exv10w5




Exhibit
10.5

EXECUTION COPY 


SECOND AMENDMENT

Dated as of May 30, 2008

to

SERIES A PREFERRED STOCK PURCHASE AGREEMENT

DATED AS OF MARCH 14, 2007




     THIS SECOND AMENDMENT TO SERIES A PREFERRED STOCK PURCHASE AGREEMENT (this “Amendment”) is
entered into as of this 30th day of May, 2008 among XStream Systems, Inc., a Delaware
corporation (“Company”), the investors identified as “Third Closing Investors” on Appendix I-C
hereto.



WITNESSETH:




     WHEREAS, the Company is a party to a certain Series A Preferred Stock Purchase Agreement dated
as of March 14, 2007, as amended by a First Amendment dated as of December 19, 2007 (as so amended,
the “Series A Preferred Stock Purchase Agreement”), which it desires to amend further in order to
provide for, among other things, (i) an amendment of the terms of the Series A Preferred Stock, the
Series B Preferred Stock and the Series C Preferred Stock (as those terms are defined in the Series
A Preferred Stock Purchase Agreement) of the Company, (ii) the issuance, as provided herein, of
additional shares of Series B Preferred Stock, along with warrants to purchase common stock of the
Company, to the Third Closing Investors and (iii) the possible issuance, as provided herein, of
additional shares of Series C Preferred Stock of the Company, along with warrants to purchase
common stock of the Company, to the Third Closing Investors;



     NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth,
the parties to this Amendment hereby agree as follows:



     1. Amendments to the Series A Preferred Stock Purchase Agreement. The Series A
Preferred Stock Purchase Agreement shall be amended as follows:




     (a) Section 1.1 (Definitions) of the Series A Preferred Stock Purchase Agreement shall
be amended as follows:




     (i) to amend the existing definitions of the terms “Equity Participation
Investor,” “Investors,” “Pro Rata Share,” “Series B Warrant Agreement” and “Series C
Warrant Agreement” to read in their entirety as follows:




     “Equity Participation Investor” means (i) each Second Closing Investor for whom
“Cash” or “Notes” is specified opposite such Second Closing Investor’s name in the
column labeled “Form of Consideration” on Appendix I-B to the First
Amendment as the form of consideration to be used to pay the amount of the purchase
price set forth opposite such Second Closing Investor’s name in the column labeled
“Purchase Price for Series B Units to be purchased at Second Closing” on such
Appendix I-B and (ii) each Third Closing Investor.



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     “Investors” means the First Closing Investors, the Second Closing Investors and
the Third Closing Investors.




     “Pro Rata Share” means (i) with respect to a Second Closing Investor, the
result obtained by dividing the number of Series B Units purchased by such Second
Closing Investor by the aggregate number of Series B Units purchased by all Second
Closing Investors and all Third Closing Investors and (ii) with respect to a Third
Closing Investor, the result obtained by dividing the number of Series B Units
purchased by such Third Closing Investor by the aggregate number of Series B Units
purchased by all Second Closing Investors and all Third Closing Investors.




     “Series B Warrant Agreement” means the Series B Warrant Agreement dated as of
December 19, 2007, as amended.




     “Series C Warrant Agreement” means the Series B Warrant Agreement dated as of
December 19, 2007, as amended.




     (ii) to add the following definitions:




     “Equity Call Right” has the meaning set forth in Section 2.1(c).




     “Securityholders Agreement Amendment” means the amendment to the Amended and
Restated Shareholders Agreement in the form attached as Exhibit K-1.




     “Series A Designations Amendment” means the amendment to the Series A
Certificate of Designations, substantially in the form attached as Exhibit
A-4.




     “Series B Designations Amendment” means the amendment to the Series B
Certificate of Designations, substantially in the form attached as Exhibit
A-5.




     “Series C Designations Amendment” means the amendment to the Series C
Certificate of Designations, substantially in the form attached as Exhibit
A-6.




     “Series B Warrant Amendment” means the Amendment dated as of the Third Closing
Date in substantially the form attached hereto as Exhibit I-1.




     “Series C Warrant Amendment” means the Amendment dated as of the Third Closing
Date in substantially the form attached hereto as Exhibit J-1.




     (b) Section 2.1 (Authorization of Preferred Shares) of the Series A Preferred Stock
Purchase Agreement shall be amended (i) to amend and restate existing subsections (b) and
(c) thereof and (ii) to add subsections (e) and (f) thereto as follows:




     (b) Prior to the Second Closing, the Company authorized (i) the issuance and
sale to the Second Closing Investors of an aggregate of up to 1,450,000 Series B
Preferred Shares having the rights and preferences set forth in



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the Series B Certificate of Designations, (ii) the reservation for issuance of
an additional 1,450,000 shares of Common Stock upon conversion or redemption of the
Series B Preferred Shares issued in connection with the Second Closing and (iii) the
reservation for issuance of an additional 7,250,000 shares of Common Stock upon
exercise of the Series B Warrants issued in connection with the Second Closing.




     (c) Prior to the Second Closing, the Company authorized (i) the issuance and
sale of an aggregate of up to 1,000,000 Series C Preferred Shares having the rights
and preferences set forth in the Series C Certificate of Designations in connection
with the exercise by the Equity Participation Investors of their rights under
Section 3.5 (the “Equity Call Right”), (ii) the reservation for issuance of
an additional 1,000,000 shares of Common Stock upon conversion or redemption of the
Series C Preferred Shares issued upon exercise of the Equity Call Right and (iii)
the reservation for issuance of an additional 5,000,000 shares of Common Stock upon
exercise of the Series C Warrants issued upon exercise of the Equity Call Right.




     (e) Prior to the Third Closing, the Company shall authorize (i) the issuance
and sale to the Third Closing Investors of an aggregate of up to 350,000 Series B
Preferred Shares having the rights and preferences set forth in the Amended and
Restated Series B Certificate of Designations, (ii) the reservation for issuance of
an additional 350,000 shares of Common Stock upon conversion or redemption of such
Series B Preferred Shares issued in connection with the Third Closing and (iii) the
reservation for issuance of an additional 1,750,000 shares of Common Stock upon
exercise of the Series B Warrants issued in connection with the Third Closing.




     (f) Prior to the Third Closing, the Company shall authorize (i) the issuance
and sale of an aggregate of up to 1,350,000 Series C Preferred Shares having the
rights and preferences set forth in the Series C Certificate of Designations in
connection with the exercise by the Equity Participation Investors of their rights
under Section 3.5, (ii) the reservation for issuance of an aggregate of
1,350,000 shares of Common Stock upon conversion or redemption of the Series C
Preferred Shares issued upon exercise of the Equity Call Right and (iii) the
reservation for issuance of an aggregate of 6,750,000 shares of Common Stock upon
exercise of the Series C Warrants issued upon exercise of the Equity Call Right .




     (c) Section 2.2 (Purchase and Sale of Preferred Shares) of the Series A Preferred Stock
Purchase Agreement shall be amended (i) to amend and restate existing subsection (b) thereof
and (ii) to add subsection (c) thereto, as follows:




     (b) Subject to the terms and the conditions set forth herein, and in reliance
upon the representations and warranties of the Company and the Second Closing
Investors set forth herein or in any certificate or other document delivered
pursuant hereto, the Company issued, sold and delivered to each Second Closing



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Investor, free and clear of all Liens (except as set forth in the Registration
Rights Agreement and the Shareholders Agreement), and each Second Closing Investor
purchased at the Second Closing, the number of Series B Units set opposite such
Second Closing Investor’s name in the column labeled “Series B Units to be purchased
at the Second Closing” on Appendix I-B from the Company at a purchase price
of $3.00 per Series B Unit, subject to the limitation set forth in Section
2.5 with respect to the Debenture Holder Investors. The Series B Preferred
Shares shall accrue dividends from the date of issuance.




     (c) Subject to the terms and the conditions set forth herein, and in reliance
upon the representations and warranties of the Company and the Third Closing
Investors set forth herein or in any certificate or other document delivered
pursuant hereto, the Company shall issue, sell and deliver to each Third Closing
Investor, free and clear of all Liens (except as set forth in the Registration
Rights Agreement and the Shareholders Agreement), and each Third Closing Investor
shall purchase at the Third Closing, the number of Series B Units set opposite such
Third Closing Investor’s name in the column labeled “Series B Units to be purchased
at the Third Closing” on Appendix I-C from the Company at a purchase price
of $3.00 per Series B Unit. The Series B Preferred Shares shall accrue dividends
from the date of issuance.




     (d) Section 2.3 (Closings) of the Series A Preferred Stock Purchase Agreement shall be
amended (i) to amend and restate existing subsection (b) thereof and (ii) to add subsection
(c) thereto, as follows:




     (b) The second closing took place at the offices of Blank Rome LLP, 1200 North
Federal Highway — Suite 417, Boca Raton, Florida at 10:00 a.m., local time, on
December 19, 2007 (the “Second Closing”). The time and date on which the Second
Closing was held is sometimes referred to herein as the “Second Closing Date.”




     (c) The third closing shall take place at the offices of Greenberg Traurig,
P.A., 5100 Town Center Circle, Suite 400, Boca Raton, Florida at 10:00 a.m., local
time, on May 30, 2008, or at such other place or time or on such other date as shall
be agreed to by the Company and the Third Closing Investors (the “Third Closing”).
The time and date on which the Third Closing is actually held is sometimes referred
to herein as the “Third Closing Date.”




     (e) Section 2.4 (Delivery of Securities; Payment of Purchase Price) of the Series A
Preferred Stock Purchase Agreement shall be amended (i) to amend and restate existing
subsection (b) thereof and (ii) to add subsection (c) thereto, as follows:




     (b) Subject to satisfaction or waiver of the conditions set forth in
Article IV, at the Second Closing, the Company issued and delivered to each
Second Closing Investor purchasing Series B Units, free and clear of all Liens
(except as set forth in the Registration Rights Agreement and the Shareholders
Agreement), (i) a stock certificate, duly executed by the Company and registered



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in the Company’s stock ledger in the name of such Second Closing Investor or
such Second Closing Investor’s nominee, evidencing all of the Series B Preferred
Shares purchased by such Second Closing Investor at the Second Closing and (ii) a
warrant certificate, duly executed by the Company and registered in the Company’s
ledger in the name of such Second Closing Investor or such Second Closing Investor’s
nominee, evidencing all of the Series B Warrants purchased by such Second Closing
Investor at the Second Closing. Subject to satisfaction or waiver of the conditions
set forth in Article III, as payment in full for the Series B Units
purchased by a Second Closing Investor at the Second Closing under this Agreement,
and against delivery of the stock and warrant certificates therefor as described in
this subparagraph (b), such Second Closing Investor delivered at the Second Closing
the amount set opposite such Investor’s name in the column labeled “Purchase Price
for Series B Units to be purchased at the Second Closing” on Appendix I-B
hereto to the account of the Company by wire transfer of immediately payable funds,
check or, if “Debentures” or “Notes” is the form of consideration specified in the
column labeled “Form of Consideration” on Appendix I-B hereto, cancellation
of outstanding debentures or promissory notes issued by the Company (the sum of such
amounts being referred to as the “Second Purchase Price”).




     (c) Subject to satisfaction or waiver of the conditions set forth in
Article IV, at the Third Closing, the Company shall issue and deliver to
each Third Closing Investor purchasing Series B Units, free and clear of all Liens
(except as set forth in the Registration Rights Agreement and the Shareholders
Agreement), (i) a stock certificate, duly executed by the Company and registered in
the Company’s stock ledger in the name of such Third Closing Investor or such Third
Closing Investor’s nominee, evidencing all of the Series B Preferred Shares being
purchased by such Third Closing Investor at the Third Closing and (ii) a warrant
certificate, duly executed by the Company and registered in the Company’s ledger in
the name of such Third Closing Investor or such Third Closing Investor’s nominee,
evidencing all of the Series B Warrants being purchased by such Third Closing
Investor at the Third Closing. Subject to satisfaction or waiver of the conditions
set forth in Article III, as payment in full for the Series B Units being
purchased by a Third Closing Investor at the Third Closing under this Agreement, and
against delivery of the stock and warrant certificates therefor as described in this
subparagraph (c), such Third Closing Investor shall deliver at the Third Closing the
amount set opposite such Investor’s name in the column labeled “Purchase Price for
Series B Units to be purchased at the Third Closing” on Appendix I-C hereto
to the account of the Company by wire transfer of immediately payable funds (the
“Third Purchase Price”).




     (f) Section 3.2A shall be added to the Series A Preferred Stock Purchase Agreement as
follows:




     3.2A Third Closing. The obligation of a Third Closing Investor to
purchase Series B Units at the Third Closing is subject to the fulfillment to the



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satisfaction of such Third Closing Investor, at or prior to the Third Closing
of each of the following conditions:




     (a) Each of the representations and warranties of the Company contained in
Article VII (other than Section 7.25 (Projections), which is hereby
excluded) shall be true, correct and complete in all material respects on and as of
the Third Closing Date as though then made, except for (i) such representations and
warranties which expressly speak as of a certain date, which representations and
warranties shall be true, correct and complete in all material respects as of the
date specified and (ii) for purposes of the representations and warranties contained
in Sections 7.5, 7.6, 7.7 and 7.8, the date of the Latest Balance Sheet shall be
deemed to be March 31, 2008 (the date of the most recent unaudited financial
statements provided to the Third Closing Investors);




     (b) All covenants, agreements and conditions contained in this Agreement to be
performed or complied with by the Company on or prior to, or in connection with, the
Third Closing Date shall have been performed or complied with;




     (c) No Event of Noncompliance (as defined in Series A Certificate of
Designations), or event which with notice or lapse of time or both would constitute
such an event, shall have occurred;




     (d) Since March 31, 2008 (the date of the most recent unaudited financial
statements provided to the Third Closing Investors), there shall not have been any
effect, change or development that, individually or in the aggregate with such other
effects, changes or developments, has had, or could reasonably be expected to have,
a Material Adverse Effect;




     (e) The Company shall have delivered to Sidley Austin LLP each of the
following:




     (i) copy of the Certificate of Incorporation, as amended, certified as
of a recent date by the Secretary of State of Delaware, including evidence
of the filing of the Series A Designations Amendment relating to the Series
A Preferred Stock, the Series B Designations Amendment relating to the
Series B Preferred Stock and the Series C Designations Amendment relating to
the Series C Preferred Stock;




     (ii) certificates of good standing and certificate of status of the
Company, as applicable, issued as of a recent date by the Secretaries of
State of Delaware and Florida;




     (iii) certificate of the Chief Executive Officer or the President of
the Company, dated the Third Closing Date, to the effect that the conditions
specified in Sections 3.2A(a) through 3.2A(d) have been
satisfied fully;



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     (iv) certificate of the Secretary or an Assistant Secretary of the
Company, dated the Third Closing Date, in form and substance reasonably
satisfactory to Sidley Austin LLP, as to: (1) no amendments to the
Certificate of Incorporation since the date of certification referenced in
subparagraph (i) above; (2) the By-laws; (3) the resolutions duly adopted by
the Board and shareholders authorizing and approving, as appropriate, the
execution, delivery and performance of this Agreement and each of the
Transaction Documents to which the Company is a party and the transactions
contemplated hereby and thereby, including the authorization, issuance, sale
and delivery of the Series B Units and the Series C Units and the
reservation for issuance of the Conversion Common Shares; and (4) complete
and accurate copies of the Series B Warrant Agreement, the Series C Warrant
Agreement, the Amended and Restated Shareholders Agreement and the
Registration Rights Agreement;




     (v) stock certificates, duly executed by the Company and registered in
the names of the Third Closing Investors (or their nominees) for the
respective number of Series B Preferred Shares set forth on Appendix
I-C;




     (vi) its executed counterpart to this Amendment;




     (vii) executed copies of each of the Series B Warrant Amendment and the
Series C Warrant Amendment;




     (viii) the Warrant Certificates (as defined in the Series B Warrant
Agreement), duly executed by the Company and registered in the names of the
Third Closing Investors (or their nominees) for the respective number of
Warrants set forth on Appendix I-C;




     (ix) its executed counterpart to the Securityholders Agreement
Amendment;




     (x) satisfactory evidence that this Amendment, the Series A
Designations Amendment, the Series B Designations Amendment, the Series C
Designations Amendment, the Series B Warrant Amendment, the Series C Warrant
Amendment and the Securityholders Agreement Amendment have been approved as
required by law, the Company’s charter documents and, in cases of amendments
to agreements, the provisions of the underlying agreements;




     (xi) if a Third Closing Investor is not currently a party to the
Amended and Restated Shareholders Agreement and the Registration Rights
Agreement, a joinder agreement providing that such Third Closing Investor
shall be a party to such agreements, signed by the Company;



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     (xii) legal opinion of Greenberg Traurig. P.A., counsel for the
Company, dated the Third Closing Date, addressed to the Third Closing
Investors and substantially in the form attached hereto as Exhibit
M; and




     (xii) such other documents, instruments, approvals or opinions relating
to the transactions contemplated by this Agreement as the Third Closing
Investors or Sidley Austin LLP may reasonably request.




     (g) Sections 3.3 (Waiver) and 3.5 (Equity Participation Right) of the Series A
Preferred Stock Purchase Agreement shall be amended to read in their entirety as follows:




     3.3 Waiver. (a) Any condition specified in this Article III
may be waived by an Investor if consented to in writing by such Investor;
provided, however, that in the event that an Investor declines to
waive a condition specified in this Article III (a “Non-Participating
Investor”), the Company and the remaining Investors may elect to proceed with the
First Closing, the Second Closing or the Third Closing, as the case may be, with the
aggregate number of Series A Preferred Shares purchased and sold on the First
Closing Date, the aggregate number of Series B Units to be purchased and sold on the
Second Closing Date or the aggregate number of Series B Units to be purchased and
sold on the Third Closing Date, as the case may be, being reduced by the number of
Series A Preferred Shares or Series B Units that otherwise would have been purchased
by the Non-Participating Investor, as set forth on Appendix I-A,
Appendix I-B or Appendix I-C, as the case may be; provided that the
remaining Investors may, in their sole discretion, elect to purchase, pro rata or
otherwise, the Series A Preferred Shares or Series B Units, as the case may be, that
otherwise would have been purchased by the Non-Participating Investor; and the
Non-Participating Investor shall be deemed removed from this Agreement and all other
Transaction Agreements, if such non-participation occurs at the First Closing, the
Non-Participating Investor shall be deemed removed from the Second Closing, if such
non-participation only occurs at the Second Closing, and the Non-Participating
Investor shall be deemed removed from the Third Closing, if such non-participation
only occurs at the Third Closing.




     (b) In the event that (i) either or both of the conditions specified in
Sections 3.1(a) or 3.1(b) is waived in writing by an Investor in
connection with the First Closing, (ii) either or both of the conditions specified
in Sections 3.2(a) or 3.2(b) is waived in writing by an Investor in
connection with the Second Closing, or (iii) either or both of the conditions
specified in Sections 3.2A(a) or 3.2A(b) is waived in writing by an
Investor in connection with the Third Closing, such waiver shall serve as a waiver
of such Investor’s (but not any other Investor’s) rights or remedies against the
Company for any claims or losses based solely on such waived condition not being
satisfied at the applicable Closing, but shall not constitute a waiver by such
Investor of any rights or remedies accruing to such Investor thereafter.



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     3.5 Equity Participation Right. (a) During the period from December
19, 2007 until (and including) October 19, 2008 (the “Equity Participation Period”),
each Equity Participation Investor shall have the right (but not the obligation) to
purchase from time to time during the Equity Participation Period up to such Equity
Participation Investor’s Pro Rata Share of up to 1,350,000 Series C Units at a
purchase price of $3.00 per Series C Unit. If an Equity Participation Investor
shall desire to exercise the right granted by this Section 3.5, such Equity
Participation Investor shall notify the Company in writing of such exercise within
the Equity Participation Period, which notice (an “Exercise Notice”) shall specify
the number of Series C Units that such Equity Participation Investor intends to
purchase and the name(s) in which the securities constituting the Series C Units are
to be issued. Each Equity Participation Investor who submits an Exercise Notice to
the Company in accordance with this Section 3.5(a) is referred to herein as
a “Series C Purchaser.”




     (b) In the event that the Company receives one or more Exercise Notices during
a calendar month, it shall schedule a closing for the purchase and sale of all
Series C Units covered by such Exercise Notices as of the first business day of the
month immediately following the receipt of such notices or on such other date as the
Series C Purchasers who sent such Exercise Notices and the Company shall mutually
agree (each such date, an “Equity Participation Closing”). The Company shall not be
obligated to schedule more than one Equity Participation Closing in any calendar
month. At each such scheduled Equity Participation Closing:




     (i) the Company shall issue and deliver to each Series C Purchaser (x)
a certificate for the number of shares of Series C Preferred Stock purchased
by such Series C Purchaser, issued as directed by such Series C Purchaser,
and a certificate for the number of Series C Warrants purchased by such
Series C Purchaser, issued as directed by the Series C Purchaser, (y) a
certificate of the Secretary, or an assistant secretary, of the Company
substantially in the form of the certificate described in Section
3.2A(e)(iv), but dated as of the date of such Equity Participation
Closing of the issuance of such Series C Units, and (z) an opinion of
Greenberg Traurig, P.A. substantially similar to the form of the opinion
attached hereto as Exhibit M, but revised to address the issuance of
the Series C Units; and




     (ii) each Series C Purchaser shall deliver the purchase price for the
Series C Units to be purchased by such Series C Purchaser at such Equity
Participation Closing.




     (h) Section 4.2A shall be added to the Series A Preferred Stock Purchase Agreement as
follows:




          4.2A Third Closing. The obligation of the Company to issue, sell and
deliver the Series B Preferred Shares at the Third Closing is subject to the



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fulfillment to the reasonable satisfaction of the Company at or prior to the
Third Closing of the following conditions:




          (a) The Third Closing Investors shall have delivered the Third Purchase Price
in accordance with Section 2.4(c);




          (b) Each Third Closing Investor shall have delivered its executed counterpart
signature page to this Amendment;




          (c) If a Third Closing Investor is not a party to the Amended and Restated
Shareholders Agreement, a joinder agreement to that agreement executed by such Third
Closing Investor;




          (d) If a Third Closing Investor is not a party to the Registration Rights
Agreement, a joinder agreement to that agreement executed by such Third Closing
Investor;




          (e) Each of the representations and warranties of the Investors contained in
Article VIII shall be true, correct and complete in all material respects on
and as of the Third Closing Date as though then made, except for such
representations and warranties which expressly speak as of a certain date, which
representations and warranties shall be true, correct and complete in all material
respects as of the date specified.




     (i) Section 5.1(a)(iii) (Financial Statements and Other Information) of the Series A
Preferred Stock Purchase Agreement shall be amended to read in its entirety as follows:




     (iii) as soon as available but in any event within 90 days after the end of
each fiscal year, audited statements of income and cash flows of the Company for
such fiscal year, and an audited balance sheet of the Company as of the end of such
fiscal year prepared in accordance with GAAP, and accompanied by, with respect to
the consolidated portions of such statements, an opinion of an independent
accounting firm of recognized regional standing selected by the Board (including the
approval of at least one of the Investor Directors), together with comparisons to
the Company’s annual budget and to the preceding fiscal year;




     (j) Section 5.15(a) (Certain Insurance Coverage) of the Series A Preferred Stock
Purchase Agreement shall be amended to read in its entirety as follows:




     (a) The Company shall at all times maintain in full force and effect the
key-man life insurance policies on the lives of each of Brian Mayo and William Mayo
in an aggregate face amount of not less than $1,000,000 for each such policy, and
the Company shall at all times be named as the beneficiary under each such policy;
provided, however, that the foregoing requirements may be modified or waived with
the approval of the Board (including the approval of at least one of the Investor
Directors).



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     (k) Section 7.4(a) (Authorized Capital Stock) of the Series A Preferred Stock Purchase
Agreement shall be amended to add subparagraph (iii) thereto as follows:




     (iii) As of the Third Closing and immediately prior to the issuance of any
Series B Preferred Stock at the Third Closing, the authorized capital stock of the
Company shall consist solely of (1) Thirty Million (30,000,000) shares of Common
Stock, of which 1,702,156 shares are issued and outstanding; and (2) Six Million
(6,000,000) shares of preferred stock, $.0001 par value per share, of which (A) Nine
Hundred Sixty Two Thousand One Hundred One (962,101) shares have been designated
Series A Preferred Stock and all of which are issued and outstanding, (B) One
Million Eight Hundred Thousand (1,800,000) shares have been designated Series B
Preferred Stock of which 1,311,135 are issued and outstanding and (C) One Million
Three Hundred Fifty Thousand (1,350,000) shares have been designated as Series C
Preferred Stock of which none are issued and outstanding. The Company has reserved
for issuance (v) sufficient shares of Common Stock for issuance upon conversion or
redemption of all outstanding or authorized Series A Preferred Shares, Series B
Preferred Shares and Series C Preferred Shares, (x) 2,100,000 shares of Common
Stock upon exercise of options pursuant to its 2004 Stock Option Incentive Plan, (y)
Nine Million (9,000,000) shares of Common Stock upon exercise of the Series B
Warrants and (z) Six Million Seven Hundred Fifty Thousand (6,750,000) shares of
Common Stock upon exercise of the Series C Warrants. Immediately after the Third
Closing, the capitalization of the Company shall be as set forth in the Third
Closing Capitalization Schedule attached to Schedule 7.4, which Third
Closing Capitalization Schedule and Schedule 7.4 (A) reflects the
capitalization of the Company both on an actual shares outstanding basis and on a
fully diluted basis assuming conversion of all convertible securities and the
exercise of all outstanding options and warrants and all options reserved for future
grant under any stock option plans and (B) sets forth (I) each outstanding option,
warrant or other right to purchase shares of capital stock of the Company or any of
its Subsidiaries and (II) for each such option, warrant or right, the holder
thereof, the date of grant, the exercise price and the number of shares subject
thereto.




     (l) Section 9.7 (Notices) of the Series A Preferred Stock Purchase Agreement shall be
amended to read in its entirety as follows:




     All notices or other communications required or permitted hereunder shall be in
writing and shall be deemed given or delivered (a) when delivered personally, (b) if
transmitted by facsimile when confirmation of transmission is received, (c) if sent
by registered or certified mail, postage prepaid, return receipt requested, three
business days after mailing or (d) if sent by reputable overnight courier service,
one business day after delivery to such service; and shall be addressed as follows:



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If to the Company, to:



XStream Systems, Inc.

10305 102nd Terrace

Suite 101

Sebastian, FL 32958

Attention: Chief Executive Officer

Facsimile: (772) 589-4622



with a copy to:



Greenberg Traurig, P.A.

5100 Town Center Circle

Suite 400



Boca Raton, FL 33486

Attention: Bruce C. Rosetto

Facsimile: (561) 367-6225





     If to any Investor, to such Investor’s address as set forth on Appendix
II or, in the case of Investors who were Debenture Holders, Appendix III
hereto.




     (m) The Series A Preferred Stock Purchase Agreement is hereby further amended to add
Appendix I-C in the form attached to this Amendment as Appendix I-C.




     (n) Appendix II to the Series A Preferred Stock Purchase Agreement shall be amended to
read in its entirety as set forth on Appendix II to this Amendment.




     (o) The Series A Preferred Stock Purchase Agreement is hereby further amended to add
Exhibits A-4, A-5, A-6, I-1, J-1 and M in the respective forms attached to this Amendment as
Exhibits A-4, A-5, A-6, I-1, J-1 and M.




     (p) Schedule 7.4 to the Series A Preferred Stock Purchase Agreement is hereby amended
to include the Third Closing Capitalization Schedule in the form attached to this Amendment
as the “Third Closing Capitalization Schedule.”



     2. Waiver Regarding Delayed Delivery of Financial Statements. Pursuant to the request
of the Company and in accordance with Section 9.2 of the Series A Preferred Stock Purchase
Agreement, the holders of Preferred Stock and Conversion Common Shares hereby consent to, and waive
(i) any Event of Noncompliance resulting from any noncompliance by the Company solely with respect
to the provision of Section 5.1(iii) of the Series A Preferred Stock Purchase Agreement by reason
of the failure of the Company to deliver the financial statements described therein for the year
ended December 31, 2007 on or before June 30, 2008.



     3. Reference to and Effect on Series A Preferred Stock Purchase Agreement;
Reaffirmation.




     (a) Upon the effectiveness of this Amendment, each reference in the Series A Preferred
Stock Purchase Agreement to “this Agreement,” “hereunder,” “hereof,”



12









 






“herein,” “hereby” or words of like import shall mean and be a reference to the Series
A Preferred Stock Purchase Agreement as amended hereby, and each reference to the Series A
Preferred Stock Purchase Agreement in any other document, instrument or agreement executed
and/or delivered in connection with the Series A Preferred Stock Purchase Agreement shall
mean and be a reference to the Series A Preferred Stock Purchase Agreement as amended
hereby.




     (b) Except as specifically amended hereby, the Series A Preferred Stock Purchase
Agreement shall remain in full force and effect and is hereby ratified and confirmed. The
execution, delivery and effectiveness of this Amendment shall not constitute a waiver of any
provision contained in the Series A Preferred Stock Purchase Agreement, except as
specifically set forth herein.



     4. Execution in Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be considered an original instrument, but all of which shall be
considered one and the same agreement, and shall become binding when one or more counterparts have
been signed by and delivered to each of the parties hereto. Delivery of an executed counterpart of
a signature page to this Amendment, whether manually executed or a facsimile of a manually executed
signature page, shall be as effective as delivery of a manually executed counterpart of this
Amendment.



     5. Governing Law. This Amendment and the appendices, exhibits and schedules hereto
shall be governed by, and construed in accordance with, the laws of the State of Florida, without
giving effect to any choice of law or conflict of law rules or provisions (whether of the State of
Florida or any other jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Florida. In furtherance of the foregoing, the internal law of the State of
Florida shall control the interpretation and construction of this Amendment (and all schedules and
exhibits hereto), even though under that jurisdiction’s choice of law or conflict of law analysis,
the substantive law of some other jurisdiction would ordinarily apply.



     6. Transaction Expenses. Irrespective of whether the Third Closing is consummated,
the Company shall pay all costs and expenses that it incurs in connection with the negotiation,
execution, delivery and performance of this Amendment and the transactions contemplated hereby. If
the Third Closing is consummated, the Company shall pay the reasonable fees and expenses of Sidley
Austin LLP, special legal counsel to the Original Series A Investors, and the reasonable fees and
expenses of Greenberg Traurig, P.A., counsel to the Company. In addition, the Company shall
reimburse the Investors for reasonable legal expenses incurred in connection with any amendment of,
or waiver or consent requested under, this Amendment or any Transaction Document, except for
waivers, amendments or consents (a) not originally requested by the Company and (b) not involving a
change to or modification of any of the Company’s obligations, covenants or agreements hereunder.



     7. Interpretation.




     (a) Capitalized terms used herein without definition shall have the respective
definitions assigned to those terms in the Series A Preferred Stock Purchase Agreement.



13









 






     (b) For purposes of this Amendment, (i) the words “include,” “includes” and “including”
mean “including without limitation,” (ii) the word “or” is not exclusive and (iii) the words
“herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this Amendment as a whole.




     (c) Unless the context otherwise requires, references herein to Sections, Exhibits and
Schedules mean the Sections of, and the Exhibits and Schedules attached to, this Amendment.
Headings of Sections are inserted for convenience of reference only and shall not be deemed
a part of or to affect the meaning or interpretation of this Amendment. The Schedules and
Exhibits referred to herein shall be construed with and as an integral part of this
Amendment to the same extent as if they were set forth verbatim herein.




     (d) Each of the parties to this Amendment has had the benefit of counsel in connection
with its review and negotiation of this Amendment. Consequently, the parties confirm that
this Amendment shall not be construed on the basis of any presumption or rule requiring
construction or interpretation against the party drafting an agreement or instrument or
causing any agreement or instrument to be drafted.



[signature page follows]




14









 





          IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the day
and year first above written.




	 	 	 	 	 
	 	XSTREAM SYSTEMS, INC.

 	 
	 	By:  	/s/ Chris Butler 	 
	 	 	Name:  	Chris Butler	 
	 	 	Title:  	CFO	 
	 



Signature Page to Second Amendment to

Series A Preferred Stock Purchase Agreement dated as of March 14, 2007




 









 









	 	 	 	 	 
	 	INVESTOR:

 	 
	 	/s/  Joseph Cornacchia
 	 
	 	Name:  	Joseph Cornacchia 	 
	 	 	 
	 



Signature Page to Second Amendment to

Series A Preferred Stock Purchase Agreement dated as of March 14, 2007








 









 










	 	 	 	 	 
	 	INVESTOR:

 	 
	 	/s/ Robert Girling
 	 
	 	Name:  	Robert Girling 	 
	 	 	 
	 



Signature Page to Second Amendment to

Series A Preferred Stock Purchase Agreement dated as of March 14, 2007








 









 









	 	 	 	 	 
	 	INVESTOR:

 	 
	 	/s/ Michael W. Haley Revocable Trust
 	 
	 	Name:  	Michael W. Haley, Trustee 	 
	 	 	 
	 



Signature Page to Second Amendment to

Series A Preferred Stock Purchase Agreement dated as of March 14, 2007








 









 








	 	 	 	 	 
	 	INVESTOR:

 	 
	 	/s/ Robert E. Kennedy
 	 
	 	Name:  	Robert E. Kennedy 	 
	 	 	 
	 



Signature Page to Second Amendment to

Series A Preferred Stock Purchase Agreement dated as of March 14, 2007








 









 









	 	 	 	 	 
	 	INVESTOR:



LOVEJOY FAMILY LIMITED PARTNERSHIP

 	 
	 	/s/ Walter R. Lovejoy
 	 
	 	Name:  	Walter R. Lovejoy, Mgr. 	 
	 	 	 
	 



Signature Page to Second Amendment to

Series A Preferred Stock Purchase Agreement dated as of March 14, 2007








 









 









	 	 	 	 	 
	 	INVESTOR:



LOWREY FAMILY INVESTMENTS LLC

 	 
	 	By:  	/s/ JAMES LOWREY	 
	 	 	James Lowrey	 
	 	 	 	 
	 



Signature Page to Second Amendment to

Series A Preferred Stock Purchase Agreement dated as of March 14, 2007








 









 








	 	 	 	 	 
	 	INVESTOR:

 	 
	 	/s/ Joseph Melone
 	 
	 	Name:  	Joseph Melone 	 
	 	 	 
	 



Signature Page to Second Amendment to

Series A Preferred Stock Purchase Agreement dated as of March 14, 2007






 









 








	 	 	 	 	 
	 	INVESTOR:

 	 
	 	/s/ Anthony Chidoni
 	 
	 	Name:  	Anthony Chidoni 	 
	 	 	 
	 



Signature Page to Second Amendment to

Series A Preferred Stock Purchase Agreement dated as of March 14, 2007






 









 









	 	 	 	 	 
	 	INVESTOR:

 	 
	 	/s/ William Wight
 	 
	 	Name:  	William Wight, Managing Partner 	 
	 	         
    52 River Course Associates LLC 	 
	 



Signature Page to Second Amendment to

Series A Preferred Stock Purchase Agreement dated as of March 14, 2007






 









 









	 	 	 	 	 
	 	INVESTOR:

 	 
	 	/s/ Thomas W. Cook
 5-20-08	 
	 	Name:  	Thomas W. Cook 	 
	 	 	 
	 



Signature Page to Second Amendment to

Series A Preferred Stock Purchase Agreement dated as of March 14, 2007






 









 










	 	 	 	 	 
	 	INVESTOR:

 	 
	 	/s/ BRIAN T. MAYO	 
	 	Name:  	Trustee, Mayo Family Revocable Trust  	 
	 	              dtd 7/13/00 	 
	 



Signature Page to Second Amendment to

Series A Preferred Stock Purchase Agreement dated as of March 14, 2007






 









 









	 	 	 	 	 
	 	INVESTOR:

 	 
	 	/s/ Samuel B. Hayes III
 	 
	 	Name:  	Samuel B. Hayes III 

5.20.08	 
	 	 	 
	 



Signature Page to Second Amendment to

Series A Preferred Stock Purchase Agreement dated as of March 14, 2007






 









 









[ILLEGIBLE]



	 	 	 	 	 
	 	INVESTOR:

 	 
	 	/s/ C.B. Rogers, Jr.
 	 
	 	Name:  	C.B. Rogers, Jr. 	 
	 	 	 
	 



Signature Page to Second Amendment to

Series A Preferred Stock Purchase Agreement dated as of March 14, 2007






 









 










	 	 	 	 	 
	 	INVESTOR:



GEOFFREY L. STRINGER

 	 
	 
	 	By:  	/s/ Geoffrey L. Stringer
 	 
	 	 	Name:  	Geoffrey L. Stringer 	 
	 	 	Title:  	Individually	 
	 



Signature Page to Second Amendment to

Series A Preferred Stock Purchase Agreement dated as of March 14, 2007






 









 








	 	 	 	 	 
	 	INVESTOR:

 	 
	 	/s/
William P. Scully
 	 
	 	Name:  	William P. Scully 	 
	 	 	 
	 



Signature Page to Second Amendment to

Series A Preferred Stock Purchase Agreement dated as of March 14, 2007





 












 





APPENDIX I-C




Third Closing Investors and Respective Amounts of Series B Units Being Purchased



	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Purchase Price
	 	 	Series B Units	 	for Series B Units
	 	 	to be purchased	 	to be purchased
	Investor	 	at Third Closing	 	at Third Closing
	Third Closing Investors:
	 	 	 	 	 	 	 	 
	Joseph Cornacchia
	 	 	16,666	 	 	 	49,998	 
	Robert Girling
	 	 	33,333	 	 	 	99,999	 
	Michael Winder Haley Revocable Trust
	 	 	33,333	 	 	 	99,999	 
	Robert Kennedy
	 	 	16,666	 	 	 	49,998	 
	Lovejoy Family Limited Partnership
	 	 	33,333	 	 	 	99,999	 
	Lowery Family Investments LLC
	 	 	33,000	 	 	 	99,000	 
	Joseph Melone
	 	 	16,666	 	 	 	49,998	 
	Anthony Chidoni
	 	 	16,666	 	 	 	49,998	 
	52 River Course Associates LLC
	 	 	16,666	 	 	 	49,998	 
	Thomas W. Cook
	 	 	16,666	 	 	 	49,998	 
	The Mayo Family Revocable Trust
	 	 	16,666	 	 	 	49,998	 
	Samuel B Hayes III, Revocable Trust
	 	 	8,333	 	 	 	24,999	 
	C.B. Rogers, Jr.
	 	 	8,333	 	 	 	24,999	 
	Geoffrey Stringer
	 	 	8,333	 	 	 	24,999	 
	William Scully
	 	 	16,666	 	 	 	49,998	 
	 
	 	 	 	 	 	 	 	 
	 	 	 
	SUBTOTAL: 
	 	 	291,326	 	 	 	873,978	 






Appendix I-C to the 

Series A
Preferred Stock Purchase Agreement





 









 








APPENDIX II 




Notice Information for each Investor



	 	 	 	 	 
	 	 	NAME	 	ADDRESS
	1.

	 	James J. Lowrey
	 	REDACTED
	 
	2.

	 	Sheridan Investment Group LLC	 	 
	 
	3.

	 	Robert Kennedy	 	 
	 
	4.

	 	William Scully	 	 
	 
	5.

	 	Summit Investors of Vero, Ltd.
	 	REDACTED
	 
	6.

	 	William Feldman	 	 
	 
	7.

	 	Sanford Katz	 	 
	 
	8.

	 	Anthony Chidoni	 	 






Appendix II to the

Series A Preferred Stock Purchase Agreement






 









 








	 	 	 	 	 
	 	 	NAME	 	ADDRESS
	9.

	 	Dennis Cummings
	 	REDACTED
	 
	10.

	 	Carole and Sonny Delaire	 	 
	 
	11.

	 	Alvin J. Delaire Jr.	 	 
	 
	12.

	 	Arthur Mclnerney
	 	REDACTED
	 
	13.

	 	Jane Delaire	 	 
	 
	14.

	 	James Coyne	 	 
	 
	15.

	 	Joseph Cornacchia	 	 
	 
	16.

	 	Navarro Family Partners	 	 
	 
	17.

	 	William Wight
	 	REDACTED






Appendix II to the

Series A Preferred Stock Purchase Agreement





 









 








	 	 	 	 	 
	 	 	NAME	 	ADDRESS
	18.
	 	Robert Girling
	 	REDACTED
	 
	19.
	 	William Jennings	 	 
	 
	20.
	 	Arthur Calcagnini	 	 
	 
	21.
	 	Robert Poden	 	 
	 
	22.
	 	Philip Odeen	 	 
	 
	23.
	 	Walter Lovejoy	 	 
	 
	24.
	 	Earl Segerdahl	 	 
	 
	25.
	 	Peter Barrett
	 	REDACTED
	 
	26.
	 	Michael W. Haley	 	 
	 
	27.
	 	Joseph Melone	 	 
	 
	28.
	 	John Edison	 	 
	 
	29.
	 	James Bernhart
	 	REDACTED






Appendix II to the

Series A Preferred Stock Purchase Agreement







 









 








	 	 	 	 	 
	 	 	NAME	 	ADDRESS
	30.
	 	Robert J. Morrissey
	 	REDACTED
	 
	31.
	 	Richard Mullany	 	 
	 
	32.
	 	Sam Hayes	 	 
	 
	33.
	 	Tom Cook	 	 
	 
	34.
	 	Michael Paterson	 	 
	 
	35.
	 	C.B. (Jack) Rogers
	 	REDACTED
	 
	36.
	 	Debbie and Scott Bell	 	 
	 
	37.
	 	Andonia and Nikitas Kleopoulos	 	 
	 
	38.
	 	Michael E. Catanzaro Jr.	 	 
	 
	39.
	 	Linda Nelson	 	 
	 
	40.
	 	Triantafillos Parlapanides	 	 
	 
	41.
	 	Michael E. Catanzaro Jr.	 	 
	 
	42.
	 	Andonia and Nikitas Kleopoulos	 	 
	 
	43.
	 	James Bennett
	 	REDACTED
	 
	44.
	 	Steven P Kleopoulos	 	 






Appendix II to the

Series A Preferred Stock Purchase Agreement







 









 








	 	 	 	 	 
	 	 	NAME	 	ADDRESS
	45.

	 	Dick Fava
	 	REDACTED
	 
	46.
	 	 	 	 






Appendix II to the

Series A Preferred Stock Purchase Agreement





 









 








APPENDIX III




List of Debenture Holders



	 	 	 	 	 	 	 	 	 
	 	 	 	 	NAME AND ADDRESS OF	 	AMOUNT OF	 
	 	 	 	 	DEBENTURE HOLDER	 	DEBENTURE	 
	 
	 	1.	 	 	The Mayo Family Revocable Trust, 7/13/00
	 	$	200,000	 
	 	2.	 	 	Jack Gruber, IRA
	 	 	200,000	 
	 	 	 	 	REDACTED
	 	 	 	 
	 	3.	 	 	Mallie Ireland
	 	 	100,000	 
	 	 	 	 	REDACTED
	 	 	 	 
	 	4.	 	 	Samuel B. Hayes, III Revocable Trust, 10/6/88
	 	 	100,000	 
	 	 	 	 	REDACTED
	 	 	 	 
	 	5.	 	 	Robert M. Gibb
	 	 	50,000	 
	 	 	 	 	REDACTED
	 	 	 	 
	 	6.	 	 	C.B. Rogers, Jr.
	 	 	50,000	 
	 	 	 	 	REDACTED
	 	 	 	 
	 	7.	 	 	Judith M. Bracken
	 	 	50,000	 
	 	 	 	 	REDACTED
	 	 	 	 
	 	8.	 	 	Robert W. Bracken
	 	 	        50,000	 
	 	 	 	 	REDACTED
	 	 	 	 
	 	9.	 	 	Amy W. and James David McGee, Jr.
	 	 	        25,000	 
	 	10.	 	 	Paul J. Micciche
	 	 	        25,000	 
	 	11.	 	 	Kathryn M. Dircks and Randy Joel DircKs Living Trust
	 	 	        25,000	 
	 	 	 	 	REDACTED
	 	 	 	 
	 	12.	 	 	Survivor Trust of the Lightfoot Revocable Trust, 2/22/83
	 	 	25,000	 
	 	 	 	 	REDACTED
	 	 	 	 
	 	13.	 	 	John F. Hulseman
	 	 	200,000	 
	 	 	 	 	REDACTED
	 	 	 	 







Appendix III to the

Series A Preferred Stock Purchase Agreement





 









 








	 	 	 	 	 	 	 	 	 
	 	 	 	 	NAME AND ADDRESS OF	 	AMOUNT OF	 
	 	 	 	 	DEBENTURE HOLDER	 	DEBENTURE	 
	 
	 	14.	 	 	Frank J. Lincoln, Jr.
	 	 	       100,000	 
	 	 	 	 	REDACTED
	 	 	 	 
	 	15.	 	 	R. David Collin Trust, 3/17/99
	 	 	50,000	 
	 	 	 	 	REDACTED
	 	 	 	 
	 	16.	 	 	John and Ann Keeley
	 	 	        25,000	 
	 	 	 	 	REDACTED
	 	 	 	 
	 	17.	 	 	Robert A. Prindiville 2006 Personal Trust
	 	 	       150,000	 
	 	 	 	 	REDACTED
	 	 	 	 
	 	18.	 	 	Thomas W. Cook
	 	 	       100,000	 
	 	 	 	 	REDACTED
	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	 	 	 	 
	 	 	 
	 	 	 	 	TOTAL
	 	$	1,525,000	 
	 	 	 	 	 
	 	 	 







Appendix III to the

Series A Preferred Stock Purchase Agreement




 









 








EXHIBIT A-4




Series A Designations Amendment




 











 






EXHIBIT A-4




AMENDMENT TO CERTIFICATE OF DESIGNATION

OF

XStream Systems, Inc.




          XSTREAM SYSTEMS, INC., a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware (the “Corporation”),



          DOES HEREBY CERTIFY THAT:



          FIRST: The Board of Directors of the Corporation adopted resolutions proposing the
following amendment to the Certificate of Designation of XStream Systems, Inc. designating the
terms of a series of the Corporation’s preferred stock known as “Series A  Redeemable Convertible
Preferred Stock”, which was filed with the Delaware Secretary of State on March 14, 2007 and which
was amended and restated through the filing of an Amended Certificate of Designation which was
filed with the Delaware Secretary of State on December 17, 2007 (as so amended, the “Series A
Certificate of Designation”):




     WHEREAS, the Board of the Directors has caused a series of preferred stock of the Corporation
to be created, consisting of 962,101 shares and designated as “Series A Redeemable Convertible
Preferred Stock,” through the filing of a Certificate of Designation on March 14, 2007, which was
subsequently amended and restated through the filing of an Amended Certificate of Designation on
December 17, 2007 (as so amended, the “Series A Certificate of Designation”); and




     WHEREAS, the Board desires to amend further the rights and preferences of the Series A
Redeemable Convertible Preferred Stock to adjust certain of the conversion provisions thereof as
hereinafter provided;




     NOW, THEREFORE, be it:




     RESOLVED, that the Board of Directors of the Corporation hereby declares it advisable that the
following amendments be made to the Series A Certificate of Designation:




     1. That Section 7(b)(iii) thereof be amended to read in its entirety as follows:




     (iii) Notwithstanding the foregoing, there shall be no adjustment in the Series A
Conversion Price as a result of any issuance or sale (or deemed issuance or sale) of:



 









 






     (A) shares of Common issued upon conversion of the Series A Preferred;




     (B) shares of Common issued upon the exercise of Options or other Convertible Securities
outstanding as of the First Closing Date;




     (C) securities issued pursuant to a Board-approved (including at least one of the Investor
Directors) bona fide acquisition of an entity by merger, purchase of substantially all of the
assets or other reorganization;




     (D) shares of Common issued to Catalyst pursuant to the Options granted under the Catalyst
Letter Agreements;




     (E) shares of Common or other securities issued as a
dividend or distribution on, or in connection with a split of or
recapitalization of, any of the capital stock of the Corporation;




     (F) up to an aggregate of 800,000 shares (or such
greater or lesser number of shares as may be approved by a
majority of the Board (including at least one of the Investor
Directors)) of Common reserved for issuance per year pursuant to
the Option Plan (subject to adjustment in the event of stock splits,
stock dividends, stock combinations, recapitalizations and like
occurrences) and shares of Common reserved for issuance pursuant
to the Option Plan in lieu of the repayment of certain salary
deferrals as approved by a majority of the Board (including at least
one of the Investor Directors), which foregoing shares may be
subject to Options or restricted stock awards granted under the
Option Plan; provided that any Options that expire or terminate
unexercised or any restricted stock awards that are repurchased by
the Corporation pursuant to the terms of such award shall not be
counted toward the maximum number set forth in this
subparagraph (F) unless and until such shares are subject to new
restricted stock awards (or new Options) pursuant to the terms of
the Option Plan;




     (G) shares of Common issued or issuable (including
options to acquire such shares of Common) to suppliers or third-
party service providers in connection with the provision of goods
or services pursuant to transactions in the ordinary course of
business and approved by a majority of the Board, including at
least one of the Investor Directors;




     (H) shares of Common issued or issuable in connection with bona-fide sponsored research,
collaboration, technology



2









 









license, development, OEM, marketing or other similar agreements or strategic partnerships or joint
ventures entered into in the ordinary course of business and approved by a majority of the Board,
including at least one of the Investor Directors (and by at least a majority of the shares of Pari
Passu Preferred and Conversion Common Shares, voting as a single class on a Common Equivalent
Basis, then outstanding, if required pursuant to Section 3(c));




     (I) securities issued in connection with a Qualified IPO; or




     (J) options (covering up to an aggregate of 330,000 shares of Common) issued in
substitution for outstanding options;




provided that the aggregate number of shares of Common issued or issuable pursuant to clauses
(G) and (H) above shall not exceed 350,000 (or such greater or lesser number of shares as may
be approved by a majority of the Board (including at least one of the Investor Directors)) in any
twelve-month period;




     2. That the definition of “Catalyst Letter Agreements” in Section 9 thereof be amended
to read in its entirety as follows:




     “Catalyst Letter Agreements” means, collectively, (a) that certain letter agreement dated as
of May 31,2006 between Catalyst and the Corporation regarding the introduction of prospective
suppliers, (b) that certain letter agreement dated as of May 31, 2006 between Catalyst and the
Corporation regarding the introduction of prospective customers, (c) that certain Consulting
Agreement dated as of May 1, 2007 between Catalyst and the Corporation and (d) such amendments to
the foregoing or other agreements between Catalyst and the Corporation as may be approved by a
majority of the Board (including at least one of the Investor Directors).



     and that the same be, and hereby are, approved and adopted.



          SECOND: The stockholders of the Corporation, by written consent of the holders of the
outstanding stock entitled to vote thereon given pursuant to Section 228 of the General
Corporation Law of the State of Delaware, copies of which have been filed with the minutes of
the Corporation, adopted the foregoing amendment to the Series A Certificate of Designation.



          THIRD: The foregoing amendment has been duly adopted in accordance with the applicable
provisions of Section 242 of the General Corporation Law of the State of Delaware.



3









 





          IN WITNESS WHEREOF, said Corporation has caused this certificate to be
signed by its duly authorized officer this                      day of May, 2008.



	 	 	 	 	 
	 

	 	 

Name:
	 	 
	 

	 	Title:	 	 






Amendment to Certificate of Designation of XStream Systems, Inc.

Relating to Series A Certificate of Designation







4









 








EXHIBIT A-5

Series B Designations Amendment




 









 










EXHIBIT A-5




AMENDMENT TO CERTIFICATE OF DESIGNATION

OF

XStream Systems, Inc.




          XSTREAM SYSTEMS, INC., a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware (the “Corporation”),



          DOES HEREBY CERTIFY THAT:



          FIRST: The Board of Directors of the Corporation adopted resolutions proposing the
following amendment to the Certificate of Designation of Series B Redeemable Convertible Preferred
Stock of XStream Systems, Inc. designating the terms of a series of the Corporation’s preferred
stock known as “Series B Redeemable Convertible Preferred Stock”, which was filed with the Delaware
Secretary of State on December 17, 2007 (the “Series B Certificate of Designation”):




     WHEREAS, the Board of the Directors caused a series of preferred stock of the Corporation to
be created, consisting of 1,450,000 shares and designated as “Series B Redeemable Convertible
Preferred Stock,” through the filing of a Certificate of Designation (the “Series B Certificate of
Designation”); and




     WHEREAS, the Board desires to amend the rights and preferences of the Series B Redeemable
Convertible Preferred Stock to increase the number of shares constituting such series of preferred
stock and to adjust certain of the conversion provisions thereof as hereinafter provided;




     NOW, THEREFORE, be it:




     RESOLVED, that the Board of Directors of the Corporation hereby declares it advisable that the
following amendments be made to the Series B Certificate of Designation:




     1. That Section 1 thereof be amended to read in its entirety as follows:




     (1) Designation, Par Value and Number. This series of Preferred Stock shall be
designated as “Series B Redeemable Convertible Preferred Stock.” The Corporation shall have the
authority to issue 1,800,000 shares of the Series B Preferred with a par value of $.0001 per share.
In accordance with the terms hereof, each share of Series B Preferred shall have the same relative
rights as, and be identical in all respects with, each other share of Series B Preferred.



 









 






     2. That Section 7(b)(iii) thereof be amended to read in its entirety as follows:




     (iii) Notwithstanding the foregoing, there shall be no adjustment in the Series B
Conversion Price as a result of any issuance or sale (or deemed issuance or sale) of:




     (A) shares of Common issued upon conversion of the Pari Passu Preferred;




     (B) shares of Common issued upon the exercise of the Warrants;




     (C) shares of Common issued upon the exercise of Options or other Convertible Securities
outstanding as of the First Closing Date;




     (D) securities issued pursuant to a Board-approved (including at least one of the Investor
Directors) bona fide acquisition of an entity by merger, purchase of substantially all of the
assets or other reorganization;




     (E) shares of Common issued to Catalyst pursuant to
the Options granted under the Catalyst Letter Agreements;




     (F) shares of Common or other securities issued as a
dividend or distribution on, or in connection with a split of or
recapitalization of, any of the capital stock of the Corporation;




     (G) up to an aggregate of 800,000 shares (or such
greater or lesser number of shares as may be approved by a
majority of the Board (including at least one of the Investor
Directors)) of Common reserved for issuance per year pursuant to
the Option Plan (subject to adjustment in the event of stock splits,
stock dividends, stock combinations, recapitalizations and like
occurrences) and shares of Common reserved for issuance pursuant
to the Option Plan in lieu of the repayment of certain salary
deferrals as approved by a majority of the Board (including at least
one of the Investor Directors), which foregoing shares may be
subject to Options or restricted stock awards granted under the
Option Plan; provided that any Options that expire or terminate
unexercised or any restricted stock awards that are repurchased by
the Corporation pursuant to the terms of such award shall not be
counted toward the maximum number set forth in this
subparagraph (G) unless and until such shares are subject to new
restricted stock awards (or new Options) pursuant to the terms of
the Option Plan;



2









 







     (H) shares of Common issued or issuable (including options to acquire such shares of
Common) to suppliers or third-party service providers in connection with the provision of goods or
services pursuant to transactions in the ordinary course of business and approved by a majority of
the Board, including at least one of the Investor Directors;




     (I) shares of Common issued or issuable in connection with bona-fide sponsored
research, collaboration, technology license, development, OEM, marketing or other similar
agreements or strategic partnerships or joint ventures entered into in the ordinary course of
business and approved by a majority of the Board, including at least one of the Investor Directors
(and by at least a majority of the shares of Pari Passu Preferred and Conversion Common Shares,
voting as a single class on a Common Equivalent Basis, then outstanding, if required pursuant to
Section 3(c)):




     (J) securities issued in connection with a Qualified IPO;




     (K) Permitted Issuances; or




     (L) options (covering up to an aggregate of 330,000 shares of Common) issued in
substitution for outstanding options;




provided that the aggregate number of shares of Common issued or issuable pursuant to clauses
(H) and (I) above shall not exceed 350,000 (or such greater or lesser number of shares as may
be approved by a majority of the Board (including at least one of the Investor Directors)) in any
twelve-month period;




     3. That the definition of “Catalyst Letter Agreements” in Section 9
thereof be amended to read in its entirety as follows:




     “Catalyst Letter Agreements” means, collectively, (a) that certain letter agreement dated as
of May 31, 2006 between Catalyst and the Corporation regarding the introduction of prospective
suppliers, (b) that certain letter agreement dated as of May 31, 2006 between Catalyst and the
Corporation regarding the introduction of prospective customers, (c) that certain Consulting
Agreement dated as of May 1, 2007 between Catalyst and the Corporation and (d) such amendments to
the foregoing or other agreements between Catalyst and the Corporation as may be approved by a
majority of the Board (including at least one of the Investor Directors).



     and that the same be, and hereby are, approved and adopted.



3









 





          SECOND: The stockholders of the Corporation, by written consent of the holders of the
outstanding stock entitled to vote thereon given pursuant to Section 228 of the General Corporation
Law of the State of Delaware, copies of which have been filed with the minutes of the Corporation,
adopted the foregoing amendment to the Series B Certificate of Designation.




          THIRD: The foregoing amendment has been duly adopted in accordance with the applicable
provisions of Section 242 of the General Corporation Law of the State of Delaware.







4









 








          IN WITNESS WHEREOF, said Corporation has caused this certificate to be
signed by its duly authorized officer this                      day of May, 2008.




	 	 	 	 	 
	 

	 	 

Name:
	 	 
	 

	 	Title:	 	 






Amendment to Certificate of Designation of XStream Systems, Inc.

Relating to Series B Certificate of Designation








5









 








EXHIBIT A-6

Series C Designations Amendment





 









 









EXHIBIT A-6




AMENDMENT TO CERTIFICATE OF DESIGNATION

OF

XStream Systems, Inc.




          XSTREAM SYSTEMS, INC., a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware (the “Corporation”),




          DOES HEREBY CERTIFY THAT:




          FIRST: The Board of Directors of the Corporation adopted resolutions proposing the following
amendment to the Certificate of Designation of Series C Redeemable Convertible Preferred Stock of
XStream Systems, Inc. designating the terms of a series of the Corporation’s preferred stock known
as “Series C Redeemable Convertible Preferred Stock”, which was filed with the Delaware Secretary
of State on December 17, 2007 (the “Series C Certificate of Designation”):





     WHEREAS, the Board of the Directors caused a series of preferred stock of the Corporation to
be created, consisting of 1,000,000 shares and designated as “Series C Redeemable Convertible
Preferred Stock,” through the filing of a Certificate of Designation (the “Series C Certificate of
Designation”); and




     WHEREAS, the Board desires to amend the rights and preferences of the Series C Redeemable
Convertible Preferred Stock to increase the authorized number of shares and to adjust certain of
the conversion provisions thereof as hereinafter provided;




     NOW, THEREFORE, be it:




     RESOLVED, that the Board of Directors of the Corporation hereby declares it advisable that the
following amendments be made to the Series C Certificate of Designation:




     1. That Section 1 thereof be amended to read in its entirety as follows:




     (1) Designation, Par Value and Number. This series of Preferred Stock shall be
designated as “Series C Redeemable Convertible Preferred Stock.” The Corporation shall have the
authority to issue 1,350,000 shares of the Series C Preferred with a par value of $.0001 per share.
In accordance with the terms hereof, each share of Series C Preferred shall have the same relative
rights as, and be identical in all respects with, each other share of Series C Preferred.



 









 






     2. That Section 7(b)(iii) thereof be amended to read in its entirety as
follows:




     (iii) Notwithstanding the foregoing, there shall be no adjustment in the Series C
Conversion Price as a result of any issuance or sale (or deemed issuance or sale) of:




     (A) shares of Common issued upon conversion of the Pari Passu Preferred;




     (B) shares of Common issued upon the exercise of the Warrants;




     (C) shares of Common issued upon the exercise of Options or other Convertible Securities
outstanding as of the First Closing Date;




     (D) securities issued pursuant to a Board-approved (including at least one of the Investor
Directors) bona fide acquisition of an entity by merger, purchase of substantially all of the
assets or other reorganization;




     (E) shares of Common issued to Catalyst pursuant to
the Options granted under the Catalyst Letter Agreements;




     (F) shares of Common or other securities issued as a
dividend or distribution on, or in connection with a split of or
recapitalization of, any of the capital stock of the Corporation;




     (G) up to an aggregate of 800,000 shares (or such greater or lesser number of shares as may be
approved by a majority of the Board (including at least one of the Investor Directors)) of Common
reserved for issuance per year pursuant to the Option Plan (subject to adjustment in the event of
stock splits, stock dividends, stock combinations, recapitalizations and like occurrences) and
shares of Common reserved for issuance pursuant to the Option Plan in lieu of the repayment of
certain salary deferrals as approved by a majority of the Board (including at least one of the
Investor Directors), which foregoing shares may be subject to Options or restricted stock awards
granted under the Option Plan; provided that any Options that expire or terminate unexercised or
any restricted stock awards that are repurchased by the Corporation pursuant to the terms of such
award shall not be counted toward the maximum number set forth in this subparagraph (G) unless and
until such shares are subject to new restricted stock awards (or new Options) pursuant to the terms
of the Option Plan;



2









 







     (H) shares of Common issued or issuable (including options to acquire such shares of
Common) to suppliers or third-party service providers in connection with the provision of goods or
services pursuant to transactions in the ordinary course of business and approved by a majority of
the Board, including at least one of the Investor Directors;




     (I) shares of Common issued or issuable in connection with bona-fide sponsored
research, collaboration, technology license, development, OEM, marketing or other similar
agreements or strategic partnerships or joint ventures entered into in the ordinary course of
business and approved by a majority of the Board, including at least one of the Investor Directors
(and by at least a majority of the shares of Pari Passu Preferred and Conversion Common Shares,
voting as a single class on a Common Equivalent Basis, then outstanding, if required pursuant to
Section 3(c));




     (J) securities issued in connection with a Qualified IPO;




     (K) Permitted Issuances; or




     (L) options (covering up to an aggregate of 330,000 shares of Common) issued in
substitution for outstanding options;




provided that the aggregate number of shares of Common issued or issuable pursuant to clauses
(H) and (I) above shall not exceed 350,000 (or such greater or lesser number of shares as may
be approved by a majority of the Board (including at least one of the Investor Directors)) in any
twelve-month period;




     3. That the definition of “Catalyst Letter Agreements” in Section 9
thereof be amended to read in its entirety as follows:




     “Catalyst Letter Agreements” means, collectively, (a) that certain letter agreement dated as
of May 31, 2006 between Catalyst and the Corporation regarding the introduction of prospective
suppliers, (b) that certain letter agreement dated as of May 31, 2006 between Catalyst and the
Corporation regarding the introduction of prospective customers, (c) that certain Consulting
Agreement dated as of May 1, 2007 between Catalyst and the Corporation and (d) such amendments to
the foregoing or other agreements between Catalyst and the Corporation as may be approved by a
majority of the Board (including at least one of the Investor Directors).



     and that the same be, and hereby are, approved and adopted.



3









 





          SECOND: The stockholders of the Corporation, by written consent of the holders of the
outstanding stock entitled to vote thereon given pursuant to Section 228 of the General Corporation
Law of the State of Delaware, copies of which have been filed with the minutes of the Corporation,
adopted the foregoing amendment to the Series C Certificate of Designation.




          THIRD: The foregoing amendment has been duly adopted in accordance with the applicable
provisions of Section 242 of the General Corporation Law of the State of Delaware.




4









 











          IN WITNESS WHEREOF, said Corporation has caused this certificate to be
signed by its duly authorized officer this         day of May, 2008.




	 	 	 	 	 
	 

	 	 

Name:
	 	 
	 

	 	Title:	 	 






Amendment to Certificate of Designation of XStream Systems, Inc.

Relating to Series C Certificate of Designation







5









 








EXHIBIT I-1

Series B Warrant Amendment





 









 










EXHIBIT I-1




AMENDMENT TO SERIES B WARRANT AGREEMENT




          THIS AMENDMENT is entered into as of this 30th day of May, 2008, between XStream
Systems, Inc., a Delaware corporation (the “Company”), and the Holders from time to time of the
Warrants created under the Series B Warrant Agreement dated as of December 19, 2007 (the “Warrant
Agreement”) between the Company and such Holders (such terms, and certain other capitalized terms
used herein as defined in the Warrant Agreement, as amended by this Amendment).




          WHEREAS, the Company is party to the Warrant Agreement providing for the issuance from time to
time of Warrants designated the Series B Warrants to purchase shares of Common Stock, par value
$.0001 per Share of the Company; and




          WHEREAS, the Company and the Holders desire to amend the provisions of the Warrant Agreement
in order to provide for an increase in the number of Warrants that may be issued thereunder and to
adjust the conversion provisions thereof as hereinafter provided;




          NOW, THEREFORE, in consideration of the foregoing, the parties hereto hereby agree as follows:




          1. Amendments. The Warrant Agreement shall be amended as follows:





     (a) Section 1 thereof shall be amended to read in its entirety as
follows:




     1. ISSUANCE




     The Company shall issue and deliver a certificate or certificates (the “Warrant Certificates”)
evidencing warrants to purchase an aggregate of 9,000,000 shares of Common Stock at the per share
exercise price specified in Section 5 (the “Warrants”) on the terms and conditions set forth in
this Agreement. Each Warrant Certificate shall be substantially in the form of Exhibit A hereto.
Each Warrant Certificate shall be dated the date of issuance. An officer shall sign each Warrant
Certificate by manual or facsimile signature. All Warrants shall at all times be identical as to
terms and conditions and date, except as to the number of shares of Common Stock for which they may
be exercised.




     (b) The definitions of “Catalyst Letter Agreements” and “Series C
Warrants” in Section 2 thereof shall be amended to read in their entirety as
follows:




     “Catalyst Letter Agreements” means, collectively, (a) that certain letter agreement dated as
of May 31, 2006 between Catalyst and the Corporation regarding the introduction of prospective
suppliers, (b) that certain letter agreement dated as of May 31, 2006 between Catalyst and



 









 







the Corporation regarding the introduction of prospective customers, (c) that certain Consulting
Agreement dated as of May 1, 2007 between Catalyst and the Corporation and (d) such amendments to
the foregoing or other agreements between Catalyst and the Corporation as may be approved by a
majority of the Board (including at least one of the Investor Directors).




     “Series C Warrants” means the warrants to purchase Common Stock of the Company issuable
pursuant to the Series C Warrant Agreement dated as of December 19, 2007, as amended.




     (c) Section 5.2(b) thereof shall be amended to read in its entirety as follows:




     (b) Notwithstanding the foregoing, there shall be no adjustment in the Exercise Price as
a result of any issuance or sale (or deemed issuance or sale) of:




     (i) shares of Common Stock issued upon conversion of the Preferred Stock;




     (ii) shares of Common Stock issued upon the exercise of the Warrants or the Series C
Warrants;




     (iii) shares of Common Stock issued upon the exercise of Options or other Convertible
Securities outstanding as of March 14, 2007;




     (iv) securities issued pursuant to a Board-approved (including at least one of the
Investor Directors) bona fide acquisition of an entity by merger, purchase of substantially all of
the assets or other reorganization;




     (v) shares of Common Stock issued to Catalyst Capital Investments LLC, a Delaware
limited liability company pursuant to the Options granted under the Catalyst Letter Agreements;




     (vi) shares of Common Stock or other securities issued as a dividend or distribution on, or
in connection with a split of or recapitalization of, any of the capital stock of the Company;




     (vii) up to an aggregate of 800,000 shares (or such greater or lesser number of shares as
may be approved by a majority of the Board (including at least one of the Investor Directors)) of
Common Stock reserved for issuance per year pursuant to the Option Plan (subject to adjustment in
the event of stock splits, stock dividends, stock combinations, recapitalizations and like
occurrences) and shares of Common Stock reserved for



2









 







issuance pursuant to the Option Plan in lieu of the repayment of certain salary deferrals as
approved by a majority of the Board (including at least one of the Investor Directors), which
foregoing shares maybe subject to Options or restricted stock awards granted under the Option Plan;
provided that any Options that expire or terminate unexercised or any restricted stock awards that
are repurchased by the Company pursuant to the terms of such award shall not be counted toward the
maximum number set forth in this subparagraph (vii) unless and until such shares are subject to new
restricted stock awards (or new Options) pursuant to the terms of the Option Plan;




     (viii) shares of Common Stock issued or issuable (including options to acquire such shares
of Common Stock) to suppliers or third-party service providers in connection with the provision of
goods or services pursuant to transactions in the ordinary course of business and approved by a
majority of the Board, including at least one of the Investor Directors;




     (ix) shares of Common Stock issued or issuable in connection with bona-fide sponsored
research, collaboration, technology license, development, OEM, marketing or other similar
agreements or strategic partnerships or joint ventures entered into in the ordinary course of
business and approved by a majority of the Board, including at least one of the Investor Directors
(and by at least a majority of the shares of Preferred Stock and Conversion Common Shares, voting
as a single class on a Common Equivalent Basis, then outstanding, if required pursuant to Section
3(c) of the Preferred Stock Certificates of Designation);




     (x) securities issued in connection with a Qualified IPO;




     (xi) Permitted Issuances; or




     (xii) options (covering up to an aggregate of 330,000 shares of Common) issued in
substitution for outstanding options;




provided that the aggregate number of shares of Common issued or issuable pursuant to clauses
(viii) and (ix) above shall not exceed 350,000 (or such greater or lesser number of shares as may
be approved by a majority of the Board (including at least one of the Investor Directors)) in any
twelve-month period.



3









 





          2. Reference to and Effect on Warrant Agreement; Reaffirmation.





     (a) Upon the effectiveness of this Amendment, each reference in the Warrant Agreement
to “this Agreement,” “hereunder,” “hereof,” “herein,” “hereby” or words of like import shall mean
and be a reference to the Warrant Agreement as amended hereby, and each reference to the Warrant
Agreement in any other document, instrument or agreement executed and/or delivered in connection
with the Warrant Agreement shall mean and be a reference to the Warrant Agreement as amended
hereby.




     (b) Except as specifically amended hereby, the Warrant Agreement shall remain in full
force and effect and is hereby ratified and confirmed. The execution, delivery and effectiveness of
this Amendment shall not constitute a waiver of any provision contained in the Warrant Agreement,
except as specifically set forth herein.



          3. Governing Law. In all respects, including all matters of construction, validity and
performance, this Amendment and the Warrants and the obligations arising hereunder and thereunder
shall be governed by, and construed and enforced in accordance with, the laws of the State of
Florida applicable to contracts made and performed in such state, except with respect to the
validity of this Amendment and the Warrants, the issuance of Warrant Stock upon exercise of the
Warrants and the rights and duties of the Company with respect to registration of transfer, which
shall be governed by the laws of the State of Delaware.




          4. Interpretation.





     (a) Capitalized terms used herein without definition shall have the respective definitions
assigned to those terms in the Warrant Agreement.




     (b) For purposes of this Amendment, (i) the words “include,” “includes” and “including” mean
“including without limitation,” (ii) the word “or” is not exclusive and (iii) the words “herein,”
“hereof,” “hereby,” “hereto” and “hereunder” refer to this Amendment as a whole.




     (c) Unless the context otherwise requires, references herein to Sections mean the Sections of
this Amendment. Headings of Sections are inserted for convenience of reference only and shall not
be deemed a part of or to affect the meaning or interpretation of this Amendment.




     (d) Each of the parties to this Amendment has had the benefit of counsel in connection with
its review and negotiation of this Amendment. Consequently, the parties confirm that this Amendment
shall not be construed on the basis of any presumption or rule requiring construction or
interpretation against the party drafting an agreement or instrument or causing any agreement or
instrument to be drafted.



[signature page follows]






4









 








          IN WITNESS WHEREOF, the Company has caused this Amendment to be
executed as of the day and year first above written.




	 	 	 	 	 
	 	XSTREAM SYSTEMS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



Signature Page to Amendment to Series B Warrant Agreement




5









 









EXHIBIT J-1

Series C Warrant Amendment





6











 





EXHIBIT
J-1




AMENDMENT TO SERIES C WARRANT AGREEMENT




          THIS AMENDMENT is entered into as of this 30th day of May, 2008, between XStream
Systems, Inc., a Delaware corporation (the
“Company”), and the Holders from time to time of the
Warrants created under the Series C Warrant Agreement dated as
of December 19, 2007 (the “Warrant
Agreement”) between the Company and such Holders (such terms, and certain other capitalized terms
used herein as defined in the Warrant Agreement, as amended by  this Amendment).




          WHEREAS, the Company is party to the Warrant Agreement providing for the issuance from time to
time of Warrants designated the Series C Warrants to purchase shares of Common Stock, par value
$.0001 per Share of the Company; and




          WHEREAS, the Company and the Holders desire to amend the provisions of the Warrant Agreement
in order to provide for an increase in the number of Warrants that may be issued thereunder and to
adjust the conversion provisions thereof as hereinafter provided;




          NOW, THEREFORE, in consideration of the foregoing, the parties hereto hereby agree as follows:




          1. Amendments. The Warrant Agreement shall be amended as follows:





     (a) Section 1 thereof shall be amended to read in its entirety as
follows:



               1. ISSUANCE




     The Company shall issue and deliver a certificate or certificates (the
“Warrant Certificates”) evidencing warrants to purchase an aggregate of
6,750,000 shares of Common Stock at the per share exercise price specified
in Section 5 (the “Warrants”) on the terms and conditions set forth in this
Agreement. Each Warrant Certificate shall be substantially in the form of
Exhibit A hereto. Each Warrant Certificate shall be dated the date of
issuance. An officer shall sign each Warrant Certificate by manual or
facsimile signature. All Warrants shall at all times be identical as to
terms and conditions and date, except as to the number of shares of Common
Stock for which they may be exercised.




     (b) The definitions of “Catalyst Letter Agreements” and “Series B
Warrants” in Section 2 thereof shall be amended to read in its entirety as follows:




     “Catalyst Letter Agreements” means, collectively, (a) that certain
letter agreement dated as of May 31, 2006 between Catalyst and the
Corporation regarding the introduction of prospective suppliers, (b) that
certain letter agreement dated as of May 31, 2006 between Catalyst and the
Corporation regarding the introduction of prospective customers, (c)



 









 







that certain Consulting Agreement dated as of May 1, 2007 between
Catalyst and the Corporation and (d) such amendments to the foregoing or
other agreements between Catalyst and the Corporation as may be
approved by a majority of the Board (including at least one of the Investor
Directors).




     “Series B Warrants” means the warrants to purchase Common Stock of the
Company issuable pursuant to the Series B Warrant Agreement dated as of
December 19, 2007, as amended.




     (c)
Section 5.2(b) thereof shall be amended to read in its entirety as
follows:




     (b) Notwithstanding the foregoing, there shall be no adjustment in
the Exercise Price as a result of any issuance or sale (or deemed issuance or
sale) of:




     (i) shares of Common Stock issued upon conversion of the
Preferred Stock;




     (ii) shares of Common Stock issued upon the exercise of
the Warrants or the Series B Warrants;




     (iii) shares of Common Stock issued upon the exercise
of Options or other Convertible Securities outstanding as of March
14, 2007;




     (iv) securities issued pursuant to a Board-approved
(including at least one of the Investor Directors) bona fide
acquisition of an entity by merger, purchase of substantially all of
the assets or other reorganization;




     (v) shares of Common Stock issued to Catalyst Capital
Investments LLC, a Delaware limited liability company pursuant to the
Options granted under the Catalyst Letter Agreements;




     (vi) shares of Common Stock or other securities issued as a
dividend or distribution on, or in connection with a split of or
recapitalization of, any of the capital stock of the Company;




     (vii) up to an aggregate of 800,000 shares (or such greater
or lesser number of shares as may be approved by a majority of the
Board (including at least one of the Investor Directors)) of Common
Stock reserved for issuance per year pursuant to the Option Plan
(subject to adjustment in the event of stock splits, stock dividends,
stock combinations, recapitalizations and like occurrences) and
shares of Common Stock reserved for issuance pursuant to the Option
Plan in lieu of the repayment of



2









 







certain salary deferrals as approved by a majority of the Board (including at
least one of the Investor Directors), which foregoing shares may be subject to
Options or restricted stock awards granted under the Option Plan; provided that
any Options that expire or terminate unexercised or any restricted stock awards
that are repurchased by the Company pursuant to the terms of such award shall not
be counted toward the maximum number set forth in this subparagraph (vii) unless
and until such shares are subject to new restricted stock awards (or new Options)
pursuant to the terms of the Option Plan;




     (viii) shares of Common Stock issued or issuable (including options to
acquire such shares of Common Stock) to suppliers or third-party service
providers in connection with the provision of goods or services pursuant to
transactions in the ordinary course of business and approved by a majority of the
Board, including at least one of the Investor Directors;




     (ix) shares of Common Stock issued or issuable in connection with
bona-fide sponsored research, collaboration, technology license, development,
OEM, marketing or other similar agreements or strategic partnerships or joint
ventures entered into in the ordinary course of business and approved by a
majority of the Board, including at least one of the Investor Directors (and by
at least a majority of the shares of Preferred Stock and Conversion Common
Shares, voting as a single class on a Common Equivalent Basis, then outstanding,
if required pursuant to Section 3(c) of the Preferred Stock Certificates of
Designation);




     (x) securities issued in connection with a Qualified IPO;




     (xi) Permitted Issuances; or




     (xii) options (covering up to an aggregate of 330,000 shares of Common)
issued in substitution for outstanding options;




provided that the aggregate number of shares of Common issued or issuable pursuant to clauses
(viii) and (ix) above shall not exceed 350,000 (or such greater or lesser number of shares as may
be approved by a majority of the Board (including at least one of the Investor Directors)) in any
twelve-month period.




2. Reference to and Effect on Warrant Agreement; Reaffirmation.




     (a) Upon the effectiveness of this Amendment, each reference in the Warrant Agreement to
“this Agreement,” “hereunder,” “hereof,” “herein,”



3









 







“hereby” or words of like import shall mean and be a reference to the Warrant
Agreement as amended hereby, and each reference to the Warrant Agreement in any
other document, instrument or agreement executed and/or delivered in connection with
the Warrant Agreement shall mean and be a reference to the Warrant Agreement as
amended hereby.




     (b) Except as specifically amended hereby, the Warrant Agreement shall
remain in full force and effect and is hereby ratified and confirmed. The execution,
delivery and effectiveness of this Amendment shall not constitute a waiver of any
provision contained in the Warrant Agreement, except as specifically set forth
herein.



          3. Governing Law. In all respects, including all matters of construction, validity and
performance, this Amendment and the Warrants and the obligations arising hereunder and thereunder
shall be governed by, and construed and enforced in accordance with, the laws of the State of
Florida applicable to contracts made and performed in such state, except with respect to the
validity of this Amendment and the Warrants, the issuance of Warrant Stock upon exercise of the
Warrants and the rights and duties of the Company with respect to registration of transfer, which
shall be governed by the laws of the State of Delaware.




          4.
Interpretation.





     (a) Capitalized terms used herein without definition shall have the respective
definitions assigned to those terms in the Warrant Agreement.




     (b) For purposes of this Amendment, (i) the words “include,” “includes” and
“including” mean “including without limitation,” (ii) the word “or” is not exclusive
and (iii) the words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to
this Amendment as a whole.




     (c) Unless the context otherwise requires, references herein to Sections mean
the Sections of this Amendment. Headings of Sections are inserted for convenience of
reference only and shall not be deemed a part of or to affect the meaning or
interpretation of this Amendment.




     (d) Each of the parties to this Amendment has had the benefit of counsel in
connection with its review and negotiation of this Amendment. Consequently, the
parties confirm that this Amendment shall not be construed on the basis of any
presumption or rule requiring construction or interpretation against the party
drafting an agreement or instrument or causing any agreement or instrument to be
drafted.



[signature page follows]




4









 





          IN WITNESS WHEREOF, the Company has caused this Amendment to be executed as of the day
and year first above written.




	 	 	 	 	 
	 	XSTREAM SYSTEMS, INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



Signature Page to Amendment to Series C Warrant Agreement





5









 




EXHIBIT
K-1

Securityholders Agreement Amendment


 








 




EXHIBIT
K-1


AMENDMENT TO 

AMENDED AND RESTATED SECURITYHOLDERS AGREEMENT


          THIS AMENDMENT is entered into as of this 30th day of May, 2008, between
XStream Systems, Inc., a Delaware corporation (the “Company”), and the Securityholders named in the
Amended and Restated Securityholders Agreement dated as of December 19, 2007 (the “Securityholders
Agreement”) between the Company and such Securityholders (such terms, and certain other capitalized
terms used herein as defined in the Securityholders Agreement, as amended by this Amendment).




          WHEREAS, the Company and the Securityholders desire to amend the provisions of the
Securityholders Agreement in order to adjust the preemptive rights provision thereof as hereinafter
provided;




          NOW, THEREFORE, in consideration of the foregoing, the parties hereto hereby agree as follows:




          1. Amendment. Section 5.1 (c) of the Securityholders Agreement shall be
amended to read in its entirety as follows:





     (c) Except as set forth in the immediately following sentence, “New Securities”
shall mean any shares of capital stock of the Corporation, including Common Stock and
preferred stock (including Preferred Stock), whether or not now authorized, and rights,
options or warrants to purchase shares of Common Stock or preferred stock (including
Preferred Stock) and securities of any type whatsoever that are, or may by their terms
become, convertible into or exchangeable for shares of Common Stock or preferred stock.
Notwithstanding the foregoing, “New Securities” shall not include the following:




     (i) shares of Common Stock issued upon the conversion of the
Preferred Stock;




     (ii) the Warrants or any shares of Common Stock issued upon exercise of
the Warrants;




     (iii) shares of Common Stock issued upon the exercise of Options or other
Convertible Securities outstanding as of March 14, 2007;




     (iv) securities issued pursuant to a Board-approved (including at least
one of the Investor Directors) acquisition of an entity by merger, purchase of
substantially all of the assets or other reorganization;




     (v) shares of Common Stock issued to Catalyst pursuant to the Options
granted under the Catalyst Letter Agreements;



 









 






     (vi) shares of Common Stock issued as a dividend or distribution on, or in
connection with a split of or recapitalization of, any of the capital stock of the
Corporation;




     (vii) up to an aggregate of 800,000 shares of Common Stock reserved for issuance
per year pursuant to the Option Plan (subject to adjustment in the event of stock splits,
stock dividends, stock combinations, recapitalizations and like occurrences) and shares of
Common Stock reserved for issuance pursuant to the Option Plan in lieu of the repayment of
certain salary deferrals as approved by a majority of the Board (including at least one of
the Investor Directors), which foregoing shares may be subject to Options or restricted
stock awards granted under the Option Plan; provided that any Options that expire or
terminate unexercised or any restricted stock awards that are repurchased by the
Corporation pursuant to the terms of such award shall not be counted toward the maximum
number set forth in this subparagraph (vii) unless and until such shares are subject to new
restricted stock awards (or new Options) pursuant to the terms of the Option Plan;




     (viii) shares of Common Stock issued or issuable (including pursuant to Options) to
suppliers or third-party service providers in connection with the provision of goods or
services pursuant to transactions in the ordinary course of business and approved by a
majority of the Board, including a majority of the Investor Directors;




     (ix) shares of Common Stock issued or issuable in connection with bona-fide
sponsored research, collaboration, technology license, development, OEM, marketing or other
similar agreements or strategic partnerships or joint ventures entered into in the ordinary
course of business and approved by a majority of the Board, including a majority of the
Investor Directors (and by at least a majority of the shares of Preferred Stock and
Conversion Common Shares, voting as a single class on a Fully-Diluted Basis, then
outstanding, if required pursuant to the Certificate of Incorporation;




     (x) securities issued in connection with a Qualified IPO;


     (xi) Permitted Issuances; or




     (xii) up to an aggregate of 330,000 shares of Common that may be issued
pursuant to options issued in substitution for outstanding options;




provided that the aggregate number of shares of Common Stock issued or issuable pursuant to clauses
(viii) and (ix) above shall not exceed 350,000 in any twelve-month period.



2









 





          2. Reference to and Effect on Securityholders Agreement: Reaffirmation.





     (a) Upon the effectiveness of this Amendment, each reference in the
Securityholders Agreement to “this Agreement,” “hereunder,” “hereof,” “herein,”
“hereby” or words of like import shall mean and be a reference to the
Securityholders Agreement as amended hereby, and each reference to the
Securityholders Agreement in any other document, instrument or agreement executed
and/or delivered in connection with the Securityholders Agreement shall mean and be
a reference to the Securityholders Agreement as amended hereby.




     (b) Except as specifically amended hereby, the Securityholders Agreement shall
remain in full force and effect and is hereby ratified and confirmed. The execution,
delivery and effectiveness of this Amendment shall not constitute a waiver of any
provision contained in the Securityholders Agreement, except as specifically set
forth herein.



          3. Governing Law. This Agreement shall be governed by the laws of the State of
Delaware without regard to the choice of law provisions of such State or any other State.




          4. Interpretation.





     (a) Capitalized terms used herein without definition shall have the respective
definitions assigned to those terms in the Securityholders Agreement.




     (b) For purposes of this Amendment, (i) the words “include,” “includes” and
“including” mean “including without limitation,” (ii) the word “or” is not exclusive
and (iii) the words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to
this Amendment as a whole.




     (c) Unless the context otherwise requires, references herein to Sections mean
the Sections of this Amendment. Headings of Sections are inserted for convenience of
reference only and shall not be deemed a part of or to affect the meaning or
interpretation of this Amendment.




     (d) Each of the parties to this Amendment has had the benefit of counsel in
connection with its review and negotiation of this Amendment. Consequently, the
parties confirm that this Amendment shall not be construed on the basis of any
presumption or rule requiring construction or interpretation against the party
drafting an agreement or instrument or causing any agreement or instrument to be
drafted.



[signature page follows]




3









 





          IN WITNESS WHEREOF, the Company and the Securityholders have caused this Amendment to be executed
as of the day and year first above written.




	 	 	 	 	 
	 	XSTREAM SYSTEMS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



Signature Page to Amendment to Amended and Restated Securityholders Agreement





 









 





	 	 	 	 	 	 	 
	 	 	SECURITYHOLDER:	 	 
	 
	 	 	 	 	 	 
	 	 	If individual:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	If entity:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	Name of entity	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 






Signature Page to Amendment to Amended and Restated Securityholders Agreement




 









 





EXHIBIT M

Form of Legal Opinion of Greenberg Traurig, P.A.









 









 
















May 30, 2008




Third Closing Investors

c/o Richard W. Astle, Esq.

Sidley Austin LLP

One South Dearborn Street

Suite 3000

Chicago, Illinois 60603







			
	Re:	 	Second Amendment to the Series A Preferred Stock Agreement dated as of May 30, 2008
(the “Amendment”), by and between the Third Closing
Investors (as defined in the Amendment)
(the “Purchasers”) and XStream Systems, Inc.





Ladies and Gentlemen:




     We
have acted as special counsel to XStream Systems, Inc., a Delaware corporation, located
at 10305
102nd Terrace, Suite 101, Sebastian, FL 32958 (the “Company”) in connection
with the transactions contemplated by the Amendment. This opinion is being rendered pursuant to
Section 3.2A(e)(xii) of the Amendment. Capitalized terms used herein but not otherwise defined
herein have the respective meanings ascribed to such terms in the Amendment.



     In rendering the opinions set forth below, we have relied with your approval, as to factual
and other matters that affect our opinions, solely on our examination of executed copies of the
documents listed on: (1) Exhibit “A” and identified as the Transaction Documents (the
“Transaction Documents”); (2) Exhibit
“B” and identified as the Authority Documents (the
“Authority Documents”); and (3) Exhibit
“C” and identified as the Certificate of the
Company.



     We also have examined and, to the extent we have deemed proper, relied upon certain
certificates, originals or copies certified to our satisfaction, of public officials and the
Company, and such other documents we deemed necessary to make the opinions set forth below. We
make no representations as to the sufficiency of our investigation for your purposes except as
set forth herein.


     We have assumed and relied, as to matters of fact and mixed questions of law and fact upon
the truth and completeness of all factual matters set forth in the certificates of government
officials and the officer’s certificate attached hereto and of the representations and warranties
of the Company set forth in the Transaction Documents. We have not made or undertaken to make any
investigation as to factual matters or as to the accuracy or completeness of any representation,
warranty, data or any other information, whether written or oral, that may have



[ILLEGIBLE] 5100 Town Center Circle | Suite 400 | Boca Raton, FL 33486 | Tel 561.955.7600 | Fax 561.338.7099






ALBANY

AMSTERDAM

ATLANTA

BOCA RATON

BOSTON

BRUSSELS*

CHICAGO

DALLAS

DELAWARE

DENVER

FORT LAUDERDALE

HOUSTON

LAS VEGAS

LONDON*

LOS ANGELES

MIAMI

MILAN*

NEW JERSEY

NEW YORK

ORANGE COUNTY

ORLANDO

PHILADELPHIA

PHOENIX

ROME*

SACRAMENTO

SILICON VALLEY

TALLAHASSEE

TAMPA

TOKYO*

TYSONS CORNER

WASHINGTON D.C.

WEST PALM BEACH

ZURICH




*Strategic Alliance

Tokyo-Office/Strategic Alliance




                                        



www.gtlaw.com









 








 





Third Closing Investors

May 30, 2008

Page 2



been made by or on behalf of the parties to the Transaction Documents or otherwise, and we
assume, in giving this opinion, that none of such information, if any, contains any untrue ,
statement of a material fact or omits to state a material fact necessary to make the statements
made, in light of the circumstances in which they are made, not misleading.




     Furthermore, in rendering the opinions below, we have assumed, to the extent relevant to any
of our opinions expressed herein, the following matters to be true:



          (a) The execution, delivery and performance of the Transaction Documents by all parties
thereto (other than the Company) and the consummation by such parties of the transactions
contemplated by the Transaction Documents do not and will not conflict with or violate and will
not cause or result in a violation or breach of: (i) any statute, regulation or rule by which any
such party is bound or to which any such party is subject, or (ii) any contracts, instruments,
agreements, injunctions, orders or decrees by which any such party is bound;




          (b) All factual matters contained in the Transaction Documents are true and correct and are
not inconsistent with the opinions set forth in this letter;




          (c) No authorization, approval or consent of, or filing or registration with, any
governmental or regulatory body is required by any party to the Transaction Documents (other than
the Company) in connection with the execution, delivery or performance, or validity or
enforceability of the Transaction Documents;




          (d) There is proper consideration for the Company’s execution of the Transaction Documents;




          (e) The legal capacity of each natural person; the legal existence of all parties to the
Transaction Documents (other than the Company); the power and authority of each party to execute,
deliver and perform each document executed and delivered and to do each other act done or to be
done by such party; and the due authorization, execution and delivery by each party of each
document executed and delivered or to be executed and delivered by such party;




          (f) The validity, binding effect and enforceability as to each party, other than the Company,
of each Transaction Document executed and delivered or to be executed
and delivered and of each
other act done or to be done by such party;




          (g) There have been no undisclosed modifications of any provision of any document reviewed by
us in connection with the rendering of these opinions and no undisclosed prior waiver of any right
or remedy contained in any of the documents;




          (h) The genuineness of each signature, the completeness of each document submitted to
us, the authenticity of each document reviewed by us as an original, the conformity




Greenberg Traurig, P.A.




 









 





Third Closing Investors

May 30, 2008

Page 3



to the original of each document reviewed by us as a copy and the authenticity of the original of
each document received by us as a copy;




          (i) Each Purchaser has acted in good faith, without notice of adverse claims, and has
complied with all laws applicable to it that affect the transaction contemplated by the
Transaction Documents;




          (j) The transactions contemplated by the Transaction Documents comply with all tests of good
faith, fairness and conscionability required by law;




          (k) Routine procedural matters such as service of process or qualification to do business in
the relevant jurisdictions will be satisfied by the parties seeking to enforce any agreements in
connection with the transaction;




          (1) No action, discretionary or otherwise, will be taken by or on behalf of a Purchaser or
the Company in the future that might result in a violation of any statute, regulation or rule;




          (m) There are no other agreements or understandings among the parties to the Transaction
Documents that would modify the terms of the Transaction Documents or the respective rights or
obligations of the parties to those documents;




          (n) With respect to the transactions contemplated by the Transaction Documents, there has
been no mutual mistake of fact and there exists no fraud or duress; and




          (o) All documents incorporated by reference into, or referred to in the Transaction
Documents, which are not themselves Transaction Documents, are enforceable against the parties
thereto in accordance with their terms.




     Whenever in this letter our opinion, with respect to the existence or absence of facts, is
intended to be based on our knowledge or attention, it is intended to signify that during the
course of our representation of the Company, no information has come to the attention of those
attorneys in this law firm who have represented the Company in connection with the transactions
described in this opinion letter which gave those attorneys actual knowledge of the existence or
absence of those facts. Except to the extent expressly set forth in this letter, as noted above, we
have not undertaken any independent investigation to determine the existence or absence of any
facts material to our opinion, and no inference as to our knowledge of the existence or absence of
those facts should be drawn from our representation of the Company.



     Subject to the foregoing and the exclusions, assumptions and qualifications contained below,
we are of the opinion that:



Greenberg Traurig, P.A.




 









 





Third Closing Investors

May 30, 2008

Page 4




     1. Based solely on the Good Standing Certificate (as defined in Exhibit “B”), the Company is a
corporation, validly existing and in good standing under the laws of the State of Delaware. Based
solely on the Authority Certificate (as defined in Exhibit “B”), the Company is qualified as a
foreign corporation in the State of Florida.



     2. The Company has all requisite corporate power and authority to execute and deliver the
Transaction Documents, and to close the transactions contemplated thereby. All corporate action
required to be taken by the Company to authorize the execution and delivery of the Transaction
Documents and the closing of the transactions contemplated thereby, have been duly and properly
taken.



     3. Each of the Transaction Documents constitutes the valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms.



     4. The execution and delivery of the Transaction Documents by the Company, and the closing of
the transactions contemplated thereby do not conflict with, or result
in any violation of or
default under, or give rise to a right of termination, cancellation or acceleration of any
obligation under, (i) any provision of the certificate of incorporation or bylaws of the Company,
as amended, or (ii) any statute, regulation or rule of the State of Delaware or the State of
Florida, which is applicable in our experience to transactions of the kind contemplated by the
Transaction Documents, or, to our knowledge, any injunction, order or decree of any executive,
legislative, judicial, administrative or regulatory body of the State of Delaware or the State of
Florida (collectively, a “Governmental Authority”) that is binding upon the Company.



     5. The shares of Series B Preferred Stock and the Series B Warrants underlying the Series B
Units, when issued in accordance with the provisions of the Amendment and upon receipt of all
consideration specified in the Amendment, will be validly issued, fully paid and nonassessable.



     6. The shares of common stock issuable upon exercise of the Series B Warrants, when issued in
accordance with the provisions of the Series B Warrant Agreement and upon receipt of all
consideration specified in the Series B Warrant Agreement, will be validly issued, fully paid and
nonassessable.




	 	 	The opinions expressed herein are subject in all respects to the following limitations and
qualifications:





          (i) We express no opinion whatsoever as to the effect of bankruptcy, reorganization,
insolvency, fraudulent conveyance, fraudulent transfer, moratorium and other similar laws or
equitable principles affecting creditors’ rights and remedies generally or general principles of
equity (including, without limitation, concepts of conscionability, materiality,




Greenberg Traurig, P.A.




 









 





Third Closing Investors

May 30, 2008

Page 5



reasonableness, good faith and fair dealing) on the enforceability of the Transaction Documents
regardless of whether considered in a proceeding at law or in equity.




          (ii) This opinion letter is limited to the laws of the States of Delaware and Florida. We
give no opinion with respect to any provision specifying that the law of a particular state is to
apply, and we assume that the Transaction Documents are governed by the laws of the States of
Delaware or Florida.




     Notwithstanding anything in this opinion letter to the contrary, we express no opinion
whatsoever regarding the following:



          1. the compliance or noncompliance of any real estate, personal property or business
operations of the Company with federal, state or local laws, statutes, ordinances, rules or
regulations;




          2. the acceleration of the obligations (or other exercise of rights or remedies) upon the
occurrence of a technical or non-material breach or violation;




          3. the availability of equitable remedies, including, without limitation, specific
performance, appointment of a receiver and injunctive relief;




          4. the effect of applicable laws and court decisions which may hereafter be enacted,
promulgated or made and which may limit or render unenforceable certain rights and remedies under
the Transaction Documents;




          5. the validity or enforceability of any indemnity from Company to the extent it would protect
an indemnitee from the gross negligence or willful misconduct of such indemnitee, its predecessor
in interest or its agent or from any other acts or conduct of the indemnitee to the extent
applicable law imposes responsibility or liability on the indemnitee for its acts or conduct;




          6. as to the validity, enforceability or effectiveness of the following contractual
provisions to the extent included in the Transaction Documents: (a) provisions which authorize
self-help, (b) provisions which purport to establish evidentiary standards, (c) provisions which
purport to render ineffective any waiver or modification not in writing, (d) provisions related to
the waiver of rights or remedies (including, without limitation, waivers of notices and hearing,
waivers of defenses, waivers of jury trials, waivers of rights of marshaling, waivers of exemptions
and stays of execution, waivers of statutes of limitations and waivers of duties which may be
imposed upon a Purchaser) or the delay or omission of enforcement thereof, (e) provisions
purporting to waive any objection to the laying of venue or any claim that an action or proceeding
has been brought in an inconvenient forum, (f) agreements by the Company to submit to the
jurisdiction of a particular court or appoint an agent for the acceptance of service of process,
(g) provisions which permit any purchaser of a participation interest to setoff or apply




Greenberg Traurig, P.A.








 









 








Third Closing Investors

May 30, 2008

Page 6



any deposit, property or indebtedness with respect to any participation interest, (h) the effect
of the law of any jurisdiction (other than the States of Delaware and Florida) wherein a Purchaser
may be located or wherein the enforcement of any Transaction Document may be sought, (i)
provisions stating that all rights or remedies of any party are cumulative and may be enforced in
addition to any other right or remedy and that the election of a particular remedy does not
preclude recourse to one or more remedies, (j) disclaimers, (k) indemnification and contribution
provisions, (l) releases of claims, (m) liability limitations, (n) liquidated damages which do not
bear a sufficient relationship to actual damages and could be determined to constitute a penalty,
(o) choice of law provisions, (p) provisions appointing the Purchasers as attorney-in-fact for the
Company, (q) provisions imposing penalties forfeitures, legal costs, late payment charges or an
increase in interest rate upon delinquency in payment (except for such legal fees, late payment
charges or default interest rate provisions permissible under Delaware law) or the occurrence of a
default, or increasing the Company’ obligations based upon capital adequacy requirements, (r)
provisions allowing the institution of judicial or nonjudicial proceedings or the exercise of any
other rights, without notice to the person or entity against whom enforcement is sought, (s)
provisions implying that a person or entity may act in any manner that is not commercially
reasonable where discretion is reserved, (t) provisions relating to the waiver of subrogation
rights, (u) provisions relating to payment of costs of indemnity, court costs, attorneys’ fees and
expenses which may be chargeable or recoverable in any judicial proceedings in excess of those
which are actually incurred and would be reasonable, or relating to interest or interest rates
after judgment is obtained in excess of the maximum rate permitted by applicable law, (v)
provisions purporting to deny a Purchaser’s responsibility or insulate a Purchaser from liability
for environmental conditions or activities or breaches of environmental laws, rules or regulations
to the extent such responsibility or obligation may be imposed upon the Purchasers under
applicable law, (w) provisions which may be limited by the application of constitutional or public
policy principles, standards of unconscionability, or requirements of commercial reasonableness
and good faith; or (q) rights which purport to grant a private right of sale in lieu of judicial
foreclosure or waive the Company’ right of redemption;




          7. the compliance with, or any governmental or regulatory filing, approval, authorization,
license or consent required by or under any (a) federal or state environmental law, (b) federal or
state antitrust law, (c) federal or state securities law, (d) federal or state taxation law, (e)
federal or state worker health or safety, zoning or permitting or land use matter, (f) federal or
state patent, trademark or copyright law (including, but not limited to, any filings and
registrations of any patent, trademark or copyright with any governmental authority), or (g)
federal or state labor or employment law (including, but not limited to, pension and employee
benefit law, rule or regulation); or




          8. the availability of specific performance, appointment of a receiver, injunctive relief or
other equitable remedies with respect to any of the covenants or remedies set forth in the
Transaction Documents.




Greenberg Traurig, P.A.




 









 





Third Closing Investors

May 30, 2008

Page 7




     The opinions expressed in this opinion letter are given solely for the benefit of Purchasers,
and its successors, in connection with the transactions contemplated by the Transaction Documents.
The opinions expressed in this opinion letter may not be relied upon, in whole or in part, by the
Purchasers, or its successors, for any other purpose or relied upon by any other person or entity
for any purpose, in each case, without the prior written consent of a partner of this firm.



     We give only the opinions that are set forth herein and no opinions should be implied. The
opinions expressed in this opinion letter are rendered as of the date hereof. We express no
opinion as to circumstances or events that may occur subsequent to such date. We disclaim any
obligation to advise you of any changes that thereafter may be brought to our attention.



	 	 	 	 	 
	 	Very truly yours 

 	 
	 	/s/ Greenberg Traurig, P.A.
 	 
	 	GREENBERG TRAURIG, P.A. 	 
	 	 	 
	 



Greenberg Traurig, P.A.





 









 





EXHIBIT “A”




TRANSACTION DOCUMENTS



     1. Second Amendment to the Series A Preferred Stock Purchase Agreement dated as
of May 30, 2008 by and between the Company and the Purchasers.



     2. Amendment to Series B Warrant Agreement, dated May 30, 2008 of the Company



     3. Amendment to Series C Warrant Agreement dated May 30, 2008 of the Company



     4. Amendment to Amended and Restated Securityholders Agreement dated May 30,
2008



Greenberg Traurig, P.A.





 











 





EXHIBIT “B”




AUTHORITY DOCUMENTS



     1. Certified copy from the Secretary of State of the State of
Delaware of the Certificate of Incorporation of XStream Systems, Inc.
dated as of May 28, 2008.



     2. Certified copy from the Secretary of State of the State of
Delaware of the Certificate of Amendment to Certificate of Designation of
Series A Redeemable Convertible Preferred Stock of the Company dated as of
May 28, 2008.



     3. Certified copy from the Secretary of State of the State of
Delaware of the Certificate of Amendment to Certificate of Designation of
Series B Redeemable Convertible Preferred Stock of the Company dated as of
May 28, 2008.



     4. Certified copy from the Secretary of State of the State of
Delaware of the Certificate of Amendment to Certificate of Designation of
Series C Redeemable Convertible Preferred Stock of the Company dated as of
May 28, 2008.



     5. Good standing certificate for XStream Systems, Inc. issued by the
Secretary of State of State of Delaware dated May 28, 2008 (the “Good
Standing Certificate”).



     6. Active Status certificate for XStream Systems, Inc. issued by the
State of Florida dated May 30, 2008 (the “Authority Certificate”).



Greenberg Traurig. P.A.



 









 





CERTIFICATE




May 29, 2008


The undersigned hereby certifies to Greenberg Traurig, P.A. that:




     1. We are familiar with all of the terms and provisions of the
Transaction Documents (as defined in the opinion to which this
Certificate is attached) and the other documents executed and delivered
in connection therewith. All capitalized terms used herein and not
otherwise defined herein have the respective meanings ascribed to them in
the Transaction Documents and in the opinion to which this Certificate is
attached.



     2. As to the matters set forth below, the undersigned either have
personal knowledge or have obtained information from officers and
employees of the Company, in whom the undersigned have confidence and
whose duties require them to have personal knowledge hereof.



     3. The representations and warranties contained in the Transaction
Documents made by the Company are true and correct on and as of the date
hereof and you may rely on such representations and warranties as if they
were made directly to you.



     4. The Company has paid all taxes and fees required to be paid to
and have made all filings required to be filed with the Secretary of
State of the States of Delaware and Florida. No action has been taken to
discontinue the business of, or to dissolve, any of the Company.



     5. The Transaction Documents have been executed by properly elected,
qualified and acting officers of the Company.



     6. The Company has provided Greenberg Traurig, P.A. true, correct
and complete copies of the agreements and other instruments listed on
Exhibit A and Exhibit B to the opinion to which this Certificate is
attached. All such agreements and instruments in the form submitted to
Greenberg Traurig, P.A. are in full force and effect as of the date
hereof, and no such agreement or instrument has been repealed or (except
as disclosed to Greenberg Traurig, P.A.) amended.



     7. There are no injunctions, orders or decrees of any Governmental
Authority binding upon the Company.



     8. There is no action, suit, proceeding or investigation pending or,
to our knowledge, threatened against the Company that prevent the right
of the Company to enter into the Transaction Documents, or to consummate
the transactions contemplated thereby.



     9. The undersigned has read and is familiar with the opinion (in the
form to which this Certificate is attached) to be rendered by Greenberg
Traurig, P.A. in connection with the Transaction Documents. The
undersigned believes that the factual assumptions identified in the
opinion are true and accurate. There are no additional facts that are
not stated in the opinion which would materially affect the validity of
the assumptions and conclusions set forth in the opinion or upon which
the opinion is based. The undersigned is executing this Certificate to
induce Greenberg Traurig, P.A. to render that opinion and understands
that Greenberg Traurig, P.A. will rely upon the foregoing as well as
other certificates and documents in rendering that opinion. The
undersigned knows of no reason why the opinion should not be issued.



[Signature Page Follows]



 









 





	 	 	 	 	 
	 	XSTREAM SYSTEMS, INC.

 	 
	 	By:  	
/s/ Thomas W. Cook
 	 
	 	 	Name:  	Thomas W. Cook 	 
	 	 	Title:  	Chairman & CEO 	 
	 



[Signature Page to Backup Certificate to Greenberg Traurig Opinion]