Employment Agreement - Rick's Cabaret International Inc. and Robert Watters
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") between Rick's Cabaret International,
Inc., a Texas corporation, having its principal office and place of business in
Houston, Texas (hereinafter referred to as the "Company") and Robert Watters, a
resident of Houston, Texas (hereinafter referred to as the "Employee").
RECITALS:
---------
The Company presently operates Rick's Cabaret in Houston, Texas and Rick's
Cabaret in New Orleans, Louisiana and Tantra in Houston, Texas and the Company
desires to employ the Employee in the capacity of the President and Chief
Executive Officer of the Company to manage the day-to-day operations of the
nightclubs and the Employee desires to be so employed under this Agreement,
subject to the terms, conditions and covenants contained herein.
CONDITIONS OF AGREEMENT
-----------------------
I.
CONSIDERATION
-------------
This Agreement is executed and delivered for good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged. The special
training and knowledge acquired or to be acquired by the Employee during
employment are material factors relating to the employment of the Employee
without which the employment relationship would not be commenced. The parties
hereto acknowledge and agree that this Agreement is necessary to protect the
Company's legitimate interests, including, but not limited to, its business
goodwill, trade secrets and other confidential or proprietary information.
II.
TERM OF EMPLOYMENT
------------------
2.1 Term. The Company hereby employs the Employee and the Employee hereby
----
accepts employment with the Company for a term of three (3) years ('Initial
Term") which shall commence on the 15th day of April, 1997 and shall Continue
for the entire Initial Term, subject to earlier termination as provided in this
Agreement.
2.2 Extension of Initial Term. After the expiration of the Initial Term, this
--------------------------
Agreement will he automatically extended for additional and successive one (1)
year periods, unless either party gives written notice to the other at least 30
days prior to the expiration of the Initial Term, or any one year renewal term,
that such
1
<PAGE>
automatic extension shall not occur, in which event Employee's employment shall
terminate upon the expiration of the Initial Term, or such renewal,
III.
DUTIES OF EMPLOYEE
------------------
3.1 Duties. The Employee is hereby employed as President and Chief Executive
-------
Officer of the Company. The Employee's responsibilities for such office shall be
as set forth in the Bylaws of the Company including managing the day-to-day
operations of the Company's business and its ongoing expansion efforts.
Generally, in his capacity as President and Chief Executive Officer of the
Company, the Employee will be primarily responsible for the general supervision,
direction, and control of the Company, subject to the control of the President.
In the discharge of such duties and throughout Employee's employment with
Company, Employee shall, with respect to conduct involving certain matters
including, but not limited to, conflicts of interest, usurpation of corporate
authority, and personal and professional decorum and reputation, comply with (i)
all requirements imposed by the Company upon similarly situated employees of the
Company; (ii) standards generally accepted within the business community
regarding similarly situated persons; and (iii) any relevant legal authority.
3.2 Change in Duties.The duties of Employee shall be those assigned to him from
-----------------
time by the Company and may be changed by the Company from time to time without
resulting in rescission or termination of this Agreement.
3.3 Engaging in Other Employment.The Employee shall devote such productive time,
-----------------------------
ability, and attention to the business of the Company during the term of this
Agreement as is required to fulfill his duties and responsibilities as set forth
in Section 3.1 above. During the period of employment, the Employee further
agrees not to (I) solely or jointly with others undertake or join any planning
for or organization of any business activity competitive with the business
activities of the Company, and (ii) directly or indirectly, engage or
participate in any other activities in conflict with the best interest of the
Company. Notwithstanding anything herein contained to the contrary, the Employee
shall be able to devote such time as he deems reasonably necessary to his own
private investments and affairs, so long as the performance of the Employee
hereunder is not impaired and the covenants contained herein are not violated,
IV.
COMPENSATION TO EMPLOYEE
------------------------
4.1. Monthly Salary. During the Initial Term of this Agreement, the Employee
----------------
shall be entitled to a monthly salary of $25,000.00, less all payroll deductions
and applicable taxes. The time of payment for each installment shall be
consistent with the general business practices of the Company.
2
<PAGE>
4.2 Other CompensationThe Employee understands and agrees that any additional
-------------------
compensation to the Employee (whether a bonus or other form of additional
compensation shall rest in the sole discretion of the Board of Directors (or any
Compensation Committee consisting of members of the Board of Directors) and
shall be based upon the performance of the Company as well as participation in
all benefit plans maintained by the company for salaried employees.
4.3 Review. The Employee, after the initial Term, if still employed by the
-------
Company, shall be reviewed at such times as are consistent with the Company's
general personnel policies.
4.4 Fringe Benefits-Employee Benefits Plan. The Employee shall be entitled to
-----------------------------------------
participate on an equitable basis, as the Board of Directors may, in the
exercise of its discretion deem appropriate, in any stock option plan and any
additional year end or other profit sharing or incentive or deferred
compensation arrangements, whether provided for in stock, cash or otherwise,
which the Company may distribute to or provide for officers and employees
generally, or for a limited or selected group, as well as under any other plans,
benefits, customs or practices now or hereinafter made available to other
executives of the Company, including as examples only, group life insurance and
medical insurance. The Company may terminate, amend or modify any or all such
plans at any time and may choose not to adopt additional plans. The Employee's
rights under any benefits plans now in force or later adopted by the Company
shall be governed solely by their terms.
4.5 Expense Account.The Employee is authorized to incur reasonable and necessary
----------------
expenses directly associated with the promotion of the interests of the Company,
and the performance of his assignments, including expenditures for entertainment
and travel. The Company will reimburse the Employee from time to time for all
such business expenses, upon the Employee's presenting to the Company such
information and support as prescribed by Company policy.
4.6 Holidays and Vacations. The Employee shall be entitled to three (3) weeks
-----------------------
of paid vacation for each year during the term hereof. Additionally, the
Employee shall be entitled to such fully paid holidays as are normally taken by
other full time employees of businesses similar to the Company, and such other
holidays which may be particular to the Employee's religious preference.
4.7 Replacement of Present Contract. This agreement shall replace the contract
--------------------------------
presently in existence between Robert Watters and the Company which commenced on
January 1, 1995 and which expires on December 31, 1997.
V.
LIFE INSURANCE
--------------
3
<PAGE>
At any time during the term of this Agreement, the Company shall have the
right to insure the Employee's life for the Company's sole benefit, and to
determine the amount and type of insurance and type of policy. The Company shall
be required to pay all premiums due on such policies. The Employee shall
cooperate with the Company in taking out insurance by submitting to physical
examination(s), by supplying all information required by the insurance company,
and by executing any and all other necessary documents. The Employee shall incur
no financial obligation by executing the required documents and shall have no
interest in any such policies, except as otherwise provided herein.
V1.
TERMINATION OF EMPLOYMENT
-------------------------
6.1 Termination by the Employee Without Cause. If theemployment of the Employee
------------------------------------------
is terminated by the Employee for any reason other than as set forth in the
other paragraphs of this Article VI (such termination being herein defined as
without cause"), the Employee shall give the Company thirty (30) days written
notice of termination; provided, however, that the Employee shall not be
entitled to terminate his employment with the Company during the initial Term
without cause. Except as otherwise provided for herein, any such termination of
the Employee's employment for any reason whatsoever, whether voluntary or
involuntary, shall not prejudice any other remedy to which any party may be
entitled either at law, in equity, or under this Agreement.
6.2 Termination for Cause by the Company. The Company may "for cause" terminate
-------------------------------------
the employment of the Employee at any time without notice. "For cause" for the
purpose of this Agreement is defined as:
A. The willful and continued failure to substantially perform his duties as
set forth in this Agreement;
B. The breach by the Employee of any of the provisions of this Agreement or
of the covenants contained in Article Vll of this Agreement;
C. If the Employee is convicted of any crime involving moral turpitude;
including without limitation, fraud or embezzlement or similar acts of
dishonesty toward the Company; or
If the Employee is terminated for cause as hereinabove defined, the Company
shall pay to the Employee onlythat compensation specified in Paragraph 6.3
----
below.
6.3 Effect of Termination on Compensation. In the event of the termination of
----------------------------------------
employment by the Company or the Employee for any reason whatsoever, including
resignation or voluntary termination by the Employee, the Employee shall be
entitled to the compensation earned by him including all compensation specified
in Article IV
4
<PAGE>
herein, prior to the date of termination as provided for in this Agreement,
computed pro rata up to and including the date of such termination of
employment. Upon such payment to the Employee, the Company shall be relieved of
further obligation as it relates to this Agreement; however, the Employee shall
still be bound by the covenants and restrictions contained in Article VII below.
VII.
RESTRICTIVE COVENANTS
---------------------
7.1 Definition. The Employee hereby acknowledges that during the course of his
-----------
employment with the Company, he will have access to and will become familiar
with various trade secrets and other proprietary and confidential information
which are owned by the Company and which are used in the operation of the
Company's business. "Trade secrets and other proprietary and confidential
information" consist of, for example, and not intending to be inclusive, (i)
methods of doing business; (ii) financial information, consisting of financial
cost, and sales data and other information; (iii) personnel information (iv)
lists of Customers and accounts, contracts, sales information, pricing list,
vendor and supplier list of the Company; (v) other information of a confidential
nature which must remain confidential for the continuing success of the Company;
and (vi) such other information concerning the business of the Company and the
Company's goodwill.
7.2 Non-Disclosure and Confidentiality Covenants. The Employee acknowledges
---------------------------------------------
that the Company's trade secrets and other proprietary and confidential
information, as they may exist from time to time, are valuable, special and
unique assets of the Company's business. Additionally, Employee acknowledges
that the business goodwill and business contacts of the Company are the sole
property of the Company and are among the Company's most valuable business
property. 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
the Company, the Employee expressly covenants and agrees as follows:
Except as required in the course of his employment with the Company, the
Employee will not, during and after the termination of his employment:
(1) Disclose, directly or indirectly, the Company's trade secrets and
proprietary and confidential information, or any part thereof, to any
person, corporation, association or other entity for any reason or purpose
whatsoever; or
(2) Directly or indirectly use the Company's trade secrets and other
proprietary and confidential information, or any part thereof, for his own
purpose or for his own benefit in any activity of any nature whatsoever.
7.3 Return of Company's Property. The Employee covenants and agrees that, upon
-----------------------------
the
5
<PAGE>
request of the Company or upon termination of employment, the Employee shall
turn over to the Company all files, records, documents, drawings, presentations,
specifications, equipment, disks or other computer media, data, computer
printouts, records, written materials and similar items relating to the business
of the Company, and any other property of the Company in his possession or under
his control. In the event the Employee fails to return the Company's property
when required or requested to do so, the Company may, in addition to any other
remedy provided by law, withhold any amounts due the Employee until full
compliance with this Paragraph 7.3.
7.4 Covenant Not to Compete. So long as the Employee is employed by the Company
------------------------
and for a period of eighteen (18) months after either (i) the voluntary
termination of employment by Employee or (ii) the termination of the Employee by
the Company for cause, as set forth in Section 6.2 hereof, the Employee
specifically agrees that he will not, for himself, on behalf of, or in
conjunction with any person, firm, corporation or entity, other than the Company
(either as principal, employee, shareholder, member, director, partner,
consultant, owner or part owner of any corporation, partnership or any type of
business entity) anywhere in any county in which the Company is doing business
at the time of termination, directly or indirectly, own, manage, operate,
control, be employed by, participate in, or he connected in any manner with the
ownership, management, operation, or control of any business similar to the type
of business conducted by the Company at the time of termination of the
Employee's employment.
7.5 Employee's Acknowledgements and Agreements. The Employee acknowledges and
--------------------------------------------
agrees that:
(1) Due to the nature of the Company's business, the foregoing
covenants place no greater restraint upon the Employee than is reasonably
necessary to protect the business and goodwill of the Company;
(2) These covenants protect a legitimate interest of the Company and
do not serve solely to limit the Company's future competition;
(3) This Agreement is not an invalid or unreasonable restraint of
trade;
(4) A breach of these covenants by the Employee would cause
irreparable damage to the Company;
(5) These covenants will not preclude the Employee from becoming
gainfully employed following termination of employment with the Company;
(6) These covenants are reasonable in scope and are reasonably
necessary to protect the Company's business and goodwill and valuable and
extensive trade which the Company has established through its own expense
and effort;
6
<PAGE>
(7) The signing of this Agreement is necessary for the Employee's
employment; and
(8) He has carefully read and considered all provisions of this
Agreement and that all of the restrictions set forth are fair and
reasonable and are reasonably required for the protection of the interests
of the Company.
7.6 Remedies Injunction. In the event of the Employee's actual or threatened
---------------------
breach provisions of this Agreement, the Employee agrees that the Company shall
be entitled to a temporary restraining order, preliminary injunction and/or
permanent injunction restraining and prohibiting the Employee from violating the
provisions herein. Nothing in this Agreement shall be construed to prohibit the
Company from pursuing any other available remedies for such breach or threatened
breach, including the recovery of damages from the Employee. The Employee
further agrees that for the purpose of any such injunction proceeding, it shall
be presumed that the Company's legal remedies would be inadequate and that the
Company would suffer irreparable harm as a result of the Employee's violation of
the provisions of this Agreement. In any proceeding brought by the Company to
enforce the provisions of this Agreement, no other matter relating to the terms
of any claim or cause of action of the Employee against the Company will be
defense thereto.
7.7 Severability. In the event that any of the provisions of this 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
valid and enforceable as though the invalid or unenforceable parts had not been
included in this 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. The
Employee 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.
VIII.
GENERAL PROVISIONS
8.1 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. Mailed notices shall
be addressed to the parties at the addresses set forth below, but each party may
change their address by written notice
7
<PAGE>
in accordance with this Paragraph 8.1 Notices delivered personally shall be
deemed communicated as of actual receipt; mailed notices shall be deemed
communicated as of three (3) days after mailing.
If to Company: Rick's Cabaret International, Inc.
3113 Bering Drive
Houston, Texas 77057
If to Employee: Robert Waiters
3113 Bering Drive
Houston, Texas
8.2 Law Governing Agreement and Venue. This Agreement shall be governed by and
-----------------------------------
construed in accordance with the laws of the State of Texas. This Agreement is
executed in Harris County, Texas. Venue shall be in Harris County, Texas for any
legal proceeding to enforce the terms, conditions or covenants contained herein.
8.3 Attorneys' Fees and Costs. If any action at law or in equity is necessary
---------------------------
to enforce or interpret the terms of this Agreement, the prevailing parties
shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which he may be entitled.
8.4 Contract Terms to be Exclusive. This 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 Employee's employment. The parties
acknowledge and agree that neither of them has made any representation with
respect to the subject matter of this Agreement or any other agreement executed
between them or any representations inducing the execution and delivery hereof
or any other agreement executed between them except such representations as are
specifically set forth herein and each of the parties hereto acknowledges that
he or it has relied on his or its own judgement in entering into the same. The
parties hereto further acknowledge that any statements or representations that
may have heretofore been made by either of them to the other are void and of no
effect and that neither of them has relied thereon in connection with his or its
dealings with the other.
8.5 Waiver or Modification Ineffective Unless in Writing. It is further agreed
-----------------------------------------------------
that no waiver or modification of this 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
Agreement, or the rights or obligations of any party hereunder, unless such
waiver or modification is in writing, duly executed as aforesaid, and the
parties further agree that the provisions of this paragraph may not be waived as
herein set forth.
8.6 Invalidity of Contract. Should any provision(s) of this Agreement be
-----------------------
declared
8
<PAGE>
invalid or unenforceable by a court of competent jurisdiction, 11 shall he
severed or modified and the remainder of this Agreement shall be enforced in
Iota[ Additionally, if the Employee claims that any provision or covenant
contained herein is invalid or unenforceable, he nevertheless agrees to comply
with such provision or covenant as written until a court of competent
jurisdiction determines the enforceability or validity of such provision or
covenant. or limit. the scope thereof and further agrees to be liable for any
and all damages to the Company pending such determination by the court.
8.7 Assignment The rights and benefits of the Company under this Agreement shall
----------
inure in the benefit of and be binding upon the successors and assigns of the
Company. The rights of the Employee 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 the Employee.
8.8 Gender In all cases where a feminine or masculine pronoun is used it shall
------
be deemed to include the other and as may be applicable to the instant matter.
IN WITINESS WHEREOF, this Agreement has been executed in Houston, Harris
County. Texas, as of the 15 day ______, 1997.
--
COMPANY;
RICK'S CABARET INTERNATIONAL, INC.
By: /s/ Erich N. White
----------------------------------------
ERICH N. WHITE, VICE PRESIDENT
EMPLOYEE:
/S/ ROBERT WATTERS
--------------------
ROBERT WATTERS
9