TELZUIT TECHNOLOGIES, LLC.,
TELZUIT TECHNOLOGIES, INC.,
XXXXXXX X. XXXXX, XXXXX X. XXXXX, AND XXX XXXXXX,
AND
TAYLOR MADISON CORP.
AND
XXXXX XXXXXXXX,
AS AUTHORIZED REPRESENTATIVE FOR THE PURCHASERS
SHARE EXCHANGE AGREEMENT
This SHARE EXCHANGE AGREEMENT, dated as of May 6, 2005 (this "Agreement"), is
entered into among Telzuit Technologies, LLC, a Florida limited liability
company, with an office located at 0000 Xxxxxxx Xxxxx, Xxxxx 000, Xxxxxxx,
Xxxxxxx 00000 (the "Telzuit LLC"), Telzuit Technologies, Inc., a Florida
corporation, with an office located at 0000 Xxxxxxx Xxxxx, Xxxxx 000, Xxxxxxx,
Xxxxxxx 00000 (the "Telzuit Inc"), Xxxxxxx X. Xxxxx, Xxxxx X. Xxxxx, and Xxx
Xxxxxx, each an individual with an office located at 0000 Xxxxxxx Xxxxx, Xxxxx
000, Xxxxxxx, Xxxxxxx 00000 (collectively, the "Founders"), Taylor Madison
Corp., a Florida corporation maintaining its business address at 0000 XX 000xx
Xxxxxx, Xxxxx XX0, Xxxxxxxx, Xxxxxxx 00000 ("Taylor Madison"), and Xxxxx
Xxxxxxxx, as authorized representative for each of the persons listed on Exhibit
"A" attached hereto that purchased 10% Convertible Promissory Debentures issued
by Taylor Madison (each a "Purchaser" and collectively the "Purchasers").
BACKGROUND INFORMATION
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Prior to the Closing Date, Telzuit LLC transferred substantially all of
its assets to Telzuit Inc. (the "Asset Transfer"), pursuant to that certain
Asset Purchase Agreement of even date herewith, by and between Telzuit LLC and
Telzuit Inc. Telzuit, LLC owns 26,492,667 shares of Telzuit Inc (the "Telzuit
Shares"), which represents 100% of the issued and outstanding capital stock of
Telzuit Inc. Telzuit LLC desires to exchange, on the terms and subject to the
conditions set forth in this Agreement, all of the Telzuit Shares for 2,207,723
shares of a newly created class of preferred stock of Taylor Madison (the "Share
Exchange"). The preferred shares shall convert into shares of Xxxxxx common
stock on a 12 for 1 basis and shall have 12 for 1 voting rights.
Contemporaneous with the Share Exchange, the Purchasers are acquiring from
Taylor Madison 10% Convertible Promissory Debentures, with an aggregate
principal amount of up to $1,000,000 (the "Debentures"), and Class A warrants
for the purchase of an aggregate of up to 1,250,000 shares of Taylor Madison's
Common Stock, par value $.001 per share (the "Class A Warrants"), in each case
issued by Taylor Madison. The Purchasers are purchasing the Debenture and
Warrants in reliance on the representations, warranties and agreements of
Telzuit LLC, Telzuit Inc., and the Founders contained herein, and in reliance on
the representations, warranties and agreements of Taylor Madison contained
herein.
OPERATIVE PROVISIONS
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In consideration of the mutual agreements contained herein, the parties
agree as follows:
ARTICLE 1
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DEFINITIONS
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1. Definitions. For the purpose of this Agreement, terms not otherwise
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defined in the text of this Agreement shall have the meanings specified in
Section 11. below.
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ARTICLE 2
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PURCHASE OF SECURITIES; CONSIDERATION
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2.1 Exchange of Securities. Subject to the terms and conditions set
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forth herein, effective as of the Closing Date (as defined in Section 6. below),
Taylor Madison shall issue to Telzuit LLC 2,207,723 shares of preferred stock in
exchange for all of Telzuit LLC's right, title and interest in and to the
Telzuit Shares. At the Closing referred to in Section 6. below, (a) Telzuit LLC
shall sell and deliver to Taylor Madison good, valid and marketable title to the
Telzuit Shares, free and clear of all liabilities, obligations, claims, liens
and encumbrances, by delivering to Taylor Madison one or more stock certificates
representing the Telzuit Shares, duly endorsed in blank or accompanied by one or
more stock powers duly endorsed in blank, in form for transfer satisfactory to
Taylor Madison, and (b) Taylor Madison shall issue to Telzuit LLC 2,207,723
shares of its preferred stock.
ARTICLE 3
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REGISTRATION; ADDITIONAL PENALTY WARRANTS
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3.1. Registration. On or before the day forty-five days after the date
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of this Agreement, Taylor Madison intends on completing an offering of its
Series A Convertible Preferred Stock and Class B Warrants pursuant to the terms
of the Confidential Term Sheet attached hereto as Exhibit "B" (the "Series A
Preferred Financing"). In accordance with Article 3 of the Debentures, upon
closing on the Series A Preferred Financing (the "Series A Closing"), the
Indebtedness (as defined in the Debentures) will automatically convert into
either, (a) Common Stock of Taylor Madison, or (b) Series A Convertible
Preferred Stock and Series B Warrants (as referred to in the Term Sheet).
Taylor Madison hereby agrees to file, at its sole cost and expense, a
registration statement on Form SB-2 (or an alternative available form if Taylor
Madison is not eligible to file a Form SB-2) no later than thirty (30) days
after the Series A Closing, registering (w) all Common Stock issued to the
Purchasers upon conversion of the Debentures, (x) all Series A Convertible
Preferred Stock and the shares of Common Stock issuable upon conversion of the
Series A Preferred Stock, (y) all Series A Warrants held by the Purchasers and
the shares of Common Stock issuable on exercise of such Series A Warrants, and
(z) all Series B Warrants held by the Purchasers and the shares of Common Stock
issuable on exercise of such Series B Warrants (collectively, the "Registerable
Securities"). In addition, the Purchasers shall have the right to enter into
any registration rights agreements, investor rights agreements, or shareholders
agreements entered into by the purchasers of the Series A Convertible Preferred
Stock at the Series A Closing.
3.2 Additional Class A Warrants. Taylor Madison hereby agrees to use
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its best efforts to have the Registration Statement declared effective within
one hundred twenty (120) days after the Series A Closing. If Taylor Madison
closes on the Series A Preferred Financing, and Taylor Madison's registration
statement is not declared effective within one hundred twenty (120) days after
the date of the Series A Closing, (a) for the initial thirty (30) day period
beginning one hundred twenty (120) days after the Series A Closing, Taylor
Madison shall issue to the each Purchaser, as liquidated damages, additional
Class A Warrants equal to two percent (2.0%) of either (i) the number of shares
of Common Stock issued to the Purchaser upon conversion of the Debentures into
Common Stock at the Series A Closing , or (ii) in the event the Purchaser elects
to convert the Debentures into Series A Preferred Stock, the number of shares of
Common Stock issuable upon conversion of the Series A Preferred Stock issued to
Purchaser upon conversion of the Debentures, and (b) for each subsequent 30-day
period, Taylor Madison shall issue to each Purchaser, as liquidated damages,
additional Class A Warrants equal to one percent (1.0%) of either (i) the number
of shares of Common Stock issued to the Purchaser upon conversion of the
Debentures into Common Stock at the Series A Closing , or (ii) in the event the
Purchaser elects to convert the Debentures into Series a Preferred Stock, the
number of shares of Common Stock issuable upon conversion of the Series A
Preferred Stock issued to Purchaser upon conversion of the Debentures; provided,
however, in no event shall the maximum number of Class A Warrants issued
pursuant to this Section 3.2 exceed ten percent (10.0%) of the Common Stock or
Common Stock issuable upon conversion of the Series A Preferred Stock, as
applicable, issued at the Series A Closing.
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3.3 Delayed Series A Closing. If Taylor Madison does not complete the
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Series A Closing on or before the day forty-five days after the date of this
Agreement, Taylor Madison hereby agrees to file, at its sole cost and expense, a
registration statement on Form SB-2 (or an alternative available form if Taylor
Madison is not eligible to file a Form SB-2) no later than thirty (30) days
after such date (the "Warrant Filing Date"), registering all Series A Warrants
held by the Purchasers and the shares of Common Stock issuable on exercise of
such Series A Warrants. If Taylor Madison does not file such registration
statement under this Section 3.3 by the Warrant Filing Date, or if such
registration statement is not declared effective within ninety (90) days of the
Warrant Filing Date, then Taylor Madison shall issue to the each Purchaser
additional Class A Warrants equal to twenty five percent (25.0%) of the number
of shares of Common Stock issuable to the Purchaser upon conversion of the
Debentures.
ARTICLE 4
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REPRESENTATIONS AND WARRANTIES AS TO SHARE EXCHANGE
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4. Representations and Warranties. Except as otherwise expressly set
--------------------------------
forth on the schedules attached to this Agreement, Telzuit LLC, Telzuit Inc.,
Taylor Madison and Founders, jointly and severally, represent and warrant to
each Purchaser that, as of the date hereof, and the Closing Date:
4.1 Organization, Powers, Good Standing, and Subsidiaries.
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(a) Organization and Powers. Telzuit Inc. is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
Florida, and has all requisite power and authority, to own and operate its
Assets, to carry on its business as now conducted and proposed to be conducted,
to enter into this Agreement, and to carry out the transactions contemplated
hereby and thereby.
(b) Good Standing. Telzuit Inc. is in good standing wherever necessary
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to carry on its present business and operations, except in jurisdictions in
which the failure to be in good standing has not had and reasonably could not be
expected to have a Material Adverse Effect.
(c) Subsidiaries. As of the Closing Date, Telzuit Inc. has no
------------
Subsidiaries.
(d) Capitalization.
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(i) Immediately before the Closing, the authorized capital stock of
the Telzuit Inc. consists of 100,000,000 shares of Common Stock, of which
26,492,667 shares are issued and outstanding, and no shares are reserved
for issuance upon the conversion, exchange, or exercise of any share of
capital stock or other security of Telzuit Inc.
(ii) Telzuit LLC has good and marketable title to the Telzuit Shares,
free and clear of all liens, claims, encumbrances and restrictions, legal
or equitable, of every kind, except for certain restrictions on transfer
imposed by federal and state securities laws. Telzuit LLC has full and
unrestricted legal right, power and authority to sell, assign and transfer
the Telzuit Shares to Taylor Madison without obtaining the consent or
approval of any other person or governmental authority, and the delivery of
such shares to Taylor Madison pursuant to this Agreement will transfer
valid title thereto, free and clear of all liens, encumbrances, claims and
restrictions of every kind, except for certain restrictions on
transferability imposed by federal and state securities laws. The execution
of this Agreement and the consummation of the transactions contemplated
hereby will not constitute a default under any provision of any agreement
by which Telzuit LLC or Telzuit Inc. is bound.
(iii) All issued and outstanding shares of common stock of Telzuit
Inc. have been duly authorized and validly issued, are fully paid and
nonassessable, and were issued in compliance with all applicable federal
and state searches laws. The Telzuit Shares have been duly and validly
reserved for issuance. The transfer of the Telzuit Shares are not and will
not be subject to any preemptive rights or rights of first refusal.
4.2 Authorization of Financing, etc.
-----------------------------------
(a) Authorization of Financing. The execution, delivery, and
----------------------------
performance of this Agreement and the other Transaction Documents by Telzuit
LLC, Telzuit Inc., and the Founders, and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
action by Telzuit LLC, Telzuit Inc., and the Founders, as applicable.
(b) No Conflict. The execution, delivery, and performance by Telzuit
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Inc., Telzuit LLC and the Founders of this Agreement or any Transaction Document
to which it is a party, and in each case, the consummation of the transactions
contemplated hereby and thereby, will not (i) violate the articles of
incorporation or by-laws of Telzuit Inc., (ii) violate the articles of
organization or operating agreement of Telzuit LLC, (iii) violate any order,
judgment, or decree of any court or other governmental agency binding on Telzuit
Inc. or Telzuit LLC or any Assets of Telzuit Inc. or Telzuit LLC except for
violations which, individually or in the aggregate, reasonably could not be
expected to have a Material Adverse Effect, (iv) violate any provision of law or
statute applicable to Telzuit Inc. or Telzuit LLC except for violations which,
individually or in the aggregate, reasonably could not be expected to have a
Material Adverse Effect, (v) conflict with, result in a breach of or constitute
(with due notice or lapse of time or both) a default under any Contractual
Obligation of Telzuit Inc. or Telzuit LLC or pursuant to which any of its Assets
are bound, other than conflicts, breaches, and defaults as to which waivers have
been obtained on or prior to the Closing Date or as to which there is no
Material Adverse Effect, (vi) result in or require the creation or imposition of
any Lien (other than Permitted Encumbrances) upon any of Telzuit Inc.'s Assets
or Telzuit LLC's Assets, except as contemplated herein, or (vii) require any
approval or consent of any Person under any Contractual Obligation of Telzuit
Inc. or Telzuit LLC, except for such approvals or consents as have been or will
be obtained on or before the Closing Date or which, if not obtained will not
have a Material Adverse Effect.
-5-
(c) Governmental Consents. The execution, delivery, and performance by
---------------------
Telzuit Inc. and Telzuit LLC of the Transaction Documents to which it is a
party, the transfer of the Telzuit Shares, and, in each case, the consummation
of the transactions contemplated hereby and thereby, do not and will not require
any registration or filing with, consent or approval of, or notice to, or other
action relating to, with or by, any Governmental Authority except for filings,
registrations, consents, approvals, notices, and actions that have been or will
be obtained or taken on or before the Closing Date or which, if not made or
obtained will not have a Material Adverse Effect.
(d) Due Execution and Delivery; Binding Obligations. The Transaction
-------------------------------------------------
Documents to which it is a party have been duly executed and delivered by
Telzuit Inc. and Telzuit LLC. Each of this Agreement and the other Transaction
Documents to which Telzuit Inc. or Telzuit LLC is a party is the legally valid
and binding obligation of Telzuit Inc. and Telzuit LLC, as applicable
enforceable against Telzuit Inc. and Telzuit LLC, as applicable, in accordance
with its respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium, or similar laws relating to or limiting creditors'
rights generally and subject to the availability of equitable remedies, whether
considered in a proceeding at law or in equity.
4.3 Financial Condition.
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(a) Attached hereto as Schedule 4.3(a)(i) is the audited balance sheet
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of Telzuit LLC and its Subsidiary as at December 31, 2004, (including the notes
thereto, the "Balance Sheet"), and the related unaudited consolidated
statements of income, changes in stockholders' equity and cash flow for the
twelve (12) month period then ended. Such financial statements and notes are
true, complete and accurate and fairly present the financial condition and the
results of operations, changes in stockholders' equity, and cash flow of Taylor
Madison as at the respective dates of and for the periods referred to in such
financial statements, all in accordance with GAAP, subject, in the case of
interim financial statements, to normal recurring year end adjustments (the
effect of which will not, individually or in the aggregate, be materially
adverse) and the absence of notes (that, if presented, would not differ
materially from those included in the Balance Sheet).
(b) Since the date of the Balance Sheet, other than the Asset Transfer
and the issuance of the 10% Convertible Debentures to Xxxxx and Xxxxx XxXxxxx as
disclosed on Schedule 4.13 below, there has been no material adverse change in
the business, operations, properties, prospects, assets or condition of Telzuit
LLC and Telzuit Inc., taken as a whole, and no event has occurred or
circumstance exists that may result in such a material adverse change.
-6-
(c) Telzuit LLC and Telzuit Inc. have no liabilities or obligations of
any nature (whether known or unknown and whether absolute, accrued, contingent,
or otherwise) except for liabilities or obligations reflected or reserved
against in the Balance Sheet and current liabilities incurred in the ordinary
course of business since the respective dates thereof and liabilities for legal
fees and costs associated with this transaction.
4.4 No Stock Payments. Since the dated of the Balance Sheet, Telzuit
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Inc. and Telzuit LLC has not, directly or indirectly, declared, ordered, paid,
or made any Distribution.
4.5 Title to Properties; Liens. Upon completion of the Asset Transfer,
--------------------------
all Assets owned by Telzuit LLC or reflected on the Balance Sheet were
transferred to Telzuit Inc. Telzuit Inc. has good and valid record title to its
real property owned in fee and a valid leasehold interest to its leased real
property, if any, and valid title to or beneficial ownership of all its other
Assets reflected in the Balance Sheet referred to in Section 4.3 hereof, except
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for (a) Assets acquired or disposed of prior to the Closing Date in the ordinary
course of business, and (b) Permitted Encumbrances. All such Assets are free
and clear of Liens other than Permitted Encumbrances. Telzuit Inc. has quiet
enjoyment under all leases to which its is a lessee in the State of Florida and
all of such leases are valid and enforceable in accordance with their terms
except as may be limited by bankruptcy, insolvency, reorganization, moratorium,
or similar laws relating to or limiting creditors' rights generally, and no
monetary or other material default exists under any of them that reasonably
could be expected to have a Material Adverse Effect.
4.6 Litigation; Adverse Facts. Except as set forth on Schedule 4.6
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attached hereto, there is no (a) action, suit, proceeding, or arbitration at law
or in equity or before or by any Governmental Authority or arbitrator pending,
or to the knowledge of Telzuit Inc. after reasonable investigation, threatened
against or affecting Telzuit Inc., or any Asset of Telzuit Inc. that reasonably
could, individually or in the aggregate, be expected to result in a Material
Adverse Effect, or (b) judgment, decree, injunction, or order of any
Governmental Body or arbitrator against Telzuit Inc. or Telzuit LLC with respect
to which any one of them is in default and where such default reasonably could
be expected to result in a Material Adverse Effect.
4.7 Payment of Taxes. Except to the extent permitted by Section 8.3
------------------ -----------
hereof, (a) all tax returns and reports of Telzuit Inc. and Telzuit LLC required
to be filed by it have been duly and timely filed, and (b) all taxes,
assessments, fees, and other governmental charges upon Telzuit Inc. or Telzuit
LLC, or upon each of its Assets, income, and franchises that are due and payable
have been paid when due and payable. There is no actual or, proposed tax
assessment against Telzuit Inc. or Telzuit LLC that, in any of the foregoing
cases, has had or reasonably could be expected to have a Material Adverse
Effect.
4.8 Performance. Neither Telzuit Inc. not Telzuit LLC is in default in
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the performance, observance, or fulfillment of any of the material obligations,
covenants, or conditions contained in any of its Contractual Obligations and no
condition exists that, with the giving of due notice or the lapse of time or
both, would constitute such a default, except where the consequences, direct or
indirect, of such default or defaults, if any, have not had and reasonably could
not be expected to have a Material Adverse Effect.
-7-
4.9 Governmental Regulation. Telzuit Inc. is not a "holding company,"
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or a "subsidiary company" of a "holding company," or an "affiliate" of a
"holding company," as such terms are defined in the Public Utility Holding
Company Act of 1935; nor is it an "investment company," or an "affiliated
company" or a "principal underwriter" of an "investment company," as such terms
are defined in the Investment Company Act of 1940.
4.10 Employee Benefit Plans. Telzuit LLC and Telzuit Inc., and each of
----------------------
Telzuit LLC and Telzuit Inc.'s ERISA Affiliates, are in compliance in all
material respects with ERISA and the provisions of the Code applicable to
employee benefit plans and the regulations and published interpretations
thereunder, except to the extent such noncompliance reasonably could not be
expected to result in a Material Adverse Effect. No ERISA Event has occurred or
is reasonably expected to occur that, when taken together with all other such
ERISA Events, reasonably could be expected to result in a Material Adverse
Effect.
4.11 Certain Fees. No broker's or finder's fee or commission will be
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payable by Telzuit LLC or Telzuit Inc. with respect to the Share Exchange or any
of the other transactions contemplated hereby or thereby except fees due to
Midtown Partners & Co., LLC.
4.12 Disclosure. No representation or warranty of Telzuit LLC, Telzuit
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Inc. or the Founders to any Purchaser contained in this Agreement contains an
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein or therein not misleading in
light of the circumstances in which the same were made.
4.13 Debt Instruments. SCHEDULE 4.13 attached hereto contains a
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complete list of all loan agreements, promissory notes, letters of credit,
security agreements, or other financing documents (other than trade accounts
payable) to which Telzuit Inc. or Telzuit LLC is a party as the debtor, account
party, guarantor, or co-borrower, as the case may be, or by which Telzuit Inc.,
Telzuit LLC or any Assets (including equipment subject to any equipment lease)
Telzuit Inc. or Telzuit LLC, is bound.
4.14 Representations Under Certain Documents. Each of the
------------------------------------------
representations and warranties made by Telzuit Inc. or Telzuit LLC in any of the
Transaction Documents was true and correct in all material respects when made
and continues to be true and correct in all material respects on the Closing
Date, except to the extent that any of such representations and warranties
relate, by the express terms thereof, solely to a date occurring prior to the
Closing Date, and except to the extent that any of such representations and
warranties may have been affected by the consummation of the transactions
contemplated and permitted or required by the Transaction Documents.
4.15 Relationships with Related Persons. Neither Telzuit Inc. or
-------------------------------------
Telzuit LLC nor any Affiliate of Telzuit Inc. or Telzuit LLC is or owns (of
record or as a beneficial owner) an equity interest or any other financial or
profit interest in, a Person that has (i) had business dealings or a material
financial interest in any transaction with Telzuit Inc. or Telzuit LLC or (ii)
engaged in a business competing with Telzuit Inc. or Telzuit LLC in any market
presently or proposed to be served by Telzuit Inc. or Telzuit LLC, nor does
Telzuit Inc. or Telzuit LLC have knowledge of any transaction that is on terms
less favorable to Telzuit Inc. or Telzuit LLC than are obtainable in an
arms-length transaction with a Person that is not an Affiliate. No Affiliate of
Telzuit Inc. or Telzuit LLC is a party to any contract, agreement, arrangement,
or understanding with, or has any claim or right against, Telzuit Inc. or
Telzuit LLC.
-8-
4.16 Material Contracts. Neither Telzuit Inc. nor Telzuit LLC has any
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Contractual Obligations, including but not limited to any distribution
agreements, financing agreements, and real property leases, except those listed
and described in SCHEDULE 4.16. , all of which were made in the usual and
---------------
ordinary course of business. Both Telzuit Inc. and Telzuit LLC have delivered
correct and complete copies of all of the Contractual Obligations that are in
written form, and SCHEDULE 4.16. contains a correct and complete description of
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any Contractual Obligations that are not in written form. Telzuit Inc. and
Telzuit LLC has fulfilled, or taken all action necessary to enable it to fulfill
when due, all material obligations under the Contractual Obligations. There has
not occurred any material breach or default, or any event which with the lapse
of time or the election of any person, or both, will become a material breach or
default, under any Contractual Obligation.
ARTICLE 5
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REPRESENTATIONS AND WARRANTIES REGARDING SECURITIES ISSUANCE
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5. Representations and Warranties. Except as otherwise expressly set
--------------------------------
forth on the schedules attached to this Agreement, Telzuit LLC, and Taylor
Madison, jointly and severally, represent and warrant to each Purchaser that, as
of the date hereof, and the Closing Date:
5.1 Organization, Powers, Good Standing, and Subsidiaries.
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(a) Organization and Powers. Taylor Madison is a corporation duly
-------------------------
organized, validly existing and in good standing under the laws of the State of
Florida, and has all requisite power and authority, to own and operate its
Assets, to carry on its business as now conducted and proposed to be conducted,
to enter into this Agreement, to issue the Debentures, to enter into the
Transaction Documents, and to carry out the transactions contemplated hereby and
thereby.
(b) Good Standing. Taylor Madison is in good standing wherever
--------------
necessary to carry on its present business and operations, except in
jurisdictions in which the failure to be in good standing has not had and
reasonably could not be expected to have a Material Adverse Effect.
(c) Capitalization.
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(i) Immediately before the Closing, the authorized capital stock of
Taylor Madison consists of 50,000,000 shares of Common Stock, of which
29,475,405 shares are issued and outstanding, and no shares (other than the
shares to be issued upon conversion of the Debentures and the Class A
Warrants (the "Conversion Shares")) are reserved for issuance upon the
conversion, exchange, or exercise of any share of capital stock or other
security of Taylor Madison.
(ii) There are no outstanding options, warrants, rights (including
conversion or preemptive rights, anti-dilution rights, and rights of first
refusal), proxy or stockholder agreements, or other agreements of any kind
(whether oral or written, contingent, or otherwise) relating to the
issuance, conversion, registration, voting, sale, or transfer of any shares
of capital stock or other securities of Taylor Madison or obligating Taylor
Madison or any other person or entity to purchase or redeem any such
capital stock or other securities.
-9-
(iii) All issued and outstanding shares of Common Stock have been duly
authorized and validly issued, are fully paid and nonassessable, and were
issued in compliance with all applicable federal and state searches laws.
The Conversion Shares have been duly and validly reserved for issuance. The
Debentures and Warrants when issued in compliance with the provisions of
this Agreement and the Conversion Shares, when issued upon conversion of
the Debentures or Warrants, as applicable, will have been duly authorized
and validly issued, will be fully paid and nonassessable, will have been
issued in compliance with all applicable laws concerning the issuance of
securities, and will be free and clear of any encumbrance or Lien. The
issuance and sale of the Notes, Warrants, and Conversion Shares are not and
will not be subject to any preemptive rights or rights of first refusal.
5.2 Authorization of Financing, etc.
-----------------------------------
(a) Authorization of Financing. The execution, delivery, and
----------------------------
performance of this Agreement and the other Transaction Documents to which it is
a party, the issuance and delivery of the Debentures and Warrants, and
Conversion Shares, upon the exercise of the Warrants or conversion of the
Debentures, as applicable, and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary action by Taylor
Madison.
(b) No Conflict. The execution, delivery, and performance by Xxxxxx
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Madison of this Agreement or any Transaction Document to which it is a party,
the issuance, delivery, and payment of the Debentures, and the issuance and
delivery of the Warrants, and in each case, the consummation of the transactions
contemplated hereby and thereby, will not (i) violate the articles of
incorporation or by-laws of Taylor Madison, (ii) violate any order, judgment, or
decree of any court or other governmental agency binding on Taylor Madison or
any Assets of Taylor Madison except for violations which, individually or in the
aggregate, reasonably could not be expected to have a Material Adverse Effect,
(iii) violate any provision of law or statute applicable to Taylor Madison
except for violations which, individually or in the aggregate, reasonably could
not be expected to have a Material Adverse Effect, (iv) conflict with, result in
a breach of or constitute (with due notice or lapse of time or both) a default
under any Contractual Obligation of Taylor Madison or pursuant to which any of
its Assets are bound, other than conflicts, breaches, and defaults as to which
waivers have been obtained on or prior to the Closing Date or as to which there
is no Material Adverse Effect, (v) result in or require the creation or
imposition of any Lien (other than Permitted Encumbrances) upon any of Taylor
Madison's Assets, except as contemplated herein, or (vi) require any approval or
consent of any Person under any Contractual Obligation of Taylor Madison, except
for such approvals or consents as have been or will be obtained on or before the
Closing Date or which, if not obtained will not have a Material Adverse Effect.
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(c) Governmental Consents. The execution, delivery, and performance by
---------------------
Taylor Madison of the Transaction Documents to which it is a party, the
issuance, delivery, and payment of the Debentures, and, in each case, the
consummation of the transactions contemplated hereby and thereby, do not and
will not require any registration or filing with, consent or approval of, or
notice to, or other action relating to, with or by, any Governmental Authority
except for filings, registrations, consents, approvals, notices, and actions
that have been or will be obtained or taken on or before the Closing Date or
which, if not made or obtained will not have a Material Adverse Effect.
(d) Due Execution and Delivery; Binding Obligations. The Transaction
----------------------------------------------------
Documents to which it is a party have been duly executed and delivered by Taylor
Madison. Each of this Agreement and the other Transaction Documents to which
Taylor Madison is a party is the legally valid and binding obligation of Taylor
Madison, enforceable against Taylor Madison in accordance with its respective
terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws relating to or limiting creditors' rights generally
and subject to the availability of equitable remedies, whether considered in a
proceeding at law or in equity.
5.3 Representations Under Certain Documents. Each of the
------------------------------------------
representations and warranties made by Taylor Madison in any of the Transaction
Documents was true and correct in all material respects when made and continues
to be true and correct in all material respects on the Closing Date, except to
the extent that any of such representations and warranties relate, by the
express terms thereof, solely to a date occurring prior to the Closing Date, and
except to the extent that any of such representations and warranties may have
been affected by the consummation of the transactions contemplated and permitted
or required by the Transaction Documents.
ARTICLE 6
---------
CLOSING
-------
6. Closing Date. The Share Exchange and the purchase and delivery of
-------------
the Debentures and Warrants shall take place in Tampa, Florida, at a closing
(the "Closing") on May 3, 2005 (the "Closing Date"). At the Closing, (a)
Telzuit LLC shall deliver the Telzuit Shares to Taylor Madison, and (b) Taylor
Madison shall deliver to Telzuit, LLC the preferred shares and (c) Taylor
Madison shall deliver to the Purchasers the Debentures and the Warrants, against
payment of the purchase price therefor, by wire transfer of immediately
available funds to such bank as Taylor Madison shall designate in writing.
ARTICLE 7
---------
CONDITIONS TO CLOSING
---------------------
7. Conditions for Closing. The obligation of Purchasers, to purchase
------------------------
and pay for the Debentures and Warrants as of the Closing Date is subject to
the satisfaction, prior to or at the Closing, of the following conditions (and
Telzuit Inc. and Taylor Madison shall use their best efforts to satisfy each
such condition):
-11-
7.1 Intentionally Omitted
7.2 Representations and Warranties; No Default. The representations
---------------------------------------------
and warranties of each of Telzuit LLC, Telzuit Inc, the Founders, and Taylor
Madison contained in this Agreement shall be true, in all material respects,
when made and on the Closing Date, except as affected by the consummation of the
subject transactions and there shall exist on the Closing Date and after giving
effect to such transactions, no Event of Default or Default. Telzuit LLC,
Telzuit Inc, and Taylor Madison shall have delivered to Purchasers an Officer's
Certificate, dated the Closing Date, to all such effects.
7.3 Purchase Permitted by Applicable Laws. The Share Exchange and the
--------------------------------------
purchase and payment for the Debentures and Warrants by the Purchasers, shall
not be prohibited by any applicable law or governmental regulation and shall not
subject any Purchaser to any tax, penalty, liability, or other onerous condition
under or pursuant to any applicable law or governmental regulation.
7.4 Compliance with Securities Laws. The offering, issuance, and sale
--------------------------------
of the Debentures and the Warrants under this Agreement shall have complied
with all applicable requirements of federal and state securities laws, and the
Purchasers shall have received evidence of such compliance in form and substance
satisfactory to it.
7.5 Issuance of Debentures and Warrants. Concurrently with the
---------------------------------------
Closing, Taylor Madison shall have issued to Purchasers the Debentures and
Warrants in accordance with the provisions hereof.
7.6 Certified Documents. Taylor Madison shall have delivered, or shall
-------------------
have caused to be delivered, to Purchasers copies of the following documents,
duly certified, or the following certificates, as applicable:
(a) Resolutions of the Board of Directors of Taylor Madison, Telzuit
Inc, and Telzuit LLC authorizing (i) the execution, delivery, and performance of
the Transaction Documents to which it is a party, (ii) the consummation of the
transactions contemplated by the Transaction Documents to which it is a party,
and (iii) all other actions to be taken by Telzuit Inc., Telzuit LLC, and Taylor
Madison in connection with the Transaction Documents to which it is a party;
(b) Certificates, signed by the Secretary or an Assistant Secretary of
each of Telzuit Inc., Telzuit LLC, and Taylor Madison, dated as of the Closing
Date, as to (i) the incumbency, and containing the specimen signature or
signatures, of the Person or Persons authorized to execute the Transaction
Documents to which Telzuit Inc., Telzuit LLC, and Taylor Madison is a party on
behalf of Telzuit Inc., Telzuit LLC, and Taylor Madison, together with evidence
of the incumbency of such Secretary or Assistant Secretary, and (ii) the
authenticity of each of Telzuit Inc., Telzuit LLC, and Taylor Madison's articles
of incorporation and by-laws; and
(c) A certificate of status or good standing of each of Telzuit Inc.,
Telzuit LLC, and Taylor Madison from the Secretary of State of Florida.
-12-
7.7 Use of Financing. Purchasers shall have received evidence
------------------
satisfactory to them that the proceeds of the sale of the Debentures are being
used and applied in accordance with the provisions of Section 8.7 hereof.
-----------
7.8 Due Diligence. Purchasers shall have completed its financial and
--------------
legal due diligence with respect to Telzuit Inc., Telzuit LLC, and Taylor
Madison, the results of all of which shall be satisfactory to Purchasers.
7.9 Asset Transfer. Telzuit LLC and Telzuit Inc. shall have completed
---------------
the Asset Transfer.
7.10 Share Exchange. Taylor Madison and Telzuit LLC. Shall have
---------------
completed the Share Exchange.
ARTICLE 8
---------
AFFIRMATIVE COVENANTS
---------------------
8. Affirmative Covenants. Taylor Madison covenants and agrees that,
----------------------
from and after the date of this Agreement, through the Closing, and thereafter
until payment in full of all of the Debentures, it will perform or will cause to
be performed, all of the covenants in this Section 8.
----------
8.1 Financial Statements and Other Reports. Taylor Madison will
------------------------------------------
maintain a system of accounting established and administered in accordance with
sound business practices to permit preparation of financial statements in
conformity with GAAP. Taylor Madison will deliver to each Purchaser and to any
Transferee (in each case, so long as it continues to hold a Debenture):
(a) as soon as practicable, but in any event within 30 days after the
end of each month in each Fiscal Year of Taylor Madison and its Subsidiaries,
if any, unaudited monthly consolidated and consolidating financial statements of
Taylor Madison for such month prepared in accordance with GAAP, and setting
forth, in comparative form, the Consolidated figures for the comparable
corresponding month of the previous Fiscal Year together with a certification by
the principal financial or accounting officer of Taylor Madison that the
information contained in such financial statements fairly presents the financial
condition of Taylor Madison as of the date thereof (subject to year-end
adjustments);
(b) as soon as practicable and in any event within 45 days after the
end of (i) each of the first three Fiscal Quarters in each Fiscal Year,
consolidated balance sheets of Taylor Madison as at the end of such period and
for the year-to-date and the related consolidated and consolidating statements
of income and cash flows of Taylor Madison and its Subsidiaries, if any, for
such Fiscal Quarter and for the year-to-date and setting forth, in comparative
form, the Consolidated figures for the comparable corresponding Fiscal Quarter
of the previous Fiscal Year; and (ii) the first three Fiscal Quarters in each
Fiscal Year, and for the period from the beginning of then current Fiscal Year
to the end of such Fiscal Quarter, a comparison setting forth the corresponding
figures from the budgeted or projected figures set forth in the Projections
described in Section 8.1(g) below for such period, all in reasonable detail and
--------------
being prepared in accordance with GAAP, together with a certification by the
chief financial or accounting officer of Taylor Madison that the information
contained in such financial statements fairly presents the financial position of
Taylor Madison and its Subsidiaries as of the date thereof (subject to year-end
adjustments).
-13-
(c) as soon as available and in any event within 120 days after the end
of each Fiscal Year, a copy of unaudited financial statements for such year for
Taylor Madison and its Subsidiaries, if any, including therein a consolidated
balance sheet of Taylor Madison and its Subsidiaries, if any, as of the end of
such Fiscal Year, a consolidated statement of income and a consolidated
statement of cash flows of Taylor Madison and its Subsidiaries for such Fiscal
Year, setting forth in each case (i) in comparative form the corresponding
figures for the preceding Fiscal Year, and (ii) in comparative form the
corresponding projected figures for such Fiscal Year as set forth in the
Projections covering such Fiscal Year previously delivered to Purchasers, all in
reasonable detail and being prepared in accordance with GAAP, together with a
certification by the chief financial or accounting officer of Taylor Madison
that the information contained in such financial statements fairly presents the
financial position of Taylor Madison and its Subsidiaries as of the date thereof
(subject to year-end adjustments).
(d) promptly, but in no event later than 5 business days, upon any
officer of Taylor Madison obtaining actual knowledge, written notice: (i) of any
condition or event that constitutes an Event of Default or Default or that any
holder of a Debenture has given any notice or taken any other action with
respect to a claimed Default or Event of Default under this Agreement, (ii) of
any Person that has given any notice to such Taylor Madison or taken any other
action with respect to a claimed default or event or condition of the type
referred to in Section 8.1(b) which could reasonably be expected to have a
---------------
Material Adverse Effect, or (iii) any pending or threatened condemnation
proceedings by any Governmental Authority affecting any Properties or Assets of
such Taylor Madison, the condemnation of which reasonably could be expected to
have a Material Adverse Effect;
(e) as soon as they are available, but in any event within 60 days
prior to the beginning of each Fiscal Year, Projections for such Fiscal Year.
Such Projections shall be in form and substance consistent with Parent's past
practices and shall be certified by the chief financial or accounting officer of
Parent as being such officer's good faith estimate of the financial performance
of Parent and its Subsidiaries during such period; and
(f) with reasonable promptness, such other information and data with
respect to any Taylor Madison as from time to time may be reasonably requested
by the Purchasers, including information regarding the business, assets,
financial condition, income or prospects of such Taylor Madison.
8.2 Corporate Existence, etc. Taylor Madison will at all times
---------------------------
preserve and keep in full force and effect its corporate existence and rights
material to the business of Taylor Madison and each of its Subsidiaries.
-14-
8.3 Payment of Taxes; Tax Consolidation.
---------------------------------------
(a) Taylor Madison and each of it Subsidiaries will duly and timely
file all tax returns and reports required to be filed in compliance with all
applicable laws, regulations, rules, and procedures and pay all taxes,
assessments, and other governmental charges imposed upon Taylor Madison or any
of its Subsidiaries, or any of the Assets of Taylor Madison or any of its
Subsidiaries or in respect of any franchises, business, income, or Assets of
Taylor Madison or any of its Subsidiaries before any material penalty or
interest in a material amount accrues thereon; provided, however, that no such
-------- -------
tax, assessment, or other charge need be paid if it is being contested in good
faith by appropriate proceedings promptly instituted and diligently conducted
and if such reserve or other appropriate provision, if any, as shall be required
in conformity with GAAP shall have been made therefor.
(b) Taylor Madison will not file or consent to the filing of any
consolidated income tax return with any Person (other than Taylor Madison and
its Subsidiaries, if any).
8.4 Maintenance of Properties; Insurance. Taylor Madison will maintain
------------------------------------
or cause to be maintained in good repair, working order, and condition all
material Assets used or useful in the business of Taylor Madison or any of its
Subsidiaries and from time to time, to the extent determined by Taylor Madison
in good faith to be necessary or appropriate, will make or cause to be made all
appropriate repairs, renewals, and replacement thereof, ordinary wear and tear
excepted. Taylor Madison will maintain or cause to be maintained, with
reputable insurers, insurance with respect to its Assets and business against
loss or damage of the kinds, and of such types and in such amounts, as shall be
reasonably determined from time to time by Taylor Madison on a basis not
inconsistent with the customary practices of entities of established reputation
engaged in the same or similar businesses and similarly situated.
8.5 Inspection. Taylor Madison shall permit any authorized
----------
representatives designated in writing by Purchasers to visit and inspect any of
the Assets of Taylor Madison or any of its Subsidiaries, including its financial
and accounting records, and to make copies and take extracts therefrom, and to
discuss its affairs, finances, and accounts with its officers and independent
and certified public accountants, all upon reasonable prior written notice and
at such reasonable times during business hours as often as may be reasonably
requested.
8.6 Compliance with Laws, etc. Taylor Madison shall comply, in all
-------------------------
material respects, with all applicable laws, rules, regulations, and orders, and
Taylor Madison shall duly observe in all material respects, all valid
requirements of applicable Governmental Authorities and all applicable statutes,
rules, and regulations, including all applicable statutes, rules and regulations
relating to public and employee health and safety except where failure so to
comply or observe reasonably could not be expected to have a Material Adverse
Effect.
8.7 Proceeds of Financing. The proceeds of the issuance and sale of
-----------------------
the Debentures shall be used by Taylor Madison for working capital.
ARTICLE 9
---------
NEGATIVE COVENANTS
------------------
9. Negative Covenants. Taylor Madison covenants and agrees with each
-------------------
Holder that, from and after the date of this Agreement, through the Closing, and
thereafter until payment in full of all of the Debentures, that it shall not,
without either (i) approval by the Holders representing no-less than 66 % of the
outstanding principal of the Debentures, or (ii) if the Holders representing
no-less than 66 % of the outstanding principal of the Debentures appoint, in
writing, an authorized representative (the "Debenture Holders' Representative"),
approval by the Debenture Holders' Authorized Representative:
-15-
(a) issue shares of equity securities, debt securities possessing
rights, preferences, privileges and limitations similar to equity securities or
are otherwise linked to equity securities, or rights, options, warrants or
convertible or exchangeable securities containing the right to subscribe for or
purchase shares of equity securities of the Taylor Madison or any of its
Subsidiaries (other than the issuance of Series A Preferred Stock in connection
with the Series A Preferred Financing);
(b) make, or permit any Subsidiary to make, any loan or advance to
any person, including, without limitation, any employee or director of Taylor
Madison or any Subsidiary, except advances and similar expenditures in the
ordinary course of business;
(c) directly or indirectly, create, incur, assume, agree to
provide, or permit to exist any Lien, or file, execute, or agree to the
execution of any financing statement, on or with respect to any Asset of Taylor
Madison, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Encumbrances;
(d) create any Subsidiary or issue any ownership interest therein
to any third party;
(e) make, or permit any Subsidiary to make, any loan or advance
to, or own any stock or other securities of, any Subsidiary or other
corporation, partnership, or other entity unless it is wholly owned by Taylor
Madison;
(f) make, or permit any Subsidiary to make, any cash Investment or
Investment through the direct or indirect holding of securities or otherwise;
(g) guarantee, directly or indirectly, or permit any Subsidiary to
guarantee, directly or indirectly, any Indebtedness except for trade accounts of
Taylor Madison or any Subsidiary arising in the ordinary course of business;
(h) directly or indirectly, declare, order, pay, make, or set
apart any sum for any distribution or dividend payment;
(i) acquire or sell, or permit any Subsidiary to acquire or sell,
any tangible or intangible assets having a GAAP book-value greater than $25,000;
(j) enter into, or permit any Subsidiary to enter into, any joint
venture, partnership, scheme, profit sharing arrangement, or franchising
agreement;
(k) make, or permit any Subsidiary to make, any capital
expenditure that (i) individually exceeds $25,000;
-16-
(l) otherwise enter into or be a party to (or permit any
Subsidiary to do any of the foregoing) any transaction with any director,
officer, or employee of Taylor Madison or any Affiliate of any such person,
except for transactions contemplated by this Agreement and the Transaction
Documents;
(m) hire, terminate, or change the compensation of the senior
officers or strategic advisors of Taylor Madison or its Subsidiaries, including
approving any employees compensation and incentive programs;
(n) change the principal business of Taylor Madison or any
Subsidiary, enter new lines of business, or exit the current line of business;
(o) sell, transfer, license, pledge, or encumber material
technology or intellectual property of Taylor Madison or any Subsidiary;
(p) commence or settle, or permit any Subsidiary to commence or
settle, any litigation, arbitration, or other legal proceeding relating to any
claim or assessment in excess of $25,000;
(q) appoint and remove Taylor Madison's independent public
accountants;
(r) enter into any transaction of merger or consolidation, or
liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution)
or convey, sell, lease, transfer, or otherwise dispose of, in one transaction or
a series of related transactions, any significant Assets, directly or through
the sale of capital Stock, whether now owned or hereafter acquired, or agree to
or effect any Asset acquisition or Stock acquisition.
ARTICLE 10
----------
EVENTS OF DEFAULT; REMEDIES
---------------------------
10. Events of Default.
-------------------
10.1 Default; Acceleration. If any of the following events shall occur
---------------------
and be continuing for any reason whatsoever (and whether such occurrence shall
be voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(a) Taylor Madison, (i) fails to pay any installment of principal of
any Debenture when due, whether at stated maturity, by acceleration, by virtue
of a required prepayment, or otherwise, (ii) fails to pay any interest on any of
the Debentures within five (5) days of the date when due, or (iii) fails to pay
any other amount due under this Agreement on the date within (10) days after
notice of such failure to pay is sent to Taylor Madison;
(b) (i) Taylor Madison or any Subsidiary of Taylor Madison defaults in
any payment of principal of, or interest on, any other obligation for money
borrowed or credit received or in respect of any Capitalized Leases, beyond any
period of grace provided with respect thereto, or (ii) Taylor Madison or any
Subsidiary of Taylor Madison defaults in the performance or observance of any
other agreement, term, or condition contained in any agreement under which any
such obligation of the type described in clause (i) above is created (or if any
other event of default thereunder or under any such agreement shall occur and be
continuing) and, as a result thereof, the holder of such Indebtedness has caused
such Indebtedness to become due prior to its stated maturity, unless and to the
extent any thereof are being actively contested in good faith and by appropriate
proceedings, and Taylor Madison or any Subsidiary of Taylor Madison maintains
reasonable reserves on their books therefor; or
-17-
(c) any representation or warranty made to any Purchaser by or on
behalf of Taylor Madison or any Subsidiary of Taylor Madison in this Agreement
or in any writing or instrument furnished in compliance with this Agreement or
otherwise furnished in connection with the transactions contemplated by this
Agreement shall be false or misleading when made or deemed made, in any material
respect;
(d) Taylor Madison or any Subsidiary of Taylor Madison defaults in the
performance or observance of any agreement, term, or condition contained in this
Agreement (other than one described in clause (a) or (b) above) and any such
---------- ---
default shall not have been remedied within 20 days after the earlier of (y) the
date on which written notice thereof was received by Taylor Madison (regardless
of the source of such notice), or (z) actual knowledge thereof by Taylor Madison
or any Subsidiary of Taylor Madison;
(e) Taylor Madison or any Subsidiary of Taylor Madison (i) generally
fails to pay, or admits in writing its inability to pay, its debts as they
become due, subject to applicable grace periods, if any, whether at stated
maturity or otherwise; (ii) voluntarily liquidates, dissolves, or ceases to
conduct its business in the ordinary course; (iii) commences any Insolvency
Proceeding with respect to itself; (iv) makes an assignment for the benefit of
creditors; or (v) takes any affirmative action to effectuate or authorize any of
the foregoing (other than the discussion of the advisability or inadvisability
of authorizing the foregoing);
(f) (i) any involuntary Insolvency Proceeding is commenced or filed
against Taylor Madison or any Subsidiary of Taylor Madison, or any writ,
judgment, warrant of attachment, execution, or similar process, is issued or
levied against a substantial part of Assets of Taylor Madison Subsidiary of
Taylor Madison and any such proceeding or petition shall not be dismissed, or
such writ, judgment, warrant of attachment, execution, or similar process shall
not be released, vacated, or fully bonded within 60 days after commencement,
filing, or levy; (ii) Taylor Madison or any Subsidiary of Taylor Madison admits
the material allegations of a petition against it in any Insolvency Proceeding,
or an order for relief (or similar order under non-U.S. law) is ordered in any
Insolvency Proceeding; (iii) Taylor Madison acquiesces in the appointment of a
receiver, trustee, custodian, conservator, liquidator, mortgagee in possession
(or agent therefor), or other similar Person for itself or a substantial portion
of its Assets or business; (iv) Taylor Madison or any Subsidiary of Taylor
Madison shall have an order for relief entered with respect to it or shall
consent to the entry of an order for relief in an involuntary case commenced
under any Bankruptcy Law, or shall consent to the conversion of an involuntary
case to a voluntary case under any such law; or (v) Taylor Madison or any
Subsidiary of Taylor Madison shall consent to the appointment of or taking
possession by a receiver, trustee, or other custodian for all or a substantial
part of its or their Assets; or
-18-
(g) any money judgment, writ, or warrant of attachment, or similar
process involving an amount in excess of $25,000 in any individual case or in
excess of $50,000 in the aggregate (exclusive of any portion which is covered by
insurance and with respect to which the insurer has not disputed coverage) shall
be entered or filed against Taylor Madison or any Subsidiary of Taylor Madison,
or any of its Assets and shall remain undischarged, unvacated, unbonded, or
unstayed for a period of 30 days or in any event later than 5 days prior to the
date of any proposed sale thereunder;
then, and in any such case (x) upon the occurrence of any Event of Default
described in subsection (f) or (g) of this Section 10.1, the unpaid principal
--------------- --- ------------
amount of and accrued interest on the Debentures automatically shall become due
and payable, and (y) upon the occurrence and during the continuance of any other
Event of Default under Section 10.1, the Purchasers, may, at their option and in
addition to any right, power, or remedy permitted by law or in equity, by 5 days
prior written notice to Taylor Madison, declare all of the Debentures to be, and
all of such Debentures shall thereupon be and become, forthwith due and payable
together with interest accrued thereon, without presentment, demand, protest, or
other notice of any kind, all of which are hereby waived by Taylor Madison.
10.2 Rescission of Acceleration. In the event a declaration of
----------------------------
acceleration in respect of the Debentures because of an Event of Default
specified in Section 10.1(b) shall have occurred and be continuing, such
----------------
declaration of acceleration automatically shall be annulled if the Indebtedness
that is subject of such Event of Default has been discharged, cured, waived,
paid in full, or the holders thereof have rescinded their declaration of
acceleration in respect of such Indebtedness, and written notice of such
discharge, cure, waiver, payment, or rescission, as the case may be, shall have
been given to Taylor Madison by the holders of such Indebtedness or a
Representative of such holders, and no other Default or Event of Default has
occurred that has not been cured or waived during such period. No rescission or
annulment referred to above shall affect any subsequent Default or any right,
power, or remedy arising out of such subsequent Default or Event of Default.
10.3 Other Remedies. If any Default or Event of Default shall occur
---------------
and be continuing, the holder of any Debenture may proceed to protect and
enforce its rights under this Agreement and such Debenture by exercising such
remedies as are available to such holder in respect thereof under applicable
law, either by suit in equity or by action at law, or both, whether for specific
performance of any covenant or other agreement contained in this Agreement or in
aid of the exercise of any power granted in this Agreement. No remedy conferred
in this Agreement upon a Purchaser or any other holder of any Debenture is
intended to be exclusive of any other remedy, and each and every such remedy
shall be cumulative and shall be in addition to every other remedy conferred
herein or now or hereafter existing at law or in equity or by statute or
otherwise.
ARTICLE 11
----------
DEFINITIONS; CONSTRUCTIONS
--------------------------
11. Definitions; Construction.
--------------------------
-19-
11.1 Definitions. For the purpose of this Agreement, the following
-----------
terms shall have the meanings specified with respect thereto below:
"Affiliate" means, when used with respect to a specified Person, another
----------
Person that directly or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified. No
Purchaser shall, however, be deemed to be an Affiliate of Taylor Madison or any
of its Affiliates.
"Agreement" has the meaning set forth in the preamble hereto.
----------
"Asset" means any interest in any kind of property or asset, whether real,
------
personal, or mixed, and whether tangible or intangible.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as codified
-----------------
under Title 11 of the United States Code, and the Bankruptcy Rules promulgated
thereunder, as the same may be in effect from time to time.
"Business Day" means any day other than a Saturday, Sunday, or any day that
--------------
either is a legal holiday under the laws of the State of Florida or is a day on
which banking institutions located in such State are authorized or required by
law or other governmental action to close.
"Capitalized Lease" means a lease under which Taylor Madison or any of its
-------------------
Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are required to be capitalized on the balance sheet of
such lessee or obligor in accordance with GAAP.
"Code" means the Internal Revenue Code of 1986, or any successor statute
-----
thereto, as the same may be amended from time to time.
"Commission" means the United States Securities and Exchange Commission and
-----------
any successor federal agency having similar powers.
"Common Stock" means a share of common stock of a Person that is a
--------------
corporation.
"Consolidated" or "consolidated" means, with reference to any term defined
------------- -------------
herein, that term as applied to the accounts of an parent company and its
Subsidiaries, consolidated in accordance with GAAP.
"Contractual Obligation" as applied to any Person, means any provision of
------------------------
any material security issued by that Person or of any material indenture, loan
agreement, credit agreement, lease, mortgage, deed of trust, contract,
undertaking, agreement, or other material instrument to which that Person is a
party or by which it or any material amount of its Assets is bound or to which
it or any material amount of its Assets is subject.
"Control" means the possession, directly or indirectly, of the power to
------
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise, and the
terms "Controlling" and "Controlled" has meanings correlative thereto.
-20-
"Default" means any of the events specified in Section 10 hereof,
-------- -----------
irrespective of whether any requirement for the giving of notice or the lapse of
time has been satisfied in connection with such event.
"Distribution" means, with respect to any Person, (a) the declaration or
-------------
payment of any dividend on or in respect of any shares of any class of capital
Stock of such Person, other than dividends payable solely in shares of common
stock, (b) the purchase, redemption, or other retirement of any shares of any
class of capital Stock of such Person, directly or indirectly, (c) the return of
capital by such Person to its shareholders or other interest holders, or (d) any
other distribution on or in respect of any shares of any class of capital Stock
of such Person.
"ERISA" means the Employee Retirement Income Security Act of 1974, or any
------
successor statute, together with the regulations thereunder, as the same may be
amended from time to time.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
--------------
any successor statute.
"Financial Officer" of any corporation means the chief financial officer,
-------------------
principal accounting officer, treasurer, or controller of such corporation.
"Fiscal Quarter" means each calendar quarter ending September 30, December
----------------
31 and March 31.
"Fiscal Year" means the fiscal year for the twelve month period ending June
------------
30.
"GAAP" means generally accepted accounting principles as in effect from
-----
time to time in the United States of America.
"Governmental Authority" means any federal, state, local, or foreign court
------------------------
or governmental agency, authority, instrumentality or regulatory body.
"Governmental Body" means any federal, state, local or foreign Governmental
------------------
Authority or regulatory body, any subdivision, agency, commission or authority
thereof or any quasi-governmental or private body exercising any governmental
regulatory authority thereunder and any Person directly or indirectly owned by
and subject to the control of any of the foregoing, or any court, arbitrator or
other judicial or quasi-judicial tribunal.
"Indebtedness" means, as applied to any Person, all obligations, contingent
-------------
and otherwise, that in accordance with GAAP should be classified upon such
Person's balance sheet as liabilities, or to which reference should be made by
footnotes thereto, including in any event and whether so classified: (a) all
debt and similar monetary obligations, whether direct or indirect, (b) all
liabilities secured by any mortgage, pledge, security interest, Lien, charge, or
other encumbrance existing on property owned or acquired subject thereto,
irrespective of whether the liability secured thereby shall have been assumed,
(c) all guarantees, endorsements, and other contingent obligations whether
direct or indirect in respect of indebtedness of others, including any
obligation to supply funds to or in any manner to invest in, directly or
indirectly, the debtor, to purchase indebtedness, or to assure the owner of
indebtedness against loss, through an agreement to purchase goods, supplies, or
services for the purpose of enabling the debtor to make payment of the
indebtedness held by such owner or otherwise, (d) the obligation to reimburse
the issuer in respect of any letter of credit, and (e) the obligations under an
Interest Rate Agreement.
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"Insolvency Proceeding" means (a) any case, action, or proceeding before
-----------------------
any court or other Governmental Authority having jurisdiction over the
applicable Person or its Assets relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up, or relief of
debtors, or (b) any general assignment for the benefit of creditors,
composition, marshaling of Assets for creditors, or other similar arrangement in
respect of its creditors generally or any substantial portion of its creditors;
in each case whether undertaken under U.S. federal (including the Bankruptcy
Code), state, or foreign law.
"Interest Rate Agreement" means any interest rate protection or hedge
--------------------------
agreement, including any interest rate future, option, swap, and cap agreements.
"Investment" as applied to any Person, means any direct or indirect
-----------
purchase or other acquisition by that Person of, or a beneficial interest in,
Stock, or other securities of any other Person, or any direct or indirect loan
or advance (other than loans or advances to employees for moving and travel
expenses, drawing accounts, and similar expenditures in the ordinary course of
business), or capital contribution by that Person to any other Person, including
all accounts receivable from that other Person that are not current assets and
did not arise from sales to that other Person in the ordinary course of
business. The amount of any Investment shall be the original cost of such
Investment plus the cost of all additions thereto, without any adjustments for
increases or decreases in value, or write-ups, write-downs, or write-offs with
respect to such Investments.
"Lien" means any mortgage, deed of trust, pledge, security interest,
-----
charge, encumbrance, lien, easement, or exception of any kind (including any
conditional sale or other title retention agreement and any agreement to give
any security interest).
"Material Adverse Effect" means a material adverse effect on the condition
-------------------------
(financial or otherwise), business, prospects, results of operations, or Assets
of such Person, taken as a whole.
"Maturity Date" has the meaning set forth in Section 1.1(a) hereof.
--------------- --------------
"Multiemployer Plan" means a "multiemployer plan" (as defined in Section
--------------------
4001(a)(3) in ERISA) maintained or contributed to for employees of such Person
or any ERISA Affiliate.
"Operating Lease" means any lease (other than a Capitalized Lease) .
-----------------
"Permitted Encumbrances" means the following types of Liens:
------------------------
(a) Liens for taxes, assessments, or governmental charges or claims the
payment of which is not at the time required by Section 8.3 hereof;
(b) Statutory Liens of landlords and depository institutions and Liens
of carriers, warehousemen, mechanics, materialmen, and other Liens imposed by
law incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith by appropriate proceedings diligently pursued;
provided, however, that Parent shall have made such reserve or other provisions
therefor as may be required by GAAP;
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(C) Liens (other than any Liens imposed by ERISA) incurred or deposits
made in the ordinary course of business in connection with workers'
compensation, unemployment insurance, and other types of social security, or to
secure the performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts or permits, performance and
return-of-money bonds, and other similar obligations (exclusive of obligations
for the payment of borrowed money);
(d) Easements, rights-of-way, zoning, and similar restrictions and
other encumbrances affecting real property that do not in any case materially
interfere with the ordinary conduct of the business of such Person, taken as a
whole;
(e) Leases, subleases, or licenses not otherwise prohibited by this
Agreement, granted to others not interfering in any material respect with the
business of such Person;
(f) Liens arising from filing UCC financing statements regarding
Operating Leases;
(g) Any interest or title of a lessor under any lease permitted by this
Agreement (including any Lien granted by such lessor on the Asset of such
lessor) under which such Person is lessee;
(h) Any attachment or judgment Lien not constituting an Event of
Default under Section 10.1(h) hereof;
----------------
(i) Liens in the nature of the subordination of the leasehold interest
of such Person in any real property to a mortgage or comparable Lien upon such
real property;
(j) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, or warranty requirements;
(k) Liens securing Indebtedness permitted under Section 9.1 hereof,
-----------
subject to any and all limitations set forth in such Section 9.1; and
------------
"Person" means and includes natural persons, corporations, limited
-------
liability companies, limited partnerships, general partnerships, joint ventures,
trusts, land trusts, business trusts, or other organizations, irrespective of
whether they are legal entities, and Governmental Authorities and political
subdivisions thereof.
"Projections" means Parent's forecasted consolidated (a) balance sheets,
------------
(b) statements of income, and (c) cash flow statements, all prepared on a basis
consistent with its historical financial statements, together with appropriate
supporting details and a statement of underlying assumptions.
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"Purchaser" and "Purchasers" have the respective meanings set forth in the
---------- -----------
preamble hereto.
"Representative" means the agent, trustee, or other appointed
---------------
representative of a holder of Indebtedness.
"Sale/Leaseback" has the meaning set forth in Section 9.6 hereof.
--------------- ------------
"Securities Act" means the Securities Act of 1933, as amended, and any
----------------
successor statute.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
------------------------
amended and any successor statute.
"Series A Convertible Preferred Financing" means the offering by the
--------------------------------------------
Corporation of Series A Preferred Stock and Series B Warrants pursuant to the
terms of the Confidential Term Sheet attached hereto as Exhibit "B".
"Stock" means all shares, options, warrants, interests, participations, or
------
other equivalents (regardless of how designated) of or in a corporation, a
limited liability company, or equivalent entity, whether voting or nonvoting,
including common stock, preferred stock, common membership interests, preferred
membership interests, or any other "equity security" (as such term is defined in
Rule 3a11-1 of the General Rules and Regulations promulgated by the Commission
under the Exchange Act).
"Subsidiary" means any corporation, association, partnership, limited
-----------
liability company, or other business entity of which more than 50% of the total
voting power of shares of Stock entitled to vote in the election of directors,
managers, or trustees thereof is at the time owned or controlled, directly or
indirectly, by any Person or one or more of the other Subsidiaries of that
Person or a combination thereof.
"Transaction Documents" means this Agreement, the Warrant, and the
-----------------------
Debentures.
"Transfer" means the sale, pledge, assignment, or other transfer of the
---------
Debentures, in whole or in part, and of the rights of the holder thereof with
respect thereto and under this Agreement.
11.2 Accounting Principles
----------------------
Where the character or amount of any Asset or liability or item of income
or expense is required to be determined or any consolidation, combination, or
other accounting computation is required to be made for the purposes of this
Agreement, the same shall be done in accordance with GAAP, to the extent
applicable, except where such principles are inconsistent with the requirements
of this Agreement.
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11.3 Construction.
------------
Unless the context of this Agreement clearly requires otherwise, references
to the plural include the singular and references to the singular include the
plural, the part includes the whole, the terms "include" and "including" are not
limiting, and the term "or" has, except where otherwise indicated, the inclusive
meaning represented by the phrase "and/or". The words "hereof," "herein,"
"hereby," "hereunder" and similar terms in this Agreement refer to this
Agreement as a whole and not to any particular provision in this Agreement.
Paragraph, section, subsection, clause, exhibit, and schedule references are to
this Agreement unless otherwise specified. Any reference herein to this
Agreement or the other Transaction Documents includes any and all alterations,
amendments, changes, extensions, modifications, renewals, or supplements thereto
or thereof, as applicable.
ARTICLE 12
----------
MISCELLANEOUS PROVISIONS
------------------------
12. Miscellaneous.
-------------
12.1 Notices: All notices or other communications required or
-------
permitted to be given pursuant to this Agreement shall be in writing and shall
be considered as properly given or made if hand delivered, mailed from within
the United States by certified mail, or sent by overnight delivery service to
the applicable address appearing in the preamble to this Agreement, or to such
other address as either party may have designated by like notice forwarded to
the other party hereto. All notices shall be deemed given when postmarked (if
mailed), when delivered to an overnight delivery service or, if hand delivered,
when delivered to the recipient.
12.2 Binding Agreements; Non-Assignability: Each of the provisions and
-------------------------------------
agreements herein contained shall be binding upon and inure to the benefit of
the personal representatives, heirs, devisees and successors of the respective
parties hereto; but none of the rights or obligations attaching to either party
hereunder shall be assignable.
12.3 Entire Agreement: This Agreement, and the other documents
-----------------
referenced herein, constitute the entire understanding of the parties hereto
with respect to the subject matter hereof, and no amendment, modification or
alteration of the terms hereof shall be binding unless the same be in writing,
dated subsequent to the date hereof and duly approved and executed by each
party.
12.4 Severability: Every provision of this Agreement is intended to be
------------
severable. If any term or provision hereof is illegal or invalid for any reason
whatever, such illegality or invalidity shall not affect the validity of the
remainder of this Agreement.
9.5 Headings: The headings of this Agreement are inserted for
--------
convenience and identification only, and are in no way intended to describe,
interpret, define or limit the scope, extent or intent hereof.
12.6 Application of Florida Law; Venue: This Agreement, and the
-------------------------------------
application or interpretation thereof, shall be governed exclusively by its
terms and by the laws of the State of Florida. Venue for any legal action which
may be brought hereunder shall be deemed to lie in Hillsborough County, Florida.
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12.7 Counterparts: This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.8 Legal Fees and Costs: If a legal action is initiated by any party
--------------------
to this Agreement against another, arising out of or relating to the alleged
performance or non-performance of any right or obligation established hereunder,
or any dispute concerning the same, any and all fees, costs and expenses
reasonably incurred by each successful party or his, her or its legal counsel in
investigating, preparing for, prosecuting, defending against, or providing
evidence, producing documents or taking any other action in respect of, such
action shall be the joint and several obligation of and shall be paid or
reimbursed by the unsuccessful party(ies).
12.9 Jurisdiction: The parties agree that, irrespective of any wording
------------
that might be construed to be in conflict with this paragraph, this agreement is
one for performance in Florida. The parties to this agreement agree that they
waive any objection, constitutional, statutory or otherwise, to a Florida
court's taking jurisdiction of any dispute between them. By entering into this
agreement, the parties, and each of them understand that they might be called
upon to answer a claim asserted in a Florida court.
IN WITNESS WHEREOF, the parties have executed this Share Exchange Agreement
as of the day and year first above written.
[Signature page follows.]
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date first
above written.
TELZUIT TECHNOLOGIES, LLC.
By:
-------------------------------------
Name:
-----------------------------------
Its:
------------------------------------
TELZUIT TECHNOLOGIES, INC.
By:
-------------------------------------
Name:
-----------------------------------
Its:
------------------------------------
FOUNDERS
----------------------------------------
Xxxxx Xxxxx, an individual
----------------------------------------
Xxxxxxx X. Xxxxx, an individual
----------------------------------------
Xxx Xxxxxx, an individual
TAYLOR MADISON CORP.
By:
-------------------------------------
Name:
-----------------------------------
Its:
------------------------------------
----------------------------------------
Xxxxx Xxxxxxxx, as authorized
representative for the Purchasers
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