EXHIBIT 10.2
[MAXIM GROUP LOGO OMITTED]
SUBJECT TO
COMMITMENT COMMITTEE APPROVAL
April 25, 2005
Xx. Xxxxx Xxxxxxxx
President
XStream Beverage Network, Inc.
0000 XX 00xx Xxxxxx
Xx. Lauderdale, FL 33309
Gentlemen:
We are pleased that XStream Beverage Network, Inc. ("XSTREAM" or the
"Company") has chosen to retain Maxim Group LLC ("MAXIM") to provide general
financial advisory and investment banking services to the Company as set forth
herein. This letter agreement (this "AGREEMENT") will confirm Xxxxx's acceptance
of such retention and set forth the terms of our engagement.
1 Retention. The Company hereby retains Maxim as its exclusive
financial advisor and investment banker to provide general financial advisory
and investment banking services, and Xxxxx accepts such retention on the terms
and conditions set forth in this Agreement. In the event that any provision(s)
in either of the agreements entered into between the Company and Midtown
Partners dated December 23, 2004 or with Adelphia Capital dated April 7, 2005
conflicts with this Agreement, the Company acknowledges that this Agreement
shall prevail. Additionally, the Company represents that it will use its best
efforts to have each of Midtown Partners and Adelphia Capital separately
acknowledge that this Agreement shall prevail in the event of any such conflict.
Without limiting the generality of the foregoing, it is the initial intention of
Maxim and the Company to structure and effect a Private Placement for XStream in
accordance with the additional set of terms set forth on Exhibit B hereto (the
"PRIVATE PLACEMENT"). It is also the intention of Maxim and the Company for
Maxim to assist and advise in reducing the number of existing warrants. For the
avoidance of doubt, the statements contained in this Section 1 regarding the
Private Placement and any subsequent financing are preliminary in nature and
subject to change and definitive documentation to be agreed upon by the Company
and Maxim. In such capacity, Maxim shall:
(a) Familiarize itself with the business, operations, properties,
financial condition, management and prospects of the Company;
(b) Advise the Company on all matters relating to a contemplated
follow-on public offering of approximately $20,000,000, as well
as evaluate alternative financing structures and arrangements;
(c) Assist the Company in developing appropriate acquisition criteria
and identifying target companies;
(d) Provide such other financial advisory and investment banking
services upon which the parties may mutually agree; and
(e) Subject to market conditions and upon confirmation of appropriate
use of proceeds, among others, initiate the process to lead
manage the contemplated follow-on public offering.
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XStream Beverage Network, Inc.
April __, 2005
Page 2
2 Information. In connection with Xxxxx's activities hereunder,
the Company will cooperate with Xxxxx and furnish Maxim upon request with all
information regarding the business, operations, properties, financial condition,
management and prospects of the Company (all such information so furnished being
the "INFORMATION") which Maxim deems appropriate and will provide Maxim with
access to the Company's officers, directors, employees, independent accountants
and legal counsel. The Company represents and warrants to Maxim that all
Information made available to Maxim hereunder will be complete and correct in
all material respects and will not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein not misleading in light of the circumstances under which such statements
are or will be made. The Company further represents and warrants that any
projections and other forward-looking information provided by it to Maxim will
have been prepared in good faith and will be based upon assumptions which, in
light of the circumstances under which they are made, are reasonable. The
Company recognizes and confirms that Maxim: (i) will use and rely primarily on
the Information and on information available from generally recognized public
sources in performing the services contemplated by this Agreement without having
independently verified the same; (ii) does not assume responsibility for the
accuracy or completeness of the Information and such other information; and
(iii) will not make an appraisal of any assets of the Company. Any advice
rendered by Xxxxx pursuant to this Agreement may not be disclosed publicly
without Xxxxx's prior written consent. Xxxxx hereby acknowledges that certain of
the Information received by Xxxxx may be confidential and/or proprietary,
including Information with respect to the Company's technologies, products,
business plans, marketing, and other Information which must be maintained by
Xxxxx as confidential. Xxxxx agrees that it will not disclose such confidential
and/or proprietary Information to any other companies in the industry in which
the Company is involved.
3 Compensation. As consideration for Xxxxx's services pursuant
to this Agreement, Xxxxx shall be entitled to receive, and the Company agrees to
pay Xxxxx, the following compensation:
(a) The Company shall pay to Maxim a non-refundable cash retainer of
$30,000 (the "RETAINER") of which $20,000 is payable upon
execution of this Agreement and $10,000 is payable one month
after the execution of this Agreement.
The fees appearing on the Fee Schedule (Exhibit C) shall be
earned by and paid to Maxim by the Company in connection with
financings undertaken by the Company, the terms of which shall be
mutually agreed upon under separate placement agency and/or
underwriting agreements (collectively, with the Placement Agency
Agreement described on Exhibit B in connection with the Private
Placement, the "AGENCY AGREEMENTS").
(b) The Company shall pay to Maxim a monthly fee of $5,000 per month
beginning one month after the execution of this Agreement and at
the beginning of each month thereafter while this Agreement is in
effect.
(c) The Company shall pay Maxim a warrant exchange fee of $0.06 per
warrant for any net reduction in the Company's existing warrants,
with a minimum fee of $100,000 (or $50,000, if there is less than
a 20% net reduction in the Company's existing warrants) and a
maximum fee of $150,000 .
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XStream Beverage Network, Inc.
April __, 2005
Page 3
(d) The Company and Maxim acknowledge and agree that in the course of
performing services hereunder, if requested by the Company, Xxxxx
may introduce the Company to third parties who may be interested
in providing financing to the Company (a "FINANCING") or in
entering into a transaction with the Company, including, without
limitation, a merger, acquisition or sale of stock or assets (in
which the Company may be the acquiring or the acquired entity),
joint venture, strategic alliance or other similar transaction
(any such transaction, a "TRANSACTION").
The Company agrees that, if during the term of this Agreement or
within 18 months from the effective date of the termination of
this Agreement either the Company or any party to whom the
Company was introduced by Xxxxx or who was contacted by Xxxxx in
connection with its services for the Company hereunder proposes a
Financing or any Transaction involving the Company and Maxim is
not engaged as the Company's exclusive financial advisor, agent
and/or investment banker in connection with such Financing or
Transaction pursuant to Section 6 hereof, then, if any such
Financing or Transaction is consummated, the Company shall pay to
Maxim:
(i) in the event of a Financing, fees in accordance with
the Fee Schedule (Exhibit C); or
(ii) in the case of a Transaction, an amount equal to
the greater of: (A) $250,000 or (B) 4% of the aggregate
consideration paid or received by the Company and/or its
stockholders in such Transaction, as the case may be.
Such fees shall be payable to Maxim in cash at the closing or
closings of the Financing or Transaction to which it relates.
The amount of consideration paid in a Transaction shall include,
for purposes of calculating such fee, all forms of consideration
paid or received, directly or indirectly, by the Company and/or
its stockholders in such Transaction, including, without
limitation, cash, securities, notes or other evidences of
indebtedness, assumption of liabilities (whether by operation of
law or otherwise), or any combination thereof. If all or any
portion of the consideration paid in the Transaction is other
than cash or securities, then the value of such non-cash
consideration shall be the fair market value thereof on the date
the Transaction is consummated as mutually agreed upon in good
faith by the Company and Maxim. If such non-cash consideration
consists of common stock, options, warrants or rights for which a
public trading market existed prior to the consummation for the
Transaction, then the value of such securities shall be
determined based upon the closing or last sales price thereof on
the date of the consummation of the Transaction. If such non-cash
consideration consists of newly-issued, publicly-traded common
stock, options, warrants or rights for which no public trading
market existed prior to the consummation of the Transaction, then
the value thereof shall be the average of the closing prices for
the 20 trading days subsequent to the fifth trading day after the
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XStream Beverage Network, Inc.
April __, 2005
Page 4
consummation of the Transaction. In such event, the fee payable
to Maxim pursuant to subparagraph 3(d)(ii) shall be paid on the
30th trading day subsequent to consummation of the Transaction.
If no public market exists for the common stock, options,
warrants or other rights issued in the Transaction, then the
value thereof shall be as mutually agreed upon in good faith by
the Company and Maxim. If the non-cash consideration paid in the
Transaction consists of preferred stock or debt securities
(regardless of whether a public trading market existed for such
preferred stock or debt securities prior to consummation of the
Transaction or exists thereafter), the value thereof shall be the
maximum liquidation value (without regard to accrued dividends)
of the preferred stock or the principal amount of the debt
securities, as the case may be.
Any amounts payable by a purchaser to the Company, any
stockholder of the Company or an affiliate of either the Company
or any stockholder of the Company in connection with a
non-competition, employment, consulting, licensing, supply or
other agreement (or payable by the Company if the Company is the
acquiring entity) shall be deemed to be part of the consideration
paid in the Transaction. If all or a portion of the consideration
payable in connection with the Transaction includes contingent
future payments, then the Company shall pay to Maxim an
additional cash fee, determined in accordance with Section
3(d)(ii), as, when and if such contingency payments are received.
However, in the event of an installment purchase at a fixed price
and fixed time schedule, the Company agrees to pay Maxim, upon
consummation of such Transaction, an additional cash fee,
determined in accordance with this Section 3(d) based upon the
present value of such installment payments using a discount rate
of 10%. If with respect to any non-cash consideration the Company
and Maxim are unable to agree on the fair market value thereof,
then such value shall be determined by submission of the question
to a reputable appraisal firm with experience valuing property of
the nature of the subject consideration acceptable to the Company
and Maxim (the fees and expenses of whom shall be borne equally
by the Company and Maxim).
4 Expenses. In addition to payment to Xxxxx of the compensation set
forth in Section 3 hereof, the Company shall promptly upon request reimburse
Maxim for all reasonable expenses (including, without limitation, fees and
disbursements of counsel and all travel and other out-of-pocket expenses)
incurred by Xxxxx in connection with its engagement hereunder. Maxim will
provide the Company an invoice and copies of receipts pursuant to its expenses
and such expenses shall not exceed $3,000 without prior authorization of the
Company, provided that the foregoing limitation and consent shall not apply to
legal fees.
5 Indemnification. The Company agrees to indemnify Maxim in accordance
with the indemnification and other provisions attached to this Agreement as
Exhibit A (the "INDEMNIFICATION PROVISIONS"), which provisions are incorporated
herein by reference and shall survive the termination or expiration of this
Agreement.
6 Future Rights. As additional consideration for its services
hereunder, if at any time during the term of this Agreement or within eighteen
(18) months from the effective date of the termination of this Agreement, the
Company proposes to effect a public offering of its securities or a Financing or
Transaction or to engage an investment banking firm to provide any other
services to the Company (other than during the term of this Agreement the
[MAXIM GROUP LOGO OMITTED]
XStream Beverage Network, Inc.
April __, 2005
Page 5
services to be provided by Xxxxx xxxxxxxxx), the Company shall offer to retain
Maxim as manager of such offering, or as its exclusive advisor, agent and/or
investment banker in connection with such Financing, Transaction or other
matter, upon such terms as the parties may mutually agree, such terms to be set
forth in a separate engagement letter or other agreement between the parties.
Such offer shall be made in writing in order to be effective. The Company shall
not offer to retain any other investment banking firm in connection with any
such offering, Financing, Transaction or other matter on terms more favorable
than those discussed with Maxim without offering to retain Maxim on such more
favorable terms. Xxxxx shall notify the Company within 20 days of its receipt of
the written offer contemplated above as to whether or not it agrees to accept
such retention. If Maxim should decline such retention, the Company shall have
no further obligations to Maxim, except as specifically provided for herein.
7 Other Activities. The Company acknowledges that Maxim has been, and
may in the future be, engaged to provide services as an underwriter, placement
agent, finder, advisor and investment banker to other companies in the industry
in which the Company is involved. Subject to the confidentiality provisions of
Maxim contained in Section 2 hereof, the Company acknowledges and agrees that
nothing contained in this Agreement shall limit or restrict the right of Maxim
or of any member, manager, officer, employee, agent or representative of Maxim,
to be a member, manager, partner, officer, director, employee, agent or
representative of, investor in, or to engage in, any other business, whether or
not of a similar nature to the Company's business, nor to limit or restrict the
right of Maxim to render services of any kind to any other corporation, firm,
individual or association. Maxim may, but shall not be required to, present
opportunities to the Company.
8 Termination; Survival of Provisions. Either Maxim or XStream may
terminate this Agreement at any time upon 30 days' prior written notice to the
other party. In the event of such termination, the Company shall pay and deliver
to Maxim: (i) all compensation earned through the date of such termination
("TERMINATION DATE") pursuant to any provision of Section 3 hereof, and (ii) all
compensation which may be earned by Xxxxx after the Termination Date pursuant to
Section 3 hereof, and shall reimburse Maxim for all expenses incurred by Xxxxx
in connection with its services hereunder pursuant to Section 4 hereof. All such
fees and reimbursements due to Maxim pursuant to the immediately preceding
sentence shall be paid to Maxim on or before the Termination Date (in the event
such fees and reimbursements are earned or owed as of the Termination Date) or
upon the closing of a Financing or Transaction or any applicable portion thereof
(in the event such fees are due pursuant to the terms of Section 3 hereof).
Notwithstanding anything expressed or implied herein to the contrary: (i) any
Agency Agreement entered into between Maxim and the Company may only be
terminated in accordance with the terms thereof, notwithstanding an actual or
purported termination of this Agreement, and (ii) the terms and provisions of
Sections 3, 4, 5 (including, but not limited to, the Indemnification Provisions
attached to this Agreement and incorporated herein by reference), 6, 7, 8, 9, 10
and 15 shall survive the termination of this Agreement.
9 Notices. All notices provided hereunder shall be given in writing and
either delivered personally or by overnight courier service or sent by certified
mail, return receipt requested, or by facsimile transmission, if to Maxim, to
Maxim Group LLC, 00 Xxxxxxxxx Xxxxxxxxx Xxxxxxxxx, Xxxxxxxx, Xxx Xxxx 00000,
Attention: Xxxxxx X. Xxxx, Esq., General Counsel, Fax No. (000) 000-0000, and if
to the Company, to the address, set forth on the first page of this Agreement,
Attention: President, Fax No.: (000) 000-0000. Any notice delivered personally
or by fax shall be deemed given upon receipt (with confirmation of receipt
required in the case of fax transmissions); any notice given by overnight
[MAXIM GROUP LOGO OMITTED]
XStream Beverage Network, Inc.
April __, 2005
Page 6
courier shall be deemed given on the next business day after delivery to the
overnight courier; and any notice given by certified mail shall be deemed given
upon the second business day after certification thereof.
10 Governing Law; Jurisdiction; Waiver of Jury Trial. This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York applicable to agreements made and to be fully performed therein,
without regard to conflicts of law principles. The Company irrevocably submits
to the exclusive jurisdiction of any court of the State of New York or the
United States District Court for the Southern District of the State of New York
for the purpose of any suit, action or other proceeding arising out of this
Agreement, or any of the agreements or transactions contemplated hereby, which
is brought by or against the Company, and agrees that service of process in
connection with any such suit, action or proceeding may be made upon the Company
in accordance with Section 9 hereof. The parties hereby expressly waive all
rights to trial by jury in any suit, action or proceeding arising under this
Agreement.
11. Amendments. This Agreement may not be modified or amended except in
a writing duly executed by the parties hereto.
12. Headings. The section headings in this Agreement have been inserted
as a matter of reference and are not part of this Agreement.
13. Successors and Assigns. The benefits of this Agreement shall inure
to the parties hereto, their respective successors and assigns and to the
indemnified parties hereunder and their respective successors and assigns, and
the obligations and liabilities assumed in this Agreement shall be binding upon
the parties hereto and their respective successors and assigns. Notwithstanding
anything contained herein to the contrary, neither Xxxxx nor the Company shall
assign any of its obligations hereunder without the prior written consent of the
other party.
14. No Third Party Beneficiaries. This Agreement does not create, and
shall not be construed as creating, any rights enforceable by any person or
entity not a party hereto, except those entitled to the benefits of the
Indemnification Provisions. Without limiting the foregoing, the Company
acknowledges and agrees that Xxxxx is not being engaged as, and shall not be
deemed to be, an agent or fiduciary of the Company's stockholders or creditors
or any other person by virtue of this Agreement or the retention of Xxxxx
xxxxxxxxx, all of which are hereby expressly waived.
15. Waiver. Any waiver or any breach of any of the terms or conditions
of this Agreement shall not operate as a waiver of any other breach of such
terms or conditions or of any other term or condition, nor shall any failure to
insist upon strict performance or to enforce any provision hereof on any one
occasion operate as a waiver of such provision or of any other provision hereof
or a waiver of the right to insist upon strict performance or to enforce such
provision or any other provision on any subsequent occasion. Any waiver must be
in writing.
16. Counterparts. This Agreement may be executed in any number of
counterparts and by facsimile transmission, each of which shall be deemed to be
an original instrument, but all of which taken together shall constitute one and
the same agreement. Facsimile signatures shall be deemed to be original
signatures for all purposes.
[Signature Page Follows]
[MAXIM GROUP LOGO OMITTED]
XStream Beverage Network, Inc.
April __, 2005
Page 7
If the foregoing correctly sets forth our agreement, please sign the
enclosed copy of this Agreement in the space provided below and return it to us.
Very truly yours,
Maxim Group LLC.
By:
------------------------
Xxxxxxx X. Xxxxxx
Managing Director
By:
------------------------
Xxxxxxxx X. Xxxxxx
Managing Director
AGREED TO AND ACCEPTED THIS ____ DAY OF APRIL, 2005
XStream Beverage Network, Inc.
By: _____________________________
Name:
Title:
Members NASD & SIPC
000 Xxxxxxxxx Xxx. * New York, NY 10174 * tel (000) 000-0000 * (000) 000-0000 *
fax (000) 000-0000 * xxx.xxxxxxxx.xxx
New York, NY * Long Island, NY * Chicago, IL
EXHIBIT A
INDEMNIFICATION PROVISIONS
Capitalized terms used in this Exhibit shall have the meanings ascribed
to such terms in the Agreement to which this Exhibit is attached.
XStream agrees to indemnify and hold harmless Maxim and each of the
other Indemnified Parties (as hereinafter defined) from and against any and all
losses, claims, damages, obligations, penalties, judgments, awards, liabilities,
costs, expenses and 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,
pursing or defending any such action, suit, proceeding or investigation (whether
or not in connection with litigation in which any Indemnified Party is a party))
(collectively, "LOSSES"), directly or indirectly, caused by, relating to, based
upon, arising out of, or in connection with, 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 between the Company and Maxim to which these indemnification
provisions are attached and form a part (the "Agreement"), any breach by the
Company of any representation, warranty, covenant or agreement contained in the
Agreement (or in any instrument, document or agreement relating thereto,
including any Agency Agreement), or the enforcement by Maxim of its rights under
the Agreement or these indemnification provisions, except to the extent that any
such Losses are found in a final judgment by a court of competent jurisdiction
(not subject to further appeal) to have resulted primarily and directly from the
gross negligence or willful misconduct of the Indemnified Party seeking
indemnification hereunder. The Company also agrees that no Indemnified Party
shall have any liability (whether direct or indirect, in contract or tort or
otherwise) to the Company for or in connection with the engagement of Maxim by
the Company or for any other reason, except to the extent that any such
liability is found in a final judgment by a court of competent jurisdiction (not
subject to further appeal) to have resulted primarily and directly from such
Indemnified Party's gross negligence or willful misconduct.
These Indemnification Provisions shall extend to the following persons
(collectively, the "INDEMNIFIED PARTIES"): 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. These
indemnification provisions shall be in addition to any liability which the
Company may otherwise have to any Indemnified Party.
If any action, suit, proceeding or investigation is commenced, as to
which an Indemnified Party proposes to demand indemnification, it shall notify
the Company with reasonable promptness; provided, however, that any failure by
an Indemnified Party to notify the Company shall not relieve the Company from
its obligations hereunder. An Indemnified Party 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 Company. Any such counsel
shall, to the extent consistent with its professional responsibilities,
cooperate with the Company and any counsel designated by the Company. The
Company shall be liable for any settlement of any claim against any Indemnified
Party made with the Company's written consent. The Company shall not, without
the prior written consent of Xxxxx, 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 of the Indemnified Parties of an
unconditional release from all liability in respect of such claim, and (ii) does
not contain any factual or legal XStream omission 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 order to provide for just and equitable contribution, if a claim for
indemnification pursuant to these indemnification provisions is made but it is
found in a final judgment by a court of competent jurisdiction (not subject to
further appeal) that such indemnification may not be enforced in such case, even
though the express provisions hereof provide for indemnification in such case,
then the Company shall contribute to the Losses to which any Indemnified Party
may be subject (i) in accordance with the relative benefits received by the
Company and its stockholders, subsidiaries and affiliates, on the one hand, and
the Indemnified Party, on the other hand, and (ii) if (and only if) the
allocation provided in clause (i) of this sentence is not permitted by
applicable law, in such proportion as to reflect not only the relative benefits,
but also the relative fault of the Company, on the one hand, and the Indemnified
Party, on the other hand, in connection with the statements, acts or omissions
which resulted in such Losses as well as any relevant equitable considerations.
No person found liable for a fraudulent misrepresentation shall be entitled to
contribution from any person who is not also found liable for fraudulent
misrepresentation. The relative benefits received (or anticipated to be
received) by the Company and it stockholders, subsidiaries and affiliates shall
be deemed to be equal to the aggregate consideration payable or receivable by
such parties in connection with the transaction or transactions to which the
Agreement relates relative to the amount of fees actually received by Maxim in
connection with such transaction or transactions. Notwithstanding the foregoing,
in no event shall the amount contributed by all Indemnified Parties exceed the
amount of fees previously received by Maxim pursuant to the Agreement.
Neither termination nor completion of the Agreement shall affect these
Indemnification Provisions which shall remain operative and in full force and
effect. The Indemnification Provisions shall be binding upon the Company and its
successors and assigns and shall inure to the benefit of the Indemnified Parties
and their respective successors, assigns, heirs and personal representatives.
EXHIBIT B
PRELIMINARY PRIVATE PLACEMENT TERM SHEET
The following general terms for the Private Placement are
presented below. The Company and Maxim acknowledge that the
following terms are preliminary in nature and are subject to
further revision.
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GENERAL TERMS
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ISSUER: XStream Beverage Network, Inc., ("XSTREAM").
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PLACEMENT AGENT: Maxim Group LLC ("MAXIM" or the "PLACEMENT
AGENT").
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SECURITIES TO BE ISSUED: Units comprising $100,000 of
Convertible Notes (the "NOTES"), warrants to
purchase 100,000 shares of common stock at
an exercise price of $1.50 per share with an
expiration date of five years, and 10,000
shares of common stock (collectively, the
"UNITS").
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AMOUNT OF FINANCING: The private placement of Units
contemplated hereby (the "PLACEMENT") shall
be undertaken by Xxxxx on a "best efforts"
basis for an approximate range of a minimum
of $3,000,000 and a maximum of $4,000,000
with an over-allotment option of 15% at the
mutual agreement of XStream and Maxim.
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PRICE: $100,000 per subscription of the Units.
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COUPON: 12% per annum payable in cash on a quarterly
basis. Any accrued but unpaid interest then
due and owing under the Notes shall be due
and payable in full upon the earlier to
occur of (i) conversion of the Notes or (ii)
the maturity date.
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MATURITY: 1 year, unless earlier accelerated by the
holders upon the occurrence of an Event of
Default (as defined in the Notes).
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CONVERTIBILITY: At the holders' option and upon consummation
of a registered public offering of common
shares during the term of the Notes, the
holders may convert their Notes into shares
at a 20% discount to the offering price of
such shares. If no registered public
offering occurs during the term of the
Notes, the holders may, at their option,
convert their Notes upon maturity into
common shares at a price of $1.50 per share.
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USE OF PROCEEDS: XStream shall use the proceeds for working
capital and general corporate purposes.
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PLACEMENT: The Units will be issued in reliance on the
private offering exemption available under
Section 4(2) of the Securities Act of 1933,
as amended, and the rules and regulations
promulgated thereunder, including Regulation
D. Maxim understands that all subscriptions
are subject to acceptance by XStream.
XStream 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
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PPM/PLACEMENT AGENT AGREEMENT: Maxim and the Company shall, promptly
following the execution of the financial
advisory letter, prepare a Confidential
Private Placement Memorandum (the "PPM") to
be used by Xxxxx in connection with the
Placement. The PPM and all amendments and
supplements thereto will be in form
acceptable to Maxim and its counsel and
shall describe in detail the businesses of
XStream. At such time that XStream and Maxim
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are mutually satisfied that it is
appropriate to commence the Placement and
send the PPM to potential investors, the
Company shall enter into a Placement Agent
Agreement with Maxim (the "PLACEMENT AGENT
AGREEMENT"). The Placement Agent Agreement
shall grant to Maxim the fees and placement
agent warrants ("PLACEMENT AGENT WARRANT")
agreed to by the parties and shall contain
customary representations and warranties of
the Company and such other terms and
conditions (including the reservation of all
applicable securities for future issuance)
as are customarily contained in agreements
of such character.
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REGISTRATION RIGHTS: The Company shall file a registration
statement covering resale of the common
shares underlying the Units within 60 days
from the initial closing and cause such
registration statement to be effective with
120 days from the initial closing. A monthly
cash penalty of 1% shall apply in the event
of any delays. The holders will also have
unlimited "piggy-back" registration rights.
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DOCUMENTATION: The parties shall prepare appropriate
documentation to memorialize the Placement,
including: (i) a form of Placement Agent
Warrant, (ii) a form of subscription
agreement. All such documents and any other
documents required for the Placement shall
be in a form acceptable to the Company and
Maxim and their counsel. At the closing,
Xxxxx shall also receive a customary legal
opinion of counsel to the Company.
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CONDITIONS PRECEDENT TO The Placement is subject to certain
PLACEMENT: customary conditions and to the following:
(i) satisfactory completion of due diligence
by Xxxxx, and (ii) receipt of approval by
the Company's Board of Directors and Xxxxx's
Commitment Committee.
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EXHIBIT C
FEE SCHEDULE
Capitalized terms used in this Exhibit shall have the meanings ascribed
to such terms in the Agreement to which this Exhibit is attached.
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FINANCING FEES:
For any Financing or Transaction of XStream,
the Company shall:
a) Pay Maxim a cash fee of 10% of the amount
of capital raised, invested or committed;
and
b) Grant Maxim Placement Agent Warrants to
purchase up to 10% of the number of
securities sold or issued in the form
of, at Maxim's option, (a) the
securities issued pursuant to a
Financing or a Transaction or (b) common
stock of the Company. The Placement
Agent Warrants shall have (a) an
exercise price equal to that of the
securities issued pursuant to the
transaction, (b) a 5-year term, (c)
cashless exercise provisions, (d)
standard anti-dilution protections for
warrants of this type, and (e) one
demand registration right and unlimited
"piggy-back" registration rights; and
c) Pay Maxim a cash fee for unallocated
expenses of 2% of the amount of capital
raised, invested or committed; and
d) Pay Maxim a warrant solicitation fee for
any warrants issued to investors in the
Financing or Transaction, in an amount
equal to five percent (5%) of the funds
received by the Company upon such
exercise, which fee shall be paid at any
time that any such warrants are
exercised.
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