Document:

Unassociated Document

    
      

    

    
      Exhibit
10.1

    

    
      

    

    
      CHIEF
FINANICIAL OFFICER

    

    
      A
Executive Officer of Hyperdynamics Corporation

    

    
      EMPLOYMENT
AGREEMENT

    

    
      

    

    
      THIS
AGREEMENT is made and entered into this 23th day of June, 2008, by and between
HYPERDYNAMICS CORPORATION, a Delaware corporation (the "Company",, and Sarah
Berel-Harrop ("Executive").

    

    
      

    

    
      WITNESSETH:

    

    
      

    

    
      WHEREAS,
Executive and the Company deem it to be in their respective best interests to
enter into an agreement providing for the Company's employment of Executive
pursuant to the terms herein stated;

    

    
      

    

    
      NOW,
THEREFORE, in consideration of the premises and the mutual promises and
agreements contained herein, it is hereby agreed as follows:

    

    
      

    

    
      1.      Effective
Date. This Agreement shall be effective on the 23th day of
June, 2008, which date shall be referred to herein as the "Effective
Date".

    

    
      

    

    
      2.      Position
and Duties.

    

    
      

    

    
      (a)
Heretofore, Executive has served the Company in various financial and
administrative roles since 1996 and is currently the Corporate Secretary of the
Company as elected by the Board of Directors, and has been instrumental to the
company's financial SEC reporting and overall administration;
and

    

    
      

    

    
      Henceforth,
the Company hereby employs Executive as its Chief Financial Officer and
Corporate Secretary pursuant to the terms of this Agreement commencing as of the
Effective Date for the "Term of Employment" (as herein defined below). In this
capacity, Executive shall devote her best efforts and his full business time and
attention to the performance of the services defined by the by-laws of the
company, services customarily incident to such offices and position and to such
other services of a senior executive nature as may be reasonably assigned by the
Chief Executive Officer or requested by the Board of Directors (the "Board") of
the Company which may include services for one or more subsidiaries or
affiliates of the Company. Executive shall in her capacity as an employee and
officer of the Company be responsible to and obey the reasonable and lawful
directives of the Chief Executive Officer and the Board of Directors of
Hyperdynamics Corporation.

    

    
      

    

    
      (b)
Executive shall devote her full time (as defined below) and attention to such
duties, except for sick leave, periodic personal trips and vacations as
determined not to conflict with the material operations of the Company, and
excused leaves of absences otherwise. Executive shall use her best efforts
during the Term of Employment to protect, encourage, and promote the interests
of the Company.

    

    
      

    

    
      Full time
with respect to this agreement is understood to credit the Executive for her
on-call status with regard to managing employees located around the world and
recognizing that the Executive's hours of specific work for the company are not
limited to any specific range of time during a work day but can be accomplished
around the clock and on weekends and/or holidays if deemed necessary by the
Chief Executive Officer or the Executive herself, and certain responsibilities
of Executive's responsibilities, as approved by the Chief Executive Officer, may
be done at any physical location including Executive's home. As approved by the
Chief Executive Officer the company may establish full home computer system and
access communications capabilities for Executive as deemed necessary by mutual
agreement of the Chief Executive Officer and Executive.

    

    
      

    

    
      Page 1 of
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      (c)
Notwithstanding paragraph 2(b), Executive shall be entitled to sit as a director
on other boards of directors so long as doing so presents no conflict of
interest with Executive's performance of her duties or her positions at the
Company, as determined and approved by the board of
directors.

    

    
      

    

    
      3.      Compensation.

    

    
      

    

    
      (a) Base
Salary. The Company shall pay to Executive during the Term of Employment a
minimum salary at the rate of One Hundred Seventy Five Thousand dollars
($175,000.00) per year. Executive has agreed to accept S8 registered common
stock from the employees stock and stock option plan for the amount of this base
salary over $100,000. Thus, $100,000 of base salary per year will be paid with
cash and $75,000 per year will be paid in common stock based on the closing
common stock price at the time of issuance for such payment

    

    
      

    

    
      Such
salary shall be payable Bi-Weekly, Semi-monthly, or monthly in accordance with
the Company's normal payroll procedures. (Executive's annual salary, as set
forth above or as it may be increased from time to time as set forth herein,
shall be referred to hereinafter as "Base Salary"). At no time during the Term
of Employment shall Executive's Base Salary be decreased from the amount of Base
Salary then in effect.

    

    
      

    

    
      (b)
Performance Bonus. In addition to the compensation otherwise payable to
Executive pursuant to this Agreement, Executive shall be eligible to receive
performance bonus(es) as determined and agreed to from time to time by the Chief
Executive Officer and the Board of Directors.

    

    
      

    

    
      (c) Long
Term Incentive/Stock Options. Upon execution of this Agreement which was
approved by the Compensation Committee and recommended to the board of directors
and then approved by the board of directors, the board of directors will take
action to grant Executive 20,000 S8 registered stock options to purchase the
common stock of the Company, every quarter during the term of this Agreement,
beginning the date that this Agreement is signed, and then on the first day of
every quarter thereafter. Thus, the total options to be granted to Executive
under this Agreement shall be 160,000 (8 quarters x 20,000). These options are
subject to the Company's Employee Stock and Stock Option plan and shall be three
(3) year options with a strike price equal to the greater of $2 or the closing
last trade price on the date of each grant by the board of
directors.

    

    
      

    

    
      4.      Benefits
During the Term of Employment:

    

    
      

    

    
      (a)
Executive shall be eligible to participate in any life, health and long-term
disability insurance programs, pension and retirement programs, stock option and
other incentive compensation programs, and other fringe benefit programs made
available to senior executive employees of the Company from time to time, and
Executive shall be entitled to receive such other fringe benefits as may be
granted to her from time to time by the Company's Board of
Directors.

    

    
      

    

    
      Page 2 of
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      (b)
Executive shall be allowed four (4) weeks of vacation with pay on the same basis
as other senior executive employees of the Company. Executive shall devote her
full time and attention to such duties, except for sick leave, and excused
leaves of absences otherwise.

    

    
      

    

    
      (c) The
Company shall reimburse Executive for reasonable business expenses incurred in
performing Executive's duties and promoting the business of the Company,
including, but not limited to, reasonable entertainment expenses, travel and
lodging expenses, following presentation of documentation in accordance with the
Company's business expense reimbursement policies.

    

    
      

    

    
      (d)
Executive shall be added as an additional named insured under all liability
insurance policies now in force or hereafter obtained covering any officer or
director of the Company in her or her capacity as an officer or director.
Company shall indemnify Executive in her capacity as an officer or director and
hold her harmless from any cost, expense or liability arising out of or relating
to any acts or decisions made by her on behalf of or in the course of performing
services for the Company.

    

    
      

    

    
      5.      Term;
Termination of Employment. As used herein, the phrase "Term of Employment" shall
mean the period commencing on the Effective Date and ending on the same date two
(2) years later; provided, however, that as of the expiration date of each of
(i) the initial Term of Employment and (ii) if applicable, any Renewal Period
(as defined below), the Term of Employment shall automatically be extended for a
one (I) year period (each a "Renewal Period") unless either the Company or
Executive provides Two (2) months' notice to the contrary. Notwithstanding the
foregoing, the Term of Employment shall expire on the first to occur of the
following:

    

    
      

    

    
      (a)
Termination by the Company. Notwithstanding anything to the contrary in this
Agreement, whether express or implied, the Company may, at any time, terminate
Executive's employment for any reason other than Cause, Death or Disability by
giving Executive at least 60 days' prior written notice of the effective date of
termination. Company may terminate Employee's employment for Cause, Death or
Disability without prior notice, except that Executive may not be terminated for
substantial and willful failure to perform specific and lawful directives of the
Board, unless and until the Board has given her reasonable written notice of its
intended actions and specifically describing the alleged events, activities or
omissions giving rise thereto and with respect to those events, activities or
omissions for which a cure is possible, a reasonable opportunity to cure such
breach; and provided further, however, that for purposes of determining whether
Cause is present, no act or failure to act by Executive shall be considered
"willful" if done or omitted to be done by Executive in good faith and in the
reasonable belief that such act or omission was in the best interest of the
Company and/or required by applicable law.

    

    
      

    

    
      (b)
Termination by Executive. In the event that Executive's employment with the
Company is voluntarily terminated by Executive, the Company shall have no
further obligation hereunder from and after the effective date of termination.
Executive shall give the Company at least 30 days' advance written notice of her
intention to terminate her employment hereunder.

    

    
      

    

    
      Page 3 of
6

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      (c)
Salary, Benefits, and Severance Pay Upon Termination. In the event of
termination of employment, Executive shall receive all regular Base Salary due
up to the date of termination, and if it has not previously been paid to
Executive, Executive shall be paid any Bonus to which Executive had become
entitled under Bonus(es) approved for Executive, prior to the effective date of
such termination. The Company shall have no further obligation hereunder from
and after the effective date of termination except as to policies put in place
for severance pay in certain situations where there is a termination not for
cause and the board approves such severance pay.

    

    
      

    

    
      Executive's
stock options with respect to the Company's stock shall be subject to the terms
of the Hyperdynamics' Employee Stock and Stock Option Plan or any successor
plan, which is a separate agreement. In the event of termination, Executive's
rights to benefits other than severance shall be governed by the terms of the
Company's retirement, insurance and other benefit plans and programs then in
effect in accordance with the terms of such plans.

    

    
      

    

    
      6.      Confidential
Information, Non-Solicitation and Non-Competition

    

    
      

    

    
      (a)
During the Term of Employment and at all times thereafter, Executive shall not,
except as may be required to perform her duties hereunder or as required by
applicable law, disclose to others or use, whether directly or indirectly, any
Confidential Information regarding the Company. "Confidential Information" shall
mean information about the Company, its subsidiaries and affiliates, and their
respective clients and customers that is not available to the general
public.

    

    
      

    

    
      7.      Return
of Company Documents: In the event Executive leaves the employment of Company
for whatever reason, Executive agrees to deliver to Company any and all property
situated on Company's premises and owned by Company including disks and other
storage media, filing cabinets or other work areas, is subject to inspection by
Company personnel at any time, with or without notice, for the purpose of
protecting Company's rights and interests in its intellectual
property.

    

    
      

    

    
      8.      Taxes.
All payments to be made to Executive under this Agreement will be subject to any
applicable withholding of federal, state and local income and employment taxes.
Any withholding regarding exercise of stock options will be determined by
including an opinion of a third party tax attorney paid by the company as
pertaining to any withholding that may be required or not
required.

    

    
      

    

    
      9.      Miscellaneous.
This Agreement shall also be subject to the following miscellaneous
considerations:

    

    
      

    

    
      (a)
Executive and the Company each represent and warrant to the other that he or it
has the authorization, power and right to deliver, execute, and fully perform
her or its obligations under this Agreement in accordance with its
terms.

    

    
      

    

    
      (b) This
Agreement (including attached Exhibit A) contains a complete statement of all
the arrangements between the parties with respect to Executive's employment by
the Company, this Agreement supersedes all prior and existing negotiations and
agreements between the parties concerning Executive's employment, and this
Agreement can only be changed or modified pursuant to a written instrument duly
executed by each of the parties hereto.

    

    
      

    

    
      (c) If
any provision of this Agreement or any portion thereof is declared invalid,
illegal, or incapable of being enforced by any court of competent jurisdiction,
the remainder of such provisions and all of the remaining provisions of this
Agreement shall continue in full force and effect

    

    
      

    

    
      Page 4 of
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      (d) This
Agreement shall be governed by and construed in accordance with the internal,
domestic laws of the State of Texas.

    

    
      

    

    
      (e) Any
rights of Executive hereunder shall be in addition to any rights Executive may
otherwise have under benefit plans, agreements, or arrangements of the Company
to which he is a party or in which he is a participant, including, but not
limited to, any Company-sponsored employee benefit plans. Provisions of this
Agreement shall not in any way abrogate Executive's rights under such other
plans, agreements, or arrangements.

    

    
      

    

    
      (f) For
the purpose of this Agreement, notices and all other communications provided for
in this Agreement shall be in writing and shall be deemed to have been duly
given when delivered or mailed by United States certified or registered mail,
return receipt requested, postage prepaid, addressed to the named Executive at
the address set forth below under her signature; provided that all notices to
the Company shall be directed to the attention of the Board of Directors with a
copy to the Secretary of the Company, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon
receipt.

    

    
      

    

    
      (g)
Section headings in this Agreement are included herein for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose.

    

    
      

    

    
      (h)
Failure to insist upon strict compliance with any of the terms, covenants, or
conditions hereof shall not be deemed a waiver of such term, covenant, or
condition, nor shall any waiver or relinquishment of, or failure to insist upon
strict compliance with, any right or power hereunder at anyone or more times be
deemed a waiver or relinquishment of such right or power at any other time or
times.

    

    
      

    

    
      (i) This
Agreement may be executed in several counterparts, each of which shall be deemed
to be an original but all of which together will constitute one and the same
instrument.

    

    
      

    

    
      10.    Survival
of Provisions: The executory provisions of this Agreement will survive the
termination of this Agreement.

    

    
      

    

    
      Page 5 of
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      IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
and year first above written.

    

    
      

    

    
      	
              EXECUTIVE

            	 
      	
              COMPANY

            	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	
              HYPERDYNAMICS
      CORPORATION

            	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	
              BY:

            	 
      	
              BY:

            	 
      
	
              /s/ Sarah Berel-Harrop

            	 
      	
              /s/ Kent Watts

            	 
      
	
              SARAH
      BEREL-HARRO

            	 
      	
              KENT
      P. WATTS

            	 
      
	 
      	 
      	 
      	 
      
	
              TITLE:

            	 
      	
              TITLE:

            	 
      
	
              CHIEF
      FINANCIAL OFFICER

            	 
      	
              CHIEF
      EXECUTIVE OFFICER

            	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	
              ADDRESS:

            	 
      	
              ADDRESS:

            	 
      
	 	 
      	 
      	
              One
      Sugar Creek Center Boulevard

            	 
      
	 	 
      	 
      	
              Suite
      125

            	 
      
	 
      	 
      	
              Sugar
      Land, Texas 77478

            	 
      

    

    
      

    

    
       

      Page 6 of
6Unassociated Document

    
      

    

    Exhibit
10.1

    

    

    PROMISSORY
NOTE

    

    

    
      	
              $4,350,000.00

            	
              ________________________,
      2008

            

    

    

    

    FOR VALUE
RECEIVED, and WITHOUT GRACE, in installments as hereinafter provided, the last
of which shall be due and payable on or before five (5) year(s) from date
hereof, RCI HOLDINGS, INC., a Texas Corporation, ("Maker", whether one or more
and if more than one then jointly and severally) promise(s) to pay to the order
of TEXAS COMMUNITY BANK, N.A. (together with its successors and assigns and any
subsequent holders of this Note, the "Lender") at its offices at 16610
Interstate 45, The Woodlands, Texas 77384, or such other place as Lender may
from time to time designate by written notice to Maker, the sum of FOUR MILLION
THREE HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($4,350,000.00), in immediately
available current funds and lawful money of the United States of America, which,
at the time of payment, shall be legal tender for the payment of public and
private debts, together with interest on the outstanding principal balance of
this Note from the date of advance until maturity at a varying rate per annum
(“Variable Rate”) which shall from day to day be equal to the greater
of:  (i) TWO PERCENT (2%) above the Prime Rate, hereafter defined, or
(ii) SEVEN AND ONE-HALF PERCENT (7.50%) per annum; provided, however, the
Variable Rate shall never exceed the Maximum Legal Rate, hereafter
defined.

    

    All past
due principal and interest, whether due as a result of acceleration or
otherwise, shall bear interest at the highest lawful rate permissible under the
laws applicable to this Note ("Maximum Legal Rate") from the date the payment
thereof shall have become due until the same shall have been repaid in
full.  If the Maximum Legal Rate hereon is established under the laws of
the State of Texas, the applicable rate ceiling shall be the indicated (weekly)
rate ceiling, from time to time in effect and applicable to this Note, as
provided in Chapter 303 of the Texas Finance Code.  However, if applicable
law establishes no Maximum Legal Rate then all past due principal and interest
shall bear interest at a rate equal to EIGHTEEN PERCENT (18%) per
annum.  In addition, Lender may charge and collect a late fee of five
percent (5%) of any scheduled installment that is more than ten (10) days past
due.  In no event shall the provisions of Chapter 346 of the Texas
Finance Code (which regulates certain revolving credit loan accounts and
revolving triparty accounts) apply to this Note.

    

    The term
“Prime Rate” as used herein shall mean the prime rate quoted in the Money Market
Rate Section of the Wall Street Journal from time to time.  Effective
the same day as the Prime Rate changes and without notice to the Maker or any
other party, the Variable Rate on this Note shall likewise change.  In
the event that two or more rates or a range of rates are quoted, then the rate
applicable hereto shall be the highest of those quoted.  If the Wall
Street Journal publishes a retraction or correction of such rate, the rate
reported in such retraction or correction shall apply.  In the event
that the Wall Street Journal shall ever cease to publish a prime or base rate,
the then holder hereof shall designate a Bank having its principal banking
location in New York, New York, whose base or prime rate, from and after the
effective date of such designation shall be the Prime Rate for purposes
hereof.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    In no
event is the rate of interest on the outstanding principal balance hereof ever
to exceed the Maximum Legal Rate and Lender, Maker and any co-maker, drawer,
accepter, endorser, guarantor, surety, accommodating party or other person or
entity now or hereafter primarily liable or secondarily liable for payment of
all or any part of this Note (each a “other liable party” or collectively “other
liable parties”), intend to conform and contract in strict compliance with
applicable usury law.  Determination of the rate of interest for the
purposes of determining whether this Note is usurious shall be made by
amortizing, prorating, allocating and spreading during the time this Note is
outstanding all interest or other sums deemed to be interest at any time
contracted for, charged or received from the Maker.  It is intended that
all interest due and payable under this Note shall not exceed the Maximum Legal
Rate and, notwithstanding anything to the contrary contained in this Note or any
agreement entered into in connection with or as security herefor, it is agreed
as follows:  the aggregate of all consideration which constitutes interest
under applicable law which is taken, reserved, contracted for, charged or
received under this Note or under any agreement executed in connection with or
as security herefor, shall under no circumstances exceed the Maximum Legal Rate
and any excess shall be deemed a mistake and credited on this Note by the then
holder thereof (or if this Note shall have been paid in full, refunded to the
Maker).  Neither the Maker, nor any other liable party shall ever be liable
for interest in excess of the Maximum Legal Rate and the provisions of this
paragraph shall control over all other provisions of this Note and all other
documents to or of which Lender is a party or a beneficiary now or hereafter
evidencing, securing, guaranteeing, modifying or otherwise relating to the
indebtedness evidenced hereby, and all extensions, renewals and modifications
thereof (the Note and the documents each a “Loan Document” or collectively the
“Loan Documents”) which may be in apparent conflict with the provisions of this
paragraph.

    

    Notwithstanding
any term or provision of this Note to the contrary, Maker confirms to Lender
that neither Maker nor its legal counsel, if any, is aware that this Note, or
the transaction in connection which this Note was issued, is or maybe usurious
in any respect.  To induce Lender to make the loan evidenced by this
Note, Maker agrees with and covenants to Lender that if at anytime Maker
believes or discovers that any term or provision of this Note or any action
taken by Lender in connection with Note is or may be in violation of the usury
laws or any other applicable law, Maker will immediately give notice to Lender
specifying with particularity the nature and extent of any such potential
violation of the usury laws or any other applicable law, and afford to Lender a
reasonable period (which in no event will be less than sixty (60) days) within
which to cure same.  Maker agrees with and covenants to Lender that in
no instance will Maker make any claim, bring any suit, prosecute or otherwise
assert any cause of action, claim, counterclaim, or defense in respect of any
violation of the usury laws or any other applicable law, unless, as a condition
precedent thereto, Maker has given to Lender such notice and afforded to Lender
such opportunity to cure as provided herein.

    

    Interest
hereon shall be computed on the basis of a year consisting of THREE HUNDRED
SIXTY (360) days unless either (a) the holder of this Note elects or (b)
compliance with applicable law requires that interest for any period of time be
computed on the basis of the actual number of days in the applicable calendar
year in which accrued, in either of which events interest for that period of
time shall be so computed.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    The
principal of this Note and the interest to accrue hereon is and shall be due and
payable in 60 consecutive monthly installments as
follows:

    

    
      	
               
      

            	
              1.

            	
              SUBJECT TO INCREASE AS
      HEREINAFTER PROVIDED, the first 59 of such installments shall be in
      the amount which is the greater of: (i) THIRTY-FIVE THOUSAND FORTY-THREE
      AND 30/100 DOLLARS ($35,043.30) each, which amount includes the interest
      which has accrued to the date of such installment or (ii) the amount of
      interest which has accrued to the due date of each such installment, with
      the first such installment becoming due and payable
      ________________________, 2008, with a like installment becoming due and
      payable on the same day of each succeeding month
      thereafter;

            

    

    

    
      	
               
      

            	
              2.

            	
              The
      60th and final installment shall be due and payable on or before five (5)
      year(s) from date hereof and shall be in the amount of the then unpaid
      principal balance of this Note, together with all of the then unpaid
      accrued interest hereon.

            

    

    

    IN
THE EVENT THE VARIABLE RATE INCREASES FROM TIME TO TIME, THE LENDER HAS THE
RIGHT (BUT NOT THE OBLIGATION) IN ITS SOLE AND ABSOLUTE DISCRETION AT ANYTIME
AND FROM TIME TO TIME TO INCREASE THE AMOUNT OF THE MONTHLY INSTALLMENTS TO AN
AMOUNT THAT WOULD BE SUFFICIENT TO REPAY THE UNPAID PRINCIPAL BALANCE OF THIS
NOTE FROM THE DATE OF LENDER’S ELECTION OF SUCH CHANGE OF AMOUNT IN FULL ON OR
BEFORE TWENTY (20) YEARS FROM THE DATE OF THIS NOTE (EVEN THOUGH THIS NOTE HAS
AN ACTUAL MATURITY OF FIVE (5) YEARS) AT THE NEW INTEREST RATE (CALCULATED AS A
FIXED RATE BASED ON THE THEN VARIABLE RATE) IN SUBSTANTIALLY EQUAL
INSTALLMENTS.  THE LENDER WILL GIVE MAKER NOTICE OF THE AMOUNT OF THE
NEW MONTHLY INSTALLMENT.  NEITHER THE FAILURE TO EXERCISE, NOR DELAY
IN EXERCISING, LENDER’S RIGHT TO INCREASE THE MONTHLY INSTALLMENTS HEREUNDER MAY
BE, OR CONSTRUED TO BE, A WAIVER OF SUCH RIGHT AND LENDER SHALL HAVE THE RIGHT
TO EXERCISE SUCH RIGHT AT ANYTIME AND FROM TIME TO TIME.

    

    Whenever
any payment to be made under this Note is stated to be due on a Saturday, Sunday
or legal holiday for commercial banks under applicable law, then such payment is
due and may be made on the next succeeding business day, and such extension of
time will be included in the computation of interest under this
Note.

    

    All or
any part of the principal hereof may be prepaid at any time without the payment
of any penalty or premium; however, at Lender's option, all voluntary
prepayments shall be applied to future installments due hereon in the inverse
order of their maturity.

    

    All
payments hereunder, whether designated as payments of principal or interest,
shall be applied first to accrued and unpaid interest, then to the discharge of
any expenses which the holder may be entitled to reimbursement for by reason
hereof or under the terms of any Loan Document, and lastly, to unpaid
principal.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    As
additional security for this Note, the Maker hereby grants to Lender an express
lien and security interest in and to all property and any and all deposits
(general or special, time or demand, provisional or final) at any time held by
the Lender for the credit or for the account of Maker.  Without impairing
or limiting the continued existence and viability of Lender’s express security
interests in such property and deposits, in the event this Note is not paid at
maturity, however such maturity may be brought about, or if a default should
occur and be continuing under any Loan Document, Lender is hereby authorized at
any time, and from time to time, without notice to Maker (any such notice being
hereby expressly waived by Maker), to set off and apply any and all such
deposits at any time held or other indebtedness at any time owing by Lender to
or for the credit or the account of Maker against the outstanding principal
balance of, and the accrued interest on, this Note.  The foregoing rights
of Lender are in addition to and cumulative of all other rights and remedies
(including, without limitation, other liens, security interests and rights of
setoff) which Lender may have.

    

    It is
agreed that time is of the essence of this Note and that in the event of a
failure to pay any installment of principal and/or interest herein provided when
due, or a breach of the provisions of any of the Loan Documents, or in the event
of a failure to pay any obligation, or loan of whatever nature owed by Maker to
Lender, whether such obligation is in existence now or in the future, upon
Maker's death, dissolution, termination of existence, insolvency or business
failure, the appointment of a receiver of all or any part of the Maker's
property, an assignment for the benefit of creditors of Maker, a calling of a
meeting of creditors of Maker, the commencement of any proceeding under any
bankruptcy, insolvency or debtor relief laws by or against Maker or any other
liable party, or if Maker or any other liable party fails to furnish financial
or other information requested by Lender, or if Maker or any other liable party
furnishes or has furnished any financial or other information or statements that
are misleading in any material respect, or a writ or order of attachment or
garnishment is issued or made against any of the property of Maker, the Lender,
at its option, may declare the entire unpaid principal balance and all unpaid
accrued interest owing hereon at once due and payable, without notice. 
Failure to exercise this option shall not constitute a waiver of the right to
exercise the same in the event of any subsequent default.

    

    The
remedies of Lender in this Note and in the Loan Documents, or at law or in
equity, shall be cumulative and concurrent, and may be pursued singly,
successively or together in Lender’s sole discretion and as often as the
occasion therefore shall arise.  Neither the failure to exercise, nor
delay in exercising, Lender’s right to accelerate the maturity of this Note or
any other right, power or remedy upon any default may be construed as a waiver
of such default or as a waiver of the right to exercise any such right, power or
remedy at anytime.  No single or partial exercise by Lender of any
right, power or remedy exhausts the same or precludes any other or further
exercise thereof, and every such right, power or remedy may be exercised at
anytime and from time to time.

    

    Remittances
and payment of any part of this Note other than in the required amount in
immediately available funds at the place where this Note is payable shall not,
regardless of any receipt or credit issued therefore, constitute payment until
the required amount is actually received by Lender in full and in accordance
herewith and shall be made and accepted subject to the condition that any check
or draft may be handled for collection in accordance with the practice of the
collecting bank or banks.  Acceptance by Lender of any payment in an
amount less than the full amount then due shall be deemed an acceptance on
account only and the failure to pay the entire amount then due shall be and
continued to be an event of default in the payment of this
Note.

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    If
default occurs in the payment of this Note at maturity, whether the maturity may
occur by acceleration or otherwise, or if this Note is collected through
probate, bankruptcy or other proceedings, Maker promises to pay all costs and
expenses of collection and enforcement.  If this Note is placed in the
hands of an attorney for collection, Maker promises to pay, in addition to all
other costs and expenses of collection and enforcement, an additional amount
equal to fifteen percent (15%) of the principal and interest then due, as
attorney's fees.

    

    Lender
may require payment by Maker and any other liable party without first resorting
to any security.  Maker and all other liable parties on this Note consent
to the release or discharge of any other liable party on this Note and to the
release, impairment or substitution of any collateral for this Note by
Lender.  MAKER AND EVERY
OTHER LIABLE PARTY WAIVE PRESENTMENT FOR PAYMENT, PROTEST, NOTICE OF DISHONOR,
GRACE, NOTICE OF INTENT TO ACCELERATE AND NOTICE OF ACCELERATION AND ANY OTHER
NOTICE, FILING OF SUIT AND DILIGENCE IN COLLECTION OF THIS NOTE AND THE
ENFORCEMENT OF ANY OF THE SECURITY RIGHTS OF LENDER, AND CONSENT AND AGREE THAT
TIME OF PAYMENT OF THIS NOTE MAY BE EXTENDED WITHOUT NOTICE AT ANY TIME AND FROM
TIME TO TIME, AND FOR PERIODS OF TIME WHETHER OR NOT FOR A TERM OR TERMS IN
EXCESS OF THE ORIGINAL TERM OF THIS NOTE WITHOUT NOTICE OR CONSIDERATION TO, OR
CONSENT FROM, ANY OF THEM.

    

    Without
being limited thereto or thereby, this Note is secured by that certain Deed of
Trust, Security Agreement and Financing Statement of even date herewith to JAMES
EBREY, Trustee, covering and describing Lot 1A, Block B/6489, Murdock Addition,
City of Dallas, DALLAS County, Texas together with an easement
estate.

    

    Maker and
each other liable party acknowledges and agrees that Lender may, at anytime, and
from time to time, without the consent of or notice to Maker or any other liable
party assign, sell, transfer or grant participations in all or part of the
obligations of Maker evidenced by this Note, together with any liens or
collateral securing the payment of this Note. Lender may disseminate to any
assignee, purchaser, transferee or participant or prospective assignee,
purchaser, transferee or participant any information that Lender has pertaining
to the loan evidenced by this Note, including without limitation, any
information regarding Maker, any other liable party, or any property owned or
held by Maker or other liable party or offered as security for or securing the
loan evidenced by this Note.  If Maker elects to assign, sell,
transfer, or participate any Overline Portion, as hereafter defined, of the
obligations evidenced by this Note and if either:  (i) Lender is
unable (having no obligation) to procure an assignee, purchaser, transferee or
participant, upon terms and conditions that are acceptable to Lender in its
sole, exclusive and absolute discretion, or (ii) an assignee, purchaser,
transferee or participant fails or refuses to advance to Maker any Overline
Portion through no fault of Lender, then Lender has no obligation and/or
liability to Maker or any other liable party for failure to fund such Overline
Portion, nor does Lender have any obligation to procure funds from other
sources.  In no event is Lender obligated to fund any amount under
this Note that would cause Lender to be in violation of any state or federal law
with respect to Maker or any other liable party or any of their related
interests being liable to Lender in an amount in excess of that permitted by
such applicable law, including applicable law on the amount that Lender may
legally loan to one borrower and its related interests.  “Overline
Portion” means the amount of loan proceeds in excess of the amount that Lender
is permitted by applicable law to loan to Maker and its related
interests.

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    Whenever
pursuant to this Note or any Loan Document Lender exercises any right given to
it to approve or disapprove, or any arrangement or term is to be satisfactory to
Lender, the decision of Lender to approve or disapprove or to decide whether
arrangements or terms are satisfactory or not satisfactory shall be (except as
is otherwise specifically and expressly provided herein to the contrary) in the
sole and absolute discretion of Lender and shall be final and
conclusive.

    

    If any
provision of this Note or the application thereof, to any person or
circumstances shall, for any reason and to any extent, be invalid or
unenforceable, then neither the remainder of this Note nor the application of
such provision to other persons or circumstances nor the other instruments
referred to herein shall be affected thereby, but rather shall be enforced to
the greatest extent permitted by applicable law.

    

    Neither
this Note nor any of the Loan Documents may be changed, waived, supplemented,
discharged or terminated orally or by any act or failure to act on the part of
Maker or Lender, but only by an agreement in writing signed by the party against
whom enforcement thereof is sought and then only to the extent expressly set
forth in such writing.  No person other than a duly authorized officer
or agent of Lender shall be deemed an agent of Lender nor have any authority to
waive, modify, supplement or terminate in any manner whatsoever any terms of
this Note.

    

    Neither
this Note nor any Loan Document nor any uncertainty or ambiguity herein or
therein shall be construed or resolved against Lender by virtue of the fact that
such document has originated with Lender as drafter.  Maker
acknowledges that it has reviewed this Note and has had the opportunity to
consult with counsel on same.  This Note, therefore, shall be
construed and interpreted according to the ordinary meanings of the words used
so as to fairly accomplish the purposes and intentions of the parties
hereto.  Reference to days for performance shall mean calendar days
unless business days are expressly indicated.

    

    From time
to time, at the request of Lender, Maker will:  (i) promptly correct
any defect, error or omission which may be discovered in the contents of this
Note or in any Loan Document or in the execution or acknowledgment thereof; (ii)
execute, acknowledge, deliver, record and/or file (or cause to be executed,
acknowledged, delivered, recorded and/or filed), such further documents and
instruments, including, without limitation, further deeds of trust, security
agreements, financing statements, continuation statements, and assignment of
rents, and perform such further acts and provide such further assurances as may
be necessary, desirable, or proper, in Lender’s opinion: (a) to carry out more
effectively the purposes of this Note and the Loan Documents and the
transactions contemplated hereunder and thereunder, (b) to confirm the rights
created under this Note and the Loan Documents, (c) to protect and further the
validity, priority and enforceability of this Note and the Loan Documents and
the liens and security interests created thereby, and (d) to subject to the Loan
Documents any property of Maker intended by the terms of any or one or more of
the Loan Documents to be encumbered by the Loan Documents; and (iii) pay all
costs in connection with any of the foregoing.

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    THIS NOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (WITHOUT REGARD TO
CONFLICTS OF LAWS) AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
Maker for itself and its successors and assigns hereby
irrevocably:  (i) submits to the non-exclusive jurisdiction of the
state and federal courts in Texas; (ii) waives, to the fullest extent permitted
by law, any objection which it may now or in the future have in the laying of
venue of any litigation arising out of or in connection with this Note or any
Loan Documents brought in the District Court of MONTGOMERY County, Texas or in
the United States District Court for the Southern District of Texas, Houston
division; (iii) waives any objection it may now or hereafter have as to the
venue of any such action or proceeding brought in such court or that such court
is an inconvenient forum; and (iv) agrees that any legal proceeding against any
party to any of the Loan Documents arising out of or in connection with any of
the Loan Documents may be brought in the foregoing courts.  The scope
of each of the foregoing waivers is intended to be all encompassing of any and
all disputes that may be filed in any court and that relate this subject matter
of this transaction, including, without limitation, contract claims, tort
claims, breach of duty claims, and other common law and statutory
claims.  Maker acknowledges that these waivers are a material
inducement to Lender’s agreement to enter into the agreements and obligations
evidenced by this Note and the Loan Documents, and that Lender has already
relied on these waivers and will continue to rely on each of these waivers and
related future dealings.  These waivers are irrevocable, meaning that
they may not be modified either orally or in writing, and these waivers apply to
any future renewals, extensions, amendments, modifications, increases, or
replacements in respect of any and all of the Note or the Loan
Documents.

    

    THIS NOTE AND THE LOAN DOCUMENTS
CONSTITUTE THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO RELATING TO THE
SUBJECT MATTER HEREOF AND THEREOF AND ALL PRIOR AGREEMENTS, WHETHER WRITTEN OR
ORAL, RELATIVE HERETO AND THERETO WHICH ARE NOT CONTAINED HEREIN OR THEREIN ARE
SUPERSEDED AND TERMINATED HEREBY AND THIS NOTE AND THE LOAN DOCUMENTS MAY NOT BE
CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO.  THERE ARE NO
UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES HERETO.

    

    Whenever
necessary, as used in this Note, the singular number shall include the plural,
the masculine shall include the feminine and the neuter, and the word "Maker"
and "Lender" shall be deemed to include the maker and holder of this Note and
their respective heirs, successors and assigns.  It is expressly understood
and agreed that Lender shall never be construed for any purposes as a partner,
joint venturer, co-principal, or associate of Maker or any other person or party
claiming by, through or under the Maker. 

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    In
Witness Whereof, Maker, intending to be legally bound hereby, has duly executed,
and unconditionally delivered, this Note as of the date and year first above
written.

    

    

    
      	 
      	
              RCI
      HOLDINGS, INC., a Texas Corporation

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              BY

            	
              /s/ Eric Langan

            
	 
      	
              NAME:

            	
               
      ERIC SCOTT LANGAN

            
	 
      	
              TITLE:

            	
               
      PRESIDENT

            

    

    

     

     8

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