SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 3, 2000
Corzon, Inc.
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(Exact name of Registrant as specified in charter)
Texas 33-95796 76-0406417
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(State or other Jurisdiction (Commission File (I.R.S. Employer
of Incorporation) Number) Identification
Number)
1087 Broad Street, Suite 402, Bridgeport, Connecticut 06604
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(Address of principal executive offices) (Zip Code)
(203) 333-6389
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(Registrant's Telephone Number, including Area Code)
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Item 5. Other Events
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Corzon, Inc. recently settled two lawsuits that had been filed
against the Company. On August 20, 1998, a lawsuit was filed by
Mr. Toufic Khalife against Harvest Restaurant Group, Inc., a
predecessor to Corzon. A settlement was reached on October 3,
2000 whereby Corzon paid Mr. Khalife $50,000 in cash and issued
925,926 shares of Corzon common stock. Corzon agreed to register
the resale of such stock on a piggy-back basis.
On June 22, 2000, litigation was commenced against the Company
and certain of its subsidiaries by Finova Mezzanine Capital, Inc.
The litigation arose out of a guaranty made by Harvest Restaurant
Group, Inc. (a predecessor to Corzon) of approximately two
million dollars ($2,000,000) in credit extended to its
subsidiaries in January 1999. A settlement was reached on
November 2, 2000 whereby Corzon issued to Finova 1,700 shares of
Series D Convertible Preferred Stock along with a cash payment of
$50,000. Each share of Series D is convertible into a certain
number of shares of common stock based upon a 20% discount to the
market value of Corzon's common stock. Finova has agreed not to
convert into common shares for one hundred eighty (180) days or
if, after discount the market value of the Company's Common Stock
is less than $.03 per share. Additionally, in no event, except
upon maturity of the Series D stock, can Finova convert into
Common Stock to the extent that the sum of the shares of Common
Stock to be issued to Finova upon conversion and the shares of
Common Stock issued upon any prior conversion that are
beneficially owned by Finova and its affiliates exceed 4.99% of
the outstanding shares of Common Stock (excluding the shares of
Common Stock which may be deemed beneficially owned through the
ownership of the unconverted portion of the Series D Preferred
Stock). Corzon has agreed to register the resale of the shares
of common stock issuable upon conversion of the Series D
Preferred Stock initially on a piggy-back basis and, after 90
days, on a demand basis.
Item 7. Exhibits
(a) Exhibits
Exhibit No. Description
10.7 Settlement Agreement and Exhibits Dated November 2, 2000 by
and among Finova Mezzanine Capital, Inc., Hartan, Inc. and
Corzon, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
Corzon, Inc.
Dated: November 7, 2000 By: /s/ Larry Shatsoff
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Larry Shatsoff, President
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EXHIBIT INDEX
Exhibit No. Description
10.7 Settlement Agreement and Related Exhibits dated
November 2, 2000 by and among Finova Mezzanine
Capital, Inc., Hartan, Inc. and Corzon, Inc.
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Exhibit 10.7
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AGREEMENT
This ("Agreement") is entered into as of the 2nd day of
November, 2000, by and among FINOVA MEZZANINE CAPITAL INC.
("Lender"), a Tennessee corporation, formerly known as Sirrom
Capital Corporation; Hartan, Inc. ("Borrower"), a Texas
corporation and successor by merger to TRC Acquisition
Corporation; and Corzon, Inc. ("Guarantor"), a Texas corporation
formerly known as Tanner's Restaurant Group, Inc.
R E C I T A L S:
WHEREAS, pursuant to a Loan Agreement dated October 22,
1996, by and between Borrower and Lender, as amended by that
certain Assumption Agreement, Consent and First Amendment to Loan
Agreement dated January 14, 1999 (the "Loan Agreement"), Lender
has made a loan to Borrower in the original principal amount of
$2,000,000.00 (the "Loan");
WHEREAS, the Loan is evidenced by an Amended and
Restated Secured Promissory Note dated January 14, 1999, in the
Loan amount, made and executed by Borrower payable to the order
of Lender (herein referred to, together with any extensions,
modifications, renewals and/or replacements thereof, as the
"Note");
WHEREAS, Guarantor and Hartan's subsidiaries described
on Exhibit A attached hereto (the "Subsidiaries") guaranteed
payment and performance of Borrower's obligations under the Loan
Documents;
WHEREAS, Borrower defaulted on its obligations under
the Loan Documents;
WHEREAS, on June 22, 2000, Lender filed an action in
the United States District Court for the Middle District of
Tennessee against Borrower, Guarantor and the Subsidiaries to
recover the indebtedness and obligations evidenced by the Loan
Documents (the "Action");
WHEREAS, Lender has agreed to accept certain shares of
preferred stock of Guarantor and certain assets of Borrower in
satisfaction of the indebtedness, obligations and liabilities
evidenced by the Loan Documents, on the terms and conditions set
forth herein;
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NOW, THEREFORE, for valuable consideration, the receipt
and sufficiency of which are acknowledged, the parties agree as
follows:
1. Definitions
(a) As used herein, "Claims" shall mean any and all
accounts, covenants, agreements, and obligations (other than
those contained in this Agreement, the Assignments of Notes and
the Subscription), and any and all claims, debts, liabilities,
offsets, demands, costs, expenses, actions or causes of action of
every nature, character and description, without limitation in
law, equity or otherwise, of any kind or character whatsoever,
known or unknown, suspected or unsuspected, whether arising in
contract or tort, or at law, in equity, or pursuant to
administrative rule or regulation, arising out of, or in
connection with, the Loan.
(b) As used herein, "Lender Parties" shall mean
Lender, its participants, predecessors, successors and assigns
and its present and previous agents, attorneys, representatives,
subsidiaries, affiliates, officers, directors, and each of them.
(c) As used herein, "Warrant" shall mean that certain
Amended and Restated Stock Purchase Warrant dated January 14,
1999, issued by Guarantor to Lender.
2. Dismissal of Action. Concurrently with the
execution of this Agreement, counsel for the parties shall
execute and file with the Court an Order in the form attached
hereto as Exhibit B and incorporated herein by reference
dismissing the Action.
3. Settlement Payment. Concurrently with the
execution hereof, Guarantor shall pay Lender $50,000.00 via wire
transfer in accordance with the wiring instruction provided by
Lender.
4. Exercise of Warrant. Concurrently with the
execution hereof, Lender shall be deemed to have properly
exercised the Warrant and paid the Exercise Price (as defined in
the Warrant) by crediting the Exercise Price against the
indebtedness and obligations evidenced by the Note and Loan
Agreement. Guarantor shall execute and deliver to Lender a
certificate or certificates for 756,331 Shares (as defined in the
Warrant) in such names and denominations as are requested by
Lender.
5. Assignment of Promissory Notes and Collateral.
Concurrently with the execution hereof, Borrower shall execute
and deliver to Lender that Assignment of Notes and Collateral a
copy of which is attached hereto as Exhibit C (the "Assignment of
Notes").
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6. Subscription Agreement. Concurrently with the
execution hereof, Guarantor shall issue to Lender 1,700.00 shares
of its Series D Preferred Stock at an original issue price of
$1,000.00 per share (the "Issue Price"). The Issue Price shall
be paid by crediting the applicable amount against the
indebtedness and obligations evidenced by the Note and Loan
Agreement. Lender and Guarantor shall enter into a Subscription
Agreement a copy of which is attached hereto as Exhibit D (the
"Subscription").
7. Release of Lender. Guarantor and Borrower do
hereby release, acquit and forever discharge the Lender Parties
from any and all Claims that they ever had, now have, or might
hereafter have against such parties, for or by reason of any
matter, cause or thing whatsoever occurring on or prior to the
date hereof. Guarantor and Borrower agree not to commence, join
in or prosecute any suit or other proceeding in a position which
is adverse to any Lender Party arising directly or indirectly
from any matter released herein. Guarantor and Borrower
represent and warrant that they have not purported to transfer,
assign or otherwise convey any interest in any matter released
herein to any other person or entity and that their execution
hereof does not require the consent of or notice to any third
party. Guarantor and Borrower agree, jointly and severally, to
indemnify, defend (with counsel satisfactory to Lender) and hold
the Lender Parties harmless against any and all loss, liability,
claim or expense, including attorneys' fees, that any of them
might incur as a result of any breach of this Agreement by
Guarantor or Borrower or the assertion of any claim or defense by
Guarantor or Borrower.
8. Release of Guarantor. Lender does hereby release,
acquit and forever discharge Borrower, Guarantor and the
Subsidiaries from any and all Claims that it ever had, now has,
or might hereafter have against such party, for or by reason of
any matter, cause or thing whatsoever occurring on or prior to
the date hereof. Lender agrees not to commence, join in or
prosecute any suit or other proceeding in a position which is
adverse to Borrower, Guarantor or any Subsidiary arising directly
or indirectly from any matter released herein. Lender represents
and warrants that it has not purported to transfer, assign or
otherwise convey any interest in any matter released herein to
any other person or entity and that its execution hereof does not
require the consent of or notice to any third party. Lender
agrees to indemnify, defend (with counsel satisfactory to
Borrower, Guarantor and the Subsidiaries) and hold Borrower,
Guarantor and the Subsidiaries harmless against any and all loss,
liability, claim or expense, including attorneys' fees, that
Borrower, Guarantor and the Subsidiaries might incur as a result
of any breach of this Agreement by Lender or the assertion of any
claim or defense by Lender that should not have been raised by
virtue of this Agreement.
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9. Indemity. Borrower and Guarantor, jointly and
severally, agrees to indemnify, defend (with counsel satisfactory
to Lender) and hold Lender harmless against any and all loss,
liability, claim or expense, including attorneys' fees, that any
of them might incur as a result of the assertion of any Claim by
any Subsidiary.
10. Voluntary Agreement. The parties hereto are
represented by legal counsel of their choice, have investigated
fully their alternatives to the execution and performance of this
Agreement, are fully aware of the terms contained in this
Agreement and have voluntarily and without coercion or duress of
any kind entered into this Agreement.
11. Further Assurances. The parties hereto agree to
execute and deliver, and to cause their respective counsel to
execute and deliver, all such other instruments and documents,
and to take all such other action as any party hereto may
reasonably request from time to time without delay or the payment
of further consideration, to effectuate the settlement of the
pending litigation and the other obligations provided for in this
Agreement. The parties shall cooperate fully with each other and
their respective counsel in connection with any actions required
to be taken as part of their respective obligations under this
Agreement.
12. Capacity of Guarantor and Borrower. Guarantor
warrants that it is a duly organized corporation in good standing
under the laws of the state of its organization. Guarantor and
Borrower each warrants that the execution of all necessary
resolutions and other prerequisites of corporate action have been
duly performed so that the individual executing this Agreement
and related documents on behalf of such entity is duly authorized
to bind such entity by his or her signature.
13. Recitals. The parties hereto warrant and
represent that all the Recitals in this Agreement are true and
correct in all respects.
14. Time. Time is of the essence of this Agreement
and each provision of this Agreement.
15. Entire Agreement. This Agreement constitutes the
entire Agreement and understanding of the parties hereto
concerning the subject matter hereof and supersedes and replaces
all prior negotiations, proposed agreements, and all
understandings, inducements or conditions, express or implied,
either written or oral, which are not contained herein concerning
the subject matter of this Agreement.
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16. Binding Effect. This Agreement will inure to the
benefit of and bind the respective heirs, personal
representatives, successors and permitted assigns of the parties
hereto.
17. Severability. If any clause or provision of this
Agreement is determined to be illegal, invalid or unenforceable
under any present or future law by the final judgment of a court
of competent jurisdiction, the remainder of this Agreement will
not be affected thereby, except as expressly provided elsewhere
herein. It is the intention of the parties that if any such
provision is held to be illegal, invalid or unenforceable, there
will be added in lieu thereof a provision as similar in terms to
such provision as is legal, valid and enforceable.
18. Amendment. Neither this Agreement nor any of the
provisions hereof can be changed, waived, discharged or
terminated, except by an instrument in writing signed by the
party against whom enforcement of the change, waiver, discharge
or termination is sought.
19. Expenses. In the event legal action is commenced
to enforce or interpret any part of this Agreement, the
prevailing party shall be entitled to recover as an element of
its costs of suit and not as damages, reasonable attorney's fees
to be fixed by the court.
20. Governing Law. This Agreement will be interpreted
and construed under the internal laws of the State of Tennessee,
regardless of the domicile of any party.
21. Consent to Jurisdiction. Lender, Borrower and
Guarantor hereby irrevocably consents to the jurisdiction of the
United States District Court for the Middle District of Tennessee
and of all Tennessee state courts sitting in Davidson County,
Tennessee, for the purpose of any litigation to which Lender may
be a party and which concerns this Agreement. It is further
agreed that venue for any such action shall lie exclusively with
courts sitting in Davidson County, Tennessee, unless Lender
agrees to the contrary in writing.
22. Waiver of Jury Trial. LENDER, BORROWER AND
GUARANTOR HEREBY KNOWINGLY AND VOLUNTARILY WAIVES ANY RIGHT TO A
TRIAL BY JURY WITH REGARD TO ANY ACTIONS, PROCEEDINGS, CLAIMS OR
COUNTERCLAIMS, WHETHER IN CONTRACT OR IN TORT, AT LAW OR IN
EQUITY, OF ANY TYPE OR NATURE WHATSOEVER ARISING UNDER OR
CONCERNING THIS AGREEMENT.
23. Counterpart Execution. This Agreement may be
executed in counterparts, each of which will be deemed an
original document, but all of which will constitute a single
document. This document will not be binding on or constitute
evidence of a contract among the parties until such time as a
counterpart of this document has been executed by each party to
this Agreement.
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24. Headings. Paragraph or other headings contained
in this Agreement are for reference purposes only and are not
intended to affect in any way the meaning or interpretation of
this Agreement.
Dated as of the date stated above.
LENDER:
FINOVA MEZZANINE CAPITAL INC.,
formerly Sirrom Capital Corporation
By: /s/ Tim McCarthy
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Title: Vice President
GUARANTOR:
CORZON, INC., formerly Tanner's
Restaurant Group, Inc.
By:/s/ Larry Shatsoff
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Title: President
BORROWER:
HARTAN, INC.. successor by merger
to TRC Acquisition Corporation
By: /s/ Larry Shatsoff
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Title: Director
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EXHIBIT A
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Subsidiaries
1. THAT CHICKEN PLACE, INC.
2. TANNER'S/VININGS, INC.
3. TANNER'S OAKS, INC.
4. TANNER'S SPALDING, INC.
5. TANNER'S MILL, INC.
6. TANNER'S - LAWRENCEVILLE, INC.
7. TANNER'S - TUCKER, INC.
8. NORTHWEST STORE, INC., formerly Tanner's - Rome, Inc.
9. TANNER'S - LILBURN, INC.
10. TANNER'S - CATERING, INC.
11. CENTRAL ADMINISTRATION, INC., formerly Tanner's
Management, Inc.
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EXHIBIT B
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Agreed Order
Intentionally Left Blank
<PAGE>
EXHIBIT C
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ASSIGNMENT OF NOTES AND COLLATERAL
This Assignment of Notes and Collateral ("Assignment")
executed as of the 2nd day of November, 2000, by Hartan, Inc.
("Assignor"), a Texas corporation and successor by merger to TRC
Acquisition Corporation, in favor of FINOVA Mezzanine Capital
Inc. ("Assignee"), a Tennessee corporation formerly known as
Sirrom Capital Corporation.
For valuable consideration, the receipt and sufficiency
of which are acknowledged, Assignor hereby assigns, transfers and
conveys to Assignee all of Assignor's right, title and interest
in and to the following:
1. Promissory Note dated July 1, 1999, in the
original principal amount of Twenty-Two Thousand and
No/100 Dollars ($22,000.00) executed by ALTIM, LLC
("ALTIM") in favor of Assignor (the "ALTIM Note");
2. Guaranty Agreement dated July 1, 1999, executed by
William Alexander and Tim Peterson in favor of
Assignor;
3. Security Agreement dated July 1, 1999, executed by
ALTIM in favor of Assignor;
4. License Agreement dated July 1, 1999, executed by
Assignor and ALTIM;
5. Promissory Note dated August 29, 1999, in the
original principal amount of One Hundred Six Thousand
and No/100 Dollars ($106,000.00) executed by Stox, Inc.
("Stox") in favor of Assignor (the "Stox Note");
6. Guaranty Agreement dated August 29, 1999, executed
by Jeffrey S. Statts and Chris Allen Cox in favor of
Assignor;
7. Security Agreement dated July 1, 1999, executed by
Stox in favor of Assignor; and
8. Tanner's Catering License Agreement dated August
29, 1999, executed by Assignor and Stox.
The Stox Note and the ALTIM Note are hereinafter
referred to collectively as the "Notes". The foregoing documents,
excluding the Notes, are hereinafter referred to collectively as
the "Security Documents."
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Assignor further warrants and agrees as follows:
1. Title of Assignor. Assignor is the lawful holder
and owner of the Notes and of the obligations evidenced thereby,
and is the secured party and beneficiary under the Security
Documents. Neither the Notes nor Assignor's interest in any of
the Security Documents is subject to any prior assignment,
participation interest or other encumbrance of any kind, and
Assignor has the full power and right to execute this Assignment.
2. Lost Originals. Assignor warrants and represents
that it has lost or misplaced the Notes, that it has made a
diligent search for the Notes, and that, despite a diligent
search, the original Notes cannot be located. Assignor agrees
that in the event that an original Note is ever located by
Assignor, Assignor shall deliver the original Note to Assignee.
Assignor agrees to indemnify and hold Assignee harmless from any
and all loss, damages and costs resulting from the loss or
inability to locate the original Notes.
3. Further Assurances. Assignor agrees to provide
Assignee with all payment records, insurance certificates,
additional documents of assignment executed by Assignor in
recordable form, and any other documents pertaining to the Notes
and Security Documents that Assignee may request to fully
effectuate the assignment made herein.
4. Assigns. The warranties and agreements of
Assignor made herein shall inure to the benefit of the heirs,
successors and assigns of Assignee.
5. Applicable Law. The validity, construction and
enforcement hereof shall be determined according to the laws of
Tennessee applicable to contracts executed, delivered and
performed entirely within that state.
EXECUTED the date first written above.
HARTAN, INC.,
Assignor
By: /s/ Larry Shatsoff
----------------------
Title: Director
FINOVA MEZZANINE CAPITAL INC.,
Assignee
By: /s/ Tim McCarthy
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Title: Vice President
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EXHIBIT D
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SUBSCRIPTION AGREEMENT
This SUBSCRIPTION AGREEMENT ("Agreement") is issued as
of the 2nd day of November, 2000, by CORZON, INC., a Texas
corporation (the "Company"), to FINOVA MEZZANINE CAPITAL INC.
("FINOVA"), a Tennessee corporation.
RECITALS
WHEREAS, FINOVA, the Company and Hartan, Inc. have
executed that Settlement Agreement of even date herewith (the
"Settlement Agreement");
WHEREAS, pursuant to the Settlement Agreement, FINOVA
and the Company have agreed to enter into this Agreement;
Now, therefore, in consideration of the transactions
described in the Settlement Agreement, the sufficiency of which
is acknowledged, the parties hereby agree as follows:
1. Subscription. Pursuant to the Settlement
Agreement, the Company shall issue to FINOVA 1,700.00 shares of
the Company's Series D Convertible Preferred Stock, which stock
may be converted to shares of the Company's common stock ("Common
Stock"), on certain terms and conditions (the "Series D Preferred
Stock"). The Series D Preferred Stock is more fully described in
that Statement of Resolution Establishing Series of Preferred
Stock filed with the Texas Secretary of State on February 12,
1999, as such may have been amended by the terms of that certain
Action Taken by Unanimous Consent of the Directors of Corzon,
Inc. dated October 26, 2000 (the "Statement"). Notwithstanding
the provisions of the Statement, (i) FINOVA shall not convert the
Series D Preferred Stock into shares of the Company's Common
Stock until the expiration of one hundred eighty (180) days from
the date hereof, and (ii) eighty percent (80%) of the Market
Value of the Company's Common Stock for purposes of sections
4(d)(2) and 7 of the Statement shall not be less than $.03 per
share.
2. Limitation on Conversion. Notwithstanding the
provision hereof or of the Series D Preferred Stock, in no event
(except for the automatic conversion set forth in the Statement
upon the maturity of the Series D Preferred Stock) shall FINOVA
be entitled to convert any Series D Preferred Stock or shall the
Company have the obligation to convert all or any portion of the
Series D Preferred Stock to the extent that the sum of (i) the
shares of Common Stock to be issued to FINOVA upon such
conversion and (ii) the shares of Common Stock issued to FINOVA
upon any prior conversion that are beneficially owned by FINOVA
and its affiliates, exceed 4.99% of the outstanding shares of
Common Stock (excluding the shares of Common Stock which may be
deemed beneficially owned through the ownership of the
unconverted portion of the Series D Preferred Stock); provided,
however, FINOVA shall be released from the foregoing limitation
in the event the Company releases any other holder of Series D
Preferred Stock from a similar limitation contained in their
respective agreement with the Company. For purposes of this
provision, beneficial ownership shall be determined in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), except as otherwise provided in clause
(1) of such sentence.
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3. Redemption. At any time and from time to time
from and after the date hereof, the Company shall have the right
to redeem the Series D Preferred Stock in whole or in part (but
not any shares of common stock resulting from conversion) for the
Redemption Price (as hereinafter defined). If the Company elects
to redeem the Series D Preferred Stock within one hundred eighty
(180) days from the date hereof, the Redemption Price shall be
one hundred ten percent (110%) of the principal amount of the
Series D Preferred Stock purchased. If the Company elects to
redeem the Series D Preferred Stock more than one hundred eighty
(180) days from the date hereof but within two hundred seventy
(270) days from the date hereof, the Redemption Price shall be
one hundred fifteen percent (115%) of the principal amount of the
Series D Preferred Stock purchased. If the Company elects to
redeem the Series D Preferred Stock more than two hundred seventy
(270) days from the date hereof, the Redemption Price shall be
one hundred twenty percent (120%) of the principal amount of the
Series D Preferred Stock purchased. The Redemption Price shall
be wired to the holder of the Series D Preferred Stock within ten
(10) days after the Company provides written notice to the holder
of the exercise of its right to redeem. The right to redeem
under this Section 3 shall become null and void in the event the
Company does not wire the Redemption Price in accordance with the
foregoing sentence.
4. Representations, Warranties and Covenants of
FINOVA. FINOVA hereby represents, warrants and covenants as
follows:
(a) FINOVA has been given access to such
information as FINOVA deems necessary to evaluate a purchase of
the Series D Preferred Stock.
(b) FINOVA is an accredited investor, as that
term is defined under Regulation D of the Securities and Exchange
Commission ("SEC") promulgated under the Securities Act of 1933,
as amended (the "1933 Act"). FINOVA also represents, warrants
and covenants that, either alone or with its purchaser
representative, it has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits
and risks of the purchase of the Series D Preferred Stock.
(c) FINOVA is acquiring the Series D Preferred
Stock for FINOVA's own account, for investment purposes, with no
view toward distribution or resale of the Series D Preferred
Stock, and not for the interest of any other person and not for
resale to any other person.
(d) FINOVA understands that the Series D
Preferred Stock has not been registered under the 1933 Act or any
applicable state securities laws and, therefore, the Series D
Preferred Stock cannot be resold unless registered under the 1933
Act and any applicable state securities laws or an exemption from
registration is available, and that a legend will be placed on
the certificates representing the Series D Preferred Stock
stating that the Series D Preferred Stock has not been registered
under the 1933 Act and setting forth restrictions on the
transferability and sale of the Series D Preferred Stock. In any
transfer of the Series D Preferred Stock not so registered, the
Company may require FINOVA to deliver to the Company at FINOVA's
expense prior to such transfer, an opinion of counsel
satisfactory to the Company to the effect that such registration
is not required.
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(e) FINOVA is a bona fide resident of Tennessee
and maintains its principal offices there.
5. Stock Certificate Legends. The shares of Series D
Preferred Stock to be delivered in connection with the Settlement
Agreement will be issued in a transaction exempt from
registration under the Securities Act of 1933, as amended (the
"Securities Act") by reason of Section 4(2) thereof or Regulation
D promulgated thereunder, and the Company is relying on the
representations of FINOVA with respect to such exemption. FINOVA
understands and agrees that there will be placed on the
certificates for such shares, and for all certificates
representing shares of common stock into which such shares of
Series D Preferred Stock may be converted, a legend stating in
substances as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES ACTS AND AS A RESULT ARE
"RESTRICTED SECURITIES" AS THAT TERM IS
DEFINED IN RULE 144 UNDER THE SECURITIES ACT.
THE SHARES MAY BE OFFERED FOR SALE OR SOLD OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS, THE
AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO
THE SATISFACTION OF THE COMPANY.
6. Registration Rights.
(a) If at any time after the date hereof the Company
shall propose to file a registration statement with respect to
any of its Common Stock, it will give notice in writing to such
effect to the registered holder(s) of the Shares (as defined
below) at least thirty (30) days prior to such filing, and, at
the written request of any such registered holder, made within
ten (10) days after the receipt of such notice, will include
therein at the Company's cost and expense (including the fees and
expenses of counsel to such holder(s), but excluding underwriting
discounts, commissions and filing fees attributable to the Shares
included therein) such of the Shares as such holder(s) shall
request; provided, however, that if the offering being registered
by the Company is underwritten and if the representative of the
underwriters certifies in writing that the inclusion therein of
the Shares would materially and adversely affect the sale of the
securities to be sold by the Company thereunder, then the Company
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shall be required to include in the offering only that number of
securities, including the Shares, which the underwriters
determine in their sole discretion will not jeopardize the
success of the offering (the securities so included to be
apportioned pro rata among all selling shareholders according to
the total amount of securities entitled to be included therein
owned by each selling shareholder, but in no event shall the
total amount of Shares included in the offering be less than the
number of securities included in the offering by any other single
selling shareholder unless all of the Shares are included in the
offering).
(b) The Company and the holders of the Shares agree
that at any time after the expiration of ninety (90) days from
the date hereof, the holder(s) of the Shares may make a written
request of the Company to file a registration statement
registering for resale by the holder(s) of the Shares sufficient
number of its Common Stock for the holder(s) of the Shares to
sell the Shares. Such request shall specify the shares of Common
Stock proposed to be sold and the intended method of disposition
thereof. If the Company receives a properly made request for
registration of Common Stock pursuant to this Section 6(b), the
Company shall, at its expense, file a registration statement with
the Commission (as defined below) to effect the registration of
all such shares of Common Stock within ninety (90) days after
receipt of the initial request.
(c) Whenever the Company undertakes to effect the
registration of any of the Shares, the Company shall, as
expeditiously as reasonably possible:
(i) Prepare and file with the Securities and
Exchange Commission (the "Commission") a registration
statement covering such Common Stock and use its best
efforts to cause such registration statement to be
declared effective by the Commission as expeditiously
as possible and to keep such registration effective
until the earlier of (A) the date when all Shares
covered by the registration statement have been sold or
(B) one hundred eighty (180) days from the effective
date of the registration statement; provided, that
before filing a registration statement or prospectus or
any amendment or supplements thereto, the Company will
furnish to the holders of the securities covered by
such registration statement and the underwriters, if
any, copies of all such documents proposed to be filed
(excluding exhibits, unless any such person shall
specifically request exhibits), which documents will be
subject to the review of such holders and underwriters,
and the Company will not file such registration
statement or any amendment thereto or any prospectus or
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any supplement thereto (including any documents
incorporated by reference therein) with the Commission
if (A) the underwriters, if any, shall reasonably
object to such filing or (B) if information in such
registration statement or prospectus concerning a
particular selling holder has changed and such holder
or the underwriters, if any, shall reasonably object.
(ii) Prepare and file with the Commission such
amendments and post-effective amendments to such
registration statement as may be necessary to keep such
registration statement effective during the period
referred to in Section 6(c)(i) and to comply with the
provisions of the Securities Act with respect to the
disposition of all securities covered by such
registration statement, and cause the prospectus to be
supplemented by any required prospectus supplement, and
as so supplemented to be filed with the Commission
pursuant to Rule 424 under the Securities Act.
(iii) Furnish to the selling holder(s) such
numbers of copies of such registration statement, each
amendment thereto, the prospectus included in such
registration statement (including each preliminary
prospectus), each supplement thereto and such other
documents as they may reasonably request in order to
facilitate the disposition of the Shares owned by them.
(iv) Use its best efforts to register and qualify
under such other securities laws of such jurisdictions
as shall be reasonably requested by any selling holder
and do any and all other acts and things which may be
reasonably necessary or advisable to enable such
selling holder to consummate the disposition of the
Shares owned by such holder, in such jurisdictions;
provided, however, that the Company shall not be
required in connection therewith or as a condition
thereto to qualify to transact business or to file a
general consent to service of process in any such
states or jurisdictions.
(v) Promptly notify each selling holder of the
happening of any event as a result of which the
prospectus included in such registration statement
contains an untrue statement of a material fact or
omits any fact necessary to make the statements therein
not misleading and, at the request of any such holder,
the Company will prepare a supplement or amendment to
such prospectus so that, as thereafter delivered to the
purchasers of such Shares, such prospectus will not
contain an untrue statement of a material fact or omit
to state any fact necessary to make the statements
therein not misleading.
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(vi) Provide a transfer agent and registrar for
all such Shares not later than the effective date of
such registration statement.
(vii) Enter into such customary agreements
(including underwriting agreements in customary form
for a primary offering) and take all such other actions
as the underwriters, if any, reasonably request in
order to expedite or facilitate the disposition of such
Shares (including, without limitation, effecting a
stock split or a combination of shares).
(viii) Make available for inspection by any
selling holder or any underwriter participating in any
disposition pursuant to such registration statement and
any attorney, accountant or other agent retained by any
such selling holder or underwriter, all financial and
other records, pertinent corporate documents and
properties of the Company, and cause the officers,
directors, employees and independent accountants of the
Company to supply all information reasonably requested
by any such seller, underwriter, attorney, accountant
or agent in connection with such registration
statement.
(ix) Promptly notify the selling holder(s) and the
underwriters, if any, of the following events and (if
requested by any such person) confirm such notification
in writing: (A) the filing of the prospectus or any
prospectus supplement and the registration statement
and any amendment or post-effective amendment thereto
and, with respect to the registration statement or any
post-effective amendment thereto, the declaration of
the effectiveness of such documents, (B) any requests
by the Commission for amendments or supplements to the
registration statement or the prospectus or for
additional information, (C) the issuance or threat of
issuance by the Commission of any stop order suspending
the effectiveness of the registration statement or the
initiation of any proceedings for that purpose and (D)
the receipt by the Company of any notification with
respect to the suspension of the qualification of the
Shares for sale in any jurisdiction or the initiation
or threat of initiation of any proceeding for such
purposes.
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<PAGE>
(x) Cooperate with the selling holder(s) and the
underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing
the Shares to be sold and not bearing any restrictive
legends, and enable such Shares to be in such lots and
registered in such names as the underwriters may
request at least two (2) business days prior to any
delivery of the Shares to the underwriters.
(xi) Otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission,
and make generally available to its security holders
earnings statements satisfying the provisions of
Section 11(a) of the Securities Act, no later than
forty-five (45) days after the end of any twelve-month
period (or ninety (90) days, if such period is a fiscal
year) (A) commencing at the end of any fiscal quarter
in which the Shares are sold to underwriters in a firm
or best efforts underwritten offering, or (B) if not
sold to underwriters in such an offering, beginning
with the first month of the first fiscal quarter of the
Company commencing after the effective date of the
registration statement, which statements shall cover
such twelve-month periods.
(d) The Company's obligations above with respect to
each holder of Shares are expressly conditioned upon such
holder's furnishing to the Company in writing such information
concerning such holder and the terms of such holder's proposed
offering as the Company shall reasonably request for inclusion in
the registration statement. If any registration statement
including any of the Shares is filed, then the Company shall
indemnify each holder thereof (and each underwriter for such
holder and each person, if any, who controls such underwriter
within the meaning of the Securities Act) from any loss, claim,
damage or liability arising out of, based upon or in any way
relating to any untrue statement of a material fact contained in
such registration statement or any omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading, except for any such
statement or omission based on information furnished in writing
by such holder of the Shares expressly for use in connection with
such registration statement; and such holder shall indemnify the
Company (and each of its officers and directors who has signed
such registration statement, each director, each person, if any,
who controls the Company within the meaning of the Securities
Act, each underwriter for the Company and each person, if any,
who controls such underwriter within the meaning of the
Securities Act) and each other such holder against any loss,
claim, damage or liability arising from any such statement or
omission which was made in reliance upon information furnished in
writing to the Company by such holder of the Shares expressly for
use in connection with such registration statement.
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<PAGE>
(e) As used herein, "Shares" shall mean (i) Series D
Preferred Stock and/or the shares of common stock that result,
or would result, from the conversion of the Series D Preferred
Stock and (ii) the 2,562,694 shares of the Company's common stock
currently held by FINOVA (756,331 acquired pursuant to exercise
of a warrant and 1,806,363 acquired pursuant to a foreclosure
sale).
(f) FINOVA's rights under Section 6 of this Agreement
may only be assigned in whole or in part to one or more of its
partners or affiliates or to one or more transferees or assignees
of not less than twenty-five percent (25%) of all Shares,
provided that such transferee or assignee delivers to the Company
a written instrument by which such transferee or assignee agrees
to be bound by this Agreement to the same extent as if such
transferee or assignee was a party hereto.
(g) FINOVA shall not assign or transfer its Shares
that are subject to a registration statement filed by the Company
prior to the earlier of (i) registration statement becoming
effective or (ii) sixty (60) days from the filing of the
registration statement.
(h) For purposes of this Section 6, all of the Shares
shall be deemed to be issued and outstanding.
7. Representations and Warranties of the Company.
Recognizing that FINOVA will be relying on the information and on
the representations and warranties set forth herein, the Company
represents and warrants to FINOVA as follows:
(a) Organization. The Company is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Texas and has the corporate power and
authority to own or to hold under lease the properties it
purports to own or hold under lease and to carry on its business
as it is now being conducted or currently proposed to be
conducted. The Company is duly qualified as a foreign corporation
to do business, and is in good standing, in each jurisdiction
where the character of its properties owned or held under lease
or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified would not
individually or in the aggregate have a material adverse effect
on the business, assets, liabilities, results of operations or
financial condition of the Company (a "Company Material Adverse
Effect").
(b) Capitalization. The authorized capital stock
of the Company (the "Authorized Company Stock") consists of (i)
500,000,000 shares of Common Stock, $0.01 par value, and (ii)
5,000,000 shares of Preferred Stock, $1.00 par value, of which
3,000,000 shares are designated Series A Convertible Preferred
Stock (the "Series A Preferred Stock"), 1,000 shares are
8
<PAGE>
designated Series B Convertible Preferred Stock (the "Series B
Preferred Stock"), 1,000 shares are designated Series C
Convertible Preferred Stock (the "Series C Preferred Stock"),
20,000 shares are designated Series D Convertible Preferred Stock
(the "Series D Preferred Stock") and 745,000 shares are
designated Series E Convertible Preferred Stock (the "Series E
Preferred Stock"). All of the issued and outstanding Authorized
Company Stock are, and immediately prior to the effectiveness
hereof will be, validly issued, fully paid and nonassessable and
free of preemptive rights. All of the Shares issuable to the
FINOVA in accordance with this Agreement will be, when so issued,
duly authorized, validly issued, fully paid and nonassessable and
free of any liens, encumbrances or preemptive rights. The
Company hereby represents and warrants that the "Equity
Capitalization Information" attached hereto as Exhibit A
completely and accurately reflects and represents the capital
structure of the Company as of the date hereof and immediately
prior to issuance of the Series D Preferred Stock. Except as set
forth in the Equity Capitalization Information, as of the date
hereof, there are no shares of capital stock of the Company
issued or outstanding or any options, warrants, subscriptions,
calls, rights, convertible securities or other agreements or
commitments obligating the Company to issue, transfer, sell,
redeem, repurchase or otherwise acquire any shares of its capital
stock or securities.
(c) Authority Relative to this Agreement. The
Company has the corporate power and authority to enter into this
Agreement and the Settlement Agreement and to carry out its
obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement
and the Settlement Agreement and the consummation by the Company
of the transactions contemplated hereby and thereby have been
duly authorized by the Board of Directors of the Company and no
other corporate action or proceedings on the part of the Company
are necessary to authorize this Agreement or the Settlement
Agreement or the transactions contemplated hereby or thereby.
This Agreement and the Settlement Agreement have been duly and
validly executed and delivered by the Company and constitute
valid and binding agreements of the Company, enforceable against
the Company in accordance with their respective terms, subject to
bankruptcy, insolvency, reorganization, moratorium or similar
laws now or hereafter in effect relating to creditors' rights
generally or to general principles of equity.
9
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(d) Consents and Approvals; No Violations. No
filing with, and no permit, authorization, consent or approval
of, any public body or authority is necessary for the
consummation by the Company of the transactions contemplated by
this Agreement or the Settlement Agreement except for such
filings, permits, authorizations, consents or approvals, the
failure of which to be made or obtained would not individually or
in the aggregate have a Company Material Adverse Effect. Neither
the execution and delivery of this Agreement or the Settlement
Agreement by the Company, nor the consummation by the Company of
the transactions contemplated hereby or thereby, nor compliance
by the Company with any of the provisions hereof or thereof, will
(a) conflict with or result in any breach of any provisions of
the incorporation documents or By-Laws of the Company, (b) result
in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of
the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, agreement or other instrument or
obligation to which the Company is a party or by which it or any
of its properties or assets may be bound, or (c) violate any
order, writ, injunction, decree, statute, rule or regulation
applicable to the Company or any of its properties or assets,
except, in the case of clause (b) of this section, for
violations, breaches or defaults which would not individually or
in the aggregate have a Company Material Adverse Effect.
(e) Compliance with Applicable Law. The Company
is in compliance with all applicable laws (whether statutory or
otherwise), rules, regulations, orders, ordinances, judgments or
decrees of all governmental authorities (federal, state, local,
foreign or otherwise) (collectively, "Laws"), except where the
failure to be in such compliance would not individually or in the
aggregate have a Company Material Adverse Effect.
8. Article and Section Headings. Numbered and titled
article and section headings are for convenience only and shall
not be construed as amplifying or limiting any of the provisions
of this Agreement.
9. Notice. Any and all notices, elections or demands
permitted or required to be made under this Agreement shall be in
writing, signed by the party giving such notice, election or
demand and shall be delivered personally, telecopied, or sent by
certified mail or overnight via nationally recognized courier
service (such as Federal Express), to the other party at the
address set forth below, or at such other address as may be
supplied in writing and of which receipt has been acknowledged in
writing. The date of personal delivery or telecopy or two (2)
business days after the date of mailing (or the next business day
after delivery to such courier service), as the case may be,
shall be the date of such notice, election or demand. For the
purposes of this Agreement:
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The Address of Holder is:
FINOVA Mezzanine Capital Inc.
Suite 200
500 Church Street
Nashville, TN 37219
Attention: Tim McCarthy
Telecopy No. 615/242-0842
with a copy to: Boult, Cummings, Conners &
Berry, PLC
Suite 1600
414 Union Street
Nashville, TN 37219
Attention: Roger G. Jones
Telecopy No. 615/252-6323
The Address of Company is:
Corzon, Inc.
1087 Broad Street
Suite 402
Bridgeport, Connecticut 06604
with a copy to: David A.Wisniewski
Nelson, Mullins, Riley &
Scarborough
First Union Plaza, Suite 1400
999 Peachtree Street, N.E.
Atlanta, Georgia 30309
10 Severability. If any provisions(s) of this
Agreement or the application thereof to any person or
circumstances shall be invalid or unenforceable to any extent,
the remainder of this Agreement and the application of such
provisions to other persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent
permitted by law.
11 Entire Agreement. This Agreement between the
Company and FINOVA represents the entire agreement between the
parties concerning the subject matter hereof, and all oral
discussions and prior agreement are merged herein.
12 Governing Law and Amendments. This Agreement
shall be construed and enforced under the laws of the State of
Tennessee applicable to contracts to be wholly performed in such
State. No amendment or modification hereof shall be effective
except in a writing executed by each of the parties hereto.
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13 Counterparts. This Agreement may be executed in
any number of counterparts and be different parties to this
Agreement in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken
together shall constitute one and the same Agreement.
14 Consent to Jurisdiction; Exclusive Venue. The
Company hereby irrevocably consents to the jurisdiction of the
United States District Court for the Middle District of Tennessee
and of all Tennessee state courts sitting in Davidson County,
Tennessee, for the purpose of any litigation to which Holder may
be a party and which concerns this Agreement. It is further
agreed that venue for any such action shall lie exclusively with
courts sitting in Davidson County, Tennessee, unless FINOVA
agrees to the contrary in writing.
15 Binding Effect. This Agreement will inure to the
benefit of and bind the respective heirs, personal
representatives, successors and permitted assigns of the parties
hereto.
16 Waiver of Trial by Jury. FINOVA AND THE COMPANY
HEREBY KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COUNSEL
WAIVE TRIAL BY JURY IN ANY ACTIONS, PROCEEDINGS, CLAIMS OR
COUNTER-CLAIMS, WHETHER IN CONTRACT OR TORT OR OTHERWISE, AT LAW
OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATING TO THIS
AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have set their
hands as of the date first above written.
CORZON, INC.,
By: /s/ Larry Shatsoff
----------------------
Title: President
FINOVA MEZZANINE CAPITAL INC.
By: Tim McCarthy
-------------------------------
Title: Vice President
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EXHIBIT A
---------
CORZON, INC.
Equity Capitalization Information
Number Common Stock
Security Outstanding Equivalents
------------------------- ----------- ---------------
Common stock 71,746,643 71,746,643
Series A preferred stock 446,410 1,205,307 (1)
Series D preferred stock 8,835.5 220,887,500 (2)
Series E preferred stock 744,500 2,978,000
Common stock purchase warrants 5,086,131 (3) 5,086,131
Series A preferred stock
purchase warrants 1,723,400 (4) 4,653,180
Options 2,216,625 2,216,265
Convertible Debentures 3 123,097,387 (2)
---------------------- --------- -----------
Total 431,870,413 (2)
(1) Each share of Series A preferred stock is convertible into
2.7 shares of common stock.
(2) Assumes a hypothetical common stock market price of $.05 per
share.
(3) Includes:
- 2,300,000 publicly-traded common stock purchase warrants
exercisable at an exercise price of $4.00 per share,
- warrants to purchase 300,000 shares of common stock we granted
to the underwriter of our 1996 initial public offering at
exercise prices of $4.00 and $6.60 per share,
- warrants to purchase 135,000 shares of common stock at an
exercise price equal to 110% of the average closing bid price of
the common stock for the five trading days ending on the most
recent annual anniversary of the date of issuance (subject to
certain adjustments), which we issued to Sterling Capital, LLC in
connection with our sale of Series B preferred stock,
- warrants to purchase 300,000 shares at an exercise price of
$2.50 per shares that we have agreed to issue to J. P. Carey
Securities, Inc.,
- warrants to purchase 175,000 shares of common stock at an
exercise price of $.04 per share that we have issued to two of
our lenders in exchange for their agreement to extend the
maturity dates of our loans to them,
- FINOVA's warrants to purchase 699,259 shares (increasing to
756,331 shares on October 22, 2000) at an exercise price of $.01
per share,
- warrants to purchase 919,800 shares of common stock at an
exercise price of $2.00 per share that have been issued to the
holders of Series D preferred stock, and
- warrants to acquire 200,000 shares of common stock, with
exercise prices of $16.00 and $10.63 per share, that were granted
to the underwriters of our 1997 public offering of Series A
preferred stock.
(4) Includes 1,723,400 publicly-traded warrants to purchase
shares of Series A preferred stock at an exercise price of $10.50
per share that were granted to the underwriters of our 1997
public offering of Series A preferred stock.
(5) Includes shares issuable upon exercise of options granted
under the TRC 1996 Employee Stock Option Plan.
