Exhibit 10.2

COVENANT NOT TO COMPETE

THIS COVENANT NOT TO COMPETE (this “Agreement”) is made and effective as of the
28 day of July, 2008 (the “Closing Date”), between Glenn Smith, a resident of
the State of California (“Smith”), and VCG-IS, LLC, a Colorado limited liability
company (“VCG-IS”).

W I T N E S S E T H:

WHEREAS, all of the assets of 2640 W. Woodland, Inc. (“Woodland”) are to be
acquired by VCG-IS pursuant to a certain Assets Purchase Agreement (the
“Purchase Agreement”); and

WHEREAS, Imperial Showgirls (hereinafter the “Business”) thereafter will become
wholly owned by VCG-IS and will continue to conduct the Business in the same
manner as such Business has been conducted by Woodland prior to the Purchase
Agreement; and

WHEREAS, Smith is the sole owner of Woodland and has intimate knowledge of the
business practices of the Business, which, if exploited by Smith in
contravention of this Agreement, would seriously, adversely and irreparably
affect the interests of VCG-IS and the Business and the ability of VCG-IS to
continue the business of The Business as previously conducted; and

WHEREAS, to induce VCG-IS to enter into the Purchase and consummate the other
transactions contemplated by the Purchase Agreement, Smith has agreed to execute
and deliver this Agreement.

NOW, THEREFORE, in consideration of the transactions contemplated by the
Purchase Agreement and the consideration to be paid to Smith in connection with
the Purchase Agreement, the above premises, the mutual promises and covenants of
the parties set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Smith and VCG-IS,
intending to be legally bound, agree as follows:

1. Definitions. As used herein, the following terms shall have the following
meanings unless the context otherwise requires:

a. “Area” shall mean a radius of twenty-five (25) miles of the Business located
at 2640 W. Woodland Drive in Anaheim, California.

b. “Business” shall mean the operations of Imperial Showgirls as conducted as of
the Closing Date.

c. “Competing Business” shall mean any business organization of whatever form
engaged, either Directly or Indirectly, in any adult entertainment or any

 

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business or enterprise which is the same as, or substantially the same as, the
Business; excluding, however, California Girls, 815 S. Brookhurst, Anaheim,
California; California Girls, 1109 S. Harbor, Santa Ana, California; California
Girls, 1189 E. Ash, Fullerton, California; TJ’s Theater, 10350 Beach Blvd.,
Stanton, California; Imperial Showgirls, 9329 Slauson Ave., Pico Rivera,
California, or any other such business currently owned or controlled, directly
or indirectly, by Sellers or in which Smith is a shareholder, member, partner,
officer or director.

d. “Directly or Indirectly” shall mean (i) acting as an agent, representative,
officer, director, or independent contractor of a Competing Business;
(ii) participating in any such Competing Business as an owner, partner, limited
partner, joint venturer, creditor or shareholder (except as a shareholder
holding less than five percent (5%) interest in a corporation whose shares are
actively traded on a regional or national securities exchange or in the
over-the-counter market); and (iii) communicating to any such Competing Business
the names or addresses or any other information concerning any past, present, or
identified prospective client or customer of the Business or an entity having
title to the goodwill of the Business.

e. “Restricted Period” shall mean the period commencing with the Closing Date
and ending on the third (3rd) anniversary thereof.

f. “Confidential Information” shall include any and all information related to
the purpose and business of the Business which is proprietary and not general
public knowledge, specifically including (but without limiting the generality of
the foregoing) any financial statements, appraisals, analysis data, cost
analyses or strategies, clients, customer lists, suppliers, the sales price paid
by VCG-IS, or any other matters regarding the Business. Information that is
orally disclosed will be considered “Confidential Information” if VCG-IS
indicates to Smith at the time of disclosure the confidential or proprietary
nature of the information and provides a written summary of such information to
Smith within ten (10) days after the initial oral disclosure thereof. Any
technical or business information of a third-person furnished or disclosed shall
be deemed “Confidential Information” of the Business unless otherwise
specifically indicated in writing to the contrary.

2. Agreement Not to Compete. Unless otherwise consented to in writing by VCG-IS,
Smith agrees that during the Restricted Period, he will not, within the Area,
either Directly or Indirectly, on his own behalf or in the service or on behalf
of others, engage in any Competing Business or provide managerial, supervisory,
administrative, financial or consulting services or assistance to, or own a
beneficial interest (except as a shareholder holding less than five percent
(5%) interest in a corporation whose shares are actively traded on a regional or
national securities exchange or in the over-the-counter market) in any Competing
Business.

3. Agreement Not to Solicit Employees. Smith agrees that during the period
commencing with the Closing Date and ending on the three (3rd) anniversary
thereof, he will not without the prior written consent of VCG-IS, either
Directly or Indirectly, on his own behalf or via sendee or on behalf of others,
solicit, divert, or hire away, or attempt to solicit, divert, or hire away from
the employment of the Business any Person employed by the Business, whether or
not such employee is a full-time employee or temporary employee, whether or not
such employment is pursuant to a written agreement, whether

 

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or not such employment is for a determined period or is at will and whether or
not such employee has voluntarily terminated their employment. Further, Smith
agrees that he will not, without the prior written consent of VCG-IS, either
Directly or Indirectly, on his own behalf or in the service or on behalf of
others, solicit, divert, or hire away, or attempt to solicit, divert, or hire
away any entertainers who have performed at the Business during the proceeding
six (6) months prior to the Closing Date until one (1) year following the
Closing Date. The parties agree that this provision shall not prohibit the
continued use of entertainers who currently work with other clubs that are
currently owned by Smith.

4. Confidentiality. Smith agrees to hold all Confidential Information of the
Business in confidence for so long as VCG-IS treats such information as
confidential or proprietary, unless otherwise agreed to in writing by the
VCG-IS. During such period Smith will use such information solely for the
purpose set forth in this Agreement unless otherwise agreed to in writing by
VCG-IS. Smith agrees not to copy such Confidential Information of the Business
unless otherwise agreed to in writing by the VCG-IS. Smith agrees that he shall
not make disclosure of any such Confidential Information to anyone (including
subcontractors) except accounting, business, financial and legal advisors of the
VCG-IS to whom disclosure is necessary for the purposes set forth above. Smith
shall appropriately notify such advisors that the disclosure is made in
confidence and shall be kept in confidence in accordance with this Agreement.
The obligations set forth in this Agreement shall be satisfied by Smith through
the exercise of the same degree of care used to restrict disclosure and use of
its own Confidential Information.

5. Remedies.

a. Smith acknowledges and agrees that, by virtue of his relationship with the
Business, great loss and irreparable damage would be suffered by VCG-IS,
including, without limitation, damage to the goodwill and proprietary interests
of VCG-IS, if Smith should breach or violate any of the terms or provisions of
the covenants and agreements set forth in Sections 2, 3 and/or 4 hereof. Smith
further acknowledges that Smith has examined in detail such restrictive
covenants and agreements and agrees that the restraints imposed thereby on Smith
are reasonable in the sense that they are no greater than are necessary to
protect the goodwill of the Business invested in by VCG-IS pursuant to the
Purchase Agreement and to protect VCG-IS in its legitimate business interests,
and the restrictive covenants and agreements are reasonable in the sense that
they are not unduly harsh or oppressive.

b. The parties acknowledge and agree that any breach of Sections 2, 3 and/or 4
of this Agreement by Smith would result in irreparable injury to VCG-IS, and
therefore Smith agrees and consents that VCG-IS shall be entitled to a temporary
restraining order and a permanent injunction to prevent a breach or contemplated
breach of any of the covenants or agreements of Smith contained herein.

c. In addition, VCG-IS shall be entitled, upon any breach of Sections 2, 3
and/or 4 of this Agreement by Smith, to demand an accounting and repayment of
all profits and other monetary compensation realized by Smith, directly or
through any Competing Business controlled by Smith, as a result of any such
breach.

d. The rights of VCG-IS under this Section 5 shall not be in limitation or in
lieu of any and all other remedies that may be available to VCG-IS under the

 

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Purchase Agreement or any other agreement, document or instrument provided for
therein, or other remedies otherwise available at law or in equity. The
existence of any claim, demand, action or cause of action against Smith whether
predicated upon this Agreement or otherwise, shall not constitute a defense to
the enforcement by VCG-IS of any then valid covenants or agreements herein.

6. Severability. Smith agrees that the covenants and agreements contained in
Sections 2, 3, 4 and 5 of this Agreement are of the essence of this Agreement;
that each such covenant was agreed to by VCG-IS and Smith as part of the
transactions contemplated by the Purchase Agreement; that Smith has received
good, adequate and valuable consideration for each of such covenants; that each
of such covenants is reasonable and necessary to protect and preserve the
interests and properties of VCG-IS; that irreparable loss and damage will be
suffered by VCG-IS should Smith breach any of such covenants and agreements;
that each of such covenants and agreements is separate, distinct and severable
not only from the other of such covenants and agreements but also from other and
remaining provisions of this Agreement; and, that the invalidity or
unenforceability of any such covenant or agreement shall not affect the validity
or enforceability of any other such covenants or agreements or any other
provision or provisions of this Agreement unless expressly stated herein.
Further, if any provision of this Agreement is ruled invalid or unenforceable by
a court of competent jurisdiction because of a conflict between such provision
and any applicable law or public policy, such provision shall be redrawn by such
court to the extent required to make such provision consistent with, and valid
and enforceable under, such law or public policy, and as redrawn may be enforced
against Smith.

7. Tolling. In the event that Smith should breach any or all of the covenants
set forth in Sections 2, 3 and/or 4 hereof, the running of the period of the
restrictions set forth in such section or sections breached shall be tolled
during the continuation(s) of any breach or breaches by Smith, and the running
of the period of such restrictions shall commence or commence again only upon
compliance by Smith with the terms of the applicable section or sections
breached.

8. Consideration. In consideration for Smith’s compliance with his obligations
under this Agreement, and as part of the transactions contemplated by the
Purchase Agreement, Smith shall receive from VCG-IS the sum of Five Thousand
($5,000.00) Dollars in cash on the Closing Date, and such other consideration
provided for in the Purchase Agreement. Further, Smith acknowledges and agrees
that the terms of this Agreement contained herein are reasonable in light of the
good, adequate and valuable consideration which Smith shall receive pursuant to
the Purchase Agreement.

9. Waiver. The waiver by either party of any breach of this Agreement by the
other party shall not be effective unless in writing, and no such waiver shall
operate or be construed as the waiver of the same or another breach on a
subsequent occasion.

10. Venue/Jurisdiction. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of California without giving
effect to any choice or conflict of law provision or rule (whether of the State
of California or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of California. The parties agree
that Anaheim, California and the federal and state courts located therein shall
be the exclusive venue for any action arising out of

 

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or relating to this Agreement and each party agrees to the personal jurisdiction
of such courts.

11. Amendment. No amendment or modification of this Agreement shall be valid or
binding upon VCG-IS or Smith unless made in writing and signed by the parties
hereto.

12. Captions and Section Headings. Captions and section headings used herein are
for convenience only and are not a part of this Agreement and shall not be used
in construing it.

13. Notices. All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have duly been given if delivered or
if mailed, by United States certified or registered mail, prepaid to the party
to which the same is directed at the following addresses (or at such other
addresses as shall be given in writing by the parties to one another):

 

a. If to Smith:

Glenn Smith

1171 E. Ash Ave.

Fullerton, CA 92831

With copies to:

David J. Harter

Law Offices of David J. Harter, APC

13681 Newport Ave., Suite 8-608

Tustin, CA 92780

 

b. If to VCG-IS:

VCG-IS, LLC

Troy Lowrie

390 Union Blvd., Suite 540

Lakewood, CO 80228

With a copy to:

Mike Ocello

1401 Mississippi Avenue #10

Sauget, IL 62201

Martin A. Grusin

780 Ridge Lake Boulevard

Suite 202

Memphis, TN 38120

Facsimile: (901) 682-3590

 

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Notices delivered in person shall be effective on the date of delivery. Notices
delivered by mail as aforesaid shall be effective upon the third calendar day
subsequent to the postmark date thereof.

14. Counterparts. This Agreement may be executed in one or more counterparts,
each of which will be deemed original, but all of which together shall
constitute one and the same instrument.

15. Entire Agreement. This Agreement constitutes the entire understanding and
agreement of the parties with respect to its subject matter and any and all
prior agreements, understandings or representations with respect to the subject
matter hereof are terminated and canceled in their entirety and are of no
further force or effect, but specifically excluding the Purchase Agreement and
the agreements, documents and instruments provided for therein.

IN WITNESS WHEREOF, Smith and VCG-IS have each executed and delivered this
Agreement as of the date first written above.

/s/ Glenn Smith Glenn Smith

VCG-IS, LLC,

A Colorado HANDWRITTEN:

CALIFORNIA limited liability company

By:   /s/ Micheal Ocello Title:   Vice President

 

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