ASSET PURCHASE AGREEMENT AMONG VitalStream Holdings, Inc., VitalStream Advertising Solutions, Inc. AND EON Streams, Inc. May 19, 2006
EXHIBIT
10.1
AMONG
VitalStream
Holdings, Inc.,
VitalStream
Advertising Solutions, Inc.
AND
EON
Streams, Inc.
May
19, 2006
TABLE
OF CONTENTS
|
1
|
||
|
8
|
||
|
8
|
||
|
8
|
||
|
10
|
||
|
11
|
||
|
12
|
||
|
12
|
||
|
12
|
||
| Tax Free Reorganization |
13
|
|
|
13
|
||
|
13
|
||
|
13
|
||
|
14
|
||
|
14
|
||
|
14
|
||
|
14
|
||
|
15
|
||
|
15
|
||
|
15
|
||
|
16
|
||
|
16
|
||
|
16
|
||
|
17
|
||
|
18
|
||
|
18
|
||
|
20
|
||
|
20
|
||
|
21
|
||
|
22
|
||
|
23
|
||
|
26
|
||
|
26
|
||
|
28
|
||
|
29
|
||
|
29
|
||
|
30
|
||
|
30
|
||
|
30
|
i
|
31
|
||
|
32
|
||
|
32
|
||
|
34
|
||
|
34
|
||
|
34
|
||
|
35
|
||
|
35
|
||
|
35
|
||
|
35
|
||
|
35
|
||
|
36
|
||
|
36
|
||
|
36
|
||
|
37
|
||
|
37
|
||
|
37
|
||
|
37
|
||
|
37
|
||
|
37
|
||
|
37
|
||
|
38
|
||
|
38
|
||
|
38
|
||
|
38
|
||
|
39
|
||
|
39
|
||
|
39
|
||
|
40
|
||
|
40
|
||
|
42
|
||
|
43
|
||
|
43
|
||
|
44
|
ii
|
44
|
||
|
44
|
||
|
44
|
||
|
44
|
||
|
45
|
||
|
46
|
||
|
46
|
||
|
47
|
||
|
48
|
||
|
48
|
||
|
48
|
||
|
48
|
||
|
49
|
||
|
49
|
||
|
50
|
||
|
51
|
||
|
51
|
||
|
51
|
||
|
52
|
||
|
52
|
||
|
52
|
||
|
52
|
||
|
52
|
||
|
52
|
||
|
53
|
||
|
53
|
||
|
54
|
||
|
54
|
||
|
54
|
||
|
54
|
||
|
54
|
||
|
54
|
||
|
55
|
iii
This
Asset Purchase Agreement (this “Agreement”) is entered into
as
of
May ___,
2006,
by
and
among VitalStream
Holdings, Inc., a Nevada corporation (“Holdings”), VitalStream Advertising
Solutions, Inc., a Nevada corporation
(the “Buyer”; collectively with Holdings, the “Buying Parties’), EON Streams,
Inc., a Tennessee corporation (“Seller”) and Xxxxxx Xxxxxxx, an individual,
Xxxxxxx Xxxxxx, an individual and Xxxxx Xxxxxxxxx, an individual (Messrs.
Xxxxxxx and Xxxxxx and Xx. Xxxxxxxxx, the “Principal Stockholders”). The Buying
Parties, the Seller
and the
Principal Stockholders are referred to collectively herein as the “Parties” and
individually as a “Party”
RECITALS
A. Seller
is
in the business of providing Internet streaming, support and related services
(the “Business”).
B. Seller
desires to sell substantially all of the assets and certain liabilities related
to the Business to Buyer, and Buyer desires to purchase such assets and assume
such liabilities from Seller, in exchange for consideration set forth herein,
all upon the terms and subject to the conditions of this Agreement.
C. Seller
and the Buying Parties are willing to make certain representations, warranties,
covenants and agreements in connection with such sale and 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 agree as follows:
1. Definitions.
For purposes of this Agreement, the following terms have the
meanings set forth below:
“Accrued
Liabilities” has the meaning set forth in Section
2(b)(i)(A)
below.
“Acquired
Assets” means all right, title, and interest in and to all
of
the assets owned or used by Seller
other
than an Unassigned Asset, including, without limitation, all of its (a) real
property, leaseholds and subleaseholds therein, improvements, fixtures, and
fittings thereon, and easements, rights-of-way, and other appurtenants thereto
(such as appurtenant rights in and to public streets), (b) tangible
personal
property (such as computers, servers, racks, machinery, equipment, inventories
of raw materials and supplies, manufactured and purchased parts, goods in
process and finished goods,
furniture, automobiles, trucks, tractors, trailers, tools,
and replacement parts), (c) Intellectual Property (including without limitation
that names “EON Streams” and “EONStreams” and associated marks), goodwill
associated therewith, licenses and sublicenses granted and obtained with respect
thereto, and rights thereunder, remedies against infringements thereof, and
rights to protection of interests therein under the laws of all jurisdictions,
(d) rights and benefits under leases, subleases, and rights thereunder,
1
(e)
rights and benefits under Acquired Contracts, agreements, contracts, indentures,
mortgages, instruments, Encumbrances,
guaranties, other similar arrangements, and rights thereunder, (f) accounts
receivable, notes under which Seller is the payee, and other receivables, (g)
securities (such as the capital stock in
its
Subsidiaries), (h) claims, deposits, prepayments, refunds, causes of action,
choses in action, rights of recovery, rights of set off, and rights of
recoupment (including any such item relating to the payment of Taxes), (i)
franchises, approvals, permits, licenses, orders, registrations, certificates,
variances, and similar rights obtained from governments and governmental
agencies, and (j) books, records, ledgers, files, documents, correspondence,
lists, plats, plans, drawings, and specifications, creative materials,
advertising and promotional materials, studies, reports, and other printed
or
written materials; provided, however, that the Acquired Assets shall not include
any of the foregoing to the extent expressly included in the Excluded Assets.
"Acquired
Contracts" means all rights and benefits under all contracts, leases, accounts
receivable, licenses and other agreements or arrangements of Seller
other
than any aspect of the foregoing included as part of the Excluded Assets or
the
Excluded Liabilities; notwithstanding the foregoing, Acquired Contracts shall
not include any contracts, leases, accounts receivable, licenses, instruments
and other agreements or arrangements that are not listed on Section
4(o)
of
Seller Disclosure Schedule and identified as Acquired Contracts unless such
contracts, leases, accounts receivable, licenses, instruments and other
agreements
or
arrangements were required to be listed on Section 4(o)
of
Seller
Disclosure
Schedule
and the Buyer delivers, in its discretion, written notice to Seller
stating
that such contract, lease, accounts receivable, license, instrument or other
agreement or arrangement shall be included among the Acquired Contracts.
“Adverse
Consequences” means all actions, suits, proceedings, hearings, investigations,
charges, complaints, claims, demands, injunctions, judgments, orders, decrees,
rulings, damages, dues, penalties, fines, costs, amounts paid in settlement,
Liabilities, obligations, Taxes, liens, losses, expenses, and fees, including
court costs and attorneys’ fees and expenses.
“Affiliate”
has the meaning set forth in Rule 12b-2 of the
Regulation
12B
promulgated under the Securities Exchange Act.
“Affiliated
Group” means any affiliated group within the meaning of Code Section 1504(a) or
any similar group defined under a similar provision of state, local, or foreign
law.
“Agreement”
has the meaning set forth in the preface above.
“Assumed
Liabilities” has the meaning set forth in Section 2(b)(i).
“Authorized
Buyer Party” shall mean any of Xxxx Xxxxxxxx, CEO of Holdings,
Xxxxxx
X.
Xxxxxx,
Chief
Operating Officer,
President
of
Holdings, Xxxx
X.
Xxxxxxxxx, Chief Financial Officer and Treasurer of Holdings,
or
Xxxxxx
Xxxx, Chief Legal Officer and Secretary of Holdings.
“Basis”
means any past or present fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act,
or transaction that forms or could reasonably form the basis for any specified
consequence.
2
“Business”
has the meaning set forth in the recitals above.
“Business
Day” has the meaning set forth in Section 11(g).
“Buyer”
has the meaning set forth in the preface above.
“Buying
Parties” has the meaning set forth in the preface above.
“Buying
Parties Group” has
the
meaning set forth in Section 10(b).
“Cancellation
and Service Credit Obligations” has
the
meaning set for in Section 2(b)(i)(D) below.
“Cash”
means cash and cash equivalents (including marketable securities and short-term
investments) calculated in accordance with GAAP applied on a basis consistent
with the preparation of the Financial Statements.
“Clear
Channel Claim” shall mean any claims based upon, related to or arising in
connection with the facts or circumstances as reflected in a case styled “Eon
Streams, Inc. v. Clear Channel Communications, Inc.” pending in the United
States District Court, Eastern District of Tennessee in Knoxville, Tennessee
(Civil Action No. 3:05-CV-578).
“Closing”
has the meaning set forth in Section 2(e) below.
“Closing
Date
Balance Sheet”
has
the
meaning set forth in Section 2(b)(i)(B)
below.
“Closing
Date” has the meaning set forth in Section 2(e)
below.
“COBRA”
means the requirements of Part 6 of Subtitle B of Title I of ERISA and Code
Section 4980B, and the requirements of any analogous state health care
continuation laws.
“Code”
means the Internal Revenue Code of 1986, as amended.
“Confidential
Information” means any information regarding the business and affairs of
Seller and
its
Subsidiaries or Holdings and its Subsidiaries that is not generally available
to
the public on the date in question and that derives independent economic value,
actual or potential, from not being generally known to, and not being readily
ascertainable by proper means by, any Person. Information that may be included
in Confidential Information includes matters of a technical nature (including
Intellectual Property, know-how, computer programs, software, patented as
unpatented technology, source-code, accounting methods, and documentation),
matters of a business nature (such as information about contract forms, costs,
profits, employees, promotional methods, markets, market or marketing plans,
sales, and client accounts), plans for further development, and any other
information meeting the definition of Confidential Information set forth above.
“Controlled
Group” has the meaning set forth in Code Section 1563.
“Disclosure
Document” has
the
meaning set forth in Section 3(d)(i).
3
“Employment
Agreements” has the meaning set forth in Section 7(a)(viii).
“Employee
Benefit Plan” means any (a) nonqualified deferred compensation or retirement
plan or arrangement, (b) qualified defined contribution retirement plan or
arrangement which is an Employee Pension Benefit Plan, (c) qualified defined
benefit retirement plan or arrangement which is an Employee Pension Benefit
Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit or other retirement, bonus, or incentive plan or
program.
“Employee
Pension Benefit Plan” has the meaning set forth in ERISA Section 3(2).
“Employee
Welfare Benefit Plan” has the meaning set forth in ERISA Section 3(1).
“Encumbrance”
shall mean any mortgage, pledge, assessment, security interest, deed of trust,
lease, lien, adverse claim, levy, charge or other encumbrance of any kind,
or
any conditional sale or title retention agreement or other agreement to give
any
of the foregoing in the future.
“Environmental,
Health, and Safety Requirements” shall mean all federal, state, local and
foreign statutes, regulations, ordinances and other provisions having the force
or effect of law,
all
judicial and administrative orders and determinations, all
contractual obligations and all common law
concerning public health and safety, worker health and safety, and pollution
or
protection of the environment, including without limitation all those relating
to the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or byproducts,
asbestos, polychlorinated biphenyls, noise or radiation, each as amended and
as
now or hereafter
in
effect.
“ERISA”
means the Employee Retirement Income Security Act of 1974, as
amended.
“ERISA
Affiliate” means each entity which is treated as a single employer with
Seller
for
purposes of Code Section 414.
"Escrow
Agent" has the meaning set forth in the Escrow Agreement.
"Escrow
Agreement" means the Escrow Agreement, dated as of the Closing Date, by and
among Holdings, the Buyer, Seller
and the
Escrow Agent in the form of Exhibit
A
attached
hereto, as amended, modified, restated, superseded or replaced from time to
time.
“Escrow
Shares”
has the meaning set forth in Section 2(c)(iii).
“Excluded
Assets” means (i) 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
Seller
as a
corporation,
(ii)
any of the rights of Seller
under
this Agreement,
any
Transaction Document,
any
side
agreement between Seller
on the
one hand and the Buyer on the other hand entered into on or after the date
of
this Agreement,
(iii)
the Clear Channel Claim, (v) Cash and (vi) the assets listed on Exhibit
B
attached
hereto.
4
“Excluded
Liabilities” shall have
the
meaning set forth in Section 2(b)(ii).
“Fiduciary”
has the meaning set forth in ERISA Section 3(21).
“Financial
Statements” has the meaning set forth in Section 4(g)
below.
“GAAP”
means United States generally accepted accounting principles as in effect from
time to time.
“Holdings
Common Stock” means the
common
stock, $.001 par value, of Holdings.
“Holdings”
has the meaning set forth in the preface above.
“Holdings’
knowledge” is applicable to certain of those warranties and representations set
forth in Section 5 of this Agreement or elsewhere in this Agreement, which
are
subject to the qualification “to Holdings’ knowledge” or “to the knowledge of
Holdings,” or otherwise limited to matters “known” to Holdings. Holdings will be
deemed to have "knowledge" of a matter if
any
Authorized Officer
has
actual knowledge of the matter after making reasonable inquiry and reasonable
diligence with respect to the matter in question.
“Holdings
Material Adverse Effect” shall mean an effect or effects which, individually or
in the aggregate is materially adverse to the business, financial condition,
assets, or operations of Holdings and its Subsidiaries, taken as a
whole.
“Indemnified
Party” has the meaning set forth in Section 10(c) below.
“Indemnifying
Party” has the meaning set forth in Section 10(c) below.
“Intellectual
Property” means (a) all inventions (whether patentable or unpatentable and
whether or not reduced to practice), all improvements thereto, and all patents,
patent applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, trade names,
and
corporate names, together with all translations, adaptations, derivations,
and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, including
the
trade names of Seller
(c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets
and
confidential business information (including ideas,
research
and development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data,
source code, and related documentation), (g) all other proprietary rights,
and
(h) all copies and embodiments thereof (in whatever form or medium).
“Liability”
means any liability (whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether liquidated
or unliquidated, and whether due or to become due), including any liability
for
Taxes.
5
“Limited
Accounts” shall mean Accrued Liabilities, Cancellation and Service Credit
Obligations, and Prepaid Accounts.
“Market
Price” means, with respect to the Holdings Common Stock, the average of the
closing price, as reported by the principal United States market for the
Holdings Common Stock, of the Holdings Common Stock on the twenty
(20)
trading
days preceding the date of determination.
“Most
Recent Balance Sheet” means the balance sheet contained within the Most Recent
Financial Statements.
“Most
Recent Financial Statements” has the meaning set forth in Section 4(g)
below.
“Most
Recent Fiscal Month End” has the meaning set forth in Section 4(g)
below.
“Most
Recent Fiscal Year End” has the meaning set forth in Section 4(g)
below.
“Most
Recent Form 10-K” has the meaning set forth in Section 3(d)(i)
below.
“Multiemployer
Plan” has the meaning set forth in ERISA Section 3(37).
“Open
Source Materials” has the meaning set forth in Section 4(m)
below.
“Ordinary
Course of Business” means the ordinary course of business consistent with past
custom and practice (including with respect to quantity and
frequency).
“Party”
and “Parties” have the respective meanings set forth in the preface
above.
“Person”
means an individual, a partnership, a limited liability company, limited
partnership, a limited liability partnership, a corporation, an association,
a
joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental entity (or any department, agency, or political subdivision
thereof).
“Permitted
Encumbrances” means (a) liens of current taxes and assessments not yet
delinquent, and (b) liens imposed by law and incurred in the ordinary course
of
business for obligations not yet due to materialmen, warehousemen, landlords
and
the like.
“Prepaid
Accounts” shall
have
the
meaning set forth in Section 2(b)(i)(E)
below.
“Prepaid
Accounts Cap” has the meaning set forth in Section (2)(c)(iv)
below.
“Principal
Stockholders” has the meaning set forth in the preamble of this
Agreement.
“Prohibited
Transaction” has the meaning set forth in ERISA Section 406 and Code Section
4975.
“Projected
Balance Sheet” has
the
meaning set forth in Section 2(d).
“Purchase
Price” has the meaning set forth in Section 2(c) below.
6
“Purchase
Shares” has the meaning set forth in Section 2(c)
below.
“Quest
and Clear Channel Liabilities” means all Liabilities of any kind related to the
Quest Claim or the Clear Channel Claim, including, without limitation, any
attorneys fees, costs or other expenses incurred with respect to the period
preceding Closing.
“Quest
Claim” shall mean shall
mean any claims based upon, related to or arising in connection with the facts
or circumstances that caused the entry to be made of the
liability identified on the Closing Date Balance Sheet as the “Old
BellSouth/Quest Payable” and is reflected in the case styled “Quest
Communications Corporation, Inc. v. EON Streams, Inc. pending in Chancery Court,
Xxxx County, Tennessee (Docket Number 160386-2).
“Reviewed
Closing Date Balance Sheet” has the meaning set forth in Section
2(d)(i)
“SEC
Filings” has the meaning set forth in Section 3(d)(i).
“Securities
Act” means the Securities Act of 1933, as amended.
“Seller”
has the meaning set forth in the preamble of this Agreement; however, unless
otherwise required by the context, “Seller” shall include Seller and its
Subsidiaries.
“Seller
Disclosure Schedule” has the meaning set forth in Section 4 below.
“Securities
Exchange Act” means the Securities Exchange Act of 1934, as
amended.
“Seller
Material Adverse Effect” shall mean an effect or effects which, individually or
in the aggregate is materially adverse to the business, financial condition,
assets, or operations of Seller and its Subsidiaries, taken as a
whole.
“Seller’s
knowledge” is applicable to certain of those warranties and representations set
forth in Section 4 of this Agreement or elsewhere in this Agreement, which
are
subject to the qualification “to Seller’s knowledge” or “to the knowledge of
Seller,” or otherwise limited to matters “known” to Seller. Seller will be
deemed to have "knowledge" of a matter if any officer of Seller, including
without limitation, Xxxxxxx X. Xxxxxx and Xxxxx Xxxxx, has actual knowledge
of
the matter after making reasonable inquiry and reasonable diligence with respect
to the matter in question.
“Seller
Long-Term Debt” has the meaning set forth in Section 2(b)(i)(B).
“Seller’s
Representative” means Xxxxxx Xxxxxxx.
“Selling
Parties Group” has the meaning set forth in Section 10(b)(ii).
“Subsidiary”
means any Person
with
respect to which a specified Person (or a Subsidiary thereof) previously
owned,
or
currently owns,
or
subsequently acquires
a
majority of the equity interest or previously had,
or
currently has,
or
subsequently acquires
the
power to vote or direct the voting of sufficient securities to elect
a
majority of the directors or, with respect to an entity other than a
corporation, the governing body most similar to a board of
directors.
“Service
Level Agreements” means those agreements between Seller or its Subsidiaries and
its customers governing such customer relationship.
7
“Tax”
means any federal, state, local, or foreign income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium, windfall
profits, environmental (including taxes under Code Section 59A), customs duties,
capital stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not.
“Tax
Return” means any return, declaration, report, claim for refund, or information
return or statement relating
to
Taxes, including any schedule or attachment thereto, and including any amendment
thereof,
any
report on Schedule K-1 (Form 1041) and similar state or local reports of equity
owner’s shares of income, deductions, etc.
“Third
Party Claim” has the meaning set forth in Section 10(c)(i) below.
“Transaction
Documents” means this Agreement, the Escrow
Agreement, the Employment Agreements, the Xxxx of Sale, the Assignment and
Assumption of Acquired Contracts, the Assignment of Intellectual Property,
Assignment of Patents and any other document, schedule, letter, certificate
or
agreement attached hereto as an Exhibit or delivered pursuant to this Agreement
or in connection with the transactions described herein.
“Unassigned
Asset” means anything that would be an Acquired Contract or other Acquired Asset
(including any claim, contract, commitment, sales order or purchase order or
any
right or any benefit arising thereunder or resulting therefrom) except for
the
fact that an attempted transfer or assignment thereof without the consent of
any
other Person would constitute a breach of such Acquired Contract (or the
agreement governing use of such Acquired Asset) or adversely affect the rights
to be transferred or assigned; provided however, at the time the required
consent of the other Person is obtained, such Unassigned Asset shall immediately
and automatically become, as applicable, an Acquired Asset and/or Acquired
Contract.
“VitalStream
Disclosure Schedule” has the meaning set forth in Section 5 below.
“WARN
Act” means the Worker Adjustment and Retraining Notification Act (WARN), as
amended.
(a) Purchase
and Sale of Assets.
On and
subject to the terms and conditions of this Agreement, the Buyer agrees to
purchase from Seller,
and
Seller
agrees
to sell, transfer, convey, and deliver to the Buyer, all of the Acquired Assets
at the Closing for the consideration specified below in this Section
2.
(i) Assumed
Liabilities.
Subject
to the conditions specified in this Agreement, on the Closing Date, the Buyer
will assume and agree to pay, defend, discharge and perform as and when due
the
following liabilities and obligations of Seller
(the
“Assumed Liabilities”):
8
(A) all
trade
payables and other current liabilities listed in Section 4(q)(ii) of the Seller
Disclosure Schedule, excluding any Quest and Clear Channel Liabilities (the
“Accrued Liabilities”), but in no case shall the amounts assumed exceed the
amounts listed thereon for each individual account nor the aggregate amount
listed thereon for all such liabilities and obligations;
(B) all
long-term debt reflected on the balance of the Company dated as of the date
hereof (the “Closing Date Balance Sheet”) delivered to the Buying Parties on the
date hereof and included in Section 2(b)(i) of the Seller Disclosure Schedule,
excluding any Quest and Clear Channel Liabilities (the “Seller Long-Term Debt”),
but in no case shall the amount of the Seller Long-Term Debt exceed the amount
of long-term debt identified as an Assumed Liability on the Closing Date Balance
Sheet for each individual item nor the aggregate amount identified thereon
for
all such liabilities and obligations;
(C) the
liabilities and obligations under the Acquired Contracts arising or accruing
after the Closing Date but only to the extent that Seller’s
rights
and benefits under such Acquired Contracts have been or will be validly assigned
to Buyer pursuant to this Agreement;
(D) the
obligations to provide cash or future services to past or current customers
on
account of such customers having cancelled service or otherwise being entitled
to a service credit that are listed on Schedule 4(p)(iii)
(the “Cancellation and Service Credit Obligations”); and
(E) the
obligations to provide services for which customers have prepaid in the amount
and of the type that are listed on Schedule 4(p)
(iv)
of Seller
Disclosure
Schedule
(the “Prepaid Accounts”).
(ii) Excluded
Liabilities.
Notwithstanding anything to the contrary contained in this Agreement, Buyer
will
not assume or be liable for any of the following liabilities or obligations
of
Seller
(the
“Excluded Liabilities”), and none of the following liabilities or obligations
will be Assumed Liabilities for purposes of this Agreement:
(A) any
of
Seller’s
Liabilities or obligations under this Agreement or any other Transaction
Document;
(B) any
of
Seller’s
Liabilities or obligations for expenses, income taxes or fees incident to or
arising out of the negotiation, preparation, approval or authorization
of
this
Agreement or the consummation (or preparation for the consummation) of the
transactions contemplated hereby (including, without limitation, all
attorneys’,
accountants’ and brokers’ fees;
(C) any
of
Seller’s
Liabilities or obligations arising by reason of any violation or alleged
violation by Seller,
its
agents or affiliates of any federal, state, local or foreign law or any
requirement of any governmental authority or by reason of any breach or alleged
breach by Seller,
its
agents or affiliates of any agreement, contract, lease, commitment, instrument,
judgment, order or decree (regardless of when any such violation or breach
is
asserted or alleged to have occurred);
9
(D) any
Liabilities and obligations of Seller
for
product liability claims (including, without limitation, claims for destruction
of property, personal injury or death), negligent or nonconforming service
claims and related lawsuits (i) arising on or prior to the Closing Date or
(ii)
arising after the Closing Date with respect to products that became finished
goods prior to the Closing Date or with respect to services rendered prior
to
the Closing Date (without regard to the date of any alleged
accident);
(E) any
Liability or obligation against which Seller
is
insured or otherwise indemnified;
(F) any
Liability or obligation of Seller
for the
payment of dividends or the repurchase or other acquisition of any shares of
its
capital stock;
(G) any
Liability or obligation of Seller
to any
Affiliate or former Affiliate of Seller;
(H) any
Quest
and Clear Channel Liability;
(I) any
Liability or obligation of Seller
under
any Acquired Contract arising on or before the Closing Date;
(J) the
$30,000 retention bonus agreed to by Seller;
(K)
except
to the extent that the Buyer receives, pursuant to Section 9(h) below all
benefits with respect with an Unassigned Asset, any Liability arising out of
or
with respect to such Unassigned Asset; and
(L) any
other
Liability or obligation of Seller
not
expressly assumed by Buyer under Section 2(b) (i) above.
(iii) On
and
subject to the terms and conditions of this Agreement, the Buyer agrees to
assume and become responsible for all of the Assumed Liabilities at the Closing.
The Buyer will not assume or have any responsibility, however, with respect
to
any other obligation or Liability not included within the definition of Assumed
Liabilities.
(c)
Consideration
Provided by Buyer for Acquired
Assets.
Subject
to the terms and conditions of this Agreement, as total consideration for the
Acquired Assets (the “Purchase Price”), at the Closing:
(i) Holdings
agrees to issue to Seller, and deliver to Seller, or the Escrow Agent as
provided in Section 2(c)(ii) below, with such legends and other restrictions
as
are described in Section 2(g), at the Closing, One Million Seven Hundred
Forty-Seven Thousand Three Hundred Twelve (1,747,312) shares of Holdings Common
Stock (the “Purchase Shares”) (which number of shares was calculated based on a
purchase price of $17,001,345
divided by a price per share of $9.73).
10
(ii) Holdings
agrees that if the closing price per share of Holdings Common Stock on the
last
trading day before the Closing Date is below $9.73 per share, the amount of
the
Purchase Price (and the number of Purchase Shares) shall be adjusted at Closing
such that Holdings will issue to Seller such additional amount of shares equal
to 50% of the amount derived from dividing the amount of the diminution in
value
of the Purchase Shares by the trading price per share that is below $9.73,
represented by the following formula:
X
=
(1,747,312) ($9.73 - Y) ÷
Y
•½
|
Based
on the variables below:
|
||
|
Original
Number of Shares
|
=
|
1,747,312
|
|
Original
Price P/Share
|
=
|
$9.73
|
|
Trading
Price P/Share below $9.73
|
=
|
Y
|
|
Additional
Number of Shares
|
=
|
X
|
(iii) Holdings
agrees to transmit to the Escrow Agent, to be held subject to the terms and
conditions of the Escrow Agreement, Two Hundred Sixty-Two Thousand Ninety-Seven
(262,097) of the Purchase Shares (the “Escrow Shares”). The Escrow Shares shall
be available to satisfy any amounts owed by Seller or the Principal Stockholders
to the Buying Parties pursuant to Section 10 of this Agreement or Section 2(d)
below, subject to the terms of this Agreement and the Escrow Agreement. Any
portion of the Escrow Shares not used to offset Adverse Consequences as
specified in Section 10 below or post-Closing adjustments as specified in
Section 2(d) below (or reserved with respect to claimed losses related to
litigation pending or threatened in writing) shall be released by the Escrow
Agent to Seller as provided in the Escrow Agreement.
(i) Attached
hereto as Exhibit
K
is a
balance sheet which represents Seller’s good faith estimate of its assets,
liabilities and stockholders equity as of the Closing Date (the “Projected
Balance Sheet”), which Projected Balance Sheet is marked (A) to distinguish
assets that Seller acknowledges are Acquired Assets from assets that Seller
believes are not Acquired Assets, and (B) to distinguish liabilities that Seller
believes are Assumed Liabilities from liabilities that Sellers acknowledges
are
not Assumed Liabilities. During the sixty-day (60-day) period following the
Closing, Buyer shall modify the Projected Balance Sheet to produce a balance
sheet dated as of the Closing Date (the “Reviewed Closing Date Balance Sheet”)
reflecting all changes required by GAAP and by information obtained by it
subsequent to the Closing, which Closing Date Balance Sheet shall, at the
Buyer’s expense, at a minimum be reviewed by Xxxx Xxxxxx & Xxxxxx.
11
(ii) To
the
extent that (A) the difference between the book value of the current assets
included in the Acquired Assets, less the book value of the Assumed Liabilities,
in each case as reflected on the Projected Balance Sheet, exceeds (B) the
difference between the book value of the current assets included in the Acquired
Assets, less the book value of the Assumed Liabilities, in each case as
reflected on the Reviewed Closing Date Balance Sheet, the Purchase Price shall
be reduced by the amount of such excess. For purposes of this subsection (ii),
(A) will be deemed to exceed (B) if: (X) the difference calculated in (A) is
a
smaller negative number than the difference calculated in (B), (Y) the
difference calculated in (A) is a larger positive number than the difference
calculated in (B), or (Z) the difference calculated in (A) is a positive number
and the difference calculated in (B) is a negative number. Any reductions to
the
Purchase Price pursuant to this Section 2(d)(ii) shall be payable out of the
Escrow Shares using the Market Price as of the Closing Date.
(iii) Seller
and the Buyer shall use their reasonable best efforts to mutually agree upon
the
amount of any adjustment under Section 2(d)(ii) not later than the later to
occur of the date that is (a) sixty (60) days following the Closing, or (b)
thirty (30) days following Buyer’s delivery to Seller of the Reviewed Closing
Date Balance Sheet, after which date, if agreement has not been reached, either
may initiate a legal action in order to have a court determine the amount of
the
adjustment.
(e) The
Closing.
The
closing of the transactions contemplated by this Agreement (the “Closing”) shall
take place at the offices of Holdings in Irvine, California commencing at 9:00
a.m. local time on the second Business Day following the satisfaction or waiver
of all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (other than conditions with respect to actions
the respective Parties will take at the Closing itself) or such other date
and
time as the Parties may mutually determine (the “Closing Date”). The parties
shall use commercially reasonable efforts to cause the Closing to occur on
the
date hereof.
(f) Deliveries
at the Closing.
At the
Closing, (i) Seller will deliver to the Buyer (or cause its Affiliates to
deliver to Buyer) the various certificates, instruments, and documents referred
to in Section 7(a) below; (ii) the Buyer will deliver to Seller the various
certificates, instruments, and documents referred to in Section 7(b) below;
and (iii); the Buyer will deliver to Seller and/or the Escrow Agent the
consideration specified in Section 2(c) above.
(g) Legends.
Each
Purchase Share will be imprinted with a legend substantially in the following
form:
"THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THE SECURITIES
REPRESENTED BY THIS INSTRUMENT HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT
BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933,
AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN
A
FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT
TO
RULE 144 UNDER SAID ACT."
12
In
the
absence of a registration statement covering the transfer of a Purchase Share,
Holdings must be furnished with a written opinion reasonably satisfactory to
Holdings in form and substance from counsel reasonably satisfactory to Holdings
to the effect that the holder may transfer the Purchase Share as desired without
registration under the Securities Act. VitalStream agrees to permit its counsel
to deliver such opinions in accordance with its then-current policy on Rule
144
opinions, subject to receipt of its standard reimbursement for such any opinion
(currently $500 per opinion). The foregoing notwithstanding, the Purchase Shares
and Seller’s rights to receive distributions of Escrow Shares under the Escrow
Agreement may be transferred, to the extent permitted by Section 9(e), to
Seller’s stockholders or a trust or other entity established for the benefit of
such shareholders upon presentation of documentation showing that the transfer
represents a distribution in accordance with equity interests and not for
consideration.
(h) Tax
Free Reorganization.
The
transactions contemplated by this Agreement are being undertaken as part of
a
“plan of reorganization” within the meaning of Treasury Regulation Section
1.368-1(c) pursuant to which Seller will (i) transfer substantially all of
its
assets solely in exchange for the Purchase Shares and assumption by Buyer of
certain Seller liabilities; and (ii) distribute the Purchase Shares to Seller’s
shareholders. As such, the transactions contemplated hereunder are intended
to
qualify as a “reorganization” within the meaning of Section 368(a)(1)(C) of the
Code. Neither Holdings nor Buyer, however, makes any representation or warranty
that the subject transactions will so qualify.
3. Investment
Representations of Seller.
Seller
represents and warrants to the Buying Parties that the statements contained
in
this Section 3 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and
as
though the Closing Date were substituted for the date of this Agreement).
(a) Experience
and Status.
Seller
is an “accredited investor,” as defined in Rule 501(a) under the Securities Act,
for the reason that all of its stockholders are individually “accredited
investors,” as defined in Rule 501(a) under the Securities Act. Seller an is
sophisticated and experienced in evaluating technology companies such as
Holdings, is able (alone or with its advisors) to fend for itself in
transactions such as the one contemplated by this Agreement, has such knowledge
and experience in financial and business matters that it is capable of
evaluating the merits and risks of his prospective investment in Holdings,
and
has the ability to bear the economic risks of the investment.
(b) Investment.
Seller
is acquiring the Purchase Shares for investment for its own account and not
with
the view to, or for resale in connection with, any distribution thereof (other
than a distribution to its shareholders in accordance with Section 2(c) hereof).
Seller understands that the Purchase Shares have not been registered under
the
Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act which depends upon, among other things, the
bona fide nature of the investment intent as expressed herein. Seller further
represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participation to any
third person with respect to any of the Purchase Shares. Seller understands
and
acknowledges that the offering of the Purchase Shares pursuant to this Agreement
will not be registered under the Securities Act on the grounds that the sale
provided for in this Agreement and the issuance of securities hereunder is
exempt from the registration requirements of the Securities Act.
13
(c)
Rule
144.
Seller
acknowledges that the Purchase Shares must be held indefinitely unless
subsequently registered under the Securities Act or an exemption from such
registration is available. Seller is aware of the provisions of Rule 144
promulgated under the Securities Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions. Seller covenants that, in the absence of an effective registration
statement covering the stock in question, Seller will sell, transfer, or
otherwise dispose of the Purchase Shares only in a manner consistent with
Section 2(g).
(i) Seller
acknowledges and represents that in making the decision to acquire the Purchase
Shares, it has relied solely upon (A) representations and warranties of the
Buying Parties contained in this Agreement and the other Transaction Documents,
(B) written information provided by Holdings or Buyer directly to Seller, (C)
information contained in the Annual Report on Form 10-K for the year ended
December 31, 2005 filed by Holdings with the Securities and Exchange Commission
and all Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed
by
Holdings since January 1, 2006 with the Securities and Exchange Commission
(collectively, the “SEC Filings”), and (D) information regarding the Buying
Parties set forth in, or incorporated by reference into, the Disclosure Document
/ Information Statement for Asset Purchase Agreement delivered by Holdings
to
Seller and the stockholders of Seller (the “Disclosure Document”).
(ii) Seller
represents and affirms that none of the following information has ever been
represented, guaranteed or warranted to it or any of its officers, employees
or
agents, expressly or by implication, by any Person: (i) the approximate or
exact
length of time that it will be required to remain a security holder of Holdings;
(ii) the percentage of profit and/or amount of or type of consideration, profit
or loss to be realized, if any, as a result of an investment in Holdings; or
(iii) the possibility that the past performance or experience on the part of
Holdings or any affiliate, or any officer, director, employee or agent of the
foregoing, might in any way indicate or predict the results of ownership of
any
of the Purchase Shares or the potential success of Holdings’
operations.
(e)
Legends.
Seller
understands that the certificates evidencing the Purchase Shares will bear
a
legend substantially in the form set forth in Section 2(g), together with any
other legends required by applicable state securities laws, and will be subject
to the restrictions set forth in Section 2(g).
(f)
Place
of Business/Residence.
Seller’s principal office is located in the State of Tennessee, and Seller has
received all offers, copies of the Transaction Documents and other materials
regarding the Buying Parties in the State of Tennessee. Section 3(f) of the
Seller Disclosure Schedule contains a true, correct and complete list of all
stockholders of Seller and includes the address(es) for each stockholder to
which the Disclosure Document and all other information regarding the
transactions contemplated by this Agreement were delivered.
14
4. Representations
and Warranties of Seller.
Seller
and each of the Principal Stockholders represent and warrant to the Buying
Parties that the statements contained in this Section are correct and complete
as of the date of this Agreement and will be correct and complete as of the
Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section), except
as
set forth in the disclosure schedule delivered by Seller in connection with
the
Agreement (the “Seller Disclosure Schedule”). Seller Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
and
subparagraphs contained in this Section 4. 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.
(a)
Organization
of Seller.
Seller
is a corporation, duly organized,
validly
existing
and in
good standing under
the
laws of the State of Tennessee.
Seller is duly
qualified as a foreign corporation and is in good standing in the states and
provinces listed on Section 4(a) of Seller Disclosure Schedule, which are the
only jurisdictions in which such qualification is necessary or required under
applicable law as a result of the conduct of Seller’s business or the ownership
of its properties. Prior to the execution of this Agreement, Seller has
delivered to Holdings true and complete copies of its Certificate of
Incorporation and Bylaws as currently in effect on the date hereof.
(b)
Authorization
of Transaction.
Seller
has full
power and authority (including full
corporate
power
and authority) to execute and deliver this Agreement and other Transaction
Documents to which Seller
is a
party and to perform its obligations hereunder and thereunder. Without limiting
the generality of the foregoing, the board of directors of Seller
have
duly authorized the execution, delivery, and performance of this Agreement
and
the other Transaction Documents to which Seller
is a
party by Seller.
This
Agreement and the other Transaction Documents to which Seller is a
party,
assuming
the due authorization, execution and delivery hereof and thereof by the Buying
Parties party hereto and thereto,
constitute the valid and legally binding obligations of Seller,
enforceable in accordance with their terms and conditions,
except
as enforceability may be limited by applicable bankruptcy, insolvency or similar
laws affecting or relating to the enforcement of creditors’ rights generally or
by equitable principles relating to enforceability.
15
(c)
Noncontravention.
Neither
the execution and the delivery of this Agreement nor any of the other
Transaction Documents to which Seller
is a
party,
nor the
consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2
above),
will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any
government,
governmental agency, or court to which any of Seller
and its
Subsidiaries is subject or any provision of the charter or bylaws of any of
Seller
and its
Subsidiaries or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
any of Seller
and its
Subsidiaries
is a party or by which it is bound or to which any of its assets is subject,
including
any Acquired Contract (or
result
in the imposition of any Encumbrance
upon any
of its assets).
None of
Seller
and its
Subsidiaries needs to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency
in
order for the Parties to consummate the transactions contemplated by this
Agreement or any other Transaction Documents to which Seller
is a
party
(including the assignments and assumptions referred to in Section 2
above). Except
as
set forth in Section 4(c) of the Disclosure Schedule (as delivered at Closing),
there will be no Unassigned Assets immediately following Closing.
(d)
Brokers’
Fees.
Seller
has
no
Liability or obligation to pay any fees or commissions to any broker, finder,
or
agent with respect to the transactions contemplated by this
Agreement.
None of
the Subsidiaries of Seller
has any
Liability or obligation to pay any fees or commissions to any broker, finder,
or
agent with respect to the transactions contemplated by this
Agreement.
(e)
Title
to Assets; Sufficiency of Assets.
Seller
and its
Subsidiaries have good and marketable title to, or a valid leasehold interest
in, the properties
and assets used by them, located on their premises,
or
shown on the Most Recent Balance Sheet or acquired after the date thereof,
free
and clear of all Encumbrances
(other than Permitted Encumbrances),
except
for properties and assets disposed of in the Ordinary Course of Business since
the date of the Most Recent Balance Sheet. Without
limiting the generality of the foregoing, Seller
has good
and marketable title to all of the Acquired Assets, free and clear of any
Encumbrance
or
restriction on transfer, and, at the Closing, will convey to the Buyer good
and
marketable title to all of the Acquired Assets, free and clear of any
Encumbrance
or
restriction on transfer. The Acquired Assets include all properties and assets
(tangible and intangible) relating to, used in connection with, or necessary
or
useful in, the operation or conduct by Seller
of
its Business
as presently conducted
and as
presently proposed to be conducted.
16
(i) Capitalization.
The
authorized capital stock of Seller consists of 50,000,000 shares of no par
value
common stock and 1,043,922 shares of no par value preferred stock. There are
issued and outstanding 8,163,001 shares of common stock of Seller and 1,043,922
issued and outstanding shares of preferred stock of Seller, which shares of
stock have been issued to, and are held beneficially and of record by, the
Persons and in the amounts listed Section 4(f)(i) of Seller Disclosure Schedule.
Except for the foregoing, there are no shares of capital stock outstanding.
All
of the issued and outstanding shares of capital stock of Seller have been duly
authorized and are validly issued, fully paid, and nonassessable and not subject
to any restriction or purchase right or forfeiture provision (other than arising
under governing securities laws). Except for the stock options listed in Section
4(f)(i) of the Seller Disclosure Schedule, there are no outstanding or
authorized options, warrants, purchase rights, subscription rights, preemptive
rights conversion rights, exchange rights, or other contracts or commitments
to
which Seller is a party or by which it is bound that could require Seller to
sell, transfer, or otherwise dispose of any shares of capital stock. There
are
no outstanding stock appreciation, phantom stock, profit participation, or
similar rights with respect to Seller. There are no voting trusts, proxies,
or
other agreements or understandings with respect to the voting of any capital
stock of Seller. The minute books and other records books of Seller are correct
and complete. Seller is not in default under or in violation of any provision
of
its organizational documents.
(ii) Subsidiaries.
Section
4(f)(ii)
of
Seller
Disclosure
Schedule
sets forth for each Subsidiary of Seller
(i) its
name and jurisdiction of incorporation, (ii) the number of shares of authorized
capital stock of each class of its capital stock, (iii) the number of issued
and
outstanding shares of each class of its capital stock, the names of the holders
thereof, and the number of shares held by each such holder, (iv) the number
of
shares of its capital stock held in treasury, and (v) its directors and
officers. Each Subsidiary of Seller
is a
corporation duly organized, validly existing, and in good standing
under
the laws of the jurisdiction of its incorporation. Each Subsidiary of
Seller
is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required. Each Subsidiary of
Seller
has full
corporate power and authority and all licenses, permits, and authorizations
necessary to carry on the businesses in which it is engaged and to own and
use
the properties owned and used by it.
Seller
has
delivered to the Buyer correct and complete copies of the charter and bylaws
of
each Subsidiary of Seller
(as
amended to date). All of the issued and outstanding shares of capital stock
of
each Subsidiary of Seller
have
been duly authorized and are validly issued, fully paid, and nonassessable.
Seller
holds of
record and owns beneficially all of the outstanding shares of each Subsidiary
of
Seller,
free
and clear of any restrictions on transfer (other than restrictions under the
Securities Act and state securities laws), Taxes, Encumbrances,
options,
warrants, purchase rights, contracts, commitments, equities, claims, and
demands. There are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require any of Seller
and its
Subsidiaries to sell, transfer, or otherwise dispose of any capital stock of
any
of its Subsidiaries or that could require any Subsidiary of Seller
to
issue, sell, or otherwise cause to become outstanding any of its own capital
stock (other than this Agreement). There are no outstanding stock appreciation,
phantom stock, profit participation, or similar rights with respect to any
Subsidiary of Seller.
There
are no voting trusts, proxies, or other agreements or understandings with
respect to the voting of any capital stock of any Subsidiary of Seller.
The
minute books (containing the records of meetings of the stockholders, the board
of directors, and any committees of the board of directors), the stock
certificate books, and the stock record books of each Subsidiary of Seller
are
correct and complete. None of the Subsidiaries of Seller
is in
default under or in violation of any provision of its charter or bylaws. None
of
Seller
or its
Subsidiaries controls directly or indirectly or has any direct or indirect
equity participation in any corporation, partnership, trust, or other business
association which is not a Subsidiary of Seller.
17
(g) Financial
Statements.
Attached
hereto as Exhibit
C
are the
following financial statements (collectively the “Financial Statements”): (i)
audited consolidated balance sheets and statements of income, changes in
stockholders’ equity,
and cash flow as of and for the fiscal years ended December 31, 2005
(the
“Most Recent Fiscal Year End”) and December 31, 2004 for Seller
and its
Subsidiaries; and (ii) unaudited consolidated and consolidating balance sheets
and statements of income, changes in stockholders’ equity,
and cash flow (the “Most Recent Financial Statements”) as of and for the three
months ended March
31,
2006
(the
“Most Recent Fiscal Month End”) for Seller
and its
Subsidiaries. The Financial Statements (including the notes thereto) have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby, present fairly the financial condition of Seller
and its
Subsidiaries as of such dates and the results of operations of Seller
and its
Subsidiaries for such periods, are correct and complete, and are consistent
with
the books and records of Seller
and its
Subsidiaries (which books and records are correct and complete); provided,
however, that the Most Recent Financial Statements are subject to normal
year-end adjustments (which will not be material individually or in the
aggregate) and lack footnotes and other presentation items. All services or
amounts owed with respect to the Limited Accounts and the Seller Long-Term
Debt
were incurred in the Ordinary Course of Business, and none of the parties other
than Seller owed/owing with respect to the Limited Accounts are Affiliates
of
Seller.
(h) Events
Subsequent to Most Recent Fiscal Month
End.
Since
the Most Recent Fiscal Month
End,
there has not been any adverse
change in the business, financial condition, operations, results of operations,
or future prospects of any of Seller
and its
Subsidiaries. Without limiting the generality of the foregoing, since that
date:
(i) none
of
Seller
and its
Subsidiaries has sold, leased, transferred, or assigned any of its assets,
tangible or intangible, other than for a fair consideration in the Ordinary
Course of Business;
(ii) none
of
Seller
and its
Subsidiaries has entered into any agreement, contract, lease, or license (or
series of related agreements, contracts, leases, and licenses) either involving
more than $20,000
in the
aggregate throughout its term or outside the Ordinary Course of
Business;
(iii) no
party
(including any of Seller
and its
Subsidiaries) has accelerated, terminated, modified, or cancelled any agreement,
contract, lease, or license (or series of related agreements, contracts, leases,
and licenses) involving more than $20,000
in the
aggregate throughout its term to which any of Seller
and its
Subsidiaries is a party or by which any of them is bound;
(iv) none
of
Seller
and its
Subsidiaries has imposed, or permitted the imposition of, any
Encumbrance
upon any
of its assets, tangible or intangible;
(v) none
of
Seller
and its
Subsidiaries has made any capital expenditure (or series of related capital
expenditures) either involving more than $20,000
or
outside the Ordinary Course of Business;
18
(vi) none
of
Seller
and its
Subsidiaries has made any capital investment in, any loan to, or any acquisition
of the securities or assets of, any other Person (or series of related capital
investments, loans, and acquisitions) either involving more than $20,000
or
outside the Ordinary Course of Business;
(vii) none
of
Seller
and its
Subsidiaries has issued any note, bond, or other debt security or created,
incurred, assumed, or guaranteed any indebtedness for borrowed money or
capitalized lease obligation either involving more than $20,000
singly
or
in the
aggregate;
(viii) none
of
Seller
and its
Subsidiaries has delayed or postponed the payment of accounts payable and other
Liabilities outside the Ordinary Course of Business;
(ix) none
of
Seller
and its
Subsidiaries 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) none
of
Seller
and its
Subsidiaries has granted any license or sublicense of any rights under or with
respect to any Intellectual Property;
(xi) there
has
been no change made or authorized in the charter or bylaws
of any
of Seller
and its
Subsidiaries;
(xii) none
of
Seller
and its
Subsidiaries has issued, sold, or otherwise disposed of any of its capital
stock,
or
granted any options, warrants, or other rights to purchase or obtain (including
upon conversion, exchange, or exercise) any of its capital stock;
(xiii) none
of
Seller
and its
Subsidiaries has declared, set aside, or paid any dividend or made any
distribution with respect to its capital stock
(whether
in cash or in kind) or redeemed, purchased, or otherwise acquired any of its
capital stock;
(xiv) none
of
Seller
and its
Subsidiaries has experienced any damage, destruction, or loss (whether or not
covered by insurance) to its property;
(xv) none
of
Seller and its Subsidiaries has experienced any loss as a result of fraud,
theft, conversion, embezzlement or other crime pertaining to the unlawful use
or
possession of another’s property;
(xvi) none
of
Seller
and its
Subsidiaries has made any loan to, or entered into any other transaction with,
any of its directors,
officers,
or
employees
(other
than the payment of salary in
the
Ordinary Course of Business);
(xvii) except
for Seller’s agreement to pay a retention bonus in the amount of $30,000 to one
of Seller’s employee’s, none of Seller
and its
Subsidiaries has entered into any employment contract or collective bargaining
agreement, written or oral, or modified the terms of any such existing contract
or agreement;
19
(xviii) none
of
Seller
and its
Subsidiaries has granted any increase in the base compensation of any of its
directors,
officers
and
employees;
(xix) none
of
Seller
and its
Subsidiaries has adopted, amended, modified, or terminated any bonus,
profit-sharing, incentive, severance, or other plan, contract, or commitment
for
the benefit of any of its directors, officers, and employees (or taken any
such
action with respect to any other Employee Benefit Plan);
(xx) none
of
Seller
and its
Subsidiaries has made any other change in employment terms for any of its
directors,
officers
and
employees outside the Ordinary Course of Business;
(xxi) none
of
Seller
and its
Subsidiaries has made or pledged to make any charitable or other capital
contribution outside
the Ordinary Course of Business;
(xxii) none
of
Seller and its Subsidiaries has paid any amount to any third party with respect
to any Liability or obligation (including any costs and expenses Seller has
incurred or may incur in connection with this Agreement and the transactions
contemplated hereby) which would not constitute an Assumed Liability if in
existence as of the Closing;
(xxiii) there
has
not been any other occurrence, event, incident, action, failure to act, or
transaction outside the Ordinary Course of Business involving any of
Seller
and its
Subsidiaries;
(xxiv) any
material change in contingent obligations of Seller or any of its Subsidiaries
by way of guaranty, endorsement, indemnity, warranty or otherwise;
and
(xxv) none
of
Seller
and its
Subsidiaries has committed to any of the foregoing.
(i) Undisclosed
Liabilities; Limited
Liabilities.
None
of
Seller and its Subsidiaries has any Liability
(and
there is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability),
except
for (A) Liabilities set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto) and (B) Liabilities which do not exceed
$25,000
in the
aggregate and have arisen after the Most Recent Fiscal Month End in the Ordinary
Course of Business (none of which results from, arises out of, relates to,
is
in the
nature of, or
was
caused
by
any breach of contract, breach of warranty, tort, infringement, or violation
of
law).
The
aggregate value of the Limited Accounts does not exceed the amount(s) set forth
in the Seller Disclosure Schedule.
(j) Legal
Compliance.
Each of
Seller,
its
Subsidiaries, and their respective predecessors and Affiliates has complied
with
all applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal, state,
local, and foreign governments (and all agencies thereof), and
no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of them alleging
any
failure so to comply.
20
(k) Tax
Matters.
(i) Each
of
Seller
and its
Subsidiaries has filed all Tax Returns that it was required to file.
All
such
Tax Returns were correct and complete in all respects. All Taxes owed by any
of
Seller
and its
Subsidiaries (whether or not shown on any Tax Return) have been paid. Except
as
set forth in Section 4(k) of the Seller Disclosure Schedule, none of
Seller
and its
Subsidiaries currently is the beneficiary of any extension of time within which
to file any Tax Return. No claim has ever been made by an authority in a
jurisdiction where any of Seller
and its
Subsidiaries does not file Tax Returns that it is or may be subject to taxation
by that jurisdiction. There are no Encumbrances
(other
than Permitted Encumbrances)
on any
of the assets of any of Seller
and its
Subsidiaries that arose in connection with any failure (or alleged failure)
to
pay any Tax.
(ii) Each
of
Seller
and its
Subsidiaries has withheld and paid all Taxes required to have been withheld
and
paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party.
(iii) No
Principal Stockholder, director,
or
officer (or employee responsible for Tax matters) of any of Seller
and its
Subsidiaries expects any authority to assess any additional Taxes for any period
for which Tax Returns have been filed. There is no dispute or claim concerning
any Tax Liability of any of Seller
and its
Subsidiaries either (A) claimed or raised by any
authority in writing or (B) as to which any
of
the Principal Stockholders and the directors and officers (and employees
responsible for Tax matters) of Seller and its Subsidiaries
has
Knowledge based upon personal contact with any agent of such authority.
Section
3(k) of Seller
Disclosure Schedule lists all
federal, state, local, and foreign income Tax Returns filed with respect to
any
of Seller and its Subsidiaries for taxable periods ended on or after December
31, 2001, indicates those Tax Returns that have been audited, and indicates
those Tax Returns that currently are the subject of audit. Seller has delivered
to the Buyer correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against or agreed
to by any of Seller and its Subsidiaries since December 31, 2001.
(iv) None
of
Seller
and its
Subsidiaries has waived any statute of limitations in respect of Taxes or agreed
to any extension of time with respect to a Tax assessment or
deficiency.
(v) The
unpaid Taxes of Seller
and its
Subsidiaries (A) did not, as of the Most Recent Fiscal Month End, exceed the
reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set
forth
on the face of the Most Recent Balance Sheet (rather than in any notes thereto)
and (B) do not exceed that reserve as adjusted for the passage of time through
the Closing Date in accordance with the past custom and practice of Seller
and its
Subsidiaries in filing their Tax Returns.
21
(vi) None
of
Seller and its Subsidiaries has filed a consent under Code Section 341(f)
concerning collapsible corporations. None of Seller and its Subsidiaries has
made any payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Code Section 280G. None of Seller
and
its Subsidiaries has been a United States real property holding corporation
within the meaning of Code Section 897(c)(2) during the applicable period
specified in Code Section 897(c)(1)(A)(ii). Each of Seller and its Subsidiaries
has disclosed on its federal income Tax Returns all positions taken therein
that
could give rise to a substantial understatement of federal income Tax within
the
meaning of Code Section 6662. None of Seller and its Subsidiaries is a party
to
any Tax allocation or sharing agreement. None of Seller and its Subsidiaries
(A)
has been a member of an Affiliated Group filing a consolidated federal income
Tax Return or a group of affiliated or related corporations filing consolidated,
combined or unitary state, local or foreign income Tax Returns (other than
a
group the common parent of which was Seller) or (B) has any Liability for the
Taxes of any Person (other than any of Seller and its Subsidiaries) under Reg.
Section 1.1502-6 (or any similar provision of state, local, or foreign law),
as
a transferee or successor, by contract, or otherwise.
(vi) Seller
does not own, and since January 1, 2001 has not owned any equity interest in
any
partnership, limited partnership, limited liability company, trust, or other
entity (excluding the Subsidiaries) the taxable income of which is allocable
to
or otherwise reportable on the income Tax Returns of Seller in whole or in
part.
(l) Real
Property.
(i) Neither
Seller
nor any
of its Subsidiaries owns any real property.
(ii) Section
4(l)(ii)
of Seller
Disclosure
Schedule
lists and describes briefly all real property leased or subleased to any of
Seller
and its
Subsidiaries. Seller
has
delivered to the Buyer correct and complete copies of the leases and subleases
listed in Section 4(l)(ii)
of Seller
Disclosure
Schedule
(as amended to date). With respect to each lease and sublease listed in Section
4(l)(ii)
of Seller
Disclosure
Schedule:
(A) the
lease
or sublease is legal, valid, binding, enforceable, and in full force and
effect;
(B) the
lease
or sublease will continue to be legal, valid, binding, enforceable, and in
full
force and effect on identical terms following the consummation of the
transactions contemplated hereby and by all of the Transaction
Documents
(including the assignments and assumptions referred to in Section 2
above);
(C) no
party
to the lease or sublease is in breach or default, and no event has occurred
which, with notice or lapse of time, would constitute a breach or default or
permit termination, modification, or acceleration thereunder;
(D) no
party
to the lease or sublease has repudiated any provision thereof;
22
(E) there
are
no disputes, oral agreements, or forbearance programs in effect as to the lease
or sublease;
(F) with
respect to each sublease, the representations and warranties set forth in
subsections (A) through (E) above are true and correct with respect to the
underlying lease;
(G) none
of
Seller
and its
Subsidiaries has assigned, transferred, conveyed, mortgaged, deeded in trust,
or
encumbered any interest in the leasehold or subleasehold;
(H) all
facilities leased or subleased thereunder have received all approvals of
governmental authorities (including licenses and permits) required in connection
with the operation thereof and have been operated and maintained in accordance
with applicable laws, rules, and regulations;
(I) all
facilities
leased
or subleased thereunder are supplied with utilities and other services necessary
for the operation of said facilities;
and
(J) no
obligation to pay money, absolute or contingent, other than the obligation
to
pay rent pursuant to the written terms thereof, could arise under these leases
and subleases.
(i) Seller
and its
Subsidiaries own, or have the right to use pursuant to license, sublicense,
agreement, or permission,
and the
Acquired Assets include,
all
Intellectual Property used by Seller and its Subsidiaries or necessary or
desirable
for the
operation of the businesses of Seller
and its
Subsidiaries as presently conducted.
Each
item of Intellectual Property owned or used by any of Seller and its
Subsidiaries immediately prior to the Closing hereunder will be owned or
available for use by the Buyer on identical terms and conditions immediately
subsequent to the Closing hereunder. Each
of
Seller and
its
Subsidiaries has taken all necessary
action
to maintain and protect their
respective rights in each
item
of Intellectual Property that
each of
them owns or uses, and the confidentiality of each such item to the extent
they
own such item, or to the extent they do not own such item, to the extent they
are obligated to protect such item’s confidentiality or other rights they may
have in such Intellectual Property. Seller has sourced and archived all of
the
development tools used in the creation and development of the Intellectual
Property developed and owned by Seller.
(ii) None
of
Seller
and its
Subsidiaries has interfered
with, infringed
upon, misappropriated, or otherwise come
into
conflict with
any
Intellectual Property rights of third parties, and none of the Principal
Stockholders and the directors and officers
(and employees with responsibility for Intellectual Property matters) of
Seller
and its
Subsidiaries has ever received any charge, complaint, claim, demand, or notice
alleging any such interference,
infringement,
misappropriation, or violation (including
any claim that any of Seller
and its
Subsidiaries must license or refrain from using any Intellectual Property rights
of any third party). To the
Knowledge of any of the Principal Stockholders and the directors and officers
(and employees with responsibility for Intellectual Property matters) of Seller
and its Subsidiaries, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with
any
Intellectual Property rights of any of Seller
and its
Subsidiaries.
23
(iii) Section
4(m)(iii)
of Seller
Disclosure
Schedule
identifies each patent,
copyright, trademark, service xxxx or other
registration which has been issued to any of Seller
and its
Subsidiaries with respect to any of its Intellectual Property, identifies each
pending patent
application or application
for a
patent,
copyright, trademark, service xxxx or other registration
which any of Seller
and its
Subsidiaries has made with respect to any of its Intellectual Property, and
identifies each license, agreement, or other permission which any of
Seller
and its
Subsidiaries has granted to any third party with respect to any of its
Intellectual Property (together with any exceptions). Seller
has
delivered to the Buyer correct and complete copies of all such patents,
copyrights,
trademarks, service marks, registrations,
applications, licenses, agreements, and permissions (as amended to date) and
has
made available to the Buyer correct and complete copies of all other written
documentation evidencing ownership and prosecution
(if applicable) of each such item. Section 4(m)(iii)
of Seller
Disclosure
Schedule
also identifies each trade name or unregistered trademark used by any of
Seller
and its
Subsidiaries in connection with any of its businesses. With respect to each
item
of Intellectual Property required to be identified in Section 4(m)(iii)
of Seller
Disclosure
Schedule:
(A) Seller
and
its
Subsidiaries possess all right, title, and interest in and to the item, free
and
clear of any Encumbrance,
license, other
restriction,
or
viable claims of ownership by any Person;
(B) the
item
is not subject to any outstanding injunction, judgment, order, decree, or
other
ruling;
(C) no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
or
demand is
pending or, to the Knowledge of any of the Principal Stockholders and the
directors and officers (and employees with responsibility for Intellectual
Property matters) of Seller is
threatened which challenges the legality, validity, enforceability, use, or
ownership of the item; and
(D) none
of
Seller
and its
Subsidiaries has ever
agreed
to
indemnify any Person for or against any interference,
infringement,
misappropriation, or other conflict
with
respect to the
item.
(iv) Section
4(m)(iv)
of Seller
Disclosure
Schedule
identifies each item of Intellectual Property that any third party owns and
that
any of Seller
and its
Subsidiaries uses pursuant to license, sublicense, agreement, or
permission
(other
than pursuant to a “shrink-wrap” license with an aggregate cost of less than
$1,000). Seller
has
delivered to the Buyer correct and complete copies of all such licenses,
sublicenses, agreements, and permissions (as amended to date). With respect
to
each item of Intellectual Property required to be identified in Section
4(m)(iv)
of Seller
Disclosure
Schedule;:
(A) the
license, sublicense, agreement, or permission covering the item is legal, valid,
binding, enforceable, and in full force and effect;
24
(B) the
license,
sublicense, agreement, or permission will continue to be legal, valid, binding,
enforceable, and
in full
force and effect on identical terms
following the consummation
of the transactions contemplated hereby and by
the
Parties’ performance as required under
the
other Transaction Documents (including
the assignments and assumptions referred to in Section 2 above);
(C) no
party
to the license, sublicense, agreement, or permission is in breach or default,
and no event has occurred which with notice or lapse of time would constitute
a
breach or default or permit termination, modification, or acceleration
thereunder;
(D) no
party
to the license, sublicense, agreement, or permission has repudiated any
provision thereof;
(E) with
respect to each sublicense,
the
representations and warranties set forth in subsections (A) through (D) above
are true and correct with respect to the underlying license;
(F) the
underlying item of Intellectual Property is not subject to any outstanding
injunction, judgment, order, decree, ruling,
or
charge;
(G) no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
or
demand is
pending or,
to
the Knowledge of any of the Principal Stockholders and the directors and
officers (and employees with responsibility for Intellectual Property matters)
of Seller and its Subsidiaries, is threatened,
which
challenges the legality, validity, or enforceability of the underlying item
of
Intellectual Property; and
(H) none
of
Seller
and its
Subsidiaries has granted any sublicense or similar right with respect to the
license, sublicense, agreement, or permission.
(v) None
of
Seller
and its
Subsidiaries will
interfere with, infringe
upon, misappropriate, or otherwise come into conflict with any
Intellectual Property rights of third parties as a result of the continued
operation of its businesses as presently conducted and as presently proposed
to
be conducted.
(vi) None
of
the Principal Stockholders and the directors and officers (and employees with
responsibility for Intellectual Property matters) of Seller and its Subsidiaries
has any Knowledge of any new products, inventions, procedures, or methods of
manufacturing or processing that any competitors or other third parties have
developed which reasonably could be expected to supersede or make obsolete
any
product or process of any of Seller and its Subsidiaries.
25
(vii) Section
4(m)(vii)
of
Seller Disclosure Schedule lists all software or
other
material that is distributed as “free software,” “open source software” or under
a similar licensing or distribution model
(including but not limited to the GNU General Public License (GPL), GNU Lesser
General Public License (LGPL), Mozilla Public License (MPL), BSD
licenses, the
Artistic License, the Netscape Public License, the Sun Community Source License
(SCSL), the
Sun
Industry Standards License (SISL)
and the
Apache License)
(“Open
Source Materials”) material
to the business and operation of Seller
and its
Subsidiaries, and describes the manner in which such Open Source Materials
are
or were used
(such
description shall include, without limitation, whether (and, if so, how) the
Open Source Materials were modified or distributed by Seller
and its
Subsidiaries).
Neither
Seller
nor any
of its Subsidiaries has (A)
incorporated Open Source Materials into, or combined Open Source Materials
with,
the Intellectual Property of Seller
or any
of its Subsidiaries or any of their products, (B)
distributed Open
Source Materials in conjunction with any
of
the Intellectual Property or products of Seller
or
its Subsidiaries, or (C) used Open Source Materials that create, or purport
to
create, obligations for Seller and its Subsidiaries with respect to the
Intellectual Property of Seller and its Subsidiaries or any of its products
to
grant, or purport to grant, to any third party, any rights or immunities under
the Intellectual Property of Seller and its Subsidiaries (including, but not
limited to, using any Open Source Materials that require, as a condition of
use,
modification or distribution of such Open Source Materials that other software
incorporated into, derived from or
distributed with such Open
Source Materials be (X)
disclosed or distributed in source code form, (Y)
be
licensed
for the
purpose of making derivative
works, or (Z) be redistributable at no charge).
(viii) Section
4(m)(viii) of Seller Disclosure Schedule lists the employees of Seller and
its
Subsidiaries that have entered into invention assignment and confidentiality
agreements under which such employees have assigned to Seller all Intellectual
Property conceived or reduced to practice in connection with their employment
at
Seller and agreed not to use or disclose, other than for the benefit of Seller,
all confidential information of Seller.
(n) Tangible
Assets.
Seller
and its
Subsidiaries own or have a valid leasehold in, and
the
Acquired Assets include, all
buildings and related heating, ventilation and air conditioning systems,
machinery, equipment, and other tangible assets
used in
the conduct of their business or necessary for the conduct of their businesses
as presently conducted. Each such tangible asset is free from defects (patent
and latent), has been maintained in accordance with normal industry practice,
is
in good operating condition and repair (subject to normal wear and tear), and
is
suitable for the purposes for which it presently is used and presently is
proposed to be used.
(o) Contracts.
(i) Section
4(o)
of
Seller
Disclosure
Schedule
lists the following contracts and other agreements to which any of Seller
and its
Subsidiaries is a party:
(A) any
agreement (or group of related agreements) for the lease of personal property
to
or from any Person;
26
(B) any
agreement (or group of related agreements) for the purchase or sale of raw
materials, commodities, supplies, products, or other personal property, or
for
the furnishing or receipt of services, the
performance of which will extend over a period of more than one year,
result
in a loss to any of Seller and its Subsidiaries, or
involve consideration in excess of $10,000;
(C) any
agreement concerning a partnership or joint venture;
(D) any
agreement (or group of related agreements) under which it has created, incurred,
assumed, or guaranteed any indebtedness for borrowed money, or any capitalized
lease obligation, under which it has imposed an
Encumbrance
on any
of its assets, tangible or intangible;
(E) any
agreement concerning confidentiality or noncompetition;
(F) any
agreement involving any of the Principal Stockholders
and
their Affiliates (other than Seller and its Subsidiaries)
or any
officers or directors of Seller;
(G) any
Employee Benefit Plan, profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or arrangement
for
the benefit of its current or former directors, officers, and
employees;
(H) any
collective bargaining agreement;
(I) any
agreement for the employment of any individual on a full-time, part-time,
consulting, or other basis or providing severance benefits;
(J) any
agreement under which it has advanced or loaned any amount to any of its current
or former directors, officers, and employees;
(K) any
supply or vendor agreement under which Seller receives any services, goods,
or
other items (including Internet bandwidth) the performance of which involves
consideration in excess of $10,000;
(L) any
agreement under which the consequences of a default or termination could cause
Seller Material Adverse Effect;
(M) any
other
agreement (or group of related agreements) the performance of which involves
consideration in excess of $10,000
in the
aggregate over the term of the Agreement;
(N) any
other
contract, lease, license or other agreements or arrangements that is used in
the
operation by Seller
of its
business; and
(O) any
agreement imposing any material restriction on the right of Seller or any of
its
Subsidiaries to compete with any other Person.
27
(ii) The
documents listed on Section 4(o) of Seller Disclosure Schedule and identified
as
Acquired Contracts constitute all of the contracts, leases, accounts receivable,
licenses, instruments and other agreements or arrangements used by Seller and
its Subsidiaries in the operation of its business other than Excluded
Assets.
(iii) Seller
has
delivered to the Buyer a correct and complete copy of each written agreement
listed in Section 4(o)
of
Seller
Disclosure
Schedule
(as amended to date) and a written summary setting forth the terms and
conditions of each oral agreement referred to in Section 4(o)
of
Seller
Disclosure
Schedule. With respect to each such agreement: (A) the agreement is legal,
valid, binding, enforceable, and in full force and effect; (B) the agreement
will continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby (including
the assignments and assumptions referred to in Section 2 above); (C)
no party
is in
breach
or default, and no event has occurred which with notice or lapse of time would
constitute a breach or default, or permit termination, modification, or
acceleration, under the agreement; and (D) no
party
has repudiated any provision of the agreement.
(i) All
notes
and accounts receivable of Seller
and its
Subsidiaries are reflected properly on its Most Recent Balance Sheet and in
its
books and records, are valid receivables arising from bona fide transactions
in
the Ordinary Course of Business subject to no setoffs, claims or refusals to
pay, are current and collectible,
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 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 Seller
and its
Subsidiaries.
Section 4(p)(i)
of
Seller Disclosure Schedule contains a listing of all of the accounts
receivable,
including the amount thereof,
of each
of Seller
and its
Subsidiaries as of the date
hereof and as of the Closing
Date. Except as set forth in Section 4(p)(i)
of
Seller Disclosure Schedule, as of the date hereof and as of the Closing Date,
(a) no account or note debtor of Seller
and its
Subsidiaries is delinquent in payment by more than sixty
(60)
days
and
(b) the aging schedule of the accounts receivable and notes receivable of
Seller
and its
Subsidiaries included in Section 4(p)(i)
of
Seller
Disclosure
Schedule
attached hereto is complete and accurate.
(ii) Section
4(p)(ii)
of Seller
Disclosure
Schedule
contains a listing of all accounts payable and notes payable (which shall
include any service level agreement credits, services or goods that have been
paid for but not provided or delivered, and similar items) that Seller
and its
Subsidiaries owe (or have any Liability with respect to) as of the date
hereof and as of the Closing
Date.
Except as set forth in Section 4(p)(ii)
of Seller
Disclosure
Schedule, as of the date hereof and as of the Closing Date, 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.
28
(iii) Section
4(p)(iii)
of Seller
Disclosure
Schedule
contains a listing of all Cancellation and Service Credit Obligations and other
obligations of Seller
to
provide cash or future services to past or current customers on account of
such
customer having cancelled service or otherwise being entitled to a service
credit, as of the date hereof and as of the Closing Date.
(iv) Section
4(p)(iv)
of Seller
Disclosure
Schedule
contains a listing of all Prepaid Accounts and other accounts for which
customers have prepaid for
services to be provided by Seller
and its
Subsidiaries, including the name of the customer,
the
date the obligation to provide services was incurred, the date the obligation
to
provide services ends, the
services
to be provided
and the
amount prepaid by such customer,
as of
the date hereof and
as of
the
Closing
Date.
(q) Powers
of Attorney.
There
are no outstanding powers of attorney executed on behalf of any of Seller
and its
Subsidiaries.
(r) Insurance.
Section
4(r)
of
Seller
Disclosure
Schedule
sets forth the following information with respect to each insurance policy,
(including policies providing property, casualty, liability, and workers’
compensation coverage and bond and surety arrangements) to which any of
Seller
and its
Subsidiaries has been a party, a named insured, or otherwise the beneficiary
of
coverage at any time within the past two
years:
(i) the
name,
address, and telephone number of the agent;
(ii) the
name
of the insurer, the name of the policyholder, and the name of each covered
insured;
(iii) the
policy number and the period of coverage;
(iv) the
scope
(including an indication of whether the coverage was on a claims made,
occurrence, or other basis) and amount (including a description of how
deductibles and ceilings are calculated and operate) of coverage;
and
(v) a
description of any retroactive premium adjustments or other loss-sharing
arrangements.
With
respect to each such insurance policy: (A) the policy is legal, valid, binding,
enforceable, and in full force and effect; (B) the policy will continue to
be
legal, valid, binding, enforceable, and in full force and effect on identical
terms immediately
following the consummation of the transactions contemplated hereby and by the
other Transaction Documents
(including the assignments and assumptions referred to in Section 2
above);
(C)
neither any of Seller
and its
Subsidiaries nor any other party to the policy is in breach or default
(including with respect to the payment of premiums or the giving of notices),
and no event has occurred which, with notice or the lapse of time, would
constitute such a breach or default, or permit termination, modification, or
acceleration, under the policy; and (D) no
party
to the policy has repudiated any provision thereof. Each of Seller
and its
Subsidiaries has been covered since inception by insurance in scope and amount
customary and reasonable for the businesses in which it has engaged during
the
aforementioned period and has never been denied coverage. Section 4(s)
of
Seller
Disclosure
Schedule
describes any self-insurance arrangements affecting any of Seller
and its
Subsidiaries.
29
(s) Litigation.
Section
4(s)
of
Seller
Disclosure
Schedule
sets forth each instance in which any of Seller
and its
Subsidiaries (i) is subject to any outstanding injunction, judgment, order,
decree, ruling, or charge or (ii) is a party or, to the Knowledge of any of
the
Principal Stockholders and the directors and officers (and employees with
responsibility for litigation matters) of Seller and its Subsidiaries, is
threatened to be made a party to any action, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator. Except for the Quest Claim, none of the actions, suits, proceedings,
hearings, and investigations set forth in Section 4(s)
of
Seller
Disclosure
Schedule
could reasonably be expected to result in a Seller Material Adverse
Effect.
None of
the Principal Stockholders and the directors and officers (and employees with
responsibility for litigation matters) of Seller and its Subsidiaries has any
reason to believe that any such action, suit, proceeding, hearing, or
investigation may be brought or threatened against any of Seller and its
Subsidiaries.
(t) Product
and Services Warranty.
Each
product
or service
manufactured,
sold, leased, provided,
or
delivered by any of Seller
and its
Subsidiaries has been in conformity with all applicable contractual commitments
and all express and implied warranties,
and
none of Seller
and its
Subsidiaries has any Liability (and
there is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability) for replacement or repair thereof or for
service level credits, claims for reimbursement,
consequential or other damages or
remuneration in
connection therewith, subject only to the reserve for product
warranty
claims set forth on the face of the Most Recent 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 Seller
and its
Subsidiaries. No product or
service
manufactured,
sold, leased, provided
or
delivered by any of Seller
and its
Subsidiaries is subject to any guaranty, warranty, or other indemnity beyond
the
applicable terms
and
conditions set forth in governing agreements. Section 4(t)
of
Seller Disclosure Schedule includes copies of the standard terms and conditions
of sale, lease, or service for each of Seller
and its
Subsidiaries (containing applicable guaranty, warranty, and indemnity
provisions),
including copies of the Service Level Agreements for each of the Prepaid
Accounts. Section 4(t) of Seller Disclosure Schedule also contains a detailed
schedule of all outstanding credits for future services resulting from product
or service warranty claims.
(u) Employees.
(i) To
the
Knowledge of any of the Principal Stockholders and the directors and officers
(and employees with responsibility for employment matters) of Seller and its
Subsidiaries,
no
executive, key employee, or group of employees has any plans to terminate
employment with any of Seller
and its
Subsidiaries
and,
except as listed in Section 4(u) of Seller Disclosure Schedule, the employment
relationship with each and every employee of Seller
and its
Subsidiaries is terminable at will by Seller or its Subsidiaries
without
continuing obligation or liability to Seller. Section
4(u) of Seller
Disclosure
Schedule
lists each
employee of Seller or its Subsidiaries whose employment has been terminated
within the last six months. None of Seller
and its
Subsidiaries is a party to or bound by any collective bargaining agreement,
nor
has any of them experienced any strikes, grievances, claims of unfair labor
practices, or other collective bargaining disputes. None of Seller
and its
Subsidiaries has committed any unfair labor practice. None
of
the Principal Stockholders and the directors and officers (and employees with
responsibility for employment matters) of Seller and its Subsidiaries has any
Knowledge of any
organizational effort is
presently
being made or threatened by or on behalf of any labor union with respect to
employees of any of Seller
and its
Subsidiaries
30
(ii) 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.
(iii) Section
4(u)(iii)
of
Seller
Disclosure
Schedule
attached hereto sets forth the name of each employee of Seller,
and
separately sets forth each such individual (A) his or her total compensation
(annualized with base compensation and bonuses separated) for 2005 and, as
of
the date hereof and the Closing Date, (B) his or her current compensation rate
(per hour or annualized, as applicable), accrued paid time off (in dollar
value), holiday time, and sick pay, and (C) the terms of any plan or agreement
under which he or she may be eligible to receive a bonus or other additional
compensation.
(v) Employee
Benefits.
(i) Section
4(v)
of
Seller
Disclosure
Schedule
lists each Employee Benefit Plan that any of Seller
and its
Subsidiaries maintains or to which any of Seller
and its
Subsidiaries contributes or has any obligation to contribute.
(A) Each
Employee Benefit Plan (and each related trust, insurance contract, or fund)
complies in form and in operation in all respects with the applicable
requirements of ERISA, the Code, and other applicable laws.
(B) All
required reports and descriptions
(including
Form 5500 Annual Reports, summary annual reports and summary plan descriptions)
have
been
timely filed and distributed appropriately with respect
to
each Employee Benefit Plan. The requirements of COBRA have been met with respect
to each such Employee Benefit Plan which is an Employee Welfare Benefit Plan
subject to COBRA.
(C) All
contributions (including all employer contributions and employee salary
reduction contributions) which are due have been paid to each Employee Benefit
Plan which is an Employee Pension Benefit Plan, and all contributions for any
period ending on or before the Closing Date which are not yet due have been
paid
to each Employee Pension Benefit Plan or accrued in accordance with the past
custom and practice of Seller
and its
Subsidiaries. All premiums or other payments for all periods ending on or before
the Closing Date have been paid with respect to each Employee Benefit Plan
which
is an Employee Welfare Benefit Plan.
(D) Each
Employee Benefit Plan which is an Employee Pension Benefit Plan, and all related
trusts, meet and have continuously since their adoption met all requirements
of
a “qualified plan” under Code Sections 401(a) and 501(a), in both form and
operation, and Seller is not aware of any facts or circumstances that could
result in the revocation of such tax-qualified status.
(E)
Seller
has
delivered to the Buyer correct and complete copies of the plan documents and
summary plan
descriptions,
the
most recent determination letter, if any, received from the Internal Revenue
Service, the most recent Form 5500 Annual Report,
and all
related trust agreements,
insurance contracts, and other funding agreements which implement each Employee
Benefit Plan.
31
(F) Neither
Seller, any of its Subsidiaries, nor any ERISA Affiliate of Seller maintains,
has maintained, contributes to, has previously contributed to, or has any
obligation or liability under any Employee Pension Benefit Plan that is (A)
subject to Title IV of ERISA, Section 412 of the Code or Section 302 of ERISA,
or (B) any
Multiemployer Plan.
(ii) There
have been no Prohibited Transactions with respect to any such Employee Benefit
Plan. No Fiduciary has any Liability for breach of fiduciary duty or any other
failure to act or comply in connection with the administration or investment
of
the assets of any such Employee Benefit Plan. No action, suit, proceeding,
hearing, or investigation with respect to the administration or the investment
of the assets of any such Employee Benefit Plan (other than routine claims
for
benefits) is pending or, to the Knowledge of any of the Principal Stockholders
and the directors and officers (and employees with responsibility for employee
benefits matters) of Seller and its Subsidiaries, threatened. None of the
Principal Stockholders and the directors and officers (and employees with
responsibility for employee benefits matters) of Seller and its Subsidiaries
has
any Knowledge of any Basis for any such action, suit, proceeding, hearing,
or
investigation.
(iii) None
of
Seller
and its
Subsidiaries maintains or ever has maintained or contributes, ever has
contributed, or ever has been required to contribute to any Employee Welfare
Benefit Plan providing medical, health, or life insurance or other welfare-type
benefits for current or future retired or terminated employees, their spouses,
or their dependents (other than in accordance with COBRA).
(iv) Consummation
of the transactions contemplated hereunder will not result in Buyer or Holdings
having any obligation for severance payments, change in control payments or
other similar benefits to the former employees of Seller.
(w) Guaranties.
None of
Seller
and its
Subsidiaries is a guarantor or otherwise is liable for any Liability or
obligation (including indebtedness) of any other Person.
(i) Each
of
Seller,
its
Subsidiaries, and their respective predecessors and Affiliates has complied
and
is in compliance
with all Environmental, Health, and Safety Requirements.
(ii) Without
limiting the generality of the foregoing, each of Seller,
its
Subsidiaries and their respective Affiliates has obtained and complied with,
and
is in compliance with, all permits, licenses and other authorizations that
are
required pursuant to Environmental, Health, and Safety Requirements for the
occupation of its facilities and the operation of its business; a list of all
such permits, licenses and other authorizations is set forth in Section
4(x)(ii)
of Seller
Disclosure
Schedule.
32
(iii) Neither
Seller,
its
Subsidiaries, nor their respective predecessors or Affiliates has received
any
written or oral notice, report or other information regarding any actual or
alleged violation of Environmental, Health, and Safety Requirements, or any
liabilities or potential liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), including any investigatory, remedial or corrective
obligations, relating to any of them or its facilities arising under
Environmental, Health, and Safety Requirements.
(iv) None
of
the following exists at any property or facility owned or operated by
Seller
or its
Subsidiaries: (1) underground storage tanks, (2) asbestos-containing material
in
any form or condition, (3) materials or equipment containing polychlorinated
biphenyls, or (4) landfills, surface impoundments, or disposal
areas.
(v) None
of
Seller,
its
Subsidiaries, or their respective predecessors or Affiliates has treated,
stored, disposed of, arranged for or permitted the disposal of, transported,
handled, or released any substance, including without limitation any hazardous
substance, or owned or operated any property or facility (and no such property
or facility is contaminated by any such substance) in a manner that has given
or
would give rise to liabilities, including any liability for response costs,
corrective action costs, personal injury, property damage, natural resources
damages or attorney fees, pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended,
the
Solid Waste Disposal Act, as amended or
any
other Environmental, Health, and Safety Requirements.
(vi) Neither
this Agreement nor the consummation of the transactions
that are the
subject of this Agreement will result in any obligations for site investigation
or cleanup, or notification to or consent of government agencies or third
parties, pursuant to any of the so-called “transaction-triggered” or
“responsible property transfer” Environmental, Health, and Safety
Requirements.
(vii) Neither
Seller,
its
Subsidiaries, nor any of their respective predecessors or Affiliates has, either
expressly or by operation of law, assumed or undertaken any liability, including
without limitation any obligation for corrective or remedial action, of any
other Person relating to Environmental, Health, and Safety Requirements.
(viii) No
facts,
events or conditions relating to the past or present facilities, properties
or
operations of Seller,
its
Subsidiaries, or any of their respective predecessors or Affiliates will
prevent, hinder or limit continued compliance with Environmental, Health, and
Safety Requirements, give rise to any investigatory, remedial or corrective
obligations pursuant to Environmental, Health, and Safety Requirements, or
give
rise to any other liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise) pursuant to Environmental, Health, and Safety
Requirements, including without limitation any relating to onsite or offsite
releases or threatened releases of hazardous materials, substances or wastes,
personal injury, property damage or natural resources damage.
33
(y)
Certain
Business Relationships With Seller
and
Its Subsidiaries.
No
former
or current officer, director,
employee,
stockholder,
or
other Affiliate of Seller
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 Seller
or any
of its Subsidiaries or owns (or has a direct interest in) any asset, tangible
or
intangible, which is used in the business of any of Seller
and its
Subsidiaries.
(z)
Disclosure.
The
representations and warranties contained in this Section 4,
including Seller Disclosure Schedule, do
not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements and information contained in
this
Section 4
not
misleading.
(aa)
Customers
and Suppliers.
(i) During
the twelve (12) month period ending on the date hereof, there has not been
any
material interruption or outage (other than as requested by a
customer
of
Seller)
in the
provision by Seller
or its
Subsidiaries of services
to
customers.
(ii) No
customer of Seller or its Subsidiaries
which
generated average monthly revenues in the three (3)
month
period ended March 31, 2006
that
accounted for in excess of $5,000 of
the
monthly revenues of the business
of Seller
and its
Subsidiaries,
has
terminated or threatened in writing to terminate its relationship, or any
agreement, with Seller
or its
Subsidiaries or
given
notice of its intention not to renew its relationship or agreement with
Seller
or its
Subsidiaries.
(iii) Section
4(aa)(iii)
of
Seller
Disclosure
Schedule
sets forth (A) a complete and accurate list of the name of each customer of
Seller and its Subsidiaries,
together with the amount of revenue generated by such customer during the one
year period ended March 31, 2006,
and (B)
a list of the contact information of each such customer,
and (C)
a description of any agreement or arrangement with any customer that deviates
from the standard customer agreement provided by Seller to Holdings.
(iv) Section
4(aa)(iv)
of
Seller
Disclosure
Schedule
contains a listing of all suppliers and vendors of Seller
and its
Subsidiaries,
together
with complete contact information and the amount of expense incurred to such
vendor or supplier during the three month period ended March 31,
2006.
(v) Section
4(aa)(v)
of
Seller
Disclosure
Schedule
contains a listing of all
joint
marketers,
resellers and referral sources
of the
Business
of Seller,
together with complete contact information for each such
reseller
or
joint
marketer.
(vi) Monthly
revenue of Seller’s Business for any month in the three-month period ended March
31, 2006 has not decreased by more than $6,000 from the previous month’s revenue
on account of customers canceling their relationships or agreements with
Seller.
34
(bb) No
Other Agreement to Sell Assets.
Except
as
set forth in Section 4(bb) of the Seller Disclosure Schedule, neither
Seller nor any officer, director of stockholder of Seller or
any of
its Subsidiaries has, since March 16, 2006,
(i)
solicited, initiated, or encouraged the submission of, or agreed to any proposal
or offer from any Person relating to the acquisition of any capital
stock
or other
voting securities, or any substantial portion of the assets, of any of
Seller
and its
Subsidiaries (including any acquisition structured as a merger, consolidation,
or share exchange) or (ii) participated in any discussions or negotiations
regarding, furnished any information with respect to, assisted or participated
in, or facilitated in any other manner any effort or attempt by any Person
to do
or seek any of the foregoing.
(cc) Personal
Guarantees and Indebtedness.
Section
4(cc) of Seller Disclosure Schedule sets forth: (i) any and all personal
guarantees and collateral pledged by the stockholders, directors or officers
of
Seller related to any indebtedness other of Liability of Seller, and (ii) the
amount of such indebtedness or other Liability as of a date within one week
prior to the Closing Date along with a per diem accrual for each day thereafter,
and (iii) the identity of the Person to which such indebtedness or other
Liability is owed.
5. Representations
and Warranties of the Buying Parties.
The
Buying Parties represent and warrant to Seller that the statements contained
in
this Section 5 are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made then
and
as though the Closing Date were substituted for the date of this Agreement
throughout this Section 5), except as set forth in the disclosure schedule
delivered by the Buying Parties in connection with the Agreement (the
“VitalStream Disclosure Schedule”). The VitalStream Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
and
subparagraphs contained in this Section 5. 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).
(a) Organization
of the Buyer.
Each of
Holdings and the Buyer is a corporation duly organized, validly existing, and
in
good standing under the laws of the jurisdiction of its
incorporation.
(b) Authorization
of Transaction.
Each of
Holdings and the Buyer has full power and authority (including full corporate
power
and authority) to execute and deliver this Agreement and the other Transaction
Documents to which it is a party and to perform its obligations
hereunder and thereunder. This Agreement and the other Transaction Documents
to
either
of
Holdings and the Buyer is a party, assuming the due authorization, execution
and
delivery hereof and thereof by the other parties hereto and thereto,
constitute the valid and legally binding obligation of each of the respective
Buying
Party,
enforceable in accordance with their terms and conditions,
except
as enforceability may be limited by applicable bankruptcy, insolvency or similar
laws affecting or relating to the enforcement of creditors’ rights generally or
by equitable principles relating to enforceability.
35
(c) Noncontravention.
Neither
the execution and the delivery of this Agreement or the other Transaction
Documents to which Holdings or the Buyer is a party, nor the consummation of
the
transactions contemplated hereby and thereby (including
the assignments and assumptions referred to in Section 2 above),
will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling,
charge,
or other restriction of any government, governmental agency, or court to which
the Buyer or Holdings is
subject or any provision of their
respective charters or
bylaws
or (ii) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which the Buyer or Holdings
is
a
party or by which it is bound or to which any of their assets is
subject,
or
result
in the imposition of any Encumbrance upon any of their respective assets (other
than Permitted Encumbrances).
Neither
the Buyer nor Holdings needs to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions contemplated
by
this Agreement (including
the assignments and assumptions referred to in Section 2 above)
or any
other Transaction Documents to which Buyer or Holdings is a party (other than
notice filings under applicable securities laws).
(d) Brokers’
Fees.
Neither
Holdings nor the Buyer has created any Liability or obligation to pay any fees
or commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which Seller
could
become liable or obligated.
(e) Capitalization.
There
are authorized 290,000,000 shares of Holdings Common Stock, of which 21,057,985
are issued and outstanding on May 15, 2006, and 10,000,000 shares of preferred
stock, $.01 par value, of which none are issued and outstanding. Holdings has
delivered to the Buyer correct and complete copies of its charter and bylaws
(as
amended to date). All of the issued and outstanding shares of common stock
of
Holdings have been duly authorized and are validly issued, fully paid, and
nonassessable and free of pre-emptive rights, and any shares issued after April
23, 2002 were issued in full compliance with applicable state and federal
securities laws and any rights of third parties. Other than as set forth in
Section 5(e) of the VitalStream Disclosure Schedule, there are no outstanding
or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments to which Holdings
or
any of its Subsidiaries is a party or by which it is bound that could require
Holdings or any of its Subsidiaries to issue, sell, transfer, or otherwise
dispose of any Holdings capital stock. There are no outstanding stock
appreciation, phantom stock, profit participation, or similar rights with
respect to Holdings. Other than as set forth in Section 5(e) of the VitalStream
Disclosure Schedule, there are no voting trusts, proxies, or other agreements
or
understandings with respect to the voting of any outstanding shares of capital
stock of Holdings to which Holdings or any of its Subsidiaries is a party or
by
which Holdings or any of its Subsidiaries is bound. No Person is entitled to
pre-emptive or similar statutory or contractual rights with respect to any
securities of Holdings. Other than as set forth in Section 5(e) of the
VitalStream Disclosure Schedule, no Person has the right to require Holdings
to
register any securities of Holdings under the Securities Act, whether on a
demand basis or in connection with the registration of securities of Holdings
for its own account or for the account of any other Person. The issuance of
the
Purchase Shares hereunder will not obligate Holdings to issue any of its
securities to any other Person and will not result in the adjustment of the
exercise, conversion, exchange or reset price of any outstanding security.
Holdings does not have outstanding stockholder purchase rights or a "poison
pill" or any similar arrangement in effect giving any Person the right to
purchase any equity interest in Holdings upon the occurrence of an acquisition,
or announced or attempted acquisition, by a Person of a specified percentage
of
the outstanding capital stock of Holdings.
36
(f) SEC
Filings.
Holdings has made available through the XXXXX system true and complete copies
of
the SEC Filings. The SEC Filings are the only filings required of Holdings
pursuant to Sections 13 and 15 of the Securities Exchange Act since January
1,
2006. Holdings and its Subsidiaries are engaged in all material respects only
in
the business described in the SEC Filings and, to the extent required by rules
governing the content of the SEC Filings, the SEC Filings contain a complete
and
accurate description in all material respects of the business of the Company
and
its Subsidiaries, taken as a whole.
(g) Valid
Issuance.
Upon
issuance pursuant to this Agreement, the Purchase Shares will be validly issued,
fully paid and nonassessable, and shall be free and clear of all Encumbrances
arising by, through or under Holdings or any of its Subsidiaries, except for
restrictions on transfer imposed by applicable securities laws and the
Transaction Documents.
(h) Litigation.
There
are no pending
actions,
suits or proceedings against Holdings, its Subsidiaries or any of its or their
properties that could reasonably be expected to have a Holdings Material Adverse
Effect; and to Holdings’ knowledge, no such actions, suits or proceedings are
threatened or contemplated.
(i)
Compliance
With Laws.
The
Buying Parties and their Subsidiaries have complied with all applicable laws
(including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings and charges thereunder) of federal, state, local and foreign
governments (and all agencies thereof), and no action, suit, preceding, hearing,
investigation, charge, complaint, claim, demand or notice has been filed or
commenced against any of them alleging any failure to so comply, and no
Authorized Buyer Party has any Knowledge of any Basis for the assertion or
commencement of any such action, suit, preceding, hearing, investigation,
charge, complaint, claim, demand or notice against any of them alleging any
failure so to comply.
(j)
Voting
Rights.
The
Purchase Shares are voting shares, and each Purchase Share will have the same
voting rights as the other issued and outstanding shares of Holdings Common
Stock.
6. 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 use its best efforts to take all action and to do all things
necessary, proper, or advisable in order to consummate and make effective the
transactions contemplated by this Agreement and the other Transaction Documents
(including satisfaction, but not waiver, of the closing conditions set forth
in
Section 7
below).
37
(b)
Notices
and Consents.
Seller
will
give (and will cause each of its Subsidiaries to give) any notices to third
parties, and Seller
will use
its best
efforts (and will cause each of its Subsidiaries to use its best
efforts) to obtain any third party consents, that the Buying Parties reasonably
may request in connection with the matters referred to in Section
4(c) above.
Holdings will give (and will cause each of its Subsidiaries to give) any notices
to third parties, and Holdings will use its reasonable best efforts (and will
cause each of its Subsidiaries to use its reasonable best efforts) to obtain
any
third party consents, that Seller reasonably may request in connection with
the
matters referred to in Section 5(c)
above.
Each of the Parties will (and each
will
cause each of its Subsidiaries to) give any notices to, make any filings with,
and use its reasonable best efforts to obtain any authorizations, consents,
and
approvals of governments and governmental agencies in connection with the
matters referred to in Section 4(c)
and
Section 5(c)
above.
(c)
Operation
of Business.
Seller
will not
(and will not cause or permit any of its Subsidiaries to) engage in any
practice, take any action, or enter into any transaction outside the Ordinary
Course of Business. Without limiting the generality of the foregoing,
Seller
will not
(and will not cause or permit any of its Subsidiaries to) (i) incur
any
additional obligation to provide services in the future based upon a customer’s
prepayment for such services, or (ii) otherwise
engage in any practice, take any action, or enter into any transaction of the
sort described in Section 4(h)
above.
(d)
Preservation
of Business;
Transfer of Employment Relationships.
Seller
will
use its
best efforts to
keep
(and will cause each of its Subsidiaries to
keep)
its business and properties substantially intact, including its present
operations, physical facilities, working conditions, and relationships with
lessors, licensors, suppliers, customers, and employees;
provided, however, Seller shall terminate, as of the moment immediately prior
to
Closing, its employment relationship with all individuals currently engaged
primarily in the conduct of the Business (except for such individuals that
Buyer
has indicated in writing that it does not wish to employ following Closing).
Seller shall retain all Liabilities arising from or associated with its
termination of the employment of any of its employees or that arose as a result
of acts or omissions prior to the termination of the employment of such
employees. The Buyer shall use good faith efforts to extend to such employees
offers of employment as the Buyer deems appropriate at a rate of compensation
comparable to that being paid by Buyer for similar positions within Buyer.
Such
offers shall be on an at-will basis, subject to Buyer’s general terms of
employment and subject to Buyer’s being able to negotiate reasonably
satisfactory terms. Buyer shall identify to Seller in writing any individuals
employed by Seller in connection with the Business that Buyer does not wish
to
employ following the Closing.
(e)
Full
Access.
Seller
will
permit (and will cause each of its Subsidiaries to permit) representatives
of
the Buyer to have full access at all reasonable times, and in a manner so as
not
to interfere with the normal business operations of Seller
and its
Subsidiaries, to all premises, properties, personnel, books, records (including
Tax records), contracts, and documents of or pertaining to each of Seller
and its
Subsidiaries.
38
(f)
Notice
of Developments.
Each
Party will give prompt written notice to the other Party of any adverse
development causing a breach or likely to cause a breach through the passage
of
time of any of its own representations and warranties in Sections 3, 4 and
5
above.
No disclosure by any Party pursuant to this Section 6(f),
however, shall be deemed to amend or supplement Seller
Disclosure
Schedule
or the
VitalStream
Disclosure Schedule, as applicable, or
to
prevent or cure any misrepresentation, breach of warranty, or breach of
covenant.
(g)
Exclusivity.
Seller
will not (and Seller will
not
cause or permit any of its Subsidiaries to)
(i)
solicit, initiate, or encourage the submission of any proposal or offer from
any
Person relating to the acquisition of any capital stock
or other
voting securities, or any substantial portion of the assets, of any
of
Seller
and its
Subsidiaries (including any acquisition structured as a merger, consolidation,
or share exchange) or (ii) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate in,
or
facilitate in any other manner any effort or attempt by any Person to do or
seek
any of the foregoing.
The
remedy for a knowing breach of any of the obligations or covenants under this
Section 6(g) prior to July 16, 2006 shall be $1,000,000 in cash, due and payable
to Buyer upon Buyer’s written notice that Seller or any of its officers or
directors, or their respective representatives, has breached any of the
obligations of covenants of this Section 6(g). Seller
will
notify the Buyer immediately if any Person makes any proposal, offer, inquiry,
or contact with respect to any of the foregoing. The
parties agree that damages for a breach of this Section 6(d) would be difficult
to calculate and accordingly the payment set forth herein is intended to be
a
reasonable sum as liquidated damages, and not a penalty.
(i) From
time
to time prior to the Closing, Seller
and the
Principal Stockholders will promptly supplement or amend the Seller Disclosure
Schedule with respect to any matter hereafter arising that, if existing or
occurring at the date of this Agreement, would have been required to be set
forth or described in any
Seller
Disclosure
Schedule
and will promptly notify Buyer of any breach by Seller
that
Seller
discovers of any representation, warranty or covenant contained in this
Agreement. No supplement or amendment of any Schedule or notice of breach made
pursuant to this Section will be deemed to cure any breach of any
representation, warranty or covenant made in this Agreement or to impair any
right of any the Buying Parties with
respect thereto unless Holdings specifically agrees thereto in writing.
(ii) From
time
to time prior to the Closing, the Buying Parties will promptly supplement or
amend the VitalStream Disclosure Schedules with respect to any matter hereafter
arising that, if existing or occurring at the date of this Agreement, would
have
been required to be set forth or described in any VitalStream Disclosure
Schedule and will promptly notify Seller of any breach by either
of
them that the
Buying Parties discover of any representation, warranty or covenant contained
in
this Agreement. No supplement or amendment of any Schedule or notice of breach
made pursuant to this Section will be deemed to cure any breach of any
representation, warranty or covenant made in this Agreement or to impair any
right of Seller with respect thereto unless the Seller’s Representative
specifically agrees thereto in writing.
39
(a) Conditions
to Obligation of the Buying
Parties.
The
obligation of the Buying Parties to consummate the transactions to be performed
by them
in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) the
representations and warranties set forth in Section 3
and
Section 4
above
shall be true and correct in all material respects at and as of the Closing
Date;
(ii) Seller
shall
have performed and complied with
all
of its covenants hereunder that are to be performed prior to Closing;
(iii) no
action, suit, or proceeding shall be pending or threatened before any court
or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (A) prevent consummation of
any
of the transactions
contemplated by this Agreement, (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation, (C)
affect
adversely the right of the Buyer to own the Acquired Assets,
or
operate the business formerly operated by Seller, or (D) affect
adversely the right of any of Seller’s
Subsidiaries to own its assets and to operate its businesses (and no such
injunction, judgment, order, decree, ruling, or charge shall be in effect);
(iv) Seller,
its
Subsidiaries, and the Buying Parties shall have received all other
authorizations, consents, and approvals referred to in Section 4(c)
and
Section 5(c)
above;
(v) Rose,
Xxxxxx and Xxxxxx shall have completed, and delivered to Seller and Holdings
an
unqualified audit report with respect to, an audit of Seller’s full financial
statements for period ending on the Most Recent Fiscal Year End (including,
but
not limited to, the balance Sheet, income statement and statement of cash
flows);
(vi) Seller
shall
have delivered to the Buying Parties
a
certificate executed by its principal executive officer
to the
effect that each of the conditions specified above in Section 7(a)(i)-(iv)
is
satisfied in all respects;
(vii) Seller
and the other parties thereto, other than the Buying Parties, shall have
executed and delivered, or be prepared to deliver at Closing,
(A) the
Escrow Agreement ,
(B) the
Financial Statement Certificate in the form attached hereto as Exhibit
D,
(C) Employment
Agreements in substantially the form attached hereto as Exhibit
E
with
individuals identified by Holdings prior to the Closing, including without
limitation Xxxxxxx X. Xxxxxx and Xxxxx Xxxxx
(the
“Employment Agreements”),
40
(D) the
Xxxx
of Sale in substantially the form attached hereto as Exhibit
F,
(E) the
Assignment and Assumption of Acquired Contracts attached hereto as Exhibit
G,
and
(F) the
Assignment of Intellectual Property attached hereto as Exhibit
H,
(G) the
Assignment of Patents attached hereto as Exhibit
I,
and
(H) a
tax
representation certificate containing representations reasonably requested
by
Holdings in order to be able to make the tax-related disclosures in the
Disclosure Document.
(viii) the
Buying Parties shall have received from counsel to Seller
an
opinion in form and substance as set forth in Exhibit
J
attached
hereto, addressed to the Buying Parties, and dated as of the Closing
Date;
(ix) Seller
shall have terminated its employment relationship with all individuals currently
engaged primarily in the conduct of the Business (except for such individuals
that Buyer has indicated in writing that it does not wish to employ following
closing);
(x) Seller
shall
have delivered to the Buying Parties a
Seller
Disclosure
Schedule
dated as of the Closing Date and such
Seller
Disclosure
Schedule
shall not contain any disclosures not included in Seller
Disclosure
Schedule
delivered on the date of this Agreement that
the
Buying Parties deem, in their discretion, to represent a Seller Material Adverse
Effect;
(xi) Seller
shall have delivered to the Buying Parties (A) a certificate of the applicable
Secretary(ies) of State dated as of a date no more than ten
(10)
days prior to the Closing Date, certifying the good standing of the Company,
(B)
a certificate from the secretary of Seller containing and certifying (i) a
true
and complete copy
of the
charter and bylaws of Seller, (ii) a true and complete copy of resolutions
of
the board of directors and stockholders of Seller authorizing the execution,
delivery and performance of the Transaction Documents by Seller and the
consummation of the transactions contemplated hereby and (iii) incumbency
matters;
(xii) all
actions to be taken by Seller
in
connection with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to effect
the
transactions contemplated hereby will be reasonably satisfactory in form and
substance to the Buying Parties;
and
(xiii) no
material adverse change in the business of Seller or its Subsidiaries shall
have
occurred.
41
(xiv) Buyer
shall have determined to its satisfaction
that the portion of the Acquired Assets consisting of Seller’s proprietary ad
insertion system has features, functionality and adaptability suitable for
the
business purposes contemplated by Buyer for such assets.
(xv) Holdings
shall have received from each stockholder of Seller an investor questionnaire
in
form and substance reasonably satisfactory to Holdings.
(xvi) Holdings
shall have determined to its satisfaction
that the issuance of shares of Common Stock to Seller will not require the
registration of such shares under violate applicable federal or state securities
laws or that an appropriate exemption from registration is otherwise available
under such laws and regulations.
(xvii) Either
(A) the total number of shares of Holdings Common Stock issuable under this
Agreement (including the Purchase Shares and the shares issuable pursuant to
this Section 2(c)(ii) could not exceed 19.99% of the issued and outstanding
shares of Holdings Common Stock on the date hereof or the proposed Closing
Date,
or (B) the transaction contemplated by this Agreement shall have been approved
by the stockholders of Holdings.
The
Buying Parties may waive any condition specified in this Section 7(a)
(other than the condition set forth in Section 7(a)(xvii), which may not be
waived) if an Authorized Buyer Party executes a writing so stating at or prior
to the Closing.
(b) Conditions
to Obligation of Seller.
The
obligation of Seller
to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the
representations and warranties set forth in Section 5
above
shall be true and correct in all material respects at and as of the Closing
Date;
(ii) the
Buying Parties
shall
have performed and complied in all material respects with
all
of their covenants
hereunder that are to be performed prior to Closing;
(iii) no
action, suit, or proceeding shall be pending or threatened before any court
or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (A) prevent consummation of
any
of the transactions
contemplated by this Agreement or (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation (and
no
such injunction, judgment, order, decree, ruling, or charge shall be in
effect);
(iv) the
Buying Parties shall have received all other authorizations, consents, and
approvals of governments and governmental agencies referred to in Section 5(c)
above;
42
(v) the
Buying Parties shall have delivered to Seller a VitalStream Disclosure Schedule
dated as of the Closing Date and such VitalStream Disclosure Schedule shall
not
contain any disclosures not included in the VitalStream Disclosure Schedule
delivered on the date of this Agreement except such disclosures related to
Events occurring after the Effective Date as, individually or in the aggregate,
would not be reasonably likely to represent a Holdings Material Adverse
Effect;
(vi) the
applicable Buying Parties shall have executed and delivered, or be prepared
to
deliver at Closing,
(A) the
Escrow
Agreement,
(B) the
Employment Agreements
(C) the
Assignment and Assumption of Acquired Contracts attached hereto as Exhibit
G.
(vii) Seller
shall
have determined to its satisfaction
that the closing of the transactions contemplated by this Agreement and
distribution by Seller to its shareholders of the Purchase Shares shall not
result in a taxable event to either Seller or its shareholders under the
applicable provisions of the Code.
Seller
may
waive any condition specified in this Section 7(b)
if it
executes a writing so stating at or prior to the Closing.
(a) Termination
of Agreement.
Certain
of the Parties may terminate this Agreement as provided below:
(i) Holdings
and Seller
may
terminate this Agreement by mutual written consent at any time prior to the
Closing;
(ii) Holdings
may terminate this Agreement by giving written notice to Seller at
any
time prior to the Closing (A) in the event Seller
has
breached any material representation, warranty, or covenant contained in this
Agreement in any material respect, Holdings has notified Seller
of the
breach, and the breach has continued without cure for a period of 20 days after
the notice of breach or (B) if the Closing shall not have occurred on or before
June 30, 2006,
by
reason
of the failure of any condition precedent under Section 7(a)
hereof (unless the failure results primarily from the Buyer or Holdings
breaching any representation, warranty, or covenant contained in this
Agreement); and
(iii) Seller
may
terminate this Agreement by giving written notice at any time prior to the
Closing (A) in the event the Buyer or Holdings has breached any material
representation, warranty, or covenant contained in this Agreement in any
material respect, Seller
has
notified Holdings of the breach, and the breach has continued without cure
for a
period of 20 days after the notice of breach or (B) if the Closing shall not
have occurred on or before June 30, 2006, by
reason
of the failure of any condition precedent under Section 7(b)
hereof (unless the failure results primarily from Seller breaching
any representation, warranty, or covenant contained in this
Agreement).
43
(b)
Effect
of Termination.
If any
Party terminates this Agreement pursuant to Section 8(a)
above, all rights and obligations of the Parties hereunder shall terminate
without any Liability of any Party to any other Party (except for any Liability
of any Party then in breach). Notwithstanding
the foregoing, the Parties’ obligations under this Agreement regarding
confidentiality shall survive for a period of three (3) years from the date
of
termination of the Agreement.
9. Post-Closing
Covenants.
The
Parties agree as follows with respect to the period following the
Closing.
(a) General.
In case
at any time after the Closing any further action is necessary or desirable
to
carry out the purposes of the Agreement, each of the Parties will take such
further action (including the execution and delivery of such further instruments
and documents) as any other Party reasonably may request, all at the sole cost
and expense of the requesting Party (unless the requesting Party is entitled
to
indemnification therefore under Section 10 below). Seller acknowledges and
agrees that from and after the Closing, Holdings and the Buyer will be entitled
to copies of all documents, books, records (including Tax records), agreements,
and financial data of any sort relating to Seller and its
Subsidiaries.
(b) Litigation
Support.
In the
event and for so long as any Party or assignee or distributee of a party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under the Transaction Documents or (ii) any
fact, situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date related to Seller, the Acquired Assets, the Excluded
Liabilities or the Assumed Liabilities and each of their Subsidiaries, each
of
the other Parties will reasonably cooperate with the contesting or defending
Party and his or its counsel in the contest or defense, make available his
or
its personnel, and provide such testimony and access to his or its books and
records as shall be necessary in connection with the contest or defense, all
at
the sole cost and expense of the contesting or defending Party.
(c) Transition.
Neither
Seller nor any Principal Stockholder will take any action that is designed
or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of any of Buyer and its Subsidiaries
from
maintaining the same business relationships with Buyer and its Subsidiaries
after the Closing as it maintained with Seller and its Subsidiaries prior to
the
Closing.
44
(d) Confidentiality.
(i) Seller
shall cause its directors, officers and employees to treat and hold as such
all
of the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly
to
the Buyer or destroy, at the request and option of the Buyer, all embodiments
and copies (in whatever form or medium) of the Confidential Information which
are in his or its possession. In the event that any such Person is requested
or
required (by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information, that Person will notify
the
Buyer and Holdings promptly of the request or requirement so that the Buyer
and
Holdings may seek an appropriate protective order or waive compliance with
the
provisions of this Section 9(d)(i). If, in the absence of a protective
order or the receipt of a waiver hereunder, any such Person is, on the advice
of
counsel, compelled to disclose any Confidential Information to any tribunal
or
else stand liable for contempt, that Person may disclose the Confidential
Information to the tribunal; provided, however, that the disclosing Person
shall
use his or its reasonable best efforts to obtain, at the reasonable request
of
the Buyer or Holdings, an order or other assurance that confidential treatment
will be accorded to such portion of the Confidential Information required to
be
disclosed as the Buyer or Holdings shall designate. Without limiting the
generality of the foregoing, any financial information Seller, or its directors,
officers and employees, receives from the Buyer with respect to periods after
December 31, 2006 will be kept confidential (and Persons that received such
information will not purchase or sell securities of Holdings) until the date
that is three Business Days after the filing of Holdings’ quarterly report on
Form 10-Q for the period ended June 30, 2006.
(ii) If
Closing does not occur, Holdings and the Buyer shall cause its officers,
directors and employees to treat and hold as such all of the Confidential
Information of Seller, refrain from using any of the Confidential Information
of
Seller except in connection with this Agreement, and deliver promptly to Seller
or destroy, at the request and option of Seller, all embodiments and copies
(in
whatever form or medium) of the Confidential Information of Seller which are
in
his or its possession. In the event that any such Person is requested or
required (by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information of Seller, that Person will
notify Seller promptly of the request or requirement so that Seller may seek
an
appropriate protective order or waive compliance with the provisions of this
Section 9(d)(ii). If, in the absence of a protective order or the receipt
of a waiver hereunder, any such Person is, on the advice of counsel, compelled
to disclose any Confidential Information of Seller to any tribunal or else
stand
liable for contempt, that Person may disclose the Confidential Information
of
Seller to the tribunal; provided, however, that the disclosing Person shall
use
his or its reasonable best efforts to obtain, at the reasonable request of
Seller, an order or other assurance that confidential treatment will be accorded
to such portion of the Confidential Information required to be disclosed as
Seller shall designate.
45
(e)
Limits
on Distribution or Liquidation.
Except
or otherwise expressly provided in this Section 9(e), Seller shall not, during
the period between the Closing Date and the date that is eleven and one-half
(11½)
months
following the Closing Date (i) distribute or otherwise purport to transfer
any
Purchase Share to its equity holders or any other Person, (ii) pledge, or create
any Encumbrance (other than arising under any Transaction Document) with respect
to, any Purchase Share, or (iii) effect any dissolution or liquidation of
Seller. Notwithstanding the foregoing, with the consent of Holdings, which
shall
not be unreasonably withheld, the Purchase Shares may be distributed to a
liquidating trust or similar entity during such time period, provided that
such
liquidating trust or similar entity assumes and becomes subject to (in addition
to Seller) all obligations and restrictions of Seller under this Agreement
and
all other Transaction Documents.
(f) Covenants
Not to Compete.
Seller
and the Principal Stockholders each acknowledge that (A) a principal business
of
Seller is the Business of Seller; (B) Seller is among a limited number of
Persons who have developed a Business; (C) the Business of Seller is, in part,
national and international in scope; (D) the agreements and covenants of Seller
contained in this Section 9(f) are essential to the business and goodwill of
the
Business of Seller and the use by the Buying Parties of the Acquired Assets
and
the conduct by the Buying Parties; and (E) the Buying Parties would not have
entered into the Asset Purchase Agreement or this Agreement and would not have
purchased the Acquired Assets but for the covenants and agreements set forth
in
this Section 9(f). Accordingly, Seller and each of the Principal Stockholders
covenants and agrees that:
(i) During
the period commencing on the Closing Date and ending five (5) years following
the Closing Date (the "Restricted Period"), neither Seller nor such Principal
Stockholder shall directly or indirectly, own (other than the ownership of
less
than 5% of a publicly traded company), 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 Business of Seller, Buyer, Holdings or their Subsidiaries
anywhere in the United States, as such business exists as of the Closing Date
(collectively, "Covered Activities").
(ii) During
the Restricted Period, neither Seller nor such Principal Stockholder shall,
without the prior written consent of the Buying Parties, 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 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 customer of Seller’s Business) 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.
46
(iii) Neither
Seller nor any Principal Stockholder shall, at any time, directly or indirectly,
verbally or in writing, publicly or in private, disparage, slander, denigrate
or
criticize the business, operations, properties, assets, activities, management,
shareholders or performance of the Buying Parties or their Subsidiaries or
Seller and shall refrain from all communications which have as their effect,
whether intended or unintended, the denigration, disparagement or deprecation
of
the Buying Parties or their Subsidiaries or Seller or their respective business,
operations, properties, assets, activities, management, shareholders or
performance.
(iv) Seller
and each of the Principal Stockholders further acknowledges and agrees
that:
(A) the
covenants set forth in Section 9(f) of this Agreement are reasonable in
geographical and temporal scope and in all other respects,
(B) the
Buying Parties would not have entered into this Agreement but for the covenants
contained herein, and
(C) the
covenants contained herein have been made in order to induce the Buying Parties
to enter into the Asset Purchase Agreement and purchase the Acquired Assets
from
which the Principal Stockholders will receive substantial benefit.
(D) If,
at
the time of enforcement of the covenants contained in Section 9(f) of this
Agreement, a court shall hold that the duration, scope or geographic
restrictions stated therein are unreasonable under circumstances then existing,
the Parties agree that the maximum duration, scope or geographic area reasonable
under such circumstances shall be substituted for the stated duration, scope
or
geographic area (and any court or other adjudicator interpreting these provision
is hereby authorized to so amend this Agreement).
(v) For
the
sole purpose of enforcement of the Buying Parties’ rights under this Section
9(f), the Parties intend to and hereby confer jurisdiction to enforce the
restrictions set forth in this 9(f) (the “Restrictions”) upon the courts of any
jurisdiction within the geographical scope of the Restrictions. If the courts
of
any one or more of such jurisdictions hold the Restrictions unenforceable by
reason of the breadth of such scope or otherwise, it is the intention of the
Parties that such determination not bar or in any way affect any Company’s
rights to the relief provided above in the courts of any other jurisdiction
within the geographical scope of the Restrictions, as to breaches of such
covenants in such other respective jurisdictions, such covenants as they relate
to each jurisdiction being, for this purpose, severable into diverse and
independent covenants. In the event of any litigation among the Parties under
this Section 9(f), the court shall award reasonable attorneys fees to the
prevailing Party.
(f) Name
Change.
Seller
agrees to changes its name to a name that does not include the words “EON,”
“EONStreams” or any similar words within thirty days of the Closing Date.
47
(g) Accounting
Support.
During
the three-month period following the Closing Date, Seller shall provide to
the
Buying Parties, the services of Xxxxx Xxxxxxxxx for approximately 24 hours
a
week, plus or minus 10 hours a week, consistent with her current commitment
depending on workload demands during that period, to assist the Buying Parties
with accounting and other financial issues associated with the initial
maintenance and subsequent integration of the Acquired Assets into the Buying
Parties’ business, internal controls and accounting procedures. The Buying
Parties shall reimburse Seller for the costs of such provided services, up
to an
amount equal to the current monthly salary of Xxxxx Xxxxxxxxx.
(h) Unassigned
Assets. With
respect to any Unassigned Asset, until
all
consents necessary to cause such asset or agreement to become an Acquired Asset
are obtained, (i) Seller shall use its best efforts in order to obtain the
consents necessary to cause such asset to become an Acquired Asset, and (ii)
Seller on the one hand, and the Buyer, on the other hand, will cooperate in
a
reasonable
arrangement designed to provide for the Buyer the benefits of Seller under
the
Unassiged Asset, to the extent of the Buyer’s performance of Seller’s
obligations on behalf of Seller, with respect to such Unassigned Asset,
including,
to the extent any Unassigned Asset is an agreement or lease, or used pursuant
to
an agreement or lease, enforcement at the request and expense of the Buyer
for
the benefit of the Buyer of any and all rights of Seller against any Person
under the respective agreement or lease or arising out of the breach or
cancellation of the respective agreement or lease. In connection with the
foregoing, Seller
may take such action as Seller deems appropriate to satisfy the obligations
with
respect to any Unassigned Asset, including, without limitation, assigning any
Unassigned Asset that is a contract or lease to a third party or arranging
for a
third party to perform the obligations thereunder, and the Buyer shall not
be
liable for any damages incurred by Seller in connection therewith.
(a) Survival
of Representations and Warranties.
All of
the representations and warranties of Seller and the Principal Stockholders
contained in Sections 3 and 4 of this Agreement shall survive the Closing
(even if the Buying Parties knew or had reason to know of any misrepresentation
or breach of warranty at the time of Closing) and continue in full force and
effect for a period of one year thereafter; except that the representations
and
warranties of Seller and the Principal Stockholders contained in Sections 4(a),
4(b), 4(e) and 4(z) of this Agreement shall survive the Closing (even if the
Buying Parties knew or had reason to know of any misrepresentation or breach
of
warranty at the time of Closing) and continue in full force and effect until
the
applicable statute of limitations has run and that the representations and
warranties of Seller and the Principal Stockholders contained in Section 4(k)
of
this Agreement shall survive the Closing (even if the Buying Parties knew or
had
reason to know of any misrepresentation or breach of warranty at the time of
Closing) and continue in full force and effect for a period of three years
thereafter. All of the representations and warranties of the Buying Parties
contained in Section 5 of this Agreement shall survive the Closing (even if
Seller knew or had reason to know of any misrepresentation or breach of warranty
at the time of Closing) and continue in full force and effect for a period
of
one year thereafter.
48
(b) Indemnification
Provisions for Benefit of the Buying
Parties, Seller and the Principal Stockholders.
(i) Seller
and the Principal Stockholders, jointly and severally, shall indemnify, defend
and hold harmless the Buying Parties, and each of their officers, directors,
employees, agents, successors and assigns (collectively the “Buying Parties
Group”) from and against any and all Adverse Consequences (including any Adverse
Consequences any member of the Buying Parties Group may suffer after the end
of
any applicable survival period) incurred in connection with, arising out of,
resulting from or incident to (i) any breach of any covenant, representation,
warranty or agreement or the inaccuracy of any representation made by Seller
or
any Principal Stockholder pursuant to any Transaction Document, (ii) Seller’s
failure to timely and completely satisfy all Liabilities retained by Seller,
including all Excluded Liabilities (and specifically including all Liabilities
and Adverse Consequences associated with any Quest and Clear Channel
Liabilities), or (iii) the existence of the Unassigned Assets immediately
following the Closing and the failure of Seller to cause all Unassigned Assets
to become Acquired Assets within 30 days of the Closing; provided, however,
if a
claim for indemnification arises as a result of an alleged inaccuracy in or
breach of any representation or warranty of Seller or any Principal Stockholder
and if there is an applicable survival period pursuant to Section 10(a)
above with respect to such representation or warranty, the claim shall be
time-barred unless a Buying Party makes a written claim for indemnification
against Seller or the Principal Stockholders pursuant to Section 10(c)
below within such survival period.
(ii) Holdings
shall indemnify, defend and hold harmless Seller and the Principal Stockholder,
and each of their officers, directors, employees, agents, successors and assigns
(collectively the “Selling Parties Group”) from and against any and all Adverse
Consequences (including any Adverse Consequences any member of the Buying
Parties Group may suffer after the end of any applicable survival
period)incurred in connection with, arising out of, resulting from or incident
to (i) any breach of any covenant, representation, warranty or agreement or
the
inaccuracy of any representation, made by any Buying Party pursuant to any
Transaction Document, or (ii) the Buyer’s failure to timely and completely
satisfy all Assumed Liabilities; provided, however, if a claim for
indemnification arises as a result of an alleged inaccuracy in or breach of
any
representation or warranty of any Buying Party and if there is an applicable
survival period pursuant to Section 10(a) above with respect to such
representation or warranty, the claim shall be time-barred unless Seller makes
a
written claim for indemnification against the Buying Parties pursuant to
Section 10(c) below within such survival period.
(i) If
any
third party shall notify any Party (the “Indemnified Party”) with respect to any
matter (a “Third Party Claim”) which may give rise to a claim for
indemnification against any other Party (the “Indemnifying Party”) under this
Section 10, then the Indemnified Party shall promptly notify each
Indemnifying Party thereof in writing; provided, however, that no delay on
the
part of the Indemnified Party in notifying any Indemnifying Party shall relieve
the Indemnifying Party from any obligation hereunder unless (and then solely
to
the extent) the Indemnifying Party thereby is prejudiced.
49
(ii) Any
Indemnifying Party will have the right to defend the Indemnified Party against
the Third Party Claim with counsel of its choice reasonably satisfactory to
the
Indemnified Party so long as (A) the Indemnifying Party notifies the Indemnified
Party in writing within 15 days after the Indemnified Party has given
notice of the Third Party Claim that the Indemnifying Party will indemnify
the
Indemnified Party from and against the entirety of any Adverse Consequences
the
Indemnified Party may suffer resulting from, arising out of, relating to, or
caused by the Third Party Claim, (B) the Indemnifying Party provides the
Indemnified Party with evidence reasonably acceptable to the Indemnified Party
that the Indemnifying Party will have the financial resources to defend against
the Third Party Claim and fulfill its indemnification obligations hereunder
(including the payment in cash of all fees and costs associated with such
defense), (C) the Third Party Claim involves only money damages and does not
seek an injunction or other equitable relief, (D) settlement of, or an adverse
judgment with respect to, the Third Party Claim is not, in the good faith
judgment of the Indemnified Party, likely to establish a precedential custom
or
practice materially adverse to the continuing business interests of the
Indemnified Party, and (E) the Indemnifying Party conducts the defense of the
Third Party Claim actively and diligently.
(iii) So
long
as the Indemnifying Party is conducting the defense of the Third Party Claim
in
accordance with Section 10(c)(ii) above, (A) the Indemnified Party may
retain separate co-counsel at its sole cost and expense and participate in
the
defense of the Third Party Claim, (B) the Indemnified Party will not consent
to
the entry of any judgment or enter into any settlement with respect to the
Third
Party Claim without the prior written consent of the Indemnifying Party (not
to
be withheld unreasonably), and (C) the Indemnifying Party will not consent
to
the entry of any judgment or enter into any settlement with respect to the
Third
Party Claim without the prior written consent of the Indemnified Party (not
to
be withheld unreasonably), unless the following shall apply (in which case
the
Indemnifying Party may settle and compromise such Third Party Claim without
the
prior written consent of the Indemnified Party): (x) there is no finding or
admission of any violation of law or any violation of the rights of any person
and no affect on any other claims that may be made against the Indemnified
Party; and (y) the sole relief provided is monetary damages that are paid in
full in cash by the Indemnifying Party.
(iv) In
the
event any of the conditions in Section 10(c)(ii) above is or becomes
unsatisfied, however, (A) the Indemnified Party may defend against, and consent
to the entry of any judgment or enter into any settlement with respect to,
the
Third Party Claim in any manner it reasonably may deem appropriate (and the
Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), (B) the Indemnifying Party will
reimburse the Indemnified Party (with cash) promptly and periodically for the
costs of defending against the Third Party Claim (including reasonable
attorneys’ fees and expenses), and (C) the Indemnifying Party will remain
responsible for any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, or caused by the Third Party Claim
to the fullest extent provided in this Section 10.
(d) Characterization
of Payments.
All
indemnification payments under this Section 10 shall be deemed adjustments
to the Purchase Price.
50
(vi) The
exclusive recourse of the Buying Parties Group for Adverse Consequences pursuant
to this Agreement, other than for fraud, shall be against the Purchase Shares
and the additional shares issuable to Seller pursuant to Section 2(c) (ii)
(subject to the right of the indemnifying Seller or Principal Stockholder to
pay
any indemnity in cash). The aggregate liability of Seller and the Principal
Stockholders, other than for fraud, shall in no event exceed $17,001,345, which
shall (unless otherwise elected by the paying indemnifying party) come
exclusively from the Purchase Shares and the additional shares issuable to
Seller pursuant to Section 2(c)(ii), valued at the Market Price as of the
Closing Date. For purposes of clarity, it is the intent of the Parties that
(A)
for claims made during the 11½
months
during which Seller is required to retain the Purchase Shares, the recourse
of
the Buying Parties Group for Adverse Consequences shall be against the Purchase
Shares held by Seller (and shall be satisfied by return of such shares), and
(B)
for claims made during the period following a permitted distribution of the
Purchase Shares by Seller to its stockholders, the recourse of the Buying
Parties Group for Adverse Consequences shall be against the Purchase Shares
distributed to the Principal Stockholders (and shall be satisfied by return
of
such shares and, for each Principal Stockholder, limited to the amount of
distributed Purchase Shares); provided, however, for purposes of the foregoing
(X) each Principal Stockholder shall be deemed to have been distributed a number
of Purchase Shares equal to such Principal Stockholder’s pro rata distribution
right with respect to the Purchase Shares as of the Closing under the charter
of
Seller, (Y) to the extent any Purchase Shares are transferred by Seller or
a
Principal Stockholder (other than through a pro rata distribution by Seller
to
its stockholders), the Buying Parties Group’s recourse shall be to not only
against the Purchase Shares actually held at the time of the claim, but against
a number of shares of Holdings Common Stock equal to those so transferred;
and
(Z) to the extent the amount of a timely claim for which the Buying Parties
Group assert entitlement to indemnification exceeds the value of the Escrow
Shares, using the Market Price of Holdings Common Stock as of the Closing Date,
Seller shall either retain a number of Purchase Shares sufficient (together
with
the Escrow Shares) to cover the claim or shall cause its distributees to sign
an
agreement, in form reasonably satisfactory to Holdings, assuming the
indemnification obligations of Seller with respect to a number of Purchase
Shares sufficient (together with the Escrow Shares) to cover the claim.
(ii) The
aggregate liability of the Buying Parties, other than for fraud, shall in no
event exceed $17,001,345, which shall, at the election of the Buying Parties
be
paid (A) exclusively in cash, or (B) be paid 50% in cash and 50% in shares
of
Holdings Common Stock, valued at the Market Price as of the date of payment.
(a) Press
Releases and Public Announcements.
No
Party shall issue any press release or make any public announcement relating
to
the subject matter of this Agreement without the prior written approval of
the
other Party; provided, however, that any Party may make any public disclosure
it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its reasonable best efforts to advise Holdings and
Seller prior to making the disclosure).
51
(b) No
Third-Party Beneficiaries.
This
Agreement shall not confer any rights or remedies upon any Person other than
the
Parties and their respective successors and permitted assigns with respect
to
all rights and obligations of such Parties hereunder.
(c) Entire
Agreement.
This
Agreement (including the Exhibits hereto and the documents and certificates
required to be delivered hereby) constitutes the entire agreement between the
Parties and supersedes any prior understandings, agreements, or representations
by or between the Parties, written or oral, to the extent they related in any
way to the subject matter hereof.
(d) Succession
and Assignment.
This
Agreement shall be binding upon and inure to the benefit of the Parties named
herein and their respective successors and permitted assigns. No Party may
assign either this Agreement or any of its rights, interests, or obligations
hereunder without the prior written approval of Holdings and Seller; provided,
however, that the Buyer may (i) assign any or all of its rights and interests
hereunder to one or more of its Affiliates and (ii) designate one or more of
its
Affiliates to perform its obligations hereunder (in any or all of which cases
the Buyer nonetheless shall remain responsible for the performance of all of
its
and such assignee's obligations hereunder).
(e) Counterparts.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original but all of which together will constitute one and the same
instrument. A facsimile copy of this Agreement or any counterpart hereto shall
be valid as an original.
(f) Headings.
The
section headings contained in this Agreement are inserted for convenience only
and shall not affect in any way the meaning or interpretation of this
Agreement.
(g) Notices.
All
notices, demands or other communications to be given or delivered under or
by
reason of the provisions of this Agreement shall be in writing and shall be
deemed to have been given when delivered personally to the recipient or when
sent by facsimile followed by delivery by reputable overnight courier service
(charges prepaid), one day after being sent to the recipient by reputable
overnight courier service (charges prepaid) or five days after being mailed
to
the recipient by certified or registered mail, return receipt requested and
postage prepaid. Any notice, demand or other communication hereunder may be
given by any other means (including telecopy or electronic mail), but shall
not
be deemed to have been duly given unless and until it is actually received
by
the intended recipient. Such notices, demands and other communications shall
be
sent to the addresses indicated below:
If
to
Seller:
EON
Streams, Inc.
Xxxxxxx
& Associates, Inc.
0000
Xxxxxxxxx
Xxxxxxx,
XX 00000
Facsimile:
(000) 000-0000
Attention:
Xxxxxx
X.
Xxxxxxx
52
with
a
copy (which shall not constitute notice to Seller) to:
Xxxxxx,
Xxxxx & Xxxxxx, P.C.
X.X.
Xxx
0000
Xxxxxxxxx,
XX 00000
(000)000-0000
(fax)
Attn:
Xxxxxx X. Xxxx
If
to
Holdings or the Buyer:
Xxx
Xxxxxx, Xxxxx 000
Xxxxxx,
Xxxxxxxxxx 00000
Facsimile:
000-000-0000
Attention:
President & COO
with
a
copy (which shall not constitute notice to Holdings or the Buyer)
to:
Xxxx
Xxxxxxxx Xxxxx Xxx & Xxxxxxxx
000
Xxxxx
Xxxxx Xxxxxx, Xxxxx 0000
Xxxx
Xxxx
Xxxx, Xxxx 00000
Facsimile:
000-000-0000
Attention:
Xxxxx X. Xxxxx, Esq.
or
to
such other address, to the attention of such other Person and/or with such
other
copy or copies as the recipient party has specified by prior written notice
to
the sending party. If any time period for giving notice or taking action expires
on a day which is a Saturday, Sunday or legal holiday in the State of California
(any other day being a "Business Day"), such time period shall automatically
be
extended to, the next Business Day immediately following such Saturday, Sunday
or legal holiday.
(h) Governing
Law.
This
Agreement shall be governed by and construed in accordance with the domestic
laws of the state of California without giving effect to any choice or conflict
of law provision or rule (whether of the state of California or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the state of California.
(i) Amendments
and Waivers.
Any
term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), by, and only by, the written consent of
Holdings and Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be valid unless the same shall be in writing and signed by an Authorized Buyer
Party on behalf of the Buying Parties or Seller’s Representative on behalf of
Seller, nor shall any such waiver be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
53
(j) Severability.
Any
term or provision of this Agreement that is invalid or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability
of
the remaining terms and provisions hereof or the validity or enforceability
of
the offending term or provision in any other situation or in any other
jurisdiction.
(k) Expenses
and Transfer Taxes.
Each of
Holdings, the Buyer, Seller, and its Subsidiaries will bear his or its own
costs
and expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby. Seller agrees that
none
of its Subsidiaries has borne or will bear any of the costs and expenses of
Seller or the Principal Stockholders (including any of its legal fees and
expenses) in connection with this Agreement or any of the transactions
contemplated hereby. Any
provision herein to the contrary notwithstanding, Seller shall bear and pay
when
due all sales Taxes, recording, registration and conveyance Taxes and fees,
and
similar transfer Taxes resulting from or associated with the transactions
contemplated hereunder.
(l) Construction.
The
Parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the Parties,
and no presumption or burden of proof shall arise favoring or disfavoring any
Party by virtue of the authorship of any of the provisions of this Agreement.
Any reference to any federal, state, local, or foreign statute or law shall
be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. The word “including” shall mean including
without limitation.
(m) Incorporation
of Exhibits and Schedules.
The
Exhibits and Schedules identified in this Agreement are incorporated herein
by
reference and made a part hereof.
(n) Specific
Performance.
Each of
the Parties acknowledges and agrees that the other Party would be damaged
irreparably in the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise are breached.
Accordingly, each of the Parties agrees that the other Parties shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States
or
any state thereof having jurisdiction over the Parties and the matter (subject
to the provisions set forth in Section 11(o) below), in addition to any
other remedy to which it may be entitled, at law or in equity.
(o) Submission
to Jurisdiction.
Except
as set forth in Section 9(f), each of the Parties submits to the exclusive
jurisdiction of any state or federal court sitting in Orange County, California
in any action or proceeding arising out of or relating to this Agreement and
agrees that all claims in respect of the action or proceeding may be heard
and
determined in any such court. Each Party also agrees not to bring or seek
removal of any action or proceeding arising out of or relating to this Agreement
in or to any other court. Each of the Parties waives any defense of inconvenient
forum to the maintenance of any action or proceeding so brought and waives
any
bond, surety, or other security that might be required of any other Party with
respect thereto. Each Party agrees that a final judgment in any action or
proceeding so brought shall be conclusive and may be enforced by suit on the
judgment or in any other manner provided by law or in equity.
54
(p) Waiver
of Trail By Jury.
EACH
PARTY HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY
IN
ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING
OUT
OF THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS OR THE VALIDITY,
PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT HEREOF OR THEREOF. EACH
PARTY AGREES THAT THIS SECTION 11(p) IS A SPECIFIC AND MATERIAL ASPECT OF THIS
AGREEMENT AND EACH OF THE OTHER TRANSACTION DOCUMENTS AND ACKNOWLEDGES THAT
THE
OTHER PARTIES WOULD NOT HAVE ENTERED INTO THIS AGREEMENT AND CONSUMMATED THE
TRANSACTIONS CONTEMPLATED HEREBY IF THIS SECTION 11(p) WERE NOT PART OF THIS
AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS.
*****
55
IN
WITNESS WHEREOF, the Parties hereto have executed this Asset Purchase Agreement
on as of the date first above written.
| VITALSTREAM HOLDINGS, INC. | ||
| |
|
|
|
|
By:
|
/s/ Xxxx Xxxxxxxx |
| Xxxx Xxxxxxxx, Chief Executive Officer | ||
| VITALSTREAM ADVERTISING SOLUTIONS, INC. | ||
| |
|
|
|
|
By:
|
/s/ Xxxxxx Xxxxxx |
| Xxxxxx Xxxxxx, President | ||
| EON STREAMS, INC. | ||
| |
|
|
|
|
By:
|
/s/ Xxxxxx Xxxxxxx |
| Xxxxxx Xxxxxxx, President | ||
| PRINCIPAL STOCKHOLDERS | ||
| |
|
|
|
|
By:
|
/s/ Xxxxxx Xxxxxxx |
| Xxxxxx Xxxxxxx, an individual | ||
|
|
By:
|
/s/ Xxxxxxx Xxxxxx |
| Xxxxxxx Xxxxxx, an individual | ||
|
|
By:
|
/s/ Xxxxx Xxxxxxxxx |
| Xxxxx Xxxxxxxxx, an individual | ||
Signature
Page to Asset Purchase Agreement
56
EXHIBIT
A
ESCROW
AGREEMENT
[See
attached]
A-1
ESCROW
AGREEMENT
THIS
ESCROW AGREEMENT (this “Agreement”) dated May 19, 2006, is entered into by and
among VitalStream Holdings, Inc., a Nevada corporation (“Holdings”), VitalStream
Advertising Solution, Inc., a Nevada corporation (together with Holdings,
the
“Buying Parties”), EON Streams, Inc., a Tennessee corporation (the “Seller”),
and Xxxxxx, Xxxxx & Xxxxxx, P.C., a Tennessee professional corporation, in
its capacity as escrow agent (the “Escrow Agent”, which term shall also include
any successor escrow agent appointed in accordance with Section 7(b)
hereof).
Reference
is made to the Asset Purchase Agreement dated as of May 19, 2006, (the “Purchase
Agreement”), to which the Buying Parties and Seller are each a party. This
Agreement is the Escrow Agreement described in the Purchase Agreement.
NOW,
THEREFORE, to induce the Buying Parties to enter into, and in consideration
of
Buying Parties entering into, the Purchase Agreement, and in consideration
of
the premises and the representations and warranties and agreements contained
herein, the parties hereto agree as follows:
1. Certain
Defined Terms.
The
following capitalized terms shall have the following meanings in this Agreement.
Additional terms are defined elsewhere in this Agreement.
“Closing”
means the closing of the purchase and sale transaction contemplated by the
Purchase Agreement , which occurred on the date first set forth above.
“Common
Stock” means the common stock, $.001 par value, of Holdings.
“Escrow
Shares” means the 262,097 Purchase Shares identified as “Escrow Shares” in the
Purchase Agreement and deliverable to the Escrow Agent by Holdings subject
to
the terms and conditions of this Agreement.
“Market
Value” means $11.41, which is the average of the closing price, as reported by
the principal United States market for the Common Stock, of the Common Stock
for
the twenty (20) trading days preceding the Closing Date (subject to adjustments
for any stock splits, reverse splits, or similar reclassifications of the
Common
Stock).
“Purchase
Shares” means the shares of Common Stock payable by Holdings to the Seller
pursuant to Section 2(c)(i) and Section 2(c)(ii) of the Purchase Agreement.
“Release
Date” means the date that is two years after the date first set forth
above.
2. Appointment
of Escrow Agent.
The
Escrow Agent is hereby appointed to act as escrow agent hereunder, and the
Escrow Agent agrees to act as such.
3. Resolution
of Indemnification Claims.
(a) Release
and Indemnification Obligations.
The
Escrow Shares shall serve as security for the indemnification obligations
of
Seller under Section 10 of the Purchase Agreement, for the post-Closing
adjustments to the purchase price pursuant to Section 2(d) of the Purchase
Agreement and for satisfying any award of reasonable attorneys’ fees and charges
and/or costs of mediation in accordance with the terms of any resolution
through
mediation (a “Prevailing Party Award”) in favor of the Buying Parties pursuant
to Section 3(c) hereof. Payment for any amount determined as provided below
to
be owing to the Buying Parties under such indemnity obligations and any
Prevailing Party Award shall be made by a release of that portion of the
Escrow
Shares to Holdings with a Market Value equal to such aggregate amount. The
releases of Escrow Shares as described in this Section 3(a) are referred to
as the “Escrow Adjustments.”
A-2
(b) Notice
of Claims.
Following the receipt by the Buying Parties of written notice or good faith
discovery of any claim, damage, or legal action or proceeding giving rise
to
indemnification rights under Section 10 of the Purchase Agreement or a
post-Closing adjustment to the purchase price under Section 2(d) of the Purchase
Agreement (a “Claim”), Holdings shall promptly give Seller written notice of
such Claim (provided that no delay on the part of Holdings to promptly provide
such notice shall relieve Seller from its obligations under the Purchase
Agreement unless (and then solely to the extent) Seller thereby is prejudiced),
specifying in reasonable detail the nature of the Claim and the computation
of
the proposed Escrow Adjustment (the “Notice of Claim”), and shall provide a copy
of such notice to the Escrow Agent.
(c) Resolution
of Claims.
Any
Notice of Claim received by Seller and the Escrow Agent pursuant to
Section 3(b) above shall be resolved as follows:
(i) Uncontested
Claims.
In the
event that Seller does not contest a Notice of Claim in writing within twenty
(20) calendar days after receipt of such notice, as provided below in
Section 3(c)(ii), then Escrow Agent shall promptly release Escrow Shares to
Holdings in an amount equal to the Escrow Adjustment proposed in such Notice
of
Claim.
(ii) Contested
Claims.
In the
event that Seller gives written notice to Holdings and the Escrow Agent
contesting all or a portion of a Notice of Claim (a “Contested Claim”) within
the twenty (20) day period provided above, matters that are subject to third
party claims brought against any Buying Party or Seller in a litigation or
arbitration shall await the final decision, award, or settlement of such
litigation or arbitration. With respect to matters that arise between a Buying
Party on the one hand and Seller on the other hand, including any disputes
regarding performance or nonperformance of a Party’s obligations under this
Agreement, such Buying Party and Seller shall use their reasonable best efforts
to resolve the matter within sixty (60) days through mediation with a mutually
acceptable mediator in accordance with the then existing Commercial
Arbitration Rules and Mediation Procedures published by the American Arbitration
Association or as otherwise agreed by the parties.
In the
event that the matter is not resolved through mediation within such sixty
(60)
day period, the parties may continue with mediation, or any party may initiate
litigation in accordance with the Purchase Agreement. If any portion of a
Notice
of Claim is not contested or is subsequently settled, Escrow Agent shall
promptly release a prorated amount of Escrow Shares to Holdings based on
the
amount of such uncontested portion and corresponding Escrow Adjustment. If
notice is received by the Escrow Agent that a Notice of Claim is contested
by
Seller, then the Escrow Agent shall hold in escrow, after what would otherwise
be the Release Date, the amount of Escrow Shares as specified in the Notice
of
Claim, until authorized to distribute the Escrow Shares in accordance with
Section 6 hereof.
4. Escrow.
On the
date hereof, Holdings shall deliver the Escrow Shares, and the Escrow Agent
shall accept the Escrow Shares for deposit in escrow pursuant to the provisions
of this Agreement. The Escrow Agent shall hold the Escrow Shares at its office
located at its address set forth in Section 9(a).
5. Rights
to Escrow Shares.
The
Escrow Shares shall be for the exclusive benefit of the Seller and the Buying
Parties, and no other person or entity shall have any right, title or interest
therein. Any claim of any person to the Escrow Shares, or any part thereof,
shall be subject and subordinate to the prior right thereto of the Buying
Parties, the Seller and the Escrow Agent, as contemplated by this
Section 5. All Escrow Shares delivered to Buying Parties hereunder shall be
considered a return of Purchase Price paid pursuant to the Purchase
Agreement.
6. Distribution
of the Escrow Shares.
Except
as set forth in Section 3 above, the Escrow Agent shall continue to hold
the
Escrow Shares in its possession until authorized hereunder to distribute
the
Escrow Shares as follows:
|
a.
|
pursuant
to the joint
written instructions of Holdings and the Seller substantially in
the form
set forth in Exhibit A hereto;
|
|
b.
|
as
determined by the final order, decree or judgment of a court of
competent
jurisdiction in the United States of America (the time for appeal
having expired with no appeal having been taken) in a proceeding
to which
the Buying Parties and the Seller are parties (a “Final Decree”) upon
receipt from Holdings or the Seller of written notice substantially
in the
form of Exhibit B hereto accompanied by a certified copy of such
Final Decree; or
|
A-3
|
c.
|
Notwithstanding
any other provision of this Section 6, the Escrow Agent may elect,
in its
sole discretion, to commence an interpleader action or seek other
judicial
relief or orders as it may deem, in its sole discretion, necessary.
The
costs and expenses (including reasonable attorneys’ fees and expenses)
incurred in connection with such proceeding shall be paid one half
by each
of, and shall be deemed a joint and several obligation of, the
Buying
Parties and the Seller.
|
7. Termination;
Periodic Distributions.
This
Agreement shall terminate upon the delivery by the Escrow Agent of all of
the
Escrow Shares in accordance with this Agreement. If upon, or any time after,
the
Release Date, there shall be no Claims for indemnity against Seller under
this
Agreement, the Buying Parties and Seller shall jointly direct the Escrow
Agent
in writing to deliver the Escrow Shares to Seller. If upon the Release Date,
there shall be one or more Claim(s) for indemnity (whether pending or threatened
in writing) against Seller under this Agreement, the Buying Parties and the
Seller shall jointly direct the Escrow Agent in writing to deliver to Seller
the
number of Escrow Shares having a Market Value equal to the amount by which
the
Market Value of all the Escrow Shares as of the date of delivery exceeds
the
aggregate of all such Claims pending or threatened at such time. Except as
provided in the Purchase Agreement, the termination of this Agreement or
the
disbursement of any Escrow Shares hereunder is not intended and shall not
constitute a termination or limitation of any amount that may be due to the
Buying Parties (or their affiliates) or any claim for indemnification that
may
be made by the Buying Parties (or their affiliates) pursuant to the Purchase
Agreement. Notwithstanding any termination of this Agreement, the provisions
of
Sections 8(c) and 8(d) hereof shall survive such termination and remain in
full force and effect.
8. Escrow
Agent.
|
a.
|
Obligations
|
|
i.
|
The
obligations of the Escrow Agent are those specifically provided
in this
Agreement and no other, and the Escrow Agent shall have no liability
under, or duty to inquire into the terms and provisions
of, any agreement between the parties hereto. The duties of the
Escrow
Agent are purely ministerial in nature, and it shall not incur
any
liability whatsoever, except for willful misconduct or gross negligence.
The Escrow Agent may consult with counsel of its choice and shall
not be
liable for reasonably following the advice of such
counsel.
|
|
ii.
|
The
Escrow Agent shall not have any responsibility for the genuineness
or
validity of any document or other item deposited with it or of
any
signature thereon and shall not have any liability for acting in
accordance with any written instructions or certificates given
to it
hereunder and believed by it to be signed by the proper
parties.
|
|
iii.
|
The
Escrow Agent shall not be required to expend or risk any of its
own funds
or otherwise incur and financial or other liability in the performance
of
any of its duties hereunder.
|
|
iv.
|
The
Escrow Agent shall not be under any duty to give the Escrow Shares
held by
it hereunder any greater degree of care than it gives its own similar
property.
|
b. Resignation
and Removal.
The
Escrow Agent may resign and be discharged from its duties hereunder at any
time
by giving at least 30 days’ notice of such resignation to the Buying Parties and
the Seller, specifying a date upon which such resignation shall take effect
(the
“Resignation Notice”); provided,
however,
that
the Escrow Agent shall continue to serve until its successor accepts the
Escrow
Shares. Upon receipt of any Resignation Notice, a successor Escrow Agent
shall
be appointed by the Buying Parties and the Seller, such successor Escrow
Agent
to become the Escrow Agent hereunder on the later of the date set forth in
the
Resignation Notice and the date on which the successor Escrow Agent accepts
the
Escrow Shares. If an instrument of acceptance by a successor Escrow Agent
shall
not have been delivered to the resigning Escrow Agent within 40 days after
delivery of the Resignation Notice, the resigning Escrow Agent may petition
any
court of competent jurisdiction for the appointment of a successor Escrow
Agent.
The expenses relating to such petition shall be paid one-half by the Buying
Parties and one-half by Seller. The Buying Parties and Seller, acting jointly,
may at any time substitute a new Escrow Agent by giving 10 days’ notice thereof
to the current Escrow Agent and paying all fees and expenses of the current
Escrow Agent as provided in Section 8(d) hereof.
A-4
c. Waiver
and Indemnification.
(i) The
Buying Parties and Seller agree to and hereby do waive any suit, claim, demand,
or cause of action of any kind that they may have or may assert against the
Escrow Agent arising out of or relating to the execution, administration,
or
performance by the Escrow Agent of this Agreement, unless such suit, claim,
demand, or cause of action is based upon the willful misconduct or gross
negligence of the Escrow Agent each as finally determined by a court of
competent jurisdiction; provided, however, that notwithstanding anything
in this
Agreement to the contrary, the Escrow Agent shall not be liable in any event
for
special, punitive, indirect, incidental, or consequential losses or damages
of
any kind whatsoever (including but not limited to lost profits), even if
the
Escrow Agent has been advised of the likelihood of such loss or damage and
regardless of the form of action. The Buying Parties and Seller further agree
to
jointly and severally indemnify the Escrow Agent, and to defend and to hold
the
Escrow Agent harmless against and from any and all claims, demands, costs,
liabilities, and expenses, including reasonable attorneys’ fees, which may be
asserted against it or to which it may be exposed or which it may incur for
any
action taken, suffered, or omitted to be taken, by reason of its execution,
administration, or performance of this Agreement, except to the extent
attributable to its willful misconduct or gross negligence. Such agreement
to
indemnify shall survive the termination of this Agreement until extinguished
by
any applicable statute of limitations.
(ii) In
case
any litigation is brought against the Escrow Agent in respect of which
indemnification may be sought hereunder, the Escrow Agent shall give prompt
notice of that litigation to the parties hereto, and the parties upon receipt
of
that notice shall have the obligation and the right to assume the defense
of
such litigation, provided that failure of the Escrow Agent to give that notice
shall not relieve the parties hereto from any of their obligations under
this
Section 8(c)(ii) except to the extent that such failure materially
prejudices the defense of such litigation by said parties and only to the
extent
of such prejudice. At its own expense, the Escrow Agent may employ separate
counsel and participate in the defense of any litigation so assumed by the
parties hereto; provided that if the Escrow Agent is advised by its own counsel
that there are material legal defenses available to it that are different
from
or additional to those available to any or all of the parties hereto, or
a
conflict of interest exists between any of the parties and the Escrow Agent,
the
Escrow Agent will be entitled to obtain its own separate attorney whereby
the
parties hereto will pay the reasonable attorneys’ fees and expenses for such
attorney. The parties hereto shall not be liable for any settlement without
their respective consents.
d. Fees
and Expenses of Escrow Agent.
i. The
Escrow Agent shall not receive any fees for its services hereunder. However,
except as otherwise provided in Section 8(d)(ii) hereof, the Escrow Agent
shall be reimbursed for all reasonable expenses, disbursements and advances,
including reasonable attorneys’ fees, incurred by the Escrow Agent in connection
with carrying
out its ordinary duties to maintain the Escrow Shares and deliver such Escrow
Shares pursuant to this Agreement. The amount of such reimbursement shall
be
paid one half (½) by Seller and one half (½) by the Buying Parties. The Escrow
Agent shall periodically xxxx Seller for such fees and expenses in accordance
with its customary billing practices.
ii. Seller,
on the one hand, and the Buying Parties, on the other hand, agree that if
the
Escrow Agent shall incur or suffer any other reasonable costs, charges, damages
or attorneys’ fees on account of being the Escrow Agent or on account of having
received the Escrow Shares hereunder (including, without limitation, costs,
charges, damages and reasonable attorneys’ fees as a result of litigation
involving this Agreement or the Escrow Shares other than by reason of the
gross
negligence or willful misconduct of the Escrow Agent), then such costs, charges,
damages or fees (including, without limitation, reasonable attorneys’ fees
incurred by the Escrow Agent in connection with any such litigation) shall
be
paid one-half by the Buying Parties and one-half by the Seller, or, in the
case
of any cost, charge, damage or fee arising as a result of litigation, in
such
manner as the court in which such litigation occurs may direct.
A-5
9. Miscellaneous.
a. Notices.
All
notices, demands or other communications to be given or delivered under or
by
reason of the provisions of this Agreement shall be in writing and shall
be
deemed to have been given when delivered personally to the recipient or when
sent by facsimile followed by delivery by reputable overnight courier service
(charges prepaid), one day after being sent to the recipient by reputable
overnight courier service (charges prepaid) or five days after being mailed
to
the recipient by certified or registered mail, return receipt requested and
postage prepaid. Any notice, demand or other communication hereunder may
be
given by any other means (including telecopy or electronic mail), but shall
not
be deemed to have been duly given unless and until it is actually received
by
the intended recipient. Such notices, demands and other communications shall
be
sent to the addresses indicated below:
if
to the
Seller, to:
EON
Streams, Inc.
℅
Xxxxxxx
& Associates, Inc.
0000
Xxxxxxxxx
Xxxxxxx,
XX 00000
Facsimile: 000-000-0000
Attention:
Xxxxxx
X.
Xxxxxxx
if
to the
Buying Parties, to:
Xxx
Xxxxxx, Xxxxx 000
Xxxxxx,
Xxxxxxxxxx 00000
Facsimile:
000-000-0000
Attention: ________________,
__________
with
a
copy (which shall not constitute notice to the Buying Parties) to:
Xxxx
Xxxxxxxx Xxxxx Xxx & Xxxxxxxx
000
Xxxxx
Xxxxx Xxxxxx, Xxxxx 0000
Xxxx
Xxxx
Xxxx, Xxxx 00000
Facsimile:
000-000-0000
Attention:
Xxxxx
X.
Xxxxx, Esq.
if
to the
Escrow Agent, to:
Xxxxxx,
Xxxxx & Xxxxxx, P.C.
0000
Xxxxx Xxxxxxxxx Xxxxx
000
Xxxxx
Xxx Xxxxxx
Xxxxxxxxx,
XX 00000
Facsimile: (000)
000-0000
Attention:
Xxxxxxx
X. Xxxxxx, Xx.
or
to
such other address, to the attention of such other person and/or with such
other
copy or copies as the recipient party has specified by prior written notice
to
the sending party. If any time period for giving notice or taking action
expires
on a day which is a Saturday, Sunday or legal holiday in the State of California
(any other day being a "business day"), such time period shall automatically
be
extended to, the next business day immediately following such Saturday, Sunday
or legal holiday.
b. Counterparts.
This Agreement may be executed in any number of counterparts and by facsimile,
and each such counterpart shall be deemed to be an original instrument, but
all
such counterparts together shall constitute one agreement.
c. Governing
Law.
This
Agreement shall be governed by and construed in accordance with the domestic
laws of the state of California without giving effect to any choice or conflict
of law provision or rule (whether of the state of California or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the state of California.
A-6
d. Benefits
of Agreement.
This
Agreement shall be binding upon inure to the benefit of and be enforceable
by
the parties hereto and their respective successors and assigns. Anything
contained in the preceding sentence to the contrary notwithstanding, neither
this Agreement nor any of the rights, interests or obligations herein or
hereunder shall be assignable by any party hereto without the consent of
the
other parties hereto.
e. Modifications.
This
Agreement shall not be altered or otherwise amended except pursuant to an
instrument in writing signed by each of the parties hereto.
f. Descriptive
Headings.
The
descriptive headings in this Agreement are for convenience only and shall
not
control or affect the meaning or construction of any provision of this
Agreement.
g. Representations
and Warranties.
Each of
the Buying Parties and the Seller hereby represents and warrants (i) that
this
Agreement has been duly authorized, executed and delivered on its behalf
and
constitutes its legal, valid and binding obligation and (ii) that the execution,
delivery and performance of this Agreement by the Buying Parties and the
Seller
does not and will not violate any applicable law regulation.
h. No
Third-party Beneficiaries.
This
Agreement shall not confer any rights or remedies upon any person other than
the
parties hereto and their respective successors and permitted assigns with
respect to all rights and obligations of such parties hereunder.
i. Entire
Agreement.
This
Agreement (including the Exhibits hereto and the documents and certificates
required to be delivered hereby) constitutes the entire agreement among the
parties and supersedes any prior understandings, agreements, or representations
by or among the parties, written or oral, to the extent they related in any
way
to the subject matter hereof.
j. Specific
Performance.
Each of
the parties acknowledges and agrees that the other party would be damaged
irreparably in the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise are breached.
Accordingly, each of the parties agrees that the other parties shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of
this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States
or
any state thereof having jurisdiction over the parties and the matter (subject
to the provisions set forth in Section 9(l) below), in addition to any
other remedy to which it may be entitled, at law or in equity.
k. Submission
to Jurisdiction.
Each of
the parties submits to the exclusive jurisdiction of any state or federal
court
sitting in Orange County, California in any action or proceeding arising
out of
or relating to this Agreement and agrees that all claims in respect of the
action or proceeding may be heard and determined in any such court. Each
party
also agrees not to bring or seek removal of any action or proceeding arising
out
of or relating to this Agreement in or to any other court. Each of the parties
waives any defense of inconvenient forum to the maintenance of any action
or
proceeding so brought and waives any bond, surety, or other security that
might
be required of any other party with respect thereto. Each party agrees that
a
final judgment in any action or proceeding so brought shall be conclusive
and
may be enforced by suit on the judgment or in any other manner provided by
law
or in equity.
A-7
l. Waiver
of Trial By Jury.
EACH
PARTY HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY
JURY IN
ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING
OUT
OF THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS OR THE VALIDITY,
PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT HEREOF OR THEREOF.
EACH
PARTY AGREES THAT THIS SECTION 9(l) IS A SPECIFIC AND MATERIAL ASPECT OF
THIS
AGREEMENT AND EACH OF THE OTHER TRANSACTION DOCUMENTS AND ACKNOWLEDGES THAT
THE
OTHER PARTIES WOULD NOT HAVE ENTERED INTO THIS AGREEMENT AND CONSUMMATED
THE
TRANSACTIONS CONTEMPLATED HEREBY IF THIS SECTION 9(l) WERE NOT PART OF THIS
AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS.
[SIGNATURE
PAGE FOLLOWS]
A-8
IN
WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to
be
executed and delivered on the date first above written.
| VITALSTREAM HOLDINGS, INC. | ||
| |
|
|
|
|
By:
|
/s/ Xxxx Xxxxxxxx |
| Xxxx Xxxxxxxx, Chief Executive Officer | ||
| EON STREAMS, INC. | ||
| |
|
|
|
|
By:
|
/s/ Xxxxxxx Xxxxxx |
| Xxxxxxx Xxxxxx, President | ||
| THE ESCROW AGENT: | ||
|
XXXXXX,
XXXXX & XXXXXX, P.C.
|
||
| |
|
|
|
|
By:
|
|
| Name | ||
| Title: | ||
Signature
Page to Escrow Agreement
A-9
EXHIBIT
A
[ADDRESS]
[Date]
Joint
Written Instructions
Ladies
and Gentlemen:
Reference
is made to the Escrow Agreement dated ______ __, 2006 (the “Escrow Agreement),
among VitalStream Holdings, Inc., a Nevada corporation (“Holdings”), ________,
Inc., a Nevada corporation (together with Holdings, the “Buying Parties”), EON
Streams, Inc., a Tennessee corporation (the “Seller”), and you. Capitalized
terms used, but not defined herein shall have the meaning set forth in the
Escrow Agreement.
Pursuant
to Section 6(a) of the Escrow Agreement, the undersigned hereby instruct
you to deliver Escrow Shares to [Seller / Holdings].
| VITALSTREAM HOLDINGS, INC. | ||
| |
|
|
|
|
By:
|
|
| Name: | ||
| Title: | ||
| EON STREAMS, INC. | ||
| |
|
|
|
|
By:
|
|
| Name: | ||
| Title: | ||
A-10
EXHIBIT B
[ADDRESS]
[Date]
Notice
of Final Decree
Ladies
and Gentlemen:
Reference
is made to the Escrow Agreement dated _____ __, 2006 (the “Escrow Agreement),
among VitalStream Holdings, Inc., a Nevada corporation (“Holdings”), ________,
Inc., a Nevada corporation (together with Holdings, the “Buying Parties”), EON
Streams, Inc., a Tennessee corporation (the “Seller”), and you. Capitalized
terms used, but not defined herein shall have the meaning set forth in the
Escrow Agreement.
Pursuant
to Sections 6(b) of the Escrow Agreement, the undersigned hereby instructs
you to deliver Escrow Shares with a Market Value equal to $______ in accordance
with the Final Decree (as defined in the Escrow Agreement), a certified copy
of
which is attached hereto.
| VITALSTREAM HOLDINGS, INC. | ||
| |
|
|
|
|
By:
|
|
| Name: | ||
| Title: | ||
| EON STREAMS, INC. | ||
| |
|
|
|
|
By:
|
|
| Name: | ||
| Title: | ||
[Attach
certified copy of Final Decree]
X-00
XXXXXXX
X
XXXXXXX
XXXXXX
Xxxx
X-0
EXHIBIT
C
SELLER
FINANCIAL STATEMENTS
[See
attached]
[to
be
filed in Form 8-K/A amendment]
C-1
EXHIBIT
D
FINANCIAL
STATEMENT CERTIFICATE
[See
attached]
D-1
EON
STREAMS, INC.
FINANCIAL
STATEMENT CERTIFICATE
I,
Xxxxx
Xxxxxxxxx,
in my
capacity as Chief
Financial Officer of EON Streams, Inc., a California
corporation
(the
“Seller”),
pursuant to Section 7(a)
of that
certain Asset Purchase Agreement dated as of May 19, 2006
(the
"Agreement"),
by
and among Seller,
VitalStream Holdings, Inc.
and
VitalStream Advertising Solutions, Inc.,
do
hereby
certify in the name of and on behalf of Seller
that:
|
1.
|
Attached
hereto are the following financial statements (collectively the
“Final
Financial Statements”):
(i) audited consolidated and unaudited consolidating balance sheets
and
statements of income, changes in stockholders’ equity, and cash flow as of
and for the fiscal year ended December 31, 2005
for Seller
and its Subsidiaries; and (ii) unaudited
consolidated
and consolidating balance sheets and statements of income, changes
in
stockholders’ equity, and cash flow as of and for the three months
ended
March 31, 2006
for Seller
and its Subsidiaries.
|
|
2.
|
The
Final Financial Statements (including the notes thereto) have been
prepared in accordance with GAAP applied on a consistent basis throughout
the periods covered thereby, present fairly the financial condition
of
Seller
and its Subsidiaries as of such dates and the results of operations
of
Seller
and its Subsidiaries for such periods, are correct and complete,
and are
consistent with the books and records of Seller
and its Subsidiaries (which books and records are correct and complete).
|
|
3.
|
The
Final Financial Statements fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in the Final Financial
Statements.
|
|
4.
|
The
Final Financial Statements, and this Certificate, are hereby incorporated
by reference into the Agreement
and shall be considered, for all purposes,
to be representations and warranties of
Seller
and the Principal Stockholders
under Section 4
of
the
Agreement.
|
Capitalized
terms used herein and not otherwise defined herein shall have the meanings
assigned to such terms in the Agreement.
*
* * *
*
D-2
IN
WITNESS WHEREOF, I have signed this Financial Statement Certificate
this 19thday
of
May, 2006.
| EON STREAMS, INC. | ||
| |
|
|
|
|
By:
|
/s/ Xxxxx Xxxxxxxxx |
|
Xxxxx
Xxxxxxxxx, Chief Financial
Officer
|
||
D-3
EXHIBIT
E
FORM
OF EMPLOYMENT
AGREEMENT
[See
attached]
E-1
EMPLOYMENT
AGREEMENT
THIS
EMPLOYMENT AGREEMENT (this “Agreement”) is entered into as of May 19, 2006 (the
“Effective Date”), by and between VitalStream Advertising Solutions, Inc., a
Nevada corporation (the “Company”), VitalStream Holdings, Inc. (“Parent”;
together with the Company and all direct and indirect subsidiaries of Parent,
the “Consolidated Company”) and Xxxxx Xxxxx (the “Employee”).
RECITALS
A. The
Company, Parent and EON Streams, Inc. (“EON”) are parties to that certain Asset
Purchase Agreement dated May 19, 2006 (the “Purchase Agreement”), pursuant to
which the Company is purchasing from EON substantially all of the assets
of EON
for the consideration set forth therein (the “Purchase”). Employee is a
shareholder of EON and will be receiving a substantial economic benefit from
the
Purchase.
B. The
going
concern value of the assets being acquired by the Company in the Purchase
would
be diminished substantially if Employee were to compete with the Company
or its
affiliates.
C. The
Company desires to hire Employee as an employee of the Company following
the
Purchase, and Employee desires to become an employee of the Company, all
on the
terms of this Agreement.
AGREEMENT
NOW,
THEREFORE, in consideration of this Agreement and of the covenants and
conditions contained in this Agreement in the Purchase Agreement, the parties
hereto agree as follows:
1. Employment;
Location.
The
Company hereby agrees to employ Employee during the Term, and Employee hereby
agrees to be employed by the Company during the Term, in Xxxx County in the
State of Tennessee or in such other location as may be mutually agreed between
Employee and the Company.
2. Term.
The
term (the “Term”) shall commence on the date first set forth above and shall
continue, unless earlier terminated as herein provided, for a period of eighteen
(18) months, subject to the option of the Company to unilaterally extend
the
Term for up to three (3) separate six-month (6-month) periods, with each
such
option to be exercised in writing within sixty (60) days of the expiration
of
the then-expiring period. If Employee’s employment with the Company continues
beyond the Term, the terms of this Agreement, other than provisions that
by
their terms apply only during the Term, will continue to govern Employee’s
employment with the Company. The “Term” shall terminate upon the termination of
Employee’s employment with the Company in a manner permitted by this Agreement,
provided that all covenants that by their terms survive termination of this
Agreement, including the covenants set forth in Sections 7, 8 and 9 of this
Agreement, shall survive termination of this Agreement indefinitely, unless
an
early termination provision is set forth therein.
E-2
3. Duties.
Employee’s title shall be Director of Advertising Products of the Company.
Employee’s
duties
shall include such duties specifically assigned or delegated to Employee
by the
Board of Directors of the Company or the Board of Directors of the Parent
(either such Board of Directors, the “Board”) and such other duties as are
typically performed by an employee with the same position as Employee. Employee
acknowledges that the Board may change, increase or decrease Employee’s title,
position and/or duties from time to time in its discretion without breach
of
this Agreement. Employee shall diligently execute his duties and shall devote
his full time, skills and efforts to such duties during ordinary working
hours.
Employee shall faithfully adhere to, execute and fulfill all lawful policies
established from time to time by the Company.
4. Compensation
and Benefits.
The
Company shall pay Employee, and Employee accepts as full compensation for
all
services to be rendered to the Company, the following compensation and
benefits:
4.1 Base
Salary.
During
the Term, the Company shall pay Employee an annual base salary of One Hundred
Thousand Dollars ($100,000) per year, payable in equal installments at least
monthly by the last day of each month or at more frequent intervals in
accordance with the Company’s
customary pay schedule. The Company may increase Employee’s base salary during
the Term but shall retain the discretion to subsequently decrease Employee’s
base salary to the level set forth herein. Following the Term, the Company
may
increase or decrease Employee’s base salary as it seems
appropriate.
4.2 Stock
Options.
Subject
to the terms and conditions of the VitalStream 2001 Stock Incentive Plan
(as
amended to date), the Company will grant to you an option to purchase 20,000
shares of Parent common stock at a price equal to the closing price of the
stock
on the grant date, ¼ of which shares will vest one year from the grant date,
with 1/16 of the remaining shares vesting at the end of each quarter thereafter
until fully vested, with an option term of 5 years.
4.3 Additional
Benefits.
Employee shall be eligible to participate in the Company’s
employee benefit plans generally available to all employees, if an when such
plans may be adopted, including, without limitation, bonus plans, pension
or
profit sharing plans, incentive stock plans, and those plans covering life,
disability, health, and dental insurance in accordance with the rules for
participation and eligibility established in the discretion of the Board
for
individual participation in any such plans as may be in effect from time
to
time; provided, nothing contained in this Agreement shall obligate the Company
to formulate or continue any such plans.
4.4 Paid
Time Off and Holidays.
Employee
shall be entitled to accrue, use and carryover paid time off in accordance
with
the Consolidated Company’s policy for each calendar year at full pay or such
increased leave as may be allowed by the Board for members of management
of the
Company generally. In addition, Employee shall be entitled to other leave
and
holidays in accordance with the Consolidated Company's policy and governing
law.
4.5 Deductions.
The
Company shall have the right to deduct from the compensation due to Employee
hereunder any and all sums required for social security and withholding taxes
and for any other federal, state or local tax or charge which may be hereafter
enacted or required by law as a charge on compensation of Employee.
5. Business
Expenses.
The
Company shall reimburse Employee for all approved, reasonable out-of-pocket
entertainment and business expenses he incurs in fulfilling his duties
hereunder, in accordance with the general policy of the Consolidated Company
in
effect from time to time, provided that Employee furnishes to the Company
adequate records and other documentary evidence required by the general policy
of the Company and
all
federal and state statutes and regulations issued by the appropriate taxing
authorities for the substantiation of each such business expense as a deduction
on the federal or state income tax returns of the Company.
E-3
6. Termination
of Employee’s Employment.
6.1 Termination
by Company.
Notwithstanding any provision in this Agreement to the contrary, the
Company may terminate Employee’s employment at any time during or following the
Term, for any or no reason and with or without Cause (as defined below) or
advance notice. The Company’s rights under this Section 6.1 may not be changed
or modified (a) by any oral representation to the contrary, (b) by any practice
or procedure followed by the Company, or (c) by any policy manual, employee
handbook, or other document issued by the Company (other than an agreement
described in the next sentence). Any such change or modification must be
a
written agreement signed by both Employee and the President or Chief Executive
Officer of Parent that specifically revokes the right of the Company to
terminate Employee’s employment at-will. No other officer or employee of any
Consolidated Company has the power or authority, either verbally or in writing,
to alter the termination-at-will relationship except as specifically set
forth
in this paragraph.
6.2 Termination
by Employee.
During
the Term, the Employee may resign from employment with the Company or otherwise
voluntarily terminate Employee’s employment with the Company only for Good
Reason (as defined below), death or Disability (as defined below). Voluntary
termination by the Employee of his employment during the Term for any other
reason shall be a breach of this Agreement, for which the Company shall have
available any and all remedies provided for in this Agreement or otherwise
available at law or equity. Following the Term, the Employee may voluntarily
terminate his Employment with the Company at any time, with or without Good
Reason or notice. “Good Reason” shall mean (a) Employer's failure to cure,
within 20 days of receiving written notice thereof, a material breach of
any of
the terms of this Agreement; and (b) a material adverse change in Employee's
position with Employer that materially reduces his responsibilities, without
Cause and without Employee's written consent.
6.3 Consequences
of Termination by Company for Cause or by Employee for Good
Reason.
If
Employee’s employment is terminated by the Company during the Term for Cause, by
the Employee during the Term for Good Reason or by either party following
the
Term, not later than 30 days after the effective date of the termination
(or
earlier if required by law), all cash compensation described in this Agreement
that was due through the effective date of the termination, but unpaid, shall
be
computed and paid to Employee by the Company. For
purposes of this Agreement, the term “Cause” means (a)
gross
misconduct; (b) violation of a Consolidated Company policy which is materially
detrimental to a Consolidated Company, its businesses, customers or employees;
(c) material breach of this Agreement, including the failure to perform the
duties as required by this Agreement; (d) material misrepresentation or fraud;
(e) misappropriation, theft or embezzlement of a Consolidated Company’s property
or assets; (f) misappropriation of a Consolidated Company’s trade secrets or
confidential information; (g) conviction of or entry of a plea of nolo
contendere to any felony or a crime of moral turpitude; (h) the use of illegal
drugs at any time during the term of Employment or the consumption of alcohol
to
an extent which materially impairs Employee’s performance of his duties
hereunder; (i) Employee’s death; or (j) Employee’s physical or mental disability
(so that Employee is not able to perform the essential functions of his or
her
job position with or without reasonable accommodation) for any consecutive
period exceeding twenty-six (26) weeks, as documented by a licensed physician.
6.4 By
Company without Cause.
If
Employee’s employment is terminated by the Company during the Term without
Cause, (a) not later than 30 days after the effective date of the termination
(or earlier if required by law), all cash compensation described in this
Agreement that was due through the effective date of the termination, but
unpaid, shall be computed and paid to Employee by the Company; and (b) the
Company shall, upon receipt of a written release from Employee in form and
substance reasonably satisfactory to the Company with respect to all liabilities
arising prior to and in connection with such termination (other than under
outstanding options to purchase common stock and this Section), continue
to pay
in accordance with the Company’s standard payroll policies to or for the benefit
of Employee or, if applicable, his heirs or estate, as their rights may be,
an
amount per-month equal to one hundred percent (100%) of any Employee’s monthly
base-salary for a period that expires at the later of the end of the initial
18
months period of the Term following such termination or the end of any 6
months
extension of the Term then in effect at the time of such termination.
E-4
6.5 Return
of Company Property.
Upon
the termination or end of the employment of Employee with the Company, or
at any
time upon the request of the Company, Employee shall provide to the Company
all
property belonging to the Consolidated Company, including, but not limited
to,
keys, card passes, credit cards, electronic equipment, cellular telephones
and
any materials containing Confidential Information.
7. Covenant
Not to Compete.
7.1 Covenant.
Employee acknowledges that execution and delivery by Employee of this Agreement
is a condition to closing of the obligations of Parent and the Company under
the
Purchase Agreement and that neither Parent nor the Company would have
consummated the transactions contemplated by the Purchase Agreement but for
Employee’s execution and delivery of this Agreement. In consideration of the
Company’s employment of Employee, and the willingness of Parent and the Company
to consummate the transactions contemplated by the Purchase Agreement, Employee
hereby agrees that, while he is employed by the Company and during the
Restrictive Period (as defined hereafter), Employee will not directly or
indirectly compete (as defined in Section 7.2 below) with the Consolidated
Company or their affiliates in any geographic area in which the Consolidated
Company now does business or in which the Consolidated Company does business
as
of the effective date of the termination of the Employee’s
employment. “Restrictive Period” means the period of time between the Effective
Date and the later of (a) three years from the Effective Date, and (b) one
year
from the date of termination of Employee’s employment with the
Company.
7.2 Direct
and Indirect Competition.
As used
herein, the phrase “directly or indirectly compete” shall include owning,
managing, operating or controlling, or participating in the ownership,
management, operation or control of, or being connecting with or having any
interest in, as a stockholder, director, officer, employee, agent, consultant,
assistant, advisor, sole proprietor, partner or otherwise, any person or
entity
other than the Consolidated Company that is engaged in, or proposes to become
engaged in, the Internet Streaming Business (as defined hereafter). “Internet
Streaming Business” means the business of providing any of (a) digital
broadcasting services over the Internet for any type of streaming media or
related technology, (b) server management services or related technology,
(c)
web hosting services or related technology, (c) services or technology ancillary
to any of (a), (b) or (c), such as services or technology for advertising
insertion or trafficking, and (d) consulting services related to any of (a),
(b)
or (d).
7.3 Nonsolicitation.
Employee hereby agrees that, during the Restrictive Period, he will not,
directly or indirectly, through an affiliate or otherwise, for his account
or
the account of any other person, (a) solicit business substantially similar
to
the Internet Streaming Business from any person that at the time of termination
is or was a customer of the Consolidated Company, whether or not he had personal
contact with such person during and by reason of employment with the
Consolidated Company; (b) in any manner induce or attempt to induce any employee
of the Company to
terminate his or her employment with the Consolidated Company; or (c) materially
and adversely interfere with the relationship between the Consolidated Company
and any employee, contractor, supplier, customer or shareholder of the
Consolidated Company.
7.4 Non-Disparagement.
Employee hereby agrees that, during the Restricted Period, he shall not in
any
way, either directly or indirectly, disparage the Company or any Consolidated
Company or any their respective managers, directors, officers, employees
or
agents.
7.5 Enforceability.
If any
of the provisions of this Section 7 are held unenforceable, the remaining
provisions shall nevertheless remain enforceable, and the court making such
determination shall modify, among other things, the scope, duration, or
geographic area of this Section to preserve the enforceability hereof to
the
maximum extent then permitted by law. In addition, the enforceability of
this
Section is also subject to the injunctive and other equitable powers of a
court
as described in Section 11 below.
E-5
7.6 Jurisdiction.
For the
sole purpose of enforcement of the Company’s rights under this Section 7, the
Company and Employee intend to and hereby confer jurisdiction to enforce
the
restrictions set forth in this Section 7 (the “Restrictions”) upon the courts of
any jurisdiction within the geographical scope of the Restrictions. If the
courts of any one or more of such jurisdictions hold the Restrictions
unenforceable by reason of the breadth of such scope or otherwise, it is
the
intention of the Company and Employee that such determination not bar or
in any
way affect the Company’s
rights
to the relief provided above in the courts of any other jurisdiction within
the
geographical scope of the Restrictions, as to breaches of such covenants
in such
other respective jurisdictions, such covenants as they relate to each
jurisdiction being, for this purpose, severable into diverse and independent
covenants. In the event of any litigation between the parties under this
Section
7, the court shall award reasonable attorneys fees to the prevailing
party.
8. Confidential
Information.
8.1 Definition.
The
term “Confidential Information” shall mean and include any information,
including a formula, pattern, compilation, program, source code, device,
method,
technique, or process, that (a) derives independent economic value, actual
or
potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from its disclosure or use, and (b) that is the subject of efforts that are
reasonable under the circumstance to maintain its secrecy. Information included
in Confidential Information includes matters of a technical nature (including
know-how, computer programs, software, patented and unpatented technology,
source-code, accounting methods, and documentation), matters of a business
nature (such as information about contract forms, costs, profits, employees,
promotional methods, markets, market or marketing plans, sales, and client
accounts), plans for further development, and any other information meeting
the
definition of Confidential Information set forth above. Confidential Information
includes all proprietary information and know-how of the Company, whether
or not
patented, related to the function, development, use, marketing, operation
or
modification of any process owned, developed or purchased by the Consolidated
Company related to the Internet Streaming Business. Confidential Information
also includes any such information developed by Employee for the Company
while
an employee of the Consolidated Company. “Confidential Information” does not
include information that is
in the
public domain and is available at the time of disclosure or which thereafter
enters the public domain and is available, through no act or omission by
Employee or other person subject to the duty to keep such information
confidential.
8.2 Nondisclosure
and Non-Use of Confidential Information.
Employee agrees that all files, records (including electronic or digitals
records), documents, and the like relating to such Confidential Information,
whether prepared by him or otherwise coming into his possession, shall remain
the exclusive property of the Consolidated Company, and Employee hereby agrees
to promptly disclose such Confidential Information to the Consolidated Company
upon request and hereby assigns to the Company any rights which he may acquire
in any Confidential Information. Employee further agrees not to disclose
or use
any Confidential Information and to use his best efforts to prevent the
disclosure or use of any Confidential Information either during the term
of his
employment or at any time thereafter, except as may be necessary in the ordinary
course of performing his duties under this Agreement. Upon termination of
Employee’s
employment with the Company for any reason, Employee shall promptly deliver
to
the Company all materials, documents, data, equipment, and other physical
property of any nature containing or pertaining to any Confidential Information,
and Employee shall not take from the Company’s
premises any such material or equipment or any reproduction thereof without
the
written consent of the Company.
9. Inventions.
9.1 Disclosure
of Inventions.
Employee hereby agrees that if he conceives, learns, makes or first reduces
to
practice, either alone or jointly with others, any “Employment Invention” (as
defined in Section 9.3 below) during his employment by the Company, either
as an
employee or as a consultant, he will promptly disclose such Employment Invention
to the Company or to any person designated by it.
E-6
9.2 Ownership,
Assignment, Assistance, and Power of Attorney.
All
Employment Inventions (as defined in Section 9.3 below) shall be the sole
and
exclusive property of the Company, and the Company shall have the right to
use
and to apply for patents, copyrights, or other statutory or common law
protection for such Employment Inventions in any country. Employee hereby
assigns to the Company any rights which he has or may acquire in such Employment
Inventions. Furthermore, Employee agrees to assist the Company in every
reasonable way at the Company’s
expense
to obtain patents, copyrights, and other statutory common law protections
for
such Employment Inventions in any country and to enforce such rights from
time
to time. Specifically, at the Company’s expense Employee agrees to execute all
documents as the Company may reasonably desire for use in applying for and
in
obtaining or enforcing such patents, copyrights, and other statutory or common
law protections together with any assignments thereof to the Company or to
any
person designated by the Company. Employee’s
obligations under this Section 9 shall continue beyond the termination of
his
employment under this Agreement, but the Company shall compensate Employee
at a
rate agreed upon by Employee and the Company pursuant to negotiations in
good
faith after such termination for the time which Employee actually spends
at the
Company’s
request
in rendering such assistance.
9.3 Employment
Inventions.
The
definition of Employment Invention as used in this Section 9 is as
follows:
““Employment
Invention” means any invention or part thereof conceived, developed, reduced to
practice, or created by an employee which is or was:
(a) conceived,
developed, reduced to practice, or created by the employee:
(i) within
the scope of his employment;
(ii) on
his
employer's time; or
(iii) with
the
aid, assistance, or use of any of his employer's property, equipment,
facilities, supplies, resources, or intellectual property;
(b) the
result of any work, services, or duties performed by an employee for his
employer;
(c) related
to the industry or trade of the employer; or
(d) related
to the current or demonstrably anticipated business, research, or development
of
the employer.
9.4 Exclusion
of Prior Inventions.
Exhibit
A
attached
hereto is a complete list by Employee of all inventions which Employee has
conceived, learned, made or first reduced to practice, either alone or jointly
with others, prior to his employment with the Company or with EON and which
he
therefore desires to exclude from the operation of this Agreement, and any
other
inventions Employee wishes to exclude from the definition of “Employment
Invention.” If no inventions are listed on this Exhibit
A,
Employee represents that he has made no such inventions at the time of signing
this Agreement. The Company hereby acknowledges and agrees that, for all
purposes of this Agreement, none of the inventions listed on Exhibit
A
shall be
treated as Employment Inventions hereunder.
9.5 Inventions
of Third Parties.
Employee shall not disclose to the Company, use in the course of his employment,
or incorporate into the Consolidated Company’s
products or processes any confidential or proprietary information or inventions
that belong to a third party, unless the Consolidated Company has received
authorization from such third party.
E-7
10. No
Conflicts.
Employee hereby represents that his performance of all the terms of this
Agreement and his work as an employee of the Company does not breach any
oral or
written agreement which he has made prior to his employment with the
Company.
11. Equitable
Remedies.
Employee acknowledges and agrees that the breach or threatened breach by
him of
certain provisions of this Agreement, including without limitation Sections
7,
8, and 9 above, would cause irreparable harm to the Company for which damages
at
law would be an inadequate remedy. Accordingly, Employee hereby agrees that
in
any such instance the Company shall be entitled to seek (without prior mediation
or arbitration) injunctive or other equitable relief in any state or federal
court within or without the State of Tennessee in addition to any other remedy
to which it may be entitled. Employee hereby submits to the jurisdiction
of any
courts within Xxxx County in the State of Tennessee and
agrees not to assert such venue is inconvenient.
12. Assignment.
This
Agreement is for the unique personal services of Employee and is not assignable
or delegable in whole or in part by Employee without the consent of the Board.
This Agreement may not be assigned or delegated in whole or in part by the
Company without the written consent of the Employee; provided, however, this
Agreement may be assigned by the Company without Employee’s prior written
consent if such assignment is made to an entity acquiring substantially all
of
the business or assets of the Consolidated Company or to another subsidiary
of
Parent.
13. Waiver
or Modification.
Any
waiver, modification, or amendment of any provision of this Agreement shall
be
effective only if in writing in a document that specifically refers to this
Agreement and such document is signed by the parties hereto.
14. Entire
Agreement.
This
Agreement constitutes the full and complete understanding and agreement of
the
parties hereto with respect to the subject matter covered herein and supersedes
all prior oral or written understandings and agreements with respect
thereto.
15. Severability.
If any
provision of this Agreement is found to be unenforceable by a court of competent
jurisdiction, the remaining provisions shall nevertheless remain in full
force
and effect.
16. Attorneys’
Fees.
Should
either Company or Employee default in any of the covenants contained in this
Agreement, or in the event a dispute shall arise as to the meaning of any
term
of this Agreement, the defaulting or nonprevailing party shall pay all costs
and
expenses, including reasonable attorneys’ fees, that may arise or accrue from
enforcing this Agreement, securing an interpretation of any provision of
this
Agreement, or in pursuing any remedy provided by applicable law whether such
remedy is pursued or interpretation is sought by the filing of a lawsuit,
an
appeal, or otherwise.
17. Confidentiality.
Each of
the parties acknowledges that Parent is a so-called “public company” obligated
to file reports under the Securities Exchange Act of 1934, as amended, and
as a
result, the Company may be required to, and hereby has authorization to,
file
this Agreement or any amendment hereto with the Securities and Exchange
Commission without requesting confidential treatment for any portion
hereof.
18. Notices.
Any
notice required hereunder to be given by either party shall be in writing
and
shall be delivered personally or sent by certified or registered mail, postage
prepaid, or by private courier, with written verification of delivery, or
by
facsimile or other electronic transmission to the other party to the address
or
facsimile number set forth below or to such other address or facsimile number
as
either party may designate from time to time according to this provision.
A
notice delivered personally, by private courier or by facsimile or electronic
transmission shall be effective upon receipt. A notice delivered by mail
shall
be effective on the third day after the day of mailing:
E-8
(a) If
to
Employee, at: Xxxxx
Xxxxx
________________
________________
(b) If
to the
Company, at: VitalStream
Holdings, Inc.
Xxx
Xxxxxx, Xxxxx 000
Xxxxxx,
Xxxxxxxxxx 00000
Facsimile
No: (000) 000-0000
Attn:
President
19. Disputes;
Governing Law; Arbitration.
(a) Except
as
provided in Sections 7.5 and 11, any dispute concerning the interpretation
or
construction of this Agreement or Employee’s employment or service with the
Company, shall be resolved by confidential mediation or binding arbitration
in
Xxxx County State of Tennessee.
The parties shall first attempt mediation with a neutral mediator agreed
upon by
the parties. If mediation is unsuccessful or if the parties are unable to
agree
upon a mediator, the dispute shall be submitted to arbitration pursuant to
the
procedures of the American Arbitration Association (“AAA”) or other procedures
agreed to by the parties. All arbitration proceedings shall be conducted
by a
neutral arbitrator mutually agreed upon by the parties from a list provided
by
AAA. The decision of the arbitrator shall be final and binding on all parties.
The costs of mediation and arbitration shall be borne equally by the
parties.
(b) This
Agreement shall be construed in accordance with and governed by the statutes
and
common law of the State of Tennessee. To the extent this Agreement expressly
permits any dispute to be resolved other than through arbitration or mediation
and except as otherwise provided in Section 7.5, the exclusive venue for
any
such action shall be the state and federal courts located in Xxxx County,
State
of Tennessee, and the parties each hereby submit to the jurisdiction of such
courts for purposes of this Agreement.
20. Counterparts;
Facsimile.
This
Agreement may be executed in multiple counterparts, all of which taken together
shall form a single Agreement. A facsimile copy of this Agreement or any
counterpart thereto shall be valid as an original.
[signature
page follows]
E-9
IN
WITNESS WHEREOF, Employee has signed this Employment Agreement personally
and
each of Parent and the Company has caused this Agreement to be executed by
its
duly authorized representative.
| PARENT: | ||
|
VITALSTREAM
HOLDINGS, INC.,
a
Nevada corporation
|
||
| |
|
|
|
|
By:
|
/s/ Xxxx Xxxxxxxx |
| Xxxx Xxxxxxxx, Chief Executive Officer | ||
| COMPANY: | ||
|
VITALSTREAM
ADVERTISING SOLUTIONS, INC.,
a
Nevada corporation
|
||
| |
|
|
|
|
By:
|
/s/ Xxxxxx Xxxxxx |
| Xxxxxx Xxxxxx, President | ||
| EMPLOYEE: | ||
| |
|
|
|
|
By:
|
/s/ Xxxxx Xxxxx |
| Xxxxx Xxxxx, an individual | ||
Signature
Page to Employment Agreement (Xxxxx)
E-10
EXHIBIT
A
PRIOR
INVENTIONS
(a) None
E-11
EMPLOYMENT
AGREEMENT
THIS
EMPLOYMENT AGREEMENT (this “Agreement”) is entered into as of May __, 2006 (the
“Effective Date”), by and between VitalStream Advertising Solutions, Inc., a
Nevada corporation (the “Company”), VitalStream Holdings, Inc. (“Parent”;
together with the Company and all direct and indirect subsidiaries of Parent,
the “Consolidated Company”) and Xxxxxxx Xxxxxx (the “Employee”).
RECITALS
A. The
Company, Parent and EON Streams, Inc. (“EON”) are parties to that certain Asset
Purchase Agreement dated May 19, 2006 (the “Purchase Agreement”), pursuant to
which the Company is purchasing from EON substantially all of the assets
of EON
for the consideration set forth therein (the “Purchase”). Employee is a
shareholder of EON and will be receiving a substantial economic benefit from
the
Purchase.
B. The
going
concern value of the assets being acquired by the Company in the Purchase
would
be diminished substantially if Employee were to compete with the Company
or its
affiliates.
C. The
Company desires to hire Employee as an employee of the Company following
the
Purchase, and Employee desires to become an employee of the Company, all
on the
terms of this Agreement.
AGREEMENT
NOW,
THEREFORE, in consideration of this Agreement and of the covenants and
conditions contained in this Agreement in the Purchase Agreement, the parties
hereto agree as follows:
1. Employment;
Location.
The
Company hereby agrees to employ Employee during the Term, and Employee hereby
agrees to be employed by the Company during the Term, in Xxxx County in the
State of Tennessee or in such other location as may be mutually agreed between
Employee and the Company.
2. Term.
The
term (the “Term”) shall commence on the date first set forth above and shall
continue, unless earlier terminated as herein provided, for a period of eighteen
(18) months, subject to the option of the Company to unilaterally extend
the
Term for up to three (3) separate six-month (6-month) periods, with each
such
option to be exercised in writing within sixty (60) days of the expiration
of
the then-expiring period. If Employee’s employment with the Company continues
beyond the Term, the terms of this Agreement, other than provisions that
by
their terms apply only during the Term, will continue to govern Employee’s
employment with the Company. The “Term” shall terminate upon the termination of
Employee’s employment with the Company in a manner permitted by this Agreement,
provided that all covenants that by their terms survive termination of this
Agreement, including the covenants set forth in Sections 7, 8 and 9 of this
Agreement, shall survive termination of this Agreement indefinitely, unless
an
early termination provision is set forth therein.
3. Duties.
Employee’s title shall be Executive Vice President - Advertising of the Company.
Employee’s
duties
shall include such duties specifically assigned or delegated to Employee
by the
Board of Directors of the Company or the Board of Directors of the Parent
(either such Board of Directors, the “Board”) and such other duties as are
typically performed by an employee with the same position as Employee. Employee
acknowledges that the Board may change, increase or decrease Employee’s title,
position and/or duties from time to time in its discretion without breach
of
this Agreement. Employee shall diligently execute his duties and shall devote
his full time, skills and efforts to such duties during ordinary working
hours.
Employee shall faithfully adhere to, execute and fulfill all lawful policies
established from time to time by the Company.
E-12
4. Compensation
and Benefits.
The
Company shall pay Employee, and Employee accepts as full compensation for
all
services to be rendered to the Company, the following compensation and
benefits:
4.1 Base
Salary.
During
the Term, the Company shall pay Employee an annual base salary of One Hundred
Seventy-Five Thousand Dollars ($175,000) per year, payable in equal installments
at least monthly by the last day of each month or at more frequent intervals
in
accordance with the Company’s
customary pay schedule. The Company may increase Employee’s base salary during
the Term but shall retain the discretion to subsequently decrease Employee’s
base salary to the level set forth herein. Following the Term, the Company
may
increase or decrease Employee’s base salary as it seems
appropriate.
4.2 Bonus.
Employee shall be eligible for the Executive Bonus Plan applicable to senior
management of the Consolidated Company generally, with
the
potential to earn an annual bonus that in the aggregate, based on 100%
achievement of performance objectives, would equal 20% of Employee’s annual
salary (or a pro rata amount if the performance objectives are set for a
period
of less than one year to coincide with the Consolidated Company’s regular cycle
of paying bonuses after the end of its fiscal year). These objectives will
include both individual and company performance targets set by the Board
and
discussed with you Employee annually.
4.3 Stock
Options.
Subject
to the terms and conditions of the VitalStream 2001 Stock Incentive Plan
(as
amended to date), the company will grant to you an option to purchase 150,000
shares of Parent common stock at a price equal to the closing price of the
stock
on the grant date, ¼ of which shares will vest one year from the grant date,
with 1/16 of the remaining shares vesting at the end of each quarter thereafter
until fully vested, with an option term of 5 years.
4.4 Additional
Benefits.
Employee shall be eligible to participate in the Company’s
employee benefit plans generally available to all employees, if an when such
plans may be adopted, including, without limitation, bonus plans, pension
or
profit sharing plans, incentive stock plans, and those plans covering life,
disability, health, and dental insurance in accordance with the rules for
participation and eligibility established in the discretion of the Board
for
individual participation in any such plans as may be in effect from time
to
time; provided, nothing contained in this Agreement shall obligate the Company
to formulate or continue any such plans.
4.5 Paid
Time Off and Holidays.
Employee
shall be entitled to accrue, use and carryover paid time off in accordance
with
the Consolidated Company’s policy for each calendar year at full pay or such
increased leave as may be allowed by the Board for members of management
of the
Company generally. In addition, Employee shall be entitled to other leave
and
holidays in accordance with the Consolidated Company's policy and governing
law.
4.6 Deductions.
The
Company shall have the right to deduct from the compensation due to Employee
hereunder any and all sums required for social security and withholding taxes
and for any other federal, state or local tax or charge which may be hereafter
enacted or required by law as a charge on compensation of Employee.
5. Business
Expenses.
The
Company shall reimburse Employee for all approved, reasonable out-of-pocket
entertainment and business expenses he incurs in fulfilling his duties
hereunder, in accordance with the general policy of the Consolidated Company
in
effect from time to time, provided that Employee furnishes to the Company
adequate records and other documentary evidence required by the general policy
of the Company and
all
federal and state statutes and regulations issued by the appropriate taxing
authorities for the substantiation of each such business expense as a deduction
on the federal or state income tax returns of the Company.
E-13
6. Termination
of Employee’s Employment.
6.1 Termination
by Company.
Notwithstanding any provision in this Agreement to the contrary, the
Company may terminate Employee’s employment at any time during or following the
Term, for any or no reason and with or without Cause (as defined below) or
advance notice. The Company’s rights under this Section 6.1 may not be changed
or modified (a) by any oral representation to the contrary, (b) by any practice
or procedure followed by the Company, or (c) by any policy manual, employee
handbook, or other document issued by the Company (other than an agreement
described in the next sentence). Any such change or modification must be
a
written agreement signed by both Employee and the President or Chief Executive
Officer of Parent that specifically revokes the right of the Company to
terminate Employee’s employment at-will. No other officer or employee of any
Consolidated Company has the power or authority, either verbally or in writing,
to alter the termination-at-will relationship except as specifically set
forth
in this paragraph.
6.2 Termination
by Employee.
During
the Term, the Employee may resign from employment with the Company or otherwise
voluntarily terminate Employee’s employment with the Company only for Good
Reason (as defined below), death or Disability (as defined below). Voluntary
termination by the Employee of his employment during the Term for any other
reason shall be a breach of this Agreement, for which the Company shall have
available any and all remedies provided for in this Agreement or otherwise
available at law or equity. Following the Term, the Employee may voluntarily
terminate his Employment with the Company at any time, with or without Good
Reason or notice. “Good Reason” shall mean (a) Employer's failure to cure,
within 20 days of receiving written notice thereof, a material breach of
any of
the terms of this Agreement; and (b) a material adverse change in Employee's
position with Employer that materially reduces his responsibilities, without
Cause and without Employee's written consent.
6.3 Consequences
of Termination by Company for Cause or by Employee for Good
Reason.
If
Employee’s employment is terminated by the Company during the Term for Cause, by
the Employee during the Term for Good Reason or by either party following
the
Term, not later than 30 days after the effective date of the termination
(or
earlier if required by law), all cash compensation described in this Agreement
that was due through the effective date of the termination, but unpaid, shall
be
computed and paid to Employee by the Company. For
purposes of this Agreement, the term “Cause” means (a)
gross
misconduct; (b) violation of a Consolidated Company policy which is materially
detrimental to a Consolidated Company, its businesses, customers or employees;
(c) material breach of this Agreement, including the failure to perform the
duties as required by this Agreement; (d) material misrepresentation or fraud;
(e) misappropriation, theft or embezzlement of a Consolidated Company’s property
or assets; (f) misappropriation of a Consolidated Company’s trade secrets or
confidential information; (g) conviction of or entry of a plea of nolo
contendere to any felony or a crime of moral turpitude; (h) the use of illegal
drugs at any time during the term of Employment or the consumption of alcohol
to
an extent which materially impairs Employee’s performance of his duties
hereunder; (i) Employee’s death; or (j) Employee’s physical or mental disability
(so that Employee is not able to perform the essential functions of his or
her
job position with or without reasonable accommodation) for any consecutive
period exceeding twenty-six (26) weeks, as documented by a licensed physician.
6.4 By
Company without Cause.
If
Employee’s employment is terminated by the Company during the Term without
Cause, (a) not later than 30 days after the effective date of the termination
(or earlier if required by law), all cash compensation described in this
Agreement that was due through the effective date of the termination, but
unpaid, shall be computed and paid to Employee by the Company; and (b) the
Company shall, upon receipt of a written release from Employee in form and
substance reasonably satisfactory to the Company with respect to all liabilities
arising prior to and in connection with such termination (other than under
outstanding options to purchase common stock and this Section), continue
to pay
in accordance with the Company’s standard payroll policies to or for the benefit
of Employee or, if applicable, his heirs or estate, as their rights may be,
an
amount per-month equal to one hundred percent (100%) of any Employee’s monthly
base-salary for a period that expires at the later of the end of the initial
18
months period of the Term following such termination or the end of any 6
months
extension of the Term then in effect at the time of such termination.
E-14
6.5 Return
of Company Property.
Upon
the termination or end of the employment of Employee with the Company, or
at any
time upon the request of the Company, Employee shall provide to the Company
all
property belonging to the Consolidated Company, including, but not limited
to,
keys, card passes, credit cards, electronic equipment, cellular telephones
and
any materials containing Confidential Information.
7. Covenant
Not to Compete.
7.1 Covenant.
Employee acknowledges that execution and delivery by Employee of this Agreement
is a condition to closing of the obligations of Parent and the Company under
the
Purchase Agreement and that neither Parent nor the Company would have
consummated the transactions contemplated by the Purchase Agreement but for
Employee’s execution and delivery of this Agreement. In consideration of the
Company’s employment of Employee, and the willingness of Parent and the Company
to consummate the transactions contemplated by the Purchase Agreement, Employee
hereby agrees that, while he is employed by the Company and during the
Restrictive Period (as defined hereafter), Employee will not directly or
indirectly compete (as defined in Section 7.2 below) with the Consolidated
Company or their affiliates in any geographic area in which the Consolidated
Company now does business or in which the Consolidated Company does business
as
of the effective date of the termination of the Employee’s
employment. “Restrictive Period” means the period of time between the Effective
Date and the later of (a) three years from the Effective Date, and (b) one
year
from the date of termination of Employee’s employment with the
Company.
7.2 Direct
and Indirect Competition.
As used
herein, the phrase “directly or indirectly compete” shall include owning,
managing, operating or controlling, or participating in the ownership,
management, operation or control of, or being connecting with or having any
interest in, as a stockholder, director, officer, employee, agent, consultant,
assistant, advisor, sole proprietor, partner or otherwise, any person or
entity
other than the Consolidated Company that is engaged in, or proposes to become
engaged in, the Internet Streaming Business (as defined hereafter). “Internet
Streaming Business” means the business of providing any of (a) digital
broadcasting services over the Internet for any type of streaming media or
related technology, (b) server management services or related technology,
(c)
web hosting services or related technology, (c) services or technology ancillary
to any of (a), (b) or (c), such as services or technology for advertising
insertion or trafficking, and (d) consulting services related to any of (a),
(b)
or (d).
7.3 Nonsolicitation.
Employee hereby agrees that, during the Restrictive Period, he will not,
directly or indirectly, through an affiliate or otherwise, for his account
or
the account of any other person, (a) solicit business substantially similar
to
the Internet Streaming Business from any person that at the time of termination
is or was a customer of the Consolidated Company, whether or not he had personal
contact with such person during and by reason of employment with the
Consolidated Company; (b) in any manner induce or attempt to induce any employee
of the Company to
terminate his or her employment with the Consolidated Company; or (c) materially
and adversely interfere with the relationship between the Consolidated Company
and any employee, contractor, supplier, customer or shareholder of the
Consolidated Company.
7.4 Non-Disparagement.
Employee hereby agrees that, during the Restricted Period, he shall not in
any
way, either directly or indirectly, disparage the Company or any Consolidated
Company or any their respective managers, directors, officers, employees
or
agents.
7.5 Enforceability.
If any
of the provisions of this Section 7 are held unenforceable, the remaining
provisions shall nevertheless remain enforceable, and the court making such
determination shall modify, among other things, the scope, duration, or
geographic area of this Section to preserve the enforceability hereof to
the
maximum extent then permitted by law. In addition, the enforceability of
this
Section is also subject to the injunctive and other equitable powers of a
court
as described in Section 11 below.
E-15
7.6 Jurisdiction.
For the
sole purpose of enforcement of the Company’s rights under this Section 7, the
Company and Employee intend to and hereby confer jurisdiction to enforce
the
restrictions set forth in this Section 7 (the “Restrictions”) upon the courts of
any jurisdiction within the geographical scope of the Restrictions. If the
courts of any one or more of such jurisdictions hold the Restrictions
unenforceable by reason of the breadth of such scope or otherwise, it is
the
intention of the Company and Employee that such determination not bar or
in any
way affect the Company’s
rights
to the relief provided above in the courts of any other jurisdiction within
the
geographical scope of the Restrictions, as to breaches of such covenants
in such
other respective jurisdictions, such covenants as they relate to each
jurisdiction being, for this purpose, severable into diverse and independent
covenants. In the event of any litigation between the parties under this
Section
7, the court shall award reasonable attorneys fees to the prevailing
party.
8. Confidential
Information.
8.1 Definition.
The
term “Confidential Information” shall mean and include any information,
including a formula, pattern, compilation, program, source code, device,
method,
technique, or process, that (a) derives independent economic value, actual
or
potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from its disclosure or use, and (b) that is the subject of efforts that are
reasonable under the circumstance to maintain its secrecy. Information included
in Confidential Information includes matters of a technical nature (including
know-how, computer programs, software, patented and unpatented technology,
source-code, accounting methods, and documentation), matters of a business
nature (such as information about contract forms, costs, profits, employees,
promotional methods, markets, market or marketing plans, sales, and client
accounts), plans for further development, and any other information meeting
the
definition of Confidential Information set forth above. Confidential Information
includes all proprietary information and know-how of the Company, whether
or not
patented, related to the function, development, use, marketing, operation
or
modification of any process owned, developed or purchased by the Consolidated
Company related to the Internet Streaming Business. Confidential Information
also includes any such information developed by Employee for the Company
while
an employee of the Consolidated Company. “Confidential Information” does not
include information that is
in the
public domain and is available at the time of disclosure or which thereafter
enters the public domain and is available, through no act or omission by
Employee or other person subject to the duty to keep such information
confidential.
8.2 Nondisclosure
and Non-Use of Confidential Information.
Employee agrees that all files, records (including electronic or digitals
records), documents, and the like relating to such Confidential Information,
whether prepared by him or otherwise coming into his possession, shall remain
the exclusive property of the Consolidated Company, and Employee hereby agrees
to promptly disclose such Confidential Information to the Consolidated Company
upon request and hereby assigns to the Company any rights which he may acquire
in any Confidential Information. Employee further agrees not to disclose
or use
any Confidential Information and to use his best efforts to prevent the
disclosure or use of any Confidential Information either during the term
of his
employment or at any time thereafter, except as may be necessary in the ordinary
course of performing his duties under this Agreement. Upon termination of
Employee’s
employment with the Company for any reason, Employee shall promptly deliver
to
the Company all materials, documents, data, equipment, and other physical
property of any nature containing or pertaining to any Confidential Information,
and Employee shall not take from the Company’s
premises any such material or equipment or any reproduction thereof without
the
written consent of the Company.
9. Inventions.
9.1 Disclosure
of Inventions.
Employee hereby agrees that if he conceives, learns, makes or first reduces
to
practice, either alone or jointly with others, any “Employment Invention” (as
defined in Section 9.3 below) during his employment by the Company, either
as an
employee or as a consultant, he will promptly disclose such Employment Invention
to the Company or to any person designated by it.
E-16
9.2 Ownership,
Assignment, Assistance, and Power of Attorney.
All
Employment Inventions (as defined in Section 9.3 below) shall be the sole
and
exclusive property of the Company, and the Company shall have the right to
use
and to apply for patents, copyrights, or other statutory or common law
protection for such Employment Inventions in any country. Employee hereby
assigns to the Company any rights which he has or may acquire in such Employment
Inventions. Furthermore, Employee agrees to assist the Company in every
reasonable way at the Company’s
expense
to obtain patents, copyrights, and other statutory common law protections
for
such Employment Inventions in any country and to enforce such rights from
time
to time. Specifically, at the Company’s expense Employee agrees to execute all
documents as the Company may reasonably desire for use in applying for and
in
obtaining or enforcing such patents, copyrights, and other statutory or common
law protections together with any assignments thereof to the Company or to
any
person designated by the Company. Employee’s
obligations under this Section 9 shall continue beyond the termination of
his
employment under this Agreement, but the Company shall compensate Employee
at a
rate agreed upon by Employee and the Company pursuant to negotiations in
good
faith after such termination for the time which Employee actually spends
at the
Company’s
request
in rendering such assistance.
9.3 Employment
Inventions.
The
definition of Employment Invention as used in this Section 9 is as
follows:
““Employment
Invention” means any invention or part thereof conceived, developed, reduced to
practice, or created by an employee which is or was:
(a) conceived,
developed, reduced to practice, or created by the employee:
(i) within
the scope of his employment;
(ii) on
his
employer's time; or
(iii) with
the
aid, assistance, or use of any of his employer's property, equipment,
facilities, supplies, resources, or intellectual property;
(b) the
result of any work, services, or duties performed by an employee for his
employer;
(c) related
to the industry or trade of the employer; or
(d) related
to the current or demonstrably anticipated business, research, or development
of
the employer.
9.4 Exclusion
of Prior Inventions.
Exhibit
A
attached
hereto is a complete list by Employee of all inventions which Employee has
conceived, learned, made or first reduced to practice, either alone or jointly
with others, prior to his employment with the Company or with EON and which
he
therefore desires to exclude from the operation of this Agreement, and any
other
inventions Employee wishes to exclude from the definition of “Employment
Invention.” If no inventions are listed on this Exhibit
A,
Employee represents that he has made no such inventions at the time of signing
this Agreement. The Company hereby acknowledges and agrees that, for all
purposes of this Agreement, none of the inventions listed on Exhibit
A
shall be
treated as Employment Inventions hereunder.
9.5 Inventions
of Third Parties.
Employee shall not disclose to the Company, use in the course of his employment,
or incorporate into the Consolidated Company’s
products or processes any confidential or proprietary information or inventions
that belong to a third party, unless the Consolidated Company has received
authorization from such third party.
E-17
10. No
Conflicts.
Employee hereby represents that his performance of all the terms of this
Agreement and his work as an employee of the Company does not breach any
oral or
written agreement which he has made prior to his employment with the
Company.
11. Equitable
Remedies.
Employee acknowledges and agrees that the breach or threatened breach by
him of
certain provisions of this Agreement, including without limitation Sections
7,
8, and 9 above, would cause irreparable harm to the Company for which damages
at
law would be an inadequate remedy. Accordingly, Employee hereby agrees that
in
any such instance the Company shall be entitled to seek (without prior mediation
or arbitration) injunctive or other equitable relief in any state or federal
court within or without the State of Tennessee in addition to any other remedy
to which it may be entitled. Employee hereby submits to the jurisdiction
of any
courts within Xxxx County in the State of Tennessee and
agrees not to assert such venue is inconvenient.
12. Assignment.
This
Agreement is for the unique personal services of Employee and is not assignable
or delegable in whole or in part by Employee without the consent of the Board.
This Agreement may not be assigned or delegated in whole or in part by the
Company without the written consent of the Employee; provided, however, this
Agreement may be assigned by the Company without Employee’s prior written
consent if such assignment is made to an entity acquiring substantially all
of
the business or assets of the Consolidated Company or to another subsidiary
of
Parent.
13. Waiver
or Modification.
Any
waiver, modification, or amendment of any provision of this Agreement shall
be
effective only if in writing in a document that specifically refers to this
Agreement and such document is signed by the parties hereto.
14. Entire
Agreement.
This
Agreement constitutes the full and complete understanding and agreement of
the
parties hereto with respect to the subject matter covered herein and supersedes
all prior oral or written understandings and agreements with respect
thereto.
15. Severability.
If any
provision of this Agreement is found to be unenforceable by a court of competent
jurisdiction, the remaining provisions shall nevertheless remain in full
force
and effect.
16. Attorneys’
Fees.
Should
either Company or Employee default in any of the covenants contained in this
Agreement, or in the event a dispute shall arise as to the meaning of any
term
of this Agreement, the defaulting or nonprevailing party shall pay all costs
and
expenses, including reasonable attorneys’ fees, that may arise or accrue from
enforcing this Agreement, securing an interpretation of any provision of
this
Agreement, or in pursuing any remedy provided by applicable law whether such
remedy is pursued or interpretation is sought by the filing of a lawsuit,
an
appeal, or otherwise.
17. Confidentiality.
Each of
the parties acknowledges that Parent is a so-called “public company” obligated
to file reports under the Securities Exchange Act of 1934, as amended, and
as a
result, the Company may be required to, and hereby has authorization to,
file
this Agreement or any amendment hereto with the Securities and Exchange
Commission without requesting confidential treatment for any portion
hereof.
18. Notices.
Any
notice required hereunder to be given by either party shall be in writing
and
shall be delivered personally or sent by certified or registered mail, postage
prepaid, or by private courier, with written verification of delivery, or
by
facsimile or other electronic transmission to the other party to the address
or
facsimile number set forth below or to such other address or facsimile number
as
either party may designate from time to time according to this provision.
A
notice delivered personally, by private courier or by facsimile or electronic
transmission shall be effective upon receipt. A notice delivered by mail
shall
be effective on the third day after the day of mailing:
E-18
(a) If
to
Employee, at: Xxxxxxx
Xxxxxx
________________
________________
(b) If
to the
Company, at: VitalStream
Holdings, Inc.
Xxx
Xxxxxx, Xxxxx 000
Xxxxxx,
Xxxxxxxxxx 00000
Facsimile
No: (000) 000-0000
Attn:
President
19. Disputes;
Governing Law; Arbitration.
(a) Except
as
provided in Sections 7.5 and 11, any dispute concerning the interpretation
or
construction of this Agreement or Employee’s employment or service with the
Company, shall be resolved by confidential mediation or binding arbitration
in
Xxxx County State of Tennessee.
The parties shall first attempt mediation with a neutral mediator agreed
upon by
the parties. If mediation is unsuccessful or if the parties are unable to
agree
upon a mediator, the dispute shall be submitted to arbitration pursuant to
the
procedures of the American Arbitration Association (“AAA”) or other procedures
agreed to by the parties. All arbitration proceedings shall be conducted
by a
neutral arbitrator mutually agreed upon by the parties from a list provided
by
AAA. The decision of the arbitrator shall be final and binding on all parties.
The costs of mediation and arbitration shall be borne equally by the
parties.
(b) This
Agreement shall be construed in accordance with and governed by the statutes
and
common law of the State of Tennessee. To the extent this Agreement expressly
permits any dispute to be resolved other than through arbitration or mediation
and except as otherwise provided in Section 7.5, the exclusive venue for
any
such action shall be the state and federal courts located in Xxxx County,
State
of Tennessee, and the parties each hereby submit to the jurisdiction of such
courts for purposes of this Agreement.
20. Counterparts;
Facsimile.
This
Agreement may be executed in multiple counterparts, all of which taken together
shall form a single Agreement. A facsimile copy of this Agreement or any
counterpart thereto shall be valid as an original.
[signature
page follows]
E-19
IN
WITNESS WHEREOF, Employee has signed this Employment Agreement personally
and
each of Parent and the Company has caused this Agreement to be executed by
its
duly authorized representative.
| PARENT: | ||
|
VITALSTREAM
HOLDINGS, INC.,
a
Nevada corporation
|
||
| |
|
|
|
|
By:
|
/s/ Xxxx Xxxxxxxx |
| Xxxx Xxxxxxxx, Chief Executive Officer | ||
| COMPANY: | ||
|
VITALSTREAM
ADVERTISING SOLUTIONS, INC.,
a
Nevada corporation
|
||
| |
|
|
|
|
By:
|
/s/ Xxxxxx Xxxxxx |
| Xxxxxx Xxxxxx, President | ||
| EMPLOYEE: | ||
| |
|
|
|
|
By:
|
/s/ Xxxxxx Xxxxxx |
| Xxxxxxx Xxxxxx , an individual | ||
Signature
Page to Employment Agreement (Xxxxxx)
E-20
EXHIBIT
A
PRIOR
INVENTIONS
(b) None
E-21
EXHIBIT
F
XXXX
OF SALE
[See
attached]
F-1
XXXX
OF SALE
THIS
XXXX
OF SALE (this “Xxxx
of Sale”)
is
executed as of May 19, 2006 by EON Streams, Inc., a Tennessee corporation
(“Seller”),
in
favor of VitalStream Advertising Solutions, Inc., a Nevada corporation
(“Buyer”).
Each
capitalized term used but not defined herein shall have the meaning ascribed
thereto under that certain Asset Purchase Agreement dated as of May 19, 2006
to
which Buyer and Seller are parties (the “Purchase
Agreement”).
1. Assignment
of Assets.
Seller,
for and in consideration of Ten and No/100 Dollars ($10.00) and other good
and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by Seller, hereby assigns, transfers, sets over and delivers
to
Buyer all right, title and interest in and to the Acquired Assets.
2. Further
Assurances.
Seller
hereby agrees that it will, at the reasonable request and expense of Buyer,
execute and deliver and will cause to be executed and delivered, such further
instruments of assignment, transfer and conveyance as may be required to
more
effectively assign, transfer, set over, deliver to, and vest in, Buyer, its
successors and assigns, title to and possession of the Acquired
Assets.
3. Binding
Effect.
This
Xxxx of Sale shall be binding upon and inure to the benefit of Seller and
Buyer
and their respective heirs, executors, administrators, successors and
assigns.
4. No
Modification.
This
Xxxx of Sale is made pursuant to the terms of the Purchase Agreement
and
does
not create any additional obligations, covenants, representations and warranties
or alter or amend any of the obligations, covenants, representations and
warranties contained in the Purchase Agreement. The provisions of the Purchase
Agreement shall survive the execution and delivery of this Xxxx of Sale.
In the
event of any inconsistency between this Xxxx of Sale and the Purchase Agreement,
the Purchase Agreement shall control.
5. Construction.
The
headings of the sections and subsections of this Xxxx of Sale are inserted
as a
matter of convenience and for reference purposes only and in no respect define,
limit or describe the scope of this Xxxx of Sale or the intent of any section
or
subsection.
6. Facsimile.
A
facsimile copy of this Xxxx of Sale shall be valid as an original.
7.
Choice
of Law.
This
Xxxx of Sale shall be governed by and construed in accordance with the domestic
laws of the state of California without giving effect to any choice or conflict
of law provision or rule (whether of the state of California or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the state of California.
IN
WITNESS WHEREOF, the undersigned executes this Xxxx of Sale as of the date
first
written above.
|
“SELLER”
|
||
| EON STREAMS, INC., a Tennessee corporation | ||
| |
|
|
|
|
By:
|
/s/ Xxxxxxx Xxxxxx |
| Xxxxxxx Xxxxxx, President | ||
F-2
EXHIBIT
G
ASSIGNMENT
AND ASSUMPTION OF ACQUIRED CONTRACTS
[See
attached]
G-1
ASSIGNMENT
AND ASSUMPTION OF CONTRACTS
THIS
ASSIGNMENT AND ASSUMPTION OF CONTRACTS (this “Assignment”) is entered into as of
the 19th
day of
May, 2006, between EON Streams, Inc., a Tennessee corporation (“Assignor”), and
________, Inc., a Nevada corporation (“Assignee”). All capitalized terms not
otherwise specifically defined herein shall have the meanings set forth in
that
certain Asset Purchase Agreement dated as of May 19, 2006, to which Assignor
and
Assignee are parties (the “Agreement”).
WHEREAS,
pursuant to the Agreement, Assignor has agreed to assign to Assignee and
Assignee has agreed to accept assignment of certain obligations under the
Acquired Contracts, including without limitation those identified on
Exhibit
A
attached
hereto and incorporated by this reference; and
WHEREAS,
Assignor desires to assign all of its right, title and interest in and to
the
Acquired Contracts to Assignee, and Assignee desires to assume the obligations
of Assignor under the Acquired Contracts as set forth below.
NOW,
THEREFORE, for Ten Dollars ($10.00) and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereby
agree as follows:
1. Assignment.
Assignor hereby assigns and transfers to Assignee all of its right, title
and
interest in, to and under the Acquired Contracts.
2. Acceptance
of Assignment.
Assignee hereby accepts the assignment of the Acquired Contracts, and agrees
to
assume and perform, to the extent set forth in the Agreement, all liabilities
and obligations of Assignor under the Acquired Contracts arising on or after
the
Closing other than as a result of breach or non-performance of the
Assignor.
3. Binding
Effect.
This
Assignment shall be binding upon and inure to the benefit of Assignor and
Assignee and their respective heirs, executors, administrators, successors
and
assigns.
4. No
Modification.
This
Assignment is made pursuant to the terms of the Agreement
and
does
not create any additional obligations, covenants, representations and warranties
or alter or amend any of the obligations, covenants, representations and
warranties contained in the Agreement. The provisions of the Agreement shall
survive the execution and delivery of this Assignment. In the event of any
inconsistency between this Assignment and the Agreement, the Agreement shall
control.
5. Construction.
The
headings of the sections and subsections of this Assignment are inserted
as a
matter of convenience and for reference purposes only and in no respect define,
limit or describe the scope of this Assignment or of the intent of any section
or subsection.
6. Counterparts.
This
Assignment may be executed in one or more counterparts, each of which shall
be
deemed an original but all of which together will constitute one and the
same
instrument. A facsimile copy of this Assignment or any counterpart hereto
shall
be valid as an original.
7.
Choice
of Law.
This
Assignment shall be governed by and construed in accordance with the domestic
laws of the state of California without giving effect to any choice or conflict
of law provision or rule (whether of the state of California or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the state of California.
(signature
page follows)
G-2
IN
WITNESS WHEREOF, the parties hereto have executed this Assignment and Assumption
of Contracts as of the date first set forth above.
|
“ASSIGNOR”
|
||
|
EON
Streams, Inc.,
a
Tennessee corporation
|
||
| |
|
|
|
|
By:
|
/s/ Xxxxxxx Xxxxxx |
| Xxxxxxx Xxxxxx, President | ||
| “ASSIGNEE” | ||
|
VitalStream
Advertising Solutions, Inc.,
a
Nevada corporation
|
||
| |
|
|
|
|
By:
|
/s/ Xxxxxx Xxxxxx |
| Xxxxxx Xxxxxx, President | ||
Signature
Page to Assignment and Assumption of Contracts
G-3
Exhibit
A
Contracts
[This
Exhibit shall be Section 4(p) of the Seller Disclosure
Schedule.]
G-4
EXHIBIT
H
ASSIGNMENT
OF INTELLECTUAL PROPERTY
[See
attached]
H-1
ASSIGNMENT
OF INTELLECTUAL PROPERTY
THIS
ASSIGNMENT OF INTELLECTUAL PROPERTY (this “Assignment”) is entered into as of
the 19th
day of
May, 2006, by EON Streams, Inc., a Tennessee corporation (“Assignor”), in favor
of VitalStream Advertising Solutions, Inc., a Nevada corporation (“Assignee”).
All capitalized terms not otherwise specifically defined herein shall have
the
meanings set forth in that certain Asset Purchase Agreement dated as of the
19th
day of May, 2006, to which Assignor and Assignee are parties (the “Purchase
Agreement”).
WHEREAS,
pursuant to the Purchase Agreement, Assignor has agreed to assign to Assignee
the Intellectual Property of Assignor; and
WHEREAS,
Assignor desires to assign all right, title and interest in and to the
Intellectual Property of Assignor to Assignee.
NOW,
THEREFORE, for Ten Dollars ($10.00) and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Assignor hereby
agrees with Assignee as follows:
1. Assignment.
Assignor hereby assigns and transfers to Assignee all right, title and interest
of Assignor in, to and under any Intellectual Property.
2. Binding
Effect.
This
Assignment shall be binding upon and inure to the benefit of Assignor and
Assignee and their respective heirs, executors, administrators, successors
and
assigns.
3. No
Modification.
This
Assignment is made pursuant to the terms of the Purchase
Agreement and
does
not create any additional obligations, covenants, representations and warranties
or alter or amend any of the obligations, covenants, representations and
warranties contained in the Purchase Agreement. The provisions of the Purchase
Agreement shall survive the execution and delivery of this Assignment. In the
event of any inconsistency between this Assignment and the Purchase Agreement,
the Purchase Agreement shall control.
4. Construction.
The
headings of the sections and subsections of this Assignment are inserted as
a
matter of convenience and for reference purposes only and in no respect define,
limit or describe the scope of this Assignment or of the intent of any section
or subsection.
5. Choice
of Law.
This
Assignment shall be governed by and construed in accordance with the domestic
laws of the state of California without giving effect to any choice or conflict
of law provision or rule (whether of the state of California or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the state of California.
IN
WITNESS WHEREOF, Assignor has caused this Assignment to be executed as of the
date first set forth above.
|
ASSIGNOR:
|
||
|
EON
Streams, Inc.,
a
Tennessee corporation
|
||
| |
|
|
|
|
By:
|
/s/ Xxxxxxx Xxxxxx |
| Xxxxxxx Xxxxxx, President | ||
H-2
EXHIBIT
I
ASSIGNMENT
OF PATENTS
[See
attached]
I-1
EXHIBIT
J
OPINION
OF SELLER’S
COUNSEL
[See
attached]
J-1
PATENT
ASSIGNMENT
This
Patent Assignment Agreement (the “Agreement”) is entered into as effective as of
the 19th
day of
May, 2006 (the “Effective Date”).
In
consideration of good and valuable consideration paid to the undersigned
and
pursuant to the Asset Purchase Agreement by and among VitalStream Holdings,
Inc., VitalStream Advertising Solutions, Inc., and EON Streams, Inc., dated
May
19, 2006 and incorporated herein by reference, EON Streams, Inc. (hereinafter
referred to as “Assignor”), having a place of business located at 000 Xxxxxx
Xxxxxx, Xxxxxxxxx, Xxxxxxxxx 00000, hereby sells and assigns to VitalStreams
Advertising Solutions, Inc., a Nevada corporation (hereinafter referred to
as
“Assignee”), having a place of business located at Xxx Xxxxxx, Xxxxx 000,
Xxxxxx, Xxxxxxxxxx 00000, its entire right, title and interest, including
the
right to xxx for past infringement and to collect for all past, present and
future damages, in the United States of America (as defined in 35 U.S.C.
'
100) and
throughout the world,
(a)
in
the inventions known as: (i) “Method for Scheduling of Broadcast Events” (Patent
Application Serial #11/193,518) for which an application for a patent in
the
United States of America was filed on July 29, 2005, and (ii) “Software and
Method for Demographic Analysis” (Patent Application Serial #60/671,706) for
which an application for a patent in the United States of America was filed
on
April 15, 2005, in any and all applications thereon, in any and all Letters
Patent(s) therefor, and
(b)
in
any and all applications that claim the benefit of the patent applications
listed above in part (a), including non-provisional applications, continuing
(continuation, divisional, or continuation-in-part) applications, reissues,
extensions, renewals and reexaminations of the patent application or Letters
Patent therefor listed above in part (a), to the full extent of the term
or
terms for which Letters Patents issue, and
(c)
in
any and all inventions described in the patent applications listed above
in part
(a), and in any and all forms of intellectual and industrial property protection
derivable from such patent applications, and that are derivable from any
and all
continuing applications, reissues, extensions, renewals and reexaminations
of
such patent applications, including, without limitation, patents, applications,
utility models, inventor=s
certificates, and designs together with the right to file applications therefor;
and including the right to claim the same priority rights from any previously
filed applications under the International Agreement for the Protection of
Industrial Property, or any other international agreement, or the domestic
laws
of the country in which any such application is filed, as may be applicable;
all
such
rights, title and interest to be held and enjoyed by the above-named Assignee,
his successors, legal representatives and assigns to the same extent as all
such
rights, title and interest would have been held and enjoyed by the Assignor
had
this assignment and sale not been made.
Assignor
represents and warrants that it holds all right and title to the foregoing
based
on assignments to Assignor by the inventors of the above-referenced patent
applications, Xxxxx Xxxxxx Xxxxx of Knoxville, Tennessee and Xxxxxxx Xxxx
Xxxxxxx of Knoxville, Tennessee, dated May 18, 2006 and incorporated herein
by
reference.
The
undersigned Assignor agrees to execute all papers necessary in connection
with
the application(s) and any non-provisional, continuing (continuation,
divisional, or continuation-in-part), reissue, reexamination or corresponding
application(s) thereof and also to execute separate assignments in connection
with such application(s) as the Assignee may deem necessary or
expedient.
The
undersigned Assignor hereby represents that it has full right to convey the
entire interest herein assigned, and that he has not executed, and will not
execute, any agreement in conflict therewith.
J-2
The
undersigned Assignor hereby grants Xxxx Xxxxxxxx Xxxxx Xxx & Xxxxxxxx, 000
Xxxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxxx Xxxx Xxxx, Xxxx 00000, power to insert
in
this assignment any further identification that may be necessary or desirable
in
order to comply with the rules of the United States Patent and Trademark
Office
for recordation of this document.
IN
WITNESS WHEREOF, executed by the undersigned Assignor on the date opposite
its
name.
| EON STREAMS, INC. | ||
| |
|
|
|
|
By:
|
/s/ Xxxxxxx Xxxxxx |
| Xxxxxxx Xxxxxx, President | ||
State
of
_____ )
:
ss.
County
of
________ )
Before
me
personally appeared said Xxxxxxx Xxxxxx, President of EON Streams, Inc.,
and
acknowledged the foregoing instrument to be his free act and deed this ___
day
of May, 2006.
(Seal)
_____________________________
Notary
Public
My
commission expires:
____________
J-3
EXHIBIT
K
PROJECTED
BALANCE SHEET
[See
attached]
K-1
