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Exhibit 10.1
EXECUTION VERSION
ASSET
PURCHASE AGREEMENT
This
Asset Purchase Agreement (the “Agreement”) is made
and entered into this 10 th day of May,
2008, by and among Rick’s Cabaret International, Inc., a
Texas corporation (“Rick’s”), its wholly
owned subsidiary, RCI Entertainment (Northwest Highway), Inc.,
a Texas corporation (hereinafter the “Purchaser”),
North by East Entertainment, Ltd., a Texas limited partner
(hereinafter the “Seller”) by and through its
General Partner, Northeast Platinum, L.L.C. doing business as
Platinum Club II, and John Auletta
(“Auletta”)
WHEREAS, Auletta owns 100% of the limited partnership
interest of the Seller and 100% of the membership interest of
Northeast Platinum, L.L.C., the general partner of the Seller;
and
WHEREAS , the Seller presently owns a business that operates
an adult entertainment cabaret known as “Platinum Club
II” (the “Business” or “PLATINUM”)
located at 2501 Northwest Highway, Dallas, Texas 75220 (the
“Real Property” or the “Premises”);
and
WHEREAS , Seller desires to sell, transfer and convey all of
the assets owned by it which are associated or used in connection
with the operation of PLATINUM to the Purchaser, on the terms and
conditions set forth herein; and
WHEREAS , the Purchaser desires to purchase the assets from
Seller on the terms and conditions set forth herein;
and
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 ASSETS
Section
1.1 Assets of Seller
to be Transferred to Purchaser . On the
Closing Date (as defined in Section 4.1 hereof), and subject
to the terms and conditions set forth in this Agreement,
Seller shall sell, convey, transfer and assign, or cause to be
sold, conveyed, transferred and assigned to Purchaser free and
clear of all liens and encumbrances, and Purchaser shall
acquire all of the tangible and intangible assets and personal
property of every kind and description and wherever situated
of the business of PLATINUM from the Seller, including but not
limited to, the following personal property of the
Seller:
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(i)
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all
of the tangible and intangible assets and personal properties of
every kind and description and wherever situated of the business of
PLATINUM, including, without limitation, inventories, furniture,
fixtures, equipment (including office and kitchen equipment),
computers and software, appliances, sign inserts, sound
and lighting and telephone systems not incorporated into the
building, telephone numbers, and other personal property of
whatever kind and nature owned or leased by Seller, installed,
located, situated or used in, on, or about, or in connection with
the operation, use and enjoyment of the Premises and all other
items on the subject Premises and used in connection with the
operation of PLATINUM;
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(ii)
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all
of Seller's inventory of supplies, accessories and any and all
other items of personal property of whatever nature, sold by the
Seller in the operation of PLATINUM (the "Inventory"),
provided that the transfer of any alcoholic inventory shall be done
in accordance with the regulations of the TABC;
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(iii)
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all
supplies (other than Inventory) and other "consumable supplies"
used in connection with the operation of PLATINUM (the
"Supplies");
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(iv)
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all
of Seller's right, title, and interest, as lessee, of any and all
equipment leased by Seller and located at PLATINUM (the "Leased
Equipment");
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(v)
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all
right, title, and interest of Seller to the use of the telephone
numbers presently being used by the Business, including all rotary
extensions thereto, and all advertisements in the "Yellow Pages",
"City Directory" and other similar publications (the "Telephone
Numbers") and after the Closing, Purchaser shall assume all
expenses for the Telephone Numbers and advertising;
and
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(vi)
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copies
of Seller's lists of suppliers compiled in connection with the
operation of PLATINUM which are requested by Purchaser (the
"Records").
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All
of the items set forth in this Section 1.1 are collectively
referred to as the “Purchased
Assets”.
Section
1.2 Excluded
Assets . Specifically excluded from the Purchased
Assets are the corporate seals, books, accounting records and
records related to corporate governance of the Seller, cash on hand
at time of Closing, those assets listed on Exhibit 1.2 hereto, and
any and all necessary permits and authorizations which are needed
to conduct an adult entertainment business serving alcoholic
beverages at PLATINUM, which Purchaser acknowledges that it will
need for such purpose, including its sexually oriented
business permit and license (hereinafter collectively referred to
as the “Excluded Assets”). In the event that
the parties agree to transfer the cash on hand at Closing from the
Seller to the Purchaser, then the Purchaser will agree to pay
Seller for such cash amount.
Notwithstanding
the foregoing, Seller agrees to cooperate with Purchaser by
surrendering its necessary permit to conduct an adult
entertainment business upon closing of this Agreement, receipt
of the Purchase Price and issuance to Purchaser by the City of
Dallas its necessary permit to conduct an adult entertainment
business on the Premises. Similarly, Seller agrees
to cooperate with Purchaser in obtaining necessary licenses
and permits to serve alcoholic beverages on the premises,
including the potential use of existing licenses and permits,
if appropriate, and by surrendering such licenses and permits
necessary to serve alcoholic beverages on the Premises upon
Closing of this Agreement, receipt of the Purchase Price and
issuance to Purchaser of the necessary permits and licenses
necessary to serve alcoholic beverages on the
Premises.
Section
1.3 Intent of the
Parties . Although the Exhibits to this
Agreement are intended to be complete, in the event such
Exhibits fail to contain the description of any asset
belonging to Seller which is used solely for the business of
PLATINUM at the Premises, such assets shall nonetheless be
deemed transferred to Purchaser at the Closing.
Asset
Purchase Agreement - Page 2
ARTICLE II
NO ASSUMPTION OF LIABILITIES
Section
2.1 Excluded
Liabilities . Notwithstanding anything
contained in this Agreement to the contrary, Purchaser shall
have no obligation and is not assuming, and Seller shall
retain, pay, perform, defend and discharge all of the
liabilities and obligations of every kind whatsoever related
or connected to the Purchased Assets or the business of
PLATINUM arising or accruing prior to the Closing Date,
whether disclosed or undisclosed, known or unknown on the
Closing Date, direct or indirect, absolute or contingent,
secured or unsecured, liquidated or unliquidated, accrued or
otherwise, whether liabilities for taxes, liabilities of
creditors, liabilities arising under any profit sharing,
pension or other benefit under any plan of Seller, liabilities
to any Governmental Agency (as hereinafter defined) or third
parties, liabilities assumed or incurred by Seller by
operation of law or otherwise (collectively, the
“Excluded Liabilities”), including, but not
limited to, (i) contractual liabilities arising from
PLATINUM’S business or ownership of the Purchased Assets
prior to the Closing Date, and (ii) any taxes owing by Seller,
whether occurring before or after Closing and whether related
to the business of PLATINUM, the Purchased Assets or otherwise
and any Liens on the Purchased Assets relating to any such
taxes.
Section
2.2 Taxes
. Seller shall pay when due any sales, transfer,
excise, or other taxes which may be imposed in any
jurisdiction in connection with or arising from the sale and
transfer of any of the Purchased Assets to
Purchaser.
Section
2.3 Bulk Sales
Laws . Seller acknowledges that any
applicable provisions of any tax clearance or bulk sales laws
pertaining to the transactions contemplated by this Agreement
are being complied with and that Seller agrees to
indemnify and hold harmless Purchaser from and against any and
all liabilities arising out of or relating to any such tax
clearance or bulk sales law. Any such liability
shall be an Excluded Liability.
ARTICLE III
PURCHASE PRICE FOR
THE PURCHASED ASSETS
Section
3.1 Purchase
Price . As consideration for the purchase of
the Purchased Assets, Purchaser shall pay to Seller, at
Closing, $1,500,000.00, payable by cashier’s check,
certified funds or wire transfer. The $1,500,000.00
cash payment is referred to as the “Purchase
Price”.
ARTICLE IV
CLOSING
Section
4.1 The
Closing . The closing of the transactions
provided for in this Agreement (the “Closing”)
shall take place on the later of: (i) June 10, 2008; or (ii)
ten (10) days after the approval of Purchaser’s
application for a Sexually Oriented Business License by the
City of Dallas and the transfer of all other permits utilized
to operate the Club to Purchaser or affiliates of Purchaser
(the “Closing Date”), provided however that in no
event shall the Closing Date be later than August 31,
2008. The parties hereto hereby agree that the
Closing Date shall be extended until August 31, 2008, if the
Purchaser determines, in its sole discretion, to extend the
Closing Date if the City of Dallas denies the initial transfer
of the sexually oriented business and the Purchaser elects to
appeal that decision. The parties have agreed
further to close at the law offices of Quilling, Selander,
Cummiskey & Lownds, P.C., 2001 Bryan Street, Suite 1800,
Dallas, Texas 75201, or at such other place as agreed upon in
writing among the parties hereto.
Asset
Purchase Agreement - Page 3
Section
4.2 Delivery and
Execution . At the Closing: (a) the Seller
shall deliver to Purchaser all instruments of assignment and
bills of sale necessary to transfer to Purchaser good and
marketable title to the Purchased Assets free and clear of all
liens, charges or encumbrances against delivery by Purchaser
to the Seller of payment in an amount equal to the Purchase
Price of the Purchased Assets being purchased by Purchaser in
the manner set forth herein; (b) the Seller and Purchaser
shall deliver the various certificates, instruments and
documents (and shall take the required actions) referred to in
Articles VII and VIII below; and (c) the Related Transactions
(as defined below) shall be consummated concurrently with the
Closing.
Section
4.3 Related
Transactions . In addition to the purchase
and sale of the Purchased Assets, the following actions shall
take place contemporaneously at the Closing (collectively, the
"Related Transactions"):
(i)
Covenant Not
to Compete . At Closing, Auletta will enter
into a five (5) year covenant not to compete either directly
of indirectly, with the adult nightclub presently known as
PLATINUM CLUB II by operating an establishment with an urban
theme that both serves liquor and provides live female nude or
semi-nude adult entertainment in Dallas
County, Tarrant County, Texas, or any of the
adjacent counties thereto; provided, however, that any
Non-Competition Agreement will permit Auletta the right to own
and/or operate an establishment without an urban theme that
both serves liquor and provides live female nude or semi-nude
adult entertainment in Dallas County, Texas, Tarrant County,
Texas, or any of the adjacent counties thereto.
(ii)
Real Estate
Purchase and Sale Agreement to Purchase Real
Property. RCI Holdings, Inc., a Texas
corporation (“RCI”) and WIRE WAY, LLC, a Texas
limited liability company (“Wire Way”) will enter
into a REAL ESTATE PURCHASE AND SALE AGREEMENT pursuant to
which RCI will purchase the Real Property from Wire Way (the
“Real Estate Agreement”), pursuant to
which the purchase and sale of the Real Property
shall be governed. A true and correct copy of the
Real Estate Agreement is attached hereto as Exhibit
4.3(ii).
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF AULETTA AND THE SELLER
Auletta
and the Seller hereby represent and warrant to Purchaser and
Rick’s as follows:
Asset
Purchase Agreement - Page 4
Section
5.1 Organization,
Good Standing and Qualification. The Seller
(i) is an entity duly organized, validly existing and in good
standing under the laws of the state of Texas, (ii) has all
requisite power and authority to operate the Business, and
(iii) is duly qualified to transact business and is in good
standing in Texas.
Section
5.2 Ownership of the
Purchased Assets . Seller owns or will own
at Closing, all of the Purchased Assets 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 Purchased Assets 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 Purchased Assets to Purchaser as contemplated
herein, Purchaser 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.
Section
5.3 Authorization
. The Seller has all requisite corporate 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 the
Seller necessary for the authorization, execution, delivery
and performance of this Agreement and all documents related to
consummate the transactions contemplated herein have been
taken or will be taken prior to the Closing Date by the
Seller. This Agreement, when duly executed and delivered in
accordance with its terms, will constitute legal, valid and
binding obligations of the 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.
Section
5.4 No Breaches;
Consents . Except as set forth in Schedule
5.4, the execution, delivery, and performance of this
Agreement and the transactions contemplated hereby by the
Seller does not: (i) violate any provision of its
Articles of Organization or Regulations; (ii) conflict with,
violate, or constitute a breach of or a default under; (iii)
result in the creation or imposition of any lien, claim, or
encumbrance of any kind upon the Purchased Assets; or (iv)
require any authorization, consent, approval, exemption, or
other action by or filing with any third party or Governmental
Authority under any provision of: (a) any
applicable Legal Requirement; or (b) any credit or loan
agreement, promissory note, or any other agreement or
instrument to which the Seller is a party or by which the
Purchased Assets may be bound or affected. For
purposes of this Agreement, "Governmental Authority" means any
foreign governmental authority, the United States of America,
any state of the United States, and any political subdivision
of any of the foregoing, and any agency, department,
commission, board, bureau, court, or similar entity, having
jurisdiction over the parties hereto or their respective
assets or properties. For purposes of this
Agreement, "Legal Requirement" means any law, statute,
injunction, decree, order or judgment (or interpretation of
any of the foregoing) of, and the terms of any license or
permit issued by, any Governmental Authority.
Section
5.5 Pending
Claims . Except as set forth in Schedule
5.5, there is no known claim, suit, arbitration,
investigation, action or other proceeding, whether judicial,
administrative or otherwise, now pending or, to the best of
the Seller’s or Auletta’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 any effect upon the Seller, or the business of PLATINUM
or the operation of PLATINUM after the Closing Date, nor is
there any basis known to the Seller or Auletta for any such
action. No litigation is pending, or, to the
Seller’s or Auletta’s knowledge, threatened
against the Seller, or the business of PLATINUM, or the
Purchased Assets which seeks to restrain or enjoin the
execution and delivery of this Agreement or any of the
documents referred to herein or the consummation of any of the
transactions contemplated hereby. Seller is not subject to any
judicial injunction or mandate or any quasi-judicial or
administrative order or restriction directed to or against
them which would affect the Seller or the
Business.
Asset
Purchase Agreement - Page 5
Section
5.6 Taxes
. The Seller has timely and accurately prepared and
filed all 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. The Seller is not delinquent in the
payment of any tax or governmental charge of any
nature. Neither the Seller nor Auletta has
knowledge of any liability for any tax to be imposed by any
taxing authorities as of the date of this Agreement and as of
the Closing that is not adequately provided for. No
assessments or notices of deficiency or other communications
have been received by the Seller 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. None of the federal, state, foreign and
local tax returns of the Seller have been audited by any
taxing authority. The Seller has no knowledge of
any additional assessments, adjustments or contingent tax
liability (whether federal or state) of any nature whatsoever,
whether pending or threatened against the Seller for any
period, nor of any basis for any such assessment, adjustment
or contingency. There are no agreements between the
Seller and any taxing authority, including, without
limitation, the Internal Revenue Service, waiving or extending
any statute of limitations with respect to any tax
return.
Section
5.7 Labor
Matters . The Seller is not a party or
otherwise subject to any collective bargaining agreement with
any labor union or association. There are no
discussions, negotiations, demands or proposals that are
pending or have been conducted or made with or by any labor
union or association, and there are not pending or threatened
against the Seller any labor disputes, strikes or work
stoppages. To the best of Seller’s and
Auletta’s knowledge, the Seller is in compliance with
all federal and state laws respecting employment and
employment practices, terms and conditions of employment and
wages and hours, and, to its knowledge, is not engaged in any
unfair labor practices.
Section
5.8 Compliance with
Laws . The Seller is, and at all times prior
to the date hereof, has been in compliance with all statutes,
orders, rules, ordinances and regulations applicable to it or
to the ownership of its assets or the operation of its
businesses, except for failures to be in compliance that would
not have a material adverse effect on the business,
properties, condition (financial or otherwise) or prospects of
the Seller. The Seller has no basis to expect, nor
has it received any order or notice of any such violation or
claim of violation of any such statute, order, rule, ordinance
or regulation by the Seller.
Section
5.9 Title to
Properties; Encumbrances . Seller has (or
will have at Closing) good and marketable title to all of the
Purchased Assets, free and clear of all mortgages, claims,
liens, security interests, charges, leases, encumbrances and
other restrictions of any kind and nature.
Asset
Purchase Agreement - Page 6
Section
5.10 Contracts and
Leases . Except as previously provided to
Purchaser, the Seller does not (i) have any leases
of personal property relating to the Purchased Assets, whether
as lessor or lessee; (ii) have any contractual or other
obligations relating to the Purchased Assets, whether written
or oral; and (iii) have given any power of attorney to
any
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