Exhibit 10.1

 

EXECUTION VERSION

 

SECURITIES PURCHASE AGREEMENT

 

THIS SECURITIES PURCHASE AGREEMENT (the “Agreement”) is made as of the 9th of
January, 2018, by and among Salon Media Group, Inc. (the “Company”), a
corporation organized under the laws of the State of Delaware, with its
principal offices at 870 Market Street, San Francisco, California 94102, and the
purchasers whose names and addresses are set forth on Schedule I attached hereto
(collectively, the “Purchasers” and each a “Purchaser”).

 

WHEREAS, the Company desires to raise immediately available funds to serve as a
bridge to the 2017 equity capital raise (referred to herein as the “2017 capital
raise”) of the Company through the issuance and sale of convertible notes of the
Company in the form attached hereto as Exhibit A (the “Notes”), which Notes
shall be, in accordance with the terms of the Notes, convertible into shares of
the Company’s common stock, $0.001 par value per share (the “Common Stock”) (as
converted, the “Conversion Shares”);

 

WHEREAS, each Purchaser wishes to purchase, severally but not jointly, and the
Company wishes to sell to each Purchaser, upon the terms and conditions stated
in this Agreement, that aggregate principal amount of Notes set forth opposite
such Purchaser’s name on Schedule I (which aggregate principal amount for all
Purchasers shall not exceed $1,000,000); and

 

WHEREAS, the Notes and the Conversion Shares collectively are referred to herein
as the “Securities.”

 

IN CONSIDERATION of the mutual covenants contained in this Agreement, the
Company and each of the Purchasers agree as follows:

 

SECTION 1.     Authorization of Sale of the Notes. Subject to the terms and
conditions of this Agreement, the Company has authorized the issuance and sale
of the Notes.

 

SECTION 2.     Agreement to Sell and Purchase the Notes. The Company shall issue
and sell to the Purchasers and the Purchasers shall buy from the Company, upon
the terms and conditions hereinafter set forth, the aggregate principal amount
of Notes set forth opposite its name on Schedule I. The purchase price (the
“Purchase Price”) for the Notes to be purchased by each Purchaser shall be equal
to $10,000 for each $10,000 of principal amount of Notes being purchased by such
Purchaser at the Closing (as hereinafter defined). The Notes are mandatorily
convertible into shares of Common Stock of the Company at the time of the
closing of the 2017 capital raise; it being understood that the Notes will be
convertible into shares of Common Stock at a price equal to 70% of the price at
which shares of Common Stock are sold in the 2017 capital raise. If, after 120
days from the Closing Date (as hereinafter defined), the 2017 capital raise
shall not have been completed, then in that event, the price per share at which
the Notes will be converted will be reduced by 2% on the first day of each
month; provided, however, that the price per share at which the Notes will be
converted shall never be less than the greater of (A) 60% of the price at which
shares of Common Stock are sold in the 2017 capital raise and (B) the price per
share paid by investors in the most recently consummated offering of the
Company’s Common Stock.

 

 

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SECTION 3.     Delivery of the Securities at the Closing.

 

3.1     The Closing. The completion of the purchase and sale of the Notes (the
“Closing”) shall occur at the offices of Morrison & Foerster LLP, 250 West 55th
Street, New York, New York 10019 on a date (the “Closing Date”) to be determined
by the Company.

 

3.2     Deliverables. At the Closing, each Purchaser shall deliver, in
immediately available funds, the aggregate Purchase Price for the Notes being
purchased hereunder by such Purchaser by wire transfer to an account designated
by the Company, and the Company shall deliver to the applicable Purchaser one or
more Notes registered in the name of the Purchaser, or in such nominee name(s)
as designated by the Purchaser in writing, in the principal amounts as such
Purchaser shall have requested prior to the Closing, bearing an appropriate
legend referring to the fact that the Notes were sold in reliance upon an
exemption from registration under the Securities Act of 1933, as amended (the
“Securities Act”), and duly executed on behalf of the Company.

 

3.3     Conditions to Company’s Obligations to Close. The Company’s obligation
to complete the purchase and sale of the Notes and deliver such Notes to each
Purchaser at the Closing shall be subject to the following conditions, any one
or more of which may be waived by the Company: (a) receipt by the Company of
same-day funds of the aggregate Purchase Price of the Notes being purchased
hereunder; (b) the accuracy of the representations and warranties made by the
Purchasers as of the date of this Agreement; and (c) the fulfillment of those
undertakings of the Purchasers to be fulfilled prior to the Closing.

 

3.4     Conditions to Purchaser’s Obligations to Close. Each Purchaser’s
obligation to accept delivery of such Notes and to pay for the Notes shall be
subject to the following conditions: (a) each of the representations and
warranties of the Company made herein shall be accurate as of the date of this
Agreement; (b) receipt by the Purchaser of a certificate executed by the chief
executive officer and the chief financial or accounting officer of the Company,
dated as of the Closing Date, to the effect that the representations and
warranties of the Company set forth herein were true and correct as of the date
of this Agreement and that the Company has complied with all the agreements and
satisfied all the conditions herein on its part to be performed or satisfied on
or prior to such Closing Date; and (c) the fulfillment of those undertakings of
the Company to be fulfilled prior to the Closing. The Purchaser’s obligations
hereunder are expressly not conditioned on the purchase by any or all of the
other Purchasers of the Notes that they have agreed to purchase from the Company
pursuant to the Agreement.

 

SECTION 4.     Representations, Warranties and Covenants of the Company. The
Company hereby represents and warrants to, and covenants with, the Purchaser
that the representations, warranties and statements contained in this Section 4
are true and correct as of the date hereof.

 

4.1     Organization and Qualification. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of Delaware
and the Company is qualified to do business as a foreign corporation in each
jurisdiction in which qualification is required, except where failure to so
qualify would not have a Material Adverse Effect (as defined herein). The
Company has no subsidiaries and does not own any capital stock or other equity
securities in any other entity, except instruments or interests held by the
Company solely for investment.

 

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4.2     Reporting Company; Form S-1. The Company is not an “ineligible issuer”
(as defined in Rule 405 promulgated under the Securities Act) and is eligible to
register the Conversion Shares for resale by the Purchaser on a registration
statement on Form S-1 under the Securities Act (the “Registration Statement”).
The Company is subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), and has filed all reports required
thereby with the Securities and Exchange Commission (the “Commission”). To the
Company’s knowledge, there exist no facts or circumstances that reasonably could
be expected to prohibit or delay the preparation and filing of a Registration
Statement on Form S-1 that can be made available for the resale of the
Conversion Shares by the Purchaser.

 

4.3     Capitalization. As of the date hereof, the authorized, issued and
outstanding share capital of the Company is as set forth on Schedule 4.3 hereto.
All of the issued and outstanding shares of Common Stock have been duly
authorized and validly issued and are fully paid, nonassessable, and have been
issued in compliance with all corporate laws, and U.S. federal and U.S. state
securities laws and regulations. Except for Notes issuable under the Agreement,
and except as otherwise publicly disclosed, the Company does not have
outstanding any options to purchase, or any preemptive rights or other rights to
subscribe for or to purchase, any securities or obligations convertible into, or
any contracts or commitments to issue or sell, shares of its capital stock or
any such options, rights, or convertible securities.

 

4.4     Authorization and Description of the Securities. The Notes have been
duly authorized for issuance and sale to the Purchasers pursuant to this
Agreement, by means of the Board of Director resolutions, and when issued and
delivered by the Company pursuant to this Agreement against payment of the
consideration set forth herein, will be validly issued and fully paid and
non-assessable. Upon conversion in accordance with the Notes, the Conversion
Shares will be duly authorized, validly issued, fully paid and nonassessable and
free and clear of all Encumbrances (as defined below) with respect to the issue
thereof, with the holders being entitled to all rights accorded to a holder of
shares of Common Stock. The shares of Common Stock conform in all material
respects to the description set forth in its Exchange Act filings. No holder of
the Notes will be subject to personal liability by reason of being a holder and
the issuance of the Notes is not subject to the preemptive or other similar
rights on any security holder of the Company. No further approval or authority
of the stockholders or the Board of Directors of the Company will be required
for the issuance and sale of the Notes or the issuance of the Conversion Shares
to be sold by the Company as contemplated herein. For purposes hereof,
“Encumbrances” means pledges, liens, charges, security interests, mortgages,
restrictions and encumbrances, other than the restrictions on transfer under
state and/or federal securities laws.

 

4.5     Due Execution, Delivery and Performance of this Agreement. The Company
has full legal right, corporate power and authority to enter into this
Agreement, and perform the transactions contemplated by this Agreement. This
Agreement has been duly authorized, executed and delivered by the Company. This
Agreement constitutes a legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting the enforcement of creditors’ rights and the application of equitable
principles relating to the availability of remedies.

 

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4.6     No Defaults or Consents.

 

(a)     The execution, delivery and performance of this Agreement by the Company
and the consummation of the transactions contemplated hereby (including, without
limitation, the issuance and sale by the Company of the Notes) will not violate
any provision of the certificate of incorporation or bylaws of the Company, and
will not result in the creation of any Encumbrances upon any assets of the
Company pursuant to the terms or provisions of, will not give rise to a right to
terminate or accelerate the due date of any payment due under, will not conflict
with, result in the breach or violation of, or constitute, either by itself or
upon notice or the passage of time or both, a default under, or require a
consent or waiver (except for such consents or waivers which have already been
obtained and are in full force and effect) under, any agreement, mortgage, deed
of trust, lease, franchise, license, indenture, permit or other instrument to
which the Company is a party or by which the Company or its properties may be
bound or affected and in each case that would have a Material Adverse Effect (as
defined below) or, to the Company’s knowledge, any statute or any authorization,
judgment, decree, order, rule or regulation of any court or any regulatory body,
administrative agency or other governmental agency or body applicable to the
Company or any of its properties.

 

(b)     No filing with, or consent, approval, authorization, license,
registration, qualification, decree or other order of any court, regulatory
body, administrative agency or other governmental agency or body in the United
States or elsewhere is necessary or required for the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated by this Agreement other than such consents, approvals or
authorizations which have been obtained or will be obtained prior to the Closing
(as applicable), and except for compliance with U.S. federal, U.S. state
securities or “blue sky” laws, applicable to the offering of the Notes.

 

(c)     For the purposes of this Agreement the term “Material Adverse Effect”
shall mean a material adverse effect on the condition (financial or otherwise),
properties, business, prospects or results of operations of the Company except
any of the following, either alone or in combination, shall not be deemed a
Material Adverse Effect: (i) effects caused by changes or circumstances
affecting general market conditions in the U.S. economy or that are generally
applicable to the industry in which the Company operates, provided that such
effects do not adversely affect the Company in a disproportionate manner,
(ii) effects resulting from or relating to the announcement or disclosure of the
sale of the Shares or other transactions contemplated by this Agreement, or
(iii) effects caused by any event, occurrence or condition resulting from or
relating to the taking of any action in accordance with this Agreement.

 

4.7     Accountants. Burr Pilger Mayer, Inc., who has expressed its opinion with
respect to the financial statements contained in the Company’s Annual Report on
Form 10-K for the year ended March 31, 2017, are registered independent public
accountants as required by the Securities Act and the rules and regulations
promulgated thereunder (the “1933 Act Rules and Regulations”) and by the rules
of the Public Accounting Oversight Board.

 

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4.8     Contracts. The material contracts to which the Company is a party have
been filed by the Company in its Exchange Act filings and (a) all such contracts
have been duly and validly authorized, executed and delivered by the Company and
constitute the legal, valid and binding agreements of the Company, enforceable
by and against it in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws relating to enforcement of creditors’
rights generally, and general equitable principles relating to the availability
of remedies, and except as rights to indemnity or contribution may be limited by
federal or state securities laws and the public policy underlying such laws; (b)
all such contracts will continue to be legal, valid, binding, enforceable, and
in full force and effect on identical terms following the consummation of the
transactions contemplated hereby; (c) no party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default, or permit termination, modification, or acceleration of, any such
contract; and (d) no party has repudiated any provision of any such contract.

 

4.9     No Actions. Except as disclosed in the Company’s Exchange Act filings,
there are no legal or governmental actions, suits or proceedings pending or, to
the Company’s knowledge, threatened against the Company before or by any court,
regulatory body or administrative agency or any other governmental agency or
body, domestic, or foreign, which actions, suits or proceedings, individually or
in the aggregate, might reasonably be expected to have a Material Adverse
Effect; and no labor disturbance by the employees of the Company exists or, to
the Company’s knowledge, is imminent, that might reasonably be expected to have
a Material Adverse Effect. The Company is not a party to or subject to the
provisions of any injunction, judgment, decree or order of any court, regulatory
body, administrative agency or other governmental agency or body that might have
a Material Adverse Effect.

 

4.10     Compliance. The Company has not been advised, nor does it have any
reason to believe, that it is not conducting business in compliance with all
applicable laws, rules and regulations of the jurisdictions in which it is
conducting business, including, without limitation, all applicable local, state
and federal environmental laws and regulations, except where failure to be so in
compliance would not have a Material Adverse Effect.

 

4.11     Tax Returns. The Company has filed on a timely basis (giving effect to
extensions) all required federal, state and foreign income and franchise tax
returns and has paid or accrued all taxes shown as due thereon, and the Company
has no knowledge of a tax deficiency that has been or might be asserted or
threatened against it that could have a Material Adverse Effect. All tax
liabilities accrued through the date hereof have been adequately provided for on
the books of the Company.

 

4.12     Investment Company. The Company is not an “investment company” or an
“affiliated person” of, or “promoter” or “principal underwriter” for an
investment company, within the meaning of the Investment Company Act of 1940, as
amended, and the rules and regulations of the Commission promulgated thereunder.

 

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4.13     Offering Materials. None of the Company, its officers and directors has
distributed or will distribute prior to the Closing Date any offering material,
including any “free writing prospectus” (as defined in Rule 405 promulgated
under the Securities Act), in connection with the offering and sale of the
Notes.

 

4.14     Insurance. The Company maintains insurance underwritten by insurers of
recognized financial responsibility, of the types and in the amounts that the
Company reasonably believes is adequate for its business, including, but not
limited to, insurance covering all real and personal property owned or leased by
the Company against theft, damage, destruction, acts of vandalism and all other
risks customarily insured against, with such deductibles as are customary for
companies in the same or similar business, all of which insurance is in full
force and effect.

 

4.15     Additional Information.

 

(a)     The information contained in its Exchange Act filings, as of the dates
thereof, did not contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances in which they were made not
misleading.

 

(b)     Its Exchange Act filings and the documents incorporated by reference
therein or attached as exhibits thereto, at the time they became effective or
were filed or furnished with the Commission, as the case may be, complied in all
material respects with the requirements of the Exchange Act, as applicable, and
the rules and regulations of the Commission thereunder (the “1934 Act Rules and
Regulations” and, together with the 1933 Act Rule and Regulations, the “Rules
and Regulations”). In the past twelve (12) calendar months, the Company has
filed all documents required to be filed by it prior to the date hereof with the
Commission pursuant to the reporting requirements of the Exchange Act.

 

4.16     Price of Shares of Common Stock. The Company has not taken, and will
not take, directly or indirectly, any action designed to cause or result in, or
that has constituted or that would reasonably be expected to constitute, the
stabilization or manipulation of the price of the shares of Common Stock.

 

4.17     Use of Purchaser Name. Except as otherwise required by applicable law
or regulation the Company shall not use the Purchaser’s name or the name of any
of its affiliates in any advertisement, announcement, press release or other
similar public communication unless it has received the prior written consent of
the Purchaser for the specific use contemplated which consent shall not be
unreasonably withheld.

 

4.18     Financial Statements. The financial statements of the Company and the
related notes and schedules thereto included in its Exchange Act filings fairly
present the financial position, results of operations, stockholders’ equity and
cash flows of the Company at the dates and for the periods specified therein.
Such financial statements and the related notes and schedules thereto have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved (except as otherwise noted
therein) and all adjustments necessary for a fair presentation of results for
such periods have been made; provided, however, that the unaudited financial
statements are subject to normal year-end audit adjustments (which are not
expected to be material) and do not contain all footnotes required under
generally accepted accounting principles. The Company does not have any material
Liability (as defined below) (and there is no basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against it giving rise to any Liability), except for liabilities set
forth on the face of the balance sheet (rather than in any notes thereto) for
the fiscal year ended March 31, 2017. For purposes hereof, “Liability” means any
liability, whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due, including any liability for
taxes.

 

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4.19     Internal Accounting Controls. The Company maintains a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management’s general or
specific authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company has disclosure controls and procedures
(as defined in Rules 13a-14 and 15d-14 under the Exchange Act) that are designed
to ensure that material information relating to the Company is made known to the
Company’s principal executive officer and the Company’s principal financial
officer or persons performing similar functions. The Company is otherwise in
compliance in all material respects with all applicable provisions of the
Sarbanes-Oxley Act of 2002, as amended and the rules and regulations promulgated
thereunder.

 

SECTION 5.     Representations, Warranties and Covenants of the Purchaser. Each
of the Purchasers, severally and not jointly, represents and warrants to, and
covenants with, the Company that:

 

5.1     Investor Status. The Purchaser is an institutional “accredited investor”
within the meaning of Rule 501(a) of Regulation D promulgated under the
Securities Act.

 

5.2     Experience of the Purchaser. The Purchaser is knowledgeable,
sophisticated and experienced in financial and business matters, in making, and
is qualified to make, decisions with respect to investments in securities
representing an investment decision like that involved in the purchase of the
Notes, including investments in securities issued by the Company and comparable
entities, has the ability to bear the economic risks of an investment in the
Notes, has undertaken an independent analysis of the merits and the risks of an
investment in the Notes, based on the Purchaser’s own financial circumstances.
The Purchaser has had the opportunity to request, receive, review and consider
all information it deems relevant in making an informed decision to purchase the
Notes and to ask questions of, and receive answers from, the Company concerning
such information.

 

5.3     No Public Sale or Distribution. The Purchaser is acquiring the number of
Notes set forth on Schedule I, and upon conversion of the Notes will acquire the
Conversion Shares issuable upon conversion of the Notes, and for his, her or its
own account for investment only and with no present intention of distributing
any of such Securities or any arrangement or understanding with any other
persons regarding the distribution of such Securities. The Purchaser will not,
directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of
(or solicit any offers to buy, purchase or otherwise acquire or take a pledge
of) any of the Securities, nor will the Purchaser engage in any short sale that
results in a disposition of any of the Securities by the Purchaser, except in
compliance with the Securities Act and the Rules and Regulations and any
applicable state securities or “blue sky” laws.

 

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5.4     Information. The Purchaser has, in connection with its decision to
purchase the number of Notes set forth on Schedule I, relied solely upon the
Company’s Exchange Act filings and the representations and warranties of the
Company contained herein.

 

5.5     Reliance on Exemptions. The Purchaser understands that the Notes are
being offered and sold to it in reliance upon specific exemptions from the
registration requirements of the Securities Act, the Rules and Regulations and
state securities or “blue sky” laws and that the Company is relying upon the
truth and accuracy of, and the Purchaser’s compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Purchaser set
forth herein in order to determine the availability of such exemptions and the
eligibility of the Purchaser to acquire the Notes.

 

5.6     Confidentiality. The Purchaser understands that the existence and nature
of all conversations and presentations, if any, regarding the Company and this
offering must be kept strictly confidential. The Purchaser understands that the
federal securities laws impose restrictions on trading based on information
regarding this offering. In addition, the Purchaser hereby acknowledges that
unauthorized disclosure of information regarding this offering may result in a
violation of U.S. federal securities laws. This obligation will terminate upon
the filing by the Company of a press release or press releases announcing the
offering. The foregoing agreements shall not apply to any information that is or
becomes publicly available through no fault of the Purchaser, or that the
Purchaser is legally required to disclose.

 

5.7     Investment Decision. The Purchaser understands that nothing in the
Agreement or any other materials presented to the Purchaser in connection with
the purchase and sale of the Notes constitutes legal, tax or investment advice.
The Purchaser has consulted such legal, tax and investment advisors as it, in
its sole discretion, has deemed necessary or appropriate in connection with its
purchase of the Notes.

 

5.8     Risk of Loss. The Purchaser understands that its investment in the Notes
involves a significant degree of risk, including a risk of total loss of the
Purchaser’s investment, and the Purchaser has full cognizance of and understands
all of the risk factors related to the Purchaser’s purchase of the Notes. The
Purchaser understands that the market price of the shares of Common Stock has
been volatile and that no representation is being made as to the future value of
the shares of Common Stock.

 

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5.9     Legend. The Purchaser understands that, until such time as the
Registration Statement has been declared effective or the Securities may be sold
pursuant to Rule 144 under the Securities Act without any restriction as to the
number of securities as of a particular date that can then be immediately sold,
the Securities will bear a restrictive legend in substantially the following
form:

 

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE
STATE SECURITIES LAWS, OR (B) AN OPINION OF COUNSEL, IN A FORM REASONABLY
ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT AND
APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER
SAID ACT. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS
NOTE, INCLUDING SECTIONS 8(e) AND 10(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED
BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF
MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION
8(e) OF THIS NOTE.”

 

5.10     Other Legends. The Purchaser also understands that the Securities will
bear any other legends required by applicable state securities or “Blue Sky”
laws.

 

5.11     Stop Transfer. The certificates representing the Securities will be
subject to a stop transfer order with the Company’s transfer agent that
restricts the transfer of such shares except upon receipt by the transfer agent
of a written confirmation from the Purchaser to the effect that the Purchaser
has satisfied its prospectus delivery requirements.

 

5.12     Residency. The Purchaser’s principal executive offices are in the
jurisdiction set forth immediately below the Purchaser’s name on Schedule I.

 

5.13     Organization; Validity; Enforcement. The Purchaser further represents
and warrants to, and covenants with, the Company that (i) the Purchaser has full
right, power, authority and capacity to enter into this Agreement and to
consummate the transactions contemplated hereby and has taken all necessary
action to authorize the execution, delivery and performance of this Agreement,
(ii) the making and performance of this Agreement by the Purchaser and the
consummation of the transactions herein contemplated will not violate any
provision of the organizational documents of the Purchaser or conflict with,
result in the breach or violation of, or constitute, either by itself or upon
notice or the passage of time or both, a default under any material agreement,
mortgage, deed of trust, lease, franchise, license, indenture, permit or other
instrument to which the Purchaser is a party, or any statute or any
authorization, judgment, decree, order, rule or regulation of any court or any
regulatory body, administrative agency or other governmental agency or body
applicable to the Purchaser, and (iii)  no consent, approval, authorization or
other order of any court, regulatory body, administrative agency or other
governmental agency or body is required on the part of the Purchaser for the
execution and delivery of this Agreement or the consummation of the transactions
contemplated by this Agreement, and (iv) upon the execution and delivery of this
Agreement, this Agreement shall constitute a legal, valid and binding obligation
of the Purchaser, enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
the enforcement of creditor’s rights and the application of equitable principles
relating to the availability of remedies.

 

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SECTION 6.     Register; Transfer Agent Instructions. The Company shall maintain
at its principal executive offices (or such other office or agency of the
Company as it may designate by notice to each holder of Notes), a register for
the Notes, in which the Company shall record the name and address of the person
in whose name the Notes have been issued (including the name and address of each
transferee) and the principal amount of Notes held by such person. The Company
shall keep the register open and available during business hours for inspection
by the Purchaser or its legal representatives upon prior written notice.

 

SECTION 7.     Survival. Notwithstanding any investigation made by any party to
this Agreement, all covenants and agreements made by the Company and the
Purchaser herein and in the Notes delivered pursuant hereto shall survive the
execution of this Agreement, the delivery to the Purchaser of the Notes being
purchased and the payment therefor. All representations and warranties made by
the Company and the Purchaser herein and in the certificates delivered pursuant
hereto shall survive the execution of this Agreement, the delivery to the
Purchaser of the Notes being purchased and the payment therefor.

 

SECTION 8.     Independent Nature of Purchasers’ Obligations and Rights. The
obligations of each of the Purchasers under this Agreement are several and not
joint with the obligations of any other Purchaser and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under the Agreement. The decision of each Purchaser to purchase the
Notes pursuant to the Agreement has been made by such Purchaser independently of
any other Purchaser. Nothing contained in the Agreement, and no action taken by
any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as
a partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert or as
a group with respect to such obligations or the transactions contemplated by the
Agreement. Each Purchaser acknowledges that no other Purchaser has acted as
agent for such Purchaser in connection with making its investment hereunder and
that no Purchaser will be acting as agent of such Purchaser in connection with
monitoring its investment in the Notes or enforcing its rights under this
Agreement. Each Purchaser shall be entitled to independently protect and enforce
its rights, including without limitation the rights arising out of this
Agreement, and it shall not be necessary for any other Purchaser to be joined as
an additional party in any proceeding for such purpose.

 

SECTION 9.     Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be mailed by first-class registered or
certified airmail, e-mail, confirmed facsimile or nationally recognized
overnight express courier postage prepaid, and shall be deemed given when so
mailed and shall be as addressed as follows:

 

(a)     if to the Company, to:

 

Salon Media Group, Inc.

870 Market Street

San Francisco, California 94102

Attention: Jordan Hoffner, Chief Executive Officer

E-mail: Jordan.Hoffner@salon.com

 

or to such other person at such other place as the Company shall designate to
the Purchaser in writing; and

 

10

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(b)     if to the Purchaser, at its address as set forth on Schedule I, or at
such other address or addresses as may have been furnished to the Company in
writing.

 

SECTION 10.     Changes. This Agreement may not be modified or amended except
pursuant to an instrument in writing signed by the Company and the Purchaser.

 

SECTION 11.     Headings. The headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be part of this Agreement.

 

SECTION 12.     Severability. In case any provision contained in this Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.

 

SECTION 13.     Governing Law; Venue. This Agreement is to be construed in
accordance with and governed by the federal law of the United States of America
and the internal laws of the State of New York without giving effect to any
choice of law rule that would cause the application of the laws of any
jurisdiction other than the internal laws of the State of New York to the rights
and duties of the parties. Each of the Company and the Purchaser submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York State court sitting in New York City
for purposes of all legal proceedings arising out of or relating to this
Agreement and the transactions contemplated hereby. Each of the Company and the
Purchaser irrevocably waives, to the fullest extent permitted by law, any
objection that it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.

 

SECTION 14.     Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute an original, but all of which, when taken
together, shall constitute but one instrument, and shall become effective when
one or more counterparts have been signed by each party hereto and delivered to
the other parties. Facsimile signatures shall be deemed original signatures.

 

SECTION 15.     Entire Agreement. This Agreement and the instruments referenced
herein contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor the Purchaser makes any representation,
warranty, covenant or undertaking with respect to such matters. Each party
expressly represents and warrants that it is not relying on any oral or written
representations, warranties, covenants or agreements outside of this Agreement.

 

11

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SECTION 16.     Fees and Expenses. Except as set forth herein, each of the
Company and the Purchaser shall pay its respective fees and expenses, if any,
related to the transactions contemplated by this Agreement.

 

SECTION 17.     Parties. This Agreement is made solely for the benefit of and is
binding upon the Purchaser and the Company. No other person shall acquire or
have any right under or by virtue of this Agreement. The term “successor and
assigns” shall not include any subsequent purchaser, as such purchaser, of the
Securities sold to the Purchaser pursuant to this Agreement.

 

SECTION 18.     Further Assurances. Each party agrees to cooperate fully with
the other parties and to execute such further instruments, documents and
agreements and to give such further written assurance as may be reasonably
requested by any other party to evidence and reflect the transactions described
herein and contemplated hereby and to carry into effect the intents and purposes
of this Agreement.

 

SECTION 19.     Construction. (a) For purposes of this Agreement, whenever the
context requires: the singular number shall include the plural, and vice versa;
the masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include the masculine and feminine genders.

 

(b)     The parties hereto agree that any rule of construction to the effect
that ambiguities are to be resolved against the drafting party shall not be
applied in the construction or interpretation of this Agreement.

 

(c)     As used in this Agreement, the words “include” and “including” and
variations thereof, shall not be deemed to be terms of limitation, but rather
shall be deemed to be followed by the words “without limitation”.

 

[Remainder of Page Left Intentionally Blank]

 

12

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives as of the day and year first above
written.

 

 

 

SALON MEDIA GROUP, INC., as the Company,

         

By:     _________________________________

Name:Elizabeth Hambrecht
Title:Chief Financial Officer

 

 

[signatures follow]

 

 

NOTE PURCHASE AGREEMENT
SALON MEDIA GROUP, INC.

--------------------------------------------------------------------------------

 

 

 

[NAME], as a Purchaser,

         

By:     _________________________________

Name:
Title:

              Address:

 

 

NOTE PURCHASE AGREEMENT
SALON MEDIA GROUP, INC.

--------------------------------------------------------------------------------

 

 

Schedule I

 

Purchasers

 

Purchaser

Aggregate Principal Amount of Notes

Address and Facsimile

 

I-1

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Schedule 4.3

 

Capitalization

 

Please refer to the Company’s reports filed with the Commission under the
Exchange Act.

 

A-1

--------------------------------------------------------------------------------

 

 

EXHIBIT A

 

Form of Note

 

 

A-1