April 5, 2013

 

Xzeres Corp

9025 Southwest Hillman Court #3124

Wilsonville, Oregon 077070

Attention: Mr. Steve Shum

Chief Executive Officer

 

Gentlemen:

 

We are pleased to confirm the arrangements under which Max Value Advisors, LLC
(“Financial Advisor”) has been exclusively engaged by each of Xzeres Corp
(“Xzeres Corp”) and Xzeres Energy Services Corporation (“Energy”) and Xzeres
Wind Europe, Ltd (“Wind, together with Xzeres Corp and Energy, collectively, the
“Company” or “Xzeres”) to provide strategic consulting services related to the
Company’s existing and future operations and financial advisory services related
to any M&A Transaction, Financing Transaction, or combination thereof, whether
effectuated in one transaction or a series of transaction (each a “Transaction”)
or such other services as the Company requires.

 

During the term of its engagement, Financial Advisor will provide such financial
advice and assistance in connection with a potential Transaction as the Company
may reasonably request. It is understood that assistance rendered by Financial
Advisor with respect to the Transaction will be on a “best efforts” basis.

 

Financial Advisor’s Role

 

Financial Advisor will:

 

 * Evaluate the Company’s strategic options, including a possible sale or
   disposition of the Company’s assets, the Company’s debt capacity and
   alternative capital structures, and the Company’s ability to raise additional
   equity capital;
 * Advise the Company as its exclusive financial advisor on all aspects of a
   potential Transaction, including timing, structure and terms;
 * Assist the Company, if required, to draft an informational offering
   memorandum, and to solicit, coordinate and evaluate indications of interest
   regarding a Transaction;
 * Assist the Company with the design of any debt and equity securities or other
   consideration to be issued in connection with a Transaction;
 * Advise the Company as to potential mergers or acquisitions, and the sale or
   other disposition of any of the Company’s assets or businesses;
 * Assist the Company in communications and negotiations with its constituents,
   including, creditors, employees, vendors, shareholders and other
   parties-in-interest in connection with any Transaction;
 * Render such other financial advisory and investment banking services as may
   be mutually agreed upon by Financial Advisor and the Company; and
 * Participate in negotiations among the Company, its existing and future
   lenders, and its creditors, suppliers and other vendors.

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Compensation

 

Monthly Fee:

 

For services performed by Financial Advisor from the date of this Agreement
through the period ending eighteen (18) months from the date hereof, the Company
shall pay Financial Advisor a monthly fee in the amount of $40,000 per month
(the “Monthly Fee”), which shall be payable in cash on the first day of each
month during the term of this Agreement in accordance with the terms of the
Budget attached as Exhibit “A”(the “Budget”) to the Company’s Loan and Security
Agreement, dated of even date herewith (the “Loan Agreement”) with Renewable
Power Resources, LLC (“Lender”). In the event the amount of the Monthly Fee
payable in cash, together with the amount of the fees due Hofflich & Associates
(“Management Consultant”) and the amount of interest and fees payable to Lender
in accordance with the terms of the Loan Agreement exceeds the amount budgeted
for Total Interest, Loan Fees and Management Fees for such month, Financial
Advisor agrees to defer that portion of the Monthly Fee that exceeds the amount
payable in accordance with the Budget, which amount shall be payable in full
accordance with the terms set forth herein. The Company acknowledges and agrees
that this agreement shall remain in full force and effect and the Monthly Fee
shall be due and payable to Financial Advisor in accordance with the terms of
this agreement as consideration for the services being provided by Financial
Advisor, and shall survive after the repayment of the obligations due Lender by
the Company under the terms of the Loan Agreement.

 

Transaction Fee:

 

In consideration for Financial Advisor’s services, the Company shall pay
directly out of the gross proceeds of any Transaction as a cost of the
Transaction a cash fee in the amount of ten (10%) percent of the Transaction
Value in the event the Transaction Value.

 

An “M&A Transaction” shall mean, collectively, (a) any merger, consolidation,
reorganization, recapitalization, business combination or other transaction
pursuant to which the Company is acquired by, or combined with, any person,
group of persons, partnership, corporation or other entity (including, without
limitation, existing lenders, creditors, employees, affiliates, and/or
shareholders) (collectively, an “Investor”); and/or (b) the acquisition,
directly or indirectly by an Investor (or by one or more persons or entities
acting together with an Investor pursuant to a written agreement or otherwise),
in a single transaction or a series of transactions, of (i) all of, or any
material, assets or operations of the Company or (ii) any outstanding or
newly-issued shares of the Company’s capital stock (or any securities
convertible into, or options, warrants or other rights to acquire such capital
stock) (such capital stock and such other securities, options, warrants and
other rights being collectively referred to as “Company Securities” resulting in
holders of shares of the Company’s capital stock immediately prior thereto
owning less than 50% of such capital stock immediately thereafter.

 

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A “Financing Transaction” shall mean, collectively, the issuance, whether public
or private, of debt and/or equity securities for or on behalf of the Company
(whether to raise funds, refinance existing senior indebtedness, refinance
outstanding securities or exchange securities or any combination thereof) or
such other financing of any type committed to complete any other Transaction.

 

For the purposes of this agreement, the term “Transaction Value” includes (i)
the total amount of proceeds and other consideration paid or received by the
Company, including, the total amount of cash, notes, securities and other
property (whether tangible or intangible) paid, payable, delivered or
deliverable, directly or indirectly, for the assets, business or capital stock
of the Company; (ii) the fair market value of any assets, securities or other
property or rights transferred, directly or indirectly, in payment for the
assets, business or stock of the Company (including, without limitation,
payments to be made pursuant to any escrow or hold back, installment or
earn-out, under non-competition or similar arrangements, other than market rate
employment on consulting arrangements, and any deferred or contingent payments),
except that debt instruments will be valued at the face amount thereof; (iii)
the fair market value of principal amount of any indebtedness for borrowed money
appearing on the most recent balance sheet of the Company prior to the
consummation of the transaction and assumed by the purchaser; (iv) the total
amount of notes, bank debt or junior and/or subordinated debt raised or
committed; and (v) any other value as may be determined through an appropriate
proceeding in recognition and furtherance of the purposes of this agreement.
Financial Advisor acknowledges that the Transaction Value shall be adjusted
appropriately based on adjustments to the purchase price made in respect of
changes to working capital. If, in lieu of receiving all or any portion of the
type of consideration payable to the other shareholders of the Company in
connection with a transaction, any shareholder directly or indirectly retains an
ownership interest in Company or directly or indirectly acquires an ownership
interest in the corporation or other entity surviving or resulting from the
transaction, the Transaction Value shall be calculated by assuming that such
shareholder had sold its entire ownership interest in the Company and received
in exchange therefor an amount per share equal to that received by the Company
or the other shareholders of the Company, as the case may be, in the
transaction.

 

For purposes of calculating the Transaction Fee, the fair market value of
securities for which there is an established trading market will be the closing
sale price of the securities on the trading day preceding the date of the
closing of the transaction. The fair market value of any assets, securities,
property or rights (other than as provided above) will be mutually agreed by
Financial Advisor and the Company. If the parties cannot agree upon the fair
market value of such assets, securities, property or rights, they will choose a
qualified appraiser of national standing to conclusively determine, at the
Company's expense, such fair market value. Upon request, the Company will make
available to Financial Advisor any information available to it for purposes of
calculating the amount of any component of the Transaction Value.

 

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The Transaction Fee will also become payable by the Company upon consummation of
(a) any merger, consolidation, reorganization, recapitalization or other
transaction or series of related transactions pursuant to which the Company is
acquired by or combined with another person or entity or (b) the acquisition,
directly or indirectly, by another person or entity, in a single transaction or
series of related transactions, of (i) all or any portion of the assets or
business of Company or (ii) securities representing 50% or more of the total
voting power of the Company in the election of Directors.

 

Expenses and Disbursements

 

The Company agrees to reimburse Financial Advisor for all reasonable
out-of-pocket expenses incurred in connection with the performance of its duties
under this agreement, including but not limited to, reasonable fees and expenses
including attorney’s fees that may be incurred in connection with any specific
legal issues that may arise. The Company agrees to the provisions with respect
to Financial Advisor’s indemnity and other matters set forth in Appendix A which
is incorporated by reference into this letter.

Warrants

 

Simultaneously with the execution and delivery of the Loan Agreement, the
Company shall execute and deliver to the Financial Advisor Initial Warrants in
favor of the Financial Advisor entitling the Financial Advisor to purchase an
aggregate of 6,000,000 (six million) shares of Common Stock of Xzeres Corp. at a
per share exercise price of $0.35 (thirty-five cents), in each case subject to
adjustment as provided therein during a term of 48 (forty-eight) months, which
Initial Warrant shall be substantially in the form attached.

Accrued Compensation

 

Each of Financial Advisor, the Management Consultant and Lender have agreed
that, in accordance with the terms of the Budget, the aggregate amount of fees
payable in cash to the Financial Advisor, the Management Consultant and Lender,
for interest and fees in accordance with the terms of the Loan Agreement, shall
not exceed the aggregate sum of Total Interest, Loan Fees and Management Fees
payable in cash per month in accordance with the Budget. To the extent the fees
and any expenses payable to the Financial Advisor are not paid in cash in full
on a monthly basis as provided in the Agreement, the Financial Advisor, at its
option, may, at the earlier of (a) the time the Company repays Lender in full in
cash, or (b) the maturity date of this Agreement, either (i) receive payment in
full in cash for the amount of accrued and unpaid fees and expenses due and
owing at such time or (ii) convert some or all of such accrued and unpaid fees
and expenses to Series A Warrants (which shall be substantially in the form
attached), which warrants shall entitle the Financial Advisor, upon exercise, to
purchase such number of shares of Common Stock of Xzeres Corp. as shall be equal
to the dollar amount being converted times 3 (three), and to purchase such
shares at an initial exercise price of $0.35 (thirty-five cents) per share,
subject to adjustment as provided therein during a term of 48 (forty-eight)
months.

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In addition, the Financial Advisor shall have the option to purchase additional
Series A Warrants, up to an amount not to exceed the amount of fees paid to the
Financial Advisor in cash during the term of this Agreement, which warrants
shall entitle the Financial Advisor, upon exercise, to purchase such number of
shares of Common Stock of Xzeres Corp. as shall be equal to the dollar amount
being purchased times 3 (three), and to purchase such shares at an initial
exercise price of $0.35 (thirty-five cents) per share, subject to adjustment as
provided therein during a term of 48 (forty-eight) months.

 

In order to coordinate our efforts to effect a transaction satisfactory to the
Company, each of Financial Advisor, and its officers, members and
representatives, and the Company, and its directors, shareholders, members and
executive officers, will promptly inform each other of any inquiry either the
Company or Financial Advisor may receive concerning the availability of all or a
portion of the stock or assets of the Company for purchase. Each of Financial
Advisor and the Company agree that prior to either the Company, or its
directors, members, shareholders and executive officers, and/ or Financial
Advisor, or its officers, members and representatives, initiating any
discussions with respect to any Transaction, including a sale of the Company,
each of the Company and Financial Advisor shall discuss and agree on a strategy,
which will be implemented in connection with initiating such discussions. In the
event either the Company, or its directors, members, shareholders and executive
officers, or Financial Advisor, or its officers, members and representatives,
initiates a discussion or receives an inquiry regarding a potential Transaction,
each of the Company and Financial Advisor agree that such discussion will be
preliminary and each will promptly contact the other to discuss any such initial
contact and that any additional discussions will not be conducted by either
Financial Advisor, nor any of its officers, members or representatives, or the
Company, nor any of its members, shareholders, directors or executive officers,
without first consulting with each other.

 

This agreement may not be terminated by the Company until such time as a
Transaction has been consummated and the fees payable by the Company to
Financial Advisor under the terms of this agreement have been paid. The Company
acknowledges and agrees that this agreement shall remain in full force and
effect and the Transaction Fee shall be due and payable to Financial Advisor in
accordance with the terms of this agreement as consideration for the services
being provided by Financial Advisor, and shall survive after the repayment of
the obligations due Lender by the Company under the terms of the Loan Agreement.

 

The Company will provide Financial Advisor (and will request that each
prospective purchaser with which the Company enters into negotiations provide
Financial Advisor) with such information as Financial Advisor reasonably deems
appropriate in connection with its engagement and will provide Financial Advisor
with access to the Company's officers, directors and advisors. The Company will
be solely responsible for the accuracy and completeness of any information
relating to the Company provided by it or on its behalf to Financial Advisor.
The Company acknowledges that Financial Advisor: (i) will not be independently
verifying the publicly available information or information supplied by or on
behalf of the Company in connection with its engagement; (ii) does not assume
responsibility for the accuracy of any such information and (iii) will not make
an appraisal of any assets or liabilities of the Company or any prospective
purchaser. The Company will use commercially reasonable efforts to negotiate an
appropriate integration clause or similar provision in any agreement with a
prospective purchaser limiting the responsibility of the Company and its
advisors to the representations expressly set forth in such agreement.

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The Company represents that it is a sophisticated business enterprise that has
retained Financial Advisor for the limited purposes set forth in this agreement,
and the parties acknowledge and agree that their respective rights and
obligations are contractual in nature. Each party disclaims any intention to
impose fiduciary obligations on the other by virtue of the engagement
contemplated by this agreement. This agreement is solely for the benefit of
Financial Advisor, the Company and each of their respective officers, directors,
employees and agents, and any person controlling them within the meaning of the
Securities Act of 1933, as amended, and the respective legal representatives,
successors and assigns of Financial Advisor and the Company, and no other person
shall acquire or have any right under or by virtue of this agreement.

 

No fee payable to any other financial advisor by the Company or any other
company in connection with the subject matter of this engagement shall reduce or
otherwise affect any fee payable hereunder to Financial Advisor.

 

Except to the extent described in the last sentence of this paragraph, any
controversy or claim arising out of or relating to this engagement agreement, or
the breach thereof, shall be settled by arbitration administered by the American
Arbitration Association under its Commercial Arbitration Rules, and judgment on
the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. Any arbitration proceedings will be conducted in New York,
New York. The arbitrator shall have no authority to award punitive damages or
any other damages not measured by the prevailing party’s actual damages, and may
not make any ruling, finding or award that does not conform to the terms and
conditions of this engagement agreement. Notwithstanding the foregoing, nothing
contained in this engagement agreement shall be construed to restrict in any way
the right of any party hereto to seek injunctive or similar equitable relief in
any court of competent jurisdiction with respect to any threatened breach of the
provisions of this agreement or any of the respective parties’ obligations
hereunder.

 

This agreement may not be amended or modified except in writing.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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If this letter accurately sets forth the understanding between us, please sign
the enclosed copy of this letter below and return it to Financial Advisor. Thank
you.

 

Very truly yours,   MAX VALUE ADVISORS, LLC   By: /s/ MAX VALUE ADVISORS Its:
Agreed to as of the above date:   XZERES CORP By: /s/ Frank Greco Its: CEO    
XZERES ENERGY SERVICES CORP By: /s/ Frank Greco Its: President   XZERES WIND
EUROPE, LTD.   By: /s/ Frank Greco Its: President

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APPENDIX A

 

In the event that Financial Advisor becomes involved in any capacity, other than
as a plaintiff, in any action, proceeding or investigation brought by any person
other than any employee of Financial Advisor, or against any person, including
the officers, directors and shareholders of Xzeres Corp and/or the officers,
directors and stockholders of Xzeres Energy Services Corp and/ or Xzeres Wind
Europe, Ltd (collectively, the “Company”), in connection with any matter related
to the assignment described in this letter, the Company agrees to periodically
reimburse Financial Advisor for its legal and other expenses (including the cost
of any investigation and preparation) reasonably incurred in connection
therewith; provided, however, that if it is found (or acknowledged by Financial
Advisor) in any such action, proceeding or investigation that any loss, claim,
damage or liability of Financial Advisor has resulted from the gross negligence
or bad faith of Financial Advisor in performing the services which are the
subject of this letter, Financial Advisor shall repay such portion of the
reimbursed amounts that is attributable to expenses incurred in relation to the
act or omission of Financial Advisor which is the subject of such finding. The
Company also will indemnify and hold Financial Advisor harmless against any
losses, claims, damages or liabilities to any such person in connection with any
matter related to the assignment described in this letter, except to the extent
that any such loss, claim, damage or liability results from the gross negligence
or bad faith of Financial Advisor in performing the services that are the
subject of this letter. If for any reason the foregoing indemnification is
unavailable to Financial Advisor or insufficient to hold it harmless, then the
Company shall contribute to the amount paid or payable by Financial Advisor as a
result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect the relative economic interests of the Company and its
stockholders on the one hand and Financial Advisor on the other hand in the
matters contemplated by this letter as well as the relative fault of the
Company, and Financial Advisor with respect to such loss, claim, damage or
liability and any other relevant equitable considerations; provided, however,
that unless it is finally judicially determined (or acknowledged by Financial
Advisor) that the loss, claim, damage or liability in question had resulted
primarily from the gross negligence or bad faith by Financial Advisor in
performing the services that are the subject of this letter, in no event shall
Financial Advisor be required to contribute any amounts in excess of the fees
received by it hereunder. The Company shall be liable for any settlement of any
claim against Financial Advisor made with the Company’s written consent, which
consent shall not unreasonably be withheld, and the Company shall not, without
the prior written consent of Financial Advisor, settle or compromise any claim
or permit a default or consent to the entry of any judgment in respect thereof,
unless such settlement, compromise or consent includes, as an unconditional term
thereof, the giving by the claimant to Financial Advisor of an unconditional
release from any and all liability in respect of such claim. Financial Advisor
shall have the right to retain counsel of its own choice to represent it in
connection with any matter as to which the indemnity, expense reimbursement and
contribution provisions apply. The reimbursement, indemnity and contribution
obligations of the Company under this paragraph shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same terms
and conditions to any affiliate of Financial Advisor and the directors, agents,
employees and controlling persons (if any), as the case may be, of Financial
Advisor and any such affiliate, and shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal representatives of the
Company and Financial Advisor, any such affiliate and any such person. The
indemnity obligations of the Company hereunder shall not extend to any affiliate
of Financial Advisor or to the directors, agents, employees, or controlling
persons (if any), as the case may be, of Financial Advisor or any such affiliate
to the extent that any loss, claim, damage or liability results from the gross
negligence or bad faith of Financial Advisor or any such other person in
performing the services which are the subject of the letter. The Company also
agrees that neither Financial Advisor nor any of such affiliates, directors,
agents, employees or controlling persons shall have any liability to the Company
or its stockholders for or in connection with any matter referred to in this
letter except to the extent that any losses, claims, damages, liabilities or
expenses incurred by the Company result from the gross negligence or bad faith
of Financial Advisor in performing the services that are the subject of this
letter. The provisions of this Appendix A shall survive any termination or
completion of the engagement provided by this letter agreement and this letter
agreement shall be governed by and construed in accordance with the laws of the
State of New York without regard to principles of conflicts of laws.

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