Attached files
| file | filename |
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| 8-K - RICK'S CABARET 8K 2-16-2010 - RCI HOSPITALITY HOLDINGS, INC. | form8k.htm |
| EX-99.2 - EXHIBIT 99.2 - RCI HOSPITALITY HOLDINGS, INC. | ex99_2.htm |
| EX-99.3 - EXHIBIT 99.3 - RCI HOSPITALITY HOLDINGS, INC. | ex99_3.htm |
Exhibit 99.1
LETTER OF
INTENT
February
16, 2010
VCG
Holding Corp.
Attn.:
Courtney Cowgill
390 Union
Boulevard, Suite 540
Lakewood,
CO 80228
Troy
Lowrie
390 Union
Boulevard, Suite 540
Lakewood,
CO 80228
This letter (this “Letter of Intent”) will
confirm the mutual intentions of Rick’s Cabaret
International, Inc., a Texas corporation (“RCI”), Troy Lowrie, an
individual, and Lowrie Management, LLLP, a Colorado limited liability limited
partnership (“Lowrie
Management” and, together with Mr. Lowrie, “Lowrie”), and VCG Holding
Corp., a Colorado corporation (“VCGH”), regarding the
acquisition by RCI of the outstanding shares of VCGH and certain related
transactions as described below.
1.
Form
of Transaction. RCI,
directly or through a newly formed, wholly-owned subsidiary, proposes to acquire
VCGH through a merger transaction (the “Merger”) on the terms set
forth herein and in a definitive merger agreement to be agreed among the parties
(together with any ancillary agreements related thereto, the “Merger
Agreement”). The Merger will be structured to qualify as a tax
free reorganization under the Internal Revenue Code of 1986, as
amended. In addition to the Merger, the Merger Agreement will provide
for certain transactions between Lowrie and RCI as described below
(collectively, the “Lowrie
Transactions”).
2.
Consideration. Upon the closing
of the Merger (the “Closing”), VCGH stockholders
will receive that number of shares of RCI common stock (“RCI Common Stock”) as
determined by the ratios set forth below, based on the RCI Stock Price (as
hereinafter defined):
VCG
Holding Corp.
Troy
Lowrie
Lowrie
Management, LLLP
February
16, 2010
Page
2
_________________________
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RCI Stock Price
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Exchange Ratio
(No.
of Shares of VCGH Common Stock to be Exchanged for One Share of RCI Common
Stock)
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$8.00
– $10.00 per share
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RCI
Stock Price divided by $2.20
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$10.01
– $11.00 per share
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RCI
Stock Price divided by $2.44
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$11.01
– $12.00 per share
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RCI
Stock Price divided by $2.66
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$12.01
– $13.00 per share
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RCI
Stock Price divided by $2.76
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$13.01
- $14.25 per share
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RCI
Stock Price divided by $2.85
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$14.26
- $16.50 per share
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RCI
Stock Price divided by $3.00
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$16.51
- $17.06 per share
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RCI
Stock Price divided by $3.25
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$17.07
- $19.95 per share
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5.25
shares of VCGH Common Stock to 1 share of RCI Common
Stock
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In
excess of $19.95 per share
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RCI
Stock Price divided by $3.80
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The
“RCI Stock Price” means
the volume weighted average price (“VWAP”) of RCI Common Stock on
the Nasdaq Global Market for the 20 trading days ending on the second trading
day before the closing of the Merger.
Notwithstanding
the foregoing, in the event that the RCI Stock Price is below $8.00 per share,
then RCI shall have the right in its sole discretion to terminate the Merger
Agreement and the Merger Agreement shall be of no force or effect; provided,
however, that RCI shall pay VCGH and Lowrie a to be negotiated termination fee
in the event it terminates the Merger Agreement pursuant to the
foregoing.
VCG
Holding Corp.
Troy
Lowrie
Lowrie
Management, LLLP
February
16, 2010
Page
3
_________________________
3.
Lowrie
Transactions. The Merger
Agreement shall provide that, contemporaneously with the Closing, RCI and Lowrie
shall consummate the “Lowrie
Transactions,” which shall consist of:
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(i)
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RCI
will acquire 5,770,197 shares of VCGH common stock held by Lowrie or any
affiliated entities (the “Lowrie Shares”) for a
purchase price of $2.44 per share (the “Purchase Price”),
provided that if the consideration paid to the other shareholders of VCGH
at the Closing equals a price per share of less than $2.44, then the
Purchase Price to Lowrie shall be reduced to the equivalent price paid to
the other shareholders of VCGH;
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(ii)
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Notwithstanding
3.(i) immediately above, Lowrie shall have the right, at Closing, to
accept RCI Common Stock for up to thirty percent (30%) of the Lowrie
Shares for the identical consideration paid to the other shareholders of
VCGH at the Closing;
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(iii)
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RCI
and Mr. Lowrie shall enter into an agreement pursuant to which Mr. Lowrie
will receive a cash payment equal to the agreed upon fair market value
(currently estimated to be $2,000,000) of Lowrie’s commitment to (A)
maintain his guarantees on existing loans made to VCGH, (B) agree to an
interest rate reduction on his existing indebtedness with VCGH as
described below and (C) restructure the payments of his existing loans to
VCGH and enter into the new loan as described
below;
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(iv)
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RCI
will enter into a consulting agreement with Mr. Lowrie, which will (A)
have a three year term, (B) provide for an expense allowance of $1,500.00
per month, (C) provide for annual payments to Mr. Lowrie of $333,333.33
and (D) contain other customary terms;
and
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(v)
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RCI
shall agree to acquire the outstanding capital stock of Club Licensing,
Inc., a wholly owned subsidiary of Lowrie Management (subject to no debt),
and Lowrie Management shall transfer and assign or shall cause to be
transferred and assigned to RCI the trademarks “Diamond Cabaret” and
“PT's,” in each case for cash payments equal to the agreed upon fair
market value (currently estimated to be $5,000,000) of the transferred
assets.
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VCG
Holding Corp.
Troy
Lowrie
Lowrie
Management, LLLP
February
16, 2010
Page
4
_________________________
The
payments to be made as set forth above (other than payments to be made pursuant
to the consulting agreement) shall be payable to Lowrie individually or to
Lowrie Management, as the case may be, for a total aggregate consideration of
$26,779,280 (subject to agreement on fair market value as noted above),
inclusive of existing indebtedness of VCGH to Lowrie of $5,700,000, of which (i)
$16,778,280 (subject to agreement on fair market value as noted above) will be
payable in cash at the Closing (assuming Lowrie takes all cash for the Lowrie
Shares) and (ii) $10,000,000 will be payable pursuant to a four (4) year
promissory note bearing interest at eight percent (8%) per annum, payable
interest only, in arrears, in equal monthly installments with principal due on
the fourth anniversary of the promissory note, which promissory note includes
the restructuring of the existing $5,700,000 indebtedness of VCGH to
Lowrie.
4.
Definitive
Agreement. The obligations
of the parties to consummate the Merger and the Lowrie Transactions will be
subject to the execution and delivery of a Merger Agreement, which shall contain
representations and warranties, covenants (including a provision to the effect
that RCI shall be entitled to a to be negotiated breakup fee as set forth in the
Merger Agreement if VCGH accepts a Superior Proposal (as hereinafter defined)),
conditions to the obligations of the respective parties and other terms
customary in transactions of this kind and satisfactory in form and substance to
the parties and their respective counsel. The Merger Agreement shall
provide, among other things, for the following conditions to the Merger and the
Lowrie Transactions:
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(i)
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The
representations and warranties of RCI, VCGH and Lowrie shall be true and
correct as of the Closing (subject to customary materiality
qualifications) as though made at the Closing and there shall have been no
material adverse change in the financial condition, results of operations,
business, assets or liabilities of RCI or VCGH since the date of execution
of the Merger Agreement;
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(ii)
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A
Registration Statement on Form S-4 registering the shares of RCI Common
Stock to be issued in the Merger shall have been declared effective by the
Securities and Exchange Commission, and such shall either have been
registered under all applicable state “blue sky” laws or an exemption from
registration shall be available
thereunder;
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(iii)
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All
material regulatory and other consents (as determined by the parties in
the due diligence process), rulings or approvals for the Merger and the
Lowrie Transactions shall have been
obtained;
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VCG
Holding Corp.
Troy
Lowrie
Lowrie
Management, LLLP
February
16, 2010
Page
5
_________________________
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(iv)
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Consummation
of the Merger and the Lowrie Transactions shall not have been restrained,
enjoined, or otherwise prohibited by any court of competent jurisdiction
or governmental authority; and
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(v)
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The
Merger shall have been approved by VCGH shareholders and the RCI
shareholders.
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5.
Negotiation
of Merger Agreement. RCI, Lowrie and
VCGH will negotiate in good faith to enter into the Merger Agreement in no event
later than March 12, 2010.
6.
No
Shop. During the period
commencing on the date hereof and ending March 12, 2010, VCGH and its
representatives shall negotiate exclusively with RCI and its representatives and
shall not solicit any offer or engage in any negotiations other than with RCI
for the merger or sale of the business or assets of VCGH or any material part
thereof or for any tender or exchange offer for VCGH Common
Stock. Notwithstanding the foregoing: (A) if VCGH or its
representatives receive an unsolicited proposal from any Person (which term
shall for these purposes include any group as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended) other than RCI and its subsidiaries
or affiliates, and such proposal shall be for (i) any tender or exchange offer
for 20% or more of the equity of VCGH, (ii) any merger, consolidation or other
business combination involving VCGH or any of its subsidiaries, (iii) any
acquisition in any manner of 20% or more of the equity of, or 20% or more of the
assets of VCGH or any of its subsidiaries, or (iv) any solicitation of proxies
or consents from VCGH’s stockholders relating to directors or an acquisition of
control of VCGH, (B) in the opinion of VCGH’s financial advisor such proposal
is, or is reasonably likely to lead to, a proposal that is more favorable to the
stockholders of VCGH than the offer presented by RCI, and (C) VCGH’s board has
determined in good faith after having been advised by outside counsel that
failure to negotiate such proposal is likely to constitute a breach of the
board’s fiduciary duties under applicable law (i.e., a “Superior Proposal”), then VCGH
shall give prompt notice to RCI of the receipt of any such Superior Proposal
stating in reasonable detail the terms thereof, and RCI shall have five (5)
business days within which to amend the terms of this Letter of Intent in order
that the third party proposal is no longer a Superior Proposal. If
RCI shall fail to so amend its offer, then the foregoing restrictions shall
cease to apply and VCGH may terminate this Letter of Intent.
7.
Expenses. Each party shall
pay all of its own expenses incident to the preparation of the Merger Agreement
and the Lowrie Transactions, provided, however, if the negotiations contemplated
hereby are terminated or abandoned due to a Superior Proposal having been
received by VCGH prior to March 12, 2010, then VCGH shall pay RCI within five
days of such termination or abandonment an amount not to exceed $250,000 in
reimbursement of the reasonable out-of-pocket expenses and fees incurred by RCI
in evaluating and negotiating the Merger, the Merger Agreement, the Lowrie
Transactions and this Letter of Intent, including, but not limited to, all fees,
expenses and disbursements of counsel, accountants, investment bankers and other
representatives of RCI and its affiliates.
VCG
Holding Corp.
Troy
Lowrie
Lowrie
Management, LLLP
February
16, 2010
Page
6
_________________________
8.
Due
Diligence. As soon as
practicable after execution of this Letter of Intent, RCI and its agents and
employees shall be permitted to make a full and complete due diligence review of
VCGH’s business and affairs, and VCGH, Lowrie and their respective agents and
employees shall be permitted to make a full and complete due diligence review of
RCI’s business and affairs, in each case subject to the applicable
Confidentiality Agreements between RCI and VCGH and RCI and Lowrie (the “Confidentiality
Agreements”). Each of RCI and VCGH shall cooperate fully with
such review, including providing access to its premises and making available all
of its documents, employees and agents necessary for same.
9.
Confidentiality;
Public Announcements. Promptly
following the execution of this Letter of Intent, each of VCGH and RCI will
issue press releases in a form to be agreed upon by each party
hereto. The parties hereto shall consult with each other before
issuing, and provide each other the opportunity to review and comment on, any
press release or other public statements with respect to this Letter of Intent
and the transactions contemplated hereby and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by applicable law, court process or by obligations pursuant to
any listing agreement with any national securities exchange or the Nasdaq Global
Market.
10.
Termination
of Letter of Intent. In the event the
parties fail to enter into the Merger Agreement on or before March 12, 2010, the
understandings contained in this Letter of Intent, unless extended by mutual
written agreement of the parties, shall terminate and be of no further force or
effect, except for paragraphs 7, 9, 10, 11, 12 and 13, which shall survive any
termination of this Letter of Intent.
11.
Governing
Law. This Letter of
Intent shall be governed by and construed in accordance with the laws of the
State of Colorado, without reference to the conflicts of laws provisions
thereof.
VCG
Holding Corp.
Troy
Lowrie
Lowrie
Management, LLLP
February
16, 2010
Page
7
_________________________
12.
Authority
to Execute. Each party executing this Letter of Intent
represents and warrants that such party has the legal authority to execute this
Letter of Intent and that the execution has been duly authorized by all
necessary corporate action in the case of VCGH and RCI.
13.
Binding
Effect. Except for the
provisions of paragraphs 6, 7, 8, 9, 10, 11, 12 and 13 (the “Binding Provisions”), each of
which shall be deemed to be an agreement and binding upon the parties, it is
understood that this Letter of Intent does not constitute nor give rise to any
legally binding commitment.
14.
Miscellaneous. The
Binding Provisions constitute the entire agreement between the parties regarding
the subject matter of this Letter of Intent and supersede all prior oral or
written agreements, understandings and dealings between the parties relating to
the subject matter hereof other than the Confidentiality
Agreements. The provisions of this Letter of Intent may not be
amended or modified except pursuant to a written instrument signed by all the
parties. This Letter of Intent may be executed in one or more
counterparts, each of which shall be deemed an original copy of this Letter of
Intent and all of which, when taken together, will be deemed to constitute one
and the same agreement.
[SIGNATURE
PAGES FOLLOW]
VCG
Holding Corp.
Troy
Lowrie
Lowrie
Management, LLLP
February
16, 2010
Page
8
_________________________
Please
indicate your acceptance and approval of the foregoing statement of our mutual
intentions, which intentions are subject in all respects to the execution and
delivery of the Merger Agreement (except for the Binding Provisions, which shall
be binding on all parties).
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Sincerely,
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RICK’S
CABARET INTERNATIONAL, INC.
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By:
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/s/ Eric Langan
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Name:
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Eric Langan
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Title:
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President
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Accepted
and Approved
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as
of the date first above written:
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VCG
HOLDING CORP.
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By:
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/s/ Courtney Cowgill
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Name:
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Courtney Cowgill
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Title:
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Chief Financial Officer
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LOWRIE
MANAGEMENT, LLLP
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By:
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Lowrie
Investment Management, Inc.,
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Its
General Partner
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By:
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/s/ Troy Lowrie
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Name:
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Troy Lowrie
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Title:
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President
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/s/ Troy Lowrie
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Troy
Lowrie
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