SHARE EXCHANGE AGREEMENT
This
Share Exchange Agreement (the “Agreement”) dated as of the 2nd day of April
2009, by and among Competitive Companies, Inc., a Nevada corporation (the
“Company”), Innovation Capital Management, Inc., a Delaware corporation
(“Innovation”), Innovation Capital Management LLC, a Texas Limited Liability
Company (“Innovation LLC”), DiscoverNet, Inc., a Wisconsin corporation
(“DiscoverNet”) each a “Selling Entity” and collectively the “Selling Entities”
and the shareholders, unit holders and preferred shareholders respectively, of
the Selling Entities named on the signature page of this Agreement
(collectively, the “Shareholders” and each, individually, a
“Shareholder”).
WITNESSETH:
WHEREAS,
the Shareholders are the holders of all of the issued and outstanding capital
stock, units and preferred shares respectively of the Selling Entities (the
“Selling Entity Shares”);
WHEREAS,
the Company is acquiring a controlling interest in the Selling
Entities;
WHEREAS,
the Company is willing to issue 29,075,600 shares of
its common stock, par value $0.001 per share (the “Common Stock”), to the
Shareholders in consideration for all of the Selling Entity Shares;
and
WHEREAS,
the Company will acquire certain assets and liabilities of the Selling Entities
as additional consideration (the “Additional Consideration”);
NOW,
THEREFORE, for the mutual consideration set out herein, the parties agree as
follows:
1.
Exchange of Shares and
Issuance to the Shareholders.
(a) Issuance of Shares by the
Company. On and subject to the conditions set forth in this Agreement,
the Company will issue to the Shareholders, in exchange for 2,907,560 Selling
Entity Shares, which represents all of the issued and outstanding capital stock
of the Selling Entities, an aggregate of 29,075,600 shares of
Common Stock. The shares of Common Stock will be issued to the Shareholders in
the amounts set forth after their respective names in Schedule I to this
Agreement.
(b) Transfer of
the Selling Entity Shares by the Shareholders. Subject to the conditions
set forth in this Agreement, the Shareholders will transfer to the Company all
of the Selling Entity Shares in exchange for shares of Common
Stock. Each Shareholder holds the number of Selling Entity Shares set
forth after his or her name in Schedule I to this
Agreement.
(c) Closing. The issuance
of the Common Stock to the Shareholders and the transfer of the Selling Entity
Shares to the Company will take place at a closing (the “Closing”) to be held at
the offices of Xxxxxx & Xxxxxx, LLP, 000 Xxxxx 0 Xxxxx, Xxxxx 000,
Xxxxxxxxx, Xxx Xxxxxx 00000 as soon as possible after or contemporaneously with
the satisfaction or waiver of all of the conditions to closing set forth in
Section 5 of this Agreement (the “Closing Date”).
2.
Representations and
Warranties of the Company. The Company hereby represents, warrants,
covenants and agrees as follows:
(a)
Organization and
Authority.
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(ii)
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Complete
and correct copies of the Company’s certificate of incorporation and
by-laws are available for review on the XXXXX system maintained by the
U.S. Securities and Exchange Commission (the
“Commission”).
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(iii)
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The
Company has full power and authority to carry out the transactions
provided for in this Agreement, and this Agreement constitutes the legal,
valid and binding obligations of the Company, enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency and other laws of general application affecting the enforcement
of creditor’s rights and except that any remedies in the nature of
equitable relief are in the discretion of the court. All
necessary action required to be taken by the Company for the consummation
of the transactions contemplated by this Agreement has been
taken.
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(iv)
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The
execution and performance of this Agreement will not constitute a breach
of any agreement, indenture, mortgage, license or other instrument or
document to which the Company is a party or by which its assets and
properties are bound, and will not violate any judgment, decree, order,
writ, rule, statute, or regulation applicable to the Company or its
properties. The execution and performance of this Agreement
will not violate or conflict with any provision of the certificate of
incorporation or by-laws of the
Company.
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(v)
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The
Securities, when issued pursuant to this Agreement, will be duly and
validly authorized and issued, fully paid and non-assessable. The issuance
of the Securities to Shareholders is exempt from the registration
requirements of the Securities Act of 1933, as amended (the “Securities
Act”), pursuant to an exemption provided by Section 4(2) and Rule 506
promulgated thereunder.
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(vi)
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The
authorized capital stock of the Company consists of 500,000,000 shares of
Common Stock, $0.001 par value of which 67,409,910 shares are currently
issued and outstanding and 999,000,000 shares of preferred stock, $0.001
par value of which 1,495,436 shares are issued. Except as
provided in, contemplated by, or set forth in this Agreement or the
Company SEC Documents (as defined below), the Company has no outstanding
or authorized warrants, options, other rights to purchase or otherwise
acquire capital stock or any other securities of the Company, preemptive
rights, rights of first refusal, registration rights or related
commitments of any nature. All issued and outstanding shares
were either (i) registered under the Securities Act, or (ii) issued
pursuant to valid exemptions from registration
thereunder.
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(vii)
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No
consent, approval or agreement of any person, party, court, governmental
authority, or entity is required to be obtained by the Company in
connection with the execution and performance by the Company of this
Agreement or the execution and performance by the Company of any
agreements, instruments or other obligations entered into in connection
with this Agreement.
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(b)
SEC
Documents.
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(i)
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The
Company is registered pursuant to Section 12 of the Exchange Act and it is
current with its reporting obligations under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”). None of the Company’s
filings made pursuant to the Exchange Act (collectively, the “Company SEC
Documents”) contains any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading. The Company SEC Documents, as of
their respective dates, complied in all material respects with the
requirements of the Exchange Act, and the rules and regulations of the
Commission thereunder, and are available on the Commission’s XXXXX
system.
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(ii)
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The
Company SEC Documents include the Company’s audited consolidated financial
statements for the fiscal year ended December 31, 2007 (the “Financial
Statements”), including, in each case, a balance sheet and the related
statements of income, stockholders’ equity and cash flows for the period
then ended, together with the related notes. The Audited
Financial Statements have been certified by Xxxxxxxx Xxxxxxxxx & Co.,
CPA P.C. (“LS & Co.”). The Financial Statements are in
accordance with all books, records and accounts of the Company, are true,
correct and complete and have been prepared in accordance with GAAP,
consistently applied. LS & Co. is independent as to the
Company under the rules of the Commission pursuant to the Securities Act
and is registered with the PCAOB. The Financial Statements present fairly
the financial position of the Company at the respective balance sheet
dates, and fairly present the results of the Company’s operations, changes
in stockholders’ equity and cash flows for the periods
covered.
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(iii)
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At
the close of business on September 30, 2008 the date of Company’s most
recent Form 10-Q filing, the Company did not have any material
liabilities, absolute or contingent, of the type required to be reflected
on balance sheets prepared in accordance with GAAP which are not fully
reflected, reserved against or disclosed on the September 30, 2008 balance
sheet. The Company has not guaranteed or assumed or incurred
any obligation with respect to any debt or obligations of any Person,
except endorsements made in the ordinary course of business in connection
with the deposit of items for collection. The Company does not
have any debts, contracts, guaranty, standby, indemnity or hold harmless
commitments, liabilities or obligations of any kind, character or
description, whether accrued, absolute, contingent or otherwise, or due or
to become due except to the extent set forth or noted in the Financial
Statements, and not heretofore paid or
discharged.
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(c)
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Absence of
Changes. Since September 30, 2008, except as set forth
in the Company SEC Documents and to the best of Company’s knowledge, there
have not been:
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(i)
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any
change in the consolidated assets, liabilities, or financial condition of
the Company, except changes in the ordinary course of business which do
not and will not have a material adverse effect on the
Company;
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(ii)
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any
damage, destruction, or loss, whether or not covered by insurance,
materially and adversely affecting the assets or financial condition of
the Company (as conducted and as proposed to be
conducted);
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(iii)
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any
change or amendment to a material contract, charter document or
arrangement not in the ordinary course of business to which the Company is
a party other than contracts which are to be terminated at or prior to the
Closing;
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(iv)
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any
loans made by the Company to any of affiliate of the Company or any of the
Company’s employees, officers, directors, shareholders or any of its
affiliates;
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(v)
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any
declaration or payment of any dividend or other distribution or any
redemption of any capital stock of the
Company;
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(vi)
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any
sale, transfer, or lease of any of the Company’s assets other than in the
ordinary course of business;
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(vii)
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any
other event or condition of any character which might have a material
adverse effect on the Company;
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(viii)
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any
satisfaction or discharge of any lien, claim or encumbrance or payment of
any obligation by Company except in the ordinary course of business and
that is not material to the assets or financial condition of the Company;
or
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(ix)
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any
agreement or commitment by the Company to do any of the things described
in this Section 2(c).
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(d) Property. Except
as set forth in the Company SEC Documents, the Company does not own any real
estate and is not a party to any lease agreement.
(e) Taxes. The
Company has filed all federal, state, county and local income, excise,
franchise, property and other tax, governmental and/or related returns, forms,
or reports, which are due or required to be filed by it prior to the date
hereof, except where the failure to do so would have no material adverse impact
on the Company, and has paid or made adequate provision in the financial
statement included in the Company SEC Documents for the payment of all taxes,
fees, or assessments which have or may become due pursuant to such returns or
pursuant to any assessments received. The Company is not delinquent
or obligated for any tax, penalty, interest, delinquency or charge.
(f) Contracts and
Commitments. Except as contemplated under this Agreement or
set forth in the Company SEC Documents, the Company is not a party to any
contract or agreement.
(g) No Adverse
Change. Since September 30, 2008, there has not been any
Material Adverse Change in the financial condition of the Company. A
Material Adverse Change shall mean a material adverse change in the business,
financial condition, operations or prospects of a person.
(h) No
Defaults. The Company is not in violation of its certificate
of incorporation or by-laws or any judgment, decree or order, applicable to
it.
(i) Litigation. There
are no material (i.e., claims which, if adversely determined based on the
amounts claimed, would exceed fifty thousand dollars ($50,000) in the aggregate)
claims, actions, suits, proceedings, inquiries, labor disputes or investigations
(whether or not purportedly on behalf of the Company) pending or, to Company’s
knowledge, threatened against the Company or any of its assets, at law or in
equity or by or before any governmental entity or in arbitration or
mediation.
(j) Compliance with
Laws. The Company, to its knowledge, is in full compliance
with all laws applicable to it (including, without limitation, with respect to
zoning, building, wages, hours, hiring, firing, promotion, equal opportunity,
pension and other benefit, immigration, nondiscrimination, warranties,
advertising or sale of products, trade regulations, anti-trust or control and
foreign exchange or, to the Company’s knowledge, environmental, health and
safety requirements).
(k) Contracts and
Commitments. The Company is not a party to any contract of
agreement other than agreements that will be terminated at or prior to the
Closing.
(l) Intellectual
Property. The Company has no intellectual property
rights.
(m) No
Broker. Neither the Company nor any of its agents or employees
has employed or engaged any broker or finder or incurred any liability for any
brokerage fees, commissions or finders’ fees in connection with the transactions
contemplated by this Agreement. The Company shall indemnify and hold
the Shareholders harmless against any loss, damage, liability or expense,
including reasonable fees and expenses of counsel, as a result of any brokerage
fees, commissions or finders’ fees which are due as a result of the consummation
of the transaction contemplated by this Agreement.
(n) Reliance by
Shareholders. The representations and warranties set forth in
this Section 2 taken together, do not contain any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
contained herein and therein, when taken together, not misleading, and there is
no fact which materially and adversely affects the business, operations or
financial condition of the Company. Shareholders may rely on the
representations set forth in this Section 2 notwithstanding any investigation it
may have made.
3.
Representations and
Warranties of Selling Entities and the Shareholders. The Selling Entities
and Shareholders hereby represent, warrant, covenant and agree as of the date
hereof and as of the Closing Date as follows:
(a)
Organization and
Authority.
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(i)
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The
Selling Entities are duly organized, validly existing and in good standing
under the laws of their respective states of incorporation. The
Selling Entities do not have any equity investment or other interest,
direct or indirect, in, or any outstanding loans, advances or guarantees
to or on behalf of, any domestic or foreign corporation, Limited Liability
Company, association, partnership, joint venture or other
entity.
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(ii)
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Complete
and correct copies of each of Innovation, Innovation LLC and DiscoverNet’s
certificate of incorporation and by-laws are attached
hereto.
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(iii)
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The
Shareholders and Selling Entities have full power and authority to carry
out the transactions provided for in this Agreement, and this Agreement
constitutes the legal, valid and binding obligations of the Shareholders
and Selling Entities, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency and other laws of
general application affecting the enforcement of creditor’s rights and
except that any remedies in the nature of equitable relief are in the
discretion of the court. All necessary action required to be
taken by the Shareholders and Selling Entities for the consummation of the
transactions contemplated by this Agreement have been
taken.
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(iv)
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The
execution and performance of this Agreement will not constitute a breach
of any agreement, indenture, mortgage, license or other instrument or
document to which the Selling Entities are a party or by which its assets
and properties are bound, and will not violate any judgment, decree,
order, writ, rule, statute, or regulation applicable to the Selling
Entities or their properties. The execution and performance of
this Agreement will not violate or conflict with any provision of the
certificate of incorporation or by-laws of the Selling
Entities.
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(v)
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No
consent, approval or agreement of any person, party, court, governmental
authority, or entity is required to be obtained by the Shareholders or the
Selling Entities in connection with the execution and performance by the
Shareholders and Selling Entiites of this Agreement or the execution and
performance by the Shareholders and Selling Entities of any agreements,
instruments or other obligations entered into in connection with this
Agreement.
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4. Closing
Deliveries.
(a) On
the Closing Date, the Company shall deliver or cause to be delivered toeach
Shareholder:
(i) a
certificate registered in the name of each Shareholder representing the number
of shares of Common Stock, Units, and Preferred Shares respectively set forth on
Schedule I;
(ii) a
legal opinion of counsel to the Company acceptable to the Shareholders;
and
(b) On
the Closing Date, each Shareholder shall deliver or cause to be deliveredto the
Company:
(i) the
certificate representing such Shareholder’s shares of Selling Entity Shares, or
if the shares were issued in uncertificated form, a written representation
executed by an officer of the Selling Entity that such Shareholder
was issued the number of shares set forth next to its name on Schedule
I.
5. Conditions to the Obligation
of the Shareholders to Close. The obligations ofShareholders
under this Agreement are subject to the satisfaction of the followingconditions
unless waived by Shareholders:
(a) Representations and
Warranties. On the Closing Date, the representations and
warranties of the Company shall be true and correct in all material respects on
and as of the Closing Date with the same force and effect as if made on such
date, and the Company shall have performed all of their respective obligations
required to be performed by them pursuant to this Agreement at or prior to the
Closing Date, and Shareholders shall have received a certificate of the Company
to such effect and as to any other matters set forth in this
Agreement.
(b) No Material Adverse
Change. No Material Adverse Change in the business or
financial condition of the Company shall have occurred or be threatened since
the date of this Agreement, and no action, suit or proceedings shall be
threatened or pending before any court of governmental agency or authority or
regulatory body seeking to restraint, prohibition or the obtain damages or other
relief in connection with this Agreement or the consummation of the transactions
contemplated by this Agreement or that, if adversely decided, has or may have a
Material Adverse Effect.
(c) Liabilities. On the
Closing Date, the Company’s total liabilities shall not exceed
$350,000.
(d) Legal
Opinion. The Shareholders shall have received a legal opinion
from the Company’s legal counsel, acceptable to the Shareholders
(e) Elections and
Appointments. On the Closing Date, the Company shall appoint
Xxxxxxx X. Xxxx as Chief Financial Officer of the Company.
(f) Shares
Outstanding. The Company shall have 67,409,910 shares of
Common Stock outstanding without giving effect to the issuances contemplated
under this Agreement.
6. Indemnification
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(a)
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The
Company agrees to indemnify, defend and hold harmless
each Selling Entity, its Affiliates and, if applicable, their
respective directors, officers, shareholders, employees, attorneys,
accountants, agents and representatives and their heirs, successors and
assigns from and against any and all Damages based upon, arising out of or
otherwise in respect of (i) any inaccuracy in or any breach of any
representation or warranty, of the Company contained in this Agreement,
(ii) the failure of the Company to perform or observe fully any covenant,
agreement or provision to be performed or observed by the Company pursuant
to this Agreement, or (iii) any third-party claim arising out of or in
connection with the operation of the Business of the Company on or before
the Closing.
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(b)
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The
Selling Entities agree to indemnify, defend and hold harmless the Company,
its Affiliates and, if applicable, their respective directors, officers,
shareholders, employees, attorneys, accountants, agents and
representatives and their heirs, successors and assigns from and against
any and all Damages based upon, arising out of or otherwise in respect of
(i) any inaccuracy in or any breach of any representation or warranty, of
the Selling Entities contained in this Agreement, or (ii) the failure of
the Selling Entities to perform or observe fully any covenant, agreement
or provision to be performed or observed by the Selling Entities pursuant
to this Agreement.
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7.
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Accredited Investor
Status. By countersigning this Agreement, each of the Shareholders,
severally and not jointly, represents that such Shareholder is an
accredited investor as such is defined in Regulation D promulgated under
the Securities Act of 1933 as amended, because such Shareholder fits one
of the definitions set forth in Exhibit A
attached hereto.
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8.
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Notices. Any
notice, demand, request, waiver or other communication required or
permitted to be given hereunder shall be in writing and shall be effective
(a) upon hand delivery by telecopy, e-mail or facsimile at the address or
number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business
day following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received) or (b)
on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The
addresses for such communications shall
be:
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if to the
Company:
Competitive
Companies, Inc.
Attn:
Chief Executive Officer
00000
Xxxxxxx Xxx. 000
Xxx
Xxxxxxx, XX 00000
Tel:
(000) 000-0000
Fax:
(000) 000-0000
if to the Selling Entities
and the Shareholders:
Innovation
Capital Management, Inc.
Attn:
Xxxxxxx X. Xxxx
00000
Xxxxxxx Xxxx, Xxxxx 000
Xxx
Xxxxxxx, XX 00000
Tel:
(000) 000-0000
Fax:
(000) 000-0000
with a copy to (which shall
not constitute notice):
Xxxxxx
& Xxxxxx LLP
Attn:
Xxxxx X. Xxxxxx, Esq.
Xxxx X.
Xxxxx, Esq.
000 Xxxxx
0 Xxxxx, Xxxxx 000
Xxxxxxxxx,
XX 00000
Phone:
(000) 000-0000
Fax:
(000) 000-0000
9.
Miscellaneous.
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(a)
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This
Agreement constitutes the entire agreement between the parties relating to
the subject matter hereof, superseding any and all prior or
contemporaneous oral and prior written agreements, understandings and
letters of intent. This Agreement may not be modified or amended nor may
any right be waived except by a writing which expressly refers to this
Agreement, states that it is a modification, amendment or waiver and is
signed by all parties with respect to a modification or amendment or the
party granting the waiver with respect to a waiver. No course of conduct
or dealing and no trade custom or usage shall modify any provisions of
this Agreement.
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(b)
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This
Agreement shall be governed by and construed in accordance with the laws
of the State of Texas without regard to any principles of conflicts of law
applicable to contracts made and to be performed entirely within such
State. Each of the parties hereby irrevocably consents and
agrees that any legal or equitable action or proceeding arising under or
in connection with this Agreement shall be brought in the federal or state
courts located in the State of Texas, by execution and delivery of this
Agreement, irrevocably submits to and accepts the jurisdiction of said
courts, (iii) waives any defense that such court is not a convenient
forum, and (iv) consent to any service of process method permitted by
law.
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(c)
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This
Agreement shall be binding upon and inure to the benefit of the parties
hereto, and their respective successors and permitted
assigns.
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(d)
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This
Agreement may be executed in two or more counterparts, each of which shall
be deemed an original but all of which together shall constitute one and
the same document. Fax or PDF copies of signatures shall be
treated as originals for all
purposes.
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(e)
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The
various representations, warranties, and covenants set forth in this
Agreement or in any other writing delivered in connection therewith shall
survive the issuance of the Shares.
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[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF, the parties have executed this Share Exchange Agreement the day
and year first above written.
COMPETITIVE COMPANIES,
INC.
By: /S/ Xxxxxxx
Xxxx
INNOVATION
CAPITAL MANAGEMENT, INC.
By: /S/ Xxxxxxx
Xxxx
INNOVATION
CAPITAL MANAGEMENT LLC
By: /S/ Xxxxxxx
Xxxx
DISCOVERNET,
INC.
By: /S/ Xxxxxxx
Xxxx
Exhibit
A
Accredited
investors
A Person
who meets any one of the following tests is an accredited investor:
(a)
The Person is an individual who has a net worth, or joint net worth with
the Person’s spouse, of at least $1,000,000.
(b)
The Person is an individual who had individual income of more than
$200,000 (or $300,000 jointly with the Person’s spouse) for the past two years,
and the Person has a reasonable expectation of having income of at least
$200,000 (or $300,000 jointly with the Person’s spouse) for the current
year.
(c)
The Person is an officer or director of the Company.
(d)
The Person is a bank as defined in section 3(a)(2) of the Securities Act
or any savings and loan association or other institution as defined in section
3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary
capacity.
(e)
The Person is a broker or dealer registered pursuant to section 15 of the
Securities Exchange Act of 1934.
(f)
The Person is an insurance company as defined in section 2(13) of the
Securities
Act.
(g)
The Person is an investment company registered under the Investment
Company Act of 1940 or a business development company as defined in section
2(a)(48) of that Act.
(h)
The Person is a small Business Investment Company licensed by the U.S.
Small Business Administration under section 301(c) or (d) of the Small Business
Investment Act of 1958.
(i)
The Person is an employee benefit plan within the meaning of Title I of
the Employee Retirement Income Security Act of 1974, if the investment decision
is made by a plan fiduciary, as defined in section 3(21) of such Act, which is
either a bank, savings and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has total assets in excess
of $5,000,000 or, if a self-directed plan, with investment decisions made solely
by persons that are accredited investors.
(j)
The Person is a private business development company as defined in
section 202(a)(22) of the Investment Advisers Act of 1940.
(k)
The Person is an organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000.
(l)
The Person is a trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered, whose
purchase is directed by a sophisticated person as described in Rule
506(b)(2)(ii) of the Commission under the Securities Act.
(m)
The Person is an entity in which all of the equity owners are accredited
investors (i.e., all of the equity owners meet one of the tests for an
accredited investor).
If
an individual Person qualifies as an accredited investor, such individual may
purchase the Shares in the name of his or her individual retirement account
(“XXX”).
Exhibit
B
Assumed
Liabilities
The
Company shall assume all circuit liabilities conducive to the ongoing operation
related to its fixed wireless operation.
