-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DEfjqub2V7e1ypmg6edcfHAuy/xF6+Yp/XNbKSGauGJfFj786yV1oWafOI8OtxhO G56fAiN3PLbZ2CqBwusajg== 0001116502-05-001578.txt : 20050707 0001116502-05-001578.hdr.sgml : 20050707 20050707172819 ACCESSION NUMBER: 0001116502-05-001578 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20050630 ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050707 DATE AS OF CHANGE: 20050707 FILER: COMPANY DATA: COMPANY CONFORMED NAME: XSTREAM BEVERAGE NETWORK, INC. CENTRAL INDEX KEY: 0000853833 STANDARD INDUSTRIAL CLASSIFICATION: BEVERAGES [2080] IRS NUMBER: 621386351 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-30158-A FILM NUMBER: 05944176 BUSINESS ADDRESS: STREET 1: 4800 N.W. 15 AVENUE, BAY A CITY: FORT LAUDERDALE STATE: FL ZIP: 33309 BUSINESS PHONE: 954-598-7997 MAIL ADDRESS: STREET 1: 4800 N.W. 15 AVENUE, BAY A CITY: FORT LAUDERDALE STATE: FL ZIP: 33309 FORMER COMPANY: FORMER CONFORMED NAME: XSTREAM BEVERAGE GROUP INC DATE OF NAME CHANGE: 20011018 FORMER COMPANY: FORMER CONFORMED NAME: GEYSER GROUP LTD DATE OF NAME CHANGE: 20010418 FORMER COMPANY: FORMER CONFORMED NAME: THEME FACTORY INC DATE OF NAME CHANGE: 19920703 8-K 1 xstream8k.txt CURRENT REPORT --------------------------------- OMB APPROVAL --------------------------------- OMB Number: 3235-0060 --------------------------------- Expires: March 31, 2006 --------------------------------- Estimated average burden --------------------------------- hours per response: 28.0 --------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) June 30, 2005 XSTREAM BEVERAGE NETWORK, INC. (Exact name of registrant as specified in its charter) Nevada 33-30158A 62-1386351 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 4800 N.W. 15 Avenue, Bay A, Fort Lauderdale, Florida 33309 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 954-598-7997 ------------------------------------------------------------ (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS ITEM 3.02. UNREGISTERED SALES OF EQUITY SECURITIES On June 30, 2005, Xstream Beverage Network, Inc. (the "Company") completed the sale of $1,400,000 of units of its securities to 15 institutional and/or accredited investors. The units consisted of $100,000 principal amount of convertible notes, warrants to purchase 100,000 shares of common stock at an exercise price of $1.50 per share with an expiration date of June 30, 2010 and 10,000 shares of common stock. The notes mature on June 30, 2006 and bear interest at the rate of 12% per annum payable at the maturity date or upon conversion of the notes if prior to the maturity date. The holders of the notes have the option to convert the notes into common shares of the Company at a price equal to the public offering price of common shares of the Company in any underwritten registered public offering involving common stock of the Company less a discount of 20%. If the Company does not complete a public offering prior to maturity, the holders may, at their option, convert their notes at maturity into common shares at a price of $1.50 per share, subject to adjustment in the event of any dilution events. The Company is obligated to file a registration statement covering the resale of the common shares underlying the units 60 days after the Company completes its current registration process and obligations, and is required to cause the registration statement to become effective within 120 days from closing. In the event of any delays in meeting these dates, the Company is obligated to pay a monthly cash penalty equal to 1% of the amount of the units. The placement agent for the offering received a commission equal to 10% of the gross proceeds received, was provided a non-accountable expense allowance equal to 2% of the gross proceeds and five-year warrants to purchase 280,000 shares of common stock at an exercise price of $1.50 per share and 280,000 shares of common stock at an exercise price equal to the conversion price of the convertible notes. In addition, the placement agent has entered into a Financial Advisory and Investment Banking Agreement with the Company pursuant to which the placement agent has received a cash retainer of $30,000 and will receive a monthly fee of $5,000 during the term of this agreement commencing May 2005. Additional fees may be earned by the placement agent in the future for completing financing and acquisition transactions. The private placement was exempt from registration under the Securities Act of 1933 by virtue of Regulation D and Rule 506 thereunder. The Company received net proceeds of approximately $ 866,015, which will be used for working capital and general corporate purposes. The Company has also entered into a series of related agreements with Cogent Capital Corp. and 16 institutional accredited investors pursuant to which the Company has issued 19,736,848 common shares at a purchase price of $0.76 per share in exchange for a total of $15,000,000 in U.S. government bonds. The price per common share was based on a discount of 20% from the closing price of the common stock on May 26, 2005. The U.S. government bonds were issued at current market value. The institutional investors participating in the transaction are Nieodparty Inc., Bindes Holdings, Inc., Krachtig, Inc., Presvedcivy Inc., Puissant Capital Inc., Triftig Holdings Inc., Ellenallhatatlan Inc., Potente Capital Inc., Neapgazams, Inc., Forte Capital Inc., Convingator Inc., Penge Equities, Inc., Gelt Investments, Inc., Cref Enterprises, Inc., Painava, Inc., and Uberzeugend, Inc. 2 The common shares provided to the investors in exchange for the bonds were issued pursuant to an exemption from registration under the Securities Act of 1933 by virtue of Section 4(2) of that Act. In conjunction with this investment, the Company and Cogent Capital Corp. entered into an escrow agreement with the investors as well as Cogent pursuant to which the 15,789,472 shares, as well as the bonds, were deposited with the designated escrow agent. In addition, the Company and Cogent Capital Corp. entered into the following agreements: o 2002 Master Agreement conforming to the form of the International Swaps and Derivatives Association, Inc.; o Credit Support Annex to the Master Agreement consistent with the ISDA form; o Equity swap transaction letter of agreement; and o Equity option transaction letter of agreement. Under the terms of the equity swap, the 15,789,472 common shares and the bonds are maintained in escrow until the earlier of 42 months or such time as all of these shares are covered by an effective registration statement filed with the SEC. The Company, however, is not obligated to register the common shares. In addition, the Company unilaterally can terminate the agreement by exercising the call option for the common shares in escrow. At such time as the Company completes a registration statement covering the 19,736,848 common shares of the Company or the common shares have satisfied the holding period under Rule 144-K at June 10, 2007, whichever date occurs first, the Company will have the right on a quarter annual basis to have $2,500,000 in value of bonds released from the escrow account. To the extent that the closing price of the common shares averaged over the last 10 trading days of each quarter annual period does not equal or exceed $0.95 per share, the Company will be required to transfer to Cogent Capital Group an amount equal to 1/6 of the sum represented by 15,789,472 multiplied by $0.95 less the price of the common shares averaged over the last 10 days of each quarter annual period. Any amount exceeding $0.95 per share would be paid directly to the Company using the formula 1/6 of the price of the common shares averaged over the last 10 days of each quarter annual period less $0.95 multiplied by 15,789,472. The Company also has the right pursuant to a call option to acquire its common shares in escrow on June 10, 2007 at a price equal to their fair market value at exercise of the option. Cogent Capital Corp. would remain collateralized on the equity swap by the bonds up to $15,000,000. During the period of the escrow, Cogent Capital Corp. will also receive interest on the amount of $15,000,000 at a rate equal to LIBOR +125 basis points, payable monthly. As the escrowed bonds are released to the Company, the amount upon which that the Company is paying interest reduces by a commensurate amount. 3 As an initial entrance amount in the equity swap transaction, Cogent Capital Corp. has received a payment of $300,000 and 1,381,579 common shares of the Company, which are subject to certain demand and piggyback registration rights, subject to deferral under certain conditions. The Company will use a portion of the funds derived from the financing conducted by the placement agent to pay the fixed fee owed to Cogent Capital Corp. As a result of the issuance of the above securities, the Company was required to make adjustments in the conversion and exercise prices of common shares underlying various securities issued to investors in previous transactions based upon an adjusted price of $0.76 per share. ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits. 4.1 Form of $1.50 common stock purchase warrant 4.2 Form of unsecured subordinated 12% convertible promissory note 10.1 Form of Amended and Restated Escrow Agreement (To be filed by Amendment) 10.2 Form of ISDA 2002 Master Agreement (To be filed by Amendment) 10.3 Form of ISDA Credit Support Annex 10.4 Form of letter agreement with Cogent Capital regarding equity option transaction 10.5 Form of letter agreement with Cogent Capital regarding equity swap transaction 10.6 Form of Escrow Agreement with Cogent Capital and Investors Bank & Trust Company 10.7 Form of Registration Rights Agreement with Cogent Capital 4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. XSTREAM BEVERAGE NETWORK, INC. Date: July 7, 2005 By: /s/ Jerry Pearring ------------------------- Jerry Pearring, President 5 EX-4.1 2 ex4-1.txt FORM OF $1.50 COMMON STOCK PUCHASE WARRANT EXHIBIT 4.1 THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT. XSTREAM BEVERAGE NETWORK, INC. FORM OF COMMON STOCK PURCHASE WARRANT WARRANT NO.: ____ ____________, 2005 THIS CERTIFICATE certifies that ____________________, having an address at ______________________________________, or permitted assignees is the registered holder (the "HOLDER") of this Common Stock Purchase Warrant (the "WARRANT") to purchase shares of the common stock, $0.001 par value per share (the "COMMON STOCK"), of XStream Beverage Network, Inc., a corporation duly organized and validly existing under the laws of the State of Nevada (the "COMPANY"). This Warrant has been issued to the Holder in connection with the private placement of securities offered pursuant to offering documents, including a copy of the Company Form 10-KSB filed with the Securities and Exchange Commission on April 14, 2005, subscription agreement, confidential prospective purchaser questionnaire and convertible note (collectively the "OFFERING DOCUMENTS"), the Company is offering ("PRIVATE OFFERING") a minimum of 30 units and a maximum of 40 units, each unit consisting of: (i) a $100,000 12% convertible promissory note ("Notes"); (ii) 100,000 Warrants; and (iii) 10,000 shares of the Company's Common Stock. FOR VALUE RECEIVED, the Company hereby certifies that the Holder is entitled to purchase from the Company ____________ duly authorized, validly issued, fully paid and nonassessable shares of Common Stock (the "WARRANT SHARES") at a purchase price per share equal to $1.50 (the "WARRANT PRICE"), and subject to the terms, conditions and adjustments set forth below in this Warrant and in the Offering Documents. The person or entity in whose name this Warrant is registered on the records of the Company regarding registration and transfers of this Warrant (the "WARRANT REGISTER") is the owner and holder thereof for all purposes, except as described in Section 8 hereof. 1. Vesting of Warrant. This Warrant shall vest and become exercisable immediately on the date hereof. 2. Expiration of Warrant. This Warrant shall expire at 5:00 p.m., New York local time, on _________, 2010, which is the fifth anniversary date of the Closing (the "EXPIRATION DATE"). 3. Exercise of Warrant. This Warrant shall be exercisable pursuant to the terms of Section 1 and this Section 3 hereof. 3.1 Manner of Exercise. This Warrant may only be exercised by the Holder hereof, in accordance with the terms and conditions hereof, in whole or in part with respect to any portion of this Warrant, into shares of Common Stock, during normal business hours on any day other than a Saturday or a Sunday or a day on which commercial banking institutions in New York, New York are authorized by law to be closed (a "BUSINESS DAY") on or prior to the Expiration Date with respect to such portion of this Warrant, by surrender of this Warrant to the Company at its office maintained pursuant to Section 8.2(a) hereof, accompanied by an exercise notice in substantially the form attached to this Warrant as Exhibit A duly executed by or on behalf of the Holder together with (a) or (b) below: (a) the payment of the Warrant Price in cash; or (b) (i) In the event that a registration statement covering the resale of the shares of Common Stock underlying this Warrant has not been declared effective within one year from the date of this Warrant, the Holder may, at its option, elect to exercise this Warrant, in whole or in part and at any time or from time to time, on a cashless basis, by surrendering this Warrant, with the purchase form attached to this Warrant as Exhibit A duly executed by or on behalf of the Holder, at the principal office of the Company, or at such other office or agency as the Company may designate, by canceling a portion of this Warrant in payment of the Warrant Price payable in respect of the number of Warrant Shares purchased upon such exercise. In the event of an exercise pursuant to this subsection 3.1(b), the number of Warrant Shares issued to the Holder shall be determined according to the following formula: X = Y(A-B) A Where: X = the number of Warrant Shares that shall be issued to the Holder; Y = the number of Warrant Shares for which this Warrant is being exercised (which shall include both the number of Warrant Shares issued to the Holder and the number of Warrant Shares subject to the portion of the Warrant being cancelled in payment of the Warrant Price); A = the Fair Market Value (as defined below) of one share of Common Stock; and B = the Warrant Price then in effect. 2 (ii) The Fair Market Value per share of Common Stock shall be determined as follows: (1) If the Common Stock is listed on a national securities exchange, the Nasdaq National Market, the OTC Bulletin Board or another nationally recognized trading system as of the Exercise Date, as defined below, the Fair Market Value per share of Common Stock shall be deemed to be the average of the high and low reported sale prices per share of Common Stock thereon on the trading day immediately preceding the Exercise Date, as defined below, (provided that if the Common Stock is not so listed on such day, the Fair Market Value per share of Common Stock shall be determined pursuant to clause (2) below). (2) If the Common Stock is not listed on a national securities exchange, the Nasdaq National Market, the OTC Bulletin Board or another nationally recognized trading system as of the Exercise Date, as defined below, the Fair Market Value per share of Common Stock shall be deemed to be the amount most recently determined by the Board of Directors of the Company or an authorized committee of the Board of Directors of the Company (the "BOARD") to represent the fair market value per share of the Common Stock (including without limitation a determination for purposes of granting Common Stock options or issuing Common Stock under any plan, agreement or arrangement with employees of the Company); and, upon request of the Holder, the Board (or a representative thereof) shall, as promptly as reasonably practicable but in any event not later than 15 days after such request, notify the Holder of the Fair Market Value per share of Common Stock. Notwithstanding the foregoing, if the Board has not made such a determination within the three-month period prior to the Exercise Date, as defined below, then (A) the Board shall make, and shall provide or cause to be provided to the Holder notice of, a determination of the Fair Market Value per share of the Common Stock within 15 days of a request by the Holder that it do so, and (B) the exercise of this Warrant pursuant to this subsection 3.1(b) shall be delayed until such determination is made and notice thereof is provided to the Holder. 3.2 When Exercise Effective. Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the Business Day on which this Warrant shall have been surrendered to the Company as provided in Section 3.1 hereof ("EXERCISE DATE"), and, at such time, the corporation, association, partnership, organization, business, individual, government or political subdivision thereof or a governmental agency (a "PERSON" or the "PERSONS") in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon exercise as provided herein shall be deemed to have become the holder or holders of record thereof. 3.3 Delivery of Stock Certificates. As soon as practicable after each exercise of this Warrant, in whole or in part, and in any event within five (5) Business Days thereafter, the Company at its expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the Holder hereof or, subject to Section 8 hereof, as the Holder (upon payment by the Holder of any applicable transfer taxes) may direct: 3 (a) a certificate or certificates (with appropriate restrictive legends, as applicable) for the number of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock to which the Holder shall be entitled upon exercise plus, in lieu of any fractional share to which the Holder would otherwise be entitled, all issuances of Common Stock shall be rounded up to the nearest whole share. (b) in case exercise is in part only, a new Warrant of like tenor, dated the date hereof and calling in the aggregate on the face thereof for the number of shares of Common Stock equal to the number of shares called for on the face of this Warrant minus the number of shares designated by the Holder upon exercise as provided in Section 3.1 hereof (without giving effect to any adjustment thereof). 3.4 Shares to be Fully Paid; Reservation of Shares. The Company covenants and agrees that all shares of Common Stock which may be issued upon the exercise of rights presented by this Warrant will, upon issuance by the Company, be validly issued, fully paid and nonassessable, and free from preemptive rights and free from all taxes, liens and charges with respect thereto. The Company further covenants and agrees that, from and after the date of issuance of the Warrant and during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized, and reserve, free from preemptive rights, out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the exercise of this Warrant, a sufficient number of shares of Common Stock to provide for the exercise of the rights represented by this Warrant. 3.5 Company to Reaffirm Obligations. The Company will, at the time of each exercise of this Warrant, upon the written request of the Holder hereof, acknowledge in writing its continuing obligation to afford to the Holder all rights (including without limitation any rights to registration of the shares of Common Stock issued upon exercise) to which the Holder shall continue to be entitled after exercise in accordance with the terms of this Warrant; provided, however, that if the Holder shall fail to make a request, the failure shall not affect the continuing obligation of the Company to afford the rights to such Holder. 4. Anti-dilution Adjustment. 4.1 Stock Dividends, Stock Splits, Etc. If the Company declares or pays a dividend on its Common Stock payable in Common Stock or other securities, or subdivides the outstanding Common Stock into a greater amount of Common Stock, then upon exercise of this Warrant, for each Warrant Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Warrant Shares of record as of the date the dividend or subdivision occurred. 4 4.2 Reclassifications, Exchange or Substitution. Upon any reclassification, exchange, substitution, or other event that results in a change of the number and/or class of the securities issuable upon exercise of this Warrant, Holder shall be entitled to receive, upon exercise of this Warrant, the number and kind of securities and property that Holder would have received for the Warrant Shares if this Warrant had been exercised immediately before such reclassification, exchange, substitution, or other event. The Company or its successor shall promptly issue to Holder a new Warrant for such new securities or other property. The new Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 4.2, including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise of the new Warrant. The provisions of this Section 4.2 shall similarly apply to successive reclassifications, exchanges, substitutions, or other events. 4.3 Adjustments for Combinations, Etc. If the outstanding shares of Common Stock are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased. 4.4 Merger or Consolidation. In case of any consolidation of the Company with, or merger of the Company into any other corporation, or in the case of any sale or conveyance of all or substantially all of the assets of the Company other than in connection with a plan of complete liquidation of the Company, then as a condition of such consolidation, merger or sale or conveyance, adequate provision will be made whereby the registered holder of the Warrant will have the right to acquire and receive upon exercise of this Warrant in lieu of the shares of Common Stock immediately theretofore subject to acquisition upon the exercise of this Warrant, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for the number of shares of Common Stock immediately theretofore subject to acquisition and receivable upon exercise of this Warrant had such consolidation, merger or sale or conveyance not taken place. In any such case, the Company will make appropriate provision to insure that the provisions of this Section 4 hereof will thereafter be applicable as nearly as may be in relation to any shares of stock or securities thereafter deliverable upon the exercise of this Warrant. 4.5 Adjustment of Warrant Price. (a) Except as otherwise hereinafter provided in Section 4.6, in the event that the Company shall, at any time prior to the first anniversary of the date hereof, sell any shares of Common Stock for a consideration per share less than the Warrant Price, or issue any options, rights or warrants to purchase Common Stock or issue any securities convertible into or exchangeable for Common Stock at an exercise or conversion price below the Warrant Price (such lower per share Common Stock sale price and/or derivative security exercise or conversion price below the Warrant Price being referred to as the "LOWERED WARRANT Price"), then the Warrant Price for the exercise of all Warrant Shares hereunder shall immediately be changed to the Lowered Warrant Price. 5 (b) Except as otherwise hereinafter provided in Section 4.6, in the event that the Company shall, at anytime after the first anniversary of the date hereof, issue or sell any shares of Common Stock or issue any options, rights or warrants to purchase Common Stock or issue any securities convertible into or exchangeable for Common Stock at the Lowered Warrant Price, then the Warrant Price shall (until another such issuance or sale) be reduced to the price (calculated to the nearest full cent) equal to the quotient derived by dividing (A) an amount equal to the sum of (X) the product of (a) the Warrant Price in effect immediately prior to such issuance or sale, multiplied by (b) the total number of shares of Common Stock outstanding immediately prior to such issuance or sale, plus (Y) the aggregate of the amount of all consideration received by the Company upon such issuance or sale, by (B) the total number of shares of Common Stock outstanding immediately after such issuance or sale; provided, however, that in no event shall the Warrant Price be adjusted pursuant to this computation to an amount in excess of the Warrant Price in effect immediately prior to such computation. 4.6 Exceptions. No adjustment to the Warrant Price shall be made pursuant to Section 4.5 with respect to (i) the issuance or sale of this Warrant or Warrant Shares, or other Warrants and Warrant Shares issued in connection herewith, or shares of Common Stock issuable upon exercise of other options, warrants and convertible securities outstanding as of the date hereof, or (ii) the issuance or sale of any shares of capital stock, or the grant of options exercisable therefore, issued or issuable after the date of this Warrant, to directors, officers, employees, advisers and consultants of the Company or any subsidiary pursuant to any incentive or non-qualified stock option plan or agreement, stock purchase plan or agreement, employee stock ownership plan (ESOP), or such other similar compensatory options, issuances, arrangements or plans approved by the Company's Board of Directors. 4.7 Notice of Adjustments. Upon any adjustment of the terms of this Warrant pursuant to this Section 4, then and in each such case the Company shall promptly deliver a notice to the registered Holder of this Warrant, which notice shall state the Warrant Price resulting from such adjustment and the changes, if any, in the number of Warrant Shares or kind of securities or other property purchasable at such price upon the exercise hereof, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. 4.8 Adjustment in Number of Securities. Upon each adjustment of the Warrant Price pursuant to the provisions of this Section 4, the number of securities issuable upon the exercise of each Warrant shall be adjusted to the nearest full amount by multiplying a number equal to the Warrant Price in effect immediately prior to such adjustment by the number of Warrant Shares issuable upon exercise of the Warrants immediately prior to such adjustment and dividing the product so obtained by the adjusted Warrant Price. 4.9 No Fractional Shares. No fractional shares shall be issuable upon exercise of this Warrant and the number of Warrant Shares to be issued shall be rounded down to the nearest whole share. 6 5. Reservation of Shares. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, free from all taxes, liens and charges with respect to the issue thereof and not be subject to preemptive rights or other similar rights of stockholders of the Company, solely for the purpose of issuing the shares of Common Stock underlying this Warrant, such number of its shares of Common Stock as shall from time to time be sufficient to effect the issuance or exercise thereof, and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to issue the Common Stock and effect the exercise of this Warrant, in addition to such other remedies as shall be available to Holder, the Company shall take such corporate action as may, in the opinion of its counsel, be necessary to increase the number of authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including without limitation, using its best efforts to obtain the requisite stockholder approval necessary to increase the number of authorized shares of the Company's Common Stock. All shares of Common Stock issuable upon exercise of this Warrant shall be duly authorized and, when issued upon exercise, shall be validly issued and, in the case of shares, fully paid and nonassessable and free from preemptive rights and free from taxes, liens and charges with respect thereto. 6. No Impairment. The Company will not, by amendment of its charter or through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant but will at all times carry out all such terms and take all such action as may be reasonably necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment. 7. Restrictions on Transfer. 7.1 Restrictive Legends. This Warrant and each Warrant issued upon transfer or in substitution for this Warrant pursuant to Section 7, each certificate for Common Stock issued upon the exercise of any Warrant and each certificate issued upon the transfer of any such Common Stock shall be transferable only upon satisfaction of the conditions specified in this Section 7 and Section 8.4. Each of the foregoing securities shall be stamped or otherwise imprinted with a legend reflecting the restrictions on transfer set forth in Section 7 and Section 8.4 hereof and any restrictions required under the Securities Act of 1933, as amended (the "ACT"). 7.2 Notice of Proposed Transfer; Opinion of Counsel. Prior to any transfer of any securities which are not registered under an effective registration statement under the Act ("RESTRICTED SECURITIES"), the Holder will give written notice to the Company of the Holder's intention to affect a transfer and to comply in all other respects with this Section 7.2. Each notice (i) shall describe the manner and circumstances of the proposed transfer, and (ii) shall designate counsel for the Holder giving the notice. The Holder giving notice will submit a copy thereof to the counsel designated in the notice. The following provisions shall then apply: 7 (a) If in the opinion of counsel for the Holder reasonably satisfactory to the Company the proposed transfer may be effected without registration of Restricted Securities under the Act (which opinion shall state the basis of the legal conclusions reached therein), the Holder shall thereupon be entitled to transfer the Restricted Securities in accordance with the terms of the notice delivered by the Holder to the Company. Each certificate representing the Restricted Securities issued upon or in connection with any transfer shall bear the restrictive legends required by Section 9.1 hereof. (b) If the opinion called for in (a) above is not delivered, the Holder shall not be entitled to transfer the Restricted Securities until either (x) receipt by the Company of a further notice from such Holder pursuant to the foregoing provisions of this Section 7.2 and fulfillment of the provisions of clause (a) above, or (y) such Restricted Securities have been effectively registered under the Act. 7.3 Termination of Restrictions. The restrictions imposed by this Section 7 upon the transferability of Restricted Securities shall cease and terminate as to any particular Restricted Securities: (a) which Restricted Securities shall have been effectively registered under the Act, or (b) when, in the opinions of both counsel for the Holder thereof and counsel for the Company, such restrictions are no longer required in order to insure compliance with the Act or Section 8 hereof. Whenever such restrictions shall cease and terminate as to any Restricted Securities, the Holder thereof shall be entitled to receive from the Company, without expense (other than applicable transfer taxes, if any), new securities of like tenor not bearing the applicable legends required by Section 7.1 hereof. 8. Ownership, Transfer and Substitution of Warrant. 8.1 Ownership of Warrant. The Company may treat the person in whose name this Warrant is registered in the Warrant Register maintained pursuant to Section 8.2(b) hereof as the owner and holder thereof for all purposes, notwithstanding any notice to the contrary, except that, if and when any Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer thereof as the owner of such Warrant for all purposes, notwithstanding any notice to the contrary. Subject to Section 7 hereof, this Warrant, if properly assigned, may be exercised by a new holder without a new Warrant first having been issued. 8.2 Office; Transfer and Exchange of Warrant. (a) The Company will maintain as principal offices at 4800 N.W. 15 Avenue, Bay A, Fort Lauderdale, Florida 33309 as the office where notices, presentations and demands in respect of this Warrant may be made upon it until the Company notifies the holder of this Warrant of any change of location of the office. 8 (b) The Company shall cause to be kept at its office maintained pursuant to Section 8.2(a) hereof a Warrant Register for the registration and transfer of this Warrant. The names and addresses of holders of this Warrant, the transfers thereof and the names and addresses of transferees of this Warrant shall be registered in such Warrant Register. The Person in whose name any Warrant shall be so registered shall be deemed and treated as the owner and holder thereof for all purposes of this Warrant, and the Company shall not be affected by any notice or knowledge to the contrary. (c) Upon the surrender of this Warrant, properly endorsed, for registration of transfer or for exchange at the office of the Company maintained pursuant to Section 8.2(a) hereof, the Company at its expense will (subject to compliance with Section 7 hereof, if applicable) execute and deliver to or upon the order of the Holder thereof a new Warrant of like tenor, in the name of such holder or as such holder (upon payment by such holder of any applicable transfer taxes) may direct, calling in the aggregate on the face thereof for the number of shares of Common Stock called for on the face of this Warrant so surrendered. 8.3 Replacement of Warrant. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, upon delivery of indemnity reasonably satisfactory to the Company in form and amount or, in the case of any mutilation, upon surrender of this Warrant for cancellation at the office of the Company maintained pursuant to Section 8.2(a) hereof, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor and dated the date hereof. 8.4 Restrictions on Transfer. In addition to the restrictions on transfer set forth in Section 7 hereof, neither this Warrant nor any portion of this Warrant may be transferred without the consent of the Company. 9. No Rights or Liabilities as Stockholder. No Holder shall be entitled to vote or receive dividends or be deemed the holder of any shares of Common Stock or any other securities of the Company which may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until this Warrant shall have been exercised and the shares of Common Stock purchasable upon the exercise hereof shall have become deliverable, as provided herein. The Holder will not be entitled to share in the assets of the Company in the event of a liquidation, dissolution or the winding up of the Company. 9 10. Notices of Record Date, Etc. In case the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time deliverable upon the exercise of this Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right; or of any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation or merger of the Company with or into another corporation (other than a consolidation or merger in which the Company is the surviving entity), or any transfer of all or substantially all of the assets of the Company; or of the voluntary or involuntary dissolution, liquidation or winding-up of the Company, then, and in each such case, the Company will mail or cause to be mailed to the registered holder of this Warrant a notice specifying, as the case may be: (i) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other stock or securities at the time deliverable upon the exercise of this Warrant) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up. Such notice shall be mailed at least ten (10) days prior to the record date or effective date for the event specified in such notice unless such prior notice is waived by the registered holder of this Warrant. 11. Notices. Any notice or other communication in connection with this Warrant shall be deemed to be given if in writing (or in the form of a facsimile) addressed as hereinafter provided and actually delivered at said address: (a) if to any Holder, at the registered address of such holder as set forth in the Warrant Register kept at the office of the Company maintained pursuant to Section 8.2(a) hereof, or (b) if to the Company, to the attention of its Chief Financial Officer at its office maintained pursuant to Section 8.2(a) hereof; provided, however, that the exercise of any Warrant shall be effective in the manner provided in Section 3 hereof. 12. Payment of Taxes. The Company will pay all documentary stamp taxes attributable to the issuance of shares of Common Stock underlying this Warrant upon exercise of this Warrant; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificate for shares of Common Stock underlying this Warrant in a name other that of the Holder. The Holder is responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving shares of Common Stock underlying this Warrant upon exercise hereof. 13. Warrant Agent. The Company shall serve as warrant agent under this Warrant. Upon thirty (30) days notice to the Holder, the Company may appoint a new warrant agent. Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or stockholders services business shall be successor warrant 10 agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder's last address as shown on the Warrant Register. 14. Miscellaneous. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. This Warrant shall be construed and enforced in accordance with and governed by the laws of the State of Florida. The section headings in this Warrant are for purposes of convenience only and shall not constitute a part hereof. IN WITNESS WHEREOF, the Company has caused this Common Stock Purchase Warrant to be duly executed as of the date first above written. XSTREAM BEVERAGE NETWORK, INC. By: ----------------------------- Name: Title: EXHIBIT A PURCHASE FORM To: Xstream Beverage Network, Inc. Dated: ------------ The undersigned, pursuant to the provisions set forth in the attached Warrant (No. ___), hereby elects to purchase (check applicable box): _________ shares of the Common Stock of Xstream Beverage Network, Inc. covered by such Warrant; or the maximum number of shares of Common Stock covered by such Warrant pursuant to the cashless exercise procedure set forth in subsection 3.1(b). The undersigned herewith makes payment of the full Warrant Price for such shares at the price per share provided for in such Warrant. Such payment takes the form of (check applicable box or boxes): $______ in lawful money of the United States; and/or the cancellation of such portion of the attached Warrant as is exercisable for a total of _____ Warrant Shares (using a Fair Market Value of $_____ per share for purposes of this calculation) ; and/or the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 3.1(b), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 3.1(b). ---------------------------------------------- Print or Type Name ----------------------------------------------- (Signature must conform in all respects to name of holder as specified on the face of Warrant) ----------------------------------------------- (Street Address) ---------------------------------------------- (City) (State) (Zip Code) 12 EX-4.2 3 ex4-2.txt FORM UNSECURED SUBORDINATED 12% CONV. PROM. NOTE EXHIBIT 4.2 THE SECURITY REPRESENTED HEREBY, AND THE SECURITIES ISSUABLE UPON CONVERSION OR REDEMPTION HEREOF, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND NEITHER SUCH 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 THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO COUNSEL FOR THIS COMPANY, IS AVAILABLE. UNSECURED SUBORDINATED 12% CONVERTIBLE PROMISSORY NOTE No. MAX-001 US$100,000 June 30th, 2005 THIS NOTE is one of a duly authorized issue of unsecured Notes (a "NOTE" or the "NOTES") of XStream Beverage Network, Inc., a corporation duly organized and validly existing under the laws of the State of Nevada ("XSTREAM" or "COMPANY"). The Notes are designated as the UNSECURED SUBORDINATED 12% CONVERTIBLE PROMISSORY NOTES, in an aggregate maximum principal face value for all Notes of this series (the "Series") of One Million Four Hundred Thousand and no/100 United States Dollars (US $1,400,000) [up to $4,000,000]. FOR VALUE RECEIVED, the Company promises to pay to the registered holder hereof and its successors and assigns (the "Holder"), the principal sum of One Hundred Thousand Dollars ($100,000.00), or such other amount as shall then equal the outstanding principal amount hereof, in accordance with the terms hereof, and to pay interest on the principal sum outstanding, at the rate of twelve percent (12%) per annum. Accrual of interest on the outstanding principal amount shall commence on the date hereof and shall continue until payment in full of the outstanding principal amount has been made or duly provided for, or until the entire outstanding principal amount of the Note has been converted. Pursuant to the offering documents, as amended or supplemented, which include a copy of the Company Form 10-KSB filed with the Securities and Exchange Commission on April 14, 2005, subscription agreement, confidential prospective purchaser questionnaire and common stock purchase warrant (collectively the "OFFERING DOCUMENTS"), the Company is offering ("PRIVATE OFFERING") a minimum of 30 units and a maximum of 40 units, subject to an over-allotment option of up to six (6) additional units, at a purchase price of $100,000 per unit, each unit consisting of: (i) a $100,000 Note; (ii) 100,000 warrants to purchase shares of common stock of the Company (the "WARRANTS"); and (iii) 10,000 shares of the Company's common stock, par value $0.001 per share ("COMMON STOCK"). The holder of this Note is also subject to the terms and restrictions set forth in the Offering Documents and shall be entitled to certain rights and privileges as set forth in the Offering Documents. The following is a statement of the rights of the Holder of this Note and the terms and conditions to which this Note is subject, and to which the Holder, by acceptance of this Note, agrees: 1. Principal Repayment. The outstanding principal amount of this Note shall be paid on or before July 6, 2005, 2006 (the "MATURITY DATE"), unless this Note has been converted as described below. 2. Interest. The holders of the Notes are entitled to receive interest at an annual cumulative rate of twelve percent (12%) of the principal face dollar value of the Notes held, payable quarterly (each, an "INTEREST PAYMENT DATE") (January 1, April 1, July 1 and October 1, with the first interest payment due on August 1, 2005, and any accrued but unpaid interest to be paid on the Maturity Date or earlier conversion of the Note) in cash out of funds legally available therefore. Interest payments for the period between the applicable closing of the Private Offering and the next interest payment date shall be pro rated based upon the actual number of days elapsed, assuming a 360 day year. The first interest payment to be made on the Notes will be due on August 1, 2005. 3. Conversion. (a) At the Holder's option, if, at any time prior to payment in full of the principal balance of this Note, the Company sells any of its securities in a registered public offering ("SUBSEQUENT FINANCING TRANSACTION"), Holder may elect to convert all or any portion of this Note into shares of the Company's Common Stock at eighty percent (80.0%) of the offering price of the Company's Common Stock in such Subsequent Financing Transaction ("SUBSEQUENT VALUATION PRICE"). The Company shall notify Holder in writing of the completion of a Subsequent Financing Transaction within three (3) business days thereafter and shall indicate in writing to Holder the Subsequent Valuation Price in the Subsequent Financing Transaction. Holder shall thereafter have ten (10) business days to elect to either convert all or any portion of this Note into Common Stock at the then applicable Subsequent Valuation Price. In the event a Holder does not convert all or any portion of this Note into Common Stock after notification of a Subsequent Financing Transaction, Holder shall continue to be entitled to elect to convert this Note in any Subsequent Financing Transaction that occurs thereafter, in accordance with the terms of this Section 3(a), prior to the Maturity Date. (b) On the Maturity Date Holder shall have the option to convert all or any portion of this Note then outstanding into shares of the Company's Common Stock at a price per share that is equal to $1.50 per share ("OTHER CONVERSION Price"), subject to adjustment as described below. Holder shall notify the Company within three (3) business days after the Maturity Date of its election to either convert all or a portion of the then remaining outstanding balance of this Note into Common Stock. 2 (c) Mechanics of Conversion. Upon any conversion of this Note, (i) such principal amount converted and all accrued but unpaid interest thereon shall be converted and such converted portion of this Note shall become fully paid and satisfied, (ii) the Holder shall surrender and deliver this Note, duly endorsed, to the Company or such other address which the Company shall designate against delivery of the certificates representing the new securities of the Company, (iii) the Company shall promptly deliver a duly executed Note to the Holder in the principal amount, if any, that remains outstanding after any such conversion; and (iv) in exchange for all or any portion of the surrendered Note described in the preceding clauses 3(a) or 3(b), the Company shall deliver to Holder certificates representing such number of shares of Common Stock to which Holder is entitled to receive based on its conversion of the Note, which certificates shall bear such legends as are required, in the opinion of counsel to the Company, pursuant to Section 5(f) hereof, any other agreement between the Company and the Holder and applicable state and federal securities laws. (d) Issue Taxes. The Holder shall pay any and all issue and other taxes that may be payable with respect to any issue or delivery of shares of Common Stock on conversion of this Note pursuant hereto; provided, however, that the Holder shall not be obligated to pay any transfer taxes resulting from any transfer requested by any holder in connection with any such conversion. (e) Elimination of Fractional Interests. No fractional shares of Common Stock shall be issued upon conversion of this Note, nor shall the Company be required to pay cash in lieu of fractional interests, it being the intent of the parties that all fractional interests shall be eliminated and that all issuances of Common Stock shall be rounded up to the nearest whole share. 4. Rights upon Liquidation, Dissolution or Winding Up. In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the holders of the Notes shall be entitled to receive, prior and in preference to any distribution of any of the assets of the Company to the holders of any equity security of the Company, an amount equal to the unpaid and unconverted principal face amount of their Notes and any accrued and unpaid interest thereon. The Holders shall share ratably with the other unsecured creditors of the Company if the available assets are not sufficient to repay the Notes. 5. Adjustments. (a) In the event that the Company should at any time or from time to time, after the date of this Note, fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock, or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly additional shares of Common Stock (hereinafter referred to as "COMMON STOCK EQUIVALENTS") without payment of any consideration by such holder for the 3 additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend, distribution, split or subdivision if no record date is fixed), then unless the Subsequent Valuation Price or Other Conversion Price is otherwise automatically adjusted in accordance with the terms of this Note, the Subsequent Valuation Price or Other Conversion Price, as applicable, shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of this Note shall be increased in proportion to such increase in the aggregate number of shares of the Common Stock outstanding. (b) In the event that the Company shall, at any time while all or any portion of this Note is outstanding, sell any shares of Common Stock for a consideration per share less than the Other Conversion Price, or issue Common Stock Equivalents convertible into or exchangeable for Common Stock at an exercise or conversion price below the Other Conversion Price (such lower per share Common Stock sale price and/or derivative security exercise or conversion price below the Other Conversion Price being referred to as the "LOWERED CONVERSION PRICE"), then the Other Conversion Price shall immediately be changed to the Lowered Conversion Price. (c) If the number of shares of Common Stock outstanding at any time after the date of this Note is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Subsequent Valuation Price or the Other Conversion Price, as applicable, shall be appropriately increased so that the number of shares of Common Stock issuable upon conversion of this Note shall be decreased in proportion to such decrease in outstanding shares. (d) A merger, consolidation or other corporate reorganization in which the Company's stockholders shall receive cash or securities of another entity, or any transaction in which all or substantially all of the assets of the Company are sold shall be treated as a liquidation for purposes of the liquidation preference. The Holder shall receive prior notice of any of the foregoing transactions and shall have an opportunity to convert, at their sole election, the Note prior to the consummation of any such transaction. (e) Upon Holder's conversion of all or any portion of this Note, Holder shall be granted registration rights in accordance with Annex A to the subscription agreement which is included in the Offering Documents. (f) No shares of Common Stock will be issued upon conversion of this Note unless such issuance and such conversion shall comply with all relevant provisions of law. As a condition to any conversion of this Note, the Holder shall make any representation or warranty to the Company, and shall enter into and execute any agreement, as shall be reasonably required by the Company. 6. Affirmative Covenants of the Company. The Company hereby agrees that, so long as the Note remains outstanding and unpaid, or any other amount is owing to the Holder hereunder, the Company will and with respect to the agreements set forth in this Section 6 hereof: 4 (a) Corporate Existence and Qualification. Take the necessary steps to preserve its corporate existence and its right to conduct business in all states in which the nature of its business requires qualification to do business. (b) Financial Information and Compliance Certificates. Comply with and timely file all periodic and annual reports with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended. Keep its books of account in accordance with good accounting practices, and until such time as the Holder no longer beneficially owns the Notes or the Warrants, promptly furnish to the Holder the following financial and other information: (i) each of the Company's Annual Reports and Quarterly Reports; and (ii) any press release issued by the Company or any of its subsidiaries. (c) Within five (5) days of any officer of the Company obtaining knowledge of any Event of Default (as defined in Section 8), if such Event of Default is then continuing, the Company shall furnish to the Holder a certificate of the chief financial or accounting officer of the Company setting forth the details thereof and the action which the Company is taking or proposes to take with respect thereto. (d) Insurance. Maintain insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Company operates and naming the Holder as an additional insured and loss payee thereon as its interest may appear. (e) Preservation of Properties; Compliance with Law. Maintain and preserve all of its properties which are used or which are useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted and comply with its charter and bylaws or other organizational or governing documents, and any law, treaty, rule or regulation, or determination of an arbitrator or a court or other governmental authority, in each case applicable to or binding upon the Company or any of its property or to which the Company or any of its property is subject; (f) Taxes. Duly pay and discharge all taxes or other claims, which might become a lien upon any of its property except to the extent that any thereof are being in good faith appropriately contested with adequate reserves provided therefor. (g) Notice of Litigation. Promptly notify the Holder in writing of any litigation, legal proceeding or dispute, other than disputes in the ordinary course of business or, whether or not in the ordinary course of business, involving amounts in excess of Fifty Thousand ($50,000.00) Dollars, affecting either the Company or any subsidiary, whether or not fully covered by insurance, and regardless of the subject matter thereof. (h) Securities Laws. The Company shall: (i) timely file with the SEC a Form D promulgated under the Act or, as appropriate, an amendment to Form D, as required under Regulation D and provide a copy thereof to Holder promptly after the filing thereof, and (ii) timely file all necessary state "blue sky" filings in connection herewith. 5 (i) Use of Proceeds. The Company will use the proceeds from the sale of the Notes for working capital and general corporate purposes, and will not use any portion of such proceeds for the repayment of indebtedness to any of its officers, directors, 5% or greater shareholders, or any affiliates thereof. (j) Reservation of Shares. 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 to provide for the issuance of all of such shares. Prior to complete conversion of the Notes and exercise of the 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. (k) The Company will not, by any voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of the provisions of this Note and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder of this Note against impairment. 7. Negative Covenants of the Company. The Company hereby agrees that, so long as the Note remains outstanding and unpaid, or any other amount is owing to the Holder hereunder it will not, nor will it permit any of its subsidiaries to: (a) Loans; Investments. Lend or advance money, credit or property to or invest in (by capital contribution, loan, purchase or otherwise) any firm, corporation, or other Person except (i) investments in United States Government obligations, certificates of deposit of any banking institution with combined capital and surplus of at least $200,000,000; (iii) accounts receivable arising out of sales of inventory in the ordinary course of business; and (iii) loans to and/or investments in subsidiaries and/or to strategic partners, including, without limitation, joint venturers with the Company or any person with whom the Company enters into a joint development agreement ("Strategic Partner"). (b) Dividends and Distributions. Pay dividends or make any other distribution on shares of its capital stock. (c) Contingent Liabilities. Assume, endorse, be or become liable for or guarantee the obligations of any Person, other than any subsidiary or Strategic Partner, contingently or otherwise, excluding however, the endorsement of negotiable instruments for deposit or collection in the ordinary course of business. (d) Sales of Receivables. Sell, discount or otherwise dispose of notes, accounts receivable or other obligations owing to the Company, with or without recourse, except for the purpose of collection in the ordinary course of business. 6 (e) Capital Expenditures; Capitalized Leases. Expend in the aggregate for the Company and all its subsidiaries in excess of $3,000,000 in any fiscal year for Capital Expenditures (as defined below) including payments made on account of Capitalized Leases (as defined below). For purposes of the foregoing, Capital Expenditures shall include payments made on account of any deferred purchase price or on account of any indebtedness incurred to finance any such purchase price. "CAPITAL EXPENDITURES" shall mean for any period, the aggregate amount of all payments made by any Person directly or indirectly for the purpose of acquiring, constructing or maintaining fixed assets, real property or equipment which, in accordance with generally accepted accounting principles, would be added as a debit to the fixed asset account of such Person, including, without limitation, all amounts paid or payable with respect to Capitalized Lease Obligations and interest which are required to be capitalized in accordance with generally accepted accounting principles. "CAPITALIZED LEASE" shall mean any lease the obligations to pay rent or other amounts under which constitute Capitalized Lease Obligations. "CAPITALIZED LEASE OBLIGATIONS" shall mean as to any Person, the obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) real and/or personal property which obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under generally accepted accounting principles and, for purposes of this Note, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with generally accepted accounting principles. (f) Lease Payments. Expend in the aggregate for the Company and all its subsidiaries in excess of $1,000,000 in any fiscal year for the lease, rental or hire of real or personal property pursuant to any rental agreement therefor, whether an operating lease or otherwise, other than with respect to Capitalized Leases. (g) Nature of Business. Materially alter the nature of the Company's business or engage in any business other than the business engaged in or proposed to be engaged in on the date of this Note. (h) Stock of Subsidiaries. Sell or otherwise dispose of any subsidiary (except in connection with a merger or consolidation of a subsidiary into the Company or another subsidiary) or permit a subsidiary to issue any additional shares of its capital stock except pro rata to its stockholders, except in a transaction in which the Company receive fair consideration in exchange for such disposition. (i) ERISA. (i) Terminate any plan ("PLAN") of a type described in Section 402l(a) of the Employee Retirement Income Security Act of l974, as amended from time to time ("ERISA") in respect of which the Company is an "employer" as defined in Section 3(5) of ERISA so as to result in any material liability to the Pension Benefit Guaranty Corporation (the "PBGC") established pursuant to Subtitle A of Title IV of ERISA, (ii) engage in or permit any person to engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1954, as amended) involving any Plan which would subject the Company to any material tax, penalty or other liability, (iii) incur or suffer to exist any material "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, 7 involving any Plan, or (iv) allow or suffer to exist any event or condition, which presents a material risk of incurring a material liability to the PBGC by reason of termination of any Plan. (j) Accounting Changes. Make, or permit any subsidiary to make any change in their accounting treatment or financial reporting practices except as required or permitted by generally accepted accounting principles in effect from time to time. (k) Transactions with Affiliates. Except as otherwise specifically set forth in this Note, directly or indirectly purchase, acquire or lease any property from, or sell, transfer or lease any property to, or enter into any other transaction, with any Company Affiliate (as defined below) of the Company, except in the ordinary course of business and at prices and on terms not less favorable to it than those which would have been obtained in an arm's-length transaction with a non-affiliated third party. "COMPANY AFFILIATE" shall mean any other Person directly or indirectly through one or more intermediaries controlling, controlled by, or under common control with, the Company, other than a Strategic Partner. For the purposes of this definition, "control" (including with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as applied to the Company, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of the Company, whether through the ownership of voting securities or by contract or otherwise. 8. Events of Default. The Note shall become immediately due and payable at the option of the holders of greater than 50% of the face amount of all then outstanding Notes issued in the Series, upon any one or more of the following events or occurrences ("EVENTS OF DEFAULT"): (a) if any portion of the Note is not paid when due; provided that this shall only constitute an Event of Default if such default is not cured by the Company within fifteen (15) days after the Holder has given the Company written notice of such default; (b) if any final judgment for the payment of money is rendered against the Company and the Company does not discharge the same or cause it to be discharged or vacated within one hundred twenty (120) days from the entry thereof, or does not appeal therefrom or from the order, decree or process upon which or pursuant to which said judgment was granted, based or entered, and does not secure a stay of execution pending such appeal within one hundred twenty (120) days after the entry thereof; (c) if the Company makes an assignment for the benefit of creditors or if the Company generally does not pay its debts as they become due; (d) if a receiver, liquidator or trustee of the Company is appointed or if the Company is adjudicated a bankrupt or insolvent, or if any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, is filed by or against, consented to, or acquiesced in, by the Company or if any proceeding for the dissolution or liquidation of the Company is instituted; however, if such appointment, adjudication, petition or proceeding is involuntary and is not consented to by the Company, upon the same not being discharged, stayed or dismissed within 60 days; 8 (e) if the Company defaults in any material respect under any other secured or unsecured indebtedness for borrowed money, other than any indebtedness owed to officers, directors or shareholders of the Company, mortgage or security agreement covering any part of its property; (f) except for specific defaults set forth in this Section 8, if the Company defaults in the observance or performance of any other term, agreement or condition of this Note, and the Company fails to remedy such default within thirty (30) days after notice by the Holder to the Company of such default, or, if such default is of such a nature that it cannot with due diligence be cured within said thirty (30) day period, if the Company fails, within said thirty (30) days, to commence all steps necessary to cure such default, and fail to complete such cure within ninety (90) days after the end of such thirty (30) day period; (g) except for specific defaults set forth in this Section 8, if the Company defaults in the observance or performance of any term, agreement or condition of the Note, and such default continues after the end of any applicable cure period provided for therein; and (h) if any of the following exist uncured for forty-five (45) days following written notice to the Company: (i) the failure of any representation or warranty made by the Company to Holder, pursuant to any of the Offering Documents, to be true and correct in all respects or (ii) the Company fails to provide the Holder with the written certifications and evidence referred to in this Note. 9. Subordination Provisions. (a) Definitions. All indebtedness of the Company under this Note and all fees, premiums and other amounts payable in respect thereof and all claims and other obligations or amounts with respect thereto are hereinafter referred to, collectively, as the "Subordinated Indebtedness." The obligations of the Company under and/or with respect to, any (i) trade payables, working lines of credit and other accounts payable incurred in the ordinary course of business, (ii) indebtedness representing the purchase price of property, plant or equipment purchased financing with any commercial banking institution or institutions, together with all refinancings, amendments, modifications, substitutions, replacement financing financings, refinancings or other successor instruments of such indebtedness, including, but not limited to, all principal, interest, fees and expenses are hereinafter referred to, collectively, as the "Senior Indebtedness." (b) Subordination. Each of the Holder and the Company agrees that the Subordinated Indebtedness is and shall be subordinate in all respects and junior in priority to the lien and priority of any Senior Indebtedness to (i) the full extent of all amounts now or hereafter disbursed, paid or advanced, or expended thereunder, (ii) the fullest extent permitted by law and as hereinafter set forth, and (iii) the security interests and other liens securing any Senior Indebtedness and any guarantees. The Holder agrees to deliver such documentation or assurances as may be reasonably requested by any holder of Senior Indebtedness to confirm the priority of the lien. 9 10. Usury. In no event shall the amount of interest paid or agreed to be paid hereunder exceed the highest lawful rate permissible under applicable law. Any excess amount of deemed interest shall be null and void and shall not interfere with or affect the Company's obligation to repay the principal of and interest on the Note. 11. Note Holder Not Deemed a Stockholder. No Holder, as such, of this Note shall be entitled (prior to conversion or redemption of this Note into Common Stock, and only then to the extent of such conversion) to vote or receive dividends or be deemed the holder of shares of Common Stock for any purpose, nor shall anything contained in this Note be construed to confer upon the Holder hereof, as such, any of the rights at law of a stockholder of the Company prior to the issuance to the holder of this Note of the shares of Common Stock which the Holder is then entitled to receive upon the due conversion of all or a portion of this Note. Notwithstanding the foregoing, the Company will provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally, contemporaneously with the giving thereof to the stockholders. 12. Mutilated, Destroyed, Lost or Stolen Notes. In case this Note shall become mutilated or defaced, or be destroyed, lost or stolen, the Company shall execute and deliver a new note of like principal amount in exchange and substitution for the mutilated or defaced Note, or in lieu of and in substitution for the destroyed, lost or stolen Note. In the case of a mutilated or defaced Note, the Holder shall surrender such Note to the Company. In the case of any destroyed, lost or stolen Note, the Holder shall furnish to the Company (a) evidence to its satisfaction of the destruction, loss or theft of such Note and (b) such security or indemnity as may be reasonably required by the Company to hold the Company harmless. 13. Waiver of Demand, Presentment, Etc. Except as otherwise provided herein, the Company hereby expressly waives demand and presentment for payment, notice of nonpayment, protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, bringing of suit and diligence in taking any action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereunder, regardless of and without any notice, diligence, act or omission as or with respect to the collection of any amount called for hereunder. 14. Payment. (a) Except as otherwise provided for herein, all payments with respect to this Note shall be made in lawful currency of the United States of America, at the option of the Holder, (i) at the principal office of the Holder, located at __________________________, or such other place or places as may be reasonably specified by the Holder of this Note in a written notice to the Company at least ten (10) business days before a given payment date, or (ii) by mailing a good check in the proper amount to the Holder at least two days prior to the due date of each payment or otherwise transferring funds so as to be received by the Holder on the due date of each such payment; provided, however, that the Company shall make payment by wire transfer to an account such Holder may specify in writing to the Company at least two days prior to the due date of each payment. Payment shall be credited first to the accrued interest then due and payable and the remainder applied to principal. The Holder shall keep a record of each payment of principal and interest with respect thereto. This Note is not secured. 10 (b) This Note may not be prepaid at any time without the prior written consent of the Holder. 15. Assignment. The rights and obligations of the Company and the Holder of this Note shall be binding upon, and inure to the benefit of, the permitted successors, assigns, heirs, administrators and transferees of the parties hereto. Notwithstanding the foregoing, the Holder may not assign, pledge or otherwise transfer this Note without the prior written consent of the Company. Interest and principal are payable only to the registered Holder of this Note. 16. Waiver and Amendment. Any provision of this Note, including, without limitation, the due date hereof, and the observance of any term hereof, may be amended, waived or modified (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the holders of greater than 50% of the face amount of all then outstanding Notes issued in the Series. 17. Notices. Any notice, request or other communication required or permitted hereunder shall be in writing and shall be deemed to have been duly given if personally delivered or mailed by registered or certified mail, postage prepaid, or delivered by facsimile transmission, to the Company at the address or facsimile number set forth herein or to the Holder at its address or facsimile number set forth in the records of the Company. Any party hereto may by notice so given change its address for future notice hereunder. Notice shall conclusively be deemed to have been given when personally delivered or when deposited in the mail in the manner set forth above and shall be deemed to have been received when delivered or, if notice is given by facsimile transmission, when delivered with confirmation of receipt. 18. Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of Florida, excluding that body of law relating to conflicts of laws. 19. Severability. If one or more provisions of this Note are held to be unenforceable under applicable law, such provisions shall be excluded from this Note, and the balance of this Note shall be interpreted as if such provisions were so excluded and shall be enforceable in accordance with its terms. 20. Headings. Section headings in this Note are for convenience only, and shall not be used in the construction of this Note. [Signature Page Follows] 11 IN WITNESS WHEREOF, the Company has caused this Note to be issued as of the date first above written. XSTREAM BEVERAGE NETWORK, INC. By: ------------------------------- Name: Jerry Pearring Title: President 12 NOTICE OF CONVERSION (to be signed upon conversion of the Note) TO XSTREAM BEVERAGE NETWORK, INC.: The undersigned, the holder of the foregoing Note, hereby surrenders such Note for conversion into ______ shares of the Common Stock of XStream Beverage Network, Inc., and requests that the certificates for such shares be issued in the name of, and delivered to, _________________, whose address is ________________________________________. Dated: _____________________ ------------------------------------ (signature) ------------------------------------ (address) 13 EX-10.3 4 ex10-3.txt MATERIAL CONTRACTS EXHIBIT 10.3 (BILATERAL FORM) (ISDA AGREEMENTS SUBJECT TO NEW YORK LAW ONLY) ISDA(R) International Swaps and Derivatives Association, Inc. CREDIT SUPPORT ANNEX to the Schedule to the 2002 ISDA MAster Agreement dated as of June 10, 2005 between Cogent Capital Corp and Xstream Beverage Network, Inc. ("Party A") ("Party B") This Annex supplements, forms part of, and is subject to, the above-referenced Agreement, is part of its Schedule and is a Credit Support Document under this Agreement with respect to each party. Accordingly, the parties agree as follows:-- PARAGRAPH 1. INTERPRETATION (a) DEFINITIONS AND INCONSISTENCY. Capitalized terms not otherwise defined herein or elsewhere in this Agreement have the meanings specified pursuant to Paragraph 12, and all references in this Annex to Paragraphs are to Paragraphs of this Annex. In the event of any inconsistency between this Annex and the other provisions of this Schedule, this Annex will prevail, and in the event of any inconsistency between Paragraph 13 and the other provisions of this Annex, Paragraph 13 will prevail. (b) SECURED PARTY AND PLEDGOR. All references in this Annex to the "Secured Party" will be to either party when acting in that capacity and all corresponding references to the "Pledgor" will be to the other party when acting in that capacity; provided, however, that if Other Posted Support is held by a party to this Annex, all references herein to that party as the Secured Party with respect to that Other Posted Support will be to that party as the beneficiary thereof and will not subject that support or that party as the beneficiary thereof to provisions of law generally relating to security interests and secured parties. PARAGRAPH 2. SECURITY INTEREST Each party, as the Pledgor, hereby pledges to the other party, as the Secured Party, as security for its Obligations, and grants to the Secured Party a first priority continuing security interest in, lien on and right of Set-off against all Posted Collateral Transferred to or received by the Secured Party hereunder. Upon the Transfer by the Secured Party to the Pledgor of Posted Collateral, the security interest and lien granted hereunder on that Posted Collateral will be released immediately and, to the extent possible, without any further action by either party. Copyright (C) 1994 by International Swaps and Derivatives Association, Inc. ISDA(R)1994 2 PARAGRAPH 3. CREDIT SUPPORT OBLIGATIONS (a) DELIVERY AMOUNT. Subject to Paragraphs 4 and 5, upon a demand made by the Secured Party on or promptly following a Valuation Date, if the Delivery Amount for that Valuation Date equals or exceeds the Pledgor's Minimum Transfer Amount, then the Pledgor will Transfer to the Secured Party Eligible Credit Support having a Value as of the date of Transfer at least equal to the applicable Delivery Amount (rounded pursuant to Paragraph 13). Unless otherwise specified in Paragraph 13, the "DELIVERY AMOUNT" applicable to the Pledgor for any Valuation Date will equal the amount by which: (i) the Credit Support Amount exceeds (ii) the Value as of that Valuation Date of all Posted Credit Support held by the Secured Party. (b) RETURN AMOUNT. Subject to Paragraphs 4 and 5, upon a demand made by the Pledgor on or promptly following a Valuation Date, if the Return Amount for that Valuation Date equals or exceeds the Secured Party's Minimum Transfer Amount, then the Secured Party will Transfer to the Pledgor Posted Credit Support specified by the Pledgor in that demand having a Value as of the date of Transfer as close as practicable to the applicable Return Amount (rounded pursuant to Paragraph 13). Unless otherwise specified in Paragraph 13, the "RETURN AMOUNT" applicable to the Secured Party for any Valuation Date will equal the amount by which: (i) the Value as of that Valuation Date of all Posted Credit Support held by the Secured Party exceeds (ii) the Credit Support Amount. "CREDIT SUPPORT AMOUNT" means, unless otherwise specified in Paragraph 13, for any Valuation Date (i) the Secured Party's Exposure for that Valuation Date plus (ii) the aggregate of all Independent Amounts applicable to the Pledgor, if any, minus (iii) all Independent Amounts applicable to the Secured Party, if any, minus (iv) the Pledgor's Threshold; provided, however, that the Credit Support Amount will be deemed to be zero whenever the calculation of Credit Support Amount yields a number less than zero. PARAGRAPH 4. CONDITIONS PRECEDENT, TRANSFER TIMING, CALCULATIONS AND SUBSTITUTIONS (a) CONDITIONS PRECEDENT. Each Transfer obligation of the Pledgor under Paragraphs 3 and 5 and of the Secured Party under Paragraphs 3, 4(d)(ii), 5 and 6(d) is subject to the conditions precedent that: (i) no Event of Default, Potential Event of Default or Specified Condition has occurred and is continuing with respect to the other party; and (ii) no Early Termination Date for which any unsatisfied payment obligations exist has occurred or been designated as the result of an Event of Default or Specified Condition with respect to the other party. (b) TRANSFER TIMING. Subject to Paragraphs 4(a) and 5 and unless otherwise specified, if a demand for the Transfer of Eligible Credit Support or Posted Credit Support is made by the Notification Time, then the relevant Transfer will be made not later than the close of business on the next Local Business Day; if a demand is made after the Notification Time, then the relevant Transfer will be made not later than the close of business on the second Local Business Day thereafter. (c) CALCULATIONS. All calculations of Value and Exposure for purposes of Paragraphs 3 and 6(d) will be made by the Valuation Agent as of the Valuation Time. The Valuation Agent will notify each party (or the other party, if the Valuation Agent is a party) of its calculations not later than the Notification Time on the Local Business Day following the applicable Valuation Date (or in the case of Paragraph 6(d), following the date of calculation). 2 ISDA(R)1994 3 (D) SUBSTITUTIONS. (i) Unless otherwise specified in Paragraph 13, upon notice to the Secured Party specifying the items of Posted Credit Support to be exchanged, the Pledgor may, on any Local Business Day, Transfer to the Secured Party substitute Eligible Credit Support (the "Substitute Credit Support"); and (ii) subject to Paragraph 4(a), the Secured Party will Transfer to the Pledgor the items of Posted Credit Support specified by the Pledgor in its notice not later than the Local Business Day following the date on which the Secured Party receives the Substitute Credit Support, unless otherwise specified in Paragraph 13 (the "Substitution Date"); provided that the Secured Party will only be obligated to Transfer Posted Credit Support with a Value as of the date of Transfer of that Posted Credit Support equal to the Value as of that date of the Substitute Credit Support. PARAGRAPH 5. DISPUTE RESOLUTION If a party (a "Disputing Party") disputes (I) the Valuation Agent's calculation of a Delivery Amount or a Return Amount or (II) the Value of any Transfer of Eligible Credit Support or Posted Credit Support, then (1) the Disputing Party will notify the other party and the Valuation Agent (if the Valuation Agent is not the other party) not later than the close of business on the Local Business Day following (X) the date that the demand is made under Paragraph 3 in the case of (I) above or (Y) the date of Transfer in the case of (II) above, (2) subject to Paragraph 4(a), the appropriate party will Transfer the undisputed amount to the other party not later than the close of business on the Local Business Day following (X) the date that the demand is made under Paragraph 3 in the case of (I) above or (Y) the date of Transfer in the case of (II) above, (3) the parties will consult with each other in an attempt to resolve the dispute and (4) if they fail to resolve the dispute by the Resolution Time, then: (i) In the case of a dispute involving a Delivery Amount or Return Amount, unless otherwise specified in Paragraph 13, the Valuation Agent will recalculate the Exposure and the Value as of the Recalculation Date by: (A) utilizing any calculations of Exposure for the Transactions (or Swap Transactions) that the parties have agreed are not in dispute; (B) calculating the Exposure for the Transactions (or Swap Transactions) in dispute by seeking four actual quotations at mid-market from Reference Market-makers for purposes of calculating Market Quotation, and taking the arithmetic average of those obtained; provided that if four quotations are not available for a particular Transaction (or Swap Transaction), then fewer than four quotations may be used for that Transaction (or Swap Transaction); and if no quotations are available for a particular Transaction (or Swap Transaction), then the Valuation Agent's original calculations will be used for that Transaction (or Swap Transaction); and (C) utilizing the procedures specified in Paragraph 13 for calculating the Value, if disputed, of Posted Credit Support. (ii) In the case of a dispute involving the Value of any Transfer of Eligible Credit Support or Posted Credit Support, the Valuation Agent will recalculate the Value as of the date of Transfer pursuant to Paragraph 13. Following a recalculation pursuant to this Paragraph, the Valuation Agent will notify each party (or the other party, if the Valuation Agent is a party) not later than the Notification Time on the Local Business Day following the Resolution Time. The appropriate party will, upon demand following that notice by the Valuation Agent or a resolution pursuant to (3) above and subject to Paragraphs 4(a) and 4(b), make the appropriate Transfer. 3 ISDA(R)1994 4 PARAGRAPH 6. HOLDING AND USING POSTED COLLATERAL (a) CARE OF POSTED COLLATERAL. Without limiting the Secured Party's rights under Paragraph 6(c), the Secured Party will exercise reasonable care to assure the safe custody of all Posted Collateral to the extent required by applicable law, and in any event the Secured Party will be deemed to have exercised reasonable care if it exercises at least the same degree of care as it would exercise with respect to its own property. Except as specified in the preceding sentence, the Secured Party will have no duty with respect to Posted Collateral, including, without limitation, any duty to collect any Distributions, or enforce or preserve any rights pertaining thereto. (b) ELIGIBILITY TO HOLD POSTED COLLATERAL; CUSTODIANS. (i) GENERAL. Subject to the satisfaction of any conditions specified in Paragraph 13 for holding Posted Collateral, the Secured Party will be entitled to hold Posted Collateral or to appoint an agent (a "Custodian") to hold Posted Collateral for the Secured Party. Upon notice by the Secured Party to the Pledgor of the appointment of a Custodian, the Pledgor's obligations to make any Transfer will be discharged by making the Transfer to that Custodian. The holding of Posted Collateral by a Custodian will be deemed to be the holding of that Posted Collateral by the Secured Party for which the Custodian is acting. (ii) FAILURE TO SATISFY CONDITIONS. If the Secured Party or its Custodian fails to satisfy any conditions for holding Posted Collateral, then upon a demand made by the Pledgor, the Secured Party will, not later than five Local Business Days after the demand, Transfer or cause its Custodian to Transfer all Posted Collateral held by it to a Custodian that satisfies those conditions or to the Secured Party if it satisfies those conditions. (iii) LIABILITY. The Secured Party will be liable for the acts or omissions of its Custodian to the same extent that the Secured Party would be liable hereunder for its own acts or omissions. (c) USE OF POSTED COLLATERAL. Unless otherwise specified in Paragraph 13 and without limiting the rights and obligations of the parties under Paragraphs 3, 4(d)(ii), 5, 6(d) and 8, if the Secured Party is not a Defaulting Party or an Affected Party with respect to a Specified Condition and no Early Termination Date has occurred or been designated as the result of an Event of Default or Specified Condition with respect to the Secured Party, then the Secured Party will, notwithstanding Section 9-207 of the New York Uniform Commercial Code, have the right to: (i) sell, pledge, rehypothecate, assign, invest, use, commingle or otherwise dispose of, or otherwise use in its business any Posted Collateral it holds, free from any claim or right of any nature whatsoever of the Pledgor, including any equity or right of redemption by the Pledgor; and (ii) register any Posted Collateral in the name of the Secured Party, its Custodian or a nominee for either. For purposes of the obligation to Transfer Eligible Credit Support or Posted Credit Support pursuant to Paragraphs 3 and 5 and any rights or remedies authorized under this Agreement, the Secured Party will be deemed to continue to hold all Posted Collateral and to receive Distributions made thereon, regardless of whether the Secured Party has exercised any rights with respect to any Posted Collateral pursuant to (i) or (ii) above. (d) DISTRIBUTIONS AND INTEREST AMOUNT. (i) DISTRIBUTIONS. Subject to Paragraph 4(a), if the Secured Party receives or is deemed to receive Distributions on a Local Business Day, it will Transfer to the Pledgor not later than the following Local Business Day any Distributions it receives or is deemed to receive to the extent that a Delivery Amount would not be created or increased by that Transfer, as calculated by the Valuation Agent (and the date of calculation will be deemed to be a Valuation Date for this purpose). 4 ISDA(R)1994 5 (ii) INTEREST AMOUNT. Unless otherwise specified in Paragraph 13 and subject to Paragraph 4(a), in lieu of any interest, dividends or other amounts paid or deemed to have been paid with respect to Posted Collateral in the form of Cash (all of which may be retained by the Secured Party), the Secured Party will Transfer to the Pledgor at the times specified in Paragraph 13 the Interest Amount to the extent that a Delivery Amount would not be created or increased by that Transfer, as calculated by the Valuation Agent (and the date of calculation will be deemed to be a Valuation Date for this purpose). The Interest Amount or portion thereof not Transferred pursuant to this Paragraph will constitute Posted Collateral in the form of Cash and will be subject to the security interest granted under Paragraph 2. PARAGRAPH 7. EVENTS OF DEFAULT For purposes of Section 5(a)(iii)(1) of this Agreement, an Event of Default will exist with respect to a party if: (i) that party fails (or fails to cause its Custodian) to make, when due, any Transfer of Eligible Collateral, Posted Collateral or the Interest Amount, as applicable, required to be made by it and that failure continues for two Local Business Days after notice of that failure is given to that party; (ii) that party fails to comply with any restriction or prohibition specified in this Annex with respect to any of the rights specified in Paragraph 6(c) and that failure continues for five Local Business Days after notice of that failure is given to that party; or (iii) that party fails to comply with or perform any agreement or obligation other than those specified in Paragraphs 7(i) and 7(ii) and that failure continues for 30 days after notice of that failure is given to that party. PARAGRAPH 8. CERTAIN RIGHTS AND REMEDIES (a) SECURED PARTY'S RIGHTS AND REMEDIES. If at any time (1) an Event of Default or Specified Condition with respect to the Pledgor has occurred and is continuing or (2) an Early Termination Date has occurred or been designated as the result of an Event of Default or Specified Condition with respect to the Pledgor, then, unless the Pledgor has paid in full all of its Obligations that are then due, the Secured Party may exercise one or more of the following rights and remedies: (i) all rights and remedies available to a secured party under applicable law with respect to Posted Collateral held by the Secured Party; (ii) any other rights and remedies available to the Secured Party under the terms of Other Posted Support, if any; (iii) the right to Set-off any amounts payable by the Pledgor with respect to any Obligations against any Posted Collateral or the Cash equivalent of any Posted Collateral held by the Secured Party (or any obligation of the Secured Party to Transfer that Posted Collateral); and (iv) the right to liquidate any Posted Collateral held by the Secured Party through one or more public or private sales or other dispositions with such notice, if any, as may be required under applicable law, free from any claim or right of any nature whatsoever of the Pledgor, including any equity or right of redemption by the Pledgor (with the Secured Party having the right to purchase any or all of the Posted Collateral to be sold) and to apply the proceeds (or the Cash equivalent thereof) from the liquidation of the Posted Collateral to any amounts payable by the Pledgor with respect to any Obligations in that order as the Secured Party may elect. Each party acknowledges and agrees that Posted Collateral in the form of securities may decline speedily in value and is of a type customarily sold on a recognized market, and, accordingly, the Pledgor is not entitled to prior notice of any sale of that Posted Collateral by the Secured Party, except any notice that is required under applicable law and cannot be waived. 5 ISDA(R)1994 6 (b) PLEDGOR'S RIGHTS AND REMEDIES. If at any time an Early Termination Date has occurred or been designated as the result of an Event of Default or Specified Condition with respect to the Secured Party, then (except in the case of an Early Termination Date relating to less than all Transactions (or Swap Transactions) where the Secured Party has paid in full all of its obligations that are then due under Section 6(e) of this Agreement): (i) the Pledgor may exercise all rights and remedies available to a pledgor under applicable law with respect to Posted Collateral held by the Secured Party; (ii) the Pledgor may exercise any other rights and remedies available to the Pledgor under the terms of Other Posted Support, if any; (iii) the Secured Party will be obligated immediately to Transfer all Posted Collateral and the Interest Amount to the Pledgor; and (iv) to the extent that Posted Collateral or the Interest Amount is not so Transferred pursuant to (iii) above, the Pledgor may: (A) Set-off any amounts payable by the Pledgor with respect to any Obligations against any Posted Collateral or the Cash equivalent of any Posted Collateral held by the Secured Party (or any obligation of the Secured Party to Transfer that Posted Collateral); and (B) to the extent that the Pledgor does not Set-off under (iv)(A) above, withhold payment of any remaining amounts payable by the Pledgor with respect to any Obligations, up to the Value of any remaining Posted Collateral held by the Secured Party, until that Posted Collateral is Transferred to the Pledgor. (c) DEFICIENCIES AND EXCESS PROCEEDS. The Secured Party will Transfer to the Pledgor any proceeds and Posted Credit Support remaining after liquidation, Set-off and/or application under Paragraphs 8(a) and 8(b) after satisfaction in full of all amounts payable by the Pledgor with respect to any Obligations; the Pledgor in all events will remain liable for any amounts remaining unpaid after any liquidation, Set-off and/or application under Paragraphs 8(a) and 8(b). (d) FINAL RETURNS. When no amounts are or thereafter may become payable by the Pledgor with respect to any Obligations (except for any potential liability under Section 2(d) of this Agreement), the Secured Party will Transfer to the Pledgor all Posted Credit Support and the Interest Amount, if any. PARAGRAPH 9. REPRESENTATIONS Each party represents to the other party (which representations will be deemed to be repeated as of each date on which it, as the Pledgor, Transfers Eligible Collateral) that: (i) it has the power to grant a security interest in and lien on any Eligible Collateral it Transfers as the Pledgor and has taken all necessary actions to authorize the granting of that security interest and lien; (ii) it is the sole owner of or otherwise has the right to Transfer all Eligible Collateral it Transfers to the Secured Party hereunder, free and clear of any security interest, lien, encumbrance or other restrictions other than the security interest and lien granted under Paragraph 2; (iii) upon the Transfer of any Eligible Collateral to the Secured Party under the terms of this Annex, the Secured Party will have a valid and perfected first priority security interest therein (assuming that any central clearing corporation or any third-party financial intermediary or other entity not within the control of the Pledgor involved in the Transfer of that Eligible Collateral gives the notices and takes the action required of it under applicable law for perfection of that interest); and (iv) the performance by it of its obligations under this Annex will not result in the creation of any security interest, lien or other encumbrance on any Posted Collateral other than the security interest and lien granted under Paragraph 2. ISDA(R)1994 7 PARAGRAPH 10. EXPENSES (a) GENERAL. Except as otherwise provided in Paragraphs 10(b) and 10(c), each party will pay its own costs and expenses in connection with performing its obligations under this Annex and neither party will be liable for any costs and expenses incurred by the other party in connection herewith. (b) POSTED CREDIT SUPPORT. The Pledgor will promptly pay when due all taxes, assessments or charges of any nature that are imposed with respect to Posted Credit Support held by the Secured Party upon becoming aware of the same, regardless of whether any portion of that Posted Credit Support is subsequently disposed of under Paragraph 6(c), except for those taxes, assessments and charges that result from the exercise of the Secured Party's rights under Paragraph 6(c). (c) LIQUIDATION/APPLICATION OF POSTED CREDIT SUPPORT. All reasonable costs and expenses incurred by or on behalf of the Secured Party or the Pledgor in connection with the liquidation and/or application of any Posted Credit Support under Paragraph 8 will be payable, on demand and pursuant to the Expenses Section of this Agreement, by the Defaulting Party or, if there is no Defaulting Party, equally by the parties. 6 PARAGRAPH 11. MISCELLANEOUS (a) DEFAULT INTEREST. A Secured Party that fails to make, when due, any Transfer of Posted Collateral or the Interest Amount will be obligated to pay the Pledgor (to the extent permitted under applicable law) an amount equal to interest at the Default Rate multiplied by the Value of the items of property that were required to be Transferred, from (and including) the date that Posted Collateral or Interest Amount was required to be Transferred to (but excluding) the date of Transfer of that Posted Collateral or Interest Amount. This interest will be calculated on the basis of daily compounding and the actual number of days elapsed. (b) FURTHER ASSURANCES. Promptly following a demand made by a party, the other party will execute, deliver, file and record any financing statement, specific assignment or other document and take any other action that may be necessary or desirable and reasonably requested by that party to create, preserve, perfect or validate any security interest or lien granted under Paragraph 2, to enable that party to exercise or enforce its rights under this Annex with respect to Posted Credit Support or an Interest Amount or to effect or document a release of a security interest on Posted Collateral or an Interest Amount. (c) FURTHER PROTECTION. The Pledgor will promptly give notice to the Secured Party of, and defend against, any suit, action, proceeding or lien that involves Posted Credit Support Transferred by the Pledgor or that could adversely affect the security interest and lien granted by it under Paragraph 2, unless that suit, action, proceeding or lien results from the exercise of the Secured Party's rights under Paragraph 6(c). (d) GOOD FAITH AND COMMERCIALLY REASONABLE MANNER. Performance of all obligations under this Annex, including, but not limited to, all calculations, valuations and determinations made by either party, will be made in good faith and in a commercially reasonable manner. (e) DEMANDS AND NOTICES. All demands and notices made by a party under this Annex will be made as specified in the Notices Section of this Agreement, except as otherwise provided in Paragraph 13. (f) SPECIFICATIONS OF CERTAIN MATTERS. Anything referred to in this Annex as being specified in Paragraph 13 also may be specified in one or more Confirmations or other documents and this Annex will be construed accordingly. ISDA(R)1994 10 "VALUATION AGENT" has the meaning specified in Paragraph 13. "VALUATION DATE" means each date specified in or otherwise determined pursuant to Paragraph 13. "VALUATION PERCENTAGE" means, for any item of Eligible Collateral, the percentage specified in Paragraph 13. "VALUATION TIME" has the meaning specified in Paragraph 13. "VALUE" means for any Valuation Date or other date for which Value is calculated and subject to Paragraph 5 in the case of a dispute, with respect to: (i) Eligible Collateral or Posted Collateral that is: (A) Cash, the amount thereof; and (B) a security, the bid price obtained by the Valuation Agent multiplied by the applicable Valuation Percentage, if any; (ii) Posted Collateral that consists of items that are not specified as Eligible Collateral, zero; and (iii) Other Eligible Support and Other Posted Support, as specified in Paragraph 13. 11 NY2-513167 7 PARAGRAPH 13. ELECTIONS AND VARIABLES (a) SECURITY INTEREST FOR "OBLIGATIONS". The term "OBLIGATIONS" as used in this Annex includes the following additional obligations: With respect to Party A: none. With respect to Party B: none. (b) CREDIT SUPPORT OBLIGATIONS. (i) DELIVERY AMOUNT, RETURN AMOUNT AND CREDIT SUPPORT AMOUNT. (A) "DELIVERY AMOUNT" has the meaning specified in Paragraph 3(a). (B) "RETURN AMOUNT" has the meaning specified in Paragraph 3(b). (C) "CREDIT SUPPORT AMOUNT" has the meaning specified in Paragraph 3. (ii) ELIGIBLE COLLATERAL. The following items will qualify as "ELIGIBLE COLLATERAL" for the party specified: PARTY A PARTY B VALUATION PERCENTAGE (A) Cash [X ] [X ] 100% (B) negotiable debt obligations issued by the U.S. Treasury Department having an original maturity t issuance of not more than one year ("Treasury Bills") [X ] [X] 100% (C) negotiable debt obligations issued by the U.S. Treasury Department having an original maturity at issuance of more than one year but not more than 10 years ("Treasury Notes") [ X] [ X] 100% (D) negotiable debt obligations issued by the U.S. Treasury Department having an original maturity at issuance of more than 10 years ("Treasury Bonds") [ ] [ ] [ ]% (E) other: ...................................................[ ] [ ] [ ]% (iii) OTHER ELIGIBLE SUPPORT. The following items will qualify as "OTHER ELIGIBLE SUPPORT" for the party specified: Party A - None. 12 NY2-513167 Party B- None (iv) THRESHOLDS. (A) "INDEPENDENT AMOUNT" means with respect to Party A: $ 0.00 (Zero) "INDEPENDENT AMOUNT" means with respect to Party B: The amount, if any, specified as the Independent Amount in the Confirmation for a particular Transaction. (B) "THRESHOLD" means with respect to Party A: Infinity "THRESHOLD" means with respect to Party B: Infinity (C) "MINIMUM TRANSFER AMOUNT" means with respect to Party A: $ 0 "MINIMUM TRANSFER AMOUNT" means with respect to Party B: $ 0 (D) ROUNDING. The Delivery Amount and the Return Amount will be rounded up and down to the nearest integral multiple of $1000, respectively. (c) VALUATION AND TIMING. (i) "VALUATION AGENT" means, for purposes of Paragraphs 3 and 5, the party making the demand under Paragraph 3, and, for purposes of Paragraph 6(d), the Secured Party receiving or deemed to receive the Distributions or the Interest Amount, as applicable. (ii) "VALUATION DATE" means: Valuation Dates as defined by Equity Swap Confirm dated June 10, 2005 (iii) "VALUATION TIME" means: [X] the close of business in the city of the Valuation Agent on the Valuation Date or date of calculation, as applicable; [ ] the close of business on the Local Business Day before the Valuation Date or date of calculation, as applicable; provided that the calculations of Value and Exposure will be made as of approximately the same time on the same date. (iv) "NOTIFICATION TIME" means 1:00 p.m., New York time, on a Local Business Day. (d) CONDITIONS PRECEDENT AND SECURED PARTY'S RIGHTS AND REMEDIES. The following Termination Event(s) will be a "SPECIFIED CONDITION" for the party specified (that party being the Affected Party if the Termination Event occurs with respect to that party): Party A Party B Illegality [X] [X] Tax Event [ ] [ ] 13 NY2-513167 8 Tax Event Upon Merger [ ] [ ] Credit Event Upon Merger [ ] [ ] Additional Termination Event(s): ......................................................................... [ ] [ ] ......................................................................... [ ] [ ] (e) SUBSTITUTION. (i) "SUBSTITUTION DATE" has the meaning specified in Paragraph 4(d)(ii). (ii) CONSENT. If specified here as applicable, then the Pledgor must obtain the Secured Party's consent for any substitution pursuant to Paragraph 4(d): applicable. (f) DISPUTE RESOLUTION. (i) "RESOLUTION TIME" means 1:00 p.m., New York time, on the Local Business Day following the date on which the notice is given that gives rise to a dispute under Paragraph 5. (ii) VALUE. For the purpose of Paragraphs 5(i)(C) and 5(ii), the Value of Posted Credit Support will be calculated as follows: Retain "AAA" rated bank or investment bank to calculations using paragraphs 5(i)(A) and 5(i)(B). (iii) ALTERNATIVE. The provisions of Paragraph 5 will apply. (g) HOLDING AND USING POSTED COLLATERAL. (i) ELIGIBILITY TO HOLD POSTED COLLATERAL; CUSTODIANS. Party A and its Custodian will be entitled to hold Posted Collateral pursuant to Paragraph 6(b); provided that the following conditions applicable to it are satisfied: (1) Party A is not a Defaulting Party. (2) Posted Collateral may be held only in the following jurisdictions: Massachusetts or New York. Initially, the Custodian for Party A is Investor's Bank & Trust. (ii) Use of Posted Collateral. The provisions of Paragraph 6(c) will not apply to the Party A. (h) Distributions and Interest Amount. (i) INTEREST RATE. The "INTEREST RATE" will be: USD-LIBOR-BBA (ii) TRANSFER OF INTEREST AMOUNT. The Transfer of the Interest Amount will be made on the last Local Business Day of each calendar month and on any Local Business Day that Posted Collateral in the form of Cash is Transferred to the Pledgor pursuant to Paragraph 3 (b). (iii) ALTERNATIVE TO INTEREST AMOUNT. The provisions of Paragraph 6(d)(ii) will apply. (i) ADDITIONAL REPRESENTATION(S). None. (j) OTHER ELIGIBLE SUPPORT AND OTHER POSTED SUPPORT. 14 NY2-513167 Not Applicable. (k) DEMANDS AND NOTICES. All demands, specifications and notices under this Annex will be made pursuant to the Notices Section of this Agreement, unless otherwise specified here: Party A: Cogent Capital Corp. Attn: Greg Kofford 11444 S. Jolley Acres Cir. Sandy, UT 84092 Fax 801-576-0583 Party B: Xstream Beverage Network, Inc. Attn: Telephone: Fax: (1) ADDRESSES FOR TRANSFERS. Party A: To be provided Party B: To be provided (m) OTHER PROVISIONS. (i) Notwithstanding anything herein to the contrary, the parties agree that: 9 (A) Party A shall not be a Pledgor under this Credit Support Annex under any circumstances and shall have no obligation to provide any Collateral to Party B pursuant to the terms of this Credit Support Annex; and (B) Party B shall have no obligation to provide Collateral to Party A pursuant to this Credit Support Annex except for the Independent Amount, if any, specified in the Confirmation for any Transaction. (ii) The Collateral to be provided by Party B to Party A pursuant to this Credit Support Annex is to be held in an account established pursuant to that certain Escrow Agreement, dated as of June 10, 2005, by and among Party A, Party B, Nieodparty Inc., Bindes Holdings, Inc., Krachtig, Inc., Presvedcivy Inc., Puissant Capital Inc., Triftig Holdings Inc., Ellenallhatatlan Inc., Potente Capital Inc., Neapgazams, Inc., Forte Capital Inc., Convingator Inc., Penge Equities, Inc., Gelt Investments, Inc., Cref Enterprises, Inc., Painava, Inc., Uberzeugend, Inc., and Investors Bank & Trust Company (the "Escrow Agreement"). Party B, as Pledgor, hereby confirms that it is hereby granting to Party A a security interest in all accounts established under the Escrow Agreement in which such Collateral may from time to time be held to the same extent as the security interest granted by Party B in the Posted Collateral pursuant to Section 2 above. (iii) Notwithstanding anything herein to the contrary, including in Paragraph 6(d)(i) or 13(h) above, the parties agree that: (A) All Distributions received by Party A shall be held by Party A in the Collateral Account referred to in the Escrow Agreement and, on each day that any Floating Amount is due from Party B to Party A under any 15 NY2-513167 Confirmation, Party A shall (and is hereby authorized to) apply any such Distributions then held in the Collateral Account in satisfaction of Party B's obligation to pay any such Floating Amount; provided that, if the amount of such Distributions so held is insufficient to satisfy all of such obligation, Party B shall remain obligated to make payment of the amount of such shortfall on the original due date therefor. (B) For purposes of federal and all other taxes based on income, Party B shall be treated as the owner of all Distributions referred to in clause (A) above. Accordingly, the Escrow Agent shall be instructed to report all such Distributions as income of Party B and to issue or cause to be issued to Party B such Forms 1099 or other such forms reflecting such income. (iv) Paragraph 5(i)(B) above is amended to read in its entirety as follows: "(B) calculating the Exposure for the Transactions in dispute by seeking four actual quotations at mid-market from third parties for purposes of calculating the relevant Close-out Amount, and taking the arithmetic average of those obtained; provided that if four quotations are not available for a particular Transaction, then fewer than four quotations may be used for that Transaction, and if no quotations are available for a particular Transaction, then the Valuation Agent's original calculations will be used for the Transaction; and" (v) The definition of "Exposure" in Paragraph 12 above is amended to read in its entirety as follows: "'EXPOSURE' means for any Valuation Date or other date for which Exposure is calculated and subject to Paragraph 5 in the case of a dispute, the amount, if any, that would be payable to a party that is the Secured Party by the other party (expressed as a positive number) or by a party that is the Secured Party to the other party (expressed as a negative number) pursuant to Section 6(e)(ii)(i) of this Agreement if all Transactions were being terminated as of the relevant Valuation Date, on the basis that (i) that party is not the Affected Party and (ii) United Stated Dollars is the Termination Currency; provided that the Close-out Amount will be determined by the Valuation Agent on behalf of that party using its estimates of mid-market of the amounts that would be paid for transactions providing the economic equivalent of (x) the material terms of the Transactions, including the payments and deliveries by the parties under Section 2(a)(i) in respect of the Transactions that would, but for the occurrence of the relevant Early 10 Termination Date, have been required after that date (assuming satisfaction of the conditions precedent in Section 2(a)(iii)); and (y) the option rights of the parties in respect of the Transactions." (vi) Paragraph 12 is amended by inserting, between the definitions of "Secured Party" and "Specified Condition", the following additional definition: "'SET-OFF' means set-off, offset, combination of accounts, right of retention or withholding or similar right or requirement to which the payer of an amount under Section 6 of the Agreement is entitled or subject (whether arising under the Agreement, under another contract, applicable law or otherwise) that is exercised by, or imposed on, such payer. Cogent Capital Corp. Xstream Beverage Network, Inc. By: ............................................................................ By: ............................................................................... Name: Gregory L. Kofford Name: Title: President Title Date: June 10, 2005 Date: June 10, 2005 EX-10.4 5 ex104.txt FORM OF LETTER AGREEMENT WITH COGENT CAPITAL Exhibit 10.4 [LOGO COGENT CAPITAL CORP.] Date: May 31, 2005 To: Xstream Beverage Network, Inc. From: Cogent Capital Corp. SUBJECT: EQUITY OPTION TRANSACTION ---------------------------------- The purpose of this communication is to set forth the terms and conditions of the Call Option transaction entered into on the Trade Date referred to below (the "Option Transaction"), between Cogent Capital Corp., a Utah corporation ("Cogent" or "we") and Xstream Beverage Network, Inc., a Nevada corporation ("XSBV" or "you"). This communication constitutes a "Confirmation" as referred to in the ISDA Master Agreement specified below. This Confirmation incorporates the definitions and provisions contained in the 2002 ISDA Equity Derivatives Definitions as published by the International Swap and Derivatives Association, Inc. (the "Equity Definitions"). In the event of any inconsistency between the Definitions and this Confirmation, this Confirmation will govern. 1. This Confirmation will supplement, form a part of, and be subject to the ISDA Master Agreement dated as of May 31, 2005 between Xstream Beverage Network and Cogent (the "Master Agreement"). All provisions contained in, or incorporated by reference to, the Master Agreement shall govern this Confirmation except as expressly modified below. In the event of any inconsistency between the provisions of that Master Agreement and this Confirmation, this Confirmation shall prevail for the purpose of this Equity Option Transaction. In addition, this Confirmation shall itself evidence a complete and binding agreement between you and us as to the terms and conditions of the Equity Option Transaction to which this Confirmation relates. Cogent and Xstream Beverage Network each represents that entering into the Equity Transaction is authorized and does not violate any laws of its jurisdiction of organization or residence or the terms of any agreement to which it is a party. Cogent and Xstream Beverage Network each represents that (i) it is not relying on the other party in connection with its decision to enter into this Option Transaction, and neither party is acting as an advisor or fiduciary of the other party in connection with this Option Transaction regardless of whether the other party provides it with market information or its views; (ii) it understands the risks of the Option Transaction and any legal, regulatory, tax, accounting and economic consequences resulting therefrom; and (iii) it has determined based upon its own judgment and upon any advice received from its own 1 professional advisors as it has deemed necessary to consult that entering into the Option Transaction is appropriate for such party in light of its financial capabilities and objectives. 2. The terms of the particular Transaction to which this Confirmation relates are as follows: General Terms: Trade Date: May 31, 2005 Option Style: European Option Type: Call Seller: Cogent Buyer: Xstream Beverage Network Shares: Xstream Beverage Network, Inc. common shares ("XSBV") CUSIP number Number of Options: 6,315,789 Option Entitlement: 1 Share per Option Strike Price: The "Strike Price" shall equal the average of the Relevant Prices for the Averaging Dates relating to that Expiration Date. Averaging Dates: The ten trading days up to and including that Expiration Date Averaging Date Disruption: Modified Postponement Relevant Price: For each Averaging Date, the average of the bid and ask price per Share as determined by the Calculation Agent at the Valuation Time on that Averaging Date. Valuation Time: The closing time on the Exchange Premium: $1 Premium Payment Date: Trade Date Exchange: All Exchanges Related Exchange(s): All Exchanges Clearance System(s): DTC or Physical Certificate(s) 2 Knock-in Event: Applicable. The "Knock-in Event" shall occur at the time that the disbursements contemplated by Section 2 of the Escrow Agreement (as defined in the Schedule to the Master Agreement) have been completed, but only if such disbursements are completed on or before the Knock-in Determination Day. Knock-in Determination Day(s): May 31, 2005 Procedures for Exercise: Latest Exercise Time: Notice given 12:00 noon, New York time, April 30, 2007 Expiration Time: The official closing time on the Exchange Expiration Date: May 31, 2007 Multiple Exercise: Not Applicable Automatic Exercise: Not Applicable Minimum Number of Options: The Number of Options. As a result, this Option may only be exercised in whole, and not in part. Seller's Telephone Number and Telex and/or Facsimile Number and Contact Details for purpose of giving Notice: Telephone: 801-523-6063 Facsimile: 801-576-0583 Settlement Terms: Physical Settlement: Applicable. Certificates with standard Rule 144 transfer restrictions may be used for good delivery. Settlement Currency: USD Settlement Method Election: Not Applicable Default Settlement Method: Physical Settlement Adjustments: Method of Adjustment: Calculation Agent Adjustment Options Exchange: Related Exchange Extraordinary Events: Consequences of Merger Events: Share-for-Share: Calculation Agent Adjustment Share-for-Other: Calculation Agent Adjustment Share-for-Combined: Calculation Agent Adjustment 3 Tender Offer: Applicable Consequences of Tender Offers: Share-for-Share: Calculation Agent Adjustment Share-for-Other: Calculation Agent Adjustment Share-for-Combined: Calculation Agent Adjustment Composition of Combined Consideration: Applicable Nationalization, Insolvency or Delisting: Negotiated Close-Out Additional Disruption Events: Change in Law: Applicable Failure to Deliver: Applicable Insolvency Filing: Applicable Determining Party: Cogent Non-Reliance: Applicable 4. Calculation Agent: Cogent 5. Account Details: Account for payments to Cogent: To be provided. Account for payments to Xstream Beverage Network: To be provided. Account for delivery of Shares to Xstream Beverage Network: To be provided. 6. Relationship between the parties: (a) Except as expressly provided herein, each party acknowledges that in connection with entering into this Transaction, it has not entered into any agreements, arrangements or understandings with the other party or any related entity of such party in relation to timing or manner of any acquisition or disposal of any Shares, the voting rights attaching to any Shares or the management of the Issuer. 4 7. Governing Law: the laws of the State of New York (without reference to choice of law doctrine). Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us or by sending to us a letter or telex substantially similar to this letter, which letter or telex sets forth the material terms of the Transaction to which this Confirmation relates and indicates your agreement to those terms. Yours sincerely, Cogent Capital Corp. By: /s/_____________________________ Gregory L. Kofford President Confirmed as of the date first above written: Xstream Beverage Network, Inc. By: /s/________________________________ Name: Theodore Farnswoth Title: CEO 5 EX-10.5 6 ex105.txt FORM OF LETTER AGREEMENT WITH COGENT CAPITAL Exhibit 10.5 [LOGO COGENT CAPITAL CORP.] Date: May 31, 2005 To: Xstream Beverage Network, Inc. From: Cogent Capital Corp. SUBJECT: EQUITY SWAP TRANSACTION -------------------------------- The purpose of this communication is to set forth the terms and conditions of the Swap transaction entered into on the Trade Date referred to below (the "Swap Transaction"), between Cogent Capital Corp., a Utah corporation ("Cogent" or "we") and Xstream Beverage Network, Inc., a Nevada corporation ("Xstream Beverage Network" or "you"). This communication constitutes a "Confirmation" as referred to in the ISDA Master Agreement specified below. This Confirmation incorporates the definitions and provisions contained in the 2002 ISDA Equity Derivatives Definitions as published by the International Swaps and Derivatives Association, Inc. (the "Equity Definitions"). In the event of any inconsistency between the Definitions and this Confirmation, this Confirmation will govern. 1. This Confirmation will supplement, form a part of, and be subject to the ISDA Master Agreement dated as of May 31, 2005 between Xstream Beverage Network and Cogent (the "Master Agreement"). All provisions contained in, or incorporated by reference to, the Master Agreement shall govern this Confirmation except as expressly modified below. In the event of any inconsistency between the provisions of that Master Agreement and this Confirmation, this Confirmation shall prevail for the purpose of this Swap Transaction. In addition, this Confirmation shall itself evidence a complete and binding agreement between you and us as to the terms and conditions of the Swap Transaction to which this Confirmation relates. Cogent and Xstream Beverage Network each represents that entering into the Swap Transaction is authorized and does not violate any laws of its jurisdiction of organization or residence or the terms of any agreement to which it is a party. Cogent and Xstream Beverage Network each represents that (i) it is not relying on the other party in connection with its decision to enter into this Swap Transaction, and neither party is acting as an advisor or fiduciary of the other party in connection with this Swap Transaction regardless of whether the other party provides it with market information or its views; (ii) it understands the risks of the Swap Transaction and any legal, regulatory, tax, accounting and economic consequences resulting therefrom; and (iii) it has determined based upon its own judgment and upon any advice received from its own professional advisors as it has deemed necessary to consult that entering into the Swap Transaction is appropriate for such party in light of its financial capabilities and objectives. 1 2. The terms of the particular Transaction to which this Confirmation relates are as follows: GENERAL TERMS: Trade Date: May 31, 2005 Effective Date: May 31, 2005 Termination Date: The earlier of: (i) November 30, 2008 and (ii) the 30th day after the Calculation Agent has determined that the Resale Condition (as defined below) has been satisfied with respect to all 8,421,060 of the Equity Shares (as defined below) or, if such day is not an Exchange Business Day, the first Exchange Business Day thereafter; provided that, if the Equity Option (as defined below) is exercised, then the Termination Date shall be the Expiration Date of the Equity Option. Shares: Xstream Beverage Network, Inc. common shares ("XSBV") CUSIP number Exchange: The primary exchange on which the shares are traded Related Exchange(s): The primary exchange on which listed options or futures on the Shares are traded. Knock-in Event: Applicable. The "Knock-in Event" shall occur at the time that the disbursements contemplated by Section 2 of the Escrow Agreement (as defined in the Schedule to the Master Agreement) have been completed, but only if such disbursements are completed on or before the Knock-in Determination Day. Knock-in Determination Day: May 31, 2005 Knock-out Event: Applicable. The "Knock-out Event" shall occur if the equity option evidenced by the Confirmation, dated May 31, 2005, between Xstream Beverage Network and Cogent (the "Equity Option") is exercised by Xstream Beverage Network. 2 Knock-out Price: The "Knock-Out Price" shall equal the Final Price as of the Termination Date (which shall be the Expiration Date of the Equity Option) and shall be determined in the manner provided below (including the use of Averaging as specified below). Knock-out Reference Security: Xstream Beverage Network, Inc. common shares ("XSBV") Knock-out Determination Day(s): April 30, 2007 Knock-out Valuation Time: The closing time on the Exchange Equity Amounts payable by Cogent Equity Amount Payer: Cogent Equity Amount Receiver: Counterparty Equity Amount: An amount determined by the Calculation Agent as of the Valuation Time on the Valuation Date equal to the product of the Equity Notional Amount as of the day and the Rate of Return, provided that, if the Equity Amount is a negative number, then the Equity Amount Receiver will pay (in addition to any other amounts payable by the Equity Amount Receiver) to the Equity Amount Payer the absolute value of the Equity Amount on the Termination Date. Number of Shares: 6,315,789 (subject to reduction as provided below) Equity Notional Amount: Number of Shares multiplied by the Initial Price Equity Notional Reset: Inapplicable Type of Return: Price Return Initial Price: $1.00 per Share Final Price: For any Valuation Date, the average of the Relevant Prices for the Averaging Dates relating to that Valuation Date. Valuation Time: The closing time on the Exchange Valuation Date: The Termination Date Averaging Dates: For any Valuation Date, the ten trading days up to and including that Valuation Date Averaging Date Disruption: Modified Postponement 3 Relevant Price: For each Averaging Date, the average of the bid and ask price per Share as determined by the Calculation Agent at the Valuation Time on that Averaging Date. Floating Amounts payable by Counterparty: Floating Amount Payer: Counterparty Notional Amount: The Equity Notional Amount Payment Dates: 1st day of each month Floating Rate Option: USD-LIBOR-BBA-2yr Spread: 3.50% Floating Rate Day Count Fraction: Actual/360 Reset Dates: Valuation Dates Initial Exchange Amount payable by Counterparty: Counterparty Initial Either (1) $540,000 cash or (2) 687,719 free trading/registered shares of Xstream common stock, par value $0.001 per share, CUSIP number plus $50,000 cash 50,000 shares common stock Xstream Beverage Network CUSIP Exchange Amount: Counterparty Initial Exchange Date: May 31, 2005 or completion of Knock-In Event whichever is earlier. Other Terms: Adjustment of Number of Shares: If no Knock-out Event has occurred and the Equity Option has expired, and this Transaction has not been otherwise terminated, the Number of Shares shall be reduced as follows: (i) If on the day occurring 27 months after the Trade Date, the Resale Condition (as defined below) is then satisfied with respect to not less than 3,157,902 of the Equity Shares (as defined below), the Number of Shares shall be reduced to 5,263,158 shares on the first Exchange Business Day thereafter, or, in the alternative, (ii) If on the day occurring 30 months after the Trade Date, the Resale Condition is then satisfied 4 with respect to not less than 4,210,533 Equity Shares, the Number of Shares shall be reduced to 4,210,526 shares on the first Exchange Business Day thereafter, (iii) If on the day occurring 33 months after the Trade Date, the Resale Condition is then satisfied with respect to not less than 5,263,165 Equity Shares, the Number of Shares shall be reduced to 3,157,895 shares on the first Exchange Business Day thereafter, (iv) If on the day occurring 36 months after the Trade Date, the Resale Condition is then satisfied with respect to not less than 6,315,796 Equity Shares, the Number of Shares shall be reduced to 2,105,263 shares on the first Exchange Business Day thereafter, and (v) If on the day occurring 39 months after the Trade Date, the Resale Condition is then satisfied with respect to not less than 7,368,428 Equity Shares, the Number of Shares shall be reduced to 1,052,632 shares on the first Exchange Business Day thereafter. The "Resale Condition" shall be deemed satisfied as of any day with respect to the number of Equity Shares that, as of such day, are then subject to an effective resale registration statement under the Securities Act of 1933, as amended, with the holders of such shares being named therein as selling shareholders or fully eligible for resale under paragraph (k) of Rule 144 adopted under the Securities Act of 1933. "Equity Shares" mean the shares originally purchased under the Subscription Agreements dated May 31, 2005 (the "Equity Shares") between Xstream Beverage Network and the investors named therein. Settlement Terms: Cash Settlement: Applicable Settlement Currency: USD Cash Settlement Payment Date: USD Currency Business Days after the relevant Valuation Date Settlement Method Election: Not Applicable Default Settlement Method: Cash Settlement Adjustments: Method of Adjustment: Calculation Agent Adjustment 5 Extraordinary Events: Consequences of Merger Events: Share-for-Share: Calculation Agent Adjustment Share-for-Other: Calculation Agent Adjustment Share-for-Combined: Calculation Agent Adjustment Determining Party: Cogent Tender Offer: Applicable Consequences of Tender Offers: Share-for-Share: Calculation Agent Adjustment Share-for-Other: Calculation Agent Adjustment Share-for-Combined: Component Adjustment Determining Party: Cogent Composition of Combined Consideration: Applicable Nationalization, Insolvency or Delisting: Negotiated Close-out Determining Party: Cogent Additional Disruption Events: Change in Law: Applicable Failure to Deliver: Applicable Insolvency Filing: Applicable Determining Party: Cogent Non-Reliance: Applicable Agreements and Acknowledgments Regarding Hedging Activities: Not Applicable Additional Acknowledgments: Applicable 6 4. Credit Support Annex: For purposes of Paragraph 13 of the Credit Support Annex to the Master Agreement, the "Independent Amount" for this Transaction shall equal the Equity Notional Amount. 5. Additional Termination Events: The parties agree that, for purposes of the Master Agreement, an "Additional Termination Event" shall occur if the Resale Condition has not been satisfied with respect to all 8,421,060 of the Equity Shares by no later than November 30, 2008; and for purposes of that Additional Termination Event, Xstream Beverage Network shall be the sole Affected Party. 6. Calculation Agent: Cogent 7. Account Details: Account for payments to Cogent: To be provided. Account for payments to Xstream Beverage Network: To be provided. 8. Relationship between the parties: (a) Except as expressly provided herein, each party acknowledges that in connection with entering into this Transaction, it has not entered into any agreements, arrangements or understandings with the other party or any related entity of such party in relation to timing or manner of any acquisition or disposal of any Shares, the voting rights attaching to any Shares or the management of the Issuer. 9. Governing Law: the laws of the State of New York (without reference to choice of law doctrine). Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us by facsimile at (801) 576-0583. Yours sincerely, Cogent Capital Corp. By: /s/ ____________________________ Gregory L. Kofford President Confirmed as of the date first above written: Xstream Beverage Network, Inc. By: /s/___________________ Name: Theordore Farnsworth Title: CEO 7 EX-10.6 7 ex106.txt FORM OF ESCROW AGREEMENT WITH COGENT CAPITAL EXHIBIT 10.6 ESCROW AGREEMENT This Escrow Agreement, dated as of May 31, 2005 ("Escrow Agreement"), is entered into by and among Cogent Capital Corp., a Utah corporation ("Cogent"), Xstream Beverage Network, Inc., a Nevada corporation ("Xstream"), [list investors] and Investors Bank & Trust Company, a Massachusetts trust company ("Escrow Agent"). Whereas, [investor] and Xstream are parties to a Subscription Agreement, dated May 31, 2005; and Whereas, [investor] and Xstream are parties to a Subscription Agreement, dated May 31, 2005; and Whereas, [investor] and Xstream are parties to a Subscription Agreement, dated May 31, 2005; and Whereas, [investor] and Xstream are parties to a Subscription Agreement, dated May 31, 2005; and Whereas, [investor] and Xstream are parties to a Subscription Agreement, dated May 31, 2005; and Whereas, Cogent and Xstream are parties to the ISDA Master Agreement, Equity Swap Confirmation, Call Option Confirmation and ISDA Credit Support Annex, dated May 31, 2005 (collectively the "Swap Agreements"); and Whereas, each Subscription Agreement provides for the delivery of certain consideration and property to effect the transactions contemplated thereby; and Whereas, the Swap Agreements provide for the delivery of certain consideration and property to effect the transactions contemplated thereby; and Whereas, Escrow Agent has agreed to serve as Escrow Agent pursuant to the terms set forth herein. Now, therefore, the parties hereto agree to the following terms: 1. DELIVERIES IN ESCROW. On or before May 31, 2005 (the "Delivery Date") Cogent, [investors] and Xstream shall deliver or deposit with the Escrow Agent according to the delivery instructions as outlined in Exhibit "B" the following (collectively the "Deliveries"): (a) By [investor], US Treasury Notes and Strips with a market value on the date immediately preceding the date of delivery to the Escrow Agent of at least $1,200,000 based on current market quote at the time of 1 delivery, together with a schedule listing for each Note and Strip the exact amount, maturity, and CUSIP number (the "A bonds"); and (b) By [investor], US Treasury Notes and Strips with a market value on the date immediately preceding the date of delivery to the Escrow Agent of at least $1,200,000 based on current market quote at the time of delivery, together with a schedule listing for each Note and Strip the exact amount, maturity, and CUSIP number (the "B bonds"); and (c) By [investor], US Treasury Notes and Strips with a market value on the date immediately preceding the date of delivery to the Escrow Agent of at least $1,200,000 based on current market quote at the time of delivery, together with a schedule listing for each Note and Strip the exact amount, maturity, and CUSIP number (the "C bonds"); and (d) By [investor], US Treasury Notes and Strips with a market value on the date immediately preceding the date of delivery to the Escrow Agent of at least $1,200,000 based on current market quote at the time of delivery, together with a schedule listing for each Note and Strip the exact amount, maturity, and CUSIP number (the "D bonds"); and (e) By [investor], US Treasury Notes and Strips with a market value on the date immediately preceding the date of delivery to the Escrow Agent of at least $1,200,000 based on current market quote at the time of delivery, together with a schedule listing for each Note and Strip the exact amount, maturity, and CUSIP number (the "E bonds"); and (f) By Xstream, (i) 1,684,212 shares of Xstream common stock, par value $0.001 per share, CUSIP number , in two certificates with standard restrictions as defined in the Subscription Agreement issued in the name of [investor], one certificate shall be in the amount of 1,263,159 shares and the other in the amount of 421,053 shares (the "A Shares"); and (ii) 1,684,212 shares of Xstream common stock, par value $0.001 per share, CUSIP number , in two certificates with standard restrictions as defined in the Subscription Agreement issued in the name of [investor], one certificate shall be in the amount of 1,263,159 shares and the other in the amount of 421,053 shares (the "B Shares"); and (iii) 1,684,212 shares of Xstream common stock, par value $0.001 per share, CUSIP number , in two certificates with standard restrictions as defined in the Subscription Agreement issued in the name of [investor], one certificate shall be in the amount of 1,263,159 shares and the other in the amount of 421,053 shares (the "C Shares"); and 2 (iv) 1,684,212 shares of Xstream common stock, par value $0.001 per share, CUSIP number , in two certificates with standard restrictions as defined in the Subscription Agreement issued in the name of [investor], one certificate shall be in the amount of 1,263,159 shares and the other in the amount of 421,053 shares (the "D Shares"); and (v) 1,684,212 shares of Xstream common stock, par value $0.001 per share, CUSIP number , in two certificates with standard restrictions as defined in the Subscription Agreement issued in the name of [investor], one certificate shall be in the amount of 1,263,159 shares and the other in the amount of 421,053 shares (the "E Shares"); and (vi) Either (1) $540,000 cash or (2) 687,719 free trading/registered shares of Xstream common stock, par value $0.001 per share, CUSIP number plus $50,000 cash , (either (1) or (2) being the "Initial Exchange Amount" as defined under the Swap Agreements). (vii) $55,000 interest impound. If all of the foregoing Deliveries are not received by the Escrow Agent on or before the Delivery Date, then the Escrow Agent shall be directed by either Cogent or Xstream to terminate the Escrow Agreement and to return to Cogent and Xstream their respective Deliveries, if any, made to the Escrow Agent on or before that date. 2. DISBURSEMENT OF DELIVERIES. If the Escrow Agent receives all of the Deliveries on or before the Delivery Date, within three business days following the Delivery Date the Escrow Agent will be directed by Cogent or Xstream to disburse the Deliveries as follows: (a) The A Bonds, the B Bonds, the C Bonds, the D Bonds and the E Bonds will be transferred to account number at Escrow Agent titled "Cogent Capital for the benefit of Xstream Beverage Network, Inc." (the "Collateral Account"); (b) The A Shares will be transferred to account number [ ] at Escrow Agent; (c) The B Shares will be transferred to account number [ ] at Escrow Agent; (d) The C Shares will be transferred to account number [ ] at Escrow Agent; (e) The D Shares will be transferred to account number [ ] at Escrow Agent; (f) The E Shares will be transferred to account number [ ] at Escrow Agent (g) The Initial Exchange Amount will be transferred to account number 4735938 at Escrow Agent. 3 (h) The interest impound to account number [ ] at Escrow Agent. 3. COLLATERAL ACCOUNT. (a) Cogent and Xstream are parties to that certain ISDA Master Agreement, dated as of May 31, 2005 (the "Master Agreement") and the Credit Support Annex thereto (the "CSA"), and have executed two Confirmations, dated as of May 31, 2005, evidencing Transactions that are subject to the Master Agreement. Cogent and Xstream hereby notify the Escrow Agent that pursuant to the CSA and the Confirmations Xstream has granted Cogent a security interest in the Collateral Account and all financial assets and other items therein. The Escrow Agent acknowledges being so notified and confirms that it has no actual knowledge or notice of any restraint, security interest, lien or other adverse claim in or to the Collateral Account or any item therein. All items in the Collateral Account shall be treated as "financial assets" within the meaning of the New York Uniform Commercial Code (the "Code"). (b) The Escrow Agent shall comply with all withdrawal, transfer, payment and redemption instructions, and all other entitlement orders (as defined in the Code) (collectively, "orders") received from Cogent (without further consent from Xstream) concerning the Collateral Account. The Escrow Agent shall not honor any orders from Xstream with respect to the Collateral Account, unless otherwise authorized to do so pursuant to written instructions from Cogent. The Escrow Agent shall not change the name or account number of the Collateral Account without having received Cogent's prior express written consent thereto. (c) The Escrow Agent waives, releases and agrees not to assert, exercise or claim any lien, encumbrance, right (including setoff right) or other claim against the Collateral Account or any financial asset, cash balance or other item therein, except with respect to payment (i) of customary fees and commissions with respect to the routine maintenance and operation of the Collateral Account or (ii) for financial assets duly purchased for the Collateral Account in accordance with the provisions hereof, in each case as provided for under any agreements between Cogent and Xstream relating to the Collateral Account. The Escrow Agent shall neither advance margin or other credit against the Collateral Account, nor hypothecate any financial assets carried in the Collateral Account, without the prior written consent of Cogent. Except as required by law, the Escrow Agent shall not agree with any other person or entity that it will comply with any withdrawal, transfer, payment and redemption instructions, or any other entitlement or other orders, from such person or entity concerning the Collateral Account or any items therein, without the prior written consent of Cogent and any such agreement entered into without such consent shall be null and void. 4. DUTY OF THE ESCROW AGENT. The sole duties and responsibilities of the Escrow Agent shall be to receive and hold the Deliveries, and disburse the Deliveries pursuant to Section 2 of this Agreement and to perform the duties and responsibilities with respect to the Collateral Account expressly set forth in writing herein (and in its standard securities accounts documentation and terms and conditions as in effect from time to time, all of which shall apply to the Accounts to the extent not inconsistent with this Agreement). Escrow Agent is not responsible for any of the respective duties or obligations of Aegis 4 Assessments and Cogent under the Master Agreement, the CSA or the Confirmations, and all references in this Agreement to the Master Agreement, the CSA or the Confirmations or any other agreements are for the convenience of the parties hereto, and Escrow Agent shall have no duties or responsibilities with respect thereto. Escrow Agent is not responsible for accounting or maintaining any records other than to document the property received and Deliveries disbursed as directed. Notwithstanding any item discussed herein, Escrow Agent has no discretion over the Deliveries deposited with it and cannot be held liable for any problem or dispute relating to such assets. All property received by the Escrow Agent in the Collateral Account will be reported for accounting purposes only. 5. DOCUMENTS. The Escrow Agent may conclusively rely upon and shall be protected in acting upon any statement, certificate, notice, request, consent, order or other document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Escrow Agent shall have no duty or liability to verify any such statement, certificate, notice, request, consent, order, or other document and its sole responsibility shall be to act only as expressly set forth in this Escrow Agreement. The Escrow Agent shall be under no obligation to institute or defend any action, suit or proceeding in connection with this Escrow Agreement unless first indemnified to its satisfaction by Cogent and Xstream. 6. FEES. The Escrow Agent shall be entitled to compensation for its services as stated in the fee schedule attached hereto as Exhibit A, which compensation shall be paid by Xstream. The fee agreed upon for the services rendered hereunder is intended as full compensation for the Escrow Agent's services as contemplated by this Escrow Agreement; provided, however, that in the event that the conditions for the disbursement of property under the Escrow Agreement are not fulfilled, or the Escrow Agent renders any material service not contemplated in the Escrow Agreement, or there is any assignment of interest in the subject matter of the Escrow Agreement, or any material modification hereof, or if any material controversy arises hereunder, or the Escrow Agent is made a party to any litigation pertaining to the Escrow Agreement, or the subject matter hereof, then the Escrow Agent shall be reasonably compensated for such extraordinary services and reimbursed for all costs and expenses, including reasonable attorney's fees, occasioned by any delay, controversy, litigation or event, and the same shall be recoverable from Xstream; provided, however, that to the extent Xstream is required to pay any such costs or expenses to the Escrow Agent pursuant to the provisions of this Section 5 as a result of the fault or negligence of Cogent, Xstream shall be entitled to recover such amount from Cogent. 7. INDEMNIFICATION OF ESCROW AGENT. Cogent and Xstream, both jointly and severally hereby indemnify and hold harmless the Escrow Agent from and against, any and all loss, liability, cost, damage and expense, including, without limitation, reasonable counsel fees, which the Escrow Agent may suffer or incur by reason of any action, claim or proceeding brought against the Escrow Agent arising out of or relating in any way to this Escrow Agreement or any transaction to which this Escrow Agreement relates unless such action, claim or proceeding is the result of the gross negligence of the Escrow Agent. To the extent Xstream or Cogent is required to pay any such loss, liability, damage, cost or expense to the Escrow Agent pursuant to the provisions of this Section 6 as a result of the fault or negligence of the other party, Xstream or Cogent, as applicable, shall be entitled to recover such amount from the other party. The Escrow Agent may consult counsel with respect of any question arising under the Escrow Agreement and the Escrow Agent shall not be liable for any action taken or omitted in good faith upon advice of such counsel. The obligation of Cogent 5 and Xstream under this Section 6 shall survive the termination of this Agreement or the resignation or removal of the Escrow Agent. 8. NOTICES. All notices, requests, demands, and other communications under this Escrow Agreement shall be in writing and shall be deemed to have been duly given (a) on the date of service if served personally on the party to whom notice is to be given, (b) on the day of transmission if sent by facsimile/email transmission to the facsimile number/email address given below, and telephonic confirmation of receipt is obtained promptly after completion of transmission, (c) on the day after delivery to Federal Express or similar overnight courier or the Express Mail service maintained by the United States Postal Service, or (d) on the fifth day after mailing, if mailed to the party to whom notice is to be given, by first class mail, registered or certified, postage prepaid, and properly addressed, return receipt requested, to the party as follows: If to Cogent: - ------------- Cogent Capital Escrow Attn: Gregory L. Kofford, President 11444 South 1780 East Sandy, Utah 84092 Telephone: (801) 523-6063 Fax: (801) 576-0583 If to Xstream: - -------------- Xstream Beverage Network, Inc. Attn: Telephone: Fax: If to [investor]: - ----------------- [investor] If to [investor]: - ----------------- [investor] If to [investor]: - ----------------- [investor] If to [investor]: - ----------------- [investor] If to [investor]: - ----------------- [investor] 6 If to Escrow Agent: - ------------------- Investor's Bank & Trust Company Attn: ___________________________ _________________________________ _________________________________ Telephone: ______________________ Fax: ____________________________ Any party may change its address for purposes of this paragraph by giving the other parties written notice of the new address in the manner set forth above. 9. SUCCESSORS AND ASSIGNS. Except as otherwise provided in this Escrow Agreement, no party hereto shall assign this Escrow Agreement or any rights or obligations hereunder without the prior written consent of the other parties hereto and any such attempted assignment without such prior written consent shall be void and of no force and effect. This Escrow Agreement shall inure to the benefit of and shall be binding upon the successors and permitted assigns of the parties hereto. 10. GOVERNING LAW; JURISDICTION. This Escrow Agreement shall be construed, performed, and enforced in accordance with, and governed by, the laws of the Commonwealth of Massachusetts, without giving effect to the principles of conflicts of laws thereof. [This is intended to be "an agreement" within the meaning of Section 8-110(e) of the Code and the terms "financial assets" and "entitlement orders" herein shall include the respective meanings given such terms in Article 8 of such Code.] 11. SEVERABILITY. In the event that any part of this Escrow Agreement is declared by any court or other judicial or administrative body to be null, void, or unenforceable, said provision shall survive to the extent it is not so declared, and all of the other provisions of this Escrow Agreement shall remain in full force and effect. 12. AMENDMENTS; WAIVERS. This Escrow Agreement may be amended or modified, and any of the terms, covenants, or conditions hereof may be waived, only by a written instrument executed by the parties hereto, or in the case of a waiver, by the party waiving compliance. Any waiver by any party of any condition, or of the breach of any provision, term, or covenant contained in this Escrow Agreement, in any one or more instances, shall not be deemed to be nor construed as further or continuing waiver of any such condition, or of the breach of any other provision, term, or covenant of this Escrow Agreement. 13. ENTIRE AGREEMENT. This Escrow Agreement contains the entire understanding among the parties hereto with respect to the escrow contemplated hereby and 7 supersedes and replaces all prior and contemporaneous agreements and understandings, oral or written, with regard to such escrow. 14. SECTION HEADINGS. The section headings in this Escrow Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Escrow Agreement. 15. COUNTERPARTS. This Escrow Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which shall constitute the same instrument. 16. RESIGNATIONS AND TERMINATION. Escrow Agent may resign upon 30 days advance written notice to the parties hereto. If a successor Escrow Agent is not appointed within the 30-day period following such notice, Escrow Agent may petition any court of competent jurisdiction to name a successor Escrow Agent or interplead the Deliveries with such court, whereupon Escrow Agent's duties hereunder shall terminate upon the naming of a successor or interpleader of the Deliveries. This Escrow Agreement shall terminate upon completion of the final disbursement by the Escrow Agent pursuant to paragraph 2 above. IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to be executed the day and year first set forth above. COGENT CAPITAL CORP. By: __________________________________ Gregory L. Kofford, President 8 XSTREAM, INC. By: __________________________________ [NAME/TITLE] [INVESTOR] By: __________________________________ [NAME/TITLE] [INVESTOR] By: __________________________________ [NAME/TITLE] [INVESTOR] By: __________________________________ [NAME/TITLE] [INVESTOR] By: __________________________________ [NAME/TITLE] [INVESTOR] By: __________________________________ [NAME/TITLE] INVESTORS BANK & TRUST COMPANY By: __________________________________ Name:_________________________________ Its: _________________________________ 9 Exhibit A Escrow Agent fees Annual Escrow Agent Fee: $3,000 10 Exhibit B INVESTORS BANK & TRUST COMPANY DELIVERY INSTRUCTIONS FOR ACCOUNTS SERVICED OUT OF: BOSTON TRUST, INSTITUTIONAL CUSTODY AND RETIREMENT PLAN SERVICES Account #: 4736811 Account Name: Cogent Capital Escrow ---------------------- ----------------------- Administrator: Carol Nicholls Phone (617) 204-8423 ---------------------- ----------------------- - ------------------------------------------------------------------------------------------------------- INVESTORS BANK MAILING INSTRUCTIONS DTC INELIGIBLE SECURITIES -UNRESTRICTED Investors Bank and Trust Company The Bank of New York OVERNIGHT One Wall Street, 3rd Floor 200 Clarendon Street, TAD 058, 16th Floor Window A Attn: Carol Nicholls New York, NY 10286 Boston, MA 02116 A/C Name: Investors Bank & Trust Company REGULAR MAIL A/C#: 017198 P.O. Box 300, TAD 058 4736811 Cogent Capital Escrow Attn: Carol Nicholls Boston, MA 02117-0300 DTC INELIGIBLE - RESTRICTED / NON-TRANSFERABLE ---------------------------------------------- SECURITIES (MUST BE HELD IN CLIENT NAME) DTC ELIGIBLE SECURITIES The Bank of New York - ----------------------- Agent Bank Name: Investors Bank & Trust Company One Wall Street, 3rd Floor *Agent Bank Number 26016 Window A Institutional ID: 28166 New York, NY 10286 DTC Participant Number: 2132 A/C Name: Investors Bank & Trust Company 4736811 - Cogent Capital Escrow A/C#: 017200 4736811 Cogent Capital Escrow GOVERNMENT ISSUES DELIVERED THROUGH FED BOOK ENTRY ABA #011001438 DTC INELIGIBLE - RESTRICTED SECURITIES (WILL BE ----------------------------------------------- INV BK BOS/1020 REREGISTERED INTO NOMINEE NAME) ------------------------------- Cogent Capital Escrow - 4736811 The Bank of New York One Wall Street, 3rd Floor GNMA SECURITIES DELIVERED THROUGH FED BOOK ENTRY Window A - ------------------------------------------------- EFFECTIVE 12/6/02 New York, NY 10286 - ----------------- Federal Reserve Bank of Boston A/C Name: Investors Bank & Trust Company ABA #011001438 - A/C#: 017195 Investors Bank & Trust Co. - Boston Cogent Capital Escrow - 4736811 Sub Account: #1020 FFC: (4736811 Cogent Capital Escrow) REGISTRATION INSTRUCTIONS FOR BROKER ACCOUNTS --------------------------------------------- Saturn & Co. Tax ID No. 04-2457313 ACH TRANSFERS IBT A/C #: 4736811 - ------------- ABA # 011001438 Account Name: Cogent Capital Escrow 4736811 Attn: Trade Processing TAD 58 Cogent Capital Escrow P.O. Box 9130 Boston, MA 02117-9130 FED WIRE CASH TRANSFERS {3400} Receiving Bank: DTC ELIGIBLE PHYSICAL CERTIFICATES INSTRUCTIONS ABA number: 011001438 Depository Trust Company Short Name: Investors Bk Bos 55 Water Street ABA Lookup: Investors Bank & Trust Co. New York Window - Concourse Level Boston, MA New York, NY 10041 Attn: Participant # 2132 - IBT {4100} Beneficiary's Bank: 569530395 Attn: Robert Mendez {4200} Beneficiary: 4736811 IBT Acct #: 4736811 {4320} Reference for Beneficiary: Cogent Capital Escrow Note: Send all legal documentation (ex. Stock powers) to the administrator at Investors Bank & Trust via mail - --------------------------------------------------------------------------------------------------------
11 EX-10.7 8 ex107.txt FORM OF REGISTRATION RIGHTS AGREMENT EXHIBIT 10.7 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered into as of June __, 2005, by and between XSTREAM BEVERAGE GROUP, INC., a Nevada corporation (the "Company"), and COGENT CAPITAL CORP. (the "Purchaser"). This Agreement is made pursuant to certain agreements dated as of the date hereof, by and between the Purchaser and the Company. The Company and the Purchaser hereby agree as follows: 1. Definitions. As used in this Agreement, the following terms shall have the following meanings: "Commission" means the Securities and Exchange Commission. "Common Stock" means shares of the Company's common stock, par value $0.001 per share. "Effectiveness Period" shall have the meaning set forth in Section 2(a). "Exchange Act" means the Securities Exchange Act of 1934, as amended, and any successor statute. "Indemnified Party" shall have the meaning set forth in Section 5(c). "Indemnifying Party" shall have the meaning set forth in Section 5(c). "Proceeding" means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened. "Prospectus" means the prospectus included in the Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. "Registrable Securities" means the 1,381,579 shares of Common Stock issued to Purchaser. "Registration Statement" means each registration statement required to be filed hereunder, including the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. "Rule 144" means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "Rule 415" means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "Rule 424" means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "Securities Act" means the Securities Act of 1933, as amended, and any successor statute. "Trading Market" means any of the NASD OTCBB, NASDAQ SmallCap Market, the Nasdaq National Market, the American Stock Exchange or the New York Stock Exchange. 2. Registration. (a) At the request of the Purchaser, the Company shall prepare and file with the Commission a Registration Statement covering the Registrable Securities for an offering to be made on a continuous basis pursuant to Rule 415. The Registration Statement shall be on Form SB-2 (except if the Company is not then eligible to register for resale the Registrable Securities on Form SB-2, in which case such registration shall be on another appropriate form in accordance herewith). The Company shall cause the Registration Statement to become effective and remain effective as provided herein. The Company shall use its reasonable commercial efforts to cause the Registration Statement to be declared effective under the Securities Act as promptly as possible after the filing thereof. The Company shall use its reasonable commercial efforts to keep the Registration Statement continuously effective under the Securities Act until the date which is the earlier date of when (i) all Registrable Securities have been sold or (ii) all Registrable Securities may be sold immediately without registration under the Securities Act and without volume restrictions pursuant to Rule 144(k), as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Company's transfer agent and the Purchaser (the "Effectiveness Period"). (b) The Company may defer the filing of the Registration Statement until the Company completes the registration process for any 2 registration statement currently being reviewed by the Securities and Exchange Commission or subject to the registration rights of others which exist prior to the date of this Agreement. (c) Within three business days of the Effectiveness Date, the Company shall cause its counsel to issue a blanket opinion in the form attached hereto as Exhibit A, to the transfer agent stating that the shares are subject to an effective registration statement and can be reissued free of restrictive legend upon notice of a sale by Purchaser and confirmation by Purchaser that it has complied with the prospectus delivery requirements, provided that the Company has not advised the transfer agent orally or in writing that the opinion has been withdrawn. Copies of the blanket opinion required by this Section 2(c) shall be delivered to Purchaser within the time frame set forth above. 3. Registration Procedures. If and whenever the Company is required by the provisions hereof to effect the registration of any Registrable Securities under the Securities Act, the Company will, as expeditiously as possible: (a) prepare and file with the Commission the Registration Statement with respect to such Registrable Securities, respond as promptly as possible to any comments received from the Commission, and use its best efforts to cause the Registration Statement to become and remain effective, and promptly provide, if requested, to the Purchaser copies of all filings and Commission letters of comment relating thereto; (b) prepare and file with the Commission such amendments and supplements to the Registration Statement and the Prospectus used in connection therewith as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by the Registration Statement and to keep such Registration Statement effective until the expiration of the Effectiveness Period; (c) furnish to the Purchaser such number of copies of the Registration Statement and the Prospectus included therein (including each preliminary Prospectus) as the Purchaser reasonably may request to facilitate the public sale or disposition of the Registrable Securities covered by the Registration Statement; (d) use its commercially reasonable efforts to register or qualify the Purchaser's Registrable Securities covered by the Registration Statement under the securities or "blue sky" laws of such jurisdictions within the United States as the Purchaser may reasonably request, provided, however, that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction; (e) list the Registrable Securities covered by the Registration Statement with any securities exchange on which the Common Stock of the Company is then listed; (f) immediately notify the Purchaser at any time when a Prospectus relating thereto is required to be delivered under the 3 Securities Act, of the happening of any event of which the Company has knowledge as a result of which the Prospectus contained in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; and (g) make available for inspection by the Purchaser and any attorney, accountant or other agent retained by the Purchaser, all publicly available, non-confidential financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors and employees to supply all publicly available, non-confidential information reasonably requested by the attorney, accountant or agent of the Purchaser. 4. Registration Expenses. All expenses relating to the Company's compliance with Sections 2 and 3 hereof, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel and independent public accountants for the Company, fees and expenses (including reasonable counsel fees) incurred in connection with complying with state securities or "blue sky" laws, fees of the NASD, transfer taxes, fees of transfer agents and registrars are called "Registration Expenses." All selling commissions applicable to the sale of Registrable Securities, including any fees and disbursements of any special counsel to the Purchaser are called "Selling Expenses." The Company shall only be responsible for all Registration Expenses but not Selling Expenses. 5. Indemnification. (a) In the event of a registration of any Registrable Securities under the Securities Act pursuant to this Agreement, the Company will indemnify and hold harmless the Purchaser, and its officers, directors and each other person, if any, who controls the Purchaser within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which the Purchaser, or such persons may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement under which such Registrable Securities were registered under the Securities Act pursuant to this Agreement, any preliminary Prospectus or final Prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Purchaser, and each such person for any reasonable legal or other expenses incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by or on behalf of the Purchaser or any such person in writing specifically for use in any such document. (b) In the event of a registration of the Registrable Securities under the Securities Act pursuant to this Agreement, the 4 Purchaser will indemnify and hold harmless the Company, and its officers, directors and each other person, if any, who controls the Company within the meaning of the Securities Act, against all losses, claims, damages or liabilities, joint or several, to which the Company or such persons may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact which was furnished in writing by the Purchaser to the Company expressly for use in (and such information is contained in) the Registration Statement under which such Registrable Securities were registered under the Securities Act pursuant to this Agreement, any preliminary Prospectus or final Prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and each such person for any reasonable legal or other expenses incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action, provided, however, that the Purchaser will be liable in any such case if and only to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished in writing to the Company by or on behalf of the Purchaser specifically for use in any such document. Notwithstanding the provisions of this paragraph, the Purchaser shall not be required to indemnify any person or entity in excess of the amount of the aggregate net proceeds received by the Purchaser in respect of Registrable Securities in connection with any such registration under the Securities Act. (c) Promptly after receipt by a party entitled to claim indemnification hereunder (an "Indemnified Party") of notice of the commencement of any action, such Indemnified Party shall, if a claim for indemnification in respect thereof is to be made against a party hereto obligated to indemnify such Indemnified Party (an "Indemnifying Party"), notify the Indemnifying Party in writing thereof, but the omission so to notify the Indemnifying Party shall not relieve it from any liability which it may have to such Indemnified Party other than under this Section 5(c) and shall only relieve it from any liability which it may have to such Indemnified Party under this Section 5(c) if and to the extent the Indemnifying Party is prejudiced by such omission. In case any such action shall be brought against any Indemnified Party and it shall notify the Indemnifying Party of the commencement thereof, the Indemnifying Party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel satisfactory to such Indemnified Party, and, after notice from the Indemnifying Party to such Indemnified Party of its election so to assume and undertake the defense thereof, the Indemnifying Party shall not be liable to such Indemnified Party under this Section 5(c) for any legal expenses subsequently incurred by such Indemnified Party in connection with the defense thereof; if the Indemnified Party retains its own counsel, then the Indemnified Party shall pay all fees, costs and expenses of such counsel, provided, however, that, if the defendants in any such action include both the indemnified party and the Indemnifying Party and the Indemnified Party shall have reasonably concluded that there may be reasonable defenses available to it which are different from or additional to those available to the Indemnifying Party or if the interests of the Indemnified Party reasonably may be deemed to conflict with the interests of the Indemnifying Party, the Indemnified Party shall have the right to select one separate counsel and to assume such 5 legal defenses and otherwise to participate in the defense of such action, with the reasonable expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the Indemnifying Party as incurred. (d) In order to provide for just and equitable contribution in the event of joint liability under the Securities Act in any case in which either (i) the Purchaser, or any officer, director or controlling person of the Purchaser, makes a claim for indemnification pursuant to this Section 5 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 5 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of the Purchaser or such officer, director or controlling person of the Purchaser in circumstances for which indemnification is provided under this Section 5; then, and in each such case, the Company and the Purchaser will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion so that the Purchaser is responsible only for the portion represented by the percentage that the public offering price of its securities offered by the Registration Statement bears to the public offering price of all securities offered by such Registration Statement, provided, however, that, in any such case, (A) the Purchaser will not be required to contribute any amount in excess of the public offering price of all such securities offered by it pursuant to such Registration Statement; and (B) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 10(f) of the Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation. 6. Miscellaneous. (a) Remedies. In the event of a breach by the Company or by Purchaser, of any of their respective obligations under this Agreement, Purchaser or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. (b) Compliance. Purchaser covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it in connection with sales of Registrable Securities pursuant to the Registration Statement. (c) Discontinued Disposition. Purchaser agrees by its acquisition of such Registrable Securities that, upon receipt of a notice from the Company of the occurrence of a Discontinuation Event (as defined below), Purchaser will forthwith discontinue disposition of such Registrable Securities under the applicable Registration Statement until such Purchaser's receipt of the copies of the supplemented Prospectus and/or amended Registration Statement or until it is advised in writing (the "Advice") by the Company that the use of the applicable 6 Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus or Registration Statement. The Company may provide appropriate stop orders to enforce the provisions of this paragraph. For purposes of this Section 6(c), a "Discontinuation Event" shall mean (i) when the Commission notifies the Company whether there will be a "review" of such Registration Statement and whenever the Commission comments in writing on such Registration Statement (the Company shall provide true and complete copies thereof and all written responses thereto to each Purchaser); (ii) any request by the Commission or any other Federal or state governmental authority for amendments or supplements to such Registration Statement or Prospectus or for additional information; (iii) the issuance by the Commission of any stop order suspending the effectiveness of such Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iv) the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and/or (v) the occurrence of any event or passage of time that makes the financial statements included in such Registration Statement ineligible for inclusion therein or any statement made in such Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to such Registration Statement, Prospectus or other documents so that, in the case of such Registration Statement or Prospectus, as the case may be, it will not contain 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, in light of the circumstances under which they were made, not misleading. (d) Piggy-Back Registrations. If at any time during the Effectiveness Period there is not an effective Registration Statement covering all of the Registrable Securities and the Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans, then the Company shall send to Purchaser written notice of such determination and, if within fifteen days after receipt of such notice, if Purchaser shall so request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities, provided the Company may do so without violating registration rights of others which exist as of the date of this Agreement, subject to customary underwriter cutbacks applicable to all holders of registration rights and subject to obtaining any required consent currently in existence of any selling stockholder(s) to such inclusion under such registration statement. (e) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and Purchaser. 7 (f) Notices. Any notice or request hereunder may be given to the Company or Purchaser at the respective addresses set forth below or as may hereafter be specified in a notice designated as a change of address under this Section 6(f). Any notice or request hereunder shall be given by registered or certified mail, return receipt requested, hand delivery, overnight mail, Federal Express or other national overnight next day carrier (collectively, "Courier") or telecopy (confirmed by mail). Notices and requests shall be, in the case of those by hand delivery, deemed to have been given when delivered to any party to whom it is addressed, in the case of those by mail or overnight mail, deemed to have been given three (3) business days after the date when deposited in the mail or with the overnight mail carrier, in the case of a Courier, the next business day following timely delivery of the package with the Courier, and, in the case of a telecopy, when confirmed. The address for such notices and communications shall be as follows: If to the Company: Xstream Beverage Group, Inc. 4800 N.W. 15th Avenue, Bay 1-A, Fort Lauderdale, Florida 33308 Attention: Jerry Pearring Facsimile: 954-598-7996 If to Purchaser: Cogent Capital Corp. 11444 South 1780 East Sandy, Utah 84092 Attention: Gregory L. Kofford Facsimile: 801-576-0583 or such other address as may be designated in writing hereafter in accordance with this Section 6(f) by such Person. (g) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of Purchaser. The Company may not assign its rights or obligations hereunder without the prior written consent of Purchaser. Purchaser may assign its respective rights hereunder with the prior written consent of the Company, which consent shall not be unreasonably withheld. (h) Execution and Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature were the original thereof. (i) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Nevada, without regard to the principles of conflicts of law thereof. 8 (j) Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. (k) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (l) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above. XSTREAM BEVERAGE GROUP, INC. By: --------------------------- Barry H. Willson Vice Chairman COGENT CAPITAL CORP. By: --------------------------- Gregory L. Kofford President 9 -----END PRIVACY-ENHANCED MESSAGE-----