ESCROW AGREEMENT
Exhibit
10.3
THIS
ESCROW AGREEMENT made as of this 11th day of April, 2008, by and among Rick’s Cabaret International,
Inc., a Texas corporation (“Rick’s”), Xxxxx Xxxxxxx (“Xxxxxxx”), Xxxxxxx Xxxxx (“Xxxxx”), Xxxxxxx XxXxxxx (“XxXxxxx”)
(individually a “Seller” and collectively the “Sellers”), Rick’s and Sellers
being collectively referred to as the “Parties” or individually referred to as a
“Party,” and Xxxxxx X. Xxxxxxx,
P.C., as the Escrow Agent (“Escrow Agent”), having an address at 0000
Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000.
WITNESSETH
WHEREAS,
the Sellers, Hotel Development – Texas, Ltd., a Texas limited partnership
(“Hotel Development”), HD Texas Management, LLC, a Texas limited liability
company (“HD”), DPC Holdings, LLC, a Texas limited liability company (“DPC”),
Illusions-Dallas Private Club, Inc., a not-for-profit Texas corporation
(“Illusions”), RCI Entertainment (Dallas), Inc., a Texas corporation (“Buyer”)
and RCI Holdings, Inc., a Texas corporation (“RCI”) entered into a Purchase
Agreement dated March 4, 2008 (the “Purchase Agreement”) pursuant to which Buyer
would acquire 100% of the limited partnership interest in Hotel Development and
100% of the membership interest in HD and pursuant to which RCI would acquire
the Real Property (as hereinafter defined); and
WHEREAS
Hotel Development owns an adult entertainment cabaret known as “The Executive
Club” (the “Club”) located at 0000 Xxxxx Xxxxxxxx Xxxxxxx, Xxxxxx, Xxxxx 00000
(the “Real Property”); and
WHEREAS,
the Parties entered into an Amendment to Purchase Agreement dated April 11,
2008, (the “Amendment”) pursuant to which Messrs. Xxxxxxx, Xxxxx and XxXxxxx
have each agreed to deposit in escrow 3,500 shares of common stock of Rick’s,
$0.01 par value, issued by Rick’s to each of the Sellers pursuant to the
Purchase Agreement, for an aggregate of 10,500 shares (collectively the 10,500
shares of Rick’s common stock are hereinafter referred to as the “Escrow Shares”
or “Escrow Stock”); and
WHEREAS,
in connection with the execution of the Amendment, it is necessary to establish
an escrow for the Escrow Stock; and
WHEREAS,
the Parties desire that Xxxxxx X. Xxxxxxx, P.C. serve as the Escrow Agent in
connection with this Escrow Agreement.
NOW
THEREFORE, in consideration of the foregoing recitals and the mutual covenants
and obligations herein contained, the Parties agree hereto as
follows:
1.
Escrow of
Escrow Shares. At the time of executing this Escrow Agreement,
the Escrow Agent shall have been delivered the following:
|
|
(a)
|
Certificates
representing the Escrow Shares, consisting of three (3) separate stock
certificates, each representing 3,500 shares of common stock of Rick’s
issued to each of Messrs. Xxxxxxx, Xxxxx and XxXxxxx, respectively, or
letters of instruction to the transfer agent to forward the Escrow Shares
directly to the Escrow Agent;
|
|
|
(b)
|
Stock
powers for the Escrow Shares, fully executed by each Seller covering the
certificates delivered in escrow. The stock powers, along with
the Escrow Shares, shall hereinafter be collectively referred to as the
"Escrowed Documents."
|
|
|
(c)
|
Each
Seller, by the delivery of the Escrow Shares to the Escrow Agent, does
hereby acknowledge and represent that the Escrow Shares are owned,
beneficially and of record, by such Seller, free and clear of any liens,
claims, equities, charges, options, rights of first refusal or
encumbrances and, further, acknowledges and represents that he has the
unrestricted right and power to transfer, convey and deliver full
ownership of his portion of the Escrow Shares (3,500 shares for each
Seller) without the consent, agreement or joinder of any other person and
without any designation, declaration or filing with any governmental
authority.
|
2.
Conditions
for Release from Escrow. The Escrow Agent is hereby instructed
to receive and hold the Escrowed Documents in escrow. The Escrowed
Documents shall not be released or dealt with in any manner whatsoever
inconsistent with this Escrow Agreement, unless the Escrow Agent
shall receive other written instructions executed by Rick’s and each
Seller. Absent contrary written instructions, the Escrow Agent shall
deliver the Escrow Documents to the Sellers or Rick’s, as the case may be, as
follows:
|
|
(a)
|
In
the event Rick’s is entitled to indemnification in accordance with
Paragraph 8.1 of the Purchase Agreement, or in the event that Rick’s or
Buyer becomes obligated to make payments under any pending litigation
against either the Sellers, Hotel Development, HD, DPC or Illusions or
makes any payment for existing claims related to the business operation of
Hotel Development, HD, DPC, Illusions or the Club, which claims occurred
prior to the Closing Date, then the Escrow Shares shall be offset by
Rick’s on the basis of $25.00 per share. A determination will
be made as to the amount owed pursuant to this Paragraph 2(a), and the
number of shares of Rick’s common stock to be forfeited, returned to and
cancelled by Rick’s in satisfaction of the indemnification or claim shall
be calculated on a basis of $25.00 per share and shall be forfeited,
returned to and cancelled by Rick’s on an equal pro rata basis among all
of the Sellers.
|
|
|
(b)
|
The
Escrow Agent shall release at the end of the Escrow Period (as defined
herein) the Escrow Documents remaining in escrow which are in the name of
each respective Seller upon receipt by the Escrow Agent of a written
statement from Rick’s that no liabilities arose during the Escrow Period
for which Rick’s was responsible for as provided in Paragraph 2(a) above,
and that no claims or disputes arose and no settlement funds or expenses
were expended by Rick’s during the Escrow Period as provided for in
Paragraph 2(a) above, provided that the Escrow Agent may retain the Escrow
Shares for a period of up to thirty (30) days after the end of the Escrow
Period if Rick’s is in the process of determining if any claims or dispute
arose pursuant to Paragraph 2(a) above which remains
unresolved.
|
|
|
(c)
|
Upon
receipt by the Escrow Agent of any written statement from Rick’s that a
claim has been asserted pursuant to Paragraph 2(a) above, then the Escrow
Agent shall give written notice of such fact, together with a copy of the
written statement, to each of the Sellers within three (3) business
days. If no objection is received by the Escrow Agent from any
of the Sellers within five (5) business days following such notification,
the Escrow Agent shall release the Escrow Documents in accordance with
Paragraph 2(a). If an objection is received within five (5)
business days, the Escrow Agent shall so notify each of the Parties of
such fact. In such event the Escrow Agent may, but shall not be
required, to submit the dispute to Arbitration as provided for in
Paragraph 12(a) hereof. Attorney’s fees and costs of
court shall be borne by the party losing any action brought to recover the
Escrowed Documents.
|
|
|
(d)
|
In
the event that the shareholders of Rick’s are requested to vote on any
matter while any Escrow Shares are held in Escrow, the Escrow Shares shall
be voted by the respective Seller in whose name the Escrow Shares are
owned.
|
3.
Escrow
Period and Delivery. The escrow period shall commence on the
date of the execution of this Escrow Agreement, which shall be the same date as
the date of the Closing of the Purchase Agreement, and shall continue for a
period of two (2) years or until the final disposition of the Escrowed Documents
(the “Escrow Period”) in accordance with the terms of this Escrow Agreement (the
“Termination"). Once the Escrow Agent has delivered the Escrowed
Documents in accordance with the terms of this Escrow Agreement, its duties
pursuant to this Escrow Agreement shall be completed and it shall have no
further responsibility whatsoever hereunder.
4.
Each Seller hereby agrees that so long as the Escrow
Stock is held in escrow pursuant to this Escrow Agreement, he will not take any
action to cancel, sell, pledge, assign, dispose of or otherwise transfer the
Escrow Stock, except as otherwise provided by this Escrow
Agreement. If Rick’s declares a cash dividend or stock dividend or if
Rick’s splits or subdivides its shares of common stock or issues any shares of
its common stock in a reclassification then any cash dividend or stock dividend
to which each Seller would be entitled shall be issued directly to the Escrow
Agent to hold in escrow in accordance with the terms and conditions of this
Escrow Agreement.
5.
The Escrow Agent is hereby authorized to exchange the share
certificates delivered to it for any number and any denomination of share
certificates that the Escrow Agent, in its sole discretion, requires to enable
it to release the Escrow Stock as required pursuant to this Escrow
Agreement.
Escrow
Agreement - Page 3
6.
The Escrow Agent shall have no duties or obligations other
than those specifically set forth herein or required by law. The
acceptance by the Escrow Agent of its duties under this Escrow Agreement is
subject to the terms and conditions hereof, which shall govern and control with
respect to its rights, duties, liabilities and immunities.
7.
Rick’s and the Sellers understand and agree that Escrow Agent
is not a principal, participant, or beneficiary of the underlying transactions
which necessitate this Escrow Agreement. The Escrow Agent shall be
obligated only for the performance of such duties as are specifically set forth
herein and may rely and shall be protected in acting or refraining from acting
on any instrument reasonably believed by it to be genuine and to have been
signed or presented by the proper Party or Parties, their officers,
representatives or agents. So long as the Escrow Agent has acted in
good faith or on the advice of counsel or has not been guilty of willful
misconduct, the Escrow Agent shall have no liability under, or duty to inquire
beyond the terms and provisions of this Escrow Agreement, and it is agreed that
its duties are purely ministerial in nature. Escrow Agent shall in no
event be liable for any exemplary or consequential damages, the Parties
understanding that this limitation is provided for in view of the fact that
Escrow Agent will receive no compensation (other than reimbursement for
expenses), for its services hereunder.
8.
The Escrow Agent shall not be
obligated to take any legal actions hereunder against any third party who is not
a party to this Escrow Agreement which might, in the Escrow Agent's judgment,
involve any expense or liability, unless the Escrow Agent shall have been
furnished with reasonable indemnity.
9.
The Escrow Agent is not bound in any way by any other contract or
agreement between or among the Parties hereto whether or not the Escrow Agent
has knowledge thereof of its terms and conditions and the Escrow Agent's only
duty, liability and responsibility shall be to hold and deal with the Escrowed
Documents as herein directed.
10. The
Escrow Agent shall not be bound by any modification, amendment, termination,
cancellation, rescission or supersession of this Escrow Agreement unless the
same shall be in writing and signed by all of the other Parties hereto and, if
its duties as Escrow Agent hereunder are affected thereby, unless it shall have
given prior written consent thereto.
11. The
Parties hereto each jointly and severally agree to indemnify the Escrow Agent
against and hold the Escrow Agent harmless from anything which the Escrow Agent
may do or refrain from doing in connection with its performance or
non-performance as Escrow Agent under this Escrow Agreement and any and all
losses, costs, damages, expenses, claims and reasonable attorneys' fees suffered
or incurred by the Escrow Agent as a result of, in connection with or arising
from or out of the acts of omissions of the Escrow Agent in performance of or
pursuant to this Escrow Agreement, except such acts or omissions as may result
from the Escrow Agent's willful misconduct.
Escrow
Agreement - Page 4
12. In
the event of any disagreement between Rick’s and the Sellers or any or either of
them concerning this Escrow Agreement or between them, or demands
being made in connection with the Escrow Stock, or in the event that the Escrow
Agent is in doubt as to what action the Escrow Agent should take hereunder, the
Escrow Agent may, at its option, refuse to comply with any claims or demands on
it, or refuse to take any other action hereunder, so long as such disagreement
continues or such doubt exists, and in any such event, the Escrow Agent shall
not be or become liable in any way or to any person for its failure or refusal
to act, and the Escrow Agent shall be entitled to continue so to refrain from
acting until:
|
|
(a)
|
the
rights of Rick’s and the Sellers shall have been settled finally,
completely and conclusively by arbitration in Texas in accordance with the
Commercial Arbitration Rules of the American Arbitration Association (the
"Rules"). The governing law of this Agreement shall be the
substantive law of the State of Texas, without giving effect to conflict
of laws. A decision of the arbitrator shall be final,
conclusive and binding on Rick’s and the Sellers. Any
arbitration held in accordance with this paragraph shall be private and
confidential and no person shall be entitled to attend the hearings except
the arbitrator, the Sellers, the Sellers’ attorneys, representatives of
Rick’s, Rick’s attorneys, the Escrow Agent and its attorneys and advisors
to or witnesses for any party. The matters submitted to
arbitration, the hearings and proceedings and the arbitration award shall
be kept and maintained in the strictest confidence by the parties hereto
and shall not be discussed, disclosed or communicated to any persons
except as may be required for the preparation of expert
testimony. The prevailing party shall be entitled to recover
reasonable and necessary attorneys' fees and costs from the non-prevailing
party and the determination of such fees and costs and the award thereof
shall be included in the claims to be resolved by the arbitrator
hereunder; or
|
|
|
(b)
|
all
differences shall have been adjusted and all doubt resolved by agreement
between Rick’s and the Sellers, and the Escrow Agent shall have been
notified thereof in writing signed by all
Parties.
|
13. Should
Escrow Agent become involved in litigation in any manner whatsoever on account
of this Escrow Agreement or the Escrow Documents, the Parties hereto (other than
Escrow Agent), hereby bind and obligate themselves, their heirs, personal
representatives, successors, assigns to pay Escrow Agent, in addition to any
charge made hereunder for acting as Escrow Agent, reasonable attorneys' fees
incurred by Escrow Agent, and any other disbursements, expenses, losses, costs
and damages in connection with or resulting from such actions, unless such
litigation is the direct result of the Escrow Agent's own willful
misconduct.
14. The
terms of these instructions are irrevocable by the undersigned unless such
revocation is consented to in writing by each of Rick’s and the
Sellers.
15. The
terms herein shall be binding upon the Escrow Agent and its successors, and upon
Rick’s and the Sellers.
Escrow
Agreement - Page 5
16. The
Escrow Agent may resign as escrow agent in respect of the Escrow Stock by giving
written notice to Rick’s and the Sellers. The resignation of the
Escrow Agent shall be effective, and the Escrow Agent shall cease to be bound by
this Escrow Agreement, thirty (30) days following the date such notice of
resignation is given.
Rick’s
and the Sellers shall, before the effective date of the resignation of the
Escrow Agent, appoint another escrow holder who shall be acceptable to them and
that appointment, when made, shall be binding on them. Upon
appointment by the new escrow holder, the Escrow Agent shall deliver the
Escrowed Documents to the new escrow holder whereupon the Escrow Agent shall not
be liable for the completion of any further acts pursuant to this Escrow
Agreement. In the event that Rick’s and the Sellers do not appoint a
new escrow holder prior to the expiration of the thirty (30) day period, the
Escrow Agent shall be entitled to make application to a court of competent
jurisdiction in the State of Texas to be relieved of the obligations upon it
and/or to interplead the Escrowed Documents into such court and for directions
with respect to the delivery of the Escrowed Documents. The Escrow
Agent shall be entitled to act in accordance with the direction of the court
without any further liability to any other Party whatsoever.
17. The
Escrow Agent will not receive any compensation for the performance of its
services in connection with this Escrow Agreement except for the reimbursement
of any and all out- of-pocket expenses incurred by the Escrow Agent in
connection with the performance of its services hereunder.
18. All
notices and other communications provided for herein shall be in writing and
shall be 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.
00000
Xxxxxx Xxxx
Xxxxxxx,
Xxxxx 00000
Fax:
(000) 000-0000
|
|
(b)
|
If
to Sellers:
|
Xxxxx X.
Xxxxxxx
__________________________
__________________________
Fax:
____________________
Xxxxxxx
X. Xxxxx
__________________________
__________________________
Fax:
____________________
Escrow
Agreement - Page 6
Xxxxxxx
X. XxXxxxx
__________________________
__________________________
Fax:
____________________
With a
copy to:
Xxxxx X.
Xxxxxxxx
Xxxxxxxx
Law Office, Ltd.
0000
Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx,
Xxxx 00000
Fax: (000)
000-0000
|
|
(d)
|
If
to Escrow Agent to:
|
Xxxxxx
X. Xxxxxxx, P.C.
c/o
Axelrod, Xxxxx & Xxxxxxxxx
0000
Xxxxxxxx Xxxxx, Xxxxx 000
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.
19. This
Escrow Agreement shall be construed according to the laws of the State of Texas
and the Parties submit themselves to the exclusive jurisdiction of the courts of
the State of Texas in the event of any dispute, other than as provided in
Paragraph 12.
20. 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.
Escrow
Agreement - Page 7
21. The
Escrow Agent and any stockholder, director, officer, partner or employee of the
Escrow Agent may have a pecuniary interest in any transaction in which the
Parties may be interested, or contract with or lend money to or otherwise act as
fully and freely as though it were not Escrow Agent under this
Agreement. In other words, this Escrow Agreement shall not prevent
the Escrow Agent from performing any other activity which it would normally
perform. Additionally, nothing herein shall preclude the Escrow Agent
from acting in any other capacity for either of the Parties. Specifically, the Parties expressly
acknowledge and agree that the Escrow Agent and employees of the Escrow Agent
serve as legal counsel to Rick’s. The Parties expressly waive any
conflict of interest which may arise from such legal representation and serving
as Escrow Agent hereunder. Further, the Sellers expressly agree that
serving as Escrow Agent will in no way preclude Escrow Agent or any employee or
partner of Escrow Agent from continuing to serve as legal counsel to
Rick’s.
[SIGNATURES
ON FOLLOWING PAGE]
Escrow
Agreement - Page 8
IN
WITNESS WHEREOF, the Parties hereto have executed this Escrow Agreement
effective as of the day and year first above written.
|
RICK’S
CABARET INTERNATIONAL, INC.
|
||
|
By:
|
/s/ Xxxx Xxxxxx
|
|
|
Xxxx
Xxxxxx, President
|
||
|
SELLERS:
|
||
|
By:
|
/s/ Xxxxx X. Xxxxxxx
|
|
|
Xxxxx
X. Xxxxxxx, Individually
|
||
|
By:
|
/s/ Xxxxxxx X. Xxxxx
|
|
|
Xxxxxxx
X. Xxxxx, Individually
|
||
|
By:
|
/s/ Xxxxxxx XxXxxxx
|
|
|
Xxxxxxx
X. XxXxxxx, Individually
|
||
|
XXXXXX X. XXXXXXX, P.C.,
as the Escrow
Agent
|
||
|
By:
|
/s/ Xxxxxx X. Xxxxxxx
|
|
|
Xxxxxx
X. Xxxxxxx, President
|
||
Escrow
Agreement - Page 9
