EXHIBIT 10.2
CONVERTIBLE NOTE AND WARRANT
PURCHASE AGREEMENT
DATED AS OF NOVEMBER 1, 2002
AMONG
VITALSTREAM HOLDINGS, INC.
AND
THE PURCHASERS REFERRED TO HEREIN
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS......................................................................1
1A. Definitions......................................................................1
SECTION 2. AUTHORIZATION AND CLOSINGS......................................................11
2A. Authorization, Purchase and Sale of the Initial Convertible Notes and
Warrants........................................................................12
2B. Authorization, Purchase and Sale of the Subsequent Convertible Notes............12
2C. The Closings....................................................................13
SECTION 3. CONDITIONS OF EACH PURCHASER'S OBLIGATIONS AT THE CLOSINGS......................14
3A. Conditions of each Purchaser's Obligations at Each Closing......................14
3B. Additional Conditions of each Purchaser's Obligations at the Initial
Closing.........................................................................16
3C. Additional Conditions of each Purchaser's Obligations at the Subsequent
Closing if the Initial Closing has not been Consummated.........................16
3D. Additional Conditions of each Purchaser's Obligations at the Subsequent
Closing if the Initial Closing has been Consummated.............................17
SECTION 4. CONDITIONS OF VITALSTREAM'S OBLIGATIONS AT THE CLOSINGS.........................17
4A. Conditions of VitalStream's Obligations at each Closing.........................17
4B. Additional Conditions of VitalStream's Obligations at the Subsequent
Closing if the Initial Closing has not been Consummated.........................18
4C. Additional Conditions of VitalStream's Obligations at the Subsequent
Closing if the Initial Closing has been Consummated.............................19
SECTION 5. COVENANTS.......................................................................19
5A. Reservation of Common Stock and Series A Preferred..............................19
5B. Intellectual Property Rights....................................................19
5C. Restrictive Covenants...........................................................20
5D. Compliance with Agreements......................................................26
5E. Current Public Information......................................................26
5F. Information Rights..............................................................26
5G. Public Disclosures..............................................................26
5H. Post-Closing Certifications and Deliveries......................................27
SECTION 6. NATURE OF RESTRICTED SECURITIES; TRANSFER OF RESTRICTED SECURITIES;
GENERAL TRANSFER PROCEDURE......................................................27
6A. General Provisions..............................................................27
6B. Opinion Delivery................................................................27
6C. Rule 144A.......................................................................28
6D. Legend Removal..................................................................28
SECTION 7. REPRESENTATIONS AND WARRANTIES OF VITALSTREAM...................................28
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7A. Approval and Consents; Authorization; No Breach.................................28
7B. Capital Stock and Related Matters...............................................29
7C. Issuance and Commitment of the Convertible Notes and Warrants...................30
7D. Investment Company..............................................................30
7E. Margin Securities...............................................................31
7F. Representations and Warranties of VitalStream in the Asset Purchase
Agreement.......................................................................31
SECTION 8. TERMINATION.....................................................................31
8A. Termination of Agreement........................................................31
8B. Effect of Termination...........................................................31
SECTION 9. MISCELLANEOUS...................................................................31
9A. Commitment Fee; Expenses........................................................31
9B. Remedies; Survival of Representations, Warranties and Covenants;
Indemnification.................................................................32
9C. Purchaser's Representations; Legends............................................33
9D. Entire Agreement................................................................35
9E. Successors and Assigns..........................................................35
9F. Counterparts....................................................................36
9G. Descriptive Headings; Interpretation............................................36
9H. Notices; Business Days..........................................................36
9I. Consent to Amendments and Waivers...............................................37
9J. Severability....................................................................37
9K. No Strict Construction..........................................................37
9L. Incorporation of Annexes, Schedules and Exhibits................................38
9M. Registered Holders; Ownership...................................................38
9N. Consideration for Warrants and Notes............................................38
9O. Understanding Among the Purchasers..............................................38
9P. GOVERNING LAW...................................................................38
9Q. JURISDICTION AND VENUE..........................................................39
9R. WAIVER OF RIGHT TO JURY TRIAL...................................................39
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ANNEXES, SCHEDULES AND EXHIBITS
ANNEXES
Annex 1 -- Schedule of Purchasers
SCHEDULES
Schedule 7A -- Approval and Consents
Schedule 7B -- Capital Stock and Related Matters
EXHIBITS
Exhibit A -- Form of Guaranty
Exhibit B -- Form of Convertible Note
Exhibit C -- Form of Investor Rights Agreement
Exhibit D -- Form of Registration Agreement
Exhibit E -- Form of VitalStream Counsel Opinion
Exhibit F -- Form of Warrant
Exhibit G -- Form of Certificate of Designation
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CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT
CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT, dated as of November
1, 2002 (this "AGREEMENT"), by and among VitalStream Holdings, Inc., a Nevada
corporation ("VITALSTREAM"), and the Persons listed on ANNEX 1 attached hereto
(such Persons shall be collectively referred to herein as the "PURCHASERS" and
individually as a "PURCHASER").
Unless otherwise indicated herein, capitalized terms used in this
Agreement have the meanings set forth in SECTION 1 of this Agreement.
WHEREAS, reference is made to that certain Asset Purchase Agreement,
dated as of the date hereof (as amended and modified from time to time, the
"ASSET PURCHASE AGREEMENT"), by and among the VitalStream, VitalStream
Broadcasting Corporation (the "BUYER"), Epoch Hosting, Inc. ("HOSTING") and
Epoch Networks, Inc. ("NETWORKS")
WHEREAS, the execution and delivery of this Agreement is a condition
to the closing of the transactions contemplated by the Asset Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:
Section 1. DEFINITIONS.
1A. DEFINITIONS. For the purposes of this Agreement, the following
terms have the meanings set forth below:
"AFFILIATE" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person,
where "CONTROL" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities, contract or otherwise.
"AGREEMENT" has the meaning set forth in the preamble of this
Agreement.
"AKKAD AGREEMENT" means the Stockholders and Registration Rights
Agreement, dated as of August 9, 2000, by and among VitalStream, Inc., Xxxx
Summer, Xxxxxx Xxxxxx and the Series B Holders (as defined therein), as assumed
by VitalStream, as amended, modified, restated, superseded or replaced from time
to time.
"ARTICLES OF INCORPORATION" means the Articles of Incorporation of
VitalStream, as amended, modified, restated, superseded or replaced from time to
time.
"ASSET PURCHASE AGREEMENT" has the meaning set forth in the preamble
of this Agreement.
"AUTHORIZED VITALSTREAM ACQUISITION TRANSACTION" means a VitalStream
Acquisition Transaction which (i) the Board of Directors has determined, in its
good faith judgment, to be fair and in the best interest of all of the
securityholders of VitalStream and (ii)
has been approved in writing, or by the vote at a duly-called meeting of the
Board of Directors, by a majority of the members of the Board of Directors.
"AUTHORIZED VITALSTREAM SALE TRANSACTION" means a VitalStream Sale
Transaction in which either (i) the consideration to be paid consists solely of
Cash Consideration, (ii) each of the following conditions have been satisfied:
(a) the Board of Directors has determined, in its good faith judgment, to be
fair and in the best interest of all of the securityholders of VitalStream, (b)
has been approved in writing, or by the vote at a duly-called meeting of the
Board of Directors, by a majority of the members of the Board of Directors, (c)
after giving effect to such VitalStream Sale Transaction, the Net Worth of the
acquiring or surviving Person of such VitalStream Sale Transaction immediately
after the consummation of such VitalStream Sale Transaction is equal to or
greater than the Net Worth of VitalStream immediately prior to the consummation
of such VitalStream Sale Transactions, (d) after giving effect to such
VitalStream Sale Transaction, the Indebtedness to Equity Ratio of the acquiring
or surviving Person of such VitalStream Sale Transaction immediately after the
consummation of such VitalStream Sale Transaction less than or equal to 0.35,
and (e) after giving effect to such VitalStream Sale Transaction, the Current
Ratio of the acquiring or surviving Person of such VitalStream Sale Transaction
immediately after the consummation of such VitalStream Sale Transaction is equal
to or greater than 1.6 or (iii) the acquiring Person in such VitalStream Sale
Transaction shall, immediately prior to the consummation of such VitalStream
Sale Transaction, (a) have securities listed on a major national or
international stock exchange and (b) have a public market capitalization of at
least $1,000,000,000.
"AVERAGE MONTHLY CASH FLOW" means, with respect to any period of any
Person, the sum of the Cash Flow of such Person for each month (and pro rata
portion thereof) during such period DIVIDED BY the number of months (and pro
rata portion thereof) in such period.
"BOARD OF DIRECTORS" means the board of directors of VitalStream.
"BUYER" has the meaning set forth in the preamble of this Agreement.
"CASH" means cash and cash equivalents (including marketable
securities and short term Investments).
"CASH CONSIDERATION" means cash and Marketable Securities.
"CASH FLOW" means, with respect to any period of any Person, (i) the
sum of each of the following for such Person and all Subsidiaries of such Person
on a consolidated basis for such period, to the extent applicable, without
duplication, (a) net income or loss (excluding extraordinary or non-recurring
items) after Taxes and interest PLUS (b) depreciation expense MINUS (ii) the sum
of each of the following for such Person and all Subsidiaries of such Person on
a consolidated basis for such period, to the extent applicable, without
duplication, (a) changes in net working capital (which change for purposes
hereunder shall be a positive number for an increase in net working capital and
a negative number for a decrease in net working capital) PLUS (b) changes in
fixed assets (which change for purposes hereunder shall be a positive number for
an increase in fixed assets and a negative number for a decrease in fixed
assets) PLUS (c) the amount of payments and prepayments of principal on any
Indebtedness for borrowed money or
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any Indebtedness evidenced by any Debt Security MINUS (iii) the amount of
proceeds of any Debt Security issued in substitution for, or exchange of,
Indebtedness for borrowed money, in each case as determined in accordance with
GAAP applied on a consistent basis in accordance with such Person's past
practice. For the avoidance of any doubt, the parties hereto hereby agree that
the calculation of Cash Flow as described immediately above shall be done in
accordance with the methodology set forth in Chapter 13 of the text CORPORATE
FINANCE: A VALUATION APPROACH by Xxxxx Xxxxxxxx and Xxxx Xxxxx.
"CERTIFICATE OF DESIGNATION" means the Certificate of Designation,
setting forth, among other matters, the rights, preferences and privileges of
the Series A Preferred, in the form of EXHIBIT G attached hereto.
"CLAIM" means any action, claim, lawsuit, demand, suit, charge,
complaint, inquiry, hearing, investigation, notice of a violation or
noncompliance, litigation, proceeding, arbitration, appeals or other dispute,
whether civil, criminal, administrative or otherwise.
"CLOSING DATE" has the meaning set forth in SECTION 2C of this
Agreement.
"CLOSING" has the meaning set forth in SECTION 2C of this Agreement.
"COMMON STOCK" means VitalStream's Common Stock, par value $0.001 per
share, and any capital stock of any class of VitalStream (other than any
Preferred Equity Securities or the Series A Preferred) hereafter authorized
which is not limited to a fixed sum or percentage of par or stated value in
respect to the rights of the holders thereof to participate in dividends or in
the distribution of assets upon any liquidation, dissolution or winding up of
VitalStream.
"COMMITMENT FEE" has the meaning set forth in SECTION 9A of this
Agreement.
"CONVERTIBLE NOTES" means the Initial Convertible Notes and Subsequent
Convertible Notes.
"CURRENT RATIO" means, with respect to any Person as of any date, the
ratio of (i) the aggregate amount of all current assets of such Person and all
Subsidiaries of such Person as determined on a consolidated basis as of such
date DIVIDED BY (ii) the aggregate amount of all current Liabilities of such
Person and all Subsidiaries of such Person as determined on a consolidated basis
as of such date, in each case as determined in accordance with GAAP applied on a
consistent basis in accordance with such Person's past practice.
"DEBT SECURITY" means any note, bond, debenture or other instrument or
security evidencing Indebtedness.
"DOLPHIN" means Dolphin Equity Partners, L.P.
"DOLPHIN DIRECTOR NOTICE" has the meaning set forth in SECTION 5C of
this Agreement.
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"DOLPHIN FUND II" means Dolphin Communications Fund II, L.P. and
Dolphin Communications Parallel Fund II (Netherlands), L.P.
"DOLPHIN DIRECTOR" has the meaning set forth in the Investor Rights
Agreement.
"EQUITY SECURITY" means (i) any capital stock or other equity
security, (ii) any security directly or indirectly convertible into or
exchangeable for any capital stock or other equity security or security
containing any profit participation features, (iii) any warrants, options or
other rights, directly or indirectly, to subscribe for or to purchase any
capital stock, other equity security or security containing any profit
participation features or directly or indirectly to subscribe for or to purchase
any security directly or indirectly convertible into or exchangeable for any
capital stock or other equity security or security containing profit
participation features, or (iv) any stock appreciation rights, phantom stock
rights or other similar rights.
"FAIR MARKET VALUE" means the price at which an asset would change
hands between a willing buyer and a willing seller when the former is not under
any compulsion to buy and the latter is not under any compulsion to sell, and
both parties are able, as well as willing, to trade and are well-informed about
the asset and the market for the asset, as determined jointly by VitalStream and
the holders of a majority of the Underlying Common Stock. If such parties are
unable to reach agreement within a reasonable period of time, such "FAIR MARKET
VALUE" shall be determined by an independent appraiser experienced in valuing
such type of asset jointly selected by VitalStream and the holders of a majority
of the Underlying Common Stock. The determination of such appraiser shall be
final and binding upon the parties and VitalStream shall pay the fees and
expenses of such appraiser. Notwithstanding the foregoing, the "FAIR MARKET
VALUE" of any security listed on any securities exchange or quoted in the NASDAQ
System (including the proposed Bulletin Board Exchange) or the over-the-counter
market shall be the "MARKET PRICE".
"FULLY DILUTED OUTSTANDING COMMON STOCK" has the meaning set forth in
the Convertible Notes.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time, applied on a consistent basis.
"GOVERNMENTAL ENTITY" means individually, and "GOVERNMENTAL ENTITIES"
means collectively, the United States of America, any state or other political
subdivision thereof, or any entity exercising executive, legislative, judicial,
regulatory or administrative functions of government, including any court.
"GUARANTEE" means any guarantee of the payment or performance of any
Indebtedness or other obligation and any other arrangement whereby credit is
extended to one obligor on the basis of any promise of such Person, whether that
promise is expressed in terms of an obligation to pay the Indebtedness of such
obligor, to provide reimbursement, or to purchase an obligation owed by such
obligor, or to purchase goods and services from such obligor pursuant to a
take-or-pay contract, or to maintain the capital, working capital, solvency or
general financial condition of such obligor, whether or not any such arrangement
is listed in the
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balance sheet of such Person, or referred to in a footnote thereto, but shall
not include endorsements of items for collection in the Ordinary Course of
Business.
"GUARANTY" means that certain Guaranty, dated as of the Initial
Closing Date or, if there is no Initial Closing, the Subsequent Closing Date, by
and among VitalStream, the VitalStream Subsidiaries and the Purchasers, in the
form of EXHIBIT A attached hereto, as amended, modified, restated, superseded or
replaced from time to time.
"HOLDINGS" means Epoch Holdings, Inc., a Delaware corporation.
"HOLDINGS EXECUTIVE OFFICER" means any current or former executive
officer of Holdings or any of its Subsidiaries or any employee of Holdings or
any of its Subsidiaries with a title of "Director" or "Vice-President" (or any
equivalent title indicating a position of similar or greater authority and
responsibility).
"HOSTING" has the meaning set forth in the preamble of this Agreement.
"INDEBTEDNESS" means at a particular time, without duplication, (i)
any indebtedness for borrowed money or issued in substitution for or exchange of
indebtedness for borrowed money, (ii) any indebtedness evidenced by any Debt
Security, (iii) any indebtedness for the deferred purchase price of property or
services with respect to which a Person is liable, contingently or otherwise, as
obligor or otherwise (other than trade payables and other current Liabilities
incurred in the Ordinary Course of Business), (iv) any commitment by which a
Person assures a creditor against loss (including, without limitation,
contingent reimbursement obligations with respect to letters of credit), (v) any
indebtedness Guaranteed in any manner by a Person (including, without
limitation, guaranties in the form of an agreement to repurchase or reimburse),
(vi) any obligations under capitalized leases and (vii) any indebtedness secured
by a Lien on a Person's assets.
"INDEBTEDNESS TO EQUITY RATIO" means, with respect to any Person as of
any date, the quotient of (i) the aggregate amount of Indebtedness of such
Person and all Subsidiaries of such Person as determined on a consolidated basis
as of such date DIVIDED BY (ii) the aggregate amount of stockholders equity of
such Person and all Subsidiaries of such Person as determined on a consolidated
basis as of such date, in each case as determined in accordance with GAAP
applied on a consistent basis in accordance with such Person's past practice.
"INDEMNITEES" has the meaning set forth in SECTION 9B of this
Agreement.
"INITIAL CLOSING DATE" has the meaning set forth in SECTION 2C of this
Agreement.
"INITIAL CLOSING" has the meaning set forth in SECTION 2C of this
Agreement.
"INITIAL CONVERTIBLE NOTES" means those certain 10% Convertible
Promissory Notes of VitalStream issued at the Initial Closing pursuant to this
Agreement, in the form of EXHIBIT B attached hereto, as amended, modified,
restated, superseded or replaced from time to time.
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"INITIAL FINANCING AMOUNT" has the meaning set forth in SECTION 2A(ii)
of this Agreement.
"INTELLECTUAL PROPERTY RIGHTS" means all (i) patents, patent
applications and patent disclosures; (ii) trademarks, service marks, trade
dress, trade names, logos, slogans, corporate names, Internet domain names and
registrations and applications for registration thereof, together with all of
the goodwill associated therewith (and all translations, adaptations,
derivations and combinations of the foregoing); (iii) copyrights (registered or
unregistered) and copyrightable works and registrations and applications for
registration thereof; (iv) mask works and registrations and applications for
registration thereof; (v) computer software (including, but not limited to,
source code and executable code), data, databases and documentation thereof;
(vi) trade secrets and other confidential information (including ideas,
formulas, compositions, inventions (whether patentable or unpatentable and
whether or not reduced to practice), know-how, manufacturing and production
processes and techniques, research and development information, customer
accounts, identifying information regarding customers, drawings, specifications,
designs, plans, proposals, technical data, financial and marketing plans and
customer and supplier lists and information); (vii) domain names, (viii) other
intellectual property or proprietary rights; and (ix) copies and tangible
embodiments thereof (in whatever form or medium).
"INVESTMENT" as applied to any Person means (i) any direct or indirect
purchase or other acquisition by such Person of any Debt Securities, Equity
Securities, obligations, instruments or ownership interests (including
partnership interests and joint venture interests) of any other Person or any
other Person's business and (ii) any capital contribution by such Person to any
other Person.
"INVESTOR RIGHTS AGREEMENT" means that certain Investor Rights
Agreement, dated as of the Initial Closing Date or, if there is no Initial
Closing, the Subsequent Closing Date, by and among VitalStream and the
securityholders of VitalStream referred to therein, in the form of EXHIBIT C
attached hereto, as amended, modified, restated, superseded or replaced from
time to time.
"KNOWLEDGE" except as otherwise provided expressly herein, means the
actual knowledge or awareness of a Person (which shall include the actual
knowledge and awareness of the executive officers and directors of such Person
and any of such Person's Subsidiaries) after making reasonable inquiry and
reasonable diligence with respect to the particular matter in question.
"LAWS" means all constitutions, statutes, laws, codes, ordinances,
regulations, rules, orders, judgments, writs, injunctions, acts or decrees of
any Governmental Entity.
"LEGAL REQUIREMENT" means any requirement arising under any action,
Law, treaty, rule or regulation, determination or direction of an arbitrator or
Governmental Entity.
"LIABILITY" means any liability or obligation of whatever kind or
nature (whether known or unknown, whether assert or unasserted, whether absolute
or contingent, whether
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accrued or unaccrued, whether liquidated or unliquidated, and whether due or to
become due), including any liability or obligation for Taxes.
"LIENS" means any mortgage, pledge, restriction, security interest,
encumbrance, option, lien or charge of any kind (including, without limitation,
any conditional sale or other title retention agreement or lease in the nature
thereof), any sale of receivables with recourse against VitalStream or any of
the VitalStream Subsidiaries, any filing or agreement to file a financing
statement as debtor under the Uniform Commercial Code or any similar statute
other than to reflect ownership by a third party of property leased to
VitalStream or any of the VitalStream Subsidiaries under a lease which is not in
the nature of a conditional sale or title retention agreement, or any
subordination arrangement in favor of another Person (other than any
subordination arising in the Ordinary Course of Business).
"LOSSES" has the meaning set forth in SECTION 9B of this Agreement.
"MARKET PRICE" of any security means either (i) if such security is
listed on an exchange, the average closing price of such security on the
principal exchange on which such security is listed, or, if there has been no
sales on such exchange on any day, the closing price of such security on the
principal exchange on the most recent day on which sales have taken place on
such exchange or (ii) if such security is not listed on an exchange but is
quoted in the NASDAQ System or on the domestic over-the-counter market as
reported by the National Quotation Bureau, the average of the closing sales
prices as reported by the NASDAQ System or the National Quotation Bureau, as
applicable, in each case over a period of five (5) days consisting of the day as
of which the "MARKET PRICE" is being determined and the four (4) consecutive
business days prior to such day on which trades were reported in such security.
If at any time such security is not listed on any securities exchange or quoted
in the NASDAQ System or the over-the-counter market, the "MARKET PRICE" shall be
the Fair Market Value thereof.
"MARKETABLE SECURITIES" means securities (i) issued by an issuer with
a public float equal to or greater than $500,000,000; (ii) that are of a class
of securities listed on a major national or international stock exchange or the
Nasdaq National Market; (iii) that constitute, in the aggregate, not more than
3.0% of the outstanding securities of such class; (iv) that are or were issued
to the Purchasers in a transaction registered under the Securities Act, or the
resale of which by such Purchasers is registered under the Securities Act, and
are otherwise freely tradable by such Purchasers without restriction under
applicable federal and state securities Laws; and (v) for which the product of
(a) the weekly trading volume for such securities for the five (5) business days
ending immediately prior to the date of consummation of an Authorized
VitalStream Sale Transaction for which such securities are to be issued,
MULTIPLIED BY, (b) four (4), is greater than the aggregate number of shares of
securities issued by such issuer as consideration for the Authorized VitalStream
Sale Transaction for which such securities are being issued.
"NETWORKS" has the meaning set forth in the preamble of this
Agreement.
"NET WORTH" means, with respect to any Person as of any date, the
difference of (i) the aggregate amount of all assets of such Person and all
Subsidiaries of such Person on a consolidated basis as of such date MINUS (ii)
the aggregate amount of all Liabilities of such
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Person and all Subsidiaries of such Person on a consolidated basis as of such
date, in each case as determined in accordance with GAAP applied on a consistent
basis in accordance with such Person's past practice.
"OFFICER'S CERTIFICATE" means a certificate signed by VitalStream's
president or its chief financial officer, stating that (i) the officer signing
such certificate has made or has caused to be made such investigations as are
necessary in order to permit him to verify the accuracy of the information set
forth in such certificate and (ii) to such officer's knowledge, such certificate
does not misstate any material fact and does not omit to state any fact
necessary to make the certificate not misleading.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"OTHER COMPANY SECURITIES" has the meaning set forth in the
Convertible Notes.
"PERMITTED LIENS" means (i) Tax Liens with respect to Taxes not yet
due and payable or which are being contested in good faith by appropriate
proceedings and for which appropriate reserves have been established in
accordance with GAAP, consistently applied; (ii) deposits or pledges made in
connection with, or to secure payment of, utilities or similar services,
workers' compensation, unemployment insurance, old age pensions or other social
security obligations; (iii) mechanics', materialmen's or contractors' Liens
created by statute securing payment for amounts not yet due and payable; and
(iv) purchase money Liens and Liens securing rental payments under capital lease
arrangements.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or any other similar entity or
organization or a Governmental Entity.
"PREFERRED EQUITY SECURITIES" has the meaning set forth in the
Convertible Notes.
"PREFERRED STOCK" means VitalStream's Preferred Stock, par value
$0.001 per share, as more fully described in the Articles of Incorporation.
"PURCHASERS" has the meaning set forth in the preamble of this
Agreement.
"REGISTRATION AGREEMENT" means that certain Registration Agreement,
dated as of the Initial Closing Date, or if there is no Initial Closing, the
Subsequent Closing Date, by and among VitalStream and the Purchasers, in the
form of EXHIBIT D attached hereto, as amended, modified, restated, superseded or
replaced from time to time.
"RESTRICTED SECURITIES" means (i) the Convertible Notes, (ii) the
Warrants, (iii) the Equity Securities issued or issuable, directly or
indirectly, upon conversion of the Convertible Notes, (iv) the Common Stock
issued or issuable upon exercise of the Warrants, (v) the Common Stock issued as
payment of the Commitment Fee and (vi) any securities issued with respect to the
securities referred to in clauses (i), (ii), (iii), (iv) or (v) above by way of
a stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular Restricted Securities, such securities shall cease to
8
be Restricted Securities when they have (a) been effectively registered under
the Securities Act and disposed of in accordance with the registration statement
covering them, (b) been distributed to the public through a broker, dealer or
market maker pursuant to Rule 144 or become eligible for sale pursuant to Rule
144(k) adopted by the Securities and Exchange Commission under the Securities
Act (as such rule may be amended from time to time) or any similar rule or
regulation hereafter adopted by the Securities and Exchange Commission or (c)
been otherwise transferred and new certificates for them not bearing the
Securities Act legend set forth in SECTION 9C of this Agreement have been
delivered by VitalStream in accordance with SECTION 6 of this Agreement.
Whenever any particular securities cease to be Restricted Securities, the holder
thereof shall be entitled to receive from VitalStream, without expense, new
securities of like tenor not bearing a Securities Act legend of the character
set forth in SECTION 9C of this Agreement.
"RULE 144" means Rule 144 adopted by the Securities and Exchange
Commission under the Securities Act (as such rule may be amended from time to
time) or any similar rule or regulation hereafter adopted by the Securities and
Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar federal Law then in force and the rules promulgated thereunder.
"SECURITIES AND EXCHANGE COMMISSION" means the Securities and Exchange
Commission and any Governmental Entity succeeding to the functions thereof.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended, or any similar federal Law then in force and the rules promulgated
thereunder.
"SERIES A PREFERRED" means the 2002 Series A Preferred Stock, $0.001
par value, of VitalStream having the rights and preferences set forth in the
Certificate of Designation.
"SUBSEQUENT CONVERTIBLE NOTES" means those certain 10% Convertible
Promissory Notes of VitalStream issued at the Subsequent Closing pursuant to
this Agreement in the form of EXHIBIT B attached hereto, as amended, modified,
restated, superseded or replaced from time to time.
"SUBSIDIARY" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control any managing director or general partner of such limited
liability company, partnership, association or other business entity.
9
"TAX" or "TAXES" means federal, state, county, local, foreign or other
income, gross receipts, ad valorem, franchise, profits, sales or use, transfer,
registration, excise, utility, environmental, communications, real or personal
property, capital stock, income, license, payroll, wage or other withholding,
employment, unemployment, social security, severance, stamp, occupation,
alternative or add-on minimum, estimated and other taxes of any kind whatsoever
(including deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not and including any obligations to indemnify or
otherwise assume or succeed to the Tax Liability of any other Person.
"TRANSACTION AGREEMENTS" means this Agreement, the Notes, the
Guaranty, the Certificate of Designation, the Warrants, the Investor Rights
Agreement, the Registration Agreement, the Asset Purchase Agreement and all
other agreements and instruments contemplated by each of the foregoing to which
VitalStream or any of the VitalStream Subsidiaries is a party other than the
Customer Migration Agreement (as defined in the Asset Purchase Agreement), the
Colocation Agreement (as defined in the Asset Purchase Agreement) and the Master
Access Agreement (as defined in the Asset Purchase Agreement).
"UNDERLYING COMMON STOCK" means (i) the Common Stock issued or
issuable, directly or indirectly, upon conversion of the Convertible Notes, (ii)
the Common Stock issued or issuable upon exercise of the Warrants, (iii) the
Common Stock issued or issuable in connection with the Commitment Fee, and (iv)
any Common Stock issued or issuable with respect to the securities referred to
in clauses (i), (ii) and (iii) above by way of stock dividend or stock split or
in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization. For purposes of this Agreement, (a) any
Person who holds Convertible Notes shall be deemed to be the holder of the
Underlying Common Stock issuable, directly or indirectly, upon conversion of
such Convertible Notes regardless of any restriction or limitation on the
conversion of such Convertible Notes and (b) any Person who holds Warrants shall
be deemed to be the holder of the Underlying Common Stock issuable upon exercise
of such Warrants regardless of any restriction or limitation on the exercise of
such Warrants, and, with respect to both clauses (a) and (b) above, such
Underlying Common Stock shall be deemed to be in existence and such Person shall
be entitled to exercise the rights of a holder of such Underlying Common Stock
hereunder. As to any particular shares of Underlying Common Stock, such shares
shall cease to be Underlying Common Stock when they have been (1) effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them, (2) distributed to the public through a
broker, dealer or market maker pursuant to Rule 144 or (3) repurchased by
VitalStream or any VitalStream Subsidiary.
"VITALSTREAM" has the meaning set forth in the preamble to this
Agreement.
"VITALSTREAM COUNSEL OPINION" shall mean an opinion of Stoel Rives,
LLP, counsel to VitalStream, substantially in the form attached hereto as
EXHIBIT E.
"VITALSTREAM MATERIAL ADVERSE EFFECT" means a material and adverse
effect upon the business, operations, assets, Liabilities, condition (financial
or otherwise), operating results, prospects, cash flow, net worth or employee,
customer or supplier relations of VitalStream and the VitalStream Subsidiaries
taken as a whole.
10
"VITALSTREAM ACQUISITION TRANSACTION" means (i) the acquisition by
VitalStream or any VitalStream Subsidiary of a Person who is not an Affiliate of
VitalStream or a substantial portion of the business of such Person by means of
any transaction or series of related transactions, including (a) any merger,
consolidation or other similar transaction, involving VitalStream or any
VitalStream Subsidiary and such Person (and its Affiliates) that, if
consummated, would result in the securityholders of VitalStream immediately
prior to the consummation of such merger, consolidation or other similar
transaction, directly or indirectly, owning more than 50% of the voting power of
the outstanding Equity Securities and Debt Securities of the surviving Person of
such merger, consolidation or other similar transaction, (b) the acquisition by
VitalStream or any VitalStream Subsidiary of Equity Securities or Debt
Securities of such Person or (c) the acquisition by VitalStream or any
VitalStream Subsidiary of the assets of such Person and (ii) VitalStream or any
VitalStream Subsidiary entering into a joint venture with a Person who is not an
Affiliate of VitalStream.
"VITALSTREAM SALE TRANSACTION" means the acquisition of VitalStream or
any VitalStream Subsidiary or a substantial portion of the business of
VitalStream or any VitalStream Subsidiary by a Person who is not an Affiliate of
VitalStream by means of any transaction or series of related transactions,
including (i) any merger, consolidation or other similar transaction, involving
VitalStream or any VitalStream Subsidiary and such Person (and its Affiliates)
that, if consummated, would result in the securityholders of VitalStream
immediately prior to the consummation of such merger, consolidation or other
similar transaction, directly or indirectly, owning less than 50% of the voting
power of the outstanding Equity Securities and Debt Securities of the surviving
Person of such merger, consolidation or other similar transaction, (ii) the
issuance of Equity Securities or Debt Securities by VitalStream or any
VitalStream Subsidiary to such Person (and its Affiliates) or the acquisition by
such Person (and its Affiliates) of Equity Securities or Debt Securities of
VitalStream or any VitalStream Subsidiary representing more than 50% of the
voting power of the outstanding Equity Securities and Debt Securities of
VitalStream or such VitalStream Subsidiary, (iii) any tender or exchange offer
that, if consummated, would result in such Person and its Affiliates owning
Equity Securities or Debt Securities of VitalStream or any VitalStream
Subsidiary representing more than 50% of the voting power of the outstanding
Equity Securities or Debt Securities of VitalStream or such VitalStream
Subsidiary or (iv) the sale of all or substantially all of the assets of
VitalStream or any VitalStream Subsidiary followed by a liquidation of
VitalStream or such VitalStream Subsidiary.
"VITALSTREAM SUBSIDIARIES" shall mean the Subsidiaries of VitalStream.
"WARRANTS" shall mean those certain Common Stock Purchase Warrants of
VitalStream issued pursuant to this Agreement, in the form of EXHIBIT F attached
hereto, as amended, modified, restated, superseded or replaced from time to
time.
"WHOLLY-OWNED SUBSIDIARY" means, with respect to any Person, a
Subsidiary of which all of the outstanding capital stock or other ownership
interests are owned by such Person or another Wholly-Owned Subsidiary of such
Person.
Section 2. AUTHORIZATION AND CLOSINGS.
11
2A. AUTHORIZATION, PURCHASE AND SALE OF THE INITIAL CONVERTIBLE
NOTES AND WARRANTS.
(i) VitalStream has duly authorized the issuance and sale,
pursuant to the terms of this Agreement, of the Initial Convertible Notes and
the Warrants. The Initial Convertible Notes are, subject to the terms of the
Initial Convertible Notes, convertible into shares of Common Stock, Series A
Preferred, Preferred Equity Securities and Other Company Securities. The
Warrants are exercisable for shares of Common Stock.
(ii) At any time during the period (the "INITIAL FINANCING PERIOD")
beginning on the date fifteen (15) business days after the date hereof and
ending on the day immediately prior to the date of the consummation of the
transactions contemplated by the Asset Purchase Agreement, subject to the terms
and conditions of this Agreement, at the Initial Closing, VitalStream shall have
the one-time right (the "INITIAL FINANCING PUT RIGHT") to require the Purchasers
to purchase, in the aggregate, no less than $150,000 and no more than
$409,167.67 principal amount of Initial Convertible Notes. If VitalStream
chooses to exercise its Initial Financing Put Rights, VitalStream shall deliver
a notice (a "INITIAL FINANCING PUT NOTICE") to each Purchaser between the date
hereof and the date that is fifteen (15) business days prior to the day
immediately prior to the date of the consummation of the transactions
contemplated by the Asset Purchase Agreement setting forth the date (the
"INITIAL CLOSING DATE") on which such issuance shall be consummated (which date
shall be no less than fifteen (15) business days after the date of the receipt
by the Purchasers of such Initial Financing Put Notice and no later than the day
immediately prior to the date of the consummation of the transactions
contemplated by the Asset Purchase Agreement) and the aggregate principal amount
of Initial Convertible Notes (the "INITIAL FINANCING AMOUNT") to be purchased by
the Initial Purchasers on the Initial Closing Date. In no event may the Initial
Closing occur after the day immediately prior to the date of the consummation of
the transactions contemplated by the Asset Purchase Agreement.
(iii) If VitalStream elects to exercise its Initial Financing Put
Rights, subject to the terms and conditions of this Agreement, at the Initial
Closing, VitalStream shall issue and sell to each Purchaser and each Purchaser
shall purchase from VitalStream: (i) an Initial Convertible Note in the
principal amount equal to the product of (a) the Initial Financing Amount
MULTIPLIED BY (b) the percentage set forth opposite such Purchaser's name on
ANNEX 1 attached hereto under the heading "PRO RATA SHARE OF INITIAL FINANCING
AMOUNT" for a price equal to such principal amount and (ii) for no additional
consideration, a Warrant to purchase a number of shares of Common Stock
calculated in accordance with the terms of the Warrant.
(iv) The sale of the Initial Convertible Notes and Warrants to each
Purchaser hereunder shall constitute a separate sale.
2B. AUTHORIZATION, PURCHASE AND SALE OF THE SUBSEQUENT CONVERTIBLE
NOTES.
(i) VitalStream has duly authorized the issuance and sale,
pursuant to the terms of this Agreement, of the Subsequent Convertible Notes.
The Subsequent Convertible Notes are, subject to the terms of the Subsequent
Convertible Notes, convertible into shares of Common Stock, Series A Preferred,
Preferred Equity Securities and Other Company Securities.
12
(ii) Subject to the terms and conditions of this Agreement, at the
Subsequent Closing, VitalStream shall issue and sell to each Purchaser and each
Purchaser shall purchase from VitalStream (a) a Subsequent Convertible Note in
the principal amount equal to the difference between (1) the product of (A)
$1,100,000 MULTIPLIED BY, (B) the percentage set forth opposite such Purchaser's
name on ANNEX 1 attached hereto under the heading "PRO RATA SHARE OF INITIAL
FINANCING AMOUNT" MINUS (2) the principal amount of Initial Convertible Notes,
if any, purchased by such Purchaser at the Initial Closing, for a price equal to
such principal amount and (b) if the Initial Closing is not consummated, for no
additional consideration, a Warrant to purchase a number of shares of Common
Stock calculated in accordance with the terms of the Warrant.
(iii) The sale of each Subsequent Convertible Note and, if
applicable, Warrants to each Purchaser hereunder shall constitute a separate
sale.
2C. THE CLOSINGS.
(i) The closing (the "INITIAL CLOSING") of the issuance, sale and
purchase of the Initial Convertible Notes and Warrants under this Agreement
shall, subject to the satisfaction or waiver of all conditions to the
obligations of the parties hereto to consummate the Initial Closing (other than
conditions with respect to actions the parties hereto will take at the Initial
Closing itself), take place at the offices of VitalStream located at Xxx Xxxxxx,
Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000 commencing at 9:00 a.m. local time on the
Initial Closing Date (or such other date as the parties hereto may mutually
determine in writing). At the Initial Closing, VitalStream shall deliver to each
Purchaser (a) an instrument evidencing the Initial Convertible Note to be
purchased by such Purchaser, payable to such Purchaser or its nominee or
registered in such Purchaser's or its nominee's name, upon payment of the
purchase price thereof by a cashier's or certified check, or by wire transfer of
immediately available funds, to VitalStream and (b) an instrument evidencing the
Warrant to be purchased by such Purchaser, registered in such Purchaser's or its
nominee's name.
(ii) SUBSEQUENT CLOSING. The closing (the "SUBSEQUENT CLOSING") of
the issuance, sale and purchase of the Subsequent Convertible Notes and, if the
Initial Closing has not been consummated, Warrants under this Agreement, shall,
subject to the satisfaction or waiver of all conditions to the obligations of
the parties hereto to consummate the Subsequent Closing (other than conditions
with respect to actions the parties hereto will take at the Subsequent Closing
itself), take place at the offices of VitalStream located at Xxx Xxxxxx, Xxxxx
000, Xxxxxx, Xxxxxxxxxx 00000 commencing at 9:00 a.m. local time on the date
(the "SUBSEQUENT CLOSING DATE" and, together with the Initial Closing Date, the
"CLOSING DATES") of closing of the transactions contemplated by the Asset
Purchase Agreement. At the Subsequent Closing (a) if the Initial Closing has
been consummated, VitalStream shall deliver to each Purchaser an instrument
evidencing the Subsequent Convertible Note to be purchased by such Purchaser,
payable to such Purchaser or its nominee or registered in such Purchaser's or
its nominee's name, upon payment of the purchase price thereof by a cashier's or
certified check, or by wire transfer of immediately available funds, to
VitalStream and (b) if the Initial Closing has not been consummated, VitalStream
shall deliver to each Purchaser (1) an instrument evidencing the Subsequent
Convertible Note to be purchased by such Purchaser, payable to such Purchaser or
its nominee or registered in such Purchaser's or its nominee's name, upon
payment of the
13
purchase price thereof by a cashier's or certified check, or by wire transfer of
immediately available funds, to VitalStream and (2) an instrument evidencing the
Warrant to be purchased by such Purchaser, registered in such Purchaser's or its
nominee's name.
Section 3. CONDITIONS OF EACH PURCHASER'S OBLIGATIONS AT THE CLOSINGS.
3A. CONDITIONS OF EACH PURCHASER'S OBLIGATIONS AT EACH CLOSING.
The obligation of each Purchaser to purchase and pay for the Convertible Notes
and Warrants, as the case may be, at each Closing shall be subject to the
fulfillment at or prior to such Closing of each of the following conditions, any
and all of which may be waived in whole or in part in writing by such Purchaser
to the extent permitted by applicable Law:
(i) REPRESENTATIONS AND WARRANTIES; COVENANTS. The representations
and warranties of VitalStream contained in SECTION 7 hereof shall be true and
correct in all material respects at and as of such Closing as though then made
and as though such Closing Date was substituted for the date of this Agreement
throughout such representations and warranties (except for any representations
or warranties made as of a specific date, which shall be true and correct as of
such date and except for any representations and warranties which are qualified
by materiality, which shall be true and correct in all respects). VitalStream
shall have duly performed or complied with, in all material respects, all of the
covenants, obligations and conditions to be performed or complied with under the
terms of this Agreement and the other Transaction Agreements on, prior to, or at
such Closing and shall be in compliance with, in all material respects, all of
the covenants, obligations and conditions to be complied with under the terms of
this Agreement at such Closing.
(ii) CONSENTS AND APPROVALS. VitalStream shall have made all
filings and shall have obtained and delivered to each Purchaser all permits,
authorizations, consents and approvals of any Governmental Entity and/or third
party required to be obtained by VitalStream to consummate the transactions
contemplated to be consummated at such Closing by this Agreement and the other
Transaction Agreements.
(iii) LITIGATION. No suit, action or other proceeding, or
injunction, order, decree or judgment relating thereto, shall be threatened or
shall be pending in which it is sought to restrain or prohibit or to obtain
damages or other relief in connection with the transactions contemplated under
this Agreement or any of the other Transaction Agreements or that would have, or
would reasonably be expected to have, a VitalStream Material Adverse Effect, and
no injunction, judgment, order, decree or ruling with respect thereto shall be
in effect.
(iv) SECURITIES LAW COMPLIANCE. VitalStream shall have made all
filings under all applicable federal and state securities Laws necessary to
consummate the issuance and sale of the Initial Convertible Notes, Warrants and
Underlying Common Stock pursuant to this Agreement in compliance with such Laws.
(v) NO VITALSTREAM MATERIAL ADVERSE EFFECT. There shall not have
occurred any VitalStream Material Adverse Effect since June 30, 2002.
(vi) ASSET PURCHASE AGREEMENT. The Asset Purchase Agreement shall
have been executed and delivered by VitalStream, the Buyer, Hosting and
Networks. The Asset
14
Purchase Agreement shall be in full force and effect as of such Closing Date and
shall not have been amended or modified.
(vii) REGISTRATION AGREEMENT. The Registration Agreement shall have
been executed and delivered by VitalStream and shall be in full force and
effect.
(viii) INVESTOR RIGHTS AGREEMENT. The Investor Rights Agreement shall
have been executed and delivered by VitalStream and each of the other parties
thereto and shall be in full force and effect.
(ix) GUARANTY. The Guaranty shall have been executed and delivered
by VitalStream and each VitalStream Subsidiary which has any assets and shall be
in full force and effect.
(x) OPINION OF VITALSTREAM'S COUNSEL. Purchasers shall have
received an executed copy of the VitalStream Counsel Opinion.
(xi) SALE OF CONVERTIBLE NOTES AND WARRANTS TO EACH PURCHASER.
VitalStream shall have simultaneously issued and sold to each Purchaser the
Convertible Notes and Warrants, as the case may be, to be purchased by such
Purchaser hereunder at such Closing and VitalStream shall have received payment
therefore in full.
(xii) CLOSING DOCUMENTS. VitalStream shall have delivered to each
Purchaser all of the following documents:
(a) an Officer's Certificate, dated as of such Closing Date,
stating that the conditions specified in SECTION 3A(i) through SECTION
3A(vi) of this Agreement have been fully satisfied;
(b) certified copies of the resolutions duly adopted by
VitalStream's Board of Directors authorizing the execution, delivery and
performance of this Agreement, the other Transaction Agreements to which it
is a party and each of the other agreements contemplated hereby or thereby
to which it is a party, the issuance and sale of the Convertible Notes, the
issuance and sale of the Warrants, the reservation for issuance of a number
of shares of Common Stock sufficient for conversion of the Convertible
Notes, the reservation for issuance of a number of shares of Common Stock
sufficient for exercise of the Warrants and the consummation of all other
transactions contemplated by this Agreement and the other Transaction
Agreements to which it is a party;
(c) certified copies of the Articles of Incorporation and
VitalStream's bylaws, each as in effect at such Closing Date;
(d) certificate of good standing from the Secretary of State
of the State of Nevada dated within ten (10) days of such Closing Date;
(e) copies of all filings, permits, authorizations, consents
and approvals of any Governmental Entity and/or third party required in
connection with the
15
consummation of the transactions contemplated by this Agreement and the
other Transaction Agreements (including, without limitation, all blue sky
Law filings); and
(f) such other documents relating to the transactions
contemplated by this Agreement or the other Transaction Agreements as any
Purchaser or its special counsel may reasonably request.
(xiii) PROCEEDINGS. All corporate and other proceedings taken or
required to be taken by VitalStream in connection with the transactions
contemplated hereby and by the other Transaction Agreements to be consummated at
or prior to such Closing and all documents incident thereto shall be reasonably
satisfactory in form and substance to each Purchaser and its special counsel.
3B. ADDITIONAL CONDITIONS OF EACH PURCHASER'S OBLIGATIONS AT THE
INITIAL CLOSING. In addition to each of the conditions set forth in SECTION 3A
hereof, the obligation of each Purchaser to purchase and pay for the Initial
Convertible Notes and Warrants at the Initial Closing shall be subject to the
fulfillment at or prior to the Initial Closing of each of the following
additional conditions, any and all of which may be waived in whole or in part in
writing by such Purchaser to the extent permitted by applicable Law:
(i) PAYMENT OF THE COMMITMENT FEE. VitalStream shall have paid
one-third of the aggregate amount of the Commitment Fee to Dolphin.
(ii) PAYMENT OF PURCHASERS' ATTORNEYS FEES. VitalStream shall have
reimbursed the Purchasers for the fees and expenses of legal counsel incurred by
Purchasers in connection with the preparation of this Agreement and the other
Transaction Agreements in an amount not to exceed $42,500.
3C. ADDITIONAL CONDITIONS OF EACH PURCHASER'S OBLIGATIONS AT THE
SUBSEQUENT CLOSING IF THE INITIAL CLOSING HAS NOT BEEN CONSUMMATED. If the
Initial Closing has not been consummated, in addition to each of the conditions
set forth in SECTION 3A hereof, the obligation of each Purchaser to purchase and
pay for the Subsequent Convertible Notes and Warrants at the Subsequent Closing
shall be subject to the fulfillment at or prior to the Subsequent Closing of
each of the following additional conditions, any and all of which may be waived
in whole or in part in writing by such Purchaser to the extent permitted by
applicable Law:
(i) ASSET PURCHASE AGREEMENT. The conditions in Section 7(b) of
the Asset Purchase Agreement shall have been satisfied in full (without reliance
on any waiver by Hosting) (other than the transfer of the Cash Consideration (as
defined in the Asset Purchase Agreement) as contemplated by Section 7(b)(xiv) of
the Asset Purchase Agreement which transfer shall not occur until immediately
after VitalStream has received the purchase price for all of the Subsequent
Convertible Notes as contemplated by this Agreement), and the transactions
contemplated by the Asset Purchase Agreement shall have been consummated
immediately prior to the Subsequent Closing in accordance with the terms of the
Asset Purchase Agreement.
(ii) PAYMENT OF THE COMMITMENT FEE. VitalStream shall have paid the
Commitment Fee to Dolphin in full.
16
(iii) PAYMENT OF PURCHASERS' ATTORNEYS FEES. VitalStream shall have
reimbursed the Purchasers for the fees and expenses of legal counsel incurred by
Purchasers in connection with the preparation of this Agreement and the other
Transaction Agreements in an amount not to exceed $42,500.
(iv) SUBSEQUENT CLOSING DOCUMENTS. VitalStream shall have delivered
to each Purchaser an Officer's Certificate, dated as of the Subsequent Closing
Date, stating that the conditions specified in SECTION 3C(i) of this Agreement
have been fully satisfied.
3D. ADDITIONAL CONDITIONS OF EACH PURCHASER'S OBLIGATIONS AT THE
SUBSEQUENT CLOSING IF THE INITIAL CLOSING HAS BEEN CONSUMMATED. If the Initial
Closing has been consummated, in addition to each of the conditions set forth in
SECTION 3A hereof, the obligation of each Purchaser to purchase and pay for the
Subsequent Convertible Notes at the Subsequent Closing shall be subject to the
fulfillment at or prior to the Subsequent Closing of each of the following
additional conditions, any and all of which may be waived in whole or in part in
writing by such Purchaser to the extent permitted by applicable Law:
(i) CONSUMMATION OF THE INITIAL CLOSING. The Initial Closing shall
have been consummated in accordance with the terms of this Agreement.
(ii) NO EVENT OF DEFAULT. No Event of Default (as defined in the
Initial Convertible Notes) shall have occurred and be continuing under the
Initial Convertible Notes.
(iii) ASSET PURCHASE AGREEMENT. The conditions in Section 7(b) of
the Asset Purchase Agreement shall have been satisfied in full (without reliance
on any waiver by Hosting) (other than the transfer of the Cash Consideration (as
defined in the Asset Purchase Agreement) as contemplated by Section 7(b)(xiv) of
the Asset Purchase Agreement which transfer shall not occur until immediately
after VitalStream has received the purchase price for all of the Subsequent
Convertible Notes as contemplated by this Agreement), and the transactions
contemplated by the Asset Purchase Agreement shall have been consummated prior
to the Subsequent Closing in accordance with the terms of the Asset Purchase
Agreement.
(iv) PAYMENT OF THE COMMITMENT FEE. VitalStream shall have paid in
full any amount of the Commitment Fee to Dolphin which has not been previously
paid.
(v) SUBSEQUENT CLOSING DOCUMENTS. VitalStream shall have delivered
to each Purchaser an Officer's Certificate, dated as of the Subsequent Closing
Date, stating that the conditions specified in SECTION 3D(i) and SECTION 3D(iii)
of this Agreement have been fully satisfied.
Section 4. CONDITIONS OF VITALSTREAM'S OBLIGATIONS AT THE CLOSINGS.
4A. CONDITIONS OF VITALSTREAM'S OBLIGATIONS AT EACH CLOSING. The
obligation of VitalStream to issue and sell the Convertible Notes and Warrants,
as the case may be, to the Purchasers at each Closing shall be subject to the
fulfillment at or prior to such Closing of each of the following conditions, any
and all of which may be waived in whole or in part in writing by VitalStream to
the extent permitted by applicable Law:
17
(i) REPRESENTATIONS AND WARRANTIES; COVENANTS. The representations
and warranties of each of the Purchasers contained in SECTION 9C hereof shall be
true and correct in all material respects at and as of such Closing as though
then made and as though such Closing Date was substituted for the date of this
Agreement throughout such representations and warranties (except for any
representations or warranties made as of a specific date, which shall be true
and correct as of such date and except for any representations and warranties
which are qualified by materiality, which shall be true and correct in all
respects). Each Purchaser shall have duly performed or complied with, in all
material respects, all of the covenants, obligations and conditions to be
performed or complied with under the terms of this Agreement on, prior to, or at
such Closing.
(ii) LITIGATION. No suit, action or other proceeding, or
injunction, order, decree or judgment relating thereto, shall be threatened or
shall be pending in which it is sought to restrain or prohibit or to obtain
damages or other relief in connection with the transactions contemplated under
this Agreement or any of the other Transaction Agreements or that would have, or
reasonably be expected to have, a VitalStream Material Adverse Effect, and no
injunction, judgment, order, decree or ruling with respect thereto shall be in
effect.
(iii) ASSET PURCHASE AGREEMENT. The Asset Purchase Agreement shall
have been executed and delivered by VitalStream, the Buyer, Hosting and
Networks. The Asset Purchase Agreement shall be in full force and effect as of
such Closing Date and shall not have been amended or modified.
(iv) SALE OF CONVERTIBLE NOTES AND WARRANTS TO EACH PURCHASER. Each
Purchaser shall have tendered at such Closing the purchase price required under
this Agreement to be tendered for the Convertible Notes and Warrants being
purchased.
(v) CLOSING DOCUMENTS. Each Purchaser shall have delivered to
VitalStream such documents relating to the transactions contemplated by this
Agreement as VitalStream or its special counsel may reasonably request.
(vi) PROCEEDINGS. All corporate and other proceedings taken or
required to be taken by each Purchaser in connection with the transactions
contemplated hereby and by the other Transaction Agreements to be consummated at
or prior to such Closing and all documents incident thereto shall be reasonably
satisfactory in form and substance to VitalStream and its special counsel.
4B. ADDITIONAL CONDITIONS OF VITALSTREAM'S OBLIGATIONS AT THE
SUBSEQUENT CLOSING IF THE INITIAL CLOSING HAS NOT BEEN CONSUMMATED. If the
Initial Closing has not been consummated, in addition to each of the conditions
set forth in SECTION 4A hereof, the obligation of VitalStream to issue and sell
the Convertible Notes and Warrants to the Purchasers at the Subsequent Closing
shall be subject to the fulfillment at or prior to the Subsequent Closing of the
following additional condition, which may be waived in whole or in part in
writing by VitalStream to the extent permitted by applicable Law:
(i) ASSET PURCHASE AGREEMENT. The conditions in Section 7(a) of
the Asset Purchase Agreement shall have been satisfied in full (without reliance
on any waiver by
18
Hosting), and the transactions contemplated by the Asset Purchase Agreement
shall have been consummated immediately prior to the Subsequent Closing in
accordance with the terms of the Asset Purchase Agreement.
4C. ADDITIONAL CONDITIONS OF VITALSTREAM'S OBLIGATIONS AT THE
SUBSEQUENT CLOSING IF THE INITIAL CLOSING HAS BEEN CONSUMMATED. If the Initial
Closing has been consummated, in addition to each of the conditions set forth in
SECTION 4A hereof, the obligation of VitalStream to issue and sell the
Subsequent Convertible Notes to the Purchasers at the Subsequent Closing shall
be subject to the fulfillment at or prior to the Subsequent Closing of each of
the following additional conditions, any and all of which may be waived in whole
or in part in writing by VitalStream to the extent permitted by applicable Law:
(i) CONSUMMATION OF THE INITIAL CLOSING. The Initial Closing shall
have been consummated in accordance with the terms of this Agreement.
(ii) ASSET PURCHASE AGREEMENT. The conditions in Section 7(a) of
the Asset Purchase Agreement shall have been satisfied in full (without reliance
on any waiver by Hosting), and the transactions contemplated by the Asset
Purchase Agreement shall have been consummated immediately prior to the
Subsequent Closing in accordance with the terms of the Asset Purchase Agreement.
Section 5. COVENANTS.
5A. RESERVATION OF COMMON STOCK AND SERIES A PREFERRED.
VitalStream shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of issuance,
directly or indirectly, upon the conversion of the Convertible Notes and
exercise of the Warrants, such number of shares of Underlying Common Stock
issuable upon the conversion of all outstanding Convertible Notes and exercise
of all outstanding Warrants. VitalStream shall at all times reserve and keep
available out of its authorized but unissued shares of Series A Preferred,
solely for the purpose of issuance upon the conversion of the Convertible Notes,
such number of shares of Series A Preferred issuable upon the conversion of all
outstanding Convertible Notes. All shares of Underlying Common Stock or Series A
Preferred, as the case may be, which are so issuable shall, when issued, be duly
and validly issued, fully paid and non assessable and free from all Taxes and
Liens. VitalStream shall take all such actions as may be necessary to assure
that all such shares of Underlying Common Stock or Series A Preferred, as the
case may be, may be so issued without violation of any applicable Law or Legal
Requirement or any requirements of any domestic securities exchange upon which
shares of Underlying Common Stock or Series A Preferred, as the case may be, may
be listed (except for official notice of issuance which shall be immediately
transmitted by VitalStream upon issuance).
5B. INTELLECTUAL PROPERTY RIGHTS. VitalStream shall possess and
maintain all Intellectual Property Rights necessary to the conduct of its
business and own all right, title and interest in and to, or have a valid and
enforceable license to use, all such Intellectual Property Rights. VitalStream
shall not take any action or fail to take any action which would result in the
invalidity, abandonment, misuse or unenforceability of such Intellectual
Property Rights or which would infringe upon or misappropriate any Intellectual
Property Rights of other Persons.
19
5C. RESTRICTIVE COVENANTS. In addition to any action otherwise
required by the Articles of Incorporation or applicable Law for so long as any
Convertible Notes remain outstanding and, (a) at any time on or prior to the
Subsequent Closing Date, for so long as the Underlying Common Stock constitutes
at least one (1) percent of VitalStream's outstanding Common Stock and (b) at
any time following the Subsequent Closing Date, for so long as the Underlying
Common Stock constitutes at least three (3) percent of VitalStream's outstanding
Common Stock, VitalStream shall not take any of the following actions without
the prior written authorization and approval of the holders of a majority of the
principal amount of the Convertible Notes then outstanding.
(i) directly or indirectly declare or pay any dividends or make
any distributions upon any of its Equity Securities, except for dividends
payable in shares of Common Stock issued upon the outstanding shares of Common
Stock;
(ii) directly or indirectly redeem, purchase or otherwise acquire,
or permit any of the VitalStream Subsidiaries to redeem, purchase or otherwise
acquire, any of VitalStream's or any of the VitalStream Subsidiary's Debt
Securities or Equity Securities or directly or indirectly redeem, purchase or
make any payments with respect to any stock appreciation rights, phantom stock
plans or similar rights or plans; PROVIDED, HOWEVER (a) the payment of any
Indebtedness under any Debt Security of VitalStream or any VitalStream
Subsidiary at the time, and in the amounts, such Indebtedness becomes due and
payable in accordance with the terms of such Debt Security or the repayment in
full of all of the Indebtedness under any Debt Security of VitalStream or any
VitalStream Subsidiary with the proceeds of an issuance of Debt Securities by
VitalStream or any VitalStream Subsidiary shall not require the consent of the
holders of the Convertible Notes under this SECTION 5C(ii) (notwithstanding the
foregoing, for the avoidance of any doubt, this provision shall not negate the
obligation of VitalStream to obtain the consent of the holders of the
Convertible Notes under SECTION 5C(xiii) of this Agreement) and (b) at any time
after the date on which the Dolphin Director becomes a member of the Board of
Directors and, for so long as any Convertible Notes remain outstanding,
continues to be a member of the Board of Directors, VitalStream may, at any time
and from time to time during any fiscal quarter, redeem shares of Common Stock
which are publicly traded and listed on any securities exchange or quoted in the
NASDAQ System (including the proposed Bulletin Board Exchange) or the
over-the-counter market, for an aggregate purchase price of up to an amount
equal to 35% of the consolidated Cash Flow of Vital Stream and the VitalStream
Subsidiaries for the prior fiscal quarter of VitalStream if (1) the Board of
Directors has determined, in its good faith judgment, that such redemption is
fair and in the best interest of all of the securityholders of VitalStream and
(2) such redemption has been approved in writing, or by the vote at a
duly-called meeting of the Board of Directors, by a majority of the members of
the Board of Directors;
(iii) (a) make, or permit any of the VitalStream Subsidiaries to
make, any loans or advances to, guaranties for the benefit of, or Investments
in, any Person or business (other than with respect to Wholly-Owned
Subsidiaries), (b) acquire, or permit any of the VitalStream Subsidiaries to
acquire, any interest in any Person or business (other than with respect to
Wholly-Owned Subsidiaries) by a purchase of assets or (c) enter into, or permit
any of the VitalStream Subsidiaries to enter into, a joint venture with any
Person (other than a Wholly-Owned Subsidiaries), except for (1) advances to
employees of an amount not in excess of one month's
20
salary in the Ordinary Course of Business, (2) Investments having a stated
maturity no greater than one year from the date such Investment is made in (A)
obligations of the United States government or any agency thereof or obligations
guaranteed by the United States government, (B) certificates of deposit of
commercial banks having combined capital and surplus of at least $50 million at
the time of such Investment, (C) commercial paper with a rating of at least
"PRIME-1" by Xxxxx'x Investors Service, Inc. at the time of such Investment or
(D) Debt Securities of a Person solely as part of the consummation of an
acquisition (whether by a purchase of assets, purchase of stock, merger or
otherwise) by VitalStream or any VitalStream Subsidiary of any interest in such
Person or such Person's business; PROVIDED, THAT, (i) to the extent required,
such acquisition has been approved by the holders of the Convertible Notes under
this XXXXXXX 0X, (xx) at any time prior to the date on which the Dolphin
Director has become a member of the Board of Directors, such acquisition and
Investment has been approved in writing by Dolphin, (iii) such acquisition and
Investment has been approved in writing, or by the vote at a duly-called meeting
of the Board of Directors, by a majority of the members of the Board of
Directors and (iv) such Investment is an amount not greater than $375,000 or (3)
Investments, acquisitions of assets or joint ventures (A) in which the pro forma
consolidated Average Monthly Cash Flow of the Person or business in which an
Investment is made, the assets acquired or the joint venture entity, as the case
may be, for the twelve (12) month period immediately following the execution of
a definitive agreement relating to such Investment, purchase of assets or joint
venture (as determined, (i) at any time prior to the date on which the Dolphin
Director has become a member of the Board of Directors, by Dolphin and (ii) at
any time after the date on which the Dolphin Director becomes a member of the
Board of Directors and, for so long as any Convertible Notes remain outstanding,
continues to be a member of the Board of Directors, by the Board of Directors in
its good faith judgment) is greater than $0.00 and (B) which constitute an
Authorized VitalStream Acquisition Transaction;
(iv) merge or consolidate with any Person, or permit any of the
VitalStream Subsidiaries to merge or consolidate with any Person (other than a
Wholly-Owned Subsidiary), except, at any time after the date on which the
Dolphin Director becomes a member of the Board of Directors and, for so long as
any Convertible Notes remain outstanding, continues to be a member of the Board
of Directors, for any merger or consolidation (a) in which the pro forma
consolidated Average Monthly Cash Flow of the Person with whom VitalStream or
any of the VitalStream Subsidiaries will merge or consolidate for the twelve
(12) month period immediately following the execution of a definitive agreement
relating to such merger or consolidation (as determined, (1) at any time prior
to the date on which the Dolphin Director has become a member of the Board of
Directors, by Dolphin and (2) at any time after the date on which the Dolphin
Director becomes a member of the Board of Directors and, for so long as any
Convertible Notes remain outstanding, continues to be a member of the Board of
Directors, by the Board of Directors in its good faith judgment) is greater than
$0.00 and (b) which constitutes either (1) an Authorized VitalStream Sale
Transaction or (2) an Authorized VitalStream Acquisition Transaction;
(v) sell, lease or otherwise dispose of, or permit any of the
VitalStream Subsidiaries to sell, lease or otherwise dispose of, in the
aggregate, more than 17.5% of the consolidated assets of VitalStream and the
VitalStream Subsidiaries (computed on the basis of the greater of (a) book value
determined in accordance with GAAP consistently applied or (b) Fair Market
Value), except for (1) any sale, lease or other disposition of assets in the
Ordinary
21
Course of Business, (2) any sale, lease or other disposition of assets required
by any Law or Legal Requirement in order to permit VitalStream or any
VitalStream Subsidiary to consummate an acquisition (whether by a purchase of
assets, purchase of stock, merger or otherwise) of any interest in a Person or
such Person's business; PROVIDED, THAT, (A) to the extent required, such
acquisition has been approved by the holders of the Convertible Notes under this
SECTION 5C, (B) at any time prior to the date on which the Dolphin Director has
become a member of the Board of Directors, such acquisition has been approved in
writing by Dolphin and (C) at any time after the date on which the Dolphin
Director becomes a member of the Board of Directors and, for so long as any
Convertible Notes remain outstanding, continues to be a member of the Board of
Directors, such acquisition has been approved in writing, or by the vote at a
duly-called meeting of the Board of Directors, by a majority of the members of
the Board of Directors or (3) any sale of assets which constitutes an Authorized
VitalStream Sale Transaction;
(vi) liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction (including, without limitation, any
reorganization into a limited liability company, a partnership or any other
non-corporate entity which is treated as a partnership for federal income tax
purposes), except for any liquidation, dissolution, recapitalization or
reorganization effectuated in connection with the consummation of (a) an
Authorized VitalStream Sale Transaction or (b) an Authorized VitalStream
Acquisition Transaction;
(vii) change the nature of the business or operations of VitalStream
or any of the VitalStream Subsidiaries or enter into or allow any of the
VitalStream Subsidiaries to enter into the ownership, active management or
operation of a line of business other than that line of business in which
VitalStream and the VitalStream Subsidiaries engage as of the date hereof;
PROVIDED, HOWEVER, that VitalStream may continue to employ new technologies and
provide new services which either become commonly employed or provided by, or,
in the good faith judgment of the management of Vital Stream are reasonably
expected to become commonly employed or provided by, Persons engaged in
VitalStream's line of business;
(viii) become subject to, or permit any of the VitalStream
Subsidiaries to become subject to (including, without limitation, by way of
amendment to or modification of) any agreement or instrument which by its terms
would (under any circumstances) restrict (a) the right of any of the VitalStream
Subsidiaries to make loans or advances or pay dividends to, transfer property
to, or repay any Indebtedness owed to, VitalStream or any of the VitalStream
Subsidiaries or (b) VitalStream's or any of the VitalStream Subsidiaries' right
to perform the provisions of this Agreement or any of the other Transaction
Agreements (including, without limitation, provisions relating to the payment of
principal and interest on the Convertible Notes);
(ix) enter into, amend, modify or supplement, or permit any of the
VitalStream Subsidiaries to enter into, amend, modify or supplement, any
agreement, transaction, commitment or arrangement with any of its or any of the
VitalStream Subsidiaries' officers, directors, employees, stockholders or
Affiliates or with any individual related by blood, marriage or adoption to any
such individual or with any entity in which any such Person or individual owns a
beneficial interest, except for (a) customary employment arrangements bonus and
benefit programs on reasonable and customary terms, (b) any agreement,
amendment, modification or supplement where the amount involved does not exceed
$25,000 per annum or (c) at any time after the date on which the Dolphin
Director becomes a member of the Board of Directors and,
22
for so long as any Convertible Notes remain outstanding, continues to be a
member of the Board of Directors, any agreement, amendment, modification or
supplement which is approved in writing, or by the vote at a duly-called meeting
of the Board of Directors, by all of the members of the Board of Directors;
(x) except as expressly provided herein or in the Asset Purchase
Agreement, (a) induce or attempt to induce, or permit any of the VitalStream
Subsidiary to induce or attempt to induce, any Holdings Executive Officer to
leave the employ of Holdings or any of its Subsidiaries, (b) hire, employ or
engage, or permit any of the VitalStream Subsidiary to hire, employ or engage,
any Holdings Executive Officer employed or engaged by Holdings or any of its
Subsidiaries, (c) hire, employ or engage, or permit any of the VitalStream
Subsidiary to hire, employ or engage, any Holdings Executive Officer who has
left the employment or engagement of Holdings or any of its Subsidiaries prior
to, on or after the date hereof within two (2) years of the termination of such
Holdings Executive Officer's employment or engagement with Holdings or any of
its Subsidiaries, or (d) in any other way interfere, or permit any of the
VitalStream Subsidiary to in any other way interfere, with the employment
relationship between Holdings and any of its Subsidiaries, on the one hand, and
any Holding's Executive Officer, on the other hand;
(xi) increase, or permit any of the VitalStream Subsidiaries to
increase, any compensation (including salary, bonuses and other forms of current
and deferred compensation), payable to any officer or director of VitalStream or
any of the VitalStream Subsidiaries, except where (a) such increase is on
reasonable and customary terms, (b) such increase does not involve an amount in
excess of $25,000, (c) such officer or director is offered and accepts new,
different, or additional employment or responsibilities with VitalStream or any
of the VitalStream Subsidiaries or (d) at any time after the date on which the
Dolphin Director becomes a member of the Board of Directors and, for so long as
any Convertible Notes remain outstanding, continues to be a member of the Board
of Directors, such increase is approved by the unanimous written consent of the
Board of Directors;
(xii) establish or acquire, or permit any of the VitalStream
Subsidiaries to establish or acquire, any Subsidiary that is not a Wholly-Owned
Subsidiary, except where such Subsidiary is established or acquired as part of
the formation of a joint venture and such Subsidiary will be consolidated with
VitalStream and the VitalStream Subsidiaries in preparation of the financial
statements of VitalStream and the VitalStream Subsidiaries in accordance with
GAAP and either (a) the pro forma consolidated Average Monthly Cash Flow of such
joint venture entity for the twelve (12) month period immediately following the
execution of a definitive agreement relating to such joint venture (as
determined, (1) at any time prior to the date on which the Dolphin Director has
become a member of the Board of Directors, by Dolphin and (2) at any time after
the date on which the Dolphin Director becomes a member of the Board of
Directors and, for so long as any Convertible Notes remain outstanding,
continues to be a member of the Board of Directors, by the Board of Directors in
its good faith judgment) is greater than $0.00, or (b) at any time after the
date on which the Dolphin Director becomes a member of the Board of Directors
and, for so long as any Convertible Notes remain outstanding, continues to be a
member of the Board of Directors, (1) the establishment or acquisition of such
Subsidiary is approved in writing, or by the vote at a duly-called meeting of
the Board of Directors, by all of the members of the Board of Directors and (2)
the joint venture in connection
23
with which such Subsidiary was established or acquired does not, and will not,
require the transfer or contribution by VitalStream or any VitalStream
Subsidiary of any assets (including Cash) to such joint venture;
(xiii) except as expressly permitted by the Transaction Agreements
create, incur, assume or suffer to exist (including as a result of the
consummation of an Authorized VitalStream Acquisition Transaction or Authorized
VitalStream Sale Transaction in which VitalStream is not the surviving entity),
or permit any of the VitalStream Subsidiaries to create, incur, assume or suffer
to exist (including as a result of the consummation of an Authorized VitalStream
Acquisition Transaction or Authorized VitalStream Sale Transaction in which such
VitalStream Subsidiary is not the surviving entity), Indebtedness except for (a)
any Indebtedness incurred under capitalized leases entered into in the Ordinary
Course of Business or (b) any Indebtedness incurred under one or more commercial
bank loans or other credit facilities with one or more commercial banking
institutions in an aggregate amount not exceeding $1,000,000 as determined on a
consolidated basis; PROVIDED, THAT, with respect to any Indebtedness described
in clause (b) above, the Indebtedness evidenced by the Convertible Notes ranks
pari passu as to seniority with respect to any Lien granted in any assets of
VitalStream or any VitalStream Subsidiary to secure such Indebtedness (other
than with respect to any Lien granted in the accounts receivable of VitalStream
or any VitalStream Subsidiary after the three-month anniversary of the
Subsequent Closing Date);
(xiv) create, incur, assume or suffer to exist, or permit any of the
VitalStream Subsidiaries to create, incur, assume or suffer to exist, any Liens
other than Permitted Liens or Liens incurred in connection with any Indebtedness
permitted to be incurred under SECTION 5C(xiii) of this Agreement;
(xv) change its, or permit any VitalStream Subsidiary to change
its, fiscal year to a fiscal year ending on a date other than December 31;
(xvi) prepay, or permit any of the VitalStream Subsidiaries to
prepay, any interest on any Indebtedness or prepay, or permit any of the
VitalStream Subsidiaries to prepay, any principal on any Indebtedness; PROVIDED,
HOWEVER, the payment of any Indebtedness of VitalStream or any VitalStream
Subsidiary at the time, and in the amounts, such Indebtedness becomes due and
payable in accordance with the terms of the Debt Security evidencing such
Indebtedness or the repayment in full of all of such Indebtedness with the
proceeds of an issuance of Debt Securities by VitalStream or any VitalStream
Subsidiary shall not require the consent of the holders of the Convertible Notes
under this SECTION 5C(xvi) (notwithstanding the foregoing, for the avoidance of
any doubt, this provision shall not negate the obligation of VitalStream to
obtain the consent of the holders of the Convertible Notes under
SECTION 5C(xiii) of this Agreement);
(xvii) amend or modify, or permit any of the VitalStream Subsidiaries
to amend or modify, any stock option plan or employee stock ownership plan as in
existence as of the Initial Closing (or if no Initial Closing has occurred, the
Subsequent Closing), except any amendments or modifications made with the
consent of the majority of the outstanding Common Stock and Underlying Common
Stock (voting together as a single class); adopt, or permit any of the
VitalStream Subsidiaries to adopt, any new stock option plan or employee stock
ownership
24
plan or issue, or permit any of the VitalStream Subsidiaries to issue, any
shares of Common Stock to its or any of the VitalStream Subsidiaries' employees,
other than, in each case, (a) options, warrants and other rights to acquire
Common Stock outstanding on the Initial Closing Date, or if the Initial Closing
has not been consummated, the Subsequent Closing Date, (b) shares of Common
Stock issued pursuant to any stock option plan or employee stock ownership plan
in existence as of the Initial Closing (or if no Initial Closing has occurred,
the Subsequent Closing), (c) at any time after the date on which the Dolphin
Director becomes a member of the Board of Directors and, for so long as any
Convertible Notes remain outstanding, continues to be a member of the Board of
Directors, with the approval in writing, or by the vote at a duly-called meeting
of the Board of Directors, by a majority of the members of the Board of
Directors, shares of capital stock issued by VitalStream to its employees for
BONA FIDE capital raising purposes or (d) at any time after the date on which
the Dolphin Director becomes a member of the Board of Directors and, for so long
as any Convertible Notes remain outstanding, continues to be a member of the
Board of Directors, with the approval in writing, or by the vote at a
duly-called meeting of the Board of Directors, by all of the members of the
Board of Directors;
(xviii) within 60 days of the Subsequent Closing Date, use the
proceeds from the sale of the Convertible Notes and Warrants other than for (a)
working capital and general corporate purposes, (b) the $250,000 payment
contemplated by Section 2(c)(i) of the Asset Purchase Agreement, (c) fees and
expenses, not exceeding $42,500, payable pursuant to SECTION 9A of this
Agreement, (d) legal and accounting fees and expenses, not exceeding $125,000,
of VitalStream's counsel and auditors in connection with the transactions
contemplated by the Asset Purchase Agreement and this Agreement (including
expenses not to exceed $25,000 to be paid in connection with the preparation of
the Hosting Audited Financial Statements (as defined in the Asset Purchase
Agreement)), (e) fees not in excess of $100,000 to be paid to The Xxxxxxx
Companies Incorporated, (f) capital expenditures, not exceeding $50,000 for
routers and switches, and (g) any acquisition, merger or Investment (including
expenses and fees) which does not require the approval of the holders of the
Convertible Notes under this SECTION 5C;
(xix) except as expressly contemplated by the Asset Purchase
Agreement or the Transaction Agreements, make any amendment to the Articles of
Incorporation or VitalStream's bylaws, or file any resolution of the Board of
Directors with the Nevada Secretary of State containing any provisions, which
would increase the number of authorized shares of the Common Stock or adversely
affect or otherwise impair the rights or the relative preferences and priorities
of the holders of the Convertible Notes, Warrants, Series A Preferred or
Underlying Common Stock under this Agreement, the Articles of Incorporation,
VitalStream's bylaws or the other Transaction Agreements;
(xx) except as expressly contemplated by the Transaction
Agreements, authorize, issue or create, or enter into any agreement providing
for the issuance (contingent or otherwise) of, any Equity Securities which are
senior to or on parity with the Series A Preferred with respect to the payment
of dividends, redemptions or distributions upon liquidation or otherwise other
than Equity Securities that are on parity with the Series A Preferred with
respect to the payment of dividends, redemptions or distributions upon
liquidation or otherwise that have terms that are identical to the terms of the
Series A Preferred (other than the conversion price of such Equity Securities);
or
25
(xxi) issue, or enter into any agreement providing for the issuance
(contingent or otherwise) of, any shares of Series A Preferred other than upon
conversion of the Convertible Notes.
For purposes of this SECTION 5C only, at any time during the period beginning on
the date on which the Dolphin Director becomes a member of the Board of
Directors and ending on the date on which the Dolphin Director is no longer
entitled to be a member of the Board of Directors pursuant to the terms of the
Investor Rights Agreement, if no individual is serving as a member of the Board
of Directors in the capacity of the Dolphin Director, VitalStream shall have the
right to deliver written notice (the "DOLPHIN DIRECTOR NOTICE") to the Dolphin
Holders (as defined in the Investor Rights Agreement) requesting that the
Dolphin Holders designate an individual to nominated as the Dolphin Director. If
the Dolphin Holders do not submit a nominee to serve as the Dolphin Director in
writing to VitalStream within ten (10) business days after receipt by the
Dolphin Holders of the Dolphin Director Notice, then the Dolphin Director shall
be deemed to be a member of the Board of Directors (regardless of whether an
individual is actually serving in such capacity).
5D. COMPLIANCE WITH AGREEMENTS. VitalStream shall perform and
observe all of its obligations to each holder of Convertible Notes, Warrants and
Underlying Common Stock as set forth in this Agreement, each of the other
Transaction Agreements, the Convertible Notes and the Warrants.
5E. CURRENT PUBLIC INFORMATION. VitalStream shall file all reports
required to be filed by it under the Securities Act and the Securities Exchange
Act and the rules and regulations adopted by the Securities and Exchange
Commission thereunder, and will take such further action as any holder or
holders of Restricted Securities may reasonably request, all to the extent
required to enable such holders to sell Restricted Securities pursuant to (i)
Rule 144 adopted by the Securities and Exchange Commission under the Securities
Act (as such rule may be amended from time to time) or any similar rule or
regulation hereafter adopted by the Securities and Exchange Commission or (ii) a
registration statement on Form S-2 or S-3 or any similar registration form
hereafter adopted by the Securities and Exchange Commission; provided, however,
that the foregoing provision shall not be interpreted to require the VitalStream
to file a registration statement on Form S-2 or S-3 other than as may be
required pursuant to the Registration Agreement. Upon the request of the holders
of a majority of the Underlying Common Stock, VitalStream will deliver to such
holders a written statement as to whether it has complied with such
requirements.
5F. INFORMATION RIGHTS. VitalStream shall deliver to Dolphin Fund
II, so long as (a) at any time on or prior to the Subsequent Closing Date, the
Underlying Common Stock constitutes at least one percent of VitalStream's
outstanding Common Stock and (b) at any time following the Subsequent Closing
Date, the Underlying Common Stock constitutes at least three percent of
VitalStream's outstanding Common Stock, each monthly, quarterly and annual
internally prepared financial statement and budget reporting packages delivered
to the Board of Directors.
5G. PUBLIC DISCLOSURES. VitalStream shall not disclose any
Purchaser's name or identity as a stockholder of VitalStream in any press
release or other public announcement or
26
in any document or material filed with any Governmental Entity,
without the prior written consent of such Purchaser, unless (i) such disclosure
is required by applicable Law, in which case VitalStream shall use its best
efforts to permit Purchaser to review and comment upon the form and substance of
such disclosure, or (ii) such disclosure has previously been reported in any
document or material filed with any Governmental Entity by either VitalStream or
such Purchaser.
5H. POST-CLOSING CERTIFICATIONS AND DELIVERIES. Within ten (10)
days of the Subsequent Closing Date, VitalStream shall deliver to each of the
Purchasers a list identifying, as of the Closing Date, each of the stockholders
of record of the Company and the number of shares of Common Stock held by such
stockholders of record, together with a certification executed by an officer of
VitalStream certifying that, except as set forth on such list, there were no
shares of Common Stock issued or outstanding on the Subsequent Closing Date.
Section 6. NATURE OF RESTRICTED SECURITIES; TRANSFER OF RESTRICTED
SECURITIES; GENERAL TRANSFER PROCEDURE.
6A. GENERAL PROVISIONS.
(i) Each Purchaser acknowledges and agrees that the Convertible
Notes and Warrants it is purchasing and the Underlying Common Stock are
characterized as "RESTRICTED SECURITIES" under the federal securities Laws
inasmuch as they are being acquired from VitalStream in a transaction not
involving a public offering and that under such Laws such securities may be
resold without registration under the Securities Act only in certain limited
circumstances as set forth in this SECTION 6. In the absence of an effective
registration statement covering such securities or an available exemption from
registration under the Securities Act, the Convertible Notes, Warrants and
Underlying Common Stock must be held indefinitely. In this connection, such
Purchaser represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the
Securities Act, including without limitation the Rule 144 condition that current
information about VitalStream be available to the public.
(ii) Restricted Securities are transferable only pursuant to (a)
public offerings registered under the Securities Act, (b) Rule 144 or Rule 144A
adopted by the Securities and Exchange Commission under the Securities Act (as
such rules may be amended from time to time) or any similar rule or regulation
hereafter adopted by the Securities and Exchange Commission if the exemption
from registration under such rule is available and (c) subject to the conditions
specified in SECTION 6B below, any other legally available means of transfer.
(iii) In addition to the restrictions set forth above, each
Purchaser acknowledges and agrees that the Convertible Notes may only be
transferred in increments of a minimum of $100,000 and $1,000 increments in
excess thereof.
6B. OPINION DELIVERY. In connection with the transfer of any
Restricted Securities (other than a transfer described in SECTION 6A(i) or
SECTION 6A(ii) above), the holder thereof shall deliver written notice to
VitalStream describing in reasonable detail the transfer or proposed transfer,
together with an opinion of legal counsel which is knowledgeable in securities
27
Law matters to the effect that such transfer of Restricted Securities may be
effected without registration of such Restricted Securities under the Securities
Act. In addition, if the transferring holder delivers to VitalStream an opinion
of such legal counsel that no subsequent transfer of such Restricted Securities
shall require registration under the Securities Act, VitalStream shall promptly
upon such contemplated transfer deliver new certificates for such Restricted
Securities which do not bear the Securities Act legend set forth in
SECTION 9C(ii) of this Agreement. If VitalStream is not required to deliver new
certificates for such Restricted Securities not bearing such legend, the holder
thereof shall not transfer the same until the prospective transferee has
confirmed to VitalStream in writing its agreement to be bound by the Investor
Rights Agreement and the conditions contained in this SECTION 6 and
SECTION 9C(ii) of this Agreement.
6C. RULE 144A. Notwithstanding any provision of this Agreement to
the contrary, upon the request of the holders of a majority of the Underlying
Common Stock, VitalStream shall promptly supply to such holders or their
prospective transferees all information regarding VitalStream required to be
delivered in connection with a transfer pursuant to Rule 144A adopted by the
Securities and Exchange Commission under the Securities Act (as such rule may be
amended from time to time) or any similar rule or regulation hereafter adopted
by the Securities and Exchange Commission.
6D. LEGEND REMOVAL. If any Restricted Securities become eligible
for sale pursuant to Rule 144(k) adopted by the Securities and Exchange
Commission under the Securities Act (as such rule may be amended from time to
time) or any similar rule or regulation hereafter adopted by the Securities and
Exchange Commission or an effective registration statement under the Securities
Act, VitalStream shall, upon the request of the holder of such Restricted
Securities, remove the legend set forth in SECTION 9C(ii) of this Agreement from
the certificates for such Restricted Securities.
Section 7. REPRESENTATIONS AND WARRANTIES OF VITALSTREAM. As a
material inducement to the Purchasers to enter into this Agreement and purchase
the Convertible Notes and Warrants hereunder, VitalStream hereby represents and
warrants to each of the Purchasers that the statements contained in this
SECTION 7 are correct and complete as of the date hereof (or on the date as of
which they are made, in the case of any representation or warranty which
specifically relates to an earlier date).
7A. APPROVAL AND CONSENTS; AUTHORIZATION; NO BREACH. VitalStream
has full power and authority (including full corporate power and authority) to
execute and deliver this Agreement and each of the other Transaction Agreements
to which it is a party and to perform its obligations hereunder and thereunder.
Without limiting the generality of the foregoing, the execution, delivery and
performance by VitalStream of this Agreement and each of the other Transaction
Agreements to which VitalStream is a party, have been duly authorized by
VitalStream. Each of this Agreement and the other Transaction Agreements to
which VitalStream is a party constitutes a valid and binding obligation of
VitalStream enforceable in accordance with its terms, except as such
enforceability may be limited by (i) applicable insolvency, bankruptcy,
reorganization, moratorium or other similar Laws affecting creditors' rights
generally, and (ii) applicable equitable principles (whether considered in a
proceeding at law or in equity) including those limiting the enforceability of
indemnification provisions. Except as set forth on SCHEDULE 7A attached hereto,
the execution and delivery by VitalStream of
28
this Agreement and the other Transaction Agreements to which VitalStream or the
Buyer is a party, and the fulfillment of and compliance with the respective
terms hereof and thereof by VitalStream or the Buyer do not and shall not (i)
conflict with or result in a breach of the terms, conditions or provisions of,
(ii) constitute a default under or result in the violation of, (iii) result in
the creation of any Lien upon the capital stock or assets of VitalStream or any
VitalStream Subsidiary pursuant to, (iv) give any third party the right to
modify, terminate or accelerate any obligation under, or (v) require any
authorization, consent, approval, exemption or other action by or notice or
declaration to, or filing with, any third party or any Governmental Entity
pursuant to, (A) the charter documents or bylaws of VitalStream or any
VitalStream Subsidiary, (B) to the Knowledge of VitalStream, any Law or Legal
Requirement to which VitalStream or any VitalStream Subsidiary is subject, or
(C) to the Knowledge of VitalStream any material agreement, instrument, order,
judgment or decree to which VitalStream or any VitalStream Subsidiary is
subject.
7B. CAPITAL STOCK AND RELATED MATTERS.
(i) The authorized capital stock of VitalStream shall consist of
(a) 290,000,000 shares of Common Stock, 22,703,719 of which shares of Common
Stock shall be issued and outstanding and (b) 10,000,000 shares of Preferred
Stock, none of which are issued and outstanding. As of the date hereof,
VitalStream does not have outstanding any Equity Securities, except as set forth
on SCHEDULE 7B attached hereto. Except as required by the Articles of
Incorporation, as of each Closing, VitalStream shall not be subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any of its Equity Securities. As of each Closing, all of the outstanding
shares of VitalStream's capital stock shall be validly issued, fully paid and
nonassessable. If the Initial Closing is consummated, immediately following the
Initial Closing, the Common Stock issuable upon the (1) conversion of the
Initial Convertible Notes shall represent 4.4% of the sum of (A) the number of
shares of Common Stock issuable upon conversion of the Initial Convertible Notes
PLUS (B) the number of shares of Fully Diluted Common Stock and (2) exercise of
the Warrants shall represent 18.0% of the sum of (A) the number of shares of
Common Stock issuable upon exercise of the Warrants PLUS (B) the number of
shares of Fully Diluted Common Stock. If the Initial Closing is consummated,
immediately following the Subsequent Closing, the Common Stock issuable upon the
conversion of the Initial Convertible Notes and the Subsequent Convertible Notes
shall represent 13.2% of the sum of (A) the number of shares of Common Stock
issuable upon conversion of the Initial Convertible Notes and the Subsequent
Convertible Notes PLUS (B) the number of shares of Fully Diluted Common Stock.
If the Initial Closing is not consummated, immediately following the Subsequent
Closing, the Common Stock issuable upon the (1) conversion of the Subsequent
Convertible Notes shall represent 13.2% of the sum of (A) the number of shares
of Common Stock issuable upon conversion of the Subsequent Convertible Notes
PLUS (B) the number of shares of Fully Diluted Common Stock and (2) exercise of
the Warrants shall represent 18.0% of the sum of (A) the number of shares of
Common Stock issuable upon exercise of the Warrants PLUS (B) the number of
shares of Fully Diluted Common Stock.
(ii) Except as set forth in SCHEDULE 7B attached hereto, (i) as of
the date of the stockholder list attached as part of SCHEDULE 7B attached
hereto, no person owns of record, or to VitalStream's Knowledge is known to own
of record, any Equity Securities of VitalStream or any VitalStream Subsidiary;
(ii) no subscription, warrant, option, convertible security, or other
29
right (contingent or other) to purchase or otherwise acquire Equity Securities
of VitalStream or any VitalStream Subsidiary is authorized or outstanding; (iii)
there is no commitment of VitalStream or any VitalStream Subsidiary to issue
shares, subscriptions, warrants, options, convertible securities, or other such
rights (contingent or otherwise) or to distribute to holders of any of its
Equity Securities or Debt Securities any evidence of indebtedness or assets.
Except as provided for in the Articles of Incorporation, or as set forth in
SCHEDULE 7B attached hereto, neither VitalStream nor any VitalStream Subsidiary
has any obligation (contingent or otherwise) to purchase, redeem, or otherwise
acquire any of its Equity Securities or Debt Securities or any interest therein
or to pay any dividend or make any other distribution is respect thereof.
Immediately prior to each Closing, other than the Investor Rights Agreement and
the AKKAD Agreement, there are no voting trusts or agreements, shareholders'
agreements, pledge agreements, buy-sell agreements, rights of first refusal,
preemptive rights or proxies relating to any Debt Securities or Equity
Securities of VitalStream or any VitalStream Subsidiary (whether or not
VitalStream or any VitalStream Subsidiary is a party thereto). All of the
outstanding Debt Securities and Equity Securities of VitalStream and each
VitalStream Subsidiary were issued in compliance with all applicable federal and
state securities Laws.
(iii) Other than as set forth in the Investor Rights Agreement,
there are no statutory or contractual stockholders preemptive rights or rights
of refusal with respect to the issuance of the Convertible Notes, Warrants or
Underlying Common Stock. VitalStream has not violated any applicable securities
Laws in connection with the offer, sale or issuance of any of its capital stock,
and (subject to the accuracy of the representations, acknowledgements and
agreements contained in SECTION 9C of this Agreement) the offer, sale and
issuance of the Convertible Notes or Warrants hereunder or the issuance of the
Underlying Common Stock upon conversion of the Notes or exercise of the Warrants
do not require registration under the Securities Act or any applicable state
securities Laws. To VitalStream's Knowledge, other than the Investor Rights
Agreement and the AKKAD Agreement, there are no agreements between VitalStream's
stockholders with respect to the voting or transfer of VitalStream's capital
stock or with respect to any other aspect of VitalStream's affairs other than as
set forth in the Articles of Incorporation.
7C. ISSUANCE AND COMMITMENT OF THE CONVERTIBLE NOTES AND WARRANTS.
The issuance, sale and delivery of the Convertible Notes and Warrants in
accordance with this Agreement and the issuance of the Underlying Common Stock
upon conversion of the Convertible Notes and exercise of the Warrants, have
been, or will be on or prior to the Closing, duly authorized by all necessary
corporate action on the part of VitalStream. The Convertible Notes and Warrants,
when so issued, sold and delivered against payment therefor in accordance with
the provisions of this Agreement, will be duly and validly issued, fully paid
and non-assessable, free and clear of all Liens, and not subject to any
preemptive rights. Subject to the accuracy of the representations,
acknowledgements and agreements made by each Purchaser in this Agreement, the
offer and sale of the Convertible Notes and Warrants and the issuance of the
Underlying Common Stock upon conversion of the Convertible Notes and exercise of
the Warrants to each Purchaser will be in compliance with all applicable Laws.
7D. INVESTMENT COMPANY. Neither VitalStream nor any of the
VitalStream Subsidiaries is an "investment company" as defined under the
Investment Company Act of 1940.
30
7E. MARGIN SECURITIES. Neither VitalStream nor any of the
VitalStream Subsidiaries is engaged in the business of extending credit for the
purpose of buying or carrying "margin securities" within the meaning of
Regulations T, U or X promulgated by the Board of Governors of the Federal
Reserve Board, and no part of the proceeds realized from the sale of the
Convertible Notes shall be used to buy or carry any such margin securities or
used in violation of Regulations T, U or X.
7F. REPRESENTATIONS AND WARRANTIES OF VITALSTREAM IN THE ASSET
PURCHASE AGREEMENT. The representations and warranties of VitalStream contained
in Section 4 of the Asset Purchase Agreement and all information contained in
any exhibit, schedule or attachment hereto or in any certificate or other
writing delivered by, or on behalf of, VitalStream pursuant to the Asset
Purchase Agreement shall be true, correct and complete in all respects as of the
date hereof (or on the date as of which they are made, in the case of any
representation or warranty which specifically relates to an earlier date).
Section 8. TERMINATION.
8A. TERMINATION OF AGREEMENT.
(i) The parties may terminate this Agreement as provided below:
(a) VitalStream and the Purchasers may terminate this
Agreement by mutual written consent of VitalStream and each of the
Purchasers at any time prior to the Initial Closing.
(b) Either VitalStream or the Purchasers may terminate this
Agreement by giving written notice to the non-terminating parties at any
time prior to the Initial Closing or, if the Initial Closing has not
occurred, prior to the Subsequent Closing, if the Initial Closing or, if
the Initial Closing has not occurred, the Subsequent Closing, shall not
have occurred on or before December 15, 2002.
(ii) This Agreement shall terminate immediately upon the
termination of the Asset Purchase Agreement if the Initial Closing or the
Subsequent Closing has not been consummated.
8B. EFFECT OF TERMINATION. If any party terminates this Agreement
pursuant to SECTION 8A of this Agreement, all rights and obligations of the
parties hereunder shall terminate without any Liability of any party to the
other party (except for any Liability of any party then in breach).
Section 9. MISCELLANEOUS.
9A. COMMITMENT FEE; EXPENSES.
(i) VitalStream shall pay to Dolphin Partners a commitment fee
(the "COMMITMENT FEE") in an amount equal to $25,000 as follows (A) if
VitalStream has elected to consummate the Initial Closing pursuant to
SECTION 2C(i) of this Agreement, one-third of the Commitment Fee shall be paid
at the Initial Closing and the remaining two-thirds of the
31
Commitment Fee shall be paid at the Subsequent Closing and (B) if VitalStream
has not elected to consummate the Initial Closing pursuant to SECTION 2C(i) of
this Agreement, the aggregate amount of the Commitment Fee shall be paid in full
at the Subsequent Closing. The Commitment Fee shall be payable in shares of
Common Stock (which shall not be registered under the Securities Act) in an
amount equal to $25,000 DIVIDED BY the Market Price of the Common Stock as
determined as of the day three (3) days prior to the Closing Date at which the
Commitment Fee is to be paid. Notwithstanding the foregoing, if any fractional
interest in a share of Common Stock would be deliverable upon the payment of the
Commitment Fee, VitalStream, in lieu of delivering the fractional share
therefor, shall pay an amount in cash to Dolphin Partners equal to the Market
Price of such fractional interest of Common Stock.
(ii) VitalStream shall pay, and hold the Purchasers harmless
against Liability for the payment of, (a) the fees and expenses of their special
counsel arising in connection with their due diligence review of VitalStream,
the negotiation and execution of this Agreement and each of the other
Transaction Agreements (other than the Asset Purchase Agreement) and the
consummation of the transactions contemplated hereby and thereby (provided,
VitalStream shall not be required to pay in excess of $42,500 pursuant to this
SECTION 9A(ii)(a)) and (b) the reasonable fees and expenses incurred with
respect to any amendments or waivers (whether or not the same become effective)
under or in respect of this Agreement or any the other Transaction Agreements
(other than the Asset Purchase Agreement). VitalStream shall pay, and hold each
Purchaser and each holder of a Convertible Note, a Warrant or Underlying Common
Stock harmless against Liability for the payment of, (1) stamp and other taxes
which may be payable in respect of the execution and delivery of this Agreement
or the issuance, delivery or acquisition of any Convertible Notes or Warrants,
any share of Common Stock issuable upon conversion of a Convertible Note or any
share of Common Stock issuable upon exercise of a Warrant, (2) the reasonable
fees and expenses incurred with respect to the enforcement of the rights granted
under this Agreement or any the other Transaction Agreements (other than the
Asset Purchase Agreement), and (3) the reasonable fees and expenses incurred by
each such Person in any filing with any Governmental Entity with respect to its
Investment in VitalStream or in any other filing with any Governmental Entity
with respect to VitalStream which mentions such Person.
9B. REMEDIES; SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS; INDEMNIFICATION.
(i) Each holder of Convertible Notes, Warrants or Underlying
Common Stock shall have all rights and remedies set forth in this Agreement, and
the other Transaction Agreements for the benefit of each such holder and all
rights and remedies which such holders have been granted at any time under any
other agreement or contract and all of the rights which such holders have under
any Law. Any Person having any rights under any provision of this Agreement or
any other Transaction Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement or any other Transaction
Agreement and to exercise all other rights granted by Law. The following
indemnification provisions are in addition to, and not in derogation of, any
statutory, equitable, or common law remedy any holder of Convertible Notes,
Warrants or Underlying Common Stock may have for breach of representation,
warranty or covenant with respect to VitalStream or any VitalStream Subsidiary
or the transactions
32
contemplated by this Agreement; provided, however, that no provision of this
Agreement shall negate any limitation on remedies as agreed among the parties
to, and set forth in, the Asset Purchase Agreement with respect to any breach of
any provision of the Asset Purchase Agreement.
(ii) The representations and warranties set forth in this Agreement
shall survive each Closing (a) with respect to the matters covered by the
representations and warranties contained in SECTION 7A, and SECTION 7B of this
Agreement and Section 4(m), Section 4(o) and Section 4(r) of the Asset Purchase
Agreement, until sixty (60) days after the expiration of all applicable statute
of limitations (including all periods of extension, whether automatic or
permissive) and (b) in the case of all other representations and warranties and
any covenant or agreement contained in this Agreement to be performed on or
prior to a Closing Date, until the date which is eight (8) months after such
Closing Date.
(iii) In consideration of each Purchaser's execution and delivery of
this Agreement and acquiring the Convertible Notes and Warrants hereunder and in
addition to all of VitalStream's and the Buyer's other obligations under this
Agreement and the other Transaction Agreements, VitalStream agrees to indemnify
on an after-tax basis and defend, protect and hold harmless each Purchaser and
its Affiliates and each of their respective directors, officers, employees,
stockholders, members, partners, agents (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement),
successors and assigns (collectively, the "INDEMNITEES") from and against any
and all Claims, costs, damages, deficiencies, expenses (including interest,
court costs, fees of attorneys, accountants and other experts or other expenses
of litigation or other proceedings or of any Claim, default or assessment),
fees, fines, Liabilities, losses and penalties (hereinafter individually, a
"LOSS" and collectively, "LOSSES") which, directly or indirectly, arise out of,
result from or relate to (irrespective of whether any such Indemnitee is a party
to the action for which indemnification hereunder is sought): (a) any facts or
circumstances which constitute a misrepresentation or breach by VitalStream or
any VitalStream Subsidiary of any representation, warranty or covenant set forth
in this Agreement (including any annex, exhibit or schedule attached hereto),
any other Transaction Agreement or in any instrument or document delivered by
VitalStream or the Buyer pursuant to this Agreement or (b) any non-fulfillment
or breach of any covenant or agreement of VitalStream or any VitalStream
Subsidiary set forth in this Agreement or any other Transaction Agreement. To
the extent that the foregoing undertakings by VitalStream or the Buyer may be
unenforceable for any reason, VitalStream and the Buyer shall make the maximum
contribution to the payment and satisfaction of the Losses described above
incurred by any Indemnitee which is permissible under applicable Law.
9C. PURCHASER'S REPRESENTATIONS; LEGENDS.
(i) Purchaser's Representations.
(a) AUTHORIZATION. Each Purchaser hereby represents that it
has full power and authority to enter into this Agreement and the
Transaction Agreements, and this Agreement and the Transaction Agreements
constitute its valid and legally binding obligations, enforceable in
accordance with their respective terms.
33
(b) DISCLOSURE OF INFORMATION. Each Purchaser hereby
represents that it has received and reviewed the information about
VitalStream and the VitalStream Subsidiaries that it has requested and
represents that it has had an opportunity to ask questions and receive
answers from VitalStream and the Buyer regarding the terms and conditions
of the offering of the Convertible Notes and Warrants and the business,
properties, prospects and financial condition of VitalStream and the
VitalStream Subsidiaries that it has requested. The foregoing, however,
does not limit or modify the representations and warranties of VitalStream
and the Buyer in SECTION 7 of this Agreement or the right of the Purchasers
to rely thereon.
(c) INVESTMENT EXPERIENCE. Each Purchaser hereby represents
that it is able to fend for itself, can bear the economic risk of its
Investment and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the
Investment in the Convertible Notes, Warrants and Underlying Common Stock.
If other than an individual, such Purchaser also represents it has not been
organized for the purpose of acquiring the Convertible Notes, Warrants or
Underlying Common Stock.
(d) ACCREDITED INVESTOR. Except as set forth on SCHEDULE 9C
attached hereto, each Purchaser hereby represents that it is an
"institutional investor," as that term is used in the definition of
"Dealer" under Section 359-e of the
New York Fraudulent Practices Act, as
presently in effect.
(e) INVESTMENT INTENT; OWN ACCOUNT. Each Purchaser hereby
represents that it is acquiring the Restricted Securities purchased
hereunder or acquired pursuant hereto for its own account, not as nominee
or agent, with the present intention of holding such securities for
purposes of Investment, and that it has no intention of selling such
securities in a public distribution in violation of the federal securities
Laws or any applicable state securities Laws; provided that nothing
contained herein shall prevent any Purchaser and subsequent holders of
Restricted Securities from transferring such securities to its Affiliates
or in compliance with the provisions of SECTION 6 of this Agreement. Each
Purchaser further represents that such Purchaser does not have
any contract, undertaking or agreement with any Person to sell, transfer or
grant participations to such Person or to any other Person with respect to
the Restricted Securities.
(f) RESIDENCE; DOMICILE. Each Purchaser hereby represents and
warrants that the principal office of such Purchaser is located at the
address set forth with respect to such Purchaser on ANNEX 1 attached
hereto.
(g) OWNERSHIP OF VITALSTREAM. Dolphin Fund II hereby
represents and warrants that, as of the date hereof, Dolphin Fund II and
its Affiliates, together with each of Holdings, Networks and Hosting and
each of their respective Affiliates own less than 5% of the outstanding
Common Stock in the aggregate.
(ii) LEGENDS. Each certificate or instrument representing
Restricted Securities shall be imprinted with a legend in substantially the
following form:
34
"THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF
COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS INSTRUMENT IS
SUBJECT TO THE CONDITIONS SPECIFIED IN THE
CONVERTIBLE NOTE AND
WARRANT PURCHASE AGREEMENT, DATED AS OF NOVEMBER 1, 2002, AMONG THE
ISSUER OF SUCH SECURITIES (THE "COMPANY") AND THE OTHER PARTIES
REFERRED TO THEREIN, AS AMENDED AND MODIFIED FROM TIME TO TIME, AND
THE COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH
SECURITIES UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO
SUCH TRANSFER. A COPY OF SUCH CONDITIONS SHALL BE FURNISHED WITHOUT
CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST.
THE SECURITIES REPRESENTED BY THIS INSTRUMENT ARE SUBJECT TO AN
INVESTOR RIGHTS AGREEMENT, DATED AS OF [__], 2002, AMONG THE COMPANY
AND THE STOCKHOLDERS OF THE COMPANY REFERRED TO THEREIN, AS AMENDED
AND MODIFIED FROM TIME TO TIME. A COPY OF SUCH INVESTOR RIGHTS
AGREEMENT SHALL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE
HOLDER HEREOF UPON WRITTEN REQUEST."
9D. ENTIRE AGREEMENT. This Agreement, the other Transaction
Agreements and the other agreements and instruments referred to herein and
therein contain the entire agreement between the parties hereto and supersede
any prior understandings, agreements or representations by or between the
parties hereto, written or oral, which may have related to the subject matter
hereof in any way.
9E. SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein or therein, all covenants and agreements contained in this Agreement or
any other Transaction Agreement by or on behalf of any of the parties hereto
shall bind and inure to the benefit of the respective successors and assigns of
the parties hereto whether so expressed or not. In addition, and whether or not
any express assignment has been made, the provisions of this Agreement or any
other Transaction Agreement which are for any Purchaser's benefit as a purchaser
or holder of Convertible Notes, Warrants or Underlying Common Stock are also for
the benefit of, and
35
enforceable by, any subsequent holder of such Convertible Notes, Warrants or
Underlying Common Stock.
9F. COUNTERPARTS. This Agreement or any other Transaction
Agreement may be executed simultaneously in two or more counterparts, any one of
which need not contain the signatures of more than one party, but all such
counterparts taken together shall constitute one and the same agreement.
9G. DESCRIPTIVE HEADINGS; INTERPRETATION. Section headings used in
this Agreement or in any other Transaction Agreement are for convenience only
and are not to affect the construction of, or to be taken into consideration in
interpreting, such agreement. The use of the word "INCLUDING" or any variation
or derivative thereof in this Agreement or in any other Transaction Agreement is
by way of example rather than by limitation.
9H. NOTICES; BUSINESS DAYS. All notices, demands or other
communications to be given or delivered under or by reason of the provisions of
this Agreement or any other Transaction Agreement shall be in writing and shall
be deemed to have been given when delivered personally to the recipient or when
sent by facsimile followed by delivery by reputable overnight courier service
(charges prepaid), one day after being sent to the recipient by reputable
overnight courier service (charges prepaid) or five days after being mailed to
the recipient by certified or registered mail, return receipt requested and
postage prepaid. Any notice, demand or other communication hereunder may be
given by any other means (including telecopy or electronic mail), but shall not
be deemed to have been duly given unless and until it is actually received by
the intended recipient. Such notices, demands and other communications shall be
sent to (i) each Purchaser at the address indicated for such Purchaser on
ANNEX 1 attached hereto, (ii) any other holder of a Convertible Note, Warrant or
Underlying Common Stock at the address set forth in VitalStream's records and
(iii) VitalStream at the address indicated below:
Xxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Chief Operating Officer
with a copy (which shall not constitute notice to
VitalStream) to:
Stoel Rives LLP
000 Xxxxx Xxxx 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
New York (any other day being a "BUSINESS DAY"), such time period shall
automatically be extended to, the next business day immediately following such
Saturday, Sunday or legal holiday.
36
9I. CONSENT TO AMENDMENTS AND WAIVERS. Except as otherwise
provided herein, no modification, amendment or waiver of any provision of this
Agreement shall be effective against VitalStream or the holders of the
Convertible Notes, Warrants or Underlying Common Stock unless such modification,
amendment or waiver is approved in writing by (i) VitalStream, in the case of
any amendment, modification or waiver affecting the rights and interests
VitalStream, (ii) in the case of any amendment, modification or waiver affecting
the rights and interests of the holders of the Initial Convertible Notes,
Warrants or Underlying Common Stock under this Agreement, the holders of a
majority of the Underlying Common Stock with respect to such Initial Convertible
Notes, Warrants or Underlying Common Stock and (iii) in the case of any
amendment, modification or waiver affecting the rights and interests of any
holder of Subsequent Convertible Notes or any Person listed on ANNEX 1 as
obligated to purchase Subsequent Convertible Notes, the holders of a majority of
the Underlying Common Stock with respect to such Subsequent Convertible Notes.
Notwithstanding the foregoing, without the consent of any other Person,
VitalStream may restate ANNEX 1 attached hereto to (a) add additional Persons
who purchase Convertible Notes hereunder and execute and deliver a counterpart
signature page to this Agreement or (b) change the addresses for notice to any
Person at such Person's request. No other course of dealing between VitalStream
and the holder of any Convertible Notes, Warrants or Underlying Common Stock or
any delay in exercising any rights under this Agreement or any of the other
Transaction Agreements shall operate as a waiver of any rights of any such
holder. For purposes of this Agreement, Convertible Notes, Warrants or
Underlying Common Stock held by VitalStream or any of the VitalStream
Subsidiaries shall not be deemed to be outstanding.
9J. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable Law, but if any provision of this Agreement or any other Transaction
Agreement is held to be prohibited by or invalid under applicable Law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this Agreement or such other
Agreement.
9K. NO STRICT CONSTRUCTION. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement and the other
Transaction Agreements. In the event an ambiguity or question of intent or
interpretation arises, this Agreement and the other Transaction Agreements shall
be construed as if drafted jointly by the parties hereto, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement or any other Transaction
Agreement. Any reference to any federal, state, local, or foreign Law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. Nothing in the schedules attached hereto (or, as
applicable, to the Asset Purchase Agreement) shall be deemed adequate to
disclose an exception to a representation or warranty made herein unless the
schedule attached hereto identifies the exception with particularity and
describes the relevant facts in detail. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or other item
shall not be deemed adequate to disclose an exception to a representation or
warranty made herein (unless the representation or warranty has to do with the
existence of the document or other item itself). The parties hereto intend that
each representation, warranty, and covenant contained herein shall have
independent significance. If any party hereto has breached any representation,
warranty, or covenant contained herein in any
37
respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which such party has not breached shall not detract from or
mitigate the fact that such party is in breach of the first representation,
warranty, or covenant.
9L. INCORPORATION OF ANNEXES, SCHEDULES AND EXHIBITS. The annexes,
schedules and exhibits identified in this Agreement are incorporated herein by
reference and made a part hereof.
9M. REGISTERED HOLDERS; OWNERSHIP. As used in this Agreement and
each of the other Transaction Agreements, references to a "HOLDER" of
Convertible Notes, Warrants or Underlying Common Stock shall mean the registered
holder of such Convertible Notes, Warrants or Underlying Common Stock as set
forth in VitalStream's records. For purposes of this Agreement and each of the
other Transaction Agreements, all holdings of Convertible Note, Warrants and
Underlying Common Stock by Persons who are Affiliates of each other shall be
aggregated for purposes of meeting any threshold tests under this Agreement and
each of the other Transaction Agreements.
9N. CONSIDERATION FOR WARRANTS AND NOTES. The Purchasers and
VitalStream acknowledge and agree that (i) the fair market value of all of the
Warrants (the "AGGREGATE WARRANT VALUE") issued hereunder shall be an amount
equal to the product of is (a) $0.055 MULTIPLIED BY (b) the aggregate Warrant
Share Amount (as defined in the Warrant) and (ii) the fair market value of all
of the Convertible Notes issued hereunder is $1,100,000 MINUS the Aggregate
Warrant Value. Each Purchaser and VitalStream shall file their respective
federal, state and local Tax returns in a manner which is consistent with such
valuation and allocation and shall not take any contrary position with any
Taxing authority.
9O. UNDERSTANDING AMONG THE PURCHASERS. The determination of each
Purchaser to purchase the Convertible Notes and Warrants pursuant to this
Agreement has been made by such Purchaser independent of any other Purchaser and
independent of any statements or opinions as to the advisability of such
purchase or as to the properties, business, prospects or condition (financial or
otherwise) of VitalStream and the VitalStream Subsidiaries which may have been
made or given by any other Purchaser or by any agent or employee of any other
Purchaser.
9P. GOVERNING LAW. TO THE EXTENT APPLICABLE, THE CORPORATE LAW OF
THE STATE OF NEVADA SHALL GOVERN ALL ISSUES AND QUESTIONS CONCERNING THE
RELATIVE RIGHTS AND OBLIGATIONS OF VITALSTREAM AND ITS SECURITYHOLDERS. ALL
OTHER ISSUES AND QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT
AND INTERPRETATION OF THIS AGREEMENT AND ANY OF THE OTHER TRANSACTION AGREEMENTS
AND THE ANNEXES, EXHIBITS AND SCHEDULES HERETO AND THERETO SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK, WITHOUT
GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW RULES OR PROVISIONS
(WHETHER OF THE STATE OF
NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE
THE APPLICATION OF THE LAWS OF
38
ANY JURISDICTION OTHER THAN THE STATE OF
NEW YORK. IN FURTHERANCE OF THE
FOREGOING, THE INTERNAL LAW OF THE STATE OF
NEW YORK SHALL CONTROL THE
INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT AND EACH OF THE OTHER
TRANSACTION AGREEMENTS (AND ALL ANNEXES, SCHEDULES AND EXHIBITS HERETO AND
THERETO), EVEN THOUGH UNDER THAT JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW
ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.
9Q. JURISDICTION AND VENUE. ALL JUDICIAL PROCEEDINGS BROUGHT
AGAINST VITALSTREAM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER TRANSACTION
AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION
IN
NEW YORK CITY,
NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT AND THE
OTHER TRANSACTION AGREEMENTS TO WHICH THEY ARE A PARTY, VITALSTREAM AND EACH
HOLDER OF CONVERTIBLE NOTES, WARRANTS OR UNDERLYING COMMON STOCK, ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY
JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER
TRANSACTION AGREEMENTS. VITALSTREAM AND EACH HOLDER OF CONVERTIBLE NOTES,
WARRANTS OR UNDERLYING COMMON STOCK HEREBY WAIVE ANY CLAIM THAT
NEW YORK CITY,
NEW YORK IS AN INCONVENIENT FORUM OR AN IMPROPER FORUM BASED ON LACK OF VENUE.
9R. WAIVER OF RIGHT TO JURY TRIAL. VITALSTREAM AND EACH HOLDER OF
CONVERTIBLE NOTES, WARRANTS OR UNDERLYING COMMON STOCK HEREBY WAIVE, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY in any litigation in any court
with respect to, in connection with, or arising out of this Agreement or any of
the other Transaction Agreements or the validity, protection, interpretation,
collection or enforcement hereof or thereof; AND VITALSTREAM HEREBY WAIVES, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, THE RIGHT TO INTERPOSE ANY SETOFF in
connection with any such litigation, irrespective of the nature of such setoff
except to the extent that the failure so to assert any such setoff would
permanently preclude the prosecution of or recovery upon same. VITALSTREAM
AGREES THAT THIS SECTION 9R IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT
AND EACH OF THE OTHER TRANSACTION AGREEMENTS AND ACKNOWLEDGES THAT EACH HOLDER
OF CONVERTIBLE NOTES, WARRANTS OR UNDERLYING COMMON STOCK WOULD NOT HAVE ENTERED
INTO THIS AGREEMENT OR MADE AN INVESTMENT HEREUNDER IF THIS SECTION 9R WERE NOT
PART OF THIS AGREEMENT AND THE OTHER TRANSACTION AGREEMENTS.
39
IN WITNESS WHEREOF, the parties have executed this
Convertible Note
and Warrant Purchase Agreement as of the date first written above.
COMPANY:
VITALSTREAM HOLDINGS, INC.
By: /s/ Xxxx Xxxxxxx
-------------------------------------------------
Name: Xxxx Xxxxxxx
Title: President and Chief Executive Officer
PURCHASERS:
DOLPHIN COMMUNICATIONS FUND II, L.P.
By: Dolphin Communications II, L.P.,
Its General Partner
By: Dolphin Communications, L.L.C.,
Its General Partner
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
DOLPHIN COMMUNICATIONS PARALLEL FUND
II (NETHERLANDS), L.P.
By: Dolphin Communications II, L.P.,
Its General Partner
By: Dolphin Communications, L.L.C.,
Its General Partner
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
ANNEX 1
SCHEDULE OF PURCHASERS
PRO RATA SHARE OF
INITIAL CONVERTIBLE
NAMES AND ADDRESSES NOTES
---------------------------------------------- -------------------
1. Dolphin Communications Fund II, L.P. 89.9%
000 Xxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xx. Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
with a copy (which shall not constitute
notice to the Dolphin) to:
Xxxxxxxx & Xxxxx
Citigroup Center
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxx, Esq.
Facsimile: (000) 000-0000
2. Dolphin Communications Parallel 10.1%
Fund II (Netherlands), L.P.
000 Xxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xx. Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
with a copy (which shall not constitute
notice to the Dolphin) to:
Xxxxxxxx & Xxxxx
Citigroup Center
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxx, Esq.
Facsimile: (000) 000-0000
-------------------
TOTAL 100.0%
SCHEDULE 7A
APPROVAL AND CONSENTS
SCHEDULE 7B
CAPITAL STOCK AND RELATED MATTERS
SCHEDULE 9C
ACCREDITED INVESTORS
1. Dolphin Communications Parallel Fund II (Netherlands), L.P.
44
EXHIBIT A
FORM OF GUARANTY
EXHIBIT B
FORM OF CONVERTIBLE NOTE
EXHIBIT C
FORM OF INVESTOR RIGHTS AGREEMENT
EXHIBIT D
FORM OF REGISTRATION AGREEMENT
EXHIBIT E
FORM OF VITALSTREAM COUNSEL OPINION
EXHIBIT F
FORM OF WARRANT
EXHIBIT G
FORM OF CERTIFICATE OF DESIGNATION
