SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934 (Amendment No. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule
14(a)-12
THE GREAT AMERICAN BACKRUB STORE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) filing Proxy Statement, if other than Registrant)
Payment of filing fee (check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or
14a- 6(i)(2) or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
<PAGE>
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
-2-
<PAGE>
THE GREAT AMERICAN BACKRUB STORE, INC.
July 12, 1996
Dear Shareholders:
You are cordially invited to attend the 1996 Annual Meeting of
Shareholders of The Great American BackRub Store, Inc., which will be held at
the offices of Olshan Grundman Frome & Rosenzweig LLP, 505 Park Avenue, New
York, New York 10022, on Monday, August 12, 1996, at 10:00 a.m., local time.
Information about the Annual Meeting, including a listing and
discussion of the matters on which the Shareholders will act, may be found in
the enclosed Notice of Annual Meeting and Proxy Statement.
We hope that you will be able to attend the Annual Meeting.
However, whether or not you anticipate attending in person, I urge you to
complete, sign and return the enclosed proxy card promptly to ensure that your
shares will be represented at the Annual Meeting. If you do attend, you will, of
course, be entitled to vote in person, and if you vote in person such vote will
nullify your proxy.
Sincerely,
/s/ WILLIAM ZANKER
------------------
WILLIAM ZANKER
Chairman of the Board and President
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. PLEASE
READ THE ATTACHED PROXY STATEMENT CAREFULLY, AND COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED
ENVELOPE.
<PAGE>
THE GREAT AMERICAN BACKRUB STORE, INC.
425 Madison Avenue, Suite 605
New York, New York 10017
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
August 12, 1996
----------------------
To the Shareholders of
THE GREAT AMERICAN BACKRUB STORE, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of THE
GREAT AMERICAN BACKRUB STORE, INC., a New York corporation (the "Company"), will
be held at the offices of Olshan Grundman Frome & Rosenzweig LLP, 505 Park
Avenue, New York, New York 10022, on Monday, August 12, 1996 at 10:00 a.m.,
local time, for the following purposes:
1. To elect seven (7) members of the Board of Directors of the
Company to serve until the next annual meeting of shareholders
and until their successors have been duly elected and shall
have qualified;
2. To approve an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of
the Company's Common Stock from ten million (10,000,000)
shares to twenty million (20,000,000) shares and to authorize
the issuance by the Company of up to fifteen million
(15,000,000) shares of Preferred Stock;
3. To ratify the appointment of BDO Seidman, LLP as independent
auditors of the Company for the year ending December 31, 1996;
and
4. To transact such other business as may properly come before
the Annual Meeting or any adjournments thereof.
Only shareholders of record at the close of business on July 2, 1996
are entitled to notice of, and to vote at, the Annual Meeting.
By Order of the Board of Directors
KEITH DEE,
Secretary
New York, New York
July 12, 1996
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL
MEETING YOU ARE URGED TO FILL IN, DATE, SIGN AND RETURN THE
ENCLOSED PROXY IN THE ENVELOPE THAT IS PROVIDED,
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
THE GREAT AMERICAN BACKRUB STORE, INC.
425 Madison Avenue, Suite 605
New York, New York 10017
-------------------------
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
August 12, 1996
-------------------------
INTRODUCTION
This Proxy Statement is furnished to the shareholders of THE GREAT
AMERICAN BACKRUB STORE, INC., a New York corporation (the "Company"), in
connection with the solicitation by the Board of Directors of the Company of
proxies ("Proxies") for the Annual Meeting of Shareholders (the "Annual
Meeting") to be held at the offices of Olshan Grundman Frome & Rosenzweig LLP,
505 Park Avenue, New York, New York 10022, on Monday, August 12, 1996 at 10:00
a.m., local time, or at any adjournments thereof. The approximate date on which
this Proxy Statement and the accompanying Proxy will be first sent or given to
shareholders is July 12, 1996.
RECORD DATE AND VOTING SECURITIES
The voting securities of the Company outstanding on July 2, 1996
consisted of 2,014,342 shares of common stock, $.001 par value ("Common Stock"),
entitling the holders thereof to one vote per share. Only shareholders of record
as at that date are entitled to notice of and to vote at the Annual Meeting or
any adjournments thereof. A majority of the outstanding shares of Common Stock
present in person or by proxy is required for a quorum.
PROXIES AND VOTING RIGHTS
Shares of Common Stock represented by Proxies, in the accompanying form
of Proxy, which are properly executed, duly returned and not revoked, will be
voted in accordance with the instructions contained therein. If no specification
is indicated on the Proxy, the shares represented thereby will be voted (i) for
the election as directors of the persons who have been nominated by the Board of
Directors, (ii) to approve an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
ten million (10,000,000) shares to twenty million (20,000,000) shares and to
authorize the issuance by the Company of up to fifteen million (15,000,000)
shares of preferred stock, $.001 par value ("Preferred Stock"), (iii) to ratify
the appointment of BDO Seidman, LLP as independent auditors of the Company for
the year ending December 31, 1996 and (iv) for any other matter that may
properly come before the Annual Meeting in accordance with the judgment of the
person or persons voting the Proxy.
The execution of a Proxy will in no way affect a shareholder's right to
attend the Annual Meeting and vote in person. Any Proxy executed and returned by
a shareholder may be revoked at any time thereafter if written notice of
revocation is given to the Secretary of the Company prior to the vote to be
taken at the Annual Meeting or by execution of a subsequent Proxy which is
presented to the Annual Meeting, or if the shareholder attends the Annual
Meeting and votes by ballot, except as to any matter or matters upon which a
vote shall have been cast pursuant to the authority conferred by such Proxy
prior to such revocation. Broker "non-votes" and the shares of Common Stock as
to which a shareholder abstains are included for purposes of determining the
presence or absence of a quorum for the transaction of business at the Annual
Meeting. A broker "non-vote" occurs when a nominee holding shares for a
beneficial owner does not vote on a particular proposal because the nominee does
not have discretionary voting power with respect to that item and has not
received instructions from the beneficial owner. Broker "non-votes" are not
counted for purposes of determining whether a proposal has been approved and,
therefore, do not have the effect of votes in opposition in such tabulations. An
abstention from voting on a matter or a Proxy instructing that a vote be
withheld has the same effect as a vote against a matter since it is one less
vote for approval.
<PAGE>
All expenses in connection with this solicitation will be borne by the
Company. It is expected that solicitations will be made primarily by mail, but
officers, directors, employees or representatives of the Company may also
solicit Proxies by telephone, telegraph or in person, without additional
compensation. The Company will, upon request, reimburse brokerage houses and
persons holding shares in the names of their nominees for their reasonable
expenses in sending solicitation material to their principals.
SECURITY OWNERSHIP
The following table sets forth information concerning ownership of the
Company's Common Stock, as at July 2, 1996, by (i) each Director, (ii) each
executive officer, (iii) all Directors and executive officers as a group and
(iv) each person known to the Company to be the beneficial owner of more than
five percent of the Common Stock.
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial
Ownership(2) Percent of Class(3)
Name and Address(1) -------------------- ---------------------
-------------------
<S> <C> <C>
Laidlaw Holdings, Inc................................................ 334,152 (4) 16.7
100 Park Avenue
New York, New York 10017
Laidlaw Equities, Inc................................................ 6,064 *
100 Park Avenue
New York, New York 10017
The William Zanker Trust............................................. 63,562 (5) 3.2
Debbie Dworkin....................................................... 63,562 (6) 3.2
William Zanker....................................................... 243,562 (7) 11.2
Terrance C. Murray................................................... 239,375 (8) 11.0
Stephen Seligman..................................................... 11,667 (9) *
Andrew L. Hyams...................................................... 72,104(10) 3.6
Edward E. Faber...................................................... 6,667(11) *
Donald R. Fleischer.................................................. 22,292(12) 1.1
Peter Hanelt......................................................... 6,667(11) *
Keith Dee............................................................ 45,000(13) 2.2
Clive Kabatznik...................................................... 113,500(14) 5.4
2665 South Bayshore Drive
Coconut Grove, Florida 33133
Cumberland Associates................................................ 130,000 6.5
1114 Avenue of the Americas
New York, New York 10036
All executive officers and Directors as a group (8 persons).......... 583,772(15) 23.9
</TABLE>
- -------------------------
* less than 1%
(1) Unless otherwise indicated, the address of each beneficial owner is c/o
the Company, 425 Madison Avenue, New York, New York 10017.
(2) Beneficial ownership has been determined in accordance with Rule 13d-3
under the Exchange Act ("Rule 13d-3") and unless otherwise indicated,
represents shares for which the beneficial owner has sole voting and
investment power.
(3) The percentage of class if calculated in accordance with Rule 13d-3 and
assumes that the beneficial owner has exercised any options or other
rights to subscribe which are exercisable within sixty (60) days and
that no other options or rights to subscribe have been exercised by
anyone else.
-2-
<PAGE>
(4) These shares consist of (i) 328,088 shares held by Laidlaw Holdings,
Inc. and (ii) 6,064 shares held by its subsidiary, Laidlaw Equities,
Inc.
(5) A family trust for the benefit of William Zanker's children. Debbie
Dworkin, the wife of William Zanker, the Company's Chairman of the
Board and President, and Andrew L. Hyams are the Trustees of this trust
and share voting and dispositive power with respect to the shares owned
by this trust.
(6) Debbie Dworkin is the wife of William Zanker, the Company's Chairman of
the Board and President. These shares consist of 63,562 shares held by
The William Zanker Trust.
(7) These shares consist of (i) 63,562 shares held by The William Zanker
Trust, and (ii) 180,000 shares issuable upon the exercise of options.
Mr. Zanker disclaims any beneficial ownership of the shares held by the
trust.
(8) Includes 180,000 shares issuable upon the exercise of options.
(9) These shares consist of (i) 5,000 shares held by Stephen Seligman and
his wife, Beth Greer, as joint tenants with right of survivorship and
(ii) 6,667 shares issuable upon the exercise of options.
(10) Andrew L. Hyams, by virtue of his shared voting and dispositive power
as Trustee over the shares held by The William Zanker Trust, may be
deemed the beneficial owner of 63,562 shares, representing the share
holdings of the trust. Mr. Hyams and his wife, Tracey Hyams, also hold
1,875 shares as joint tenants with right of survivorship. In addition,
these shares include 6,667 shares issuable upon the exercise of
options.
(11) Represents 6,667 shares issuable upon the exercise of options.
(12) These shares consist of (i) 3,125 shares held by Mr. Fleischer, (ii)
6,667 shares issuable upon the exercise of options and (iii) 12,500
shares issuable upon the exercise of certain warrants.
(13) Represents 45,000 shares issuable upon the exercise of options.
(14) Includes (i) 86,000 shares issuable upon the exercise of options and
(ii) 27,500 shares held by Colonial Capital Corp. of which Mr.
Kabatznik is the President.
(15) Includes 444,168 shares issuable upon the exercise of options.
----------------------------
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Directors of the Company hold office until the next annual meeting of
shareholders or until their successors are elected and qualified. Directors
shall be elected by a plurality of the votes cast, in person or by proxy, at the
Annual Meeting. If no contrary instructions are indicated, Proxies will be voted
for the election of William Zanker, Terrance C. Murray, Stephen Seligman, Edward
E. Faber, Andrew L. Hyams, Donald R. Fleischer and Peter Hanelt, the seven
nominees of the Board of Directors. All of the nominees are currently Directors
of the Company. The Company does not expect that any of the nominees will be
unavailable for election, but if that should occur before the Annual Meeting,
the Proxies will be voted in favor of the remaining nominees and may also be
voted for a substitute nominee or nominees selected by the Board of Directors.
-3-
<PAGE>
The names of the nominees and certain information concerning them are
set forth below:
Name Age Position(s) with the Company
- ---- --- ----------------------------
William Zanker 40 Chairman of the Board and President
Terrance C. Murray 46 Chief Executive Officer and Director
Stephen Seligman 40 Director
Edward E. Faber 61 Director
Andrew L. Hyams 40 Director
Donald R. Fleischer 40 Director
Peter Hanelt 50 Director
WILLIAM ZANKER founded the Company in December 1992 and has served as
the Chairman of the Board of Directors and President since that time. Prior to
founding the Company, Mr. Zanker was the founder and from 1980 to December 1991
the Chairman of the Board of Directors and Chief Executive Officer of The
Learning Annex, Inc., a national chain offering short, inexpensive educational
programs in a variety of subjects. In December 1991, an involuntary petition in
bankruptcy was filed against The Learning Annex, Inc. (Case No. 91-B-12582
(SDNY)). From December 1991 to December 1992, Mr. Zanker was a consultant to The
Learning Annex, Inc.
TERRANCE C. MURRAY has been a director and Chief Executive Officer of
the Company since December 1993. From February 1993 through November 1993, Mr.
Murray was a management consultant. From May 1991 through January 1993, Mr.
Murray was Executive Vice President, Operations of Supercuts, Inc., a national
chain of company-owned and franchised hair care salons with headquarters in San
Francisco, California. From July 1985 through April 1991, Mr. Murray was an
attorney with the law firm Foley, McIntosh & Foley located in Albany,
California.
STEPHEN SELIGMAN has been a director of the Company since February
1994. He has been Chief Executive Officer of The Learning Annex - California
from January 1991 to the present. From October 1989 through December 1990, Mr.
Seligman was Chief Executive Officer of The Learning Annex - New York. From 1986
through September 1989, Mr. Seligman was Chief Operating Officer of Hema Systems
Limited, a blood service management company located in New York, New York.
EDWARD E. FABER became a director of the Company on March 7, 1995. Mr.
Faber was the President, Chief Executive Officer and Deputy Chairman of the
Board of Directors of Supercuts, Inc. from June 1991 until he retired from
active management in December 1992. During his tenure at Supercuts, Mr. Faber
had primary responsibility for franchise development and marketing. From 1976
through January 1990, he held various executive positions with ComputerLand,
including President from 1976 to 1983, President and Chief Executive Officer
from 1985 to 1986, Chairman and Chief Executive Officer from 1986 until
Computerland was sold in 1987, and Vice Chairman from 1987 to January 1990. From
February 1990 to April 1991, he was Chairman and Chief Executive Officer of
Dataphaz, a ComputerLand franchisee, which was sold to ComputerLand.
Additionally, from 1957 to 1969, Mr. Faber held various positions with
International Business Machines. Mr. Faber also served as an officer in the
United States Marine Corps.
-4-
<PAGE>
ANDREW L. HYAMS became a director of the Company on March 7, 1995. Mr.
Hyams has been a strategic planner for the Boston Department of Health and
Hospitals since September 1992 and since June 1991 has been in private law
practice in health law and policy in Massachusetts. From September 1990 to May
1991, he attended the Harvard School of Public Health. From 1985 to August 1990,
he served as general counsel to the Massachusetts Board of Registration in
Medicine. Mr. Hyams has practiced law in New York and Massachusetts in both the
public and private sectors, specializing in health law and regulation and has
written and lectured in this field. Mr. Hyams is also a visiting lecturer at the
Harvard School of Public Health. Mr. Hyams holds law and public health degrees
from Harvard Law School and Harvard School of Public Health, respectively.
DONALD R. FLEISCHER became a director of the Company on March 7, 1995.
In 1981, Mr. Fleischer co-founded First Moments, Inc., an advertising firm which
is a leader in the marketing and delivery of sample kits to targeted groups, and
has served as its Executive Vice President since then. Mr. Fleischer is also
President of Additions, Inc., which specializes in direct marketing, contract
packaging and product fulfillment.
PETER HANELT became a director of the Company on March 7, 1995. Mr.
Hanelt has been Chief Operating Officer and Chief Financial Officer of Esprit de
Corp., an international women's apparel manufacturer and retailer, since October
1993, and was a consultant in the development of Esprit's turnaround strategy
between April and October 1993. During his nineteen-year career in operations
and finance, Mr. Hanelt has held a number of Chief Operating Officer and Chief
Financial Officer positions with such companies as Post Tool, Inc., a
multi-store, multi-state retail chain (from September 1990 to December 1992);
Sam & Libby, Inc., retailer and wholesaler of women's shoes (from February 1990
to August 1990); and Manetti-Farrow, Inc., the exclusive U.S. wholesaler for
Gucci, Fendi and Mark Cross accessories and leather goods (from 1983 to January
1990). In addition, Mr. Hanelt held executive financial positions at various San
Francisco hospitals, where he was responsible for a public bond refinancing and
negotiation of a hospital affiliation. He was a certified public accountant with
Deloitte & Touche in San Francisco from 1975 to 1979. Mr. Hanelt received his
undergraduate degree from the U.S. Military Academy at West Point in 1967, and
his M.B.A. from the University of California at Berkeley in 1975.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company formally met on three occasions
during the year ended December 31, 1995. From time to time during such fiscal
year, the members of the Board acted by unanimous written consent. Each of the
directors attended (or participated by telephone conference in) more than 75% of
the aggregate of such meetings of the Board of Directors and Committees on which
he served during the year ended December 31, 1995. The Board of Directors has
authorized an Executive Committee, an Audit Committee, and a Compensation
Committee (which also functions as the Stock Option Committee). The Executive
Committee members are William Zanker, Terrance Murray and Stephen Seligman. The
Audit Committee members are Donald Fleischer, Peter Hanelt (Chairman) and
Stephen Seligman. The Compensation Committee members are Andrew Hyams (Chairman)
and Edward Faber. Only independent directors will be appointed to the Audit and
Compensation Committees.
The Executive Committee is permitted to meet, and act, in lieu of a
meeting of the entire Board of Directors, except as provided by law. The
Executive Committee held no meetings during the year ended December 31, 1995.
The Audit Committee reviews, analyzes and makes recommendations to the Board of
Directors with respect to the Company's compensation and accounting policies,
controls and statements and coordinates with the Company's independent public
accountants. The Audit Committee held no meetings during the year ended December
31, 1995. The Compensation Committee reviews, analyzes and makes recommendations
to the Board of Directors regarding compensation of Company directors,
employees, consultants and others, including grants of stock options. The
Compensation Committee held no meetings during the year ended December 31, 1995.
From time to time during the year ended December 31, 1995, the members of the
Compensation Committee acted by unanimous written consent. The Company does not
have a standing nominating committee or a committee which serves nominating
functions.
-5-
<PAGE>
BOARD OF DIRECTORS COMPENSATION
Each Director who is not an employee of the Company receives $1,000 for
each Board or committee meeting attended. Employees of the Company receive no
additional compensation for service as a Director. All Directors are reimbursed
for their reasonable out-of-pocket expenses incurred in connection with their
duties to the Company.
The Company granted options to purchase 10,000 shares of Common Stock
to each of Messrs. Seligman, Faber, Hyams, Fleischer and Hanelt on March 7,
1995. The options have a per share exercise price of $5.00 and vest one-third
upon issuance, one-third on March 7, 1996 and one-third on March 7, 1997.
EXECUTIVE COMPENSATION
The following table sets forth, for the fiscal years indicated, all
compensation awarded to, earned by or paid to the chief executive officer
("CEO") of the Company and the Chairman of the Board of the Company. There is no
other executive officer of the Company whose salary and bonus exceeded $100,000
with respect to the fiscal years ended December 31, 1995, December 31, 1994 and
December 31, 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------- ----------------------
Awards
Name and Principal Position Year Salary($) Options (#)
- --------------------------- ---- --------- -----------
<S> <C> <C> <C>
William Zanker 1993 * --
Chairman of the Board 1994 * 120,000
1995 108,308 100,000
Terrance Murray 1993 * --
Chief Executive Officer 1994 * 120,000
1995 108,308 100,000
</TABLE>
- --------------
* Mr. Zanker and Mr. Murray did not receive any compensation for 1993 or
1994.
The following table sets forth certain information regarding stock
option grants made to each of the Executive Officers named in the Summary
Compensation Table during the year ended December 31, 1995.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------------------------------
Number of Shares
of Common Stock % of Total Options
underlying Options Granted to Employees Exercise or Base Expiration
Name Granted (#) in Fiscal Year Price ($/Share) Date
---- ----------- -------------- --------------- ----
<S> <C> <C> <C> <C>
William Zanker 100,000 21.5% $1.875 7/18/00
Terrance C. Murray 100,000 21.5% $1.875 7/18/00
</TABLE>
-6-
<PAGE>
The following table provides certain information regarding unexercised
stock options held by each of the Executive Officers named in the Summary
Compensation Table as of December 31, 1995. No stock options were exercised by
any such officer during the fiscal year ended December 31, 1995.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Unexercised
Options at Fiscal Year End (#) Value of Unexercised in-the-Money Options ($)
Name Exercisable/Unexercisable Exercisable/Unexercisable
-------------------------------------------- --------------------------------------------
<S> <C> <C>
William Zanker 140,000/80,000 $205,000/10,000
Terrance C. Murray 140,000/80,000 $205,000/10,000
</TABLE>
LONG-TERM INCENTIVE PLANS
The Company does not have any long-term incentive or defined benefit
pension plans.
EMPLOYMENT AGREEMENTS
The Company has entered into an agreement with Mr. Zanker pursuant to
which he is employed full-time as the President of the Company for a term of
three years, commencing as of November 1, 1994. Mr. Zanker will be required to
devote substantially all of his business time and attention to the affairs of
the Company. Mr. Zanker will receive an annual base salary of $120,000 for the
first two years of the agreement. The salary for the third year will be set by
the Compensation Committee of the Company's Board of Directors. Mr. Zanker will
also be entitled to receive an annual bonus, if, when and as may be determined
by the Company's Board of Directors. In addition, Mr. Zanker will receive a
bonus ("Performance Bonus") of $100,000 payable anytime during the initial term
of the employment agreement upon (i) the opening of an aggregate of 40
Company-owned and/or franchised stores or (ii) the Common Stock trading at
$10.00 per share for 30 consecutive trading days at any time after August 28,
1995, or (iii) the Company's revenues for any of the years ended December 31,
1995, 1996 or 1997 equalling or exceeding $12.5 million, exclusive of revenues
from acquired companies. The employment agreement contains a non-compete
provision during the term of the agreement and for two years thereafter. In
addition, Mr. Zanker shall be entitled to receive such benefits as are generally
provided from time to time by the Company to its senior management employees, as
well as to participate in the Company's stock option plan as may from time to
time be in effect.
The Company has entered into a three-year employment agreement with Mr.
Murray similar to that of Mr. Zanker, commencing November 1, 1994, containing
generally the same terms and conditions as provided for above; provided,
however, that Mr. Murray shall be entitled to receive a Performance Bonus of
$130,000 payable on the achievement of the same performance criteria as
described above. Mr. Murray's employment agreement provides for Mr. Murray to be
employed as Chief Executive Officer.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission (the "Commission"). Officers, directors and greater than ten percent
shareholders are required by the Commission's regulations to furnish the Company
with copies of all Section 16(a) forms they file.
-7-
<PAGE>
Based solely on review of copies of such forms furnished to the
Company, or written representations that no Form 5's were required, the Company
believes that during the year ended December 31, 1995, except as described
below, all Section 16(a) filing requirements applicable to its officers,
directors and greater than ten-percent beneficial owners were complied with.
Messrs. Zanker, Murray and Dee each failed to timely file one Form 4
reflecting the grant of options to purchase Common Stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
A former officer of the Company owned a 12.5% limited partnership
interest in a franchise which was terminated during 1995. As part of the
termination agreement, this limited partnership received $25,000 and 18,185
shares of Company common stock with a market value of approximately $55,000 on
the date the franchise termination agreement was executed.
At December 31, 1994, the Company had a non-interest bearing demand
note payable due to an officer of $15,000 and had amounts due to officers for
unreimbursed expenses of $67,040. These amounts were paid during the year ended
December 31, 1995.
In December 1994, each of Messrs. Zanker and Murray waived their
respective salaries which have accrued since January 1994 in the aggregate
amount of $220,000 as of December 31, 1994 and worked without salary until March
1, 1995. Each has been subsequently compensated in accordance with the terms of
their respective employment agreements.
On March 9, 1995, the Company entered into a consulting agreement with
A. Clinton Allen (the "Consulting Agreement"). Pursuant to such agreement, Mr.
Allen was paid $3,000 per month, plus expenses. In addition, the Company granted
to Mr. Allen options to purchase 100,000 shares of Common Stock exercisable for
a period of 10 years at a price of $5.00 per share and was to grant to Mr. Allen
an option to purchase 25,000 shares of Common Stock at the beginning of each
calendar year during the term of the Consulting Agreement. Mr. Allen became a
director of the Company on March 9, 1995. On December 18, 1995, Mr. Allen
resigned from his position as a member of the Board of Directors of the Company
and the Consulting Agreement was terminated.
On December 7, 1995, the Company entered into an option agreement (the
"Option Agreement") with Laidlaw Equities, Inc. and Laidlaw Holdings, Inc.
("Laidlaw") pursuant to which Laidlaw granted the Company an option (the "First
Option") to purchase 100,000 shares of Common Stock (the "First Option Shares")
and an option (the "Second Option" and together with the First Option, the
"Options") to purchase 375,000 shares of Common Stock (the "Second Option
Shares" and together with the First Option Shares, the "Option Shares"). The
First Option may be exercised in whole or in part, at any time or from time to
time, prior to September 7, 1996 (the "Expiration Date"), after which the First
Option, to the extent not previously exercised, will expire. The exercise price
for the First Option shall be $4.00 per share.
The Second Option may be exercised in whole or in part, at any time or
from time to time, prior to the Expiration Date, after which the Second Option,
to the extent not previously exercised, will expire. The exercise price for the
Second Option shall be $4.00 per share.
The Option Agreement may be assigned by the Company, at any time or
from time to time in whole or in part, without the consent of Laidlaw as to any
of the Options which are simultaneously therewith being exercised by any such
assignee.
On April 9, 1996, Laidlaw and Investors Associates, Inc. ("IA") entered
into an agreement whereby Laidlaw granted IA an option to purchase the First
Option Shares at an exercise price of $3.00 per share at any time to and
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including May 9, 1996 and the Company simultaneously released Laidlaw from the
First Option. IA exercised such option.
On April 24, 1996, the Company and certain individuals unaffiliated
with the Company (the "Holders") entered into an agreement whereby the Company
granted such individuals the right (the "Right") to cause the Company to assign
the Second Option to them at any time prior to June 7, 1996; provided, however,
that the exercise price of the Second Option shall be $5.00 per share. This
agreement has been extended to September 7, 1996. IA purchased 50,000 of the
Second Option Shares from Laidlaw. Simultaneously therewith, the Company
released Laidlaw from the Second Option as to such 50,000 shares and the Holders
released the Company from the Right as to such 50,000 shares.
All future and ongoing transactions and loans with officers, directors
and principal shareholders of the Company will be on terms no less favorable
than could be obtained from independent third parties and will be approved by a
majority of the disinterested directors of the Company.
-------------------------
PROPOSAL NO. 2
INCREASE AUTHORIZED COMMON STOCK AND AUTHORIZE PREFERRED STOCK
The Board of Directors recommends an amendment to the Company's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock from ten million (10,000,000) shares to twenty million (20,000,000)
shares and to authorize the issuance of up to fifteen million (15,000,000)
shares of Preferred Stock. The text of the proposed amendment is attached hereto
as Exhibit A and is incorporated herein by reference.
The Company is currently authorized to issue 10,000,000 shares of
Common Stock and no shares of Preferred Stock. As of July 2, 1996, the record
date for the Annual Meeting, 2,014,342 shares of Common Stock were issued and
outstanding, and approximately an additional 1,223,453 shares of Common Stock
were reserved for issuance upon exercise of outstanding stock options and
warrants and for options that may be granted in the future under the Company's
1994 Employee Stock Option Plan.
Common Stock. The Board of Directors of the Company believes that it is
advisable and in the best interests of the Company to have available additional
authorized but unissued shares of Common Stock in an amount adequate to provide
for the future needs of the Company. The additional shares will be available for
issuance from time to time by the Company in the discretion of the Board of
Directors, normally without further shareholder action (except as may be
required for a particular transaction by applicable law, requirements of
regulatory agencies or by stock exchange rules), for any proper corporate
purpose including, among other things, future acquisitions of property or
securities of other corporations, stock dividends, stock splits, convertible
debt financing and equity financings. No shareholder of the Company would have
any preemptive rights regarding future issuance of any shares of Common Stock.
The Company has no present plans, understandings or agreements for the
issuance or use of the proposed additional shares of Common Stock, except that
the Company has entered into a letter of intent for a proposed underwritten
public offering aggregating gross proceeds of approximately $2,700,000. The
public offering is currently contemplated to consist of shares of convertible
preferred stock and warrants to purchase convertible preferred stock. No
assurances can be given that the public offering will be consummated on these or
any other terms. The Board of Directors believes that if an increase in the
authorized number of shares of Common Stock were to be postponed until a
specific need arose, the delay and expense incident to obtaining the approval of
the Company's shareholders at that time could significantly impair the Company's
ability to meet financing requirements or other objectives.
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<PAGE>
Issuing additional shares of Common Stock may have the effect of
diluting the stock ownership of persons seeking to obtain control of the
Company. Although the Board of Directors has no present intention of doing so,
the Company's authorized but unissued Common Stock could be issued in one or
more transactions that would make more difficult or costly, and less likely, a
takeover of the Company. The proposed amendment to the Company's Certificate of
Incorporation is not being recommended in response to any specific effort of
which the Company is aware to obtain control of the Company, nor is the Board of
Directors currently proposing to shareholders any anti-takeover measures.
PREFERRED STOCK. The Board of Directors believes that the authorization
of the Preferred Stock is in the best interests of the Company and its
shareholders and believes that it is advisable to authorize such shares and have
them available in connection with possible future transactions, such as
financings, strategic alliances, corporate mergers, acquisitions, possible
funding of new product programs or businesses and other uses not presently
determinable and as may be deemed to be feasible and in the best interests of
the Company. In addition, the Board of Directors believes that it is desirable
that the Company have the flexibility to issue shares of Preferred Stock without
further shareholder action, except as otherwise provided by law.
It is not possible to determine the actual effect of the Preferred
Stock on the rights of the shareholders of the Company until the Board of
Directors determines the rights of the holders of a series of the Preferred
Stock. However, such effects might include (i) restrictions on the payment of
dividends to holders of the Common Stock; (ii) dilution of voting power to the
extent that the holders of shares of Preferred Stock are given voting rights;
(iii) dilution of the equity interests and voting power if the Preferred Stock
is convertible into Common Stock; and (iv) restrictions upon any distribution of
assets to the holders of the Common Stock upon liquidation or dissolution and
until the satisfaction of any liquidation preference granted to the holders of
Preferred Stock.
The Board of Directors is required by New York law to make any
determination to issue shares of Preferred Stock based upon its judgment as to
the best interests of the shareholders and the Company. Although the Board of
Directors has no present intention of doing so, it could issue shares of
Preferred Stock (within the limits imposed by applicable law) that could,
depending on the terms of such series, make more difficult or discourage an
attempt to obtain control of the Company by means of a merger, tender offer,
proxy contest or other means. When in the judgment of the Board of Directors
such action would be in the best interests of the shareholders and the Company,
the issuance of shares of Preferred Stock could be used to create voting or
other impediments or to discourage persons seeking to gain control of the
Company, for example, by the sale of Preferred Stock to purchasers favorable to
the Board of Directors. In addition, the Board of Directors could authorize
holders of a series of Preferred Stock to vote either separately as a class or
with the holders of Common Stock, on any merger, sale or exchange of assets by
the Company or any other extraordinary corporate transaction. The existence of
the additional authorized shares could have the effect of discouraging
unsolicited takeover attempts. The issuance of new shares could also be used to
dilute the stock ownership of a person or entity seeking to obtain control of
the Company should the Board of Directors consider the action of such entity or
person not to be in the best interests of the stockholders and the Company. Such
issuance of Preferred Stock could also have the effect of diluting the earnings
per share and book value per share of the Common Stock held by the holders of
Common Stock.
While the Company may consider effecting an equity offering of
Preferred Stock in the future for the purposes of raising additional working
capital or otherwise, the Company, as of the date hereof, has no agreements or
understandings with any third party to effect any such offering and no
assurances are given that any offering will in fact be effected, except that the
Company has entered into a letter of intent for a proposed public offering
aggregating gross proceeds of approximately $2,700,000. The public offering is
currently contemplated to consist of shares of convertible preferred stock and
warrants to purchase convertible preferred stock. No assurances can be given
that the public offering will be consummated on these or any other terms.
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<PAGE>
DISSENTERS' RIGHTS
Pursuant to the New York Business Corporation Law, the Company's
shareholders are not entitled to dissenters' rights of appraisal with respect to
the proposed amendment.
The affirmative vote of the holders of a majority of outstanding shares
of Common Stock is required for approval of the proposal to amend the Company's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock and to authorize the issuance of Preferred Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF
THE PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION
---------------------------
PROPOSAL NO. 3
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has appointed BDO Seidman, LLP to be the
independent auditors of the Company for the fiscal year ending December 31,
1996. Although the selection of auditors does not require ratification, the
Board of Directors has directed that the appointment of BDO Seidman, LLP be
submitted to shareholders for ratification. If shareholders do not ratify the
appointment of BDO Seidman, LLP, the Board of Directors will consider the
appointment of other certified public accountants. A representative of BDO
Seidman, LLP is expected to be available at the Annual Meeting to make a
statement if such representative desires to do so and to respond to appropriate
questions.
On November 28, 1994, the Company's prior auditors, Elwell, Cangiano,
Zdon & Dee LLC, resigned. The resignation was tendered solely on the basis that
the Company had decided to pursue a public offering. On the same date, the
Company engaged BDO Seidman, LLP to audit its financial statements for the
fiscal years ended December 31, 1993 and December 31, 1994. The decision to
change principal accountants was made with the approval of the Company's Board
of Directors.
The Company believes, and has been advised by Elwell, Cangiano, Zdon &
Dee LLC that it concurs in such belief, that during the fiscal year ended
December 31,1993 and through November 28,1994, the Company and Elwell, Cangiano,
Zdon & Dee LLC did not have any disagreement on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure, which disagreement, if not resolved to the satisfaction of Elwell,
Cangiano, Zdon & Dee LLC, would have caused it to make reference in connection
with its report on the Company's financial statements to the subject matter of
the disagreement.
No report of Elwell, Cangiano, Zdon & Dee LLC on the Company's
financial statements for either of the past two fiscal years contained an
adverse opinion, a disclaimer of opinion or a qualification or was modified as
to uncertainty, audit scope or accounting principles. During such fiscal
periods, there were no "reportable events" within the meaning of Item 304(a)(1)
of Regulation SB promulgated under the Securities Act of 1933, as amended.
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The affirmative vote of the holders of a majority of the Common Stock
present, in person or by proxy, is required for ratification of the appointment
of BDO Seidman, LLP as independent auditors of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
RATIFICATION OF THE SELECTION OF BDO SEIDMAN, LLP AS THE
COMPANY'S INDEPENDENT AUDITORS.
SHAREHOLDER PROPOSALS
To the extent required by law, any shareholder proposal intended for
presentation at next year's annual shareholders' meeting must be received at the
Company's principal executive offices prior to March 13, 1997.
OTHER MATTERS
So far as it is known, there is no business other than that described
above to be presented for action by the shareholders at the forthcoming Annual
Meeting, but it is intended that Proxies will be voted upon any other matters
and proposals that may legally come before the Annual Meeting, or any
adjustments thereof, in accordance with the discretion of the persons named
therein.
The Annual Report on Form 10-KSB for the fiscal year ended December 31,
1995, including financial statements, has been mailed to shareholders with this
Proxy Statement. If, for any reason, you did not receive your copy of the Annual
Report, please advise the Company and a copy will be sent to you.
By Order of the Board of Directors
KEITH DEE,
Secretary
New York, New York
July 12, 1996
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<PAGE>
Exhibit A
"FOURTH. NUMBER OF SHARES. The total number of shares of stock that the
Corporation shall have authority to issue is: thirty-five million (35,000,000),
consisting of twenty million (20,000,000) shares of common stock (the "Common
Stock") of the par value of one-tenth of one cent ($.001) each and fifteen
million (15,000,000) shares of preferred stock (the "Preferred Stock") of the
par value of one-tenth of one cent ($.001) each.
DESIGNATION OF CLASSES; RELATIVE RIGHTS, ETC. The designation, relative
rights, preferences and limitations of the shares of each class are as follows:
The shares of Preferred Stock may be issued from time to time in one or
more series of any number of shares, provided that the aggregate number
of shares issued and not canceled of any and all such series shall not
exceed the total number of shares of Preferred Stock hereinabove
authorized, and with distinctive serial designations, all as shall
hereafter be stated and expressed in the resolution or resolutions
providing for the issue of such shares of Preferred Stock from time to
time adopted by the Board of Directors pursuant to authority so to do
which is hereby vested in the Board of Directors. Each series of shares
of Preferred Stock (a) may have such voting powers, full or limited, or
may be without voting powers; (b) may be subject to redemption at such
time or times and at such prices; (c) may be entitled to receive
dividends (which may be cumulative or non-cumulative) at such rate or
rates, on such conditions and at such times, and payable in preference
to, or in such relation to, the dividends payable on any other class or
classes or series of stock; (d) may have such rights upon the
dissolution of, or upon any distribution of the assets of, the
Corporation; (e) may be made convertible into or exchangeable for,
shares of any other class or classes or of any other series of the same
or any other class or classes of shares of the Corporation at such
price or prices or at such rates of exchange and with such adjustments;
(f) may be entitled to the benefit of a sinking fund to be applied to
the purchase or redemption of shares of such series in such amount or
amounts; (g) may be entitled to the benefit of conditions and
restrictions upon the creation of indebtedness of the Corporation or
any subsidiary, upon the issue of any additional shares (including
additional shares of such series or of any other series) and upon the
payment of dividends or the making of other distributions on, and the
purchase, redemption or other acquisition by the Corporation or any
subsidiary of, any outstanding shares of the Corporation; and (h) may
have such other relative, participating, optional or other special
rights, qualifications, limitations or restrictions thereof; all as
shall be stated in said resolution or resolutions providing for the
issue of such shares of Preferred Stock. Shares of Preferred Stock of
any series that have been redeemed (whether through the operation of a
sinking fund or otherwise) or that if convertible or exchangeable, have
been converted into or exchanged for shares of any other class or
classes shall have the status of authorized and unissued shares of
Preferred Stock of the same series and may be reissued as a part of the
series of which they were originally a part or may be reclassified and
reissued as part of a new series of shares of Preferred Stock to be
created by resolution or resolutions of the Board of Directors or as
part of any other series of shares of Preferred Stock, all subject to
the conditions or restrictions on issuance set forth in the resolution
or resolutions adopted by the Board of Directors providing for the
issue of any series of shares of Preferred Stock.
Subject to the provisions of any applicable law or of the By-laws of
the Corporation as from time to time amended, with respect to the
closing of the transfer books or the fixing of a record date for the
determination of shareholders entitled to vote and except as otherwise
provided by law or by the resolution or resolutions providing for the
issue of any series of shares of Preferred Stock, the holders of
outstanding shares of Common Stock shall exclusively possess voting
power for the election of directors and for all other purposes, each
holder of record of shares of Common Stock being entitled to one vote
for each share of Common Stock outstanding in his or her name on the
books of the Corporation. Except as otherwise provided by the
resolution or resolutions providing for the issue of any series of
shares of Preferred Stock, the holders of shares of Common Stock shall
be entitled, to the exclusion of the holders of shares of Preferred
Stock of any and all series, to receive such dividends as from time to
time may be declared by
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<PAGE>
the Board of Directors. In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, after
payment shall have been made to the holders of shares of Preferred
Stock of the full amount to which they shall be entitled pursuant to
the resolution or resolutions providing for the issue of any series of
shares of Preferred Stock, the holders of shares of Common Stock shall
be entitled, to the exclusion of the holders of shares of Preferred
Stock of any and all series, to share, ratably according to the number
of shares of Common Stock held by them, in all remaining assets of the
Corporation available for distribution to its stockholders.
Subject to the provisions of this Certificate of Incorporation and
except as otherwise provided by law, the stock of the Corporation,
regardless of class, may be issued for such consideration and for such
corporate purposes as the Board of Directors may from time to time
determine."
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<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE GREAT AMERICAN BACKRUB STORE, INC.
PROXY -- Annual Meeting of Shareholders, August 12, 1996
The undersigned, a shareholder of The Great American BackRub Store, Inc., a
New York corporation (the "Company"), does hereby constitute and appoint William
Zanker and Terrance Murray and each of them, the true and lawful attorneys and
proxies with full power of substitution, for and in the name, place and stead of
the undersigned, to vote all of the shares of Common Stock of the Company that
the undersigned would be entitled to vote if personally present at the 1996
Annual Meeting of Shareholders of the Company to be held at the offices of
Olshan Grundman Frome & Rosenzweig LLP, 505 Park Avenue, New York, New York
10022, on August 12, 1996 at 10:00 a.m., local time, or at any adjournment or
adjournments thereof.
The undersigned hereby instructs said proxies or their substitutes as set
forth below.
1. ELECTION OF DIRECTORS:
The election of William Zanker, Terrance C. Murray, Stephen Seligman, Edward
E. Faber, Andrew L. Hyams, Donald R. Fleischer and Peter Hanelt.
/ / FOR / / TO WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE(S), PRINT NAME(S)
BELOW:
2. TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION.
/ / FOR / / AGAINST / / ABSTAIN
3. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS.
/ / FOR / / AGAINST / / ABSTAIN
4. DISCRETIONARY AUTHORITY.
(Continued on the reverse side)
<PAGE>
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH ANY DIRECTIONS HEREINBEFORE
GIVEN. UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED TO ELECT THE
NOMINEES AS DIRECTORS, TO APPROVE THE AMENDMENT OF THE COMPANY'S CERTIFICATE OF
INCORPORATION, TO RATIFY THE APPOINTMENT OF BDO SEIDMAN, LLP AS THE COMPANY'S
INDEPENDENT AUDITORS AND IN ACCORDANCE WITH THE DISCRETION OF THE PROXIES OR
PROXY WITH RESPECT TO ANY OTHER BUSINESS TRANSACTED AT THE ANNUAL MEETING.
The undersigned here revokes any proxy or proxies heretofore given and
ratifies and confirms all that the proxies appointed hereby, or any of the them,
or their substitutes, may lawfully do or cause to be done by virtue hereof.
Please mark, date, sign and mail this
proxy in the envelope provided for this
purpose. No postage is required if
mailed in the United States.
, 1996
---------------------------------(L.S.)
---------------------------------(L.S.)
Signature(s)
NOTE: Please sign exactly as your name
or names appear hereon. When signing as
attorney, executor, administrator,
trustee or guardian, please indicate
the capacity in which signing. When
signing as joint tenants, all parties
in the joint tenancy must sign. When a
proxy is given by a corporation, it
should be signed with full corporate
name by a duly authorized officer.
