STOCK EXCHANGE AGREEMENT
EXHIBIT
99.3
This
Agreement dated as of the 11th
day of
January, 2006, by and among Xxxxxxxxxx Holdings I, Inc., a Delaware corporation
having its offices at 00000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000,
Xxxxxx, Xxxxxxxx 00000 (the “Issuer”), and
the
individuals named on Schedule I to this Agreement (collectively, the
“Stockholders” and each, individually, a “Stockholder”).
W
I T
N E S S E T H:
WHEREAS,
the Stockholders are the holders of all of the issued and outstanding capital
stock (the “Acquisition Shares”) of CNS Acquisition Corp., a Virginia
corporation (“Acquisition Company”); and
WHEREAS,
the Stockholders, together with Xxxxxx Partners LP (“Xxxxxx”), are acquiring a
controlling interest in the Issuer;
WHEREAS,
pursuant to a separate preferred stock purchase agreement between the Issuer
and
Xxxxxx Partners is acquiring shares of preferred stock and warrant to purchase
common stock, par value $.0001 per share (“Common Stock”); and
WHEREAS,
the Issuer is willing to issue shares of Common Stock and warrants to the
Stockholders in consideration for all of the issued and outstanding capital
stock of Acquisition Corp.
NOW,
THEREFORE, for the mutual consideration set out herein, the parties agree
as
follows:
1. Exchange
of Shares.
(a) Issuance
of Securities by Issuer.
On and
subject to the conditions set forth in this Agreement, the Issuer will issue
to
Stockholders, in exchange for all of the Acquisition Shares, which represents
all of the issued and outstanding capital stock of Acquisition Company, an
aggregate of 285,000 shares (the “Shares”) of Common Stock and warrants (the
“Warrants”) to purchase an aggregate of 1,140,000 shares of Common Stock at an
exercise price of $.12 per share. The Warrants shall be in substantially
the
form of Exhibit A to this Agreement. The Shares and Warrants are referred
to as
the “Securities.” The Securities will be issued to the Stockholders in the
amounts set forth after their respective names in Schedule I to this
Agreement.
(b) Transfer
of Acquisition Shares by the Stockholders.
On and
subject to the conditions set forth in this Agreement, the Stockholders will
transfer to the Issuer all of the Acquisition Shares in exchange for the
Securities. Each Stockholder holds the number of Acquisition Shares set forth
after his or her name in Schedule I to this Agreement.
(c) Closing.
The
issuance of the Securities to the Stockholders and the transfer of the
Acquisition Shares to the Issuer will take place at a closing (the “Closing”) to
be held at the office of Esanu Katsky Xxxxxx & Siger, LLP, 000 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000 as soon as possible after or contemporaneously with
the
satisfaction or waiver of all of the conditions to closing set forth in Section
4 of this Agreement.
(d) Delivery
of Securities.
Prior
to the Closing, the Stockholders will deliver to Esanu Katsky Xxxxxx &
Siger, LLP, counsel for the Issuer, the certificates for, or other evidence
of,
ownership of the Acquisition Shares, for delivery to the Issuer upon the
issuance by the Issuer of the Securities in the names of the
Stockholders.
2. Representations
and Warranties of the Issuer.
The
Issuer hereby represents and warrants to the Stockholders as
follows:
(a) General.
(i) The
Issuer is
a corporation duly organized, validly existing and in good standing under
the
laws of the State of Delaware. The Issuer does not have any equity investment
or
other interest, direct or indirect, in, or any outstanding loans, advances
or
guarantees to or on behalf of, any domestic or foreign corporation, limited
liability company, association, partnership, joint venture or other
entity.
(ii) Complete
and
correct copies of the Issuer’s certificate of incorporation and by-laws are
available for review on the XXXXX system maintained by the U.S. Securities
and
Exchange Commission (the “Commission”).
(iii) The
Issuer
has full power and authority to carry out the transactions provided for in
this
Agreement, and this Agreement constitutes the legal, valid and binding
obligations of the Issuer, enforceable in accordance with its terms, except
as
enforceability may be limited by bankruptcy, insolvency and other laws of
general application affecting the enforcement of creditor’s rights and except
that any remedies in the nature of equitable relief are in the discretion
of the
court. All necessary action required to be taken by the Issuer for the
consummation of the transactions contemplated by this Agreement has been
taken.
(iv) The
Shares,
when issued pursuant to this Agreement, will be duly and validly authorized
and
issued, fully paid and non-assessable. The issuance of the Securities to
Stockholders is exempt from the registration requirements of the Securities
Act
of 1933, as amended (the “Securities Act”), pursuant to an exemption provided by
Section 4(2) thereunder.
(v) The
Warrants,
when issued pursuant to this Agreement will constitute the legal, valid and
binding obligations of the Issuer, enforceable in accordance with their terms,
except as enforceability may be limited by bankruptcy, insolvency and other
laws
of general application affecting the enforcement of creditor’s rights and except
that any remedies in the nature of equitable relief are in the discretion
of the
court. The shares of Common Stock issuable upon exercise of the Warrants,
when
issued upon payment of the exercise price provided in the Warrants, will
be duly
and validly authorized and issued, fully paid and non-assessable.
(b) SEC
Documents.
The
Issuer is registered pursuant to Section 12 of the Exchange Act and it current
with its reporting obligations under the Securities Exchange Act of 1934,
as
amended (the “Exchange Act”). None of the Issuer’s filings made pursuant to the
Exchange Act (collectively, the “Issuer SEC Documents”) contains any untrue
statement of a material fact or omitted to state a material fact required
to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Issuer SEC
Documents, as of their respective dates, complied in all material respects
with
the requirements of the Exchange Act, and the rules and regulations of the
Commission thereunder, and are available on the Commission’s XXXXX
system.
-2-
3. Representations
and Warranties of Stockholders.
Each
Stockholder hereby severally represents, warrants, covenants and agrees as
follows:
(a) Such
Stockholder understands that the offer and sale of the Securities is being
made
only by means of this Agreement and understands that the Company has not
authorized the use of, and the Stockholder confirms that he or she is not
relying upon, any other information, written or oral, other than material
contained in this Agreement. Such
Stockholder is aware that the purchase of the Securities involves a high
degree
of risk and that such Stockholder may sustain, and has the financial ability
to
sustain, the loss of his or her entire investment, understands that no assurance
can be given that the Company will be profitable in the future, that there
is no
public market for the Common Stock, and the Issuer can give no assurance
that
there will ever be a public market for the Common Stock. Furthermore,
in subscribing for the Securities, such Stockholder acknowledges it is not
relying upon any projections or any statements of any kind relating to future
revenue, earnings, operations or cash flow in making an investment in the
Securities.
(b) Such
Stockholder severally represents to the Company that he or she is an accredited
investor within the meaning of Rule 501 of the Commission under the Securities
Act of 1933, as amended (the “Securities Act”) and it understands the meaning of
the term “accredited investor.” The requirements for an accredited investor as
set forth in Exhibit B. Such Stockholder further represents that he or she
has
such knowledge and experience in financial and business matters as to enable
the
Stockholder to understand the nature and extent of the risks involved in
purchasing the Securities. Such Stockholder is fully aware that such investments
can and sometimes do result in the loss of the entire investment. Such
Stockholder has engaged his or her own counsel and accountants to the extent
that the Stockholder deems it necessary.
(c) All
of
the information provided by such Stockholder in his or her Confidential
Questionnaire is true and correct in all material respects.
(d) Such
Stockholder is acquiring the Securities pursuant to this Agreement for his
or
her own account, for investment and not with a view to the sale or distribution
thereof, for the Stockholder’s own account and not on behalf of others; has not
granted any other person any interest or participation in or right or option
to
purchase all or any portion of the Securities; is aware that the Securities
are
restricted securities within the meaning of Rule 144 of the Commission under
the
Securities Act, and may not be sold or otherwise transferred other than pursuant
to an effective registration statement or an exemption from registration;
and
understands and agrees that the certificates for the Securities shall bear
the
Company’s standard investment legend. The Stockholder understands the meaning of
these restrictions.
(e) The
Stockholder will not transfer any Securities except in compliance with all
applicable federal and state securities laws and regulations, and, in such
connection, the Company may request an opinion of counsel reasonably acceptable
to the Company as to the availability of any exemption.
(f) Such
Stockholder represents and warrants that no broker or finder was involved
directly or indirectly in connection with his or her purchase of the Securities
pursuant to this Agreement. Such Stockholder shall indemnify the Company
and
hold it harmless from and against any manner of loss, liability, damage or
expense, including fees and expenses of counsel, resulting from a breach
of the
Stockholder’s warranty contained in this Paragraph 3(f).
-3-
(g) Such
Stockholder understands that he or she has no registration rights with respect
to the Securities except as set forth in Exhibit C to this
Agreement.
(h) Such
Stockholder represents and warrants that the address set forth on Schedule
I to
this Agreement is its true and correct address, and understands that the
Company
will rely on this representation in making filings under state securities
or
blue sky laws.
4. Conditions
to the Obligation of Stockholders and the Issuer.
The
obligations of Stockholders and the Issuer under this Agreement are subject
to
the completion of the sale of preferred stock and warrants to Xxxxxx Partners
pursuant to an agreement between the Issuer and Xxxxxx Partners prior to
or
contemporaneously with the exchange contemplated by this Agreement.
5. Miscellaneous.
(a) This
Agreement constitutes the entire agreement between the parties relating to
the
subject matter hereof, superseding any and all prior or contemporaneous oral
and
prior written agreements, understandings and letters of intent. This Agreement
may not be modified or amended nor may any right be waived except by a writing
which expressly refers to this Agreement, states that it is a modification,
amendment or waiver and is signed by all parties with respect to a modification
or amendment or the party granting the waiver with respect to a waiver. No
course of conduct or dealing and no trade custom or usage shall modify any
provisions of this Agreement.
(b) This
Agreement shall be governed by and construed in accordance with the laws
of the
State of New York applicable to contracts made and to be performed entirely
within such State.
(c) This
Agreement shall be binding upon and inure to the benefit of the parties hereto,
and their respective successors and permitted assigns.
(d) This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original but all of which together shall constitute one and the
same
document.
(e) The
various representations, warranties, and covenants set forth in this Agreement
or in any other writing delivered in connection therewith shall survive the
issuance of the Shares.
(f) If
the
Stockholder is a resident of a state set forth in Exhibit D to this Agreement
or
if the Stockholder negotiates the purchase of the Shares from or receives
this
Agreement while in Florida, the provisions of such Exhibit C relating to
the
Stockholder’s purchase of the Shares are incorporated as if set forth in full in
this Agreement.
-4-
Please
confirm your agreement with the foregoing by signing this Agreement where
indicated.
Very
truly yours,
Xxxx
X.
Xxxxxxxxx
Xxx
Xxxxxxxx
Xxxxxxx
Accepted
this day of January, 2006
XXXXXXXXXX
HOLDINGS I, INC.
By:
Xxxx
X.
Xxxxxxxxx, Chief Executive Officer
-5-
Schedule
I
|
Address,
Telecopier and Social
Security No.
|
Name
|
Acquisition
Shares
|
Shares
|
Warrant
Shares
|
|
00000
Xxxxx Xxxxx Xxxxxxx,
Xxxxxxxx,
Xxxxxxxx 00000
|
Xxxx
X. Xxxxxxxxx
|
720
|
267,750
|
624,750
|
|
Xxx
Xxxxxxxx
|
200
|
91,800
|
214,200
|
|
|
Xxxxx
X. Xxxxxxx
|
80
|
22,950
|
53,550
|
|
|
Total
|
1,000
|
382,500
|
892,500
|
-6-
Exhibit
B
Accredited
investors
A
Stockholder who meets any one of the following tests is an accredited
investor:
(a) The
Stockholder is an individual who has a net worth, or joint net worth with
the
Stockholder’s spouse, of at least $1,000,000.
(b) The
Stockholder is an individual who had individual income of more than $200,000
(or
$300,000 jointly with the Stockholder’s spouse) for the past two years, and the
Stockholder has a reasonable expectation of having income of at least $200,000
(or $300,000 jointly with the Stockholder’s spouse) for the current
year.
(c) The
Stockholder is an officer or director of the Company.
(d) The
Stockholder is a bank as defined in section 3(a)(2) of the Securities Act
or any
savings and loan association or other institution as defined in section
3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary
capacity.
(e) The
Stockholder is a broker or dealer registered pursuant to section 15 of the
Securities Exchange Act of 1934.
(f) The
Stockholder is an insurance company as defined in section 2(13) of the
Securities
Act.
(g) The
Stockholder is an investment company registered under the Investment Company
Act
of 1940 or a business development company as defined in section 2(a)(48)
of that
Act.
(h) The
Stockholder is a small Business Investment Company licensed by the U.S. Small
Business Administration under section 301(c) or (d) of the Small Business
Investment Act of 1958.
(i) The
Stockholder is an employee benefit plan within the meaning of Title I of
the
Employee Retirement Income Security Act of 1974, if the investment decision
is
made by a plan fiduciary, as defined in section 3(21) of such Act, which
is
either a bank, savings and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has total assets in excess
of $5,000,000 or, if a self-directed plan, with investment decisions made
solely
by persons that are accredited investors.
(j) The
Stockholder is a private business development company as defined in section
202(a)(22) of the Investment Advisers Act of 1940.
(k) The
Stockholder is an organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000.
(l) The
Stockholder is a trust, with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the securities offered, whose purchase
is
directed by a sophisticated person as described in Rule 506(b)(2)(ii) of
the
Commission under the Securities Act.
(m) The
Stockholder is an entity in which all of the equity owners are accredited
investors (i.e., all of the equity owners meet one of the tests for an
accredited investor).
If
an
individual Stockholder qualifies as an accredited investor, such individual
may
purchase the Shares in the name of his or her individual retirement account
(“XXX”).
B-1
Exhibit
D
State
Representations
The
following provisions are an integral part of this Agreement if the Stockholder
is a resident of the following state(s).
1. Florida
If
the
Stockholder is a Florida resident or if the offer or sale occurs in Florida
or
if the Disclosure Material is delivered in Florida, the following shall
apply:
Pursuant
to Section 517.061(11)(a)(5) of the Florida Statutes, Florida Stockholders
have
a three day right to rescission. If a Florida resident has executed a
subscription agreement, he or she may elect, within three business days after
signing the subscription agreement, to withdraw from the subscription agreement
and receive a full refund and return (without interest) of any money paid
by him
or her. A Florida resident’s withdrawal will be without any further liability to
any person. To accomplish such withdrawal, a Florida resident need only send
a
letter or telegram to the issuer at 00000
Xxxx Xxxxx Xxxxxxx, Xxxx Xxxxx, XX 00000,
Attention of Xx. Xxxxx X. Xxxxxxxx, President and CEO, indicating his or
her
intention to withdraw. Such letter or telegram must be sent and postmarked
prior
to the end of the aforementioned third business day. If a Florida resident
sends
a letter, it is prudent to sent it by certified mail, return receipt requested,
to insure that it is received and also to evidence the time and date when
it is
mailed. Should a Florida resident make this request orally, he or she should
ask
for written confirmation that his or her request has been received.
2. Pennsylvania
If
the
Stockholder is a Pennsylvania resident, the following shall apply:
Each
person who accepts an offer to purchase securities exempted from registration
by
Section 203(d) of the Pennsylvania Securities Act of 1972, as amended, directly
from the issuer or affiliate of the issuer, shall have the right to withdraw
his
or her acceptance without incurring any liability to the seller, underwriter
(if
any) or any other person within two business days from the date of receipt
by
the issuer of his or her written binding contract of purchase or, in the
case of
a transaction in which there is no binding contract of purchase, within two
business days after he or she makes the initial payment for the securities
being
offered.
Each
Pennsylvania subscriber is prohibited from selling his or her Shares for
a
period of twelve months from the date of his or her purchase.
D-1
