LOCK-UP/LEAK-OUT AGREEMENT
Exhibit
10.3
EXECUTION
VERSION
LOCK-UP/LEAK-OUT
AGREEMENT
THIS LOCK-UP/LEAK-OUT AGREEMENT
(the “Agreement”) is made and entered into as of the 4th day of September, 2008,
between RICK’S CABARET
INTERNATIONAL, INC., a Texas corporation (“Rick’s”), and DI FOOD AND BEVERAGE OF LAS VEGAS,
LLC, a Nevada limited liability company (“Holder”).
WHEREAS, the Holder has agreed
to sell, transfer and convey all of the assets owned by it which are associated
or used in connection with the operations of an adult entertainment cabaret
known as SCORES located at 0000 Xxxxxxx Xxxxxx, Xxx Xxxxx, Xxxxxx 00000, to RCI
Entertainment (Las Vegas), Inc., a Nevada corporation (the “Purchaser”),
pursuant to the terms and conditions of the Asset Purchase Agreement by and
among Rick’s, the Purchaser, the Holder, and Xxxxxx Xxxxxx, Xxxxx Xxxxxx and
Xxxxxx XxXxxx, who are all members of the Holder dated April 17, 2008, as
amended by the Third Amendment to Asset Purchase Agreement, dated September 4,
2008 (the “Amended and Restated Purchase Agreement”); and
WHEREAS, under the terms of
the Amended and Restated Purchase Agreement, the Holder shall be entitled to
receive 200,000 shares of common stock of Rick’s (“Rick’s Shares”) upon the
Closing of the Amended and Restated Purchase Agreement (“Closing Date”), which
is conditioned upon, among other things, the execution and delivery of this
Agreement; and
WHEREAS, the Holder has agreed
to enter into this Agreement and to restrict the sale, assignment, transfer,
conveyance, or hypothecation of the Rick’s Shares, all on the terms set forth
below; and
WHEREAS, any capitalized terms
not defined herein shall have the meaning set forth in the Amended and Restated
Purchase Agreement.
NOW, THEREFORE, in
consideration of the foregoing premises and the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as
follows:
1.
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The
Holder agrees it may not sell, pledge, hypothecate, transfer, assign or in
any other manner dispose of the Rick’s Shares for six (6) months from
the date hereof.
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2.
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(a) Thereafter,
on or after seven (7) months from the Closing Date, the Holder shall have
the right, but not the obligation, to have Rick’s purchase from the Holder
a total of 150,000 of the Rick’s Shares (for purposes of this Section
2(a), the 150,000 Rick’s Shares shall hereinafter be referred to as the
“Rick’s Put Share”) in an amount and at a rate of not more than 6,250 of
the Rick’s Put Shares per month (the “Monthly Shares”) calculated at a
price per share equal to $20.00 per share (“Value of the Rick’s Shares”)
until the Holder has received an aggregate of $3,000,000 from (i) the sale
of the Rick’s Put Shares, regardless of whether sold to Rick’s, sold in
the open market or in a private transaction or otherwise and (ii) the
payment of any Deficiency (as hereinafter defined) by
Rick’s. Holder shall notify Rick’s during any given month of
its election to “Put” the Monthly Shares to Rick’s during that particular
month and Rick’s shall have
three (3) business days to elect to buy the Monthly Shares or instruct the
Holder to sell the Monthly Shares in the open market. At
Rick’s election, during any given month, it may either buy the Monthly
Shares or, if Rick’s elects not to buy the Monthly Shares from Holder,
then Holder shall sell the Monthly Shares in the open market and any
deficiency between the amount which Holder receives from the sale of the
Monthly Shares and the Value of the Rick’s Shares (the “Deficiency”) shall
be paid by Rick’s within three (3) business days after receipt of written
notice from the Holder of the sale of the Monthly Shares which shall
provide the written sales confirmation and the amount of the
Deficiency. Rick’s obligation under this Section 2(a) to
purchase the Monthly Shares from Holder shall terminate and cease at such
time as Holder has received an aggregate amount of $3,000,000 from (i) the
sale of the Rick’s Put Shares, regardless of whether sold to Rick’s, sold
in the open market or in a private transaction or otherwise, and (ii) the
payments of any Deficiency by Rick’s. Holder agrees to provide
monthly statements to Rick’s as to the total number of Rick’s Put Shares
which Holder sold and the amount of proceeds derived
therefrom. Except as set forth in Section 2(b) below, nothing
contained in this Section 2(a) shall limit or preclude Holder from selling
the Rick’s Put Shares in the open market or require Holder to “Put” the
Rick’s Put Shares to Rick’s during any given
month.
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(b) The
Holder will not sell more than 25,000 Rick’s Shares per 30-day period,
regardless of whether the Holder “Puts” the Rick’s Put Shares to Rick’s or sells
them in the open market or otherwise. In the event that the Holder
elects to sell any of the Rick’s Put Shares pursuant to this Section 2(b), then
any amount sold at prices less than the Value of the Rick’s Shares shall be
deemed to be sold at $20.00 for purposes of Section 2(a).
3.
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The
Holder acknowledges and agrees that Rick’s may advise its Transfer Agent
of this Agreement and issue a stop transfer order to the Transfer Agent to
ensure that any sale of the Rick’s Shares by the Holder is in accordance
with the terms and conditions
hereof.
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4.
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The
Holder agrees that it will not engage in any short selling of shares of
Rick’s common stock during the term of this
Agreement.
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5.
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Except
as otherwise provided in this Agreement or any other agreements between
the parties, the Holder shall be entitled to its respective beneficial
rights of ownership of the Rick’s Shares, including the right to vote the
Rick’s Shares for any and all
purposes.
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6.
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The
resale restrictions on the Rick’s Shares set forth in this Agreement shall
be in addition to all other restrictions on transfer imposed by applicable
United States and state securities laws, rules and
regulations.
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7.
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If
either Rick’s or the Holder fails to fully adhere to the terms and
conditions of this Agreement, it shall be liable to the other party for
any damages suffered by the other party by reason of any such breach of
the terms and conditions hereof. Rick’s and the Holder agree
that in the event of a breach of any of the terms and conditions of this
Agreement by Rick’s or the Holder, that in addition to all other remedies
that may be available in law or in equity to Rick’s or the Holder, as the
case may be, a preliminary and permanent injunction and an order of a
court requiring Rick’s or the Holder to cease and desist from violating
the terms and conditions of this Agreement and specifically requiring
Rick’s or the Holder to perform their obligations hereunder is fair and
reasonable by reason of the inability of the parties to this Agreement to
presently determine the type, extent or amount of damages that Rick’s or
the Holder may suffer as a result of any breach or continuation thereof.
In the event of default hereunder, the non-defaulting party shall be
entitled to recover reasonable attorney's fees incurred in the enforcement
of this Agreement.
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8.
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This
Agreement sets forth the entire understanding of the parties hereto with
respect to the subject matter hereof, and may not be amended except by a
written instrument executed by the parties
hereto.
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9.
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This
Agreement shall be governed by, and construed in accordance with, the laws
of the state of Nevada, without regard to principles of conflict of
laws.
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10.
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This
Agreement may be executed in two or more counterparts, all of which when
taken together shall be considered one and the same agreement and shall
become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need
not sign the same counterpart. In the event that any signature
is delivered by facsimile transmission or by e-mail delivery of a “.pdf”
format data file, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile or “.pdf”
signature page were an original
thereof.
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IN WITNESS WHEREOF, the
undersigned have duly executed and delivered this Agreement as of the day and
year first above written.
Dated:
September 4 , 2008
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RICK’S
CABARET INTERNATIONAL, INC.
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By:
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/s/ Xxxx Xxxxxx
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Xxxx
Xxxxxx, President
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HOLDER:
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DI
FOOD AND BEVERAGE OF LAS VEGAS, LLC
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By:
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/s/ Xxxxxx XxXxxx
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Xxxxxx
XxXxxx, Manager
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Number
of Rick’s Shares Subject to this Agreement:
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200,000
shares of Rick’s Shares
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