EXHIBIT 1.1
STOCK EXCHANGE AGREEMENT
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THIS STOCK EXCHANGE AGREEMENT (the "Agreement"), dated as of _____________,
1998, is by and among RICK'S CABARET INTERNATIONAL, INC., a Texas corporation
("Rick's"), and each of the persons or entities whose names appear and who are
identified as stockholders on the signature page hereof (individually, a
"STOCKHOLDER" and collectively the "STOCKHOLDERS"), such persons or entities
being registered holders of capital stock of Taurus Entertainment Companies,
Inc., a Colorado corporation ("Taurus").
R E C I T A L S
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WHEREAS, each Stockholder is the record and beneficial owner of the number
of shares of common stock, $.001 par value of Taurus indicated in the table set
forth as Exhibit A to this Agreement (which shares are hereinafter collectively
referred to as the "Taurus Stock");
WHEREAS, Rick's desires to acquire from the Stockholders, and the
Stockholders desire to convey to Rick's, all of the issued and outstanding
Taurus Stock owned by the Stockholders in exchange for shares of voting common
stock, $0.01 par value of Rick's (the "Rick's Stock"), all on the terms and
conditions set forth below;
NOW, THEREFORE, in consideration of the premises, the mutual covenants and
agreements and the respective representations and warranties herein contained in
this Agreement, and on the terms and subject to the conditions set forth in this
Agreement, the parties hereto, intending to be legally bound, hereby agree as
follows:
ARTICLE I
EXCHANGE OF SHARES
Section 1.1 Taurus Stock. At the Closing (as defined below), each
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Stockholder shall transfer, convey and deliver to Rick's the number of shares of
Taurus Stock set forth opposite their name on Exhibit A hereto, and shall
deliver to Rick's stock certificates representing the Taurus Stock, duly
endorsed to Rick's or accompanied by duly executed stock powers in form and
substance satisfactory to Rick's.
Section 1.2 Rick's Stock. At the Closing, in exchange for each share
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of Taurus Stock transferred to Rick's, Rick's shall issue and deliver to each
Stockholder the number of shares of Rick's Stock set forth opposite their name
on Exhibit A hereto. The transaction by which the transfer shall take place is
referred to in this Agreement as the "Exchange".
ARTICLE II
THE CLOSING
The Closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at 4:00 p.m. on ______________, 1998 (the "Closing
Date"), at the offices of Xxxxxxx, Xxxxx & Xxxxxxxxx, 0000 Xxxxxxxx Xxxxx, Xxxxx
000, Xxxxxxx, Xxxxx 00000 or at such other time and place as agreed upon among
the parties hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each of the Stockholders hereby severally represents and warrants to Rick's
as follows:
Section 3.1 Ownership of the Taurus Stock. The Stockholder owns,
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beneficially and of record, that number of shares of Taurus Stock set forth
opposite the Stockholder's name on Exhibit A hereto; except for restrictions
imposed by federal and state securities laws, (i) such shares are owned by such
Stockholder free and clear of any liens, claims, equities, charges, options,
rights of first refusal, or encumbrances; (ii) the Stockholder has the
unrestricted right and power to transfer, convey and deliver full ownership of
such shares without the consent or agreement of any other person and without any
designation, declaration or filing with any governmental authority; and, (iii)
upon the transfer of such shares to Rick's as contemplated herein, Rick's 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 3.2 Organization. If the Stockholder is either a corporation,
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limited liability company or partnership, it represents and warrants that it is
duly organized, validly existing and in good standing under the laws of the
state of its incorporation or formation, 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 will own at the Closing, and to perform its obligations under
this Agreement. If the Stockholder is a corporation, limited liability company
or partnership it is qualified as a foreign corporation, foreign limited
liability company or foreign partnership (which ever the case may be) and is in
good standing in each jurisdiction in which the failure to qualify would have
material adverse effect on the business, properties or condition (financial or
otherwise) of the corporate, limited liability company or partnership
Stockholder.
Section 3.3 Authorization. If the Stockholder is a person, then he or
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she is of the 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 or herself and his or her spouse, if any. If the Stockholder is a
corporation, limited liability company or partnership, then all corporate,
limited liability company or partnership action on the part of the corporate,
limited liability company or partnership Shareholder necessary for the
authorization, execution, delivery and performance of this Agreement and the
transactions contemplated hereby has been taken or will be taken prior to the
Closing. All action on the part of the Stockholder necessary for the
authorization, execution, delivery and performance of this Agreement by the
Stockholder has been taken or will be taken prior to the Closing. This
Agreement constitutes a valid and binding obligation of the Stockholder,
enforceable against the Stockholder in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, and other laws of general application
relating to or affecting creditors' rights and to general equitable principles.
Section 3.4 Pending Claims. There is no claim, suit, action or
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proceeding, whether judicial, administrative or otherwise, pending or, to the
best of the Stockholder's knowledge, threatened that would preclude or restrict
the transfer to Rick's of the Taurus Stock owned by the Stockholder or the
performance of this Agreement by the Stockholder.
Section 3.5 No Default. The execution, delivery and performance of
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this Agreement by the Stockholder does not and will not constitute a violation
or default under or conflict with any contract, agreement, understanding or
commitment to which such Stockholder is a party or by which such Stockholder is
bound.
Section 3.6 Acquisition of Stock for Investment. The Stockholder
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understands that the issuance of Rick's Stock will not have been registered
under the Securities Act of 1933, as amended (the "Act"), or any state
securities acts, and, accordingly, are restricted securities, and that he/she
represents and warrants to Rick's that his/her present intention is to receive
and hold the Rick's Stock for investment only and not with a view to the
distribution or resale thereof.
Additionally, the Stockholder understands that any sale by the Stockholder
of any of the Rick's Stock received under this Agreement will, under current
law, require either (a) the registration of the Rick's Stock 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. The Stockholder understands that
Rick's has not undertaken and does not presently intend to file a Registration
Statement to register the Rick's Stock to be issued to the Stockholder. The
Stockholder hereby agrees to execute, deliver, furnish or otherwise provide to
Rick's an opinion of counsel reasonably acceptable to Rick's prior to any
subsequent transfer of the Rick's Stock, that such transfer will not violate the
registration requirements of the federal or state securities acts. The
Stockholder further agrees to execute, deliver, furnish or otherwise provide to
Rick's any documents or instruments as may be reasonably necessary or desirable
in order to evidence and record the Rick's Stock acquired hereby.
To assist in implementing the above provisions, the Stockholder hereby
consents to the placement of the legend, or a substantially similar legend, set
forth below, on all certificates representing ownership of the Rick's Stock
acquired hereby until the Rick's Stock has 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 MUST BE
ACQUIRED FOR 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."
In addition, each Stockholder consents to Rick's placing a "stop transfer
notation" in its corporate records concerning the transfer of the Rick's Stock
acquired by each Stockholder.
Section 3.7 Subscription Agreement. The Stockholder hereby
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acknowledges, as a condition to the consummation of the transactions
contemplated hereby, that he/she will, simultaneously with the execution of this
Agreement execute a Subscription Agreement containing additional representations
and warranties relating to the issuance of the Rick's Stock to the Stockholder.
Section 3.8 Stockholder Access to Information. The Stockholder hereby
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confirms and represents that he/she: (a) has been afforded the opportunity to
ask questions of and receive answers from representatives of Rick's concerning
the business and financial condition, properties, operations and prospects of
Rick's and has asked such questions as he/she desires to ask and all such
questions have been answered to the full satisfaction of the Stockholder; (b)
has such knowledge and experience in financial and business matters so as to be
capable of evaluating the relative merits and risks of the transactions
contemplated hereby; (c) has had an opportunity to engage and is represented by
an attorney of his/her choice; (d) has had an opportunity to negotiate the terms
and conditions of this Agreement; (e) has been given adequate time to evaluate
the merits and risks of the transactions contemplated hereby; and (f) has been
provided with and given an opportunity to review all current information about
Xxxxx including Xxxxx (A) Annual Report, which includes its Form 10-KSB for the
fiscal year ended September 30, 1997, (B) Form 10-QSB for the quarters ended
December 31, 1997 and March 31, 1998 (C) Form S-3 Prospectus dated May 7, 1998
and (D) Proxy Statement dated May 28,1998.
Section 3.9 Disclosure. To the best of the Stockholder's knowledge, no
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representation or warranty of the Stockholder contained in this Agreement
(including the exhibits and schedules hereto) contains any untrue statement of a
material fact 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 3.10 Indemnification by Stockholder The Stockholder recognizes
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that the Exchange being conducted with Rick's is based, to a material degree,
upon the representations and warranties of Stockholder as set forth and
contained herein and the Stockholder hereby agrees to indemnify and hold
harmless Rick's against all damages, costs, or expenses (including reasonable
attorney's fees) arising as a result of any breach of representation or warranty
or omission made herein by the Stockholder.
If any action is brought against Rick's in respect of which indemnity may
be sought against the Stockholder pursuant to the foregoing paragraph, Rick's
shall promptly notify the Stockholder in writing of the institution of such
action (but the omission to so notify the Stockholder shall not relieve it from
any liability that it may have to Rick's except to the extent the Stockholder is
materially prejudiced or otherwise forfeit substantive rights or defenses by
reason of such failure), and the Stockholder shall assume the defense of such
action, including the employment of counsel to be chosen by the Stockholder to
be reasonably satisfactory to Rick's, and payment of expenses. Rick's shall
have the right to employ the Stockholder's or their own counsel in any such
case, but the fees and expenses of such counsel shall be at Rick's expense,
unless the employment of such counsel shall have been authorized in writing by
the Stockholder in connection with the defense of such action, or the
Stockholder shall not have employed counsel to take charge of the defense of
such action, or counsel employed by the Stockholder shall not be diligently
defending such action, or Rick's shall have reasonably concluded that there may
be defenses available to it which are different from or additional to those
available to the Stockholder, or that representation of Rick's by the same
counsel would be inappropriate under applicable standards of professional
conduct due to actual or potential differing interests between them (in which
case the Stockholder shall not have the right to direct the defense of such
action on behalf of Rick's), in any of which event such fees and expenses shall
be borne by the Stockholder. Anything in this paragraph to the contrary
notwithstanding, the Stockholder shall not be liable for any settlement of, or
any expenses incurred with respect to, any such claim or action effected without
the Stockholder's written consent, which consent shall not be unreasonably
withheld. The Stockholder shall not, without the prior written consent of
Rick's effect any settlement of any proceeding in respect of which Rick's is a
party and indemnity has been sought hereunder unless such settlement includes an
unconditional release of Rick's from all liability on claims that are the
subject matter of such proceeding.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF XXXX XXXXXX
In addition to the representations and warranties of the Stockholders as
set forth in Article III herein, Xxxx Xxxxxx ("Xxxxxx"), one of the
Stockholders, as an officer and director of Taurus, additionally represents and
warrants to Rick's as follows:
Section 4.1 Organization and Capitalization. Taurus is a corporation
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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 will
own at the Closing. Taurus is qualified as a foreign corporation and is in good
standing in each jurisdiction in which the failure to qualify would have a
material adverse effect on the business, properties or condition (financial or
otherwise) of Taurus. Taurus does not have any subsidiaries or any other
investments or ownership interest in any corporation, partnership, joint venture
or other business enterprise, except as set forth in Exhibit 4.2. The
authorized capital stock of Taurus consists of 20,000,000 shares of common
stock, $.001 par value, of which 4,305,518 shares are validly issued and
outstanding; and 10,000,000 shares of preferred stock, none of which are issued.
All of such issued and outstanding shares of Taurus Stock have been duly
authorized and validly issued and are fully paid and non-assessable. None of
the shares were issued in violation of any preemptive rights. Except as set
forth in Exhibit 4.2, there are no existing warrants, options, rights of first
refusal, conversion rights, calls, commitments or other agreements of any
character pursuant to which Taurus is or may become obligated to issue any of
its stock or securities. Taurus has no obligation to repurchase, reacquire or
redeem any of its outstanding capital stock.
Section 4.2 Subsidiaries. Schedule 4.2 sets forth a complete and
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accurate list of all Subsidiaries of Taurus, showing (as to each such
Subsidiary) the date of its incorporation and the jurisdiction of its
incorporation. All of the outstanding capital stock of, or other ownership
interests in, each Subsidiary is owned by Taurus, directly or indirectly, free
and clear of any lien or any other limitation or limitation or restriction
(including restrictions on the right to vote). All outstanding shares of the
capital stock of each Subsidiary have been duly authorized and validly issued
and are fully paid and non-assessable and are free of any preemptive rights.
There are no outstanding securities of any Subsidiary convertible into or
evidencing the right to purchase or subscribe for any shares of capital stock of
any Subsidiary, there are no outstanding or authorized options, warrants, calls,
subscriptions, rights, commitments or any other agreements of any character
obligating any Subsidiary to issue any shares of its capital stock or any
securities convertible into or evidencing the right to purchase or subscribe for
any shares of such stock, and there are no agreements or understandings with
respect to the voting, sale, transfer or registration of any shares of capital
stock of any Subsidiary.
Section 4.3 SEC Reports. Since September 30, 1997, Taurus has filed
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with the Securities and Exchange Commission (the "SEC") all of the reports
required to be filed with the SEC pursuant to Section 15(d) of the Securities
Exchange Act of 1934, as amended, through the filing of its Form 10-QSB for the
quarter ended March 31, 1998. Xxxxxx has delivered, and Rick's acknowledges
receipt thereof, of Taurus' Form 10-KSB for the fiscal year ended September 30,
1997, its 10-QSB's for the three month periods ended December 31, 1997 and March
31, 1998, and its Form 8-K/A filed with the SEC on May 20, 1998 ("SEC Filings").
To the best of Xxxxxx'x knowledge, as of their respective dates, the SEC Filings
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
Section 4.4 Financial Information. Taurus has delivered to Rick's the
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audited balance sheet of Taurus as of September 30, 1997, together with the
related statements of income, changes in shareholder's equity and cash flow for
the years then ended, including the related notes, all certified by Xxxxxxxx,
Xxxxx & Xxxxxxxx L.L.P., certified public accountants. In addition, Taurus has
delivered to Rick's its interim unaudited financial statements as filed with the
SEC for the three month periods ending December 31, 1997 and March 31, 1998,
together with financial information provided in its Form 8-K/A as filed with the
SEC on May 20, 1998. In addition, Taurus has delivered to Xxxxx its interim
unaudited financial statements as filed with the SEC for the three month periods
ended December 31, 1997 and March 31, 1998 (the audited balance sheet and
interim financial statements are collectively referred to as the "Financial
Statements"). Such Financial Statements, including the related notes, are in
accordance with the books and records of Taurus and fairly present the financial
position of Taurus and the results of operations and changes in financial
position of Taurus 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, Taurus, 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, there will not have been any
adverse change in the financial condition or other operations, business,
properties or assets of Taurus other than liabilities incurred in the ordinary
course of business in which, in the aggregate, are not in excess of $50,000 from
that reflected in the latest Financial Statements of Taurus furnished to Rick's
pursuant hereto.
Section 4.5 Litigation. Except as disclosed in Exhibit 4.5, there are
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no actions, suits or proceedings, formal or informal, pending or, to the best
knowledge of Xxxx Xxxxxx, threatened against Taurus, nor is Taurus subject to
any order, judgment or decree, except in all cases, whether known or unknown,
for matters which, in the aggregate, would not result in a loss to Taurus in
excess of $50,000.
Section 4.6 Taxes. Except as disclosed in Exhibit 4.6, Taurus has
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filed all federal tax returns and reports due or required to be filed, and has
paid all taxes, interest payments and penalties, if any, required to be paid
with respect thereto. Taurus 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 is not delinquent in the payment of any material tax or
governmental charge of any nature.
Section 4.7 Compliance with Laws. Except as set forth in Exhibit 4.7,
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Taurus is, and at all times prior to the date hereof has been, to the best of
Xxxxxx'x knowledge, in compliance with all statutes, orders, rules, and
regulations applicable to it or to the ownership of its assets or the operation
of its business, 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 Taurus, and Taurus has no basis to expect to receive,
and has not received, any order or notice of any such violation or claim of
violation of any such statute, order, rule, ordinance or regulation.
Section 4.8 Books and Records. The books of account, minute books,
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stock record books and other records of Taurus, all of which have been made
available to Rick's, are accurate and complete in all material respects and have
been maintained in accordance with sound business practices.
Section 4.9 Title to Properties; Encumbrances. Taurus has good title
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to all of its properties and assets, real and personal, tangible and intangible,
that are material to the condition (financial or otherwise), business,
operations or prospects of Taurus, free and clear of all mortgages, claims,
liens, security interests, charges, leases, encumbrances and other restrictions
of any kind and nature, except (i) as specifically disclosed in Exhibit 4.9,
(ii) as disclosed in the financial statements of Taurus, (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.
Section 4.10 Disclosure. To the best of Xxxxxx'x knowledge, no
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representation or warranty of Xxxxxx contained in this Agreement (including the
exhibits and schedules 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 4.11 Insurance . Taurus and its Subsidiaries maintain adequate
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insurance with respect to their respective businesses and are in compliance with
all material requirements and provisions thereof.
Section 4.12 Material Agreements; Action . Except as set forth in SEC
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Filing or on Schedule 4.12, there are no material contracts, agreements,
commitments, understandings or proposed transactions, whether written or oral,
to which Taurus or any of its Subsidiaries is a party or by which it is bound
that involve or relate to: (i) any of their respective officers, directors,
stockholders or partners or any Affiliate thereof; (ii) the sale of any of the
assets of Taurus or any of its Subsidiaries other than in the ordinary course of
business; (iii) covenants of Taurus or any of its Subsidiaries not to compete in
any line of business or with any person in any geographical area or covenants of
any other person not to compete with Taurus or any of its Subsidiaries in any
line of business or in any geographical area; (iv) the acquisition by Taurus or
any of its Subsidiaries of any operating business or the capital stock of any
other Person; (v) the borrowing of money or (vi) the expenditure of more than
$50,000 in the aggregate or the performance by Taurus or any Subsidiary
extending for a period more than one year from the date hereof, other than in
the ordinary course of business. There have been made available to Rick's and
its representatives true and complete copies of all such agreements. All such
agreements are in full force and effect. Neither the Company nor any of its
Subsidiaries is in default under any such agreements nor is any other party to
any such agreements in default thereunder in any respect.
Section 4.13 Employee Benefit Plans . Taurus is not a party to any
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employee benefit plan.
Section 4.14 No Pending Transactions . Except for the transactions
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contemplated by this Agreement, neither Taurus nor any Subsidiary 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 Taurus or any Subsidiary, (ii) the
sale of all or substantially all of the assets of Taurus or any Subsidiary, or
(iii) a change of control of more than five percent of the outstanding capital
stock of Taurus or any Subsidiary.
Section 4.15 No Undisclosed Liabilities . To the best of Xxxxxx'x
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knowledge, neither Taurus nor or any Subsidiary has any obligation or liability
(contingent or otherwise) that would be required to be reflected in the
financial statements of the Company in accordance with GAAP except as reflected
in Taurus's Balance Sheet.
Section 4.16 Indemnification by Xxxxxx. Xxxxxx recognizes that the
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Exchange being conducted with Rick's is based, to a material degree, upon the
representations and warranties of Xxxxxx as set forth and contained herein and
Xxxxxx hereby agrees to indemnify and hold harmless Rick's against all damages,
costs, or expenses (including reasonable attorney's fees) arising as a result of
any breach of representation or warranty or omission made herein by Xxxxxx.
If any action is brought against Rick's in respect of which indemnity may
be sought against Xxxxxx pursuant to the foregoing paragraph, Rick's shall
promptly notify Xxxxxx in writing of the institution of such action (but the
omission to so notify Xxxxxx shall not relieve it from any liability that it may
have to Rick's except to the extent Xxxxxx is materially prejudiced or otherwise
forfeit substantive rights or defenses by reason of such failure), and Xxxxxx
shall assume the defense of such action, including the employment of counsel to
be chosen by Xxxxxx to be reasonably satisfactory to Rick's, and payment of
expenses. Rick's shall have the right to employ Xxxxxx'x or their own counsel
in any such case, but the fees and expenses of such counsel shall be at Rick's
expense, unless the employment of such counsel shall have been authorized in
writing by Xxxxxx in connection with the defense of such action, or Xxxxxx shall
not have employed counsel to take charge of the defense of such action, or
counsel employed by Xxxxxx shall not be diligently defending such action, or
Rick's shall have reasonably concluded that there may be defenses available to
it which are different from or additional to those available to Xxxxxx, or that
representation of Rick's by the same counsel would be inappropriate under
applicable standards of professional conduct due to actual or potential
differing interests between them (in which case Xxxxxx shall not have the right
to direct the defense of such action on behalf of Rick's), in any of which event
such fees and expenses shall be borne by Xxxxxx. Anything in this paragraph to
the contrary notwithstanding, Xxxxxx shall not be liable for any settlement of,
or any expenses incurred with respect to, any such claim or action effected
without Xxxxxx'x written consent, which consent shall not be unreasonably
withheld. Xxxxxx shall not, without the prior written consent of Rick's effect
any settlement of any proceeding in respect of which Rick's is a party and
indemnity has been sought hereunder unless such settlement includes an
unconditional release of Rick's from all liability on claims that are the
subject matter of such proceeding.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF RICK'S
Rick's hereby represents and warrant to the Stockholders as follows:
Section 5.1 Organization and Capitalization. Rick's is a corporation
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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 will own
at the Closing, and to perform its obligations under this Agreement. Rick's is
qualified as a foreign corporation and is in good standing in each jurisdiction
in which the failure to qualify would have a material adverse effect on the
business, properties or condition (financial or otherwise) of Rick's. Rick's
does not have any subsidiaries or any other investments or ownership interest in
any corporation, partnership, joint venture or other business enterprise, except
as set forth in Exhibit 5.2. Immediately prior to the Closing Date the
authorized capital stock of Rick's consists of (i) 15,000,000 shares of common
stock, $.01 par value of which 4,831,054 shares are validly issued and
outstanding, and (ii) 1,000,000 shares of preferred stock $.10 par value, none
of which are issued and outstanding. All of such issued and outstanding shares
of Rick's Stock have been and all of the shares of Rick's Stock to be issued
hereby will be, at the Closing, duly authorized and validly issued and are and
will be at the Closing fully paid and non-assessable. None of the shares that
were issued and none of the shares to be issued hereby will be in violation of
any preemptive rights. Rick's has no obligation to repurchase, reacquire or
redeem any of its outstanding capital stock. Rick's also has outstanding
1,160,000 warrants which are exercisable at prices ranging from $3.00 to $4.35
per share.
Section 5.2 Subsidiaries. Schedule 5.2 sets forth a complete and
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accurate list of all Subsidiaries of Rick's, showing (as to each such
Subsidiary) the date of its incorporation and the jurisdiction of its
incorporation. All of the outstanding capital stock of, or other ownership
interests in, each Subsidiary is owned by Rick's, directly or indirectly, free
and clear of any lien or any other limitation or limitation or restriction
(including restrictions on the right to vote). All outstanding shares of the
capital stock of any Subsidiary have been duly authorized and validly issued
and are fully paid and non-assessable and are free of any preemptive rights.
There are no outstanding securities of any Subsidiary convertible into or
evidencing the right to purchase or subscribe for any shares of capital stock of
any Subsidiary, there are no outstanding or authorized options, warrants, calls,
subscriptions, rights, commitments or any other agreements of any character
obligating any Subsidiary to issue any shares of its capital stock or any
securities convertible into or evidencing the right to purchase or subscribe for
any shares of such stock, and there are no agreements or understandings with
respect to the voting, sale, transfer or registration of any shares of capital
stock of any Subsidiary.
Section 5.3 Authorization. All corporate action on the part of Rick's
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necessary for the authorization, execution, delivery and performance of this
Agreement by Rick's has been taken or will be taken prior to the Closing.
Rick's has the requisite corporate power and authority to execute, deliver and
perform this Agreement. This Agreement has been duly executed and delivered by
Rick's, and constitutes a valid and binding obligation of Rick's, enforceable
against Rick's in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, and other laws of general application relating to or affecting
creditors' rights and to general equitable principles.
Section 5.4 Litigation. Except as set forth in Exhibit 5.4, there are
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no claims, actions, suits or proceedings, formal or informal, pending or, to the
best knowledge of Rick's, threatened against Rick's, nor is Rick's subject to
any order, judgment or decree, except in either case for matters which, in the
aggregate, would not result in a loss to Rick's in excess of $100,000.
Section 5.5 SEC Reports. During the last twelve months, Rick's has
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filed with the SEC all of the reports required to be filed with the SEC pursuant
to Section 15(d) of the Securities Exchange Act of 1934, as amended, through the
filing of its Form 10-QSB for the quarter ended March 31, 1998. Rick's has
delivered, and the Stockholders acknowledge receipt thereof, of Rick's Form
10-KSB for the fiscal year ended September 30, 1997, its 10-QSB's for the three
month periods ended December 31, 1997 and March 31, 1998 ("SEC Filings"). To the
best of Rick's knowledge, as of their respective dates, the SEC Filings did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Section 5.6 Taxes. Rick's has filed all federal, state or local tax
-----
returns and reports due or required to be filed and has paid all taxes, interest
payments and penalties, if any, required to be paid with respect thereto, and
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 is not
delinquent in the payment of any material tax or governmental charge of any
nature.
Section 5.7 Financial Information. Rick's has delivered to the
----------------------
Stockholders the audited balance sheet of Rick's as of September 30, 1997,
together with the related statements of income, changes in shareholder's equity
and cash flow for the years then ended, including the related notes, all
certified by Xxxxxxx & Xxxxxx, P.C., certified public accountants. In addition,
Rick's has delivered to the Stockholders its interim unaudited financial
statements as filed with the SEC for the three month periods ended December 31,
1997 and March 31, 1998 (the audited balance sheet and interim financial
statements are collectively referred to the as the "Financial Statements").
Such Financial Statements, including the related notes, are in accordance with
the books and records of Rick's and fairly present the financial position of
Rick's and the results of operations and changes in financial position of Rick's
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,
Rick's 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, there will not have been any adverse change in the financial
condition or other operations, business, properties or assets of Rick's in
excess of $100,000 from that reflected in the latest financial statements of
Rick's furnished to the Stockholders pursuant hereto.
Section 5.8 Compliance with Laws. Except as set forth in Exhibit 5.8,
--------------------
Rick's is, and at all 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 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 Rick's and Rick's has no basis to expect, nor has
received, any order or notice of any such violation or claim of violation of any
such statute, order, rule, ordinance or regulation.
Section 5.9 Title to Properties; Encumbrances. Rick's has good and
------------------------------------
marketable title to all of its properties and assets, real and personal,
tangible and intangible, that are material to the condition (financial or
otherwise), business, operations or prospects of Rick's, free and clear of all
mortgages, claims, liens, security interests, charges, leases, encumbrances and
other restrictions of any kind and nature, except (i) as specifically disclosed
in Exhibit 5.9, (ii) as disclosed in the Financial Statements of Rick's, (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.
Section 5.10 Disclosure. Except as set forth in Exhibit 5.10, to the
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best of Rick's knowledge, no representation or warranty of Rick's contained in
this Agreement (including the exhibits and schedules hereto) contains any untrue
statement of a material fact 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 5.11 No Default. The execution, delivery and performance of
-----------
this Agreement by Rick's does not and will not constitute a violation or default
under or conflict with any contract, agreement, understanding or commitment to
which it is a party or by which it is bound or the Certificate of Incorporation
or By-Laws of Rick's or any statute, regulation, law, ordinance, judgment,
decree, writ, injunction, order or ruling of any government entity.
Section 5.12 Pending Claims. There is no claim, suit, action or
---------------
proceeding, whether judicial, administrative or otherwise, pending or, to the
best of Rick's's knowledge, threatened that would preclude or restrict the
transfer to the Stockholders of the Rick's Stock or the performance of this
Agreement by Rick's.
Section 5.13 Insurance . Rick's and its Subsidiaries maintain adequate
---------
insurance with respect to their respective businesses and are in compliance with
all material requirements and provisions thereof.
Section 5.14 Employee Benefit Plans . Rick's is not a party to any
------------------------
employee benefit plan.
Section 5.15 No Pending Transactions . Except for the transactions
-------------------------
contemplated by this Agreement, neither Rick's nor any Subsidiary 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 Rick's or any Subsidiary, (ii) the
sale of all or substantially all of the assets of Rick's or any Subsidiary, or
(iii) a change of control of more than five percent of the outstanding capital
stock of Rick's or any Subsidiary.
Section 5.16 No Undisclosed Liabilities . to the best of its
----------------------------
knowledge, neither Rick's nor or any Subsidiary has any obligation or liability
(contingent or otherwise) that would be required to be reflected in the
financial statements of the Company in accordance with GAAP except as reflected
in Rick's Balance Sheet.
Section 5.17 Indemnification by Rick's Rick's recognizes that the
---------------------------
Exchange being conducted with the Stockholders is based, to a material degree,
upon the representations and warranties of Rick's as set forth and contained
herein and Rick's hereby agrees to indemnify and hold harmless the Stockholders
against all damages, costs, or expenses (including reasonable attorney's fees)
arising as a result of any breach of representation or warranty or omission made
herein by Rick's.
If any action is brought against Rick's, the Stockholders (collectively the
"Indemnified Parties") in respect of which indemnity may be sought against
Rick's pursuant to the foregoing paragraph, the Indemnified Parties shall
promptly notify Rick's in writing of the institution of such action (but the
omission to so notify Rick's shall not relieve it from any liability that it may
have to such Indemnified Parties except to the extent Rick's is materially
prejudiced or otherwise forfeits substantive rights or defenses by reason of
such failure), and Rick's shall assume the defense of such action, including the
employment of counsel to be chosen by Rick's to be reasonably satisfactory to
the Indemnified Parties, and payment of expenses. The Indemnified Parties shall
have the right to employ Rick's or their own counsel in any such case, but the
fees and expenses of such counsel shall be at the Indemnified Party's expense,
unless the employment of such counsel shall have been authorized in writing by
Rick's in connection with the defense of such action, or Rick's shall not have
employed counsel to take charge of the defense of such action, or counsel
employed by Rick's shall not be diligently defending such action, or the
Indemnified Parties shall have reasonably concluded that there may be defenses
available to it which are different from or additional to those available to
Rick's, or that representation of such Indemnified Party and Rick's by the same
counsel would be inappropriate under applicable standards of professional
conduct due to actual or potential differing interests between them (in which
case Rick's shall not have the right to direct the defense of such action on
behalf of the Indemnified Parties), in any of which event such fees and expenses
shall been borne by Rick's. Anything in this paragraph to the contrary
notwithstanding, Rick's shall not be liable for any settlement of, or any
expenses incurred with respect to, any such claim or action effected without
Rick's written consent, which consent shall not be unreasonably withheld.
Rick's shall not, without the prior written consent of the Indemnified Parties
effect any settlement of any proceeding in respect of which any Indemnified
Parties is a party and indemnity has been sought hereunder unless such
settlement includes an unconditional release of such Indemnified Parties from
all liability on claims that are the subject matter of such proceeding.
ARTICLE VI
CLOSING; DELIVERY
Section 6.1(a) Closing Documents of the Stockholders. The obligations
-------------------------------------
of Rick's to effect the transactions contemplated hereby are subject to the
delivery by the Stockholders at Closing of each of the following documents:
(i) The Stockholders shall have delivered certificates evidencing their
Taurus Common Stock duly endorsed for transfer by the Stockholders to Rick's as
contemplated by this Agreement, in form and substance satisfactory to counsel
for Xxxxx.
(ii) The Stockholders shall have executed and delivered to Xxxxx the
Subscription Agreement as contemplated by Section 3.7 hereof.
Section 6.1(b) Closing Documents of Xxxxx. The obligations of the
-----------------------------
Stockholders to effect the transactions contemplated hereby are subject to each
of the following conditions:
(i) Rick's shall have delivered either (i) certificates evidencing
Rick's Common Stock, duly executed for issuance by Rick's to the Stockholders as
contemplated by this Agreement or (ii) letter of instructions from a duly
authorized officer of Rick's to American Securities Transfer, Inc. (Rick's's
transfer agent), instructing the transfer agent to duly issue stock certificates
evidencing the shares of Common Stock of Rick's to the Stockholders, all as
contemplated by this Agreement, in form and substance satisfactory to counsel
for the Stockholders.
(ii) Xxxxx shall agree to undertake to file with the Nasdaq Stock
Market, Inc., within 10 days of Closing, a Listing for Additional
Shares which will list the Xxxxx Stock to be issued to the Stockholders
at Closing.
Section 6.1 (c) Conditions to the Obligations of Xxxxx and the
-----------------------------------------------------
Stockholders. The obligations of Xxxxx and the Stockholders to effect the
------------
transactions contemplated hereby are further subject to the following condition:
(i) The Board of Directors of Xxxxx shall have approved and authorized
the transactions contemplated herein.
(ii) No action, suit or proceeding by or before any court or any
governmental or regulatory authority shall have been commenced or threatened,
and no investigation by any governmental or regulatory authority shall have been
commenced or threatened, seeking to restrain, prevent or challenge the
transactions contemplated hereby or seeking judgments against Rick's or the
Stockholders.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Notices. All notices and other communications provided
-------
for herein shall be in writing and shall be deemed to have been duly given if
delivered personally or sent by registered or certified mail, return receipt
requested, postage prepaid, or overnight air courier guaranteeing next day
delivery:
(a) If to Rick's:
Rick's Cabaret International, Inc.
Xx. Xxxxxx X. Xxxxxxx
0000 Xxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Fax: (000) 000-0000
With a copy to:
Xxxxxx X. Xxxxxxx
Xxxxxxx, Xxxxx & Xxxxxxxxx
0000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Fax: (000) 000-0000
(b) If to the Stockholders, to:
The addresses listed on Exhibit A, attached hereto.
With a copy to:
Xxxxxx Xxxxxxxxx
Xxxxxx & Xxxxxxxxx
Texas Heritage Building
0000 Xxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxx 00000
Fax: (000) 000-0000
All notices and communications shall be deemed to have been duly given: at
the time delivered by hand, if personally delivered; three days after being
deposited in the mail, postage prepaid, sent certified mail, return receipt
requested, if mailed; and the next day after timely delivery to the courier, if
sent by overnight air courier guaranteeing next day delivery.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
Section 7.2 Assignment. Neither this Agreement nor any of the rights,
----------
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties, which consent will not
be unreasonably withheld. 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.
Section 7.3 Counterparts. This Agreement may be executed in any number
------------
of counterparts, which taken together shall constitute one and the same
instrument and each of which shall be considered an original for all purposes.
Section 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.
Section 7.5 Entire Agreement. This Agreement, the documents to be
-----------------
executed hereunder and the exhibits and schedules 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 and schedules referred to in this Agreement are hereby
incorporated into this Agreement by reference and constitute a part of this
Agreement.
Section 7.6 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.
Section 7.7 Survival. The respective representations, warranties,
--------
covenants and agreements set forth in this Agreement shall survive the Closing
for a period of one year from the execution hereof.
Section 7.8 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
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 to
make such public announcement or statement, then such announcement or statement
may be made without the approval of the other parties.
Section 7.9 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.
Section 7.10 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.
Section 7.11 Costs and Expenses. Rick's and the Stockholders shall
--------------------
each pay their own respective fees and disbursements incurred in connection with
this Agreement.
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.
RICK'S CABARET INTERNATIONAL, INC.
By:__________________________________
Xxxxxx X. Xxxxxxx, President
STOCKHOLDER(S):
_____________________________________
(Signature)
_____________________________________
(Printed Name)
Address:_____________________________
_____________________________________
_____________________________________
STOCKHOLDER(S):
_____________________________________
(Signature)
_____________________________________
(Printed Name)
Address:_____________________________
_____________________________________
_____________________________________
