NON-COMPETITION AGREEMENT
Exhibit
10.4
This
Non-Competition Agreement dated September 4, 2008 (the "Non-Competition
Agreement"), is by and among Rick’s Cabaret International, Inc., a Texas
corporation, (“Rick’s”), its wholly owned subsidiary, RCI
Entertainment (Las Vegas), Inc., a Nevada corporation (the “Buyer”) and Xxxxxx
XxXxxx (“XxXxxx”), a Nevada resident (sometimes collectively referred to as the
“Parties”).
W
I T N E S S E T H:
WHEREAS, the parties entered
into an Asset Purchase Agreement dated April 17, 2008 , as subsequently amended
(the “Asset Purchase Agreement”), between the Buyer, Rick’s, D.I. Food and
Beverage of Las Vegas, LLC, a Nevada limited liability company (the “Seller”)
and Xxxxxx Xxxxxx (“Danzig”), Xxxxx Xxxxxx (“Xxxxxx”) and XxXxxx pursuant to
which Buyer will acquire substantially all of the assets of Seller in accordance
with the terms and conditions thereof (the “Transaction”); and
WHEREAS, Seller owns and
operates an adult entertainment cabaret known as “SCORES” (“SCORES” or the
“Business”), located at 0000 Xxxxxxx Xxxxxx, Xxx Xxxxx, Xxxxxx 00000 (the “Real
Property”); and
WHEREAS, pursuant to the terms
and conditions of the Asset Purchase Agreement, Seller has agreed to sell to
Buyer all of the assets related to the Business (the “Acquisition”);
and
WHEREAS, XxXxxx is a member of
the Seller and will benefit from the Transaction; and
WHEREAS, in connection with
the Transaction, Buyer has agreed to pay Seller consideration as more fully
described in the Asset Purchase Agreement; and
WHEREAS, Buyer and Rick’s
require that XxXxxx enter into this Non-Competition Agreement as a condition to
Buyer and Rick’s entering into the Transaction; and
WHEREAS, Buyer and Rick’s have
agreed to pay to XxXxxx, upon the execution hereof, an additional cash
consideration of $66,667 (the “Cash Consideration”) for entering into this
Non-Competition Agreement; and
WHEREAS, XxXxxx agrees to
enter into this Non-Competition Agreement in consideration of acts and payments
on the part of Buyer and Rick’s as contemplated by the Transaction and by this
Non-Competition Agreement; and
WHEREAS, all terms not defined
herein shall have the meaning set forth in the Asset Purchase
Agreement.
NOW, THEREFORE, in
consideration of the premises, the closing of the Transaction, the Cash
Consideration and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Definitions. "Proprietary
and confidential information" means information that is kept as confidential
including, but not limited to (i) financial information, consisting of financial
cost, and sales data and other information of SCORES; (ii) personnel information
of SCORES; (iii) and lists, whether written or in electronic form, of customers
and accounts, contracts, sales information, pricing lists, vendor and supplier
lists of SCORES. Proprietary and confidential information shall not
include information available to the public through no fault of XxXxxx or
information required to be disclosed by court order. Proprietary and
confidential information under this Agreement is also not intended to, nor shall
it include (a) information XxXxxx knew or possessed prior to his affiliation
with SCORES; (b) information XxXxxx obtained through other business operations;
(c) information not specific to SCORES, but used by XxXxxx in other business
operations, including, but not limited to Scores (Chicago), the Penthouse Club
and/or Scores (Los Angeles); or (d) other general industry knowledge possessed
by XxXxxx by virtue of his experience in the nightclub/adult entertainment
business.
By way of
illustration only, proprietary and confidential information is meant to cover
written or electronic lists of customers and accounts, contracts, sales
information, pricing lists, vendor and supplier lists that are in the possession
of or maintained by SCORES. The Parties acknowledge that XxXxxx is
not allowed to remove, replicate or maintain such any such lists after the
Transition (except for purposes relating to his Consulting
Agreement). The Parties further acknowledge, however, that XxXxxx may
possesses such information through his other businesses and/or through his
general knowledge of the industry and that such knowledge and/or information is
not considered proprietary and confidential information for SCORES under this
Agreement. The Parties further acknowledge that XxXxxx may possess
information relating to SCORES that is combined with information relating to
other business operations of which he is a member (e.g. comparative financial
information). XxXxxx is not required by virtue of this Agreement to
turn over or destroy such information, provided it is not used in violation of
this Agreement.
2. Non-Disclosure and
Confidentiality Covenants. XxXxxx acknowledges that
the proprietary and confidential information of SCORES, as it exists
from time to time, is valuable to SCORES' business. Additionally,
XxXxxx acknowledges that the business goodwill and business contacts
of SCORES are being sold, transferred and conveyed to the Buyer and
will become the sole property of the Buyer and are among the most valuable
business assets being sold, transferred and conveyed to Buyer. Buyer
acknowledges that an inseparable, but indeterminate amount of business goodwill
and business contacts are possessed by XxXxxx individually and not by SCORES and
that XxXxxx is not, and cannot, transfer such goodwill and contacts entirely
without losing his ability to work in the nightclub/adult entertainment
industry. Therefore, in consideration of the mutual promises herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and to protect the foregoing
valuable property of SCORES, XxXxxx expressly covenants and agrees as
follows:
XxXxxx
will not:
(1) Disclose,
directly or indirectly, proprietary and confidential information, or
any part thereof, to any person, firm, corporation, association or other entity
for any reason or purpose whatsoever; or
(2) Directly
or indirectly use any of the SCORE's proprietary and confidential
information.
3. Covenant
Not to Compete. For a period of twenty-four (24) months after
the date of execution of this Non-Competition Agreement (the “Term”), XxXxxx
specifically agrees that he will not, for himself, on behalf of or in
conjunction with any person, firm, corporation or entity (either as principal,
employee, shareholder, member, director, officer, partner, consultant, owner or
part owner of any corporation, partnership or any type of business entity),
directly or indirectly, whether for compensation or not, compete
with Buyer or the club known as SCORES by owning or sharing in the
earnings of, carrying on, managing, operating, controlling, being engaged in,
rendering services to, soliciting customers for, participating in or otherwise
being connected with, any business engaged in the operation of an establishment
providing live female nude or semi-nude adult entertainment in Xxxxx County,
Nevada or in a radius of 25 miles of Xxxxx County, Nevada; provided, however,
that this Non-Competition Agreement shall specifically exclude the Penthouse
Club and Bada Bing Club located in Xxxxx County, Nevada.
4. Covenant
of Non-Solicitation and Employment of Employees and Independent
Contractors. During the Term hereof and within Xxxxx County,
Nevada and a radius of 25 miles of Xxxxx County, Nevada, XxXxxx agrees not to
solicit or induce or attempt to solicit or induce any employee, independent
contractor, or agent or consultant of Buyer, or SCORES to leave his or her
employment or terminate his or her agreement or relationship or independent
contractor relationship with the Buyer or SCORES. The Parties
acknowledge that some SCORES employees, independent contractors, agents and/or
consultants have long-standing relationships with XxXxxx and that it is
conceivable, although currently not contemplated by or known to XxXxxx, that
such persons may contact XxXxxx seeking employment. In such an event,
and expressly provided that XxXxxx does not initiate contact with such a person,
it is not a breach of this Agreement for such employees to be hired at Penthouse
Club and Bada Bing Club, provided however, if XxXxxx is contacted by an existing
employee of SCORES or Buyer for employment then he shall not encourage, induce
or take and steps or actions to cause such person to be employed and will notify
the Buyer immediately upon such contact.
5. Acknowledgments
and Agreements of XxXxxx. XxXxxx
acknowledges and agrees that:
|
|
(a)
|
Due
to the nature of Rick’s and Buyer’s business, the foregoing covenants
place no greater restraint upon XxXxxx than is reasonably necessary to
protect the business and goodwill of Rick’s or the
Buyer;
|
|
|
(b)
|
These
covenants protect a legitimate interest of Rick’s and the Buyer and do not
serve solely to limit Rick’s and the Buyer’s future
competition;
|
Non-Competition
Agreement - Page 3
|
|
(c)
|
This
Non-Competition Agreement is not an invalid or unreasonable restraint of
trade;
|
|
|
(d)
|
A
breach of these covenants by XxXxxx would cause irreparable damage to
Rick’s and Buyer;
|
|
|
(e)
|
These
covenants will not preclude XxXxxx from becoming gainfully employed
following the closing of the Asset Purchase
Agreement;
|
|
|
(f)
|
These
covenants are reasonable in scope and are reasonably necessary to protect
Rick’s and the Buyer’s business and goodwill and valuable and extensive
trade which Rick’s has established through its own expense and
effort;
|
|
|
(g)
|
The
signing of this Non-Competition Agreement is necessary as part of the
consummation of the Transaction previously discussed;
and
|
|
|
(h)
|
XxXxxx
has carefully read and considered all provisions of this Non-Competition
Agreement and agrees that all of the restrictions set forth are fair and
reasonable and are reasonably required for the protection of the interests
of Rick’s and the Buyer.
|
6. Remedies,
Injunction. In the event of
an actual breach of any provisions of this Non-Competition Agreement by XxXxxx,
XxXxxx agrees that Rick’s and the Buyer shall be entitled to a temporary
restraining order, preliminary injunction and/or permanent injunction
restraining and enjoining XxXxxx from violating the provisions
herein. Nothing in this Non-Competition Agreement shall be construed
to prohibit Rick’s or Buyer from pursuing any other available remedies for such
breach, including, without limitation, the recovery of damages, including
actual, indirect, incidental, consequential or punitive damages or lost or
imputed profits from XxXxxx. XxXxxx further agrees that, for the
purpose of any such injunction proceeding, it shall be presumed that Rick’s and
the Buyer’s legal remedies would be inadequate and that Rick’s and the Buyer
would suffer irreparable harm as a result of any violation of the provisions of
this Non-Competition Agreement by XxXxxx.
7. Severability. In the event that
any of the provisions of this Non-Competition Agreement are held to be invalid
or unenforceable in whole or in part, those provisions to the extent enforceable
and all other provisions shall nevertheless continue to be valid and enforceable
as though the invalid or unenforceable parts had not been included in this
Non-Competition Agreement. In the event that any provision relating
to the time period or scope of a restriction shall be declared by a court of
competent jurisdiction to exceed the maximum time period or scope such court
deems reasonable and enforceable, then the time period or scope of the
restriction deemed reasonable and enforceable by the court shall become and
shall thereafter be the maximum time period or the applicable scope of the
restriction. XxXxxx further agrees that such covenants and/or any
portion thereof are severable, separate and independent, and should any specific
restriction or the application thereof, to any person, firm, corporation, or
situation be held to be invalid, that holding shall not affect the remainder of
such provisions or covenants.
8. General
Provisions.
|
|
(a)
|
Notices. Any
notices to be given hereunder by either party to the other may be effected
either by personal delivery in writing or by mail, registered or
certified, postage prepaid with return receipt requested or by a
recognized overnight delivery service. Mailed notices shall be
addressed to the parties at the addresses set forth below, but each party
may change their address by written notice in accordance with this
Paragraph (a). Notices delivered personally shall be
deemed communicated as of actual receipt; mailed notices shall be deemed
communicated as of three (3) days after mailing; and overnight delivery
service shall be deemed delivered one (1) day after depositing with the
overnight delivery service.
|
Non-Competition
Agreement - Page 4
|
|
If
to Rick’s or Buyer:
|
Xxxx
Xxxxxx,
President
|
00000
Xxxxxx Xxxx
Xxxxxxx,
Xxxxx 00000
|
|
With
a copy to:
|
Xx.
Xxxxxx X. Xxxxxxx
|
Xxxxxxx,
Xxxxx & Xxxxxxxxx
0000
Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx,
Xxxxx 00000
|
|
If
to XxXxxx:
|
Xxxxxx
XxXxxx
|
_____________________
_____________________
|
|
With
a copy to:
|
Xxxxx
X. Xxxxxxx
|
Xxxxx
Xxxxx
00 Xxxx
Xxxxxx Xxxxxx
Xxxxx
0000
Xxxxxxx,
Xxxxxxxx 00000
|
|
(b)
|
Law Governing Non-Competition
Agreement and Venue. This Non-Competition Agreement
shall be governed by, and construed in accordance with, the laws of the
State of Nevada, without regard to principles of conflict of
laws. In any action between the Parties, each of the Parties
consents to the exclusive jurisdiction and venue of the federal and state
courts located in Xxxxx County,
Nevada.
|
|
|
(c)
|
Execution. This
Agreement may be executed in two or more counterparts, all of which when
taken together shall be considered one and the same agreement and shall
become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need
not sign the same counterpart. In the event that any signature
is delivered by facsimile transmission or by e-mail delivery of a “.pdf”
format data file, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile or “.pdf”
signature page were an original
thereof.
|
Non-Competition
Agreement - Page 5
|
|
(d)
|
Contract Terms to be
Exclusive. This Non-Competition Agreement contains the
sole and entire agreement between the parties and shall supersede any and
all other agreements between the parties with respect to the agreement of
XxXxxx not to compete with Rick’s or the Buyer or
SCORES.
|
|
|
(e)
|
Waiver or Modification
Ineffective Unless in Writing. It is further agreed that
no waiver or modification of this Non-Competition Agreement or of any
covenant, condition, or limitation herein contained shall be valid unless
in writing and duly executed by the party to be charged therewith and that
no evidence of any waiver or modification shall be offered or received in
evidence in any proceeding or litigation between the parties hereto
arising out of or affecting this Non-Competition Agreement, or the rights
or obligations of any party hereunder, unless such waiver or modification
is in writing, duly executed as
aforesaid.
|
|
|
(f)
|
Assignment. The
rights and benefits of Rick’s and the Buyer under this Non-Competition
Agreement shall inure to the benefit of and be binding upon the successors
and assigns of Rick’s and the Buyer. The rights of XxXxxx
hereunder are personal and nontransferable except that the rights and
benefits hereof shall inure to the benefit of the heirs, executors and
legal representatives of XxXxxx.
|
|
|
(g)
|
Binding
Effect. Except as otherwise provided herein, this
Non-Competition Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and
assigns.
|
[SIGNATURES
ON FOLLOWING PAGE]
Non-Competition
Agreement - Page 6
IN
WITNESS WHEREOF, this Non-Competition Agreement has been executed as of the
4th
day of September, 2008.
|
RICK’S
CABARET INTERNATIONAL, INC.
|
||
|
By:
|
/s/ Xxxx Xxxxxx
|
|
|
Xxxx
Xxxxxx, President
|
||
|
RCI
ENTERTAINMENT (LAS VEGAS), INC.
|
||
|
By:
|
/s/ Xxxx Xxxxxx
|
|
|
Xxxx
Xxxxxx, President
|
||
|
/s/ Xxxxxx XxXxxx
|
||
|
Xxxxxx
XxXxxx, Individually
|
||
Non-Competition Agreement -
Page 7
