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
[ ] Definitive Proxy Statement Only (as Permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to
ss.240.14a-11(c) or ss.240.14a-12
Tanner's Restaurant Group, Inc.
(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: None
(2) Form, Schedule or Registration Statement No.: Not Applicable
(3) Filing Party: Not Applicable
(4) Date Filed: Not Applicable
Notes
<PAGE>
TANNER'S RESTAURANT GROUP, INC.
1087 Broad Street, 4th Floor
Bridgeport, Connecticut 06604
Letter to Shareholders
July ___, 2000
To Our Shareholders:
On May 31, 2000, Tanner's Restaurant Group, Inc. acquired all of the
outstanding common stock of Fone.com, Limited, a telecommunications company
doing business primarily in the United Kingdom. This acquisition signifies the
transformation of the Company into an international telecommunications company
that will focus on the convergence and integration of international long
distance telecommunications with internet services.
While Fone.com Limited is not yet profitable and has been in existence for
a relatively short period of time, previous Tanner's management believed that it
could capitalize on the strategic alliances and international service agreements
that were either already in place or are in the process of being negotiated by
Fone.
Our acquisition of Fone.com followed the sale, in February of this year, of
all of the assets used in the operation of the "Rick Tanner's Original Grill"
chain of restaurants. As a result of this sale, we no longer operate or
franchise any restaurants, and we have dedicated ourselves to the transformation
of the Company into an international telecommunications company.
As consideration for the acquisition of Fone.com, we issued 40,000,000
shares of our common stock to DCI Telecommunications, Inc., the former parent of
Fone.com, representing approximately 62.7% of our currently outstanding shares
of common stock. We also assumed certain liabilities of DCI. Shortly after this
acquisition, outside investors agreed to invest $4,553,652 in us in exchange for
two promissory debentures that are convertible into shares of our common stock.
Of this amount, $3,653,652 was invested in us to refinance existing indebtedness
and $900,000 was invested in us to fund our operations and for general working
capital purposes.
Given the significant number of shares issued to DCI, and given the
significant number of shares of common stock that we could become obligated to
issue upon conversion of outstanding convertible securities, including these two
new convertible debentures, and upon exercise of outstanding options and
warrants, we believe it is necessary to amend the Company's articles of
incorporation to increase the number of authorized common shares. We also want
to amend the articles of incorporation to change our name to "Corzon, Inc.,"
which reflects that we are no longer engaged in the restaurant business.
Additionally, in accordance with the terms of our agreement to purchase
Fone.com, we need to elect a new board of directors. Finally, we want to ratify
the appointment of Feldman Sherb Horowitz & Co., P.C. as our accounting firm for
the fiscal year ending on December 31, 2000.
We need your approval to carry out these proposals. Accordingly, we
cordially invite you to attend a special meeting of the Company's shareholders
on Monday, August 7, 2000 at 9:00 a.m. local time at the Holiday Inn, 1070 Main
Street, Bridgeport, Connecticut 06604. If you can not attend the meeting in
person, we encourage you to complete, sign and date the enclosed proxy card and
return it as promptly as possible in the enclosed envelope. No postage is
required if the proxy is mailed in the United States.
By Order of the Board of Directors,
Lawrence Shatsoff,
President
<PAGE>
TANNER'S RESTAURANT GROUP, INC.
1087 Broad Street, 4th Floor
Bridgeport, Connecticut 06604
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 7, 2000
To the shareholders of Tanner's Restaurant Group, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of
Tanner's Restaurant Group, Inc., a Texas corporation (the "Company" or "we"),
will be held at the Holiday Inn, 1070 Main Street, Bridgeport, Connecticut
06604, on Monday, August 7, 2000 at 9:00 a.m. local time. At the meeting, we
will ask you to:
(1) Approve an amendment to our articles of incorporation to increase the
number of authorized shares of common stock from 200,000,000 to
500,000,000 shares.
(2) Approve an amendment to our articles of incorporation to change our
name to "Corzon, Inc."
(3) Elect Jose A. Auffant, Lawrence Shatsoff and Clifford Postelnik to the
board of directors.
(4) Ratify the appointment of Feldman Sherb Horowitz & Co., P.C. as our
independent auditors for the fiscal year ending December 31, 2000.
(5) Vote on such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
The foregoing items of business are described more fully in the proxy
materials accompanying this Notice. July 17, 2000 is the record date for
determining shareholders entitled to notice of and to vote at the meeting.
We cordially invite you to attend the meeting in person. Regardless of
whether you plan to attend, please complete, sign and date the enclosed proxy
card and return it as promptly as possible in the enclosed envelope. No postage
is required if the proxy is mailed in the United States.
By Order of the Board of Directors,
Lawrence Shatsoff,
President
Bridgeport, Connecticut
July ___, 2000
<PAGE>
TANNER'S RESTAURANT GROUP, INC.
1087 Broad Street, 4th Floor
Bridgeport, Connecticut 06604
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
AUGUST 7, 2000
General Information
We are furnishing this Proxy Statement in connection with the solicitation
of proxies by the board of directors of Tanner's Restaurant Group, Inc. (the
"Company" or "we") for use at the annual meeting of the Company's shareholders
on Monday, August 7, 2000 at 9:00 a.m. local time, and at any adjournment or
postponement of such meeting. The Annual Meeting will be held at the Holiday
Inn, 1070 Main Street, Bridgeport, Connecticut 06604. We are mailing this proxy
statement and the accompanying proxy card on or about July ___, 2000 to all
shareholders entitled to vote at the Annual Meeting.
Voting and Record Date
The board of directors has fixed the close of business on July 17, 2000 as
the record date for the meeting. Only persons who hold shares of our common
stock of record as of the record date will be entitled to notice of and to vote
at the meeting. Each shareholder of record of common stock on the record date is
entitled to cast one vote per share, exercisable in person or by a properly
executed proxy at the meeting. As of the record date, ___________ shares of our
common stock were outstanding and entitled to vote.
The presence at the meeting, in person or by a proxy, of the holders of a
majority of the shares of common stock outstanding on the record date will
constitute a quorum at the meeting. Inspectors appointed by the Company will
count votes. Shares represented by proxies that reflect abstentions or include
"broker non-votes" will be treated as shares that are present and entitled to
vote for purposes of determining the presence of a quorum (a broker non-vote
occurs when a registered broker holding customer securities in street name has
not received voting instructions from the beneficial owner regarding any
"non-routine" matter as so designated by that broker's self-regulatory
organization).
Approval of each of the amendments to our articles of incorporation
requires the affirmative vote of the holders of two-thirds of our issued and
outstanding common stock as of the record date. Election of each nominee to the
board of directors requires the affirmative vote of the holders of a plurality
of the shares of common stock entitled to vote and represented in person or by
proxy at the meeting, and ratification of Feldman Sherb Horowitz & Co., P.C. as
our independent public accountants requires the affirmative vote of the holders
of a majority of the shares of common stock entitled to vote and represented in
person or by proxy at the meeting. Abstentions and broker non-votes will be
treated as "no" votes for purposes of determining whether approval of each
proposal has been obtained.
If a sufficient number of votes to adopt the proposals is not present,
either in person or by proxy, at the meeting, we intend to adjourn the meeting
to solicit additional votes. At any such adjourned meeting, all proxies will be
voted in the same manner as they would have been voted at the meeting.
<PAGE>
Proxies
All shares of common stock represented at the meeting by properly executed
proxies received prior to or at the meeting, and not duly and timely revoked,
will be voted at the meeting in accordance with the choices marked by the
shareholders. Unless a contrary choice is marked, or if the proxy is left blank
as to choice, the shares will be voted "For" approval of each proposal.
The board of directors is not aware of any other matters not referred to in
these proxy materials that will be presented for action at the meeting. If any
other matters properly come before the meeting, the persons designated in the
proxy intend to vote the shares represented thereby in accordance with their
best judgment.
You may revoke any proxy at any time before it is voted. Proxies may be
revoked by: (a) filing with the Secretary of the Company at or before the taking
of the vote the meeting a written revocation bearing a later date than the
proxy, (b) duly executing a later-dated proxy relating to the same shares and
delivering it to the Secretary of the Company before the taking of the vote at
the meeting, or (c) attending the meeting and voting in person (although
attendance at the meeting alone will not revoke a proxy).
No Dissenters' Rights
The taking of the proposed actions will not entitle any shareholder to
dissent and demand a right of appraisal or payment for its shares under the
Texas Business Corporation Act.
Costs of Solicitation
The board of directors is making this proxy solicitation and the Company
will pay all of the expenses involved in preparing, assembling and mailing these
proxy materials, along with the costs of soliciting proxies. In addition to
solicitation by mail, directors, officers, and regular employees of the Company
may solicit proxies by telephone or personal interview. They will receive no
compensation for their services other than their regular compensation. The
Company will also make arrangements with brokerage houses and other custodians,
nominees and fiduciaries to forward solicitation materials to the beneficial
owners of the shares held of record by such persons. The Company may reimburse
such persons for reasonable out-of-pocket expenses they incur in doing so.
Other Information
Our principal executive offices are located at 1087 Broad Street, 4th
Floor, Bridgeport, Connecticut 06604, and our telephone number is (203)
333-6389.
Holders of shares of the common stock are requested to complete, date, and
sign the enclosed Proxy and to return it to the Company in the postage paid
envelope provided.
2
<PAGE>
PROPOSAL 1: AMENDMENT TO INCREASE THE NUMBER OF AUTHORIZED SHARES
Overview
Under our articles of incorporation, we are presently authorized to issue
200,000,000 shares of common stock, par value $.01 per share, and 5,000,000
shares of preferred stock, par value $1.00 per share. As of the close of
business on July 17, 2000, ______________ shares of common stock, _________
shares of Series A Preferred Stock, 8841.5 shares of Series D Preferred Stock,
and 744,500 shares of Series E Preferred Stock were outstanding.
The increase in the number of authorized shares is necessary because we
need additional authorized shares of common stock in order to have a sufficient
number of shares available for issuance upon conversion of the outstanding
shares of our Series A Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock, upon conversion of two recently issued convertible debentures
and upon exercise of outstanding warrants and options. Given the number of
shares of common stock now outstanding, and assuming all of the preferred stock,
convertible debt, warrants, and options were to be converted or exercised
(assuming, for purposes of the Series D Preferred Stock and the two new
convertible debentures, a trading price of the common stock of ____ per share,
the closing price on the OTC Bulletin Board on the record date), we would have
approximately __________ shares of common stock outstanding, which would be
approximately ______________ more shares than the 200,000,000 shares we are now
authorized to issue. If the market price of the common stock were to decrease to
$.05, then the total number of shares of common stock outstanding following
conversion and exercise of all outstanding securities would be 424,150,059. If
the market price of the common stock were to decrease further, the total number
of shares of common stock issuable upon conversion and exercise of outstanding
securities would increase. If we do not amend our articles of incorporation and
cannot issue shares of common stock upon conversion or exercise of the preferred
stock, warrants, and options, we will likely incur substantial liability to the
holders of such securities.
The increase in the number of authorized shares is also necessary because
we may need additional shares of common stock for future acquisitions, stock
dividends, and for other matters. Our ability to sustain operations, make future
capital expenditures, and fund the development and marketing of our operations
is dependent in part on our ability to raise additional capital.
If the amendment is approved, all or any part of the additional authorized
but unissued shares may be issued without further approval by the shareholders,
for such purposes and on such terms as the board of directors may determine. (If
we are able to list the common stock on the Nasdaq SmallCap Market or a national
exchange, of which we can offer no assurances, the listing agreement with Nasdaq
or the exchange will require shareholder approval of certain issuances. No such
requirement now applies to us.) Holders of our common stock do not have any
preemptive rights to subscribe for the purchase of any shares of common stock,
which means that current shareholders do not have a prior right to purchase any
new issue of common stock to maintain their proportionate ownership. The
amendment will not affect the rights of existing holders of common stock except
to the extent that future issuances of common stock will dilute each existing
shareholder's proportionate ownership interest in us.
Potential Dilution. Each share of Series D Preferred Stock is convertible
into shares of common stock at a ratio determined by the following formula:
$1,000 divided by 80% of the per share market value of the common stock. Using
the closing market price on the OTC Bulletin Board on July 17, 2000 of ____ per
share, the 8841.5 shares of Series D Preferred Stock that are currently
outstanding would be convertible into _____________ shares of common stock. If
the market price of the common stock were to decrease to $.05, these 8841.5
shares of Series D Preferred Stock would be convertible into 221,037,500 shares
of common stock. Conversely, if the market price of the common stock were to
increase to $.25, these 8841.5 shares of Series D Preferred Stock would be
convertible into 44,207,500 shares of common stock. (These calculations are
intended to serve only as examples, not as predictions as to the future market
price of the common stock.)
Similarly, our two recently issued convertible debentures, in the aggregate
principal amount of $4,553,652, are convertible into shares of common stock in
accordance with a formula that depends on the market price of the common stock.
These two debentures were issued following our acquisition of Fone.com, Limited.
See "Proposal 2: Amendment to Change the Company's Name." Specifically, the
number of shares of common stock issuable upon conversion of these debentures is
equal to the principal amount of the debentures divided by the lesser of: (i)
$.75; or (ii) the average of the five lowest closing prices of the common stock
during the twenty trading days immediately preceding the date of conversion.
3
<PAGE>
Furthermore, the holders of our Series A Preferred Stock and Series E
Preferred Stock and the holders of options and warrants to acquire shares of our
common stock, will be able to convert or exercise, as applicable, their
securities into shares of common stock. Consequently, substantial dilution of
the voting power of the current shareholders is likely as convertible securities
are converted and options and warrants are exercised over time.
Changes in Control
Since the beginning of 1999, three changes in control of the Company have
occurred.
In January 1999, we issued 4,123,219 shares of our common stock,
representing record ownership of 50.1% of the then-outstanding shares of our
common stock, to the former shareholders of TRC Acquisition Corporation, which
owned and franchised the "Rick Tanner's Original Grill" chain of restaurants, in
connection with the merger of TRC with and into Hartan, our wholly-owned
subsidiary. These shares now represent approximately 6.5% of the outstanding
shares of our common stock.
On May 11, 2000, a group of persons owning shares of our Series D preferred
stock, acting together, converted a portion of their shares of Series D
preferred stock into shares of our common stock in transactions that resulted in
a change in control of the Company. After conversion, these persons, and those
persons acting with them, owned or controlled 51.2% of the outstanding shares of
our common stock. These persons were Sovereign Partners, L.P., Cache Capital
(USA), L.P., Dominion Capital Fund Limited, Fetu Holdings, Ltd., the Rearden
Trust, Oscar Brito and Sandro Grimaldi. These persons now own of record
approximately 19.1% of the outstanding shares of our common stock.
Effective May 31, 2000 (closing date June 2, 2000), we purchased from DCI
Telecommunications, Inc. all of the outstanding stock of Fone.com, Limited, a
company organized under the laws of England and Wales, in exchange for
40,000,000 shares of our common stock and our assumption of $3,453,652 of debt
of DCI. DCI now owns of record 62.67% of the outstanding shares of our common
stock. See "Proposal 2: Amendment to Change the Company's Name."
Effect of the Proposed Amendment on the Company's Shareholders
If the proposal to amend our articles of incorporation to increase the
number of authorized shares to 500,000,000 is adopted, shareholders will retain
their equity interests in us, although such interests will be subject to the
possibility of significant future dilution of voting power. The number of shares
of common stock that we are authorized to issue will increase from 200,000,000
to 500,000,000 and, upon the issuance of additional shares of common stock, the
voting power of the current shareholders will be diluted. Because the
outstanding shares of Series A, Series D and Series E Preferred Stock and the
convertible debentures (see "Description of Securities - Convertible
Debentures") are or will be convertible into shares of common stock and the
outstanding options and warrants are currently exercisable for shares of common
stock, we are obligated to issue additional shares of common stock at the
election of the holders of those securities. The proposed amendment will not
result in any changes in the rights of the shareholders.
Consequences of the Failure of the Shareholders to Approve the Proposed
Amendment
If the shareholders do not approve Proposal 1, we will be adversely
affected in several ways. First, we may be forced to pay penalties if we are
unable to convert shares of Series D Preferred Stock upon demand. If we are
unable to issue the shares of common stock to a holder of Series D Preferred
Stock who presents his shares for conversion, we will be required to rectify the
problem within 45 days. If we cannot do so, we must pay a penalty to all holders
of shares of Series D Preferred Stock in an amount equal to approximately .07%
of the stated value of the outstanding shares of Series D Preferred Stock held
by each holder for each day that we are unable to convert shares for which the
shareholder has requested conversion. For example, assuming that no shares of
common stock are available for issuance when a holder of Series D Preferred
Stock presents his shares for conversion, and assuming 8841.5 shares of Series D
Preferred Stock are outstanding, we will be penalized approximately $6,189 for
each day that we do not have shares of common stock available to convert all
outstanding shares of Series D Preferred Stock. If we cannot increase the
authorized shares for 180 days, for example, the total penalty would be
approximately $1,114,029.
4
<PAGE>
Moreover, the failure of the shareholders to approve Proposal 1 is likely
to expose us to liability to holders of warrants, options and other securities
that entitle the holder to acquire shares of common stock. A number of the
contracts between these holders and us require that we reserve a number of
shares sufficient to support the exercise or conversion of the securities. If an
adequate number of shares is not reserved, we will be in violation the
underlying agreements and be exposed to claims by the holders of such
instruments.
Description Of Securities
Our articles of incorporation authorize the board of directors to issue
200,000,000 shares of common stock, par value $0.01 per share, and 5,000,000
shares of preferred stock, par value $1.00 per share, in one or more series or
classes, and to determine the rights, powers, preferences, limitations and
restrictions of each series or class. As described below, the board of directors
has designated, to date, 3,754,200 shares of preferred stock into three classes.
Common Stock
Holders of common stock are entitled to receive dividends as the board of
directors may legally declare from time to time. Each holder of common stock is
entitled to one vote for each share held of record on all matters submitted to a
vote of shareholders, including the election of directors. Shareholders have no
right to cumulate votes in the election of directors. Holders of common stock
have no preemptive or redemption rights and have no right to convert their
common stock into any other securities. Upon our liquidation, dissolution or
winding up, holders of common stock will be entitled to share ratably in our net
assets available for distribution to common shareholders. The rights of the
holders of the common stock are subordinate to the rights of holders of
preferred stock. Accordingly, the rights conferred on holders of any additional
shares of preferred stock that are issued in the future under the articles of
incorporation may adversely affect the rights of holders of the common stock.
All of the outstanding shares of common stock are fully paid and non-assessable.
As of July 17, 2000, ___________ shares of common stock were outstanding.
Preferred Stock
The board of directors may from time to time authorize us to issue
preferred stock without action by the shareholders. The preferred stock may be
in one or more series for such consideration, and with such relative rights,
privileges, and preferences, as the board may determine. Accordingly, the board
has the power to fix the dividend rate and to establish the provisions, if any,
relating to voting rights, redemption rate, sinking fund, liquidation
preferences, and conversion rights for any series of preferred stock issued in
the future.
Series A Redeemable Convertible Preferred Stock. On June 23, 1997, the
board of directors approved the issuance of 3,000,000 shares of Series A
Redeemable convertible preferred stock of the Company. The original issue price
of the Series A preferred stock was $10.00 per share. Holders of Series A
preferred stock are entitled to receive dividends at the annual rate of 12% of
the original issue price per share, or $1.20 per share, payable quarterly in
cash or in common stock at our sole discretion. Dividends are cumulative from
the date of issue. We may not declare or pay cash dividends on any other series
of preferred stock that is junior to or on par with the Series A preferred
stock, or on the common stock, nor may we redeem, purchase or otherwise acquire
any of that stock, unless full cumulative dividends have been or are
contemporaneously paid on the Series A preferred stock. Under the terms of our
guaranty of our subsidiary's secured loan from FINOVA Mezzanine Capital, Inc.,
we may pay cash dividends on the Series A preferred stock only if (a) our
subsidiary makes an equal prepayment on the FINOVA note; and (b) the payments do
not cause us to breach a specified financial covenant.
If we are liquidated or dissolved, the holders of shares of Series A
preferred stock are entitled to receive out of our assets available for
distribution to shareholders, before any distributions are made to holders of
common stock or of any other shares of our capital stock ranking junior to the
Series A preferred stock, liquidating distributions in the amount of $10.00 per
share, plus accrued and unpaid dividends.
The Series A preferred stock is redeemable at our option at any time, in
whole or in part, for cash or in common stock, on at least 30 days' notice. The
price payable upon redemption is 110% of the average bid price per share of the
Series A preferred stock as quoted on the Nasdaq SmallCap Market, or other
national securities exchange, for the 20 trading days before the redemption
date, plus all accrued and unpaid dividends. If the Series A preferred stock is
5
<PAGE>
not quoted by Nasdaq or listed on a securities exchange, its market value will
be the fair value as determined by a member of a national securities exchange
selected by us or by the board of directors.
The Series A preferred stock automatically converts into common stock if
the closing price for the Series A preferred stock equals or exceeds $20.00 per
share for a period of ten consecutive trading days. The holders of Series A
preferred stock have the right, at their option, to convert any or all their
shares of Series A preferred stock into common stock. The number of shares of
common stock issuable on conversion of a share of Series A preferred stock is
equal to $10.00 divided by $3.70, subject to adjustment. Holders of Series A
preferred stock may also convert their shares, if we call them for redemption,
at any time up to and including the close on business on the fifth full business
day before the date fixed for redemption.
The holders of the Series A preferred stock have no voting rights except as
otherwise required by the Texas Business Corporation Act and applicable law. The
holders of shares of Series A preferred stock have no preemptive or other rights
to subscribe for any other shares or securities. The Series A preferred stock
ranks ahead of the common stock as to dividends and on our liquidation.
As of the close of business on July 17, 2000, ___________ shares of Series
A preferred stock were issued and outstanding.
Series B Convertible Preferred Stock. On January 14, 1999, all 133.2 of the
outstanding shares of Series B convertible preferred stock were exchanged for
1,998 shares of Series D convertible preferred stock. No other shares of Series
B preferred stock are outstanding, and the board of directors does not intend to
issue any more shares of Series B preferred stock.
Series C Convertible Preferred Stock. On January 14, 1999, all 200 of the
outstanding shares of Series C convertible preferred stock were exchanged for
2,600 shares of Series D preferred stock. No other shares of Series C preferred
stock are outstanding, and the board of directors does not intend to issue any
more shares of Series C preferred stock.
Series D Convertible Preferred Stock. The original issue price of the
Series D preferred stock is $1,000 per share. Dividends on the Series D
preferred stock accrue at an annual rate of 7% of the original issue price, or
$70 per share, and are payable in cash or common stock, as determined by the
holders, only at the time of conversion of such shares. Dividends are cumulative
from the date of issue. Unless full cumulative dividends have been or are
contemporaneously paid on the Series D preferred stock, we may not declare or
pay cash dividends on the common stock, nor may we redeem, purchase or otherwise
acquire common stock, nor may we make any other distribution with respect to the
common stock or any class of capital stock on a parity with or junior to the
Series D preferred stock. Under the terms of our guaranty of our subsidiary's
secured loan from FINOVA, we may pay cash dividends on the Series D preferred
stock so long as (a) our subsidiary makes an equal prepayment on the FINOVA
note; and (b) we are not in default under the loan documents governing the loan
and no default is created by such payments.
If we are liquidated or dissolved, the holders of shares of Series D
preferred stock are entitled to receive out of our assets available for
distribution to shareholders, before any distributions are made to holders of
common stock or of any other shares of our capital stock ranking junior to the
Series D preferred stock, liquidating distributions in the amount of $1,000 per
share, plus accrued and unpaid dividends.
The Series D preferred stock is convertible at the option of the holder
into shares of common stock for up to three years after initial issuance. After
three years, the Series D preferred stock will convert automatically into shares
of common stock. The conversion rate per share is equal to $1,000 divided by 80%
of the five-day average closing bid price of the common stock on the Nasdaq
Stock Market, the OTC Bulletin Board, or on any other national securities
exchange on which the common stock is listed at the time of conversion. We are
not required, however, to convert any shares if the conversion would result in
the issuance of 20% or more of the issued and outstanding common stock to the
holders of the Series D preferred stock, as provided by Nasdaq Marketplace Rule
4320(e)(21)(H), unless we obtain shareholder approval of that conversion. If a
conversion is requested and we do not convert the Series D preferred stock
because of the Nasdaq rule, we will pay the holder of the Series D preferred
stock 125% of the principal amount of the issued and outstanding Series D
preferred stock plus accrued interest.
Holders of Series D preferred stock may not convert those shares into
shares of common stock if and to the extent that upon conversion that holder
would beneficially own more than 4.99% of the outstanding common stock.
6
<PAGE>
The Series D preferred stock is non-voting, and it is ranked junior to the
Company's Series A preferred stock. The holders of the Series D preferred stock
have no preemptive rights or other rights to subscribe for any of our other
shares or securities.
On January 14, 1999, 133.2 shares of Series B preferred stock and 200
shares of Series C preferred stock were exchanged for 4,598 shares of Series D
preferred stock. We issued 1,300 shares of Series D preferred stock for
$1,000,000 in January 1999, and we issued another 1,300 shares of Series D
preferred stock for $1,000,000 in February 1999. In May and June 1999, we issued
another 500 shares of Series D preferred stock to certain of the outside
investors in exchange for $500,000. We issued the final 1,500 shares of Series D
preferred stock upon receipt of $1,500,000 in September 1999. The outside
investors who purchased Series D preferred stock for cash or by exchanging
Series B or Series C preferred stock also were issued common stock purchase
warrants, as described below.
As of July 17, 2000, 8841.5 shares of Series D preferred stock were issued
and outstanding.
Series E Convertible Preferred Stock. A total of 744,500 shares of Series E
preferred stock are issued and outstanding. The original issue price of the
Series E preferred stock is $10.00 per share. Dividends on the Series E
preferred stock accrue at an annual rate of 8% of the original issue price, or
$0.80 per share, and are payable in cash or common stock, as we determine, only
at the time of conversion of the shares. Dividends are cumulative from the date
of issue. Unless full cumulative dividends have been or are contemporaneously
paid on the Series E preferred stock, we may not declare or pay cash dividends
on the common stock, nor may we redeem, purchase or otherwise acquire common
stock, nor may we make any other distribution with respect to the common stock
or any class of capital stock on a parity with or junior to the Series E
preferred stock. Under the terms of our guaranty of our subsidiary's secured
loan with FINOVA, we may not pay cash dividends on the Series E preferred stock.
If we are liquidated or dissolved, the holders of shares of Series E
preferred stock are entitled to receive out of our assets available for
distribution to shareholders, before any distributions are made to holders of
common stock or of any other shares of our capital stock ranking junior to the
Series E preferred stock, liquidating distributions in the amount of $10.00 per
share, plus accrued and unpaid dividends.
The Series E preferred stock is redeemable at our option at any time after
six months from the date of issuance, in whole or in part, for $0.01 per share,
if the average closing bid price of our common stock, as quoted on any national
securities exchange, Nasdaq, or the OTC Bulletin Board, exceeds $3.50 per share
for five (5) consecutive trading days.
Each share of Series E preferred stock is convertible at the option of the
holder into four shares of common stock at any time after six months from the
date of issuance, subject to adjustment. The Series E preferred stock is
non-voting, and it is ranked junior to our Series A preferred stock and Series D
preferred stock. The holders of the Series E preferred stock have no preemptive
rights or other rights to subscribe for any of our other shares or securities.
Redeemable Preferred Stock Purchase Warrants
As of July 17, 2000, Redeemable Preferred Stock Purchase Warrants to
purchase [1,723,400] shares of our Series A Preferred Stock were outstanding,
plus a warrant issued to the underwriters of the offering of these warrants to
purchase 200,000 additional shares of our common stock. Each warrant represents
the right to purchase one share of Series A preferred stock at an exercise price
of $10.50 per share until June 11, 2002, subject to adjustment. These warrants
may be redeemed, in whole or in part, at our option, upon 30 days' notice, at a
redemption price equal to $0.01 per warrant at any time if the closing price of
the Series A preferred stock on the Nasdaq SmallCap Market averages at least
$11.00 per share for a period of 20 consecutive trading days or if we redeem the
Series A preferred stock.
Common Stock Purchase Warrants
At July 17, 2000, there were Common Stock Purchase Warrants to purchase
[2,300,000] shares of our common stock outstanding, which we refer to as the IPO
Warrants, plus additional warrants issued to the underwriters of the offering of
the IPO Warrants to purchase 300,000 shares of our common stock. Each IPO
Warrant entitles the holder to purchase one share of common stock at $4.00 per
7
<PAGE>
share until July 9, 2001, subject to adjustment. IPO Warrants may be redeemed,
in whole or in part, at our option, upon 30 days notice, at a redemption price
equal to $0.01 per IPO Warrant at any time, if the closing price of the common
stock on the Nasdaq SmallCap Market averages at least $8.00 per share for a
period of 20 consecutive trading days. The other warrants are exercisable at
prices ranging from $2.00 per share to $6.60 per share.
We have also issued warrants to purchase 135,000 shares of common stock at
an exercise price of 110% of the average closing bid price of the common stock
on certain benchmark dates (subject to certain adjustments) to Sterling Capital,
LLC, and have issued warrants to purchase 643,509 shares of common stock
(increasing to 699,259 shares on October 22, 1999 and to 756,331 shares on
October 22, 2000) at an exercise price of $.01 to FINOVA, our senior secured
lender. Warrants to purchase 300,000 shares at an exercise price of $2.50 per
share are also outstanding.
As noted above, we issued common stock purchase warrants to holders of our
Series D preferred stock to purchase 919,800 shares of common stock at a price
of $2.00 per share. These warrants are exercisable for five years after
issuance.
Convertible Debentures
In early June, 2000, we issued two 6% Secured Convertible Debentures in an
aggregate principal amount of $4,553,652. These Debentures bear interest at a
rate of 6% per annum and will mature on June 7, 2002. These Debentures entitle
the holders thereof to convert all or a portion of the Debentures into shares of
our common stock at a conversion price which is the lower of (i) $.75 per share
or (ii) seventy-five percent of the average of the five lowest closing prices of
our common stock during the twenty preceding trading days immediately prior to
the date of conversion. In addition, the conversion price will be further
reduced by a ten percent discount if, before October 5, 2000, we sell shares of
our common stock without the consent of all of the holders of the Debentures at
a price that is lower than either the market price of our common stock on June
7, 2000 or $.75 per share. The maximum number of shares of common stock into
which the holder of a Debenture may convert is capped at 4.9% of the total
number of outstanding shares of our common stock, as determined in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as amended. The
holder of a Debenture may convert into additional shares of common stock only to
the extent that previously converted shares of common stock have been sold in
the open market, such that that total number of shares beneficially owned by
that holder never exceeds 4.9% of the outstanding shares of our common stock.
The Company may redeem the Debentures in whole or in part at redemption prices
that increase over time from 123.33% of the principal amount (during the 120 day
period following June 7, 2000) to 133.33% of the principal amount (at any time
more than 180 days after June 7, 2000). The Debentures are secured by all of the
assets and property of the Company, including a pledge of all of the outstanding
shares of Fone.com.
Certain Provisions of Our Bylaws and Texas Law
Number, Term and Removal of Directors. Our bylaws provide that the number
of directors must not be less than one and not be more than five. We currently
have two directors. Upon a vacancy created in the board of directors, a
successor or new director may be appointed by the affirmative vote of a majority
of the directors then in office.
Special Shareholder Meetings. Our bylaws provide that special meetings of
shareholders may be called at any time by a majority of the board of directors,
the chairman of the board or our president, and that special meetings of
shareholders must be called when the holders of shares representing at least 10%
of the votes entitled to be cast on each issue presented at the meeting request
a meeting in writing.
Texas Anti-Takeover Statutes. Some provisions of the Texas Business
Corporation Act may be considered to have anti-takeover effects and may hinder,
delay, deter or prevent a tender offer, proxy contest or other attempted
takeover that a shareholder may deem to be in his best interest. Those
provisions might allow the board of directors to defend against an attempted
transaction that might otherwise result in payment of a premium over the market
price for shares the shareholder holds.
8
<PAGE>
Transfer Agent and Registrar
The transfer agent and registrar for the common stock, the common stock
purchase warrants, the Series A preferred stock, the Series A preferred stock
purchase warrants and the Series D preferred stock is Corporate Stock Transfer,
3200 Cherry Creek Drive South, Suite 430, Denver, Colorado 80209. We have acted
as our own transfer agent and registrar for the Series E preferred stock.
Recommendation of the Board of Directors
Approval and adoption of this proposed amendment requires the affirmative
vote of the holders of two-thirds of the issued and outstanding common stock
entitled to vote on the amendment. The board of directors believes that the
proposed amendment to increase the number of authorized shares is fair in the
best interests of the Company and its shareholders. Accordingly, the board of
directors has unanimously approved the proposal and recommends that you vote
"For" its approval.
9
<PAGE>
PROPOSAL 2: AMENDMENT TO CHANGE THE COMPANY'S NAME
Effective May 31, 2000, we acquired all of the outstanding common
stock of Fone.com, Limited, a telecommunications company doing business
primarily in the United Kingdom. This acquisition signifies our transformation
from a restaurant company into an international telecommunications company that
will focus on the convergence and integration of international long distance
telecommunications and internet services. Our acquisition of Fone.com followed
the sale, in February of this year, of all of the assets used in the operation
of the "Rick Tanner's Original Grill" chain of restaurants. As a result of this
sale, we no longer operate or franchise any restaurants, and we have dedicated
ourselves to the transformation of the Company into an international
telecommunications company.
As consideration for the acquisition of Fone.com, we issued 40,000,000
shares of our common stock to DCI Telecommunications, Inc., the former parent of
Fone.com, representing approximately 62.7% of our currently outstanding shares
of common stock. We also assumed certain liabilities of DCI. Shortly after this
acquisition, outside investors agreed to invest $4,553,652 in us in exchange for
two promissory debentures that are convertible into shares of our common stock.
Of this amount, $3,653,652 was used to refinance existing indebtedness and
$900,000 is being used by us to fund our operations and for general working
capital purposes.
In connection with the ongoing transformation of the Company into an
international telecommunications company, the board of directors has determined
that it is in the best interests of the Company to change the Company's name to
"Corzon, Inc." The change in the Company's name will reflect that the Company is
no longer engaged in the restaurant business.
Approval and adoption of this proposal requires the affirmative vote of the
holders of two-thirds of the issued and outstanding common stock entitled to
vote on the amendment.
The board of directors has unanimously approved this proposal and
recommends that you vote "For" the amendment to our articles of incorporation to
change the name of the Company to "Corzon, Inc."
10
<PAGE>
PROPOSAL 3: ELECTION OF BOARD OF DIRECTORS
Pursuant to our Articles of Incorporation, the board of directors shall
have at least one but not more than five directors. The board of directors can
determine the number of directors within these limits. The directors elected at
this meeting will hold office for a term of one year and until their successors
are elected and qualified.
At the meeting, you will be asked to elect three directors. If you return
your proxy card and do not specify otherwise on your proxy card, we will vote
your shares in favor of the election of the persons named below as nominees.
Only one of the nominees is currently a director of the Company. The board
believes that the nominees will stand for election and will serve if elected as
directors. If, however, any nominee fails to stand for election or is unable to
accept election and the board recommends another nominee, we will vote in favor
of the election of the other person that the board recommends. Directors will be
elected by a plurality of the votes cast at the meeting. There are no cumulative
voting rights in the election of directors.
The director nominees, their ages and their other positions with the
Company as of July 17, 2000 are as follows:
Director Nominees Age Position(s) with the Company
----------------- --- ----------------------------
Jose A. Auffant 31 Chief Executive Officer, Chief
Financial Officer, Secretary and Director
Lawrence A. Shatsoff 46 President
Clifford Postelnik 56 Vice President of Operations
Other Directors and
Executive Officers
------------------
Rollin M. Shouse 58 Director
In December 1999, Clyde E. Culp, III resigned from the Board. Richard E.
Tanner resigned from the Board in January 2000, and on May 11, 2000, the holders
of a majority of our then-outstanding shares of common stock elected Jose A.
Auffant and Rollin M. Shouse to the Board and effectively removed James R.
Walter from the Board.
Lawrence Shatsoff and Clifford Postelnik were officers of Fone.com prior to
our acquisition of Fone.com. In addition, Mr. Shatsoff was an officer of DCI
Telecommunications, from whom we purchased all of the outstanding stock of
Fone.com. DCI now owns 62.7% of the outstanding shares of our common stock,
although Mr. Shatsoff is no longer an officer or director of DCI. Mr. Shatsoff
owns 122,199 shares of common stock of DCI.
Our officers are appointed at the first meeting of the board of directors
after each annual meeting of stockholders. Officers hold office for a term of
one year and until their successors are chosen and qualified or until their
earlier resignation or removal.
11
<PAGE>
Director Nominees
Jose A. Auffant has served as our Chief Executive Officer, Chief Financial
Officer, Secretary and Director since May 2000. Mr. Auffant is currently the
general counsel for J.P. Carey Securities, Inc. From 1997 to 2000, Mr. Auffant
was associated with Winston & Strawn, a Chicago, Illinois based law firm, in its
corporate department. Mr. Auffant received a Juris Doctor degree from Emory
University School of Law in 1997 and a Bachelor of Business Administration
degree from Stetson University in 1991.
Lawrence Shatsoff has served as our President since June 2000. Prior to
joining us, Mr. Shatsoff was the Vice President and Chief Operations Officer of
DCI. From 1991 to 1994, Mr. Shatsoff was the Vice President and Chief Operations
Officer of Alpha Products, a computer board sales and manufacturing company.
From 1988 through 1990, Mr. Shatsoff was the Executive Vice President of Kalon
Systems, a data processing services company.
Clifford A. Postelnik has served as our Vice President since June 2000.
Prior to joining us, Mr. Postelnik was the Managing Director of European
Operations for Fone.com. Prior to joining Fone.com, Mr. Postelnik had a 30-year
career in bilateral carrier contract negotiations and marketing to the tour and
travel industry, airlines and hotels in Europe, Africa and the Far East.
Other Directors
Rollin M. Shouse has served as a Director of the Company since May 2000.
Mr. Shouse is currently the Chief Executive Officer of Technest.com, Inc., a
full-service accelerator for Internet startup companies. From 1996 to 1999, Mr.
Shouse served as Chief Executive Officer and President of Shouse Enterprises,
Inc., a convenience store chain comprised of 26 stores. From 1993 to 1996, Mr.
Shouse served as Chief Executive Officer and President of Sunshine-Jr. Stores,
Inc., a publicly-traded company with 232 convenience stores and six
supermarkets. Mr. Shouse received a Bachelor of Business Administration degree
from Georgetown College in 1964. We expect that Mr. Shouse will not serve on the
Board following the Annual Meeting.
Committees of the Board of Directors and Nominations by Shareholders
During 1999, the board of directors held two regular meetings. All of our
directors attended at least 75% or more of the meetings of the board and board
committees on which they served, during the time periods during which they
served, in 1999.
We do not have standing audit, compensation or nominating committees. The
board nominates candidates to stand for election as directors. Our articles of
incorporation permit shareholders to make nominations for directors but only if
such nominations are made pursuant to timely notice in writing to our Secretary.
For more information on stockholder proposals, see "Other Matters - Shareholder
Proposals for the 2001 Annual Meeting of Shareholders."
Certain Relationships and Related Transactions
The following is a summary of certain transactions and relationships among
the Company and our subsidiaries and our directors, executive officers and
greater than 5% stockholders.
Lawrence Shatsoff, our President, was formerly a director of Fone.com,
Limited and the Vice President and Chief Operations Officer of DCI, from whom we
acquired Fone.com. Mr. Shatsoff owns 122,199 shares of common stock of DCI,
which now owns 40,000,000 shares of our common stock.
As consideration for the acquisition of Fone.com, we issued 40,000,000
shares of our common stock to DCI, the former parent of Fone.com. Consequently,
DCI now owns approximately 62.7% of our outstanding shares of common stock. We
also assumed certain liabilities of DCI in the acquisition of Fone.com.
SECA VII, LLC, a significant shareholder and an entity in which Mr. Walker,
formerly one of our directors, is an equity owner, has loaned Hartan $350,000 at
an interest rate of 12.5%. This loan matured on September 9, 1999. SECA agreed
to extend the maturity date of the loan in November 1999 in exchange for our
issuance to SECA of warrants of acquire 100,000 shares of our common stock at an
exercise price of $.04 per share. The maturity date has been extended to January
31, 2001.
12
<PAGE>
In March 1999, Clyde E. Culp, III, our former Chairman of the Board and
Chief Executive Officer, loaned approximately $350,000 to Pacific Ocean
Restaurants, Inc., the parent entity of Crabby Bob's Seafood, Inc., from whom we
sought to purchase the assets used in the operation of the Crabby Bob's Seafood
Grill Restaurant chain. Mr. Culp loaned these funds to Pacific Ocean so that
Pacific Ocean could satisfy certain of its immediate obligations while we
continued to pursue our acquisition of the Crabby Bob's assets. Interest on Mr.
Culp's loan began accruing at a rate of 10% per annum in September 1999. Mr.
Culp's loan became due on the date of termination of the letter of intent
between us and Pacific Ocean. The obligations of Pacific Ocean under Mr. Culp's
note are secured by the personal property, general intangibles and intellectual
property used in the operation of the Crabby Bob's Seafood Grill and Bob's on
the Bay restaurants operated by Crabby Bob's Seafood, Inc.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires our executive officers and
directors and persons who beneficially own more than 10% of a registered class
of our equity securities to file reports of securities ownership and changes in
such ownership with the Commission and NASDAQ. Officers, directors and greater
than 10% beneficial owners also are required by rules promulgated by the
Commission to furnish us with copies of all Section 16(a) forms they file. Based
solely on review of the copies of the reports furnished to us and written
representations that no other reports were required, except for the late filing
of a Form 5 on behalf of SECA VII, LLC, we believe that, during 1999, our
executive officers, directors and greater than 10% beneficial owners complied
with all applicable Section 16(a) filing requirements.
13
<PAGE>
Security Ownership of Certain Beneficial Owners and Management of the Company
The following table provides information as of July 17, 2000 concerning
ownership of the capital stock by each director and officer, all directors and
officers as a group, certain former officers and directors, and all beneficial
owners of 5% or more of the outstanding shares of common stock. As of July 17,
2000, __________ shares of our common stock were outstanding.
Except as otherwise noted, the persons named in the table own the shares
beneficially and of record and have sole voting and investment power with
respect to all shares of capital stock shown as owned by them, subject to
community property laws, where applicable. Each shareholder's address is in care
of us at 1087 Broad Street, 4th Floor, Bridgeport, Connecticut 06604. The Right
to Acquire column in the table also reflects all shares of common stock that
each individual has the right to acquire within 60 days from the above date upon
exercise of stock options or common stock purchase warrants or upon conversion
of preferred stock.
Percent of
Outstanding
Class of Number of Right Shares
Name Stock Shares Owned to Acquire of Class
---- ----- ------------ ---------- --------
DCI Telecommunications, Inc. Common 40,000,000 0 62.7%
The Rearden Trust Common 4,854,803 0 7.6
Clyde E. Culp, III Common 1,178,063 78,538 2.0
William J. Gallagher Common 46,667 140,000 (4)
Richard Tanner Common 1,413,675 353,419 5.5
Series E(3) 469,775 0 63.1
James R. Walker (1) Common 765,741 154,976(2) 2.6
Series E(3) 183,150 0 24.6
SECA VII, LLC (1) Common 765,741 154,976(2) 2.6
Series E(3) 183,150 0 24.6
Robert J. Hoffman Common 0 243,466 (4)
Timothy R. Robinson Common 0 254,462 (4)
All officers and directors
as a group (4 persons) (5) Common 0 0 0%
Series E 0 0 0%
----------------
(1) Mr. Walker, a former director, is an equity owner of SECA VII, LLC, which
directly owns 765,741 shares of common stock and 183,150 shares of Series E
preferred stock and has the right to acquire 154,976 shares of common
stock.
(2) Includes options to purchase 54,976 shares of common stock at an exercise
price of $.01 per share and a warrant to purchase 100,000 shares of common
stock at an exercise price of $.04 per share.
(3) Each share of our Series E preferred stock is convertible into four shares
of common stock.
(4) Represents less than 1% of the outstanding shares of our common stock.
(5) None of Messrs. Auffant, Shouse, Shatsoff or Postelnik, who constitute all
of our current directors and executive officers, beneficially own any
shares of our capital stock or have the right to acquire any shares of our
capital stock.
Executive Compensation
The following table provides information concerning compensation for the
past fiscal three years to our executive officers.
14
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Compensation
Awards
Annual Compensation Securities
Other Annual Underlying
Name and Principal Position Year Salary($) Bonus($) Compensation($) Options(#)
--------------------------- ---- --------- -------- --------------- ----------
<S> <C> <C> <C> <C> <C>
William J. Gallagher 1999 160,000 0 0 0
Former Chairman and 1998 90,000 0 13,691(2) 140,000(1)
Chief Executive Officer 1997 89,519 37,156 17,663 0
Clyde E. Culp, III
Former Chairman and 1999 142,308 0 0 0
Chief Executive Officer
Robert J. Hoffman
Former Chief Executive Officer, 1999 126,575 0 4,200(3) 0
President and Secretary;
Former Senior Vice
President of Operations
Timothy R. Robinson
Former Vice President and 1999 122,599 0 0 0
Chief Financial Officer
----------
</TABLE>
(1) On February 5, 1998, the Board of Directors authorized a repricing of the
option exercise price for all outstanding options granted under the Harvest
Stock Option Plan to $1.00, with no change in the vesting periods. Mr.
Gallagher owned 140,000 options at that time. This revised exercise price
represented approximately 200% of the market price of the common stock on
the date of the repricing.
(2) This amount consists of a car allowance of $5,157 and $8,534 that was used
to pay off a loan.
(3) This amount represents a car allowance.
Compensation of Directors
While we have stated previously that directors are paid $250 per meeting,
we have not paid our directors for attending meetings since the date of the
merger with TRC.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
When we completed the merger with TRC on January 14, 1999, Clyde E. Culp,
III, the chairman and chief executive officer of TRC prior to the merger, became
our Chairman and Chief Executive Officer. Mr. Culp's five year employment
agreement provided that Mr. Culp would be paid an annual salary of $200,000. Mr.
Culp resigned in December 1999.
In connection with the merger, William J. Gallagher, our chief executive
officer prior to the merger with TRC, executed a severance agreement with us
pursuant to which he resigned from all positions that he held with us, other
than as one of our directors, in exchange for our agreement to pay him a total
of $200,000. Mr. Gallagher remained on the board of directors until April 1999.
We have paid Mr. Gallagher all amounts owed him under his severance agreement.
15
<PAGE>
PROPOSAL 4: RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
The board of directors has appointed Feldman Sherb Horowitz & Co., P.C. to
serve as our independent public accountants for the year ending December 31,
2000, subject to ratification by the shareholders at the annual meeting. Feldman
Sherb Horowitz & Co., P.C. has served as independent public accountants for
Fone.com since November, 1999. If your return your proxy card and do not specify
otherwise on your proxy card, we will vote your shares in favor of ratifying the
appointment of Feldman Sherb Horowitz & Co., P.C., independent certified public
accountants, to audit our books and accounts for the year ending December 31,
2000. The board of directors has not determined what action it would take if the
stockholders do not ratify the appointment.
Representatives of Feldman Sherb Horowitz & Co., P.C. will not be present
at the meeting.
Changes in the Company's Independent Public Accountants
(a) Previous Independent Accountants
(i) On June 16, 2000, we dismissed Porter Keadle Moore, LLP ("PKM"), as our
independent accountants effective immediately. PKM had completed all activities
related to our 1999 fiscal year audit. We dismissed PKM in order to hire Feldman
Sherb Horowitz & Co., P.C. because they are located closer to our new executive
offices and have extensive experience with companies in our industry.
(ii) The reports of PKM on our consolidated balance sheets as of December
26, 1999 and December 27, 1998, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the years ended December
26, 1999 and December 27, 1998, did not contain an adverse opinion or disclaimer
of opinion, and were not qualified or modified as to uncertainty, audit scope or
accounting principles.
(iii) The decision to terminate PKM was approved by the board of directors,
who also expressed appreciation for the work performed by PKM.
(iv) During the two most recent fiscal years and the interim period
subsequent to December 26, 1999 through June 16, 2000, there were no
disagreements with PKM on any matter of accounting practices or principles,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of PKM, would have caused
them to make reference thereto in their report on the financial statements for
such periods.
(v) During the two most recent fiscal years and the interim period
subsequent to December 26, 1999 through June 16, 2000, none of the events
described in Regulation S-K Item 304(a)(1)(v) occurred.
(vi) On June 20, 2000, we delivered a copy of the disclosures contained
herein to PKM and requested that PKM furnish us with a letter addressed to the
Securities and Exchange Commission stating whether or not PKM agreed with such
disclosures. PKM provided us with such a letter, dated June 20, 2000, indicating
its agreement with these statements, and a copy of this letter was filed by us
as Exhibit 16.1 to our current report on Form 8-K, dated June 16, 2000.
(b) New Independent Accountants
(i) On June 16, 2000, we engaged the firm of Feldman Sherb Horowitz & Co.,
P.C. ("FSH") as independent accountants for our fiscal year ending December 31,
2000. The board of directors approved the selection of FSH as independent
accountants.
16
<PAGE>
(ii) During the two most recent fiscal years and the interim period
subsequent to December 26, 1999 through June 16, 2000, we have not consulted
with FSH with respect to (1) the application of accounting principles to a
specified transaction, either completed or proposed; or the type of audit
opinion that might be rendered on our financial statements; or (2) on any matter
that was either the subject of a disagreement (as defined in Item 304 (a)(1)(iv)
of Regulation S-K) or a reportable event (as described in Item 304(a)(1)(v) of
Regulation S-K).
Votes Required to Ratify the Appointment
The affirmative vote of a majority of the shares present in person or
represented by proxy at the meeting is necessary for ratification of the
appointment of Feldman Sherb Horowitz & Co., P.C. as our independent public
accountants.
The board of directors has unanimously approved this proposal and
recommends that you vote "For" Proposal 4 to ratify the appointment of Feldman
Sherb Horowitz & Co., L.P. as our independent public accounts for the year
ending December 31, 2000.
17
<PAGE>
OTHER MATTERS
The board of directors knows of no other matters to be presented for action
at the meeting. As stated in the accompanying proxy card, if any other business
should come before the meeting, proxies have discretionary authority to vote
their shares according to their best judgment, including, without limitation, a
motion to adjourn or postpone the meeting to another time and/or place for the
purpose of soliciting additional proxies.
SHAREHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING OF SHAREHOLDERS
We anticipate that the 2001 annual meeting will be held in April, 2001.
Proposals of shareholders of the Company intended to be presented at the 2001
annual meeting must be received by the Company not later than December 15, 2000
to be considered for inclusion in the Company's proxy statement and form of
proxy relating to that meeting. Any proposal for presentation of our next annual
meeting which is outside the processes of Rule 14a-8 under the Securities
Exchange Act of 1934 will be considered untimely for purposes of Rules 14a-4 and
14a-5 if we receive it after February 1, 2001.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act and, in accordance therewith, is required to file reports, proxy statements,
and other information with the Commission. Such reports, proxy statements and
other information can be inspected and copied at the Public Reference Section of
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
the Commission's regional offices at Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New
York, New York 10048. Copies of the reports, proxy statements, and other
information can be obtained from the Public Reference Section of the Commission,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a World
Wide Web site on the Internet at http://www.sec.gov that contains reports,
proxies, information statements, and registration statements and other
information filed with the Commission through the EDGAR system. The common stock
of the Company is traded on the OTC Bulletin Board (symbol "ROTI") and such
reports, proxy statements, and other information concerning the Company also can
be inspected at the offices of Nasdaq Operations, 1735 K Street, N.W.,
Washington, D.C. 20006.
By Order of the Board of Directors,
Lawrence Shatsoff,
President
Bridgeport, Connecticut
July ___, 2000
18
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
FOR THE ANNUAL MEETING OF SHAREHOLDERS OF
TANNER'S RESTAURANT GROUP, INC.
TO BE HELD AUGUST 7, 2000
The undersigned hereby constitutes and appoints Lawrence Shatsoff as the
lawful agent and proxy of the undersigned (with all the powers the undersigned
would possess if personally present, including full power of substitution), and
hereby authorizes him to represent and to vote, as designated below, all the
shares of Common Stock of Tanner's Restaurant Group, Inc. (the "Company") held
of record by the undersigned on July 17, 2000, at the Annual Meeting of
Shareholders of the Company to be held August 7, 2000, or any adjournment or
postponement thereof.
1. To amend the Company's Articles of Incorporation to increase the number of
authorized shares of Common Stock to 500,000,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. To amend the Company's Articles of Incorporation to change its name to
"Corzon, Inc."
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To elect the following persons to the Board of Directors:
JOSE A. AUFFANT
LAWRENCE SHATSOFF
CLIFFORD POSTELNIK
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY to
listed (except as vote for all nominees
marked to the contrary)
(INSTRUCTION: To withhold authority to vote for any individual
nominee(s), write that nominee's name(s) in the space provided below.)
4. To ratify the appointment of Feldman Sherb Horowitz & Co., P.C. as
independent public accountants of the Company for the year ending December
31, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. IN HIS DISCRETION, Lawrence Shatsoff may act upon such other business as
may properly come before the meeting or any adjournment thereof.
It is understood that when properly executed, this proxy will be voted in
the manner directed herein by the undersigned shareholder. The Board of
Directors recommends a vote "FOR" all proposals. WHERE NO CHOICE IS SPECIFIED BY
THE SHAREHOLDER, THE PROXY WILL BE VOTED FOR ALL PROPOSALS.
<PAGE>
The undersigned hereby revokes all previous proxies relating to the shares
covered hereby and confirms all that said proxy may do by virtue hereof.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Dated: _________________________________
Signature: _____________________________
PLEASE MARK, SIGN, DATE
AND RETURN THE PROXY
CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
Signature,
if held jointly: ________________________
PLEASE CHECK THIS BOX IF YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING OF
SHAREHOLDERS. [ ]
