Stock to provide for the
conversion of such Preferred Stock into Common Stock.
3.2 Notice of Certain Events. If the Company proposes at any time (a) to
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declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the Company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (1) at least ten days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least ten days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.
3.3 Information Rights. So long as the Holder holds this Warrant and/or
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any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all communiques to the shareholders of the Company, (b)
within ninety (90) days after the end of each fiscal year of the Company, the
annual audited financial statements of the Company certified by independent
public accountants of recognized standing and (c) within forty-five (45) days
after the end of each of the first three quarters of each fiscal year, the
Company's quarterly, unaudited financial statements.
3.4 Omitted.
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ARTICLE 4. MISCELLANEOUS
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4.1 Term: Notice of Expiration. This Warrant is exercisable, in whole or
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in part, at any time and from time to time on or before the Expiration Date set
forth above. To the extent that this Warrant has not been exercised on or
before the Expiration Date, this Warrant shall automatically be deemed to be
exercised in full pursuant to the provisions of Section 1.2, without any further
action on behalf of Holder, on the Expiration Date.
4.2 Legends. This Warrant and the Shares (and the securities issuable,
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directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION
IS NOT REQUIRED.
4.3 Compliance with Securities Laws on Transfer. This Warrant and the
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Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company). The Company
shall not require Holder to provide an opinion of counsel if the transfer is to
an affiliate of Holder or if there is no material question as to the
availability of current information as referenced in Rule 144(c), Holder
represents that it has complied with Rule 144(d) and (e) in reasonable detail,
the selling broker represents that it has complied with Rule 144(f), and the
Company is provided with a copy of Holder's notice of proposed sale.
4.4 Transfer Procedure. Subject to the provisions of Section 4.2, Holder
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may transfer all or part of this Warrant or the Shares issuable upon exercise of
this Warrant (or the securities issuable, directly or indirectly, upon
conversion of the Shares, if any) by giving the Company notice of the portion of
the Warrant being transferred setting forth in the name, address and taxpayer
identification number of the transferee and surrendering this Warrant to the
Company for reissuance to the transferee(s) (and Holder, if applicable). Unless
the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this Warrant to any person who directly competes with
the Company.
4.5 Notices. All notices and other communications from the Company to the
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Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such Holder from time
to time.
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4.6 Waiver. This Warrant and any term hereof may be changed, waived,
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discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.7 Attorney's Fees. In the event of any dispute between the parties
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concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
4.8 Governing Law. This Warrant shall be governed by and construed in
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accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
SALON INTERNET, INC.
By: /s/ Authorized Officer
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Name: Authorized Officer
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Title: Title
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APPENDIX 1
NOTICE OF EXERCISE
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1. The undersigned elects to purchase _______________ shares of the
Series C Preferred Stock of Salon Internet, Inc., pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price of such
shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This
conversion is exercised with respect to _______________ of the Shares covered by
the Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:
Chief Financial Officer
Controllers Department
Imperial Bancorp
X.X. Xxx 00000
Xxx Xxxxxxx, XX 00000
or registered assignee
3. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
IMPERIAL BANCORP or registered assignee
_____________________________
(Signature)
_____________________________
(Date)
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EXHIBIT A
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Anti-Dilution Provisions
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In the event of the issuance (a "Diluting Issuance") by the Company, after
the Issue Date of the Warrant, of securities at a price per share less than the
Conversion Price for the preferred stock then acquirable under the Warrant, then
the number of shares of common stock issuable upon conversion of the Shares
shall be adjusted in accordance with those provisions (the "Provisions") of the
Company's Articles (Certificate) of Incorporation which apply to Diluting
Issuances.
The Company agrees that the Provisions, as in effect on the Issue Date,
shall be deemed to remain in full force and effect during the term of the
Warrant notwithstanding any subsequent amendment, waiver or termination thereof
by the Company's shareholders, unless all holders of the class of preferred
stock then acquirable under Warrant are treated the same by such amendment,
waiver or termination.
Under no circumstances shall the aggregate Warrant Price payable by the
Holder upon exercise of the Warrant increase as a result of any adjustment
arising from a Diluting Issuance.
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