Re:
Proposed Acquisition of Business and Assets of Tralliance Corporation
(“Company”)
Gentlemen:
The
purpose of this letter (this “Letter”) is to set out certain non-binding
understandings and certain binding agreements among The Registry Management
Company, LLC, a Delaware limited liability company, or one of its affiliates
or
related entities (“Buyer”), Tralliance Corporation, a New York corporation (the
“Company"), and theglobe.com, inc., a Delaware corporation and the sole
shareholder of the Company (“Seller”), with respect to a potential acquisition
(the “Proposed Acquisition”) of substantially all of the business and net assets
of the Company (or a successor created to facilitate such Proposed Acquisition),
together with the acquisition of approximately 269 million shares of the
Seller’s common stock (the “Shares”), by the Buyer or certain of its affiliates
and related parties.
1. The
parties hereto shall promptly proceed with the negotiation of a definitive
purchase agreement with respect to the Proposed Acquisition (together with
all
related agreements, documents, and instruments, a “Definitive Agreement”),
containing, among other things, the terms and conditions set forth in the
outline of terms attached to this Letter as Exhibit A.
2. Following
execution of this Letter by all of the parties, the Seller and the Company
shall
afford Buyer and its officers, employees, and agents (collectively,
“Representatives”) full and free access to the properties, books, and records
(including, without limitation, financial, operating, and other data) of the
Company, as well as to the Company’s independent accountants, at reasonable
times in order to permit Buyer to make such investigation of the business,
properties, and operations of the Company as Buyer may deem appropriate.
Information disclosed to Buyer and its Representatives pursuant to this Letter
shall be subject to, and handled, on a confidential basis.
3. Each
of
the Seller and the Company represents and warrants to Buyer that (a) neither
of
them has entered into any agreement pursuant to which any person or entity
has
obtained the right to acquire any portion of the securities or assets of the
Company; (b) the execution, delivery, and performance of this Letter by the
Seller and the Company does not and will not breach, violate, conflict with,
or
permit the cancellation of, any agreement to which the Seller or the Company
is
a party or by which the Company or the Company’s properties are bound; and (c)
that Seller is the sole stockholder and holder of any equity interest (including
any rights to receive any equity interest) in the Company.
4. Buyer
shall be responsible for its fees, costs, and expenses incurred in connection
with the Proposed Acquisition, and the Seller shall be responsible for the
fees,
costs, and expenses incurred by the Seller and the Company in connection with
the Proposed Acquisition, in each case including, but not limited to,
commissions or fees of any broker or finder referred by either of them and
any
attorneys’ or accountants’ fees incurred by either of them in connection with
the Proposed Acquisition.
5. This
Letter may be terminated at any time by Buyer, on the one hand, or the Company
or Seller, on the other hand, in the event that a Definitive Agreement has
not
been executed by all parties by February 20, 2008. The parties agree to use
their respective good faith efforts to negotiate and enter into a Definitive
Agreement by such date.
6. This
Letter may be executed in two or more counterparts, each of which shall be
deemed to be an original, but all of which taken together shall constitute
one
and the same document. This Letter shall be effective upon the exchange by
facsimile or email of executed signature pages. This Letter shall be governed
by
and construed in accordance with the laws of the State of Florida (regardless
of
the laws that might otherwise govern under applicable principles of conflicts
of
law).
Please
be
advised that other than paragraphs 2 through 6 above (the “Binding Paragraphs”)
which are intended to be binding and enforceable, this Letter is not intended
to
bind Buyer, the Company, or the Seller in any way. Rather, this Letter is
written solely as a summary of terms upon which Buyer would consider the
Proposed Acquisition and is intended to serve merely as a guide to the
preparation of a Definitive Agreement satisfactory to the parties to this
Letter. It is expressly understood and agreed that (a) Exhibit A to this Letter
is not considered to be part of the Binding Paragraphs; (b) no liability or
binding obligation is intended to be created between or among any of the parties
to this Letter, except with respect to the Binding Paragraphs; and (c) other
than with respect to the Binding Paragraphs, any legal rights and obligations
between or among any of the parties to this Letter will come into existence
only
upon the parties’ execution and delivery of a written Definitive Agreement, and
then only in accordance with the terms and conditions of such Definitive
Agreement.
The
Binding Paragraphs shall survive termination of this Letter and shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. The rights and obligations of any party to this Letter
under the Binding Paragraphs may not be assigned by any party without the prior
written consent of the other parties, except that Buyer may make any such
assignment to an affiliate of Buyer without the prior consent of the other
parties.
Please
indicate your agreement to the terms of this Letter by executing the enclosed
copy of this Letter.
Tralliance
Corporation (referred to as the
“Company”).
Seller:
theglobe.com,
inc.
Buyer:
The
Registry Management Company, LLC, or one of its affiliates. The Buyer
is
controlled by Michael Egan and each of Edward Cespedes and Robin
Segaul
Lebowitz, each a director of the Seller, own a minority
interest.
Structure:
The
Proposed Acquisition of the Company by the Buyer, together with the
purchase and sale of approximately 269 million shares of the Seller’s
common stock, $.001 par value (the “Shares”), to the Buyer, shall be
accomplished in a form to be determined in light of applicable tax,
legal,
and financial considerations. Most likely, the form will involve
the
acquisition of all of substantially all of the business and net assets
of
the company via an asset purchase transaction, together with the
purchase
of the Shares, pursuant to a Stock Purchase Agreement. After giving
affect
to the Shares issued in the Proposed Acquisition, the Buyer, Michael
Egan
and his affiliates or related parties will own approximately 76%
of the
Company on an outstanding common stock basis.
Consideration:
In
consideration for the purchase of substantially all of the business
and
net assets of the company and the Shares, the Buyer shall, or shall
cause
its affiliates and other related parties to, (a) exchange and surrender
to
the Seller all of their right, title and interest to the convertible
promissory notes described on Schedule A attached hereto, together
with
all accrued and unpaid interest thereon, as well as outstanding rent
and
miscellaneous fees due and unpaid to the Buyer or Mr. Egan and his
affiliates through the date of closing of the Proposed Transaction
(equal
to approximately $6.0 million in the aggregate as of December 31,2007)
and (b) pay an earn-out to the Seller equal to 10% of the Buyer’s net
revenue derived from “.travel” names registered by the Company through May5, 2015, as more particularly described below. The net present value
of
the minimum guaranteed earn-out payments is estimated to be approximately
$1.3 million, bringing the total consideration to approximately $7.3
million.
Revenue
Sharing:
As
indicated above, the Definitive Agreement will include a provision
whereby
the Buyer will pay 10% of its net revenue from the registration
of
“.travel names by the Company through May 5, 2015. Buyer shall further
guaranty that such payments will be no less that $300,000 in the
first
year following the closing of the transaction and increasing by
$25,000 in
each subsequent year.
Due
Diligence:
Buyer
intends to undertake full legal and financial due diligence review
of the
Company. This will include, without limitation, a review of recent
financial results. The results of Buyer’s due diligence shall be
satisfactory to Buyer in its sole
discretion.
Shareholder
Approval,
Fairness
Opinion
and
other:
The Proposed Acquisition will be subject
to approval by the Seller’s shareholders at a duly called meeting of the
Seller’s shareholders. In addition, the parties obligations to conclude
the Proposed Acquisition will be subject to receipt by the Seller of
an
opinion of an independent valuation expert, that the Proposed Acquisition
is “fair” to the shareholders of the Seller from a financial point of
view. The Proposed Acquisition will also be subject to the accuracy
and/or
satisfaction of the representations, warranties, covenants, and conditions
included in a Definitive Agreement. The Definitive Agreement will include
customary representations, warranties, covenants, indemnities and
conditions, as well as a non-competition agreement, applicable to the
Seller.
Schedule
A
Outstanding
Principal E&C Capital Partners, LLP Convertible Notes
$
1,700,000
Outstanding
Principal E&C Capital Partners II, LLP Convertible
Notes
1,700,000
Outstanding
Principal Dancing Bear, Inc Convertible Notes
