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Exhibit 10.1    
  

AMENDED AND RESTATED ASSET PURCHASE AGREEMENT  

 Dated as of January 15, 2003  

 Among  

 VitalStream Holdings, Inc.,  

 VitalStream Broadcasting Corporation,  

 Epoch Hosting, Inc.  

 And  

 Epoch Networks, Inc.  

  

 
 

TABLE OF CONTENTS    
  

	1.	 	Definitions	 	1
	

2.	
 	

Basic Transaction	
 	

13
	 	 	(a)	 	Purchase and Sale of Assets	 	13
	 	 	(b)	 	Assumption of Liabilities	 	13
	 	 	(c)	 	Consideration	 	14
	 	 	(d)	 	Post-Closing Adjustment in Connection with the Issuance of Common Stock Pursuant Section 1.4(c)(iii) of the Merger Agreement	 	14
	 	 	(e)	 	Post-Closing Adjustment in Connection with the Issuance of Common Stock Pursuant Section 1.4(c)(iv) of the Merger Agreement	 	16
	 	 	(f)	 	Post-Closing Adjustment in Connection with the Issuance of Common Stock Pursuant Section 1.4(c)(v) of the Merger Agreement	 	16
	 	 	(g)	 	Allocation of Consideration	 	16
	 	 	(h)	 	The Closing	 	17
	 	 	(i)	 	Deliveries at the Closing	 	17
	 	 	(j)	 	Post-Closing Deliveries	 	17
	

3.	
 	

Representations and Warranties of Hosting and Networks	
 	

17
	 	 	(a)	 	Organization, Corporate Power and Licenses	 	17
	 	 	(b)	 	Approval and Consents; Authorization; No Breach	 	18
	 	 	(c)	 	Subsidiaries	 	18
	 	 	(d)	 	Hosting Financial Statements	 	19
	 	 	(e)	 	Notes and Accounts Receivable; Notes and Accounts Payable	 	19
	 	 	(f)	 	Guaranties	 	20
	 	 	(g)	 	Title to Assets; Condition of Assets; Sufficiency of Assets	 	20
	 	 	(h)	 	Absence of Undisclosed Liabilities	 	20
	 	 	(i)	 	Absence of Certain Developments	 	20
	 	 	(j)	 	Compliance With Laws	 	22
	 	 	(k)	 	Litigation	 	22
	 	 	(l)	 	Contracts and Commitments	 	22
	 	 	(m)	 	Tax Matters	 	24
	 	 	(n)	 	Real Property	 	25
	 	 	(o)	 	Environmental Matters	 	26
	 	 	(p)	 	Intellectual Property Rights	 	27
	 	 	(q)	 	Employees	 	29
	 	 	(r)	 	Employee Benefits Relating to Hosting	 	30
	 	 	(s)	 	Employee Benefits Relating to Networks	 	30
	 	 	(t)	 	Insurance	 	31
	 	 	(u)	 	Affiliate Transactions	 	31
	 	 	(v)	 	Brokerage	 	31
	 	 	(w)	 	Governmental Consent, etc	 	31
	 	 	(x)	 	Disclosure	 	31
	 	 	(y)	 	Capital Stock and Related Matters	 	31
	 	 	(z)	 	Investment in Purchase Shares	 	32
	 	 	(aa)	 	Customers and Suppliers	 	32
	 	 	(bb)	 	Paid January Expenses	 	33
	

4.	
 	

Representations and Warranties of VitalStream	
 	

33
	 	 	(a)	 	Organization, Corporate Power and Licenses	 	33
	 	 	(b)	 	Approval and Consents; Authorization; No Breach	 	33
	 	 	(c)	 	Subsidiaries	 	34

i

 

	 	 	(d)	 	Securities and Exchange Commission Reports and VitalStream Financial Statements	 	34
	 	 	(e)	 	Notes and Accounts Receivable	 	35
	 	 	(f)	 	Guaranties	 	35
	 	 	(g)	 	Title to Assets; Condition of Assets; Sufficiency of Assets	 	35
	 	 	(h)	 	Absence of Undisclosed Liabilities	 	35
	 	 	(i)	 	Absence of Certain Developments	 	36
	 	 	(j)	 	Compliance With Laws	 	37
	 	 	(k)	 	Litigation	 	37
	 	 	(l)	 	Contracts and Commitments	 	37
	 	 	(m)	 	Tax Matters	 	39
	 	 	(n)	 	Real Property	 	40
	 	 	(o)	 	Environmental Matters	 	42
	 	 	(p)	 	Intellectual Property Rights	 	43
	 	 	(q)	 	Employees	 	44
	 	 	(r)	 	Employee Benefits	 	45
	 	 	(s)	 	Insurance	 	46
	 	 	(t)	 	Affiliate Transactions	 	46
	 	 	(u)	 	Brokerage	 	46
	 	 	(v)	 	Governmental Consent, etc	 	47
	 	 	(w)	 	Disclosure	 	47
	 	 	(x)	 	Capital Stock and Related Matters	 	47
	 	 	(y)	 	Issuance of the Purchase Shares	 	48
	 	 	(z)	 	Customers and Suppliers	 	48
	 	 	(aa)	 	Investment Company	 	48
	

5.	
 	

Pre-Closing Covenants	
 	

48
	 	 	(a)	 	General	 	48
	 	 	(b)	 	Notices and Consents	 	48
	 	 	(c)	 	Operation and Preservation of Business	 	49
	 	 	(d)	 	Full Access	 	49
	 	 	(e)	 	Notice of Developments	 	50
	 	 	(f)	 	Exclusivity	 	50
	

6.	
 	

Additional Agreements	
 	

51
	 	 	(a)	 	General	 	51
	 	 	(b)	 	Litigation Support	 	51
	 	 	(c)	 	Purchase Shares	 	52
	 	 	(d)	 	Employees	 	53
	 	 	(e)	 	Non-Competition; Non-Interference; Non-Solicitation	 	53
	 	 	(f)	 	No Assignment Causing Breach	 	55
	 	 	(g)	 	Mail, Notices and Other Correspondence	 	55
	 	 	(h)	 	Tax Matters	 	55
	 	 	(i)	 	Notice of Assignment	 	56
	 	 	(j)	 	Updating Hosting Contracts List	 	56
	 	 	(k)	 	Post-Closing Certifications and Deliveries	 	57
	 	 	(l)	 	Additional Software Licenses	 	57
	 	 	(m)	 	Reimbursement For Paid January Expenses	 	57
	 	 	(n)	 	Reimbursement For Unpaid January Expenses	 	57
	

7.	
 	

Conditions to Obligation to Close	
 	

58
	 	 	(a)	 	Conditions to Obligation of Each of VitalStream and the Buyer	 	58
	 	 	(b)	 	Conditions to Obligation of Each of Hosting and Networks	 	60

ii

 

	

8.	
 	

Survival of Representations and Warranties; Indemnification.	
 	

63
	 	 	(a)	 	Survival of Representations and Warranties	 	63
	 	 	(b)	 	Indemnification of VitalStream	 	63
	 	 	(c)	 	Indemnification of the Holders of the Purchase Shares	 	64
	 	 	(d)	 	Method of Asserting Claims Involving Third-Party Claims	 	64
	 	 	(e)	 	Method of Asserting Claims not Involving Third-Party Claims	 	66
	 	 	(f)	 	Limitations	 	66
	 	 	(g)	 	Exclusive Remedies	 	67
	

9.	
 	

[Intentionally Deleted]	
 	

67
	

10.	
 	

Miscellaneous	
 	

67
	 	 	(a)	 	Expenses	 	67
	 	 	(b)	 	Press Releases and Public Announcements	 	67
	 	 	(c)	 	No Third-Party Beneficiaries	 	67
	 	 	(d)	 	Entire Agreement	 	67
	 	 	(e)	 	Successors and Assigns	 	67
	 	 	(f)	 	Counterparts	 	67
	 	 	(g)	 	Descriptive Headings; Interpretation	 	67
	 	 	(h)	 	Notices; Business Days	 	68
	 	 	(i)	 	Amendments and Waivers	 	68
	 	 	(j)	 	Severability	 	69
	 	 	(k)	 	Construction	 	69
	 	 	(l)	 	Incorporation of Annexes, Schedules and Exhibits	 	69
	 	 	(m)	 	Specific Performance	 	69
	 	 	(n)	 	GOVERNING LAW	 	69
	 	 	(o)	 	JURISDICTION AND VENUE	 	70
	 	 	(p)	 	WAIVER OF RIGHT TO JURY TRIAL	 	70

iii

 
 
 

ANNEXES, SCHEDULES AND EXHIBITS
  ANNEXES    
  

Annex
1—Eligible Networks Employees 

 
 

SCHEDULES    
  

	Schedule 1(b)	 	—	 	Excluded Hosting Assets
	Schedule 1(c)	 	—	 	Hosting Business Customers
	Schedule 1(d)	 	—	 	Hosting Permits and Licenses
	Schedule 1(e)	 	—	 	Hosting Records and Miscellaneous Items
	Schedule 1(f)	 	—	 	Hosting Tangible Personal Property
	Schedule 1(g)	 	—	 	Hosting Customer Security Deposits
	Schedule 3(a)	 	—	 	Organization, Corporate Power and Licenses
	Schedule 3(b)	 	—	 	Approval and Consents
	Schedule 3(e)	 	—	 	Notes and Accounts Receivable; Notes and Accounts Payable
	Schedule 3(f)	 	—	 	Guaranties
	Schedule 3(g)	 	—	 	Title to Assets; Condition of Assets
	Schedule 3(i)	 	—	 	Absence of Certain Developments
	Schedule 3(j)	 	—	 	Compliance with Laws
	Schedule 3(k)	 	—	 	Litigation
	Schedule 3(l)	 	—	 	Contracts and Commitments
	Schedule 3(m)	 	—	 	Tax Matters
	Schedule 3(n)(ii)	 	—	 	Hosting Leased Real Property
	Schedule 3(p)(iii)	 	—	 	Intellectual Property Rights—Patents, Trademarks and Copyrights
	Schedule 3(p)(iv)	 	—	 	Intellectual Property Rights—Third Parties
	Schedule 3(q)	 	—	 	Employees
	Schedule 3(r)	 	—	 	Employee Benefits
	Schedule 3(s)	 	—	 	Employee Benefits Relating to Networks
	Schedule 3(u)	 	—	 	Affiliate Transaction
	Schedule 3(aa)	 	—	 	Customers and Suppliers
	Schedule 3(bb)	 	—	 	Paid January Expenses
	Schedule 4(a)	 	—	 	Organization, Corporate Power and Licenses
	Schedule 4(b)	 	—	 	Approval and Consents
	Schedule 4(c)	 	—	 	Subsidiaries
	Schedule 4(d)	 	—	 	Securities and Exchange Commission Reports and VitalStream Financial Statements
	Schedule 4(e)	 	—	 	Notes and Accounts Receivable; Notes and Accounts Payable
	Schedule 4(f)	 	—	 	Guaranties
	Schedule 4(g)	 	—	 	Title to Assets; Condition of Assets
	Schedule 4(i)	 	—	 	Absence of Certain Developments
	Schedule 4(j)	 	—	 	Compliance with Laws
	Schedule 4(k)	 	—	 	Litigation
	Schedule 4(l)	 	—	 	Contracts and Commitments
	Schedule 4(l)(ii)	 	—	 	Contracts and Commitments
	Schedule 4(m)	 	—	 	Tax Matters
	Schedule 4(n)(ii)	 	—	 	Hosting Leased Real Property
	Schedule 4(p)(iii)	 	—	 	Intellectual Property Rights—Patents, Trademarks and Copyrights
	Schedule 4(p)(iv)	 	—	 	Intellectual Property Rights—Third Parties
	Schedule 4(q)	 	—	 	Employees
	Schedule 4(r)	 	—	 	Employee Benefits

iv

 

	Schedule 4(t)	 	—	 	Affiliate Transaction
	Schedule 4(u)	 	—	 	Brokerage
	Schedule 4(x)(i)	 	—	 	Capital Stock and Related Matters
	Schedule 4(z)	 	—	 	Customers and Suppliers
	Schedule 6(l)	 	—	 	Additional Software Licenses
	Schedule 8(f)(ii)	 	—	 	Non-Locatable Asset List

 
 

EXHIBITS    
  

	Exhibit A	 	—	 	Form of Colocation Agreement
	Exhibit B	 	—	 	Form of Escrow Agreement
	Exhibit C	 	—	 	Form of Investor Rights Agreement
	Exhibit D	 	—	 	Form of Master Access Agreement
	Exhibit E	 	—	 	Form of Networks Contribution Agreement
	Exhibit F	 	—	 	Form of Opinion of Hosting's Counsel
	Exhibit G	 	—	 	Form of Opinion of VitalStream's Counsel
	Exhibit H	 	—	 	Form of Registration Agreement
	Exhibit I	 	—	 	Form of Customer Migration Agreement
	Exhibit J	 	—	 	Form of Assignment and Assumption Agreement
	Exhibit K	 	—	 	Form of Bill of Sale
	Exhibit L	 	—	 	Hosting Financial Statements
	Exhibit M	 	—	 	Form of Partial Termination and Second Amendment to Sublease Agreement
	Exhibit N	 	—	 	Form of Hosting Schedule Bring Down Officer's Certificate
	Exhibit O	 	—	 	Form of VitalStrean Schedule Bring Down Officer's Certificate

v

 
 

AMENDED AND RESTATED ASSET PURCHASE AGREEMENT    
  

        This AMENDED AND RESTATED ASSET PURCHASE AGREEMENT, dated as of January 15, 2003 (this "Agreement"), by and
among VitalStream Holdings, Inc., a Nevada corporation ("VitalStream"), VitalStream Broadcasting Corporation, a Nevada corporation (the
"Buyer"; and together with VitalStream, the "Buying Parties"), Epoch Networks, Inc., a California
corporation ("Networks"), and Epoch Hosting, Inc. a Delaware corporation ("Hosting").
VitalStream, Buyer, Networks and Hosting are referred to collectively herein as the "Parties." Unless otherwise indicated herein, capitalized terms used
in this Agreement have the meanings set forth in Section 1 of this Agreement. 

 
 

RECITALS    
  

        WHEREAS, the Parties hereto entered into that certain Asset Purchase Agreement dated as of November 1, 2002 (the "Original Asset
Purchase Agreement") pursuant to which the Buyer agreed to (1) purchase substantially all of the assets of Hosting and certain specified assets of Networks and
(2) assume certain specified Liabilities of Hosting and Networks related to their Hosting Businesses and (3) VitalStream agreed to pay the Cash Consideration and issue the Purchase
Shares to Hosting as consideration therefore. 

        WHEREAS,
the closing of the transactions contemplated by the Original Asset Purchase Agreement has not yet been consummated. 

        WHEREAS,
the Parties desire to enter into this Agreement in order to amend and restate the Original Asset Purchase 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
hereby agree that the Original Asset Purchase Agreement shall be amended and restated in its entirety by this Agreement, and the parties hereto further agree as follows: 

 
 
        1.    Definitions.    For
the purposes of this Agreement, the following terms have the meanings set forth below: 

        "AKKAD Agreement" means the Stockholders and Registration Rights Agreement, dated as of August 9, 2000, by and among
VitalStream, Inc., Paul Summer, Philip Kaplan and the Series B Holders (as defined therein), as assumed by VitalStream, as amended, modified, restated, superseded or replaced from time
to time. 

        "Acquired Assets" means all right, title, and interest of (a) Hosting in and to all of the assets of any kind, other than the
Excluded Hosting Assets, that are used or held for use by Hosting following the consummation of the Contribution Transaction in connection with the operation of the Hosting Business of Hosting as
currently operated by Hosting, including all rights and benefits of Hosting under and in each of the following: (i) the Hosting Real Property Leases to which Hosting is a party; (ii) the
Hosting Tangible Personal Property; (iii) the Hosting Intellectual Property Rights; (iv) the Hosting Contracts; (v) all Hosting Permits and Licenses; (vi) the Hosting
Records and Miscellaneous Items; (vii) the Hosting Customer Security Deposits; and (viii) all goodwill and going concern value associated with the Hosting Business as currently operated
by Hosting; (b) Networks under and in each of the Hosting Real Property Leases to which it is a party; and (c) Hosting or Networks in and to (i) the $300,000 in Cash contained in
an account with Silicon Valley and used to secured a letter of credit in such amount required by the landlord in connection with the Los Angeles Lease Agreement and (ii) all accounts receivable
in respect of sales made, or services provided, by the Hosting Business of Networks or Hosting on or after January 1, 2003. 

        "Acquired Assets Generated Quarterly Net Revenues" has the meaning set forth in  Section 2(d)(i) of this Agreement. 

 

        "Affiliate" of any particular Person means any other Person controlling, controlled by or under common control with such particular
Person, where "control" means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, contract or
otherwise. 

        "Articles of Incorporation" means the Articles of Incorporation of VitalStream as amended, modified, restated, superseded or replaced from
time to time. 

        "Assignment and Assumption Agreement" has the meaning set forth in Section 2(i) of
this Agreement. 

        "Assumed Liabilities" means (a) all of the Liabilities of Hosting or Networks, as the case may be, relating to, or arising out of
or in connection with, each of the Hosting Contracts set forth on Schedule 3(l) attached hereto (as such  Schedule 3(l) attached hereto may be
amended from time to time pursuant to Section 6(j) of
this Agreement) to the extent such Liabilities arise or accrue after the Closing Date; (b) all of the Liabilities under the Hosting Real Property Leases to the extent such Liabilities arise or
accrue after the Closing Date; (c) all of the Liabilities of Hosting which constitute deferred revenue Liabilities, to the extent such Liabilities do not exceed $20,000 in the aggregate, as
determined in accordance with GAAP; and (d) any Liabilities of Networks to any Transferred Employee for paid time off in an amount set forth opposite such Transferred Employee's name on  Annex 1
attached hereto under the heading "Dollar Value of Accrued Paid Time Off", which will be updated
at Closing for the period from the date of this Agreement through the Closing Date. 

        "Audited Financial Statements Preparation Fee" shall mean an amount equal to $25,000 to be paid by VitalStream as partial reimbursement of
the fees and expenses incurred by Hosting in connection with the preparation by Rose, Snyder & Jacobs of the Hosting Audited Financial Statements. 

        "Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors. 

        "Bill of Sale" has the meaning set forth in Section 2(i) of this Agreement. 

        "Buying Parties" has the meaning set forth in the preamble to this Agreement. 

        "Cash" means cash and cash equivalents (including marketable securities and short term investments) calculated in accordance with GAAP
applied on a basis consistent with the preparation of the Hosting Financial Statements. 

        "Cash Consideration" has the meaning set forth in Section 2(c). 

        "Cisco" means Cisco Systems Capital Corporation. 

        "Cisco Indebtedness" means the Indebtedness evidenced by that certain Secured Promissory Note, dated as of August 31, 2001, by
Holdings in favor of Cisco. 

        "Cisco Security Agreements" means that certain (a) Second Amended and Restated General Security Agreement, dated as of
January 31, 2002, between Holdings, Networks, Epoch Network Communications, Inc., and Cisco, as agent, as amended; (b) Second Amended And Restated Pledge Agreement, dated as of
January 31, 2002, by and among Holdings, Networks, Epoch Network Communications, Inc., and Cisco, as agent, as amended; and (c) Second Amended And Restated Guaranty, dated as of
January 31, 2002, by and among Networks, Epoch Network Communications, Inc., and Cisco, as agent, as amended. 

2

 

        "Claim" means any action, claim, lawsuit, demand, suit, charge, complaint, inquiry, hearing, investigation, notice of a violation or
noncompliance, litigation, proceeding, arbitration, appeals or other dispute, whether civil, criminal, administrative or otherwise. 

        "Closing" has the meaning set forth in Section 2(h) of this Agreement. 

        "Closing Date" has the meaning set forth in Section 2(h) of this Agreement. 

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

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

        "Colocation Agreement" means that certain Colocation Agreement, dated as of the Closing Date, by and between VitalStream and Netifice in
the form of Exhibit A attached hereto, as amended, modified, restated, superseded or replaced from time to time. 

        "Common Stock" means the Common Stock of VitalStream, par value $0.001 per share. 

        "Confidential Information" means any of the following, to the extent not already made available to the public, trade secrets and any other
information of a secret, confidential or proprietary nature concerning the operation of the Hosting Business of Hosting as currently operated by Hosting or of any of the customers or customer accounts
of the Hosting Business of Hosting (including the accounts and information related to the Hosting Business Customers), including (a) matters of a technical nature (including
know-how, processes, computer programs), (b) accounting methods, and documentation, (c) matters of a business nature (such as information about prices, costs, profits,
contract forms,
promotional methods, markets, market or marketing plans, sales, customers or accounts, possible customers or accounts, and employees), (d) plans for further development and (e) any other
information not generally available to the public. 

        "Contribution Transaction" means the contribution of certain assets of Networks to Hosting and the assumption by Hosting of certain
Liabilities of Networks pursuant to the Network Contribution Agreement (including the exhibits attached thereto). 

        "Covered Activities" has the meaning set forth in Section 6(e)(i) of this
Agreement. 

        "Convertible Promissory Note and Warrant Purchase Agreement" means that certain Amended and Restated Convertible Promissory Note and
Warrant Purchase Agreement, dated as of the Closing Date, by and among VitalStream and the Purchasers set forth on the signature pages thereto, as amended, modified, restated, superseded or replaced
from time to time. 

        "Customer Migration Agreement" means that certain Customer Migration Agreement, dated as of the Closing Date, by and between VitalStream
and Netifice in the form of Exhibit I attached hereto, as amended, modified, restated, superseded or replaced from time to time. 

        "Debt Security" means any note, bond, debenture or other instrument or security evidencing Indebtedness. 

        "Deciding Accountant" has the meaning set forth in Section 2(d)(iii) of this
Agreement. 

        "Dispute" has the meaning set forth in Section 2(d)(ii) of this Agreement. 

        "Dolphin" means Dolphin Equity Partners, L.P. 

        "Dolphin Communications I" means Dolphin Communications Fund, L.P. 

        "Dolphin Communications II" means Dolphin Communications Fund II, L.P. 

        "Dolphin Fund I" means Dolphin Communications I and Dolphin Parallel I. 

3

 

        "Dolphin Fund II" means Dolphin Communications II and Dolphin Parallel II. 

        "Dolphin Parallel I" means Dolphin Communications Parallel Fund, L.P. 

        "Dolphin Parallel II" means Dolphin Communications Parallel Fund II (Netherlands), L.P. 

        "Eligible Networks Employees" has the meaning set forth in Section 6(d) of this
Agreement. 

        "Employee Benefit Plan" means any "employee benefit plan" (as such term is defined in Section 3(3) of ERISA) and any other employee
benefit plan, program or arrangement of any kind. 

        "Environmental, Health, and Safety Requirements" means all Laws, all contractual obligations and all common law concerning public health
and safety, worker health and safety, pollution or protection of the environment, including all those relating to the presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control, or cleanup of any hazardous materials, substances or wastes, chemical substances or
mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum products or byproducts, asbestos, polychlorinated biphenyls, noise or radiation, each as amended and as now or hereafter in
effect. 

        "Equity Security" means (a) any capital stock or other equity security, (b) any security, directly or indirectly,
convertible into or exchangeable for any capital stock or other equity security or security containing any profit participation features, (c) any warrants, options or other rights, directly or
indirectly, to subscribe for or to purchase any capital stock, other equity security or security containing any profit participation features or, directly or indirectly, to subscribe for or to
purchase any security, directly or indirectly, convertible into or exchangeable for any capital stock, other equity security or security containing profit participation features, or (d) any
stock appreciation rights, phantom stock rights or other similar rights. 

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

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

        "Escrow Agreement" means the Escrow Agreement, dated as of the Closing Date, by and among VitalStream, Hosting and the Escrow Agent in the
form of Exhibit B attached hereto, as amended, modified, restated, superseded or replaced from time to time. 

        "Exchange Act" means the Securities Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder. 

        "Excluded Hosting Assets" means the right, title and interest of Hosting or Networks in and to the following assets: (a) the
corporate charter, qualifications to conduct business as a foreign corporation, arrangements with registered agents relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other documents relating to the organization, maintenance, and existence of Hosting as a corporation, (b) any of the
rights of Hosting or Networks under this Agreement (or under any Transaction Agreement or side agreement between Hosting and/or Networks, on the one hand, and VitalStream, on the other hand, entered
into on or after the date of this Agreement), (c) all Cash of Hosting or Networks (other than as set forth in subsection (c) of the definition of Acquired Assets), (d) all
accounts and notes receivable of Networks or Hosting (including all accounts receivable in respect of sales by Networks or Hosting through December 31, 2002) and (e) any of the assets of
Hosting set forth on Schedule 1(b) attached hereto. 

        "Excluded Hosting Liabilities" means all Liabilities of Hosting or Networks which do not constitute Assumed Liabilities. 

4

 

        "Fair Market Value" means the price at which an asset would change hands between a willing buyer and a willing seller when the former is
not under any compulsion to buy and the latter is not under any compulsion to sell, and both parties are able, as well as willing, to trade and are well-informed about the asset and the
market for the asset, as determined jointly by VitalStream and Hosting. If such parties are unable to reach agreement within a reasonable period of time, such "Fair Market
Value" shall be determined by an independent appraiser experienced in valuing such type of asset jointly selected by VitalStream and Hosting. The determination of such
appraiser shall be final and binding upon the Parties and VitalStream shall pay the first $10,000 of the fees and expenses of such appraiser, after which VitalStream and Hosting shall each pay
one-half of the fees and expenses of such appraiser. Notwithstanding the foregoing, the "Fair Market Value" of any security listed on any
securities exchange or quoted in the NASDAQ System (including the proposed Bulletin Board Exchange) or the over-the-counter market shall be the "Market
Price." 

        "Fully Diluted Outstanding Common Stock" means the number of shares of Common Stock actually outstanding on the Closing Date immediately
prior to the Closing. 

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

        "Governmental Entity" means individually, and "Governmental Entities" means collectively,
the United States of America, any foreign country and any state or other political subdivision thereof, or any entity exercising executive, legislative, judicial, regulatory or administrative
functions of government, including any court. 

        "Guarantee" means any guarantee or other contingent Liability (other than any endorsement for collection or deposit in the ordinary course
of business), direct or indirect with respect to any Liabilities of another Person, through a contract or otherwise, including, (a) any endorsement or discount with recourse or undertaking
substantially equivalent to or having economic effect similar to a guarantee in respect of any such Liabilities and (b) any contract (i) to purchase, or to advance or supply funds for
the payment or purchase of, any such Liabilities, (ii) to purchase, sell or lease property, products, materials or supplies, or transportation or services, in respect of enabling such other
Person to pay any such Liability or to assure the owner thereof against loss regardless of the delivery or nondelivery of the property, products, materials or supplies or transportation or services or
(iii) to make any loan, advance or capital contribution to or other investment in, or to otherwise provide funds to or for, such other Person in respect of enabling such Person to satisfy a
Liability (including any Liability for a dividend, stock liquidation payment or expense) or to assure a minimum equity, working capital or other balance sheet condition in respect of any such
Liability. 

        "Highest Calendar Quarter" has the meaning set forth in Section 2(d)(i) of this
Agreement. 

        "Highest Calendar Quarter Net Revenues" has the meaning set forth in  Section 2(d)(i) of this Agreement. 

        "Holdings" means Epoch Holdings, Inc., a Delaware corporation and the parent of Networks. 

        "Hosting" has the meaning set forth in the preamble of this Agreement. 

        "Hosting Balance Sheet" has the meaning set forth in Section 3(d)(i)(B) of this
Agreement. 

        "Hosting Schedule Bring Down Officer's Certificate" means that certain officer's certificate from an officer of Hosting updating and
disclosing certain matters regarding the Schedules of Hosting and Networks in the form attached hereto as Exhibit N. 

        "Hosting Business" means (a) the hosting business of any Person, which includes providing customers any or all of an Internet
website, server and network monitoring, reporting and ongoing 

5

 

maintenance and backup, e-mail account management (to the extent that such e-mail account management arises solely as part of a hosting agreement) and traffic reporting as
each pertains to the provision of hosting services and (b) the colocation business of any Person, which includes leasing or licensing space for a server or other computer equipment to
customers. 

        "Hosting Business Customers" means each Person set forth on Schedule 1(c) attached
hereto and to which (i) Hosting provided goods or services at any time in connection with the operation of its Hosting Business during the period commencing on January 1, 2002, and
continuing through the Closing Date, as determined from the books and records of Hosting or (ii) Networks provided goods or services at any time in connection with the operation of its Hosting
Business during the period commencing on January 1, 2002 and continuing through the consummation of the transactions contemplated by the Networks Contribution Agreement, as determined from the
books and records of Networks; provided, however, "Hosting Business Customers" shall exclude any Person which, prior to the Closing Date,
(a) notified Hosting or Networks, as the case may be, of its intention to cease purchasing goods and services from Hosting or Networks, as the case may be, and (b) ceased purchasing
goods and services from Hosting or Networks, as the case may be prior to the Closing Date. 

        "Hosting Contracts" means all contracts, leases, accounts receivable, licenses, employment agreements, instruments and other agreements to
the extent that they are used or held for use by Hosting following the consummation of the Contribution Transaction in connection with the operation of the Hosting Business of Hosting as currently
operated by Hosting; provided, however, the Hosting Contracts shall exclude any contracts, leases, accounts receivable, licenses employment agreements, instruments and other agreements which
constitute an Excluded Hosting Asset. Notwithstanding the foregoing, Hosting Contracts shall not include any contracts, leases, accounts receivable, licenses, employment agreements, instruments and
other agreements that are not listed on Schedule 3(l) attached hereto (as such  Schedule 3(l) attached hereto may be amended from time to time
pursuant to Section 6(j) of
this Agreement). 

        "Hosting Customer Security Deposits" means those Cash security deposits held by Hosting and Networks as security for the payment by
certain Hosting Business Customers for services provided by the Hosting Business of Hosting and Networks and which are set forth on  Schedule 1(g)attached hereto. 

        "Hosting Financial Statements" has the meaning set forth in Section 3(d) of this
Agreement. 

        "Hosting Intellectual Property Rights" means all right, title and interest in and to all Intellectual Property Rights to the extent that
they are used or held for use by Hosting following the consummation of the Contribution Transaction in connection with the operation of the Hosting Business of Hosting as currently operated by
Hosting, including (a) all Intellectual Property Rights with respect to web sites, URLs and domain names, (b) the Intellectual Property Rights set forth on  Schedule 3(p)(iii) and
Schedule 3(p)(iv) attached hereto and (c) all rights of
Hosting arising under licenses and sublicenses and other agreement or permissions obtained with respect to any of the foregoing Intellectual Property Rights, together with all income, royalties,
damages and payments due to Hosting and payable on the Closing Date or thereafter (including damages and payments due to Hosting for past or future infringements or misappropriations thereof by third
parties), remedies against infringements thereof and rights to protection of interests therein (including the right to sue and recover for past infringements and misappropriations thereof), and any
and all corresponding rights that now or hereafter may arise or be secured under the Laws of all jurisdictions; provided, however, the Hosting Intellectual Property Rights shall exclude any
Intellectual Property Rights which constitute an Excluded Hosting Asset. 

        "Hosting Material Adverse Effect" means a material and adverse effect upon the business, operations, assets, liabilities, condition
(financial or otherwise), operating results, prospects, cash 

6

 

flow, net worth or employee, customer or supplier relations of the Hosting Business of Hosting and Networks as currently operated by Hosting and Networks. 

        "Hosting Material Contracts" has the meaning set forth in Section 3(l). 

        "Hosting Leased Real Property" has the meaning set forth in Section 3(n) of this
Agreement. 

        "Hosting Permits and Licenses" means all franchises, authorizations, approvals, permits, licenses, orders, registrations, certificates,
variances and similar rights obtained from Governmental Entities to the extent that they are used or held for use by Hosting in connection with the operation of the Hosting Business of Hosting as
currently operated by Hosting and includes all such items identified on Schedule 1(d) attached hereto; provided, however, the Hosting Permits and
Licenses shall exclude any franchises, authorizations, approvals, permits, licenses, orders, registrations, certificates, variances and similar rights obtained from Governmental Entities which
constitute an Excluded Hosting Asset. 

        "Hosting Real Property Leases" has the meaning set forth in Section 3(n) of this
Agreement. 

        "Hosting Records and Miscellaneous Items" means all of the following, to the extent that they are used or held for use by Hosting
following the consummation of the Contribution Transaction in connection with the operation of the Hosting Business of Hosting as currently operated by Hosting: (a) lists of the
Hosting Business Customers, information regarding the Hosting Business Customers and related pricing information; (b) Claims, deposits, prepayments, refunds, causes of action, choices in
action, rights of recovery, rights of set off, prepaid operating expenses, deposits, warranties and rights of recoupment (other than any such item relating to the payment of Taxes paid by Hosting);
(c) books, records, ledgers, files, documents, correspondence, lists, plats, architectural plans, drawings and specifications, creative materials, advertising, marketing and promotional
materials, studies, reports and other printed or written materials; (d) any Debt Securities (under which Hosting is the lender) or Equity Securities held by Hosting immediately prior to the
Closing; (e) telephone, telefax and telex numbers and listings in all telephone books, Internet sites and directories used solely in the Hosting Business of Hosting; and (f) all of the
items identified on Schedule 1(e) attached hereto; provided, however, the Hosting Records and Miscellaneous Items shall exclude any of the
foregoing items which constitute an Excluded Hosting Asset. 

        "Hosting Services Agreement" means that certain Inter-Company Management and Services Agreement, dated as of February 28, 2002, by
and between Networks and Hosting, as amended, modified, restated, superseded or replaced from time to time. 

        "Hosting Tangible Personal Property" means all tangible personal property (including all machinery, equipment, inventories of raw
materials and supplies, manufactured and purchased parts, goods in process and finished goods, furniture, automobiles, trucks, tractors, trailers, tools, and dies) used or held for use by Hosting
following the consummation of the Contribution Transaction in connection with the operation of the Hosting Business of Hosting as currently operated by Hosting including the tangible personal property
set forth on Schedule 1(f) attached hereto; provided, however, the Hosting Tangible Personal Property shall exclude any tangible personal
property which constitutes an Excluded Hosting Asset. 

        "Improvements" means all buildings, structures, fixtures, building systems and equipment, and all components thereof, including the roof,
foundation, load-bearing walls and other structural elements thereof, heating, ventilation, air conditioning, mechanical, electrical, plumbing and other building systems, environmental
control, remediation and abatement systems; sewer, storm and waste water systems, irrigation and other water distribution systems, parking facilities; fire protection, security and surveillance
systems, telecommunications, computer wiring and cable installations and landscaping. 

7

 

        "Indebtedness" with respect to any Person means (a) any Liability of such Person for borrowed money, including: (i) any
Liabilities incurred for all or any part of the purchase price of property or other assets or for the cost of property or other assets constructed or of improvements thereto, other than accounts
payable included in current Liabilities and incurred in respect of property purchased in the Ordinary Course of Business, (whether or not such Person has assumed or become liable for the payment of
such Liabilities) (whether accrued, absolute, contingent, unliquidated or otherwise, known or unknown, whether due or to become due) and whether or not secured by liens; (ii) the face amount of
all letters of credit issued for the account of such Person and all drafts drawn thereunder; (iii) capitalized lease obligations; and (iv) all Guarantees of such Person;
(b) accounts payable of such Person that have not
been paid within sixty (60) calendar days of their due date; and (c) retroactive insurance premium obligations. 

        "Indemnitee" has the meaning set forth in Section 8(d)(i) of this Agreement. 

        "Indemnitor" has the meaning set forth in Section 8(d)(i) of this Agreement. 

        "Initial Purchase Shares" has the meaning set forth in Section 2(c) of this
Agreement. 

        "Intellectual Property Rights" means all (a) patents, patent applications and patent disclosures; (b) trademarks, service
marks, trade dress, trade names, logos, slogans, corporate names, Internet domain names and registrations and applications for registration thereof, together with all of the goodwill associated
therewith (and all translations, adaptations, derivations and combinations of the foregoing); (c) copyrights (registered or unregistered) and copyrightable works and registrations and
applications for registration thereof; (d) mask works and registrations and applications for registration thereof; (e) computer software (including, but not limited to, source code and
executable code), data, databases and documentation thereof; (f) trade secrets and other confidential information (including ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, manufacturing and production processes and techniques, research and development information, customer accounts, identifying
information regarding customers, drawings, specifications, designs, plans, proposals, technical data, financial and marketing plans and customer and supplier lists and information); (g) domain
names, (h) other intellectual property or proprietary rights; and (i) copies and tangible embodiments thereof (in whatever form or medium). 

        "Investment" as applied to any Person means (a) any direct or indirect purchase or other acquisition by such Person of any Debt
Securities, Equity Securities, obligations, instruments or ownership interests (including partnership interests and joint venture interests) of any other Person and (b) any capital contribution
by such Person to any other Person. 

        "Investor Rights Agreement" means that certain Investor Rights Agreement, dated as of the Closing Date, by and among VitalStream, Hosting
and the other signatories thereto in the form of Exhibit C attached hereto, as amended, modified, restated, superseded or replaced from time to
time. 

        "Knowledge" except as provided expressly herein, means the actual knowledge or awareness of a Person (which shall include the actual
knowledge and awareness of the executive officers and directors of such Person and, in the case of VitalStream only, its Subsidiaries) after making reasonable inquiry and reasonable diligence with
respect to the particular matter in question. 

        "Laws" means all constitutions, statutes, laws, treaties, codes, ordinances, regulations, rules, orders, judgments, writs, injunctions,
acts, determinations, directions or decrees of any Governmental Entity. 

        "Legal Requirement" means any requirement arising under any action or Law of an arbitrator or Governmental Entity, including any
Environmental, Health, and Safety Requirements. 

8

 

        "Lease Consents" has the meaning set forth in Section 7(a) of this Agreement. 

        "Leased Real Property" means all leasehold or subleasehold estates and other rights to use or occupy any land, buildings, structures or
other Improvements or interest in Real Property. 

        "Liability" means any liability or obligation (whether known or unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due), including any liability or obligation for Taxes. 

        "Liens" means any mortgage, pledge, restriction, security interest, encumbrance, option, lien or charge of any kind (including any
conditional sale or other title retention agreement or lease in the nature thereof), any sale of receivables with recourse against a Party, any filing or agreement to file a financing statement
as debtor under the Uniform Commercial Code or any similar statute other than to reflect ownership by a third party of property leased to a Party or any of its Subsidiaries under a lease which is not
in the nature of a conditional sale or title retention agreement, or any subordination arrangement in favor of another Person (other than any subordination arising in the Ordinary Course of Business). 

        "Los Angeles Lease Agreement" means that certain Sublease, dated November 15, 1999, by and between Networks and Charter
Holdings, Inc., as amended by First Amendment to Sublease, dated March 1, 2000. 

        "Loss" and "Losses" have the meanings set forth in  Section 8(b) of this Agreement. 

        "Market Price" of any security means either (a) if such security is listed on an exchange, the closing prices of such security on
the principal exchange on which such security is listed, or, if there has been no sales on such exchange on any day, the closing price of such security on the principal exchange on the most recent day
on which sales have taken place on such exchange or (b) if such security is not
listed on an exchange but is quoted in the NASDAQ System or on the domestic over-the-counter market as reported by the National Quotation Bureau, the average of the closing
sales prices as reported by the NASDAQ System or the National Quotation Bureau, as applicable, in each case over a period of five (5) days consisting of the day as of which the
"Market Price" is being determined and the four (4) consecutive business days prior to such day on which trades were reported in such security.
If at any time such security is not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market, the "Market
Price" shall be the Fair Market Value thereof. 

        "Master Access Agreement" means that certain Master Access Agreement, dated as of the Closing Date, by and between VitalStream and
Netifice, in the form of Exhibit D attached hereto, as amended, modified, restated, superseded or replaced from time to time. 

        "Merger Agreement" means that certain merger agreement by and between VitalStream, VitalStream, Inc. and VitalStream Operating
Corporation, dated February 13, 2002. 

        "Merger Closing Date" means April 23, 2002. 

        "Most Recent VitalStream Balance Sheet" means the balance sheet of VitalStream as of October 31, 2002, contained within the
VitalStream Financial Statements. 

        "Netifice" means Netifice Communications Inc., a Delaware corporation. 

        "Netifice Services Agreement" means that certain Services Agreement, dated as of October 9, 2002, by and between Netifice and
Networks, as amended, modified, restated, superseded or replaced from time to time. 

        "Networks" means Epoch Networks, Inc., a California corporation. 

9

  

        "Networks Contribution Agreement" means that certain Contribution Agreement dated as of October 4, 2002, by and between Hosting and
Networks pursuant to which Networks contributed the Networks Contributed Assets (as defined in the Networks Contribution Agreement) and Hosting assumed the Networks Contributed Liabilities (as defined
in the Networks Contribution Agreement), in the form attached hereto as Exhibit E. 

        "Networks Defined Contribution Plan" has the meaning set forth in Section 3(s) of
this Agreement. 

        "Networks Plans" has the meaning set forth in Section 3(s) of this Agreement. 

        "Nex2 Disposition" has the meaning set forth in Section 2(e) of this Agreement. 

        "Nex2 Disposition Contingent Shares" has the meaning set forth in Section 2(e) of
this Agreement. 

        "Nex2" has the meaning set forth in Section 2(e) of this Agreement. 

        "Non-Material Assets" means (a) a group of assets or properties with a Fair Market Value less than or equal to $20,000,
in the aggregate, which are used or held for use by Hosting or Networks in connection with the operation or conduct of their respective Hosting Businesses and (b) Omitted Hosting Contracts that
the Buyer is deemed to have accepted pursuant to the third sentence of Section 6(j)(i) of this Agreement. 

        "Omitted Hosting Contract" means any contract, lease, account receivable, license, employment agreement, instrument and other agreement
that would have been a Hosting Contract but for the fact that such contract, lease, account receivable, license, employment agreement, instrument or other agreement is not listed on  Schedule 3(l)
attached hereto. 

        "Opinion of Hosting's Counsel" means an opinion of Karen Muller, general counsel to Hosting and Networks, substantially in the form
attached hereto as Exhibit F. 

        "Opinion of VitalStream's Counsel" means an opinion of Stoel Rives LLP legal counsel to VitalStream, substantially in the form attached
hereto as Exhibit G. 

        "Option Shares" has the meaning set forth in Section 2(f) of this Agreement. 

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

        "Original Asset Purchase Agreement" has the meaning set forth in the preamble of this Agreement. 

        "Other Networks Plans" has the meaning set forth in Section 3(s) of this Agreement. 

        "Other VitalStream Plans" has the meaning set forth in Section 4(r) of this
Agreement. 

        "Paid January Expenses" has the meaning set forth in Section 3(bb) of this
Agreement. 

        "Paid January Expense Amount" has the meaning set forth in Section 3(bb) of this
Agreement. 

        "Parties" has the meaning set forth in the preamble of this Agreement. 

        "Permitted Liens" means (a) Liens with respect to Taxes not yet due and payable; (b) deposits or pledges made in connection
with, or to secure payment of, utilities or similar services; (c) mechanics', materialmen's or contractors' Liens created by statute securing payment for amounts not yet due and payable;
(d) rights of landlords under any Real Property Leases; and (e) in the case of VitalStream and the VitalStream Subsidiaries, purchase money Liens, Liens securing rental payments under
capital lease arrangements and Liens on a bank account containing 

10

 

$300,000 (plus interest) necessary to secure the $300,000 letter of credit the Buyer is required to establish in order to be able to assume the Los Angeles Lease Agreement. 

        "Person" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization or any other similar entity or organization or a Governmental Entity. 

        "Purchase Shares" has the meaning set forth in Section 2(c) of this Agreement. 

        "Purchase Share Distributees" means Hosting, Networks, Holding, Dolphin Fund I and Dolphin Fund II 

        "Purchase Share Indemnitees" has the meaning set forth in Section 8(c)(i) of this
Agreement. 

        "Quarterly Revenue Contingent Shares" has the meaning set forth in Section 2(d)(i)
of this Agreement. 

        "Quarterly Revenue Contingent Shares Statement" has the meaning set forth in  Section 2(d)(ii) of this Agreement. 

        "Quarterly Revenue Contingent Shares Period" has the meaning set forth in  Section 2(d)(i) of this Agreement. 

        "Real Property" means all land, together with all Improvements and all easements and other rights and interests appurtenant thereto
(including air, oil, gas, mineral and water rights). 

        "Real Property Lease" means a lease, sublease, license, concession and other agreement (written or oral), including all amendments,
extensions, renewals, guaranties and other agreements with respect thereto, pursuant to which a Person holds any Leased Real Property, including the right to all security deposits and other amounts
and instruments deposited by or on behalf of such Person thereunder. 

        "Registration Agreement" means that certain Registration Rights Agreement, dated as of the Closing Date, by and between VitalStream and
Hosting in the form of Exhibit H attached hereto, as amended, modified, restated, superseded or replaced from time to time. 

        "Restricted Period" has the meaning set forth in Section 6(e)(i)(A) of this
Agreement. 

        "Restricted Securities" means (a) the Purchase Shares and (b) any securities issued with respect to the securities referred
to in clause (a) above by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization. As to any
particular Restricted Securities, such securities shall, subject to the Escrow Agreement and Section 6(c)(v) of this Agreement cease to be
Restricted Securities when they have (i) been effectively registered under the Securities Act and disposed of in accordance with the registration statement covering them, (ii) been
distributed to the public through a broker, dealer or market maker pursuant to Rule 144 or become eligible for sale pursuant to Rule 144(k) adopted by the Securities and Exchange
Commission under the Securities Act (as such rule may be amended from time to time) or any similar rule or regulation hereafter adopted by the Securities and Exchange Commission or (iii) been
otherwise transferred and new certificates for them not bearing the Securities Act legend set forth in Section 6(c)(i) of this Agreement have
been delivered by VitalStream in accordance with Section 6(c) of this Agreement. Whenever any particular securities cease to be Restricted
Securities, the holder thereof shall be entitled, subject to the Escrow Agreement and Section 6(c)(v) of this Agreement to receive from
VitalStream, without expense, new securities of like tenor not bearing a Securities Act legend of the character set forth in Section 6(c)(i) of
this Agreement. 

11

 

        "Securities Act" means the Securities Act of 1933, as amended and the rules and regulations promulgated thereunder. 

        "Subsidiary" means, with respect to any Person, any corporation, limited liability company, partnership, association or other business
entity of which (a) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or
(b) if a limited liability company, partnership, association or other business entity, a majority of the partnership or other similar ownership interest thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association or other business entity if such Person or Persons shall be allocated a majority of limited liability company, partnership,
association or other business entity gains or losses or shall be or control any managing director or general partner of such limited liability company, partnership, association or other business
entity. 

        "Tax" or "Taxes" means federal, state, county, local, foreign or other income, gross
receipts, ad valorem, franchise, profits, sales or use, transfer, registration, excise, utility, environmental, communications, real or personal property, capital stock, income, license, payroll, wage
or other withholding, employment, unemployment, social security, severance, stamp, occupation, alternative or add-on minimum, estimated and other taxes of any kind whatsoever (including
deficiencies, penalties, additions to tax, and interest attributable thereto) whether disputed or not and including any obligations to indemnify or otherwise assume or succeed to the tax Liability of
any other Person. 

        "Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof. 

        "Transaction Agreements" means this Agreement, the Assignment and Assumption Agreement, the Bill of Sale, Escrow Agreement, Convertible
Promissory Note and Warrant Purchase Agreement, Customer Migration Agreement, Colocation Agreement, Master Access Agreement, Registration Agreement, Investor Rights Agreement and all other agreements
and instruments contemplated by each of the foregoing instruments or agreements to which VitalStream, the Buyer, Hosting or Networks is a party. 

        "Transferred Employees" has the meaning set forth in Section 6(d) of this
Agreement. 

        "Unpaid January Expenses" has the meaning set forth in Section 6(n) of this
Agreement. 

        "Unpaid January Expense Amount" has the meaning set forth in Section 6(n) of this
Agreement. 

        "Unpaid January Expense Notice" has the meaning set forth in Section 6(n) of this
Agreement. 

        "VitalStream" has the meaning set forth in the preamble of this Agreement. 

        "VitalStream Defined Contribution Plan" has the meaning set forth in Section 4(r)
of this Agreement. 

        "VitalStream Financial Statements" has the meaning set forth in Section 4(d) of
this Agreement. 

        "VitalStream Generated Quarterly Net Revenues" has the meaning set forth in  Section 2(d)(i) of this Agreement. 

12

 

        "VitalStream Indemnitees" has the meaning set forth in Section 8(b)(i) of this
Agreement. 

        "VitalStream Intellectual Property Rights" has the meaning set forth in  Section 4(p) of this Agreement. 

        "VitalStream Leased Real Property" has the meaning set forth in Section 4(n) of
this Agreement. 

        "VitalStream Material Adverse Effect" means a material and adverse effect upon the business, operations, assets, liabilities, condition
(financial or otherwise), operating results, prospects, cash flow, net worth or employee, customer or supplier relations of VitalStream and the VitalStream Subsidiaries taken as a whole. 

        "VitalStream Material Contracts" has the meaning set forth in Section 4(l). 

        "VitalStream Party" has the meaning set forth in Section 5(f)(iii) of this
Agreement. 

        "VitalStream Plans" has the meaning set forth in Section 4(r) of this Agreement. 

        "VitalStream Proposed Amounts" has the meaning set forth in Section 2(d)(ii) of
this Agreement. 

        "VitalStream Real Property Leases" has the meaning set forth in Section 4(n) of
this Agreement. 

        "VitalStream Schedule Bring Down Officer's Certificate" means that certain officer's certificate from an officer of VitalStream and the
Buyer updating and disclosing certain matters regarding the Schedules of VitalStream in the form attached hereto as Exhibit O. 

        "VitalStream Securities and Exchange Commission Reports" has the meaning set forth in  Section 4(d) of this Agreement. 

        "VitalStream Subsidiaries" has the meaning set forth in Section 4(a) of this
Agreement. 

        "VitalStream Transaction" has the meaning set forth in Section 5(f)(iii) of this
Agreement. 

        "WARN Act" means the Worker Adjustment and Retraining Notification Act of 1988, as amended, and any similar applicable foreign, state or
local Law. 

 
 
        2.    Basic Transaction.     

 
 
           (a)    Purchase and Sale of Assets.     On and subject to the terms and conditions of this Agreement, at the
   Closing, the Buyer agrees to purchase from Hosting and Networks, and Hosting and Networks
agree to sell, transfer, assign, convey and deliver to the Buyer, all of their respective right, title and interest in and to the Acquired Assets, free and clear of all Liens, Claims, Indebtedness and
restrictions on transfer (except for Permitted Liens, the Assumed Liabilities and restrictions on transfer set forth in any Hosting Contract) for the consideration specified in  Section 2(b) and
Section 2(c) of this Agreement. 

 
 
           (b)    Assumption of Liabilities.     

          (i)  On
and subject to the terms and conditions of this Agreement, at the Closing, the Buyer agrees to assume and thereafter become responsible for and pay, perform or
discharge all of the Assumed Liabilities. 

        (ii)  Each
of Hosting and Networks expressly understands and agrees that, except for the Assumed Liabilities, the Buying Parties have not agreed to pay, will not be required
to assume and will have no Liability for any Liabilities of Hosting, Networks or any Affiliate of Hosting or Networks. Without limiting the breadth of the foregoing, the Buying Parties have not agreed
to pay, will not be required to assume and will have no Liability for the Excluded 

13

 

Hosting Liabilities, which Excluded Hosting Liabilities will, as between Hosting and Networks, on the one hand, and the Buying Parties, on the other hand, remain the sole responsibility of, and will
be satisfied by, Hosting and Networks, as the case may be. 

        (iii)  The
assumption by the Buyer of the Assumed Liabilities, and the transfer thereof by Hosting and Networks, shall in no way expand the rights or remedies of any third
party against VitalStream, the Buyer, Hosting, Networks or any of their respective Affiliates, officers, directors, employees, shareholders and advisors as compared to the rights and remedies which
such third party would have had against such parties had the Buyer not assumed such Assumed Liabilities. Hosting or Networks, as the case may be, shall pay and discharge when due, or contest in good
faith, any of their respective Liabilities which constitute Excluded Hosting Liabilities. 

 
 
           (c)    Consideration.     In addition to the assumption of the Assumed Liabilities by the Buyer pursuant to
   Section 2(b) of this
Agreement, in consideration for sale of the Acquired Assets by Hosting and Networks to the Buyer, VitalStream shall pay to Hosting the Cash Consideration and issue to Hosting the Purchase Shares, in
accordance with this Section 2(c). 

 
 
           (i)    Cash Consideration.     As partial consideration for the sale by Hosting and Networks to the Buyer of the
   Acquired Assets, VitalStream agrees to pay to Hosting at Closing cash in the
amount of $200,000 (the "Cash Consideration"). 

 
 
          (ii)    Purchase Shares.     VitalStream has duly authorized the issuance of Common Stock pursuant to the terms
  of this Agreement. As partial consideration for the sale by Hosting and
Networks of the Acquired Assets to the Buyer, VitalStream agrees to issue to Hosting a number of shares of Common Stock (the "Initial Purchase Shares")
equal to the difference between (A) the Fully Diluted Outstanding Common Stock divided by 0.875  minus (B) the Fully Diluted Outstanding Common
Stock (all such shares of Common Stock together with such additional shares of Common Stock issued
by VitalStream to Hosting pursuant to the terms of this Agreement are hereinafter referred to as the "Purchase Shares"). Within ten (10) days of
the Closing Date, VitalStream shall issue and deliver two stock certificates evidencing the Initial Purchase Shares as follows: (1) one stock certificate shall evidence a number of shares of
Common Stock equal to 0.70 multiplied by the number of Initial Purchase Shares and shall be issued in the name of, and shall be delivered to, Hosting and (2) one stock certificate shall
evidence a number of shares of Common Stock equal to 0.30 multiplied by the number of Initial Purchase Shares and shall be issued in the name of Hosting and shall be delivered to the Escrow Agent to
be held subject to the terms and conditions of the Escrow Agreement. The Initial Purchase Shares delivered to the Escrow Agent pursuant to the terms of this Agreement and held by the Escrow Agent
pursuant to the terms of the Escrow Agreement shall be available to satisfy any amounts owed by Hosting or Networks to VitalStream pursuant to  Section 8 of this Agreement, in each case subject to
the terms of this Agreement and the Escrow Agreement. 

 
 
           (d)    Post-Closing Adjustment in Connection with the Issuance of Common Stock Pursuant Section 1.4(c)(iii) of the Merger  Agreement.
       

          (i)  If
VitalStream is required to issue any portion of the 8,789,907 shares of Common Stock (the "Quarterly Revenue Contingent
Shares") pursuant to Section 1.4(b) and Section 1.4(c)(iii) of the Merger Agreement (which number of shares of Common Stock shall be determined in
accordance with the Merger Agreement based upon VitalStream's and its Subsidiaries' highest quarterly consolidated net revenue for any calendar quarter during the period (the
"Quarterly Revenue Contingent Shares Period") beginning on the Merger Closing Date and ending on September 30, 2003 (the calendar quarter during
such period in which such highest quarterly consolidated net revenue occurs shall hereinafter be referred to as the 

14

 

"Highest Calendar Quarter" and the consolidated net revenue of VitalStream and its Subsidiaries generated during the Highest Calendar Quarter shall
hereinafter be referred to as the "Highest Calendar Quarter Net Revenues")), VitalStream shall, simultaneously with the issuance of such Quarterly
Revenue Contingent Shares, deliver to Hosting a stock certificate registered in the name of Hosting
evidencing an additional number of shares of Common Stock in an amount equal to: (A) if (1) the Highest Calendar Quarter Net Revenues is equal to or greater than $3,000,000 and
(2) the difference (such difference shall hereinafter be referred to as the "VitalStream Generated Quarterly Net Revenues") between
(x) the Highest Calendar Quarter Net Revenues minus (y) that portion of the Highest Calendar Quarter Net Revenues (such portion of the
Highest Calendar Quarter Net Revenues shall hereinafter be referred to as the "Acquired Assets Generated Quarterly Net Revenues") generated by or from
any of the Hosting Business Customers, is equal to or greater than $3,000,000, then zero; (B) if the Highest Calendar Quarter Net Revenues is equal to or greater than $3,000,000 and the
VitalStream Generated Quarterly Net Revenues is less than $3,000,000, the product of (1) the number of Quarterly Revenue Contingent Shares actually issued by VitalStream and (2) a
fraction, the numerator of which shall be the difference between (x) $3,000,000 minus (y) the VitalStream Generated Quarterly Net
Revenues, and the denominator of which shall be $3,000,000; and (C) if the Highest Calendar Quarter Net Revenues is less than $3,000,000, the product of (1) the number of Quarterly
Revenue Contingent Shares actually issued by VitalStream and (2) a fraction, the numerator of which shall be the Acquired Assets Generated Quarterly Net Revenues and the denominator of which
shall be the Highest Calendar Quarter Net Revenues. 

        (ii)  Simultaneously
with the issuance of any Quarterly Revenue Contingent Shares pursuant to Section 1.4(b) and Section 1.4(c)(iii) of the Merger
Agreement, VitalStream shall prepare and deliver to Hosting a statement (the "Quarterly Revenue Contingent Shares Statement") setting forth the number
of Quarterly Revenue Contingent Shares issued, the Highest Calendar Quarter Net Revenues, the VitalStream Generated Quarterly Net Revenues and the Acquired Assets Generated Quarterly Net Revenues (the
amounts so determined by VitalStream and set forth in the Quarterly Revenue Contingent Shares Statement being hereinafter respectively referred to as the "VitalStream Proposed
Amounts"). Hosting shall have fifteen (15) days after their receipt of such statement to review the VitalStream Proposed Amounts. VitalStream shall make the work papers,
books, records and other back-up materials used by VitalStream in preparing the Quarterly Revenue Contingent Shares Statement or otherwise requested by Hosting available to Hosting and its
accountants and other representatives at reasonable times and upon reasonable notice during the (A) preparation by VitalStream of the Quarterly Revenue Contingent Shares Statement,
(B) the fifteen (15) day period referred to above and (C) resolution by the Parties of any objections raised by Hosting to the VitalStream Proposed Amounts set forth in the
Quarterly Revenue Contingent Shares Statement. If Hosting shall deliver to VitalStream a notice indicating its disagreement with any of the VitalStream Proposed Amounts during the fifteen
(15) day period referred to above, the Parties shall, in good faith, attempt to resolve the disagreement as to such contested VitalStream Proposed Amounts within fifteen (15) days after
VitalStream's receipt of such notice. If the Parties fail to resolve such disagreement (a "Dispute") within such time period, the Parties shall promptly
refer such disagreement for resolution to a Deciding Accountant in accordance with the provision of Section 2(d)(iii) of this Agreement. The
number of Quarterly Revenue Contingent Shares issued, the Highest Calendar Quarter Net Revenues, the VitalStream Generated Quarterly Net Revenues and the Acquired Assets Generated Quarterly Net
Revenues as agreed to by the Parties or as determined by the Deciding Accountant shall be final and binding for all purposes of this Agreement. 

15

 

        (iii)  In
the event the Parties refer a Dispute to an accounting firm, such accounting firm shall be selected by lot (from a group of six Western-regional accounting firms
agreed upon by the Parties after excluding the respective regular outside accounting firms of VitalStream, Hosting and Networks) (the
"Deciding Accountant"). Each of the Parties shall promptly furnish to the Deciding Accountant, at their own cost and expense, such documents and
information as the Deciding Accountant may request in connection with such Dispute. The Deciding Accountant shall be instructed to report its determination of the Dispute in writing to each of the
Parties within thirty (30) days after such engagement. The fees and expenses payable to the Deciding Accountant with respect to all disputes subject to the procedure set forth in  Section 2(d)(ii), up to $15,000 in the aggregate, shall be borne by VitalStream after which all such fees and expenses shall be paid 50% by
Hosting and Networks, on the one hand, and 50% by VitalStream, on the other hand. 

        (iv)  All
amounts calculated for purposes of this Section 2(d) shall be calculated from the books and records of
VitalStream in accordance with GAAP applied on a consistent basis in accordance with VitalStream's past practice. 

        (v)  Any
additional shares of Common Stock issued by VitalStream pursuant to this Section 2(d) shall not be subject to
the terms of the Escrow Agreement. 

 
 
          (e)    Post-Closing Adjustment in Connection with the Issuance of Common Stock Pursuant Section 1.4(c)(iv) of the Merger  Agreement.
      If VitalStream is required to issue any portion of the 1,318,488 shares of Common Stock (the "Nex2 Disposition Contingent
Shares") pursuant to Section 1.4(b) and Section 1.4(c)(iv) of the Merger Agreement as a result of the disposition of Nex2, Inc.
("Nex2") by VitalStream (the "Nex2 Disposition"), VitalStream shall, simultaneously with the issuance of
such Nex2 Disposition Contingent Shares, deliver to Hosting a stock certificate registered in the name of Hosting evidencing an additional number of shares of Common Stock in an amount equal to the
difference between (i) the number of Nex2 Disposition Contingent Shares divided by 0.875 minus (ii) the number of Nex2 Disposition
Contingent Shares. Any additional shares of Common Stock issued by VitalStream pursuant to this Section 2(e) shall not be subject to the terms of
the Escrow Agreement. 

 
 
           (f)    Post-Closing Adjustment in Connection with the Issuance of Common Stock Pursuant Section 1.4(c)(v) of the Merger  Agreement.
       If VitalStream is required to issue any portion of the 1,133,905 shares of Common Stock (the "Option Shares")
pursuant to Section 1.4(b) and Section 1.4(c)(v) of the Merger Agreement as a result of the amount of proceeds received by VitalStream in connection with the exercise of the
"Outstanding Parent Options" (as defined in the Merger Agreement), VitalStream shall, simultaneously with the issuance of such Option Shares, deliver to Hosting a stock certificate registered in the
name of Hosting evidencing an additional number of shares of Common Stock in an amount equal to the difference between (i) the number of Option Shares divided by 0.875  minus (ii) the number of
Option Shares. Any additional shares of Common Stock issued by VitalStream pursuant to this  Section 2(f) shall not be subject to the terms of the Escrow Agreement. 

 
 
          (g)    Allocation of Consideration.     The Parties agree to allocate the aggregate consideration to be paid for
  the Acquired Assets in accordance with Section 1060 of the Code. The Parties agree
that VitalStream shall prepare and provide to Hosting a draft allocation of the consideration to be paid among the Acquired Assets within ninety (90) calendar days after the Closing Date. The
Parties agree that the amount of consideration to be allocated to the tangible personal property or assets which constitute part of the Acquired Assets in connection with the allocation of the
aggregate consideration to be paid for the Acquired Assets (as
adjusted pursuant to Section 2(d), Section 2(e) and  Section 2(f) of this Agreement) pursuant
to this Section 2(g) shall be $100,000. Hosting
shall notify VitalStream within thirty (30) calendar days of receipt of such draft allocation 

16

 

of any objection Hosting may have thereto. The Parties agree to resolve any disagreement with respect to such allocation in good faith. In addition, the Parties hereby undertake and agree to file
timely any information that may be required to be filed pursuant to Treasury Regulations promulgated under Section 1060(b) of the Code, and shall use the allocation determined pursuant to this  Section 2(g)
 in connection with the preparation of Internal Revenue Service Form 8594 as such form relates to the transactions
contemplated by this Agreement. No Party shall file any Tax Return or other document or otherwise take any position which is inconsistent with the allocation determined pursuant to this Section except
as may be adjusted by subsequent agreement following an audit by the Internal Revenue Service or by court decision. 

 
 
          (h)    The Closing.     The closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of
VitalStream located at One Jenner, Suite 100, Irvine, California 92618 commencing at 9:00 a.m. local time on the date of satisfaction or waiver of all conditions to the obligations of the
Parties to consummate the transactions contemplated hereby (other than conditions with respect to actions the Parties will take at the Closing itself) or such other date as the Parties may mutually
determine in writing (the "Closing Date"). 

 
 
          (i)    Deliveries at the Closing.     At the Closing: (i) Hosting and/or Networks will deliver to the
  VitalStream the various certificates, instruments and documents referred to in  Section 7(a) of this Agreement; (ii) the Buying Parties will deliver to Hosting and Networks the various
  certificates, instruments and
documents referred to in Section 7(b) of this Agreement; (iii) Hosting and Networks will execute and deliver to the Buyer (A) the
instrument of assignment substantially in the form of Exhibit J attached hereto (the "Assignment and Assumption
Agreement"), (B) the instrument of sale, transfer, conveyance, and assignment substantially in the form of  Exhibit K attached hereto (the "Bill
of Sale"), and (C) such other instruments,
certificates and agreements as VitalStream and its counsel may reasonably request (including any documents evidencing the transfer of the Hosting Intellectual Property Rights); (iv) the Buyer
will execute and deliver to Hosting and Networks (A) the Assignment and Assumption Agreement and (B) such other instruments, certificates and agreements as Hosting, Networks and their
counsel may reasonably request; (v) VitalStream will execute and deliver to Hosting (A) the Cash Consideration by wire transfer of immediately available funds (B) the Assignment
and Assumption Agreement and (C) such other instruments, certificates and agreements as Hosting and its counsel may reasonably request; and (vi) VitalStream will execute and deliver to
Networks (A) the Assignment and Assumption Agreement and (B) such other instruments, certificates and agreements as Networks and its counsel may reasonably request. 

 
 
           (j)    Post-Closing Deliveries.     Within 10 days following the Closing Date, (i) VitalStream will
   execute and deliver to Hosting a stock certificate evidencing the Initial Purchase
Shares to be issued to Hosting pursuant to Section 2(c)(ii) of this Agreement registered in the name of Hosting and (ii) VitalStream will
execute and deliver to the Escrow Agent a stock certificate evidencing the Initial Purchase Shares to be escrowed pursuant to Section 2(c)(ii) of
this Agreement, registered in the name of Hosting. 

 
 
        3.    Representations and Warranties of Hosting and Networks.     As a material inducement to the Buying Parties to
enter into this Agreement, Hosting and Networks, jointly and severally, hereby represent and warrant to the
Buying Parties that the statements contained in this Section 3 are correct and complete as of the date hereof (or on the date as of which they
are made, in the case of any representation or warranty which specifically relates to an earlier date). 

 
 
           (a)    Organization, Corporate Power and Licenses.     Each of Hosting and Networks is a corporation duly
   organized, validly existing and in good standing under the Laws of its respective jurisdiction of incorporation
and is qualified to do business in every jurisdiction in which such qualification is required, except where failure to be so qualified would not reasonably be expected 

17

 

to have a Hosting Material Adverse Effect. Each of Hosting and Networks possesses all requisite corporate power and authority and all material licenses, permits and authorizations necessary to own
and operate its properties, to carry on its Hosting Business as now conducted and presently proposed to be conducted and to carry out the transactions contemplated by this Agreement and the other
Transaction Agreements to which it is a party except where such failure would not reasonably be expected to have a Hosting Material Adverse Effect.  Schedule 3(a) contains a list of all
jurisdictions in which each of Hosting and Networks are qualified or licensed to do business and a list of
all of the Hosting Permits and Licenses. The copies of Hosting's and Networks' charter documents and bylaws to which VitalStream has been provided access reflect all amendments made thereto at any
time prior to the date of this Agreement and are correct and complete. 

 
 
           (b)    Approval and Consents; Authorization; No Breach.     Each of Hosting and Networks has full power and
   authority (including full corporate power and authority) to execute and deliver this Agreement and each of the
other Transaction Agreements to which it is a party and to perform its obligations hereunder and thereunder. Without limiting the generality of the foregoing, the execution and delivery by each of
Hosting and Networks and the performance by each of Hosting and Networks of this Agreement and each of the other Transaction Agreements to which it is a party, and the consummation of the transactions
contemplated by this Agreement and the other Transaction Agreements have been duly authorized by the respective boards of directors of each of Hosting and Networks, by Networks, as the sole
shareholder of Hosting, and by Holdings, as the sole shareholder of Networks. Except as described above, no other corporate proceedings on the part of Hosting or Networks are necessary to authorize
the execution and delivery of this Agreement or any other Transaction Agreements by Hosting and Networks and the consummation by Hosting and Networks of the transactions contemplated by this Agreement
and the other Transaction Agreements. Each of this Agreement and the other Transaction Agreements to which Hosting or Networks is a party constitutes a valid and binding obligation of Hosting and
Networks enforceable in accordance with its terms, except as such enforceability may be limited by (i) applicable insolvency, bankruptcy, reorganization, moratorium or other similar Laws
affecting creditors' rights generally, and (ii) applicable equitable principles (whether considered in a proceeding at law or in equity). Except as set forth on  Schedule 3(b) attached hereto,
the execution and delivery by Hosting and Networks of this Agreement and the other Transaction Agreements to which
Hosting or Networks is a party, and the fulfillment of and compliance with the respective terms hereof and thereof by Hosting and Networks do not and shall not (i) conflict with or result in a
breach of the terms, conditions or provisions of, (ii) constitute a default under or result in the violation of, (iii) result in the creation of any Lien upon Hosting's or Networks'
capital stock or assets pursuant to, (iv) give any third party the right to modify, terminate or accelerate any obligation under, or (v) require any authorization, consent, approval,
exemption or other action by or notice or declaration to, or filing with, any third party or any Governmental Entity (other than any filings required by state and federal securities Laws) pursuant to,
(A) the charter documents or bylaws of Hosting or Networks, (B) any Law or Legal Requirement to which Hosting or Networks is subject, or (C) any material agreement, instrument,
order, judgment or decree to which Hosting or Networks is subject. 

 
 
          (c)    Subsidiaries.     All of the issued and outstanding Equity Securities of Hosting are owned by Networks.
  All of the issued and outstanding Equity Securities of Networks are owned by
Holdings. Hosting has no Subsidiaries and does not own or control, directly or indirectly, any shares of capital stock of any other corporation or any interest in any partnership, joint venture or
other non-corporate business enterprise. 

18

  

 
 
          (d)    Hosting Financial Statements.     

          (i)  Hosting
has provided to VitalStream the following financial statements (collectively, as to the financial statements set forth in  Section 3(d)(i)(A), Section 3(d)(i)(B)
 and  Section 3(d)(i)(C) of this Agreement, the "Hosting Financial Statements"), each of which is
attached to this Agreement as Exhibit L: 

        (A)  the
audited pro forma balance sheet of the Hosting Business of Hosting and Networks as of December 31, 2001, and the related pro forma statements of income and
cash flows as of and for the twelve-month period then ended; 

        (B)  the
audited pro forma balance sheet of the Hosting Business of Hosting and Networks as of September 30, 2002 (the "Hosting Balance
Sheet"), and the related pro forma statements of income and cash flows as of and for the nine-month period then ended; and 

        (C)  an
unaudited balance sheet of the Hosting Business of Hosting as of October 31, 2002, and the related statements of operations and cash flows as of and for the
ten-month period then ended. 

        (ii)  The
Hosting Financial Statements (A) are accurate and complete in all material respects, (B) are consistent with the books and records of Hosting and
Networks, as the case may be (each of which, in turn, are accurate and complete in all material respects), (C) were prepared in accordance with GAAP applied on a consistent basis during the
respective periods involved (except as may be indicated therein or in the notes, if any, thereto), subject to normal year-end audit adjustments, which will not be material either
individually or in the aggregate, and an absence of required footnotes and (D) fairly present the financial position of the Hosting Business of Hosting and Networks as at the date thereof and
the results of their operations and cash flows for the respective periods then ended. 

        (iii)  The
total revenues of the Hosting Business conducted by Networks and Hosting for the one month ended November 30, 2002 was $233,415. 

 
 
           (e)    Notes and Accounts Receivable; Notes and Accounts Payable.     

          (i)  All
notes and accounts receivable of Hosting (including those accounts receivable of Networks which were contributed to Hosting pursuant to the Networks Contribution
Agreement) are reflected properly on its books and records, are valid receivables arising from bona fide transactions in the Ordinary Course of Business subject to no setoffs, Claims or refusals to
pay, are current and collectible, and will be collected in accordance with their terms at their recorded amounts, subject only to the reserve for bad debts set forth on the face of the Hosting Balance
Sheet (rather than in any notes thereto) as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of Hosting and Networks.  Schedule 3(e) attached
hereto contains a listing of all of the accounts receivable of each of Hosting and Networks (provided, in the case of
Networks, solely to the extent arising solely from the conduct by Networks of its Hosting Business) as of August 31, 2002. Except as set forth on  Schedule 3(e) attached hereto, as of
August 31, 2002, (a) no account or note debtor of Hosting is delinquent in payment by more
than sixty (60) days and (b) the aging schedule of the accounts receivable and notes receivable of Hosting included in  Schedule 3(e) attached hereto is complete and accurate. 

        (ii)  Schedule 3(e) attached hereto contains a listing of all accounts payable and notes payable (which shall include
any service level agreement credits, services or goods that have been paid for but not provided or delivered, and similar items) that each of Hosting and Networks (provided, in the case of Networks,
solely to the extent arising solely from the 

19

 

conduct by Networks of its Hosting Business) will owe (or have any Liability with respect to) as of August 31, 2002. Except as set forth on  Schedule 3(e) attached hereto, as of August 31,
2002, all such accounts payable and notes payable arose from bona fide transactions in the
Ordinary Course of Business and, no such account payable or note payable is delinquent by more than sixty (60) days in its payment. 

 
 
           (f)    Guaranties.     Except as set forth on Schedule 3(f)
   attached hereto, Hosting is not a guarantor of or otherwise is liable
for, and no assets or properties of Hosting are subject to, or security for, any Liability (including Indebtedness) of any other Person. 

 
 
           (g)    Title to Assets; Condition of Assets; Sufficiency of Assets.     Either Hosting or Networks has good and
   marketable title to, or a valid leasehold interest in, the Acquired Assets (other than properties and assets disposed of
in the Ordinary Course of Business since the date of the Hosting Balance Sheet), free and clear of all Liens, Claims, Indebtedness and restrictions on transfer, except for (i) Permitted Liens
and (ii) the Liens set forth on Schedule 3(g) attached hereto. All of the equipment and other tangible assets included in the Acquired
Assets are free from material defects (patent or latent), have been maintained in good operating condition and repair (subject to normal wear and tear), and are suitable for the purpose for which they
presently are used by Hosting and Networks in the conduct of their respective Hosting Businesses. Except for (i) the Excluded Hosting Assets, (ii) any Non-Material Assets,
(iii) any properties or assets (tangible or intangible) needed to supply the services provided to Networks and Hosting pursuant to the Hosting Services Agreement, (iv) any properties or
assets (tangible or intangible) needed to supply the services provided to Hosting pursuant to the Netifice Services Agreement, (v) any properties or assets (tangible
or intangible) needed to supply the services provided to Hosting pursuant to the Customer Migration Agreement, (vi) any properties or assets (tangible or intangible) needed to supply the
services provided to Hosting pursuant to the Master Access Agreement and (vii) any properties or assets (tangible or intangible) set forth on  Schedule 3(g) attached hereto, the Acquired Assets
include all of the properties or assets (tangible or intangible) (including all licenses and
other forms of permission necessary to use any Intellectual Property Right owned by any third party and used by Hosting or Networks in connection with the Hosting Business of Hosting and Networks
during the ninety (90) day period prior to Closing) necessary for the Buyer to, and used immediately prior to the Closing by Hosting to, (x) conduct the Hosting Business as presently
conducted by Hosting and (y) conduct the Hosting Business as conducted by Networks immediately prior to the consummation of the transactions contemplated by the Networks Contribution Agreement. 

 
 
           (h)    Absence of Undisclosed Liabilities.     Neither Hosting nor Networks (provided, in the case of Networks,
   solely with respect to the conduct by Networks of its Hosting Business) has any Liability (and
there is no basis for any present or future Claim giving rise to any Liability), except for (i) Liabilities not required to be reflected on a balance sheet of the Hosting Business conducted by
Hosting and Networks prepared in accordance with GAAP consistently applied in accordance with Hosting's and Networks' past practice, (ii) Liabilities set forth on the face of the Hosting
Balance Sheet (rather than in any notes thereto), (iii) Liabilities which have arisen after the date of the Hosting Balance Sheet in the Ordinary Course of Business (none of which results from,
arises out of, relates to, is in the nature of, or was caused by any Claim, breach of contract, breach of warranty, tort, infringement, Environmental, Health, and Safety Requirements or violation of
Law) and (iv) the Assumed Liabilities. 

 
 
          (i)    Absence of Certain Developments.     Except as set forth in Schedule 3(i)
   attached hereto and for the transactions contemplated by this
Agreement and the other Transaction Agreements, since September 30, 2002, no event has occurred or is anticipated, and no fact or facts exists, that individually or in the aggregate have had or
could have a Hosting Material Adverse Effect. Without limiting the generality of the foregoing, since September 30, 2002, neither Networks nor 

20

 

Hosting (provided, in the case of Networks, with respect to each of the following items, solely with respect to the conduct by Networks of its Hosting Business): 

          (i)  has
sold, leased, transferred, or assigned any of its assets, tangible or intangible necessary for, or useful in, the conduct by Hosting or Networks of their respective
Hosting Businesses, other than for a fair consideration in the Ordinary Course of Business; 

        (ii)  has
entered into any agreement, contract, lease, or license (or series of related agreements, contracts, leases, and licenses) either involving more than $25,000 or
outside the Ordinary Course of Business; 

        (iii)  has
accelerated, terminated, modified, or cancelled any agreement, contract, lease, or license (or series of related agreements, contracts, leases, and licenses)
involving more than $25,000 to which
Hosting or Networks is a party or by which either of them is bound (and no other party to any such agreement, contract, lease, or license (or series of related agreements, contracts, leases, and
licenses) has accelerated, terminated, modified, or cancelled any such agreement, contract, lease, or license (or series of related agreements, contracts, leases, and licenses); 

        (iv)  has
imposed, or permitted to exist, any Liens (except for Permitted Liens) upon any of its assets, tangible or intangible; 

        (v)  has
made any capital expenditure (or series of related capital expenditures) either involving more than $25,000 or outside the Ordinary Course of Business; 

        (vi)  has
made any Investment in, any loan to, or any acquisition of the assets of, any other Person (or series of related capital Investments, loans, and acquisitions)
outside the Ordinary Course of Business; 

      (vii)  has
issued any Debt Security or created, incurred, assumed, or Guaranteed any Indebtedness for borrowed money or capitalized lease obligation either involving more
than $10,000 singly or $50,000 in the aggregate; 

      (viii)  has
delayed or postponed the payment of accounts payable or other Liabilities outside the Ordinary Course of Business; 

        (ix)  has
cancelled, compromised, waived, or released any right or Claim (or series of related rights and Claims) either involving more than $10,000 or outside the Ordinary
Course of Business; 

        (x)  has
granted any license or sublicense of any rights under or with respect to any Hosting Intellectual Property Rights, other than in the Ordinary Course of Business; 

        (xi)  has
experienced any damage, destruction, or loss (whether or not covered by insurance) to its properties or assets; 

      (xii)  has
made any loan to, or entered into any other transaction with, any of its Affiliates, stockholders, directors, officers or employees outside the Ordinary Course of
Business; 

      (xiii)  has
entered into any employment contract or collective bargaining agreement, written or oral, or modified the terms of any existing such contract or agreement
relating to or affecting any employee of Hosting or Networks; 

      (xiv)  has
granted any increase in the base compensation of any of the directors, officers or employees of Hosting or Networks outside the Ordinary Course of Business or has
granted any increase at all in the base compensation of any of the Transferred Employees; 

21

 

      (xv)  has
adopted, amended, modified, or terminated any bonus, profit sharing, incentive, severance, or other plan, contract, or commitment for the benefit of any of the
directors, officers or employees of Hosting or Networks, or taken any such action with respect to any other Employee Benefit Plan; 

      (xvi)  has
made any other change in employment terms for any of the directors, officers or employees of Hosting or Networks outside the Ordinary Course of Business or has
made any change at all in the employment terms for any of the Transferred Employees; and 

    (xvii)  has
not collected any accounts receivable out of the Ordinary Course of Business; and 

    (xviii)  has
committed to any of the foregoing. 

 
 
           (j)    Compliance With Laws.     Except as set forth in Schedule 3(j)
    attached hereto, neither Networks nor Hosting (provided, in the case
of Networks, with respect to each of the following items, solely with respect to the conduct by Networks of its Hosting Business) has violated any Law or Legal Requirement and neither Hosting nor
Networks has not received any written notice alleging any such violation. 

 
 
           (k)    Litigation.     Except as set forth in Schedule 3(k)
   attached hereto, neither Networks nor Hosting (provided, in the case
of Networks, solely with respect to the conduct by Networks of its Hosting Business) is (i) subject to any outstanding injunction, judgment, order, decree, ruling, or charge or (ii) a
party or, to the Knowledge of Hosting and Networks, threatened to be made a party to any Claim at law or in equity, before any Governmental Entity or that could come before any arbitrator. None of the
Claims set forth in Schedule 3(k) attached hereto could, either individually or in the aggregate, result in or have a Hosting Material Adverse
Effect. To the Knowledge of Hosting and Networks, neither Hosting nor Networks has any reason to believe that any such Claim may be brought against Hosting or Networks. 

 
 
           (l)    Contracts and Commitments.     

          (i)  Except
as expressly contemplated by this Agreement or as set forth in Schedule 3(l) attached hereto, neither
Networks nor Hosting (provided, in the case of Networks, with respect to each of the following items, solely with respect to the conduct by Networks of its Hosting Business) is a party to or bound by
any written or oral: 

        (A)  pension,
profit sharing, stock option, employee stock purchase or other plan or arrangement providing for deferred or other compensation to employees or any other
employee benefit plan or arrangement, or any collective bargaining agreement or any other contract with any labor union, or severance agreements, programs, policies or arrangements; 

        (B)  contract
for the employment of any officer, individual employee or other Person on a full-time, part-time, consulting or other basis providing
annual compensation in excess of $75,000 or contract relating to loans to officers, directors or Affiliates (unless terminable at will without severance obligations); 

        (C)  contract
or agreement with any Governmental Entity entered into outside the Ordinary Course of Business; 

        (D)  contract
under which Hosting or Networks has advanced or loaned any other Person amounts in the aggregate exceeding $10,000; 

        (E)  agreement
or indenture relating to borrowed money or other Indebtedness or the mortgaging, pledging or otherwise placing a Lien (other than a Permitted Lien) on any
assets of Hosting or Networks; 

22

 

        (F)  Guarantee
of any Liability of any Person; 

        (G)  settlement,
conciliation or similar agreement under which such party has any future obligations or Liability; 

        (H)  lease
or agreement under which Hosting is lessee of or holds or operates any property, real or personal, owned by any other party, except for any lease of real or
personal property under which the aggregate annual rental payments do not exceed $25,000; 

        (I)  lease
or agreement under which Hosting or Networks is lessor of or permits any third party to hold or operate any property, real or personal, owned or controlled by
Hosting Networks; 

        (J)  contract
or group of related contracts with the same party or group of Affiliated parties the performance of which involves the payment by Hosting or Networks of
consideration in excess of $25,000 annually; 

        (K)  assignment,
license, indemnification or agreement with respect to any intangible property (including any Hosting Intellectual Property Rights) entered into outside the
Ordinary Course of Business; 

        (L)  warranty
agreement with respect to its services rendered or its products sold or leased; 

        (M) agreement
under which it has granted any Person any registration rights (including demand and piggyback registration rights), any rights of first refusal or vetoes on
the sale of the Acquired Assets; 

        (N)  agreement
relating to any Investment; 

        (O)  contract
or agreement prohibiting it from freely engaging in any business or competing anywhere in the world; or 

        (P)  any
other agreement which is material to the operation of its Hosting Business or business prospects or involves a consideration in excess of $25,000 annually. 

        (ii)  All
of the contracts, agreements and instruments referenced on Schedule 3(l) attached hereto (the
"Hosting Material Contracts") are valid, binding and enforceable in accordance with their respective terms, except as such enforceability may be limited
by (i) applicable insolvency, bankruptcy, reorganization, moratorium or other similar Laws affecting creditors' rights generally, and (ii) applicable equitable principles (whether
considered in a proceeding at law or in equity). Hosting or Networks, as the case may be, has performed all material obligations required to be performed by it under the Hosting Material Contracts and
is not in default under or in breach of nor in receipt of any claim of default or breach under any Hosting Material Contracts; no event has occurred which with the passage of time or the giving of
notice or both would result in a default, breach or event of noncompliance by
Hosting or Networks, as the case may be, under any of the Hosting Material Contracts; neither Hosting nor Networks has any present expectation or intention of not fully performing all such
obligations; neither Hosting nor Networks has any Knowledge of any breach or anticipated breach of any material obligation to be performed by the other parties to any of the Hosting Material
Contracts. 

        (iii)  VitalStream
has been provided access to a true and correct copy of each of the written Hosting Material Contracts, together with all amendments, waivers or other
changes thereto, and an accurate description of each of the oral Hosting Material Contracts. 

23

 

 
 
           (m)    Tax Matters.     

          (i)  Except
as set forth in Schedule 3(m) attached hereto, each of Hosting and Networks has filed all Tax Returns
which it is required to file under applicable Laws. All such Tax Returns are complete and correct and have been prepared in compliance with all applicable Laws in all material respects. Each of
Hosting and Networks has paid all Taxes due and owing by it (whether or not such Taxes are required to be shown on a Tax Return) and have withheld and paid over to the appropriate taxing authority all
Taxes which they were or are required to withhold from amounts paid or owing to any employee, stockholder, creditor or other third party. Neither Hosting nor Networks has waived any statute of
limitations with respect to any Taxes or agreed to any extension of time with respect to any Tax assessment or deficiency. The accrual for Taxes on the Hosting Balance Sheet would be adequate to pay
all Tax Liabilities of Hosting and Networks (provided, in the case of Networks, solely with respect to the conduct of by Networks of its Hosting Business) (A) if Hosting's current Tax year were
treated as ending on the date of the Hosting Balance Sheet (excluding any amount recorded which is attributable solely to timing differences between book and Tax income), and (B) if Hosting's
current Tax year were treated as ending on the Closing Date and the accrual for Taxes on the Hosting Balance Sheet was adjusted with the past custom and practice of Hosting in filing its Tax Returns.
Since the date of the Hosting Balance Sheet, neither Hosting nor Networks has incurred any Liability for Taxes other than in the Ordinary Course of Business. The assessment of any additional Taxes or
Hosting or Networks for periods for which Tax Returns have been filed by Hosting or Networks shall not exceed the recorded Liability therefor on the Hosting Balance Sheets (excluding any amount
recorded which is attributable solely to timing differences between book and Tax income). There has not been any audit of any Tax Return filed by Hosting or Networks. Neither Hosting nor Networks has
consented to any waiver of the statute of limitations for the assessment of any Taxes and had not requested any extension of time for the payment of any Taxes. There are no Liens for Taxes (other than
Permitted Liens) upon any of the assets of Hosting or Networks. No Claim has ever been made by an authority in a jurisdiction where neither Hosting nor Networks file Tax Returns that either Hosting or
Networks is or may be subject to Taxation by that jurisdiction. No foreign, federal, state or local Tax audits or administrative or judicial proceedings are pending or being conducted with respect to
Hosting or Networks. No information related to Tax matters has been requested by any foreign, federal, state or local Taxing authority, no written notice indicating an intent to open an audit or other
review has been received by Hosting or Networks from any foreign, federal, state or local Taxing authority, and no notice of deficiency or proposed adjustment for any amount of Tax proposed, asserted
or assessed by a Taxing authority against Hosting or Networks has been received by Hosting or Networks and there are no material unresolved questions or claims concerning Hosting's or Networks' Tax
Liability. 

        (ii)  Neither
Hosting nor Networks has made an election under Section 341(f) of the Code. Neither Hosting nor Networks is liable for the Taxes of another Person that
is not a Subsidiary under (A) Treas. Reg. Section 1.1502-6 (or comparable provisions of state, local or foreign Law), (B) as a transferee or successor, (C) by
contract or indemnity or (D) otherwise. Neither Hosting nor Networks is a party to any Tax allocation or sharing agreement. Neither Hosting nor Networks has made any payments, is obligated to
make payments or is a party to an agreement that could obligate it to make any payments that would not be deductible under Section 280G of the Code. 

24

 

 
 
           (n)    Real Property.     

          (i)  Hosting
does not own any Real Property. Networks does not own any Real Property. Hosting is not a party to any agreement or option to purchase any Real Property or
interest therein. 

        (ii)  Schedule 3(n)(ii) attached hereto sets forth a true and complete list of (A) the address of each parcel of
all Leased Real Property that is used or held for use by Hosting or Networks in connection with, the operation of their respective Hosting Business as currently operated by each of them (collectively,
the "Hosting Leased Real Property") and (B) the date and the names of the parties to each Real Property Lease in respect of each parcel of
Hosting Leased Real Property (collectively, the "Hosting Real Property Leases"). Hosting and Networks has delivered to VitalStream a true and complete
copy of each written Hosting Real Property Lease, and in the case of any oral Hosting Real Property Lease, a written summary of the material terms of such Hosting Real Property Lease. Except as set
forth on Schedule 3(n)(ii) attached hereto, with respect to each Hosting Real Property: 

        (A)  such
Hosting Real Property Lease is legal, valid, binding, enforceable and in full force and effect, except as such enforceability may be limited by
(1) applicable insolvency, bankruptcy, reorganization, moratorium or other similar Laws affecting creditors' rights generally and (2) applicable equitable principles (whether considered
in a proceeding at law or in equity); 

        (B)  the
transactions contemplated by this Agreement and the other Transaction Agreements do not require the consent of any other party to such Hosting Real Property Lease
(except as set forth in Schedule 3(b) attached hereto), will not result in a breach of or default under such Hosting Real Property Lease, and
will not otherwise cause such Hosting Real Property Lease to cease to be legal, valid, binding, enforceable and in full force and effect on identical terms following the Closing; 

        (C)  Neither
Hosting's nor Network's possession and quiet enjoyment of the Hosting Leased Real Property under such Hosting Real Property Lease has not been disturbed, and
there are no disputes with respect to such Hosting Real Property Lease; 

        (D)  Neither
Hosting's or Network's, on the one hand, nor, to the Knowledge of Hosting and Networks, any other party to such Hosting Real Property Lease, on the other hand,
is in breach or default under such Hosting Real Property Lease, and no event has occurred or circumstance exists which, with the delivery of notice, the passage of time or both, would constitute such
a breach or default, or permit the termination, modification or acceleration of rent under such Hosting Real Property Lease; 

        (E)  Neither
Hosting nor Networks owe in the future, any brokerage commissions or finder's fees with respect to such Hosting Real Property Lease; 

        (F)  The
other party to such Hosting Real Property Lease is not an Affiliate of, and otherwise does not have any economic interest in, Hosting or Networks; 

        (G)  Neither
Hosting nor Networks has subleased, licensed or otherwise granted any Person the right to use or occupy such Hosting Leased Real Property or any portion thereof; 

        (H)  Neither
Hosting nor Networks has collaterally assigned or granted any other Lien in such Hosting Real Property Lease or any interest therein; and 

25

 

        (I)  Except
as may arise by operation of law or under any Hosting Real Property Lease, there are no Liens on the estate or interest created by such Hosting Real Property
Lease. 

        (iii)  All
Improvements included in the Hosting Leased Real Property are in good condition and repair and sufficient for the operation of the Hosting Business of Hosting and
Networks as currently conducted thereon or contemplated to be conducted thereon. There are no structural deficiencies or latent defects affecting any of the Improvements and there are no facts or
conditions affecting any of the Improvements which would, individually or in the aggregate, interfere in any respect with the use or occupancy of the Improvements or any portion thereof in the
operation of the Hosting Business of Hosting and Networks as currently conducted thereon or contemplated to be conducted thereon. 

        (iv)  There
is no condemnation, expropriation or other proceeding in eminent domain, pending or threatened, affecting any parcel of Hosting Leased Real Property or any
portion thereof or interest therein. There is no injunction, decree, order, writ or judgment outstanding, nor any Claims, administrative actions or similar proceedings, pending or threatened, relating
to the ownership, lease, use or occupancy of the Hosting Leased Real Property or any portion thereof, or the operation of the Hosting Business of Hosting as currently conducted thereon or contemplated
to be conducted thereon. 

        (v)  The
Hosting Leased Real Property is in compliance with all applicable Real Property Laws (including any Environmental, Health and Safety Requirements, zoning, planning,
subdivision, platting or similar Laws) affecting the Hosting Leased Real Property, and the current use and occupancy of the Hosting Leased Real Property and operation of the Hosting Business of
Hosting thereon does not violate any Real Property Laws. Neither Hosting nor Networks has received any notice of violation of any Real Property Law and there is no basis for the issuance of any such
notice or the taking of any action for such violation. There is no pending or anticipated change in any Real Property Law that will have a Hosting Material Adverse Effect on the ownership, lease, use
or occupancy of any Hosting Leased Real Property or any portion thereof in the continued operation of the Hosting Business of Hosting and Networks as currently conducted thereon or contemplated to be
conducted thereon. 

 
 
          (o)    Environmental Matters.     

          (i)  Each
of Hosting, Networks and their predecessors have complied and each of Hosting and Networks is in compliance with all Environmental, Health and Safety Requirements
and all permits thereunder. 

        (ii)  Neither
Hosting, Networks nor any of their predecessors or Affiliates has received any written or oral notice, report or other information regarding any actual or
alleged violation of Environmental, Health, and Safety Requirements, or any Liabilities or potential Liabilities, including any investigatory, remedial or corrective Liabilities, relating to any of
them or their facilities arising under Environmental, Health, and Safety Requirements. 

        (iii)  Neither
Hosting, Networks nor their predecessors and Affiliates has assumed or undertaken or otherwise become subject to any Liability, including any Liability for
corrective or remedial action, of any other Person relating to Environmental, Health, and Safety Requirements. 

        (iv)  No
facts, events or conditions relating to the past or present facilities, properties or operations of Hosting or Networks, or any of their predecessors or Affiliates
will prevent, hinder or limit continued compliance with Environmental, Health, and Safety Requirements, give rise to any investigatory, remedial or corrective obligations pursuant to Environmental,
Health, and Safety Requirements, or give rise to any other Liabilities pursuant to 

26

 

Environmental, Health, and Safety Requirements, including any relating to onsite or offsite releases or threatened releases of hazardous materials, substances or wastes, personal injury, property
damage or natural resources damage. 

        (v)  None
of Hosting, Networks or their predecessors or Affiliates has treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled, or
released any substance, including any hazardous substance, or owned or operated any property or facility (and no such property or facility is contaminated by any such substance) in a manner that has
given rise to Liabilities or give rise to Liabilities, including any Liability for response costs, corrective action costs, personal injury, property damage, natural resource damages or attorney fees,
pursuant to CERCLA or any other Environmental, Health, and Safety Requirements. 

        (vi)  Hosting
has provided to VitalStream copies of all material environmental reports, audits, assessments, and investigations, and any other material environmental
documents, related to the past or present facilities, properties or operations of Hosting, Networks or their predecessors or Affiliates, to the extent the forgoing are in the possession, custody, or
control of Hosting or Networks. 

 
 
           (p)    Intellectual Property Rights.     

          (i)  Hosting
owns and possesses all right, title and interest in and to, free and clear of any Liens, Claims, Indebtedness, licenses, restrictions on transfer or any other
restrictions or limitations, except for (i) Permitted Liens and (ii) the Liens set forth on Schedule 3(p)(i) attached hereto, or
has the right to use pursuant to a valid and enforceable, written license, sublicense, agreement, or other permission, all Hosting Intellectual Property Rights. Hosting has taken all commercially
reasonable actions to maintain and protect the Hosting Intellectual Property Rights. 

        (ii)  To
the Knowledge of Hosting and Networks, neither Hosting nor Networks (provided, in the case of Networks, solely with respect to the conduct by Networks of its Hosting
Business) has interfered with, infringed upon, violated, misappropriated, or otherwise come into conflict with any Intellectual Property Rights of any other Person and, to the Knowledge of Hosting and
Networks, neither Hosting nor Networks will interfere with, infringe upon, violate, misappropriate or otherwise come into conflict with any Intellectual Property Rights of any Person as a result of
the continued operation of its Hosting Business as presently conducted or as contemplated to be conducted. Neither Hosting nor Networks (provided, in the case of Networks, solely with respect to the
conduct by Networks of its Hosting Business) has ever received any Claim or notice alleging any such interference, infringement, conflict, misappropriation, or violation (including, but not limited
to, any Claim that Hosting or Networks must license or refrain from using any Intellectual Property Rights of any other Person and any demand or offer to license any Intellectual Property Rights from
any Person), and neither Hosting nor Networks is aware of any facts that indicate a likelihood of any of the foregoing. To the Knowledge of Hosting and Networks, no third party has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any Hosting Intellectual Property Rights, and neither Hosting nor Networks is aware of any facts that indicate a likelihood of any
of the foregoing. 

        (iii)  Schedule 3(p)(iii) attached hereto identifies: (A) each patent or registration which has been issued to
Hosting or Networks with respect to any Hosting Intellectual Property Rights and each pending patent application or application for registration which Hosting or Networks has made with respect to any
Hosting Intellectual Property Rights; (B) each license, sublicense, agreement, or other permission which Hosting or Networks has granted to any Person with respect to any Hosting Intellectual
Property Rights (other than such licenses, 

27

 

sublicenses and other permissions as are granted in the Ordinary Course of Business under the terms of Hosting form licensing agreements), together with any exceptions; (C) each material
unregistered trademark, copyright, material service mark, trade name, corporate name or Internet domain name, computer software item (other than commercially available
off-the-shelf software purchased or licensed for less than a total cost of $1,000 in the aggregate) within the Hosting Intellectual Property Rights and (D) any other
material Hosting Intellectual Property Rights. Hosting or Networks has delivered to VitalStream correct and complete copies of all such patents, registrations, applications, licenses, sublicenses,
agreements, and permissions (as amended to date) and has made available to VitalStream correct and complete copies of all other written documentation evidencing ownership and prosecution (if
applicable) of each such item. 

        (iv)  Schedule 3(p)(iv) attached hereto identifies each Hosting Intellectual Property Right that any third party owns
and that Hosting or Networks uses pursuant to a written license, sublicense, agreement, or permission (other than commercially available off-the-shelf software purchased or
licensed for less than a total cost of $1,000 in the aggregate). Either Hosting or Networks has delivered to VitalStream correct and complete copies of all such licenses, sublicenses, agreements, and
permissions (as amended to date). With respect to each Hosting Intellectual Property Right required to be identified in Schedule 3(p)(iv)
attached hereto: 

        (A)  the
license, sublicense, agreement, or permission covering such Hosting Intellectual Property Right is legal, valid, binding, enforceable, and in full force and effect; 

        (B)  the
license, sublicense, agreement, or permission covering such Hosting Intellectual Property Right will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the transactions contemplated by this Agreement; 

        (C)  to
the Knowledge of Hosting and Networks no party to the license, sublicense, agreement, or permission covering such Hosting Intellectual Property Right is in breach or
default, and, to the Knowledge of Hosting and Networks, no event has occurred which with notice or lapse of time would constitute a breach or default or permit termination, modification, or
acceleration thereunder; 

        (D)  to
the Knowledge of Hosting and Networks no party to the license, sublicense, agreement, or permission covering such Hosting Intellectual Property Right has repudiated
any provision thereof; 

        (E)  such
Hosting Intellectual Property Right is not subject to any outstanding injunction, judgment, order, decree, ruling, or charge; 

        (F)  no
Claim is pending or, to the Knowledge of Hosting and Networks (and employees of Hosting or Networks with responsibility for Intellectual Property Right matters), is
threatened which challenges the legality, validity, or enforceability of such Hosting Intellectual Property Right, and there are no grounds for the same; and 

        (G)  neither
Hosting nor Networks has granted any sublicense or similar right with respect to the license, sublicense, agreement, or permission covering such Hosting
Intellectual Property Right. 

28

  

        (v)  No
Hosting Intellectual Property Right is subject to any outstanding injunction, judgment, order, decree, ruling, or charge. No Claim is pending or, to the Knowledge of
Hosting and Networks (and employees of Hosting and Networks with responsibility for Intellectual Property Right matters), threatened which challenges the legality, validity, enforceability, use, or
ownership of any Hosting Intellectual Property Right, and, to the Knowledge of Hosting and Networks, there are no grounds for the same. To the Knowledge of Hosting and Networks, no loss or expiration
of any Hosting Intellectual Property Right is threatened, pending, or reasonably foreseeable, except for patents expiring at the end of their statutory terms (and not as a result of any act or
omission by Hosting, including, a failure by Hosting or Networks to pay any required maintenance fees). 

 
 
           (q)    Employees.     

          (i)  Hosting
does not currently have, and has never had, any employees. 

        (ii)  Except
as set forth on Schedule 3(q) attached hereto: 

        (A)  Networks
is not party to or bound by any collective bargaining agreement or relationship with any labor organization; 

        (B)  To
the Knowledge of Networks, no executive, key employee or group of employees has any plans to terminate their employment with Networks; 

        (C)  to
the Knowledge of Networks, no labor organization or group of employees has filed any representation petition or made any written or oral demand for recognition; 

        (D)  no
union organizing or decertification efforts are underway or, to the Knowledge of Networks, threatened; 

        (E)  within
the past five (5) years no labor strike, work stoppage, slowdown or other labor dispute has occurred, and none is underway or, to the Knowledge of
Networks, threatened; 

        (F)  there
is no workman's compensation Liability, experience or matter that would reasonably be expected to have a Hosting Material Adverse Effect; and 

        (G)  there
is no employment-related charge, complaint, grievance, investigation, inquiry or Liability of any kind, pending or threatened in any forum, relating to an alleged
violation or breach by Networks (or its officers or directors) of any Law, regulation or contract and, to the Knowledge of Networks, no facts or circumstances exist that would reasonably be expected
to give rise to such a charge, complaint, grievance, investigation, inquiry or Liability. 

        (iii)  Any
notice of the transaction contemplated by this Agreement required under any Law or collective bargaining agreement has been given, and all bargaining obligations
with any labor organization or other employee representative have been, or prior to Closing will be, satisfied. 

        (iv)  In
connection with the transactions contemplated by this Agreement, no plant closing or mass layoff of employees has been implemented that could implicate the WARN Act. 

        (v)  Annex 1 attached hereto sets forth the name of each Eligible Networks Employee, as defined in  Section 6(d) of this Agreement) and separately sets forth each such
individual's current annual salary, and for the eight (8) month period
ended August 31, 2002, the amount of each such individual's salary, bonus payments and any other indirect compensation as well as the paid time off (in dollar value), holiday time and sick pay
due each Eligible Networks Employee as of the date of this Agreement. 

29

 

 
 
           (r)    Employee Benefits Relating to Hosting.     

          (i)  Hosting
does not have any obligation to contribute to (or any other Liability, including current or potential withdrawal liability, with respect to) any "multiemployer
plan" (as defined in Section 3(37) of ERISA), or any "defined benefit plan" (as defined in Section 3(35) of ERISA), whether or not terminated. 

        (ii)  Hosting
does not maintain or have any obligation to contribute to (or any other Liability with respect to) any plan or arrangement whether or not terminated, which
provides medical, health, life
insurance or other welfare-type benefits for current or future retired or terminated employees (except for limited continued medical benefit coverage required to be provided under COBRA). 

        (iii)  Hosting
does not maintain, contribute to or have any Liability under (or with respect to) any plan which is a "defined contribution plan" (as defined in
Section 3(34) of ERISA), whether or not terminated. 

        (iv)  Hosting
does not maintain, contribute to or have any Liability under (or with respect to) any Employee Benefit Plan providing benefits to current or former employees,
including any bonus plan, plan for deferred compensation, employee health or other welfare benefit plan or other arrangement, whether or not terminated. 

 
 
           (s)    Employee Benefits Relating to Networks.     

          (i)  Networks
does not have any obligation to contribute to (or any other Liability, including current or potential withdrawal liability, with respect to) any
"multi-employer plan" (as defined in Section 3(37) of ERISA), or any "defined benefit plan" (as defined in Section 3(35) of ERISA), whether or not terminated. 

        (ii)  Networks
does not maintain or have any obligation to contribute to (or any other Liability with respect to) any plan or arrangement whether or not terminated, which
provides medical, health, life insurance or other welfare-type benefits for current or future retired or terminated employees (except for limited continued medical benefit coverage
required to be provided under COBRA). 

        (iii)  Except
as set forth on Schedule 3(s) attached hereto, Networks does not maintain, contribute to or have any
Liability under (or with respect to) any employee plan which is a "defined contribution plan" (as defined in Section 3(34) of ERISA), whether or not terminated (the
"Networks Defined Contribution Plan"). No Acquired Asset is subject to any Lien under ERISA or the Code. 

        (iv)  Except
for the Networks Defined Contribution Plan and as set forth on Schedule 3(s) attached hereto, Networks
does not maintain, contribute to or have any Liability under (or with respect to) any Employee Benefit Plan providing benefits to current or former employees, including any bonus plan, plan for
deferred compensation, employee health or other welfare benefit plan or other arrangement, whether or not terminated. Such Employee Benefit Plans are referred to as the "Other
Networks Plans" and, together with the Networks Defined Contribution Plan, the "Networks Plans." 

        (v)  The
Networks Plans and all related trusts, insurance contracts and funds have been maintained, funded and administered in accordance with their terms and have complied
in form and in operation in
all material respects with the applicable requirements of ERISA, the Code and other applicable Laws. The requirements of COBRA have been met in all material respects with respect to each Networks Plan
which is an "employee welfare benefit plan" (as such term is defined in Section 3(1) of ERISA) which is subject to COBRA. 

30

 

        (vi)  Each
of the Networks Plans which is intended to be qualified under Section 401(a) of the Code has received a favorable determination from the Internal Revenue
Service that such Networks Plan is qualified under Section 401(a) of the Code, and there are no circumstances which could reasonably be expected to adversely affect the qualified status of any
such Networks Plan. All such Networks Plans have been or will be timely amended for the requirements of the Tax legislation commonly known as "GUST" and have been or will be submitted to the Internal
Revenue Service for a favorable determination letter within the remedial amendment period prescribed by GUST. 

      (vii)  No
action, suit, proceeding, hearing, or investigation with respect to the administration or the investment of the assets of any Networks Plan (other than routine
claims for benefits) is pending or, to the Knowledge of Networks, threatened which could result in or subject Networks to any material Liability, and there are no circumstances which could reasonably
be expected to give rise to any such actions, suits or claims. 

 
 
           (t)    Insurance.     Neither Hosting nor Networks is in material default with respect to its obligations under
   any insurance policy maintained by it, and neither Hosting nor Networks
has ever been denied insurance coverage. The insurance coverage of Hosting is customary for entities of similar size engaged in similar lines of business. The reserves set forth on the Hosting Balance
Sheets are adequate to cover all anticipated Liabilities with respect to all self-insurance or co-insurance programs. 

 
 
           (u)    Affiliate Transactions.     Except as set forth on the attached Schedule 3(u)
    attached hereto, no officer, director, employee,
stockholder, or other Affiliate of Hosting or any individual related by blood, marriage or adoption to any such individual or any entity in which any such Person or individual owns any beneficial
interest, is a party to any agreement, contract, commitment or transaction with Hosting or Networks or has any material interest in the Acquired Assets. 

 
 
           (v)    Brokerage.     Neither Hosting nor any Affiliate of Hosting has any Liability to pay (or has made any
   arrangement under which Hosting or VitalStream may be required to pay) any
fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement or the other Transaction Agreements. 

 
 
           (w)    Governmental Consent, etc.     No permit, consent, approval or authorization of, or declaration to or
   filing with, any Governmental Entity is required in connection with the execution, delivery
and performance by Hosting or Networks
of this Agreement or any other Transaction Agreement or the consummation by Hosting or Networks of any of the transactions contemplated hereby or thereby, except for filings with any Governmental
Entity which are required or permitted to be made after the date hereof pursuant to applicable federal and state securities Laws and blue sky Laws, which filings will be effected within the applicable
statutory periods. 

 
 
           (x)    Disclosure.     This Agreement, together with the annexes, schedules, exhibits and certificates supplied
   by Hosting or Networks or on behalf of Hosting or Networks with respect
to the transactions contemplated by this Agreement and the other Transaction Agreements, do not contain any untrue statement of a material fact, as of the date hereof, or omit to state a material fact
necessary to make the statements contained herein or therein, in light of the circumstances in which they were made, not misleading. 

 
 
           (y)    Capital Stock and Related Matters.     The authorized capital stock of Hosting consists of 1,000 shares
   of common stock, par value $0.01 per share, all of which shares of common stock are issued and
outstanding and owned by Networks. As of the date hereof, Hosting does not have outstanding any Equity Securities or Debt Securities, except for the shares of common stock held by Networks. 

31

 

 
 
           (z)    Investment in Purchase Shares.     

 
 
          (i)    Disclosure of Information.     Hosting hereby represents that representatives of each of the Purchase
  Share Distributees have received and reviewed all the information about VitalStream that
such Person needs to invest in the Purchase Shares and represents that representatives of each of the Purchase Share Distributees asked questions and received answers from VitalStream regarding the
terms and conditions of the offering of the Purchase Shares and the business, properties, prospects and condition (financial or otherwise) of VitalStream and the VitalStream Subsidiaries. The
foregoing, however, does not limit or modify the representations and warranties of VitalStream in Section 4 of this Agreement or the right of
Hosting to rely thereon. 

 
 
           (ii)    Investment Experience.     Hosting hereby represents that each of the Purchase Share Distributees is
   able to fend for itself, can bear the economic risk of its investment, has such
knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Purchase Shares and has been represented with respect to the
decision to invest in the Purchase Shares by Persons with such knowledge and experience in financial or business matters as to be capable of advising such Purchase Share Distributee with respect to
the decision to invest in the Purchase Shares. Hosting also represents none of the Purchase Share Distributees has been organized for the purpose of acquiring the Purchase Shares. 

 
 
           (iii)    Investment Intent; Own Account.     Except for the dividend or other distribution of the Purchase
   Shares by (A) Hosting to Networks, (B) Networks to Holdings and (C) Holdings to
one of more Purchase Share Distributees, Hosting hereby represents that it is acquiring the Purchase Shares for its own account, not as nominee or agent, with the present intention of holding such
securities for purposes of investment, and that it has no intention of selling such securities in a public distribution in violation of the federal securities Laws or any applicable state securities
Laws. Subject to the foregoing, Hosting further represents that neither it nor any Purchase Shares Distributee has any contract, undertaking or agreement with any Person to sell, transfer or grant
participations to such Person or to any other Person with respect to the Purchase Shares. 

 
 
          (aa)    Customers and Suppliers.     

          (i)  Except
as set forth on Schedule 3(aa) attached hereto, during the twelve (12) month period ending on the
date hereof, there has not been any material interruption or outage (other than as requested by a Hosting Business Customer) in the provision by Hosting or Networks to the Hosting Business Customers
of the goods and services provided by Hosting or Networks in the operation of its Hosting Business. 

        (ii)  Except
as set forth on Schedule 3(aa) attached hereto, no Hosting Business Customer which generated monthly
revenues in the one month period ended August 31, 2002 that accounted for in excess of $5,000 of the monthly revenues of the Hosting Business of Hosting or Networks, has terminated or
threatened in writing to terminate its relationship, or any agreement, with Hosting or Networks, as the case may be. 

        (iii)  Schedule 3(aa) attached hereto sets forth (A) a complete and accurate list of the name of each Hosting
Business Customer, together with the amount of revenue generated by such Hosting Business Customer during the one (1) month period ended August 31, 2002 and (B) a list of the
contact information of each such Hosting Business Customer. 

        (iv)  Schedule 3(aa) attached hereto contains a listing of all suppliers and vendors of the Hosting Business of Hosting
and Networks, together with complete contact information and 

32

 

the amount of expense incurred to such vendor or supplier during the one (1) month period ended October 31, 2002. 

 
 
           (bb)    Paid January Expenses.     Schedule 3(bb) attached
   hereto sets forth a list of all expenses (describing the payee of each expense, a
description of each expense and the amount of each expense) that (i) have been incurred by Hosting or Networks on or after January 1, 2003 in the Ordinary Course of Business (which list
does not include any expenses related to any Transaction Agreement or any expenses or Liabilities for breach of any agreement or related to any threatened or pending litigation) with respect to the
Hosting Business of
Hosting or Networks and (ii) have been paid by Hosting or Networks as of the Closing Date (all such expenses satisfying (i) and (ii) above shall hereinafter be referred to as the
"Paid January Expenses" and the aggregate amount of all such expenses shall hereinafter be referred to as the "Paid January
Expense Amount"). 

 
 
        4.    Representations and Warranties of VitalStream.     As a material inducement to Hosting and Networks to enter
into this Agreement, VitalStream and the Buyer, jointly and severally, hereby represent and warrant to
Hosting and Networks that the statements contained in this Section 4 are correct and complete as of the date hereof (or on the date as of which
they are made, in the case of any representation or warranty which specifically relates to an earlier date). 

 
 
           (a)    Organization, Corporate Power and Licenses.     Except as set forth on Schedule 4(a), each of VitalStream and its direct and indirect Subsidiaries
(including the Buyer) (collectively, the "VitalStream Subsidiaries") is a corporation duly organized, validly existing and in good standing under the
Laws of its respective jurisdiction of incorporation and is qualified to do business in every jurisdiction in which such qualification is required except where failure to be so qualified would not
reasonably be expected to have a VitalStream Material Adverse Effect. Each of VitalStream and the VitalStream Subsidiaries possess all requisite corporate power and authority and all material
licenses, permits and authorizations necessary to own and operate its properties, to carry on its business as now conducted and as presently proposed to be conducted and to carry out the transactions
contemplated by this Agreement and the other Transaction Agreements to which it is a party except where such failure would not reasonably be expected to have a VitalStream Material Adverse Effect. The
copies of VitalStream's and Buyer's charter documents and bylaws to which Hosting has been provided access reflect all amendments made thereto at any time prior to the date of this Agreement and are
correct and complete. 

 
 
           (b)    Approval and Consents; Authorization; No Breach.     Each of the Buying Parties full power and authority
   (including full corporate power and authority) to execute and deliver this Agreement and each of the other
Transaction Agreements to which it is a party and to perform its obligations hereunder and thereunder. Without limiting the generality of the foregoing, the execution and delivery by the Buying
Parties and the performance by the Buying Parties of this Agreement and each of the other Transaction Agreements to which either Buying Party is a party, and the consummation of the transactions
contemplated by this Agreement and the other Transaction Agreements have been duly authorized by the respective boards of directors of each of VitalStream and Buyer. Except as described above, no
other corporate proceedings on the part of any Buying Party is necessary to authorize the execution and delivery of this Agreement or any other Transaction Agreements by any of the Buying Parties and
the consummation by the Buying Parties of the transactions contemplated by this Agreement and the other Transaction Agreements. Each of this Agreement and the other Transaction Agreements to which any
of the Buying Parties is a party constitutes a valid and binding obligation of each such Buying Party, enforceable in accordance with its terms, except as such enforceability may be limited by
(i) applicable insolvency, bankruptcy, reorganization, moratorium or other similar Laws affecting creditors' rights generally, and (ii) applicable equitable principles (whether
considered in a proceeding at law or in equity). Except as set forth on Schedule 4(b) attached hereto, the execution and delivery by any of the 

33

 

Buying Parties of this Agreement and the other Transaction Agreements to which any of the Buying Parties is a party, and the fulfillment of and compliance with the respective terms hereof and thereof
by each such Buying Party do not and shall not (i) conflict with or result in a breach of the terms,
conditions or provisions of, (ii) constitute a default under or result in the violation of, (iii) result in the creation of any Lien upon the capital stock or assets of any of the Buying
Parties or any VitalStream Subsidiary pursuant to, (iv) give any third party the right to modify, terminate or accelerate any obligation under, or (v) require any authorization, consent,
approval, exemption or other action by or notice or declaration to, or filing with, any third party or any Governmental Entity (other than any filings required by state and federal securities Laws)
pursuant to, (A) the charter documents or bylaws of any of the Buying Parties or any VitalStream Subsidiary, (B) any Law or Legal Requirement to which any of the Buying Parties or any
VitalStream Subsidiary is subject, or (C) any material agreement, instrument, order, judgment or decree to which any of the Buying Parties or any VitalStream Subsidiary is subject. 

 
 
           (c)    Subsidiaries.     Schedule 4(c) attached hereto sets
   forth a complete and accurate list of the VitalStream Subsidiaries.
Except as set forth on Schedule 4(c) attached hereto, VitalStream has no Subsidiaries and does not own or control, directly or indirectly, any
shares of capital stock of any other corporation or any interest in any partnership, joint venture or other non-corporate business enterprise. All of the outstanding shares of capital
stock of each VitalStream Subsidiary are validly issued, full paid and nonassessable, and all such shares are owned by VitalStream or another of the VitalStream Subsidiaries free and clear of any Lien
and not subject to any option or right to purchase any such shares. Except as set forth on the Schedule 4(c) attached hereto, neither VitalStream
nor any of the VitalStream Subsidiaries owns or holds the right to acquire any shares of stock or any other Equity Security of any other Person. 

 
 
           (d)    Securities and Exchange Commission Reports and VitalStream Financial Statements.     The filings located
   on the Internet website of the Securities and Exchange Commission with respect to VitalStream (previously known as Sensar Corporation),
together with the filings delivered by VitalStream to Hosting prior to the execution of this Agreement, constitute a true and complete copy of each form, report, schedule, registration statement,
definitive proxy statement and other document (together with all amendments thereof and supplements thereto), filed by VitalStream or any of the VitalStream Subsidiaries with the Securities and
Exchange Commission since January 1, 2001 (as such documents have since the time of their filing been amended or supplemented, the "VitalStream Securities and Exchange
Commission Reports"), which are all the documents (other than preliminary material) that VitalStream and the VitalStream Subsidiaries were required to file with the Securities
and Exchange Commission since such date. As of their respective dates, the VitalStream Securities and Exchange Commission Reports (i) complied as to form in all material respects with the
requirements of the Securities Act, or the Exchange Act, as the case may be, and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The audited consolidated financial statements and
unaudited interim consolidated financial statements (including, in each case, the notes, if any, thereto) included in the VitalStream Securities and Exchange Commission Reports (the
"VitalStream Financial Statements") (A) complied as to form in all material respects with the published rules and regulations of the Securities
and Exchange Commission with respect thereto, (B) are accurate and complete in all material respects, (C) are consistent with the books and records of VitalStream and the VitalStream
Subsidiaries (which, in turn, are accurate and complete in all material respects), (D) were prepared in accordance with GAAP applied on a consistent basis during the periods involved (except
(1) with respect to audited statements, as may be indicated therein or in the notes thereto and (2) with respect to unaudited statements, subject to normal year-end audit
adjustments, which will not be material either individually or in the aggregate, an absence of required footnotes and as permitted by Form 10-Q of the Securities and 

34

 

Exchange Commission) and (E) fairly present the consolidated financial position of VitalStream and the VitalStream Subsidiaries as at the respective dates thereof and the consolidated results
of their operations and cash flows for the respective periods then ended. Except as set forth on Schedule 4(d) attached hereto, each VitalStream
Subsidiary is treated as a consolidated Subsidiary of VitalStream in the VitalStream Financial Statements for all periods covered thereby. 

 
 
           (e)    Notes and Accounts Receivable.     

          (i)  All
notes and accounts receivable of VitalStream and the VitalStream Subsidiaries are reflected properly on its books and records, are valid receivables arising from
bona fide transactions in the Ordinary Course of Business subject to no setoffs, Claims or refusals to pay, are current and collectible, and will be collected in accordance with their terms at their
recorded amounts, subject only to the reserve for bad debts set forth on the face of the Most Recent VitalStream Balance Sheet (rather than in any notes thereto) as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of VitalStream. Schedule 4(e) attached hereto contains a listing of all
of the accounts receivable of VitalStream and the VitalStream Subsidiaries as of August 31, 2002. Except as set forth on Schedule 4(e)
attached hereto, as of August 31, 2002, (a) no account or note debtor of VitalStream or any VitalStream Subsidiary is delinquent in payment by more than sixty (60) days and
(b) the aging schedule of the accounts receivable and notes receivable of VitalStream or any VitalStream Subsidiary included in  Schedule 4(e) is complete and accurate. 

        (ii)  Schedule 4(e) attached hereto contains a listing of all accounts payable and notes payable (which shall include
any service level agreement credits, services or goods that have been paid for but not provided or delivered, and similar items) that VitalStream and the VitalStream Subsidiaries will owe (or have any
Liability with respect to) as of August 31, 2002. Except as set forth on Schedule 4(e) attached hereto, as of August 31, 2002, all
accounts payable and notes payable of VitalStream and the VitalStream Subsidiaries arose from bona fide transactions in the Ordinary Course of Business and, no such account payable or note payable is
delinquent by more than sixty (60) days in its payment. 

 
 
          (f)    Guaranties.     Neither VitalStream nor any VitalStream Subsidiary is a guarantor of, or otherwise is
  liable for, and no assets or properties of VitalStream or any VitalStream
Subsidiary are subject to, or security for, any Liability (including Indebtedness) of any other Person. 

 
 
           (g)    Title to Assets; Condition of Assets; Sufficiency of Assets.     Each of VitalStream and the VitalStream
   Subsidiaries has good and marketable title to, or a valid leasehold interest in, the properties and assets of its
respective properties and assets used by it in the conduct of its business, located on its premises or shown on the Most Recent VitalStream Balance Sheet or acquired after the date thereof (other than
properties and assets disposed of in the Ordinary Course of Business since the date of the Most Recent VitalStream Balance Sheet), free and clear of all Liens, Claims, Indebtedness and restrictions on
transfer, except for (i) Permitted Liens and (ii) the Liens set forth on Schedule 4(g) attached hereto. The equipment and other
tangible assets of VitalStream and each of the VitalStream Subsidiaries are free from material defects (patent or latent), have been maintained in good operating condition and repair (subject to
normal wear and tear), and are suitable for the purpose for which they presently are used (including the conduct of the business of VitalStream and each of the VitalStream Subsidiaries) and are
proposed to be used by VitalStream and the
VitalStream Subsidiaries. VitalStream and the VitalStream Subsidiaries own, or have a valid leasehold interest in, all properties and assets (tangible and intangible) (including all licenses and other
forms of permission necessary to use any Intellectual Property Right owned by any third party and used by VitalStream and the VitalStream Subsidiaries in connection with their Hosting Business during
the ninety (90) day period prior to Closing) 

35

 

necessary for VitalStream and the VitalStream Subsidiaries to conduct their Hosting Business as presently conducted and are proposed to be used by VitalStream and the VitalStream Subsidiaries. 

 
 
           (h)    Absence of Undisclosed Liabilities.     Except as set forth on Schedule 4(h),
   neither VitalStream nor any VitalStream Subsidiary has any Liability
(and there is no basis for any present or future Claim giving rise to any Liability), except for (i) Liabilities not required to be reflected on a consolidated balance sheet of VitalStream and
the VitalStream Subsidiaries prepared in accordance with GAAP consistently applied in accordance with VitalStream's past practice, (ii) Liabilities set forth on the face of the Most Recent
VitalStream Balance Sheet (rather than in any notes thereto) and (iii) Liabilities which have arisen after the date of the Most Recent VitalStream Balance Sheet in the Ordinary Course of
Business (none of which results from, arises out of, relates to, is in the nature of, or was caused by any Claim, breach of contract, breach of warranty, tort, infringement, Environmental, Health, and
Safety Requirements or violation of Law). 

 
 
          (i)    Absence of Certain Developments.     Except as set forth in Schedule 4(i)
   attached hereto and for the transactions contemplated by this
Agreement and the other Transaction Agreements, since October 31, 2002, no event has occurred or is anticipated, and no fact or facts exists, that individually or in the aggregate have had or
could have a VitalStream Material Adverse Effect. Without limiting the generality of the foregoing, since October 31, 2002: 

          (i)  neither
VitalStream nor any VitalStream Subsidiary has sold, leased, transferred, or assigned any of its assets, tangible or intangible necessary for, or useful in, the
conduct of its business, other than for a fair consideration in the Ordinary Course of Business; 

        (ii)  neither
VitalStream nor any VitalStream Subsidiary has entered into any agreement, contract, lease, or license (or series of related agreements, contracts, leases, and
licenses) either involving more than $25,000 or outside the Ordinary Course of Business; 

        (iii)  no
party (including VitalStream or any VitalStream Subsidiary) has accelerated, terminated, modified, or cancelled any agreement, contract, lease, or license (or
series of related agreements, contracts, leases, and licenses) involving more than $25,000 to which VitalStream or any VitalStream Subsidiary is a party or by which any of them are bound; 

        (iv)  neither
VitalStream nor any VitalStream Subsidiary has imposed, or permitted to exist, any Liens (except for Permitted Liens) upon any of their assets, tangible or
intangible; 

        (v)  neither
VitalStream nor any VitalStream Subsidiary has made any capital expenditure (or series of related capital expenditures) either involving more than $25,000 or
outside the Ordinary Course of Business; 

        (vi)  neither
VitalStream nor any VitalStream Subsidiary has made any Investment in, any loan to, or any acquisition of the assets of, any other Person (or series of related
capital Investments, loans, and acquisitions) outside the Ordinary Course of Business; 

      (vii)  neither
VitalStream nor any VitalStream Subsidiary has issued any Debt Security or created, incurred, assumed, or Guaranteed any Indebtedness for borrowed money or
capitalized lease obligation either involving more than $10,000 singly or $50,000 in the aggregate; 

      (viii)  neither
VitalStream nor any VitalStream Subsidiary has delayed or postponed the payment of accounts payable or other Liabilities outside the Ordinary Course of
Business; 

        (ix)  neither
VitalStream nor any VitalStream Subsidiary has cancelled, compromised, waived, or released any right or Claim (or series of related rights and Claims) either
involving more than $10,000 or outside the Ordinary Course of Business; 

36

  

        (x)  neither
VitalStream nor any VitalStream Subsidiary has granted any license or sublicense of any rights under or with respect to any VitalStream Intellectual Property
Rights, other than in the Ordinary Course of Business; 

        (xi)  neither
VitalStream nor any VitalStream Subsidiary has experienced any damage, destruction, or loss (whether or not covered by insurance) to its properties or assets; 

      (xii)  neither
VitalStream nor any VitalStream Subsidiary has made any loan to, or entered into any other transaction with, any of its Affiliates, stockholders, directors,
officers or employees outside the Ordinary Course of Business; 

      (xiii)  neither
VitalStream nor any VitalStream Subsidiary has entered into any employment contract or collective bargaining agreement, written or oral, or modified the terms
of any existing such contract or agreement relating to or affecting any employee of VitalStream or any VitalStream Subsidiary; 

      (xiv)  neither
VitalStream nor any VitalStream Subsidiary has granted any increase in the base compensation of any of the directors, officers or employees of VitalStream or
any VitalStream Subsidiary outside the Ordinary Course of Business; 

      (xv)  neither
VitalStream nor any VitalStream Subsidiary has adopted, amended, modified, or terminated any bonus, profit sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of the directors, officers or employees of VitalStream or any VitalStream Subsidiary, or taken any such action with respect to any other Employee Benefit
Plan; 

      (xvi)  neither
VitalStream nor any VitalStream Subsidiary has made any other change in employment terms for any of the directors, officers or employees of VitalStream or any
VitalStream Subsidiary outside the Ordinary Course of Business; and 

    (xvii)  Neither
VitalStream nor any VitalStream Subsidiary has not collected any accounts receivable out of the Ordinary Course of Business; and 

    (xviii)  Neither
VitalStream nor any VitalStream Subsidiary has committed to any of the foregoing. 

 
 
           (j)    Compliance With Laws.     Neither VitalStream nor any VitalStream Subsidiary has violated any Law or
   Legal Requirement and neither VitalStream nor any VitalStream Subsidiary has received
any written notice alleging any such violation. 

 
 
           (k)    Litigation.     Except as set forth in Schedule 4(k)
   attached hereto, neither VitalStream nor any VitalStream Subsidiary is
(i) subject to any outstanding injunction, judgment, order, decree, ruling, or charge or (ii) a party or, to the Knowledge of VitalStream, threatened to be made a party to any Claim at
law or in equity, before any Governmental Entity or that could come before any arbitrator. None of the Claims set forth in Schedule 4(k) attached
hereto could, either individually or in the aggregate, result in or have a VitalStream Material Adverse Effect. Except as set forth in  Schedule 4(k), to the Knowledge of VitalStream, VitalStream
does not have any reason to believe that any such Claim may be brought against
VitalStream or any of the VitalStream Subsidiaries. 

 
 
           (l)    Contracts and Commitments.     

          (i)  Except
as disclosed in the VitalStream Securities and Exchange Commission Reports, as expressly contemplated by this Agreement or as set forth in  Schedule 4(l) attached hereto, 

37

 

neither VitalStream nor any VitalStream Subsidiary is a party to or bound by any written or oral: 

        (A)  pension,
profit sharing, stock option, employee stock purchase or other plan or arrangement providing for deferred or other compensation to employees or any other
employee benefit plan or arrangement, or any collective bargaining agreement or any other contract with any labor union, or severance agreements, programs, policies or arrangements; 

        (B)  contract
for the employment of any officer, individual employee or other Person on a full-time, part-time, consulting or other basis providing
annual compensation in excess of $75,000 or contract relating to loans to officers, directors or Affiliates (unless terminable at will without severance obligations); 

        (C)  contract
or agreement with any Governmental Entity entered into outside the Ordinary Course of Business; 

        (D)  contract
under which VitalStream or any VitalStream Subsidiary has advanced or loaned any other Person amounts in the aggregate exceeding $10,000; 

        (E)  agreement
or indenture relating to borrowed money or other Indebtedness or the mortgaging, pledging or otherwise placing a Lien (other than a Permitted Lien) on any
assets of VitalStream or any VitalStream Subsidiary; 

        (F)  Guarantee
of any Liability of any Person; 

        (G)  settlement,
conciliation or similar agreement under which such party has any future obligations or Liability; 

        (H)  lease
or agreement under which VitalStream or any VitalStream Subsidiary is lessee of or holds or operates any property, real or personal, owned by any other party,
except for any lease of real or personal property under which the aggregate annual rental payments do not exceed $25,000; 

        (I)  lease
or agreement under which VitalStream or any VitalStream Subsidiary is lessor of or permits any third party to hold or operate any property, real or personal, owned
or controlled by VitalStream or any VitalStream Subsidiary; 

        (J)  contract
or group of related contracts with the same party or group of Affiliated parties the performance of which involves the payment by VitalStream or any VitalStream
Subsidiary of consideration in excess of $25,000; annually; 

        (K)  assignment,
license, indemnification or agreement with respect to any intangible property (including any Intellectual Property Rights) entered into outside the Ordinary
Course of Business; 

        (L)  warranty
agreement with respect to its services rendered or its products sold or leased; 

        (M) agreement
under which it has granted any Person any registration rights (including demand and piggyback registration rights, any rights of first refusal or vetoes on the
sale of the Acquired Assets); 

        (N)  agreement
relating to any Investment; 

        (O)  contract
or agreement prohibiting it from freely engaging in any business or competing anywhere in the world; or 

38

 

        (P)  any
other agreement which is material to the operation of its Hosting Business or business prospects or involves a consideration in excess of $25,000; annually. 

        (ii)  All
of the contracts, agreements and instruments set forth in Schedule 4(l) attached hereto (the
"VitalStream Material Contracts") are valid, binding and enforceable in accordance with their respective terms, except as such enforceability may be
limited by (i) applicable insolvency, bankruptcy, reorganization, moratorium or other similar Laws affecting creditors' rights generally, and (ii) applicable equitable principles
(whether considered in a proceeding at law or in equity). Except as set forth on Schedule 4(l)(ii) attached hereto, VitalStream and each
VitalStream Subsidiary has performed all material obligations required to be performed by it under the VitalStream Material Contracts and is not in default under or in breach of nor in receipt of any
claim of default or breach under any VitalStream Material Contracts; no event has occurred which with the passage of time or the giving of notice or both would result in a default, breach or event of
noncompliance by VitalStream or any of the VitalStream Subsidiaries under any of the VitalStream Material Contracts; neither VitalStream nor any of the VitalStream Subsidiaries has any present
expectation or intention of not fully performing all such obligations; VitalStream does not have any Knowledge of any breach or anticipated breach of any material obligation to be performed by the
other parties to any of the VitalStream Material Contracts. 

        (iii)  Other
than VitalStream Material Contracts included as exhibits to the VitalStream Securities and Exchange Commission Reports, Hosting has been supplied with a true and
correct copy of each of the written VitalStream Material Contracts, together with all amendments, waivers or other changes thereto, and an accurate description of each of the oral VitalStream Material
Contracts. 

 
 
           (m)    Tax Matters.     

          (i)  Except
as set forth in Schedule 4(m) attached hereto, each of VitalStream and the VitalStream Subsidiaries has
filed all Tax Returns which it is required to file under applicable Laws. All such Tax Returns are complete and correct and have been prepared in compliance with all applicable Laws in all material
respects. Each of VitalStream and the VitalStream Subsidiaries has paid all Taxes due and owing by it (whether or not such Taxes are required to be shown on a Tax Return) and have withheld and paid
over to the appropriate taxing authority all Taxes which they were or are required to withhold from amounts paid or owing to any employee, stockholder, creditor or other third party. Neither
VitalStream nor any VitalStream Subsidiary has waived any statute of limitations with respect to any Taxes or agreed to any extension of time with respect to any Tax assessment or deficiency. The
accrual for Taxes on the Most Recent VitalStream Balance Sheet would be adequate to pay all Tax Liabilities
of VitalStream and any VitalStream Subsidiaries (A) if VitalStream's current Tax year were treated as ending on the date of the Most Recent VitalStream Balance Sheet (excluding any amount
recorded which is attributable solely to timing differences between book and Tax income), and (B) if VitalStream's current Tax year were treated as ending on the Closing Date and the accrual
for Taxes on the Most Recent VitalStream Balance Sheet was adjusted with the past custom and practice of VitalStream in filing its Tax Returns. Since the date of the Most Recent VitalStream Balance
Sheet, neither VitalStream nor any VitalStream Subsidiary has incurred any Liability for Taxes other than in the Ordinary Course of Business. The assessment of any additional Taxes for periods for
which Tax Returns have been filed by VitalStream or any VitalStream Subsidiary shall not exceed the recorded Liability therefor on the Most Recent VitalStream Balance Sheet (excluding any amount
recorded which is attributable solely to timing differences between book and Tax income). There has not been any audit of any Tax Return filed by VitalStream or any VitalStream Subsidiary. Neither
VitalStream nor any VitalStream Subsidiary has consented to any waiver 

39

 

of the statute of limitations for the assessment of any Taxes and had not requested any extension of time for the payment of any Taxes. There are no Liens for Taxes (other than Permitted Liens) upon
any of the assets of VitalStream or any VitalStream Subsidiary. No Claim has ever been made by an authority in a jurisdiction where VitalStream or any VitalStream Subsidiary does not file Tax Returns
that it is or may be subject to Taxation by that jurisdiction. No foreign, federal, state or local Tax audits or administrative or judicial proceedings are pending or being conducted with respect to
VitalStream or any VitalStream Subsidiary. No information related to Tax matters has been requested by any foreign, federal, state or local Taxing authority, no written notice indicating an intent to
open an audit or other review has been received by VitalStream or any VitalStream Subsidiary from any foreign, federal, state or local Taxing authority, and no notice of deficiency or proposed
adjustment for any amount of Tax proposed, asserted or assessed by a Taxing authority against VitalStream or any VitalStream Subsidiary has been received by VitalStream or any VitalStream Subsidiary
and there are no material unresolved questions or claims concerning VitalStream's or any VitalStream Subsidiary's Tax Liability. 

        (ii)  Neither
VitalStream nor any VitalStream Subsidiary has made an election under Section 341(f) of the Code. Neither VitalStream nor any VitalStream Subsidiary is
liable for the Taxes of another Person that is not a Subsidiary under (A) Treas. Reg. Section 1.1502-6 (or comparable provisions of state, local or foreign Law),
(B) as a transferee or successor, (C) by contract or indemnity or (D) otherwise. Neither VitalStream nor any VitalStream Subsidiary is a party to any Tax allocation or sharing
agreement. Neither VitalStream nor any VitalStream Subsidiary has made any payments, is not obligated to make payments and is not a party to an agreement that could obligate it to make any payments
that would not be deductible under Section 280G of the Code. 

 
 
          (n)    Real Property.     

          (i)  Neither
VitalStream nor any VitalStream Subsidiary owns any Real Property. Neither VitalStream nor any VitalStream Subsidiary is a party to any agreement or option to
purchase any Real Property or interest therein. 

        (ii)  Schedule 4(n)(ii) attached hereto sets forth a true and complete list of (A) the address of each parcel
relating to, used in connection with, or necessary or useful in, the operation or conduct of the business of VitalStream and the VitalStream Subsidiaries (collectively, the
"VitalStream Leased Real Property") and (B) the date and the names of the parties to each Real Property Lease in respect of each parcel of
VitalStream Leased Real Property (collectively, the "VitalStream Real Property Leases"). VitalStream has delivered to Hosting a true and complete copy
of each written VitalStream Real Property Lease, and in the case of any oral VitalStream Real Property Lease, a written summary of the material terms of such VitalStream Real Property Lease. Except as
set forth on Schedule 4(n)(ii) attached hereto, with respect to each VitalStream Real Property Lease: 

        (A)  such
VitalStream Real Property Lease is legal, valid, binding, enforceable and in full force and effect, except as such enforceability may be limited by
(1) applicable insolvency, bankruptcy, reorganization, moratorium or other similar Laws affecting creditors' rights generally and (2) applicable equitable principles (whether considered
in a proceeding at law or in equity); 

        (B)  the
transactions contemplated by this Agreement and the other Transaction Agreements do not require the consent of any other party to such VitalStream Real Property
Lease (except as set forth in Schedule 4(b) attached hereto), will not result in a breach of or default under such VitalStream Real Property
Lease, and will not otherwise 

40

 

cause such VitalStream Real Property Lease to cease to be legal, valid, binding, enforceable and in full force and effect on identical terms following the Closing; 

        (C)  VitalStream's
and the VitalStream Subsidiaries' possession and quiet enjoyment of the VitalStream Leased Real Property under such VitalStream Real Property Lease has not
been disturbed and there are no disputes with respect to such VitalStream Real Property Lease; 

        (D)  None
of VitalStream, any VitalStream Subsidiary or, to the Knowledge of VitalStream, any other party to such VitalStream Real Property Lease is in breach or default
under such VitalStream Real Property Lease, and no event has occurred or circumstance exists which, with the delivery of notice, the passage of time or both, would constitute such a breach or default,
or permit the termination, modification or acceleration of rent under such VitalStream Real Property Lease; 

        (E)  Neither
VitalStream nor VitalStream Subsidiary owes, or will owe in the future, any brokerage commissions or finder's fees with respect to such VitalStream Real Property
Lease; 

        (F)  The
other party to such VitalStream Real Property Lease is not an Affiliate of, and otherwise does not have any economic interest in, VitalStream or any VitalStream
Subsidiary; 

        (G)  Neither
VitalStream nor any VitalStream Subsidiary has subleased, licensed or otherwise granted any Person the right to use or occupy such VitalStream Leased Real
Property or any portion thereof; 

        (H)  Neither
VitalStream nor any VitalStream Subsidiary has collaterally assigned or granted any other Lien in such VitalStream Real Property Lease or any interest therein;
and 

        (I)  Except
as may arise by operation of law or under any VitalStream Real Property Lease, there are no Liens on the estate or interest created by such VitalStream Real
Property Lease. 

        (iii)  All
Improvements included in the VitalStream Leased Real Property are in good condition and repair and sufficient for the operation of VitalStream's and any
VitalStream Subsidiary's business as currently conducted thereon or contemplated to be conducted thereon. There are no structural deficiencies or latent defects affecting any of the Improvements and
there are no facts or conditions affecting any of the Improvements which would, individually or in the aggregate, interfere in any respect with the use or occupancy of the Improvements or any portion
thereof in the operation of VitalStream's and any VitalStream Subsidiary's business as currently conducted thereon or contemplated to be conducted thereon. 

        (iv)  There
is no condemnation, expropriation or other proceeding in eminent domain, pending or threatened, affecting any parcel of VitalStream Leased Real Property or any
portion thereof or interest therein. There is no injunction, decree, order, writ or judgment outstanding, nor any Claims, administrative actions or similar proceedings, pending or threatened, relating
to the ownership, lease, use or occupancy of the VitalStream Leased Real Property or any portion thereof, or the operation of VitalStream's and any VitalStream Subsidiary's business as currently
conducted thereon or contemplated to be conducted thereon. 

        (v)  The
VitalStream Leased Real Property is in compliance with all applicable Real Property Laws (including any Environmental, Health and Safety Requirements, zoning, 

41

 

planning, subdivision, platting or similar Laws) affecting the VitalStream Leased Real Property, and the current use and occupancy of the VitalStream Leased Real Property and operation of by
VitalStream and the VitalStream Subsidiaries of their business thereon does not violate any Real Property Laws. VitalStream has not received any notice of violation of any Real Property Law and there
is no basis for the issuance of any such notice or the taking of any action for such violation. There is no pending or anticipated change in any Real Property Law that will have a VitalStream Material
Adverse Effect on the ownership, lease, use or occupancy of any VitalStream Leased Real Property or any portion thereof in the continued operation of VitalStream's and any VitalStream Subsidiary's
business as currently conducted thereon or contemplate to be conducted thereon. 

 
 
           (o)    Environmental Matters.     

          (i)  Each
of VitalStream, the VitalStream Subsidiaries and their predecessors has complied and is in compliance with all Environmental, Health and Safety Requirements and
all permits thereunder. 

        (ii)  Neither
VitalStream, the VitalStream Subsidiaries nor any of their predecessors or Affiliates has received any written or oral notice, report or other information
regarding any actual or alleged violation of Environmental, Health, and Safety Requirements, or any Liabilities or potential Liabilities, including any investigatory, remedial or corrective
Liabilities, relating to any of them or their facilities arising under Environmental, Health, and Safety Requirements. 

        (iii)  Neither
VitalStream, the VitalStream Subsidiaries nor their predecessors and Affiliates has assumed or undertaken or otherwise become subject to any Liability,
including any Liability for corrective or remedial action, of any other Person relating to Environmental, Health, and Safety Requirements. 

        (iv)  No
facts, events or conditions relating to the past or present facilities, properties or operations of VitalStream, the VitalStream Subsidiaries, or any of their
predecessors or Affiliates will prevent, hinder or limit continued compliance with Environmental, Health, and Safety Requirements, give rise to any investigatory, remedial or corrective obligations
pursuant to Environmental, Health, and Safety Requirements, or give rise to any other Liabilities pursuant to Environmental, Health, and Safety Requirements, including any relating to onsite or
offsite releases or threatened releases of hazardous materials, substances or wastes, personal injury, property damage or natural resources damage. 

        (v)  None
of VitalStream, the VitalStream Subsidiaries or their predecessors or Affiliates has treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled, or released any substance, including any hazardous substance, or owned or operated any property or facility (and no such property or facility is contaminated by any such
substance) in a manner that has given rise to Liabilities or give rise to Liabilities, including any Liability for response costs, corrective action costs, personal injury, property damage, natural
resource damages or attorney fees, pursuant to CERCLA or any other Environmental, Health, and Safety Requirements 

        (vi)  VitalStream
has provided to Hosting copies of all material environmental reports, audits, assessments, and investigations, and any other material environmental
documents, related to the past or present facilities, properties or operations of VitalStream, the VitalStream Subsidiaries or their predecessors or Affiliates, to the extent the forgoing are in the
possession, custody, or control of VitalStream. 

42

 

 
 
          (p)    Intellectual Property Rights.     

          (i)  Each
of VitalStream and the VitalStream Subsidiaries own and possess all right, title and interest in and to, free and clear of any Liens, Claims, Indebtedness,
licenses, restrictions on transfer or any other restrictions or limitations, except for Permitted Liens, or has the right to use pursuant to a valid and enforceable, written license, sublicense,
agreement, or other permission, all Intellectual Property Rights relating to, or used in connection with, the operation or conduct of the business of VitalStream and the VitalStream Subsidiaries as
presently conducted (the "VitalStream Intellectual Property Rights"). The VitalStream Intellectual Property Rights will be owned or available for use by
VitalStream and the VitalStream Subsidiaries immediately subsequent to the Closing on identical terms and conditions as applicable to VitalStream immediately prior to the Closing. VitalStream has
taken all commercially reasonable actions to maintain and protect the VitalStream Intellectual Property Rights. 

        (ii)  To
the Knowledge of VitalStream, neither VitalStream nor the VitalStream Subsidiaries has interfered with, infringed upon, violated, misappropriated, or otherwise come
into conflict with any Intellectual Property Rights of any other Person and, to the Knowledge of VitalStream, the continued conduct and operation of its business as presently conducted and operated
will not interfere with, infringe upon, violate, misappropriate or otherwise come into conflict with any Intellectual Property Rights of any other Person. Neither VitalStream nor any VitalStream
Subsidiary has ever received any Claim or notice alleging any such interference, infringement, conflict, misappropriation, or violation (including, but not limited to, any Claim that VitalStream or
any VitalStream Subsidiary must license or refrain from using any Intellectual Property Rights of any other Person or any demand or offer to license any Intellectual Property Rights from any Person),
and VitalStream is not aware of any facts that indicate a likelihood of any of the foregoing. To the Knowledge of VitalStream, no third party has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any VitalStream Intellectual Property Rights, and VitalStream is not aware of any facts that indicate a likelihood of any of the foregoing. 

        (iii)  Schedule 4(p)(iii) attached hereto identifies (A) each patent or registration which has been issued to
VitalStream or any VitalStream Subsidiary with respect to any VitalStream Intellectual Property Rights and each pending patent application or application for registration which VitalStream or any
VitalStream Subsidiary has made with respect to any VitalStream Intellectual Property Rights (B) each license, sublicense, agreement, or other permission which VitalStream or any VitalStream
Subsidiary has granted to any Person with respect to any VitalStream Intellectual Property Rights (other than such licenses, sublicenses and other permissions as are granted in the Ordinary Course of
Business under the terms of VitalStream form licensing agreements) (together with any exceptions); (C) each material unregistered trademark, copyright, material unregistered service mark, trade
name, corporate name, Internet domain name, computer software item (other than commercially available off-the-shelf software purchased or licensed for less than a total cost of
$1,000 in the aggregate) within the VitalStream Intellectual Property Rights; and (D) any other material VitalStream Intellectual Property Rights. VitalStream has delivered to Hosting correct
and complete copies of all such patents, registrations, applications, licenses, sublicenses, agreements, and permissions (as amended to date) and has made available to Hosting correct and complete
copies of all other written documentation evidencing ownership and prosecution (if applicable) of each such item. 

        (iv)  Schedule 4(p)(iv) attached hereto identifies each VitalStream Intellectual Property Right that any third party
owns and that VitalStream or the VitalStream Subsidiaries use (or contemplate to use) pursuant to a written license, sublicense, agreement, or permission (other 

43

 

than commercially available off-the-shelf software purchased or licensed for less than a total cost of $1,000 in the aggregate). VitalStream has delivered to Hosting correct
and complete copies of all such licenses, sublicenses, agreements, and permissions (as amended to date). With respect to each Intellectual Property Right required to be identified on  Schedule 4(p)(iv) attached hereto: 

        (A)  the
license, sublicense, agreement, or permission covering such VitalStream Intellectual Property Right is legal, valid, binding, enforceable, and in full force and
effect; 

        (B)  the
license, sublicense, agreement, or permission covering such VitalStream Intellectual Property Right will continue to be legal, valid, binding, enforceable, and in
full force and effect on identical terms following the consummation of the transactions contemplated by this Agreement (including the assignments and assumptions referred to in  Section 2 of this
Agreement); 

        (C)  to
the Knowledge of VitalStream no party to the license, sublicense, agreement, or permission covering such VitalStream Intellectual Property Right is in breach or
default, and, to the Knowledge of VitalStream, no event has occurred which with notice or lapse of time would constitute a breach or default or permit termination, modification, or acceleration
thereunder; 

        (D)  to
the Knowledge of VitalStream no party to the license, sublicense, agreement, or permission covering such VitalStream Intellectual Property Right has repudiated any
provision thereof; 

        (E)  such
VitalStream Intellectual Property Right is not subject to any outstanding injunction, judgment, order, decree, ruling or charge; 

        (F)  no
Claim is pending or, to the Knowledge of VitalStream (and employees with responsibility for Intellectual Property Right matters), is threatened which challenges the
legality, validity, or enforceability of such VitalStream Intellectual Property Right and there are no grounds for the same; and 

        (G)  Neither
VitalStream nor any VitalStream Subsidiary has granted any sublicense or similar right with respect to the license, sublicense, agreement, or permission covering
such VitalStream Intellectual Property Right. 

        (v)  No
VitalStream Intellectual Property Right is subject to any outstanding injunction, judgment, order, decree, ruling, or charge. No Claim is pending or, to the Knowledge
of VitalStream (and employees with responsibility for Intellectual Property Right matters), is threatened which challenges the legality, validity, enforceability, use, or ownership of any VitalStream
Intellectual Property Right, and, to the Knowledge of VitalStream, there are no grounds for the same. To the Knowledge of VitalStream, no loss or expiration of any VitalStream Intellectual Property
Right is threatened, pending, or reasonably foreseeable, except for patents expiring at the end of their statutory terms (and not as a result of any act or omission by VitalStream or any VitalStream
Subsidiary, including, a failure by VitalStream or any VitalStream Subsidiary to pay any required maintenance fees). 

 
 
           (q)    Employees.     

          (i)  Except
as set forth on Schedule 4(q) attached hereto: 

        (A)  Neither
VitalStream nor any of the VitalStream Subsidiaries is a party to or bound by any collective bargaining agreement or relationship with any labor organization; 

44

  

        (B)  To
the Knowledge of VitalStream, no executive, key employee or group of employees has any plans to terminate their employment with any Buying Party or any VitalStream
Subsidiary; 

        (C)  to
the Knowledge of VitalStream, no labor organization or group of employees has filed any representation petition or made any written or oral demand for recognition; 

        (D)  no
union organizing or decertification efforts are underway or, to the Knowledge of VitalStream, threatened; 

        (E)  within
the past five (5) years no labor strike, work stoppage, slowdown, or other labor dispute has occurred, and none is underway or, to the Knowledge of
VitalStream, threatened; 

        (F)  there
is no workman's compensation Liability, experience or matter that would reasonably be expected to have a VitalStream Material Adverse Effect; and 

        (G)  there
is no employment-related charge, complaint, grievance, investigation, inquiry or Liability of any kind, pending or threatened in any forum, relating to an alleged
violation or breach by VitalStream or any VitalStream Subsidiary (or their officers or directors) of any Law, regulation or contract and, to the Knowledge of VitalStream, no facts or circumstances
exist that would reasonably be expected to give rise to such a charge, complaint, grievance, investigation, inquiry or Liability. 

        (ii)  Any
notice of the transaction contemplated by this Agreement required under any Law or collective bargaining agreement has been given, and all bargaining obligations
with any labor organization or other employee representative have been, or prior to Closing will be, satisfied. 

        (iii)  No
plant closing or mass layoff of employees has been implemented that could implicate the WARN Act. 

 
 
           (r)    Employee Benefits.     

          (i)  Neither
VitalStream nor any VitalStream Subsidiary has any obligation to contribute to (or any other Liability, including current or potential withdrawal liability,
with respect to) any "multiemployer plan" (as defined in Section 3(37) of ERISA), or any "defined benefit plan" (as defined in Section 3(35) of ERISA), whether or not terminated. 

        (ii)  Except
as set forth on Schedule 4(r) attached hereto, neither VitalStream nor any VitalStream Subsidiary
maintains or has any obligation to contribute to (or any other Liability with respect to) any plan or arrangement whether or not terminated, which provides medical, health, life insurance or other
welfare-type benefits for current or future retired or terminated employees (except for limited continued medical benefit coverage required to be provided under COBRA). 

        (iii)  Except
as set forth on Schedule 4(r) attached hereto, VitalStream does not maintain, contribute to or have any
Liability under (or with respect to) any employee plan which is a "defined contribution plan" (as defined in Section 3(34) of ERISA), whether or not terminated (the
"VitalStream Defined Contribution Plan"). 

        (iv)  Except
for the VitalStream Defined Contribution Plan and as set forth on Schedule 4(r) attached hereto, neither
VitalStream nor any VitalStream Subsidiary maintains, contributes to or has any Liability under (or with respect to) any Employee Benefit Plan providing benefits to current or former employees,
including any bonus plan, plan for deferred compensation, employee health or other welfare benefit plan or other arrangement, whether 

45

 

or not terminated. Such Employee Benefit Plans are referred to as the "Other VitalStream Plans" and, together with the VitalStream Defined Contribution
Plan, the "VitalStream Plans." 

        (v)  With
respect to the VitalStream Defined Contribution Plan and the Other VitalStream Plans (collectively, the "VitalStream
Plans"), all required or recommended (in accordance with historical practices) payments, premiums, contributions, reimbursements or accruals for all periods (or partial
periods) ending prior to or as of the date hereof shall have been made or properly accrued on the Most Recent VitalStream Balance Sheet. None of the VitalStream Plans has any material unfunded
Liabilities which are not reflected on the Most Recent VitalStream Balance Sheet. 

        (vi)  The
VitalStream Plans and all related trusts, insurance contracts and funds have been maintained, funded and administered in accordance with their terms and have
complied in form and in operation in all material respects with the applicable requirements of ERISA, the Code and other applicable Laws. The requirements of COBRA have been met in all material
respects with respect to each VitalStream Plan which is an "employee welfare benefit plan" (as such term is defined in Section 3(1) of ERISA) which is subject to COBRA. 

      (vii)  Each
of the VitalStream Plans which is intended to be qualified under Section 401(a) of the Code has received a favorable determination from the Internal
Revenue Service that such VitalStream Plan is qualified under Section 401(a) of the Code, and there are no circumstances which could reasonably be expected to adversely affect the qualified
status of any such VitalStream Plan. All such VitalStream Plans have been or will be timely amended for the requirements of the Tax legislation commonly known as "GUST" and have been or will be
submitted to the Internal Revenue Service for a favorable determination letter within the remedial amendment period prescribed by GUST. 

      (viii)  No
action, suit, proceeding, hearing, or investigation with respect to the administration or the investment of the assets of any VitalStream Plan (other than routine
claims for benefits) is pending or, to the Knowledge of VitalStream, threatened which could result in or subject VitalStream or any VitalStream Subsidiary to any material Liability, and there are no
circumstances which could reasonably be expected to give rise to any such actions, suits or claims. 

 
 
           (s)    Insurance.     Neither VitalStream nor any of the VitalStream Subsidiaries is in material default with
   respect to its obligations under any insurance policy maintained by it,
and neither VitalStream nor any of the VitalStream Subsidiaries has ever been denied insurance coverage. The insurance coverage of VitalStream and the VitalStream Subsidiaries is customary for
entities of similar size engaged in similar lines of business. The reserves set forth on the Most Recent VitalStream Balance Sheet is adequate to cover all anticipated Liabilities with respect to all
self-insurance or co-insurance programs. 

 
 
           (t)    Affiliate Transactions.     Except as set forth on the attached Schedule 4(t)
    attached hereto or in the VitalStream Securities and
Exchange Commission Reports, no officer, director, employee, stockholder, or other Affiliate of VitalStream or any of the VitalStream Subsidiaries or any individual related by blood, marriage or
adoption to any such individual or any entity in which any such Person or individual owns any beneficial interest, is a party to any agreement, contract, commitment or transaction with VitalStream or
any of the VitalStream Subsidiaries or has any material interest in any assets or property owned or used by VitalStream or any of the VitalStream Subsidiaries. 

 
 
           (u)    Brokerage.     Except as set forth on Schedule 4(u),
   neither VitalStream nor any of the VitalStream Subsidiaries has any
Liability to pay (or has made any arrangement under which VitalStream or any VitalStream Subsidiary may be required to pay) any fees or commissions to any 

46

 

broker, finder, or agent with respect to the transactions contemplated by this Agreement or the other Transaction Agreements. 

 
 
           (v)    Governmental Consent, etc.     No permit, consent, approval or authorization of, or declaration to or
   filing with, any Governmental Entity is required in connection with the execution, delivery
and performance by VitalStream or the Buyer of this Agreement or any other Transaction Agreement or the consummation by VitalStream or the Buyer of any of the transactions contemplated hereby or
thereby, except for filings with any
Governmental Entity which are required or permitted to be made after the date hereof pursuant to applicable federal and state securities Laws and blue sky Laws, which filings will be effected within
the applicable statutory periods. 

 
 
           (w)    Disclosure.     This Agreement, together with the VitalStream Securities and Exchange Commission Reports
   and the annexes, schedules, exhibits and certificates supplied by
VitalStream or the Buyer or on behalf of VitalStream or the Buyer or any of the other VitalStream Subsidiaries with respect to the transactions contemplated by this Agreement and the other Transaction
Agreements, do not contain any untrue statement of a material fact, as of the date hereof or thereof, as the case may be, or omit to state a material fact necessary to make the statements contained
herein or therein, in light of the circumstances in which they were made, not misleading. 

 
 
           (x)    Capital Stock and Related Matters.     

          (i)  The
authorized capital stock of VitalStream consists of (A) 290,000,000 shares of Common Stock, 24,488,933 of which shares of Common Stock are issued and
outstanding as of the date hereof and (B) 10,000,000 shares of Preferred Stock, no shares of which have been issued. As of the date hereof, VitalStream does not have outstanding any Equity
Securities, except as set forth on Schedule 4(x)(i)attached hereto. Except as required by the Articles of Incorporation, VitalStream is not
subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any of its Equity Securities. All of the outstanding shares of VitalStream's capital stock have been
validly issued and are fully paid and nonassessable. Immediately following the Closing, the Initial Purchase Shares shall represent 12.5% of the sum of (1) the number of shares of Common Stock
issuable pursuant to this Agreement at Closing plus (2) the number of shares of Fully Diluted Common Stock. 

        (ii)  Except
as set forth in Schedule 4(x)(ii) attached hereto, (A) as of the date of the stockholder list
attached as part of Schedule 4(x)(ii) attached hereto, no person owns of record or is known to VitalStream to own of record any Equity Securities
of VitalStream; (B) no subscription, warrant, option, convertible security, or other right (contingent or otherwise) to purchase or otherwise acquire Equity Securities of VitalStream issued by
VitalStream is authorized or outstanding; (C) there is no commitment of VitalStream to issue shares, subscriptions, warrants, options, convertible securities, or other such rights (contingent
or otherwise) or to distribute to holders of any of its Equity Securities or Debt Securities any evidence of Indebtedness or assets. Except as provided for in the Articles of Incorporation, or as set
forth in Schedule 4(x)(ii) attached hereto, VitalStream has no obligation (contingent or otherwise) to purchase, redeem, or otherwise acquire any
of its Equity Securities or Debt Securities or any interest therein or to pay any dividend or make any other distribution is respect thereof. All of the outstanding Equity Securities and Debt
Securities of VitalStream were issued in compliance with all applicable federal, provincial and state securities Laws. 

        (iii)  There
are no statutory or contractual stockholders preemptive rights or rights of refusal with respect to the issuance of the Purchase Shares. VitalStream has not
violated any applicable securities Laws in connection with the offer, sale or issuance of any of its capital stock, and (subject to the accuracy of the representations, acknowledgements and agreements 

47

 

contained in Section 3(z) and Section 6(c) of this Agreement), the offer, sale and
issuance of the Purchase Shares hereunder do not require registration under the Securities Act or any applicable state securities Laws. To VitalStream's Knowledge, except for the AKKAD Agreement and
the Investor Rights Agreement, there are no agreements between VitalStream's stockholders with respect to the voting or transfer of VitalStream's capital stock or with respect to any other aspect of
VitalStream's affairs other than as set forth in the Articles of Incorporation. 

 
 
           (y)    Issuance of the Purchase Shares.     The issuance, sale and delivery of the Purchase Shares in accordance
   with this Agreement, have been, or will be on or prior to the Closing, duly authorized by all
necessary corporate action on the part of VitalStream. The Purchase Shares, when so issued, sold and delivered against payment therefor in accordance with the provisions of this Agreement, will be
duly and validly issued, fully paid and non-assessable, free and clear of all Liens, and not subject to any preemptive rights. Subject to the accuracy of the representations,
acknowledgements and agreements contained in Section 3(z) and Section 6(c) of this
Agreement, the offer and sale of the Purchase Shares to Hosting will be in compliance with all applicable Laws. 

 
 
          (z)    Customers and Suppliers.     

          (i)  Except
as set forth on Schedule 4(z) attached hereto, during the twelve (12) month period ending on the
date hereof, there has not been any material interruption or outage (other than as requested by a customer of VitalStream or any VitalStream Subsidiary) in the provision by VitalStream or any
VitalStream Subsidiary to any customer of VitalStream or any VitalStream Subsidiary of the goods and services provided by VitalStream or any VitalStream Subsidiary in the operation of its Hosting
Business. 

        (ii)  Except
as set forth on Schedule 4(z) attached hereto, no customer of VitalStream or any VitalStream Subsidiary
which generated monthly revenues in the one month period ended October 31, 2002 that accounted for in excess of $5,000 of the monthly revenues of the Hosting Business operated by VitalStream
and any VitalStream Subsidiary has terminated or threatened in writing to terminate its relationship, or any agreement, with VitalStream or any VitalStream Subsidiary, as the case may be. 

 
 
          (aa)    Investment Company.     The Company is not an "investment company" as defined under the Investment
  Company Act of 1940. 

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

 
 
          (a)    General.     Each of the Parties will, and VitalStream will cause each of the VitalStream Subsidiaries to,
  use its reasonable best efforts to take all action and to do all
things necessary, proper or advisable in order to consummate and make effective the transactions contemplated by this Agreement and by the other Transaction Agreements (including satisfaction, but not
waiver, of the closing conditions set forth in Section 6(h)(i)of this Agreement). 

 
 
           (b)    Notices and Consents.     

          (i)  Each
of Hosting and Networks, will give any notices to third parties, and each of Hosting and Networks will use their respective reasonable best efforts to obtain any
third party consents required in connection with the consummation of the transactions contemplated by this Agreement and the other Transaction Agreements VitalStream may reasonably request in
connection with the matters contemplated herein and in the other Transaction Agreements. Each of Hosting and Networks, will give any notices to, make any filings with, and use its reasonable best
efforts to obtain any authorizations, consents and 

48

 

approvals of any Governmental Entity required in connection with the consummation of the transactions contemplated by this Agreement and the other Transaction Agreements. 

        (ii)  Each
of the Buying Parties will, and VitalStream will cause each of the other VitalStream Subsidiaries to, give any notices to third parties, and each of the Buying
Parties will, and VitalStream will cause each of the VitalStream Subsidiaries to, use their reasonable best efforts to obtain any third party consents required in connection with the consummation of
the transactions contemplated by this Agreement and the other Transaction Agreements Hosting may reasonably request in connection with the matters contemplated herein and in the Transaction
Agreements. Each of the Buying Parties will, and VitalStream will cause each of the other VitalStream Subsidiaries to, give any notices to, make any filings with, and use its reasonable best efforts
to obtain any authorizations, consents and approvals of any Governmental Entity required in connection with the consummation of the transactions contemplated by this Agreement and the other
Transaction Agreements. 

 
 
           (c)    Operation and Preservation of Business.     

          (i)  Each
of Hosting and Networks shall operate its Hosting Business in the Ordinary Course of Business consistent with prudent business practices and in compliance with
applicable Laws, and to the extent consistent therewith so as to preserve the current value and integrity of the Hosting Business of Hosting and the Acquired Assets, maintain insurance on the Acquired
Assets (in amounts and types consistent with past practice), and use its reasonable best efforts to preserve the goodwill and organization of the Hosting Business of Hosting and its relationships with
customers, suppliers and others having business dealings with it. Neither Hosting nor Networks will engage in any practice, take any action, or enter into any transaction outside the Ordinary Course
of Business of their respective Hosting Businesses. 

        (ii)  VitalStream
shall, and shall cause each of the VitalStream Subsidiaries to, operate its business in the Ordinary Course of Business consistent with prudent business
practices and in compliance with applicable Laws, and to the extent consistent therewith so as to preserve the current value and integrity of its business, and use its reasonable best efforts to
preserve the goodwill and organization of its business and its relationships with customers, suppliers and others having business dealings with it. VitalStream will not, and will cause each of the
VitalStream Subsidiaries not to, engage in any practice, take any action, or enter into any transaction (other than a transaction described in  Section 5(f) of this Agreement which shall be governed
by Section 5(f) of this Agreement)
outside the Ordinary Course of Business. 

 
 
           (d)    Full Access.     

          (i)  Each
of Hosting and Networks shall afford to VitalStream and its counsel, accountants, agents and other authorized representatives specified by VitalStream access
during business hours to their respective premises, properties, personnel, books, records (including Tax records), contracts and documents of or pertaining to the Acquired Assets in order that
VitalStream may have full opportunity to make such reasonable investigations as it shall desire to make of the affairs of the Acquired Assets and their respective Hosting Businesses. Each of Hosting
and Networks shall cause its officers and employees, and shall use its best efforts to cause their counsel and auditors to furnish such additional financial and operating data and other information as
VitalStream shall from time to time reasonably request including any internal control recommendations made by its independent auditors in connection with any audit of their respective Hosting
Businesses. From time to time prior to the Closing Date, each of Hosting and Networks shall promptly supplement or amend information previously delivered to VitalStream with respect to any matter
hereafter arising which, if existing or occurring at the date of this Agreement, would have been required to be 

49

 

set forth or disclosed herein; provided, however, that such supplemental information shall not be deemed to be an amendment to any schedule hereto and shall not change the risk allocation of this
Agreement between VitalStream, on the one hand, and Hosting and Networks, on the other hand. 

        (ii)  VitalStream
shall, and shall cause each of the VitalStream Subsidiaries to, afford to Hosting and its counsel, accountants, agents and other authorized representatives
specified by Hosting access during business hours to the premises, properties, personnel, books, records (including Tax records), contracts and documents of or pertaining to VitalStream and each of
the VitalStream Subsidiaries in order that Hosting may have full opportunity to make such reasonable investigations as it shall desire to make of the affairs of VitalStream and each of the VitalStream
Subsidiaries. VitalStream shall, and shall cause each of the VitalStream Subsidiaries to, cause its officers and employees, and shall use its best efforts to cause their counsel and auditors to
furnish such additional financial and operating data and other information as Hosting shall from time to time reasonably request including, any internal control recommendations made by its independent
auditors in connection with any audit of VitalStream and the VitalStream Subsidiaries. From time to time prior to the Closing Date, VitalStream shall promptly supplement or amend information
previously delivered to Hosting with respect to any matter hereafter arising which, if existing or occurring at the date of this Agreement, would have been required to be set forth or disclosed
herein; provided, however, that such supplemental information shall not be
deemed to be an amendment to any schedule hereto and shall not change the risk allocation of this Agreement between VitalStream, on the one hand, and Hosting and Networks, on the other hand. 

 
 
           (e)    Notice of Developments.     Each Party will give prompt written notice to the other Party of any material
   adverse development causing a breach of any of its own representations and
warranties set forth in Section 2(j) and Section 4 of this Agreement. No disclosure by any
Party pursuant to this Section 5(e), however, shall be deemed to amend or supplement any schedule attached hereto or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant. 

 
 
           (f)    Exclusivity.     

          (i)  During
the period beginning on the date of the execution of this Agreement and continuing until the earlier of (A) the termination of this Agreement and
(B) the consummation of the transactions contemplated by this Agreement, no Party (nor any of such Party's stockholders, directors, officers, employees, agents or representatives, if any) will,
without the prior written approval of each of the other Parties: 

        (A)  solicit,
initiate, encourage the submission or discuss any proposal or offer from any Person (other than the Parties) relating to any financing, acquisition, divestiture
or business combination of or involving the Hosting Business of such Party (including any acquisition or divestiture of any capital stock or other voting securities or any portion of the assets of
such Party and any acquisition structured as a merger, consolidation, or share exchange) other than communications necessary to advise Persons of such Party's lack of interest in any such proposal or
offer or 

        (B)  participate
in any discussions or negotiations regarding, furnish any information with respect to, assist or participate in, or facilitate in any other manner any effort
or attempt by any Person to do or seek any of the foregoing. 

        (ii)  For
the avoidance of any doubt, this Section 5(f) shall not prohibit any transaction involving, Holdings,
Networks or any of their respective Affiliates, stockholders, directors, officers, employees, agents or representatives in connection with any financing, acquisition, 

50

 

divestiture or business combination (including any acquisition or divestiture of any capital stock or other voting securities or any portion of the assets of such Party and any acquisition structured
as a merger, consolidation, or share exchange) of or involving the business and operations of Networks or Holdings (or any of their respective Subsidiaries) other than their respective Hosting
Business including, without limitation, the transactions contemplated by that certain Asset Purchase Agreement dated as of October 10, 2002, by and among Netifice, Holdings and Networks. 

        (iii)  Notwithstanding
anything to the contrary set forth in Section 5(f)(i) of this Agreement, this
Section 5(f) shall not prohibit (A) the issuance of Equity Securities of VitalStream upon the exercise of any options or warrants outstanding on the Closing Date, (B) the grant of
options by VitalStream pursuant to the VitalStream 2001 Stock Incentive Plan, (C) the discussion by VitalStream of any transaction involving VitalStream or any VitalStream Subsidiary or any of
their respective Affiliates, stockholders, directors, officers, employees, agents or representatives (each a "VitalStream Party") in connection with any
financing, acquisition, divestiture or business combination (including any acquisition or divestiture of any Equity Securities or any portion of the assets of such VitalStream Party and any
acquisition structured as a merger, consolidation or share exchange) of or involving the business and operations of VitalStream or any VitalStream Subsidiary (a "VitalStream
Transaction") provided, however, that such VitalStream Party shall promptly update Dolphin as to any material information
regarding a VitalStream Transaction and provide Dolphin with at least a weekly update of such discussions (in writing, if Dolphin shall so request) regarding any VitalStream Transaction and copies of
all term sheets, agreements and any other documentation or correspondence prepared for or in connection with such VitalStream Transaction and provided
further, that no VitalStream Party shall enter into any term sheet, contract or other agreement or arrangement (whether written or oral) upon the earlier to occur of
(1) December 31, 2002, and (2) that date that is fifteen days following the Closing Date. VitalStream hereby represents and warrants that neither VitalStream, any VitalStream
Subsidiary nor, to the Knowledge of VitalStream, any other VitalStream Party has entered into any executory agreement which has not yet terminated or accepted any commitment with respect to any
VitalStream Transaction. 

 
 
        6.    Additional Agreements.     

 
 
           (a)    General.     At any time after the Closing, if any further action is necessary or desirable to carry out
   the purposes of this Agreement or any other Transaction Agreement
(including any action necessary to transfer, convey and assign the Acquired Assets to VitalStream and to put VitalStream in the possession and operating control of the Acquired Assets), each of the
Parties will take such further action (including the execution and delivery of such further instruments and documents of sale, transfer, conveyance, assignment and confirmation) as any other Party may
request, at the sole cost and expense of the requesting Party (unless the requesting Party is entitled to indemnification therefor under  Section 8 of this Agreement). Each of Hosting and Networks
acknowledges and agrees that from and after the Closing Date VitalStream will be
entitled to possession of all documents, books, records (including Tax records), agreements, and financial data of any sort relating to the Hosting Business of Hosting or the Acquired Assets. Networks
acknowledges and agrees that from and after the Closing Date VitalStream will be entitled to possession of all documents, books, records (including Tax records), agreements, and financial data of any
sort relating solely to the Hosting Business of Networks. 

 
 
           (b)    Litigation Support.     At any time after the Closing, in the event and for so long as any Party actively
   is contesting or defending against any Claim in connection with (i) any
transaction contemplated under this Agreement or any Transaction Agreement or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to 

51

 

act, or transaction on or prior to the Closing Date involving the Hosting Business of Hosting or Networks or the Acquired Assets, the other Parties will (and VitalStream will cause each of the
VitalStream Subsidiaries to) cooperate with the contesting or defending Party and its counsel in the contest or defense, make available its personnel, and provide such testimony and access to its
books and records as shall be necessary in connection with the contest or defense, all at the sole cost and expense of the contesting or defending Party (unless the contesting or defending Party is
entitled to indemnification therefor under Section 8 of this Agreement). 

 
 
           (c)    Purchase Shares.     

          (i)  The
Purchase Shares issued pursuant to this Agreement will be imprinted with a legend substantially in the following form: 

"THE
SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES REPRESENTED BY THIS INSTRUMENT
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. 

"THE
TRANSFER OF THE SECURITIES REPRESENTED BY THIS INSTRUMENT ARE SUBJECT TO THE CONDITIONS SPECIFIED IN THE AMENDED AND RESTATED ASSET PURCHASE AGREEMENT, DATED AS OF JANUARY 15, 2003, AMONG THE
ISSUER OF SUCH SECURITIES (THE "COMPANY") AND THE OTHER PARTIES REFERRED TO THEREIN, AS AMENDED AND MODIFIED FROM TIME TO TIME, AND THE COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH
SECURITIES UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. A COPY OF SUCH CONDITIONS SHALL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN
REQUEST." 

        (ii)  Hosting
acknowledges and agrees that the Purchase Shares it is acquiring pursuant to this Agreement are characterized as "restricted securities" under the federal
securities Laws inasmuch as they are being acquired from VitalStream in a transaction not involving a public offering and that under such Laws such securities may be resold without registration under
the Securities Act only in certain limited circumstances as set forth in this Section 6(c). Restricted Securities are transferable only pursuant
to (A) public offerings registered under the Securities Act, (B) Rule 144 or Rule 144A adopted by the Securities and Exchange Commission under the Securities Act (as such
rule may be amended from time to time) or any similar rule or regulation hereafter adopted by the Securities and Exchange Commission if the exemption from registration under such rule is available and
(C) subject to the conditions specified in Section 6(c)(iii) below, any other legally available means of transfer. 

52

  

        (iii)  In
connection with the transfer of any Restricted Securities (other than a transfer described in  Section 6(c)(ii) of this Agreement), the holder thereof shall deliver written notice to VitalStream
describing in reasonable detail the transfer
or proposed transfer, together with an opinion of legal counsel which is knowledgeable in securities Law matters to the effect that such transfer of Restricted Securities may be effected without
registration of such Restricted Securities under the Securities Act. In addition, if the transferring holder delivers to VitalStream an opinion of such legal counsel that no subsequent transfer of
such Restricted Securities shall require registration under the Securities Act, VitalStream shall promptly upon such contemplated transfer deliver new certificates for such Restricted Securities which
do not bear the Securities Act legend set forth in Section 6(c)(i) of this Agreement. If VitalStream is not required to deliver new certificates
for such Restricted Securities not bearing such legend, the holder thereof shall not transfer the same until the prospective transferee has confirmed to VitalStream in writing its agreement to be
bound by the conditions contained in this Section 6(c). 

        (iv)  Notwithstanding
any provision of this Agreement to the contrary, upon the request of the holders of a majority of the Purchase Shares, VitalStream shall promptly supply
to such holders or their prospective transferees all information regarding VitalStream required to be delivered in connection with a transfer pursuant to Rule 144A adopted by the Securities and
Exchange Commission under the Securities Act (as such rule may be amended from time to time) or any similar rule or regulation hereafter adopted by the Securities and Exchange Commission. 

        (v)  If
any Restricted Securities become eligible for sale pursuant to Rule 144(k) adopted by the Securities and Exchange Commission under the Securities Act (as such
rule may be amended from time to time) or any similar rule or regulation hereafter adopted by the Securities and Exchange Commission, VitalStream shall, upon the request of the holder of such
Restricted Securities remove the legend set forth in Section 6(c)(i) of this Agreement from the certificates for such Restricted Securities. 

 
 
           (d)    Employees.     As of the Closing Date, Networks shall terminate the employment of each individual
   currently employed by Networks and listed on Annex
1 (the "Eligible Networks Employees"). As of the Closing Date, VitalStream will offer employment to the Eligible Networks
Employees on such terms and conditions as VitalStream shall determine in its sole discretion. Those Eligible Networks Employees who accept such offer of employment as of the Closing Date shall be
referred to herein as the "Transferred Employees." Notwithstanding the provisions of this  Section 6(d), nothing in this Agreement shall limit
VitalStream's ability to terminate the employment of any Transferred Employee at any time and
for any reason, including without cause. Networks shall be liable for all severance costs and other Liabilities incurred as a result of the termination of the Transferred Employees other than those
severance costs and other Liabilities expressly assumed by VitalStream pursuant to the terms of this Agreement. VitalStream will use its reasonable best efforts to assist Networks in obtaining
releases of Liability of Hosting and Networks from all Transferred Employees. 

 
 
           (e)    Non-Competition; Non-Interference; Non-Solicitation.     As a significant inducement to the Buying
   Parties to enter into and perform their obligations under this Agreement, each of Networks and Hosting (collectively,
the "Noncompeting Parties"), hereby agree as follows: 

          (i)  Each
Noncompeting Party acknowledges that (A) a principal business of Hosting is the Hosting Business of Hosting; (B) Hosting and Networks are among a
limited number of Persons who have developed a Hosting Business; (C) the Hosting Business of Hosting and Networks is, in part, national and international in scope; (D) the agreements and
covenants of each Noncompeting Party contained in this Section 6(e)(i) are essential to the business and 

53

 

goodwill of the Hosting Business of Hosting and Networks and the use by VitalStream of the Acquired Assets and the conduct by VitalStream of the Hosting Business of Hosting and Networks; and
(E) VitalStream would not have entered into this Agreement and would not have purchased the Acquired Assets but for the covenants and agreements set forth in this  Section 6(e)(i). Accordingly,
each of the Noncompeting Parties covenants and agrees that: 

        (A)  During
the period commencing on the Closing Date and ending five (5) years following the Closing Date (the "Restricted
Period"), none of the Noncompeting Parties will directly or indirectly, own, operate, manage, control, participate in, consult with, advise, permit its name to be used by,
provide services for, lease, or in any manner engage in any business that manufactures or sells any products or provides any services which are in competition with any products or services of the
Hosting Business of Hosting and Networks anywhere in the United States, as such businesses exist as of the Closing Date (collectively, "Covered
Activities"). 

        (B)  At
all times after the date hereof, each of the Noncompeting Parties shall keep secret and retain in strictest confidence all Confidential Information, and shall not use
for its benefit or for the benefit of any third party, any and all Confidential Information and shall not disclose any Confidential Information to anyone outside of each of the Noncompeting Parties
and their Affiliates and advisors who do not presently have such Confidential Information, except with the express written consent of VitalStream and except for Confidential Information which is at
the time of receipt or thereafter becomes publicly known through no wrongful act of any of the Noncompeting Parties of their Affiliates. 

        (C)  During
the Restricted Period, none of the Noncompeting Parties shall, without the prior written consent of VitalStream, directly or indirectly, (i) induce or
attempt to induce any employee of any Buying Party to leave the employ of any Buying Party, (ii) employ any employee of any Buying Party when employed by any Buying Party, (iii) in any
other way interfere with the relationship between any Buying Party and any employee of any Buying Party, (iv) employ during the period commencing from the date hereof and ending two
(2) years following the Closing Date any Person (other than a Transferred Employee) who is employed by any Buying Party during such period, or (v) induce or attempt to induce any
customer, supplier, licensee, licensor, reseller, partner or franchisee of any Buying Party (including any Hosting Business Customer) to cease doing business with any Buying Party,
or in any way interfere with the relationship between any such customer, supplier, licensee, licensor, reseller, partner or franchisee or business relation and any Buying Party. 

        (ii)  Each
of Networks and Hosting further acknowledge and agree that: 

        (A)  the
covenants set forth in Section 6(e)(i) of this Agreement are reasonable in geographical and temporal scope and
in all other respects, 

        (B)  VitalStream
would not have entered into this Agreement but for the covenants of Hosting and Networks contained herein, and 

        (C)  the
covenants contained herein have been made in order to induce VitalStream to enter into this Agreement and purchase the Acquired Assets from which VitalStream will
receive substantial benefit. 

        (iii)  If,
at the time of enforcement of the covenants contained in Section 6(e)(i) of this Agreement, a court shall
hold that the duration, scope or geographic restrictions stated therein are unreasonable under circumstances then existing, the Parties agree that the maximum duration, scope or geographic area
reasonable under such circumstances shall be 

54

 

substituted for the stated duration, scope or geographic area (and any court or other adjudicator interpreting these provision is hereby authorized to so amend this Agreement). 

        (iv)  For
the avoidance of any doubt, this Section 6(e) shall not prohibit any transaction by Networks or any assignee
of Networks pursuant to which Networks or any such assignee shall lease the premises located at 555 Anton Blvd, Costa Mesa California, to any third party for the purpose of the conduct by such third
party of its colocation business. 

 
 
           (f)    No Assignment Causing Breach.     Notwithstanding anything in this Agreement, neither this Agreement nor
   any document or instrument delivered pursuant hereto shall constitute an assignment of an
Acquired Asset (including any Claim, contract, commitment, sales order or purchase order or any right or any benefit arising thereunder or resulting therefrom) if an attempted assignment thereof
without the consent of any other Person would constitute a breach thereof or in any way adversely affect the rights to be assigned. Until such consent is obtained, or if an attempted assignment
thereunder would be ineffective or would affect the rights of Hosting thereunder so that VitalStream, would not in fact receive all such rights, Hosting on the one hand, and VitalStream, on the other
hand, will cooperate with each other to provide for the benefits of, and to permit VitalStream to assume all Liabilities under, any such Acquired Asset or Assumed Liability including enforcement at
the request and expense of VitalStream for the benefit of VitalStream any and all rights of Hosting against any Person thereto arising out of the breach or
cancellation thereof by such Person; and any transfer or assignment to VitalStream by Hosting of any Acquired Asset which shall require the consent or approval of any Person shall be made subject to
such consent or approval being obtained. 

 
 
           (g)    Mail, Notices and Other Correspondence.     

          (i)  After
the Closing, Hosting and Networks shall deliver or cause to be delivered to VitalStream, promptly after receipt by Hosting or Networks, as the case may be, all
mail, notices and other correspondence relating to the Acquired Assets or the Hosting Business of Hosting or Networks. 

        (ii)  After
the Closing, each of VitalStream and the Buyer shall deliver or cause to be delivered to Hosting, promptly after receipt by VitalStream or the Buyer
(A) all mail, notices and other correspondence which do not relate to the Acquired Assets or the Hosting Business of Hosting or Networks, (B) all payments in respect of any accounts or
notes receivable which constitute an Excluded Asset or (C) any other Excluded Asset that comes into its possession at any time after the Closing. 

 
 
          (h)    Tax Matters.     

          (i)  Hosting
and Networks will be responsible for the preparation and filing of all Tax Returns for Hosting and Networks for all periods as to which Tax Returns are due
after the Closing Date (including the consolidated, unitary, and combined Tax Returns for Hosting and Networks which include the operations of the Hosting Business of Hosting and Networks for any
period ending on or before the Closing Date); provided, however, that VitalStream, will reimburse Hosting or Networks, as the case may be, concurrently therewith to the extent any payment Hosting or
Networks, as the case may be, is making relates to the operations of the Hosting Business of Hosting and Networks for any period beginning after the Closing Date. 

        (ii)  VitalStream
will be responsible for the preparation and filing of all Tax Returns for the Acquired Assets for all periods as to which Tax Returns are due after the
Closing Date (other than for Tax Returns of Hosting and Networks described in Section 6(h)(i) of this Agreement). VitalStream will make all
payments required with respect to any such Tax Return; provided, however, that Hosting or Networks, as the case may be, will reimburse VitalStream concurrently therewith to the extent any payment
VitalStream is making relates to 

55

 

the operations of the Hosting Business of Hosting and Networks for any period ending on or before the Closing Date. 

        (iii)  Notwithstanding
anything in Section 6(h)(i) and  Section 6(h)(ii) to the contrary, Hosting shall pay, or reimburse VitalStream for, all sales Tax payable to the
State of California as a result
of the purchase and sale of the Acquired Assets pursuant to the Transaction Agreements. 

 
 
           (i)    Notice of Assignment.     Hosting shall promptly after the Closing Date notify the Hosting Business
   Customers of the assignment of their service contracts to the Buyer and shall instruct
the Hosting Business Customers to make payments for the services provided by Buyer directly to the Buyer in accordance with instructions from Buyer. 

 
 
          (j)    Updating Hosting Contracts List     

          (i)  At
any time and from time to time following the Closing Date, if Hosting discovers the existence of an Omitted Hosting Contract, Hosting shall deliver to the Buyer and
VitalStream an addendum to Schedule 3(l) attached hereto listing such Omitted Hosting Contract (each, a "Contract
Addendum"), together with a true, correct and complete copy of such Omitted Hosting Contract. The Buyer shall have ten (10) days after their receipt of the Contract
Addendum to review the Contract Addendum. To the extent (a) the document listed on the Contract Addendum is an Omitted Hosting Contract and (b) the performance of such Omitted Hosting
Contract, when aggregated with all other Omitted Hosting Contracts listed on Contract Addenda previously delivered to the Buyer and VitalStream involves the payment by or to Hosting of consideration
less than or equal to $20,000 annually, such Omitted Hosting Contract shall automatically be deemed to have been accepted by the Buyer as a Hosting Contract and added to  Schedule 3(l) attached
hereto as of the date hereof. To the extent either (A) the document listed on the Contract Addendum is not an
Omitted Hosting Contract or (B) the performance of such Omitted Hosting Contract, when aggregated with all other Omitted Hosting Contracts listed on Contract Addenda previously delivered to the
Buyer and VitalStream involves the payment by or to Hosting of consideration greater than $20,000 annually, the Buyer may reject any such asserted Omitted Hosting Contract by delivering written notice
(the "Buyer Rejection Notice") to Hosting indicating its rejection of such asserted Omitted Hosting Contract and the reason for such rejection prior to
the expiration of the ten (10) day period referred to above. If the Buyer does not deliver a Buyer Rejection Notice within the ten (10) day period described above, the Omitted Hosting
Contract described in the respective Contract Addendum shall be deemed to have been accepted by the Buyer as a Hosting Contract and added to  Schedule 3(l) attached hereto as of the date hereof. In
the event of a dispute regarding whether an asserted Omitted Hosting Contract may, or may
not, be rejected, Hosting and the Buyer shall, in good faith, attempt to resolve the dispute within fifteen (15) days after Hosting's receipt of the Buyer Rejection Notice. 

        (ii)  At
any time and from time to time following the Closing Date if the Buyer discovers the existence of an Omitted Hosting Contract, the Buyer may, in its discretion,
deliver to Hosting a demand that Hosting deliver a Contract Addendum listing such Omitted Hosting Contract (a "Contract Demand"). Hosting shall have ten
(10) days after its receipt of the Contract Demand to review the Contract Demand. To the extent the document identified in the Contract Demand is an Omitted Hosting Contract, Hosting shall,
within the ten (10) day period described above, deliver a Contract Addendum listing such Omitted Hosting Contract (which the Buyer will be deemed to have accepted with respect to the relevant
Omitted Hosting Contract). To the extent the document identified in the Contract Demand is not an Omitted Hosting Contract, Hosting may reject any such asserted Omitted Hosting Contract by 

56

 

delivering written notice (a "Hosting Rejection Notice") to the Buyer indicating its rejection of such asserted Omitted Hosting Contract and the reason
for such rejection prior to the expiration of the ten (10) day period referred to above. If Hosting does not deliver a Hosting Rejection Notice within the ten (10) day period referred to
above, the Omitted Hosting Contract described in the respective Contract Addendum shall be deemed to have been accepted Hosting and the Buyer as a Hosting Contract and added to  Schedule 3(l)
attached hereto as of the date hereof. In the event of a dispute regarding whether an asserted Omitted Hosting Contract may, or may
not, be rejected, Hosting and the Buyer shall, in good faith, attempt to resolve the dispute within fifteen (15) days after the Buyer's receipt of the Hosting Rejection Notice. 

 
 
          (k)    Post-Closing Certifications and Deliveries.     Within ten (10) days of the Closing Date, VitalStream
  shall deliver to Hosting a list identifying, as of the Closing Date, each of the stockholders of
record of the Company and the number of shares of Common Stock held by such stockholders of record, together with a certification executed by an officer of VitalStream certifying that, except as set
forth on such list, there were no shares of Common Stock issued or outstanding on the Closing Date. 

 
 
          (l)    Additional Software Licenses.     Hosting and Networks shall each use their good faith reasonable efforts
  to transfer all right, title and interest, if any, held by each of them in and to each of
the software licenses set forth on Schedule 6(l) attached hereto. Notwithstanding the foregoing, VitalStream hereby acknowledges that to the
extent Hosting or Networks do not have any right, title or interest in such software licenses, such software licenses shall not be transferred to VitalStream pursuant to this  Section 6(l).

 
 
          (m)    Reimbursement For Paid January Expenses.     Promptly following the receipt by Buyer and/or VitalStream of
  Cash with respect to accounts receivable generated as a result of sales of products and/or services
to the Hosting Business Customers on or after January 1, 2003 (whether such receipt results through collections by Buyer and/or VitalStream or as a result of the collection efforts of a third
party on behalf of Buyer and/or VitalStream) in an aggregate amount equal to the Paid January Expense Amount, Buyer and/or VitalStream shall pay to Hosting an amount equal to the Paid January Expense
Amount. Notwithstanding anything in this Section 6(m) to the contrary, the aggregate amount Buyer and/or VitalStream shall be obligated to pay to
Hosting pursuant to this Section 6(m) shall not exceed the Paid January Expense Amount. 

 
 
           (n)    Reimbursement For Unpaid January Expenses.     

          (i)  From
time to time following the Closing Date, Buyer hereby agrees, subject to and in accordance with the provisions of this  Section 6(n), to pay all expenses that (A) have been incurred by Hosting
or Networks during the period beginning on January 1, 2003
and ending on the Closing Date in the Ordinary Course of Business with respect to the Hosting Business of Hosting or Networks (other than expenses or Liabilities related to any Transaction Agreement,
any expenses or Liabilities related to any breach or violation of any agreement, Legal Requirement or Intellectual Property Right or any expenses or Liabilities related to, or arising out of, any
litigation), (B) arise (1) from the sale of goods or services by Hosting or Networks to the Hosting Business Customers (which expenses described in this
clause (1) shall not exceed $2,000), (2) under the Hosting Contracts assumed by Buyer or (3) with respect to the Transferred Employees and (C) are not a Paid January
Expense (ie. not set forth on Schedule 3(bb) attached hereto) (all such expenses satisfying (A), (B) and (C) above shall
hereinafter be referred to as the "Unpaid January Expenses"). Upon receipt of an invoice, bill or agreement in respect of an Unpaid January Expense,
Hosting shall provide Buyer with a copy of such invoice, bill or agreement along with a written notice (each, an "Unpaid January Expense Notice")
setting forth the payee of such expense, a description of such expense and 

57

 

the amount of such expense (each, an "Unpaid January Expense Amount") and stating whether or not such expense has been paid in full or in part by
Hosting or Networks. Upon request, Hosting shall provide to Buyer such additional information as Buyer may reasonably request to confirm that such expense is an Unpaid January Expenses and whether or
not such Unpaid January Expense has been paid in full or in part by Hosting or Networks. 

        (ii)  Promptly
following the receipt by Buyer and/or VitalStream of Cash with respect to accounts receivable generated as a result of sales of products and/or services to the
Hosting Business Customers on or after January 1, 2003 (whether such receipt results through collections by Buyer and/or VitalStream or as a result of the collection efforts of a third party on
behalf of Buyer and/or VitalStream) in an aggregate amount equal to the sum of (A) the Paid January Expense Amount plus (B) the aggregate
of all Unpaid January Expense Amounts as set forth in all Unpaid January Expense Notices submitted by Hosting to Buyer, Buyer and/or VitalStream shall (1) pay to Hosting an amount equal to the
amount of such Unpaid January Expense Amount paid by Hosting or Networks and/or (2) pay on behalf of Hosting or Networks each Unpaid January Expense Amount (or portion thereof) that has not
previously been paid by Hosting or Networks (provided that if such expense is by the terms of the governing invoice, bill or agreement payable on a deferred basis or over time, the Buyer shall be
permitted to pay as per the governing invoice, bill or agreement). Notwithstanding anything in this Section 6(n) to the contrary, the aggregate
amount Buyer and/or VitalStream shall be obligated to pay to or on behalf of Hosting or Networks pursuant to this Section 6(n) shall not exceed
the aggregate of the Unpaid January Expense Amounts. 

 
 
        7.    Conditions to Obligation to Close.     

 
 
           (a)    Conditions to Obligation of Each of VitalStream and the Buyer.     The obligation of each of VitalStream
   and the Buyer to consummate the transactions to be performed by it in connection with the Closing shall be subject to the
fulfillment at or prior to the Closing of each of the following conditions, any and all of which may be waived in whole or in part in writing by VitalStream and the Buyer to the extent permitted by
applicable Law: 

 
 
           (i)    Networks Contribution Agreement.     The Networks Contribution Agreement shall have been executed and
   delivered by Networks and Hosting, and shall be in full force and effect and shall not have been
amended or modified. The transactions contemplated by the Networks Contribution Agreement shall have been consummated prior to the Closing in accordance with the terms of the Networks Contribution
Agreement. 

 
 
           (ii)    Convertible Promissory Note and Warrant Purchase Agreement.     The Convertible Promissory Note and
   Warrant Purchase Agreement shall have been executed and delivered by each of the Purchasers (as that term is defined in the
Convertible Promissory Note and Warrant Purchase Agreement). The Convertible Promissory Note and Warrant Purchase Agreement shall be in full force and effect as of the Closing Date and shall not have
been amended or modified. The transactions contemplated by the Convertible Promissory Note and Warrant Purchase Agreement, including the wire transfer to VitalStream of all amounts payable at or in
connection with the consummation of the transactions under the Convertible Promissory Note and Warrant Purchase Agreement, shall have been consummated in accordance with the terms of the Convertible
Promissory Note and Warrant Purchase Agreement. 

 
 
           (iii)    Representations and Warranties; Covenants.     The representations and warranties contained in
   Section 3 of this Agreement shall be true and correct in
all material respects (except for any representations and warranties which are qualified by materiality, which shall be true and correct in all respects) at the Closing as though then made and as
though the Closing Date was substituted for the date of this Agreement throughout such representations 

58

 

and warranties (except for any representation or warranty made as of a specific date, which shall be true and correct as of such date). Hosting and Networks shall have duly performed or complied
with, in all material respects, all of the covenants, obligations and conditions to be performed or complied with under the terms of this Agreement and the other Transaction Agreements on, prior to,
or at the Closing and shall be in compliance with, in all material respects, all of the covenants, obligations and conditions to be complied with under the terms of this Agreement at the Closing. 

 
 
           (iv)    Consents and Approvals.     Each of Hosting and Networks shall have made all filings and shall have
   obtained and delivered to VitalStream all governmental and/or third party permits,
authorizations, consents and approvals required to be obtained by it to consummate the transactions contemplated by this Agreement and the other Transaction Agreements, including all of the consents
to assignment of the Hosting Contracts identified on Schedule 3(b). 

 
 
           (v)    Litigation.     No Claim shall be threatened or shall be pending in which it is sought to restrain or
   prohibit or to obtain damages or other relief in connection with the
transactions contemplated by this Agreement or that would have, or reasonably be expected to have, a Hosting Material Adverse Effect, and no injunction, judgment, order, decree or ruling with respect
thereto shall be in effect. 

 
 
          (vi)    No Bankruptcy.     Neither Hosting nor Networks shall not have sought protection pursuant to any
  Bankruptcy Law. No Persons shall have initiated any Claim or proceedings under any
Bankruptcy Law against Hosting or Networks. 

 
 
           (vii)    No Hosting Material Adverse Effect.     There shall not have occurred any Hosting Material Adverse
   Effect since the date of the Hosting Balance Sheet. 

 
 
          (viii)    Escrow Agreement.     The Escrow Agreement shall have been executed and delivered by the Hosting and
  the Escrow Agent and shall be in full force and effect. 

 
 
           (ix)    Master Access Agreement.     The Master Access Agreement shall have been executed and delivered by
   Netifice and shall be in full force and effect. 

 
 
          (x)    Customer Migration Agreement.     The Customer Migration Agreement shall have been executed and delivered
  by Netifice and shall be in full force and effect. 

 
 
           (xi)    Colocation Agreement.     The Colocation Agreement shall have been executed and delivered by Netifice
   and shall be in full force and effect. 

 
 
          (xii)    Partial Termination and Second Amendment to Sublease Agreement.     The Partial Termination and Second
  Amendment to Sublease Agreement relating to the Los Angeles Lease in the form of  Exhibit M attached hereto shall have been executed and delivered by Charter Holdings, Inc and Networks on or prior
  to the Closing Date and shall
be in full force and effect. 

 
 
          (xiii)    Assignment and Assumption Agreement.     The Assignment and Assumption Agreement shall have been
  executed and delivered by Hosting and shall be in full force and effect. 

 
 
           (xiv)    Bill of Sale.     The Bill of Sale shall have been executed and delivered by Hosting and shall be in
   full force and effect. 

59

 

 
 
           (xv)    Closing Documents.     Hosting and Networks shall have delivered to VitalStream all of the following
   documents: 

        (A)  an
officer's certificate, dated as of the Closing Date, stating that the conditions specified in Section 7(a)(i)
through Section 7(a)(vii) of this Agreement have been fully satisfied; 

        (B)  certified
copies of the resolutions complying with the requirements of Section 3(b) duly adopted by the board of
directors of Hosting (and by the shareholders of Hosting) authorizing the execution, delivery and performance of this Agreement, the other Transaction Agreements to which it is a party and each of the
other agreements contemplated hereby or thereby to which it is a party and the consummation of all other transactions contemplated by this Agreement and the other Transaction Agreements to which it is
a party; 

        (C)  certified
copies of the certificate of incorporation and bylaws of each of Hosting and Networks as in effect at the Closing Date; 

        (D)  certificate
of good standing of each of Hosting and Networks from the Secretary of State of the state of its respective incorporation dated within five (5) days
of the Closing Date; 

        (E)  copies
of all third party and governmental consents, approvals and filings required in connection with the consummation of the transactions contemplated by this
Agreement and the other Transaction Agreements (including all blue sky Law filings); and 

        (F)  such
other documents relating to the transactions contemplated by this Agreement or the other Transaction Agreements as VitalStream or its special counsel may reasonably
request. 

 
 
           (xvi)    Proceedings.     All corporate and other proceedings taken or required to be taken by each of Hosting
   and Networks in connection with the transactions contemplated hereby and by
the other Transaction Agreements to be consummated at or prior to the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to VitalStream and its special
counsel. 

 
 
           (xvii)    Termination of Cisco Security Agreements.     Cisco shall have released the Acquired Assets from all
   Liens under the Cisco Security Agreements which relate to the Acquired Assets, and evidence of termination
of all financing statements and other evidences of a Lien or other Indebtedness with respect to the Cisco Security Agreements affecting any of the Acquired Assets shall have been delivered to
VitalStream. 

 
 
           (xviii)    Supplemental Schedule Certificate.     Hosting and Networks shall have delivered the Hosting Schedule
   Bring Down Officer's Certificate along with the Schedules to be attached thereto.
 

 
 
           (b)    Conditions to Obligation of Each of Hosting and Networks.     The obligation of each of Hosting and
   Networks to consummate the transactions to be performed by it in connection with the Closing shall be subject to the
fulfillment at or prior to the Closing of each of the following conditions, any and all of which may be waived in whole or in part in writing by Hosting and Networks to the extent permitted by
applicable Law: 

 
 
           (i)    Convertible Promissory Note and Warrant Purchase Agreement.     The Convertible Promissory Note and
   Warrant Purchase Agreement shall have been executed and delivered by VitalStream. The Convertible Promissory Note and Warrant
Purchase Agreement shall be in 

60

 

full force and effect as of the Closing Date and shall not have been amended or modified. The conditions in Section 2(B) of the Convertible Promissory Note and Warrant Purchase Agreement shall
have been satisfied in full (without reliance on any waiver by the Purchasers (as that term is defined in the Convertible Promissory Note and Warrant Purchase Agreement)), and the transactions
contemplated by the Convertible Promissory Note and Warrant Purchase Agreement shall have been consummated in accordance with the terms of the Convertible Promissory Note and Warrant Purchase
Agreement. 

 
 
           (ii)    Representations and Warranties; Covenants.     The representations and warranties contained in
   Section 4 of this Agreement shall be true and correct in
all material respects (except for any representations and warranties which are qualified by materiality, which shall be true and correct in all respects) at the Closing as though then made and as
though the Closing Date was substituted for the date of this Agreement throughout such representations and warranties (except for any representation or warranty made as of a specific date, which shall
be true and correct as of such date). The Buying Parties shall have duly performed or complied with, in all material respects, all of the covenants, obligations and conditions to be performed or
complied with under the terms of this Agreement and the other Transaction Agreements on, prior to, or at the Closing and shall be in compliance with, in all material respects, all of the covenants,
obligations and conditions to be complied with under the terms of this Agreement at the Closing. 

 
 
          (iii)    Consents and Approvals.     Each of the Buying Parties shall have made all filings and shall have
  obtained and delivered to Hosting all governmental and/or third party permits,
authorizations, consents and approvals required to be obtained it to consummate the transactions contemplated by this Agreement and the other Transaction Agreements. 

 
 
           (iv)    Litigation.     No Claim shall be threatened or shall be pending in which it is sought to restrain or
   prohibit or to obtain damages or other relief in connection with the
transactions contemplated by this Agreement or that would have, or reasonably be expected to have, a VitalStream Material Adverse Effect, and no injunction, judgment, order, decree or ruling with
respect thereto shall be in effect. 

 
 
           (v)    No Bankruptcy.     No Buying Party nor any Subsidiary of VitalStream shall have sought protection
   pursuant to any Bankruptcy Law. No Persons shall have initiated any Claim or
proceedings under any Bankruptcy Law against any Buying Party or any Subsidiary of VitalStream. 

 
 
          (vi)    No VitalStream Material Adverse Effect.     There shall not have occurred any VitalStream Material
  Adverse Effect since the date of the Most Recent VitalStream Balance Sheet. 

 
 
           (vii)    Securities Law Compliance.     The Buying Parties shall have made all filings under all applicable
   federal and state securities Laws necessary to consummate the issuance of the Purchase Shares
pursuant to this Agreement in compliance with such Laws. 

 
 
           (viii)    Escrow Agreement.     The Escrow Agreement shall have been executed and delivered by VitalStream and
   the Escrow Agent and shall be in full force and effect. 

 
 
           (ix)    Master Access Agreement.     The Master Access Agreement shall have been executed and delivered by
   VitalStream and Netifice and shall be in full force and effect. 

 
 
           (x)    Customer Migration Agreement.     The Customer Migration Agreement shall have been executed and delivered
   by VitalStream and Netifice and shall be in full force and effect. 

 
 
           (xi)    Colocation Agreement.     The Colocation Agreement shall have been executed and delivered by VitalStream
   and Netifice and shall be in full force and effect. 

61

  

 
 
           (xii)    Registration Agreement.     The Registration Agreement shall have been executed and delivered by
   VitalStream, and shall be in full force and effect. 

 
 
           (xiii)    Investor Rights Agreement.     The Investor Rights Agreement shall have been executed and delivered by
   VitalStream and the other signatories thereto (other than Hosting) and shall be in full
force and effect. 

 
 
           (xiv)    Delivery of Cash Consideration.     VitalStream shall have delivered or shall be ready to deliver at
   Closing to Hosting $200,000 by wire transfer of immediately available funds pursuant to  Section 2(c) of this Agreement. 

 
 
           (xv)    Termination of Cisco Security Agreements.     Each of the Cisco Security Agreements shall have been
   terminated by the parties thereto, Cisco shall have released the Acquired Assets from all Liens thereunder
which relate to the Acquired Assets, and evidence of termination of all financing statements and other evidences of a Lien or other Indebtedness with respect to the Cisco Security Agreement affecting
any of the Acquired Assets shall have been delivered to VitalStream. 

 
 
           (xvi)    Partial Termination and Second Amendment to Sublease Agreement.     The Partial Termination and Second
   Amendment to Sublease Agreement relating to the Los Angeles Lease in the form of  Exhibit M attached hereto shall have been executed and delivered by Charter Holdings, Inc and Networks on or prior
   to the Closing Date and shall
be in full force and effect. 

 
 
           (xvii)    Closing Documents.     VitalStream shall have delivered to Hosting and Networks all of the following
   documents: 

        (A)  an
officer's certificate, dated as of the Closing Date, stating that the conditions specified in Section 7(b)(i)
through Section 7(b)(vii) of this Agreement have been fully satisfied; 

        (B)  certified
copies of the resolutions duly adopted by each of VitalStream's and the Buyer's board of directors authorizing the execution, delivery and performance of this
Agreement, the other Transaction Agreements to which it is a party and each of the other agreements contemplated hereby or thereby to which it is a party and the consummation of all other transactions
contemplated by this Agreement and the other Transaction Agreements to which it is a party; 

        (C)  certified
copies of the Articles of Incorporation and the articles of incorporation of the Buyer as in effect at the Closing Date; 

        (D)  certified
copies of the bylaws of each of the Buying Parties as in effect at the Closing Date; 

        (E)  certificate
of good standing of each of the Buying Parties from the Secretary of State of the state of its respective incorporation dated within five (5) days of
the Closing Date; 

        (F)  copies
of all third party and governmental consents, approvals and filings required in connection with the consummation of the transactions contemplated by this
Agreement and the other Transaction Agreements (including all blue sky law filings); and 

        (G)  such
other documents relating to the transactions contemplated by this Agreement or the other Transaction Agreements as Hosting, Networks or its special counsel may
reasonably request. 

62

 

 
 
           (xviii)    Proceedings.     All corporate and other proceedings taken or required to be taken by each of the
   Buying Parties in connection with the transactions contemplated hereby and by the
other Transaction Agreements to be consummated at or prior to the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to Hosting, Networks and its special
counsel. 

 
 
           (xix)    Supplemental Schedule Certificate.     VitalStream and Buyer shall have delivered the VitalStream
   Schedule Bring Down Officer's Certificate along with the Schedules to be attached thereto. 

 
 
        8.    Survival of Representations and Warranties; Indemnification.     

 
 
           (a)    Survival of Representations and Warranties.     

          (i)  The
representations and warranties of Hosting and Networks set forth in this Agreement shall survive the Closing (A) with respect to the matters covered by the
representations and warranties contained in Section 3(z), until sixty (60) days after the expiration of all applicable statute of
limitations
(including all periods of extension, whether automatic or permissive), (B) in the case of all other representations and warranties and any covenant or agreement contained in this Agreement to
be performed on or prior to the Closing Date (including the Hosting Schedule Bring Down Officer's Certificate), until the date which is nine (9) months after the Closing Date and
(C) with respect to each other covenant and agreement contained in this Agreement, until nine (9) months after the last date on which such covenant or agreement is to be performed or, if
no such date is specified, indefinitely, in each case regardless of any investigation by VitalStream or on behalf of VitalStream. 

        (ii)  The
representations and warranties of VitalStream set forth in this Agreement shall survive the Closing (A) with respect to the matters covered by the
representations and warranties contained in Section 4(x) and Section 4(y) of this
Agreement, until sixty (60) days after the expiration of all applicable statute of limitations (including all periods of extension, whether automatic or permissive), (B) in the case of
all other representations and warranties and any covenant or agreement contained in this Agreement to be performed on or prior to the Closing Date (including the VitalStream Schedule Bring Down
Officer's Certificate), until the date which is nine (9) months after the Closing Date and (C) with respect to each other covenant and agreement contained in this Agreement, until nine
(9) months after the last date on which such covenant or agreement is to be performed or, if no such date is specified, indefinitely, in each case regardless of any investigation by Hosting or
Networks or on behalf of Hosting or Networks. 

 
 
           (b)    Indemnification of VitalStream.     

          (i)  Subject
to the limitations set forth in this Section 8, Hosting and Networks, jointly and severally, agree to
indemnify on an after-tax basis and defend, protect and hold harmless VitalStream and its Affiliates and each of their respective directors, officers, employees, stockholders, members,
partners, agents (including, those retained in connection with the transactions contemplated by this Agreement), successors and assigns (collectively, the "VitalStream
Indemnitees") from and against any and all Claims, costs, damages, deficiencies, expenses (including interest, court costs, fees of attorneys, accountants and other experts or
other expenses of litigation or other proceedings or of any Claim, default or assessment), fees, fines, Liabilities, losses and penalties (hereinafter individually, a
"Loss" and collectively, "Losses") which, directly or indirectly, arise out of, result from or relate to
(irrespective of 

63

 

whether any such VitalStream Indemnitee is a party to the action for which indemnification hereunder is sought): 

        (A)  any
facts or circumstances which constitute a misrepresentation or breach by Hosting or Networks of any representation or warranty set forth in this Agreement (including
any annex or schedule attached hereto), any other Transaction Agreement or in any instrument or document delivered by Hosting or Networks pursuant to this Agreement; 

        (B)  any
non-fulfillment or breach of any covenant or agreement of Hosting or Networks set forth in this Agreement; or 

        (C)  any
Excluded Hosting Liability. 

        (ii)  To
the extent that the foregoing undertakings by Hosting and Networks may be unenforceable for any reason, Hosting and Networks shall make the maximum contribution to
the payment and satisfaction of the Losses described above incurred by any VitalStream Indemnitee which is permissible under applicable Law. 

 
 
           (c)    Indemnification of the Holders of the Purchase Shares.     

          (i)  Subject
to the limitations set forth in this Section 8, VitalStream agrees to indemnify on an
after-tax basis and defend, protect and hold harmless the holders of the Purchase Shares (provided that such holder is Holdings, a wholly-owned Subsidiary of Holdings or an Affiliate of
Dolphin) and each of their Affiliates and each of their respective directors, officers, employees, stockholders, members, partners, agents (including those retained in connection with the transactions
contemplated by this Agreement), successors and assigns (collectively, the "Purchase Share Indemnitees") from and against any and all Losses which,
directly or indirectly, arise out of, result from or relate to (irrespective of whether any such Purchase Share Indemnitee is a party to the action for which indemnification hereunder is sought): 

        (A)  any
facts or circumstances which constitute a misrepresentation or breach by VitalStream of any representation or warranty set forth in this Agreement (including any
annex or schedule attached hereto), any other Transaction Agreement or in any instrument or document delivered by VitalStream pursuant to this Agreement; 

        (B)  any
non-fulfillment or breach of any covenant or agreement of VitalStream set forth in this Agreement; or 

        (C)  any
Assumed Liability. 

        (ii)  To
the extent that the foregoing undertakings by VitalStream may be unenforceable for any reason, VitalStream shall make the maximum contribution to the payment and
satisfaction of the Losses described above incurred by any Purchase Share Indemnitee which is permissible under applicable Law. 

 
 
           (d)    Method of Asserting Claims Involving Third-Party Claims.     

          (i)  The
following procedures shall be applicable with respect to indemnification for third-party Claims. Promptly after receipt by the Party seeking indemnification under
this Section 8 (hereinafter referred to as the "Indemnitee") of notice of the commencement of any
(A) Tax audit or proceeding for the assessment of Tax by any Taxing Authority or any other proceeding likely to result in the imposition of a Tax Liability or (B) any action or the
assertion of any Claim or Liability by a third party (whether by legal process or otherwise), against which Claim or Liability another Party (hereinafter the
"Indemnitor") is, or may be, required under this Agreement to indemnify such Indemnitee, the Indemnitee shall, if a Claim 

64

 

thereon is to be, or may be, made against the Indemnitor, notify the Indemnitor in writing of the commencement or assertion thereof and give the Indemnitor a copy of such Claim, process and all legal
pleadings. The Indemnitor shall have the right to (1) participate in the defense of such action with counsel of reputable standing and (2) assume the defense of such action by agreeing
to assume such defense within ten (10) calendar days of transmittal of the notice of the Claim by the Indemnitee, in writing unless such Claim (a) may result in criminal proceedings,
injunctions or other equitable remedies in respect of the Indemnitee or its business; (b) may result in Liabilities which, taken with other then existing Claims under this  Section 8, would not
be fully indemnified hereunder; (c) may have a material and adverse effect on the business or condition (financial or
otherwise) of the Indemnitee after the Closing Date (including an effect on the Tax Liabilities, earnings or ongoing business relationships of the Indemnitee); (d) is for an alleged amount of
less than $5,000; (e) upon petition by the Indemnitee, if an appropriate court rules that the Indemnitor failed or is failing to vigorously prosecute or defend such Claim, in which events the
Indemnitee shall assume the defense; or (f) also involves the Indemnitor or its Affiliate as a party and counsel to the Indemnitee determines in good faith that joint representation would give
rise to a conflict of interest. 

        (ii)  The
Indemnitor and the Indemnitee shall cooperate in the defense of any third-party Claims. In the event that the Indemnitor assumes or participates in the defense of
such third-party Claim as provided herein, the Indemnitee shall make available to the Indemnitor all relevant records and take such other action and sign such documents as are reasonable necessary to
defend such third-party Claim in a timely manner. If the Indemnitee shall be required by judgment or a settlement agreement to pay any amount in respect of any Liability against which the Indemnitor
has agreed to indemnify the Indemnitee under this Agreement, the Indemnitor shall promptly reimburse the Indemnitee in an amount equal to the Losses incurred by such Indemnitee in connection with such
Liability subject to this Section 8. No Indemnitor, in the defense of any such Claim, shall, except with the consent of the Indemnitee, consent
to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnitee of a release from all Liability
with respect to such Claim. In addition, with respect to a Claim for Taxes, the Indemnitor shall not enter into any settlement or arrangement with any Taxing Authority without the prior written
consent of the Indemnitee, such consent not to be unreasonably withheld or delayed. In the event that the Indemnitor does not accept the defense of any matter for which it is entitled to assume as
provided above, the Indemnitee shall have the full right to defend such Claim. 

        (iii)  Prior
to paying or settling any Claim against which an Indemnitor is, or may be, obligated under this Agreement to indemnify an Indemnitee, the Indemnitee must first
supply the Indemnitor with a copy of a final court judgment or decree holding the Indemnitee liable on such Claim or failing such judgment or decree, must first receive the written approval of the
terms and conditions of such settlement from the Indemnitor, which shall not be unreasonably withheld; provided however, that no
written approval is required from the Indemnitor as to any third party Claim (A) that results solely in injunctions or other equitable remedies in respect of the Indemnitee or its business;
(B) that settles Liabilities, or portions thereof, that are not subject to indemnification hereunder; or (C) is for an amount of less than $5,000. 

        (iv)  An
Indemnitee shall have the right to employ its own counsel in any case and the fees and expenses of such counsel shall be at the expense of the Indemnitee unless
(A) the employment of such counsel shall have been authorized in writing by the Indemnitor in connection with the defense of such Claim; (B) the Indemnitor shall not have employed
counsel in the defense of such Claim after ten (10) calendar days notice; or (C) such 

65

 

Indemnitee shall have reasonably concluded that there may be defenses available to it which are contrary to, or inconsistent with, those available to the Indemnitor; in any of the foregoing events
such fees and expenses shall be borne by the Indemnitor. 

 
 
          (e)    Method of Asserting Claims not Involving Third-Party Claims.     In the event any Indemnitee shall have a
  Claim against any Indemnitor under this Agreement which does not involve a Claim being asserted against or sought to be
collected from such Indemnitee by a third party, the Indemnitee shall notify the Indemnitor in writing of such Claim. 

 
 
           (f)    Limitations.     

          (i)  In
the absence of fraud, (A) neither Hosting nor Networks shall have any Liability, nor be subject to any Claim, under  Section 8(b)(i)(A) of this Agreement in respect of any misrepresentation or
breach by Hosting or Networks of any representation or warranty set
forth in this Agreement (1) with respect to any individual Liability or Claim, unless such Liability or Claim involves Losses in excess of $5,000 or (2) the amount of indemnifiable
Losses, in the aggregate, exceeds $75,000, and then shall be liable only to the extent of such excess and (B) the aggregate obligation of Networks and Hosting to indemnify, defend and hold the
VitalStream Indemnitees harmless hereunder shall be limited to $800,000. In the event a VitalStream Indemnitee seeks indemnification for Losses pursuant to this  Section 8, such VitalStream
Indemnitee's sole recourse shall be against the Escrow Shares, (as defined in the Escrow Agreement). Any recourse
against the Escrow Shares shall be made based upon the Fair Market Value of the Escrow Shares as determined on the day immediately prior to the date on which a Claims Notice (as defined in the Escrow
Agreement) is sent by VitalStream. 

        (ii)  In
addition to the limitations set forth in Section 8(f)(i) of this Agreement, neither Hosting nor Networks shall
have any Liability, nor be subject to any Claim, under this Agreement in respect of any Liability or Claim arising out of or related to (A) the methodology and billing practices utilized by
Networks and Hosting to charge its customers for services (including bandwidth) other than Losses incurred by VitalStream based upon any third-party Claim brought against VitalStream with respect to
such methodology and billing practices and (B) the failure by Networks or Hosting to transfer any of the assets set forth on  Schedule 8(f)(ii). 

        (iii)  In
the absence of fraud, (A) VitalStream shall have no Liability, nor be subject to any Claim, under  Section 8(c)(i)(A) of this Agreement in respect of any misrepresentation or breach by
VitalStream of any representation or warranty set forth in
this Agreement (1) with respect to any individual Liability or Claim, unless such Liability or Claim involves Losses in excess of $5,000 or (2) the amount of indemnifiable Losses, in the
aggregate, exceeds $75,000, and then shall be liable only to the extent of such excess and (B) the aggregate obligation of VitalStream to indemnify, defend and hold Purchase Share Indemnitees
harmless hereunder shall be limited to $800,000. In the event a Purchase Share Indemnitee seeks indemnification for Losses pursuant to this  Section 8, such Purchase Share Indemnitee's sole remedy
shall be the issuance by VitalStream of additional shares of Common Stock to such
Purchase Share Indemnitee with an aggregate Fair Market Value (as determined on the day immediately prior to the date on which a Purchase Share Indemnitee sends a notice of an indemnifiable Loss to
VitalStream under this Section 8) equal to such indemnifiable Losses; provided, however, the aggregate number of shares of Common Stock
VitalStream shall be required to issue pursuant to this Section 8 shall not exceed a number of shares of Common Stock equal to the number of
Escrow Shares. Notwithstanding the foregoing, in the event a Purchase Share Indemnitee seeks indemnification for Losses pursuant to this  Section 8 in respect of a breach by VitalStream or Buyer of
Section 6(m) or  Section 6(n) of this Agreement, such Purchase Share 

66

 

Indemnitee shall be entitled to Cash from VitalStream in an amount equal to the amount of such Indemnifiable Losses. 

 
 
           (g)    Exclusive Remedies.     Subject to Section 10(m), the
   remedies set forth in this  Section 8 shall be the exclusive remedies of the Parties with respect to this Agreement and the transactions contemplated hereby. The Parties
hereby waive, with respect to each other, to the fullest extent permitted by Law, any and all other rights and remedies. 

 
 
        9.    [Intentionally Deleted].     

 
 
        10.    Miscellaneous.     

 
 
          (a)    Expenses.     Each Party shall pay the fees and expenses incurred by such Party in consummation of the
  transactions contemplated by this Agreement and the other Transaction
Agreements. 

 
 
           (b)    Press Releases and Public Announcements.     No Party shall issue any press release or make any public
   announcement or in any document or material filed with any Governmental Entity relating to the subject
matter of this Agreement or containing the name of any other Party without the prior written approval of each of the other Parties, unless such Party has a good faith belief that such disclosure is
required by applicable Law or governmental regulations or by order of a court of competent jurisdiction, in which case prior to making such disclosure the disclosing Party shall give written notice to
the each of the other Parties
describing in reasonable detail the proposed content of such disclosure and shall permit the non-disclosing Party to review and comment upon the form and substance of such disclosure. 

 
 
           (c)    No Third-Party Beneficiaries.     Except as expressly provided herein, this Agreement shall not confer
   any rights or remedies upon any Person other than the Parties and their respective successors
and permitted assigns. 

 
 
          (d)    Entire Agreement.     This Agreement, the Transaction Agreements and the documents referred to herein and
  therein contain the entire agreement between the Parties and supersede any
prior understandings, agreements or representations by or between the Parties, written or oral, which may have related to the subject matter hereof in any way (including the Original Asset Purchase
Agreement). 

 
 
           (e)    Successors and Assigns.     This Agreement shall be binding upon and inure to the benefit of the Parties
   and their respective successors and permitted assigns. No Party may assign this
Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of each of the other Parties. Notwithstanding the foregoing and whether or not any express
assignment has been made, the provisions of this Agreement or any other Transaction Agreement which are for Hosting's benefit as a holder of Purchase Shares are also for the benefit of, and
enforceable by, any subsequent holder of such Purchase Shares so long as such Person is an Affiliate of Dolphin. 

 
 
           (f)    Counterparts.     This Agreement or any other Transaction Agreement may be executed simultaneously in two
   or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall constitute one and the same agreement. A facsimile copy of this Agreement or any counterpart thereto shall be valid as an original. 

 
 
           (g)    Descriptive Headings; Interpretation.     Section headings used in this Agreement or in any other
   Transaction Agreement are for convenience only and are not to affect the construction of, or to be taken
into consideration in interpreting, such agreement. The use of the word "including" or any variation or derivative thereof in this Agreement or in any other Transaction Agreement is by way of example
rather than by limitation. 

67

 

 
 
           (h)    Notices; Business Days.     All notices, demands or other communications to be given or delivered under
   or by reason of the provisions of this Agreement or any other Transaction Agreement
shall be in writing and shall be deemed to have been given when delivered personally to the recipient or when sent by facsimile followed by delivery by reputable overnight courier service (charges
prepaid), one day after being sent to the recipient by reputable overnight courier service (charges prepaid) or five days after being mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Any notice, demand or other communication hereunder may be given by any other means (including telecopy or electronic mail), but shall not be deemed to have been
duly given unless and until it is
actually received by the intended recipient. Such notices, demands and other communications shall be sent to the addresses indicated below: 

If
to VitalStream: 

One
Jenner, Suite 100

Irvine, California 92618

Facsimile: 949-453-8686

Attention: Philip N. Kaplan, Chief Operating Officer 

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

Stoel
Rives LLP

201 South Main Street, Suite 1100

Salt Lake City, Utah 84111

Facsimile: 801-578-6999

Attention: Bryan T. Allen, Esq. 

If
to Hosting: 

Epoch
Hosting, Inc.

555 Anton Boulevard

Costa Mesa, CA 92626

Facsimile: 714-327-2031

Attention: General Counsel 

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

Kirkland &
Ellis

Citigroup Center

153 East 53rd Street

New York, NY 10022

Facsimile: 212-446-4900

Attention: John Kuehn, Esq. 

or
to such other address, to the attention of such other Person and/or with such other copy or copies as the recipient party has specified by prior written notice to the sending party. If any time
period for giving notice or taking action expires on a day which is a Saturday, Sunday or legal holiday in the State of California or the State of New York (any other day being a "business day"), such
time period shall automatically be extended to, the next business day immediately following such Saturday, Sunday or legal holiday. 

 
 
          (i)    Amendments and Waivers.     No amendment of any provision of this Agreement shall be valid unless the same
  shall be in writing and signed by each Party. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or 

68

 

subsequent such occurrence. This Agreement shall amend and restate the Original Asset Purchase Agreement in its entirety and become effective immediately upon the execution of this Agreement by each
of the Parties. The Parties hereby acknowledge and agree that (A) references to the "Convertible Promissory Note and Warrant Purchase Agreement", "Note Purchase Agreement" or "Note and Warrant
Purchase Agreement, as the case may be, in each of the Transaction Agreements shall be to the Convertible Promissory Note and Warrant Purchase Agreement (as defined herein) (as amended and modified
from time to time) and (B) references to the "Asset Purchase Agreement" in each of the Transaction Agreements shall be to this Agreement (as amended and modified from time to time). 

 
 
           (j)    Severability.     Whenever possible, each provision of this Agreement shall be interpreted in such manner
   as to be effective and valid under applicable Law, but if any provision of
this Agreement or any other Transaction Agreement is held to be prohibited by or invalid under applicable Law, such provision shall be ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of this Agreement or such other Agreement. 

 
 
          (k)    Construction.     The Parties have participated jointly in the negotiation and drafting of this Agreement
  and the other Transaction Agreements. In the event an ambiguity or
question of intent or interpretation arises, this Agreement and the other Transaction Agreements shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement or any other Transaction Agreement. Any reference to any federal, state, local, or
foreign Law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. Nothing in the schedules attached hereto shall be deemed adequate
to disclose an exception to a representation or warranty made herein unless the schedule attached hereto identifies the exception with particularity and describes the relevant facts in detail. Without
limiting the generality of the foregoing, the mere listing (or inclusion of a copy) of a document or other item shall not be deemed adequate to disclose an exception to a representation or warranty
made herein (unless the representation or warranty has to do with the existence of the document or other item itself). The Parties intend that each representation, warranty, and covenant contained
herein shall have independent significance. If any Party has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation,
warranty, or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the Party has not breached shall not detract from or mitigate the fact that the Party
is in breach of the first representation, warranty, or covenant. 

 
 
           (l)    Incorporation of Annexes, Schedules and Exhibits.     The annexes, schedules and exhibits identified in
   this Agreement are incorporated herein by reference and made a part hereof. 

 
 
          (m)    Specific Performance.     Each of the Parties acknowledges and agrees that the other Parties would be
  damaged irreparably in the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise are breached. Accordingly, each of the Parties agrees that, notwithstanding any provision limiting the remedies of the Parties contained
herein, the other Parties shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States or any state thereof having jurisdiction over the Parties and the matter (subject to the provisions set forth in  Section 10(o) of this Agreement), in addition to any other remedy to which it may be entitled, at law or in equity.
 

 
 
           (n)    GOVERNING LAW.     ALL ISSUES AND QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY,
   ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT AND ANY OF THE OTHER
TRANSACTION AGREEMENTS AND THE  

69

 

 ANNEXES, SCHEDULES AND EXHIBITS HERETO AND THERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT
OF LAW RULES OR PROVISIONS (WHETHER OF THE STATE OF CALIFORNIA OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF CALIFORNIA. IN
FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE STATE OF CALIFORNIA SHALL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT AND EACH OF THE OTHER TRANSACTION AGREEMENTS (AND ALL
ANNEXES, SCHEDULES AND EXHIBITS HERETO AND THERETO), EVEN THOUGH UNDER THAT JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY
APPLY.

 
 
          (o)    JURISDICTION AND VENUE.     ALL JUDICIAL PROCEEDINGS BROUGHT BY VITALSTREAM OR THE
  BUYER AGAINST NETWORKS OR HOSTING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
TRANSACTION AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN NEW YORK CITY, NEW YORK. ALL JUDICIAL PROCEEDINGS BROUGHT BY NETWORKS OR HOSTING AGAINST VITALSTREAM OR
THE BUYER WITH RESPECT TO THIS AGREEMENT OR ANY OTHER TRANSACTION AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN ORANGE COUNTY, CALIFORNIA. BY EXECUTING AND
DELIVERING THIS AGREEMENT AND THE OTHER TRANSACTION AGREEMENTS TO WHICH THEY ARE A PARTY, EACH PARTY ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION AGREEMENTS. EACH PARTY
HEREBY WAIVES ANY CLAIM THAT ORANGE COUNTY, CALIFORNIA OR NEW YORK CITY,
NEW YORK IS AN INCONVENIENT FORUM OR AN IMPROPER FORUM BASED ON LACK OF VENUE.

 
 
           (p)    WAIVER OF RIGHT TO JURY TRIAL.     EACH PARTY HEREBY WAIVES, TO THE EXTENT
   PERMITTED BY APPLICABLE LAW, TRIAL BY JURY in any litigation in any court
with respect to, in connection with, or arising out of this Agreement or any of the other Transaction Agreements or the validity, protection, interpretation, collection or enforcement hereof or
thereof. EACH PARTY AGREES THAT THIS SECTION 10(p) IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND EACH OF THE OTHER
TRANSACTION AGREEMENTS AND ACKNOWLEDGES THAT THE OTHER PARTIES WOULD NOT HAVE ENTERED INTO THIS AGREEMENT AND CONSUMMATED THE TRANSACTIONS CONTEMPLATED HEREBY IF THIS SECTION
10(p) WERE NOT PART OF THIS AGREEMENT AND THE OTHER TRANSACTION AGREEMENTS.

*
* * * * 

70

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

	

 	
 	
VITALSTREAM HOLDINGS, INC.
	

 	
 	

By:	

/s/  PAUL S. SUMMERS      

	 	 	Name:	Paul S. Summers
	 	 	Title:	Chief Executive Officer
	

 	
 	
VITALSTREAM BROADCASTING CORPORATION
	

 	
 	

By:	

/s/  PAUL S. SUMMERS      

	 	 	Name:	Paul S. Summers
	 	 	Title:	Chief Executive Officer
	

 	
 	
EPOCH HOSTING, INC.
	

 	
 	

By:	

/s/  KAREN M. MULLER      

	 	 	Name:	Karen M. Muller
	 	 	Title:	Vice President
	

 	
 	
EPOCH NETWORKS, INC.
	

 	
 	

By:	

/s/  KAREN M. MULLER      

	 	 	Name:	Karen M. Muller
	 	 	Title:	Vice President

 
 

Annex 1
  
    Eligible Networks Employees    
  

	Name of Employee
 
	 	Dollar Value of Accrued Paid Time Off

	    	 	 

QuickLinks

Exhibit 10.1

TABLE OF CONTENTS

ANNEXES, SCHEDULES AND EXHIBITS ANNEXES

SCHEDULES

EXHIBITS

AMENDED AND RESTATED ASSET PURCHASE AGREEMENT

RECITALS

1. Definitions.

2. Basic Transaction.

(a)  Purchase and Sale of Assets.

(b)  Assumption of Liabilities.

(c)  Consideration.

(i)  Cash Consideration.

(ii)  Purchase Shares.

(d)  Post-Closing Adjustment in Connection with the Issuance of Common Stock Pursuant Section 1.4(c)(iii) of the Merger Agreement.

(e)  Post-Closing Adjustment in Connection with the Issuance of Common Stock Pursuant Section 1.4(c)(iv) of the Merger Agreement.

(f)  Post-Closing Adjustment in Connection with the Issuance of Common Stock Pursuant Section 1.4(c)(v) of the Merger Agreement.

(g)  Allocation of Consideration.

(h)  The Closing.

(i)  Deliveries at the Closing.

(j)  Post-Closing Deliveries.

3. Representations and Warranties of Hosting and Networks.

(a)  Organization, Corporate Power and Licenses.

(b)  Approval and Consents; Authorization; No Breach.

(c)  Subsidiaries.

(d)  Hosting Financial Statements.

(e)  Notes and Accounts Receivable; Notes and Accounts Payable.

(f)  Guaranties.

(g)  Title to Assets; Condition of Assets; Sufficiency of Assets.

(h)  Absence of Undisclosed Liabilities.

(i)  Absence of Certain Developments.

(j)  Compliance With Laws.

(k)  Litigation.

(l)  Contracts and Commitments.

(m)  Tax Matters.

(n)  Real Property.

(o)  Environmental Matters.

(p)  Intellectual Property Rights.

(q)  Employees.

(r)  Employee Benefits Relating to Hosting.

(s)  Employee Benefits Relating to Networks.

(t)  Insurance.

(u)  Affiliate Transactions.

(v)  Brokerage.

(w)  Governmental Consent, etc.

(x)  Disclosure.

(y)  Capital Stock and Related Matters.

(z)  Investment in Purchase Shares.

(i)  Disclosure of Information.

(ii)  Investment Experience.

(iii)  Investment Intent; Own Account.

(aa)  Customers and Suppliers.

(bb)  Paid January Expenses.

4. Representations and Warranties of VitalStream.

(a)  Organization, Corporate Power and Licenses.

(b)  Approval and Consents; Authorization; No Breach.

(c)  Subsidiaries.

(d)  Securities and Exchange Commission Reports and VitalStream Financial Statements.

(e)  Notes and Accounts Receivable.

(f)  Guaranties.

(g)  Title to Assets; Condition of Assets; Sufficiency of Assets.

(h)  Absence of Undisclosed Liabilities.

(i)  Absence of Certain Developments.

(j)  Compliance With Laws.

(k)  Litigation.

(l)  Contracts and Commitments.

(m)  Tax Matters.

(n)  Real Property.

(o)  Environmental Matters.

(p)  Intellectual Property Rights.

(q)  Employees.

(r)  Employee Benefits.

(s)  Insurance.

(t)  Affiliate Transactions.

(u)  Brokerage.

(v)  Governmental Consent, etc.

(w)  Disclosure.

(x)  Capital Stock and Related Matters.

(y)  Issuance of the Purchase Shares.

(z)  Customers and Suppliers.

(aa)  Investment Company.

5. Pre-Closing Covenants.

(a)  General.

(b)  Notices and Consents.

(c)  Operation and Preservation of Business.

(d)  Full Access.

(e)  Notice of Developments.

(f)  Exclusivity.

6. Additional Agreements.

(a)  General.

(b)  Litigation Support.

(c)  Purchase Shares.

(d)  Employees.

(e)  Non-Competition; Non-Interference; Non-Solicitation.

(f)  No Assignment Causing Breach.

(g)  Mail, Notices and Other Correspondence.

(h)  Tax Matters.

(i)  Notice of Assignment.

(j)  Updating Hosting Contracts List

(k)  Post-Closing Certifications and Deliveries.

(l)  Additional Software Licenses.

(m)  Reimbursement For Paid January Expenses.

(n)  Reimbursement For Unpaid January Expenses.

7. Conditions to Obligation to Close.

(a)  Conditions to Obligation of Each of VitalStream and the Buyer.

(i)  Networks Contribution Agreement.

(ii)  Convertible Promissory Note and Warrant Purchase Agreement.

(iii)  Representations and Warranties; Covenants.

(iv)  Consents and Approvals.

(v)  Litigation.

(vi)  No Bankruptcy.

(vii)  No Hosting Material Adverse Effect.

(viii)  Escrow Agreement.

(ix)  Master Access Agreement.

(x)  Customer Migration Agreement.

(xi)  Colocation Agreement.

(xii)  Partial Termination and Second Amendment to Sublease Agreement.

(xiii)  Assignment and Assumption Agreement.

(xiv)  Bill of Sale.

(xv)  Closing Documents.

(xvi)  Proceedings.

(xvii)  Termination of Cisco Security Agreements.

(xviii)  Supplemental Schedule Certificate.

(b)  Conditions to Obligation of Each of Hosting and Networks.

(i)  Convertible Promissory Note and Warrant Purchase Agreement.

(ii)  Representations and Warranties; Covenants.

(iii)  Consents and Approvals.

(iv)  Litigation.

(v)  No Bankruptcy.

(vi)  No VitalStream Material Adverse Effect.

(vii)  Securities Law Compliance.

(viii)  Escrow Agreement.

(ix)  Master Access Agreement.

(x)  Customer Migration Agreement.

(xi)  Colocation Agreement.

(xii)  Registration Agreement.

(xiii)  Investor Rights Agreement.

(xiv)  Delivery of Cash Consideration.

(xv)  Termination of Cisco Security Agreements.

(xvi)  Partial Termination and Second Amendment to Sublease Agreement.

(xvii)  Closing Documents.

(xviii)  Proceedings.

(xix)  Supplemental Schedule Certificate.

8. Survival of Representations and Warranties; Indemnification.

(a)  Survival of Representations and Warranties.

(b)  Indemnification of VitalStream.

(c)  Indemnification of the Holders of the Purchase Shares.

(d)  Method of Asserting Claims Involving Third-Party Claims.

(e)  Method of Asserting Claims not Involving Third-Party Claims.

(f)  Limitations.

(g)  Exclusive Remedies.

9. [Intentionally Deleted].

10. Miscellaneous.

(a)  Expenses.

(b)  Press Releases and Public Announcements.

(c)  No Third-Party Beneficiaries.

(d)  Entire Agreement.

(e)  Successors and Assigns.

(f)  Counterparts.

(g)  Descriptive Headings; Interpretation.

(h)  Notices; Business Days.

(i)  Amendments and Waivers.

(j)  Severability.

(k)  Construction.

(l)  Incorporation of Annexes, Schedules and Exhibits.

(m)  Specific Performance.

(n)  GOVERNING LAW.

(o)  JURISDICTION AND VENUE.

(p)  WAIVER OF RIGHT TO JURY TRIAL.

Annex 1 Eligible Networks EmployeesQuickLinks
 -- Click here to rapidly navigate through this document

 
 

Exhibit 10.2    
  

 
 

AMENDED AND RESTATED CONVERTIBLE NOTE AND WARRANT
  PURCHASE AGREEMENT    
  

Dated as of January 15, 2003  

 Among  

 VitalStream Holdings, Inc.  

 and  

 The Purchasers Referred to Herein  

  

 
 

TABLE OF CONTENTS    
  

	 
	 	 
	 	Page

	Section 1.	 	Definitions	 	1
	1A.	 	Definitions	 	1
	
Section 2.	
 	

Authorization and Closings	
 	

10
	2A.	 	Authorization, Purchase and Sale of the Initial Convertible Notes and Warrants	 	10
	2B.	 	Authorization, Purchase and Sale of the Subsequent Convertible Notes	 	11
	2C.	 	The Closings	 	11
	
Section 3.	
 	

Conditions of each Purchaser's Obligations at the Closings	
 	

12
	3A.	 	Conditions of each Purchaser's Obligations at Each Closing	 	12
	3B.	 	Additional Conditions of each Purchaser's Obligations at the Initial Closing	 	14
	3C.	 	Additional Conditions of each Purchaser's Obligations at the Subsequent Closing if the Initial Closing has not been Consummated	 	14
	3D.	 	Additional Conditions of each Purchaser's Obligations at the Subsequent Closing if the Initial Closing has been Consummated	 	14
	
Section 4.	
 	

Conditions of VitalStream's Obligations at the Closings	
 	

15
	4A.	 	Conditions of VitalStream's Obligations at each Closing	 	15
	4B.	 	Additional Conditions of VitalStream's Obligations at the Subsequent Closing if the Initial Closing has not been Consummated	 	16
	4C.	 	Additional Conditions of VitalStream's Obligations at the Subsequent Closing if the Initial Closing has been Consummated	 	16
	
Section 5.	
 	

Covenants	
 	

16
	5A.	 	Reservation of Common Stock and Series A Preferred	 	16
	5B.	 	Intellectual Property Rights	 	17
	5C.	 	Restrictive Covenants	 	17
	5D.	 	Compliance with Agreements	 	23
	5E.	 	Current Public Information	 	23
	5F.	 	Information Rights	 	23
	5G.	 	Public Disclosures	 	23
	5H.	 	Post-Closing Certifications and Deliveries	 	23
	
Section 6.	
 	

Nature of Restricted Securities; Transfer of Restricted Securities; General Transfer Procedure	
 	

24
	6A.	 	General Provisions	 	24
	6B.	 	Opinion Delivery	 	24
	6C.	 	Rule 144A	 	24
	6D.	 	Legend Removal	 	24
	
Section 7.	
 	

Representations and Warranties of VitalStream	
 	

25
	7A.	 	Approval and Consents; Authorization; No Breach	 	25
	7B.	 	Capital Stock and Related Matters	 	25
	7C.	 	Issuance and Commitment of the Convertible Notes and Warrants	 	27
	7D.	 	Investment Company	 	27
	7E.	 	Margin Securities	 	27
	7F.	 	Representations and Warranties of VitalStream in the Asset Purchase Agreement	 	27
	
Section 8.	
 	

[Intentionally Deleted]	
 	

27
	
Section 9.	
 	

Miscellaneous	
 	

27
	9A.	 	Commitment Fee; Expenses	 	27

i

 

	9B.	 	Remedies; Survival of Representations, Warranties and Covenants; Indemnification	 	28
	9C.	 	Purchaser's Representations; Legends	 	29
	9D.	 	Entire Agreement	 	31
	9E.	 	Successors and Assigns	 	31
	9F.	 	Counterparts	 	31
	9G.	 	Descriptive Headings; Interpretation	 	31
	9H.	 	Notices; Business Days	 	31
	9I.	 	Consent to Amendments and Waivers	 	32
	9J.	 	Severability	 	32
	9K.	 	No Strict Construction	 	32
	9L.	 	Incorporation of Annexes, Schedules and Exhibits	 	33
	9M.	 	Registered Holders; Ownership	 	33
	9N.	 	Consideration for Warrants and Notes	 	33
	9O.	 	Understanding Among the Purchasers	 	33
	9P.	 	GOVERNING LAW	 	33
	9Q.	 	JURISDICTION AND VENUE	 	34
	9R.	 	WAIVER OF RIGHT TO JURY TRIAL	 	34

 
 

ANNEXES, SCHEDULES AND EXHIBITS    
  

ANNEXES  

Annex
1—Schedule of Purchasers 

SCHEDULES  

Schedule 7A—Approval
and Consents

Schedule 7B—Capital Stock and Related Matters 

EXHIBITS  

Exhibit A—Form
of Guaranty

Exhibit B—Form of Convertible Note

Exhibit C—Form of Investor Rights Agreement

Exhibit D—Form of Registration Agreement

Exhibit E—Form of VitalStream Counsel Opinion

Exhibit F—Form of Warrant

Exhibit G—Form of Certificate of Designation 

ii

 
 

AMENDED AND RESTATED CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT    
  

        AMENDED AND RESTATED CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT, dated as of January 15, 2003 (this
"Agreement"), by and among VitalStream Holdings, Inc., a Nevada corporation ("VitalStream"), and
the Persons listed on Annex 1 attached hereto (such Persons shall be collectively referred to herein as the
"Purchasers" and individually as a "Purchaser"). Unless otherwise indicated herein, capitalized terms
used in this Agreement have the meanings set forth in Section 1 of this Agreement. 

        WHEREAS,
reference is made to that certain Amended and Restated Asset Purchase Agreement, dated as of the date hereof, by and among VitalStream, VitalStream Broadcasting Corporation (the
"Buyer"), Epoch Hosting, Inc. ("Hosting") and Epoch Networks, Inc.
("Networks") (as amended and modified from time to time, the "Asset Purchase Agreement"). 

        WHEREAS,
reference is made to that certain Convertible Note Purchase Agreement, dated as of November 1, 2002 (the "Original Note Purchase
Agreement"), by and among VitalStream, Buyer, Hosting and Networks. 

        WHEREAS,
VitalStream, Buyer, Hosting and Networks acknowledge and agree that the Initial Closing under the Original Note Purchase Agreement was consummated on November 26, 2002. 

        WHEREAS,
VitalStream, Buyer, Hosting and Networks desire to enter into this Agreement in order to amend and restate the Original Note Purchase 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
hereto hereby agree that the Original Asset Purchase Agreement shall be amended and restated in its entirety by this Agreement, and the parties hereto further agree as follows: 

 
 
        Section 1.    Definitions.     

 
 
           1A.    Definitions.     For the purposes of this Agreement, the following terms have the meanings set forth
   below: 

        "Affiliate" of any particular Person means any other Person controlling, controlled by or under common control with such particular
Person, where "control" means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the
ownership of voting securities, contract or otherwise. 

        "Agreement" has the meaning set forth in the preamble of this Agreement. 

        "AKKAD Agreement" means the Stockholders and Registration Rights Agreement, dated as of August 9, 2000, by and among
VitalStream, Inc., Paul Summer, Philip Kaplan and the Series B Holders (as defined therein), as assumed by VitalStream, as amended,
modified, restated, superseded or replaced from time to time. 

        "Articles of Incorporation" means the Articles of Incorporation of VitalStream, as amended, modified, restated, superseded or replaced
from time to time. 

        "Asset Purchase Agreement" has the meaning set forth in the preamble of this Agreement. 

        "Authorized VitalStream Acquisition Transaction" means a VitalStream Acquisition Transaction which (i) the Board of Directors has
determined, in its good faith judgment, to be fair and in the best interest of all of the securityholders of VitalStream and (ii) has been approved in writing, or by the vote at a
duly-called meeting of the Board of Directors, by a majority of the members of the Board of Directors. 

        "Authorized VitalStream Sale Transaction" means a VitalStream Sale Transaction in which either (i) the consideration to be paid
consists solely of Cash Consideration, (ii) each of the following conditions have been satisfied: (a) the Board of Directors has determined, in its good faith judgment, to be fair and in
the best interest of all of the securityholders of 

 

VitalStream, (b) has been approved in writing, or by the vote at a duly-called meeting of the Board of Directors, by a majority of the members of the Board of Directors,
(c) after giving effect to such VitalStream Sale Transaction, the Net Worth of the acquiring or surviving Person of such VitalStream
Sale Transaction immediately after the consummation of such VitalStream Sale Transaction is equal to or greater than the Net Worth of VitalStream immediately prior to the consummation of such
VitalStream Sale Transactions, (d) after giving effect to such VitalStream Sale Transaction, the Indebtedness to Equity Ratio of the acquiring or surviving Person of such VitalStream Sale
Transaction immediately after the consummation of such VitalStream Sale Transaction less than or equal to 0.35, and (e) after giving effect to such VitalStream Sale Transaction, the Current
Ratio of the acquiring or surviving Person of such VitalStream Sale Transaction immediately after the consummation of such VitalStream Sale Transaction is equal to or greater than 1.6 or
(iii) the acquiring Person in such VitalStream Sale Transaction shall, immediately prior to the consummation of such VitalStream Sale Transaction, (a) have securities listed on a major
national or international stock exchange and (b) have a public market capitalization of at least $1,000,000,000. 

        "Average Monthly Cash Flow" means, with respect to any period of any Person, the sum of the Cash Flow of such Person for each month (and
pro rata portion thereof) during such period divided by the number of months (and pro rata portion thereof) in such period. 

        "Board of Directors" means the board of directors of VitalStream. 

        "Buyer" has the meaning set forth in the preamble of this Agreement. 

        "Cash" means cash and cash equivalents (including marketable securities and short term Investments). 

        "Cash Consideration" means cash and Marketable Securities. 

        "Cash Flow" means, with respect to any period of any Person, (i) the sum of each of the following for such Person and all
Subsidiaries of such Person on a consolidated basis for such period, to the extent applicable, without duplication, (a) net income or loss (excluding extraordinary or non-recurring
items) after Taxes and interest plus (b) depreciation expense minus (ii) the sum of each
of the following for such Person and all Subsidiaries of such Person on a consolidated basis for such period, to the extent applicable, without duplication, (a) changes in net working capital
(which change for purposes hereunder shall be a positive number for an increase in net working capital and a negative number for a decrease in net working capital)  plus (b) changes in fixed assets
(which change for purposes hereunder shall be a positive number for an increase in fixed assets and a negative
number for a decrease in fixed assets) plus (c) the amount of payments and prepayments of principal on any Indebtedness for borrowed money or any
Indebtedness evidenced by any Debt Security minus (iii) the amount of proceeds of any Debt Security issued in substitution for, or exchange of,
Indebtedness for borrowed money, in each case as determined in accordance with GAAP applied on a consistent basis in accordance with such Person's past practice. For the avoidance of any doubt, the
parties hereto hereby agree that the calculation of Cash Flow as described immediately above shall be done in accordance with the methodology set forth in Chapter 13 of the text  Corporate Finance: A Valuation
Approach by Simon Benninga and Oded Sarig. 

        "Certificate of Designation" means the Certificate of Designation, setting forth, among other matters, the rights, preferences and
privileges of the Series A Preferred, in the form of Exhibit G attached hereto. 

        "Claim" means any action, claim, lawsuit, demand, suit, charge, complaint, inquiry, hearing, investigation, notice of a violation or
noncompliance, litigation, proceeding, arbitration, appeals or other dispute, whether civil, criminal, administrative or otherwise. 

2

 

        "Closing Date" has the meaning set forth in Section 2C of this Agreement. 

        "Closing" has the meaning set forth in Section 2C of this Agreement. 

        "Common Stock" means VitalStream's Common Stock, par value $0.001 per share, and any capital stock of any class of VitalStream (other than
any Preferred Equity Securities or the Series A Preferred) hereafter authorized which is not limited to a fixed sum or percentage of par or stated value in respect to the rights of the holders
thereof to participate in dividends or in the distribution of assets upon any liquidation, dissolution or winding up of VitalStream. 

        "Commitment Fee" has the meaning set forth in Section 9A of this Agreement. 

        "Convertible Notes" means the Initial Convertible Notes and Subsequent Convertible Notes. 

        "Current Ratio" means, with respect to any Person as of any date, the ratio of (i) the aggregate amount of all current assets of
such Person and all Subsidiaries of such Person as determined on a consolidated basis as of such date divided by (ii) the aggregate amount of all
current Liabilities of such Person and all Subsidiaries of such Person as determined on a consolidated basis as of such date, in each case as determined in accordance with GAAP applied on a consistent
basis in accordance with such Person's past practice. 

        "Debt Security" means any note, bond, debenture or other instrument or security evidencing Indebtedness. 

        "Dolphin" means Dolphin Equity Partners, L.P. 

        "Dolphin Director Notice" has the meaning set forth in Section 5C of this
Agreement. 

        "Dolphin Fund II" means Dolphin Communications Fund II, L.P. and Dolphin Communications Parallel Fund II (Netherlands), L.P. 

        "Dolphin Director" has the meaning set forth in the Investor Rights Agreement. 

        "Equity Security" means (i) any capital stock or other equity security, (ii) any security directly or indirectly convertible
into or exchangeable for any capital stock or other equity security or security containing any profit participation features, (iii) any warrants, options or other rights, directly or
indirectly, to subscribe for or to purchase any capital stock, other equity security or security containing any profit participation features or directly or indirectly to subscribe for or to purchase
any security directly or indirectly convertible into or exchangeable for any capital stock or other equity security or security containing profit participation features, or (iv) any stock
appreciation rights, phantom stock rights or other similar rights. 

        "Fair Market Value" means the price at which an asset would change hands between a willing buyer and a willing seller when the former is
not under any compulsion to buy and the latter is not under any compulsion to sell, and both parties are able, as well as willing, to trade and are well-informed about the asset and the
market for the asset, as determined jointly by VitalStream and the holders of a majority of the Underlying Common Stock. If such parties are unable to reach agreement within a reasonable period of
time, such "Fair Market Value" shall be determined by an independent appraiser experienced in valuing such type of asset jointly selected by VitalStream
and the holders of a majority of the Underlying Common Stock. The determination of such appraiser shall be final and binding upon the parties and VitalStream shall pay the fees and expenses of such
appraiser. Notwithstanding the foregoing, the "Fair Market Value" of any security listed on any securities exchange or quoted in the NASDAQ System
(including the proposed Bulletin Board Exchange) or the over-the-counter market shall be the "Market Price". 

3

 

        "Fully Diluted Outstanding Common Stock" has the meaning set forth in the Convertible Notes. 

        "GAAP" means United States generally accepted accounting principles as in effect from time to time, applied on a consistent basis. 

        "Governmental Entity" means individually, and "Governmental Entities" means collectively,
the United States of America, any state or other political subdivision thereof, or any entity exercising executive, legislative, judicial, regulatory or administrative functions of government,
including any court. 

        "Guarantee" means any guarantee of the payment or performance of any Indebtedness or other obligation and any other arrangement whereby
credit is extended to one obligor on the basis of any promise of such Person, whether that promise is expressed in terms of an obligation to pay the Indebtedness of such obligor, to provide
reimbursement, or to purchase an obligation owed by such obligor, or to purchase goods and services from such obligor pursuant to a take-or-pay contract, or to maintain the
capital, working capital, solvency or general financial condition of such obligor, whether or not any such arrangement is listed in the balance sheet of such Person, or referred to in a footnote
thereto, but shall not include endorsements of items for collection in the Ordinary Course of Business. 

        "Guaranty" means that certain Guaranty, dated as of the Initial Closing Date or, if there is no Initial Closing, the Subsequent Closing
Date, by and among VitalStream, the VitalStream Subsidiaries and the Purchasers, in the form of Exhibit A attached hereto, as amended, modified,
restated, superseded or replaced from time to time. 

        "Holdings" means Epoch Holdings, Inc., a Delaware corporation. 

        "Holdings Executive Officer" means any current or former executive officer of Holdings or any of its Subsidiaries or any employee of
Holdings or any of its Subsidiaries with a title of "Director" or "Vice-President" (or any equivalent title indicating a position of similar or greater authority and responsibility). 

        "Hosting" has the meaning set forth in the preamble of this Agreement. 

        "Indebtedness" means at a particular time, without duplication, (i) any indebtedness for borrowed money or issued in substitution
for or exchange of indebtedness for borrowed money, (ii) any indebtedness evidenced by any Debt Security, (iii) any indebtedness for the deferred purchase price of property or services
with respect to which a Person is liable, contingently or otherwise, as obligor or otherwise (other than trade payables and other current Liabilities incurred in the Ordinary Course of Business),
(iv) any commitment by which a Person assures a creditor against loss (including, without limitation, contingent reimbursement obligations with respect to letters of credit), (v) any
indebtedness Guaranteed in any manner by a Person (including, without limitation, guaranties in the form of an agreement to repurchase or reimburse), (vi) any obligations under capitalized
leases and (vii) any indebtedness secured by a Lien on a Person's assets. 

        "Indebtedness to Equity Ratio" means, with respect to any Person as of any date, the quotient of (i) the aggregate amount of
Indebtedness of such Person and all Subsidiaries of such Person as determined on a consolidated basis as of such date divided by (ii) the
aggregate amount of stockholders equity of such Person and all Subsidiaries of such Person as determined on a consolidated basis as of such date, in each case as determined in accordance with GAAP
applied on a consistent basis in accordance with such Person's past practice. 

        "Indemnitees" has the meaning set forth in Section 9B of this Agreement. 

4

 

        "Initial Closing Date" has the meaning set forth in Section 2C of this Agreement. 

        "Initial Closing" has the meaning set forth in Section 2C of this Agreement. 

        "Initial Convertible Notes" means those certain 10% Convertible Promissory Notes of VitalStream issued at the Initial Closing pursuant to
this Agreement, in the form of Exhibit B attached hereto, as amended, modified, restated, superseded or replaced from time to time. 

        "Initial Financing Amount" has the meaning set forth in Section 2A(ii) of this
Agreement. 

        "Intellectual Property Rights" means all (i) patents, patent applications and patent disclosures; (ii) trademarks, service
marks, trade dress, trade names, logos, slogans, corporate names, Internet domain names and registrations and applications for registration thereof, together with all of the goodwill associated
therewith (and all translations, adaptations, derivations and combinations of the foregoing); (iii) copyrights (registered or unregistered) and copyrightable works and registrations and
applications for registration thereof; (iv) mask works and registrations and applications for registration thereof; (v) computer software (including, but not limited to, source code and
executable code), data, databases and documentation thereof; (vi) trade secrets and other confidential information (including ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, manufacturing and production processes and techniques, research and development information, customer accounts, identifying
information regarding customers, drawings, specifications, designs, plans, proposals, technical data, financial and marketing plans and customer and supplier lists and information);
(vii) domain names, (viii) other intellectual property or proprietary rights; and (ix) copies and tangible embodiments thereof (in whatever form or medium). 

        "Investment" as applied to any Person means (i) any direct or indirect purchase or other acquisition by such Person of any Debt
Securities, Equity Securities, obligations, instruments or ownership interests
(including partnership interests and joint venture interests) of any other Person or any other Person's business and (ii) any capital contribution by such Person to any other Person. 

        "Investor Rights Agreement" means that certain Investor Rights Agreement, dated as of the Initial Closing Date or, if there is no Initial
Closing, the Subsequent Closing Date, by and among VitalStream and the securityholders of VitalStream referred to therein, in the form of  Exhibit C attached hereto, as amended, modified, restated,
superseded or replaced from time to time. 

        "Knowledge" except as otherwise provided expressly herein, means the actual knowledge or awareness of a Person (which shall include the
actual knowledge and awareness of the executive officers and directors of such Person and any of such Person's Subsidiaries) after making reasonable inquiry and reasonable diligence with respect to
the particular matter in question. 

        "Laws" means all constitutions, statutes, laws, codes, ordinances, regulations, rules, orders, judgments, writs, injunctions, acts or
decrees of any Governmental Entity. 

        "Legal Requirement" means any requirement arising under any action, Law, treaty, rule or regulation, determination or direction of an
arbitrator or Governmental Entity. 

        "Liability" means any liability or obligation of whatever kind or nature (whether known or unknown, whether assert or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due), including any liability or obligation for Taxes. 

5

 

        "Liens" means any mortgage, pledge, restriction, security interest, encumbrance, option, lien or charge of any kind (including, without
limitation, any conditional sale or other title retention agreement or lease in the nature thereof), any sale of receivables with recourse against VitalStream or any of the VitalStream Subsidiaries,
any filing or agreement to file a financing statement as debtor under the Uniform Commercial Code or any similar statute other than to reflect ownership by a third party of property leased to
VitalStream or any of the VitalStream Subsidiaries under a lease which is not in the nature of a conditional sale or title retention agreement, or any subordination arrangement in favor of another
Person (other than any subordination arising in the Ordinary Course of Business). 

        "Losses" has the meaning set forth in Section 9B of this Agreement. 

        "Market Price" of any security means either (i) if such security is listed on an exchange, the average closing price of such
security on the principal exchange on which such security is listed, or, if there has been no sales on such exchange on any day, the closing price of such security on the principal exchange on the
most recent day on which sales have taken place on such exchange or (ii) if such security is not listed on an exchange but is quoted in the NASDAQ System or on the domestic
over-the-counter market as reported by the National Quotation Bureau, the average of the closing sales prices as reported by the NASDAQ System or the National Quotation Bureau,
as applicable, in each case over a period of five (5) days consisting of the day as of which the "Market Price" is being determined and the four
(4) consecutive business days prior to such day on which trades were reported in such security. If at any time such security is not listed on any securities exchange or quoted in the NASDAQ
System or the over-the-counter market, the "Market Price" shall be the Fair Market Value thereof. 

        "Marketable Securities" means securities (i) issued by an issuer with a public float equal to or greater than $500,000,000;
(ii) that are of a class of securities listed on a major national or international stock exchange or the Nasdaq National Market; (iii) that constitute, in the aggregate, not more than
3.0% of the outstanding securities of such class; (iv) that are or were issued to the Purchasers in a transaction registered under the Securities Act, or the resale of which by such Purchasers
is registered under the Securities Act, and are otherwise freely tradable by such Purchasers without restriction under applicable federal and state securities Laws; and (v) for which the
product of (a) the weekly trading volume for such securities for the five (5) business days ending immediately prior to the date of consummation of an Authorized VitalStream Sale
Transaction for which such securities are to be issued, multiplied by, (b) four (4), is greater than the aggregate number of shares of securities
issued by such issuer as consideration for the Authorized VitalStream Sale Transaction for which such securities are being issued. 

        "Networks" has the meaning set forth in the preamble of this Agreement. 

        "Net Worth" means, with respect to any Person as of any date, the difference of (i) the aggregate amount of all assets of such
Person and all Subsidiaries of such Person on a consolidated basis as of such date minus (ii) the aggregate amount of all Liabilities of such
Person and all Subsidiaries of such Person on a consolidated basis as of such date, in each case as determined in accordance with GAAP applied on a consistent basis in accordance with such Person's
past practice. 

        "Officer's Certificate" means a certificate signed by VitalStream's president or its chief financial officer, stating that (i) the
officer signing such certificate has made or has caused to be made such investigations as are necessary in order to permit him to verify the accuracy of the information set forth in such certificate
and (ii) to such officer's knowledge, such 

6

 

certificate does not misstate any material fact and does not omit to state any fact necessary to make the certificate not misleading. 

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

        "Other Company Securities" has the meaning set forth in the Convertible Notes. 

        "Permitted Liens" means (i) Tax Liens with respect to Taxes not yet due and payable or which are being contested in good faith by
appropriate proceedings and for which appropriate reserves have been established in accordance with GAAP, consistently applied; (ii) deposits or pledges made in connection with, or to secure
payment of, utilities or similar services, workers' compensation, unemployment insurance, old age pensions or other social security obligations; (iii) mechanics', materialmen's or contractors'
Liens created by statute securing payment for amounts not yet due and payable; (iv) purchase money Liens and Liens securing rental payments under capital lease arrangements; and
(v) Liens on a bank account containing $300,000 (plus interest) necessary to secure the $300,000 letter of credit the Buyer is required to establish in order to be able to assume the Los
Angeles Lease Agreement (as defined in the Asset Purchase Agreement). 

        "Person" means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or any other similar entity or organization or a Governmental Entity. 

        "Preferred Equity Securities" has the meaning set forth in the Convertible Notes. 

        "Preferred Stock" means VitalStream's Preferred Stock, par value $0.001 per share, as more fully described in the Articles of
Incorporation. 

        "Purchasers" has the meaning set forth in the preamble of this Agreement. 

        "Registration Agreement" means that certain Registration Agreement, dated as of the Initial Closing Date, or if there is no Initial
Closing, the Subsequent Closing Date, by and among VitalStream and the Purchasers, in the form of Exhibit D attached hereto, as amended,
modified, restated, superseded or replaced from time to time. 

        "Restricted Securities" means (i) the Convertible Notes, (ii) the Warrants, (iii) the Equity Securities issued or
issuable, directly or indirectly, upon conversion of the Convertible Notes, (iv) the Common Stock issued or issuable upon exercise of the Warrants, (v) the Common Stock issued as payment
of the Commitment Fee and (vi) any securities issued with respect to the securities referred to in clauses (i), (ii), (iii), (iv) or (v) above by way of a stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization. As to any particular
Restricted Securities, such securities shall cease to be Restricted Securities when they have (a) been effectively registered under the Securities Act and disposed of in accordance with the
registration statement covering them, (b) been distributed to the public through a broker, dealer or market maker pursuant to Rule 144 or become eligible for sale pursuant to
Rule 144(k) adopted by the Securities and Exchange Commission under the Securities Act (as such rule may be amended from time to time) or any similar rule or regulation hereafter adopted by the
Securities and Exchange Commission or (c) been otherwise transferred and new certificates for them not bearing the Securities Act legend set forth in  Section 9C of this Agreement have been
delivered by VitalStream in accordance with  Section 6 of this Agreement. Whenever any particular securities cease to be Restricted Securities, the holder thereof shall be entitled to
receive from VitalStream, without expense, new securities of like tenor not bearing a Securities Act legend of the character set forth in  Section 9C of this Agreement. 

7

 

        "Rule 144" means Rule 144 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. 

        "Securities Act" means the Securities Act of 1933, as amended, or any similar federal Law then in force and the rules promulgated
thereunder. 

        "Securities and Exchange Commission" means the Securities and Exchange Commission and any Governmental Entity succeeding to the functions
thereof. 

        "Securities Exchange Act" means the Securities Exchange Act of 1934, as amended, or any similar federal Law then in force and the rules
promulgated thereunder. 

        "Series A Preferred" means the 2002 Series A Preferred Stock, $0.001 par value, of VitalStream having the rights and
preferences set forth in the Certificate of Designation. 

        "Subsequent Convertible Notes" means those certain 10% Convertible Promissory Notes of VitalStream issued at the Subsequent Closing
pursuant to this Agreement in the form of Exhibit B attached hereto, as amended, modified, restated, superseded or replaced from time to time. 

        "Subsidiary" means, with respect to any Person, any corporation, limited liability company, partnership, association or other business
entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a limited liability company, partnership, association or other business entity, a majority of
the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination
thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity if such Person
or Persons shall be allocated a majority of limited liability company, partnership, association or other business entity gains or losses or shall be or control any managing director or general partner
of such limited liability company, partnership, association or other business entity. 

        "Tax" or "Taxes" means federal, state, county, local, foreign or other income, gross
receipts, ad valorem, franchise, profits, sales or use, transfer, registration, excise, utility, environmental, communications, real or personal property, capital stock, income, license, payroll, wage
or other withholding, employment, unemployment, social security, severance, stamp, occupation, alternative or add-on minimum, estimated and other taxes of any kind whatsoever (including
deficiencies, penalties, additions to tax, and interest attributable thereto) whether disputed or not and including any obligations to indemnify or otherwise assume or succeed to the Tax Liability of
any other Person. 

        "Transaction Agreements" means this Agreement, the Notes, the Guaranty, the Certificate of Designation, the Warrants, the Investor Rights
Agreement, the Registration Agreement, the Asset Purchase Agreement and all other agreements and instruments contemplated by each of the foregoing to which VitalStream or any of the VitalStream
Subsidiaries is a party other than the Customer Migration Agreement (as defined in the Asset Purchase Agreement), the Colocation Agreement (as defined in the Asset Purchase Agreement) and the Master
Access Agreement (as defined in the Asset Purchase Agreement). 

8

  

        "Underlying Common Stock" means (i) the Common Stock issued or issuable, directly or indirectly, upon conversion of the Convertible
Notes, (ii) the Common Stock issued or issuable upon exercise of the Warrants, (iii) the Common Stock issued or issuable in connection with the Commitment Fee, and (iv) any Common
Stock issued or issuable with respect to the securities referred to in clauses (i), (ii) and (iii) above by way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization. For purposes of this Agreement, (a) any Person who holds Convertible Notes shall be deemed to be the holder of the
Underlying Common Stock issuable, directly or indirectly, upon conversion of such Convertible Notes regardless of any restriction or limitation on the conversion of such Convertible Notes and
(b) any Person who holds Warrants shall be deemed to be the holder of the Underlying Common Stock issuable upon exercise of such Warrants regardless of any restriction or limitation on the
exercise of such Warrants, and, with respect to both clauses (a) and (b) above, such Underlying Common Stock shall be deemed to be in existence and such Person shall be entitled to
exercise the rights of a holder of such Underlying Common Stock hereunder. As to any particular shares of Underlying Common Stock, such shares shall cease to be Underlying Common Stock when they have
been (1) effectively registered under the Securities Act and disposed of in accordance with the registration statement covering them, (2) distributed to the public through a broker,
dealer or market maker pursuant to Rule 144 or (3) repurchased by VitalStream or any VitalStream Subsidiary. 

        "VitalStream" has the meaning set forth in the preamble to this Agreement. 

        "VitalStream Counsel Opinion" shall mean an opinion of Stoel Rives, LLP, counsel to VitalStream, substantially in the form attached hereto
as Exhibit E. 

        "VitalStream Material Adverse Effect" means a material and adverse effect upon the business, operations, assets, Liabilities, condition
(financial or otherwise), operating results, prospects, cash flow, net worth or employee, customer or supplier relations of VitalStream and the VitalStream Subsidiaries taken as a whole. 

        "VitalStream Acquisition Transaction" means (i) the acquisition by VitalStream or any VitalStream Subsidiary of a Person who is not
an Affiliate of VitalStream or a substantial portion of the business of such Person by means of any transaction or series of related transactions, including (a) any merger, consolidation or
other similar transaction, involving VitalStream or any VitalStream Subsidiary and such Person (and its Affiliates) that, if consummated, would result in the securityholders of VitalStream immediately
prior to the consummation of such merger, consolidation or other similar transaction, directly or indirectly, owning more than 50% of the voting power of the outstanding Equity Securities
and Debt Securities of the surviving Person of such merger, consolidation or other similar transaction, (b) the acquisition by VitalStream or any VitalStream Subsidiary of Equity Securities or
Debt Securities of such Person or (c) the acquisition by VitalStream or any VitalStream Subsidiary of the assets of such Person and (ii) VitalStream or any VitalStream Subsidiary
entering into a joint venture with a Person who is not an Affiliate of VitalStream. 

        "VitalStream Sale Transaction" means the acquisition of VitalStream or any VitalStream Subsidiary or a substantial portion of the business
of VitalStream or any VitalStream Subsidiary by a Person who is not an Affiliate of VitalStream by means of any transaction or series of related transactions, including (i) any merger,
consolidation or other similar transaction, involving VitalStream or any VitalStream Subsidiary and such Person (and its Affiliates) that, if consummated, would result in the securityholders of
VitalStream immediately prior to the consummation of such merger, consolidation or other similar transaction, directly or indirectly, owning less than 50% of the voting power of the outstanding 

9

 

Equity Securities and Debt Securities of the surviving Person of such merger, consolidation or other similar transaction, (ii) the issuance of Equity Securities or Debt Securities by
VitalStream or any VitalStream Subsidiary to such Person (and its Affiliates) or the acquisition by such Person (and its Affiliates) of Equity Securities or Debt Securities of VitalStream or any
VitalStream Subsidiary representing more than 50% of the voting power of the outstanding Equity Securities and Debt Securities of VitalStream or such VitalStream Subsidiary, (iii) any tender or
exchange offer that, if consummated, would result in such Person and its Affiliates owning Equity Securities or Debt Securities of VitalStream or any VitalStream Subsidiary representing more than 50%
of the voting power of the outstanding Equity Securities or Debt Securities of VitalStream or such VitalStream Subsidiary or (iv) the sale of all or substantially all of the assets of
VitalStream or any VitalStream Subsidiary followed by a liquidation of VitalStream or such VitalStream Subsidiary. 

        "VitalStream Subsidiaries" shall mean the Subsidiaries of VitalStream. 

        "Warrants" shall mean those certain Common Stock Purchase Warrants of VitalStream issued pursuant to this Agreement, in the form of  Exhibit F attached hereto, as
amended, modified, restated, superseded or replaced from time to time. 

        "Wholly-Owned Subsidiary" means, with respect to any Person, a Subsidiary of which all of the outstanding capital stock or other ownership
interests are owned by such Person or another Wholly-Owned Subsidiary of such Person. 

 
 
        Section 2.    Authorization and Closings.     

 
 
          2A.    Authorization, Purchase and Sale of the Initial Convertible Notes and Warrants.     

          (i)  VitalStream
has duly authorized the issuance and sale, pursuant to the terms of this Agreement, of the Initial Convertible Notes and the Warrants. The Initial
Convertible Notes are, subject to the terms of the Initial Convertible Notes, convertible into shares of Common Stock, Series A Preferred, Preferred Equity Securities and Other Company
Securities. The Warrants are exercisable for shares of Common Stock. 

        (ii)  At
any time during the period (the "Initial Financing Period") beginning on the date fifteen (15) business days
after the date hereof and ending on the day immediately prior to the date of the consummation of the transactions contemplated by the Asset Purchase Agreement, subject to the terms and conditions of
this Agreement, at the Initial Closing, VitalStream shall have the one-time right (the "Initial Financing Put Right") to require the
Purchasers to purchase, in the aggregate, no less than $150,000 and no more than $409,167.67 principal amount of Initial Convertible Notes. If VitalStream chooses to exercise its Initial Financing Put
Rights, VitalStream shall deliver a notice (a "Initial Financing Put Notice") to each Purchaser between the date hereof and the date that is fifteen
(15) business days prior to the day immediately prior to the date of the consummation of the transactions contemplated by the Asset Purchase Agreement setting forth the date (the
"Initial Closing Date") on which such issuance shall be consummated (which date shall be no less than fifteen (15) business days after the date
of the receipt by the Purchasers of such Initial Financing Put Notice and no later than the day immediately prior to the date of the consummation of the transactions contemplated by the Asset Purchase
Agreement) and the aggregate principal amount of Initial Convertible Notes (the "Initial Financing Amount") to be purchased by the Initial Purchasers on
the Initial Closing Date. In no event may the Initial Closing occur after the day immediately prior to the date of the consummation of the transactions contemplated by the Asset Purchase Agreement. 

        (iii)  If
VitalStream elects to exercise its Initial Financing Put Rights, subject to the terms and conditions of this Agreement, at the Initial Closing, VitalStream shall
issue and sell to 

10

 

each Purchaser and each Purchaser shall purchase from VitalStream: (i) an Initial Convertible Note in the principal amount equal to the product of (a) the Initial Financing Amount  multiplied by (b) the percentage set forth opposite such Purchaser's name on Annex 1 attached
hereto under the heading "Pro Rata Share of Initial Financing Amount" for a price equal to such principal amount and (ii) for no additional
consideration, a Warrant to purchase a number of shares of Common Stock calculated in accordance with the terms of the Warrant. 

        (iv)  The
sale of the Initial Convertible Notes and Warrants to each Purchaser hereunder shall constitute a separate sale. 

 
 
           2B.    Authorization, Purchase and Sale of the Subsequent Convertible Notes.     

          (i)  VitalStream
has duly authorized the issuance and sale, pursuant to the terms of this Agreement, of the Subsequent Convertible Notes. The Subsequent Convertible Notes
are, subject to the terms of the Subsequent Convertible Notes, convertible into shares of Common Stock, Series A Preferred, Preferred Equity Securities and Other Company Securities. 

        (ii)  Subject
to the terms and conditions of this Agreement, at the Subsequent Closing, VitalStream shall issue and sell to each Purchaser and each Purchaser shall purchase
from VitalStream (a) a Subsequent Convertible Note in the principal amount equal to the difference between (1) the product of (A) $1,100,000 multiplied
by, (B) the percentage set forth opposite such Purchaser's name on Annex 1 attached hereto under the heading
"Pro Rata Share of Initial Financing Amount" minus (2) the principal amount of Initial
Convertible Notes, if any, purchased by such Purchaser at the Initial Closing, for a price equal to such principal amount and (b) if the Initial Closing is not consummated, for no additional
consideration, a Warrant to purchase a number of shares of Common Stock calculated in accordance with the terms of the Warrant. 

        (iii)  The
sale of each Subsequent Convertible Note and, if applicable, Warrants to each Purchaser hereunder shall constitute a separate sale. 

 
 
           2C.    The Closings.     

          (i)  The
closing (the "Initial Closing") of the issuance, sale and purchase of the Initial Convertible Notes and Warrants
under this Agreement shall, subject to the satisfaction or waiver of all conditions to the obligations of the parties hereto to consummate the Initial Closing (other than conditions with respect to
actions the parties hereto will take at the Initial Closing itself), take place at the offices of VitalStream located at One Jenner, Suite 100, Irvine, California 92618 commencing at 9:00 a.m.
local time on the Initial Closing Date (or such other date as the parties hereto may mutually determine in writing). At the Initial Closing, VitalStream shall deliver to each Purchaser (a) an
instrument evidencing the Initial Convertible Note to be purchased by such Purchaser, payable to such Purchaser or its nominee or registered in such Purchaser's or its nominee's name, upon payment of
the purchase price thereof by a cashier's or certified check, or by wire transfer of immediately available funds, to VitalStream and (b) an instrument evidencing the Warrant to be purchased by
such Purchaser, registered in such Purchaser's or its nominee's name. 

        (ii)  Subsequent Closing. The closing (the "Subsequent Closing") of the
issuance, sale and purchase of the Subsequent Convertible Notes and, if the Initial Closing has not been consummated, Warrants under this Agreement, shall, subject to the satisfaction or waiver of all
conditions to the obligations of the parties hereto to consummate the Subsequent Closing (other than conditions with respect to actions the parties hereto will take at the Subsequent Closing itself),
take place at the offices of VitalStream located at One Jenner, Suite 100, Irvine, California 92618 commencing at 9:00 a.m. local time on the date (the "Subsequent
Closing Date" and, together with the Initial Closing Date, the "Closing Dates") of closing of 

11

 

the transactions contemplated by the Asset Purchase Agreement. At the Subsequent Closing (a) if the Initial Closing has been consummated, VitalStream shall deliver to each Purchaser an
instrument evidencing the Subsequent Convertible Note to be purchased by such Purchaser, payable to such Purchaser or its nominee or registered in such Purchaser's or its nominee's name, upon payment
of the purchase price thereof by a cashier's or certified check, or by wire transfer of immediately available funds, to VitalStream and (b) if the Initial Closing has not been consummated,
VitalStream shall deliver to each Purchaser (1) an instrument evidencing the Subsequent Convertible Note to be purchased by such Purchaser, payable to such Purchaser or its nominee or
registered in such Purchaser's or its nominee's name, upon payment of the purchase price thereof by a cashier's or certified check, or by wire transfer of immediately available funds, to VitalStream
and (2) an instrument evidencing the Warrant to be purchased by such Purchaser, registered in such Purchaser's or its nominee's name. 

 
 
        Section 3.    Conditions of each Purchaser's Obligations at the Closings.     

 
 
           3A.    Conditions of each Purchaser's Obligations at Each Closing.     The obligation of each Purchaser to
   purchase and pay for the Convertible Notes and Warrants, as the case may be, at each Closing shall be subject to the
fulfillment at or prior to such Closing of each of the following conditions, any and all of which may be waived in whole or in part in writing by such Purchaser to the extent permitted by applicable
Law: 

 
 
           (i)    Representations and Warranties; Covenants.     The representations and warranties of VitalStream
   contained in Section 7 hereof shall be true and correct
in all material respects at and as of such Closing as though then made and as though such Closing Date was substituted for the date of this Agreement throughout such representations and warranties
(except for any representations or warranties made as of a specific date, which shall be true and correct as of such date and except for any representations and warranties which are qualified by
materiality, which shall be true and correct in all respects). VitalStream shall have duly performed or complied with, in all material respects, all of the covenants, obligations and conditions to be
performed or complied with under the terms of this Agreement and the other Transaction Agreements on, prior to, or at such Closing and shall be in compliance with, in all material respects, all of the
covenants, obligations and conditions to be complied with under the terms of this Agreement at such Closing. 

 
 
          (ii)    Consents and Approvals.     VitalStream shall have made all filings and shall have obtained and delivered
  to each Purchaser all permits, authorizations, consents and approvals of any
Governmental Entity and/or third party required to be obtained by VitalStream to consummate the transactions contemplated to be consummated at such Closing by this Agreement and the other Transaction
Agreements. 

 
 
           (iii)    Litigation.     No suit, action or other proceeding, or injunction, order, decree or judgment relating
   thereto, shall be threatened or shall be pending in which it is sought to
restrain or prohibit or to obtain damages or other relief in connection with the transactions contemplated under this Agreement or any of the other Transaction Agreements or that would have, or would
reasonably be expected to have, a VitalStream Material Adverse Effect, and no injunction, judgment, order, decree or ruling with respect thereto shall be in effect. 

 
 
           (iv)    Securities Law Compliance.     VitalStream shall have made all filings under all applicable federal and
   state securities Laws necessary to consummate the issuance and sale of the Initial
Convertible Notes, Warrants and Underlying Common Stock pursuant to this Agreement in compliance with such Laws. 

 
 
           (v)    No VitalStream Material Adverse Effect.     There shall not have occurred any VitalStream Material
   Adverse Effect since June 30, 2002. 

12

 

 
 
          (vi)    Asset Purchase Agreement.     The Asset Purchase Agreement shall have been executed and delivered by
  VitalStream, the Buyer, Hosting and Networks. The Asset Purchase Agreement shall be in full
force and effect as of such Closing Date and shall not have been amended or modified. 

 
 
          (vii)    Registration Agreement.     The Registration Agreement shall have been executed and delivered by
  VitalStream and shall be in full force and effect. 

 
 
           (viii)    Investor Rights Agreement.     The Investor Rights Agreement shall have been executed and delivered by
   VitalStream and each of the other parties thereto and shall be in full force and effect. 

 
 
          (ix)    Guaranty.     The Guaranty shall have been executed and delivered by VitalStream and each VitalStream
  Subsidiary which has any assets and shall be in full force and effect. 

 
 
           (x)    Opinion of VitalStream's Counsel.     Purchasers shall have received an executed copy of the VitalStream
   Counsel Opinion. 

 
 
           (xi)    Sale of Convertible Notes and Warrants to each Purchaser.     VitalStream shall have simultaneously
   issued and sold to each Purchaser the Convertible Notes and Warrants, as the case may be, to be purchased by such Purchaser
hereunder at such Closing and VitalStream shall have received payment therefore in full. 

 
 
           (xii)    Closing Documents.     VitalStream shall have delivered to each Purchaser all of the following
   documents: 

        (a)  an
Officer's Certificate, dated as of such Closing Date, stating that the conditions specified in Section 3A(i)
through Section 3A(vi) of this Agreement have been fully satisfied; 

        (b)  certified
copies of the resolutions duly adopted by VitalStream's Board of Directors authorizing the execution, delivery and performance of this Agreement, the other
Transaction Agreements to which it is a party and each of the other agreements contemplated hereby or thereby to which it is a party, the issuance and sale of the Convertible Notes, the issuance and
sale of the Warrants, the reservation for issuance of a number of shares of Common Stock sufficient for conversion of the Convertible Notes, the reservation for issuance of a number of shares of
Common Stock sufficient for exercise of the Warrants and the consummation of all other transactions contemplated by this Agreement and the other Transaction Agreements to which it is a party; 

        (c)  certified
copies of the Articles of Incorporation and VitalStream's bylaws, each as in effect at such Closing Date; 

        (d)  certificate
of good standing from the Secretary of State of the State of Nevada dated within ten (10) days of such Closing Date; 

        (e)  copies
of all filings, permits, authorizations, consents and approvals of any Governmental Entity and/or third party required in connection with the consummation of the
transactions contemplated by this Agreement and the other Transaction Agreements (including, without limitation, all blue sky Law filings); and 

        (f)    such
other documents relating to the transactions contemplated by this Agreement or the other Transaction Agreements as any Purchaser or its special counsel may
reasonably request. 

 
 
           (xiii)    Proceedings.     All corporate and other proceedings taken or required to be taken by VitalStream in
   connection with the transactions contemplated hereby and by the other 

13

 

Transaction Agreements to be consummated at or prior to such Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to each Purchaser and its special
counsel. 

 
 
           3B.    Additional Conditions of each Purchaser's Obligations at the Initial Closing.     In addition to each of
   the conditions set forth in Section 3A hereof, the obligation of each Purchaser to
purchase and pay for the Initial Convertible Notes and Warrants at the Initial Closing shall be subject to the fulfillment at or prior to the Initial Closing of each of the following additional
conditions, any and all of which may be waived in whole or in part in writing by such Purchaser to the extent permitted by applicable Law: 

 
 
           (i)    Payment of the Commitment Fee.     VitalStream shall have paid one-third of the aggregate amount of the
   Commitment Fee to Dolphin. 

 
 
           (ii)    Payment of Purchasers' Attorneys Fees.     VitalStream shall have reimbursed the Purchasers for the fees
   and expenses of legal counsel incurred by Purchasers in connection with the preparation of this
Agreement and the other Transaction Agreements in an amount not to exceed $42,500. 

 
 
           3C.    Additional Conditions of each Purchaser's Obligations at the Subsequent Closing if the Initial Closing has not been Consummated.     If the Initial Closing has not been consummated, in addition to each of the conditions set forth in  Section 3A hereof, the obligation of each Purchaser to purchase
   and pay for the Subsequent Convertible Notes and Warrants at the Subsequent
Closing shall be subject to the fulfillment at or prior to the Subsequent Closing of each of the following additional conditions, any and all of which may be waived in whole or in part in writing by
such Purchaser to the extent permitted by applicable Law: 

 
 
           (i)    Asset Purchase Agreement.     The conditions in Section 7(b) of the Asset Purchase Agreement shall
   have been satisfied in full (without reliance on any waiver by Hosting) (other than
the transfer of the Cash Consideration (as defined in the Asset Purchase Agreement) as contemplated by Section 7(b)(xiv) of the Asset Purchase Agreement which transfer shall not occur
until immediately after VitalStream has received the purchase price for all of the Subsequent Convertible Notes as contemplated by this Agreement), and the transactions contemplated by the Asset
Purchase Agreement shall have been consummated immediately prior to the Subsequent Closing in accordance with the terms of the Asset Purchase Agreement. 

 
 
           (ii)    Payment of the Commitment Fee.     VitalStream shall have paid the Commitment Fee to Dolphin in full.
   

 
 
           (iii)    Payment of Purchasers' Attorneys Fees.     VitalStream shall have reimbursed the Purchasers for the
   fees and expenses of legal counsel incurred by Purchasers in connection with the preparation of this
Agreement and the other Transaction Agreements in an amount not to exceed $42,500. 

 
 
           (iv)    Subsequent Closing Documents.     VitalStream shall have delivered to each Purchaser an Officer's
   Certificate, dated as of the Subsequent Closing Date, stating that the conditions specified in  Section 3C(i) of this Agreement have been fully satisfied. 

 
 
          3D.    Additional Conditions of each Purchaser's Obligations at the Subsequent Closing if the Initial Closing has been Consummated.     If the Initial Closing has been consummated, in addition to each of the conditions set forth in Section 3A
hereof, the obligation of each Purchaser to purchase and pay for the Subsequent Convertible Notes at the Subsequent Closing shall be subject to the fulfillment at or prior to the Subsequent Closing of
each of the following additional conditions, any 

14

 

and all of which may be waived in whole or in part in writing by such Purchaser to the extent permitted by applicable Law: 

 
 
           (i)    Consummation of the Initial Closing.     The Initial Closing shall have been consummated in accordance
   with the terms of this Agreement. 

 
 
          (ii)    No Event of Default.     No Event of Default (as defined in the Initial Convertible Notes) shall have
  occurred and be continuing under the Initial Convertible Notes. 

 
 
           (iii)    Asset Purchase Agreement.     The conditions in Section 7(b) of the Asset Purchase Agreement shall
   have been satisfied in full (without reliance on any waiver by Hosting) (other than
the transfer of the Cash Consideration (as defined in the Asset Purchase Agreement) as contemplated by Section 7(b)(xiv) of the Asset Purchase Agreement which transfer shall not occur
until immediately after VitalStream has received the purchase price for all of the Subsequent Convertible Notes as contemplated by this Agreement), and the transactions contemplated by the Asset
Purchase Agreement shall have been consummated prior to the Subsequent Closing in accordance with the terms of the Asset Purchase Agreement. 

 
 
           (iv)    Payment of the Commitment Fee.     VitalStream shall have paid in full any amount of the Commitment Fee
   to Dolphin which has not been previously paid. 

 
 
           (v)    Subsequent Closing Documents.     VitalStream shall have delivered to each Purchaser an Officer's
   Certificate, dated as of the Subsequent Closing Date, stating that the conditions specified in  Section 3D(i) and Section 3D(iii) of this
   Agreement have been fully satisfied. 

 
 
        Section 4.    Conditions of VitalStream's Obligations at the Closings.     

 
 
           4A.    Conditions of VitalStream's Obligations at each Closing.     The obligation of VitalStream to issue and
   sell the Convertible Notes and Warrants, as the case may be, to the Purchasers at each Closing shall be subject to the
fulfillment at or prior to such Closing of each of the following conditions, any and all of which may be waived in whole or in part in writing by VitalStream to the extent permitted by applicable Law: 

 
 
           (i)    Representations and Warranties; Covenants.     The representations and warranties of each of the
   Purchasers contained in Section 9C hereof shall be true
and correct in all material respects at and as of such Closing as though then made and as though such Closing Date was substituted for the date of this Agreement throughout such representations and
warranties (except for any representations or warranties made as of a specific date, which shall be true and correct as of such date and except for any representations and warranties which are
qualified by materiality, which shall be true and correct in all respects). Each Purchaser shall have duly performed or complied with, in all material respects, all of the covenants, obligations and
conditions to be performed or complied with under the terms of this Agreement on, prior to, or at such Closing. 

 
 
           (ii)    Litigation.     No suit, action or other proceeding, or injunction, order, decree or judgment relating
   thereto, shall be threatened or shall be pending in which it is sought to
restrain or prohibit or to obtain damages or other relief in connection with the transactions contemplated under this Agreement or any of the other Transaction Agreements or that would have, or
reasonably be expected to have, a VitalStream Material Adverse Effect, and no injunction, judgment, order, decree or ruling with respect thereto shall be in effect. 

 
 
           (iii)    Asset Purchase Agreement.     The Asset Purchase Agreement shall have been executed and delivered by
   VitalStream, the Buyer, Hosting and Networks. The Asset Purchase Agreement shall be in full
force and effect as of such Closing Date and shall not have been amended or modified. 

15

 

 
 
           (iv)    Sale of Convertible Notes and Warrants to each Purchaser.     Each Purchaser shall have tendered at such
   Closing the purchase price required under this Agreement to be tendered for the Convertible Notes and Warrants being
purchased. 

 
 
          (v)    Closing Documents.     Each Purchaser shall have delivered to VitalStream such documents relating to the
  transactions contemplated by this Agreement as VitalStream or its special
counsel may reasonably request. 

 
 
           (vi)    Proceedings.     All corporate and other proceedings taken or required to be taken by each Purchaser in
   connection with the transactions contemplated hereby and by the other
Transaction Agreements to be consummated at or prior to such Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to VitalStream and its special counsel. 

 
 
           4B.    Additional Conditions of VitalStream's Obligations at the Subsequent Closing if the Initial Closing has not been Consummated.     If the Initial Closing has not been consummated, in addition to each of the conditions set forth in  Section 4A hereof, the obligation of VitalStream to issue and sell
   the Convertible Notes and Warrants to the Purchasers at the Subsequent Closing
shall be subject to the fulfillment at or prior to the Subsequent Closing of the following additional condition, which may be waived in whole or in part in writing by VitalStream to the extent
permitted by applicable Law: 

 
 
           (i)    Asset Purchase Agreement.     The conditions in Section 7(a) of the Asset Purchase Agreement shall
   have been satisfied in full (without reliance on any waiver by Hosting), and the
transactions contemplated by the Asset Purchase Agreement shall have been consummated immediately prior to the Subsequent Closing in accordance with the terms of the Asset Purchase Agreement. 

 
 
          4C.    Additional Conditions of VitalStream's Obligations at the Subsequent Closing if the Initial Closing has been Consummated.     If the Initial Closing has been consummated, in addition to each of the conditions set forth in Section 4A
hereof, the obligation of VitalStream to issue and sell the Subsequent Convertible Notes to the Purchasers at the Subsequent Closing shall be subject to the fulfillment at or prior to the Subsequent
Closing of each of the following additional conditions, any and all of which may be waived in whole or in part in writing by VitalStream to the extent permitted by applicable Law: 

 
 
           (i)    Consummation of the Initial Closing.     The Initial Closing shall have been consummated in accordance
   with the terms of this Agreement. 

 
 
           (ii)    Asset Purchase Agreement.     The conditions in Section 7(a) of the Asset Purchase Agreement shall
   have been satisfied in full (without reliance on any waiver by Hosting), and the
transactions contemplated by the Asset Purchase Agreement shall have been consummated immediately prior to the Subsequent Closing in accordance with the terms of the Asset Purchase Agreement. 

 
 
        Section 5.    Covenants.     

 
 
           5A.    Reservation of Common Stock and Series A Preferred.     VitalStream shall at all times reserve and
   keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of issuance, directly
or indirectly, upon the conversion of the Convertible Notes and exercise of the Warrants, such number of shares of Underlying Common Stock issuable upon the conversion of all outstanding Convertible
Notes and exercise of all outstanding Warrants. VitalStream shall at all times reserve and keep available out of its authorized but unissued shares of Series A Preferred, solely for the purpose
of issuance upon the conversion of the Convertible Notes, such number of shares of Series A Preferred issuable upon the conversion of all 

16

 

outstanding Convertible Notes. All shares of Underlying Common Stock or Series A Preferred, as the case may be, which are so issuable shall, when issued, be duly and validly issued, fully paid
and non assessable and free from all Taxes and Liens. VitalStream shall take all such actions as may be necessary to assure that all such shares of Underlying Common Stock or Series A
Preferred, as the case may be, may be so issued without violation of any applicable Law or Legal Requirement or any requirements of any domestic securities exchange upon which shares of Underlying
Common Stock or Series A Preferred, as the case may be, may be listed (except for official notice of issuance which shall be immediately transmitted by VitalStream upon issuance). 

 
 
          5B.    Intellectual Property Rights.     VitalStream shall possess and maintain all Intellectual Property Rights
  necessary to the conduct of its business and own all right, title and interest in and to,
or have a valid and enforceable license to use, all such Intellectual Property Rights. VitalStream shall not take any action or fail to take any action which would result in the invalidity,
abandonment, misuse or unenforceability of such Intellectual Property Rights or which would infringe upon or misappropriate any Intellectual Property Rights of other Persons. 

 
 
          5C.    Restrictive Covenants.     In addition to any action otherwise required by the Articles of Incorporation
  or applicable Law for so long as any Convertible Notes remain outstanding and,
(a) at any time on or prior to the Subsequent Closing Date, for so long as the Underlying Common Stock constitutes at least one (1) percent of VitalStream's outstanding Common Stock and
(b) at any time following the Subsequent Closing Date, for so long as the Underlying Common Stock constitutes at least three (3) percent of VitalStream's outstanding Common Stock,
VitalStream shall not take any of the following actions without the prior written authorization and approval of the holders of a majority of the principal amount of the Convertible Notes then
outstanding. 

          (i)  directly
or indirectly declare or pay any dividends or make any distributions upon any of its Equity Securities, except for dividends payable in shares of Common Stock
issued upon the outstanding shares of Common Stock; 

        (ii)  directly
or indirectly redeem, purchase or otherwise acquire, or permit any of the VitalStream Subsidiaries to redeem, purchase or otherwise acquire, any of
VitalStream's or any of the VitalStream Subsidiary's Debt Securities or Equity Securities or directly or indirectly redeem, purchase or make any payments with respect to any stock appreciation rights,
phantom stock plans or similar rights or plans; provided, however (a) the payment of any
Indebtedness under any Debt Security of VitalStream or any VitalStream Subsidiary at the time, and in the amounts, such Indebtedness becomes due and payable in accordance with the terms of such Debt
Security or the repayment in full of all of the Indebtedness under any Debt Security of VitalStream or any VitalStream Subsidiary with the proceeds of an issuance of Debt Securities by VitalStream or
any VitalStream Subsidiary shall not require the consent of the holders of the Convertible Notes under this Section 5C(ii) (notwithstanding the
foregoing, for the avoidance of any doubt, this provision shall not negate the obligation of VitalStream to obtain the consent of the holders of the Convertible Notes under  Section 5C(xiii) of this
Agreement) and (b) at any time after the date on which the Dolphin Director becomes a member of the Board of
Directors and, for so long as any Convertible Notes remain outstanding, continues to be a member of the Board of Directors, VitalStream may, at any time and from time to time during any fiscal
quarter, redeem shares of Common Stock which are publicly traded and listed on any securities exchange or quoted in the NASDAQ System (including the proposed Bulletin Board Exchange) or the
over-the-counter market, for an aggregate purchase price of up to an amount equal to 35% of the consolidated Cash Flow of Vital Stream and the VitalStream Subsidiaries for the
prior fiscal quarter of VitalStream if (1) the Board of Directors has determined, in its good faith judgment, that such redemption is fair and in the best interest of all of the securityholders
of VitalStream and 

17

 

(2) such redemption has been approved in writing, or by the vote at a duly-called meeting of the Board of Directors, by a majority of the members of the Board of Directors; 

        (iii)  (a)
make, or permit any of the VitalStream Subsidiaries to make, any loans or advances to, guaranties for the benefit of, or Investments in, any Person or business
(other than with respect to Wholly-Owned Subsidiaries), (b) acquire, or permit any of the VitalStream Subsidiaries to acquire, any interest in any Person or business (other than with respect to
Wholly-Owned Subsidiaries) by a purchase of assets or (c) enter into, or permit any of the VitalStream Subsidiaries to enter into, a joint venture with any Person (other than a Wholly-Owned
Subsidiaries), except for (1) advances to employees of an amount not in excess of one month's salary in the Ordinary Course of Business,
(2) Investments having a stated maturity no greater than one year from the date such Investment is made in (A) obligations of the United States government or any agency thereof or
obligations guaranteed by the United States government, (B) certificates of deposit of commercial banks having combined capital and surplus of at least $50 million at the time of such
Investment, (C) commercial paper with a rating of at least "Prime-1" by Moody's Investors Service, Inc. at the time of such
Investment or (D) Debt Securities of a Person solely as part of the consummation of an acquisition (whether by a purchase of assets, purchase of stock, merger or otherwise) by VitalStream or
any VitalStream Subsidiary of any interest in such Person or such Person's business; provided, that,
(i) to the extent required, such acquisition has been approved by the holders of the Convertible Notes under this Section 5C,
(ii) at any time prior to the date on which the Dolphin Director has become a member of the Board of Directors, such acquisition and Investment has been approved in writing by Dolphin,
(iii) such acquisition and Investment has been approved in writing, or by the vote at a duly-called meeting of the Board of Directors, by a majority of the members of the Board of
Directors and (iv) such Investment is an amount not greater than $375,000 or (3) Investments, acquisitions of assets or joint ventures (A) in which the pro forma consolidated
Average Monthly Cash Flow of the Person or business in which an Investment is made, the assets acquired or the joint venture entity, as the case may be, for the twelve (12) month period
immediately following the execution of a definitive agreement relating to such Investment, purchase of assets or joint venture (as determined, (i) at any time prior to the date on which the
Dolphin Director has become a member of the Board of Directors, by Dolphin and (ii) at any time after the date on which the Dolphin Director becomes a member of the Board of Directors and, for
so long as any Convertible Notes remain outstanding, continues to be a member of the Board of Directors, by the Board of Directors in its good faith judgment) is greater than $0.00 and
(B) which constitute an Authorized VitalStream Acquisition Transaction; 

        (iv)  merge
or consolidate with any Person, or permit any of the VitalStream Subsidiaries to merge or consolidate with any Person (other than a Wholly-Owned Subsidiary),
except, at any time after the date on which the Dolphin Director becomes a member of the Board of Directors and, for so long as any Convertible Notes remain outstanding, continues to be a member of
the Board of Directors, for any merger or consolidation (a) in which the pro forma consolidated Average Monthly Cash Flow of the Person with whom VitalStream or any of the VitalStream
Subsidiaries will merge or consolidate for the twelve (12) month period immediately following the execution of a definitive agreement relating to such merger or consolidation (as determined,
(1) at any time prior to the date on which the Dolphin Director has become a member of the Board of Directors, by Dolphin and (2) at any time after the date on which the Dolphin Director
becomes a member of the Board of Directors and, for so long as any Convertible Notes remain outstanding, continues to be a member of the Board of Directors, by the Board of Directors in its good faith
judgment) is greater than $0.00 and (b) which constitutes either (1) an Authorized VitalStream Sale Transaction or (2) an Authorized VitalStream Acquisition Transaction; 

18

  

        (v)  sell,
lease or otherwise dispose of, or permit any of the VitalStream Subsidiaries to sell, lease or otherwise dispose of, in the aggregate, more than 17.5% of the
consolidated assets of VitalStream and the VitalStream Subsidiaries (computed on the basis of the greater of (a) book value determined in accordance with GAAP consistently applied or
(b) Fair Market Value), except for (1) any sale, lease or other disposition of assets in the Ordinary Course of Business, (2) any sale, lease or other disposition of assets
required by any Law or Legal Requirement in order to permit VitalStream or any VitalStream Subsidiary to consummate an acquisition (whether by a purchase of assets, purchase of stock, merger or
otherwise) of any interest in a Person or such Person's business; provided, that, (A) to the
extent required, such acquisition has been approved by the holders of the Convertible Notes under this Section 5C, (B) at any time prior
to the date on which the Dolphin Director has become a member of the Board of Directors, such acquisition has been approved in writing by Dolphin and (C) at any time after the date on which the
Dolphin Director becomes a member of the Board of Directors and, for so long as any Convertible Notes remain outstanding, continues to be a member of the Board of Directors, such acquisition has been
approved in writing, or by the vote at a duly-called meeting of the Board of Directors, by a majority of the members of the Board of Directors or (3) any sale of assets which
constitutes an Authorized VitalStream Sale Transaction (for the avoidance of any doubt, the granting of a security interest to a secured lender by VitalStream or any VitalStream Subsidiary in its
accounts receivable in connection with the establishment by VitalStream or any VitalStream Subsidiary of a secured credit facility shall not constitute a sale, lease or otherwise disposition of the
assets of VitalStream or any VitalStream Subsidiary for purposes of this Section 5C(v)); 

        (vi)  liquidate,
dissolve or effect a recapitalization or reorganization in any form of transaction (including, without limitation, any reorganization into a limited
liability company, a partnership or any other non-corporate entity which is treated as a partnership for federal income tax purposes), except for any liquidation, dissolution,
recapitalization or reorganization effectuated in connection with the consummation of (a) an Authorized VitalStream Sale Transaction or (b) an Authorized VitalStream Acquisition
Transaction; 

      (vii)  change
the nature of the business or operations of VitalStream or any of the VitalStream Subsidiaries or enter into or allow any of the VitalStream Subsidiaries to
enter into the ownership, active management or operation of a line of business other than that line of business in which VitalStream and the VitalStream Subsidiaries engage as of the date hereof;  provided, however, that VitalStream may continue to employ new technologies and provide new services
which either become commonly employed or provided by, or, in the good faith judgment of the management of Vital Stream are reasonably expected to become commonly employed or provided by, Persons
engaged in VitalStream's line of business; 

      (viii)  become
subject to, or permit any of the VitalStream Subsidiaries to become subject to (including, without limitation, by way of amendment to or modification of) any
agreement or instrument which by its terms would (under any circumstances) restrict (a) the right of any of the VitalStream Subsidiaries to make loans or advances or pay dividends to, transfer
property to, or repay any Indebtedness owed to, VitalStream or any of the VitalStream Subsidiaries or (b) VitalStream's or any of the VitalStream Subsidiaries' right to perform the provisions
of this Agreement or any of the other Transaction Agreements (including, without limitation, provisions relating to the payment of principal and interest on the Convertible Notes); 

        (ix)  enter
into, amend, modify or supplement, or permit any of the VitalStream Subsidiaries to enter into, amend, modify or supplement, any agreement, transaction,
commitment or arrangement with any of its or any of the VitalStream Subsidiaries' officers, directors, employees, stockholders or Affiliates or with any individual related by blood, 

19

 

marriage or adoption to any such individual or with any entity in which any such Person or individual owns a beneficial interest, except for (a) customary employment arrangements bonus and
benefit programs on reasonable and customary terms, (b) any agreement, amendment, modification or supplement where the amount involved does not exceed $25,000 per annum or (c) at any
time after the date on which the Dolphin Director becomes a member of the Board of Directors and, for so long as any Convertible Notes remain outstanding, continues to be a member of the Board of
Directors, any agreement, amendment, modification or supplement which is approved in writing, or by the vote at a duly-called meeting of the Board of Directors, by all of the members of
the Board of Directors; 

        (x)  except
as expressly provided herein or in the Asset Purchase Agreement, (a) induce or attempt to induce, or permit any of the VitalStream Subsidiary to induce or
attempt to induce, any Holdings Executive Officer to leave the employ of Holdings or any of its Subsidiaries, (b) hire, employ or engage, or permit any of the VitalStream Subsidiary to hire,
employ or engage, any Holdings Executive Officer employed or engaged by Holdings or any of its Subsidiaries, (c) hire, employ or engage, or permit any of the VitalStream Subsidiary to hire,
employ or engage, any Holdings Executive Officer who has left the employment or engagement of Holdings or any of its Subsidiaries prior to, on or after the date hereof within two (2) years of
the termination of such Holdings Executive Officer's employment or engagement with Holdings or any of its Subsidiaries, or (d) in any other way interfere, or permit any of the VitalStream
Subsidiary to in any other way interfere, with the employment relationship between Holdings and any of its Subsidiaries, on the one hand, and any Holding's Executive Officer, on the other hand; 

        (xi)  increase,
or permit any of the VitalStream Subsidiaries to increase, any compensation (including salary, bonuses and other forms of current and deferred compensation),
payable to any officer or director of VitalStream or any of the VitalStream Subsidiaries, except where (a) such increase is on reasonable and customary terms, (b) such increase does not
involve an amount in excess of $25,000, (c) such officer or director is offered and accepts new, different, or additional employment or responsibilities with VitalStream or any of the
VitalStream Subsidiaries or (d) at any time after the date on which the Dolphin Director becomes a member of the Board of Directors and, for so long as any Convertible Notes remain outstanding,
continues to be a member of the Board of Directors, such increase is approved by the unanimous written consent of the Board of Directors; 

      (xii)  establish
or acquire, or permit any of the VitalStream Subsidiaries to establish or acquire, any Subsidiary that is not a Wholly-Owned Subsidiary, except where such
Subsidiary is established or acquired as part of the formation of a joint venture and such Subsidiary will be consolidated with VitalStream and the VitalStream Subsidiaries in preparation of the
financial statements of VitalStream and the VitalStream Subsidiaries in accordance with GAAP and either (a) the pro forma consolidated Average Monthly Cash Flow of such joint venture entity for
the twelve (12) month period immediately following the execution of a definitive agreement relating to such joint venture (as determined, (1) at any time prior to the date on which the
Dolphin Director has become a member of the Board of Directors, by Dolphin and (2) at any time after the date on which the Dolphin Director becomes a member of the Board of Directors and, for
so long as any Convertible Notes remain outstanding, continues to be a member of the Board of Directors, by the Board of Directors in its good faith judgment) is greater than $0.00, or (b) at
any time after the date on which the Dolphin Director becomes a member of the Board of Directors and, for so long as any Convertible Notes remain outstanding, continues to be a member of the Board of
Directors, (1) the establishment or acquisition of such Subsidiary is approved in writing, or by the vote at a duly-called meeting of the Board of Directors, by all of the members
of the Board of 

20

 

Directors and (2) the joint venture in connection with which such Subsidiary was established or acquired does not, and will not, require the transfer or contribution by VitalStream or any
VitalStream Subsidiary of any assets (including Cash) to such joint venture; 

      (xiii)  except
as expressly permitted by the Transaction Agreements create, incur, assume or suffer to exist (including as a result of the consummation of an Authorized
VitalStream Acquisition Transaction or Authorized VitalStream Sale Transaction in which VitalStream is not the surviving entity), or permit any of the VitalStream Subsidiaries to create, incur, assume
or suffer to exist (including as a result of the consummation of an Authorized VitalStream Acquisition Transaction or Authorized VitalStream Sale Transaction in which such VitalStream Subsidiary is
not the surviving entity), Indebtedness except for (a) any Indebtedness incurred under capitalized leases entered into in the Ordinary Course of Business or (b) any Indebtedness incurred
under one or more commercial bank loans or other credit facilities with one or more commercial banking institutions in an aggregate amount not exceeding $1,000,000 as determined on a consolidated
basis; provided, that, with respect to any Indebtedness described in clause (b) above, the
Indebtedness evidenced by the Convertible Notes ranks pari passu as to seniority with respect to any Lien granted in any assets of VitalStream or any
VitalStream Subsidiary to secure such Indebtedness (other than with respect to any Lien granted in the accounts receivable of VitalStream or any VitalStream Subsidiary after the three-month
anniversary of the Subsequent Closing Date); 

      (xiv)  create,
incur, assume or suffer to exist, or permit any of the VitalStream Subsidiaries to create, incur, assume or suffer to exist, any Liens other than Permitted
Liens or Liens incurred in connection with any Indebtedness permitted to be incurred under Section 5C(xiii) of this Agreement; 

      (xv)  change
its, or permit any VitalStream Subsidiary to change its, fiscal year to a fiscal year ending on a date other than December 31; 

      (xvi)  prepay,
or permit any of the VitalStream Subsidiaries to prepay, any interest on any Indebtedness or prepay, or permit any of the VitalStream Subsidiaries to prepay,
any principal on any Indebtedness; provided, however, the payment of any Indebtedness of VitalStream or
any VitalStream Subsidiary at the time, and in the amounts, such Indebtedness becomes due and payable in accordance with the terms of the Debt Security evidencing such Indebtedness or the repayment in
full of all of such Indebtedness with the proceeds of an issuance of Debt Securities by VitalStream or any VitalStream Subsidiary shall not require the consent of the holders of the Convertible Notes
under this Section 5C(xvi) (notwithstanding the foregoing, for the avoidance of any doubt, this provision shall not negate the obligation of
VitalStream to obtain the consent of the holders of the Convertible Notes under Section 5C(xiii) of this Agreement); 

    (xvii)  amend
or modify, or permit any of the VitalStream Subsidiaries to amend or modify, any stock option plan or employee stock ownership plan as in existence as of the
Initial Closing (or if no Initial Closing has occurred, the Subsequent Closing), except any amendments or modifications made with the consent of the majority of the outstanding Common Stock and
Underlying Common Stock (voting together as a single class); adopt, or permit any of the VitalStream Subsidiaries to adopt, any new stock option plan or employee stock ownership plan or issue, or
permit any of the VitalStream Subsidiaries to issue, any shares of Common Stock to its or any of the VitalStream Subsidiaries' employees, other than, in each case, (a) options, warrants and
other rights to acquire Common Stock outstanding on the Initial Closing Date, or if the Initial Closing has not been consummated, the Subsequent Closing Date, (b) shares of Common Stock issued
pursuant to any stock option plan or employee stock ownership plan in existence as of the Initial Closing (or if no Initial Closing 

21

 

has occurred, the Subsequent Closing), (c) at any time after the date on which the Dolphin Director becomes a member of the Board of Directors and, for so long as any Convertible Notes remain
outstanding, continues to be a member of the Board of Directors, with the approval in writing, or by the vote at a duly-called meeting of the Board of Directors, by a majority of the
members of the Board of Directors, shares of capital stock issued by VitalStream to its employees for bona fide capital raising purposes or
(d) at any time after the date on which the Dolphin Director becomes a member of the Board of Directors and, for so long as any Convertible Notes remain outstanding, continues to be a member of
the Board of Directors, with the approval in writing, or by the vote at a duly-called meeting of the Board of Directors, by all of the members of the Board of Directors; 

    (xviii)  within
60 days of the Subsequent Closing Date, use the proceeds from the sale of the Convertible Notes and Warrants other than for (a) working capital
and general corporate purposes, (b) the $250,000 payment contemplated by Section 2(c)(i) of the Asset Purchase Agreement, (c) fees and expenses, not exceeding $42,500,
payable pursuant to Section 9A of this Agreement, (d) legal and accounting fees and expenses, not exceeding $125,000, of VitalStream's
counsel and auditors in connection with the transactions contemplated by the Asset Purchase Agreement and this Agreement (including expenses not to exceed $25,000 to be paid in connection with the
preparation of the Hosting Audited Financial Statements (as defined in the Asset Purchase Agreement)), (e) fees not in excess of $100,000 to be paid to The Seidler Companies Incorporated,
(f) capital expenditures, not exceeding $50,000 for routers and switches, and (g) any acquisition, merger or Investment (including expenses and fees) which does not require the approval
of the holders of the Convertible Notes under this Section 5C; 

      (xix)  except
as expressly contemplated by the Asset Purchase Agreement or the Transaction Agreements, make any amendment to the Articles of Incorporation or VitalStream's
bylaws, or file any resolution of the Board of Directors with the Nevada Secretary of State containing any provisions, which would increase the number of authorized shares of the Common Stock or
adversely affect or otherwise impair the rights or the relative preferences and priorities of the holders of the Convertible Notes, Warrants, Series A Preferred or Underlying Common Stock under
this Agreement, the Articles of Incorporation, VitalStream's bylaws or the other Transaction Agreements; 

      (xx)  except
as expressly contemplated by the Transaction Agreements, authorize, issue or create, or enter into any agreement providing for the issuance (contingent or
otherwise) of, any Equity Securities which are senior to or on parity with the Series A Preferred with respect to the payment of dividends, redemptions or distributions upon liquidation or
otherwise other than Equity Securities that are on parity with the Series A Preferred with respect to the payment of dividends, redemptions or distributions upon liquidation or otherwise that
have terms that are identical to the terms of the Series A Preferred (other than the conversion price of such Equity Securities); or 

      (xxi)  issue,
or enter into any agreement providing for the issuance (contingent or otherwise) of, any shares of Series A Preferred other than upon conversion of the
Convertible Notes. 

For
purposes of this Section 5C only, at any time during the period beginning on the date on which the Dolphin Director becomes a member of the
Board of Directors and ending on the date on which the Dolphin Director is no longer entitled to be a member of the Board of Directors pursuant to the terms of the Investor Rights Agreement, if no
individual is serving as a member of the Board of Directors in the capacity of the Dolphin Director, VitalStream shall have the right to deliver written notice (the "Dolphin
Director Notice") to the Dolphin 

22

 

Holders (as defined in the Investor Rights Agreement) requesting that the Dolphin Holders designate an individual to nominated as the Dolphin Director. If the Dolphin Holders do not submit a nominee
to serve as the Dolphin Director in writing to VitalStream within ten (10) business days after receipt by the Dolphin Holders of the Dolphin Director Notice, then the Dolphin Director shall be
deemed to be a member of the Board of Directors (regardless of whether an individual is actually serving in such capacity). 

 
 
           5D.    Compliance with Agreements.     VitalStream shall perform and observe all of its obligations to each
   holder of Convertible Notes, Warrants and Underlying Common Stock as set forth in this
Agreement, each of the other Transaction Agreements, the Convertible Notes and the Warrants. 

 
 
          5E.    Current Public Information.     VitalStream shall file all reports required to be filed by it under the
  Securities Act and the Securities Exchange Act and the rules and regulations adopted by
the Securities and Exchange Commission thereunder, and will take such further action as any holder or holders of Restricted Securities may reasonably request, all to the extent required to enable such
holders to sell Restricted Securities
pursuant to (i) Rule 144 adopted by the Securities and Exchange Commission under the Securities Act (as such rule may be amended from time to time) or any similar rule or regulation
hereafter adopted by the Securities and Exchange Commission or (ii) a registration statement on Form S-2 or S-3 or any similar registration form hereafter adopted
by the Securities and Exchange Commission; provided, however, that the foregoing provision shall not be interpreted to require the VitalStream to file a registration statement on
Form S-2 or S-3 other than as may be required pursuant to the Registration Agreement. Upon the request of the holders of a majority of the Underlying Common Stock,
VitalStream will deliver to such holders a written statement as to whether it has complied with such requirements. 

 
 
          5F.    Information Rights.     VitalStream shall deliver to Dolphin Fund II, so long as (a) at any time on
  or prior to the Subsequent Closing Date, the Underlying Common Stock
constitutes at least one percent of VitalStream's outstanding Common Stock and (b) at any time following the Subsequent Closing Date, the Underlying Common Stock constitutes at least three
percent of VitalStream's outstanding Common Stock, each monthly, quarterly and annual internally prepared financial statement and budget reporting packages delivered to the Board of Directors. 

 
 
          5G.    Public Disclosures.     VitalStream shall not disclose any Purchaser's name or identity as a stockholder
  of VitalStream in any press release or other public announcement or in any
document or material filed with any Governmental Entity, without the prior written consent of such Purchaser, unless (i) such disclosure is required by applicable Law, in which case VitalStream
shall use its best efforts to permit Purchaser to review and comment upon the form and substance of such disclosure, or (ii) such disclosure has previously been reported in any document or
material filed with any Governmental Entity by either VitalStream or such Purchaser. 

 
 
          5H.    Post-Closing Certifications and Deliveries.     Within ten (10) days of the Subsequent Closing Date,
  VitalStream shall deliver to each of the Purchasers a list identifying, as of the Closing Date, each
of the stockholders of record of the Company and the number of shares of Common Stock held by such stockholders of record, together with a certification executed by an officer of VitalStream
certifying that, except as set forth on such list, there were no shares of Common Stock issued or outstanding on the Subsequent Closing Date. 

23

 

 
 
        Section 6.    Nature of Restricted Securities; Transfer of Restricted Securities; General Transfer  Procedure.     

 
 
          6A.    General Provisions.     

          (i)  Each
Purchaser acknowledges and agrees that the Convertible Notes and Warrants it is purchasing and the Underlying Common Stock are characterized as
"restricted securities" under the federal securities Laws inasmuch as they are being acquired from VitalStream in a transaction not involving a
public offering and that under such Laws such securities may be resold without registration under the Securities Act only in certain limited circumstances as set forth in this  Section 6. In the
absence of an effective registration statement covering such securities or an available exemption from registration under the
Securities Act, the Convertible Notes, Warrants and Underlying Common Stock must be held indefinitely. In this connection, such Purchaser represents that it is familiar with SEC Rule 144, as
presently in effect, and understands the resale limitations imposed thereby and by the Securities Act, including without limitation the Rule 144 condition that current information about
VitalStream be available to the public. 

        (ii)  Restricted
Securities are transferable only pursuant to (a) public offerings registered under the Securities Act, (b) Rule 144 or Rule 144A
adopted by the Securities and Exchange Commission under the Securities Act (as such rules may be amended from time to time) or any similar rule or regulation hereafter adopted by the Securities and
Exchange Commission if the exemption from registration under such rule is available and (c) subject to the conditions specified in  Section 6B below, any other legally available means of
transfer. 

        (iii)  In
addition to the restrictions set forth above, each Purchaser acknowledges and agrees that the Convertible Notes may only be transferred in increments of a minimum
of $100,000 and $1,000 increments in excess thereof. 

 
 
          6B.    Opinion Delivery.     In connection with the transfer of any Restricted Securities (other than a transfer
  described in  Section 6A(i) or Section 6A(ii) above), the holder thereof shall deliver written notice to
VitalStream describing in reasonable detail the transfer or proposed transfer, together with an opinion of legal counsel which is knowledgeable in securities Law matters to the effect that such
transfer of Restricted Securities may be effected without registration of such Restricted Securities under the Securities Act. In addition, if the transferring holder delivers to VitalStream an
opinion of such legal counsel that no subsequent transfer of such Restricted Securities shall require registration under the Securities Act, VitalStream shall promptly upon such contemplated transfer
deliver new certificates for such Restricted Securities which do not bear the Securities Act legend set forth in Section 9C(ii) of this
Agreement. If VitalStream is not required to deliver new certificates for such Restricted Securities not bearing such legend, the holder thereof shall not transfer the same until the prospective
transferee has confirmed to VitalStream in writing its agreement to be bound by the Investor Rights Agreement and the conditions contained in this  Section 6 and Section 9C(ii) of this Agreement. 

 
 
          6C.    Rule 144A.     Notwithstanding any provision of this Agreement to the contrary, upon the request of
  the holders of a majority of the Underlying Common Stock, VitalStream shall
promptly supply to such holders or their prospective transferees all information regarding VitalStream required to be delivered in connection with a transfer pursuant to Rule 144A adopted by
the Securities and Exchange Commission under the Securities Act (as such rule may be amended from time to time) or any similar rule or regulation hereafter adopted by the Securities and Exchange
Commission. 

 
 
          6D.    Legend Removal.     If any Restricted Securities become eligible for sale pursuant to Rule 144(k)
  adopted by the Securities and Exchange Commission under the Securities Act
(as such 

24

 

rule may be amended from time to time) or any similar rule or regulation hereafter adopted by the Securities and Exchange Commission or an effective registration statement under the Securities Act,
VitalStream shall, upon the request of the holder of such Restricted Securities, remove the legend set forth in Section 9C(ii) of this Agreement
from the certificates for such Restricted Securities. 

 
 
        Section 7.    Representations and Warranties of VitalStream.     As a material inducement to the Purchasers to
enter into this Agreement and purchase the Convertible Notes and Warrants hereunder, VitalStream hereby represents
and warrants to each of the Purchasers that the statements contained in this Section 7 are correct and complete as of the date hereof (or on the
date as of which they are made, in the case of any representation or warranty which specifically relates to an earlier date). 

 
 
           7A.    Approval and Consents; Authorization; No Breach.     VitalStream has full power and authority (including
   full corporate power and authority) to execute and deliver this Agreement and each of the other Transaction
Agreements to which it is a party and to perform its obligations hereunder and thereunder. Without limiting the generality of the foregoing, the execution, delivery and performance by VitalStream of
this Agreement and each of the other Transaction Agreements to which VitalStream is a party, have been duly authorized by VitalStream. Each of this Agreement and the other Transaction Agreements to
which VitalStream is a party constitutes a valid and binding obligation of VitalStream enforceable in accordance with its terms, except as such enforceability may be limited by (i) applicable
insolvency, bankruptcy, reorganization, moratorium or other similar Laws affecting creditors' rights generally, and (ii) applicable equitable principles (whether considered in a proceeding at
law or in equity) including those limiting the enforceability of indemnification provisions. Except as set forth on Schedule 7A attached hereto,
the execution and delivery by VitalStream of this Agreement and the other Transaction Agreements to which VitalStream or the Buyer is a party, and the fulfillment of and compliance with the respective
terms hereof and thereof by VitalStream or the Buyer do not and shall not (i) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default
under or result in the violation of, (iii) result in the creation of any Lien upon the capital stock or assets of VitalStream or any VitalStream Subsidiary pursuant to, (iv) give any
third party the right to modify, terminate or accelerate any obligation under, or (v) require any authorization, consent, approval, exemption or other action by or notice or declaration to, or
filing with, any third party or any Governmental Entity pursuant to, (A) the charter documents or bylaws of VitalStream or any VitalStream Subsidiary, (B) to the Knowledge of
VitalStream, any Law or Legal Requirement to which VitalStream or any VitalStream Subsidiary is subject, or (C) to the Knowledge of VitalStream any material agreement, instrument, order,
judgment or decree to which VitalStream or any VitalStream Subsidiary is subject. 

 
 
           7B.    Capital Stock and Related Matters.     

          (i)  The
authorized capital stock of VitalStream shall consist of (a) 290,000,000 shares of Common Stock, 24,488,933 of which shares of Common Stock shall be issued
and outstanding and (b) 10,000,000 shares of Preferred Stock, none of which are issued and outstanding. As of the date hereof, VitalStream does not have outstanding any Equity Securities,
except as set forth on Schedule 7B attached hereto. Except as required by the Articles of Incorporation, as of each Closing, VitalStream shall
not be subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any of its Equity
Securities. As of each Closing, all of the outstanding shares of VitalStream's capital stock shall be validly issued, fully paid and nonassessable. If the Initial Closing is consummated, immediately
following the Initial Closing, the Common Stock issuable upon the (1) conversion of the Initial Convertible Notes shall represent 4.4% of the sum of (A) the number of shares of Common
Stock issuable upon conversion of the Initial Convertible Notes plus (B) the number of shares of Fully Diluted Common Stock and
(2) exercise of the Warrants shall represent 2.376% of the sum of (A) the 

25

 

number of shares of Common Stock issuable upon exercise of the Warrants plus (B) the number of shares of Fully Diluted Common Stock. If the
Initial Closing is consummated, immediately following the Subsequent Closing, the Common Stock issuable upon the conversion of the Initial Convertible Notes and the Subsequent Convertible Notes shall
represent 13.2% of the sum of (A) the number of shares of Common Stock issuable upon conversion of the Initial Convertible Notes and the Subsequent Convertible Notes  plus (B) the number of
shares of Fully Diluted Common Stock. If the Initial Closing is not consummated, immediately following the Subsequent
Closing, the Common Stock issuable upon the (1) conversion of the Subsequent Convertible Notes shall represent 13.2% of the sum of (A) the number of shares of Common Stock issuable upon
conversion of the Subsequent Convertible Notes plus (B) the number of shares of Fully Diluted Common Stock and (2) exercise of the
Warrants shall represent 2.376% of the sum of (A) the number of shares of Common Stock issuable upon exercise of the Warrants plus (B) the
number of shares of Fully Diluted Common Stock. 

        (ii)  Except
as set forth in Schedule 7B attached hereto, (i) as of the date of the stockholder list attached as
part of Schedule 7B attached hereto, no person owns of record, or to VitalStream's Knowledge is known to own of record, any Equity Securities of
VitalStream or any VitalStream Subsidiary; (ii) no subscription, warrant, option, convertible security, or other right (contingent or other) to purchase or otherwise acquire Equity Securities
of VitalStream or any VitalStream Subsidiary is authorized or outstanding; (iii) there is no commitment of VitalStream or any VitalStream Subsidiary to issue shares, subscriptions, warrants,
options, convertible securities, or other such rights (contingent or otherwise) or to distribute to holders of any of its Equity Securities or Debt Securities any evidence of indebtedness or assets.
Except as provided for in the Articles of Incorporation, or as set forth in Schedule 7B attached hereto, neither VitalStream nor any VitalStream
Subsidiary has any obligation (contingent or otherwise) to purchase, redeem, or otherwise acquire any of its Equity Securities or Debt Securities or any interest therein or to pay any dividend or make
any other distribution is respect thereof. Immediately prior to each Closing, other than the Investor Rights Agreement and the AKKAD Agreement, there are no voting trusts or agreements, shareholders'
agreements, pledge agreements, buy-sell agreements, rights of first refusal, preemptive rights or proxies relating to any Debt Securities or Equity Securities of VitalStream or any
VitalStream Subsidiary (whether or not VitalStream or any VitalStream Subsidiary is a party thereto). All of the outstanding Debt Securities and Equity Securities of VitalStream and each VitalStream
Subsidiary were issued in compliance with all applicable federal and state securities Laws. 

        (iii)  Other
than as set forth in the Investor Rights Agreement, there are no statutory or contractual stockholders preemptive rights or rights of refusal with respect to the
issuance of the Convertible Notes, Warrants or Underlying Common Stock. VitalStream has not violated any applicable securities Laws in connection with the offer, sale or issuance of any of its capital
stock, and (subject to the accuracy of the representations, acknowledgements and agreements contained in Section 9C of this Agreement) the offer,
sale and issuance of the Convertible Notes or Warrants hereunder or the issuance of the Underlying Common Stock upon conversion of the Notes or exercise of the Warrants do not require registration
under the Securities Act or any applicable state securities Laws. To
VitalStream's Knowledge, other than the Investor Rights Agreement and the AKKAD Agreement, there are no agreements between VitalStream's stockholders with respect to the voting or transfer of
VitalStream's capital stock or with respect to any other aspect of VitalStream's affairs other than as set forth in the Articles of Incorporation. 

26

  

 
 
          7C.    Issuance and Commitment of the Convertible Notes and Warrants.     The issuance, sale and delivery of the
  Convertible Notes and Warrants in accordance with this Agreement and the issuance of the Underlying Common Stock upon
conversion of the Convertible Notes and exercise of the Warrants, have been, or will be on or prior to the Closing, duly authorized by all necessary corporate action on the part of VitalStream. The
Convertible Notes and Warrants, when so issued, sold and delivered against payment therefor in accordance with the provisions of this Agreement, will be duly and validly issued, fully paid and
non-assessable, free and clear of all Liens, and not subject to any preemptive rights. Subject to the accuracy of the representations, acknowledgements and agreements made by each
Purchaser in this Agreement, the offer and sale of the Convertible Notes and Warrants and the issuance of the Underlying Common Stock upon conversion of the Convertible Notes and exercise of the
Warrants to each Purchaser will be in compliance with all applicable Laws. 

 
 
           7D.    Investment Company.     Neither VitalStream nor any of the VitalStream Subsidiaries is an "investment
   company" as defined under the Investment Company Act of 1940. 

 
 
          7E.    Margin Securities.     Neither VitalStream nor any of the VitalStream Subsidiaries is engaged in the
  business of extending credit for the purpose of buying or carrying "margin
securities" within the meaning of Regulations T, U or X promulgated by the Board of Governors of the Federal Reserve Board, and no part of the proceeds realized from the sale of the Convertible Notes
shall be used to buy or carry any such margin securities or used in violation of Regulations T, U or X. 

 
 
          7F.    Representations and Warranties of VitalStream in the Asset Purchase Agreement.     The representations and
  warranties of VitalStream contained in Section 4 of the Asset Purchase Agreement and all information contained in any exhibit,
schedule or attachment hereto or in any certificate or other writing delivered by, or on behalf of, VitalStream pursuant to the Asset Purchase Agreement shall be true, correct and complete in all
respects as of the date hereof (or on the date as of which they are made, in the case of any representation or warranty which specifically relates to an earlier date). 

 
 
        Section 8.    [Intentionally Deleted].     

 
 
        Section 9.    Miscellaneous.     

 
 
           9A.    Commitment Fee; Expenses.     

          (i)  VitalStream
shall pay to Dolphin Partners a commitment fee (the "Commitment Fee") in an amount equal to $25,000 as
follows (A) if VitalStream has elected to consummate the Initial Closing pursuant to Section 2C(i) of this Agreement,
one-third of the Commitment Fee shall be paid at the Initial Closing and the remaining two-thirds of the Commitment Fee shall be paid at the Subsequent Closing and
(B) if VitalStream has not elected to consummate the Initial Closing pursuant to Section 2C(i) of this Agreement, the aggregate amount of
the Commitment Fee shall be paid in full at the Subsequent Closing. The Commitment Fee shall be payable in shares of Common Stock (which shall not be registered under the Securities Act) in an amount
equal to $25,000 divided by the Market Price of the Common Stock as determined as of the day three (3) days prior to the Closing Date at which
the Commitment Fee is to be paid. Notwithstanding the foregoing, if any fractional interest in a share of Common Stock would be deliverable upon the payment of the Commitment Fee, VitalStream, in lieu
of delivering the fractional share therefor, shall pay an amount in cash to Dolphin Partners equal to the Market Price of such fractional interest of Common Stock. 

        (ii)  VitalStream
shall pay, and hold the Purchasers harmless against Liability for the payment of, (a) the fees and expenses of their special counsel arising in
connection with their due diligence review of VitalStream, the negotiation and execution of this Agreement and 

27

 

each of the other Transaction Agreements (other than the Asset Purchase Agreement) and the consummation of the transactions contemplated hereby and thereby (provided, VitalStream shall not be
required to pay in excess of $42,500 pursuant to this Section 9A(ii)(a)) and (b) the reasonable fees and expenses incurred with respect to
any amendments or waivers (whether or not the same become effective) under or in respect of this Agreement or any the other Transaction Agreements (other than the Asset Purchase Agreement).
VitalStream shall pay, and hold each Purchaser and each holder of a Convertible Note, a Warrant or Underlying Common Stock harmless against Liability for the payment of, (1) stamp and other
taxes which may be payable in respect of the execution and delivery of this Agreement or the issuance, delivery or acquisition of any Convertible Notes or Warrants, any share of Common Stock issuable
upon conversion of a Convertible Note or any share of Common Stock issuable upon exercise of a Warrant, (2) the reasonable fees and expenses incurred with respect to the enforcement of the
rights granted under this Agreement or any the other Transaction Agreements (other than the Asset Purchase Agreement), and (3) the reasonable fees and expenses incurred by each such Person in
any filing with any Governmental Entity with respect to its Investment in VitalStream or in any other filing with any Governmental Entity with respect to VitalStream which mentions such Person. 

 
 
           9B.    Remedies; Survival of Representations, Warranties and Covenants; Indemnification.     

          (i)  Each
holder of Convertible Notes, Warrants or Underlying Common Stock shall have all rights and remedies set forth in this Agreement, and the other Transaction
Agreements for the benefit of each such holder and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which such
holders have under any Law. Any Person having any rights under any provision of this Agreement or any other Transaction Agreement shall be
entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any breach of any provision of this Agreement or any other Transaction
Agreement and to exercise all other rights granted by Law. The following indemnification provisions are in addition to, and not in derogation of, any statutory, equitable, or common law remedy any
holder of Convertible Notes, Warrants or Underlying Common Stock may have for breach of representation, warranty or covenant with respect to VitalStream or any VitalStream Subsidiary or the
transactions contemplated by this Agreement; provided, however, that no provision of this Agreement shall negate any limitation on remedies as agreed among the parties to, and set forth in, the Asset
Purchase Agreement with respect to any breach of any provision of the Asset Purchase Agreement. 

        (ii)  The
representations and warranties set forth in this Agreement shall survive each Closing (a) with respect to the matters covered by the representations and
warranties contained in Section 7A, and Section 7B of this Agreement and
Section 4(m), Section 4(o) and Section 4(r) of the Asset Purchase Agreement, until sixty (60) days after the expiration of all applicable statute of limitations (including
all periods of extension, whether automatic or permissive) and (b) in the case of all other representations and warranties and any covenant or agreement contained in this Agreement to be
performed on or prior to a Closing Date, until the date which is nine (9) months after such Closing Date. 

        (iii)  In
consideration of each Purchaser's execution and delivery of this Agreement and acquiring the Convertible Notes and Warrants hereunder and in addition to all of
VitalStream's and the Buyer's other obligations under this Agreement and the other Transaction Agreements, VitalStream agrees to indemnify on an after-tax basis and defend, protect and
hold harmless each Purchaser and its Affiliates and each of their respective directors, officers, employees, stockholders, members, partners, agents (including, without limitation, those retained in
connection with the transactions contemplated by this 

28

 

Agreement), successors and assigns (collectively, the "Indemnitees") from and against any and all Claims, costs, damages, deficiencies, expenses
(including interest, court costs, fees of attorneys, accountants and other experts or other expenses of litigation or other proceedings or of any Claim, default or assessment), fees, fines,
Liabilities, losses and penalties (hereinafter individually, a "Loss" and collectively, "Losses") which,
directly or indirectly, arise out of, result from or relate to (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought): (a) any
facts or circumstances which constitute a misrepresentation or breach by VitalStream or any VitalStream Subsidiary of any representation, warranty or covenant set forth in this Agreement (including
any annex, exhibit or schedule attached hereto), any other Transaction Agreement or in any instrument or document delivered by VitalStream or the Buyer pursuant to this Agreement or (b) any
non-fulfillment or breach of any covenant or agreement of VitalStream or any VitalStream Subsidiary set forth in this Agreement or any other Transaction Agreement. To the extent that the
foregoing undertakings by VitalStream or the Buyer may be unenforceable for any reason, VitalStream and the Buyer shall make the maximum contribution to the payment and satisfaction of the Losses
described above incurred by any Indemnitee which is permissible under applicable Law. 

 
 
           9C.    Purchaser's Representations; Legends.     

          (i)  Purchaser's
Representations. 

 
 
          (a)    Authorization.     Each Purchaser hereby represents that it has full power and authority to enter into
  this Agreement and the Transaction Agreements, and this Agreement and the
Transaction Agreements constitute its valid and legally binding obligations, enforceable in accordance with their respective terms. 

 
 
           (b)    Disclosure of Information.     Each Purchaser hereby represents that it has received and reviewed the
   information about VitalStream and the VitalStream Subsidiaries that it has requested and
represents that it has had an opportunity to ask questions and receive answers from VitalStream and the Buyer regarding the terms and conditions of the offering of the Convertible Notes and Warrants
and the business, properties, prospects and financial condition of VitalStream and the VitalStream Subsidiaries that it has requested. The foregoing, however, does not limit or modify the
representations and warranties of VitalStream and the Buyer in Section 7 of this Agreement or the right of the Purchasers to rely thereon. 

 
 
          (c)    Investment Experience.     Each Purchaser hereby represents that it is able to fend for itself, can bear
  the economic risk of its Investment and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and risks of the Investment in the Convertible Notes, Warrants and Underlying Common Stock. If other than an individual, such
Purchaser also represents it has not been organized for the purpose of acquiring the Convertible Notes, Warrants or Underlying Common Stock. 

 
 
          (d)    Accredited Investor.     Except as set forth on Schedule 9C attached hereto, each Purchaser hereby represents that it is an
"institutional investor," as that term is used in the definition of "Dealer" under Section 359-e of the New York Fraudulent Practices Act, as presently in effect. 

 
 
           (e)    Investment Intent; Own Account.     Each Purchaser hereby represents that it is acquiring the Restricted
   Securities purchased hereunder or acquired pursuant hereto for its own account, not as
nominee or agent, with the present intention of holding such securities for purposes of Investment, and that it has no intention of selling such 

29

 

securities in a public distribution in violation of the federal securities Laws or any applicable state securities Laws; provided that nothing contained herein shall prevent any Purchaser and
subsequent holders of Restricted Securities from transferring such securities to its Affiliates or in compliance with the provisions of Section 6
of this Agreement. Each Purchaser further represents that such Purchaser does not have any contract, undertaking or agreement with any Person to sell, transfer or grant participations to such Person
or to any other Person with respect to the Restricted Securities. 

 
 
           (f)    Residence; Domicile.     Each Purchaser hereby represents and warrants that the principal office of such
   Purchaser is located at the address set forth with respect to such Purchaser on  Annex 1 attached hereto. 

 
 
          (g)    Ownership of VitalStream.     Dolphin Fund II hereby represents and warrants that, as of the date hereof,
  Dolphin Fund II and its Affiliates, together with each of Holdings, Networks and
Hosting and each of their respective Affiliates own less than 5% of the outstanding Common Stock in the aggregate. 

 
 
           (ii)    Legends.     Each certificate or instrument representing Restricted Securities shall be imprinted with a
   legend in substantially the following form: 

"THE
SECURITIES REPRESENTED BY THIS INSTRUMENT 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. 

THE
TRANSFER OF THE SECURITIES REPRESENTED BY THIS INSTRUMENT IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE AMENDED AND RESTATED CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT, DATED AS OF JANUARY
15, 2003, AMONG THE ISSUER OF SUCH SECURITIES (THE "COMPANY") AND THE OTHER PARTIES REFERRED TO THEREIN, AS AMENDED AND MODIFIED FROM TIME TO TIME, AND THE COMPANY RESERVES THE RIGHT TO REFUSE THE
TRANSFER OF SUCH SECURITIES UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. A COPY OF SUCH CONDITIONS SHALL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF
UPON WRITTEN REQUEST. 

THE
SECURITIES REPRESENTED BY THIS INSTRUMENT ARE SUBJECT TO AN INVESTOR RIGHTS AGREEMENT, DATED AS OF NOVEMBER 26, 2002, AMONG THE COMPANY AND THE STOCKHOLDERS OF THE COMPANY REFERRED TO THEREIN, AS
AMENDED AND MODIFIED FROM TIME TO TIME. A COPY OF SUCH INVESTOR RIGHTS AGREEMENT SHALL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST." 

30

 

 
 
           9D.    Entire Agreement.     This Agreement, the other Transaction Agreements and the other agreements and
   instruments referred to herein and therein contain the entire agreement between the
parties hereto and supersede any prior understandings, agreements or representations by or between the parties hereto, written or oral, which may have related to the subject matter hereof in any way
(including the Original Note Purchase Agreement). 

 
 
           9E.    Successors and Assigns.     Except as otherwise expressly provided herein or therein, all covenants and
   agreements contained in this Agreement or any other Transaction Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. In addition, and whether or not any
express assignment has been made, the provisions of this Agreement or any other Transaction Agreement which are for any Purchaser's benefit as a purchaser or holder of Convertible Notes, Warrants or
Underlying Common Stock are also for the benefit of, and enforceable by, any subsequent holder of such Convertible Notes, Warrants or Underlying Common Stock. 

 
 
           9F.    Counterparts.     This Agreement or any other Transaction Agreement may be executed simultaneously in two
   or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall constitute one and the same agreement. 

 
 
           9G.    Descriptive Headings; Interpretation.     Section headings used in this Agreement or in any other
   Transaction Agreement are for convenience only and are not to affect the construction of, or to be taken
into consideration in interpreting, such agreement. The use of the word "including" or any variation or derivative thereof in this Agreement or in any
other Transaction Agreement is by way of example rather than by limitation. 

 
 
           9H.    Notices; Business Days.     All notices, demands or other communications to be given or delivered under
   or by reason of the provisions of this Agreement or any other Transaction Agreement
shall be in writing and shall be deemed to have been given when 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 (i) each Purchaser at the address indicated for
such Purchaser on Annex 1 attached hereto, (ii) any other holder of a Convertible Note, Warrant or Underlying Common Stock at the address set
forth in VitalStream's records and (iii) VitalStream at the address indicated below: 

One
Jenner, Suite 100

Irvine, California 92618

Facsimile: (949) 453-8686

Attention: Philip N. Kaplan, Chief Operating Officer 

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

Stoel
Rives LLP

201 South Main Street, Suite 1100

Salt Lake City, Utah 84111

Facsimile: (801) 578-6999

Attention: Bryan T. Allen, Esq. 

31

 

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 New York (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. 

 
 
           9I.    Consent to Amendments and Waivers.     Except as otherwise provided herein, no modification, amendment or
   waiver of any provision of this Agreement shall be effective against VitalStream or the holders
of the Convertible Notes, Warrants or Underlying Common Stock unless such modification, amendment or waiver is approved in writing by (i) VitalStream, in the case of any amendment, modification
or waiver affecting the rights and interests VitalStream, (ii) in the case of any amendment, modification or waiver affecting the rights and interests of the holders of the Initial Convertible
Notes, Warrants or Underlying Common Stock under this Agreement, the holders of a majority of the Underlying Common Stock with respect to such Initial Convertible Notes, Warrants or Underlying Common
Stock and (iii) in the case of any amendment, modification or waiver affecting the rights and interests of any holder of Subsequent Convertible Notes or any Person listed on  Annex 1 as obligated to
purchase Subsequent Convertible Notes, the holders of a majority of the Underlying Common Stock with respect to such Subsequent
Convertible Notes. Notwithstanding the foregoing, without the consent of any other Person, VitalStream may restate Annex 1 attached hereto to
(a) add additional Persons who purchase Convertible Notes hereunder and execute and deliver a counterpart signature page to this Agreement or (b) change the addresses for notice to any
Person at such Person's request. No other course of dealing between VitalStream and the holder of any Convertible Notes, Warrants or Underlying Common Stock or any delay in exercising any rights under
this Agreement or any of the other Transaction Agreements shall operate as a waiver of any rights of any such holder. For purposes of this Agreement, Convertible Notes, Warrants or Underlying Common
Stock held by VitalStream or any of the VitalStream Subsidiaries shall not be deemed to be outstanding. This Agreement shall amend and restate the Original Note Purchase Agreement in its entirety and
become effective immediately upon the execution of this Agreement by each of the Parties hereto. The parties hereto hereby acknowledge and agree that (A) references to the "Convertible
Promissory Note and Warrant Purchase Agreement", "Note Purchase Agreement" or "Note and Warrant Purchase Agreement, as the case may be, in each of the Transaction Agreements shall be to this Agreement
(as amended and modified from time to time) and (B) references to the "Asset Purchase Agreement" in each of the Transaction Agreements shall be to the Asset Purchase Agreement (as defined
herein) (as amended and modified from time to time). 

 
 
          9J.    Severability.     Whenever possible, each provision of this Agreement shall be interpreted in such manner
  as to be effective and valid under applicable Law, but if any provision of
this Agreement or any other Transaction Agreement is held to be prohibited by or invalid under applicable Law, such provision shall
be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement or such other Agreement. 

 
 
           9K.    No Strict Construction.     The parties hereto have participated jointly in the negotiation and drafting
   of this Agreement and the other Transaction Agreements. In the event an ambiguity or
question of intent or interpretation arises, this Agreement and the other Transaction Agreements shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement or any other Transaction Agreement. Any reference to any federal, state, local, or
foreign Law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. Nothing in the schedules attached hereto (or, as applicable, to
the Asset Purchase Agreement) shall be deemed adequate to disclose 

32

 

an exception to a representation or warranty made herein unless the schedule attached hereto identifies the exception with particularity and describes the relevant facts in detail. Without limiting
the generality of the foregoing, the mere listing (or inclusion of a copy) of a document or other item shall not be deemed adequate to disclose an exception to a representation or warranty made herein
(unless the representation or warranty has to do with the existence of the document or other item itself). The parties hereto intend that each representation, warranty, and covenant contained herein
shall have independent significance. If any party hereto 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 such party has not breached shall not detract from or mitigate the fact that such
party is in breach of the first representation, warranty, or covenant. 

 
 
           9L.    Incorporation of Annexes, Schedules and Exhibits.     The annexes, schedules and exhibits identified in
   this Agreement are incorporated herein by reference and made a part hereof. 

 
 
           9M.    Registered Holders; Ownership.     As used in this Agreement and each of the other Transaction Agreements,
    references to a "holder" of Convertible
Notes, Warrants or Underlying Common Stock shall mean the registered holder of such Convertible Notes, Warrants or Underlying Common Stock as set forth in VitalStream's records. For purposes of this
Agreement and each of the other Transaction Agreements, all holdings of Convertible Note, Warrants and Underlying Common Stock by Persons who are Affiliates of each other shall be aggregated for
purposes of meeting any threshold tests under this Agreement and each of the other Transaction Agreements. 

 
 
           9N.    Consideration for Warrants and Notes.     The Purchasers and VitalStream acknowledge and agree that
   (i) the fair market value of all of the Warrants (the "Aggregate Warrant
Value") issued hereunder shall be an amount equal to the product of is (a) $0.055 multiplied by (b) the aggregate
Warrant Share Amount (as defined in the Warrant) and (ii) the fair market value of all of the Convertible Notes issued hereunder is $1,100,000  minus the Aggregate Warrant Value. Each Purchaser and
VitalStream shall file their respective federal, state and local Tax returns in a manner which is
consistent with such valuation and allocation and shall not take any contrary position with any Taxing authority. 

 
 
           9O.    Understanding Among the Purchasers.     The determination of each Purchaser to purchase the Convertible
   Notes and Warrants pursuant to this Agreement has been made by such Purchaser independent of any
other Purchaser and independent of any statements or opinions as to the advisability of such purchase or as to the properties, business, prospects or condition (financial or otherwise) of VitalStream
and the VitalStream Subsidiaries which may have been made or given by any other Purchaser or by any agent or employee of any other Purchaser. 

 
 
           9P.    GOVERNING LAW.     TO THE EXTENT APPLICABLE, THE CORPORATE LAW OF THE STATE OF
   NEVADA SHALL GOVERN ALL ISSUES AND QUESTIONS CONCERNING THE RELATIVE RIGHTS
AND OBLIGATIONS OF VITALSTREAM AND ITS SECURITYHOLDERS. ALL OTHER ISSUES AND QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT AND ANY OF THE OTHER
TRANSACTION AGREEMENTS AND THE ANNEXES, EXHIBITS AND SCHEDULES HERETO AND THERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
ANY CHOICE OF LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF NEW YORK. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL CONTROL THE INTERPRETATION  

33

 

 AND CONSTRUCTION OF THIS AGREEMENT AND EACH OF THE OTHER TRANSACTION AGREEMENTS (AND ALL ANNEXES, SCHEDULES AND EXHIBITS HERETO AND THERETO), EVEN THOUGH UNDER THAT JURISDICTION'S CHOICE OF LAW OR
CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.

 
 
           9Q.    JURISDICTION AND VENUE.     ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST VITALSTREAM
   WITH RESPECT TO THIS AGREEMENT OR ANY OTHER TRANSACTION AGREEMENT MAY BE BROUGHT IN
ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN NEW YORK CITY, NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT AND THE OTHER TRANSACTION AGREEMENTS TO WHICH THEY ARE A PARTY, VITALSTREAM
AND EACH HOLDER OF CONVERTIBLE NOTES, WARRANTS OR UNDERLYING COMMON STOCK, ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION AGREEMENTS. VITALSTREAM AND EACH HOLDER OF CONVERTIBLE
NOTES, WARRANTS OR UNDERLYING COMMON STOCK HEREBY WAIVE ANY CLAIM THAT NEW YORK CITY, NEW YORK IS AN INCONVENIENT FORUM OR AN IMPROPER FORUM BASED ON LACK OF VENUE.

 
 
          9R.    WAIVER OF RIGHT TO JURY TRIAL.     VITALSTREAM AND EACH HOLDER OF CONVERTIBLE NOTES,
   WARRANTS OR UNDERLYING COMMON STOCK HEREBY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, TRIAL BY JURY in any litigation in any court with respect to, in connection with, or arising out of this
Agreement or any of the other Transaction Agreements or the validity, protection, interpretation, collection or enforcement hereof or thereof; AND VITALSTREAM HEREBY WAIVES, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, THE RIGHT TO INTERPOSE ANY SETOFF in connection with any such litigation, irrespective of the nature of such setoff except to the extent
that the failure so to assert any such setoff would permanently preclude the prosecution of or recovery upon same. VITALSTREAM AGREES THAT THIS SECTION
9R IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND EACH OF THE OTHER TRANSACTION AGREEMENTS AND ACKNOWLEDGES THAT EACH HOLDER OF CONVERTIBLE NOTES, WARRANTS OR
UNDERLYING COMMON STOCK WOULD NOT HAVE ENTERED INTO THIS AGREEMENT OR MADE AN INVESTMENT HEREUNDER IF THIS SECTION 9R WERE NOT PART OF THIS AGREEMENT
AND THE OTHER TRANSACTION AGREEMENTS.

34

        IN WITNESS WHEREOF, the parties have executed this Amended and Restated Convertible Note and Warrant Purchase Agreement as of the date first written above. 

	 	 	COMPANY:
	

 	
 	

VITALSTREAM HOLDINGS, INC.
	

 	
 	

By:	

/s/  PAUL S. SUMMERS      

	 	 	Name:	Paul S. Summers
	 	 	Title:	Chief Executive Officer
	

 	
 	
PURCHASERS:
	

 	
 	

DOLPHIN COMMUNICATIONS FUND II, L.P.
	

 	
 	

By:	

Dolphin Communications II, L.P.,

Its General Partner
	

 	
 	

By:	

Dolphin Communications, L.L.C.,

Its General Partner
	

 	
 	

By:	

/s/  RICHARD J. BREKKA      

	 	 	Name:	Richard J. Brekka
	 	 	Title:	President
	

 	
 	
DOLPHIN COMMUNICATIONS PARALLEL FUND II (NETHERLANDS), L.P.
	

 	
 	

By:	

Dolphin Communications II, L.P.,

Its General Partner
	

 	
 	

By:	

Dolphin Communications, L.L.C.,

Its General Partner
	

 	
 	

By:	

/s/  RICHARD J. BREKKA      

	 	 	Name:	Richard J. Brekka
	 	 	Title:	President

 
 

ANNEX 1
  SCHEDULE OF PURCHASERS    
  

	Names and Addresses
 
	 	Pro Rata Share of Initial

Convertible Notes
	 
	1.	 	Dolphin Communications Fund II, L.P.

750 Lexington Avenue

16th Floor

New York, NY 10022

Attention: Mr. Richard J. Brekka

Facsimile: (212) 446-4900

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

Kirkland & Ellis

Citigroup Center

153 East 53rd Street

New York, NY 10022

Attention: John Kuehn, Esq.

Facsimile: (212) 446-4900	 	89.9	%
	

2.	
 	

Dolphin Communications Parallel Fund II (Netherlands), L.P.

750 Lexington Avenue

16th Floor

New York, NY 10022

Attention: Mr. Richard J. Brekka

Facsimile: (212) 446-4900

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

Kirkland & Ellis

Citigroup Center

153 East 53rd Street

New York, NY 10022

Attention: John Kuehn, Esq.

Facsimile: (212) 446-4900	
 	

10.1	
%
	 	 	 	 	
	 
	 	 	    TOTAL	 	100.0	%

QuickLinks

Exhibit 10.2

AMENDED AND RESTATED CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT

TABLE OF CONTENTS

ANNEXES, SCHEDULES AND EXHIBITS

AMENDED AND RESTATED CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT

Section 1. Definitions.

1A. Definitions.

Section 2. Authorization and Closings.

2A. Authorization, Purchase and Sale of the Initial Convertible Notes and Warrants.

2B. Authorization, Purchase and Sale of the Subsequent Convertible Notes.

2C. The Closings.

Section 3. Conditions of each Purchaser's Obligations at the Closings.

3A. Conditions of each Purchaser's Obligations at Each Closing.

(i)  Representations and Warranties; Covenants.

(ii)  Consents and Approvals.

(iii)  Litigation.

(iv)  Securities Law Compliance.

(v)  No VitalStream Material Adverse Effect.

(vi)  Asset Purchase Agreement.

(vii)  Registration Agreement.

(viii)  Investor Rights Agreement.

(ix)  Guaranty.

(x)  Opinion of VitalStream's Counsel.

(xi)  Sale of Convertible Notes and Warrants to each Purchaser.

(xii)  Closing Documents.

(xiii)  Proceedings.

3B. Additional Conditions of each Purchaser's Obligations at the Initial Closing.

(i)  Payment of the Commitment Fee.

(ii)  Payment of Purchasers' Attorneys Fees.

3C. Additional Conditions of each Purchaser's Obligations at the Subsequent Closing if the Initial Closing has not been Consummated.

(i)  Asset Purchase Agreement.

(ii)  Payment of the Commitment Fee.

(iii)  Payment of Purchasers' Attorneys Fees.

(iv)  Subsequent Closing Documents.

3D. Additional Conditions of each Purchaser's Obligations at the Subsequent Closing if the Initial Closing has been Consummated.

(i)  Consummation of the Initial Closing.

(ii)  No Event of Default.

(iii)  Asset Purchase Agreement.

(iv)  Payment of the Commitment Fee.

(v)  Subsequent Closing Documents.

Section 4. Conditions of VitalStream's Obligations at the Closings.

4A. Conditions of VitalStream's Obligations at each Closing.

(i)  Representations and Warranties; Covenants.

(ii)  Litigation.

(iii)  Asset Purchase Agreement.

(iv)  Sale of Convertible Notes and Warrants to each Purchaser.

(v)  Closing Documents.

(vi)  Proceedings.

4B. Additional Conditions of VitalStream's Obligations at the Subsequent Closing if the Initial Closing has not been Consummated.

(i)  Asset Purchase Agreement.

4C. Additional Conditions of VitalStream's Obligations at the Subsequent Closing if the Initial Closing has been Consummated.

(i)  Consummation of the Initial Closing.

(ii)  Asset Purchase Agreement.

Section 5. Covenants.

5A. Reservation of Common Stock and Series A Preferred.

5B. Intellectual Property Rights.

5C. Restrictive Covenants.

5D. Compliance with Agreements.

5E. Current Public Information.

5F. Information Rights.

5G. Public Disclosures.

5H. Post-Closing Certifications and Deliveries.

Section 6. Nature of Restricted Securities; Transfer of Restricted Securities; General Transfer Procedure.

6A. General Provisions.

6B. Opinion Delivery.

6C. Rule 144A.

6D. Legend Removal.

Section 7. Representations and Warranties of VitalStream.

7A. Approval and Consents; Authorization; No Breach.

7B. Capital Stock and Related Matters.

7C. Issuance and Commitment of the Convertible Notes and Warrants.

7D. Investment Company.

7E. Margin Securities.

7F. Representations and Warranties of VitalStream in the Asset Purchase Agreement.

Section 8. [Intentionally Deleted].

Section 9. Miscellaneous.

9A. Commitment Fee; Expenses.

9B. Remedies; Survival of Representations, Warranties and Covenants; Indemnification.

9C. Purchaser's Representations; Legends.

(a)  Authorization.

(b)  Disclosure of Information.

(c)  Investment Experience.

(d)  Accredited Investor.

(e)  Investment Intent; Own Account.

(f)  Residence; Domicile.

(g)  Ownership of VitalStream.

(ii)  Legends.

9D. Entire Agreement.

9E. Successors and Assigns.

9F. Counterparts.

9G. Descriptive Headings; Interpretation.

9H. Notices; Business Days.

9I. Consent to Amendments and Waivers.

9J. Severability.

9K. No Strict Construction.

9L. Incorporation of Annexes, Schedules and Exhibits.

9M. Registered Holders; Ownership.

9N. Consideration for Warrants and Notes.

9O. Understanding Among the Purchasers.

9P. GOVERNING LAW.

9Q. JURISDICTION AND VENUE.

9R. WAIVER OF RIGHT TO JURY TRIAL.

ANNEX 1 SCHEDULE OF PURCHASERS

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