EXHIBIT 10.38
[MAXIM GROUP LOGO]
PLACEMENT AGENCY AGREEMENT
--------------------------
June 30, 2005
Xx. Xxxxx Xxxxxxxx
President
XStream Beverage Network, Inc.
0000 XX 00xx Xxxxxx
Xx. Xxxxxxxxxx, XX 00000
Dear Xx. Xxxxxxxx:
This Placement Agency Agreement (the "AGREEMENT") confirms the
retention of Maxim Group LLC ("MAXIM" or "PLACEMENT AGENT") by Xstream Beverage
Network, Inc., a Nevada corporation ("XSTREAM" or the "COMPANY"), to provide, on
an exclusive basis, certain investment banking services in connection with a
"best efforts" private placement of Units (as defined below) consisting of
securities of the Company (the "PRIVATE PLACEMENT"). Each Unit ("UNIT") shall
consist of: (i) a $100,000 12% convertible promissory note ("Notes"); (ii)
100,000 common stock purchase warrants ("WARRANTS"); and (iii) 10,000 shares of
the Company's common stock, par value $0.001 per share ("COMMON STOCK"). The
Units, the Notes, the Warrants and the Common Stock are sometimes referred to
herein as the "PRIVATE PLACEMENT SECURITIES" or the "SECURITIES." The investors
introduced by Maxim to the Company in connection with the financing contemplated
hereunder are referred to herein each as an "INVESTOR" and collectively as the
"INVESTORS."
1. PLACEMENT
(a) The Private Placement shall be a "best efforts" placement consisting of
a minimum of thirteen (13) Units, or one million three hundred thousand dollars
($1,300,000) (the "PRIVATE PLACEMENT MINIMUM AMOUNT") and up to a maximum of
forty (40) Units, or four million dollars ($4,000,000), at an offering price of
$100,000 per Unit (the "PRIVATE PLACEMENT MAXIMUM AMOUNT"). The Company has
granted the Placement Agent the option to exercise an over-allotment option to
sell up to an additional six (6) Units (the "OVER-ALLOTMENT OPTION"). The Notes
and Warrants, or the other agreements or instruments entered into in connection
with the Private Placement shall have such other features as are agreed to by
the Company and Maxim and memorialized in the Offering Documents (as defined
below) including, without limitation, the registration rights described in
Section 1(e) below as well as those described in the subscription documents
included in the Offering Documents, as defined below, for the shares of Common
Stock receivable upon the conversion of the Notes, or upon the exercise of the
Warrants, or issuable as part of the Units.
[MAXIM GROUP LOGO] XStream Beverage Network, Inc.
June 30, 2005
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(b) Maxim will, on an exclusive basis, conduct the Placement on a "best
efforts" basis to accredited investors, as meant in Regulation D. If at least
the Private Placement Minimum Amount has been subscribed for and accepted by the
Company at any time during the Private Placement Offering Period, as defined
below, the Company will promptly conduct an initial closing (the "INITIAL
CLOSING") and may conduct subsequent closings (each, a "SUBSEQUENT CLOSING" and
together with the Initial Closing, each, a "CLOSING" and collectively, the
"CLOSINGS"), until the date on which the Maximum Amount is subscribed for by
Investors and accepted by the Company (the "FINAL CLOSING DATE"). Unless
terminated earlier in the Company's or Maxim's sole discretion, the offering
period for the Private Placement ("PRIVATE PLACEMENT OFFERING PERIOD") will
expire on the earlier to occur of: (i) May 27, 2005, unless extended in the
mutual discretion of the Company and Maxim (the "TERMINATION DATE"), (ii) the
date on which the Private Placement Maximum Amount is subscribed for and
accepted by the Company, or (iii) the termination of the Private Placement or
this Agreement, but in any event no later than July 26, 2005. Any Closing shall
be undertaken in a manner agreed to by the Company and Maxim. Unless the Private
Placement Minimum Amount is subscribed for and accepted by the Company by the
Termination Date, the Private Placement will be terminated and all subscription
proceeds will be returned to Investors without interest or deduction The minimum
subscription amount per investor shall be One Hundred Thousand Dollars
($100,000.00).
(c) The Private Placement will be made pursuant to the Offering Documents,
as defined below. The Securities will not be registered under the Securities Act
of 1933, as amended, or any applicable successor statute (the "Act"), but will
be issued in reliance on the private offering exemption available under Section
4(2) of the Act and the Rules and Regulations, as defined below, promulgated
thereunder, including Regulation D ("REGULATION D"). Maxim understands that all
subscriptions for Units are subject to acceptance by the Company. The Company
and Maxim reserve the right in their reasonable discretion to accept or reject
any or all subscriptions for Units, in whole or in part, regardless whether any
funds have been deposited into an escrow account. Any subscription monies
received by Maxim from Investors will be handled in accordance with Rule 15c2-4
under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"),
whether or not Maxim is subject to the Exchange Act, and as otherwise may be
prescribed by the terms of the Offering Documents (as defined in Section 2
below). As used herein, the term "RULES AND REGULATIONS" means the applicable
rules and regulations promulgated under the Securities Act and the Exchange Act.
(d) Until the Closing (as defined below) is held, all subscription funds
received shall be held by American Stock Transfer & Trust Company (the "ESCROW
AGENT"). Maxim shall not have any independent obligation to verify the accuracy
or completeness of any information contained in any Subscription Documents (as
defined in Section 2 below) or the authenticity, sufficiency or validity of any
check delivered by any prospective Investor in payment for the Units, nor shall
Maxim incur any liability with respect to any such verification or failure to
verify, unless it had actual knowledge that any information in the Subscription
Documents was untrue. All subscription checks and funds shall be promptly and
directly delivered without offset or deduction to the Escrow Agent.
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June 30, 2005
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(e) In the event that the Private Placement Minimum Amount is raised, the
Company agrees to file a registration statement, on a form to be agreed upon by
the Company and Maxim (the "REGISTRATION STATEMENT"), with the Securities and
Exchange Commission (the "SEC") no later than thirty (30) days following the
date the SEC declares the Company's SB-2 registration statement (registration
no. 333-119403) effective, covering the resale of the shares of Common Stock:
(i) issuable upon the conversion of the Notes and exercise of the Warrants, (ii)
included in the Units, and (iii) underlying any Placement Agent Warrant (as
defined below) issued to Maxim in connection with the Private Placement. In
addition, the Company shall use reasonable efforts to have such Registration
Statement declared effective by the SEC by no later than one hundred-twenty
(120) days following the Final Closing of the Private Placement with the SEC
(the "TARGET EFFECTIVE DATE"), and to maintain the effectiveness of such
Registration Statement until the third (3rd) anniversary of the date of such
effectiveness. The terms of such registration rights are more fully described in
the Offering Documents.
2. OFFERING DOCUMENTS AND RELATED MATTERS
(a) The Company has prepared an Offering Document which includes: (i) the
Form 10-KSB as filed with the Securities and Exchange Commission on April 14,
2005, (ii) the subscription booklet, (iii) the form of Notes, (iv) the form of
Warrants, and (v) the Offering term sheet, relating to the Private Placement
(such Offering Documents and any amendments or supplements thereto prepared and
furnished by the Company, being referred to herein as the "OFFERING DOCUMENTS"),
which Offering Documents, among other things, describes the Private Placement
and certain investment risks relating thereto. The Offering Documents shall
contain substantially all of the information required in a Registration
Statement on Form SB-2 under the Act.
(b) The Company has been and will continue to be responsible for preparing
and filing required documentation, if any, with the authorities in the United
States or any state located therein (and subsequent to, if required by the laws
of any such jurisdiction) in connection with the distribution of the Offering
Documents to prospective Investors (the parties acknowledging, however, that the
Private Placement is intended and expected to be wholly or partially exempt from
filing requirements in the United States by reason of an "accredited investor"
exemption).
(c) Maxim and its counsel and the Company and its counsel have or will
jointly prepare a form of subscription agreement (the "SUBSCRIPTION AGREEMENT")
and a form of purchaser questionnaire (collectively, with the Subscription
Agreement, the Note, the Warrant or other documents required in connection with
the Private Placement, the "SUBSCRIPTION DOCUMENTS"), which Subscription
Documents shall contain such representations, warranties, conditions and
covenants as are customary in private placements of corporate debt and equity
securities with United States accredited investors. Maxim and its counsel have
[MAXIM GROUP LOGO] XStream Beverage Network, Inc.
June 30, 2005
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had or will have an opportunity to review the final form of the Offering
Documents and Subscription Documents prior to the distribution thereof to
prospective Investors, and the Offering Documents and the Subscription Documents
will be the only offering documents (other than cover letters which may be used
by Maxim, and any documents made available to Investors in accordance with the
terms of the Offering Documents) shown to prospective Investors. The Company and
its counsel will advise Maxim and its counsel , in writing of those
jurisdictions in which the Securities may lawfully be offered and sold, and the
manner in which the Securities may lawfully be offered and sold in each such
jurisdiction in connection with the Private Placement, and Maxim agrees that the
Securities will be offered or sold only in such jurisdictions and in the manner
specified by the Company; provided, however, that Maxim shall not be responsible
for independently verifying such written advice with respect to the
jurisdictions in which the Securities may be offered and sold and with respect
to the manner in which the Securities may be offered and sold in such
jurisdictions. Notwithstanding the foregoing, Maxim shall determine whether it
is licensed to offer and sell the Securities in each jurisdiction in which it
intends to do so.
(d) The Private Placement will be made in accordance with the requirements
of Section 4(2) under the Act and/or Regulation D only to investors that qualify
as accredited investors, as defined in Rule 501(a) under the Act ("ACCREDITED
INVESTORS"), purchasing for their own account for investment purposes only and
not for distribution in violation of securities laws. Furthermore, prospective
Investors will have been provided with the Offering Documents and access to the
management of the Company and afforded the opportunity to ask questions.
(e) The Company recognizes, agrees and confirms that Maxim (or any selling
agent permitted to be utilized by Maxim under Section 3(a) hereof): (i) will use
and rely primarily on the information contained in the Offering Documents and
the Subsciption Documents and on information available from generally recognized
public sources in performing the services contemplated by this Agreement without
having independently verified the same; (ii) is authorized, as the Company's
exclusive financial advisor and placement agent in connection with the Private
Placement, to transmit to any prospective Investor a copy or copies of the
Offering Documents, the Subsciption Documents and any other documentation
supplied to Maxim for transmission to any prospective Investor by or on behalf
of the Company or by any of the Company's officers, representatives or agents,
in connection with the performance of Maxim's services hereunder or any
transaction contemplated hereby; (iii) does not assume responsibility for the
accuracy or completeness of any information contained in the Offering Documents
and the Subsciption Documents or any such other information; (iv) will not make
an appraisal of the Company or any assets of the Company or the securities being
offered by the Company in the Private Placement; and (v) retains the right to
continue to perform due diligence of the Company during the course of the
Company's engagement of Maxim.
[MAXIM GROUP LOGO] XStream Beverage Network, Inc.
June 30, 2005
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3. PLACEMENT AGENT MATTERS
(a) Subject to the provisions of this Agreement and to the performance by
the Company of all of its obligations to be performed hereunder, Maxim agrees to
use its best efforts to assist in arranging for sales of Private Placement
Securities. The Company recognizes that "best efforts" does not assure that the
Private Placement will be consummated. It is understood and agreed that this
Agreement does not create any partnership, joint venture or other similar
relationship between or among Maxim and the Company, and that Maxim is acting
only as a sales agent. The Company hereby agrees that Maxim shall have the right
to utilize other selling broker-dealers in connection with the Private Placement
on terms approved by Maxim.
(b) For the services of Maxim hereunder, the Company will pay or caused to
be paid to Maxim the following fees at each Closing in connection with the
Private Placement:
(i) a cash payment equal to 10.0% of the gross proceeds received by the
Company from the sale of the Private Placement Securities, payable at each
applicable Closing, in lawful money of the United States by check or wire
transfer of immediately available funds;
(ii) a non-accountable expense allowance equal to 2.0% of the gross
proceeds received by the Company from the sale of the Private Placement
Securities, payable at each applicable Closing, in lawful money of the United
States by check or wire transfer of immediately available funds;
(iii) a warrant (the "PLACEMENT AGENT WARRANT I") to purchase such
number of shares of Common Stock, equal to 10.0% of the aggregate number of
shares of Common Stock into which the Notes sold in the Private Placement are
convertible, at 100% of the conversion price of the Notes ("EXERCISE PRICE I"),
as defined in the Offering Documents, exercisable for a period of five (5) years
from the date of issuance, subject to customary anti-dilution protection rights
contained in warrants of this type.
(iv) a warrant (the "PLACEMENT AGENT WARRANT II") to purchase such
number of shares of Common Stock, equal to 10.0% of the aggregate number of
shares of Common Stock into which the Warrants sold in the Private Placement are
convertible, at 100% of the exercise price of the Warrants ("EXERCISE PRICE
II"), as defined in the Offering Documents, exercisable for a period of five (5)
years from the date of issuance, subject to customary anti-dilution protection
rights contained in warrants of this type.
Placement Agent Warrant I and Placement Agent Warrant II shall collectively be
referred to herein as the "Placement Agent Warrants." The Placement Agent
Warrants will be issued at the applicable Closing pursuant to Warrant
Certificates to be signed by the Company, as applicable. The Placement Agent
Warrants shall provide, among other things:
(A) that the Placement Agent Warrants shall:
(1) be exercisable at Exercise Price I or Exercise
Price II, as applicable;
(2) expire five (5) years from the date of issuance,
unless otherwise agreed to; and
(3) be non-redeemable,
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June 30, 2005
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(B) for registration rights on the same terms granted to the
Investors,
(C) for such other terms as are normal and customary for
Placement Agent Warrants issued to placement agents.
(c) The Company has agreed to pay the Placement agent a cash fee of five
percent (5.0%) of the amount of funds received by the Company upon the exercise
of any of the Warrants sold in the Private Placement, which fee shall be paid
within five days of the Company's receipt of any such funds in connection with
any such exercise of the Warrants.
(d) All terms of the Financial Advisory Agreement entered into between the
Company and the Placement Agent on April 25, 2005 ("FINANCIAL ADVISORY
AGREEMENT") shall remain in full force and effect. The Financial Advisory
Agreement grants a right of first refusal and certain fee rights to the
Placement Agent during the term of the Financial Advisory Agreement and for a
period of 18 months thereafter, as more fully described in such agreement.
(e) Upon receipt by the Company from a proposed Investor of completed
Subscription Documents, and such other documents as the Company requests, the
Company and Maxim will determine in their reasonable discretion whether they
wish to accept or reject the subscription.
4. PAYMENT BY COMPANY OF EXPENSES
The Company will pay for or promptly reimburse to Maxim, as the case may
be, and whether or not any Securities are sold in connection with the Private
Placement , all expenses of the Company and Maxim relating to the Private
Placement (including all reasonable legal fees incurred by Maxim) and all other
reasonable out-of-pocket expenses of Maxim relating to activities under this
Agreement, including, without limitation: (i) the preparation, printing,
reproduction, filing, distribution and mailing of the Offering Documents and all
other documents relating to the Private Placement, and any supplements or
amendments thereto, including the fees and expenses of counsel to the Company,
and the cost of all copies thereof; (ii) the issuance, sale, transfer and
delivery of the Private Placement Securities, including any transfer or other
taxes payable thereon and the fees of any transfer agent or registrar; (iii) the
public registration and listing of, or registration and qualification of the
Securities pursuant to the resale registration statement required to be filed in
connection with the sale of the Securities or otherwise and for the securing of
an exemption therefrom under state or foreign "blue sky" or securities laws,
including, without limitation, filing fees payable in the jurisdictions in which
such registration or qualification or exemption therefrom is sought, the costs
of preparing preliminary, supplemental and final "blue sky surveys" relating to
the offer and sale of the Securities and the fees and disbursements of counsel
to Maxim in connection with such "blue sky" matters; (iv) the filing fees, if
any, payable to the applicable securities regulatory authorities, including, but
not limited to, the NASD in connection with filings made via the NASD's
CobraDesk filing system; (v) all Escrow Agent fees; and (vi) all road show
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June 30, 2005
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expenses, travel, legal in connection with the Private Placement (in a fixed
amount of $30,000), and other related expenses. Any expenses (other than Maxim's
legal or other professional expenses) in excess of $3,000 shall be subject to
prior approval by the Company, which approval shall not be unreasonably withheld
or delayed. For the avoidance of doubt, the fees and disbursements of legal
counsel to Maxim in connection with the Registration Statement (as defined
below) as contemplated by Section 9(c) hereof shall be separate from and in
addition to the foregoing fees.
5. TERMINATION OF PRIVATE PLACEMENT
The Private Placement may be terminated: (i) by Maxim or the Company at any
time upon fifteen (15) days prior written notice; (ii) by the Company on July
26, 2005 or any day thereafter, on prior written notice to Maxim; or (iii)
immediately by Maxim upon giving written notice to the Company, but, with
respect to clause (iii), only in the event that if:
(a) in the opinion of Maxim, the Offering Documents contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements appearing therein
not misleading in the light of the circumstances in which they were made, and
the Company shall not have corrected such untrue statement or omission to the
reasonable satisfaction of Maxim and its counsel within ten (10) days after the
Company receives notice of such untrue statement or omission, provided that
notwithstanding such ten (10) day period, no Closing shall occur hereunder until
Maxim shall notify the Company that it is satisfied, in its reasonable
determination, that the Company has taken such steps (including circulating
amended offering materials and afforded prospective Investors a reasonable
opportunity to review such amendments) to allow the applicable Closing to occur;
or
(b) the Company shall be in material breach of any representation, warranty
or covenant made by it in this Agreement, any Subscription Document or any other
document relating to the Private Placement ("CAUSE"); or
(c) (i) any calamitous domestic or international event or act or occurrence
has taken place and, in Maxim's opinion, has or will materially disrupt general
securities markets in the United States in the immediate future; or (ii) if
trading on the New York Stock Exchange, the American Stock Exchange, or in the
over-the-counter market shall have been suspended or minimum or maximum prices
for trading shall have been fixed, or maximum ranges for prices for securities
shall have been required on the over-the-counter market by the National
Association of Securities Dealers, Inc. ("NASD") or by order of the SEC or any
other government authority having jurisdiction; or (iii) if the United States
shall have become subject to an act of terrorism or involved in a war, major
hostilities or the like; or (iv) if a banking moratorium has been declared by a
New York State or federal authority; or (v) if the Company shall have sustained
a material loss, whether or not insured, by reason of fire, flood, accident or
other calamity; or (vii) if there shall have been such material adverse change
in the conditions or prospects of the Company, involving a change not
contemplated by the Offering Documents; or (viii) if there shall have been such
material adverse general market conditions as in Maxim's reasonable judgment
would make it inadvisable to proceed with the Private Placement or the sale or
delivery of the Securities.
[MAXIM GROUP LOGO] XStream Beverage Network, Inc.
June 30, 2005
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6. PRIVATE PLACEMENT OFFERING PERIOD; CLOSINGS
Subject to the terms and conditions set forth herein, the Units which are
the subject of the Private Placement will be offered as described in Section
1(b) hereof. Unless the Private Placement Minimum Amount is subscribed for and
accepted by the Company by the Termination Date (as the same may be extended
pursuant to the terms hereof), the Private Placement will be terminated and all
subscription proceeds will be returned to Investors without interest or
deduction. At any Closing, the Company shall deliver to the Investors
instruments or preferred stock or warrant certificates representing the
securities underlying the Units and instruments representing the Placement Agent
Warrants, duly executed by the Company, together with such other closing
documentation as may be required by Maxim in its reasonable discretion in order
to affect the applicable Closing. Any date on which a Closing occurs is referred
to herein as a "CLOSING DATE."
7. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
The Company hereby represents, warrants, covenants and agrees with and to
Maxim: (i) as of the date hereof, (ii) as of each applicable Closing Date and
(iii) as of the date of the filing of the Registration Statement (or any
amendment or supplement thereto), as follows and except as disclosed in the
Company's periodic reports as filed with the SEC. References in this Section 7
to the Offering Documents are made on the assumption, and the Company's
agreement, that the Offering Documents have been prepared to contain
substantially all of the information required in a Registration Statement on
Form SB-2 under the Act.
(a) The Company has been validly formed and legally exists as a corporation
in good standing under the laws of the State of Nevada. The Company has full
corporate power and authority to conduct its business as currently conducted,
and is in good standing in the jurisdiction in which the conduct of its
businesses or the nature of its properties requires such qualification or
authorization, except where the failure to be so qualified or authorized and in
good standing could not reasonably be expected to have a material adverse effect
on the business and financial condition of the Company or any other Subsidiary
(as defined below) of the Company, each taken as a whole (a "MATERIAL ADVERSE
EFFECT"). As of the date hereof, the Company does not have, directly or
indirectly, any subsidiaries other than as disclosed in the Company's filings
with the SEC (each, a "SUBSIDIARY" and collectively, the "SUBSIDIARIES"). Each
Subsidiary has been duly organized, is validly existing and in good standing
under the laws of the jurisdiction of its organization, has the power and
authority to own its properties and to conduct its business and is duly
qualified and authorized to transact business and is in good standing in each
jurisdiction in which the conduct of its business or the nature of its
properties requires such qualification or authorization, except where the
failure to be so qualified or authorized and in good standing could not
reasonably be expected to have a Material Adverse Effect.
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(b) Except for the Subsidiaries, the Company holds no ownership or other
interest, nominal or beneficial, direct or indirect, in any corporation,
partnership, joint venture or other business entity. With the exception of
certain pledges made by the Company's subsidiaries and for certain security
interests as granted to Laurus Master Fund, Ltd.("Laurus") as set forth in the
Company's transaction documents dated May 14th 2004 with Laurus, whereby Laurus
is recognized as the Senior Lender, all of the issued and outstanding capital
stock of each Subsidiary is owned by the Company, free and clear of any lien,
charge, mortgage, pledge, security interest, claim, equity, trust or other
encumbrance, preferential arrangement, defect or restriction of any kind
whatsoever (each, a "LIEN"), and has been duly authorized and validly issued,
and is non-assessable.
The authorized capital stock of the Company consists of 60,000,000 shares
of capital stock, of which: (i) 50,000,000 are classified as Common Stock, par
value $0.001 per share, and (ii) 10,000,000 are classified as "blank check"
preferred stock, par value $0.001 per share. As of the date hereof and as of
each Closing Date, _________ shares of the Company's Common Stock, 200,000
shares of Series A Preferred Stock and 43.2 shares of Series B Preferred Stock
and no other shares of capital stock of the Company are or will be issued and
outstanding, except as otherwise contemplated by the Offering Documents and all
such shares of capital stock are, as the case may be, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights. The
shares of Common Stock underlying the Notes, the Warrants and the Placement
Agent Warrants, will be duly reserved, and when issued in accordance with the
terms of the Private Placement, will be validly issued, fully paid and
nonassessable and not subject to preemptive or any other similar rights and no
personal liability will attach to the ownership thereof. The outstanding
options, warrants and other convertible securities of the Company are as set
forth in the Offering Documents and the Company's filings with the SEC. Except
as disclosed in the Offering Documents, neither the Company nor any Subsidiary
is a party to an agreement, instrument or understanding which calls for, and no
securities of the Company or any Subsidiary contain provisions relating to, the
resetting or repricing of any debt or equity security instrument of the Company
or any Subsidiary. The issuance of the Securities or the consummation of the
Private Placement will not trigger any resetting or repricing of any debt or
equity security instrument of the Company or any Subsidiary.
(c) This Agreement, the Subscription Documents, the Notes, the Warrants,
the Placement Agent Warrants, and all other documents to be entered into by the
Company in connection with the transactions described in the Offering Documents
have been duly authorized, executed and delivered by the Company and constitutes
the legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except insofar as enforcement of the
indemnification or contribution provisions hereof may be limited by applicable
laws or principles of public policy and except further as to enforcement, to the
availability of equitable remedies and limitations imposed by bankruptcy,
insolvency, reorganization and other similar laws and related court decisions
relating to or affecting creditors' rights generally.
(d) Neither the Offering Documents, the Registration Statement, the
Subscription Documents nor any of the Company's filings with the SEC
(collectively, the "COMPANY DOCUMENTS") contain or will contain any untrue
statement of a material fact, and the Company Documents will not omit to state
any material fact necessary in order to make the statements made, in light of
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the circumstances under which they were made, not misleading, except that the
Company shall have no liability for any information provided to the Company in
writing by, and relating to, Maxim, for use in and used in the Offering
Documents. It is understood that any summary in the Offering Documents of a
document which appears therein in full (either as signed or substantially in the
form to be signed) does not constitute an untrue or misleading statement merely
because it is a summary; provided, however, that any such summary may not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements made, in light of the circumstances under
which they were made, not misleading. If, at any time before the Private
Placement is completed or terminated or before all subscriptions are accepted by
the Company, there should be any change which would cause the Company Documents
not to comply with this Section 7(e), the Company will promptly advise Maxim
thereof and make any necessary corrective filings with the SEC and prepare and
furnish Maxim with, for distribution to Investors, after prior review and
approval by Maxim and its counsel (such approval not to be unreasonably
withheld), such copies of such supplements or amendments to the Offering
Documents and the Subscription Documents as will cause the Offering Documents
and the Subscription Documents, as so supplemented or amended, to comply with
this Section 7(e), and will authorize Maxim to make to Investors, if: (i) deemed
necessary by counsel to Maxim and approved by Maxim, or (ii) if deemed necessary
by counsel to the Company, an offer of rescission.
(e) Except as disclosed in the Company Documents, since December 31, 2004,
there has been no material adverse change (or any development involving a
prospective material adverse change), whether or not arising from transactions
in the ordinary course of business, in or affecting: (i) the business, condition
(financial or otherwise), results of operations, shareholders' equity,
properties or prospects of the Company and each Subsidiary, taken as a whole;
(ii) the long-term debt or capital stock of the Company or any of its
Subsidiaries; or (iii) the Private Placement or consummation of any of the other
transactions contemplated by this Agreement. Since the date of the latest the
Company balance sheet presented in or attached to the Offering Documents,
neither the Company nor any Subsidiary has incurred or undertaken any
liabilities or obligations, whether direct or indirect, liquidated or
contingent, matured or unmatured, or entered into any transactions, including
any acquisition or disposition of any business or asset, which are material to
the Company and the Subsidiaries taken as a whole, except for liabilities,
obligations and transactions which are disclosed in the Offering Documents and
the exhibits thereto.
(f) Neither the Company nor any Subsidiary is in: (i) violation of its
certificate or articles of incorporation, by-laws or other organizational
documents, (ii) default under, and no event has occurred which, with notice or
lapse of time or both, would constitute a default under or result in the
creation or imposition of any Lien upon any of its property or assets pursuant
to, any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which it is a party or by which it is bound or to which any of its
property or assets is subject or (iii) violation in any respect of any law,
rule, regulation, ordinance, directive, judgment, decree or order of any
judicial, regulatory or other legal or governmental agency or body, foreign or
domestic, except (in the case of clause (ii) above) for any Lien disclosed in
the Offering Documents and the exhibits thereto and except, in the cases of (ii)
and (iii), where such defaults or violations do not, individually or in the
aggregate, have a Material Adverse Effect.
[MAXIM GROUP LOGO] XStream Beverage Network, Inc.
June 30, 2005
Page 11 of 34
(g) The execution, delivery and performance of this Agreement, all Company
Documents and all other documents to be entered into by the Company in
connection with any transaction described in the Offering Documents or in
connection with the Private Placement, and the consummation of the transactions
contemplated hereby, have been or will be prior to such execution, delivery,
performance or consummation, as the case may be, duly and validly authorized by
the Company and do not and will not: (i) constitute, or result in, a breach or
violation of any of the terms, provisions or conditions of the Certificate or
Articles of Incorporation, Bylaws or other governing documents of the Company or
any of the Subsidiaries, (ii) constitute, or result in, a material violation of
any applicable statute, law, ordinance or regulation of any state, territory or
other jurisdiction, or (iii) violate, constitute, or result in, a default under
(or an event which with the passing of time or the giving of notice or both
would constitute a default under) or breach of the terms, provisions or
conditions of any material indenture, note, contract, commitment, instrument or
document to which the Company or any of the Subsidiaries is or will be a party
or by which the Company, any of the Subsidiaries or any of its properties are
bound, or any award, judgment, decree, rule or regulation of any court or
governmental or regulatory agency or body having jurisdiction over the Company
or any of the Subsidiaries or its activities or properties. No consent,
approval, authorization or order of any court or governmental or regulatory
agency or body or any individual or entity is required on the part of the
Company for the lawful consummation of the transactions contemplated hereby and
thereby, except for such consents and approvals with respect to the offer and
sale of the Securities in certain jurisdictions which are identified to Maxim by
counsel for the Company.
(h) Each of the Company and the Subsidiaries has all necessary consents,
approvals, authorizations, orders, registrations, qualifications, licenses,
filings and permits of, with and from all applicable judicial, regulatory and
other legal or governmental agencies and bodies and all third parties, foreign
and domestic (collectively, the "CONSENTS"), to own, lease and operate their
respective properties and conduct their respective businesses as are now being
conducted and as disclosed in the Offering Documents, except where the failure
to have any such Consent would not have a Material Adverse Effect. Each such
Consent is valid and in full force and effect, and neither the Company nor any
Subsidiary has received written notice of any investigation or proceedings which
results in or, if decided adversely to the Company or any Subsidiary, could
reasonably be expected to result in, the revocation of, or imposition of a
materially burdensome restriction on, any Consent.
(i) Each of the Company and its Subsidiaries is in compliance with all
applicable laws, rules, regulations, ordinances, directives, judgments, decrees
and orders, foreign and domestic, except where the failure to so comply does or
would not have a Material Adverse Effect.
(j) Except as disclosed in the Offering Documents, there is no judicial,
regulatory, arbitral or other legal or governmental proceeding or other
litigation or arbitration, domestic or foreign, pending to which the Company or
any Subsidiary is a party or of which any property, operations or assets of the
Company or any Subsidiary is the subject which, individually or in the
aggregate, if determined adversely to the Company or any Subsidiary, could
reasonably be expected to have a Material Adverse Effect. No such proceeding,
litigation or arbitration is threatened or contemplated, and the defense of all
such proceedings, litigation and arbitration against or involving the Company or
any Subsidiary could not reasonably be expected to have a Material Adverse
Effect.
[MAXIM GROUP LOGO] XStream Beverage Network, Inc.
June 30, 2005
Page 12 of 34
(k) Sherb & Co., LLP, whose report is included or attached to the Form
10-KSB included in the Offering Documents, are independent public accountants as
required by the Securities Act, the Exchange Act and the Rules and Regulations.
(l) Except as disclosed in the Offering Documents, and except for such
matters that, individually or in the aggregate, would not have a Material
Adverse Effect on the business, operations or financial results of the Company
and its subsidiaries (either individually or in the aggregate) there are no
claims, actions, suits, investigations or proceedings before or by any
arbitrator, court, governmental authority or instrumentality pending or
threatened against or affecting the Company or any of its subsidiaries or
involving the properties of the Company which might affect the business,
properties or financial condition of the Company or any of its subsidiaries or
which might affect the transactions or other acts contemplated by this Agreement
or the validity or enforceability of this Agreement.
(m) Neither the Company nor any of its Subsidiaries has violated or is
currently in violation of any provisions of: (a) any federal or state
environmental law, (b) Employee Retirement Income Security Act of 1974, as
amended, including the regulations and published interpretations thereunder
("ERISA"), (c) the Bank Secrecy Act, as amended, (d) the Money Laundering
Control Act of 1986, as amended, (e) the Foreign Corrupt Practices Act, or (f)
the Uniting and Strengthening of America by Providing Appropriate Tools Required
to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, and the rules
and regulations promulgated under any such law, or any successor law, except for
such violations which, singly or in the aggregate, would not have a Material
Adverse Effect.
(n) Except as disclosed in the Offering Documents, there are no contracts,
agreements or understandings between the Company and any person that would give
rise to a valid claim against the Company or Maxim for a brokerage commission,
finder's fee or other like payment in connection with the transactions
contemplated by this Agreement or, to the Company's knowledge, any arrangements,
agreements, understandings, payments or issuance with respect to the Company or
any of its officers, directors, shareholders, partners, employees, Subsidiaries
or affiliates that may affect Maxim's compensation.
(o) The financial statements, including the notes thereto, and the
supporting schedules included, attached to or incorporated by reference in the
Form 10-KSB included in the Offering Documents and the Offering Documents
present fairly, in all material respects the financial position as of the dates
indicated and the cash flows and results of operations for the periods specified
of the Company and its consolidated Subsidiaries and the other entities for
which financial statements are included, attached to or incorporated by
reference in the Offering Documents. Except as otherwise stated in the Offering
Documents and the Company Documents, said financial statements have been
prepared in conformity with United States generally accepted accounting
principles applied on a consistent basis throughout the periods involved. The
supporting schedules included, attached to or incorporated by reference in the
Offering Documents and the Company Documents present fairly the information
required to be stated therein. The other financial and statistical information
included in the Offering Documents and the Company Documents present fairly the
information included therein in all material respects.
[MAXIM GROUP LOGO] XStream Beverage Network, Inc.
June 30, 2005
Page 13 of 34
(p) The Company and its Subsidiaries maintain a system of internal accounting
and other controls sufficient to provide reasonable assurances that: (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with United States generally
accepted accounting principles and to maintain accountability for assets, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization, and (iv) the recorded accounting for assets is compared
with existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(q) Neither the Company nor any of its affiliates (within the meaning of
Rule 144 under the Securities Act) (collectively, "AFFILIATES") has, prior to
the date hereof, made any offer or sale of any securities which could be
"integrated" for purposes of the Act with the offer and sale of the Securities
pursuant to the Offering Documents or the Registration Statement.
(r) All private offers and sales of securities prior to the date hereof by
the Company or any Subsidiary have been validly exempt from registration under
the Act and have been properly registered with all applicable state securities
authorities pursuant to appropriate "blue sky" filings or otherwise and if not
properly filed or registered, all such purchasers in such private offerings have
received an offer of recission, which has been prepared and offered to
purchasers in accordance with the laws and regulations of each state in which
such recission offer was required to be made. Additionally, recission has not
been offered to purchasers that would not be entitled to any such recission
based on the expiration of the applicable statute of limitations in the state in
which such purchaser resides.
(s) Except as disclosed in the Offering Documents and except for the
holders of the Company's promissory notes issued in conjunction with the Term
Sheet dated February 16, 2005 and Adelphia Holdings LLC, no holder of any
security of the Company or any Subsidiary has any rights to require registration
of any such security as part or on account of, or otherwise in connection with,
the offer and sale of the Securities contemplated by the Registration Statement,
and any such rights so disclosed have either been fully complied with by the
applicable entity or effectively waived by the holders thereof, and any such
waivers remain in full force and effect.
[MAXIM GROUP LOGO] XStream Beverage Network, Inc.
June 30, 2005
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(t) Neither the Company nor any of its respective directors, officers,
employees, agents or representatives ("COMPANY REPRESENTATIVES") has taken or
will take any action which has caused or may cause the Private Placement not to
qualify for exemption from the registration requirements of the Act or of United
States federal, state or other securities or other laws. In connection with the
Private Placement, neither the Company nor the Company Representatives shall
offer or cause to be offered the Securities by any form of general solicitation
or general advertising as defined in Rule 502(c) of Regulation D. The Company
and the Company Representatives have not taken and shall not take any action
(except for actions contemplated by the Offering Documents) that would cause the
Private Placement to be integrated with other transactions under Rule 502(a) of
Regulation D.
(u) No relationship, direct or indirect, exists between the Company or any
of its Affiliates, on the one hand, and any director, officer, shareholder,
customer or supplier of the Company or any Affiliate of them, on the other hand,
which is required by the Act or the Exchange Act to be described in the Form
10-KSB included in the Offering Documents which is not so described and
described as required. There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or guarantees
of indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any of their respective family members, except as
disclosed in the Form 10-KSB included in the Offering Documents. The Company has
not, in violation of the Xxxxxxxx-Xxxxx Act of 2002 ("SARB-OX"), directly or
indirectly, including through a Subsidiary (other than as permitted under the
Sarb-Ox for depositary institutions), extended or maintained credit, arranged
for the extension of credit, or renewed an extension of credit, in the form of a
personal loan to or for any director or executive officer of the Company.
(v) The Company is in material compliance with the provisions of Sarb-Ox
and the rules and regulations promulgated thereunder and related or similar
rules and regulations promulgated by NASDAQ or any other governmental or self
regulatory entity or agency, except for such violations which, singly or in the
aggregate, would not have a Material Adverse Effect.
(w) With the exception of product liability insurance, the Company and/or
the Subsidiaries maintain insurance in such amounts and covering such risks as
they reasonably consider adequate for the conduct of their businesses and the
value of their properties and as is customary for companies engaged in similar
businesses in similar industries, all of which insurance is in full force and
effect. There are no claims by the Company or any Subsidiary under any such
policy or instrument as to which any insurance company is denying liability or
defending under a reservation of rights clause. The Company reasonably believes
that it will be able to renew its existing insurance, if any, as and when such
coverage expires or will be able to obtain replacement insurance adequate for
the conduct of its business.
(x) No "prohibited transaction" (as defined in either Section 406 of the
ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended from time
to time (the "CODE")), "accumulated funding deficiency" (as defined in Section
302 of ERISA) or other event of the kind described in Section 4043(b) of ERISA
(other than events with respect to which the 30-day notice requirement under
Section 4043 of ERISA has been waived) has occurred with respect to any employee
benefit plan for which the Company or any Subsidiary would have any liability;
each employee benefit plan of the Company or any Subsidiary is in compliance in
all material respects with applicable law, including (without limitation) ERISA
and the Code; the Company has not incurred and does not expect to incur
liability under Title IV of ERISA with respect to the termination of, or
withdrawal from any "pension plan"; and each employee benefit plan of the
Company or any Subsidiary that is intended to be qualified under Section 401(a)
of the Code is so qualified and nothing has occurred, whether by action or by
failure to act, which could cause the loss of such qualification.
[MAXIM GROUP LOGO] XStream Beverage Network, Inc.
June 30, 2005
Page 15 of 34
(y) The Company and each Subsidiary owns or leases all such properties as
are necessary to the conduct of their businesses as presently operated and as
proposed to be operated as described in the Offering Documents. The Company and
each Subsidiary have good and marketable title in fee simple to all real
property and good and marketable title to all personal property owned by them,
in each case free and clear of all liens and encumbrances, except such as are
described in the Offering Documents or such as do not (individually or in the
aggregate) materially affect the business or prospects of the Company or any of
the Subsidiaries. Any real property and buildings held under lease or sublease
by the Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material to, and do not
interfere with, the use made and proposed to be made of such property and
buildings by the Company and the Subsidiaries. Neither the Company nor any
Subsidiary has received any notice of any claim adverse to its ownership of any
real or personal property or of any claim against the continued possession of
any real property, whether owned or held under lease or sublease by the Company
or any Subsidiary.
(z) The Company and each Subsidiary: (i) owns or possesses adequate right
to use all patents, patent applications, trademarks, service marks, trade names,
trademark registrations, service xxxx registrations, copyrights, licenses,
formulae, customer lists, and know-how and other intellectual property
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures, "INTELLECTUAL PROPERTY")
necessary for the conduct of their respective businesses as being conducted and
as described in the Offering Documents and (ii) does not believe that the
conduct of their respective businesses does or will conflict with, and have not
received any notice of any claim of conflict with, any such right of others. All
material technical information developed by and belonging to the Company or any
Subsidiary which has not been patented has been kept confidential so as, among
other things, all such information may be deemed proprietary to the applicable
entity. Neither the Company nor any Subsidiary has granted or assigned to any
other person or entity any right to manufacture, have manufactured, assemble or
sell the current products and services of the Company or any Subsidiary or those
products and services described in the Offering Documents. After due
investigation, there is no infringement by third parties of any such
Intellectual Property; there is no pending or threatened action, suit,
proceeding or claim by others challenging the Company's or any Subsidiary's
rights in or to any such Intellectual Property, and the Company is unaware of
any facts which would form a reasonable basis for any such claim. There is no
pending or threatened action, suit, proceeding or claim by others that the
Company or any Subsidiary infringes or otherwise violates any patent, trademark,
copyright, trade secret or other proprietary rights of others, and the Company
is unaware of any other fact which would form a reasonable basis for any such
claim.
[MAXIM GROUP LOGO] XStream Beverage Network, Inc.
June 30, 2005
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(aa) Except as disclosed in the Company Documents, and except for such
matters that, individually or in the aggregate, would not have a Material
Adverse Effect:
(i) the Company and each of its Subsidiaries are, and have been, in
compliance with all Environmental Laws (as defined below), and neither the
Company nor any of its Subsidiaries has received any: (A) communication that
alleges that the Company or any such Subsidiary is in violation of, or has
liability under, any Environmental Law, (B) written request for information
pursuant to any Environmental Law, or (C) notice regarding any requirement that
is proposed for adoption or implementation under any Environmental Law and that
would be applicable to the operations of the Company or any of its Subsidiaries;
(ii) (A) The Company and each of its Subsidiaries have obtained and
are in compliance with all permits, licenses and governmental authorizations
pursuant to all Environmental Laws (collectively, "ENVIRONMENTAL Permits")
necessary for their operations as currently conducted, (B) all such
Environmental Permits are valid and in good standing, and (C) neither the
Company nor any of its Subsidiaries has been advised by any governmental entity
or authority of any actual or potential change in the status or terms and
conditions of any Environmental Permit;
(iii) there are no Environmental Claims pending or threatened,
against the Company or any of its Subsidiaries;
(iv) there have been no Releases of any Hazardous Material that
could reasonably be expected to form the basis of any Environmental Claim
against the Company or any of its Subsidiaries or against any person whose
liabilities for such Environmental Claims the Company or any of its Subsidiaries
has, or may have, retained or assumed, either contractually or by operation of
law; and
(v) (A) neither the Company nor any of its Subsidiaries has
retained or assumed, either contractually or by operation of law, any
liabilities or obligations that could reasonably be expected to form the basis
of any Environmental Claim against the Company or any Subsidiary, and (B) no
Environmental Claims are pending against any person or entity whose liabilities
for such Environmental Claims the Company or any Company Subsidiary has, or may
have, retained or assumed, either contractually or by operation of law.
As used in this Agreement, the terms: (A) "ENVIRONMENTAL CLAIM" means any
and all administrative, regulatory or judicial actions, suits, orders, demands,
directives, claims, investigations, proceedings or notices of violation by or
from any person or entity alleging liability of whatever kind or nature arising
out of, based on or resulting from (y) the presence or release of, or exposure
to, any Hazardous Materials at any location; or (z) the failure to comply with
any Environmental Law; (B) "ENVIRONMENTAL LAWS" means all applicable federal,
state, local and foreign laws, rules, regulations, orders, decrees, judgments,
[MAXIM GROUP LOGO] XStream Beverage Network, Inc.
June 30, 2005
Page 17 of 34
legally binding agreements or Environmental Permits issued, promulgated or
entered into by or with any governmental entity or authority, relating to
pollution, natural resources or protection of endangered or threatened species,
human health or the environment (including ambient air, surface water,
groundwater, land surface or subsurface strata); (C) "HAZARDOUS MATERIALS" means
(y) any petroleum or petroleum products, radioactive materials or wastes,
asbestos in any form, urea formaldehyde foam insulation and polychlorinated
biphenyls; and (z) any other chemical, material, substance or waste that in
relevant form or concentration is prohibited, limited or regulated under any
Environmental Law; and (D) "RELEASE" means any actual or threatened release,
spill, emission, leaking, dumping, injection, pouring, deposit, disposal,
discharge, dispersal, leaching or migration into or through the environment
(including ambient air, surface water, groundwater, land surface or subsurface
strata) or within any building, structure, facility or fixture.
(bb) Each of the Company and the Subsidiaries has accurately prepared
and filed all federal, state, foreign and other tax returns that are required to
be filed by it and has paid or made provision for the payment of all taxes,
assessments, governmental or other similar charges, including without
limitation, all sales and use taxes and all taxes which the Company or any
Subsidiary is obligated to withhold from amounts owing to employees, creditors
and third parties, with respect to the periods covered by such tax returns
(whether or not such amounts are shown as due on any tax return). No deficiency
assessment with respect to a proposed adjustment of the Company or any
Subsidiary's federal, state, local or foreign taxes is pending or threatened.
The accruals and reserves on the books and records of the Company and the
Subsidiaries in respect of tax liabilities for any taxable period not finally
determined are adequate to meet any assessments and related liabilities for any
such period and, since the date of the Company's most recent audited financial
statements, the Company and the Subsidiaries have not incurred any liability for
taxes other than in the ordinary course of its business. There is no tax lien,
whether imposed by any federal, state, foreign or other taxing authority,
outstanding against the assets, properties or business of the Company or any
Subsidiary.
(cc) Neither the Company any Subsidiary nor any of their respective
employees or agents has at any time during the last five (5) years: (i) made any
unlawful contribution to any candidate for foreign office, or failed to disclose
fully any contribution in violation of law, or (ii) made any payment to any
federal or state governmental officer or official, or other person charged with
similar public or quasi-public duties, other than payments that are not
prohibited by the laws of the United States of any jurisdiction thereof
(dd) No labor disturbance by the employees of the Company or any
Subsidiary currently exists or is likely to occur.
(ee) The Company has not offered, or caused Maxim to offer, the
Securities to any person or entity with the intention of unlawfully influencing:
(i) a customer or supplier of the Company or any Subsidiary to alter the
customer's or supplier's level or type of business with the Company or any
Subsidiary or (ii) a journalist or publication to write or publish favorable
information about the Company, any Subsidiary or its products or services.
[MAXIM GROUP LOGO] XStream Beverage Network, Inc.
June 30, 2005
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(ff) The Company will not offer the Securities for sale hereunder on
the basis of any communications or documents relating to Maxim or the Securities
except the Offering Documents and the exhibits thereto and documents described
or referred to therein, including the Subscription Documents.
(gg) So long as any of the Securities are "restricted securities"
within the meaning of Rule 144(a)(3) under the Act, the Company, during any
period in which it is not subject to and in compliance with Section 13 or 15(d)
of the Exchange Act, or is not exempt from such reporting requirements pursuant
to and in compliance with Rule 12g3-2b under the Exchange Act, provide to each
holder of Notes, and the underlying shares of Common Stock, and to each
prospective purchaser (as designated by such holder) of Notes, and the
underlying shares of Common Stock, upon the request of such holder or
prospective holder, any information required to be provided by Rule 144A(d)(4)
under the Act.
(hh) Neither the Company nor any Subsidiary is and, at all times up to
and including consummation of the transactions contemplated by this Agreement,
and after giving effect to application of the net proceeds of the Private
Placement, will not be, subject to registration as an "investment company" under
the Investment Company Act of 1940, as amended, and is not and will not be an
entity "controlled" by an "investment company" within the meaning of such act.
The Company will: (i) utilize the proceeds of the Placement in accordance with
the "Use of Proceeds" section of the Offering Documents and (ii) initially
utilize the proceeds of the Placement and all other funds of the Company in such
a manner so as to cause the Company not to be subject to the 1940 Act, and will
thereafter use its best efforts to avoid the Company's becoming subject to the
1940 Act.
(ii) In addition to the foregoing, to the extent not set forth herein,
Maxim may rely on the representations and warranties made by the Company in the
Subscription Agreement provided by the Company and used in connection with the
Private Placement.
8. REPRESENTATIONS, WARRANTIES AND COVENANTS OF MAXIM
Maxim hereby represents and warrants to, and covenants with, the Company
that:
(a) This Agreement has been duly authorized, executed and delivered by
Maxim and constitutes the legal, valid and binding obligation of Maxim,
enforceable against it in accordance with its terms, except insofar as
enforcement of the indemnification or contribution provisions hereof may be
limited by applicable laws or principles of public policy and subject, as to
enforcement, to the availability of equitable remedies and limitations imposed
by bankruptcy, insolvency, reorganization and other similar laws and related
court decisions relating to or affecting creditors' rights generally.
[MAXIM GROUP LOGO] XStream Beverage Network, Inc.
June 30, 2005
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(b) Maxim will cooperate with the Company to ensure that the offering and
sale of the Securities will comply with the requirements of the Act, including,
without limitation, the general conditions contained in Regulation D and the
federal securities laws, and will follow the reasonable advice of the Company
with respect to the manner in which to offer and sell the Securities so as to
ensure that the offering and sale thereof will comply with the securities laws
of any jurisdiction in which Securities are offered by Maxim, and Maxim will not
make an offer of Securities in any jurisdiction in which the Company advises it
in writing that such offer would be unlawful for Maxim to offer or sell
securities.
(c) Maxim is: (i) a registered broker-dealer under the Exchange Act; (ii) a
member in good standing of the NASD; and (iii) registered as a broker-dealer in
each jurisdiction in which it is required to be registered as such in order to
offer and sell the Securities in such jurisdiction.
(d) Maxim has not and will not make an offer of Securities (or of any
securities, the offering of which may be integrated with the Private Placement)
on the basis of any communications or documents relating to the Company or the
Securities except the Offering Documents and the exhibits thereto and documents
described, referred to or incorporated by reference therein (including the
Subscription Documents). Maxim will deliver a copy of the Offering Documents to
each prospective Investor solicited by it prior to such offeree's execution of
the Subscription Documents or, in the case of amendments or supplements to the
Offering Documents (other than those amendments and supplements approved in
writing by the Company but designated in writing as not subject to this
requirement), prior to such offeree's execution of an acknowledgment of receipt
of such amendment or supplement and reconfirmation of intent to subscribe.
(e) Maxim will not transmit to the Company any written offer from an
offeree to purchase Securities unless, immediately prior thereto, it reasonably
believes that: (i) the offeree is an Accredited Investor; and (ii) the offeree
meets all other offeree and/or purchaser suitability standards, if any, required
under applicable securities laws and regulations.
(f) Maxim will periodically notify the Company of the jurisdiction in which
the Securities are being offered by it or will be offered by it pursuant to this
Agreement, and will periodically notify the Company of the status of the
offering conducted pursuant to this Agreement.
9. COVENANTS
The Company covenants to Maxim that it shall:
(a) Notify Maxim as soon as practicable, and confirm such notice promptly
in writing: (i) when any event shall have occurred during the period commencing
on the date hereof and ending on the later of the date of the Final Closing as a
result of which the Offering Documents would include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and (ii) of the
receipt of any notification with respect to the modification, rescission,
[MAXIM GROUP LOGO] XStream Beverage Network, Inc.
June 30, 2005
Page 20 of 34
withdrawal or suspension of the qualification or registration of the Securities
or of an exemption from such registration or qualification in any jurisdiction.
The Company will use its reasonable best efforts to prevent the issuance of any
such modification, rescission, withdrawal or suspension and, if any such
modification, rescission, withdrawal or suspension is issued, to obtain the
lifting thereof as promptly as possible.
(b) Not supplement or amend the Offering Documents unless Maxim and its
counsel shall have approved of such supplement or amendment in writing, such
approval not to be unreasonably withheld, delayed or conditioned. If, at any
time during the period commencing on the date hereof and ending on the date of
the Final Closing, any event shall have occurred as a result of which the
Offering Documents contains any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading, or if, in the opinion of counsel to the
Company or counsel to Maxim, it is necessary at any time to supplement or amend
the Offering Documents to comply with the Act, Regulation D or any applicable
securities or "blue sky" laws, the Company will promptly prepare an appropriate
supplement or amendment (in form and substance reasonably satisfactory to Maxim
and its counsel) which will correct such statement or omission or which will
effect such compliance.
(c) Include all the shares of Common Stock underlying the Notes, Warrants
and the Placement Warrants, and all shares of Common Stock included as part of
the Units, issued in this Placement in a registration statement of its
securities under the Act to be filed with the SEC within sixty (60) days
following the initial Closing of the Placement (the "TARGET FILING DATE") and
will use its best efforts to have the SEC declare such registration statement
effective by no later than one hundred-twenty (120) days following the initial
Closing of the Placement (the "TARGET EFFECTIVE DATE"), and to maintain the
effectiveness of such registration statement until the third (3rd) anniversary
of the final Closing of the Placement. In the event that the Company fails to
file the registration statement by the Target Filing Date, or fails to have the
SEC declare such registration statement effective by the Target Effective Date,
then the Company will pay the holders of the securities comprising the Units 1%
monthly payments in cash until the registration statement becomes effective. In
addition, Investors shall be provided with certain "piggy back" registration
rights as described in the Offering Documents. The Company will prepare and file
with the SEC such amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective until the sale of the securities registered
thereunder, and shall comply with the provisions of the Act with respect to the
disposition of all securities owned by the Investors and Maxim that are covered
by such registration statement during such period in accordance with the
intended methods of disposition by the Investors and Maxim. The Company will
furnish to the Investors and Maxim such number of copies of such registration
statement, each amendment and supplement thereto, the prospectus included in
such registration statement (including each preliminary prospectus) and such
other documents as the Investors and Maxim may request in order to facilitate
the disposition of the shares of Common Stock which may be owned by the
Investors and Maxim. The Company shall bear all expenses of the Registration
Statement, including fees and expenses, if any, of counsel or other advisors to
the Investors and Maxim, all of which shall be payable upon the initial filing
of the Registration Statement. The Company shall also pay all expenses of the
[MAXIM GROUP LOGO] XStream Beverage Network, Inc.
June 30, 2005
Page 21 of 34
Investors and Maxim for any "144 opinions" or other opinions which are required
in connection with any transfers of Securities made by such parties under Rule
144 or any other applicable sale or transfer (including, without limitation,
sales made pursuant to prospectus delivery). In addition to the foregoing, the
Company also grants to Maxim, with respect to the shares of Common Stock
underlying the Placement Agent Warrants, each of the registration rights and
anti-dilution protections granted to the Investors in the Placement.
(d) Use its best good faith efforts to, within sixty (60) days of the
Closing, obtain a "key man" life insurance policy with a nationally recognized
carrier and with the Company as the beneficiary on the lives of each of Xxxxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx and Xxxxx Xxxxxxx in an amount no less than
$2,000,000 worth of coverage each.
(e) Deliver without charge to Maxim such number of copies of the Offering
Documents and any supplement or amendment thereto as may reasonably be requested
by Maxim.
(f) Not, directly or indirectly, in connection with the Private Placement
or as otherwise agreed to in this Agreement, solicit any offer to buy from, or
offer to sell to, any person or entity any Securities or other securities of the
Company except through Maxim.
(g) Not solicit any offer to buy or offer to sell Securities by any form of
general solicitation or advertising, including, without limitation, any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar medium or broadcast over the Internet, television
or radio or at any seminar or meeting whose attendees have been invited by any
general solicitation or advertising.
(h) At all times during the period commencing on the date hereof and ending
on the date of the Final Closing, provide to each prospective Investor or his
purchaser representative, if any, on reasonable request, such information (in
addition to that contained in the Offering Documents) concerning the Private
Placement, the Company, the Securities and any other relevant matters as it
possesses or can acquire without unreasonable effort or expense and extend to
each prospective investor or his purchaser representative, if any, the
opportunity to ask questions of, and receive answers from the Company concerning
the terms and conditions of the Private Placement and the business of the
Company and to obtain any other additional information, to the extent it
possesses the same or can acquire it without unreasonable effort or expense, as
such prospective Investor or purchaser representative may consider necessary in
making an informed investment decision or in order to verify the accuracy of the
information furnished to such prospective Investor or purchaser representative,
as the case may be.
(i) Notify Maxim promptly of the acceptance or rejection of any
subscription.
[MAXIM GROUP LOGO] XStream Beverage Network, Inc.
June 30, 2005
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(j) File, through Maxim's counsel, five (5) copies of a Notice of Sales of
Securities on Form D with the SEC no later than 15 days after the first sale of
the Securities, if required by law. The Company shall, through Maxim's counsel,
file promptly such amendments to such Notices on Form D as shall become
necessary and shall also comply with any filing requirement imposed by the laws
of any province or jurisdiction in which offers and sales are made. The Company
shall furnish Maxim with copies of all such filings. The Company acknowledges
that it shall be liable for all filing fees and expenses, as well as Maxim's
counsel's legal fees, in all state and federal filings made in connection with
the sale or proposed sale of Securities.
(k) Place the following legend on all certificates representing the
Securities:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST
THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT OR SUCH LAWS OR AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS
WHICH, IN THE OPINION OF COUNSEL FOR THIS CORPORATION, IS
AVAILABLE."
(l) Not, directly or indirectly, engage in any act or activity which may
jeopardize the status of the offering and sale of the Securities as exempt
transactions under the Act or under the securities or "blue sky" laws of any
jurisdiction in which the Private Placement may be made.
(m) Not and shall use its best efforts to ensure that none of its
Affiliates shall sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security that would be integrated with the offer or
sale of the Securities in a manner that would require the registration under the
Act of the issue, offer or sale of the Securities to the Investors.
(n) Apply the net proceeds from the sale of the Securities for working
capital and general corporate purposes, and shall not be used: (i) to make any
loan to any officer, director, principal shareholder, or any Affiliate thereof,
of the Company, or (ii) for the repayment of any indebtedness to any officer,
director or principal shareholder, or any Affiliate thereof, of the Company.
(o) Not, during the period commencing on the date hereof and ending on the
date of the Final Closing, issue any press release or other communication or
hold any press conference with respect to the Company, its financial condition,
results of operations, business properties, assets, liabilities or future
prospects of the Private Placement, without the prior written consent of Maxim,
which consent will not be unreasonably withheld.
(p) Not, prior to the completion of the Private Placement, bid for,
purchase, attempt to induce others to purchase, or sell, directly or indirectly,
any shares of Common Stock or any other securities in violation of the
provisions of Regulation M under the Exchange Act.
[MAXIM GROUP LOGO] XStream Beverage Network, Inc.
June 30, 2005
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(q) Use its good faith best efforts after the date hereof to become
compliant with all aspects of the Xxxxxxxx-Xxxxx Act of 2002 ("SARB-OX") and the
rules and regulations promulgated thereunder that are applicable to the Company
at the date of this Agreement and the rules and regulations with respect to
Sarb-Ox that are now or will be applicable to the Company from time to time
including, without limitation, those provisions relating to loans to Company
officers and directors (it being covenanted and agreed to by the Company that it
shall not, after the date hereof, make any loans to any officer or director of
the Company).
(r) Not, for a period of one (1) year from the Final Closing Date, increase
the base salary of any officer of the Company in excess of ten percent (10%) per
year.
(s) Within one business day of the filing of the Registration Statement,
the Company will prepare and file, through Maxim's counsel, the selling
stockholder resale offering described in the Registration Statement for review
by the National Association of Securities Dealers, Inc. ("NASD") via the NASD's
CobraDesk filing system ("COBRADESK FILING") for the purpose of having the
prospectus contained within the Registration Statement treated as a "base
prospectus" in connection with such resale offering. The Company will use its
best efforts to have the CobraDesk Filing approved by the NASD within thirty
(30) days of the Target Filing Date. The Company shall be liable for Maxim's
counsel's legal fees in connection therewith. The Company shall bear all
expenses of the CobraDesk Filing, including fees and expenses, if any, of
counsel or other advisors to the Investors or Maxim. In all circumstances, the
Company shall pay for all NASD filing fees associated with the CobraDesk Filing.
The Company agrees to cooperate with Maxim and/or its counsel and to
promptly supply all necessary information for completion of the CobraDesk Filing
to Maxim and/or its counsel. The Company agrees to indemnify each of Maxim and
its counsel for any and all statements and/or representations made by the
Company to Maxim and/or its counsel included by Maxim and/or its counsel in the
CobraDesk Filing.
(t) (A) issue a press release accurately describing and disclosing the
transactions contemplated hereby on the Closing Date, (B) file with the SEC a
report on Form 8-K or Form 10-QSB disclosing the transactions contemplated
hereby within four (4) business days after the Closing Date, and (C) timely file
with the SEC a Form D promulgated under the Act as required under Regulation D.
(u) So long as Investor owns any of the Securities, timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all
reports required to be filed by the Company after the date hereof pursuant to
Section 13(a) or 15(d) of the Exchange Act. If at any time while Investor owns
any of the Securities, the Company is not required to file reports pursuant to
Section 13(a) or 15(d) of the Exchange Act, it will prepare and furnish to
Investor and make publicly available in accordance with Rule 144(c) promulgated
under the Act annual and quarterly financial statements, together with a
discussion and analysis of such financial statements in form and substance
[MAXIM GROUP LOGO] XStream Beverage Network, Inc.
June 30, 2005
Page 24 of 34
substantially similar to those that would otherwise be required to be included
in reports required by Section 13(a) or 15(d) of the Exchange Act, as well as
any other information required thereby, in the time period that such filings
would have been required to have been made under the Exchange Act. The Company
further covenants that it will take such further action as any holder of the
Securities may reasonably request, all to the extent required from time to time
to enable such holder to sell the Common Stock underlying the Securities without
registration under the Exchange Act under Rule 144 promulgated under the Act.
Upon the request of any such holder, the Company shall deliver thereto a written
certification of a duly authorized officer as to whether it has complied with
such requirements.
(v) The Company shall at all times have authorized, and reserved for the
purpose of issuance, a sufficient number of shares of Common Stock issuable upon
conversion of the Notes and exercise of the Warrants and the Placement Agent
Warrants to provide for the issuance of all of such shares. Prior to complete
conversion of the Notes and exercise of the Warrants and the Placement Agent
Warrants, the Company shall not reduce the number of shares of Common Stock
reserved for issuance hereunder without the prior written consent of the Holder
except for a reduction proportionate to a reverse stock split, which reverse
stock split affects all shares of Common Stock equally.
If the Company would be, if a notice of conversion of the Notes or exercise
of the Warrants or Placement Agent Warrants, as applicable, were to be delivered
on such date, precluded from issuing the full number of shares of Common Stock
as would then be issuable if all Notes were converted on such date or upon the
exercise of the Warrants and the Placement Agent Warrants, due to the
unavailability of a sufficient number of shares of authorized but unissued or
re-acquired Common Stock, then the Board of Directors of the Company shall
promptly (and in any case within 30 days from such date) prepare and mail to the
stockholders of the Company proxy materials requesting authorization to amend
the Company's articles of incorporation to increase the number of shares of
Common Stock which the Company is authorized to issue to at least a number of
shares equal to the sum of (1) all shares of Common Stock then outstanding, (2)
the number of shares of Common Stock issuable on account of all outstanding
warrants, options and convertible securities (other than the Notes, Warrants and
Placement Agent Warrants) and on account of all shares of Common Stock reserved
under any stock option, stock purchase, warrant or similar plan, and (3) the
number of shares of Common Stock to be issued upon conversion of all Notes and
upon exercise of all Warrants and Placement Agent Warrants.
(w) Give prompt written notice to Maxim of any breach by it of any
representation, warranty or other agreement contained in this Agreement, or any
other document to which the Company, the Placement Agent and Investor has relied
or is relying on in connection with the Offering ("TRANSACTION DOCUMENTS"), as
well as any events or occurrences arising after the date hereof, which would
reasonably be likely to cause any representation or warranty or other agreement
of such party, as the case may be, contained in the Transaction Documents to be
incorrect or breached as of and after the Closing Date. However, no disclosure
by any party pursuant to this Section shall be deemed to cure any breach of any
representation, warranty or other agreement contained in any Transaction
Documents.
[MAXIM GROUP LOGO] XStream Beverage Network, Inc.
June 30, 2005
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(x) Promptly seek the listing of all shares of Common Stock underlying the
Securities offered in the Offering not previously listed as such shares of
Common Stock are issued on the securities exchange, market or other quotation
system on which the Common Stock is then listed or traded and shall maintain, so
long as any other shares of Common Stock shall be so listed, such listing of all
such securities from time to time issuable under the terms of the Notes,
Warrants or Placement Agent Warrants. Once listed, the Company shall maintain
the Common Stock's authorization for listing on a securities exchange, market or
other quotation system on which the Common Stock is then listed or traded. The
Company shall promptly provide to Maxim copies of any notices it receives from
the securities exchange, market or other quotation system on which the Common
Stock is then listed or traded regarding the continued eligibility of the Common
Stock for listing on such a securities exchange, market or other quotation
system. The Company shall pay all fees and expenses in connection with
satisfying its obligations hereunder.
(y) In addition to the foregoing, to the extent not set forth herein, Maxim
may rely on the covenants made by the Company in the Subscription Documents used
in connection with the Private Placement.
10. CONDITIONS OF MAXIM'S OBLIGATIONS
The obligations of Maxim pursuant to this Agreement shall be subject, in
its discretion, to the continuing accuracy of the representations and warranties
of the Company contained herein and in each certificate and document
contemplated under this Agreement to be delivered to Maxim or otherwise at any
Closing (including, without limitation, all Subscription Documents), as of the
date hereof and as of the Closing Date or the date of any Closing subsequent to
the Closing Date, to the performance by the Company of its obligations
hereunder, and to the following conditions:
(a) At each Closing, Maxim shall have received the favorable legal opinion
of Xxxxxxxxx Xxxxxxxxxx & Beilly LLP, outside legal counsel to the Company, in
the form and substance reasonably satisfactory to Maxim and substantially to the
effect that:
(i) The Company has been duly organized and is validly existing and in
good standing under the laws of its state of incorporation, has all requisite
corporate power and authority necessary to own or hold its properties and
conduct its business and, to our knowledge, is duly qualified or licensed to do
business as a foreign corporation in each other jurisdiction in which the
ownership or leasing of its properties or the conduct of its business requires
such qualification, except where the failure to so qualify or be licensed would
not have a Material Adverse Effect;
[MAXIM GROUP LOGO] XStream Beverage Network, Inc.
June 30, 2005
Page 26 of 34
(ii) Each Subsidiary is validly existing and in good standing under the
laws of the jurisdiction of its organization, has the corporate power and
authority to own its properties and to conduct its business and, to our
knowledge, is duly qualified and authorized to transact business and is in good
standing in each jurisdiction in which the conduct of its business or the nature
of its properties requires such qualification or authorization, except where the
failure to be so qualified or authorized and in good standing could not
reasonably be expected to have a Material Adverse Effect. To our knowledge, all
of the issued and outstanding capital stock of each Subsidiary is owned by the
Company, free and clear of any liens except as disclosed in the Offering
Documents and the Company Documents;
(iii) Each of the Agreement, the Escrow Agreement by and among Maxim,
the Company and the Escrow Agent, the Securities, Placement Agent Warrants and
the Subscription Documents has been duly and validly authorized, executed and
delivered by the Company and is the valid and binding obligation of the Company
enforceable against it in accordance with its terms, subject to any applicable
bankruptcy, insolvency or other laws affecting the rights and remedies of
creditors generally and to general equitable principles;
(iv) The authorized capital stock of the Company as of the date hereof
(before giving effect to the transactions contemplated by this Agreement) is as
set forth in the Form 10-KSB as filed with the Securities and Exchange
Commission on April 14, 2005. Except for the Securities to be issued as
contemplated by this Agreement, to our knowledge, there are no outstanding
warrants, options, agreements, convertible securities, preemptive rights or
other commitments pursuant to which the Company is, or may become, obligated to
issue any shares of its capital stock or other securities of the Company other
than as set forth in the Offering Documents and the Company Documents. The
Securities and the Common Stock underlying each of the Notes, Warrants and the
Placement Agent Warrants, will be duly reserved, and when issued in accordance
with the terms of the Private Placement, will be validly issued, fully paid and
nonassessable and, to our knowledge, will not have been issued in violation of
or subject to preemptive or any other similar rights that entitle or will
entitle any Person to acquire any shares of Common Stock from the Company upon
issuance thereof and no personal liability will attach to the ownership thereof;
(v) To our knowledge, neither the Company nor any of its Affiliates
has, prior to the date hereof, made any offer or sale of any securities which
are required to be "integrated" pursuant to the Securities Act or the Rules and
Regulations with the offer and sale of the Securities pursuant to the Private
Placement, except for the 19,736,848 shares of common stock of the Company
issued to certain investors simultaneously herewith;
(vi) Assuming: (i) the accuracy of the information provided by the
Investors in the Subscription Documents, (ii) that Maxim has complied in all
material respects with the requirements of Section 4(2) of the Act (and the
provisions of Regulation D promulgated thereunder), and (iii) the filing of Form
D relating to the Private Placement, the issuance and sale of the Units, and the
securities included therein, is exempt from registration under the Act and
Regulation D promulgated thereunder;
[MAXIM GROUP LOGO] XStream Beverage Network, Inc.
June 30, 2005
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(vii) Neither the execution, delivery and performance of this Agreement
and consummation of the transactions contemplated by the Private Placement and
the Offering Documents do not and will not: (a) to our knowledge, conflict with
or result in a breach of any of the terms and provisions of, or constitute a
default (or an event which with notice or lapse of time, or both, would
constitute a default) under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or any of
its Subsidiaries pursuant to, any indenture, mortgage, deed of trust, loan
agreement or any other agreement, instrument, franchise, license or permit known
to us to which the Company or any of its Subsidiaries is a party or by which any
of the Company or any of its Subsidiaries or their respective properties or
assets may be bound or (b) violate or conflict with any provision of the
certificate or articles of incorporation, by-laws or other governing documents
of the Company or any of its Subsidiaries, or, to our best knowledge, any
judgment, decree, order, statute, rule or regulation of any court or any
judicial, regulatory or other legal or governmental agency or body;
(viii) To our knowledge, neither the Company nor any of its
Subsidiaries is in violation of its respective charter or by-laws and, to our
knowledge, neither the Company nor any of its Subsidiaries is in default in the
performance of any material obligation, agreement, covenant or condition
contained in any indenture, loan agreement, mortgage, lease or other agreement
or instrument that is material to the Company and its Subsidiaries, taken as a
whole, to which the Company or any of its Subsidiaries is a party or by which
the Company or any of its Subsidiaries or their respective property is bound
except as disclosed in the Offering Documents or Company Documents;
(ix) To our knowledge, no consent approval authorization, order,
registration, filing, qualification, license or permit of or with any court or
any judicial, regulatory or other legal or governmental agency or body is
required for the execution, delivery and performance of this Agreement or
consummation of the transactions contemplated by this Agreement, the Private
Placement and the Offering Documents, except for (1) such as may be required
under state securities or blue sky laws in connection with the sale of the
Securities by the Company, and (2) such as have been made or obtained under the
Act;
(x) To our knowledge, there are no claims, actions, suits,
investigations or proceedings before or by any arbitrator, court, governmental
authority or instrumentality pending or threatened against or affecting the
Company or involving the properties of the Company which might materially and
adversely affect the business, properties or financial condition of the Company,
or which might materially adversely affect the transactions or other acts
contemplated by this Agreement or the validity or enforceability of this
Agreement, except as set forth in or contemplated by the Offering Documents or
Company Documents and to our knowledge, no such proceedings are threatened or
contemplated;
(xi) The Company is not and, after giving effect to the offering and
sale of the Securities and the application of the proceeds thereof as described
in the Offering Documents, will not be, an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended; and
[MAXIM GROUP LOGO] XStream Beverage Network, Inc.
June 30, 2005
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(xii) We have participated in the preparation of the Offering Documents
and the Company Documents and nothing has come to our attention to cause us to
have reason to believe that the Offering Documents or Company Documents
contained any untrue statement of a material fact required to be stated therein
or omitted to state any material fact required to be stated therein or necessary
to make the statements therein not misleading.
(b) At the Initial Closing and each Subsequent Closing, Maxim shall have
received the Notes sold to the Investors in the Placement, duly executed and
made out in the name of such Investors for the principal amount of the Notes
purchased.
(c) At the Initial Closing and each Subsequent Closing, Maxim shall have
received warrant certificates for Warrants sold to the Investors in the
Placement, duly executed and made out in the name of such Investors for the
amount of Warrants purchased.
(d) At the Initial Closing and each Subsequent Closing, Maxim shall have
received stock certificates for Common Stock sold to the Investors in the
Placement, duly executed and made out in the name of such Investors for the
number of shares of Common Stock purchased.
(e) At the Initial Closing and each Subsequent Closing, Maxim shall have
received the applicable fees payable and securities issuable to Maxim as
described in Section 3 hereof.
(f) To use its best good faith efforts to, within sixty (60) days of the
Closing, obtain a "key man" life insurance policy with a nationally recognized
carrier and with the Company as the beneficiary on the lives of each of Xxxxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx and Xxxxx Xxxxxxx in an amount no less than
$2,000,000 worth of coverage each.
(g) At each Closing, Maxim shall have received a certificate of the chief
executive officer of both the Company, dated, as applicable, as of the Closing
Date or the date of such Closing, to the effect that, as of the date of this
Agreement and as of the applicable date, the representations and warranties of
the Company contained herein were and are accurate, and that, as of the
applicable date, the obligations to be performed by the Company hereunder on or
prior thereto have been fully performed.
(h) At each Closing, Maxim shall have received a duly executed management
confirmation letter from the directors and officers the Company, relating to
certain information appearing in the Offering Documents.
(i) At each Closing, Maxim shall have received a certificate of the
Secretary of the Company, dated, as applicable, as of the date of such Closing,
certifying to the charter, by-laws, good standing in its state of incorporation
and board resolutions relating to the Placement.
[MAXIM GROUP LOGO] XStream Beverage Network, Inc.
June 30, 2005
Page 29 of 34
(j) On or prior to the Initial Closing Date or the date of any Subsequent
Closing, as the case may be, Maxim shall have been furnished with: (i) such
information, documents and certificates as it may reasonably require for the
purpose of enabling it to review the matters referred to in this Section 10 and
in order to evidence the accuracy, completeness or satisfaction of any of the
representations, warranties, covenants, agreements or conditions herein
contained, and (ii) such other closing documentation as may be required in order
to affect the applicable Closing or as Maxim may otherwise reasonably request.
(k) All proceedings taken in connection with the issuance, sale and
delivery of the Securities and the Placement Agent Warrant shall be reasonably
satisfactory in form and substance to Maxim and its counsel, and Maxim shall
have received certified resolutions or minutes of the Board of Directors of the
Company authorizing each of the transactions contemplated by this Agreement.
(l) Any certificate or other document signed by any officer of the Company
and delivered to Maxim and its counsel as required hereunder shall be deemed a
representation and warranty by the Company hereunder as to the statements made
therein. If any condition to Maxim's obligations hereunder have not been
fulfilled as and when required to be so fulfilled, Maxim may terminate this
Agreement or, if Maxim so elects, in writing waive any such conditions which
have not been fulfilled or extended the time for their fulfillment. In the event
that Maxim elects to terminate this Agreement, Maxim shall notify the Company of
such election in writing. Upon such termination, neither party shall have any
further liability nor obligation to the other except as provided in Section 11
hereof.
(m) On or prior to or following the Closing Date, as the case may be, Maxim
shall have been furnished such information, documents and certificates as it may
reasonably require for the purpose of enabling it to review the matters referred
to in this Section 10 and in order to evidence the accuracy, completeness or
satisfaction of any of the representations, warranties, covenants, agreements or
conditions herein contained, or as it may otherwise reasonably request.
(n) If there is more than one Closing, then at each such Closing there
shall be delivered to Maxim updated opinions, certificates or other information
described in this Section 10.
11. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless Maxim, any person who
controls Maxim within the meaning of the Act, Section 20(a) of the Exchange Act
or any applicable statute, and each partner, director, officer, employee, agent,
legal counsel and representative of Maxim and its representatives from and
against any and all losses, damages, obligations, penalties, judgments, awards,
costs, expenses, liabilities, claims or disbursements, and any and all actions,
suits, proceedings and investigations in respect thereof and any and all legal
and other costs, expenses and disbursements in giving testimony or furnishing
documents in response to a subpoena or otherwise (including, without limitation,
the costs, expenses and disbursements, as and when incurred, of investigating,
preparing, pursuing or defending against any such action, suit, proceeding or
investigation (whether or not in connection with litigation in which any
Indemnified Party, as defined below, is a party)) which any such person may
[MAXIM GROUP LOGO] XStream Beverage Network, Inc.
June 30, 2005
Page 30 of 34
incur or which may be made or brought against any such person directly or
indirectly, caused by, relating to, based upon, arising out of or in connection
with: (i) Maxim's acting for the Company, including, without limitation, any act
or omission by Maxim in connection with its acceptance of or the performance or
non-performance of its obligations under the Agreement (ii) any breach of any of
the agreements, representations, warranties or covenants of the Company
contained in or contemplated by this Agreement or the Subscription Documents,
including, without limitation, those arising out of or based on any alleged
untrue statement of a material fact or omission to state a material fact
required to be stated in either the Offering Documents or the Subscription
Documents or necessary in order to make the statements appearing therein not
misleading in the light of the circumstances in which they were made, (iii) any
violation of any federal or state securities laws attributable to the Private
Placement, or (iv) any violation of law by the Company or any Affiliate thereof,
or any director, officer, employee, agent or representative of any of them,
related to or arising out of the Private Placement. This indemnity agreement by,
and the agreements, warranties and representations of the Company shall survive
the offer, sale and delivery of the Securities and the termination of this
Agreement and shall remain in full force and effect regardless of any
investigation made by or on behalf of any person indemnified hereunder, and
termination of this Agreement and acceptance of any payment for the Securities
hereunder.
(b) If any action, suit, proceeding or investigation is commenced against
Maxim, its present and former affiliated entities, managers, members, officers,
employees, legal counsel, agents and controlling persons (within the meaning of
the federal securities laws), and the officers, directors, partners,
stockholders, members, managers, employees, legal counsel, agents and
controlling persons of any of them (the "INDEMNIFIED Party" or "INDEMNIFIED
PARTIES") in respect of which indemnity may be sought against one or more of the
Company or any affiliates thereof (the "INDEMNIFYING PARTY" or "INDEMNIFYING
PARTIES"), the Indemnified Party shall notify the Indemnifying Party or Parties
with reasonable promptness in writing of the institution of such action;
provided, however, the failure to give such notice shall not release the
Indemnifying Party or Parties from its or their obligation to indemnify the
Indemnified Party hereunder, except to the extent the Indemnifying Party shall
have been materially prejudiced by such delay and shall not release the
Indemnifying Party or Parties from any other obligations or liabilities to the
Indemnified Party in any event. The Indemnified Party or Parties shall have the
right to retain counsel of its own choice to represent it, and the fees,
expenses and disbursements of such counsel shall be borne by the Indemnifying
Party or Parties. Any such counsel shall, to the extent consistent with its
professional responsibilities, cooperate with the Company in any defense, except
such matters in respect of which the Indemnified Parties counsel shall advise
the Indemnified Parties that such cooperation would impair a defense available
to the Indemnified Parties that is unavailable to the Company. In the event that
the Indemnified Party or Parties do not elect to retain their own counsel, the
Indemnifying Party or Parties shall at its or their own expense assume the
defense of such action, including the employment of counsel reasonably
acceptable to the Indemnified Party; provided, however, that no Indemnifying or
Indemnified Party shall, without the prior written consent of Maxim, settle or
compromise any claim, or permit a default or consent to the entry of any
judgment in respect thereof, unless such settlement, compromise or consent (i)
includes, as an unconditional term thereof, the giving by the claimant to all
Indemnified Parties of an unconditional release from all liability in respect of
[MAXIM GROUP LOGO] XStream Beverage Network, Inc.
June 30, 2005
Page 31 of 34
such claim, and (ii) does not contain any factual or legal admission by or with
respect to an Indemnified Party or an adverse statement with respect to the
character, professionalism, expertise or reputation of any Indemnified Party or
any action or inaction of any Indemnified Party. In the event the Indemnifying
Party or Parties assume a defense hereunder, the Indemnified Party shall be
entitled to retain its own counsel in connection therewith and, except as
provided below, shall bear the fees and expenses of any such counsel, and
counsel to the Indemnified Party or Parties shall cooperate with such counsel to
the Indemnifying Party in connection with such proceeding. If the Indemnifying
Party or Parties assume the defense hereunder and an Indemnified Party
reasonably determines that there are or may be differing or additional defenses
available to the Indemnified Party which are not available to the Indemnifying
Party, or that there is or may be a conflict between the respective positions of
the Indemnifying Party and of the Indemnified Party in conducting the defense of
any action, then the Indemnifying Party shall bear the reasonable fees and
expenses of any counsel retained by the Indemnified Party in connection with
such proceeding. All references to the Indemnified Party contained in this
Section 11(b) include, and extend to and protect with equal effect, any persons
who may control the Indemnified Party within the meaning of the Act, Section
20(a) of the Exchange Act or any applicable statute, any successor to the
Indemnified Party and each of its partners, officers, directors, employees,
agents and representatives. The indemnity agreements set forth in this Section
11 shall be in addition to any other obligations or liabilities of the
Indemnifying Party or Parties hereunder or at common law or otherwise.
(c) If recovery is not available under the foregoing indemnification
provisions of this Section 11, for any reason other than as specified therein,
the party entitled to indemnification by the terms thereof shall be entitled to
contribution to losses, damages, liabilities and expenses of the nature
contemplated by such indemnification provisions. In determining the amount of
such contribution, there shall be considered the relative benefits received by
the Company on the one hand, and Maxim on the other hand from the Private
Placement (which shall be deemed to be the portion of the proceeds of the
Private Placement realized by each party), the parties' relative knowledge and
access to information concerning the matter with respect to which the claim was
asserted, the opportunity to correct and prevent any statement or omission, the
relative culpability of the parties, the relative benefits received by the
parties and any other equitable considerations appropriate under the
circumstances. No party shall be liable for contribution with respect to any
action or claim settled without its consent. Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this Section 11, notify such
party or parties from whom contribution may be sought, but the omission to so
notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have under this
Section 11 or otherwise. For purposes of this Section 11, each person, if any,
who controls a party to this Agreement within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act shall have the same rights to
contribution as that party to this Placement Agreement.
(d) In any claim for indemnification for United States Federal or state
securities law violations, the party seeking indemnification shall place before
the court the position of: (i) the SEC and (ii) if applicable, any state
securities commissioner or agency having jurisdiction with respect to the issue
of indemnification for securities law violations.
[MAXIM GROUP LOGO] XStream Beverage Network, Inc.
June 30, 2005
Page 32 of 34
12. MISCELLANEOUS
(a) The agreements set forth in this Agreement have been made and are made
solely for the benefit of the Company, Maxim, the Investors with respect to
Sections 7 and 9, and the respective Affiliates, heirs, personal representatives
and permitted successors and assigns thereof, and except as expressly provided
herein nothing expressed or mentioned herein is intended or shall be construed
to give any other person, firm or corporation any legal or equitable right,
remedy or claim under or in respect of this Agreement or any representation,
warranty or agreement herein contained. The term "successors and assigns" as
used herein shall not include any purchaser of any Securities merely because of
such purchase.
(b) Neither party will be liable to the other by reason of any failure in
performances of this Agreement if the failure arises out of the unavailability
of third party communication facilities or energy sources or acts of God, acts
of governmental authority, acts of terrorism, fires, strikes, delays in
transportation, riots or war, or any cause beyond the reasonable control of such
party.
(c) Any notice or other communication required or appropriate under the
provisions of this Agreement shall be given in writing addressed (or sent by
facsimile transmission, with confirmation of receipt) as follows: (i) if to the
Company, at the address set forth above, Attention: President, Fax No.: (954)
000-0000; and (ii) if to Maxim, Maxim Group LLC, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx,
XX 00000, Attention: Xx. Xxxxxxx Xxxxxx, Fax No.: (000) 000-0000; with a copy to
Ellenoff Xxxxxxxx & Schole LLP, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Xxxxx X. Xxxxxxxx, Esq., Fax No.: (000) 000-0000, or at such other
address as any party may designate to the others in accordance with this Section
12(c).
(d) This Agreement shall be governed and construed in accordance with the
laws of the State of New York, without giving effect to conflicts of law
provisions thereof (other than Section 5-1401 of the New York General
Obligations Law).
(e) Any legal suit, action or proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby shall be instituted
exclusively in New York Supreme Court, County of New York, or in the United
States District Court for the Southern District of New York. The parties hereto
hereby: (i) waives any objection which they may now have or hereafter have to
the venue of any such suit, action or proceeding, and (ii) irrevocably consents
to the jurisdiction of the New York Supreme Court, County of New York, and the
United States District Court for the Southern District of New York in any such
suit, action or proceeding. The parties further agree to accept and acknowledge
service of any and all process which may be served in any such suit, action or
proceeding in the New York Supreme Court, County of New York, or in the United
[MAXIM GROUP LOGO] XStream Beverage Network, Inc.
June 30, 2005
Page 33 of 00
Xxxxxx Xxxxxxxx Xxxxx for the Southern District of New York and agree that
service of process upon a party mailed by certified mail to such party's address
shall be deemed in every respect effective service of process upon such party in
any such suit, action or proceeding
(f) This Agreement constitutes the entire agreement between the parties
hereto with respect to the Private Placement and supercedes any and all prior
agreements, and may be amended or modified only by a duly authorized writing
signed by such parties. This Agreement may be executed in any number of
counterparts and by facsimile, each of which shall be deemed an original and all
of which shall constitute a single instrument.
[SIGNATURE PAGE FOLLOWS]
[MAXIM GROUP LOGO] XStream Beverage Network, Inc.
June 30, 2005
Page 34 of 34
This Placement Agency Agreement is executed and shall be effective as
of June 30, 2005.
Very truly yours,
MAXIM GROUP LLC
By: /s/
---------------------------
Name:
Title:
ACCEPTED AND AGREED TO:
XSTREAM BEVERAGE NETWORK, INC.
By: /s/
------------------------------
Name:
Title:
