INDEMNIFICATION AND TRANSACTION FEE AGREEMENT
-------------------------------------------------
This Indemnification and Transaction Fee Agreement ("Agreement") is made
this __ day of June, 2003, by and among Taurus Entertainment Companies, Inc., a
Colorado corporation ("Taurus"), and Rick's Cabaret International, Inc., a Texas
corporation ("Rick's").
R E C I T A L S:
WHEREAS, Taurus and Bluestar Physical Therapy, Inc., a Texas corporation
("Bluestar") have entered into that certain Stock Exchange Agreement dated June
__, 2003 (the "Stock Exchange Agreement"), whereby Bluestar became a
wholly-owned subsidiary of Taurus; and
WHEREAS, Taurus and Rick's have entered into that certain Asset Purchase
Agreement simultaneously herewith (the "Asset Purchase Agreement"), whereby
Rick's will purchase certain assets of Taurus and 100% of the capital stock (or
similar classification of securities) of certain of Taurus's subsidiaries; and
WHEREAS, Taurus requires as part of the Asset Purchase Agreement with
Rick's for Rick's to indemnify Taurus for liabilities assumed by Rick's pursuant
to the Asset Purchase Agreement which expressly relate to the Purchased Assets
that exist and the liabilities related to the Purchased Assets that exist or may
arise in the future (the "Indemnification"); and
WHEREAS, Rick's requires compensation from Taurus for providing the
Indemnification; and Rick's requires compensation from Taurus to compensate
Rick's for the time and effort expended to assist in the consummation of the
aforesaid transaction (the "Indemnification and Transaction Fee"); and
WHEREAS, Rick's, Taurus and Bluestar will have an opportunity to benefit
from the Asset Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements set forth herein and in reliance upon the representations and
warranties contained herein, the parties hereto covenant and agree as follows:
ARTICLE I
INDEMNIFICATION FEE
Taurus shall pay an Indemnification and Transaction Fee of $270,000.00 to
Rick's payable in three installments at no interest, as follows: (i) $140,000 in
cash due at Closing, (ii) $60,000 in cash due no later than July 15, 2003, and
(iii) $70,000 in cash due no later than August 15, 2003. Installments (ii) and
(iii) shall be evidenced by a promissory note in a form acceptable to Rick's and
shall be guaranteed by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, individually, in a form acceptable to
Rick's.
1
ARTICLE II
INDEMNIFICATION
2.1 Indemnification from Rick's. Rick's agrees to and shall indemnify,
---------------------------
defend (with legal counsel reasonably acceptable to Taurus) and hold Taurus, its
officers, directors, shareholders, employees, agents, affiliates and assigns
harmless at all times after the date of Closing from and against, and in
respect of any liability, claim, deficiency, loss, damage, or injury, and all
reasonable costs and expenses (including reasonably attorneys' fees and costs of
any suit related thereto) suffered or incurred by Taurus, from (a) any
misrepresentation by, or breach of any covenant or warranty of, Rick's contained
in this Agreement or any exhibit or schedule, certificate, or other agreement or
instrument furnished or to be furnished by Rick's hereunder, or any claim by a
third party (regardless of whether the claimant is ultimately successful), that
if true, would be such a misrepresentation or breach; (b) any nonfulfillment of
any agreement on the part of Rick's under this Agreement, or from any
misrepresentation in or omission from, any certificate or other agreement or
instrument furnished or to be furnished to Taurus hereunder; and, (c) the
Assumed Liabilities (as defined in the Asset Purchase Agreement) which are the
liabilities assumed by Rick's pursuant to the Asset Purchase Agreement which
expressly relate only to the Purchased Assets and the liabilities related to the
Purchased Assets that exist or may arise in the future.
2.2 Defense of Claims. If any lawsuit or enforcement action is filed
-------------------
against any party entitled to the benefit of indemnity hereunder, written notice
thereof shall be given to Rick's as promptly as practicable (and in any event
not less than fifteen (15) days prior to any hearing date or other date by which
action must be taken); provided that the failure of any indemnified party to
give timely notice shall not affect rights to indemnification hereunder except
to the extent that the indemnifying party demonstrates actual damage caused by
such failure. After such notice, if the indemnifying party shall acknowledge in
writing to such indemnified party that this Agreement applies with respect to
such lawsuit or action, then the indemnifying party shall be entitled, if it so
elects, to take control of the defense and investigation of such lawsuit or
action and to employ and engage attorneys of its own choice to handle and defend
the same, at the indemnifying party's cost, risk and expense; and such
indemnified party shall cooperate in all reasonable respects, at its cost, risk
and expense, with the indemnifying party and such attorneys in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom; provided, however, that the indemnified party may, at its own
cost, participate in such investigation, trial and defense of such lawsuit or
action and any appeal arising therefrom. The indemnifying party shall not,
without the prior written consent of the indemnified party, effect any
settlement of any proceeding in respect of which any indemnified party is a
party and indemnity has been sought hereunder unless such settlement of a claim,
investigation, suit, or other proceeding only involves a remedy for the payment
of money by the indemnifying party and includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such proceeding.
2.3 Default of Indemnification Obligation. If Rick's shall fail to
----------------------------------------
assume its obligation as set forth above in Section 2.2, then the party or
entities or both, as the case may be, to whom such indemnification, defense and
hold harmless obligation is due shall have the right, but not the
2
obligation, to assume and maintain such defense (including reasonable counsel
fees and costs of any suit related thereto) and to make any settlement or pay
any judgment or verdict as the individual or entities deem necessary or
appropriate in such individual's or entities' absolute sole discretion and to
charge the cost of any such settlement, payment, expense and costs, including
reasonable attorneys' fees, to Rick's, who had the obligation to provide such
indemnification, defense and hold harmless obligation and same shall constitute
an additional obligation of Rick's.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF TAURUS
Taurus represents and warrants to Rick's as follows:
3.1 Organization and Capitalization of Taurus. Taurus is a corporation
-----------------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Colorado, with full power and authority and all necessary governmental
and regulatory licenses, permits and authorizations to carry on the businesses
in which it is engaged, to own the properties that it owns currently and to
perform its obligations under this Agreement.
3.2 Authorization of Agreement. Taurus has all requisite corporate
----------------------------
power and authority to execute and deliver this Agreement and to perform its
obligations here-under. The execution and delivery by Taurus of this Agreement
and the performance by Taurus of its obligations hereunder (a) have been duly
and validly authorized by all requisite corporate action and (b) will not
violate its charter or bylaws or any order, writ, injunction, decree, statute,
rule or regulations applicable to it or any of its properties or assets, or be
in conflict with, result in a breach of or constitute a default under any note,
bond, indenture, mortgage, lease, license, franchise agreement or other
agreement, instrument or obligation, or result in the creation or imposition of
any lien, charge or encumbrance of any kind or nature whatsoever upon any of the
properties or assets of Taurus. This Agreement and each and every agreement,
document, exhibit and instrument to be executed, delivered and performed by
Taurus in connection herewith constitute the valid and legally binding
obligations of Taurus enforceable against it, except as enforceability may be
limited by applicable equitable principles or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws from time to time in effect
affecting the enforcement of creditors' rights generally.
3.3 Disclosure. No representation or warranty of Taurus contained in
----------
this Agreement (including the exhibits hereto) contains any untrue statement or
omits to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF RICK'S
3
Rick's hereby represents and warrants to Taurus and Bluestar as follows:
4.1 Organization and Capitalization of Rick's. Rick's is a corporation
-----------------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Texas, with full power and authority and all necessary governmental and
regulatory licenses, permits and authorizations to carry on the businesses in
which it is engaged, to own the properties that it owns currently and to perform
its obligations under this Agreement.
4.2 Authorization of Agreement. Rick's has all requisite corporate
----------------------------
power and authority to execute and deliver this Agreement and to perform its
obligations here-under. The execution and delivery by Rick's of this Agreement
and the performance by Rick's of its obligations hereunder (a) have been duly
and validly authorized by all requisite corporate action and (b) will not
violate its charter or bylaws or any order, writ, injunction, decree, statute,
rule or regulations applicable to it or any of its properties or assets, or be
in conflict with, result in a breach of or constitute a default under any note,
bond, indenture, mortgage, lease, license, franchise agreement or other
agreement, instrument or obligation, or result in the creation or imposition of
any lien, charge or encumbrance of any kind or nature whatsoever upon any of the
properties or assets of Rick's. This Agreement and each and every agreement,
document, exhibit and instrument to be executed, delivered and performed by
Rick's in connection herewith constitute the valid and legally binding
obligations of Rick's enforceable against it, except as enforceability may be
limited by applicable equitable principles or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws from time to time in effect
affecting the enforcement of creditors' rights generally.
4.3 Disclosure. No representation or warranty of Rick's contained in
----------
this Agreement (including the exhibits hereto) contains any untrue statement or
omits to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading.
ARTICLE V
CONDITIONS TO CLOSING
5.1 Conditions to the Obligations of Taurus. The obligations of Taurus
-----------------------------------------
to consummate the transactions contemplated hereby shall be subject to the
satisfaction, on or before the Closing Date, of each and every one of the
following conditions, unless waived, in whole or in part, by Taurus for purposes
of consummating such transaction.
(a) Taurus shall have received a corporate resolution of Rick's that
authorizes the execution, delivery and performance of this
Agreement.
(b) No action, suit or proceeding by or before any court or any
governmental or regulatory authority shall have been commenced
and no investigation by any governmental or regulatory authority
shall have been commenced seeking to
4
restrain, prevent or challenge the transactions contemplated
hereby or seeking judgments against Rick's.
5.2 Conditions to the Obligations of Rick's. The obligations of Rick's
---------------------------------------
to effect the transactions contemplated hereby shall be subject to the
satisfaction, on or before the Closing Date, of each and every one of the
following conditions, unless waived, in whole or in part, by Rick's for purposes
of consummating such transaction.
(a) Rick's shall have received a corporate resolutions of the Board
of Directors of Taurus that authorize the execution, delivery and
performance of this Agreement and the documents referred to
herein to which it is or is to be a party;
(b) No action, suit or proceeding by or before any court or any
governmental or regulatory authority shall have been commenced
and no investigation by any governmental or regulatory authority
shall have been commenced seeking to restrain, prevent or
challenge the transactions contemplated hereby or seeking
judgments against Taurus or Bluestar.
ARTICLE VI
THE CLOSING
6.1 Time and Place of Closing. The Closing of the transactions
-----------------------------
provided for in this Agreement ("Closing") shall be held at the offices of
▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, commencing at 1:00 p.m. Central Daylight Time on June __, 2003. The day
on which the Closing occurs is referred to herein as the "Closing Date."
ARTICLE VII
MISCELLANEOUS
7.1 Notices. All communications required or permitted under this
-------
Agreement shall be in writing and any communication or delivery hereunder shall
be deemed to have been duly made if actually delivered or sent by electronic fax
or overnight commercial courier or registered or certified mail, postage
prepaid, addressed to the party being notified as set forth below. All such
notices and communications shall be deemed to have been received (i) on the date
of delivery; (ii) conformed facsimile transmission; (iii) one day after delivery
to an overnight commercial courier; or (iv) on the third business day after the
mailing thereof. Any party may, by written notice so delivered to the other,
change the address to which delivery shall thereafter be made. Notices to the
parties hereto shall be made at the addresses set forth below:
5
(a) If to Taurus to:
Taurus Entertainment Companies, Inc.
c/o ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
(b) If to Rick's, to:
Rick's Cabaret International, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
7.2 Assignment. No party shall assign this Agreement without the
----------
written consent of the other party. This Agreement will be binding upon, inure
to the benefit of and be enforceable by the parties and their respective heirs,
personal representatives, successors and assigns.
7.3 Counterparts and Facsimiles. This Agreement may be executed in
-----------------------------
multiple counterparts and in any number of counterparts, each of which shall be
deemed an original but all of which taken together shall constitute and be
deemed to be one and the same instrument and each of which shall be considered
and deemed an original for all purposes. This Agreement shall be effective with
the facsimile signature of any of the parties set forth below and the facsimile
signature shall be deemed as an original signature for all purposes and the
Agreement shall be deemed as an original for all purposes.
7.4 Section Headings. The section headings contained in this Agreement
----------------
are for convenient reference only and shall not in any way affect the meaning or
interpretation of this Agreement.
7.5 Entire Agreement; Amendment. This Agreement, the documents to be
-----------------------------
executed hereunder and the exhibits attached hereto constitute the entire
agreement among the parties hereto pertaining to the subject matter hereof and
supersede all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties pertaining to the subject matter hereof,
and there are no warranties, representations or other agreements among the
parties in connection with the subject matter hereof except as specifically set
forth herein or in documents delivered pursuant hereto. No supplement,
amendment, alteration, modification, waiver or termination of this Agreement
shall be binding unless executed in writing by the parties hereto. All of the
exhibits referred to in this Agreement are hereby incorporated into this
Agreement by reference and constitute a part of this Agreement.
7.6 Survival. All warranties and representations herein shall survive
--------
the Closing and shall be true and correct as of the date hereof . The
respective representations, warranties, covenants
6
and agreements set forth in this Agreement shall survive the Closing for the
maximum period allowed by law.
7.7 Public Announcements. The parties hereto agree that prior to
---------------------
making any public announcement or statement with respect to the transactions
contemplated by this Agreement, the party desiring to make such public
announcement or statement shall consult with the other parties hereto and the
parties shall exercise their best efforts to (i) agree upon the text of a joint
public announcement or statement to be made by all of such parties or (ii)
obtain approval of the other parties hereto to the text of a public announcement
or statement to be made solely by the party desiring to make such public
announcement; provided, however, that if any party hereto is required by law or
by rule of a self-regulatory organization such as Nasdaq to make such public
announcement or statement, then such announcement or statement may be made
without the approval of the other parties.
7.8 Validity. The invalidity or unenforceability of any provision of
--------
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
7.9 Waiver. No waiver by any party of any default or non-performance
------
shall be deemed a waiver of any subsequent default or non-performance, and no
waiver of any kind shall be effective unless set forth in writing and signed by
the party against whom such waiver is to be charged.
7.10 Further Assurances. Each party covenants that at any time, and
-------------------
from time to time, after the Closing Date, it will execute such additional
instruments and take such actions as may be reasonably requested by the other
parties to confirm or perfect or otherwise to carry out the intent and purposes
of this Agreement.
7.11 Exhibits Not Attached. Any exhibits not attached hereto on the
-----------------------
date of execution of this Agreement shall be deemed to be and shall become a
part of this Agreement as if executed on the date hereof upon each of the
parties initialing and dating each such exhibit, upon their respective
acceptance of its terms, conditions and/or form.
7.12 Expenses. All expenses incurred by the parties hereto in
--------
connection with or related to the authorization, preparation and execution of
this Agreement and the Closing of the transactions contemplated hereby, shall be
borne solely and entirely by the party that has incurred the same.
7.13 Gender. All personal pronouns used in this Agreement shall
------
include the other genders, whether used in the masculine, feminine or neuter
gender, and the singular shall include the plural, and vice versa, whenever
appropriate.
7.14 Choice of Law. This Agreement shall be governed by, and construed
-------------
in accordance with, the laws of the State of Texas, without regard to principles
of conflict of laws.
7
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed effective as of the day and year first above written.
TAURUS:
Taurus Entertainment Companies, Inc.
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President
RICK'S:
Rick's Cabaret International, Inc.
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, President
8