As filed with the Securities and Exchange Commission on May 6, 1996
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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THE GREAT AMERICAN BACKRUB STORE, INC.
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(Exact name of Registrant as specified in its charter)
New York 13-3729043
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
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425 Madison Avenue
Suite 605
New York, New York 10017
(212) 750-7046
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(Address, including zip code, and telephone
number, including area code, of Registrant's principal
executive offices)
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William Zanker
The Great American BackRub Store, Inc.
425 Madison Avenue
Suite 605
New York, New York 10017
(212) 750-7046
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(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
Stephen Irwin, Esq.
Olshan Grundman Frome & Rosenzweig LLP
505 Park Avenue
New York, New York 10022
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Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box. /X/
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box
<PAGE>
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=============================================================================================================================--
Proposed
Maximum Proposed
Amount Offering Maximum Amount of
Title of Shares to to be Price Per Aggregate Registration
be Registered Registered Share Offering Price Fee
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<S> <C> <C> <C> <C>
Common Stock, $.001 137,500(1)(2) $2.50(2) $343,750(2) $118.53
par value, issuable
upon exercise of
Bridge Warrants
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Common Stock, $.001 92,266(3) $4.50(3) $415,197(3) $143.17
par value
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Common Stock, $.001 510,953(1)(4) $2.69(4) $1,374,463.57(4) $473.95
par value, issuable
upon exercise of
options and warrants
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Total Registration Fee......................................................................... $735.65
================================================================================================================================
</TABLE>
(1) Pursuant to Rule 416 under the Securities Act, this Registration
Statement also relates to an indeterminate number of additional shares
that may be issued as result of anti-dilution provisions of the
Warrants.
(2) Represents 137,500 shares of Common Stock issuable upon exercise of
Bridge Warrants at an exercise price of $2.50 per share.
(3) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933, as amended
(the "Securities Act"), based upon $4.50, the per share average of high
and low sales prices of the Common Stock on the Nasdaq SmallCap Market
on May 1, 1996.
(4) Represents 510,953 shares of Common Stock issuable upon the exercise of
outstanding options and warrants at an average exercise price of $2.69
per share.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 6, 1996
PROSPECTUS
740,719 SHARES
THE GREAT AMERICAN BACKRUB STORE, INC.
Common Stock ($.001 par value)
This Prospectus relates to the reoffer and resale by certain selling
shareholders (the "Selling Shareholders") of shares (the "Shares") of the Common
Stock, $.001 par value (the "Common Stock"), of The Great American BackRub
Store, Inc. (the "Company") that were (i) previously issued by the Company to
the Selling Shareholders or (ii) were or will be issued by the Company to the
Selling Shareholders upon exercise of certain options and warrants. The Shares
are being reoffered and resold for the account of the Selling Shareholders and
the Company will not receive any of the proceeds from the resale of the Shares.
The Company has agreed to bear certain expenses (other than selling commissions
and fees and expenses of counsel and other advisors to the Selling Shareholders)
in connection with the registration and sale of the Shares being offered by the
Selling Shareholders.
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 in
the over-the-counter market, in negotiated transactions or otherwise at market
prices prevailing at the time of the sale or at prices otherwise negotiated. The
Selling Shareholders may effect such transactions by selling the Shares to or
through broker-dealers who may receive compensation in the form of discounts,
concessions or commissions from the Selling Shareholders and/or the purchasers
of the Shares for whom such broker-dealers may act as agent or to whom they sell
as principal, or both (which compensation as to a particular broker-dealer may
be in excess of customary commissions). Any broker-dealer acquiring the Shares
from the Selling Shareholders may sell such securities in its normal market
making activities, through other brokers on a principal or agency basis, in
negotiated transactions, to its customers or through a combination of such
methods. See "Plan of Distribution."
The Common Stock is traded on the Nasdaq SmallCap Market ("Nasdaq")
under the symbol "RUBB." On May 1, 1996, the closing bid price for the Common
Stock as reported by Nasdaq was $4.50.
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AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES
A HIGH DEGREE OF RISK AND SHOULD ONLY BE MADE BY INVESTORS
WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT.
SEE "RISK FACTORS" AT PAGE 3 HEREOF.
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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 , 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; 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.
The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form S-3 (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,
each such statement being qualified in all respects by such reference.
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 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 January 3, 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 exhibits to such documents. Written requests for such copies should
be directed to The Great American BackRub Store, Inc. at 425 Madison Avenue,
Suite 605, New York, New York 10017, Attention: Secretary. Oral requests should
be directed to such officer (telephone number (212) 750-7046).
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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 the Selling Shareholders. 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
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
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<PAGE>
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.
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
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<PAGE>
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
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.
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<PAGE>
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 warrants (the "Bridge Warrants") to purchase an aggregate of 137,500
shares of Common Stock exercisable at a price of $2.50 per share. The resale of
the shares of Common Stock underlying such Bridge Warrants is being registered
in the registration statement of which this Prospectus forms a part. In
addition, options to purchase 5,000 shares of Common Stock are presently issued
and outstanding under the 1994 Employee Stock Option Plan (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 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
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<PAGE>
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.
THE COMPANY
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 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
-7-
<PAGE>
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, 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
-8-
<PAGE>
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. The resale of such
shares is being registered in the Registration Statement of which this
Prospectus forms a part.
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 not receive any of the proceeds from the reoffer and
resale of the Shares offered hereby by the Selling Shareholders. The Company
will receive the exercise price of the Bridge Warrants and the options and
warrants held by certain Selling Shareholders, if and when exercised. Such
proceeds will be used by the Company for working capital purposes.
SELLING SHAREHOLDERS
The following table sets forth (i) the number of shares of Common Stock
owned by each Selling Shareholder, (ii) the number of shares 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 the completion of
the offering.
-9-
<PAGE>
<TABLE>
<CAPTION>
Number of shares of
Common Stock/
Number of Percentage of Class
Number of shares Shares to to be Owned After
of Common Stock be Offered Completion of the
Name Beneficially Owned for Resale Offering
- ------------------------------ ---------------------------- ------------------ -----------------------------
<S> <C> <C> <C>
Michael Monroe................... 12,500 12,500(1) 0
Fred Taylor Isquith.............. 12,500 12,500(1) 0
Michael Channey.................. 12,500 12,500(1) 0
Donald Fleischer................. 22,792(2) 12,500(1) 10,292
Maurice and Barbara
Kuprtiz.......................... 12,500 12,500(1) 0
Glenn and Dawn James............. 12,500 12,500(1) 0
John Davis....................... 25,000 25,000(1) 0
Robert Leeds..................... 12,500 12,500(1) 0
Craig A. Newman.................. 6,250 6,250(1) 0
Adi Raviv 6,250 6,250(1) 0
Jules Leventhal.................. 6,250 6,250(1) 0
Private Label
Furniture........................ 6,250 6,250(1) 0
Peter Forbes &
Associates, Inc.................. 16,581 16,581(3) 0
Matthew Frazer................... 3,637 3,637 0
Robert Garff..................... 7,273 7,273 0
W. Blair Garff................... 3,637 3,637 0
Alan Luther...................... 1,819 1,819 0
Michael Luther................... 1,819 1,819 0
Olshan Grundman
Frome & Rosenzweig
LLP.............................. 7,500 7,500 0
Stephen Irwin.................... 2,800 2,800 0
Jeffrey Spindler................. 200 200 0
Clive Kabatznick................. 100,000 100,000(4) 0
Effrat Meier..................... 9,375 9,375 0
Danny Meier...................... 9,375 9,375 0
Karen Meier...................... 9,375 9,375 0
Michael Meier.................... 9,375 9,375 0
Harold Hochberger................ 12,500 12,500 0
Bob Gill......................... 5,000 5,000 0
Steve Schragis 2,000 2,000 0
Investors
Associates, Inc.................. 300,000 300,000(5) 0
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
Number of shares of
Common Stock/
Number of Percentage of Class
Number of shares Shares to to be Owned After
of Common Stock be Offered Completion of the
Name Beneficially Owned for Resale Offering
- ------------------------------ ---------------------------- ------------------ -----------------------------
<S> <C> <C> <C>
Spectrum Realty
Capital.......................... 953 953(4) 0
A. Clinton Allen................. 100,000 100,000(4) 0
</TABLE>
- -------------------
* Less than 1%
(1) Consists of shares of Common Stock issuable upon exercise of Bridge
Warrants.
(2) Mr. Fleischer is a director of the Company. These shares consist of (i)
3,625 shares held by Mr. Fleischer, (ii) 6,667 shares issuable upon the
exercise of options and (iii) 12,500 shares issuable upon the exercise
of Bridge Warrants purchased by Mr. Fleischer.
(3) Includes 10,000 shares of Common Stock issuable upon exercise of
options.
(4) Consists of shares of Common Stock issuable upon exercise of options.
(5) Consists of shares of Common Stock issuable upon exercise of warrants.
There is no assurance that the Selling Shareholders will sell any of
the Shares offered hereby. To the extent required, the specific Shares to be
sold, the names of the Selling Shareholders, other additional shares of Common
Stock beneficially owned by such Selling Shareholder, the public offering price
of the Shares to be sold, the names of any agent, dealer or underwriter employed
by such Selling Shareholder in connection with such sale, and any applicable
commission or discount with respect to a particular offer will be set forth in
an accompanying Prospectus Supplement.
The Shares covered by this Prospectus may be sold from time to time so
long as this Prospectus remains in effect; provided, however, that the Selling
Shareholder is first required to contact the Company's Corporate Secretary to
confirm that this Prospectus is in effect. Since a Selling Shareholder may be
liable if he sells Shares when this Prospectus is not in effect, the Company
requires each Selling Shareholder to contact it to confirm that this Prospectus
is then in effect prior to any sale of Shares. The Selling Shareholders expect
to sell the Shares at prices then attainable, less ordinary brokers' commissions
and dealers' discounts as applicable.
The Selling Shareholders and any broker or dealer to or through whom
any of the Shares are sold may be deemed to be underwriters within the meaning
of the Securities Act with respect to the Common Stock offered hereby, and any
profits realized by the Selling Shareholders or such brokers or dealers may be
deemed to be underwriting commissions. Brokers' commissions and dealers'
discounts, taxes and other selling expenses to be borne by the Selling
Shareholder are not expected to exceed normal selling expenses for sales
over-the-counter or otherwise, as the case may be. The registration of the
Shares under the Securities Act shall not be deemed an admission by the Selling
Shareholders or the Company that the Selling Shareholders are underwriters for
purposes of the Securities Act of any Shares offered under this Prospectus.
-11-
<PAGE>
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Continental
Stock Transfer & Trust Company, New York, New York.
PLAN OF DISTRIBUTION
This Prospectus covers 740,719 shares of Common Stock. All of the
Shares offered hereby are being sold by the Selling Shareholders. The Company
will realize no proceeds from the sale of the Shares by the Selling
Shareholders.
The distribution of the Shares by the Selling Shareholders is not
subject to any underwriting agreement. The Selling Shareholders may sell the
Shares offered hereby from time to time in transactions in the over-the-counter
market, in negotiated transactions, or a combination of such methods of sale, at
fixed prices which may be changed, at market prices prevailing at the time of
sale, at prices relating to prevailing market prices or at negotiated prices.
The Selling Shareholders may effect such transactions by selling the Shares to
or through broker-dealers, and such broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the Selling Shareholders
and/or the purchasers of the Shares for whom such broker-dealers may act as
agents or to whom they sell as principals, or both (which compensation as to a
particular broker-dealer might be in excess of the customary commissions). The
Selling Shareholders and any broker-dealers that participate with the Selling
Shareholders in the distribution of the Shares may be deemed to be underwriters
within the meaning of Section 2(11) of the Securities Act and any commissions
received by them and any profit on the resale of the Shares commissioned by them
may be deemed to be underwriting commissions or discounts under the Securities
Act. The Selling Shareholders will pay any transaction costs associated with
effecting any sales that occur.
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with by the Company and the Selling
Shareholders.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the Shares may not simultaneously engage
in market-making activities with respect to the Common Stock for a period of two
business days prior to the commencement of such distribution. In addition and
without limiting the foregoing, each Selling Shareholder will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including without limitation, Rules 10b-6, 10b-6A and 10b-7, which
provisions may limit the timing of the purchases and sales of shares of Common
Stock by the Selling Shareholders.
The Selling Shareholders are not restricted as to the price or prices
at which they may sell their Shares. Sales of such Shares may have an adverse
effect on the market price of the Common Stock. Moreover, the Selling
Shareholders are not restricted as to the number of Shares that may be sold at
any time and it is possible that a significant number of Shares could be sold at
the same time which may also have an adverse effect on the market price of the
Common Stock.
-12-
<PAGE>
The Company has agreed to pay all fees and expenses incident to the
registration of the Shares, except selling commissions and fees and expenses of
counsel or any other professionals or other advisors, if any, to the Selling
Shareholders.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby and certain
other legal matters will be passed upon for the Company by Olshan Grundman Frome
& Rosenzweig LLP, New York, New York. Olshan Grundman Frome & Rosenzweig LLP
holds 7,500 shares of Common Stock of the Company. Stephen Irwin, of counsel to
Olshan Grundman Frome & Rosenzweig LLP, holds 2,800 shares of Common Stock of
the Company. Such Shares are being registered for resale in the Registration
Statement of which this Prospectus forms a part.
EXPERTS
The financial statements of the Company included in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1995 (the "10-KSB")
have been audited by BDO Seidman, LLP, independent public accountants and have
been incorporated herein by reference in reliance upon the report (which
contains an explanatory paragraph regarding the Company's ability to continue as
a going concern) of BDO Seidman, LLP, included in the 10-KSB, and upon the
authority of said firm as experts in accounting and auditing.
To the extent that a firm of independent public accountants audits and
reports on the financial statements of the Company issued at future dates, and
consents to the use of their report thereon, such financial statements also will
be incorporated by reference herein in reliance upon their report and said
authority.
-13-
<PAGE>
No dealer, salesperson or any other person is authorized in connection with any
offering made hereby to give any information or to make any representation not
contained in this Prospectus, and if given or made, such information or
representation must not be relied upon as having been authorized by the Company
or any other person. This Prospectus does not constitute an offer to sell or the
solicitation of an offer to buy any of the securities offered hereby by anyone
in any state in which such offer or solicitation is not authorized or in which
the person making the offer or solicitation is not qualified to do so or to any
person to whom it is unlawful to make such offer or solicitation. Neither the
delivery of this Prospectus nor any sale made hereunder shall under any
circumstance create any implication that information contained herein is correct
as of any date subsequent to the date hereof.
TABLE OF CONTENTS
Page
Available Information.................................2
Incorporation of Certain
Documents By Reference..............................2
Risk Factors..........................................3
The Company...........................................7
Recent Developments...................................8
Use of Proceeds.......................................9
Selling Shareholders..................................9
Transfer Agent and Registrar ........................11
Plan of Distribution.................................11
Legal Matters........................................12
Experts..............................................13
THE GREAT AMERICAN
BACKRUB STORE, INC.
740,719 SHARES OF
COMMON STOCK
---------------------------
PROSPECTUS
---------------------------
_________, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses which will be paid
by the Company in connection with the securities being registered. With the
exception of the SEC Registration Fee, all amounts are estimates.
SEC Registration Fee.................................. $735.65
Nasdaq listing expenses............................... 7,500.00
Accounting Fees and Expenses.......................... 5,000.00
Legal Fees and Expenses (other than Blue
Sky).................................................. 10,000.00
Blue Sky Fees and Expenses (including legal
and filing fees)...................................... 5,000.00
Miscellaneous Expenses................................ 1,764.35
---------
Total................................................. $30,000.00
==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 722 of the New York Business Corporation Law ("NYBCL") permits,
in general, a New York corporation to indemnify any person made, or threatened
to be made, a party to an action or proceeding by reason of the fact that he or
she was a director or officer of the corporation, or served another entity in
any capacity at the request of the corporation, against any judgment, fines,
amounts paid in settlement and reasonable expenses, including attorney's fees
actually and necessarily incurred as a result of such action or proceeding, or
any appeal therein, if such person acted in good faith, for a purpose he or she
reasonably believed to be in, or, in the case of service for another entity, not
opposed to, to the best interests of the corporation and, in criminal actions or
proceedings, in addition had no reasonable cause to believe that his or her
conduct was unlawful. Section 723 of the NYBCL permits the corporation to pay in
advance of a final disposition of such action or proceeding the expenses
incurred in defending such action or proceeding upon receipt of an undertaking
by or on behalf of the director or officer to repay such amount as, and to the
extent, required by statute. Section 721 of the NYBCL provides that
indemnification and advancement of expense provisions contained in the NYBCL
shall not be deemed exclusive of any rights to which a director or officer
seeking indemnification or advancement of expenses may be entitled, provided no
indemnification may be made on behalf of any director or officer if a judgment
or other final adjudication adverse to the director or officer establishes that
his or her acts were committed in bad faith or were the result of active or
deliberate dishonesty and were material to the cause of action so adjudicated,
or that he or she personally gained in fact a financial profit or other
advantage to which he or she was not legally entitled.
Article Seventh of the Company's Certificate of Incorporation, as
amended, provides, in general, that the personal liability of the directors of
the Company is eliminated to the fullest extent permitted by the provisions of
paragraph (b) of Section 402 of the NYBCL, as the same may be amended and
supplemented. Section 402(b) of the NYBCL provides that the certificate of
incorporation of a New York corporation may set forth a provision eliminating or
limiting the
II-1
<PAGE>
personal liability of directors to the corporation or its stockholders for
damages for any breach of duty in such capacity, provided that no such provision
shall eliminate or limit (1) the liability of any director if a judgment or
other final adjudication adverse to him establishes that his acts or omissions
were in bad faith or involved intentional misconduct or a knowing violation of
law or that he personally gained in fact a financial profit or other advantage
to which he is not legally entitled or (2) the liability of any director for any
act or omission prior to the adoption of a provision authorized by Section
402(b) of the NYBCL.
ITEM 16. EXHIBITS.
Exhibit No. Description
- ----------- -----------
4(a) Form of Common Stock Certificate (incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement on Form
SB-2 (Registration No. 33-88052)).
4(b) Form of Bridge Warrant (incorporated by reference to Exhibit
4.2 to the Company's Registration Statement on Form SB-2
(Registration No. 33-88052)).
4(c) Warrants dated as of February 9, 1996 to Investors Associates.
4(d) Option Agreement dated October 18, 1995 by and between the
Company and Spectrum Realty Capital.
4(e) Option Agreement dated March 9, 1995 by and between the
Company and A. Clinton Allen.
5 Opinion of Olshan Grundman Frome & Rosenzweig LLP with respect
to the securities registered hereunder.
23(a) Consent of BDO Seidman, LLP
23(b) Consent of Olshan Grundman Frome & Rosenzweig LLP (included
within Exhibit 5).
24 Power of Attorney (included on signature page to this
Registration Statement).
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
a) To file, during any period in which offers or
sales are being made, a post-effective amendment to this registration statement
to include any material information with respect to the plan of distribution not
previously
II-2
<PAGE>
disclosed in the registration statement or any material change to such
information in the registration statement.
b) That, for the purpose of determining any
liability under the Securities Act of 1933, 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.
c) To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
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 the 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.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 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 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against each 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 controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
<PAGE>
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-3 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-4
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
4(a) Form of Common Stock Certificate (incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement on Form
SB-2 (Registration No. 33-88052)).
4(b) Form of Bridge Warrant (incorporated by reference to Exhibit
4.2 to the Company's Registration Statement on Form SB-2
(Registration No. 33-88052)).
4(c) Warrants dated as of February 9, 1996 to Investors Associates.
4(d) Option Agreement dated October 18, 1995 by and between the
Company and Spectrum Realty Capital.
4(e) Option Agreement dated March 9, 1995 by and between the
Company and A. Clinton Allen.
5 Opinion of Olshan Grundman Frome & Rosenzweig LLP with respect
to the securities registered hereunder
23(a) Consent of BDO Seidman, LLP
23(b) Consent of Olshan Grundman Frome & Rosenzweig LLP (included
within Exhibit 5).
24 Power of Attorney (included on signature page to this
Registration Statement).
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
NEITHER THIS WARRANT NOR ANY INTEREST THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT AND THE RULES AND REGULATIONS THEREUNDER. BY ITS
ACCEPTANCE HEREOF, THE HOLDER OF THIS WARRANT REPRESENTS THAT IT IS ACQUIRING
THIS WARRANT FOR INVESTMENT AND AGREES TO COMPLY IN ALL RESPECTS WITH ANY
APPLICABLE STATE SECURITIES LAWS COVERING THE PURCHASE OF THIS WARRANT AND
RESTRICTING ITS TRANSFER, COPIES OF WHICH MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF THIS WARRANT TO THE SECRETARY OF THIS
COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICE AT 425 MADISON AVENUE, SUITE 605, NEW
YORK, NEW YORK 10017.
Dated: As of February 9, 1996
WARRANT
To purchase up to 100,000 Shares of Common Stock
THE GREAT AMERICAN BACKRUB STORE, INC.
Expiring January 31, 1997
THIS IS TO CERTIFY THAT, for value received, INVESTORS ASSOCIATES, INC.
or registered assigns (the "Holder"), is entitled, subject to certain conditions
set forth in Section 1.01 hereof, to purchase from THE GREAT AMERICAN BACKRUB
STORE, INC., a New York corporation (the "Company"), at any time or from time to
time after 9:00 a.m., New York City time, on the date hereof and prior to 5:00
p.m. New York City time, on January 31, 1997, at the Company's principal
executive office, at the Exercise Price (as hereinafter defined), up to the
number of shares of Common Stock, $.001 par value per share (the "Common
Stock"), of the Company shown above, all subject to adjustment and upon the
terms and conditions as hereinafter provided, and is entitled also to exercise
the other appurtenant rights, powers and privileges hereinafter described.
Certain terms used in this Warrant are defined in Article IV hereof.
ARTICLE I
METHOD OF EXERCISE
1.01. METHOD OF EXERCISE. To exercise this Warrant in whole or in part,
the Holder shall deliver to the Company, at the Company's principal executive
office (a) this Warrant, (b) a written notice of such Holder's election to
exercise this Warrant, which notice shall specify the number of shares of Common
Stock to be purchased, but in no event less than 10,000 shares, the
denominations of the share certificate or certificates desired and the name or
names in which such certificates are to be registered, and (c) payment of the
Exercise Price with respect to such shares. Such payment may be made, at the
option of the Holder, in cash, by certified or bank cashier's check, money order
or wire transfer, or in any other manner consented to in writing by the Company,
or any combination thereof.
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The Company shall, as promptly as practicable after receipt of the
items required by the previous paragraph, execute and deliver or cause to be
executed and delivered, in accordance with such notice, a certificate or
certificates representing the aggregate number of shares of Common Stock
specified in said notice. The share certificate or certificates so delivered
shall be in such denominations as may be specified in such notice or, if such
notice shall not specify denominations, in denominations of 10,000 shares each,
and shall be issued in the name of the Holder or such other name as shall be
designated in such notice. Such certificate or certificates shall be deemed to
have been issued, and such Holder or Holders or any other person so designated
to be named therein shall be deemed for all purposes to have become a Holder of
record of such shares, as of the date the aforementioned notice is received by
the Company. If this Warrant shall have been exercised only in part, the Company
shall, at the time of delivery of the certificate or certificates, deliver to
the Holder a new Warrant evidencing the right to purchase the remaining shares
of Common Stock called for by this Warrant which new Warrant shall in all other
respects be identical with this Warrant, or, at the request of the Holder,
appropriate notations may be made on this Warrant which shall then be returned
to the Holder. The Company shall pay all expenses, taxes and other charges
payable in connection with the preparation, issuance and delivery of share
certificates and new Warrants, except that, if share certificates or new
Warrants shall be registered in a name or names other than the name of the
Holder, funds sufficient to pay all transfer taxes, if any, payable as a result
of such transfer shall be paid by the Holder at the time of delivering the
aforementioned notice of exercise or promptly upon receipt of a written request
of the Company for payment.
1.02. SHARES TO BE FULLY PAID AND NONASSESSABLE. All shares of Common
Stock issued upon the exercise of this Warrant shall be validly issued, fully
paid and nonassessable.
1.03. NO FRACTIONAL SHARES TO BE ISSUED. The Company shall not be
required to issue fractions of shares of Common Stock upon exercise of this
Warrant. If any fractions of a share would, but for this Section, be issuable
upon any exercise of this Warrant, in lieu of such fractional share the Company
shall pay to the holder, in cash, an amount equal to the same fraction of the
Market Price per share of Common Stock for the Trading Day immediately prior to
the date of such exercise.
1.04. SHARE LEGEND. Each certificate for shares of Common Stock issued
upon exercise of this Warrant, unless at the time of exercise such shares are
registered under the Act, shall bear the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 AND NEITHER SUCH SHARES OF THE COMMON STOCK NOR ANY
INTEREST THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SAID ACT AND THE RULES AND
REGULATIONS THEREUNDER. BY ITS ACCEPTANCE HEREOF, THE HOLDER
OF SUCH SHARES OF COMMON STOCK REPRESENTS THAT IT IS
ACQUIRING THIS COMMON STOCK FOR INVESTMENT AND AGREES TO
COMPLY IN ALL RESPECTS WITH ANY APPLICABLE STATE SECURITIES
LAWS, AND THE WARRANT RELATING TO THIS COMMON STOCK ISSUED
PURSUANT TO SUCH WARRANT, COVERING THE PURCHASE OF THIS
COMMON STOCK AND RESTRICTING THEIR TRANSFER, COPIES OF WHICH
MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THIS
COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICE AT 425 MADISON
AVENUE, SUITE 605, NEW YORK, NEW YORK 10017.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the Act)
shall also bear such legend unless, in the opinion of counsel reasonably
acceptable to the Company, the
<PAGE>
securities represented thereby need no longer be subject to restrictions on
resale under the Act.
ARTICLE II
EXCHANGES, TRANSFERS AND REPLACEMENTS
2.01. EXCHANGE AND REGISTRATION OR TRANSFER OF WARRANTS. Provided, in
the opinion of counsel acceptable to the Company, the following is permitted
under the Act, the holder of this Warrant may, at its option, surrender this
Warrant at the principal executive office of the Company and receive in exchange
therefor a Warrant or Warrants, each for 10,000 shares of Common Stock or an
integral multiple thereof, for the same aggregate number of shares of Common
Stock as the Warrant or Warrants so surrendered for exchange and registered to
such person or persons as may be designated by such holder.
This Warrant may be divided upon presentation hereof at the principal
executive office of the Company, together with a written notice specifying the
names and denominations in which the new Warrant or Warrants are to be issued,
signed by the holder hereof and thereof or their respective duly authorized
agents or attorneys. Subject to compliance with this Section 2.01 as to any
transfer which may be involved in the division, the Company shall execute and
deliver a new Warrant or Warrants to be divided in accordance with such notice.
The Company shall keep, at said principal office, a register in which,
subject to such reasonable regulations as it may prescribe, the Company shall
register or cause to be registered Warrants and shall register or cause to be
registered the transfer of the Warrants as provided in this Section 2.01. Such
register shall be in written form. Upon due presentment for registration of
transfer of any Warrants at such office, the Company shall execute and register
or cause to be registered and deliver in the name of the transferee or
transferees a new Warrant or Warrants for an equal aggregate number of Shares.
The Company shall pay any tax or other governmental charge that may be
imposed in connection with any exchange of Warrants not involving a transfer,
but the Company may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with a transfer of
Warrants.
2.02. LOSS, THEFT OR DESTRUCTION OF WARRANT CERTIFICATES. Upon receipt
of evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Company,
or, in the case of any such mutilation, upon surrender and cancellation of the
Warrant, the Company will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same aggregate number of shares of Common Stock.
ARTICLE III
ANTIDILUTION PROVISIONS
3.01 ADJUSTMENTS GENERALLY. The Exercise Price and the number of shares
of Common Stock (or other securities or property) issuable upon exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events, as provided in this Article III.
<PAGE>
3.02 COMMON STOCK REORGANIZATION. If the Company shall subdivide its
outstanding shares of Common Stock into a greater number of shares or
consolidate its outstanding shares of Common Stock into a smaller number of
shares (any such event being called a "Common Stock Reorganization"), then (a)
the Exercise Price shall be adjusted, effective immediately after the record
date at which the holders of shares of Common Stock are determined for purposes
of such Common Stock Reorganization, to a price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the number of shares of Common Stock outstanding
on such record date before giving effect to such Common Stock Reorganization and
the denominator of which shall be the number of shares of Common Stock
outstanding after giving effect to such Common Stock Reorganization, and (b) the
number of shares of Common Stock subject to purchase upon exercise of this
Warrant shall be adjusted, effective at such time, to a number determined by
multiplying the number of shares of Common Stock subject to purchase immediately
before such Common Stock Reorganization by a fraction, the numerator of which
shall be the number of shares then outstanding after giving effect to such
Common Stock Reorganization and the denominator of which shall be the number of
shares of Common Stock outstanding immediately before such Common Stock
Reorganization.
3.03 SPECIAL DIVIDENDS. If the Company shall issue or distribute to all
or substantially all holders of shares of Common Stock evidences of
indebtedness, any other securities of the Company, or any cash, property or
other assets, and if such issuance or distribution does not constitute a cash
dividend or distribution out of surplus or net profits legally available
therefor, or a Common Stock Reorganization (any such nonexcluded event being
herein called a "Special Dividend"), the Exercise Price shall be adjusted,
effective immediately after the record date at which the holders of shares of
Common Stock are determined for purposes of such Special Dividend, to a price
determined by multiplying the Exercise Price then in effect by a fraction, the
numerator of which shall be the Market Price per share of Common Stock on such
record date less the then fair market value (as reasonably determined in good
faith by the Board of Directors of the Company) of the evidences of
indebtedness, securities or property or other assets issued or distributed in
such Special Dividend with respect to one share of Common Stock, and the
denominator of which shall be the Market Price per share of Common Stock on such
record date.
3.04 CAPITAL REORGANIZATIONS. If there shall be any consolidation or
merger to which the Company is a party, other than a consolidation or a merger
in which the Company is a continuing corporation and which does not result in
any reclassification of, or change (other than a Common Stock Reorganization or
a change in par value) in, outstanding shares of Common Stock, or any sale or
conveyance of the property of the Company as an entirety or substantially as an
entirety (any such event being called a "Capital Reorganization"), then
effective upon the effective date of such Capital Reorganization, the Holder
shall have the right to purchase, upon exercise of this Warrant, the kind and
amount of shares of stock and other securities and property (including in cash)
which the Holder would have owned or have been entitled to receive after such
Capital Reorganization if this Warrant had been exercised immediately prior to
such Capital Reorganization. As a condition to effecting any Capital
Reorganization, the Company or the successor or surviving corporation, as the
case may be, shall execute and deliver to each Warrantholder an agreement as to
the Warrantholders' rights in accordance with this Section 3.04, providing for
subsequent adjustments as nearly equivalent as may be practicable to the
adjustments provided for in this Article III. The provisions of this Section
3.04 shall similarly apply to successive Capital Reorganizations.
3.05. CERTAIN OTHER EVENTS. If any event occurs as to which the
foregoing provisions of this Article III are not strictly applicable or, if
strictly applicable, would not, in the good faith judgment of the Board of
Directors of the Company, fairly protect the purchase rights of the Warrants in
accordance with the essential intent and principles of such provisions, then
such Board shall make such adjustments in the application of such provisions, in
accordance with such essential intent and principles, as shall be reasonably
necessary, in the good faith opinion of such Board, to protect such purchase
rights as aforesaid, but in no event shall any such adjustment have the effect
of increasing the Exercise Price or decreasing the number of shares of Common
Stock subject to purchase upon exercise of this Warrant.
<PAGE>
3.06. ADJUSTMENT RULES. (a) Any adjustments pursuant to this Article
III shall be made successively whenever an event referred to therein shall
occur.
(b) If the Company shall set a record date to determine the holders of
shares of Common Stock for purposes of a Common Stock Reorganization or Capital
Reorganization, and shall legally abandon such action prior to effecting such
action, then no adjustment shall be made pursuant to this Article III in respect
of such action.
(c) All calculations under this Article III shall be made to the
nearest cent or to the nearest one hundredth (1/100th) of a share, as the case
may be. Notwithstanding any provision of this Article III to the contrary, no
adjustment in the Exercise Price shall be made if the amount of such adjustment
would be less than $0.05, but any such amount shall be carried forward and an
adjustment with respect thereto shall be made at the time of and together with
any subsequent adjustment which, together with such amount and any other amount
or amounts so carried forward, shall aggregate $0.05 or more.
(d) In any case in which the provisions of this Article III shall
require that an adjustment shall become effective immediately after a record
date for an event, the Company may defer until the occurrence of such event (i)
issuing to the holder of any Warrant exercised after such record date and before
the occurrence of such event the additional shares of Common Stock issuable upon
such conversion by reason of the adjustment required by such event over and
above the shares of Common Stock issuable upon such conversion before giving
effect to such adjustment and (ii) paying to such holder any amount of cash in
lieu of a fractional share of Common Stock pursuant to Section 1.03; provided
that the Company upon request shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's rights to receive such
additional shares, and such cash, upon the occurrence of the event requiring
such adjustment.
3.07 PROCEEDINGS PRIOR TO ANY ACTION REQUIRING ADJUSTMENT. As a
condition precedent to the taking of any action which would require an
adjustment pursuant to this Article III, the Company shall take any action which
may be necessary in order that the Company may thereafter validly and legally
issue as fully paid and nonassessable all shares of Common Stock which the
holders of Warrants are entitled to receive upon exercise thereof.
3.08 STATEMENT REGARDING ADJUSTMENT. Whenever the Exercise Price or the
number of shares received upon exercise of the Warrants shall be adjusted as
provided in Article III, the Company shall forthwith file, at the office of any
transfer agent for the Warrants and at the principal office of the Company, a
statement showing in detail the facts requiring such adjustment and the Exercise
Price and the number of shares received upon exercise of the Warrants that shall
be in effect after such adjustment, and the Company shall also cause a copy of
such statement to be sent by mail, first class postage prepaid, to each holder
of Warrants, at its address appearing on the Company's records. Where
appropriate, such copy may be given in advance and may be included as part of a
notice required to be mailed under the provisions of Section 3.09. Failure to
give such notice, or any defect therein, shall not affect the legality or
validity of any such action.
3.09 NOTICE TO HOLDERS. In the event the Company shall propose to take
any action of the type described in Article III (but only if the action of the
type described in Article III would result in an adjustment in the Exercise
Price or the number of shares received upon exercise of the Warrants), the
Company shall give notice to each Warrantholder in the manner set forth in this
Section 3.09, which notice shall specify the record date, if any, with respect
to any such action and the approximate date on which such action is to take
place. Such notice shall also set forth such facts with respect thereto as shall
be reasonably necessary to indicate the effect of such action (to the extent
such effect may be known at the date of such notice) on the Exercise Price and
the number, kind or class of shares or other securities or property which shall
be deliverable or purchasable upon the occurrence of such action or
<PAGE>
deliverable upon exercise of the Warrants. In the case of any action which would
require the fixing of a record date, such notice shall be given at least 5 days
prior to the date so fixed, and in case of all other action, such notice shall
be given at least 10 days prior to the taking of such proposed action. Failure
to give such notice, or any defect therein, shall not affect the legality or
validity of any such action.
ARTICLE IV
DEFINITIONS
The following terms, as used in this Warrant, have the following
respective meanings:
"Act" means the Securities Act of 1933, as amended, and any similar or
successor Federal statute, and the rules and regulations of the Securities and
Exchange Commission (or its successor) thereunder, all as the same shall be in
effect at the time.
"Capital Reorganization" shall have the meaning set forth in Section
3.04 hereof.
"Closing Price" on any day means (a) if the Common Stock is listed or
admitted for trading on a national securities exchange, the reported last sales
price or, if no such reported sale occurs on such day, the average of the
closing bid and asked prices on such day, in each case on the principal national
securities exchange on which the Common Stock is listed or admitted to trading,
(b) if the Common Stock is not listed or admitted to trading on any national
securities exchange, the average of the closing bid and asked prices in the
over-the-counter market on such day as reported by NASDAQ or any comparable
system or, if not so reported, as reported by any New York Stock Exchange member
firm selected by the Company for such purpose or (c) if no such quotations are
available on such day, the fair market value of one share of Common Stock on
such day as determined in good faith by the Board of Directors of the Company.
"Common Stock" shall have the meaning set forth in the first paragraph
of this Warrant, subject to adjustment pursuant to Article III.
"Common Stock Reorganization" shall have the meaning set forth in
Section 3.02 hereof.
"Company" shall have the meaning set forth in the first paragraph of
this Warrant.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any similar or successor Federal statute, and the rules and regulations of
the Securities and Exchange Commission (or its successor) thereunder, all as the
same shall be in effect at the time.
"Exercise Price" means $1.00 per share of Common Stock, subject to
adjustment pursuant to Article III hereof.
"Holder" shall have the meaning set forth in the first paragraph of
this Warrant and "Holders" shall include any and all successors and assigns of
the initial Holder with respect to this Warrant.
<PAGE>
"Market Price" on any day means the average of the daily Closing Prices
of a share of Common Stock for the 20 consecutive Trading Days ending on the
most recent Trading Day for which a closing price is available and if the Common
Stock is not then publicly traded Market Price shall be determined in good faith
by the Board of Directors of the Company.
"NASD" means The National Association of Securities Dealers, Inc.
"NASDAQ" means The National Association of Securities Dealers, Inc.
Automated Quotation System.
"Registrable Securities" means 100% of the number of shares of the
Company's Common Stock issuable upon exercise of this Warrant.
"Trading Day" means (a) if the Common Stock is listed or admitted to
trading on a national securities exchange, a day on which the principal national
securities exchange on which the Common Stock is listed or admitted to trading
is open for business or (b) if the Common Stock is not so listed or admitted to
trading, a day on which any New York Stock Exchange member firm is open for
business.
"Warrantholder" means a holder of a Warrant.
"Warrant" and "Warrants" shall mean this warrant and any warrants into
which this warrant may be divided in accordance with Section 2.01.
"Warrant Common Stock" means the Common Stock issued upon the exercise
of the Warrant.
ARTICLE V
REDEMPTION AND CANCELLATION OF WARRANTS
5.01 REDEMPTION OF WARRANTS. The Warrants are not redeemable by the
Company and the Company has no rights to purchase or otherwise acquire the
Warrants.
5.02 CANCELLATION OF WARRANTS. The Company shall cancel any Warrant
surrendered for transfer, exchange or exercise.
ARTICLE VI
REGISTRATION RIGHTS
6.01 REGISTRATION RIGHTS. If the Company files a registration statement
to register any of its securities under the Act (other than a Form S-8, Form S-4
or comparable registration statement) prior to February 9, 1998, the Company
shall:
(a) promptly (but not less than ten days prior to the filing of any
registration statement) give written notice thereof (which shall include a list
of the jurisdictions, if any, in which the Company intends to register or
qualify such securities under the applicable blue sky or other state securities
laws) to each Holder and each holder of Warrant Common Stock. The notice shall
offer to include in such
<PAGE>
filing the aggregate number of shares of Warrant Common Stock as each holder may
request;
(b) If a holder desires to have shares of Warrant Common Stock
registered under this Section 6.01, such holder shall advise the Company in
writing within five days after the date of receipt of such offer from the
Company, setting forth the amount of such Warrant Common Stock for which
registration is requested. The Company shall thereupon include in such filing
the number of shares of Warrant Common Stock for which registration is so
requested, subject to the following: in the event that the proposed registration
by the Company is, in whole or in part, an underwritten public offering of
securities of the Company, the Company shall not be required to include any of
the Warrant Common Stock in such underwriting unless the holder agrees to accept
the offering on the same terms and conditions as the shares of common stock, if
any, being sold through underwriters under such registration; provided, however,
that (i) if the managing underwriter determines and advises the Company in
writing that the inclusion of all Warrant Common Stock proposed to be included
by the holders in the underwritten public offering and other issued and
outstanding shares of Common Stock proposed to be included therein by persons
other than the holders and the Company (the "Other Shares") would jeopardize the
success of the Company's offering, then the Company shall be required to include
in the offering (in addition to the number of shares to be sold by the Company)
only that number of shares of Warrant Common Stock that the managing underwriter
believes will not jeopardize the success of the Company's offering; and (ii) in
each case all shares of common stock owned by the holders which are not included
in the underwritten public offering shall be withheld from the market by the
holders thereof for a period, not to exceed one hundred twenty calendar days,
which the managing underwriter reasonably determines as necessary in order to
effect the underwritten public offering. In the event the Company chooses a
registration form which limits the size of the offering either in terms of the
number of shares or dollar amount, the Company shall not be required to include
in the offering (in addition to the number of shares to be sold by the Company)
shares of Warrant Common Stock which would exceed such limits.
6.02 EXPENSES. The Company shall bear all of its expenses in connection
with such registration, qualification and compliance under this Article VI,
including, without limitation, all registration and filing fees, printing
expenses and fees and disbursements of the Company's counsel and expenses of any
audits incident to or required by any such registration, qualification and
compliance, provided, that the Company shall not, in any event, be required to
bear the cost of any Holder's counsel or commissions and compensation paid, and
concessions and discounts allowed to, underwriters, dealers, brokers or others
performing similar functions in connection with the sale and distribution of the
Warrant Common Stock sold by any holders thereof.
6.03 INDEMNIFICATION. (a) If Registrable Securities are included in a
Registration Statement, the Company will indemnify each Holder and each holder
of Warrant Common Stock against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on (A) any untrue statement
(or alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or (B) any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (C) any violation by the Company of any
rule or regulation promulgated under the Act applicable to the Company and
relating to action or inaction required of the Company in connection with any
registration, qualification or compliance, and will reimburse each Holder and
each holder of Warrant Common Stock for any legal and any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage or
liability arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company by a Holder or a holder of
Warrant Common Stock specifically for use therein.
(b) Each party entitled to indemnification under this Section 6.03
(sometimes referred to as the "Indemnified Party") shall give notice to the
party required to provide indemnification (the "Indemnifying Party") promptly
after such Indemnified Party has actual knowledge of any claim as to which
indemnity may be
<PAGE>
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that unless such failure
materially and adversely affects the rights or abilities of the Indemnifying
Party to defend such action, the failure of any Indemnified Party to give notice
as provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 6.03. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability with respect to such claim or
litigation. If any such Indemnified Party shall have reasonably concluded that
there may be one or more legal defenses available to such Indemnified Party
which is different from or additional to those available to the Indemnifying
Party, or that such claim or litigation involves or could have an effect upon
matters beyond the scope of the indemnity agreement provided in this Section
6.03, the Indemnifying Party shall not have the right to assume the defense of
such action on behalf of such Indemnified Party and such Indemnifying Party
shall reimburse such Indemnified Party for that portion of the fees and expenses
of one counsel retained by the Indemnified Party which is reasonably related to
the matters covered by the indemnity agreement provided in this Section 6.03.
(c) If the indemnification provided for in this Section 6.03 shall for
any reason be unenforceable by an indemnified party, although otherwise
available in accordance with its terms, then each indemnifying party shall, in
lieu of indemnifying such indemnified party, contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages,
liabilities or expenses with respect to which such indemnified party has claimed
indemnification, in such proportion as is appropriate to reflect the relative
fault of the indemnified party on the one hand and the indemnifying party on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The Company and each Holder agree that it would not be
just and equitable if contribution pursuant hereto were to be determined by pro
rata allocation or by any other method of allocation which does not take into
account such equitable considerations. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, liabilities or
expenses referred to herein shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending against any action or claim which is the subject
hereof. No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who
is not guilty of such fraudulent misrepresentation.
6.04 INFORMATION BY THE INVESTOR. Each Holder and each holder of
Warrant Common Stock shall furnish in writing to the Company such information
regarding such person and the distribution proposed by such person as the
Company may request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Article VI.
6.05 NOTIFICATION; CONTINUATION OF EFFECTIVENESS. In the case of a
registration, qualification and compliance pursuant to this Article VI, the
Company will keep all Holders and all holders of Warrant Common Stock promptly
advised in writing as to the initiation of proceedings for such registration,
qualification and compliance and as to the completion thereof, and will advise,
upon request, of the progress of such proceedings. The Company will, at its
expense, keep such registration, qualification and compliance effective, unless
otherwise noted herein, for a period of twelve months, or for such longer period
as may be required by the Act, by such action as may be necessary or appropriate
to permit the sale or distribution of Warrant Common Stock not theretofore sold
or distributed including, without limitation, the filing of post-effective
amendments and supplements to any registration statement or prospectus necessary
to keep the registration current and further qualification under any applicable
blue sky or other state securities law, all as requested by any Holder or holder
of Warrant Common Stock with respect to which such registration is being
effected.
<PAGE>
6.06 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company
to register securities granted by the Company under this Article VI may be
assigned by the Holder to a transferee or assignee of all or less than all the
Registrable Securities, provided that such transfer may otherwise be effected in
accordance with applicable securities laws and that the Company is given written
notice, as provided in Article VI.
6.07 PROSPECTUSES, ETC. The Company will, at its expense, furnish to
each Holder or holder of Warrant Common Stock with respect to which registration
has been effected, such number of prospectuses, offering circulars and other
documents incident to such registration and related qualification or compliance
as such holder from time to time may reasonably request.
6.08 LISTING ON SECURITIES EXCHANGES, ETC. The Company will, at its
expense, list on each national securities exchange, or NASDAQ, on which Common
Stock is at the time listed, upon official notice of issuance upon the exercise
of the Warrant, and maintain such listing of, all shares of Common Stock from
time to time issuable upon the exercise of the Warrant, and when and if required
by the Exchange Act will register thereunder all shares of Common Stock from
time to time so issuable.
6.09 UNDERWRITTEN OFFERINGS. In the event any registration under this
Article VI is underwritten and the managing underwriter determines that the
inclusion of all Registrable Securities that are to be included would materially
interfere with the successful completion thereof in the reasonable judgment of
such managing underwriter, then the number of Registrable Securities to be
included may be reduced at the discretion of such managing underwriter.
ARTICLE VII
MISCELLANEOUS
7.01 NOTICES. All notices, requests and other communications provided
for herein shall be in writing, and shall be deemed to have been made or given
when delivered or mailed, first class, postage prepaid, or sent by telex or
other telegraphic communications equipment. Such notices and communications
shall be addressed:
(a) if to the Company, to
425 Madison Avenue, Suite 605
New York, New York 10017
Attention: President; or
(b) if to the Holder, to its address as shown on the
registry books maintained pursuant to Section 2.01;
or in any of the foregoing cases at such other
address as such Person may hereafter specify for such
purpose by notice to the other Persons referred to
above.
7.02 WAIVERS; AMENDMENTS. No failure or delay of the Holder in
exercising any right, power or privilege, hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof, or any abandonment or
discontinuance of steps to enforce such a right, power or privilege, preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies of the Holder are cumulative and not
exclusive of any rights or remedies which it would otherwise have. The
provisions of this Warrant may be amended, modified or
<PAGE>
waived if, but only if, such amendment, modification or waiver is in writing and
is signed by the Company and a majority of the Holders; provided that no
amendment, modification or waiver may change the exercise price of (including
without limitation any adjustments or any provisions with respect to
adjustments, the expiration of or the manner of exercising the Warrants) without
the consent in writing of all of the Holders.
7.03 GOVERNING LAW. This Warrant shall be construed in accordance with
and governed by the laws of the State of New York.
7.05 COVENANTS TO BIND SUCCESSOR AND ASSIGNS. All the covenants,
stipulations, promises and agreements in this Warrant contained by or on behalf
of the Company shall bind its successors and assigns, whether or not so
expressed.
7.06 SEVERABILITY. In case any one or more of the provisions contained
in this Warrant shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions contained
herein and therein shall not in any way be affected or impaired in such
jurisdiction and shall not invalidate or render illegal or unenforceable such
provision in any other jurisdiction.
7.07 HEADINGS. The headings used herein are for convenience of
reference only and shall not be deemed to be a part of this Warrant.
7.08 NO RIGHTS AS STOCKHOLDER. This Warrant shall not entitle the
Holder to any rights as a stockholder of the Company.
7.09 PRONOUNS. The pronouns "it" and "its" herein shall be deemed to
mean "he" or "his", as the context requires.
<PAGE>
IN WITNESS WHEREOF, The Great American BackRub Store, Inc. has caused
this Warrant to be executed in its corporate name by one of its officers
thereunto duly authorized, attested by its Secretary or an Assistant Secretary,
all as of the day and year first above written.
THE GREAT AMERICAN BACKRUB STORE, INC.
By:/s/ William Zanker
-----------------------------------
William Zanker, President
Attest:
/s/ Keith Dee
- ---------------------------
Keith Dee
Secretary
<PAGE>
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
NEITHER THIS WARRANT NOR ANY INTEREST THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT AND THE RULES AND REGULATIONS THEREUNDER. BY ITS
ACCEPTANCE HEREOF, THE HOLDER OF THIS WARRANT REPRESENTS THAT IT IS ACQUIRING
THIS WARRANT FOR INVESTMENT AND AGREES TO COMPLY IN ALL RESPECTS WITH ANY
APPLICABLE STATE SECURITIES LAWS COVERING THE PURCHASE OF THIS WARRANT AND
RESTRICTING ITS TRANSFER, COPIES OF WHICH MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF THIS WARRANT TO THE SECRETARY OF THIS
COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICE AT 425 MADISON AVENUE, SUITE 605, NEW
YORK, NEW YORK 10017.
Dated: As of February 9, 1996
WARRANT
To purchase up to 200,000 Shares of Common Stock
THE GREAT AMERICAN BACKRUB STORE, INC.
Expiring January 31, 1998
THIS IS TO CERTIFY THAT, for value received, INVESTORS ASSOCIATES, INC.
or registered assigns (the "Holder"), is entitled, subject to certain conditions
set forth in Section 1.01 hereof, to purchase from THE GREAT AMERICAN BACKRUB
STORE, INC., a New York corporation (the "Company"), at any time or from time to
time after 9:00 a.m., New York City time, on the date hereof and prior to 5:00
p.m. New York City time, on January 31, 1998, at the Company's principal
executive office, at the Exercise Price (as hereinafter defined), up to the
number of shares of Common Stock, $.001 par value per share (the "Common
Stock"), of the Company shown above, all subject to adjustment and upon the
terms and conditions as hereinafter provided, and is entitled also to exercise
the other appurtenant rights, powers and privileges hereinafter described.
Certain terms used in this Warrant are defined in Article IV hereof.
ARTICLE I
METHOD OF EXERCISE
1.01. METHOD OF EXERCISE. To exercise this Warrant in whole or in part,
the Holder shall deliver to the Company, at the Company's principal executive
office (a) this Warrant, (b) a written notice of such Holder's election to
exercise this Warrant, which notice shall specify the number of shares of Common
Stock to be purchased, but in no event less than 10,000 shares, the
denominations of the share certificate or certificates desired and the name or
names in which such certificates are to be registered, and (c) payment of the
Exercise Price with respect to such shares. Such payment may be made, at the
option of the Holder, in cash, by certified or bank cashier's check, money order
or wire transfer, or in any other manner consented to in writing by the Company,
or any combination thereof.
The Company shall, as promptly as practicable after receipt of the
items required by the previous paragraph, execute and deliver or cause to be
executed and delivered, in accordance with such notice, a certificate or
certificates representing the aggregate number of shares of Common Stock
specified in said notice. The share certificate or certificates so delivered
shall be in such denominations as may be specified in such notice or, if such
notice shall not specify denominations, in
<PAGE>
denominations of 10,000 shares each, and shall be issued in the name of the
Holder or such other name as shall be designated in such notice. Such
certificate or certificates shall be deemed to have been issued, and such Holder
or Holders or any other person so designated to be named therein shall be deemed
for all purposes to have become a Holder of record of such shares, as of the
date the aforementioned notice is received by the Company. If this Warrant shall
have been exercised only in part, the Company shall, at the time of delivery of
the certificate or certificates, deliver to the Holder a new Warrant evidencing
the right to purchase the remaining shares of Common Stock called for by this
Warrant which new Warrant shall in all other respects be identical with this
Warrant, or, at the request of the Holder, appropriate notations may be made on
this Warrant which shall then be returned to the Holder. The Company shall pay
all expenses, taxes and other charges payable in connection with the
preparation, issuance and delivery of share certificates and new Warrants,
except that, if share certificates or new Warrants shall be registered in a name
or names other than the name of the Holder, funds sufficient to pay all transfer
taxes, if any, payable as a result of such transfer shall be paid by the Holder
at the time of delivering the aforementioned notice of exercise or promptly upon
receipt of a written request of the Company for payment.
1.02. SHARES TO BE FULLY PAID AND NONASSESSABLE. All shares of Common
Stock issued upon the exercise of this Warrant shall be validly issued, fully
paid and nonassessable.
1.03. NO FRACTIONAL SHARES TO BE ISSUED. The Company shall not be
required to issue fractions of shares of Common Stock upon exercise of this
Warrant. If any fractions of a share would, but for this Section, be issuable
upon any exercise of this Warrant, in lieu of such fractional share the Company
shall pay to the holder, in cash, an amount equal to the same fraction of the
Market Price per share of Common Stock for the Trading Day immediately prior to
the date of such exercise.
1.04. SHARE LEGEND. Each certificate for shares of Common Stock issued
upon exercise of this Warrant, unless at the time of exercise such shares are
registered under the Act, shall bear the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 AND NEITHER SUCH SHARES OF THE COMMON STOCK NOR ANY
INTEREST THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SAID ACT AND THE RULES AND
REGULATIONS THEREUNDER. BY ITS ACCEPTANCE HEREOF, THE HOLDER
OF SUCH SHARES OF COMMON STOCK REPRESENTS THAT IT IS
ACQUIRING THIS COMMON STOCK FOR INVESTMENT AND AGREES TO
COMPLY IN ALL RESPECTS WITH ANY APPLICABLE STATE SECURITIES
LAWS, AND THE WARRANT RELATING TO THIS COMMON STOCK ISSUED
PURSUANT TO SUCH WARRANT, COVERING THE PURCHASE OF THIS
COMMON STOCK AND RESTRICTING THEIR TRANSFER, COPIES OF WHICH
MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THIS
COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICE AT 425 MADISON
AVENUE, SUITE 605, NEW YORK, NEW YORK 10017.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the Act)
shall also bear such legend unless, in the opinion of counsel reasonably
acceptable to the Company, the securities represented thereby need no longer be
subject to restrictions on resale under the Act.
ARTICLE II
<PAGE>
EXCHANGES, TRANSFERS AND REPLACEMENTS
2.01. EXCHANGE AND REGISTRATION OR TRANSFER OF WARRANTS. Provided, in
the opinion of counsel acceptable to the Company, the following is permitted
under the Act, the holder of this Warrant may, at its option, surrender this
Warrant at the principal executive office of the Company and receive in exchange
therefor a Warrant or Warrants, each for 10,000 shares of Common Stock or an
integral multiple thereof, for the same aggregate number of shares of Common
Stock as the Warrant or Warrants so surrendered for exchange and registered to
such person or persons as may be designated by such holder.
This Warrant may be divided upon presentation hereof at the principal
executive office of the Company, together with a written notice specifying the
names and denominations in which the new Warrant or Warrants are to be issued,
signed by the holder hereof and thereof or their respective duly authorized
agents or attorneys. Subject to compliance with this Section 2.01 as to any
transfer which may be involved in the division, the Company shall execute and
deliver a new Warrant or Warrants to be divided in accordance with such notice.
The Company shall keep, at said principal office, a register in which,
subject to such reasonable regulations as it may prescribe, the Company shall
register or cause to be registered Warrants and shall register or cause to be
registered the transfer of the Warrants as provided in this Section 2.01. Such
register shall be in written form. Upon due presentment for registration of
transfer of any Warrants at such office, the Company shall execute and register
or cause to be registered and deliver in the name of the transferee or
transferees a new Warrant or Warrants for an equal aggregate number of Shares.
The Company shall pay any tax or other governmental charge that may be
imposed in connection with any exchange of Warrants not involving a transfer,
but the Company may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with a transfer of
Warrants.
2.02. LOSS, THEFT OR DESTRUCTION OF WARRANT CERTIFICATES. Upon receipt
of evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Company,
or, in the case of any such mutilation, upon surrender and cancellation of the
Warrant, the Company will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same aggregate number of shares of Common Stock.
ARTICLE III
ANTIDILUTION PROVISIONS
3.01 ADJUSTMENTS GENERALLY. The Exercise Price and the number of shares
of Common Stock (or other securities or property) issuable upon exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events, as provided in this Article III.
3.02 COMMON STOCK REORGANIZATION. If the Company shall subdivide its
outstanding shares of Common Stock into a greater number of shares or
consolidate its outstanding shares of Common Stock into a smaller number of
shares (any such event being called a "Common Stock Reorganization"), then (a)
the Exercise Price shall be adjusted, effective immediately after the record
date at which the holders of shares of Common Stock are determined for purposes
of such Common Stock Reorganization, to a price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the number of shares of
<PAGE>
Common Stock outstanding on such record date before giving effect to such Common
Stock Reorganization and the denominator of which shall be the number of shares
of Common Stock outstanding after giving effect to such Common Stock
Reorganization, and (b) the number of shares of Common Stock subject to purchase
upon exercise of this Warrant shall be adjusted, effective at such time, to a
number determined by multiplying the number of shares of Common Stock subject to
purchase immediately before such Common Stock Reorganization by a fraction, the
numerator of which shall be the number of shares then outstanding after giving
effect to such Common Stock Reorganization and the denominator of which shall be
the number of shares of Common Stock outstanding immediately before such Common
Stock Reorganization.
3.03 SPECIAL DIVIDENDS. If the Company shall issue or distribute to all
or substantially all holders of shares of Common Stock evidences of
indebtedness, any other securities of the Company, or any cash, property or
other assets, and if such issuance or distribution does not constitute a cash
dividend or distribution out of surplus or net profits legally available
therefor, or a Common Stock Reorganization (any such nonexcluded event being
herein called a "Special Dividend"), the Exercise Price shall be adjusted,
effective immediately after the record date at which the holders of shares of
Common Stock are determined for purposes of such Special Dividend, to a price
determined by multiplying the Exercise Price then in effect by a fraction, the
numerator of which shall be the Market Price per share of Common Stock on such
record date less the then fair market value (as reasonably determined in good
faith by the Board of Directors of the Company) of the evidences of
indebtedness, securities or property or other assets issued or distributed in
such Special Dividend with respect to one share of Common Stock, and the
denominator of which shall be the Market Price per share of Common Stock on such
record date.
3.04 CAPITAL REORGANIZATIONS. If there shall be any consolidation or
merger to which the Company is a party, other than a consolidation or a merger
in which the Company is a continuing corporation and which does not result in
any reclassification of, or change (other than a Common Stock Reorganization or
a change in par value) in, outstanding shares of Common Stock, or any sale or
conveyance of the property of the Company as an entirety or substantially as an
entirety (any such event being called a "Capital Reorganization"), then
effective upon the effective date of such Capital Reorganization, the Holder
shall have the right to purchase, upon exercise of this Warrant, the kind and
amount of shares of stock and other securities and property (including in cash)
which the Holder would have owned or have been entitled to receive after such
Capital Reorganization if this Warrant had been exercised immediately prior to
such Capital Reorganization. As a condition to effecting any Capital
Reorganization, the Company or the successor or surviving corporation, as the
case may be, shall execute and deliver to each Warrantholder an agreement as to
the Warrantholders' rights in accordance with this Section 3.04, providing for
subsequent adjustments as nearly equivalent as may be practicable to the
adjustments provided for in this Article III. The provisions of this Section
3.04 shall similarly apply to successive Capital Reorganizations.
3.05. CERTAIN OTHER EVENTS. If any event occurs as to which the
foregoing provisions of this Article III are not strictly applicable or, if
strictly applicable, would not, in the good faith judgment of the Board of
Directors of the Company, fairly protect the purchase rights of the Warrants in
accordance with the essential intent and principles of such provisions, then
such Board shall make such adjustments in the application of such provisions, in
accordance with such essential intent and principles, as shall be reasonably
necessary, in the good faith opinion of such Board, to protect such purchase
rights as aforesaid, but in no event shall any such adjustment have the effect
of increasing the Exercise Price or decreasing the number of shares of Common
Stock subject to purchase upon exercise of this Warrant.
3.06. ADJUSTMENT RULES. (a) Any adjustments pursuant to this Article
III shall be made successively whenever an event referred to therein shall
occur.
(b) If the Company shall set a record date to determine the holders of
shares of Common Stock for purposes of a Common Stock Reorganization or Capital
Reorganization, and shall legally abandon such action prior to effecting such
action,
<PAGE>
then no adjustment shall be made pursuant to this Article III in respect of such
action.
(c) All calculations under this Article III shall be made to the
nearest cent or to the nearest one hundredth (1/100th) of a share, as the case
may be. Notwithstanding any provision of this Article III to the contrary, no
adjustment in the Exercise Price shall be made if the amount of such adjustment
would be less than $0.05, but any such amount shall be carried forward and an
adjustment with respect thereto shall be made at the time of and together with
any subsequent adjustment which, together with such amount and any other amount
or amounts so carried forward, shall aggregate $0.05 or more.
(d) In any case in which the provisions of this Article III shall
require that an adjustment shall become effective immediately after a record
date for an event, the Company may defer until the occurrence of such event (i)
issuing to the holder of any Warrant exercised after such record date and before
the occurrence of such event the additional shares of Common Stock issuable upon
such conversion by reason of the adjustment required by such event over and
above the shares of Common Stock issuable upon such conversion before giving
effect to such adjustment and (ii) paying to such holder any amount of cash in
lieu of a fractional share of Common Stock pursuant to Section 1.03; provided
that the Company upon request shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's rights to receive such
additional shares, and such cash, upon the occurrence of the event requiring
such adjustment.
3.07 PROCEEDINGS PRIOR TO ANY ACTION REQUIRING ADJUSTMENT. As a
condition precedent to the taking of any action which would require an
adjustment pursuant to this Article III, the Company shall take any action which
may be necessary in order that the Company may thereafter validly and legally
issue as fully paid and nonassessable all shares of Common Stock which the
holders of Warrants are entitled to receive upon exercise thereof.
3.08 STATEMENT REGARDING ADJUSTMENT. Whenever the Exercise Price or the
number of shares received upon exercise of the Warrants shall be adjusted as
provided in Article III, the Company shall forthwith file, at the office of any
transfer agent for the Warrants and at the principal office of the Company, a
statement showing in detail the facts requiring such adjustment and the Exercise
Price and the number of shares received upon exercise of the Warrants that shall
be in effect after such adjustment, and the Company shall also cause a copy of
such statement to be sent by mail, first class postage prepaid, to each holder
of Warrants, at its address appearing on the Company's records. Where
appropriate, such copy may be given in advance and may be included as part of a
notice required to be mailed under the provisions of Section 3.09. Failure to
give such notice, or any defect therein, shall not affect the legality or
validity of any such action.
3.09 NOTICE TO HOLDERS. In the event the Company shall propose to take
any action of the type described in Article III (but only if the action of the
type described in Article III would result in an adjustment in the Exercise
Price or the number of shares received upon exercise of the Warrants), the
Company shall give notice to each Warrantholder in the manner set forth in this
Section 3.09, which notice shall specify the record date, if any, with respect
to any such action and the approximate date on which such action is to take
place. Such notice shall also set forth such facts with respect thereto as shall
be reasonably necessary to indicate the effect of such action (to the extent
such effect may be known at the date of such notice) on the Exercise Price and
the number, kind or class of shares or other securities or property which shall
be deliverable or purchasable upon the occurrence of such action or deliverable
upon exercise of the Warrants. In the case of any action which would require the
fixing of a record date, such notice shall be given at least 5 days prior to the
date so fixed, and in case of all other action, such notice shall be given at
least 10 days prior to the taking of such proposed action. Failure to give such
notice, or any defect therein, shall not affect the legality or validity of any
such action.
<PAGE>
ARTICLE IV
DEFINITIONS
The following terms, as used in this Warrant, have the following
respective meanings:
"Act" means the Securities Act of 1933, as amended, and any similar or
successor Federal statute, and the rules and regulations of the Securities and
Exchange Commission (or its successor) thereunder, all as the same shall be in
effect at the time.
"Capital Reorganization" shall have the meaning set forth in Section
3.04 hereof.
"Closing Price" on any day means (a) if the Common Stock is listed or
admitted for trading on a national securities exchange, the reported last sales
price or, if no such reported sale occurs on such day, the average of the
closing bid and asked prices on such day, in each case on the principal national
securities exchange on which the Common Stock is listed or admitted to trading,
(b) if the Common Stock is not listed or admitted to trading on any national
securities exchange, the average of the closing bid and asked prices in the
over-the-counter market on such day as reported by NASDAQ or any comparable
system or, if not so reported, as reported by any New York Stock Exchange member
firm selected by the Company for such purpose or (c) if no such quotations are
available on such day, the fair market value of one share of Common Stock on
such day as determined in good faith by the Board of Directors of the Company.
"Common Stock" shall have the meaning set forth in the first paragraph
of this Warrant, subject to adjustment pursuant to Article III.
"Common Stock Reorganization" shall have the meaning set forth in
Section 3.02 hereof.
"Company" shall have the meaning set forth in the first paragraph of
this Warrant.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any similar or successor Federal statute, and the rules and regulations of
the Securities and Exchange Commission (or its successor) thereunder, all as the
same shall be in effect at the time.
"Exercise Price" means $2.50 per share of Common Stock, subject to
adjustment pursuant to Article III hereof.
"Holder" shall have the meaning set forth in the first paragraph of
this Warrant and "Holders" shall include any and all successors and assigns of
the initial Holder with respect to this Warrant.
"Market Price" on any day means the average of the daily Closing Prices
of a share of Common Stock for the 20 consecutive Trading Days ending on the
most recent Trading Day for which a closing price is available and if the Common
Stock is not then publicly traded Market Price shall be determined in good faith
by the Board of Directors of the Company.
<PAGE>
"NASD" means The National Association of Securities Dealers, Inc.
"NASDAQ" means The National Association of Securities Dealers, Inc.
Automated Quotation System.
"Registrable Securities" means 100% of the number of shares of the
Company's Common Stock issuable upon exercise of this Warrant.
"Trading Day" means (a) if the Common Stock is listed or admitted to
trading on a national securities exchange, a day on which the principal national
securities exchange on which the Common Stock is listed or admitted to trading
is open for business or (b) if the Common Stock is not so listed or admitted to
trading, a day on which any New York Stock Exchange member firm is open for
business.
"Warrantholder" means a holder of a Warrant.
"Warrant" and "Warrants" shall mean this warrant and any warrants into
which this warrant may be divided in accordance with Section 2.01.
"Warrant Common Stock" means the Common Stock issued upon the exercise
of the Warrant.
ARTICLE V
REDEMPTION AND CANCELLATION OF WARRANTS
5.01 REDEMPTION OF WARRANTS. The Warrants are not redeemable by the
Company and the Company has no rights to purchase or otherwise acquire the
Warrants.
5.02 CANCELLATION OF WARRANTS. The Company shall cancel any Warrant
surrendered for transfer, exchange or exercise.
ARTICLE VI
REGISTRATION RIGHTS
6.01 REGISTRATION RIGHTS. If the Company files a registration statement
to register any of its securities under the Act (other than a Form S-8, Form S-4
or comparable registration statement) prior to February 9, 1998, the Company
shall:
(a) promptly (but not less than ten days prior to the filing of any
registration statement) give written notice thereof (which shall include a list
of the jurisdictions, if any, in which the Company intends to register or
qualify such securities under the applicable blue sky or other state securities
laws) to each Holder and each holder of Warrant Common Stock. The notice shall
offer to include in such filing the aggregate number of shares of Warrant Common
Stock as each holder may request;
(b) If a holder desires to have shares of Warrant Common Stock
registered under this Section 6.01, such holder shall advise the Company in
writing within five days after the date of receipt of such offer from the
Company, setting forth the amount of such Warrant Common Stock for which
registration is requested. The Company shall
<PAGE>
thereupon include in such filing the number of shares of Warrant Common Stock
for which registration is so requested, subject to the following: in the event
that the proposed registration by the Company is, in whole or in part, an
underwritten public offering of securities of the Company, the Company shall not
be required to include any of the Warrant Common Stock in such underwriting
unless the holder agrees to accept the offering on the same terms and conditions
as the shares of common stock, if any, being sold through underwriters under
such registration; provided, however, that (i) if the managing underwriter
determines and advises the Company in writing that the inclusion of all Warrant
Common Stock proposed to be included by the holders in the underwritten public
offering and other issued and outstanding shares of Common Stock proposed to be
included therein by persons other than the holders and the Company (the "Other
Shares") would jeopardize the success of the Company's offering, then the
Company shall be required to include in the offering (in addition to the number
of shares to be sold by the Company) only that number of shares of Warrant
Common Stock that the managing underwriter believes will not jeopardize the
success of the Company's offering; and (ii) in each case all shares of common
stock owned by the holders which are not included in the underwritten public
offering shall be withheld from the market by the holders thereof for a period,
not to exceed one hundred twenty calendar days, which the managing underwriter
reasonably determines as necessary in order to effect the underwritten public
offering. In the event the Company chooses a registration form which limits the
size of the offering either in terms of the number of shares or dollar amount,
the Company shall not be required to include in the offering (in addition to the
number of shares to be sold by the Company) shares of Warrant Common Stock which
would exceed such limits.
6.02 EXPENSES. The Company shall bear all of its expenses in connection
with such registration, qualification and compliance under this Article VI,
including, without limitation, all registration and filing fees, printing
expenses and fees and disbursements of the Company's counsel and expenses of any
audits incident to or required by any such registration, qualification and
compliance, provided, that the Company shall not, in any event, be required to
bear the cost of any Holder's counsel or commissions and compensation paid, and
concessions and discounts allowed to, underwriters, dealers, brokers or others
performing similar functions in connection with the sale and distribution of the
Warrant Common Stock sold by any holders thereof.
6.03 INDEMNIFICATION. (a) If Registrable Securities are included in a
Registration Statement, the Company will indemnify each Holder and each holder
of Warrant Common Stock against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on (A) any untrue statement
(or alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or (B) any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (C) any violation by the Company of any
rule or regulation promulgated under the Act applicable to the Company and
relating to action or inaction required of the Company in connection with any
registration, qualification or compliance, and will reimburse each Holder and
each holder of Warrant Common Stock for any legal and any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage or
liability arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company by a Holder or a holder of
Warrant Common Stock specifically for use therein.
(b) Each party entitled to indemnification under this Section 6.03
(sometimes referred to as the "Indemnified Party") shall give notice to the
party required to provide indemnification (the "Indemnifying Party") promptly
after such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom, provided that
counsel for the Indemnifying Party, who shall conduct the defense of such claim
or litigation, shall be approved by the Indemnified Party (whose approval shall
not be unreasonably withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that unless such failure
materially and adversely affects the rights or abilities of the Indemnifying
Party to defend such action, the failure of any Indemnified Party to give notice
as provided herein shall not relieve the Indemnifying
<PAGE>
Party of its obligations under this Section 6.03. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
with respect to such claim or litigation. If any such Indemnified Party shall
have reasonably concluded that there may be one or more legal defenses available
to such Indemnified Party which is different from or additional to those
available to the Indemnifying Party, or that such claim or litigation involves
or could have an effect upon matters beyond the scope of the indemnity agreement
provided in this Section 6.03, the Indemnifying Party shall not have the right
to assume the defense of such action on behalf of such Indemnified Party and
such Indemnifying Party shall reimburse such Indemnified Party for that portion
of the fees and expenses of one counsel retained by the Indemnified Party which
is reasonably related to the matters covered by the indemnity agreement provided
in this Section 6.03.
(c) If the indemnification provided for in this Section 6.03 shall for
any reason be unenforceable by an indemnified party, although otherwise
available in accordance with its terms, then each indemnifying party shall, in
lieu of indemnifying such indemnified party, contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages,
liabilities or expenses with respect to which such indemnified party has claimed
indemnification, in such proportion as is appropriate to reflect the relative
fault of the indemnified party on the one hand and the indemnifying party on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The Company and each Holder agree that it would not be
just and equitable if contribution pursuant hereto were to be determined by pro
rata allocation or by any other method of allocation which does not take into
account such equitable considerations. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, liabilities or
expenses referred to herein shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending against any action or claim which is the subject
hereof. No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who
is not guilty of such fraudulent misrepresentation.
6.04 INFORMATION BY THE INVESTOR. Each Holder and each holder of
Warrant Common Stock shall furnish in writing to the Company such information
regarding such person and the distribution proposed by such person as the
Company may request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Article VI.
6.05 NOTIFICATION; CONTINUATION OF EFFECTIVENESS. In the case of a
registration, qualification and compliance pursuant to this Article VI, the
Company will keep all Holders and all holders of Warrant Common Stock promptly
advised in writing as to the initiation of proceedings for such registration,
qualification and compliance and as to the completion thereof, and will advise,
upon request, of the progress of such proceedings. The Company will, at its
expense, keep such registration, qualification and compliance effective, unless
otherwise noted herein, for a period of twelve months, or for such longer period
as may be required by the Act, by such action as may be necessary or appropriate
to permit the sale or distribution of Warrant Common Stock not theretofore sold
or distributed including, without limitation, the filing of post-effective
amendments and supplements to any registration statement or prospectus necessary
to keep the registration current and further qualification under any applicable
blue sky or other state securities law, all as requested by any Holder or holder
of Warrant Common Stock with respect to which such registration is being
effected.
6.06 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company
to register securities granted by the Company under this Article VI may be
assigned by the Holder to a transferee or assignee of all or less than all the
Registrable Securities, provided that such transfer may otherwise be effected in
accordance with applicable securities laws and that the Company is given written
notice, as provided in Article VI.
<PAGE>
6.07 PROSPECTUSES, ETC. The Company will, at its expense, furnish to
each Holder or holder of Warrant Common Stock with respect to which registration
has been effected, such number of prospectuses, offering circulars and other
documents incident to such registration and related qualification or compliance
as such holder from time to time may reasonably request.
6.08 LISTING ON SECURITIES EXCHANGES, ETC. The Company will, at its
expense, list on each national securities exchange, or NASDAQ, on which Common
Stock is at the time listed, upon official notice of issuance upon the exercise
of the Warrant, and maintain such listing of, all shares of Common Stock from
time to time issuable upon the exercise of the Warrant, and when and if required
by the Exchange Act will register thereunder all shares of Common Stock from
time to time so issuable.
6.09 UNDERWRITTEN OFFERINGS. In the event any registration under this
Article VI is underwritten and the managing underwriter determines that the
inclusion of all Registrable Securities that are to be included would materially
interfere with the successful completion thereof in the reasonable judgment of
such managing underwriter, then the number of Registrable Securities to be
included may be reduced at the discretion of such managing underwriter.
ARTICLE VII
MISCELLANEOUS
7.01 NOTICES. All notices, requests and other communications provided
for herein shall be in writing, and shall be deemed to have been made or given
when delivered or mailed, first class, postage prepaid, or sent by telex or
other telegraphic communications equipment. Such notices and communications
shall be addressed:
(a) if to the Company, to
425 Madison Avenue, Suite 605
New York, New York 10017
Attention: President; or
(b) if to the Holder, to its address as shown on the
registry books maintained pursuant to Section 2.01;
or in any of the foregoing cases at such other
address as such Person may hereafter specify for such
purpose by notice to the other Persons referred to
above.
7.02 WAIVERS; AMENDMENTS. No failure or delay of the Holder in
exercising any right, power or privilege, hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof, or any abandonment or
discontinuance of steps to enforce such a right, power or privilege, preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies of the Holder are cumulative and not
exclusive of any rights or remedies which it would otherwise have. The
provisions of this Warrant may be amended, modified or waived if, but only if,
such amendment, modification or waiver is in writing and is signed by the
Company and a majority of the Holders; provided that no amendment, modification
or waiver may change the exercise price of (including without limitation any
adjustments or any provisions with respect to adjustments, the expiration of or
the manner of exercising the Warrants) without the consent in writing of all of
the Holders.
<PAGE>
7.03 GOVERNING LAW. This Warrant shall be construed in accordance with
and governed by the laws of the State of New York.
7.05 COVENANTS TO BIND SUCCESSOR AND ASSIGNS. All the covenants,
stipulations, promises and agreements in this Warrant contained by or on behalf
of the Company shall bind its successors and assigns, whether or not so
expressed.
7.06 SEVERABILITY. In case any one or more of the provisions contained
in this Warrant shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions contained
herein and therein shall not in any way be affected or impaired in such
jurisdiction and shall not invalidate or render illegal or unenforceable such
provision in any other jurisdiction.
7.07 HEADINGS. The headings used herein are for convenience of
reference only and shall not be deemed to be a part of this Warrant.
7.08 NO RIGHTS AS STOCKHOLDER. This Warrant shall not entitle the
Holder to any rights as a stockholder of the Company.
7.09 PRONOUNS. The pronouns "it" and "its" herein shall be deemed to
mean "he" or "his", as the context requires.
<PAGE>
IN WITNESS WHEREOF, The Great American BackRub Store, Inc. has caused
this Warrant to be executed in its corporate name by one of its officers
thereunto duly authorized, attested by its Secretary or an Assistant Secretary,
all as of the day and year first above written.
THE GREAT AMERICAN BACKRUB STORE, INC.
By:/s/ William Zanker
-------------------------
William Zanker, President
Attest:
/s/ Keith Dee
- ----------------
Keith Dee
Secretary
THE GREAT AMERICAN BACKRUB STORE, INC.
425 MADISON AVENUE, SUITE 605
NEW YORK, NEW YORK 10017
October 18, 1995
Spectrum Realty Capital
110 East 59th Street, 6th Floor
New York, New York 10022
On October 18, 1995, in connection with your services as a consultant
to The Great American BackRub Store, Inc. (the "Company") the Board of Directors
granted you an option (the "Option") to purchase Nine Hundred and Fifty-Three
(953) shares (the "Shares") of the Company's Common Stock, $.001 par value per
share, at a price of $2.625 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 October 17,
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
<PAGE>
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, 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:
SPECTRUM REALTY CAPITAL
By: /s/ Louis Wachtel
- -------------------------
<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 October 18, 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,
--------------------------
March 9, 1995
A. Clinton Allen III
710 South Street
Needham, Mass. 02192
Dear Mr. Allen:
This will confirm that in connection with your services as a consultant
to The Great American BackRub Store, Inc. (the "Company") and pursuant to that
certain Consulting Agreement between you and the Company dated the date hereof
(the "Consulting Agreement"), effective March 9, 1995 the Company granted to you
an option (the "Option") to purchase one hundred thousand(100,000) shares (the
"Shares") of its authorized but unissued common stock, par value $.001 ("Common
Stock"), at a purchase price equal to $5.00 per share.
The Option may be exercised at any time prior to March 8, 2005.
The Option hereby granted to you is not transferable in whole or in
part.
Exercise of the Option may be effected by delivering to the Company, at
its principal offices, a notice of exercise in the form annexed hereto as
Exhibit A, together with payment of the purchase price. The purchase price is to
be paid by certified or cashier's check payable to the Company in an amount
equal to the number of Shares you are purchasing multiplied by the purchase
price per Share set forth herein, 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. Neither the Option granted to you
hereunder nor the Shares issuable upon exercise of the Option have been
registered under the Securities Act of 1933, as amended (the "Act"), and are not
being acquired by you with a view towards distribution for resale and may not be
mortgaged, pledged, hypothecated or otherwise transferred without an effective
registration statement for such Shares under the Act or an opinion of counsel
for the Company that registration is not required under the Act. Any of the
Shares issued upon the exercise of the Option (unless registered under the Act
by the Company) shall bear the following legend:
The shares represented by this certificate have not
been registered under the Securities Act of 1933,
as amended. These shares have been acquired for
investment and not with a view to distribution or
resale and may not be sold or transferred in the
absence of an effective registration statement for
such shares under the Securities Act of 1933 or an
opinion of counsel for the Company that
registration is not required under such Act.
<PAGE>
In the event that the Company shall at any time prior to the expiration
of this 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 this Option, the
purchase price of the Shares and the number of shares of Common Stock 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 this Option prior to the happening of any of the foregoing events.
This Option does not confer upon you any right whatsoever as a
stockholder of the Company. Upon the exercise of this Option, the subscription
form attached hereto must be duly executed and the accompanying instructions for
registration of the stock filled in.
This Option shall be binding upon any successors or assigns of the
Company.
If the foregoing correctly sets forth our understanding, please
indicate your acceptance by signing this letter in the space provided below.
Very truly yours,
THE GREAT AMERICAN BACKRUB STORE, INC.
By: /s/ William Zanker
-------------------
Name: William Zanker
Title: Chairman of the Board and
President
AGREED AND ACCEPTED AS OF
THE DATE FIRST WRITTEN ABOVE:
/s/ A. Clinton Allen III
- -------------------------
A. Clinton Allen III
<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 $5.00 per Share (prior to any adjustments as
provided in the Stock Option Letter Agreement between us dated March 9, 1995),
pursuant to the provisions of the option granted to me on March 9, 1995,
pursuant to the Stock Option Letter Agreement. 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.
I represent and warrant that I am acquiring the said shares for my own
account for investment purposes only; that I have no present intention of
selling or otherwise disposing of such shares or any part thereof; that I will
not transfer shares in violation of the securities laws of the United States;
that I am familiar with the business operations, management and financial
condition and affairs of the Company; that I have not relied upon any
representation of the Company with respect thereto; and that I have the personal
financial means to comply with all of said representations. I further confirm
that I have been advised that said shares have [not] been registered under the
Securities Act of 1933, as amended, and that I have consulted with and been
advised by counsel as to the restrictions on resale to which said shares will
thereby be subject.
The following information is supplied for use in issuing and
registering the Shares purchased hereby:
Number of Certificates
and Denominations ___________________
Name ___________________
Address ___________________
<PAGE>
___________________
Social Security Number ___________________
Dated: _______________, ____
Very truly yours,
--------------------------
May 3, 1996
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: THE GREAT AMERICAN BACKRUB STORE, INC.
Gentlemen:
We have acted as counsel to The Great American BackRub Store, Inc. (the
"Company") in connection with its filing of a registration statement on Form S-3
(the "Registration Statement") covering 740,719 shares (the "Shares") of Common
Stock, $.001 par value, all as more particularly described in the Registration
Statement.
In our capacity as counsel to the Company, we have examined the
Company's Certificate of Incorporation and By-Laws, as amended to date, and such
other documents as we have considered appropriate for purposes of this opinion.
With respect to factual matters, we have relied upon statements and
certificates of officers of the Company. We have also reviewed such other
matters of law and examined and relied upon such other documents, records and
certificates as we have deemed relevant hereto. In all such examinations we have
assumed conformity with the original documents of all documents submitted to us
as conformed or photostatic copies, the authenticity of all documents submitted
to us as originals and the genuineness of all signatures on all documents
submitted to us.
On the basis of the foregoing, we are of the opinion that the Shares
have been validly authorized and are, or when issued and paid for will be
legally
<PAGE>
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 made to us under the caption "Legal
Matters" in the prospectus constituting part of the Registration Statement.
Very truly yours,
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-3 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
