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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 4, 1997
FILE NO.
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
RICK'S CABARET INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
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TEXAS 76-0458229
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
ROBERT L. WATTERS,
3113 BERING DRIVE, 3113 BERING DRIVE,
HOUSTON, TEXAS 77057 HOUSTON, TEXAS 77057
(713) 785-0444 (713) 785-0444
(Address of principal executive offices, (Name and address of agent for service and
including zip code and Registrant's agent's telephone number, including area
telephone number, including area code) code)
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With copies to:
ROBERT D. AXELROD,
5300 MEMORIAL DRIVE, SUITE 700,
HOUSTON, TEXAS 77007
(713) 861-1996
(713) 552-0202-FAX
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to a dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If the Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(*) PRICE(*) REGISTRATION FEE
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Common Stock, par value
$0.01...................... 380,000 $2.8125 $1,068,750 $323.87
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* Estimated solely for the purpose of calculating the registration fee.
Calculated pursuant to Rule 457(g) and based on the average bid and asked
price of the Company's Common Stock on March 31, 1997.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVENESS DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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RICK'S CABARET INTERNATIONAL, INC.
CROSS-REFERENCE SHEET
SHOWING LOCATION IN THE PROSPECTUS OF
INFORMATION REQUIRED BY ITEMS OF FORM S-3
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FORM S-3 ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
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1. Front of Registration Statement and Outside Front
Cover of Prospectus................................. Outside Front Cover Page of Prospectus
2. Inside Front Cover and Outside Back Cover Pages of
Prospectus.......................................... Inside Front Cover and Outside Back Cover
Pages of Prospectus
3. Summary Information and Risk Factors................ The Company; Risk Factors
4. Use of Proceeds..................................... Use of Proceeds
5. Determination of Offering Price..................... Outside Front Cover; Use of Proceeds
6. Dilution............................................ *
7. Selling Stockholders................................ Selling Stockholders
8. Plan of Distribution................................ Outside Front Cover Page; Risk Factors;
Plan of Distribution
9. Description of Securities to be Registered.......... *
10. Interest of Named Experts and Counsel............... Legal Matters
11. Material Changes.................................... Recent Houston, Texas City Ordinance
12. Incorporation by Reference of Certain Information... Documents Incorporated by Reference
13. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... Limitation on Director's Liability;
Indemnification
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(*) None or Not Applicable
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED APRIL 4, 1997
RICK'S CABARET INTERNATIONAL, INC.
380,000 SHARES OF COMMON STOCK
This Prospectus relates to the resale of 380,000 shares of common stock,
par value $0.01 per share (the "Common Stock"), of Rick's Cabaret International,
Inc. (the "Company") which may be offered and sold from time to time (the
"Stockholder Shares") by certain security holders of the Company (the "Selling
Stockholders"). The Selling Stockholders may from time to time sell all or any
portion of the Common Stock in the over-the-counter market, on any regional or
national securities exchange on which the Common Stock is listed or traded, in
negotiated transactions or otherwise, at prices then prevailing or related to
the then current market price or at negotiated prices. A current Prospectus must
be in effect at the time of the sale of the shares of Common Stock to which this
Prospectus relates. The Common Stock may be sold directly or through broker
dealers, or in a distribution by one or more underwriters on a firm commitment
or a best efforts basis. The Selling Stockholders and any broker-dealer who
participates in the distribution of the Common Stock may be deemed to be
Underwriters ("Underwriters") within the meaning of the Securities Act of 1933,
as amended (the "Act"). Any commission received by any broker-dealer and any
profit on resale of Common Stock purchased by them may be deemed to be
underwriting commission under the Act. The Company will not receive any proceeds
from the sale of the Common Stock offered hereby, but will incur certain
expenses in connection with this Offering. See, Use of Proceeds.
The Company's Common Stock is quoted on the National Association of
Securities Dealer's NASDAQ Small Cap Market automated quotation system under the
symbol "RICK". On March 31, 1997, the last closing bid price of the Company's
Common Stock as reported by the National Association of Securities Dealer's
NASDAQ Small Cap Market was $2.8125 per share bid.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN
CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK, SEE THE "RISK FACTORS"
SECTION OF THIS PROSPECTUS BEGINNING ON PAGE 4.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Date of this Prospectus is April , 1997.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, ANY SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER
PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCE, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY OR ITS SUBSIDIARIES SINCE THE DATE HEREOF.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO
ANY PERSON IN ANY STATE WHERE SUCH OFFER WOULD BE UNLAWFUL.
TABLE OF CONTENTS
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SECTION PAGE
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Available Information....................................... 3
Documents Incorporated by Reference......................... 3
The Company................................................. 4
Risk Factors................................................ 4
Recent Houston, Texas City Ordinance........................ 9
Use of Proceeds............................................. 9
Plan of Distribution........................................ 9
Selling Stockholders........................................ 11
Limitations on Directors' Liability; Indemnification........ 12
Legal Matters............................................... 12
Experts..................................................... 12
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports, proxy statements and other information with the
Commission. The Company will provide without charge to each person who receives
a copy of this Prospectus, upon written or oral request, a copy of any
information that is incorporated by reference in this Prospectus (not including
exhibits to the information that is incorporated by reference unless the
exhibits are themselves specifically incorporated by reference). Such request
should be directed to Rick's Cabaret International, Inc., Attention of Robert L.
Watters, 3113 Bering Drive, Houston, Texas 77057, tel. (713) 785-0444.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Act with respect to the securities offered by this Prospectus.
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to the Company and this offering, reference is made to the Registration
Statement, including the exhibits filed therewith, as well as such reports,
proxy statements and other information filed with the Commission, which may be
inspected without charge at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such
material may also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
The Commission maintains a Web site on the Internet that contains reports,
proxy and information statements and other information regarding issuers that
file electronically with the Commission. The address of the site is
http://www.sec.gov. Visitors to the site may access such information by
searching the EDGAR data base on the site.
DOCUMENTS INCORPORATED BY REFERENCE
The Company hereby incorporates by reference in this Prospectus (i) the
Company's Annual Report on Form 10-KSB for the fiscal year ended September 30,
1996; (ii) the Company's Quarterly Report on Form 10-QSB for the fiscal quarter
ended December 31, 1996; (iii) the Company's Report on Form 8-K dated October
22, 1996; and (iv) the description of the Company's Common Stock contained in
the Company's Form SB-2 dated October 12, 1995, including any amendments or
reports filed for the purpose of updating such description. All other reports
filed by the Company pursuant to Section 13(a) or 15(d) of the Exchange Act
since September 30, 1996, are hereby incorporated herein by reference.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14, or 15(d) of the Exchange Act, prior to the termination of this
offering, shall be deemed to be incorporated by reference into this Prospectus.
Any statement contained in a document incorporated or deemed to be incorporated
by reference in this Prospectus shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained in this
Prospectus or any other subsequently filed document which also is or is deemed
to be incorporated by reference modifies or replaces such statement.
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THE COMPANY
The Company was organized in 1994 to acquire all of the outstanding capital
stock of Trumps, Inc. ("Trumps"), a Texas corporation formed in 1982. Since
1983, Trumps has operated Rick's Cabaret ("Rick's"), a premiere adult nightclub
offering topless entertainment in Houston, Texas. Rick's Cabaret, which caters
primarily to businessmen, has developed a clientele base which includes
professionals, business executives and other individuals who tend to entertain
more frequently than the average person and who tend to have greater disposable
income. From its inception, the Company's objective was to provide a first-class
entertainment environment for the business consumer. To achieve this goal and
reach its target market, Rick's created an attractive, yet discreet environment,
complimented by a first-class bar and restaurant operation conducive to
attracting businessmen and out-of-town convention clientele.
In February, 1996, the Company formed RCI Entertainment, Louisiana, Inc., a
Louisiana corporation, for the purpose of administering, operating, managing and
leasing its new location in New Orleans, Louisiana. The Company recently opened
its new facility in New Orleans which is located at 315 Bourbon Street. In
addition, the Company formed RCI Entertainment (Texas), Inc. in June, 1996, for
the purpose of acquiring 1.13 acres of land in Houston, Texas. The Company is
presently evaluating whether to build a new adult oriented nightclub at this
location within the next twelve to eighteen months.
RISK FACTORS
The Common Stock offered hereby is speculative and involves a high degree
of risk. In addition to the other information set forth in this Prospectus, each
prospective investor should carefully consider the following risk factors before
making an investment decision.
NECESSARY PERMITS -- RECENT HOUSTON CITY ORDINANCE
The Company currently has a Business Permit (the "Permit") to operate a
sexually oriented business ("Sexually Oriented Business") in Houston, Texas.
However, in January, 1997 the City Council of the City of Houston passed a
comprehensive new ordinance regulating the location of and the conduct within
Sexually Oriented Businesses. The new Ordinance, which will become fully
effective by mid 1997 establishes new distances that Sexually Oriented
Businesses may be located to schools, churches, playgrounds and other sexually
oriented businesses. There are no provisions in the Ordinance exempting
previously permitted sexually oriented businesses from the effect of the new
Ordinance. Rick's Cabaret at its original location at 3113 Bering Drive and its
proposed new location on the Southwest Freeway have both applied for new permits
under the new ordinance, but it appears likely that the original location and
possibly the new proposed location on the Southwest Freeway will be denied
permits. It is the intention of the Company to join with a number of other
sexually oriented businesses and to file suit against the City of Houston to
challenge the constitutionality of the new ordinance. The Company, along with
numerous other sexually oriented businesses will seek injunctive relief to halt
implementation of the new ordinance until such time as the matter can be brought
before a full and considered hearing. There are other provisions in the
ordinance, such as provisions governing the level of lighting in a sexually
oriented business, the distance between a customer and a dancer while the dancer
is performing in a state of nudity and provisions regarding the licensing of
dancers which may be detrimental to the conduct of business by the Company and
all of these provisions also will be the subject of the above mentioned
litigation.
The Company is presently in the process of selecting the legal counsel
which will represent the Company in this matter. No assurance can be given as to
the likelihood of the success of any litigation filed against the City of
Houston, but in the event that such litigation is unsuccessful the Company will
be able to take the benefit of an amortization provision contained in the new
ordinance designed to allow recovery of a business's investment and which will
allow the Company to continue in business at its present location during the
amortization period.
A dance hall permit is required for the operation of a discotheque in the
city of Houston. The dance hall permit is not a discretionary permit, but must
be granted by the city if the provisions of the applicable
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ordinance are satisfied. A dance hall permit may be revoked or renewal may be
refused if certain criminal activities occur on the premises or if the person
listed as the applicant has committed certain named offenses. The loss of the
dance hall permit would have a material adverse effect on Rick's business,
financial condition and results of operations.
RISK OF ADULT NIGHTCLUB OPERATIONS
Historically, the adult entertainment, restaurant and bar industry has been
an extremely volatile industry. The industry tends to be extremely sensitive to
the general local economy, in that when economic conditions are prosperous,
entertainment industry revenues increase, and when economic conditions are
unfavorable, entertainment industry revenues decline. Coupled with this economic
sensitivity is the trendy personal preferences of the customers who frequent
adult cabarets. The Company continuously monitors trends in its customers'
tastes and entertainment preferences so that, if necessary, it can make
appropriate changes which will allow it to remain one of the premiere adult
cabarets. However, any significant decline in general corporate conditions or
uncertainties regarding future economic prospects that affect consumer spending
could have a material adverse effect on the Company's business. In addition,
Rick's has historically catered to a clientele base from the upper end of the
market. Accordingly, further reductions in the amounts of entertainment expenses
allowed as deductions from income under the Internal Revenue Code of 1954, as
amended, could adversely affect sales to customers dependent upon corporate
expense accounts.
FINANCIAL CONTROLS
A significant part of the revenues earned by the Company through its adult
nightclub operations will be collected in cash by full and part-time employees.
Comprehensive financial controls are required to minimize the potential loss of
revenue through theft or misappropriation of cash. To the extent that these
controls are not structured or executed properly, significant cash revenues
could be lost and profitability of the Company impaired. The Company believes
that it has implemented significant cash controls, including separating
management personnel from actually handling cash and utilizing a combination of
accounting and physical inventory control devices to deter theft and to ensure a
high level of security within its accounting practices and procedures.
COMPETITION
The adult topless club entertainment business is highly competitive with
respect to price, service and location, as well as the professionalism of the
entertainment. Rick's Cabaret in Houston competes with a number of locally-owned
adult cabarets, some of whose names may enjoy recognition that equals that of
Rick's. There are approximately 50 adult cabarets located in the Houston area of
which approximately 10 are in direct competition with the Company. In recent
years, Rick's has been among the highest adult nightclub in the Houston area in
alcoholic beverage sales, according to the information made available by the
Texas Alcoholic Beverage Commission. Although the Company believes that it is
well-positioned to compete successfully, there can be no assurance that Rick's
will be able to maintain its high level of name recognition and prestige within
the marketplace.
DEPENDENCE ON AND AVAILABILITY OF MANAGEMENT; MANAGEMENT OF GROWTH
The success of the Company is substantially dependent upon the time,
talent, and experience of Robert Watters, its President and Chief Executive
Officer. The Company has entered into a three-year employment agreement with Mr.
Watters which extends to December 31, 1997. Additionally, the Company has
obtained key-man life insurance on the life of Mr. Watters in the amount of
$3,000,000. The loss of the services of Mr. Watters would have a material
adverse impact on the Company and its business. In the event of Mr. Watters
unavailability or in the event that he should become temporarily disabled, the
Company believes that it presently has in place management systems and controls
which are sufficiently strong to enable it to run efficiently and effectively
until Mr. Watters' return or until a replacement could be found. No assurance
can be given, however, that a replacement for Mr. Watters could be located in
the event of his unavailability. Further, in order for the Company to expand its
business operations, it must continue to improve and expand the level
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of expertise of its personnel and must attract, train and manage qualified
managers and employees to oversee and manage the expanded operations. The
Company's practice of training management without prior adult topless club
experience could result in a delay in the Company's anticipated growth plans due
to the time required to attract and train such qualified managers and employees.
KEY EMPLOYEES
The Company's success depends on maintaining a high quality of female
entertainers and waitresses. Competition for topless entertainers in the adult
entertainment business is intense. The lack of availability of quality,
personable, attractive entertainers or the Company's inability to attract and
retain other key employees, such as kitchen personnel and bartenders, could
adversely impact the business of the Company.
ABILITY TO MANAGE GROWTH
It is the intention of the Company to expand its existing business
operations by opening additional topless nightclubs in other metropolitan areas
under the trade name "Rick's Cabaret." The opening of additional topless
nightclubs will subject the Company to a variety of risks associated with
rapidly growing companies. In particular, the Company's growth may place a
significant strain on its accounting systems and internal controls and personal
overview of its day-to-day operations. Although management intends to ensure
that its internal controls remain adequate to meet the demands of further
growth, there can be no assurance that its systems, controls or personnel will
be sufficient to meet these demands. Inadequacies in these areas could have a
material adverse effect on Rick's business, financial condition and results of
operations.
PERMITS RELATING TO THE SALE OF ALCOHOL
Rick's derives a significant portion of its revenues from the sale of
alcoholic beverages. In Texas, the authority to issue a permit to sell alcoholic
beverages is governed by the Texas Alcoholic Beverage Commission (the "TABC"),
which has the authority, in its discretion, to issue the appropriate permits.
Rick's presently holds a Mixed Beverage Permit and a Late Hours Permit (the
"Permits"). These Permits are subject to annual renewal, provided Rick's has
complied with all rules and regulations governing the permits. Renewal of a
permit is subject to protest, which may be made by a law enforcement agency or
by a member of the general public. In the event of a protest, the TABC may hold
a hearing at which time the views of interested parties are expressed. The TABC
has the authority after such hearing not to issue a renewal of the protested
alcoholic beverage permit. While Rick's has never been subject to a protest
hearing against the renewal of its Permits, there can be no assurance that such
a protest could not be made in the future, nor can there be any assurance that
the Permits would be granted in the event such a protest was made. Other states
may have similar laws which may limit the availability of a permit to sell
alcoholic beverages or which may provide for suspension or revocation of a
permit to sell alcoholic beverages in certain circumstances. The temporary or
permanent suspension or revocations of either of the Permits or the inability to
obtain permits in areas of expansion would have a material adverse effect on the
revenues, financial condition and results of operations of the Company.
STATUS OF ENTERTAINERS AS INDEPENDENT CONTRACTORS
The Company believes its entertainers to be independent contractors and not
employees for federal income tax purposes and that the entertainers should be
treated as self-employed independent contractors under the income tax
withholding provisions of the Internal Revenue Code and under the Federal
Insurance Contributions Act and the Federal Unemployment Tax Act. In addition,
the Company believes the entertainers are independent contractors for purposes
of regulations administered by the United States Department of Labor. However,
the status of the entertainers as independent contractors is not free from
doubt. The Company has sought neither a ruling from either the Internal Revenue
Service or the Department of Labor nor an opinion of counsel as to the status of
its entertainers as independent contractors. After consultation with counsel,
the Company does not believe that it could obtain an opinion on this issue at a
cost which the Company would find acceptable. Moreover, the Company believes
that any such opinion, if obtained, would be of very limited value, given the
inherently factual nature of the issue. To the extent that a
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determination were made that the entertainers are not independent contractors,
but rather are employees for tax or labor purposes, and a similar determination
were not made as to other adult cabarets, the Company could be at a competitive
disadvantage with other adult cabarets. Moreover, such a determination could
result in the imposition of penalties against the Company for its prior
treatment, the effect of which could be material. The Company is a member of the
Texas Entertainment Association, an organization composed of the largest adult
cabarets in Texas. One of the objectives of the Texas Entertainment Association
has been to keep the membership informed of changes in the law relating to the
status of entertainers as independent contractors and to coordinate the policies
of the major adult cabarets in an effort to ensure that changes in the policies
and procedures relating to the employment status of entertainers are made
uniformly by the entire adult industry in Texas. The Company presently intends
to change its treatment of its entertainers from independent contractors to
employees in the near future. The Company is working cooperatively with the
Texas Entertainment Association in an effort to achieve an orderly transition
within the entire industry.
EXISTING LITIGATION
The Company and Mr. Watters are presently involved in certain litigation.
In Dallas J. Fontenot v. Trumps, Inc. and Robert L. Watters, Cause No. 94-057144
in the 127th District Court of Harris County, Texas (the "Fontenot Lawsuit"),
Mr. Fontenot sued the Company and Mr. Watters for alleged breaches of an
Agreement entered into in April, 1993 among Mr. Fontenot, the Company and Mr.
Watters. Mr. Fontenot alleges that Mr. Watters and the Company have breached
this Agreement, but does not indicate the manner in which the breach has
occurred. The Company believes that it has fully complied with its obligations
under this Agreement. The litigation is in its initial stages and no trial date
has been set. The Company believes, after consultation with counsel, that it has
substantial defenses to the claims being asserted against it and that the risk
of material financial exposure to the Company is remote.
UNINSURED RISKS
The Company maintains insurance in amounts it considers adequate for
personal injury and property damage to which the business of the Company may be
subject. As of September 1996, the Company maintains personal injury liquor
liability insurance, however, there can be no assurance that the Company may not
be exposed to potential liabilities in excess of the coverage provided by
insurance, which liabilities may be imposed pursuant to the Texas "Dram Shop"
statute or similar "Dram Shop" statutes or common law theories of liability in
other states where the Company may expand. The Texas "Dram Shop" statute
provides a person injured by an intoxicated person the right to recover damages
from an establishment that wrongfully served alcoholic beverages to such person
if it was apparent to the server that the individual being sold, served or
provided with an alcoholic beverage was obviously intoxicated to the extent that
he presented a clear danger to himself and others. An employer is not liable for
the actions of its employee who overserves if (i) the employer requires its
employees to attend a seller training program approved by the TABC; (ii) the
employee has actually attended such a training program; and (iii) the employer
has not directly or indirectly encouraged the employee to violate the law. It is
the policy of Rick's to require that all servers of alcohol working at Rick's be
certified as servers under a training program approved by the TABC, which
certification gives statutory immunity to the sellers of alcohol from damage
caused to third parties by those who have consumed alcoholic beverages at such
establishment pursuant to the Texas Alcoholic Beverage Code. There can be no
assurance, however, that uninsured liabilities may not arise which could have a
material adverse effect on the Company.
CONTROL BY MANAGEMENT
The Chief Executive Officer and Chairman of the Board of the Company owns
approximately 37% of the outstanding Common Stock of the Company. As a result,
management will be able to influence the election of directors and otherwise
influence the affairs of the Company for the foreseeable future.
LIMITATIONS ON PROTECTION OF SERVICE MARKS
Rights of the Company to the tradenames "Rick's" and "Rick's Cabaret", are
established under the common law, based upon the Company's substantial and
continuous use of these trademarks in interstate
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commerce since at least as early as 1987. "RICK'S AND STARS DESIGN" and "RICK'S
CABARET" logos are registered through service mark registrations issued by the
United States Patent and Trademark Office ("PTO").
There can be no assurance that these steps taken by the Company to protect
its Service Marks will be adequate to deter misappropriation of its protected
intellectual property rights. Litigation may be necessary in the future to
protect the Company's rights from infringement, which may be costly and time
consuming. The loss of the intellectual property rights owned or claimed by the
Company could have a material adverse affect on the Company.
POSSIBLE VOLATILITY OF COMMON STOCK PRICE
The market price of the Common Stock of the Company may be highly volatile,
as has been the case with the securities of many other small capitalization
companies. Additionally, in recent years, the securities markets have
experienced a high level of price and volume volatility and the market prices of
securities for many companies, particularly small capitalization companies, have
experienced wide fluctuations which have not necessarily been related to the
operating performances or underlying asset values of such companies. Securities
of issuers having relatively limited capitalization or securities recently
issued in a public offering are particularly susceptible to change based on
short-term trading strategies of certain investors.
NO CASH DIVIDENDS
The Company has never paid cash dividends on its Common Stock and the Board
of Directors does not anticipate paying cash dividends in the foreseeable
future. It currently intends to retain future earnings to finance the growth of
its business.
ANTI-TAKEOVER EFFECTS OF ISSUANCE OF PREFERRED STOCK
The Board of Directors has the authority to issue up to 1,000,000 shares of
Preferred Stock, $.10 par value per share, in one or more series, to fix the
number of shares constituting any such series, and to fix the rights and
preferences of the shares constituting any series, without any further vote or
action by the stockholders. The issuance of Preferred Stock by the Board of
Directors could adversely affect the rights of the holders of Common Stock. For
example, such issuance could result in a class of securities outstanding that
would have preferences with respect to voting rights and dividends and in
liquidation over the Common Stock, and could (upon conversion or otherwise)
enjoy all of the rights appurtenant to Common Stock. The Board's authority to
issue Preferred Stock could discourage potential takeover attempts and could
delay or prevent a change in control of the Company through merger, tender
offer, proxy contest or otherwise by making such attempts more difficult to
achieve or more costly. There are no issued and outstanding shares of Preferred
Stock; there are no agreements or understandings for the issuance of Preferred
Stock, and the Board of Directors has no present intention to issue Preferred
Stock.
LIMITATION ON DIRECTOR LIABILITY
The Company's Articles of Incorporation provide, as permitted by governing
Texas law, that a director of the Company shall not be personally liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty as
a director, with certain exceptions. These provisions may discourage
stockholders from bringing suit against a director for breach of fiduciary duty
and may reduce the likelihood of derivative litigation brought by stockholders
on behalf of the Company against a director. See, Limitation on Directors'
Liability; Indemnification.
8
<PAGE> 11
RECENT HOUSTON, TEXAS CITY ORDINANCE
The Company currently has a Business Permit (the "Permit") to operate a
sexually oriented business ("Sexually Oriented Business") in Houston, Texas.
However, in January, 1997 the City Council of the City of Houston passed a
comprehensive new ordinance regulating the location of and the conduct within
Sexually Oriented Businesses. The new Ordinance, which will become fully
effective by mid 1997 establishes new distances that Sexually Oriented
Businesses may be located to schools, churches, playgrounds and other sexually
oriented businesses. There are no provisions in the Ordinance exempting
previously permitted sexually oriented businesses from the effect of the new
Ordinance. Rick's Cabaret at its original location at 3113 Bering Drive and its
proposed new location on the Southwest Freeway have both applied for new permits
under the new ordinance, but it appears likely that the original location and
possibly the new proposed location on the Southwest Freeway will be denied
permits. It is the intention of the Company to join with a number of other
sexually oriented businesses and to file suit against the City of Houston to
challenge the constitutionality of the new ordinance. The Company, along with
numerous other sexually oriented businesses will seek injunctive relief to halt
implementation of the new ordinance until such time as the matter can be brought
before a full and considered hearing. There are other provisions in the
ordinance, such as provisions governing the level of lighting in a sexually
oriented business, the distance between a customer and a dancer while the dancer
is performing in a state of nudity and provisions regarding the licensing of
dancers which may be detrimental to the conduct of business by the Company and
all of these provisions also will be the subject of the above mentioned
litigation.
The Company is presently in the process of selecting the legal counsel
which will represent the Company in this matter. No assurance can be given as to
the likelihood of the success of any litigation filed against the City of
Houston, but in the event that such litigation is unsuccessful the Company will
be able to take the benefit of an amortization provision contained in the new
ordinance designed to allow recovery of a business's investment and which will
allow the Company to continue in business at its present location during the
amortization period.
USE OF PROCEEDS
The Company will not receive any proceeds upon the resale of the Common
Stock by the Selling Stockholders. Selling Stockholders will not pay any of the
costs of this Offering.
PLAN OF DISTRIBUTION
The Selling Stockholders may, from time to time, sell all or a portion of
the Stockholder Shares in transactions (which may include block transactions) in
the over-the-counter market on any national or regional securities exchange in
which the Common Stock is listed or traded, in negotiated transactions or
otherwise, at prices then prevailing or related to the then current market price
or at negotiated prices. Resales by the purchasers of such shares may be made in
the same manner.
The Selling Stockholders may effect such transactions by selling their
securities directly to purchasers, through broker-dealers acting as agents for
the Selling Stockholders or to broker-dealers who may purchase shares as
principals and thereafter sell the securities from time to time in the
over-the-counter market, in negotiated transactions or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from both the Selling Stockholders and/or the
purchasers for whom such broker-dealers may act as agents or to whom they may
sell as principals (which compensation as to a particular broker-dealer may be
in excess of customary commissions).
If the Company is notified by a Selling Stockholder that any material
arrangement has been entered into with a broker-dealer for the sale of the
Common Stock, the Company would be required to amend the Registration Statement
of which this Prospectus is a part and file a Prospectus Supplement to describe
the agreements between the Selling Stockholder and such broker-dealer relating
to the distribution.
The Selling Stockholders and any broker-dealers participating in the
distribution of the Common Stock covered by this Prospectus may be deemed to be
"underwriters" (within the meaning of Section 2(11) of the
9
<PAGE> 12
Act). Any commissions received by them, as well as any proceeds from any sales
as a principal by them, may be deemed to be underwriting discounts and
commissions under the Act.
The Company will pay certain costs and expenses incurred in connection with
the registration of the Stockholder Shares under the Act. The Company will not,
however, pay any commissions or any other fees in connection with the sale of
the Common Stock.
There is no assurance that the Selling Stockholders will sell any or all of
the Common Stock.
10
<PAGE> 13
SELLING STOCKHOLDERS
The following table sets forth the name of each Selling Stockholder, the
number of shares of Common Stock offered by each Selling Stockholder, the number
of shares of Common Stock to be owned by each Selling Stockholder if all shares
were to be sold in the Offering and the percentage of the Company's outstanding
Common Stock that will be owned by each Selling Stockholder if all shares are
sold in the offering. The shares of Common Stock being offered hereby are being
registered to permit public secondary trading and the Selling Stockholders may
offer all or a portion of the shares for resale from time to time.
<TABLE>
<CAPTION>
SHARES SHARES PERCENTAGE
OWNED SHARES OWNED AFTER OWNED AFTER
SELLING BEFORE OFFERED OFFERING IF ALL OFFERING IF ALL
STOCKHOLDER(1) OFFERING FOR SALE SHARES SOLD* SHARES SOLD
-------------- -------- -------- --------------- ---------------
<S> <C> <C> <C> <C>
Paul E. Bennet............................... 5,000 5,000 0 0%
Arthur L. Asch............................... 5,000 5,000 0 0%
Jack Gilbert................................. 10,000 10,000 0 0%
Harry Falterbauer............................ 20,000 20,000 0 0%
Austin A. Cooper............................. 10,000 10,000 0 0%
Sterling Capital LLC......................... 5,000 5,000 0 0%
Dan R. Balabon............................... 5,000 5,000 0 0%
Marc Granet.................................. 3,076 3,076 0 0%
Arnold S. Gale, IRA.......................... 5,000 5,000 0 0%
Barney R. Stephens........................... 20,000 20,000 0 0%
Larry J. Corneck............................. 10,000 10,000 0 0%
Irving J. Denmark............................ 5,000 5,000 0 0%
C.G. Chase Construction Co................... 10,000 10,000 0 0%
Stanley Snyder............................... 5,000 5,000 0 0%
Private Trust Corp. Ltd.
TTEE:New Amsterdam Investment Trust........ 5,000 5,000 0 0%
Nicholas Kratsios............................ 3,500 3,500 0 0%
Dan Signore.................................. 4,000 4,000 0 0%
Matt Tomaszewski............................. 15,000 15,000 0 0%
Thomas F. Polich............................. 5,000 5,000 0 0%
Julia A. Knight.............................. 3,500 3,500 0 0%
Jeffrey D. Gohd.............................. 2,000 2,000 0 0%
Lawrence C. Gibbs............................ 10,000 10,000 0 0%
Thad Thrash.................................. 1,000 1,000 0 0%
Nicholas B. Graziano 0
Revocable Family 0
Living Trust of 12-13-95................... 2,846 2,846 0 0%
Rock Fund(2)................................. 125,000 125,000 0 0%
Fidelity Holdings, LTD....................... 80,000 80,000 0 0%
Richard M. Hoffman........................... 5,000 5,000 0 0%
</TABLE>
- ---------------
(*) Assumes no sales are effected by the Selling Stockholders during the
offering period other than pursuant hereto.
(1) Except as set forth below, no Selling Stockholder has held any position or
office, or has had any material relationship with the Company or any of its
affiliates within the past three years.
(2) Affiliates of the Rock Fund own an additional 119,600 shares of Common Stock
for a total of 244,600 shares.
11
<PAGE> 14
LIMITATION ON DIRECTOR'S LIABILITY; INDEMNIFICATION
Texas law authorizes corporations to limit or eliminate the personal
liability of directors to corporations and their stockholders for monetary
damages for breach of directors' fiduciary duty of care. The Articles of the
Company limit the liability of directors of the Company (in their capacity as
directors but not in their capacity as officers) to the Company or its
stockholders to the fullest extent permitted by Texas law. Specifically,
directors of the Company will not be personally liable for monetary damages for
breach of a director's fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Article 2.41
under the Texas Business Corporation Act ("TBCA"), or (iv) for any transactions
from which the director derived an improper personal benefit, whether or not the
benefit resulted from an action taken in the person's official capacity. Section
2.41 of the TBCA relates to directors' liability for unlawful dividends and
stock issuances.
The inclusion of this provision in the Articles may have the effect of
reducing the likelihood of derivative litigation against directors, and may
discourage or deter stockholders or management from bringing a lawsuit against
directors for breach of their duty of care, even though such an action, if
successful, might otherwise have benefited the Company and its stockholders.
The Company's Articles provide for the indemnification of its executive
officers and directors, and the advancement to them of expenses in connection
with any proceedings and claims, to the fullest extent permitted by the TBCA
law. The Articles include related provisions meant to facilitate the
indemnitees' receipt of such benefits. These provisions cover, among other
things: (i) specification of the method of determining entitlement to
indemnification and the selection of independent counsel that will in some cases
make such determination, (ii) specification of certain time periods by which
certain payments or determinations must be made and actions must be taken, and
(iii) the establishment of certain presumptions in favor of an indemnitee.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers or controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is therefore unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by a small
business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered, the small
business issuer will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed on for the
Company by Axelrod Smith & Kirshbaum of Houston, Texas. Mr. Robert D. Axelrod
presently owns 2,000 shares of Common Stock of the Company and 20,000 Common
Stock Purchase Warrants.
EXPERTS
The consolidated balance sheets at September 30, 1996 and 1995 and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for the years ended September 30, 1996 and 1995 of Rick's Cabaret
International, Inc. incorporated by reference into this Prospectus and
Registration Statement have been audited by Jackson & Rhodes P.C., independent
auditors, as set forth in their report, and are incorporated by reference in
reliance upon such report, given upon the authority of such firm as experts in
accounting and auditing.
12
<PAGE> 15
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be incurred in
connection with the distribution of the securities being registered. The
expenses shall be paid by the Company.
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 323.87
Printing and Engraving Expenses............................. 2,500.00
Legal Fees and Expenses..................................... 7,500.00
Accounting Fees and Expenses................................ 1,000.00
Blue Sky Fees and Expenses.................................. 0.00
Transfer Agent Fees and Miscellaneous....................... 1,000.00
----------
Total............................................. $12,323.87
</TABLE>
ITEM 15. LIMITATION ON DIRECTOR'S LIABILITY; INDEMNIFICATION
Texas law authorizes corporations to limit or eliminate the personal
liability of directors to corporations and their stockholders for monetary
damages for breach of directors' fiduciary duty of care. The Articles of the
Company limit the liability of directors of the Company (in their capacity as
directors but not in their capacity as officers) to the Company or its
stockholders to the fullest extent permitted by Texas law. Specifically,
directors of the Company will not be personally liable for monetary damages for
breach of a director's fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Article 2.41
under the Texas Business Corporation Act ("TBCA"), or (iv) for any transactions
from which the director derived an improper personal benefit, whether or not the
benefit resulted from an action taken in the person's official capacity. Section
2.41 of the TBCA relates to directors' liability for unlawful dividends and
stock issuances.
The inclusion of this provision in the Articles may have the effect of
reducing the likelihood of derivative litigation against directors, and may
discourage or deter stockholders or management from bringing a lawsuit against
directors for breach of their duty of care, even though such an action, if
successful, might otherwise have benefited the Company and its stockholders.
The Company's Articles provide for the indemnification of its executive
officers and directors, and the advancement to them of expenses in connection
with any proceedings and claims, to the fullest extent permitted by the TBCA
law. The Articles include related provisions meant to facilitate the
indemnitees' receipt of such benefits. These provisions cover, among other
things: (i) specification of the method of determining entitlement to
indemnification and the selection of independent counsel that will in some cases
make such determination, (ii) specification of certain time periods by which
certain payments or determinations must be made and actions must be taken, and
(iii) the establishment of certain presumptions in favor of an indemnitee.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers or controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is therefore unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by a small
business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered, the small
business issuer will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II-1
<PAGE> 16
ITEM 16. EXHIBITS
The following exhibits are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NO. IDENTIFICATION OF EXHIBIT
------- -------------------------
<C> <S>
4.1 -- Form of Registration Rights Agreement.
4.2 -- The Company's Articles of Incorporation, which are
incorporated by reference to the Company's Form SB-2
Exhibit 3.1 as effective with the Commission on October
12, 1995.
4.3 -- The Company's By-laws, which are incorporated by
reference to the Company's Form SB-2 Exhibit 3.2 as
effective with the Commission on October 12, 1995.
4.4 -- Specimen of the Company's common stock certificate, which
is incorporated by reference to the Company's Form SB-2
Exhibit 4.1 as effective with the Commission on October
12, 1995.
4.5 -- Instruments defining the rights of security holders,
which are incorporated by reference to the Company's Form
SB-2 Exhibit 4.2 as effective with the Commission on
October 12, 1995.
5.1 -- Opinion of Axelrod, Smith & Kirshbaum
23.1 -- Consent of Axelrod, Smith & Kirshbaum (Included in
Exhibit 5.1)
23.2 -- Consent of Jackson & Rhodes P.C.
27.1 -- Financial Data Schedule, which is incorporated by
reference to the Company's Quarterly Report on Form
10-QSB for the fiscal quarter ended December 31, 1996
filed with the Commission on February 14, 1997.
</TABLE>
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offer or sales are being made, a
post-effective amendment to this registration statement:
i. To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
ii. To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement; and
iii. To include any additional or changed material information with
respect to the plan of distribution.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) i. That, for the purpose of determining liability under the
Securities Act of 1933, the information omitted from the form
of prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of prospectus
filed by the registrant pursuant to Rule 424(b)(1) or (4), or
497(h) under the Securities Act of 1933 shall be deemed to be
part of this registration statement as of the time it was
declared effective.
II-2
<PAGE> 17
ii. That, for the purpose of determining liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
<PAGE> 18
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form S-3 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Houston,
State of Texas on March 11, 1997.
RICK'S CABARET INTERNATIONAL, INC.
By: /s/ ROBERT L. WATTERS
----------------------------------
Robert L. Watters, Chairman of the
Board and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on March 11, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ ROBERT L. WATTERS Chairman of the Board, Chief March 11, 1997
- ----------------------------------------------------- Executive Officer, and Director
Robert L. Watters
/s/ ERICH NORTON WHITE Director and Executive Vice March 11, 1997
- ----------------------------------------------------- President
Erich Norton White
/s/ SCOTT C. MITCHELL Director March 11, 1997
- -----------------------------------------------------
Scott C. Mitchell
/s/ MARTIN SAGE Director March 15, 1997
- -----------------------------------------------------
Martin Sage
/s/ ROBERT GARY WHITE Chief Financial Officer and March 11, 1997
- ----------------------------------------------------- Principal Accounting Officer
Robert Gary White
</TABLE>
II-4
<PAGE> 19
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. IDENTIFICATION OF EXHIBIT
------- -------------------------
<S> <C>
4.1 -- Form of Registration Rights Agreement.
4.2 -- The Company's Articles of Incorporation, which are
incorporated by reference to the Company's Form SB-2
Exhibit 3.1 as effective with the Commission on October
12, 1995.
4.3 -- The Company's By-laws, which are incorporated by
reference to the Company's Form SB-2 Exhibit 3.2 as
effective with the Commission on October 12, 1995.
4.4 -- Specimen of the Company's common stock certificate, which
is incorporated by reference to the Company's Form SB-2
Exhibit 4.1 as effective with the Commission on October
12, 1995.
4.5 -- Instruments defining the rights of security holders,
which are incorporated by reference to the Company's Form
SB-2 Exhibit 4.2 as effective with the Commission on
October 12, 1995.
5.1 -- Opinion of Axelrod, Smith & Kirshbaum
23.1 -- Consent of Axelrod, Smith & Kirshbaum (Included in
Exhibit 5.1)
23.2 -- Consent of Jackson & Rhodes P.C.
27.1 -- Financial Data Schedule, which is incorporated by
reference to the Company's Quarterly Report on Form
10-QSB for the fiscal quarter ended December 31, 1996
filed with the Commission on February 14, 1997.
</TABLE>
<PAGE> 1
EXHIBIT 4.1
FORM OF REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made by and between
the undersigned (the "Shareholder") and RICK'S CABARET INTERNATIONAL, INC., a
Texas corporation (the "Company").
WITNESSETH:
WHEREAS, pursuant to that certain Subscription Agreement (the "Subscription
Agreement") the Shareholder has purchased shares (the "Shares") of
common stock of the Company, par value $.01 per share (the "Common Stock") in
the Offering of Shares of Common Stock (the "Offering") made by the Company as
described in the Confidential Private Placement Memorandum dated September 3,
1996 (the "Memorandum");
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. The Registration. Commencing 90 days after the Termination Date (as
defined in the Memorandum) of the Offering and continuing for a period of two
years from the Termination Date, subject to the Shareholder and the purchasers
in the Offering holding, at the time of exercise of their rights, Shares of
Common Stock which represent in the aggregate a minimum of 5,000 shares (the
"Registration Shares") (such number as determined without adjustment for stock
dividends, reclassifications, splits and reverse splits occurring after the date
of the closing of the Offering), upon the written request of the Shareholder and
such purchasers in the Offering requesting that the Company effect the
registration under the Securities Act of 1933, as amended (the "Securities Act")
of all or a specified portion of the Registration Shares, the Company will use
its best efforts to file a registration statement (the "Registration Statement")
under the Securities Act with the Securities and Exchange Commission (the
"Commission"). The Company shall promptly give written notice of such requested
registration to all holders of record of shares of Common Stock, which were
purchased or issued in connection with the Offering. The Registration Statement
will include the Registration Shares, all other shares for which written notice
was given by the Company which are requested to be included by the holders
thereof by written notice to the Company within thirty (30) days of the giving
of written notice by the Company and may include shares of Common Stock other
than the foregoing, either for the Company's account or for the account of other
selling shareholders. The Company will use reasonable efforts to cause the
Registration Statement to become effective and to keep the Registration
Statement current for a period of two years after the Termination Date of the
Offering. The Company shall not be obligated to effect more than one
registration on behalf of Shareholder and purchasers in the Offering under this
section. Notwithstanding the foregoing, if the Company is engaged in
negotiations in respect of an acquisition or financing transaction and, in the
good faith judgment of the Board of Directors such transaction would be
adversely affected by the filing of the Registration Statement, the Company
shall be entitled to postpone the filing of such registration statement until
such transaction would not be adversely affected by such filing but, in any
event, for a period not to exceed six months.
2. Registration Procedures.
(a) In performing its obligations under Section 1 to register the Shares,
the Company will, subject to the limitations provided herein, as
expeditiously as possible:
(i) prepare and file with the Commission the Registration Statement
and use its commercially reasonable best efforts to cause such
registration to become and remain effective for the term
specified herein;
RRA-1
<PAGE> 2
(ii) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the Prospectus used
in connection therewith as may be necessary to keep the
Registration Statement effective in accordance with the terms of
the Agreement and to comply with the provisions of the Securities
Act with respect to the disposition of all shares covered by the
Registration Statement;
(iii) furnish to the Shareholder one conformed copy of the Registration
Statement and of each such amendment and supplement thereto (in
each case including all exhibits), one copy of the Prospectus
(including each preliminary prospectus and any summary
prospectus) and any other Prospectus filed under Rule 424 under
the Securities Act, and such other documents, as the Shareholder
may reasonably request;
(iv) use its reasonable efforts to (a) register or qualify the Shares
under such other securities or blue sky laws of such jurisdictions
as the Shareholder shall reasonably request, (b) keep such
registration or qualification in effect for so long as each of the
Registration Statement remain in effect, and (c) take any other
action which may be reasonably necessary or advisable to enable
the Shareholder to consummate the disposition of the Shares in
such jurisdictions, except that the Company shall not for any such
purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it would not but
for the requirements of this subdivision (iv) be obligated to be
so qualified, to consent to general service of process in any such
jurisdiction, or to take any such action which would impose
unreasonable expense on the Company;
(v) furnish to the Shareholder a copy of an opinion of counsel for the
Company rendered to the underwriter, if one is engaged, dated the
effective date of each of the Registration Statement (and, if such
registration includes an underwritten public offering, dated the
date of the closing under the underwriting agreement), covering
substantially the same matters with respect to each registration
statement and prospectus as are customarily covered in opinions of
issuer's counsel delivered to the underwriters in underwritten
public offerings of securities;
(vi) notify the Shareholder at any time when a Prospectus relating to
the Shares is required to be delivered under the Securities Act,
upon discovery that, or upon the happening of any event as a
result of which, the Prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were
made, and prepare and furnish to the Shareholder one copy of a
supplement to or an amendment of such Prospectus as may be
necessary so that, as thereafter delivered to the purchasers of
such securities, such Prospectus shall not include an untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under
which they were made;
(vii) otherwise use reasonable efforts to comply with all applicable
rules and regulations of the Commission;
(viii) provide and cause to be maintained a transfer agent for the
Common Stock from and after a date not later than the effective
date of the Registration Statement;
(ix) properly notify any securities exchange on which any of the
Company's Common Stock is listed of the registration of any of the
Shares, and use its best efforts to satisfy all prerequisites and
regulations of any such exchange relating to the trading of such
Shares on such exchange;
(x) if requested by the Shareholder, promptly incorporate in a
prospectus supplement or post-effective amendment such information
as the Shareholder reasonably requests to be included therein with
respect to the number of Shares being sold by the Shareholder and
the
RRA-2
<PAGE> 3
Shareholder's plan of distribution and promptly make all required
filings of such prospectus supplement or post-effective amendment;
(xi) as promptly as practicable after filing with the Commission of any
document which is incorporated by reference in a prospectus
contained in a registration statement, deliver a copy of such
document to the Shareholder;
(xii) cooperate with the Shareholder to facilitate the timely
preparation and delivery of certificates (not bearing any
restrictive legends) representing Shares to be sold under the
Registration Statement, in such denominations and registered in
such names as the Shareholder may reasonably request; and
(xiii) make available for inspection by the Shareholder, and any one
attorney, accountant or other agent retained by one or more
holders of Shares (the "Inspector"), all financial and other
records, pertinent corporate documents and properties of the
Company (collectively, the "Records"), as shall be reasonably
necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any
such Inspector in connection with such registration statement;
provided that records which the Company determines, in good
faith, to be confidential and which it notifies the Inspector
are confidential shall not be disclosed by the Inspector unless
(i) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in the Registration Statement
or (ii) the release of such Records is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction;
provided, further, the Shareholder agrees that it will, upon
learning that disclosure of such Records is sought in a court of
competent jurisdiction, give notice to the Company and allow the
Company, at its expense, to undertake appropriate action and to
prevent disclosure of the Records deemed confidential.
(b) All expenses incident to the Company's performance of its obligations
under this Agreement, including without limitation, all registration
and filing fees, fees and expenses of compliance with securities and
Blue Sky laws, printing expenses, fees and disbursements of the
Company's counsel, independent certified public accountants, and other
persons retained by the Company (all such expenses being herein called
"Registration Expenses") will be borne by the Company. The Shareholder
shall be responsible for all discounts and commissions relating to the
Shares and for the fees and expenses of counsel and other persons
engaged by the Shareholder.
3. Obligations of Shareholder.
(a) The Shareholder agrees that it will offer and sell Shares in
compliance with all applicable state and federal securities laws.
Specifically, without limitation, the Shareholder agrees as follows:
(i) The Shareholder agrees not to use any prospectus (as that term is
defined under the Securities Act) for the purpose of offering or
selling the Shares to the public except for the Prospectus, as
the same may be supplemented and amended from time to time.
(ii) Neither the Shareholder nor any affiliate of the Shareholder
shall engage in any practice which would violate Rule 10b-6
promulgated under the Securities Exchange Act of 1934 ("Exchange
Act").
(iii) Neither the Shareholder nor any affiliate of the Shareholder
shall solicit purchases of Common Stock to facilitate the
distribution of Shares in violation of Rule 10b-2 promulgated
under the Exchange Act.
(iv) Neither the Shareholder nor any affiliate of the Shareholder shall
effect any stabilizing transactions to facilitate the offer and
sale of Shares to the public in violation of Rule 10b-7
promulgated under the Exchange Act.
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<PAGE> 4
(b) The Shareholder agrees to promptly notify the Company as and when any
Shares are sold and when the Shareholder elects to terminate all
further offers and sales of Shares pursuant to the Registration
Statement. The Shareholder acknowledges that any Shares which have not
been sold within two years after the Termination Date of the Offering
or any earlier termination of the distribution of the Shares will be
removed from registration by means of a post-effective amendment to
the Registration Statement.
(c) It shall be a condition precedent to the obligations of the Company to
take any action with respect to registering the Shares that the
Shareholder furnish the Company in writing such information regarding
the Shareholder, the Shares and other securities of the Company held
by the Shareholder, and the distribution of such Shares as the Company
may from time to time reasonably request in writing. If the
Shareholder refuses to provide the Company with any of such
information on the grounds that it is not necessary to include such
information in the Registration Statement, the Company may exclude the
Shareholder's Shares from the Registration Statement if the Company
provides the Shareholder with an opinion of counsel to the effect that
such information must be included in the Registration Statement and
the Shareholder thereafter continues to withhold such information.
The Shareholder agrees that upon receipt of any notice from the
Company of the happening of any event of the kind described in Section
2(a)(vi), the Shareholder will forthwith discontinue the Shareholder's
disposition of Shares pursuant to the Registration Statement until the
Shareholder's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 2(a)(vi) and, if so directed by the
Company, will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in such Shareholder's
possession, of the Prospectus current at the time of receipt of such
notice.
4. Public Offering by the Company. Notwithstanding the registration rights
granted to the Shareholder under this Agreement, in the event the Company files
a registration statement for an underwritten public offering of Common Stock (a
"Company Offering") within two years of the Termination Date of the Offering and
while the Registration Statement covering the Registration Shares is effective,
then upon the request of the Company's underwriter in such Company Offering, the
Shareholder agrees to enter into an agreement pursuant to which the Shareholder
will be prohibited from transferring the Shares for such period of time, not to
exceed 90 days after completion of the Company Offering, as the Company's
underwriter may request. The Company may enter stop transfer orders with its
transfer agent in order to effect this prohibition. In the event the Company
makes a Company Offering and the Company's underwriter imposes transfer
restrictions on the sale of Shares, the period during which the Registration
Statement will be kept current shall not be extended beyond the maximum two-year
period from the Termination Date of the Offering as provided in Section 1.
5. Restrictions on Transfer. The Shareholder agrees that it will not sell,
exchange, pledge or otherwise transfer any Shares except in transactions (i)
made pursuant to the Registration Statement, or (ii) which are exempt from all
registration requirements of the Securities Act (or conducted pursuant to Rule
144 thereunder) and all applicable state securities laws, and for which the
Company is provided with an opinion of counsel to the Shareholder and other
evidence as may be reasonably satisfactory to the Company to the effect that
such transfer will not be in violation of the Securities Act and all applicable
state securities laws.
6. Indemnification.
(a) Indemnification by the Company. To the extent permitted by law, the
Company will, and hereby does, indemnify and hold harmless the
Shareholder, its directors and officers, each other natural person,
corporation, business trust, association, company, partnership, joint
venture and other entity (each, a "Person") who participates as an
underwriter in the offering or sale of such securities and each other
Person, if any, who controls the Shareholder or any such underwriter
within the meaning of the Securities Act, against any losses, claims,
damages or liabilities, joint or several, to which the Shareholder or
any such director or officer or underwriter or controlling Person may
become subject under the Securities Act or otherwise, insofar as such
losses, claims,
RRA-4
<PAGE> 5
damages or liabilities (or actions or proceedings, whether commenced
or threatened, in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities
were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the
Company will reimburse the Shareholder and each such director,
officer, underwriter and controlling person for any legal or any other
expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, liability, action or proceeding;
provided that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement in reliance upon written information furnished
to the Company by the Shareholder expressly for use in the preparation
thereof. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the
Shareholder or any such director, officer, underwriter or controlling
person and shall survive the transfer of Shares by the Shareholder.
(b) Indemnification by the Shareholder. To the extent permitted by law,
the Shareholder will, and hereby does, indemnify and hold harmless (in
the same manner and to the same extent as set forth in subdivision (a)
of this Section 6) each underwriter, each Person who controls such
underwriter within the meaning of the Securities Act, the Company,
each director of the Company, each officer of the Company and each
other Person, if any, who controls the Company within the meaning of
the Securities Act, with respect to any statement or alleged statement
in or omission or alleged omission from such registration statement,
any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, if such
statement or alleged statement or omission or alleged omission was
made in reliance upon written information furnished to the Company by
the Shareholder expressly for use in the preparation of such
registration statement, preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement, and with respect to any
violation by the Shareholder of the Securities Act or the Exchange
Act.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified party
of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 6,
such indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party, give written notice to the latter
of the commencement of such action, provided that the failure of any
indemnified party to give notice as provided herein shall not relieve
the indemnifying party of its obligations under the preceding
subdivisions of this Section 6, except to the extent that the
indemnifying party is actually prejudiced by such failure to give
notice. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying parties
actually exists in respect of such claim, the indemnifying party shall
be entitled to participate in and to assume the defense thereof,
jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to
such indemnified party of its election to assume the defense thereof,
the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or litigation.
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<PAGE> 6
(d) Other Indemnification. Indemnification similar to that specified in
the preceding subdivisions of this Section 6 (with appropriate
modifications) shall be given by the Company and the Shareholder with
respect to any required registration or other qualification of
securities under any Federal or state law or regulation of any
governmental authority other than the Securities Act.
(e) Indemnification Payments. The indemnification required by this Section
6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
7. Reporting Requirements Under the Exchange Act. At all times when it is
legally required to do so, the Company shall keep effective its registration
under Section 12 of the Exchange Act, shall timely file such information,
documents and reports as the Commission may require or prescribe under Section
13 of the Exchange Act, and from and after the effective date of the first
registration statement filed by the Company under the Securities Act, the
Company shall timely file such information, documents and reports which a
corporation, partnership or other entity subject to Section 13 or 15(d)
(whichever is applicable) of the Exchange Act is required to file.
8. Notices. All notices required or permitted herein must be in writing and
shall be deemed to have been duly given the first business day following the
date of service if served personally, on the first business day following the
date of actual receipt if delivered by telecopier, telex or other similar
communication to the party or parties to whom notice is to be given, or on the
third business day after mailing if mailed to the party or parties to whom
notice is to be given by registered or certified mail, return receipt requested,
postage prepaid, to the Shareholder at the address set forth in the Subscription
Agreement, and to the Company at the address set forth below, or to such other
addresses as either party hereto may designate to the other by notice from time
to time for this purpose.
Rick's Cabaret International, Inc.
3113 Bering Drive
Houston, Texas 77057
Attn: Robert L. Watters
Telecopier No: (713) 785-2593
With a copy to:
Axelrod, Smith & Kirshbaum
5300 Memorial Drive, Suite 700
Houston, TX 77007
Attn: Robert Axelrod
Telecopier No.: (713) 552-0202
9. Entire Agreement. This Agreement contains and constitutes the entire
agreement between and among the parties with respect to the matters set forth
herein and supersedes all prior agreements and understandings between the
parties hereto relating to the subject matter hereof. There are no agreements,
understandings, restrictions, warranties or representations among the parties
relating to the subject matter hereof other than those set forth or referred to
herein. This instrument is not intended to have any legal effect whatsoever, or
to be a legally binding agreement or any evidence thereof, until it has been
signed by all parties hereto.
10. Binding Effect. This Agreement shall be binding on and enforceable by
the Shareholder and by the Company and its successors. No transferee of Shares
shall acquire any rights under this Agreement except with the written consent of
the Company, which may be withheld for any reason. In the event the Company is a
party to a merger or consolidation in a transaction in which the Shares are
converted into equity securities of another entity, then the Company shall cause
such other entity to assume the Company's obligations under this Agreement such
that this Agreement shall apply to the equity securities received by the
Shareholder in exchange for the Shares, unless such equity securities are, upon
receipt and without further action by the Shareholder, readily salable without
registration under the Securities Act.
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<PAGE> 7
11. Construction. This Agreement shall be construed, enforced and governed
in accordance with the laws of the State of Texas. All pronouns and any
variations thereof shall be deemed to refer to the masculine, feminine or neuter
gender thereof or to the plurals of each, as the identity of the person or
persons or the context may require. The descriptive headings contained in this
Agreement are for reference purposes only and are not intended to describe,
interpret, define or limit the scope, extent or intent of this Agreement or any
provision contained herein.
12. Invalidity. If any provision contained in this Agreement shall for any
reason be held to be invalid, illegal, void or unenforceable in any respect,
such provisions shall be deemed modified so as to constitute a provision
conforming as nearly as possible to such invalid, illegal, void or unenforceable
provisions while still remaining valid and enforceable, and the remaining terms
or provisions contained herein shall not be affected thereby.
13. Counterparts. This Agreement may be executed in any number of
Counterparts and by the parties hereto in separate Counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same Agreement.
14. Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless agreed to in writing by both the
Company and the Shareholder.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
dates shown below.
SHAREHOLDER: /s/
------------------------------------
------------------------------------
Date
COMPANY: RICK'S CABARET INTERNATIONAL, INC.
By: /s/ ROBERT L. WATTERS
-----------------------------------
Robert L. Watters, President
------------------------------------
Date
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<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD]
April 2, 1997
Robert L. Watters, President
Rick's Cabaret International, Inc.
3113 Bering Drive
Houston, Texas 77057
Dear Mr. Watters:
As counsel for Rick's Cabaret International, Inc., a Texas corporation
("Company"), you have requested our firm to render this opinion in connection
with the Registration Statement of the Company on Form S-3 ("Registration
Statement") under the Securities Act of 1933, as amended (the "Act"), filed with
the Securities and Exchange Commission relating to the resale of 380,000 shares
of common stock, par value $.01 per share (the "Common Stock") by certain
security holders of the Company. All of the 380,000 shares of Common Stock are
currently outstanding shares of the Company's Common Stock owned by a certain
security holders of the Company.
We are familiar with the Registration Statement and the registration
contemplated thereby. In giving this opinion, we have reviewed the Registration
Statement and such other documents and certificates of public officials and of
officers of the Company with respect to the accuracy of the factual matters
contained therein as we have felt necessary or appropriate in order to render
the opinions expressed herein. In making our examination, we have assumed the
genuineness of all signatures, the authenticity of all documents presented to us
as originals, the conformity to original documents of all documents presented to
us as copies thereof, and the authenticity of the original documents from which
any such copies were made, which assumptions we have not independently verified.
Based upon the foregoing, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Texas; and
2. The shares of Common Stock to be resold are validly authorized,
validly issued, fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference in the Registration Statement to Axelrod, Smith,
& Kirshbaum under the heading "Exhibits -- Opinion."
Very truly yours,
/s/ AXELROD, SMITH & KIRSHBAUM
<PAGE> 1
EXHIBIT 23.2
The Board of Directors
Rick's Cabaret International, Inc.
We consent to the use of our reports included herein and to the references
to our firm under the heading "Experts" in the Registration Statement on Form
S-3.
/s/ JACKSON & RHODES P.C.
------------------------------------
Jackson & Rhodes P.C.
Dallas, Texas
April 2, 1997
