UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14(a)-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement.
[ ] Confidential, for use of the Commission only (as permitted by Rule
14a-6(e)(2)).
[ ] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Section 240.14a-12
CITY CAPITAL CORPORATION
_______________________________________________________________________________
(Name of Registrant as Specified in Its Charter)
______________________________________________________________________________
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
_______________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
_______________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
______________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
______________________________________________________________________________
(5) Total fee paid:
______________________________________________________________________________
[ ] Fee paid previously with preliminary materials.
______________________________________________________________________________
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount Previously Paid:
______________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
______________________________________________________________________________
(3) Filing Party:
______________________________________________________________________________
(4) Date Filed:
______________________________________________________________________________
CITY CAPITAL CORPORATION
2535 Pilot Knob Road, Suite 118
Mendota Heights MN 55120
SOLICITATION OF CONSENTS
TO THE STOCKHOLDERS OF CITY CAPITAL CORPORATION:
The Board of Directors of CITY CAPITAL CORPORATION (the "Company") requests
your consent in writing, without a meeting, to the following proposals:
PROPOSAL ONE: ECC Vine Acquisition. To approve a transaction (the "ECC Vine
Acquisition") whereby control of the Company would be acquired by the sole
unitholder of ECC Vine Street Real Estate Acquisitions, LLC ("ECC Vine"), a
Missouri limited liability company, pursuant to the terms of a reorganization
agreement (the "Agreement") more particularly described hereinafter; and
PROPOSAL TWO: Conversion Transaction. To approve the conversion to equity
(the "Conversion Transaction") of the Company's indebtedness under an issued
convertible note such that the holder of the indebtedness will receive and hold
equity of the Company in excess of 20% of the total issued and outstanding
common stock of the Company, as more particularly described hereinafter; and
PROPOSAL THREE: BDC Withdrawal. To consider and vote upon a proposal to
authorize the Board to withdraw the Company's election (the "BDC Withdrawal") to
be treated as a business development company ("BDC") pursuant to Section 54(c)
under the Investment Company Act of 1940.
Pursuant to Section 78.320(2) of the Nevada Revised Statutes, no meeting of
stockholders will be held in connection with this Consent Solicitation because
this Consent Solicitation is in lieu of a special meeting of stockholders. The
attached Consent Solicitation Statement is provided to you pursuant to Rule
14a-3 under the Securities Exchange Act of 1934. Please read the Consent
Solicitation Statement thoroughly. YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY
APPROVED PROPOSALS ONE AND TWO AND UNANIMOUSLY RECOMMENDS THAT YOU CONSENT TO
THOSE PROPOSALS. AS TO PROPOSAL THREE, THE BOARD OF DIRECTORS HAS NOT TAKEN A
POSITION ON THE MERITS OF PROPOSAL THREE, BUT HAS RESOLVED TO BE BOUND BY THE
WILL OF A MAJORITY OF THE COMPANY'S STOCKHOLDERS AS TO PROPOSAL THREE.
Only holders of record of common stock of the Company as of the close of
business on May __, 2006 (the "Record Date") are entitled to receive the
accompanying Consent Solicitation Statement and Consent and to consent to the
proposals. Each stockholder is urged to sign, date, and mail the accompanying
Consent as promptly as possible in the enclosed self-addressed envelope.
BY ORDER OF THE BOARD OF DIRECTORS
Ephren W. Taylor II
Chief Executive Officer
May __, 2006
Mendota Heights, Minnesota
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Your Consent is Important to Us
It is important that all of your shares are represented. To ensure that your
consent is counted, please complete, sign and date the enclosed consent as
promptly as possible and mail it in the enclosed envelope. You may revoke in
writing any consent that you give at any time before the consent is used by the
Company. If you have any questions, please contact Gary Borglund, President, at
(651) 452-1606.
THIS CONSENT SOLICITATION STATEMENT IS BEING PROVIDED TO YOU BY THE MANAGEMENT
OF THE COMPANY
CITY CAPITAL CORPORATION
2535 Pilot Knob Road, Suite 118
Mendota Heights MN 55120
CONSENT SOLICITATION STATEMENT
The Board of Directors of CITY CAPITAL CORPORATION (the "Company") hereby
requests consents from the holders of the Company's common stock. Please
indicate your consent by SIGNING, DATING and MAILING the enclosed consent
("Consent") using the enclosed envelope.
This Consent Solicitation Statement and the accompanying form of Consent
are first being mailed on or about May ___, 2006 to holders of record of common
stock as of the close of business on May __, 2006 (the "Record Date").
Requests for information regarding this Consent Solicitation Statement may
be directed to the attention of Gary Borglund, President, at (651) 452-1606 or
delivered in writing to the Company at its principal executive office located at
2535 Pilot Knob Road, Suite 118, Mendota Heights MN 55120.
As part of this Consent Solicitation Statement, the Board of Directors of
the Company asks the holders of record to (a) approve a transaction whereby
control of the Company would be acquired by the sole unitholder of ECC Vine
Street Real Estate Acquisitions, LLC ("ECC Vine"), a Missouri limited liability
company, pursuant to the terms of a reorganization agreement (the "Agreement")
more particularly described hereinafter; and (ii) approve the conversion to
equity (the "Conversion Transaction") of the Company's indebtedness under an
issued convertible note such that the holder of the indebtedness will receive
and hold equity of the Company in excess of 20% of the total issued and
outstanding common stock of the Company, as more particularly described
hereinafter; and (iii) consider and vote upon a proposal to authorize the Board
to withdraw the Company's election (the "BDC Withdrawal") to be treated as a
business development company ("BDC") pursuant to Section 54(c) under the
Investment Company Act of 1940.
SOLICITATION, VOTING AND REVOCABILITY OF CONSENTS
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As of the Record Date, the Company had _______________ shares of common
stock issued and outstanding. Only holders of record of common stock as of the
close of business on the Record Date are entitled to consent to the proposal.
Each share of common stock is entitled to one vote. The shares of common stock
for which properly executed Consents in the accompanying form are received will,
if no contrary instruction is received, be deemed submitted FOR the proposal.
Each consent must have a dated signature of each stockholder who signs the
consent. An undated consent cannot be counted. The time by which the Company
must receive your response to this solicitation (the "Consent Solicitation
Period") is the close of business on _______, 2006. If approved, it is
anticipated that the Company will effect the proposed ECC Vine Acquisition
(Proposal One) on the following business day. If approved, the Conversion
Transaction (Proposal Two) will be effected thereafter at the option of the
holder of the subject indebtedness. The results of voting on Proposal Three will
be taken up by the Board of Directors at a special meeting to be held as soon as
possible following the Company's receipt of the results of voting by the
stockholders on Proposal Three.
Any Consent given pursuant to this solicitation is considered revocable by
the person giving it at any time before it is used by the Company. If, prior to
the earlier of the date on which the Company has received Consents from persons
holding the minimum number of shares of common stock required to approve the
proposals or the end of the Consent Solicitation Period, the Company receives a
written notice of revocation of a Consent or receives a duly executed Consent
bearing a later date, any earlier dated consent will be revoked.
The Company will bear the cost of the solicitation of Consents by the Board
of Directors. The Company may use the services of its executive officers and
directors to solicit consents from stockholders in person and by mail, telephone
and facsimile. Arrangements may also be made with brokers, fiduciaries,
custo0dians and nominees to send Consents, Consent Solicitation Statements and
other material to the beneficial owners of the Company's common stock held of
record by such persons, and the Company may reimburse them for reasonable
out-of-pocket expenses incurred by them in so doing.
APPROVAL OF ECC VINE ACQUISITION
(Proposal 1)
On April __, 2006, the Company entered into an Agreement and Plan of
Reorganization with the sole unit holder of ECC VINE STREET REAL ESTATE
ACQUISITIONS, LLC ("ECC VINE"), a Missouri limited liability company. Under this
agreement, (1) all of the issued and outstanding limited liability company
equity units hares of ECC Vine will be acquired by the Company in exchange for
new restricted common shares of the Company to be issued to the sole unitholder
of ECC Vine, (2) ECC Vine will become a wholly owned subsidiary of the Company,
(3) the former unitholder of ECC Vine will become the largest stockholder of the
Company, holding approximately ___% of the issued and outstanding common shares
(before giving effect to any conversion of Company indebtedness under the
measure outlined in Proposal 2 below), and (4) persons nominated by the sole
unitholder of ECC Vine will assume positions in the management (i.e., board of
directors and officers) of the Company and the former directors and officers of
the Company will resign. This agreement was approved by the Company's Board of
Directors and by the unitholder of ECC Vine. The transaction is intended to be a
reverse acquisition for accounting purposes and a reorganization for income tax
purposes. A copy of the ECC Vine agreement is attached.
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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE "FOR" PROPOSAL 1
APPROVAL OF CONVERSION TRANSACTION
(Proposal 2)
On April 12, 2006, the Company entered into a Securities Purchase Agreement
with Macenta Group, LLC ("Macenta"), a Missouri limited liability company. Under
this agreement, (1) the Company has issued its convertible note (the "Note") in
the original principal amount of $4.5 million, (2) the Note is convertible at
the option of Macenta into common shares of the Company, and (3) any conversion
of the Note that would constitute Macenta the holder of in excess of 19.9% of
the issued and outstanding common shares of the Company must first be approved
by the stockholders of the Company. This agreement was approved by the Company's
Board of Directors, the Note has been issued pending the Company's receipt of
the funds due from Macenta in consideration of the Note.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE "FOR" PROPOSAL 2
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial ownership of ECC
Vine as of March 31, 2006 (i) by each person who is known by it to beneficially
own more than 5% of its equity units; (ii) by each of its officers and
directors; and (iii) by all of its officers and directors as a group:
-------------------------------------- -------------------- ------------------
Name and Address Amount and Nature Percentage of
of Beneficial Owner of Beneficial Owner Class Owned
-------------------------------------- -------------------- ------------------
Ephren W. Taylor II 1.0 Unit 100.0%
-------------------------------------- -------------------- ------------------
Total 1.0 Unit 100.0%
-------------------------------------- -------------------- ------------------
All Directors and Officers as a group
(the persons named above) 1.0 Unit 100.0%
-------------------------------------- -------------------- ------------------
Beneficial Ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Each of the beneficial owners listed above has
direct ownership of and sole voting power and investment power with respect to
the shares of our common stock.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE "FOR" PROPOSAL 2
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APPROVAL OF BDC WITHDRAWAL
(Proposal 3)
BACKGROUND
On December 6, 2004, the Company elected to be regulated as a Business
Development Company ("BDC") as that term is defined in Section 54 of the
Investment Company Act. As a BDC, the Company is subject to the laws and
regulations contained in the Investment Company Act of 1940. As a BDC, the
Company became subject to significant regulation of its activities, as described
below under "Investment Company Act Provisions Applicable to BDC's."
On May 18, 2006, the Board unanimously approved placing a proposal to withdraw
the Company's election to be treated as a BDC before the Company's stockholders,
so that, if approved by the Company's stockholders, the Company might again
conduct business as a regular company rather than as a BDC subject to the
Investment Company Act.
INVESTMENT COMPANY ACT PROVISIONS APPLICABLE TO BDC'S
Generally, to be eligible to elect BDC status, a company must engage in the
business of furnishing capital and offering significant managerial assistance to
companies that do not have ready access to capital through conventional
financial channels. More specifically, in order to qualify as a BDC, a company
must (a) be a domestic company; (b) have registered a class of its securities or
have filed a registration statement with the SEC pursuant to Section 12 of the
Exchange Act; (c) operate for the purpose of investing in the securities of
certain types of eligible portfolio companies, namely less seasoned or emerging
companies and businesses suffering or just recovering from financial distress;
(d) offer to extend significant managerial assistance to such eligible portfolio
companies; and (e) file a proper notice of election with the SEC.
The Investment Company Act also imposes, among others, the following regulations
on BDC's:
o A BDC may not change the nature of its business or fundamental
investment policies without the prior approval of the stockholders;
o A BDC must carry its investments at value if a public trading market
exists for its portfolio securities or fair value if one does not
rather than at cost in its financial reports;
o The issuance of senior equities and debt securities by a BDC is
subject to certain limitations;
o A BDC's right to issue options, rights and warrants to purchase its
stock is restricted;
o A BDC may not engage in certain transactions with affiliates without
obtaining exemptive relief from the SEC;
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o There are prohibitions and restrictions on investing in certain types
of companies, such as brokerage firms, insurance companies and other
investment companies;
o There are limits on the types of assets that a BDC may acquire. A BDC
may not acquire any asset other than "qualifying assets" unless, at
the time the acquisition is made, such "qualifying assets" represent
at least 70% of the value of the BDC's total assets. "Qualifying
Assets" generally include: (i) securities purchased in transactions
not involving any public offering from the issuer of such securities,
which issuer is an eligible portfolio company. An eligible portfolio
company is defined as any issuer that (a) is organized and has its
principal place of business in the United States, (b) is not an
investment company other than a small business investment company
wholly-owned by the BDC, and (c) does not have any class of
publicly-traded securities with respect to which a broker may extend
credit; (ii) securities received in exchange for or distributed with
respect to securities described above, or pursuant to the exercise of
options, warrants or rights relating to such securities; and (iii)
cash, cash items, Government securities, or high quality debt
securities maturing in one year or less from the time of investment. A
BDC may invest in the securities of public companies and other
investments that are not "qualifying assets", but such investments may
not exceed 30% of the BDC's total asset value at the time of such
investment;
o A BDC generally may not issue common stock at a per share price less
than the then-current net asset value of the common stock without the
prior approval of stockholders; and
o A BDC is restricted in its ability to repurchase its shares directly
from stockholders.
SHOULD SHAREHOLDERS NOT APPROVE OF THE BDC WITHDRAWAL
It is the opinion of the Company's board of directors that the costs of
continuing as a BDC outweigh the advantages, given the current plan of business
of the Company. Failure to change the Company's status from a regulated BDC may
result in the following:
o The Company may be constrained in making future acquisitions;
o The Company may face persistent regulatory inquiries into its affairs;
and
o There is a greater probability that the Company will not be able to
retain or attract senior management and directors.
LOSS TO SHAREHOLDERS OF INVESTMENT COMPANY ACT PROTECTIONS
Upon the Company's withdrawal of its election to be treated as a BDC, the
Company would no longer be subject to regulation under the Investment Company
Act, which is designed to protect the interests of investors in investment
companies. Specifically, our stockholders would no longer have the following
protections of the Investment Company Act:
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o Asset coverage ratio that is designed to protect stockholders' value
by having security in an asset. Section 61 of the 1940 Act requires
that a BDC maintain a ratio of assets to senior securities of at least
200%.
o Inability to change the nature of our business so as to cease to be,
or withdraw our election as, a BDC unless authorized by vote of a
"majority of the outstanding voting securities," as defined in the
1940 Act.
o Prohibition from protecting any director or officer against any
liability to the Company or our stockholders arising from willful
malfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such person's office.
o Requirement to provide and maintain a bond issued by a reputable
fidelity insurance company to protect us against larceny and
embezzlement.
o A majority of our directors must be persons who are not interested
persons, as that term is defined in Section 56 of the 1940 Act.
o Loss of certain protections set forth in Section 57 of the 1940 Act,
which requires, in part, the following:
a. Transactions involving controlling or closely affiliated
persons. It shall be unlawful for any person who is related to a
business development company in a manner described in subsection (b)
of this section, acting as principal 1. knowingly to sell any security
or other property to such business development company or to any
company controlled by such business development company, unless such
sale involves solely (A) securities of which the buyer is the issuer,
or (B) securities of which the seller is the issuer and which are part
of a general offering to the holders of a class of its securities; 2.
knowingly to purchase from such business development company or from
any company controlled by such business development company, any
security or other property (except securities of which the seller is
the issuer); 3. knowingly to borrow money or other property from such
business development company or from any company controlled by such
business development company (unless the borrower is controlled by the
lender), except as permitted in section 21(b) [15 USCS ss. 80a-21(b)]
or section 62 [15 USCS ss. 80a-61]; or knowingly to effect any
transaction in which such business development company or a company
controlled by such business development company is a joint or a joint
and several participant with such person in contravention of such
rules and regulations as the Commission may prescribe for the purpose
of limiting or preventing participation by such business development
company or controlled company on a basis less advantageous than that
of such person, except that nothing contained in this paragraph shall
be deemed to preclude any person from acting as manager of any
underwriting syndicate or other group in which such business
development company or controlled company is a participant and
receiving compensation therefor.
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b. Controlling or closely affiliated persons. The provisions of
subsection (a) of this section shall apply to the following persons:
1. Any director, officer, employee, or member of an advisory board of
a business development company or any person (other than the business
development company itself) who is, within the meaning of section
2(a)(3)(C) of this title [15 USCS ss. 80a- 2(a)(3)(C)], an affiliated
person of any such person specified in this paragraph. 2. Any
investment adviser or prooter of, general partner in, principal
underwriter for, or person directly or indirectly either controlling,
controlled by, or under common control with, a business development
company (except the business development company itself and any person
who, if it were not directly or indirectly controlled by the business
development company, would not be directly or indirectly under the
control of a person who controls the business development company), or
any person who is, within the meaning of section 2(a)(3)(C) or (D) [15
USCS ss. 80a-2(a)(3)(C) or (D)], an affiliated person of any such
person specified in this paragraph.
c. Exemption orders. Notwithstanding paragraphs (1), (2), and (3)
of subsection (a), any person may file with the Commission an
application for an order exempting a proposed transaction of the
applicant from one or more provisions of such paragraphs. The
Commission shall grant such application and issue such order of
exemption if evidence establishes that 1. the terms of the proposed
transaction, including the consideration to be paid or received, are
reasonable and fair and do not involve overreaching of the business
development company or its shareholders or partners on the part of any
person concerned; 2. the proposed transaction is consistent with the
policy of the business development company as recited in the filings
made by such company with the Commission under the Securities Act of
1933, its registration statement and reports filed under the
Securities Exchange Act of 1934, and its reports to shareholders or
partners; and 3. the proposed transaction is consistent with the
general purposes of this title.
d. Transactions involving non-controlling shareholders or
affiliated persons. It shall be unlawful for any person who is related
to a business development company in the manner described in
subsection (e) of this section and who is not subject to the
prohibitions of subsection (a) of this section, acting as principal-
1. knowingly to sell any security or other property to such business
development company or to any company controlled by such business
development company, unless such sale involves solely (A) securities
of which the buyer is the issuer, or (B) securities of which the
seller is the issuer and which are part of a general offering to the
holders of a class of its securities; 2. knowingly to purchase from
such business development company or from any company controlled by
such business development company, any security or other property
(except securities of which the seller is the issuer); 3. knowingly to
borrow money or other property from such business development company
or from any company controlled by such business development company
9
(unless the borrower is controlled by the lender), except as permitted
in section 21(b) [15 USCS ss.80a-21(b)]; or 4. knowingly to effect any
transaction in which such business development company or a company
controlled by such business development company is a joint or a joint
and several participant with such affiliated person in contravention
of such rules and regulations as the Commission may prescribe for the
purpose of limiting or preventing participation by such business
development company or controlled company on a basis less advantageous
than that of such affiliated person, except that nothing contained in
this paragraph shall be deemed to preclude any person from acting as
manager of any underwriting syndicate or other group in which such
business development company or controlled company is a participant
and receiving compensation therefor.
e. Non-controlling shareholders or affiliated persons; executive
officer. The provisions of subsection (d) of this section shall apply
to the following persons: 1. Any person (A) who is, within the meaning
of section 2(a)(3)(A)[15 USCS ss.80a-2(a)(3)(A)], an affiliated person
of a business development company, (B) who is an executive officer or
a director of, or general partner in, any such affiliated person, or
(C) who directly or indirectly either controls, is controlled by, or
is under common control with, such affiliated person. 2. Any person
who is an affiliated person of a director, officer, employee,
investment adviser, member of an advisory board or promoter of,
principal underwriter for, general partner in, or an affiliated person
of any person directly or indirectly either controlling or under
common control with a business development company (except the
business development company itself and any person who, if it were not
directly or indirectly controlled by the business development company,
would not be directly or indirectly under the control of a person who
controls the business development company). For purposes of this
subsection, the term "executive officer" means the president,
secretary, treasurer, any vice president in charge of a principal
business function, and any other person who performs similar
policymaking functions.
f. Approval of proposed transactions. Notwithstanding subsection
(d) of this section, a person described in subsection (e) may engage
in a proposed transaction described in subsection (d) if such proposed
transaction is approved by the required majority (as defined in
subsection (o)) of the directors of or general partners in the
business development company on the basis that 1. the terms thereof,
including the consideration to be paid or received, are reasonable and
fair to the shareholders or partners of the business development
company and do not involve overreaching of such company or its
shareholders or partners on the part of any person concerned; 2. the
proposed transaction is consistent with the interests of the
shareholders or partners of the business development company and is
10
consistent with the policy of such company as recited in filings made
by such company with the Commission under the Securities Act of 1933,
its registration statement and reports filed under the Securities
Exchange Act of 1934, and its reports to shareholders or partners; and
3. the directors or general partners record in their minutes and
preserve in their records, for such periods as if such records were
required to be maintained pursuant to section 31(a) [15 USCS
ss.80a-30(a)], a description of such transaction, their findings, the
information or materials upon which their findings were based, and the
basis therefor.
g. Transactions in the ordinary course of business.
Notwithstanding subsection (a) or (d), a person may, in the ordinary
course of business, sell to or purchase from any company merchandise
or may enter into a lessor-lessee relationship with any person and
furnish the services incident thereto.
h. Inquiry procedures. The directors of or general partners in
any business development company shall adopt, and periodically review
and update as appropriate, procedures reasonably designed to ensure
that reasonable inquiry is made, prior to the consummation of any
transaction in which such business development company or a company
controlled by such business development company proposes to
participate, with respect to the possible involvement in the
transaction of persons described in subsections (b) and (e) of this
section.
o The loss of protections set forth in Section 61 of the 1940 Act, which
requires the following:
a. Exceptions for business development company. Notwithstanding
the exemption set forth in section 6(f) [15 USCS ss. 80a-6(f)],
section 18 [15 USCS ss. 80a-18] shall apply to a business development
company to the same extent as if it were a registered closed-end
investment company, except as follows: 1. The asset coverage
requirements of section 18(a)(1)(A) and (B)[15 USCS
ss.80a-18(a)(1)(A), (B)] applicable to business development companies
shall be 200 per centum. 2. Notwithstanding section 18(c) [15 USCS
ss.80a-18(c)], a business development company may issue more than one
class of senior security representing indebtedness. 3. Notwithstanding
section 18(d) [15 USCS ss.80a-18(d)]- A. a business development
company may issue warrants, options, or rights to subscribe or convert
to voting securities of such company, accompanied by securities, if i.
such warrants, options, or rights expire by their terms within ten
years; ii such warrants, options, or rights are not separately
transferable unless no class of such warrants, options, or rights and
the securities accompanying them has been publicly distributed; iii.
the exercise or conversion price is not less than the current market
value at the date of issuance, or if no such market value exists, the
current net asset value of such voting securities; and iv. the
proposal to issue such securities is authorized by the shareholders or
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partners of such business development company, and such issuance is
approved by the required majority (as defined in section 57(o) [15
USCS ss. 80a-56(o)]) of the directors of or general partners in such
company on the basis that such issuance is in the best interests of
such company and its shareholders or partners;
b. a business development company may issue, to its directors,
officers, employees, and general partners, warrants, options, and
rights to purchase voting securities of such company pursuant to an
executive compensation plan, if i. (I) in the case of warrants,
options, or rights issued to any officer or employee of such business
development company (including any officer or employee who is also a
director of such company), such securities satisfy the conditions in
clauses (i), (iii), and (iv) of subparagraph (A); or (II) in the case
of warrants, options, or rights issued to any director of such
business development company who is not also an officer or employee of
such company, or to any general partner in such company, the proposal
to issue such securities satisfies the conditions in clauses (i) and
(iii) of subparagraph (A) is authorized by the shareholders or
partners of such company, and is approved by order of the Commission,
upon application, terms of the proposal are fair and reasonable and do
not involve overreaching of such company or its shareholders or
partners; ii. such securities are not transferable except for
disposition by gift, will, or intestacy; iii. no investment adviser of
such business development company receives any compensation described
in paragraph (1) of section 205 of title II of this Act except to the
extent permitted by clause (A) or (B) of that section; and iv. such
business development company does not have a profit-sharing plan
described in section 57(n) [15 USCS ss. 80a-56(n)]; and
c. a business development company may issue warrants, options, or
rights to subscribe to, convert to, or purchase voting securities not
accompanied by securities, if i. such warrants, options, or rights
satisfy the conditions in clauses (i) and (iii) of subparagraph (A);
and ii. the proposal to issue such warrants, options, or rights is
authorized by the shareholders or partners of such business
development company, and such issuance is approved by the required
majority (as defined in section 57(o) [15 USCS ss. 80a-56(o)]) of the
directors of or general partners in such company on the basis that
such issuance is in the best interests of the company and its
shareholders or partners. Notwithstanding this paragraph, the amount
of voting securities that would result from the exercise of all
outstanding warrants, options, and rights at the time of issuance
shall not exceed 25 per centum of the outstanding voting securities of
the business development company, except that if the amount of voting
securities that would result from the exercise of all outstanding
warrants, options, and rights issued to such company's directors,
officers, employees, and general partners pursuant to any executive
12
compensation plan meeting the requirements of subparagraph (B) of this
paragraph would exceed 15 per centum of the outstanding voting
securities of such company, then the total amount of voting securities
that would result from the exercise of all outstanding warrants,
options, and rights at the time of issuance shall not exceed 20 per
centum of the outstanding voting securities of such company
d. For purposes of measuring the asset coverage requirements of
section 18(a) [15 USCS ss.80a-18(a)], a senior security created by the
guarantee by a business development company of indebtedness issued by
another company shall be the amount of the maximum potential liability
less the fair market value of the net unencumbered assets (plus the
indebtedness which has been guaranteed) available in the borrowing
company whose debts have been guaranteed, except that a guarantee
issued by a business development company of indebtedness issued by a
company which is a wholly-owned subsidiary of the business development
company and is licensed as a small business investment company under
the Small Business Investment Act of 1958 shall not be deemed to be a
senior security of such business development company for purposes of
section 18(a) [15 USCS ss.80a-18(a)] if the amount of the indebtedness
at the time of its issuance by the borrowing company is itself taken
fully into account as a liability by such business development
company, as if it were issued by such business development company, in
determining whether such business development company, at that time,
satisfies the asset coverage requirements of section 18(a) [15 USCS
ss. 80a-18(a)].
d. Compliance. A business development company shall comply with
the provisions of this section at the time it becomes subject to
sections 55 through 65 [15 USCS ss.80a-54-80a-64], as if it were
issuing a security of each class which it has outstanding at such
time.
o Loss of the protections set forth in Section 63 of the 1940 Act, which
requires the following:
Notwithstanding the exemption set forth in section 6(f) [15 USCS
ss.80a-6(f)], section 23 [15 USCS ss.80a-23] shall apply to a business
development company to the same extent as if it were a registered closed-end
investment company, except as follows:
1. The prohibitions of section 23(a)(2) [15 USCS ss.80a-23(a)(2)]
shall not apply to any company which (A) is a wholly-owned subsidiary
of, or directly or indirectly controlled by, a business development
company, and (B) immediately after the issuance of any of its
securities for property other than cash or securities, will not be an
investment company within the meaning of section 3(a) [15 USCS
ss.80a-3(a)].
2. Notwithstanding the provisions of section 23(b) [15 USCS
ss.80a-23(b)], a business development company may sell any common
13
stock of which it is the issuer at a price below the current net asset
value of such stock, and may sell warrants, options, or rights to
acquire any such common stock at a price below the current net asset
value of such stock, if A. the holders of a majority of such business
development company's outstanding voting securities, and the holders
of a majority of such company's outstanding voting securities that are
not affiliated persons of such company, approved such company's policy
and practice of making such sales of securities at the last annual
meeting of shareholders or partners within one year immediately prior
to any such sale, except that the shareholder approval requirements of
this subparagraph shall not apply to the initial public offering by a
business development company of its securities; B. a required majority
(as defined in section 57(o) [15 USCS ss.80a-56(o)]) of the directors
of or general partners in such business development company have
determined that any such sale would be in the best interests of such
company and its shareholders or partners; and C. a required majority
(as defined in section 57(o) [15 USCS ss.80a-56(o)]) of the directors
of or general partners in such business development company, in
consultation with the underwriter or underwriters of the offering if
it is to be underwritten, have determined in good faith, and as of a
time immediately prior to the first solicitation by or on behalf of
such company of firm commitments to purchase such securities or
immediately prior to the issuance of such securities, that the price
at which such securities are to be sold is not less than a price which
closely approximates the market value of those securities, less any
distributing commission or discount.
3. A business development company may sell any common stock of
which it is the issuer at a price below the current net asset value of
such stock upon the exercise of any warrant, option, or right issued
in accordance with section 61(a)(3) [15 USCS ss.80a-60(a)(3)].
By withdrawing its election, the Company returns to a standard operating
company. The Company will continue as a reporting public company and will
continue to be subject to the Securities Exchange Act of 1934; however, it will
no longer be subject to the 1940 Act.
REASONS FOR THE WITHDRAWAL OF THE COMPANY AS A BDC
Given the investment focus, asset mix, business and operations of the Company
resulting from the implementation of its business plan, the Board believed that
it was prudent for the Company to withdraw its election as a BDC as soon as
practicable to eliminate many of the regulatory, financial reporting and other
requirements and restrictions imposed by the Investment Company Act discussed
above. For example:
Regulatory Scrutiny. Management of the Company believes, based on
communications with staff of the Securities and Exchange Commission, that the
Commission disfavors the BDC model and will, for possibly years to come, be
concentrating audit and enforcement efforts on BDC's for the sole purpose of
harassing and frustrating the management of such companies and compelling them
to recommend to the shareholders of their companies that the BDC election be
abandoned.
14
Issuance of Securities other than Common Stock. BDC's are limited or
restricted as to the type of securities other than common stock which they may
issue. The issuance of convertible securities and rights to acquire shares of
common stock (e.g., warrants and options) is restricted primarily because of the
statutory interest in facilitating computation of the Company's net asset value
per share. In addition, issuances of senior debt and senior equity securities
require that certain "asset coverage" tests and other criteria be satisfied on a
continuing basis. This significantly affects the use of these types of
securities because asset coverage continuously changes by variations in market
prices of the Company's investment securities. Operating companies, including
holding companies operating through subsidiaries, benefit from having maximum
flexibility to raise capital through various financing structures and means. The
Board believes that it may be useful to have the ability to raise capital
through various financing structures and means in order to make further
acquisitions.
Issuance of Common Stock. By virtue of its BDC election, the Company may
not issue new shares of Common Stock at a per share price less than the then net
asset value per share of outstanding Common Stock without prior stockholder
approval. Historically, the market prices for BDC stocks have been lower than
net asset value, making it much more difficult for BDC's to raise equity
capital. While this restriction provides stockholders of an investment company
with appropriate and meaningful protection against dilution of their indirect
investment interest in portfolio securities, the Company's Board believes that
this would essentially be irrelevant to the interests of investors in an
operating company, who look to its consolidated earnings stream and cash flow
from operations for investment value.
Compensation of Executives. The Investment Company Act limits the extent to
which and the circumstances under which executives of a BDC may be paid
compensation other than in the form of salary payable in cash. For example, the
issuance of Restricted Stock is generally prohibited. However, the Board
believes that by achieving greater flexibility in the structuring of employee
compensation packages, the Company will be able to attract and retain additional
talented and qualified personnel and to more fairly reward and more effectively
motivate its personnel in accordance with industry practice.
Related Party Transactions. The Investment Company Act significantly
restricts among other things (a) transactions involving transfers of property in
either direction between the Company and most affiliated persons of the Company
(or the affiliated persons of such affiliated persons) and (b) transactions
between the Company and such affiliated persons (or the affiliated persons of
such affiliated persons) participating jointly on the one hand and third parties
on the other. To overcome these investment company restrictions, which are
somewhat relaxed as applied to BDC's, requires SEC approval, which is often a
time-consuming and expensive procedure, regardless of the intrinsic fairness of
such transactions or the approval thereof by disinterested directors of the
Company. The Company believes situations may arise in which a corporation's best
interests are served by such transactions. The Board believes that stockholders
are adequately protected by the fiduciary obligations imposed on the Company's
directors under state corporate law, which generally requires that the
15
disinterested members of the Board determine fairness to the Company of an
interested-party transaction (after full disclosure of all material facts
regarding the transaction and the interested party's relationship with the
Company is made), and SEC disclosure rules, which require the Company to include
specified disclosure regarding transactions with related parties in its SEC
filings.
Eligible Investments. As a BDC, the Company may not acquire any asset other
than "Qualifying Assets" unless, at the time the acquisition is made, Qualifying
Assets represent at least 70% of the value of the total assets (the "70% TEST").
Because of the limitations on the type of investments the Company may make, as
well as the Company's total asset composition, the Company may be foreclosed
from participating in prudent investment opportunities and otherwise lack
diversification.
Compliance Expense. The Company must incur significant general and
administrative costs in order to comply with the regulations imposed by the
Investment Company Act. Management devotes considerable time to issues relating
to compliance with the Investment Company Act and the Company incurs substantial
legal and accounting fees with respect to such matters. The costs of this
regulation are borne by, and the protections of this regulation are for the
benefit of, the stockholders of the Company. Resources now being expended on
Investment Company Act compliance matters could possibly be utilized more
productively if devoted to the operation of the Company's business. The costs of
compliance with the Investment Company Act are substantial, especially when
compared to the Company's relative size and net income, and it could therefore
be in the financial interests of the stockholders for the Company to cease to be
regulated under the Investment Company Act altogether.
The Board believes that the issues identified above, which could have the effect
of dampening market interest in the Company and hindering its financial growth
in the future, are significant and best resolved by a vote of the stockholders.
Accordingly, a majority of the members of the Board has determined to recommend
to the shareholders that the challenges represented by the Company's need to
comply with the many requirements and restrictions associated with operating as
a BDC under the Investment Company Act, be resolved by a withdrawal of the
Company's election to be treated as a BDC.
EFFECT OF BDC WITHDRAWAL ON THE COMPANY'S FINANCIAL STATEMENTS
With the withdrawal of the Company's election to be treated as a BDC, and it
then becoming an operating company, the fundamental nature of the Company's
business changes from that of investing in a portfolio of securities, with the
goal of achieving gains on appreciation and dividend income, to that of being
actively engaged in the ownership and development of real estate projects and
properties, with the goal of generating income from the operations of those
properties.
The election to withdraw the Company as a BDC under the Investment Company Act
results in a significant change in the Company's required method of accounting.
BDC financial statement presentation and accounting utilizes the value method of
accounting used by investment companies, which allows BDC's to recognize income
and value their investments at market value as opposed to historical cost. As an
operating company, the required financial statement presentation and accounting
for securities held will be either fair value or historical cost methods of
16
accounting, depending on the classification of the investment and the Company's
intent with respect to the period of time it intends to hold the investment. As
an operating company, the Company must consolidate its financial statements with
subsidiaries, thus eliminating the portfolio company reporting benefits
available to BDC's.
The Company does not believe that the withdrawal of its election to be treated
as a BDC will have any impact on its federal income tax status, since it has
never elected to be treated as a regulated investment company under Subchapter M
of the Internal Revenue Code. (Electing treatment as a regulated investment
company under Subchapter M generally allows a qualified investment company to
avoid paying corporate level federal income tax on income it distributes to its
stockholders.) Instead, the Company has always been subject to corporate level
federal income tax on its income (without regard to any distributions it makes
to its stockholders) as a "regular" corporation under Subchapter C of the Code.
There will be no change in its federal income tax status as a result of becoming
an operating company.
OPERATING COMPANY
As an operating company, the Company (i) is not limited in the amount of
excessive leverage that it could incur, (ii) is permitted to issue more types of
securities to finance its activities, and (iii) is not limited in the amounts or
types of compensation that it pays to executives.
STOCKHOLDER APPROVAL: VOTE REQUIRED
Section 58 of the Investment Company Act provides that a BDC may not
deregister as a BDC unless it is authorized to do so by a majority of its issued
and outstanding voting securities.
Proposal No. 3 (the approval and authorization of the Board to withdraw the
Company's election to be treated as a BDC pursuant to Section 54(c) under
Investment Company Act) will be approved if a "majority of the outstanding
shares" of the Common Stock are voted "FOR" the proposal. Abstentions and broker
non-votes will also have the same effect as votes "AGAINST" Proposal No. 3.
A MAJORITY OF THE BOARD OF DIRECTORS RECOMMENDS
THAT YOU VOTE "FOR" PROPOSAL 3
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of March 31, 2006 by (a) each of the
Company's directors and executive officers, (b) all of the Company's directors
and executive officers as a group and (c) each person known by the Company to be
the beneficial owner of more than five percent of its outstanding common stock.
17
- --------------------------------------- --------------------- ------------------
Name of Number of Shares of Percent of Common
Beneficial Owner Common Stock Owned Stock Owned
- --------------------------------------- --------------------- ------------------
Gary Borglund (President and director) 37,500 .77%
- ---------------------------------------
Ephren W. Taylor II 0 0%
- --------------------------------------- --------------------- ------------------
All officers and directors as a group 40,500 .78%
(2 person)
- --------------------------------------- --------------------- ------------------
IF YOU HAVE ANY QUESTIONS REGARDING THIS CONSENT SOLICIATION
STATEMENT AND/OR THE PROPOSAL, PLEASE CONTACT:
Gary Borglund
Chief executive Officer
CITY CAPITAL CORPORATION
2535 Pilot Knob Road, Suite 118
Mendota Heights MN 55120
(651) 452-1606
18
CITY CAPITAL CORPORATION
2535 Pilot Knob Road, Suite 118
Mendota Heights MN 55120
CONSENT
THIS CONSENT IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF CITY CAPITAL CORPORATION
The undersigned stockholder of CITY CAPITAL CORPORATION (the "Company")
hereby consents, pursuant to Section 228(a) of the Delaware General Corporation
Law, with respect to all shares of common stock, par value $.001 per share, of
the Company held by the undersigned, to the following actions without a meeting,
without prior notice and without a vote.
Proposal (1): ECC Vine Acquisition. To approve a transaction (the "ECC Vine
Acquisition") whereby control of the Company would be acquired by the sole
unitholder of ECC Vine Street Real Estate Acquisitions, LLC ("ECC Vine"), a
Missouri limited liability company, pursuant to the terms of a reorganization
agreement (the "Agreement") more particularly described hereinafter; and
CONSENT______ CONSENT WITHHELD______ ABSTAIN_____
If no space is marked above with respect to Proposal 1, the undersigned will be
deemed to consent to such proposal.
Proposal (2): Conversion Transaction. To approve the conversion to equity
(the "Conversion Transaction") of the Company's indebtedness under an issued
convertible note such that the holder of the indebtedness will receive and hold
equity of the Company in excess of 20% of the total issued and outstanding
common stock of the Company, as more particularly described hereinafter; and
CONSENT______ CONSENT WITHHELD______ ABSTAIN_____
If no space is marked above with respect to Proposal 2, the undersigned will be
deemed to consent to such proposal.
Proposal (3): BDC Withdrawal. To consider and vote upon a proposal to
authorize the Board to withdraw the Company's election (the "BDC Withdrawal") to
be treated as a business development company ("BDC") pursuant to Section 54(c)
under the Investment Company Act of 1940.
CONSENT______ CONSENT WITHHELD______ ABSTAIN_____
If no space is marked above with respect to Proposal 3, the undersigned will be
deemed to consent to such proposal.
19
PLEASE SIGN, DATE AND RETURN THIS CONSENT PROMPTLY, USING THE ENCLOSED ENVELOPE.
JOINT OWNERS SHOULD EACH SIGN PERSONALLY. IF SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE INCLUDE YOUR FULL TITLE. CORPORATE
CONSENTS MUST BE SIGNED BY AN AUTHORIZED OFFICER.
Date:________________, 2006
(Date is Mandatory for all Consents)
________________________________________________________
(Printed Name of Stockholder)
________________________________________________________
(Signature of Stockholder)
________________________________________________________
(Signature of Stockholder, if held jointly)
Attachment
AGREEMENT AND PLAN OF REORGANIZATION
20
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT ("AGREEMENT") is made this 19 day of April,
2006, by and between CITY CAPITAL CORPORATION, a Nevada corporation, ("CCCN"),
and EPHREN CAPITAL CORPORATION (the "ECC Unit Holder"), a Missouri corporation
and the sole holder of issued and outstanding limited liability company units of
ECC Vine Street Real Estate Acquisitions, LLC ("ECC"), a Missouri limited
liability company dba "ECC JAZZ DISTRICT ACQUISITIONS, LLC", pursuant to which
all of the issued and outstanding capital units of ECC will be exchanged for a
quantity of newly issued common shares of the Company. In this Agreement, the
parties are at times referred to collectively as the "Parties" and individually
as a "Party."
WITNESSETH
WHEREAS, CCCN is a publicly traded company whose common stock, par
value $.001 per share (the "CCCN Common Stock") is quoted on the OTC Bulletin
Board under the symbol "CCCN," and
WHEREAS, the ECC Unit Holder owns all of the issued and outstanding
units of ECC (the "ECC Units"), and
WHEREAS, the parties desire that CCCN acquire all of the ECC Units from
the ECC Unit Holder solely in exchange for an aggregate of 6,731,364 newly
issued shares of common stock of CCCN (the "CCCN Exchange Shares") pursuant to
the terms and conditions set forth in this Agreement, and
WHEREAS, the Parties intend that the transaction contemplated herein
(the "Transaction") qualifies as a reorganization and tax-free exchange under
Section 368(a) of the Internal Revenue Code of 1986, as amended, and
WHEREAS, immediately following the Closing (as hereinafter defined),
there will be issued and outstanding an aggregate of 11,569,895 shares of CCCN
Common Stock, including the CCCN Exchange Shares to be issued to the ECC Unit
Holder, and
WHEREAS, following the Closing, ECC will become a wholly-owned
subsidiary of CCCN.
WHEREAS, immediately following the consummation of the Transaction, the
CCCN Exchange Shares will represent between approximately Fifty-Seven Percent
(57%) of the total outstanding Common Stock of CCCN, and
AGREEMENT
NOW, THEREFORE, on the stated premises and for and in consideration of
the foregoing recitals, which are hereby incorporated by reference, the mutual
covenants and agreements hereinafter set forth and the mutual benefits to the
Parties to be derived herefrom and for other good and valuable consideration,
the sufficiency and receipt of which are hereby acknowledged, the Parties hereto
agree as follows:
EXCHANGE
1.1 The Exchange. At the Closing (as hereinafter defined), each ECC
Unit issued and outstanding immediately prior to the Closing Date shall be
exchanged for share(s) of CCCN Common Stock. The aggregate number of shares of
CCCN Stock exchanged for all of the ECC Units pursuant to this Agreement shall
be 6,731,364. From and after the Closing Date, the ECC Unit Holder shall no
longer own any ECC Units, and the membership certificate(s) formerly
representing ECC Units shall represent the CCCN Exchange Shares issuable in
exchange therefor pursuant to this Agreement.
1.2 No Dilution. CCCN shall neither effect, nor fix any record date
with respect to, any stock split, stock dividend, reverse stock split,
recapitalization, or similar change in the CCCN Stock between the date of this
Agreement and the Effective Time.
1.3 Closing. The closing ("Closing") of the Transaction shall occur no
later than three (3) business days after each of the closing conditions set
forth in Articles V and VI have been satisfied or waived (the "Closing Date").
1.4 Closing Events. At the Closing, each of the respective Parties
hereto shall execute, acknowledge, and deliver (or shall cause to be executed,
acknowledged, and delivered) any and all stock certificates, officers'
certificates, opinions, financial statements, disclosures, agreements,
resolutions, rulings, or other instruments required by this Agreement to be so
delivered at or prior to the Closing, and the documents and certificates
provided in Sections 5.2, 5.4, 6.2, 6.4 and 6.5, together with such other items
as may be reasonably requested by the Parties hereto and their respective legal
counsel in order to effectuate or evidence the Transaction. If agreed to by the
Parties, the Closing may take place through the exchange of documents (other
than the exchange of stock certificates) by efax, fax, email and/or express
courier. At the Closing, the CCCN Exchange Shares shall be issued in the names
and denominations provided by the ECC Unit Holder.
1.5 Standstill.
(a) Until the earlier of the Closing or April 28, 2006 (the
"No Shop Period"), neither ECC nor the ECC Unit Holder will (i) solicit or
encourage any offer or enter into any agreement or other understanding, whether
written or oral, for the sale, transfer or other disposition of any capital
stock or assets of ECC to or with any other entity or person, except as
contemplated by the Transaction, other than sales of goods and services by ECC
in the ordinary course of its business; (ii) entertain or pursue any unsolicited
communication, offer or proposal for any such sale, transfer or other
disposition; or (iii) furnish to any person or entity (other than CCCN and its
authorized agents and representatives) any nonpublic information concerning ECC
or its business, financial affairs or prospects for the purpose or with the
intent of permitting such person or entity to evaluate a possible acquisition of
any capital stock or assets of ECC. If either ECC or the ECC Unit Holder shall
receive any unsolicited communication or offer, ECC or the ECC Unit Holder, as
applicable, shall immediately notify CCCN of the receipt of such communication
or offer.
(b) During the No-Shop Period, CCCN will not (i) solicit or
encourage any offer or enter into any agreement or other understanding, whether
written or oral, for the sale, transfer or other disposition of any capital
stock or assets of CCCN to or with any other entity or person, except as
contemplated herein, other than sales of goods and services by CCCN in the
ordinary course of its business; (ii) entertain or pursue any unsolicited
communication, offer or proposal for any such sale, transfer or other
disposition; or (iii) furnish to any person or entity (other than ECC, and its
authorized agents and representatives) any nonpublic information concerning CCCN
or its business, financial affairs or prospects for the purpose or with the
intent of permitting such person or entity to evaluate a possible acquisition of
any capital stock or assets of CCCN. If either CCCN or any of CCCN's
stockholders shall receive any unsolicited communication or offer, CCCN or
CCCN's stockholders, as applicable, shall immediately notify the ECC Unit Holder
of the receipt of such communication or offer.
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF ECC UNIT HOLDER
As an inducement to, and to obtain the reliance of CCCN, the ECC Unit
Holder represents and warrants to CCCN as follows:
2.1 Organization. ECC is a limited liability company duly organized,
validly existing, and in good standing under the laws of the State of Missouri.
ECC has the power and is duly authorized, qualified, franchised, and licensed
under all applicable laws, regulations, ordinances, and orders of public
authorities to own all of its properties and assets and to carry on its business
in all material respects as it is now being conducted, including qualification
to do business as a foreign corporation in jurisdictions in which the character
and location of the assets owned by it or the nature of the business transacted
by it requires qualification. The execution and delivery of this Agreement does
not, and the consummation of the Transaction in accordance with the terms hereof
will not, violate any provision of ECC's organizational documents. ECC has taken
all action required by laws, its articles of incorporation, certificate of
business registration, or otherwise to authorize the execution and delivery of
this Agreement. ECC has full power, authority, and legal right and has taken or
will take all action required by law, its organizational documents, and
otherwise to consummate the Transaction.
2.2 Capitalization. All issued and outstanding ECC Units are legally
issued, fully paid, and non-assessable and were not issued in violation of the
pre-emptive or other rights of any person.
2.3 Subsidiaries and Predecessor Corporations. ECC does not have any
subsidiaries and does not own, beneficially or of record, any shares or other
equity interests of any other corporation or entity.
2.4 Financial Statements.
(a) On or before the Closing Date (the "Audit Period"), ECC
shall have delivered to CCCN (i) audited financial statements and notes thereto
covering its fiscal years ending December 31, 2005 and 2004, including income
statements, balance sheets and statements of cash flow and equity for such
fiscal years then ended (the "ECC Financial Statements").
(b) ECC has filed all local income tax returns required to be
filed by it from its inception to the date hereof. All such returns are complete
and accurate in all material respects. ECC has no liabilities with respect to
the payment of federal, county, local, or other taxes (including any
deficiencies, interest, or penalties), except for taxes accrued but not yet due
and payable, for which ECC may be liable in its own right or as a transferee of
the assets of, or as a successor to, any other corporation or entity.
(c) No deficiency for any taxes has been proposed, asserted or
assessed against ECC. There has been no tax audit, nor has there been any notice
to ECC by any taxing authority regarding any such tax audit, or, to the
knowledge of ECC, is any such tax audit threatened with regard to any taxes or
ECC tax returns. ECC does not expect the assessment of any additional taxes of
ECC for any period prior to the date hereof and has no knowledge of any
unresolved questions concerning the liability for taxes of ECC.
(d) The books and records, financial and otherwise, of ECC are
in all material respects complete and correct and have been maintained in
accordance with good business and accounting practices.
2.5 Information. The information concerning ECC set forth in this
Agreement and the ECC Information are and will be complete and accurate in all
material respects and does not contain any untrue statement of a material fact
or omit to state a material fact required to make the statements made, in light
of the circumstances under which they were made, nor misleading as of the date
hereof and as of the Closing Date.
2.6 Common Stock Equivalents. There are no existing options, warrants,
calls, commitments of any character or other common stock equivalents relating
to any authorized but un-issued ECC Units.
2.7 Absence of Certain Changes or Events. Except as set forth in this
Agreement or the ECC Information, since the date of the ECC Financial
Statements:
(a) except in the normal course of business, there has not
been (i) any material adverse change in the business, operations, properties,
assets, or condition of ECC; or (ii) any damage, destruction, or loss to ECC
(whether or not covered by insurance) materially and adversely affecting the
business, operations, properties, assets, or condition of ECC;
(b) ECC has not (i) borrowed or agreed to borrow any funds or
incurred, or become subject to, any material obligation or liability (absolute
or contingent) not otherwise in the ordinary course of business, and except for
capital raised by issuance of debt or equity in a private placement or other
capital raising transaction deemed advisable by ECC; (ii) paid any material
obligation or liability not otherwise in the ordinary course of business
(absolute or contingent) other than current liabilities reflected in or shown on
the most recent ECC consolidated balance sheet, and current liabilities incurred
since that date in the ordinary course of business; (iii) sold or transferred,
or agreed to sell or transfer, any of its assets, properties, or rights not
otherwise in the ordinary course of business (except assets, properties, or
rights not used or useful in its business which, in the aggregate have a value
of less than $50,000), or canceled, or agreed to cancel, any debts or claims
(except debts or claims which in the aggregate are of a value of less than
$50,000); (iv) made or permitted any amendment or termination of any contract,
agreement, or license to which they are a party not otherwise in the ordinary
course of business if such amendment or termination is material, considering the
business of ECC; or (v) issued, delivered, or agreed to issue or deliver any
stock, bonds or other corporate securities including debentures (whether
authorized and unissued or held as treasury stock).
(c) such imperfections of title and easements as do not and
will not materially detract from or interfere with the present or proposed use
of the properties subject thereto or affected thereby or otherwise materially
impair present business operations on such properties.
2.8 Litigation and Proceedings. Except as set forth in the ECC
Information, there are no actions, suits, proceedings, or investigations pending
or, to the knowledge of ECC, threatened by or against ECC, or affecting ECC or
its properties, at law or in equity, before any court or other governmental
agency or instrumentality, domestic or foreign, or before any arbitrator of any
kind.
2.9 No Conflict With Other Instruments. The execution of this Agreement
and the consummation of the Transaction will not result in the breach of any
term or provision of, or constitute an event of default under, any material
indenture, mortgage, deed of trust, or other material contract, agreement, or
instrument to which ECC is a party or to which any of its properties or
operations are subject.
2.10 Contracts. ECC has provided, or will provide CCCN, copies of all
material contracts, agreements, franchises, license agreements, or other
commitments to which ECC is a party or by which it or any of its assets,
products, technology, or properties are bound.
2.11 Compliance With Laws and Regulations. ECC has complied with all
applicable statutes and regulations of any national, county, or other
governmental entity or agency thereof, except to the extent that noncompliance
would not materially and adversely affect the business, operations, properties,
assets, or condition of ECC, or except to the extent that noncompliance would
not result in the incurrence of any material liability for ECC.
2.12 Approval of Agreement. The management of ECC (the "ECC
Management") and the ECC Unit Holder have approved the execution and delivery of
this Agreement by the ECC Unit Holders, and have approved the Transaction.
2.13 ECC Information. ECC will deliver, as soon as practicable, the
following information, which are collectively referred to as the "ECC
Information," all certified by the chief executive officer of ECC as complete,
true, and correct:
(a) Complete and correct copies of the organizational
documents, as amended, of ECC in effect as of the date of this Agreement, and
(b) True and correct copies of all material contracts,
agreements, or other instruments to which ECC is a party or by which it or its
properties are bound, specifically including all contracts, agreements, or
arrangements referred to in Section 2.10.
2.14 Title and Related Matters. ECC has good and marketable title to
all of its properties, interest in properties, and assets, real and personal,
which are reflected in the ECC Financial Statements or acquired after that date
(except properties, interest in properties, and assets sold or otherwise
disposed of since such date in the ordinary course of business), free and clear
of all liens, pledges, charges, or encumbrances except:
(a) statutory liens or claims not yet delinquent;
(b) such imperfections of title and easements as do not and
will not materially detract from or interfere with the present or proposed use
of the properties subject thereto or affected thereby or otherwise materially
impair present business operations on such properties; and
(c) as described in the ECC Information.
2.15 Governmental Authorizations. ECC has all licenses, franchises,
permits, and other government authorizations, that are legally required to
enable it to conduct its business operations in all material respects as
conducted on the date hereof. Except for compliance with federal and state
securities or corporation laws, as hereinafter provided, no authorization,
approval, consent, or order of, or registration, declaration, or filing with,
any court or other governmental body is required in connection with the
execution and delivery by ECC of this Agreement and the consummation by ECC of
the Transaction.
2.16 Continuity of Business Enterprises. ECC has no commitment or
present intention to liquidate ECC or sell or otherwise dispose of a material
portion of its business or assets following the consummation of the Transaction.
2.17 Ownership of ECC Units. The ECC Unit Holder is the legal and
beneficial owner of 100% of the ECC Units, free and clear of any claims,
charges, equities, liens, security interests, and encumbrances whatsoever, and
the ECC Unit Holder has full right, power, and authority to transfer, assign,
convey, and deliver his ECC Units; and delivery of such ECC Units at the Closing
will convey to CCCN good and marketable title to such ECC Units, free and clear
of any and all claims, charges, equities, liens, security interests, and
encumbrances whatsoever.
2.18 Brokers. The ECC Unit Holder has not entered into any contract
with any person, firm or other entity that would obligate ECC or CCCN to pay any
commission, brokerage or finder's fee in connection with the Transaction.
2.19 Nominees. During the past five years, no event listed in
Sub-paragraphs (1) through (4) of Subparagraph (d) of Item 401 of Regulation S-B
has occurred with respect to any of the nominees of the ECC Unit Holder (the
"Nominees") to serve as CCCN's directors and officers following the Closing
which is material to an evaluation of the ability or integrity of such Nominee.
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF CCCN
As an inducement to, and to obtain the reliance of the ECC Unit Holder,
CCCN represents and warrants as follows:
3.1 Organization. CCCN is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Nevada, and has
the corporate power and is duly authorized, qualified, franchised, and licensed
under all applicable laws, regulations, ordinances, and orders of public
authorities to own all of its properties and assets and to carry on its business
in all material respects as it is now being conducted, and there is no
jurisdiction in which it is not qualified in which the character and location of
the assets owned by it or the nature of the business transacted by it requires
qualification. Included in the CCCN Information (as hereinafter defined) are
complete and correct copies of the Articles of Incorporation and bylaws of CCCN,
and all amendments thereto, as in effect on the date hereof. The execution and
delivery of this Agreement does not, and the consummation of the Transaction
will not, violate any provision of CCCN's Articles of Incorporation or bylaws.
CCCN has taken all action required by law, its Articles of Incorporation, its
bylaws, or otherwise to authorize the execution and delivery of this Agreement,
and CCCN has full power, authority, and legal right and has taken all action
required by law, its Articles of Incorporation, bylaws, or otherwise to
consummate the Transaction.
3.2 Capitalization. CCCN's authorized capitalization consists of
235,000,000 shares of Common Stock, of which no more than 4,838,531 shares will
be issued and outstanding immediately prior to the Closing (an aggregate of
10,569,895 shares of CCCN Stock shall be outstanding immediately following the
Closing); and 15,000,000 shares of preferred stock, none of which are issued and
outstanding. All presently issued and outstanding shares are legally issued,
fully paid, and non-assessable and not issued in violation of the pre-emptive or
other rights of any person. The CCCN Exchange Shares will be legally issued,
fully paid and non-assessable and shall not be issued in violation of the
pre-emptive or other rights of any other person.
3.3 Subsidiaries. Except as otherwise disclosed in its SEC reports,
CCCN does not have any subsidiaries and does not own, beneficially or of record,
any shares or other equity interests of any other corporation or other entity.
3.4 Financial Statements. Except as otherwise disclosed in its SEC
reports:
(a) CCCN has no liabilities with respect to the payment of any
federal, state, county, local, or other taxes (including any deficiencies,
interest, or penalties), except for taxes accrued but not yet due and payable,
for which CCCN may be liable in its own right, or as a transferee of the assets
of, or as a successor to, any other corporation or entity;
(b) CCCN has filed all federal, state, or local income tax
returns required to be filed by it from its inception to the date hereof; and
(c) The books and records, financial and otherwise, of CCCN
are in all material respects complete and correct and have been maintained in
accordance with good business and accounting practices. No deficiency for any
taxes has been proposed, asserted or assessed against CCCN. There has been no
tax audit, nor has there been any notice to CCCN by any taxing authority
regarding any such tax audit, or, to the knowledge of CCCN, is any such tax
audit threatened with regard to any taxes or CCCN tax returns. CCCN does not
expect the assessment of any additional taxes of CCCN for any period prior to
the date hereof and has no knowledge of any unresolved questions concerning the
liability for taxes of CCCN. CCCN has good and marketable title to its assets
and, except as set forth in the CCCN Information or the Financial Statements of
CCCN or the notes thereto, has no material contingent liabilities, direct or
indirect, matured or unmatured.
3.5 Information. The information concerning CCCN set forth in this
Agreement and the CCCN Information are and will be complete and accurate in all
material respects and does not contain any untrue statement of a material fact
or omit to state a material fact required to make the statements made, in light
of the circumstances under which they were made, not misleading as of the date
hereof and as of the Closing Date.
3.6 Common Stock Equivalents. Except as set forth herein, there are no
existing options, warrants, calls, commitments of any character or other common
stock equivalents relating to authorized and unissued stock of CCCN.
3.7 Absence of Certain Changes or Events. Except as described herein
or in the CCCN Information, since September 30, 2005: (a) There has not been (i)
any material adverse change, financial or otherwise, in the business,
operations, properties, assets, or condition of CCCN (whether or not covered by
insurance) materially and adversely affecting the business, operations,
properties, assets, or condition of CCCN;
(b) CCCN has not (i) amended its Articles of Incorporation or
bylaws; (ii) declared or made, or agreed to declare or make any payment of
dividends or distributions of any assets of any kind whatsoever to stockholders
or purchased or redeemed, or agreed to purchase or redeem, any of its capital
stock; (iii) waived any rights of value which in the aggregate are extraordinary
or material considering the business of CCCN; (iv) made any material change in
its method of management, operation, or accounting; (v) entered into any other
material transactions; (vi) made any accrual or arrangement for or payment of
bonuses or special compensation of any kind or any severance or termination pay
to any present or former officer or employee; (vii) increased the rate of
compensation payable or to become payable by it to any of its officers or
directors or any of its employees; or (viii) made any increase in any profit
sharing, bonus, deferred compensation, insurance, pension, retirement, or other
employee benefit plan, payment, or arrangement, made to, for, or with its
officers, directors, or employees;
(c) CCCN has not (i) granted or agreed to grant any options,
warrants, or other rights for its stocks, bonds, or other corporate securities
calling for the issuance thereof, except for those issued to Macenta Group, LLC
pursuant to this transaction; (ii) borrowed or agreed to borrow any funds or
incurred, or become subject to, any material obligation or liability (absolute
or contingent) except liabilities incurred in the ordinary course of business;
(iii) paid or agreed to pay any material obligation or liability (absolute or
contingent) other than current liabilities reflected in or shown on the most
recent CCCN balance sheet and current liabilities incurred since that date in
the ordinary course of business and professional and other fees and expenses
incurred in connection with the preparation of this Agreement and the
consummation of the Transaction; (iv) sold or transferred, or agreed to sell or
transfer, any of its assets, property, or rights (except assets, property, or
rights not used or useful in its business which, in the aggregate have a value
of less than $5,000), or canceled, or agreed to cancel, any debts or claims
(except debts or claims which in the aggregate are of a value of less than
$5,000); (v) made or permitted any amendment or termination of any contract,
agreement, or license to which it is a party if such amendment or termination is
material, considering the business of CCCN; or (vi) issued, delivered, or agreed
to issue or deliver any stock, bonds, or other corporate securities including
debentures (whether authorized and unissued or held as treasury stock), except
in connection with this Agreement; and
(d) To the best knowledge of CCCN, it has not become subject
to any law or regulation which materially and adversely affects, or in the
future may adversely affect, the business, operations, properties, assets, or
condition of CCCN. 3.8 Title and Related Matters. Except as otherwise stated in
its Sec reports, CCCN has good and marketable title to all of its properties,
interest in properties, and assets, real and personal, which are reflected in
the CCCN balance sheet or acquired after that date (except properties, interest
in properties, and assets sold or otherwise disposed of since such date in the
ordinary course of business), free and clear of all liens, pledges, charges, or
encumbrances except:
(a) statutory liens or claims not yet delinquent;
(b) such imperfections of title and easements as do not and
will not materially detract from or interfere with the present or proposed use
of the properties subject thereto or affected thereby or otherwise materially
impair present business operations on such properties; and
(c) as described in the CCCN Information.
3.9 Litigation and Proceedings. There are no actions, suits, or
proceedings pending or, to the knowledge of CCCN, threatened by or against or
affecting CCCN, at law or in equity, before any court or other governmental
agency or instrumentality, domestic or foreign, or before any arbitrator of any
kind.
3.10 Contracts. CCCN is not a party to any material contract,
agreement, or other commitment, except as specifically disclosed in its SEC
reports and the disclosures called for by this Agreement.
3.11 No Conflict With Other Instruments. The execution of this
Agreement and the consummation of the Transaction will not result in the breach
of any term or provision of, or constitute a default under, any indenture,
mortgage, deed of trust, or other material agreement or instrument to which CCCN
is a party or to which it or any of its assets or operations are subject.
3.12 Governmental Authorizations. CCCN has all licenses, franchises,
permits, and other government authorizations, that are legally required to
enable it to conduct its business operations in all material respects as
conducted on the date hereof. Except for compliance with federal and state
securities or corporation laws, as hereinafter provided, no authorization,
approval, consent, or order of, or registration, declaration, or filing with,
any court or other governmental body is required in connection with the
execution and delivery by CCCN of this Agreement and the consummation by CCCN of
the Transaction.
3.13 Compliance With Laws and Regulations. Except as described herein,
in its SEC reports or in the CCCN Information, to the best of its knowledge,
CCCN has complied with all applicable statutes and regulations of any federal,
state, or other applicable governmental entity or agency thereof, except to the
extent that noncompliance would not materially and adversely affect the
business, operations, properties, assets, or conditions of CCCN or except to the
extent that noncompliance would not result in the incurrence of any material
liability. This compliance includes, but is not limited to, to the extent such
compliance is applicable, the filing of all reports to date with the United
States Securities and Exchange Commission (the "SEC") and state securities
authorities.
3.14 Insurance. CCCN owns no insurable properties and carries no
casualty or liability insurance except a fidelity bond covering its officers and
directors.
3.15 Approval of Agreement. The board of directors of CCCN (the "CCCN
Board") has authorized the execution and delivery of this Agreement by CCCN and
the CCCN Board and a majority of CCCN's shareholders (the "CCCN Shareholders")
have by written consent approved this Agreement and the Transaction.
3.16 Continuity of Business Enterprises. CCCN has no commitment or
present intention to liquidate CCCN or sell or otherwise dispose of a material
portion of its business or assets following the consummation of the Transaction.
3.17 Material Transactions of Affiliations. Except as disclosed herein
and in the CCCN Information, there exists no material contract, agreement, or
arrangement between CCCN and any person who was at the time of such contract,
agreement, or arrangement an officer, director, or person owning of record or
known by CCCN to own beneficially, 10% or more of the issued and outstanding
common stock of CCCN and which is to be performed in whole or in part after the
date hereof or was entered into not more than three years prior to the date
hereof. Neither any officer, director, nor 10% stockholder of CCCN has, or has
had during the last preceding full fiscal year, any known interest in any
material transaction with CCCN which was material to the business of CCCN. CCCN
has no commitment, whether written or oral, to lend any funds to, borrow any
money from, or enter into any other material transaction with any such
affiliated person.
3.18 Employment Matters. CCCN has no employees other than its
executive officers.
3.19 CCCN Information. CCCN has delivered to ECC, or will deliver as
soon as practicable at ECC's request, the following disclosures, which are
collectively referred to as the "CCCN Information," which are dated the date of
this Agreement, all certified by an officer to be complete, true, and accurate:
(a) complete and accurate copies of the Articles of
Incorporation and bylaws, as amended, of CCCN as in effect as of the date of
this Agreement;
(b) a copy of the federal income tax returns of CCCN
identified in Section 3.4(b);
(c) a description of any material adverse change in the
business, operations, property, assets, or condition of CCCN, required to be
provided pursuant to Section 3.7; and
(d) any other information, together with any required copies
of documents, required to be disclosed in the CCCN Information by Sections 3.1
through 3.17.
3.20 Current Information. CCCN shall cause the CCCN Information and the
instruments and data delivered to ECC hereunder to be updated after the date
hereof up to and including the Closing Date.
3.21 Brokers. CCCN has not entered into any contract with any person,
firm or other entity that would obligate ECC or CCCN to pay any commission,
brokerage or finders' fee in connection with the Transaction. SPECIAL COVENANTS
4.1 Shareholders' Actions of CCCN. Prior to the Closing (and in
compliance with applicable laws, rules and regulations), CCCN shall cause the
following actions to be taken by the written consent of the Board of Directors
of the Company:
(a) Current Directors of CCCN shall appoint and elect Ephren
Taylor, Jr. as a director and the CEO of CCCN, effective at the time of the
Closing;
(b) Approval of this Agreement and the Transaction; and
(c) Current Directors will resign at closing and take such
other actions as the directors may determine are necessary or appropriate.
4.2 Unit Holders' Actions of ECC. Prior to the Closing, the following
actions shall be taken by the written unanimous consent of the ECC Unit Holders:
(a) the approval of this Agreement and the Transaction; and
(b) such other actions as the management of ECC may determine
are necessary or appropriate.
4.3 Access to Properties and Records. CCCN and ECC will each afford to
the officers and authorized representatives of the other reasonable access to
the properties, books, and records of CCCN or ECC in order that each may have
full opportunity to make such reasonable investigation as it shall desire to
make of the affairs of the other, and each will furnish the other with such
additional financial and operating data and other information as to the business
and properties of CCCN or ECC as the other shall from time to time reasonably
request.
4.4 Delivery of Books and Records. At the Closing, CCCN shall deliver
to ECC, the originals of the corporate minute books, books of account,
contracts, records, and all other books or documents of CCCN now in the
possession or control of CCCN or its representatives and agents.
4.5 Dilution Protection. Until ninety (90) days after the Closing, CCCN
shall not effect any stock dividend, subdivision, reclassification,
recapitalization, split, conversion, consolidation or combination of CCCN Common
Stock.
4.6 Actions Prior to Closing by both Parties.
(a) From and after the date of this Agreement until the
Closing Date and except as set forth in the CCCN or ECC Information or as
permitted or contemplated by this Agreement, CCCN and ECC will each: (i) carry
on its business in substantially the same manner as it has heretofore; (ii)
maintain and keep its properties in states of good repair and condition as at
present, except for depreciation due to ordinary wear and tear and damage due to
casualty; (iii) maintain in full force and effect insurance comparable in amount
and in scope of coverage to that now maintained by it; (iv) perform in all
material respects all of its obligation under material contracts, leases, and
instruments relating to or affecting its assets, properties, and business; (v)
use its best efforts to maintain and preserve its business organization intact,
to retain its key employees, and to maintain its relationship with its material
suppliers and customers; and (vi) fully comply with and perform in all material
respects all obligations and duties imposed on it by all federal and state laws
and all rules, regulations, and orders imposed by federal or state governmental
authorities.
(b) From and after the date of this Agreement until the
Closing Date, neither CCCN nor ECC will: (i) make any change in their
organizational documents, Articles of Incorporation or bylaws; (ii) take any
action described in Section 2.7 in the case of ECC, or in Section 3.7, in the
case of CCCN (all except as permitted therein or as disclosed in the applicable
Party's disclosures); (iii) enter into or amend any contract, agreement, or
other instrument of any of the types described in such Party's disclosures,
except that a Party may enter into or amend any contract, agreement, or other
instrument in the ordinary course of business involving the sale of goods or
services, or (iv) make or change any material tax election, settle or compromise
any material tax liability or file any amended tax return.
4.7 Indemnification.
(a) ECC hereby agrees to indemnify CCCN and each of the
officers, agents and directors of CCCN as of the date of execution of this
Agreement against any loss, liability, claim, damage, or expense (including, but
not limited to, any and all expense whatsoever reasonably incurred in
investigating, preparing, or defending against any litigation, commenced or
threatened, or any claim whatsoever), to which it or they may become subject
arising out of or based on any inaccuracy appearing in or misrepresentation made
in Article II. The indemnification provided for in this paragraph shall not
survive the Closing and consummation of the Transaction but shall survive the
termination of this Agreement pursuant to Section 7.1(b) of this Agreement.
(b) CCCN hereby agrees to indemnify ECC and each of the
officers, agents and directors of ECC as of the date of execution of this
Agreement against any loss, liability, claim, damage, or expense (including, but
not limited to, any and all expense whatsoever reasonably incurred in
investigating, preparing, or defending against any litigation, commenced or
threatened, or any claim whatsoever), to which it or they may become subject
arising out of or based on any inaccuracy appearing in or misrepresentation made
under Article III. The indemnification provided for in this paragraph shall not
survive the Closing and consummation of the Transaction but shall survive the
termination of this Agreement pursuant to Section 7.1(c) of this Agreement.
CONDITIONS PRECEDENT TO OBLIGATIONS OF CCCN
The obligations of CCCN under this Agreement are subject to the
satisfaction, at or before the Closing, of the following conditions:
5.1 Accuracy of Representations; Performance. The representations and
warranties made by the ECC Unit Holders in this Agreement were true when made
and shall be true at the Closing Date with the same force and effect as if such
representations and warranties were made at and as of the Closing Date (except
for changes therein permitted by this Agreement), and ECC shall have performed
or complied with all covenants and conditions required by this Agreement to be
performed or complied with by the ECC Unit Holders prior to or at the Closing.
CCCN may request to be furnished with a certificate, signed by a duly authorized
representative of all of the ECC Unit Holders and dated the Closing Date, to the
foregoing effect.
5.2 Certificates. CCCN shall have been furnished with a certificate
dated the Closing Date and signed by a duly authorized representative of all of
the ECC Unit Holders to the effect that no litigation, proceeding,
investigation, or inquiry is pending or, to the best knowledge of such ECC Unit
Holders is threatened, which might result in an action to enjoin or prevent the
consummation of the Transaction, or, to the extent not disclosed in the ECC
Information, by or against ECC which might result in any material adverse change
in any of the assets, properties, business, or operations of ECC.
5.3 No Material Adverse Change. Prior to the Closing Date, there shall
not have occurred any material adverse change in the financial condition,
business, or operations of ECC, nor shall any event have occurred which, with
the lapse of time or the giving of notice, may cause or create any material
adverse change in the financial condition, business, or operations.
5.4 Other Items.
(a) CCCN shall have received a member list of ECC containing
the name, address, and number of units held by each ECC Unit Holder as of the
date of Closing certified by an executive officer of ECC as being true,
complete, and accurate;
(b) CCCN shall have received such further documents,
certificates, or instruments relating to the Transaction as CCCN may reasonably
request;
(c) complete and satisfactory due diligence review of ECC by
CCCN;
(d) approval of the Transaction by the ECC Board and the ECC Unit Holders;
(e) on or before the date of the Closing, ECC shall have delivered to CCCN the
ECC Financial Statements; and
(f) any necessary third-party consents shall be obtained prior
to Closing, including but not limited to consents necessary from ECC's lenders,
creditors, vendors and lessors.
CONDITIONS PRECEDENT TO OBLIGATIONS OF ECC UNIT HOLDERS
The obligations of the ECC Unit Holders under this Agreement are
subject to the satisfaction, at or before the Closing, of the following
conditions:
6.1 Accuracy of Representations; Performance. The representations and
warranties made by CCCN in this Agreement were true when made and shall be true
as of the Closing Date (except for changes therein permitted by this Agreement)
with the same force and effect as if such representations and warranties were
made at and as of the Closing Date, and CCCN shall have performed and complied
with all covenants and conditions required by this Agreement to be performed or
complied with by CCCN prior to or at the Closing. ECC shall have been furnished
with a certificate, signed by a duly authorized executive officer of CCCN and
dated the Closing Date, to the foregoing effect.
6.2 Officer's Certificate. ECC shall have been furnished with a
certificate dated the Closing Date and signed by a duly authorized executive
officer of CCCN to the effect that no litigation, proceeding, investigation, or
inquiry is pending or, to the best knowledge of CCCN threatened, which might
result in an action to enjoin or prevent the consummation of the Transaction.
6.3 No Material Adverse Change. Prior to the Closing Date, there shall
not have occurred any material adverse change in the financial condition,
business, or operations of CCCN nor shall any event have occurred which, with
the lapse of time or the giving of notice, may cause or create any material
adverse change in the financial condition, business, or operations of CCCN.
6.4 Good Standing. ECC shall have received a certificate of good
standing from the Secretary of State of the State of Nevada or other appropriate
office, dated as of a date within ten days prior to the Closing Date certifying
that CCCN is in good standing as a corporation in the State of Nevada and has
filed all tax returns required to have been filed by it to date and has paid all
taxes reported as due thereon.
6.5 Other Items.
(a) ECC shall have received a stockholder list of CCCN
containing the name, address, and number of shares held by each CCCN stockholder
as of the date of Closing certified by an executive officer of CCCN as being
true, complete, and accurate;
(b) ECC shall have received such further documents,
certificates, or instruments relating to the Transaction as ECC may reasonably
request;
(c) complete and satisfactory due diligence review of CCCN by
the ECC Unit Holders;
(d) approval of the Transaction by the CCCN Board and a
majority of the CCCN Shareholders;
(e) there shall have been no material adverse changes in CCCN,
financial or otherwise, from the information provided in the CCCN Financial
Statements;
(f) at the Closing, the authorized capitalization of CCCN
shall consist of (i) 235,000,000 shares of CCCN Stock, of which 4,838,531 shares
shall be issued and outstanding immediately after the Closing, excluding the
CCCN Exchange Shares;
(g) except as set forth herein, there shall be no CCCN Common
Stock Equivalents outstanding as of immediately prior to the Closing. For
purposes of the foregoing, "CCCN Common Stock Equivalents" shall mean any
subscriptions, warrants, options or other rights or commitments of any character
to subscribe for or purchase from CCCN, or obligating CCCN to issue, any shares
of any class of the capital stock of CCCN or any securities convertible into or
exchangeable for such shares;
(h) the resignation of the officers and directors of CCCN
effective upon the Closing, with such vacancies filled by the nominees of the
ECC Unit Holders as set forth herein; and
(i) any necessary third-party consents shall be obtained prior
to Closing, including but not limited to consents necessary from CCCN's lenders,
creditors, vendors and lessors.
TERMINATION
7.1 Termination.
(a) This Agreement may be terminated by either the ECC Unit
Holders or the CCCN Board at any time prior to the Closing Date if: (i) there
shall be any actual or threatened action or proceeding before any court or any
governmental body which shall seek to restrain, prohibit, or invalidate the
Transaction and which, in the judgment of such board of directors, made in good
faith and based on the advice of its legal counsel, makes it inadvisable to
proceed with the exchange contemplated by this Agreement; (ii) the Transaction
is disapproved by any regulatory authority whose approval is required to
consummate such transaction or in the judgment of such board of directors, made
in good faith and based on the advice of counsel, there is substantial
likelihood that any such approval will not be obtained or will be obtained only
on a condition or conditions which would be unduly burdensome, making it
inadvisable to proceed with the exchange; (iii) there shall have been any change
after the date of the latest balance sheets of ECC and CCCN, respectively, in
the assets, properties, business, or financial condition of ECC and CCCN, which
could have a materially adverse effect on the value of the business of ECC and
CCCN respectively, except any changes disclosed in the ECC and CCCN Information,
as the case may be, dated as of the date of execution of this Agreement. In the
event of termination pursuant to this paragraph (a) of Section 7.1, no
obligation, right, or liability shall arise hereunder, and each party shall bear
all of the expenses incurred by it in connection with the negotiation, drafting,
and execution of this Agreement and the Transaction; (iv) the Closing Date shall
not have occurred by May 30, 2006; or (v) if CCCN shall not have provided
responses satisfactory in ECC's reasonable judgment to ECC's request for due
diligence materials.
(b) This Agreement may be terminated at any time prior to the
Closing by action of the CCCN Board if the ECC Unit Holders shall fail to comply
in any material respect with any of their covenants or agreements contained in
this Agreement or if any of the representations or warranties of the ECC Unit
Holders contained herein shall be inaccurate in any material respect, and, in
either case if such failure is reasonably subject to cure, it remains uncured
for seven days after notice of such failure is provided to the ECC Unit Holders.
If this Agreement is terminated pursuant to this paragraph (b) of Section 7.1,
this Agreement shall be of no further force or effect, and no obligation, right,
or liability shall arise hereunder.
(c) This Agreement may be terminated at any time prior to the
Closing by action of the ECC Unit Holders if CCCN shall fail to comply in any
material respect with any of its covenants or agreements contained in this
Agreement or if any of the representations or warranties of CCCN contained
herein shall be inaccurate in any material respect, and, in either case if such
failure is reasonably subject to cure, it remains uncured for seven days after
notice of such failure is provided to CCCN. If this Agreement is terminated
pursuant to this paragraph (c) of Section 7.1, this Agreement shall be of no
further force or effect, and no obligation, right, or liability shall arise
hereunder.
MISCELLANEOUS
8.1 Governing Law. This Agreement shall be governed by, enforced, and
construed under and in accordance with the laws of the United States of America
and, with respect to matters of state law, with the laws of Nevada. Any dispute
arising under or in any way related to this Agreement will be submitted to
binding arbitration before a single arbitrator by the American Arbitration
Association in accordance with the Association's commercial rules then in
effect. The arbitration will be conducted in San Antonio, Texas. The decision of
the arbitrator will set forth in reasonable detail the basis for the decision
and will be binding on the parties. The arbitration award may be confirmed by
any court of competent jurisdiction.
8.2 Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if personally delivered to it or sent by
registered mail or certified mail, postage prepaid, or by prepaid telegram
addressed as follows:
If to CCCN, to: City Capital Corporation
ATTN: Gary Borglund
2535 Pilot Knob Road, Suite 118
Mendota Heights, MN 55120
If to the ECC Ephren Capital Corporation
Unit Holders, to: ATTN: Ephren Taylor, Jr.
2000 Mallory Lane, Suite 130-301
Franklin, TN 37067
or such other addresses as shall be furnished in writing by any Party in the
manner for giving notices hereunder, and any such notice or communication shall
be deemed to have been given as of the date so delivered, mailed, or
telegraphed.
8.3 Attorney's Fees. In the event that any Party institutes any action
or suit to enforce this Agreement or to secure relief from any default hereunder
or breach hereof, the breaching Party or Parties shall reimburse the
non-breaching Party or Parties for all costs, including reasonable attorneys'
fees, incurred in connection therewith and in enforcing or collecting any
judgment rendered therein.
8.4 Confidentiality. CCCN and the ECC Unit Holders will keep
confidential all information and materials regarding the other Party designated
by such Party as confidential. The provisions of this Section 8.5 shall not
apply to any information which is or shall become part of the public domain
through no fault of the Party subject to the obligation from a third party with
a right to disclose such information free of obligation of confidentiality. CCCN
and ECC agree that no public disclosure will be made by either Party of the
existence of the Transaction or the letter of intent or any of its terms without
first advising the other Party and obtaining its prior written consent to the
proposed disclosure, unless such disclosure is required by law, regulation or
stock exchange rule.
8.5 Expenses. Except as otherwise set forth herein, each Party shall
bear their own costs and expenses associated with the Transaction. Without
limiting the generality of the foregoing, all costs and expenses incurred by ECC
and CCCN after the Closing shall be borne by CCCN. After the Closing, the costs
and expenses of the ECC Unit Holders shall be borne by the ECC Unit Holders.
8.6 Information; Knowledge. Each Party is presumed to have full
knowledge of all information set forth in the other party's disclosures
delivered pursuant to this Agreement.
8.7 Third Party Beneficiaries. This contract is solely between CCCN and
the ECC Unit Holders, and, except as specifically provided, no director,
officer, stockholder, employee, agent, independent contractor, or any other
person or entity shall be deemed to be a third party beneficiary of this
Agreement.
8.8 Entire Agreement. This Agreement represents the entire agreement
between the Parties relating to the Transaction. There are no other courses of
dealing, understandings, agreements, representations, or warranties, written or
oral, except as set forth herein.
8.9 Survival. The representations and warranties of the respective
Parties shall not survive the Closing and the
consummation of the Transaction.
8.10 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall be but a single instrument.
8.11 Amendment or Waiver. Every right and remedy provided herein shall
be cumulative with every other right and remedy, whether conferred herein, at
law, or in equity, and may be enforced concurrently herewith, and no waiver by
any party of the performance of any obligation by the other shall be construed
as a waiver of the same or any other default then, theretofore, or thereafter
occurring or existing. At any time prior to the Closing Date, this Agreement may
be amended by a writing signed by all Parties hereto, with respect to any of the
terms contained herein, and any term or condition of this Agreement may be
waived or the time for performance hereof may be extended by a writing signed by
the party or parties for whose benefit the provision is intended.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their respective representatives, hereunto duly authorized, as of
the date first above-written.
"ECC UNIT HOLDER" EPHREN CAPITAL CORPORATION
By:
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Ephren Taylor, President
"CCCN" CITY CAPITAL CORPORATION
By: /s/ Gary Borglund
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Gary Borglund, President