EXHIBIT 10.1
SECURITIES EXCHANGE AGREEMENT
This Securities Exchange Agreement is made and entered into as of January
28, 2005 (the "Agreement") by and among TurboWorx, Inc., a Delaware corporation
("Turbo") and National Scientific Corporation, a U.S. Texas Public Corporation
("NSC").
WHEREAS, pursuant to that certain Memorandum of Understanding ("MOU") dated
as of October 29, 2004 between Turbo and NSC, Turbo and NSC agreed to explore a
technology and marketing relationship to improve the value of their respective
technology solutions to prospective customers and to improve their respective
efficiencies of accessing these customers and markets; and
WHEREAS, in furtherance of the relationships created by the MOU, Turbo
desires to invest in NSC, and NSC desires to invest in Turbo.
NOW, THEREFORE, in consideration of the mutual agreements hereinafter set
forth, and intending to be legally bound hereby, the parties have agreed and do
hereby agree as follows:
1. CONVERSION AND EXCHANGE OF SECURITIES.
1.1. EXCHANGE OF TURBO COMMON STOCK. Subject to the terms and
conditions of this Agreement, at the Closing, Turbo agrees to exchange with NSC
and NSC agrees to exchange with Turbo, 360,000 shares of Turbo's common stock,
$0.001 par value ("Turbo Common Stock") PLUS $240,000 (the "Cash Consideration")
payable by wire transfer of immediately available funds for 7,150,000 shares of
NSC's common stock, $0.01 par value ("NSC Common Stock").
1.2. CLOSING; DELIVERY. The transactions set forth in this Section 1
shall take place at the offices of Xxxxxxxxx Xxxxxxx, 000 Xxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000 at such time as the parties mutually agree upon (which time is
designated as the "Closing"). At the Closing:
(a) Turbo shall transfer to NSC the Turbo Common Stock being
exchanged for shares of NSC Common Stock as set forth in Section 1.1, along with
such share certificates (accompanied by stock powers duly endorsed in blank) as
may be necessary to facilitate such transfer.
(b) Turbo shall pay and deliver to NSC the Cash Consideration in cash
by wire transfer of immediately available funds to accounts specified by NSC in
writing at least two business days prior to the Closing.
(c) NSC shall deliver to Turbo such share certificates representing
the number of shares of NSC Common Stock, or shall deliver an irrevocable letter
of instruction to NSC's transfer agent providing for such number of NSC Common
Stock to be delivered to and in the name of Turbo, in consideration for the Cash
Consideration and the Turbo Common Stock to be exchanged by Turbo to NSC
hereunder for shares of NSC Common Stock.
(d) Turbo shall deliver to NSC the lock-up letter in the form of
EXHIBIT A hereto executed by Turbo.
(e) NSC shall deliver to Turbo the lock-up letter in the form of
EXHIBIT B hereto executed by NSC.
(f) Turbo shall provide to NSC or to its transfer agent such
information as shall be requested by NSC or its transfer agent with regard to
Turbo, including information regarding its mailing address, telephone number and
other contact information, and any and all information necessary with regard to
the filing of a Form W-9 regarding Turbo.
1.3. SPIN-OFF, REGISTRATION.
(a) NSC hereby agrees that it shall spin-off at least 50% of the
shares of Turbo Common Stock to the stockholders of NSC pursuant to a
registration statement on Form SB-2 (the "Registration Statement") to be filed
by Turbo under the Securities Act of 1933, as amended (the "Securities Act"), as
soon as practicable following the Closing, with such shares being freely
tradable. Other than as provided in section 1.3(c) below, NSC hereby agrees that
it shall distribute such Turbo Common Stock to its stockholders on a PRO RATA
basis. Turbo hereby undertakes that it will file the Registration Statement
within 30 days following the Closing. Turbo hereby agrees to use its best
efforts to have such Registration Statement effective no later than 90 days
following the filing thereof. NSC agrees to cooperate in furnishing all required
information requested by Turbo in connection with the preparation and filing of
the Registration Statement.
(b) All expenses incurred in connection with the registration
pursuant to this Section 1.3, including without limitation all registration and
qualification fees, blue sky fees, printers' and accounting fees, fees and
disbursements of counsel for NSC, shall be borne by Turbo, provided that Turbo
shall not be responsible for any fees and expenses greater than $150,000.
(c) Turbo hereby agrees that it shall waive any rights it may have as
a shareholder of NSC to receive such shares of Turbo Common Stock to be spun-off
to the stockholders of NSC pursuant to Section 1.3(a).
(d) NSC hereby agrees that it shall notify Turbo in writing at least
thirty (30) days prior to filing any registration statement under the Securities
Act for purposes of effecting a public offering of securities of NSC (including,
but not limited to, new registration statements relating to secondary offerings
of securities of NSC, but EXCLUDING any updates to existing registration
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statements relating to secondary offerings of securities of NSC, employee
benefit plan or a corporate reorganization or other transaction covered by Rule
145 promulgated under the Securities Act, or a registration on any registration
form which does not permit secondary sales or does not include substantially the
same information as would be required to be included in a registration statement
covering the sale of NSC Common Stock) and will use its best efforts to afford
Turbo an opportunity to include in such registration statement all or any part
of the NSC Common Stock then held by Turbo. In the event that Turbo desires to
include in any such registration statement all or any part of the NSC Common
Stock held by Turbo, Turbo shall, within twenty (20) days after receipt of the
above-described notice from NSC, so notify NSC in writing, and in such notice
shall inform NSC of the number of NSC Common Stock Turbo wishes to include in
such registration statement. If Turbo decides not to include all of the NSC
Common Stock in any registration statement thereafter filed by NSC, Turbo shall
nevertheless continue to have the right to include any NSC Common Stock in any
subsequent registration statement or registration statements as may be filed by
NSC with respect to offerings of its securities, all upon the terms and
conditions set forth herein. The registration rights and obligations set forth
above shall terminate on January 31, 2008.
(e) Turbo hereby agrees that it shall notify NSC in writing at least
thirty (30) days prior to filing any registration statement under the Securities
Act for purposes of effecting a public offering of securities of Turbo
(including, but not limited to, registration statements relating to secondary
offerings of securities of Turbo, but EXCLUDING any employee benefit plan or a
corporate reorganization or other transaction covered by Rule 145 promulgated
under the Securities Act, or a registration on any registration form which does
not permit secondary sales or does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of Turbo Common Stock) and will use its best efforts to afford
NSC an opportunity to include in such registration statement all or any part of
the Turbo Common Stock then held by NSC. In the event that NSC desires to
include in any such registration statement all or any part of the Turbo Common
Stock held by NSC, NSC shall, within twenty (20) days after receipt of the
above-described notice from Turbo, so notify Turbo in writing, and in such
notice shall inform Turbo of the number of Turbo Common Stock NSC wishes to
include in such registration statement. If NSC decides not to include all of the
Turbo Common Stock in any registration statement thereafter filed by Turbo, NSC
shall nevertheless continue to have the right to include any Turbo Common Stock
in any subsequent registration statement or registration statements as may be
filed by Turbo with respect to offerings of its securities, all upon the terms
and conditions set forth herein. The registration rights and obligations set
forth above shall terminate on January 31, 2008.
2. REPRESENTATIONS AND WARRANTIES OF TURBO.
Turbo hereby respectively represents and warrants to NSC as follows:
2.1. AUTHORIZATION. Turbo has full power, authority and legal capacity
to enter into this Agreement and to consummate the transactions contemplated
hereby and thereby, and has duly executed and delivered this Agreement. All
corporate action on the part of Turbo, its officers, directors and stockholders
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necessary for the authorization, execution, delivery and performance of this
Agreement by Turbo, and the performance of all of Turbo's obligations hereunder
have been taken. This Agreement constitutes valid and legally binding
obligations of Turbo, enforceable in accordance with its terms, except (a) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, and any other laws of general application affecting
enforcement of creditors' rights generally, (b) as limited by laws relating to
the availability of a specific performance, injunctive relief or other equitable
remedies, or (c) to the extent limited by applicable federal or state securities
laws, public policy and other equitable considerations.
2.2. CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution and
delivery of this Agreement by Turbo, nor the consummation by Turbo of the
transactions contemplated hereby, will (i) conflict with or result in any breach
of any provision of any contract between Turbo and any third party, or (ii)
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental authority or shareholders.
2.3 ORGANIZATION, GOOD STANDING AND QUALIFICATION. Turbo is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Turbo has all requisite power and authority to own and
operate its properties and assets and to carry on its business as now conducted
and as presently proposed to be conducted. Turbo is duly qualified and
authorized to transact business and is in good standing as a foreign corporation
in each jurisdiction in which the nature of its activities and of its properties
(both owned and leased) makes such qualification necessary, except for those
jurisdictions in which failure to do so would not have a material adverse effect
on Turbo.
2.4. AUTHORIZATION OF TURBO COMMON STOCK. Turbo has taken all
necessary action to permit it to issue the Turbo Common Stock to NSC pursuant to
Section 1.1 of this Agreement. The Turbo Common Stock to be issued to NSC
pursuant to Section 1.1 will, when issued, be validly issued, fully paid and
nonassessable. No Turbo stockholder will have any preemptive right of
subscription or purchase in respect thereof.
2.5. CAPITALIZATION. As of the date hereof, the authorized capital
stock of Turbo consists of: (i) 16,500,000 shares of common stock, $0.001 par
value per share; and 9,088,819 shares of preferred stock, par value $0.001 per
share. As of December 31, 2004, there were 559,513 shares of the common stock of
Turbo, $0.001 par value per share, issued and outstanding and 894,741 shares of
preferred stock of Turbo, $0.001 par value per share, issued and outstanding.
Turbo warrants that the 360,000 shares of Turbo Common Stock to be exchanged as
stated in Section 1.1, 1.2 and 1.3(a) of this Agreement represents on the date
of this Agreement approximately 2.4% (on a fully-diluted basis) of Turbo's
outstanding common stock, and will continue to represent approximately 2.4% (on
a fully-diluted basis) of Turbo's outstanding common stock until such a time as
the Registration Statement becomes effective.
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2.6. LEGENDS. It is understood that each certificate representing
Turbo Common Stock shall bear the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES
UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
"THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFER
AND MAY NOT BE SOLD, EXCHANGED, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE
WITH AND SUBJECT TO ALL THE TERMS AND CONDITIONS OF A
CERTAIN LOCK-UP AGREEMENT DATED AS OF FEBRUARY __, 2005 (AS
THE SAME MAY BE AMENDED OR MODIFIED FROM TIME TO TIME), A
COPY OF WHICH THE COMPANY WILL FURNISH TO THE HOLDER OF THIS
CERTIFICATE UPON REQUEST AND WITHOUT CHARGE."
3. REPRESENTATIONS AND WARRANTIES OF NSC.
NSC represents and warrants to Turbo as follows:
3.1. AUTHORIZATION. NSC has full power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby and
thereby, and has duly executed and delivered this Agreement. All corporate
action on the part of NSC, its officers, directors and stockholders necessary
for the authorization, execution, delivery and performance of this Agreement by
NSC, and the performance of all of NSC's obligations hereunder and thereunder,
have been taken. This Agreement constitutes a valid and legally binding
obligation of NSC, enforceable in accordance with its terms, except (a) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, and any other laws of general application affecting
enforcement of creditors' rights generally, or (b) as limited by laws relating
to the availability of a specific performance, injunctive relief or other
equitable remedies, or (c) to the extent limited by applicable federal or state
securities laws, public policy and other equitable considerations.
3.2. CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution and
delivery of this Agreement, nor the consummation by NSC of the transactions
contemplated hereby, will (i) conflict with or result in any breach of any
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provision of NSC's organizational documents or any contract between NSC and any
third party, or (ii) require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental authority, except for
filings required under applicable federal or state securities laws.
3.3. ORGANIZATION, GOOD STANDING AND QUALIFICATION. NSC is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas. NSC has all requisite power and authority to own and
operate its properties and assets and to carry on its business as now conducted
and as presently proposed to be conducted. NSC is duly qualified and authorized
to transact business and is in good standing as a foreign corporation in each
jurisdiction in which the nature of its activities and of its properties (both
owned and leased) makes such qualification necessary, except for those
jurisdictions in which failure to do so would not have a material adverse effect
on NSC.
3.4. CAPITALIZATION. As of the date hereof, the authorized capital
stock of NSC consists of: (i) 120,000,000 shares of common stock, $0.01 par
value per share; and 4,000,000 shares of preferred stock, $0.10 par value per
share. As of December 31, 2004, there were 84,350,657 shares of NSC common
stock, $0.01 par value per share, issued and outstanding and 4,000,000 shares of
NSC preferred stock, $0.10 par value per share authorized but not issued.
3.5. AUTHORIZATION OF NSC COMMON STOCK. NSC has taken all necessary
action to permit it to issue the NSC Common Stock to Turbo pursuant to Section
1.1 of this Agreement. The NSC Common Stock to be issued to Turbo pursuant to
Section 1.1 will, when issued, be validly issued, fully paid and nonassessable.
No NSC stockholder will have any preemptive right of subscription or purchase in
respect thereof.
3.6 LEGENDS. It is understood that each certificate representing NSC
Common Stock shall bear the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES
UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
"THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFER
AND MAY NOT BE SOLD, EXCHANGED, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE
WITH AND SUBJECT TO ALL THE TERMS AND CONDITIONS OF A
CERTAIN LOCK-UP AGREEMENT DATED AS OF FEBRUARY 1, 2005 (AS
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THE SAME MAY BE AMENDED OR MODIFIED FROM TIME TO TIME), A
COPY OF WHICH THE COMPANY WILL FURNISH TO THE HOLDER OF THIS
CERTIFICATE UPON REQUEST AND WITHOUT CHARGE."
4. PROFESSIONAL FEES
4.1 FEES OF CASIMIR CAPITAL. Turbo and NSC hereby agree that Casimir
Capital ("Casimir") is entitled to receive the following compensation from NSC
and from Turbo in connection with this Agreement:
(a) Turbo shall (i) pay Casimir $125,000 in cash, and (ii) issue
Casimir five-year warrants to purchase 95,000 shares of Turbo's common stock,
$0.001 par value. Such warrants shall have an exercise price of $2.50 per share,
shall contain cashless exercise provisions and shall provide full-ratchet
anti-dilution protection for two years and weighted average anti-dilution
protection thereafter.
(b) NSC shall (i) pay Casimir $25,000 in cash at Closing, and (ii)
issue Casimir 800,000 cashless exercise (at an exercise price of $0.10) warrants
of five- year term of the same form as the Placement Agent Warrants provided by
NSC to Casimir in April 2004.
5. MISCELLANEOUS.
5.1. ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS. This Agreement and the
schedules and exhibits hereto constitute the entire agreement between or among
the parties relative to the subject matter hereof. Any previous agreement
between or among the parties is superseded by this Agreement. Subject to the
exceptions specifically set forth in this Agreement, the terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
executors, administrators, heirs, successors and assigns of the parties.
5.2. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware applicable to contracts
entered into and wholly to be performed within the State of Delaware by Delaware
residents.
5.3. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.
5.4. NOTICES. Any notice required or permitted hereunder shall be
given in writing and shall be conclusively deemed effectively given upon
personal delivery, or delivery by overnight courier, or five (5) business days
after deposit in the United States mail, by registered or certified mail,
postage prepaid, addressed:
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(i) if to Turbo, to:
TurboWorx, Inc.
0 Xxxxxxxxxx Xxxxx,
Xxxxxxx, XX 00000,
Attention: Xxxx Xxxxx
Phone 000-000-0000
Fax 000-000-0000
with a copy (which copy shall not constitute notice) to:
Xxxxxxxxx Traurig, LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
(ii) if to NSC, to:
National Scientific Corporation
00000 X. Xxxxxx Xx. Xxx 000
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxx
Phone: 000-000-0000
Fax: 000-000-0000
with a copy (which copy shall not constitute notice) to:
Xxxxx X. Xxxxx, P.C.
8655 Xxx Xx Xxxxxxx, Xxxxx X-000
Xxxxxxxxxx, XX. 00000
Phone: 000-000-0000
Fax: 000-000-0000
or at such other address as Turbo or NSC may designate by ten (10) days' advance
written notice to the other parties to this Agreement.
5.5. AMENDMENT OF AGREEMENT. Any provision of this Agreement may be
amended by a written instrument signed by Turbo and NSC.
5.6. SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
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from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
5.7. ATTORNEY'S FEES. If any action at law or in equity (including
arbitration) is necessary to enforce or interpret the terms of any of this
Agreement, the prevailing party shall be entitled to reasonable attorney's fees,
costs and necessary disbursements in addition to any other relief to which such
party may be entitled.
5.8. DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any party under this Agreement, upon any breach or
default of any other party under this Agreement, shall impair any such right,
power or remedy of such non-breaching or non-defaulting party, nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party, shall be cumulative and not alternative.
5.9. CONFIDENTIALITY. Each party hereto agrees that, except with the
prior written permission of the parties hereto, it shall at all times keep
confidential and not divulge, furnish or make accessible to anyone any
confidential information, knowledge or data concerning or relating to the
business or financial affairs of the other parties to which such party has been
or shall become privy by reason of this Agreement, discussions or negotiations
relating to this Agreement or the performance of its obligations hereunder. The
provisions of this Section 5.9 shall be in addition to, and not in substitution
for, the provisions of any separate nondisclosure agreement that may be executed
by the parties hereto.
5.10. FURTHER ACTIONS. Each party hereto shall execute such further
documents and instruments and take such further actions as may reasonably be
requested by the other party to consummate the transactions contemplated hereby
or to effect the other purposes of this Agreement.
5.11. JUDICIAL PROCEEDINGS. EACH OF THE PARTIES HERETO AGREES THAT ANY
ACTION, SUIT OR PROCEEDING AGAINST ANY OF THE PARTIES HERETO ARISING UNDER OR
RELATING IN ANY WAY TO THIS AGREEMENT OR A TRANSACTION CONTEMPLATED HEREBY MAY
BE BROUGHT OR ENFORCED IN THE COURTS OF THE STATE OF Delaware OR, AND EACH OF
THE PARTIES HERETO CONSENTS TO THE JURISDICTION OF EACH SUCH COURT IN RESPECT OF
ANY SUCH ACTION, SUIT OR PROCEEDING. EACH OF THE PARTIES HERETO FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS IN ANY SUCH ACTION, SUIT OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL
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POSTAGE PRE-PAID, RETURN RECEIPT REQUESTED, OR BY A NATIONALLY RECOGNIZED
OVERNIGHT COURIER, TO SUCH PARTY AT ITS ADDRESSES PROVIDED FOR NOTICES
HEREUNDER.
5.12. INTERPRETATION. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. All references to the term "as of the date
hereof" shall mean the date of this Agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, The undersigned, intending to be legally bound
hereby, has duly executed this document as of the date and year first set forth
above.
TURBOWORX, INC.
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President, Operations
NATIONAL SCIENTIFIC CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: CEO & Chairman
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