Earnest Money Contract [Amendment No. 1] - Larry A. Holmberg, Amusement Center Inc., Buns & Roses II, Rick's Cabaret International Inc. and RCI Entertainment (Minnesota) Inc.
AMENDMENT TO ASSET PURCHASE AGREEMENT
AMENDMENT TO EARNEST MONEY CONTRACT
The parties to this Agreement ("Amendments") made this 4th day of
August, 1997, are as follows:
LARRY A. HOLMBERG ("Holmberg" under the Asset Purchase Agreement and
"Seller" under the Earnest Money Contract); AMUSEMENT CENTER, INC., a Minnesota
Corporation ("Amusement Center", and collectively referred to as "Seller" with
BUNS & ROSES II, INC., under the Asset Purchase Agreement); "BUNS & ROSES II,
INC., a Minnesota Corporation ("B&R II" and collectively referred to as "Seller"
with Amusement Center, Inc., in the Asset Purchase Agreement); RICK'S CABARET
INTERNATIONAL, INC., a Texas Corporation, ("Buyer" under the Asset Purchase
Agreement; "Purchaser" under the Earnest Money Contract); and RCI ENTERTAINMENT
(MINNESOTA), INC., a Minnesota Corporation ("RCI") a wholly owned subsidiary of
Rick's Cabaret International, Inc., and its designee to acquire all of the
assets under the Asset Purchase Agreement and Earnest Money Contract.
WHEREAS, the various parties have entered into a certain Asset Purchase
Agreement dated the 24th day of December, 1996, and a certain Earnest Money
Contract dated the 24th day of December, 1996; and
WHEREAS, the parties contemplated a combined closing under those
Agreements on or about July 31, 1997, which combined closing did not occur; and
WHEREAS, the parties desire to amend the Asset Purchase Agreement and
the Earnest Money Contract provide for the subsequent combined closing.
NOW, THEREFORE, in consideration of promises and mutual covenants
contained herein, the parties agree as follows:
ARTICLE I.
EXPLANATION OF AMENDMENTS
A. The parties agree that the total Purchase Price of
$3,000,000.00 remains unchanged. That all the terms and
conditions of the original Asset Purchase Agreement and
Earnest Money Contract shall be in full force and effect
unless changed by these Amendments. These Amendments shall
supersede and replace the terms of the Asset Purchase
Agreement and Earnest Money Contract.
1. The downpayment, however allocated between the
Purchased Assets and the Property should be as
follows:
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(i) $50,000.00 to be dispersed from the Escrow
Agreement to Holmberg on the execution of
these Amendments by all parties;
(ii) $150,000.00 to be paid to Holmberg at the
time of Closing on the sale of Purchased
Assets and Property;
(iii) 80,000 shares of common stock of Rick's
Cabaret International, Inc., issued to
Holmberg at the time of Closing;
(iv) The total value of the downpayment shall be
$300,000.00.
2. $200,000.00 of the purchase price shall be paid by
Buyer's execution and delivery of a Promissory Note
to be executed at Closing in the amount of
$200,000.00 amortized over 18 months, bearing
interest at the rate of 10% per annum payable in 17
equal monthly installments of principal and interest,
and a final balloon payment due on the 18th monthly
installment payment. The $200,000.00 Promissory Note
will be secured by all the collateral securing any
and all other indebtedness owned from the
Buyer/Purchaser to any of the Sellers.
3. The remaining $2,500,000.00 of the purchase price
shall be paid according to the terms of the Asset
Purchase Agreement and Earnest Money Contract.
4. The allocation of the Purchase Price of the Purchased
Assets shall be pursuant to an appraisal obtained,
prior to closing, by the Buyer/Purchaser as allocated
between the tangible personal property and goodwill.
The allocation of the Purchase Price for the Property
shall remain at $750,000.00.
5. The Closing, as contemplated by the parties, shall be
on or before October 31, 1997.
6. Following the execution of these Amendments,
Buyer/Purchaser shall be permitted to commence
construction or improvements of the building for
dressing rooms in the basement and a kitchen on the
ground floor following completion of the dressing
rooms. All such construction and improvements shall
be at the expense of Buyer/Purchaser and such
constructions and improvements shall not commence
until the Sellers have been provided with
certificates of insurance providing general
comprehensive liability insurance and coverage of not
less than $1,000,000.00 per occurrence and per person
and fire and extended coverages in an amount not less
than $750,000.00. Such certificate shall be specified
through all policies of insurance in effect and shall
not be canceled except upon ten (10) days prior
written notice to Sellers, and all
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policies of insurance shall name Sellers as an
additional insured thereunder. Buyer/Purchaser shall
obtain the consent of Holmberg for all such
construction and improvements, which consent shall
not unreasonably withheld. Prior to the beginning of
any construction or improvements, Buyer/Purchaser
shall establish an escrow construction fund and
deposit all funds required to pay for the
construction or improvements contemplated. Holmberg's
written consent shall be required for any
dispersements from the escrow account.
Buyer/Purchaser shall produce appropriate lien
waivers prior to dispersement.
B. Nothing contained in these Amendments or the original Asset
Purchase Agreement and Earnest Money Contract shall prevent
the Buyer/Purchaser from prepaying any amount due thereunder;
however, until all the obligations of Buyer/Purchaser to
Seller are paid or performed according to the terms of the
various Agreements, Buyer/Purchaser shall not be provided with
any satisfaction, release, or termination of any and all
mortgages, security agreements, and notes. It is further
agreed that Buyer/Purchaser may not sell, assign, or transfer
its interest (other than to RCI), and cannot dispose of any of
the assets, other than in the ordinary course of business,
without all of the obligations due to Sellers being performed
or paid in full.
ARTICLE II.
CHANGES IN THE ASSET PURCHASE AGREEMENT
A. As set forth in Article I., of these Amendments the changes,
additions, and deletions in the Asset Purchase Agreement dated
December 24, 1996, are as follows:
1. RCI, the wholly owned subsidiary of Rick's Cabaret
International, Inc., shall be the "Buyer", and all
the closing documents should be amended to reflect
this change. Rick's Cabaret International, Inc.,
shall guarantee and remain liable for all the
obligations of RCI.
2. 1.3(i) is amended to provide that the downpayment is
changed as set forth in Article I. to provide for
$50,000.00 Earnest Money at the time of execution of
these Amendments as provided for in Article III. A.
2. (a); $150,000.00 payable by cashiers check,
certified funds, or wire transfer at Closing; 80,000
shares of common stock of Rick's Cabaret
International, Inc., with a value assigned to those
shares of $100,000,00; and a note from Rick's Cabaret
International, Inc., payable to Holmberg amortized
and payable over 18 months, bearing interest at the
rate of 10% per annum, with the first payment due 30
days after Closing.
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3. 1.4 is deleted and replaced as follows: "In the event
there is no Closing, based upon this Agreement or the
Earnest Money Contract, being canceled or terminated
by Buyer, Holmberg shall retain the $50,000.00
Earnest Money released and paid to Holmberg as
liquidated damages, which shall be the sole and
exclusive remedy of Holmberg, Amusement Center, and
B&R II, except that the Seller shall not be required
to reimburse Buyer/Purchaser for any remodeling done
prior to Closing."
4. 1.6 shall be amended to read:
"The Purchase Price of the Property shall be
$750,000.00. The Purchase Price of the
Purchased Assets shall be allocated among
the Purchased Assets in accordance with the
schedule which shall be agreed upon and
signed by all the parties prior to the
Closing Date following an appraisal by the
Buyer."
5. 3.1 is amended to refer to "Buyer" as Rick's Cabaret
International, Inc., and a new sentence should be
added identical to the first regarding RCI
Entertainment (Minnesota), Inc., a Minnesota
corporation.
6. The following statement should be added to Paragraph
4.1:
"Effective July 19, 1997, the City of Minneapolis
approved an On-Sale Liquor Class A with Sunday Sales
License."
7. Subparagraph (h) of Paragraph 5.1 should be amended
to add the following:
" . . ., except for existing litigation
filed by Robert W. Sabes and Classic
Affairs, Inc., or any other action filed by
Sabes or a related party."
8. Subparagraphs (e), and (j) of Paragraph 5.2 shall be
deleted.
9. 6.1 shall be deleted and replaced as follows:
"The Closing of the transactions provided for in this
Agreement ("Closing") shall be held at the offices of
Messerli & Kramer P.A., 1800 Fifth Street Towers,
Minneapolis, Minnesota, 55402, commencing at 10:00
a.m. central daylight time on October 31, 1997,
unless an earlier Closing date is requested by Buyer
with at least five (5) business days written notice
of such earlier date. The day on which the Closing
occurs is referred to herein as the "Closing Date."
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10. 6.4 is amended to delete Subparagraphs (a) and (b)
and to relist Subparagraphs (c) through (h) as
Subparagraphs (d) through (i). New Subparagraphs (a)
through (c) are as follows:
(a) $150,000.00 payable by certified check, bank
check, or "Fed Funds" wire transfer;
(b) Promissory Note from Rick's Cabaret
International, Inc., in the amount of
$200,000.00 in the form to be provided at
Closing amortized and payable over 18
months, bearing interest at the rate of 10%
per annum;
(c) 80,000 shares of common stock of Rick's
Cabaret International, Inc., registered in
the name of Holmberg;
11. A new Paragraph 6.5 shall be added:
"6.5. HOLMBERG'S RIGHTS REGARDING THE COMMON
STOCK. Holmberg shall have the right to
demand sixty (60) days after the Closing
Date of the Agreement that Rick's Cabaret
International, Inc., file a Registration
Statement of Form S-3 (or if S-3 is not
available on any other available form) with
the Securities and Exchange Commission
("Commission") under the Securities Act of
1933, as amended ("the Act"), which, when
effective, will permit the resale of the
shares of common stock issued to Holmberg
pursuant to this Agreement. Rick's Cabaret
International, Inc., shall cause to be filed
with the Commission, as soon as practical
after demand is made by Holmberg, the
Registration Statement and shall use its
best efforts to cause the Registration
Statement to become effective as soon
thereafter as practical and will maintain
such effectiveness for a period of one (1)
year from the Closing Date.
12. A new Paragraph 6.6 shall be added:
"6.6 FAILURE TO CLOSE. In the event that Buyer
fails or refuses to close the transactions
contemplated by this Agreement or the
Earnest Money Contract, then Holmberg shall
retain the $50,000.00 previously released
and paid to Holmberg on August 4, 1997 as
liquidated damages, which shall be the sole
and exclusive remedy of Holmberg, Amusement
Center and/or B & R II, except that Sellers
shall not have to reimburse Buyer for any
improvements made by Buyer to the Property
before Closing. In the event that Holmberg,
Amusement Center or B & R II fail or refuse
to close the transactions contemplated by
this Agreement or the Earnest Money
Contract, then the Buyer shall have the
right to seek relief available at law, and
in addition to any other remedy available at
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law, to apply for and receive from a court
of competent jurisdiction equitable relief
by way of restraining order, injunction or
otherwise, prohibitory or mandatory, to
prevent a breach of the terms of this
Agreement or the Earnest Money Contract, or
by way of specific performance to enforce
performance of the terms of this Agreement
and the Earnest Money Contract, plus
reimbursement for costs, including
reasonable attorney's fees, incurred in the
securing of such relief."
13. 9.16 is deleted in its entirety.
B. Unless amended, added, or deleted by Article I. above or under
this Article II., all the remaining terms and conditions of
the Asset Purchase Agreement shall remain in full force and
effect according to its terms.
ARTICLE III.
EARNEST MONEY CONTRACT
A. As set forth in Article I. of these Amendments, the changes,
additions, and deletions in the Earnest Money Contract dated
December 24, 1996, are as follows:
1. RCI, the wholly owned subsidiary of Rick's Cabaret
International, Inc., shall be the "Purchaser", and
all the closing documents should be amended to
reflect this change. Rick's Cabaret International,
Inc., shall guarantee and remain liable for all the
obligations of RCI.
2. Subparagraphs 2.a. through c. are deleted and
replaced as follows:
a. $50,000.00 earnest money previously paid to
Seller; and
b. $700,000.00 by Purchaser executing two (2)
Promissory Notes in the form attached as
Exhibit C-1 in the amount of $200,000.00
from Rick's Cabaret International, Inc., and
as Exhibit C-2 in the amount of $500,000.00
from RCI secured by a Combination Mortgage,
Security Agreement and Fixture and Financing
Statement in the form attached as Exhibit D,
and UCC-2 Financing Statement in the form
attached as Exhibit E. The Exhibit C-2
Promissory Note and all the other
obligations of RCI shall be guaranteed by
Rick's Cabaret International, Inc., in the
form attached hereto as Exhibit F.
3. A new Paragraph 8. shall be added and old Paragraphs
8 through 22 shall be renumbered. New Paragraph 8.
shall be as follows:
"8. REMODELING. The parties hereto agree that
the Purchaser may commence remodeling of the
real property after the execution of
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these Amendments and before the contemplated
closing of October 31, 1997. The parties'
agreement to allow the remodeling to
commence prior to closing on this Agreement
shall be subject to the following:
a. The remodeling shall be limited to
the construction or improvement to
the dressing rooms in the basements,
which shall be done first, and then
for the construction of a kitchen on
the ground floor.
b. Purchaser shall retain a Contractor
licensed to do business in the City
of Minneapolis and State of
Minnesota to perform the remodeling
work. The Contractor shall secure
any necessary permits and
inspections necessary for the proper
completion of the work.
c. All plans and specifications
relating to the remodeling shall be
approved in writing by Seller prior
to any work being commenced. Any
material change or modification to
those plans and specifications shall
also be approved in writing by
Seller. Seller's approval will not
be unreasonably withheld.
d. The Contractor shall provide a firm
bid for the remodeling prior to
construction and any changes to the
bid shall be in writing from the
Contractor, which will include a
sworn construction statement listing
subcontractors and materialmen.
e. Purchaser agrees to deposit funds
equal to the amount of the
remodeling costs as set forth in
Contractor's firm bid in an
interest-bearing escrow account
requiring two signatures, one by
Seller and one by Purchaser. Seller
agrees to sign checks to disburse
funds from that escrow account
directly to Contractor and/or
Subcontractors in exchange for full
or partial mechanic's lien waivers
from Contractor and/or
Subcontractors. Purchaser shall also
sign those checks. Seller agrees to
cooperate with Purchaser in
disbursing reasonable progress
payments to Contractor based upon
Contractor's completion of work.
Seller may use those funds to
discharge any mechanic's liens filed
against the real property relating
to remodeling work done by Purchaser
by paying them into Hennepin County
District Court for that purpose, or
if Purchaser does not dispute the
mechanic's lien claim, by paying
them directly
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to Contractor and/or Subcontractor
for a mechanic's lien waiver.
Purchaser agrees to execute the
checks necessary to accomplish the
above. Prior to or contemporaneously
with the release of all of the
escrowed funds to the Contractor,
Contractor shall provide a full
mechanic's lien waiver from itself
and its subcontractors and
materialmen to Seller and Purchaser.
f. Contractor shall carry public
liability insurance covering claims
for injury, wrongful death, or
property damage, covering the period
of construction in an amount of not
less than $1,000,000.00 per
occurrence and in the amount of
$750,000.00 for property damage
insurance. Contractor shall also
carry, during the period of
construction, builder's risk
insurance on the improvements
against loss or damage by vandalism,
malicious mischief, fire and
extended insurance coverage. Said
insurance shall name Purchaser and
Seller and its Mortgagees, if any,
as loss payees under the policy and
provide that no act or omission of
Contractor shall operate to deny or
limit coverage to Purchaser, Seller,
and/or Seller's Mortgagee. The
policy shall be in an amount not
less than the full replacement value
of the improvements. Prior to the
commencement of the remodeling,
Contractor shall deliver to Seller
and Purchaser certificates of
liability and builder's risk
insurance required herein.
g. In the event that there is no
Closing, Seller shall not be
required to reimburse Purchaser for
any remodeling done prior to
Closing, and Purchaser shall remain
liable to Seller for any unpaid
remodeling costs.
4. The following sentence shall be added to
Paragraph 11 (old Paragraph 10):
"Until all the obligation of Rick's Cabaret
International, Inc., and RCI to Seller or
Holmberg under the Asset Purchase Agreement
or Earnest Money Contract are completed,
Purchasers will not receive a satisfaction
of the Exhibit D, Mortgage or termination of
the Exhibit E., Financing Statement."
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5. Paragraph 20 (old Paragraph 19) shall be
deleted and replaced as follows:
"REMEDIES. If Seller defaults in the
performance of this Agreement and Purchaser
does not terminate this Agreement, Seller
acknowledges that the Property is unique and
that money damages to Purchaser in the event
of default by Seller are inadequate.
Accordingly, Purchaser shall have the right
to seek any other relief available at law,
and in addition to any other remedy
available at law, to apply for and to
receive from a court of competent
jurisdiction equitable relief by way of
restraining order, injunction or otherwise,
prohibitory or mandatory, to prevent a
breach of the terms of this Agreement, or by
way of specific performance to enforce
performance of the terms of this Agreement,
or by way or specific performance to enforce
performance of the terms of this Agreement
or rescission, plus reimbursement for costs,
including reasonable attorneys' fees,
incurred in the securing of such relief.
This right to equitable relief shall not be
construed to be in lieu of or to preclude
Purchaser's right to seek a remedy at law.
If Purchaser defaults in the performance of
this Agreement, Seller's sole and exclusive
remedy shall be to retain the $50,000.00
Earnest Money released and paid to him as
liquidated damages except that Seller shall
not be required to reimburse Purchaser for
any remodeling done prior to Closing."
B. To the extent that these Amendments to the Asset Purchase
Agreement and Earnest Money Contract cause any change,
addition, or deletion to any of the Exhibits herein, then the
parties agree that such Exhibits shall be modified prior to
Closing to conform to these Amendments.
C. Unless amended, added, or deleted by Article I. above or under
this Article III., all the remaining terms and conditions of
the Earnest Money Contract shall remain in full force and
effect according to its terms.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
these Amendments as of date first above written.
SELLERS: BUYER/PURCHASER
AMUSEMENT CENTER, INC. RICK'S CABARET INTERNATIONAL, INC.
<PAGE>
By /s/ LARRY A. HOLMBERG By /s/ ROBERT L. WATTERS
--------------------- ---------------------
Larry A. Holmberg Robert L. Watters
President President
BUNS & ROSES, INC. RCI ENTERTAINMENT (MINNESOTA) INC.
By /s/ LARRY A. HOLMBERG By /s/ ROBERT L. WATTERS
--------------------- ---------------------
Larry A. Holmberg Robert L. Watters
President President
/s/ LARRY A. HOLMBERG
---------------------
Larry A. Holmberg
Individually