Item 2.01
Completion
of Acquisition or Disposition of Assets.
On September 17,
2007, VCG Holding Corp., a Colorado corporation (the Company), entered into a
Purchase of Membership Interests agreement (the Purchase Agreement) and closed
the transaction contemplated thereby with Golden Productions JGC Fort Worth,
LLC, a Texas limited liability company (Golden), and Bryan S. Foster (the Seller),
pursuant to which the Company purchased (a) 100% of Goldens issued and
outstanding membership units for $1,900,000 in cash and (b) the building in
which Golden operates an adult entertainment nightclub commonly known as Jaguars
Gold Club of Fort Worth, with all its contents, including improvements,
fixtures and personal property, for $1,800,000 in cash.
The Purchase
Agreement contains ordinary and customary provisions for agreements of this
nature, such as representations, warranties, and covenants. In accordance with the Purchase Agreement,
all applicable licenses and permits in order to operate the nightclub were
transferred to the Company at closing.
The acquired nightclub is a so called bring your own bottle
establishment, whereby it is not subject to a liquor licensing requirement or
state liquor tax.
Pursuant to the
terms of the Purchase Agreement, the Seller granted to the Company an option to
purchase a future, not currently existing, adult entertainment nightclub (Club
2), if built by the Seller. The Company
may exercise its option at any time after Club 2 has been open for business for
at least one year and a day and has achieved certain gross revenue and net
profit targets. In the event that the
Company exercises its option, the Company must pay a purchase price equal to 36
times Club 2s monthly average net profit based on the most recently completed
six month period at such time. The
Seller is under no obligation to build Club 2.
The Companys option expires five years after the closing date of the
Purchase Agreement.
In connection with the closing of the Purchase
Agreement, the Company entered into a Covenant Not to Compete with each of the
Seller (the Seller Non-Competition Agreement) and a former employee of Golden
(the Former Employee Non-Competition Agreement) pursuant to which each of the
Seller and the former employee agreed not to compete with the Company for a
period of five years following the closing date within 50 miles of the acquired
nightclub, excluding Club 2 and an adult entertainment nightclub located in
Dallas, Texas operated by Manana Entertainment, Inc. commonly known as
Jaguars Gold Club. Each of the Seller
Non-Competition Agreement and the Former Employee Non-Competition Agreement
also contains non-solicitation and confidentiality covenants. The Company paid
each of the Seller and the former employee $5,000 in cash at the closing in
consideration for entering into the Seller Non-Competition Agreement and the
Former Employee Non-Competition Agreement, respectively.
The purchase of
the building did not include the real property upon which it is located. However, the Company entered into a Deed of
Ground Lease (the Lease) for the real property used in the operation of the
nightclub as further reported under Item 2.03 of this Current Report on Form
8-K, which disclosure is incorporated herein by reference.
The Company has
attached hereto as Exhibits 10.1, 10.2 and 10.3, respectively, copies of the
Purchase Agreement, the Seller Non-Competition Agreement and the Former
Employee
Non-Competition
Agreement. The foregoing summaries are
qualified in their entirety by the contents of the Purchase Agreement, the
Seller Non-Competition Agreement and the Former Employee Non-Competition
Agreement.
Item 2.03
Creation
of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet
Arrangement of a Registrant.
On September 17, 2007, the Seller, in his capacity as
landlord, and the Company entered into the Lease pursuant to which the Seller
leased to the Company the real property used in the operation of the adult
entertainment nightclub commonly known as Jaguars Gold Club of Fort Worth,
located at 12325 Calloway Cemetery Road, Fort Worth, Texas, for a term of five
years at a monthly base rent of $20,000. The Lease automatically renews for
four separate additional five year periods unless the Company declines renewal
in a written notice to the Seller. The
monthly base rent increases by 10 percent for each five-year renewal
period. In addition, the Seller granted
to the Company a right of first refusal and option to purchase the real
property under certain circumstances.
The Company has attached hereto as Exhibit 10.4 a copy
of the Lease. The foregoing summary is qualified in its entirety by the
contents of the Lease.