Exhibit 10.11
WORLDWIDE DATA, INC.
36 Toronto Street
Suite 250
Toronto, Ontario, Canada M5C2C5
PURCHASE AGREEMENT made as of this 27th day of February, 1998,
between Woldwide Data, Inc. (the "Company"), a Delaware corporation, and the
purchaser named on the signature page hereto (the "Purchaser").
WHEREAS, the Company is engaged in the business of providing
Internet-based services, including internet access services and the creation of
intranets for corporations, and the Company is currently developing an on line
trading service, a service which will enables users to send faxes via the
Internet, and a service which will allow users to make voice calls via the
Internet (the "Business");
WHEREAS, in order to finance the marketing and further development
of the Business, the Company wishes to issue and sell to the Purchasers, and the
Purchasers wish to purchase from the Company, on the Closing Date (as herein
defined), (i) an aggregate of up to 20,000 shares of the Company's common stock
(the "Shares"), up to 440,000 Class A stock purchase warrants (the "Class A
Warrants") and up to 900,000 Class B stock purchase warrants (the "Class B
Warrants", together with the Class A Warrants, the "Warrants"), all on the
terms and subject to the conditions hereinafter set forth; and
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, the parties hereby agree as follows:
1. ISSUANCE AND SALE OF THE SHARES AND WARRANTS; REPRESENTATIONS BY PURCHASER
1.1 Subject to the terms and conditions set forth herein, on the Closing
Date, the Company shall issue and the Purchaser hereby agrees to purchase from
the Company, such number of the Company's Units as is set forth upon the
signature page hereof (the "Units") at a purchase price of five dollars ($5.00)
per Unit and the Company agrees to sell such Units to the Purchaser for said
price. Each Unit will consist of one share of the Company's common stock, par
value $.001 (the "Common Stock"), twenty-two (22) Class A Warrants,
substantially in the form attached hereto as Exhibit A, each to purchase a share
of the Company's Common Stock on or before thirty-one (31) days after the
Closing Date, at an exercise price of $1.50 per share (the "Class A Purchase
Price") and forty-five (45) Class B Warrants, substantially in the form attached
hereto as Exhibit B, each to purchase a share of the Company's Common Stock at
any time after April 5, 1999 and expiring on April 5, 2001, at
an exercise price of $1.00 per share (the "Class B Purchase Price").
Subject to the terms and conditions set forth herein, within
thirty-one (31) days of the Closing Date, the Company shall issue and deliver to
each purchaser certificates in definitive form, registered in the name of such
Purchaser or such Purchaser's nominee, evidencing the Shares and the Warrants so
issued and sold to such Purchaser hereunder. The Purchaser further agrees that
payment for the Units shall be made to the Company, in accordance with any
instructions from the Company regarding such payment, in good funds on or before
March 2, l998 (the "Closing Date"). To exercise the Warrants, the Purchaser
shall deliver to the Company a duly completed Notice of Exercise (in the form
attached to the Class A Warrant or the Class B Warrant) and payment of the Class
A Purchase Price or Class B Purchase Price, as applicable. This offering is not
conditioned on any minimum number of Units being sold.
On or before the Closing Date, the Company shall exchange its
capital stock for the capital stock of Worldwide Online Corp. a Canadian Company
("Worldwide Canada") and as a result, Worldwide Canada will become a
wholly-owned subsidiary of the Company which will continue to operate as a
Canadian company.
1.2 The Purchaser acknowledges that it (a) is acquiring the Units for its
own account, for investment only; (b) either alone or together with its
advisors, has significant knowledge and experience in business, investment and
financial matters to evaluate the merits and risks of this investment; and (c)
is able to bear the substantial economic risks of this investment and, at the
present time, could afford a complete loss of such investment.
1.3 The Purchaser represents that is has been furnished by the Company,
during the course of this transaction, with all information regarding the
Company and its principals which he or she had requested or desired to know;
that all documents which could be reasonably provided have been made available
for the Purchaser's inspection and review; and that the Purchaser has been
afforded the opportunity to ask questions of and receive answers from duly
authorized officers and/or other representatives of the Company concerning the
terms and conditions of the sale of Units, along with any additional
information which it had requested.
1.4 The purchaser acknowledges that it is aware that this sale of Units
has not been reviewed by the Securities and Exchange Commission ("SEC") because
of the Company's representations that it is intended to be a nonpublic sale
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the "Act")
and the provisions of Rule 504 of Regulation D thereunder, or otherwise exempt
from registration under the Act and that, in the event that the Company becomes
a reporting company under the Securities Exchange Act of 1934, the exemption
from registration under Rule 504 shall no longer be available and the shares
underlying the Class B Warrants would not be exempt from registration.
1.5 The Purchaser represents that it is an "Accredited Investor" as that
term is defined in Rule 501 of Regulation D promulgated under the Act.
1.6 The Purchaser recognizes that an investment in the Company involves a
high degree of risk, acknowledges that he or she may lose his or her entire
investment and has full cognizance of and understands the risk factors related
to an investment in the Company, which include, but are not limited to:
(a) Acquisition of Worldwide Online Corp.. The Company was
incorporated in 1995. On or before the Closing Date the Company will
effect a share exchange with Worldwide Canada, as a result of which
Worldwide Canada will become a wholly-owned subsidiary of the Company.
Prior to the purchase of the capital stock of Worldwide Canada, the
Company has had no significant business activities. The Company's
only present asset is ownership of 264,706 shares of common stock of
Worldwide Canada, which is equal to approximately 15% of the outstanding
Common Stock of Worldwide Canada. Consequently, the Company will be
subject to all the risks inherent in the business of Worldwide Canada.
(b) Acquisition of Worldwide Canada Not an Arms-Length Transaction.
Bronson Conrad, together with entities with which be is affiliated,
beneficially owns a controlling interest in Worldwide Canada and the
Company and, as a result, the share exchange between Worldwide Data and
the Company was not an arms-length transaction.
(c) Development-Stage Company. The Company, through Worldwide
Online, provides an internet-access service, creates intranets for
corporations, is in the process of establishing an on-line service which
will allow users to buy and sell securities from their personal computers
and is presently commercializing a service which enables users to send
faxes via the Internet on a cost effective basis. In addition, Worldwide
Canada is in the process of developing a service which will allow users to
make voice calls via the Internet. The likelihood of success of the
Company must be considered in light of the problems, costs and delays
encountered in connection with the development of new businesses in a
rapidly evolving industry characterized by intense competition and an
increasing and substantial number of new market entrants and new Internet
products and services. No assurance can be given that the Company will
generate sufficient revenues to sustain its operations or become
profitable.
(d) Limited Revenues; Losses. Neither the Company nor Worldwide
Canada has generated any meaningful revenues. For the fiscal year ended
December 31, 1997, Worldwide Canada had revenues of approximately
$500,000. For the period from
3
inception to the date hereof, both the Company and Worldwide Canada have
incurred losses and its is anticipated that the Company and Worldwide
Canada will continue to incur significant losses until, at the earliest,
the Company and/or worldwide Canada generate significant revenue from
Worldwide Canada's Intranet-based services. There can be no assurance that
the Company and/or Worldwide Canada will generate meaningful revenues or
achieve profitable operation.
(e) Business Plan. The Company's purposed plan of operation and
prospects will be largely dependant upon the Company's continuing ability
to create intranets for corporations and to provide real-time on-line
stock trading services to subscribers, as well as its ability to market
its on-line fax service, WorldFAX, and its ability to develop and market
is on-line voice calling service, WorldVOICE, on a timely and cost
effective basis. The Company has limited experience in commercializing
new Intranet products and services and there is limited information
available concerning the potential performance or market acceptance of
the services. There can be no assurance that the Company will be able to
successfully implement its business plan or that unanticipated problems,
expenses or technical difficulties will not occur which would result in
discontinuation of services the Company is providing or material delays
in the implementation of services under development.
(f) Dependence on Offering Proceeds; Uncertainty of Capital Needs.
The capital requirements relating to implementation of the Company's
business plan will be significant. The Company is dependant on the
proceeds of this offering in order to fully implement its proposed plan of
operation. The Company may need to raise additional funds through public
or private offerings or equity financings in order to take advantage of
unanticipated opportunities. including rapid expansion. If additional
funds are raised through the issuance of equity securities, the percentage
ownership of the then current stockholders may be reduced or such equity
securities may possess rights senior to the holders of the Common Stock.
There can be no assurance that additional financing will be available on
terms favorable to the Company, or at all. In addition, the consummation
of this offering is not contingent upon a minimum number of Units being
sold. Consequently, if a limited number of Units are sold, the company my
not have sufficient resources to meet its business plan or capital needs
in the short term, which would materially and adversely affect the
Company's operations.
(g) New Industry; Uncertainty or Market Acceptance. The Internet
services industry is characterized by a limited operating history and a
high rate of business failures. Because the market is relatively new and
current and future
4
competitors are likely to introduce competing Internet-based services, it
is difficult to predict the rate at which the market will grow or at which
new or increased competition will result in market saturation.
(h) Possible Service Interruptions. The Company's operations require
that its telecommunications networks operate on a continuous basis. It is
possible that the company's telecommunications networks may from time to
time experience service interruptions or equipment failures. Service
interruptions or equipment failures resulting in material delays would
adversely effect the confidence of users of the services as well as the
Company's business operations and reputation.
(i) Capacity Constraints; System Failure and Security Risks. The
Company's operations will depend upon the capacity, reliability and
security of its network infrastructure. The Company currently has limited
network capacity and will be required to continually expand its network
infrastructure. Expansion of the Company's infrastructure will require
significant financial, operational and management resources. There can be
no assurance that the Company will be able to expand its infrastructure on
a timely basis, at a commercially reasonable price, or at all. The
Company's operations will also be dependent on the Company's ability to
protect its computer equipment against damage from fire, power loss,
telecommunications failures and similar events. The Company's network
infrastructure will be vulnerable to computer viruses, break-ins and
similar disruptions from unauthorized tampering with the Company's
computer systems. Computer viruses or problems caused by third parties
could lead to material interruptions, delays or cessation in services.
Inappropriate use of the Internet by third parties could also potentially
jeopardize the security of confidential information stored in the computer
systems of users. Security and privacy concerned of users may limit the
Company's ability to successfully market its services.
(j) Technological Change. The market for Internet-based Services is
characterized by rapidly changing technology, evolving industry standards,
emerging competition and frequent new software and service introductions.
There can be no assurance that the Company can successfully identify new
product and service opportunities as they develop and bring new products
and services to market in a timely manner or that software, services or
technologies developed by others will not render the Company's services or
technologies noncompetitive, obsolete or less marketable. The Company
presently does not have any proprietary applications software. The
Company's business is also subject to fundamental changes in the way
Internet-based services are delivered.
5
(k) Competition; Minimal Barriers to Entry. The market for Internet
based services is extremely competitive. There are no substantial barriers
to entry, and the Company expects that competition will intensify in the
near future. The Company believes that success will depend upon a number
of factors, including market presence, capacity, reliability and security
of its network infrastructure. Furthermore, the Company will have to
compete with the pricing policies of competitors and suppliers, the timing
and introduction of new products and industry and general economic trends.
The Company expects that all of the major on-line services and
telecommunications companies will compete fully in the Internet-based
services market. The Company believes that new competitors, including
large computer hardware, software, media and other technology and
telecommunications companies will enter the Internet-based services
market, resulting in even greater competition. Such companies are larger
and substantially more established, with far greater resources and
financial capabilities than the Company.
The Company anticipates that it will encounter significant pricing
pressure, which in turn could result in reductions in the average selling
price of the Company's services. Large telecommunications corporations may
be able to reduce the communications costs involved in providing
internet-based services. There can be no assurance that the Company will
be able to offset the effects of any such price reductions.
(l) Limited Sales Force. The Company has a limited sales force and
does not have established distribution channels for its products or
services. No assurance can be given as to the ability of the Company to
establish or generate sufficient demand for its services, and the
inability of the Company to do so would have a material adverse effect on
the Company's business, financial condition and operating results.
(m) Dependence on Suppliers. The Company relies on other companies
to supply certain key components of its network infrastructure, including
telecommunications and networking equipment. There can be no assurance
that the Company will be able to obtain such services on the scale and
within the time frame required at a reasonable cost, or at all. The
inability to do so would have a material adverse effect on the Company's
business, financial condition and results of operations.
(n) Dependence Upon Key Personnel; Bronson Conrad. The Company
depends upon the services of Bronson Conrad, its President and Chief
Executive Officer. The loss of Mr.
6
Conrad's services would be detrimental to the Company's prospects. The
Company does not contemplate obtaining "Keyman" life insurance with
respect to Mr. Conrad.
(o) Limited Intellectual Property Protection. The Company relies on
a combination of copyright and trademark laws, trade secrets and software
security measures to protect its proprietary information. The Company
currently has no registered copyrights or patents or patent applications
pending. It may be possible for unauthorized third parties to copy aspects
of, or otherwise obtain and use, the Company's proprietary information
without authorization.
(p) Broad Discretion in Application of Proceeds. The estimated net
proceeds of this offering have been allocated to working capital and
general corporate purposes. Accordingly, the Company's management will
have broad discretion as to the application of such proceeds.
(q) NASDAQ's OTC Bulletin Board Service; Risks Relating to Low
Priced Stocks. The Company's Common Stock currently trades on NASDAQ's OTC
Bulletin Board Service. Such market is characterized by limited and
episodic trading and limited liquidity. Investors could find it difficult
to dispose of, or to obtain accurate quotations as to the market value of,
the Company's Common Stock.
(r) Possible Inapplicability of Rule 504 Exemption to Class B
Warrants. The sale of the Units is intended to be exempt form registration
pursuant to Section 4(2) of the Act and the provisions of Rule 504 of
Regulation D thereunder. In the event that the Company becomes a reporting
company under the Federal securities laws prior to the exercise of the
Class B Warrants, the Class B Warrants will not be eligible for the
exemption from registration under Rule 504 and, unless the Company
registers the Common Stock underlying the Class B Warrants, the Class B
Warrants will not be exercisable.
(s) Control By Bronson Conrad; Disproportionate Voting Rights.
Following completion of the offering, Bronson Conrad, together with
entities with which he is affiliated will beneficially own, in the
aggregate, over approximately 15% of the Company's fully diluted Common
Stock on an as-converted basis. As a result, Mr. Conrad has the ability to
substantially influence or control the election of a majority of directors
and other actions by stockholders with respect to the business and affairs
of the Company.
1.7 The Purchaser is not taking, and will not take or cause to be taken,
any action that would cause the Purchaser to be deemed an underwriter, as
defined in Section 2(11) of the Act with respect to the Units, other than to
the extent the undersigned may be
7
deemed to be an underwriter in connection with sales by it of Units registered
under the Act.
1.8 The Purchaser understands that the Units are being offered and sold in
reliance on specific exemptions from the registration requirements of Federal
and state securities laws and that the Company is relying upon the truth and
accuracy of the representations, warranties, agreements, acknowledgements and
understandings set forth herein in order to determine the applicability of such
exemptions and the suitability of the Purchaser to acquire the Units
1.9 The Purchaser has the full right, power and authority to enter into
this agreement. The execution, delivery and performance of this agreement by the
Purchaser has been duly and validly authorized and approved by all necessary
corporate action, if any. This agreement is a valid and binding agreement of the
Purchaser enforceable in accordance with its terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency, reorganization or
other similar laws and legal and equitable principles limiting or affecting the
rights of creditors generally and/or (b) general principles of equity,
regardless of whether considered in a proceeding in equity or at law.
1.10 The Purchaser maintains a domicile or business at the address shown
on the signature page of this Agreement, at which address and in compliance with
the local laws of which the Purchaser has subscribed for the Units hereunder.
1.11 The Purchaser represents that the foregoing representations and
warranties are true and correct as of the date hereof. The foregoing
representations, warranties and agreements shall survive the date hereof.
2. REPRESENTATIONS AND COVENANTS BY THE COMPANY
2.1 The Company represents and warrants and, where applicable, covenants
to the Purchaser as follows:
(a) The Company is a corporation duly organized, existing and in
good standing under the laws of the State of Delaware and has the
corporate power to conduct the business which it proposes to conduct.
(b) The execution, delivery and performance of this Agreement by the
Company has been duly approved by the Board of Directors of the Company.
(c) The Shares to be sold and delivered to the Purchaser hereunder
will be duly authorized and validly issued and, upon payment, fully paid
and non-assessable.
8
(d) The Company shall at all times reserve and keep available out of
its authorized capital stock, solely for the purpose of issue upon
conversion of the Warrants, such number of shares of the Common Stock as
shall be issuable upon the exercise of all outstanding Warrants. All
shares of Common Stock issuable upon exercise of the Warrants shall, upon
issuance in accordance with the terms hereof, be duly and validly issued
and fully paid and non assessable and free from all taxes, liens,
encumbrances and charges with respect to the issue thereof.
3. MISCELLANEOUS
3.1 Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt required, addressed to the Company, at:
Worldwide Data, Inc.
36 Toronto street, Suite 250
Toronto, Ontario, Canada M5C2C5
and to the Purchaser at his address indicated on the last page of this
Agreement. Notices shall be deemed to have been given on the date of mailing,
except notices of change of address, which shall be deemed to have been given
when received.
3.2 This Agreement shall not be changed, modified or amended except by a
writing signed by the parties to be charged.
3.3 This Agreement shall be binding upon and inure to the benefit of the
parties hereto and to their respective heirs, legal representatives, successors
and assigns.
3.4 This Agreement sets forth the entire agreement and understanding
between the parties as to the subject matter thereof and merges and supersedes
all prior discussions, agreements and understandings of any and every nature
among them.
3.5 This Agreement and its validity, construction and performance shall be
governed in all respects by the laws of the State of New York.
3.6 This Agreement may be executed in counterparts. Upon the execution
and delivery of this Agreement by the Purchaser, this Agreement shall become a
biding obligation of the Purchaser with respect to the purchase of Units as
herein provided.
9
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first written above.
Number of Units purchased
at $5.00 per Unit: 5,000 Units
Gold Coast International Ltd.
(Name of Purchaser)
TR Kessler
----------------------------------------
PO Box N-8303 Nassau Bahamas
----------------------------------------
Address of Purchaser
N/A
----------------------------------------
Social Security or Taxpayer
Identification No. of Purchaser
TR Kessler
----------------------------------------
Signature of Purchaser
Accepted by:
WORLDWIDE DATA, INC.
By: /s/ Bronson Conrad
--------------------------------
Bronson Conrad, President
EXHIBIT A
FORM OF CLASS A WARRANT
EXHIBIT B
FORM OF CLASS B WARRANT