SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: March 29, 1999
RICK'S CABARET INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Texas 0-26958 76-0037324
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation or organization) Identification No.)
505 North Belt, Suite 630
Houston, Texas 77060
(Address of principal executive offices, including zip code)
(281) 820-1181
(Registrant's telephone number, including area code)
Item 1. Changes in control of Registrant
References to shares of common stock in this Form 8-K refer to pre-reverse
split shares with respect to the March 15, 1999 two for one reverse split of the
Company's common stock.
On March 29, 1999, E.S. Langan, L.P., a Texas limited partnership ("Langan,
L.P."), of which Eric Langan is the general partner, and Ralph McElroy
purchased, in the aggregate, 1,790,000 shares of common stock (the "Shares") of
Rick's Cabaret International, Inc. (the "Company") from Robert L. Watters for a
combined purchase price of $1,560,072. Mr. Watters is a Director of the Company
and, prior to the completion of this transaction, was President and Chief
Executive Officer of the Company. The Shares were acquired as follows:
1. Langan, L.P. acquired 1,041,064 shares of common stock of the Company
from Mr. Watters for $907,328, payable $707,328 in cash and a $200,000
promissory note to Mr. Watters, due in full on May 3, 1999, which bears interest
at the rate of 18% per annum. Eric Langan is a Director of the Company and,
upon the completion of this transaction, was appointed President of the Company.
As a result of this transaction, Langan, L.P., is now the beneficial owner of
1,133,464 shares of common stock of the Company, representing approximately
17.7% of the common stock of the Company. In addition, Mr. Langan is the
beneficial owner of 414,811 shares of common stock of the Company or
approximately 6.4%. Accordingly, as a result of his indirect beneficial
ownership through Langan, L.P., Mr. Langan is now the beneficial owner, directly
or indirectly, of a total of 1,548,275 shares of common stock of the Company or
24.1%.
The source of funds used by Langan, L.P. for the acquisition of the shares of
common stock of the Company were funds from Langan, L.P., except that Langan,
L.P. borrowed $175,000 from Mr. Steve Wadley, a private investor, pursuant to a
short term promissory note due in full on May 1, 1999, which bears interest at
the rate of eighteen percent (18%) per annum. The note is secured by 512,650
shares of common stock of the Company presently owned by Mr. Langan or Langan,
L.P.
2. Mr. McElroy acquired 748,936 shares of common stock of the Company from
Mr. Watters for $652,744, which was paid by Mr. McElroy pursuant to a secured
promissory note made payable to Mr. Watters (the "McElroy Note"). The McElroy
Note which is due July 31, 2004, bears interest at the rate of twelve percent
(12%) per annum with interest being paid monthly. The principal of the McElroy
Note is due in one lump sum payment. The McElroy Note is secured by (i) a
convertible debenture of the Company in the original principal amount of
$366,000, which was issued August, 11, 1998, in favor of Mr. McElroy (the
"Convertible Debenture") and (ii) a promissory note of Taurus Entertainment
Companies, Inc. (a subsidiary of the Company) and guaranteed by the Company
(which has a conversion feature) in the original principal amount of
$286,744.61, dated August 11, 1998, in favor of Mr. McElroy, (the "Convertible
Promissory Note"). Both the Convertible Debenture and the Convertible
Promissory Note are secured by certain real estate of the Company or its
subsidiaries.
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As a result of this transaction, Mr. McElroy is now the beneficial owner of
1,337,936 shares of common stock of the Company, representing approximately
20.9% of the common stock of the Company. This amount does not include shares
of the Company issuable upon the conversion of the Convertible Debenture or upon
conversion of the Convertible Promissory Note. The Convertible Debenture and
the Convertible Promissory Note are in the aggregate amount of $652,744 and are
convertible at any time at $2.75 per share, subject to adjustment. If the
Convertible Debenture and the Convertible Promissory Note were converted, Mr.
McElroy would receive an additional 237,361 shares of common stock of the
Company. Accordingly, Mr. McElroy is deemed beneficial owner of a total of
1,575,297 shares of common stock of the Company, or approximately 24.6% of the
common stock of the Company.
Mr. Langan, as General Partner of Langan, L.P., has voting rights for
Langan, L.P. and as such, Mr. Langan and Langan, L.P. will vote as a group.
There is no voting agreement between Mr. Langan, Langan, L.P. and Mr. McElroy.
Item 2. Acquisition or Disposition Assets
On March 29, 1999, Robert L. Watters, a Director of the Company, purchased
RCI Entertainment Louisiana, Inc. ("RCI Louisiana"), a subsidiary of the
Company, for the purchase price of $2,200,000 consisting of $1,057,327 in cash,
the endorsement over to the Company of the McElroy Note, a guaranteed promissory
note in the amount of $326,773 made by Mr. Watters (the "Watters Note"), and the
cancellation by Mr. Watters of the Company's $163,156 indebtedness to him. The
Watters Note is guaranteed by RCI Louisiana, which operates a Rick's Cabaret in
New Orleans, Louisiana. The McElroy Note is secured as reflected above in Item
1. In connection with the acquisition of the stock of RCI Louisiana, Mr.
Watters also assumed RCI Louisiana's liabilities of approximately $1,400,000.
As a condition of this transaction, Mr. Watters arranged for the release by a
lender of the Company's liability of $763,199 owed to the lender by RCI
Louisiana, which the Company had guaranteed. The Company obtained an opinion
from Chaffe & Associates, Inc., a New Orleans investment banking firm, stating
that the purchase price paid by Mr. Watters for RCI Louisiana was fair from a
financial point of view to the shareholders of the Company. The terms of this
transaction were the result of arms-length negotiations between the Company and
Mr. Watters.
In connection with the sale of RCI Louisiana, Mr. Watters and Erich Norton
White, a Vice-president and Director of the Company entered into agreements with
the Company to terminate their Employment Agreements and to cancel all stock
options of the Company which they held. Messrs. Watters and White continue to
serve as Directors of the Company.
Further, in connection with the sale of RCI Louisiana, the Company entered
into an Exclusive Licensing Agreement with Mr. Watters which granted Mr. Watters
the right to the use of the name "Rick's Cabaret" and all logos, trademarks and
service marks attendant thereto for use in the states of Louisiana, Florida,
Mississippi and Alabama.
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Item 5. Other Events
On March 29, 1999, Mr. Langan was appointed President and acting Chief
Accounting Officer of the Company and Mr. Watters resigned as President, Chief
Executive Officer and Chief Financial Officer of the Company. Mr. White also
resigned as Vice-President of the Company. Messrs. Watters and White continue
to serve as Directors of the Company.
Item 7. Financial Statements and Exhibits
Financial Statements:
The financial information required in this item is not included
herein, but will be filed by amendment by June 14, 1999.
Exhibits:
Exhibit 10.1 Stock Purchase Agreement between the E. S. Langan, L.P.,
Ralph McElroy, and Robert L. Watters.
Exhibit 10.2 Stock Purchase Agreement between the Company and Robert L.
Watters.
Exhibit 10.3 Exclusive Licensing Agreement
Exhibit 10.4 Termination and Non-compete Agreement of Robert L. Watters
Exhibit 10.5 Termination and Non-compete Agreement of Erich Norton White
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report on Form 8-K to be signed on its behalf by
the undersigned hereunto duly authorized.
RICK'S CABARET INTERNATIONAL, INC.
Date: April 5, 1999 By: /s/ Eric Langan
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President
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