EXHIBIT 10.1
PURCHASE AGREEMENT
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This Purchase Agreement (the "Agreement") is made and entered into this
13th day of June, 2005, by and among ▇▇▇▇ ▇▇▇▇ ("Seller" or "▇▇▇▇"), Top Shelf
Entertainment, L.L.C., a North Carolina limited liability company (the
"Company"), Rick's Cabaret International, Inc., a Texas corporation ("Rick's)
and RCI Entertainment (North Carolina), Inc., a North Carolina corporation ("RCI
North Carolina" or the "Buyer").
WHEREAS, Seller owns 100% of the units of membership interest of the
Company (the "Units"); and
WHEREAS, the Company owns an adult entertainment cabaret known as "The
Manhattan Club" (the "Club"), located at ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Premises").
WHEREAS, Seller and Buyer entered into a Management Agreement dated
February 13, 2005, pursuant to which Buyer has been managing the Club since
February 1, 2005, and under which the Buyer is currently operating the Club (the
"Management Agreement").
WHEREAS, Seller and Buyer entered into an Option to Purchase Agreement
dated February 1, 2005, (the "Option Agreement") under which Seller granted
Buyer an option to purchase all of the outstanding Units of the Company for a
purchase price of $1,000,000.
WHEREAS, Seller desires to sell the Units of the Company to Buyer on the
terms and conditions set forth herein; and
WHEREAS, Buyer desires to purchase the Units of the Company from Seller on
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises, the mutual covenants and
agreements and the respective representations and warranties herein contained,
and on the terms and subject to the conditions herein set forth, the parties
hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE UNITS
Section 1.1 Sale of the Units. Subject to the terms and conditions set
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forth in this Agreement, at the Closing (as hereinafter defined) Seller hereby
agrees to sell, transfer, convey and deliver to Buyer all of the Units, free and
clear of all encumbrances, which represents all of the issued and outstanding
units of membership interest of the Company, and shall deliver to Buyer
certificates representing the Units, duly endorsed to Buyer or accompanied by
duly executed stock powers in form and substance satisfactory to Buyer.
Section 1.2 Purchase Price. As consideration for the purchase of the
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Units, Buyer shall pay to Seller the total consideration of $1,000,000 (the
"Purchase Price"), which shall be payable as follows:
(a) 180,000 shares of common stock of Rick's (the "Shares") to be
valued at $3.75 per share; and
(b) the balance of the Purchase Price shall be evidenced by a seven
(7) year $325,000 promissory note bearing simple interest at a
rate of seven percent (7%) per annum (the "Promissory Note")
payable (i) with an initial payment due November 1, 2005 of
interest only for the period of time from the date of Closing
until October 31, 2005, plus a principal reduction payment in the
amount of $3,009.29, and thereafter (ii) eighty-three (83)
successive equal monthly payments commencing December 1, 2005, of
principal and interest in the amount of $4,905.12 until paid in
full. The Promissory Note shall be secured by the assets of the
Buyer.
Section 1.3 Right of ▇▇▇▇ to "Put" Shares. On or after November 1,
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2005, ▇▇▇▇ shall have the right but not the obligation to have Rick's purchase
from ▇▇▇▇ 4,285 Shares per month (the "Monthly Shares"), calculated at a price
per share equal to $3.75 ("Value of the Shares") until ▇▇▇▇ has received a total
of $1,000,000 from the sale of the Shares less the amount of the Promissory Note
as provided for in Section 1.2(b) above. At Rick's election, during any given
month, it may either buy the Monthly Shares or if Rick's elects not to buy the
Monthly Shares from ▇▇▇▇, then ▇▇▇▇ shall sell the Monthly Shares in the open
market and any deficiency between the amount which ▇▇▇▇ receives from the sale
of the Monthly Shares and the Value of the Shares shall be paid by Rick's within
three (3) days of the date of sale of the Monthly Shares during that particular
month. ▇▇▇▇ shall notify Rick's during any given month of its election to "Put"
the Monthly Shares to Rick's during that particular month and Rick's shall have
three (3) business days to elect to buy the Monthly Shares or instruct ▇▇▇▇ to
sell the Monthly Shares in the open market. Rick's obligation under this
Section 1.3 to purchase the Monthly Shares from ▇▇▇▇ shall terminate and cease
at such time as ▇▇▇▇ has received a total of $1,000,000 from the sale of the
Shares, less the amount of the Promissory Note as provided for in Section 1.2(b)
above. ▇▇▇▇ agrees to provide monthly statements to Rick's as to the total
number of Shares which he has sold and the amount of proceeds derived therefrom.
Nothing contained in this Section 1.3 shall limit or preclude ▇▇▇▇ from selling
the Shares in the open market or require ▇▇▇▇ to "Put" the Shares to Rick's
during any given month.
Section 1.4 Sale by Buyer. In the event that Buyer transfers or sells
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all or substantially all of the assets of the Buyer or Rick's/Buyer sells, or
transfers all or substantially all of its interest or ownership in the Buyer to
an unaffiliated third party, then in such event, ▇▇▇▇ shall have the right and
option that Rick's shall purchase from ▇▇▇▇ all remaining Shares of Rick's owned
by ▇▇▇▇ The purchase price, if ▇▇▇▇ exercises this option, shall be determined
as follows: The price will be a dollar amount calculated by deducting the
unpaid amount owed to ▇▇▇▇ on the Promissory Note by the Buyer and deducting the
amount paid or received by ▇▇▇▇ for any sold Shares of Rick's stock by ▇▇▇▇ from
$1,000,000.00. Further, in the event that ▇▇▇▇ exercises his option for Rick's
to purchase his Shares as provided for in this Section 1.4, and in the event
that Buyer/Rick's receives cash or cash equivalent from the sale of all or
substantially all of the assets or ownership interests of the Buyer as provided
for in this Section 1.4 in an amount in excess of the
amount to be paid to ▇▇▇▇ for the Shares of Rick's then such excess shall be
prepaid on the Promissory Note to reduce or eliminate any unpaid portion of the
Promissory Note. This resulting amount would be paid to ▇▇▇▇ within five (5)
days from the date of the option being exercised by ▇▇▇▇. The Buyer shall give
written notice to ▇▇▇▇ of any anticipated transaction as described in this
paragraph and any closed transaction.
Section 1.5 Registration Rights. Rick's agrees to file a Registration
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Statement under the Securities Act of 1933, as amended (the "Act") within thirty
(30) days after Closing with the Securities and Exchange Commission ("SEC") on
Form SB-2 or Form S-3 or other similar form (except on Form S-8 or Form S-4) to
register for re-sale of the Shares, as set forth in the Registration Rights
Agreement between the parties (a copy of which is attached hereto as Exhibit
"A"). Rick's will use its best efforts to cause the Registration Statement to
become effective under the Act (the "Effective Date"), as promptly as is
practical and to keep the Registration Statement continuously effective under
the Act for a period of the earlier of (i) two years from the Effective Date, or
(ii) until all of the Shares which were registered for re-sale have been sold.
ARTICLE II
CLOSING
Section 2.1 The Closing. The closing of the transactions provided for
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in this Agreement shall take place on or before June 10, 2005 (the "Closing
Date"), or at such other time and place as agreed upon among the parties hereto
(the "Closing"). The parties have agreed further to close at ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
Section 2.2 Actions at the Closing. At the Closing:
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(a) the Buyer shall deliver to the Seller and/or the Company the
various certificates, instruments and documents (and shall take
the required actions) referred to in Article VI below;
(b) the Seller shall deliver to the Buyer the various certificates,
instruments and documents (and shall take the required actions)
referred to in Article VI below;
(c) the Seller shall deliver or cause to be delivered to Buyer
originally issued certificates representing the Units of the
Company duly endorsed over to the Buyer in a form satisfactory to
the Buyer;
(d) the Buyer shall deliver the Shares representing the Purchase
Price to Seller or a letter of instruction to the transfer agent
instructing the issuance of the Shares; and
(e) the Buyer shall execute the Promissory Note and Security
Agreement as set forth in Section 1.2.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLER AND THE COMPANY
Seller and the Company, jointly and severally, hereby represent and warrant
to the Buyer and Rick's as follows:
Section 3.1. Organization, Good Standing and Qualification.
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(a) The Company (i) is an entity duly organized, validly existing and
in good standing under the laws of the state of North Carolina, (ii) has all
requisite power and authority to own, operate and lease its properties and to
carry on its business, and (iii) is duly qualified to transact business and is
in good standing in all jurisdictions where its ownership, lease or operation of
property or the conduct of its business requires such qualification, except
where the failure to do so would not have a material adverse effect to Seller or
the Company, respectively.
(b) The authorized capital of the Company consists of 1,000 units of
Membership Interest of which 1,000 units of Membership Interest are validly
issued and outstanding. There is no other class of capital authorized or issued
by the Company. All of the issued and outstanding units of membership interest
of the Company are owned by Seller and are fully paid and non-assessable. None
of the Units issued are in violation of any preemptive rights. The Company has
no obligation to repurchase, reacquire, or redeem any of its outstanding units
of membership interests. There are no outstanding securities convertible into
or evidencing the right to purchase or subscribe for any units of membership
interests of the Company, there are no outstanding or authorized options,
warrants, calls, subscriptions, rights, commitments or any other agreements of
any character obligating the Company to issue any units of membership interests
or any securities convertible into or evidencing the right to purchase or
subscribe for any units of membership interests, and there are no agreements or
understandings with respect to the voting, sale, transfer or registration of any
units of membership interest of the Company.
Section 3.2 Ownership of the Units. Seller owns, beneficially and of
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record, all of the Units of the Company free and clear of any liens, claims,
equities, charges, options, rights of first refusal, or encumbrances. Seller
has the unrestricted right and power to transfer, convey and deliver full
ownership of the Units without the consent or agreement of any other person and
without any designation, declaration or filing with any governmental authority.
Upon the transfer of the Units to Buyer as contemplated herein, Buyer will
receive good and valid title thereto, free and clear of any liens, claims,
equities, charges, options, rights of first refusal, encumbrances or other
restrictions (except those imposed by applicable securities laws).
Section 3.3 Authorization. The Company has all requisite corporate
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power and authority to execute and deliver this Agreement and to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
All action on the part of Seller necessary for the authorization, execution,
delivery and performance of this Agreement has been taken by the Seller. This
Agreement, when duly executed and delivered in accordance with its terms, will
constitute legal, valid and binding obligations of the Company and Seller
enforceable against it in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization and other
similar laws of general application affecting creditors' rights generally or by
general equitable principles.
▇▇▇▇ represents that he is a person of full age of majority, with full
power, capacity, and authority to enter into this Agreement and perform the
obligations contemplated hereby by and for himself and his spouse. All action
on the part of ▇▇▇▇ necessary for the authorization, execution, delivery and
performance of this Agreement by him has been taken and will be taken prior to
Closing. This Agreement, when duly executed and delivered in accordance with
its terms, will constitute legal, valid and binding obligations of ▇▇▇▇
enforceable against him in accordance with its terms, except as may be limited
by bankruptcy, insolvency, reorganization and other similar laws of general
application affecting creditors' rights generally or by general equitable
principles.
Section 3.4 Consents. No consent of, approval by, order or
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authorization of, or registration, declaration or filing by the Seller or the
Company with any court or any governmental or regulatory agency or authority
having jurisdiction over the Seller or any of its property or assets is required
on the part of the Seller or the Company (a) in connection with the consummation
of the transactions contemplated by this Agreement or (b) as a condition to the
legality, validity or enforceability as against the Company of this Agreement,
excluding any registration, declaration or filing the failure to effect which
would not have a material adverse effect on the financial condition of the
Company. Except for the landlord's consent, no consent or approval of any other
third party is required in connection with the execution, delivery and
performance by the Seller of this Agreement.
Section 3.5 Acquisition of Stock for Investment. The Seller
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understands that any issuance of the Shares (as referenced in Section 1.2
herein) will not have been registered under the Securities Act of 1933, as
amended (the "Act"), or any state securities acts, and are accordingly, are
restricted securities, and the Seller represents and warrants to the Purchaser
that the Seller's present intention is to receive and hold the Shares for
investment only and not with a view to the distribution or resale thereof.
Additionally, the Seller understands that any sale of any the Shares
issued, under current law, will require either (a) the registration of the
Shares under the Act and applicable state securities acts; (b) compliance with
Rule 144 of the Act; or (c) the availability of an exemption from the
registration requirements of the Act and applicable state securities acts.
To assist in implementing the above provisions, the Seller hereby consent
to the placement of the legend, or a substantially similar legend, set forth
below, on all certificates representing ownership of the Shares acquired hereby
until the Shares have been sold, transferred, or otherwise disposed of, pursuant
to the requirements hereof. The legend shall read substantially as follows:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES ACTS. THESE SECURITIES HAVE BEEN ACQUIRED FOR
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INVESTMENT, ARE RESTRICTED AS TO TRANSFERABILITY, AND MAY
NOT BE SOLD, HYPOTHECATED, OR OTHERWISE TRANSFERRED WITHOUT
COMPLIANCE WITH THE REGISTRATION AND QUALIFICATION
PROVISIONS OF
APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE
EXEMPTIONS THEREFROM."
Section 3.6 Litigation. There is no claim, suit, arbitration,
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investigation, judgment, action or other proceeding, whether judicial,
administrative or otherwise, now pending or, to the best of Seller's knowledge,
threatened before any court, arbitration, administrative or regulatory body or
any governmental agency which may result in any judgment, order, award, decree,
liability or other determination which will or could reasonably be expected to
have a material adverse effect upon the Company or the transfer by Seller to
Buyer of the Units under this Agreement.
Section 3.7 Taxes. The Company has timely and accurately filed all
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federal, state, foreign and local tax returns and reports required to be filed
prior to such dates and have timely paid all taxes shown on such returns as owed
for the periods of such returns, including all sales taxes and withholding or
other payroll related taxes shown on such returns and any taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
creditor or independent contractor. The Company has made adequate provision for
the payment of all taxes accruable for all periods ending on or before the
Closing Date to any taxing authority and are not delinquent in the payment of
any tax or governmental charge of any nature. No assessments or notices of
deficiency or other communications have been received by the Company with
respect to any tax return which has not been paid, discharged or fully reserved
against and no amendments or applications for refund have been filed or are
planned with respect to any such return. The Company does not have knowledge of
any actions by any taxing authority in connection with assessing additional
taxes against or in respect of it for any past period. There are no agreements
between the Company and any taxing authority waiving or extending any statute of
limitations with respect to any tax return.
Section 3.8 Financial Statements. Seller has delivered to Buyer the
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audited balance sheet of the Company as of December 31, and 2004 and the
unaudited balance sheet for the quarter ended December 31, 2004, together with
the related statements of income, changes in shareholder's equity and cash flow
for the year, or quarter, then ended, including the related notes for the
Company (collectively, the "Financial Statements"). Such Financial Statements,
including the related notes, are in accordance with the books and records of the
Company and fairly represent the financial position of the Company and the
results of operations and changes in financial position of the Company as of the
dates and for the periods indicated, in each case in conformity with generally
accepted accounting principles applied on a consistent basis. Except as, and to
the extent reflected or reserved against in the Financial Statements, the
Company, as of the date of the Financial Statements, has no material liability
or obligation of any nature, whether absolute, accrued, continued or otherwise,
not fully reflected or reserved against in the Financial Statements. As of the
Closing Date, Seller represents there have been no adverse changes in the
financial condition or other operations, business, properties or assets of the
Company from that reflected in the latest financial statements of the Company as
furnished pursuant to this Agreement.
Section 3.9 Labor Matters. The Company is not a party or otherwise
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subject to any collective bargaining agreement with any labor union or
association. The Company is not a party to any written or oral contract,
agreement or understanding for the employment of any officer, director or
employee of the Company. The Company is not a party to any employee benefits
plans (as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended) or any other fringe or employee benefits plan, programs or
arrangements.
Section 3.10 Compliance with Laws; Permits. The Company is, and at all
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times prior to the date hereof has been, to the best of its knowledge, in
compliance with all statutes, orders, rules, ordinances and regulations
applicable to it or to the ownership of their assets or the operation of their
businesses, except for failures to be in compliance that would not have a
material adverse effect on the business, properties or condition (financial or
otherwise) of the Company. Except as contemplated by this Agreement the Company
owns, holds, possesses or lawfully uses in the operation of its business all
permits and licenses which are in any manner necessary for it to conduct its
business as now or previously conducted.
Section 3.11 No Conflicts. Te execution and delivery by the Company
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and the Seller of this Agreement does not, and the performance and consummation
by the Company and the Seller of the transactions contemplated hereby will not
(i) conflict with the articles of organization or regulations of the Company;
(ii) conflict with or result in a breach or violation of, or default under, or
give rise to any right of acceleration or termination of, any of the terms,
conditions or provisions of any note, bond, lease, license, agreement or other
instrument or obligation to which the Company is a party or by which the
Company's or Seller's assets or properties are bound; (iii) result in the
creation of any encumbrance on any of the assets or properties of the Company;
or (iv) violate any law, rule, regulation or order applicable to the Company or
Seller or any of the Company's assets or properties.
Section 3.12 Title to Properties; Encumbrances. The Company has good
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and marketable title to all of the personal property and assets, that are used
in the business that are material to the condition (financial or otherwise),
business, operations or prospects of the Company, free and clear of all
mortgages, claims, liens, security interests, charges, leases, encumbrances and
other restrictions of any kind and nature, except (i) as disclosed in the
Financial Statements of the Company, (ii) any and all intellectual property
rights of the Seller and the Company, including but not limited to any and all
copyrights, trademarks, tradenames, trade secrets, servicemarks, slogans, logos,
corporate or partnership names (and any existing or possible combination or
derivation of any or all of the same) associated with or used in connection with
the operation or business of the Club, which may have been previously used by
the Company, (iii) statutory liens not yet delinquent, and (iv) such liens
consisting of zoning or planning restrictions, imperfections of title,
easements, pledges, charges and encumbrances, if any, as do not materially
detract from the value or materially interfere with the present use of the
property or assets subject thereto or affected thereby. The Company does not
own any real property.
Section 3.13 No Pending Transactions. Except for the transactions
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contemplated by this Agreement, neither Seller nor the Company is a party to or
bound by or the subject of any agreement, undertaking, commitment or discussions
or negotiations with any person that could result in (i) the sale, merger,
consolidation or recapitalization of the Company, (ii) the sale of any of the
assets of the Company except in the ordinary course of business, or (iii) the
sale of any outstanding capital stock of the Company.
Section 3.14 Contracts and Leases. Except as disclosed to the Buyer,
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the Company (i) has no leases of personal property relating to the assets of the
Company, whether as lessor or lessee; (ii) has no contractual or other
obligations relating to the assets of the Company, whether written or oral; and
(iii) has not given any power of attorney to any person or organization for any
purpose
relating to the assets of the Company. Other than as contemplated by this
Agreement, as of the Closing Date, there will not be any lease agreements for
the Premises where the Club is located. The Company has provided Buyer access
to each and every contract, lease or other document relating to the assets of
the Company to which they are subject or are a party or a beneficiary. To
Seller's knowledge, such contracts, leases or other documents are valid and in
full force and effect according to their terms and constitutes a legal, valid
and binding obligation of the Company and the other respective parties thereto
and are enforceable in accordance with their terms. Seller has no knowledge of
any default or breach under such contracts, leases or other documents or of any
pending or threatened claims under any such contracts, leases or other
documents.
Section 3.15 Material Agreements; Action Except as disclosed to
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Buyer, there are no contracts, agreements, commitments, understandings or
proposed transactions, whether written or oral, to which the Company is a party
or by which it is bound that involve or relate to: (i) any of the respective
officers, managers or affiliates of the Company; (ii) the sale of any of the
assets of the Company other than in the ordinary course of business; (iii) the
acquisition by the Company of any operating business or the capital stock of any
other Person; or (iv) the borrowing of money.
Section 3.16 No Default. The Company is not (a) in violation of any
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provision of its articles of organization or regulations or (b) in default under
any term or condition of any instrument evidencing, creating or securing any
indebtedness of the Company, and there has been no default in any material
obligation to be performed by the Company under any other contract, lease,
agreement, commitment or undertaking to which it is a party or by which it or
its assets or properties are bound, nor has the Company waived any material
right under any such contract, lease, agreement, commitment or undertaking.
Section 3.17 Books and Records. The books of account, minute books,
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stock record books and other records of the Company are accurate and complete
and have been maintained in accordance with sound business practices and will be
located at the Premises upon Closing.
Section 3.18 Insurance Policies. Copies of all insurance policies
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maintained by the Company relating to the operation of the Club have been
delivered or made available to Buyer. The policies of insurance held by the
Company are in such amounts, and insure against such losses and risks, as the
Company reasonably deems appropriate for its property and business operations.
All such insurance policies are in full force and effect, and all premiums due
thereon have been paid. Valid policies for such insurance will be outstanding
and duly in force at all times prior to the Closing.
Section 3.19 Disclosure. No representation or warranty of Seller
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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.
Section 3.20 Brokerage Commission. No broker or finder has acted for
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the Seller, or the Company in connection with this Agreement or the transactions
contemplated hereby, and no person is entitled to any brokerage or finder's fee
or compensation in respect thereof based in any way on agreements, arrangements
or understandings made by or on behalf of Seller or the Company.
Section 3.21 Environmental. The Company has not received any citation,
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directive, letter or other communication, written or oral, or any notice of any
proceeding, claim or lawsuit relating to any environmental issue arising out of
the ownership or occupation of the Club.
Section 3.22 Banks and Brokerage Accounts. Exhibit 3.22 sets forth (a)
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a true and complete list of the names and locations of all banks, trust
companies, securities brokers and other financial institutions at which the
Company has an account or safe deposit box or maintains a banking, custodial,
trading or other similar relationship, and (b) a true and complete list and
description of each such account, box and relationship, indicating in each case
the account number and the names of the respective officers, employees, agents
or other similar representatives of the Company having signatory power with
respect thereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF BUYER
Buyer hereby represents and warrants to Seller as follows:
Section 4.1 Organization, Good Standing and Qualification. Buyer (i)
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is an entity duly organized, validly existing and in good standing under the
laws of the state of North Carolina, (ii) has all requisite power and authority
to carry on its business, and (iii) is duly qualified to transact business and
is in good standing in all jurisdictions where its ownership, lease or operation
of property or the conduct of its business requires such qualification, except
where the failure to do so would not have a material adverse effect to Buyer.
Section 4.2 Authorization. Buyer is a corporation duly organized in
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the state of North Carolina and has full power, capacity, and authority to enter
into this Agreement and perform the obligations contemplated hereby. All action
on the part of Buyer necessary for the authorization, execution, delivery and
performance of this Agreement by it has been taken and will be taken. This
Agreement, when duly executed and delivered in accordance with its terms, will
constitute legal, valid, and binding obligations of Buyer enforceable against
Buyer in accordance with its terms, except as may be limited by bankruptcy,
insolvency, and other similar laws affecting creditors' rights generally or by
general equitable principles.
Section 4.3 Consents. No permit, consent, approval or authorization
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of, or designation, declaration or filing with, any governmental authority or
any other person or entity is required on the part of Buyer in connection with
the execution and delivery by Buyer of this Agreement or the consummation and
performance of the transactions contemplated hereby other than as may be
required under the federal securities laws.
Section 4.4 Disclosure. No representation or warranty of Buyer
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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.
Section 4.5 Brokerage Commission. No broker or finder has acted for
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the Buyer in connection with this Agreement or the transactions contemplated
hereby, and no person is entitled to any brokerage or finder's fee or
compensation in respect thereof based in any way on agreements, arrangements or
understandings made by or on behalf of Buyer.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF RICK'S
Rick's hereby represents and warrants to Seller as follows:
Section 5.1 Organization, Good Standing and Qualification. Rick's (i)
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is a corporation duly organized, validly existing and in good standing under the
laws of the State of Texas, (ii) has all requisite power and authority to carry
on its business, and (iii) is duly qualified to transact business and is in good
standing in all jurisdictions where its ownership, lease or operation of
property or the conduct of its business requires such qualification, except
where the failure to do so would not have a material adverse effect to Rick's.
Section 5.2 Authorization. Rick's is a corporation duly organized in
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the state of Texas and has full power, capacity, and authority to enter into
this Agreement and perform the obligations contemplated hereby. All action on
the part of Rick's necessary for the authorization, execution, delivery and
performance of this Agreement by it has been taken and will be taken. This
Agreement, when duly executed and delivered in accordance with its terms, will
constitute legal, valid, and binding obligations of Rick's enforceable against
Rick's in accordance with its terms, except as may be limited by bankruptcy,
insolvency, and other similar laws affecting creditors' rights generally or by
general equitable principles.
Section 5.3 Consents. No permit, consent, approval or authorization
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of, or designation, declaration or filing with, any governmental authority or
any other person or entity is required on the part of Rick's in connection with
the execution and delivery by Rick's of this Agreement or the consummation and
performance of the transactions contemplated hereby other than as may be
required under the federal securities laws.
Section 5.4 Disclosure. No representation or warranty of Rick's
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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.
Section 5.5 Brokerage Commission. No broker or finder has acted for
---------------------
the Rick's in connection with this Agreement or the transactions contemplated
hereby, and no person is entitled to any brokerage or finder's fee or
compensation in respect thereof based in any way on agreements, arrangements or
understandings made by or on behalf of Rick's.
ARTICLE VI
CONDITIONS TO CLOSING
The obligations of the parties to effect the transactions contemplated
hereby are subject to the satisfaction at or prior to the Closing of the
following conditions:
Section 6.1 Conditions to Obligations of Buyer and Rick's.
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(a) Representations and Warranties of the Seller. The
-------------------------------------------------
representations and warranties of the Company and the Seller shall be true and
correct on the date hereof and on and as of the Closing Date, as though made on
and as of the Closing Date.
(b) Resolutions. Seller shall have delivered resolutions of the
-----------
Company, which 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 dated as of the Closing Date.
(c) Third-Party Consents. Any and all consents or waivers
---------------------
required from third parties relating to this Agreement or any of the other
transactions contemplated hereby shall have been obtained.
(d) Satisfactory Diligence. Buyer shall have concluded its due
-----------------------
diligence investigation of the Company and its assets and properties and all
other matters related to the foregoing, and shall be satisfied, in its absolute
and sole discretion, with the results thereof.
(e) No Actions or Proceedings. No claim, action, suit,
----------------------------
investigation or proceeding shall be pending or threatened before any court or
governmental agency which presents a substantial risk of the restraint or
prohibition of the transactions contemplated by this Agreement.
(f) Government Approvals. All authorizations, permits, consents,
---------------------
orders, licenses or approvals of, or declarations or filings with, or expiration
of waiting periods imposed by, any governmental entity necessary for the
consummation of the transactions contemplated by this Agreement shall have been
filed, occurred or been obtained.
(g) Resignation of Officer. ▇▇▇▇ ▇▇▇▇ shall have resigned as an
------------------------
officer and director of the Company.
Section 6.2 Conditions to Obligations of the Company and the Seller
----------------------------------------------------------
(a) Representations, Warranties and Agreements of Buyer and
-------------------------------------------------------------
Rick's. The representations and warranties of Buyer shall be true and correct
on the date hereof and on and as of the Closing Date, as though made on and as
of the Closing Date.
(b) Resolutions. Buyer and Risk's shall deliver resolutions of
-----------
the Buyer and Rick's, which 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 dated as of the Closing Date.
(c) Third-Party Consents. Any and all consents or waivers
---------------------
required from third parties relating to this Agreement or any of the other
transactions contemplated hereby shall have been obtained.
(d) No Actions or Proceedings. No claim, action, suit,
----------------------------
investigation or proceeding shall be pending or threatened before any court or
governmental agency which presents a substantial risk of the restraint or
prohibition of the transactions contemplated by this Agreement.
(e) Government Approvals. All authorizations, permits, consents,
---------------------
orders or approvals of, or declarations or filings with, or expiration of
waiting periods imposed by, any governmental entity necessary for the
consummation of the transactions contemplated by this Agreement shall have been
filed, occurred or been obtained.
ARTICLE VII
INDEMNIFICATION
Section 7.1 Indemnification from Seller. Seller hereby agrees to and
----------------------------
shall indemnify, defend (with legal counsel reasonably acceptable to Buyer), and
hold Buyer, its officers, directors, shareholders, employees, affiliates,
agents, legal counsel successors and assigns (collectively, the "Buyer Group")
harmless at all times after the date of this Agreement, from and against any and
all actions, suits, claims, demands, debts, liabilities, obligations, losses,
damages, costs, expenses, penalties or injury (including reasonable attorneys
fees and costs of any suit related thereto) (collectively, "Indemnifiable Loss"
or "Indemnifiable Losses") suffered or incurred by any of the Buyer Group
arising from: (a) any material misrepresentation by, or material breach of any
covenant or warranty of Seller contained in this Agreement, or any exhibit,
certificate, or other instrument furnished or to be furnished by Seller or the
Company hereunder; (b) any nonfulfillment of any material agreement on the part
of Seller under this Agreement; or (c) any suit, action, proceeding, claim or
investigation against Buyer which arises from or which is based upon or
pertaining to Seller's conduct or the operation or liabilities of the business
of the Company prior to entering into the Management Agreement.
Section 7.2 Indemnification from Buyer. Buyer agrees to and shall
----------------------------
indemnify, defend (with legal counsel reasonably acceptable to Seller) and hold
Seller and his agents, affiliates, legal counsel, successors and assigns
(collectively, the "Seller's Group") harmless at all times after the date of the
Agreement from and against any and all actions, suits, claims, demands, debts,
liabilities, obligations, losses, damages, costs, expenses, penalties or injury
(including reasonably attorneys fees and costs of any suit related thereto)
suffered or incurred by any of the Seller's Group, arising from (a) any material
misrepresentation by, or material breach of any covenant or warranty of Buyer
contained in this Agreement or any exhibit, certificate, or other agreement or
instrument furnished or to be furnished by Buyer hereunder; (b) any
nonfulfillment of any material agreement on the part of Buyer under this
Agreement; or (c) any suit, action, proceeding, claim or investigation against
Seller which arises from or which is based upon or pertaining to Buyer's conduct
or the operation or liabilities of the business of Buyer subsequent to entering
into the Management Agreement.
Section 7.3 Defense of Claims.
-------------------
(a) If any indemnitee receives notice of assertion or commencement of
any claim, action or proceeding made or brought by any person or entity who or
which is not a party to this Agreement or an affiliate of a party to this
Agreement ("Third Party Claim") against such indemnitee with respect to which an
indemnifying party is obligated to provide indemnification under this Agreement,
the indemnitee will give such indemnifying party reasonably prompt written
notice thereof, but in any event not later than thirty (30) calendar days after
receipt of such notice of such Third Party Claim. Such notice will describe the
Third Party Claim in reasonable detail, will include copies of all material
written evidence thereof and will indicate the estimated amount, if reasonably
practicable, of the Indemnifiable Loss that has been or may be sustained by the
indemnitee. The indemnifying party will have the right to participate in, or,
by giving written notice to the indemnitee, to assume, the defense of any Third
Party Claim at such indemnifying party's own expense and by such indemnifying
party's own counsel (reasonably satisfactory to the indemnitee), and the
indemnitee will cooperate in good faith in such defense.
(b) If, within ten (10) calendar days after giving notice of a Third
Party Claim to an indemnifying party pursuant to Section 7.3(a), an indemnitee
receives written notice from the indemnifying party that the indemnifying party
has elected to assume the defense of such Third Party Claim as provided in the
last sentence of Section 7.3(a), the indemnifying party will not be liable for
any legal expenses subsequently incurred by the indemnitee in connection with
the defense thereof; provided, however, that if the indemnifying party fails to
take reasonable steps necessary to defend diligently such Third Party Claim
within ten (10) calendar days after receiving written notice from the indemnitee
that the indemnitee believes the indemnifying party has failed to take such
steps or if the indemnifying party has not undertaken fully to indemnify the
indemnitee in respect of all Indemnifiable Losses relating to the matter, the
indemnitee may assume its own defense, and the indemnifying party will be liable
for all reasonable costs or expenses paid or incurred in connection therewith.
Without the prior written consent of the indemnitee, the indemnifying party will
not enter into any settlement of any Third Party Claim which would lead to
liability or create any financial or other obligation on the part of the
indemnitee for which the indemnitee is not entitled to indemnification
hereunder. If a firm offer is made to settle a Third Party Claim without
leading to liability or the creation of a financial or other obligation on the
part of the indemnitee for which the indemnitee is not entitled to
indemnification hereunder and the indemnifying party desires to accept and agree
to such offer, the Indemnifying party will give written notice to the indemnitee
to that effect. If the indemnitee fails to consent to such firm offer within
ten (10) calendar days after its receipt of such notice, the indemnitee may
continue to contest or defend such Third Party Claim and, in such event, the
maximum liability of the indemnifying party as to such Third Party Claim will
not exceed the amount of such settlement offer, plus costs and expenses paid or
incurred by the indemnitee through the end of such ten calendar day period.
(c) A failure to give timely notice or to include any specified
information in any notice as provided in Sections 7.3(a) or 7.3(b) will not
affect the rights or obligations of any party hereunder except and only to the
extent that, as a result of such failure, any party which was entitled to
receive such notice was deprived of its right to recover any payment under its
applicable insurance coverage or was otherwise damaged as a result of such
failure.
(d) The indemnifying party will have a period of thirty (30) calendar
days within which to respond in writing to any claim by an indemnitee on account
of an Indemnifiable Loss which does not result from a Third Party Claim (a
"Direct Claim"). If the indemnifying party does not so
respond within such thirty (30) calendar day period, the indemnifying party will
be deemed to have rejected such claim, in which event the indemnitee will be
free to pursue such remedies as may be available to the indemnitee on the terms
and subject to the provisions of this Article VII.
(e) If the amount of any Indemnifiable Loss, at any time subsequent to
the making of an indemnity payment, is reduced by recovery, settlement or
otherwise under or pursuant to any insurance coverage, or pursuant to any claim,
recovery, settlement or payment by or against any other entity, the amount of
such reduction, less any costs, expenses, premiums or taxes incurred in
connection therewith (together with interest thereon from the date of payment
thereof at the annualized rate of interest equal to the "prime" or "reference"
rate of interest as publicly announced by Bank One, N.A. and in effect from time
to time during the relevant period, calculated on the basis of the actual number
of days elapsed over 365) will promptly be repaid by the indemnitee to the
indemnifying party. Upon making any indemnity payment the indemnifying party
will, to the extent of such indemnity payment, be subrogated to all rights of
the indemnitee against any third party that is not an affiliate of the
indemnitee in respect of the Indemnifiable Loss to which the indemnity payment
related; provided, however, that (i) the indemnifying party shall then be in
compliance with its obligations under this Agreement in respect of such
Indemnifiable Loss and (ii) until the indemnitee recovers fully payment of its
Indemnifiable Loss, any and all claims of the indemnifying party against any
such third party on account of said indemnity Payment will be subrogated and
subordinated in right of payment to the indemnitee's rights against such third
party. Without limiting the generality or effect of any other provision hereof,
each such indemnitee and indemnifying party will duly execute upon request all
instruments reasonably necessary to evidence and perfect the above-described
subrogation and subordination rights.
Section 7.4 Default of Indemnification Obligation. If an entity or
----------------------------------------
individual having an indemnification, defense and hold harmless obligation, as
above provided, shall fail to assume such obligation, 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 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 the entity or individual that had the obligation to provide such
indemnification, defense and hold harmless obligation and same shall constitute
an additional obligation of the entity or of the individual or both, as the case
may be.
Section 7.5 Termination. Indemnification obligations of the Seller and
-----------
the Buyer shall terminate on February 1, 2006.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Amendment; Waiver. Neither this Agreement nor any
------------------
provision hereof may be amended, modified or supplemented unless in writing,
executed by all the parties hereto. Except as otherwise expressly provided
herein, no waiver with respect to this Agreement shall be enforceable unless in
writing and signed by the party against whom enforcement is sought. Except as
otherwise expressly provided herein, no failure to exercise, delay in
exercising, or single or partial exercise of any right, power or remedy by any
party, and no course of dealing between or
among any of the parties, shall constitute a waiver of, or shall preclude any
other or further exercise of, any right, power or remedy.
Section 8.2 Notices. Any notices or other communications required or
-------
permitted hereunder shall be sufficiently given if in writing and delivered in
person, transmitted by facsimile transmission (fax) or sent by registered or
certified mail (return receipt requested) or recognized overnight delivery
service, postage pre-paid, addressed as follows, or to such other address has
such party may notify to the other parties in writing:
(a) if to the Seller: ▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇-▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(b) if to Buyer or Rick's: RCI Entertainment (North Carolina), Inc.
Attn: President
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
With a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
A notice or communication will be effective (i) if delivered in person or by
overnight courier, on the business day it is delivered, (ii) if transmitted by
telecopier, on the business day of actual confirmed receipt by the addressee
thereof, and (iii) if sent by registered or certified mail, three (3) business
days after dispatch.
Section 8.3 Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
Section 8.4 Assignment; Successors and Assigns. Except as otherwise
----------- -----------------------
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors and permitted assigns of the parties hereto. No
party hereto may assign its rights or delegate its obligations under this
Agreement without the prior written consent of the other parties hereto, which
consent will not be unreasonably withheld.
Section 8.5 Entire Agreement. This Agreement and the other documents
-----------------
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subject matter hereof and
thereof and supersede and cancel all prior representations,
alleged warranties, statements, negotiations, undertakings, letters,
acceptances, understandings, contracts and communications, whether verbal or
written among the parties hereto and thereto or their respective agents with
respect to or in connection with the subject matter hereof.
Section 8.6 Jurisdiction. This Agreement shall be governed by, and
------------
construed in accordance with, the laws of the State of North Carolina, without
regard to principles of conflict of laws. The parties agree that venue for
purposes of construing or enforcing this Agreement shall be proper in
Mecklenburg County, North Carolina.
Section 8.7 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.
Section 8.8 Costs and Expenses. Each party shall pay their own
--------------------
respective fees, costs and disbursements incurred in connection with this
Agreement.
Section 8.9 Section Headings. The section and subsection headings in
-----------------
this Agreement are used solely for convenience of reference, do not constitute a
part of this Agreement, and shall not affect its interpretation.
Section 8.10 No Third-Party Beneficiaries. Nothing in this Agreement
-----------------------------
will confer any third party beneficiary or other rights upon any person
(specifically including any employees of the Company) or any entity that is not
a party to this Agreement.
Section 8.11 Attorneys' Review. In connection with the negotiation and
-----------------
drafting of this Agreement, the parties represent and warrant to each other they
have had the opportunity to be advised by attorneys of their own choice.
Section 8.12 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 be requested
by the other parties to confirm or perfect or otherwise to carry out the intent
and purposes of this Agreement.
Section 8.13 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.
IN WITNESS WHEREOF, the undersigned have executed this Purchase Agreement
to become effective as of the date first set forth above.
RCI ENTERTAINMENT
(NORTH CAROLINA), INC.
/s/ ▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------
By: ▇▇▇▇ ▇▇▇▇▇▇, President
Date: June 13, 2005
RICK'S CABARET INTERNATIONAL, INC.
/s/ ▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------
By: ▇▇▇▇ ▇▇▇▇▇▇, President
Date: June 13, 2005
SELLER
/s/ ▇▇▇▇ ▇▇▇▇
----------------------------------------
▇▇▇▇ ▇▇▇▇, Individually
Date: June 13, 2005
TOP SHELF ENTERTTAINMENT, LLC
/s/ ▇▇▇▇ ▇▇▇▇
----------------------------------------
By: ▇▇▇▇ ▇▇▇▇, Manager
Date: June 13, 2005