Document:

damhexh10_1.htm

Exhibit 10.1

DAM HOLDINGS, INC.

2009 CONSULTANT STOCK COMPENSATION PLAN

THIS CONSULTANT COMPENSATION PLAN (the "Plan") is made as of the date first written below, among DAM HOLDINGS, INC., a Nevada corporation ("COMPANY"); and the following individual who has executed and delivered this Plan by the execution and delivery of the Counterpart Signature Pages which are designated as Exhibit "A" hereof (the "Consultant").

WHEREAS, the Board of Directors of COMPANY has adopted this written compensation plan for compensation of the individual consultants who are natural persons; and

WHEREAS, COMPANY has, from time to time, engaged the Consultants to provide services at the request of and subject to the satisfaction of its management; and

WHEREAS, Consultants have or will provide services at the request and subject to the approval and acceptance of the management of COMPANY; and

WHEREAS, a general description of the nature of the services performed and/or to be performed by the Consultant and the maximum value of such services under and pursuant to this Plan are listed in the Counterpart Signature Pages and exhibits thereto; and

WHEREAS, COMPANY and the Consultant intend that this Plan and the services performed hereunder shall be made, requested and performed in such a manner that this Plan shall be a "written compensation agreement" as defined in Rule 405 of the Securities and Exchange Commission ("Commission") pursuant to which COMPANY may issue up to 1,000,000
"freely tradeable" shares (except as may be limited by "affiliate" status) of its common stock as payment for services rendered pursuant to an S-8 Registration Statement to be filed with the Commission by COMPANY;

NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, it is agreed:

SECTION 1

Compensation Plan

1.1       Employment. COMPANY hereby employs the Consultant and the Consultant hereby accepts such employment, and has and will perform the services requested by management of COMPANY to its satisfaction during the term hereof. The services performed by the Consultant hereunder have been and will be personally
rendered by the Consultant, and no one acting for or on behalf of the Consultant, except those persons normally employed by the Consultant in rendering services to others, such as secretaries, bookkeepers and the like.

 

 

  

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1.2        Independent Contractors. Regardless of the Consultant's status as "employees" under Rule 405 of the Commission, all services rendered by the Consultant hereunder have been rendered as that of an independent contractor, and the Consultant shall be liable for any FICA taxes, withholding or other similar taxes or charges,
and the Consultant shall indemnify and hold COMPANY harmless therefrom; it is understood and agreed that the value of all such items have been taken into account by the Consultant in computing the billable rate for the services the Consultant has rendered and agreed to render to COMPANY.

1.3        Term. All services performed at the request of COMPANY by the Consultant have either been performed and completed, or shall be performed within one year from the date hereof, at which time this Plan shall terminate, unless extended by written agreement of COMPANY and the Consultant for
one additional year. If the Plan shall terminate, and options for unearned shares have been exercised and said shares issued to Consultant pursuant to this Plan, said shares shall be returned by Consultant(s) and canceled by COMPANY.

1.4        Payment. COMPANY and the Consultant agrees that COMPANY shall pay the Consultant for the services performed under this Plan by the issuance of shares of its common stock at a price per share as set forth in the attached agreements with and/or invoices from the Consultant; provided, however,
such shares of common stock shall be issued pursuant to and shall be subject to the filing and effectiveness of a Registration Statement with the Commission on Form S-8 covering such shares.

1.5        Common Stock Price. To the extent deemed required or necessary and for all purposes of this Plan, the Consultant shall have an "option" covering such shares of common stock at the per share price set forth in paragraph 1.4 above during the term hereof; the Consultant assumes the risk of
any decrease in the per share price or value of the shares of common stock of COMPANY that may be issued by COMPANY for services performed by the Consultant hereunder, and the Consultant agrees that any such decrease shall in no way affect the rights, obligations or duties of the Consultant hereunder.

1.6        Limitation on Services. None of the services rendered by the Consultant and paid for by the issuance of shares of common stock or options for the purchase of shares of common stock of COMPANY shall be services related to any "capital raising" or "stock promotion" transaction.

1.7        Delivery of Shares. Upon effectiveness of the Registration Statement on Form S-8 covering the shares or options for the purchase of shares, one or more stock or option certificates representing such shares shall be delivered to the Consultant at the address listed on the Counterpart Signature
Pages, unless another address shall be provided to COMPANY in writing prior to the issuance of such shares.

 

 

  

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1.8        Adjustments in the Number of Shares of Common Stock and Price Per Share. COMPANY and the Consultant agree that the per share price of shares of common stock that may be issued by COMPANY to the Consultant for services performed under this Plan has been arbitrarily set by COMPANY; however,
in the event COMPANY shall undergo a merger, consolidation, reorganization, recapitalization, declare a stock dividend of its shares of common stock or cause to be implemented a forward or reverse stock split which affects the present number of issued and outstanding shares of common stock of COMPANY prior to the issuance of shares to the Consultant, that the per share price and the number of shares issuable to the Consultant for services actually rendered hereunder after such event shall be appropriately adjusted
to reflect any such event.

1.9        Effective Date. The Effective Date of this Plan shall be the date set forth on the respective Counterpart Signature Pages.

SECTION 2

Representations and Warranties of COMPANY

COMPANY represents and warrants to, and covenants with, the Consultant as follows:

2.1        Corporate Status. COMPANY is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada and is licensed or qualified as a foreign corporation in all states in which the nature of its business or the character or ownership of its properties
makes such licensing or qualification necessary.

2.2        Compensation Plan. The Board of Directors of COMPANY has duly adopted a Compensation Plan as defined in Rule 405 of the Commission pursuant to which COMPANY may issue "freely tradeable" shares of its common stock as payment for services rendered, subject to the filing and effectiveness
of an S-8 Registration Statement to be filed with the Commission by COMPANY.

2.3        Registration Statement on Form S-8. COMPANY shall engage the services of a competent professional to prepare and file a Registration Statement on Form S-8 with the Commission to cover the shares of common stock to be issued under the Plan; shall cooperate with such professional in every
manner whatsoever to the extent reasonably required or necessary so that such Registration Statement shall be competently prepared, which such Registration Statement shall not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading, and which such Registration Statement shall become effective immediately upon its filing; such Registration Statement shall be
prepared at the sole cost and expense of COMPANY; and COMPANY will provide to the Consultant prior to the issuance and delivery of any such shares of common stock a copy of such Registration Statement, the Compensation Plan adopted by its Board of Directors, all quarterly, annual or current reports or other documents incorporated by reference into such Registration Statement

 

 

  

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and any other similar reports filed or publicly disseminated following the effective date of any such Registration Statement.

2.4        Federal and State Securities Laws, Rules and Regulations. COMPANY shall fully comply with any and all federal or state securities laws, rules and regulations governing the issuance of any such shares of common stock.

2.5        Limitation on Services. COMPANY shall not request the Consultant to perform any services in connection with any "capital raising" or "stock promotion" transaction under this Plan.

2.6        Reports With The Commission. COMPANY is required to file reports with the Commission pursuant to Section 13 of the Securities Exchange Act of 1934, as amended (the "1934 Act"), and COMPANY has or will file with the Commission all reports required to be filed by it forthwith, and shall continue
to file such reports with the Commission timely so long as required, but for a period of not less than one year; and such reports are or will be true and correct in every material respect.

2.7        Corporate Authority and Due Authorization. COMPANY has full corporate power and authority to enter into this Plan and to carry out its obligations hereunder. Execution of this Plan and performance by COMPANY hereunder have been duly authorized by all requisite corporate action on the part
of COMPANY, and this Plan constitutes a valid and binding obligation of COMPANY and performance hereunder will not violate any provision of the Articles of Incorporation, Bylaws, agreements, mortgages or other commitments of COMPANY.

SECTION 3

Representations and Warranties of the Consultant

Consultant represents and warrants to, and covenants with, COMPANY as follows:

3.1        Employment. Consultant hereby accepts employment by COMPANY for the services performed pursuant to this Agreement. The services performed by the Consultant hereunder have been personally rendered by the Consultant, and no one acting for or on behalf of the Consultant.

3.2        Accredited Investors. Consultant represents and warrants that, by reason of income, net assets, education, background and business acumen, the Consultant has the experience and knowledge to evaluate the risks and merits attendant to an investment in shares of common stock of COMPANY, either
singly or through the aid and assistance of a competent professional, and is fully capable of bearing the economic risk of loss of the total investment of services; further, Consultant is an "accredited investor" as that term is defined under the 1933 Act or the rules and regulations promulgated thereunder.

 

 

  

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3.3        Suitability of Investment. Prior to the execution of this Plan, Consultant shall have provided the services outlined in the respective Counterpart Signature Pages to COMPANY, and the Consultant, singly, or through the advice of a competent professional, fully believe that an investment
in shares of common stock of COMPANY is a suitable investment for the Consultant.

3.4        Limitation on Services. None of the services rendered by the Consultant and paid for by the issuance of shares of common stock of COMPANY shall be services related to any "capital raising" transaction.

3.5        Authority and Authorization. Consultant has full power and authority to enter into this Plan and carry out the obligations hereunder. Execution of this Plan and performance by the Consultant hereunder constitutes a valid and binding obligation of the Consultant and performance hereunder
will not violate any other agreement to which any of the Consultant is a party.

SECTION 4

Indemnity

COMPANY and the Consultant agree to indemnify and hold the other harmless for any loss or damage resulting from any misstatement of a material fact or omission to state a material fact by the other contained herein or contained in the S-8 Registration Statement of COMPANY to be filed hereunder, to the extent that any misstatement or omission
contained in the Registration Statement was based upon information supplied by the other.

SECTION 5

Termination

Prior to the performance of services hereunder, this Plan may be terminated (1) by mutual consent of COMPANY and the respective Consultant in writing; (2) by either the Directors of COMPANY or the respective Consultant if there has been a material misrepresentation or material breach of any warranty or covenant by the other party; and (3)
shall automatically terminate at the expiration of the term hereof, provided, however, all representations and warranties shall survive the termination hereof; provided, further, however, that any obligation of COMPANY to pay for any services actually rendered by the Consultant hereunder shall survive any such termination.

SECTION 6

General Provisions

 

6.1        Further Assurances. At any time, and from time to time, after the execution hereof, each party will execute such additional instruments and take such action as may be reasonably requested by the other party to carry out the intent and purposes of this Plan.

  

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6.2        Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been given if delivered in person or sent by prepaid first-class registered or certified mail, return receipt requested.

6.3        Entire Agreement. This Plan constitutes the entire agreement between the parties and supersedes and cancels any other agreement, representation, or communication, whether oral or written, between the parties hereto relating to the transactions contemplated herein or the subject matter hereof.

6.4        Headings. The section and subsection headings in this Plan are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Plan.

6.5        Governing law. This Plan shall be governed by and construed and enforced in accordance with the laws of the State of Nevada, except to the extent pre-empted by federal law, in which event (and to that extent only), federal law shall govern.

6.6        Assignment. Neither COMPANY nor the Consultant can assign any rights, duties or obligations under this Plan, and in the event of any such assignment, such assignment shall be deemed null and void.

6.7           Counterparts. This Plan may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties have executed this Plan effective the day and year first above written.

	
DAM HOLDINGS, INC.

	  
	
By:____________________________

	
Print Name:

	
Print Title:

  

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EXHIBIT "A"

CONSULTANT COMPENSATION AGREEMENT

COUNTERPART SIGNATURE PAGE

THIS COUNTERPART SIGNATURE PAGE for that certain Consultant Compensation Agreement between DAM HOLDINGS, INC. and the undersigned Consultant is executed as of the date set forth herein below.

	
______________________________

	
Signature

	
 

______________________________

	
Address

	
 

______________________________

	
City                      State                 Zip

Date: ____________________

Number of Shares and Maximum Value of Services

General Description of Services to be Performed

See Exhibit A-1 attached hereto and incorporated herein by reference as set forth and as will be set forth in invoices for _______________ shares of COMPANY common stock, at ____($___) per share.

 

 

 

 

 

 

 

 

  

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EXHIBIT A-1

Date: _______________

Via Facsimile

DAM Holdings, Inc.

52-66 Iowa Avenue

Paterson, NJ 07503

Re: Compensation

Gentlemen:

This will confirm for purposes of any filing requirements the work performed in exchange for the shares of COMPANY that COMPANY agreed to have issued to me.

1.        ____________ shares represent the stock portion of my fee for work related to the services as set forth on the accompanying invoice.

Please call with any questions you may have.

Sincerely,

	
______________________________

	
Signature

	
 

______________________________

	
Address

	
 

______________________________

	
City                    State            Zip

 

 

 

 

 

  

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DAM HOLDINGS INC.

2009 CONSULTANTS STOCK COMPENSATION PLAN

STOCK OPTION

THIS STOCK OPTION evidences that, subject to the following terms and conditions, on the date that first appears below (the "Grant Date"), DAM HOLDINGS, INC., a Nevada Corporation, (the "Company") granted to the person whose name first appears below (the "Consultant") a stock option (the "Option") for the purchase of shares of the Company’s
common stock $0.00015 par value (the “Stock”), at an option price per share (the "Option Price") as more fully set forth herein, for service provided as a consultant to the Company.

SECTION 1

Definitions.  For purposes of this Option, following terms are defined as set forth below:

(a)        "Board" means the Board of Directors of the Company.

(b)        "Change of Control" shall have the meaning set forth in Section 5 below.

(c)        "Committee" means the Committee referred to in Section 3 below.

(d)        "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and any successor thereto.

(e)        "Fair Market Value" means the closing sale price as of any given date of a share of Stock if the Stock is listed on a national securities exchange or quoted on the Nasdaq system or, if no such closing price is available on such date, such closing price as reported for the immediately preceding
business day.  If the Stock is not listed on a national securities exchange or quoted on an electronic stock trading system, the Fair Market Value of the Stock shall be determined by the Committee in good faith.

(f)        "Rule 16b-3" means the exemption under Rule 16b-3 to Section 16(b) of the Exchange Act, as amended from time to time.

(g)        “Grant Date”, “Expiration Date”, “Number of Shares” and “Exercise Price” shall mean:

 

	  	  	  	  	  	  	  
	
Grant Date
	  	
Expiration Date
	  	
Number of Shares
	  	
Exercise Price

In addition, certain other terms used herein have definitions given to them in the first place in which they are used.  For purposes of the definitions set forth in this Section 1, the singular shall include the plural and the plural shall include the singular.

 

 

  

  

  

 

SECTION 2.  Stock Option.  The Option shall be subject to the following terms and conditions:

(a)        Exercisability and Term. The Option shall be immediately exercisable and shall expire on the Expiration Date as set forth in Section 1 herein but in no event shall such Option be exercised after the tenth (10th)
anniversary of the Grant Date.

(b)        Method of Exercise. Subject to the provisions of this Section 2, the Option may be exercised (to the extent then exercisable), in whole or in part, at any time during the Option term by giving written notice of exercise to the Company specifying the number of shares of Stock subject to
the Option to be purchased. Such notice shall be accompanied by payment in full of the purchase price by check or such other instrument as the Company may accept. Payment in full or in part also may be made in the form of unrestricted common stock of the Company already owned by the holder of this Option; provided that if the Option is exercised using unrestricted common stock of the Company already owned by the holder, such stock must have been held by the holder for at least six (6) months or by the net issuance
of the number of shares exercised reduced by a number of shares equal to the total exercise price divided by the Fair Market Value of the Stock.

In the discretion of the Committee, payment for any Stock subject to the Option also may be made by delivering a properly executed exercise notice to the Company together with a copy of irrevocable instructions to a broker to deliver promptly to the Company the purchase price. To facilitate the foregoing, the Company may enter into agreements
for coordinated procedures with one or more brokerage firms. The value of already owned shares of common stock of the Company exchanged in full or partial payment for the shares purchased upon the exercise of the Option shall be equal to the aggregate Fair Market Value of such already owned shares of stock on the date preceding the exercise of the Option (and transfer of such already owned shares to the account of the Company).

(c)        Non-transferability of Option.  The Option shall not be transferable by the Optionee other than by will or by the laws of descent and distribution, and the Option shall be exercisable, during the Optionee's lifetime, only by the Optionee or by the guardian or legal representative
of the Optionee, it being understood that the term "Optionee" include the guardian and legal representative of the Optionee and any person to whom the Option is transferred by will or the laws of descent and distribution.

(d)        Cashing out of Option.  On receipt of written notice of exercise, the Committee may elect to cash out all or part of the Option to be exercised by paying the Optionee an amount, in cash or Stock, equal to the excess of the Fair Market Value of a share of Stock over the Option
price times the number of shares of Stock subject to the Option on the effective date of such cash out.

SECTION 3.  Administration.

This Option shall be administered by Board of Directors of the Company or  by the Compensation Committee ("Committee") of the Board or such other committee of the Board, composed of not less than two (2) members, each of whom shall be appointed by and shall serve at the pleasure of the Board and shall come within the definition
of a "non-employee director"

 

 

  

  

  

 

under Rule 16b-3 and an "outside director" under Section 162(m) of the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. If at any time no Committee shall be in place, the functions of the Committee specified in this Option shall be exercised by the Board.

The Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing this Option as it shall, from to time, deem advisable; to interpret the terms and provisions of this Option; and to otherwise supervise the administration of this Option.

The Committee may act only by a majority of its members then in office, except that the members thereof may authorize any one or more of their number or any officer of the Company to execute and deliver documents on behalf of the Committee. Any determination made by the Committee pursuant to the provisions of this Option with respect to
the Option shall be made in its sole discretion at the time of the grant of the Option or, unless in contravention of any express term of this Option, at any time thereafter. All decisions made by the Committee pursuant to the provisions of this Option shall be final and binding on all persons, including the Company and the Optionee.

SECTION 4.     Adjustments.

In the event of any merger, reorganization, consolidation, recapitalization (including, but not limited to, the issuance of common stock or any securities convertible into common stock in exchange for securities of the Company), stock dividend, stock split or reverse stock split, extraordinary distribution with respect to the Stock or other
similar change in corporate structure affecting the Stock, such substitution or adjustments shall be made in the number and Option price of shares subject to the Option granted under this Options as may be determined to be appropriate by the Committee, in its sole discretion; provided, however, that the number of shares subject to the Option always shall be a whole number.

SECTION 5.  Change of Control.

Upon the occurrence of a Change of Control, the Committee, in its discretion, shall have the right (but not the obligation) to cash out prior to the transaction the Option by paying the Optionee an amount, in cash or common stock, equal to the excess of the Fair Market Value of a share of Stock over the Option price per share of Stock times
the number of shares of Stock subject to the Option on the effective date of the cash out (in which event the Option shall thereupon expire).

For purposes of this Plan, "Change of Control" means the occurrence of any of the following events:

(a)        the acquisition, directly or indirectly, by any "person" or "group" (as those terms are defined in Sections 3(a)(9), 13(d), and 14(d) of the Exchange Act and the rules there under, including, without limitation, Rule 13d-5(b)) of "beneficial ownership" (as determined pursuant to Rule 13d-3
under the Exchange Act) of securities entitled to vote generally in the election of

 

  

  

  

 

directors ("voting securities") of the Company that represent 35% or more of the combined voting power of the Company's then outstanding voting securities, other than

(i)        an acquisition by a trustee or other fiduciary holding securities under any employee benefit plan (or related trust) sponsored or maintained by the Company or any person controlled by the Company or by any employee benefit plan (or related trust) sponsored or maintained by the Company or
any person controlled by the Company, or

(ii)        an acquisition of voting securities by the Company or a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the stock of the Company, or

(iii)        an acquisition of voting securities pursuant to a transaction described in clause (c) below that would not be a Change of Control under clause (c);

(b)        a change in the composition of the Board that causes less than a majority of the directors of the Company to be directors that meet one or more of the following descriptions:

(i)        a director who has been a director of the Company for a continuous period of at least 24 months, or

(ii)       a director whose election or nomination as director was approved by a vote of at least two-thirds of the then directors described in clauses (b)(i), (ii), or (iii) by prior nomination or election, but excluding, for the purpose of this subclause (ii), any director whose initial assumption of
office occurred as a result of an actual or threatened (y) election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person or group other than the Board or  (z) tender offer, merger, sale of substantially all of the Company's assets, consolidation, reorganization, or business combination that would be a Change of Control under clause (c) on consummation thereof, or

(iii)      who were serving on the Board as a result of the consummation of a transaction described in clause (c) that would not be a Change of Control under clause (c);

(c)        the consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company's
assets or (z) the acquisition of assets or stock of another entity, in each case, other than in a transaction

(i)        that results in the Company's voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly,
the Company or owns, directly or indirectly, all or substantially all of the Company's assets or otherwise succeeds to the business of the Company (the Company or such person, the "Successor Entity")) directly or indirectly, at least 50% of the combined voting power of the Successor Entity's outstanding voting securities immediately after the transaction, and

 

  

  

  

 

(ii)        after which more than 50% of the members of the board of directors of the Successor Entity were members of the Board at the time of the Board's approval of the agreement providing for the transaction or other action of the Board approving the transaction (or whose election or nomination
was approved by a vote of at least two-thirds of the members who were members of the Board at that time), and

(iii)       after which no person or group beneficially owns voting securities representing 35% or more of the combined voting power of the Successor Entity, unless the Board determines in its discretion that beneficial ownership by a person or group of voting securities representing 35% or more of the
combined voting power of the Successor Entity shall not be deemed a Change of Control; or

(d)        a liquidation or dissolution of the Company.  For purposes of clarification, an acquisition of Company securities by the Company that causes the Company's voting securities beneficially owned by a person or group to represent 35% or more of the combined voting power of the Company's
then outstanding voting securities is not to be treated as an "acquisition" by any person or group for purposes of clause (a) above. For purposes of clause (a) above, the Company makes the calculation of voting power as if the date of the acquisition were a record date for a vote of the Company's shareholders, and for purposes of clause (c) above, the Company makes the calculation of voting power as if the date of the consummation of the transaction were a record date for a vote of the Company's shareholders.

SECTION 6.     Amendment.

The Board may amend this Option, but no amendment shall be made that would (i) impair the rights of the Optionee without the Optionee's consent, except such an amendment made to cause this Option to qualify for the exemption provided by Rule 16b-3, or (ii) disqualify this Option from the exemption provided by Rule 16b-3. In addition, no
such amendment shall be made without the approval of the Company's stockholders to the extent such approval is required by law.

SECTION 7.     General Provisions.

(a)        Compliance with Laws.  The Option shall not be exercised and no related share certificates shall be delivered if in the sole discretion of the Company any requisite approval, consent, registration or other qualification of any stock exchange upon which the securities of the Company
may then be listed, the Securities and Exchange Commission or other governmental authority having jurisdiction over the exercise of the Option or the issuance of shares shall not have been secured.

(b)        Beneficiary.  The Committee shall establish such procedures as it deems appropriate for the Optionee to designate a beneficiary to whom any amounts payable in the event of the Optionee's death are to be paid.

 

  

  

  

 

(c)        Severability.  If any provisions of this Option shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions of this Option or the subject agreement.

(d)        Governing Law.  This Option shall be governed by and construed in accordance with the laws of the State of Nevada.

(e)        Merger Clause.  This Option supersedes any and all understandings between the Company and the Optionee with respect to the Option and, except as otherwise provided herein, this Option may be amended only in writing signed by the Company and the Optionee.

(f)        Headings.  The headings in this Option are for reference purposes only and shall not affect in any way the meaning or interpretation of thereof.

PLEASE INDICATE YOUR UNDERSTANDING AND ACCEPTANCE OF THE FOREGOING BY SIGNING AND RETURNING A COPY OF THIS OPTION.

DAM HOLDINGS, INC.

	  	  	  	  
	
 

By:
	  	  	  
	
Print Name:
	  	
Date

	
Print Title:
	  	  

I hereby acknowledge receipt of the Option granted on the Grant Date which has been granted to me under the foregoing terms and conditions. I further agree to conform to all of the terms and conditions of the Option.

CONSULTANT

	  	  	  
	  	  	  
	
Signature
	  	
Date

	 	 	 
	  	  	  
	
Print Name
	  	
Taxpayer I.D. Number

	 	 	 
	  	  	  
	
Address

 

 
	  	
Telephone Number

City         State         Zipex10_1.htm

    
      
Exhibit 10.1

     

    
      [EXECUTION
VERSION]

      STOCK PURCHASE
AGREEMENT

      

      This
Stock Purchase Agreement (the “Agreement”) is made and entered into this 18th
day of December, 2009, by and among RCI Entertainment (3105 I-35),
Inc., a Texas corporation (the “Purchaser”), Spiridon Karamalegos (the
“Seller”), The Joy Club of Austin, Inc. and
North IH-35 Investments,
Inc.

      

      WHEREAS, The Joy Club of Austin, Inc.
(“JOY”) is the owner and operator of the adult nightclub business known as “Joy
of Austin” which leases and occupies the real property and improvements located
at 3105 South IH 35, Round Rock, Texas  78664 (the “Property”). North IH 35 Investments, Inc.
(“NIII”) is the owner of the Property, and has leased the Property to JOY;
and

      

      WHEREAS, the Seller presently
owns fifty-one percent (51%) of the outstanding shares of common stock of JOY
and presently owns forty-nine percent (49%) of the outstanding shares of common
stock of NIII (collectively the “Seller Shares”); and

      

      WHEREAS, Evangelos Polykrates
(“Polykrates”) presently owns forty-nine percent (49%) of the outstanding shares
of common stock of JOY and presently owns fifty-one percent (51%) of the
outstanding shares of common stock of NIII (collectively the “Polykrates
Shares”); and

      

      WHEREAS, Seller and Polykrates
have entered into a Purchase Agreement dated December 18, 2009 (the “Polykrates Purchase
Agreement”), pursuant to which Polykrates has agreed to sell and convey
his forty-nine percent (49%) of the outstanding shares of common stock of JOY
and his fifty-one percent (51%) of the outstanding shares of common stock of
NIII to Seller; and

      

      WHEREAS, the Purchaser desires
to purchase and acquire all of the outstanding shares of common stock of JOY
(the “JOY Shares”) and all of the outstanding shares of common stock of NIII
(the “NIII Shares”), which represents one hundred percent (100%) of all of the
shares of capital stock of JOY and NIII issued and outstanding (hereinafter the
JOY Shares and the NIII Shares are collectively referred to as the “JOY/NIII
Shares”); and

      

      WHEREAS, the Polykrates
Purchase Agreement provides the right to the Seller to assign his rights under
the Polykrates Purchase Agreement; and

      

      WHEREAS, Seller has agreed to
assign his rights under the Polykrates Purchase Agreement to the Purchaser
hereunder as provided in an Assignment Agreement between the Purchaser, Seller
and Polykrates; and

      

      WHEREAS, the Purchaser desires
to have the Polykrates Purchase Agreement assigned to it, which will enable the
Purchaser to acquire the Polykrates Shares; and

      

      WHEREAS, the Seller desires to
sell all of his Seller Shares to the Purchaser on the terms and conditions set
forth herein; and

      

      WHEREAS, the Purchaser desires
to purchase all of the Seller Shares on the terms and conditions set forth
herein; and

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      WHEREAS, the acquisition of
(i) 100% of the JOY Shares by the Purchaser and (ii) 100% of NIII Shares by the
Purchaser shall sometimes collectively be referred to herein as the
“Acquisition”.

      

      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 SELLER SHARES

      

      Section
1.1          
  Sale of
the Shares.  Subject to the terms and conditions set forth in
this Agreement, at the Closing (as hereinafter defined) the Seller hereby agrees
to sell, transfer, convey and deliver to Purchaser fifty-one percent (51%) of
the outstanding shares of common stock of JOY and forty-nine percent (49%) of
the outstanding shares of common stock of NIII, which represents, all of the
outstanding capital stock of JOY and NIII owned by the Seller, free and clear of
all encumbrances, and shall deliver to Purchaser stock certificates representing
the Seller Shares, duly endorsed to Purchaser.

      

      Section
1.2          
  Purchase
Price.  As consideration for the purchase of the Seller Shares,
Purchaser shall pay to Seller a total consideration of $2,350,000, plus
assumption of the First State Bank Note described below (the “Purchase Price”),
which shall be payable as follows:

      

      (a)    
       $1,820,000 payable by cashier’s check,
certified funds or wire transfer at the Closing; and

      

      (b)      
     $530,000 evidenced by a five (5) year secured
promissory note (the “Secured Note”).  The Secured Note shall bear
interest at the rate of 4.75% per annum, payable in sixty (60) equal monthly
installments of principal and interest.  The Secured Note will be
secured by (i) a third lien in favor of the Seller against the Property and
improvements located thereon and (ii) so long as Seller remains obligated under
that certain Guaranty Agreement referenced in Section 1.2 (b) iii of the
Polykrates Purcahe Agreement,  a second lien on all of the shares of
JOY and NIII.  The initial monthly payment shall be due thirty (30)
days after the date of Closing, with each subsequent monthly payment due
thereafter.  A copy of the form of the Secured Note is attached hereto
as Exhibit 1.2(b).

      

      (c)       
    Purchaser shall assume the Promissory Note dated Sept.
10, 2004, in the original principal amount of $850,000, executed by NIII and
payable to First State Bank-Taylor, which Promissory Note had a current balance
of $652,489.25 as of November 16, 2009 (the “First State Bank Note”). A copy of
the form of the Assumption Agreement is attached hereto as Exhibit 1.2
(c).

      

      ARTICLE
II

      CLOSING

      

      Section
2.1         
   The
Closing.  The closing of the transactions contemplated by this
Agreement shall take place on or before December 17, 2009 (the “Closing Date”),
at the law offices of Hearne & Browder, LLP, 700 Lavaca, Suite 910, Austin,
Texas 78701, or at such other time and place as agreed upon among the parties
hereto (the “Closing”).

      
        
           

        

        
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Purchase Agreement - Pg 2

          
            

          

        

        
           

        

      

      Section
2.2      
      Delivery of Documents at
Closing.  At the Closing: (a) the Seller shall deliver to
Purchaser certificates evidencing the Seller Shares of JOY and NIII free and
clear of any liens, claims, equities, charges, options, rights of first refusal
or encumbrances, duly endorsed to Purchaser or accompanied by duly executed
stock powers in form and substance satisfactory to Purchaser against delivery by
Purchaser to the Seller of payment in an amount equal to the Purchase Price for
the Seller Shares being purchased by Purchaser in the manner set forth in
Section 1.2; (b) the parties hereto shall deliver the various certificates,
instruments and documents and shall take the required actions referred to in
Articles V and VI below; and (c) the Related Transactions (as defined below)
shall be consummated concurrently with the Closing.

      

      Section
2.3         
   Related
Transactions.  In addition to the purchase and sale of the
Seller Shares, the following actions shall take place contemporaneously at the
Closing (collectively, the “Related Transactions”):

      

      (a)       
    The Seller shall enter into a 3 year covenant not to
compete pursuant to the terms of which the Seller shall not either individually
or jointly, directly or indirectly, whether for compensation or not, alone or in
association with any other person or entity:

      

      
        	
                 
      

              	
                (i)

              	
                Own
      or share in the earnings of, carry on, manage, operate, control, be
      engaged in, render services to, solicit customers for, participate in or
      otherwise be connected with, any business engaged in the operation of an
      establishment featuring live female nude or semi-nude entertainment within
      a five (5) mile radius of the Property;
or

              

      

      

      
        	
                 
      

              	
                (ii)

              	
                Solicit
      or induce, or attempt to solicit or induce, any employee, independent
      contractor, or agent or consultant of JOY or NIII or any of its affiliates
      or the business known as “Joy of Austin” to leave his or her employment or
      terminate his or her agreement or relationship with JOY or NIII or any of
      its affiliates or the business known as “Joy of
  Austin;”

              

      

      

      
        The form
of Non-Competition Agreement is attached hereto as Exhibit
2.3(a).

      

      

      (b)        
   Prior to or contemporaneously with the Closing, the Seller
shall assign and transfer to the Purchaser the Polykrates Purchase Agreement
pursuant to an Assignment Agreement, which shall provide, among other things,
that the Purchaser will (i) assume the obligations of the Seller to pay the
purchase price as set forth in the Polykrates Purchase Agreement and (ii) assume
First State Bank Note and (iii) discharge those obligations assumed by Purchaser
under the Polykrates Purchase Agreement and will receive those benefits
conferred upon the Seller as indicated in the Polykrates Purchase Agreement and
(iv) be entitled to receive all of the Polykrates Shares of JOY and NIII being
transferred in the Polykrates Purchase Agreement; and

      

      (c)          
 Prior to and contemporaneously with the Closing, there shall be a closing
of the Polykrates Purchase Agreement as contemplated in Article II of the
Polykrates Purchase Agreement.

      
        
           

        

        
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Purchase Agreement - Pg 3

          
            

          

        

        
           

        

      

      
        ARTICLE
III

      

      REPRESENTATIONS
AND WARRANTIES

      OF
SELLER

      

      The
Seller, individually and in his capacity as President of JOY and Vice-President
of NIII hereby represents and warrants to Purchaser as follows:

      

      Section
3.1.            Organization, Good Standing
and Qualification of JOY and NIII.  JOY and NIII (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
their 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 JOY and
NIII, respectively.

      

      The
authorized capital stock of JOY consists of 3,000,000 shares of common stock, no
par value, of which 3,000,000 shares are validly issued and
outstanding.  The authorized capital stock of NIII consists of 1000
shares of common stock, no par value, of which 1,000 shares are validly issued
and outstanding. There are no shares of preferred stock authorized or issued and
there is no other class of capital stock authorized or issued by JOY or
NIII.  All of the issued and outstanding shares of common stock of JOY
and NIII are owned by the Seller and Polykrates and are fully paid and
non-assessable.  None of the JOY/NIII Shares issued are in violation
of any preemptive rights.  Neither JOY nor NIII has any obligation to
repurchase, reacquire, or redeem any of its outstanding capital
stock.  There are no outstanding securities convertible into or
evidencing the right to purchase or subscribe for any shares of capital stock of
JOY or NIII, there are no outstanding or authorized options, warrants, calls,
subscriptions, rights, commitments or any other agreements of any character
obligating JOY or NIII to issue any shares of its capital stock or any
securities convertible into or evidencing the right to purchase or subscribe for
any shares of such stock, and there are no agreements or understandings with
respect to the voting, sale, transfer or registration of any shares of capital
stock of JOY or NIII, save and except the July 1, 2009 Stock Purchase Agreement,
which Stock Purchase Agreement will be terminated upon the Closing of the
Polykrates Purchase Agreement upon Closing.

      

      Section
3.2       
     Subsidiaries.  Neither
JOY nor NIII have any subsidiaries.

      

      Section
3.3        
    Ownership of the JOY/NIII
Shares.  The Seller owns, beneficially and of record, (i)
1,530,000 shares of common stock of JOY, which represents fifty-one percent
(51%) of the issued and outstanding shares of common stock of JOY and (ii) 490
shares of common stock of NIII, which represents forty-nine percent (49%) of the
issued and outstanding shares of common stock of NIII, free and clear of any
liens, claims, equities, charges, options, rights of first refusal, or
encumbrances.  Polykrates owns, beneficially and of record, (i)
1,470,000 shares of common stock of JOY, which represents forty-nine percent
(49%) of the issues and outstanding shares of common stock of JOY and (ii) 510
shares of common stock of NIII, which represents fifty-one percent (51%) of the
issued and outstanding shares of common stock of NIII, free and clear of any
liens, claims, equities, charges, options, rights of first refusal, or
encumbrances.  Upon the transfer of the JOY/NIII Shares, as
contemplated herein and in the Polykrates Purchase Agreement, Purchaser 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).

      
        
           

        

        
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Purchase Agreement - Pg 4

          
            

          

        

        
           

        

      

      Section
3.4      
      Authorization.  Seller
represents that he is a person of full age of maturity, with full power,
capacity and authority to enter into this Agreement and to perform the
obligations contemplated hereby by and for himself.  All action on the
part of the Seller necessary for the authorization, execution, delivery and
performance of this Agreement and all documents related to consummate the
transactions contemplated herein have been taken by the Seller.  This
Agreement, when duly executed and delivered in accordance with its terms, will
constitute a valid and binding obligation of the Seller, enforceable against the
Seller in accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, and other similar laws of general application
relating to or affecting creditors’ rights and to general equitable
principles.

      

      Section
3.5        
    No Breaches or
Defaults.  The execution, delivery, and performance of this
Agreement by the Seller does not:  (i) conflict with, violate, or
constitute a breach of or a default under, (ii) result in the creation or
imposition of any lien, claim, or encumbrance of any kind upon the JOY/NIII
Shares or (iii) require any authorization, consent, approval, exemption, or
other action by or filing with any third party or Governmental Authority under
any provision of:  (a) to the best of Seller’s knowledge, any
applicable Legal Requirement, or (b) any credit or loan agreement, promissory
note, or any other agreement or instrument to which the Seller, JOY or NIII is a
party or by which the JOY/NIII Shares may be bound or affected.  For
purposes of this Agreement, "Governmental Authority" means any foreign
governmental authority, the United States of America, any state of the United
States, and any political subdivision of any of the foregoing, and any agency,
department, commission, board, bureau, court, or similar entity, having
jurisdiction over the parties hereto or their respective assets or
properties.  For purposes of this Agreement, "Legal Requirement" means
any law, statute,  injunction, decree, order or judgment (or
interpretation of any of the foregoing) of, and the terms of any license or
permit issued by, any Governmental Authority.

      

      Section
3.6      
      Consents.   No
consent of, approval by, order or authorization of, or registration, declaration
or filing by the Seller or JOY or NIII  with any court or any
governmental or regulatory agency or authority having jurisdiction over the
Seller or JOY or NIII  or any of their  property or assets
is required on the part of the Seller or JOY or NIII  (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 Seller, JOY or NIII  of this Agreement.

      

      Section
3.7         
   Pending
Claims.  Except as set forth in Exhibit 3.7, there is no claim,
suit, arbitration, investigation, action, litigation or other proceeding,
whether judicial, administrative or otherwise, now pending or, to the Seller’s
knowledge, contemplated or threatened against the Seller or JOY or NIII 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
material effect upon Seller or JOY or NIII or the transfer to Purchaser of the
JOY/NIII Shares under this Agreement, and there is no basis known to Seller for
any such action.  No litigation is pending, or, to Seller’s knowledge,
threatened against Seller, JOY or NIII or their assets or properties which seeks
to restrain or enjoin the execution and delivery of this Agreement or any of the
documents or Related Transactions referred to herein or the consummation of any
of the transactions contemplated thereby or hereby.  Neither Seller,
JOY nor NIII is subject to any judicial injunction or mandate or any
quasi-judicial or administrative order or restriction directed to or against
them or which would affect JOY, NIII, or the JOY/NIII Shares, to be transferred
under this Agreement.

      
        
           

        

        
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Purchase Agreement - Pg 5

          
            

          

        

        
           

        

      

      Section
3.8        
    Taxes.  Except
as set forth in Exhibit 3.8, JOY and NIII have timely prepared and 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.  Except as set
forth in Exhibit 3.8, JOY and NIII are not delinquent in the payment of any tax
or governmental charge of any nature.  The Seller has no knowledge of
any liability for any tax to be imposed by any taxing authorities upon JOY or
NIII as of the date of this Agreement and as of the Closing that is not
adequately provided for.  No assessments or notices of deficiency or
other communications have been received by the Seller, JOY or NIII, 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 the federal, state, foreign and
local tax returns of JOY or NIII have been audited by any taxing
authority.  The Seller has no knowledge of any additional assessments,
adjustments or contingent tax liability (whether federal or state) of any nature
whatsoever, whether pending or threatened against JOY or NIII for any period,
nor of any basis for any such assessment, adjustment or
contingency.  There are no agreements between JOY, NIII or Seller and
any taxing authority, including, without limitation, the Internal Revenue
Service, waiving or extending any statute of limitations with respect to any tax
return.

      

      Section
3.9       
     Financial
Statements.  Seller has delivered to Purchaser the unaudited
balance sheets of JOY and NIII as of October 31, 2009, together with the related
unaudited statements of income, for the periods then ended (collectively
referred to as the “Financial Statements”). To the best of Seller’s knowledge,
such Financial Statements, including the related notes, are in accordance with
the books and records of JOY and NIII and fairly represent the financial
position of JOY and NIII and the results of operations and changes in financial
position of JOY and NIII as of the dates and for the periods
indicated.  Except as, and to the extent reflected or reserved against
in the Financial Statements, neither JOY nor NIII, as of the date of the
Financial Statements, has any material liability or obligation of any nature,
whether absolute, accrued, continued or otherwise, not referenced in the
Financial Statements or exhibits attached hereto or reserved against in the
Financial Statements.

      

      Section
3.10           No Material Adverse
Change.  Since the date of the Financial Statements, JOY and
NIII have conducted their business in the ordinary course, consistent with past
practice, and there has been no (i) change that has had or would reasonably be
expected to have a material adverse effect upon the assets or business or the
financial condition or other operations of JOY and NIII; (ii) acquisition or
disposition of any material asset by JOY and NIII or any contract or arrangement
therefore, otherwise than for fair value in the ordinary course of business;
(iii) material change in JOY’s or NIII’s accounting principles, practices or
methods; (iv) incurrence of any material indebtedness or lending of money to any
person or entity; (v) acceleration, termination, modification or cancellation of
any agreement, contract, lease or license (or series of related agreements,
contracts, leases or licenses) involving more than $1,000 to which JOY or NIII
is a party; or (vi) delay or postponement in the payment of any accounts payable
or other liabilities.  The representations made in this Section
3.10(i), (ii) and (iii) are made by the Seller to the best of his
knowledge.

      

      Section
3.11           Labor Matters. JOY is
not a party or otherwise subject to any collective bargaining agreement with any
labor union or association.  There are no discussions, negotiations,
demands or proposals that are pending or have been conducted or made with or by
any labor union or association, and there are not pending or threatened against
JOY any labor disputes, strikes or work stoppages.  To the best of
Seller’s knowledge, JOY is in compliance with all federal and state laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, and, to their knowledge, is not engaged in any
unfair labor practices.  JOY is not a party to any written or oral
contract, agreement or understanding for the employment of any officer, director
or employee of JOY.

      
        
           

        

        
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Purchase Agreement - Pg 6

          
            

          

        

        
           

        

      

      Section
3.12           Compliance with
Laws.  JOY and NIII are in compliance with all statutes,
orders, rules, ordinances and regulations applicable to it which are material to
its ownership of its assets or the operation of its
businesses.  Except as disclosed in JOY’s and its predecessor’s
administrative history with the TABC (as has been disclosed to Purchaser), the
Seller has no basis to expect, or has he or JOY or NIII received, any order or
notice of any such violation or claim of violation of any such statute, order,
rule, ordinance or regulation by JOY or NIII.  JOY and NIII now or
will as of the Closing own, hold, possess or lawfully use in the operation of
its business all permits and licenses which are in any manner necessary or
required for it to conduct its operation and business as now being
conducted.  Exhibit 3.12 sets forth all licenses and permits held by
JOY and NIII used in the operation of their businesses, all of which are in good
standing and in effect as of the Closing Date.

      

      Section
3.13           No
Conflicts.  The execution and delivery of this Agreement by the
Seller does not, and the performance and consummation of the transactions
contemplated hereby by the Seller, will not (i) 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 JOY or NIII is a party or by which JOY’s or NIII’s assets or properties
are bound; or (ii) result in the creation of any encumbrance on any of the
assets or properties of JOY or NIII, including the business of Joy of
Austin.

      

      Section
3.14           Title to Properties;
Encumbrances.  Except as set forth on Exhibit 3.14, JOY and
NIII have good and marketable title to all of its properties and assets, real
and personal, tangible and intangible (including the Property where Joy of
Austin operates its adult entertainment cabaret located at 3105 South IH-35,
Round Rock, Texas 78664) that are material to the condition (financial or
otherwise), business, operations or prospects of JOY and NIII, 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 JOY and NIII, (ii) the lien related to the First State
Bank Note (ii) statutory liens not yet delinquent, and (iii) such liens
consisting of zoning or planning restrictions, imperfections of title, easements
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, including the business of Joy of
Austin.   As of the Closing Date, the assets of JOY and NIII
shall include, but shall not be limited to all property, equipment and fixtures
located on the premises at Joy of Austin that are not subject to an existing
lease agreement.

      

      Section
3.15           No
Liabilities.  Except for the promissory note dated September
10, 2004, executed by NIII and payable to First State Bank-Taylor (which Note is
and will be current  as of the Closing Date), as of the Closing
Date  JOY and NIII do not have and shall not have any obligation or
liability (contingent or otherwise) or unpaid bill to any third party which will
not either be paid in full at Closing, or paid within sixty (60) days of Closing
under Article VIII of the Polykrates Purchase Agreement.

      
        
           

        

        
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Purchase Agreement - Pg 7

          
            

          

        

        
           

        

      

      Section
3.16           Contracts and
Leases.  Except as disclosed on Exhibit 3.16, neither JOY nor
NIII (i) have any leases of personal property relating to the assets of JOY or
NIII, whether as lessor or lessee; (ii) have any contractual or other
obligations relating to the assets of JOY or NIII, whether written or oral; and
(iii) have given any power of attorney to any person or organization for any
purpose relating to the business or assets of JOY or NIII.  JOY has an
existing real estate lease agreement with NIII covering the property where Joy
of Austin operates its adult entertainment cabaret located at 3105 South IH-35,
Round Rock, Texas 78664 (the “Lease Agreement”), which Lease Agreement will at
the election of Purchaser be terminated subsequent to the Closing Date. To the
best of Seller’s knowledge,  JOY and NIII have previously provided to
Purchaser every material contract or lease relating to the assets of JOY and
NIII to which they are subject or are a party or a beneficiary.  To
Seller’s knowledge, such contracts or leases are valid and in full force and
effect according to their terms and constitute legal, valid and binding
obligations of JOY or NIII and the other respective parties thereto and are
enforceable in accordance with their terms.  Seller, JOY or NIII have
no 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.  Neither the execution of this Agreement,
nor the consummation of all or any of the transactions contemplated under this
Agreement, will constitute a breach or default under any such contracts or
leases which would have a material adverse effect on the financial condition of
JOY or NIII or the operation of Joy of Austin after the Closing.

      

      Section
3.17           No Pending
Transactions.  Except as set forth in Exhibit 3.17 and except
for the transactions contemplated by this Agreement, referenced in the Exhibits
attached hereto, and the Related Transactions contemplated in Section 2.3
herein, neither JOY nor NIII 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 JOY or NIII; (ii) the sale of any of the assets of JOY or
NIII; (iii) the sale of any outstanding capital stock of JOY or NIII; (iv) the
acquisition by JOY or NIII of any operating business or the capital stock of any
other person or entity; (v) the borrowing of money; (vi) any agreement with any
of the respective officers, managers or affiliates of JOY or NIII; or (vii) the
expenditure of more than $1,000 or the performance by JOY or NIII extending for
a period more than one year from the date hereof.

      

      Section
3.18           Material Agreements;
Action.    Except for the transactions contemplated
by this Agreement and the Related Transactions contemplated in Section 2.3
herein, there are no contracts, agreements, commitments, understandings or
proposed transactions, whether written or oral, to which JOY or NIII are a party
or by which they are bound that involve or relate to (i) any of the respective
officers, directors, stockholder or partners of JOY or NIII or (ii) covenants of
JOY or NIII not to compete in any line of business or with any person in any
geographical area.

      

      Section
3.19           Insurance Policies.  Copies
of all insurance policies maintained by JOY or NIII relating to the operation of
Joy of Austin have been delivered or made available to Purchaser.  The
policies of insurance held by JOY and NIII are in such amounts, and insure
against such losses and risks, as JOY and NIII reasonably deems appropriate for
their 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.

      
        
           

        

        
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Purchase Agreement - Pg 8

          
            

          

        

        
           

        

      

      Section
3.20           No
Default.  Neither Seller nor JOY nor NIII is in default under
any term or condition of any instrument evidencing, creating or securing any
indebtedness of  JOY or NIII, and  to the best of Seller’s
knowledge, there has been no default in any material obligation to be performed
by Seller or JOY or NIII  under any other contract, lease (except for
the existing lease agreement between JOY and NIII relating to the Property),
agreement, commitment or undertaking to which JOY or NIII is a party or by which
it or its assets or properties are bound, nor have Seller, JOY or NIII waived
any material right under any such contract, lease, agreement, commitment or
undertaking.

      

      Section
3.21           Books and
Records.  The books of account, minute books, stock record
books and other records of JOY and NIII in the possession of Seller have been
made available to Purchaser, and upon Closing, all such books and records will
be in the possession of Seller.

      

      Section
3.22           Banks and Brokerage
Accounts.  Exhibit 3.22 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 JOY and NIII has 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 JOY or NIII having signatory power with respect
thereto.

      

      Section
3.23           Unpaid
Bills.  As of the Closing, there will be no unpaid bills or
claims in connection with any repair of the Property or other work performed or
materials purchased in connection with the repair of the Property which will not
either be paid in full at Closing, or paid within sixty (60) days of Closing
under Article VIII of the Polykrates Purchase Agreement..

      

      Section
3.24           Notices.  Neither
the Seller nor NIII or any representative of NIII have received any written
notice (i) from any insurance companies or governmental agencies of any
condition, defects or inadequacies with respect to the Property which, if not
corrected, would result in termination of insurance coverage, (ii) from any
governmental agencies within the last two (2) years with respect to any
violations of any building codes and/or zoning ordinances or any other
governmental laws, regulations or orders affecting the Property, including,
without limitation, the Americans With Disabilities Act, (iii) of any pending or
threatened condemnation proceedings with respect to the Property, or (iv) of any
proceedings which could or would cause the change, redefinition or other
modification of the zoning classification of the Property.

      

      Section
3.25           Proceedings Relating to
Property.   There is no pending, or, to the best knowledge
of the Seller, NIII or any representative of NIII, threatened, judicial,
municipal or administrative proceedings with respect to, or in any manner
affecting the Property 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 Property or by reason of the use
and operation of the Property, 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 NIII or the Property itself, or
the taking of the Property for public needs.

      
        
           

        

        
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Purchase Agreement - Pg 9

          
            

          

        

        
           

        

      

      Section
3.26           Public
Improvements.  Neither Seller and, to the best of Seller’s
knowledge, NIII or any  representative of NIII has knowledge of any
existing or proposed public improvements which involve or which may result in
any charge being levied or assessed against the Property or which will or could
result in the creation of any lien upon the Property or any part
thereof.

      

      Section
3.27           Certificates.  To
the best knowledge of Seller, NIII or any representative of NIII, all
certificates of occupancy, licenses, permits, authorizations and approvals
required by law or by any governmental authority having jurisdiction over the
Property have been obtained and are in full force and effect.

      

      Section
3.28           Material
Defect.  None of the Seller, NIII or any representative of NIII
has knowledge of any material defects to the Property which would have a
material adverse effect on the operation of Joy of Austin as of the date of
Closing.

      

      Section
3.29           Flooding.  None
of the Seller, NIII or any representative of NIII has knowledge of any flooding
which has occurred on the Property.

      

      Section
3.30           Environmental.   To
the best of Seller’s knowledge, the Property 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 Property.  No
citation, directive, letter or other communication, written or oral, or any
notice of any proceeding, claim or lawsuit relating to any environmental issue
arising out of the ownership or occupation of the Property is currently pending,
and there is no basis known to the Seller or NIII for any such
action.

      

      Section
3.31           Employee Benefit
Plans.  Neither JOY nor NIII is a party to any employee-benefit
plan.

      

      Section
3.32           Disclosure.  No
representation or warranty of the Seller 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
3.33           Brokerage
Commission.  No broker or finder has acted on behalf of JOY or
NIII in connection with this Agreement or the transactions contemplated hereby
and except as disclosed to Purchaser, for which Purchaser has no obligation, no
person is entitled to any brokerage or finder’s fee or compensation in respect
thereto based in any way on agreements, arrangements or understandings made by
or on behalf of Seller, JOY or NIII.

      

      ARTICLE
IV

      REPRESENTATIONS
AND WARRANTIES

      OF
PURCHASER

      

      Purchaser
hereby represents and warrants to the Seller as follows:

      
        
           

        

        
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Purchase Agreement - Pg 10

          
            

          

        

        
           

        

      

      Section
4.1       
     Authorization.  Purchaser
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 Purchaser necessary
for the authorization, execution, delivery and performance of this Agreement by
it has been taken and will be taken prior to Closing.  This Agreement,
when duly executed and delivered in accordance with its terms, will constitute
legal, valid, and binding obligations of Purchaser enforceable against Purchaser
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
4.2            
No Breaches or
Defaults.  The execution, delivery, and performance of this
Agreement by Purchaser does not:  (i) conflict with, violate, or
constitute a breach of or a default under or (ii) require any authorization,
consent, approval, exemption, or other action by or filing with any third party
or Governmental Authority under any provision of:  (a) any applicable
Legal Requirement, or (b) any credit or loan agreement, promissory note, or any
other agreement or instrument to which Purchaser is a party.

      

      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 Purchaser in connection with the execution and delivery
by Purchaser of this Agreement or the consummation and performance of the
transactions contemplated hereby other than as required under the federal
securities laws.

      

      Section
4.4            
Disclosure.  No
representation or warranty of Purchaser 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 on behalf of the
Purchaser 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 thereto based in any way on agreements, arrangements or
understandings made by or on behalf of the Purchaser.

      

      ARTICLE
V

      CONDITIONS
TO CLOSING OF

      SELLER

      

      Each
obligation of Seller, JOY or NIII to be performed on the Closing Date shall be
subject to the satisfaction of each of the conditions stated in this Article V,
except to the extent that such satisfaction is waived by Seller, JOY or NIII in
writing.

      

      Section
5.1     
       Representations and
Warranties Correct.  The representations and warranties made by
Purchaser contained in this Agreement shall be true and correct as of the
Closing Date.

      

      Section
5.2       
     Covenants.  All
covenants, agreements and conditions contained in this Agreement to be performed
by Purchaser on or prior to the Closing Date shall have been performed or
complied with in all respects.

      
        
           

        

        
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Purchase Agreement - Pg 11

          
            

          

        

        
           

        

      

      Section
5.3      
      Delivery of
Certificate.  Purchaser shall provide to Seller certificates,
dated the Closing Date and signed by the President of Purchaser to the effect
set forth in Section 5.1 and 5.2 for the purpose of verifying the accuracy of
such representations and warranties and the performance and satisfaction of such
covenants and conditions.

      

      Section
5.4             
Payment of Purchase
Price.  Purchaser shall have tendered the Purchase Price for
the Seller Shares as set forth in Section 1.2 to the Seller concurrently with
the Closing.

      

      Section
5.5            
 Related
Transactions.  The Related Transactions set forth in Section
2.3 shall be consummated concurrently with the Closing and the obligations
thereunder shall have been fulfilled.

      

      Section
5.6            
Corporate
Resolutions.  Purchaser shall provide corporate resolutions of
the Board of Directors of Purchaser which approve the transactions contemplated
herein and 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.

      

      Section
5.7            
Absence of
Proceedings.  No action, suit or proceeding by or before any
court or any governmental or regulatory authority shall have been commenced and
no investigation by any governmental or regulatory authority shall have been
commenced seeking to restrain, prevent or challenge the transactions
contemplated hereby or seeking judgments against Purchaser.

      

      
        ARTICLE
VI

      

      CONDITIONS
TO CLOSING OF

      PURCHASER

      

      Each
obligation of Purchaser to be performed on the Closing Date shall be subject to
the satisfaction of each of the conditions stated in this Article VI, except to
the extent that such satisfaction is waived by Purchaser in
writing.

      

      Section
6.1           Representations and
Warranties Correct.  The representations and warranties made by
the Seller, JOY and NIII hereof shall be true and correct as of the Closing
Date.

      

      Section
6.2     
       Covenants.  All
covenants, agreements and conditions contained in this Agreement to be performed
by the Seller on or prior to the Closing Date shall have been performed or
complied with in all respects.

      

      Section
6.3       
     Delivery of
Certificate.  Seller, JOY and NIII shall provide to Purchaser
certificates, dated the Closing Date and signed by the Seller, individually and
in his capacity as President of JOY and Vice-President of NIII to the effect set
forth in Section 6.1 and 6.2 for the purpose of verifying the accuracy of such
representations and warranties and the performance and satisfaction of such
covenants and conditions.

      

      Section
6.4         
   Delivery
of  Shares.  Seller shall have delivered certificates
evidencing the Seller Shares duly endorsed to Purchaser or accompanied by duly
executed stock powers in form and substance satisfactory to the
Purchaser.

      
        
           

        

        
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Purchase Agreement - Pg 12

          
            

          

        

        
           

        

      

      Section
6.5     
       Consents; Status of Permits
and Licenses.  As of the Closing, JOY shall possess all
necessary permits, zoning classifications and other authorizations, whether
city, county, state or federal, which may be needed to conduct adult topless
entertainment with the sale of alcoholic beverages on the Property, without any
interruption, and all such permits, zoning classifications and authorizations
shall be in good order, in full force and effect, without any administrative
actions pending or concluded that may challenge or present an obstacle to the
continued performance of adult topless entertainment or sale of alcoholic
beverages at Joy of Austin.  All transfers of licenses and leases, if
any, required for the continued operation of the business of JOY and NIII shall
have been obtained.  The City of Round Rock’s Sexually Oriented
Business Permit issued to JOY on or about July 31, 2009, shall be in full force
and effect.

      

      Section
6.6        
    Related
Transactions.  The Related Transactions set forth in Section
2.3 shall be consummated concurrently with the Closing and the obligations
thereunder shall have been fulfilled.

      

      Section
6.7         
   Resignations.  The
officers and directors of JOY and NIII shall have provided to Purchaser their
written resignations.

      

      Section
6.8           
 Termination of
Existing Lease.  Any and all existing leases for the Property
where Joy of Austin is located shall, at the election of
Purchaser,  have been terminated.

      

      Section
6.9           
 Corporate
Resolutions. Seller shall provide corporate resolutions of the Board of
Directors of JOY and NIII  which approve the transactions contemplated
herein and 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

      

      Section
6.10            Termination of Stock
Purchase Agreement.  The July 1, 2009, Stock Purchase Agreement
by and between the Seller and Polykrates shall have been
terminated.

      

      Section
6.11           Absence of
Proceedings.  No action, suit or proceeding by or before any
court or any governmental or regulatory authority shall have been commenced and
no investigation by any governmental or regulatory authority shall have been
commenced seeking to restrain, prevent or challenge the transactions
contemplated hereby or seeking judgments against JOY or NIII or any of their
assets.

      

      ARTICLE
VII

      TAX
COVENANTS; CLOSING ADJUSTMENTS

      

      Section
7.1            
Tax
Covenants.

      

      (a)     
      The Seller shall be responsible for, and
shall pay or cause to be paid, and shall indemnify and hold JOY, NIII and
Purchaser harmless from and against one half (1/2) of any and all federal, state
and local income and property (real and personal) taxes, including penalties and
interest, if any, thereon (individually, a “Tax” and collectively, “Taxes”) that
may be imposed on or assessed against JOY, NIII and/or Purchaser on account of
taxes imposed upon JOY or NIII or its assets prior to the Closing Date,
including all taxes due on income received by JOY or NIII prior to the Closing
Date and real property taxes due for the Property.  The Seller shall
also pay or cause to be paid and shall indemnify and hold harmless JOY, NIII and
Purchaser against one half (1/2) of  all losses, damages and
reasonable third party costs and expenses (including reasonable attorney,
accountant and expert witness fees and disbursements) (“Related Costs”) incurred
in connection with the Taxes for which the Seller indemnifies JOY, NIII and
Purchaser pursuant to this Section 7.1 (a)(or any asserted deficiency, claim
demand or assessment, including the defense or settlement thereof) or the
enforcement of this Section 7.1(a).  Any payment required to be made
by the Seller pursuant to this Section 7.1(a) shall be made within 45 days of
written notice from the Purchaser.

      
        
           

        

        
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Purchase Agreement - Pg 13

          
            

          

        

        
           

        

      

      (b)      
     The Purchaser shall be responsible for, and shall
pay or cause to be paid, and shall indemnify and hold the Seller harmless from
and against, any and all Taxes that may be imposed on or assessed against the
Seller on account of Taxes imposed on JOY or NIII or its assets following the
Closing Date, including all taxes due on income received by JOY or NIII
beginning after the Closing Date.  The Purchaser shall also pay or
cause to be paid and shall indemnify and hold harmless the Seller from and
against all Related Costs of the Seller incurred in connection with the Taxes
for which the Purchaser indemnifies the Seller pursuant to this Section 7.1(b)
(or any asserted deficiency, claim, demand or assessment, including the defense
or settlement thereof) or the enforcement of this Section 7.1(b).  Any
payment required to be made by the Purchaser pursuant to this Section 7.1(b)
shall be made within 45 days of written notice from the Seller.

      

      (c)     
      For purposes of this Article VII, Taxes for
the period up to and including the Closing Date (“Seller’s Taxes”) shall be
determined on the basis of an interim closing of the books as of the Closing
Date; provided,
however, that in the case of any Tax not based on income or receipts,
such Seller’s Taxes shall be equal to one half (1/2) of the amount of such Tax
for the taxable year multiplied by a fraction, the numerator of which shall be
the number of days from the beginning of the taxable year through the day prior
to the Closing Date, and the denominator of which shall be
the number of days in the taxable year.

      

      (d)        
   Seller shall be responsible for filing or causing to be filed
all tax returns (specifically including the 2008 federal income tax return and
Texas franchise tax report for the 2009 privilege period) required to be filed
by or on behalf of JOY or NIII on or before the Closing Date.  If not
already filed,  Purchaser shall be provided with a copy of the tax
returns for Purchaser’s review and approval.  Purchaser shall be
responsible for filing or causing to be filed all tax returns required to be
filed by or on behalf of JOY or NIII after the Closing Date (other than tax
returns for periods ending on or before the Closing Date but not due until after
the Closing Date).

      

      (e)        
   The Seller and the Purchaser shall cooperate fully with each
other and make available to each other in a timely fashion such Tax data and
other information and personnel as may be reasonably required for the payment of
any estimated Taxes and the preparation of any tax returns required to be
prepared hereunder.  The Seller and the Purchaser shall make available
to the other, as reasonably requested, all information, records or documents in
their possession relating to Tax liabilities of JOY or NIII for all taxable
periods thereof ending on, before or including the Closing Date and shall
preserve all such information, records and documents until the expiration of any
applicable Tax statute of limitations or extensions thereof; provided, however, that if a
proceeding has been instituted for which the information, records or documents
are required prior to the expiration of the applicable statute of limitations,
then such information, records or documents shall be retained until there is a
final determination with respect to such proceeding.

      
        
           

        

        
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Purchase Agreement - Pg 14

          
            

          

        

        
           

        

      

      (f)      
     The Purchaser and the Seller shall promptly notify
each other in writing upon receipt by the Purchaser or the Seller, as the case
may be, of any notice of any tax audits of or assessments against JOY or NIII
for taxable periods ending on or before the Closing Date.  The failure
of one party promptly to notify the other party of any such audit or assessment
shall not forfeit the right to indemnity except to the extent that a party is
materially prejudiced as a result.  The Purchaser shall have the right
to defend (using counsel reasonably acceptable to Seller) JOY’s or NIII’s
interests in any tax proceeding relating to such tax audit or
assessment.  Seller shall have the right through counsel of its choice
to participate in the defense, at its own cost.  Seller shall have no
obligation to pay any tax liability that may result from any tax proceeding
relating to such tax audit or assessment (and the accompanying legal fees and
expenses incurred in connection therewith) if the Seller did not agree to such
tax liability.  The Purchaser, on the one hand, and the Seller, on the
other, each agree to cooperate fully with the other and its or their respective
counsel in the defense against or compromise of any claim in any tax
proceeding.

      

      (g)        
   Notwithstanding anything to the contrary contained elsewhere
in this Agreement, all obligations under this Article VII shall survive the
Closing hereunder and continue until 30 days following the expiration of the
statute of limitations on assessment of the relevant Tax.

      

      Section
7.2       
     Texas Patron
Tax.  Due to court proceedings challenging its
constitutionality,  Purcahser recognizes and acknowledges that JOY has
not  fully paid to the State of Texas a Patron Tax in accordance with
the legislation that was implemented by the Texas Legislature (the “Patron
Tax”).  In the event that a final non-appealable determination is made
by the state courts in Texas or federal courts (collectively the “Courts”) that
the Patron Tax is constitutional  and thereafter there is a
determination to seek to collect from JOY the Patron Tax by the State of Texas
or any of its regulatory bodies, then:

      

      
        	
                 
      

              	
                (a)

              	
                the
      Seller agrees to indemnify and hold harmless the Purchaser and JOY from
      one half (1/2) of any and all liabilities that result from the imposition
      of the Patron Tax upon JOY or the Purchaser or their assets for taxes
      claimed due on the operations of JOY predating the Closing;
      and

              

      

      

      
        	
                 
      

              	
                (b)

              	
                the
      Purchaser and JOY agree to indemnify and hold harmless Seller from any and
      all liabilities that result from the imposition of the Patron Tax upon JOY
      or the Seller or their assets for taxes claimed due on the operations of
      JOY subsequent to the Closing.

              

      

      

      Section
7.3        
    Closing
Adjustments.  The Seller and the Purchaser agree that there
shall be an adjustment made within sixty (60) days of the Closing Date to adjust
for any liabilities that are found to exist of JOY or NIII as of the Closing
Date so that the Seller shall be responsible and liable to the Purchaser for
one-half (1/2) of the liabilities of JOY or NIII that exist as of the Closing
Date, less one-half (1/2) of any credit which Seller would be entitled to for
credit card receivables or pro rata portion of prepaid items.  The
Polykrates Purchase Agreement contemplates that an escrow fund in the amount of
$50,000 will be established for the payment of such liabilities.  The
Seller acknowledges and agrees that the escrow fund will be utilized for the
adjustments as contemplated in this Section 7.3.

      
        
           

        

        
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Purchase Agreement - Pg 15

          
            

          

        

        
           

        

      

      ARTICLE
VIII

      INDEMNIFICATION

      

      Section
8.1       
     Indemnification from
Seller.  Subject to the limitations set forth in Section 9.17
(Survival of Representations and Warranties), Section 8.6 (Basket), Section 8.7
(Taxes),  Section 8.8 (Cap), Section 8.9 (Limitation to Amount Not
Covered by Insurance and Subrogation of Indemnitor), Section 8.10 (Repayment of
Excess Benefit), Section 8.11 (Exclusivity), and Section 9.18 (“AS IS”) the
Seller agrees to and shall indemnify, defend (with legal counsel reasonably
acceptable to Purchaser), and hold Purchaser, JOY, and NIII, and their officers,
directors, and shareholders (collectively, the “Purchaser 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 Purchaser Group arising from or related to: (a) any
material misrepresentation by, or material breach of any covenant or warranty
of  the Seller  contained in this Agreement, or any exhibit,
certificate, or other instrument furnished or to be furnished by the Seller
hereunder; or (b) any nonfulfillment of any material agreement on the part
of  the Seller under this Agreement, or (c) any suit, action,
proceeding, claim or investigation against any member of the Purchaser’s Group
which arises from or which is based upon or pertaining to the Seller’s conduct,
or (d) one-half (1/2) of the costs hereafter incurred by any member of the
Purchaser Group in defending or settling any and all actions, suits, claims,
demands, debts, liabilities, obligations, losses, damages, costs, expenses,
penalties or injury which have been, or may hereafter be asserted against any
member of the Purchaser Group by any third-party for acts or omissions occurring
in connection with the operation of JOY or NIII prior to the Closing, or (e)
one-half (1/2) of any expenses, debts, obligations or liabilities of JOY or NIII
incurred prior to the Closing.

      

      Section
8.2        
    Indemnification from
Purchaser.  Subject to the limitations set forth in Section
9.17, (Survival of Representations and Warranties), and Section 8.6 (Basket),
Section 8.10 (Repayment of Excess Benefit) and Section 8.11 (Exclusivity)
Purchaser agree to and shall indemnify, defend (with legal counsel reasonably
acceptable to Seller) and hold the Seller and his heirs, successors and assigns,
(collectively, the "Seller’s 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 the Seller’s Group, arising from or
related to: (a) any material misrepresentation by, or material breach of any
covenant or warranty of Purchaser contained in this Agreement, or any exhibit,
certificate, or other agreement or instrument furnished or to be furnished by
Purchaser hereunder; (b) any nonfulfillment of any material agreement on the
part of Purchaser under this Agreement; (c) any suit, action, proceeding, claim
or investigation against any member of the Seller’s Group which arises from or
which is based upon or pertaining to the Purchaser’s conduct, or (d) the costs
hereinafter incurred by Seller in defending or settling any and all actions,
suits, claims, demands, debts, liabilities, obligations, losses, damages, costs,
expenses, penalties or injury which have been, or may hereafter be asserted
against any member of the Seller’s Group by any third-party for acts or
omissions occurring in connection with the operation of JOY or NIII subsequent
to the Closing, or (e) any expenses, debts, obligations or liabilities of JOY or
NIII incurred subsequent to the Closing.

       
 

      Section
8.3             Defense of
Claims.  If any claim, demand, 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) except in cases where
the indemnified party has less than sixteen (16) days prior notice of such
hearing or action which must be taken.  The indemnifying party shall
have no obligation pursuant to this Agreement if the indemnified party fails to
provide notice to the indemnifying party of the claims, demand, or lawsuit
unless the indemnified party can show that the indemnifying party was not
prejudiced by the failure to provide such notice.  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.

      
        
           

        

        
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Purchase Agreement - Pg 16

          
            

          

        

        
           

        

      

      Notwithstanding
the above paragraph, JOY or NIII, as the case may be, shall have the
right  to defend (using counsel reasonably acceptable to Seller) any
suit, action, proceeding or claim where Seller has an indemnity obligation
pursuant to Section 8.1(d).  Purchaser and JOY or NIII, as the case
may be, shall promptly inform the Seller of such suit, action, proceeding or
claim.  Seller shall have the right through counsel of its choice to
participate in the defense, at its own cost.  Seller shall have no
obligation to indemnify any party for any settlement made of any suit, action
proceeding or claim for any settlement and the accompanying legal fees and
expenses incurred if the Seller did not agree to such settlement.

      

      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 individuals 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.

      

      Section
8.5       
     Right to
Offset.   In the event that the Purchaser’s Group is
entitled to indemnification in accordance with this Article VIII (including the
payment by the Purchaser of any debts or liabilities resulting from the purchase
of JOY or NIII which were incurred at or prior to the Closing Date or payment of
the Patron Tax), or in the event that the Purchaser or JOY or NIII is entitled
to indemnification pursuant to Article VII, then Purchaser shall have the right
to offset any such amount from any obligations that are then due and payable to
Seller under the Secured Note.

      
        
           

        

        
          Stock
Purchase Agreement - Pg 17

          
            

          

        

        
           

        

      

      Section
8.6      
      Basket.  Neither
Purchaser nor Seller shall be entitled to seek indemnification under this
Article until the aggregate of the Indemnifiable Losses exceeds $5,000 at which
time either the Purchaser or Seller, as the case may be, shall be indemnified
dollar for dollar for the entire amount of indemnification to which it would be
entitled.

      

      Section
8.7        
    Taxes.  Any
indemnity obligation of Seller for federal income tax, state sales tax or state
margin tax pursuant to Section 8.1(c) or 8.1 (e) shall be limited to one-half of
(1) any payment of tax actually required, plus one-half of interest and penalty
less (2) a reduction for one-half of any increased deductions that have or will
occur in any subsequent year as a result of the adjustment that gave rise to the
increased tax liability.

      

      Section
8.8       
     Maximum Indemnity
Obligation.  The aggregate obligation of Seller under this
Article is limited to $2, 350,000, except that the obligations are unlimited
with respect to any Indemnifiable Loss arising out of or relating to fraud or
willful misconduct by Seller.

      

      Section
8.9       
     Indemnity, Obligation Net of
Insurance Proceeds.  JOY and NIII shall maintain the same type
and amount of insurance coverage as JOY and NIII provided immediately prior to
the execution and exchange of this Agreement and as described on Exhibit A
attached to this Agreement. Notwithstanding the other sections of this
Agreement, an Indemnifying Party shall only have an indemnity obligation with
regard to claims for amounts in excess of (1) amounts covered by applicable
insurance proceeds payable as a result of the incident or (2) amounts that would
have been covered by insurance proceeds that would have been payable as a result
of the incident if the insurance of the type and amount listed on Exhibit A had
been maintained.  An insurer who is otherwise obligated to pay a claim
is not relieved of the responsibility with respect to the claim and has no
subrogation rights with respect to the claim, in either instance, solely by
virtue of the indemnification provisions of this Article.

      

      Section
8.10           Indemnified Party’s
Obligation to Refund Excess Payment.  If any indemnified party
recovers an amount from a third party in respect of an Indemnifiable Loss for
which indemnification is provided in this Agreement and an indemnifying party
has either (i) previously paid the full amount of the Indemnifiable Loss, or
(ii) has made a partial payment of the Indemnifiable Loss and the aggregate
amount of that partial payment, plus the amount of the payment received from the
third party exceeds the amount of the Indemnifiable Loss, then (iii) the
indemnified party shall promptly remit to the indemnifying party the amount of
the payment received from the third party that exceeds the Indemnifiable Loss,
up to but not exceeding the amount that indemnifying party previously paid in
respect of the Indemnifiable Loss.

      

      Section
8.11            Exclusivity.  The
rights and remedies set forth in this Article constitute the exclusive rights
and remedies of the parties in respect to the matters indemnified under Sections
8.1 and 8.2.

      

      ARTICLE
IX

      MISCELLANEOUS

      

      Section
9.1         
   Purchaser’s Right to
Terminate. Purchaser acknowledges that Seller has a right to terminate
the transaction with Polykrates under the terms of that certain Memorandum of
Understanding (“MOU”) dated September 23, 2009, and as subsequently modified via
email correspondence (copies of the MOU and email extensions have been furnished
to Purchaser). Should Seller elect to terminate the Acquisition in accordance
with the terms of the MOU, this Agreement and all instruments hereafter prepared
and executed in connection with this transaction, shall terminate and be null
and void, with no further right or remedy to either Seller and
Purchaser.

      
        
           

        

        
          Stock
Purchase Agreement - Pg 18

          
            

          

        

        
           

        

      

      Section 9.2      
      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
9.3       
     Notices.  Any
notices or other communications required or permitted hereunder shall be
sufficiently given if in writing and delivered in Person or sent by registered
or certified mail (return receipt requested) or nationally 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:

      

      
        	
                 
      

              	
                (a)

              	
                If
      to Purchaser:

              	
                RCI
      Entertainment (3105 I-35), Inc.

              

      

      Attn:   Eric
Langan, President

      10959
Cutten Road

      Houston,
Texas 77066

      

      
        	
                 
      

              	
                with
      a copy to:

              	
                Robert
      D. Axelrod

              

      

      Axelrod,
Smith & Kirshbaum

      5300
Memorial Drive, Suite 700

      Houston,
Texas  77007

      713 861
1996 – telephone

      713 552
0202 - facsimile

      

      
        	
                 
      

              	
                (b)

              	
                If
      to Seller:

              	
                Spiridon
      Karamalegos

              

      

      
        	
                 
      

              	
                with
      a copy to:

              	
                Douglass
      D. Hearne, Jr.

              

      

      700
Lavaca, Suite 910

      Austin,
Texas 78701

      512 494
8811 – telephone

      512 494
8819 – facsimile

      

      
        	
                 
      

              	
                (c)

              	
                If
      JOY (post-closing):

              	
                Joy
      of Austin

              

      

      Attn:
Eric Langan

      3105
South IH 35

      Round
Rock

      
        
           

        

        
          Stock
Purchase Agreement - Pg 19

          
            

          

        

        
           

        

      

      Texas  78664

      (512)
218-8012

      (512)
218-9008-FAX

      

      

      
        	
                 
      

              	
                (d)

              	
                If
      to NIII(post-closing):

              	
                North
      IH 35, Inc.

              

      

      Attn:
Eric Langan

      3105
South IH 35

      Round
Rock

      Texas  78664:

      (512)
218-8012

      (512)
218-9008-FAX

      

      

      A notice
or communication will be effective (i) if delivered in Person or by overnight
courier, on the business day it is delivered and (ii) if sent by registered or
certified mail, three (3) business days after dispatch.

      

      Section
9.4     
       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
9.5        
    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.

      

      Section
9.6           
 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 agree upon the text of a public announcement or
statement to be made 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
9.7            
Entire
Agreement.  This Agreement, the Polykrates Purchase
Agreement,  and the other documents delivered pursuant thereto
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
9.8            
Choice of
Law.  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.  In any action between or among any of the parties,
whether arising out of this Agreement or otherwise, each of the parties
irrevocably consents to the exclusive jurisdiction and venue of the federal and
state courts located in Travis County, Texas.

      
        
           

        

        
          Stock
Purchase Agreement - Pg 20

          
            

          

        

        
           

        

      

      Section
9.9  
          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
9.10            Costs and
Expenses.   Each party shall pay their own respective
fees, costs and disbursements incurred in connection with this
Agreement.

      

      Section
9.11            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
9.12            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 JOY or NIII) or any entity that is not a party to this
Agreement.

      

      Section
9.13           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
9.14           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.

      

      Section
9.15           Attorney Review -
Construction.  In connection with the negotiation and drafting
of this Agreement, the parties represent and warrant to each other that they
have had the opportunity to be advised by attorneys of their own choice and,
therefore, the normal rule of construction to the effect that any ambiguities
are to be resolved against the drafting party shall not be employed in the
interpretation of this Agreement or any amendments hereto.

      

      Section
9.16            Gender.  All
personal pronouns used in this Agreement shall include the other genders,
whether used in the masculine, feminine or neuter gender and the singular shall
include the plural and vice versa, wherever appropriate.

      

      Section
9.17      __Survival of Representations
and Warranties.  All representations, warranties and
indemnities made in, pursuant to or in connection with this Agreement shall
survive the Closing for a period ending twenty-four months from the Closing,
provided, however, that any claim arising pursuant to Section 7.1 and Section
8.7 above shall survive until thirty (30) days following the expiration of its
applicable statute of limitations (“Survival Date”). Notwithstanding the
foregoing, however, no claim for indemnification may be made against the party
required to indemnify under this Agreement unless the party entitled to
indemnification shall have given written notice of such claim to the other party
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.

      
        
           

        

        
          Stock
Purchase Agreement - Pg 21

          
            

          

        

        
           

        

      

      Section
9.18           Property Sold “AS
IS”.  Notwithstanding anything in this Agreement to the
contrary, Purchaser acknowledges that as a material part of the consideration
for this Agreement, Seller and Purchaser agree that Purchaser is taking the
Property "AS IS" with any and all latent and patent defects and that there is no
warranty by Seller that the Property is fit for a particular purpose except that
the Property has all necessary permits, zoning classifications and other
authorizations, whether city, county, state or federal, which may be needed to
conduct adult topless entertainment with the sale of alcoholic beverages on the
Property.  Purchaser acknowledges that it is not relying upon any
representation, statement or other assertion with respect to the Property
condition, but is relying upon its examination of the Property. Purchaser takes
the Property under the express understanding there are no express or implied
warranties (except for limited warranties of title set forth in the closing
documents).

      

      

      [SIGNATURES
APPEAR ON THE FOLLOWING PAGE.]

      
        
           

        

        
          Stock
Purchase Agreement - Pg 22

          
            

          

        

        
           

        

      

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

      

      
        	 
      	
                PURCHASER:

              	 
      
	 
      	 
      	 
      	 
      
	 
      	
                RCI
      ENTERTAINMENT (3105 I-35), INC.

              	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
                By:

              	
                Eric
      Langan, President

              	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
                SELLER:

              	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
                By:

              	 
      	 
      
	 
      	 
      	
                Spiridon
      Karamalegos, Individually

              	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
                JOY
      CLUB OF AUSTIN, INC.

              	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
                By:

              	 
      	 
      
	 
      	 
      	
                Spiridon
      Karamalegos, President

              	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
                NORTH
      IH 35 INVESTMENTS, INC.

              	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
                By:

              	 
      	 
      
	 
      	 
      	
                Spiridon
      Karamalegos, Vice-President

              	 
      

      

      

      

      SPOUSAL
CONSENT:

      

      

      The
undersigned, being the wife of Spiridon Karamalegos, has reviewed this Stock
Purchase Agreement, and hereby consents to the terms thereof.

      

      

      ________________________________

      Jacquelyn
Karamalegos

      
        
           

        

        
          Stock
Purchase Agreement - Pg 23

          
            

          

        

        
           

        

      

      EXHIBITS

       

       

      Stock
Purchase Agreement - Pg 24

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