Exhibit 10.1
DEFINITIVE ASSET
PURCHASE AGREEMENT
THIS
AGREEMENT is made as of this 12:01 a.m. on
the 16th day of September, 2005, by and between SITESTAR
CORPORATION , a Nevada corporation, with its principal place of
business located at 7109 Timberlake Road, #201, Lynchburg, VA
24502 (the “ Buyer ”), and IDACOMM,
INC., an Idaho corporation (the “ Seller ”).
The Seller and the Buyer may sometimes be referred to herein
individually as a “ Party ” or collectively as
“ Parties .”
RECITALS:
A.
The Seller provides
multiple communications services to a broad residential and
corporate customer base, including dial-up and broadband Internet
access and related services, telephony, web hosting and other
various services.
B.
Seller agrees to sell
and Buyer agrees to purchase certain Assets, as defined below, of
the Seller used in its Internet service business (the “
Internet Service Business ”), as defined below, in
accordance with the terms and conditions set forth in this
Agreement.
C.
The parties to this
Agreement desire to establish their mutual rights and obligations
with regard to the transactions by this Agreement.
NOW, THEREFORE, in
consideration of the mutual covenants and agreements contained in
this Agreement, and other good and valuable consideration, the
parties hereto agree as follows:
DEFINITIONS . As used herein, the
following terms shall have the meaning set forth:
A.
“ Accounts
Receivable ” shall mean all sums owed to the Seller from
the Selected Customer Base.
B.
“ Active
Customers ” shall mean Selected Customer Base that is
marked active or expired, but have not been marked as
cancelled.
C.
“ Assets
” shall have the definition set forth in Section
II.
D.
“ Closing
” shall have the meaning set forth in Section VI.
E.
“ Closing
Date ” shall have the meaning set forth in Section
VI.
F.
“ Customer
List ” shall have the meaning set forth in Section
II.A.1.
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G.
“ Deferred
Revenue ” shall mean all sums billed by Seller from the
Selected Customer Base on account of pre-paid services to be
provided by Buyer to the Customers after the Closing
Date.
H.
“ Dial-Up
Customers ” shall mean all Customers who dial-up to the
Internet via a modem and have purchased Dial-Up Service from the
Seller.
I.
“ Dial-Up
Services ” shall mean providing Internet access for
customers via a dial-up modem and phone line connection.
J.
“ Estimated
Active Customers ” shall mean 11,500 active Customers
purchasing Internet Service from the Seller as of the Closing Date
to be conveyed to Buyer from Seller.
K.
“ Estimated
Active Annualized DSL Revenues ” shall mean
$501,448.00.
L.
“ Estimated
Active Annualized Other Services Revenues ” shall mean
$2,006,373.
M.
“ Internet
Service Business ” shall have the meaning of the business
of using the Internet and related hardware to provide customers
with such services as dial-up Internet access, Digital Subscriber
Services (DSL) access, email, web hosting, web acceleration, domain
name services and other various related services.
N.
“ Network
” shall mean the equipment, Internet connection and bandwidth
necessary to provide Internet access for a customer.
O.
“ Pre-Paid
Accounts ” shall mean the Customers who prior to the
Closing Date have been billed for Services to be provided by Buyer
to Customers after the Closing Date.
P.
“ Selected
Customer Base ” shall mean those selected customers with
dial-up Internet access, DSL access, web hosting and other
miscellaneous services as conveyed by Seller to Buyer from the
Customer List.
Q.
“ Verified
Active Customer ” shall have the meaning set forth in
Section III.B.1.a.i.a.
R.
“ Verified
Active Annualized DSL Revenues ” shall mean annualized
revenues from DSL services from Verified Active
Customers.
S.
“ Verified
Active Annualized Other Services Revenues ” shall mean
annualized revenues from all services other than DSL from Verified
Active Customers.
II.
PURCHASE, SALE AND
DELIVERY OF ASSETS.
A.
Subject to and in
accordance with the terms and conditions of this Agreement and in
consideration of the Purchase Price provided in Section III
below,
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Buyer agrees to
purchase, and Seller agrees to sell, transfer, convey and assign
all of their respective right, title, and interest in and good and
marketable title, free and clear of all liabilities, obligations,
security interests, liens (including tax liens), mortgages, leases
or leasehold interests, encumbrances and rights of others of any
kind whatsoever to the following assets used in the operation of
the Internet Service Business:
1.
Any and all Dial-Up
Customers, selected DSL Customers, selected web hosting customers
and other selected customers of miscellaneous services including
Customer accounts and Customer contracts or agreements, of the
Internet Service Business. Seller will provide Buyer with a
true, correct, and complete list of all Customers (the “
Customer List ”) in electronic format at
Closing.
2.
All accounts
receivable to Seller from Customers from the Customer List prior to
Closing (the “ Accounts Receivable ”). At
Closing Seller will provide Buyer with a true and correct listing
of the Accounts Receivable as of the Closing Date.
3.
All equipment from the
Seller that is listed in Schedule A.
4.
All intangible
personal property specifically relating to the Assets, including
without limitation, Customer contracts and agreements.
5.
Certain Domain Names
needed to provide email services and web hosting to the Customer
List excluding, the following domain names: Velocitus.com,
Velocitus.net, Velocitusbroadband.net, Velocitusbroadband.com and
Velocitushosting.com.
The above shall be
collectively referred to as the "Assets".
B.
The Seller shall pay
all expenses, debts, deficiencies, obligations, liabilities,
assessments, claims, demands, fines or penalties related to any of
the Assets prior to the Closing Date. Except as set forth in
Section III.D., the Buyer is not assuming or undertaking to assume
and shall have no responsibility for any liabilities of the Seller
whether fixed or contingent, past, present or future, or direct or
indirect, arising out of or in connection with Seller’s
Internet Service Business or Seller’s ownership and use of
the Assets, or any other acts or omissions of Seller in connection
therewith prior to the Closing.
III.
PURCHASE PRICE;
ADJUSTMENT AND PAYMENT.
A.
Purchase
Price .
Subject to and in accordance with the terms and conditions of
this Agreement, Seller agrees to sell to the Buyer, and Buyer
agrees to purchase from the Seller, all of the Seller’s
rights, title, and interest in and to the Assets, for an aggregate
purchase price equal to ONE MILLION SIX HUNDRED NINETY EIGHT
THOUSAND AND NO/dollars ($1,698,000.00) (the “ Purchase
Price ”), to be paid as provided in Subsection C below of
this Section III. Buyer and Seller agree that the Purchase
Price is based on the Seller’s (i) aggregate revenue, (ii)
actual number of Active Dial-Up Customers, (iii) select asset base,
(iv) the amount of deferred revenue,
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specified DSL
customers, and (v) the general financial performance reflecting the
representations of the Seller.
B.
Adjustments to
Purchase Price . The Purchase Price is
subject to adjustment as follows:
1.
Post–Closing
Adjustment for Actual Annualized Revenues of Customers
.
a.
The Purchase Price is
based in part on Seller’s estimate that as of the Closing
Date, Seller will have annualized revenues of $501,448.00 from the
Active DSL Customers, $2,006,373
annualized revenues from the other Active customers’ services
and deferred revenues of $107,500.00. Following Closing, Buyer will
verify the actual number of Active Customers and the amount of
Deferred Revenue. In the event that the actual number of
Active Customers annualized revenues differs from the estimates,
the Purchase Price will be subject to adjustment, all as set forth
below:
i.
Buyer will
verify the actual number of Active Dial-Up Customers in accordance
with the following procedure:
a)
For purposes of this
Section III, a “ Verified Active Customer ”
shall be an Active Customer that:
i)
has prepaid for
service from Seller’s or Buyer’s Network and has not
cancelled within 15 days from the Closing Date; OR
ii)
pays monthly and must
be paid up or have made at least one payment during the month of
September or October for their current service.
ii.
During the 60 day
period following Closing, Buyer will determine whether an Active
Customer is a Verified Active Customer, for among other reasons, to
determine the amount, if any, by which the actual amount of
Verified Active Annualized Revenues differ from the Estimated
Active Annualized Revenues. The Buyer will also determine if
the Deferred Revenue amount given is also correct. Following
such determination, the Purchase Price will be adjusted as follows
(a “ Purchase Price Adjustment ”)
a)
The Purchase Price
will be increased or decreased by an amount of the difference of
the Verified Active Annualized DSL Revenues from the amount of the
Estimated Active Annualized DSL Revenues; and/or
b)
The Purchase Price
will be increased or decreased by sixty-five percent (65%) of the
amount the difference of the Verified Active Annualized Other
Services Revenues from the amount of the Estimated Active
Annualized Other Services Revenues; and/or
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c)
The Purchase Price
will be increased or decreased by the difference of the given
Deferred Revenue amount from the actual Deferred Revenue
amount.
iii.
The Purchase Price
Adjustment will be added to or subtracted from (as the case may be)
the Deferred Purchase Price Payment (as defined below) payable to
Seller pursuant to Subsection C.2. below.
2.
Liens and
Encumbrances . If, as of the Closing, any
of the Assets are subject to or encumbered by any security
interests or liens the outstanding aggregate balance (including any
accrued interest or other charges) of the total debts or
liabilities underlying such liens or security interests shall be
deducted from the Purchase Price and paid directly to the
applicable creditor of the Seller at the Closing.
3.
A/R
adjustment. There will be no adjustment
for actual Accounts Receivable being assumed by Buyer.
C.
Payment of Purchase
Price .
The Buyer has paid the total Purchase Price to the Sellers as
follows:
1.
Payment At
Closing .
Two Hundred Fifty Thousand dollars ($250,000) paid at Closing
of which Ten Thousand dollars ($10,000) has already been paid to
Seller as a deposit to this transaction. This Payment At
Closing was paid via wire transfer to an account designated by the
Seller.
2.
Deferred
Payment .
Starting November 1, 2005, Buyer will pay to the Seller
monthly installments of $250,000.00 towards the balance of the
Purchase Price, with any plus or minus adjustments to the Purchase
Price made pursuant to Subsection B. above of this Section III
(collectively, the “Deferred Purchase Price Payment”)
to adjust the final installment payment, via Bank Check or wire
transfer to an account designated by the Seller. The
balance of the Purchase Price will be secured by a non-interest
bearing Note and Security Agreement, in the form attached hereto,
both of which shall be executed by Buyer at Closing. The
terms of the Security Agreement and Note are incorporated herein by
reference.
3.
Assumption of
Liabilities . The Buyer shall assume the
obligation to provide Dial-Up Services to the Pre-Paid Accounts
following the Closing Date. This obligation called carries a
portion of Deferred Revenue that Buyer will assume as part of the
purchase price. At Closing, Seller will provide Buyer with a
true and correct listing of the Deferred Revenue and the Customers
to which the deferred revenue relates as of the Closing
Date.
IV.
REPRESENTATIONS AND
WARRANTIES OF SELLER.
The Seller represents
and warrants to the Buyer, its successors and assigns, that the
following facts are true, complete, and correct as of the date of
this Agreement and will be true, correct, and complete as of the
Closing Date (as though made then and as though the Closing Date
were substituted for the date of this Agreement throughout
this
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Section IV, with the
knowledge that Buyer is purchasing the Assets in full reliance
thereon):
A.
Organization of the
Seller .
Seller is a corporation duly organized, validly existing, and
in good standing as a domestic corporation under the laws of the
State of Idaho and has the corporate power to carry on its business
as now conducted and to perform its obligations
hereunder.
B.
Authorization of
Transaction . The Seller has full power
and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its obligations
hereunder. Without limiting the generality of the foregoing, the
board of directors of the Seller and the Seller’s
stockholders have duly authorized the execution, delivery, and
performance of this Agreement by the Seller. This Agreement
constitutes the valid and legally binding obligation of the Seller,
enforceable in accordance with its terms and conditions.
C.
Noncontravention
. Neither the
execution and the delivery of this Agreement, nor the consummation
of the transactions contemplated hereby (including the assignments
and assumptions referred to in Section II above), will (i) violate
any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Seller is
subject or any provision of the charter or bylaws of the Seller or
(ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right
to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other
arrangement to which the Seller is a party or by which it is bound
or to which any of its assets is subject (or result in the
imposition of any security interest, lien, or encumbrance upon any
of its assets). The Seller does not need to give any notice
to, make any filing with, or obtain any authorization, consent, or
approval of any gover
