--------------------------------------------------------------------------------

Exhibit 10.1
 
PURCHASE AGREEMENT

This Purchase Agreement (the “Agreement”) is made and entered into this 4th day
of  March, 2008, by and among Jerry Golding (“Golding”), Kenneth Meyer
(“Meyer”), Charles McClure (“McClure”), 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”), Rick’s Cabaret International, Inc., a Texas
corporation (“Rick’s), RCI Entertainment (Dallas), Inc., a Texas corporation
(“Buyer”) and RCI Holdings, Inc., a Texas corporation (“RCI”).  Golding, Meyer
and McClure are sometimes collectively referred to herein as the “Sellers.”

WHEREAS, the Sellers own 100% of the limited partnership interest of Hotel
Development (the “Partnership Interest”) and 100% of the membership interest in
HD (the “Membership Interest”); and

WHEREAS, Golding, Meyer and McClure are the sole Directors of Illusions, a
not-for-profit Texas corporation.

WHEREAS, HD is the general partner of Hotel Development.

WHEREAS, Hotel Development owns an adult entertainment cabaret known as “The
Executive Club” (the “Club”), located at 8550 North Stemmons Freeway, Dallas,
Texas 75247 (the “Premises”); and

WHEREAS, Illusions holds the liquor license for the Club.

WHEREAS, the Sellers own 100% of the membership interests of DPC; and

WHEREAS, DPC owns the real property associated with the Premises (the “Real
Property”); and

WHEREAS, the Sellers desire to sell 100% of the issued and outstanding
Partnership Interest of Hotel Development and 100% of the issued and outstanding
Membership Interest of HD to Buyer on the terms and conditions set forth herein;
and

WHEREAS, DPC desires to sell the Real Property to RCI on the terms and
conditions set forth herein; and

WHEREAS, the Buyer and RCI are wholly owned subsidiaries of Rick’s.

NOW, THEREFORE, in consideration of the premises, the mutual covenants and
agreements and the respective representations and warranties herein contained,
and on the terms and subject to the conditions herein set forth, the parties
hereto, intending to be legally bound, hereby agree as follows:

 

--------------------------------------------------------------------------------

 

ARTICLE I
PURCHASE AND SALE OF THE PARTNERSHIP INTEREST,
THE MEMBERSHIP INTEREST
AND THE REAL PROPERTY

Section 1.1    Sale of the Partnership Interest and Membership
Interest.  Subject to the terms and conditions set forth in this Agreement, at
the Closing (as hereinafter defined) Sellers hereby agree to sell, transfer,
convey and deliver to Buyer 100% of the issued and outstanding Partnership
Interest of Hotel Development and 100% of the issued and outstanding Membership
Interest of HD, free and clear of all encumbrances, and shall deliver to Buyer
certificates representing the Partnership Interest, duly endorsed to Buyer or
accompanied by duly executed stock powers in form and substance satisfactory to
Buyer.

Section 1.2    Purchase Price for the Partnership Interest and Membership
Interest.  As consideration for the purchase of the Partnership Interest and
Membership Interest, Buyer shall pay to Sellers the total consideration of
$3,802,050 (the “LLC Purchase Price”), which shall be payable by the issuance of
50,694 shares of restricted common stock $.01 par value of Rick’s to each of
Messrs. Golding, Meyer and McClure, for an aggregate total of 152,082 shares
(collectively, the “Rick’s LLC Shares”) to be valued at $25.00 per share.

Section 1.3    Sale of the Real Property.  Subject to the terms and conditions
set forth in this Agreement, at the Closing (as hereinafter defined) DPC hereby
agrees to sell, transfer, convey and deliver a General Warranty Deed which shall
convey good and marketable title to the Real Property, free and clear of all
liens and encumbrances.

Section 1.4    Purchase Price for the Real Property.  As consideration for the
purchase of the Real Property, Buyer shall pay to DPC the total consideration of
$5,697,950 (the “Real Property Purchase Price”), which shall be payable as
follows:

 
(a)
$4,250,000 by cashier’s check, certified funds or wire transfer payable at
Closing; and

 
(b)
57,918 shares of restricted common stock $.01 par value of Rick’s (the “Rick’s
Real Property Shares”) to be valued at $25.00 per share.

The Rick’s LLC Shares and Rick’s Real Property Shares are collectively referred
to herein as the “Shares.”  The LLC Purchase Price and the Real Property
Purchase Price are collectively referred to herein as the “Purchase Price.”

Section 1.5                                Right of Sellers to “Put” Shares.

 
Purchase Agreement - Page 2

--------------------------------------------------------------------------------

 

 
a)
Rick’s LLC Shares.  On or after one (1) year from the date of Closing, each of
Messrs. Golding, Meyer and McClure shall have the right, but not the obligation,
to have Rick’s purchase from each of Messrs. Golding, Meyer and McClure 1,207 of
the Rick’s LLC Shares per month (the “Monthly LLC Shares”) calculated at a price
per share equal to $25.00 per share (“Value of the Rick’s LLC Shares”) until
Messrs. Golding, Meyer and McClure have each received $1,267,350 from (i) the
sale of the 50,694 Rick’s LLC Shares sold by them, regardless of whether sold to
Rick’s, sold in the open market or in a private transaction or otherwise and
(ii) the payment of any Deficiency (as hereinafter defined) by Rick’s.  Each
Seller, individually, shall notify Rick’s during any given month of his election
to “Put” the Monthly LLC Shares to Rick’s during that particular month and
Rick’s shall have three (3) business days to elect to buy the Monthly LLC Shares
or instruct the respective Seller(s) to sell the Monthly LLC Shares in the open
market.   At Rick’s election, during any given month, it may either buy the
Monthly LLC Shares or, if Rick’s elects not to buy the Monthly LLC Shares from
the respective Seller(s), then such Seller(s) shall sell the Monthly LLC Shares
in the open market and any deficiency between the amount which the Seller(s)
receive from the sale of the Monthly LLC Shares and the Value of the Rick’s LLC
Shares (the “LLC Deficiency”) shall be paid by Rick’s within three (3) business
days after receipt of written notice from the respective Seller(s) of the sale
of the Monthly LLC Shares which shall provide the written sales confirmation and
the amount of the LLC Deficiency.  Rick’s obligation under this Section 1.5(a)
to purchase the Monthly LLC Shares from any respective Seller shall terminate
and cease at such time as such Seller has received an aggregate amount of
$1,267,350 from (i) the sale of the Rick’s LLC Shares, regardless of whether
sold to Rick’s, sold in the open market or in a private transaction or
otherwise, and (ii) the payments of any LLC Deficiency by Rick’s.  Each of the
Sellers, individually, agree to provide monthly statements to Rick’s as to the
total number of Rick’s LLC Shares which Seller sold and the amount of proceeds
derived therefrom.  Except as set forth in Section 1.5(c) below, nothing
contained in this Section 1.5(a) shall limit or preclude any Seller from selling
their Rick’s LLC Shares in the open market or require any Seller to “Put” their
Rick’s LLC Shares to Rick’s during any given month.

 
(b)
Rick’s Real Property Shares.  On or after one (1) year from the date of Closing,
DPC shall have the right, but not the obligation, to have Rick’s purchase from
DPC 1,379 of the Rick’s Real Property Shares per month (the “Monthly Real
Property Shares”) calculated at a price per share equal to $25.00 per share
(“Value of the Rick’s Real Property Shares”) until DPC has received an aggregate
of $1,447,950 from (i) the sale of the Rick’s Real Property Shares, regardless
of whether sold to Rick’s, sold in the open market or in a private transaction
or otherwise and (ii) the payment of any Deficiency (as hereinafter defined) by
Rick’s.   DPC shall notify Rick’s during any given month of its election to
“Put” the Monthly Real Property Shares to Rick’s during that particular month
and Rick’s shall have three (3) business days to elect to buy the Monthly Real
Property Shares or instruct DPC to sell the Monthly Real Property Shares in the
open market.   At Rick’s election, during any given month, it may either buy the
Monthly Real Property Shares or, if Rick’s elects not to buy the Monthly Real
Property Shares from DPC, then DPC shall sell the Monthly Real Property Shares
in the open market and any deficiency between the amount which DPC receive from
the sale of the Monthly Real Property Shares and the Value of the Rick’s Real
Property Shares (the “Real Property Deficiency”) shall be paid by Rick’s within
three (3) business days after receipt of written notice from DPC of the sale of
the Monthly Real Property Shares which shall provide the written sales
confirmation and the amount of the Real Property Deficiency.  Rick’s obligation
under this Section 1.5(b) to purchase the Monthly Real Property Shares from DPC
shall terminate and cease at such time as DPC has received an aggregate amount
of $1,447,950 from (i) the sale of the Rick’s Real Property Shares, regardless
of whether sold to Rick’s, sold in the open market or in a private transaction
or otherwise, and (ii) the payments of any Real Property Deficiency by
Rick’s.  DPC agrees to provide monthly statements to Rick’s as to the total
number of Rick’s Real Property Shares which DPC sold and the amount of proceeds
derived therefrom.  Except as set forth in Section 1.5(c) below, nothing
contained in this Section 1.5(b) shall limit or preclude the Sellers from
selling the Rick’s Real Property Shares in the open market or require DPC to
“Put” the Rick’s Real Property Shares to Rick’s during any given month.

 
Purchase Agreement - Page 3

--------------------------------------------------------------------------------

 

 
(c)
Messrs. Golding, Meyer and McClure, individually, and Rick’s will enter into a
Lock-Up/Leak-Out Agreement which will provide that each of Messrs. Golding,
Meyer and McClure will sell (i) not more than 2,414 Shares per 7-day period,
(ii) not more than 6,035 Shares per 30-day period, and (iii) not more than
16,898 Shares per 90-day period, regardless of whether each of Messrs. Golding,
Meyer and McClure “Put” the Shares to Rick’s or sell them in the open market or
otherwise.  In the event that Messrs. Golding, Meyer or McClure elect to sell
their Shares pursuant to this Section 1.5(c), then any amount sold at prices
less than $25.00 shall be deemed to be sold at $25.00 for purposes of Section
1.5.

 
(d)
DPC and Rick’s will enter into a Lock-Up/Leak-Out Agreement which will provide
that DPC will sell (i) not more than 2,758 Shares per 7-day period, (ii) not
more than 6,895 Shares per 30-day period, and (iii) not more than 19,306 Shares
per 90-day period, regardless of whether DPC “Puts” the Shares to Rick’s or
sells them in the open market or otherwise.  In the event that DPC elects to
sell its Shares pursuant to this Section 1.5(d), then any amount sold at prices
less than $25.00 shall be deemed to be sold at $25.00 for purposes of Section
1.5.

ARTICLE II
CLOSING

Section 2.1    The Closing.  The closing of the transactions provided for in
this Agreement shall take place on the earlier of: (i) April 30, 2008, or (ii)
ten (10) days after the approval of Rick’s application for a Sexually Oriented
Business License by the City of Dallas and the transfer of all other permits
utilized to operate the Club, with the exception of the liquor license for the
Club which shall continue to be maintained by Illusions,  to Buyer or affiliates
of Buyer (the “Closing Date”), or at such other time and place as agreed upon in
writing among the parties hereto (the “Closing”).  The parties have agreed
further to close at the law offices of Axelrod, Smith & Kirshbaum, 5300 Memorial
Drive, Suite 700, Houston, Texas  77007.

Section 2.2    Delivery and Execution.  At the Closing: (a) the Sellers shall
deliver to Buyer certificates evidencing the Partnership Interest of Hotel
Development and the Membership Interest of HD, free and clear of any liens,
claims, equities, charges, options, rights of first refusal or encumbrances,
duly endorsed to Buyer or accompanied by duly executed stock powers in form and
substance satisfactory to Buyer against delivery by Buyer to the Sellers of
payment in an amount equal to the LLC Purchase Price for the Partnership
Interest being purchased by Buyer in the manner set forth in Section 1.2; (b)
DPC shall deliver to RCI a General Warranty Deed which shall convey good and
marketable title to the Real Property, free and clear of all encumbrances
against delivery by RCI to DPC of payment in the amount equal to the Real
Property Purchase Price for the Real Property being purchased by RCI in the
manner set forth in Section 1.4; and (c) the Related Transactions (as defined
below) shall be consummated concurrently with the Closing.

 
Purchase Agreement - Page 4

--------------------------------------------------------------------------------

 

Section 2.3    Related Transactions.  In addition to the purchase and sale of
the Partnership Interest and the purchase and sale of the Real Property, the
following actions shall take place contemporaneously at the Closing
(collectively, the "Related Transactions"):

 
(a)
Each of the Sellers will enter into a five (5) year covenant not to compete
pursuant to the terms of which the Sellers will agree not to compete, either
directly of indirectly, with the Purchaser, RCI, Rick’s or any of their
affiliates, by operating an establishment featuring live adult entertainment in
Dallas County, Tarrant County or any of the adjacent counties thereto; and

 
(b)
Rick’s. DPC and the Sellers shall have entered into a Lock-Up/Leak-Out
Agreement.

ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SELLERS, HOTEL DEVELOPMENT, HD, ILLUSIONS AND DPC

The Sellers, Hotel Development, HD, Illusions and DPC, jointly and severally,
hereby represent and warrant to the Buyer, RCI and Rick’s as follows:

Section 3.1.    Organization, Good Standing and Qualification.

 
(a)
Hotel Development, HD, Illusions and DPC (i) are entities duly organized,
validly existing and in good standing under the laws of the state of Texas, (ii)
have all requisite power and authority to own, operate and lease its properties
and to carry on its business, and (iii) are duly qualified to transact business
and are in good standing in all jurisdictions where their ownership, lease or
operation of property or the conduct of its business requires such
qualification, except where the failure to do so would not have a material
adverse effect to the Sellers, Hotel Development, HD, Illusions or DPC,
respectively.

 
(b)
The authorized capital of Hotel Development consists of the units of Partnership
Interest listed on Exhibit 3.1(b) which are validly issued and outstanding.
There is no other class of capital authorized or issued by Hotel
Development.  All of the issued and outstanding Partnership Interest of Hotel
Development are owned by the Sellers and are fully paid and
non-assessable.  None of the Partnership Interest issued are in violation of any
preemptive rights.  Hotel Development has no obligation to repurchase,
reacquire, or redeem any of its outstanding Partnership Interest.  There are no
outstanding securities convertible into or evidencing the right to purchase or
subscribe for any Partnership Interest of Hotel Development, there are no
outstanding or authorized options, warrants, calls, subscriptions, rights,
commitments or any other agreements of any character obligating Hotel
Development to issue any Partnership Interest or any securities convertible into
or evidencing the right to purchase or subscribe for any Partnership Interest,
and there are no agreements or understandings with respect to the voting, sale,
transfer or registration of any Partnership Interest of Hotel Development.

 
Purchase Agreement - Page 5

--------------------------------------------------------------------------------

 

 
(c)
The authorized capital of HD consists of the units of Membership Interest listed
on Exhibit 3.1(c) which are validly issued and outstanding. There is no other
class of capital authorized or issued by HD.  HD is the sole General Partner of
Hotel Development.  All of the issued and outstanding Membership Interest of HD
are owned by the Sellers and are fully paid and non-assessable.  None of the
Membership Interests issued are in violation of any preemptive rights.  HD has
no obligation to repurchase, reacquire, or redeem any of its outstanding
Membership Interest.  There are no outstanding securities convertible into or
evidencing the right to purchase or subscribe for any Membership Interest of HD,
there are no outstanding or authorized options, warrants, calls, subscriptions,
rights, commitments or any other agreements of any character obligating HD to
issue any Membership Interest or any securities convertible into or evidencing
the right to purchase or subscribe for any Membership Interest, and there are no
agreements or understandings with respect to the voting, sale, transfer or
registration of any Membership Interest of HD.

Section 3.2    Ownership of the Partnership Interest.  The Sellers own,
beneficially and of record, all of the Partnership Interest of Hotel Development
free and clear of any liens, claims, equities, charges, options, rights of first
refusal, or encumbrances.  The Sellers have the unrestricted right and power to
transfer, convey and deliver full ownership of the Partnership Interest without
the consent or agreement of any other person and without any designation,
declaration or filing with any governmental authority.  Upon the transfer of the
Partnership Interest to Buyer as contemplated herein, Buyer will receive good
and valid title thereto, free and clear of any liens, claims, equities, charges,
options, rights of first refusal, encumbrances or other restrictions (except
those imposed by applicable securities laws).

Section 3.3    Ownership of the Membership Interest.  The Sellers own,
beneficially and of record, all of the Membership Interest of HD free and clear
of any liens, claims, equities, charges, options, rights of first refusal, or
encumbrances.  The Sellers have the unrestricted right and power to transfer,
convey and deliver full ownership of the Membership Interest without the consent
or agreement of any other person and without any designation, declaration or
filing with any governmental authority.  Upon the transfer of the Membership
Interest to Buyer as contemplated herein, Buyer will receive good and valid
title thereto, free and clear of any liens, claims, equities, charges, options,
rights of first refusal, encumbrances or other restrictions (except those
imposed by applicable securities laws).

Section 3.4    Ownership of the Real Property.  DPC owns, beneficially and of
record, the Real Property free and clear of any liens, claims, equities,
charges, options, rights of first refusal, or encumbrances as evidenced by the
title commitment for the Real Property to be issued to RCI prior to Closing and
as evidenced by a title policy provided to RCI at the time of Closing.  DPC has
the unrestricted right and power to transfer, convey and deliver full ownership
of the Real Property without the consent or agreement of any other person and
without any designation, declaration or filing with any governmental
authority.  Upon the transfer of the Real Property to RCI as contemplated
herein, RCI will receive good and valid title thereto, free and clear of any
liens, claims, equities, charges, options, rights of first refusal, encumbrances
or other restrictions.

 
Purchase Agreement - Page 6

--------------------------------------------------------------------------------

 

Section 3.5    Authorization.  Hotel Development, HD, Illusions and DPC have all
requisite corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder and to consummate the transactions
contemplated hereby.  All action on the part of Hotel Development, HD, Illusions
and DPC necessary for the authorization, execution, delivery and performance of
this Agreement and all documents related to consummate the transactions
contemplated herein have been taken or will be taken prior to the Closing Date
by Hotel Development, HD, Illusions and DPC. This Agreement, when duly executed
and delivered in accordance with its terms, will constitute legal, valid and
binding obligations of Hotel Development, HD, Illusions and DPC enforceable
against them in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization and other similar laws of general
application affecting creditors’ rights generally or by general equitable
principles.

Each of the Sellers represents that he is a person of full age of majority, with
full power, capacity, and authority to enter into this Agreement and perform the
obligations contemplated hereby by and for himself and his spouse (if
applicable).  All action on the part of the Sellers necessary for the
authorization, execution, delivery and performance of this Agreement by him has
been taken and will be taken prior to Closing Date.  This Agreement, when duly
executed and delivered in accordance with its terms, will constitute legal,
valid and binding obligations of the Sellers enforceable against each of them in
accordance with its terms, except as may be limited by bankruptcy, insolvency,
reorganization and other similar laws of general application affecting
creditors’ rights generally or by general equitable principles.

Section 3.6    Consents.  No consent of, approval by, order or authorization of,
or registration, declaration or filing by Hotel Development, HD, Illusions, DPC
or the Sellers with any court or any governmental or regulatory agency or
authority having jurisdiction over the Hotel Development, HD, Illusions or DPC,
or any of their respective property or assets is required on the part of Hotel
Development,  HD, Illusions, DPC or the Sellers (a) in connection with the
consummation of the transactions contemplated by this Agreement or (b) as a
condition to the legality, validity or enforceability as against Hotel
Development, HD, Illusions or DPC of this Agreement, excluding any registration,
declaration or filing, the failure to effect which would not have a material
adverse effect on the financial condition of Hotel Development, HD or Illusions.

Section 3.7    Acquisition of Stock for Investment.  Each of the Sellers and DPC
understand that any issuance of the Shares (as referenced in Section 1.4 herein)
will not have been registered under the Securities Act of 1933, as amended (the
“Act”), or any state securities acts, and accordingly, are restricted
securities, and each of the Sellers and DPC represent and warrant to the Buyer,
RCI and Rick’s that the present intention of Sellers and DPC is to receive and
hold the Shares for investment only and not with a view to the distribution or
resale thereof.

 
Purchase Agreement - Page 7

--------------------------------------------------------------------------------

 

Additionally, each of the Sellers and DPC understand that any sale of any the
Shares issued, under current law, will require either (a) the registration of
the Shares under the Act and applicable state securities acts; (b) compliance
with Rule 144 of the Act; or (c) the availability of an exemption from the
registration requirements of the Act and applicable state securities acts.

To assist in implementing the above provisions, each of the Sellers and DPC
hereby consent to the placement of the legend, or a substantially similar
legend, set forth below, on all certificates representing ownership of the
Shares acquired hereby until the Shares have been sold, transferred, or
otherwise disposed of, pursuant to the requirements hereof.  The legend shall
read substantially as follows:
 
“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES ACTS.  THESE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT, ARE RESTRICTED AS TO TRANSFERABILITY, AND MAY NOT BE
SOLD, HYPOTHECATED, OR OTHERWISE TRANSFERRED WITHOUT COMPLIANCE WITH THE
REGISTRATION AND QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE
SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.”

Section 3.8    Access to Information.  Each of the Sellers and DPC hereby
confirm and represent that they (a) have received a copy of Rick’s Form 10-KSB
filed with the Securities and Exchange Commission (the “SEC”) for the year ended
September 30, 2007, and a copy of Rick’s Form 10-QSB for the quarter ended
December 31, 2007, as filed with the SEC; (b) a copy of Rick’s Form 14C filed
with the SEC on June 27, 2007; (c) a copy of the Form 8-K’s filed with the SEC
on January 28, 2008, February 11, 2008 and February 13, 2008; (d) have been
afforded the opportunity to ask questions of and receive answers from
representatives of  Rick’s concerning the business and financial condition,
properties, operations and prospects of Rick’s; (e) have such knowledge and
experience in financial and business matters so as to be capable of evaluating
the relative merits and risks of the transactions contemplated hereby; (f) have
had an opportunity to engage and is represented by an attorney of his choice;
(g) have had an opportunity to negotiate the terms and conditions of this
Agreement; (h) have been given adequate time to evaluate the merits and risks of
the transactions contemplated hereby; and (i) have been provided with and given
an opportunity to review all current information about Rick’s.  The Sellers and
DPC have asked such questions to representatives of Rick’s about Rick’s as they
desire to ask and all such questions have been answered to the full satisfaction
of each of the Sellers and DPC.  The forms filed by Rick’s with the SEC as set
forth in Section 3.8(a), (b) and (c) are hereafter collectively referred to as
“SEC Reports”.

Section 3.9    Purchase for Investment.  Each of the Sellers and DPC are
acquiring the Shares for their own accounts, for investment purposes only and
not with view to any public resale or other distribution thereof.  Each of the
Sellers and DPC represent and warrant that each   is an Accredited Investor as
that term is defined in Rule 501(a) of Regulation D of the Securities Act of
1933, as amended.  Each of the Sellers, DPC and their respective representatives
have received, or have had access to, and have had sufficient opportunity to
review, all books, records, financial information and other information which
each of the Sellers and DPC consider necessary or advisable to enable him to
make a decision concerning its acquisition of the Shares, and that each of them
possesses such knowledge and experience in financial and business matters that
each is capable of evaluating the merits and risks of his investment hereunder.

 
Purchase Agreement - Page 8

--------------------------------------------------------------------------------

 

Section 3.10    No Default.  None of Hotel Development, HD, Illusions or DPC is
(a) in violation of any provision of its Articles of Organization or Regulations
or (b) in default under any term or condition of any instrument evidencing,
creating or securing any indebtedness of Hotel Development, HD, Illusions or
DPC, and there has been no default in any material obligation to be performed by
Hotel Development, HD, Illusions or DPC under any other contract, lease,
agreement, commitment or undertaking to which either of them is a party or by
which they or their assets or properties are bound, nor has Hotel Development,
HD, Illusions or DPC waived any material right under any such contract, lease,
agreement, commitment or undertaking.

Section 3.11    Taxes.  Hotel Development, HD, Illusions and DPC have timely and
accurately filed all federal, state, foreign and local tax returns and reports
required to be filed prior to such dates and have timely paid all taxes shown on
such returns as owed for the periods of such returns, including all sales taxes
and withholding or other payroll related taxes shown on such returns and any
taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, creditor or independent contractor.  Hotel Development,
HD, Illusions and DPC have made adequate provision for the payment of all taxes
accruable for all periods ending on or before the Closing Date to any taxing
authority and are not delinquent in the payment of any tax or governmental
charge of any nature.  No assessments or notices of deficiency or other
communications have been received by Hotel Development, HD, Illusions, DPC or
the Sellers with respect to any tax return which has not been paid, discharged
or fully reserved against and no amendments or applications for refund have been
filed or are planned with respect to any such return.  None of Hotel
Development, HD, Illusions, DPC or any of the Sellers has knowledge of any
action by any taxing authority in connection with assessing additional taxes
against or in respect of it for any past period.  There are no agreements
between Hotel Development, HD, Illusions or DPC and any taxing authority waiving
or extending any statute of limitations with respect to any tax return.

Section 3.12    Financial Statements.  The Sellers and DPC have delivered to
Buyer and RCI the financial information available relating to Hotel Development,
HD and DPC, respectively (the “Financial Information”).  Such Financial
Information, are in accordance with the books and records of Hotel Development,
HD and DPC, and fairly represent the financial position of Hotel Development, HD
and DPC, and the results of operations and changes in financial position of
Hotel Development,  HD and DPC as of the dates and for the periods
indicated.  Except as set forth in Exhibit 3.12, none of Hotel Development, HD
or DPC, as of the date of the Financial Information, has any material liability
or obligation of any nature, whether absolute, accrued, continued or
otherwise.  As of the Closing Date, the Sellers and DPC represent there have
been no adverse changes in the financial condition or other operations,
business, properties or assets of Hotel Development,  HD or DPC, respectively,
from that reflected in the latest Financial Information of Hotel Development, HD
or DPC as furnished pursuant to this Agreement.

Section 3.13    Labor Matters.  Neither Hotel Development nor HD is a party or
otherwise subject to any collective bargaining agreement with any labor union or
association.  Neither Hotel Development nor HD is a party to any written or oral
contract, agreement or understanding for the employment of any officer, director
or employee of Hotel Development or HD.  Neither Hotel Development nor HD is a
party to any employee benefits plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended) or any other fringe or
employee benefits plan, programs or arrangements.

 
Purchase Agreement - Page 9

--------------------------------------------------------------------------------

 

Section 3.14    Compliance with Laws; Permits.  Except as set forth in Exhibit
3.14, Hotel Development, HD, Illusions  and DPC are, and at all times prior to
the date hereof have been in compliance with all statutes, orders, rules,
ordinances and regulations applicable to each of them or to the ownership of
their respective assets or the operation of their respective businesses. Except
as set forth in Exhibit 3.14, Hotel Development, HD and Illusions will own, hold
or possess, or will own, hold or posses prior to the Closing Date, all permits
and licenses which are in any manner necessary for the Club to conduct a
sexually oriented business, including the right to serve alcoholic beverages.

Section 3.15    No Conflicts.  The execution and delivery by Hotel Development,
HD, Illusions, DPC and the Sellers of this Agreement does not, and the
performance and consummation by Hotel Development, HD, Illusions, DPC and the
Sellers of the transactions contemplated hereby will not (i) conflict with the
articles of organization or regulations of Hotel Development, HD, Illusions or
DPC; (ii) conflict with or result in a breach or violation of, or default under,
or give rise to any right of acceleration or termination of, any of the terms,
conditions or provisions of any note, bond, lease, license, agreement or other
instrument or obligation to which Hotel Development, HD, Illusions or DPC is a
party or by which the assets or properties of Hotel Development, HD, Illusions
or DPC are bound; (iii) result in the creation of any encumbrance on any of the
assets or properties of Hotel Development, HD or DPC; or (iv) violate any law,
rule, regulation or order applicable to Hotel Development, HD, Illusions, DPC or
the Sellers or any of the  assets or properties of Hotel Development, HD,
Illusions or DPC.

Section 3.16   Title to Properties; Encumbrances.  Hotel Development and HD have
good and marketable title to all of the personal property and assets, that are
used in the business that are material to the condition (financial or
otherwise), business, operations or prospects of Hotel Development and HD, free
and clear of all mortgages, claims, liens, security interests, charges, leases,
encumbrances and other restrictions of any kind and nature, except (i) as
disclosed in the Financial Statements of Hotel Development and HD, (ii)
statutory liens not yet delinquent, and (iii) such liens consisting of zoning or
planning restrictions, imperfections of title, easements, pledges, charges and
encumbrances, if any, as do not materially detract from the value or materially
interfere with the present use of the property or assets subject thereto or
affected thereby.  Neither Hotel Development nor HD owns any real
property.  With the exception of the items listed on Exhibit 3.16 all of which
will be paid in full prior to Closing, DPC has good and marketable title to the
Real Property, free and clear of all mortgages, claims, liens, security
interests, charges, leases, encumbrances and other restrictions of any kind and
nature.

Section 3.17    No Pending Transactions.  Except for the transactions
contemplated by this Agreement, none of Hotel Development, HD, Illusions, DPC or
the Sellers is a party to or bound by or the subject of any agreement,
undertaking, commitment or discussions or negotiations with any person that
could result in (i) the sale, merger, consolidation or recapitalization of Hotel
Development, HD, Illusions or DPC, (ii) the sale of any of the assets of Hotel
Development, HD, or  Illusions except in the ordinary course of business, (iii)
the sale of the Real Property by DPC, (iv) the sale of any outstanding
Partnership Interest of Hotel Development or outstanding Membership Interest of
HD, (v) the acquisition by Hotel Development or HD of any operating business or
the capital stock of any other person or entity, (vi) the borrowing of money by
Hotel Development or HD, whether secured or unsecured, or (vii) any agreement
with any of the respective officers, managers or affiliates of Hotel
Development, HD, Illusions or DPC.

 
Purchase Agreement - Page 10

--------------------------------------------------------------------------------

 

Section 3.18    Contracts and Leases.  Except as set forth in Exhibit 3.18,
neither Hotel Development nor HD (i) has any leases of personal property
relating to the assets of Hotel Development or HD, whether as lessor or lessee;
(ii) has any contractual or other obligations relating to the assets of Hotel
Development or HD, whether written or oral; and (iii) have given any power of
attorney to any person or organization for any purpose relating to the assets of
Hotel Development or HD.  Hotel Development and HD have provided Buyer access to
each and every contract, lease or other document relating to the assets of Hotel
Development and HD to which they are subject or are a party or a
beneficiary.  To the knowledge of each of the Sellers, such contracts, leases or
other documents are valid and in full force and effect according to their terms
and constitutes a legal, valid and binding obligation of Hotel Development and
HD and the other respective parties thereto and are enforceable in accordance
with their terms.  None of the Sellers have knowledge of any default or breach
under such contracts, leases or other documents or of any pending or threatened
claims under any such contracts, leases or other documents.

Section 3.19    No Default.  None of Hotel Development, HD, Illusions or DPC is
(a) in violation of any provision of its articles of organization or regulations
or (b) in default under any term or condition of any instrument evidencing,
creating or securing any indebtedness of Hotel Development, HD, Illusions or
DPC.  Further, there has been no default in any material obligation to be
performed by Hotel Development, HD, Illusions or DPC under any other contract,
lease, agreement, commitment or undertaking to which it is a party or by which
it or its assets or properties are bound, nor has Hotel Development, HD,
Illusions or DPC waived any material right under any such contract, lease,
agreement, commitment or undertaking.

Section 3.20    Books and Records.  The books of account, minute books, stock
record books or other records of Hotel Development and HD that exist are
accurate and complete and have been maintained in accordance with sound business
practices and will be located at the Premises upon Closing.

Section 3.21    Insurance Policies.  Copies of all insurance policies maintained
by Hotel Development, HD and Illusions relating to the operation of the Club
have been delivered or made available to Buyer.  The policies of insurance held
by Hotel Development, HD and Illusions are in such amounts, and insure against
such losses and risks, as Hotel Development, HD and Illusions reasonably deem
appropriate for their respective property and business operations.  All such
insurance policies are in full force and effect, and all premiums due thereon
have been paid.  Valid policies for such insurance will be outstanding and duly
in force at all times prior to the Closing.

 
Purchase Agreement - Page 11

--------------------------------------------------------------------------------

 

Section 3.22    Pending Claims.  Except as set forth in Exhibit 3.22, there are
no claims, suits, arbitrations, investigations, actions or other proceedings,
whether judicial, administrative or otherwise, now pending or, to the best
knowledge of  Hotel Development, HD, Illusions, DPC or any of the Sellers,
threatened before any court, arbitration, administrative or regulatory body or
any governmental agency which may result in any judgment, order, award, decree,
liability or other determination which will or could reasonably be expected to
have any effect upon Hotel Development, HD or Illusions, the business of the
Club, the transfer of the Partnership Interest or the Membership Interest by the
Sellers to Buyer under this Agreement, the operation of the Club after the
Closing Date, or the transfer of the Real Property, nor is there any basis known
to Hotel Development, HD, Illusions, DPC or any of the Sellers for any such
action. Except as set forth in Exhibit 3.22, no litigation is pending, or, to
the knowledge of Hotel Development, HD, Illusions, DPC or any of the Sellers,
threatened against Hotel Development, HD or Illusions, or the business of the
Club, DPC, the Real Property, or the assets or properties of Hotel Development,
HD, Illusions or DPC which seeks to restrain or enjoin the execution and
delivery of this Agreement or any of the documents referred to herein or the
consummation of any of the transactions contemplated thereby or hereby.  None of
Hotel Development, HD, Illusions, DPC or any of the Sellers is subject to any
judicial injunction or mandate or any quasi-judicial or administrative order or
restriction directed to or against them which would affect Hotel Development, HD
or Illusions, or the business of the Club, the Partnership Interest, the
Membership Interest or the Real Property to be transferred under this Agreement.

Section 3.23    No Liabilities. As of the Closing Date, neither Hotel
Development nor HD shall have any obligations or liability (contingent or
otherwise) to any third party.

Section 3.24    Unpaid Bills.  As of the Closing, there will be no unpaid bills
or claims in connection with any repair of the Premises or other work performed
or materials purchased in connection with the repair of the Premises.

Section 3.25    Notices.  Neither the Sellers, Hotel Development, HD or DPC have
received any written notice (i) from any insurance companies, governmental
agencies or from any other parties of any condition, defects or inadequacies
with respect to the Premises which, if not corrected, would result in
termination of insurance coverage or increase its cost, (ii) from any
governmental agencies or any other third parties with respect to any violations
of any building codes and/or zoning ordinances or any other governmental laws,
regulations or orders affecting the Premises, including, without limitation, the
Americans With Disabilities Act, (iii) of any pending or threatened condemnation
proceedings with respect to the Premises, or (iv) of any proceedings which could
or would cause the change, redefinition or other modification of the zoning
classification of the Premises.

Section 3.26    Proceedings Relating to Premises.  Except as set forth on
Exhibit 3.26 hereto, there is no pending, or, to the best of Sellers, Hotel
Development, HD or DPC knowledge, threatened, judicial, municipal or
administrative proceedings with respect to, or in any manner affecting the
Premises or any portion thereof, including, without limitation, proceedings for
or involving tenant evictions, collections, condemnations, eminent domain,
alleged building code or zoning violations, personal injuries or property damage
alleged to have occurred on the Premises or by reason of the use and operation
of the Premises, or written notice of any attachments, executions, assignments
for the benefit of creditors, receiverships, conservatorships or voluntary or
involuntary proceedings in bankruptcy or pursuant to any other debtor relief
laws pending or threatened against the seller of the Premises or the Premises
itself, or the taking of the Premises for public needs.

 
Purchase Agreement - Page 12

--------------------------------------------------------------------------------

 

Section 3.27    Public Improvements.  None of the Sellers, Hotel Development, HD
or DPC has knowledge of any existing or proposed public improvements which
involve or which may result in any charge being levied or assessed against the
Premises or which will or could result in the creation of any lien upon the
Premises or any part thereof.

Section 3.28    Certificates.  To the best of Sellers, Hotel Development, HD or
DPC knowledge, all certificates of occupancy, licenses, permits, authorizations
and approvals required by law or by any governmental authority having
jurisdiction over the Premises have been obtained and are in full force and
effect.

Section 3.29    Material Defect.  None of the Sellers, Hotel Development, HD or
DPC has knowledge of any material defects to the Premises which have not been
disclosed in writing to RCI.

Section 3.30    Flooding.  None of the Sellers, Hotel Development, HD or DPC has
knowledge of any flooding which has occurred on the Premises.

Section 3.31    Environmental.  To the best of Sellers, Hotel Development, HD or
DPC knowledge, the Premises is not in violation of any state, local or federal
statutes, laws, regulations, ordinances, or rules pertaining to health or the
environment requirements affecting the Premises and none of the Sellers, Hotel
Development, HD or DPC have received any citation, directive, letter or other
communication, written or oral, or any notice of any proceeding, claim or
lawsuit relating to any environmental issue at the Real Property.

Section 3.32    Brokerage Commission.  No broker or finder has acted for the
Hotel Development, HD, Illusions, DPC or the Sellers in connection with this
Agreement or the transactions contemplated hereby, and no person is entitled to
any brokerage or finder’s fee or compensation in respect thereof based in any
way on agreements, arrangements or understandings made by or on behalf of Hotel
Development, HD, Illusions, DPC or the Sellers.

Section 3.33    Banks and Brokerage Accounts.  Exhibit 3.33 sets forth (a) a
true and complete list of the names and locations of all banks, trust companies,
securities brokers and other financial institutions at which Hotel Development,
HD and Illusions have an account or safe deposit box or maintains a banking,
custodial, trading or other similar relationship, and (b) a true and complete
list and description of each such account, box and relationship, indicating in
each case the account number and the names of the respective officers,
employees, agents or other similar representatives of Hotel Development, HD or
Illusions having signatory power with respect thereto.

Section 3.34    Disclosure.  No representation or warranty of Hotel Development,
HD, Illusions, DPC or the Sellers contained in this Agreement (including the
exhibits hereto) contains any untrue statement or omits to state a material fact
necessary in order to make the statements contained herein or therein, in light
of the circumstances under which they were made, not misleading.

 
Purchase Agreement - Page 13

--------------------------------------------------------------------------------

 

ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF BUYER AND RCI

Buyer hereby represents and warrants to Hotel Development, HD, Illusions, DPC
and the Sellers as follows:

Section 4.1    Organization, Good Standing and Qualification.  Buyer and RCI (i)
are entities duly organized, validly existing and in good standing under the
laws of the state of Texas, (ii) have all requisite power and authority to carry
on its business, and (iii) are duly qualified to transact business and are in
good standing in all jurisdictions where their ownership, lease or operation of
property or the conduct of their business requires such qualification, except
where the failure to do so would not have a material adverse effect to Buyer
and/or RCI.

Section 4.2    Authorization.  Buyer is a corporation duly organized in the
state of Texas and has full power, capacity, and authority to enter into this
Agreement and perform the obligations contemplated hereby.  RCI is a limited
liability company duly organized in the state of Texas and has full power,
capacity, and authority to enter into this Agreement and perform all the
obligations contemplated hereby.  All action on the part of Buyer and RCI
necessary for the authorization, execution, delivery and performance of this
Agreement by it has been or will be taken before Closing.  This Agreement, when
duly executed and delivered in accordance with its terms, will constitute legal,
valid, and binding obligations of Buyer and RCI enforceable against Buyer and
RCI in accordance with its terms, except as may be limited by bankruptcy,
insolvency, and other similar laws affecting creditors' rights generally or by
general equitable principles.

Section 4.3    Consents.  No permit, consent, approval or authorization of, or
designation, declaration or filing with, any governmental authority or any other
person or entity is required on the part of Buyer or RCI in connection with the
execution and delivery by Buyer and RCI of this Agreement or the consummation
and performance of the transactions contemplated hereby other than as may be
required under the federal securities laws.

Section 4.4    Disclosure.  No representation or warranty of Buyer or RCI
contained in this Agreement (including the exhibits hereto) contains any untrue
statement or omits to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances under
which they were made, not misleading.

Section 4.5    Brokerage Commission.  No broker or finder has acted for the
Buyer or RCI in connection with this Agreement or the transactions contemplated
hereby, and no person is entitled to any brokerage or finder’s fee or
compensation in respect thereof based in any way on agreements, arrangements or
understandings made by or on behalf of Buyer or RCI.

 
Purchase Agreement - Page 14

--------------------------------------------------------------------------------

 

ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF RICK’S

Rick’s hereby represents and warrants to Hotel Development, HD, Illusions, DPC
and the Sellers as follows:

Section 5.1    Organization, Good Standing and Qualification.  Rick’s (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas, (ii) has all requisite power and authority to carry on
its business, and (iii) is duly qualified to transact business and is in good
standing in all jurisdictions where its ownership, lease or operation of
property or the conduct of its business requires such qualification, except
where the failure to do so would not have a material adverse effect to Rick’s.

Section 5.2    Authorization.  Rick’s is a corporation duly organized in the
state of Texas and has full power, capacity, and authority to enter into this
Agreement and perform the obligations contemplated hereby.  All action on the
part of Rick’s necessary for the authorization, execution, delivery and
performance of this Agreement by it has been or will be taken.  This Agreement,
when duly executed and delivered in accordance with its terms, will constitute
legal, valid, and binding obligations of Rick’s enforceable against it in
accordance with its terms, except as may be limited by bankruptcy, insolvency,
and other similar laws affecting creditors' rights generally or by general
equitable principles.

Section 5.3    Consents.  No permit, consent, approval or authorization of, or
designation, declaration or filing with, any governmental authority or any other
person or entity is required on the part of the Buyer or Rick’s in connection
with the execution and delivery by Rick’s of this Agreement or the consummation
and performance of the transactions contemplated hereby other than as may be
required under the federal securities laws.

Section 5.4    Disclosure.  No representation or warranty of Rick’s contained in
this Agreement (including the exhibits hereto) contains any untrue statement or
omits to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading.

Section 5.5    Brokerage Commission.  No broker or finder has acted for Rick’s
in connection with this Agreement or the transactions contemplated hereby, and
no person is entitled to any brokerage or finder’s fee or compensation in
respect thereof based in any way on agreements, arrangements or understandings
made by or on behalf of Rick’s.

 
Purchase Agreement - Page 15

--------------------------------------------------------------------------------

 

ARTICLE VI
COVENANTS OF HOTEL DEVELOPMENT,
HD, ILLUSIONS, DPC AND THE SELLERS

Section 6.1    Stand Still.  To induce Buyer, RCI and Ricks to proceed with this
Agreement, Hotel Development, HD, Illusions, DPC and the Sellers agree that
until the Closing Date or the termination of this Agreement, none of the
representatives of Hotel Development, HD, Illusions, DPC or the Sellers will
offer to sell or solicit any offer to purchase or engage in any discussions or
activities of any nature whatsoever, directly or indirectly, involving in any
manner the actual or potential sale, transfer, encumbrance, pledge,
collateralization or hypothecation of any assets of Hotel Development, HD or
Illusions, or any Partnership Interest or Membership Interest of the Sellers, or
the Real Property.  Hotel Development, HD, Illusions, DPC and the Sellers hereby
agree to advise the Buyer, RCI and Ricks of any contact from any third party
regarding the acquisition of any Partnership Interest or Membership Interest of
the Sellers or other investment in Hotel Development, HD or Illusions, the
acquisition of the Real Property, or of any contact which would relate to the
transactions contemplated by this Agreement.

Section 6.2    Access; Due Diligence.  Between the date of this Agreement and
the Closing Date, Hotel Development, HD, Illusions, DPC and the Sellers shall
(a) provide Buyer, RCI, Rick’s and/or their authorized representatives
reasonable access to all plants, offices, warehouse and other facilities and
properties of Hotel Development, HD, DPC and Illusions, and to the books and
records of Hotel Development, HD, DPC and Illusions; (b) permit the Buyer, RCI,
Rick’s and/or their authorized representatives to make inspections thereof; and
(c) cause the officers and advisors of Hotel Development, HD, DPC and Illusions
to furnish the Buyer with such financial and operating data and other
information with respect to the business and properties of Hotel Development,
HD, DPC and Illusions, and to discuss with the Buyer or RCI and their authorized
representatives the affairs of Hotel Development, HD, DPC and Illusions as the
Buyer or RCI may from time to time reasonably request.

Section 6.3    Conduct of Business.  From the date of the execution hereof until
the Closing Date, Hotel Development, HD and Illusions shall operate the business
of the Club in the ordinary course of business, and:

 
(a)
None of Hotel Development, HD and Illusions will authorize, declare, pay or
effect any dividend except as is consistent with past practices of Hotel
Development, HD and/or Illusions, or liquidation or other distribution in
respect of the units of Partnership Interest of Hotel Development or Membership
Interest of HD, or any other equity interest or any direct or indirect
redemption, purchase or other acquisition of any equity interest of Hotel
Development, HD or Illusions;

 
(b)
None of Hotel Development, HD and Illusions will make any changes in their
condition (financial or otherwise), liabilities, assets, or business or in any
of their business relationships, including relationships with suppliers or
customers, that, when considered individually or in the aggre­gate, might
reasonably be expected to have a material adverse effect on Hotel Development,
HD or Illusions or the results of operations of the Club;

 
Purchase Agreement - Page 16

--------------------------------------------------------------------------------

 

 
(c)
None of Hotel Development, HD and Illusions will increase the salary or other
compensation payable or to become payable by Hotel Development, HD and/or
Illusions to any employee, or the declaration, payment, or commitment or
obligation of any kind for the pay­ment by Hotel Development, HD and/or
Illusions of a bonus or other additional salary or compensation to any such
person except in the normal course of business, consistent with past practices
of Hotel Development, HD and/or Illusions;

 
(d)
None of Hotel Development, HD or Illusions will sell, lease, transfer or assign
any of their assets, tangible or intangible, other than for a fair consideration
in the ordinary course of business;

 
(e)
None of Hotel Development, HD or Illusions will accelerate, terminate, modify or
cancel any agreement, contract, lease or license (or series of related
agreements, contracts, leases and licenses) involving more than $1,000 to which
Hotel Development, HD or Illusions is a party;

 
(f)
None of Hotel Development, HD or Illusions will make any loans to any person or
entity, or guarantee any loan, absent the consent of the Buyer;

 
(g)
None of Hotel Development, HD or Illusions will waive or release any right or
claim held by Hotel Development, HD or Illusions, absent the consent of the
Buyer;

 
(h)
Hotel Development, HD and Illusions will operate their respective businesses in
the ordinary course and consistent with past practices so as to preserve their
business organization intact, to retain the ser­vices of their employees and to
preserve their goodwill and relationships with suppliers, creditors, cus­tomers,
and others having business relationships with them;

 
(i)
None of Hotel Development, HD or Illusions will issue any note, bond or other
debt security or create, incur or assume, or guarantee any indebtedness for
borrowed money or capitalized lease obligations;

 
(j)
None of Hotel Development, HD or Illusions will delay or postpone the payment of
accounts payable and other liabilities outside the ordinary course of business;

 
(k)
None of Hotel Development, HD or Illusions will make any loan to, or enter into
any other transaction with, any of their directors, officers, and employees,
outside the ordinary course of business;

 
(l)
None of Hotel Development, HD or Illusions will make any change in any method,
practice, or principle of accounting involving the business of Hotel
Development, HD and/or Illusions, or the assets of Hotel Development, HD and/or
Illusions;

 
Purchase Agreement - Page 17

--------------------------------------------------------------------------------

 

 
(m)
Hotel Development will not issue, sell or otherwise dispose of any of its
Partnership Interests, or create, sell or dispose of any options, rights,
conversion rights or other agreements or commitments of any kind relating to the
issuance, sale or disposition of any of its Partnership Interests;

 
(n)
HD will not issued, sell or otherwise dispose of any of its Membership
Interests, or create, sell or dispose of any options, rights, conversion rights
or other agreements or commitments of any kind relating to the issuance, sale or
disposition of any of its Membership Interests;

 
(o)
Hotel Development will not reclassify, split up or otherwise change any of its
Partnership Interests;

 
(p)
HD will not reclassify, split up or otherwise changes of its Membership
Interests;

 
(q)
None of Hotel Development, HD or Illusions will be a party to any merger,
consolidation or other business combination; and

 
(r)
None of Hotel Development, HD or Illusions will agree to take any action
described in this Section 6.3.

ARTICLE VII
CONDITIONS TO CLOSING

The obligations of the parties to effect the transactions contemplated hereby
are subject to the satisfaction at or prior to the Closing of the following
conditions:

Section 7.1    Conditions to Obligations of Buyer, RCI and Rick’s.

 
(a)
Representations and Warranties of Hotel Development, HD, Illusions, DPC and the
Sellers.  The representations and warranties of Hotel Development, HD,
Illusions, DPC and the Sellers shall be true and correct on the date hereof and
on and as of the Closing Date, as though made on and as of the Closing Date;

 
(b)
Covenants.  All covenants, agreements and conditions contained in this Agreement
to be performed by Hotel Development, HD, Illusions, DPC and the Sellers on or
prior to the Closing Date shall have been performed or complied with in all
respects;

 
(c)
Delivery of Certificates.  The Sellers, Hotel Development, HD, Illusions and DPC
shall provide to Buyer, RCI and Rick’s certificates, dated as of the Closing
Date and signed by each of the Sellers and by representatives of Hotel
Development, HD, Illusions and DPC, respectively, to effect set forth in Section
7.1(a) and 7.1(b) for the purpose of verifying the accuracy of such
representations and warranties and the performance and satisfaction of such
covenants and conditions;

 
Purchase Agreement - Page 18

--------------------------------------------------------------------------------

 

 
(d)
Resolutions.  Hotel Development, HD, DPC and Illusions shall have delivered
resolutions of Hotel Development, HD DPC and Illusions, which authorize the
execution, delivery and performance of this Agreement and the documents referred
to herein to which it is or is to be a party dated as of the Closing Date;

 
(e)
Delivery of Partnership Interest and Membership Interest.  The Sellers shall
deliver or cause to be delivered to Buyer (i) originally issued certificate
representing the Partnership Interest of Hotel Development and (ii) the
originally issued certificate representing the Membership Interest of HD duly
endorsed over to the Buyer in a form satisfactory to the Buyer;

 
(f)
Delivery of Real Property.  DPC shall deliver or cause to be delivered to RCI a
General Warranty Deed and any other documents necessary to convey good and
marketable title to the Real Property, free and clear of all encumbrances;

 
(g)
Management Agreement.  The Management Agreement between Illusions and Hotel
Development shall be in full force and effect;

 
(h)
Legal Opinion.  Illusions shall deliver to Buyer, RCI and Rick’s a legal opinion
confirming the validity of the actions to be taken by Illusions hereunder in a
form mutually acceptable to the parties hereto ;

 
(i)
Related Transactions.  The Related Transactions set forth in Section 2.3 shall
be consummated concurrently with the Closing;

 
(j)
Permits.  Buyer shall possess all necessary permits and other authorizations,
whether city, county, state or federal, which may be needed to conduct topless
entertainment with the sale of alcoholic beverages on the Premises and all such
permits and authorizations shall be in good order, and, unless otherwise waived
by the Buyer and Rick’s, without any administrative actions pending or concluded
that may challenge or present an obstacle to the continued performance of
topless entertainment and sale of alcoholic beverages at the Club and the
Certificate of Occupancy issued by the City of Dallas which zones the Premises
for an adult oriented business shall be in full force and effect;

 
(k)
Zoning.  Illusions shall continue to hold any and all permits, zoning
classifications or authorizations necessary to sell alcoholic beverages at the
Club and the Buyer shall have been issued any permits, zoning classifications or
authorizations necessary to conduct topless entertainment at the Club and these
permits, zoning classifications or authorizations shall be held and/or issued to
Buyer at or prior to the Closing.

 
(l)
Financial Records.  The financial records of Hotel Development and HD shall be
maintained and exist in such a manner as to allow for a certified audit as
determined by Rick’s;

 
Purchase Agreement - Page 19

--------------------------------------------------------------------------------

 

 
(m)
Liabilities.  None of Hotel Development, HD or Illusions shall have any
liabilities as of the date of Closing except for any contingent liabilities
which may exist as set forth in Exhibit 3.22;

 
(n)
Financing.  RCI shall have obtained bank financing acceptable to it in its sole
discretion in an amount of not less than $3,200,000 in connection with the
financing of the Property;

 
(o)
Third-Party Consents.  Any and all consents or waivers required from third
parties relating to this Agreement or any of the other transactions contemplated
hereby shall have been obtained;

 
(p)
Satisfactory Diligence.  Buyer shall have concluded its due diligence
investigation of Hotel Development and HD and their respective assets and
properties, RCI shall have concluded to its satisfaction its due diligence
investigation related to the title to the Real Property, and all other matters
related to the foregoing, and shall be satisfied, in its absolute and sole
discretion, with the results thereof;

 
(q)
No Actions or Proceedings.  No claim, action, suit, investigation or proceeding
shall be pending or threatened before any court or governmental agency which
presents a substantial risk of the restraint or prohibition of the transactions
contemplated by this Agreement;

 
(r)
Government Approvals.  All authorizations, permits, consents, orders, licenses
or approvals of, or declarations or filings with, or expiration of waiting
periods imposed by, any governmental entity necessary for the consummation of
the transactions contemplated by this Agreement shall have been filed, occurred
or been obtained; and

 
(s)
Appointment of Manager/Officer/Resignations.  At Closing, (i) Eric Langan shall
have been appointed as President/Chief Executive Officer of Hotel Management and
HD; (ii) Buyer shall have been appointed as Manager of HD; (iii)the Board of
Directors of Illusions shall have caused a membership meeting to have occurred
wherein the then existing Board of Directors will resign and nominate three new
members as chosen by the Buyer to serve on the new Board of Directors of
Illusions; and (iv) each of the Sellers shall resign any and all officer
positions held in Hotel Development and/or HD.

Section 7.2            Conditions to Obligations of Hotel Development, HD,
Illusions, DPC and the Sellers

 
(a)
Representations, Warranties and Agreements of Buyer, RCI and Rick’s.  The
representations and warranties of Buyer, RCI and Rick’s shall be true and
correct on the date hereof and on and as of the Closing Date, as though made on
and as of the Closing Date;

 
Purchase Agreement - Page 20

--------------------------------------------------------------------------------

 

 
(b)
Covenants.  All covenants, agreements and conditions contained in this Agreement
to be performed by the Buyer, RCI or Rick’s on or prior to the Closing Date
shall have performed or complied with in all respects;

 
(c)
Delivery of Certificates.  Buyer, RCI and Rick’s shall provide to Hotel
Development, HD, Illusions, DPC and the Sellers certificates dated as of the
Closing Date and signed by a representative of the Buyer, RCI and Rick’s to the
effect set forth in Section 7.2(a) and 7.2(b) for the purpose of verifying the
accuracy of such representations and warranties and the performance and
satisfaction of such covenants and conditions;

 
(d)
Resolutions.  Buyer, RCI and Rick’s shall deliver resolutions of the Buyer, RCI
and Rick’s, which authorize the execution, delivery and performance of this
Agreement and the documents referred to herein to which it is or is to be a
party dated as of the Closing Date;

 
(e)
Payment of Purchase Price.  (i) Buyer and RCI shall have tendered the cash
portions of the Purchase Price set forth in Section 1.2 and 1.4, and (ii) Rick’s
shall have delivered the Shares representing the stock portions of the Purchase
Price to the Sellers as set forth in Section 1.2 and 1.4 or shall deliver a
letter of instruction to the transfer agent instructing the issuance of the
Shares to the Sellers;

 
(f)
Related Transactions.  The Related Transaction set forth in Section 2.3 shall be
consummated concurrently with the Closing;

 
(g)
Consents; Transfer of Licenses.  All necessary transfers of licenses and leases
required for the operation of the business of Hotel Development and HD shall
have been obtained.  The Certificate of Occupancy issued by the City of Dallas
which zones the Premises for an adult oriented business shall be in full force
and effect;

 
(h)
Third Party Consents.  Any and all consents or waivers required from third
parties relating to this Agreement or any of the other transactions contemplated
hereby shall have been obtained;

 
(i)
No Actions or Proceedings.  No claim, action, suit, investigation or proceeding
shall be pending or threatened before any court or governmental agency which
presents a substantial risk of the restraint or prohibition of the transactions
contemplated by this Agreement;. and

 
(j)
Government Approvals.  All authorizations, permits, consents, orders or
approvals of, or declarations or filings with, or expiration of waiting periods
imposed by, any governmental entity necessary for the consummation of the
transactions contemplated by this Agreement shall have been filed, occurred or
been obtained.

 
Purchase Agreement - Page 21

--------------------------------------------------------------------------------

 

ARTICLE VIII
INDEMNIFICATION

Section 8.1    Indemnification from the Sellers Illusions and DPC.  Each of the
Sellers, Illusions and DPC, jointly and severally,  hereby agree to and shall
indemnify, defend (with legal counsel reasonably acceptable to Buyer), and hold
Buyer, RCI, Rick’s, their officers, directors, shareholders, employees,
affiliates, parent, agents, legal counsel, successors and
assigns  (collectively, the “Buyer’s Group”) harmless at all times after the
date of this Agreement, from and against any and all actions, suits, claims,
demands, debts, liabilities, obligations, losses, damages, costs, expenses,
penalties or injury  (including reasonable attorneys fees and costs of any suit
related thereto) (collectively, “Indemnifiable Loss” or “Indemnifiable Losses”)
suffered or incurred by any or all of  the Buyer’s Group arising from: (a) any
material misrepresentation by, or material breach of any covenant or warranty
of  the Sellers, DPC, Illusions, HD or Hotel Development contained in this
Agreement, or any exhibit, certificate, or other instrument furnished or to be
furnished by the Sellers, DPC, Illusions, HD or Hotel Development hereunder; (b)
any nonfulfillment of any material agreement on the part of  the Sellers, DPC,
Illusions, HD or Hotel Development under this Agreement;  or (c) from any
liability or obligation due to any third party by Hotel Development, HD, DPC,
Illusions and/or the Sellers incurred prior to the Closing Date, including all
damages resulting to the Buyer’s Group from the Sellers’, DPC’s, Illusions’,
HD’s or Hotel Development’s breach of any of any contracts occurring prior to
the Closing Date; or (d) any liabilities of Hotel Development, HD or DPC
incurred prior to the Closing Date.

Section 8.2    Indemnification from Buyer, RCI and Rick’s.  Buyer, RCI and
Rick’s agree to and shall indemnify, defend (with legal counsel reasonably
acceptable to Company) and hold the Sellers, DPC and Illusions and their agents,
officers, directors, shareholders, employees, affiliates, parent, agents, legal
counsel, successors and assigns, (collectively, the "Sellers’ Group") harmless
at all times after the date of the Agreement from and against any and all
actions, suits, claims, demands, debts, liabilities, obligations, losses,
damages, costs, expenses, penalties or injury (including reasonably attorneys
fees and costs of any suit related thereto) suffered or incurred by any or all
of Sellers’ Group, arising from (a) any material misrepresentation by, or
material breach of any covenant or warranty of Buyer, RCI or Rick’s  contained
in this Agreement or any exhibit, certificate, or other agreement or instrument
furnished or to be furnished by Buyer, RCI or Rick’s hereunder; (b) any
nonfulfillment of any material agreement on the part of Buyer, RCI or Rick’s
under this Agreement; or (c) any liabilities of HD or Hotel Development incurred
subsequent to the Closing Date.

Section 8.3    Defense of Claims.  If any lawsuit or enforcement action is filed
against any party entitled to the benefit of indemnity hereunder, written notice
thereof shall be given to the indemnifying party as promptly as practicable (and
in any event not less than fifteen (15) days prior to any hearing date or other
date by which action must be taken); provided that the failure of any
indemnified party to give timely notice shall not affect rights to
indemnification hereunder except to the extent that the indemnifying party
demonstrates actual damage caused by such failure.  After such notice, the
indemnifying party shall be entitled, if it so elects, to take control of the
defense and investigation of such lawsuit or action and to employ and engage
attorneys of its own choice to handle and defend the same, at the indemnifying
party's cost, risk and expense; and such indemnified party shall cooperate in
all reasonable respects, at its cost, risk and expense, with the indemnifying
party and such attorneys in the investigation, trial and defense of such lawsuit
or action and any appeal arising therefrom; provided, however, that the
indemnified party may, at its own cost, participate in such investigation, trial
and defense of such lawsuit or action and any appeal arising therefrom.  The
indemnifying party shall not, without the prior written consent of the
indemnified party, effect any settlement of any proceeding in respect of which
any indemnified party is a party and indemnity has been sought hereunder unless
such settlement of a claim, investigation, suit, or other proceeding only
involves a remedy for the payment of money by the indemnifying party and
includes an unconditional release of such indemnified party from all liability
on claims that are the subject matter of such proceeding.

 
Purchase Agreement - Page 22

--------------------------------------------------------------------------------

 

Section 8.4    Default of Indemnification Obligation.  If an entity or
individual having an indemnification, defense and hold harmless obligation, as
above provided, shall fail to assume such obligation, then the party or entities
or both, as the case may be, to whom such indemnification, defense and hold
harmless obligation is due shall have the right, but not the obligation, to
assume and maintain such defense (including reasonable counsel fees and costs of
any suit related thereto) and to make any settlement or pay any judgment or
verdict as the individual or entities deem necessary or appropriate in such
individual’s or entities’ absolute sole discretion and to charge the cost of any
such settlement, payment, expense and costs, including reasonable attorneys
fees, to the entity or individual that had the obligation to provide such
indemnification, defense and hold harmless obligation and same shall constitute
an additional obligation of the entity or of the individual or both, as the case
may be.

ARTICLE IX
MISCELLANEOUS

Section 9.1    Amendment; Waiver.  Neither this Agreement nor any provision
hereof may be amended, modified or supplemented unless in writing, executed by
all the parties hereto.  Except as otherwise expressly provided herein, no
waiver with respect to this Agreement shall be enforceable unless in writing and
signed by the party against whom enforcement is sought.  Except as otherwise
expressly provided herein, no failure to exercise, delay in exercising, or
single or partial exercise of any right, power or remedy by any party, and no
course of dealing between or among any of the parties, shall constitute a waiver
of, or shall preclude any other or further exercise of, any right, power or
remedy.

Section 9.2    Notices.  Any notices or other communications required or
permitted 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:

 
Purchase Agreement - Page 23

--------------------------------------------------------------------------------

 

(a)
if to the Sellers:
The Address listed on Exhibit 9.2(a)
 
 
   
with a copy to:
Karen S.  Hockstad
   
Hockstad Law Office, Ltd.
   
5003 Horizons Drive, Suite 200
   
Columbus, Ohio  43220
   
Fax: (614) 451-3156
     
(b)
if to Illusions:
Illusions-Dallas Private Club, Inc.
   
8550 N. Stemmons Freeway
   
Dallas, Texas  75226
       
With a copy to:
Roger Albright
   
Law Offices of Roger Albright
   
3301 Elm Street
   
Dallas, Texas  75226-2562
   
Fax: (214) 939-9229
     
(c)
if to Buyer, RCI or Rick’s:
RCI Entertainment (Dallas), Inc.
   
Attn:  Eric Langan, President
   
10959 Cutten Road
   
Houston, Texas  77066
   
Fax:  (281) 397-6765
       
with a copy to:
Robert D. Axelrod
   
Axelrod Smith & Kirshbaum
   
5300 Memorial Drive, Suite 700
   
Houston, Texas  77007
   
Fax:  (713) 552-0202

A notice or communication will be effective (i) if delivered in person or by
overnight courier, on the business day it is delivered, (ii) if transmitted by
telecopier, on the business day of actual confirmed receipt by the addressee
thereof, and (iii) if sent by registered or certified mail, three (3) business
days after dispatch.

Section 9.3    Severability.  Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.

Section 9.4    Assignment; Successors and Assigns.  Except as otherwise provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors and permitted assigns of the parties hereto.  No party
hereto may assign its rights or delegate its obligations under this Agreement
without the prior written consent of the other parties hereto, which consent
will not be unreasonably withheld.

 
Purchase Agreement - Page 24

--------------------------------------------------------------------------------

 

Section 9.5    Entire Agreement.  This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subject matter hereof and
thereof and supersede and cancel all prior representations, alleged warranties,
statements, negotiations, undertakings, letters, acceptances, understandings,
contracts and communications, whether verbal or written among the parties hereto
and thereto or their respective agents with respect to or in connection with the
subject matter hereof.

Section 9.6    Jurisdiction.  This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Texas, without regard to principles
of conflict of laws.  The parties agree that venue for purposes of construing or
enforcing this Agreement shall be proper in Harris County, Texas.

Section 9.7    Execution.  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.

Section 9.8    Costs and Expenses.   Each party shall pay their own respective
fees, costs and disbursements incurred in connection with this Agreement.

Section 9.9    Section Headings.  The section and subsection headings in this
Agreement are used solely for convenience of reference, do not constitute a part
of this Agreement, and shall not affect its interpretation.

Section 9.10   No Third-Party Beneficiaries.  Nothing in this Agreement will
confer any third party beneficiary or other rights upon any person (specifically
including any employees of Hotel Development) or any entity that is not a party
to this Agreement.

Section 9.11   Attorneys’ Review.  In connection with the negotiation and
drafting of this Agreement, the parties represent and warrant to each other they
have had the opportunity to be advised by attorneys of their own choice.

Section 9.12   Further Assurances.  Each party covenants that at any time, and
from time to time, after the Closing Date, it will execute such additional
instruments and take such actions as may be reasonably be requested by the other
parties to confirm or perfect or otherwise to carry out the intent and purposes
of this Agreement.

Section 9.13   Survival of Representations, Warranties and Covenants.  The
respective representations, warranties, covenants and indemnities given by the
parties to each other pursuant to this Agreement shall survive the Closing for a
period ending twenty-four (24) months from the Closing Date hereof (“Survival
Date”). Notwithstanding anything to the contrary contained herein, no claim for
indemnification may be made against the party required to indemnify (the
“Indemnitor”) under this Agreement unless the party entitled to indemnification
(the “Indemnitee”) shall have given the Indemnitor written notice of such claim
as provided herein on or before the Survival Date.  Any claim for which notice
has been given prior to the expiration of the Survival Date shall not be barred
hereunder.

 
Purchase Agreement - Page 25

--------------------------------------------------------------------------------

 

Section 9.14   Public Announcements.   The parties hereto agree that prior to
making any public announcement or statement with respect to the transactions
contemplated by this Agreement, the party desiring to make such public
announcement or statement shall consult with the other parties hereto and
exercise their best efforts to (i) agree upon the text of a joint public
announcement or statement to be made by all of such parties or (ii) obtain
approval of the other parties hereto to the text of a public announcement or
statement to be made solely by the party desiring to make such public
announcement; provided, however, that if any party hereto is required by law to
make such public announcement or statement, then such announcement or statement
may be made without the approval of the other parties.

Section 9.15   Validity.  The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.

Section 9.16   Exhibits Not Attached.  Any exhibits not attached hereto on the
date of execution of this Agreement shall be deemed to be and shall become a
part of this Agreement as if executed on the date hereof upon each of the
parties initialing and dating each such exhibit, upon their respective
acceptance of its terms, conditions and/or form.

[SIGNATURES APPEAR ON THE FOLLOWING PAGES.]

 
Purchase Agreement - Page 26

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned have executed this Purchase Agreement to
become effective as of the date first set forth above.

 
RCI ENTERTAINMENT (DALLAS), INC.
     
/s/ Eric Langan
 
By:  Eric Langan, President
 
Date: March 4, 2008
         
RICK’S CABARET INTERNATIONAL, INC.
     
/s/ Eric Langan
 
By:  Eric Langan, President
 
Date: March 4, 2008
         
RCI HOLDINGS, INC.
     
/s/ Eric Langan
 
By:  Eric Langan, President
 
Date: March 4, 2008
         
THE SELLERS
     
/s/ Jerry W. Golding
 
Jerry W. Golding, Individually
 
Date:  February 29, 2008
         
/s/ Kenneth L. Meyer
 
Kenneth L. Meyer, Individually
 
Date:  March 3, 2008
         
/s/ Charles A. McClure
 
Charles A. McClure, Individually
 
Date:  March 3, 2008

 
Purchase Agreement - Page 27

--------------------------------------------------------------------------------

 
 

 
HOTEL DEVELOMENT – TEXAS, LTD
 
 
By:  HD Texas Management, LLC
   
Its:  General Partner
             
/s/ Charles A. McClure
 
By:  Charles A. McClure
 
Its:  Co-Chief Executive Officer
 
Date: March 4, 2008
                   
HD TEXAS MANAGEMENT, LLC
   
By:
   
Its:  Manager
             
/s/ Charles A. McClure
 
By:  Charles A. McClure
 
Its:  Co-Chief Executive Officer
 
Date: March 4, 2008
                   
ILLUSIONS-DALLAS PRIVATE CLUB, INC.
             
/s/ Charles A. McClure
 
By:  Charles A. McClure
 
Its:  President
 
Date: March 4, 2008

 
 
Purchase Agreement-Page 28

--------------------------------------------------------------------------------