UNITED STATES
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 (date of earliest event reported): February 6, 1998
WESTERN COUNTRY CLUBS, INC.
(Exact name of registrant as specified in its charter)
Colorado
(State or other jurisdiction of incorporation or organization)
000-24058 84-1131343
(Commission File Number) (I.R.S. Employer Identification No.)
1601 N.W. Expressway
Oklahoma City, Oklahoma 73118
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 405-848-0996
<PAGE>
Item 2. Disposition of Assets
Sale of Atlanta Partnership Interest
On December 26, 1997, Western Country Clubs, Inc. (the "Company") agreed to
sell its 50% limited partner interest in Cowboys Concert Hall/Atlanta, Ltd.
("CCHA, Ltd.") for $220,000 to Backstage Entertainment ("Backstage").
Backstage is affiliated with Cowboys Concert Hall/Atlanta, Inc., the 50%
general partner of CCHA, Ltd. CCHA, Ltd. is a Texas limited partnership
formed June 29,1995, to own and operate a country-western nightclub in
Atlanta under the name Cowboys. The Company initially invested $500 in
the partnership and loaned an additional $638,822 during 1995, all of which
was written off in the year ended December 31, 1995. On September 16, 1996,
CCHA, Ltd. filed a Voluntary Petition in Bankruptcy under Chapter 11 in the
United States Bankruptcy Court, Northern District of Georgia, Atlanta
Division (96-74391).
Under the contract of sale, Backstage will pay the Company $220,000 for its
partnership interest as follows: $10,000 cash, which was paid on December 31,
1997, and a secured promissory note to be delivered on January 9, 1998, in
the amount of $210,000 providing for three $10,000 payments due on the
first day of February, March and April, 1998, and eight $5,000 payments
due on the first day of each subsequent month beginning May 1, 1998,
with the remaining balance due December 31, 1998. The note bears interest
at eight percent per year and provides for prepayment discounts of $55,000
if paid on or before April 1, 1998, and $35,000 if paid thereafter but on
or before June 15, 1998. The promissory note is collateralized by the 50%
limited partner interest in CCHA, Ltd.
The Company has no basis in its CCHA, Ltd. limited partner interest and
therefore expects to report a gain of $220,000 on the sale in the first
quarter, 1998.
Sale of Indianapolis Partnership Assets
On February 6, 1998, Western Country Clubs, Inc. (the "Company") sold all
of the assets of its Indianapolis Club to A Little Bit of Texas, Ltd.
("Texas"), a company controlled by Troy H. Lowrie who is the former
President and former largest shareholder of the Company. The Indianapolis
Club was owned by Western Country Club I, Ltd., a limited partnership of
which the Company is general partner and 80% interest holder.
Texas purchased the assets for $1.15 million paid through the assumption of
approximately $550,000 of the first and second mortgages on the Indianapolis
real estate and accrued property taxes owed on the property, and a note in
the amount of $600,000 bearing interest at 6% and payable either in cash
or the surrender of approximately 738,000 shares of the Company's common
stock.
In anticipation of completion of the sale in early 1998, a $250,000
impairment reserve in the carrying value of WCC I's long lived assets was
recognized in the Company's consolidated financial statements as of
December 31, 1997.
Item 5. Other Events
Wichita Club Lawsuit Judgment Settlement
InCahoots Limited Partnership, ("InCahoots"), owner of the Wichita Club,
was a party to a proceeding titled Oelkers v. InCahoots Ltd. Partnership
in which the plaintiff alleged that InCahoots was responsible for personal
injuries sustained when she was knocked down in an incident involving two
patrons. A subsidiary of the Company is the general partner and 80% owner
of InCahoots. On September 23, 1997, a judgment was entered in Kansas
District Court in favor of the plaintiff awarding her compensatory damages
in the amount of $771,000 plus court costs, expenses and interest.
InCahoots' insurer had filed a declaratory judgment action in Federal
Court in the Western District of Oklahoma asserting that the basis of
Oelker's claim was an assault and battery and that its policy excluded
coverage for liability arising out of an assault and battery. InCahoots
defended the declaratory judgment action believing that Oelker's injury
did not arise out of an assault and battery. On October 10, 1997, the
Federal Court granted the insurer's motion for summary judgment holding
that the carrier was not obligated to provide coverage for Oelker's
damages.
On February 18, 1998, InCahoots and Oelkers entered into an Agreement and
Covenant Not to Execute (the "Agreement") whereby InCahoots agreed to
pay Oelkers $166,808, payable over two years, plus 100,000 shares of the
Company's common stock and 200,000 warrants to purchase the Company's
common stock in exchange for a covenant by Oelkers to stay any attempts
to execute collection of the judgment against InCahoots. The Agreement
allows Oelkers to pursue collection of the judgment against InCahoots'
insurer. The Company recorded settlement costs of $216,808 in the
Company's financial statements for the year ending December 31, 1997
to reflect the impact of this Agreement.
Conversion of Debt Into Preferred Stock
On January 1, 1998, Troy H. Lowrie, the Company's former President and former
largest shareholder, agreed to convert the Company's notes and accrued
interest in the amount of $400,000 into 40,000 shares of Series A Convertible
Preferred Stock. The Series A Preferred provides for a par value of $10.00
per share; a 10% cumulative annual dividend, payable quarterly; conversion
into the Company's common stock at the rate of $1.00 per share; and
redemption by the Company at the rate of up to 10,000 shares annually on
each anniversary date for four years.
On February 18, 1998, Ceres, L.L.C., agreed to convert the Company's note
in the amount of $160,000 into 16,000 shares of Series B Cumulative
Convertible Preferred Stock. The Series B Preferred provides for a par
value of $10.00 per share; a 12 percent cumulative annual dividend, payable
quarterly; conversion into the Company's common stock at a rate of $1.00
per share; and redemption of the preferred stock funded in the amount
of $5,000.00 monthly.
Item 7. Financial Statements and Exhibits
(b) Pro forma consolidated balance sheet and income statement as of
December 31, 1997, as adjusted.
(c) Exhibits
Sequentially
Exhibit No. Exhibit Name
4.0 Agreement to convert notes to Series A Preferred Stock
dated January 1, 1998 between Troy H. Lowrie and Western
Country Clubs, Inc.
4.1 Agreement to convert notes to Series B Preferred Stock
dated February 18, 1998 between Ceres, L.L.C. and Western
Country Clubs, Inc.
10.0 Contract of sale dated December 26, 1997, and note dated
January 9, 1998, between Western Country Clubs, Inc. and
Backstage Entertainment.
10.1 Contract of sale dated November 25, 1997, along with
addendum numbers 1 through 3 thereto, and noted dated
February 19, 1998, between Western Country Clubs, Inc.
and A Little Bit of Texas, Ltd.
10.2 Agreement and Covenant Not To Execute dated February 18,
1998, between Western Country Clubs, Inc. and Jana Oelkers.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto authorized.
Western Country Clubs, Inc.
/s/ James E. Blacketer
_________________________________
Date: February 20, 1998 James E. Blacketer, President
<PAGE>
WESTERN COUNTRY CLUBS, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
(Unaudited)
Historical
December 31, Pro Forma
1997 Adjustments Pro Forma
------------ ----------- -----------
ASSETS
CURRENT ASSETS
Cash $ 85,949 $ (58,500) (2) $ 27,449
Accounts receivable 40,713 40,713
Notes and loans receivable 267,020 210,000 (1) 477,020
Inventories 54,897 54,897
Prepaid expenses 31,323 31,323
Deferred income taxes 309,677 (27,131) (1) 273,811
(8,735) (4)
-------- ---------
TOTAL CURRENT ASSETS 789,579 905,213
PROPERTY AND EQUIPMENT, at cost
Land and improvements 298,286 (224,989) (4) 73,297
Building and building improvements 1,361,335 (1,361,335) (4) -
Leasehold improvements 1,510,529 1,510,529
Equipment 677,944 (290,783) (4) 387,161
Furniture and fixtures 333,328 (57,129) (4) 276,199
----------
4,181,422 2,247,186
Less accumulated depreciation (1,499,072) 623,293 (4) (875,779)
Less reserve for impairment of
long lived assets (250,272) 250,272 (4) -
---------- ----------
PROPERTY AND EQUIPMENT, net 2,432,078 1,371,407
---------- ----------
OTHER ASSETS
Note receivable - related party - 600,000 (4) 600,000
Investment in Cowboys 114,800 114,800
Deferred income taxes 107,733 107,733
Deposits and other 67,980 (6,001) (4) 61,979
Goodwill, net of accumulated
amortization 25,970 25,970
---------- ----------
TOTAL OTHER ASSETS 316,483 910,482
---------- --------- ----------
TOTAL ASSETS $3,538,140 $(351,038) $3,187,102
========== ========= ==========
See Notes to Pro Forma Consolidated Financial Statements.
<PAGE>
WESTERN COUNTRY CLUBS, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
(Unaudited)
Historical
December 31, Pro Forma
1997 Adjustments Pro Forma
------------ ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 366,471 $ 366,471
Accrued expenses 529,950 (10,000) (1) 268,647
(182,500) (2)
(21,725) (3)
(47,078) (4)
Current portion of notes payable -
related parties 369,870 (321,213) (3) 48,657
Current portion of long-term debt 356,636 38,000 (2) 134,369
(160,000) (5)
(100,267) (4)
---------- ---------
TOTAL CURRENT LIABILITIES 1,622,927 818,144
NOTES PAYABLE - related parties 126,625 (57,062) (3) 69,563
LONG-TERM DEBT 437,084 (390,159) (4) 82,925
36,000 (2)
---------- ---------
TOTAL LIABILITIES 2,186,636 970,632
---------- ---------
COMMITMENTS AND CONTINGENCIES
EQUITY INTEREST, other partners in
consolidated subsidiary 146,645 14,166 (4) 160,811
---------- ---------
STOCKHOLDERS' EQUITY
Series A, 10% cumulative
convertible preferred stock,
$10 par value - 400,000 (3) 400,000
Series B, 12% cumulative
convertible preferred
stock, $10 par value - 160,000 (5) 160,000
Common stock, $.01 par value;
25,000,000 shares authorized,
3,639,700 shares issued
and outstanding 36,347 1,000 (2) 37,347
Additional paid-in capital 4,314,739 49,000 (2) 4,363,739
Retained deficit (3,146,227) 192,869 (1) (2,905,427)
47,931 (4)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 1,204,859 2,055,659
---------- --------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $3,538,140 $(351,038) $3,187,102
See Notes to Pro Forma Consolidated Financial Statements.
<PAGE>
WESTERN COUNTRY CLUBS, INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
For the Year Ended December 31,
Historical Pro Forma
1997 Adjustments Pro Forma
---------- ----------- -----------
REVENUES
Beverage and food sales $4,456,887 $ $4,456,887
Admission fees 2,110,665 2,110,665
Gain on sale of partnership interest 220,000 (1) 220,000
Gain on sale of assets 210,645 70,832 (4) 281,477
Other revenues 338,580 338,580
---------- ----------
TOTAL REVENUES 7,116,777 7,407,609
---------- ----------
COSTS AND EXPENSES
Cost of products and services 2,493,806 2,493,806
General and administrative expense 4,334,780 4,334,780
Depreciation 394,719 394,719
Amortization 72,402 72,402
Interest 158,821 158,821
Litigation loss 216,808 216,808
Offering costs 375,653 375,653
Impairment of long-lived assets 250,272 250,272
---------- ----------
TOTAL COSTS AND EXPENSES 8,297,261 8,297,261
---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES
AND OTHER PARTNERS' INTERESTS,
EQUITY IN LOSS OF PARTNERSHIP (1,180,484) (889,652)
INCOME TAX BENEFIT 83,789 (27,131) (1) 49,923
(8,735) (4)
LOSS BEFORE MINORITY INTEREST (1,096,695) (841,729)
OTHER PARTNERS' INTERESTS IN NET LOSS
OF CONSOLIDATED SUBSIDIARIES 110,319 (14,166) (4) 96,153
---------- --------- ----------
NET LOSS $ (986,376) $ 240,800 $ (745,576)
========== ========= ==========
NET LOSS PER COMMON SHARE $ (0.27) $ (0.21)
========= ==========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 3,619,162 3,619,162
========== ==========
See Notes to Pro Forma Consolidated Financial Statements.
<PAGE>
WESTERN COUNTRY CLUBS, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 31, 1997
The accompanying pro forma consolidated balance sheet and income
statement as of December 31, 1997 and for the year then ended of Western
Country Clubs, Inc. presents the effect on the Company's financial statements
of five transactions which occurred subsequent to the balance sheet date as
if they had occurred on December 31, 1997.
1. Effective January 9, 1998, the Company sold its interest in a limited
partnership for $10,000 in cash and a $210,000 note. Due to extensive
losses of the partnership the investment in the partnership had been
reduced to zero in 1995. The sale resulted in a gain of $192,869,
net of the tax effect of $27,131.
2. On February 19, 1998, the Company settled a lawsuit for $92,808 in cash,
a payment agreement totaling $74,000, and 100,000 shares of the Company's
stock valued at $50,000. Cash of $34,308 was paid in 1997 and the
remainder of the loss was fully accrued at December 31, 1997.
3. On January 1, 1998, a $378,275 note payable and $21,725 of accrued
interest were converted to 40,000 shares of the Company's Series A 10%
cumulative convertible preferred stock.
4. On February 6, 1998, the Company sold its Indianapolis club to a
shareholder of the Company for a $600,000 note and the assumption of
$490,426 of long-term debt and $60,078 of accrued interest and taxes,
less $13,000 to be refunded to the buyer. A reserve of $250,272 for
impairment of long-lived assets had been recorded at December 31, 1997,
for the Indianapolis club. The sale resulted in a gain of $47,931, net
of the tax effect of $8,735 and minority interest of $14,166.
5. On February 18, 1998, a note payable of $160,000 was converted to 16,000
shares of the Company's Series B 12% cumulative convertible preferred
stock.
<PAGE>
Exhibit No. 4.0
AGREEMENT
This Agreement, by and between Troy Lowrie ("Lowrie"), and
Western Country Clubs, Inc. ("WCCI"), made an entered into this 1st day
of January 1998.
WITNESSETH:
WHEREAS, WCCI owes Lowrie two promissory notes plus accrued
interest; and
WHEREAS, Lowrie has agreed to convert said notes owed to him and
owned by him to Preferred Stock of WCCI upon the terms and conditions set
forth herein;
NOW THEREFORE, the parties have agreed with each other as
follows:
1. WCCI owes two promissory notes to Lowrie as set forth below:
(A) $100,000 promissory note dated October 10, 1996
(B) $278,275.60 promissory note dated Sept. 19, 1997
2. The balance owed on said notes, including accrued interest, is
$396,000.
3. Lowrie agrees to convert said promissory notes into 40,000
shares of Series A Preferred Stock of WCCI, with a 10% cumulative
dividend payable quarterly, and redeemable at the rate of 25% or 10,000
shares annually on each anniversary date for four years, and convertible
into common stock of WCCI at the rate of $1.00 per share, with
"piggy-back" registration rights for said stock, all as shown in the
attached Exhibit "A", a copy of the terms of the Series A Preferred
Stock as shown in the Articles of Amendment to the Articles of
Incorporation of WCCI as filed with the State of Colorado.
4. WCCI agrees that if it completes an equity offering of its
common stock in the minimum amount of $2,000,000 during the terms of the
Series A Preferred Stock, then it would fully redeem the balance of said
preferred stock not already redeemed.
5. WCCI also agrees that if the promissory note dated January 15,
1998 in the amount of $210,000 wherein Backstage Entertainment, Inc.
owes WCCI, is paid in full on or before June 1, 1998, WCCI will use
one-half of the proceeds from said note to pay Lowrie toward an early
redemption of said preferred stock.
Upon receipt of the 40,000 shares of Series A Preferred Stock
from WCCI, Lowrie agrees to cancel the two promissory notes owed by WCCI
and return the original notes to WCCI.
IN WITNESS WHEREOF, the parties have set their hands the day and
year first above written.
Western Country Clubs, Inc.
By: /s/ James E. Blacketer
James E. Blacketer,
President
/s/ Troy Lowrie
Troy Lowrie
<PAGE>
Exhibit No. 4.1
JOHN HUDSON
ATTORNEY AT LAW
1601 N.W. EXPRESSWAY, STE. 2101
OKLAHOMA CITY, OK 73118
(405) 848-1581 FAX: (405) 840-4671
February 18, 1998
VIA FACSIMILE
Ms. Donna R. Murray
CERES, L.L.C.
5900 Mosteller Drive
Suite 1521
Oklahoma City, OK 73112
Re: Exchange of $160,000 Note for Preferred Stock
Dear Donna:
Pursuant to our recent discussions and agreement concerning the
outstanding loan to Western Country Clubs, Inc. ("WCCI") in the amount
of $160,000, I am writing to confirm your agreement with WCCI as of
December 31, 1997 concerning this matter:
1. WCCI agrees to pay all interest current through 2-18-98.
2. You agree to exchange the note for $160,000 of "Series B
Cumulative Convertible Preferred Stock" of WCCI,
with a 12% cumulative dividend payable quarterly and
convertible into WCCI common stock at a conversion rate
of $1.00 per share. In addition, a sinking fund
reserving for the retirement of said Preferred Stock
will be established requiring a $5,000 monthly reserve
payment. In the event of a default thereunder, WCCI
agrees to secure said performance with the FF&E of the
St. Louis unit.
3. The original 15,000 shares of WCCI common stock will be issued
to you and your participants immediately (see attached
Letter of Instruction to Transfer Agent).
4. You (and your participants) will also be issued immediately the
original 80,000 3-year warrants with a revised $1.00
exercise price and also an additional 60,000 3-year
warrants with an exercise price of $.75 per share.
Please indicate your agreement to the terms and conditions set
forth herein on the line indicated below and return this executed letter
agreement to me via facsimile. Once I receive your confirmation of this
agreement, I will forward to the Colorado Secretary of State for
amendment to WCCI's Articles of Incorporation providing for the Series B
Preferred Stock. In addition, I will deliver to you and to your
participants the two sets of warrants.
Thank you for your attention to this matter.
Sincerely,
/s/ John Hudson
JOHN HUDSON
JH:fs
I agree to the terms and conditions set forth herein concerning the
exchange of the note for preferred stock and the delivery of the common
stock and warrants due hereunder.
CERES, L.L.C.
By: /s/ Donna R. Murray, Mgr.
Donna R. Murray, Manager
<PAGE>
Exhibit No. 10.0
December 26, 1997
VIA FACSIMILE
Mr. Jim Blacketer
Western Country Clubs, Inc.
1601 N. W. Expressway, Suite 1610
Oklahoma City, Oklahoma 73118
RE: Contract to purchase Western Country Clubs, Inc.'s Fifty percent
(50%) Limited Partner Interest in Cowboys Concert Hall/Atlanta, Ltd.
Dear Jim:
The following will constitute a contract to purchase Western Country
Clubs, Inc.'s ("Western") fifty percent (50%) limited partnership
interest in Cowboys Concert Hall/Atlanta, Ltd. ("CCH/Atlanta") by
Backstage Entertainment ("Backstage").
The appropriate promissory note, security instruments and other
documentation will be executed on or before January 9, 1998.
Terms of the purchase are as follows:
1. The purchase price shall be two hundred twenty thousand dollars
($220,000). Payment of the purchase price shall be made as
follows:
A. A non-refundable down payment in the amount of $10,000
will be paid to Western on December 31, 1997.
B. Three (3) monthly payments in the amount of ten thousand
dollars ($10,000) to be paid to Western on the first
(1st) day of February, March and April, 1998.
C. Eight (8) monthly payments in the amount of five
thousand dollars ($5,000) to be paid on the first (1st)
day of each month beginning May 1, 1998, and continuing
through December 1, 1998.
D. The remaining balance on the purchase price in the
amount of $140,000 plus accrued interest shall be paid
in full to Western on or before December 31, 1998.
2. Interest shall accrue at eight percent (8%) on the unpaid
balance commencing on January 1, 1998. All payments shall be
applied first to accrued interest and then to principal.
3. If the promissory note is paid by April 1, 1998, a discount of
$55,000 from the $220,000 initial sales price shall be granted
to Backstage, making the adjusted sales price $165,000.
4. If the promissory note is paid in full after April 1, 1998,
but on or before June 15, 1998, a discount of $35,000 from the
$220,000 initial sales price shall be granted to Backstage,
making the adjusted sales price $185,000.
5. Western shall retain as collateral its interest in the 50%
limited partner interest of CCH/Atlanta. Western shall also
retain its collateral interest in CCH/Atlanta.
The above contract is executed by the following parties this 26th day of
December, 1997:
Backstage Entertainment Western Country Clubs, Inc.
/s/ Mike Murphy /s/ James E. Blacketer
Mike Murphy James E. Blacketer
<PAGE>
PROMISSORY NOTE
$210,000.00 Oklahoma City, Oklahoma
FOR VALUE RECEIVED, the undersigned, 2 Backstreet Entertainment,
Inc., a Texas corporation, (the "Maker") promises to pay to Western
Country Clubs, Inc., a Colorado corporation, (the "Holder") the
principal sum of TWO HUNDRED TEN THOUSAND DOLLARS ($210,000.00) plus
interest at the rate of eight percent per annum (8%) until paid in full.
All payments required under this note shall be made to the Holder or its
assignee at its offices at 1601 N.W. Expressway, Suite 1610, Oklahoma
City, OK 73118, or at such other as the Holder or its assignee shall
designate.
The Maker agrees to pay to Holder the sum of TEN THOUSAND
DOLLARS ($10,000.00) on the first day of February, 1998, and again on
the first day of March, 1998 and again on the first day of April, 1998.
In addition, Maker agrees to pay Holder the sum of FIVE TH0USAND DOLLARS
($5,000.00) monthly beginning on May 1, 1998, and continuing on the
first day of each month thereafter through December 1, 1998. The total
of the payments to be made as set forth above is $70,000.00, and the
entire remaining balance of principal and interest shall be due and
payable on or before December 31, 1998.
Any and all payments made to the Maker of this note shall be
applied first to the payment of interest at the aforesaid rate with the
balance, if any, of any payments applied to the principal balance of
this note.
In the event that the Maker hereof shall pay this note in full
on or before April 1,1998, then the Maker shall be entitled to a
discount in the amount of this note of $55,000.00. In the event the
Maker hereof shall pay this note in full after April 1, 1998 but on or
before June 15, 1998, then the Maker shall be entitled to a discount in
the amount of $35,000.00. After June 15, 1998, Maker shall have no
discounts in the amount of this note.
To secure the Maker's obligations for the payments provided
herein, this note is secured by 1000 shares of the common stock, par
$.01 per share, of Cowboys Concert Hall/Atlanta I, Inc., all of which
shares of common stock are owned by Cowboys Entertainment, Inc., now
Cowboys Concert Hall Arlington, Inc., which shall pledge such shares as
collateral for this note. This is the identical common stock which is
presently pledged to secure a note in favor of "WCCI dated June 29,1995,
wherein Cowboys Concert Hall/Atlanta, Ltd., a Texas limited partnership,
was the maker. The 1000 shares of common CCH Atlanta, Inc. stock will
be released back to CCH Atlanta I, Inc. when this note is satisfied.
If this note, together with certain instruments which secure the
payment hereof, is not paid in accordance with the terms herein, and not
later than December 31, 1998, then the Holder hereof or its assignee
shall be entitled, without notice, to declare the entire amount of principal
and interest to be due and payable immediately, and may exercise any and
all rights and remedies under all instruments securing payment hereof, as
well as any and all other rights and remedies at law or in equity
or otherwise for the collection of the indebtedness evidenced hereby and
herein.
The Holder shall the right to declare a default in this note
when there is a breach of any terms, conditions or provisions of this
note, when any payment is not paid when due, or when the Maker shall (1)
apply for or consent to or have appointed a receiver, trustee, or
liquidator of the Maker's or of all or substantially all of Maker's
assets; or (2) file a voluntary petition in bankruptcy, be adjudged a
bankrupt or file a petition or institute any proceedings under any
bankruptcy act; or (3) make a general assignment for the benefit of
creditors; or (4) file a petition or answer seeking a reorganization or
an arrangement with creditors or take advantage of any insolvency law;
or (5) file an answer admitting the material allegations of a petition
filed against the Makers in any bankruptcy, reorganization or insolvency
proceeding.
The Maker may, at its option, prepay the balance of this note in
whole or in part at any time without penalty.
The Maker, endorsers, sureties and guarantors each waives
presentment for payment, protest, notice of nonpayment and protest, and
agrees to any extension of time of payment or partial payment before, at
or after maturity. If this note is not paid when due, and suit is
brought for collection, then the Maker agrees to pay all costs of
collection, trial, appeal or otherwise, incurred by the holder in
enforcing this note against the Maker.
This note is to be construed according to the laws of the State
of Oklahoma, and the undersigned hereby consents to the exclusive
jurisdiction of any and all state and federal courts with jurisdiction
over Maker, Maker's property, and any other collateral securing payment
of this note.
IN WITNESS WHEREOF, the Maker has executed this note this ____
day of January, 1998.
2 BACKSTREET ENTERTAINMENT, INC.
By: /s/ Steve Albeck
President
<PAGE>
GUARANTY AGREEMENT
The undersigned hereby agree to guarantee payment of the
Promissory Note attached hereto dated January ____, 1998, in the amount of
$210,000 plus interest, said Promissory Note owed by 2 Backstreet
Entertainment, Inc. to Western Country Clubs, Inc. The undersigned
agree to be bound by the terms and conditions of this note and the
undersigned and each of them, shall have 10 days from the date of
default of this note to cure the default and satisfy the note by either
making the required payment or by paying the note in full, including all
principal and interest.
This guaranty of payment is given by the undersigned in order to
cause Western Country Clubs, Inc. to extend credit to 2 Backstreet
Entertainment, Inc., and in consideration thereof. This guaranty is an
absolute and continuing guarantee of payment and shall not terminate
until the promissory note has been paid in full, including all interest.
The liability of the undersigned shall not be released or diminished,
impaired, reduced or affected by (1) the taking of any other security or
guaranty for part or all of the note (2) any release, surrender,
exchange, subordination or loss of any security (3) any partial release
of the liability of the undersigned or any one of them (4) the death,
insolvency,k bankruptcy, disability or lack of corporate power of the
Maker or any guarantor (5) any renewal, extension or modification of any
payment or any part of the note or security or (6) any act by the Holder
of the promissory note taken with or without notice to any of the
undersigned.
The undersigned agree that upon default in the note, the Holder
thereof shall be able to immediately pursue all of its rights and
remedies against the undersigned and shall not be required to take any
action against the Maker of the note or the other security. The
undersigned waives all set-offs and counterclaims.
Dated this _____ day of January, 1998.
/s/ Richard Murphy Cowboys Concert Hall Arlington,
Michael Murphy Inc.
/s/ Steve Albeck By: /s/Michael J. Murphy
Steve Albeck President
<PAGE>
Exhibit No. 10.1
PURCHASE AGREEMENT
Buyer offers to buy real estate (the "Property") known as InCahoots, in
Wayne Township, Marion County, Indianapolis, Indiana 46224 Zip Code,
which is legally described as: 111/143 North Lynhurst Drive in
accordance with the terms and conditions set forth below:
A. PURCHASE PRICE: Buyer agrees to pay $1,250,000.00 for above
Property and Business assets of Western Country Club Limited I.
B. IMPROVEMENTS AND FIXTURES: The above price includes all
improvements permanently installed and affixed, such as, but not
limited to, electrical and/or gas fixtures, heating equipment
and all attachments thereto, gas grills, incinerators, fixtures,
awnings, TV antennas, all landscaping, mailbox, ceiling fax,
smoke alarms, storage sheds, and the following: sound and video
equipment, furniture, bar equipment, office equipment, inventory
cash, and operating supplies.
C. METHOD OF PAYMENT: See Addendum to Purchase Agreement.
D. Deleted
E. CLOSING DATE: Closing date shall be on or before December
15, 1997.
F. Deleted
G. Deleted
H. Deleted
I. Deleted
J. SETTLEMENT/CLOSING FEE: If the method of payment for this
transaction is cash, assumption, or conditional sales contract,
the settlement/closing fee shall be paid by seller.
K. Deleted
L. UTILITIES/MUNICIPAL SERVICES: Seller shall pay for all
municipal services and public utility charges through the day of
possession.
M. PUBLIC IMPROVEMENT ASSESSMENTS: Seller warrants that Seller has
no knowledge of any planned improvements which may result in
assessments and that no governmental or private agency has served
notice requiring repairs, alterations or correction of any
existing conditions. Public or municipal improvements which are
not completed as of the date hereof but which will result in a
lien or charge shall be paid by Buyer.
N. RISK OF LOSS: Seller shall be responsible for risk of loss
and/or damage to the improvements on the Property until time of
closing when title to or an interest in the Property is
transferred to the Buyer.
O. MAINTENANCE OF PROPERTY: Seller agrees that maintaining the
condition of the Property and related equipment is his
responsibility during the period of this Contract and/or until
time of possession, whichever is later.
P. TIME IS OF THE ESSENCE: Time periods specified in this
Agreement shall expire at midnight on the date stated unless the
parties agree in writing to a different date and/or time.
Q. EARNEST MONEY: Buyer submits herewith $0 as earnest money which
shall be applied to the purchase price.
R. Deleted.
S. Deleted.
T. Deleted.
U. EXPIRATION AND APPROVAL: This Purchase Agreement is void if not
accepted in writing on or before 12:00 Noon December 1, 1997.
V. TERMS BINDING: All terms and conditions are included herein and
no verbal agreements shall be binding.
W. ACKNOWLEDGEMENTS: By signature below the parties verify that
they understand and approve the Purchase Agreement and
acknowledge receipt of a signed copy.
This Agreement may be executed simultaneously or in two or more
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
Delivery of this document may be accomplished by electronic
facsimile reproduction (FAX): if FAX delivery is utilized, the
original document shall be promptly executed and/or delivered,
if requested.
/s/ Troy Lowrie 11/25/97
BUYER'S SIGNATURE DATE
Troy Lowrie, GP, A Little Bit of Texas, Ltd.
PRINTED
###-##-####
BUYER'S SOCIAL SECURITY #/FEDERAL I.D.#
ACCEPTANCE OF PURCHASE AGREEMENT
The above terms and conditions are accepted this 26th day of November,
1997, at 12:00 Noon.
/s/ J. C. Blacketer
SELLER'S SIGNATURE
Western Country Club Limited I
By: Western Country Clubs, Inc., G.P.
James E. Blacketer, President
PRINTED
<PAGE>
ADDENDUM TO PURCHASE AGREEMENT FOR A LITTLE BIT OF TEXAS, LIMITED
PARTNERSHIP
METHOD OF PAYMENT
1) Assumption of 1st mortgage with Dulaney Bank of Marshall, IL in
the estimated amount of $485,000.00
2) Assumption of 2nd mortgage with Expo Bowl, Inc. in the estimated
amount of $35,000.00
3) Debt forgiveness with Troy Lowrie owed to him by WCCI in the
amount of $400,000.00.
4) $350,000.00 of WCCI stock, the number of shares to be determined
as per the stock price as of the date of closing. Real estate
taxes shall be prorated to the date of closing. If any taxes are
deemed delinquent then purchaser agrees to pay those taxes,
however, a reduction in the number of shares of stock required
to satisfy this agreement will result.
5) Deleted
6) Verification of assets by a final walk through prior to closing
of, but not limited to, all items listed in section B of
purchase agreement.
7) There shall be no sale commission with regard to this purchase.
No claim for any commission will be recognized nor honored by
purchaser.
8) Numbers 1, 2, and 3 will be exact amount due as of December 15,
1997.
9) The number of shares equaling $350,000.00 will be determined by
split between the bid and asked price as of the close of
business on December 11, 1997.
<PAGE>
ADDENDUM #2 TO PURCHASE AGREEMENT DATED NOVEMBER 25, 1997
BY AND BETWEEN
WESTERN COUNTRY CLUBS I, LTD. AND
LITTLE BIT OF TEXAS LTD. PARTNERSHIP
This second addendum to that certain purchase agreement dated
November 25, 1997 between Western Country Club I Limited Partnership
("Seller") and Little Bit of Texas, Ltd., ("Buyer"), wherein the said
parties agree to amend the purchase agreement and the first addendum as
set forth herein below:
1. The purchase price shall remain $1,250,000.
2. Buyer agrees to assume the first and second mortgage to Delaney
Bank and to Expo Bowl, Inc. in the combined amount of approximately
$500,000.
3. The balance of the purchase price is agreed by the parties to be
paid by Buyer to Seller by delivery of 738,131 shares of common stock of
Western Country Clubs, Inc., and is agreed by the parties to be valued
at $1.00 per share based upon the market price of said stock.
4. The Buyer agrees to pay all of the property taxes which may be
due and outstanding against the property purchased herein.
5. The Seller agrees to pay the sum of $13,000 to Buyer in monthly
payments as follows: $3000 on March 5, 1998; $3000 on April 5,1998;
$3000 on May 5, 1998; and $4000 on June 5, 1998. Said $13,000
represents part of the assets purchased by Buyer.
6. The debt forgiveness referred to in the first addendum is no
longer a part of this transaction.
7. Buyer has completed his inspection of the premises, accepts the
same as is, and agrees that all fixtures, equipment, inventory and other
items set forth in the purchase agreement are accepted by Buyer and
Buyer agrees that there are no items missing and Buyer has no claims
against Seller regarding said personal property. Seller agrees to
execute an Indemnification and Warranty Agreement warranting clear title
to said personal property and indemnifying Buyer against any debt, lien
or other liability against said property, except as provided herein.
Said purchase agreement and addendum thereto shall otherwise
remain unchanged.
Dated this 5th day of February, 1998.
BUYER:
Little Bit of Texas Ltd. Partnership
/s/ Troy Lowrie
Troy Lowrie, General Partner
SELLER:
Western Country Club I, Ltd.
By: /s/ James E. Blacketer
James E. Blacketer, President
Western Country Clubs, Inc.
General Partner
<PAGE>
ADDENDUM #3 TO PURCHASE AGREEMENT DATED NOVEMBER 25, 1997
BY AND BETWEEN
WESTERN COUNTRY CLUBS I LIMITED PARTNERSHIP AND
LITTLE BIT OF TEXAS LTD. PARTNERSHIP
This third addendum to that certain purchase agreement dated
November 25, 1997 between Western Country Club I Limited Partnership
("Seller") and Little Bit of Texas, Ltd., ("Buyer"), wherein the said
parties agree to amend the purchase agreement and the first addendum as
set forth herein below:
1. The purchase price shall remain $1,150,000.
2. Buyer agrees to assume the first and second mortgage to Delaney
Bank and to Expo Bowl, Inc. in the combined amount of approximately
$500,000.
3. The balance of the purchase price is agreed by the parties to be
paid by Buyer to Seller delivery of a promissory note in the amount of
$600,000 for a term of one year, with interest at the rate of seven (7%)
percent per annum, with the entire amount of principal and interest due
at maturity. Said note shall be secured by 750,121 shares of common
stock of Western Country Clubs, Inc., and Buyer shall have the option
upon maturity of said note to pay the entire amount due by transferring
title of said shares to the Seller. Said note shall be without recourse
against the Buyer.
4. The Buyer agrees to pay all of the property taxes which may be
due and outstanding against the property purchased herein.
5. The Seller agrees to pay the sum of $13,000 to Buyer in monthly
payments as follows: $3000 on March 5, 1998; $3000 on April 5,1998;
$3000 on May 5, 1998; and $4000 on June 5, 1998. Said $13,000
represents part of the assets purchased by Buyer.
6. The debt forgiveness referred to in the first addendum is no
longer a part of this transaction.
7. Buyer has completed his inspection of the premises, accepts the
same as is, and agrees that all fixtures, equipment, inventory and other
items set forth in the purchase agreement are accepted by Buyer and
Buyer agrees that there are no items missing and Buyer has no claims
against Seller regarding said personal property. Seller agrees to
execute an Indemnification and Warranty Agreement warranting clear title
to said personal property and indemnifying Buyer against any debt, lien
or other liability against said property, except as provided herein.
Said purchase agreement and addendum thereto shall otherwise
remain unchanged.
Dated this 19th day of February, 1998.
BUYER:
Little Bit of Texas Ltd. Partnership
/s/ Troy Lowrie
Troy Lowrie, General Partner
SELLER:
Western Country Club I, Ltd.
By: /s/ James E. Blacketer
James E. Blacketer, President
Western Country Clubs, Inc.
General Partner
<PAGE>
PROMISSORY NOTE
$600,000.00 Denver, Colorado
FOR VALUE RECEIVED, the undersigned, Little Bit of Texas, Ltd.,
Partnership, a Colorado limited partnership, (the "Maker") promises to pay
to Western Country Club I Limited Partnership (the "Holder") the sum of
Six Hundred Thousand Dollars ($600,000.00) with interest at the rate of
seven (7%) percent per annum, upon the following terms.
The entire balance of principal and interest shall be due and
payable one year from the date hereof.
This note shall be secured by 738,131 shares of common stock of
Western Country Clubs, Inc. ("WCCI").
Upon maturity, the Maker hereof shall have the option of paying
the entire balance of principal and interest by transferring the 738,131
shares of WCCI stock pledged as security for this note to the Holder.
Such transfer will operate to satisfy all amounts due on this note.
This note shall be without recourse against the Maker hereof,
and the remedies of the Holder in the event of a default herein shall be
limited to the security pledged as collateral herein, and the Maker
shall have no personal liability herein.
All payments herein shall apply to the principal balance inasmuch
as there is no interest due on the principal balance.
In the event of a default in payments herein, the Holder shall
have the right to declare the entire balance due and payable.
The Maker shall have the right to prepay the balance of this note in
whole or in part at any time without penalty.
The Maker and any endorses or sureties each waives presentment for
payment, protest, notice of nonpayment and protest, and agrees to any
extension of time of payment or partial payment before, at or after maturity.
If this note is not paid when due, the Maker agrees to pay all costs of
collection, including reasonable attorney fees.
IN WITNESS WHEREOF, the Maker has executed this note this 19th
day of February, 1998.
Little Bit of Texas Ltd. Partnership
By: /s/ Troy Lowrie
Troy Lowrie, General Partner
<PAGE>
Exhibit No. 10.2
AGREEMENT AND COVENANT NOT TO EXECUTE
This Agreement is entered into as of the 18th day of February
1998 by and between
IN CAHOOTS LIMITED PARTNERSHIP, a Kansas limited
partnership (individually referred to as "Club").
ENTERTAINMENT WICHITA, INC., a Kansas corporation and
the general partner in In Cahoots (individually referred
to as "EWE"),
(jointly referred to as "In Cahoots")
and
WESTERN COUNTRY CLUBS, INC., a Colorado corporation
(individually referred to as "WCCI")
and
JANA OELKERS, an individual resident of Wichita, Kansas
("Oelkers").
WHEREAS, Oelkers obtained a Judgment against In Cahoots in the
approximate principal amount of $771,000.00 in the case captioned
Oelkers vs. In Cahoots, Sedgwick County, Kansas, District Court, Case
No. 96 C 695 on September 23, 1997 ("Judgment");
WHEREAS, the Sedgwick County Kansas District Court issued writs
of execution and garnishments which were served on In Cahoots on October
18, 19, and 20, 1997, attaching all cash on hand, liquor and all other
furniture, fixtures and equipment located at the In Cahoots club in
Wichita, Kansas;
WHEREAS, the parties heretofore have entered into various
agreements concerning Judgment, including an interim Agreement and two
Addenda thereto (hereinafter the "Interim Agreement" ) and a Letter
Agreement dated as of December 31, 1997 (hereinafter the "Letter
Agreement"); and
WHEREAS, this Agreement is not intended to be a release of the
liability provided for in the Judgment;
WHEREAS, the parties intend to allow Oelkers to continue to seek
recovery from the Dallas Fire Insurance Company while entering into a
covenant not to execute against the other assets of In Cahoots under the
terms and provisions of this Agreement; and
NOW, THEREFORE, in consideration of the agreements and the
obligations of the parties contained herein, the parties agree with each
other as follows:
1. The Interim Agreement as amended and the Letter
Agreement that contains the agreement to enter into this Agreement are
superseded by this Agreement. The parties agree that by virtue of this
Agreement there are no further monetary payments required under the
Interim Agreement. The parties further agree that the security interest
granted by the Security Agreement dated October 22, 1997 is modified by
the partial release of the Wichita FF&E described below.
2. Oelkers shall retain the funds she obtained through her
garnishment efforts (approximately $34,000.00).
3. In consideration of the covenant not to further execute
on certain assets of In Cahoots, In Cahoots shall pay the following
amounts to Oelkers:
A.) Fifty Eight Thousand Five Hundred Dollars
($58,500.00) to be paid in immediately available
funds upon the execution of this Agreement and
the other documents necessary to close this
transaction;
B.) Eight Thousand Dollars ($8,000.00) to be paid
in a cashier's check or otherwise immediately
available funds to Oelkers on or before March
1, 1998 (provided that no further grace
period shall be allowed for this payment);
C.) Monthly payments of Three Thousand Dollars
($3,000.00) each for 22 months beginning March
15, 1998 and continuing on the 15th day of each
month thereafter until a total of 22 months or
Sixty Six Thousand Dollars ($66,000.00) have
been paid.
The initial payment of $58,500 shall be sent by wire transfer to the
trust account of Donald A. McKinney upon the execution of this Agreement
and the furnishing of copies of the signatures of the parties by
telefacsimile. The payment of $8,000.00 shall be made by a cashier's
check payable to Jan Oelkers and Donald A. McKinney and Victor S.
Nelson, P.A. The 22 monthly payments shall be made by cashier's check
payable to the same three parties. Payments made in compliance with
this paragraph shall be deemed in compliance with this Agreement, made
on behalf of Oelkers and in compliance with any and all attorney liens
held by signatories to this Agreement.
4. If any of the payments contemplated by this agreement
are not timely made, the delinquent amount shall bear interest at the
rate of 18% per annum from the date the payment was first due. In the
event the delinquency is not cured within 15 days after the payment due
date, Oelkers may, at her option, accelerate all amounts remaining
unpaid on the Judgment as well as begin execution again for all amounts
remaining unpaid for the entire Judgment including costs without further
notice to In Cahoots or WCCI.
5. The parties agree that the security interest previously
granted to Oelkers by In Cahoots in the Security Agreement dated October
22, 1997 shall continue and secure the timely performance of all
obligations under this Agreement and related agreements which are owed
to Oelkers by In Cahoots. Said security interest shall encumber the
assets of In Cahoots as identified in the Security Agreement executed by
the parties dated October 22, 1997, and identified in the UCC-1
Financing Statements executed on the same date, and shall remain in
effect and shall remain as a valid security interest encumbering said
collateral in favor of Oelkers, except:
All of the Fixtures, Furniture and Equipment (the
"FF&E") belonging to In Cahoots and located in Wichita,
Kansas, at 10001 E.Kellogg Drive, Wichita, Kansas, 67207, all
as shown on the attached Exhibit "A," which of the parties
hereto agree shall be released by Oelkers upon the execution
of this Agreement in order that In Cahoots may sell the same
and use the proceeds from said sale to make the initial
payment due Oelkers herein above the amount of $58,500.00.
In connection therewith and upon the receipt of immediately available
and collected funds for the initial payment of $58,500.00, Oelkers
agrees to execute a Partial Release of Judgment Lien and Execution and a
Partial Release of UCC-1 Financing Statements, all of same documents
releasing the security interest and Judgment liens only as they apply to
said FF&E described herein above. Upon receipt of all payments to her
provided by this Agreement, Oelkers agrees to release the security
interest granted by In Cahoots in the Security Agreement dated October
22, 1997.
6. WCCI agrees to guarantee the timely payment of the
payments set forth hereinabove to be made by In Cahoots to Oelkers,
specifically those payments set forth in paragraph 3 above, which
include the 48,000.00 payment due on March 1, 1998, and the 22 monthly
payments of $3,000.00 each in the total amount of $66,000.00, for a total
guarantee of Seventy Four Thousand Dollars ($74,000.00). The parties
agree that WCCI will execute a separate Guaranty Agreement evidencing this
obligation, attached hereto as Exhibit "B," and agree that said
guarantee is limited to the payments described herein in the total
amount of $74,000.00.
7. WCCI also agrees to issue 100,000 shares of its common
stock to Oelkers and her attorneys, said shares to be issued as set
forth herein below. These shares will be subject to SEC rules regarding
transferability and sale, and specifically shall be subject to SEC Rule
144. The limitations on the ability of Oelkers and her attorneys to
sell or transfer said stock are based upon rules promulgated by the SEC,
and not because of anything set forth in this Agreement or by the intent
of WCCI or In Cahoots or Oelkers. Subject to the provisions of said
Rule 144, these shares will generally be transferable after one year.
The shares shall be issued as follows:
Jana Oelkers 50,000 shares
Donald A. McKinney 32,000 shares
Donald A. McKinney 5,500 shares
Victor S. Nelson, P.A. 12,500 shares
These shares shall be issued by WCCI's stock transfer agent upon closing
of this transaction and delivered to the above parties shortly after
closing.
8. WCCI also agrees to issue 200,000 warrants to purchase
200,000 shares of its common stock to Oelkers and her attorneys, upon
the following terms and conditions: 100,000 warrants shall be
exercisable in whole or in part for 3 years at a price of Seventy-Five
Cents ($.75) per share, and 100,000 warrants shall be exercisable for 3
years at a price of One Dollar ($1.00) per share. Neither the warrants
to be issued pursuant hereto nor the shares which said warrants allow
the holders to convert into are registered with the SEC, and therefore,
are subject to applicable SEC rules governing transferability. WCCI
agrees to grant "piggy-back" registration rights to Oelkers and her
attorneys, allowing the underlying shares to be registered along with
any future registration statement filed by WCCI. The parties shall
enter into separate Warrant Agreements to grant these rights. The two
series of warrants shall be divided and issued to the following
entities:
$.75/share Warrants $1.00/share Warrants
Jana Oelkers 50,000 50,000
Donald A. McKinney 32,000 32,000
Donald A. McKinney 5,500 5,000
Victor S. Nelson, P.A. 12,500 12,500
WCCI will issue these warrants upon the execution of this Agreement at
the time of closing of this transaction.
9. At or before closing, WCCI shall supply an option of its counsel
that the transactions, documents, provisions and agreements contemplated
as a part of this Agreement and all associated agreements, do not
violate any laws or regulations, including securities laws, contracts
involving In Cahoots or WCCI, the corporate Bylaws or charters of WCCI
or In Cahoots, any partnership agreements involving In Cahoots or any
other applicable restrictions or regulations. Oelkers is specifically
relying upon the issuance and accuracy of this opinion.
10. In consideration of the above and forgoing covenants on the part
of In Cahoots, Oelkers, recognizing that the Judgment in this case has
been rendered against In Cahoots because of negligence occurring
during policy periods when coverage was afforded to In Cahoots or to
certain of them and additional parties, by the said Dallas Fire
Insurance Company, hereby covenants and agrees that so long as all
covenants and obligations of In Cahoots under this Agreement are timely
performed, Oelkers will look solely and exclusively to the proceeds of
insurance policies issued by the said Dallas Fire Insurance Company in
the collection of the said Judgment and will not seek personal
collection against EWI, the Club or WCCI nor against premises used by
them in the operation of their businesses or real estate personally
owned by them or any of them; and such documents will be executed as may
be necessary from time to time to release any Judgment lien upon such
premises; and that upon the termination of final litigation on
behalf of Oelkers against the said Dallas Fire Insurance Company and
the payment of all obligations owed to Oelkers under this Agreement,
such orders will be entered as may be necessary properly to carry this
Agreement into effect. The covenant described in this paragraph shall
remain effective and continue in effect so long as the Judgment remains
unsatisfied and outstanding.
11. It is not the parties' intent herein to release the Judgment or
the obligation owing to Oelkers, but rather intend to enter into an
agreement providing for a covenant not to execute on specific assets.
Further, the parties agree that they specifically do not intend to
release any obligations of Dallas Fire Insurance Company to or on behalf
of any of these parties.
12. While WCCI represents that it is not a named insured of Dallas
Fire Insurance Company, WCCI and In Cahoots expressly agree that any
proceedings against insurance carriers or the said Dallas Fire Insurance
Company may be instituted in the names of In Cahoots, WCCI or their
constituent entities and that they will join in said proceedings in so
far as may be necessary to enforce the liability of the said Dallas Fire
Insurance Company or other insurance carriers. WCCI represents that
WCCI is not a named insured of any policy issued by Dallas Fire Insurance
nor is WCCI a party to the legal proceedings in which the Judgment was
rendered. The parties agree that WCCI and In Cahoots will furnish or
cause to be furnished all evidence within their power to produce, either
known to WCCI or to In Cahoots or through insurance agents and/or
insurance adjusters representing any third parties with whom WCCI or In
Cahoots has done business which may bear upon the issues involved in the
proceedings to enforce and collect the Judgment, and upon any suits,
garnishments, attachments or other legal proceedings which may be
brought by or on behalf of Oelkers to collect the Judgment.
13. This Agreement is not a settlement of Oelkers' Judgment. The
parties agree that the payments provided for herein do not constitute
a full and complete settlement of the Judgment. all payments and
property received under this Agreement are received in consideration
often covenant not to execute. Upon the occurrence of an Event of
Default as defined in this Agreement, Oelkers' remedy against the other
parties to this Agreement shall be limited to the amount of the Judgment
less all monetary payments made to or on behalf of Oelkers hereunder by
the parties to this Agreement or any entities on such parties behalf.
14. The parties agree that the writs of execution served on In
Cahoots by Oelkers attached all property of the In Cahoots club located
in Wichita subject to the rights of American Home Mortgage, Inc., if any.
In Cahoots further agrees that it is estopped from disputing the
effectiveness of these attachments and the continuation of them
to encumber and attach the property in the Club. The parties further
agree that Oelkers relied upon this agreement and estoppel statement.
The parties also agree that as part of this Agreement, Oelkers agrees to
release the Wichita F.F.&E listed on Exhibit "A" upon payment of the sum
of $58,500.00 at closing as provided for herein and Oelkers agrees that
upon receipt of said payment, she has no further claims or rights in
and to such F.F.&E. The parties understand and agree that the funds that
were garnished by the garnishment served in October, 1997 on Nations
Bank in connection with the Judgment have been paid over to Oelkers or
released. The parties further understand and agree that the writs of
execution served on the Wichita club October 18, 1997 do not continue in
effect after the signing of this Agreement and the receipt of the
$58,500.00 payment by Oelkers.
15. For so long as payments under this Agreement remain owing to
Oelkers, In Cahoots agrees to operate the club in Wichita in the normal
course of business as done during the past two years. In Cahoots
further agrees to maintain a liquor, wine and beer inventory with a
cost value of at least $10,000.00 from the date of this Agreement until
the release of the security interest of Oelkers as evidenced by the
Security Agreement dated October 22, 1997. On a monthly basis beginning
as of February 18, 1998 and continuing on the 15th day of each month
thereafter, In Cahoots shall certify in writing to Oelkers or her
representatives that the level in this paragraph is satisfied.
16. The Club represents that Boots, Inc., a Kansas corporation, is
the only limited partner in it and further represents that Entertainment
Wichita, Inc. is wholly owned by Western Country Clubs,Inc., a Colorado
corporation. In Cahoots represents that Jim Blacketer is the sole
director and officer of EWI.
17. The following shall constitute Events of Default under this
Agreement:
(a) If In Cahoots fails to pay or perform, as the case may
be, any of the obligations under this Agreement when the
same become due and payable or performable, as the case
may be; or
(b) If an event of default occurs under the security
agreement or any other agreement between In Cahoots and
Oelkers; or
(c) If In Cahoots fails to perform any obligations or
violates any covenant contained in this Agreement; or
(d) If any representation or warranty is knowingly,
intentionally or recklessly made by In Cahoots or on its
behalf in this Agreement or any information contained in
any financial statement or other document delivered to
Oelkers by or on behalf of In Cahoots knowingly,
intentionally or recklessly contains any untrue
statement of a material fact or intentionally or
recklessly omits to state a material fact necessary to
make the statements therein not misleading in light of
the circumstances in which they were made; or
(e) If In Cahoots
(i) makes an assignment for the benefit of, or enters
into any composition or arrangement with creditors of In
Cahoots or any related entity; or
(ii) conceals, removes or permits to be concealed or
removed, any part of its property or the property of In
Cahoots, with intent to hinder, delay or defraud their
creditors or any of them, or makes or suffers a transfer
of any of its property or the property of In Cahoots
which may be fraudulent under any applicable bankruptcy,
fraudulent conveyance or similar law, or makes any
transfer of its property to or for the benefit of a
creditor at a time when other creditors similarly
situated have not been paid; or
(f) (i) if a trustee, receiver, agent or custodian is
appointed or authorized to take charge of any property of In
Cahoots for the purpose of enforcing a lien against such
property or for the purpose of administering such property for
the benefit of its creditors; or
(ii) if an order for relief as to In Cahoots is granted
under Title 11 of the United States Code or any similar
law; or
(iii) if In Cahoots files any pleasing seeking or
authorizes or consents to any such appointment or order,
whether by formal action or by the admission of the
material allegations of a pleading or otherwise; or
(iv) if any action or proceeding seeking such
appointment or order is commenced without the authority or
consent of In Cahoots, and is not dismissed within thirty (30)
days after its commencement;
then In Cahoots shall be in default and Oelkers shall have, in addition
to the remedies provided in this Agreement and to any other remedies
available to it under the law or any agreement, the rights and remedies
of a secured party under Article 9 of the Kansas Uniform Commercial
Code.
18. If an Event of Default occurs under this Agreement, Oelkers
may pursue all rights under this Agreement and all other rights available to
her to collect the full unpaid amount of the Judgment from any source
including In Cahoots. In Cahoots shall be allowed a grace period of
fifteen (15) calendar days in which to cure an Event of Default caused
by a delinquent payment to Oelkers except the payment due hereunder on
March 1, 1998 which shall not have a grace period. Provided that all
payment obligations herein are current, the parties shall have thirty
(30) calendar days after notice from Oelkers in which to cure any non-
monetary defaults defined in paragraph 17 (a), (b) or (c). The non-
monetary Events of Default specifically include a violation of the
requirements for the collateral levels in paragraph 15 of this Agreement.
If any payments to Oelkers herein are in default at the time of a
non-monetary Event of Default defined in paragraphs 17 (a), (b) or (c)
occur and remain uncured after any applicable grace period, Oelkers'
rights upon default to collect more than the payments provided
by this Agreement from In Cahoots or WCCI shall be suspended if
and for so long as all the payments to her required by Agreement
are current.
19. In Cahoots further waives the benefit of any future bankruptcy
stay entered under the provisions of Title 11 of the United States Code
with respect to the rights of Oelkers.
20. Time is hereby expressly made of the essence of this Agreement.
21. This Agreement shall be construed and enforced according to the
laws of the State of Kansas.
22. If any term or provision of this Agreement or the application
thereof to any person or situation shall to any extent be invalid or
unenforceable, the remainder of this Agreement or the application of
such terms or provisions to persons or situations, other than those as
to which it is invalid or unenforceable, shall not be affected thereby,
and each term and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
23. This Agreement may not be changed orally, but only by an
agreement in writing which is signed by the parties hereto.
24. All the covenants herein contained are joint and several
obligations of each company listed as part of In Cahoots above and shall
also bind, and the benefits and advantages thereof shall also inure, to
the respective heirs, executors, administrators, successors and assigns
of the parties hereto.
25. This Agreement is made for the sold protection and benefit of
WCCI, In Cahoots, Oelkers and her lawyers, and no other person shall be
deemed to have a right of action of any kind hereunder.
26. This Agreement shall be binding upon and inure to the benefits
of the parties hereto, their respective heirs, representatives,
successors and assigns.
27. Whenever used, the singular in number shall include the plural,
and the plural the singular and the use of any gender shall include all
genders.
28. Any notices required herein may be given to the respective
parties by mailing the same by United States first class mail, postage
prepaid, to the respective parties' addresses appearing below or such
other address as In Cahoots or Oelkers may from time to time designate
by written notice to the other as herein required:
"In Cahoots" "Oelkers"
Mr. James Blacketer Mr. Donald A. McKinney
1601 N.W. Expressway, Ste. 1610 #5 Douglas Avenue
Oklahoma City, Oklahoma 73118 Wichita, Kansas 67207-1002
with copies to:
Mr. John Hudson Mr. Victor S. Nelson
Attorney at Law Victor S. Nelson, P.A.
1601 N.W. Expressway, Ste. 1910 3700 E. Douglas, Bldg. 70
Oklahoma City, Oklahoma 73118 Wichita, Kansas 67208
29. Oelkers shall have all the rights and remedies granted in this
Agreement, the Security Agreement, or available at law or in equity, and
these same rights and remedies shall be cumulative and may be pursued
separately, successively, or concurrently against In Cahoots or its
property at the sole discretion of Oelkers. The exercise or failure to
exercise any of the same shall not constitute a waiver or release
thereof of any other right or remedy, and the same shall be
nonexclusive.
30. The parties agree to close this transaction with executed copies
of this Agreement exchanged by telefacsimile and a wire transfer of the
initial payment to Oelkers. The parties further agree to send the
original signed copies of this Agreement to each other by overnight
delivery service so that each party maintains a fully signed original
counterpart of this Agreement. The parties also agree to send all other
original documents executed in connection with this Agreement by
overnight delivery service to the other party, if applicable. Attached
as Exhibit"C" is a list of the documents executed in connection this
Agreement showing the distribution of the original counterparts.
31. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original but all of which taken together
shall constitute one agreement. By execution hereof the signers
certified that they have read this Agreement and that they are duly
authorized to execute this Agreement in the capacities stated below.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be signed in their respective names on the day and year
first above written.
"IN CAHOOTS"
IN CAHOOTS LIMITED PARTNERSHIP
A Kansas Limited Partnership
By: /s/ Jim Blacketer
Jim Blacketer, President of
Entertainment Wichita, Inc.
General Partner
ENTERTAINMENT WICHITA, INC.,
a Kansas corporation
By: /s/ Jim Blacketer
Jim Blacketer, President
WESTERN COUNTRY CLUBS, INC.
a Colorado corporation
By: /s/ Jim Blacketer
Jim Blacketer, President
"OELKERS"
/s/ Jana Oelkers
Jana Oelkers
The following attorneys reviewed and consent to the attorney
lien, payment, stock and warrant provisions of this Agreement. The
following attorneys specifically agree that the receipt of payments,
stock and warrants as provided herein shall comply with their attorney
lien rights in this matter.
VICTOR S. NELSON, P.A.
/s/ Victor S. Nelson
By Victor S. Nelson, President
DONALD A. MCKINNEY
/s/ Donald A. McKinney
Donald A. McKinney
<PAGE>
EXHIBIT "A"
All furniture, fixtures and equipment located in the building
located at 10001 E. Kellogg Drive, Wichita, Sedgwick County, Kansas
67207, known as InCahoots, including but not limited to the following:
1. Universal controller and 8 trackspot fixtures
2. Sound, light and video equipment
3. Simplex system
4. Bars and affixed millwork
5. Underbar equipment/jockey
6. Walk-in cooler
7. All tables
8. All chairs
9. All bar stools
10. All kitchen equipment, including but not limited to exhaust
hoods, ice machines, ice makers, glasses, utensils,
glass racks, overhead racks and all other miscellaneous
kitchen items
11. All speakers and subwoofer cabinets
12. Diamond-turf panels
13. Custom pieces of art work
14. Framed prints
15. All other equipment, furniture or fixtures which may be
located at said address
16. All other tangible personal property located at said address
