Exhibit 10.2


 


COVENANT NOT TO COMPETE


 


THIS COVENANT NOT TO COMPETE (this “Agreement”) is made and effective
as of the Effective Date, as defined in the Stock Purchase Agreement entered
into by and between VCG Holding Company, a Colorado corporation, and Manana
Entertainment, Inc. d/b/a Jaguar’s Gold Club Dallas and Bryan S. Foster on
October 29, 2006 (the “Effective Date”), between Bryan S. (Niko) Foster, a
resident of the State of Texas (“Prior Owner”), and VCG Holding Company, a
Colorado corporation (“Employer”).


 


W I T N E S S
E T H:


 


WHEREAS, all of the shares of common stock of Manana Entertainment,
Inc., a Texas corporation d/b/a Jaguar’s Gold Club Dallas (“Dallas”) are to be
acquired by Employer pursuant to a certain Stock Purchase Agreement (the “Purchase
Agreement”); and


 


WHEREAS, Dallas thereafter will become wholly owned by Employer and
will continue to conduct its respective business in the same manner as such
business has been conducted by Dallas prior to the acquisition; and


 


WHEREAS, Prior Owner has been an owner of Dallas and has intimate
knowledge of its business practices, which, if exploited by Prior Owner in
contravention of this Agreement, would seriously, adversely and irreparably
affect the interests of Employer and Dallas and the ability of Dallas to
continue the business previously conducted by it; and


 


WHEREAS, to induce Employer to enter into the Purchase Agreement, make
such cash payment to Prior Owner and consummate the other transactions
contemplated by the Purchase Agreement, Prior Owner has agreed to execute and
deliver this Agreement.


 


NOW, THEREFORE, in consideration of the transactions contemplated by
the Purchase Agreement, the consideration paid and to be paid to Prior Owner
under the Purchase Agreement, the above premises, the mutual promises and
covenants of the parties hereto set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Prior Owner and Employer, 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:


 


(INITIALED:
BF, MO)


 


a.             “Area” shall mean a radius of fifty (50)
miles of Dallas, excluding Jaguar’s Gold Club Fort Worth No. 2.


 


b.             “Business” shall mean the operations of
Dallas as conducted as of the Effective Date.


 

















 


c.             “Competing
Business” shall mean any business organization of whatever form engaged, either
Directly or Indirectly, in any adult entertainment or any business or
enterprise which is the same as, or substantially the same as, Dallas.


 


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 Dallas or an entity having title to the
goodwill of Dallas.


 


e.             “Restricted
Period” shall mean the period commencing with the Effective Date and ending on
the fifth (5th) anniversary thereof.


 


f.              
“Confidential Information” shall include any and all information related to the
purpose and business of Dallas 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 of Dallas
paid by Employer, or any other matters regarding Dallas.  Information that is orally disclosed will be
considered “Confidential Information” if Employer indicates to Prior Owner at
the time of disclosure the confidential or proprietary nature of the
information and provides a written summary of such information to Prior Owner
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 Dallas unless otherwise specifically indicated in writing to the contrary.


 


2.             Agreement
Not to Compete. Unless otherwise consented to in writing by Employer, Prior
Owner 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.


 


(INITIALED:
BF, MO)


 


3.             Agreement
Not to Solicit Employees. Prior Owner agrees that during the period
commencing with the Effective Date and ending on the fifth (5th) anniversary
thereof, he will not. without the prior written consent of Employer, 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 Dallas or any of its subsidiaries, any Person employed by
Dallas or any of its subsidiaries, 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 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, Prior Owner agrees
that he will not, without the prior written consent of Employer, either
directly or indirectly, on his own behalf or in the service or on behalf of
others, hire or attempt to hire any entertainers who have performed at Dallas
during the preceding six (6) months prior to the Effective Date 


 

















 


until the end of the period commencing with the Effective Date and
ending on the fifth (5th) anniversary thereof.


 


4.             Confidentiality.  Prior Owner agrees to hold all Confidential
Information of Dallas in confidence for so long as Dallas treats such
information as confidential or proprietary, unless otherwise agreed to in
writing by the Employer.  During such
period Prior Owner will use such information solely for the purpose set forth
in this Agreement unless otherwise agreed to in writing by Employer.  Prior Owner agrees not to copy such
Confidential Information of Dallas unless otherwise agreed to in writing by the
Employer.  Prior Owner 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 Employer to whom
disclosure is necessary for the purposes set forth above.  Prior Owner 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 Prior
Owner through the exercise of the same degree of care used to restrict
disclosure and use of its own Confidential Information.


 


5.             Remedies.


 


a.             Prior
Owner acknowledges and agrees that, by virtue of his relationship with Dallas,
great loss and irreparable damage would be suffered by Employer, including,
without limitation, damage to the goodwill and proprietary interests of
Employer, if Prior Owner 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.  Prior Owner further acknowledges
that Prior Owner has examined in detail such restrictive covenants and
agreements and agrees that the restraints imposed thereby on Prior Owner are
reasonable in the sense that they are no greater than are necessary to protect
the goodwill of Dallas invested in by Employer pursuant to the Purchase
Agreement and to protect Employer in its legitimate business interests, and the
restrictive covenants and agreements are reasonable in the sense that they are
not unduly harsh or oppressive.


 


(INITIALED:
BF, MO)


 


b.             The
parties acknowledge and agree that any breach of Sections 2, 3 and/or 4 of this
Agreement by Prior Owner would result in irreparable injury to Employer, and
therefore Prior Owner agrees and consents that Employer 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 Prior Owner
contained herein.


 


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


 


d.             The
rights of Employer under this Section 5 shall not be in limitation or in lieu
of any and all other remedies that may be available to Employer under the
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 Prior Owner
whether predicated upon this Agreement or otherwise, shall 


 

















 


not constitute a defense to the enforcement by Employer of any then
valid covenants or agreements herein.


 


6.             Severability.  Prior Owner 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 Employer
and Prior Owner as part of the transactions contemplated by the Purchase
Agreement; that Prior Owner 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 Employer; that Dallas and its subsidiaries are engaged in the Business
through the Area: that irreparable loss and damage will be suffered by Employer
should Prior Owner 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 Prior Owner.


 


7.             Tolling.  In the event that Prior Owner 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 Prior Owner, and the running of the period


 


(INITIALED:
BF, MO)


 


of such restrictions shall commence or commence again only upon
compliance by Prior Owner with the terms of the applicable section or sections
breached.


 


8.             Consideration.  In consideration for Prior Owner’s compliance
with his obligations under this Agreement, and as part of the transactions
contemplated by the Purchase Agreement, Prior Owner shall receive from Employer
the sum of Five Thousand ($5,000.00) Dollars in cash on the Effective Date, and
such other consideration provided for in the Purchase Agreement. Further, Prior
Owner acknowledges and agrees that the terms of this Agreement contained herein
are


 


reasonable in light of the good, adequate and valuable consideration
which Prior Owner 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.           Governing
Law.  This Agreement and the rights
of the parties hereunder shall be governed by, and construed in accordance
with, the laws of the State of Texas, without regard to the conflicts of laws
provisions thereof.


 

















 


11.           Amendment.  No amendment or modification of this Agreement
shall be valid or binding upon Employer or Prior Owner 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 Prior Owner:


 


	
   

  	
  Bryan S. (Niko) Foster

  
	
   

  	
  2171 Manana Drive

  
	
   

  	
  Dallas, TX 75202

  
	
   

  	
   

  
	
   

  	
  With copy to:

  
	
   

  	
   

  
	
   

  	
  Arthur F. Selander

  
	
   

  	
  Attorney at Law

  
	
   

  	
  2001 Bryan Tower, Ste. 1800

  
	
   

  	
  Dallas, TX 75201

  



 


(INITIALED:  BF, MO)


 


b.             If
to Employer:


 


	
   

  	
  VCG Holding Company

  
	
   

  	
  Attn: Mike Ocello

  
	
   

  	
  390 Union Blvd., Suite 540

  
	
   

  	
  Lakewood, CO 80228

  
	
   

  	
   

  
	
  with a copy to:

  	
  Martin A. Grusin

  
	
   

  	
  780 Ridge Lake Boulevard

  
	
   

  	
  Suite 202

  
	
   

  	
  Memphis, TN 38120

  
	
   

  	
  Facsimile: (901) 682-3590

  



 


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, Prior Owner and Employer have each executed and
delivered this Agreement as of the date first written above.


 


	
   

  	
  /s/ Bryan S. Foster

  	
   

  
	
   

  	
  Bryan S. (Niko) Foster, Prior Owner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  VCG HOLDING COMPANY,

  
	
   

  	
  A Colorado corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Micheal L. Ocello

  	
   

  
	
   

  	
  Title:

  	
   

  	
  President