EXHIBIT 10.1
NOTE PURCHASE AGREEMENT
THIS NOTE
PURCHASE AGREEMENT (the "Agreement") is made as of the 22nd day
of April, 2005, by and between
theglobe.com, inc., a Delaware corporation (the
"Company"), and the each purchaser now or
hereinafter (in accordance with
Section 2 below) listed on Schedule A
hereto (individually, an "Investor" and
collectively, the "Investors").
WHEREAS,
the initial Investors set forth on Schedule A are willing to
lend
the Company the aggregate sum of One
Million Five Hundred Thousand Dollars
($1,500,000) pursuant to the terms of this
Agreement and a promissory note (a
"Note") convertible into shares of the
Company's common stock, $.001 par value
(the "Common Stock"), all as more
particularly described in the form of Note
attached hereto as Exhibit A; and
WHEREAS,
as more particularly set forth on Schedule A hereof, the
Company
has also granted certain parties, for a
period of ninety (90) days from the date
hereof, the optional right to purchase
(each an "Option") additional Notes
pursuant to this Agreement such that the
aggregate amount of Notes issued
hereunder may reach the aggregate sum of
Four Million Dollars ($4,000,000) (the
"Offering Limit");
WHEREAS,
the parties have agreed that the obligation to repay the Notes
shall be secured by a pledge of
substantially all of the assets of the Company
and its subsidiaries pursuant to the terms
of a Security Agreement in the form
attached hereto as Exhibit B; and
WHEREAS,
as a material inducement to the Investors to purchase the Notes
and in recognition of the substantial
benefit which the Company's subsidiaries
will receive from the proceeds of the
Notes, the subsidiaries have agreed to
guaranty the Notes pursuant to the terms of
a Guaranty in the form attached
hereto as Exhibit C;
NOW,
THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby
acknowledged, and in consideration of the
premises and the mutual agreements,
representations and warranties, provisions
and covenants contained herein, the parties
hereto, intending to be legally
bound hereby, agree as follows:
1.
Purchase and Sale of Notes; Option. On the applicable Closing Date
(as
hereinafter defined), subject to the terms
and conditions of this Agreement,
each Investor hereby agrees to purchase and
the Company hereby agrees to sell
and issue a Note in the principal amount
set forth opposite such Investor's name
on Schedule A hereto. In addition, the
Company does hereby grant an Option to
the Investors (or such other parties who
are identified on Schedule A and whom
shall upon any exercise of the Option,
shall thereafter be deemed "Investors"
for all purposes of this Agreement) to
acquire in accordance with Section 2
hereof that additional principal amount of
the Notes as is set forth opposite
such Investors (or other parties') name,
all as more particularly described on
Schedule A.
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2. The
Closing(s). Subject to the conditions set forth below, the
initial
purchase and sale of the Notes shall take
place at the offices of Proskauer Rose
LLP, 2255 Glades Road, Boca Raton, Florida,
33414, on or before April 22, 2005,
or at such other time and place as the
Company and the Investors mutually agree
(the "Closing" and the "Closing Date").
Additional closings may be held with
respect to additional purchases and sales
of the Notes up to the Offering Limit
upon exercise of any Option, which closings
shall be held as soon as practicable
after any exercise of an Option (each a
"Closing"). Any party holding an Option
shall exercise such Option, if at all, by
delivering to the Company on or before
the 90th day from the date hereof a notice
of exercise setting forth the amount
of Notes to be acquired. The Investors for
any such additional Closings shall
execute and deliver a joinder to this
Agreement in a form satisfactory to the
Company. At the Closing, the Company shall
deliver to each Investor: (i) an
executed counterpart of this Agreement, the
Security Agreement and Guaranty; and
(ii) such Investor's original Note in the
amount set forth opposite such
Investor's name on Schedule A. At the
Closing each Investor shall fund his or
her respective Note by cashier's check or
wire transfer of immediately available
funds (to an account designated by the
Company).
3. Closing
Conditions. The obligation of each Investor to purchase and
fund its Note at the applicable Closing is
subject to the fulfillment, to the
Investor's reasonable satisfaction, prior
to or at the Closing in question, of
each of the following conditions:
3.1 Representations and Warranties. The representations and
warranties of the Company contained in this
Agreement shall be true and correct
in all material respects on the date hereof
and on and as of the applicable
Closing Date as if made on and as of such
date.
3.2 Notes. At the Closing, the Company shall have tendered to
the
Investor the appropriate Note.
3.3 No Actions. No action, proceeding, investigation, regulation
or
legislation shall have been instituted,
threatened or proposed before any court,
governmental agency or authority or
legislative body to enjoin, restrain,
prohibit, or obtain substantial damages in
respect of, this Agreement or the
consummation of the transactions
contemplated by this Agreement.
3.4 Proceedings and Documents. All proceedings in connection
with
the transactions contemplated hereby and
all documents and instruments incident
to such transactions shall be satisfactory
in substance and form to the
Investor, and the Company shall have
received all such counterpart originals or
certified or other copies of such documents
as the Investors may reasonably
request.
4.
Representations and Warranties of the Company. The Company
hereby
represents and warrants to Investor
that:
4.1 Organization, Good Standing and Qualification. The Company is
a
corporation duly organized, validly
existing and in good standing under the laws
of the State of Delaware. The Company is
duly qualified to transact business and
is in good standing in each jurisdiction in
which the failure to so qualify
would have a material adverse effect on its
business or properties.
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4.2 Capitalization and Voting Rights. The authorized capital of
the
Company as of April 11, 2005 consists
of:
(a) Preferred Stock. 3,000,000 shares of Preferred Stock, par
value $0.001 per share (the "Preferred
Stock"), of which there are no shares
presently issued and outstanding.
(b) Common Stock. 500,000,000 shares of common stock, par
value $0.001 per share ("Common Stock"), of
which 175,798,747 shares were issued
and outstanding.
4.3 Authorization. All corporate action on the part of the
Company,
its officers, directors and stockholders
necessary for the authorization,
execution and delivery of this Agreement
and the Security Agreement and the
performance of all obligations of the
Company hereunder and thereunder, and the
authorization (or reservation for
issuance), sale and issuance of the Notes and
the Common Stock into which the Notes are
convertible or exercisable (the
"Underlying Securities"), have been taken
on or prior to the date hereof.
4.4 Valid Issuance of the Underlying Securities. The Underlying
Securities when issued and delivered in
accordance with the terms of this
Agreement and the Notes for the
consideration expressed herein and therein, will
be duly and validly issued, fully paid and
nonassessable and will be free of
restrictions on transfer, other than
restrictions on transfer under this
Agreement and under applicable state and
federal securities laws.
4.5 Offering. Subject to the truth and accuracy of each
Investor's
representations set forth in Section 5 of
this Agreement, the offer and issuance
of the Notes, together with the Underlying
Securities, as contemplated by this
Agreement are exempt from the registration
requirements of the Securities Act of
1933, as amended (the "1933 Act") and the
qualification or registration
requirements of state securities laws or
other applicable blue sky laws. Neither
the Company nor any authorized agent acting
on its behalf will take any action
hereafter that would cause the loss of such
exemptions.
4.6 Public Reports. The Company is current in its filing
obligations
under the Securities Act of 1934, as
amended (the "1934 Act"), including without
limitation as to its filings of Annual
Reports on Form 10-K (or 10-KSB, as
applicable) and Quarterly Reports on Form
10-Q (or 10-QSB, as
applicable)(collectively, the "Public
Reports"). The Public Reports do not
contain any untrue statement of a material
fact or omit to state any fact
necessary to make any statement therein not
misleading. The financial statements
included within the Public Reports for the
fiscal year ended December 31, 2003,
and for the fiscal year ended December 31,
2004 (the "Financial Statements"),
have been prepared in accordance with
generally accepted accounting principles
("GAAP") applied on a consistent basis
throughout the periods indicated. The
Financial Statements fairly present, in all
material respects, the financial
condition and operating results of the
Company as of the dates, and for the
periods, indicated therein.
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4.7 Compliance With Laws. Neither the Company nor any subsidiary
has
violated any law or any governmental
regulation or requirement which violation
has had or would reasonably be expected to
have a material adverse effect on its
business or prospects, and neither the
Company nor any subsidiary has received
written notice of any such violation.
4.8 Violations. The consummation of the transactions contemplated
by
this Agreement and all other documents and
instruments required to be delivered
in connection herewith and therewith,
including without limitation, the Security
Agreement and Notes, will not result in or
constitute any of the following: (a)
a violation of any provision of the
certificate of incorporation, bylaws or
other governing documents of the Company;
(b) a violation of any provisions of
any applicable law or of any writ or decree
of any court or governmental
instrumentality; (c) a default or an event
that, with notice or lapse of time or
both, would be a default, breach, or
violation of a lease, license, promissory
note, conditional sales contract,
commitment, indenture, mortgage, deed of
trust, or other agreement, instrument, or
arrangement to which the Company is a
party or by which the Company or its
property is bound; (d) an event that would
permit any party to terminate any agreement
or to accelerate the maturity of any
indebtedness or other obligation of the
Company; or (e) the creation or
imposition of any lien, pledge, option,
security agreement, equity, claim,
charge, encumbrance or other restriction or
limitation on the capital stock or
on any of the properties or assets of the
Company.
4.9 Consents; Waivers. No consent, waiver, approval or authority
of
any nature, or other formal action, by any
person, firm or corporation, or any
agency, bureau or department of any
government or any subdivision thereof, not
already obtained, is required in connection
with the execution and delivery of
this Agreement by the Company or the
consummation by the Company of the
transactions provided for herein and
therein.
5.
Representations and Warranties of the Investors. Each Investor
hereby
represents, warrants and covenants,
severally and not jointly, that:
5.1 Authorization. Investor has full power and authority to
enter
into this Agreement, and such agreement
constitutes the valid and legally
binding obligation of Investor, enforceable
in accordance with its terms.
5.2 Purchase Entirely for Own Account. This Agreement is made
with
Investor in reliance upon Investor's
representation to the Company, which by
Investor's execution of this Agreement,
Investor hereby confirms, that the
Notes, Option and Underlying Securities to
be received by Investor will be
acquired for investment for Investor's own
account, not as a nominee or agent,
and not with a view to the resale or
distribution of any part thereof, and that
Investor has no present intention of
selling, granting any participation in or
otherwise distributing the same. By
executing this Agreement, Investor further
represents that Investor does not have any
contract, undertaking, agreement or
arrangement with any person to sell,
transfer or grant participations to such
person or to any third person, with respect
to any of the Notes, Option or
Underlying Securities.
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5.3
Disclosure of Information. Investor believes it has received
all
the information it considers necessary or
appropriate for deciding whether to
purchase the Notes. Investor further
represents that he has had an opportunity
to ask questions and receive answers from
the Company regarding the terms and
conditions of the offering of the Notes and
the business, properties, prospects
and financial condition of the Company. The
foregoing, however, does not limit
or modify the representations and
warranties of the Company in Section 4 of this
Agreement or the right of Investor to rely
thereon.
5.4 Investment Experience. Investor can bear the economic risk
of
its investment, and has such knowledge and
experience in financial or business
matters that it is capable of evaluating
the merits and risks of the investment
in the Notes and Underlying Securities.
5.5 Accredited Investor. Investor is an "accredited investor"
within
the meaning of the Securities and Exchange
Commission ("SEC") Rule 501 of
Regulation D, as presently in effect; by
virtue of falling within one or more of
the following: (a) a natural person whose
individual net worth (or joint net
worth with his spouse) at the time of
purchase exceeds $1,000,000; or (b) a
natural person who had individual income in
excess of $200,000 or joint income
with his spouse in excess of $300,000 in
each of the two most recent years and
reasonably expects to have individual
income in excess of $200,000 or joint
income with his spouse in excess of
$300,000 in the current year; (c) an
executive officer or director of the
Company; or (d) an entity in which all of
the equity owners thereof are natural
persons whom are "accredited" by virtue of
falling within one or more of the foregoing
categories.
5.6 Restricted Securities. Investor understands that the Notes,
Option and Underlying Securities it is
purchasing are characterized as
"restricted securities" under the federal
securities laws inasmuch as they are
being acquired from the Company in a
transaction not involving a public offering
and that under such laws and applicable
regulations such Notes, Option and
Underlying Securities may be resold without
registration under the 1933 Act only
in certain limited circumstances. In the
absence of an effective registration
statement covering the Notes or the
Underlying Securities, as applicable, or an
available exemption from registration under
the 1933 Act, the Notes and
Underlying Securities must be held
indefinitely. Investor represents that it is
familiar with SEC Rule 144, as presently in
effect, and understands the resale
limitations imposed thereby and by the 1933
Act, including without limitation
the Rule 144 condition that current
information about the Company be available
to the public.
5.7 Further Limitations on Disposition. Without in any way
limiting
the representations set forth above,
Investor shall not make any disposition of
all or any portion of the Notes, Option or
Underlying Securities unless and
until the transferee has agreed in writing
for the benefit of the Company to be
bound by this Section 5, and:
(a) there is then in effect a registration statement under the
1933 Act covering such proposed disposition
and such disposition is made in
accordance with such registration
statement; or
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(b) Investor shall have notified the Company of the proposed
disposition and shall have furnished the
Company with a detailed statement of
the circumstances surrounding the proposed
disposition, and if requested by the
Company, the Investor shall have furnished
the Company with an opinion of
counsel, reasonably satisfactory to the
Company, that such disposition will not
require registration of the Note, Option or
Underlying Securities, as
applicable, under the 1933 Act or any
applicable state securities laws.
5.8 Legends. It is understood that the certificates evidencing
the
Notes and Underlying Securities may bear
one or all of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933, as amended. They
may not be sold, offered for sale,
pledged or hypothecated in the absence of a
registration statement in effect
with respect to the securities under such
Act or an opinion of counsel
satisfactory to the Company that such
registration is not required."
(b) Any legend required by state securities laws.
5.9 Tax Advisors. Investor has reviewed with Investor's own tax
advisors the federal, state and local tax
consequences of this investment, where
applicable, and the transactions
contemplated by this Agreement. Investor is
relying solely on such advisors and not on
any statements or representations of
the Company (except the representations and
statements of the Company set forth
in this Agreement) or any of its agents and
understands that Investor (and not
the Company) shall be responsible for
Investor's own tax liability that may
arise as a result of this investment or the
transactions contemplated by this
Agreement, except where such liability
arises as a result of a failure of a
representation of the Company set forth in
this Agreement to be true or a breach
by the Company of a covenant of the Company
set forth in this Agreement.
5.10 Investor Counsel. Investor acknowledges that it has had
the
opportunity to review this Agreement, the
exhibits and the schedules attached
hereto and the transactions contemplated by
this Agreement with Investor's own
legal counsel. Investor is relying solely
on its legal counsel and not on any
statements or representations of the
Company or any of the Company's agents for
legal advice with respect to this
investment or the transactions contemplated by
this Agreement.
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5.11 Florida Rescission Right. Investor, if a Florida resident or
a
Florida entity, acknowledges that he, she
or it may at any time within three (3)
days after payment to the Company of the
applicable purchase price for a Note
notify the Company, pursuant to the
provisions of Section 7.4 herein, of the
Investor's intent to cancel his or her
purchase. In such event, such Investor's
investment shall be canceled and of no
further force or effect (and any Option
null and void), Investor shall return any
Note issued to such Investor and the
Company shall promptly cause to be refunded
to the Investor all consideration
paid by the Investor for the Notes in
connection herewith, without interest and
without deduction.
5.12 Residency. Investor is a resident of the state as set
forth
below such Investor's signature on the
signature page hereof or any applicable
Joinder to this Agreement.
6.
Registration Rights.
6.1 Demand Registration; Limitation. At any time after April
17,
2006, the holders (the "Holders") of a
majority of the shares of Common Stock
issued or issuable upon conversion of the
Notes shall be entitled to deliver
written notice to the Company demanding the
registration of all Registerable
Securities (as hereinafter defined) or such
lesser numbe
