EXHIBIT 10.38
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
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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 a
