As filed with the Securities and Exchange Commission on May 7, 1996
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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THE GREAT AMERICAN BACKRUB STORE, INC.
New York 13-3729043
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
425 Madison Avenue, Suite 605
New York, New York 10017
(Address of principal executive offices) (Zip Code)
--------------------
The Great American BackRub Store, Inc.
1994 Employee Stock Option Plan and Purchase Agreements
(Full Title of the Plan)
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William Zanker
President
The Great American Backrub Store, Inc.
425 Madison Avenue, Suite 605
New York, New York 10017
(Name and Address of agent for service)
(212)750-7046
(Telephone number, including area code, of agent for service)
--------------------
With a copy to:
Stephen Irwin, Esq.
Olshan Grundman Frome & Rosenzweig LLP
505 Park Avenue
New York, New York 10022
(212) 753-7200
--------------------
Approximate date of proposed sale pursuant to the Plan:
From time to time after the effective date of this
registration statement.
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
========================================================================================================================
Proposed Proposed
Maximum Maximum
Title of Amount Offering Aggregate Amount of
Securities to be Price Offering Registration
to be Registered Registered Per Share Price Fee
- ------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
Common Stock,
$.001 par value 5,000(1)(2) $3.4375(1) $17,187.50(1) $5.93
- ------------------------------------------------------------------------------------------------------------------------
Common Stock,
$.001 par value 70,000(2)(3) $4.50(3) $315,000(3) $108.62
- ------------------------------------------------------------------------------------------------------------------------
Common Stock,
$.001 par value 615,000(2)(4) $3.03(4) $1,863,450(4) $642.57
- ------------------------------------------------------------------------------------------------------------------------
Total Registration Fee......................................................................... $757.12
========================================================================================================================
</TABLE>
<PAGE>
(1) Represents 5,000 shares with respect to which options were granted
under the Registrant's 1994 Employee Stock Option Plan (the "Employee
Plan") at an exercise price of $3.4375 per share.
(2) Pursuant to Rule 416, an indeterminate number of shares of Common Stock
that may become issuable pursuant to antidilution provisions of the
Employee Plan and the various other written purchase agreements and
written compensation contracts pursuant to which options were granted
by the Registrant (collectively, the "Purchase Agreements") are also
being registered.
(3) Represents 70,000 shares of Common Stock with respect to which options
have not yet been granted under the Employee Plan. Pursuant to Rule
457(g) and (h), the offering price for these shares of Common Stock
which may be issued under the Employee Plan is estimated solely for the
purpose of determining the registration fee and is based on $4.50, the
per share average of high and low sale prices of the Common Stock as
reported by the Nasdaq SmallCap Market on May 1, 1996.
(4) Shares of Common Stock with respect to which options have been granted
under the Purchase Agreements at an average exercise price of $3.03 per
share to certain employees, directors and consultants of the Company.
================================================================================
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PROSPECTUS
665,000 SHARES
THE GREAT AMERICAN BACKRUB STORE, INC.
Common Stock, $.001 par value per share
This Prospectus relates to the reoffer and resale by certain selling
shareholders (the "Selling Shareholders") of 655,000 shares (the "Shares") of
Common Stock, $.001 par value per share (the "Common Stock") of The Great
American BackRub Store, Inc. (the "Company") that may be issued by the Company
to the Selling Shareholders upon the exercise of outstanding stock options
granted under (a) the Company's 1994 Employee Stock Option Plan (the "1994
Plan") and (b) various written purchase agreements and written compensation
contracts (collectively, the "Purchase Agreements"). This Prospectus also
relates to the reoffer and resale of Shares to be acquired upon exercise of
stock options that may be granted to individuals who may be deemed "affiliates"
of the Company (collectively, the "Future Selling Shareholders") upon the
exercise of outstanding stock options to be granted under the 1994 Plan. If and
when such options are granted to the Future Selling Shareholders, the Company
intends to distribute a Prospectus Supplement as required by Rule 424(b) of the
Securities Act of 1933, as amended (the "Securities Act"). Such Prospectus
Supplement will specify the names of the Future Selling Shareholders and the
amount of Shares to be reoffered and sold by them.
The offer and sale of the Shares to the Selling Shareholders and to the
Future Selling Shareholders were previously registered under the Securities Act.
The Shares are being reoffered and may be resold for the accounts of the Selling
Shareholders and the Future Selling Shareholders and the Company will not
receive any of the proceeds from the resale of the Shares.
The Selling Shareholders have advised the Company that the resale of
their Shares may be effected from time to time in one or more transactions on
the Nasdaq SmallCap Market ("Nasdaq"), in negotiated transactions or otherwise
at market prices prevailing at the time of the sale or at prices otherwise
negotiated. See "Plan of Distribution." The Company will bear all expenses in
connection with the preparation of this Prospectus.
The Common Stock is traded on Nasdaq under the symbol "RUBB". On May 1,
1996, the closing price for the Common Stock, as reported by Nasdaq, was $4.50.
AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES
A HIGH DEGREE OF RISK. SEE "RISK FACTORS" AT PAGE 3 HEREOF.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is May 7, 1996.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549; or at certain of the regional offices of
the Commission located at 500 West Madison Street, Suite 1400, Chicago, Illinois
60661; and Seven World Trade Center, Suite 1300, New York, New York 10048.
Copies of such material can be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates.
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION................................................2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE......................2
RISK FACTORS.........................................................4
GENERAL INFORMATION..................................................8
RECENT DEVELOPMENTS..................................................9
USE OF PROCEEDS.....................................................10
SELLING SHAREHOLDERS................................................11
PLAN OF DISTRIBUTION................................................12
LEGAL MATTERS.......................................................12
ADDITIONAL INFORMATION..............................................12
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's (i) Annual Report on Form 10-KSB for the year ended
December 31, 1995 and (ii) Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1996, which have been filed with the Commission pursuant to the
Exchange Act, are hereby incorporated by reference in this Prospectus and shall
be deemed to be a part hereof. All documents filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of this offering are deemed to be
incorporated by reference in this Prospectus and shall be deemed to be a part
hereof from the date of filing of such documents.
The Company's Application for Registration of its Common Stock under
Section 12(g) of the Exchange Act filed on February 23, 1995, is incorporated by
reference in this Prospectus and shall be deemed to be a part hereof.
The Company hereby undertakes to provide without charge to each person
to whom a copy of this Prospectus has been delivered, on the written or oral
request of any such person, a copy of any or all of the documents referred to
above which have been or may be incorporated in this Prospectus by reference,
other than
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<PAGE>
exhibits to such documents. Written requests for such copies should be directed
to The Great American BackRub Store, Inc., 425 Madison Avenue, Suite 605, New
York, New York 10017, Attention: President. Oral requests should be directed to
such officer (telephone number (212) 750-7046).
--------------------
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made hereby, and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company or any Selling Shareholder. This Prospectus does not constitute
an offer to sell, or a solicitation of an offer to buy, the securities offered
hereby to any person in any state or other jurisdiction in which such offer or
solicitation is unlawful. The delivery of this Prospectus at any time does not
imply that information contained herein is correct as of any time subsequent to
its date.
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<PAGE>
RISK FACTORS
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS
BEFORE MAKING AN INVESTMENT DECISION.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS CONTAINING AN EXPLANATORY
PARAGRAPH THAT INDICATES GOING CONCERN UNCERTAINTIES. The Company's independent
certified public accountants have included an explanatory paragraph in their
report on the Company's Financial Statements stating that the Financial
Statements have been prepared based on the assumption that the Company will
continue as a going concern and that the Company's losses from operations since
inception raise substantial doubt about the ability of the Company to continue
as a going concern.
DEVELOPMENT STAGE COMPANY; LIMITED OPERATING HISTORY AND REVENUES; HISTORICAL
AND ANTICIPATED LOSSES; ACCUMULATED DEFICIT. The Company was organized in
December 1992, commenced operations in August 1993, opened its first
Company-owned store in October 1993 and therefore has a limited operating
history upon which an evaluation of the Company's future performance and
prospects can be made. The Company's prospects must be considered in light of
the risks, expenses, delays, problems and difficulties frequently encountered in
the establishment of a new business in an emerging and evolving industry. Since
inception, the Company has generated limited revenues and has incurred
significant losses, including losses of $1,118,975, $2,647,255 and $597,870,
respectively, for the years ended December 31, 1994 and 1995 and the three
months ended March 31, 1996 resulting, at March 31, 1996, in an accumulated
deficit of $4,774,065. Losses are continuing through the date of this
Prospectus. Inasmuch as the Company continues to have a high level of operating
expenses and will be required to make significant up-front expenditures in
connection with its proposed expansion, the Company anticipates that losses will
continue for at least the next 12 months and until such time, if ever, as the
Company is able to generate sufficient revenues to finance its operations and
the costs of continuing expansion. Since inception, the Company's operations
have generated negative cash flow, as its expenses have exceeded revenues, and
the Company's ability to continue its operations has been dependent upon debt
and equity financings. There can be no assurance that the Company will be able
to generate significant revenues or achieve profitable operations or that its
operations will generate positive cash flow.
NEW INDUSTRY; UNCERTAINTY OF MARKET ACCEPTANCE. As is typically the case in an
emerging industry, demand and market acceptance for newly introduced services
and products are subject to a high level of uncertainty. The Company has not yet
commenced significant marketing activities or studies and currently has limited
marketing experience in the retail back rub business and limited financial,
personnel and other resources to undertake extensive marketing activities or
studies. The Company does not intend to conduct any formal marketing or other
concept feasibility studies to determine the potential commercial viability of
its concept. Achieving market acceptance for the Company's services and products
will require substantial marketing efforts and expenditure of significant funds
to create awareness and demand. The Company's success depends in large part on
its ability to attract suitable franchisees and will also be dependent on the
level of acceptance and usage of the Company's services and products by
consumers. Because demand by prospective franchisees and consumers may be
interrelated, any lack or lessening of demand by any one of these could
adversely affect market acceptance for the Company's services and products. In
light of the relatively undeveloped and emerging markets for retail back rubs,
there can be no assurance that a substantial market for the Company's services
and products will develop and grow.
RISKS ASSOCIATED WITH GROWTH STRATEGY AND RAPID EXPANSION. The Company has
achieved only limited growth to date. Implementation of the Company's proposed
expansion will be substantially dependent on, among other things, the Company's
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ability to identify and secure advantageous locations and leases for its
Company-owned and franchised stores on a timely basis and on favorable terms;
hire and retain skilled management, financial, marketing and other personnel;
and successfully manage growth (including monitoring operations, controlling
costs and maintaining effective quality, inventory and service controls). The
Company's prospects will also be significantly affected by its ability to
successfully develop and maintain relationships with its franchisees. The
Company's growth strategy and plans are subject to change as a result of a
number of factors, including progress or delays in the Company's marketing
efforts, changes in market conditions and competitive factors. There can be no
assurance that the Company will be able to successfully implement its business
strategy or otherwise expand its operations.
FRANCHISING. The Company's success will be dependent upon the development and
implementation of an effective franchise program, which would afford
unaffiliated parties the opportunity to own and operate Great American BackRub
Stores using the Company's concept. The Company intends to include in such a
program criteria to evaluate franchisees. However, there can be no assurance
that the Company will be able to manage such a program effectively, that its
franchisees will have the ability or resources necessary to successfully develop
and operate their stores or that such franchisees' stores will be well operated
and promoted. In addition, the Company intends to lease the space for any
franchised stores directly from the landlord and sublease to the franchisee. The
Company will be primarily liable for any such leases and may be required to pay
the landlord directly if the franchisee fails to do so.
DEPENDENCE ON PROCEEDS OF INITIAL PUBLIC OFFERING TO FINANCE EXPANSION AND
WORKING CAPITAL; POSSIBLE NEED FOR ADDITIONAL FINANCING. The Company remains
dependent on the proceeds of the its initial public offering completed in March
1995 (the "IPO") and other future financings to implement its proposed expansion
and to finance its working capital requirements. The Company anticipates, based
on currently proposed plans and assumptions relating to its operations
(including the costs associated with its proposed expansion), that the net
proceeds of the IPO will be sufficient to satisfy its anticipated cash
requirements at least through July 1996. The Company will be required to seek
additional financing to implement its proposed expansion and to finance its
working capital requirements. To the extent that the Company incurs indebtedness
or issues debt securities, the Company will be subject to risks associated with
incurring substantial indebtedness, including the risks that interest rates may
fluctuate and cash flow may be insufficient to pay principal and interest on any
such indebtedness. The Company has no current arrangements with respect to, or
sources of, additional financing, and it is not anticipated that existing
shareholders will provide any portion of the Company's future financing
requirements. There can be no assurance that additional financing will be
available to the Company on commercially reasonable terms or at all. If the
Company is unable to obtain additional financing, its ability to meet its
current obligations and current plans for expansion could be materially
adversely affected.
POTENTIAL LIABILITY; INSURANCE. The Company is engaged in a business which could
expose it to possible liability claims from others, including personal injury
claims. The Company maintains a general liability insurance policy that is
subject to a $1,000,000 per occurrence limit with a $1,000,000 aggregate limit.
Currently, the Company requires all of its employee/therapists to obtain
professional liability insurance (in the minimum amount of $1,000,000) through
one of two professional massage organizations. In some cases, the Company is
permitted under the applicable policy to be named as an additional insured. In
addition, the Company has obtained a professional liability policy for an
additional $1,000,000 covering all of its employees. There can be no assurance,
however, that the Company's insurance will be sufficient to cover potential
claims or that an adequate level of coverage will be available in the future at
a reasonable cost. A partially insured or completely uninsured successful claim
against the Company could have a material adverse effect on the Company.
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REGULATION. Certain states in which the Company intends to operate, as well as
the State of New York, in which the Company currently operates its eight
Company-owned stores, require the licensing of massage therapists. The offer,
sale, termination or renewal of franchises in the United States is subject to
requirements established by the Federal Trade Commission (the "FTC"). In
addition to the requirements of the FTC, certain states require that franchisors
register in the state prior to offering franchises in such states. The Company
believes that it is in compliance with all applicable laws and regulations and
has all required licenses to conduct its business. However, no assurance can be
given that current laws or regulations applicable to the Company's business will
not change. Any such new laws or regulations or the Company's expansion into new
geographic areas could subject the Company to substantial costs in order to
comply with such applicable laws or regulations. Any failure by the Company to
comply with any new or existing laws or regulations could subject the Company to
substantial penalties.
COMPETITION. Management of the Company believes that no other multi-unit
retailer is in the business in which the Company operates. Competition consists
of numerous independent massage therapists, spas, salons and health clubs
providing full body massage and a limited number of massage therapists providing
seated massage in non-retail "off-site" environments. However, due to the
relatively low cost of, and lack of other barriers to, entry into the Company's
business, no assurance can be given that others will not develop multi-unit
retail concepts or stores similar to or competitive with the Company's concept
and stores or that the Company will successfully compete with any such
competitors, some of whom may have substantially greater financial and other
resources than the Company.
DEPENDENCE ON KEY PERSONNEL; ATTRACTION AND RETENTION OF KEY PERSONNEL. The
Company is dependent to a great extent, on the experience, abilities and
continued services of Mr. Zanker, the Company's Chairman of the Board and
President and Mr. Murray, the Company's Chief Executive Officer. While the
Company's management has substantial national retail and franchise experience,
no assurance can be given that such prior experience will assure the Company's
success. In addition, the Company's management has no prior experience with
companies offering products and services similar to those offered by the
Company. The Company has entered into three-year employment agreements with each
of Messrs. Zanker and Murray which expire on October 31, 1997. The loss of the
services of Messrs. Zanker and Murray could have a material adverse effect on
the Company. The Company has obtained $2,000,000 of key man insurance on the
lives of each of Messrs. Zanker and Murray. The Company's success also depends
upon its ability to attract and retain qualified massage therapists and other
additional qualified personnel. While the Company believes there are numerous
qualified massage therapists currently available, competition for such personnel
may become intense. There can be no assurances that the Company will be able to
attract and retain qualified personnel.
POSSIBLE IMMEDIATE AND SUBSTANTIAL DILUTION. At March 31, 1996, the Company had
a net tangible book value of approximately $1.46 per share. If purchasers of the
Common Stock offered hereby purchase such shares at a price higher than the net
tangible book value per share, they will experience dilution in an amount equal
to the difference between the price per share they paid and the net tangible
book value per share.
NO DIVIDENDS. The Company has never paid a dividend on its Common Stock and does
not intend to pay any dividends to its shareholders in the foreseeable future.
The Company currently intends to reinvest earnings, if any, in the development
and expansion of its business.
NO ASSURANCE OF CONTINUED PUBLIC MARKET; POSSIBLE VOLATILITY OF MARKET. There
can be no assurance that a regular trading market for the Common Stock will be
sustained. The market price of the Common Stock may be highly volatile as has
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been the case with the securities of many emerging companies. Factors such as
the Company's operating results and announcements by the Company or its
competitors of new products or services may significantly impact the market
price of the Company's securities. In addition, in recent years, the stock
market has experienced a high level of price and volume volatility and market
prices for the securities of many companies have experienced wide price
fluctuations not necessarily related to the operating performance of such
companies. Although Laidlaw may make and certain dealers presently make a market
in the Common Stock, they are not obligated to do so and may cease such market
making activities at any time.
EFFECT OF OUTSTANDING OPTIONS AND WARRANTS, COMPANY'S STOCK OPTION PLAN AND
REPRESENTATIVE'S WARRANTS; DILUTIVE EFFECTS. As of the date of this Prospectus,
options and warrants to purchase an aggregate of 1,225,000 shares of Common
Stock are issued and outstanding, held by the Company's executive officers, a
former executive officer, consultants and a former consultant to the Company. In
connection with a bridge financing consummated in November 1994, the Company
issued the warrants (the "Bridge Warrants") to purchase an aggregate of 137,500
shares of Common Stock exercisable at a price of $2.50 per share. In addition,
options to purchase 5,000 shares of Common Stock are presently issued and
outstanding under the Employee Plan. The Company may from time to time issue
options under the Employee Plan to purchase up to an additional 70,000 shares of
Common Stock. The Company agreed with the underwriters in the IPO not to grant
or issue options to purchase more than 37,500 shares of Common Stock under the
Employee Plan prior to February 28, 1997. The Company granted options to
purchase an aggregate of 50,000 shares of Common Stock to directors of the
Company. In connection with the IPO, the Company issued and sold to the
representatives of the several underwriters in the IPO (the "Representative")
for nominal consideration the Representative's Warrants which entitle the
Representative to purchase an aggregate of 125,000 shares of Common Stock. The
Representative's Warrants are exercisable through February 25, 2000, at an
exercise price of $6.00 per share. The Company recently entered into an Option
Agreement with the Representative which provides that in the event certain
options granted to the Company to repurchase shares of Common Stock from the
Representative are exercised in full, the Representative's Warrants will not be
exercisable prior to June 4, 1996. See "Recent Developments." The holders of the
options and warrants presently outstanding, holders of any subsequently issued
options and warrants of the Company, as well as the Representative will have the
opportunity to profit from a rise in the market price of the Common Stock
without assuming the risk of ownership. The sale of Common Stock or other
securities held by or issuable to any such holders, or merely the potential of
such sales, could have an adverse effect on the market price of the Common
Stock. The Company may find it more difficult to raise additional equity
capital, if it should be needed for the business of the Company, while any of
such securities are outstanding. At any time when the holders thereof might be
expected to convert or exercise them, the Company would probably be able to
obtain additional equity capital on terms more favorable than those provided by
such securities. To the extent that any such securities are converted or
exercised, as the case may be, the percentage of ownership interest of the
Company's shareholders will be diluted.
SHARES ELIGIBLE FOR FUTURE SALE. Of the 1,785,266 shares of Common Stock
outstanding, 410,266 shares are "restricted securities" within the meaning of
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the "Act") and, generally, may be sold only in
compliance with Rule 144 under the Act. In addition, certain of the 410,266
shares are subject to lockup restrictions described below. Of the remaining
1,375,000 shares, 125,000 shares, which represent shares of Common Stock sold by
the Company in a private placement in June 1993, are freely tradeable and not
subject to lockup restrictions. Of the 410,226 restricted securities, 184,187
may be sold pursuant to Rule 144, 63,562 of which shares are subject to the
lockup restrictions described below and the remaining 226,039 shares are
available for sale under
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Rule 144 at various times during 1996 and 1997, of which 91,250 shares are
subject to the lockup restrictions described below. Under Rule 144, a person who
has held restricted securities for a period of two years may sell a limited
number of such securities into the public market without registration of such
securities under the Act. Rule 144 also permits, under certain circumstances,
persons who are not affiliates of the Company to sell their restricted
securities without quantity limitations once they have satisfied Rule 144's
three-year holding period. Sales made pursuant to Rule 144 by the Company's
existing shareholders may have a depressive effect on the price of the shares of
Common Stock in the public market. Such sales could also adversely affect the
Company's ability to raise capital at that time through the sale of its equity
securities. All of the Company's officers and directors (who own 173,562 shares
in the aggregate) have agreed not to sell, assign or transfer 154,812 of their
shares of Common Stock for a period of eighteen (18) months from February 28,
1995 without the Representative's prior written consent. The Company's Option
Agreement with the Representative provides that in the event the Options are
exercised in full, the lock-up agreements entered into by Messrs. Zanker and
Murray and such 5% or greater shareholder shall become null and void. The
holders of the Representative's Warrants have certain registration rights with
respect to the Common Stock underlying such Warrants.
LISTING AND MAINTENANCE CRITERIA FOR NASDAQ QUOTATION. The Common Stock is
quoted on Nasdaq. To continue to be quoted on Nasdaq, the Company must satisfy
certain maintenance criteria, including having (i) at least two market makers
for the Common Stock, (ii) total assets of at least $2 million, (iii) capital
and surplus of at least $1 million, (iv) a minimum bid price per share of $1,
(v) at least 300 shareholders and (vi) a public float of at least 100,000 shares
with a market value of at least $200,000. The failure to meet these maintenance
criteria in the future may result in the Common Stock not being eligible for
quotation on Nasdaq and trading, if any, of the Common Stock would thereafter be
conducted on the OTC Bulletin Board. As a result of such ineligibility for
quotation, an investor may find it more difficult to dispose of, or to obtain
accurate quotations as to the market value of, the Common Stock.
GENERAL INFORMATION
The Company is a development stage company engaged in the creation of a
national chain of stores under the name "The Great American BackRub Store,"
which offer reasonably-priced back rubs to customers while they are seated and
fully clothed in a clean, open, non-threatening environment. The back rubs
currently offered by the Company are for 5, 10, 20, 30 or 45 minutes, priced at
approximately $8.95, $14.95, $24.95, $34.95 and $49.95, respectively. By design,
The Great American BackRub Store is a specialty interactive retailer offering a
wide range of massage and stress reduction products, including oils, bath salts,
back supports and electronic and mechanical stress reduction devices (priced
generally from $4.95 to $250.00). The Company believes that the combination of a
boutique retail concept with back rub services makes The Great American BackRub
Store a unique shopping experience.
The Company currently owns and operates seven retail stores in New York
City and one location in the Westchester Mall in White Plains, New York. The
Company plans to open approximately 40 Company-owned stores within two years
from the date of this Prospectus and additional franchised stores, although
there can be no assurance that the Company will be successful in this plan. The
Company intends to place its stores in high traffic locations such as malls,
airports, urban sites and casinos.
The typical Great American BackRub Store location consists of
approximately 600 to 1,200 square feet, including 300 to 600 square feet of
retail space. Customers are seated on a specially-designed chair which provides
cushioned support for the chest, arms and head. The Company's stores are
designed to permit people both inside and outside the store to view the back rub
process and
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at the same time maintain the privacy of the back rub customer. The Company's
stores will also offer back rub services off-site, to corporate offices,
convention centers and tourist attractions. All back rub services are provided
by therapists who are either licensed (in states where such licensing is
required) or have completed training at a school certified by a recognized trade
association.
The Company's growth strategy is to be implemented primarily by
Terrance Murray, the Company's Chief Executive Officer, who previously served as
the executive vice president - operations of Supercuts, Inc. Supercuts, Inc. is
a hair care chain with in excess of 1,000 company-owned and franchised stores in
43 states and Puerto Rico. The Company believes that the substantial national
retail and franchise experience of Mr. Murray will be an asset to the Company.
The Company was incorporated under the laws of the State of New York in
December 1992. The Company's executive offices are located at 425 Madison
Avenue, Suite 605, New York, New York 10017 and its telephone number is (212)
750-7046.
RECENT DEVELOPMENTS
OPTION AGREEMENT
On December 7, 1995, the Company entered into an option agreement (the
"Option Agreement") with Laidlaw and the Selling Shareholder 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, from the date (the "Effective
Date") the post-effective amendment to the registration statement of which this
Prospectus is a part is declared effective by the Commission to and including
June 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 from the Effective Date to and including the fifth business day following
the Effective Date (the "Step-up Date") shall be $3.50 per share. The exercise
price for the First Option from the day immediately following the Step-up Date
until the Expiration Date 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, from the Effective Date until 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 24, 1996, the Company entered into an agreement with three
individuals (the "Holders") whereby the Company granted to the Holders the right
to cause the Company to assign the Second Option to the Holders. The agreement
expires on June 7, 1996 (the "Termination Date"). To the extent the Expiration
Date is extended, the Termination Date shall be extended to coincide with such
Expiration Date. The exercise price of the Second Option to the Holders is $5.00
per share.
FRANCHISE/FRANCHISE OPTION TERMINATIONS
The Company's first franchised store (the "Las Vegas Store") opened in
July 1994 in Las Vegas, Nevada. The Company entered into a franchise agreement
(the "Franchise Agreement") with its Las Vegas franchisee (the "Franchisee") on
June 1, 1994. Pursuant to the Franchise Agreement, the Franchisee paid the
Company an initial, non-recurring, non-refundable franchise fee of $10,000. In
addition,
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the Franchisee paid the Company a monthly royalty fee equal to 8% of the
Franchisee's gross monthly revenues (as such term is defined in the Franchise
Agreement). The Franchisee also paid to the Company an advertising and sales
promotion fee which is equal to the greater of 3% of the Franchisee's gross
monthly revenues or $1,000. On May 30, 1995, the Company and the Franchisee
entered into a franchise termination agreement whereby (i) the Franchise
Agreement and related sublease were terminated, (ii) the Company purchased
certain assets from the Franchisee and (iii) the Company and the Franchisee
provided for the mutual release of any obligations of each to the other whether
arising out of the Franchise Agreement, the sublease or otherwise. The purchase
price for the assets conveyed by the Franchisee to the Company was $25,000 and
18,185 shares of Common Stock. Simultaneously with the Franchise Termination
Agreement, the Company closed the Las Vegas Store.
The Company entered into two option agreements (the "Option
Agreements") with Bay Area Backs I, a California limited partnership (the
"Optionee"), on June 20, 1994 and June 21, 1994, respectively, for the opening
of two franchised stores in the San Francisco area. Pursuant to the Option
Agreements, the Optionee paid to the Company $5,000 for each of two options (the
"Options") to require the Company to enter into franchise agreements with the
Optionee. On May 30, 1995, the Company and the Optionee entered into an option
termination agreement whereby (i) the Option Agreements were terminated, (ii)
the Company purchased certain assets from the Optionee and (iii) the Company and
the Optionee provided for the mutual release of any obligations of each to the
other whether arising out of the Option Agreements or otherwise. The purchase
price for the assets conveyed by the Optionee to the Company and the termination
of the Options was $27,300.
CONSULTING AGREEMENT
On February 8, 1996, the Company entered into a Financial Advisory and
Consulting Agreement (the "Financial Advisory Agreement") with Investors
Associates, Inc. ("Investors Associates"). The Financial Advisory Agreement
expires on January 31, 1997. As compensation for the services to be performed by
Investors Associates to the Company pursuant to the Financial Advisory
Agreement, the Company paid to Investors Associates a financial consulting fee
of $100,000, warrants to purchase 100,000 shares of Common Stock of the Company
at an exercise price of $1.00 per share exercisable to and including January 31,
1997, and warrants to purchase 200,000 shares of Common Stock of the Company at
an exercise price of $2.50 per share exercisable to and including January 31,
1998. The Company has granted certain registration rights to Investors
Associates relating to the registration of the shares issuable upon exercise of
the warrants under the Securities Act of 1933, as amended.
During the term of the Financial Advisory Agreement, Investors
Associates will provide the Company with such regular and customary consulting
advice as is reasonably requested by the Company. Investors Associate's duties
will include, but will not necessarily be limited to (i) providing sponsorship
and exposure in connection with the dissemination of corporate information
regarding the Company to the investment community at large, (ii) arranging
meetings with securities analysts, (iii) assisting in the Company's financial
public relations and (iv) rendering advice regarding a future public or private
offering of securities of the Company or of any of its subsidiaries. In this
regard, Investors Associates has agreed to use its best efforts to assist the
Company in arranging for a private placement or public offering of securities
with gross proceeds to the Company of at least $2 million.
USE OF PROCEEDS
The Company will receive the exercise price of the options when
exercised by the holders thereof. Such proceeds will be used for working capital
purposes
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by the Company. The Company will not receive any of the proceeds from the
reoffer and resale of the Shares by the Selling Shareholders.
SELLING SHAREHOLDERS
This Prospectus relates to the reoffer and resale of Shares issued or
that may be issued to the Selling Shareholders under the Purchase Agreements or
the 1994 Plan.
The following table sets forth (i) the number of shares of Common Stock
beneficially owned by each Selling Shareholder, (ii) the number of Shares of
Common Stock to be offered for resale by each Selling Shareholder and (iii) the
number and percentage of shares of Common Stock to be held by each Selling
Shareholder after completion of the offering.
Number of shares
of Common Stock/
Number of Percentage of
shares of Number of Class to be
Common Stock Shares to Owned After
Owned Prior to be Offered Completion of
Name Offering for Resale the Offering
- -------------------------- --------------- ------------ -----------------
William Zanker (1)........ 302,312(2) 220,000 82,312/4.6%
Terrance Murray (3)....... 279,375(4) 220,000 59,375/3.3%
Keith Dee (5)............. 100,000(6) 100,000 0
Edward Faber (7).......... 10,000(8) 10,000 0
Andrew Hyams (7).......... 75,437(9) 10,000 65,437/3.7%
Donald Fleischer (7)...... 26,125(10) 10,000 16,125/*
Peter Hanelt (7).......... 10,000(8) 10,000 0
Stephen Seligman (7)...... 15,000(11) 10,000 5,000/*
- -----------------------
* less than 1%.
(1) Mr. Zanker is the Chairman of the Board, President and a director of
the Company.
(2) Includes (i) 63,562 shares of Common Stock held by The William Zanker
Trust for the benefit of his children (Mr. Zanker disclaims beneficial
ownership of such shares), (ii) 18,750 shares of Common Stock held by
Debbie Dworkin, Mr. Zanker's wife (Mr. Zanker disclaims beneficial
ownership of such shares), (iii) options to purchase 100,000 shares of
Common Stock at an exercise price of $1.875 per share and (iv) options
to purchase 120,000 shares of Common Stock at an exercise price of
$3.75 per share.
(3) Mr. Murray is the Chief Executive Officer and a director of the
Company.
(4) Includes (i) options to purchase 100,000 shares of Common Stock at an
exercise price of $1.875 per share and (ii) options to purchase 120,000
shares of Common Stock at an exercise price of $3.75 per share.
(5) Mr. Dee is the Chief Financial Officer and Secretary of the Company.
(6) Represents (i) options to purchase 10,000 shares of Common Stock at an
exercise price of $2.5625 per share and (ii) options to purchase 90,000
Shares of Common Stock at an exercise price of $2.375 per share.
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<PAGE>
(7) Messrs. Faber, Hyams, Fleischer, Hanelt, and Seligman are directors of
the Company.
(8) Represents options to purchase 10,000 shares of Common Stock at an
exercise price of $5.00 per share.
(9) Includes (i) 1,875 shares of Common Stock held by Mr. Hyams and his
wife as joint tenants with the right of survivorship, (ii) 63,562
shares of Common Stock held as trustee for The William Zanker Trust and
(iii) options to purchase 10,000 shares of Common Stock at an exercise
price of $5.00 per share.
(10) These shares consist of (i) 3,625 shares held by Mr. Fleischer, (ii)
10,000 shares issuable upon the exercise of options at an exercise
price of $5.00 per share and (iii) 12,500 shares issuable upon the
exercise of warrants purchased by Mr. Fleischer in the Company's bridge
financing.
(11) Includes (i) 5,000 shares of Common Stock held by Mr. Seligman and his
wife as joint tenants with the right of survivorship and (ii) options
to purchase 10,000 shares of Common Stock at an exercise price of $5.00
per share.
PLAN OF DISTRIBUTION
It is anticipated that all of the Shares will be offered by the Selling
Shareholders from time to time in the open market, either directly or through
brokers or agents, or in privately negotiated transactions. The Selling
Shareholders have advised the Company that they are not parties to any
agreement, arrangement or understanding as to such sales.
LEGAL MATTERS
Certain legal matters in connection with the issuance of the Shares
offered hereby have been passed upon for the Company by Olshan Grundman Frome &
Rosenzweig LLP, 505 Park Avenue, New York, New York 10022. Such firm
beneficially owns 7,500 shares of Common Stock of the Company. Stephen Irwin, of
counsel to Olshan Grundman Frome & Rosenzweig LLP, beneficially owns 2,800
shares of Common Stock of the Company.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form S-8 (together with all amendments and exhibits
thereto, the "Registration Statement") under the Securities Act with respect to
the Shares offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company and the securities offered
hereby, reference is made to the Registration Statement. Statements contained in
this Prospectus as to the contents of any contract or other document are not
necessarily complete, and in each instance, reference is made to the copy of
such contract or document filed as an exhibit to the Registration Statement,
such statement being qualified in all respects by such reference.
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PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Securities and Exchange
Commission (the "Commission") are incorporated herein by reference and made a
part hereof:
(a) The Company's Annual Report on Form 10-KSB for the year
ended December 31, 1995.
(b) The Company's Quarterly Report on Form 10-QSB for the
quarter ended March 31, 1996.
(c) The description of the Company's securities contained in
the Company's Registration Statement on Form 8-A filed on February 23,
1995.
All reports and other documents subsequently filed by the Company
pursuant to Sections 13, 14 and 15(d) of the Securities Exchange Act of 1934, as
amended, prior to the filing of a post-effective amendment which indicates that
all securities offered hereby have been sold or which deregisters all securities
remaining unsold, shall be deemed to be incorporated by reference herein and to
be a part hereof from the date of the filing of such reports and documents.
ITEM 4. DESCRIPTION OF SECURITIES
Not applicable.
ITEM 5. INTEREST OF NAMED EXPERTS AND COUNSEL
Certain legal matters in connection with the issuance of the Shares
offered hereby have been passed upon for the Company by Olshan Grundman Frome &
Rosenzweig LLP, 505 Park Avenue, New York, New York 10022. Such firm
beneficially owns 7,500 shares of Common Stock of the Company. Stephen Irwin, of
counsel to Olshan Grundman Frome & Rosenzweig LLP, beneficially owns 2,800
shares of Common Stock of the Company.
ITEM 6. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Except as hereinafter set forth, there is no statute, charter
provision, by-law, contract or other arrangement under which any controlling
person, director or officer of the Company is insured or indemnified in any
manner against liability which he may incur in his capacity as such.
The Company's authority to indemnify its directors and officers is
governed by the provisions of Sections 721 to 726 of the New York Business
Corporation Law (the "BCL"), as follows:
Section 721 Nonexclusivity of Statutory Provisions for Indemnification
of Directors and Officers -- The indemnification and advancement of expenses
granted pursuant to, or provided by, this article shall not be deemed exclusive
of any other rights to which a director or officer seeking indemnification or
advancement of expenses may be entitled, whether contained in the certificate of
incorporation or the by-laws or, when authorized by such certificate of
incorporation or by-laws, (i) a resolution of shareholders, (ii) a resolution of
directors, or (iii) an agreement providing for such indemnification, provided
that no indemnification may be made to or on behalf of any director or officer
if a judgment or other final adjudication adverse to the director or officer
establishes that his acts were committed in bad faith or were the result of
active and deliberate dishonesty and were material to the cause of action so
adjudicated, or that he personally gained in fact a financial profit or other
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advantage to which he was not legally entitled. Nothing contained in this
article shall affect any rights to indemnification to which corporate personnel
other than directors and officers may be entitled by contract or otherwise under
law.
Section 722 Authorization for Indemnification of Directors and Officers
- -- (a) A corporation may indemnify any person, made, or threatened to be made, a
party to an action or proceeding other than one by or in the right of the
corporation to procure a judgment in its favor, whether civil or criminal,
including an action by or in the right of any other corporation of any type or
kind, domestic or foreign, or any partnership, joint venture, trust, employee
benefit plan or other enterprise, which any director or officer of the
corporation served in any capacity at the request of the corporation, by reason
of the fact that he, his testator or intestate, was a director or officer of the
corporation, or served such other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise in any capacity, against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorneys' fees actually and necessarily incurred as a result of such action or
proceeding, or any appeal therein, if such director or officer acted, in good
faith, for a purpose which he reasonably believed to be in, or, in the case of
service for any other corporation or any partnership, joint venture, trust,
employee benefit plan or other enterprise, not opposed to, the best interests of
the corporation and, in criminal actions or proceedings, in addition, had no
reasonable cause to believe that his conduct was unlawful.
(b) The termination of any such civil or criminal action or
proceeding by judgment, settlement, conviction or upon a plea of nolo
contendere, or its equivalent, shall not in itself create a presumption that any
such director or officer did not act, in good faith, for a purpose which he
reasonably believed to be in, or, in the case of service for any other
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise, not opposed to, the best interests of the corporation or that
he had reasonable cause to believe that his conduct was unlawful.
(c) A corporation may indemnify any person made, or threatened
to be made, a party to an action by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he, his testator or
intestate, is or was a director or officer of the corporation, or is or was
serving at the request of the corporation as a director or officer of any other
corporation of any type or kind, domestic or foreign, of any partnership, joint
venture, trust, employee benefit plan or other enterprise, against amounts paid
in settlement and reasonable expenses, including attorneys' fees, actually and
necessarily incurred by him in connection with the defense or settlement of such
action, or in connection with an appeal therein if such director or officer
acted, in good faith, for a purpose which he reasonably believed to be in, or,
in the case of service for any other corporation or any partnership, joint
venture, trust, employee benefit plan or other enterprise, not opposed to, the
best interests of the corporation, except that no indemnification under this
paragraph shall be made in respect of (1) a threatened action, or a pending
action which is settled or otherwise disposed of, or (2) any claim issue or
matter as to which such person shall have been adjudged to be liable to the
corporation, unless and only to the extent that the court in which the action
was brought, or, if no action was brought, any court of competent jurisdiction,
determines upon application that, in view of all the circumstances of the case,
the person is fairly and reasonably entitled to indemnity for such portion of
the settlement amount and expenses as the court deems proper.
(d) For the purpose of this section, a corporation shall be
deemed to have requested a person to serve an employee benefit plan where the
performance by such person of his duties to the corporation also imposes duties
on, or otherwise involves services by, such person to the plan or participants
or beneficiaries of the plan; excise taxes assessed on a person with respect to
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<PAGE>
an employee benefit plan pursuant to applicable law shall be considered fines;
and action taken or omitted by a person with respect to an employee benefit plan
in the performance of such person's duties for a purpose reasonably believed by
such person to be in the interest of the participants and beneficiaries of the
plan shall be deemed to be for a purpose which is not opposed to the best
interests of the corporation.
Section 723 Payment of Indemnification Other Than By Court Award -- (a)
A person who has been successful, on the merits or otherwise, in the defense of
a civil or criminal action or proceeding of the character described in section
722 shall be entitled to indemnification as authorized in such section.
(b) Except as provided in paragraph (a), any indemnification
under section 722 or otherwise permitted by section 721, unless ordered by a
court under section 724 (Indemnification of directors and officers by a court),
shall be made by the corporation, only if authorized in the specific case:
(1) By the board acting by a quorum consisting of
directors who are not parties to such action or proceeding upon a finding that
the director or officer has met the standard of conduct set forth in section 722
or established pursuant to section 721, as the case may be, or,
(2) If a quorum under subparagraph (1) is not
obtainable or, even if obtainable, a quorum of disinterested directors so
directs;
(A) By the board upon the opinion in writing of
independent legal counsel that indemnification is proper in the circumstances
because the applicable standard of conduct set forth in such sections has been
met by such director or officer, or
(B) By the shareholders upon a finding that the
director or officer has met the applicable standard of conduct set forth in such
sections.
(c) Expenses incurred in defending a civil or criminal action
or proceeding may be paid by the corporation in advance of the final disposition
of such action or proceeding upon receipt of an undertaking by or on behalf of
such director or officer to repay such amount as, and to the extent, required by
paragraph (a) of section 725.
Section 724 Indemnification of Directors and Officers by a Court -- (a)
Notwithstanding the failure of a corporation to provide indemnification, and
despite any contrary resolution of the board or of the shareholders in the
specific case under section 723 (Payment of indemnification other than by court
award), indemnification shall be awarded by a court to the extent authorized
under section 722 (Authorization for indemnification of directors and officers),
and paragraph (a) of section 723. Application therefor may be made, in every
case, either:
(1) In the civil action or proceeding in which the
expenses were incurred or other amounts were paid, or
(2) To the supreme court in a separate proceeding,
in which case the application shall set forth the disposition of any previous
application made to any court for the same or similar relief and also reasonable
cause for the failure to make application for such relief in action or
proceeding in which the expenses were incurred or other amounts were paid.
(b) The application shall be made in such manner
and form as may be required by the applicable rules of court or, in the absence
thereof, by direction of a court to which it is made. Such application shall be
upon notice to the corporation. The court may also direct that notice be given
at the
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expense of the corporation to the shareholders and such other persons as it may
designate in such manner as it may require.
(c) Where indemnification is sought by judicial
action, the court may allow a person such reasonable expenses, including
attorneys' fees, during the pendency of the litigation as are necessary in
connection with his defense therein, if the court shall find that the defendant
has by his pleadings or during the course of the litigation raised genuine
issues of fact or law.
Section 725 Other Provisions Affecting Indemnification of Directors and
Officers -- (a) All expenses incurred in defending a civil or criminal action or
proceeding which are advanced by the corporation under paragraph (c) of section
723 (Payment of indemnification other than by court award) or allowed by a court
under paragraph (c) of section 724 (Indemnification of directors and officers by
a court) shall be repaid in case the person receiving such advancement or
allowance is ultimately found, under the procedure set forth in this article,
not to be entitled to indemnification or, where indemnification is granted, to
the extent the expenses so advanced by the corporation or allowed by the court
exceed the indemnification to which he is entitled:
(b) No indemnification, advancement or allowance shall be
made under this article in any circumstance where it appears:
(1) That the indemnification would be inconsistent with
the law of the jurisdiction of incorporation of a foreign corporation which
prohibits or otherwise limits such indemnification;
(2) That the indemnification would be inconsistent with
a provision of the certificate of incorporation, a by-law, a resolution of the
board or of the shareholders, an agreement or other proper corporate action, in
effect at the time of the accrual of the alleged cause of action asserted in the
threatened or pending action or proceeding in which the expenses were incurred
or other amounts were paid, which prohibits or otherwise limits indemnification;
or
(3) If there has been a settlement approved by the
court, that the indemnification would be inconsistent with any condition with
respect to indemnification expressly imposed by the court in approving the
settlement.
(c) If any expenses or other amounts are paid by way of
indemnification, otherwise than by court order or action by the shareholders,
the corporation shall, not later than the next annual meeting of shareholders
unless such meeting is held within three months from the date of such payment,
and in any event, within fifteen months from the date of such payment, mail to
its shareholders of record at the time entitled to vote for the election of
directors a statement specifying the persons paid, the amounts paid, and the
nature and status at the time of such payment of the litigation or threatened
litigation.
(d) If any action with respect to indemnification of
directors and officers is taken by way of amendment of the by-laws, resolution
of directors, or by agreement, then the corporation shall, not later than the
next annual meeting of shareholders, unless such meeting is held within three
months from the date of such action, and, in any event, within fifteen months
from the date of such action, mail to its shareholders of record at the time
entitled to vote for the election of directors a statement specifying the action
taken.
(e) Any notification required to be made pursuant to the
foregoing paragraph (c) or (d) of this section by any domestic mutual insurer
shall be satisfied by compliance with the corresponding provisions of section
one thousand two hundred sixteen of the insurance law.
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<PAGE>
(f) The provisions of this article relating to
indemnification of directors and officers and insurance therefor shall apply to
domestic corporations and foreign corporations doing business in this state,
except as provided in section 1320 (Exemption from certain provisions).
Section 726 Insurance for Indemnification of Directors and Officers --
(a) Subject to paragraph (b), a corporation shall have power to purchase and
maintain insurance:
(1) To indemnify the corporation for any obligation
which it incurs as a result of the indemnification of directors and officers
under the provisions of this article, and
(2) To indemnify directors and officers in instances
in which they may be indemnified by the corporation under the provisions of this
article, and
(3) To indemnify directors and officers in instances
in which they may not otherwise be indemnified by the corporation under the
provisions of this article provided the contract of insurance covering such
directors and officers provides, in a manner acceptable to the superintendent of
insurance, for a retention amount and for co-insurance.
(b) No insurance under paragraph (a) may provide for any
payment, other than cost of defense, to or on behalf of any director or officer.
(1) if a judgment or other final adjudication
adverse to the insured director or officer establishes that his acts of active
and deliberate dishonesty were material to the cause of action so adjudicated,
or that he personally gained in fact a financial profit or other advantage to
which he was not legally entitled, or
(2) in relation to any risk the insurance of which
is prohibited under the insurance law of this state.
(c) Insurance under any or all subparagraphs of paragraph
(a) may be included in a single contract or supplement thereto. Retrospective
rated contracts are prohibited.
(d) The corporation shall, within the time and to the
persons provided in paragraph (c) of section 725 (Other provisions affecting
indemnification of directors or officers), mail a statement in respect of any
insurance it has purchased or renewed under this section, specifying the
insurance carrier, date of the contract, cost of the insurance, corporate
positions insured, and a statement explaining all sums, not previously reported
in a statement to shareholders, paid under any indemnification insurance
contract.
(e) This section is the public policy of this state to
spread the risk of corporate management, notwithstanding any other general or
special law of this state or of any other jurisdiction including the federal
government.
----------- ------------ ----------
The Company's certificate of incorporation provides that the personal
liability of the directors of the Company is eliminated to the fullest extent
permitted by Section 402(b) of the BCL.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not applicable.
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ITEM 8. EXHIBITS
4(a) - The Great American BackRub Store, Inc. 1994 Employee
Stock Option Plan (the "1994 Plan") (incorporated by
reference to Exhibit 4.4 to the Company's
Registration Statement on Form SB-2 (File no.
33-88052)).
4(b) - Stock Option Agreement dated as of December 23, 1994,
by and between the Company and William Zanker.
4(c) - Stock Option Agreement dated as of July 19, 1995, by
and between the Company and William Zanker.
4(d) - Stock Option Agreement dated as of December 23, 1994,
by and between the Company and Terrance Murray.
4(e) - Stock Option Agreement dated as of July 19, 1995, by
and between the Company and Terrance Murray.
4(f) - Stock Option Agreement dated as of July 27, 1995, by
and between the Company and Simon Abrahams.
4(g) - Stock Option Agreement dated as of July 27, 1995, by
and between the Company and Keith Dee.
4(h) - Stock Option Agreement dated as of December 15, 1995
by and between the Company and Keith Dee.
4(i) - Form of Stock Option Agreement by and between the
Company and Edward Faber, Andrew Hyams, Donald
Fleischer, Peter Hanelt and Stephen Seligman.
5 - Opinion of Olshan, Grundman, Frome & Rosenzweig LLP.
23(a) - Consent of BDO Seidman, LLP, independent auditors.
23(b) - Consent of Olshan, Grundman, Frome & Rosenzweig LLP
(included in its opinion filed as Exhibit 5).
24 - Powers of Attorney (included on the signature page to
this Registration Statement).
ITEM 9. UNDERTAKINGS.
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
Registration Statement to include any additional or
changed material information on the plan of
distribution.
(2) That, for the purposes of determining any liability
under the Securities Act of 1933, as amended, each
such post-effective amendment shall be deemed to be a
new registration statement relating to the securities
offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered that remain unsold at the termination of
the offering.
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B. The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934 (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by
reference in this Registration Statement shall be deemed to be
a new registration statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering
thereof.
C. Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to
directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of
1933, as amended, and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by a
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Securities Act of
1933, as amended, and will be governed by the final
adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of New York, State of New York, on this 6th day of May
1996.
THE GREAT AMERICAN BACKRUB STORE, INC.
--------------------------------------
(Registrant)
By: /s/ William Zanker
--------------------------------
William Zanker, Chairman of the Board
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints William Zanker, Terrance C. Murray and
Keith Dee his true and lawful attorneys-in-fact and agent, with full power of
substitution and resubstitution, for and in his or her name, place and stead, in
any and all capacities, to sign any or all amendments to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his or her substitute, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
Signature Title Date
/s/ William Zanker Chairman of the Board, May 6, 1996
- --------------------------- President and Director
William Zanker
/s/ Terrance C. Murray Chief Executive Officer May 6, 1996
- --------------------------- (principal executive
Terrance C. Murray officer) and Director
/s/ Keith Dee Chief Financial Officer May 6, 1996
- --------------------------- (principal financial
Keith Dee officer and principal
accounting officer) and
Secretary
/s/ Stephen Seligman Director May 6, 1996
- ---------------------------
Stephen Seligman
/s/ Edward E. Faber Director May 6, 1996
- ---------------------------
Edward E. Faber
/s/ Peter Hanelt Director May 6, 1996
- ---------------------------
Peter Hanelt
/s/ Donald R. Fleischer Director May 6, 1996
- ----------------------------
Donald R. Fleischer
/s/ Andrew L. Hyams Director May 6, 1996
- ----------------------------
Andrew L. Hyams
II-8
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
4(a) - The Great American BackRub Store, Inc. 1994 Employee
Stock Option Plan (the "1994 Plan") (incorporated by
reference to Exhibit 4.4 to the Company's
Registration Statement on Form SB-2 (File no.
33-88052)).
4(b) - Stock Option Agreement dated as of December 23, 1994,
by and between the Company and William Zanker.
4(c) - Stock Option Agreement dated as of July 19, 1995, by
and between the Company and William Zanker.
4(d) - Stock Option Agreement dated as of December 23, 1994,
by and between the Company and Terrance Murray.
4(e) - Stock Option Agreement dated as of July 19, 1995, by
and between the Company and Terrance Murray.
4(f) - Stock Option Agreement dated as of July 27, 1995, by
and between the Company and Simon Abrahams.
4(g) - Stock Option Agreement dated as of July 27, 1995, by
and between the Company and Keith Dee.
4(h) - Stock Option Agreement dated as of December 15, 1995,
by and between the Company and Keith Dee.
4(i) - Form of Stock Option Agreement by and between the
Company and Edward Faber, Andrew Hyams, Donald
Fleischer, Peter Hanelt, and Stephen Seligman.
5 - Opinion of Olshan, Grundman, Frome & Rosenzweig LLP.
23(a) - Consent of BDO Seidman, LLP, independent auditors.
23(b) - Consent of Olshan, Grundman, Frome & Rosenzweig LLP
(included in its opinion filed as Exhibit 5).
24 - Powers of Attorney (included on the signature page to
this Registration Statement).
THE GREAT AMERICAN BACKRUB STORE, INC.
958 THIRD AVENUE
NEW YORK, NEW YORK 10022
As of December 23, 1994
William Zanker
265 South Berry Avenue
Mamaroneck, New York 10543
On December 23, 1994, the Board of Directors of The Great American
BackRub Store, Inc. (the "Company") granted to you an option (the "Prior
Agreement") to purchase certain shares of the Company's Common Stock, $.001 par
value per Share (the "Common Stock"). The Prior Agreement based the per share
exercise price on a percentage of the expected initial public offering price.
Since the proposed initial public offering price has changed, and since the
Prior Agreement was ambiguous as to the effect that the Company's 1 for 8
reverse stock split (the "Reverse Split") would have on the terms of the Prior
Agreement, this Stock Option Letter restates and modifies the Prior Agreement,
and as such, supersedes any and all prior agreements, memoranda, arrangements
and understandings relating to the subject matter hereof, including the Prior
Agreement.
The Board of Directors of the Company has granted to you an option
(the "Option") to purchase 960,000 shares (such 960,000 shares to become 120,000
shares upon the effectiveness of the Reverse Split) (the "Shares") of Common
Stock at a price equal to 75% of the initial public offering price.
The Option may be exercised as follows: as to 331/3% of the Shares
upon the consummation of the Company's initial public offering, as to an
additional 331/3% of the Shares on December 23, 1995 and as to an additional
331/3% of the Shares on December 23, 1996. Should your employment with the
Company terminate for cause, any portion of the Option not previously vested
will immediately terminate.
The Option, to the extent not previously exercised, will expire on
December 23, 2004.
In the event of your death, the Option may be exercised (to the
extent vested) within three months after your death, with respect to all or any
portion of the Shares issuable upon exercise of the Option, by the person or
persons entitled to do so under your will or, if you shall have failed to make
testamentary disposition of the Option or shall have died intestate, by your
legal representative or representatives (after which three month period the
Option will, to the extent not exercised, expire). Except as provided above, the
Option hereby granted to you is not transferable in whole or in part.
Unless at the time of the exercise of the Option a registration
statement under the Securities Act of 1933, as amended (the "Act"), is in effect
as to such Shares, any Shares purchased by you upon the exercise of the Option
shall be acquired for investment and not for sale or distribution, and if the
Company so requests, upon any exercise of the Option, in whole or in part, you
will execute and deliver to the Company a certificate to such effect. The
Company shall not be obligated to issue any Shares pursuant to the Option if, in
the opinion of counsel to the Company, the Shares to be so issued are required
to be registered or otherwise qualified under the Act or under any other
applicable statute, regulation or ordinance affecting the sale of securities,
unless and until such Shares have been so registered or otherwise qualified.
You understand and acknowledge that, under existing law, unless at
the time of the exercise of the Option a registration statement under the Act is
in effect as to such Shares (i) any Shares purchased by you upon exercise of the
Option may be required to be held indefinitely unless such Shares are
<PAGE>
subsequently registered under the Act or an exemption from such registration is
available; (ii) any sales of such Shares made in reliance upon Rule 144
promulgated under the Act may be made only in accordance with the terms and
conditions of that Rule (which, under certain circumstances, restrict the number
of shares which may be sold and the manner in which shares may be sold); (iii)
in the case of securities to which Rule 144 is not applicable, compliance with
Regulation A promulgated under the Act or some other disclosure exemption will
be required; (iv) certificates for Shares to be issued to you hereunder shall
bear a legend to the effect that the Shares have not been registered under the
Act and that the Shares may not be sold, hypothecated or otherwise transferred
in the absence of an effective registration statement under the Act relating
thereto or an opinion of counsel satisfactory to the Company that such
registration is not required; (v) the Company will place an appropriate "stop
transfer" order with its transfer agent with respect to such Shares; and (vi)
the Company has undertaken no obligation to register the Shares or include the
Shares in any registration statement which may be filed by it subsequent to the
issuance of the Shares to you. In addition, you understand and acknowledge that
the Company has no obligation to you to furnish information necessary to enable
you to make sales under Rule 144.
In the event that the Company shall at any time prior to the
expiration of the Option and prior to the exercise thereof: (i) declare or pay
to the holders of the Common Stock a dividend payable in any kind of shares of
stock of the Company; or (ii) change or divide or otherwise reclassify its
Common Stock into the same or a different number of shares with or without par
value, or into shares of any class or classes; or (iii) consolidate or merge
with, or transfer its property as an entirety or substantially all of its assets
to any other corporation; or (iv) make any distribution of its assets to holders
of its Common Stock as a liquidation, or partial liquidation dividend or by way
of return of capital; then, upon the subsequent exercise of the Option, the
purchase price of the Shares issuable upon the exercise hereof shall be
appropriately adjusted by the Board of Directors of the Company so that you
shall receive for the exercise price, in addition to or in substitution for the
Shares to which you would be entitled upon such exercise, such additional shares
of stock of the Company, or such reclassified shares of stock of the Company, or
such securities or property of the Company resulting from such consolidation or
merger or transfer, of such assets of the Company, which you would have been
entitled to receive had you exercised the Option prior to the happening of any
of the foregoing events.
The Option (or installment thereof) is to be exercised by
delivering to the Company a written notice of exercise in the form attached
hereto as Exhibit A, specifying the number of Shares to be purchased, together
with payment of the purchase price of the Shares to be purchased. The purchase
price is to be paid in cash, by delivering shares of the Company's stock already
owned by you and having a fair market value on the date of exercise equal to the
exercise price of the Option, or through your written election to have Shares
withheld by the Company from the Shares otherwise to be received with such
withheld Shares having a fair market value on the date of exercise equal to the
exercise price of the Option.
Would you kindly evidence your acceptance of this Option and your
agreement to comply with the provisions hereof by executing this letter under
the words "Agreed To and Accepted."
Very truly yours,
THE GREAT AMERICAN BACKRUB STORE, INC.
By: /s/ Terrance C. Murray
--------------------------------------
Terrance C. Murray
Chief Executive Officer
AGREED TO AND ACCEPTED:
/s/ William Zanker
- ------------------------
WILLIAM ZANKER
-2-
<PAGE>
Exhibit A
The Great American BackRub Store, Inc.
958 Third Avenue
New York, New York 10022
Gentlemen:
Notice is hereby given of my election to purchase ______ shares of
Common Stock, $.001 par value per share (the "Shares"), of The Great American
BackRub Store, Inc. at a price of $4.50 per Share, pursuant to the provisions of
the Option granted to me on December 23, 1994. Enclosed in payment for the
Shares is:
/ / my check in the amount of $________.
/ / __________________ Shares having a total value
$______________, such value being based on the closing
price(s) of the Shares on the date hereof.
/ / Withhold _____ Shares having a total value of
$__________, such value being based on the closing
price(s) of the Shares on the date hereof, from the
Shares otherwise to be received.
The following information is supplied for use in issuing and
registering the Shares purchased hereby:
Number of Certificates
and Denominations ___________________
Name ___________________
Address ___________________
___________________
___________________
Social Security Number ___________________
Dated: _______________, ____
Very truly yours,
--------------------------
-3-
THE GREAT AMERICAN BACKRUB STORE, INC.
425 MADISON AVENUE, SUITE 605
NEW YORK, NEW YORK 10017
As of July 19, 1995
William Zanker
265 South Berry Avenue
Mamaroneck, New York 10543
On July 19, 1995, the Compensation Committee of the Board of
Directors of The Great American BackRub Store, Inc. (the "Company") recommended
the grant to you of an option (the "Option") to purchase One Hundred Thousand
(100,000) shares (the "Shares") of the Company's Common Stock, $.001 par value
per share, at a price of $1.875 per Share and said grant was approved by the
Board of Directors of the Company on July 27, 1995.
Except as provided below, the Option may be exercised in whole or
in part, at any time and from time to time from the date hereof until July 18,
2000 (on which date the Option, to the extent not previously exercised, will
expire).
In the event of your death, the Option may be exercised within
three months after your death, with respect to all or any portion of the Shares
issuable upon exercise of the Option, by the person or persons entitled to do so
under your will or, if you shall have failed to make testamentary disposition of
the Option or shall have died intestate, by your legal representative or
representatives (after which three month period the Option will, to the extent
not exercised, expire). Except as provided above, the Option hereby granted to
you is not transferable in whole or in part.
Unless at the time of the exercise of the Option a registration
statement under the Securities Act of 1933, as amended (the "Act"), is in effect
as to such Shares, any Shares purchased by you upon the exercise of the Option
shall be acquired for investment and not for sale or distribution, and if the
Company so requests, upon any exercise of the Option, in whole or in part, you
will execute and deliver to the Company a certificate to such effect. The
Company shall not be obligated to issue any Shares pursuant to the Option if, in
the opinion of counsel to the Company, the Shares to be so issued are required
to be registered or otherwise qualified under the Act or under any other
applicable statute, regulation or ordinance affecting the sale of securities,
unless and until such Shares have been so registered or otherwise qualified.
You understand and acknowledge that, under existing law, unless at
the time of the exercise of the Option a registration statement under the Act is
in effect as to such Shares (i) any Shares purchased by you upon exercise of the
Option may be required to be held indefinitely unless such Shares are
subsequently registered under the Act or an exemption from such registration is
available; (ii) any sales of such Shares made in reliance upon Rule 144
promulgated under the Act may be made only in accordance with the terms and
conditions of that Rule (which, under certain circumstances, restrict the number
of shares which may be sold and the manner in which shares may be sold); (iii)
in the case of securities to which Rule 144 is not applicable, compliance with
some other disclosure exemption will be required; (iv) certificates for Shares
to be issued to you hereunder shall bear a legend to the effect that the Shares
have not been registered under the Act and that the Shares may not be sold,
hypothecated or otherwise transferred in the absence of an effective
registration statement under the Act relating thereto or an opinion of counsel
satisfactory to the Company that such registration is not required; (v) the
Company will place an appropriate "stop transfer" order with its transfer agent
with respect to such Shares; and (vi) the Company has undertaken no obligation
to register the Shares or include the Shares in any registration statement which
may be filed by it subsequent to the issuance of the Shares to you. In addition,
you understand and acknowledge that the Company has no obligation to you to
furnish information necessary to enable you to make sales under Rule 144.
<PAGE>
In the event that the Company shall at any time prior to the
expiration of the Option and prior to the exercise thereof: (i) declare or pay
to the holders of the Common Stock a dividend payable in any kind of shares of
stock of the Company; or (ii) change or divide or otherwise reclassify its
Common Stock into the same or a different number of shares with or without par
value, or into shares of any class or classes; or (iii) consolidate or merge
with, or transfer its property as an entirety or substantially all of its assets
to any other corporation; or (iv) make any distribution of its assets to holders
of its Common Stock as a liquidation, or partial liquidation dividend or by way
of return of capital; then, upon the subsequent exercise of the Option, the
purchase price of the Shares issuable upon the exercise hereof shall be
appropriately adjusted by the Board of Directors of the Company so that you
shall receive for the exercise price, in addition to or in substitution for the
Shares to which you would be entitled upon such exercise, such additional shares
of stock of the Company, or such reclassified shares of stock of the Company, or
such securities or property of the Company resulting from such consolidation or
merger or transfer, or such assets of the Company, which you would have been
entitled to receive had you exercised the Option prior to the happening of any
of the foregoing events.
The Option (or installment thereof) is to be exercised by
delivering to the Company a written notice of exercise in the form attached
hereto as Exhibit A, specifying the number of Shares to be purchased, together
with payment of the purchase price of the Shares to be purchased. The purchase
price is to be paid in cash, or by delivering shares of the Company's stock
already owned by you and having a fair market value on the date of exercise
equal to the exercise price of the Option, or through your written election to
have Shares withheld by the Company from the Shares otherwise to be received
with such withheld Shares having a fair market value on the date of exercise
equal to the exercise price of the Option.
This Option shall be binding upon any successors or assigns of the
Company.
Kindly evidence your acceptance of this Option and your agreement
to comply with the provisions hereof by executing this letter under the words
"Agreed To and Accepted."
Very truly yours,
THE GREAT AMERICAN BACKRUB STORE, INC.
By: /s/ Terrance C. Murray
---------------------------------
Terrance C. Murray
Chief Executive Officer
AGREED TO AND ACCEPTED:
/s/ William Zanker
- --------------------------
WILLIAM ZANKER
-2-
<PAGE>
EXHIBIT A
The Great American BackRub Store, Inc.
425 Madison Avenue, Suite 605
New York, New York 10017
Gentlemen:
Notice is hereby given of my election to purchase ______ shares of
Common Stock, $.001 par value per share (the "Shares"), of The Great American
BackRub Store, Inc. at a price of $_____ per Share, pursuant to the provisions
of the Option granted to me on July 19, 1995. Payment for the Shares is made by:
/ / my check, enclosed, in the amount of $________.
/ / __________________ Shares, enclosed, having a total value
of $______________, such value being based on the closing
price of the Shares on the date hereof.
/ / Your withholding _____ Shares, having a total value of
$__________, such value being based on the closing price
of the Shares on the date hereof, from the Shares
otherwise to be received by me.
The following information is supplied for use in issuing and
registering the Shares purchased hereby:
Number of Certificates
and Denominations ___________________
Name ___________________
Address ___________________
___________________
___________________
Social Security Number ___________________
Dated: _______________, ____
Very truly yours,
--------------------------
-3-
THE GREAT AMERICAN BACKRUB STORE, INC.
958 THIRD AVENUE
NEW YORK, NEW YORK 10022
As of December 23, 1994
Terrance C. Murray
3377 Silver Springs Court
Lafayette, California 94549
On December 23, 1994, the Board of Directors of The Great American
BackRub Store, Inc. (the "Company") granted to you an option (the "Prior
Agreement") to purchase certain shares of the Company's Common Stock, $.001 par
value per Share (the "Common Stock"). The Prior Agreement based the per share
exercise price on a percentage of the expected initial public offering price.
Since the proposed initial public offering price has changed, and since the
Prior Agreement was ambiguous as to the effect that the Company's 1 for 8
reverse stock split (the "Reverse Split") would have on the terms of the Prior
Agreement, this Stock Option Letter restates and modifies the Prior Agreement,
and as such, supersedes any and all prior agreements, memoranda, arrangements
and understandings relating to the subject matter hereof, including the Prior
Agreement.
The Board of Directors of the Company has granted to you an option
(the "Option") to purchase 960,000 shares (such 960,000 shares to become 120,000
shares upon the effectiveness of the Reverse Split) (the "Shares") of Common
Stock at a price equal to 75% of the initial public offering price.
The Option may be exercised as follows: as to 331/3% of the Shares
upon the consummation of the Company's initial public offering, as to an
additional 331/3% of the Shares on December 23, 1995 and as to an additional
331/3% of the Shares on December 23, 1996. Should your employment with the
Company terminate for cause, any portion of the Option not previously vested
will immediately terminate.
The Option, to the extent not previously exercised, will expire on
December 23, 2004.
In the event of your death, the Option may be exercised (to the
extent vested) within three months after your death, with respect to all or any
portion of the Shares issuable upon exercise of the Option, by the person or
persons entitled to do so under your will or, if you shall have failed to make
testamentary disposition of the Option or shall have died intestate, by your
legal representative or representatives (after which three month period the
Option will, to the extent not exercised, expire). Except as provided above, the
Option hereby granted to you is not transferable in whole or in part.
Unless at the time of the exercise of the Option a registration
statement under the Securities Act of 1933, as amended (the "Act"), is in effect
as to such Shares, any Shares purchased by you upon the exercise of the Option
shall be acquired for investment and not for sale or distribution, and if the
Company so requests, upon any exercise of the Option, in whole or in part, you
will execute and deliver to the Company a certificate to such effect. The
Company shall not be obligated to issue any Shares pursuant to the Option if, in
the opinion of counsel to the Company, the Shares to be so issued are required
to be registered or otherwise qualified under the Act or under any other
applicable statute, regulation or ordinance affecting the sale of securities,
unless and until such Shares have been so registered or otherwise qualified.
You understand and acknowledge that, under existing law, unless at
the time of the exercise of the Option a registration statement under the Act is
in effect as to such Shares (i) any Shares purchased by you upon exercise of the
Option may be required to be held indefinitely unless such Shares are
subsequently registered under the Act or an exemption from such registration is
available; (ii) any sales of such Shares made in reliance upon Rule 144
promulgated under the Act may be made only in accordance with the terms and
<PAGE>
conditions of that Rule (which, under certain circumstances, restrict the number
of shares which may be sold and the manner in which shares may be sold); (iii)
in the case of securities to which Rule 144 is not applicable, compliance with
Regulation A promulgated under the Act or some other disclosure exemption will
be required; (iv) certificates for Shares to be issued to you hereunder shall
bear a legend to the effect that the Shares have not been registered under the
Act and that the Shares may not be sold, hypothecated or otherwise transferred
in the absence of an effective registration statement under the Act relating
thereto or an opinion of counsel satisfactory to the Company that such
registration is not required; (v) the Company will place an appropriate "stop
transfer" order with its transfer agent with respect to such Shares; and (vi)
the Company has undertaken no obligation to register the Shares or include the
Shares in any registration statement which may be filed by it subsequent to the
issuance of the Shares to you. In addition, you understand and acknowledge that
the Company has no obligation to you to furnish information necessary to enable
you to make sales under Rule 144.
In the event that the Company shall at any time prior to the
expiration of the Option and prior to the exercise thereof: (i) declare or pay
to the holders of the Common Stock a dividend payable in any kind of shares of
stock of the Company; or (ii) change or divide or otherwise reclassify its
Common Stock into the same or a different number of shares with or without par
value, or into shares of any class or classes; or (iii) consolidate or merge
with, or transfer its property as an entirety or substantially all of its assets
to any other corporation; or (iv) make any distribution of its assets to holders
of its Common Stock as a liquidation, or partial liquidation dividend or by way
of return of capital; then, upon the subsequent exercise of the Option, the
purchase price of the Shares issuable upon the exercise hereof shall be
appropriately adjusted by the Board of Directors of the Company so that you
shall receive for the exercise price, in addition to or in substitution for the
Shares to which you would be entitled upon such exercise, such additional shares
of stock of the Company, or such reclassified shares of stock of the Company, or
such securities or property of the Company resulting from such consolidation or
merger or transfer, of such assets of the Company, which you would have been
entitled to receive had you exercised the Option prior to the happening of any
of the foregoing events.
The Option (or installment thereof) is to be exercised by
delivering to the Company a written notice of exercise in the form attached
hereto as Exhibit A, specifying the number of Shares to be purchased, together
with payment of the purchase price of the Shares to be purchased. The purchase
price is to be paid in cash, by delivering shares of the Company's stock already
owned by you and having a fair market value on the date of exercise equal to the
exercise price of the Option, or through your written election to have Shares
withheld by the Company from the Shares otherwise to be received with such
withheld Shares having a fair market value on the date of exercise equal to the
exercise price of the Option.
Would you kindly evidence your acceptance of this Option and your
agreement to comply with the provisions hereof by executing this letter under
the words "Agreed To and Accepted."
Very truly yours,
THE GREAT AMERICAN BACKRUB STORE, INC.
By: /s/ William Zanker
----------------------------
William Zanker
Chairman of the Board
AGREED TO AND ACCEPTED:
/s/ Terrance C. Murray
- ----------------------
TERRANCE C. MURRAY
-2-
<PAGE>
EXHIBIT A
The Great American BackRub Store, Inc.
958 Third Avenue
New York, New York 10022
Gentlemen:
Notice is hereby given of my election to purchase ______ shares of
Common Stock, $.001 par value per share (the "Shares"), of The Great American
BackRub Store, Inc. at a price of $4.50 per Share, pursuant to the provisions of
the Option granted to me on December 23, 1994. Enclosed in payment for the
Shares is:
/ / my check in the amount of $________.
/ / __________________ Shares having a total value
$______________, such value being based on the closing
price(s) of the Shares on the date hereof.
/ / Withhold _____ Shares having a total value of $__________,
such value being based on the closing price(s) of the
Shares on the date hereof, from the Shares otherwise to be
received.
The following information is supplied for use in issuing and
registering the Shares purchased hereby:
Number of Certificates
and Denominations ___________________
Name ___________________
Address ___________________
___________________
___________________
Social Security Number ___________________
Dated: _______________, ____
Very truly yours,
--------------------------
-3-
THE GREAT AMERICAN BACKRUB STORE, INC.
425 MADISON AVENUE, SUITE 605
NEW YORK, NEW YORK 10017
As of July 19, 1995
Terrance C. Murray
3377 Silver Springs Court
Lafayette, California 94549
On July 19, 1995, the Compensation Committee of the Board of
Directors of The Great American BackRub Store, Inc. (the "Company") recommended
the grant to you of an option (the "Option") to purchase One Hundred Thousand
(100,000) shares (the "Shares") of the Company's Common Stock, $.001 par value
per share, at a price of $1.875 per Share and said grant was approved by the
Board of Directors of the Company on July 27, 1995.
Except as provided below, the Option may be exercised in whole or
in part, at any time and from time to time from the date hereof until July 18,
2000 (on which date the Option, to the extent not previously exercised, will
expire).
In the event of your death, the Option may be exercised within
three months after your death, with respect to all or any portion of the Shares
issuable upon exercise of the Option, by the person or persons entitled to do so
under your will or, if you shall have failed to make testamentary disposition of
the Option or shall have died intestate, by your legal representative or
representatives (after which three month period the Option will, to the extent
not exercised, expire). Except as provided above, the Option hereby granted to
you is not transferable in whole or in part.
Unless at the time of the exercise of the Option a registration
statement under the Securities Act of 1933, as amended (the "Act"), is in effect
as to such Shares, any Shares purchased by you upon the exercise of the Option
shall be acquired for investment and not for sale or distribution, and if the
Company so requests, upon any exercise of the Option, in whole or in part, you
will execute and deliver to the Company a certificate to such effect. The
Company shall not be obligated to issue any Shares pursuant to the Option if, in
the opinion of counsel to the Company, the Shares to be so issued are required
to be registered or otherwise qualified under the Act or under any other
applicable statute, regulation or ordinance affecting the sale of securities,
unless and until such Shares have been so registered or otherwise qualified.
You understand and acknowledge that, under existing law, unless at
the time of the exercise of the Option a registration statement under the Act is
in effect as to such Shares (i) any Shares purchased by you upon exercise of the
Option may be required to be held indefinitely unless such Shares are
subsequently registered under the Act or an exemption from such registration is
available; (ii) any sales of such Shares made in reliance upon Rule 144
promulgated under the Act may be made only in accordance with the terms and
conditions of that Rule (which, under certain circumstances, restrict the number
of shares which may be sold and the manner in which shares may be sold); (iii)
in the case of securities to which Rule 144 is not applicable, compliance with
some other disclosure exemption will be required; (iv) certificates for Shares
to be issued to you hereunder shall bear a legend to the effect that the Shares
have not been registered under the Act and that the Shares may not be sold,
hypothecated or otherwise transferred in the absence of an effective
registration statement under the Act relating thereto or an opinion of counsel
satisfactory to the Company that such registration is not required; (v) the
Company will place an appropriate "stop transfer" order with its transfer agent
with respect to such Shares; and (vi) the Company has undertaken no obligation
to register the Shares or include the Shares in any registration statement which
may be filed by it subsequent to the issuance of the Shares to you. In addition,
you understand and acknowledge that the Company has no obligation to you to
furnish information necessary to enable you to make sales under Rule 144.
<PAGE>
In the event that the Company shall at any time prior to the
expiration of the Option and prior to the exercise thereof: (i) declare or pay
to the holders of the Common Stock a dividend payable in any kind of shares of
stock of the Company; or (ii) change or divide or otherwise reclassify its
Common Stock into the same or a different number of shares with or without par
value, or into shares of any class or classes; or (iii) consolidate or merge
with, or transfer its property as an entirety or substantially all of its assets
to any other corporation; or (iv) make any distribution of its assets to holders
of its Common Stock as a liquidation, or partial liquidation dividend or by way
of return of capital; then, upon the subsequent exercise of the Option, the
purchase price of the Shares issuable upon the exercise hereof shall be
appropriately adjusted by the Board of Directors of the Company so that you
shall receive for the exercise price, in addition to or in substitution for the
Shares to which you would be entitled upon such exercise, such additional shares
of stock of the Company, or such reclassified shares of stock of the Company, or
such securities or property of the Company resulting from such consolidation or
merger or transfer, or such assets of the Company, which you would have been
entitled to receive had you exercised the Option prior to the happening of any
of the foregoing events.
The Option (or installment thereof) is to be exercised by
delivering to the Company a written notice of exercise in the form attached
hereto as Exhibit A, specifying the number of Shares to be purchased, together
with payment of the purchase price of the Shares to be purchased. The purchase
price is to be paid in cash, or by delivering shares of the Company's stock
already owned by you and having a fair market value on the date of exercise
equal to the exercise price of the Option, or through your written election to
have Shares withheld by the Company from the Shares otherwise to be received
with such withheld Shares having a fair market value on the date of exercise
equal to the exercise price of the Option.
This Option shall be binding upon any successors or assigns of the
Company.
Kindly evidence your acceptance of this Option and your agreement
to comply with the provisions hereof by executing this letter under the words
"Agreed To and Accepted."
Very truly yours,
THE GREAT AMERICAN BACKRUB STORE, INC.
By: /s/ William Zanker
----------------------------
William Zanker
Chairman of the Board
AGREED TO AND ACCEPTED:
/s/ Terrance C. Murray
- ------------------------
TERRANCE C. MURRAY
-2-
<PAGE>
EXHIBIT A
The Great American BackRub Store, Inc.
425 Madison Avenue, Suite 605
New York, New York 10017
Gentlemen:
Notice is hereby given of my election to purchase ______ shares of
Common Stock, $.001 par value per share (the "Shares"), of The Great American
BackRub Store, Inc. at a price of $_____ per Share, pursuant to the provisions
of the Option granted to me on July 19, 1995. Payment for the Shares is made by:
/ / my check, enclosed, in the amount of $________.
/ / __________________ Shares, enclosed, having a total value
of $______________, such value being based on the closing
price of the Shares on the date hereof.
/ / Your withholding _____ Shares, having a total value of
$__________, such value being based on the closing price of
the Shares on the date hereof, from the Shares otherwise to
be received by me.
The following information is supplied for use in issuing and
registering the Shares purchased hereby:
Number of Certificates
and Denominations ___________________
Name ___________________
Address ___________________
___________________
___________________
Social Security Number ___________________
Dated: _______________, ____
Very truly yours,
--------------------------
-3-
THE GREAT AMERICAN BACKRUB STORE, INC.
425 MADISON AVENUE, SUITE 605
NEW YORK, NEW YORK 10017
As of July 27, 1995
Simon Abrahams
c/o The Leg Room
265 West 37th Street
New York, New York 10018
On July 27, 1995, pursuant to that certain management agreement
between you and The Great American BackRub Store, Inc. (the "Company") dated May
1, 1995, the Board of Directors granted you an option (the "Option") to purchase
Twenty-Five Thousand (25,000) shares (the "Shares") of the Company's Common
Stock, $.001 par value per share, at a price of $4.00 per Share.
Except as provided below, the Option may be exercised in whole or
in part, at any time and from time to time from the date hereof until July 26,
2000 (on which date the Option, to the extent not previously exercised, will
expire).
In the event of your death, the Option may be exercised within
three months after your death, with respect to all or any portion of the Shares
issuable upon exercise of the Option, by the person or persons entitled to do so
under your will or, if you shall have failed to make testamentary disposition of
the Option or shall have died intestate, by your legal representative or
representatives (after which three month period the Option will, to the extent
not exercised, expire). Except as provided above, the Option hereby granted to
you is not transferable in whole or in part.
Unless at the time of the exercise of the Option a registration
statement under the Securities Act of 1933, as amended (the "Act"), is in effect
as to such Shares, any Shares purchased by you upon the exercise of the Option
shall be acquired for investment and not for sale or distribution, and if the
Company so requests, upon any exercise of the Option, in whole or in part, you
will execute and deliver to the Company a certificate to such effect. The
Company shall not be obligated to issue any Shares pursuant to the Option if, in
the opinion of counsel to the Company, the Shares to be so issued are required
to be registered or otherwise qualified under the Act or under any other
applicable statute, regulation or ordinance affecting the sale of securities,
unless and until such Shares have been so registered or otherwise qualified.
You understand and acknowledge that, under existing law, unless at
the time of the exercise of the Option a registration statement under the Act is
in effect as to such Shares (i) any Shares purchased by you upon exercise of the
Option may be required to be held indefinitely unless such Shares are
subsequently registered under the Act or an exemption from such registration is
available; (ii) any sales of such Shares made in reliance upon Rule 144
promulgated under the Act may be made only in accordance with the terms and
conditions of that Rule (which, under certain circumstances, restrict the number
of shares which may be sold and the manner in which shares may be sold); (iii)
in the case of securities to which Rule 144 is not applicable, compliance with
some other disclosure exemption will be required; (iv) certificates for Shares
to be issued to you hereunder shall bear a legend to the effect that the Shares
have not been registered under the Act and that the Shares may not be sold,
hypothecated or otherwise transferred in the absence of an effective
registration statement under the Act relating thereto or an opinion of counsel
satisfactory to the Company that such registration is not required; (v) the
Company will place an appropriate "stop transfer" order with its transfer agent
with respect to such Shares; and (vi) the Company has undertaken no obligation
to register the Shares or include the Shares in any registration statement which
may be filed by it subsequent to the issuance of the Shares to you. In addition,
you understand and acknowledge that the Company has no obligation to you to
furnish information necessary to enable you to make sales under Rule 144.
<PAGE>
In the event that the Company shall at any time prior to the
expiration of the Option and prior to the exercise thereof: (i) declare or pay
to the holders of the Common Stock a dividend payable in any kind of shares of
stock of the Company; or (ii) change or divide or otherwise reclassify its
Common Stock into the same or a different number of shares with or without par
value, or into shares of any class or classes; or (iii) consolidate or merge
with, or transfer its property as an entirety or substantially all of its assets
to any other corporation; or (iv) make any distribution of its assets to holders
of its Common Stock as a liquidation, or partial liquidation dividend or by way
of return of capital; then, upon the subsequent exercise of the Option, the
purchase price of the Shares issuable upon the exercise hereof shall be
appropriately adjusted by the Board of Directors of the Company so that you
shall receive for the exercise price, in addition to or in substitution for the
Shares to which you would be entitled upon such exercise, such additional shares
of stock of the Company, or such reclassified shares of stock of the Company, or
such securities or property of the Company resulting from such consolidation or
merger or transfer, or such assets of the Company, which you would have been
entitled to receive had you exercised the Option prior to the happening of any
of the foregoing events.
The Option (or installment thereof) is to be exercised by
delivering to the Company a written notice of exercise in the form attached
hereto as Exhibit A, specifying the number of Shares to be purchased, together
with payment of the purchase price of the Shares to be purchased. The purchase
price is to be paid in cash, or by delivering shares of the Company's stock
already owned by you and having a fair market value on the date of exercise
equal to the exercise price of the Option, or through your written election to
have Shares withheld by the Company from the Shares otherwise to be received
with such withheld Shares having a fair market value on the date of exercise
equal to the exercise price of the Option.
Kindly evidence your acceptance of this Option and your agreement
to comply with the provisions hereof by executing this letter under the words
"Agreed To and Accepted."
Very truly yours,
THE GREAT AMERICAN BACKRUB STORE, INC.
By: /s/ Terrance C. Murray
------------------------
Terrance C. Murray
Chief Executive Officer
AGREED TO AND ACCEPTED:
/s/ Simon Abrahams
- ------------------------
Simon Abrahams
-2-
<PAGE>
EXHIBIT A
The Great American BackRub Store, Inc.
425 Madison Avenue, Suite 605
New York, New York 10017
Gentlemen:
Notice is hereby given of my election to purchase ______ shares of
Common Stock, $.001 par value per share (the "Shares"), of The Great American
BackRub Store, Inc. at a price of $ 4.00 per Share, pursuant to the provisions
of the Option granted to me on July 27, 1995. Payment for the Shares is made by:
/ / my check, enclosed, in the amount of $________.
/ / __________________ Shares, enclosed, having a total value
of $______________, such value being based on the closing
price of the Shares on the date hereof.
/ / Your withholding _____ Shares, having a total value of
$__________, such value being based on the closing price of
the Shares on the date hereof, from the Shares otherwise to
be received by me.
The following information is supplied for use in issuing and
registering the Shares purchased hereby:
Number of Certificates
and Denominations ___________________
Name ___________________
Address ___________________
___________________
___________________
Social Security Number ___________________
Dated: _______________, ____
Very truly yours,
--------------------------
-3-
THE GREAT AMERICAN BACKRUB STORE, INC.
425 MADISON AVENUE, SUITE 605
NEW YORK, NEW YORK 10017
As of July 27, 1995
Keith Dee
Elwell, Cangiano, Zdon & Dee
70 Essex Road, P.O. Box 689
Westbrook, Connecticut 06498
On July 27, 1995, the Board of Directors of The Great American
BackRub Store, Inc. (the "Company") granted to you an option (the "Option") to
purchase Ten Thousand (10,000) shares (the "Shares") of the Company's Common
Stock, $.001 par value per share, at a price of $2.5625 per Share, such Option
to vest as to 5,000 Shares on July 27, 1996 and as to an additional 5,000 Shares
on July 27, 1997 (each such amount upon vesting being referred to herein as a
"Vested Amount").
Except as provided below, the Option may be exercised in whole or
in part as to each Vested Amount, at any time and from time to time from the
date of vesting of such Vested Amount until the day before the fifth anniversary
of such date of vesting (on which dates the Option as to the respective Vested
Amount, to the extent not previously exercised, will expire).
In the event of your death, the Option may be exercised (to the
extent vested) within three months after your death, with respect to all or any
portion of the Shares issuable upon exercise of the Option, by the person or
persons entitled to do so under your will or, if you shall have failed to make
testamentary disposition of the Option or shall have died intestate, by your
legal representative or representatives (after which three month period the
Option will, to the extent not exercised, expire). Except as provided above, the
Option hereby granted to you is not transferable in whole or in part.
Unless at the time of the exercise of the Option a registration
statement under the Securities Act of 1933, as amended (the "Act"), is in effect
as to the shares underlying such Warrants (the "Shares"), any Shares purchased
by you upon the exercise of the Warrants shall be acquired for investment and
not for sale or distribution, and if the Company so requests, upon any exercise
of the Warrants, in whole or in part, you will execute and deliver to the
Company a certificate to such effect. The Company shall not be obligated to
issue any Shares pursuant to the Warrants if, in the opinion of counsel to the
Company, the Shares to be so issued are required to be registered or otherwise
qualified under the Act or under any other applicable statute, regulation or
ordinance affecting the sale of securities, unless and until such Shares have
been so registered or otherwise qualified.
You understand and acknowledge that, under existing law, unless at
the time of the exercise of the Warrants a registration statement under the Act
is in effect as to such Shares (i) any Shares purchased by you upon exercise of
the Warrants may be required to be held indefinitely unless such Shares are
subsequently registered under the Act or an exemption from such registration is
available; (ii) any sales of such Shares made in reliance upon Rule 144
promulgated under the Act may be made only in accordance with the terms and
conditions of that Rule (which, under certain circumstances, restrict the number
of shares which may be sold and the manner in which shares may be sold); (iii)
in the case of securities to which Rule 144 is not applicable, compliance with
some other disclosure exemption will be required; (iv) certificates for Shares
to be issued to you hereunder shall bear a legend to the effect that the Shares
have not been registered under the Act and that the Shares may not be sold,
hypothecated or otherwise transferred in the absence of an effective
registration statement under the Act relating thereto or an opinion of counsel
satisfactory to the Company that such registration is not required; and (v) the
Company will place an appropriate "stop transfer" order with its transfer agent
with respect to such Shares. In addition, you understand and acknowledge that
the Company has
<PAGE>
no obligation to you to furnish information necessary to enable you to make
sales under Rule 144.
In the event that the Company shall at any time prior to the
expiration of the Option and prior to the exercise thereof: (i) declare or pay
to the holders of the Common Stock a dividend payable in any kind of shares of
stock of the Company; or (ii) change or divide or otherwise reclassify its
Common Stock into the same or a different number of shares with or without par
value, or into shares of any class or classes; or (iii) consolidate or merge
with, or transfer its property as an entirety or substantially all of its assets
to any other corporation; or (iv) make any distribution of its assets to holders
of its Common Stock as a liquidation, or partial liquidation dividend or by way
of return of capital; then, upon the subsequent exercise of the Option, the
purchase price of the Shares issuable upon the exercise hereof shall be
appropriately adjusted by the Board of Directors of the Company so that you
shall receive for the exercise price, in addition to or in substitution for the
Shares to which you would be entitled upon such exercise, such additional shares
of stock of the Company, or such reclassified shares of stock of the Company, or
such securities or property of the Company resulting from such consolidation or
merger or transfer, or such assets of the Company, which you would have been
entitled to receive had you exercised the Option prior to the happening of any
of the foregoing events.
The Option (or installment thereof) is to be exercised by
delivering to the Company a written notice of exercise in the form attached
hereto as Exhibit A, specifying the number of Shares to be purchased, together
with payment of the purchase price of the Shares to be purchased. The purchase
price is to be paid in cash, or by delivering shares of the Company's stock
already owned by you and having a fair market value on the date of exercise
equal to the exercise price of the Option, or through your written election to
have Shares withheld by the Company from the Shares otherwise to be received
with such withheld Shares having a fair market value on the date of exercise
equal to the exercise price of the Option.
Kindly evidence your acceptance of this Option and your agreement
to comply with the provisions hereof by executing this letter under the words
"Agreed To and Accepted."
Very truly yours,
THE GREAT AMERICAN BACKRUB STORE, INC.
By: /s/ Terrance C. Murray
-----------------------------
Terrance C. Murray
Chief Executive Officer
AGREED TO AND ACCEPTED:
/s/ Keith Dee
- ------------------------
KEITH DEE
-2-
<PAGE>
EXHIBIT A
The Great American BackRub Store, Inc.
425 Madison Avenue, Suite 605
New York, New York 10017
Gentlemen:
Notice is hereby given of my election to purchase ______ shares of
Common Stock, $.001 par value per share (the "Shares"), of The Great American
BackRub Store, Inc. at a price of $2.5625 per Share, pursuant to the provisions
of the Option granted to me on July 27`, 1995. Payment for the Shares is made
by:
/ / my check, enclosed, in the amount of $________.
/ / __________________ Shares, enclosed, having a total value
of $______________, such value being based on the closing
price of the Shares on the date hereof.
/ / Your withholding _____ Shares, having a total value of
$__________, such value being based on the closing price of
the Shares on the date hereof, from the Shares otherwise to
be received by me.
The following information is supplied for use in issuing and
registering the Shares purchased hereby:
Number of Certificates
and Denominations ___________________
Name ___________________
Address ___________________
___________________
___________________
Social Security Number ___________________
Dated: _______________, ____
Very truly yours,
--------------------------
-3-
THE GREAT AMERICAN BACKRUB STORE, INC.
425 MADISON AVENUE, SUITE 605
NEW YORK, NEW YORK 10017
As of December 15, 1995
Keith R. Dee
33 Grandview Terrace
Essex, Connecticut 06426
On December 15, 1995, the Board of Directors of The Great American
BackRub Store, Inc. (the "Company") granted to you an option (the "Option") to
purchase Ninety Thousand (90,000) shares (the "Shares") of the Company's Common
Stock, $.001 par value per share, at a price of $2.375 per Share, such Option to
vest as to 45,000 Shares immediately and as to an additional 45,000 Shares on
December 15, 1996 (each such amount upon vesting being referred to herein as a
"Vested Amount").
Except as provided below, the Option may be exercised in whole or
in part as to each Vested Amount, at any time and from time to time from the
date of vesting of such Vested Amount until the day before the fifth anniversary
of such date of vesting (on which dates the Option as to the respective Vested
Amount, to the extent not previously exercised, will expire).
In the event of your death, the Option may be exercised (to the
extent vested) within three months after your death, with respect to all or any
portion of the Shares issuable upon exercise of the Option, by the person or
persons entitled to do so under your will or, if you shall have failed to make
testamentary disposition of the Option or shall have died intestate, by your
legal representative or representatives (after which three month period the
Option will, to the extent not exercised, expire). Except as provided above, the
Option hereby granted to you is not transferable in whole or in part.
Unless at the time of the exercise of the Option a registration
statement under the Securities Act of 1933, as amended (the "Act"), is in effect
as to such Shares, any Shares purchased by you upon the exercise of the Option
shall be acquired for investment and not for sale or distribution, and if the
Company so requests, upon any exercise of the Option, in whole or in part, you
will execute and deliver to the Company a certificate to such effect. The
Company shall not be obligated to issue any Shares pursuant to the Option if, in
the opinion of counsel to the Company, the Shares to be so issued are required
to be registered or otherwise qualified under the Act or under any other
applicable statute, regulation or ordinance affecting the sale of securities,
unless and until such Shares have been so registered or otherwise qualified.
You understand and acknowledge that, under existing law, unless at
the time of the exercise of the Option a registration statement under the Act is
in effect as to such Shares (i) any Shares purchased by you upon exercise of the
Option may be required to be held indefinitely unless such Shares are
subsequently registered under the Act or an exemption from such registration is
available; (ii) any sales of such Shares made in reliance upon Rule 144
promulgated under the Act may be made only in accordance with the terms and
conditions of that Rule (which, under certain circumstances, restrict the number
of shares which may be sold and the manner in which shares may be sold); (iii)
in the case of securities to which Rule 144 is not applicable, compliance with
some other disclosure exemption will be required; (iv) certificates for Shares
to be issued to you hereunder shall bear a legend to the effect that the Shares
have not been registered under the Act and that the Shares may not be sold,
hypothecated or otherwise transferred in the absence of an effective
registration statement under the Act relating thereto or an opinion of counsel
satisfactory to the Company that such registration is not required; (v) the
Company will place an appropriate "stop transfer" order with its transfer agent
with respect to such Shares; and (vi) the Company has undertaken no obligation
to register the Shares or include the Shares in any registration statement which
may be filed by it subsequent to the issuance of the Shares to you. In addition,
you understand and
<PAGE>
acknowledge that the Company has no obligation to you to furnish information
necessary to enable you to make sales under Rule 144.
In the event that the Company shall at any time prior to the
expiration of the Option and prior to the exercise thereof: (i) declare or pay
to the holders of the Common Stock a dividend payable in any kind of shares of
stock of the Company; or (ii) change or divide or otherwise reclassify its
Common Stock into the same or a different number of shares with or without par
value, or into shares of any class or classes; or (iii) consolidate or merge
with, or transfer its property as an entirety or substantially all of its assets
to any other corporation; or (iv) make any distribution of its assets to holders
of its Common Stock as a liquidation, or partial liquidation dividend or by way
of return of capital; then, upon the subsequent exercise of the Option, the
purchase price of the Shares issuable upon the exercise hereof shall be
appropriately adjusted by the Board of Directors of the Company so that you
shall receive for the exercise price, in addition to or in substitution for the
Shares to which you would be entitled upon such exercise, such additional shares
of stock of the Company, or such reclassified shares of stock of the Company, or
such securities or property of the Company resulting from such consolidation or
merger or transfer, or such assets of the Company, which you would have been
entitled to receive had you exercised the Option prior to the happening of any
of the foregoing events.
The Option (or installment thereof) is to be exercised by
delivering to the Company a written notice of exercise in the form attached
hereto as Exhibit A, specifying the number of Shares to be purchased, together
with payment of the purchase price of the Shares to be purchased. The purchase
price is to be paid in cash, or by delivering shares of the Company's stock
already owned by you and having a fair market value on the date of exercise
equal to the exercise price of the Option, or through your written election to
have Shares withheld by the Company from the Shares otherwise to be received
with such withheld Shares having a fair market value on the date of exercise
equal to the exercise price of the Option.
Kindly evidence your acceptance of this Option and your agreement
to comply with the provisions hereof by executing this letter under the words
"Agreed To and Accepted."
Very truly yours,
THE GREAT AMERICAN BACKRUB STORE, INC.
By: /s/ TERRANCE C. MURRAY
----------------------------------
Terrance C. Murray
Chief Executive Officer
AGREED TO AND ACCEPTED:
- -----------------------
KEITH R. DEE
-2-
<PAGE>
EXHIBIT A
The Great American BackRub Store, Inc.
425 Madison Avenue, Suite 605
New York, New York 10017
Gentlemen:
Notice is hereby given of my election to purchase ______ shares of
Common Stock, $.001 par value per share (the "Shares"), of The Great American
BackRub Store, Inc. at a price of $ per Share, pursuant to the provisions of the
Option granted to me on December 15, 1995. Payment for the Shares is made by:
/ / my check, enclosed, in the amount of $________.
/ / __________________ Shares, enclosed, having a total value
of $______________, such value being based on the closing
price of the Shares on the date hereof.
/ / Your withholding _____ Shares, having a total value of
$__________, such value being based on the closing price of
the Shares on the date hereof, from the Shares otherwise to
be received by me.
The following information is supplied for use in issuing and
registering the Shares purchased hereby:
Number of Certificates
and Denominations ___________________
Name ___________________
Address ___________________
___________________
___________________
Social Security Number ___________________
Dated: _______________, ____
Very truly yours,
--------------------------
-3-
THE GREAT AMERICAN BACKRUB STORE, INC.
958 Third Avenue
New York, New York 10022
February __, 1995
[Name of Outside Director]
[Address]
On February __, 1995 the Board of Directors of The Great American
BackRub Store, Inc. (the "Company") granted to you an incentive stock option
(the "Option") to purchase Ten Thousand (10,000) shares (the "Shares") of Common
Stock, $.001 par value per share, of the Company, at a price of $[IPO price] per
Share.
The Option may be exercised as follows: as to 331/3% of the Shares
immediately, as to an additional 331/3% of the Shares on February __, 1996 and
as to an additional 331/3% of the Shares on February __, 1997. At such time as
you are no longer a Director of the Company, any portion of the Option vested on
the date of termination may be exercised in whole or in part at any time within
one year after the date of such termination (but in no event after the
expiration of the Option) and shall thereafter terminate, and any portion of the
Option not already vested will immediately terminate.
The Option, to the extent not previously exercised, will expire on
February __, 2005.
In the event of your death, the Option may be exercised (to the
extent vested) within three months after your death, with respect to all or any
portion of the Shares issuable upon exercise of the Option, by the person or
persons entitled to do so under your will or, if you shall have failed to make
testamentary disposition of the Option or shall have died intestate, by your
legal representative or representatives (after which three month period the
Option will, to the extent not exercised, expire). Except as provided above, the
Option hereby granted to you is not transferable in whole or in part.
Unless at the time of the exercise of this Option a registration
statement under the Securities Act of 1933, as amended (the "Act"), is in effect
as to such Shares, any Shares purchased by you upon the exercise of the Option
shall be acquired for investment and not for sale or distribution, and if the
Company so requests, upon any exercise of the Option, in whole or in part, you
will execute and deliver to the Company a certificate to such effect. The
Company shall not be obligated to issue any Shares pursuant to the Option if, in
the opinion of counsel to the Company, the Shares to be so issued are required
to be registered or otherwise qualified under the Act or under any other
applicable statute, regulation or ordinance affecting the sale of securities,
unless and until such Shares have been so registered or otherwise qualified.
You understand and acknowledge that, under existing law, unless at
the time of the exercise of the Option a registration statement under the Act is
in effect as to such Shares (i) any Shares purchased by you upon exercise of the
Option may be required to be held indefinitely unless such Shares are
subsequently registered under the Act or an exemption from such registration is
available; (ii) any sales of such Shares made in reliance upon Rule 144
promulgated under the Act may be made only in accordance with the terms and
conditions of that Rule (which, under certain circumstances, restrict the number
of shares which may be sold and the manner in which shares may be sold); (iii)
in the case of securities to which Rule 144 is not applicable, compliance with
Regulation A promulgated under the Act or some other disclosure exemption will
be required; (iv) certificates for Shares to be issued to you hereunder shall
bear a legend to the effect that the Shares have not been registered under the
Act and that the Shares may not be sold, hypothecated or otherwise transferred
in the absence of an effective registration statement under the Act relating
thereto or an opinion of counsel satisfactory to the Company that such
registration is not required; (v) the Company will place an appropriate "stop
<PAGE>
transfer" order with its transfer agent with respect to such Shares; and (vi)
the Company has undertaken no obligation to register the Shares or to include
the Shares in any registration statement which may be filed by it subsequent to
the issuance of the Shares to you. In addition, you understand and acknowledge
that the Company has no obligation to you to furnish information necessary to
enable you to make sales under Rule 144.
In the event that the Company shall at any time prior to the expiration
of the Option and prior to the exercise thereof: (i) declare or pay to the
holders of the Common Stock a dividend payable in any kind of shares of stock of
the Company; or (ii) change or divide or otherwise reclassify its Common Stock
into the same or a different number of shares with or without par value, or into
shares of any class or classes; or (iii) consolidate or merge with, or transfer
its property as an entirety or substantially all of its assets to any other
corporation; or (iv) make any distribution of its assets to holders of its
Common Stock as a liquidation, or partial liquidation dividend or by way of
return of capital; then, upon the subsequent exercise of the Option, the
purchase price of the Shares issuable upon the exercise hereof shall be
appropriately adjusted by the Board of Directors of the Company so that you
shall receive for the exercise price, in addition to or in substitution for the
Shares to which you would be entitled upon such exercise, such additional shares
of stock of the Company, or such reclassified shares of stock of the Company, or
such securities or property of the Company resulting from such consolidation or
merger or transfer, of such assets of the Company, which you would have been
entitled to receive had you exercised the Option prior to the happening of any
of the foregoing events.
The Option (or installment thereof) is to be exercised by delivering to
the Company a written notice of exercise in the form attached hereto as Exhibit
A, specifying the number of Shares to be purchased, together with payment of the
purchase price of the Shares to be purchased. The purchase price is to be paid
in cash, by delivering shares of the Company's stock already owned by you and
having a fair market value on the date of exercise equal to the exercise price
of the Option, or through your written election to have Shares withheld by the
Company from the Shares otherwise to be received with such withheld Shares
having a fair market value on the date of exercise equal to the exercise price
of the Option.
Would you kindly evidence your acceptance of this Option and your
agreement to comply with the provisions hereof by executing this letter under
the words "Agreed To and Accepted."
Very truly yours,
THE GREAT AMERICAN BACKRUB STORE, INC.
By:
------------------------------
William Zanker
Chairman of the Board
AGREED TO AND ACCEPTED:
- -----------------------
[Name of Outside Director]
-2-
<PAGE>
EXHIBIT A
The Great American BackRub Store, Inc.
958 Third Avenue
New York, New York 10022
Gentlemen:
Notice is hereby given of my election to purchase ______ shares of
Common Stock, $.001 par value per share (the "Shares"), of The Great American
BackRub Store, Inc. at a price of $_______ per Share, pursuant to the provisions
of the Option granted to me on February __, 1995. Enclosed in payment for the
Shares is:
/ / my check in the amount of $________.
/ / __________________ Shares having a total value
$______________, such value being based on the closing
price(s) of the Shares on the date hereof.
/ / Withhold _____ Shares having a total value of $__________,
such value being based on the closing price(s) of the Shares
on the date hereof, from the Shares otherwise to be
received.
The following information is supplied for use in issuing and
registering the Shares purchased hereby:
Number of Certificates
and Denominations ___________________
Name ___________________
Address ___________________
___________________
___________________
Social Security Number ___________________
Dated: _______________, ____
Very truly yours,
--------------------------
-3-
OLSHAN GRUNAMDN FROME & ROSENZWEIG LLP
505 Park Avenue
New York, New York 10022
Tel. (212) 753-7200
May 3, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Re: THE GREAT AMERICAN BACKRUB STORE, INC.-
REGISTRATION STATEMENT ON FORM S-8
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-8 dated
the date hereof (the "Registration Statement"), filed with the Securities and
Exchange Commission by The Great American BackRub Store, Inc., a New York
corporation (the "Company"). The Registration Statement relates to an aggregate
of 690,000 (the "Shares") of common stock, par value $.001 per share (the
"Common Stock"). The Shares will be issued and sold by the Company (i) in
accordance with the Company's 1994 Employee Stock Option Plan (the "Plan") and
(i) various written purchase agreements and written compensation contracts (the
"Purchase Agreements").
We advise you that we have examined originals or copies certified
or otherwise identified to our satisfaction of the Certificate of Incorporation
and By-laws of the Company, minutes of meetings of the Board of Directors and
stockholders of the Company, the Plan, the Purchase Agreements and such other
documents, instruments and certificates of officers and representatives of the
Company and public officials, and we have made such examination of the law, as
we have deemed appropriate as the basis for the opinion hereinafter expressed.
In making such examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals, and the
conformity to original documents of documents submitted to us as certified or
photostatic copies.
Based upon the foregoing, we are of the opinion that the Shares,
when issued and paid for in accordance with the terms and conditions set forth
in the Plan and the Purchase Agreements, will be duly and validly issued, fully
paid and non-assessable; subject to the provisions of Section 630 of the New
York Business Corporation Law.
Please note that this Firm holds 7,500 shares of Common Stock of
the Company. In addition, Stephen Irwin, of counsel to this Firm, holds 2,800
shares of Common Stock of the Company.
We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the prospectus constituting a part of the Registration
Statement.
Very truly yours,
/S/ OLSHAN GRUNDMAN FROME & ROSENZWEIG LLP
------------------------------------------
OLSHAN GRUNDMAN FROME & ROSENZWEIG LLP
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Great American BackRub Store, Inc.
We hereby consent to the incorporation by reference in the prospectus
constituting a part of this Registration Statement on Form S-8 of our report
dated February 23, 1996, relating to the financial statements of The Great
American BackRub Store, Inc., appearing in the Company's Annual Report on Form
10-KSB for the year ended December 31, 1995. Our report contains an explanatory
paragraph regarding uncertainties as to the Company's ability to continue as a
going concern.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO Seidman, LLP
New York, New York
May 1, 1996
