{"id":41115,"date":"2015-09-17T11:25:58","date_gmt":"2015-09-17T16:25:58","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/contracts\/uncategorized\/loan-agreement-salon-internet-inc-and-imperial-bank.html"},"modified":"2015-09-17T11:25:58","modified_gmt":"2015-09-17T16:25:58","slug":"loan-agreement-salon-internet-inc-and-imperial-bank","status":"publish","type":"corporate_contracts","link":"https:\/\/corporate.findlaw.com\/contracts\/finance\/loan-agreement-salon-internet-inc-and-imperial-bank.html","title":{"rendered":"Loan Agreement &#8211; Salon Internet Inc. and Imperial Bank"},"content":{"rendered":"<pre>\n                                LOAN AGREEMENT\n\n     This Loan Agreement is entered into as of April 13, 1998 (this \"Loan\nAgreement\") between Salon Internet, Inc., a California corporation (herein\ncalled \"Borrower\"), and Imperial Bank (herein called \"Bank\").\n\n     1.  COMMITMENTS.\n\n          A.   REVOLVING LOAN COMMITMENT.  Subject to all the terms and\nconditions of this Loan Agreement and prior to the termination of its commitment\nas hereinafter provided, Bank hereby agrees to make loans (each a \"Revolving\nLoan\") to Borrower, from time to time and in such amounts as Borrower shall\nrequest pursuant to this Section 1.A., up to an aggregate principal amount\noutstanding under the Revolving Loan Account (as hereinafter defined) not to\nexceed the least of:  (a) $250,000.00 plus eighty percent (80.0%) of Eligible\nAccounts (as the same may be adjusted from time to time as provided for under\nSection 9.B. hereof, the \"Borrowing Base\") or (b) $500,000.00 (the \"Revolving\nLoan Commitment\"), as the same may be adjusted in accordance with Sections\n1.A.(2) or 1.A.(3) hereof.  If at any time or for any reason, the outstanding\nprincipal amount of the Revolving Loan Account is greater than the least of, (x)\nthe Borrowing Base or (y) the Revolving Loan Commitment, Borrower shall\nimmediately pay to Bank upon demand, in cash, the amount of such excess.  Any\ncommitment of Bank, pursuant to the terms of this Loan Agreement, to make\nRevolving Loans shall expire on the Revolving Loan Maturity Date (as hereinafter\ndefined), subject to Bank's right to renew said commitment in its sole and\nabsolute discretion at Borrower's request.  Any such renewal of said commitment\nshall not be binding upon Bank unless it is in writing and signed by an officer\nof Bank.  Provided that no Event of Default (as hereinafter defined) has\noccurred and is continuing, all or any portion of the Revolving Loans advanced\nby Bank which are repaid by Borrower shall be available for reborrowing in\naccordance with the terms hereof.  Borrower promises to pay to Bank the entire\noutstanding unpaid principal balance (and all accrued unpaid interest thereon)\nof the Revolving Loan Account on or before April 12, 1999 (\"Revolving Loan\nMaturity Date\").\n\n               (1)  REVOLVING LOANS. The amount of each Revolving Loan made by\nBank to Borrower hereunder shall be debited to the loan ledger account of\nBorrower maintained by Bank for the Revolving Loan Commitment (herein called the\n\"Revolving Loan Account\") and Bank shall credit the Revolving Loan Account with\nall loan repayments in respect thereof made by Borrower. When Borrower desires\nto obtain a Revolving Loan, Borrower shall notify Bank (which notice shall be\nsigned by an officer of Borrower and shall be irrevocable) in accordance with\nSection 2 hereof, to be received no later than 3:00 p.m. Pacific time one (1)\nBanking Day (as hereinafter defined) before the day on which the Revolving Loan\nis to be made. Revolving Loans may only be used for working capital purposes and\nfor the issuance of letters of credit and corporate credit cards as further\ndescribed below.\n\n                    (A)  LETTER OF CREDIT USAGE AND SUBLIMIT. Subject to the\navailability of the Revolving Loan Commitment and in reliance on the\nrepresentations and warranties of Borrower set forth herein, at any time and\nfrom time to time from the date hereof \n\n \nthrough the Banking Day immediately prior to the Revolving Loan Maturity Date,\nBank shall issue for the account of Borrower such standby and commercial letters\nof credit (\"Letters of Credit\") as Borrower may request, which request shall be\nmade by delivering to Bank a duly executed letter of credit application on\nBank's standard form; provided, however, that the outstanding and undrawn\namounts under all such Letters of Credit (i) shall not at any time exceed\n$100,000.00 and (ii) shall be deemed to constitute Revolving Loans for the\npurpose of calculating availability under the Revolving Loan Commitment. Unless\nBorrower shall have deposited with Bank cash collateral in an amount sufficient\nto cover all undrawn amounts under each such Letter of Credit, no Letter of\nCredit shall have an expiration date that is later than the Revolving Loan\nMaturity Date. All Letters of Credit shall be in form and substance acceptable\nto Bank in its sole discretion and shall be subject to the terms and conditions\nof Bank's form application and letter of credit agreement. Borrower will pay any\nstandard issuance and other fees that Bank notifies Borrower will be charged for\nissuing and processing Letters of Credit for Borrower.\n\n                    (B)  CORPORATE CREDIT CARD USAGE AND SUBLIMIT. Subject to\nthe availability of the Revolving Loan Commitment and in reliance on the\nrepresentations and warranties of Borrower set forth herein, at any time and\nfrom time to time from the date hereof through the Banking Day immediately prior\nto the Revolving Loan Maturity Date, Bank shall make advances (\"Credit Card\nAdvances\") under the Revolving Loan Commitment in accordance with the terms and\nconditions of that certain Credit Card Line of Credit and Security Agreement\ndated as of April 14, 1997 (\"Credit Card Agreement\") between Borrower and Bank;\nprovided, however, that (i) such Credit Card Advances shall not at any time\nexceed $55,000.00 and (ii) the outstanding balance of the charges under the\nCredit Card (as defined in the Credit Card Agreement), whether or not such\ncharges are due and payable or there has been a Credit Card Advance pursuant to\nthis Section in respect thereof, together with any Credit Card Advances pursuant\nto this Section in respect thereof, shall be deemed to constitute Revolving\nLoans for the purpose of calculating availability under the Revolving Loan\nCommitment. Borrower agrees to pay all fees and expenses, if any, incurred by\nBank in connection with any Credit Card Advances made under the Revolving Loan\nCommitment pursuant to this Section.\n\n               (2)  INCREASES UNDER THE REVOLVING LOAN COMMITMENT.\nNotwithstanding any of the provisions contained in Section 1.A. hereof, upon\ndelivery by Borrower to Bank on or before July 31, 1998 a term sheet accepted by\na lead investor (in form acceptable to Bank, the \"Term Sheet\") for at least\n$2,500,000.00 of new equity to be contributed to Borrower (\"New Equity Round\"),\nBank hereby agrees to adjust the Borrowing Base and increase the Revolving Loan\nCommitment as hereinafter set forth and to make Revolving Loans to Borrower up\nto an aggregate principal amount outstanding under the Revolving Loan Account\nnot to exceed the least of: (a) $500,000.00 plus eighty percent (80.0%) of\nEligible Accounts (as the same may be adjusted from time to time as provided for\nunder Section 9.B. hereof) or (b) $750,000.00.\n\n               (3)  FURTHER INCREASES UNDER THE REVOLVING LOAN COMMITMENT.\nNotwithstanding any of the provisions contained in Section 1.A. hereof, upon the\ndate of close of the New Equity Round, and delivery of evidence of same to Bank,\nBank hereby agrees to further \n\n                                      -2-\n\n \nadjust the Borrowing Base and increase the Revolving Loan Commitment as\nhereinafter set forth and to make Revolving Loans to Borrower up to an aggregate\nprincipal amount outstanding under the Revolving Loan Account not to exceed the\nleast of: (a) $250,000.00 plus eighty percent (80.0%) of Eligible Accounts (as\nthe same may be adjusted from time to time as provided for under Section 9.B.\nhereof) or (b) $1,000,000.00.\n\n               (4)  INTEREST PAYMENTS ON REVOLVING LOANS. Borrower further\npromises to pay to Bank from the date of the advance of the initial Revolving\nLoan through the Revolving Loan Maturity Date, on or before the tenth (10th) day\nof each month, interest on the average daily unpaid balance of the Revolving\nLoan Account during the immediately preceding month at a rate of interest per\nannum equal to the rate of interest which Bank has announced as its prime\nlending rate (the \"Prime Rate\"), which shall vary concurrently with any change\nin the Prime Rate. Interest shall be computed at the above rate on the basis of\nthe actual number of days during which the principal balance of the Revolving\nLoan Account is outstanding divided by 360, which shall for interest computation\npurposes be considered one (1) year.\n\n          B.   EQUIPMENT LOAN COMMITMENT. Subject to all the terms and\nconditions of this Loan Agreement and prior to the termination of its commitment\nas hereinafter provided, Bank hereby agrees to make loans (each an \"Equipment\nLoan\") to Borrower in such amounts as Borrower shall request pursuant to this\nSection 1.B. at any time from the date hereof through December 31, 1998 (the\n\"Equipment Availability End Date\"), in an aggregate principal amount not to\nexceed $300,000.00 (the \"Equipment Loan Commitment\"). If at any time or for any\nreason, the outstanding principal amount of the Equipment Loan Account (as\nhereinafter defined) is greater than the Equipment Loan Commitment, Borrower\nshall immediately pay to Bank upon demand, in cash, the amount of such excess.\nAny commitment of Bank, pursuant to the terms of this Loan Agreement, to make\nEquipment Loans shall expire on the Equipment Availability End Date, subject to\nBank's right to renew said commitment in its sole and absolute discretion at\nBorrower's request. Any such renewal of said commitment shall not be binding\nupon Bank unless it is in writing and signed by an officer of Bank. Equipment\nLoans which are repaid by Borrower may not be reborrowed. Borrower promises to\npay to Bank the outstanding unpaid principal balance (and all accrued unpaid\ninterest thereon) of the Equipment Loan Account on or before December 31, 2000\n(\"Equipment Loan Maturity Date\").\n\n               (1)  EQUIPMENT LOANS. The amount of each Equipment Loan made by\nBank to Borrower hereunder shall be debited to the loan ledger account of\nBorrower maintained by Bank for the Equipment Loan Commitment (herein called the\n\"Equipment Loan Account\") and Bank shall credit the Equipment Loan Account with\nall loan repayments in respect thereof made by Borrower. When Borrower desires\nto obtain an Equipment Loan, Borrower shall notify Bank (which notice shall be\nsigned by an officer of Borrower and shall be irrevocable) in accordance with\nSection 2 hereof, to be received no later than 3:00 p.m. Pacific time one (1)\nBanking Day before the day on which the Equipment Loan is to be made. The notice\nshall be signed by an officer of Borrower and include a copy of the invoice for\nthe equipment, software or furniture to be financed. Equipment Loans may only be\nused to purchase or reimburse the cost of acquiring equipment, software and\nfurniture purchased by Borrower after October 1, 1997. Equipment Loans for\nequipment and furniture will be limited to one hundred percent (100.00%)  \n\n                                      -3-\n\n \nof the invoice amount for such equipment or furniture, approved from time to\ntime by Bank, less any taxes, shipping and freight charges or discounts,\nwarranty charges, installation expenses and other similar soft costs. Equipment\nLoans for software will be limited to (a) one hundred percent (100.00%) of the\ninvoice amount for such software, approved from time to time by Bank, less any\ntaxes, shipping and freight charges or discounts, warranty charges, installation\nexpenses and other similar soft costs and (b) $100,000.00.\n\n               (2)  INTEREST PAYMENTS PRIOR TO EQUIPMENT LOAN MATURITY DATE.\nBorrower further promises to pay to Bank from the date of the advance of the\ninitial Equipment Loan through the Equipment Availability End Date, on or before\nthe tenth (10th) day of each month, interest on the average daily unpaid balance\nof the Equipment Loan Account during the immediately preceding month at a rate\nof interest per annum equal to the Prime Rate, which shall vary concurrently\nwith any change in the Prime Rate. Interest shall be computed at the above rate\non the basis of the actual number of days during which the principal balance of\nthe Equipment Loan Account is outstanding divided by 360, which shall for\ninterest computation purposes be considered one (1) year.\n\n               (3)  PRINCIPAL AND INTEREST PAYMENTS FOLLOWING EQUIPMENT\nAVAILABILITY END DATE. Borrower further promises to pay to Bank, on or before\nJanuary 10, 1999 and on or before the tenth (10th) day of each month thereafter\nthrough the Equipment Loan Maturity Date, (a) the outstanding principal balance\nof the Equipment Loan Account on the Equipment Availability End Date in twenty-\nfour (24) equal monthly installments plus (b) interest on the average daily\nunpaid balance of the Equipment Loan Account accruing from and after January 1,\n1999 and thereafter accruing during the immediately preceding month at the rate\nof interest equal to one-half percent (0.50%) in excess of the Prime Rate and\ncomputed in accordance with Section 1.B.(2) hereof.\n\n     2.   LOAN REQUESTS. Requests for Loans hereunder shall be in writing duly\nexecuted by Borrower in a form satisfactory to Bank and shall contain a\ncertification setting forth the matters referred to in Section 1, which shall\ndisclose that Borrower is entitled to the amount and type of Loan being\nrequested. Bank is hereby authorized to charge Borrower's deposit account with\nBank for all sums due Bank under this Loan Agreement.\n\n     3.   DELIVERY OF PAYMENTS. Payment to Bank of all amounts due hereunder\nshall be made at its Santa Clara Valley Regional office, or at such other place\nas may be designated in writing by Bank from time to time. If any payment date\nfalls on a day that is not a day that Bank is open for the transaction of\nbusiness (\"Banking Day\"), the payment due date shall be extended to the next\nBanking Day.\n\n     4.   LATE CHARGE. If any interest payment, principal payment or principal\nbalance payment required hereunder is not received by Bank on or before ten (10)\ndays from the date in which such payment becomes due, Borrower shall pay to\nBank, a late charge equal to the lesser of (a) five percent (5.0%) of the amount\nof such unpaid payment, in addition to said unpaid payment or (b) the maximum\namount permitted to be charged by applicable law, until remitted to Bank;\nprovided, however, nothing contained in this Section 4, shall be construed\nas any \n\n                                      -4-\n\n \nobligation on the part of Bank to accept payment of any past due payment or less\nthan the total unpaid principal balance of the applicable Loan Account following\nthe Revolving Loan Maturity Date or the Equipment Loan Maturity Date, as\napplicable. All payments shall be applied first to any late charges due\nhereunder, next to accrued interest then payable and the remainder, if any, to\nreduce any unpaid principal due under the applicable Loan Account.\n\n     5.   DEFAULT INTEREST. From and after the Revolving Loan Maturity Date or\nthe Equipment Loan Maturity Date, as applicable, or such earlier date as all\nsums owing under any Loan Account becomes due and payable by acceleration or\notherwise, or upon the occurrence of an Event of Default, at the option of Bank\nall sums owing under the applicable Loan Account shall bear interest until paid\nin full at a rate equal to the lesser of (a) five percent (5.0%) per annum in\nexcess of the then applicable interest rate provided for in Sections 1.A.1,\n1.B.(2) or 1.B.(3) hereof or (b) the maximum amount permitted to be charged by\napplicable law, until all obligations hereunder are repaid in full or the Event\nof Default is waived or cured to the satisfaction of Bank, as applicable.\n\n     6.   DEFINITIONS.  As used in this Loan Agreement and unless otherwise\ndefined herein, all initially capitalized terms shall have the meanings set\nforth on Exhibit A attached hereto and incorporated herein by this reference.\n\n     7.   REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to\nBank: (a) That Borrower is a corporation, duly organized and existing in the\nState of its incorporation and the execution, delivery and performance of each\nof the Loan Documents are within Borrower's corporate powers, have been duly\nauthorized and are not in conflict with law or the terms of any charter, by-law\nor other incorporation papers, or of any indenture, agreement or undertaking to\nwhich Borrower is a party or by which Borrower is bound or affected; (b)\nBorrower is, and at the time the Collateral becomes subject to Bank's security\ninterest will be, the true and lawful owner of and has, and at the time the\nCollateral becomes subject to Bank's security interest will have, good and clear\ntitle to the Collateral, subject only to Bank's rights therein and to Permitted\nLiens; (c) Each Account is, and at the time the Account comes into existence\nwill be, a true and correct statement of a bona fide indebtedness incurred by\nthe debtor named therein in the amount of the Account for either merchandise\nsold or delivered (or being held subject to Borrower's delivery instructions)\nto, or services rendered, performed (or to be rendered and performed) and\naccepted by, the account debtor; (d) That to the best of Borrower's knowledge\nthere are and will be no material defenses, counterclaims, or setoffs which may\nbe asserted against the Accounts from time to time represented by Borrower to be\nEligible Accounts, except as permitted in the definition thereof; (e) Any and\nall financial information, including information relating to the Collateral,\nsubmitted by Borrower to Bank, whether previously or in the future, is and will\nbe true and correct in all material respects; (f) There is no litigation or\nother proceeding pending or, to Borrower's knowledge, threatened against or\naffecting Borrower, and Borrower is not in default with respect to any order,\nwrit, injunction, decree or demand of any court or other governmental or\nregulatory authority, except for proceedings and defaults which will not have a\nMaterial Adverse Effect upon its financial condition, operations or business as\nnow conducted; (g)(i) The consolidated and consolidating profit and loss\nstatements for the 11-month period ended February 28, 1998, and the related\n\n                                      -5-\n\n \nbalance sheet for the fiscal month ended March 31, 1998, copies of which have\nheretofore been delivered to Bank by Borrower, and all other statements and data\nsubmitted in writing by Borrower to Bank in connection with Borrower's request\nfor credit are true and correct, and said balance sheet and profit and loss\nstatement accurately present the financial condition of Borrower as of the date\nthereof and the results of the operations of Borrower for the period covered\nthereby, and have been prepared in accordance with GAAP, (ii) since such date,\nthere have been no material adverse changes in the financial condition of\nBorrower, and (iii) Borrower has no knowledge of any liabilities, contingent or\notherwise, which are not reflected in said balance sheet, and Borrower has not\nentered into any special commitments or substantial contracts which are not\nreflected in said balance sheet, other than in the ordinary and normal course of\nits business, which may have a Material Adverse Effect upon its financial\ncondition, operations or business as now conducted; (h) Borrower has no\nliability for any delinquent local, state or federal taxes, and, if Borrower has\ncontracted with any government agency, it has no liability for renegotiation of\nprofits; and (i) Borrower, as of the date hereof, possesses all necessary\ntrademarks, trade names, copyrights, patents, patent rights, and licenses to\nconduct its business as now operated, without any known conflict with valid\ntrademarks, trade names, copyrights, patents, patent rights and license rights\nof others.\n\n     8.   NEGATIVE COVENANTS.  Borrower agrees that so long as any loans,\nobligations or liabilities remain outstanding or unpaid to Bank or the\ncommitment of Bank hereunder is in effect, neither Borrower, nor any of its\nsubsidiaries (\"Subsidiaries\") will, without the prior written consent of Bank,\nwhich consent shall not be unreasonably withheld, delayed or conditioned in the\ncase of Section 8.F. below:\n\n          A.   Make any substantial change in the character of its business as\nnow conducted;\n\n          B.   Create, incur, assume or permit to exist any Indebtedness other\nthan loans from Bank except obligations now existing as shown in the financial\nstatements referenced in Section 7.(g)(i), excluding those being refinanced by\nBank, Subordinated Debt and Permitted Indebtedness; or sell or transfer, either\nwith or without recourse, any accounts or notes receivable or any monies due or\nto become due;\n\n          C.   Create, incur, assume or permit to exist any mortgage, pledge,\nencumbrance, lien or charge of any kind (including the charge upon property at\nany time purchased or acquired under conditional sale or other title retention\nagreement) upon any asset now owned or hereafter acquired by it, other than\nPermitted Liens and liens in favor of Bank;\n\n          D.   Sell, dispose of or grant a security interest in any of the\nCollateral other than to Bank (other than the disposing of such Collateral in\nthe ordinary and normal course of its business as now conducted or other assets\nwhich are obsolete or otherwise considered surplus), or execute any financing\nstatements covering the Collateral in favor of any secured party or Person other\nthan Bank, except to the extent required to perfect Permitted Liens;\n\n          E.   Make any loans or advances to any Person or other entity other\nthan in the ordinary and normal course of its business as now conducted or as\nreasonably conducted under \n\n                                      -6-\n\n \nstandard industry practices for businesses similar to Borrower's (provided that\nsuch loans or advances are not made to any Person or entity which is controlled\nby or under common control with Borrower) or make any investment in the\nsecurities of any Person or other entity other than the United States\nGovernment;\n\n          F.   Purchase or otherwise acquire all or substantially all of the\nassets or business of any Person or other entity; or liquidate, dissolve, merge\n(other than a merger to change Borrower's state of incorporation) or\nconsolidate, or commence any proceedings therefore; or, except in the ordinary\nand normal course of its business as now conducted or as reasonably conducted\nunder standard industry practices for businesses similar to Borrower's, sell\n(including, without limitation, the selling of any property or other asset\naccompanied by the leasing back of the same) any assets including any fixed\nassets, any property, or other assets necessary for the continuance of its\nbusiness as now conducted;\n\n          G.   Declare or pay any dividend or make any other distribution on any\nof its capital stock now outstanding or hereafter issued or purchase, redeem or\nretire any of such stock other than in dividends or distributions payable in\nBorrower's or any such Subsidiary's capital stock.  Notwithstanding the\nforegoing, Borrower may redeem or repurchase its capital stock in connection\nwith any agreement entered into in the ordinary course of its business with any\nof its officers, directors, employees or consultants wherein Borrower is\nobligated or entitled to repurchase from such officer, director, employee or\nconsultant shares of Borrower's capital stock upon the termination of such\nperson's employment with or services provided to Borrower.\n\n     9.   AFFIRMATIVE COVENANTS. Borrower affirmatively covenants that so long\nas any loans, obligations or liabilities remain outstanding or unpaid to Bank or\nthe commitment of Bank hereunder is in effect, it will:\n\n          A.   Furnish Bank from time to time such financial statements and\ninformation as Bank may reasonably request and inform Bank immediately upon the\noccurrence of a material adverse change therein;\n\n          B.   Upon five (5) days prior notice to Borrower, permit\nrepresentatives of Bank to conduct an audit of Borrower's books and records\nrelating to the Collateral and make extracts therefrom, with results\nsatisfactory to Bank, provided that Bank shall use its best efforts to not\ninterfere with the conduct of Borrower's business, and to the extent possible to\narrange for verification of the Accounts directly with the account debtors\nobligated thereon or otherwise, all under reasonable procedures acceptable to\nBank and at Borrower's sole expense; provided further that, prior to an Event of\nDefault, Borrower shall not be responsible for the expense of more than two (2)\nsuch audits, in any fiscal year. Borrower hereby acknowledges and agrees that\nupon completion of any such audit, Bank shall have the right to adjust the\nBorrowing Base percentage, in its sole and reasonable discretion, based on its\nreview of the results of such Collateral audit;\n\n          C.   Promptly notify Bank of any attachment or other legal process\nlevied against any of the Collateral and any information received by Borrower\nrelative to the Collateral, including the Accounts, the account debtors or other\nPersons obligated in connection therewith, \n\n                                      -7-\n\n \nwhich may in any way affect the value of the Collateral or the rights and\nremedies of Bank in respect thereto;\n\n          D.   Reimburse Bank upon demand for any and all legal costs, including\nreasonable attorneys' fees, and other expenses incurred in collecting any sums\npayable by Borrower under any Loan Account or any other obligation secured\nhereby, enforcing any term or provision of this Loan Agreement or otherwise or\nin the checking, handling and collection of the Collateral and the preparation\nand enforcement of any agreement relating thereto;\n\n          E.   Notify Bank of each location and of each office of Borrower at\nwhich records of Borrower relating to the Accounts are kept;\n\n          F.   Provide, maintain and deliver to Bank policies insuring the\nCollateral against loss or damage by such risks and in such amounts, forms and\ncompanies as Bank may require (to the extent customarily maintained by\nbusinesses similar to Borrower) and with loss payable to Bank, and, in the event\nBank takes possession of the Collateral, the insurance policy or policies and\nany unearned or returned premium thereon shall at the option of Bank become the\nsole property of Bank, such policies and the proceeds of any other insurance\ncovering or in any way relating to the Collateral, whether now in existence or\nhereafter obtained, being hereby assigned to Bank;\n\n          G.   In the event the unpaid balance of any Loan Account shall exceed\nthe maximum amount of outstanding loans to which Borrower is entitled under\nSection 1 hereof, as applicable, Borrower shall immediately pay to Bank, upon\ndemand, for credit to such Loan Account the amount of such excess;\n\n          H.   Maintain and preserve all rights, franchises and other authority\nadequate and necessary for the conduct of its business and maintain and preserve\nits existence in the state of its incorporation and any other state(s) in which\nBorrower conducts its business, except with respect to such other state(s),\nwhere the failure to do so would not have a Material Adverse Effect;\n\n          I.   Maintain public liability, property damage and workers\ncompensation insurance and insurance on all its insurable property against fire\nand other hazards with responsible insurance carriers to the extent usually\nmaintained by similar businesses.  Borrower shall provide evidence of property\ninsurance in amounts and types acceptable to Bank, and certificates naming Bank\nas a loss payee;\n\n          J.   Pay and discharge, before the same becomes delinquent and\npenalties accrue thereon, all taxes, assessments and governmental charges upon\nor against it or any of its properties, and any of its other liabilities at any\ntime existing, except to the extent and so long as: (1) the same are being\ncontested in good faith and by appropriate proceedings in such manner as not to\ncause any Material Adverse Effect or the loss of any right of redemption from\nany sale thereunder; and (2) it shall have set aside on its books reserves\n(segregated to the extent required by GAAP);\n\n                                      -8-\n\n \n          K.   Maintain a standard and modern system of accounting in accordance\nwith GAAP on a basis consistently maintained.  Upon five (5) days prior notice\nto Borrower, permit Bank's representatives to have access to, and to examine its\nproperties, books and records during normal business hours, provided that Bank\nshall use its best efforts to not interfere with the conduct of Borrower's\nbusiness and so long as no Event of Default has occurred and is continuing, such\nexaminations shall not be conducted more than semi-annually by Bank;\n\n          L.   Maintain its properties, equipment and facilities in good order\nand repair (ordinary wear and tear excepted);\n\n          M.   Maintain its primary banking accounts with Bank; and\n\n          N.   Prior to allowing any of Borrower's raw materials, work in\nprocess, finished goods inventory and property, plant and equipment to be\ntransported to or be held at any contract manufacturer, warehouse or other\nlocation (other than with bona fide distributors and retail accounts), Borrower\nshall provide notice to Bank and Borrower shall have complied with such filing\nand notice requirements as shall, in Bank's opinion, assure Borrower's and\nBank's priority in such property over creditors of such contract manufacturer,\nwarehouseman or operator of such other location, including, without limitation,\nmaking filings under California Commercial Code 2326, providing notice under\nCalifornia Commercial Code 9114 and making filings and publications as required\nunder California Civil Code (S) 3440.1 and (S) 3440.5.  All such filings,\nnotices and publications shall be in form and substance satisfactory to Bank.\n\n     10.  FINANCIAL COVENANTS AND INFORMATION.  All financial covenants and\nfinancial information referenced herein shall be interpreted and prepared in\naccordance with GAAP as used in the United States of America applied on a basis\nconsistent with previous years.  Compliance with the financial covenants shall\nbe calculated and monitored on a monthly basis, except as shall be expressly\nstated to the contrary.  Borrower affirmatively covenants that so long as any\nloans, obligations or liabilities remain outstanding or unpaid to Bank or any\ncommitment is outstanding hereunder, it will, on a consolidated basis:\n\n          A.   At all times, maintain a Minimum Tangible Net Worth (meaning all\nassets, excluding any value for goodwill, trademarks, patents, copyrights,\norganization expense and other similar intangible items, less all liabilities,\nplus Subordinated Debt) of not less than (1) $500,000.00 through July 31, 1998\nand (2) $4,000,000.00 thereafter;\n\n          B.   At all times maintain a Maximum Ratio of Total Liabilities\n(meaning all liabilities, excluding Subordinated Debt) to Tangible Net Worth (as\ndefined in Section 10.A. hereof) not to exceed (1) 1.50:1.00 through July 31,\n1998 and (2) 1.00:1.00 thereafter;\n\n          C.   At all times maintain a Minimum Quick Ratio (meaning all cash\nplus Accounts divided by current liabilities) of not less than (1) 1.25:1.00\nthrough July 31, 1998 and (2) 2.00:1.00 thereafter;\n\n          D.   As soon as it is available, but not later than thirty (30) days\nafter and as of the end of each month, deliver to Bank an internally-prepared\nfinancial statement consisting of a \n\n                                      -9-\n\n \nbalance sheet and profit and loss statement, in form satisfactory to Bank, and a\nCompliance Certificate in the form of Exhibit B attached hereto and incorporated\nherein by this reference, certified by an officer of Borrower;\n\n          E.   As soon as it is available, but not later than one hundred twenty\n(120) days after the end of Borrower's fiscal year, deliver to Bank unqualified\ncopies of Borrower's consolidated financial statements together with changes in\nfinancial position audited by an independent certified public accountant\nselected by Borrower but acceptable to Bank;\n\n          F.   So long as the Revolving Loan Commitment shall be outstanding or\nany amounts remain outstanding and unpaid under the Revolving Loan Account, as\nsoon as it is available, but not later than thirty (30) days after and as of the\nend of each month, deliver to Bank, in such form and detail as Bank may require,\nstatements showing aging of the Accounts and Borrower's accounts payable,\ntogether with a Borrowing Base Certificate in the form of Exhibit C attached\nhereto and incorporated herein by this reference, certified by an officer of\nBorrower (\"Borrowing Base Certificate\").  Notwithstanding the foregoing, as a\ncondition to any request for a Revolving Loan, Borrower shall have delivered to\nBank said aging statements as well as a Borrowing Base Certificate covering the\nmost recent month then ended prior to the date of Borrower's request for an\nadvance for a Revolving Loan;\n\n          G.   Upon the reasonable request of Bank, deliver to Bank current\nbudgets, sales projections, operating plans and other financial exhibits and\ninformation in form and substance satisfactory to Bank; and\n\n          H.   Upon any officer becoming aware, deliver immediately to Bank\nwritten notice of any pending or threatened litigation claiming, or reasonably\nlikely to result in, damages against Borrower in an amount in excess of\n$50,000.00.\n\n     11.  LOAN FEE.  In addition to any other amounts due, or to become due,\nconcurrent with the execution of the Loan Documents, Borrower shall deliver to\nBank with respect to (a) the Revolving Loan Commitment a loan fee in the amount\nof Three Thousand Five Hundred Dollars ($3,500.00) and (b) the Equipment Loan\nCommitment a loan fee in the amount of One Thousand Five Hundred Dollars\n($1,500.00).\n\n     12.  DEFAULT AND REMEDIES.  The occurrence of any one or more of the\nfollowing shall constitute an \"Event of Default\": (a) Default be made in the\npayment of any obligation by Borrower under any Loan Document; (b) Except for\nany failure to pay as described in clause (a) above, breach be made in any\nwarranty, statement, promise, term or condition, contained herein or in any\nother Loan Document and the same shall not have been cured to the satisfaction\nof Bank within fifteen (15) days after Borrower shall have become aware thereof,\nwhether by written notice from Bank, or otherwise, (except that no cure period\nshall exist for breaches in respect of Borrower's obligations under Section 8,\nSubsections 9.A., 9.B., 9.C., 9.F., 9.G., 9.H. and 9.I., Subsections 10.A.,\n10.B., 10.C., 10.D., 10.E. and 10.F. of this Loan Agreement, and Sections 1 and\n2 of the General Security Agreement); (c) Any statement, warranty or\nrepresentation made by Borrower at any time proves false in any material\nrespect; (d) Borrower defaults in the repayment of any principal of or the\npayment of any interest on any indebtedness \n\n                                      -10-\n\n \nexceeding in the aggregate principal amount $10,000.00 or breaches or violates\nany term or provision of any promissory note, loan agreement, mortgage,\nindenture or other evidence of such indebtedness pursuant to which amounts\noutstanding in the aggregate exceed $10,000.00 if the effect of such breach is\nto permit the acceleration of such indebtedness, whether or not waived by the\nnote holder or obligee, and such failure shall not have been cured to Bank's\nsatisfaction within fifteen (15) calendar days after Borrower shall become aware\nthereof, whether by written notice from Borrower of such indebtedness; (e)\nBorrower becomes insolvent or makes an assignment for the benefit of creditors;\n(f) Any proceeding be commenced by Borrower under any bankruptcy, or moratorium\nlaw or statute or, any such a proceeding is commenced against Borrower and is\nnot dismissed or stayed within thirty (30) days (provided that no Loans will be\nmade prior to the dismissal of such proceeding); (g) Any material money\njudgment, writ of attachment, garnishment, eecution or other legal process be\nentered against Borrower or issued against any material property of Borrower\nwhich is not fully covered by insurance (subject to reasonable deductibles) and\nremains unvacated, unbonded, unstayed or unpaid or undischarged for more than\nfifteen (15) days (whether or not consecutive) or in any event later than five\n(5) days prior to the date of any proposed sale thereunder, or if any assessment\nfor taxes against Borrower other than against any of its real property, is made\nby the Federal or State government or any department thereof; (h) Any change in\nBorrower's financial condition, prospects or operations which has a Material\nAdverse Effect; (i) Borrower has failed to deliver the Term Sheet to Bank by the\ndate specified in Section 1.A.(2) hereof; or (j) an \"Event of Default\" occurs\nunder that certain Security and Loan Agreement dated as of April 14, 1997, as\namended by that certain First Amendment to Loan Agreement dated of even date\nherewith, executed by and between Bank and Borrower (as the same may be further\namended from time to time, collectively, the \"Other Loan Agreement\"). Upon the\noccurrence and during the continuance of an Event of Default, Bank may, at its\noption and without demand first made and without notice to Borrower, do any one\nor more of the following: (i) Terminate its obligation to make loans to Borrower\nas provided in Section 1 hereof; (ii) Declare all sums secured hereby\nimmediately due and payable; (iii) Immediately take possession of the Collateral\nwherever it may be found, using all legally permissible means to do so, or\nrequire Borrower to assemble the Collateral and make it available to Bank at a\nplace designated by Bank which is reasonably convenient to Borrower and Bank,\nand Borrower waives all claims for damages due to or arising from or connected\nwith any such taking; (iv) Proceed in the foreclosure of Bank's security\ninterest and sale of the Collateral in any manner permitted by law, or provided\nfor herein; (v) Sell, lease or otherwise dispose of the Collateral at public or\nprivate sale, with or without having the Collateral at the place of sale, and\nupon terms and in such manner as Bank may determine, and Bank may purchase same\nat any such sale; (vi) Retain the Collateral in full satisfaction of the\nobligations secured thereby to the extent permitted under the Uniform Commercial\nCode; or (vii) Exercise any remedies of a secured party under the Uniform\nCommercial Code. Prior to any such disposition, Bank may, at its option, cause\nany of the Collateral to be repaired or reconditioned in such manner and to such\nextent as Bank may deem advisable, and any sums expended therefor by Bank shall\nbe repaid by Borrower and secured hereby. Bank shall have the right to enforce\none or more remedies hereunder successively or concurrently, and any such action\nshall not estop or prevent Bank from pursuing any further remedy which it may\nhave hereunder or by law. If a sufficient sum is not realized from any such\ndisposition of the Collateral to pay all obligations\n\n                                      -11-\n\n \nsecured by this Loan Agreement, Borrower hereby promises and agrees to pay Bank\nany deficiency.\n     \n     13.  RECORDS RETENTION.  If Borrower refuses to accept their return,\nBorrower authorizes Bank to destroy all invoices, delivery receipts, reports and\nother types of documents and records submitted to Bank in connection with the\ntransactions contemplated herein at any time subsequent to four (4) months from\nthe time such items are delivered to Bank.\n\n     14.  ATTORNEYS' FEES.  Borrower agrees to reimburse Borrower for its\nreasonable attorneys' fees and expenses incurred in connection with the\nnegotiation, preparation, execution and delivery of the Loan Documents.\n\n     15.  GOVERNING LAW; JUDICIAL REFERENCE.\n\n          A.  GOVERNING LAW.  This Agreement shall be deemed to have been made\nin the State of California and the validity, construction, interpretation, and\nenforcement hereof, and the rights of the parties hereto, shall be determined\nunder, governed by, and construed in accordance with the internal laws of the\nState of California, without regard to principles of conflicts of law.\n\n          B.  JUDICIAL REFERENCE.\n\n               (1)  Other than (a) nonjudicial foreclosure and all matters in\nconnection therewith regarding security interests in real or personal property;\nor (b) the appointment of a receiver, or the exercise of other provisional\nremedies (any and all of which may be initiated pursuant to applicable law),\neach controversy, dispute or claim between the parties arising out of or\nrelating to this Loan Agreement or the other Loan Documents, which controversy,\ndispute or claim is not settled in writing within thirty (30) days after the\n\"Claim Date\" (defined as the date on which a party subject to this Loan\nAgreement gives written notice to all other parties that a controversy, dispute\nor claim exists), will be settled by a reference proceeding in California in\naccordance with the provisions of Section 638 et seq. of the California Code of\nCivil Procedure, or their successor section (\"CCP\"), which shall constitute the\nexclusive remedy for the settlement of any controversy, dispute or claim\nconcerning this Loan Agreement, including whether such controversy, dispute or\nclaim is subject to the reference proceeding and except as set forth above, the\nparties waive their rights to initiate any legal proceedings against each other\nin any court or jurisdiction other than the Superior Court in the County where\nthe real property, if any, is located or Santa Clara County, if none (the\n\"Court\").  The referee shall be a retired Judge of the Court selected by mutual\nagreement of the parties, and if they cannot so agree within forty-five (45)\ndays after the Claim Date, the referee shall be promptly selected by the\nPresiding Judge of the Court (or his\/her representative).  The referee shall be\nappointed to sit as a temporary judge, with all of the powers for a temporary\njudge, as authorized by law, and upon selection should take and subscribe to the\noath of office as provided for in Rule 244 of the California Rules of Court (or\nany subsequently enacted Rule).  Each party shall have one peremptory challenge\npursuant to CCP (S) 170.6.  The referee shall (x) be requested to set the matter\nfor hearing within sixty (60) days after the date of selection of the referee\nand (y) try any and all issues of law or fact and report a statement of decision\nupon them, if possible, within ninety (90) days of the Claim Date.  \n\n                                      -12-\n\n \nAny decision rendered by the referee will be final, binding and conclusive and\njudgment shall be entered pursuant to CCP (S) 644 in any court in the State of\nCalifornia having jurisdiction. Any party may apply for a reference proceeding\nat any time after thirty (30) days following notice to any other party of the\nnature of the controversy, dispute or claim by filing a petition for a hearing\nand\/or trial. All discovery permitted by this Loan Agreement shall be completed\nno later than fifteen (15) days before the first hearing date established by the\nreferee. The referee may extend such period in the event of a party's refusal to\nprovide requested discovery for any reason whatsoever, including, without\nlimitation, legal objections raised to such discovery or unavailability of a\nwitness due to absence or illness. No party shall be entitled to \"priority\" in\nconducting discovery. Depositions may be taken by either party upon seven (7)\ndays written notice, and request for production or inspection of documents shall\nbe responded to within ten (10) days after service. All disputes relating to\ndiscovery which cannot be resolved by the parties shall be submitted to the\nreferee whose decision shall be final and binding upon the parties. Pending\nappointment of the referee as provided herein, the Superior Court is empowered\nto issue temporary and\/or provisional remedies, as appropriate.\n\n               (2)  Except as expressly set forth in this Loan Agreement, the\nreferee shall determine the manner in which the reference proceeding is\nconducted including the time and place of all hearings, the order of\npresentation of evidence, and all other questions that arise with respect to the\ncourse of the reference proceeding. All proceedings and hearings conducted\nbefore the referee, except for trial, shall be conducted without a court\nreporter except that when any party so requests, a court reporter will be used\nat any hearing conducted before the referee. The party making such a request\nshall have the obligation to arrange for and pay for the court reporter. The\ncosts of the court reporter at the trial shall be borne equally by the parties.\n\n               (3)  The referee shall be required to determine all issues in\naccordance with existing case law and the statutory laws of the State of\nCalifornia. The rules of evidence applicable to proceedings at law in the State\nof California will be applicable to the reference proceeding. The referee shall\nbe empowered to enter equitable as well as legal relief, to provide all\ntemporary and\/or provisional remedies and to enter equitable orders that will be\nbinding upon the parties. The referee shall issue a single judgment at the close\nof the reference proceeding which shall dispose of all of the claims of the\nparties that are the subject of the reference. The parties hereto expressly\nreserve the right to contest or appeal from the judgment or any appealable order\nor appealable judgment entered by the referee. The parties hereto expressly\nreserve the right to findings of fact, conclusions of laws, a written statement\nof decision, and the right to move for a new trial or a different judgment,\nwhich new trial, if granted, is also to be a reference proceeding under this\nprovision.\n\n               (4)  In the event that the enabling legislation which provides\nfor appointment of a referee is repealed (and no successor statute is enacted),\nany dispute between the parties that would otherwise be determined by the\nreference procedure herein described will be resolved and determined by\narbitration. The arbitration will be conducted by a retired judge of the Court,\nin accordance with the California Arbitration Act, (S) 1280 through (S) 1294.2\nof the CCP as amended from time to time. The limitations with respect to\ndiscovery as set forth hereinabove shall apply to any such arbitration\nproceeding.\n\n                                      -13-\n\n \n     16.  CONFIDENTIALITY.  Bank shall not disclose to any Person any\ninformation with respect to Borrower or any of its Subsidiaries which is\nfurnished pursuant to this Loan Agreement and the other Loan Documents, except\nthat Bank may disclose any such information (a) to its own directors, officers,\nemployees, auditors, counsel and other professional advisors and to its\naffiliates if Bank in its sole discretion determines that any such party should\nhave access to such information; (b) if such information is generally available\nto the public; (c) if required or appropriate in any report, statement or\ntestimony submitted to any governmental authority having or claiming to have\njurisdiction over Bank, (d) if required or appropriate in response to any\nsummons or subpoena or in connection with any litigation, to the extent\npermitted or deemed advisable by counsel; (e) to comply with any requirement or\nlaw applicable to Bank; (f) to the extent necessary in connection with the\nexercise of any right or remedy under any Loan Document; (g) to any participant\nor assignee of Bank or any prospective participant or assignee, provided that\nsuch participant or assignee or prospective participant or assignee agrees in\nwriting to be bound by this Section 16 prior to disclosure; or (h) otherwise\nwith the prior consent of Borrower; provided, however, that any disclosure made\nin violation of this Loan Agreement shall not affect the obligations of Borrower\nor any of its Subsidiaries under this Loan Agreement or the other Loan\nDocuments.\n\n     17.  MISCELLANEOUS PROVISIONS.\n\n          A.  Nothing herein shall in any way limit the effect of the conditions\nset forth in  any other security or other agreement executed by Borrower, but\neach and every condition hereof shall be in addition thereto.\n\n          B.  No failure or delay on the part of Bank, in the exercise of any\npower, right or privilege hereunder shall operate as a waiver thereof, nor shall\nany single or partial exercise thereof.\n\n          C.  All rights and remedies existing under this Loan Agreement or any\nother Loan Document are cumulative to, and not exclusive of, any rights or\nremedies otherwise available.\n\n          D.  All headings and captions in this Loan Agreement and any related\ndocuments are for convenience only and shall not have any substantive effect.\n\n          E.  This Loan Agreement may be executed in any number of counterparts,\neach of which when so delivered shall be deemed an original, but all such\ncounterparts shall constitute but one and the same instrument.  Each such\nagreement shall become effective upon\n\n                                      -14-\n\n \nthe execution of a counterpart hereof or thereof by each of the parties hereto\nand telephonic notification that such executed counterparts has been received by\nBorrower and Bank.\n\nBANK:                                        BORROWER:\n\nIMPERIAL BANK                                SALON INTERNET, INC.,\n                                             a California corporation\n\nBy:     \/s\/ Authorized Officer               By:    \/s\/ Authorized Officer\n        -----------------------                     ----------------------\nName:       Authorized Officer               Name:      Authorized Officer\n        -----------------------                     ----------------------\nTitle:      Title                            Title:     Title\n        -----------------------                     ----------------------\n\n\n                        LIST OF EXHIBITS AND SCHEDULES\n\nExhibit A:  Definitions\nSchedule 1 To Exhibit A:  List of Specific Permitted Indebtedness\nSchedule 2 To Exhibit A:  List of Specific Permitted Liens\n\nExhibit B:  Compliance Certificate\n\nExhibit C:  Borrowing Base Certificate\n\n                                      -15-\n\n \n                                   EXHIBIT A\n\n                                  DEFINITIONS\n\n\n     \"ACCOUNTS\" means any right to payment for goods sold or leased, or to be\nsold or to be leased, or for services rendered or to be rendered no matter how\nevidenced, including accounts receivable, contract rights, chattel paper,\ninstruments, purchase orders, notes, drafts, acceptances, general intangibles\nand other forms of obligations and receivables.\n\n     \"APPROVED ACCOUNT\" means one specific account debtor approved by Bank in\nits sole and reasonable discretion.\n\n     \"BORDERS ACCOUNT\" means the Account of Borders, Inc., an account debtor of\nBorrower.\n\n     \"CAPITAL LEASE\" means, as to any Person, any lease of any Property by such\nPerson as lessee that is, or should be in accordance with Financing Accounting\nStandards Board Statement No. 13, classified and accounted for as a \"capital\nlease\" on the balance sheet of such Person prepared in accordance with GAAP.\n\n     \"CAPITAL LEASE OBLIGATION\" means, with respect to any Capital Lease, the\namount of the obligation of the lessee thereunder that, in accordance with GAAP,\nwould appear on a balance sheet of such lessee in respect of such Capital Lease\nor otherwise be disclosed in a note to such balance sheet.\n\n     \"COLLATERAL\" means any and all personal property of Borrower which is\nassigned or hereafter is assigned to Bank as security or in which Bank now has\nor hereafter acquires a security interest hereunder (including, without\nlimitation, the Accounts), or pursuant to the terms of the General Security\nAgreement, the IP Security Agreement or otherwise.\n\n     \"CONTINGENT OBLIGATION\" means, as applied to any Person, any direct or\nindirect liability, contingent or otherwise, of that Person with respect to any\nindebtedness, lease, dividend, letter of credit or other obligation of another,\nincluding, without limitation, any such obligation directly or indirectly\nguaranteed, endorsed (otherwise than for collection or deposit in the ordinary\ncourse of business), co-made or discounted or sold with recourse by that Person,\nor in respect of which that Person is otherwise directly or indirectly liable,\nincluding, without limitation, any such obligation for which that Person is in\neffect liable through any agreement (contingent or otherwise) to purchase,\nrepurchase or otherwise acquire such obligation or any security therefor, or to\nprovide funds for the payment or discharge of such obligation (whether in the\nform of loans, advances, capital stock purchases, capital contributions or\notherwise), or to maintain the solvency of the obligor of such obligation, or to\nmake payment for any products, materials or supplies or for any transportation,\nservices or lease regardless of the non-delivery or non-furnishing thereof, in\nany such case if the purpose or intent of such agreement is to provide assurance\nthat such obligation will be paid or discharged, or that any agreements relating\nthereto will be complied with, or that the holders of such obligation will be\nprotected (in whole or in part) against loss in respect thereof.  The amount of\nany Contingent Obligation of any Person shall be deemed to be an amount equal to\nthe maximum amount of such Person's liability with \n\n                                      -1-\n\n \nrespect to the stated or determinable amount of the primary obligation for which\nsuch Contingent Obligation is incurred or, if not stated or determinable, the\nmaximum reasonably anticipated liability in respect thereof (assuming such\nPerson is required to perform thereunder).\n\n     \"ELIGIBLE ACCOUNTS\" means such of Borrower's Accounts and the Borders\nAccount, as Bank in its sole reasonable discretion shall determine are eligible\nfrom time to time; provided, however, that in no event shall Eligible Accounts\ninclude the following:\n\n     (1)  all Accounts under which payment is not received within 90 days from\nthe applicable invoice date;\n\n     (2)  all Accounts against which the account debtor or any other Person\nobligated to make payment thereon asserts any defense, offset, counterclaim or\nother right to avoid or reduce the liability represented by the Accounts to the\nextent of such defense, offset or counterclaim;\n\n     (3)  any Accounts if the account debtor or any other Person liable in\nconnection therewith is insolvent, subject to bankruptcy or receivership\nproceedings or has made an assignment for the benefit of creditors or whose\ncredit standing is unacceptable to Bank and Bank has so notified Borrower;\n\n     (4)  Accounts with respect to which the account debtor is an officer,\ndirector, shareholder, employee or Subsidiary;\n\n     (5)  Accounts due from an account debtor if more than twenty-five percent\n(25%) of the aggregate amount of Accounts of such account debtor have at that\ntime remained unpaid for more than ninety (90) days from the applicable invoice\ndate;\n\n     (6)  Accounts with respect to international transactions unless either (a)\nsuch Accounts are insured or covered by a letter of credit in a manner and form\nacceptable to the Bank or (b) Bank shall have otherwise permitted in writing in\nits sole and absolute direction;\n\n     (7)  salesperson's accounts for promotional purposes;\n\n     (8)  the amount by which the aggregate of all Accounts of an account debtor\nexceeds twenty percent (20.0%) of the total accounts receivable balance\n(\"Concentration Limit\"); provided, however, the Concentration Limit for the\nApproved Account shall be forty percent (40.0%);\n\n     (9)  Accounts where the account debtor is a seller to borrower, to the\nextent that a potential offset exists;\n\n     (10) Accounts where the account debtor is a federal governmental entity,\nfederal agency or instrumentality thereof.\n\n     (11) the amount by which the aggregate of the Border's Account exceeds\nFifty Thousand Dollars ($50,000.00) during any calendar month; and\n\n                                      -2-\n\n \n     (12) unless otherwise permitted by Bank, the entire Borders Account, if it\nis determined upon Bank's review of the Borrowing Base Certificate that the\nminimum number of monthly \"book impressions\" required to be provided by Borrower\nto Borders pursuant to the terms of that certain Definitive Agreement for\nProposed Relationship entered into as of July 31, 1997, have not been met by\nBorrower.\n\n     \"EQUIPMENT LOAN MATURITY DATE\" has the meaning set forth in Section 1.B.\n\n     \"EVENT OF DEFAULT\" has the meaning set forth in Section 12.\n\n     \"GENERAL SECURITY AGREEMENT\" means that certain General Security Agreement\n(Tangible and Intangible Personal Property) dated as of April 14, 1997, made by\nBorrower in favor of Bank.\n\n     \"INDEBTEDNESS\" means, as to any Person, without duplication, (a) all\nindebtedness of such Person for borrowed money, including, without limitation,\nall of such indebtedness outstanding under this Loan Agreement and any of the\nother Loan Documents, (b) all Capital Lease Obligations of such Person, (c) to\nthe extent of the outstanding indebtedness thereunder, any obligation of such\nPerson representing an extension of credit to such Person, whether or not for\nborrowed money, (d) any obligation of such Person for the deferred purchase\nprice of Property or services (other than (i) trade or other accounts payable in\nthe ordinary course of business in accordance with customary industry terms and\n(ii) deferred franchise fees), (e) all Contingent Obligations, (f) any\nobligation of such Person of the nature described in clauses (a), (b), (c), (d)\nor (e) above, that is secured by a Lien on assets of such Person and which is\nnon-recourse to the credit of such Person, but only to the extent of the fair\nmarket value of the assets so subject to the Lien, (g) obligations of such\nPerson arising under acceptance facilities or under facilities for the discount\nof accounts receivable of such Person, (h) any obligation of such Person to\nreimburse the issuer of any letter of credit issued for the account of such\nPerson upon which a draw has been made, and (i) any lease having the effect of\nindebtedness, whether or not the same shall be treated as such on the balance\nsheet of Borrower under GAAP.\n\n     \"IP SECURITY AGREEMENT\" means that certain Collateral Assignment, Patent\nMortgage and Security Agreement dated of even date herewith, made by Borrower in\nfavor of Bank.\n\n     \"LIEN\" means any mortgage, pledge, security interest, lien or other charge\nor encumbrance, including the lien or retained security title of a conditional\nvendor, upon or with respect to any property or assets.\n\n     \"LOAN ACCOUNT OR LOAN ACCOUNTS\" means individually and collectively, the\nRevolving Loan Account, and the Equipment Loan Account.\n\n     \"LOAN DOCUMENTS\" means this Loan Agreement, the General Security Agreement,\nthe IP Security Agreement, the Warrants to Purchase Stock, the Subordination\nAgreement and that certain Agreement to Provide Insurance (Real or Personal\nProperty) dated of even date herewith, each as executed by Borrower in favor of\nBank, together with all other documents entered into or \n\n                                      -3-\n\n \ndelivered pursuant to any of the foregoing, in each case as originally executed\nor as the same may from time to time be modified, amended, supplemented or\nrestated.\n\n     LOANS\" means individually and collectively, the Revolving Loans and the\nEquipment Loans advanced pursuant to Section 1.\n\n     \"MATERIAL ADVERSE EFFECT\" means any set of circumstances or events which\n(a) has or could reasonably be expected to have any material adverse effect upon\nthe validity or enforceability of any material provision of any Loan Document,\n(b) is or could reasonably be expected to be material and adverse to the\ncondition (financial or otherwise) or business operations of Borrower, (c)\nmaterially impairs or could reasonably be expected to materially impair the\nability of Borrower, to perform its material Obligations, (d) materially impairs\nor could reasonably be expected to materially impair the value or priority of\nBank's security interest in any Collateral or (e) materially impairs or could\nreasonably be expected to materially impair the ability of Bank to enforce any\nof its legal remedies pursuant to the Loan Documents.\n\n     \"PERMITTED INDEBTEDNESS\" means the following:\n\n     (1)  indebtedness of Borrower or Indebtedness and Contingent Obligations of\nits Subsidiaries in favor of Bank arising under this Loan Agreement and the\nother Loan Documents;\n\n     (2)  the existing Indebtedness and Contingent Obligations disclosed on\nSchedule 1 attached hereto and incorporated herein by this reference; provided\nthat the principal amount thereof is not increased and the terms thereof are not\nmodified to impose more burdensome terms upon Borrower or any of its\nSubsidiaries;\n\n     (3)  the Subordinated Debt;\n\n     (4)  extensions, renewals or refinancings of Indebtedness permitted under\nthis Loan Agreement, other than clause (3) immediately above;\n\n     (5)  accrued dividends on the preferred stock of Borrower;\n\n     (6)  Indebtedness and Contingent Obligations as permitted under this Loan\nAgreement;\n\n     (7)  interest rate and currency hedging agreements;\n\n     (8)  guaranties of any Subsidiary's suppliers in connection with the\npurchase of supplies in the ordinary course of business;\n\n     (9)  guaranties of lease obligations incurred in the ordinary course of\nbusiness and to the extent otherwise permitted hereunder;\n\n     (10) Contingent Obligations constituting Permitted Liens; and\n\n     (11) the indebtedness referred to in clause (3)(a) of the definition of\nPermitted Liens.\n\n                                      -4-\n\n \n     \"PERMITTED LIENS\" means the following:\n\n     (1)  liens and security interests existing as of this date and disclosed in\nSchedule 2 attached hereto and incorporated herein by this reference;\n\n     (2)  liens for taxes, fees, assessments or other governmental charges or\nlevies, either not delinquent or being contested in good faith by appropriate\nproceedings;\n\n     (3)  liens and security interests (a) upon or in any equipment acquired or\nheld by Borrower to secure the purchase price of such equipment or indebtedness\nincurred solely for the purpose of financing the acquisition of such equipment\nand in an amount not greater than the purchase price thereof or (b) existing on\nsuch equipment at the time of its acquisition, provided that the lien and\nsecurity interest is confined solely to the property so acquired and\nimprovements thereon, and the proceeds of such equipment;\n\n     (4)  liens consisting of leases or subleases and licenses and sublicenses\ngranted to others in the ordinary course of Borrower's business not interfering\nin any material respect with the business of Borrower and any interest or title\nof a lessor or licensor under any lease or license, as applicable;\n\n     (5)  liens securing claims or demands of materialmen, mechanics, carriers,\nwarehousemen, landlords and other like persons or entities imposed without\naction of such parties, provided that the payment thereof is not yet required;\n\n     (6)  liens incurred or deposits made in the ordinary course of Borrower's\nbusiness in connection with worker's compensation, unemployment insurance,\nsocial security and other like laws;\n\n     (7)  liens arising from judgments, decrees or attachments in circumstances\nnot constituting an Event of Default;\n\n     (8)  1easements, reservations, rights-of-way, restrictions, minor defects\nor irregulatories in title and other similar charges or encumbrances affecting\nreal property not interfering in any material respect with the ordinary conduct\nof Borrower's business;\n\n     (9)  liens in favor of customs and revenue authorities arising as a matter\nof law to secure payment of customs duties in connection with the importation of\ngoods;\n\n     (10) liens that are not prior to Bank's security interest which constitute\nrights of set-off of a customary nature;\n\n     (11) any interest or title of a lessor in equipment subject to any\nCapitalized Lease otherwise permitted hereunder; and\n\n     (12) any liens arising from the filing of any financing statements relating\nto true leases otherwise permitted hereunder.\n\n                                      -5-\n\n \n     \"PERSON\" means any individual, sole proprietorship, partnership, joint\nventure, trust, unincorporated organization, association, corporation, limited\nliability company, institution, public benefit corporation, firm, joint stock\ncompany, estate, entity or governmental agency.\n\n     \"PROPERTY\" means any interest in any kind of property or asset, whether\nreal, personal or mixed, whether tangible or intangible.\n\n     \"REVOLVING LOAN MATURITY DATE\" has the meaning set forth in Section 1.A.\n\n     \"SUBORDINATED DEBT\" means indebtedness of Borrower, the repayment of\nprincipal of which is fully subordinated in time and right of payment to the\nLoans, and has been approved in Bank's sole and absolute discretion and in\nwriting.\n\n     \"WARRANTS TO PURCHASE STOCK\" means collectively, that certain Warrant to\nPurchase Stock issued on April 14, 1997 by Borrower to Bank in connection with\nthe Other Loan Agreement and that certain Warrant to Purchase Stock issued as of\nthe date hereof by Borrower to Bank in connection herewith.\n\n                                      -6-\n\n \n                            SCHEDULE 1 To EXHIBIT A\n                        SPECIFIC PERMITTED INDEBTEDNESS\n\n \n                            SCHEDULE 2 To EXHIBIT A\n                           SPECIFIC PERMITTED LIENS\n\n \n                                   EXHIBIT B\n\n                            COMPLIANCE CERTIFICATE\n\n\n     The consolidated financial statements dated as of\n______________________________ of Salon Internet, Inc., a California corporation\n(\"Borrower\") attached hereto and submitted to Imperial Bank (\"Bank\") pursuant to\nthat certain Loan Agreement dated as of April 13, 1998, entered into between\nBorrower and Bank (the \"Loan Agreement\"), are in compliance with all financial\ncovenants (unless otherwise noted below) as specified in Section 10 therein, as\nfollows:\n\nCOVENANT:                                                   ACTUAL:\n\nA.   MINIMUM TANGIBLE NET WORTH OF:\n     -----------------------------\n\n     $500,000.00 through July 31, 1998\n \n     $4,000,000 thereafter\n\nB.   MAXIMUM LIABILITIES TO TANGIBLE NET WORTH RATIO:\n     -----------------------------------------------\n\n     1.50:1.00 through July 31, 1998\n \n     2.00:1.00 thereafter\n\nC.   MINIMUM QUICK RATIO:\n     ------------------- \n\n     1.25:1.00 through July 31, 1998\n \n     2.00:1.00 thereafter\n\n\nExceptions:  (if none, so state):\n\n________________________________________________________________________________\n\n________________________________________________________________________________\n\n________________________________________________________________________________\n\n\nThe undersigned authorized officer of Borrower hereby certifies that Borrower is\nin complete compliance with the terms and conditions of the Loan Agreement for\nthe period ending _______________, _____, and as of the date of this Compliance\nCertificate the representations and warranties stated therein are true, accurate\nand complete as of the date hereof (except as to those representations and\nwarranties which specifically reference a particular date and except as noted\nabove).\n\n                                      -1-\n\n \nThe undersigned further certifies that s\/he knows of no pending conditions which\nmay cause an Event of Default (as defined in the Loan Agreement) to exist in the\nnext thirty (30) days.  The required support documents for this certification\nare attached and prepared in accordance with GAAP consistently applied.\n\nDate: ______________________            SALON INTERNET, INC.,\n                                        a California corporation\n \n \n                                        By:_________________________\n                                        Name:_______________________\n                                        Title:______________________\n\n                                      -2-\n\n \n                                   EXHIBIT C\n\n                          BORROWING BASE CERTIFICATE\n\n                     (To be provided and attached by Bank)\n\n \n                                 IMPERIAL BANK\n                                  MEMBER FDIC\n\n                        ITEMIZATION OF AMOUNT FINANCED\n                           DISBURSEMENT INSTRUCTIONS\n \n  Borrower: SALON INTERNET, INC.                           Date: April 13, 1998\n\n     $                        paid to you directly by Cashiers Check No.\n \n     $  1,000,000.00          (maximum aggregate amount) credited to deposit\n                              Account No. 20-002-379 (when advances are\n                              requested from the revolving loan commitment)\n                         \n     $     30,000.00          credited to deposit Account No. 20-002-379 (from\n                              undisbursed proceeds from the equipment loan\n                              commitment)\n\n     $                        paid on Loan(s) No.\n \n     $                        amounts paid to Bank for:\n \n  Amounts paid to others on your behalf:\n  -------------------------------------\n \n     $                        to ______________________________ Title Insurance\n                              Company\n\n     $                        to Public Officials\n \n     $                        to\n \n     $                        to\n \n     $                        to\n \n     $                        to\n \n     $  1,300,000.00          SUBTOTAL (LOAN AMOUNT)\n \nLES  $          0.00          Prepaid Finance Charge (Loan Fee)\n \n     $  1,300,000.00          TOTAL (AMOUNT FINANCED)\n\n  Upon consummation of this transaction, this document will also serve as the\n  authorization for Imperial Bank to disburse the loan proceeds as stated above.\n\n \n                                        SALON INTERNET, INC.,\n                                        a California corporation\n \n \n                                        By:_______________________________\n                                        Printed Name:_____________________\n                                        Title:____________________________\n\n \n                          SECURITY AND LOAN AGREEMENT\n                             (ACCOUNTS RECEIVABLE)\n\n\n     THIS SECURITY AND LOAN AGREEMENT (Accounts Receivable) is entered into as\nof April 14, 1997 (this \"Loan Agreement\") between SALON, INTERNET, INC., a\nCalifornia corporation (herein called \"Borrower\") and IMPERIAL BANK (herein\ncalled \"Bank\").\n\n     1.   COMMITMENT. Bank hereby commits, subject to all the terms and\nconditions of this Loan Agreement and prior to the termination of its commitment\nas hereinafter provided, to make loans to Borrower from time to time in such\namounts as may be determined by Bank up to, but not exceeding, an aggregate\nunpaid principal balance of $500,000.00 (the \"Commitment Amount\"). All loans\nadvanced pursuant to Sections 1A and 1B hereof, shall be referred to\ncollectively as \"Loans\". If, at any time or for any reason, the outstanding\nprincipal amount of the Loan is greater than the Commitment Amount, Borrower\nshall immediately pay to Bank, in cash, the amount of such excess. Any\ncommitment of Bank, pursuant to the terms of this Loan Agreement, to make (a)\nEquipment Advances shall expire on the Equipment Availability End Date and (b)\nWorking Capital Advances shall expire on the Working Capital Maturing Date (as\nsaid terms are hereinafter defined), subject to Bank's right to renew said\ncommitment in its sole and absolute discretion. Any such renewal of said\ncommitment shall not be binding upon Bank unless it is in writing and signed by\nan officer of Bank. The outstanding principal balance of the Loans may be\nprepaid in whole or in part at any time without penalty. Except for the\nprincipal payments required hereunder, any partial prepayment of principal will\nbe applied to the Loans in inverse order of maturity. Provided that no Event\nDefault has occurred and is continuing, all or any portion of the Loans advanced\nby Bank for Working Capital Advances which are repaid by Borrower shall be\navailable for reborrowing in accordance with the terms hereof. Equipment\nAdvances which are repaid by Borrower may not be reborrowed.\n\n          A.   EQUIPMENT ADVANCES. At any time from the date hereof through\nSeptember 30, 1997 (the \"Equipment Availability End Date\"), Borrower may from\ntime to time request advances (each an \"Equipment Advance\" and collectively,\n\"Equipment Advances\") from Bank in an aggregate amount not to exceed the\nCommitment Amount less the outstanding balance under the Working Capital Loan\nAccount (as hereinafter defined). When Borrower desires to obtain an Equipment\nAdvance, Borrower shall notify Bank (which notice shall be irrevocable) in\naccordance with Section 2 hereof, to be received no later than 3:00 p.m. pacific\ntime one (1) business day before the day on which the Equipment Advance is to be\nmade. The notice shall be signed by an officer of Borrower and include a copy of\nthe invoice for the equipment to be financed. Equipment Advances may only be\nused to purchase equipment and will be limited to one hundred percent (100%) of\nthe invoice amount for such equipment, approved from time to time by Bank, less\nany taxes, shipping and freight charges or discounts, warranty charges,\ninstallation expenses and other soft costs, as may be reasonably identified by\nBank from time to time. The amount of each Equipment Advance shall be debited to\nthe loan ledger account of Borrower maintained by Bank with respect to Equipment\nAdvances (herein called the \"Equipment Loan Account\") and Bank shall credit Bank\nthe outstanding unpaid\n\n                                       1\n\n \nprincipal balance (and all accrued unpaid interest thereon) of the Equipment\nLoan Account on March 31, 2000 (the \"Equipment Maturity Date\").\n\n               (i)  INTEREST PAYMENTS PRIOR TO EQUIPMENT AVAILABILITY END DATE.\nBorrower further promises to pay to Bank from the date of the initial Equipment\nAdvance through the Equipment Availability End Date, on or before the tenth\n(10th) day of each month, and each month thereafter through and including a\npayment on October 10, 1997, interest on the average daily unpaid balance of the\nEquipment Loan Account during the immediately preceding month at the rate of\ninterest per annum which Bank has announced as its prime lending rate (the\n\"Prime Rate\"), which shall vary concurrently with any change in the Prime Rate.\nInterest shall be computed at the above rate on the basis of the actual number\nof days during which the principal balance of the Equipment Loan Account is\noutstanding divided by 360, which shall for interest computation purposes be\nconsidered one (1) year.\n\n               (ii) PRINCIPAL REPAYMENT AND INTEREST PAYMENTS FOLLOWING\nEQUIPMENT AVAILABILITY END DATE. Borrower further promises to pay to Bank, on or\nbefore November 10, 1997 and on or before the tenth (10th) day of each month\nthereafter through the Equipment Maturity Date, (a) the outstanding unpaid\nprincipal balance of the Equipment Loan Account on the Equipment Availability\nEnd Date in equal monthly Installments plus (b) interest on the average daily\nunpaid balance of the Equipment Loan Account accruing from and after October 1,\n1997, during the immediately preceding month at the rate of one-half one percent\n(0.5%) per annum in excess of the Prime Rate, which shall vary concurrently with\nany change in the Prime Rate. Interest shall be computed at the above rate on\nthe basis of the actual number of days during which the principal balance of the\nEquipment Loan Account is outstanding divided by 360, which shall for interest\ncomputation purposes be considered one (1) year.\n\n          B.   WORKING CAPITAL ADVANCES. At any time from the date hereof and\nprior to three hundred sixty-four (364) days from the date thereof (\"Working\nCapital Maturity Date\"), Borrower may from time to time request advances (each a\n\"Working Capital Advance\" and collectively, \"Working Capital Advances\") from\nBank in an aggregate amount not to exceed the Commitment Amount less the then\noutstanding balance of the Equipment Loan Account. When Borrower desires to\nobtain a Working Capital Advance, Borrower shall notify Bank (which notice shall\nbe signed by an officer of Borrower and shall be irrevocable) in accordance with\nSection 2 hereof, to be received no later than 3:00 p.m. Pacific time one (1)\nbusiness day before the day on which the Working Capital Advance is to be made.\nWorking Capital Advances may only be used for general corporate and working\ncapital purposes. The amount of each Working Capital Advances (herein called the\n\"Working Capital Loan Account\") and Bank shall credit the Working Capital Loan\nAccount with all loan repayments in respect thereof made by Borrower. Borrower\npromises to pay to Bank the outstanding unpaid principal balance (and all\naccrued unpaid interest thereon) of the Working Capital Loan Account on the\nWorking Capital Maturing Date.\n\n               (i)  INTEREST. Borrower further promises to pay to Bank from the\ndate of the initial Working Capital Advance through the Working Capital Maturity\nDate, on or before the tenth (10th) day of each month, and each month thereafter\ninterest on the average daily \n\n                                      -2-\n\n \nunpaid balance of the Working Capital Loan Account during the immediately\npreceding month at the rate of interest per annum equal to the Prime Rate, which\nshall vary concurrently with any change in the Prime Rate. Interest shall be\ncomputed at the above rate on the basis of the actual number of days during\nwhich the principal balance of the Working Capital Loan Account is outstanding\ndivided by 360, which shall for interest computation purposes be considered one\n(1) year.\n\n     2.   LOAN REQUESTS. Requests for Loan hereunder shall be in writing duly\nexecuted by Borrower in a form satisfactory to Bank and shall contain a\ncertification setting forth the matters referred to in Section 1 hereof, which\nshall disclose that Borrower is entitled to the amount of Loan being requested.\n\n     3.   DELIVERY OF PAYMENTS. Payment to Bank of all amounts due hereunder\nshall be made at its Santa Clara Valley Regional offices, or at such other place\nas may be designated in writing by Bank from time to time.\n\n     4.   LATE CHARGE. If any interest payment, principal payment or principal\nbalance payment required hereunder is not received by Bank on or before ten (10)\ndays from the date in which such payment becomes due, Borrower shall pay to\nBank, a late charge equal to the lesser of (a) a five percent (5.0%) of the\namount of such unpaid payment, in addition to such unpaid payment or (b) the\nmaximum amount permitted to be charged by applicable law, until remitted to\nBank; provided; however, nothing contained in this Section 4, shall be construed\nas any obligation on the part of Bank to accept payment of any past due payment\nor less than the total unpaid principal balance of the Working Capital Loan\nAccount or the Equipment Loan Account following the Working Capital Maturity\nDate and Equipment Maturity Date, respectively. All payments shall be applied\nfirst to any late charges due hereunder, next to accrued interest then payable\nand the remainder, if any, to reduce any unpaid principal due under the Working\nCapital Loan Account or the Equipment Loan Account, as applicable.\n\n     5.   DEFAULT INTEREST. From and after the Working Capital Maturity Date\nand\/or the Equipment Maturity Date, as applicable, or such earlier date as all\nsums owing under the Working Capital Loan Account and\/or the Equipment Loan\nAccount become due and payable by acceleration or otherwise, or upon the\noccurrence and continuance of an Event of Default, all sums owing under the\nWorking Capital Loan Account and\/or the Equipment Loan Account, as applicable,\nshall at the option of Bank, bear interest until paid in full at a rate equal to\nthe lesser of (a) five percent (5.0%) per annum in excess of the then applicable\ninterest rate provided for in Section 1(A)(i), 1A(ii) or 1B(i) hereof, as\napplicable, or (b) the maximum amount permitted to be charged by applicable law,\nuntil all obligations hereunder are repaid in full or the Event of Default is\nwaived or cured to the satisfaction of Bank, as applicable.\n\n     6.   DEFINITIONS. As used in this Loan Agreement and unless otherwise\ndefined herein, all initially capitalized terms shall have the meanings set\nforth on Exhibit A attached hereto and incorporated herein by reference.\n\n     7.   ASSIGNMENT OF ACCOUNTS. Borrower hereby assigns to Bank all of\nBorrower's present and future Accounts, including all proceeds due thereunder,\nall guaranties and security\n\n                                      -3-\n\n \ntherefor, and hereby grants to Bank a continuing security interest in all moneys\ncollected as contemplated under Section 8 hereof, as security for any and all\nobligations of Borrower to Bank, whether now owing or hereunder incurred and\nwhether direct, indirect, absolute or contingent. So long as Borrower is\nindebted to Bank or Bank is committed to extend credit to Borrower and there\nshall exist and be continuing and Event of Default, Borrower will execute and\ndeliver to Bank such assignments, including Bank's standard forms of Specific or\nGeneral Assignment covering individual Accounts, notices, financing statements,\nand other documents and papers as Bank may required in order to affirm,\neffectuate or further assure the assignment to Bank of the Collateral or to give\nany third party, including the account debtors obligated on the Accounts, notice\nof Bank's interest in the Collateral. Notwithstanding the foregoing, so long as\nno Event of Default has occurred and is continuing, Borrower shall be entitled\nto use the proceeds of such Accounts in the ordinary course of its business.\n\n     8.   COLLECTION OF ACCOUNTS. Until Bank exercises its rights to collect the\nAccounts pursuant to Section 17 hereof, Borrower will collect with diligence all\nBorrower's Accounts. Any collection of Accounts by Borrower, whether in the form\nof cash, checks, notes, or other instruments for the payment of money (properly\nendorsed or assigned where required to enable Bank to collect same), shall be in\nthe trust for Bank. If an Event of Default has occurred, Borrower shall keep all\nsuch collections separate and apart from all other funds and property so as to\nbe capable of indemnification as the property of Bank and deliver said\ncollections daily to Bank in the identical from received. The proceeds of such\ncollections when received by Bank may be applied by Bank directly to the payment\nof the Loan Account or to any other obligation secured hereby. Any credit given\nby Bank upon receipt of said proceeds shall be conditional credit subject to\ncollection. Returned items at Bank's option may be charged to Borrower's deposit\naccount with Bank. All collections of the Accounts shall be set forth on an\nitemized schedule, showing the name of the account debtor, the amount of each\npayment and such other information as Bank may request.\n\n     9.   RETURNS AND ADJUSTMENTS. Until Bank exercises its rights to collect\nthe Accounts pursuant to Section 17 hereof, Borrower may continue its present\npolicies with respect to returned merchandise and adjustments. However, Borrower\nshall immediately notify Bank of all cases involving repossessions, and material\nloss or damage of or to merchandise represented by the Accounts.\n\n     10.  REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to\nBank: (a) that Borrower is a corporation, duly organized and existing in the\nState of its incorporation and the execution, delivery and performance of each\nof the Loan Documents are within Borrower's corporate powers, have been duly\nauthorized and are not in conflict with law or the terms of any charter, by-law\nor other incorporation papers, or of any indenture, agreement or undertaking to\nwhich Borrower is a party or by which Borrower is bound or affected; (b)\nBorrower is, and at the time the Collateral becomes subject to Bank's security\ninterest will be, the true and lawful owner of and has, and at the time the\nCollateral becomes subject to Bank's security interest will have, good and clear\ntitle to the Collateral, subject only to Bank's rights therein and to Permitted\nLiens; (c) each Account is, all at the time the Account comes into existence\nwill be, a true and correct statement of a bona fide indebtedness incurred by\nthe debtor\n\n                                      -4-\n\n \nnamed therein in the amount of the Account for either merchandise sold or\ndelivered (or being held subject to Borrower's delivery instructions) to, or\nservices rendered, performed and accepted by, the account debtor, (d) that to\nthe best of Borrower's knowledge, there are and will be no material defenses,\ncounterclaims, or setoffs which may be asserted against the Accounts from time\nto time, except as permitted in the definition thereof; (e) any and all\nfinancial information, including information relating to the Collateral,\nsubmitted by Borrower to Bank, whether previously or in the future, is and will\nbe true and correct; (f) there is no litigation or other proceeding pending or\nthreatened against or affecting Borrower, and Borrower is not in default with\nrespect to any order, writ, injunction, decree or deemed of any court or other\ngovernmental or regulatory authority; (g) (i) the consolidated and consolidating\nprofit and loss statements for the 11-month period ended February 28, 1997, and\nthe related balance sheet for the fiscal month ended February 28, 1997, copies\nof which have been delivered to Bank by Borrower, and all other statements and\ndata submitted in writing by Borrower to Bank in connection with Borrower's\nrequest for credit are true and correct, and said balance sheet and profit and\nloss statement accurately present and financial condition of Borrower as of the\ndate thereof and the results of the operations of Borrower for the period\ncovered thereby, and have been prepared in accordance with GAAP, (ii) since such\ndate, there have been no material adverse changes in the financial conditions of\nBorrower, and (iii) Borrower has no knowledge of any liabilities, contingent or\notherwise, which are not reflected in said balance sheet, and Borrower has not\nentered into any special commitments or substantial contracts which are not\nreflected in said balance sheet, other than in the ordinary and normal course of\nits business, which may have a Materially Adverse Effect upon its financial\ncondition, operations or business as now conducted; (h) Borrower has no\nliability for any delinquent local, state or federal taxes, and, if Borrower has\ncontracted with any government agency, it has no liability for renegotiation of\nprofits; and (i) Borrower, as of the date hereof, possesses all necessary\ntrademarks, trade names, copyrights, patents, patent rights, and licenses to\nconduct its business as now operated, without any known conflict with valid\ntrademarks, trade names, copyrights, patents, patent rights and license rights\nof others.\n\n     11.  NEGATIVE COVENANTS. Borrower agrees that so long as any loans,\nobligations or liabilities remain outstanding or unpaid to Bank or the\ncommitment of Bank hereunder is in effect, neither Borrower, nor any of its\nSubsidiaries (as hereinafter defined), will without the prior written consent of\nBank;\n\n          A.   Make any substantial change in the character of its business as\nnow conducted.\n\n          B.   Create, incur, assume or permit to exist any Indebtedness other\nthan loans from Bank except obligations now existing as shown in the financial\nstatements described in Section 10(g)(i) hereof, excluding those being\nrefinanced by Bank, Subordinated Debt or Permitted Indebtedness; or sell or\ntransfer, either with or without recourse, any accounts or notes receivable or\nany monies due or become due.\n\n          C.   Create, incur, assume or permit to exist any mortgage, pledge,\nencumbrance, lien or charge of any kind (including charge upon property at any\ntime purchased \n\n                                      -5-\n\n \nor acquired under conditional sale or other title retention agreement) upon any\nasset now owned or hereafter acquired by it, other than Permitted Liens and\nliens in favor of Bank.\n\n          D.   Sell, dispose of or grant a security interest in any of the\nCollateral other than to Bank (other than the disposing of such Collateral in\nthe ordinary and normal course of its business as now conducted or other assets\nwhich are obsolete or otherwise considered surplus), or execute any financing\nstatements covering the Collateral in favor of any secured party of Person other\nthan Bank.\n\n          E.   Make any loans or advances to any Person or other entity other\nthan in the ordinary and normal course of its business as now conducted or as\nreasonably conducted under standard industry practices for businesses similar to\nBorrower's (provided that such loans or advances are not made to any Person or\nentity which is controlled by or under common control with Borrower) or make any\ninvestment in the securities of any Person or other entity other than the United\nStates Government.\n\n          F.   Purchase or otherwise acquire all or substantially all of the\nassets or business of any Person or other entity; or liquidate, dissolve, merge\nor consolidate, or commence any proceedings therefore, or, except in the\nordinary and normal course of its business as now conducted or as reasonably\nconducted under standard industry practices for businesses similar to\nBorrower's, sell (including, without limitation, the selling of any property or\nother asset accompanied by the leasing back of the same) any assets including\nany fixed assets, any property, or other assets necessary for the continuance of\nits business as now conducted.\n\n          G.   Declare or pay any dividend or make any other distribution on any\nof its capital stock now outstanding or hereafter issued or purchase, redeem or\nretire any of such stock other than in dividends or distributions payable in\nBorrower's or any such Subsidiary's capital stock.  Notwithstanding the\nforegoing, Borrower may redeem or repurchase its capital stock in connection\nwith any agreement entered into in the ordinary course of its business with any\nof its officers, directors, employees or consultants wherein Borrower is\nobligated or entitled to repurchase from such officer, director, employee or\nconsultant shares of Borrower's capital stock upon the termination of such\nperson's employment with or services provided to Borrower.\n\n     12.  AFFIRMATIVE COVENANTS.  Borrower affirmatively covenants that so\nlong as any loans, obligations or liabilities remain outstanding or unpaid to\nBank or the commitment of Bank hereunder is in effect, it will:\n\n          A.   Furnish Bank from time to time such financial statements and\ninformation as Bank may reasonably request and inform Bank immediately upon the\noccurrence of a material adverse change therein;\n\n          B.   Upon five (5) days prior notice to Borrower, permit\nrepresentative of Bank to inspect Borrower's books and records relating to the\nCollateral and make extracts therefrom at any reasonable time, provided that\nBank shall use its best efforts to not interfere with the conduct of Borrower's\nbusiness, and to arrange for verification of the Accounts, under reasonable\nprocedures, acceptable to Bank, directly with the account debtors or otherwise\nat Borrower's\n\n                                      -6-\n\n \nreasonable cost and expense provided, however, so long as no Event of Default\nhas occurred and its continuing, such inspections shall not be conducted more\nthan semi-annually by Bank.\n\n          C.   Promptly notify Bank, upon any officer becoming aware, of any\nattachment or other legal process levied against any of the Collateral and any\ninformation received by Borrower relative to the Collateral, including the\nAccounts, the account debtors or other Persons obligated in connection\ntherewith, which may in any way have a Material Adverse Effect On the value of\nthe Collateral or the rights and remedies of Bank in respect thereto as\ndetermined by Bank in its reasonable discretion;\n\n          D.   Reimburse Bank upon demand for any and all legal costs, including\nreasonable attorneys' fees, and other expense incurred in collecting any sums\npayable by Borrower under the Loan Account or any other obligation secured\nhereby, enforcing any term or provision of this Loan Agreement or otherwise or\nin the checking, handling and collection of the Collateral and the preparation\nand enforcement of any agreement relating thereto;\n\n          E.   Notify Bank of each location and of each office of Borrower at\nwhich records of Borrower relating to the Accounts are kept;\n\n          F.   Provide, maintain and deliver to Bank policies insuring the\nCollateral against loss or damage by such risks and in such amounts, forms and\ncompanies as Bank may required (to the extent customarily maintained by business\nsimilar to Borrower) and with loss payable to Bank, and, in the event Bank takes\npossession of the Collateral, the insurance policy or policies and any unearned\nor returned premium thereon shall at the option of Bank becomes the sole\nproperty of Bank, such policies and the proceeds of any other insurance covering\nor in any way relating to the Collateral, whether now in existence or hereafter\nobtained, being hereby assigned to Bank;\n\n          G.   In the event the unpaid balance of the Equipment Loan Account\nand\/or the Working Capital Loan Account shall exceed the maximum amount of\noutstanding loans to which Borrower is entitled under Section 1 hereof, as\napplicable, Bank shall promptly notify Borrower of such excess and Borrower\nshall immediately pay to Bank for credit to such Loan Account the amount of such\nexcess;\n\n          H.   Maintain and preserve all rights, franchises and other authority\nadequate and necessary for the conduct of its business and maintain and preserve\nits existence in the State of its incorporation and any other state(s) in which\nBorrower conducts its business, except with respect to such other state(s), as\nthe failure to do so would not have a Material Adverse Effect;\n\n          I.   Maintain public liability, property damage and workers\ncompensation insurance and insurance on all its insurable property against fire\nand other hazards with responsible insurance carriers to the extent usually\nmaintained by similar businesses.  Borrower shall provide evidence of property\ninsurance in amounts and types acceptable to Bank, and certificates naming Bank\nas a loss payee;\n\n                                      -7-\n\n \n          J.   Pay and discharge, before the same becomes delinquent and before\npenalties accrue thereon, all taxes, assessments and governmental charges upon\nor against it or any of its properties, and any of its other liabilities at any\ntime existing, except to the extent and so long as:  (i) the same are being\ncontested in good faith and by appropriate proceedings in such manner as not to\ncause any Materially Adverse Effect or the loss of any right of redemption from\nany sale thereunder; and (ii) it shall have set aside on its books reserves\n(segregated to the extent required by GAAP);\n\n          K.   Maintain a standard and modern system of accounting in accordance\nwith GAAP on a basis consistently maintained.  Upon five (5) days prior notice\nto Borrower; permit Bank's representatives to have access to, and to examine its\nproperties, books and records at all reasonable times, provided that Bank shall\nuse its best efforts to not interfere with the conduct of Borrower's business;\nprovided, however, so long as no Event of Default has occurred and is\ncontinuing, such examinations shall not be conducted more than semi-annually by\nBank; and\n\n          L.   Maintain its properties, equipment and facilities in good order\nand repair.\n\n     13.  FINANCIAL COVENANTS AND INFORMATION.  All financial covenants and\nfinancial information referenced herein shall be interpreted and prepared in\naccordance with GAAP as used in the United States of America applied on a basis\nconsistent with previous years.  Compliance with financial covenants shall be\ncalculated and monitored on a monthly basis, except as shall be expressly stated\nto the contrary.  Borrower affirmatively covenants that so long as any loans,\nobligations or liabilities remain outstanding or unpaid to Bank, it will, on a\nconsolidated basis:\n\n          A.   At all times, maintain a minimum tangible net worth (meaning all\nassets, excluding any value for goodwill, trademarks, patents, copyrights,\norganization expense and other similar intangible items, less all liabilities,\nplus Subordinated Debt) or not less than $1,000,000.\n\n          B.   As soon as it is available, but not later than thirty (30) days\nafter and as of the end of each month, deliver to Bank a financial statement\nconsisting of a balance sheet and profit and loss statement in the form\nsatisfactory to Bank, and a Compliance Certificate in the form of Exhibit B\nattached hereto and incorporated herein by this reference, certified by an\nofficer of Borrower.\n\n          C.   As soon as it is available, but not less than ninety (90) days\nafter the end of Borrower's fiscal year, deliver to Bank copies of Borrower's\nconsolidated financial statements together with changes in financial position\nreviewed by an independent certified public accountant selected by Borrower, but\nacceptable to Bank.\n\n          D.   As soon as it is available, but not later than thirty (30) days\nafter and as of the end of each month, deliver to Bank, in such form and detail\nas Bank may require, statements showing aging of the Accounts and Borrower's\naccounts payable.\n\n                                      -8-\n\n \n          E.   Upon the reasonable request of Bank, deliver to Bank current\nbudgets, sales projections, operating plans and other financial exhibits and\ninformation in form and substance satisfactory to Bank.\n\n          F.   Upon any officer becoming aware, deliver immediately to Bank\nwritten notice of any pending or threatened litigation claiming, or reasonably\nlikely to result in, damages against Borrower in an amount in excess of\n$50,000.00.\n\n     14.  LOAN FEE.  [INTENTIONALLY DELETED]\n\n     15.  BANKING RELATIONSHIP.  Borrower will maintain its primary\naccounts with Bank.\n\n     16.  DEFAULT AND REMEDIES.  The occurrence of any one or more of the\nfollowing shall constitute an \"Event of Default\":  (a) default be made in the\npayment of any obligation by Borrower under any Loan Document; (b) subject to\nclause (a) above, breach be made in any warranty, statement, promise, term or\ncondition, contained herein or in any other Loan Document and the same shall not\nhave been cured to the satisfaction of Bank within fifteen (15) days after\nBorrower shall have become aware thereof, whether by written notice from Bank,\nor otherwise, (except that no cure period shall exist for breaches in respect of\nBorrower's obligations under Section 11, Subsections 12A, B, C, F, G, H and I,\nSubsections 13A, B, C and D of this Loan Agreement, and Sections 1 and 2 of the\nGeneral Security Agreement); (c) any statement, warranty or representation made\nby Borrower at any time proves false as of date such statement, warranty or\nrepresentation is made which has a Material Adverse Effect; (d) Borrower\ndefaults in the repayment of any principal of or the payment of any interest on\nany indebtedness exceeding in the aggregate principal amount $10,000.00 or\nbreaches or violates any term or provision of any promissory note, loan\nagreement, mortgage, indenture or other evidence of such indebtedness pursuant\nto which amounts outstanding in the aggregate exceed $10,000.00 if the effect of\nsuch breach is to permit the acceleration of such indebtedness, whether or not\nwaived by the note holder or obligee, and such failure shall not have been cured\nto Bank's satisfaction within fifteen (15) calendar days after Borrower shall\nbecome aware thereof, whether by written notice from Bank or otherwise, or there\nhas in fact been an acceleration of such indebtedness; (e) Borrower becomes\ninsolvent or makes an assignment for the benefit of creditors; (f) any\nproceeding be commenced by Borrower under any bankruptcy, reorganization,\narrangement, readjustment of debt or moratorium law or statute or, any such a\nproceeding is commenced against Borrower and is not dismissed or stayed within\nthirty (30) days (provided that no Loans will be made prior to the dismissal of\nsuch proceeding); (g) any material money judgment, writ of attachment,\ngarnishment, execution or other legal process be entered against Borrower or\nissued against any material property of Borrower which is not fully covered by\ninsurance (subject to reasonable deductibles) and remains unvacated, unbonded,\nunstayed or unpaid or undischarged for more than fifteen (15) days (whether or\nnot consecutive) or in any event later than five (5) days prior to the date of\nany proposed sale thereunder, or if any assessment for taxes against Borrower\nother than against any of its real property, is made by the Federal or State\ngovernment or any department thereof; or (h) any change in Borrower's financial\ncondition, prospects or operations which has a Material Adverse Effect.  Upon\nthe occurrence and during the continuance of an event of Default, Bank may, at\nits option and without demand first made and \n\n                                      -9-\n\n \nwithout notice to Borrower, do any one or more of the following: (i) terminate\nits obligation to make loans to Borrower as provided in Section 1 hereof; (ii)\ndeclare all sums secured hereby immediately due and payable; (iii) immediately\ntake possession of the Collateral wherever it may be found, using all necessary\nforce so to do, or require Borrower to assemble the Collateral and make it\navailable to Bank at a place designated by Bank which is reasonably convenient\nto Borrower to assemble the Collateral and make it available to Bank at a place\ndesignated by Bank which is reasonably convenient to Borrower and Bank, and\nBorrower waives all claims for damages due to or arising from or connected with\nany such taking; (iv) proceed in the foreclosure of Bank's security interest and\nsale of the Collateral in any manner permitted by law, or provided for herein;\n(v) sell, lease or otherwise dispose of the Collateral at public or private\nsale, with or without having the Collateral at the place of sale, and upon terms\nand in such manner as Bank may determine, and Bank may purchase same at any such\nsale; (vi) retain the Collateral in full satisfaction of the obligations secured\nthereby to the extent permitted under the Uniform Commercial Code; or (vii)\nexercise any remedies of a secured party under the Uniform Commercial Code.\nPrior to any such disposition, Bank may, at its option, cause any of the\nCollateral to be repaired or reconditioned in such manner and to such extent as\nBank may deem advisable, and any sums expanded therefor by Bank shall be repaid\nby Borrower and secured hereby. Bank shall have the right to enforce one or more\nremedies hereunder successively or concurrently, and any such action shall not\nestop or prevent Bank from pursuing any further remedy which it may have\nhereunder or by law. If a sufficient sum is not realized from any such\ndisposition of the Collateral to pay all obligations secured by this Loan\nAgreement, Borrower hereby promises and agrees to pay Bank any deficiency.\n\n     17.  COLLECTION OF ACCOUNTS BY BANK.  After and during the continuance\nof an Event of Default Bank may, without prior notice to Borrower, collect the\nAccounts and may give notice of assignment to any and all account debtors, and\nafter and during the continuance of an Event of Default, Borrower does hereby\nmake, constitute and appoint Bank its irrevocable, true and lawful attorney with\npower (a) to receive, open and dispose of all mail addressed to Borrower, (b) to\nendorse the name of Borrower upon any checks or other evidences of payment that\nmay come in the possession of Bank upon the Accounts, (c) to endorse the name of\nBorrower upon any document or instrument relating to the Collateral, in its name\nor otherwise, (d) to demand, sue for, collect and give acquaintances for any and\nall moneys due or to become due upon the Accounts, (e) to compromise, prosecute\nor defend any action, claim or proceeding with respect thereto and (f) to do any\nand all things necessary and proper to carry out the purpose herein\ncontemplated.\n\n     18.  RECORDS RETENTIONS.  If Borrower refuses to accept their return,\nBorrower authorizes Bank to destroy all invoices, delivery receipts, reports and\nother types of documents and records submitted to Bank in connection with the\ntransactions contemplated herein at any time subsequent to four (4) months from\nthe time such items are delivered to Bank.\n\n     19.  NO ORIGINAL ISSUE DISCOUNT.  Borrower and Bank hereby acknowledge\nand agree that the warrant (the \"Warrant\") to purchase stock transferred to Bank\nunder the Warrant to Purchase Stock is part of an investment unit within the\nmeaning of Section 1273(c)(2) of the Internal Revenue Code which includes the\nLoans.  Borrower and Bank further agree as between \n\n                                     -10-\n\n \nBorrower and Bank, that the fair market value of the Warrant is equal to\nUS$1,000.00 and that, pursuant to Treas. Reg. (S) 1.1273-2(h). US$1,000.00 of\nthe issue price of the investment unit will be allocable to the Warrant and the\nbalance shall be allocable to the Loans. Borrower and Bank agree to prepare\ntheir federal income tax returns in a manner consistent with the foregoing\nagreement, pursuant to Treas. Reg. (S) 1.1273, the original issue discount on\nthe Loans shall be considered to be zero.\n\n     20.  CONFIDENTIALITY. Bank shall not disclose to any Person any information\nwith respect to Borrower or any of its Subsidiaries which is furnished pursuant\nto this Loan Agreement or any other Loan Document, except that Bank may disclose\nany such information (a) to its own directors, officers, employees, auditors,\ncounsel and other professional advisors and to its affiliates if Bank in its\nsole discretion determines that any such party should have access to such\ninformation; (b) if such information is generally available to the public; (c)\nif required or appropriate in any report, statement or testimony submitted to\nany governmental authority having or claiming to have jurisdiction over Bank;\n(d) if required or appropriate in respect to any summons or subpoena or in\nconnection with any litigation, to the extent permitted or deemed advisable by\ncounsel; (e) to comply with any requirement or law applicable to Bank; (f) to\nthe extent necessary in connection with the exercise of any right or remedy\nunder any Loan Document; (g) to any participant or assignee of Bank or any\nprospective participant or assignee, provided that such participant or assignee\nor prospective participant or assignee agrees in writing to be bound by this\nSection 20 prior to disclosure; or (h) otherwise with the prior consent of\nBorrower; provided, however, that any disclosure made in violation of this Loan\nAgreement or any other Loan Document shall not affect the obligations of\nBorrower or any of its Subsidiaries under this Loan Agreement or the other Loan\nDocuments.\n\n     21.  ATTORNEYS FEES. Borrower agrees to reimburse Bank up to $5,000.00 for\nits reasonable attorneys' fees and expenses incurred in connection with the\nnegotiation, preparation, execution and delivery of the Loan Documents.\n\n     22.  MISCELLANEOUS PROVISIONS.\n\n          A.   Nothing herein shall in any way limit the effect of the\nconditions set forth in any other security or other agreement executed by\nBorrower, but each and every condition hereof shall be in addition thereto.\n\n          B.   No failure or delay on the part of Bank, in the exercise of any\nright or privilege hereunder shall operate as a waiver thereof, nor shall\nany single or partial exercise thereof.\n\n          C.   All rights and remedies existing under this Loan Agreement or any\nother Loan Document are cumulative to, and not exclusive of, any rights or\nremedies otherwise available.\n\n          D.   All headings and captions in this Loan Agreement and any related\ndocuments are for convenience only and shall not have any substantive effect.\n\n                                     -11-\n\n \n          E.   This Loan Agreement shall be governed by, and construed in\naccordance with, the internal laws of the State of California, without regard to\nprinciples of conflicts of law.\n\n\n          F.   This Loan Agreement may be executed in any number of\ncounterparts, each of which when so delivered shall be deemed an original, but\nall such counterparts shall constitute but one and the same instrument. Each\nsuch agreement shall become effective upon the execution of a counterpart hereof\nor thereof by each of the parties hereto and telephonic notification that such\nexecuted counterparts has been received by Borrower and Bank.\n\n\nBANK:                                        BORROWER:\n\nImperial Bank                                Salon Internet, Inc.,\n                                             a California corporation\n\nBy:    \/s\/ Authorized Officer                By:    \/s\/ Authorized Officer\n   ---------------------------                   ---------------------------\nName:  Authorized Officer                    Name:  Authorized Officer\n     -------------------------                    --------------------------\nTitle: Title                                 Title: Title\n      ------------------------                     -------------------------\n\n                                     -12-\n\n \n     LIST OF EXHIBITS AND SCHEDULES\n     ------------------------------\n\n     EXHIBIT A:  Definitions\n\n          SCHEDULE 1 to EXHIBIT A: List of Specific Permitted Indebtedness\n\n          SCHEDULE 2 to EXHIBIT A: List of Specific Permitted Liens\n\n     EXHIBIT B:  Compliance Certificate\n\n                                     -13-\n\n \n                                   EXHIBIT A\n\n                                  DEFINITIONS\n\n\n     \"ACCOUNTS\" means any right to payment for goods sold or leased, or to be\nsold or to be leased, or for services rendered or to be rendered no matter how\nevidenced, including accounts receivable, contract rights, chattel paper,\ninstruments, purchase orders, notes, drafts, acceptances, general intangibles\nand other forms of obligations and receivables.\n\n     \"CAPITAL LEASE\" means, as to any Person, any lease of any Property by such\nPerson as lessee that is, or should be in accordance with Financing Accounting\nStandards Board Statement No. 13, classified and accounted for as a \"capital\nlease\" on the balance sheet of such Person prepared in accordance with GAAP.\n\n     \"CAPITAL LEASE OBLIGATION\" means, with respect to any Capital Lease, the\namount of the obligation of the lessee thereunder that, in accordance with GAAP,\nwould appear on a balance sheet of such lessee in respect of such Capital Lease\nor otherwise be disclosed in a note to such balance sheet.\n\n     \"COLLATERAL\" means any and all personal property of Borrower which is\nassigned or hereafter is assigned to Bank as security or in which Bank now has\nor hereafter acquires a security interest hereunder (including, without\nlimitation, the Accounts), or pursuant to the terms of the General Security\nAgreement, the Intellectual Property Security Agreement or otherwise.\n\n     \"CONTINGENT OBLIGATION\" means, as applied to any Person, any direct or\nindirect liability, contingent or otherwise, of that Person with respect to any\nindebtedness, lease, dividend, letter of credit or other obligation of another,\nincluding, without limitation, any such obligation directly or indirectly\nguaranteed, endorsed (otherwise than for collection or deposit in the ordinary\ncourse of business), co-made or discounted or sold with recourse by that Person,\nor in respect of which that Person is otherwise directly or indirectly liable,\nincluding, without limitation, any such obligation for which that Person is in\neffect liable through any agreement (contingent or otherwise) to purchase,\nrepurchase or otherwise acquire such obligation or any security therefor, or to\nprovide funds for the payment or discharge of such obligation (whether in the\nform of loans, advances, capital stock purchases, capital contributions or\notherwise), or to maintain the solvency of the obligor of such obligation, or to\nmake payment for any products, materials or supplies or for any transportation,\nservices or lease regardless of the non-delivery or non-furnishing thereof, in\nany such case if the purpose or intent of such agreement is to provide assurance\nthat such obligation will be paid or discharged, or that any agreements relating\nthereto will be complied with, or that the holders of such obligation will be\nprotected (in whole or in part) against loss in respect thereof. The amount of\nany Contingent Obligation of any Person shall be deemed to be an amount equal to\nthe maximum amount of such Person's liability with respect to the stated or\ndeterminable amount of the primary obligation for which such Contingent\nObligation is incurred or, if not stated or determinable, the maximum reasonably\nanticipated liability in respect thereof (assuming such Person is required to\nperform thereunder).\n\n                                     -14-\n\n \n     \"EVENT OF DEFAULT\" has the meaning set forth in Section 16.\n\n     \"EQUIPMENT MATURITY DATE\" has the meaning set forth in Section 1A.\n\n     \"GAAP\" means generally accepted accounting principles set forth in the\nopinions and pronouncements of the Accounting Principles Board of the American\nInstitute of Certified Public Accountants and statements and pronouncements of\nthe Financial Accounting Standards Board or in such other statements by such\nother Person as may be approved by the significant segment of the accounting\nprofession, which are applicable to the circumstances as of the date of\ndetermination.\n\n     \"GENERAL SECURITY AGREEMENT\" means that certain General Security Agreement\n(Tangible and Intangible Personal Property) dated of even date herewith, made by\nBorrower in favor of Bank.\n\n     \"INDEBTEDNESS\" means, as to any Person, without duplication, (a) all\nindebtedness of such Person for borrowed money, including, without limitation,\nall of such indebtedness outstanding under this Loan Agreement and any of the\nother Loan Documents, (b) all Capital Lease Obligations of such Person, (c) to\nthe extent of the outstanding indebtedness thereunder, any obligation of such\nPerson representing an extension of credit to such Person, whether or not for\nborrowed money, (d) any obligation of such Person for the deferred purchase\nprice of Property or services (other than (i) trade or other accounts payable in\nthe ordinary course of business in accordance with customary industry terms and\n(ii) deferred franchise fees), (e) all Contingent Obligations, (f) any\nobligation of such Person of the nature described in clauses (a), (b), (c), (d)\nor (e) above, that is secured by a Lien on assets of such Person and which is\nnon-recourse to the credit of such Person, but only to the extent of the fair\nmarket value of the assets so subject to the Lien, (g) obligations of such\nPerson arising under acceptance facilities or under facilities for the discount\nof accounts receivable of such Person, (h) any obligation of such Person to\nreimburse the issuer of any letter of credit issued for the account of such\nPerson upon which a draw has been made and (i) any lease having the effect of\nindebtedness, whether or not the same shall be treated as such on the balance\nsheet of Borrower under GAAP.\n\n     \"IP SECURITY AGREEMENT\" means that certain Collateral Assignment, Patent\nMortgage and Security Agreement dated of even date herewith, made by Borrower in\nfavor of Bank.\n\n     \"LIEN\" means any mortgage, pledge, security interest, lien or other charge\nor encumbrance, including the lien or retained security title of a conditional\nvendor, upon or with respect to any property or assets.\n\n     \"LOAN ACCOUNT\" means collectively, the Equipment Loan Account and the\nWorking Capital Loan Account.\n\n     \"LOAN DOCUMENTS\" means this Loan Agreement, the General Security Agreement,\nthe IP Security Agreement, the Warrant to Purchase Stock, that certain Agreement\nto provide Insurance (Real or Personal Property) dated of even date herewith,\neach as executed by Borrower in favor of Bank, together with all other documents\nentered into or delivered pursuant to any of the\n\n                                     -15-\n\n \nforegoing.\n\n     \"MATERIAL ADVERSE EFFECT\" means any set of circumstances or events which\n(a) has or could reasonably be expected to have such material adverse effect\nupon the validity or enforceability of any material provision of any Loan\nDocument, (b) is or could reasonably be expected to be material and adverse to\nthe condition (financial or otherwise) or business operations of Borrower, (c)\nmaterially impairs or could reasonably be expected to materially impair the\nvalue or priority of Bank's security interest in any Collateral or (e)\nmaterially impairs or could reasonably be expected to materially impair the\nability of Bank to enforce any of its legal remedies pursuant to the Loan\nDocuments.\n\n     \"PERMITTED INDEBTEDNESS\" means the following\"\n\n     (1)  Indebtedness of Borrower or Indebtedness and Contingent Obligations of\nany affiliates or subsidiaries of Borrower (\"Borrower's Subsidiaries\") in favor\nof Bank arising under this Loan Agreement and the other Loan Documents;\n\n     (2)  The existing Indebtedness and Contingent Obligations disclosed on\nSchedule 1 attached hereto and incorporated herein by this reference; provided\nthat the principal amount thereof is not increased and the terms thereof are not\nmodified to impose more burdensome terms upon Borrower or any of Borrower's\nSubsidiaries;\n\n     (3)  The Subordinated Debt;\n\n     (4)  Extensions, renewals or refinancings of Indebtedness permitted under\nthis Loan Agreement, other than clause (3) immediately above;\n\n     (5)  Accrued dividends on the preferred stock of Borrower;\n\n     (6)  Indebtedness and Contingent Obligations as permitted under this Loan\nAgreement;\n\n     (7)  Interest rate and currency hedging agreements;\n\n     (8)  Guaranties of suppliers to Borrower's Subsidiaries in connection with\nthe purchase of supplies in the ordinary course of business;\n\n     (9)  Guaranties of lease obligations incurred in the ordinary course of\nbusiness and to the extent otherwise permitted hereunder;\n\n     (10) Contingent Obligations constituting Permitted Liens; and\n\n     (11) The Indebtedness referred to in clause (3)(a) of the definition of\nPermitted Liens.\n\n                                     -16-\n\n \n     \"PERMITTED LIENS\" MEANS THE FOLLOWING:\n\n     (1)  liens and security interests existing as of this date and disclosed in\nSchedule 2 attached hereto and incorporated herein by this reference;\n\n     (2)  liens for taxes, fees, assessments or other governmental charges or\nlevies, either not delinquent or being contested in good faith by appropriate\nproceedings;\n\n     (3)  liens and security interests (a) upon or in any equipment acquired or\nheld by Borrower to secure the purchase price of such equipment or indebtedness\nincurred solely for the purpose of financing the acquisition of such equipment\nand in an amount not greater than the purchase price thereof or (b) existing on\nsuch equipment at the time of its acquisition, provided that the lien and\nsecurity interest is confined solely to the property so acquired and\nimprovements thereon, and the proceeds of such equipment;\n\n     (4)  liens consisting of leases or subleases and licenses and sublicenses\ngranted to others in the ordinary course of Borrower's business not interfering\nin any material respect with the business of Borrower and any interest or title\nof a lessor or licensor under any lease or license, as applicable;\n\n     (5)  liens securing claims or demands of materialmen, mechanics, carriers,\nwarehousemen, landlords and other like persons or entities imposed without\naction of such parties, provided that the payment thereof is not yet required.\n\n     (6)  liens incurred or deposits made in the ordinary course of Borrower's\nbusiness in connection with worker's compensation, unemployment insurance,\nsocial security and other like laws;\n\n     (7)  liens arising from judgments, decrees or attachments in circumstances\nnot constituting an Event of Default;\n\n     (8)  easements, reservations, rights-of-way, restrictions, minor defects or\nirregularities in title and other similar charges or encumbrances affecting real\nproperty not interfering in any material respect with the ordinary conduct of\nBorrower's business.;\n\n     (9)  liens in favor of customs and revenue authorities arising as a matter\nof law to secure payment of customs duties in connection with the importation of\ngoods;\n\n     (10) liens that are not prior to Bank's security interest which constitute\nrights of set-off of a customary nature;\n\n     (11) any interest or title of a lessor in equipment subject to any\nCapitalized Lease otherwise permitted hereunder; and\n\n     (12) any liens arising from the filing of any financing statements relating\nto true leases otherwise permitted hereunder.\n\n                                     -17-\n\n \n     \"PERSON\" means any individual, sole proprietorship, partnership, joint\nventure, trust, unincorporated organization, association, corporation, limited\nliability company, institution, public benefit corporation, firm, joint stock\ncompany, estate, entity or governmental agency.\n\n     \"PROPERTY\" means any interest in any kind of property or asset,\nwhether real, personal or mixed, whether tangible or intangible.\n\n     \"SUBORDINATED DEBT\" means indebtedness of Borrower, the payment of\nwhich is fully subordinated in time and right of payment to the Loans, and has\nbeen approved in Bank's sole and absolute discretion and in writing.\n\n     \"WARRANT TO PURCHASE STOCK\" means that certain Warrant to Purchase\nStock issued as of the date hereof by Borrower to Bank in connection herewith.\n\n     \"WORKING CAPITAL MATURITY DATE\" has the meaning set forth in Section\n1B.\n\n                                     -18-\n\n \nSCHEDULE 1 TO EXHIBIT A\n\n\n                        SPECIFIC PERMITTED INDEBTEDNESS\n\n                           (List or indicate \"None\")\n\n \n                            SCHEDULE 2 TO EXHIBIT A\n\n                           SPECIFIC PERMITTED LIENS\n\n\n                           (List or indicate \"None\")\n\n                                        \n\n \n                       FIRST AMENDMENT TO LOAN AGREEMENT\n\n\n     THIS FIRST AMENDMENT TO LOAN AGREEMENT (\"First Amendment\") is made and\nentered into as of April 13, 1998, by and among SALON INTERNET, INC., a\nCalifornia corporation (\"Borrower\"), and IMPERIAL BANK (\"Bank\").\n\n                                   RECITALS\n\n     A.   Bank agreed to make loans to Borrower in the maximum principal amount\nof $500,000.00 pursuant to the terms of that certain Security and Loan Agreement\ndated as of April 14, 1997 (the \"Existing Loan Agreement\"), entered into between\nBorrower and Bank.\n\n     B.   Bank has agreed to make (1) revolving loans to Borrower in the maximum\nprincipal amount of $1,000,000.00 and (2) an equipment term loan to Borrower in\nthe maximum principal amount of $300,000.00 pursuant to the terms of that\ncertain Loan Agreement dated of even date herewith (the \"New Loan Agreement\"),\nentered into between Borrower and Bank.\n\n     C.   Borrower and Bank desire to amend certain provisions of the Existing\nLoan Agreement all in accordance with the terms set forth in this First\nAmendment.\n\n     D.   This First Amendment and the Loan Documents (as defined in the\nExisting Loan Agreement), together with all other documents entered into or\ndelivered pursuant to any of the foregoing, in each case as originally executed\nor as the same may from time to time be modified, amended, supplemented,\nrestated or superseded are hereinafter collectively referred to as the \"Existing\nLoan Documents.\"\n\n                                   AGREEMENT\n\n     NOW, THEREFORE, in consideration of the foregoing recitals and the mutual\ncovenants herein set forth and for other good and valuable consideration, the\nreceipt and sufficiency of which are hereby acknowledged, and intending to be\nlegally bound, and to induce Bank to enter into the New Loan Agreement, Borrower\nand Bank hereby agree to amend the Existing Loan Documents as follows:\n\n     1.   DEFINITIONS.  Unless otherwise defined herein, all terms defined\nin the Existing Loan Agreement have the same meaning when used herein.\n\n     2.   AMENDMENT TO EXISTING LOAN AGREEMENT. The Existing Loan Agreement is\nhereby amended as follows:\n\n          2.1  SECTIONS 13.A. AND 13.B. of the Existing Loan Agreement are\nhereby deleted in their entirety and the following paragraphs substituted\ntherefor:\n\n          \"A.  At all times, maintain a Minimum Tangible Net Worth (meaning all\n     assets, excluding any value for goodwill, trademarks, patents, copyrights,\n     organization \n\n                                       1\n\n \n     expense and other similar intangible items, less all liabilities, plus\n     Subordinated Debt) of not less than (1) $500,000.00 through July 31, 1998\n     and (2) $4,000,000.00 thereafter;\n\n          A.   At all times maintain a Maximum Ratio of Total Liabilities\n     (meaning all liabilities, excluding Subordinated Debt) to Tangible Net\n     Worth (as defined in Section 10.A. hereof) not to exceed (1) 1.50:1.00\n     through July 31, 1998 and (2) 1.00:1.00 thereafter;\n\n          B.   At all times maintain a Minimum Quick Ratio (meaning all cash\n     plus Accounts divided by current liabilities) of not less than (1)\n     1.25:1.00 through July 31, 1998 and (2) 2.00:1.00 thereafter;\"\n\n          2.2  SECTIONS 13.C. of the Existing Loan Agreement is hereby deleted\nin its entirety and the following paragraph substituted therefor:\n\n          \"D.  As soon as it is available, but not later than one hundred twenty\n     (120) days after the end of Borrower's fiscal year, deliver to Bank\n     unqualified copies of Borrower's consolidated financial statements together\n     with changes in financial position audited by an independent certified\n     public accountant selected by Borrower but acceptable to Bank;\"\n\n          2.3  SECTIONS 13.D., 13.E. and 13.F. of the Existing Loan Agreement\nare hereby renumbered as Sections 13.E., 13.F. and 13.G., respectively.\n\n          2.4  SECTION 16 of the Existing Loan Agreement is hereby amended to\nadd the following subparagraph (i) as an additional Event of Default thereunder:\n\n          \"or (i) an \"Event of Default\" occurs under the New Loan Agreement.\"\n\n          2.5  EXHIBIT B of the Existing Loan Agreement is hereby deleted in its\nentirety and replaced with the Exhibit B attached hereto and incorporated herein\n                               ---------                                        \nby this reference.\n\n     3.   REPRESENTATIONS AND WARRANTIES.  Borrower represents and warrants\nthat its representations and warranties in the Existing Loan Documents continue\nto be true and complete in all material respects as of the date hereof after\ngiving effect to this First Amendment (except to the extent such specifically\nrelate to another date or as specifically described on Schedule 1 attached\nhereto and incorporated herein by this reference) and that the execution,\ndelivery and performance of this First Amendment are duly authorized, do not\nrequire the consent or approval of any governmental body or regulatory authority\nand are not in contravention of or in conflict with any law or regulation or any\nterm or provision of any other agreement entered into by Borrower.\n\n     4.   CONDITIONS PRECEDENT.  The legal effectiveness of this First\nAmendment is subject to the satisfaction of all of the following conditions\nprecedent:\n\n          (a)  EXECUTED FIRST AMENDMENT.  Bank shall have received this First\nAmendment duly executed and delivered by Borrower.\n\n                                       2\n\n \n          (b)  INTELLECTUAL PROPERTY COLLATERAL UPDATE. Bank shall have received\nschedules and other documents updating descriptions of Borrower's intellectual\nproperty position as Bank shall have requested, all in form appropriate for\nfiling of the same with appropriate authorities.\n\n          (c)  RESOLUTIONS AND OTHER CORPORATE DOCUMENTS OF BORROWER. Bank shall\nhave received resolutions of the Board of Directors of Borrower authorizing\nBorrower to enter into this First Amendment and to deliver such other corporate\ndocuments as Bank shall reasonably request.\n\n          (d)  FINANCIAL CONDITION.  There shall have occurred no material\nadverse change in the financial condition or prospects of Borrower as shown on\nthe most recent financial statements submitted to Bank or disclosed to Bank,\nrespectively, and relied upon by Bank in entering into this First Amendment.\n\n          (e)  NO DEFAULT.  There shall have occurred no Event of Default that\nremains uncured and is continuing under any of the Existing Loan Documents.\n\n          (f)  PAYMENT OF FEES.  Bank shall have received reimbursement from\nBorrower of its costs and expenses incurred (including, without limitation, its\nattorneys' fees and expenses) in connection with this First Amendment and the\ntransactions contemplated hereby.\n\n          (g)  OTHER DOCUMENTS.  Bank shall have received such other documents,\ninformation and items from Borrower as it shall reasonably request to effectuate\nthe transactions contemplated hereby.\n\n     5.   RELEASE AND WAIVER.\n\n          (a)  Borrower hereby acknowledges and agrees that: (1) it has no claim\nor cause of action against Bank or any parent, subsidiary or affiliate of Bank,\nor any of Bank's officers, directors, employees, attorneys or other\nrepresentatives or agents (all of which parties other than Bank being,\ncollectively, \"Bank's Agents\") in connection with the Existing Loan Documents,\nthe loans thereunder or the transactions contemplated therein and herein; (2) it\nhas no offset or defense against any of its respective obligations, indebtedness\nor contracts in favor of Bank; and (3) it recognizes that Bank has heretofore\nproperly performed and satisfied in a timely manner all of its obligations to\nand contracts with Borrower.\n\n          (b)  Although Bank regards its conduct as proper and does not believe\nBorrower to have any claim, cause of action, offset or defense against Bank or\nany of Bank's Agents in connection with the Existing Loan Documents, the loans\nthereunder or the transactions contemplated therein, Bank wishes and Borrower\nagrees to eliminate any possibility that any past conditions, acts, omissions,\nevents, circumstances or matters could impair or otherwise affect any rights,\ninterests, contracts or remedies of Bank.  Therefore, Borrower unconditionally\nreleases and waives (1) any and all liabilities, indebtedness and obligations,\nwhether known or unknown, of any kind to Bank or of any of Bank's Agents to\nBorrower, except the obligations remaining to be performed by Bank as expressly\nstated in the Existing Loan Agreement, this First Amendment \n\n                                       3\n\n \nand the other Existing Loan Documents executed by Bank; (2) any legal, equitable\nor other obligations or duties, whether known or unknown, of Bank or of any of\nBank's Agents to Borrower (and any rights of Borrower against Bank) besides\nthose expressly stated in the Existing Loan Agreement, this First Amendment and\nthe other Existing Loan Documents; (3) any and all claims under any oral or\nimplied agreement, obligation or understanding with Bank or any of Bank's\nAgents, whether known or unknown, which is different from or in addition to the\nexpress terms of the Existing Loan Agreement, this First Amendment or any of the\nother Existing Loan Documents; and (4) all other claims, causes of action or\ndefenses of any kind whatsoever (if any), whether known or unknown, which\nBorrower might otherwise have against Bank or any of Bank's Agents, on account\nof any condition, act, omission, event, contract, liability, obligation,\nindebtedness, claim, cause of action, defense, circumstance or matter of any\nkind whatsoever which existed, arose or occurred at any time prior to the\nexecution and delivery of this First Amendment or which could arise concurrently\nwith the effectiveness of this First Amendment.\n\n          (c)  Borrower agrees that it understands the meaning and effect of\nSection 1542 of the California Civil Code, which provides:\n\n               Section 1542. Certain Claims Not Affected by General\n               Release. A general release does not extend to claims which\n               the creditor does not know or suspect to exist in his favor\n               at the time of executing the release, which if known by him\n               must have materially affected his settlement with the \n               debtor.\n\nBORROWER AGREES TO ASSUME THE RISK OF ANY AND ALL UNKNOWN, UNANTICIPATED OR\nMISUNDERSTOOD DEFENSES, CLAIMS, CAUSES OF ACTION, CONTRACTS, LIABILITIES,\nINDEBTEDNESS AND OBLIGATIONS WHICH ARE RELEASED BY THIS FIRST AMENDMENT IN FAVOR\nOF BANK AND BANK'S AGENTS, AND BORROWER HEREBY WAIVES AND RELEASES ALL RIGHTS\nAND BENEFITS WHICH IT MIGHT OTHERWISE HAVE UNDER THE AFOREMENTIONED SECTION 1542\nOF THE CALIFORNIA CIVIL CODE WITH REGARD TO THE RELEASE OF SUCH UNKNOWN,\nUNANTICIPATED OR MISUNDERSTOOD DEFENSES, CLAIMS, CAUSES OF ACTION, CONTRACTS,\nLIABILITIES, INDEBTEDNESS AND OBLIGATIONS.  TO THE EXTENT (IF ANY) WHICH ANY\nSUCH LAWS MAY BE APPLICABLE, BORROWER WAIVES AND RELEASES (TO THE MAXIMUM EXTENT\nPERMITTED BY LAW) ANY RIGHT OR DEFENSE WHICH IT MIGHT OTHERWISE HAVE UNDER ANY\nOTHER LAW OF ANY APPLICABLE JURISDICTION WHICH MIGHT LIMIT OR RESTRICT THE\nEFFECTIVENESS OR SCOPE OF ANY OF ITS WAIVERS OR RELEASES UNDER THIS FIRST\nAMENDMENT.\n\n     6.   FULL FORCE AND EFFECT; ENTIRE AGREEMENT.  Except to the extent\nexpressly provided in this First Amendment, the terms and conditions of the\nExisting Loan Agreement and the other Existing Loan Documents shall remain in\nfull force and effect.  This First Amendment and the other Existing Loan\nDocuments constitute and contain the entire agreement of the parties hereto and\nsupersede any and all prior agreements, negotiations, correspondence,\nunderstandings and communications between the parties, whether written or oral,\nrespecting the subject matter \n\n                                       4\n\n \nhereof. The parties hereto further agree that the Existing Loan Documents\ncomprise the entire agreement of the parties thereto and supersede any and all\nprior agreements, negotiations, correspondence, understandings and other\ncommunications between the parties thereto, whether written or oral respecting\nthe extension of credit by Bank to Borrower and\/or its affiliates.\n\n     7.   COUNTERPARTS; EFFECTIVENESS. This First Amendment may be executed in\nany number of counterparts, each of which when so delivered shall be deemed an\noriginal, but all such counterparts taken together shall constitute but one and\nthe same instrument. Each such agreement shall become effective upon the\nexecution of a counterpart hereof or thereof by each of the parties hereto and\ntelephonic notification that such executed counterparts has been received by\nBorrower and Bank.\n\n     IN WITNESS WHEREOF, each of the parties hereto has caused this First\nAmendment to be executed and delivered by its duly authorized officer as of the\ndate first written above.\n\n                                   BORROWER\n\n                                   SALON INTERNET, INC.,\n                                   a California corporation\n \n \n                                   By: \/s\/ Authorized Officer\n                                      -----------------------------\n                                   Printed Name: AUTHORIZED OFFICER\n                                                -------------------\n                                   Title: Title\n                                         -------------------------- \n \n                                   BANK\n \n                                   IMPERIAL BANK\n \n                                   By: \/s\/ Authorized Officer\n                                      -----------------------------\n                                   Printed Name: AUTHORIZED OFFICER\n                                                -------------------\n                                   Title: Title           \n                                         -------------------------- \n\n                                       5\n\n \n                                  SCHEDULE 1 \n\n           Schedule of Exceptions to Representations and Warranties\n\n\n                           (List or indicate \"NONE\")\n\n \n                                   EXHIBIT B\n\n                            COMPLIANCE CERTIFICATE\n\n\n     The consolidated financial statements dated as of ___________________ of\nSALON INTERNET, INC., a California corporation (\"Borrower\") attached hereto and\nsubmitted to IMPERIAL BANK (\"Bank\") pursuant to that certain Loan Agreement\ndated as of April 14, 1997, entered into between Borrower and Bank, as amended\nby that certain First Amendment to Loan Agreement dated as of April 13, 1998\n(collectively, the \"Loan Agreement\"), are in compliance with all financial\ncovenants (unless otherwise noted below) as specified in Section 13 therein, as\nfollows:\n\n--------------------------------------------------------------------------------\nCOVENANT:                                                   ACTUAL:\n\n--------------------------------------------------------------------------------\nA.   Minimum Tangible Net Worth of:\n     -----------------------------\n\n     $500,000.00 through July 31, 1998\n \n     $4,000,000 thereafter\n--------------------------------------------------------------------------------\nB.   Maximum Liabilities to Tangible Net Worth Ratio:\n     -----------------------------------------------\n\n     1.50:1.00 through July 31, 1998\n \n     2.00:1.00 thereafter\n--------------------------------------------------------------------------------\nC.   Minimum Quick Ratio:\n     -------------------\n\n     1.25:1.00 through July 31, 1998\n \n     2.00:1.00 thereafter\n--------------------------------------------------------------------------------\n\nExceptions: (if none, so state):\n\n________________________________________________________________________________\n\n________________________________________________________________________________\n\n________________________________________________________________________________\n\n\nThe undersigned authorized officer of Borrower hereby certifies that Borrower is\nin complete compliance with the terms and conditions of the Loan Agreement for\nthe period ending _________________________, _____, and as of the date of this\nCompliance Certificate the representations and warranties stated therein are\ntrue, accurate and complete as of the date hereof (except as to those\nrepresentations and warranties which specifically reference a particular date\nand except as noted above).\n\n                                      B-1\n\n \nThe undersigned further certifies that s\/he knows of no pending conditions which\nmay cause an Event of Default (as defined in the Loan Agreement) to exist in the\nnext thirty (30) days.  The required support documents for this certification\nare attached and prepared in accordance with GAAP consistently applied.\n\n\nDate: _______________                   SALON INTERNET, INC.,\n                                        a California corporation\n \n \n                                        By:__________________________\n                                        Name:________________________\n                                        Title:_______________________\n\n                                      B-2\n\n \n                        AGREEMENT TO PROVIDE INSURANCE\n                          (REAL OR PERSONAL PROPERTY)\n\nTO:  IMPERIAL BANK                                         Date:  April 13, 1998\n     226 Airport Parkway                          Borrower: SALON INTERNET, INC.\n     San Jose, California 95110\n\n     In consideration of loans in the aggregate principal amount not to exceed\n$1,300,000.00 (\"Loans\"), secured by all tangible personal property of the\nundersigned, including inventory and equipment, the undersigned agrees to obtain\nadequate insurance coverage to remain in force during the term of the Loans.\n\n     The undersigned also agrees to advise the below named agent to add IMPERIAL\nBANK (\"Bank\") as a loss payee on the new or existing insurance policy, and to\nfurnish Bank at the above address with a copy of said policy\/endorsements and\nany subsequent renewal policies.\n\n     The undersigned understands that the policy must contain:\n\n     1.   Fire and extended coverage in an amount sufficient to cover:\n\n          (a)  The amount of the Loans, OR\n\n          (b)  All existing encumbrances, whichever is greater.\n\n     But not in excess of the replacement value of the Improvements on the real\nproperty.\n\n     2.   A Lender's \"Loss Payable\" Endorsement Form 438 BFU in favor of\nIMPERIAL BANK, or any other form acceptable to Bank.\n\n                             INSURANCE INFORMATION\n\nInsurance Co.\/Agent: _______________________      Telephone No.:________________\n \nAgent's Address:________________________________________________________________\n\n                                             BORROWER\n \n                                             SALON INTERNET, INC.,\n                                             a California corporation\n \n \n                                             By:_______________________________\n                                             Printed Name:_____________________\n                                             Title:____________________________\n\n================================================================================\n------------------------------------------------\n               FOR BANK USE ONLY\n\nINSURANCE VERIFICATION:       Date:____________\nPerson spoken to:______________________________\nPolicy Number:_________________________________\nEffective Form:____________ To: _______________\nVerified By:___________________________________\n------------------------------------------------    \n\n \n                                 IMPERIAL BANK\n                                  MEMBER FDIC\n\n\n                         AUTOMATIC DEBIT AUTHORIZATION\n\n\nTO:  IMPERIAL BANK\n\nRE:  LOAN # __________________________\n\nYou are hereby authorized and instructed to charge Account No. 20-002-379 in the\nname of SALON INTERNET, INC. for principal and\/or interest payments due on the\nabove referenced loan as set forth below and credit the loan referenced above.\n\n     [X]  Debit each interest payment as it becomes due according to the terms\n          of that certain Loan Agreement dated of even date herewith, and any\n          renewals or amendments thereof.\n\n     [X]  Debit each principal payment as it becomes due according to the terms\n          of that certain Loan Agreement dated of even date herewith, and any\n          renewals or amendments thereof.\n\nThis Authorization is to remain in full force and effect until revoked in\nwriting.\n\n--------------------------------------------------------------------------------\nBorrower Signature:                               Date: April 13, 1998\n \nSALON INTERNET, INC.,\na California corporation\n \n \nBy:____________________________________\nPrinted Name:__________________________\nTitle:_________________________________\n\n--------------------------------------------------------------------------------\n\n \n                                 IMPERIAL BANK\n                                  Member FDIC\n\n                     CORPORATE RESOLUTION REGARDING CREDIT\n\n\n\n\nOFFICE:  Emerging Growth Industries    ADDRESS: 226 Airport Parkway, San Jose, \n                                                CA 95110\n\n\n     RESOLVED, that SALON INTERNET, INC., a California corporation (the\n\"Corporation\"), borrow from IMPERIAL BANK hereinafter referred to as \"Bank\",\nfrom time to time, such sums of money as, in the judgment of the officer or\nofficers hereinafter authorized, this Corporation may require; provided that the\naggregate amount of such borrowing, pursuant to this resolution, shall not at\nany one time exceed the principal sum of ONE MILLION THREE HUNDRED THOUSAND\nDOLLARS ($1,300,000.00), in addition to such amount as may be otherwise\nauthorized;\n\n     RESOLVED FURTHER, that any one (1) of the following named officers\n\n\n                                       \n__________________________________       the__________________________________  \n \n__________________________________       the__________________________________  \n\n__________________________________       the__________________________________  \n\n\nof this Corporation (the officer or officers acting in combination, authorized\nto act pursuant hereto being hereinafter designated as \"authorized officers\"),\nbe and he\/she\/they is\/are hereby authorized, directed and empowered, for and on\nbehalf and in the name of this Corporation (1) to execute and deliver to Bank\nsuch notes or other evidences of indebtedness of this Corporation for the monies\nso borrowed, with interest thereon, as Bank may require, and to execute and\ndeliver, from time to time, renewals or extensions of such notes or other\nevidences of indebtedness; (2) to grant a security interest in, transfer, or\notherwise hypothecate or deed in trust for Bank's benefit and deliver by such\ninstruments in writing or otherwise as may be demanded by Bank, any of the\nproperty of this Corporation as may be required by Bank to secure the payment of\nany notes or other indebtedness of this Corporation or third parties to Bank,\nwhether arising pursuant to this resolution or otherwise; and (3) to perform all\nacts and execute and deliver all instruments which Bank may deem necessary to\ncarry out the purposes of this resolution;\n\n     RESOLVED FURTHER, that said authorized officers be and he\/she\/they is\/are\nhereby authorized and empowered, and that any ________ (____) of said authorized\nofficers be and he\/she\/they is\/are hereby authorized and empowered (1) to\ndiscount with or sell to Bank conditional sales contracts, notes, acceptances,\ndrafts, bailment agreements, leases, receivables and evidences of indebtedness\npayable to this Corporation, upon such terms as may be agreed upon by them and\nBank, and to endorse in the name of this Corporation said notes, acceptances,\ndrafts, bailment agreements, leases, receivables and evidences of indebtedness\nso discounted, and to guarantee the payment of the same to Bank, and (2) to\napply for and obtain from Bank letters of credit and in connection therewith to\nexecute such agreement, applications, guarantees, indemnities and other\nfinancial undertakings as Bank may require;\n\n     RESOLVED FURTHER, that said authorized officers are also authorized to\ndirect the disposition of the proceeds of any such obligation, and to accept or\ndirect delivery from Bank of any property of this Corporation at any time held\nby Bank;\n\n     RESOLVED FURTHER, that the authority given hereunder shall be deemed\nretroactive and any and all acts authorized hereunder performed prior to the\npassage of this resolution are hereby ratified and affirmed;\n\n\n                                       1\n\n \n     RESOLVED FURTHER, that this resolution will continue in full force and\neffect until Bank shall receive official notice in writing from this Corporation\nof the revocation thereof by a resolution duly adopted by the Board of Directors\nof this Corporation, and that the classification of the Secretary of this\nCorporation as to the signatures of the above named persons shall be binding on\nthis Corporation.\n\n     I, _________________________, secretary of the Corporation, duly organized\nand existing under the laws of the State of California, do hereby certify that\nthe foregoing is a full, true and correct copy of a resolution of the Board of\nDirectors of the Corporation, duly and regularly passed and adopted by the Board\nof Directors of the Corporation.\n\n     I further certify that said resolution is still in full force and effect\nand has not been amended or revoked, and that the specimen signatures appearing\nbelow are the signatures of the officers authorized to sign for this Corporation\nby virtue of said resolution.\n\n     Executed as of April 13, 1998.\n\n\n\n \n                                        ____________________________________\n                                        ______________________, Secretary\n\n\n\n\n                            AUTHORIZED SIGNATURES:\n\n\n\n__________________________________     Signature:_____________________________  \n\n__________________________________     Signature:_____________________________ \n \n__________________________________     Signature:_____________________________\n\n                                       2\n\n \nTHIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER\nTHE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR\nOTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT\nOR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE\nCORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.\n\n\n                           WARRANT TO PURCHASE STOCK\n\nCorporation:               Salon Internet, Inc., a California Corporation\nNumber of Shares:          23,734 (subject to Section 1.8)\nClass of Stock:            Series B Preferred (subject to Section 1.8)\nInitial Exercise Price:    $1.58 per share (subject to Section 1.8)\nIssue Date:                ________________, 1998\nExpiration Date:           ________________, 2005 (Subject to Article 4.1)\n\n\nTHIS WARRANT CERTIFIES THAT, in consideration of the payment of $1.00 and for\nother good and valuable consideration, IMPERIAL BANK or registered assignee\n(\"Holder\") is entitled to purchase the number of fully paid and nonassessable\nshares of the class of securities (the \"Shares\") of the corporation (the\n\"Company\") at the initial exercise price per Share (the \"Warrant Price\") all as\nset forth above and as adjusted pursuant to Article 2 of this Warrant, subject\nto the provisions and upon the terms and conditions set forth of this Warrant.\n\nARTICLE 1.  EXERCISE.\n            -------- \n\n     1.1    Method of Exercise.  Holder may exercise this Warrant by delivering\n            ------------------                                                 \nthis Warrant and a duly executed Notice of Exercise in substantially the form\nattached as Appendix I to the principal office of the Company.  Unless Holder is\nexercising the conversion right set forth in Section 1.2, Holder shall also\ndeliver to the Company a check for the aggregate Warrant Price for the Shares\nbeing purchased.\n\n     1.2    Conversion Right. In lieu of exercising this Warrant as specified in\n            ----------------\nSection 1.1, Holder may from time to time convert this Warrant, in whole or in\npart, into a number of Shares determined by dividing (a) the aggregate fair\nmarket value of the Shares or other securities otherwise issuable upon exercise\nof this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair\nmarket value of one Share. The fair market value of the Shares shall be\ndetermined pursuant to Section 1.4.\n\n     1.3    No Fractional Shares.  No fractional shares shall be issued upon\n            --------------------                                            \nexercise or conversion of this Warrant.  The company shall, in lieu of issuing\nany fractional share, pay the Holder entitled to such fraction a sum in cash\nequal to the fair market value of a Share (as determined pursuant to Section\n1.4) multiplied by such fraction.\n\n                                       1\n\n \n     1.4  Fair Market Value.  If the Shares are traded regularly in a public\n          -----------------                                                 \nmarket, the fair market value of the Shares shall be the closing price of the\nShares (or the closing price of the Company's stock into which the Shares are\nconvertible) reported for the business day immediately before Holder delivers\nits Notice of Exercise to the Company.  If the Shares are not regularly traded\nin a public market, the Board of Directors of the Company shall determine fair\nmarket value in its reasonable good faith judgment.  The foregoing\nnotwithstanding, if Holder advises the Board of Directors in writing that Holder\ndisagrees with such determination, then the Company and Holder shall promptly\nagree upon a reputable investment banking firm to undertake such valuation.  If\nthe valuation of such investment banking firm is greater than that determined by\nthe Board of Directors by an amount equal to or greater than the lesser of (i)\n10% of the valuation made by the Board of Directors or (ii) $0.50 per share,\nthen all fees and expenses of such investment banking firm shall be paid by the\nCompany.  In all other circumstances, such fees and expenses shall be paid by\nHolder.\n\n     1.5  Delivery of Certificate and New Warrant.  Promptly after Holder\n          ---------------------------------------                        \nexercises or converts this Warrant, the Company shall deliver to Holder\ncertificates for the Shares acquired and, if this Warrant has not been fully\nexercised or converted and has not expired, a new Warrant representing the\nShares not so acquired.\n\n     1.6  Replacement of Warrants.  On receipt of evidence reasonably\n          -----------------------                                    \nsatisfactory to the Company of the loss, theft, destruction or mutilation of\nthis Warrant and, in the case of loss, theft or destruction, on delivery of an\nindemnity agreement reasonably satisfactory in form and amount to the Company\nor, in the case of mutilation, or surrender and cancellation of this Warrant,\nthe Company at its expense shall execute and deliver, in lieu of this Warrant, a\nnew warrant of like tenor.\n\n     1.7  Repurchase on Sale, Merger, or Consolidation of the Company.\n          ----------------------------------------------------------- \n\n          1.7.1  \"Acquisition\".  For the purpose of this Warrant, \"Acquisition\"\n                 -------------                                                 \nmeans any sale, license, or other disposition of all or substantially all of the\nassets (including intellectual property) of the Company, or any reorganization,\nconsolidation, or merger of the Company where the holders of the Company's\nsecurities before the transaction beneficially own less than 50% of the\noutstanding voting securities of the surviving entity after the transaction.\n\n          1.7.2  Assumption of Warrant.  If after the date hereof the Company\n                 ---------------------                                       \nshall enter into any Acquisition, then, as a condition of such Acquisition,\nlawful provisions shall be made, and duly executed documents evidencing the same\nfrom the Company or its successor shall be delivered to Holder, so that Holder\nshall thereafter have the right to purchase, at a total price not to exceed that\npayable upon the exercise of this Warrant in full, the kind and amount of shares\nof stock and other securities and property receivable upon such Acquisition by a\nholder of the number of Shares which might have been purchased by the Holder\nimmediately prior to such Acquisition, and in any such case appropriate\nprovisions shall be made with respect to the rights and interest of Holder to\nthe end that the provisions hereof (including without limitation, provisions for\nthe adjustment of the Warrant Price and the number of shares issuable hereunder)\n\n                                       2\n\n \nshall thereafter be applicable in relation to any shares of stock or other\nsecurities and property thereafter deliverable upon exercise hereof.\n\n          1.7.3  Purchase Right.  Notwithstanding the foregoing, at the election\n                 --------------                                                 \nof Holder, the Company shall purchase the unexercised portion of this Warrant\nfor cash upon the closing of any Acquisition for an amount equal to (a) the fair\nmarket value of any consideration that would have been received by Holder in\nconsideration of the Shares had Holder exercised the unexercised portion of this\nWarrant immediately before the record date for determining the shareholders\nentitled to participate in the proceeds of the Acquisition, less (b) the\naggregate Warrant Price of the Shares, but in no event less than zero; provided,\nhowever, that the purchase right under this Section 1.7.3 shall not be effective\nif the accountants for the Company determine that it would result in the\ndisallowance of pooling of interest treatment.\n\n     1.8    Adjustment in Underlying Preferred Stock Price and Exercise Price.\n            -----------------------------------------------------------------\nIf on or before August 31, 1998, the Company sells and issues to any investors,\npreferred stock with aggregate gross proceeds to the Company of at least\n$2,500,000, this Warrant shall concurrent with the issuance of such shares of\npreferred stock automatically be adjusted to instead be exercisable for shares\nof the same series and class and bearing the same rights, preferences, and\nprivileges, of such shares of stock, with the Warrant Price hereunder adjusted\nto equal the per share purchase price of such stock, and the number of such\nshares subject to this Warrant adjusted to equal (i) thirty-seven thousand, five\nhundred dollars ($37,500), divided by (ii) such modified per share Warrant\nPrice.\n\nARTICLE 2.  ADJUSTMENTS TO THE SHARES.\n            ------------------------- \n\n     2.1    Stock Dividends, Splits, Etc.  If the Company declares or pays a\n            ----------------------------                                    \ndividend on its common stock (or the Shares if the Shares are securities other\nthan common stock) payable in common stock, or other securities, subdivides the\noutstanding common stock into a greater amount of common stock, or, if the\nshares are securities other than common stock. subdivides the Shares in a\ntransaction that increases the amount of common stock into which the Shares are\nconvertible, then upon exercise of this Warrant, for each Share acquired, Holder\nshall receive, without cost to Holder, the total number and kind of securities\nto which Holder would have been entitled had Holder owned the Shares of record\nas of the date the dividend or subdivision occurred.\n\n     2.2    Reclassification, Exchange or Substitution.  Upon any\n            ------------------------------------------           \nreclassification, exchange, substitution, or other event that results in a\nchange of the number and\/or class of the securities issuable upon exercise or\nconversion of this Warrant, Holder shall be entitled to receive, upon exercise\nor conversion of this Warrant, the number and kind of securities and property\nthat Holder would have received for the Shares if this Warrant had been\nexercised immediately before such reclassification, exchange, substitution, or\nother event.  Such an event shall include any automatic conversion of the\noutstanding or issuable securities of the Company of the same class or series as\nthe Shares to common stock pursuant to the terms of the Company's Articles of\nIncorporation upon the closing of a registered public offering of the Company's\ncommon stock.  The Company or its successor shall promptly issue to Holder a new\nWarrant for such new\n\n                                      3\n\n \nsecurities or other property. The new Warrant shall provide for adjustments\nwhich shall be as nearly equivalent as may be practicable to the adjustments\nprovided for in this Article 2 including, without limitation, adjustments to the\nWarrant Price and to the number of securities or property issuable upon exercise\nof the new Warrant. The provisions of this Section 2.2 shall similarly apply to\nsuccessive reclassifications, exchanges, substitutions, or other events.\n\n     2.3   Adjustments for Combinations, Etc.  If the outstanding Shares are\n           ---------------------------------                                \ncombined or consolidated, by reclassification or otherwise, into a lesser number\nof shares, the Warrant Price shall be proportionately increased.\n\n     2.4   Adjustments for Diluting Issuances.  The Warrant Price and the number\n           ----------------------------------                                   \nof Shares issuable upon exercise of this Warrant or, if the shares are Preferred\nStock, the number of shares of common stock issuable upon conversion of the\nShares, shall be subject to adjustment, from time to time, in the manner set\nforth on Exhibit A attached hereto in the event of Diluting Issuances (as\n         ---------                                                       \ndefined on Exhibit A).\n           ---------  \n\n     2.5   No Impairment. The Company shall not, by amendment of its Articles of\n           -------------\nIncorporation or through a reorganization, transfer of assets, consolidation,\nmerger, dissolution, issue, or sale of securities or any other voluntary action,\navoid or seek to avoid the observance or performance of any of the terms to be\nobserved or performed under this Warrant by the Company, but shall at all times\nin good faith assist in carrying out all the provisions of this Article 2 and in\ntaking all such action as may be necessary or appropriate to protect Holder's\nrights under this Article against impairment. If the Company takes any action\naffecting the Shares or its common stock other than as described above that\nadversely affects Holder's rights under this Warrant, the Warrant Price shall be\nadjusted downward and the number of Shares issuable upon exercise of this\nWarrant shall be adjusted upward in such a manner that the aggregate Warrant\nPrice of this Warrant is unchanged.\n\n     2.6   Certificate as to Adjustments.  Upon each adjustment of the Warrant\n           -----------------------------                                      \nPrice, the Company at its expense shall promptly compute such adjustment, and\nfurnish Holder with a certificate of its Chief Financial Officer setting forth\nsuch adjustment and the facts upon which such adjustment is based.  The Company\nshall, upon written request, furnish Holder a certificate setting forth the\nWarrant Price in effect upon the date thereof and the series of adjustments\nleading to such Warrant Price.\n\nARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.\n           -------------------------------------------- \n\n     3.1   Representations and Warranties.  The Company hereby represents and\n           ------------------------------                                    \nwarrants to the Holder as follows:\n\n           (a) The initial Warrant Price referenced on the first page of this\nWarrant is not greater than the price per share at which the Shares were last\nissued in an arms length transaction in which at least $500,000 of the shares\nwere sold.\n\n           (b) All Shares which may be issued upon the exercise of the purchase\nright represented by this Warrant, and all securities, if any, issuable upon\nconversion of the Shares,\n\n                                       4\n\n \nshall, upon issuance in accordance with the terms of this Warrant, be duly\nauthorized, validly issued, fully paid and nonassessable, and free of any liens\nand encumbrances except for restrictions on transfer provided for herein or\nunder applicable federal and state securities laws. During the period within\nwhich the rights represented by this Warrant may be exercised, the Company will\nat all times have authorized, and reserved for the purpose of the issue upon\nexercise of the purchase rights evidenced by this Warrant, a sufficient number\nof shares of its Series B Preferred Stock (subject to Article 1.8) to provide\nfor the exercise of the rights represented by this Warrant and a sufficient\nnumber of shares of its Common Stock to provide for the conversion of such\nPreferred Stock into Common Stock.\n\n      3.2   Notice of Certain Events.  If the Company proposes at any time (a)\n            ------------------------\nto declare any dividend or distribution upon its common stock, whether in cash,\nproperty, stock, or other securities and whether or not a regular cash dividend;\n(b) to offer for subscription pro rata to the holders of any class or series of\nits stock any additional shares of stock of any class or series or other rights;\n(c) to effect any reclassification or recapitalization of common stock; (d) to\nmerge or consolidate with or into any other corporation, or sell, lease,\nlicense, or convey all or substantially all of its assets, or to liquidate,\ndissolve or wind up; or (e) offer holders of registration rights the opportunity\nto participate in an underwritten public offering of the company's securities\nfor cash, then, in connection with each such event, the Company shall give\nHolder (1) at least ten days prior written notice of the date on which a record\nwill be taken for such dividend, distribution, or subscription rights (and\nspecifying the date on which the holders of common stock will be entitled\nthereto) or for determining rights to vote, if any, in respect of the matters\nreferred to in (c) and (d) above; (2) in the case of the matters referred to in\n(c) and (d) above at least ten days prior written notice of the date when the\nsame will take place (and specifying the date on which the holders of common\nstock will be entitled to exchange their common stock for securities or other\nproperty deliverable upon the occurrence of such event); and (3) in the case of\nthe matter referred to in (e) above, the same notice as is given to the holders\nof such registration rights.\n\n      3.3   Information Rights.  So long as the Holder holds this Warrant and\/or\n            ------------------                                                  \nany of the Shares, the Company shall deliver to the Holder (a) promptly after\nmailing, copies of all communiques to the shareholders of the Company, (b)\nwithin ninety (90) days after the end of each fiscal year of the Company, the\nannual audited financial statements of the Company certified by independent\npublic accountants of recognized standing and (c) within forty-five (45) days\nafter the end of each of the first three quarters of each fiscal year, the\nCompany's quarterly, unaudited financial statements.\n\n      3.4   Registration Under Securities Act of 1933, as amended.  The Company\n            -----------------------------------------------------              \nagrees that the Shares or, if the shares are convertible into common stock of\nthe Company, such common stock, shall be subject to the registration rights set\nforth on Exhibit B hereto.\n         ---------        \n\nARTICLE 4.  MISCELLANEOUS.\n            ------------- \n\n \n\n     4.1    Term:  Notice of Expiration.  This Warrant is exercisable, in whole\n            ---------------------------\nor in part, at any time and from time to time on or before the Expiration Date\nset forth above. To the extent\n\n                                      5\n\n \n that this Warrant has not been exercised on or before the Expiration Date, this\nWarrant shall automatically be deemed to be exercised in full pursuant to the\nprovisions of Section 1.2, without any further action on behalf of Holder, on\nthe Expiration Date.\n\n     4.2  Legends.  This Warrant and the Shares (and the securities issuable,\n          -------                                                            \ndirectly or indirectly, upon conversion of the Shares, if any) shall be\nimprinted with a legend in substantially the following form:\n\n     THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS\n     AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN\n     EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN\n     OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS\n     COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.\n\n     4.3  Compliance with Securities Laws on Transfer.  This Warrant and the\n          -------------------------------------------                       \nShares issuable upon exercise of this Warrant (and the securities issuable,\ndirectly or indirectly, upon conversion of the Shares, if any) may not be\ntransferred or assigned in whole or in part without compliance with applicable\nfederal and state securities laws by the transferor and the transferee\n(including, without limitation, the delivery of investment representation\nletters and legal opinions reasonably satisfactory to the Company).  The Company\nshall not require Holder to provide an opinion of counsel if the transfer is to\nan affiliate of Holder or if there is no material question as to the\navailability of current information as referenced in Rule 144(c), Holder\nrepresents that it has complied with Rule 144(d) and (e) in reasonable detail,\nthe selling broker represents that it has complied with Rule 144(f), and the\nCompany is provided with a copy of Holder's notice of proposed sale.\n\n     4.4  Transfer Procedure.  Subject to the provisions of Section 4.2, Holder\n          ------------------                                                   \nmay transfer all or part of this Warrant or the Shares issuable upon exercise of\nthis Warrant (or the securities issuable, directly or indirectly, upon\nconversion of the Shares, if any) by giving the Company notice of the portion of\nthe Warrant being transferred setting forth the name, address and taxpayer\nidentification number of the transferee and surrendering this Warrant to the\nCompany for reissuance to the transferee(s) (and Holder, if applicable).  Unless\nthe Company is filing financial information with the SEC pursuant to the\nSecurities Exchange Act of 1934, the Company shall have the right to refuse to\ntransfer any portion of this Warrant to any person who directly competes with\nthe Company.\n\n     4.5  Notices.  All notices and other communications from the Company to the\n          -------                                                               \nHolder, or vice versa, shall be deemed delivered and effective when given\npersonally or mailed by first-class registered or certified mail, postage\nprepaid, at such address as may have been furnished to the Company or the\nHolder, as the case may be, in writing by the Company or such Holder from time\nto time.\n\n     4.6  Waiver.  This Warrant and any term hereof may be changed, waived,\n          ------                                                           \ndischarged or terminated only by an instrument in writing signed by the party\nagainst which enforcement of such change, waiver, discharge or termination is\nsought.\n\n                                       6\n\n \n     4.7  Attorneys' Fees.  In the event of any dispute between the parties\n          ---------------                                                  \nconcerning the terms and provisions of this Warrant, the party prevailing in\nsuch dispute shall be entitled to collect from the other party all costs\nincurred in such dispute, including reasonable attorneys' fees.\n\n     4.8  Governing Law.  This Warrant shall be governed by and construed in\n          -------------                                                     \naccordance with the laws of the State of California, without giving effect to\nits principles regarding conflicts of law.\n\n\n                                           SALON INTERNET, INC.,\n \n                                           By:_______________________________\n\n                                           Name:_____________________________\n\n                                           Title:_____________________________\n\n\n                                       7\n\n \n                                  APPENDIX 1\n\n                              NOTICE OF EXERCISE\n\n\n     1.   The undersigned hereby elects to purchase __________ shares of the\nSeries B Preferred stock of Salon Internet, Inc. pursuant to the terms of the\nattached Warrant, and tenders herewith payment of the purchase price of such\nshares in full.\n\n     1.   The undersigned hereby elects to convert the attached Warrant into\nShares\/cash [strike one] in the manner specified in the Warrant.  This\nconversion is exercised with respect to ___________ of the Shares covered by the\nWarrant.\n\n     [Strike paragraph that does not apply.]\n\n     2.   Please issue a certificate or certificates representing said shares in\nthe name of the undersigned or in such other name as is specified below:\n\n          Chief Financial Officer\n          Controllers Department\n          Imperial Bank or registered assignee\n          P.O. Box 92991\n          Los Angeles, CA 90009\n\n     3.   The undersigned represents it is acquiring the shares solely for its\nown account and not as a nominee for any other party and not with a view toward\nthe resale or distribution thereof except in compliance with applicable\nsecurities laws.\n\nIMPERIAL BANK or registered assignee\n\n\n_________________________________________\n(Signature)\n\n\n_________________________________________ \n(Date)\n\n \n                                   EXHIBIT A\n                                   ---------\n\n                           Anti-Dilution Provisions\n                           ------------------------\n\n\n     In the event of the issuance (a \"Diluting Issuance\") by the Company, after\nthe Issue Date of the Warrant, of securities at a price per share less than the\nConversion Price for the preferred stock then acquirable under the Warrant, then\nthe number of shares of common stock issuable upon conversion of the Shares\nshall be adjusted in accordance with those provisions (the \"Provisions\") of the\nCompany's Articles (Certificate) of Incorporation which apply to Diluting\nIssuances.\n\n     The Company agrees that the Provisions, as in effect on the Issue Date,\nshall be deemed to remain in full force and effect during the term of the\nWarrant notwithstanding any subsequent amendment, waiver or termination thereof\nby the Company's shareholders, unless all holders of the class of preferred\nstock then acquirable under Warrant are treated the same by such amendment,\nwaiver or termination.\n\n     Under no circumstances shall the aggregate Warrant Price payable by the\nHolder upon exercise of the Warrant increase as a result of any adjustment\narising from a Diluting Issuance.\n\n \n                                   EXHIBIT B\n                                   ---------\n\n                              Registration Rights\n                              -------------------\n\n\n     The Warrant and the Shares issuable upon exercise of the Warrant shall be\ndeemed to be \"Registrable Right Securities\" and the common stock issuable upon\nconversion of the Shares, shall be deemed \"Registrable Securities\" under the\nfollowing agreement (the \"Agreement\") between the Company and its investor(s):\n\n     The Rights Agreement dated December 22, 1995 by and among Salon Internet,\n     -------------------------------------------------------------------------\nInc. and the holders of the Series A Preferred Stock and the holders of Common\n------------------------------------------------------------------------------\nStock of the Company\n--------------------\n\n     By acceptance of the Warrant to which this Exhibit B is attached, Holder\n                                                ---------                    \nshall be deemed to be a party to the Agreement.\n\n     The Company represents and warrants that all consents necessary to make\nHolder a party to the Agreement have been obtained.\n\n<\/pre>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[8749],"corporate_contracts_industries":[9468],"corporate_contracts_types":[9560,9567],"class_list":["post-41115","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-salon-media-group-inc","corporate_contracts_industries-media__other","corporate_contracts_types-finance","corporate_contracts_types-finance__loan"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/41115","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate_contracts"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=41115"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=41115"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=41115"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=41115"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}