EXHIBIT 4.2.7
-------------
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is made as of
February 14, 2002 between Salon Media Group, Inc., a Delaware corporation (the
"Company"), and Adobe Systems Incorporated (the "Purchaser"). The parties hereby
agree as follows:
RECITAL
-------
On the terms and subject to the conditions set forth herein, Purchaser
is willing to purchase from the Company and the Company is willing to sell to
Purchaser, One Hundred Twenty Five (125) shares of the Company's Series B
Preferred Stock and a Warrant in the amount of 1,414,827 shares of the Company's
Common Stock.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, and the
representations, warranties, and conditions set forth below, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Sale and Issuance of the Shares; Consideration. Subject to the terms
and conditions hereof, at the Closing (as defined below), the Company will issue
and sell to the Purchaser and the Purchaser will purchase from the Company 125
shares of the Company's Series B Preferred Stock, $.001 par value, (the
"Shares") at a purchase price of $4,000 per share, or an aggregate purchase
price of up to $500,000. In consideration for the Shares, the Purchaser at the
Closing will pay the appropriate purchase price by delivery of a check, payable
to the order of the Company, or by wire transfer at such Closing.
The Purchaser shall not sell or transfer any of the Shares other than
to an affiliate of Purchaser prior to the first anniversary of the Closing Date.
Any such affiliate shall be subject to such restriction on transfer. For the
purposes of this Agreement, an "affiliate" shall mean any partner, limited
partner or member of Purchaser or any person or entity that directly or
indirectly through one or more intermediaries controls or is controlled by or is
under common control with Purchaser.
2. Warrant. The Company agrees to issue, sell and deliver to Purchaser,
a warrant to purchase stock in substantially the form attached hereto as Exhibit
A (the "Warrant") to purchase 1,414,827 shares of the Company's Common Stock
(the "Conversion Shares").
3. Agreement of the Company and Purchaser. The Company and the
Purchaser, having adverse interests and as a result of arm's length bargaining,
agree that:
(1) Neither the Purchaser nor any affiliated company has
rendered any services to the Company in connection with this Agreement;
1
(2) The Warrant is not being issued as compensation;
(3) The aggregate fair market value of the Shares, if issued
apart from the Warrant and the aggregate fair market value of the Warrant, if
issued apart from the Shares, are set forth herein; and
(4) All tax returns and other information returns of each party
relative to this Agreement and Warrant issued pursuant hereto shall consistently
reflect the matters agreed to in (1) through (3) above.
4. Closing; Delivery.
-----------------
4.1 Closing. The closing of the sale and purchase of the Shares and
the Warrant (the "Closing") shall take place at the offices of Xxxx Xxxx Xxxx &
Freidenrich LLP, 000 Xxxxxxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx 00000 on February
14, 2002 or such later date as shall be mutually acceptable to the Company and
the Purchaser (the "Closing Date").
4.2 Delivery. At Closing, on the terms and subject to the conditions
hereof, Purchaser shall pay to the Company, by check or wire transfer of
immediately available funds, by delivery of evidence of the indebtedness of the
Company to be cancelled, $500,000, and in exchange for and upon receipt or
confirmation of such payment, the Company will issue and deliver to Purchaser a
stock certificate representing the of Shares purchased by Purchaser and a
Warrant for the Conversion Shares.
5. Representations and Warranties of the Company.
---------------------------------------------
The Company hereby represents and warrants to the Purchaser that:
5.1 Organization and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to carry on its
businesses as now conducted and as proposed to be conducted.
5.2 Corporate Power. The Company has all requisite corporate power
necessary for the authorization, execution and delivery of this Agreement, the
Amended and Restated Securities Rights Agreement, in the form attached hereto as
Exhibit B (the "Rights Agreement"), and the Warrant, to sell and issue the
Shares hereunder, and to carry out and perform all of its obligations under the
terms of this Agreement, the Rights Agreement, the Warrant and the Certificate
of Designation of Preferences and Rights of the Series B Preferred Stock (the
"Certificate of Designation") and to carry on its business as presently
conducted and as presently proposed to be conducted, and such other agreements
and instruments. Each of the Agreement, the Rights Agreement and the Warrant is
a valid and binding obligation of the Company, enforceable in accordance with
its terms, except as the same may be limited by bankruptcy, insolvency,
moratorium, and other laws of general application affecting the enforcement of
creditors' rights.
5.3 Capitalization. As of January 1, 2002, the authorized capital
stock of the Company is Fifty million (50,000,000) shares of Common Stock and
Five million (5,000,000) shares of Preferred Stock, and there are issued and
outstanding (i) 14,155,276 shares of the
2
Common Stock, (ii) 819 shares of Series A Preferred Stock, (iii) no shares of
Series B Preferred Stock (iv) warrants to purchase an aggregate of 6,496,000
shares of Common Stock, and (v) options to purchase 6,870,469 shares of Common
Stock granted to employees pursuant to the Company's 1995 Stock Option Plan. All
such issued and outstanding shares have been duly authorized and validly issued,
are fully paid and nonassessable, and were issued in compliance with all
applicable state and federal laws concerning the issuance of securities. Since
January 1, 2002, the Company has not issued any shares of capital stock, nor
granted any options to purchase shares of Common Stock. Upon issuance of the
Shares, the Series A Conversion Price, as defined in the Company's Certificate
of Designation of Preferences and Rights of the Series A Preferred Stock (the
"Series A Certificate of Designation"), shall automatically be adjusted as set
forth in Section 6(b)(iv) of the Series A Certificate of Designation, and the
Warrant Price as defined in the outstanding Common Stock Purchase Warrants
issued in connection with the sale and issuance of the Series A Preferred Stock
(the "Series A Warrants"), will be adjusted as set forth in Section 3(d)(iv) of
the Series A Warrants.
5.4 Authorization.
(1) Corporate Action. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the sale and
issuance of the Shares and the authorization, execution and performance of the
Company's obligations hereunder and under the Warrant has been taken.
(2) Valid issuance. The Shares and the Warrant, any shares of
stock issued upon conversion or exercise of the Warrant (collectively the
"Securities"), when issued in compliance with the provisions of this Agreement
will be validly issued, fully paid and nonassessable and will be free of
restrictions on transfer other than restrictions under the Warrant and under
applicable federal and state securities laws.
5.5 No Preemptive Rights. No person has any right of first refusal
or any preemptive rights in connection with the issuance of the Securities or
any future issuances of securities by the Company.
5.6 Compliance with Other Instruments. The execution, delivery and
performance of and compliance with this Agreement or the Warrant by the Company,
and the issuance and sale of Shares will not result in any violation of the
Certificate of Incorporation or Bylaws of the Company or in any violation of or
default in any material respect under the terms of any mortgage, indenture,
contract, agreement, instrument, judgment or decree.
5.7 Consents. No consent, approval or authorization of or
designation, declaration or filing with any governmental authority or other
third party on the part of the Company is required in connection with: (a) the
valid execution and delivery of the Warrant; or (b) the offer, sale or issuance
of Securities.
5.8 Offering. In reliance on the representations and warranties of
the Purchaser in Section 6 hereof, the offer, sale and issuance of Securities in
conformity with the terms of this Agreement and the Warrant will not result in a
violation of the Securities Act of
3
1933, as amended (the "Securities Act"), or any state securities laws, including
the qualification or registration requirements of applicable blue sky laws.
5.9 Company Reports; Disclosure.
(a) Company Reports. For the purposes of this Agreement, the term "Company
Reports" shall mean, collectively, each registration statement, report, proxy
statement or information statement filed with the Securities and Exchange
Commission (the "SEC" since January 1, 1999, in the form (including exhibits,
annexes and any amendments thereto) filed with the SEC. As of their respective
dates, the Company Reports complied in all material respects with the
requirements of the Securities Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances in
which they were made, not misleading. Nothing has occurred since January 31,
2002 which would require the filing of any additional report or of any amendment
to any of the Company Reports with the SEC, or which would cause any of the
Company Reports to contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading.
(b) Disclosure. No representation or warranty by the Company in this Agreement,
or in any document or certificate furnished or to be furnished to the Purchaser
pursuant hereto or in connection with the transactions contemplated hereby, when
taken together, contains or will contain any untrue statement of a material fact
or omits or will omit to state a material fact necessary to make the statements
made herein and therein, in the light of the circumstances under which they were
made herein and therein, in the light of the circumstances under which they were
made, not misleading. The Company has either filed with the SEC or fully
provided the Purchaser with all the information necessary for the Purchaser to
decide whether to purchase the Shares.
6. Representations and Warranties of the Purchaser and Restrictions on
transfer Imposed by the Securities Act. Purchaser represents and warrants to the
Company as to itself as follows:
6.1 Power. Purchaser has all requisite corporate power necessary for
the authorization, execution and delivery of the Agreement and Warrant to which
it is a party. Each of the Agreement and the Warrant to which the Purchaser is a
party is a valid and binding obligation of the Purchaser, enforceable against
the Purchaser in accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, moratorium, and other laws of general application
affecting the enforcement of creditors' rights.
6.2 Authorization. All corporate action on the part of the
Purchaser, its officers, directors and stockholders necessary for the
authorization, execution and performance of the Purchaser's obligations
hereunder and under the Warrant to which it is a party have been taken.
4
6.3 Compliance with Other Instruments. The execution, delivery and
performance of and compliance with this Agreement and the Warrant to which
Purchaser is a party will not result in any violation of or default in any
material respect under the terms of any mortgage, indenture, contract,
agreement, instrument, judgment or decree to which the Purchaser is a party or
is otherwise subject.
6.4 Consents. No consent, approval or authorization of or
designation, declaration or filing with any governmental authority or other
third party on the part of the Purchaser is required in connection with the
valid execution and delivery of the Warrant to which it is a party.
6.5 Investment Intent. This Agreement is made with the Purchaser in
reliance upon the Purchaser's representation to the Company, evidenced by the
Purchaser's execution of this Agreement, that the Purchaser is acquiring the
Shares for investment for the Purchaser's own account, and not with a view to,
or for resale in connection with, any distribution or public offering thereof
within the meaning of the Securities Act.
6.6 Shares Not Registered. The Purchaser understands and
acknowledges that the offering of the Shares pursuant to this Agreement will not
be registered under the Securities Act or qualified under applicable blue sky
laws on the grounds that the offering and sale of securities contemplated by
this Agreement are exempt from registration under the Securities Act and exempt
from qualifications available under applicable blue sky laws, and that the
Company's reliance upon such exemptions is predicated upon the Purchaser's
representations set forth in this Agreement. The Purchaser acknowledges and
understands that, except for transfers to Affiliates of the Purchaser, the
Shares must be held for at least 12 months after Closing and thereafter
indefinitely unless the Shares are registered under the Securities Act and
qualified under applicable blue sky laws or an exemption from such registration
and such qualification is available.
6.7 Knowledge and Experience. The Purchaser (i) has such knowledge
and experience in financial and business matters as to be capable of evaluating
the merits and risks of the Purchaser's prospective investment in the Shares;
(ii) has the ability to bear the economic risks of the Purchaser's prospective
investment; and (iii) has not been offered the Shares by any form of
advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any such media.
6.8 Accredited Investor. The Purchaser is an "accredited investor"
as that term is defined in Rule 501(a) under the Securities Act.
6.9 Legends. Each certificate representing the Shares may be
endorsed with the following legends:
(1) Federal Legend. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") AND ARE "RESTRICTED SECURITIES" AS DEFINED IN RULE 144
PROMULGATED UNDER THE ACT. THE SECURITIES MAY NOT BE
5
SOLD OR OFFERED FOR SALE OR OTHERWISE DISTRIBUTED EXCEPT (i) IN CONJUNCTION WITH
AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE ACT OR (ii) IN
COMPLIANCE WITH RULE 144, OR (iii) PURSUANT TO AN OPINION OF COUNSEL, THAT SUCH
REGISTRATION OR COMPLIANCE IS NOT REQUIRED AS TO SAID SALE, OFFER OR
DISTRIBUTION.
(2) Other Legends. Any other legends required by applicable
state blue sky laws. The Company need not register a transfer of legended
Shares, and may also instruct its transfer agent not to register the transfer of
the Shares, unless the conditions specified in each of the foregoing legends are
satisfied.
6.10 Removal of Legend and Transfer Restrictions. Any legend
endorsed on a certificate pursuant to subsection 6.9(1) and the stop transfer
instructions with respect to such legend Shares shall be removed, and the
Company shall issue a certificate without such legend to the holder of such
Shares if such Shares are registered under the Securities Act and a prospectus
meeting the requirements of Section 10 of the Securities Act is available or if
such holder satisfies the requirements of Rule 144(k).
7. Conditions to Closing.
7.1 Conditions to the Purchaser's Obligations. The obligation of the
Purchaser to purchase the Securities at the Closing is subject to the
fulfillment to the Purchaser's satisfaction, on or prior to the Closing Date, of
the following conditions, any of which may be waived by the Purchaser.
(1) Representations and Warranties Correct; Performance of
Obligations. The representations and warranties made by the Company in Section 5
hereof shall be true and correct when made, and shall be true and correct in all
material respects on the Closing Date with the same force and effect as if they
had been made on and as of said date (except to the extent any such
representation or warranty expressly speaks of an earlier date). The Company
shall have performed in all material respects all obligations and conditions
herein required to be performed or observed by it on or prior to the Closing
Date.
(2) Warrant. The Company shall have executed the Warrant.
(3) Officer's Certificate. The Company shall have delivered a
Certificate, executed on behalf of the Company by its President, dated the
Closing Date, certifying to the fulfillment of the conditions specified in
subsection (1) of this Section 7.1.
(4) Secretary's Certificate. The Company shall have delivered a
Certificate, executed on behalf of the Company by its Secretary, dated the
Closing Date, certifying the Board of Directors resolutions approving the
Warrant and the issuance of the Shares, the Company's Certificate of Designation
and the Company's Bylaws.
(5) Nasdaq Notice. Pursuant to Rule 4310(c)(17) of the Nasdaq
Marketplace Rules, the Company shall have notified Nasdaq of the issuance of
securities contemplated by this Agreement and the Warrant.
6
(6) Amended and Restated Securities Rights Agreement. The
Company and the Purchaser shall have entered into the Rights Agreement.
8. Conditions to Obligations of the Company. The Company's obligation
to sell and issue the shares at the Closing is subject to the fulfillment to the
satisfaction of the Company on or prior to the Closing Date of the following
condition, which may be waived by the Company:
8.1 Representations and Warranties Correct. The representations and
warranties made by the Purchaser in Section 6 hereof shall be true and correct
when made, and shall be true and correct on the Closing Date with the same force
and effect as if they had been made on and as of said date (except to the extent
any such representation or warranty expressly speaks of an earlier date). The
Purchaser shall have performed in all material respects all obligations and
conditions herein required to be performed or observed by it on or prior to the
Closing Date.
9. Affirmative Covenants of the Company.
------------------------------------
9.1 Preliminary Proxy Statement. The Company hereby covenants and
agrees that it will file a Preliminary Proxy Statement prior to August 31, 2002,
containing, amongst other things, a request for stockholder approval required
under Rule 4350(i) of the Nasdaq Marketplace Rules for the transactions
contemplated hereby (the "Stockholder Approval"); and will hold the Stockholder
Meeting no later than October 31, 2002.
10. Miscellaneous.
-------------
10.1 Governing Law. This Agreement shall be governed in all respects
by the laws of the State of Delaware.
10.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive the Closing of the transactions
contemplated hereby, notwithstanding any investigation made by the Purchaser.
All statements as to factual matters contained in any certificates or other
instrument delivered by or on behalf of the Company pursuant hereto or in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by the Company hereunder as of the date of such
certificate or instrument.
10.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
10.4 Entire Agreement. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof and
they supersede, merge and render void every other prior written and/or oral
understanding or agreement among or between the parties hereto.
10.5 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be delivered personally,
mailed by first class mail, postage prepaid, or delivered by courier or
overnight delivery, addressed (a) if to the Purchaser, to the address such
Purchaser shall have furnished to the Company in writing or (b) if to the
7
Company, at 00 Xxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxxxxxxx, XX 00000 Attention:
Chief Financial Officer, or at such other address as the Company shall have
furnished to the Purchaser in writing. Notices that are mailed shall be deemed
received five days after deposit in the United States mail.
10.6 Severability. In case any provision of this Agreement shall be
found by a court of law to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not n any way be affected or impaired thereby.
10.7 Finder's Fees and Other Fees.
(1) The Company (i) represents and warrants that it has retained
no finder or broker in connection with the transactions contemplated by this
Agreement and, (ii) hereby agrees to indemnify and to hold the Purchaser
harmless from and against any liability for commission or compensation in the
nature of a finder's fee to any broker or other person or firm (and the costs
and expenses of defending against such liability or asserted liability) for
which the Company, or any of its employees or representatives, are responsible.
(2) Each Purchaser (i) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated by
this Agreement and (ii) hereby agrees to indemnify and to hold the Company
harmless from and against any liability for any commission or compensation in
the nature of a finder's fee to any broker or other person or firm (and the
costs and expenses of defending against such liability or asserted liability)
for which such Purchaser, or any of its employees or representatives, are
responsible.
10.8 Expenses. The Company and each Purchaser shall each bear their
own expenses and legal fees in connection with the consummation of this
transaction.
10.9 Titles and Subtitles. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
10.10 Non-Recourse. No partner, limited partner, member, officer,
director, shareholder, employee or agent or other holder of an ownership
interest in any party to this Agreement or the Rights Agreement shall have any
liability in respect of any such party's obligations under this Agreement or the
Rights Agreement by reason of his or her status as such partner, limited
partner, member, officer, director, shareholder, employee or agent or other
holder of an ownership interest in any party to this Agreement or the Rights
Agreement. The obligations under this Agreement and the Rights Agreement shall
be limited to the assets of each of the Purchaser and shall not exceed the
Purchase Price.
10.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
10.12 Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to the Company or to any holder of any
securities issued or to be issued hereunder shall impair any such right, power
or remedy of the Company or such holder, nor shall
8
it be construed to be a waiver of any breach or default under this Agreement, or
an acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any delay or omission to exercise any right, power or
remedy or any waiver of any single breach or default be deemed a waiver of any
other right, power or remedy or breach or default theretofore or thereafter
occurring. All remedies, either under this Agreement, or by law otherwise
afforded to the Company or any holder, shall be cumulative and not alternative.
10.13 Attorneys' Fees. If any action at law or in equity is
necessary to enforce or interpret the terms of any of the Transaction
Agreements, the prevailing party shall be entitled to reasonable attorneys'
fees, costs and disbursements in addition to any other relief to which such
party may be entitled.
10.14 Venue. The parties hereby irrevocably submit to the
jurisdiction of the courts of the State of California and the Federal courts of
the United States of America located in the State of California solely in
respect of the interpretation and enforcement of the provisions of the Warrant,
and in respect of the transactions contemplated hereby, and hereby waive, and
agree not to assert, as a defense in any action, suit or proceeding for the
interpretation or enforcement hereof or of any such document, that it is not
subject thereto or that such action, suit or proceeding may not be brought or is
not maintainable in said courts or that the venue thereof may not be appropriate
or that the Warrant may not be enforced in or by such courts, and the parties
hereto irrevocably agree that all claims with respect to such action or
proceeding shall be heard and determined in such a California state or Federal
court. The parties hereby consent to and grant any such court jurisdiction over
the person of such parties and over the subject matter of such dispute and agree
that mailing of process or other papers in connection with any such action or
proceeding in the manner provided in Section 10.5 hereof shall be valid ad
sufficient service thereof.
[The remainder of this page is intentionally left blank]
9
IN WITNESS WHEREOF, the parties hereto have executed this Stock and
Warrant Purchase Agreement as of the date first written above.
SALON MEDIA GROUP, INC.
By: /s/ Xxxxxxx X. X'Xxxxxxx
-----------------------------
Title: CEO/President
[Counterpart Signature Page to Securities Purchase Agreement]
10
PURCHASER
By: /s/ Xxx Xxxxxxxx
-----------------------------
Title: SVP Worldwide Sales,
Customer Care, Field Marketing
[Counterpart Signature Page to Securities Purchase Agreement]
11
