Exhibit 10.3

CONFIDENTIAL TERMINATION AGREEMENTAND GENERAL RELEASE

This Confidential Termination Agreement and General Release ("Agreement") is
made by and between Kevin D. Herzog ("Executive") and VitalStream Holdings, Inc.
("Company") as of April 29, 2004. Company and Executive agree to terminate their
employment relationship as follows:

1.     Executive's employment with the Company is terminated as of March 24,
2004 ("Separation Date"). The Company has paid Executive the usual salary and
fourteen (14) hours of earned PTO, less legally required deductions, in full
through that date.

Within fourteen (14) days of the execution of this Agreement by Executive and
its delivery to Company, and subject to the condition precedent described below
in Section 4.a., Company shall pay Executive the sum of Ten Thousand Dollars
($10,000.00), less legally required deductions.

2.     If Executive makes a timely election and payment of premiums, Executive
may extend, beginning the Separation Date, Executive's current level of medical,
dental, prescription and vision coverage for up to an additional eighteen (18)
months in accordance with COBRA.

3.     Commencing on the Separation Date through December 31, 2004, Executive
shall provide information as requested regarding matters previously handled by
Executive or about which Executive has knowledge.

4.     The Company has previously granted to Executive on November 1, 2001 and
October 10, 2002, respectively, options to purchase 467,957 shares of the
Company's common stock at $0.3233 per share (the "$0.32 Options") and 250,000
shares of the Company's common stock at $0.40 per share (the"$0.40 Options")
(collectively, the "Options"), pursuant to and subject to the applicable Company
stock option plan and the stock option agreement between Company and Executive
(collectively, "Plan Documents"). Notwithstanding the provisions of the Plan
Documents which provide broad discretion to the Board with respect to
administration of the stock option plan and the terms and conditions of option
exercise, the Company and Executive agree as follows with respect to the
Options:

a.     Executive may purchase up to 104,166 shares pursuant to an exercise of
$0.40 Options and up to 467,957 shares pursuant to an exercise of $0.32 Options
anytime between the date of this Agreement and March 31, 2005. Upon execution of
this Agreement by Executive and its delivery to Company, Company shall deposit
in its bank account Executive's personal check in the amount of $41,666.40, and
upon the funds represented thereby clearing the bank (which payment shall be the
condition precedent referenced in Section 1 above), Company shall proceed with
completing Executive's exercise of all of the $0.40 Options

b.     After the Separation Date, Executive shall have no right to exercise any
Options other than those specifically set forth in this Section 4, and
Executive's right to exercise such Options shall continue to be subject to the
provisions of the Plan Documents except as modified herein.

c.     As a material inducement to the Company to allow an extension of time
within which Executive would otherwise be allowed to exercise the Options under
the Plan Documents, Executive further agrees that until March 31, 2005, he shall
not make any dispositions in any calendar quarter of more than 150,000 shares in
the aggregate acquired pursuant to an exercise of Options except in connection
with any merger, acquisition or other business combination transaction involving
the Company.

d.     Until at least the Company's 2004 Q2 earnings release and (if later) so
long as Executive is in possession of material inside information, he continues
to be bound by the Company's policy and applicable securities laws on insider
trading, including with respect to the disposition of shares of the Company's
common stock acquired upon exercise of the Options or shares subsequently
acquired or already held by Executive.

5.     Executive shall not disparage the Company in any manner and Executive
shall not use or disclose any confidential information Executive learned while
employed by the Company. Executive shall not participate or assist in the
solicitation of any employees or customers of the Company. Executive shall keep
this Agreement and its contents in complete confidence and shall not disclose
any of the contents of this Agreement to any person other than his immediate
family, including without limitation any past, present or prospective employee
of the Company, except for any advisors on a need to know basis for purposes of
providing professional services to Executive and provided that Executive advises
them of the confidential nature of this Agreement and shall be responsible for
any breach by such persons.

Company shall not disparage Executive in any manner. The previously published
statement that Executive's employment terminated on March 24, 2004, shall not be
considered disparagement. The facts and circumstances surrounding the
termination of Executive's employment shall be kept confidential and shall not
be disclosed to any person or entity, except that the Company may in its
discretion make such disclosures as may be required by applicable laws or
regulations (including without limitation, disclosing the Company's agreement to
extend the exercise period of the Options and make a payment to Executive) in a
periodic report or registration statement filed with the SEC) or discuss such
facts and circumstances with its board of directors, outside counsel, officers
of the Company and other persons on a need-to-know basis.

6.     In consideration of the additional benefits provided in Section 1 and
Section 4 of this Agreement, which the company would not otherwise be obligated
to provide, and in accordance with the Older Workers Benefit Protection Act
(OWBPA), Executive knowingly and voluntarily waives all rights and claims, known
or unknown, arising under the Age Discrimination In Employment Act of 1967
(ADEA), as amended, which Executive might otherwise have had against the Company
or its related entities, officers, directors, managers or employees regarding
any aspect of Executive's employment up to and including the date this Agreement
is signed by Executive.

Executive is advised to consult with an attorney prior to signing this
Agreement. Executive has twenty-one (21) days in which to consider and accept
this Agreement. To accept this Agreement, please sign and return it to Phil
Kaplan. In addition, Executive has a period of seven (7) days following the date
this Agreement is signed, in which Executive may revoke acceptance of this
Agreement. If Executive does not advise the Company (by writing received by Phil
Kaplan within the seven (7) day period) of Executive's intent to revoke this
Agreement, this Agreement will become effective and enforceable upon the
expiration of the seven (7) day period.

7.     In consideration of the additional benefits provided in Section 1 and
Section 4, which the company would not otherwise be obligated to provide,
Executive further agrees to waive and release all other claims, known and
unknown, which Executive might otherwise have had against the Company, its
related entities, officers, directors, employees, agents or representatives,
regarding any aspect of Executive's employment with or separation from the
Company up to and including the date this Agreement is signed by Executive. This
includes without limitation, all claims of discrimination under Title VII of the
Civil Rights Act of 1964, Age Discrimination in Employment Act, Americans With
Disabilities Act, and the California Fair Employment and Housing Act. Executive
shall not be entitled to receive, and Executive expressly waives any claim to
any right, benefit or compensation, other than as expressly set forth in
Sections 2 and 4 of this Agreement, and subject to the conditions set forth
therein.

As a condition of this settlement, all rights under Section 1542 of the Civil
Code of the State of California are expressly waived by Executive. Section 1542
reads as follows:

"A General Release does not extend to claims which a creditor does not know or
suspect to exist in his favor at the time of executing the Release, which if
known by him must have materially affected his settlement with the debtor."

Notwithstanding the provision of Section 1542, and for the purpose of
implementing a full and complete release and discharge of the Company, Executive
expressly acknowledges that this Agreement is intended to include and does
include, without limitation, all claims which Executive does not know or suspect
to exist in Executive's favor against the Company at the time of execution of
this Agreement and that this settlement agreed upon expressly contemplates the
extinguishment of all such claims.

8.     This Agreement contains all of the terms, promises, representations and
understandings made between the parties and supersedes any express or implied
agreements between the parties. Executive agrees that no promises,
representations or inducements have been made to Executive which caused
Executive to sign this Agreement other than what is expressly set forth above.

9.     Executive understands that this Agreement is final and binding when
executed by all parties, and Executive and the Company agree not to thereafter
challenge its enforceability. Should Executive nevertheless attempt to challenge
the enforceability of this Agreement, as a further limitation on any right to
make such a challenge, Executive shall initially submit to the Company by
certified check, all monies received directly from the Company or as a result of
the benefits provided pursuant to this Agreement (including without limitation
the net proceeds of any stock option exercises), plus interest, and invite the
Company to retain such monies and agree with Executive to cancel this Agreement.
In the event the Company accepts this offer, the Company shall retain such
monies and this Agreement shall be canceled. In the event the Company does not
accept such offer, the Company shall so notify Executive, and shall place such
monies into an interest-bearing escrow account pending resolution of the dispute
between them as to whether or not this Agreement shall be set aside and/or
otherwise rendered unenforceable.

Any dispute regarding any aspect of this Agreement, including its formation, or
any act which would violate any provision in this Agreement (except for Section
5, the breach or threatened breach of which would give the Company the right to
obtain injunctive relief), shall be resolved in final and binding arbitration by
an experienced employment law arbitrator licensed to practice law in California
and selected in accordance with the rules of the American Arbitration
Association, as the exclusive remedy for such dispute. Judgment on any award
rendered by such arbitrator may be entered in any court having proper
jurisdiction. Should Executive or the Company institute any legal action or
administrative proceeding with respect to any claim waived by this Agreement by
any method other than said arbitration, the responding party shall be entitled
to recover from the other party all damages, costs, expenses and attorneys' fees
incurred as a result of such action.

10.     The unenforceability or nullity of one or more of the provisions of this
Agreement shall not render any other provision unenforceable, null or void.

11.     This Confidential Termination Agreement and General Release is governed
by and construed in accordance with the internal laws of the State of
California.

 

 

VITALSTREAM HOLDINGS, INC.

By: ________________________

Title: ________________________

 

 

The undersigned understands and agrees to all the foregoing terms of this
Agreement on April ___, 2004.

________________________________
     Kevin D. Herzog

 

As of the date this is Agreement is signed by Kevin D. Herzog, the undersigned
waives any rights she may have related to his employment with the Company other
than what is specifically provided to him in the foregoing Agreement.

________________________________
     Elizabeth Herzog

 

Approved As To Form:

Date: April ___, 2004

_________________________________

     

Samuel J. Wells, Esq.
     Attorney for Kevin D. Herzog