EXHIBIT 10.17
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 OInformation SystemsFinancial Printing GroupTHIS 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 SERIES C PREFERRED STOCK
Corporation: SALON INTERNET, INC.
Number of Shares: 51,546
Class of Stock: Series C Preferred Stock
Initial Exercise Price: $1.94
Issue Date/Initial Vesting Date: April 14, 1999
Expiration Date: April 14, 2004
THIS WARRANT CERTIFIES THAT, for good and valuable consideration, ACT III
COMMUNICATIONS ("Holder") is entitled to purchase the number of fully paid and
nonassessable shares of the class of securities (the "Shares") of Salon
Internet, Inc. (the "Company") at the initial exercise price per Share (the
"Warrant Price") all as set forth above, as adjusted pursuant to Article 2 of
this Warrant, subject to the provisions and upon the terms and conditions,
including without limitation the vesting provisions, set forth in this Warrant.
ARTICLE 1. EXERCISE.
1.1 Exercise of Warrant. This Warrant shall be exercisable on and
after the Issue Date and prior to the Expiration Date in an amount not to exceed
the Number of Shares set forth above less the number of Shares previously
acquired by Holder upon exercise of this Warrant.
1.2 Method of Exercise. Holder may exercise this Warrant by
delivering 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 1.3, Holder also shall
deliver to the Company a check for the aggregate Warrant Price for the Shares
being purchased.
1.3 Conversion Right. In lieu of exercising this Warrant as
specified in Section 1.2, 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 Section 1.5.
1.4 No Rights as Shareholder. This Warrant does not entitle Holder
to any voting rights as a shareholder of the Company prior to the exercise
hereof.
1.5 Fair Market Value. If the Shares are traded in a public
market, the fair market value of the Shares shall be the closing price of the
Shares on the Business Day prior to the date of measurement (or the closing
price of the Company's stock into which the Shares are convertible) before
Holder delivers its Notice of Exercise to the Company. If the Shares are not
traded in a public market, the Board of Directors of the Company shall determine
fair market value in its reasonable good faith judgment.
1.6 Delivery of Certificate and New Warrant. Promptly after Holder
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.
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1.7 Replacement of Warrants. On receipt of evidence reasonably
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.
1.8 Repurchase on Sale, Merger, or Consolidation of the Company.
1.8.1 "Acquisition". For the purpose of this Warrant,
"Acquisition" means any sale, or other disposition of all or substantially all
of the assets 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.
1.8.2 Assumption of Warrant. Upon the closing of any
Acquisition the successor entity shall assume the obligations of this Warrant,
and this Warrant shall be exercisable for the same securities, cash, and
property as would be payable for the Shares issuable upon exercise of the
unexercised portion of this Warrant as if such Shares were outstanding on the
record date for the Acquisition and subsequent closing. The Warrant Price shall
be adjusted accordingly.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays
a 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
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 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 charter
documents 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 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 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 in the Company's Articles
of Incorporation, as amended.
2.5 No Impairment. The Company shall not, by amendment of its
Articles of 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
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performed under this Warrant by the Company, but shall at all times in good
faith assist in carrying out of 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 2 against impairment.
2.6 Fractional Shares. No fractional Shares shall be issuable upon
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share
interest arises upon any exercise or conversion of the Warrant, the Company
shall eliminate such fractional share interest by paying Holder an amount
computed by multiplying the fractional interest by the fair market value of a
full Share.
2.7 Certificate as to Adjustments. Upon each adjustment of the
Warrant 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.
3.1 Representations and Warranties. The Company hereby represents
and warrants to the Holder that 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, 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.
3.2 Registration Rights. The common stock issued or issuable upon
conversion of the Shares shall be deemed "Registrable Securities" under, and
Holder shall become a party to that certain Second Amended and Restated Rights
Agreement dated September 18, 1998 among the Company and certain shareholders of
the Company (the "Rights Agreement").
ARTICLE 4. MISCELLANEOUS.
4.1 Term. This Warrant is exercisable, in whole or in part, at any
time and from time to time on or before the Expiration Date set forth above.
4.2 Legends. This Warrant and the Shares (and the securities
issuable, 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; Right of First
Refusal. This Warrant and the 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 Section 4.4 below and 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, as reasonably requested by 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.
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4.4 Transfer Procedure. This Warrant and the Shares issuable upon
exercise of this Warrant (or 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 the requirements of the Rights
Agreement.
4.5 Notices. All notices and other communications from the Company
to the 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.
4.6 Waiver. This Warrant and any term hereof may be changed,
waived, 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 Attorneys Fees. In the event of any dispute between the
parties 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 accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
"COMPANY"
SALON INTERNET, INC.
By: /S/ XXXX XXXXX
------------------------------
Xxxx Xxxxx
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APPENDIX 1
NOTICE OF EXERCISE
------------------
1. The undersigned hereby 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 in the manner specified in the Warrant. This conversion is exercised with
respect to _____________________ of the Shares covered by the Warrant.
[Strike paragraph above 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:
_____________________________
(Name)
_____________________________
_____________________________
(Address)
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.
___________________________________________
(Signature)
____________________
(Date)
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