EXHIBIT 10.12
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.
Number of Shares: 158,228
Class of Stock: SERIES B PREFERRED STOCK
Initial Exercise Price: $ 1.58
Issue Date: JULY 31, 1998
Expiration Date: JULY 31, 2003
THIS WARRANT CERTIFIES THAT, for good and valuable consideration,
AMERICA ONLINE INC. ("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 in this Warrant.
ARTICLE 1. EXERCISE.
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1.1 Method of Exercise. Holder may exercise this Warrant by
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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 1.2, 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
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specified in 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 Section 1.4.
1.3 No Rights as Shareholder. This Warrant does not entitle Holder
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to any voting rights as a shareholder of the Company prior to the exercise
hereof.
1.4 Fair Market Value. If the Shares are traded in a public market,
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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.
1.5 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
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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,
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"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.
1.7.2 Assumption of Warrant. Upon the closing of any
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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. In the event successor entity does not agree to assume
the obligations of this Warrant, then the Warrant shall terminate to the extent
not exercised at the date of the Acquisition.
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.
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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 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 Certificate 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
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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
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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
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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 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 against impairment.
2.6 Fractional Shares. No fractional Shares shall be issuable upon
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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
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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.
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ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
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3.1 Representations and Warranties. The Company hereby represents
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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
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conversion of the Shares shall be deemed "Registrable Securities" under, and
Holder shall become a party to, Section 1 ("Registration Rights") and Section 6
("Miscellaneous") of that certain First Amended and Restated Rights Agreement
dated November 28, 1997 among the Company and certain shareholders of the
Company.
ARTICLE 4. MISCELLANEOUS.
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4.1 Term. This Warrant is exercisable, in whole or in part, at any
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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
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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
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Refusal. This Warrant and the Shares issuable upon exercise this Warrant (and
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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, 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. Holder further agrees that the Shares
issuable upon exercise of this Warrant (and the securities issuable, directly or
indirectly, upon conversion of the Shares, if any) will be transferred in
accordance with the right of first refusal set forth in Exhibit A hereto.
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4.4 Transfer Procedure. Subject to the provisions of Section 4.3,
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Holder may transfer all or part of this Warrant or 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 or Shares being transferred setting forth the name, address and
taxpayer identification number of the transferee and surrendering the Warrant or
Shares to the Company for reissuance to the transferee(s) (and Holder if
applicable). The Company shall have the right to refuse to transfer any portion
of the Warrant or Shares to any person who directly or indirectly competes with
the Company.
4.5 Notices. All notices and other communications from the Company
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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,
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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
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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
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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/ Xxxxxxx X'Xxxxxxx
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Xxxxxxx X'Xxxxxxx, President
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APPENDIX 1
NOTICE OF EXERCISE
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1. The undersigned hereby elects to purchase _____________ shares of the
Common/Series B 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 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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EXHIBIT A
RIGHT OF FIRST REFUSAL
Before any equity securities of the Company registered in the name of
Holder may be sold or transferred (including transfer by operation of law) other
than to a partner, shareholder, subsidiary, affiliate, family member, family
trust or the estate of the Holder (provided that such permitted transferees
shall agree, as a condition of the transfer, to be bound by the provisions of
this right of first refusal), such shares shall first be offered to the Company
in the following manner:
Notice. If the Holder intends to sell securities of the Company,
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Holder shall first deliver a written notice ("Notice") to the Companystating (i)
theHolder desires to sell or transfer such equity securities, (ii) the number of
equity securities proposed to be sold or transferred, and (iii) the price and
other terms of the proposed sale or transfer.
Company Right. Within ten business days after receipt of the Notice,
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the Company may elect to purchase all (but not less than all) of the equity
securities to which the Notice refers, on the same terms and conditions
specified in the Notice, by delivering to the Holder a written notice of such
election. The Company may assign this right to any third party.
Company Purchase. In the event the Company elects to acquire all of
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the equity securities pursuant to this right of first refusal, the Company and
the Holder shall complete the sale and purchase of such equity securities shares
within thirty days after the Company receives the Notice.
Selling Party Right. If all of the equity securities to which the
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Notice refers are not elected to be purchased by the Company, the Holder may
sell all such shares at the price and on the terms specified in the Notice,
provided that (i) such sale or transfer is consummated within ninety days of the
date of the Notice, and (ii) that prior to the transfer, the transferee of such
equity securities agrees in writing (in a form satisfactory to the Company) that
such transferee shall receive and hold such securities subject to the provisions
of this right of first refusal.
Termination. The rights and obligations of the Company and the Holder
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under this right of first refusal shall terminate upon the earlier to occur of
(and not apply to the transfer of shares upon) (i) the closing of the Company's
first firmly underwritten public offering registered under the Securities Act of
1933, or (ii) shareholder approval of any merger or consolidation of the Company
with any other corporation in which more than 50% of the voting control of the
Company is transferred to a party or parties not affiliated with the Company or
any shareholder of the Company, provided that, if such merger or consolidation
is not consummated, the rights and obligations of this right of first refusal
shall be deemed restored and reinstated to full force and effect.
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