EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
DATED AS OF NOVEMBER 1, 2002
AMONG
VITALSTREAM HOLDINGS, INC.,
VITALSTREAM BROADCASTING CORPORATION,
EPOCH HOSTING, INC.
AND
EPOCH NETWORKS, INC.
TABLE OF CONTENTS
1. Definitions..............................................................................................1
2. Basic Transaction.......................................................................................15
(a) Purchase and Sale of Assets......................................................................15
(b) Assumption of Liabilities........................................................................16
(c) Consideration....................................................................................16
(d) Post-Closing Adjustment in Connection with the Issuance of Common Stock Pursuant
Section 1.4(c)(iii) of the Merger Agreement......................................................17
(e) Post-Closing Adjustment in Connection with the Issuance of Common Stock Pursuant
Section 1.4(c)(iv) of the Merger Agreement.......................................................19
(f) Post-Closing Adjustment in Connection with the Issuance of Common Stock Pursuant
Section 1.4(c)(v) of the Merger Agreement........................................................19
(g) Allocation of Consideration......................................................................19
(h) The Closing......................................................................................20
(i) Deliveries at the Closing........................................................................20
(j) Post-Closing Deliveries..........................................................................20
3. Representations and Warranties of Hosting and Networks..................................................20
(a) Organization, Corporate Power and Licenses.......................................................20
(b) Approval and Consents; Authorization; No Breach..................................................21
(c) Subsidiaries.....................................................................................21
(d) Hosting Financial Statements.....................................................................22
(e) Notes and Accounts Receivable; Notes and Accounts Payable........................................22
(f) Guaranties.......................................................................................23
(g) Title to Assets; Condition of Assets; Sufficiency of Assets......................................23
(h) Absence of Undisclosed Liabilities...............................................................23
(i) Absence of Certain Developments..................................................................24
(j) Compliance With Laws.............................................................................25
(k) Litigation.......................................................................................25
(l) Contracts and Commitments........................................................................26
(m) Tax Matters......................................................................................27
(n) Real Property....................................................................................29
(o) Environmental Matters............................................................................31
(p) Intellectual Property Rights.....................................................................32
(q) Employees........................................................................................34
(r) Employee Benefits Relating to Hosting............................................................35
(s) Employee Benefits Relating to Networks...........................................................35
(t) Insurance........................................................................................36
(u) Affiliate Transactions...........................................................................36
(v) Brokerage........................................................................................37
(w) Governmental Consent, etc........................................................................37
(x) Disclosure.......................................................................................37
(y) Capital Stock and Related Matters................................................................37
(z) Investment in Purchase Shares....................................................................37
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(aa) Customers and Suppliers..........................................................................38
4. Representations and Warranties of VitalStream...........................................................38
(a) Organization, Corporate Power and Licenses.......................................................39
(b) Approval and Consents; Authorization; No Breach..................................................39
(c) Subsidiaries.....................................................................................40
(d) Securities and Exchange Commission Reports and VitalStream Financial Statements..................40
(e) Notes and Accounts Receivable....................................................................41
(f) Guaranties.......................................................................................41
(g) Title to Assets; Condition of Assets; Sufficiency of Assets......................................41
(h) Absence of Undisclosed Liabilities...............................................................42
(i) Absence of Certain Developments..................................................................42
(j) Compliance With Laws.............................................................................44
(k) Litigation.......................................................................................44
(l) Contracts and Commitments........................................................................44
(m) Tax Matters......................................................................................46
(n) Real Property....................................................................................47
(o) Environmental Matters............................................................................49
(p) Intellectual Property Rights.....................................................................50
(q) Employees........................................................................................52
(r) Employee Benefits................................................................................53
(s) Insurance........................................................................................54
(t) Affiliate Transactions...........................................................................55
(u) Brokerage........................................................................................55
(v) Governmental Consent, etc........................................................................55
(w) Disclosure.......................................................................................55
(x) Capital Stock and Related Matters................................................................55
(y) Issuance of the Purchase Shares..................................................................56
(z) Customers and Suppliers..........................................................................56
(aa) Investment Company...............................................................................57
5. Pre-Closing Covenants...................................................................................57
(a) General..........................................................................................57
(b) Notices and Consents.............................................................................57
(c) Operation and Preservation of Business...........................................................58
(d) Full Access......................................................................................58
(e) Notice of Developments...........................................................................59
(f) Exclusivity......................................................................................59
6. Additional Agreements...................................................................................60
(a) General..........................................................................................61
(b) Litigation Support...............................................................................61
(c) Purchase Shares..................................................................................61
(d) Employees........................................................................................63
(e) Non-Competition; Non-Interference; Non-Solicitation..............................................63
(f) No Assignment Causing Breach.....................................................................65
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(g) Mail, Notices and Other Correspondence...........................................................65
(h) Tax Matters......................................................................................65
(i) Notice of Assignment.............................................................................66
(j) Updating Hosting Contracts List..................................................................66
(k) Post-Closing Certifications and Deliveries.......................................................67
(l) Additional Software Licenses.....................................................................67
7. Conditions to Obligation to Close.......................................................................67
(a) Conditions to Obligation of Each of VitalStream and the Buyer....................................68
(b) Conditions to Obligation of Each of Hosting and Networks.........................................70
8. Survival of Representations and Warranties; Indemnification.............................................73
(a) Survival of Representations and Warranties.......................................................73
(b) Indemnification of VitalStream...................................................................74
(c) Indemnification of the Holders of the Purchase Shares............................................75
(d) Method of Asserting Claims Involving Third-Party Claims..........................................75
(e) Method of Asserting Claims not Involving Third-Party Claims......................................77
(f) Limitations......................................................................................77
(g) Exclusive Remedies...............................................................................77
9. Termination.............................................................................................78
(a) Termination of Agreement.........................................................................78
(b) Effect of Termination............................................................................78
10. Miscellaneous...........................................................................................78
(a) Expenses.........................................................................................78
(b) Press Releases and Public Announcements..........................................................79
(c) No Third-Party Beneficiaries.....................................................................79
(d) Entire Agreement.................................................................................79
(e) Successors and Assigns...........................................................................79
(f) Counterparts.....................................................................................79
(g) Descriptive Headings; Interpretation.............................................................79
(h) Notices; Business Days...........................................................................79
(i) Amendments and Waivers...........................................................................81
(j) Severability.....................................................................................81
(k) Construction.....................................................................................81
(l) Incorporation of Annexes, Schedules and Exhibits.................................................81
(m) Specific Performance.............................................................................81
(n) GOVERNING LAW....................................................................................82
(o) JURISDICTION AND VENUE...........................................................................82
(p) WAIVER OF RIGHT TO JURY TRIAL....................................................................82
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ANNEXES, SCHEDULES AND EXHIBITS
ANNEXES
Annex 1 -- Eligible Networks Employees
SCHEDULES
Schedule 1(b) -- Excluded Hosting Assets
Schedule 1(c) -- Hosting Business Customers
Schedule 1(d) -- Hosting Permits and Licenses
Schedule 1(e) -- Hosting Records and Miscellaneous Items
Schedule 1(f) -- Hosting Tangible Personal Property
Schedule 1(g) -- Hosting Customer Security Deposits
Schedule 3(a) -- Organization, Corporate Power and Licenses
Schedule 3(b) -- Approval and Consents
Schedule 3(e) -- Notes and Accounts Receivable; Notes and Accounts
Payable
Schedule 3(f) -- Guaranties
Schedule 3(g) -- Title to Assets; Condition of Assets
Schedule 3(i) -- Absence of Certain Developments
Schedule 3(j) -- Compliance with Laws
Schedule 3(k) -- Litigation
Schedule 3(l) -- Contracts and Commitments
Schedule 3(m) -- Tax Matters
Schedule 3(n)(ii) -- Hosting Leased Real Property
Schedule 3(p)(iii) -- Intellectual Property Rights - Patents, Trademarks and
Copyrights
Schedule 3(p)(iv) -- Intellectual Property Rights - Third Parties
Schedule 3(q) -- Employees
Schedule 3(r) -- Employee Benefits
Schedule 3(s) -- Employee Benefits Relating to Networks
Schedule 3(u) -- Affiliate Transaction
Schedule 3(aa) -- Customers and Suppliers
Schedule 4(a) -- Organization, Corporate Power and Licenses
Schedule 4(b) -- Approval and Consents
Schedule 4(c) -- Subsidiaries
Schedule 4(d) -- Securities and Exchange Commission Reports and
VitalStream Financial Statements
Schedule 4(e) -- Notes and Accounts Receivable; Notes and Accounts
Payable
Schedule 4(f) -- Guaranties
Schedule 4(g) -- Title to Assets; Condition of Assets
Schedule 4(i) -- Absence of Certain Developments
Schedule 4(j) -- Compliance with Laws
Schedule 4(k) -- Litigation
Schedule 4(l) -- Contracts and Commitments
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Schedule 4(l)(ii) -- Contracts and Commitments
Schedule 4(m) -- Tax Matters
Schedule 4(n)(ii) -- Hosting Leased Real Property
Schedule 4(p)(iii) -- Intellectual Property Rights - Patents, Trademarks and
Copyrights
Schedule 4(p)(iv) -- Intellectual Property Rights - Third Parties
Schedule 4(q) -- Employees
Schedule 4(r) -- Employee Benefits
Schedule 4(t) -- Affiliate Transaction
Schedule 4(u) -- Brokerage
Schedule 4(x)(i) -- Capital Stock and Related Matters
Schedule 4(z) -- Customers and Suppliers
Schedule 6(l) -- Additional Software Licenses
EXHIBITS
Exhibit A -- Form of Colocation Agreement
Exhibit B -- Form of Escrow Agreement
Exhibit C -- Form of Investor Rights Agreement
Exhibit D -- Form of Master Access Agreement
Exhibit E -- Form of Networks Contribution Agreement
Exhibit F -- Form of Opinion of Hosting's Counsel
Exhibit G -- Form of Opinion of VitalStream's Counsel
Exhibit H -- Form of Registration Agreement
Exhibit I -- Form of Customer Migration Agreement
Exhibit J -- Form of Assignment and Assumption Agreement
Exhibit K -- Form of ▇▇▇▇ of Sale
Exhibit L -- Form of Hosting Audited Financial Statements Officer's
Certificate
Exhibit M -- Form of Hosting Financial Statements
Exhibit N -- Form of Partial Termination and Second Amendment to
Sublease Agreement
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ASSET PURCHASE AGREEMENT
This
ASSET PURCHASE AGREEMENT, dated as of November 1, 2002 (this
"AGREEMENT"), by and among VitalStream Holdings, Inc., a Nevada corporation
("VITALSTREAM"), VitalStream Broadcasting Corporation, a Nevada corporation (the
"BUYER"; and together with VitalStream, the "BUYING PARTIES"), Epoch Networks,
Inc., a California corporation ("NETWORKS"), and Epoch Hosting, Inc. a Delaware
corporation ("HOSTING"). VitalStream, Buyer, Networks and Hosting are referred
to collectively herein as the "PARTIES." Unless otherwise indicated herein,
capitalized terms used in this Agreement have the meanings set forth in SECTION
1 of this Agreement.
RECITALS
WHEREAS, this Agreement contemplates a transaction in which the Buyer will
(1) purchase substantially all of the assets of Hosting and certain specified
assets of Networks and (2) assume certain specified Liabilities of Hosting and
Networks related to their Hosting Businesses and (3) VitalStream will pay the
Cash Consideration and issue the Purchase Shares to Hosting as consideration
therefor.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.
1. DEFINITIONS. For the purposes of this Agreement, the following terms
have the meanings set forth below:
"AKKAD AGREEMENT" means the Stockholders and Registration Rights Agreement,
dated as of August 9, 2000, by and among VitalStream, Inc., ▇▇▇▇ Summer, ▇▇▇▇▇▇
▇▇▇▇▇▇ and the Series B Holders (as defined therein), as assumed by VitalStream,
as amended, modified, restated, superseded or replaced from time to time.
"ACQUIRED ASSETS" means all right, title, and interest of (a) Hosting in
and to all of the assets of any kind, other than the Excluded Hosting Assets,
that are used or held for use by Hosting following the consummation of the
Contribution Transaction in connection with the operation of the Hosting
Business of Hosting as currently operated by Hosting, including all rights and
benefits of Hosting under and in each of the following: (i) the Hosting Real
Property Leases to which Hosting is a party; (ii) the Hosting Tangible Personal
Property; (iii) the Hosting Intellectual Property Rights; (iv) the Hosting
Contracts; (v) all Hosting Permits and Licenses; (vi) the Hosting Records and
Miscellaneous Items; (vii) the Hosting Customer Security Deposits; and (viii)
all goodwill and going concern value associated with the Hosting Business as
currently operated by Hosting and (b) Networks under and in each of the Hosting
Real Property Leases to which it is a party.
"ACQUIRED ASSETS GENERATED QUARTERLY NET REVENUES" has the meaning set
forth in SECTION 2(d)(i) of this Agreement.
"AFFILIATE" of any particular Person means any other Person controlling,
controlled by or under common control with such particular Person, where
"control" means the possession,
directly or indirectly, of the power to direct the management and policies of a
Person whether through the ownership of voting securities, contract or
otherwise.
"ARTICLES OF INCORPORATION" means the Articles of Incorporation of
VitalStream as amended, modified, restated, superseded or replaced from time to
time.
"ASSIGNMENT AND ASSUMPTION AGREEMENT" has the meaning set forth in SECTION
2(i) of this Agreement.
"ASSUMED LIABILITIES" means (a) all of the Liabilities of Hosting or
Networks, as the case may be, relating to, or arising out of or in connection
with, each of the Hosting Contracts set forth on SCHEDULE 3(l) attached hereto
(as such SCHEDULE 3(l) attached hereto may be amended from time to time pursuant
to SECTION 6(j) of this Agreement) to the extent such Liabilities arise or
accrue after the Closing Date, (b) all of the Liabilities under the Hosting Real
Property Leases to the extent such Liabilities arise or accrue after the Closing
Date, (c) all of the Liabilities of Hosting which constitute deferred revenue
Liabilities, to the extent such Liabilities do not exceed $20,000 in the
aggregate, as determined in accordance with GAAP and (d) any Liabilities of
Networks to any Transferred Employee for paid time off in an amount set forth
opposite such Transferred Employee's name on ANNEX 1 attached hereto under the
heading "DOLLAR VALUE OF ACCRUED PAID TIME OFF", which will be updated at
Closing for the period from the date of this Agreement through the Closing Date.
"AUDITED FINANCIAL STATEMENTS PREPARATION FEE" shall mean an amount equal
to $25,000 to be paid by VitalStream as partial reimbursement of the fees and
expenses incurred by Hosting in connection with the preparation by Rose, ▇▇▇▇▇▇
& ▇▇▇▇▇▇ of the Hosting Audited Financial Statements.
"BANKRUPTCY LAW" means Title 11, U.S. Code, or any similar federal or state
law for the relief of debtors.
"▇▇▇▇ OF SALE" has the meaning set forth in SECTION 2(i) of this Agreement.
"BUYING PARTIES" has the meaning set forth in the preamble to this
Agreement.
"CASH" means cash and cash equivalents (including marketable securities and
short term investments) calculated in accordance with GAAP applied on a basis
consistent with the preparation of the Hosting Financial Statements.
"CASH CONSIDERATION" has the meaning set forth in SECTION 2(c).
"CISCO" means Cisco Systems Capital Corporation.
"CISCO INDEBTEDNESS" means the Indebtedness evidenced by that certain
Secured Promissory Note, dated as of August 31, 2001, by Holdings in favor of
Cisco.
"CISCO SECURITY AGREEMENTS" means that certain (a) Second Amended and
Restated General Security Agreement, dated as of January 31, 2002, between
Holdings, Networks, Epoch Network Communications, Inc., and Cisco, as agent, as
amended; (b) Second Amended And
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Restated Pledge Agreement, dated as of January 31, 2002, by and among Holdings,
Networks, Epoch Network Communications, Inc., and Cisco, as agent, as amended;
and (c) Second Amended And Restated Guaranty, dated as of January 31, 2002, by
and among Networks, Epoch Network Communications, Inc., and Cisco, as agent, as
amended.
"CLAIM" means any action, claim, lawsuit, demand, suit, charge, complaint,
inquiry, hearing, investigation, notice of a violation or noncompliance,
litigation, proceeding, arbitration, appeals or other dispute, whether civil,
criminal, administrative or otherwise.
"CLOSING" has the meaning set forth in SECTION 2(h) of this Agreement.
"CLOSING DATE" has the meaning set forth in SECTION 2(h) of this Agreement.
"COBRA" means the requirements of Part 6 of Subtitle B of Title I of ERISA
and Section 4980B of the Code and of any similar state Law.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLOCATION AGREEMENT" means that certain Colocation Agreement, dated as of
the Closing Date, by and between VitalStream and Netifice in the form of EXHIBIT
A attached hereto, as amended, modified, restated, superseded or replaced from
time to time.
"COMMON STOCK" means the Common Stock of VitalStream, par value $0.001 per
share.
"CONFIDENTIAL INFORMATION" means any of the following, to the extent not
already made available to the public, trade secrets and any other information of
a secret, confidential or proprietary nature concerning the operation of the
Hosting Business of Hosting as currently operated by Hosting or of any of the
customers or customer accounts of the Hosting Business of Hosting (including the
accounts and information related to the Hosting Business Customers), including
(a) matters of a technical nature (including know-how, processes, computer
programs), (b) accounting methods, and documentation, (c) matters of a business
nature (such as information about prices, costs, profits, contract forms,
promotional methods, markets, market or marketing plans, sales, customers or
accounts, possible customers or accounts, and employees), (d) plans for further
development and (e) any other information not generally available to the public.
"CONTRIBUTION TRANSACTION" means the contribution of certain assets of
Networks to Hosting and the assumption by Hosting of certain Liabilities of
Networks pursuant to the Network Contribution Agreement (including the exhibits
attached thereto).
"COVERED ACTIVITIES" has the meaning set forth in SECTION 6(e)(i) of this
Agreement.
"CONVERTIBLE PROMISSORY NOTE AND WARRANT PURCHASE AGREEMENT" means that
certain Convertible Promissory Note and Warrant Purchase Agreement, dated as of
the Closing Date, by and among VitalStream and the Purchasers set forth on the
signature pages thereto, as amended, modified, restated, superseded or replaced
from time to time.
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"CUSTOMER MIGRATION AGREEMENT" means that certain Customer Migration
Agreement, dated as of the Closing Date, by and between VitalStream and Netifice
in the form of EXHIBIT I attached hereto, as amended, modified, restated,
superseded or replaced from time to time.
"DEBT SECURITY" means any note, bond, debenture or other instrument or
security evidencing Indebtedness.
"DECIDING ACCOUNTANT" has the meaning set forth in SECTION 2(d)(iii) of
this Agreement.
"DISPUTE" has the meaning set forth in SECTION 2(d)(ii) of this Agreement.
"DOLPHIN" means Dolphin Equity Partners, L.P.
"DOLPHIN COMMUNICATIONS I" means Dolphin Communications Fund, L.P.
"DOLPHIN COMMUNICATIONS II" means Dolphin Communications Fund II, L.P.
"DOLPHIN FUND I" means Dolphin Communications I and Dolphin Parallel I.
"DOLPHIN FUND II" means Dolphin Communications II and Dolphin Parallel II.
"DOLPHIN PARALLEL I" means Dolphin Communications Parallel Fund, L.P.
"DOLPHIN PARALLEL II" means Dolphin Communications Parallel Fund II
(Netherlands), L.P.
"ELIGIBLE NETWORKS EMPLOYEES" has the meaning set forth in SECTION 6(d) of
this Agreement.
"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" (as such term is
defined in Section 3(3) of ERISA) and any other employee benefit plan, program
or arrangement of any kind.
"ENVIRONMENTAL, HEALTH, AND SAFETY REQUIREMENTS" means all Laws, all
contractual obligations and all common law concerning public health and safety,
worker health and safety, pollution or protection of the environment, including
all those relating to the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control, or cleanup of any
hazardous materials, substances or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum products or
byproducts, asbestos, polychlorinated biphenyls, noise or radiation, each as
amended and as now or hereafter in effect.
"EQUITY SECURITY" means (a) any capital stock or other equity security, (b)
any security, directly or indirectly, convertible into or exchangeable for any
capital stock or other equity security or security containing any profit
participation features, (c) any warrants, options or other rights, directly or
indirectly, to subscribe for or to purchase any capital stock, other equity
security or security containing any profit participation features or, directly
or indirectly, to subscribe for or to purchase any security, directly or
indirectly, convertible into or exchangeable
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for any capital stock, other equity security or security containing profit
participation features, or (d) any stock appreciation rights, phantom stock
rights or other similar rights.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCROW AGENT" has the meaning set forth in the Escrow Agreement.
"ESCROW AGREEMENT" means the Escrow Agreement, dated as of the Closing
Date, by and among VitalStream, Hosting and the Escrow Agent in the form of
EXHIBIT B attached hereto, as amended, modified, restated, superseded or
replaced from time to time.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended and
the rules and regulations promulgated thereunder.
"EXCLUDED HOSTING ASSETS" means the right, title and interest of Hosting or
Networks in and to the following assets: (a) the corporate charter,
qualifications to conduct business as a foreign corporation, arrangements with
registered agents relating to foreign qualifications, taxpayer and other
identification numbers, seals, minute books, stock transfer books, blank stock
certificates, and other documents relating to the organization, maintenance, and
existence of Hosting as a corporation, (b) any of the rights of Hosting or
Networks under this Agreement (or under any Transaction Agreement or side
agreement between Hosting and/or Networks, on the one hand, and VitalStream, on
the other hand, entered into on or after the date of this Agreement), (c) all
Cash of Hosting or Networks, (d) all accounts and notes receivable of Networks
or Hosting and (e) any of the assets of Hosting set forth on SCHEDULE 1(b)
attached hereto.
"EXCLUDED HOSTING LIABILITIES" means all Liabilities of Hosting or Networks
which do not constitute Assumed Liabilities.
"FAIR MARKET VALUE" means the price at which an asset would change hands
between a willing buyer and a willing seller when the former is not under any
compulsion to buy and the latter is not under any compulsion to sell, and both
parties are able, as well as willing, to trade and are well-informed about the
asset and the market for the asset, as determined jointly by VitalStream and
Hosting. If such parties are unable to reach agreement within a reasonable
period of time, such "FAIR MARKET VALUE" shall be determined by an independent
appraiser experienced in valuing such type of asset jointly selected by
VitalStream and Hosting. The determination of such appraiser shall be final and
binding upon the Parties and VitalStream shall pay the first $10,000 of the fees
and expenses of such appraiser, after which VitalStream and Hosting shall each
pay one-half of the fees and expenses of such appraiser. Notwithstanding the
foregoing, the "FAIR MARKET VALUE" of any security listed on any securities
exchange or quoted in the NASDAQ System (including the proposed Bulletin Board
Exchange) or the over-the-counter market shall be the "MARKET PRICE."
"FULLY DILUTED OUTSTANDING COMMON STOCK" means the sum of (a) the number of
shares of Common Stock actually outstanding on the Closing Date immediately
prior to the Closing and (b) a number of shares equal to 1,757,982, (as such
number of shares shall be equitably adjusted for stock splits, stock
combinations and dividends affecting the Common Stock).
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"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"GOVERNMENTAL ENTITY" means individually, and "GOVERNMENTAL ENTITIES" means
collectively, the United States of America, any foreign country and any state or
other political subdivision thereof, or any entity exercising executive,
legislative, judicial, regulatory or administrative functions of government,
including any court.
"GUARANTEE" means any guarantee or other contingent Liability (other than
any endorsement for collection or deposit in the ordinary course of business),
direct or indirect with respect to any Liabilities of another Person, through a
contract or otherwise, including, (a) any endorsement or discount with recourse
or undertaking substantially equivalent to or having economic effect similar to
a guarantee in respect of any such Liabilities and (b) any contract (i) to
purchase, or to advance or supply funds for the payment or purchase of, any such
Liabilities, (ii) to purchase, sell or lease property, products, materials or
supplies, or transportation or services, in respect of enabling such other
Person to pay any such Liability or to assure the owner thereof against loss
regardless of the delivery or nondelivery of the property, products, materials
or supplies or transportation or services or (iii) to make any loan, advance or
capital contribution to or other investment in, or to otherwise provide funds to
or for, such other Person in respect of enabling such Person to satisfy a
Liability (including any Liability for a dividend, stock liquidation payment or
expense) or to assure a minimum equity, working capital or other balance sheet
condition in respect of any such Liability.
"HIGHEST CALENDAR QUARTER" has the meaning set forth in SECTION 2(d)(i) of
this Agreement.
"HIGHEST CALENDAR QUARTER NET REVENUES" has the meaning set forth in
SECTION 2(d)(i) of this Agreement.
"HOLDINGS" means Epoch Holdings, Inc., a Delaware corporation and the
parent of Networks.
"HOSTING" has the meaning set forth in the preamble of this Agreement.
"HOSTING AUDITED FINANCIAL STATEMENTS" has the meaning set forth in SECTION
7(a)(viii) of this Agreement.
"HOSTING AUDITED FINANCIAL STATEMENTS OFFICER'S CERTIFICATE" means that
certain officer's certificate from an officer of Hosting certifying,
representing and warranting as to certain matters regarding the Hosting Audited
Financial Statements in the form attached hereto as EXHIBIT L.
"HOSTING BALANCE SHEET" means the balance sheet contained within the
Hosting Financial Statements.
"HOSTING BUSINESS" means (a) the hosting business of any Person, which
includes providing customers any or all of an Internet website, server and
network monitoring, reporting and ongoing maintenance and backup, e-mail account
management (to the extent that such e-mail account management arises solely as
part of a hosting agreement) and traffic reporting as
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each pertains to the provision of hosting services and (b) the colocation
business of any Person, which includes leasing or licensing space for a server
or other computer equipment to customers.
"HOSTING BUSINESS CUSTOMERS" means each Person set forth on SCHEDULE 1(c)
attached hereto and to which (i) Hosting provided goods or services at any time
in connection with the operation of its Hosting Business during the period
commencing on January 1, 2002, and continuing through the Closing Date, as
determined from the books and records of Hosting or (ii) Networks provided goods
or services at any time in connection with the operation of its Hosting Business
during the period commencing on January 1, 2002 and continuing through the
consummation of the transactions contemplated by the Networks Contribution
Agreement, as determined from the books and records of Networks; provided,
however, "HOSTING BUSINESS CUSTOMERS" shall exclude any Person which, prior to
the Closing Date, (a) notified Hosting or Networks, as the case may be, of its
intention to cease purchasing goods and services from Hosting or Networks, as
the case may be, and (b) ceased purchasing goods and services from Hosting or
Networks, as the case may be prior to the Closing Date.
"HOSTING CONTRACTS" means all contracts, leases, accounts receivable,
licenses, employment agreements, instruments and other agreements to the extent
that they are used or held for use by Hosting following the consummation of the
Contribution Transaction in connection with the operation of the Hosting
Business of Hosting as currently operated by Hosting; provided, however, the
Hosting Contracts shall exclude any contracts, leases, accounts receivable,
licenses employment agreements, instruments and other agreements which
constitute an Excluded Hosting Asset. Notwithstanding the foregoing, Hosting
Contracts shall not include any contracts, leases, accounts receivable,
licenses, employment agreements, instruments and other agreements that are not
listed on SCHEDULE 3(l) attached hereto (as such SCHEDULE 3(l) attached hereto
may be amended from time to time pursuant to SECTION 6(j) of this Agreement).
"HOSTING CUSTOMER SECURITY DEPOSITS" means those Cash security deposits
held by Hosting and Networks as security for the payment by certain Hosting
Business Customers for services provided by the Hosting Business of Hosting and
Networks and which are set forth on SCHEDULE 1(g) attached hereto.
"HOSTING FINANCIAL STATEMENTS" has the meaning set forth in SECTION 3(d) of
this Agreement.
"HOSTING INTELLECTUAL PROPERTY RIGHTS" means all right, title and interest
in and to all Intellectual Property Rights to the extent that they are used or
held for use by Hosting following the consummation of the Contribution
Transaction in connection with the operation of the Hosting Business of Hosting
as currently operated by Hosting, including (a) all Intellectual Property Rights
with respect to web sites, URLs and domain names, (b) the Intellectual Property
Rights set forth on SCHEDULE 3(p)(iii) and SCHEDULE 3(p)(iv) attached hereto and
(c) all rights of Hosting arising under licenses and sublicenses and other
agreement or permissions obtained with respect to any of the foregoing
Intellectual Property Rights, together with all income, royalties, damages and
payments due to Hosting and payable on the Closing Date or thereafter (including
damages and payments due to Hosting for past or future infringements or
misappropriations thereof by third parties), remedies against infringements
thereof and rights to protection of interests therein (including the right to
▇▇▇ and recover for past infringements and
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misappropriations thereof), and any and all corresponding rights that now or
hereafter may arise or be secured under the Laws of all jurisdictions; provided,
however, the Hosting Intellectual Property Rights shall exclude any Intellectual
Property Rights which constitute an Excluded Hosting Asset.
"HOSTING MATERIAL ADVERSE EFFECT" means a material and adverse effect upon
the business, operations, assets, liabilities, condition (financial or
otherwise), operating results, prospects, cash flow, net worth or employee,
customer or supplier relations of the Hosting Business of Hosting and Networks
as currently operated by Hosting and Networks.
"HOSTING MATERIAL CONTRACTS" has the meaning set forth in SECTION 3(l).
"HOSTING LEASED REAL PROPERTY" has the meaning set forth in SECTION 3(n) of
this Agreement.
"HOSTING PERMITS AND LICENSES" means all franchises, authorizations,
approvals, permits, licenses, orders, registrations, certificates, variances and
similar rights obtained from Governmental Entities to the extent that they are
used or held for use by Hosting in connection with the operation of the Hosting
Business of Hosting as currently operated by Hosting and includes all such items
identified on SCHEDULE 1(d) attached hereto; provided, however, the Hosting
Permits and Licenses shall exclude any franchises, authorizations, approvals,
permits, licenses, orders, registrations, certificates, variances and similar
rights obtained from Governmental Entities which constitute an Excluded Hosting
Asset.
"HOSTING REAL PROPERTY LEASES" has the meaning set forth in SECTION 3(n) of
this Agreement.
"HOSTING RECORDS AND MISCELLANEOUS ITEMS" means all of the following, to
the extent that they are used or held for use by Hosting following the
consummation of the Contribution Transaction in connection with the operation of
the Hosting Business of Hosting as currently operated by Hosting: (a) lists of
the Hosting Business Customers, information regarding the Hosting Business
Customers and related pricing information; (b) Claims, deposits, prepayments,
refunds, causes of action, choices in action, rights of recovery, rights of set
off, prepaid operating expenses, deposits, warranties and rights of recoupment
(other than any such item relating to the payment of Taxes paid by Hosting); (c)
books, records, ledgers, files, documents, correspondence, lists, plats,
architectural plans, drawings and specifications, creative materials,
advertising, marketing and promotional materials, studies, reports and other
printed or written materials; (d) any Debt Securities (under which Hosting is
the lender) or Equity Securities held by Hosting immediately prior to the
Closing; (e) telephone, telefax and telex numbers and listings in all telephone
books, Internet sites and directories used solely in the Hosting Business of
Hosting; and (f) all of the items identified on SCHEDULE 1(e) attached hereto;
provided, however, the Hosting Records and Miscellaneous Items shall exclude any
of the foregoing items which constitute an Excluded Hosting Asset.
"HOSTING SERVICES AGREEMENT" means that certain Inter-Company Management
and Services Agreement, dated as of February 28, 2002, by and between Networks
and Hosting, as amended, modified, restated, superseded or replaced from time to
time.
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"HOSTING TANGIBLE PERSONAL PROPERTY" means all tangible personal property
(including all machinery, equipment, inventories of raw materials and supplies,
manufactured and purchased parts, goods in process and finished goods,
furniture, automobiles, trucks, tractors, trailers, tools, and dies) used or
held for use by Hosting following the consummation of the Contribution
Transaction in connection with the operation of the Hosting Business of Hosting
as currently operated by Hosting including the tangible personal property set
forth on SCHEDULE 1(f) attached hereto; provided, however, the Hosting Tangible
Personal Property shall exclude any tangible personal property which constitutes
an Excluded Hosting Asset.
"IMPROVEMENTS" means all buildings, structures, fixtures, building systems
and equipment, and all components thereof, including the roof, foundation,
load-bearing walls and other structural elements thereof, heating, ventilation,
air conditioning, mechanical, electrical, plumbing and other building systems,
environmental control, remediation and abatement systems; sewer, storm and waste
water systems, irrigation and other water distribution systems, parking
facilities; fire protection, security and surveillance systems,
telecommunications, computer wiring and cable installations and landscaping.
"INDEBTEDNESS" with respect to any Person means (a) any Liability of such
Person for borrowed money, including: (i) any Liabilities incurred for all or
any part of the purchase price of property or other assets or for the cost of
property or other assets constructed or of improvements thereto, other than
accounts payable included in current Liabilities and incurred in respect of
property purchased in the Ordinary Course of Business, (whether or not such
Person has assumed or become liable for the payment of such Liabilities)
(whether accrued, absolute, contingent, unliquidated or otherwise, known or
unknown, whether due or to become due) and whether or not secured by liens; (ii)
the face amount of all letters of credit issued for the account of such Person
and all drafts drawn thereunder; (iii) capitalized lease obligations; and (iv)
all Guarantees of such Person; (b) accounts payable of such Person that have not
been paid within sixty (60) calendar days of their due date; and (c) retroactive
insurance premium obligations.
"INDEMNITEE" has the meaning set forth in SECTION 8(d)(i) of this
Agreement.
"INDEMNITOR" has the meaning set forth in SECTION 8(d)(i) of this
Agreement.
"INITIAL PURCHASE SHARES" has the meaning set forth in SECTION 2(c) of this
Agreement.
"INTELLECTUAL PROPERTY RIGHTS" means all (a) patents, patent applications
and patent disclosures; (b) trademarks, service marks, trade dress, trade names,
logos, slogans, corporate names, Internet domain names and registrations and
applications for registration thereof, together with all of the goodwill
associated therewith (and all translations, adaptations, derivations and
combinations of the foregoing); (c) copyrights (registered or unregistered) and
copyrightable works and registrations and applications for registration thereof;
(d) mask works and registrations and applications for registration thereof; (e)
computer software (including, but not limited to, source code and executable
code), data, databases and documentation thereof; (f) trade secrets and other
confidential information (including ideas, formulas, compositions, inventions
(whether patentable or unpatentable and whether or not reduced to practice),
know-how, manufacturing and production processes and techniques, research and
development information, customer accounts, identifying information regarding
customers, drawings,
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specifications, designs, plans, proposals, technical data, financial and
marketing plans and customer and supplier lists and information); (g) domain
names, (h) other intellectual property or proprietary rights; and (i) copies and
tangible embodiments thereof (in whatever form or medium).
"INVESTMENT" as applied to any Person means (a) any direct or indirect
purchase or other acquisition by such Person of any Debt Securities, Equity
Securities, obligations, instruments or ownership interests (including
partnership interests and joint venture interests) of any other Person and (b)
any capital contribution by such Person to any other Person.
"INVESTOR RIGHTS AGREEMENT" means that certain Investor Rights Agreement,
dated as of the Closing Date, by and among VitalStream, Hosting and the other
signatories thereto in the form of EXHIBIT C attached hereto, as amended,
modified, restated, superseded or replaced from time to time.
"KNOWLEDGE" except as provided expressly herein, means the actual knowledge
or awareness of a Person (which shall include the actual knowledge and awareness
of the executive officers and directors of such Person and, in the case of
VitalStream only, its Subsidiaries) after making reasonable inquiry and
reasonable diligence with respect to the particular matter in question.
"LAWS" means all constitutions, statutes, laws, treaties, codes,
ordinances, regulations, rules, orders, judgments, writs, injunctions, acts,
determinations, directions or decrees of any Governmental Entity.
"LEGAL REQUIREMENT" means any requirement arising under any action or Law
of an arbitrator or Governmental Entity, including any Environmental, Health,
and Safety Requirements.
"LEASE CONSENTS" has the meaning set forth in SECTION 7(a) of this
Agreement.
"LEASED REAL PROPERTY" means all leasehold or subleasehold estates and
other rights to use or occupy any land, buildings, structures or other
Improvements or interest in Real Property.
"LIABILITY" means any liability or obligation (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability or obligation for Taxes.
"LIENS" means any mortgage, pledge, restriction, security interest,
encumbrance, option, lien or charge of any kind (including any conditional sale
or other title retention agreement or lease in the nature thereof), any sale of
receivables with recourse against a Party, any filing or agreement to file a
financing statement as debtor under the Uniform Commercial Code or any similar
statute other than to reflect ownership by a third party of property leased to a
Party or any of its Subsidiaries under a lease which is not in the nature of a
conditional sale or title retention agreement, or any subordination arrangement
in favor of another Person (other than any subordination arising in the Ordinary
Course of Business).
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"LOS ANGELES LEASE AGREEMENT" means that certain Sublease, dated November
15, 1999, by and between Networks and Charter Holdings, Inc., as amended by
First Amendment to Sublease, dated March 1, 2000.
"LOSS" and "LOSSES" have the meanings set forth in SECTION 8(b) of this
Agreement.
"MARKET PRICE" of any security means either (a) if such security is listed
on an exchange, the closing prices of such security on the principal exchange on
which such security is listed, or, if there has been no sales on such exchange
on any day, the closing price of such security on the principal exchange on the
most recent day on which sales have taken place on such exchange or (b) if such
security is not listed on an exchange but is quoted in the NASDAQ System or on
the domestic over-the-counter market as reported by the National Quotation
Bureau, the average of the closing sales prices as reported by the NASDAQ System
or the National Quotation Bureau, as applicable, in each case over a period of
five (5) days consisting of the day as of which the "MARKET PRICE" is being
determined and the four (4) consecutive business days prior to such day on which
trades were reported in such security. If at any time such security is not
listed on any securities exchange or quoted in the NASDAQ System or the
over-the-counter market, the "MARKET PRICE" shall be the Fair Market Value
thereof.
"MASTER ACCESS AGREEMENT" means that certain Master Access Agreement, dated
as of the Closing Date, by and between VitalStream and Netifice, in the form of
EXHIBIT D attached hereto, as amended, modified, restated, superseded or
replaced from time to time.
"MERGER AGREEMENT" means that certain merger agreement by and between
VitalStream, VitalStream, Inc. and VitalStream Operating Corporation, dated
February 13, 2002.
"MERGER CLOSING DATE" means April 23, 2002.
"MOST RECENT VITALSTREAM BALANCE SHEET" means the balance sheet of
VitalStream as of August 31, 2002, contained within the VitalStream Financial
Statements.
"NETIFICE" means Netifice Communications Inc., a Delaware corporation.
"NETIFICE SERVICES AGREEMENT" means that certain Services Agreement, dated
as of October 9, 2002, by and between Netifice and Networks, as amended,
modified, restated, superseded or replaced from time to time.
"NETWORKS" means Epoch Networks, Inc., a California corporation.
"NETWORKS CONTRIBUTION AGREEMENT" means that certain Contribution Agreement
dated as of October 4, 2002, by and between Hosting and Networks pursuant to
which Networks contributed the Networks Contributed Assets (as defined in the
Networks Contribution Agreement) and Hosting assumed the Networks Contributed
Liabilities (as defined in the Networks Contribution Agreement), in the form
attached hereto as EXHIBIT E.
"NETWORKS DEFINED CONTRIBUTION PLAN" has the meaning set forth in SECTION
3(s) of this Agreement.
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"NETWORKS PLANS" has the meaning set forth in SECTION 3(s) of this
Agreement.
"NEX2 DISPOSITION" has the meaning set forth in SECTION 2(e) of this
Agreement.
"NEX2 DISPOSITION CONTINGENT SHARES" has the meaning set forth in SECTION
2(e) of this Agreement.
"NEX2" has the meaning set forth in SECTION 2(e) of this Agreement.
"NON-MATERIAL ASSETS" means (a) a group of assets or properties with a Fair
Market Value less than or equal to $20,000, in the aggregate, which are used or
held for use by Hosting or Networks in connection with the operation or conduct
of their respective Hosting Businesses and (b) Omitted Hosting Contracts that
the Buyer is deemed to have accepted pursuant to the third sentence of SECTION
6(j)(i) of this Agreement.
"OMITTED HOSTING CONTRACT" means any contract, lease, account receivable,
license, employment agreement, instrument and other agreement that would have
been a Hosting Contract but for the fact that such contract, lease, account
receivable, license, employment agreement, instrument or other agreement is not
listed on SCHEDULE 3(l) attached hereto.
"OPINION OF HOSTING'S COUNSEL" means an opinion of ▇▇▇▇▇ ▇▇▇▇▇▇, general
counsel to Hosting and Networks, substantially in the form attached hereto as
EXHIBIT F.
"OPINION OF VITALSTREAM'S COUNSEL" means an opinion of Stoel Rives LLP
legal counsel to VitalStream, substantially in the form attached hereto as
EXHIBIT G.
"OPTION SHARES" has the meaning set forth in SECTION 2(f) of this
Agreement.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"OTHER NETWORKS PLANS" has the meaning set forth in SECTION 3(s) of this
Agreement.
"OTHER VITALSTREAM PLANS" has the meaning set forth in SECTION 4(r) of this
Agreement.
"PARTIES" has the meaning set forth in the preamble of this Agreement.
"PERMITTED LIENS" means (a) Liens with respect to Taxes not yet due and
payable; (b) deposits or pledges made in connection with, or to secure payment
of, utilities or similar services; (c) mechanics', materialmen's or contractors'
Liens created by statute securing payment for amounts not yet due and payable;
(d) rights of landlords under any Real Property Leases; and (e) in the case of
VitalStream and the VitalStream Subsidiaries, purchase money Liens and Liens
securing rental payments under capital lease arrangements.
"PERSON" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization
or any other similar entity or organization or a Governmental Entity.
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"PURCHASE SHARES" has the meaning set forth in SECTION 2(c) of this
Agreement.
"PURCHASE SHARE DISTRIBUTEES" means Hosting, Networks, Holding, Dolphin
Fund I and Dolphin Fund II
"PURCHASE SHARE INDEMNITEES" has the meaning set forth in SECTION 8(c)(i)
of this Agreement.
"QUARTERLY REVENUE CONTINGENT SHARES" has the meaning set forth in SECTION
2(d)(i) of this Agreement.
"QUARTERLY REVENUE CONTINGENT SHARES STATEMENT" has the meaning set forth
in SECTION 2(d)(ii) of this Agreement.
"QUARTERLY REVENUE CONTINGENT SHARES PERIOD" has the meaning set forth in
SECTION 2(d)(i) of this Agreement.
"REAL PROPERTY" means all land, together with all Improvements and all
easements and other rights and interests appurtenant thereto (including air,
oil, gas, mineral and water rights).
"REAL PROPERTY LEASE" means a lease, sublease, license, concession and
other agreement (written or oral), including all amendments, extensions,
renewals, guaranties and other agreements with respect thereto, pursuant to
which a Person holds any Leased Real Property, including the right to all
security deposits and other amounts and instruments deposited by or on behalf of
such Person thereunder.
"REGISTRATION AGREEMENT" means that certain Registration Rights Agreement,
dated as of the Closing Date, by and between VitalStream and Hosting in the form
of EXHIBIT H attached hereto, as amended, modified, restated, superseded or
replaced from time to time.
"RESTRICTED PERIOD" has the meaning set forth in SECTION 6(e)(i)(A) of this
Agreement.
"RESTRICTED SECURITIES" means (a) the Purchase Shares and (b) any
securities issued with respect to the securities referred to in clause (a) above
by way of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization. As to
any particular Restricted Securities, such securities shall, subject to the
Escrow Agreement and SECTION 6(c)(v) of this Agreement cease to be Restricted
Securities when they have (i) been effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering them,
(ii) been distributed to the public through a broker, dealer or market maker
pursuant to Rule 144 or become eligible for sale pursuant to Rule 144(k) adopted
by the Securities and Exchange Commission under the Securities Act (as such rule
may be amended from time to time) or any similar rule or regulation hereafter
adopted by the Securities and Exchange Commission or (iii) been otherwise
transferred and new certificates for them not bearing the Securities Act legend
set forth in SECTION 6(c)(i) of this Agreement have been delivered by
VitalStream in accordance with SECTION 6(c) of this Agreement. Whenever any
particular securities cease to be Restricted Securities, the holder thereof
shall be entitled, subject to the Escrow Agreement and SECTION 6(c)(v) of this
Agreement to receive from
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VitalStream, without expense, new securities of like tenor not bearing a
Securities Act legend of the character set forth in SECTION 6(c)(i) of this
Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as amended and the rules
and regulations promulgated thereunder.
"SUBSIDIARY" means, with respect to any Person, any corporation, limited
liability company, partnership, association or other business entity of which
(a) if a corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (b) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control any managing director or general partner of such limited
liability company, partnership, association or other business entity.
"TAX" or "TAXES" means federal, state, county, local, foreign or other
income, gross receipts, ad valorem, franchise, profits, sales or use, transfer,
registration, excise, utility, environmental, communications, real or personal
property, capital stock, income, license, payroll, wage or other withholding,
employment, unemployment, social security, severance, stamp, occupation,
alternative or add-on minimum, estimated and other taxes of any kind whatsoever
(including deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not and including any obligations to indemnify or
otherwise assume or succeed to the tax Liability of any other Person.
"TAX RETURN" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"TRANSACTION AGREEMENTS" means this Agreement, the Assignment and
Assumption Agreement, the ▇▇▇▇ of Sale, Escrow Agreement, Convertible Promissory
Note and Warrant Purchase Agreement, Customer Migration Agreement, Colocation
Agreement, Master Access Agreement, Registration Agreement, Investor Rights
Agreement and all other agreements and instruments contemplated by each of the
foregoing instruments or agreements to which VitalStream, the Buyer, Hosting or
Networks is a party.
"TRANSFERRED EMPLOYEES" has the meaning set forth in SECTION 6(d) of this
Agreement.
"VITALSTREAM" has the meaning set forth in the preamble of this Agreement.
"VITALSTREAM DEFINED CONTRIBUTION PLAN" has the meaning set forth in
SECTION 4(r) of this Agreement.
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"VITALSTREAM FINANCIAL STATEMENTS" has the meaning set forth in SECTION
4(d) of this Agreement.
"VITALSTREAM GENERATED QUARTERLY NET REVENUES" has the meaning set forth in
SECTION 2(d)(i) of this Agreement.
"VITALSTREAM INDEMNITEES" has the meaning set forth in SECTION 8(b)(i) of
this Agreement.
"VITALSTREAM INTELLECTUAL PROPERTY RIGHTS" has the meaning set forth in
SECTION 4(p) of this Agreement.
"VITALSTREAM LEASED REAL PROPERTY" has the meaning set forth in SECTION
4(n) of this Agreement.
"VITALSTREAM MATERIAL ADVERSE EFFECT" means a material and adverse effect
upon the business, operations, assets, liabilities, condition (financial or
otherwise), operating results, prospects, cash flow, net worth or employee,
customer or supplier relations of VitalStream and the VitalStream Subsidiaries
taken as a whole.
"VITALSTREAM MATERIAL CONTRACTS" has the meaning set forth in SECTION 4(l).
"VITALSTREAM PARTY" has the meaning set forth in SECTION 5(f)(iii) of this
Agreement.
"VITALSTREAM PLANS" has the meaning set forth in SECTION 4(r) of this
Agreement.
"VITALSTREAM PROPOSED AMOUNTS" has the meaning set forth in SECTION
2(d)(ii) of this Agreement.
"VITALSTREAM REAL PROPERTY LEASES" has the meaning set forth in SECTION
4(n) of this Agreement.
"VITALSTREAM SECURITIES AND EXCHANGE COMMISSION REPORTS" has the meaning
set forth in SECTION 4(d) of this Agreement.
"VITALSTREAM SUBSIDIARIES" has the meaning set forth in SECTION 4(a) of
this Agreement.
"VITALSTREAM TRANSACTION" has the meaning set forth in SECTION 5(f)(iii) of
this Agreement.
"WARN ACT" means the Worker Adjustment and Retraining Notification Act of
1988, as amended, and any similar applicable foreign, state or local Law.
2. BASIC TRANSACTION.
(a) PURCHASE AND SALE OF ASSETS. On and subject to the terms and
conditions of this Agreement, at the Closing, the Buyer agrees to purchase from
Hosting and Networks, and Hosting and Networks agree to sell, transfer, assign,
convey and deliver to the Buyer, all of their respective right, title and
interest in and to the Acquired Assets, free and clear of all Liens, Claims,
Indebtedness and restrictions on transfer (except for Permitted Liens, the
Assumed
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Liabilities and restrictions on transfer set forth in any Hosting Contract) for
the consideration specified in SECTION 2(b) and SECTION 2(c) of this Agreement.
(b) ASSUMPTION OF LIABILITIES.
(i) On and subject to the terms and conditions of this Agreement,
at the Closing, the Buyer agrees to assume and thereafter become
responsible for and pay, perform or discharge all of the Assumed
Liabilities.
(ii) Each of Hosting and Networks expressly understands and agrees
that, except for the Assumed Liabilities, the Buying Parties have not
agreed to pay, will not be required to assume and will have no Liability
for any Liabilities of Hosting, Networks or any Affiliate of Hosting or
Networks. Without limiting the breadth of the foregoing, the Buying Parties
have not agreed to pay, will not be required to assume and will have no
Liability for the Excluded Hosting Liabilities, which Excluded Hosting
Liabilities will, as between Hosting and Networks, on the one hand, and the
Buying Parties, on the other hand, remain the sole responsibility of, and
will be satisfied by, Hosting and Networks, as the case may be.
(iii) The assumption by the Buyer of the Assumed Liabilities, and
the transfer thereof by Hosting and Networks, shall in no way expand the
rights or remedies of any third party against VitalStream, the Buyer,
Hosting, Networks or any of their respective Affiliates, officers,
directors, employees, shareholders and advisors as compared to the rights
and remedies which such third party would have had against such parties had
the Buyer not assumed such Assumed Liabilities. Hosting or Networks, as the
case may be, shall pay and discharge when due, or contest in good faith,
any of their respective Liabilities which constitute Excluded Hosting
Liabilities.
(c) CONSIDERATION. In addition to the assumption of the Assumed
Liabilities by the Buyer pursuant to SECTION 2(b) of this Agreement, in
consideration for sale of the Acquired Assets by Hosting and Networks to the
Buyer, VitalStream shall pay to Hosting the Cash Consideration and issue to
Hosting the Purchase Shares, in accordance with this SECTION 2(c).
(i) CASH CONSIDERATION. As partial consideration for the sale by
Hosting and Networks to the Buyer of the Acquired Assets, VitalStream
agrees to pay to Hosting at Closing cash in the amount of $250,000 (the
"CASH CONSIDERATION").
(ii) PURCHASE SHARES. VitalStream has duly authorized the issuance
of Common Stock pursuant to the terms of this Agreement. As partial
consideration for the sale by Hosting and Networks of the Acquired Assets
to the Buyer, VitalStream agrees to issue to Hosting a number of shares of
Common Stock (the "INITIAL PURCHASE SHARES") equal to the difference
between (A) the Fully Diluted Outstanding Common Stock DIVIDED BY 0.835
MINUS (B) the Fully Diluted Outstanding Common Stock (all such shares of
Common Stock together with such additional shares of Common Stock issued by
VitalStream to Hosting pursuant to the terms of this Agreement are
hereinafter referred to as the "PURCHASE SHARES"). Within ten (10) days of
the Closing Date, VitalStream shall issue and deliver two stock
certificates evidencing the Initial ▇▇▇▇▇▇▇▇
-▇▇-
▇▇▇▇▇▇ as follows: (1) one stock certificate shall evidence a number of
shares of Common Stock equal to 0.70 multiplied by the number of Initial
Purchase Shares and shall be issued in the name of, and shall be delivered
to, Hosting and (2) one stock certificate shall evidence a number of shares
of Common Stock equal to 0.30 multiplied by the number of Initial Purchase
Shares and shall be issued in the name of Hosting and shall be delivered to
the Escrow Agent to be held subject to the terms and conditions of the
Escrow Agreement. The Initial Purchase Shares delivered to the Escrow Agent
pursuant to the terms of this Agreement and held by the Escrow Agent
pursuant to the terms of the Escrow Agreement shall be available to satisfy
any amounts owed by Hosting or Networks to VitalStream pursuant to SECTION
8 of this Agreement, in each case subject to the terms of this Agreement
and the Escrow Agreement.
(d) POST-CLOSING ADJUSTMENT IN CONNECTION WITH THE ISSUANCE OF COMMON
STOCK PURSUANT SECTION 1.4(c)(iii) OF THE MERGER AGREEMENT.
(i) If VitalStream is required to issue any portion of the
8,789,907 shares of Common Stock (the "QUARTERLY REVENUE CONTINGENT
SHARES") pursuant to Section 1.4(b) and Section 1.4(c)(iii) of the Merger
Agreement (which number of shares of Common Stock shall be determined in
accordance with the Merger Agreement based upon VitalStream's and its
Subsidiaries' highest quarterly consolidated net revenue for any calendar
quarter during the period (the "QUARTERLY REVENUE CONTINGENT SHARES
PERIOD") beginning on the Merger Closing Date and ending on September 30,
2003 (the calendar quarter during such period in which such highest
quarterly consolidated net revenue occurs shall hereinafter be referred to
as the "HIGHEST CALENDAR QUARTER" and the consolidated net revenue of
VitalStream and its Subsidiaries generated during the Highest Calendar
Quarter shall hereinafter be referred to as the "HIGHEST CALENDAR QUARTER
NET REVENUES")), VitalStream shall, simultaneously with the issuance of
such Quarterly Revenue Contingent Shares, deliver to Hosting a stock
certificate registered in the name of Hosting evidencing an additional
number of shares of Common Stock in an amount equal to: (A) if (1) the
Highest Calendar Quarter Net Revenues is equal to or greater than
$3,000,000 and (2) the difference (such difference shall hereinafter be
referred to as the "VITALSTREAM GENERATED QUARTERLY NET REVENUES") between
(x) the Highest Calendar Quarter Net Revenues MINUS (y) that portion of the
Highest Calendar Quarter Net Revenues (such portion of the Highest Calendar
Quarter Net Revenues shall hereinafter be referred to as the "ACQUIRED
ASSETS GENERATED QUARTERLY NET REVENUES") generated by or from any of the
Hosting Business Customers, is equal to or greater than $3,000,000, then
zero; (B) if the Highest Calendar Quarter Net Revenues is equal to or
greater than $3,000,000 and the VitalStream Generated Quarterly Net
Revenues is less than $3,000,000, the product of (1) the number of
Quarterly Revenue Contingent Shares actually issued by VitalStream and (2)
a fraction, the numerator of which shall be the difference between (x)
$3,000,000 MINUS (y) the VitalStream Generated Quarterly Net Revenues, and
the denominator of which shall be $3,000,000; and (C) if the Highest
Calendar Quarter Net Revenues is less than $3,000,000, the product of (1)
the number of Quarterly Revenue Contingent Shares actually issued by
VitalStream and (2) a fraction, the numerator of which shall be the
Acquired Assets Generated Quarterly Net Revenues and the denominator of
which shall be the Highest Calendar Quarter Net Revenues.
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(ii) Simultaneously with the issuance of any Quarterly Revenue
Contingent Shares pursuant to Section 1.4(b) and Section 1.4(c)(iii) of the
Merger Agreement, VitalStream shall prepare and deliver to Hosting a
statement (the "QUARTERLY REVENUE CONTINGENT SHARES STATEMENT") setting
forth the number of Quarterly Revenue Contingent Shares issued, the Highest
Calendar Quarter Net Revenues, the VitalStream Generated Quarterly Net
Revenues and the Acquired Assets Generated Quarterly Net Revenues (the
amounts so determined by VitalStream and set forth in the Quarterly Revenue
Contingent Shares Statement being hereinafter respectively referred to as
the "VITALSTREAM PROPOSED AMOUNTS"). Hosting shall have fifteen (15) days
after their receipt of such statement to review the VitalStream Proposed
Amounts. VitalStream shall make the work papers, books, records and other
back-up materials used by VitalStream in preparing the Quarterly Revenue
Contingent Shares Statement or otherwise requested by Hosting available to
Hosting and its accountants and other representatives at reasonable times
and upon reasonable notice during the (A) preparation by VitalStream of the
Quarterly Revenue Contingent Shares Statement, (B) the fifteen (15) day
period referred to above and (C) resolution by the Parties of any
objections raised by Hosting to the VitalStream Proposed Amounts set forth
in the Quarterly Revenue Contingent Shares Statement. If Hosting shall
deliver to VitalStream a notice indicating its disagreement with any of the
VitalStream Proposed Amounts during the fifteen (15) day period referred to
above, the Parties shall, in good faith, attempt to resolve the
disagreement as to such contested VitalStream Proposed Amounts within
fifteen (15) days after VitalStream's receipt of such notice. If the
Parties fail to resolve such disagreement (a "DISPUTE") within such time
period, the Parties shall promptly refer such disagreement for resolution
to a Deciding Accountant in accordance with the provision of SECTION
2(d)(iii) of this Agreement. The number of Quarterly Revenue Contingent
Shares issued, the Highest Calendar Quarter Net Revenues, the VitalStream
Generated Quarterly Net Revenues and the Acquired Assets Generated
Quarterly Net Revenues as agreed to by the Parties or as determined by the
Deciding Accountant shall be final and binding for all purposes of this
Agreement.
(iii) In the event the Parties refer a Dispute to an accounting
firm, such accounting firm shall be selected by lot (from a group of six
Western-regional accounting firms agreed upon by the Parties after
excluding the respective regular outside accounting firms of VitalStream,
Hosting and Networks) (the "DECIDING ACCOUNTANT"). Each of the Parties
shall promptly furnish to the Deciding Accountant, at their own cost and
expense, such documents and information as the Deciding Accountant may
request in connection with such Dispute. The Deciding Accountant shall be
instructed to report its determination of the Dispute in writing to each of
the Parties within thirty (30) days after such engagement. The fees and
expenses payable to the Deciding Accountant with respect to all disputes
subject to the procedure set forth in SECTION 2(d)(ii), up to $15,000 in
the aggregate, shall be borne by VitalStream after which all such fees and
expenses shall be paid 50% by Hosting and Networks, on the one hand, and
50% by VitalStream, on the other hand.
(iv) All amounts calculated for purposes of this SECTION 2(d) shall
be calculated from the books and records of VitalStream in accordance with
GAAP applied on a consistent basis in accordance with VitalStream's past
practice.
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(v) Any additional shares of Common Stock issued by VitalStream
pursuant to this SECTION 2(d) shall not be subject to the terms of the
Escrow Agreement.
(e) POST-CLOSING ADJUSTMENT IN CONNECTION WITH THE ISSUANCE OF COMMON
STOCK PURSUANT SECTION 1.4(c)(iv) OF THE MERGER AGREEMENT. If VitalStream is
required to issue any portion of the 1,318,488 shares of Common Stock (the "NEX2
DISPOSITION CONTINGENT SHARES") pursuant to Section 1.4(b) and Section
1.4(c)(iv) of the Merger Agreement as a result of the disposition of Nex2, Inc.
("NEX2") by VitalStream (the "NEX2 DISPOSITION"), VitalStream shall,
simultaneously with the issuance of such Nex2 Disposition Contingent Shares,
deliver to Hosting a stock certificate registered in the name of Hosting
evidencing an additional number of shares of Common Stock in an amount equal to
the difference between (i) the number of Nex2 Disposition Contingent Shares
divided by 0.835 MINUS (ii) the number of Nex2 Disposition Contingent Shares.
Any additional shares of Common Stock issued by VitalStream pursuant to this
SECTION 2(e) shall not be subject to the terms of the Escrow Agreement.
(f) POST-CLOSING ADJUSTMENT IN CONNECTION WITH THE ISSUANCE OF COMMON
STOCK PURSUANT SECTION 1.4(c)(v) OF THE MERGER AGREEMENT. If VitalStream is
required to issue any portion of the 1,133,905 shares of Common Stock (the
"OPTION SHARES") pursuant to Section 1.4(b) and Section 1.4(c)(v) of the Merger
Agreement as a result of the amount of proceeds received by VitalStream in
connection with the exercise of the "Outstanding Parent Options" (as defined in
the Merger Agreement), VitalStream shall, simultaneously with the issuance of
such Option Shares, deliver to Hosting a stock certificate registered in the
name of Hosting evidencing an additional number of shares of Common Stock in an
amount equal to the difference between (i) the number of Option Shares divided
by 0.835 MINUS (ii) the number of Option Shares. Any additional shares of Common
Stock issued by VitalStream pursuant to this SECTION 2(f) shall not be subject
to the terms of the Escrow Agreement.
(g) ALLOCATION OF CONSIDERATION. The Parties agree to allocate the
aggregate consideration to be paid for the Acquired Assets in accordance with
Section 1060 of the Code. The Parties agree that VitalStream shall prepare and
provide to Hosting a draft allocation of the consideration to be paid among the
Acquired Assets within ninety (90) calendar days after the Closing Date. The
Parties agree that the amount of consideration to be allocated to the tangible
personal property or assets which constitute part of the Acquired Assets in
connection with the allocation of the aggregate consideration to be paid for the
Acquired Assets (as adjusted pursuant to SECTION 2(d), SECTION 2(e) and SECTION
2(f) of this Agreement) pursuant to this SECTION 2(g) shall be $100,000. Hosting
shall notify VitalStream within thirty (30) calendar days of receipt of such
draft allocation of any objection Hosting may have thereto. The Parties agree to
resolve any disagreement with respect to such allocation in good faith. In
addition, the Parties hereby undertake and agree to file timely any information
that may be required to be filed pursuant to Treasury Regulations promulgated
under Section 1060(b) of the Code, and shall use the allocation determined
pursuant to this SECTION 2(g) in connection with the preparation of Internal
Revenue Service Form 8594 as such form relates to the transactions contemplated
by this Agreement. No Party shall file any Tax Return or other document or
otherwise take any position which is inconsistent with the allocation determined
pursuant to this Section except as may be adjusted by subsequent agreement
following an audit by the Internal Revenue Service or by court decision.
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(h) THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of VitalStream located
at ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ commencing at 9:00 a.m. local
time on the date of satisfaction or waiver of all conditions to the obligations
of the Parties to consummate the transactions contemplated hereby (other than
conditions with respect to actions the Parties will take at the Closing itself)
or such other date as the Parties may mutually determine in writing (the
"CLOSING Date").
(i) DELIVERIES AT THE CLOSING. At the Closing: (i) Hosting and/or Networks
will deliver to the VitalStream the various certificates, instruments and
documents referred to in SECTION 7(a) of this Agreement; (ii) the Buying Parties
will deliver to Hosting and Networks the various certificates, instruments and
documents referred to in SECTION 7(b) of this Agreement; (iii) Hosting and
Networks will execute and deliver to the Buyer (A) the instrument of assignment
substantially in the form of EXHIBIT J attached hereto (the "ASSIGNMENT AND
ASSUMPTION AGREEMENT"), (B) the instrument of sale, transfer, conveyance, and
assignment substantially in the form of EXHIBIT K attached hereto (the "▇▇▇▇ OF
SALE"), and (C) such other instruments, certificates and agreements as
VitalStream and its counsel may reasonably request (including any documents
evidencing the transfer of the Hosting Intellectual Property Rights); (iv) the
Buyer will execute and deliver to Hosting and Networks (A) the Assignment and
Assumption Agreement and (B) such other instruments, certificates and agreements
as Hosting, Networks and their counsel may reasonably request; (v) VitalStream
will execute and deliver to Hosting (A) the Cash Consideration by wire transfer
of immediately available funds (B) the Assignment and Assumption Agreement and
(C) such other instruments, certificates and agreements as Hosting and its
counsel may reasonably request; and (vi) VitalStream will execute and deliver to
Networks (A) the Assignment and Assumption Agreement and (B) such other
instruments, certificates and agreements as Networks and its counsel may
reasonably request.
(j) POST-CLOSING DELIVERIES. Within 10 days following the Closing Date,
(i) VitalStream will execute and deliver to Hosting a stock certificate
evidencing the Initial Purchase Shares to be issued to Hosting pursuant to
SECTION 2(c)(ii) of this Agreement registered in the name of Hosting and (ii)
VitalStream will execute and deliver to the Escrow Agent a stock certificate
evidencing the Initial Purchase Shares to be escrowed pursuant to SECTION
2(c)(ii) of this Agreement, registered in the name of Hosting.
3. REPRESENTATIONS AND WARRANTIES OF HOSTING AND NETWORKS. As a material
inducement to the Buying Parties to enter into this Agreement, Hosting and
Networks, jointly and severally, hereby represent and warrant to the Buying
Parties that the statements contained in this SECTION 3 are correct and complete
as of the date hereof (or on the date as of which they are made, in the case of
any representation or warranty which specifically relates to an earlier date).
(a) ORGANIZATION, CORPORATE POWER AND LICENSES. Each of Hosting and
Networks is a corporation duly organized, validly existing and in good standing
under the Laws of its respective jurisdiction of incorporation and is qualified
to do business in every jurisdiction in which such qualification is required,
except where failure to be so qualified would not reasonably be expected to have
a Hosting Material Adverse Effect. Each of Hosting and Networks possesses all
requisite corporate power and authority and all material licenses, permits and
authorizations necessary to own and operate its properties, to carry on its
Hosting Business
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as now conducted and presently proposed to be conducted and to carry out the
transactions contemplated by this Agreement and the other Transaction Agreements
to which it is a party except where such failure would not reasonably be
expected to have a Hosting Material Adverse Effect. SCHEDULE 3(a) contains a
list of all jurisdictions in which each of Hosting and Networks are qualified or
licensed to do business and a list of all of the Hosting Permits and Licenses.
The copies of Hosting's and Networks' charter documents and bylaws to which
VitalStream has been provided access reflect all amendments made thereto at any
time prior to the date of this Agreement and are correct and complete.
(b) APPROVAL AND CONSENTS; AUTHORIZATION; NO BREACH. Each of Hosting and
Networks has full power and authority (including full corporate power and
authority) to execute and deliver this Agreement and each of the other
Transaction Agreements to which it is a party and to perform its obligations
hereunder and thereunder. Without limiting the generality of the foregoing, the
execution and delivery by each of Hosting and Networks and the performance by
each of Hosting and Networks of this Agreement and each of the other Transaction
Agreements to which it is a party, and the consummation of the transactions
contemplated by this Agreement and the other Transaction Agreements have been
duly authorized by the respective boards of directors of each of Hosting and
Networks, by Networks, as the sole shareholder of Hosting, and by Holdings, as
the sole shareholder of Networks. Except as described above, no other corporate
proceedings on the part of Hosting or Networks are necessary to authorize the
execution and delivery of this Agreement or any other Transaction Agreements by
Hosting and Networks and the consummation by Hosting and Networks of the
transactions contemplated by this Agreement and the other Transaction
Agreements. Each of this Agreement and the other Transaction Agreements to which
Hosting or Networks is a party constitutes a valid and binding obligation of
Hosting and Networks enforceable in accordance with its terms, except as such
enforceability may be limited by (i) applicable insolvency, bankruptcy,
reorganization, moratorium or other similar Laws affecting creditors' rights
generally, and (ii) applicable equitable principles (whether considered in a
proceeding at law or in equity). Except as set forth on SCHEDULE 3(b) attached
hereto, the execution and delivery by Hosting and Networks of this Agreement and
the other Transaction Agreements to which Hosting or Networks is a party, and
the fulfillment of and compliance with the respective terms hereof and thereof
by Hosting and Networks do not and shall not (i) conflict with or result in a
breach of the terms, conditions or provisions of, (ii) constitute a default
under or result in the violation of, (iii) result in the creation of any Lien
upon Hosting's or Networks' capital stock or assets pursuant to, (iv) give any
third party the right to modify, terminate or accelerate any obligation under,
or (v) require any authorization, consent, approval, exemption or other action
by or notice or declaration to, or filing with, any third party or any
Governmental Entity (other than any filings required by state and federal
securities Laws) pursuant to, (A) the charter documents or bylaws of Hosting or
Networks, (B) any Law or Legal Requirement to which Hosting or Networks is
subject, or (C) any material agreement, instrument, order, judgment or decree to
which Hosting or Networks is subject.
(c) SUBSIDIARIES. All of the issued and outstanding Equity Securities of
Hosting are owned by Networks. All of the issued and outstanding Equity
Securities of Networks are owned by Holdings. Hosting has no Subsidiaries and
does not own or control, directly or indirectly, any shares of capital stock of
any other corporation or any interest in any partnership, joint venture or other
non-corporate business enterprise.
-21-
(d) HOSTING FINANCIAL STATEMENTS.
(i) Hosting has provided to VitalStream the following financial
statements (collectively, as to the financial statements set forth in
Section 3(d)(i)(A) and Section 3(d)(i)(B) of this Agreement, the "HOSTING
FINANCIAL STATEMENTS"), each of which is attached to this Agreement as
EXHIBIT M:
(A) an unaudited pro forma balance sheet of the Hosting
Business of Hosting and Networks as of August 31, 2002 (the "HOSTING
BALANCE SHEET"), and the related pro forma statements of operations,
and cash flows as of and for the one month ended August 31, 2002; and
(B) an unaudited balance sheet of the Hosting Business of
Hosting as of August 31, 2002, and the related statements of
operations and cash flows as of and for the eight months ended August
31, 2002.
(ii) The Hosting Financial Statements (A) are accurate and complete
in all material respects, (B) are consistent with the books and records of
Hosting and Networks, as the case may be (each of which, in turn, are
accurate and complete in all material respects), (C) were prepared in
accordance with GAAP applied on a consistent basis during the respective
periods involved (except as may be indicated therein or in the notes, if
any, thereto), subject to normal year-end audit adjustments, which will not
be material either individually or in the aggregate, and an absence of
required footnotes and (D) fairly present the financial position of the
Hosting Business of Hosting and Networks as at the date thereof and the
results of their operations and cash flows for the respective periods then
ended.
(iii) The total revenues of the Hosting Business conducted by
Networks and Hosting for the one month ended August 31, 2002 was $260,798
(which amount includes revenues generated by customers of Networks which
shall not be contributed by Networks to Hosting pursuant to the Networks
Contribution Agreement).
(e) NOTES AND ACCOUNTS RECEIVABLE; NOTES AND ACCOUNTS PAYABLE.
(i) All notes and accounts receivable of Hosting (including those
accounts receivable of Networks which were contributed to Hosting pursuant
to the Networks Contribution Agreement) are reflected properly on its books
and records, are valid receivables arising from bona fide transactions in
the Ordinary Course of Business subject to no setoffs, Claims or refusals
to pay, are current and collectible, and will be collected in accordance
with their terms at their recorded amounts, subject only to the reserve for
bad debts set forth on the face of the Hosting Balance Sheet (rather than
in any notes thereto) as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of Hosting and
Networks. SCHEDULE 3(e) attached hereto contains a listing of all of the
accounts receivable of each of Hosting and Networks (provided, in the case
of Networks, solely to the extent arising solely from the conduct by
Networks of its Hosting Business) as of August 31, 2002. Except as set
forth on SCHEDULE 3(e) attached hereto, as of August 31, 2002, (a) no
account or note debtor of
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Hosting is delinquent in payment by more than sixty (60) days and (b) the
aging schedule of the accounts receivable and notes receivable of Hosting
included in SCHEDULE 3(e) attached hereto is complete and accurate.
(ii) SCHEDULE 3(e) attached hereto contains a listing of all
accounts payable and notes payable (which shall include any service level
agreement credits, services or goods that have been paid for but not
provided or delivered, and similar items) that each of Hosting and Networks
(provided, in the case of Networks, solely to the extent arising solely
from the conduct by Networks of its Hosting Business) will owe (or have any
Liability with respect to) as of August 31, 2002. Except as set forth on
SCHEDULE 3(e) attached hereto, as of August 31, 2002, all such accounts
payable and notes payable arose from bona fide transactions in the Ordinary
Course of Business and, no such account payable or note payable is
delinquent by more than sixty (60) days in its payment.
(f) GUARANTIES. Except as set forth on SCHEDULE 3(f) attached hereto,
Hosting is not a guarantor of or otherwise is liable for, and no assets or
properties of Hosting are subject to, or security for, any Liability (including
Indebtedness) of any other Person.
(g) TITLE TO ASSETS; CONDITION OF ASSETS; SUFFICIENCY OF ASSETS. Either
Hosting or Networks has good and marketable title to, or a valid leasehold
interest in, the Acquired Assets (other than properties and assets disposed of
in the Ordinary Course of Business since the date of the Hosting Balance Sheet),
free and clear of all Liens, Claims, Indebtedness and restrictions on transfer,
except for (i) Permitted Liens and (ii) the Liens set forth on SCHEDULE 3(g)
attached hereto. All of the equipment and other tangible assets included in the
Acquired Assets are free from material defects (patent or latent), have been
maintained in good operating condition and repair (subject to normal wear and
tear), and are suitable for the purpose for which they presently are used by
Hosting and Networks in the conduct of their respective Hosting Businesses.
Except for (i) the Excluded Hosting Assets, (ii) any Non-Material Assets, (iii)
any properties or assets (tangible or intangible) needed to supply the services
provided to Networks and Hosting pursuant to the Hosting Services Agreement,
(iv) any properties or assets (tangible or intangible) needed to supply the
services provided to Hosting pursuant to the Netifice Services Agreement, (v)
any properties or assets (tangible or intangible) needed to supply the services
provided to Hosting pursuant to the Customer Migration Agreement, (vi) any
properties or assets (tangible or intangible) needed to supply the services
provided to Hosting pursuant to the Master Access Agreement and (vii) any
properties or assets (tangible or intangible) set forth on SCHEDULE 3(g)
attached hereto, the Acquired Assets include all of the properties or assets
(tangible or intangible) necessary for the Buyer to, and used immediately prior
to the Closing by Hosting to, (x) conduct the Hosting Business as presently
conducted by Hosting and (y) conduct the Hosting Business as conducted by
Networks immediately prior to the consummation of the transactions contemplated
by the Networks Contribution Agreement.
(h) ABSENCE OF UNDISCLOSED LIABILITIES. Neither Hosting nor Networks
(provided, in the case of Networks, solely with respect to the conduct by
Networks of its Hosting Business) has any Liability (and there is no basis for
any present or future Claim giving rise to any Liability), except for (i)
Liabilities not required to be reflected on a balance sheet of the Hosting
Business conducted by Hosting and Networks prepared in accordance with GAAP
consistently applied in accordance with Hosting's and Networks' past practice,
(ii) Liabilities set forth on the
-23-
face of the Hosting Balance Sheet (rather than in any notes thereto), (iii)
Liabilities which have arisen after the date of the Hosting Balance Sheet in the
Ordinary Course of Business (none of which results from, arises out of, relates
to, is in the nature of, or was caused by any Claim, breach of contract, breach
of warranty, tort, infringement, Environmental, Health, and Safety Requirements
or violation of Law) and (iv) the Assumed Liabilities.
(i) ABSENCE OF CERTAIN DEVELOPMENTS. Except as set forth in SCHEDULE 3(i)
attached hereto and for the transactions contemplated by this Agreement and the
other Transaction Agreements, since August 31, 2002, no event has occurred or is
anticipated, and no fact or facts exists, that individually or in the aggregate
have had or could have a Hosting Material Adverse Effect. Without limiting the
generality of the foregoing, since August 31, 2002, neither Networks nor Hosting
(provided, in the case of Networks, with respect to each of the following items,
solely with respect to the conduct by Networks of its Hosting Business):
(i) has sold, leased, transferred, or assigned any of its assets,
tangible or intangible necessary for, or useful in, the conduct by Hosting
or Networks of their respective Hosting Businesses, other than for a fair
consideration in the Ordinary Course of Business;
(ii) has entered into any agreement, contract, lease, or license
(or series of related agreements, contracts, leases, and licenses) either
involving more than $25,000 or outside the Ordinary Course of Business;
(iii) has accelerated, terminated, modified, or cancelled any
agreement, contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) involving more than $25,000 to which
Hosting or Networks is a party or by which either of them is bound (and no
other party to any such agreement, contract, lease, or license (or series
of related agreements, contracts, leases, and licenses) has accelerated,
terminated, modified, or cancelled any such agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and licenses);
(iv) has imposed, or permitted to exist, any Liens (except for
Permitted Liens) upon any of its assets, tangible or intangible;
(v) has made any capital expenditure (or series of related capital
expenditures) either involving more than $25,000 or outside the Ordinary
Course of Business;
(vi) has made any Investment in, any loan to, or any acquisition of
the assets of, any other Person (or series of related capital Investments,
loans, and acquisitions) outside the Ordinary Course of Business;
(vii) has issued any Debt Security or created, incurred, assumed, or
Guaranteed any Indebtedness for borrowed money or capitalized lease
obligation either involving more than $10,000 singly or $50,000 in the
aggregate;
(viii) has delayed or postponed the payment of accounts payable or
other Liabilities outside the Ordinary Course of Business;
-24-
(ix) has cancelled, compromised, waived, or released any right or
Claim (or series of related rights and Claims) either involving more than
$10,000 or outside the Ordinary Course of Business;
(x) has granted any license or sublicense of any rights under or
with respect to any Hosting Intellectual Property Rights, other than in the
Ordinary Course of Business;
(xi) has experienced any damage, destruction, or loss (whether or
not covered by insurance) to its properties or assets;
(xii) has made any loan to, or entered into any other transaction
with, any of its Affiliates, stockholders, directors, officers or employees
outside the Ordinary Course of Business;
(xiii) has entered into any employment contract or collective
bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement relating to or affecting any employee
of Hosting or Networks;
(xiv) has granted any increase in the base compensation of any of
the directors, officers or employees of Hosting or Networks outside the
Ordinary Course of Business or has granted any increase at all in the base
compensation of any of the Transferred Employees;
(xv) has adopted, amended, modified, or terminated any bonus,
profit sharing, incentive, severance, or other plan, contract, or
commitment for the benefit of any of the directors, officers or employees
of Hosting or Networks, or taken any such action with respect to any other
Employee Benefit Plan;
(xvi) has made any other change in employment terms for any of the
directors, officers or employees of Hosting or Networks outside the
Ordinary Course of Business or has made any change at all in the employment
terms for any of the Transferred Employees; and
(xvii) has not collected any accounts receivable out of the Ordinary
Course of Business; and
(xviii) has committed to any of the foregoing.
(j) COMPLIANCE WITH LAWS. Except as set forth in SCHEDULE 3(j) attached
hereto, neither Networks nor Hosting (provided, in the case of Networks, with
respect to each of the following items, solely with respect to the conduct by
Networks of its Hosting Business) has violated any Law or Legal Requirement and
neither Hosting nor Networks has not received any written notice alleging any
such violation.
(k) LITIGATION. Except as set forth in SCHEDULE 3(k) attached hereto,
neither Networks nor Hosting (provided, in the case of Networks, solely with
respect to the conduct by Networks of its Hosting Business) is (i) subject to
any outstanding injunction, judgment, order, decree, ruling, or charge or (ii) a
party or, to the Knowledge of Hosting and Networks, threatened to be
-25-
made a party to any Claim at law or in equity, before any Governmental Entity or
that could come before any arbitrator. None of the Claims set forth in SCHEDULE
3(k) attached hereto could, either individually or in the aggregate, result in
or have a Hosting Material Adverse Effect. To the Knowledge of Hosting and
Networks, neither Hosting nor Networks has any reason to believe that any such
Claim may be brought against Hosting or Networks.
(l) CONTRACTS AND COMMITMENTS.
(i) Except as expressly contemplated by this Agreement or as set
forth in SCHEDULE 3(l) attached hereto, neither Networks nor Hosting
(provided, in the case of Networks, with respect to each of the following
items, solely with respect to the conduct by Networks of its Hosting
Business) is a party to or bound by any written or oral:
(A) pension, profit sharing, stock option, employee stock
purchase or other plan or arrangement providing for deferred or other
compensation to employees or any other employee benefit plan or
arrangement, or any collective bargaining agreement or any other
contract with any labor union, or severance agreements, programs,
policies or arrangements;
(B) contract for the employment of any officer, individual
employee or other Person on a full-time, part-time, consulting or
other basis providing annual compensation in excess of $75,000 or
contract relating to loans to officers, directors or Affiliates
(unless terminable at will without severance obligations);
(C) contract or agreement with any Governmental Entity
entered into outside the Ordinary Course of Business;
(D) contract under which Hosting or Networks has advanced or
loaned any other Person amounts in the aggregate exceeding $10,000;
(E) agreement or indenture relating to borrowed money or
other Indebtedness or the mortgaging, pledging or otherwise placing a
Lien (other than a Permitted Lien) on any assets of Hosting or
Networks;
(F) Guarantee of any Liability of any Person;
(G) settlement, conciliation or similar agreement under which
such party has any future obligations or Liability;
(H) lease or agreement under which Hosting is lessee of or
holds or operates any property, real or personal, owned by any other
party, except for any lease of real or personal property under which
the aggregate annual rental payments do not exceed $25,000;
(I) lease or agreement under which Hosting or Networks is
lessor of or permits any third party to hold or operate any property,
real or personal, owned or controlled by Hosting Networks;
-26-
(J) contract or group of related contracts with the same
party or group of Affiliated parties the performance of which involves
the payment by Hosting or Networks of consideration in excess of
$25,000 annually;
(K) assignment, license, indemnification or agreement with
respect to any intangible property (including any Hosting Intellectual
Property Rights) entered into outside the Ordinary Course of Business;
(L) warranty agreement with respect to its services rendered
or its products sold or leased;
(M) agreement under which it has granted any Person any
registration rights (including demand and piggyback registration
rights), any rights of first refusal or vetoes on the sale of the
Acquired Assets;
(N) agreement relating to any Investment;
(O) contract or agreement prohibiting it from freely engaging
in any business or competing anywhere in the world; or
(P) any other agreement which is material to the operation of
its Hosting Business or business prospects or involves a consideration
in excess of $25,000 annually.
(ii) All of the contracts, agreements and instruments referenced on
SCHEDULE 3(l) attached hereto (the "HOSTING MATERIAL CONTRACTS") are valid,
binding and enforceable in accordance with their respective terms, except
as such enforceability may be limited by (i) applicable insolvency,
bankruptcy, reorganization, moratorium or other similar Laws affecting
creditors' rights generally, and (ii) applicable equitable principles
(whether considered in a proceeding at law or in equity). Hosting or
Networks, as the case may be, has performed all material obligations
required to be performed by it under the Hosting Material Contracts and is
not in default under or in breach of nor in receipt of any claim of default
or breach under any Hosting Material Contracts; no event has occurred which
with the passage of time or the giving of notice or both would result in a
default, breach or event of noncompliance by Hosting or Networks, as the
case may be, under any of the Hosting Material Contracts; neither Hosting
nor Networks has any present expectation or intention of not fully
performing all such obligations; neither Hosting nor Networks has any
Knowledge of any breach or anticipated breach of any material obligation to
be performed by the other parties to any of the Hosting Material Contracts.
(iii) VitalStream has been provided access to a true and correct
copy of each of the written Hosting Material Contracts, together with all
amendments, waivers or other changes thereto, and an accurate description
of each of the oral Hosting Material Contracts.
(m) TAX MATTERS.
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(i) Except as set forth in SCHEDULE 3(m) attached hereto, each of
Hosting and Networks has filed all Tax Returns which it is required to file
under applicable Laws. All such Tax Returns are complete and correct and
have been prepared in compliance with all applicable Laws in all material
respects. Each of Hosting and Networks has paid all Taxes due and owing by
it (whether or not such Taxes are required to be shown on a Tax Return) and
have withheld and paid over to the appropriate taxing authority all Taxes
which they were or are required to withhold from amounts paid or owing to
any employee, stockholder, creditor or other third party. Neither Hosting
nor Networks has waived any statute of limitations with respect to any
Taxes or agreed to any extension of time with respect to any Tax assessment
or deficiency. The accrual for Taxes on the Hosting Balance Sheet would be
adequate to pay all Tax Liabilities of Hosting and Networks (provided, in
the case of Networks, solely with respect to the conduct of by Networks of
its Hosting Business) (A) if Hosting's current Tax year were treated as
ending on the date of the Hosting Balance Sheet (excluding any amount
recorded which is attributable solely to timing differences between book
and Tax income), and (B) if Hosting's current Tax year were treated as
ending on the Closing Date and the accrual for Taxes on the Hosting Balance
Sheet was adjusted with the past custom and practice of Hosting in filing
its Tax Returns. Since the date of the Hosting Balance Sheet, neither
Hosting nor Networks has incurred any Liability for Taxes other than in the
Ordinary Course of Business. The assessment of any additional Taxes or
Hosting or Networks for periods for which Tax Returns have been filed by
Hosting or Networks shall not exceed the recorded Liability therefor on the
Hosting Balance Sheets (excluding any amount recorded which is attributable
solely to timing differences between book and Tax income). There has not
been any audit of any Tax Return filed by Hosting or Networks. Neither
Hosting nor Networks has consented to any waiver of the statute of
limitations for the assessment of any Taxes and had not requested any
extension of time for the payment of any Taxes. There are no Liens for
Taxes (other than Permitted Liens) upon any of the assets of Hosting or
Networks. No Claim has ever been made by an authority in a jurisdiction
where neither Hosting nor Networks file Tax Returns that either Hosting or
Networks is or may be subject to Taxation by that jurisdiction. No foreign,
federal, state or local Tax audits or administrative or judicial
proceedings are pending or being conducted with respect to Hosting or
Networks. No information related to Tax matters has been requested by any
foreign, federal, state or local Taxing authority, no written notice
indicating an intent to open an audit or other review has been received by
Hosting or Networks from any foreign, federal, state or local Taxing
authority, and no notice of deficiency or proposed adjustment for any
amount of Tax proposed, asserted or assessed by a Taxing authority against
Hosting or Networks has been received by Hosting or Networks and there are
no material unresolved questions or claims concerning Hosting's or
Networks' Tax Liability.
(ii) Neither Hosting nor Networks has made an election under
Section 341(f) of the Code. Neither Hosting nor Networks is liable for the
Taxes of another Person that is not a Subsidiary under (A) Treas. Reg.
Section 1.1502-6 (or comparable provisions of state, local or foreign Law),
(B) as a transferee or successor, (C) by contract or indemnity or (D)
otherwise. Neither Hosting nor Networks is a party to any Tax allocation or
sharing agreement. Neither Hosting nor Networks has made any payments, is
obligated
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to make payments or is a party to an agreement that could obligate it to
make any payments that would not be deductible under Section 280G of the
Code.
(n) REAL PROPERTY.
(i) Hosting does not own any Real Property. Networks does not own
any Real Property. Hosting is not a party to any agreement or option to
purchase any Real Property or interest therein.
(ii) SCHEDULE 3(n)(ii) attached hereto sets forth a true and
complete list of (A) the address of each parcel of all Leased Real Property
that is used or held for use by Hosting or Networks in connection with, the
operation of their respective Hosting Business as currently operated by
each of them (collectively, the "HOSTING LEASED REAL PROPERTY") and (B) the
date and the names of the parties to each Real Property Lease in respect of
each parcel of Hosting Leased Real Property (collectively, the "HOSTING
REAL PROPERTY LEASES"). Hosting and Networks has delivered to VitalStream a
true and complete copy of each written Hosting Real Property Lease, and in
the case of any oral Hosting Real Property Lease, a written summary of the
material terms of such Hosting Real Property Lease. Except as set forth on
SCHEDULE 3(n)(ii) attached hereto, with respect to each Hosting Real
Property:
(A) such Hosting Real Property Lease is legal, valid,
binding, enforceable and in full force and effect, except as such
enforceability may be limited by (1) applicable insolvency,
bankruptcy, reorganization, moratorium or other similar Laws affecting
creditors' rights generally and (2) applicable equitable principles
(whether considered in a proceeding at law or in equity);
(B) the transactions contemplated by this Agreement and the
other Transaction Agreements do not require the consent of any other
party to such Hosting Real Property Lease (except as set forth in
SCHEDULE 3(b) attached hereto), will not result in a breach of or
default under such Hosting Real Property Lease, and will not otherwise
cause such Hosting Real Property Lease to cease to be legal, valid,
binding, enforceable and in full force and effect on identical terms
following the Closing;
(C) Neither Hosting's nor Network's possession and quiet
enjoyment of the Hosting Leased Real Property under such Hosting Real
Property Lease has not been disturbed, and there are no disputes with
respect to such Hosting Real Property Lease;
(D) Neither Hosting's or Network's, on the one hand, nor, to
the Knowledge of Hosting and Networks, any other party to such Hosting
Real Property Lease, on the other hand, is in breach or default under
such Hosting Real Property Lease, and no event has occurred or
circumstance exists which, with the delivery of notice, the passage of
time or both, would constitute such a breach or default, or permit the
termination, modification or acceleration of rent under such Hosting
Real Property Lease;
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(E) Neither Hosting nor Networks owe in the future, any
brokerage commissions or finder's fees with respect to such Hosting
Real Property Lease;
(F) The other party to such Hosting Real Property Lease is
not an Affiliate of, and otherwise does not have any economic interest
in, Hosting or Networks;
(G) Neither Hosting nor Networks has subleased, licensed or
otherwise granted any Person the right to use or occupy such Hosting
Leased Real Property or any portion thereof;
(H) Neither Hosting nor Networks has collaterally assigned or
granted any other Lien in such Hosting Real Property Lease or any
interest therein; and
(I) Except as may arise by operation of law or under any
Hosting Real Property Lease, there are no Liens on the estate or
interest created by such Hosting Real Property Lease.
(iii) All Improvements included in the Hosting Leased Real Property
are in good condition and repair and sufficient for the operation of the
Hosting Business of Hosting and Networks as currently conducted thereon or
contemplated to be conducted thereon. There are no structural deficiencies
or latent defects affecting any of the Improvements and there are no facts
or conditions affecting any of the Improvements which would, individually
or in the aggregate, interfere in any respect with the use or occupancy of
the Improvements or any portion thereof in the operation of the Hosting
Business of Hosting and Networks as currently conducted thereon or
contemplated to be conducted thereon.
(iv) There is no condemnation, expropriation or other proceeding in
eminent domain, pending or threatened, affecting any parcel of Hosting
Leased Real Property or any portion thereof or interest therein. There is
no injunction, decree, order, writ or judgment outstanding, nor any Claims,
administrative actions or similar proceedings, pending or threatened,
relating to the ownership, lease, use or occupancy of the Hosting Leased
Real Property or any portion thereof, or the operation of the Hosting
Business of Hosting as currently conducted thereon or contemplated to be
conducted thereon.
(v) The Hosting Leased Real Property is in compliance with all
applicable Real Property Laws (including any Environmental, Health and
Safety Requirements, zoning, planning, subdivision, platting or similar
Laws) affecting the Hosting Leased Real Property, and the current use and
occupancy of the Hosting Leased Real Property and operation of the Hosting
Business of Hosting thereon does not violate any Real Property Laws.
Neither Hosting nor Networks has received any notice of violation of any
Real Property Law and there is no basis for the issuance of any such notice
or the taking of any action for such violation. There is no pending or
anticipated change in any Real Property Law that will have a Hosting
Material Adverse Effect on the ownership, lease, use or occupancy of any
Hosting Leased Real Property or any portion thereof in the
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continued operation of the Hosting Business of Hosting and Networks as
currently conducted thereon or contemplated to be conducted thereon.
(o) ENVIRONMENTAL MATTERS.
(i) Each of Hosting, Networks and their predecessors have complied
and each of Hosting and Networks is in compliance with all Environmental,
Health and Safety Requirements and all permits thereunder.
(ii) Neither Hosting, Networks nor any of their predecessors or
Affiliates has received any written or oral notice, report or other
information regarding any actual or alleged violation of Environmental,
Health, and Safety Requirements, or any Liabilities or potential
Liabilities, including any investigatory, remedial or corrective
Liabilities, relating to any of them or their facilities arising under
Environmental, Health, and Safety Requirements.
(iii) Neither Hosting, Networks nor their predecessors and
Affiliates has assumed or undertaken or otherwise become subject to any
Liability, including any Liability for corrective or remedial action, of
any other Person relating to Environmental, Health, and Safety
Requirements.
(iv) No facts, events or conditions relating to the past or present
facilities, properties or operations of Hosting or Networks, or any of
their predecessors or Affiliates will prevent, hinder or limit continued
compliance with Environmental, Health, and Safety Requirements, give rise
to any investigatory, remedial or corrective obligations pursuant to
Environmental, Health, and Safety Requirements, or give rise to any other
Liabilities pursuant to Environmental, Health, and Safety Requirements,
including any relating to onsite or offsite releases or threatened releases
of hazardous materials, substances or wastes, personal injury, property
damage or natural resources damage.
(v) None of Hosting, Networks or their predecessors or Affiliates
has treated, stored, disposed of, arranged for or permitted the disposal
of, transported, handled, or released any substance, including any
hazardous substance, or owned or operated any property or facility (and no
such property or facility is contaminated by any such substance) in a
manner that has given rise to Liabilities or give rise to Liabilities,
including any Liability for response costs, corrective action costs,
personal injury, property damage, natural resource damages or attorney
fees, pursuant to CERCLA or any other Environmental, Health, and Safety
Requirements.
(vi) Hosting has provided to VitalStream copies of all material
environmental reports, audits, assessments, and investigations, and any
other material environmental documents, related to the past or present
facilities, properties or operations of Hosting, Networks or their
predecessors or Affiliates, to the extent the forgoing are in the
possession, custody, or control of Hosting or Networks.
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(p) INTELLECTUAL PROPERTY RIGHTS.
(i) Hosting owns and possesses all right, title and interest in
and to, free and clear of any Liens, Claims, Indebtedness, licenses,
restrictions on transfer or any other restrictions or limitations, except
for (i) Permitted Liens and (ii) the Liens set forth on SCHEDULE 3(p)(i)
attached hereto, or has the right to use pursuant to a valid and
enforceable, written license, sublicense, agreement, or other permission,
all Hosting Intellectual Property Rights. Hosting has taken all
commercially reasonable actions to maintain and protect the Hosting
Intellectual Property Rights.
(ii) To the Knowledge of Hosting and Networks, neither Hosting nor
Networks (provided, in the case of Networks, solely with respect to the
conduct by Networks of its Hosting Business) has interfered with, infringed
upon, violated, misappropriated, or otherwise come into conflict with any
Intellectual Property Rights of any other Person and, to the Knowledge of
Hosting and Networks, neither Hosting nor Networks will interfere with,
infringe upon, violate, misappropriate or otherwise come into conflict with
any Intellectual Property Rights of any Person as a result of the continued
operation of its Hosting Business as presently conducted or as contemplated
to be conducted. Neither Hosting nor Networks (provided, in the case of
Networks, solely with respect to the conduct by Networks of its Hosting
Business) has ever received any Claim or notice alleging any such
interference, infringement, conflict, misappropriation, or violation
(including, but not limited to, any Claim that Hosting or Networks must
license or refrain from using any Intellectual Property Rights of any other
Person and any demand or offer to license any Intellectual Property Rights
from any Person), and neither Hosting nor Networks is aware of any facts
that indicate a likelihood of any of the foregoing. To the Knowledge of
Hosting and Networks, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Hosting
Intellectual Property Rights, and neither Hosting nor Networks is aware of
any facts that indicate a likelihood of any of the foregoing.
(iii) SCHEDULE 3(p)(iii) attached hereto identifies: (A) each patent
or registration which has been issued to Hosting or Networks with respect
to any Hosting Intellectual Property Rights and each pending patent
application or application for registration which Hosting or Networks has
made with respect to any Hosting Intellectual Property Rights; (B) each
license, sublicense, agreement, or other permission which Hosting or
Networks has granted to any Person with respect to any Hosting Intellectual
Property Rights (other than such licenses, sublicenses and other
permissions as are granted in the Ordinary Course of Business under the
terms of Hosting form licensing agreements), together with any exceptions;
(C) each material unregistered trademark, copyright, material service ▇▇▇▇,
trade name, corporate name or Internet domain name, computer software item
(other than commercially available off-the-shelf software purchased or
licensed for less than a total cost of $1,000 in the aggregate) within the
Hosting Intellectual Property Rights and (D) any other material Hosting
Intellectual Property Rights. Hosting or Networks has delivered to
VitalStream correct and complete copies of all such patents, registrations,
applications, licenses, sublicenses, agreements, and permissions (as
amended to date) and has made available to VitalStream correct and complete
copies of
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all other written documentation evidencing ownership and prosecution (if
applicable) of each such item.
(iv) SCHEDULE 3(p)(iv) attached hereto identifies each Hosting
Intellectual Property Right that any third party owns and that Hosting or
Networks uses pursuant to a written license, sublicense, agreement, or
permission (other than commercially available off-the-shelf software
purchased or licensed for less than a total cost of $1,000 in the
aggregate). Either Hosting or Networks has delivered to VitalStream correct
and complete copies of all such licenses, sublicenses, agreements, and
permissions (as amended to date). With respect to each Hosting Intellectual
Property Right required to be identified in SCHEDULE 3(p)(iv) attached
hereto:
(A) the license, sublicense, agreement, or permission
covering such Hosting Intellectual Property Right is legal, valid,
binding, enforceable, and in full force and effect;
(B) the license, sublicense, agreement, or permission
covering such Hosting Intellectual Property Right will continue to be
legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions
contemplated by this Agreement;
(C) to the Knowledge of Hosting and Networks no party to the
license, sublicense, agreement, or permission covering such Hosting
Intellectual Property Right is in breach or default, and, to the
Knowledge of Hosting and Networks, no event has occurred which with
notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(D) to the Knowledge of Hosting and Networks no party to the
license, sublicense, agreement, or permission covering such Hosting
Intellectual Property Right has repudiated any provision thereof;
(E) such Hosting Intellectual Property Right is not subject
to any outstanding injunction, judgment, order, decree, ruling, or
charge;
(F) no Claim is pending or, to the Knowledge of Hosting and
Networks (and employees of Hosting or Networks with responsibility for
Intellectual Property Right matters), is threatened which challenges
the legality, validity, or enforceability of such Hosting Intellectual
Property Right, and there are no grounds for the same; and
(G) neither Hosting nor Networks has granted any sublicense
or similar right with respect to the license, sublicense, agreement,
or permission covering such Hosting Intellectual Property Right.
(v) No Hosting Intellectual Property Right is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge. No
Claim is pending or, to the Knowledge of Hosting and Networks (and
employees of Hosting and Networks with responsibility for Intellectual
Property Right matters), threatened which challenges the
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legality, validity, enforceability, use, or ownership of any Hosting
Intellectual Property Right, and, to the Knowledge of Hosting and Networks,
there are no grounds for the same. To the Knowledge of Hosting and
Networks, no loss or expiration of any Hosting Intellectual Property Right
is threatened, pending, or reasonably foreseeable, except for patents
expiring at the end of their statutory terms (and not as a result of any
act or omission by Hosting, including, a failure by Hosting or Networks to
pay any required maintenance fees).
(q) EMPLOYEES.
(i) Hosting does not currently have, and has never had, any
employees.
(ii) Except as set forth on SCHEDULE 3(q) attached hereto:
(A) Networks is not party to or bound by any collective
bargaining agreement or relationship with any labor organization;
(B) To the Knowledge of Networks, no executive, key employee
or group of employees has any plans to terminate their employment with
Networks;
(C) to the Knowledge of Networks, no labor organization or
group of employees has filed any representation petition or made any
written or oral demand for recognition;
(D) no union organizing or decertification efforts are
underway or, to the Knowledge of Networks, threatened;
(E) within the past five (5) years no labor strike, work
stoppage, slowdown or other labor dispute has occurred, and none is
underway or, to the Knowledge of Networks, threatened;
(F) there is no ▇▇▇▇▇▇▇'▇ compensation Liability, experience
or matter that would reasonably be expected to have a Hosting Material
Adverse Effect; and
(G) there is no employment-related charge, complaint,
grievance, investigation, inquiry or Liability of any kind, pending or
threatened in any forum, relating to an alleged violation or breach by
Networks (or its officers or directors) of any Law, regulation or
contract and, to the Knowledge of Networks, no facts or circumstances
exist that would reasonably be expected to give rise to such a charge,
complaint, grievance, investigation, inquiry or Liability.
(iii) Any notice of the transaction contemplated by this Agreement
required under any Law or collective bargaining agreement has been given,
and all bargaining obligations with any labor organization or other
employee representative have been, or prior to Closing will be, satisfied.
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(iv) In connection with the transactions contemplated by this
Agreement, no plant closing or mass layoff of employees has been
implemented that could implicate the WARN Act.
(v) ANNEX 1 attached hereto sets forth the name of each Eligible
Networks Employee, as defined in SECTION 6(d) of this Agreement) and
separately sets forth each such individual's current annual salary, and for
the eight (8) month period ended August 31, 2002, the amount of each such
individual's salary, bonus payments and any other indirect compensation as
well as the paid time off (in dollar value), holiday time and sick pay due
each Eligible Networks Employee as of the date of this Agreement.
(r) EMPLOYEE BENEFITS RELATING TO HOSTING.
(i) Hosting does not have any obligation to contribute to (or any
other Liability, including current or potential withdrawal liability, with
respect to) any "multiemployer plan" (as defined in Section 3(37) of
ERISA), or any "defined benefit plan" (as defined in Section 3(35) of
ERISA), whether or not terminated.
(ii) Hosting does not maintain or have any obligation to contribute
to (or any other Liability with respect to) any plan or arrangement whether
or not terminated, which provides medical, health, life insurance or other
welfare-type benefits for current or future retired or terminated employees
(except for limited continued medical benefit coverage required to be
provided under COBRA).
(iii) Hosting does not maintain, contribute to or have any Liability
under (or with respect to) any plan which is a "defined contribution plan"
(as defined in Section 3(34) of ERISA), whether or not terminated.
(iv) Hosting does not maintain, contribute to or have any Liability
under (or with respect to) any Employee Benefit Plan providing benefits to
current or former employees, including any bonus plan, plan for deferred
compensation, employee health or other welfare benefit plan or other
arrangement, whether or not terminated.
(s) EMPLOYEE BENEFITS RELATING TO NETWORKS.
(i) Networks does not have any obligation to contribute to (or any
other Liability, including current or potential withdrawal liability, with
respect to) any "multi-employer plan" (as defined in Section 3(37) of
ERISA), or any "defined benefit plan" (as defined in Section 3(35) of
ERISA), whether or not terminated.
(ii) Networks does not maintain or have any obligation to
contribute to (or any other Liability with respect to) any plan or
arrangement whether or not terminated, which provides medical, health, life
insurance or other welfare-type benefits for current or future retired or
terminated employees (except for limited continued medical benefit coverage
required to be provided under COBRA).
(iii) Except as set forth on SCHEDULE 3(s) attached hereto, Networks
does not maintain, contribute to or have any Liability under (or with
respect to) any employee plan
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which is a "defined contribution plan" (as defined in Section 3(34) of
ERISA), whether or not terminated (the "NETWORKS DEFINED CONTRIBUTION
Plan"). No Acquired Asset is subject to any Lien under ERISA or the Code.
(iv) Except for the Networks Defined Contribution Plan and as set
forth on SCHEDULE 3(s) attached hereto, Networks does not maintain,
contribute to or have any Liability under (or with respect to) any Employee
Benefit Plan providing benefits to current or former employees, including
any bonus plan, plan for deferred compensation, employee health or other
welfare benefit plan or other arrangement, whether or not terminated. Such
Employee Benefit Plans are referred to as the "OTHER NETWORKS PLANS" and,
together with the Networks Defined Contribution Plan, the "NETWORKS PLANS."
(v) The Networks Plans and all related trusts, insurance contracts
and funds have been maintained, funded and administered in accordance with
their terms and have complied in form and in operation in all material
respects with the applicable requirements of ERISA, the Code and other
applicable Laws. The requirements of COBRA have been met in all material
respects with respect to each Networks Plan which is an "employee welfare
benefit plan" (as such term is defined in Section 3(1) of ERISA) which is
subject to COBRA.
(vi) Each of the Networks Plans which is intended to be qualified
under Section 401(a) of the Code has received a favorable determination
from the Internal Revenue Service that such Networks Plan is qualified
under Section 401(a) of the Code, and there are no circumstances which
could reasonably be expected to adversely affect the qualified status of
any such Networks Plan. All such Networks Plans have been or will be timely
amended for the requirements of the Tax legislation commonly known as
"GUST" and have been or will be submitted to the Internal Revenue Service
for a favorable determination letter within the remedial amendment period
prescribed by GUST.
(vii) No action, suit, proceeding, hearing, or investigation with
respect to the administration or the investment of the assets of any
Networks Plan (other than routine claims for benefits) is pending or, to
the Knowledge of Networks, threatened which could result in or subject
Networks to any material Liability, and there are no circumstances which
could reasonably be expected to give rise to any such actions, suits or
claims.
(t) INSURANCE. Neither Hosting nor Networks is in material default with
respect to its obligations under any insurance policy maintained by it, and
neither Hosting nor Networks has ever been denied insurance coverage. The
insurance coverage of Hosting is customary for entities of similar size engaged
in similar lines of business. The reserves set forth on the Hosting Balance
Sheets are adequate to cover all anticipated Liabilities with respect to all
self-insurance or co-insurance programs.
(u) AFFILIATE TRANSACTIONS. Except as set forth on the attached SCHEDULE
3(u) attached hereto, no officer, director, employee, stockholder, or other
Affiliate of Hosting or any individual related by blood, marriage or adoption to
any such individual or any entity in which any such Person or individual owns
any beneficial interest, is a party to any agreement, contract,
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commitment or transaction with Hosting or Networks or has any material interest
in the Acquired Assets.
(v) BROKERAGE. Neither Hosting nor any Affiliate of Hosting has any
Liability to pay (or has made any arrangement under which Hosting or VitalStream
may be required to pay) any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement or the other
Transaction Agreements.
(w) GOVERNMENTAL CONSENT, ETC. No permit, consent, approval or
authorization of, or declaration to or filing with, any Governmental Entity is
required in connection with the execution, delivery and performance by Hosting
or Networks of this Agreement or any other Transaction Agreement or the
consummation by Hosting or Networks of any of the transactions contemplated
hereby or thereby, except for filings with any Governmental Entity which are
required or permitted to be made after the date hereof pursuant to applicable
federal and state securities Laws and blue sky Laws, which filings will be
effected within the applicable statutory periods.
(x) DISCLOSURE. This Agreement, together with the annexes, schedules,
exhibits and certificates supplied by Hosting or Networks or on behalf of
Hosting or Networks with respect to the transactions contemplated by this
Agreement and the other Transaction Agreements, do not contain any untrue
statement of a material fact, as of the date hereof, or omit to state a material
fact necessary to make the statements contained herein or therein, in light of
the circumstances in which they were made, not misleading.
(y) CAPITAL STOCK AND RELATED MATTERS. The authorized capital stock of
Hosting consists of 1,000 shares of common stock, par value $0.01 per share, all
of which shares of common stock are issued and outstanding and owned by
Networks. As of the date hereof, Hosting does not have outstanding any Equity
Securities or Debt Securities, except for the shares of common stock held by
Networks.
(z) INVESTMENT IN PURCHASE SHARES.
(i) DISCLOSURE OF INFORMATION. Hosting hereby represents that
representatives of each of the Purchase Share Distributees have received
and reviewed all the information about VitalStream that such Person needs
to invest in the Purchase Shares and represents that representatives of
each of the Purchase Share Distributees asked questions and received
answers from VitalStream regarding the terms and conditions of the offering
of the Purchase Shares and the business, properties, prospects and
condition (financial or otherwise) of VitalStream and the VitalStream
Subsidiaries. The foregoing, however, does not limit or modify the
representations and warranties of VitalStream in SECTION 4 of this
Agreement or the right of Hosting to rely thereon.
(ii) INVESTMENT EXPERIENCE. Hosting hereby represents that each of
the Purchase Share Distributees is able to fend for itself, can bear the
economic risk of its investment, 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 Purchase Shares and has been represented
with respect to the decision to invest in the Purchase Shares by
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Persons with such knowledge and experience in financial or business matters
as to be capable of advising such Purchase Share Distributee with respect
to the decision to invest in the Purchase Shares. Hosting also represents
none of the Purchase Share Distributees has been organized for the purpose
of acquiring the Purchase Shares.
(iii) INVESTMENT INTENT; OWN ACCOUNT. Except for the dividend or
other distribution of the Purchase Shares by (A) Hosting to Networks, (B)
Networks to Holdings and (C) Holdings to one of more Purchase Share
Distributees, Hosting hereby represents that it is acquiring the Purchase
Shares for its own account, not as nominee or agent, with the present
intention of holding such securities for purposes of investment, and that
it has no intention of selling such securities in a public distribution in
violation of the federal securities Laws or any applicable state securities
Laws. Subject to the foregoing, Hosting further represents that neither it
nor any Purchase Shares Distributee has any contract, undertaking or
agreement with any Person to sell, transfer or grant participations to such
Person or to any other Person with respect to the Purchase Shares.
(aa) CUSTOMERS AND SUPPLIERS.
(i) Except as set forth on SCHEDULE 3(aa) attached hereto, during
the twelve (12) month period ending on the date hereof, there has not been
any material interruption or outage (other than as requested by a Hosting
Business Customer) in the provision by Hosting or Networks to the Hosting
Business Customers of the goods and services provided by Hosting or
Networks in the operation of its Hosting Business.
(ii) Except as set forth on SCHEDULE 3(aa) attached hereto, no
Hosting Business Customer which generated monthly revenues in the one month
period ended August 31, 2002 that accounted for in excess of $5,000 of the
monthly revenues of the Hosting Business of Hosting or Networks, has
terminated or threatened in writing to terminate its relationship, or any
agreement, with Hosting or Networks, as the case may be.
(iii) SCHEDULE 3(aa) attached hereto sets forth (A) a complete and
accurate list of the name of each Hosting Business Customer, together with
the amount of revenue generated by such Hosting Business Customer during
the one (1) month period ended August 31, 2002 and (B) a list of the
contact information of each such Hosting Business Customer.
(iv) SCHEDULE 3(aa) attached hereto contains a listing of all
suppliers and vendors of the Hosting Business of Hosting and Networks,
together with complete contact information and the amount of expense
incurred to such vendor or supplier during the one (1) month period ended
August 31, 2002.
4. REPRESENTATIONS AND WARRANTIES OF VITALSTREAM. As a material
inducement to Hosting and Networks to enter into this Agreement, VitalStream and
the Buyer, jointly and severally, hereby represent and warrant to Hosting and
Networks that the statements contained in this SECTION 4 are correct and
complete as of the date hereof (or on the date as of which they are made, in the
case of any representation or warranty which specifically relates to an earlier
date).
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(a) ORGANIZATION, CORPORATE POWER AND LICENSES. Except as set forth on
SCHEDULE 4(a), each of VitalStream and its direct and indirect Subsidiaries
(including the Buyer) (collectively, the "VITALSTREAM SUBSIDIARIES") is a
corporation duly organized, validly existing and in good standing under the Laws
of its respective jurisdiction of incorporation and is qualified to do business
in every jurisdiction in which such qualification is required except where
failure to be so qualified would not reasonably be expected to have a
VitalStream Material Adverse Effect. Each of VitalStream and the VitalStream
Subsidiaries possess all requisite corporate power and authority and all
material licenses, permits and authorizations necessary to own and operate its
properties, to carry on its business as now conducted and as presently proposed
to be conducted and to carry out the transactions contemplated by this Agreement
and the other Transaction Agreements to which it is a party except where such
failure would not reasonably be expected to have a VitalStream Material Adverse
Effect. The copies of VitalStream's and Buyer's charter documents and bylaws to
which Hosting has been provided access reflect all amendments made thereto at
any time prior to the date of this Agreement and are correct and complete.
(b) APPROVAL AND CONSENTS; AUTHORIZATION; NO BREACH. Each of the Buying
Parties full power and authority (including full corporate power and authority)
to execute and deliver this Agreement and each of the other Transaction
Agreements to which it is a party and to perform its obligations hereunder and
thereunder. Without limiting the generality of the foregoing, the execution and
delivery by the Buying Parties and the performance by the Buying Parties of this
Agreement and each of the other Transaction Agreements to which either Buying
Party is a party, and the consummation of the transactions contemplated by this
Agreement and the other Transaction Agreements have been duly authorized by the
respective boards of directors of each of VitalStream and Buyer. Except as
described above, no other corporate proceedings on the part of any Buying Party
is necessary to authorize the execution and delivery of this Agreement or any
other Transaction Agreements by any of the Buying Parties and the consummation
by the Buying Parties of the transactions contemplated by this Agreement and the
other Transaction Agreements. Each of this Agreement and the other Transaction
Agreements to which any of the Buying Parties is a party constitutes a valid and
binding obligation of each such Buying Party, enforceable in accordance with its
terms, except as such enforceability may be limited by (i) applicable
insolvency, bankruptcy, reorganization, moratorium or other similar Laws
affecting creditors' rights generally, and (ii) applicable equitable principles
(whether considered in a proceeding at law or in equity). Except as set forth on
SCHEDULE 4(b) attached hereto, the execution and delivery by any of the Buying
Parties of this Agreement and the other Transaction Agreements to which any of
the Buying Parties is a party, and the fulfillment of and compliance with the
respective terms hereof and thereof by each such Buying Party do not and shall
not (i) conflict with or result in a breach of the terms, conditions or
provisions of, (ii) constitute a default under or result in the violation of,
(iii) result in the creation of any Lien upon the capital stock or assets of any
of the Buying Parties or any VitalStream Subsidiary pursuant to, (iv) give any
third party the right to modify, terminate or accelerate any obligation under,
or (v) require any authorization, consent, approval, exemption or other action
by or notice or declaration to, or filing with, any third party or any
Governmental Entity (other than any filings required by state and federal
securities Laws) pursuant to, (A) the charter documents or bylaws of any of the
Buying Parties or any VitalStream Subsidiary, (B) any Law or Legal Requirement
to which any of the Buying Parties or any VitalStream Subsidiary is subject, or
(C) any material
-39-
agreement, instrument, order, judgment or decree to which any of the Buying
Parties or any VitalStream Subsidiary is subject.
(c) SUBSIDIARIES. SCHEDULE 4(c) attached hereto sets forth a complete and
accurate list of the VitalStream Subsidiaries. Except as set forth on SCHEDULE
4(c) attached hereto, VitalStream has no Subsidiaries and does not own or
control, directly or indirectly, any shares of capital stock of any other
corporation or any interest in any partnership, joint venture or other
non-corporate business enterprise. All of the outstanding shares of capital
stock of each VitalStream Subsidiary are validly issued, full paid and
nonassessable, and all such shares are owned by VitalStream or another of the
VitalStream Subsidiaries free and clear of any Lien and not subject to any
option or right to purchase any such shares. Except as set forth on the SCHEDULE
4(c) attached hereto, neither VitalStream nor any of the VitalStream
Subsidiaries owns or holds the right to acquire any shares of stock or any other
Equity Security of any other Person.
(d) SECURITIES AND EXCHANGE COMMISSION REPORTS AND VITALSTREAM FINANCIAL
STATEMENTS. The filings located on the Internet website of the Securities and
Exchange Commission with respect to VitalStream (previously known as Sensar
Corporation), together with the filings delivered by VitalStream to Hosting
prior to the execution of this Agreement, constitute a true and complete copy of
each form, report, schedule, registration statement, definitive proxy statement
and other document (together with all amendments thereof and supplements
thereto), filed by VitalStream or any of the VitalStream Subsidiaries with the
Securities and Exchange Commission since January 1, 2001 (as such documents have
since the time of their filing been amended or supplemented, the "VITALSTREAM
SECURITIES AND EXCHANGE COMMISSION REPORTS"), which are all the documents (other
than preliminary material) that VitalStream and the VitalStream Subsidiaries
were required to file with the Securities and Exchange Commission since such
date. As of their respective dates, the VitalStream Securities and Exchange
Commission Reports (i) complied as to form in all material respects with the
requirements of the Securities Act, or the Exchange Act, as the case may be, and
(ii) did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The audited consolidated financial statements and unaudited
interim consolidated financial statements (including, in each case, the notes,
if any, thereto) included in the VitalStream Securities and Exchange Commission
Reports (the "VITALSTREAM FINANCIAL STATEMENTS") (A) complied as to form in all
material respects with the published rules and regulations of the Securities and
Exchange Commission with respect thereto, (B) are accurate and complete in all
material respects, (C) are consistent with the books and records of VitalStream
and the VitalStream Subsidiaries (which, in turn, are accurate and complete in
all material respects), (D) were prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except (1) with respect to audited
statements, as may be indicated therein or in the notes thereto and (2) with
respect to unaudited statements, subject to normal year-end audit adjustments,
which will not be material either individually or in the aggregate, an absence
of required footnotes and as permitted by Form 10-Q of the Securities and
Exchange Commission) and (E) fairly present the consolidated financial position
of VitalStream and the VitalStream Subsidiaries as at the respective dates
thereof and the consolidated results of their operations and cash flows for the
respective periods then ended. Except as set forth on SCHEDULE 4(d) attached
hereto, each VitalStream Subsidiary is treated as a
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consolidated Subsidiary of VitalStream in the VitalStream Financial Statements
for all periods covered thereby.
(e) NOTES AND ACCOUNTS RECEIVABLE.
(i) All notes and accounts receivable of VitalStream and the
VitalStream Subsidiaries are reflected properly on its books and records,
are valid receivables arising from bona fide transactions in the Ordinary
Course of Business subject to no setoffs, Claims or refusals to pay, are
current and collectible, and will be collected in accordance with their
terms at their recorded amounts, subject only to the reserve for bad debts
set forth on the face of the Most Recent VitalStream Balance Sheet (rather
than in any notes thereto) as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of
VitalStream. SCHEDULE 4(e) attached hereto contains a listing of all of the
accounts receivable of VitalStream and the VitalStream Subsidiaries as of
August 31, 2002. Except as set forth on SCHEDULE 4(e) attached hereto, as
of August 31, 2002, (a) no account or note debtor of VitalStream or any
VitalStream Subsidiary is delinquent in payment by more than sixty (60)
days and (b) the aging schedule of the accounts receivable and notes
receivable of VitalStream or any VitalStream Subsidiary included in
SCHEDULE 4(e) is complete and accurate.
(ii) SCHEDULE 4(e) attached hereto contains a listing of all
accounts payable and notes payable (which shall include any service level
agreement credits, services or goods that have been paid for but not
provided or delivered, and similar items) that VitalStream and the
VitalStream Subsidiaries will owe (or have any Liability with respect to)
as of August 31, 2002. Except as set forth on SCHEDULE 4(e) attached
hereto, as of August 31, 2002, all accounts payable and notes payable of
VitalStream and the VitalStream Subsidiaries arose from bona fide
transactions in the Ordinary Course of Business and, no such account
payable or note payable is delinquent by more than sixty (60) days in its
payment.
(f) GUARANTIES. Neither VitalStream nor any VitalStream Subsidiary is a
guarantor of, or otherwise is liable for, and no assets or properties of
VitalStream or any VitalStream Subsidiary are subject to, or security for, any
Liability (including Indebtedness) of any other Person.
(g) TITLE TO ASSETS; CONDITION OF ASSETS; SUFFICIENCY OF ASSETS. Each of
VitalStream and the VitalStream Subsidiaries has good and marketable title to,
or a valid leasehold interest in, the properties and assets of its respective
properties and assets used by it in the conduct of its business, located on its
premises or shown on the Most Recent VitalStream Balance Sheet or acquired after
the date thereof (other than properties and assets disposed of in the Ordinary
Course of Business since the date of the Most Recent VitalStream Balance Sheet),
free and clear of all Liens, Claims, Indebtedness and restrictions on transfer,
except for (i) Permitted Liens and (ii) the Liens set forth on SCHEDULE 4(g)
attached hereto. The equipment and other tangible assets of VitalStream and each
of the VitalStream Subsidiaries are free from material defects (patent or
latent), have been maintained in good operating condition and repair (subject to
normal wear and tear), and are suitable for the purpose for which they presently
are used (including the conduct of the business of VitalStream and each of the
VitalStream Subsidiaries) and are proposed to be
-41-
used by VitalStream and the VitalStream Subsidiaries. VitalStream and the
VitalStream Subsidiaries own, or have a valid leasehold interest in, all
properties and assets (tangible and intangible) necessary for VitalStream and
the VitalStream Subsidiaries to conduct their Hosting Business as presently
conducted and are proposed to be used by VitalStream and the VitalStream
Subsidiaries.
(h) ABSENCE OF UNDISCLOSED LIABILITIES. Neither VitalStream nor any
VitalStream Subsidiary has any Liability (and there is no basis for any present
or future Claim giving rise to any Liability), except for (i) Liabilities not
required to be reflected on a consolidated balance sheet of VitalStream and the
VitalStream Subsidiaries prepared in accordance with GAAP consistently applied
in accordance with VitalStream's past practice, (ii) Liabilities set forth on
the face of the Most Recent VitalStream Balance Sheet (rather than in any notes
thereto) and (iii) Liabilities which have arisen after the date of the Most
Recent VitalStream Balance Sheet in the Ordinary Course of Business (none of
which results from, arises out of, relates to, is in the nature of, or was
caused by any Claim, breach of contract, breach of warranty, tort, infringement,
Environmental, Health, and Safety Requirements or violation of Law).
(i) ABSENCE OF CERTAIN DEVELOPMENTS. Except as set forth in SCHEDULE 4(i)
attached hereto and for the transactions contemplated by this Agreement and the
other Transaction Agreements, since August 31, 2002, no event has occurred or is
anticipated, and no fact or facts exists, that individually or in the aggregate
have had or could have a VitalStream Material Adverse Effect. Without limiting
the generality of the foregoing, since that August 31, 2002:
(i) neither VitalStream nor any VitalStream Subsidiary has sold,
leased, transferred, or assigned any of its assets, tangible or intangible
necessary for, or useful in, the conduct of its business, other than for a
fair consideration in the Ordinary Course of Business;
(ii) neither VitalStream nor any VitalStream Subsidiary has entered
into any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) either involving more than
$25,000 or outside the Ordinary Course of Business;
(iii) no party (including VitalStream or any VitalStream Subsidiary)
has accelerated, terminated, modified, or cancelled any agreement,
contract, lease, or license (or series of related agreements, contracts,
leases, and licenses) involving more than $25,000 to which VitalStream or
any VitalStream Subsidiary is a party or by which any of them are bound;
(iv) neither VitalStream nor any VitalStream Subsidiary has
imposed, or permitted to exist, any Liens (except for Permitted Liens) upon
any of their assets, tangible or intangible;
(v) neither VitalStream nor any VitalStream Subsidiary has made
any capital expenditure (or series of related capital expenditures) either
involving more than $25,000 or outside the Ordinary Course of Business;
-42-
(vi) neither VitalStream nor any VitalStream Subsidiary has made
any Investment in, any loan to, or any acquisition of the assets of, any
other Person (or series of related capital Investments, loans, and
acquisitions) outside the Ordinary Course of Business;
(vii) neither VitalStream nor any VitalStream Subsidiary has issued
any Debt Security or created, incurred, assumed, or Guaranteed any
Indebtedness for borrowed money or capitalized lease obligation either
involving more than $10,000 singly or $50,000 in the aggregate;
(viii) neither VitalStream nor any VitalStream Subsidiary has delayed
or postponed the payment of accounts payable or other Liabilities outside
the Ordinary Course of Business;
(ix) neither VitalStream nor any VitalStream Subsidiary has
cancelled, compromised, waived, or released any right or Claim (or series
of related rights and Claims) either involving more than $10,000 or outside
the Ordinary Course of Business;
(x) neither VitalStream nor any VitalStream Subsidiary has granted
any license or sublicense of any rights under or with respect to any
VitalStream Intellectual Property Rights, other than in the Ordinary Course
of Business;
(xi) neither VitalStream nor any VitalStream Subsidiary has
experienced any damage, destruction, or loss (whether or not covered by
insurance) to its properties or assets;
(xii) neither VitalStream nor any VitalStream Subsidiary has made
any loan to, or entered into any other transaction with, any of its
Affiliates, stockholders, directors, officers or employees outside the
Ordinary Course of Business;
(xiii) neither VitalStream nor any VitalStream Subsidiary has entered
into any employment contract or collective bargaining agreement, written or
oral, or modified the terms of any existing such contract or agreement
relating to or affecting any employee of VitalStream or any VitalStream
Subsidiary;
(xiv) neither VitalStream nor any VitalStream Subsidiary has granted
any increase in the base compensation of any of the directors, officers or
employees of VitalStream or any VitalStream Subsidiary outside the Ordinary
Course of Business;
(xv) neither VitalStream nor any VitalStream Subsidiary has
adopted, amended, modified, or terminated any bonus, profit sharing,
incentive, severance, or other plan, contract, or commitment for the
benefit of any of the directors, officers or employees of VitalStream or
any VitalStream Subsidiary, or taken any such action with respect to any
other Employee Benefit Plan;
(xvi) neither VitalStream nor any VitalStream Subsidiary has made
any other change in employment terms for any of the directors, officers or
employees of VitalStream or any VitalStream Subsidiary outside the Ordinary
Course of Business; and
-43-
(xvii) Neither VitalStream nor any VitalStream Subsidiary has not
collected any accounts receivable out of the Ordinary Course of Business;
and
(xviii) Neither VitalStream nor any VitalStream Subsidiary has
committed to any of the foregoing.
(j) COMPLIANCE WITH LAWS. Neither VitalStream nor any VitalStream
Subsidiary has violated any Law or Legal Requirement and neither VitalStream nor
any VitalStream Subsidiary has received any written notice alleging any such
violation.
(k) LITIGATION. Except as set forth in SCHEDULE 4(k) attached hereto,
neither VitalStream nor any VitalStream Subsidiary is (i) subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) a
party or, to the Knowledge of VitalStream, threatened to be made a party to any
Claim at law or in equity, before any Governmental Entity or that could come
before any arbitrator. None of the Claims set forth in SCHEDULE 4(k) attached
hereto could, either individually or in the aggregate, result in or have a
VitalStream Material Adverse Effect. Except as set forth in SCHEDULE 4(k), to
the Knowledge of VitalStream, VitalStream does not have any reason to believe
that any such Claim may be brought against VitalStream or any of the VitalStream
Subsidiaries.
(l) CONTRACTS AND COMMITMENTS.
(i) Except as disclosed in the VitalStream Securities and Exchange
Commission Reports, as expressly contemplated by this Agreement or as set
forth in SCHEDULE 4(l) attached hereto, neither VitalStream nor any
VitalStream Subsidiary is a party to or bound by any written or oral:
(A) pension, profit sharing, stock option, employee stock
purchase or other plan or arrangement providing for deferred or other
compensation to employees or any other employee benefit plan or
arrangement, or any collective bargaining agreement or any other
contract with any labor union, or severance agreements, programs,
policies or arrangements;
(B) contract for the employment of any officer, individual
employee or other Person on a full-time, part-time, consulting or
other basis providing annual compensation in excess of $75,000 or
contract relating to loans to officers, directors or Affiliates
(unless terminable at will without severance obligations);
(C) contract or agreement with any Governmental Entity
entered into outside the Ordinary Course of Business;
(D) contract under which VitalStream or any VitalStream
Subsidiary has advanced or loaned any other Person amounts in the
aggregate exceeding $10,000;
(E) agreement or indenture relating to borrowed money or
other Indebtedness or the mortgaging, pledging or otherwise placing a
Lien (other than a Permitted Lien) on any assets of VitalStream or any
VitalStream Subsidiary;
-44-
(F) Guarantee of any Liability of any Person;
(G) settlement, conciliation or similar agreement under which
such party has any future obligations or Liability;
(H) lease or agreement under which VitalStream or any
VitalStream Subsidiary is lessee of or holds or operates any property,
real or personal, owned by any other party, except for any lease of
real or personal property under which the aggregate annual rental
payments do not exceed $25,000;
(I) lease or agreement under which VitalStream or any
VitalStream Subsidiary is lessor of or permits any third party to hold
or operate any property, real or personal, owned or controlled by
VitalStream or any VitalStream Subsidiary;
(J) contract or group of related contracts with the same
party or group of Affiliated parties the performance of which involves
the payment by VitalStream or any VitalStream Subsidiary of
consideration in excess of $25,000; annually;
(K) assignment, license, indemnification or agreement with
respect to any intangible property (including any Intellectual
Property Rights) entered into outside the Ordinary Course of Business;
(L) warranty agreement with respect to its services rendered
or its products sold or leased;
(M) agreement under which it has granted any Person any
registration rights (including demand and piggyback registration
rights, any rights of first refusal or vetoes on the sale of the
Acquired Assets);
(N) agreement relating to any Investment;
(O) contract or agreement prohibiting it from freely engaging
in any business or competing anywhere in the world; or
(P) any other agreement which is material to the operation of
its Hosting Business or business prospects or involves a consideration
in excess of $25,000; annually.
(ii) All of the contracts, agreements and instruments set forth in
SCHEDULE 4(l) attached hereto (the "VITALSTREAM MATERIAL CONTRACTS") are
valid, binding and enforceable in accordance with their respective terms,
except as such enforceability may be limited by (i) applicable insolvency,
bankruptcy, reorganization, moratorium or other similar Laws affecting
creditors' rights generally, and (ii) applicable equitable principles
(whether considered in a proceeding at law or in equity). Except as set
forth on SCHEDULE 4(l)(ii) attached hereto, VitalStream and each
VitalStream Subsidiary has performed all material obligations required to
be performed by it under the VitalStream Material Contracts and
-45-
is not in default under or in breach of nor in receipt of any claim of
default or breach under any VitalStream Material Contracts; no event has
occurred which with the passage of time or the giving of notice or both
would result in a default, breach or event of noncompliance by VitalStream
or any of the VitalStream Subsidiaries under any of the VitalStream
Material Contracts; neither VitalStream nor any of the VitalStream
Subsidiaries has any present expectation or intention of not fully
performing all such obligations; VitalStream does not have any Knowledge of
any breach or anticipated breach of any material obligation to be performed
by the other parties to any of the VitalStream Material Contracts.
(iii) Other than VitalStream Material Contracts included as exhibits
to the VitalStream Securities and Exchange Commission Reports, Hosting has
been supplied with a true and correct copy of each of the written
VitalStream Material Contracts, together with all amendments, waivers or
other changes thereto, and an accurate description of each of the oral
VitalStream Material Contracts.
(m) TAX MATTERS.
(i) Except as set forth in SCHEDULE 4(m) attached hereto, each of
VitalStream and the VitalStream Subsidiaries has filed all Tax Returns
which it is required to file under applicable Laws. All such Tax Returns
are complete and correct and have been prepared in compliance with all
applicable Laws in all material respects. Each of VitalStream and the
VitalStream Subsidiaries has paid all Taxes due and owing by it (whether or
not such Taxes are required to be shown on a Tax Return) and have withheld
and paid over to the appropriate taxing authority all Taxes which they were
or are required to withhold from amounts paid or owing to any employee,
stockholder, creditor or other third party. Neither VitalStream nor any
VitalStream Subsidiary has waived any statute of limitations with respect
to any Taxes or agreed to any extension of time with respect to any Tax
assessment or deficiency. The accrual for Taxes on the Most Recent
VitalStream Balance Sheet would be adequate to pay all Tax Liabilities of
VitalStream and any VitalStream Subsidiaries (A) if VitalStream's current
Tax year were treated as ending on the date of the Most Recent VitalStream
Balance Sheet (excluding any amount recorded which is attributable solely
to timing differences between book and Tax income), and (B) if
VitalStream's current Tax year were treated as ending on the Closing Date
and the accrual for Taxes on the Most Recent VitalStream Balance Sheet was
adjusted with the past custom and practice of VitalStream in filing its Tax
Returns. Since the date of the Most Recent VitalStream Balance Sheet,
neither VitalStream nor any VitalStream Subsidiary has incurred any
Liability for Taxes other than in the Ordinary Course of Business. The
assessment of any additional Taxes for periods for which Tax Returns have
been filed by VitalStream or any VitalStream Subsidiary shall not exceed
the recorded Liability therefor on the Most Recent VitalStream Balance
Sheet (excluding any amount recorded which is attributable solely to timing
differences between book and Tax income). There has not been any audit of
any Tax Return filed by VitalStream or any VitalStream Subsidiary. Neither
VitalStream nor any VitalStream Subsidiary has consented to any waiver of
the statute of limitations for the assessment of any Taxes and had not
requested any extension of time for the payment of any Taxes. There are no
Liens for Taxes (other than Permitted Liens) upon any of the assets of
VitalStream or any
-46-
VitalStream Subsidiary. No Claim has ever been made by an authority in a
jurisdiction where VitalStream or any VitalStream Subsidiary does not file
Tax Returns that it is or may be subject to Taxation by that jurisdiction.
No foreign, federal, state or local Tax audits or administrative or
judicial proceedings are pending or being conducted with respect to
VitalStream or any VitalStream Subsidiary. No information related to Tax
matters has been requested by any foreign, federal, state or local Taxing
authority, no written notice indicating an intent to open an audit or other
review has been received by VitalStream or any VitalStream Subsidiary from
any foreign, federal, state or local Taxing authority, and no notice of
deficiency or proposed adjustment for any amount of Tax proposed, asserted
or assessed by a Taxing authority against VitalStream or any VitalStream
Subsidiary has been received by VitalStream or any VitalStream Subsidiary
and there are no material unresolved questions or claims concerning
VitalStream's or any VitalStream Subsidiary's Tax Liability.
(ii) Neither VitalStream nor any VitalStream Subsidiary has made an
election under Section 341(f) of the Code. Neither VitalStream nor any
VitalStream Subsidiary is liable for the Taxes of another Person that is
not a Subsidiary under (A) Treas. Reg. Section 1.1502-6 (or comparable
provisions of state, local or foreign Law), (B) as a transferee or
successor, (C) by contract or indemnity or (D) otherwise. Neither
VitalStream nor any VitalStream Subsidiary is a party to any Tax allocation
or sharing agreement. Neither VitalStream nor any VitalStream Subsidiary
has made any payments, is not obligated to make payments and is not a party
to an agreement that could obligate it to make any payments that would not
be deductible under Section 280G of the Code.
(n) REAL PROPERTY.
(i) Neither VitalStream nor any VitalStream Subsidiary owns any
Real Property. Neither VitalStream nor any VitalStream Subsidiary is a
party to any agreement or option to purchase any Real Property or interest
therein.
(ii) SCHEDULE 4(n)(ii) attached hereto sets forth a true and
complete list of (A) the address of each parcel relating to, used in
connection with, or necessary or useful in, the operation or conduct of the
business of VitalStream and the VitalStream Subsidiaries (collectively, the
"VITALSTREAM LEASED REAL PROPERTY") and (B) the date and the names of the
parties to each Real Property Lease in respect of each parcel of
VitalStream Leased Real Property (collectively, the "VITALSTREAM REAL
PROPERTY LEASES"). VitalStream has delivered to Hosting a true and complete
copy of each written VitalStream Real Property Lease, and in the case of
any oral VitalStream Real Property Lease, a written summary of the material
terms of such VitalStream Real Property Lease. Except as set forth on
SCHEDULE 4(N)(II) attached hereto, with respect to each VitalStream Real
Property Lease:
(A) such VitalStream Real Property Lease is legal, valid,
binding, enforceable and in full force and effect, except as such
enforceability may be limited by (1) applicable insolvency,
bankruptcy, reorganization, moratorium or other similar Laws affecting
creditors' rights generally and (2) applicable equitable principles
(whether considered in a proceeding at law or in equity);
-47-
(B) the transactions contemplated by this Agreement and the
other Transaction Agreements do not require the consent of any other
party to such VitalStream Real Property Lease (except as set forth in
SCHEDULE 4(b) attached hereto), will not result in a breach of or
default under such VitalStream Real Property Lease, and will not
otherwise cause such VitalStream Real Property Lease to cease to be
legal, valid, binding, enforceable and in full force and effect on
identical terms following the Closing;
(C) VitalStream's and the VitalStream Subsidiaries'
possession and quiet enjoyment of the VitalStream Leased Real Property
under such VitalStream Real Property Lease has not been disturbed and
there are no disputes with respect to such VitalStream Real Property
Lease;
(D) None of VitalStream, any VitalStream Subsidiary or, to
the Knowledge of VitalStream, any other party to such VitalStream Real
Property Lease is in breach or default under such VitalStream Real
Property Lease, and no event has occurred or circumstance exists
which, with the delivery of notice, the passage of time or both, would
constitute such a breach or default, or permit the termination,
modification or acceleration of rent under such VitalStream Real
Property Lease;
(E) Neither VitalStream nor VitalStream Subsidiary owes, or
will owe in the future, any brokerage commissions or finder's fees
with respect to such VitalStream Real Property Lease;
(F) The other party to such VitalStream Real Property Lease
is not an Affiliate of, and otherwise does not have any economic
interest in, VitalStream or any VitalStream Subsidiary;
(G) Neither VitalStream nor any VitalStream Subsidiary has
subleased, licensed or otherwise granted any Person the right to use
or occupy such VitalStream Leased Real Property or any portion
thereof;
(H) Neither VitalStream nor any VitalStream Subsidiary has
collaterally assigned or granted any other Lien in such VitalStream
Real Property Lease or any interest therein; and
(I) Except as may arise by operation of law or under any
VitalStream Real Property Lease, there are no Liens on the estate or
interest created by such VitalStream Real Property Lease.
(iii) All Improvements included in the VitalStream Leased Real
Property are in good condition and repair and sufficient for the operation
of VitalStream's and any VitalStream Subsidiary's business as currently
conducted thereon or contemplated to be conducted thereon. There are no
structural deficiencies or latent defects affecting any of the Improvements
and there are no facts or conditions affecting any of the Improvements
which would, individually or in the aggregate, interfere in any respect
with the use or
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occupancy of the Improvements or any portion thereof in the operation of
VitalStream's and any VitalStream Subsidiary's business as currently
conducted thereon or contemplated to be conducted thereon.
(iv) There is no condemnation, expropriation or other proceeding in
eminent domain, pending or threatened, affecting any parcel of VitalStream
Leased Real Property or any portion thereof or interest therein. There is
no injunction, decree, order, writ or judgment outstanding, nor any Claims,
administrative actions or similar proceedings, pending or threatened,
relating to the ownership, lease, use or occupancy of the VitalStream
Leased Real Property or any portion thereof, or the operation of
VitalStream's and any VitalStream Subsidiary's business as currently
conducted thereon or contemplated to be conducted thereon.
(v) The VitalStream Leased Real Property is in compliance with all
applicable Real Property Laws (including any Environmental, Health and
Safety Requirements, zoning, planning, subdivision, platting or similar
Laws) affecting the VitalStream Leased Real Property, and the current use
and occupancy of the VitalStream Leased Real Property and operation of by
VitalStream and the VitalStream Subsidiaries of their business thereon does
not violate any Real Property Laws. VitalStream has not received any notice
of violation of any Real Property Law and there is no basis for the
issuance of any such notice or the taking of any action for such violation.
There is no pending or anticipated change in any Real Property Law that
will have a VitalStream Material Adverse Effect on the ownership, lease,
use or occupancy of any VitalStream Leased Real Property or any portion
thereof in the continued operation of VitalStream's and any VitalStream
Subsidiary's business as currently conducted thereon or contemplate to be
conducted thereon.
(o) ENVIRONMENTAL MATTERS.
(i) Each of VitalStream, the VitalStream Subsidiaries and their
predecessors has complied and is in compliance with all Environmental,
Health and Safety Requirements and all permits thereunder.
(ii) Neither VitalStream, the VitalStream Subsidiaries nor any of
their predecessors or Affiliates has received any written or oral notice,
report or other information regarding any actual or alleged violation of
Environmental, Health, and Safety Requirements, or any Liabilities or
potential Liabilities, including any investigatory, remedial or corrective
Liabilities, relating to any of them or their facilities arising under
Environmental, Health, and Safety Requirements.
(iii) Neither VitalStream, the VitalStream Subsidiaries nor their
predecessors and Affiliates has assumed or undertaken or otherwise become
subject to any Liability, including any Liability for corrective or
remedial action, of any other Person relating to Environmental, Health, and
Safety Requirements.
(iv) No facts, events or conditions relating to the past or present
facilities, properties or operations of VitalStream, the VitalStream
Subsidiaries, or any of their
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predecessors or Affiliates will prevent, hinder or limit continued
compliance with Environmental, Health, and Safety Requirements, give rise
to any investigatory, remedial or corrective obligations pursuant to
Environmental, Health, and Safety Requirements, or give rise to any other
Liabilities pursuant to Environmental, Health, and Safety Requirements,
including any relating to onsite or offsite releases or threatened releases
of hazardous materials, substances or wastes, personal injury, property
damage or natural resources damage.
(v) None of VitalStream, the VitalStream Subsidiaries or their
predecessors or Affiliates has treated, stored, disposed of, arranged for
or permitted the disposal of, transported, handled, or released any
substance, including any hazardous substance, or owned or operated any
property or facility (and no such property or facility is contaminated by
any such substance) in a manner that has given rise to Liabilities or give
rise to Liabilities, including any Liability for response costs, corrective
action costs, personal injury, property damage, natural resource damages or
attorney fees, pursuant to CERCLA or any other Environmental, Health, and
Safety Requirements
(vi) VitalStream has provided to Hosting copies of all material
environmental reports, audits, assessments, and investigations, and any
other material environmental documents, related to the past or present
facilities, properties or operations of VitalStream, the VitalStream
Subsidiaries or their predecessors or Affiliates, to the extent the
forgoing are in the possession, custody, or control of VitalStream.
(p) INTELLECTUAL PROPERTY RIGHTS.
(i) Each of VitalStream and the VitalStream Subsidiaries own and
possess all right, title and interest in and to, free and clear of any
Liens, Claims, Indebtedness, licenses, restrictions on transfer or any
other restrictions or limitations, except for Permitted Liens, or has the
right to use pursuant to a valid and enforceable, written license,
sublicense, agreement, or other permission, all Intellectual Property
Rights relating to, or used in connection with, the operation or conduct of
the business of VitalStream and the VitalStream Subsidiaries as presently
conducted (the "VITALSTREAM INTELLECTUAL PROPERTY RIGHTS"). The VitalStream
Intellectual Property Rights will be owned or available for use by
VitalStream and the VitalStream Subsidiaries immediately subsequent to the
Closing on identical terms and conditions as applicable to VitalStream
immediately prior to the Closing. VitalStream has taken all commercially
reasonable actions to maintain and protect the VitalStream Intellectual
Property Rights.
(ii) To the Knowledge of VitalStream, neither VitalStream nor the
VitalStream Subsidiaries has interfered with, infringed upon, violated,
misappropriated, or otherwise come into conflict with any Intellectual
Property Rights of any other Person and, to the Knowledge of VitalStream,
the continued conduct and operation of its business as presently conducted
and operated will not interfere with, infringe upon, violate,
misappropriate or otherwise come into conflict with any Intellectual
Property Rights of any other Person. Neither VitalStream nor any
VitalStream Subsidiary has ever received any Claim or notice alleging any
such interference, infringement, conflict, misappropriation, or violation
(including, but not limited to, any Claim that VitalStream
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or any VitalStream Subsidiary must license or refrain from using any
Intellectual Property Rights of any other Person or any demand or offer to
license any Intellectual Property Rights from any Person), and VitalStream
is not aware of any facts that indicate a likelihood of any of the
foregoing. To the Knowledge of VitalStream, no third party has interfered
with, infringed upon, misappropriated, or otherwise come into conflict with
any VitalStream Intellectual Property Rights, and VitalStream is not aware
of any facts that indicate a likelihood of any of the foregoing.
(iii) SCHEDULE 4(p)(iii) attached hereto identifies (A) each patent
or registration which has been issued to VitalStream or any VitalStream
Subsidiary with respect to any VitalStream Intellectual Property Rights and
each pending patent application or application for registration which
VitalStream or any VitalStream Subsidiary has made with respect to any
VitalStream Intellectual Property Rights (B) each license, sublicense,
agreement, or other permission which VitalStream or any VitalStream
Subsidiary has granted to any Person with respect to any VitalStream
Intellectual Property Rights (other than such licenses, sublicenses and
other permissions as are granted in the Ordinary Course of Business under
the terms of VitalStream form licensing agreements) (together with any
exceptions); (C) each material unregistered trademark, copyright, material
unregistered service ▇▇▇▇, trade name, corporate name, Internet domain
name, computer software item (other than commercially available
off-the-shelf software purchased or licensed for less than a total cost of
$1,000 in the aggregate) within the VitalStream Intellectual Property
Rights; and (D) any other material VitalStream Intellectual Property
Rights. VitalStream has delivered to Hosting correct and complete copies of
all such patents, registrations, applications, licenses, sublicenses,
agreements, and permissions (as amended to date) and has made available to
Hosting correct and complete copies of all other written documentation
evidencing ownership and prosecution (if applicable) of each such item.
(iv) SCHEDULE 4(p)(iv) attached hereto identifies each VitalStream
Intellectual Property Right that any third party owns and that VitalStream
or the VitalStream Subsidiaries use (or contemplate to use) pursuant to a
written license, sublicense, agreement, or permission (other than
commercially available off-the-shelf software purchased or licensed for
less than a total cost of $1,000 in the aggregate). VitalStream has
delivered to Hosting correct and complete copies of all such licenses,
sublicenses, agreements, and permissions (as amended to date). With respect
to each Intellectual Property Right required to be identified on SCHEDULE
4(p)(iv) attached hereto:
(A) the license, sublicense, agreement, or permission
covering such VitalStream Intellectual Property Right is legal, valid,
binding, enforceable, and in full force and effect;
(B) the license, sublicense, agreement, or permission
covering such VitalStream Intellectual Property Right will continue to
be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions
contemplated by this Agreement (including the assignments and
assumptions referred to in SECTION 2 of this Agreement);
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(C) to the Knowledge of VitalStream no party to the license,
sublicense, agreement, or permission covering such VitalStream
Intellectual Property Right is in breach or default, and, to the
Knowledge of VitalStream, no event has occurred which with notice or
lapse of time would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(D) to the Knowledge of VitalStream no party to the license,
sublicense, agreement, or permission covering such VitalStream
Intellectual Property Right has repudiated any provision thereof;
(E) such VitalStream Intellectual Property Right is not
subject to any outstanding injunction, judgment, order, decree, ruling
or charge;
(F) no Claim is pending or, to the Knowledge of VitalStream
(and employees with responsibility for Intellectual Property Right
matters), is threatened which challenges the legality, validity, or
enforceability of such VitalStream Intellectual Property Right and
there are no grounds for the same; and
(G) Neither VitalStream nor any VitalStream Subsidiary has
granted any sublicense or similar right with respect to the license,
sublicense, agreement, or permission covering such VitalStream
Intellectual Property Right.
(v) No VitalStream Intellectual Property Right is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge. No
Claim is pending or, to the Knowledge of VitalStream (and employees with
responsibility for Intellectual Property Right matters), is threatened
which challenges the legality, validity, enforceability, use, or ownership
of any VitalStream Intellectual Property Right, and, to the Knowledge of
VitalStream, there are no grounds for the same. To the Knowledge of
VitalStream, no loss or expiration of any VitalStream Intellectual Property
Right is threatened, pending, or reasonably foreseeable, except for patents
expiring at the end of their statutory terms (and not as a result of any
act or omission by VitalStream or any VitalStream Subsidiary, including, a
failure by VitalStream or any VitalStream Subsidiary to pay any required
maintenance fees).
(q) EMPLOYEES.
(i) Except as set forth on SCHEDULE 4(q) attached hereto:
(A) Neither VitalStream nor any of the VitalStream
Subsidiaries is a party to or bound by any collective bargaining
agreement or relationship with any labor organization;
(B) To the Knowledge of VitalStream, no executive, key
employee or group of employees has any plans to terminate their
employment with any Buying Party or any VitalStream Subsidiary;
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(C) to the Knowledge of VitalStream, no labor organization or
group of employees has filed any representation petition or made any
written or oral demand for recognition;
(D) no union organizing or decertification efforts are
underway or, to the Knowledge of VitalStream, threatened;
(E) within the past five (5) years no labor strike, work
stoppage, slowdown, or other labor dispute has occurred, and none is
underway or, to the Knowledge of VitalStream, threatened;
(F) there is no ▇▇▇▇▇▇▇'▇ compensation Liability, experience
or matter that would reasonably be expected to have a VitalStream
Material Adverse Effect; and
(G) there is no employment-related charge, complaint,
grievance, investigation, inquiry or Liability of any kind, pending or
threatened in any forum, relating to an alleged violation or breach by
VitalStream or any VitalStream Subsidiary (or their officers or
directors) of any Law, regulation or contract and, to the Knowledge of
VitalStream, no facts or circumstances exist that would reasonably be
expected to give rise to such a charge, complaint, grievance,
investigation, inquiry or Liability.
(ii) Any notice of the transaction contemplated by this Agreement
required under any Law or collective bargaining agreement has been given,
and all bargaining obligations with any labor organization or other
employee representative have been, or prior to Closing will be, satisfied.
(iii) No plant closing or mass layoff of employees has been
implemented that could implicate the WARN Act.
(r) EMPLOYEE BENEFITS.
(i) Neither VitalStream nor any VitalStream Subsidiary has any
obligation to contribute to (or any other Liability, including current or
potential withdrawal liability, with respect to) any "multiemployer plan"
(as defined in Section 3(37) of ERISA), or any "defined benefit plan" (as
defined in Section 3(35) of ERISA), whether or not terminated.
(ii) Except as set forth on SCHEDULE 4(r) attached hereto, neither
VitalStream nor any VitalStream Subsidiary maintains or has any obligation
to contribute to (or any other Liability with respect to) any plan or
arrangement whether or not terminated, which provides medical, health, life
insurance or other welfare-type benefits for current or future retired or
terminated employees (except for limited continued medical benefit coverage
required to be provided under COBRA).
(iii) Except as set forth on SCHEDULE 4(r) attached hereto,
VitalStream does not maintain, contribute to or have any Liability under
(or with respect to) any employee plan
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which is a "defined contribution plan" (as defined in Section 3(34) of
ERISA), whether or not terminated (the "VITALSTREAM DEFINED CONTRIBUTION
PLAN").
(iv) Except for the VitalStream Defined Contribution Plan and as
set forth on SCHEDULE 4(r) attached hereto, neither VitalStream nor any
VitalStream Subsidiary maintains, contributes to or has any Liability under
(or with respect to) any Employee Benefit Plan providing benefits to
current or former employees, including any bonus plan, plan for deferred
compensation, employee health or other welfare benefit plan or other
arrangement, whether or not terminated. Such Employee Benefit Plans are
referred to as the "OTHER VITALSTREAM PLANS" and, together with the
VitalStream Defined Contribution Plan, the "VITALSTREAM PLANS."
(v) With respect to the VitalStream Defined Contribution Plan and
the Other VitalStream Plans (collectively, the "VITALSTREAM PLANS"), all
required or recommended (in accordance with historical practices) payments,
premiums, contributions, reimbursements or accruals for all periods (or
partial periods) ending prior to or as of the date hereof shall have been
made or properly accrued on the Most Recent VitalStream Balance Sheet. None
of the VitalStream Plans has any material unfunded Liabilities which are
not reflected on the Most Recent VitalStream Balance Sheet.
(vi) The VitalStream Plans and all related trusts, insurance
contracts and funds have been maintained, funded and administered in
accordance with their terms and have complied in form and in operation in
all material respects with the applicable requirements of ERISA, the Code
and other applicable Laws. The requirements of COBRA have been met in all
material respects with respect to each VitalStream Plan which is an
"employee welfare benefit plan" (as such term is defined in Section 3(1) of
ERISA) which is subject to COBRA.
(vii) Each of the VitalStream Plans which is intended to be
qualified under Section 401(a) of the Code has received a favorable
determination from the Internal Revenue Service that such VitalStream Plan
is qualified under Section 401(a) of the Code, and there are no
circumstances which could reasonably be expected to adversely affect the
qualified status of any such VitalStream Plan. All such VitalStream Plans
have been or will be timely amended for the requirements of the Tax
legislation commonly known as "GUST" and have been or will be submitted to
the Internal Revenue Service for a favorable determination letter within
the remedial amendment period prescribed by GUST.
(viii) No action, suit, proceeding, hearing, or investigation with
respect to the administration or the investment of the assets of any
VitalStream Plan (other than routine claims for benefits) is pending or, to
the Knowledge of VitalStream, threatened which could result in or subject
VitalStream or any VitalStream Subsidiary to any material Liability, and
there are no circumstances which could reasonably be expected to give rise
to any such actions, suits or claims.
(s) INSURANCE. Neither VitalStream nor any of the VitalStream Subsidiaries
is in material default with respect to its obligations under any insurance
policy maintained by it, and
-54-
neither VitalStream nor any of the VitalStream Subsidiaries has ever been denied
insurance coverage. The insurance coverage of VitalStream and the VitalStream
Subsidiaries is customary for entities of similar size engaged in similar lines
of business. The reserves set forth on the Most Recent VitalStream Balance Sheet
is adequate to cover all anticipated Liabilities with respect to all
self-insurance or co-insurance programs.
(t) AFFILIATE TRANSACTIONS. Except as set forth on the attached SCHEDULE
4(t) attached hereto or in the VitalStream Securities and Exchange Commission
Reports, no officer, director, employee, stockholder, or other Affiliate of
VitalStream or any of the VitalStream Subsidiaries or any individual related by
blood, marriage or adoption to any such individual or any entity in which any
such Person or individual owns any beneficial interest, is a party to any
agreement, contract, commitment or transaction with VitalStream or any of the
VitalStream Subsidiaries or has any material interest in any assets or property
owned or used by VitalStream or any of the VitalStream Subsidiaries.
(u) BROKERAGE. Except as set forth on SCHEDULE 4(u), neither VitalStream
nor any of the VitalStream Subsidiaries has any Liability to pay (or has made
any arrangement under which VitalStream or any VitalStream Subsidiary may be
required to pay) any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement or the other
Transaction Agreements.
(v) GOVERNMENTAL CONSENT, ETC. No permit, consent, approval or
authorization of, or declaration to or filing with, any Governmental Entity is
required in connection with the execution, delivery and performance by
VitalStream or the Buyer of this Agreement or any other Transaction Agreement or
the consummation by VitalStream or the Buyer of any of the transactions
contemplated hereby or thereby, except for filings with any Governmental Entity
which are required or permitted to be made after the date hereof pursuant to
applicable federal and state securities Laws and blue sky Laws, which filings
will be effected within the applicable statutory periods.
(w) DISCLOSURE. This Agreement, together with the VitalStream Securities
and Exchange Commission Reports and the annexes, schedules, exhibits and
certificates supplied by VitalStream or the Buyer or on behalf of VitalStream or
the Buyer or any of the other VitalStream Subsidiaries with respect to the
transactions contemplated by this Agreement and the other Transaction
Agreements, do not contain any untrue statement of a material fact, as of the
date hereof or thereof, as the case may be, or omit to state a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances in which they were made, not misleading.
(x) CAPITAL STOCK AND RELATED MATTERS.
(i) The authorized capital stock of VitalStream consists of (A)
290,000,000 shares of Common Stock, 22,703,719 of which shares of Common
Stock are issued and outstanding as of the date hereof and (B) 10,000,000
shares of Preferred Stock, no shares of which have been issued. As of the
date hereof, VitalStream does not have outstanding any Equity Securities,
except as set forth on SCHEDULE 4(x)(i) attached hereto. Except as required
by the Articles of Incorporation, VitalStream is not subject to any
obligation
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(contingent or otherwise) to repurchase or otherwise acquire or retire any
of its Equity Securities. All of the outstanding shares of VitalStream's
capital stock have been validly issued and are fully paid and
nonassessable. Immediately following the Closing, the Initial Purchase
Shares shall represent 16.5% of the sum of (1) the number of shares of
Common Stock issuable pursuant to this Agreement plus (2) the number of
shares of Fully Diluted Common Stock.
(ii) Except as set forth in SCHEDULE 4(x)(ii) attached hereto, (A)
as of the date of the stockholder list attached as part of SCHEDULE
4(x)(ii) attached hereto, no person owns of record or is known to
VitalStream to own of record any Equity Securities of VitalStream; (B) no
subscription, warrant, option, convertible security, or other right
(contingent or otherwise) to purchase or otherwise acquire Equity
Securities of VitalStream issued by VitalStream is authorized or
outstanding; (C) there is no commitment of VitalStream to issue shares,
subscriptions, warrants, options, convertible securities, or other such
rights (contingent or otherwise) or to distribute to holders of any of its
Equity Securities or Debt Securities any evidence of Indebtedness or
assets. Except as provided for in the Articles of Incorporation, or as set
forth in SCHEDULE 4(x)(ii) attached hereto, VitalStream has no obligation
(contingent or otherwise) to purchase, redeem, or otherwise acquire any of
its Equity Securities or Debt Securities or any interest therein or to pay
any dividend or make any other distribution is respect thereof. All of the
outstanding Equity Securities and Debt Securities of VitalStream were
issued in compliance with all applicable federal, provincial and state
securities Laws.
(iii) There are no statutory or contractual stockholders preemptive
rights or rights of refusal with respect to the issuance of the Purchase
Shares. VitalStream has not violated any applicable securities Laws in
connection with the offer, sale or issuance of any of its capital stock,
and (subject to the accuracy of the representations, acknowledgements and
agreements contained in SECTION 3(z) and SECTION 6(c) of this Agreement),
the offer, sale and issuance of the Purchase Shares hereunder do not
require registration under the Securities Act or any applicable state
securities Laws. To VitalStream's Knowledge, except for the AKKAD
Agreement, there are no agreements between VitalStream's stockholders with
respect to the voting or transfer of VitalStream's capital stock or with
respect to any other aspect of VitalStream's affairs other than as set
forth in the Articles of Incorporation.
(y) ISSUANCE OF THE PURCHASE SHARES. The issuance, sale and delivery of
the Purchase Shares in accordance with this Agreement, have been, or will be on
or prior to the Closing, duly authorized by all necessary corporate action on
the part of VitalStream. The Purchase Shares, when so issued, sold and delivered
against payment therefor in accordance with the provisions of this Agreement,
will be duly and validly issued, fully paid and non-assessable, free and clear
of all Liens, and not subject to any preemptive rights. Subject to the accuracy
of the representations, acknowledgements and agreements contained in SECTION
3(z) and SECTION 6(c) of this Agreement, the offer and sale of the Purchase
Shares to Hosting will be in compliance with all applicable Laws.
(z) CUSTOMERS AND SUPPLIERS.
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(i) Except as set forth on SCHEDULE 4(z) attached hereto, during
the twelve (12) month period ending on the date hereof, there has not been
any material interruption or outage (other than as requested by a customer
of VitalStream or any VitalStream Subsidiary) in the provision by
VitalStream or any VitalStream Subsidiary to any customer of VitalStream or
any VitalStream Subsidiary of the goods and services provided by
VitalStream or any VitalStream Subsidiary in the operation of its Hosting
Business.
(ii) Except as set forth on SCHEDULE 4(z) attached hereto, since
July 31, 2002, no customer of VitalStream or any VitalStream Subsidiary
which generated monthly revenues in the one month period ended August 31,
2002 that accounted for in excess of $5,000 of the monthly revenues of the
Hosting Business operated by VitalStream and any VitalStream Subsidiary has
terminated or threatened in writing to terminate its relationship, or any
agreement, with VitalStream or any VitalStream Subsidiary, as the case may
be.
(aa) INVESTMENT COMPANY. The Company is not an "investment company" as
defined under the Investment Company Act of 1940.
5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) GENERAL. Each of the Parties will, and VitalStream will cause each of
the VitalStream Subsidiaries to, use its reasonable best efforts to take all
action and to do all things necessary, proper or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
and by the other Transaction Agreements (including satisfaction, but not waiver,
of the closing conditions set forth in SECTION 6(h)(i) of this Agreement).
(b) NOTICES AND CONSENTS.
(i) Each of Hosting and Networks, will give any notices to third
parties, and each of Hosting and Networks will use their respective
reasonable best efforts to obtain any third party consents required in
connection with the consummation of the transactions contemplated by this
Agreement and the other Transaction Agreements VitalStream may reasonably
request in connection with the matters contemplated herein and in the other
Transaction Agreements. Each of Hosting and Networks, will give any notices
to, make any filings with, and use its reasonable best efforts to obtain
any authorizations, consents and approvals of any Governmental Entity
required in connection with the consummation of the transactions
contemplated by this Agreement and the other Transaction Agreements.
(ii) Each of the Buying Parties will, and VitalStream will cause
each of the other VitalStream Subsidiaries to, give any notices to third
parties, and each of the Buying Parties will, and VitalStream will cause
each of the VitalStream Subsidiaries to, use their reasonable best efforts
to obtain any third party consents required in connection with the
consummation of the transactions contemplated by this Agreement and the
other
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Transaction Agreements Hosting may reasonably request in connection with
the matters contemplated herein and in the Transaction Agreements. Each of
the Buying Parties will, and VitalStream will cause each of the other
VitalStream Subsidiaries to, give any notices to, make any filings with,
and use its reasonable best efforts to obtain any authorizations, consents
and approvals of any Governmental Entity required in connection with the
consummation of the transactions contemplated by this Agreement and the
other Transaction Agreements.
(c) OPERATION AND PRESERVATION OF BUSINESS.
(i) Each of Hosting and Networks shall operate its Hosting
Business in the Ordinary Course of Business consistent with prudent
business practices and in compliance with applicable Laws, and to the
extent consistent therewith so as to preserve the current value and
integrity of the Hosting Business of Hosting and the Acquired Assets,
maintain insurance on the Acquired Assets (in amounts and types consistent
with past practice), and use its reasonable best efforts to preserve the
goodwill and organization of the Hosting Business of Hosting and its
relationships with customers, suppliers and others having business dealings
with it. Neither Hosting nor Networks will engage in any practice, take any
action, or enter into any transaction outside the Ordinary Course of
Business of their respective Hosting Businesses.
(ii) VitalStream shall, and shall cause each of the VitalStream
Subsidiaries to, operate its business in the Ordinary Course of Business
consistent with prudent business practices and in compliance with
applicable Laws, and to the extent consistent therewith so as to preserve
the current value and integrity of its business, and use its reasonable
best efforts to preserve the goodwill and organization of its business and
its relationships with customers, suppliers and others having business
dealings with it. VitalStream will not, and will cause each of the
VitalStream Subsidiaries not to, engage in any practice, take any action,
or enter into any transaction (other than a transaction described in
SECTION 5(f) of this Agreement which shall be governed by SECTION 5(f) of
this Agreement) outside the Ordinary Course of Business.
(d) FULL ACCESS.
(i) Each of Hosting and Networks shall afford to VitalStream and
its counsel, accountants, agents and other authorized representatives
specified by VitalStream access during business hours to their respective
premises, properties, personnel, books, records (including Tax records),
contracts and documents of or pertaining to the Acquired Assets in order
that VitalStream may have full opportunity to make such reasonable
investigations as it shall desire to make of the affairs of the Acquired
Assets and their respective Hosting Businesses. Each of Hosting and
Networks shall cause its officers and employees, and shall use its best
efforts to cause their counsel and auditors to furnish such additional
financial and operating data and other information as VitalStream shall
from time to time reasonably request including any internal control
recommendations made by its independent auditors in connection with any
audit of their respective Hosting Businesses. From time to time prior to
the Closing Date, each of Hosting and Networks shall promptly supplement or
amend information previously delivered to VitalStream
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with respect to any matter hereafter arising which, if existing or
occurring at the date of this Agreement, would have been required to be set
forth or disclosed herein; provided, however, that such supplemental
information shall not be deemed to be an amendment to any schedule hereto
and shall not change the risk allocation of this Agreement between
VitalStream, on the one hand, and Hosting and Networks, on the other hand.
(ii) VitalStream shall, and shall cause each of the VitalStream
Subsidiaries to, afford to Hosting and its counsel, accountants, agents and
other authorized representatives specified by Hosting access during
business hours to the premises, properties, personnel, books, records
(including Tax records), contracts and documents of or pertaining to
VitalStream and each of the VitalStream Subsidiaries in order that Hosting
may have full opportunity to make such reasonable investigations as it
shall desire to make of the affairs of VitalStream and each of the
VitalStream Subsidiaries. VitalStream shall, and shall cause each of the
VitalStream Subsidiaries to, cause its officers and employees, and shall
use its best efforts to cause their counsel and auditors to furnish such
additional financial and operating data and other information as Hosting
shall from time to time reasonably request including, any internal control
recommendations made by its independent auditors in connection with any
audit of VitalStream and the VitalStream Subsidiaries. From time to time
prior to the Closing Date, VitalStream shall promptly supplement or amend
information previously delivered to Hosting with respect to any matter
hereafter arising which, if existing or occurring at the date of this
Agreement, would have been required to be set forth or disclosed herein;
provided, however, that such supplemental information shall not be deemed
to be an amendment to any schedule hereto and shall not change the risk
allocation of this Agreement between VitalStream, on the one hand, and
Hosting and Networks, on the other hand.
(e) NOTICE OF DEVELOPMENTS. Each Party will give prompt written notice to
the other Party of any material adverse development causing a breach of any of
its own representations and warranties set forth in SECTION 2(j) and SECTION 4
of this Agreement. No disclosure by any Party pursuant to this SECTION 5(e),
however, shall be deemed to amend or supplement any schedule attached hereto or
to prevent or cure any misrepresentation, breach of warranty, or breach of
covenant.
(f) EXCLUSIVITY.
(i) During the period beginning on the date of the execution of
this Agreement and continuing until the earlier of (A) the termination of
this Agreement and (B) the consummation of the transactions contemplated by
this Agreement, no Party (nor any of such Party's stockholders, directors,
officers, employees, agents or representatives, if any) will, without the
prior written approval of each of the other Parties:
(A) solicit, initiate, encourage the submission or discuss
any proposal or offer from any Person (other than the Parties)
relating to any financing, acquisition, divestiture or business
combination of or involving the Hosting Business of such Party
(including any acquisition or divestiture of any capital stock or
other voting securities or any portion of the assets of such Party and
any
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acquisition structured as a merger, consolidation, or share exchange)
other than communications necessary to advise Persons of such Party's
lack of interest in any such proposal or offer or
(B) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any Person to
do or seek any of the foregoing.
(ii) For the avoidance of any doubt, this SECTION 5(f) shall not
prohibit any transaction involving, Holdings, Networks or any of their
respective Affiliates, stockholders, directors, officers, employees, agents
or representatives in connection with any financing, acquisition,
divestiture or business combination (including any acquisition or
divestiture of any capital stock or other voting securities or any portion
of the assets of such Party and any acquisition structured as a merger,
consolidation, or share exchange) of or involving the business and
operations of Networks or Holdings (or any of their respective
Subsidiaries) other than their respective Hosting Business including,
without limitation, the transactions contemplated by that certain
Asset
Purchase Agreement dated as of October 10, 2002, by and among Netifice,
Holdings and Networks.
(iii) Notwithstanding anything to the contrary set forth in SECTION
5(f)(i) of this Agreement, this Section 5(f) shall not prohibit (A) the
issuance of Equity Securities of VitalStream upon the exercise of any
options or warrants outstanding on the Closing Date, (B) the grant of
options by VitalStream pursuant to the VitalStream 2001 Stock Incentive
Plan, (C) the discussion by VitalStream of any transaction involving
VitalStream or any VitalStream Subsidiary or any of their respective
Affiliates, stockholders, directors, officers, employees, agents or
representatives (each a "VITALSTREAM PARTY") in connection with any
financing, acquisition, divestiture or business combination (including any
acquisition or divestiture of any Equity Securities or any portion of the
assets of such VitalStream Party and any acquisition structured as a
merger, consolidation or share exchange) of or involving the business and
operations of VitalStream or any VitalStream Subsidiary (a "VITALSTREAM
TRANSACTION") PROVIDED, HOWEVER, that such VitalStream Party shall promptly
update Dolphin as to any material information regarding a VitalStream
Transaction and provide Dolphin with at least a weekly update of such
discussions (in writing, if Dolphin shall so request) regarding any
VitalStream Transaction and copies of all term sheets, agreements and any
other documentation or correspondence prepared for or in connection with
such VitalStream Transaction and PROVIDED FURTHER, that no VitalStream
Party shall enter into any term sheet, contract or other agreement or
arrangement (whether written or oral) upon the earlier to occur of (1)
December 31, 2002, and (2) that date that is fifteen days following the
Closing Date. VitalStream hereby represents and warrants that neither
VitalStream, any VitalStream Subsidiary nor, to the Knowledge of
VitalStream, any other VitalStream Party has entered into any executory
agreement which has not yet terminated or accepted any commitment with
respect to any VitalStream Transaction.
6. ADDITIONAL AGREEMENTS.
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(a) GENERAL. At any time after the Closing, if any further action is
necessary or desirable to carry out the purposes of this Agreement or any other
Transaction Agreement (including any action necessary to transfer, convey and
assign the Acquired Assets to VitalStream and to put VitalStream in the
possession and operating control of the Acquired Assets), each of the Parties
will take such further action (including the execution and delivery of such
further instruments and documents of sale, transfer, conveyance, assignment and
confirmation) as any other Party may request, at the sole cost and expense of
the requesting Party (unless the requesting Party is entitled to indemnification
therefor under SECTION 8 of this Agreement). Each of Hosting and Networks
acknowledges and agrees that from and after the Closing Date VitalStream will be
entitled to possession of all documents, books, records (including Tax records),
agreements, and financial data of any sort relating to the Hosting Business of
Hosting or the Acquired Assets. Networks acknowledges and agrees that from and
after the Closing Date VitalStream will be entitled to possession of all
documents, books, records (including Tax records), agreements, and financial
data of any sort relating solely to the Hosting Business of Networks.
(b) LITIGATION SUPPORT. At any time after the Closing, in the event and
for so long as any Party actively is contesting or defending against any Claim
in connection with (i) any transaction contemplated under this Agreement or any
Transaction Agreement or (ii) any fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction on or prior to the Closing Date involving the
Hosting Business of Hosting or Networks or the Acquired Assets, the other
Parties will (and VitalStream will cause each of the VitalStream Subsidiaries
to) cooperate with the contesting or defending Party and its counsel in the
contest or defense, make available its personnel, and provide such testimony and
access to its books and records as shall be necessary in connection with the
contest or defense, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under SECTION 8 of this Agreement).
(c) PURCHASE SHARES.
(i) The Purchase Shares issued pursuant to this Agreement will be
imprinted with a legend substantially in the following form:
"THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES REPRESENTED
BY THIS INSTRUMENT HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL,
IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144
UNDER SAID ACT.
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"THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS
INSTRUMENT ARE SUBJECT TO THE CONDITIONS SPECIFIED IN THE
ASSET PURCHASE AGREEMENT, DATED AS OF NOVEMBER 1, 2002, AMONG
THE ISSUER OF SUCH SECURITIES (THE "COMPANY") AND THE OTHER
PARTIES REFERRED TO THEREIN, AS AMENDED AND MODIFIED FROM
TIME TO TIME, AND THE COMPANY RESERVES THE RIGHT TO REFUSE
THE TRANSFER OF SUCH SECURITIES UNTIL SUCH CONDITIONS HAVE
BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. A COPY OF SUCH
CONDITIONS SHALL BE FURNISHED WITHOUT CHARGE BY THE COMPANY
TO THE HOLDER HEREOF UPON WRITTEN REQUEST."
(ii) Hosting acknowledges and agrees that the Purchase Shares it is
acquiring pursuant to this Agreement are characterized as "restricted
securities" under the federal securities Laws inasmuch as they are being
acquired from VitalStream in a transaction not involving a public offering
and that under such Laws such securities may be resold without registration
under the Securities Act only in certain limited circumstances as set forth
in this SECTION 6(c). Restricted Securities are transferable only pursuant
to (A) public offerings registered under the Securities Act, (B) Rule 144
or Rule 144A adopted by the Securities and Exchange Commission under the
Securities Act (as such rule may be amended from time to time) or any
similar rule or regulation hereafter adopted by the Securities and Exchange
Commission if the exemption from registration under such rule is available
and (C) subject to the conditions specified in SECTION 6(c)(iii) below, any
other legally available means of transfer.
(iii) In connection with the transfer of any Restricted Securities
(other than a transfer described in SECTION 6(c)(ii) of this Agreement),
the holder thereof shall deliver written notice to VitalStream describing
in reasonable detail the transfer or proposed transfer, together with an
opinion of legal counsel which is knowledgeable in securities Law matters
to the effect that such transfer of Restricted Securities may be effected
without registration of such Restricted Securities under the Securities
Act. In addition, if the transferring holder delivers to VitalStream an
opinion of such legal counsel that no subsequent transfer of such
Restricted Securities shall require registration under the Securities Act,
VitalStream shall promptly upon such contemplated transfer deliver new
certificates for such Restricted Securities which do not bear the
Securities Act legend set forth in SECTION 6(c)(i) of this Agreement. If
VitalStream is not required to deliver new certificates for such Restricted
Securities not bearing such legend, the holder thereof shall not transfer
the same until the prospective transferee has confirmed to VitalStream in
writing its agreement to be bound by the conditions contained in this
SECTION 6(c).
(iv) Notwithstanding any provision of this Agreement to the
contrary, upon the request of the holders of a majority of the Purchase
Shares, VitalStream shall promptly supply to such holders or their
prospective transferees all information regarding VitalStream required to
be delivered in connection with a transfer pursuant to Rule 144A adopted by
the Securities and Exchange Commission under the Securities Act (as such
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rule may be amended from time to time) or any similar rule or regulation
hereafter adopted by the Securities and Exchange Commission.
(v) If any Restricted Securities become eligible for sale pursuant
to Rule 144(k) adopted by the Securities and Exchange Commission under the
Securities Act (as such rule may be amended from time to time) or any
similar rule or regulation hereafter adopted by the Securities and Exchange
Commission, VitalStream shall, upon the request of the holder of such
Restricted Securities remove the legend set forth in SECTION 6(c)(i) of
this Agreement from the certificates for such Restricted Securities.
(d) EMPLOYEES. As of the Closing Date, Networks shall terminate the
employment of each individual currently employed by Networks and listed on ANNEX
1 (the "ELIGIBLE NETWORKS EMPLOYEES"). As of the Closing Date, VitalStream will
offer employment to the Eligible Networks Employees on such terms and conditions
as VitalStream shall determine in its sole discretion. Those Eligible Networks
Employees who accept such offer of employment as of the Closing Date shall be
referred to herein as the "TRANSFERRED EMPLOYEES." Notwithstanding the
provisions of this SECTION 6(d), nothing in this Agreement shall limit
VitalStream's ability to terminate the employment of any Transferred Employee at
any time and for any reason, including without cause. Networks shall be liable
for all severance costs and other Liabilities incurred as a result of the
termination of the Transferred Employees other than those severance costs and
other Liabilities expressly assumed by VitalStream pursuant to the terms of this
Agreement. VitalStream will use its reasonable best efforts to assist Networks
in obtaining releases of Liability of Hosting and Networks from all Transferred
Employees.
(e) NON-COMPETITION; NON-INTERFERENCE; NON-SOLICITATION. As a significant
inducement to the Buying Parties to enter into and perform their obligations
under this Agreement, each of Networks and Hosting (collectively, the
"NONCOMPETING PARTIES"), hereby agree as follows:
(i) Each Noncompeting Party acknowledges that (A) a principal
business of Hosting is the Hosting Business of Hosting; (B) Hosting and
Networks are among a limited number of Persons who have developed a Hosting
Business; (C) the Hosting Business of Hosting and Networks is, in part,
national and international in scope; (D) the agreements and covenants of
each Noncompeting Party contained in this SECTION 6(e)(i) are essential to
the business and goodwill of the Hosting Business of Hosting and Networks
and the use by VitalStream of the Acquired Assets and the conduct by
VitalStream of the Hosting Business of Hosting and Networks; and (E)
VitalStream would not have entered into this Agreement and would not have
purchased the Acquired Assets but for the covenants and agreements set
forth in this SECTION 6(e)(i). Accordingly, each of the Noncompeting
Parties covenants and agrees that:
(A) During the period commencing on the Closing Date and
ending five (5) years following the Closing Date (the "RESTRICTED
PERIOD"), none of the Noncompeting Parties will directly or
indirectly, own, operate, manage, control, participate in, consult
with, advise, permit its name to be used by, provide services for,
lease, or in any manner engage in any business that manufactures or
sells any products or provides any services which are in competition
with any
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products or services of the Hosting Business of Hosting and Networks
anywhere in the United States, as such businesses exist as of the
Closing Date (collectively, "COVERED ACTIVITIES").
(B) At all times after the date hereof, each of the
Noncompeting Parties shall keep secret and retain in strictest
confidence all Confidential Information, and shall not use for its
benefit or for the benefit of any third party, any and all
Confidential Information and shall not disclose any Confidential
Information to anyone outside of each of the Noncompeting Parties and
their Affiliates and advisors who do not presently have such
Confidential Information, except with the express written consent of
VitalStream and except for Confidential Information which is at the
time of receipt or thereafter becomes publicly known through no
wrongful act of any of the Noncompeting Parties of their Affiliates.
(C) During the Restricted Period, none of the Noncompeting
Parties shall, without the prior written consent of VitalStream,
directly or indirectly, (i) induce or attempt to induce any employee
of any Buying Party to leave the employ of any Buying Party, (ii)
employ any employee of any Buying Party when employed by any Buying
Party, (iii) in any other way interfere with the relationship between
any Buying Party and any employee of any Buying Party, (iv) employ
during the period commencing from the date hereof and ending two (2)
years following the Closing Date any Person (other than a Transferred
Employee) who is employed by any Buying Party during such period, or
(v) induce or attempt to induce any customer, supplier, licensee,
licensor, reseller, partner or franchisee of any Buying Party
(including any Hosting Business Customer) to cease doing business with
any Buying Party, or in any way interfere with the relationship
between any such customer, supplier, licensee, licensor, reseller,
partner or franchisee or business relation and any Buying Party.
(ii) Each of Networks and Hosting further acknowledge and agree
that:
(A) the covenants set forth in SECTION 6(e)(i) of this
Agreement are reasonable in geographical and temporal scope and in all
other respects,
(B) VitalStream would not have entered into this Agreement
but for the covenants of Hosting and Networks contained herein, and
(C) the covenants contained herein have been made in order to
induce VitalStream to enter into this Agreement and purchase the
Acquired Assets from which VitalStream will receive substantial
benefit.
(iii) If, at the time of enforcement of the covenants contained in
SECTION 6(e)(i) of this Agreement, a court shall hold that the duration,
scope or geographic restrictions stated therein are unreasonable under
circumstances then existing, the Parties agree that the maximum duration,
scope or geographic area reasonable under such circumstances shall be
substituted for the stated duration, scope or geographic area (and any
court or
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other adjudicator interpreting these provision is hereby authorized to so
amend this Agreement).
(iv) For the avoidance of any doubt, this SECTION 6(e) shall not
prohibit any transaction by Networks or any assignee of Networks pursuant
to which Networks or any such assignee shall lease the premises located at
▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, to any third party for the purpose
of the conduct by such third party of its colocation business.
(f) NO ASSIGNMENT CAUSING BREACH. Notwithstanding anything in this
Agreement, neither this Agreement nor any document or instrument delivered
pursuant hereto shall constitute an assignment of an Acquired Asset (including
any Claim, contract, commitment, sales order or purchase order or any right or
any benefit arising thereunder or resulting therefrom) if an attempted
assignment thereof without the consent of any other Person would constitute a
breach thereof or in any way adversely affect the rights to be assigned. Until
such consent is obtained, or if an attempted assignment thereunder would be
ineffective or would affect the rights of Hosting thereunder so that
VitalStream, would not in fact receive all such rights, Hosting on the one hand,
and VitalStream, on the other hand, will cooperate with each other to provide
for the benefits of, and to permit VitalStream to assume all Liabilities under,
any such Acquired Asset or Assumed Liability including enforcement at the
request and expense of VitalStream for the benefit of VitalStream any and all
rights of Hosting against any Person thereto arising out of the breach or
cancellation thereof by such Person; and any transfer or assignment to
VitalStream by Hosting of any Acquired Asset which shall require the consent or
approval of any Person shall be made subject to such consent or approval being
obtained.
(g) MAIL, NOTICES AND OTHER CORRESPONDENCE.
(i) After the Closing, Hosting and Networks shall deliver or cause
to be delivered to VitalStream, promptly after receipt by Hosting or
Networks, as the case may be, all mail, notices and other correspondence
relating to the Acquired Assets or the Hosting Business of Hosting or
Networks.
(ii) After the Closing, each of VitalStream and the Buyer shall
deliver or cause to be delivered to Hosting, promptly after receipt by
VitalStream or the Buyer (A) all mail, notices and other correspondence
which do not relate to the Acquired Assets or the Hosting Business of
Hosting or Networks, (B) all payments in respect of any accounts or notes
receivable which constitute an Excluded Asset or (C) any other Excluded
Asset that comes into its possession at any time after the Closing.
(h) TAX MATTERS.
(i) Hosting and Networks will be responsible for the preparation
and filing of all Tax Returns for Hosting and Networks for all periods as
to which Tax Returns are due after the Closing Date (including the
consolidated, unitary, and combined Tax Returns for Hosting and Networks
which include the operations of the Hosting Business of Hosting and
Networks for any period ending on or before the Closing Date); provided,
however,
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that VitalStream, will reimburse Hosting or Networks, as the case may be,
concurrently therewith to the extent any payment Hosting or Networks, as
the case may be, is making relates to the operations of the Hosting
Business of Hosting and Networks for any period beginning after the Closing
Date.
(ii) VitalStream will be responsible for the preparation and filing
of all Tax Returns for the Acquired Assets for all periods as to which Tax
Returns are due after the Closing Date (other than for Tax Returns of
Hosting and Networks described in SECTION 6(h)(i) of this Agreement).
VitalStream will make all payments required with respect to any such Tax
Return; provided, however, that Hosting or Networks, as the case may be,
will reimburse VitalStream concurrently therewith to the extent any payment
VitalStream is making relates to the operations of the Hosting Business of
Hosting and Networks for any period ending on or before the Closing Date.
(iii) Notwithstanding anything in SECTION 6(h)(i) and SECTION 6(h)
(ii) to the contrary, Hosting shall pay, or reimburse VitalStream for, all
sales Tax payable to the State of California as a result of the purchase
and sale of the Acquired Assets pursuant to the Transaction Agreements.
(i) NOTICE OF ASSIGNMENT. Hosting shall promptly after the Closing Date
notify the Hosting Business Customers of the assignment of their service
contracts to the Buyer and shall instruct the Hosting Business Customers to make
payments for the services provided by Buyer directly to the Buyer in accordance
with instructions from Buyer.
(j) UPDATING HOSTING CONTRACTS LIST
(i) At any time and from time to time following the Closing Date,
if Hosting discovers the existence of an Omitted Hosting Contract, Hosting
shall deliver to the Buyer and VitalStream an addendum to SCHEDULE 3(l)
attached hereto listing such Omitted Hosting Contract (each, a "CONTRACT
ADDENDUM"), together with a true, correct and complete copy of such Omitted
Hosting Contract. The Buyer shall have ten (10) days after their receipt of
the Contract Addendum to review the Contract Addendum. To the extent (a)
the document listed on the Contract Addendum is an Omitted Hosting Contract
and (b) the performance of such Omitted Hosting Contract, when aggregated
with all other Omitted Hosting Contracts listed on Contract Addenda
previously delivered to the Buyer and VitalStream involves the payment by
or to Hosting of consideration less than or equal to $20,000 annually, such
Omitted Hosting Contract shall automatically be deemed to have been
accepted by the Buyer as a Hosting Contract and added to SCHEDULE 3(l)
attached hereto as of the date hereof. To the extent either (A) the
document listed on the Contract Addendum is not an Omitted Hosting Contract
or (B) the performance of such Omitted Hosting Contract, when aggregated
with all other Omitted Hosting Contracts listed on Contract Addenda
previously delivered to the Buyer and VitalStream involves the payment by
or to Hosting of consideration greater than $20,000 annually, the Buyer may
reject any such asserted Omitted Hosting Contract by delivering written
notice (the "BUYER REJECTION NOTICE") to Hosting indicating its rejection
of such asserted Omitted Hosting Contract and the reason for such rejection
prior to the expiration of the ten (10) day period referred to above. If
the Buyer does not deliver a
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Buyer Rejection Notice within the ten (10) day period described above, the
Omitted Hosting Contract described in the respective Contract Addendum
shall be deemed to have been accepted by the Buyer as a Hosting Contract
and added to SCHEDULE 3(l) attached hereto as of the date hereof. In the
event of a dispute regarding whether an asserted Omitted Hosting Contract
may, or may not, be rejected, Hosting and the Buyer shall, in good faith,
attempt to resolve the dispute within fifteen (15) days after Hosting's
receipt of the Buyer Rejection Notice.
(ii) At any time and from time to time following the Closing Date
if the Buyer discovers the existence of an Omitted Hosting Contract, the
Buyer may, in its discretion, deliver to Hosting a demand that Hosting
deliver a Contract Addendum listing such Omitted Hosting Contract (a
"CONTRACT DEMAND"). Hosting shall have ten (10) days after its receipt of
the Contract Demand to review the Contract Demand. To the extent the
document identified in the Contract Demand is an Omitted Hosting Contract,
Hosting shall, within the ten (10) day period described above, deliver a
Contract Addendum listing such Omitted Hosting Contract (which the Buyer
will be deemed to have accepted with respect to the relevant Omitted
Hosting Contract). To the extent the document identified in the Contract
Demand is not an Omitted Hosting Contract, Hosting may reject any such
asserted Omitted Hosting Contract by delivering written notice (a "HOSTING
REJECTION NOTICE") to the Buyer indicating its rejection of such asserted
Omitted Hosting Contract and the reason for such rejection prior to the
expiration of the ten (10) day period referred to above. If Hosting does
not deliver a Hosting Rejection Notice within the ten (10) day period
referred to above, the Omitted Hosting Contract described in the respective
Contract Addendum shall be deemed to have been accepted Hosting and the
Buyer as a Hosting Contract and added to SCHEDULE 3(l) Hosting Contract
may, or may not, be rejected, Hosting and the Buyer shall, in good faith,
attempt to resolve the dispute within fifteen (15) days after the Buyer's
receipt of the Hosting Rejection Notice.
(k) POST-CLOSING CERTIFICATIONS AND DELIVERIES. Within ten (10) days of
the Closing Date, VitalStream shall deliver to Hosting a list identifying, as of
the Closing Date, each of the stockholders of record of the Company and the
number of shares of Common Stock held by such stockholders of record, together
with a certification executed by an officer of VitalStream certifying that,
except as set forth on such list, there were no shares of Common Stock issued or
outstanding on the Closing Date.
(l) ADDITIONAL SOFTWARE LICENSES. Hosting and Networks shall each use
their good faith reasonable efforts to transfer all right, title and interest,
if any, held by each of them in and to each of the software licenses set forth
on SCHEDULE 6(l) attached hereto. Notwithstanding the foregoing, VitalStream
hereby acknowledges that to the extent Hosting or Networks do not have any
right, title or interest in such software licenses, such software licenses shall
not be transferred to VitalStream pursuant to this SECTION 6(l).
7. CONDITIONS TO OBLIGATION TO CLOSE.
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(a) CONDITIONS TO OBLIGATION OF EACH OF VITALSTREAM AND THE BUYER. The
obligation of each of VitalStream and the Buyer to consummate the transactions
to be performed by it in connection with the Closing shall be subject to the
fulfillment at or prior to the Closing of each of the following conditions, any
and all of which may be waived in whole or in part in writing by VitalStream and
the Buyer to the extent permitted by applicable Law:
(i) NETWORKS CONTRIBUTION AGREEMENT. The Networks Contribution
Agreement shall have been executed and delivered by Networks and Hosting,
and shall be in full force and effect and shall not have been amended or
modified. The transactions contemplated by the Networks Contribution
Agreement shall have been consummated prior to the Closing in accordance
with the terms of the Networks Contribution Agreement.
(ii) CONVERTIBLE PROMISSORY NOTE AND WARRANT PURCHASE AGREEMENT.
The Convertible Promissory Note and Warrant Purchase Agreement shall have
been executed and delivered by each of the Purchasers (as that term is
defined in the Convertible Promissory Note and Warrant Purchase Agreement).
The Convertible Promissory Note and Warrant Purchase Agreement shall be in
full force and effect as of the Closing Date and shall not have been
amended or modified. The transactions contemplated by the Convertible
Promissory Note and Warrant Purchase Agreement, including the wire transfer
to VitalStream of all amounts payable at or in connection with the
consummation of the transactions under the Convertible Promissory Note and
Warrant Purchase Agreement, shall have been consummated in accordance with
the terms of the Convertible Promissory Note and Warrant Purchase
Agreement.
(iii) REPRESENTATIONS AND WARRANTIES; COVENANTS. The representations
and warranties contained in SECTION (j) of this Agreement shall be true and
correct in all material respects (except for any representations and
warranties which are qualified by materiality, which shall be true and
correct in all respects) at the Closing as though then made and as though
the Closing Date was substituted for the date of this Agreement throughout
such representations and warranties (except for any representation or
warranty made as of a specific date, which shall be true and correct as of
such date). Hosting and Networks shall have duly performed or complied
with, in all material respects, all of the covenants, obligations and
conditions to be performed or complied with under the terms of this
Agreement and the other Transaction Agreements on, prior to, or at the
Closing and shall be in compliance with, in all material respects, all of
the covenants, obligations and conditions to be complied with under the
terms of this Agreement at the Closing.
(iv) CONSENTS AND APPROVALS. Each of Hosting and Networks shall
have made all filings and shall have obtained and delivered to VitalStream
all governmental and/or third party permits, authorizations, consents and
approvals required to be obtained by it to consummate the transactions
contemplated by this Agreement and the other Transaction Agreements,
including all of the consents to assignment of the Hosting Contracts
identified on SCHEDULE 3(b).
(v) LITIGATION. No Claim shall be threatened or shall be pending
in which it is sought to restrain or prohibit or to obtain damages or other
relief in connection with the
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transactions contemplated by this Agreement or that would have, or
reasonably be expected to have, a Hosting Material Adverse Effect, and no
injunction, judgment, order, decree or ruling with respect thereto shall be
in effect.
(vi) NO BANKRUPTCY. Neither Hosting nor Networks shall not have
sought protection pursuant to any Bankruptcy Law. No Persons shall have
initiated any Claim or proceedings under any Bankruptcy Law against Hosting
or Networks.
(vii) NO HOSTING MATERIAL ADVERSE EFFECT. There shall not have
occurred any Hosting Material Adverse Effect since the date of the Hosting
Balance Sheet.
(viii) AUDITED FINANCIALS STATEMENTS. Hosting shall have caused to be
prepared and delivered to VitalStream audited balance sheets and statements
of income and cash flow of the Hosting Business of Hosting and Networks as
of and for the twelve months ended December 31, 2001, and as of and for the
nine months ended September 30, 2002, in a form sufficient to satisfy the
requirements of Item 7(a) on a Current Report on Form 8-K with respect to a
Current Report on Form 8-K to be filed by VitalStream reporting the
transaction contemplated by this Agreement (the "HOSTING AUDITED FINANCIAL
STATEMENTS"), together with the Hosting Audited Financial Statements
Certificate.
(ix) ESCROW AGREEMENT. The Escrow Agreement shall have been
executed and delivered by the Hosting and the Escrow Agent and shall be in
full force and effect.
(x) MASTER ACCESS AGREEMENT. The Master Access Agreement shall
have been executed and delivered by Netifice and shall be in full force and
effect.
(xi) CUSTOMER MIGRATION AGREEMENT. The Customer Migration Agreement
shall have been executed and delivered by Netifice and shall be in full
force and effect.
(xii) COLOCATION AGREEMENT. The Colocation Agreement shall have been
executed and delivered by Netifice and shall be in full force and effect.
(xiii) PARTIAL TERMINATION AND SECOND AMENDMENT TO SUBLEASE
AGREEMENT. The Partial Termination and Second Amendment to Sublease
Agreement relating to the Los Angeles Lease substantially in the form of
EXHIBIT N attached hereto shall have been executed and delivered by Charter
Holdings, Inc and Networks on or prior to the Closing Date and shall be in
full force and effect.
(xiv) ASSIGNMENT AND ASSUMPTION AGREEMENT. The Assignment and
Assumption Agreement shall have been executed and delivered by Hosting and
shall be in full force and effect.
(xv) ▇▇▇▇ OF SALE. The ▇▇▇▇ of Sale shall have been executed and
delivered by Hosting and shall be in full force and effect.
(xvi) CLOSING DOCUMENTS. Hosting and Networks shall have delivered
to VitalStream all of the following documents:
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(A) an officer's certificate, dated as of the Closing Date,
stating that the conditions specified in SECTION 7(a)(i) through
SECTION 7(a)(vii) of this Agreement have been fully satisfied;
(B) certified copies of the resolutions complying with the
requirements of SECTION 3(b) duly adopted by the board of directors of
Hosting (and by the shareholders of Hosting) authorizing the
execution, delivery and performance of this Agreement, the other
Transaction Agreements to which it is a party and each of the other
agreements contemplated hereby or thereby to which it is a party and
the consummation of all other transactions contemplated by this
Agreement and the other Transaction Agreements to which it is a party;
(C) certified copies of the certificate of incorporation and
bylaws of each of Hosting and Networks as in effect at the Closing
Date;
(D) certificate of good standing of each of Hosting and
Networks from the Secretary of State of the state of its respective
incorporation dated within five (5) days of the Closing Date;
(E) copies of all third party and governmental consents,
approvals and filings required in connection with the consummation of
the transactions contemplated by this Agreement and the other
Transaction Agreements (including all blue sky Law filings); and
(F) such other documents relating to the transactions
contemplated by this Agreement or the other Transaction Agreements as
VitalStream or its special counsel may reasonably request.
(xvii) PROCEEDINGS. All corporate and other proceedings taken or
required to be taken by each of Hosting and Networks in connection with the
transactions contemplated hereby and by the other Transaction Agreements to
be consummated at or prior to the Closing and all documents incident
thereto shall be reasonably satisfactory in form and substance to
VitalStream and its special counsel.
(xviii) TERMINATION OF CISCO SECURITY AGREEMENTS. Cisco shall have
released the Acquired Assets from all Liens under the Cisco Security
Agreements which relate to the Acquired Assets, and evidence of termination
of all financing statements and other evidences of a Lien or other
Indebtedness with respect to the Cisco Security Agreements affecting any of
the Acquired Assets shall have been delivered to VitalStream.
(b) CONDITIONS TO OBLIGATION OF EACH OF HOSTING AND NETWORKS. The
obligation of each of Hosting and Networks to consummate the transactions to be
performed by it in connection with the Closing shall be subject to the
fulfillment at or prior to the Closing of each of the following conditions, any
and all of which may be waived in whole or in part in writing by Hosting and
Networks to the extent permitted by applicable Law:
(i) CONVERTIBLE PROMISSORY NOTE AND WARRANT PURCHASE AGREEMENT.
The Convertible Promissory Note and Warrant Purchase Agreement shall have
been executed
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and delivered by VitalStream. The Convertible Promissory Note and Warrant
Purchase Agreement shall be in full force and effect as of the Closing Date
and shall not have been amended or modified. The conditions in Section 2(B)
of the Convertible Promissory Note and Warrant Purchase Agreement shall
have been satisfied in full (without reliance on any waiver by the
Purchasers (as that term is defined in the Convertible Promissory Note and
Warrant Purchase Agreement)), and the transactions contemplated by the
Convertible Promissory Note and Warrant Purchase Agreement shall have been
consummated in accordance with the terms of the Convertible Promissory Note
and Warrant Purchase Agreement.
(ii) REPRESENTATIONS AND WARRANTIES; COVENANTS. The representations
and warranties contained in SECTION 4 of this Agreement shall be true and
correct in all material respects (except for any representations and
warranties which are qualified by materiality, which shall be true and
correct in all respects) at the Closing as though then made and as though
the Closing Date was substituted for the date of this Agreement throughout
such representations and warranties (except for any representation or
warranty made as of a specific date, which shall be true and correct as of
such date). The Buying Parties shall have duly performed or complied with,
in all material respects, all of the covenants, obligations and conditions
to be performed or complied with under the terms of this Agreement and the
other Transaction Agreements on, prior to, or at the Closing and shall be
in compliance with, in all material respects, all of the covenants,
obligations and conditions to be complied with under the terms of this
Agreement at the Closing.
(iii) CONSENTS AND APPROVALS. Each of the Buying Parties shall have
made all filings and shall have obtained and delivered to Hosting all
governmental and/or third party permits, authorizations, consents and
approvals required to be obtained it to consummate the transactions
contemplated by this Agreement and the other Transaction Agreements.
(iv) LITIGATION. No Claim shall be threatened or shall be pending
in which it is sought to restrain or prohibit or to obtain damages or other
relief in connection with the transactions contemplated by this Agreement
or that would have, or reasonably be expected to have, a VitalStream
Material Adverse Effect, and no injunction, judgment, order, decree or
ruling with respect thereto shall be in effect.
(v) NO BANKRUPTCY. No Buying Party nor any Subsidiary of
VitalStream shall have sought protection pursuant to any Bankruptcy Law. No
Persons shall have initiated any Claim or proceedings under any Bankruptcy
Law against any Buying Party or any Subsidiary of VitalStream.
(vi) NO VITALSTREAM MATERIAL ADVERSE EFFECT. There shall not have
occurred any VitalStream Material Adverse Effect since the date of the Most
Recent VitalStream Balance Sheet.
(vii) SECURITIES LAW COMPLIANCE. The Buying Parties shall have made
all filings under all applicable federal and state securities Laws
necessary to consummate the
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issuance of the Purchase Shares pursuant to this Agreement in compliance
with such Laws.
(viii) ESCROW AGREEMENT. The Escrow Agreement shall have been
executed and delivered by VitalStream and the Escrow Agent and shall be in
full force and effect.
(ix) MASTER ACCESS AGREEMENT. The Master Access Agreement shall
have been executed and delivered by VitalStream and Netifice and shall be
in full force and effect.
(x) CUSTOMER MIGRATION AGREEMENT. The Customer Migration Agreement
shall have been executed and delivered by VitalStream and Netifice and
shall be in full force and effect.
(xi) COLOCATION AGREEMENT. The Colocation Agreement shall have been
executed and delivered by VitalStream and Netifice and shall be in full
force and effect.
(xii) REGISTRATION AGREEMENT. The Registration Agreement shall have
been executed and delivered by VitalStream, and shall be in full force and
effect.
(xiii) INVESTOR RIGHTS AGREEMENT. The Investor Rights Agreement shall
have been executed and delivered by VitalStream and the other signatories
thereto (other than Hosting) and shall be in full force and effect.
(xiv) DELIVERY OF CASH CONSIDERATION. VitalStream shall have
delivered or shall be ready to deliver at Closing to Hosting $250,000 by
wire transfer of immediately available funds pursuant to SECTION 2(c) of
this Agreement.
(xv) TERMINATION OF CISCO SECURITY AGREEMENTS. Each of the Cisco
Security Agreements shall have been terminated by the parties thereto,
Cisco shall have released the Acquired Assets from all Liens thereunder
which relate to the Acquired Assets, and evidence of termination of all
financing statements and other evidences of a Lien or other Indebtedness
with respect to the Cisco Security Agreement affecting any of the Acquired
Assets shall have been delivered to VitalStream.
(xvi) PARTIAL TERMINATION AND SECOND AMENDMENT TO SUBLEASE
AGREEMENT. The Partial Termination and Second Amendment to Sublease
Agreement relating to the Los Angeles Lease substantially in the form of
EXHIBIT N attached hereto shall have been executed and delivered by Charter
Holdings, Inc and Networks on or prior to the Closing Date and shall be in
full force and effect.
(xvii) CLOSING DOCUMENTS. VitalStream shall have delivered to Hosting
and Networks all of the following documents:
(A) an officer's certificate, dated as of the Closing Date,
stating that the conditions specified in SECTION 7(b)(i) through
SECTION 7(b)(vii) of this Agreement have been fully satisfied;
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(B) certified copies of the resolutions duly adopted by each
of VitalStream's and the Buyer's board of directors authorizing the
execution, delivery and performance of this Agreement, the other
Transaction Agreements to which it is a party and each of the other
agreements contemplated hereby or thereby to which it is a party and
the consummation of all other transactions contemplated by this
Agreement and the other Transaction Agreements to which it is a party;
(C) certified copies of the Certificate of Incorporation and
the certificate of incorporation of the Buyer as in effect at the
Closing Date;
(D) certified copies of the bylaws of each of the Buying
Parties as in effect at the Closing Date;
(E) certificate of good standing of each of the Buying
Parties from the Secretary of State of the state of its respective
incorporation dated within five (5) days of the Closing Date;
(F) copies of all third party and governmental consents,
approvals and filings required in connection with the consummation of
the transactions contemplated by this Agreement and the other
Transaction Agreements (including all blue sky law filings); and
(G) such other documents relating to the transactions
contemplated by this Agreement or the other Transaction Agreements as
Hosting, Networks or its special counsel may reasonably request.
(xviii) PROCEEDINGS. All corporate and other proceedings taken or
required to be taken by each of the Buying Parties in connection with the
transactions contemplated hereby and by the other Transaction Agreements to
be consummated at or prior to the Closing and all documents incident
thereto shall be reasonably satisfactory in form and substance to Hosting,
Networks and its special counsel.
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(i) The representations and warranties of Hosting and Networks set
forth in this Agreement shall survive the Closing (A) with respect to the
matters covered by the representations and warranties contained in SECTION
3(z), until sixty (60) days after the expiration of all applicable statute
of limitations (including all periods of extension, whether automatic or
permissive), (B) in the case of all other representations and warranties
and any covenant or agreement contained in this Agreement to be performed
on or prior to the Closing Date, until the date which is eight (8) months
after the Closing Date and (C) with respect to each other covenant and
agreement contained in this Agreement (including the Hosting Audited
Financial Statements Certificate), until one hundred and eighty (180) days
after the last date on which such covenant or agreement is
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to be performed or, if no such date is specified, indefinitely, in each
case regardless of any investigation by VitalStream or on behalf of
VitalStream.
(ii) The representations and warranties of VitalStream set forth in
this Agreement shall survive the Closing (A) with respect to the matters
covered by the representations and warranties contained in SECTION 4(x) and
SECTION 4(y) of this Agreement, until sixty (60) days after the expiration
of all applicable statute of limitations (including all periods of
extension, whether automatic or permissive), (B) in the case of all other
representations and warranties and any covenant or agreement contained in
this Agreement to be performed on or prior to the Closing Date, until the
date which is eight (8) months after the Closing Date and (C) with respect
to each other covenant and agreement contained in this Agreement, until one
hundred and eighty (180) days after the last date on which such covenant or
agreement is to be performed or, if no such date is specified,
indefinitely, in each case regardless of any investigation by Hosting or
Networks or on behalf of Hosting or Networks.
(b) INDEMNIFICATION OF VITALSTREAM.
(i) Subject to the limitations set forth in this SECTION 8,
Hosting and Networks, jointly and severally, agree to indemnify on an
after-tax basis and defend, protect and hold harmless VitalStream and its
Affiliates and each of their respective directors, officers, employees,
stockholders, members, partners, agents (including, those retained in
connection with the transactions contemplated by this Agreement),
successors and assigns (collectively, the "VITALSTREAM INDEMNITEES") from
and against any and all Claims, costs, damages, deficiencies, expenses
(including interest, court costs, fees of attorneys, accountants and other
experts or other expenses of litigation or other proceedings or of any
Claim, default or assessment), fees, fines, Liabilities, losses and
penalties (hereinafter individually, a "Loss" and collectively, "LOSSES")
which, directly or indirectly, arise out of, result from or relate to
(irrespective of whether any such VitalStream Indemnitee is a party to the
action for which indemnification hereunder is sought):
(A) any facts or circumstances which constitute a
misrepresentation or breach by Hosting or Networks of any
representation or warranty set forth in this Agreement (including any
annex or schedule attached hereto), any other Transaction Agreement or
in any instrument or document delivered by Hosting or Networks
pursuant to this Agreement;
(B) any non-fulfillment or breach of any covenant or
agreement of Hosting or Networks set forth in this Agreement; or
(C) any Excluded Hosting Liability.
(ii) To the extent that the foregoing undertakings by Hosting and
Networks may be unenforceable for any reason, Hosting and Networks shall
make the maximum contribution to the payment and satisfaction of the Losses
described above incurred by any VitalStream Indemnitee which is permissible
under applicable Law.
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(c) INDEMNIFICATION OF THE HOLDERS OF THE PURCHASE SHARES.
(i) Subject to the limitations set forth in this SECTION 8,
VitalStream agrees to indemnify on an after-tax basis and defend, protect
and hold harmless the holders of the Purchase Shares (provided that such
holder is Holdings, a wholly-owned Subsidiary of Holdings or an Affiliate
of Dolphin) and each of their Affiliates and each of their respective
directors, officers, employees, stockholders, members, partners, agents
(including those retained in connection with the transactions contemplated
by this Agreement), successors and assigns (collectively, the "PURCHASE
SHARE INDEMNITEES") from and against any and all Losses which, directly or
indirectly, arise out of, result from or relate to (irrespective of whether
any such Purchase Share Indemnitee is a party to the action for which
indemnification hereunder is sought):
(A) any facts or circumstances which constitute a
misrepresentation or breach by VitalStream of any representation or
warranty set forth in this Agreement (including any annex or schedule
attached hereto), any other Transaction Agreement or in any instrument
or document delivered by VitalStream pursuant to this Agreement;
(B) any non-fulfillment or breach of any covenant or
agreement of VitalStream set forth in this Agreement; or
(C) any Assumed Liability.
(ii) To the extent that the foregoing undertakings by VitalStream
may be unenforceable for any reason, VitalStream shall make the maximum
contribution to the payment and satisfaction of the Losses described above
incurred by any Purchase Share Indemnitee which is permissible under
applicable Law.
(d) METHOD OF ASSERTING CLAIMS INVOLVING THIRD-PARTY CLAIMS.
(i) The following procedures shall be applicable with respect to
indemnification for third-party Claims. Promptly after receipt by the Party
seeking indemnification under this SECTION 8 (hereinafter referred to as
the "INDEMNITEE") of notice of the commencement of any (A) Tax audit or
proceeding for the assessment of Tax by any Taxing Authority or any other
proceeding likely to result in the imposition of a Tax Liability or (B) any
action or the assertion of any Claim or Liability by a third party (whether
by legal process or otherwise), against which Claim or Liability another
Party (hereinafter the "INDEMNITOR") is, or may be, required under this
Agreement to indemnify such Indemnitee, the Indemnitee shall, if a Claim
thereon is to be, or may be, made against the Indemnitor, notify the
Indemnitor in writing of the commencement or assertion thereof and give the
Indemnitor a copy of such Claim, process and all legal pleadings. The
Indemnitor shall have the right to (1) participate in the defense of such
action with counsel of reputable standing and (2) assume the defense of
such action by agreeing to assume such defense within ten (10) calendar
days of transmittal of the notice of the Claim by the Indemnitee, in
writing unless such Claim (a) may result in criminal proceedings,
injunctions or other equitable remedies in respect of the Indemnitee or its
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business; (b) may result in Liabilities which, taken with other then
existing Claims under this SECTION 8, would not be fully indemnified
hereunder; (c) may have a material and adverse effect on the business or
condition (financial or otherwise) of the Indemnitee after the Closing Date
(including an effect on the Tax Liabilities, earnings or ongoing business
relationships of the Indemnitee); (d) is for an alleged amount of less than
$5,000; (e) upon petition by the Indemnitee, if an appropriate court rules
that the Indemnitor failed or is failing to vigorously prosecute or defend
such Claim, in which events the Indemnitee shall assume the defense; or (f)
also involves the Indemnitor or its Affiliate as a party and counsel to the
Indemnitee determines in good faith that joint representation would give
rise to a conflict of interest.
(ii) The Indemnitor and the Indemnitee shall cooperate in the
defense of any third-party Claims. In the event that the Indemnitor assumes
or participates in the defense of such third-party Claim as provided
herein, the Indemnitee shall make available to the Indemnitor all relevant
records and take such other action and sign such documents as are
reasonable necessary to defend such third-party Claim in a timely manner.
If the Indemnitee shall be required by judgment or a settlement agreement
to pay any amount in respect of any Liability against which the Indemnitor
has agreed to indemnify the Indemnitee under this Agreement, the Indemnitor
shall promptly reimburse the Indemnitee in an amount equal to the Losses
incurred by such Indemnitee in connection with such Liability subject to
this SECTION 8. No Indemnitor, in the defense of any such Claim, shall,
except with the consent of the Indemnitee, consent to entry of any judgment
or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnitee of
a release from all Liability with respect to such Claim. In addition, with
respect to a Claim for Taxes, the Indemnitor shall not enter into any
settlement or arrangement with any Taxing Authority without the prior
written consent of the Indemnitee, such consent not to be unreasonably
withheld or delayed. In the event that the Indemnitor does not accept the
defense of any matter for which it is entitled to assume as provided above,
the Indemnitee shall have the full right to defend such Claim.
(iii) Prior to paying or settling any Claim against which an
Indemnitor is, or may be, obligated under this Agreement to indemnify an
Indemnitee, the Indemnitee must first supply the Indemnitor with a copy of
a final court judgment or decree holding the Indemnitee liable on such
Claim or failing such judgment or decree, must first receive the written
approval of the terms and conditions of such settlement from the
Indemnitor, which shall not be unreasonably withheld; provided however,
that no written approval is required from the Indemnitor as to any third
party Claim (A) that results solely in injunctions or other equitable
remedies in respect of the Indemnitee or its business; (B) that settles
Liabilities, or portions thereof, that are not subject to indemnification
hereunder; or (C) is for an amount of less than $5,000.
(iv) An Indemnitee shall have the right to employ its own counsel
in any case and the fees and expenses of such counsel shall be at the
expense of the Indemnitee unless (A) the employment of such counsel shall
have been authorized in writing by the Indemnitor in connection with the
defense of such Claim; (B) the Indemnitor shall not have employed counsel
in the defense of such Claim after ten (10) calendar days notice;
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or (C) such Indemnitee shall have reasonably concluded that there may be
defenses available to it which are contrary to, or inconsistent with, those
available to the Indemnitor; in any of the foregoing events such fees and
expenses shall be borne by the Indemnitor.
(e) METHOD OF ASSERTING CLAIMS NOT INVOLVING THIRD-PARTY CLAIMS. In the
event any Indemnitee shall have a Claim against any Indemnitor under this
Agreement which does not involve a Claim being asserted against or sought to be
collected from such Indemnitee by a third party, the Indemnitee shall notify the
Indemnitor in writing of such Claim.
(f) LIMITATIONS.
(i) In the absence of fraud, (A) neither Hosting nor Networks
shall have any Liability, nor be subject to any Claim, under SECTION
8(b)(i)(A) of this Agreement in respect of any misrepresentation or breach
by Hosting or Networks of any representation or warranty set forth in this
Agreement (1) with respect to any individual Liability or Claim, unless
such Liability or Claim involves Losses in excess of $5,000 or (2) the
amount of indemnifiable Losses, in the aggregate, exceeds $75,000, and then
shall be liable only to the extent of such excess and (B) the aggregate
obligation of Networks and Hosting to indemnify, defend and hold the
VitalStream Indemnitees harmless hereunder shall be limited to $800,000. In
the event a VitalStream Indemnitee seeks indemnification for Losses
pursuant to this SECTION 8, such VitalStream Indemnitee's sole recourse
shall be against the Escrow Shares, (as defined in the Escrow Agreement).
Any recourse against the Escrow Shares shall be made based upon the Fair
Market Value of the Escrow Shares as determined on the day immediately
prior to the date on which a Claims Notice (as defined in the Escrow
Agreement) is sent by VitalStream.
(ii) In the absence of fraud, (A) VitalStream shall have no
Liability, nor be subject to any Claim, under SECTION 8(c)(i)(A) of this
Agreement in respect of any misrepresentation or breach by VitalStream of
any representation or warranty set forth in this Agreement (1) with respect
to any individual Liability or Claim, unless such Liability or Claim
involves Losses in excess of $5,000 or (2) the amount of indemnifiable
Losses, in the aggregate, exceeds $75,000, and then shall be liable only to
the extent of such excess and (B) the aggregate obligation of VitalStream
to indemnify, defend and hold Purchase Share Indemnitees harmless hereunder
shall be limited to $800,000. In the event a Purchase Share Indemnitee
seeks indemnification for Losses pursuant to this SECTION 8, such Purchase
Share Indemnitee's sole remedy shall be the issuance by VitalStream of
additional shares of Common Stock to such Purchase Share Indemnitee with an
aggregate Fair Market Value (as determined on the day immediately prior to
the date on which a Purchase Share Indemnitee sends a notice of an
indemnifiable Loss to VitalStream under this SECTION 8) equal to such
indemnifiable Losses; provided, however, the aggregate number of shares of
Common Stock VitalStream shall be required to issue pursuant to this
SECTION 8 shall not exceed a number of shares of Common Stock equal to the
number of Escrow Shares.
(g) EXCLUSIVE REMEDIES. Subject to SECTION 10(m), the remedies set forth
in this SECTION 8 shall be the exclusive remedies of the Parties with respect to
this Agreement and the
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transactions contemplated hereby. The Parties hereby waive, with respect to each
other, to the fullest extent permitted by Law, any and all other rights and
remedies.
9. TERMINATION.
(a) TERMINATION OF AGREEMENT. The Parties may terminate this Agreement as
provided below:
(i) The Parties may terminate this Agreement by mutual written
consent at any time prior to the Closing;
(ii) VitalStream may terminate this Agreement by giving written
notice to Hosting at any time prior to the Closing (A) in the event Hosting
or Networks has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, VitalStream has
notified Hosting and Networks of the breach in writing, and the breach has
continued without cure for a period of thirty (30) days after delivery of
the written notice of breach or (B) if the Closing shall not have occurred
on or before December 15, 2002, by reason of the failure of any condition
precedent under SECTION 7(a) of this Agreement (unless the failure results
primarily from VitalStream or the Buyer themselves breaching any
representation, warranty, or covenant contained in this Agreement);
(iii) Hosting and Networks may terminate this Agreement by giving
written notice to VitalStream at any time prior to the Closing (A) in the
event VitalStream or the Buyer have breached any material representation,
warranty, or covenant contained in this Agreement in any material respect,
Hosting and Networks have notified VitalStream of the breach in writing,
and the breach has continued without cure for a period of thirty (30) days
after delivery of the written notice of breach or (B) if the Closing shall
not have occurred on or before December 15, 2002, by reason of the failure
of any condition precedent under SECTION 7(b) of this Agreement (unless the
failure results primarily from Hosting or Networks breaching any
representation, warranty, or covenant contained in this Agreement); and
(iv) Any Party may terminate this Agreement by giving written
notice to the non-terminating Parties at any time prior to the Closing if
the Closing shall not have occurred on or before December 31, 2002.
(b) EFFECT OF TERMINATION. If any Party terminates this Agreement pursuant
to SECTION 9(a) of this Agreement, all rights and obligations of the Parties
hereunder shall terminate without any Liability of any Party to the other Party
(except for any Liability of any Party then in breach).
10. MISCELLANEOUS.
(a) EXPENSES. Each Party shall pay the fees and expenses incurred by such
Party in consummation of the transactions contemplated by this Agreement and the
other Transaction Agreements. Notwithstanding the foregoing, in the event
Hosting or Networks terminates this Agreement pursuant to SECTION 9(a)(iii) of
this Agreement, VitalStream shall pay to Hosting
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within five (5) business days of the date of the termination of this Agreement
the Audited Financial Statements Preparation Fee and indemnify, defend, protect
and hold harmless Networks and Hosting for the same.
(b) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or make any public announcement or in any document or material
filed with any Governmental Entity relating to the subject matter of this
Agreement or containing the name of any other Party without the prior written
approval of each of the other Parties, unless such Party has a good faith belief
that such disclosure is required by applicable Law or governmental regulations
or by order of a court of competent jurisdiction, in which case prior to making
such disclosure the disclosing Party shall give written notice to the each of
the other Parties describing in reasonable detail the proposed content of such
disclosure and shall permit the non-disclosing Party to review and comment upon
the form and substance of such disclosure.
(c) NO THIRD-PARTY BENEFICIARIES. Except as expressly provided herein,
this Agreement shall not confer any rights or remedies upon any Person other
than the Parties and their respective successors and permitted assigns.
(d) ENTIRE AGREEMENT. This Agreement, the Transaction Agreements and the
documents referred to herein and therein contain the entire agreement between
the Parties and supersede any prior understandings, agreements or
representations by or between the Parties, written or oral, which may have
related to the subject matter hereof in any way.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the Parties and their respective successors and permitted
assigns. No Party may assign this Agreement or any of its rights, interests, or
obligations hereunder without the prior written approval of each of the other
Parties. Notwithstanding the foregoing and whether or not any express assignment
has been made, the provisions of this Agreement or any other Transaction
Agreement which are for Hosting's benefit as a holder of Purchase Shares are
also for the benefit of, and enforceable by, any subsequent holder of such
Purchase Shares so long as such Person is an Affiliate of Dolphin.
(f) COUNTERPARTS. This Agreement or any other Transaction Agreement may be
executed simultaneously in two or more counterparts, any one of which need not
contain the signatures of more than one party, but all such counterparts taken
together shall constitute one and the same agreement. A facsimile copy of this
Agreement or any counterpart thereto shall be valid as an original.
(g) DESCRIPTIVE HEADINGS; INTERPRETATION. Section headings used in this
Agreement or in any other Transaction Agreement are for convenience only and are
not to affect the construction of, or to be taken into consideration in
interpreting, such agreement. The use of the word "including" or any variation
or derivative thereof in this Agreement or in any other Transaction Agreement is
by way of example rather than by limitation.
(h) NOTICES; BUSINESS DAYS. All notices, demands or other communications
to be given or delivered under or by reason of the provisions of this Agreement
or any other Transaction Agreement shall be in writing and shall be deemed to
have been given when
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delivered personally to the recipient or when sent by facsimile followed by
delivery by reputable overnight courier service (charges prepaid), one day after
being sent to the recipient by reputable overnight courier service (charges
prepaid) or five days after being mailed to the recipient by certified or
registered mail, return receipt requested and postage prepaid. Any notice,
demand or other communication hereunder may be given by any other means
(including telecopy or electronic mail), but shall not be deemed to have been
duly given unless and until it is actually received by the intended recipient.
Such notices, demands and other communications shall be sent to the addresses
indicated below:
If to VitalStream:
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Operating Officer
with a copy (which shall not constitute notice to VitalStream)
to:
Stoel Rives LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
If to Hosting:
Epoch Hosting, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: General Counsel
with a copy (which shall not constitute notice to Hosting) to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
Citigroup Center
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: 212-446-4900
Attention: ▇▇▇▇ ▇▇▇▇▇, Esq.
or to such other address, to the attention of such other Person and/or with such
other copy or copies as the recipient party has specified by prior written
notice to the sending party. If any time period for giving notice or taking
action expires on a day which is a Saturday, Sunday or legal holiday in the
State of California or the State of New York (any other day being a "business
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day"), such time period shall automatically be extended to, the next business
day immediately following such Saturday, Sunday or legal holiday.
(i) AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by each
Party. No waiver by any Party of any default, misrepresentation, or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
(j) SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable Law, but if any provision of this Agreement or any other Transaction
Agreement is held to be prohibited by or invalid under applicable Law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this Agreement or such other
Agreement.
(k) CONSTRUCTION. The Parties have participated jointly in the negotiation
and drafting of this Agreement and the other Transaction Agreements. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement and the other Transaction Agreements shall be construed as if drafted
jointly by the Parties, and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement or any other Transaction Agreement. Any reference
to any federal, state, local, or foreign Law shall be deemed also to refer to
all rules and regulations promulgated thereunder, unless the context requires
otherwise. Nothing in the schedules attached hereto shall be deemed adequate to
disclose an exception to a representation or warranty made herein unless the
schedule attached hereto identifies the exception with particularity and
describes the relevant facts in detail. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or other item
shall not be deemed adequate to disclose an exception to a representation or
warranty made herein (unless the representation or warranty has to do with the
existence of the document or other item itself). The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
(l) INCORPORATION OF ANNEXES, SCHEDULES AND EXHIBITS. The annexes,
schedules and exhibits identified in this Agreement are incorporated herein by
reference and made a part hereof.
(m) SPECIFIC PERFORMANCE. Each of the Parties acknowledges and agrees that
the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that,
notwithstanding any provision limiting the remedies of the Parties contained
herein, the other Parties shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce specifically
this Agreement and the
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terms and provisions hereof in any action instituted in any court of the United
States or any state thereof having jurisdiction over the Parties and the matter
(subject to the provisions set forth in SECTION 10(o) of this Agreement), in
addition to any other remedy to which it may be entitled, at law or in equity.
(n) GOVERNING LAW. ALL ISSUES AND QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT AND ANY OF THE OTHER
TRANSACTION AGREEMENTS AND THE ANNEXES, SCHEDULES AND EXHIBITS HERETO AND
THERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF
LAW RULES OR PROVISIONS (WHETHER OF THE STATE OF CALIFORNIA OR ANY OTHER
JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION
OTHER THAN THE STATE OF CALIFORNIA. IN FURTHERANCE OF THE FOREGOING, THE
INTERNAL LAW OF THE STATE OF CALIFORNIA SHALL CONTROL THE INTERPRETATION AND
CONSTRUCTION OF THIS AGREEMENT AND EACH OF THE OTHER TRANSACTION AGREEMENTS (AND
ALL ANNEXES, SCHEDULES AND EXHIBITS HERETO AND THERETO), EVEN THOUGH UNDER THAT
JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF
SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.
(o) JURISDICTION AND VENUE. ALL JUDICIAL PROCEEDINGS BROUGHT BY
VITALSTREAM OR THE BUYER AGAINST NETWORKS OR HOSTING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER TRANSACTION AGREEMENT MAY BE BROUGHT IN ANY STATE OR
FEDERAL COURT OF COMPETENT JURISDICTION IN NEW YORK CITY, NEW YORK. ALL JUDICIAL
PROCEEDINGS BROUGHT BY NETWORKS OR HOSTING AGAINST VITALSTREAM OR THE BUYER WITH
RESPECT TO THIS AGREEMENT OR ANY OTHER TRANSACTION AGREEMENT MAY BE BROUGHT IN
ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN ORANGE COUNTY,
CALIFORNIA. BY EXECUTING AND DELIVERING THIS AGREEMENT AND THE OTHER TRANSACTION
AGREEMENTS TO WHICH THEY ARE A PARTY, EACH PARTY ACCEPTS FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION
OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER
TRANSACTION AGREEMENTS. EACH PARTY HEREBY WAIVES ANY CLAIM THAT ORANGE COUNTY,
CALIFORNIA OR NEW YORK CITY, NEW YORK IS AN INCONVENIENT FORUM OR AN IMPROPER
FORUM BASED ON LACK OF VENUE.
(p) WAIVER OF RIGHT TO JURY TRIAL. EACH PARTY HEREBY WAIVES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, TRIAL BY JURY in any litigation in any court with
respect to, in connection with, or arising out of this Agreement or any of the
other Transaction Agreements or the validity, protection, interpretation,
collection or enforcement hereof or thereof. EACH PARTY AGREES THAT THIS SECTION
10(p) IS A
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SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND EACH OF THE OTHER TRANSACTION
AGREEMENTS AND ACKNOWLEDGES THAT THE OTHER PARTIES WOULD NOT HAVE ENTERED INTO
THIS AGREEMENT AND CONSUMMATED THE TRANSACTIONS CONTEMPLATED HEREBY IF THIS
SECTION 10(p) WERE NOT PART OF THIS AGREEMENT AND THE OTHER TRANSACTION
AGREEMENTS.
* * * * *
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IN WITNESS WHEREOF, the Parties have executed this
Asset Purchase Agreement
as of the date first above written.
VITALSTREAM HOLDINGS, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
VITALSTREAM BROADCASTING CORPORATION
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
EPOCH HOSTING, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President and Secretary
EPOCH NETWORKS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President and Secretary
ANNEX 1
ELIGIBLE NETWORKS EMPLOYEES
NAME OF EMPLOYEE DOLLAR VALUE OF ACCRUED PAID TIME OFF
SCHEDULE 1(b)
EXCLUDED HOSTING ASSETS
SCHEDULE 1(c)
HOSTING BUSINESS CUSTOMERS
SCHEDULE 1(d)
HOSTING PERMITS AND LICENSES
SCHEDULE 1(e)
HOSTING RECORDS AND MISCELLANEOUS ITEMS
SCHEDULE 1(f)
HOSTING TANGIBLE PERSONAL PROPERTY
SCHEDULE 1(g)
HOSTING CUSTOMER SECURITY DEPOSITS
SCHEDULE 3(s)
EMPLOYEE BENEFITS RELATING TO NETWORKS
SCHEDULE 3(aa)
CUSTOMERS AND SUPPLIERS
SCHEDULE 4(a)
ORGANIZATION, CORPORATE POWER AND LICENSES
SCHEDULE 4(e)
NOTES AND ACCOUNTS RECEIVABLE
SCHEDULE 1(b)
EXECUTED HOSTING LIABILITIES
SCHEDULE 3(b)
APPROVAL AND CONSENTS
SCHEDULE 3(f)
GUARANTIES
SCHEDULE 3(g)
TITLE TO ASSETS; CONDITION OF ASSETS
SCHEDULE 3(i)
ABSENCE OF CERTAIN DEVELOPMENTS
SCHEDULE 3(j)
COMPLIANCE WITH LAWS
SCHEDULE 3(k)
LITIGATION
SCHEDULE 3(l)
CONTRACTS AND COMMITMENTS
SCHEDULE 3(m)
TAX MATTERS
SCHEDULE 3(n)(ii)
HOSTING LEASED REAL PROPERTY
SCHEDULE 3(p)(iii)
INTELLECTUAL PROPERTY RIGHTS - PATENTS, TRADEMARKS AND COPYRIGHTS
SCHEDULE 3(p)(iv)
INTELLECTUAL PROPERTY RIGHTS - THIRD PARTIES
SCHEDULE 3(q)
EMPLOYEES
SCHEDULE 3(r)
EMPLOYEE BENEFITS
SCHEDULE 3(u)
AFFILIATE TRANSACTION
SCHEDULE 4(b)
APPROVAL AND CONSENTS
SCHEDULE 4(c)
SUBSIDIARIES
SCHEDULE 4(d)
SECURITIES AND EXCHANGE COMMISSION REPORTS AND VITALSTREAM FINANCIAL STATEMENTS
SCHEDULE 4(f)
GUARANTIES
SCHEDULE 4(g)
TITLE TO ASSETS; CONDITION OF ASSETS
SCHEDULE 4(i)
ABSENCE OF CERTAIN DEVELOPMENTS
SCHEDULE 4(j)
COMPLIANCE WITH LAWS
SCHEDULE 4(k)
LITIGATION
SCHEDULE 4(l)
CONTRACTS AND COMMITMENTS
SCHEDULE 4(l)(ii)
CONTRACTS AND COMMITMENTS
SCHEDULE 4(m)
TAX MATTERS
SCHEDULE 4(n)(ii)
VITALSTREAM LEASED REAL PROPERTY
SCHEDULE 4(p)(iii)
INTELLECTUAL PROPERTY RIGHTS - PATENTS, TRADEMARKS AND COPYRIGHTS
SCHEDULE 4(p)(iv)
INTELLECTUAL PROPERTY RIGHTS - THIRD PARTIES
SCHEDULE 4(q)
EMPLOYEES
SCHEDULE 4(r)
EMPLOYEE BENEFITS
SCHEDULE 4(t)
AFFILIATE TRANSACTION
SCHEDULE 4(x)(i)
CAPITAL STOCK AND RELATED MATTERS.
SCHEDULE 4(z)
CUSTOMERS AND SUPPLIERS
SCHEDULE 6(l)
ADDITIONAL SOFTWARE LICENSES
EXHIBIT A
FORM OF COLOCATION AGREEMENT
EXHIBIT B
FORM OF ESCROW AGREEMENT
EXHIBIT C
INVESTOR RIGHTS AGREEMENT
EXHIBIT D
FORM OF MASTER ACCESS AGREEMENT
EXHIBIT E
FORM OF NETWORKS CONTRIBUTION AGREEMENT
EXHIBIT F
FORM OF OPINION OF HOSTING'S COUNSEL
EXHIBIT G
FORM OF OPINION OF VITALSTREAM'S COUNSEL
EXHIBIT H
FORM OF REGISTRATION AGREEMENT
EXHIBIT I
FORM OF CUSTOMER MIGRATION AGREEMENT
EXHIBIT J
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT K
FORM OF ▇▇▇▇ OF SALE
EXHIBIT L
FORM OF HOSTING AUDITED FINANCIAL STATEMENTS OFFICER'S CERTIFICATE
EXHIBIT M
FORM OF HOSTING FINANCIAL STATEMENTS
EXHIBIT N
FORM OF PARTIAL TERMINATION AND SECOND AMENDMENT TO SUBLEASE AGREEMENT
