EXHIBIT 10.37
NOTE PURCHASE AGREEMENT
-----------------------
This Note Purchase Agreement, dated as of April 4, 2008, (this
"Agreement"), is entered into by and among Salon Media Group, Inc., a Delaware
corporation (the "Company"), and each of the purchasers (collectively the
"Purchasers" and individually a "Purchaser"), listed on the Schedule of
Purchasers attached hereto as Exhibit A (the "Schedule of Purchasers").
RECITAL
-------
A. On the terms and subject to the conditions set forth herein, the
Purchasers are willing to purchase from the Company, and the Company is willing
to sell to the Purchasers, Convertible Promissory Notes (each, a "Note" and
collectively, the "Notes"), in the principal amounts set forth opposite each
Purchaser's name on the Schedule of Purchasers (each, a "Loan Amount" and
collectively, the "Loan Amounts").
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing, and the representations,
warranties, and covenants set forth below, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Notes.
(a) Issuance of Notes. In reliance upon the representations,
warranties and covenants of the parties set forth herein, the Company agrees to
issue, sell and deliver to the Purchasers, and the Purchasers agree to purchase
from the Company, the Notes, in an aggregate amount not to exceed $2,000,000.
The purchase price for the Notes shall be payable in immediately available
funds.
(b) Terms of the Notes. The terms and conditions of the Notes are set
forth in the form of Note attached hereto as Exhibit B. Capitalized terms not
otherwise defined herein shall have the meanings set forth in Exhibit B attached
hereto.
2. Closings; Delivery.
(a) Closing. The closing of the purchase and sale hereunder (the
"Closing"), shall take place at the offices of DLA Piper US LLP, counsel to the
Company, 0000 Xxxxxxxxxx Xxxxxx, Xxxx Xxxx Xxxx, Xxxxxxxxxx 00000 in one or more
closings at such time and place as the Company and each Purchaser may agree
(each a "Closing Date").
(b) Delivery. Subject to the terms of this Agreement, at each Closing,
the Company will deliver to each Purchaser a Note in such Purchaser's name
representing the Note purchased by such Purchaser, and such Purchaser will
deliver to the Company, by check or wire transfer, payment for the Note being
purchased in an amount equal to the amount set forth opposite Purchaser's name
on the Schedule of Purchasers.
1
3. Representations and Warranties of the Company. The Company hereby
represents and warrants to each Purchaser as of the date hereof:
(a) 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
business as currently conducted.
(b) Corporate Power. The Company has all requisite legal and corporate
power to enter into, execute and deliver this Agreement and to issue each Note.
This Agreement, and the Notes, when issued, are valid and binding obligations of
the Company, enforceable in accordance with their terms, except as the same may
be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium, usury or other laws of general application relating to or affecting
enforcement of creditors' rights and the rules or laws governing specific
performance, injunctive relief or other equitable remedies.
(c) Authorization.
(i) Corporate Action. All corporate and legal action on the part
of the Company, its officers, directors and stockholders necessary for the
execution and delivery of this Agreement, the sale and issuance of the Notes,
and the performance of the Company's obligations hereunder and under the Notes
have been taken.
(ii) Valid Issuance. The Notes and any shares of common stock
issued upon conversion of the Notes (the "Securities"), when issued in
compliance with the provisions of this Agreement and the Notes, as the case may
be, will be validly issued and will be free of any liens or encumbrances and
issued in compliance with all applicable federal securities laws, provided,
however, that the Securities may be subject to restrictions on transfer under
state and/or federal securities laws as set forth herein, and as may be required
by future changes in such laws.
(d) Government Consent, Etc. No consent, approval, order or
authorization of, or designation, registration, declaration or filing with, any
federal, state, local or other governmental authority on the part of the Company
is required in connection with the valid execution and delivery of this
Agreement and the Notes, other than, if required, filings or qualifications
under the Securities Act of 1933, as amended (the "Securities Act"), and other
applicable state securities laws, which filings or qualifications, if required,
will be timely filed or obtained by the Company.
(e) Offering. Assuming the accuracy of the representations and
warranties of the Purchasers contained in Section 4 hereof, the offer, issue,
and sale of the Notes and any shares common stock issued upon the conversion of
the Notes will be exempt from the registration and prospectus delivery
requirements of the Securities Act, and have been registered or qualified (or
are exempt from registration and qualification) under the registration, permit,
or qualification requirements of all applicable state securities laws.
4. Representations and Warranties by the Purchaser. Each Purchaser hereby
represents and warrants to the Company as of the date hereof:
2
(a) Investment Intent. The Securities will be acquired for the
Purchaser's own account, for investment 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. The Purchaser understands that the Securities have not
been registered under the Securities Act by reason of their issuance in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act pursuant to Section 4(2) thereof, which exemption depends
upon, among other things, the bona fide nature of the Purchaser's investment
intent expressed herein.
(b) Access to Information. During the negotiation of the transactions
contemplated herein, the Purchaser and its representatives have been afforded
full and free access to corporate books, financial statements, records,
contracts, documents, and other information concerning the Company, and to its
offices and facilities, have been afforded an opportunity to ask such questions
of the Company's officers, employees, agents, accountants and representatives
concerning the Company's business, operations, financial condition, assets,
liabilities and other relevant matters as they have deemed necessary or
desirable, and have been given all such information as has been requested, in
order to evaluate the merits and risks of the prospective investment
contemplated herein.
(c) Due Diligence. The Purchaser and its representatives have been
solely responsible for the Purchaser's own "due diligence" investigation of the
Company and its management and business, for its own analysis of the merits and
risks of this investment, and for its own analysis of the fairness and
desirability of the terms of the investment. Notwithstanding the foregoing, such
due diligence investigation shall not limit the representations and warranties
made by the Company in Section 4 hereof.
(d) Accredited Investor. The Purchaser (i) is an "Accredited Investor"
as that term is defined in Rule 501 of Regulation D promulgated under the
Securities Act or has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of such Purchaser's
prospective investment in the Securities; and (ii) has the ability to bear the
economic risks of such Purchaser's prospective investment, including a complete
loss of Purchaser's investment in the Securities.
(e) General Solicitation. The Purchaser has not been offered the
Securities 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.
(f) Authority. The Purchaser has the full right, power and authority
to enter into and perform the Purchaser's obligations under this Agreement, and
this Agreement constitutes a valid and binding obligation of the Purchaser
enforceable in accordance with its terms except as may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium, usury or other
laws of general application relating to or affecting enforcement of creditors'
rights and the rules or laws governing specific performance, injunctive relief
or other equitable remedies.
(g) Government Consent. No consent, approval, order or authorization
of, or designation, registration, declaration or filing with, any federal,
state, local or other governmental authority on the part of the Purchaser is
required in connection with the valid execution and delivery of this Agreement.
3
(h) Restricted Securities. The Purchaser understands that the Company
has no present intention of registering the Securities, and that if the Company
does not (i) register its Common Stock with the Securities and Exchange
Commission pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), (ii) become subject to Section 15(d) of the
Exchange Act, (iii) supply information pursuant to Rule 15c2-11 thereunder, or
(iv) have a registration statement covering the Securities under the Securities
Act in effect when Purchaser desires to sell the Securities, the Purchaser may
be required to hold the Securities for an indeterminate period. Purchaser also
understands that any sale of the Securities that might be made by such Purchaser
in reliance upon Rule 144 under the Securities Act may be made only in limited
amounts in accordance with the terms and conditions of that rule.
5. Restrictive Legend. Each certificate or document representing the
Securities, and any other securities issued in respect of the Securities upon
any stock split, stock dividend, recapitalization, merger, consolidation or
similar event shall be stamped or otherwise imprinted with a legend in
substantially the following form (in addition to any legend required under
applicable state securities laws):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE 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 THE ACT COVERING SUCH
SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE
ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF
THESE SECURITIES 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.
6. Miscellaneous.
(a) Waivers and Amendments. Any provision of this Agreement may be
amended, waived or modified upon the written consent of the Company and the
Purchasers holding at least a majority in interest of the then outstanding Loan
Amounts.
(b) Governing Law. This Agreement and all actions arising out of or in
connection with this Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware regard to the conflicts of law provisions
of the State of Delaware or of any other state.
(c) Entire Agreement. This Agreement, together with Exhibit A and
Exhibit B attached hereto, constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
4
(d) Expenses. The Company and the Purchasers shall each bear their
respective expenses and legal fees incurred in connection with the negotiation
and consummation of this Agreement.
(e) Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
(i) upon actual delivery to the party to be notified, (ii) 24 hours after
confirmed facsimile transmission, (iii) one (1) business day after deposit with
a recognized overnight courier, or (iv) three (3) business days after deposit
with the U.S. Postal Service by first class certified or registered mail,
postage prepaid, return receipt requested, addressed or sent (a) if to a
Purchaser, at the address or facsimile number of the Purchaser set forth below
such party's name on the Schedule of Purchasers, or at such other address or
number as the Purchaser shall have furnished to the Company in writing upon 10
days' notice, or (b) if to the Company, at 000 Xxxxx Xxxxxx, Xxxxx 000, Xxx
Xxxxxxxxx, XX 00000 , fax number (000.000.0000) or at such other address or
number as the Company shall have furnished to the Purchasers in writing upon 10
days' notice.
(f) Validity. If any provision of this Agreement or a Note shall be
judicially determined to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
(g) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall be deemed to constitute one instrument.
[remainder of page intentionally left blank]
5
IN WITNESS WHEREOF, the parties hereto have executed this Note Purchase
Agreement as of the date first set forth above.
COMPANY:
SALON MEDIA GROUP, INC.
a Delaware corporation
By: /s/ Xxxxxxxxxxx Xxxxxxx
----------------------------
Xxxxxxxxxxx Xxxxxxx,
Chief Executive Officer
6
COUNTERPART SIGNATURE PAGE TO
NOTE PURCHASE AGREEMENT
PURCHASERS:
-----------
/s/ Xxxx Xxxxxxx
------------------------------
Xxxx Xxxxxxx
7
COUNTERPART SIGNATURE PAGE TO
NOTE PURCHASE AGREEMENT
PURCHASERS:
-----------
The Xxxxxxxxx 1980 Revocable Trust
By: /s/ Xxxxxxx X. Xxxxxxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
-----------------------------
Title: Trustee
---------------------------
8
EXHIBIT A
---------
SCHEDULE OF PURCHASERS
----------------------
PURCHASERS DATE OF INVESTMENT AMOUNT OF NOTE
---------- ------------------ --------------
Xxxx Xxxxxxx April 4, 2008 $500,000
The Xxxxxxxxx 1980
Revocable Trust April 4, 2008 $500,000
EXHIBIT B
---------
THIS NOTE AND THE SECURITIES EVIDENCED BY 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 THE ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE
WITH RULE 144 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR
THE HOLDER OF SUCH SECURITIES REASONABLY SATISFACTORY TO THE COMPANY STATING
THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT.
CONVERTIBLE PROMISSORY NOTE
---------------------------
$____________ XXXXXX, __ 2008
FOR VALUE RECEIVED, Salon Media Group, Inc., a Delaware corporation (the
"Company"), promises to pay to ________________________ (the "Holder"), or its
registered assigns, the principal sum of Dollars ($_________), or such lesser
amount as shall then equal the outstanding principal amount hereof, together
with simple interest from the date of this Note on the unpaid principal balance
at a rate equal to seven and one-half percent (7.5%) per annum. The interest
rate shall be computed on the basis of the actual number of days elapsed and a
year of 365 days. Such interest shall be payable in semi-annual installments
and, at the option of the Company, may be paid in cash or by the delivery of a
note in substantially the same form as this Note for an amount equal to the
interest payment then due Holder. All unpaid principal, together with the unpaid
and accrued interest payable hereunder, if not converted by the provisions of
Section 5 below, shall be due and payable on demand at any time after the
earlier of (i) March 31, 2012 (the "Maturity Date"), (ii) when such amounts are
declared due and payable by the Holder upon or after the occurrence of an Event
of Default (as defined below) or (ii) in the event of a Change of Control. This
Note is one of a series of Convertible Promissory Notes containing substantially
identical terms and conditions issued pursuant to the Note Purchase Agreement
dated April 4, 2008 (the "Purchase Agreement"), and the holders of the Notes are
referred to herein as the "Holders."
The following is a statement of the rights of the Holder and the conditions
to which this Note is subject, and to which the Holder hereof, by the acceptance
of this Note, agrees:
1. Definitions. As used in this Note, the following capitalized terms have
the following meanings:
(a) "Change of Control" shall mean (i) the acquisition of the Company
by another entity by means of any transaction or series of related transactions
(including, without limitation, any reorganization, merger or consolidation); or
(ii) a sale of all or substantially all of the assets of the Company, in either
case, in which the stockholders of the Company immediately prior to the
acquisition or sale, as the case may be, do not hold a majority of the
outstanding shares of capital stock of the surviving corporation.
Notwithstanding the foregoing, a transaction shall not be deemed a Change of
Control if the sole purpose of the transaction is to change the state of the
Company's incorporation or to create a holding company that will be owned in
substantially the same proportions by the persons who held the Company's
securities immediately prior to such transaction.
(b) "Common Stock" shall mean the Company's common stock.
(c) "Obligations" shall mean all principal and accrued interest due
hereunder.
(d) "Original Conversion Price" shall mean the volume-weighted price
per share of Common Stock on the five (5) trading days prior to the date of
initial Closing under the Purchase Agreement. Such Initial Conversion Price
shall be adjusted to stock splits and the like.
(e) "Subsequent Conversion Price" shall mean the higher of (i) the
volume-weighted price per share of Common Stock on the five (5) trading days
prior to the closing date of a subsequent Closing which the Holder participated
pursuant to the Purchase Agreement or (ii) the Original Conversion Price. Such
Subsequent Conversion Price shall be adjusted to stock splits and the like.
2. Events of Default. The occurrence of any of the following shall
constitute an "Event of Default" under this Note:
(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 ten (10) days of the Company's receipt of the
Holder's written notice to the Company of such failure to pay;
(b) Voluntary Bankruptcy or Insolvency Proceedings. The Company shall
(i) apply for or consent to the appointment of a receiver, trustee, liquidator
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) become insolvent (as such
term may be defined or interpreted under any applicable statute), (v) 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 (vi) take any
action for the purpose of effecting any of the foregoing;
(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 its property, 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 order for relief
entered, or such proceeding shall not be dismissed or discharged within thirty
(30) days of commencement; or
2
(d) Breach of Agreements. Unless waived by the Holders of at least a
majority in interest of the then outstanding Loan Amounts (as defined in the
Purchase Agreement) (the "Majority Holders"), the Company's material breach of
any representation, covenant or agreement contained in this Note or the Purchase
Agreement, which such breach is not cured by the Company within ten (10) days
after written notice thereof is given to the Company by the Holder.
3. Rights of Holder Upon Default. Upon the occurrence or existence of any
Event of Default and at any time thereafter during the continuance of such Event
of Default, upon the written consent of the Majority Holders, Holder may declare
all outstanding Obligations payable by the 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. In addition to the foregoing
remedies, upon the occurrence or existence of any Event of Default, upon the
written consent of the Majority Holders, the Holder may exercise any other
right, power or remedy granted to it or otherwise permitted to it by law, either
by suit in equity or by action at law, or both.
4. Prepayment; Payment After Maturity Date Without Demand. This Note may
not be prepaid in whole or in part at any time by the Company without the prior
written consent of the Holder.
5. Optional Conversion.
(a) At any time Holder may convert all of the principal and accrued
interest then outstanding under the Note into Common Stock. The number of shares
of Common Stock issued upon conversion shall be equal to the Obligations divided
by (i) the Original Conversion Price if the Holder participated in the initial
Closing or (ii) the Subsequent Closing Price if the Holder participated in a
subsequent Closing.
(b) Fifteen (15) days prior written notice (the "Company Notice")
shall be delivered to the Holder of this Note at the address last shown on the
records of the Company for the Holder or, if no such address appears, at the
place where the principal executive office of the Company is located, notifying
the Holder of the terms and conditions of a Change of Control, the price per
share to be paid to holders of Common Stock in such Change of Control and
calling upon such Holder, if conversion is elected by the Holder, to surrender
to the Company, in the manner and at the place designated, the Note. If the
Holder elects to convert this Note (or elects to have the Note repaid in full by
the Company in the case of a Change of Control), the Holder shall provide
written notice to the Company no later than five (5) days after the Company
Notice is deemed given.
(c) No fractional shares of Common Stock shall be issued upon
conversion of this Note. Upon the conversion of all of the principal and accrued
interest outstanding under this Note, in lieu of the Company issuing any
fractional shares to the Holder, the Company shall pay to the Holder the amount
of outstanding principal and accrued interest that is not so converted. Upon
full conversion of this Note, the Company shall be forever released from all its
obligations and liabilities under this Note.
3
6. Right of Exchange. In the event that the Company, at any time prior to
the payment in full of this Note, or conversion thereof, shall (a) issue and
sell shares of its common or preferred stock or an instrument convertible into
its common or preferred stock or (b) issue and sell debentures or enter into any
new indebtedness (in either case a "Financing"), then the Holders of the first
$1 million in principal of the Notes issued hereunder may choose to exchange the
outstanding principal balance and accrued interest due under this Note for new
securities issued on the same terms and conditions of the Financing. If the
Company completes a Financing in excess of $500,000, then this Right of Exchange
will terminate 30 days following notice of such a Financing being given to these
Holders.
7. Successors and Assigns. Subject to the restrictions on transfer
described in Section 8 below, the rights and obligations of the Company and the
Holder of this Note shall be binding upon and benefit the successors, assigns,
heirs, administrators and transferees of the parties.
8. Waiver and Amendment. Any provision of this Note may be amended, waived
or modified upon the written consent of the Company and the Majority Holders.
Any amendment or waiver effected in accordance with this Section 7 shall be
binding upon the Company, the Holders and each transferee of a Note.
Notwithstanding the foregoing, any amendment which reduces the amount of the
Obligations of this Note shall require the consent of the Holder of this Note.
9. Transfer of this Note. This Note may not be transferred in violation of
any restrictive legend set forth hereon. Each new Note issued upon transfer of
this Note shall bear a legend as to the applicable restrictions on
transferability in order to ensure compliance with the Securities Act of 1933,
as amended (the "Securities Act"), unless in the opinion of counsel for the
Company such legend is not required in order to ensure compliance with the
Securities Act. The Company may issue stop transfer instructions to its transfer
agent in connection with such restrictions. Prior to presentation of this Note
for registration of transfer, the Company shall treat the Holder as the owner
and registered 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 the Company shall not be affected by notice
to the contrary.
10. Treatment of Note. To the extent permitted by generally accepted
accounting principles, the Company will treat, account and report the Note as
debt and not equity for accounting purposes and with respect to any returns
filed with federal, state or local tax authorities.
11. Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
(i) upon actual delivery to the party to be notified, (ii) 24 hours after
confirmed facsimile transmission, (iii) one (1) business day after deposit with
a recognized overnight courier, or (iv) three (3) business days after deposit
with the U.S. Postal Service by first class certified or registered mail,
postage prepaid, return receipt requested, addressed or sent (a) if to the
4
Holder, at the address or facsimile number of the Holder set forth below such
party's name on the Schedule of Purchasers, or at such other address or number
as the Holder shall have furnished to the Company in writing upon 10 days'
notice, or (b) if to the Company, at 000 Xxxxx Xxxxxx, Xxxxx 000, Xxx Xxxxxxxxx,
XX 00000 , fax number (000.000.0000) or at such other address or number as the
Company shall have furnished to the Holder in writing upon 10 days' notice.
12. Payment. Payment shall be made in lawful tender of the United States.
13. Expenses; Waivers. If action is instituted to collect this Note, the
Company promises to pay all costs and expenses, including, without limitation,
reasonable attorneys' fees and costs, incurred in connection with such action.
The Company hereby waives notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor and all other notices or demands
relative to this instrument.
14. Governing Law. This Note and all actions arising out of or in
connection with this Note shall be governed by and construed in accordance with
the laws of the State of Delaware, without regard to the conflicts of law
provisions of the State of Delaware or of any other state.
IN WITNESS WHEREOF, the Company has caused this Convertible Promissory Note
to be issued as of the date first set forth above.
Salon Media Group, Inc.
a Delaware corporation
By:
-------------------------------
Xxxxxxxxxxx Xxxxxxx
Chief Executive Officer
5
