Exhibit 10.3


 


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 Richard Richardson, a resident
of the State of Texas (“Prior Employee”), 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 Employee has been an employee of Dallas and has intimate
knowledge of its business practices, which, if exploited by Prior Employee 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 make such cash payment to Prior
Employee, Prior Employee has agreed to execute and deliver this Agreement.


 


NOW, THEREFORE,  in consideration
of 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 Employee 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:


 


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


 


(INITIALED:
BF, MO)


 


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, independent contractor or Prior Employee 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 Employee
at the time of disclosure the confidential or proprietary nature of the
information and provides a written summary of such information to Prior
Employee 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
Employee agrees that during the Restricted Period, he will not, within the
Area, either Directly or Indirectly, on his own behalf or in the service or on
behalf of others, engage in any Competing Business or provide managerial,
supervisory, administrative, financial or consulting services or assistance to,
or own a beneficial interest (except as a shareholder holding less than five
percent (5%) interest in a corporation whose shares are actively traded on a
regional or national securities exchange or in the over-the-counter market) in
any Competing Business.


 


3.             Agreement
Not to Solicit Employees. Prior Employee 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 


 


(INITIALED:
BF, MO)


 


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 Employee
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 Employee 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 Employee will use such information solely for the purposes set
forth in this Agreement unless otherwise agreed to in writing by Employer.  Prior Employee agrees not to copy such
Confidential Information of Dallas unless otherwise agreed to in writing by the
Employer.  Prior Employee 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 purpose set forth above.  Prior Employee 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
Employee through the exercise of the same degree of care used to restrict
disclosure and use of its own Confidential Information.


 


5.             Remedies.


 


a.             Prior
Employee 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 Employee 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 Employee further
acknowledges that Prior Employee has examined in detail such restrictive
covenants and agreements and agrees that the restraints imposed thereby on
Prior Employee 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.


 


b.             The
parties acknowledge and agree that any breach of Sections 2, 3 and/or 4 of this
Agreement by Prior Employee would result in irreparable injury to Employer, and
therefore Prior Employee agrees and consents that Employer shall be entitled to
a temporary restraining order and a permanent injunction to prevent a breach 


 


(INITIALED:
BF, MO)


 


or contemplated breach of any of the covenants or agreements of Prior
Employee contained herein.


 


c.             In
addition, Employer shall be entitled, upon any breach of Sections 2, 3 and/or 4
of this Agreement by Prior Employee, to demand an accounting and repayment of
all profits and other monetary compensation realized by Prior Employee,
directly or through any Competing Business controlled by Prior Employee, 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 at law or in
equity. The existence of any claim, demand, action or cause of action against
Prior Employee, 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 Employee 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 Prior Employee 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 Employee 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 Employee.


 


7.             Tolling.  In the event that Prior Employee 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 Employee, and the running of the period of such restrictions
shall commence or commence again only upon compliance by Prior Employee with
the terms of the applicable section or sections breached.


 


8.             Consideration.  In consideration for Prior Employee’s
compliance with his obligations under this Agreement, Prior Employee shall
receive from Employer the sum of Five 


 

















 


Thousand ($5,000.00) Dollars in cash on the Effective Date. Further,
Prior Employee acknowledges and agrees that the terms of this Agreement
contained herein are reasonable in light of the good, adequate and valuable
consideration which Prior Employee 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 Employee 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 Employee:


 


	
   

  	
  Richard Richardson

  
	
   

  	
  2171 Manana Drive

  
	
   

  	
  Dallas, TX 75202

  
	
   

  	
   

  
	
   

  	
  With copy to:

  
	
   

  	
   

  
	
   

  	
  Arthur F. Selander

  
	
   

  	
  Attorney at Law

  
	
   

  	
  2001 Bryan Tower, Ste. 1800

  
	
   

  	
  Dallas, TX 75201

  



 


b.             If
to Employer:


 


	
   

  	
  VCG Holding Company

  
	
   

  	
  Attn: Mike Ocello

  
	
   

  	
  390 Union Blvd., Suite 540

  
	
   

  	
  Lakewood, CO 80228

  



 


(INITIALED: BF, MO)


 

















 


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


 


	
   

  	
  /s/ Richard Richardson

  	
   

  
	
   

  	
  Richard Richardson, Prior Employee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  VCG HOLDING COMPANY,

  
	
   

  	
  A Colorado corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Micheal L. Ocello

  	
   

  
	
   

  	
  Title:

  	
   

  	
  President

  	
   

  
							



 


 


(INITIALED: BF)