Definitive Purchase Agreement
EXHIBIT 10.1
CONFIDENTIAL
June 30, 2004
Page 1
I.
Acquiring Entity
Sitestar Corporation (the “Buyer” “Sitestar”) incorporated in the State of Nevada, and/or an affiliate, will purchase the assets of (the “Purchase” or the “Transaction”) Virginia Link Internet (“Seller,” or the “Company”) incorporated in the Commonwealth of Virginia (collectively the “Company”); its assets currently owned by Xxxxx Xxxxx Xxxxxxxx, Jr., Xxxxxxx Xxxx Xxxxxx, Xxxxxxxxx Xxxxxxxxx and Xxxxxx Xxxx (the “Owners”).
II.
Structure and Consideration
Buyer will acquire 100% of the Company’s dial-up Internet-related assets, including but not limited to: all customers, software, hard assets and intellectual property (trademarks, brands, trade names, customer lists, Web content, etc). Buyer will not acquire any automobiles the company may have listed as assets.
III.
Company Representations and Warranties
a.
The Company provides multiple services to a residential and corporate customer base. Service offerings including dial up Internet access, web hosting, retail sales of products and services, information technology consulting and network installations.
b.
The Company will generate at least $402,348.30 in sales from Virginia Link and Network Management, Inc. and North Carolina Mt. Airy Networks operations for the FY 2004 calendar year.
c.
The Company has approximately 1,726 Internet access subscribers with an attrition rate of not greater than 20% per year.
d.
The Company’s hard assets (excluding the company vehicle) have a current fair market value of not less than $25,000.00 and are free and clear of any leans or encumbrances.
e.
The Company is in good standing with its creditors, employees and suppliers and is not currently party to any pending legal action.
CONFIDENTIAL
June 30, 2004
Page 2
IV.
Purchase Consideration
Purchase consideration is based on the Company’s aggregate revenue, as adjusted for deferred revenue, number of subscribers, asset base and general financial performance reflecting the representations of the Company. Should the actual value differ from the values represented by the Company, the Purchase Price will be adjusted accordingly. Assets of the Company include all balance sheet items and other assets and intellectual property utilized in the operation of the business. A definitive list of assets shall be compiled and agreed upon by Buyer and Seller. All additional terms and conditions of the purchase consideration will be addressed in the definitive agreement.
a.
Buyer will not assume any of the Seller’s ongoing financial responsibilities.
b.
If any liens or encumbrances are found to be attached to the assets of the purchased assets, the value shall be deducted from the Purchase Consideration.
V.
Payment Structure
This Transaction will include the following components:
a.
Seller shall receive $220,000 less an adjustment for deferred revenue (portion of prepaid sales) over a period of thirty (30) months in equal monthly installments due on the 10th of the month.
b.
For value received, Seller will enter into a three-year Non-Compete Agreement.
c.
Any payments during the term of the agreement that are accepted by Seller on behalf of Sitestar may be deducted from total amount due and deducted from the monthly payments.
d.
Each party agrees to refer prospective customers to one another whenever possible.
VI.
Covenants
a.
Each party shall be responsible for their own legal and transactional expenses.
b.
Any debts incurred by the Company that are attached to assets must be disclosed and a portion of payments may be made directly to satisfy the outstanding debt.
CONFIDENTIAL
June 30, 2004
Page 3
VII.
Employment/Non-Compete Contracts
a.
Included in the Purchase Price, Xx. Xxxxx X. Xxxxxxxx shall provide his services for a reasonable transition period, up to a maximum of thirty (30) days. From that point forward, up to one year, Owners agree to be available to Sitestar management by telephone only on an as-needed basis. Xx. Xxxxxxxx may xxxx Sitestar an hourly rate of $45.00 for services performed after the 30 days as approved by Sitestar.
b.
Sitestar acknowledges that Xx. Xxxxxxxx has committed to help the local fire department build a broadband wireless network and to have a not-for-profit hotspot to assist the locality for economic development purposes only and if Sitestar loses paying customers because of this free service, the fair value of those customers will be deducted from the purchase price.
c.
Owners will be encouraged to continue to sign up new customers for Internet services based on Buyers rates and policies as an affiliate.
d.
Sitestar will require Owners to enter into a Non-Compete Contract pertaining to internet access services within the states of Virginia and North Carolina and bordering states for a period of thirty six (36) months: The terms and conditions of this agreement will be addressed during the due diligence period.
VIII.
Conduct of Business
From the date of your acceptance hereof, through the closing date, the Seller shall conduct its business only in the ordinary course and consistent with relationships and goodwill existing on the date hereof and promptly notify Buyer of any emergency or other change in the ordinary course of the Seller’s business.
IX.
Confidentiality
The Purchase Price and all discussions pertaining to this agreement or this Transaction will be held by the parties in strict confidence and will not be disclosed to anyone other than the agents or representatives and financing sources of the parties who need to know such information in connection with the Transaction completed hereby.
X.
Intermediaries
a.
Buyer and the Company agree that no intermediaries have represented either party in the proposed Transaction.
CONFIDENTIAL
June 30, 2004
Page 4
AGREED AND ACCEPTED:
Virginia Link Internet and Network Management, Inc.
Sitestar
By: Xxxxx Xxxxxxxx, Jr.
/s/ Xxxxx Xxxxxxxx, Jr.
/s/ Xxxxx X. Xxxxxxxx
President
Chairman & CEO
Virginia Link Internet
By: Xxxxxxx Xxxx Xxxxxx
/s/ Xxxxxxx Xxxx Xxxxxx
Shareholder
Virginia Link Internet
By: Xxxxxxxxx Xxxxxxxxx
/s/ Xxxxxxxxx Xxxxxxxxx
Shareholder
Virginia Link Internet
By: Xxxxxx Xxxx
/s/ Xxxxxx Xxxx
Shareholder
