<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
THE GREAT AMERICAN BACKRUB STORE, INC.
- --------------------------------------------------------------------------------
(Name of Issuer)
COMMON STOCK, PAR VALUE $0.001 PER SHARE
- --------------------------------------------------------------------------------
(Title of Class of Securities)
38982 E 20 0
- --------------------------------------------------------------------------------
(CUSIP Number)
DAVID COIA, PRESIDENT
ASCOT INTERNATIONAL CORP.
4707 140TH AVENUE NO., SUITE 312
CLEARWATER, FL 34622
(813) 532-4818
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
OCTOBER 20, 1997
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box [ ].
Check the following box if a fee is being paid with the statement [X].
(A fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent of
the class of securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of five percent or less of
such class.) (See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom copies
are to be sent.
(Page 1 of __ Pages)
Exhibit Index located on Page __
<PAGE>
SCHEDULE 13D
CUSIP NO. 3892 E 20 0 PAGE 2 OF PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Ascot International Corp.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
(a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS (SEE INSTRUCTIONS)
OO
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
11,000,000
SHARES -------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 0
------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
11,000,000
WITH ------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11,000,000
- --------------------------------------------------------------------------------
<PAGE>
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES
(SEE INSTRUCTIONS) [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
80.3% as of October 20, 1997
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
CO
- --------------------------------------------------------------------------------
STATEMENT ON SCHEDULE 13D
Item 1. Security and Issuer.
This Schedule 13D relates to the Common Stock, par value $0.001 per
share (the "GAB Common Stock"), of The Great American BackRub Store, Inc., a
New York corporation ("GAB"). The principal executive offices of GAB are
located at 53 West 36th Street, Room 1202, New York, New York 10018.
Item 2. Identity and Background.
This statement is being filed by Ascot International Corp.
("Ascot")Ascot is a corporation organized under the laws of the State of
Delaware and its business address is 4707 140th Avenue No., Suite 312,
Clearwater, Florida 34622. It is engaged in owning and developing real estate
properties, including through a subsidiary, Caribsun Corp., a Delaware
corporation ("Caribsun")which was the subject of the Exchange Agreement
described in Item 3 below. Neither Ascot nor any officer, director or
principal stockholder of Ascot has, during the last five years, been a party
to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, Federal or State securities laws or
finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
Ascot acquired an aggregate of 11,000,000 shares of GAB Common Stock
(the "Exchange Shares") in exchange (the "Exchange") for its equity interests
in Caribsun. The Exchange took place pursuant to the terms of that certain
Agreement and Plan of Merger and Exchange dated as of September 30, 1997,
between GAB and Ascot, as stockholder of Caribsun, a copy of which is attached
hereto as Exhibit A (the "Exchange Agreement") which was amended by agreement
dated October 16, 1997 (Exhibit B) and incorporated herein by reference. The
Exchange Agreement requires GAB to issue an additional 6,097,419 Exchange
Shares following shareholder approval of a proposal to increase the number of
authorized common shares of GAB. The final number of Exchange Shares may be
reduced to the extent the audited net worth of Caribsun at October 15, 1997 is
less than $4.5 million, the audit of Caribsun balance sheet is not delivered
by Ascot prior to November 15, 1997, or if Ascot does not provide at least
$150,000 of financing to GAB before November 15, 1997. The Exchange Shares
were acquired in a transaction claimed to be exempt from registration pursuant
to Section 4(2) of the Securities Act of 1933, as amended.
<PAGE>
Item 4. Purpose of Transaction.
As described above in Item 3, Ascot acquired the Exchange Shares in
connection with the Exchange for investment purposes. Ascot will continue to
evaluate its investment in GAB on the basis of various factors, including
GAB's business, financial condition, results of operation and prospects,
general economic and industry conditions, the securities markets in general
and those for GAB's securities in particular, as well as its own financial
condition, other investment opportunities and other future developments. Based
upon such evaluation, Ascot will take such actions in the future as it may
deem appropriate in light of the circumstances existing from time to time.
Depending on market and other factors, GAB may determine that it should
dispose some or all of the GAB Common Stock it owns or may acquire additional
shares.
The new board of directors of GAB, appointed pursuant to the Exchange
Agreement, will take office ten days following the mailing of a notice to
shareholders of GAB in accordance with Section 14(f) of the Securities
Exchange Act of 1934 will be as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
David S. Coia 42 Chairman of the Board, Chief Executive Officer
David Coia 65 President, Chief Operating Officer
David L. West 39 Chief Financial Officer, Treasurer, Secretary
and Director
Kevin P. Stone 39 Director
Waylon E. McMullen 51 Director
</TABLE>
David S. Coia is the son of David Coia and is the founder, principal
shareholder and chief executive officer of the Barclay Group. The Barclay
Group is a private real estate development firm which specializes in the
development of retail properties. It engages in all phases of the acquisition
and development of real estate properties and is currently developing projects
valued at $75 million, having experienced an annual growth rate of 20% during
the last 18 months. Representative clients include Walgreens, Home Depot and
Publix Supermarkets. Mr. Coia's business address is 1123 Overcash Drive,
Dunedin, Florida 34698.
David Coia has served as Director, President and Chief Executive
Officer of Ascot since March 1995. Mr. Coia has served as a consultant to the
Barclay Group since February 1988. Mr. Coia founded, and was the President of
Counsel Food Services, Inc., a Florida pizza franchise company in Clearwater,
Florida from 1988 to 1991. From 1975 to 1988 Mr. Coia served in various top
managerial positions, including Vice President of Development, and General
Manager of Operations for the Sheraton Hotels and Holiday Inn. In such
capacity, Mr. Coia was responsible for site selection, development and
expansion of various hotel sites and operations. Mr. Coia's business address
is 4707 140th Avenue N.E., Suite 312, Clearwater, Florida 33762.
David L. West has been the Chief Financial Officer of Ascot since
January 1995. From July 1993 through December 1994 Mr. West was a Manager in
the accounting firm of Lewis, Birch & Ricardo, P.A. Mr. West served as
Controller and Chief Financial Officer of Bently Pharmaceuticals, Inc. from
October 1991 through June 1993. From March 1984 through September 1991 Mr.
West served in the audit practice of KPMG Peat Marwick, LLP. Mr. West's
business address is 4707 140th Avenue N.E., Suite 312, Clearwater, Florida
33762.
Kevin P. Stone has been the President of Underwriting at Commonwealth
International Group, Ltd. since February 1996. Mr. Stone was the General
Manager/Special Risks Manager for Metropole Insurance Brokers, Toronto, from
1993 through 1996. Mr. Stone was the International Manager of South Western
<PAGE>
Insurance Group from 1991 through 1993. Mr. Stone's business address is 338
Soudan Avenue, Toronto, Ontario, Canada.
Waylon E. McMullen is a licensed and practicing attorney in Dallas,
Texas and has been since 1971. In 1991 Mr. McMullen founded Waylon E.
McMullen, P.C., a law firm, and currently serves as its President. From 1975
to 1991 Mr. McMullen served as President of Akin & McMullen, P.C., a law firm
in Dallas, Texas. Mr. McMullen served as a Director for Pizza Inn, a publicly
traded corporation traded on the American Stock Exchange from 1975 to 1987.
Mr. McMullen is presently serving as a Director for the Furia Organization and
Golden Interstate Medical Management, Inc. Mr. McMullen's business address is
P.O. Box 795517, Dallas, Texas.
At the time the new board takes office, it plans to consider changes
to GAB's business and corporate structure including but not limited to:
combining the number of outstanding shares of capital stock; increasing the
number of authorized but unissued shares of common stock, changing GAB's
corporate domicile to Delaware; developing the properties owned by Caribsun in
addition to the business of GAB prior to the Exchange Agreement; and raising
capital in connection with the forgoing.
As described above in Item 3, the Exchange Shares were acquired by
Ascot pursuant to the exemption set forth in Section 4(2) under the Securities
Act, the Exchange Shares may not be sold, pledged, conveyed or otherwise
transferred without registration or qualification under the Securities Act or
applicable state securities or blue sky laws.
To the extent permitted by applicable law, pursuant to the Exchange
Agreement, GAB has agreed to appoint nominees of Ascot to fill vacancies on
the Board of Directors of GAB.
Except as set forth in this Item 4, Ascot does not have any plan or
proposal with respect to any of the actions specified in clauses (a) through
(j) of Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer.
(a) The following table sets forth information with respect
to GAB Common Stock beneficially owned by Ascot as of the close of business on
October 20, 1997. Based on representations made by GAB's corporate counsel,
the percentage interest is computed on the basis of 13,700,716 shares of GAB
Common Stock outstanding as of October 20, 1997.
Name Number of Shares Approximate Percentage of
- ---- ---------------- Outstanding Shares (1)
-------------------------
Ascot International Corp. 11,000,000 80.3%
- -----------------------
Does not include an additional 6,097,419 GAB shares issuable to Ascot
following shareholder approval of a proposed amendment to increase the number
of authorized shares.
(b) Ascot has the sole power to vote or direct the vote and
to dispose or to direct the disposition of the Exchange Shares.
(c) Ascot has not acquired any shares of GAB Common stock
within the past 60 days, other than the Exchange Shares acquired on October
20, 1997, as described above in Item 3.
(d) No other person has the right to receive or the power to
direct receipt of dividends from, or the proceeds from the sale of, any of the
Exchange Shares.
<PAGE>
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
Except as set forth herein, there are no contracts,
arrangements, understandings or relationships (legal or otherwise) between GAB
and any other person with respect to any securities of GAB, including, but not
limited to, transfer or voting of any of such securities, finder's fees, joint
ventures, loan or option arrangements, puts or calls, guarantees of profits or
loss, or the giving or withholding of proxies.
As described above in Item 4, GAB has agreed to appoint
persons selected by Ascot to fill vacancies on the Board of Directors of GAB.
Item 7. Material to be Filed as Exhibits.
EXHIBIT DESCRIPTION OF EXHIBIT
------- ----------------------
Exhibit A Securities Exchange Agreement dated as of September 30, 1997
between The Great American BackRub Store, Inc. and Ascot
International Corp.
Exhibit B Amendment to Securities Exchange Agreement dated as of
October 16, 1997.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: October 29, 1997
Ascot International Corp.
/s/ DAVID COIA
----------------------------------------
David Coia, President
<PAGE>
Exhibit A
================================================================================
SECURITIES EXCHANGE AGREEMENT
Dated as of September 30, 1997
By and between
THE GREAT AMERICAN BACKRUB STORE, INC.
and
ASCOT INTERNATIONAL CORP.
the sole stockholder
of
CARIBSUN CORP.
================================================================================
<PAGE>
TABLE OF CONTENTS
RECITALS
ARTICLE 1. REPRESENTATIONS OF ASCOT AND CARIBSUN
Section 1.1 Ownership of Stock
Section 1.2 Authority to Execute and Perform Agreement;
No Breach
Section 1.3 Existence and Good Standing
Section 1.4 Capital Stock
Section 1.5 Financial Statements and No Material Changes
Section 1.6 Books and Records
Section 1.7 Title to Properties; Encumbrances
Section 1.8 Leases
Section 1.9 Material Contracts
Section 1.10 Restrictive Documents
Section 1.11 Litigation
Section 1.12 Taxes
Section 1.13 Liabilities
Section 1.14 Insurance
Section 1.15 Intellectual Properties
Section 1.16 Compliance with Laws
Section 1.17 Employment Relations
Section 1.18 Employee Benefit Plans
Section 1.19 Environmental Laws and Regulations
Section 1.20 Interests in Clients, Suppliers, Etc.
Section 1.21 Intercompany Transactions
Section 1.22 Bank Accounts, Powers of Attorney and
Compensation of Employees
Section 1.23 No Changes since August Balance Sheet Date
Section 1.24 Securities Matters
Section 1.25 Certain Business Practices
Section 1.26 Subsidiaries
Section 1.27 Disclosure
Section 1.28 Broker's or Finder's Fees
Section 1.29 Copies of Documents
1
<PAGE>
ARTICLE 2. REPRESENTATIONS OF THE PURCHASER
Section 2.1 Organization and Corporate Power
Section 2.2 Authorization
Section 2.3 Capitalization
Section 2.4 Financial Statements
Section 2.5 Subsidiaries
Section 2.6 Absence of Undisclosed Liabilities
Section 2.7 No Pending Material Litigation or Proceedings
Section 2.8 Disclosure
Section 2.9 Tax Returns and Payments
Section 2.10 Compliance with Law and Government Regulations
Section 2.11 Broker's or Finder's Fees
ARTICLE 3. SALE OF SHARES AND WARRANTS
Section 3.1 Sale of Shares
Section 3.2 Price for Caribsun Shares
Section 3.3 Closing
ARTICLE 4. CONDITIONS TO PURCHASER'S OBLIGATIONS
Section 4.1 Opinion of Caribsun's Counsel
Section 4.2 Good Standing and Other Certificates
Section 4.3 Certain Agreements
Section 4.4 No Material Adverse Change
Section 4.5 Truth of Representations and Warranties
Section 4.6 Performance of Agreements
Section 4.7 No Litigation Threatened
Section 4.8 Chief Financial Officer's Letter
Section 4.9 Consulting Agreement
Section 4.10 Governmental Approvals
Section 4.11 Proceedings
Section 4.12 Appraisal and Balance Sheet
Section 4.13 Receipt of Evidence of Title
Section 4.14 Issuance of Stock Underlying Options
Section 4.15 Issuance of Stock as Replacement for Stock
Pledged as Collateral
Section 4.16 Closing
Section 4.17 Indemnification Agreements
Section 4.18 Agreement with Terrance Murray
2
<PAGE>
ARTICLE 5. CONDITIONS TO THE OBLIGATIONS OF ASCOT AND CARIBSUN
Section 5.1 Opinion of the Purchaser's Counsel
Section 5.2 Good Standing Certificates
Section 5.3 Truth of Representations and Warranties
Section 5.4 Governmental Approvals
Section 5.5 Performance of Agreements
Section 5.6 Proceedings
Section 5.7 Consulting Agreement
Section 5.8 Board Representation
Section 5.9 Bridge Loans
Section 5.10 Closing
Section 5.11 Agreement with Terrance Murray
ARTICLE 5A. INTERIM MANAGEMENT
Section 5A.1 Appointment of Interim Operating Officer
Section 5A.2 Operation of Purchaser and Caribsun in the
Ordinary Course
Section 5A.3 Termination
Section 5A.4 Survival
ARTICLE 6. COVENANTS OF ASCOT
Section 6.1 Non-Competition; Non-Interference
Section 6.2 Construction
Section 6.3 Enforcement
Section 6.4 Continuance of Certain Insurance Policies
Section 6.5 Certain Actions
Section 6.6 Certain Registrations
Section 6.7 Certain Personal Guarantees
ARTICLE 7. SURVIVAL OF REPRESENTATIONS; INDEMNITY; SET-OFF
Section 7.1 Survival of Covenants and Agreements
Section 7.2 Indemnification
Section 7.3 Conditions of Indemnification
ARTICLE 8. MISCELLANEOUS
Section 8.1 Knowledge of Ascot, Caribsun and Coconut Hall
Section 8.2 Expenses
Section 8.3 Governing Law
Section 8.4 Jurisdiction
3
<PAGE>
ARTICLE 8. MISCELLANEOUS (continued)
Section 8.5 Captions
Section 8.6 Publicity
Section 8.7 Notices
Section 8.8 Parties in Interest
Section 8.9 Counterparts
Section 8.10 Entire Agreement
Section 8.11 Amendments
Section 8.12 Severability
Section 8.13 Third Party Beneficiaries
Section 8.14 Cooperation After Closing
4
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS [Initial Reference]
<S> <C> <C>
EXHIBIT 1 Opinion of Ascot, Caribsun and Coconut Hall's counsel [ss.4.1]
EXHIBIT 2 Letter of Caribsun's Chief Financial Officer [ss.4.8]
EXHIBIT 3 William Zanker Consulting Agreement [ss.4.9]
EXHIBIT 4 Indemnification Agreement [ss.4.17]
EXHIBIT 5 Opinion of Purchaser's counsel [ss.5.1]
SCHEDULES
Schedule 1.1 Ownership of Stock [ss.1.1]
Schedule 1.2 Authority to Execute and Perform Agreements [ss.1.2]
Schedule 1.4 Capital Stock [ss.1.4]
Schedule 1.5 Financial Statements [ss.1.5]
Schedule 1.6 Books and Records [ss.1.6]
Schedule 1.7 Title to Properties; Encumbrances [ss.1.7]
a) Liens
b) Government permits, approvals, and consents
Schedule 1.8 Leases [ss.1.8]
Schedule 1.9 Material Contracts [ss.1.9]
Schedule 1.10 Restrictive Documents [ss.1.10]
Schedule 1.11 Litigation [ss.1.11]
Schedule 1.12 Taxes [ss.1.12]
Schedule 1.13 Liabilities [ss.1.13]
Schedule 1.14 Insurance [ss.1.14]
Schedule 1.15 Intellectual Properties [ss.1.15]
Schedule 1.16 Compliance Laws [ss.1.16]
Schedule 1.18 Employee Benefit Plans [ss.1.18]
Schedule 1.20 Interests in Clients, Suppliers, Etc. [ss.1.20]
Schedule 1.21 Intercompany Transactions [ss.1.21]
Schedule 1.22 Bank Accounts, Powers of Attorney;
Compensation [ss.1.22]
Schedule 2.3 Capitalization [ss.2.3]
Schedule 2.4 Purchaser's Interim Financial Statements [ss.2.4]
Schedule 2.5 Subsidiaries of Purchaser [ss.2.5]
Schedule 2.6 Changes [ss.2.6]
Schedule 2.7 Litigation [ss.2.7]
Schedule 3.2 Calculation of Initial Purchaser Shares [ss.3.2]
Schedule 5A.2 New Hires [ss.5A.2]
</TABLE>
5
<PAGE>
SECURITIES EXCHANGE AGREEMENT
SECURITIES EXCHANGE AGREEMENT ("this Agreement") dated as of September
30, 1997 by and between THE GREAT AMERICAN BACKRUB STORE, INC., a New York
corporation ("Purchaser"), and ASCOT INTERNATIONAL CORP., a Delaware corporation
(the "Ascot"), being the sole Stockholder of CARIBSUN CORP., a Delaware
corporation (the "Caribsun").
W I T N E S S E T H:
WHEREAS, Ascot owns 100 shares (the "Caribsun Shares") of common stock,
no par value of Caribsun (the "Caribsun Common Stock"), being all of the
outstanding shares of Caribsun's capital stock; and
WHEREAS, Caribsun owns 10,000 shares of Coconut Hall Resort Limited, a
copy limited by shares organized pursuant to the Companies Act of Antigua and
Barbuda ("Coconut Hall"), being all of the outstanding shares of Coconut Hall's
capital stock;
WHEREAS, Ascot desires to sell and Purchaser desires to purchase the
Carbisun Shares pursuant to this Agreement in exchange for shares of the common
stock $0.001 par value ("Purchaser Stock") of the Purchaser ("Purchaser
Shares"); and
WHEREAS, it is the intention of the parties hereto that, upon
consummation of the purchase and sale of the Caribsun Stock pursuant to this
Agreement, Purchaser shall own all of the outstanding shares of capital stock of
Caribsun;
NOW, THEREFORE, IT IS AGREED:
ARTICLE 1
REPRESENTATIONS OF ASCOT AND CARIBSUN
Ascot and Caribsun, jointly and severally, represent, warrant and agree
as follows:
1.1 Ownership of Stock. Ascot is the lawful owner of the Caribsun
Shares and Caribsun owns all of the outstanding shares of Coconut Hall's capital
stock, free and clear of all preemptive or similar rights, liens, encumbrances,
restrictions and claims of every kind, except those listed on Schedule 1.1
hereto and the delivery to Purchaser of the Caribsun Shares pursuant to the
provisions of this Agreement will transfer to Purchaser valid title thereto,
free and clear of all liens, encumbrances, restrictions and claims of every
kind.
1
<PAGE>
1.2 Authority to Execute and Perform Agreement; No Breach. Ascot and
Caribsun each have the full legal right and power and all authority and approval
required to enter into, execute and deliver this Agreement, and to sell, assign,
transfer and convey the Caribsun Shares and to perform fully their respective
obligations hereunder. This Agreement has been duly executed and delivered by
Ascot and Caribsun and, assuming due execution and delivery by, and
enforceability against, Purchaser, constitutes the valid and binding obligation
of Ascot and Caribsun enforceable in accordance with its terms, subject to the
qualifications that enforcement of the rights and remedies created hereby is
subject to (i) bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting the rights and remedies of creditors, and (ii)
general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law). No approval or consent of, or
filing with, any governmental or regulatory body, and no approval or consent of,
or filing with, any other person is required to be obtained by Ascot or in
connection with the execution and delivery by Ascot of this Agreement and
consummation and performance by them of the transactions contemplated hereby,
other than as set forth on Schedule 1.2. The execution, delivery and performance
of this Agreement by Ascot and the consummation of the transactions contemplated
hereby in accordance with the terms and conditions hereof by Ascot and Caribsun
will not:
(a) violate any provision of the Certificate of Incorporation or
By laws of Ascot;
(b) violate, conflict with or result in the breach of any of the
terms of, or constitute (or with notice or lapse of time or
both would constitute) a default under, any contract, lease,
agreement or other instrument or obligation to which either
Ascot or Caribsun is a party or by or to which any of the
properties and assets of either Ascot or Caribsun may be bound
or subject;
(c) violate any order, judgment, injunction, award or decree of
any court, arbitrator, governmental or regulatory body, by
which either Ascot or Caribsun or the securities, assets,
properties or business of any of them is bound; or
(d) violate any statute, law or regulation.
1.3 Existence and Good Standing.
(a) Each of Caribsun and Ascot is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Delaware. Caribsun has the power to own or lease its
properties and assets and to carry on its business as now
being conducted. Caribsun is duly qualified to do business and
is in good standing in Barbuda and Antigua, which is the only
jurisdiction in which the character or location of the
properties owned or leased by Caribsun or the nature of the
business conducted by Caribsun makes such qualification
necessary.
(b) Coconut Hall is a company limited by shares duly organized,
validly existing and in good standing under the laws of
Barbuda and Antigua. Coconut Hall has the power to own or
lease its properties and assets and to carry on its business
as now being conducted. The business of Coconut Hall does not
require qualifications to do business in any jurisdiction
other than Barbuda and Antigua.
2
<PAGE>
1.4 Capital Stock.
(a) Caribsun has an authorized capitalization consisting of 1,500
shares of Common Stock, of which 100 shares are issued and
outstanding and no shares of Common Stock are held in
Caribsun's treasury. All such outstanding shares have been
duly authorized and validly issued and are fully paid and
nonassessable. Except as set forth as Schedule 1.4 attached
hereto, there are no outstanding options, warrants, rights,
calls, commitments, conversion rights, rights of exchange,
plans or other agreements, commitments or arrangements of any
character providing for the purchase, subscription, issuance
or sale of any shares of the capital stock of Caribsun, other
than the sale of the Caribsun Shares as contemplated by this
Agreement.
(b) Coconut Hall has an authorized capitalization consisting of
10,000 shares $1.00 each, of which 10,000 shares are issued
and outstanding and no shares of Common Stock are held in the
Company's treasury. All such outstanding shares have been duly
authorized and validly issued and are fully paid and
nonassessable. Except as set forth as Schedule 1.4 attached
hereto, there are no outstanding options, warrants, rights,
calls, commitments, conversion rights, rights of exchange,
plans or other agreements, commitments or arrangements of any
character providing for the purchase, subscription, issuance
or sale of any shares of the capital stock of the Company.
1.5 Financial Statements and No Material Changes. Annexed hereto
as Schedule 1.5 are: (i) the unaudited consolidated balance sheet of Caribsun as
of December 31, 1996; and (ii) the unaudited balance sheet of Caribsun at August
31, 1997 (the "August Balance Sheet" and collectively the "Financial
Statements").
The Financial Statements were carefully prepared from the books and
records of Caribsun, and although the Financial Statements are not audited and
do not contain the footnotes which would be required in audited financial
statements, present fairly the financial position, assets and liabilities of
Caribsun and the results of its operations, for the respective periods indicated
and reflect all necessary accruals, all in conformity with generally accepted
accounting principles ("GAAP") applied on a consistent basis. The Financial
Statements contain all adjustments (consisting of only normal recurring
accruals) required to be made by GAAP, subject to normal year-end adjustments.
Since August 31, 1997 (the "August Balance Sheet Date") there has been
(x) no material adverse change in the assets or liabilities, or in the business
or condition, financial or otherwise, or in the results of operations or
prospects, of Caribsun whether as a result of any legislative or
3
<PAGE>
regulatory change, revocation of any license or rights to do business, fire,
explosion, accident, casualty, labor trouble, flood, drought, riot, storm,
condemnation or act of God or other public force or otherwise and (y) no
material adverse change in the assets or liabilities, or in the business or
condition, financial or otherwise, or in the results of operations or prospects,
of Caribsun and to the best knowledge, information and belief of Caribsun and
Ascot, no fact or condition exists or is contemplated or threatened which might
cause such a change in the future.
1.6 Books and Records. The minute books of Caribsun and Coconut
Hall, all the contents of which have been previously made available to the
Purchaser and their representatives, contain accurate records of all meetings
of, and corporate action taken by (including action taken by written consent)
the shareholders and Board of Directors of Caribsun. Except as set forth on
Schedule 1.6 attached hereto, neither Caribsun nor Coconut Hall have any of its
respective records, systems, controls, data or information recorded, stored,
maintained, operated or otherwise wholly or partly dependent upon or held by any
means (including any electronic, mechanical or photographic process, whether
computerized or not) which (including all means of access thereto and therefrom)
are not under the exclusive ownership and direct control of Caribsun or Coconut
Hall, as the case may be.
1.7 Title to Properties; Encumbrances.
(a) Except as set forth on Schedule 1.7 attached hereto, Caribsun
and Coconut Hall each have good, valid and marketable title to
(a) all of their respective properties and assets (real and
personal, tangible and intangible), including, without
limitation, all of the properties and assets reflected in the
balance sheet included as part of the August Financial
Statements, except as indicated in the Schedules hereto; and
(b) all of the properties and assets purchased by Caribsun and
Coconut Hall since the August Balance Sheet Date all of which
purchases as of a date not more than two days prior to the
date of this Agreement, have been set forth on Schedule 1.7
attached hereto; in each case subject to no encumbrance, lien,
charge or other restriction of any kind or character, except
for (i) liens reflected in the balance sheet, included as part
of the August Financial Statements; (ii) liens consisting of
zoning or planning restrictions, easements, permits and other
restrictions or limitations on the use of real property or
irregularities in title thereto which do not materially
detract from the value of, or impair the use of, such property
by Caribsun and Coconut Hall in the operation of its business;
(iii) liens for current taxes, assessments or governmental
charges or levies on property not yet due and delinquent; and
(iv) liens described on Schedule 1.7 attached hereto (liens of
the type described in clause (i), (ii) and (iii) above are
hereinafter sometimes referred to as "Permitted Liens").
(b) The rights, properties and other assets presently owned,
leased or licensed, by Caribsun reflected on the balance sheet
included in the August Financial Statements or acquired since
the August Balance Sheet Date include all rights, properties
and other assets necessary to permit Caribsun to conduct its
business in the same manner as its business has heretofore
been conducted. All such properties and assets owned or leased
by Caribsun are in satisfactory condition and repair, other
than ordinary wear and tear.
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No structure or improvement on the real property leased by
Caribsun, whether now existing or intended to be constructed
pursuant to existing plans and specifications, violates, or if
completed would violate, any applicable zoning or building
regulations or ordinances or similar federal, state or
municipal law.
With respect to the real property and structures and
improvements, whether now existing, under construction or
intended to be constructed pursuant to existing plans and
specifications, Caribsun and Coconut Hall each have all
governmental permits, approvals, consents or similar
authorizations necessary to own or lease, construct and
operate its properties, each of which are listed on Schedule
1.7(b). Such governmental permits, approvals, consents or
similar authorizations will remain in effect or, if due to
expire by its terms, Caribsun and Ascot have no reason to
believe that they will not be renewable in accordance with
their terms.
No violations of any easements or restrictions relating to the
real property exist.
No material structural defects in any of the buildings or
other improvements erected on the leased real property exist.
1.8 Leases. Schedule 1.8 attached hereto, contains an accurate and
complete list and description of the terms of all leases to which either
Caribsun or Coconut Hall is a party (as lessee or lessor). Each lease set forth
on Schedule 1.8 (or required to be set forth on Schedule 1.8) is in full force
and effect; all rents and additional rents due to date on each such lease have
been paid; in each case, the lessee has been in peaceable possession since the
commencement of the original term of such lease and is not in default thereunder
and no waiver, indulgence or postponement of the lessee's obligations thereunder
has been granted by the lessor; and there exists no event of default or event,
occurrence, condition or act (including the consummation of the transactions
contemplated hereby) which, with the giving of notice, the lapse of time or the
happening of any further event or condition, would become a default under such
lease. Neither Caribsun nor Coconut Hall has violated any of the terms or
conditions under any such lease in any material respect, and, to the best
knowledge, information and belief of Ascot and Caribsun, all of the covenants to
be performed by any other party under any such lease have been fully performed.
The property leased by Caribsun or Coconut Hall is in a state of good
maintenance and repair and is adequate and suitable for the purposes for which
it is presently being used.
1.9 Material Contracts. Except as set forth on Schedule 1.9
attached hereto, neither Caribsun nor Coconut Hall has nor is bound by:
(a) any agreement, contract or commitment relating to the
employment of any person by Caribsun or Coconut Hall, or any
bonus, deferred compensation, pension, profit sharing, stock
option, employee stock purchase, retirement or other employee
benefit plan;
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(b) any agreement, indenture or other instrument which contains
restrictions with respect to payment of dividends or any other
distribution in respect of its capital stock;
(c) any loan or advance to, or investment in, any individual,
partnership, joint venture, corporation, trust, unincorporated
organization, government or other entity (each a "Person") or
any agreement, contract or commitment relating to the making
of any such loan, advance or investment;
(d) any guarantee or other contingent liability in respect of any
indebtedness or obligation of any Person (other than the
endorsement of negotiable instruments for collection in the
ordinary course of business);
(e) any management service, consulting or any other similar type
contract;
(f) any agreement, contract or commitment limiting the freedom of
Caribsun or any subsidiary to engage in any line of business
or to compete with any Person;
(g) any agreement, contract or commitment not entered into in the
ordinary course of business which involves $25,000 or more and
is not cancelable without penalty or premium within 30 days;
or
(h) any agreement, contract or commitment which might reasonably
be expected to have a potential adverse impact on the business
or operations of Caribsun; or
(i) any agreement, contract or commitment not reflected in the
Financial Statement under which Caribsun is obligated to make
cash payments of, or deliver products or render services with
a value greater than $10,000 individually or $30,000 in the
aggregate, or receive cash payments of, or receive products or
services with a value greater than $10,000 individually or
$30,000 in the aggregate, and any other agreement, contract or
commitment which is material to the conduct of the business of
Caribsun.
Each contract or agreement set forth on Schedule 1.9 (or not required
to be set forth on Schedule 1.9) is in full force and effect and there exists no
default or event of default or event, occurrence, condition or act (including
the consummation of the transactions contemplated hereby) which, with the giving
of notice, the lapse of time or the happening of any other event or condition,
would become a default or event of default thereunder. Neither Caribsun nor
Coconut Hall has violated any of the terms or conditions of any contract or
agreement set forth on Schedule 1.9 (or not required to be set forth on Schedule
1.9) in any material respect, and, to the best knowledge, information and belief
of Ascot and Caribsun, all of the covenants to be performed by any other party
thereto have been fully performed. Except as set forth on Schedule 1.9, the
consummation of the transactions contemplated hereby does not constitute an
event of default (or an event, which with notice or the lapse of time or both
would constitute a default) under any such contract or agreement.
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1.10 Restrictive Documents. Except as set forth on Schedule 1.10
attached hereto, neither Caribsun, Coconut Hall, nor Stockholder is subject to,
or a party to, any charter, by-law, mortgage, lien, lease, license, permit,
agreement, contract, instrument, law, rule, ordinance, regulation, order,
judgment or decree, or any other restriction of any kind or character, which
could materially adversely affect the business practices, operations or
condition of Caribsun or any of its assets or property ("Caribsun's Property",
which for the purposes of this Agreement includes the assets and property of
Coconut Hall), or which would prevent consummation of the transactions
contemplated by this Agreement, compliance by Ascot with the terms, conditions
and provisions hereof or the continued operation of "Caribsun's Business" (which
for the purpose of this Agreement includes the business of Coconut Hall
including the development and construction of a hotel and casino project
described on Schedule 1.10 hereto) after the date hereof or the Closing Date (as
hereinafter defined) on substantially the same basis as heretofore operated or
which would restrict the ability of Caribsun or Coconut Hall to acquire any
property or conduct business in any area.
1.11 Litigation. Except as set forth on Schedule 1.11 attached hereto,
there is no action, suit, proceeding at law or in equity, arbitration or
administrative or other proceeding by or before (or to the best knowledge,
information and belief of Ascot and Caribsun any investigation by) any
governmental or other instrumentality or agency, pending, or, to the best
knowledge, information and belief of Ascot and Caribsun, threatened, against or
affecting Caribsun or Coconut Hall, or any of their respective properties or
rights, or against Ascot, or any officer, director or employee of Ascot other
than such items which are insignificant and immaterial and which do not
adversely affect (i) the right or ability of Caribsun's Business to carry on
business as now conducted; (ii) the condition, whether financial or otherwise,
or properties of Caribsun; or (iii) the consummation of the transactions
contemplated hereby and neither Caribsun nor Ascot know of any valid basis for
any such action, proceeding or investigation. There are no outstanding orders,
judgments, injunctions, awards or decrees of any court, governmental or
regulatory body or arbitration tribunal by which either Ascot or Caribsun, or
any officer, director or employee of Ascot or Caribsun, or the securities,
assets, properties or business of any of them is bound, other than any such
items which are insignificant and immaterial and which do not and will not
adversely affect (i) the right of Caribsun to carry on its business as now
conducted and as proposed to be conducted by the Purchaser after the
consummation of the transactions contemplated by this Agreement; (ii) the
condition, whether financial or otherwise, or properties of Caribsun; or (iii)
the consummation of the transactions contemplated hereby.
1.12 Taxes. Except as set forth on Schedule 1.12, Caribsun and every
member of the consolidated group of which Caribsun is a part has filed or caused
to be filed, within the times and within the manner prescribed by law, all
federal, state, local and foreign tax returns and tax reports which are required
to be filed by, or with respect to, Caribsun. Such returns and reports
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reflect accurately all liability for taxes of Caribsun for the periods covered
thereby. Except as set forth on Schedule 1.12, all federal, state, local and
foreign income, profits, franchise, employment, sales, use, occupancy, excise
and other taxes and assessments, stock and transfer taxes (including interest
and penalties) payable by, or due from, Caribsun and any member of the
consolidated group of which Caribsun is a part, have been fully paid and fully
provided for in the books and financial statements of Caribsun. No examination
of any tax return of Caribsun or any member of a consolidated group of which
Caribsun is a part, is currently in progress. There are no outstanding
agreements or waivers extending the statutory period of limitation applicable to
any tax return of Caribsun. Schedule 1.12 attached hereto lists all tax sharing
contracts, agreements or arrangements to which Caribsun is a party and all such
contracts, agreements and arrangements have been terminated prior to the Closing
Date with no liability or obligation to Caribsun.
1.13 Liabilities. Except as set forth on Schedule 1.13, Caribsun on a
consolidated basis has no outstanding claims, liabilities or indebtedness,
contingent or otherwise, which are not properly reflected in the Financial
Statements in a manner consistently with past practice, other than liabilities
incurred subsequent to the August Balance Sheet Date in the ordinary course of
business not exceeding $10,000 individually or $30,000 in the aggregate; the
reserves reflected in the Financial Statements are adequate, appropriate and
reasonable. Caribsun is not in default in respect of the terms or conditions of
any indebtedness.
1.14 Insurance. Set forth on Schedule 1.14, attached hereto, is a brief
description of insurance policies (specifying the insurer, the policy number or
coverage note number with respect to binders and the amount of any deductible,
describing the pending claims if such claims exceed the applicable policy
limits, setting forth the aggregate amount paid out by the insurer under each
policy from December 31, 1996, through the date hereof and the aggregate limit,
if any, of the insurer's liability thereunder) which Caribsun or Coconut Hall
maintain with respect to its business, properties or employees. Such policies
are valid, binding and enforceable in accordance with their terms and are in
full force and effect and are free from any right of termination on the part of
the insurance carriers. Such policies, with respect to their amounts and types
of coverage, are adequate to insure fully against risks to which Caribsun,
Coconut Hall and their respective property and assets are normally exposed in
the operation of their businesses. Neither Caribsun nor Coconut Hall is in
default with respect to any material provision in any such policy or binder and
has not failed to give any notice or present any claim under any such policy or
binder in due and timely fashion, and neither Caribsun nor Coconut Hall has
received any notice of cancellation or non-renewal with respect to any such
policy or binder. Except for claims set forth on Schedule 1.14, there are no
outstanding unpaid claims under any such policy or binder which have gone unpaid
for more than 45 days or as to which the carrier has disclaimed liability.
1.15 Intellectual Properties. The operation of the business of Caribsun
or Coconut Hall requires no rights under Intellectual Property (as hereinafter
defined) other than rights under Intellectual Property listed on Schedule 1.15
attached hereto, and rights granted to Caribsun or Coconut Hall pursuant to
agreements listed on Schedule 1.15. Within the three year period
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immediately prior to the date of this Agreement, neither the business of
Caribsun or Coconut Hall made use of Intellectual Property rights other than
rights under Intellectual Property listed on Schedule 1.15 and rights granted to
Caribsun or Coconut Hall pursuant to agreements listed on Schedule 1.15. Except
as otherwise set forth on Schedule 1.15, either Caribsun or Coconut Hall owns
all right, title and interest in the Intellectual Property listed on Schedule
1.15 including, without limitation, exclusive rights to use and license the
same. Each item of Intellectual Property listed on Schedule 1.15 has been duly
registered with, filed in, or issued by the appropriate domestic or foreign
governmental agency, to the extent required, and each such registration, filing
and issuance remains in full force and effect. Except as set forth on Schedule
1.15, no claim adverse to the interests of Caribsun or Coconut Hall in the
Intellectual Property or agreements listed on Schedule 1.15 has been made in
litigation. To the best knowledge, information and belief of Caribsun and Ascot,
no such claim has been threatened or asserted, no basis exists for any such
claim, and no Person has infringed or otherwise violated the rights of Caribsun
or Coconut Hall in any of the Intellectual Property or agreements listed on
Schedule 1.15. Except as set forth on Schedule 1.15, no litigation is pending
wherein Caribsun or Coconut Hall is accused of infringing or otherwise violating
the Intellectual Property right of another, or of breaching a contract conveying
rights under Intellectual Property. To the best knowledge, information and
belief of Caribsun and Ascot, no such claim has been asserted or threatened
against Caribsun, nor are there any facts that would give rise to such a claim.
For purposes of this Section 1.15, "Intellectual Property" means domestic and
foreign patents, patent applications, registered and unregistered trade marks
and service marks, trade names, registered and unregistered copyrights, computer
programs, data bases, trade secrets and proprietary information. Stockholder
will assign any Intellectual Property owned by it and used in Caribsun's
Business to the Purchaser.
1.16 Compliance with Laws. Neither Caribsun, Coconut Hall nor Ascot,
nor to the knowledge of Caribsun or Ascot, any officer, director or employee of
Caribsun, Coconut Hall or Ascot is in violation of any applicable order,
judgment, injunction, award or decree, related to, arising out of or affecting
the business or operations of Caribsun, Coconut Hall or their respective
properties or assets. Neither Caribsun, Coconut Hall nor Ascot, nor to the
knowledge of Caribsun or Ascot, any officer, director or employee of either
Caribsun, Coconut Hall or Ascot is in violation of any federal, state, local or
foreign law, ordinance, regulation or any other requirement of any governmental
or regulatory body, court or arbitrator (including, without limitation, laws
relating to the environment and OSHA and the Americans with Disabilities Act)
other than insignificant or immaterial violations which do not and will not
adversely affect (i) Caribsun's Business or Property; (ii) the business proposed
to be conducted by the Purchaser after the consummation of the transactions
contemplated by this Agreement; or (iii) the consummation of the transactions
contemplated by this Agreement. Each permit, license, order or approval of any
governmental or regulatory body or other applicable authority ("Permits") that
is material to the conduct of Caribsun's Business is in full force and effect,
no violations are or have been recorded in respect of any permit and no
proceeding is pending or, to the knowledge of Caribsun of Ascot, threatened, to
revoke or limit any Permit, which revocation or limitation could have an adverse
effect on Caribsun's Business or Property or the business to be conducted by the
Purchaser after the consummation of the transactions contemplated by this
Agreement. Schedule 1.16 contains a list of all Permits. Except as set forth on
Schedule 1.16, no approval or consent of any person is needed in order that the
Permits continue in full force and effect following the consummation of the
transactions contemplated by this Agreement.
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1.17 Employment Relations.
(a) Caribsun and Coconut Hall are each in compliance with all
Federal, state or other applicable laws, domestic or foreign,
respecting employment and employment practices, terms and
conditions of employment and wages and hours, and has not and
is not engaged in any unfair labor practice;
(b) no unfair labor practice complaint against Caribsun or Coconut
Hall is currently pending before the National Labor Relations
Board nor has such a complaint been pending in the last two
years;
(c) there is no labor strike, dispute, slowdown or stoppage
actually pending or threatened against or involving Caribsun
or Coconut Hall nor has one existed during the last two years;
(d) no representation question exists respecting the employees of
Caribsun or Coconut Hall;
(e) no grievance which might have an adverse effect upon Caribsun
or Coconut Hall or the conduct of Caribsun's Business exists,
no arbitration proceeding arising out of or under any
collective bargaining agreement is pending and no claim
therefor has been asserted;
(f) Neither Caribsun nor Coconut Hall is a party to, nor does
there otherwise exist, any union, collective bargaining
agreement or similar agreement with respect to the employees
of Caribsun or Coconut Hall and no collective bargaining
agreement or similar agreement is currently being negotiated
by Caribsun or Coconut Hall; and
(g) Neither Caribsun nor Coconut Hall has experienced any labor
difficulty during the last two years. There has not been, and
to the best knowledge, information and belief of Caribsun and
Ascot there will not be, any adverse change in relations with
employees of Caribsun or Coconut Hall as a result of any
announcement of the transactions contemplated by this
Agreement.
1.18 Employee Benefit Plans.
(a) Schedule 1.18 contains a complete list, as of August 31, 1997,
of all employees, including their names, birthdates, job
titles, base salaries and dates of hire. Schedule 1.18
contains a true and complete list and accurate description of
each
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employee welfare benefit plan (an "Employee Welfare Plan"), as
defined in Section 3(1) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), maintained
currently or at any time by Caribsun or any other organization
which as of the Closing Date is a member of a controlled group
of organizations within the meaning of Section 414(b), (c),
(m) or (o) of the Internal Revenue Code of 1986, as amended,
(the "Code"), of which Caribsun is a member (an "ERISA
Affiliate"), or to which Caribsun or any ERISA Affiliate
contributes or is required to contribute or contributed or was
required to contribute at any time. Schedule 1.18 contains a
true and complete list and accurate description of each
employee pension benefit plan, as defined in Section 3(2) of
ERISA (an "Employee Pension Plan"), maintained currently or at
any time by Caribsun or any ERISA affiliate or to which
Caribsun or any ERISA Affiliate contributes or is required to
contribute or contributed or was required to contribute at any
time. The Employee Welfare Plans, the Employee Pension Plans
and the other plans listed on Schedule 1.18 are collectively
referred to herein as the "Plans." Neither Caribsun nor any
ERISA Affiliate has maintained at any time, nor does it
contribute to or has it contributed to or is or was required
to contribute to: (i) any multi-employer plan (as defined in
Section 3(37) of ERISA); or (ii) any funded or unfunded
medical, health or life insurance plans or arrangements for
current or future retirees or terminated employees.
(b) With respect to each current Plan, the Purchaser has been
provided heretofore with true and complete copies of: (i) all
Plan documents and all documents or instruments establishing
or constituting any related trust, annuity contract or other
funding instrument, and any amendments thereto; (ii) the most
recent determination letter received from the IRS; (iii) the
most recent financial statement; (iv) the most recent IRS Form
5500; and (v) written descriptions of all non-written
agreements relating to the Plans. All current Plans, all Plan
documents and all documents or instruments establishing or
constituting any related trust, annuity contract or other
funding instrument, and any amendments thereto, comply in all
material respects with the provisions of ERISA and the Code
and applicable laws, rules and regulations. All necessary
governmental approvals for all current Plans have been
obtained and favorable determinations as to the qualification
under the Code of each of the current Plans, and for any Code
Section 501(c)(9) trust maintained in connection with any
current Employee Welfare Plan, and each amendment thereto,
have been made by the IRS, or have been applied for and no
event has occurred and no facts or circumstances exist that
may cause the loss of any such qualification or may cause any
such application to be denied.
(c) Except as set forth on Schedule 1.18, the administration of
all Plans has been consistent with, and in compliance in all
material respects with, applicable requirements of the Code
and ERISA, including, without limitation, compliance on a
timely basis with all requirements for reporting, disclosure
and requirements
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for the continuation of group health insurance. Neither
Caribsun, any ERISA Affiliate nor any Plan fiduciary (as
defined in Section 3(21) of ERISA), with respect to any Plan,
has engaged in any transaction or acted or failed to act in
any manner that violates Section 404 or 406 of ERISA or
engaged in any prohibited transaction (as defined in Section
4975(c)(1) of the Code) for which there exists neither a
statutory nor regulatory exemption or for which an exemption
has not been obtained. All obligations required to be
performed by Caribsun or any ERISA Affiliate under each Plan
have been performed, and Caribsun is not in violation of the
terms of any Plan, nor does Caribsun or Ascot have any
knowledge of any existing violation by any other party of any
term or requirement of or applicable to any current Plan. All
contributions required by law to have been made under any
Plan, or to any trusts or funds established thereunder or in
connection therewith, have been made by the due dates thereof
(including any valid extensions).
(d) No claims, suits or other proceedings are pending or
threatened, and no facts or circumstances exist that could
provide a basis for any such claim, suit or other proceeding,
by any of Caribsun's or any ERISA Affiliate's current or
former employees, any participant (as defined in Section 3(7)
of ERISA) to any Plan maintained at any time by Caribsun or
any ERISA Affiliate to which Caribsun contributes or has
contributed or is or was required to contribute, any fiduciary
of any Plan, any beneficiary (as defined in Section 3(8) of
ERISA) of any such person or by any governmental body, agency
or instrumentality thereof relating to or affecting any Plan,
other than usual and ordinary claims for benefits by eligible
persons. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby
will constitute: (i) a termination of employment or other
event entitling any person to any additional or other
benefits, or that would otherwise modify any benefits or the
vesting of any benefits, under any Plan maintained at any time
by Caribsun or any ERISA affiliate, or to which Caribsun or
any ERISA Affiliate contributes or has contributed or is or
was required to contribute; or (ii) a violation of Section 404
or 406 of ERISA or a prohibited transaction (as defined in
Section 4975(c)(1) of the Code) for which there exists neither
a statutory nor regulatory exemption or for which an exemption
has not been obtained.
(e) Neither Caribsun nor any ERISA Affiliate maintains any Plans
that are subject to the requirements of Section 412 of the
Code.
1.19 Environmental Laws and Regulations.
(a) Neither Caribsun nor Coconut Hall has generated, transported
or disposed of any hazardous material (defined below) during
the past three years.
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(b) Neither Caribsun nor Coconut Hall has Hazardous Materials at
any site or facility owned or operated presently or at any
previous time by Caribsun or Coconut Hall.
Caribsun and Coconut Hall are in compliance in all material respects
with all applicable federal, state and local laws and regulations relating to
product registration, pollution control and environmental contamination
including, but not limited to, all laws and regulations governing the
generation, use, collection, discharge, or disposal of Hazardous Materials and
all laws and regulations with regard to record keeping, notification and
reporting requirements respecting Hazardous Materials. Neither Caribsun nor
Coconut Hall has been alleged to be in violation of, and has not been subject to
any administrative or judicial proceeding pursuant to, such laws or regulations
either now or any time during the past three years. There are no facts or
circumstances which Caribsun or Ascot reasonably expects could form the basis
for the assertion of any Environmental Claim (as defined below) against Caribsun
or Coconut Hall relating to environmental matters including, but not limited to,
any Environmental Claim arising from past or present environmental practices
asserted under CERCLA (as defined below) and RCRA (as defined below), or any
other federal, state or local environmental statute, which Caribsun believes
might have an adverse effect on the business, results of operations, financial
condition or prospects of Caribsun and Coconut Hall taken as a whole.
For purposes of this Section 1.19, the following terms shall have the
following meanings: (A) "Hazardous Materials" shall mean materials defined as
"hazardous substances", "hazardous wastes" or "solid wastes" in (i) the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. ss.ss. 9601--5657, and any amendments thereto ("CERCLA"); (ii) the
Resource Conservation and Recovery Act, 42 U.S.C. ss.ss.6901-6987 and any
amendments thereto ("RCRA"); and (iii) any similar federal, state or local
environmental statute; and (B) "Environmental Claim" shall mean any and all
claims, demands, causes of actions, suits, proceedings, administrative
proceedings, losses, judgments, decrees, debts, damages, liabilities, court
costs, attorneys' fees and any other expenses incurred, assessed or sustained by
or against Caribsun.
1.20 Interests in Clients, Suppliers, Etc. Except as set forth on
Schedule 1.20 attached hereto, neither Ascot nor any officer or director of
Caribsun or Coconut Hall possesses, directly or indirectly, any financial
interest in, or is a director, officer or employee of, any corporation, firm,
association or business organization which is a client, supplier, customer,
lessor, lessee, or competitor or potential competitor of Caribsun or Coconut
Hall. Ownership of securities of a company whose securities are registered under
the Securities Exchange Act of 1934, as amended, not in excess of 1% of any
class of such securities shall not be deemed to be a financial interest for
purposes of this Section 1.20.
1.21 Intercompany Transactions.Schedule 1.21 hereto contains an
accurate description of all material transactions or series of related
transactions between Ascot or any entity controlling, controlled by or under
common control with Ascot, or any officer or director of Ascot or any officer or
director of Caribsun or Coconut Hall or any other entity controlling, controlled
by, or under common control with Caribsun, on the one hand, and Caribsun or
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Coconut Hall, on the other hand, for the past five years. For purposes of the
preceding sentence, "material" transactions shall mean transactions in which the
consideration paid or received by Caribsun or Coconut Hall was in excess of
$10,000. Schedule 1.22 hereto also contains a complete and correct list of all
payments to shareholders, officers and directors of Ascot or Caribsun by Ascot,
Caribsun or Coconut Hall since September 30, 1997, other than salary or fringe
benefits set forth on Schedule 1.22. Neither Caribsun nor Coconut Hall have any
direct or indirect liabilities to its officers or directors except for accrued
salaries, bonuses and fringe benefits listed on Schedule 1.22 and other benefits
listed on Schedule 1.18 and Caribsun and Coconut Hall have no outstanding loans
to any officer or director of Caribsun or Coconut Hall as of the date hereof.
Except as set forth in the balance sheet included as part of the Financial
Statements, at the date hereof, Caribsun has no liability to any direct or
indirect shareholder of Caribsun and has no outstanding loans or advances to any
direct or indirect shareholder of Caribsun.
1.22 Bank Accounts, Powers of Attorney and Compensation of Employees.
Set forth on Schedule 1.22 attached hereto is an accurate and complete list
showing (a) the name and address of each bank in which Caribsun or Coconut Hall
has an account or safe deposit box, the number of any such account or any such
box and the names of all persons authorized to draw thereon or to have access
thereto; (b) the names of all persons, if any, holding powers of attorney from
Caribsun or Coconut Hall and a summary statement of the terms thereof; and (c)
the names and current salaries, including bonus and fringe benefits (other than
those described on Schedule 1.18 hereto) of all officers and of all persons
whose compensation from Caribsun and Coconut Hall for the calendar year to date
ended on the August Balance Sheet Date exceeded an annualized rate of $25,000,
together with a statement of the full amount paid or payable to each such person
for services rendered during such fiscal year.
1.23 No Changes Since August Balance Sheet Date. Since the August
Balance Sheet Date, Caribsun has not on a consolidated basis:
(a) incurred any liability or obligation of any nature (whether
accrued, absolute, contingent or otherwise), except
liabilities and obligations in the ordinary course of business
and consistent with past practice, resulting in an increase
for the liabilities shown on the August Balance Sheet of less
than $30,000 in the aggregate;
(b) permitted any of its assets to be subjected to any mortgage,
pledge, lien, security interest, encumbrance, restriction or
charge of any kind (other than Permitted Liens);
(c) sold, transferred or otherwise disposed of any assets except
inventory sold in the ordinary course of business and
consistent with past practice;
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(d) made any single capital expenditure or commitment therefor, in
excess of $10,000 or made aggregate capital expenditures and
commitments therefor in excess of $30,000;
(e) declared or paid any dividend or made any distribution on any
shares of its capital stock, or redeemed, purchased or
otherwise acquired any shares of its capital stock or any
option, warrant or other right to purchase or acquire any such
shares;
(f) made any bonus or profit sharing distribution or payment of
any kind;
(g) increased its indebtedness for borrowed money, or made any
loan to any Person;
(h) written off as uncollectible any notes or accounts receivable,
except immaterial write-downs or write-offs in the ordinary
course of business and consistent with past practice which do
not exceed $10,000 in the aggregate charged to applicable
reserves, and none of which individually or in the aggregate
is material to Caribsun or Coconut Hall;
(i) granted any increase in the rate of wages, salaries, bonuses
or other remuneration or benefits of any executive employee or
other employees or consultants, and no such increase is
customary on a periodic basis or required by agreement or
understanding except as set forth on Schedule 1.20;
(j) canceled or waived any claims or rights of substantial value;
(k) made any change in any method of accounting or auditing
practice;
(l) otherwise conducted its business or entered into any
transaction, except in the usual and ordinary manner and in
the ordinary course of business and consistent with past
practices;
(m) paid, discharged or satisfied any claims, liabilities or
obligations (absolute, accrued, contingent or otherwise) other
than the payment, discharge or satisfaction in the ordinary
course of business and consistent with past practice of
liabilities and obligations reflected and reserved against in
Caribsun's September 30, 1997 Financial Statements or incurred
in the ordinary course of business and consistent with past
practice since the August Balance Sheet Date;
(n) paid, loaned or advanced any amount to, or sold, transferred
or leased any properties or assets (real, personal or mixed,
tangible or intangible to, or entered into any agreement or
arrangement of any kind with, any of its officers, directors
or shareholders or any affiliate or associate of its officers,
directors or shareholders, except compensation to officers at
rates not exceeding the rate of compensation in effect as of
the August Balance Sheet Date;
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(o) suffered any material adverse changes in its working capital,
financial condition, assets, liabilities (absolute, accrued,
contingent or otherwise), reserves, business operations or
prospects; or
(p) agreed, whether or not in writing, to do any of the foregoing.
1.24 Securities Matters. Ascot hereby represents, warrants and
covenants to the Purchaser, as follows:
(a) Ascot understands that the Purchaser Shares have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities act in reliance on
exemptions therefrom.
(b) The Purchaser Shares are being acquired solely for Ascot's own
account, for investment and are not being acquired with a view
to or for the resale, distribution, subdivision or
fractionalization thereof, Ascot has no present plans to enter
into any such contract, undertaking, agreement or arrangement
and Ascot further understands that the Purchaser Shares, may
only be resold pursuant to a registration statement under the
Securities Act, or pursuant to some other available exemption;
(c) Ascot is an "accredited investor" as that term is defined in
Regulation D of the Securities Act and through its officers
and directors has sufficient knowledge and experience in
financial and business matters to be capable of evaluating the
merits and the risks of its investment in the Purchaser Shares
and is able to bear the economic risk of its investment in the
Purchaser Shares;
(d) Ascot acknowledges, in connection with the purchase of the
Purchaser Shares, that no representation has been made by
representatives of the Purchaser regarding its business,
assets or prospects other than that set forth herein and that
it is relying upon the information set forth in the filings
made by Purchaser pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended and such other
representations and warranties as set forth in this Agreement.
(e) Ascot agrees that the certificate or certificates representing
the Purchaser Shares will be inscribed with substantially the
following legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933. The securities have been
acquired for investment and may not be sold, transferred assigned in
the absence of an effective registration statement for these securities
under the Securities Act of 1933 or an opinion of Purchaser's counsel
that registration is not required under said Act."
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1.25 Certain Business Practices. No officer, director, shareholder,
employee, agent or other representative of Caribsun or Coconut Hall, or any
person acting on behalf of Caribsun or Coconut Hall, has directly or indirectly,
within the past five years, given or agreed to give any illegal, unethical or
improper gift or similar benefit to any customer, supplier, governmental
employee or other person who is or may be in a position to help or hinder
Caribsun or Coconut Hall or assist Caribsun or Coconut Hall in connection with
an actual or proposed transaction.
1.26 Subsidiaries. Caribsun has no subsidiaries or interest in any
corporation, partnership, joint venture or other entity except for its ownership
of Coconut Hall.
1.27 Disclosure. Neither this Agreement, nor the Financial Statements
referred to in Section 1.5 hereof, any Schedule, Exhibit or certificate attached
hereto or delivered in accordance with the terms hereof or any document or
statement in writing which has been supplied by or on behalf of Ascot or by or
on behalf of any of Caribsun's directors or officers in connection with the
transactions contemplated by this Agreement contains any untrue statement of a
material fact, or omits any statement of a material fact necessary in order to
make the statements contained herein or therein not misleading. There is no fact
known to Caribsun or Ascot which could materially and adversely affect the
business, prospects or financial condition of Caribsun or Coconut Hall or their
respective properties or assets, which has not been set forth in this Agreement,
the Financial Statements referred to in Section 1.5 hereof (including the
footnotes thereto), any Schedule, Exhibit or certificate attached hereto or
delivered in accordance with the terms hereof or any document or statement in
writing which has been supplied by or on behalf of Ascot or by or on behalf of
any of Caribsun's directors or officers in connection with the transactions
contemplated by this Agreement.
1.28 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of Ascot or Caribsun is, or will be, entitled to any commission or
broker's or finder's fees from any of the parties hereto, or from any Person
controlling, controlled by or under common control with any of the parties
hereto, in connection with any of the transactions contemplated by this
Agreement.
1.29 Copies of Documents. The Stockholder has caused to be made
available for inspection and copying by the Purchaser and its advisers, true,
complete and correct copies of all documents referred to in this Article 1 or in
any Schedule attached hereto.
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ARTICLE 2
REPRESENTATIONS OF THE PURCHASER
The Purchaser represents, warrants and agrees as follows:
2.1 Organization and Corporate Power.
The Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York, and is duly qualified and
in good standing to do business as a foreign corporation in each jurisdiction in
which such qualification is required and where the failure to be so qualified
would have a materially adverse effect upon the Purchaser. The Purchaser has all
requisite corporate power and authority to conduct its business as now being
conducted and to own and lease the properties which it now owns and leases. The
Purchaser's Articles of Incorporation as amended to date, certified by the
Secretary of State of New York, and the By-laws of the Purchaser as amended to
date, certified by the President and the Secretary of the Purchaser, which have
been delivered to Ascot prior to the execution hereof, are true and complete
copies thereof as in effect as of the date hereof.
2.2 Authorization.
The Purchaser has full power, legal capacity and authority to enter
into this Agreement, to execute all attendant documents and instruments
necessary to consummate the transaction herein contemplated, and to issue and
sell the Purchaser Shares to Ascot, and to perform all of its obligations
hereunder. This Agreement and all other agreements, documents and instruments to
be executed in connection herewith have been effectively authorized by all
necessary action, corporate or otherwise, on the part of the Purchaser, which
authorizations remain in full force and effect, have been duly executed and
delivered by the Purchaser, and no other corporate proceedings on the part of
the Purchaser are required to authorize this Agreement and the transactions
contemplated hereby, except as specifically set forth herein. This Agreement
constitutes the legal, valid and binding obligation of the Purchaser and is
enforceable with respect to the Purchaser in accordance with its terms, except
as enforcement hereof may be limited by bankruptcy, insolvency, reorganization,
priority or other laws of court decisions relating to or affecting generally the
enforcements of creditors' rights or affecting generally the availability of
equitable remedies. Neither the execution and delivery of this Agreement, nor
the consummation by the Purchaser of any of the transactions contemplated
hereby, or compliance with any of the provisions hereof, will (i) conflict with
or result in a breach or, violation of, or default under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license, lease,
credit agreement or other agreement, document, instrument or obligation
(including, without limitation, any of its charter documents) to which the
Purchaser is a party or by which the Purchaser or any of its assets or
properties may be bound, or (ii) violate any judgment, order, injunction,
decree, statute, rule or properties of the Purchaser. No authorization, consent
or approval of any public body of authority or any third party is necessary for
the consummation by the Purchaser of the transactions contemplated by this
Agreement.
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2.3 Capitalization.
The authorized and outstanding capital stock of the Purchaser as of
September 15, 1997 is as set forth on Schedule 2.3. All of the outstanding
shares of the Purchaser's Common Stock have been, and all of the Purchaser's
Common Stock to be issued and sold to Ascot pursuant to this Agreement, when
issued and delivered as provided herein will be duly authorized, validly issued,
fully paid and non-assessable and free of preemptive or similar rights. Except
as set forth on Schedule 2.3, there are no options warrants or other rights to
acquire securities of the Purchaser or securities convertible into such
securities.
2.4 Financial Statements.
(a) The Purchaser's financial statements contained in its Form
10-KSB filing for the fiscal year ended December 31, 1996, its
Form 10-QSB filings for the periods ended March 31, 1997, and
June 30, 1997, each as amended (collectively the "Purchaser's
Financial Statements") are complete in material respects and
have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout
the periods indicated. The Purchaser's Financial Statements
accurately set out and describe the financial condition and
operating results of the Purchaser as of the dates, and for
the periods indicated therein, subject to normal year-end
audit adjustments. Except as set forth in the Purchaser's
Financial Statements and the Form 8-K reports filed by the
Purchaser, the Purchaser has no liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to June 30, 1997 and (ii)
obligations under contracts and commitments incurred in the
ordinary course of business and not required under generally
accepted accounting principles to be reflected in the
Purchaser's Financial Statements. The Purchaser maintains and
will continue to maintain a standard system of accounting
established and administered in accordance with generally
accepted accounting principles.
(b) The unaudited balance sheet of the Purchaser as of July 31,
1997 and related income statement for the seven months ended
July 31, 1997 (the "Purchaser's Interim Financial Statements")
are annexed hereto as Schedule 2.4. The Purchaser's Interim
Financial Statements were carefully prepared from the books
and records of Purchaser, and although the Purchaser's Interim
Financial Statements are not audited and do not contain the
footnotes which would be required in audited financial
statements, present fairly the financial position, assets and
liabilities of Purchaser and the results of its operations,
for the respective periods indicated and reflect all necessary
accruals, all in conformity with GAAP applied on a consistent
basis. The Financial Statements contain all adjustments
(consisting of only normal recurring accruals) required to be
made by GAAP, subject to normal year-end adjustments.
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(c) Except as set forth in Schedule 2.4, since July 31, 1997 there
has been (x) no material adverse change in the assets or
liabilities, or in the business or condition, financial or
otherwise, or in the results of operations or prospects, of
Purchaser whether as a result of any legislative or regulatory
change, revocation of any license or rights to do business,
fire, explosion, accident, casualty, labor trouble, flood,
drought, riot, storm, condemnation or act of God or other
public force or otherwise and (y) no material adverse change
in the assets or liabilities, or in the business or condition,
financial or otherwise, or in the results of operations or
prospects, of Purchaser and to the best knowledge, information
and belief of Purchaser, no fact or condition exists or is
contemplated or threatened which might cause such a change in
the future.
(d) The accounts payable report of the Company as of August 31,
1997 set forth on Schedule 2.4 and monthly store sales reports
for the month ended August 31, 1997 are an accurate
representation of such data and are taken directly from the
Purchaser's accounting system.
2.5 Subsidiaries.
The Purchaser has no subsidiaries and no investments, directly or
indirectly, or other financial interest in any other corporation or business
organization, joint venture or partnership of any kind whatsoever except set
forth in Schedule 2.5.
2.6. Absence of Undisclosed Liabilities.
Except as and to the extent reflected or reserved against in the most
recent balance sheet included in the Company's Financial Statements, the
Purchaser has no liability(s) or obligation(s) (whether accrued, to become due,
contingent or otherwise) which individually or in the aggregate could have a
materially adverse effect on the business, assets, properties, condition
(financial or otherwise) or prospects of the Purchaser. Except as disclosed on
Schedule 2.6 hereto, there are no material changes in the business of the
Purchaser.
2.7 No Pending Material Litigation or Proceedings.
Except as set forth on Schedule 2.7, there are no actions, suits or
proceedings pending or, to the best of the Purchaser's knowledge, threatened
against or affecting the Purchaser (including actions, suits or proceedings
where liabilities may be adequately covered by insurance) at law or in equity or
before or by any federal, state, municipal or other governmental department,
commission, court, board, bureau, agency or instrumentality, domestic or
foreign, or affecting any of the officers or directors of the Purchaser in
connection with the business, operations or affairs of the Purchaser, which
might result in any adverse change in the business, properties or assets, or in
the condition (financial or otherwise) of the Purchaser, or which might prevent
the sale of the transactions contemplated by this Agreement. The Purchaser is
not subject to any voluntary or involuntary proceeding under the United States
Bankruptcy Code and has not made an assignment for the benefit of creditors.
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2.8 Disclosure.
Neither this Agreement, nor any certificate, exhibit, or other written
document or statement, furnished to the Shareholders by the Purchaser in
connection with the transactions contemplated by this Agreement contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to be stated in order to make the statements contained
herein or therein not misleading.
2.9 Tax Returns and Payments.
All tax returns and reports, including, without limitation, all foreign
returns and reports, of the Purchaser required by law to be filed have been duly
filed, and all taxes, assessments, fees and other governmental charges
heretofore levied upon any properties, assets, income or franchises of the
Purchaser which are due and payable have been paid, except as otherwise
reflected in the Financial Statements. No extension of time for the assessment
of deficiencies in any federal or state tax has been requested of or granted by
the Purchaser.
2.10 Compliance with Law and Government Regulations.
The Purchaser is in compliance with all applicable statutes,
regulations, decrees, orders, restrictions, guidelines and standards, whether
mandatory or voluntary, imposed by the United States of America, any state,
county, municipality or agency of any thereof, and any foreign country or
government to which the Purchaser is subject. Without limiting the generality of
the foregoing, the Purchaser has filed all reports and statements required to be
filed pursuant to the Securities Act of 1933 (the "1933 Act") and Securities
Exchange Act of 1934 (the "1934 Act") including all periodic reports required
under the Section 13 or 15 of the Exchange Act and Form SR reports under Rule
463 of the Securities Act of 1933. Each of such reports was complete, did not
contain any material misstatement of or omit to state any material fact.
2.11 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of the Purchaser is, or will be, entitled to any commission or
broker's or finder's fees from Ascot or from any Person controlling, controlled
by or under common control with any of the parties hereto, in connection with
any of the transactions contemplated herein.
ARTICLE 3
SALE OF SHARES AND WARRANTS
3.1 Sale of Shares. Subject to the terms and conditions herein stated,
Ascot agrees to sell, assign, transfer and deliver to Purchaser on the Closing
Date, and Purchaser agrees to
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purchase the Caribsun Shares from Ascot on the Closing Date. The certificates
representing the Caribsun Shares shall be duly endorsed in blank, or accompanied
by stock powers duly executed in blank, by Ascot transferring the same, with all
necessary transfer tax and other revenue stamps, acquired at Ascot's expense,
affixed and canceled. Ascot agrees to cure any deficiencies with respect to the
endorsement of the certificates representing the Caribsun Shares owned by Ascot
or with respect to the stock power accompanying any such certificates.
3.2 Price for Caribsun Shares.
(a) In full consideration for the acquisition of Caribsun Shares,
the Purchaser will issue to Ascot a sufficient number of
Purchaser Shares to equal 80% of the outstanding shares of
Purchaser Common Stock after giving effect to such issuance
and assuming that all currently existing options, warrants and
other securities presently convertible into shares of the
Purchaser Common Stock had been exercised and converted on the
Closing Date (the "Initial Number of Purchaser Shares"). The
calculation used to determine the Initial Number of Shares is
annexed hereto as Schedule 3.2.
(b) The number of Purchaser Shares shall be subject to adjustment
at Closing as follows:
At Closing, Ascot will deliver a Balance Sheet of Caribsun at
August 31, 1997 audited by Kirkland, Brakeman & Ross,
Clearwater, Florida. The audited balance sheet of Caribsun as
of August 31, 1997 shall be referred to in this Agreement as
the "Closing Balance Sheet." In the event that the net worth
of Caribsun as of August 31, 1997 shown on the Closing Balance
Sheet is less than $4,500,000, the number of Purchaser Shares
to be issued to Ascot in exchange for the Caribsun Shares
shall be reduced (but not increased) by the number of shares
determined by subtracting the difference between $4,500,000
and the net worth of Caribsun set forth on the Closing Balance
Sheet, dividing by $4,500,000 and multiplying the result by
the Initial Number of Purchaser Shares. The reduced number of
Purchaser Shares thus obtained shall be the final purchase
price for the Caribsun Shares.
(c) In the event that there are not a sufficient number of
authorized, unissued and unreserved shares of Purchaser's
Common Stock at Closing, to issue the number of Purchaser
Shares equaling the final purchase price, the Purchaser will
promptly call a meeting of shareholders, or take appropriate
action by consent to authorize the additional number of shares
to fully pay the final purchase price. In the event the
outstanding shares of Purchasers Common Stock are increased or
reduced without the receipt of consideration as a result of
corporation action by the Purchaser, the number of share so
Purchasers Stock comprising the shortfall will be
proportionately reduced or increased.
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3.3 Closing. The sales referred to in Sections 3.1 shall take place at
10:00 A.M. at the offices of Sommer & Schneider LLP, 600 Old Country Road, Suite
535, Garden City, New York, 11530, on October 15, 1997, or at such other time
and date as the parties hereto shall by written instrument designate. Such time
and date are herein referred to as the "Closing Date."
ARTICLE 4
CONDITIONS TO PURCHASER'S OBLIGATIONS
The purchase of the Caribsun Shares by Purchaser on the Closing Date is
conditioned upon satisfaction, on or prior to such date, of the following
conditions:
4.1 Opinion of Caribsun's Counsel. Ascot shall have furnished the
Purchaser with a favorable opinion, dated the Closing Date, of Ascot's and
Caribsun's counsel, in form and substance satisfactory to the Purchaser and
their counsel, to the effect set forth in Exhibit 1 attached hereto.
4.2 Good Standing and Other Certificates. Ascot, Caribsun and Coconut
Hall, as the case may be, shall have delivered to the Purchaser:
(a) copies of Ascot's, Caribsun's, and Coconut Hall's charter
including all amendments thereto, in each case certified by
the Secretary of State or other appropriate official of its
jurisdiction of incorporation;
(b) a certificate from the Secretary of State or other appropriate
official of their respective jurisdictions of incorporation to
the effect that Ascot, Caribsun and Coconut Hall are in good
standing or subsisting in such jurisdiction and listing all
charter documents including all amendments thereto, of Ascot,
Caribsun and Coconut Hall on file;
(c) a copy of the By-Laws each of Ascot, Caribsun and Coconut
Hall, certified by the respective Secretary of each entity as
being true and correct and in effect on the Closing Date.
(d) a resolution of Ascot's and Caribsun's Board of Directors
certified by their respective Secretary approving the
transactions contemplated hereby and authorizing the President
and Secretary of each entity to execute this Agreement and all
documents necessary to consummate the sale of the Caribsun
Shares.
4.3 Certain Agreements. Except as listed on Schedule 1.9 hereto,
neither Caribsun or Coconut Hall has any management or consulting agreements.
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4.4 No Material Adverse Change. Prior to the Closing Date, there shall
be no material adverse change in the assets or liabilities, the business or
condition, financial or otherwise, the results of operations, or prospects of
Caribsun or Coconut Hall, whether as a result of any legislative or regulatory
change, revocation of any license or rights to do business, fire, explosion,
accident, casualty, labor trouble, flood, drought, riot, storm, condemnation or
act of God or other public force or otherwise, and Ascot shall have delivered to
the Purchaser a certificate signed by Ascot's duly authorized representative,
dated the Closing Date, to such effect.
4.5 Truth of Representations and Warranties. The representations and
warranties of each of Ascot and Caribsun contained in this Agreement or in any
Schedule attached hereto shall be true and correct on and as of the Closing Date
with the same effect as though such representations and warranties had been made
on and as of such date, and each of Ascot and Caribsun shall have delivered to
the Purchaser a certificate, dated the Closing Date, signed by each of Ascot's
and Caribsun's respective duly authorized representative, to such effect.
4.6 Performance of Agreements. All of the agreements of each of Ascot,
Caribsun and Coconut Hall to be performed on or before the Closing Date pursuant
to the terms hereof shall have been duly performed, and Ascot and Caribsun shall
have delivered to the Purchaser a certificate, signed by each of Ascot's and
Caribsun's respective duly authorized representative dated the Closing Date, to
such effect.
4.7 No Litigation Threatened. No action or proceedings shall have been
instituted or threatened before a court or other government body or by any
public authority to restrain or prohibit any of the transactions contemplated
hereby, and Ascot and Caribsun shall have delivered to the Purchaser a
certificate signed by Ascot's and Caribsun's duly authorized representative,
dated the Closing Date, to such effect.
4.8 Chief Financial Officer's Letter. The Purchaser shall have received
a letter, dated the Closing Date, from Caribsun's Chief Financial Officer, in
form and substance satisfactory to them, to the effect set forth in Exhibit 2
attached hereto.
4.9 Consulting Agreement. The Purchaser shall have entered into the
amended and revised Consulting Agreement with William Zanker in the form annexed
hereto as Exhibit 3.
4.10 Governmental Approvals. All governmental and other consents and
approvals, if any, necessary to permit the consummation of the transactions
contemplated by this Agreement shall have been received.
4.11 Proceedings. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and all documents incident thereto
shall be satisfactory in form and substance to the Purchaser and their counsel,
and the Purchaser shall have received copies of all such documents and other
evidences as they or their counsel may reasonably request in order to establish
the consummation of such transactions and the taking of all proceedings in
connection therewith.
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4.12 Appraisal and Balance Sheet. The audited balance sheet of Caribsun
as of August 31, 1997, after giving affect to a current fair market value
appraisal by HVS International and such liabilities as should be included on a
balance sheet prepared in accordance with GAAP shall show Caribsun having a net
worth equal to or exceeding $3,125,000.
4.13 Receipt of Evidence of Title. Purchaser shall be reasonably
satisfied by correspondence with Stewart Title that Coconut Hall has title to
approximately 86 acres of the real estate in Antigua.
4.14 Issuance of Stock Underlying Options. The Purchaser shall have
issued stock certificates bearing appropriate legends and stop transfer
instructions, covering shares issuable to each of William Zanker, Terrance
Murray, Keith Dee, Andrew Hyams, Donald R. Fleischer and Stephen Seligman. The
legend will be substantially to the following effect:
"The shares represented by this certificate have not been fully paid
and may not be voted or sold, hypothecated, assigned or otherwise
transferred in whole or in part until the issuer receives the full
consideration described in that option agreement between the issuer and
the name in which this certificate is registered, a copy of which is on
file with the issuers transfer agent."
4.15 Issuance of Stock as Replacement for Stock Pledged as Collateral.
The Purchaser shall have issued 60,000 shares of its common stock to each of
Terrance Murray and William Zanker in lieu of shares held by Mark Schwarz, Esq.
as escrow agent under Pledge Agreements dated December 27, 1996 related to
$265,000 of outstanding Bridge Notes. In the event the Bridge Notes are paid and
the shares of stock held by Mark Schwarz are returned to Messrs. Murray and
Zanker, each will promptly return 60,000 shares to the Company for cancellation.
4.16 Closing. The transactions contemplated by this Agreement shall
have been consummated by October 15, 1997.
4.17 Indemnification Agreements. The Purchaser shall have entered into
the Indemnification Agreement with William Zanker, Terrance Murray, Keith Dee,
Andrew Hyams, Donald R. Fleischer and Stephen Seligman in the form annexed
hereto as Exhibit 5.
4.18 Agreement with Terrance Murray. The Purchaser shall have entered
into an agreement with Terrance Murray providing for the termination of Mr.
Murray's employment contract and the settlement of claims of Mr. Murray against
the Purchaser for approximately $60,000 of salary in exchange for Warrants to
purchase an aggregate of 100,000 shares of Purchaser's Common Stock. (1/3 @
$.50, 1/3 @ $.75, 1/3 @ $1.00, protected from price dilution in the same manner
as the warrants described in the Consulting Agreement set forth as Exhibit 3.)
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ARTICLE 5
CONDITIONS TO THE OBLIGATIONS OF
ASCOT AND CARIBSUN
The obligations of Ascot and Caribsun on the Closing Date are
conditioned upon satisfaction, on or prior to such date, of the following
conditions:
5.1 Opinion of the Purchaser's Counsel. The Purchaser shall have
furnished Ascot and Caribsun with an opinion, dated the Closing Date, of Sommer
& Schneider LLP; to the effect set forth in Exhibit 4 attached hereto.
5.2 Good Standing Certificates. The Purchaser shall have delivered
to Ascot:
(a) copies of the Certificate of Incorporation of the Purchaser,
including all amendments thereto, certified by the Secretary
of State of the State of New York; and
(b) certificates from the Secretary of State of the State of New
York to the effect that Purchaser is in good standing in such
State and listing all charter documents, including all
amendments thereto, of Purchaser on file.
5.3 Truth of Representations and Warranties. The representations and
warranties of the Purchaser contained in this Agreement shall be true and
correct on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, and
Purchaser shall have delivered to Ascot a certificate, dated the Closing Date,
to such effect.
5.4 Governmental Approvals. All governmental consents and approvals, if
any, necessary to permit the consummation of the transactions contemplated by
this Agreement shall have been received.
5.5 Performance of Agreements. All of the agreements of the Purchaser
to be performed on or before the Closing Date pursuant to the terms hereof shall
have been duly performed, and the Purchaser shall have delivered to Ascot a
certificate, dated the Closing Date, to such effect.
5.6 Proceedings. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and all documents incident thereto
shall be reasonably satisfactory in form and substance to Ascot and its counsel,
and Ascot shall have received copies of all such documents and other evidences
as they or their counsel may reasonably request in order to establish the
consummation of such transactions and the taking of all proceedings in
connection therewith.
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5.7 Consulting Agreement. The Purchaser shall have entered into the
consulting agreement with William Zanker annexed hereto as Exhibit 3.
5.8 Board Representation. At Closing all present directors of Purchaser
shall resign and not less than three persons designed by Ascot shall be
appointed to the Board of Directors of the Purchaser.
5.9 Bridge Loans. Holders of seventy-five percent outstanding Bridge
Notes aggregating $265,000 shall have agreed to give the Purchaser an option to
redeem the Bridge Notes prior to December 27, 1997 and acquire the related
Preferred Stock Warrants for the face value of the Notes, plus accrued and
unpaid interest payable at the Purchaser's option in cash or shares of the
Purchaser's Common Stock. The number of shares of the Purchaser's Common Stock
necessary to redeem the Notes and Preferred Stock Warrants shall be calculated
by dividing the principal amount redeemed by 0.85 times the average closing
price of the Purchaser's common stock on the five business days preceding the
Purchaser's call.
5.10 Closing. The transactions contemplated by this Agreement shall
have been consummated by October 15, 1997.
5.11 Agreement with Terrance Murray. The Purchaser shall have entered
into the Agreement set forth in Section 4.18 above.
ARTICLE 5A
INTERIM MANAGEMENT
5A.1 Appointment of Interim Operating Officer. David Coia is hereby
appointed Interim Operating Officer of the Purchaser to all powers and
responsibilities of a chief executive officer with William Zanker from the date
of this Agreement until either the Closing or termination.
5A.2 Operation of Purchaser and Caribsun in the Ordinary Course. Ascot
covenants and agrees that pending the Closing, the business of Purchaser shall
be operated in the ordinary course of business consistent with past practice and
except (i) the hiring of personnel set forth in Schedule 5A.2 hereto, which
discloses name, title and salary; (ii) the payment of professional fees and
services reasonably necessary to complete the transactions contemplated by the
Agreement; or (iii) as otherwise agreed in writing by William Zanker:
(a) Existing Condition. Ascot shall not cause nor permit to occur
any of the events or occurrences described in Section 5A.2
hereof.
27
<PAGE>
(b) Maintenance of Physical Assets. Ascot shall continue to
maintain and service the physical assets used in the conduct
of the Purchaser's Business in the same manner as has been its
consistent past practice.
(c) Employees and Business Relations. Ascot shall use its best
efforts to keep available the services of the present
employees and agents of the Purchaser's Business and to
maintain the relations and goodwill with the suppliers,
customers, distributors and any others having business
relations with the Purchaser's Business.
(d) Compliance with Laws, etc. Ascot shall comply with all laws,
ordinances, rules, regulations and orders applicable to the
Purchaser's Business, or Purchaser's operations, assets or
properties in respect thereof, the noncompliance with which
might materially affect the Purchaser Business or the Assets.
(e) Sale of Assets; Negotiations. Ascot shall not, directly or
indirectly, sell or encumber all or any part of the assets of
Purchaser, other than in the ordinary course of the
Purchaser's Business consistent with past practice, or
initiate or participate in any discussions or negotiations or
enter into any agreement to do any of the foregoing. Ascot
shall not provide any confidential information concerning the
Purchaser's Business or its properties or assets or any third
party.
(f) Checks. Ascot will not permit Purchaser to issue any check in
an amount of $1,000 or group of checks in an amount exceeding
$10,000 except the payment of existing liabilities of
Purchaser or professionals necessary for the transaction
contemplated hereby.
5A.3 Termination. In the event the transactions contemplated by this
Agreement are not consummated by October 15, 1997, Mr. Coia and the persons set
forth on Schedule 5A.2 shall resign and return all documents and property of the
Purchaser in their possession to Mr. Zanker.
5A.4 Survival. Notwithstanding anything to the contrary contained in
Article 6 below, the covenants of Ascot contained in this Article 5A shall
survive the termination of this Agreement and Ascot shall indemnify the
Purchaser from any damages resulting from breach of these covenants and
agreements whether or not the transactions contemplated hereby are consummated.
28
<PAGE>
ARTICLE 6
COVENANTS OF ASCOT
6.1 Non-Competition; Non-Interference. In consideration of the purchase
of the Shares by Purchaser, Ascot agrees that from the date of this Agreement
until September 30, 2002, Ascot and the officers and directors of Caribsun and
Ascot (the "Ascot Parties") will not, whether for their own account or for the
account or any other person, directly or indirectly:
(a) engage or invest in, own, manage, operate, control or
participate in the ownership, management, operation or control
of, be employed by, associated or in any manner connected with
or render services or advice to, any business, the products or
services of which compete, in whole or in part, with the
products or activities of Caribsun within the geographical
territories within Antigua in which Caribsun at the time up to
the Closing Date has conducted its business.
(b) solicit any potential customer or client to which Caribsun has
made a presentation, or with which Caribsun has been in
contact, not to hire Caribsun, or to hire another company
whether or not such Ascot Party had personal contact with such
person during or by reason of his or its association with
Caribsun; or
(c) solicit the business of any company which is a customer or
client of Caribsun, or was its customer or client within two
years prior to the date of this Agreement;
(d) persuade or attempt to persuade any employee of Caribsun, or
any individual who was its employee during the two years prior
to the date of this Agreement, to leave Caribsun's employ, or
to become employed by or otherwise be engaged as an
independent consultant or otherwise for, any person other than
Caribsun; or
(e) disclose or use any confidential information of Caribsun or
any of their clients and customers. For purposes of this
section "confidential information" with respect to any entity
shall mean trade secrets concerning such entity's operations,
future plans, projected and historical sales, marketing,
costs, production, growth and distribution, any customer
lists, customer information or other information relating to
the products or services, whether patentable or not,
concerning the business of such entity as conducted prior to
the Closing Date.
6.2 Construction. It is the desire and intent of the parties to this
Agreement that the provisions of Section 6.1 shall be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. If any particular provisions or
portion of Section 6.1 shall be adjudicated to be invalid or unenforceable, for
any reason, including, without limitation, the geographic or business scope or
duration thereof, such provision shall be construed in such a way as to make it
valid and enforceable to the maximum extent possible. Any validity or
unenforceability of any provision of this Agreement shall attach only to such
provision and shall not effect or render invalid any other provision of this
Agreement or any other agreement or instrument.
29
<PAGE>
6.3 Enforcement. The parties recognize that the performance of the
obligations under Section 6 by Ascot Affiliates is special, unique and
extraordinary in character, and that in the event of the breach by such
Stockholder Affiliate of the terms and conditions of Section 6.1 to be
performed, Caribsun and/or the Purchaser would suffer irreparable harm for which
there would be no adequate remedy at law. Accordingly, Ascot Affiliates agree
that in such event, in addition to any other remedies which Caribsun and/or
Purchaser may have in law or equity for money damages or other relief, Caribsun
and the Purchaser shall be entitled to temporary and/or injunctive relief,
without the necessity of posting a bond therefor or of proving damages, to
enforce the provisions hereof.
6.4 Continuance of Certain Insurance Policies. Ascot shall cause the
Purchaser (including making all premium payments) to keep in force the present
officers and directors liability policy for a period of three years following
the Closing.
6.5 Certain Actions. With respect to creditors, Ascot agrees to cause
the Purchaser following Closing to take all action reasonably necessary to pay
or settle the claims of all existing creditors of the Purchaser including the
holders of the Bridge Notes.
6.6 Certain Registrations. Ascot agrees to file and/or maintain
effective registration statements under the Securities Act of 1933 with respect
to shares of Purchasers Common Stock issued or issuable:
(a) to former officers and directors pursuant to the exercise of
stock options or warrants;
(b) to Josh Alexander Associates, Inc. pursuant to a finder's fee
agreement dated September 4, 1997;
(c) to William Zanker and Terrance Murray set forth in Section
4.15 above;
(d) to employees pursuant to other stock plans which are in effect on
the date of the Agreement.
6.7 Personal Gurantees. Ascot agrees to take such action as shall be
necessary within 10 days following Closing to release William Zanker from any
personal guarantee of the obligations of the Purchaser of any of the Purchaser's
subsidiaries for liabilities arising after Closing and if Mr. Zanker cannot be
so released to provide Mr. Zanker with backup indemnity from any claims on such
guarantees.
30
<PAGE>
ARTICLE 7
SURVIVAL OF REPRESENTATIONS; INDEMNITY; SET-OFF
7.1 Survival of Covenants and Agreements. The respective
representations, warranties, covenants and agreements of Ascot, Caribsun and the
Purchaser contained in this Agreement, or any Schedule attached hereto or any
agreement or document delivered pursuant to this Agreement shall survive for a
period of five years from the consummation of the transactions contemplated
hereby; provided, however, that the representations, warranties and agreements
made with regard to taxes and ERISA matters shall survive until the applicable
statutes of limitations have expired; and provided further, however, that with
respect to any covenant, term or provision to be performed hereunder or in any
of the Schedules hereto or any documents or agreements delivered hereunder, the
right of indemnification under this Article 7 shall survive until such covenant,
term or provision has been fully paid, performed or discharged.
7.2 Indemnification.
(a) Ascot agrees to indemnify and hold the Purchaser and their
officers, directors, shareholders, employees, affiliates and
agents harmless from damages, losses, liabilities,
assessments, judgments, costs or expenses (including, without
limitation, penalties, interest and reasonable counsel fees
and expenses), (each a "Claim"), in excess of $25,000 in the
aggregate, as a result of or arising out of the breach of any
representation or warranty made by Ascot and/or Caribsun or
the failure of any representation or warranty made by Ascot
and/or Caribsun in this Agreement or in any Schedule attached
hereto or any document or agreement delivered hereunder to be
true and correct in all respects as of the date of this
Agreement and as of the Closing Date or the non-performance by
Ascot and/or Caribsun of any covenant, term or provision to be
performed by it hereunder or in any of the documents or
agreements delivered hereunder which may be imposed or sought
to be imposed on Purchaser or Caribsun.
(b) The Purchaser agrees to indemnify and hold Ascot and Caribsun
and each of their officers, directors, shareholders,
employees, affiliates and agents harmless from damages, losses
or expenses (including, without limitation, reasonable counsel
fees and expenses) in excess of $25,000, in the aggregate,
suffered or paid, directly or indirectly, as a result of or
arising out of the failure of any representation or warranty
made by the Purchaser in this Agreement to be true and correct
in all respects as of the date of this Agreement and as of the
Closing Date.
(c) The Purchaser's and Caribsun's right to indemnification as
provided in this Section 7.2 shall not be eliminated, reduced
or modified in any way as a result of the fact that (i) the
Purchaser or Caribsun has notice of a breach or inaccuracy of
any representation, warranty or covenant contained herein;
(ii) the Purchaser has been provided with access, as requested
by Purchaser, to officers and employees of Ascot, Caribsun and
Coconut Hall and such of Ascot's, Caribsun's and Coconut
Hall's books, documents, contracts and records as has been
provided to Purchaser in response to Purchaser's requests.
31
<PAGE>
7.3 Conditions of Indemnification.
(a) A party entitled to indemnification hereunder (the
"Indemnified Party") shall notify the party or parties liable
for such indemnification (the "Indemnified Party") in writing
of any Claim or potential liability for Taxes ("Tax Claim")
which the Indemnified Party has determined has given or could
give rise to a right of indemnification under this Agreement.
Such notice shall be given within a reasonable (taking into
account the nature of the Claim or Tax Claim) period of time
after the Indemnified Party has actual knowledge thereof. The
Indemnifying Party shall satisfy its obligations under this
Article 7 within forty days after receipt of subsequent
written notice from the Indemnified Party if an amount is
specified therein, or promptly following receipt of subsequent
written notice or notices specifying the amount of such Claim
or Tax Claim additions thereto; provided, however, that for so
long as the Indemnifying Party is in good faith defending a
Claim or Tax Claim pursuant to Section 7.3(b) hereof, its
obligation to indemnify the Indemnified Party with respect
thereto shall be suspended (other than with respect to any
costs, expenses or other liabilities incurred by the
Indemnified Party prior to the assumption of the defense by
the Indemnifying Party). Failure to provide a notice of Claim
or Tax Claim within the time period referred to above shall
not constitute a defense to a Claim or Tax Claim or release
the Indemnifying Party from any obligation hereunder to the
extent that such failure does not prejudice the position of
the Indemnifying Party.
(b) If the facts giving rise to any such indemnification involve
any actual, threatened or possible Claim or demand or Tax
Claim by any person not a party to this Agreement against the
Indemnified Party, the Indemnifying Party shall be entitled to
contest or defend such Claim or demand Tax Claim at its
expense and through counsel of its own choosing, which counsel
shall be reasonably acceptable to the Indemnified Party, such
right to contest or defend shall only apply if the
Indemnifying Party gave written notice of its intention to
assume the contest and defense of such Claim or demand Tax
Claim to the Indemnified Party as soon as practicable, but in
no event more than thirty days after receipt of the notice of
Claims or Tax Claim, and provided the Indemnified Party with
appropriate assurances as to the creditworthiness of the
Indemnifying Party, and that the Indemnifying Party will be in
a position to pay all fees, expenses and judgments that might
arise out of such Claim or demand Tax Claim. The Indemnified
Party shall have the obligation to cooperate in the defense of
any such Claim or demand Tax Claim and the right, at its own
expense, to participate in the defense of any Claim or Tax
Claim. So long as the Indemnifying Party is defending in good
faith any such Claim or demand Tax Claim asserted by a third
party against the
32
<PAGE>
Indemnified Party, the Indemnified Party shall not settle or
compromise such Claim or demand Tax Claim. The Indemnifying
Party shall have the right to settle or compromise any such
Claim or demand Tax Claim without the consent of the
Indemnified Party at any time utilizing its own funds to do so
if in connection with such settlement or compromise the
Indemnified Party is fully released by the third party and is
paid in full any indemnification amounts due hereunder. The
Indemnified Party shall make available to the Indemnifying
Party or its agents all records and other materials in the
Indemnified Party's possession reasonably required by it for
its use in contesting any third party Claim or demand Tax
Claim and shall otherwise cooperate, at the expense of the
Indemnifying Party, in the defense thereof in such manner as
the Indemnifying Party may reasonably request. Whether or not
the Indemnifying Party elects to defend such Claim or demand
Tax Claim, the Indemnified Party shall have no obligation to
do so.
ARTICLE 8
MISCELLANEOUS
8.1 Knowledge of Ascot, Caribsun and Coconut Hall. Where any
representation or warranty contained in this Agreement is expressly qualified by
reference to the knowledge, information and belief of Ascot, Caribsun and
Coconut Hall and Ascot, Caribsun and Coconut Hall confirm that they have made
due and diligent inquiry as to the matters that are the subject of such
representations and warranties.
8.2 Expenses. The parties hereto shall pay all of their own expenses
relating to the transactions contemplated by this Agreement, including, without
limitation, the fees and expenses of their respective counsel and financial
advisers; except that, in the event the transactions contemplated by this
Agreement are not completed, Ascot will reimburse the Purchaser within five days
of demand for all expenses in connection with an appraisal of the property of
Coconut Hall.
8.3 Governing Law. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the laws of the
State of New York applicable to agreements executed and to be performed solely
within such State without regard to conflicts of laws.
8.4 Jurisdiction. Any judicial proceeding brought against any of the
parties to this Agreement on any dispute arising out of this Agreement or any
matter related hereto may be brought in the courts of the State of New York, or
in the United States District Court for the Eastern or Southern District of New
York, and, by execution and delivery of this Agreement, each of the parties to
this Agreement accepts the exclusive jurisdiction of such courts, and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Agreement. The prevailing party or parties in any such litigation
shall be entitled to receive from the losing party or parties all costs and
expenses, including reasonable counsel fees, incurred by the prevailing party or
parties.
33
<PAGE>
8.5 Captions. The Article and Section captions used herein for
reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
8.6 Publicity. Except as otherwise required by law, none of the parties
hereto shall issue any press release or make any other public statement, in each
case relating to, connected with or arising out of this Agreement or the matters
contained herein, without obtaining the prior approval of Purchaser and Caribsun
to the contents and the manner of presentation and publication thereof. The
parties hereto agree that the execution of this Agreement requires the release
of information to the financial press concerning this acquisition and
accordingly agree to promptly issue a press release mutually acceptable to Ascot
and the Purchaser and to file a Form 8-K report with the Securities and Exchange
Commission containing this agreement and all exhibits and schedules hereto.
8.7 Notices. Any notice or other communication required or permitted
hereunder shall be deemed sufficiently given when delivered in person, one
business day after delivery to a reputable overnight carrier, four business days
if delivered by registered or certified mail, postage prepaid or when sent by
telecopy with a copy following by hand or overnight carrier or mailed, certified
or registered mail, postage prepaid, addressed as follows:
If to the Purchaser:
The Great American Backrub Store, Inc.
53 West 36th Street, Room 1202
New York, NY 10018
with a required copy to:
Sommer & Schneider LLP
600 Old Country Road, Suite 535
Garden City, NY 11530
If to Ascot:
Ascot International Corp.
4707 140th Avenue No., Suite 312
Clearwater, FL 34622
34
<PAGE>
If to Caribsun:
Caribsun Corp.
4707 140th Avenue No., Suite 312
Clearwater, FL 34622
8.8 Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by operation
of law. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
8.9 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
8.10 Entire Agreement. This Agreement, including the Schedules hereto
and the other documents referred to herein which form a part hereof, contain the
entire understanding of the parties hereto with respect to the subject matter
contained herein and therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
8.11 Amendments. This Agreement may not be changed orally, but only by
an agreement in writing signed by Purchaser, Company and Ascot.
8.12 Severability. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
8.13 Third Party Beneficiaries. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereof.
8.14 Cooperation After Closing.From and after the Closing Date, each of
the parties hereto shall execute such documents and other papers and take such
further actions as may be reasonably required or desirable to carry out the
provisions hereof and the transactions contemplated hereby.
[SIGNATURE PAGE TO FOLLOW]
35
<PAGE>
IN WITNESS WHEREOF, each of the Purchaser, Ascot, Caribsun and Coconut
Hall have executed this Agreement, all as of the day and year first above
written.
PURCHASER
THE GREAT AMERICAN BACKRUB STORE, INC.
By: /s/ William Zanker
----------------------------
Title: President
ASCOT
ASCOT INTERNATIONAL CORP.
By: /s/ David S. Coia
----------------------------
Title: President
CARIBSUN
CARIBSUN CORP.
By: /s/ David S. Coia
----------------------------
Title: President
COCONUT HALL RESORT LIMITED
By: /s/ David S. Coia
----------------------------
Title: President
36
<PAGE>
SCHEDULE 1.1
Ownership of Stock
None
SCHEDULE 1.2
Consents
None
SCHEDULE 1.4
Capital Stock
None
<PAGE>
SCHEDULE 1.5
Financial Statements
[ATTACHED HERETO]
<PAGE>
CARIBSUN, CORP.
BALANCE SHEET
DECEMBER 31, 1997
(Unaudited)
ASSETS
Land $ 9,500,000
--------------
$ 9,500,000
--------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Accrued expenses $ 375,000
Long-term debt 5,000,000
--------------
Total Liabilities $ 5,375,000
Total stockholder's equity $ 4,125,000
--------------
$ 9,500,000
--------------
<PAGE>
CARIBSUN, CORP.
BALANCE SHEET
AUGUST 31, 1997
(Unaudited)
ASSETS
Land $ 9,500,000
--------------
$ 9,500,000
--------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Note payable $ 450,000
Long-term debt 5,000,000
--------------
Total Liabilities 5,500,000
Total stockholder's equity 4,000,000
--------------
$ 9,500,000
<PAGE>
SCHEDULE 1.6
Books and Records
No exceptions
SCHEDULE 1.7
Title to Properties;
Encumbrances
None
SCHEDULE 1.8
Leases
None
<PAGE>
SCHEDULE 1.9
Material Contracts
(a) Employment Contracts
None
(b) Dividend & Distribution Restriction Agreement
None
(c) Loans & Advances
None
(d) Guarantees
None
(e) Management Agreement
None
(f) Non-Compete Agreements
None
(g) Extraordinary Contracts
None
(h) Miscellaneous Contracts which may impair business of Company
None
(i) Contracts and Commitments
None
<PAGE>
SCHEDULE 1.10
Restrictive Documents
Project Description: Residential villas (13)
Residential houses (16)
Condominiums (50) - for right to use program [Phase I]
Hotel - 300 rooms
Casino - 2,500 square feet
Marina yacht club (50 slips)
Tennis complex (20 courts, plus center exhibition court)
Health club and spa
SCHEDULE 1.11
Litigation
None
SCHEDULE 1.12
Taxes
None
<PAGE>
SCHEDULE 1.13
Liabilities
None
<PAGE>
SCHEDULE 1.14
Insurance
1. Sun Alliance (Eastern Caribbean) Limited
Policy # PL9711931
Term: 5/1/97 to 4/30/98
Public Liability $1,000,000 U.S.
Premium $ 1,000.00
Deductible $ -0-
Amounts Paid Out $ -0-
<PAGE>
SCHEDULE 1.15
Intellectual Properties
None
SCHEDULE 1.16
Compliance With Laws
None
<PAGE>
SCHEDULE 1.18
Employee Benefit Plans
and List of Employees
Salary Date
Employee Birth Date Job Title YTD of hire
- -------- ----------- --------- --- -------
None
No plans other than:
None
<PAGE>
SCHEDULE 1.20
Interests in Clients, Suppliers, Etc.
None
SCHEDULE 1.21
Intercompany Transactions
None
<PAGE>
SCHEDULE 1.22
Bank Accounts, Powers of Attorney
and
Compensation of Employees
Account Persons
1. Bank Accounts Number Having Access
Bank Name and Address
None
2. Powers of Attorney
None
3. Compensation of Employees
Employees Salaries Exceeding $25,000
None
<PAGE>
SCHEDULE 2.3
Great American Backrub
Authorized Outstanding
---------- -----------
Common 20,000,000 2,416,854
A Preferred 0 0
B Preferred 15,000,000 0
Existing Common Options or Agreements
Name Expires Price Number Number
---- ------- ----- ------ Under $1.00
-----------
William Zanker Dec-04 0.375 120,000 120,000
Terrance Murray Dec-04 0.375 120,000 120,000
Keith Dee Dec-04 0.375 10,000 10,000
Clint Allen 5.000 100,000
Steven Thompson Dec-04 3.750 120,000
Employee Plan various various 8,500
Simon Abrahams Jul-99 4.000 25,000
Tim Simon Jul-99 4.000 40,000
First Bridge 2.500 107,500
Und. Warrants Feb-00 6.000 125,000
E. Faber Mar-05 5.000 10,000
P. Hanlet Mar-05 5.000 10,000
A. Hyams Mar-05 5.000 10,000
D. Fleisher Mar-05 5.000 10,000
S. Seligman Mar-05 5.000 10,000
A. Hyams Sep-02 0.375 12,500 12,500
D. Fleisher Sep-02 0.375 12,500 12,500
S. Seligman Sep-02 0.375 12,500 12,500
------ ------
863,500 287,500
Agreements to issue Common after closing
Josh Alexander Associates services 1,000,000 1,000,000
Preferred Stock Bridge Warrants exercisable 12/27/97
Harold Hockberger 275,200
Terrance C. Murray 145,550
Keith Dee 79,250
Eastern Valley Holdings Ltd. 500,000
RAASAY S.A. 500,000
HANDA, S.A. 500,000
-------
2,000,000
Total Common 4,280,354 3,704,354
<PAGE>
SCHEDULE 2.4
Purchaser's Interim Financial Statements
[ATTACHED HERETO]
<PAGE>
Summary of Part II of Schedule 2.4
The Part is a nineteen page computer generated report titled "Open
Invoice List." The report lists approximately 139 individuals and entities to
whom the company owes a total of $575,945.58.
Summary of Part III of Schedule 2.4
The Part is a twelve page computer generated report titled "Monthly
Sales Report." The report details the August 1997 service and product sales at
the company's retail locations and one of the company's franchise locations. The
"Gross Sales" as shown on the report are as follows:
Roosevelt Field (franchise location) $31,658.34
Schaumberg 36,222.64
78th and Broadway 29,855.32
91st and Broadway 14,251.93
71st and Broadway 44,000.35
Park Slope 19,702.60
Westchester 31,409.08
81st and Second 23,238.59
Soho (Spring Street) 31,228.85
Bleeker Street 17,011.23
35th and Third 20,758.62
58th and Third 42,176.93
<PAGE>
Great American Backrub
Balance Sheet
AS OF 07/31/97
ASSETS
-------------------------
CURRENT ASSETS
BONY - Checking/Diab A/C (9,526.23)
Cash-Operating (#003-077934) (78,846.87)
Cash Payroll (#003-077926) (10,408.67)
Cash-Warrant(#003-077969) 76,168.45
Cash Register Fund 220.00
CASH-WESTCHESTER 3,677.64
Cash-RB001 (#003-077861) 3,157.84
Cash-RB004 (#003-077853) 1,250.62
Cash-RD005 (#003-077845) 1,072.96
Cash-RB006 (#003-077837) 1,644.16
Cash-RB007 (#003-077829) 1,069.31
Cash-RB011 (#003-77780) 747.05
Cash-RB012 (#003-914755) 2,360.07
BONY-Payroll A/C (9,051.86)
CITIBANK-RB011-96467106 93.69
Cash- Chemical(RB014) 2,336.87
Cash-First Chicago(RB015) 4,249.78
Swiss Bank A/C 161,204.48
Petty Cash 400.00
Cash-RB013 (#003-928993) 1,282.13
Inventory 259,697.20
Notes Rec. - Current 50,937.80
EMPLOYEES EXPENSE ADVANCE 8,350.00
Other Receivables 23,354.66
135.99
A/R-Roosevelt Field 21,961.81
A/R-Cherry Creek Mall 93,180.70
ALLOWANCE FOR BAD DEBTS (26,000.00)
Prepaid Rent 94,689.00
PREPAID INSURANCE 22,927.14
PREPAID STATE INCOME TAX 2,500.00
PREPAID CITY TAXES 1,500.00
----------
Total Current Assets 706,335.72
FIXED ASSETS
EQUIPMENT 22,250.00
EQUIPMENT - RB001 95,293.00
EQUIPMENT-RB4 21,100.00
EQUIPMENT-RB5 10,458.00
EQUIPMENT - RB006 29,189.00
EQUIPMENT 15,100.00
<PAGE>
Great American Backrub
Balance Sheet
AS OF 07/31/97
EQUIPMENT -- WESTCHESTER 62,057.00
EQP-COLUMBUS AVE 15,255.00
EQUIPMENT-RB10 15,202.00
EQUIPMENT PARK SLOPE #12 33,656.88
EQUIPMENT - (RB0012) 28,121.59
Furniture & Equipment-RB013 21,470.95
Furniture & Equipment-RB014 34,601.18
Furniture & Fixtures-RB015 26,465.70
EQUIPMENT 3,113.30
EQUIPMENT - CORPORATE 30,227.16
EQP RENTAL RB10 (0.40)
LEASEHOLD IMPRO-RB1 122,575.91
LHI - RB004 32,505.43
LEASEHOLD IMPROV. - RB5 18,431.00
LEASEHOLD IMPROVEMENTS 31,376.90
LSE. HOLD IMPRO. WEST 21,088.00
LHI -WESTCHERSTER 247,894.00
LSE HOLD IMPRO-RB10 30,833.80
LSE HOLD IMPRO-JFK 34,505.47
LHI - PARK SLOPE(RB0011) 64,651.25
LEASEHOLD IMPROVE. (RB012) 29,697.37
LSE HOLD IMPRO - (RB013) 42,729.74
LSE HOLD IMPRO - (RB014) 81,287.80
LSE HOLD IMPRO - (RB015) 170,845.13
Warehouse Improvements 2,524.39
COMPUTER EQUIPMEMT 4,984.00
COMPUTER EQUIPMENT - RB4 4,170.00
COMPUTER EQUIPMENT - RB 5 5,232.15
COMPUTER EQUIPMENT - RB6 4,045.00
COMPUTER EQUIPMENT -RB7 4,045.00
COMPUTER EQUIPMENT - RB8 4,045.00
COMPUTER EQUIPMENT - RB9 3,229.25
COMPUTER EQUIPMENT - RB10 4,164.00
COMPUTER EQUIPMENT 2,991.99
COMPUTER EQUIPMENT 4,191.00
COMPUTER EQUIPMENT 3,994.00
COMPUTER EQUIPMENT 366.41
Accum Deprec-Furn & Fix (239,694.00)
Accum Deprec-Building (30,654.00)
Acc Depr-Computer Equip (3,149.70)
------------
Total Fixed Assets 1,166,466.67
OTHER ASSETS
Utility Deposits 9,373.85
UTILITY DEPOSIT - RE004 630.00
Health Insurance Deposits 16,000.00
<PAGE>
Great American Backrub
Balance Sheet
AS OF 07/31/97
Rent Deposits 290,932.23
----------
Total Other Assets 316,936.08
----------
Total Assets 2,189,738.47
============
LIABILITIES & EQUITY
-------------------------
CURRENT LIABILITIES
Accounts Payable 632,223.75
Accrued Payroll 84,477.06
Fica/WH Payable 1,267.22
Accrued Payroll Taxes (0.03)
FUTA liability 0.03
SUI Liability (1,054.35)
State W/H Liability 1.20
NYC W/H Liability (4.46)
SDI Liability 1,608.51
CA State W/H Tax Liability (102.32)
Connecticut SUI (453.06)
Sales Tax Payable 3,278.70
Deferred Revenue 52,675.62
Accrued Other Exps 152,597.99
Accrued Rent 365,652.43
Bridge Notes Payable 262,666.67
Original Issue Discount (102,803.00)
ACCRUED VACATION 40,000.00
---------------
Total Current Liabilities 1,492,031.96
LONG TERM LIABILITIES
---------------
Total Long Term Liab. 0.00
------------
Total Liabilities 1,492,031.96
EQUITY
Common Stock 2,416.50
Addnl Paid In Capital 8,865,331.47
Retained Earnings (7,005,507.01)
Current Earnings (1,164,534.45)
-------------
Total Equity 697,706.51
------------
Total Liab. & Equity 2,189,738.47
============
<PAGE>
Income Statement
FOR THE MONTH ENDING 07/31/97
<TABLE>
<CAPTION>
CURR. PERIOD RATIO: NET REVENUE
YTD RATIO.........: NET REVENUE THIS MONTH RATIO 7 MONTHS RATIO
====================================================================================================
<S> <C> <C> <C> <C>
INCOME
Service Sales 239,312.06 88.0 1,981,073.14 85.8
Product Sales 49,098.40 18.1 444,872.24 19.3
NO CHARGE SALES 0.00 0.0 (9,706.47) (0.4)
Royalties/Franchise Fees 0.00 0.0 15,124.88 0.7
Returns & Allowances (1,418.58) (0.5) (22,021.82) (1.0)
Other Income 0.00 0.0 63.08 0.0
SALES DISCOUNTS (15,026.56) (5.5) (99,544.81) (4.3)
----------- ----- ------------ -----
Total Sales 271,965.32 100.0 2,309,860.24 100.0
COST OF GOODS SOLD
COGS - Service Sales 77,961.22 28.7 675,984.92 29.3
DIRECT - FICA 4,809.20 1.8 41,194.78 1.8
DIRECT - MEDICARE 1,124.72 0.4 9,634.28 0.4
DIRECT - SUTA 1,357.65 0.5 34,441.09 1.5
Service - FUTA 329.57 0.1 4,179.51 0.2
COGS - Product Purchases 29,459.06 10.8 259,997.93 11.3
Freight In 281.66 0.1 2,065.30 0.1
----------- ----- ------------ -----
Total Cost of Goods Sold 115,323.08 42.4 1,027,497.81 44.5
----------- ----- ------------ -----
Gross Profit 156,642.24 57.6 1,282,362.43 55.5
EXPENSES
Advertising-Print 4,414.38 1.6 49,757.63 2.2
Advertising-Help Wanted (23.25) (0.0) 5,329.46 0.2
DISPLAY 0.00 0.0 (3,531.12) (0.2)
Amex Charges 1,138.37 0.4 8,821.29 0.4
Bank Charges 1,545.94 0.6 14,445.55 0.6
CAM CHARGES 3,995.95 1.5 27,426.71 1.2
Cleaning 0.00 0.0 140.00 0.0
Dues & Subscriptions 0.00 0.0 959.95 0.0
EQUIPMENT RENTAL 457.89 0.2 2,773.47 0.1
Messenger Service 2,189.76 0.8 22,184.94 1.0
Garbage 523.27 0.2 4,362.61 0.2
Gifts 1,136.63 0.4 1,136.63 0.0
Insurance - Business 5,200.00 1.9 37,780.57 1.6
Insurance - Property & Casual 0.00 0.0 16,668.44 0.7
Insurance - Health 0.00 0.0 31,702.30 1.4
Insurance - Liability 0.00 0.0 5,029.20 0.2
Insurance-Director/Officer 3,000.00 1.1 27,340.00 1.2
INSURANCE-DISABILITY 1,570.00 0.6 3,103.58 0.1
Insurance - Worker's Comp 477.75 0.2 16,725.75 0.7
Licenses & Fees 0.00 0.0 6,159.00 0.3
</TABLE>
Management Use only Not intended for distribution
<PAGE>
Income Statement
FOR THE MONTH ENDING 07/31/97
<TABLE>
<CAPTION>
CURR. PERIOD RATIO: NET REVENUE
YTD RATIO.........: NET REVENUE THIS MONTH RATIO 7 MONTHS RATIO
====================================================================================================
<S> <C> <C> <C> <C>
MC/Visa Charges 1,460.37 0.5 12,077.75 0.5
Meals & Entertainment 0.00 0.0 14,638.20 0.6
Miscellaneous (10,258.27) (3.8) (5,817.49) (0.3)
Office Supplies 7,615.84 2.8 63,046.82 2.7
Outside Services 1,189.79 0.4 16,715.91 0.7
Over/Shorts 629.89 0.2 11,576.22 0.5
Parking & Tolls 0.00 0.0 894.00 0.0
Payroll Processing 374.30 0.1 3,034.15 0.1
Petty Cash 0.00 0.0 867.76 0.0
Postage & Deliveries 0.00 0.0 1,655.00 0.1
Printing & Stationery 115.19 0.0 10,491.26 0.5
Pro Fees-Legal & Accting 8,000.00 2.9 195,867.83 8.5
Professional Fees-Consult 2,500.00 0.9 25,158.75 1.1
Pro Fees-Public Relations 0.00 0.0 19,200.58 0.8
Pro Fees-Transfer Agent 486.10 0.2 4,461.99 0.2
Rent-Building 83,916.66 30.9 660,915.34 28.6
Repairs & Maintenance 2,136.67 0.8 24,678.53 1.1
Subscriptions & Dues 0.00 0.0 282.95 0.0
Supplies 215.42 0.1 4,272.08 0.2
Property Tax 3,209.69 1.2 12,214.49 0.5
Telephone 3,917.30 1.4 48,986.19 2.1
Transportation 0.00 0.0 2,873.87 0.1
Travel 0.00 0.0 19,815.61 0.9
Utilities 4,826.72 1.8 28,890.56 1.3
Interest Expense 88.37 0.0 154,965.61 6.7
Income Tax Expense 222.05 0.1 5,502.05 0.2
Penalties & Fines 0.00 0.0 2,162.64 0.1
Salaries & Wages 52,658.80 19.4 336,584.01 14.6
Salaries-Corporate 13,731.98 5.0 169,281.65 7.3
Salaries-Stores 25,466.18 9.4 158,774.86 6.9
FICA 4,903.17 1.8 33,476.72 1.4
Medicare 1,312.50 0.5 9,420.48 0.4
FUTA 111.87 0.0 1,493.67 0.1
SUTA 854.28 0.3 14,723.12 0.6
----------- ----- ------------ -----
Total Expenses 235,311.56 86.5 2,341,499.12 101.4
----------- ----- ------------ -----
Net Operating Income (78,669.32) (28.9) (1,059,136.69) (45.9)
OTHER INCOME
Interest Income 912.22 0.3 10,550.24 0.5
OTHER EXPENSES
Depreciation-Furn. & Fixt 12,800.00 4.7 115,948.00 5.0
----------- ----- ------------ -----
Net Income (90,557.10) (33.3) (1,164,534.45) (50.4)
=========== ===== ============ =====
</TABLE>
<PAGE>
Great American Backrub
Department Income Statement
FOR THE MONTH ENDING 07/31/97
<TABLE>
<CAPTION>
01 3RD AVE, NY
CURR. PERIOD RATIO: NET REVENUE
YTD RATIO.........: NET REVENUE THIS MONTH RATIO 7 MONTHS RATIO
====================================================================================================
<S> <C> <C> <C> <C>
INCOME
Service sales 33,304.45 90.6 266,314.74 89.4
Product sales 5,936.06 16.1 50,170.17 16.8
No charge sales 0.00 0.0 (2,649.48) (0.9)
Returns & allowances (246,65) (0.7) (2,313.50) (0.8)
Sales discounts (2,222.67) (6.0) (13,599.83) (4.6)
--------- ----- ---------- -----
Total Sales 36,771.19 100.0 297,922.10 100.0
COST OF GOODS SOLD
Direct Labor 10,169.37 27.7 84,252.19 28.3
Direct - fica 575.35 1.6 5,244.89 1.8
Direct - medicare 134.56 0.4 1,226.65 0.4
Direct - suta 114.49 0.3 2,890.29 1.0
COST OF SALES - FUTA 20.82 0.1 327.19 0.1
Cogs-product purchases 3,561.64 9.7 29,371.31 9.9
--------- ----- ---------- -----
Total Cost of Goods Sold 14,576.23 39.6 123,312.52 41.4
--------- ----- ---------- -----
Gross Profit 22,194.96 60.4 174,609.58 58.6
EXPENSES
advertising 643.25 1.7 4,097.87 1.4
amex charges 165.73 0.5 1,358.78 0.5
UPS/Shipping 122.71 0.3 1,101.76 0.4
insurance - business 600.00 1.6 4,422.86 1.5
mc/visa charges 155.45 0.4 1,314.27 0.4
miscellaneous 0.00 0.0 160.00 0.1
supplies 158.70 0.4 2,456.21 0.8
Outside Services 0.00 0.0 485.00 0.2
overs/shorts 120.40 0.3 1,047.28 0.4
rent - building 11,767.00 32.0 82,415.83 27.7
repairs 564.60 1.5 1,988.47 0.7
telephone 322.99 0.9 2,190.06 0.7
travel 0.00 0.0 400.00 0.1
utilities 411.58 1.1 2,897.74 1.0
salaries & wages 2,372.08 6.5 20,729.54 7.0
SALARY - MANAGER 1,703.23 4.6 12,648.30 4.2
fica 215.85 0.6 2,083.70 0.7
medicare 50.48 0.1 487.33 0.2
futa 0.00 0.0 56.00 0.0
suta 20.40 0.1 1,814.09 0.6
--------- ----- ---------- -----
Total Expenses 19,394.45 52.7 144,155.09 48.4
--------- ----- ---------- -----
Net Operating Income 2,800.51 7.6 30,454.49 10.2
OTHER INCOME
OTHER EXPENSES
DEPRECIATION EXPENSE-RB1 1,000.00 2.7 7,000.00 2.3
--------- ----- ---------- -----
Net Income 1,800.51 4.9 23,454.49 7.9
========= ===== ========== =====
</TABLE>
Management Use only Not intended for distribution
<PAGE>
Great American Backrub
Department Income Statement
FOR THE MONTH ENDING 07/31/97
<TABLE>
<CAPTION>
02 JFK - IAB
CURR. PERIOD RATIO: NET REVENUE
YTD RATIO.........: NET REVENUE THIS MONTH RATIO 7 MONTHS RATIO
================================================================================================
<S> <C> <C> <C> <C>
INCOME ----- ------ ----- -----
Total Sales 0.00 0.0 0.00 0.0
COST OF GOODS SOLD
----- ------ ----- -----
Total cost of Goods Sold 0.00 0.0 0.00 0.0
----- ------ ----- -----
Gross Profit 0.00 0.0 0.00 0.0
EXPENSES
----- ------ ----- -----
Total Expenses 0.00 0.0 0.00 0.0
----- ------ ----- -----
Net Operating Income 0.00 0.0 0.00 0.0
OTHER INCOME
OTHER EXPENSES
----- ------ ----- -----
Net income 0.00 0.0 0.00 0.0
===== ====== ===== =====
</TABLE>
Management Use only Not intended for distribution
<PAGE>
Great American Backrub
Department Income Statement
FOR THE MONTH ENDING 07/31/97
<TABLE>
<CAPTION>
03 LAS VEGAS
CURR. PERIOD RATIO: NET REVENUE
YTD RATIO.........: NET REVENUE THIS MONTH RATIO 7 MONTHS RATIO
================================================================================================
<S> <C> <C> <C> <C>
INCOME ------
----- ------ ----- -----
Total Sales 0.00 0.0 0.00 0.0
COST OF GOODS SOLD ----- ------ ----- -----
Total cost of Goods Sold 0.00 0.0 0.00 0.0
----- ------ ----- -----
Cross Profit 0.00 0.0 0.00 0.0
EXPENSES ----- ------ ----- -----
Total Expenses 0.00 0.0 0.00 0.0
----- ------ ----- -----
Net operating Income 0.00 0.0 0.00 0.0
OTHER INCOME
OTHER EXPENSES
----- ------ ----- -----
Net Income 0.00 0.0 0.00 0.0
===== ====== ===== =====
</TABLE>
Management Use only Not intended for distribution
<PAGE>
Great American Backrub
Department Income Statement
FOR THE MONTH ENDING 07/31/97
<TABLE>
<CAPTION>
04 36TH STREET
CURR. PERIOD RATIO: NET REVENUE
YTD RATIO.........: NET REVENUE THIS MONTH RATIO 7 MONTHS RATIO
====================================================================================================
<S> <C> <C> <C> <C>
INCOME
Service sales 15,717.50 91.6 140,406.01 90.7
Sales - product 2,669.48 15.6 24,469.49 15.8
RETURNS & ALLOWANCES 0.00 0.0 (767.67) (0.5)
RETURNS & ALLOWANCES (164.85) (1.0) (975.10) (0.6)
SALES DISCOUNTS 36TH STREET (1,067.98) (6.2) (8,345.53) (5.4)
--------- ---- ---------- ----
Total Sales 17,154.15 100.0 154,787.20 100.0
--------- ---- ---------- ----
COST OF GOODS SOLD
DIRECT LABOR 5,363.60 31.3 44,185.63 28.5
DIRECT - FICA 310.19 1.8 2,744.96 1.8
DIRECT - MEDICARE 72.54 0.4 641.96 0.4
DIRECT - SUTA 36TH STREET 151.88 0.9 3,143.31 2.0
FUTA EXPENSE 25.64 0.1 343.19 0.2
cogs-product purchases 1,601.69 9.3 14,301.01 9.2
--------- ---- ---------- ----
Total Cost of Goods Sold 7,525.54 43.9 65,360.06 42.2
--------- ---- ---------- ----
Gross Profit 9,628.61 56.1 89,427.14 57.8
EXPENSES
ADVERTISING 335.25 2.0 1,901.95 1.2
AMEX CHARGES 81.52 0.5 684.89 0.4
UPS/Shipping 36.80 0.2 361.29 0.2
BUILDING INSURANCE 400.00 2.3 2,926.86 1.9
VISA/MC CHARGES 102.61 0.6 868.60 0.6
misc exp - 36th st 300.00 1.7 880.00 0.6
SUPPLIES-RB4 52.13 0.3 1,969.65 1.3
OUTSIDE SERVICES 0.00 0.0 324.75 0.2
overs/shorts 894.66 5.2 1,769.03 1.1
rent - 35th st 3,875.00 22.6 20,750.00 13.4
REPAIRS 0.00 0.0 1,046.08 0.7
telephone - 36 st 231.75 1.4 1,791.76 1.2
utilities - 36 st 320.56 1.9 2,173.33 1.4
Salaries & wages 1,671.30 9.7 10,725.91 6.9
MANAGERS SALARY 2,554.85 14.9 15,966.52 10.3
FICA 243.69 1.4 1,651.08 1.1
medicare 56.99 0.3 386.14 0.2
FUTA 3.92 0.0 175.53 0.1
SUTA 21.57 0.1 1,539.32 1.0
--------- ---- ---------- ----
Total Expenses 11,182.60 65.2 67,892.69 43.9
--------- ---- ---------- ----
Net Operating Income (1,553.99) (9.1) 21,534.45 13.9
OTHER INCOME
OTHER EXPENSES
DEPRECIATION EXPENSE-RB4 400.00 2.3 2,900.00 1.9
--------- ---- ---------- ----
Net Income (1,953.99) (11.4) 18,634.45 12.0
========= ==== ========== ====
</TABLE>
Management Use only Not intended for distribution
<PAGE>
Great American Backrub
Department Income Statement
FOR THE MONTH ENDING 07/31/97
<TABLE>
<CAPTION>
05 BLEECKER STREET
CURR. PERIOD RATIO: NET REVENUE
YTD RATIO.........: NET REVENUE THIS MONTH RATIO 7 MONTHS RATIO
====================================================================================================
<S> <C> <C> <C> <C>
INCOME
Service sales 14,322.50 93.0 106,681.95 90.9
sales - product 2,041.40 13.3 17,555.90 15.0
sales - product bleecker 0.00 0.0 (1,037.34) (0.9)
RETURNS & ALLOWANCES (289.96) (1.9) (792.71) (0.7)
SALES DISCOUNTS BLEECKER (675.96) (4.4) (5,040.32) (4.3)
--------- ----- ---------- -----
Total Sales 15,397.98 100.0 117,367.48 100.0
COST OF GOODS SOLD
DIRECT LABOR 6,418.37 41.7 46,523.97 39.6
DIRECT - FICA 391.26 2.5 2,859.17 2.4
DIRECT - MEDICARE 91.50 0.6 668.65 0.6
DIRECT - SUTA BLEECKER ST 116.53 0.8 1,973.82 1.7
FUTA EXPENSE 19.87 0.1 184.62 0.2
cogs-product purchases 1,224.84 8.0 10,230.18 8.7
--------- ----- ---------- -----
Total Cost Of Goods Sold 8,262.37 53.7 62,440.41 53.2
--------- ----- ---------- -----
Gross Profit 7,135.61 46.3 54,927.07 46.8
EXPENSES
ADVERTISING 65.70 0.4 727.50 0.6
AMEX CHARGES 76.03 0.5 458.51 0.4
UPS/Shipping 74.26 0.5 291.85 0.2
garbage - rb5 54.13 0.4 378.91 0.3
BUILDING INSURANCE 300.00 1.9 2,256.86 1.9
VISA/MC CHARGES 97.35 0.6 927.56 0.8
SUPPLIES 346.61 2.3 2,277.54 1.9
outside serv.-rb5 0.00 0.0 541.25 0.5
over/shorts 710.52 4.6 1,200.08 1.0
rent - bleecker st 2,625.00 17.0 18,375.00 15.7
REPAIRS 111.00 0.7 734.62 0.6
supplies - bleecker st 0.00 0.0 127.80 0.1
telephone - bleecker st 229.13 1.5 1,606.56 1.4
utilities - bleecker st 214.93 1.4 1,634.96 1.4
FINES 0.00 0.0 16.00 0.0
salaries & wages 2,514.96 16.3 10,668.20 9.1
MANAGER SALARY 0.00 0.0 6,923.07 5.9
fica 128.73 0.8 1,105.03 0.9
medicare 30.11 0.2 258.45 0.2
FUTA EXPENSE 10.94 0.1 128.67 0.1
SUTA 60.16 0.4 786.69 0.7
--------- ----- ---------- -----
Total Expenses 7,649.56 49.7 51,425.11 43.8
--------- ----- ---------- -----
Net Operating Income (513.95) (3.3) 3,501.96 3.0
OTHER INCOME
OTHER EXPENSES
DEPRECIATION EXPENSES-RB5 400.00 2.6 2,900.00 2.5
--------- ----- ---------- -----
Net Income (913.95) (5.9) 601.96 0.5
========= ===== ========== =====
</TABLE>
Management Use only Not intended for distribution
<PAGE>
Great American Backrub
Department Income Statement
FOR THE MONTH ENDING 07/31/97
<TABLE>
<CAPTION>
06 SPRING STREET-RB6
CURR. PERIOD RATIO: NET REVENUE
YTD RATIO.........: NET REVENUE THIS MONTH RATIO 7 MONTHS RATIO
====================================================================================================
<S> <C> <C> <C> <C>
INCOME
Service sales 21,848.95 85.1 155,202.92 83.0
product Sales 4,802.73 18.7 39,382.55 21.1
sales #2 0.00 0.0 (557.53) (0.3)
returns & allowances (69.95) (0.3) (1,141.56) (0.6)
SALES DISCOUNTS SPRING ST (914.19) (3.6) (5,979.82) (3.2)
--------- ----- ---------- -----
Total Sales 25,667.54 100.0 186,909.56 100.0
COST OF GOODS SOLD
DIRECT LABOR 6,378.57 24.9 51,461.35 27.5
DIRECT - FICA 372.70 1.5 3,201.83 1.7
DIRECT - MEDICARE 87.16 0.3 748.82 0.4
DIRECT - SUTA SPRING STRE 112.28 0.4 2,371.73 1.3
FUTA EXPENSE 20.41 0.1 267.40 0.1
cogs-product purchases 2,881.64 11.2 23,155.14 12.4
--------- ----- ---------- -----
Total Cost of Goods Sold 9,852.76 38.4 81,206.27 43.4
--------- ----- ---------- -----
Gross Profit 15,814.78 61.6 105,700.29 56.6
EXPENSES
advertising 33.90 0.1 350.20 0.2
amex charges 125.46 0.5 840.50 0.4
UPS/Shipping 33.18 0.1 426.34 0.2
garbage 43.30 0.2 303.10 0.2
insurance - business 300.00 1.2 2,271.71 1.2
mc/visa charges 142.67 0.6 1,041.77 0.6
supplies 214.06 0.8 1,611.80 0.9
Outside Services 30.00 0.1 30.00 0.0
overs/shorts 3.88 0.0 908.51 0.5
rent-building 5,000.00 19.5 35,000.00 18.7
repairs 111.00 0.4 704.89 0.4
subscriptions & dues 0.00 0.0 258.00 0.1
telephone 227.86 0.9 1,542.50 0.8
travel 0.00 0.0 200.00 0.1
salaries & wages 2,505.23 9.8 13,745.53 7.4
SALARY- MANAGER 2,980.67 11.6 13,990.32 7.5
fica 316.45 1.2 1,659.59 0.9
medicare 74.01 0.3 388.11 0.2
futa 0.86 0.0 166.48 0.1
suta 4.74 0.0 1,326.55 0.7
--------- ----- ---------- -----
Total Expenses 12,147.27 47.3 76,765.92 41.1
--------- ----- ---------- -----
Net Operating Income 3,667.51 14.3 28,934.37 15.5
OTHER INCOME
OTHER EXPENSES
DEPRECIATION EXPENSE-RB6 800.00 3.1 5,300.00 2.8
--------- ----- ---------- -----
Net Income 2,867.51 11.2 23,634.37 12.6
========= ===== ========== =====
</TABLE>
Management Use only Not intended for distribution
<PAGE>
Great American Backrub
Department Income Statement
FOR THE MONTH ENDING 07/31/97
<TABLE>
<CAPTION>
07 81st AND SECOND AVENUE
CURR. PERIOD RATIO: NET REVENUE
YTD RATIO.........: NET REVENUE THIS MONTH RATIO 7 MONTHS RATIO
====================================================================================================
<S> <C> <C> <C> <C>
INCOME
Service sales 18,458.60 92.1 147,036.00 92.6
PRODUCT SALES 2,959.36 14.8 22,531.45 14.2
NO CHARGES SALES 0.00 0.0 (378.52) (0.2)
RETURNS & ALLOWANCES (46.85) (0.2) (304.80) (0.2)
SALES DISCOUNTS 81st AND (1,334.01) (6.7) (10,070.22) (6.3)
--------- ----- ---------- -----
Total Sales 20,037.10 100.0 158,813.91 100.0
COST OF GOODS SOLD
DIRECT LABOR 7,114.33 35.5 54,113.68 34.1
DIRECT - FICA 390.95 2.0 3,387.09 2.1
DIRECT - MEDICARE 91.43 0.5 792.15 0.5
DIRECT -- SUTA 81st AND SE 58.25 0.3 2,130.98 1.3
FUTA EXPENSE 10.59 0.3 244.09 0.2
COGS-RB7 1,775.62 8.9 11,181.07 8.3
--------- ----- ---------- ----
Total Cost of Goods Sold 9,441.17 47.1 73,849.06 46.5
--------- ----- ---------- ----
Gross Profit 10,595.93 52.9 84,964.85 53.5
EXPENSES
ADVERTISING 187.60 0.9 523.85 0.3
AMEX CHARGES 108.31 0.5 794.91 0.5
UPS/Shipping 95.68 0.5 621.97 0.4
garbage-rb7 37.89 0.2 503.35 0.3
BUSINESS INSURANCE 300.00 1.5 2,271.71 1.4
VISA/MC CHARGES 119.95 0.6 913.44 0.6
MISCELLANEOUS 0.00 0.0 100.00 0.1
SUPPLIES 211.58 1.1 1,951.73 1.2
outside serv.-rb7 0.00 0.0 541.25 0.3
OVER/SHORT (18.19) (0.1) 1,951.41 1.2
rent 81st st 6,400.00 31.9 45,800.00 28.8
REPAIRS 369.00 1.8 796.92 0.5
TELEPHONE-RB7 263.40 1.3 1,605.28 1.0
COX EDISON-RB7 0.00 0.0 840.33 0.5
SALARIES AND WAGES 2,619.65 13.1 16,522.10 10.4
MANAGER SALARY 2,554.85 12.8 14,611.92 9.2
PICA 292.60 1.5 1,846.29 1.2
MEDICARE 68.43 0.3 431.78 0.3
FUTA EXPENSE 8.25 0.0 188.96 0.1
SUTA EXPENSE 45.46 0.2 1,296.13 0.8
--------- ----- ---------- ----
Total Expenses 13,664.46 68.2 94,113.33 59.3
--------- ----- ---------- ----
Net Operating Income (3,068.53) (15.3) (9,148.48) (5.8)
OTHER INCOME
OTHER EXPENSES
DEPRECIATION EXPENSE-RB8 500.00 2.5 3,500.00 2.2
--------- ----- ---------- ----
Net Income (3,568.53) (17.8) (12,648.48) (8.0)
========= ==== ========== ====
</TABLE>
Management Use only Not intended for distribution
<PAGE>
Great American Backrub
Department Income Statement
FOR THE MONTH ENDING 07/31/97
<TABLE>
<CAPTION>
08 WESTCHESTER
CURR. PERIOD RATIO: NET REVENUE
YTD RATIO.........: NET REVENUE THIS MONTH RATIO 7 MONTHS RATIO
====================================================================================================================
<S> <C> <C> <C> <C> <C>
INCOME
Service sales 22,666.65 87.7 201,164.21 87.1
PRODUCT SALES 4,827.35 18.7 46,293.75 20.0
NO CHARGE SALES 0.00 0.0 (1,655.66) (0.7)
RETURNS & ALLOWANCES (238.55) (0.9) (5,127.90) (2.2)
SALES DISCOUNTS WESTCHESTER (1,395.30) (5.4) (9,741.80) (4.2)
--------- ----- ---------- -----
Total Sales 25,860.15 100.0 230,932.60 100.0
COST OF GOODS SOLD
DIRECT LABOR 5,968.12 23.1 50,624.22 21.9
DIRECT - FICA 355.55 1.4 3,294.44 1.4
DIRECT - MEDICARE 83.15 0.3 770.48 0.3
DIRECT - SUTA WESTCHESTER 58.54 0.2 3,191.06 1.4
FUTA EXPENSE 10.64 0.0 363.52 0.2
COST OF GOODS SOLD-RB008 2,896.41 11.2 26,992.99 11.7
--------- ----- ---------- -----
Total Cost of Goods Sold 9,372.41 36.2 85,236.71 36.9
--------- ----- ---------- -----
Gross Profit 16,487.74 63.8 145,695.89 63.1
EXPENSES
ADVERTISING 973.15 3.8 1,712.39 0.7
AMEX CHARGES 107.55 0.4 840.39 0.4
BANK CHARGES 208.96 0.8 793.67 0.3
CAM CHARGES WESTCHESTER 2,430.95 9.4 15,439.71 6.7
UPS/Shipping 47.13 0.2 363.07 0.2
GARBAGE 75.43 0.3 528.01 0.2
INSURANCE EXPENSE 400.00 1.5 2,933.14 1.3
VISA/MC CHARGES 133.83 0.5 1,189.99 0.5
MISCELLANEOUS-RB8 0.00 0.0 92.50 0.0
SUPPLIES-RB8 90.83 0.4 1,285.18 0.6
OVER/SHORT 19.67 0.1 1,179.35 0.5
PRO-FEES RR8 0.00 0.0 633.75 0.3
RENT-RB8 7,666.66 29.6 48,960.51 21.2
REPAIRS-MAIN. RB8 0.00 0.0 55.00 0.0
TELEPHONE-RB8 66.86 0.3 1,737.07 0.8
TRAVEL-RB8 0.00 0.0 200.00 0.1
CON EDISON-RB8 0.00 0.0 1,395.05 0.6
SALARIES & WAGES 2,913.09 11.3 19,798.53 8.6
SALARIES-STORE MANAGER 2,980.95 11.5 18,412.68 8.0
FICA EXPENSE 324.84 1.3 2,345.89 1.0
MEDICARE EXPENSE 75.97 0.3 482.43 0.2
FUTA EXPENSE 20.38 0.1 174.11 0.1
SUTA EXPENSE 112.07 0.4 1,477.12 0.6
--------- ----- ---------- -----
Total Expenses 18,648.02 72.1 122,029.54 52.8
--------- ----- ---------- -----
Net Operating Income (2,160.28) (8.4) 23,666.35 10.2
OTHER INCOME
OTHER EXPENSES
DEPRECIATION EXPENSE-RB8 3,000.00 11.6 20,500.00 8.9
--------- ----- ---------- -----
Net Income (5,160.28) (20.0) 3,166.35 1.4
========= ===== ========== =====
</TABLE>
Management Use only Not intended for distribution
<PAGE>
Great American Backrub
Department Income Statement
FOR THE MONTH ENDING 07/31/97
<TABLE>
<CAPTION>
09 COLUMBUS AVE
CURR. PERIOD RATIO: NET REVENUE
YTD RATIO.........: NET REVENUE THIS MONTH RATIO 7 MONTHS RATIO
====================================================================================================
<S> <C> <C> <C> <C>
INCOME
Service sales 0.00 0.0 29,006.87 79.5
PRODUCT SALES 0.00 0.0 8,861.44 24.3
NO CHARGE SALES 0.00 0.0 (234.12) (0.6)
RETURNS & ALLOWANCES 0.00 0.0 (59.90) (0.2)
SALES DISCOUNTS COLUMBUS 0.00 0.0 (1,065.38) (2.9)
------ --- --------- -----
Total Sales 0.00 0.0 36,508.91 100.0
COST OF GOODS SOLD
DIRECT LABOR 0.00 0.0 20,775.29 56.9
DIRECT - FICA 0.00 0.0 1,475.49 4.0
DIRECT - MEDICARE 0.00 0.0 345.07 0.9
DIRECT - SUTA COLUMBUS AV 66.21 0.0 928.02 2.5
SERVICE - FUAT 10.73 0.0 105.82 0.3
COGS-RB9 0.00 0.0 5,135.37 14.1
------ --- --------- -----
Total Cost of Goods Sold 76.94 0.0 28,765.06 78.8
------ --- --------- -----
Gross Profit (76.94) 0.0 7,743.85 21.2
EXPENSES
Advertising 0.00 0.0 107.40 0.3
AMEX CHARGERS 0.00 0.0 166.78 0.5
EQUIPMMT RENTAL 0.00 0.0 233.82 0.6
UPS/Shipping 0.00 0.0 406.27 1.1
GARBAGE 0.00 0.0 86.60 0.2
BUSINESS INSURANCE 400.00 0.0 2,982.86 8.2
MC\VISA CHARGES 0.00 0.0 253.42 0.7
SUPPLIES 0.00 0.0 1,128.80 3.1
outside sevr.rb9 0.00 0.0 253.37 0.7
OVER/SHORT 0.00 0.0 440.36 1.2
RENT-RB9 0.00 0.0 20,520.00 56.2
REPAIRS-RB9 0.00 0.0 463.07 1.3
SUPPLIES 0.00 0.0 149.80 0.4
TELEPHONE-RB9 101.32 0.0 1,365.88 3.7
CON EDISON-RB9 0.00 0.0 1,231.17 3.4
SALARIES & WAGES 0.00 0.0 1,124.60 3.1
MANAGER SALARY 0.00 0.0 1,976.97 5.4
FICA EXPENSE 0.00 0.0 227.23 0.6
MEDICARE EXPENSE 0.00 0.0 53.15 0.1
FUTA EXPENS8 0.00 0.0 9.37 0.0
SUTA 0.00 0.0 200.93 0.6
------ --- --------- -----
Total Expenses 501.32 0.0 33,381.85 91.4
------ --- --------- -----
Net Operating Income (578.26) 0.0 (25,638.00) (70.2)
OTHER INCOME
OTHER EXPENSES
DEPRECIATION EXPENSE-RB9 0.00 0.0 3,000.00 8.2
------- --- ---------- -----
Net Income (578.26) 0.0 (28,638.00) (78.4)
======= === ========== =====
</TABLE>
Management Use only Not intended for distribution
<PAGE>
Great American Backrub
Department Income Statement
FOR THE MONTH ENDING 07/31/97
<TABLE>
<CAPTION>
10 81ST & BROADWAY
CURR. PERIOD RATIO: NET REVENUE
YTD RATIO.........: NET REVENUE THIS MONTH RATIO 7 MONTHS RATIO
====================================================================================================
<S> <C> <C> <C> <C>
INCOME
Service sales 0.00 0.0 88,854.98 91.6
PRODUCT SALES 0.00 0.0 14,621.65 15.1
NO CHARGE SALES 0.00 0.0 (555.09) (0.6)
RETURNS & ALLOWANCES 0.00 0.0 (720.28) (0.7)
SALES DISCOUNTS 81ST & BROADWAY 0.00 0.0 (5,164.23) (5.3)
---------- ----- --------- -----
Total Sales 0.00 0.0 97,037.03 100.0
COST OF GOODS SOLD
DIRECT LABOR 140.18 0.0 31,888.85 32.9
DIRECT - FICA 121.73 0.0 2,147.78 2.2
DIRECT - MEDICARE 28.47 0.0 502.31 0.5
DIRECT - SUTA 81ST & BROADWAY 144.32 0.0 3,385.50 3.5
Direct - Futa 28.11 0.0 375.04 0.4
COGS-RB10 0.00 0.0 8,446.30 8.7
---------- ----- --------- -----
Total Cost of Goods Sold 462.92 0.0 46,745.78 48.2
---------- ----- --------- -----
Gross Profit (462.81) 0.0 50,291.25 51.8
EXPENSES
Advertising 0.00 0.0 745.85 0.8
AMEX CHARGES 4.59 0.0 382.56 0.4
EQUIPMENT RENTAL 40.97 0.0 286.79 0.3
UPS/Shipping 25.68 0.0 415.31 0.4
GARBAGE-RB10 43.30 0.0 129.90 0.1
BUSINESS INSURANCE 400.00 0.0 3,014.57 3.1
MC/VISA CHARGES 55.65 0.0 520.51 0.5
SUPPLIES-RB10 0.00 0.0 1,474.22 1.5
Outside serv-rb10 190.00 0.0 693.00 0.7
OVER/SHORT 0.00 0.0 326.29 0.3
RENT-RB10 1,203.00 0.0 55,386.00 57.1
REPAIRS-RB10 (9.16) 0.0 1,630.79 1.7
PROPERTY TAX 0.00 0.0 763.51 0.8
TELEPHONE--RB10 174.67 0.0 1,955.15 2.0
CON EDISON-RB10 198.80 0.0 1,763.95 1.8
Salaries & Wages 91.93 0.0 15,767.83 16.2
MANAGER SALARY 0.00 0.0 2,091.37 2.2
FICA EXPENSE 79.83 0.0 1,227.76 1.3
MEDICARE EXPENSE 155.00 0.0 1,200.84 1.2
FUTA EXPENSE 7.65 0.0 106.76 0.1
SUTA EXPENSE 42.08 0.0 1,039.37 1.1
---------- ----- --------- -----
Total Expenses 2,703.99 0.0 90,922.33 93.7
---------- ----- --------- -----
Net Operating Income (3,166.80) 0.0 (40,631.08) (41.9)
OTHER INCOME
OTHER EXPENSES
DEPRECIATION EXPENSE-RB10 500.00 0.0 3,500.00 3.6
---------- ----- --------- -----
Net Income (3,666.80) 0.0 (44,131.08) (45.5)
</TABLE>
Management Use only Not intended for distribution
<PAGE>
Great American Backrub
Department Income Statement
FOR THE MONTH ENDING 07/31/97
<TABLE>
<CAPTION>
11 PARK SLOPE
CURR. PERIOD RATIO: NET REVENUE
YTD RATIO.........: NET REVENUE THIS MONTH RATIO 7 MONTHS RATIO
====================================================================================================
<S> <C> <C> <C> <C>
INCOME
Service sales 13,835.50 80.5 114,165.35 78.7
product sales 4,425.42 25.7 41,517.52 28.6
sales #2 0.00 0.0 (549.74) (0.4)
returns & allowances 0.00 0.0 (561.18) (0.4)
SALES DISCOUNTS JFK-IAB (1,063.78) (6.2) (9,417.18) (6.5)
---------- ----- ---------- -----
Total Sales 17,197.14 100.0 145,154.77 100.0
COST OF GOODS SOLD
cogs - service sales (21.40) (0.1) 37,616.41 25.9
COST OF SALES - FICA 350.06 2.0 2,712.87 1.9
COST OF SALES - MEDICARE 61.87 0.5 634.46 0.4
DIRECT - SUTA JFK-IAB 108.79 0.6 2,061.05 1.4
COST OF SALES - FUTA 15.86 0.1 190.88 0.1
cogs-product purchases 2,655.25 15.4 24,287.54 16.7
---------- ----- ---------- -----
Total Cost of Goods Sold 3,190.43 18.6 67,503.21 46.5
---------- ----- ---------- -----
Gross Profit 14,006.71 81.4 77,651.56 53.5
EXPENSES
advertising 400.05 2.3 3,110.81 2.1
amex charges 50.56 0.3 414.48 0.3
UPS/Shipping 108.90 0.6 904.53 0.6
garbage 86.60 0.5 789.05 0.5
insurance - business 400.00 2.3 2,800.00 1.9
mc/visa charges 95.18 0.6 777.15 0.5
supplies 220.14 1.3 1,457.35 1.0
Outside Services 0.00 0.0 162.38 0.1
overs/shorts (455.76) (2.7) 1,650.12 1.1
rent - building 4,968.00 28.9 36,308.00 25.0
repairs 111.00 0.6 613.35 0.4
supplies 0.00 0.0 2.55 0.0
telephone 378.17 2.2 2,078.42 1.4
travel 0.00 0.0 200.00 0.1
utilities 520.16 3.0 4,335.62 3.0
salaries & wages 7,026.45 40.9 15,349.93 10.6
Salaries - Manager 2,767.75 16.1 18,928.50 13.0
fica 199.28 1.2 1,783.82 1.2
medicare 20.72 0.1 290.64 0.2
futa 4.82 0.0 94.63 0.1
suta 26.52 0.2 823.50 0.6
---------- ----- ---------- -----
Total Expenses 16,928.54 98.4 92,874.83 64.0
---------- ----- ---------- -----
Net Operating Income (2,921.83) (17.0) (15,223.27) (10.5)
OTHER INCOME
OTHER EXPENSES
DEPRECIATION EXPENSE 900.00 5.2 5,700.00 3.9
---------- ----- ---------- -----
Net Income (3,831.83) (22.2) (20,923.27) (14.4)
========== ===== ========== =====
Management Use only Not intended for distribution
</TABLE>
<PAGE>
Great American Backrub
Department Income Statement
FOR THE MONTH ENDING 07/31/97
<TABLE>
<CAPTION>
12 71ST AND BROADWAY
CURR. PERIOD RATIO: NET REVENUE
YTD RATIO.........: NET REVENUE THIS MONTH RATIO 7 MONTHS RATIO
====================================================================================================
<S> <C> <C> <C> <C>
INCOME
Service sales 34,054.45 90.0 254,934.62 87.5
product sales 5,730.83 15.1 49,467.70 17.0
NO CHARGE SALES 0.00 0.0 (308.68) (0.1)
returns & allowances (97.73) (0.3) (1,678.26) (0.6)
SALES DISCOUNTS 3RD AVE, (1,850.36) (4.9) (11,053.13) (3.8)
--------- ----- ---------- ------
Total sales 37,837.19 100.0 291,362.25 100.0
COST OF GOODS SOLD
DIRECT LABOR 10,842.99 28.7 75,745.15 26.0
DIRECT - FICA 608.10 1.9 4,717.57 1.6
DIRECT - MEDICARE 142.22 0.4 1,103.31 0.4
DIRECT - SUTA 71ST AND BR 93.64 0.2 6,020.13 2.1
COST OF SALES - FUTA 17.04 0.0 683.77 0.2
cogs-product purchases 3,438.50 9.1 28,932.50 9.9
--------- ----- ---------- ------
Total Cost of Goods Sold 15,142.49 40.0 117,202.43 40.2
--------- ----- ---------- ------
Gross Profit 22,694.10 60.0 174,159.82 59.8
EXPENSES
advertising 164.55 0.4 1,788.45 0.6
amex charges 165.73 0.4 1,276.95 0.4
dues & subscriptions 0.00 0.0 258.00 0.1
UPS/Shipping 128.39 0.3 593.46 0.2
garbage 37.89 0.1 189.45 0.1
insurance - business 400.00 1.1 2,800.00 1.0
mc/visa charges 171.39 0.5 1,395.48 0.5
miscellaneous 0.00 0.0 100.00 0.0
supplies 198.44 0.5 2,244.84 0.8
Outside Services 0.00 0.0 216.50 0.1
overs/shorts 236.39 0.6 3,990.66 1.4
Pro Fees-Accounting 3RD A 0.00 0.0 57.00 0.0
rent - building 9,066.00 24.0 63,529.00 21.8
repairs 657.23 1.7 1,504.59 0.5
telephone 257.74 0.7 2,284.49 0.8
travel 0.00 0.0 200.00 0.1
utilities 651.30 1.7 3,418.64 1.2
salaries & wages 2,830.73 7.5 22,039.15 7.6
SALARY - MANAGER 3,406.48 9.0 12,743.77 4.4
fica 381.54 1.0 1,430.78 0.5
medicare 81.96 0.2 650.68 0.2
futa 15.42 0.0 166.74 0.1
suta 84.87 0.2 1,404.96 0.5
--------- ----- ---------- ------
Total Expenses 18,936.05 50.0 124,283.59 42.7
--------- ----- ---------- ------
Net Operating Income 3,758.65 9.9 49,876.23 17.1
OTHER INCOME
OTHER EXPENSES
DEPRECIATION EXPENSE-RB12 800.00 2.1 5,300.00 1.8
--------- ----- ---------- ------
Net Income 21,958.65 7.8 44,576.23 15.3
========= ===== ========== ======
</TABLE>
Management Use only Not intended for distribution
<PAGE>
Great American Backrub
Department Income Statement
FOR THE MONTH ENDING 07/31/97
<TABLE>
<CAPTION>
13 91st and Broadway
CURR. PERIOD RATIO: NET REVENUE
YTD RATIO.........: NET REVENUE THIS MONTH RATIO 7 MONTHS RATIO
====================================================================================================
<S> <C> <C> <C> <C>
INCOME
Service sales 13,519.80 88.3 109,444.77 86.2
product sales 2,645.60 17.3 23,691.43 18.7
NO CHARGE SALES 0.00 0.0 (1,012.64) (0.8)
returns & allowances (13.44) (0.1) (409.28) (0.3)
SALES DISCOUNTS 3RD AVE, (842.12) (5.5) (4,776.91) (3.8)
--------- ----- ---------- -----
Total Sales 15,309.84 100.0 126,937.37 100.0
COST OF GOODS SOLD
DIRECT LABOR 5,089.84 33.2 40,787.83 32.1
DIRECT - FICA 104.16 0.7 669.09 0.5
DIRECT - MEDICARE 24.36 0.2 156.48 0.1
DIRECT - SUTA 91st and Br 102.32 0.7 1,734.53 1.4
COST OF SALES - FUTA 18.61 0.1 204.18 0.2
cogs-product purchases 1,587.36 10.4 13,790.28 10.9
--------- ----- ---------- -----
Total Cost of Goods Sold 6,926.65 45.2 57,342.39 45.2
--------- ----- ---------- -----
Gross Profit 8,383.19 54.8 69,594.98 54.8
EXPENSES
advertising 730.60 4.8 4,099.48 3.2
amex charges 45.48 0.3 452.66 0.4
bank charges 0.00 0.0 125.84 0.1
UPS/Shipping 0.00 0.0 348.09 0.3
garbage 0.00 0.0 292.26 0.2
insurance - business 400.00 2.6 2,800.00 2.2
mc/visa charges 106.22 0.7 684.26 0.5
miscellaneous 0.00 0.0 80.00 0.1
supplies 555.01 3.6 2,402.33 1.9
Outside Services 0.00 0.0 541.25 0.4
overs/shorts 8.64 0.1 1,251.29 1.0
postage & deliveries 0.00 0.0 155.00 0.1
rent - building 8,993.00 58.7 62,951.00 49.6
repairs 222.00 1.5 313.24 0.2
telephone 202.48 1.3 1,502.24 1.2
travel 0.00 0.0 200.00 0.2
utilities 423.13 2.8 2,258.18 1.8
penalties & fines 0.00 0.0 80.00 0.1
salaries & wages 1,629.54 10.6 11,074.63 8.7
SALARY - MANAGER 1,859.93 12.1 11,751.71 9.3
fica 203.29 1.3 1,361.53 1.1
medicare 47.54 0.3 318.42 0.3
futa 21.71 0.1 101.70 0.1
suta 119.41 0.8 933.55 0.7
--------- ----- ---------- -----
Total Expenses 15,567.98 101.7 106,078.66 83.6
--------- ----- ---------- -----
Net Operating Income (7,184.79) (46.9) (36,483.68) (28.7)
OTHER INCOME
OTHER EXPENSES
DEPRECIATION EXPENSE-RB13 800.00 5.2 5,600.00 4.4
--------- ----- ---------- -----
Net Income (7,984.79) (52.2) (42,083.68) (33.2)
========= ===== ========== =====
</TABLE>
Management Use only Not intended for distribution
<PAGE>
Great American Backrub
Department Income Statement
FOR THE MONTH ENDING 07/31/97
<TABLE>
<CAPTION>
14 79th and Broadway
CURR. PERIOD RATIO: NET REVENUE
YTD RATIO.........: NET REVENUE THIS MONTH RATIO 7 MONTHS RATIO
====================================================================================================
<S> <C> <C> <C> <C>
INCOME
Service sales 21,123.25 86.3 107,686.53 80.5
product sales 6,113.26 25.0 36,632.17 27.4
returns & allowances (74.90) (0.3) (1,454.30) (1.1)
SALES DISCOUNTS 3RD AVE, (2,682.86) (11.0) (9,156.27) (6.8)
--------- ----- ---------- -----
Total Sales 24,478.75 100.0 133,708.13 100.0
COST OF GOODS SOLD
DIRECT LABOR 7,093.54 29.0 46,529.74 34.8
DIRECT - FICA 368.08 1.5 2,913.58 2.2
DIRECT - MEDICARE 86.08 0.4 681.40 0.5
DIRECT - SUTA 79th and Broadway 220.20 0.9 1,329.01 1.0
COST OF SALES - FUTA 40.05 0.2 164.97 0.1
cogs-product purchases 3,667.96 15.0 21,406.92 16.0
--------- ----- ---------- -----
Total Cost of Goods Sold 11,475.91 46.9 73,025.62 54.6
--------- ----- ---------- -----
Gross Profit 13,002.84 53.1 60,682.51 45.4
EXPENSES
advertising 407.10 1.7 3,749.31 2.8
DISPLAY 0.00 0.0 (31,531.12) (2.6)
amex charges 150.84 0.6 734.19 0.5
bank charges 0.00 0.0 117.23 0.1
UPS/Shipping 96.56 0.4 273.79 0.2
garbage 35.94 0.1 422.62 0.3
insurance - business 400.00 1.6 2,800.00 2.1
mc/visa charges 122.14 0.5 755.37 0.6
miscellaneous 0.00 0.0 160.00 0.1
supplies 466.26 1.9 2,591.55 1.9
Outside Services 0.00 0.0 711.25 0.5
overs/shorts (1,073.02) (4.4) (1,990.11) (1.5)
rent - building 11,769.00 48.1 82,383.00 61.6
repairs 0.00 0.0 3,589.37 2.7
telephone 219.39 0.9 1,844.48 1.4
utilities 243.19 1.0 3,806.49 2.8
salaries & wages 1,607.66 6.6 10,049.29 7.5
SALARY - MANAGER 2,102.92 8.6 11,257.21 8.4
fica 204.44 0.8 1,200.95 0.9
medicare 110.44 0.5 827.19 0.6
futa 11.81 0.0 175.44 0.1
suta 65.02 0.3 1,517.39 1.1
--------- ----- ---------- -----
Total Expenses 16,939.69 69.2 123,444.89 92.3
--------- ----- ---------- -----
Net Operating Income (3,936.85) (16.1) (62,762.38) (46.9)
OTHER INCOME
OTHER EXPENSES
DEPRECIATION EXPENSE-RB14 1,000.00 4.1 7,000.00 5.2
--------- ----- ---------- -----
Net Income (4,936.85) (20.2) (69,762.38) (52.2)
========= ===== ========== =====
</TABLE>
Management Use only Not intended for distribution
<PAGE>
Great American Backrub
Department Income Statement
FOR THE MONTH ENDING 07/31/97
<TABLE>
<CAPTION>
15 Woodfield Mall-Chicago
CURR. PERIOD RATIO: NET REVENUE
YTD RATIO.........: NET REVENUE THIS MONTH RATIO 7 MONTHS RATIO
====================================================================================================
<S> <C> <C> <C> <C>
INCOME
Service sales 21,598.45 78.8 195,734.43 77.4
product sales 6,946.91 25.4 69,677.02 27.6
returns & allowances (175.70) (0.6) (6,483.05) (2.6)
SALES DISCOUNTS 3RD AVE, (977.33) (3.6) (6,134.19) (2.4)
--------- ----- ---------- -----
Total Sales 27,392.33 100.0 252,794.21 100.0
COST OF GOODS SOLD
DIRECT LABOR 6,066.95 22.1 59,171.12 23.4
DIRECT - FICA 420.58 1.5 3,812.51 1.5
DIRECT - MEDICARE 918.36 0.4 891.64 0.4
DIRECT - SUTA Woodfield M 10.20 0.0 3,281.66 1.3
COST OF SALES - FUTA 45.37 0.2 439.48 0.2
cogs-product purchases 4,168.15 15.2 40,767.32 16.1
Freight In 0.00 0.0 283.79 0.1
--------- ----- ---------- -----
Total Cost of Goods Sold 10,809.61 39.5 108,647.52 43.0
--------- ----- ---------- -----
Gross Profit 16,582.72 60.5 144,146.69 57.0
EXPENSES
advertising 473.23 1.7 8,872.59 3.5
advertising-help wanted 0.00 0.0 91.35 0.0
amex charges 56.57 0.2 415.69 0.2
bank charges 113.73 0.4 887.66 0.4
CAM CHARGES Woodfield Mal 1,565.00 5.7 11,987.00 4.7
UPS/Shipping 29.00 0.1 865.76 0.4
garbage 27.60 0.1 124.13 0.0
insurance - business 500.00 1.8 3,500.00 1.4
mc/visa charges 114.52 0.4 873.36 0.3
miscellaneous 5.80 0.0 52.82 0.0
supplies 680.14 2.5 4,798.74 1.9
overs/shorts 182.67 0.7 900.76 0.4
pro fees - consulting 0.00 0.0 91.45 0.0
rent - building 6,957.00 25.4 48,699.00 19.3
property tax 791.00 2.9 6,189.86 2.4
telephone 137.41 0.5 2,054.37 0.8
travel 0.00 0.0 200.00 0.1
utilities 304.80 1.1 609.60 0.2
penalties & fines 0.00 0.0 92.81 0.0
salaries & wages 1,928.33 7.0 12,633.37 5.0
SALARY - MANAGER 2,554.85 9.3 17,472.52 6.9
fica 245.84 0.9 1,785.04 0.7
medicare 57.49 0.2 417.45 0.2
futa 6.11 0.0 172.56 0.1
outa 0. 00 0.0 1,080.27 0.4
--------- ----- ---------- -----
Total Expenses 16,731.09 61.1 124,888.16 49.4
--------- ----- ---------- -----
Net Operating Income (148.37) (0.5) 19,258.53 7.6
OTHER INCOME
OTHER EXPENSES
DEPRECIATION EXPENSE-RB1 2,500.00 9.1 17,500.00 6.9
--------- ----- ---------- -----
Net Income (2,648,37) (9.7) 1,758.53 0.7
========= ===== ========== =====
</TABLE>
Management Use only Not intended for distribution
<PAGE>
Great American Backrub
Department Income Statement
FOR THE MONTH ENDING 07/31/97
<TABLE>
<CAPTION>
97 Franchise operation
CURR. PERIOD RATIO: NET REVENUE
YTD RATIO.........: NET REVENUE THIS MONTH RATIO 7 MONTHS RATIO
=======================================================================================================
<S> <C> <C> <C> <C>
INCOME
royalties/franchise fees 0.00 0.0 15,124.88 100.0
------ --- ---------- -----
Total Sales 0.00 0.0 15,124.88 100.0
COST OF GOODS SOLD
------ --- ---------- -----
Total Cost of Goods Sold 0.00 0.0 0.00 0.0
------ --- ---------- -----
Gross Profit 0.00 0.0 15,124.88 100.0
EXPENSES
licences & fees 0.00 0.0 1,900.00 12.6
Outside Services 0.00 0.0 1,000.00 6.6
Pro Fees-Accounting 3RD A 0.00 0.0 1,014.50 6.7
pro fees - consulting 0.00 0.0 22,061.20 145.9
property tax 155.69 0.0 155.69 1.0
salaries & wages 0.00 0.0 7,784.80 51.5
fica 0.00 0.0 482.66 3.2
medicare 0.00 0.0 112.89 0.7
futa 0.00 0.0 56.75 0.4
suta 0.00 0.0 503.56 3.3
------ --- ---------- -----
Total Expenses 155.69 0.0 35,072.05 231.9
------ --- ---------- -----
Net Operating Income (155.69) 0.0 (19,947.17) (131.9)
OTHER INCOME
OTHER EXPENSES
------ --- ---------- -----
Net Income (155.69) 0.0 (19,947.17) (131.9)
====== === ========== =====
</TABLE>
Management Use only Not intended for distribution
<PAGE>
Great American Backrub
Department Income Statement
FOR THE MONTH ENDING 07/31/97
<TABLE>
<CAPTION>
98 Warehouse
CURR. PERIOD RATIO: NET REVENUE
YTD RATIO.........: NET REVENUE THIS MONTH RATIO 7 MONTHS RATIO
================================================================================
<S> <C> <C> <C> <C> <C>
INCOME
--------- ----- ---------- -----
Total Sales 0.00 0.0 0.00 0.0
COST OF GOODS SOLD
Freight In 281.66 0.0 433.29 0.0
--------- ----- ---------- -----
Total Cost of Goods Sold 281.66 0.0 433.29 0.0
--------- ----- ---------- -----
Gross Profit (281.66) 0.0 (433.29) 0.0
EXPENSES
advertising 0.00 0.0 303.10 0.0
UPS/Shipping 837.84 0.0 6,999.82 0.0
garbage 81.19 0.0 568.33 0.0
miscellaneous 0.00 0.0 150.00 0.0
supplies 199.29 0.0 3,741.24 0.0
Outside Services 0.00 0.0 3,859.62 0.0
rent - building 2,627.00 0.0 15,762.00 0.0
supplies 0.00 0.0 186.56 0.0
property tax 0.00 0.0 2,500.00 0.0
telephone 260.02 0.0 2,347.12 0.0
utilities 489.98 0.0 1,196.05 0.0
salaries & wages 5,132.54 0.0 29,471.87 0.0
fica 281.02 0.0 1,725.66 0.0
medicare 65.72 0.0 403.59 0.0
futa 0.00 0.0 118.34 0.0
suta 0.00 0.0 1,050.22 0.0
--------- ----- ---------- -----
Total Expenses 9,974.60 0.0 70,383.52 0.0
--------- ----- ---------- -----
Net Operating Income (10,256.26) 0.0 (70,816.81) 0.0
OTHER INCOME
OTHER EXPENSES
DEPRECIATION EXPENSE-WARE 200.00 0.0 1,400.00 0.0
--------- ----- ---------- -----
Net Income (10,456.26) 0.0 (72,216.81) 0.0
========= ===== ========== =====
</TABLE>
Management Use only Not intended for distribution
<PAGE>
Great American Backrub
Department Income Statement
FOR THE MONTH ENDING 07/31/97
<TABLE>
<CAPTION>
99 ADMINISTRATIVE
CURR. PERIOD RATIO: NET REVENUE
YTD RATIO.........: NET REVENUE THIS MONTH RATIO 7 MONTHS RATIO
================================================================================
<S> <C> <C> <C> <C> <C>
INCOME
service sales 8,861.96 100.0 64,439.76 99.9
other income 0.00 0.0 63.08 0.1
--------- ----- ---------- -------
Total Sales 8,861.96 100.0 64,502.84 100.0
COST OF GOODS SOLD
DIRECT LABOR 7,336.76 82.8 32,309.49 50.1
Service-FICA 440.49 5.0 2,013.51 3.1
Service-MEDICARE 103.02 1.2 470.90 0.7
Service-FUTA 45.83 0.5 285.36 0.4
Freight In 0.00 0.0 1,348.22 2.1
--------- ----- ---------- -------
Total Cost of Goods Sold 7,926.10 89.4 36,427.48 56.5
--------- ----- ---------- -------
Gross Profit 935.86 10.6 28,075.36 43.5
EXPENSES
advertising 0.00 0.0 17,666.88 27.4
advertising-help wanted (23.25) (0.3) 5,238.11 8.1
bank charges 1,223.25 13.8 12,521.15 19.4
cleaning 0.00 0.0 140.00 0.2
dues & subscriptions 0.00 0.0 701.95 1.1
EQUIPMENT RENTAL 416.92 4.7 2,252.86 3.5
fedex 553.63 6.2 8,191.63 12.7
garbage 0.00 0.0 46.90 0.1
gifts 1,136.63 12.8 1,136.63 1.8
insurance - equipment 0.00 0.0 16,668.44 25.8
insurance - health 0.00 0.0 31,702.30 49.1
insurance - liability 0.00 0.0 5,029.20 7.8
INSURANCE-DIR/OFFICERS 3,000.00 33.9 27,340.00 42.4
INSURANCE-DISABILITY CORP 1,570.00 17.7 3,103.58 4.8
insurance-workmans comp 477.75 5.4 16,725.75 25.9
licences & fees 0.00 0.0 4,259.00 6.6
mc/visa charges 43.41 0.5 562.57 0.9
meals & entertainment 0.00 0.0 14,638.50 22.7
miscellaneous (10,564.07) (119.2) (7,592.81) (11.8)
supplies 4,222.65 47.6 31,655.64 49.1
Outside Services 969.79 10.9 7,356.29 11.4
overs/shorts 0.03 0.0 (3,048.81) (4.7)
parking/tolls 0.00 0.0 894.00 1.4
payroll processing 374.30 4.2 3,034.15 4.7
PETTY CASH ADMINISTRATIVE 0.00 0.0 867.76 1.3
postage & deliveries 0.00 0.0 1,500.00 2.3
Printing & Stationary ADM 115.19 1.3 10,491.26 16.3
Pro Fees-Legal & Acctg. 8,000.00 90.3 194,796.33 302.0
pro fees - consulting 2,500.00 28.2 2,372.35 3.7
pro fees-public relations 0.00 0.0 19,200.58 29.8
pro fees-transfer agent 486.10 5.5 4,461.99 6.9
rent - building 1,000.00 11.3 24,076.00 37.3
repairs 0.00 0.0 11,238.14 17.4
subscriptions & dues 0.00 0.0 24.95 0.0
supplies 215.42 2.4 3,805.37 5.9
property tax 2,263.00 25.5 2,605.43 4.0
telephone 844.11 9.5 23,080.81 35.8
transportation 0.00 0.0 2,873.87 4.5
travel 0.00 0.0 18,215.61 28.2
utilities 1,048.29 11.8 1,329.45 2.1
interest expense 88.37 1.0 154,965.61 240.2
income tax expense 222.05 2.5 5,502.05 8.5
penalties & fines 0.00 0.0 1,973.83 3.1
salaries & wages 17,815.31 201.0 119,098.73 184.6
</TABLE>
Management Use only Not intended for distribution
<PAGE>
Great American Backrub
Department Income Statement
FOR THE MONTH ENDING 07/31/97
<TABLE>
<CAPTION>
99 ADMINISTRATIVE
CURR. PERIOD RATIO: NET REVENUE
YTD RATIO.........: NET REVENUE THIS MONTH RATIO 7 MONTHS RATIO
================================================================================
<S> <C> <C> <C> <C> <C>
salaries - corporate 13,731.98 155.0 169,281.65 262.4
fica 1,785.77 20.2 11,559.71 17.9
medicare 417.64 4.7 2,711.37 4.2
futa 0.00 0.0 (398.37) (0.6)
suta 251.98 2.8 (2,070.53) (3.2)
--------- ----- ---------- -------
Total Expenses 54,186.25 611.4 983,787.56 1,525.2
--------- ----- ---------- -------
Net Operating Income (53,250.39) (600.9) (955,712.20) (1,481.7)
OTHER INCOME
interest income 912.22 10.3 10,550.24 16.4
OTHER EXPENSES
DEPRECIATION EXPENSE-OFF. 0.00 0.0 24,848.00 38.5
--------- ----- ---------- -------
Net Income (52,338.17) (590.6) (970,009.96) (1,503.8)
========= ===== ========== =======
</TABLE>
Management Use only Not intended for distribution
<PAGE>
SCHEDULE 2.5
Subsidiaries of Purchaser
Name Jurisdiction of Percentage of
- ---- Incorporation Ownership
------------- ---------
The Great American Backrub
of Second Avenue, Inc. New York 100%
GAB Park Slope, Inc. New York 100%
GAB Columbus Inc. New York 100%
GAB-Spring, Inc. New York 100%
[Additional?]
<PAGE>
SCHEDULE 2.6
Changes
Since July 31, 1997:
(1) The stores owned by the Company at 91st Street and Broadway and
81st Street and Broadway, New York City have been closed;
(2) Mangers have been informed verbally that they may be given the
option to purchase their respective stores and become franchisees;
(3) Losses for the month of August 1997 are approximately $100,000;
(4) Cash on hand at September 19, 1997 is approximately $100,000;
(5) Payables as of August 31, 1997 are as set forth on Schedule 2.4;
and
(6) Store sales are as set forth on Schedule 2.4;
(7) Nasdaq de-listing procedure set forth in correspondence previously
provided to Ascot.
<PAGE>
SCHEDULE 2.7
Litigation
[List to be provided at signing]
<PAGE>
SCHEDULE 3.2
Great American Backrub Initial Purchase Price
Fully Diluted (under $1.00) 3,704,354 18.05%
Zanker 300, Murray 100 400,000 1.95%
Shares to Ascot 16,417,416 80.00%
----------
20,521,770
<PAGE>
SCHEDULE 5A.2
New Hires
Name Title Weekly Salary
---- ----- -------------
[List]
<PAGE>
EXHIBIT 1
G9715020
[LETTERHEAD OF ASCOT'S COUNSEL]
October ___, 1997
The Great American BackRub Store, Inc.
53 West 36th Street, Room 1202
New York, NY 10018
Ladies and Gentlemen:
We have acted as counsel for Ascot International, Corp., a Delaware
corporation ("Ascot"), Caribsun Corp., a Delaware corporation ("Caribsun") and
Coconut Hall Limited, a company limited by shares formed under the laws of
Antigua and Barbuda ("Coconut Hall") in connection the Securities Exchange
Agreement dated as of September 29, 1997 (the "Securities Exchange Agreement"),
by and between The Great American BackRub Store, Inc. ("Purchaser"), Ascot and
Caribsun. The Securities Exchange Agreement, in part, provides for the
acquisition by Purchaser of all the outstanding shares of capital stock, no par
value, of Caribsun (the "Caribsun Shares"). Any term used herein without a
definition shall have the meaning assigned to such term in the Securities
Exchange Agreement.
This opinion letter is being provided to you at the request of Ascot,
Caribsun and Coconut Hall pursuant to Section 4.1 of the Securities Exchange
Agreement.
For purposes of the opinions expressed herein, we have examined the
charter documents and by-laws, as currently in effect, of Ascot, Caribsun and
Coconut Hall, resolutions adopted by the Board of Directors of Ascot, Caribsun
and Coconut Hall, the Securities Exchange Agreement, Consulting Agreement of
William Zanker, Indemnification Agreement, and all documents and instruments
executed in connection therewith (collectively, the "Acquisition Documents"),
and such other documents and documents and legal matters as we have considered
necessary and relevant. In rendering this opinion, we have relied upon
appropriate certificates of public officials and, as to relevant matters of fact
not independently established, we have relied upon statements and certificates
of officers of Ascot, Caribsun and Coconut Hall, and upon representations of
Ascot, Caribsun and Coconut Hall made pursuant to the Acquisition Documents.
Based upon the foregoing, it is our opinion that:
1. Each of Caribsun and Ascot is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Caribsun
has the power to own or lease its properties and assets and to carry on its
business as now being conducted. Caribsun is
<PAGE>
The Great American Backrub Store, Inc.
October __, 1997
Page 2
duly qualified to do business and is in good standing in Barbuda and Antigua,
which is the only jurisdiction in which the character or location of the
properties owned or leased by Caribsun or the nature of the business conducted
by Caribsun makes such qualification necessary.
2. Coconut Hall is a company limited by shares duly organized, validly
existing and in good standing under the laws of Barbuda and Antigua. Coconut
Hall has the power to own or lease its properties and assets and to carry on its
business as now being conducted. The business of Coconut Hall does not require
qualifications to do business in any jurisdiction other than Barbuda and
Antigua.
3. Caribsun has an authorized capitalization consisting of 1,500 shares
of Common Stock, of which 100 shares are issued and outstanding and no shares of
Common Stock are held in Caribsun's treasury. All such outstanding shares have
been duly authorized and validly issued and are fully paid and nonassessable.
There are no outstanding options, warrants, rights, calls, commitments,
conversion rights, rights of exchange, plans or other agreements, commitments or
arrangements of any character providing for the purchase, subscription, issuance
or sale of any shares of the capital stock of Caribsun, other than the sale of
the Caribsun Shares as contemplated by the Securities Exchange Agreement.
4. Coconut Hall has an authorized capitalization consisting of 10,000
shares $1.00 each, of which 10,000 shares are issued and outstanding and no
shares of Common Stock are held in the Company's treasury. All such outstanding
shares have been duly authorized and validly issued and are fully paid and
nonassessable and are owned of record by Caribsun. There are no outstanding
options, warrants, rights, calls, commitments, conversion rights, rights of
exchange, plans or other agreements, commitments or arrangements of any
character providing for the purchase, subscription, issuance or sale of any
shares of the capital stock of Coconut Hall.
5. To the best of our knowledge after having made due inquiry with
respect thereto, Ascot, Caribsun and Coconut Hall each have full legal right,
power and authority to enter into the Securities Exchange Agreement and Ascot
has the full legal right, power and authority to sell, assign, transfer and
convey the Caribsun Shares.
6. The Securities Exchange Agreement has been duly executed and
delivered by Ascot, Caribsun and Coconut Hall. Ascot, Caribsun and Coconut Hall
have the full legal right and power and all authority and approval required to
enter into, execute and deliver this Agreement, and with respect to Ascot, to
sell, assign, transfer and convey the Shares and to perform fully its
obligations under the Securities Exchange Agreement. This Securities Exchange
Agreement has been duly executed and delivered by Ascot, Caribsun and Coconut
Hall and, assuming due execution and delivery by, and enforceability against,
Purchaser, constitutes the valid and binding obligation of Ascot and Caribsun
enforceable in accordance with its terms, subject to the qualifications that
enforcement of the rights and remedies created hereby is subject to (i)
bankruptcy, insolvency, reorganization, moratorium and other laws of
<PAGE>
The Great American Backrub Store, Inc.
October __, 1997
Page 3
general application affecting the rights and remedies of creditors, and (ii)
general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law). The qualifications in the
preceding sentences are hereafter referred to as the "General Qualifications".
No approval or consent of, or filing with, any governmental or regulatory body,
and no approval or consent of, or filing with, any other person is required to
be obtained by either Ascot or Caribsun in connection with the execution and
delivery by Ascot and Caribsun of the Securities Exchange Agreement and
consummation and performance by them of the transactions contemplated therein.
8. The delivery to Purchaser of the Caribsun Shares by Ascot on the
date hereof pursuant to the provisions of the Securities Exchange Agreement
passed good and marketable title to the Stock to Purchaser, free and clear of
all liens, encumbrances, restrictions and claims of every kind. The consummation
of the purchase of the Caribsun Shares pursuant to the Securities Exchange
Agreement vested in Purchaser all of the outstanding shares of capital stock of
Caribsun.
9. There are no stock transfer taxes due and unpaid upon transfer of
the Caribsun Shares by Ascot to Purchaser.
10. The execution, delivery and performance of this Agreement by Ascot,
Caribsun and Coconut Hall and the consummation of the transactions contemplated
by the Securities Exchange Agreement in accordance with the terms and conditions
hereof by Ascot, Caribsun and Coconut Hall will not:
(i) violate any provision of the charter documents or By laws of Ascot,
Caribsun and Coconut Hall;
(ii) violate, conflict with or result in the breach of any of the terms
of, or constitute (or with notice or lapse of time or both would constitute) a
default under, any contract, lease, agreement or other instrument or obligation
to which either Ascot, Caribsun or Coconut Hall is a party or by or to which any
of the properties and assets of either Ascot, Caribsun or Coconut Hall may be
bound or subject;
(iii) violate any order, judgment, injunction, award or decree of any
court, arbitrator, governmental or regulatory body, by which either Ascot,
Caribsun or Coconut Hall or the securities, assets, properties or business of
any of them is bound; or
(iv) violate any statute, law or regulation.
11. To the best of our knowledge after having made due inquiry with
respect thereto, there is no action, suit, proceeding at law or in equity,
arbitration or administrative or other proceeding by or before any governmental
or other instrumentality or agency, pending, or
<PAGE>
The Great American Backrub Store, Inc.
October __, 1997
Page 4
threatened, against or affecting Ascot, Caribsun or Coconut Hall, or any of
their respective properties or rights, Ascot, or any officer, director or
employee of Ascot, Caribsun or Coconut Hall other than such items which are
insignificant and immaterial and which do not adversely affect (i) the right or
ability of Caribsun or Coconut Hall to carry on their business as now conducted;
(ii) the condition, whether financial or otherwise, or properties of Caribsun or
Coconut Hall; (iii) the development of the real estate owned by Coconut Hall; or
(iv) the consummation of the transactions contemplated Securities Exchange
Agreement. To the best of our knowledge after due inquiry with respect thereto,
there are no outstanding orders, judgments, injunctions, awards or decrees of
any court, governmental or regulatory body or arbitration tribunal by which
either Ascot, Caribsun or Coconut Hall, or any officer, director or employee of
Ascot Caribsun or Coconut Hall, or the securities, assets, properties or
business of any of them is bound, other than any such items which are
insignificant and immaterial and which do not and will not adversely affect (i)
the right of Caribsun and Coconut Hall to carry on Coconut Hall business as now
conducted and as proposed to be conducted by the Purchaser after the
consummation of the transactions contemplated by the Securities Exchange
Agreement, including the development of the real property owned by Coconut Hall;
(ii) the condition, whether financial or otherwise, or properties of Caribsun or
Coconut Hall; or (iii) the consummation of the transactions contemplated
thereby.
12. The Acquisition Documents have been duly authorized, executed and
delivered and constitute the valid and binding obligations of Borrowers,
enforceable in accordance with their respective terms.
We draw your attention to the fact that we are admitted to practice law
only in the State of Florida.
This opinion is solely for the information of the addressee hereof, and
is not to be quoted in whole or in part or otherwise referred to (except in a
list of closing documents), nor is it to be filled with any governmental agency
or other person without our prior written consent. Other than the addressee
hereof, no one is entitled to rely on this opinion.
This opinion is based on our knowledge of the law and facts as of the
date hereof. We assume no duty to communicate with you with respect to any
matter which comes to our attention hereafter.
Very truly yours,
Robert Harrison
RH/md
<PAGE>
EXHIBIT 3
CONSULTING AGREEMENT
This Agreement is made and entered into as of the ____ day of October,
1997 by and between William Zanker ("WZ"), and The Great American Backrub Store,
Inc., a New York corporation (the "Company"). In consideration of the parties
terminating the employment agreement of WZ dated November 1, 1994, as amended,
and the mutual promises made herein and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. PURPOSE.
The Company hereby engages WZ for the term specified in Paragraph 2
hereof to render consulting advice to the Company relating to financial
management, marketing, personnel and similar matters upon the terms and
conditions set forth herein.
2. TERM.
Except as otherwise specified in paragraph 4 hereof, this Agreement
shall be effective from October ___, 1997 to September 30, 1999.
3. DUTIES OF WZ.
During the term of this Agreement, WZ shall, as reasonably requested by
the Company during normal business hours, provide advice to the Company relating
to financial affairs, marketing, personnel and similar matters so as to assist
new management in operating the Company during the term thereof. It is
understood and acknowledged by the parties that the value of WZ's advice is not
measurable in any quantitative manner, and that WZ shall be obligated to render
advice, upon the request of the Company, in good faith, but shall not be
obligated to spend any specific amount of time in doing so. It is further agreed
that the services contemplated by this Agreement shall not interfere with other
commitments of WZ.
4. COMPENSATION.
In consideration for the services rendered by WZ to the Company under
this Agreement the Company:
(a) will pay WZ $120,000 in equal monthly installments of $10,000
commencing November 1, 1997 for the first twelve months of the Agreement;
(b) will pay WZ $80,000 in equal monthly installments of $6,666.66
commencing November 1, 1998 for the second twelve months of this Agreement; and
(c) issue concurrently with the execution of this Agreement five-year
warrants to WZ to acquire shares of the Company's common stock as follows:
1
<PAGE>
100,000 shares @ $ .50 per share
100,000 shares @ $ .75 per share
100,000 shares @ $1.00 per share
The shares underlying the warrants will be registered by the Company
under the Securities Act of 1933 promptly on Form S-8 (or, if S-8 is not
available, any available form) and will be protected by standard anti-dilution
provisions except, in the event of a reverse stock split the Company's
outstanding shares of capital stock, the number of shares into which the
warrants will be exercisable may be reduced, but the prices of said exercise
will not change.
5. LIABILITY OF WZ.
The Company acknowledges that all opinions and advice (written or oral)
given by WZ to the Company in connection with WZ's engagement are intended
solely for the benefit and use of the Company, and the Company agrees that no
person or entity other than the Company shall be entitled to make use of or rely
upon the advice of WZ to be given hereunder, and no such opinion or advice shall
be used for any other purpose or reproduced, disseminated, quoted or referred to
at any time, in any manner or for any purpose.
6. WZ's SERVICES TO OTHERS.
Except as set forth in paragraph 7(b) and 8 below, nothing herein
contained shall be construed to limit or restrict WZ in conducting business or
being employed by others.
7. COMPANY INFORMATION.
(a) The Company recognizes and confirms that, in advising the Company
and in fulfilling its engagement hereunder, WZ will use and rely on data,
material and other information furnished to WZ by the Company. The Company
acknowledges and agrees that in performing its services under this engagement,
WZ may rely upon the data, material and other information supplied by the
Company without independently verifying the accuracy, completeness or veracity
of same.
(b) Except as contemplated by the terms hereof or as required by
applicable law, WZ shall keep confidential all material, non-public information
provided to it by the Company, and shall not disclose such information to any
third party, other than such of its employees and advisors as WZ determines have
a need to know.
8. NON-COMPETITION; NON-INTERFERENCE.
(a) WZ agrees provided the Company is not in breach of its obligations
hereunder that from the date of this Agreement until September 30, 1999, WZ will
not, whether for his own account or for the account or any other person,
directly or indirectly:
2
<PAGE>
(i) except to the extent that WZ has an interest in franchisee's of
the Company, engage or invest in, own, manage, operate, control
or participate in the ownership, management, operation or
control of, be employed by, associated or in any manner
connected with or render services or advice to, any business,
the products or services of which compete, in whole or in
part, business of owning, operating or franchising stores that
provide massage therapy within the geographical territories
within which the Company at the time up to the termination of
this Agreement has conducted its business; or
(ii) persuade or attempt to persuade any employee of the Company, or
any individual who was its employee during the one year prior
to the date of this Agreement, to leave the Company's employ,
or to become employed by or otherwise be engaged as an
independent consultant or otherwise for, any person other than
the Company.
(b) Construction. It is the desire and intent of the parties to this
Agreement that the provisions of Section 8 shall be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. If any particular provisions or
portion of Section 8 shall be adjudicated to be invalid or unenforceable, for
any reason, including, without limitation, the geographic or business scope or
duration thereof, such provision shall be construed in such a way as to make it
valid and enforceable to the maximum extent possible. Any validity or
unenforceability of any provision of this Agreement shall attach only to such
provision and shall not effect or render invalid any other provision of this
Agreement or any other agreement or instrument.
(c) Enforcement. The parties recognize that the performance of the
obligations under Section 8 by WZ is special, unique and extraordinary in
character, and that in the event of the breach by WZ of the terms and conditions
of Section 8 to be performed, the Company would suffer irreparable harm for
which there would be no adequate remedy at law. Accordingly, WZ agrees that in
such event, in addition to any other remedies which the Company may have in law
or equity for money damages or other relief, the Company shall be entitled to
temporary and/or injunctive relief, without the necessity of posting a bond
therefor or of proving damages, to enforce the provisions hereof.
9. INDEMNIFICATION.
(a) The Company shall indemnify and hold WZ harmless against any and
all liabilities, claims, lawsuits, arising out of or are in connection with the
services rendered by WZ or any transactions in connection with this Agreement,
except for any liabilities, claims and lawsuits (including awards and/or
judgments), arising out of acts or omissions of WZ. In addition, the Company
shall also indemnify and hold WZ harmless against any and all costs and
expenses, including reasonable counsel fees, incurred or relating to the
foregoing. WZ shall give the Company prompt notice of any such liability, claim
or lawsuit which WZ contends is the subject matter of the Company's
indemnification and the Company thereupon shall be granted the right to take any
and all necessary and proper action, at its sole cost and expense, with respect
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to such liability, claim and lawsuit, including the right to settle, compromise
and dispose of such liability, claim or lawsuit, excepting therefrom any and all
proceedings or hearings before any regulatory bodies and/or authorities.
(b) WZ shall indemnify and hold the Company harmless against any and
all liabilities, claims and lawsuits, arising out of any act or omission of WZ
in connection with this agreement. In addition, WZ shall also indemnify and hold
the Company harmless against any and all costs and expenses, including
reasonable counsel fees, incurred or relating to the foregoing. The Company
shall give to WZ prompt notice of any such liability, claim or lawsuit which the
Company contends is the subject matter of WZ's indemnification and WZ thereupon
shall be granted the right to a take any and all necessary and proper action, at
its sole cost and expense, with respect to such liability, claim and lawsuit,
including the right to settle, compromise or dispose of such liability, claim or
lawsuit, excepting therefrom any and all proceedings or hearings before any
regulatory bodies and/or authorities.
10. WZ AN INDEPENDENT CONTRACTOR.
WZ shall perform its services hereunder as an independent contractor
and not as an employee of the Company or an affiliate thereof. It is expressly
understood and agreed to by the parties hereto that WZ shall have no authority
to act for, represent or bind the Company or any affiliate thereof in any
manner, except as may be agreed to expressly by the Company in writing from time
to time.
11. DEFAULT. In the event of the Company's default in the payment of any
sum due to WZ under this Agreement for a period of 10 calendar days, WZ may, at
his option, declare all unpaid sums due to the end of the term of the Agreement
due and payable. In the event of an action to recover sums due from the Company
under this Agreement, WZ shall also recover the costs of collection including
reasonable attorney's fees.
12. MISCELLANEOUS.
(a) This Agreement between the Company and WZ constitutes the entire
agreement and understanding of the parties hereto, and supersedes any and all
previous agreements and understandings whether oral or written, between the
parties with respect to the matters set forth herein.
(b) Any notice or communication permitted or required hereunder shall
be in writing and shall be deemed sufficiently given if hand-delivered or sent
(i) postage prepaid by registered mail, return receipt requested, or (ii) by
facsimile, to the respective parties as set forth below, or to such other
address as either party may notify the other in writing:
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If to the Company:
The Great American Backrub Store, Inc.
53 West 36th Street, Room 1202
New York, NY 10018
If to WZ:
William Zanker
20 Taconic Road
Millwood, NY 10546
(c) This Agreement shall be binding upon and inure to the benefit of
each of the parties hereto and their respective successors, legal
representatives and assigns.
(d) This Agreement may be executed in any number of counterparts, each
of which together shall constitute one and the same original document.
(e) No provision of this Agreement may be amended, modified or waived,
except in a writing signed by all of the parties hereto.
(f) This Agreement shall be construed in accordance with and governed
by the laws of the State of New York, without giving effect to conflict of law
principles. The parties hereby agree that any dispute which may arise between
them arising out of or in connection with this Agreement shall be adjudicated
before a court located in New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
_________________________________________
William Zanker
THE GREAT AMERICAN BACKRUB STORE, INC.
By:______________________________________
David Coia, Interim Operating Officer
5
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EXHIBIT 4
INDEMNIFICATION AGREEMENT
AGREEMENT, effective as of October ___, 1997, between The Great
American Backrub Store, Inc., a New York corporation (the "Company"), and
_____________ (the "Indemnitee"), a present or former officer or director of the
Company.
WHEREAS, in recognition of Indemnitee's need for substantial protection
against personal liability in connection with Indemnitee's service to the
Company and Indemnitee's reliance on the provisions of the Bylaws requiring
indemnification of the Indemnitee under certain circumstances, and in part to
provide Indemnitee with specific contractual assurances that the protection
promised by such Bylaws will be available to Indemnitee (regardless of, among
other things, any amendment to or revocation of such Bylaws or any change in the
composition of the Company's Board of Directors or acquisition transaction
relating to the Company), the Company wishes to provide in this Agreement for
the indemnification of and the advancing of expenses to Indemnitee to the full
extent (whether partial or complete) permitted by law and as set forth in this
Agreement, and, to the extent insurance is maintained, for the continued
coverage of Indemnitee under the Company's directors' and officers' liability
insurance policies.
NOW WHEREFORE, in consideration of the premises and of Indemnitee
agreeing to release the Company from other claims for indemnification, and
intending to be legally bound hereby, the parties hereto agree as follows:
1. BASIC INDEMNIFICATION ARRANGEMENT.
(a) In the event Indemnitee was, is or becomes a party to or witness or
other participant in, or is threatened to be made a party to or witness or other
participant in, a Claim by reason of (or arising in part out of) an
Indemnifiable Event, the Company shall indemnify Indemnitee to the fullest
extent permitted by law as soon as practicable but in any event no late than 10
days after written demand is presented to the Company, against any and all
Expenses, judgments, finds, penalties and amounts paid in settlement of such
Claim. If so requested by Indemnitee, the Company shall advance (within ten
business days of such written request) any and all Expenses to Indemnitee (an
"Expense Advance"). Notwithstanding anything in this Agreement to the contrary,
and except as provided in Section 3, prior to a Change in Control, Indemnitee
shall not be entitled to indemnification pursuant to this Agreement in
connection with any Claim initiated by Indemnitee against the Company or any
director or officer of the Company unless the Company has joined in or consented
to the initiation of such Claim.
(b) Notwithstanding the foregoing, (i) the obligations of the Company
under Section 1(a) shall be subject to the condition that the Reviewing Party
shall not have determined (in a written opinion, in any case in which the
special independent counsel referred to in Section 2 hereof is involved) that
Indemnitee would not be permitted to be indemnified under applicable law, and
(ii) the obligation of the Company to make an Expense Advance pursuant to
Section 1(a) shall be subject to the condition that, if, when and to the extent
that the Reviewing Party determines that Indemnitee would not be permitted to be
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so indemnified under applicable law, the Company shall be entitled to be
reimburse by Indemnitee (who hereby agrees to reimburse the Company) for all
such amounts theretofore paid; provided, however, that if Indemnitee has
commenced legal proceedings in a court of competent jurisdiction to secure a
determination that Indemnitee should be indemnified under applicable law, any
determination made by the Reviewing Party that Indemnitee shall not be required
to reimburse the Company for any Expense Advance until a final judicial
determination is made with respect thereto (as to which all rights of appeal
therefrom have been exhausted or lapsed). If there has not been a Change in
Control, the Reviewing Party shall be selected by the Board of Indemnitees, and
if there has been such a Change in Control, the Reviewing Party shall be the
special independent counsel referred to in Section 2 hereof. If there has been
no determination by the Reviewing Party or if the Reviewing Party determines
that Indemnitee substantively would not be permitted to be indemnified in whole
or in part under applicable law, Indemnitee shall have the right to commence
litigation in any court in the states of New York having subject matter
jurisdiction thereof and in which venue is proper seeking an initial
determination by the court of challenging any such determination by the
Reviewing Party or any aspect thereof, and the Company hereby consents to
service of process and to appear in any such proceeding. Any determination by
the Reviewing Party otherwise shall be conclusive and binding on the Company and
Indemnitee.
2. CHANGE IN CONTROL.
The Company agrees that if there is a Change in Control of the Company
(other than a Change in Control which has been approved by a majority of the
Company's Board of Indemnitees who were directors immediately prior to such
Change in Control) then with respect to all matters thereafter arising
concerning the rights of the Indemnitee to indemnity payments and Expense
Advances under this Agreement or any other agreement or Company Bylaw now or
hereafter in effect relating to Claims for Indemnifiable Events, the Company
shall seek legal advice only from special independent counsel selected by
Indemnitee and approved by the Company (which approval shall not be unreasonably
withheld), and who has not otherwise performed services for the Company within
the last five years (other than in connection with such matters) or Indemnitee.
Such counsel, among other things, shall render its written opinion to the
Company and Indemnitee as to whether and to what extent Indemnitee would be
permitted to be indemnified under applicable law. The Company agrees to pay the
reasonable fees of the special, independent counsel referred to above and to
fully indemnity such counsel against any and all expenses Including attorneys'
fees), claims, liabilities and damages arising out of or relating to this
Agreement or its engagement pursuant hereto.
3. INDEMNIFICATION FOR ADDITIONAL EXPENSES.
The Company shall indemnify Indemnitee against any and all expenses
(including attorneys' fees) and, if requested by Indemnitee, shall (within ten
business days of such written request) advance such expenses to Indemnitee,
which are incurred by Indemnitee in connection with any claim asserted against
or action brought by Indemnitee for indemnification or advance payment of
Expenses by the Company under this Agreement or any other agreement or Company
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Bylaw now or hereinafter in effect relating to Claims for Indemnifiable Events
and/or (i) recover under any directors' and officers' liability insurance
policies maintained by the Company, regardless of whether Indemnitee ultimately
is determined to be entitled to such indemnification, advance expense payment or
insurance recovery, as the case may be.
4. PARTIAL INDEMNITY, ETC.
If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Company of some or a portion of the expenses, judgments,
fines, penalties and amounts paid in settlement of a Claim but not, however, for
all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion thereof to which Indemnitee is entitled. Moreover,
notwithstanding any other provision of this Agreement, to the extent that
Indemnitee has been successful on the merits or otherwise in defense of any or
all Claims relating in whole or in part to an Indemnifiable Event or in defense
of any issue or matter therein, including dismissal without prejudice,
Indemnitee shall be indemnified against all Expenses incurred in connection
therewith. In connection with any determination by the Reviewing Party or
otherwise as to whether Indemnitee is entitled to be indemnified hereunder the
burden of proof shall be on the Company to establish that Indemnitee is not so
entitled.
5. NO PRESUMPTION.
For purposes of this Agreement, the termination of any action, suit or
proceeding by judgment, order settlement (whether with or without court
approval) or conviction, or upon a plea of nolo contendre, or its equivalent,
shall not create a presumption that Indemnitee did not meet any particular
standard of conduct or have any particular belief or that a court has determined
that indemnification is not permitted by applicable law.
6. NON-EXCLUSIVITY, ETC.
The rights of Indemnitee hereunder shall be in addition to any other
rights Indemnitee may have under the Company's Bylaws or the New York Business
Corporation Law or otherwise. To the extent that a change in the New York
Business Corporation Law (whether by statute or judicial decision), or the
Company's Bylaws, permits greater indemnification by agreement that would be
afforded currently under the Company's Bylaws and this Agreement, it is to the
intent of the parties hereto that Indemnitee shall enjoy by this Agreement the
greater benefits so afforded by such change.
7. LIABILITY INSURANCE.
To the extent the Company maintains an insurance policy or policies
providing directors' and officers' liability insurance, Indemnitee shall be
covered by such policy or policies, in accordance with its or their terms, to
the maximum extent of the coverage available for any Company director.
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8. CERTAIN DEFINITIONS.
(a) Change in Control. Shall be deemed to have occurred if (i) any
"person" (as much term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended), other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or a
corporation owned directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of the Company representing 20% or more of
the total voting power represented by the Company's then outstanding Voting
Securities, or (ii) during any period of two consecutive years, individuals who
at the beginning such period constitute the Board of Directors of the Company
and any new director whose election by the Board of Directors or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority thereof,
or (iii) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or consolidation
which would result in the Voting Securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into Voting Securities of the surviving
entity) at least 80% of the total voting power represented by the Voting
Securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation, or the stockholders of the Company approve a plan
of complete liquidation of the Company or any agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets.
(b) Claim. Any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative.
(c) Expenses. Include attorneys' fees and all other costs, expenses and
obligations paid or incurred in connection with investigation, defending, being
a witness in or participating in (including on appeal), or preparing to defend,
be a witness in or participate in any Claim relating to any Indemnifiable Event.
(d) Indemnifiable Event. Any event or occurrence related to the fact
that Indemnitee is or was a director, officer, employee, agent of fiduciary of
the Company, or is or was serving at the request of the Company as a director,
officer, employee, trustee, agent or fiduciary of another corporation,
partnership, joint venture, employee benefits plan, trust or other enterprise,
or by reason of anything done or not done by Indemnitee in any such capacity.
(e) Reviewing Party. Any appropriate person or body consisting of a
member of or members of the Company's Board of Directors or any other person or
body appointed by the Board (including the special independent counsel referred
to in Section 2) who is not a party to the particular Claim for which Indemnitee
is seeking indemnification.
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(f) Voting Securities. Any securities of the Company which vote
generally in the election of directors.
9. AMENDMENT AND WAIVER.
No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by both of the parties hereto. No waiver of
any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provisions hereof (whether or not similar) nor shall such
waiver constitute a continuing waiver.
10. SUBROGATION.
In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and shall do everything that
may be necessary to secure such rights, including the execution of such
documents necessary to enable the Company effectively to bring suit to enforce
such rights.
11. NO DUPLICATION OF PAYMENTS.
The Company shall not be liable under this Agreement to make any
payment in connection with any claim made against Indemnitee to the extent
Indemnitee has otherwise actually receive payment (under any insurance policy,
Bylaw or otherwise) of the amounts otherwise Indemnifiable hereunder.
12. BINDING EFFECT, ETC.
This Agreement shall be binding upon and inure to the benefit of and
shall be enforceable by the parties hereto and their respective successors,
assigns, including any director or indirect successor by purchase, merger,
consolidation or otherwise to all or substantially all of the business and/or
assets of the Company, spouses, heirs, and personal and legal representatives.
This Agreement shall continue in effect regardless of whether Indemnitee
continues to serve as a director (or in one of the capacities enumerated in
Section 8(d) hereof) of the Company or of any other enterprise at the Company's
request.
13. SEVERABILITY.
The provisions of this Agreement shall be severable in the event that
any of the provisions hereof (including any provision within a single section,
paragraph or sentence) are held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, and the remaining provisions shall
remain enforceable to the fullest extent permitted by law.
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14. GOVERNING LAW.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York applicable to contracts made
and to be performed in such state without giving effect to the principles of
conflicts of laws.
Executed this _______ day of ____________, 199___.
THE GREAT AMERICAN
BACKRUB STORE, INC.
By:___________________________
, President
______________________________
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Exhibit B
THE GREAT AMERICAN BACKRUB STORE, INC.
53 WEST 36TH STREET, ROOM 1202
NEW YORK, NEW YORK 10018
------------
Telephone (212) 750-7046
October 16, 1997
Ascot International Corp.
4707 140th Avenue N., Suite 312
Clearwater, FL 34622
Att: David Coia, President
Re: Securities Exchange Agreement
Ladies and Gentlemen:
Reference is hereby made to the Securities Exchange Agreement ("the
Agreement") dated as of September 30, 1997 by and between The Great American
BackRub Store, Inc., a New York corporation ("Purchaser"), and Ascot
International Corp., a Delaware corporation ("Ascot"), being the sole
Stockholder of Caribsun Corp., a Delaware corporation ("Caribsun"). Unless
defined herein, all capitalized terms used in this amendment shall have the
meanings defined in the Agreement.
Ascot International Corp. has informed the Purchaser that it is not
able to deliver the Closing Balance Sheet in the form required by paragraph
3.2(b) of the Agreement. The parties to the Agreement wish to extend the
Closing dated until October 16, 1997 and are willing to close the transactions
contemplated by the Agreement with the amendments set forth herein.
The parties hereby agree to amend the Agreement as follows:
(1) Section 3.2 of the Agreement is amended:
(a) to amend paragraphs 3.2(a), (b)and (c) to read as follows:
"(a) In full consideration for the acquisition of Caribsun
Shares, the Purchaser will issue to Ascot a sufficient
number of Purchaser Shares to equal 80% of the outstanding
shares of Purchaser Common Stock after giving effect to such
issuance and assuming that all currently existing options,
warrants and other securities presently convertible into
shares of the Purchaser Common Stock had been exercised and
converted on the Closing Date (the "Initial Number of
Purchaser Shares"). The calculation used to determine the
Initial Number of Shares is annexed to this Agreement as
Amended Schedule 3.2. The Purchaser will deliver 11,000,000
Purchaser Shares to Ascot at Closing (the "Downpayment
Shares").
<PAGE>
(b) The number of Purchaser Shares shall be subject to
adjustment as follows:
By November 15, 1997, Ascot will deliver a Balance Sheet of
Caribsun at October 15, 1997 audited by Elliot Weinberg &
Associates. The audited balance sheet of Caribsun as of
October 15, 1997 shall be referred to in this Agreement as
the "Closing Balance Sheet." In the event that the net worth
of Caribsun shown on the Closing Balance Sheet which will be
reflected as net worth of the Purchaser following
consolidation is less than $4,500,000, the number of
Purchaser Shares to be issued to Ascot in exchange for the
Caribsun Shares shall be reduced (but not increased) by the
number of shares determined by subtracting the difference
between $4,500,000 and the net worth of Caribsun set forth
on the Closing Balance Sheet, dividing by $4,500,000 and
multiplying the result by the Initial Number of Purchaser
Shares. The reduced number of Purchaser Shares thus obtained
shall be the final purchase price for the Caribsun Shares.
In the event the Closing Balance Sheet is not delivered to
the Purchaser by November 15, 1997, the number of Purchaser
Shares shall be reduced by 500,000 and thereafter to be
reduced 500,000 for each month or portion thereof that the
Closing Balance Sheet is late.
(c) In the event that there are not a sufficient number of
authorized, unissued and unreserved shares of Purchaser's
Common Stock, to issue the number of Purchaser Shares
equaling the final purchase price, the Purchaser will
promptly call a meeting of shareholders, or take appropriate
action by consent to authorize the additional number of
shares to fully pay the final purchase price. In the event
the outstanding shares of Purchasers Common Stock are
increased or reduced without the receipt of consideration as
a result of corporation action by the Purchaser, the number
of share so Purchasers Stock comprising the shortfall will
be proportionately reduced or increased."
(b) to add the following paragraph 3.2(d):
"(d) Certificates representing the "Downpayment Shares",
together with stock power duly endorsed in blank by Ascot
shall be held in escrow pursuant to an escrow agreement with
Sommer & Schneider LLP, in form and substance acceptable to
Ascot."
(2) Section 4.12 is deleted in its entirety.
(3) Article IV is amended to add the following Section 4.20:
"4.20 Issuance of Preferred Stock. The holder of a
$5,000,000 Note payable by Caribsun shall have agreed in
writing to exchange such for preferred stock which is not
callable at the option of the holder."
<PAGE>
(4) Article VI is amended to add the following Section 6.8:
"6.8 Financing. Ascot agrees to provide the Purchaser with
financing in an amount not less than $150,000 by November
15, 1997 to fund the operation of the BackRub Stores. In the
event such funding is not received by November 15, 1997, the
final purchase price for Caribsun shall be reduced by
500,000 Purchaser Shares."
Except as modified by this amendment, all other provisions of the
Agreement shall remain in full force and effect.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
Please sign and date this amendment in the spaces provided below to
confirm our mutual understandings and agreements as set forth in this Letter
and return a signed copy to the undersigned..
Very truly yours,
/s/ William Zanker
William Zanker
President
Acknowledged and agreed to:
CARIBSUN CORP.
By: /s/ David Coia
----------------------------
David Coia, President
Date: _________________________
ASCOT INTERNATIONAL CORP.
By: /s/ David Coia
----------------------------
David Coia, President
Date: ______________________________
COCONUT HALL RESORT LIMITED
By: /s/ David Coia
----------------------------
David Coia, President
Date:_______________________________
