EXHIBIT 4.2.11
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THIS NOTE AND ANY SHARES ACQUIRED UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT
BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING THIS NOTE, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF
COUNSEL FOR THE HOLDER OF THIS NOTE REASONABLY SATISFACTORY TO THE COMPANY,
STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
SALON MEDIA GROUP, Inc.
CONVERTIBLE PROMISSORY NOTE
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$_______________ July __, 2002
Salon Media Group, Inc., a Delaware corporation (the "Company"), for
value received, hereby promises to pay to _______ ("Holder"), the principal sum
of _____ ($______) with interest as provided below.
1. Payment.
(a) Payment. Subject to the provisions of Section 3 hereof relating to
the conversion of this Note, principal and accrued interest hereof shall be
payable on the earlier of (i) the date of the next meeting of the Company's
stockholders at which a proposal seeking the approval of the sale of the Bridge
Notes (as defined below) and the sale of shares of the Company's Series B
Preferred Stock is voted upon and is not approved by the Company's stockholders,
or (ii) September 30, 2003 (the "Maturity Date"). Payments hereunder shall be
made by the Company to the Holder, at the address as provided to the Company by
the Holder in writing, in lawful money of the United States of America. Interest
shall accrue with respect to the unpaid principal amount of the loan from the
date of this Note until such principal is paid or converted as provided in
Section 3 hereof at a rate of six percent (6%) per annum (computed on the basis
of a 365-day year).
(b) Prepayment. The Company shall have the right at any time and
without penalty to prepay, in whole or in part, the principal outstanding and/or
the interest accrued hereunder.
2. Certain Definitions.
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(a) "Bridge Notes" shall mean the series of notes, of which this Note
is a part, dated on or about the date hereof, each of which are identical, other
than the date of the Note, identity of the Holder and principal amount of this
Note.
(b) "Financing" shall mean the first closing of the Company's first
sale of its equity securities following the date hereof with aggregate gross
proceeds to the Company of at least $2,000,000 (including the conversion of the
Obligations less any applicable accrued interest hereunder and other converted
indebtedness of the Company).
(c) "Financing Securities" shall mean the shares of equity securities
of the Company sold in the Financing.
(d) "Obligations" shall mean all outstanding principal and accrued
interest due hereunder.
3. Conversion.
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(a) Stockholder Approval Required. Notwithstanding any other provision
of hereof, this Note shall not be convertible into Financing Securities or the
Company's common stock ("Common Stock"), as the case may be, unless and until
the earlier of (i) the sale of the Bridge Notes and Warrants (as such term is
defined in the Note and Warrant Purchase Agreement) and the sale of shares of
the Company's Series B Preferred Stock have been duly approved by the Company's
stockholders in accordance with applicable Nasdaq Marketplace Rules, or (ii)
such time as the Company's equity securities are no longer subject to Nasdaq
Marketplace Rules.
(b) Automatic Conversion Upon Financing. Subject to the provisions of
subsection 3(a) hereof, this Note shall automatically convert into the Financing
Securities upon the closing of the Financing.
(c) Automatic Conversion Absent Financing by September 30, 2003.
Subject to the provisions of subsection 3(a) hereof, if no Financing shall have
occurred by the close of business on September 30, 2003, then this Note shall
automatically convert into shares of Common Stock.
(d) Conversion Price Upon Financing. In the event of an automatic
conversion pursuant to subsection 3(b) hereof, the number of shares of the
Financing Securities to be issued upon conversion of the Obligations shall equal
the aggregate amount of the Obligations divided by the price per share of the
Financing Securities issued and sold in the Financing.
(e) Conversion Price Absent Financing by September 30, 2003. In the
event of an automatic conversion pursuant to subsection 3(c) hereof, the number
of shares of the Common Stock to be issued upon conversion of this Note shall
equal the aggregate amount of the Obligations divided by the average closing
price of the Common Stock over the sixty (60) trading days ending on September
30, 2003, as reported on such market(s) and/or exchange(s) where the Common
Stock has traded during such sixty trading days.
(f) Notice Regarding Financing. Written notice shall be delivered to
the Holder of this Note pursuant to Section 7 below notifying the Holder of the
terms and conditions of the Financing, the applicable conversion price, the date
on which any automatic conversion
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occurred and calling upon such Xxxxxx to surrender the Note to the Company for
cancellation and conversion in the manner and at the place designated.
(g) Mechanics and Effect of Conversion. No fractional shares of
Financing Securities or Common Stock shall be issued upon conversion of this
Note. Notwithstanding any other provision of this Note or the Note and Warrant
Purchase Agreement, upon the conversion of the Obligations under this Note, in
lieu of the Company issuing any fractional shares to the Holder, the Company
shall pay to the Holder in cash the amount of the Obligations that is not so
converted. Upon conversion of this Note pursuant hereto, the Holder shall
surrender this Note, duly endorsed, at the principal office of the Company and
shall execute such documents as are reasonably required to be executed by all
purchasers of the Financing Securities. The Company shall, as soon as
practicable thereafter, issue and deliver to such Holder at such principal
office a certificate or certificates for the number of shares of the Financing
Securities or Common Stock to which the Holder shall be entitled upon such
conversion (bearing such legends as are required by applicable state and federal
securities laws in the opinion of counsel to the Company), together with any
other securities and property to which the Holder is entitled upon such
conversion under the terms of this Note. Upon full conversion of this Note
pursuant to the terms hereof, the Company shall be forever released from all its
obligations and liabilities under this Note. Upon conversion of this Note into
Financing Securities or Common Stock, the Holder shall be entitled to all rights
and privileges afforded by the Company to other holders of such Financing
Securities or Common Stock.
4. Events of Default. The occurrence of any of the following shall
constitute an "Event of Default" under this Note and the Note and Warrant
Purchase Agreement of even date herewith (the "Purchase Agreement"):
(a) Failure to Pay. The Company shall fail to pay (i) when due any
principal payment on the due date hereunder or (ii) any interest or other
payment required under the terms of this Note on the date due and such payment
shall not have been made within fifteen (15) days of Company's receipt of
Xxxxxx's written notice to the Company of such failure to pay; or
(b) Voluntary Bankruptcy or Insolvency Proceedings. The Company shall
(i) apply for or consent to the appointment of a receiver, trustee, liquidate or
custodian of itself or of all or a substantial part of its property, (ii) make a
general assignment for the benefit of its or any of its creditors, (iii) be
dissolved or liquidated in full or in part, (iv) commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or consent to any such relief or to the
appointment of or taking possession of its property by any official in an
involuntary case or other proceeding commenced against it, or (v) take any
action for the purpose of effecting any of the foregoing; or
(c) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for
the appointment of a receiver, trustee, liquidator or custodian of the Company
or of all or a substantial part of the property thereof, or an involuntary case
or other proceedings seeking liquidation, reorganization or other relief with
respect to the Company or the debts thereof under any bankruptcy, insolvency or
other similar law or hereafter in effect shall be commenced and an
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order for relief entered or such proceeding shall not be dismissed or discharged
within thirty (30) days of commencement.
5. Rights of Holder Upon Default. Subject to the provisions set forth
in Sections 5 and 6 of the Purchase Agreement, upon the occurrence or existence
of any Event of Default (other than an Event of Default referred to in
Paragraphs 4(c) and 4(d)) and at any time thereafter during the continuance of
such Event of Default, Holder may declare all outstanding Obligations payable by
Company hereunder to be immediately due and payable without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the Purchase Agreement to the contrary
notwithstanding. Upon the occurrence or existence of any Event of Default
described in Paragraphs 4(c) and 4(d), immediately and without notice, all
outstanding Obligations payable by Company hereunder shall automatically become
immediately due and payable, without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived, anything contained
herein or in the Purchase Agreement to the contrary notwithstanding. In addition
to the foregoing remedies, upon the occurrence or existence of any Event of
Default and subject to the provisions of Sections 5 and 6 of the Purchase
Agreement, Holder may exercise any other right, power or remedy granted to it by
the Purchase Agreement or otherwise permitted to it by law, either by suit in
equity or by action at law, or both.
6. Security Interest. The satisfaction of the Obligations hereunder are
secured by a security interest in favor of the Purchasers in all of the
Company's right, title and interest in presently existing and hereafter acquired
assets as provided for in Section 4 of the Purchase Agreement.
7. Miscellaneous.
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(a) Amendment Provisions. Any provision of this Note other than the
principal amount and identity of the Holder may be amended, waived or modified
upon the written consent of the Company and the parties providing at least a
majority of the aggregate principal amounts provided pursuant to the Bridge
Notes.
(b) Severability. If any provision of this Note is determined to be
invalid, illegal or unenforceable, in whole or in part, the validity, legality
and enforceability of any of the remaining provisions or portions of this Note
shall not in any way be affected or impaired thereby and this Note shall
nevertheless be binding between the Company and the Holder.
(c) Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of Delaware.
(d) Binding Effect. This Note shall be binding upon, and shall inure to
the benefit of, the Company and the Holder and their respective successors and
assigns; provided, however, that the Company may not assign its obligations
hereunder without the Holder's prior written consent.
(e) Enforcement Costs. The Company agrees to pay all costs and
expenses, including, without limitation, reasonable attorneys' fees and
expenses, the Holder expends or
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incurs in connection with the enforcement of this Note, the collection of any
sums due hereunder, any actions for declaratory relief in any way related to
this Note, or the protection or preservation of any rights of the Holder
hereunder.
(f) Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be duly given upon receipt if
personally delivered or mailed by registered or certified mail, postage prepaid,
or by recognized overnight courier or personal delivery, addressed (i) if to
Holder, at the address or facsimile number of such Holder as set forth below
such party's name on Exhibit A to the Purchase Agreement, or at such other
address or number as such Holder shall have furnished to the Company in writing,
or (ii) if to Company, at 00 Xxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxxxxxxx, XX 00000,
Attention: Chief Financial Officer or at such other address as Company shall
furnish to the Purchaser in writing.
(g) Payment. Payment shall be made in lawful tender of the United
States.
(h) Transfer of Note or Securities Issuable on Conversion Hereof. This
Note or the securities issuable on conversion hereof may not be transferred in
violation of any restrictive legend set forth hereon or thereon. Each new Note
issued upon transfer of this Note, and each security issuable on conversion
hereof, shall bear the restrictive legend set forth below, unless in the opinion
of counsel for Company such legend is not required in order to ensure compliance
with the Act:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT."
The Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions. Subject to the foregoing, transfers of this
Note shall be registered upon registration books maintained for such purpose by
or on behalf of the Company as provided in the Purchase Agreement. Prior to
presentation of this Note for registration of transfer, the Company shall treat
the registered holder hereof as the owner and holder of this Note for the
purpose of receiving all payments of principal and interest hereon and for all
other purposes whatsoever, whether or not this Note shall be overdue and Company
shall not be affected by notice to the contrary.
(i) Headings. Section headings used in this Note have been set forth
herein for convenience of reference only. Unless the contrary is compelled by
the context, everything contained in each section hereof applies equally to this
entire Note.
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IN WITNESS WHEREOF, the Company has caused this Note to be issued as of
the date first written above.
Salon Media Group, Inc.
By:
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Name:
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Title:
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