Exhibit 10.1

 

 

ASSET PURCHASE AGREEMENT

BY AND AMONG

VitalStream Holdings, Inc.,

PlayStream, Inc., and

PlayStream, LLC

 

April 27, 2005

 

 

 

 

 

 

 

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TABLE OF CONTENTS

     

Definitions

1

     

Basic Transaction

8

       

Purchase and Sale of Assets

8

       

Consideration Provided by Buyer for Acquired Assets

9

       

The Closing

10

       

Deliveries at the Closing

10

       

Legends

10

       

Legends

10

     

Investment Representations of PlayStream

11

       

Experience

11

       

Investment

11

       

Rule 144

11

       

Access to Data/Representations

11

       

Legends

12

       

Principal Place of Business

12

       

No Distribution

12

     

Representations and Warranties of PlayStream

12

       

Organization of PlayStream

12

       

Authorization of Transaction

12

       

Noncontravention

12

       

Brokers' Fees

13

       

Title to Assets; Sufficiency of Assets

13

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Capitalization and Subsidiaries

13

       

Financial Statements

14

       

Events Subsequent to Most Recent Fiscal Month End

15

       

Undisclosed Liabilities; Limited Liabilities

17

       

Legal Compliance

17

       

Tax Matters

17

       

Real Property

18

       

Intellectual Property

18

       

Tangible Assets

21

       

[reserved]

21

       

Contracts

21

       

Notes and Accounts Receivable/Payable

23

       

Powers of Attorney

23

       

Insurance

23

       

Litigation

24

       

Services Warranty

24

       

[reserved]

24

       

Employees

24

       

Employee Benefits

25

       

Guaranties

26

       

Environmental, Health, and Safety Matters

26

       

Certain Business Relationships With PlayStream and Its Subsidiaries

27

       

Disclosure

27

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Customers and Suppliers.

27

       

No Other Agreement to Sell Assets

28

       

Personal Guarantees and Indebtedness

28

     

Representations and Warranties of the Buying Parties

28

       

Organization of the Buyer

28

       

Authorization of Transaction

28

       

Noncontravention

28

       

Brokers' Fees

29

       

Capitalization

29

       

SEC Filings

29

       

Valid Issuance

30

       

Consents

30

       

No Material Adverse Change

30

       

SEC Filings

31

       

Tax Matters

31

       

Certificates, Authorities and Permits

31

       

No Labor Disputes

31

       

Litigation

31

       

Financial Statements

32

       

Listing

32

       

No Manipulation of Stock

32

       

Contracts

32

       

Internal Controls

32

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Disclosures

33

     

Pre-Closing Covenants

33

       

General

33

       

Notices and Consents

33

       

Operation of Business

33

       

Preservation of Business

33

       

Full Access

33

       

Notice of Developments

34

       

Exclusivity

34

       

Supplements to Schedules

34

     

Obligation to Close

34

       

Conditions to Obligation of the Buying Parties

34

       

Conditions to Obligation of PlayStream

36

     

Termination

37

       

Termination of Agreement

37

       

Effect of Termination

38

     

Post-Closing Covenants

38

       

General

38

       

Litigation Support

38

       

Transition

38

       

Confidentiality

38

       

Legend Removal

39

       

No Distribution or Liquidation

39

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PlayStream Employees

39

       

Assets Requiring Consent/Notice

40

       

Name Change

40

       

Insurance

40

     

Remedies for Breaches of this Agreement

40

       

Survival of Representations and Warranties

41

       

Indemnification Provisions for Benefit of the Buying Parties and PlayStream

41

       

Matters Involving Third Parties

41

       

Characterization of Payments

42

       

Limitations; Escrow Shares

42

     

Miscellaneous

43

       

Press Releases and Public Announcements

43

       

No Third-Party Beneficiaries

43

       

Entire Agreement

43

       

Succession and Assignment

43

       

Counterparts

43

       

Headings

44

       

Notices

44

       

Governing L

45

       

Amendments and Waivers

45

       

Severability

45

       

Expenses

45

       

Construction

45

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Incorporation of Exhibits and Schedules

45

       

Specific Performance

45

       

Submission to Jurisdiction

46

       

Waiver of Trial By Jury

46

     

 

 

 

 

 

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ASSET PURCHASE AGREEMENT

            This Asset Purchase Agreement (this "Agreement") is entered into as
of April 27, 2005, by and among VitalStream Holdings, Inc., a Nevada corporation
("Holdings"), PlayStream, Inc., a Nevada corporation (the "Buyer"; collectively
with Holdings, the "Buying Parties"), and PlayStream, LLC, a Washington limited
liability company ("PlayStream"). The Buying Parties and PlayStream are referred
to collectively herein as the "Parties."

RECITALS

            A.             PlayStream is in the business of providing Internet
streaming, support and related services (the "Business").

            B.             PlayStream desires to sell substantially all of its
assets and certain liabilities related to the Business to Buyer, and Buyer
desires to purchase such assets and assume such liabilities from PlayStream, in
exchange for consideration set forth herein, all upon the terms and subject to
the conditions of this Agreement.

            C.             PlayStream and the Buying Parties are willing to make
certain representations, warranties, covenants and agreements in connection with
such sale and purchase.

            D.             It is intended that such sale and purchase shall not
constitute a reorganization within the meaning of Section 368 of the Code or
under any other relevant section of the Code, and that this Agreement shall not
constitute a "plan of reorganization" for purposes of Section 368 of the Code.

AGREEMENT

            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 purposes of this Agreement, the following terms
have the meanings set forth below:

            "Accrued Liabilities" shall have the meaning set forth in Section
2(b)(i)(A).

            "Acquired Assets" means all of the assets owned or used by
PlayStream as of March 31, 2005, plus any assets acquired in the Ordinary Course
of Business since the date of the Most Recent Balance Sheet and on or before the
Closing Date and less any properties or assets disposed of in the Ordinary
Course of Business since the date of the Most Recent Balance Sheet and on or
before the Closing Date, including, without limitation, all of its (a) real
property, leaseholds and subleaseholds therein, improvements, fixtures, and
fittings thereon, and easements, rights-of-way, and other appurtenants thereto
(such as appurtenant rights in and to public streets), (b) tangible personal
property (such as computers, servers, racks, machinery, equipment, goods,
furniture, automobiles, trucks, tools, and replacement parts), (c) Intellectual
Property, remedies against infringements thereof, (d) rights and benefits under
leases, subleases, and rights thereunder, (e) rights and benefits under Acquired
Contracts, agreements, contracts, indentures, mortgages, instruments,
Encumbrances, guaranties, other similar arrangements, and rights thereunder, (f)
accounts, notes, and other receivables, (g) securities (such as the capital
stock in its Subsidiaries), (h) claims, deposits, prepayments, refunds, causes
of action, choses in action, rights of recovery, rights of set off, and rights
of recoupment (including any such item relating to the payment of Taxes), (i)
franchises, approvals, permits, licenses, orders, registrations, certificates,
variances, and similar rights obtained from governments and governmental
agencies, (j) books, records, ledgers, files, documents, correspondence, lists,
plats, plans, drawings, and specifications, creative materials, advertising and
promotional materials, studies, reports, and other printed or written materials,
(k) Cash (including all monies contained in all bank, trust, lock box, sweep or
similar accounts), and (l) accounts receivable; provided, however, that the
Acquired Assets shall not include any of the foregoing to the extent expressly
included in the Excluded Assets.

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            "Acquired Contracts" means all contracts, leases, accounts
receivable, licenses and other agreements or arrangements of PlayStream other
than any Excluded Asset or any contract, lease or other agreement included in
the Excluded Liabilities. For the purpose of clarity, the following agreements
shall be included in the Acquired Contracts: (a) that certain

Master Services Agreement, and the Services Addendum, dated March 21, 2005
between PlayStream and Fisher Media Services Company for PlayStream's office
space, and (b) that certain Internap Master Services Agreement effective as of
April 1, 2005 between PlayStream and Internap.

            "Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including court costs and attorneys' fees and expenses.

            "Affiliate" has the meaning set forth in Rule 12b-2 of Regulation
12B promulgated under the Securities Exchange Act.

            "Agreement" has the meaning set forth in the preface above.

            

"Asset(s) Requiring Consent/Notice" means anything that would be an Acquired
Contract or other Acquired Asset (including any claim, contract, commitment,
sales order or purchase order or any right or any benefit arising thereunder or
resulting therefrom) except that prior consent of another Person is required for
transfer or assignment thereof and such consent has not been obtained as of the
Closing Date.

            "Assumed Liabilities" shall have the meaning set forth in Section
2(b)(i).

            "Assumed Severance Liability" shall have the meaning set forth in
Section 2(b)(i)(E).

            "Authorized Buyer Party" shall mean Philip N. Kaplan, Chief
Operating Officer, President and Director of Holdings, Mark Z. Belzowski, Chief
Financial Officer of Holdings, or Arturo Sida, General Counsel of Holdings.

             "Business" has the meaning set forth in the recitals above.

            "Buyer" has the meaning set forth in the preface above.

            "Buying Parties" has the meaning set forth in the preface above.

            "Cancellation and Service Credit Obligations" shall have the meaning
set forth in Section 2(b)(i)(C).

            "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 Financial Statements.

            "Cause" means (a) gross neglect or willful material breach of an
employee's principal employment responsibilities or duties, (b) a final judicial
adjudication of guilt, a guilty plea or plea of no contest by an employee with
respect to a felony or a gross misdemeanor involving fraud, theft, conversion,
embezzlement or other crime pertaining to the unlawful use or possession of
another's property, (c) fraudulent conduct as determined by a court of competent
jurisdiction in the course of an employee's employment with PlayStream, (d) the
unreasonable refusal by an employee to perform the responsibilities or duties of
the employee's position in any material respect, (e) intoxication, including
without limitation the use of a prohibited controlled substance (without a valid
prescription) during work hours, or (f) or a final judicial adjudication of
guilt, a guilty plea or plea of no contest by an employee with respect to the
use of prohibited controlled substances (without a valid prescription) at any
time.

            "Class A Units" means Class A Units of PlayStream.

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            "Class B Units" means Class B Units of PlayStream.

            "Closing" has the meaning set forth in Section 2(d) below.

            "Closing Date" has the meaning set forth in Section 2(d) below.

            "COBRA" means the requirements of Part 6 of Subtitle B of Title I of
ERISA and Code Section 4980B.

            "Code" means the Internal Revenue Code of 1986, as amended.

            "Confidential Information" means any information regarding the
business and affairs of PlayStream and its Subsidiaries or Holdings and its
Subsidiaries that is not generally available to the public on the date hereto
and that derives independent economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by, any
Person. Information that may be included in Confidential Information includes
matters of a technical nature (including Intellectual Property, know-how,
computer programs, software, patented and unpatented technology, source-code,
accounting methods, and documentation), matters of a business nature (such as
information about contract forms, costs, profits, employees, promotional
methods, markets, market or marketing plans, sales, and client accounts), plans
for further development, and any other information meeting the definition of
Confidential Information set forth above.

            "Controlled Group" has the meaning set forth in Code Section 1563.

            "Employee Transition Date" has the meaning set forth in Section
9(g).

            "Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement, (b) qualified defined
contribution retirement plan or arrangement which is an Employee Pension Benefit
Plan, (c) qualified defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan (including any Multiemployer Plan), or (d)
Employee Welfare Benefit Plan or material fringe benefit or other retirement,
bonus, or incentive plan or program.

            "Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 4(2).

            "Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 4(1).

            "Encumbrance" shall mean any mortgage, pledge, assessment, security
interest, deed of trust, lease, lien, adverse claim, levy, charge or other
encumbrance of any kind, or any conditional sale or title retention agreement or
other agreement to give any of the foregoing in the future.

            "Environmental, Health, and Safety Requirements" shall mean all
federal, state, local and foreign statutes, regulations, ordinances and other
provisions having the force or effect of law and all judicial and administrative
orders and determinations, and all contractual obligations concerning public
health and safety, worker health and safety, and pollution or protection of the
environment, including without limitation 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 now or previously in
effect.

            "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.

            "ERISA Affiliate" means each entity which is treated as a single
employer with PlayStream for purposes of Code Section 414.

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            "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 Holdings, the Buyer, PlayStream and the Escrow Agent
in the form of Exhibit A attached hereto, as amended, modified, restated,
superseded or replaced from time to time.

            "Escrow Fund" has the meaning set forth in the Escrow Agreement.

            "Escrow Shares" has the meaning set forth in Section 2(c)(iv).

            "Excluded Assets" means (i) the charter documents, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, and other documents relating to the organization,
maintenance, and existence of PlayStream as a limited liability company,
(ii) any of the rights of PlayStream under this Agreement, any Transaction
Document, any side agreement between PlayStream on the one hand and either of
the Buying Parties on the other hand entered into on or after the date of this
Agreement, and (iii) the assets listed on Exhibit B attached hereto.

            "Excluded Liabilities" shall have the meaning set forth in Section
2(b)(ii).

            "Fiduciary" has the meaning set forth in ERISA Section 4(21).

            "Financial Statements" has the meaning set forth in Section 4(g)
below.

            "GAAP" means United States generally accepted accounting principles
as in effect from time to time.

            "Good Reason" means, without an employee's express written consent:

(a)              (i) The assignment to the employee of duties, or limitation of
the employee's responsibilities, inconsistent with the employee's title,
position, duties, responsibilities and status with PlayStream to the extent such
employee held such title, position, duties, responsibilities and status at all
times from December 31, 2004 to Closing, or (ii) removal of the employee from,
or failure to re-elect the employee to any of the employee's positions with
PlayStream to the extent such employee held such positions at all times from
December 31, 2004 to Closing, except in connection with the involuntary
termination of the employee's employment for Cause or as a result of the
employee's death or disability.

(b)             failure of Buyer to pay, or reduction by Buyer of, the
employee's annual base salary, as reflected in Section 4(w) of the PlayStream
Disclosure Schedule; or

(c)             the relocation of the principal place of the employee's
employment to a location that is more than 50 miles further from the employee's
principal residence than such principal place of employment immediately prior to
the Closing.

            "Holdings Common Stock" means the common stock, $.001 par value, of
Holdings.

            "Holdings" has the meaning set forth in the preface above.

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            "Holdings' knowledge" is applicable to certain of those warranties
and representations set forth in Section 5 of this Agreement or elsewhere in
this Agreement, which are subject to the qualification "to Holdings' knowledge"
or "to the knowledge of Holdings," or otherwise limited to matters "known" to
Holdings. Holdings will be deemed to have "knowledge" of a matter if Philip N.
Kaplan, Chief Operating Officer, President and Director of Holdings, Mark Z.
Belzowski, Chief Financial Officer of Holdings, or Arturo Sida, General Counsel
of Holdings, has actual knowledge of the matter after making reasonable inquiry
and reasonable diligence with respect to the matter in question.

            "Holdings Material Adverse Effect" shall mean an effect or effects
which, individually or in the aggregate is materially adverse to the business,
financial condition, assets, or operations of Holdings and its Subsidiaries,
taken as a whole.

            "Indemnified Party" has the meaning set forth in Section 10(c)
below.

            "Indemnifying Party" has the meaning set forth in Section 10(c)
below.

            "Intellectual Property" means (a) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures, together
with all reissuances, continuations, continuations-in-part, revisions,
extensions, and reexaminations thereof, (b) all trademarks, service marks, trade
dress, logos, trade names, and corporate names, together with all translations,
adaptations, derivations, and combinations thereof and including all goodwill
associated therewith, and all applications, registrations, and renewals in
connection therewith, including the trade name "PlayStream," (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
(f) all computer software (including data, source code, and related
documentation), (g) all other proprietary rights, (h) all copies and embodiments
thereof (in whatever form or medium), and (i) with respect to each of the
foregoing, all goodwill associated therewith, licenses and sublicenses granted
and obtained with respect thereto, and rights thereunder, and rights to
protection of interests therein under the laws of all jurisdictions.

            "Liability" means any liability (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 for Taxes.

            "Market Value" means, with respect to the Holdings Common Stock, the
average of the closing price, as reported by the principal United States market
for the Holdings Common Stock, of the Holdings Common Stock on the twenty (20)
trading days preceding the date of determination.

            "Most Recent Balance Sheet" means the balance sheet contained within
the Most Recent Financial Statements.

            "Most Recent Financial Statements" has the meaning set forth in
Section 4(g) below.

            "Most Recent Fiscal Month End" has the meaning set forth in Section
4(g) below.

            "Most Recent Fiscal Year End" has the meaning set forth in Section
4(g) below.

            "Most Recent Form 10-K" has the meaning set forth in Section 3(d)(i)
below.

            "Multiemployer Plan" has the meaning set forth in ERISA Section
4(37).

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            "Open Source Materials" has the meaning set forth in Section
4(m)(vi) below.

            "Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).

            "Party" has the meaning set forth in the preface above.

            "Person" means an individual, a partnership, a limited liability
company, limited partnership, a limited liability partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).

            "Permitted Encumbrances" means (a) liens of current taxes and
assessments not yet delinquent, (b) liens imposed by law and incurred in the
ordinary course of business for obligations not yet due to materialmen,
warehousemen, landlords and the like, and (c) liens described in Section 4(e) of
the PlayStream Disclosure Schedule.

            "PlayStream" has the meaning set forth in the preface above.

            "PlayStream Disclosure Schedule" has the meaning set forth in
Section 4 below.

            "PlayStream Material Adverse Effect" shall mean an effect or effects
which, individually or in the aggregate is materially adverse to the business,
financial condition, assets, or operations of PlayStream and its Subsidiaries,
taken as a whole.

            "PlayStream's knowledge" is applicable to certain of those
warranties and representations set forth in Section 4 of this Agreement or
elsewhere in this Agreement, which are subject to the qualification "to
PlayStream's knowledge" or "to the knowledge of PlayStream," or otherwise
limited to matters "known" to PlayStream. PlayStream will be deemed to have
"knowledge" of a matter if George Grubb or James Mutton, has actual knowledge of
the matter after making reasonable inquiry and reasonable diligence with respect
to the matter in question.

            "PlayStream's Representative" means George Grubb.

            "PlayStream's Standard Severance" means the severance arrangement
described in Section 6 of the employee manual of PlayStream, as provided to the
Buying Parties.

            "Prepaid Accounts" shall have the meaning set forth in Section
2(b)(i)(D).

            "Purchase Price" has the meaning set forth in Section 2(c) below.

            "Purchase Shares" has the meaning set forth in Section 2(c)(i)
below.

            "Reed Capital" means Reed Global Capital, LLC.

            "Reportable Event" has the meaning set forth in ERISA Section 4043.

            "SEC Filings" has the meaning set forth in Section 5(f).

            "Securities Act" means the Securities Act of 1933, as amended.

            "Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.

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            "Subsidiary" means any Person with respect to which a specified
Person (or a Subsidiary thereof) previously owned or currently owns a majority
of the equity interest or previously had or currently has the power to vote or
direct the voting of sufficient securities to elect the primary governing body
of that Person.

            "Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.

            "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, any report
on Schedule K-1 (Form 1041) and similar state or local reports of equity owner's
shares of income, deductions, etc.

            "Third Party Claim" has the meaning set forth in Section 10(c)(i)
below.

            "Transaction Documents" means this Agreement, the Escrow Agreement,
the Warrants, the Employment Agreement with George Grubb, the Bill of Sale, the
Assignment and Assumption of Acquired Contracts, the Assignment of Intellectual
Property, and any other document, schedule, letter, certificate or agreement
attached hereto as an Exhibit or delivered pursuant to this Agreement or in
connection with the transactions described herein.

            "Transaction Securities" means the Purchase Shares, the Warrants and
the Warrant Shares.

            "Units" means Class A Units, Class B Units and any other membership
unit, security or right that represents an ownership interest in PlayStream.

            "VitalStream Disclosure Schedule" has the meaning set forth in
Section 5 below.

            "Warrants" has the meaning set forth in Section 2(c)(iii) below.

            "Warrant Shares" means the shares of Holdings Common Stock issuable
upon the exercise of the Warrants.

2.

            Basic Transaction.

                        

(a)             Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from PlayStream, and
PlayStream agrees to sell, transfer, convey, and deliver to the Buyer, subject
to any Permitted Encumbrances, all of PlayStream's right, title and interest in
and to the Acquired Assets, as such right, title and interest shall exist at the
Closing for the consideration specified below in this Section 2. In the event
that PlayStream receives possession of any Acquired Assets following Closing,
PlayStream shall promptly deliver such Acquired Assets to Buyer.

                        (b)             Assumed /Excluded Liabilities.

                                     (i)             Assumed Liabilities.
Subject to the conditions specified in this Agreement, on the Closing Date,
Buyer will assume and agrees to pay, defend, discharge and perform as and when
due the following liabilities and obligations of PlayStream (the "Assumed
Liabilities") other than any of the following that are specifically identified
in Section 2(b)(ii) as Excluded Liabilities:

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(A)          all Liabilities reflected on the Most Recent Balance Sheet
(including the notes thereto);

                                     (B)          all Liabilities incurred by
PlayStream in the Ordinary Course of Business between the Most Recent Fiscal
Month End and the Closing Date;

                                     (C)          all amounts owed by PlayStream
to Rose, Snyder and Jacobs in excess of $20,000;

                                     (D)          all Liabilities and
obligations under the Acquired Contracts (but not as a result of any breach or
non-performance by PlayStream of any term of the Acquired Contract prior to
Closing); and

                                     (E)          the

obligation to pay severance equal to three month's salary plus PlayStream's
Standard Severance to any former employee of PlayStream, other than George
Grubb, who (i) accepts an offer for employment by Buyer at or about Closing,
(ii) was an employee of PlayStream as of March 15, 2005 and immediately prior to
Closing and (iii) is discharged, without Cause or terminates his employment with
Buyer with Good Reason, during the first twelve months following the Closing
Date (the "Assumed Severance Liability").

In the event that PlayStream receives any invoices, requests for payment or
other obligations with respect to any Assumed Liabilities following Closing,
PlayStream shall promptly send such items to Buyer for payment by Buyer.

                                     (ii)  Excluded Liabilities. Notwithstanding
anything to the contrary contained in this Agreement, Buyer will not assume or
be liable for any of the following liabilities or obligations of PlayStream (the
"Excluded Liabilities") and none of the following liabilities or obligations
will be Assumed Liabilities for purposes of this Agreement:

                                     (A)          any of PlayStream's
Liabilities or obligations under this Agreement or any other Transaction
Document;

                                     (B)          any of PlayStream's
Liabilities or obligations for expenses, income taxes or fees incident to or
arising out of the negotiation, preparation, approval or authorization of this
Agreement or the consummation (or preparation for the consummation) of the
transactions contemplated hereby (including, without limitation, all attorneys',
accountants' and brokers' fees, including any brokers' fees to Reed Capital
pursuant to that certain Engagement Letter dated January 25, 2005 between Reed
Capital and PlayStream; excluding the amounts identified in Section 2(b)(i)(C);

                                     (D)          except for the Assumed
Severance Liability and the obligations with respect to accrued but unpaid paid
time off described in Section 9(g), any Liabilities or obligations with respect
to accrued wages payable to employees of PlayStream up to the Closing Date (even
if such individuals are subsequently hired by the Buying Parties);

                                     (E)         any Liabilities or obligations
with respect to any amount of Taxes (including interest, penalties and additions
to such Taxes) that arose or accrued before the Closing Date in excess of the
accrued amount identified on the Most Recent Balance Sheet;

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                                     (F)          any of PlayStream's
Liabilities or obligations arising by reason of any violation by PlayStream, its
agents or affiliates of any federal, state, local or foreign law or any
requirement of any governmental authority or by reason of any breach or alleged
breach by PlayStream, its agents or affiliates of any agreement, contract,
lease, commitment, instrument, judgment, order or decree (regardless of when any
such violation or breach is asserted or alleged to have occurred); and

                                     (G)          any Liability or obligation of
PlayStream for the payment of dividends or the repurchase or other acquisition
of any equity interest in PlayStream.

                                     (iii)             On and subject to the
terms and conditions of this Agreement, the Buyer agrees to assume and become
responsible for all of the Assumed Liabilities at the Closing. The Buyer will
not assume or have any responsibility, however, with respect to any other
obligation or Liability not included within the definition of Assumed
Liabilities.

                        

(c)             Consideration Provided by Buyer for Acquired Assets. Subject to
the terms and conditions of this Agreement, as total consideration for the
Acquired Assets (the "Purchase Price"), at the Closing:

                                     (i)             Holdings agrees to issue to
PlayStream, and deliver to PlayStream or the Escrow Agent as provided in Section
2(c)(iv) below, with such legends and other restrictions as are described in
Section 2(f), at the Closing, Three Million Seven Hundred Fifty Thousand
(3,750,000) shares of Holdings Common Stock (the "Purchase Shares");

                                     (ii)             Buyer shall deliver to
PlayStream, at the Closing, Five Hundred Thousand Dollars ($500,000);

                                     (iii)             Holdings shall transmit
to PlayStream and deliver to PlayStream, with such legends and other
restrictions as are described in Section 2(f), at the Closing, warrants for the
purchase of up to Two Hundred Thousand (200,000) shares of Holdings Common Stock
in the form attached hereto as Exhibit C (the "Warrants");

                                     (iv)             Holdings agrees to
transmit to the Escrow Agent, to be held subject to the terms and conditions of
the Escrow Agreement, Three Hundred Seventy-Five Thousand (375,000) of the
Purchase Shares (the "Escrow Shares"). The Escrow Shares shall be available to
satisfy any amounts owed by PlayStream to the Buying Parties pursuant to Section
10 of this Agreement, subject to the terms of this Agreement and the Escrow
Agreement. Any portion of the Escrow Shares not used to offset indemnifiable
losses as specified in Section 10 below (or reserved with respect to claimed
losses related to litigation pending or threatened in writing) shall be released
by the Escrow Agent to PlayStream as provided in the Escrow Agreement.

                        

(d)             The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Holdings in
Irvine, California commencing at 9:00 a.m. local time on the second business day
following the 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 respective Parties will take at the
Closing itself) or such other date as the Parties may mutually determine (the
"Closing Date"). The parties shall use commercially reasonable efforts to cause
the Closing to occur by April 27, 2005.

                        

(e) Deliveries at the Closing. At the Closing, (i) PlayStream will deliver to
the Buyer (or cause its Affiliates to deliver to Buyer) the various
certificates, instruments, and documents referred to in Section 7(a) below; (ii)
the Buyer will deliver to PlayStream the various certificates, instruments, and
documents referred to in Section 7(b) below; and (iii); the Buyer will deliver
to PlayStream and/or the Escrow Agent the consideration specified in
Section 2(c) above.

 

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(f) Legends. Each Purchase Share will be imprinted with a legend substantially
in the following form:

"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY 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."

In the absence of a registration statement covering the transfer of a Purchase
Share, PlayStream or any subsequent holder desiring to transfer a Purchase Share
first must furnish Holdings with a written opinion reasonably satisfactory to
Holdings in form and substance from counsel reasonably satisfactory to Holdings
by reason of experience to the effect that the holder may transfer the Purchase
Share as desired without registration under the Securities Act.

                        

(g) Closing for Accounting Purposes. To the extent permitted by GAAP, for
financial accounting purposes, the Closing shall be deemed to have occurred on
April 1, 2005 (so that all revenues and expenses of PlayStream on or after that
date are deemed to be revenues and expenses of the Buyer). The foregoing shall
not in any way increase or decrease the scope of the Acquired Assets, Assumed
Liabilities, Excluded Assets or Excluded Liabilities or affect any
representation, warranty or covenant set forth in this Agreement.

            

3. Investment Representations of PlayStream. PlayStream represents and warrants
to the Buying Parties that the statements contained in this Section are correct
and complete as of the date of this Agreement and will be correct and complete
as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement.

                        

(a)             Experience. PlayStream is experienced in evaluating technology
companies such as Holdings, is able to fend for itself in transactions such as
the one contemplated by this Agreement, has such knowledge and experience in
financial and business matters that PlayStream is capable of evaluating the
merits and risks of PlayStream's prospective investment in Holdings, and has the
ability to bear the economic risks of the investment.

                        

(b) Investment. PlayStream is acquiring the Transaction Securities for
investment for PlayStream's own account and not with the view to, or for resale
in connection with, any distribution thereof. PlayStream understands that the
Transaction Securities have not been registered under the Securities Act by
reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature of
the investment intent as expressed herein. PlayStream further represents that it
does not have any contract, undertaking, agreement or arrangement with any
Person to sell, transfer or grant participation to any third person with respect
to any of the Transaction Securities. PlayStream understands and acknowledges
that the offering of the Transaction Securities pursuant to this Agreement will
not be registered under the Securities Act on the grounds that the sale provided
for in this Agreement and the issuance of securities hereunder is exempt from
the registration requirements of the Securities Act.

                        

(c) Rule 144. PlayStream acknowledges that the Transaction Securities must be
held indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. PlayStream is aware of the
provisions of Rule 144 promulgated under the Securities Act which permit limited
resale of shares purchased in a private placement subject to the satisfaction of
certain conditions. PlayStream covenants that, in the absence of an effective
registration statement covering the stock in question, PlayStream will sell,
transfer, or otherwise dispose of the Transaction Securities only in a manner
consistent with Section 2(f).

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                         (d) Access to Data/Representations.

                                     (i) PlayStream acknowledges and represents
that in making the decision to acquire the Purchase Shares and Warrants it has
relied solely upon (A) representations and warranties of the Buying Parties
contained in this Agreement and the other Transaction Documents, (B) written
information provided by Holdings or Buyer directly to PlayStream, and
(C) information contained in the Annual Report on Form 10-K for the year ended
December 31, 2004 (the "Most Recent Form 10-K") filed by Holdings with the
Securities and Exchange Commission and Current Reports on Form 8-K filed by
Holdings since January 1, 2005 with the Securities and Exchange Commission.

                                     (ii) PlayStream represents and affirms that
none of the following information has ever been represented, guaranteed or
warranted to PlayStream, expressly or by implication, by any Person: (A) the
approximate or exact length of time that PlayStream will be required to remain a
security holder of Holdings; (B) the percentage of profit and/or amount of or
type of consideration, profit or loss to be realized, if any, as a result of an
investment in Holdings; or (C) the possibility that the past performance or
experience on the part of Holdings or any affiliate, or any officer, director,
employee or agent of the foregoing, might in any way indicate or predict the
results of ownership of any of the Purchase Shares or the potential success of
Holdings' operations.

                        

(e) Legends. PlayStream understands that the certificates evidencing the
Purchase Shares and other Transaction Securities will bear a legend
substantially in the form set forth in Section 2(f), together with any other
legends required by applicable state securities laws, and will be subject to the
restrictions set forth in Section 2(f).

                        

(f) Principal Place of Business. PlayStream maintains its principal place of
business in the State of Washington and has received all offers, copies of the
Transaction Documents and other materials regarding the Buying Parties in the
State of Washington.

                        

(g) No Distribution. PlayStream represents and warrants that it does not have
any plans, agreements or arrangements with respect to the distribution of
Transaction Securities within one year of the Closing Date.

            

4. Representations and Warranties of PlayStream. PlayStream represents and
warrants to the Buying Parties that the statements contained in this Section 4
are correct and complete as of the date of this Agreement and will be correct
and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
Section 4), except as set forth in the disclosure schedule delivered by
PlayStream in connection with the Agreement (the "PlayStream Disclosure
Schedule"). The PlayStream Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs and subparagraphs
contained in this Section 4. Any matter disclosed on the PlayStream Disclosure
Schedule in respect of a particular representation will be deemed to have been
disclosed in respect of any other representation calling for a similar or
related type of disclosure (even if such matter is not specifically referenced
to the lettered and numbered paragraphs relating to such representation), if and
only to the extent that, it is clear from a reading of the disclosure that it
applies to such other representation.

                        

(a) Organization of PlayStream. PlayStream is a limited liability company duly
organized and validly existing under the laws of the jurisdiction of its
organization. PlayStream is duly qualified as a foreign corporation and is in
good standing (where such concept applies) in the states and provinces listed on
Section 4(a) of the PlayStream Disclosure Schedule, which are the only
jurisdictions in which such qualification is necessary or required under
applicable law as a result of the conduct of PlayStream's business or the
ownership of its properties. Prior to the execution of this Agreement,
PlayStream has delivered to Holdings true and complete copies of its certificate
of formation and limited liability company agreement as currently in effect on
the date hereof.

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(b) Authorization of Transaction. PlayStream has full power and authority
(including full limited liability company power and authority) to execute and
deliver this Agreement and the other Transaction Documents to which PlayStream
is a party and to perform its obligations hereunder and thereunder. Without
limiting the generality of the foregoing, all authorizations from the members of
PlayStream required under PlayStream's limited liability company agreement,
certificate of formation or by Revised Code of Washington Chapter 25.15 with
respect to the execution, delivery, and performance of this Agreement and the
other Transaction Documents to which PlayStream is a party have been obtained.
This Agreement and the other Transaction Documents to which PlayStream is a
party, assuming the due authorization, execution and delivery hereof and thereof
by the Buying Parties party hereto and thereto, constitute the valid and legally
binding obligations of PlayStream, enforceable in accordance with their terms
and conditions, except as enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting or relating to the enforcement
of creditors' rights generally or by equitable principles relating to
enforceability.

                        

(c) Noncontravention. Neither the execution and the delivery of this Agreement
or any of the other Transaction Documents to which PlayStream is a party, nor
the consummation of the transactions contemplated hereby, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which any of PlayStream and its Subsidiaries is subject or any
provision of the certificate of formation or limited liability company agreement
of PlayStream or the charter documents of any of its Subsidiaries or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, or create in any party the right to accelerate, terminate,
modify or cancel, or require any consent under any agreement, contract, lease,
license, instrument, or other arrangement to which any of PlayStream and its
Subsidiaries is a party or by which it is bound or to which any of its assets is
subject, or result in the imposition of any Encumbrance upon any of its assets
(other than Permitted Encumbrances), the occurrence of which would result in a
PlayStream Material Adverse Effect. Except for any consent required by a
government or governmental agency under an arrangement contemplated by clause
(ii) above, none of PlayStream and its Subsidiaries needs to give any notice to,
make any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement or any other Transaction Documents
to which PlayStream is a party.

                        

(d) Brokers' Fees. PlayStream is obligated to pay fees to Reed Capital with
respect to the transactions contemplated by this Agreement pursuant to the
Engagement Letter dated January 25, 2005 by and among Reed Capital and
PlayStream. Other than as set forth in such agreement, PlayStream has no
Liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement. None of
the Subsidiaries of PlayStream has any Liability or obligation to pay any fees
or commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.

                        

(e) Title to Assets; Sufficiency of Assets. PlayStream and its Subsidiaries have
good and marketable title to, or a valid leasehold interest in, the Acquired
Assets, free and clear of all Encumbrances (other than Permitted Encumbrances),
except for properties and assets disposed of in the Ordinary Course of Business
since the date of the Most Recent Balance Sheet. At the Closing, PlayStream will
convey to the Buyer good and marketable title to all of the Acquired Assets
(other than the Assets Requiring Consent/Notice), as such right, title and
interest shall exist at the Closing, free and clear of any Encumbrance (other
than Permitted Encumbrances) or restriction on transfer. The Acquired Assets
include all properties and assets (tangible and intangible) used in connection
with the operation or conduct by PlayStream of its Business as presently
conducted other than the Excluded Assets.

 

 

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(f) Capitalization and Subsidiaries.

                                    

(i)       Capitalization. There are issued and outstanding 48,341,250 Units, of
which 4,716,352 are Class A Units and 43,624,898 are Class B Units, which Units
have been issued to, and are held beneficially and of record by, the Persons and
in the amounts listed on Section 4(f)(i) of the PlayStream Disclosure Schedule.
PlayStream has delivered to the Buyer correct and complete copies of the
certificate of formation and limited liability company agreement of PlayStream
(as amended to date). All of the issued and outstanding Units of PlayStream have
been duly authorized and are validly issued, fully paid, and nonassessable and
not subject to any restriction or purchase right or forfeiture provision (other
than arising under governing securities laws). There are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments to which PlayStream
is a party or by which it is bound that could require PlayStream to sell,
transfer, or otherwise dispose of any Units. There are no outstanding stock
appreciation, phantom stock, profit participation, or similar rights with
respect to PlayStream. Other than PlayStream's limited liability company
agreement, there are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of any Units of PlayStream. The minute
books and other records books of PlayStream are correct and complete. PlayStream
is not in default under or in violation of any provision of its certificate of
formation or limited liability company agreement.

                                    

(ii)      Subsidiaries. Section 4(f)(ii) of the PlayStream Disclosure Schedule
sets forth for each Subsidiary of PlayStream (i) its name and jurisdiction of
incorporation, (ii) the number of shares of authorized capital stock of each
class of its capital stock, (iii) the number of issued and outstanding shares of
each class of its capital stock, the names of the holders thereof, and the
number of shares held by each such holder, (iv) the number of shares of its
capital stock held in treasury, and (v) its directors and officers. Each
Subsidiary of PlayStream is a company duly organized, validly existing, and in
good standing (where such concept applies) under the laws of the jurisdiction of
its incorporation. Each Subsidiary of PlayStream is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction where such
qualification is required. Each Subsidiary of PlayStream has full company power
and authority and all licenses, permits, and authorizations necessary to carry
on the businesses in which it is engaged and to own and use the properties owned
and used by it. PlayStream has delivered to the Buyer correct and complete
copies of the charter documents of each Subsidiary of PlayStream (as amended to
date). All of the issued and outstanding shares of capital stock of each
Subsidiary of PlayStream have been duly authorized and are validly issued, fully
paid, and nonassessable. PlayStream holds of record and owns beneficially all of
the outstanding shares of each Subsidiary of PlayStream, free and clear of any
restrictions on transfer (other than restrictions under the Securities Act and
state securities laws), Taxes, Encumbrances (other than Permitted Encumbrances),
options, warrants, purchase rights, contracts, commitments, equities, claims,
and demands. There are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require any of PlayStream and its
Subsidiaries to sell, transfer, or otherwise dispose of any capital stock of any
of its Subsidiaries or that could require any Subsidiary of PlayStream to issue,
sell, or otherwise cause to become outstanding any of its own capital stock
(other than this Agreement). There are no outstanding stock appreciation,
phantom stock, profit participation, or similar rights with respect to any
Subsidiary of PlayStream. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of any capital stock of
any Subsidiary of PlayStream. The minute books (containing the records of
meetings of the stockholders, the board of directors, and any committees of the
board of directors), the stock certificate books, and the stock record books of
each Subsidiary of PlayStream are correct and complete. None of the Subsidiaries
of PlayStream is in default under or in violation of any provision of its
charter or bylaws. None of PlayStream or its Subsidiaries controls directly or
indirectly or has any direct or indirect equity participation in any
corporation, partnership, trust, or other business association which is not a
Subsidiary of PlayStream.

 

 

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(g) Financial Statements. Attached hereto as Exhibit D are the following
financial statements (collectively the "Financial Statements"): (i) audited
consolidated and consolidating balance sheets and statements of income, changes
in members' equity, and cash flow as of and for the fiscal year ended December
31, 2004 (the "Most Recent Fiscal Year End") for PlayStream and its
Subsidiaries; and (ii) unaudited consolidated and consolidating balance sheets
and statements of income, changes in members' equity, and cash flow (the "Most
Recent Financial Statements") as of and for the three months ended March 31,
2005 (the "Most Recent Fiscal Month End") for PlayStream and its Subsidiaries.
The Financial Statements (including the notes thereto) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, present fairly the financial condition of PlayStream and its
Subsidiaries as of such dates and the results of operations of PlayStream and
its Subsidiaries for such periods, are correct and complete, and are consistent
with the books and records of PlayStream and its Subsidiaries (which books and
records are correct and complete); provided, however, that the Most Recent
Financial Statements are subject to normal year-end adjustments (which will not
be material individually or in the aggregate) and lack footnotes and other
presentation items.

                        

(h) Events Subsequent to Most Recent Fiscal Month End. Since the Most Recent
Fiscal Month End, there has not been any material adverse change in the
business, financial condition, operations, results of operations, or future
prospects of any of PlayStream and its Subsidiaries. Without limiting the
generality of the foregoing, since that date:

                                     (i)             none of PlayStream and its
Subsidiaries has sold, leased, transferred, or assigned any of its assets,
tangible or intangible, other than for a fair consideration in the Ordinary
Course of Business;

                                     (ii)           none of PlayStream and its
Subsidiaries has entered into any agreement, contract, lease, or license (or
series of related agreements, contracts, leases, and licenses) either involving
more than $20,000 or outside the Ordinary Course of Business;

                                     (iii)          no party (including any of
PlayStream and its Subsidiaries) has accelerated, terminated, modified, or
cancelled any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) involving more than $20,000 to
which any of PlayStream and its Subsidiaries is a party or by which any of them
is bound;

                                     (iv)          none of PlayStream and its
Subsidiaries has imposed any Encumbrance (other than Permitted Encumbrances)
upon any of its assets, tangible or intangible;

                                     (v)          none of PlayStream and its
Subsidiaries has made any capital expenditure (or series of related capital
expenditures) either involving more than $20,000 or outside the Ordinary Course
of Business;

                                     (vi)         (none of PlayStream and its
Subsidiaries has made any capital investment in, any loan to, or any acquisition
of the securities or assets of, any other Person (or series of related capital
investments, loans, and acquisitions) either involving more than $20,000 or
outside the Ordinary Course of Business;

                                     (vii)          none of PlayStream and its
Subsidiaries has issued any note, bond, or other debt security or created,
incurred, assumed, or guaranteed any indebtedness for borrowed money or
capitalized lease obligation either involving more than $20,000 singly or
$50,000 in the aggregate;

                                     (viii)          none of PlayStream and its
Subsidiaries has delayed or postponed the payment of accounts payable and other
Liabilities outside the Ordinary Course of Business;

                                     (ix)          none of PlayStream and its
Subsidiaries has cancelled, compromised, waived, or released any right or claim
(or series of related rights and claims) either involving more than $20,000 or
outside the Ordinary Course of Business;

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                                     (x)          none of PlayStream and its
Subsidiaries has granted any license or sublicense of any rights under or with
respect to any Intellectual Property outside the Ordinary Course of Business;

                                     (xi)          there has been no change made
or authorized in the certificate of formation or limited liability company
agreement of PlayStream or the charter documents of any of its Subsidiaries;

                                     (xii)          none of PlayStream and its
Subsidiaries has issued, sold, or otherwise disposed of any of its Units or
other equity interests, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion, exchange, or exercise) any of its
Units or other equity interests;

                                     (xiii)         none of PlayStream and its
Subsidiaries has declared, set aside, or paid any dividend or made any
distribution with respect to any of its Units or other equity interests (whether
in cash or in kind) or redeemed, purchased, or otherwise acquired any of its
Units or other equity interests;

                                     (xiv)          none of PlayStream and its
Subsidiaries has experienced any damage, destruction, or loss (whether or not
covered by insurance) to its property except in an amount less than $5,000 in
the aggregate;

                                    

(xv)          none of PlayStream and its Subsidiaries has experienced any loss
as a result of fraud, theft, conversion, embezzlement or other crime pertaining
to the unlawful use or possession of another's property;

                                     (xvi)          none of PlayStream and its
Subsidiaries has made any loan to, or entered into any other transaction with,
any of its members, officers or employees (other than the payment of salary in
the Ordinary Course of Business);

                                     (xvii)          none of PlayStream and its
Subsidiaries has entered into any employment contract or collective bargaining
agreement, written or oral, or modified the terms of any such existing contract
or agreement;

                                     (xviii)          none of PlayStream and its
Subsidiaries has granted any increase in the base compensation of any of its
officers and employees;

                                     (xix)          none of PlayStream and its
Subsidiaries has adopted, amended, modified, or terminated any bonus,
profit-sharing, incentive, severance, or other plan, contract, or commitment for
the benefit of any of its directors, officers, and employees (or taken any such
action with respect to any other Employee Benefit Plan);

                                     (xx)          none of PlayStream and its
Subsidiaries has made any other change in employment terms for any of its
officers and employees outside the Ordinary Course of Business;

                                     (xxi)          none of PlayStream and its
Subsidiaries has made or pledged to make any charitable or other capital
contribution individually of $5,000 or greater outside the Ordinary Course of
Business;

                                     (xxii)          there has not been any
other occurrence, event, incident, action, failure to act, or transaction
outside the Ordinary Course of Business involving any of PlayStream and its
Subsidiaries that could reasonably be expected to have a PlayStream Material
Adverse Effect;

                                     (xxiii)          there has not been any
material change in contingent obligations of PlayStream or any of its
Subsidiaries by way of guaranty, endorsement, indemnity, warranty or otherwise;
and

                                     (xxiv)        none of PlayStream and its
Subsidiaries has committed to any of the foregoing.

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(i)             Undisclosed Liabilities; Limited Liabilities. None of PlayStream
and its Subsidiaries has any Liability, except for (A) Liabilities set forth in
the Most Recent Balance Sheet (including any notes thereto) and (B) Liabilities
which do not exceed $25,000 in the aggregate and have arisen after the Most
Recent Fiscal Month End in the Ordinary Course of Business (none of which
results from, arises out of, relates to, or was caused by any breach of
contract, breach of warranty, tort, infringement, or violation of law); and (C)
Liabilities disclosed in Section 4(i) of the PlayStream Disclosure Schedule.

                        

(j)             Legal Compliance. Each of PlayStream, its Subsidiaries, and
their respective predecessors and Affiliates has complied with all applicable
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state, local, and
foreign governments (and all agencies thereof), except for violations which, in
the aggregate, could not reasonably be expected to have a PlayStream Material
Adverse Effect, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against any of
them alleging any failure so to comply.

                        

(k)             Tax Matters.

                                     (i)             Except as set forth on
Section 4(k) of the PlayStream Disclosure Schedule, each of PlayStream and its
Subsidiaries has filed all Tax Returns that it was required to file, and none of
PlayStream and its Subsidiaries currently is the beneficiary of any extension of
time within which to file any Tax Return. All such Tax Returns were correct and
complete in all respects. All Taxes owed by any of PlayStream and its
Subsidiaries (whether or not shown on any Tax Return) have been paid. No claim
has ever been made by an authority in a jurisdiction where any of PlayStream and
its Subsidiaries does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no Encumbrances (other than Permitted
Encumbrances) on any of the assets of any of PlayStream and its Subsidiaries
that arose in connection with any failure (or alleged failure) to pay any Tax.

                                     (ii)             Each of PlayStream and its
Subsidiaries has withheld and paid all Taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party.

                                     (iii)             No member, manager or
officer (or employee responsible for Tax matters) of any of PlayStream and its
Subsidiaries expects any authority to assess any additional Taxes for any period
for which Tax Returns have been filed. There is no dispute or claim concerning
any Tax Liability of any of PlayStream and its Subsidiaries either (A) claimed
or raised by any authority in writing or (B) as to which PlayStream has
Knowledge based upon personal contact with any agent of such authority.
PlayStream has elected to be treated as a partnership for federal, state and
local income tax purposes and is not obligated to pay income tax in any
jurisdiction.

                                     (iv)             None of PlayStream and its
Subsidiaries has waived any statute of limitations in respect of Taxes or agreed
to any extension of time with respect to a Tax assessment or deficiency.

                                     (v)             The unpaid Taxes of
PlayStream and its Subsidiaries (A) did not, as of the Most Recent Fiscal Month
End, exceed the reserve for Tax Liability (rather than any reserve for deferred
Taxes established to reflect timing differences between book and Tax income) set
forth in the Most Recent Balance Sheet (including any notes thereto) and (B) do
not exceed that reserve as adjusted for the passage of time through the Closing
Date in accordance with the past custom and practice of PlayStream and its
Subsidiaries in filing their Tax Returns.

                        

(l)             Real Property.

                                     (i)             Neither PlayStream nor any
of its Subsidiaries owns any real property.

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                                     (ii)             Section 4(l)(ii) of the
PlayStream Disclosure Schedule lists and describes briefly all real property
leased or subleased to any of PlayStream and its Subsidiaries. PlayStream has
delivered to the Buyer correct and complete copies of the leases and subleases
listed in Section 4(l)(ii) of the PlayStream Disclosure Schedule (as amended to
date). With respect to each lease and sublease listed in Section 4(l)(ii) of the
PlayStream Disclosure Schedule:

                                     (A)           the lease or sublease is
legal, valid, binding, enforceable, and in full force and effect;

                                     (B)           to PlayStream's knowledge,
the lease or sublease will continue to be legal, valid, binding, enforceable,
and in full force and effect on identical terms following the consummation of
the transactions contemplated hereby and by all of the Transaction Documents;

                                     (C)          to PlayStream's knowledge, no
party to the lease or sublease is in breach or default, and 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 PlayStream's knowledge, no
party to the lease or sublease has repudiated any provision thereof;

                                     (E)          to PlayStream's knowledge,
there are no disputes, oral agreements, or forbearance programs in effect as to
the lease or sublease;

                                     (F)          with respect to each sublease,
the representations and warranties set forth in subsections (A) through (E)
above are true and correct with respect to the underlying lease;

                                     (G)          none of PlayStream and its
Subsidiaries has assigned, transferred, conveyed, mortgaged, deeded in trust, or
encumbered any interest in the leasehold or subleasehold;

                                     (H)          to PlayStream's knowledge, all
facilities leased or subleased thereunder have received all approvals of
governmental authorities (including licenses and permits) required in connection
with the operation thereof and have been operated and maintained in accordance
with applicable laws, rules, and regulations;

                                     (I)          all facilities leased or
subleased thereunder are supplied with utilities and other services necessary
for the operation of said facilities; and

                                     (J)          no amounts owed by PlayStream
are past due under the lease or sublease.

                        

(m) Intellectual Property.

                                     (i)             PlayStream and its
Subsidiaries own or have the right to use pursuant to license, sublicense,
agreement, or permission all Intellectual Property necessary for the operation
of the businesses of PlayStream and its Subsidiaries as presently conducted and
as presently proposed to be conducted up to Closing. Each of PlayStream and its
Subsidiaries has taken all commercially reasonable action to maintain and
protect their respective rights in each item of Intellectual Property that each
of them owns or uses, and the confidentiality of each such item to the extent
they own such item, or to the extent they do not own such item, to the extent
they are obligated to protect such item's confidentiality. PlayStream has
sourced and archived all of the development tools used in the creation and
development of the Intellectual Property developed and owned by PlayStream.

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                                     (ii)             None of PlayStream and its
Subsidiaries has infringed upon, misappropriated, or otherwise violated any
Intellectual Property rights of third parties that arise under the statutory or
common laws within the United States (or rules promulgated thereunder). To
PlayStream's knowledge, none of PlayStream and its Subsidiaries has infringed
upon, misappropriated, or otherwise violated any Intellectual Property rights of
third parties that arise under a statutory law, common law or other source other
than statutory or common laws within the United States (or rules promulgated
thereunder). None of the officers (and employees with responsibility for
Intellectual Property matters) of PlayStream and its Subsidiaries has ever
received any charge, complaint, claim, demand, or notice alleging any such
infringement, misappropriation, or violation of any Person's Intellectual
Property rights (including any claim that any of PlayStream and its Subsidiaries
must license or refrain from using any Intellectual Property rights of any third
party). To PlayStream's knowledge, no third party is infringing upon,
misappropriating, or otherwise violating any Intellectual Property rights of any
of PlayStream and its Subsidiaries.

                                     (iii)             Section 4(m)(iii) of the
PlayStream Disclosure Schedule identifies each patent, copyright, trademark,
service mark or other registration which has been issued to any of PlayStream
and its Subsidiaries with respect to any of its Intellectual Property,
identifies each pending application for a patent, copyright, trademark, service
mark or other registration which any of PlayStream and its Subsidiaries has made
with respect to any of its Intellectual Property, and identifies each license,
agreement, or other permission which any of PlayStream and its Subsidiaries has
granted to any third party with respect to any of its Intellectual Property.
PlayStream has delivered to the Buyer correct and complete copies of all such
patents, copyright registrations, trademarks, service marks, registrations,
applications, licenses, agreements, and permissions (as amended to date) and has
made available to Buyer correct and complete copies of other written
documentation filed with or received from the United States Patent and Trademark
Office or similar governmental agency evidencing ownership and prosecution (if
applicable) of each such item. Section 4(m)(iii) of the PlayStream Disclosure
Schedule also identifies each trade name or unregistered trademark used by any
of PlayStream and its Subsidiaries in connection with any of its businesses.
With respect to each item of Intellectual Property required to be identified in
Section 4(m)(iii) of the PlayStream Disclosure Schedule:

                                     (A)             PlayStream and its
Subsidiaries possess all right, title, and interest in and to the item, free and
clear of any Encumbrance, license, or other restriction, and, to PlayStream's
knowledge, free and clear of any enforceable claims of ownership by any Person,
except for such licenses, agreements, and other permissions which any of
PlayStream and its Subsidiaries has granted to any third party with respect to
such item and which also are identified in Section 4(m)(iii) of the PlayStream
Disclosure Schedule;

                                     (B)             the item is not subject to
any binding outstanding injunction, judgment, order, decree, or other ruling of
any court or government entity of competent jurisdiction;

                                     (C)             no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand has been
initiated (with notice to PlayStream and its Subsidiaries) is pending or, to
PlayStream's knowledge, is threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and

                                     (D)             none of PlayStream and its
Subsidiaries has any currently binding agreement to indemnify any Person for or
against any infringement, misappropriation, or other violation with respect to
the item, except for agreements entered into with suppliers or customers in the
Ordinary Course of Business.

                                     (iv)             Section 4(m)(iv) of the
PlayStream Disclosure Schedule identifies each item of Intellectual Property
that any third party owns and that any of PlayStream and its Subsidiaries uses
pursuant to license, sublicense, agreement, or permission (other than certain
off-the-shelf software with a purchase or license price of less than $5,000).
PlayStream has delivered to the Buyer correct and complete copies of all such
licenses, sublicenses, agreements, and permissions (as amended to date). With
respect to each item of Intellectual Property required to be identified in
Section 4(m)(iv) of the PlayStream Disclosure Schedule:

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                                     (A)             to PlayStream's knowledge,
the license, sublicense, agreement, or permission covering the item is legal,
valid, binding, enforceable, and in full force and effect;

                                     (B)             the consummation of the
transactions contemplated hereby and the Parties' performance as required under
the other Transaction Documents will not affect the license's, sublicense's,
agreement's, or permission's legality, validity, binding nature, enforceability,
or existence and the same shall remain in full force and effect on identical
terms;

                                     (C)             to PlayStream's knowledge,
no party to the license, sublicense, agreement, or permission is in breach or
default, and 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 PlayStream's knowledge,
no party to the license, sublicense, agreement, or permission has informed any
other party thereto that it repudiates any provision thereof;

                                     (E)             with respect to each
sublicense, to PlayStream's knowledge, the representations and warranties set
forth in subsections (A) through (D) above are true and correct with respect to
the underlying license;

                                     (F)             the underlying item of
Intellectual Property is not subject to any binding outstanding injunction,
judgment, order, decree, or other ruling of any court or government entity of
competent jurisdiction;

                                     (G)             no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand has been
initiated (with notice to PlayStream or its Subsidiaries) with respect to such
item nor is pending nor, to PlayStream's knowledge is threatened, which
challenges the legality, validity, or enforceability of the underlying item of
Intellectual Property; and

                                     (H)             none of PlayStream and its
Subsidiaries has granted any sublicense or similar right with respect to the
license, sublicense, agreement, or permission; provided that PlayStream grants a
sublicense for streaming technologies to all customers using PlayStream's
services, as set forth in PlayStream's terms and conditions of use.

                                     (v)             To PlayStream's knowledge,
none of PlayStream and its Subsidiaries will infringe upon, misappropriate, or
otherwise violate any Intellectual Property rights of third parties as a result
of the continued operation of its Business as presently conducted and as
presently proposed to be conducted up to Closing.

                                     (vi)             Section 4(m)(vi) of the
PlayStream Disclosure Schedule lists all software that is distributed pursuant
to any license that requires, as a condition of modification and/or distribution
of software subject to such license, that (A) such software and/or other
software combined and/or distributed with such software be disclosed or
distributed in source code form, or (B) such software and/or other software
combined and/or distributed with such software and any associated intellectual
property be licensed on a royalty free basis (including for the purpose of
making additional copies or derivative works) (including but not limited to the
GNU General Public License (GPL), GNU Lesser General Public License (LGPL),
Mozilla Public License (MPL), the Artistic License, the Netscape Public License,
the Sun Community Source License (SCSL), and the Sun Industry Standards License
(SISL)) ("Open Source Materials") that is both material to and used in the
business and operation of PlayStream and its Subsidiaries, and describes the
manner in which such Open Source Materials are or were used. Such description
shall include, without limitation, whether (and, if so, how) the Open Source
Materials were modified or distributed by PlayStream and its Subsidiaries.
Neither PlayStream nor any of its Subsidiaries has (X) incorporated Open Source
Materials into, or combined Open Source Materials with, the Intellectual
Property of PlayStream or any of its Subsidiaries or any of their products, or
(Y) distributed any of the Intellectual Property or products of PlayStream or
its Subsidiaries as part of a whole which is a work based on Open Source
Materials.

--------------------------------------------------------------------------------

                                     (vii)             Except as set forth on
Section 4(m)(vii) of the PlayStream Disclosure Schedule, all of the employees of
PlayStream and its Subsidiaries have entered into invention assignment and
confidentiality agreements under which such employees have assigned to
PlayStream all Intellectual Property conceived or reduced to practice in
connection with their employment at PlayStream (subject to exceptions to the
assignment of inventions required by applicable law) and agreed not to use or
disclose, other than for the benefit of PlayStream, all confidential information
of PlayStream.

(n) Tangible Assets. PlayStream and its Subsidiaries own or lease all buildings
and related heating, ventilation and air conditioning systems, machinery,
equipment, and other tangible assets reasonably necessary for the conduct of the
Business as presently conducted and as presently proposed to be conducted up to
Closing. Each such tangible asset is free from defects (patent and latent), has
been maintained in accordance with normal industry practice, is in good
operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used and presently is
proposed to be used up to Closing.

                        

(o)              [reserved].

                        

(p)             Contracts.

                                     (i)             Section 4(p) of the
PlayStream Disclosure Schedule lists the following contracts and other
agreements to which any of PlayStream and its Subsidiaries is a party and that
are in effect as of the date hereof:

                                     (A)             any agreement (or group of
related agreements) for the lease of personal property to or from any Person
that involves consideration in excess of $10,000 per year;

                                     (B)             any agreement (or group of
related agreements) for the purchase or sale of raw materials, commodities,
supplies, products, or other personal property, or for the furnishing or receipt
of services, which by its terms will extend over a period of more than one year
or involve consideration in excess of $10,000 per year;

                                     (C)             any agreement concerning a
partnership or joint venture (for purposes of clarification this shall not
include affiliate agreements in a form or forms provided by PlayStream to
Holdings);

                                     (D)             any agreement (or group of
related agreements) under which it has created, incurred, assumed, or guaranteed
any indebtedness for borrowed money, or any capitalized lease obligation, under
which it has imposed an Encumbrance (other than Permitted Encumbrances) on any
of its assets, tangible or intangible;

                                     (E)             any agreement imposing any
material restriction on the right of PlayStream or any of its Subsidiaries to
compete with any other Person;

                                     (F)             any agreement between
PlayStream or its Subsidiaries and their Affiliates (other than PlayStream's
limited liability company agreement);

                                     (G)             any Employee Benefit Plan,
profit sharing, stock option, stock purchase, stock appreciation, deferred
compensation, severance, or other plan or arrangement for the benefit of its
current or former directors, officers, and employees;

 

--------------------------------------------------------------------------------

                                     (H) any collective bargaining agreement;

                                     (I)             any agreement for the
employment of any individual on a full-time, part-time, consulting, or other
basis or providing severance benefits;

                                     (J)             any agreement under which
it has advanced or loaned any amount to any of its current or former officers
and employees;

                                     (K)             any supply or vendor
agreement under which PlayStream receives any services, goods, or other items
(including Internet bandwidth) the performance of which involves consideration
in excess of $10,000 per year;

                                     (L)             any agreement under which
the consequences of a default or termination could have a PlayStream Material
Adverse Effect; or

                                     (M)             any

other agreement the performance of which involves consideration in excess of
$10,000 per year that has not been disclosed to Holdings on the PlayStream
Disclosure Schedule in connection with any other representation or warranty
contained in this Section 4(p) (or incorporated by reference into Section 4(p)
of the PlayStream Disclosure Schedule).

                                     (ii)             PlayStream has delivered
to the Buyer a correct and complete copy of each written agreement listed in
Section 4(p) of the PlayStream Disclosure Schedule (as amended to date) and a
written summary setting forth the terms and conditions of each oral agreement
referred to in Section 4(p) of the PlayStream Disclosure Schedule. With respect
to each such agreement: (A) the agreement is legal, valid, binding, enforceable,
and in full force and effect; (B) the consummation of the transactions
contemplated hereby will not cause the agreement to cease being legal, valid,
binding, enforceable, and in full force and effect, except as would not result
in a PlayStream Material Adverse Effect; (C) PlayStream is not and, to
PlayStream's knowledge, each other party is not in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default, or permit termination, modification, or acceleration, under the
agreement; and (D) to PlayStream's knowledge, no party has repudiated any
provision of the agreement.

                        

(q) Notes and Accounts Receivable/Payable.

                                     (i)             All notes and accounts
receivable of PlayStream and its Subsidiaries are reflected properly on its Most
Recent Balance Sheet and in 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 in accordance
with their terms at their recorded amounts, subject only to the reserve for bad
debts set forth in the Most Recent Balance Sheet (including any notes thereto)
as adjusted for the passage of time through the Closing Date in accordance with
the past custom and practice of PlayStream and its Subsidiaries. Schedule
4(q)(i) sets forth the aging schedule of the accounts receivable and notes
receivable of PlayStream and its Subsidiaries as of the Most Recent Fiscal Month
End.

                                     (ii)             Section 4(q)(ii) of the
PlayStream Disclosure Schedule 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 PlayStream and its Subsidiaries will owe (or have any Liability with
respect to) as of the Most Recent Fiscal Month End. All such accounts payable
and notes payable arose from bona fide transactions in the Ordinary Course of
Business and, except as set forth in Section 4(q)(ii) of the PlayStream
Disclosure Schedule, as of the Most Recent Fiscal Month End, no such account
payable or note payable is delinquent by more than sixty (60) days in its
payment.

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                                     (iii)             Section 4(q)(iii) of the
PlayStream Disclosure Schedule contains a listing of all obligations of
PlayStream to provide cash or future services to past or current customers on
account of such customer having cancelled service or otherwise being entitled to
a service credit, as of April 13, 2005, and PlayStream has not incurred any
obligation to provide cash or future services outside the Ordinary Course of
Business after the Most Recent Fiscal Month End.

                                     (iv)             Section 4(q)(iv) of the
PlayStream Disclosure Schedule contains a listing of all accounts for which
customers have prepaid in excess of $1,000 for services to be provided by
PlayStream and its Subsidiaries, including the name of the customer and the
amount prepaid by such customer as of the Most Recent Fiscal Month End.
PlayStream has not received any prepayments outside of the Ordinary Course of
Business after the Most Recent Fiscal Month End.

                        

(r)             Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of any of PlayStream and its Subsidiaries other than powers
of attorney contained in agreements entered into in the Ordinary Course of
Business with vendors that give the vendors the right to take certain actions in
the event of default by PlayStream under the applicable agreement.

                        

(s)             Insurance. Section 4(s) of the PlayStream Disclosure Schedule
sets forth the following information with respect to each insurance policy,
(including policies providing property, casualty, liability, and workers'
compensation coverage and bond and surety arrangements) to which any of
PlayStream and its Subsidiaries has been a party, a named insured, or otherwise
the beneficiary of coverage at any time within the past two years:

                                     (i)             the name, address, and
telephone number of the agent;

                                     (ii)             the name of the insurer,
the name of the policyholder, and the name of each covered insured; and

                                     (iii)             the policy number and the
period of coverage.

With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) neither any of
PlayStream and its Subsidiaries nor, to PlayStream's knowledge, any other party
to the policy is in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration, under the policy; and (C) to
PlayStream's knowledge, no party to the policy has repudiated any provision
thereof. Each of PlayStream and its Subsidiaries has been covered since
inception by insurance in scope and amount customary and reasonable for the
businesses in which it has engaged during the aforementioned period and has
never been denied coverage. Section 4(s) of the PlayStream Disclosure Schedule
describes any self-insurance arrangements affecting any of PlayStream and its
Subsidiaries.

                        

(t)             Litigation. Section 4(t) of the PlayStream Disclosure Schedule
sets forth each instance in which any of PlayStream and its Subsidiaries (i) is
subject to any outstanding injunction, judgment, order, decree, ruling, or
charge or (ii) is a party or, to PlayStream's knowledge, is threatened to be
made a party to any action, suit, proceeding, hearing, or investigation of, in,
or before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator. None of the
actions, suits, proceedings, hearings, and investigations set forth in Section
4(t) of the PlayStream Disclosure Schedule could result in a PlayStream Material
Adverse Effect.

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(u)             Services Warranty. Each service provided or delivered by any of
PlayStream and its Subsidiaries has been in conformity with all applicable
contractual commitments and all express and implied warranties (if any), and
none of PlayStream and its Subsidiaries has any Liability for service level
credits, claims for reimbursement, consequential or other damages or
remuneration in connection therewith, subject only to the reserve for warranty
claims set forth in the Most Recent Balance Sheet (including any notes thereto)
as adjusted for the passage of time through the Closing Date in accordance with
the past custom and practice of PlayStream and its Subsidiaries. No service
provided or delivered by any of PlayStream and its Subsidiaries is subject to
any guaranty, warranty, or other indemnity beyond the applicable terms and
conditions set forth in governing agreements. PlayStream has delivered to Buyer
correct and complete copies of the standard terms and conditions of sale, lease,
or service for each of PlayStream and its Subsidiaries (containing applicable
guaranty, warranty, and indemnity provisions).

                        

(v)              [reserved]

                        

(w)             Employees.

                                     (i)             To PlayStream's knowledge,
no executive, key employee, or group of employees has any plans to terminate
employment with any of PlayStream and its Subsidiaries, and the employment
relationship with each and every employee of PlayStream and its Subsidiaries is
terminable at will by PlayStream or its Subsidiaries. Section 4(w) of the
PlayStream Disclosure Schedule lists each employee of PlayStream or its
Subsidiaries whose employment has been terminated within the last six months,
the reasons for termination, and any allegations of violation of law, or threats
of litigation, made to any representative of PlayStream in connection with such
terminations. None of PlayStream and its Subsidiaries is a party to or bound by
any collective bargaining agreement, nor has any of them experienced any
strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. None of PlayStream and its Subsidiaries has committed any
unfair labor practice. To PlayStream's knowledge no organizational effort is
presently being made or threatened by or on behalf of any labor union with
respect to employees of any of PlayStream and its Subsidiaries.

                                     (ii)             Section 4(w)(ii) of the
PlayStream Disclosure Schedule attached hereto sets forth the name of each
employee of PlayStream, and separately sets forth each such individual's current
annual salary, and for the three (3) month period ended March 31, 2005, 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 to each employee of PlayStream as of March 31, 2005.

                                    

(iii)             Section 4(w)(iii) of the Disclosure Schedule attached hereto
describes all severance arrangements offered by PlayStream to any of its
employees (excluding accrued wages and paid time off) other than PlayStream's
Standard Severance.

                        

(x)             Employee Benefits.

                                    

(i)             Section 4(x) of the PlayStream Disclosure Schedule lists each
Employee Benefit Plan that any of PlayStream and its Subsidiaries maintains or
to which any of PlayStream and its Subsidiaries contributes or has any
obligation to contribute.

                                     (A)             Each

such Employee Benefit Plan (and each related trust, insurance contract, or fund)
complies in form and in operation in all respects with the applicable
requirements of ERISA, the Code, and other applicable laws.

                                     (B)             All required reports and
descriptions have been timely filed and distributed appropriately with respect
to each such Employee Benefit Plan. The requirements of COBRA have been met with
respect to each such Employee Benefit Plan which is an Employee Welfare Benefit
Plan.

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                                     (C)             All contributions
(including all employer contributions and employee salary reduction
contributions) which are due have been paid to each such Employee Benefit Plan
which is an Employee Pension Benefit Plan and all contributions for any period
ending on or before the Closing Date which are not yet due have been paid to
each such Employee Pension Benefit Plan or accrued in accordance with the past
custom and practice of PlayStream and its Subsidiaries. All premiums or other
payments for all periods ending on or before the Closing Date have been paid
with respect to each such Employee Benefit Plan which is an Employee Welfare
Benefit Plan.

                                     (D)             PlayStream has delivered to
the Buyer correct and complete copies of the plan documents and summary plan
descriptions and all related trust agreements, insurance contracts, and other
funding agreements which implement each such Employee Benefit Plan.

                                     (ii)             None of PlayStream, its
Subsidiaries, and the other members of the Controlled Group that includes
PlayStream and its Subsidiaries contributes to, ever has contributed to, or ever
has been required to contribute to any Multiemployer Plan or has any Liability
(including withdrawal liability as defined in ERISA Section 4201) under any
Multiemployer Plan.

                                     (iii)             None of PlayStream and
its Subsidiaries maintains or ever has maintained or contributes, ever has
contributed, or ever has been required to contribute to any Employee Welfare
Benefit Plan providing medical, health, or life insurance or other welfare-type
benefits for current or future retired or terminated employees, their spouses,
or their dependents (other than in accordance with Code Section 4980B).

                        

(y)             Guaranties. None of PlayStream and its Subsidiaries is a
guarantor or otherwise is liable for any Liability or obligation (including
indebtedness) of any other Person.

                        

(z)             Environmental, Health, and Safety Matters.

                                     (i)             Each of PlayStream, its
Subsidiaries, and their respective predecessors and Affiliates has complied and
is in material compliance with all Environmental, Health, and Safety
Requirements.

                                     (ii)             Without limiting the
generality of the foregoing, each of PlayStream, its Subsidiaries and their
respective Affiliates has obtained and complied with, and is in compliance with,
all permits, licenses and other authorizations that are required pursuant to
Environmental, Health, and Safety Requirements for the occupation of its
facilities and the operation of its business; a list of all such permits,
licenses and other authorizations is set forth in Section 4(z)(ii) of the
PlayStream Disclosure Schedule.

                                     (iii)             Neither PlayStream, its
Subsidiaries, nor their respective 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 (whether accrued, absolute, contingent,
unliquidated or otherwise), including any investigatory, remedial or corrective
obligations, relating to any of them or its facilities arising under
Environmental, Health, and Safety Requirements.

                                     (iv)             To PlayStream's knowledge,
none of the following exists at any property or facility owned or operated by
PlayStream or its Subsidiaries: (1) underground storage tanks, (2)
asbestos-containing material in any form or condition, (3) materials or
equipment containing polychlorinated biphenyls, or (4) landfills, surface
impoundments, or disposal areas.

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                                     (v)             None of PlayStream, its
Subsidiaries, or their respective predecessors or Affiliates has treated,
stored, disposed of, arranged for or permitted the disposal of, transported,
handled, or released any substance, including without limitation 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 or
would give rise to liabilities, including any liability for response costs,
corrective action costs, personal injury, property damage, natural resources
damages or attorney fees, pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Solid Waste Disposal
Act, as amended or any other Environmental, Health, and Safety Requirements.

                                     (vi)             Neither this Agreement nor
the consummation of the transactions that are the subject of this Agreement will
result in any obligations for site investigation or cleanup, or notification to
or consent of government agencies or third parties, pursuant to any of the
so-called "transaction-triggered" or "responsible property transfer"
Environmental, Health, and Safety Requirements.

                                     (vii)             Neither PlayStream, its
Subsidiaries, nor any of their respective predecessors or Affiliates has, either
expressly or by operation of law, assumed or undertaken any liability, including
without limitation any obligation for corrective or remedial action, of any
other Person relating to Environmental, Health, and Safety Requirements.

                                     (viii)             No facts, events or
conditions relating to the past or present office space of PlayStream, its
Subsidiaries, or any of their respective 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 (whether accrued, absolute, contingent,
unliquidated or otherwise) pursuant to Environmental, Health, and Safety
Requirements, including without limitation any relating to onsite or offsite
releases or threatened releases of hazardous materials, substances or wastes,
personal injury, property damage or natural resources damage.

                        

(aa) Certain Business Relationships With PlayStream and Its Subsidiaries. No
former or current officer, employee, member, or other Affiliate of PlayStream 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 PlayStream
or any of its Subsidiaries or owns (or has a direct interest in) any asset,
tangible or intangible, which is used in the business of any of PlayStream and
its Subsidiaries.

                        

(bb)             Disclosure. The representations and warranties contained in
this Section 4, including the PlayStream Disclosure Schedule, do not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements and information contained in this Section 4,
including the PlayStream Disclosure Schedule, in light of the circumstances
under which they were made, not misleading.

                        

(cc)             Customers and Suppliers.

                                     (i)             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) in the provision
by PlayStream or its Subsidiaries of services to the customers,

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                                     (ii)             No customer of PlayStream
or its Subsidiaries which generated average monthly revenues in the 6-month
period ended on the Most Recent Fiscal Month End that accounted for in excess of
$5,000 per month of the monthly revenues of the Business of PlayStream and its
Subsidiaries, has terminated or threatened in writing to terminate its
relationship, or any agreement, with PlayStream or its Subsidiaries or given
notice of its intention not to renew its relationship or agreement with
PlayStream or its Subsidiaries.

                                     (iii)             Section 4(cc)(iii) of the
PlayStream Disclosure Schedule sets forth a complete and accurate list of the
name of each customer of PlayStream and its Subsidiaries, together with the
amount PlayStream billed such customer during the one-year period ended on the
Most Recent Fiscal Month End. PlayStream has delivered to Buyer correct and
complete copies of current and certain past versions of PlayStream's terms and
conditions that apply to PlayStream's customers, other than terms and conditions
that are terminable by the parties within 60 days. The terms and conditions
governing PlayStream's provision of services to any and all of its customers
include provisions limiting the liability of PlayStream to the same extent as
the terms and conditions delivered to Buyer.

                                     (iv)             Section 4(cc)(iv) of the
PlayStream Disclosure Schedule contains a listing of all suppliers and vendors
of PlayStream and its Subsidiaries to which PlayStream or its Subsidiaries paid
or were obligated to pay in excess of $10,000 during the one-year period ended
on the Most Recent Fiscal Month End.

                                     (v)             Section 4(cc)(v) of the
PlayStream Disclosure Schedule contains a listing of all material joint
marketers, resellers and referral sources of the Business of PlayStream with
which PlayStream has a written agreement, together with a form of such
agreement.

                        

(dd)             No Other Agreement to Sell Assets. Other than in connection
with the transactions contemplated by this Agreement, neither PlayStream nor any
officers, managers, members, employees, advisors or other representatives of
PlayStream or any of its Subsidiaries has, since February 19, 2005,
(i) solicited, initiated, or encouraged the submission of, or agreed to any
proposal or offer from any Person relating to the acquisition of any Units or
other voting securities, or any substantial portion of the assets, of any of
PlayStream and its Subsidiaries (including any acquisition structured as a
merger, consolidation, or share exchange) or (ii) participated in any
discussions or negotiations regarding, furnished any information with respect
to, assisted or participated in, or facilitated in any other manner any effort
or attempt by any Person to do or seek any of the foregoing.

                        

(ee)             Personal Guarantees and Indebtedness. Section 4(ee) of the
PlayStream Disclosure Schedule sets forth: (i) any and all personal guarantees
and collateral pledged by the members of PlayStream related to any indebtedness
or other Liability of PlayStream, and (ii) the amount of such indebtedness or
other Liability as of a date within one month prior to the Closing Date, and
(iii) the identity of the Person to which such indebtedness or other Liability
is owed.

 

 

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5.             Representations and Warranties of the Buying Parties. The Buying
Parties represent and warrant to PlayStream that the statements contained in
this Section 5 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 5), except as set forth in the disclosure schedule
delivered by the Buying Parties in connection with the Agreement (the
"VitalStream Disclosure Schedule"). The VitalStream Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs and
subparagraphs contained in this Section 5. Any matter disclosed on the
VitalStream Disclosure Schedule in respect of a particular representation will
be deemed to have been disclosed in respect of any other representation calling
for a similar or related type of disclosure (even if such matter is not
specifically referenced to the lettered and numbered paragraphs relating to such
representation), if and only to the extent that, it is clear from a reading of
the disclosure that it applies to such other representation.

                        

(a)             Organization of the Buyer. Each of Holdings and the Buyer is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation.

                        

(b)             Authorization of Transaction. Each of Holdings and the Buyer has
full power and authority (including full corporate power and authority) to
execute and deliver this Agreement and the other Transaction Documents to which
it is a party and to perform its obligations hereunder and thereunder. This
Agreement and the other Transaction Documents to which either Holdings and/or
the Buyer is a party, assuming the due authorization, execution and delivery
hereof and thereof by the other parties hereto and thereto, constitute the valid
and legally binding obligation of each respective Buying Party, enforceable in
accordance with their terms and conditions, except as enforceability may be
limited by applicable bankruptcy, insolvency or similar laws affecting or
relating to the enforcement of creditors' rights generally or by equitable
principles relating to enforceability.

                        

(c)             Noncontravention. Neither the execution and the delivery of this
Agreement or the other Transaction Documents to which Holdings or the Buyer is a
party, nor the consummation of the transactions contemplated hereby and thereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Buyer or Holdings or any of their
Subsidiaries is subject or any provision of their respective charters or bylaws
or (ii) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any consent under any agreement, contract, lease,
license, instrument, or other arrangement to which the Buyer or Holdings or any
of their Subsidiaries is a party or by which it is bound or to which any of
their assets is subject, or result in the imposition of any Encumbrance upon any
of their respective assets (other than Permitted Encumbrances), the occurrence
of which would result in a Holdings Material Adverse Effect. Neither the Buyer
nor Holdings nor any of their Subsidiaries needs to give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any government
or governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement or any other Transaction Documents to which Buyer
or Holdings is a party (other than notice filings under applicable securities
laws).

                        

(d)             Brokers' Fees. Neither Holdings nor the Buyer has any Liability
or obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement for which
PlayStream could become liable or obligated.

 

 

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(e)             Capitalization. There are authorized 290,000,000 shares of
Holdings Common Stock, of which 60,824,225 are issued and outstanding on April
22, 2005, and 10,000,000 shares of preferred stock, $.01 par value, of which
none are issued and outstanding. Holdings has delivered to PlayStream correct
and complete copies of its charter and bylaws (as amended to date). All of the
issued and outstanding shares of common stock of Holdings have been duly
authorized and, are validly issued, fully paid, and nonassessable and free of
pre-emptive rights and were issued in full compliance with applicable state and
federal securities laws and any rights of third parties. Other than as set forth
in Section 5(e) of the VitalStream Disclosure Schedule, there are no outstanding
or authorized options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights, or other contracts or commitments to which
Holdings or any of its Subsidiaries is a party or by which it is bound that
could require Holdings or any of its Subsidiaries to issue, sell, transfer, or
otherwise dispose of any Holdings capital stock. There are no outstanding stock
appreciation, phantom stock, profit participation, or similar rights with
respect to Holdings. Other than as set forth in Section 5(e) of the VitalStream
Disclosure Schedule, there are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of any outstanding shares of capital
stock of Holdings to which Holdings or any of its Subsidiaries is a party or by
which Holdings or any of its Subsidiaries is bound. No Person is entitled to
pre-emptive or similar statutory or contractual rights with respect to any
securities of Holdings. No Person has the right to require Holdings to register
any securities of Holdings under the Securities Act, whether on a demand basis
or in connection with the registration of securities of Holdings for its own
account or for the account of any other Person. The issuance of the Purchase
Shares hereunder will not obligate Holdings to issue any of its securities to
any other Person and will not result in the adjustment of the exercise,
conversion, exchange or reset price of any outstanding security. Holdings does
not have outstanding stockholder purchase rights or a "poison pill" or any
similar arrangement in effect giving any Person the right to purchase any equity
interest in Holdings upon the occurrence of an acquisition, or announced or
attempted acquisition, by a Person of a specified percentage of the outstanding
capital stock of Holdings.

                        

(f)             SEC Filings. Holdings has made available through the EDGAR
system true and complete copies of the Most Recent Form 10-K, and all other
reports filed by Holdings pursuant to the Securities Exchange Act since the
filing of the Most Recent Form 10-K (collectively, the "SEC Filings"). Since
January 1, 2003, Holdings has made all filings and reports it has been required
to make under the Exchange Act. Holdings and its Subsidiaries are engaged in all
material respects only in the business described in the SEC Filings and, to the
extent required by rules governing the content of the SEC Filings, the SEC
Filings contain a complete and accurate description in all material respects of
the business of the Company and its Subsidiaries, taken as a whole.

                        

(g)             Valid Issuance. Upon issuance pursuant to this Agreement, the
Purchase Shares will be validly issued, fully paid and nonassessable, and shall
be free and clear of all Encumbrances arising by, through or under Holdings or
any of its Subsidiaries, except for restrictions on transfer imposed by
applicable securities laws and the Transaction Documents. The Warrants have been
duly and validly authorized and will be validly issued when issued in accordance
with the terms of this Agreement. Upon the due exercise of the Warrants and
issuance of the Warrants Shares in accordance with the terms of the Warrants,
the Warrant Shares will be validly issued, fully paid and nonassessable, free
and clear of all Encumbrances arising by, through or under Holdings or any of
its Subsidiaries, except for restrictions on transfer imposed by applicable
securities laws; provided that the Escrow Shares are subject to the Escrow
Agreement. Holdings has reserved a sufficient number of shares of its Common
Stock for issuance upon the exercise of the Warrants.

 

 

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(h)             Consents. The execution, delivery and performance by Holdings of
the Transaction Documents and the offer, issuance and sale of the Transaction
Securities require no consent of, action by or in respect of, or filing with,
any Person, governmental body, agency or official having jurisdiction over
Holdings or any of its Affiliates that will not have been obtained on the
Closing Date (other than notice filings required under applicable securities
laws), including without limitation, the OTC Bulletin Board (the "Bulletin
Board") and the Holdings shareholders. The following transactions will not
trigger the application of any provisions of any shareholder rights plan or
other "poison pill" arrangement, any anti-takeover, business combination or
control share law or statute binding on Holdings or to which Holdings or any of
its assets and properties may be subject and any provision of the Holdings
charter or bylaws that is or could reasonably be expected to become applicable
to PlayStream as a result of the transactions contemplated hereby: (i) the
issuance and sale of the Transaction Securities, (ii) the issuance of the
Warrant Shares upon due exercise of the Warrants, and (iii) the other
transactions contemplated by the Transaction Documents.

                        

(i)             No Material Adverse Change. Since December 31, 2004, except as
identified and described in the SEC Filings, there has not been:

                                     (i)             any change in the
consolidated assets, liabilities, financial condition or operating results of
Holdings from that reflected in the financial statements included in the Most
Recent Form 10-K, except for changes in the Ordinary Course of Business which
have not and could not reasonably be expected to have a Holdings Material
Adverse Effect, individually or in the aggregate;

                                     (ii)             any declaration or payment
of any dividend, or any authorization or payment of any distribution, on any of
the capital stock of Holdings, or any redemption or repurchase of any securities
of Holdings;

                                     (iii)             any material damage,
destruction or loss exceeding $5,000, whether or not covered by insurance to any
assets or properties of Holdings or any of its Subsidiaries;

                                     (iv)             any change or amendment to
the Holdings charter or bylaws;

                                     (v)             any material difficulties
with a labor union or labor union organizing activities with respect to
employees of Holdings or any of its Subsidiaries;

                                     (vi)             the loss of the services
of any key employee, or material change in the composition or duties of the
senior management of Holdings or any of its Subsidiaries;

                                     (vii)             any material changes in
compensation arrangements with any key executive officers or directors;

                                     (viii)             the loss or threatened
loss in writing of any customer which accounted for more than $100,000 of
PlayStream's revenue in 2004;

                                     (ix)             any material change in
contingent obligations of Holdings or any of its Subsidiaries by way of
guaranty, endorsement, indemnity, warranty or otherwise; or

                                    

(x)             to Holdings' knowledge, the occurrence of any other event or the
arising condition of any character that has had or could reasonably be expected
to have a Holdings Material Adverse Effect.

 

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(j)             SEC Filings. At the time of filing thereof, the SEC Filings
complied as to form in all material respects with the requirements of the
Securities Exchange Act and did not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. Holdings is in compliance in all material respects with
all provisions of the Sarbanes-Oxley Act of 2002 that are applicable to it as of
the date hereof.

                        

(k)             Tax Matters. With respect to periods between April 23, 2002 to
the date hereof, Holdings and each of its Subsidiaries has timely prepared and
filed all Tax Returns required to have been filed by Holdings or such Subsidiary
with all appropriate governmental agencies and timely paid all Taxes shown
thereon or otherwise owed by it. The charges, accruals and reserves on the books
of Holdings in respect of Taxes for all fiscal periods from April 23, 2002 to
the date hereof are adequate in all material respects, and there are no material
unpaid assessments against Holdings or any of its Subsidiaries nor, to Holdings'
knowledge, any basis for the assessment of any additional Taxes, penalties or
interest for any such fiscal period or audits by any federal, state or local
taxing authority except for any assessment which would not have a Holdings
Material Adverse Effect. From April 23, 2002 to the date hereof, all Taxes and
other assessments and levies that Holdings or any Subsidiary is required to
withhold or to collect for payment have been duly withheld and collected and
paid to the proper governmental entity or third party when due, except where
such failure to withhold or collect would not have a Holdings Material Adverse
Effect. There are no Tax liens (other than Permitted Encumbrances) or claims
pending or, to Holdings' Knowledge, threatened against Holdings or any of its
Subsidiaries or any of their respective assets or property. There are no
outstanding Tax sharing agreements or other such arrangements between Holdings
and any of its Subsidiaries on the one hand and any other Person on the other
hand.

                        

(l)             Certificates, Authorities and Permits. Holdings and each of its
Subsidiaries possess adequate certificates, authorities or permits issued by
appropriate governmental agencies or bodies necessary to conduct the business
now operated by it without a Holdings Material Adverse Effect, and neither
Holdings nor any of its Subsidiaries has received any notice of proceedings
relating to the revocation or modification of any such certificate, authority or
permit that, if not yet resolved, and if determined adversely to Holdings or
such Subsidiary, could reasonably be expected to have a Holdings Material
Adverse Effect, individually or in the aggregate.

                        

(m)             No Labor Disputes. No labor dispute with the employees of
Holdings or any of its Subsidiaries as a group exists or, to Holdings'
knowledge, is imminent.

                        

(n)             Litigation. There are no pending actions, suits or proceedings
against Holdings, its Subsidiaries or any of its or their properties that could
reasonably be expected to have a Holdings Material Adverse Effect; and to
Holdings' knowledge, no such actions, suits or proceedings are threatened or
contemplated.

                        

(o)             Financial Statements. The financial statements included in each
SEC Filing present fairly, in all material respects, the consolidated financial
position of Holdings as of the dates shown and its consolidated results of
operations and cash flows for the periods shown, and such financial statements
have been prepared in conformity with GAAP applied on a consistent basis (except
as may be disclosed therein or in the notes thereto, and, in the case of
quarterly financial statements, as permitted by Form 10-Q under the Securities
Exchange Act). Except as set forth in the financial statements of Holdings
included in the SEC Filings, neither Holdings nor any of its Subsidiaries has
incurred any Liabilities required to be set forth in the financial statements in
accordance with GAAP, except those incurred in the Ordinary Course of Business,
consistent (as to amount and nature) with past practices since the date of such
financial statements, none of which individually or in the aggregate, have had
or could reasonably be expected to have a Holdings Material Adverse Effect.

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(p)             Listing. The Holdings Common Stock is quoted on the Bulletin
Board. Holdings has not received any oral or written notice that its Common
Stock will be delisted from the Bulletin Board nor that its Common Stock does
not meet all requirements for the continuation of such quotation, and Holdings
satisfies the requirements for the continued listing of its Common Stock on the
Bulletin Board.

                        

(q)             No Manipulation of Stock. Between April 23, 2002 and the date
hereof, neither Holdings, nor any of its directors or officers, has taken, in
violation of applicable law, any action designed to or that might reasonably be
expected to cause or result in, or which has constituted, stabilization or
manipulation of the price of the Common Stock to facilitate the sale or resale
of Holdings securities.

                        

(r)             Contracts. The contracts filed as exhibits to the SEC Filings
that are currently material to Holdings and have not expired by their terms (or
are not described in the SEC filings as having been terminated) are in full
force and effect on the date hereof, and neither Holdings nor, to Holdings'
knowledge, any other party to such contracts is in breach of or default under
any of such contracts which would have a Holdings Material Adverse Effect.

                        

(s)             Internal Controls. Holdings has:

                                     (i)             Designed

disclosure controls and procedures, or caused disclosure controls and procedures
to be designed under the supervision of appropriate officers, to ensure that
material information relating to Holdings, including its consolidated
Subsidiaries, is made known to appropriate officers of Holdings by others within
those entities;

                                    

(ii)             Disclosed in its Most Recent Form 10-K report any change in its
internal control over financial reporting that occurred during its most recent
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, its internal control over financial reporting;

                                    

(iii)             Caused the appropriate officers of Holdings to disclose, based
on their most recent evaluation of internal control over financial reporting, to
Holdings' auditors and the audit committee of Holdings' board of directors (or
persons performing the equivalent functions):

                                    

(A)             All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are
reasonably likely to adversely affect Holdings' ability to record, process,
summarize and report financial information; and

                                    

(B)             Any fraud, whether or not material, that involves management or
other employees who have a significant role in Holdings' internal control over
financial reporting.

                        

(t)             Disclosures. The representations and warranties contained in
this Section 5, including the VitalStream Disclosure Schedule, together with the
SEC Filings, do not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements and information
contained in this Section 5, including the VitalStream Disclosure Schedule,
together with the SEC filings, in light of circumstances under which they were
made, not misleading.

            

6.             Pre-Closing Covenants. The Parties agree as follows with respect
to the period between the execution of this Agreement and the Closing.

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(a)             General. Each of the Parties will 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 the other Transaction Documents (including satisfaction, but not
waiver, of the closing conditions set forth in Section 7 below).

                        

(b)             Notices and Consents. PlayStream will give (and will cause each
of its Subsidiaries to give) any notices to third parties, and PlayStream will
use its reasonable best efforts (and will cause each of its Subsidiaries to use
its reasonable best efforts) to obtain any third party consents, that the Buying
Parties reasonably may request in connection with the matters referred to in
Section 4(c) above. Holdings will give (and will cause each of its Subsidiaries
to give) any notices to third parties, and Holdings will use its reasonable best
efforts (and will cause each of its Subsidiaries to use its reasonable best
efforts) to obtain any third party consents, that PlayStream reasonably may
request in connection with the matters referred to in Section 5(h) above. Each
of the Parties will (and each will cause each of its Subsidiaries to) give any
notices to, make any filings with, and use its reasonable best efforts to obtain
any authorizations, consents, and approvals of governments and governmental
agencies in connection with the matters referred to in Section 4(c) and
Section 5(c) above.

                        

(c)             Operation of Business. PlayStream will not (and will not cause
or permit any of its Subsidiaries to) engage in any practice, take any action,
or enter into any transaction outside the Ordinary Course of Business. Without
limiting the generality of the foregoing, PlayStream will not (and will not
cause or permit any of its Subsidiaries to) (i) declare, set aside, or pay any
dividend or make any distribution with respect to its membership interests or
redeem, purchase, or otherwise acquire any of its membership interests, (ii) or
otherwise engage in any practice, take any action, or enter into any transaction
of the sort described in Section 4(h) above.

                        

(d)             Preservation of Business. PlayStream will use its reasonable
best efforts to keep (and will cause each of its Subsidiaries to use their
reasonable best efforts to keep) its business and properties substantially
intact, including its present operations, physical facilities, working
conditions, and relationships with lessors, licensors, suppliers, customers, and
employees.

                        

(e)             Full Access. PlayStream will permit (and will cause each of its
Subsidiaries to permit) representatives of the Buyer to have full access at all
reasonable times, and in a manner so as not to interfere with the normal
business operations of PlayStream and its Subsidiaries, to all premises,
properties, personnel, books, records (including Tax records), contracts, and
documents of or pertaining to each of PlayStream and its Subsidiaries.

                        

(f)             Notice of Developments. Each Party will give prompt written
notice to the other Party of any material adverse development causing a breach
or likely to cause a breach through the passage of time of any of its own
representations and warranties in Section 3, Section 4 and Section 5 above. No
disclosure by any Party pursuant to this Section 6(f), however, shall be deemed
to amend or supplement the PlayStream Disclosure Schedule or the VitalStream
Disclosure Schedule, as applicable, or to prevent or cure any misrepresentation,
breach of warranty, or breach of covenant.

                        

(g)             Exclusivity. None of PlayStream nor its members will (and
PlayStream will not cause or permit any of its Subsidiaries to), during the
period between the date of this Agreement and the earlier of the Closing Date
and the date 45 days after the date of this Agreement, (i) solicit, initiate, or
encourage the submission of any proposal or offer from any Person relating to
the acquisition of any Units or other voting securities, or any substantial
portion of the assets, of any of PlayStream and its Subsidiaries (including any
acquisition structured as a merger, consolidation, or share exchange) or (ii)
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. PlayStream will notify the Buyer immediately if any Person makes any
proposal, offer, inquiry, or contact with respect to any of the foregoing.

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(h)             Supplements to Schedules.

                                    

(i)             From time to time prior to the Closing, PlayStream will promptly
supplement or amend the PlayStream Disclosure Schedules with respect to any
matter hereafter arising that, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in any
PlayStream Disclosure Schedule and will promptly notify Buyer of any breach by
PlayStream that PlayStream discovers of any representation, warranty or covenant
contained in this Agreement. No supplement or amendment of any Schedule or
notice of breach made pursuant to this Section will be deemed to cure any breach
of any representation, warranty or covenant made in this Agreement or to impair
any right of any Buying Party with respect thereto unless Holdings specifically
agrees thereto in writing.

                                    

(ii)             From time to time prior to the Closing, the Buying Parties will
promptly supplement or amend the VitalStream Disclosure Schedules with respect
to any matter hereafter arising that, if existing or occurring at the date of
this Agreement, would have been required to be set forth or described in any
VitalStream Disclosure Schedule and will promptly notify PlayStream of any
breach by either of them that the Buying Parties discover of any representation,
warranty or covenant contained in this Agreement. No supplement or amendment of
any Schedule or notice of breach made pursuant to this Section will be deemed to
cure any breach of any representation, warranty or covenant made in this
Agreement or to impair any right of PlayStream with respect thereto unless
PlayStream's Representative specifically agrees thereto in writing.

            

7. Obligation to Close.

                        

(a)             Conditions to Obligation of the Buying Parties. The obligation
of the Buying Parties to consummate the transactions to be performed by them in
connection with the Closing is subject to satisfaction of the following
conditions:

                                    

(i)             the representations and warranties set forth in Section 3 and
Section 4 above shall be true and correct in all material respects at and as of
the Closing Date;

                                    

(ii)             PlayStream shall have performed and complied in all material
respects with all of its covenants hereunder that are to be performed prior to
Closing;

                                     (iii)             no action, suit, or
proceeding shall be pending or threatened before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator wherein an unfavorable injunction, judgment, order,
decree, ruling, or charge would (A) prevent consummation of any of the material
transactions contemplated by this Agreement, (B) cause any of the material
transactions contemplated by this Agreement to be rescinded following
consummation, (C) materially affect adversely the right of the Buyer to own the
Acquired Assets or operate the business formerly operated by PlayStream, or (D)
materially affect adversely the right of any of PlayStream's Subsidiaries to own
its assets and to operate its businesses (and no such injunction, judgment,
order, decree, ruling, or charge shall be in effect);

                                     (iv)             PlayStream, its
Subsidiaries, and the Buying Parties shall have received all other
authorizations, consents, and approvals referred to in Section 4(c) and
Section 5(c) above;

                                     (v)             Rose, Snyder and Jacobs
shall have completed, and delivered to PlayStream and Holdings an unqualified
audit report with respect to, an audit of PlayStream's full financial statements
for the Most Recent Fiscal Year End (including, but not limited to, the Balance
Sheet, Income Statement and Statement of Cash Flows);

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                                     (vi)             PlayStream shall have
delivered to the Buying Parties a certificate executed by George Grubb to the
effect that each of the conditions specified above in Section 7(a)(i)-(iv) is
satisfied in all respects;

                                     (vii)             PlayStream, and the other
parties thereto, other than the Buying Parties, shall have executed and
delivered, or be prepared to deliver at Closing, the

                                    (A)             Escrow Agreement in the form
attached hereto as Exhibit A,

                                     (B)             Financial Statement
Certificate attached hereto as Exhibit E,

                                     (C)             Employment Agreement with
George Grubb attached hereto as Exhibit F,

                                     (D)             the Bill of Sale attached
hereto as Exhibit G,

                                     (E)             the Assignment

and Assumption of Acquired Contracts attached hereto as Exhibit H, and

                                    

(F)             the Assignment of Intellectual Property attached hereto as
Exhibit I;

the Buying Parties shall have received from counsel to PlayStream an opinion in
form and substance as set forth in

Exhibit J attached hereto, addressed to the Buying Parties, and dated as of the
Closing Date;

                                     (viii)             each of Matthew Wright
and James Mutton shall have executed and delivered to Holdings
copyright/inventions assignment, confidentiality, nonsolicitation and
noncompetition agreements in form and substance reasonably satisfactory to the
Buying Parties. Blake Lindsay shall have executed and delivered to Holdings a
copyright/inventions assignment, confidentiality, and nonsolictation agreement
in form and substance reasonably satisfactory to the Buying Parties.

                                     (ix)             PlayStream shall have
delivered to the Buying Parties a PlayStream Disclosure Schedule dated as of the
Closing Date and such PlayStream Disclosure Schedule shall not contain any
disclosures not included in the PlayStream Disclosure Schedule delivered on the
date of this Agreement except such disclosures related to events occurring after
the date of this Agreement as, individually or in the aggregate, would not be
reasonably likely to represent a PlayStream Material Adverse Effect;

                                     (x)             all actions to be taken by
PlayStream in connection with consummation of the transactions contemplated
hereby and all certificates, opinions, instruments, and other documents required
to effect the transactions contemplated hereby will be reasonably satisfactory
in form and substance to the Buying Parties;

                                     (xi)             no material adverse change
in the business of PlayStream or its Subsidiaries, Holdings or the Buyer shall
have occurred; and

                                     (xii)             PlayStream shall have
paid or shall be prepared to pay simultaneously with the Closing all fees owed
to Reed Capital in connection with the transactions contemplated by this
Agreement.

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The Buying Parties may waive any condition specified in this Section 7(a) if an
Authorized Buyer Party executes a writing so stating at or prior to the Closing.

                         (b)             Conditions to Obligation of PlayStream.
The obligation of PlayStream to consummate the transactions to be performed by
it in connection with the Closing is subject to satisfaction of the following
conditions:

                                     (i)             the representations and
warranties set forth in Section 5 above shall be true and correct in all
material respects at and as of the Closing Date;

                                     (ii)             the Buying Parties shall
have performed and complied in all material respects with all of their covenants
hereunder that are to be performed prior to Closing;

                                     (iii)             no action, suit, or
proceeding shall be pending or threatened before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator wherein an unfavorable injunction, judgment, order,
decree, ruling, or charge would (A) prevent consummation of any of the material
transactions contemplated by this Agreement or (B) cause any of the material
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling, or charge
shall be in effect);

                                     (iv)             the Buying Parties shall
have received all other authorizations, consents, and approvals of governments
and governmental agencies referred to in Section 5(c) above;

                                     (v)             the trading price of the
Holdings Common Stock on the OTC Bulletin Board shall be above $.50 per share;

                                     (vi)             PlayStream shall have
received from counsel to Holdings an opinion in form and substance as set forth
in

Exhibit K attached hereto, addressed to PlayStream, and dated as of the Closing
Date;

                                     (vii)             the Buying Parties shall
have delivered to PlayStream a VitalStream Disclosure Schedule dated as of the
Closing Date and such VitalStream Disclosure Schedule shall not contain any
disclosures not included in the VitalStream Disclosure Schedule delivered on the
date of this Agreement except such disclosures related to events occurring after
the date of this Agreement as, individually or in the aggregate, would not be
reasonably likely to represent a Holdings Material Adverse Effect;

                                     (viii)             the Buying Parties shall
have (a) secured the release as of Closing of the personal guarantees or
collateral pledged by any member of PlayStream that are set forth in Section
4(ee) of the PlayStream Disclosure Schedule, and (b) at the option of the Buying
Parties, either secured the consent of Lexington State Bank to the transactions
contemplated by this Agreement or agreed to pay at Closing all indebtedness of
PlayStream to Lexington State Bank; and

 

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                                     (ix)             the Buying Parties shall
have executed and delivered, or be prepared to deliver at Closing, the

                                     (A)             Escrow Agreement in the
form attached hereto as Exhibit A,

                                     (B)             Employment Agreement with
George Grubb attached hereto as Exhibit F,

                                     (C)             the

Bill of Sale attached hereto as Exhibit G,

                                    

(D)             the Assignment and Assumption of Acquired Contracts attached
hereto as Exhibit H, and

                                    

(E)             the Assignment of Intellectual Property attached hereto as
Exhibit I.

PlayStream may waive any condition specified in this Section 7(b) if it executes
a writing so stating at or prior to the Closing.

            

8.             Termination.

                        

(a)             Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:

                                     (i)             Holdings and PlayStream may
terminate this Agreement by mutual written consent at any time prior to the
Closing;

                                     (ii)             Holdings may terminate
this Agreement by giving written notice to PlayStream at any time prior to the
Closing (A) in the event PlayStream has breached any material representation,
warranty, or covenant contained in this Agreement in any material respect,
Holdings has notified PlayStream of the breach, and the breach has continued
without cure for a period of 20 days after the notice of breach or (B) if the
Closing shall not have occurred on or before May 31, 2005, by reason of the
failure of any condition precedent under Section 7(a) hereof (unless the failure
results primarily from the Buyer or Holdings itself breaching any
representation, warranty, or covenant contained in this Agreement); and

                                     (iii)             PlayStream may terminate
this Agreement by giving written notice at any time prior to the Closing (A) in
the event the Buyer or Holdings has breached any material representation,
warranty, or covenant contained in this Agreement in any material respect,
PlayStream has notified Holdings of the breach, and the breach has continued
without cure for a period of 20 days after the notice of breach or (B) if the
Closing shall not have occurred on or before May 31, 2005, by reason of the
failure of any condition precedent under Section 7(b) hereof (unless the failure
results primarily from PlayStream's breaching any representation, warranty, or
covenant contained in this Agreement).

                        

(b)Effect of Termination. If any Party terminates this Agreement pursuant to
Section 8(a) above, all rights and obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party then in breach). Notwithstanding the foregoing, the
Parties' obligations under this Agreement regarding confidentiality shall
survive for a period of two (2) years from the date of termination of the
Agreement.

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9.             Post-Closing Covenants. The Parties agree as follows with respect
to the period following the Closing.

                        

(a)             General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of the Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under
Section 10 below). PlayStream acknowledges and agrees that from and after the
Closing, Holdings and the Buyer will be entitled to copies of all documents,
books, records (including Tax records), agreements, and financial data of any
sort relating to PlayStream and its Subsidiaries.

                        

(b)             Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under the Transaction Documents 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 any of Holdings, Buyer, PlayStream and each of
their Subsidiaries, each of the other Parties will reasonably cooperate with the
contesting or defending Party and his or its counsel in the contest or defense,
make available his or its personnel, and provide such testimony and access to
his or 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.

                        

(c)             Transition. PlayStream will not take any action that is designed
or intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of any of Buyer and its Subsidiaries from
maintaining the same business relationships with Buyer and its Subsidiaries
after the Closing as it maintained with PlayStream and its Subsidiaries prior to
the Closing.

                        

(d)             Confidentiality.

                                     (i)             PlayStream shall cause its
members, managers, officers and employees to treat and hold as such all of the
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement, and deliver promptly to the Buyer or
destroy, at the request and option of the Buyer, all embodiments and copies (in
whatever form or medium) of the Confidential Information which are in his or its
possession. In the event that any such Person is requested or required (by oral
question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process) to
disclose any Confidential Information, that Person will notify the Buyer and
Holdings promptly of the request or requirement so that the Buyer and Holdings
may seek an appropriate protective order or waive compliance with the provisions
of this Section 9(d)(i). If, in the absence of a protective order or the receipt
of a waiver hereunder, any such Person is, on the advice of counsel, compelled
to disclose any Confidential Information to any tribunal or else stand liable
for contempt, that Person may disclose the Confidential Information to the
tribunal; provided, however, that the disclosing Person shall use his or its
reasonable best efforts to obtain, at the reasonable request of the Buyer or
Holdings, an order or other assurance that confidential treatment will be
accorded to such portion of the Confidential Information required to be
disclosed as the Buyer or Holdings shall designate. Without limiting the
generality of the foregoing, any financial information PlayStream, or its
managers, officers and employees, received from Holdings with respect to periods
after December 31, 2004 will be kept confidential (and Persons that received
such information will not purchase or sell securities of Holdings) until the
date that is three business days after the filing of Holdings' quarterly report
on Form 10-Q for the period ended March 31, 2005.

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                                     (ii)             If the Closing does not
occur, Holdings and the Buyer shall cause its officers, directors and employees
to treat and hold as such all of the Confidential Information of PlayStream,
refrain from using any of the Confidential Information of PlayStream except in
connection with this Agreement, and deliver promptly to PlayStream or destroy,
at the request and option of PlayStream, all embodiments and copies (in whatever
form or medium) of the Confidential Information of PlayStream which are in his
or its possession. In the event that any such Person is requested or required
(by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information of PlayStream, that Person
will notify PlayStream promptly of the request or requirement so that PlayStream
may seek an appropriate protective order or waive compliance with the provisions
of this Section 9(d)(ii). If, in the absence of a protective order or the
receipt of a waiver hereunder, any such Person is, on the advice of counsel,
compelled to disclose any Confidential Information of PlayStream to any tribunal
or else stand liable for contempt, that Person may disclose the Confidential
Information of PlayStream to the tribunal; provided, however, that the
disclosing Person shall use his or its reasonable best efforts to obtain, at the
reasonable request of PlayStream, an order or other assurance that confidential
treatment will be accorded to such portion of the Confidential Information
required to be disclosed as PlayStream shall designate.

                         (e)             Legend Removal.  If any Purchase Shares
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, Holdings shall, upon the request of the
holder of such Purchase Shares and certification of facts sufficient to
establish the applicability of Rule 144(k), remove the legend set forth in
Section 2(f) of this Agreement from the certificates for such Purchase Shares.

                        

(f)             No Distribution or Liquidation. PlayStream shall not, during the
period between the Closing Date and the one-year anniversary of the Closing Date
(i) distribute or otherwise purport to transfer any Transaction Security to its
members or any other Person, (ii) pledge, or create any Encumbrance (other than
arising under any Transaction Document) with respect to, any Transaction
Security, (iii) commence any dissolution or liquidation of PlayStream.

                        

(g)             PlayStream Employees.

                                    

(i)             On such date following the Closing Date as mutually agreed to by
PlayStream and the Buyer (but in no event later than May 15, 2005) (such date,
the "Employee Transition Date"), (A) PlayStream will terminate all of its
employees and will pay each terminated PlayStream employee any wages to which
such employee is entitled through the Closing Date and (B) Buyer or Holdings
will make an offer of employment to each terminated employee of PlayStream,
other than George Grubb (who will be employed pursuant to the terms of the
Employment Agreement), with compensation, benefits, duties and other terms and
conditions of employment reasonably comparable to such employee's compensation,
benefits, duties and other terms and conditions of employment existing
immediately prior to the Closing Date. In addition, on the Employee Transition
Date, Buyer will pay each terminated PlayStream employee all accrued but unpaid
paid time off through the Employee Transition Date; provided that instead of
making such payment to a terminated PlayStream employee, Buyer may give such
terminated PlayStream employee (if hired by Buyer) a credit for all accrued but
unpaid paid time off through the Employee Transition Date if such employee so
elects in writing.

 

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(ii)             Between the Closing Date and the Employee Transition Date, (i)
PlayStream shall continue to pay its employees wages and provide its employees
with benefits in accordance with past practice, (ii) Buyer shall promptly
reimburse PlayStream (or pay for the benefit or PlayStream) for the cost of such
wages and employee benefits, and (iii) PlayStream shall make available to Buyer
the services of such employees and shall direct such employees to continue to
provide the same services provided prior to Closing in substantially the same
manner provided prior to Closing (except to the extent other agreed by Buyer and
PlayStream). PlayStream and the Buyer shall comply with all applicable laws
relating to the PlayStream employees, including those pertaining to occupational
safety, health, discrimination, harassment and retaliation, and Buyer shall
comply with all reasonable requests from PlayStream in connection with the same.
The Buying Parties shall indemnify, defend and hold harmless PlayStream against
any Adverse Consequences that PlayStream may suffer resulting from, arising out
of, relating to or caused by any act or omission of the Buying Parties in
violation of the terms of this Section 9(g) related to the employment of the
PlayStream employees during the period between the Closing Date and the Employee
Transition Date.

                                    

(iii)             PlayStream represents and warrants to the Buying Parties that
the amounts of accrued but unpaid time off through April 25, 2005 for each
PlayStream employee (other than George Grubb) are set forth on Schedule 9(g).

                         (h)             Assets Requiring Consent/Notice. With
respect to any Asset Requiring Consent/Notice, u

ntil the earlier to occur of the time all consents necessary to cause such asset
or agreement to become an Acquired Asset are obtained or the termination of the
Asset Requiring Consent/Notice, (i) PlayStream shall use its reasonable best
efforts to obtain the consents necessary to convey to the Buyer good and
marketable title to such Asset Requiring Notice/Consent, as such right, title
and interest shall exist immediately prior to the date all required notices are
provided and consents are obtained, and (ii) to the extent any purported
assignment thereof is not legally effective, PlayStream on the one hand, and
Buyer, on the other hand, will cooperate in a reasonable arrangement designed to
provide to Buyer the economic and other rights and benefits, and to have Buyer
assume the economic and other Liabilities accruing after the Closing Date
associated with such Asset Requiring Consent/Notice. The Buying Parties shall
indemnify, defend and hold harmless PlayStream for any Adverse Consequences
arising out of the purported assignment pursuant to the Transaction Documents at
Closing of any Asset Requiring Consent/Notice without complying with the consent
or notice provisions of the respective Asset Requiring Consent/Notice.

                        

(i)             Name Change. Promptly after Closing, and in no event more than
seven (7) days after the Closing, PlayStream shall change its name to a name
that shall not include the term "PlayStream".

                        

(j)             Insurance. To the extent PlayStream is insured or indemnified
with respect to any Liability that is an Assumed Liability, PlayStream shall
take commercially reasonable steps to convey to the Buyer any payments,
assistance or other benefits PlayStream receives with respect to such Assumed
Liability.

 

 

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10.             Remedies for Breaches of this Agreement.

                        

(a)             Survival of Representations and Warranties. All of the
representations and warranties of PlayStream contained in Sections 3 and 4 of
this Agreement shall survive the Closing (even if the Buying Parties knew or had
reason to know of any misrepresentation or breach of warranty at the time of
Closing) and continue in full force and effect for a period of one year
thereafter; except that the representations and warranties of PlayStream
contained in Sections 4(a), 4(b) and 4(z) of this Agreement shall survive the
Closing (even if the Buying Parties knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing) and continue in
full force and effect until the applicable statute of limitations has run and
that the representations and warranties of PlayStream contained in Section 4(k)
of this Agreement shall survive the Closing (even if the Buying Parties knew or
had reason to know of any misrepresentation or breach of warranty at the time of
Closing) and continue in full force and effect for a period of three years
thereafter. All of the representations and warranties of the Buying Parties
contained in Section 5 of this Agreement shall survive the Closing (even if
PlayStream knew or had reason to know of any misrepresentation or breach of
warranty at the time of Closing) and continue in full force and effect for a
period of one year thereafter.

                        

(b)             Indemnification Provisions for Benefit of the Buying Parties and
PlayStream.

                                     (i)             In the event PlayStream
breaches any of its representations and warranties contained in Sections 3 or 4
of this Agreement or any of its covenants contained in this Agreement, and,
provided that the Buyer makes a written claim for indemnification against
PlayStream pursuant to Section 10(c) below within the applicable survival period
set forth in Section 10(a) above, then PlayStream agrees to indemnify the Buying
Parties from and against the entirety of any Adverse Consequences the Buying
Parties or any Affiliates of the Buying Parties may suffer through and after the
date of the claim for indemnification (including any Adverse Consequences the
Buying Parties may suffer after the end of any applicable survival period)
resulting from, arising out of, relating to, or caused by the breach.

                                     (ii)             In the event any Buying
Party breaches any of its representations or warranties contained in Section 5
of this Agreement or any of its covenants contained in this Agreement, and,
provided that PlayStream makes a written claim for indemnification pursuant to
Section 10(c) below within the applicable survival period set forth in
Section 10(a) above, then Holdings agrees to indemnify PlayStream from and
against the entirety of any Adverse Consequences PlayStream may suffer through
and after the date of the claim for indemnification (including any Adverse
Consequences PlayStream may suffer after the end of any applicable survival
period) resulting from, arising out of, relating to, or caused by the breach.

                        

(c)             Matters Involving Third Parties.

                                     (i)             If any third party shall
notify any Party (the "Indemnified Party") with respect to any matter (a "Third
Party Claim") which may give rise to a claim for indemnification against any
other Party (the "Indemnifying Party") under this Section 10, then the
Indemnified Party shall promptly notify each Indemnifying Party thereof in
writing; provided, however, that no delay on the part of the Indemnified Party
in notifying any Indemnifying Party shall relieve the Indemnifying Party from
any obligation hereunder unless (and then solely to the extent) the Indemnifying
Party thereby is prejudiced.

 

 

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                                     (ii)             Any Indemnifying Party
will have the right to defend the Indemnified Party against the Third Party
Claim with counsel of its choice reasonably satisfactory to the Indemnified
Party so long as (A) the Indemnifying Party notifies the Indemnified Party in
writing within 15 days after the Indemnified Party has given notice of the Third
Party Claim that the Indemnifying Party will indemnify the Indemnified Party
from and against the entirety of any Adverse Consequences the Indemnified Party
may suffer resulting from, arising out of, relating to, or caused by the Third
Party Claim, (B) the Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the Third Party Claim
and fulfill its indemnification obligations hereunder (including the payment in
cash of all fees and costs associated with such defense), (C) the Third Party
Claim involves only money damages and does not seek an injunction or other
equitable relief, (D) settlement of, or an adverse judgment with respect to, the
Third Party Claim is not, in the good faith judgment of the Indemnified Party,
likely to establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party, and (E) the Indemnifying
Party conducts the defense of the Third Party Claim actively and diligently.

                                     (iii)             So long as the
Indemnifying Party is conducting the defense of the Third Party Claim in
accordance with Section 10(c)(ii) above, (A) the Indemnified Party may retain
separate co-counsel at its sole cost and expense and participate in the defense
of the Third Party Claim, (B) the Indemnified Party will not consent to the
entry of any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnifying Party (not to
be withheld unreasonably), and (C) the Indemnifying Party will not consent to
the entry of any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnified Party (not to
be withheld unreasonably), unless the following shall apply (in which case the
Indemnifying Party may settle and compromise such Third Party Claim without the
prior written consent of the Indemnified Party): (x) there is no finding or
admission of any violation of law or any violation of the rights of any Person
and no affect on any other claims that may be made against the Indemnified
Party; and (y) the sole relief provided is monetary damages that are paid in
full in cash by the Indemnifying Party. If the Indemnified Party fails to
consent to any settlement or compromise offer, the Indemnifying Party may
continue to contest such Third Party Claim and, in such event, the maximum
liability of the Indemnifying Party for such Third Party Claim shall not exceed
such settlement or compromise offer.

                                     (iv)             In the event any of the
conditions in Section 10(c)(ii) above is or becomes unsatisfied, however, (A)
the Indemnified Party may defend against, and consent to the entry of any
judgment or enter into any settlement with respect to, the Third Party Claim in
any manner it reasonably may deem appropriate (and the Indemnified Party need
not consult with, or obtain any consent from, any Indemnifying Party in
connection therewith; provided that such judgment or settlement does not involve
a finding or admission of any violation of law or any violation of the rights of
any Person by the Indemnifying Party, there is no affect on any other claims
that may be made against the Indemnifying Party, and the sole relief for which
the Indemnifying Party may be responsible is monetary damages), (B) the
Indemnifying Party will reimburse the Indemnified Party (with cash or Holdings
Common Stock, as elected by the Indemnifying Party) promptly and periodically
for the costs of defending against the Third Party Claim (including reasonable
attorneys' fees and expenses), and (C) the Indemnifying Party will remain
responsible for any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, or caused by the Third Party Claim
to the fullest extent provided in this Section 10.

                         (d)             Characterization of Payments. All
indemnification payments under this Section 10 shall be deemed adjustments to
the Purchase Price.

 

 

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(e)             Limitations; Purchase Shares.

                                     (i)             In the event the Buying
Parties seek indemnification for Adverse Consequences pursuant to Section
10(b)(i) of this Agreement, the Buying Parties and their Affiliates shall first
seek recourse against the Escrow Shares; provided that PlayStream may at its
option elect to pay any indemnity in cash rather than shares of Holdings Common
Stock.

                                     (ii)             No Buying Party shall be
entitled to assert any claims against PlayStream until the aggregate amount of
all losses for all Buying Parties and their Affiliates exceeds $50,000 (and then
back to the first dollar of losses). PlayStream shall not be entitled to assert
any claims against any Buying Party until the aggregate amount of all losses for
PlayStream and its Affiliates exceeds $50,000 (and then back to the first dollar
of losses).

                                     (iii)             The Purchase Shares shall
serve as the exclusive recourse of the Buying Parties for Adverse Consequences
pursuant to this Agreement (subject to PlayStream's right to elect to pay any
indemnity in cash), other than for fraud. The aggregate liability of PlayStream,
other than for fraud, shall in no event exceed $1,250,000, which shall (unless
otherwise elected by PlayStream) come exclusively from the Purchase Shares,
valued at the Market Value of such shares on the day such shares are delivered
in satisfaction of an indemnification obligation pursuant to this Section 10.

                                     (iv)             The

aggregate liability of the Buying Parties, other than for fraud, in connection
with this Agreement and the transactions contemplated hereby, shall in no event
exceed $1,250,000 and shall be paid exclusively in cash.

            

11.             Miscellaneous.

                        

(a)             Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to the subject matter
of this Agreement without the prior written approval of Holdings and PlayStream;
provided, however, that any Party may make any public disclosure it believes in
good faith is required by applicable law or any listing or trading agreement
concerning its publicly-traded securities (in which case the disclosing Party
will use its reasonable best efforts to advise Holdings and PlayStream prior to
making the disclosure).

                        

(b)             No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns with respect to all rights and
obligations of such Parties hereunder.

                        

(c)             Entire Agreement. This Agreement (including the Exhibits hereto
and the documents and certificates required to be delivered hereby) constitutes
the entire agreement between the Parties and supersedes any prior
understandings, agreements, or representations by or between the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.

                        

(d)             Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of Holdings and PlayStream; provided, however, that the Buyer may (i)
assign any or all of its rights and interests hereunder to one or more of its
Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Buyer nonetheless shall
remain responsible for the performance of all of its and such assignee's
obligations hereunder).

 

--------------------------------------------------------------------------------

                        

(e)             Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument. A facsimile copy of this
Agreement or any counterpart hereto shall be valid as an original.

                        

(f)             Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.

                        

(g)             Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when 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 PlayStream:

Grubb Holdings, LLC
1523 Elizabeth Avenue, Suite 220
Charlotte, North Carolina 28204
Facsimile: 704-372-9882
Attention: Clay Grubb

and

George Grubb
1516 East Republican Street, Unit 11
Seattle, Washington 98112

with a copy (which shall not constitute notice to PlayStream) to:

Preston Gates & Ellis LLP
925 Fourth Avenue, Suite 2900
Seattle, WA 98104
Facsimile: 206-623-7022
Attention: Matthew S. Topham, Esq.

 

--------------------------------------------------------------------------------

If to Holdings or the Buyer:

One Jenner, Suite 100
Irvine, California 92618
Facsimile: 949-453-8686
Attention: Philip N. Kaplan, President

with a copy (which shall not constitute notice to Holdings or the Buyer) to:

Parr Waddoups Brown Gee & Loveless
185 South State Street, Suite 1300
Salt Lake City, Utah 84111
Facsimile: 801-537-7750

Attention: Bryan T. Allen, 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 (any other day being a "business day"), such time period
shall automatically be extended to, the next business day immediately following
such Saturday, Sunday or legal holiday.

 a. Governing Law. This Agreement shall be governed by and construed in
    accordance with the domestic laws of the state of California without giving
    effect to any choice or conflict of law provision or rule (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.

                        

(h)             Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of Holdings and PlayStream. No
waiver by any Party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be valid unless the same
shall be in writing and signed by an Authorized Buyer Party on behalf of the
Buying Parties or PlayStream's Representative on behalf of PlayStream, nor shall
any such waiver 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.

                        

(i)             Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.

                        

(j)             Expenses. Each of Holdings, the Buyer, PlayStream, and its
Subsidiaries will bear his or its own costs and expenses (including legal fees
and expenses) incurred in connection with this Agreement and the transactions
contemplated hereby. PlayStream agrees that none of its Subsidiaries has borne
or will bear any of the costs and expenses of PlayStream (including any of its
legal fees and expenses) in connection with this Agreement or any of the
transactions contemplated hereby.

 

--------------------------------------------------------------------------------

                        

(k)             Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement 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. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. 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. The use
of the neuter, male or female gender in these Transaction Documents shall
include each of the neuter, male and female gender.

                        

(l)             Incorporation of Exhibits and Schedules. The Exhibits and
Schedules 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 Party 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
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 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 11(o)
below), in addition to any other remedy to which it may be entitled, at law or
in equity.

                        

(n)             Submission to Jurisdiction. Each of the Parties submits to the
exclusive jurisdiction of any state or federal court sitting in Orange County,
California in any action or proceeding arising out of or relating to this
Agreement and agrees that all claims in respect of the action or proceeding may
be heard and determined in any such court. Each Party also agrees not to bring
or seek removal of any action or proceeding arising out of or relating to this
Agreement in or to any other court. Each of the Parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought and
waives any bond, surety, or other security that might be required of any other
Party with respect thereto. Each Party agrees that a final judgment in any
action or proceeding so brought shall be conclusive and may be enforced by suit
on the judgment or in any other manner provided by law or in equity.

                        

(o)             Waiver of Trial By Jury. 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 DOCUMENTS OR THE VALIDITY, PROTECTION, INTERPRETATION,
COLLECTION OR ENFORCEMENT HEREOF OR THEREOF. EACH PARTY AGREES THAT THIS SECTION
11(P) IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND EACH OF THE OTHER
TRANSACTION DOCUMENTS AND ACKNOWLEDGES THAT THE OTHER PARTIES WOULD NOT HAVE
ENTERED INTO THIS AGREEMENT AND CONSUMMATED THE TRANSACTIONS CONTEMPLATED HEREBY
IF THIS SECTION 11(P) WERE NOT PART OF THIS AGREEMENT AND THE OTHER TRANSACTION
DOCUMENTS.

*****

 

--------------------------------------------------------------------------------

 

            IN WITNESS WHEREOF, the Parties hereto have executed this Asset
Purchase Agreement as of the date first above written.

 

   

VITALSTREAM HOLDINGS, INC.

                   

By:

/s/ Philip N. Kaplan

--------------------------------------------------------------------------------

   

Title:

President

                   

PLAYSTREAM, INC.

                   

By:

/s/ Philip N. Kaplan

--------------------------------------------------------------------------------

   

Title:

President

                   

PLAYSTREAM, LLC

                   

By:

/s/ George Grubb

--------------------------------------------------------------------------------

   

Title:

President

               

 

--------------------------------------------------------------------------------

 

 

EXHIBIT A
ESCROW AGREEMENT
[see attached]

 

 

 

[Escrow Agreement not finalized as per side letter]

 

 

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

EXHIBIT B
EXCLUDED ASSETS
[see below and attached]

 

 

 

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

EXHIBIT C
FORM OF WARRANT
[see attached]

 

 

 

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

EXHIBIT D
PLAYSTREAM FINANCIAL STATEMENTS
[See attached]

 

 

 

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

EXHIBIT E
FINANCIAL STATEMENT CERTIFICATE
[See attached]

 

 

 

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

PLAYSTREAM

FINANCIAL STATEMENT CERTIFICATE

            I, George Grubb, in my capacity as President of PlayStream, LLC, a
Washington limited liability company ("PlayStream"), pursuant to Section
7(a)(vii)(B) of that certain Asset Purchase Agreement dated as of April 27, 2005
(the "Agreement"), by and among PlayStream, VitalStream Holdings, Inc., and
PlayStream, Inc., do hereby certify in the name of and on behalf of PlayStream
that:

1.

 

Attached hereto are the following financial statements (collectively the "Final
Financial Statements"): (i) audited consolidated and unaudited consolidating
balance sheets and statements of income, changes in stockholders' equity, and
cash flow as of and for the fiscal year ended December 31, 2004 for PlayStream
and its Subsidiaries; and (ii) unaudited consolidated and consolidating balance
sheets and statements of income, changes in stockholders' equity, and cash flow
as of and for the 3 months ended March 31, 2005 for PlayStream and its
Subsidiaries.

     

2.

 

The Final Financial Statements (including the notes thereto) have been prepared
in accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, present fairly the financial condition of PlayStream and its
Subsidiaries as of such dates and the results of operations of PlayStream and
its Subsidiaries for such periods, are correct and complete, and are consistent
with the books and records of PlayStream and its Subsidiaries (which books and
records are correct and complete).

     

3.

 

The Final Financial Statements fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in the Final Financial Statements.

     

4.

 

The Final Financial Statements, and this Certificate, are hereby incorporated by
reference into the Agreement and shall be considered, for all purposes, to be
representations and warranties of PlayStream under Section 4 of the Agreement.

            Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Agreement.

* * * * *

 

 

--------------------------------------------------------------------------------

 

            IN WITNESS WHEREOF, I have signed this Financial Statement
Certificate this 27th day of April, 2005.

 

 

   

Playstream, LLC

                   

By:

/s/ George Grubb

--------------------------------------------------------------------------------

   

Name:
Title:

George Grubb
President

 

 

 

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

EXHIBIT F
GEORGE GRUBB EMPLOYMENT AGREEMENT
[See attached]

 

 

 

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

EXHIBIT G
BILL OF SALE
[See attached]

 

 

 

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

BILL OF SALE

               THIS BILL OF SALE (this "Bill of Sale") is executed as of April
27, 2005 by PlayStream, LLC, a Washington limited liability company ("Seller"),
in favor of PlayStream, Inc., a Nevada corporation ("Buyer"). Each capitalized
term used but not defined herein shall have the meaning ascribed thereto under
that certain Asset Purchase Agreement dated as of April 27, 2005 to which Buyer
and Seller are parties (the "Purchase Agreement").

               1.          Assignment of Assets. Seller, for and in
consideration of Ten and No/100 Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
Seller, hereby assigns, transfers, sets over and delivers to Buyer all right,
title and interest in and to the Acquired Assets.

               2.           Further Assurances. Seller hereby agrees that it
will, at the reasonable request and expense of Buyer, execute and deliver and
will cause to be executed and delivered, such further instruments of assignment,
transfer and conveyance as may be required to more effectively assign, transfer,
set over, deliver to, and vest in, Buyer, its successors and assigns, title to
and possession of the Acquired Assets.

               3.           Binding Effect. This Bill of Sale shall be binding
upon and inure to the benefit of Seller and Buyer and their respective heirs,
executors, administrators, successors and assigns.

               4.           No Modification. This Bill of Sale is made pursuant
to the terms of the Purchase Agreement and does not create any additional
obligations, covenants, representations and warranties or alter or amend any of
the obligations, covenants, representations and warranties contained in the
Purchase Agreement. The provisions of the Purchase Agreement shall survive the
execution and delivery of this Bill of Sale. In the event of any inconsistency
between this Bill of Sale and the Purchase Agreement, the Purchase Agreement
shall control.

               5.           Construction. The headings of the sections and
subsections of this Bill of Sale are inserted as a matter of convenience and for
reference purposes only and in no respect define, limit or describe the scope of
this Bill of Sale or the intent of any section or subsection.

               6.           Facsimile. A facsimile copy of this Bill of Sale
shall be valid as an original.

               7.           Choice of Law. This Bill of Sale shall be governed
by and construed in accordance with the domestic laws of the state of California
without giving effect to any choice or conflict of law provision or rule
(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 WITNESS WHEREOF, the undersigned executes this Bill of Sale as
of the date first written above.

   

"SELLER"

         

PLAYSTREAM, LLC, a Washington limited liability company

                   

By:

/s/ George Grubb

--------------------------------------------------------------------------------

   

Name:

George Grubb

   

Title:

President

       

 

--------------------------------------------------------------------------------

 

 

EXHIBIT H
ASSIGNMENT AND ASSUMPTION OF ACQUIRED CONTRACTS
[See attached]

 

 

 

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

ASSIGNMENT AND ASSUMPTION OF CONTRACTS

 

               

THIS ASSIGNMENT AND ASSUMPTION OF CONTRACTS (this "Assignment") is entered into
as of the 27th day of April, 2004, between PlayStream, LLC, a Washington limited
liability company ("Assignor"), and PlayStream, Inc., a Nevada corporation
("Assignee"). All capitalized terms not otherwise specifically defined herein
shall have the meanings set forth in that certain Asset Purchase Agreement dated
as of April 27, 2005, to which Assignor and Assignee are parties (the
"Agreement").

               

WHEREAS, pursuant to the Agreement, Assignor has agreed to assign to Assignee
and Assignee has agreed to accept assignment of the Acquired Contracts,
including without limitation those identified on Exhibit A attached hereto and
incorporated by this reference; and

               

WHEREAS, Assignor desires to assign all of its right, title and interest in and
to the Acquired Contracts to Assignee, and Assignee desires to assume the
obligations of Assignor under the Acquired Contracts as set forth below.

               

NOW, THEREFORE, for Ten Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:

               

1.          Assignment. Assignor hereby assigns and transfers to Assignee all of
its right, title and interest in, to and under the Acquired Contracts.

               

2.           Acceptance of Assignment. Assignee hereby accepts the assignment of
the Acquired Contracts, and agrees to assume and perform, to the extent set
forth in the Agreement, all liabilities and obligations of Assignor under the
Acquired Contracts arising on or after the Closing other than as a result of
breach or non-performance of the Assignor.

               

3.           Binding Effect. This Assignment shall be binding upon and inure to
the benefit of Assignor and Assignee and their respective heirs, executors,
administrators, successors and assigns.

               

4.           No Modification. This Assignment is made pursuant to the terms of
the Agreement and does not create any additional obligations, covenants,
representations and warranties or alter or amend any of the obligations,
covenants, representations and warranties contained in the Agreement. The
provisions of the Agreement shall survive the execution and delivery of this
Assignment. In the event of any inconsistency between this Assignment and the
Agreement, the Agreement shall control.

               

5.           Construction. The headings of the sections and subsections of this
Assignment are inserted as a matter of convenience and for reference purposes
only and in no respect define, limit or describe the scope of this Assignment or
of the intent of any section or subsection.

               

6.           Counterparts. This Assignment may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument. A facsimile copy of this
Assignment or any counterpart hereto shall be valid as an original.

               

7.           Choice of Law. This Assignment shall be governed by and construed
in accordance with the domestic laws of the state of California without giving
effect to any choice or conflict of law provision or rule (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.

(signature page follows)

 

--------------------------------------------------------------------------------

 

               

IN WITNESS WHEREOF, the parties hereto have executed this Assignment and
Assumption of Contracts as of the date first set forth above.

 

"ASSIGNOR"

 

"ASSIGNEE"

     

PlayStream, LLC,
a Washington limited liability company

 

PlayStream Inc.,
a Nevada corporation

         

By:

/s/ George Grubb

 

By:

/s/ Philip Kaplan

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Name:

George Grubb

 

Name:

Philip Kaplan

Title:

President

 

Title:

President

         

 

--------------------------------------------------------------------------------

 

EXHIBIT I
ASSIGNMENT OF INTELLECTUAL PROPERTY
[See attached]

 

 

 

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

ASSIGNMENT OF INTELLECTUAL PROPERTY

               THIS ASSIGNMENT OF INTELLECTUAL PROPERTY (this "Assignment") is
entered into as of the 27th day of April, 2005, by PlayStream, LLC, a Washington
limited liability company ("Assignor"), in favor of PlayStream, Inc., a Nevada
corporation ("Assignee"). All capitalized terms not otherwise specifically
defined herein shall have the meanings set forth in that certain Asset Purchase
Agreement dated as of the 27th day of April, 2005, to which Assignor and
Assignee are parties (the "Purchase Agreement").

               WHEREAS, pursuant to the Purchase Agreement, Assignor has agreed
to assign to Assignee the Intellectual Property; and

               WHEREAS, Assignor desires to assign all right, title and interest
in and to the Intellectual Property to Assignee.

               NOW, THEREFORE, for Ten Dollars ($10.00) and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Assignor hereby agrees with Assignee as follows:

               1.          Assignment. Assignor hereby assigns and transfers to
Assignee all right, title and interest of Assignor in, to and under any
Intellectual Property.

               2.           Binding Effect. This Assignment shall be binding
upon and inure to the benefit of Assignor and Assignee and their respective
heirs, executors, administrators, successors and assigns.

               3.           No Modification. This Assignment is made pursuant to
the terms of the Purchase Agreement and does not create any additional
obligations, covenants, representations and warranties or alter or amend any of
the obligations, covenants, representations and warranties contained in the
Purchase Agreement. The provisions of the Purchase Agreement shall survive the
execution and delivery of this Assignment. In the event of any inconsistency
between this Assignment and the Purchase Agreement, the Purchase Agreement shall
control.

               4.           Construction. The headings of the sections and
subsections of this Assignment are inserted as a matter of convenience and for
reference purposes only and in no respect define, limit or describe the scope of
this Assignment or of the intent of any section or subsection.

               5.           Choice of Law. This Assignment shall be governed by
and construed in accordance with the domestic laws of the state of California
without giving effect to any choice or conflict of law provision or rule
(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 WITNESS WHEREOF, Assignor has caused this Assignment to be
executed as of the date first set forth above.

   

ASSIGNOR:

         

PLAYSTREAM, LLC, a Washington limited liability company

                   

By:

/s/ George Grubb

--------------------------------------------------------------------------------

   

Name:

George Grubb

   

Title:

President

       

 

--------------------------------------------------------------------------------

 

EXHIBIT J
OPINION OF PLAYSTREAM'S COUNSEL
[See attached]

[form not attached to agreement]

 

 

 

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

EXHIBIT K
OPINION OF VITALSTREAM'S COUNSEL
[See attached]

[form not attached to agreement]

 

 

 

 

 

 

 

 

 

 

--------------------------------------------------------------------------------