Document:

ex10_4.htm

    Exhibit
      10.4

     

    
      FORM
        OF SERIES A WARRANT

       

      NEITHER
        THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
        HAVE
        BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
        COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
        THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
        ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
        TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
        TO
        AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
        REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
        APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL
        TO
        THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
        ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON
        EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
        MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES

       

      

       

      SALON
        CITY, INC.

       

      SERIES
        A WARRANT TO PURCHASE ________ SHARES OF COMMON STOCK

       

      (SUBJECT
        TO ADJUSTMENT)

       

      (Void
        after ________, 2011)

       

      

      THIS
        SERIES A COMMON STOCK PURCHASE
        WARRANT CERTIFIES that, for value received, _____________________________
        (the
“Holder”), is entitled, upon the terms and subject to
        the limitations on exercise and the conditions hereinafter set forth, at
        any
        time on or after the date hereof (the “Initial Exercise
        Date”) or prior to the close of business on ________, 2011 (the
“Termination Date”) but not thereafter, to subscribe
        for
        and purchase from Salon City, Inc., a Nevada corporation (the
“Company”), up to ________ shares (the
“Warrant Shares”) of Common Stock, $.001
        par value per
        share, of the Company (the “Common Stock”). The purchase
        price of one share of Common Stock (the “Exercise
        Price”) under this Warrant shall be $.10, subject to adjustment
        hereunder.  The Exercise Price and the number of Warrant Shares for
        which the Warrant is exercisable shall be subject to adjustment as provided
        herein. Capitalized terms used and not otherwise defined herein shall
        have the meanings set forth in that certain Subscription Agreement, dated
        _______, 2006, between the Company and the Holder (the
“Subscription
        Agreement”).

       

      
        
           

        

        
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      1.    
        Title
        to Warrant. Prior to the Termination Date and subject to compliance with
        applicable laws and Section 7 of this Warrant, this Warrant and all
        rights hereunder are transferable, in whole or in part, at the office or
        agency
        of the Company by the Holder in person or by duly authorized attorney, upon
        surrender of this Warrant together with the Assignment Form annexed hereto
        properly endorsed. The transferee shall sign an investment letter in form
        and
        substance reasonably satisfactory to the Company.

       

      2.  Authorization
        of Shares. The Company covenants that all Warrant Shares which may be issued
        upon the exercise of the purchase rights represented by this Warrant will,
        upon
        exercise of the purchase rights represented by this Warrant, be duly authorized,
        validly issued, fully paid and nonassessable and free from all taxes, liens
        and
        charges in respect of the issue thereof (other than taxes in respect of any
        transfer occurring contemporaneously with such issue).

       

      3.  Exercise
        of Warrant.

       

      (a)  Exercise
        of the purchase rights represented by this Warrant may be made at any time
        or
        times on or after the Initial Exercise Date and on or before the Termination
        Date by the surrender of this Warrant and the Notice of Exercise Form annexed
        hereto duly executed, at the office of the Company (or such other office
        or
        agency of the Company as it may designate by notice in writing to the registered
        Holder at the address of such Holder appearing on the books of the Company),
        and
        upon payment of the Exercise Price of the Warrant Shares thereby purchased
        by
        wire transfer or cashier’s check drawn on a United States bank or
        internationally recognized bank, the Holder shall be entitled to receive
        a
        certificate for the number of Warrant Shares so purchased. Certificates for
        Warrant Shares purchased hereunder shall be delivered to the Holder within
        seven
        (7) Trading Days after the date on which this Warrant shall have been exercised
        as aforesaid. This Warrant shall be deemed to have been exercised and such
        certificate or certificates shall be deemed to have been issued, and the
        Holder
        or any other person so designated to be named therein shall be deemed to
        have
        become a holder of record of such shares for all purposes, as of the date
        the
        Warrant has been properly exercised by payment to the Company of the Exercise
        Price and all taxes required to be paid by the Holder, if any, pursuant to
        Section 5 have been paid. If such conditions by the Holder have been
        met, and the Company fails to deliver to the Holder a certificate or
        certificates representing the Warrant Shares pursuant to this
Section 3(a) by the close of business on the 7th Trading Day after
        the date of such conditions being met by the Holder, then the Holder will
        have
        the right to rescind such exercise.  In addition to any other rights
        available to the Holder, if the Company fails to deliver to the Holder a
        certificate or certificates representing the Warrant Shares pursuant to a
        proper
        exercise, and all conditions being met by the Holder, by the close of business
        on the 10th Trading Day after the date of exercise, and if after such 10th
        Trading Day the Holder is required by its broker to purchase (in an open
        market
        transaction or otherwise) shares of Common Stock to deliver in satisfaction
        of a
        sale by the Holder of the Warrant Shares which the Holder anticipated receiving
        upon such exercise (a “Buy-In”), then the Company shall
        (1) pay in immediately available funds to the Holder the amount by which
        (x) the
        Holder’s total purchase price (including brokerage commissions, if any) for the
        Warrant Shares so purchased exceeds (y) the amount obtained by multiplying
        (A)
        the number of Warrant Shares that the Company was required to deliver to
        the
        Holder in connection with the exercise at issue times (B) the price at which
        the
        sell order giving rise to such purchase obligation was executed, and (2)
        at the
        option of the Holder, either reinstate the portion of the Warrant and equivalent
        number of Warrant Shares for which such exercise was not honored or deliver
        to
        the Holder the number of shares of Common Stock that would have been issued
        had
        the Company timely complied with its exercise and delivery obligations
        hereunder. For example, if the Holder purchases Common Stock having a total
        purchase price of $100 to cover a Buy-In with respect to an attempted exercise
        of Warrant Shares with an aggregate sale price giving rise to such purchase
        obligation of $80, under clause (1) of the immediately preceding sentence
        the
        Company shall be required to pay the Holder $20.  The Holder shall
        provide the Company written notice indicating the amounts payable to the
        Holder
        in respect of the Buy-In, together with applicable confirmations and other
        evidence reasonably requested by the Company. Nothing herein shall limit
        a
        Holder’s right to pursue any other remedies available to it hereunder, at law or
        in equity including, without limitation, a decree of specific performance
        and/or
        injunctive relief with respect to the Company’s failure to timely deliver
        certificates representing Warrant Shares as required pursuant to the terms
        hereof.

       

      (b)  If
        this
        Warrant shall have been exercised in part, the Company shall, at the time
        of
        delivery of the certificate or certificates representing Warrant Shares,
        deliver
        to Holder a new Warrant evidencing the rights of Holder to purchase the
        unpurchased Warrant Shares called for by this Warrant, which new Warrant
        shall
        in all other respects be identical with this Warrant.

       

      
        
           

        

        
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      (c)  If,
        but
        only if, at any time after one year from the date of issuance of this Warrant
        there is no effective Registration Statement registering the resale of the
        Warrant Shares by the Holder, this Warrant may also be exercised at such
        time by
        means of a “cashless exercise” in which the Holder shall be entitled to receive
        a certificate for the number of Warrant Shares equal to the quotient obtained
        by
        dividing [(A-B) (X)] by (A), where:

       

      (A)
        =  the Closing Price on the Trading Day preceding the date of such
        election;

       

      (B)
        =  the Exercise Price of the Warrants, as adjusted; and

       

      
        	
                (X)
                  =

              	
                the
                  number of Warrant Shares issuable upon exercise of the Warrants
                  in
                  accordance with the terms of this
                  Warrant.

              

      

       

      4.  No
        Fractional Shares or Scrip. No fractional shares or scrip representing
        fractional shares shall be issued upon the exercise of this Warrant. As to
        any
        fraction of a share which Holder would otherwise be entitled to purchase
        upon
        such exercise, the Company shall pay a cash adjustment in respect of such
        final
        fraction in an amount equal to such fraction multiplied by the Exercise
        Price.

       

      5.  Charges,
        Taxes and Expenses. Issuance of certificates for Warrant Shares shall be
        made without charge to the Holder for any issue or transfer tax or other
        incidental expense in respect of the issuance of such certificate, all of
        which
        taxes and expenses shall be paid by the Company, and such certificates shall
        be
        issued in the name of the Holder or in such name or names as may be directed
        by
        the Holder; provided, however, that in the event certificates for
        Warrant Shares are to be issued in a name other than the name of the Holder,
        this Warrant when surrendered for exercise shall be accompanied by the
        Assignment Form attached hereto duly executed by the Holder; and the Company
        may
        require, as a condition thereto, the payment of a sum sufficient to reimburse
        it
        for any transfer tax incidental thereto.

       

      6.  Closing
        of Books. The Company will not close its stockholder books or records in any
        manner which prevents the timely exercise of this Warrant, pursuant to the
        terms
        hereof.

       

      7.  Transfer,
        Division and Combination.

       

      (a)  Subject
        to compliance with any applicable securities laws and the conditions set
        forth
        in Section 1 and Section 7(e) hereof and to the
        provisions of Section 4.1 of the Purchase Agreement, this Warrant
        and all rights hereunder are transferable, in whole or in part, upon surrender
        of this Warrant at the principal office of the Company, together with a written
        assignment of this Warrant substantially in the form attached hereto duly
        executed by the Holder or its agent or attorney and funds sufficient to pay
        any
        transfer taxes payable upon the making of such transfer. Upon such surrender
        and, if required, such payment, the Company shall execute and deliver a new
        Warrant or Warrants in the name of the assignee or assignees and in the
        denomination or denominations specified in such instrument of assignment,
        and
        shall issue to the assignor a new Warrant evidencing the portion of this
        Warrant
        not so assigned, and this Warrant shall promptly be cancelled. A Warrant,
        if
        properly assigned, may be exercised by a new holder for the purchase of Warrant
        Shares without having a new Warrant issued.

       

      (b)  This
        Warrant may be divided or combined with other Warrants upon presentation
        hereof
        at the aforesaid office of the Company, together with a written notice
        specifying the names and denominations in which new Warrants are to be issued,
        signed by the Holder or its agent or attorney. Subject to compliance with
        Section 7(a), as to any transfer which may be involved in such
        division or combination, the Company shall execute and deliver a new Warrant
        or
        Warrants in exchange for the Warrant or Warrants to be divided or combined
        in
        accordance with such notice.

       

      (c)  The
        Company shall prepare, issue and deliver at its own expense (other than transfer
        taxes) the new Warrant or Warrants under this
Section 7.

       

      (d)  The
        Company agrees to maintain, at its aforesaid office, books for the registration
        and the registration of transfer of the Warrants.

       

      (e)  If,
        at
        the time of the surrender of this Warrant in connection with any transfer
        of
        this Warrant, the transfer of this Warrant shall not be registered pursuant
        to
        an effective registration statement under the Securities Act and under
        applicable state securities or blue sky laws, the Company may require, as
        a
        condition of allowing such transfer (i) that the Holder or transferee of
        this
        Warrant, as the case may be, furnish to the Company a written opinion of
        counsel
        (which opinion shall be in form, substance and scope customary for opinions
        of
        counsel in comparable transactions) to the effect that such transfer may
        be made
        without registration under the Securities Act and under applicable state
        securities or blue sky laws, (ii) that the holder or transferee execute and
        deliver to the Company an investment letter in form and substance acceptable
        to
        the Company and (iii) that the transferee be an “accredited investor” as defined
        in Rule 501(a) promulgated under the Securities Act.

       

      
        
           

        

        
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      8.  No
        Rights as Shareholder Until Exercise. This Warrant does not entitle the
        Holder to any voting rights or other rights as a shareholder of the Company
        prior to the exercise hereof. Upon the surrender of this Warrant and the
        payment
        of the aggregate Exercise Price, the Warrant Shares so purchased shall be
        and be
        deemed to be issued to such Holder as the record owner of such shares as
        of the
        close of business on the later of the date of such surrender or
        payment.

       

      9.  Loss,
        Theft, Destruction or Mutilation of Warrant. The Company covenants that upon
        receipt by the Company of evidence reasonably satisfactory to it of the loss,
        theft, destruction or mutilation of this Warrant or any stock certificate
        relating to the Warrant Shares, and in case of loss, theft or destruction,
        of
        indemnity or security reasonably satisfactory to it (which, in the case of
        the
        Warrant, shall not include the posting of any bond), and upon surrender and
        cancellation of such Warrant or stock certificate, if mutilated, the Company
        will make and deliver a new Warrant or stock certificate of like tenor and
        dated
        as of such cancellation, in lieu of such Warrant or stock
        certificate.

       

      10.  Saturdays,
        Sundays, Holidays, etc. If the last or appointed day for the taking of any
        action or the expiration of any right required or granted herein shall be
        a
        Saturday, Sunday or a legal holiday in the State of California, then such
        action
        may be taken or such right may be exercised on the next succeeding day not
        a
        Saturday, Sunday or legal holiday in the State of New York.

       

      11.  Adjustments
        to Exercise Price and Number of Warrant Shares.

       

      For
        purposes of this Section 11, references to Common Stock shall include
        shares of Common Stock, par value $.001 of the Company (and any other classes
        of
        common stock issued by the Company).

       

      (a)  Stock
        Splits, Etc. The number and kind of securities purchasable upon the exercise
        of this Warrant and the Exercise Price shall be subject to adjustment from
        time
        to time upon the happening of any of the following. In case the Company shall
        (i) pay a dividend in shares of Common Stock or make a distribution in shares
        of
        Common Stock to holders of its outstanding Common Stock, (ii) subdivide its
        outstanding shares of Common Stock into a greater number of shares, (iii)
        combine its outstanding shares of Common Stock into a smaller number of shares
        of Common Stock, or (iv) issue any shares of its capital stock in a
        reclassification of the Common Stock, then the number of Warrant Shares
        purchasable upon exercise of this Warrant immediately prior thereto shall
        be
        adjusted so that the Holder shall be entitled to receive the kind and number
        of
        Warrant Shares or other securities of the Company which it would have owned
        or
        have been entitled to receive had such Warrant been exercised in advance
        thereof. Upon each such adjustment of the kind and number of Warrant Shares
        or
        other securities of the Company which are purchasable hereunder pursuant
        to this
        Section 11(a), the Holder shall thereafter be entitled to purchase the number
        of
        Warrant Shares or other securities resulting from such adjustment at an Exercise
        Price per Warrant Share or other security obtained by multiplying the Exercise
        Price in effect immediately prior to such adjustment by the number of Warrant
        Shares purchasable pursuant hereto immediately prior to such adjustment and
        dividing by the number of Warrant Shares or other securities of the Company
        resulting from such adjustment. An adjustment made pursuant to this paragraph
        shall become effective immediately after the effective date of such event
        retroactive to the record date, if any, for such event.

       

      (b)  Anti-Dilution
        Provisions.  From the Initial Exercise Date until one year
        following the Closing Date, the Exercise Price and the number of Warrant
        Shares
        issuable hereunder and for which this Warrant is then exercisable pursuant
        to
Section 1 hereof shall be subject to adjustment from time to time as
        provided in this Section 11(b). In the event that any adjustment of
        the Exercise Price as required herein results in a fraction of a cent, such
        Exercise Price shall be rounded up or down to the nearest cent.

       

      (i)  Effect
        on Exercise Price of Certain Events.  For purposes of determining
        the adjusted Exercise Price under Section 11(b) hereof, the following
        will be applicable:

       

      
        
           

        

        
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      (A)  If
        at any
        time from Closing Date until the first anniversary thereof, the Company shall
        grant any warrants to any person or entity with an exercise price which shall
        be
        less than the Exercise Price, without the consent of each Holder, the Exercise
        Price (of the Warrants which have not been exercised) shall be adjusted to
        equal
        to such lower exercise price.

       

      (B)  Exceptions
        to Adjustment of Exercise Price. Notwithstanding anything to the contrary
        herein, this Section 11(b) shall not apply to the following (1) the
        granting of warrants to employees, officers, directors or consultants of
        the
        Company pursuant to any stock option plan or other written compensatory
        agreement, or (2) the issuance of warrants in connection with acquisitions,
        joint ventures, arrangements related to the Company’s operations and strategic
        relationships, or other strategic investments, the primary purpose of which
        is
        not to raise capital.

       

      (ii)  Minimum
        Adjustment of Exercise Price. No adjustment of the Exercise Price shall be
        made in an amount of less than 1% of the Exercise Price in effect at the
        time
        such adjustment is otherwise required to be made, but any such lesser adjustment
        shall be carried forward and shall be made at the time and together with
        the
        next subsequent adjustment which, together with any adjustments so carried
        forward, shall amount to not less than 1% of such Exercise Price.

       

      12.  Reorganization,
        Reclassification, Merger, Consolidation or Disposition of Assets. In case
        the Company shall reorganize its capital, reclassify its capital stock (other
        than as set forth in Section 11), consolidate or merge with or into another
        corporation (where the Company is not the surviving corporation or where
        there
        is a change in or distribution with respect to any class of common stock
        of the
        Company), or sell, transfer or otherwise dispose of all or substantially
        all its
        property, assets or business to another corporation and, pursuant to the
        terms
        of such reorganization, reclassification, merger, consolidation or disposition
        of assets, shares of common stock of the successor or acquiring corporation,
        or
        any cash, shares of stock or other securities or property of any nature
        whatsoever (including warrants or other subscription or purchase rights)
        in
        addition to or in lieu of common stock of the successor or acquiring corporation
        (“Other Property”), are to be received by or distributed
        to the holders of Common Stock of the Company, then the Holder shall have
        the
        right thereafter to receive, upon exercise of this Warrant, the number of
        shares
        of Common Stock of the successor or acquiring corporation or of the Company,
        if
        it is the surviving corporation, and Other Property receivable upon or as
        a
        result of such reorganization, reclassification, merger, consolidation or
        disposition of assets by a Holder of the number of shares of Common Stock
        for
        which this Warrant is exercisable immediately prior to such event. In case
        of
        any such reorganization, reclassification, merger, consolidation or disposition
        of assets, the successor or acquiring corporation (if other than the Company)
        shall expressly assume the due and punctual observance and performance of
        each
        and every covenant and condition of this Warrant to be performed and observed
        by
        the Company and all the obligations and liabilities hereunder, subject to
        such
        modifications as may be deemed appropriate (as determined in good faith by
        resolution of the Board of Directors of the Company) in order to provide
        for
        adjustments of Warrant Shares for which this Warrant is exercisable which
        shall
        be as nearly equivalent as practicable to the adjustments provided for in
        this
Section 12. For purposes of this Section 12,
“common stock of the successor or acquiring corporation”
shall include stock of such corporation
        of any class which is not preferred as
        to dividends or assets over any other class of stock of such corporation
        and
        which is not subject to redemption and shall also include any evidences of
        indebtedness, shares of stock or other securities which are convertible into
        or
        exchangeable for any such stock, either immediately or upon the arrival of
        a
        specified date or the happening of a specified event and any warrants or
        other
        rights to subscribe for or purchase any such stock. The foregoing provisions
        of
        this Section 12 shall similarly apply to successive reorganizations,
        reclassifications, mergers, consolidations or disposition of
        assets.

       

      13.  Voluntary
        Adjustment by the Company. The Company may at any time during the term of
        this Warrant reduce the then current Exercise Price to any amount and for
        any
        period of time deemed appropriate by the Board of Directors of the
        Company.

       

      14.  Notice
        of Adjustment. Whenever the number of Warrant Shares or number or kind of
        securities or other property purchasable upon the exercise of this Warrant
        or
        the Exercise Price is adjusted, as herein provided, the Company shall give
        notice thereof to the Holder, which notice shall state the number of Warrant
        Shares (and other securities or property) purchasable upon the exercise of
        this
        Warrant and the Exercise Price of such Warrant Shares (and other securities
        or
        property) after such adjustment, setting forth a brief statement of the facts
        requiring such adjustment and setting forth the computation by which such
        adjustment was made.

       

      
        
           

        

        
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      15.  Notice
        of Corporate Action. If at any time:

       

      (a)  the
        Company shall take a record of the holders of its Common Stock for the purpose
        of entitling them to receive a dividend or other distribution, or any right
        to
        subscribe for or purchase any evidences of its indebtedness, any shares of
        stock
        of any class or any other securities or property, or to receive any other
        right,
        or

       

      (b)  there
        shall be any capital reorganization of the Company, any reclassification
        or
        recapitalization of the capital stock of the Company or any consolidation
        or
        merger of the Company with, or any sale, transfer or other disposition of
        all or
        substantially all the property, assets or business of the Company to, another
        corporation or,

       

      (c)  there
        shall be a voluntary or involuntary dissolution, liquidation or winding up
        of
        the Company;

       

      then,
        in
        any one or more of such cases, the Company shall give to Holder (i) at least
        10
        days’ prior written notice of the date on which a record date shall be selected
        for such dividend, distribution or right or for determining rights to vote
        in
        respect of any such reorganization, reclassification, merger, consolidation,
        sale, transfer, disposition, liquidation or winding up, and (ii) in the case
        of
        any such reorganization, reclassification, merger, consolidation, sale,
        transfer, disposition, dissolution, liquidation or winding up, at least 10
        days’
prior written notice of the date when the same shall take place. Such notice
        in
        accordance with the foregoing clause also shall specify (i) the date on which
        any such record is to be taken for the purpose of such dividend, distribution
        or
        right, the date on which the holders of Common Stock shall be entitled to
        any
        such dividend, distribution or right, and the amount and character thereof,
        and
        (ii) the date on which any such reorganization, reclassification, merger,
        consolidation, sale, transfer, disposition, dissolution, liquidation or winding
        up is to take place and the time, if any such time is to be fixed, as of
        which
        the holders of Common Stock shall be entitled to exchange their Warrant Shares
        for securities or other property deliverable upon such disposition, dissolution,
        liquidation or winding up. Each such written notice shall be sufficiently
        given
        if addressed to Holder at the last address of Holder appearing on the books
        of
        the Company and delivered in accordance with
Section 17(d).

       

      16.  Authorized
        Shares. The Company covenants that during the period the Warrant is
        outstanding, it will reserve from its authorized and unissued Common Stock
        a
        sufficient number of shares to provide for the issuance of the Warrant Shares
        upon the exercise of any purchase rights under this Warrant. The Company
        further
        covenants that its issuance of this Warrant shall constitute full authority
        to
        its officers who are charged with the duty of executing stock certificates
        to
        execute and issue the necessary certificates for the Warrant Shares upon
        the
        exercise of the purchase rights under this Warrant. The Company will take
        all
        such reasonable action as may be necessary to assure that such Warrant Shares
        may be issued as provided herein without violation of any applicable law
        or
        regulation, or of any requirements of the principal Trading Market upon which
        the Common Stock may be listed.

       

      (a)  Except
        and to the extent as waived or consented to by the Holder, the Company shall
        not
        by any action, including, without limitation, amending its certificate of
        incorporation or through any reorganization, transfer of assets, consolidation,
        merger, dissolution, issue or sale of securities or any other voluntary action,
        avoid or seek to avoid the observance or performance of any of the terms
        of this
        Warrant, but will at all times in good faith assist in the carrying out of
        all
        such terms and in the taking of all such actions as may be necessary or
        appropriate to protect the rights of Holder as set forth in this Warrant
        against
        impairment. Without limiting the generality of the foregoing, the Company
        will
        (a) not increase the par value of any Warrant Shares above the amount payable
        therefore upon such exercise immediately prior to such increase in par value,
        (b) take all such action as may be necessary or appropriate in order that
        the
        Company may validly and legally issue fully paid and nonassessable Warrant
        Shares upon the exercise of this Warrant, and (c) use commercially reasonable
        efforts to obtain all such authorizations, exemptions or consents from any
        public regulatory body having jurisdiction thereof as may be necessary to
        enable
        the Company to perform its obligations under this Warrant.

       

      (b)  Before
        taking any action which would result in an adjustment in the number of Warrant
        Shares for which this Warrant is exercisable or in the Exercise Price, the
        Company shall obtain all such authorizations or exemptions thereof, or consents
        thereto, as may be necessary from any public regulatory body or bodies having
        jurisdiction thereof.

       

      
        
           

        

        
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      17.  Piggy-Back
        Registration Rights.  The Series A Warrant Shares into which this
        Series A Warrant are exercisable shall have piggy-back registration rights
        and
        shall be entitled to be registered and included in any registration statement
        filed by the Company on Form SB-2 with the Securities and Exchange
        Commission.  The cost of such registration shall be borne by the
        Company and the Company shall, prior to the effectiveness of such registration
        statement, enter into an indemnification agreement to protect the holders
        of the
        Series A Warrant Shares from liability under the Securities Act of 1933,
        as
        amended, in an agreement containing customary terms and conditions for a
        transaction of this sort.

       

      18.  Miscellaneous.

       

      (a)  Jurisdiction.
        This Agreement shall be governed by and construed in accordance with the
        internal laws of the State of California without regard to the conflicts
        of laws
        principles thereof. The parties hereto hereby irrevocably agree that any
        suit or
        proceeding arising directly and/or indirectly pursuant to or under this
        Agreement, shall be brought solely in a federal or state court located in
        the
        City of Los Angeles, California. By its execution hereof, the parties hereby
        covenant and irrevocably submit to the in personam jurisdiction of
        the federal and state courts located in the City of Los Angeles, California,
        and
        agree that any process in any such action may be served upon any of them
        personally, or by certified mail or registered mail upon them or their agent,
        return receipt requested, with the same full force and effect as if personally
        served upon them in Los Angeles, California. The parties hereto waive any
        claim
        that any such jurisdiction is not a convenient forum for any such suit or
        proceeding and any defense or lack of in personam jurisdiction with
        respect thereto. In the event of any such action or proceeding, the party
        prevailing therein shall be entitled to payment from the other party hereto
        of
        its reasonable counsel fees and disbursements in an amount judicially
        determined.

       

      (b)  Restrictions.
        The Holder acknowledges that the Warrant Shares acquired upon the exercise
        of
        this Warrant, if not registered for resale under the Securities Act, will
        have
        legends imprinted upon any stock certificates evidencing such Warrant Shares
        and
        the Company will notify its transfer agent of restrictions upon resale imposed
        by the applicable state and federal securities laws.

       

      (c)  Nonwaiver
        and Expenses. No course of dealing or any delay or failure to exercise any
        right hereunder on the part of Holder shall operate as a waiver of such right
        or
        otherwise prejudice Holder’s rights, powers or remedies, notwithstanding all
        rights hereunder terminate on the Termination Date. If the Company willfully
        and
        knowingly fails to comply with any provision of this Warrant, which results
        in
        any material damages to the Holder, the Company shall pay to Holder such
        amounts
        as shall be sufficient to cover any costs and expenses including, but not
        limited to, reasonable attorneys’ fees, including those of appellate
        proceedings, incurred by Holder in collecting any amounts due pursuant hereto
        or
        in otherwise enforcing any of its rights, powers or remedies
        hereunder.

       

      (d)  Notices.
        Any notice, request or other document required or permitted to be given or
        delivered to the Holder by the Company shall be delivered in accordance with
        the
        notice provisions of the Purchase Agreement; provided, upon any permitted
        assignment of this Warrant, the assignee shall promptly provide the Company
        with
        its contact information.

       

      (e)  Limitation
        of Liability. No provision hereof, in the absence of any affirmative action
        by Holder to exercise this Warrant or purchase Warrant Shares, and no
        enumeration herein of the rights or privileges of Holder, shall give rise
        to any
        liability of Holder for the purchase price of any Common Stock or as a
        stockholder of the Company, whether such liability is asserted by the Company
        or
        by creditors of the Company.

       

      (f)  Remedies.
        Holder, in addition to being entitled to exercise all rights granted by law,
        including recovery of damages, will be entitled to specific performance of
        its
        rights under this Warrant. The Company agrees that monetary damages would
        not be
        adequate compensation for any loss incurred by reason of a breach by it of
        the
        provisions of this Warrant and hereby agrees to waive the defense in any
        action
        for specific performance that a remedy at law would be adequate.

       

      (g)  Successors
        and Assigns. Subject to applicable securities laws, this Warrant and the
        rights and obligations evidenced hereby shall inure to the benefit of and
        be
        binding upon the successors of the Company and the successors and permitted
        assigns of Holder. The provisions of this Warrant are intended to be for
        the
        benefit of all Holders from time to time of this Warrant and shall be
        enforceable by any such Holder or holder of Warrant Shares.

       

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

       

      (h)  Amendment.
        This Warrant may be modified or amended or the provisions hereof waived with
        the
        written consent of the Company and the Holder.

       

      (i)  Severability.
        Wherever possible, each provision of this Warrant shall be interpreted in
        such
        manner as to be effective and valid under applicable law, but if any provision
        of this Warrant shall be prohibited by or invalid under applicable law, such
        provision shall be ineffective to the extent of such prohibition or invalidity,
        without invalidating the remainder of such provisions or the remaining
        provisions of this Warrant.

       

      (j)  Headings.
        The headings used in this Warrant are for the convenience of reference only
        and
        shall not, for any purpose, be deemed a part of this Warrant.

       

      [Remainder
        of page intentionally left blank]

       

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

       

      IN
        WITNESS WHEREOF,
        the Company has caused this Warrant to be executed by its officer thereunto
        duly
        authorized.

       

      Dated:
        ___________, 2006

       

      
        	
                 

              	
                SALON
                  CITY, INC.

              

      

      

      

      
        	
                 

              	
                By:
                  /s/  Steven
                  Casciola

              

      

                                                                                         
        Name:  Steven Casciola

                                                                                        
         Title:  President

      

      

      HOLDER

      

      

      Name:  __________________________

      

      By:

      Name:

      Title:

      

      

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

       

      NOTICE
        OF EXERCISE

       

      

       

      To:           Salon
        City, Inc.

       

      

       

      1.  The
        undersigned hereby elects to purchase ________ Series A Warrant Shares of
        Salon
        City, Inc. pursuant to the terms of the attached Series A Warrant (only if
        exercised in full), and tenders herewith payment of the exercise price in
        full,
        together with all applicable transfer taxes, if any.

       

      2.  Payment
        shall take the form of in lawful money of the United States; or

       

      3.  Please
        issue a certificate or certificates representing said Series A Warrant Shares
        in
        the name of the undersigned or in such other name as is specified
        below:

       

      

       

      The
        Series A Warrant Shares shall be delivered to the following:

       

      

       

      4.  Accredited
        Investor. The undersigned is an “accredited investor” as defined in
        Regulation D promulgated under the Securities Act of 1933, as
        amended.

       

      [PURCHASER]

      

      

      

      By:________________________                                                      

      Name:

      Title:

      

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

       

      ASSIGNMENT
        FORM

      

       

      (To
        assign the foregoing warrant, execute this form and supply required
        information.

       

      Do
        not
        use this form to exercise the warrant.)

       

      FOR
        VALUE RECEIVED,
        the foregoing Series A Warrant and all rights evidenced thereby are hereby
        assigned to

       

      _________________________________________________,
        whose address is:

       

      _________________________________________________

       

      _________________________________________________

      

       

      Dated: ______________                             ,
        200_

       

      

       

      Holder’s
        Signature: ___________________                                                                          

       

      Holder’s
        Address: ____________________                                                                          

       

      

       

      

       

      Signature
        Guaranteed:
        _________________________________                                                                                                

       

      

       

      NOTE:
        The
        signature to this Assignment Form must correspond with the name as it appears
        on
        the face of the Series A Warrant, without alteration or enlargement or any
        change whatsoever, and must be guaranteed by a bank or trust company. Officers
        of corporations and those acting in a fiduciary or other representative capacity
        should file proper evidence of authority to assign the foregoing Series A
        Warrant.

       

      
        
           

        

        
          11ex10_5.htm

     

    Exhibit
      10.5

     

    
       

      100
        Second Avenue S., Suite 300N

      St.
        Petersburg, Fl   33701

      Phone:
        (727) 289-0010

      Fax:
        (727) 289-0069

      dave@islandstocktransfer.com

      

      TRANSFER
        AGENT AGREEMENT

      (Transfer
        Agent Services)

      

      This
        Transfer Agent Agreement (“Agreement”), is made and entered into as of June 14,
        2006 by and between Island Capital Management, LLC, dba Island Stock Transfer
        (“Agent”), and Salon City, Inc. (“Company”).

      

      RECITALS

      

      WHEREAS,
        Agent is a transfer agent in the business of maintaining stock ownership
        and
        transfer records for companies whose stock is publicly traded;

      

      WHEREAS,
        Company is a company whose stock is publicly traded or is in the process
        of
        having its stock publicly traded;

      

      WHEREAS,
        Company wishes to utilize the services of Agent as its transfer agent under
        the
        term of this Agreement and Agent wishes to become Company’s transfer agent
        provider;

      

      NOW,
        THEREFORE, in consideration of the mutual promises herein contained, the
        parties
        hereto hereby agree as follows:

      

      1.           APPOINTMENT
        OF AGENT

      

      Upon
        the
        execution of this Agreement by both parties, the Company hereby appoints
        Agent
        as its transfer agent, warrant agent, and registrar for the common stock
        of the
        Company.

       

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

      

      2.           START-UP
        FEES AND DOCUMENTATION BY COMPANY

      

      The
        Agent
        agrees to waive the initial setup fee of $2,000.

      

      Prior
        to
        Agent beginning work as the Company’s transfer agent the Company must deliver
        the following:

      

      A.           An
        executed copy of this Agreement;

      

      B.           Payment
        in full of 300,000 shares of restricted common shares of the Company. The
        Agent
        agrees to waive the Security Deposit as set forth on Exhibit A, which is
        incorporated herein by this reference. The Company agrees to the issuance
        of the
        shares of common stock to Agent, or Agent’s assignee, as compensation for a
        number of advisory services, to be determined solely by Agent, that we
        customarily provide to our new development stage clients during the set up
        process.  These advisory services include, but are not limited to:
        contact and assistance with establishing DTC eligibility for the Company’s
        securities, requesting CUSIP number assignments for the Company’s securities,
        consulting with the Company with respect to initial design and layout of
        securities certificates, compiling and reviewing the Company’s shareholder lists
        including complying with lost shareholder requirements and escheatment
        regulations when shareholder lists have been dormant, reconciling split and
        other reorganization items that may be required, and consulting with Company
        representatives who are not experienced in the rules and protocols governing
        the
        transfer of securities, reorganization procedures, and proxy solicitation
        regulations.  The Company understands Agent’s initial set-up fee does
        not include any fees that are charged by third parties as part of the set-up
        process such as: printing certificates, DTC fees and CUSIP fees, and charges
        associated with searching for lost securities holders; and the Company agrees
        to
        directly pay those charges to third parties or reimburse Agent for its out
        of
        pocket expenses incurred on behalf of the Company.  The Company agrees
        to register the shares herein described on SEC registration form S-8 or other
        registration statement form as soon as the Company has attained fully reporting
        status and is legally able to comply with all related regulatory requirements.
        The Agent will have the right to assign these shares to an employee or other
        assignee in order to comply with S-8 or other exemption
        regulations;

      

      C.           The
        documents listed on Exhibit B, which is incorporated herein by this reference,
        delivered and represented to by an authorized officer of the
        Company.

      

      The
        Company agrees to update Agent regarding any changes to its corporate documents
        including changes to its articles of incorporation, bylaws, and changes to
        its
        officers, directors, and all “insiders” or “control persons.”

      

      3.           STOCK
        ISSUANCES BY AGENT

      

      A.           After
        the Company has provided Agent with all the documentation required under
        Section
        2, Agent will issue original stock of the Company, as directed by the Company,
        upon receipt of the following:

      

      1.           A
        written request by an authorized representative of the Company stating the
        number of shares, name of shareholder, address of shareholder, and delivery
        instructions;

      

      2.           A
        copy of a fully executed Board of Directors resolution authorizing the stock
        issuance requested by the Company;

      

      3.           If
        deemed necessary by Agent, a legal opinion letter from an attorney appointed
        by
        the Company approving the stock issuance requested by the Company;

      

      4.           The
        payment of the appropriate fee by the Company; and

      

      5.           Any
        other documentation deemed necessary in the discretion of Agent.

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      

      B.           After
        the Company has provided Agent with all the documentation required under
        Section
        2, in the event of a lost, stolen, or destroyed stock certificate, or a transfer
        of stock by a shareholder, Agent will issue replacement certificates upon
        receipt of the following:

      

      1.           In
        the event of a lost or destroyed certificate, a lost certificate affidavit
        or an
        old certificate with all the necessary endorser’s signatures guaranteed in such
        a form and manner as Agent requires;

      

      2.           In
        the event of a stock transfer, the old certificate being surrendered with
        a
        validly executed and medallion guaranteed stock power outlining the new
        recipients and amount of stock to be issued to each recipient;

      

      3.           Valid
        instructions from the Company executed by the authorized representative of
        the
        Company regarding the action to be taken by the Agent;

      

      4.           The
        payment of the appropriate fees by the Company or shareholder, as applicable;
        and

      

      5.           Any
        other documentation deemed necessary at the discretion of Agent to evidence
        the
        genuineness and effectiveness of any necessary endorsement, and satisfactory
        evidence of compliance with all applicable laws relating to collection of
        taxes,
        if any.

      

      4.         PURCHASE
        OF STOCK CERTIFICATES

      

      The
        Company hereby authorizes Agent to purchase from time to time, certificates
        as
        may be needed by it to perform regular transfer duties, not to exceed 1,000
        certificates without prior written approval by the Company.  The cost
        of such certificates must be paid in advance by the Company.  Such
        certificates must be signed by authorized officers of the Company, as set
        forth
        by law or in the Company’s bylaws, and if required, shall bear the corporate
        seal of the Company.

      

      5.           REGISTERING
        TRANSFERS

      

      In
        registering transfers, Agent may rely upon the Uniform Commercial Code, Section
        17 of the Securities Code as set forth by the Securities and Exchange
        Commission, or any other statute that in the opinion of counsel protects
        Agent
        and Company for the purposes of inquiry, or in refusing registration wherein
        an
        adverse claim may require such refusal. The Company agrees to hold the Agent
        harmless from any liability resulting from instructions issued to Agent by
        the
        Company regarding the registering of transfers.

      

      6.           RECORDS
        OF AGENT

      

      Agent
        will maintain customary records in connection with its agency, all of which
        shall be available for examination and inspection by the Company at all
        reasonable times.

      

      7.           FEES
        AND PAYMENT OF FEES

      

      The
        Company agrees to pay Agent a one-time set up fee. The Company also agrees
        to
        pay Agent a monthly fee to maintain computerized records of the Company in
        an
        orderly and accurate manner, and enable Agent to act as the Company’s transfer
        agent or registrar, or both. These fees, as well as all other costs and fees
        for
        actions taken by Agent as the transfer agent of Company, are attached hereto
        as
        Exhibit A, which is incorporated herein by this reference.

      

      Agent’s
        fees may be increased in Agent’s sole discretion upon written notice to the
        Company. The Company agrees to pay all amounts due to Agent under this Agreement
        within 30 days of billing. Company specifically agrees that Agent shall have
        a
        lien against all Company records to secure any amounts owed to
        Agent.  In addition, Company specifically agrees that Agent may, at
        its option, refuse to make any transfers of Company’s securities until all past
        due amounts have been paid in full.

       

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      

      8.           TRANSFER
        AGENT EXPENSE

      

      The
        Company agrees to reimburse Agent for any and all expenses resulting from
        Agent
        being served with a subpoena by a Federal or State agency or a request from
        one
        of said agencies, requiring or requesting that Agent produce information
        or
        documents to said agency.  Said expenses include, but are not limited
        to, travel expenses, copying charges, computer time, employee time, and attorney
        fees for counsel to the Agent.

      

      9.           TERMINATION
        BY COMPANY

      

      The
        Company may terminate this Agreement at any time and for any reason and remove
        Agent at any time by giving Agent thirty (30) days written notice in the
        form of
        a resolution from the Board of Directors of the Company authorizing the
        termination of this Agreement. Upon receipt of such proper notice, the payment
        of the termination fee (see Exhibit B), and the payment of any other unpaid
        invoices and fees owed to Agent, Agent shall deliver to a new transfer agent
        or
        the Company, all the Company’s records maintained by Agent.

      

      10.           TERMINATION
        BY AGENT

      

      Agent
        may
        terminate this Agreement at any time and for any reason upon ten (10) days
        written notice to the Company.  However, if this Agreement is being
        terminated for non-payment of fees, Agent may refuse to do any work for the
        Company during the ten (10) day period unless it is paid in full all amounts
        owed. If Company has paid Agent all fees Agent is owed, then at the end of
        the
        ten (10) day period, Agent will deliver all the Company’s records to the Agent’s
        successor, if any, or to the Company.

      

      11.           INDEMNITY

      

      The
        Company agrees to hold Agent harmless and fully indemnify Agent, including
        attorney fees, for any claim or action brought by a third party that is based
        upon:

      

      A.           Any
        paper or document that the Agent reasonably believed to be genuine and to
        have
        been signed by the proper person or persons;

      

      B.           Stock
        certificates that Agent reasonably believes to bear the proper manual or
        facsimile signatures of the officers of the Company;

      

      C.           The
        Agent’s compliance with the written instructions of the Company or the Company’s
        counsel; or

      

      D.           The
        Agent’s duties and responsibilities as the transfer agent of the Company and
        under this Agreement, unless such action or claim is based on the willful
        misconduct or reckless conduct of the Agent.

      

      12.           ASSIGNMENT

      

      This
        Agreement may not be assigned by either party without the express written
        consent of the other party.

      

      13.           MODIFICATION

      

      No
        change, modification, addition, or amendment to this Agreement shall be valid
        unless in writing and signed by all parties hereto.

      

      14.           NO
        INTERPRETATION AGAINST DRAFTER

      

      This
        Agreement has been negotiated at arm’s length between persons sophisticated and
        knowledgeable in these types of matters.  In addition, each party has
        been represented by experienced and knowledgeable legal counsel, or had the
        opportunity to consult such counsel. Accordingly, any normal rule of
        construction or legal decision that would require a court to resolve any
        ambiguities against the drafting party is hereby waived and shall not apply
        in
        interpreting this Agreement.

       

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      

      IN
        WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
        executed as of the Effective Date listed above.

      

      “Agent”                                                                           “Company”

      Island
        Capital Management,
        LLC                                        Salon
        City, Inc.

      dba
        Island Stock Transfer

      

      

      /s/  David
        Lopez                                                                 
/s/ Steve Casciola

      By:
        David
        Lopez                                                                 By:
        Steve Casciola

      Its:
        General
        Manager                                                          
Its:  President

       

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

       

      Exhibit
        B

      

      Company
        documents to be delivered to the Agent:

      

      
        	
                A.

              	
                A
                  copy of the Articles of Incorporation and bylaws of the Company
                  and all
                  the amendments thereto, and a copy of the Certificate of Incorporation
                  as
                  issued by the State of
                  Incorporation.

              

      

      

      
        	
                B.

              	
                Specimens
                  of all forms of outstanding certificates for all classes of securities
                  of
                  the Company, in the forms approved by the Board of
                  Directors.

              

      

      

      
        	
                C.

              	
                A
                  resolution certifying the authorized and outstanding securities
                  of the
                  Company including a list of’ all outstanding securities together with a
                  statement that future transfers may be made without restriction
                  on all
                  securities, except as to securities subject to a restriction noted
                  on the
                  face of said securities and in the corporate stock
                  records.

              

      

      

      
        	
                D.

              	
                A
                  list of all shareholders deemed to be “insiders” or “control persons” as
                  defined in the Securities Act of 1933 & 1934 and other acts of
                  Congress and rules and regulations of the United States Securities
                  and
                  Exchange Commission when
                  applicable.

              

      

      

      
        	
                E.

              	
                The
                  names and specimen signatures of all officers who are and have
                  been
                  authorized to sign certificate for securities on behalf of the
                  Company and
                  the names and addresses of any other Transfer Agents or Registrars
                  of
                  securities of the Company.

              

      

      

      
        	
                F.

              	
                A
                  copy of the Resolution of the Board of Directors of the Company,
                  authorizing its execution of this Agreement and approving the terms
                  and
                  conditions herein including the agreement that in the event that
                  there are
                  any future amendments or changes to any of the foregoing, the Company
                  will
                  issue prompt written notification of such change or changes, together
                  with
                  copies of the relevant resolutions, instruments or other documents,
                  specimen signatures, certificates, opinions or the like as the
                  Agent may
                  deem necessary or appropriate. This resolution will also approve
                  a credit
                  and background check for the company and it’s officers and
                  directors.

              

      

      

      
        	
                G.

              	
                The
                  name and address of legal counsel to this
                  Company.

              

      

       

      

      
        
           

        

        
          6

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