EXHIBIT 10.11
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTTHIS 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: 17,500
Class of Stock: Series A Preferred
Initial Exercise Price: $1.00 per share
Issue Date: April 14, 1997
Expiration Date: April 14, 2002 (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 ("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.
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 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
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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:
(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 A Preferred Stock 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
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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 Registration Under Securities Act of 1933, as amended. The Company
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agrees that the Shares or, if the shares are convertible into common stock of
the Company, such common stock, shall be subject to the registration rights set
forth on Exhibit B hereto.
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
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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.
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.
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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 A 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:
Xx. Xxxxxx Xxxxxx
Chief Financial Officer
Controllers Department
Imperial Bancorp
X.X. Xxx 00000
Xxx Xxxxxxx, XX 00000
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
___________________________________
(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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EXHIBIT B
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Registration Rights
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The Warrant and the Shares issuable upon exercise of the Warrant shall be
deemed to be "Registrable Right Securities" and the common stock issuable upon
conversion of the Shares, shall be deemed "Registrable Securities" under the
following agreement (the "Agreement") between the Company and its investor(s):
________________________________________________________________
[Identify Agreement by date, title and parties. If no Agreement
exists, indicate by "none."]
By acceptance of the Warrant to which this Exhibit B is attached, Holder
shall be deemed to be a party to the Agreement.
The Company represents and warrants that all consents necessary to make
Holder a party to the Agreement have been obtained.
If no Agreement exists, then the Company and the Holder shall enter into
Holder's standard form of Registration Rights Agreement as in effect on the
Issue Date of the Warrant.
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