Termination and Non-Competition Agreement - Rick's Cabaret International Inc. and Robert L. Watters
TERMINATION AND NON-COMPETITION AGREEMENT
(WATTERS)
This Termination and Non-Competition Agreement (this "Agreement") dated
March 29, 1999, by and between RICK'S CABARET INTERNATIONAL, INC., a Texas
corporation having its principal office and place of business in Harris County,
Texas (the "Company"), and ROBERT L. WATTERS, an individual residing in Harris
County, Texas ("Watters").
W I T N E S S E T H:
WHEREAS, on or about April 15, 1997, Watters executed an employment
agreement with the Company upon terms and conditions as set forth on Exhibit "A"
attached hereto and made a part hereof for all purposes (the "Employment
Agreement"); and
WHEREAS, it is the intention of Watters to resign as an employee of the
Company on or about March 15, 1999; and
WHEREAS, it is the desire of Watters to terminate his existing Employment
Agreement with the Company and to terminate all of the 20,000 outstanding
options of the Company which Watters presently holds (the "Options"); and
WHEREAS, the Company is willing to terminate the Employment Agreement of
Watters and to terminate all of the outstanding Options of the Company which
Watters presently holds; and
WHEREAS, effective upon the date of termination of Watters as an employee
of the Company, the aforementioned Employment Agreement and the Options will be
terminated; and
WHEREAS, contemporaneously herewith, Watters is acquiring the stock of RCI
Entertainment (Louisiana), Inc., a wholly owned subsidiary of the Company, in
order to operate an adult entertainment facility currently located in New
Orleans, Louisiana; and
WHEREAS, in consideration of the termination of the Employment Agreement
and of the sale of stock of RCI Entertainment (Louisiana), Inc. from the Company
to Watters, Watters has agreed to execute a non-competition agreement as
evidenced by the terms and conditions hereof.
NOW, THEREFORE, for a valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Company and Watters agree as follows:
1. TERMINATION OF EMPLOYMENT AGREEMENT.
a. Watters hereby tenders his resignation as President of the Company and
any of its affiliates and subsidiaries, except RCI Entertainment (Minnesota),
Inc., which resignations shall be effective on March 15, 1999.
TERMINATION AND NON-COMPETITION AGREEMENT (WATTERS) PAGE 1
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b. This Agreement constitutes termination of the Employment Agreement with
no further obligation of Watters to the Company or the Company to Watters
pursuant to the Employment Agreement.
c. The salary of Watters will cease on February 28, 1999.
2. NON-COMPETITION AGREEMENT.
1. Definitions. "Trade secrets and other proprietary and confidential
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information" mean and 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 of the Company; (iii)
personnel information of the Company; (iv) lists of customers and accounts,
contracts, sales information, pricing list, vendor and supplier list of the
Company; and (v) other information of a confidential nature of the Company which
must remain confidential for the continuing success of the Company.
Confidential information shall not include information available to the public
through no fault of Watters or information required to be disclosed by court
order.
2. Non-Disclosure and Confidentiality Covenants of Watters. Watters
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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, Watters
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, Watters expressly covenants and agrees as
follows:
Except as required in the course of Watters involvement with the current
operations in New Orleans, Louisiana, which he is acquiring from the Company
contemporaneously herewith, Watters will not, during the Term hereof (as defined
below):
(i) Disclose, directly or indirectly, the Company's trade secrets and other
proprietary and confidential information, or any part thereof, to any person,
firm, corporation, association or other entity for any reason or purpose
whatsoever; or
(ii) 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.
TERMINATION AND NON-COMPETITION AGREEMENT (WATTERS) PAGE 2
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c. Covenants of Watters
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(i) Covenant Not to Compete. For a period of sixty (60) months after the
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date hereon (the "Term"), Watters 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, share-holder, member, director, partner,
consultant, owner or part-owner of any corporation, partnership or any type of
business entity (except that Watters may own up to 2% of the capital stock of
any publicly held company), anywhere within the United States of America, except
in Louisiana, Florida, Mississippi and Alabama (i) directly or indirectly, own,
manage, operate, control, be employed by, participate in, or be connected in any
manner with the ownership, management, operation, or control of any
establishment which has live female nude or semi-nude entertainment or is in any
business similar to or competitive with the business presently conducted by the
Company; (ii) disclose, directly or indirectly, the Company's trade secrets and
other proprietary and confidential information, or any part thereof, to any
person, firm, corporation, association or other entity for any reason or purpose
whatsoever; or (iii) 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.
(ii) Covenant of Non-Solicitation and Employment of Employees and
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Independent Contractors. During the Term hereof, Watters agrees not to hire,
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solicit or attempt to solicit for employment by Watters or any company to which
he may be involved, either directly or indirectly, any party who is an employee
or independent contractor of the Company or any entity which is affiliated with
the Company, or a former employee or independent contractor of the Company or
any entity which is affiliated with the Company, except for employees and
independent contractors that presently work at RCI Entertainment (Louisiana),
Inc., provided however, that Watters may hire any independent contractor or
former independent contractor, if Watters does not solicit or attempt to solicit
such independent contractor. If Watters is approached by any independent
contractor or former independent contractor, such hiring would not be in
violation of this Agreement.
d. Acknowledgments and Agreements. Watters acknowledges and agrees that:
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(i) Due to the nature of the Company's business, the foregoing covenants
place no greater restraint upon Watters than is reasonably necessary to protect
the business and goodwill of the Company;
TERMINATION AND NON-COMPETITION AGREEMENT (WATTERS) PAGE 3
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(ii) These covenants protect the legitimate interests of the Company and do
not serve solely to limit the Company's future competition;
(iii) This Agreement is not an invalid or unreasonable restraint of trade;
(iv) A breach of these covenants by Watters would cause irreparable damage
to the Company;
(v) 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;
(vi) The signing of this Agreement is necessary as part of the consummation
of the transactions previously discussed; and
(vii) 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.
e. Remedies, Injunction. In the event of Watters' actual breach of any
---------------------
provisions of this Agreement, Watters agrees that the Company shall be entitled
without the necessity of a bond or other security to a temporary restraining
order, preliminary injunction and/or permanent injunction restraining and
enjoining Watters 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 Watters. Watters 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 Watters' 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 Watters
against the Company will be defense thereto.
TERMINATION AND NON-COMPETITION AGREEMENT (WATTERS) PAGE 4
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f. Severability. In the event that any of the provisions of this
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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 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. Watters 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.
3. CANCELLATION OF OPTIONS.
Upon the execution of this Agreement, the Company shall cause to be cancelled on
the books and records of the Company all of the outstanding Options presently
issued to Watters.
4. GENERAL PROVISIONS.
a. Notices. Any notices or other communications required or permitted
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hereunder shall be sufficiently given if in writing and delivered in Person,
transmitted by facsimile transmission (fax) or sent by registered or certified
mail (return receipt requested) or recognized overnight delivery service,
postage pre-paid, addressed as follows, or to such other address has such party
may notify to the other parties in writing:
(i) if to the Seller:
Rick's Cabaret International, Inc.
16770 Hedgecroft Drive, #714
Houston, Texas 77060
Attn: Eric Langan
Telephone No.: 281-820-1181
Facsimile No.: 281-820-1445
with a copy to:
Robert D. Axelrod
Axelrod, Smith & Kirshbaum
5300 Memorial Drive, Suite 700
Houston, Texas 77007
Telephone No.: 713-861-1996
Facsimile No.: 713-552-0202
(ii) if to Watters:
Robert L. Watters
1810 Elmen
Houston, Texas 77019
Telephone No.: 713-529-4110
Facsimile No.: 713-942-9656
TERMINATION AND NON-COMPETITION AGREEMENT (WATTERS) PAGE 5
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with a copy to:
Chaffe, McCall, Phillips, Toler & Sarpy, L.L.P.
2300 Energy Centre
1100 Poydras Street
New Orleans, Louisiana 70163
Attn: E. Howell Crosby, Esq.
Telephone No.: 504-585-7212
Facsimile No.: 504-585-7587
b. Law Governing and Venue. This Agreement shall be governed by and
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construed in accordance with the laws of the State of Texas. This Agreement is
executed in Houston, Texas. Venue shall be in Harris County, Texas for any
legal proceeding to enforce the terms, conditions or covenants contained herein.
c. Contract Terms to be Exclusive. This Agreement contains the sole and
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entire agreement between the parties and shall supersede any and all other
agreements between the parties with respect to the termination of the Employment
Agreement and Watters' agreement not to compete with the Company. 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 judgment 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.
d. Waiver or Modification Ineffective Unless in Writing. It is further
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agreed that no waiver or modifica-tion 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 liti-gation between the parties hereto arising out of or
affect-ing 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.
TERMINATION AND NON-COMPETITION AGREEMENT (WATTERS) PAGE 6
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e. Invalidity of Contract. Should any provision(s) of this Agreement be
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declared invalid or unenforceable by a court of competent jurisdiction, it shall
be severed or modified and the remainder of this Agreement shall be enforced in
total. Additionally, if Watters 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
limits the scope thereof, and further agrees to be liable for any and all
damages to the Company pending such determination by the court.
f. Assignment. The rights and benefits of the Company under this Agreement
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shall inure to the benefit of and be binding upon the successors and assigns of
the Company. The rights of Watters hereunder are personal and nontransfer-able
except that the rights and benefits hereof shall inure to the benefit of the
heirs, executors, legal representatives, administrators, successors and assigns
of Watters.
g. Binding Effect. Except as otherwise provided herein, this Agreement
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shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
IN WITNESS WHEREOF, this Agreement has been executed as of the date first
above mentioned.
RICK'S CABARET INTERNATIONAL, INC.
BY: /S ERIC LANGAN
NAME: ERIC LANGAN
TITLE: VICE-PRESIDENT
/S/ ROBERT L. WATTERS
ROBERT L. WATTERS
TERMINATION AND NON-COMPETITION AGREEMENT (WATTERS) PAGE 7