Document:

ex10_2.htm

    
      

    

    
      
         

        Exhibit
10.2

      

      

       

      Form
of Severance Compensation Agreement

       

      THIS AGREEMENT is made and
entered into as of [date], by and between Callon Petroleum Company, a
Delaware corporation (together with its subsidiaries, “Callon”)
and [name], as the current [office], (“Executive”).

       

      WITNESSETH:

       

      WHEREAS, Callon recognizes
that the current business environment makes it difficult to attract and retain
highly qualified executives unless a certain degree of security can be offered
to such individuals against organizational and personnel changes which
frequently follow a Change of Control (as defined below) of a corporation;
and

       

      WHEREAS, even rumors of
acquisitions or mergers may cause executives to consider major career changes in
an effort to assure financial security for themselves and their families;
and

       

      WHEREAS, Callon desires to
assure fair treatment of its key executives in the event of a Change of Control
and to allow them to make critical career decisions without undue time pressure
and financial uncertainty, thereby increasing their willingness to remain with
Callon notwithstanding the outcome of a possible Change of Control transaction;
and

       

      WHEREAS, Callon recognizes
that its key executives will be involved in evaluating or negotiating any
offers, proposals, or other transactions which could result in a Change of
Control of Callon and believes that it is in the best interest of Callon and its
stockholders for such key executives to be in a position, free from personal
financial and employment considerations, to be able to assess objectively and
pursue aggressively the interests of Callon and its stockholders in making these
evaluations and carrying on such negotiations; and

       

      WHEREAS, the Board of
Directors of Callon (the “Board”)
believes it is essential to provide the Executive with compensation arrangements
upon a Change of Control which provide the Executive with individual financial
security and which are competitive with those of other corporations, and in
order to accomplish these objectives, the Board has caused Callon to enter into
this Agreement.

       

      NOW, THEREFORE, in
consideration of the mutual premises and conditions contained herein, the
parties hereto agree as follows:

       

      Article 1.
Term

       

      This
Agreement shall terminate, except to the extent that any obligation of Callon
hereunder remains unpaid as of such time, upon the earliest of:

       

      
        	
              	
                (a)

              	
                _________;
      provided, however, that, commencing on December 31, ___ and on each
      anniversary date thereafter (each such date, an “Anniversary
      Date”), the expiration date under this clause (i) shall
      automatically be extended for one additional year unless, immediately
      prior to such Anniversary Date, either party shall have given written
      notice that it does not wish to extend this Agreement, but in no event
      shall the expiration date under this clause be earlier than the second
      anniversary of the effective date of a Change of
  Control;

              

      

       

      
        
          
             

          

          
            1

            
              

            

          

          
             

          

        

      

      

      
        	
              	
                (b)

              	
                The
      termination of the Executive’s employment with Callon based on death,
      Disability (as defined in Section 3.1 hereof), or Cause (as defined in
      Section 3.2 hereof); and

              

      

       

      
        	
              	
                (c)

              	
                The
      voluntary resignation of the Executive for any reason other than Good
      Reason (as defined in Section 3.3).

              

      

       

      Article 2. Change of
Control

       

      Except as
provided herein, no benefits shall be payable hereunder unless there shall have
been a Change of Control of Callon as defined below, and Executive’s employment
by Callon shall thereafter have been terminated within two (2) years after the
date of such Change of Control in accordance with Section 3. For purposes
hereof, a “Change of Control” or “Change of Control of Callon” shall mean any
one of the following: (i) any person or group of persons acting in concert
(within the meaning of Section 13(d) of the Securities Exchange Act of 1934)
shall have become the beneficial owner of more than fifty percent (50%) of the
outstanding common stock of Callon; (ii) the stockholders of Callon shall cause
a change in a majority of the members of the Board within a twelve (12) month
period, provided, however, that the election of a newly-elected director shall
not be deemed to be a change in the membership of the Board if the nomination
for election by Callon’s stockholders of such new director was approved by the
vote of two-thirds (2/3) of the directors then still in office who were
directors at the beginning of such twelve (12) month period; or (iii) Callon or
its stockholders shall enter into an agreement to dispose of all or
substantially all of the assets or outstanding capital stock of Callon in any
manner (including, but not limited to, by means of sale, merger, reorganization
or liquidation). A Change of Control will not result from the issuance of common
stock or other securities of Callon to creditors of Callon in connection with
the restructuring of Callon’s indebtedness, or from transactions entered into
pursuant to or during the pendency of a voluntary or involuntary case or
proceeding by or against Callon under the Federal Bankruptcy Code or any
applicable federal or state bankruptcy, insolvency, reorganization, or other
similar law, if such transactions are related to such case or proceeding, or
from the appointment at any time of a custodian, receiver, liquidator, assignee,
trustee, or sequestrator of Callon.

       

      If the
Executive’s employment with Callon is terminated in accordance with the
provisions of Section 3 within the six (6) month period prior to the date on
which a Change of Control is effective, and it is reasonably demonstrated that
such termination: (i) was at the request of a third party who has taken steps
reasonably calculated to effect a Change of Control or (ii) otherwise arose in
connection with a Change of Control, then for all purposes hereof, such
termination shall be deemed to have occurred following a Change of
Control.

       

      Notwithstanding
the foregoing provisions of Section 2, with respect to any payment hereunder
that is (i) subject to Section 409A of the Code and (ii) a Change of Control
which would accelerate the timing of payment thereof, the term “Change of
Control” shall mean a change in the ownership or effective control of the
Company, or in the ownership of a substantial portion of the assets of the
Company as defined Section 409A of the Code and the authoritative guidance
issued thereunder, but only to the extent inconsistent with the above definition
and as necessary to comply with Section 409A as determined by the
Company.

       

      
        
          
             

          

          
            2

            
              

            

          

          
             

          

        

      

      

      Article 3. Termination of
Employment Following a Change of Control

       

      If any of
the events described in Section 2 constituting a Change of Control of Callon
shall have occurred, Executive shall be entitled to the benefits provided in
Section 5, and upon the subsequent termination of his employment the benefits
provided in Section 4, provided that such termination occurs within two (2)
years following a Change of Control of Callon (unless such termination is on
account of Executive’s death, in which case such termination must occur within
six (6) months following a Change of Control of Callon), unless such termination
is: (a) because of his “Disability” (as defined in Section 3.1), (b) by
Callon for “Cause” (as defined in Section 3.2); or (c) by Executive other than
for “Good Reason” (as defined in Section 3.3).

       

      3.1          Disability. If, upon the
disability of Executive, which, for purposes of this Agreement shall be the
physical or mental inability of Executive to carry out the normal and usual
duties of his employment on a full-time basis for an entire period of six (6)
continuous months together with the reasonable likelihood as determined by the
Board that Executive, upon the advice of a qualified physician, will be unable
to carry out the normal and usual duties of his employment on a full-time basis
for the following continuous period of six (6) months, and within thirty (30)
days after written Notice of Termination (as hereinafter defined) is given,
Executive shall not have returned to the full time performance of his duties,
Callon may terminate Executive’s employment for “Disability.”

       

      3.2          Cause. For the purposes
hereof, Callon shall have “Cause” to terminate Executive’s employment hereunder
upon (i) willful misconduct or intentional and continual neglect of duties which
in the good faith or reasonable judgment of the Board (excluding Executive) has
materially adversely affected Callon; provided, however, that Executive shall
have first received written notice from such Board advising of the acts or
omissions that constitute the misconduct or neglect of duties, and such
misconduct or neglect of duties continues after Executive shall have had a
reasonable opportunity to correct the same; (ii) theft or conviction of a felony
or any crime involving dishonesty or moral turpitude; provided, however, that
Executive shall have first received written notice from the Board advising of
the acts or omissions that constitute the failure or refusal to substantially
perform duties, and such failure or refusal continues after Executive shall have
had a reasonable opportunity to correct the same; (iii) the filing of a
voluntary or involuntary case or proceeding by or against Callon under the
Federal Bankruptcy Code or any applicable federal or state bankruptcy,
insolvency, reorganization, or other similar law, or the appointment of a
custodian, receiver, liquidator, assignee, trustee, or sequestrator of Callon;
or (iv) the acquisition by Callon’s creditors of all or substantially all of
Callon’s assets through foreclosure or other judicial means.

       

      3.3          Good Reason. Executive may
terminate his employment for Good Reason. For purposes of this Agreement, “Good
Reason” shall mean:

       

      
        
          
             

          

          
            3

            
              

            

          

          
             

          

        

      

      

      
        	
                 
      

              	
                (a)

              	
                Following
      a Change of Control, the failure of the Board of Directors to re-elect
      Executive as [office] of Callon, or Executive’s removal from such office,
      or at any time during the term of employment, Callon’s failure to vest
      Executive with the powers and authority of [office] of Callon, except in
      connection with a termination for Cause as contemplated by Section 3.2 of
      this Agreement;

              

      

       

      
        	
                 
      

              	
                (b)

              	
                Following
      a Change of Control, a significant change in the scope, nature or status
      of Executive’s responsibilities or employment
  prerogatives;

              

      

       

      
        	
                 
      

              	
                (c)

              	
                Following
      a Change of Control, an attempted or actual reduction in Executive’s base
      salary as in effect on the date of a Change of Control or as the same may
      be increased from time to time thereafter or a failure by Callon to
      increase Executive’s salary from time to time or to pay Executive a bonus
      at a level comparable to the level of salary increases or bonuses (based
      on the average of the three (3) preceding years) paid prior to a Change of
      Control, determined by consistent application of the bonus formula
      utilized to establish bonus payments during the preceding three (3)
      years;

              

      

       

      
        	
                 
      

              	
                (d)

              	
                Following
      a Change of Control, Executive’s relocation by Callon to any place other
      than a location within the Natchez, Mississippi area, except for a
      relocation consented to by Executive or a relocation to the greater
      Houston, Texas area if all reasonable costs of relocation, including
      moving expenses, costs of selling a principal residence (and, if requested
      by Executive, the purchase of such principal residence at its value as
      appraised by a qualified appraiser selected by Executive) are paid or
      provided for by Callon;

              

      

       

      
        	
                 
      

              	
                (e)

              	
                Following
      a Change of Control, the failure by Callon to continue in effect any
      compensation plan in which Executive participates unless an equitable
      arrangement (embodied in an ongoing substitute or alternative plan) has
      been made with respect to such plan in connection with a Change of
      Control, or the failure of Callon to continue Executive’s participation
      therein or the taking of any action by Callon which would materially and
      adversely affect Executive’s participation in any such plan or reduce
      Executive’s benefits thereunder;

              

      

       

      
        	
                 
      

              	
                (f)

              	
                Following
      a Change of Control, the failure by Callon to continue to provide
      Executive with benefits not less, in the aggregate, than those enjoyed
      under any of Callon’s pension, life insurance, medical, health, and
      accident, or disability plans in which Executive was participating at the
      time of a Change of Control or the taking of any action by Callon which
      would directly or indirectly materially reduce any such
      benefits;

              

      

       

      
        	
                 
      

              	
                (g)

              	
                The
      failure of Callon to obtain a satisfactory agreement from any successor or
      parent thereof to assume and agree to perform this Agreement pursuant to
      Article 7;

              

      

       

      
        
          
             

          

          
            4

            
              

            

          

          
             

          

        

      

      

      
        	
                 
      

              	
                (h)

              	
                Any
      purported termination of Executive’s employment with Callon which is not
      effected pursuant to a Notice of Termination satisfying the requirements
      of Section 3.4 hereof (and for purposes of this Agreement, no such
      purported termination shall be effective);
and

              

      

       

      
        	
                 
      

              	
                (i)

              	
                Termination
      of employment by reason of the Executive’s death or Disability, at any
      time during the six month period beginning on the 1st day after the
      effective date of a Change of
Control.

              

      

       

          3.4           Notice of Termination. Any
termination pursuant to the foregoing provisions of this Section (including
termination due to Executive’s death) shall be communicated by written Notice of
Termination to the other party hereto. For purposes hereof, a “Notice of
Termination” shall mean a notice which shall indicate the specific termination
provision herein relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of Executive’s
employment under the provision so indicated. In the event that Executive seeks
to terminate his employment with Callon pursuant to Section 3.3, he must
communicate his written Notice of Termination to Callon within sixty (60) days
of being notified of such action or actions by Callon which constitute Good
Reason for termination.

       

      3.5          Date of Termination. “Date of
Termination” shall mean: (i) if this Agreement is terminated for Disability,
thirty (30) days after Notice of Termination is given (provided that Executive
shall not have returned to the performance of his duties on a full-time basis
during such thirty (30) day period); or (ii) if Executive’s employment is
terminated pursuant to Section 3.3 or if the Executive’s employment is
terminated for any other reason, the date the Executive Separates from
Service.

       

      3.6          Reimbursement of Expenses. To
the extent this Agreement provides for the reimbursement of expenses which are
not specifically excluded from Code Section 409A, (i) such expenses shall
be eligible for reimbursement for the lifetime of the Executive, (ii) the
amount of expenses eligible for reimbursement during the Executive’s taxable
year shall not affect the expenses eligible for reimbursement in any other
taxable year and (iii) the reimbursement shall be made not later than by
December 31st of the
year following the calendar year in which such expense was incurred by the
Executive.

       

      Article 4. Compensation upon
Termination

       

      4.1          Termination without Cause or for Good
Reason. If Executive’s employment is terminated (including termination
due to Executive’s death) other than pursuant to Sections 3.1 or 3.2 or if
Executive shall terminate his employment for Good Reason, then, subject to
Sections 4.1(c) and 4.2, and provided that the Executive signs a general release
in a form provided by Callon that releases Callon from any and all claims that
the Executive may have, and the Executive affirmatively agrees not to violate
the provisions of Article 6, the Executive shall be entitled, if such
termination occurred within two (2) years following the effective date of a
Change of Control (or in the case of termination due to Executive’s death, if
such termination occurred within six (6) months following the effective date of
a Change of Control), to the following benefits:

       

      
        
          
             

          

          
            5

            
              

            

          

          
             

          

        

      

      

      
        	
                 
      

              	
                (a)

              	
                Callon
      shall pay to the Executive in a lump sum, in cash, on the date which is
      six (6) months following his Date of Termination, an amount equal to two (2) times
      the sum of: (i) the Executive’s annual base salary as in effect
      immediately prior to the Change of Control or, if higher, in effect
      immediately prior to the Date of Termination and (ii) the greater of: (A)
      the average bonus (under all Callon bonus plans for which the Executive is
      eligible) earned with respect to the three most recently completed full
      fiscal years or (B) the target bonus (under all Callon bonus plans for
      which the Executive is eligible) for the fiscal year in which the Change
      of Control occurs, based on a forecast that has been approved by the Board
      of the results for the fiscal year in which the Change of Control
      occurs.

              

      

       

      
        	
                 
      

              	
                (b)

              	
                Callon
      shall, at its expense, maintain in full force and effect for Executive’s
      continued benefit until twenty-four (24)
      months after the Date of Termination all life, disability, medical,
      dental, accident and health insurance coverage to which Executive was
      entitled immediately prior to the Notice of Termination. In the event that
      (i) Executive’s participation in any such coverage is barred under
      the general terms and provisions of the plans and programs under which
      such coverage is provided, or (ii) any such coverage is discontinued
      or the benefits thereunder materially reduced, Callon shall provide or
      arrange to provide Executive with benefits substantially similar to those
      which Executive was entitled to receive under such coverage immediately
      prior to the Notice of Termination. At the end of the period of coverage
      herein above provided for, Executive shall have the option to have
      assigned to Executive at no cost and with no apportionment of prepaid
      premiums, any assignable insurance owned by Callon and relating
      specifically to Executive and Executive shall be entitled to all health
      and similar benefits that are or would have been made available to
      Executive under law.  The continued coverage under this Section
      4.1(b) shall be provided in a manner that is intended to satisfy an
      exception to Section 409A of the Code, and therefore not treated as an
      arrangement providing for nonqualified deferred compensation that is
      subject to taxation under Section 409A, including (i) providing such
      benefits on a nontaxable basis to Executive, (ii) providing for the
      reimbursement of medical expenses incurred during the time period during
      which Executive would be entitled to continuation coverage under a group
      health plan of the Company pursuant to Section 4980B of the Code (i.e., COBRA
      continuation coverage), (iii) providing that such benefits constitute the
      reimbursement or provision of in-kind benefits payable at a specified time
      or pursuant to a fixed schedule as permitted under Section 409A and the
      authoritative guidance thereunder, or (4) such other manner as determined
      by the Company in compliance with an exception from being treated as
      nonqualified deferred compensation subject to Section
  409A.

              

      

       

      
        	
                 
      

              	
                (c)

              	
                Callon’s
      obligation to pay severance amounts due to the Executive pursuant to this
      Section 4.1, to the extent not already paid, shall cease
      immediately and such payments will be forfeited if the Executive violates
      any condition described in Sections 6.1, 6.2 or 6.3 after the Date of
      Termination. To the extent already paid, should the Executive violate any
      condition described in Sections 6.1, 6.2 or 6.3 after the Date of
      Termination, the severance amounts provided hereunder shall be repaid in
      their entirety by the Executive to Callon with interest at the “applicable
      federal rate” (as defined in Section 1274(d) of the Code), and all
      rights to such payments shall be
forfeited.

              

      

       

      
        
          
             

          

          
            6

            
              

            

          

          
             

          

        

      

      

      4.2          Limitation
on Payments.

       

      
        	
                 
      

              	
                (a)

              	
                Whether
      or not the Executive becomes entitled to the payments under Section 4.1
      hereof, if any of the payments or benefits received or to be received by
      the Executive in connection with a Change of Control or the Executive’s
      termination of employment (whether pursuant to the terms of this Agreement
      or any other plan, arrangement, or agreement with Callon, any person whose
      actions result in a Change of Control or any person affiliated with Callon
      or such person) (such payments or benefits, excluding the Gross-Up
      Payment, being hereinafter referred to as the “Total
      Payments”) would be subject to the excise tax imposed under Section
      4999 of the Code (the “Excise
      Tax”), Callon shall pay to the Executive an additional amount (the
      “Gross-Up
      Payment”) such that the net amount retained by the Executive, after
      deduction of any Excise Tax on the Total Payments and any federal, state,
      and local income and employment taxes and Excise Tax upon the Gross-Up
      Payment, shall be equal to the Total Payments. Callon shall pay to the
      Executive the Gross-Up Payment by the end of the Executive’s taxable year
      next following the Executive’s taxable year in which he remits the related
      taxes. For purposes of determining the amount of the Gross-Up Payment, the
      Executive shall be deemed to pay federal income taxes at the highest
      marginal rate of federal income taxation in the calendar year in which the
      Gross-Up Payment is to be made and state and local income taxes at the
      highest marginal rate of taxation in the state and locality of the
      residence of the Executive on the Date of Termination, net of the maximum
      reduction in federal income taxes which could be obtained from deduction
      of such state and local taxes.

              

      

       

      
        	
                 
      

              	
                (b)

              	
                All
      determinations required to be made under this Section 4.2, including
      whether a Gross-Up Payment is required and the amount of such Gross-Up
      Payment, shall be made by the independent accounting firm which served as
      Callon’s auditor immediately prior to the Change of Control (the “Accounting
      Firm”), which shall provide detailed supporting calculations both
      to Callon and the Executive within fifteen (15) business days after the
      Date of Termination, if applicable, or such earlier time as is requested
      by Callon. In the event that the Accounting Firm is also serving as
      accountant or auditor for the individual, entity, or group effecting the
      Change of Control, the Executive may appoint another nationally recognized
      public accounting firm to make the determinations required hereunder
      (which accounting firm shall then be referred to as the Accounting Firm
      hereunder), by giving written notice of such appointment to Callon within
      five (5) business days after the Date of Termination. All fees and
      expenses of the Accounting Firm shall be borne solely by Callon and it
      shall be Callon’s obligation to cause the Accounting Firm to take any
      actions required hereby.

              

      

       

      
        
          
             

          

          
            7

            
              

            

          

          
             

          

        

      

      

      If the
Accounting Firm determines that no Excise Tax is payable by the Executive, it
shall furnish the Executive with an opinion that he has substantial authority
not to report any Excise Tax on his federal income tax return. As a result of
the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
a Gross-Up Payment which will not have been made by Callon should have been made
(“Underpayment”),
consistent with the calculations required to be made hereunder. In the event
that Callon exhausts its remedies pursuant to Section 4.2(c) and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by Callon to or for the benefit of the
Executive.

       

      
        	
                 
      

              	
                (c)

              	
                The
      Executive shall notify Callon, in writing, of any claim by the Internal
      Revenue Service that, if successful, would require the payment by Callon
      of the Gross-Up Payment. Such notification shall be given as soon as
      practicable but no later than ten (10) business days after the Executive
      receives notice of such claim and shall apprise Callon of the nature of
      such claim and the date on which such claim is requested to be paid. The
      Executive shall not pay such claim prior to the expiration of the thirty
      (30) day period following the date on which he gives such notice to Callon
      (or such shorter period ending on the date that any payment of taxes with
      respect to such claim is due). If Callon notifies the Executive in writing
      prior to the expiration of such period that it desires to contest such
      claim, the Executive shall:

              

      

       

      
        	
                 
      

              	
                (i)

              	
                Give
      Callon any information reasonably requested by Callon relating to such
      claim;

              

      

       

      
        	
                 
      

              	
                (ii)

              	
                Take
      such action in connection with contesting such claim as Callon shall
      reasonably request in writing from time to time, including, without
      limitation, accepting legal representation with respect to such claim by
      an attorney reasonably selected by
Callon;

              

      

       

      
        	
                 
      

              	
                (iii)

              	
                Cooperate
      with Callon in good faith in order to effectively contest such claim;
      and

              

      

       

      
        	
                 
      

              	
                (iv)

              	
                Permit
      Callon to participate in any proceedings relating to such claim, provided,
      however, that, in accordance with the provisions of Section 3.6, Callon
      shall bear and pay directly all costs and expenses (including additional
      interest and penalties) incurred in connection with such contest and shall
      indemnify and hold the Executive harmless, on an after-tax basis, for any
      Excise Tax or income tax, including interest and penalties with respect
      thereto, imposed as a result of such representation and payment of costs
      and expenses. Without limitation on the foregoing provisions of this
      Section 4.2(c), Callon shall control all proceedings taken in connection
      with such contest and, at its sole option, may pursue or forgo any and all
      administrative appeals, proceedings, hearings, and conferences with the
      taxing authority in respect of such claim and may, at its sole option,
      either direct the Executive to pay the tax claimed and sue for a refund,
      or contest the claim in any permissible manner, and the Executive agrees
      to prosecute such contest to a determination before any administrative
      tribunal, in a court of initial jurisdiction and in one or more appellate
      courts, as Callon shall determine; provided, however, that if Callon
      directs the Executive to pay such claim and sue for a refund, Callon shall
      advance the amount of such payment to the Executive, on an interest-free
      basis and shall indemnify and hold the Executive harmless, on an after-tax
      basis, from any Excise Tax or income tax, including interest or penalties
      with respect thereto, imposed with respect to such advance or with respect
      to any imputed income with respect to such advance; and further provided
      that any extension of the statute of limitations relating to payment of
      taxes for the taxable year of the Executive with respect to which such
      contested amount is claimed to be due is limited solely to such contested
      amount. Furthermore, Callon’s control of the contest shall be limited to
      issues with respect to which a Gross-Up Payment would be payable hereunder
      and the Executive shall be entitled to settle or contest, as the case may
      be, any other issue raised by the Internal Revenue Service or any other
      taxing authority.

              

      

       

      
        
          
             

          

          
            8

            
              

            

          

          
             

          

        

      

      

      
        	
                 
      

              	
                (d)

              	
                If,
      after the receipt by the Executive of an amount advanced by Callon
      pursuant to Section 4.2(c), the Executive becomes entitled to receive any
      refund with respect to such claim, the Executive shall (subject to
      Callon’s complying with the requirements of Section 4.2(c)) promptly pay
      to Callon the amount of such refund (together with any interest paid or
      credited thereon after taxes applicable thereto). If, after the receipt by
      the Executive of an amount advanced by Callon pursuant to Section 4.2(c),
      a determination is made that the Executive shall not be entitled to any
      refund with respect to such claim and Callon does not notify the Executive
      in writing of its intent to contest such denial of refund prior to the
      expiration of thirty (30) days after such determination, then such advance
      shall be forgiven and shall not be required to be repaid and the amount of
      such advance shall offset, to the extent thereof, the amount of Gross-Up
      Payment required to be paid.

              

      

       

      4.3          No Mitigation or Set-off of Amounts
Payable Hereunder. Executive shall not be required to mitigate the amount
of any payment provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment provided for in this Section 4 be
reduced by any compensation earned by Executive as the result of employment by
another employer after the Date of Termination, or otherwise. Callon’s
obligations hereunder also shall not be affected by any set-off, counterclaim,
recoupment, defense, or other claim, right or action which Callon may have
against Executive.

       

      
        
          
             

          

          
            9

            
              

            

          

          
             

          

        

      

      

      Article 5. Stock Options and
Other Plans

       

      5.1          Acceleration
of Benefits.

       

      If a
Change of Control occurs:

       

      
        	
              	
                (a)

              	
                Notwithstanding
      any provision to the contrary in any stock option agreement, restricted
      stock agreement, or other applicable agreement that may be outstanding
      between Executive and Callon, all outstanding units, stock options,
      incentive stock options, performance shares, performance awards, stock
      appreciation rights, career shares, bridge shares, and shares of
      restricted stock (the “Stock
      Rights”) then held by Executive shall immediately become
      exercisable and Executive shall become one hundred percent (100%) vested
      in such stock rights held by or for the benefit of
      Executive.  In the event that, and to the extent that, Callon is
      unable to provide for acceleration of vesting in accordance with this
      paragraph as a result of the provisions in existence prior to a Change of
      Control of any plan or agreement, Callon shall provide in lieu thereof a
      lump sum cash payment equal to the difference between the total value of
      such outstanding stock rights as of the Executive’s Date of Termination
      and the total value of the stock rights in which the Executive is vested
      as of the Executive’s Date of Termination, payable within the time
      specified in Section 4.1(a). The value of such accelerated vesting in the
      Executive’s stock rights shall be determined by the Board in good faith
      based on a valuation performed by an independent consultant mutually
      agreed to by the Board and
Executive.

              

      

       

      Notwithstanding
the above provisions of this Section 5.1(a), no accelerated vesting or cash out
shall apply to any agreement to the extent such acceleration or cash out would
cause the compensation payable thereunder to fail to qualify as
“performance-based compensation” under Section 162(m)(4)(C) of the
Code.

       

      
        	
              	
                (b)

              	
                Notwithstanding
      any provision to the contrary in any stock option agreement that may be
      outstanding between Executive and Callon, Executive’s right to exercise
      any previously unexercised options under any such stock option agreement
      shall not terminate until the latest date on which the option granted
      under such agreement would expire under the terms of such agreement but
      for Executive’s termination of employment.  In the event that,
      and to the extent that, Callon is unable to provide for the extension of
      the expiration date of such options as a result of the provisions in
      existence prior to a Change of control of any plan or agreement, Callon
      shall provide in lieu thereof a lump sum cash payment equal to the value
      of such extension Callon is unable to provide payable within the time
      specified in Section 4.1(a).  The values of such accelerated
      vesting and exercisability shall be determined by the Board in good faith
      based on a valuation performed by an independent consultant mutually
      agreed to by the Board and
Executive.

              

      

       

      
        
          
             

          

          
            10

            
              

            

          

          
             

          

        

      

      

      Article 6. Noncompetition,
Nonsolicitation, Nondisclosure of Trade Secrets, Nonpublic Information, and
Ownership

       

      6.1          Noncompetition. The Executive
agrees that during the term of the Executive’s employment with Callon and for a
period of one year after the Date of Termination or cessation of the Executive’s
employment with Callon for any reason whatsoever, he will not, directly or
indirectly, compete with Callon by providing services to any other person,
partnership, association, corporation, or other entity that is an “Oil and Gas
Business” in any geographic location where Callon currently operates. As used
herein, an “Oil and Gas Business” means owning, managing, acquiring, attempting
to acquire, soliciting the acquisition of, operating, controlling, or developing
Oil and Gas interests or engaging in or being connected with, as a principal,
owner, officer, director,  employee, shareholder, promoter,
consultant, contractor, partner, member, joint venture, agent, equity owner or
in any other capacity whatsoever, any of the foregoing activities of the oil and
gas exploration and production business. The parties agree that the above
restrictions on competition are completely severable and independent agreements
supported by good and valuable consideration and, as such, shall survive the
termination of this Agreement for whatever reason. The parties further agree
that any invalidity or unenforceability of any one or more of such restrictions
on competition shall not render invalid or unenforceable any remaining
restrictions on competition. Additionally, should a court of competent
jurisdiction determine that the scope of any provision of this Section 6.1 is
too broad to be enforced as written, the parties intend that the court reform
the provision to such narrower scope as it determines to be reasonable and
enforceable.

       

      6.2.          Nonsolicitation. During the
term of the Executive’s employment with Callon and for a period of (three (3)
years) after the Date of Termination with Callon for any reason whatsoever, the
Executive shall not, on his own behalf or on behalf of any other person,
partnership, association, corporation, or entity: (a) directly, indirectly, or
through a third party hire or cause to be hired; (b) directly, indirectly, or
through a third party solicit; or (c) in any manner attempt to influence or
induce any employee of Callon or its subsidiaries or affiliates to leave the
employment of Callon or its subsidiaries or affiliates, nor shall he use or
disclose to any person, partnership, association, corporation, or other entity
any information obtained concerning the names and addresses Callon’s employees.
The parties agree that the above restrictions on hiring and solicitation are
completely severable and independent agreements supported by good and valuable
consideration and, as such, shall survive the termination of this Agreement for
whatever reason. The parties further agree that any invalidity or
unenforceability of any one or more such restrictions on hiring and solicitation
shall not render invalid or unenforceable any remaining restrictions on hiring
and solicitation. Additionally, should a court of competent jurisdiction
determine that the scope of any provision of this Section 6.2 is too broad to be
enforced as written, the parties intend that the court reform the provision to
such narrower scope as it determines to be reasonable and
enforceable.

       

      6.3.          Nondisclosure of Trade Secrets.
Callon promises to disclose to the Executive and the Executive
acknowledges that in and as a result of his employment by Callon, he will
receive, make use of, acquire, have access to and/or become familiar with,
various trade secrets and proprietary and confidential information of Callon,
its subsidiaries, and affiliates, including, but not limited to, processes,
computer programs, compilations of information, records, financial information,
sales reports, sales procedures, customer requirements, pricing techniques,
customer lists, method of doing business, identities, locations, performance and
compensation levels of employees, and other confidential information
(collectively, “Trade
Secrets”) which are owned by Callon, its subsidiaries, and/or affiliates
and regularly used in the operation of its business, and as to which Callon, its
subsidiaries, and/or affiliates take precautions to prevent dissemination to
persons other than certain directors, officers, and employees. The Executive
acknowledges and agrees that the Trade Secrets:

       

      
        
          
             

          

          
            11

            
              

            

          

          
             

          

        

      

      

      
        	
                 
      

              	
                (a)

              	
                Are
      secret and not known in the
industry;

              

      

       

      
        	
                 
      

              	
                (b)

              	
                Give
      Callon or its subsidiaries or affiliates an advantage over competitors who
      do not know or use the Trade
Secrets;

              

      

       

      
        	
                 
      

              	
                (c)

              	
                Are
      of such value and nature as to make it reasonable and necessary to protect
      and preserve the confidentiality and secrecy of the Trade Secrets;
      and

              

      

       

      
        	
                 
      

              	
                (d)

              	
                Are
      valuable, special, and unique assets of Callon or its subsidiaries or
      affiliates, the disclosure of which could cause substantial injury and
      loss of profits and goodwill to Callon or its subsidiaries or
      affiliates.

              

      

       

      The
Executive promises not to use in any way or disclose any of the Trade Secrets
and confidential and proprietary information, directly or indirectly, either
during or after the term of his employment, except as required in the course of
his employment with Callon, if required in connection with a judicial or
administrative proceeding, or if the information becomes public knowledge other
than as a result of an unauthorized disclosure by the Executive. All files,
records, documents, information, data, and similar items relating to the
business of Callon, whether prepared by the Executive or otherwise coming into
his possession, will remain the exclusive property of Callon and may not be
removed from the premises of Callon under any circumstances without the prior
written consent of Callon (except in the ordinary course of business during the
Executive’s period of active employment under this Agreement), and in any event
must be promptly delivered to Callon upon termination of the Executive’s
employment with Callon. The Executive agrees that upon his receipt of any
subpoena, process, or other requests to produce or divulge, directly or
indirectly, any Trade Secrets to any entity, agency, tribunal, or person,
whether received during or after the term of the Executive’s employment with
Callon, the Executive shall timely notify and promptly hand deliver a copy of
the subpoena, process, or other request to Callon. For this purpose, the
Executive irrevocably nominates and appoints Callon (including any attorney
retained by Callon), as his true and lawful attorney-in-fact, to act in the
Executive’s name, place, and stead to perform any act that the Executive might
perform to defend and protect against any disclosure of any Trade
Secrets.

       

      The
parties agree that the above restrictions on confidentiality and disclosure are
completely severable and independent agreements supported by good and valuable
consideration and, as such, shall survive the termination of this Agreement for
whatever reason. The parties further agree that any invalidity or
unenforceability of any one or more of such restrictions on confidentiality and
disclosure shall not render invalid or unenforceable any remaining restrictions
on confidentiality and disclosure. Additionally, should a court of competent
jurisdiction determine that the scope of any provision of this Section 6.3 is
too broad to be enforced as written, the parties intend that the court reform
the provision to such narrower scope as it determines to be reasonable and
enforceable.

       

      
        
          
             

          

          
            12

            
              

            

          

          
             

          

        

      

      

      6.4          Ownership. The Executive
agrees that all inventions, copyrightable material, business and/or technical
information, marketing plans, customer lists, and trade secrets which arise out
of the performance of this Agreement are the property of Callon.

       

      Article 7. Successors;
Binding Agreement

       

      7.1          Successors of Callon. Callon
will require any successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) to all or substantially all of the business and/or
assets of Callon, by agreement in form and substance satisfactory to Executive,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent that Callon would be required to perform it if no such
succession had taken place. Failure of Callon to obtain such agreement prior to
the effectiveness of any such succession shall be a breach hereof and shall
entitle Executive to compensation from Callon in the same amount and on the same
terms as Executive would be entitled hereunder if Executive terminated his
employment for Good Reason, the date on which any such succession becomes
effective shall be deemed the Date of Termination; provided however, that such
compensation shall be paid to Executive only if such successor is a considered
to be a successor to Callon by reason of a Change of Control.  As used
herein, “Callon Petroleum Company” shall mean Callon as hereinbefore defined and
any successor to its business and/or assets as aforesaid which executes and
delivers the agreement provided for in this Section 6 or which otherwise becomes
bound by all the terms and provisions hereof by operation of law.

       

      7.2          Executive’s Heirs, Etc. This
Agreement shall inure to the benefit of and be enforceable by Executive’s
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees, and legatees. If Executive should die while any amounts
would still be payable to him hereunder as if he had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms hereof to his designee or, if there be no such designee, to his
estate.

       

      Article 8.
Notice

       

      For the
purposes hereof, notices and all other communications provided for herein shall
be in writing and shall be deemed to have been duly given when delivered or
mailed by United States registered or certified mail, return receipt requested,
postage prepaid, addressed to Callon at its principal place of business and to
Executive at his address as shown on the records of Callon, provided that all
notices to Callon shall be directed to the attention of the Chief Executive
Officer of Callon with a copy to the Secretary of Callon, or to such other
address provided in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt.

       

      Article 9.
Miscellaneous

       

      No
provisions hereof may be amended, modified, waived, or discharged unless such
amendment, waiver, modification, or discharge is agreed to in writing and signed
by Executive and such officer as may be specifically designated by the Board
(which shall in any event include Callon’s Chief Executive Officer). No waiver
by either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision hereof, to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly herein.

       

      
        
          
             

          

          
            13

            
              

            

          

          
             

          

        

      

      

      Article 10.
Validity

       

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

       

      Article 11. Legal
Expenses

       

      In
accordance with the provisions of Section 3.6, Callon agrees to pay, upon
written demand therefore by Executive, all legal fees and expenses which
Executive may reasonably incur as a result of any dispute or contest (regardless
of the outcome thereof) by or with Callon or others regarding the validity or
enforceability of, or liability under, any provision hereof (including as a
result of any contest about the amount of any payment pursuant to Section 4.2),
plus interest on such legal fees and expenses at the “applicable federal rate”
(as defined in Section 1274(d) of the Code). In any such action brought by
Executive for damages or to enforce any provisions hereof, he shall be entitled
to seek both legal and equitable relief and remedies, including, without
limitation, specific performance of Callon’s obligations hereunder, in his sole
discretion.

       

      Article 12. Continuation of
Salary during Dispute

       

      In the
event of Executive’s termination of employment, if there is any dispute or
contest by or with Callon or others regarding the validity or enforceability of,
or liability under, any provision hereof (including as a result of any contest
about the amount of any payments pursuant to Section 4), and upon written demand
by the Executive, Callon shall continue to pay the Executive his base salary and
maintain all life, disability, medical, dental, accident, and health insurance
coverage in effect immediately prior to the date of such dispute. Said periodic
payments shall be made in accordance with Callon’s normal payroll practices.
Payments shall continue until final resolution of such dispute or contest either
by an agreement between the Executive and Callon or final order of a court with
proper jurisdiction. In the event that Callon substantially prevails in such
dispute, the Executive shall be obligated to repay to Callon all amounts he has
received for base salary under this Section 11 (after taxes applicable thereto)
plus interest at the “applicable federal rate” (as defined in
Section 1274(d) of the Code).

       

      Article 13.
Counterparts

       

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

       

      Article 14. Governing
Law

       

      This
Agreement shall be governed by and construed under the laws of the State of
Mississippi.

       

      
        
          
             

          

          
            14

            
              

            

          

          
             

          

        

      

      

      Article 15. Captions and
Gender

       

      The use
of captions and section headings herein is for purposes of convenience only and
shall not effect the interpretation or substance of any provisions contained
herein. Similarly, the use of the masculine gender with respect to pronouns
herein is for purposes of convenience and includes either sex who may be a
signatory.

       

      

       

      [Signature
page follows.]

      

      
        
          
             

          

          
            15

            
              

            

          

          
             

          

        

      

      

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

       

      
        	
                CALLON
      PETROLEUM COMPANY

              	 
      
	 
      	 
      	 
      
	
                By:

              	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                EXECUTIVE

              	 
      
	 
      	 
      	 
      
	
                By:

              	 
      	 
      

      

      

       

    

     16ex10_1.htm

    
      

    

    Exhibit
10.1

     

    
      EXECUTION
VERSION

      

      ASSET PURCHASE
AGREEMENT

      

      This
Asset Purchase Agreement (the “Agreement”) is made and entered into this ____
day of April, 2008, by and among Rick’s Cabaret International, Inc., a Texas
corporation (“Rick’s), its wholly owned subsidiary, RCI Entertainment (Las
Vegas), Inc., a Nevada corporation (the “Purchaser”), DI Food and Beverage of
Las Vegas, LLC, a Nevada limited liability company (“DI Food” or “Seller”) and
Harold Danzig (“Danzig”), Frank Lovaas (“Lovaas”) and Dennis DeGori (“DeGori”),
who are all members of DI Food.  Messrs. Danzig, Lovaas and DeGori are
hereinafter collectively referred to herein as “Members”.

      

      WHEREAS, DI Food presently
owns and operates an adult entertainment cabaret known as “SCORES” (the
“Business” or “SCORES”) located at 3355 Procyon Street, Las Vegas, Nevada 89102
(the “Real Property” or the “Premises”); and

      

      WHEREAS, DI Food presently has
an option to purchase the Real Property where SCORES is located;
and

      

      WHEREAS, the Members own 100%
of the membership interest of DI Food (the “Membership Interest”);
and

      

      WHEREAS, DI Food desires to
sell, transfer and convey all of the assets owned by it which are associated or
used in connection with the operation of SCORES to the Purchaser, on the terms
and conditions set forth herein; and

      

      WHEREAS, the Purchaser desires
to purchase the assets from DI Food on the terms and conditions set forth
herein; and

      

      WHEREAS, DI Food and the
Purchaser desire to enter into an Option Agreement pursuant to which either
party may exercise the option to purchase the Real Property where SCORES is
located (the “Option Agreement”); and

      

      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 ASSETS

      

      Section
1.1  Assets of Seller to be
Transferred to Purchaser.  On the Closing Date (as defined in
Section 4.1 hereof), and subject to the terms and conditions set forth in this
Agreement, Seller shall sell, convey, transfer and assign, or cause to be sold,
conveyed, transferred and assigned to Purchaser free and clear of all liens and
encumbrances, and Purchaser shall acquire all of the tangible and intangible
assets and personal property of every kind and description and wherever situated
of the business of SCORES from the Seller, including but not limited to, the
following personal property of the Seller:

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      
        	
                 
      

              	
                (i)

              	
                all
      of the tangible and intangible assets and personal properties of every
      kind and description and wherever situated of the business of SCORES,
      including, without limitation, inventories, furniture, fixtures, equipment
      (including office and kitchen equipment), computers and software,
      appliances, sign inserts,  sound and lighting and telephone
      systems not incorporated into the building, telephone numbers, and other
      personal property of whatever kind and nature owned or leased by Seller,
      installed, located, situated or used in, on, or about, or in connection
      with the operation, use and enjoyment of the Premises and all other items
      on the subject Premises and used in connection with the operation of
      SCORES;

              

      

      

      
        	
                 
      

              	
                (ii)

              	
                all
      of Seller's inventory of supplies, accessories and any and all other items
      of personal property of whatever nature, sold by the Seller in the
      operation of SCORES (the
"Inventory");

              

      

      

      
        	
                 
      

              	
                (iii)

              	
                all
      supplies (other than Inventory) and other "consumable supplies" used in
      connection with the operation of SCORES (the
  "Supplies");

              

      

      

      
        	
                 
      

              	
                (iv)

              	
                all
      of Seller's right, title, and interest, as lessee, of any and all
      equipment leased by Seller and located at SCORES (the "Leased
      Equipment");

              

      

      

      
        	
                 
      

              	
                (v)

              	
                all
      right, title, and interest of Seller to the use of the telephone numbers
      presently being used by the Business, including all rotary extensions
      thereto, and all advertisements in the "Yellow Pages", "City Directory"
      and other similar publications (the "Telephone Numbers") and after the
      Closing, Purchaser shall assume all expenses for the Telephone Numbers and
      advertising;

              

      

      

      
        	
                 
      

              	
                (vi)

              	
                copies
      of Seller's lists of suppliers, and any and all of books, records, papers,
      files, memoranda and other documents relating to or compiled in connection
      with the operation of SCORES which are requested by Purchaser (the
      "Records"); and

              

      

      

      
        	
                 
      

              	
                (vii)

              	
                to
      the extent transferable, any and all necessary permits and authorizations
      which are needed to conduct an adult entertainment business serving
      alcoholic beverages at SCORES which the Seller has the right to transfer
      and convey, including its sexually oriented business permit and license
      and all other licenses, consents, authorizations, accreditations, waivers
      and approvals (together with all government filings pertaining thereto),
      however designated, establishes, maintained or renewed and issued
      evidencing or authorizing the Seller, Seller’s agent(s) or nominee(s) for
      the purpose of engaging in the business and/or operation of an adult
      cabaret nightclub business, gaming facility, restaurant, bar, lounge, sale
      of liquor or any other business currently operating or capable of being
      operated on the Premises however
characterized.

              

      

      

      All of
the items set forth in this Section 1.1 are collectively referred to as the
“Purchased Assets”.

      

      Section 1.2  Excluded
Assets.  Specifically excluded from the Purchased
Assets are the corporate seals, books, accounting records and records related to
corporate governance of the Seller and those assets listed on Exhibit
1.2 (hereinafter collectively referred to
as the “Excluded Assets”).

      
        
           

        

        
          Asset
Purchase Agrement - Page 2

          
            

          

        

        
           

        

      

      Section 1.3  Intent of
the Parties.  Although the Exhibits to
this Agreement are intended to be complete, in the event such Exhibits fail to
contain the description of any asset belonging to Seller which is used solely
for the business of SCORES, such assets shall nonetheless be
deemed transferred to Purchaser at the Closing.

      

      ARTICLE
II

      NO
ASSUMPTION OF LIABILITIES

      

      Section 2.1  Excluded
Liabilities.  Notwithstanding anything contained in this
Agreement to the contrary, Purchaser shall have no obligation and is not
assuming, and Seller shall retain, pay, perform, defend and discharge all of the
liabilities and obligations of every kind whatsoever related or connected to the
Purchased Assets or the business of SCORES arising or accruing prior to the
Closing Date, whether disclosed or undisclosed, known or unknown on the Closing
Date, direct or indirect, absolute or contingent, secured or unsecured,
liquidated or unliquidated, accrued or otherwise, whether liabilities for taxes,
liabilities of creditors, liabilities arising under any profit sharing, pension
or other benefit under any plan of Seller, liabilities to any Governmental
Agency (as hereinafter defined) or third parties, liabilities assumed or
incurred by Seller by operation of law or otherwise (collectively, the “Excluded
Liabilities”), including, but not limited to, (i) contractual liabilities
arising from SCORES’ business or ownership of the Purchased Assets prior to the
Closing Date, and (ii) any taxes owing by Seller, whether occurring before or
after Closing and whether related to the business of SCORES, the Purchased
Assets or otherwise and any Liens on the Purchased Assets relating to any such
taxes.

      

      Section 2.2  Taxes.  Seller
shall pay when due any sales, transfer, excise, or other taxes which may be
imposed in any jurisdiction in connection with or arising from the sale and
transfer of any of the Purchased Assets to Purchaser.

      

      Section 2.3  Bulk Sales
Laws.  Seller acknowledges that any applicable provisions of
any tax clearance or bulk sales laws pertaining to the transactions contemplated
by this Agreement are  being complied with and that Seller agrees to
indemnify and hold harmless Purchaser from and against any and all liabilities
arising out of or relating to any such tax clearance or bulk sales
law.  Any such liability shall be an Excluded Liability.

      

      ARTICLE
III

      PURCHASE
PRICE FOR

      THE
PURCHASED ASSETS

      

      Section
3.1  Purchase
Price.  As consideration for the purchase of the Purchased
Assets, Purchaser shall pay to Seller an aggregate amount payable at Closing as
follows:

      

      
        	
                 
      

              	
                (i)

              	
                $16,000,000
      payable by cashier’s check, certified funds or wire
    transfer;

              

      

      

      
        	
                 
      

              	
                (ii)

              	
                $5,000,000
      as evidenced by a Convertible Debenture of Rick’s bearing simple interest
      of four percent (4%) per annum (the “Convertible
      Debenture”).  The Convertible Debenture shall be payable
      commencing seven (7) months after the Closing Date (as defined herein) as
      follows:  Twenty-five (25) equal monthly principal payments of
      $200,000 in cash or by the conversion of 10,000 shares of common stock of
      Rick’s, par value $0.01, at the option of the holder of the Convertible
      Debenture, plus interest payable in
cash.

              

      

      
        
           

        

        
          Asset
Purchase Agrement - Page 3

          
            

          

        

        
           

        

      

      The (i)
$16,000,000 cash payment and (ii) the Convertible Debenture are collectively
referred to as the “Purchase Price”.

      

      Section 3.2  Payment into
Escrow.  As of the date of execution of this Agreement, the
Purchaser shall have deposited $250,000 into an escrow account (the “Escrow
Amount”) with Robert D. Axelrod, P.C. (the “Escrow Agent”) pursuant to a written
Escrow Agreement with the Seller and the Escrow Agent (the “Escrow
Agreement”).  The $250,000 shall be held in escrow until the Closing
as hereinafter defined.

      

      In the event that the Closing occurs,
the Escrow Amount will be paid by the Escrow Agent to the Seller and shall be
credited against the cash portion of the Purchase Price as set forth in Section
3.1(i) above.  The Escrow Agreement shall further provide that if the
Purchaser, through no fault of Seller, does not complete the acquisition as
provided for in this Agreement, that the Seller shall be entitled, as its sole,
legal and equitable remedy, to receive and retain all of the Escrow Amount as
and for its liquidated damages.  The Escrow Agreement shall further
provide that in the event that the Closing does not occur through no fault of
Purchaser, then the Purchaser shall be entitled, in addition to any other
remedies which it may have, to receive and retain all of the Escrow
Amount.

      

      Section 3.3  Pro Rata Payment of License
Fees.  In the event that the Purchaser does not complete and
close the acquisition of the Purchased Assets by May 31, 2008, then the
Purchaser and Seller agree that any licensing fees that are required to be
renewed and paid for by he Seller after May 31, 2008, and prior to the Closing
Date shall be pro rated for the applicable renewal period and the Purchaser will
be required to reimburse the Seller at Closing for the pro rata portion of the
term of the licensing fee that each of Purchaser and Seller shall have the use
and benefit.

      

      

      ARTICLE
IV

      CLOSING

      

      Section
4.1  The
Closing.  The closing of the transactions contemplated by this
Agreement shall take place on or before June 10, 2008 (the “Closing Date”), at
the offices of Shimon & Lovaas, a Professional Corporation, 3016 W.
Charleston Blvd., Suite 210, Las Vegas, Nevada 89102, or at such other time and
place as agreed upon among the parties hereto (the “Closing”).

      

      Section
4.2  Right to License
Name.  In the event that the Closing does not occur on or prior
to May 6, 2008, then Rick’s will agree, commencing on that date, to license its
name for a period of ninety (90) days (or until the Closing Date if sooner)
without charge to DI Food to use instead and in place of the name SCORES at the
Premises.

      

      Section
4.3  Delivery and
Execution.  At the Closing: (a) the Seller shall deliver to
Purchaser all instruments of assignment and bills of sale necessary to transfer
to Purchaser good and marketable title to the Purchased Assets free and clear of
all liens, charges or encumbrances against delivery by Purchaser to the Seller
of payment in an amount equal to the Purchase Price of the Purchased Assets
being purchased by Purchaser in the manner set forth herein; (b) the Seller and
Purchaser shall deliver the various certificates, instruments and documents (and
shall take the required actions) referred to in Articles VII and VIII below; and
(c) the Related Transactions (as defined below) shall be consummated
concurrently with the Closing.

      
        
           

        

        
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      Section
4.4  Related
Transactions.  In addition to the purchase and sale of the
Purchased Assets, the following actions shall take place contemporaneously at
the Closing (collectively, the "Related Transactions"):

      

      (i)           Covenant Not to
Compete.  At Closing certain members and managers of DI Food
will enter into a five (5) year covenant not to compete as evidenced by a
Non-Competition Agreement pursuant to the terms of which each officer and
director will agree not to compete, either directly of indirectly, with the
adult nightclub presently known as SCORES-Las Vegas by operating an
establishment serving liquor and providing live female nude or semi-nude adult
entertainment in Clark County, Nevada; provided, however, that the
Non-Competition Agreement shall specifically exclude, as set forth on the
Exhibit to be attached thereto, any licensed casino property and any existing
operating business that serves liquor and provides live female nude or semi-nude
adult entertainment in Clark County, Nevada.

      

      (ii)           Option to Purchase Real
Property.  The Purchaser and DI Food will enter into an Option
Agreement, expiring January 1, 2011 (the “Option Agreement”), pursuant to which
either party may exercise the option to purchase the Real Property previously
granted under that certain Real Estate Lease and Option Agreement by and between
DI Food and SHE CAT, LLC (the “Lease Agreement”), a copy of which will be
attached thereto as Exhibit “A”.  The Option Agreement shall provide
that either Purchaser or DI Food may exercise the option granted under the Lease
Agreement by providing the other party thirty (30) days prior written
notice.  In the event that Purchaser exercises the option to acquire
the Real Property then Purchaser shall grant to DI Food the option to purchase
approximately two (2) acres located on the south portion of the Real Property,
as more fully described in Exhibit “B” to be attached thereto, for potential use
as a hotel for $11,000,000.  In the event that DI Food exercises the
option to purchase the Real Property then DI Food shall grant to Rick’s the
option to purchase approximately two and one-half (2.5) acres, plus the building
where Scores-Las Vegas is located, as more fully described in Exhibit “C” to be
attached thereto, for $12,000,000.  In either event, DI Food, or its
assignee, shall provide for adequate parking for Scores-Las Vegas on the
approximate two (2) acre portion of the Real Property which it
acquires.  To the extent that the Option Agreement is exercised
between DI Food and Purchaser for the purchase of the Real Property, then DI
Food will be obligated to pay all closing costs in connection
therewith.  As consideration for the Purchaser entering into the
Option Agreement, DI Food, or its assignee, agrees to pay to Purchaser $100,000
per month (“Option Fee”) for the term of the Option Agreement, provided however,
that in the event that any assignee of the Option Agreement, as contemplated by
this Agreement, defaults on its obligations, then DI Food shall not be obligated
thereafter to pay the Option Fee.

      

      (iii)           Conveyance of Convertible Debenture
and Option Agreement.  Simultaneously with the Closing, DI Food
will agree to contingently assign and Deco Hotel Development, LLC, a Nevada
limited liability company (“Deco”), will agree to acquire, subject to said
contingent assignment, from DI Food the Convertible Debenture and the Option
Agreement for $9,000,000, payable by the execution of a Promissory Note(s) from
Deco to DI Food (the “Deco Promissory Note”), payable as
follows:

      
        
           

        

        
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        (a)    $5,000,000
payable in twenty-five (25) equal monthly principal payments of $200,000, plus
interest computed at the rate of four percent (4%) per annum, payable in cash,
with the first monthly payment due seven (7) months after the Closing Date,
which payment and performance will be guaranteed by Rick’s;
and

      

      

      
        (b)    $2,000,000
of the indebtedness arising under the Deco Promissory Note and evidenced thereby
shall be due and payable forty-five (45) days after the expiration of any appeal
period during which no appeal has been filed after DI Food has applied for and
obtained a Final Zoning Approval for a change for the Real Property which would
allow the continued operation of Scores-Las Vegas as well as allow construction
of other improvements for residential and/or hotel purposes at the Real Property
(the “Final H1 Zoning Approval”), provided that the payment pursuant to this
Section 4.4(iii)(b) shall be reduced by the amount paid for the closing costs
attributable to the purchase of the Real Property.  The Final H1
Zoning Approval shall provide and vest the right to build at least 299 hotel
rooms from the Clark County Commission and all other necessary and appropriate
authorities for obtaining these rights in and for the Real Property;
and

      

      

      
        (c)    The
remaining $2,000,000 of the indebtedness arising under the Deco Promissory Note
and evidenced thereby shall be due and payable to DI Food twelve (12) months
following the payment of the Final H1 Zoning Approval payment as described in
Paragraph 4.4(iii)(b) above.  There shall be no pre-payment penalty
with respect to this final payment.

      

      

      
        (d)    The
Promissory Note shall be secured by

      

      

      
        (1)  the
collateral assignment of the Convertible Debenture, which collateral assignment
will provide that if cash payment is to be made pursuant to the Convertible
Debenture, that Rick’s shall make such payments directly to DI Food,
and

      

      

      
        (2) the
pledge of the Option Agreement.

      

       

      
        (e)    Neither
the $2,000,000 portion of the Deco Promissory Note set forth in Section
4.4(iii)(b) or the $2,000,000 portion of the Deco Promissory Note set forth in
Section 4.4(iii)(c) shall be guaranteed by Rick’s.

      

      
        
           

        

        
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      ARTICLE
V

      REPRESENTATIONS
AND WARRANTIES

      OF
THE SELLER AND THE MEMBERS

      

      The
Seller and the Members, jointly and severally, hereby represent and warrant to
Purchaser and Rick’s as follows:

      

      Section
5.1  Organization, Good Standing
and Qualification.

      

      
        	
                 
      

              	
                (i)

              	
                The
      Seller (i) is an entity duly organized, validly existing and in good
      standing under the laws of the state of Nevada, (ii) has all requisite
      power and authority to own, operate and lease its properties and to carry
      on its business, and (iii) is duly qualified to transact business and is
      in good standing in all jurisdictions where its ownership, lease or
      operation of property or the conduct of its business requires such
      qualification, except where the failure to do so would not have a material
      adverse effect to Seller.

              

      

      

      
        	
                 
      

              	
                (ii)

              	
                The
      authorized capital of the Seller consists of _______ units of Membership
      Interest of which _______ units of Membership Interest are validly issued,
      fully paid and outstanding. There is no other class of capital authorized
      or issued by the Seller.  The Members collectively own all of
      the Membership Interest.  None of the Membership Interest issued
      are in violation of any preemptive rights.  The Seller has no
      obligation to repurchase, reacquire, or redeem any of its outstanding
      Membership Interest.  There are no outstanding securities
      convertible into or evidencing the right to purchase or subscribe for any
      Membership Interest of the Seller, there are no outstanding or authorized
      options, warrants, calls, subscriptions, rights, commitments or any other
      agreements of any character obligating the Seller to issue any Membership
      Interest or any securities convertible into or evidencing the right to
      purchase or subscribe for any Membership Interest, and there are no
      agreements or understandings with respect to the voting, sale, transfer or
      registration of any Membership Interest of the
  Seller.

              

      

      

      Section
5.2  Ownership of the Purchased
Assets.  Seller owns all of the Purchased Assets free and clear
of any liens, claims, equities, charges, options, rights of first refusal, or
encumbrances. Seller has the unrestricted right and power to transfer, convey
and deliver full ownership of the Purchased Assets without the consent or
agreement of any other person and without any designation, declaration or filing
with any governmental authority.  Upon the transfer of the Purchased
Assets to Purchaser as contemplated herein, 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.

      

      Section
5.3  Authorization.  The
Seller has all requisite corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby.  All action on the part of 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 or will be taken prior to the Closing Date
by the Seller. This Agreement, when duly executed and delivered in accordance
with its terms, will constitute legal, valid and binding obligations of the
Seller enforceable against it in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization and other similar laws of
general application affecting creditors’ rights generally or by general
equitable principles.

      
        
           

        

        
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      Each
Member, individually, represents that he is a person of full age of majority,
with full power, capacity, and authority to enter into this Agreement and
perform the obligations contemplated hereby by for himself.  All
action on the part of such Member necessary for the authorization, execution,
delivery and performance of this Agreement by him 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 such Member enforceable against him in accordance with its terms,
except as may be limited by bankruptcy, insolvency, reorganization and other
similar laws of general application affecting creditors’ rights generally or by
general equitable principles.

      

      Section
5.4  Acquisition of Convertible
Debenture.  The Seller understands that the issuance by Rick’s
of the  Convertible Debenture (as referenced in Section 3.1 herein)
will not have been registered under the Securities Act of 1933, as amended (the
“Act”), or any state securities acts, and accordingly, are restricted
securities.

      

      The
Seller understands that any sale of any shares of common stock of Rick’s
underlying the Convertible Debenture (the “Rick’s Shares”), under current law,
will require either (a) the registration of the Rick’s Shares under the Act and
applicable state securities acts; (b) compliance with Rule 144 of the Act; or
(c) the availability of an exemption from the registration requirements of the
Act and applicable state securities acts.

      

      To assist in implementing the above
provisions, the Seller hereby consents to the placement of the legend, or a
substantially similar legend, set forth below, on the Convertible Debenture and
on all certificates representing ownership of the Rick’s Shares acquired thereby
until the Rick’s Shares have been sold, transferred, or otherwise disposed of,
pursuant to the requirements hereof.  The legend shall read
substantially as follows:

      

      “THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES ACTS.  THESE SECURITIES
HAVE BEEN ACQUIRED FOR
INVESTMENT, ARE RESTRICTED AS TO TRANSFERABILITY, AND MAY NOT BE SOLD,
HYPOTHECATED, OR OTHERWISE TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION
AND QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR
APPLICABLE EXEMPTIONS THEREFROM.”

      

      Section 5.5  Seller’s Access to
Information.  The Seller hereby confirms and represents that it
(a) has received a copy of Rick’s Form 10-KSB filed with the Securities and
Exchange Commission (the “SEC”) for the year ended September 30, 2007, and a
copy of Rick’s Form 10-QSB for the quarter ended December 31, 2007, as filed
with the SEC; (b) a copy of Rick’s Form 14C filed with the SEC on June 27, 2007;
(c) a copy of the Form 8-K’s filed with the SEC on January 28, 2008, February
11, 2008, February 13, 2008, March 7, 2008, March 18, 2008, April 3, 2008 and
April 4, 2008; (d) has been afforded the opportunity to ask questions of and
receive answers from representatives of  Rick’s concerning the
business and financial condition, properties, operations and prospects of
Rick’s; (e) has such knowledge and experience in financial and business matters
so as to be capable of evaluating the relative merits and risks of the
transactions contemplated hereby; (f) has had an opportunity to engage and is
represented by an attorney of his choice; (g) has had an opportunity to
negotiate the terms and conditions of this Agreement; (h) has been given
adequate time to evaluate the merits and risks of the transactions contemplated
hereby; and (i) has been provided with and given an opportunity to review all
current information about Rick’s.  Seller has asked such questions to
representatives of Rick’s about Rick’s as it desires to ask and all such
questions have been answered to the full satisfaction of the
Seller.  The forms filed by Rick’s with the SEC as set forth in
Section 5.5(a), (b) and (c) are hereafter collectively referred to as “SEC
Reports”.

      
        
           

        

        
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      Section
5.6  Purchase for
Investment.  Seller acknowledges that it is an Accredited
Investor as that term is defined in Rule 501(a) of Regulation D of the Act, as
amended.  Seller and its representatives have received, or have had
access to, and have had sufficient opportunity to review, all books, records,
financial information and other information which Seller considers necessary or
advisable to enable it to make a decision concerning its acquisition of the
Convertible Debenture, and that it possesses such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of its investment hereunder.

      

      Section
5.7  No Breaches;
Consents.  Except as set forth in Schedule 5.7, the execution,
delivery, and performance of this Agreement and the transactions contemplated
hereby by the Seller does not:  (i) violate any provision of its
Articles of Organization or Regulations, (ii) conflict with, violate, or
constitute a breach of or a default under, (iii) result in the creation or
imposition of any lien, claim, or encumbrance of any kind upon the Purchased
Assets, or (iv) 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 the Seller is a party or by which the Purchased Assets 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
5.8  Pending
Claims.  Except as set forth in Schedule 5.8, there is no
claim, suit, arbitration, investigation, action or other proceeding, whether
judicial, administrative or otherwise, now pending or, to the best of the
Seller’s or Members’ knowledge, threatened before any court, arbitration,
administrative or regulatory body or any governmental agency which may result in
any judgment, order, award, decree, liability or other determination which will
or could reasonably be expected to have any effect upon the Seller, or the
business of SCORES or the operation of SCORES after the Closing Date, nor is
there any basis known to the Seller or Members for any such
action.  No litigation is pending, or, to the Seller’s or Members’
knowledge, threatened against the Seller, or the business of SCORES, or the
Purchased Assets which seeks to restrain or enjoin the execution and delivery of
this Agreement or any of the documents referred to herein or the consummation of
any of the transactions contemplated hereby. Neither the Seller nor the Members
is subject to any judicial injunction or mandate or any quasi-judicial or
administrative order or restriction directed to or against them which would
affect the Seller or the business of SCORES.

      
        
           

        

        
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      Section
5.9  Taxes.  The
Seller has timely and accurately 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.  The Seller is not delinquent in the
payment of any tax or governmental charge of any nature.  Neither the
Seller nor the Members has knowledge of any liability for any tax to be imposed
by any taxing authorities 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 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 the Seller have been audited by any taxing
authority.  Neither the Seller nor the Members has knowledge of any
additional assessments, adjustments or contingent tax liability (whether federal
or state) of any nature whatsoever, whether pending or threatened against the
Seller for any period, nor of any basis for any such assessment, adjustment or
contingency.  There are no agreements between the 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 5.10  Financial
Statements.  Seller has delivered to Purchaser its unaudited
income statement for the eleven months ending November 30, 2007 (the “Financial
Statements”). Such Financial Statements are in accordance with the books and
records of the Seller and fairly represent the financial position of the Seller
and the results of operations as of the date indicated, in each case in
conformity with generally accepted accounting principles applied on a consistent
basis.

      

      Section 5.1 1  No Material Adverse
Change.  Since the date of the Financial Statements, Seller has
conducted its 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 Purchased Assets or business or the
financial condition or other operations of Seller or SCORES, (ii) acquisition or
disposition of any material asset by Seller or any contract or arrangement
therefore, otherwise then for fair value in the ordinary course of business,
(iii) material change in Seller’s accounting principles, practices or methods or
(iv) incurrence of any material indebtedness.

      

      Section 5.12   Labor
Matters.  The Seller 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 the Seller
any labor disputes, strikes or work stoppages.  To the best of
Seller’s and Members’ knowledge, the Seller 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 its knowledge, is not
engaged in any unfair labor practices.

      
        
           

        

        
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      Section 5.13   Compliance with
Laws.  The Seller is, and at all times prior to the date
hereof, has been in compliance with all statutes, orders, rules, ordinances and
regulations applicable to it or to the ownership of its assets or the operation
of its businesses, except for failures to be in compliance that would not have a
material adverse effect on the business, properties, condition (financial or
otherwise) or prospects of the Seller.  The Seller has no basis to
expect, nor has it received any order or notice of any such violation or claim
of violation of any such statute, order, rule, ordinance or regulation by the
Seller.  Schedule 5.13 sets forth all licenses and permits held by the
Seller used in the operation of SCORES, all of which are in good standing and in
effect as of the Closing Date.  These licenses and permits represent
all of the licenses and permits required by the Seller for the operation of
SCORES.

      

      Section
5.14   Title to Properties;
Encumbrances.   Except as set forth in Schedule 5.14, the
Seller has good and marketable title to all of the Purchased Assets, which
represent all of the assets, personal, tangible, and intangible, that are
material to the condition (financial or otherwise), business, operations or
prospects of SCORES, free and clear of all mortgages, claims, liens, security
interests, charges, leases, encumbrances and other restrictions of any kind and
nature.

      

      Section 5.15   Contracts
and Leases.  Except as previously provided to
Purchaser, the Seller does not (i) have any leases of personal property relating to
the Purchased Assets, whether as lessor or lessee; (ii)
have any contractual or other obligations relating to the Purchased Assets,
whether written or oral; and (iii) have given any power of attorney to any
person or organization for any purpose relating to the Purchased Assets or the
business of SCORES.  The Seller has previously provided to Purchaser
or will provide to Purchaser prior to the Closing Date each and every contract,
lease or other document relating to the Purchased Assets to which it is subject
or is a party or a beneficiary.  To Seller’s and Members’ knowledge,
such contracts, leases or other documents are valid and in full force and effect
according to their terms and constitute legal, valid and binding obligations of
the Seller and the other respective parties thereto and are enforceable in
accordance with their terms.  Neither Seller nor the Members has any
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.  Except for the consent to assign the Lease
Agreement, 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, leases or other documents which
would have a material adverse effect on the Purchased Assets or the financial
condition or operation of SCORES after the Closing.

      

      Section
5.16   No Pending
Transactions.  Except for the transactions contemplated by this
Agreement and the Related Transactions contemplated in Section 4.4 herein, the
Seller is not 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 of any of the Purchased Assets; (ii) the sale,
merger, consolidation or recapitalization of the Seller; (iii) the acquisition
by the Seller of any operating business or the capital stock of any other person
or entity; (iv) the borrowing of money; (v) any agreement with any of the
respective officers, managers or affiliates of the Seller; (vi) the expenditure
of more than $10,000, in the aggregate, or the performance by the Seller
extending for a period more than one year from the date hereof, other than in
the ordinary course of business; or (vii) the sale of any outstanding securities
of the Seller.

      
        
           

        

        
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      Section 5.17   Insurance Policies.  Copies of all insurance
policies maintained by the Seller relating to the operation of SCORES has been
delivered or made available to Purchaser.  The policies of insurance
held by the Seller are in such amounts, and insure against such losses and
risks, as the Seller reasonably deems appropriate for its 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.

      

      Section
5.18   No
Default.  Seller is not in default under any term or condition
of any instrument evidencing, creating or securing any indebtedness
of  the Seller, and there has been no default in any material
obligation to be performed by Seller under any other contract, lease, agreement,
commitment or undertaking to which the Seller is a party or by which it or its
assets or properties are bound, nor has Seller waived any material right under
any such contract, lease, agreement, commitment or undertaking.

      

      Section 5.19   Books and
Records.  The books of account, minute books, stock record
books and other records of the Seller, all of which have been made available to
Purchaser, are accurate and complete and have been maintained in accordance with
sound business practices.

      

      Section 5.20   Environmental.  The
Seller has not received any citation, directive, letter or other communication,
written or oral, or any notice of any proceeding, claim or lawsuit relating to
any environmental issue arising out of the ownership or occupation of the
Premises, and there is no basis known to the Seller or the Members for any such
action.

      

      Section
5.21   Brokerage
Commission.  The Seller represents and warrants that it shall
be responsible for any broker or finder’s fee due or payable in connection with
this Agreement or the transactions contemplated hereby, including any fees due
Lasman Property  Group, Inc.  In the event of a claim for
broker’s or finder’s fees or commissions in connection with the transactions
contemplated hereby by any third party, then Seller shall indemnify, defend and
hold harmless Purchaser and Rick’s from same.

      

      Section
5.22   Disclosure.  No
representation or warranty of the Seller or the Members contained in this
Agreement (including the exhibits and schedules 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.

      
        
           

        

        
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      ARTICLE
VI

      REPRESENTATIONS
AND WARRANTIES

      OF
PURCHASER AND RICK’S

      

      Purchaser
and Rick’s hereby represent and warrant to the Seller as follows:

      

      Section
6.1  Organization, Good Standing
and Qualification.

      

      
        	
                 
      

              	
                (i)

              	
                Purchaser
      (i) is an entity duly organized, validly existing and in good standing
      under the laws of the state of Nevada, (ii) has all requisite power and
      authority to carry on its business, and (iii) is duly qualified to
      transact business and is in good standing in all jurisdictions where its
      ownership, lease or operation of property or the conduct of its business
      requires such qualification, except where the failure to do so would not
      have a material adverse effect to
Purchaser.

              

      

      

      
        	
                 
      

              	
                (ii)

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

              

      

      

      Section
6.2  Authorization.  Purchaser
is a corporation duly organized in the state of Nevada and has full power,
capacity, and authority to enter into this Agreement and perform the obligations
contemplated hereby.  Rick’s is a corporation duly organized in the
state of Texas and has full power, capacity, and authority to enter into this
Agreement and perform the obligations contemplated hereby.  All action
on the part of Purchaser and Rick’s necessary for the authorization, execution,
delivery and performance of this Agreement by it has been taken or will be taken
prior to the Closing Date.  This Agreement, when duly executed and
delivered in accordance with its terms, will constitute legal, valid, and
binding obligations of Purchaser and Rick’s enforceable against each of them 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
6.3  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 or Rick’s in connection with the execution and
delivery by Purchaser or Rick’s of this Agreement or the consummation and
performance of the transactions contemplated hereby other than as may be
required under the federal securities laws.

      

      Section
6.4  Compliance with Filing
Obligations.  Rick’s has filed with the SEC all reports,
schedules and statements required to be filed by it under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) and will, as of the
Closing Date, have filed all reports required of it under the Exchange
Act.

      

      Section
6.5  No
Conflicts.  The execution and delivery of this Agreement by the
Purchaser and Rick’s does not, and the performance and consummation of the
transactions contemplated hereby by the Purchaser and Rick’s will not (i)
conflict with the articles of incorporation or bylaws of the Purchaser or
Rick’s; (ii) conflict with or result in a breach or violation of, or default
under, or give rise to any right of acceleration or termination of, any of the
terms, conditions or provisions of any note, bond, lease, license, agreement or
other instrument or obligation to which the Purchaser or Rick’s is a party or by
which the Purchaser’s or Rick’s assets or properties are bound; or (iii) result
in the creation of any encumbrance on any of the assets or properties of the
Purchaser or Rick’s

      
        
           

        

        
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Purchase Agrement - Page 13

          
            

          

        

        
           

        

      

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

      

      Section
6.7  Disclosure.  No
representation or warranty of the Purchaser or Rick’s  contained in
this Agreement (including the exhibits and schedules hereto) contains any untrue
statement of a material fact 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.

      

      ARTICLE
VII

      CONDITIONS
TO CLOSING OF

      SELLER
AND THE MEMBERS

      

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

      

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

      

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

      

      Section
7.3  Delivery of
Certificate.  Purchaser and Rick’s shall provide to Seller
certificates, dated the Closing Date and signed by the President of Purchaser
and Rick’s to the effect set forth in Section 7.1 and 7.2 for the purpose of
verifying the accuracy of such representations and warranties and the
performance and satisfaction of such covenants and conditions.

      

      Section
7.4  Payment of Purchase
Price.  Purchaser shall have tendered the Purchase Price for
the Purchased Assets as referenced in Section 3.1 to the Seller concurrently
with the Closing.

      

      Section
7.5  Related
Transactions.  The Related Transactions set forth in Section
4.4 shall be consummated concurrently with the Closing.

      
        
           

        

        
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      Section
7.6  Assignment of Lease
Agreement.  The landlord under the Lease Agreement shall have
agreed to an assignment of the Lease Agreement to the
Purchaser.  Purchaser and Rick’s shall cooperate in any reasonable
manner requested by DI Food to assist DI Food in procuring said assignment from
Landlord.

      

      Section
7.7  Corporate
Resolutions.  Purchaser and Rick’s shall provide corporate
resolutions of their Board of Directors 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
7.8  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 against Purchaser or Rick’s.

      

      
        ARTICLE
VIII

      

      CONDITIONS
TO CLOSING OF

      PURCHASER
AND RICK’S

      

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

      

      Section 8.1  Representations and
Warranties Correct.  The representations and warranties made by
the Seller and the Members shall be true and correct as of the Closing
Date.

      

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

      

      Section
8.3  Delivery of
Certificate.  Seller and the Members shall provide to Purchaser
and Rick’s certificates, dated the Closing Date and signed by the
President/Manager of the Seller and the Members, respectively, to the effect set
forth in Section 8.1 and 8.2 for the purpose of verifying the accuracy of such
representations and warranties and the performance and satisfaction of such
covenants and conditions.

      

      Section
8.4  Delivery of Purchased
Assets.  The Seller shall have delivered to
Purchaser  all  instruments of  assignment and
bills of sale necessary to transfer to Purchaser good and marketable title to
the Purchased Assets.

      

      Section
8.5  Corporate
Resolutions.  The Seller shall provide to Purchaser resolutions
of the Seller which approves all of the transactions contemplated herein and
authorizes 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.

      
        
           

        

        
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      Section
8.6  Ownership of Purchased
Assets.  The Seller shall own not less than 100% of the
Purchased Assets, which represent all of the assets, personal, tangible and
intangible that are required and material to the condition (financial or
otherwise), business, operations or prospects of SCORES.

      

      Section
8.7  Consents; Transfer of
Licenses.  Purchaser shall possess all necessary permits,
zoning classifications and other authorizations, whether city, county, state or
federal, which may be needed or necessary to conduct  adult topless
entertainment with the sale of alcoholic beverages on the Premises, without any
interruption, and all such permits, zoning classifications and authorizations
shall be in good order, 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 SCORES.  All
necessary transfers of licenses and leases required for the continued operation
of SCORES shall have been obtained.  The sexually oriented business
license of SCORES shall be in full force and effect.

      

      Section
8.8  Related
Transactions.  The Related Transactions set forth in Section
4.4 shall be consummated concurrently with the Closing.

      .

      Section 8.9  Ability to
Audit.  The financial records of the Seller shall be maintained
and exist in such a manner as to allow for a certified audit as determined by
Purchaser and Rick’s.

      

      Section
8.10    Acceptable
Financing.  Purchaser and Rick’s shall have obtained financing
acceptable to them for the acquisition of the Purchased Assets.

      

      Section
8.11    Gross Revenue and EBITDA
Required.  SCORES shall have gross revenues of at least
$18,500,000 with EBITDA of not less than $4,000,000 for the preceding twelve
(12) months from the date of Closing.

      

      Section
8.12    No Assumption of
Liabilities.  Neither the Purchaser nor Rick’s shall assume any
liabilities as of the date of Closing.

      

      Section
8.13   Assignment of Lease
Agreement.  The landlord under the Lease Agreement shall have
agreed to an assignment of the Lease Agreement to the
Purchaser.  Purchaser and Rick’s shall cooperate in any reasonable
manner requested by DI Food to assist DI Food in procuring said assignment from
Landlord.

      

      Section
8.14    Satisfactory
Diligence.  Purchaser and Rick’s shall have concluded their due
diligence investigation of the Seller and the business of SCORES and their
respective assets and properties and all other matters related to the foregoing,
and shall be satisfied, in its sole discretion, with the results
thereof.

      

      Section
8.15    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 the Seller or any of its
assets.

      
        
           

        

        
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      Section
8.16    Board
Approval.  The Board of Directors of Purchaser and Rick’s shall
have approved all of the transactions contemplated hereby and shall have
authorized the execution, delivery and performance of all agreements and
documents referred to herein to which it is or is to be a party.

      

      

      ARTICLE
IX

      COVENANTS
OF THE SELLER AND THE MEMBERS

      

      Section
9.1      Stand
Still.  To induce Purchaser and Rick’s to proceed with this
Agreement, the Seller and the Members agree that until the Closing Date or the
termination of this Agreement, no representative of the Seller or the Members
will offer to sell or solicit any offer to purchase or engage in any discussions
or activities of any nature whatsoever, directly or indirectly, involving in any
manner the actual or potential sale, transfer, encumbrance, pledge,
collateralization or hypothecation of any of the Purchased
Assets.  The Seller and the Members hereby agree to advise the
Purchaser and Rick’s of any contact from any third party regarding the
acquisition of the Purchased Assets or other investment in the Seller, or of any
contact which would relate to the transactions contemplated by this
Agreement.

      

      Section
9.2      Access; Due
Diligence.  Between the date of this Agreement and the Closing
Date or the termination of this Agreement, Seller and the Members shall (a)
provide Purchaser and Rick’s and their authorized representatives full access to
all assets, plants, offices, warehouse and other facilities and properties
of  Seller and SCORES, and to the books and records of Seller and
SCORES; (b) permit the Purchaser and Rick’s to make inspections thereof; and (c)
cause the officers, managers, members and advisors of Seller to furnish the
Purchaser and Rick’s with such financial and operating data and other
information with respect to the business and properties of Seller and to discuss
with the Purchaser and Rick’s and their authorized representatives the affairs
of Seller as the Purchaser and Rick’s may from time to time reasonably
request.

      

      Section
9.3      Preservation of
Business.  Subsequent to the execution of this Agreement, and
prior to the Closing Date of this Agreement, the Seller will carry on its
business and operate the Seller and SCORES in substantially the same manner as
it has heretofore consistent with past practices, and:

      

      
        	
                 
      

              	
                (a)

              	
                The
      Seller will not authorize, declare, pay or effect any dividends or
      liquidate or distribute any common stock of the Seller or other equity
      interest or undertake any direct or indirect redemption, purchase or other
      acquisition of any equity interest of the
  Seller;

              

      

      

      
        	
                 
      

              	
                (b)

              	
                The
      Seller will not make any changes in its condition (financial or
      otherwise), liabilities, assets, or its business, or the business of
      SCORES, or in any of its business relationships, including relationships
      with suppliers or customers, that, when considered individually or in the
      aggre­gate, might reasonably be expected to have a material adverse
      effect on the Seller;

              

      

      
        
           

        

        
          Asset
Purchase Agrement - Page 17

          
            

          

        

        
           

        

      

      
        	
                 
      

              	
                (c)

              	
                The
      Seller shall perform in all material respects all of its obligations under
      material contracts, leases and other documents relating to or affecting
      any of its assets, property or its business or the business of
      SCORES;

              

      

      

      
        	
                 
      

              	
                (d)

              	
                The
      Seller will not sell, lease, transfer or assign any of its assets,
      tangible or intangible, other than inventory for a fair consideration, and
      in the ordinary course of business;

              

      

      

      
        	
                 
      

              	
                (e)

              	
                The
      Seller will not accelerate, terminate, modify or cancel any agreement,
      contract, lease or license (or series of related agreements, contracts,
      leases and licenses) involving more than $10,000 to which the Seller is a
      party, absent the consent of the
Purchaser;

              

      

      

      
        	
                 
      

              	
                (f)

              	
                The
      Seller will not make any loans to any person or entity, or guarantee any
      loan, absent the consent of the
Purchaser;

              

      

      

      
        	
                 
      

              	
                (g)

              	
                The
      Seller will not waive or release any right or claim held by the Seller,
      absent the consent of the
Purchaser;

              

      

      

      
        	
                 
      

              	
                (h)

              	
                The
      Seller will operate its business and the business of SCORES in the
      ordinary course and consistent with past practices so as to preserve its
      business organization intact, to retain the ser­vices of its employees
      and to preserve its goodwill and relationships with suppliers, creditors,
      cus­tomers, and others having business relationships with
      it;

              

      

      

      
        	
                 
      

              	
                (i)

              	
                The
      Seller will not issue any note, bond or other debt security or create,
      incur or assume, or guarantee any indebtedness for borrowed money or
      capitalized lease obligations, absent the consent of the
      Purchaser;

              

      

      

      
        	
                 
      

              	
                (j)

              	
                The
      Seller will not delay or postpone the payment of accounts payable and
      other liabilities outside the ordinary course of
  business;

              

      

      

      
        	
                 
      

              	
                (k)

              	
                The
      Seller will not enter into any employment agreements or enter into any
      other transaction with, any of its members, managers and
      employees;

              

      

      

      
        	
                 
      

              	
                (l)

              	
                The
      Seller will not make any change in any method, practice, or principle of
      accounting involving the Seller’s business or the assets of the
      Seller;

              

      

      

      
        	
                 
      

              	
                (m)

              	
                The
      Seller will not issue, sell or otherwise dispose of any of its capital
      stock or create, sell or dispose of any options, rights, conversion rights
      or other agreements or commitments of any kind relating to the issuance,
      sale or disposition of any of its equity
  interests;

              

      

      

      
        	
                 
      

              	
                (n)

              	
                The
      Seller will not reclassify, split up or otherwise change any of its common
      stock or capital structure;

              

      

      
        
           

        

        
          Asset
Purchase Agrement - Page 18

          
            

          

        

        
           

        

      

      
        	
                 
      

              	
                (o)

              	
                The
      Seller will not be a party to any merger, consolidation or other business
      combination; and

              

      

      

      
        	
                 
      

              	
                (p)

              	
                The
      Seller will not agree to take any action described in this Section
      9.3.

              

      

      

      

      ARTICLE
X

      INDEMNIFICATION

      

      Section
10.1  Indemnification from Seller
and the Members.  Seller and the Members, jointly and
severally, hereby agree to and shall indemnify, defend (with legal counsel
reasonably acceptable to Purchaser and Rick’s), and hold Purchaser and Rick’s,
its officers, directors, shareholders, employees, affiliates, agents, legal
counsel, successors and assigns (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) suffered or incurred by any of the
Purchaser Group arising from: (a) any misrepresentation by, or breach of any
covenant or warranty of the Seller or the Members contained in this Agreement,
or any exhibit, certificate, or other instrument furnished or to be furnished by
Seller or the Members hereunder; (b) any nonfulfillment of any agreement on the
part of Seller or the Members under this Agreement; (c) any liability or
obligation due to any third party by the Seller or the business of SCORES
arising or incurred at or prior to the Closing Date; or (d) any suit, action,
proceeding, claim or investigation against any of the Purchaser Group which
arises from or which is based upon or pertaining to the conduct or the operation
or liabilities of Seller or the business of SCORES at or prior to the Closing
Date.

       

      Section
10.2  Indemnification from
Purchaser and Rick’s.  Purchaser and Rick’s agree to and shall
indemnify, defend (with legal counsel reasonably acceptable to the Seller) and
hold each Member and Seller and its members, managers, employees, affiliates,
agents, legal counsel, successors and assigns (collectively, the "Seller 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 attorney’s
fees and costs of any suit related thereto)  suffered or incurred by
any of the Seller Group, arising from (a) any misrepresentation by, or breach of
any covenant or warranty of Purchaser or Rick’s contained in this Agreement or
any exhibit, certificate, or other agreement or instrument furnished or to be
furnished by Purchaser or Rick’s hereunder; (b) any nonfulfillment of any
agreement on the part of Purchaser or Rick’s under this Agreement; or (c) any
suit, action, proceeding, claim or investigation against any of the Seller Group
which arises from or which is based upon or pertaining to Purchaser’s conduct or
the operation of the business of SCORES subsequent to the Closing
Date.

      

      Section
10.3  Defense of
Claims.  If any lawsuit enforcement action or any attempt to
collect on an alleged liability is filed against any party entitled to the
benefit of indemnity hereunder, written notice thereof shall be given to the
indemnifying party within ten (10) business days after receipt
of  notice or other date by which action must be taken; provided that
the failure of any indemnified party to give timely notice shall not affect
rights to indemnification hereunder except to the extent that the indemnifying
party demonstrates damage caused by such failure.  After such notice,
the indemnifying party shall be entitled, if it so elects, to take control of
the defense and investigation of such lawsuit or action and to employ and engage
attorneys of its own choice to handle and defend the same, at the indemnifying
party's cost, risk and expense; and such indemnified party shall cooperate in
all reasonable respects, at its cost, risk and expense, with the indemnifying
party and such attorneys in the investigation, trial and defense of such lawsuit
or action and any appeal arising therefrom; provided, however, that the
indemnified party may, at its own cost, participate in such investigation, trial
and defense of such lawsuit or action and any appeal arising therefrom, but the
fees and expenses of such counsel shall be at the expense of such indemnified
party, except to the extent that (i) the employment thereof has been
specifically authorized by the indemnifying party in writing, (ii) the
indemnifying party has failed after a reasonable period of time to assume such
defense and to employ counsel or (iii) in such action there is, in the
reasonable opinion of such separate counsel, a material conflict on any material
issue between the position of the indemnifying party and the position of such
indemnified party, in which case the indemnifying party shall be responsible for
the reasonable fees and expenses of no more than one such separate
counsel.  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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      Section
10.4  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 10.5  Right to
Offset.  In the event that the Purchaser or Rick’s is entitled
to indemnification in accordance with Section 10.1 and 10.3 hereof, including
the payment by the Purchaser of any debts or liabilities resulting from the
purchase of the Purchased Assets which were incurred prior to the Closing Date,
then Purchaser or Rick’s shall have the right to offset any such amount from any
obligations that are then due and payable to the Seller.

      

      Section 10.6  Survival of Representations
and Warranties.  The respective representations, warranties and
indemnities given by the parties to each other pursuant to this Agreement shall
survive the Closing for a period ending twenty-four (24) months from the Closing
Date (“Survival Date”).  Notwithstanding anything to the contrary
contained herein, no claim for indemnification may be made against the party
required to indemnify (the “Indemnitor”) under this Agreement unless the party
entitled to indemnification (the “Indemnitee”) shall have given the Indemnitor
written notice of such claim as provided herein on or before the Survival
Date.  Any claim for which notice has been given prior to the
expiration of the Survival Date shall not be barred hereunder.

      
        
           

        

        
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      ARTICLE
XI

      MISCELLANEOUS

      

      Section
11.1  Termination of
Agreement.  This Agreement shall terminate and be of no force
and effect and all other agreements executed herewith shall be of no force and
effect if:  (i) the transactions contemplated by this Agreement,
including the sale of the Purchased Assets are not consummated on or before June
10, 2008, unless all of the parties hereto agree in writing to extend the
Agreement or (ii) all of the parties agree in writing to terminate this
Agreement sooner.

      

      Section
11.2  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
11.3  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 DI Food:

              	 
      	
                Attn:  Frank
      Lovaas

              
	 
      	 
      	 
      	
                3355
      Procyon Street

              
	 
      	 
      	 
      	
                Las
      Vegas, Nevada 89102

              
	 
      	 
      	 
      	 
      
	
                (b)

              	
                If
      to the Members:

              	 
      	
                3355
      Procyon Street

              
	 
      	 
      	 
      	
                Las
      Vegas, Nevada 89102

              
	 
      	 
      	 
      	 
      
	 
      	
                with
      a copy to:

              	 
      	
                Aaron
      Lovaas

              
	 
      	 
      	 
      	
                Shimon
      & Lovaas

              
	 
      	 
      	 
      	
                3016
      W. Charleston Blvd., Suite 210

              
	 
      	 
      	 
      	
                Las
      Vegas, Nevada 89102

              
	 
      	 
      	 
      	 
      
	
                (c)

              	
                if
      to Purchaser or Rick’s:

              	 
      	
                Rick’s
      Cabaret International, Inc.

              
	 
      	 
      	 
      	
                Attn:  Eric
      Langan, President/CEO

              
	 
      	 
      	 
      	
                10959
      Cutten Road

              
	 
      	 
      	 
      	
                Houston,
      Texas  77066

              
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
                with
      a copy to:

              	 
      	
                Robert
      D. Axelrod

              
	 
      	 
      	 
      	
                Axelrod,
      Smith & Kirshbaum

              
	 
      	 
      	 
      	
                5300
      Memorial Drive, Suite 700

              
	 
      	 
      	 
      	
                Houston,
      Texas  77007

              

      

      

      
        
          
          

        

        
          Asset
Purchase Agrement - Page 21

          
            

          

        

        
          
          

        

      

       

      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
11.4  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
11.5  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
11.6  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
11.7  Entire
Agreement.  This Agreement and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subject matter hereof and thereof and
supersede and cancel all prior representations, alleged warranties, statements,
negotiations, undertakings, letters, acceptances, understandings, contracts and
communications, whether verbal or written among the parties hereto and thereto
or their respective agents with respect to or in connection with the subject
matter hereof.

      

      Section
11.8  Choice of
Law.  This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Nevada, 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 Clark County, Nevada.

      

      Section
11.9  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.

      
        
           

        

        
          Asset
Purchase Agrement - Page 22

          
            

          

        

        
           

        

      

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

      

      Section
11.11    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
11.12    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
11.13    No Third-Party
Beneficiaries.  Nothing in this Agreement will confer any third
party beneficiary or other rights upon any person or any entity that is not a
party to this Agreement.

      

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

      

      Section
11.15    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
11.16    Exhibits Not
Attached.  Any exhibits not attached hereto on the date of
execution of this Agreement shall be deemed to be and shall become a part of
this Agreement as if executed on the date hereof upon each of the parties
initialing and dating each such exhibit, upon their respective acceptance of its
terms, conditions and/or form.

      

      Section
11.17    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.

      

      

      [SIGNATURES
APPEAR ON THE FOLLOWING PAGE.]

      
        
           

        

        
          Asset
Purchase Agrement - Page 23

          
            

          

        

        
           

        

      

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

      

      
        	 
      	
                RICK’S
      CABARET INTERNATIONAL, INC.

              
	 
      	 
      	 
      
	 
      	
                /s/ Eric Langan

              
	 
      	
                By:  Eric
      Langan, President

              
	 
      	 
      	 
      
	 
      	
                Date:

              	April
      17, 2008 
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                RCI
      ENTERTAINMENT (LAS VEGAS), INC.

              
	 
      	 
      	 
      
	 
      	
                /s/ Eric
      Langan

              
	 
      	
                By:  Eric
      Langan, President

              
	 
      	 
      	 
      
	 
      	
                Date:

              	April
      17, 2008
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                DI
      FOOD AND BEVERAGE OF LAS VEGAS, LLC

              
	 
      	 
      	 
      
	 
      	
                /s/
      Frank Lovaas

              
	 
      	
                By:

              	Frank
      Lovaas
	 
      	 
      	 
      
	 
      	
                Date:

              	April
      17, 2008
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                /s/
      Harold Danzig

              
	 
      	
                Harold
      Danzig, Individually,

              
	 
      	
                Member
      of DI Food and Beverage of Las Vegas, LLC

              
	 
      	 
      	 
      
	 
      	
                Date:

              	April
      17, 2008
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                /s/
      Frank Lovaas

              
	 
      	
                Frank
      Lovaas, Individually,

              
	 
      	
                Member
      of DI Food and Beverage of Las Vegas, LLC

              
	 
      	 
      	 
      
	 
      	
                Date:

              	April
      17, 2008
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                /s/ Dennis
      DeGori

              
	 
      	
                Dennis
      DeGori, Individually,

              
	 
      	
                Member
      of DI Food and Beverage of Las Vegas, LLC

              
	 
      	 
      	 
      
	 
      	
                Date:

              	April
      16, 2008

      

       

Asset Purchase Agrement -
Page 25

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