Document:

Exhibit 4.2

 

SECURED
BUSINESS PROMISSORY NOTE

 

	
  Omaha, Nebraska

  	
   

  	
  $10,400,000.00

  
	
  March 31, 2008

  	
   

  	
  March 30, 2009

  
	
  (Note Date)

  	
   

  	
  (Maturity Date)

  

 

 

On or before March 30,
2009, BALLANTYNE OF OMAHA, INC. (“Maker”) promises to pay to the order of FIRST
NATIONAL BANK OF OMAHA (“Lender”) the principal sum hereof, which shall be the
lesser of Ten Million Four Hundred Thousand Dollars ($10,400,000.00), or so
much thereof as may have been advanced by Lender pursuant to the Revolving
Credit Agreement dated as of March 10, 2003, as amended by that certain
First Amendment to Revolving Credit Agreement, dated as of August 31,
2003, as further amended by that Second Amendment to Revolving Credit
Agreement, dated as of February 27, 2004, as further amended by that Third
Amendment to Revolving Credit Agreement, dated as of August 30, 2004, as
further amended by that Fourth Amendment to Revolving Credit Agreement, dated
as of August 29, 2005, as further amended by that Fifth Amendment to
Revolving Credit Agreement, dated as of August 29, 2006, as further
amended by that Sixth Amendment to Revolving Credit Agreement, dated as of August 29,
2007, as further amended by that Seventh Amendment to Revolving Credit
Agreement, dated as of March 31, 2008, and as further amended from time to
time (the “Agreement”) between Maker and Lender.  All capitalized terms not defined herein
shall have their respective meanings as set forth in the Agreement.

 

Interest shall accrue on
the principal sum hereof outstanding from time to time at a floating per annum
interest rate equal to the Interim Revolving Credit Rate.  The Interim Revolving Credit
Rate will be adjusted on each Adjustment Date.

 

Interest shall accrue
from and after the date of advance to the date of repayment and shall be
calculated based on a year of 360 days, and actual days elapsed.  Notwithstanding anything to the contrary
elsewhere herein, after an Event of Default has occurred interest shall accrue
on the entire outstanding balance of principal and interest on all indebtedness
hereunder at a fluctuating rate equal to the Default Rate.  Interest shall be due no later than the tenth
day of each month.

 

The aggregate principal
balance outstanding under this Note together with all accrued but unpaid
interest thereon shall be due on the Interim Facility Termination Date.  All obligations of Maker under this Note
shall be payable in immediately available funds in lawful money of the United
States of America at the principal office of Lender in Omaha, Nebraska or at
such other address as may be designated by Lender in writing.  In the event that a payment day is not a
Business Day, the payment shall be due on the next succeeding Business Day.

 

Maker may at any time
prepay the principal amount outstanding under this Note if Maker has given Lender
at least two (2) Business Day’s prior written notice of its intention to
make such prepayment.  Any such
prepayment may be made without penalty.

 

All obligations of Maker
hereunder shall be secured by a first security interest in the 

 

 

Collateral, as more specifically described in the
Security Agreement, the Pledge Agreement and Control Agreement, subject to
liens permitted thereunder.

 

 

GENERAL TERMS

 

Maker’s liability for any
amounts owed under this Note and the other Operative Documents (the “Obligations”)
shall not be affected by any of the following:

 

Acceptance or retention
by Lender of other property or interests as security for the Obligations, or
for the liability of any person other than a Maker with respect to the
Obligations;

 

The release of all or any
of the Collateral or other security for any of the Obligations to any Maker; or

 

Failure by Lender to
resort to other security or any person liable for any of the Obligations before
resorting to the Collateral.

 

Lender is not required to
take any action whatsoever in respect of the Collateral.  Impairment or destruction of the Collateral
shall not release Maker of its liability hereunder.

 

Upon the failure of Maker
to make any payment of principal or interest when due hereunder or the occurrence
of any Event of Default, all of the Obligations shall, upon the election of
Lender and without notice or demand, mature and become immediately due and
payable; and Lender shall have all rights and remedies for default provided by
the Uniform Commercial Code, any other applicable law and/or the Operative
Documents.

 

All costs and expenses
incurred by Lender in enforcing its rights under this Note or any mortgage,
endorsement, surety agreement, guaranty relating thereto are the obligation of
Maker and are immediately due and payable. 
Interest shall accrue on such costs and expenses from the date of
incurrence at the rate specified herein for delinquent Note payments.  Each Maker, endorser, surety and guarantor
hereby waives presentment, protest, demand, notice of dishonor, and the defense
of any statute of limitations.

 

Without affecting the
liability of any Maker, endorser, surety or guarantor, the holder may, without
notice, renew or extend the time for payment, accept partial payments, release
or impair any Collateral or other security for the payment of this Note or
agree to sue any party liable on it.

 

Lender shall not be
deemed to have waived any of its rights upon or under this Note, or under any
mortgage, endorsement, surety agreement or guaranty, unless such waivers be in
writing and signed by Lender, as the case may be.  No delay or omission on the part of Lender in
exercising any right shall operate as a waiver of such right or any other
right.  A waiver on any one occasion
shall not be construed as a bar to or waiver of any right on any future
occasion.  All rights and remedies of
Lender on liabilities or the Collateral, whether evidenced hereby or by any 

 

2

 

other instrument or papers, shall be cumulative and
may be exercised singularly or concurrently.

 

Maker, if more than one,
shall be jointly and severally liable hereunder and all provisions hereof
regarding the liabilities or security of Maker shall apply to any liability or
any security of any or all of them.  This
Note shall be binding upon the heirs, executors, administrators, assigns or
successors of Maker; shall constitute a continuing agreement, applying to all
future as well as existing transactions, whether or not of the character contemplated
at the date of this Note, and if all transactions between Lender and Maker
shall be at any time closed, shall be equally applicable to any new  transactions thereafter, provided  that Lender’s interest in the Collateral
shall be limited to the extent provided in the Security Agreement, the Pledge
Agreement and the Control Agreement; shall benefit Lender, its successors and
assigns; and shall so continue in force notwithstanding any change in any
partnership party hereto, whether such change occurs through death, retirement
or otherwise.

 

All obligations of Maker
hereunder shall be payable in immediately available funds in lawful money of
the United States of America at the principal office of Lender.

 

This Note shall be
construed according to the laws of the State of Nebraska.

 

Unless the context
otherwise requires, all terms used herein which are defined in the Uniform
Commercial Code shall have the meanings therein stated.

 

Any provision of this
Note which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.

 

Executed as of this 31st
day of March, 2008.

 

 

	
   

  	
  BALLANTYNE OF OMAHA, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Christopher Stark

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Vice President of Operations

  
				

 

3

 

PROMISSORY NOTE SCHEDULE

 

Loan Advances and
Payments of Principal

 

BALLANTYNE OF
OMAHA, INC.

 

 

REVOLVING NOTE
ADVANCES AND PAYMENTS:

 

	
  Date

  	
   

  	
  Amount of

  Advance

  	
   

  	
  Amount of

  Principal Paid

  or Prepaid

  	
   

  	
  Amount of

  Interest Paid

  	
   

  	
  Unpaid

  Principal

  Balance

  	
   

  	
  Notation

  Made by

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

4ex10_1.htm

    
      

    

    Exhibit
10.1

     

    PURCHASE
AGREEMENT

    

    This
Purchase Agreement (the “Agreement”) is made and entered into this 31st day
of  March, 2008, by and among Behzad Bahrami (“Seller” or “Bahrami”),
Rick’s Cabaret International, Inc., a Texas corporation (“Rick’s) and RCI
Entertainment (Austin), Inc., a Texas corporation (“Buyer”).

    

    WHEREAS, the parties
previously entered a Purchase Agreement dated November 11, 2006, pursuant to
which Bahrami sold Buyer 51% of the membership interest of Playmates Gentlemen’s
Club, L.L.C., a Texas limited liability company (the “Company”);
and

    

    WHEREAS, pursuant to the
transaction documents, the Buyer serves as the Manager of the Company;
and

    

    WHEREAS, Seller owns the
remaining 49% of the membership interest of the Company (the “Membership
Interest”); and

    

    WHEREAS, the Buyer is a wholly
owned subsidiary of Rick’s; and

    

    WHEREAS, the Company owns an
adult entertainment cabaret known as “Playmates” (the “Club”), located at 8110
Springdale Road, Austin 78724 (the “Premises”); and

    

    WHEREAS, Seller desires to
sell the remaining 49% of the issued and outstanding Membership Interest of the
Company to Buyer on the terms and conditions set forth herein; and

    

    WHEREAS, Buyer desires to
purchase the remaining 49% of the issued and outstanding Membership Interest of
the Company from Seller on the terms and conditions set forth herein;
and

    

    WHEREAS, the Buyer and the
Seller are responsible for paying the operational expenses of the Company and
the Club (the “Expenses”); and

    

    WHEREAS, the Seller is
obligated to pay certain Expenses related to his 49% ownership of the Company
which have not yet been paid; and

    

    WHEREAS, the Buyer has paid
the Expenses related to its 51% ownership of the Company and has advanced the
payment of Expenses related to Seller’s 49% ownership of the Company;
and

    

    WHEREAS, as part of this
Agreement, the Buyer and Seller desire to agree upon the amount owed by Seller
to Buyer as its obligation to pay Seller’s portion of the Expenses;
and

    

    WHEREAS, as part of this
Agreement, Seller desires to pay in full the Expenses related to his 49%
ownership which have been advanced by Buyer.

    

    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 MEMBERSHIP INTEREST

    

    Section
1.1        Sale of the Membership
Interest.  Subject to the terms and conditions set forth in
this Agreement, at the Closing (as hereinafter defined) Seller hereby agrees to
sell, transfer, convey and deliver to Buyer 49% of the issued and outstanding
Membership Interest of the Company, free and clear of all encumbrances, and
shall deliver to Buyer certificates representing the Membership Interest, duly
endorsed to Buyer or accompanied by duly executed stock powers in form and
substance satisfactory to Buyer.

    

    Section
1.2         Purchase Price for the
Membership Interest.  As consideration for the purchase of the
Membership Interest, Buyer shall pay to Seller the following purchase price (the
“Purchase Price”):

     

    
      	
               
      

            	
              (a)

            	
              $701,711.30
      payable at Closing (subject to an offset as set forth in Section 1.4 below
      for amounts owed by Bahrami to the Buyer);
and

            

    

     

    
      	
               
      

            	
              (b)

            	
              35,000
      shares of restricted common stock $.01 par value of Rick’s (the “Shares”)
      to be valued at $20.00 per share.

            

    

     

    Section
1.3         Right of Bahrami to “Put”
Shares.

     

    

    
      	
               
      

            	
              (a)

            	
              On
      or after one (1) year from the date of Closing, Bahrami shall have the
      right, but not the obligation, to have Rick’s purchase from Bahrami 5,000
      Shares per month (the “Monthly Shares”) calculated at a price per share
      equal to $20.00 per share (“Value of the Shares”) until Bahrami has
      received an aggregate of $700,000 from (i) the sale of the Shares,
      regardless of whether sold to Rick’s, sold in the open market or in a
      private transaction or otherwise and (ii) the payment of any Deficiency
      (as hereinafter defined) by Rick’s. Bahrami shall notify Rick’s during any
      given month of his election to “Put” the Monthly Shares to Rick’s during
      that particular month and Rick’s shall have three (3) business days to
      elect to buy the Monthly Shares or instruct Bahrami to sell the Monthly
      Shares in the open market.   At Rick’s election, during any
      given month, it may either buy the Monthly Shares or, if Rick’s elects not
      to buy the Monthly Shares from Bahrami, then Bahrami shall sell the
      Monthly Shares in the open market and any deficiency between the amount
      which Bahrami receives from the sale of the Monthly Shares and the Value
      of the Shares (the “Deficiency”) shall be paid by Rick’s within three (3)
      business days after receipt of written notice from Bahrami of the sale of
      the Monthly Shares which shall provide the written sales confirmation and
      the amount of the Deficiency.  Rick’s obligation under this
      Section 1.3(a) to purchase the Monthly Shares from Bahrami shall terminate
      and cease at such time as Bahrami has received an aggregate amount of
      $700,000 from (i) the sale of the Shares, regardless of whether sold to
      Rick’s, sold in the open market or in a private transaction or otherwise,
      and (ii) the payments of any Deficiency by Rick’s.  Bahrami
      agrees to provide monthly statements to Rick’s as to the total number of
      Shares which Bahrami sold and the amount of proceeds derived
      therefrom.  Except as provided in Section 1.3(b), nothing
      contained in this Section 1.3(a) shall limit or preclude Bahrami from
      selling the Shares in the open market or require Bahrami to “Put” the
      Shares to Rick’s during any given
month.

            

    

    
      
        
           

        

         

      

      
        Purchase
Agreement - Page 2

        
          

        

      

      
         

      

    

     

    
      	
               
      

            	
              (b)

            	
              In
      the event Bahrami elects not to “put” the Shares to Rick’s, Bahrami shall
      not sell more than 10,000 Shares received by Bahrami under this Agreement
      during any ninety (90) day period in the open market, provided that
      Bahrami complies with Rule 144 of the Securities Act of 1933, as amended,
      in connection with his sale of the Shares.  In the event that
      Bahrami elects to sell the Shares pursuant to this Section 1.3, then any
      amount sold at prices less than the Value of the Shares shall be deemed to
      be sold at $20.00 for purposes of Section
1.3.

            

    

    

    Section
1.4        Offset of Purchase
Price.  Seller hereby agrees to offset from the cash portion of
the Purchase Price as set forth in Section 1.2(a) above,
$701,711.30  (“Amount of Offset”) which represents the portion of
Expenses related to his 49% ownership of the Company.

    

    ARTICLE
II

    CLOSING

    

    Section
2.1        The
Closing.  The closing of the transactions provided for in this
Agreement shall take place on or before March 5, 2008, or at such other time and
place as agreed upon in writing among the parties hereto (the
“Closing”).  The parties have agreed further to close at the law
offices of Axelrod, Smith & Kirshbaum, 5300 Memorial Drive, Suite 700,
Houston, Texas  77007.

    

    Section
2.2        Delivery and
Execution.  At the Closing the Seller shall deliver to Buyer
certificates evidencing the Membership Interest of the Company, free and clear
of any liens, claims, equities, charges, options, rights of first refusal or
encumbrances, duly endorsed to Buyer or accompanied by duly executed stock
powers in form and substance satisfactory to Buyer against delivery by Buyer to
the Seller of payment in an amount equal to the Purchase Price of the Membership
Interest being purchased by Buyer in the manner set forth in Section
1.2.

    

    ARTICLE
III

    REPRESENTATIONS
AND WARRANTIES

    OF
SELLER

    

    Seller
hereby represents and warrants to the Buyer and Rick’s as follows:

    

    Section
3.1.       Ownership of the Membership
Interest.  Seller owns, beneficially and of record, all of the
Membership Interest of the Company 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 Membership Interest 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 Membership Interest to Buyer as contemplated herein, Buyer will
receive good and valid title thereto, free and clear of any liens, claims,
equities, charges, options, rights of first refusal, encumbrances or other
restrictions (except those imposed by applicable securities
laws).

    
      
        
           

        

         

      

      
        Purchase
Agreement - Page 3

        
          

        

      

      
         

      

    

     

    Section
3.2        Authorization.   Bahrami
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 and for himself.  All action on the part of
Bahrami necessary for the authorization, execution, delivery and performance of
this Agreement by him has been taken and will be taken prior to Closing
Date.  This Agreement, when duly executed and delivered in accordance
with its terms, will constitute legal, valid and binding obligations of Bahrami
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
3.3        Consents.  No
consent of, approval by, order or authorization of, or registration, declaration
or filing by the Seller or the Company with any court or any governmental or
regulatory agency or authority having jurisdiction over the Seller or the
Company or any of its property or assets is required on the part of the Seller
or the Company (a) in connection with the consummation of the transactions
contemplated by this Agreement or (b) as a condition to the legality, validity
or enforceability as against the Company of this Agreement, excluding any
registration, declaration or filing the failure to effect which would not have a
material adverse effect on the financial condition of the Company.

    

    Section
3.4        Acquisition of Stock for
Investment.  The Seller understands that any issuance of the
Shares (as referenced in Section 1.2 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, and the Seller represents and
warrants to the Buyer and Rick’s that the Seller’s present intention is to
receive and hold the Shares for investment only and not with a view to the
distribution or resale thereof.

    

    Additionally,
the Seller understands that any sale of any the Shares issued, under current
law, will require either (a) the registration of the 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
all certificates representing ownership of the Shares acquired hereby until the
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.”

    
      
        
           

        

         

      

      
        Purchase
Agreement - Page 4

        
          

        

      

      
         

      

    

     

    Section
3.5        Sellers’ Access to
Information.  The Seller hereby confirms and represents that he
(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) has received a copy of Rick’s Form 14C filed with the SEC on
June 27, 2007; (c) has received a copy of the Form 8-K’s filed with the SEC on
January 28, 2008, February 11, 2008 and February 13, 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 he desires
to ask and all such questions have been answered to the full satisfaction of
each Seller.  The forms filed by Rick’s with the SEC as set forth in
Section 3.6(a), (b) and (c) are hereafter collectively referred to as “SEC
Reports”.

    

    Section
3.6        Purchase for
Investment.  The Seller is acquiring the Rick’s Shares for his
own account, for investment purposes only and not with view to any public resale
or other distribution thereof.  Seller acknowledges that he is an
Accredited Investor as that term is defined in Rule 501(a) of Regulation D of
the Securities Act of 1933, as amended.  Seller and his
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 him to make
a decision concerning its acquisition of the Shares, and that he possesses such
knowledge and experience in financial and business matters that he is capable of
evaluating the merits and risks of his investment hereunder.

    

    Section
3.7        Brokerage
Commission.  No broker or finder has acted for the Seller 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 Seller.

    

    Section
3.8        Disclosure.  No
representation or warranty of the Seller contained in this Agreement (including
the exhibits hereto) contains any untrue statement or omits to state a material
fact necessary in order to make the statements contained herein or therein, in
light of the circumstances under which they were made, not
misleading.

    

    ARTICLE
IV

    REPRESENTATIONS
AND WARRANTIES

    OF
BUYER

    

    Buyer
hereby represents and warrants to Seller as follows:

    
      
        
        

         

      

      
        Purchase
Agreement - Page 5

        
          

        

      

      
         

      

    

     

    Section
4.1        Organization, Good Standing
and Qualification.  Buyer (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 Buyer.

    

    Section
4.2        Authorization.  Buyer
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 Buyer necessary for
the authorization, execution, delivery and performance of this Agreement by it
has been or will be taken.  This Agreement, when duly executed and
delivered in accordance with its terms, will constitute legal, valid, and
binding obligations of Buyer enforceable against Buyer in accordance with its
terms, except as may be limited by bankruptcy, insolvency, and other similar
laws affecting creditors' rights generally or by general equitable
principles.

    

    Section
4.3        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 Buyer in connection with the execution and delivery by
Buyer 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
4.4        Disclosure.  No
representation or warranty of Buyer contained in this Agreement (including the
exhibits hereto) contains any untrue statement or omits to state a material fact
necessary in order to make the statements contained herein or therein, in light
of the circumstances under which they were made, not misleading.

    

    Section
4.5        Brokerage
Commission.  No broker or finder has acted for the Buyer 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 Buyer.

    

    ARTICLE
V

    REPRESENTATIONS
AND WARRANTIES

    OF
RICK’S

    

    Rick’s
hereby represents and warrants to Seller as follows:

    

    Section
5.1        Organization, Good Standing
and Qualification.  Rick’s (i) is a corporation 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.

    
      
        
           

        

         

      

      
        Purchase
Agreement - Page 6

        
          

        

      

      
         

      

    

     

    Section
5.2        Authorization.  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 Rick’s necessary for
the authorization, execution, delivery and performance of this Agreement by it
has been or will be taken.  This Agreement, when duly executed and
delivered in accordance with its terms, will constitute legal, valid, and
binding obligations of Rick’s enforceable against it 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
5.3        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 the Buyer or Rick’s in connection with the execution and
delivery by 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
5.4        Disclosure.  No
representation or warranty of Rick’s contained in this Agreement (including the
exhibits hereto) contains any untrue statement or omits to state a material fact
necessary in order to make the statements contained herein or therein, in light
of the circumstances under which they were made, not misleading.

    

    Section
5.5        Brokerage
Commission.  No broker or finder has acted for 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 Rick’s.

    

    Section
5.6        Compliance with Laws;
Permits.  Except as disclosed in the SEC Reports, Rick’s is,
and at all times prior to the date hereof has been, to the best of its
knowledge, in compliance with all statutes, orders, rules, ordinances and
regulations applicable to it or to the operation of its business or 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 or condition (financial or otherwise) of Rick’s.

    

    Section
5.7        No
Conflicts.  The execution and delivery of this Agreement by
Rick’s does not, and the performance and consummation of the transactions
contemplated hereby by the Buyer and Rick’s , will not (i) conflict with the
articles of incorporation or bylaws of 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 Rick’s is a party or by which Rick’s assets or properties are bound; (iii)
result in the creation of any encumbrance on any of the assets or properties of
the Buyer; or (iv) violate any law, rule, regulation or order applicable to
Rick’s or any of Rick’s securities, assets or properties

    

    Section
5.8        No
Default.  Rick’s is not (a) in violation of any provision of
its articles of incorporation or bylaws or (b) in default under any term or
condition of any instrument evidencing, creating or securing any indebtedness of
Rick’s, and there has been no default in any material obligation to be performed
by Rick’s under any other contract, lease, agreement, commitment or undertaking
to which it is a party or by which it or its assets or properties are bound, nor
has Rick’s waived any material right under any such contract, lease, agreement,
commitment or undertaking.

    
      
        
           

        

         

      

      
        Purchase
Agreement - Page 7

        
          

        

      

      
         

      

    

     

    Section
5.9        Pending
Claims.  Except as described in the SEC Reports, there is no
claim, suit, arbitration, investigation, action or other proceeding, whether
judicial, administrative or otherwise, now pending or, to the best of the Rick’s
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 a material adverse effect upon Rick’s, nor is
there any basis known to Rick’s for any such action.  No litigation is
pending, or, to Rick’s knowledge, threatened against Rick’s or its assets or
properties 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 thereby or hereby.   Rick’s is
not subject to any judicial injunction or mandate or any quasi-judicial or
administrative order or restriction directed to or against it which would have a
material adverse affect on the Buyer.

    

    ARTICLE
VI

    CONDITIONS
TO CLOSING

    

    The
obligations of the parties to effect the transactions contemplated hereby are
subject to the satisfaction at or prior to the Closing of the following
conditions:

    

    Section
6.1        Conditions to Obligations of
Buyer and Rick’s.

     

    (a)       Representations and
Warranties of the Seller.  The representations and warranties
of the Seller shall be true and correct on the date hereof and on and as of the
Closing Date, as though made on and as of the Closing Date.

     

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

     

    (c)       Delivery of
Certificates.  The Seller shall provide to Buyer certificates,
dated as of the Closing Date and signed by Seller to effect set forth in Section
6.1(a) and 6.1(b) for the purpose of verifying the accuracy of such
representations and warranties and the performance and satisfaction of such
covenants and conditions.

     

    (d)      
[Left blank.]

     

    (e)       Delivery of Membership
Interest.  The Seller shall deliver or cause to be delivered to
Buyer originally issued certificate representing the Membership Interest of the
Company duly endorsed over to the Buyer in a form satisfactory to the
Buyer.

     

    (f)       
Third-Party
Consents.  Any and all consents or waivers required from third
parties relating to this Agreement or any of the other transactions contemplated
hereby shall have been obtained.

    
 

    
      
        
          
             

          

           

        

        
          Purchase
Agreement - Page 8

          
            

          

        

        
           

        

      

    

     

    (g)       No Actions or
Proceedings.  No claim, action, suit, investigation or
proceeding shall be pending or threatened before any court or governmental
agency which presents a substantial risk of the restraint or prohibition of the
transactions contemplated by this Agreement.

     

    (h)       Government
Approvals.  All authorizations, permits, consents, orders,
licenses or approvals of, or declarations or filings with, or expiration of
waiting periods imposed by, any governmental entity necessary for the
consummation of the transactions contemplated by this Agreement shall have been
filed, occurred or been obtained.

     

    Section
6.2        Conditions to Obligations of
the Company and the Seller

    

    (a)       Representations, Warranties
and Agreements of Buyer and Rick’s.  The representations and
warranties of Buyer and Rick’s shall be true and correct on the date hereof and
on and as of the Closing Date, as though made on and as of the Closing
Date.

     

    (b)       Covenants.  All
covenants, agreements and conditions contained in this Agreement to be performed
by the Buyer or Rick’s on or prior to the Closing Date shall have performed or
complied with in all respects.

     

    (c)       Delivery of
Certificates.  Buyer and Rick’s shall provide to the Company
and Seller certificates dated as of the Closing Date and signed by a
representative of the Buyer and Rick’s to the effect set forth in Section 6.2(a)
and 6.2(b) for the purpose of verifying the accuracy of such representations and
warranties and the performance and satisfaction of such covenants and
conditions.

     

    (d)       Resolutions.  Buyer
and Rick’s shall deliver resolutions of the Buyer and Rick’s, which 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.

     

    (e)       Payment of Purchase
Price.  Buyer (i) shall have tendered the cash portion of the
Purchase Price set forth in Section 1.2(a) less the Amount of Offset as provided
for in Section 1.4, and (ii) shall have delivered the Shares representing a
portion of the Purchase Price to Seller as set forth in Section 1.2, or shall
deliver a letter of instruction to the transfer agent instructing the issuance
of the Shares to Seller.

    

    (f)        Third Party
Consents.  Any and all consents or waivers required from third
parties relating to this Agreement or any of the other transactions contemplated
hereby shall have been obtained.

    

    (g)       No Actions or
Proceedings.  No claim, action, suit, investigation or
proceeding shall be pending or threatened before any court or governmental
agency which presents a substantial risk of the restraint or prohibition of the
transactions contemplated by this Agreement.

    

    (h)       Government
Approvals.  All authorizations, permits, consents, orders or
approvals of, or declarations or filings with, or expiration of waiting periods
imposed by, any governmental entity necessary for the consummation of the
transactions contemplated by this Agreement shall have been filed, occurred or
been obtained.

     

    
      
        
           

        

         

      

      
        Purchase
Agreement - Page 9

        
          

        

      

      
         

      

    

     

    ARTICLE
VII

    INDEMNIFICATION

    

    Section
7.1        Indemnification from the
Seller.  The Seller agrees to and shall indemnify, defend (with
legal counsel reasonably acceptable to Buyer), and hold Buyer, its officers,
directors, shareholders, employees, affiliates, parent, agents, legal counsel,
successors and assigns  (collectively, the “Buyer Group”) harmless at
all times after the date of this Agreement, from and against any and all
actions, suits, claims, demands, debts, liabilities, obligations, losses,
damages, costs, expenses, penalties or injury  (including reasonable
attorneys fees and costs of any suit related thereto) (collectively,
“Indemnifiable Loss” or “Indemnifiable Losses”) suffered or incurred by any or
all of  the Buyer Group arising from or related to: (a) any material
misrepresentation by, or material breach of any covenant or warranty
of  the Seller  contained in this Agreement, or any exhibit,
certificate, or other instrument furnished or to be furnished by the Seller
hereunder; or (b) any nonfulfillment of any material agreement on the part
of  the Seller under this Agreement.

    

    Section
7.2        Indemnification from
Buyer.  Buyer agrees to and shall indemnify, defend (with legal
counsel reasonably acceptable to Seller) and hold the Seller and his
agents,  affiliates, agents, legal counsel, heirs, successors and
assigns, (collectively, the "Seller’s Group") harmless at all times after the
date of the Agreement from and against any and all actions, suits, claims,
demands, debts, liabilities, obligations, losses, damages, costs, expenses,
penalties or injury (including reasonably attorneys fees and costs of any suit
related thereto) suffered or incurred by any or all of the Seller’s Group,
arising from or related to: (a) any material misrepresentation by, or material
breach of any covenant or warranty of Buyer contained in this Agreement or any
exhibit, certificate, or other agreement or instrument furnished or to be
furnished by Buyer hereunder; (b) any nonfulfillment of any material agreement
on the part of Buyer under this Agreement; (c) any alleged act or omission on
the part of the Company occurring prior to, or subsequent to the Closing Date;
(d) any and all actions, suits, claims, demands, debts, liabilities,
obligations, losses, damages, costs, expenses, penalties or injury (including
reasonably attorneys fees and costs of any suit related thereto) which have
been, or may hereafter be asserted against the Club or the Company by any
third-party; (e) any expenses, debts, obligations or liabilities of the Company
incurred prior to the Closing Date; or (f) any expenses, debts, obligations or
liabilities of the Company  incurred subsequent to the Closing
Date.

    

    Section
7.3        Defense of
Claims.  If any lawsuit or enforcement action is filed against
any party entitled to the benefit of indemnity hereunder, written notice thereof
shall be given to the indemnifying party as promptly as practicable (and in any
event not less than fifteen (15) days prior to any hearing date or other date by
which action must be taken); 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 actual 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.  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.

    
      
        
           

        

         

      

      
        Purchase
Agreement - Page 10

        
          

        

      

      
         

      

    

     

    Section
7.4        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 individual’s 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.

    

    ARTICLE
VIII

    LIMITED
MUTUAL RELEASE OF CLAIMS

    

    Section
8.1        Release by Seller.
The Seller hereby releases and discharges Buyer, Rick’s and the Company, their
officers, directors, shareholders, employees, attorneys, affiliates and assigns
from any and all claims, demands, or causes of action, relating to the
activities, operations, or management of the Company or the Club, or any
expenses incurred by the Company or the Club; PROVIDED, HOWEVER, Seller does not
release (i) Buyer or the Company from the Lease Agreement (and accompanying
agreements, covenants, and obligations executed in connection therewith, or made
a part thereof, including that certain  Lease Guaranty) entered into
by and between Seller and Company on or about November 10, 2006, (ii) Rick’s or
the Buyer from the Purchase Agreement (and accompanying agreements, covenants,
and obligations executed in connection therewith, or made a part thereof),
entered into by and between Seller, the Company, Rick’s and the Buyer dated the
10th
day of October 2006, (iii) any of the parties to the Purchase Agreement (and
accompanying agreements, covenants, and obligations executed in connection
therewith, or made a part thereof), entered into by and among Spiros Partners,
Ltd., Seller, RCI Debit Services, Inc., and others, dated August 4, 2006, or
(iv) any other matter unrelated to the activities, operations, management of, or
expenses incurred by, the Company or the Club; all such other agreements,
liabilities, obligations, commitments or responsibilities shall remain in full
force and effect.

    

    Section
8.2        Release by Buyer, Rick’s and
the Company.  Company, Buyer and Rick’s hereby release and
discharge the Seller from any and all claims, demands, or  causes of
action relating to the activities, operations, or management of the Company or
Club, any debts or capital contributions allegedly owed by Seller to Company or
Club, or any expenses incurred by the Company or the Club; PROVIDED, HOWEVER,
Company, Buyer, and Rick’s do not release (i) Seller from the Lease Agreement
(and accompanying agreements, covenants, and obligations executed in connection
therewith, or made a part thereof, including that certain  Lease
Guaranty) entered into by and between Seller and Company on or about November
10, 2006, (ii) Seller from the Purchase Agreement (and accompanying agreements,
covenants, and obligations executed in connection therewith, or made a part
thereof), entered into by and between Seller, the Company, Rick’s and
the  Buyer dated the 10th day of
October 2006, (iii) any of the parties to the Purchase Agreement (and
accompanying agreements, covenants, and obligations executed in connection
therewith, or made a part thereof), entered into by and among Spiros Partners,
Ltd., Seller, RCI Debit Services, Inc., and others, dated August 4, 2006, or
(iv) any other matter unrelated to the activities, operations, management of, or
expenses incurred by, the Company or the Club; all such agreements, liabilities,
obligations, commitments or responsibilities shall remain in full force and
effect

    
      
        
           

        

         

      

      
        Purchase
Agreement - Page 11

        
          

        

      

      
         

      

    

     

    ARTICLE
IX

    MISCELLANEOUS

    

    Section
9.1        Amendment;
Waiver.  Neither this Agreement nor any provision hereof may be
amended, modified or supplemented unless in writing, executed by all the parties
hereto.  Except as otherwise expressly provided herein, no waiver with
respect to this Agreement shall be enforceable unless in writing and signed by
the party against whom enforcement is sought.  Except as otherwise
expressly provided herein, no failure to exercise, delay in exercising, or
single or partial exercise of any right, power or remedy by any party, and no
course of dealing between or among any of the parties, shall constitute a waiver
of, or shall preclude any other or further exercise of, any right, power or
remedy.

    

    Section
9.2        Notices.  Any
notices or other communications required or permitted hereunder shall be
sufficiently given if in writing and delivered in person, transmitted by
facsimile transmission (fax) or sent by registered or certified mail (return
receipt requested) or 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 the Seller:

            	
              Behzad
      Bahrami

            
	 
      	 
      	
              9010
      IH 35, Suite112

            
	 
      	 
      	
              Austin,
      Texas 78753

            
	 
      	 
      	
              Phone:
      (512) 658-4333

            
	 
      	 
      	
              Fax:
      (512) 371-0401

            
	 
      	 
      	 
      
	 
      	
              with
      a copy to:

            	
              Douglass
      D. Hearne, Jr.

            
	 
      	 
      	
              700
      Lavaca, Suite 910

            
	 
      	 
      	
              Austin,
      Texas 78701

            
	 
      	 
      	
              Fax:
      (512) 494-8819

            
	 
      	 
      	 
      
	
              (b)

            	
              if
      to Buyer/Rick’s:

            	
              RCI
      Entertainment (Austin), Inc.

            
	 
      	 
      	
              Attn:  Eric
      Langan, President

            
	 
      	 
      	
              10959
      Cutten Road

            
	 
      	 
      	
              Houston,
      Texas  77066

            
	 
      	 
      	
              Fax:  (281)
      397-6765

            
	 
      	 
      	 
      
	 
      	
              with
      a copy to:

            	
              Robert
      D. Axelrod

            
	 
      	 
      	
              Axelrod
      Smith & Kirshbaum

            
	 
      	 
      	
              5300
      Memorial Drive, Suite 700

            
	 
      	 
      	
              Houston,
      Texas  77007

            
	 
      	 
      	
              Fax:  (713)
      552-0202

            

    

    
      
        
           

        

         

      

      
        Purchase
Agreement - Page 12

        
          

        

      

      
         

      

    

     

    A notice
or communication will be effective (i) if delivered in person or by overnight
courier, on the business day it is delivered, (ii) if transmitted by telecopier,
on the business day of actual confirmed receipt by the addressee thereof, and
(iii) if sent by registered or certified mail, three (3) business days after
dispatch.

    

    Section
9.3        Severability.  Whenever
possible, each provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Agreement is held to be prohibited by or invalid under applicable law, such
provision will be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this Agreement.

    

    Section
9.4        Assignment; Successors and
Assigns.  Except as otherwise provided herein, the provisions
hereof shall inure to the benefit of, and be binding upon, the successors and
permitted assigns of the parties hereto.  No party hereto may assign
its rights or delegate its obligations under this Agreement without the prior
written consent of the other parties hereto, which consent will not be
unreasonably withheld.

    

    Section
9.5        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
9.6        Jurisdiction.  This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of Texas, without regard to principles of conflict of
laws.  The parties agree that venue for purposes of construing or
enforcing this Agreement shall be proper in Harris County, Texas, if litigation
is initiated by the Seller or Travis County, Texas, if litigation is initiated
by the Buyer.

    

    Section
9.7        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.

    
      
        
           

        

         

      

      
        Purchase
Agreement - Page 13

        
          

        

      

      
         

      

    

     

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

    

    Section
9.9        Section
Headings.  The section and subsection headings in this
Agreement are used solely for convenience of reference, do not constitute a part
of this Agreement, and shall not affect its interpretation.

    

    Section
9.10      No Third-Party
Beneficiaries.  Nothing in this Agreement will confer any third
party beneficiary or other rights upon any person (specifically including any
employees of the Company) or any entity that is not a party to this
Agreement.

    

    Section
9.11      Attorneys’
Review.  In connection with the negotiation and drafting of
this Agreement, the parties represent and warrant to each other they have had
the opportunity to be advised by attorneys of their own choice.

    

    Section
9.12      Further
Assurances.  Each party covenants that at any time, and from
time to time, after the Closing Date, it will execute such additional
instruments and take such actions as may be reasonably be requested by the other
parties to confirm or perfect or otherwise to carry out the intent and purposes
of this Agreement.

    

    Section
9.13      Survival of Representations,
Warranties and Covenants.  All representations and warranties
made in, pursuant to or in connection with this Agreement shall survive the
execution and delivery of this Agreement for the maximum period allowed by
law.

    

    Section
9.14      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 (i) agree upon the text of a joint public
announcement or statement to be made by all of such parties or (ii) obtain
approval of the other parties hereto to the text of a public announcement or
statement to be made solely by the party desiring to make such public
announcement; provided, however, that if any party hereto is required by law to
make such public announcement or statement, then such announcement or statement
may be made without the approval of the other parties.

    

    Section
9.15      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
9.16      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.

    

    [SIGNATURES
APPEAR ON THE FOLLOWING PAGE.]

    
      
        
           

        

         

      

      
        Purchase
Agreement - Page 14

        
          

        

      

      
         

      

    

     

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

    

    
      	 
      	
              RCI
      ENTERTAINMENT (AUSTIN), INC.

            
	 
      	 
      
	 
      	
              /s/ Eric Langan

            
	 
      	
              By:  Eric
      Langan, President

            
	 
      	
              Date:

            
	 
      	 
      
	 
      	 
      
	 
      	
              RICK’S
      CABARET INTERNATIONAL, INC.

            
	 
      	 
      
	 
      	
              /s/ Eric Langan

            
	 
      	
              By:  Eric
      Langan, President

            
	 
      	
              Date:

            
	 
      	 
      
	 
      	 
      
	 
      	
              SELLER

            
	 
      	 
      
	 
      	
              /s/ Behzad Bahrami

            
	 
      	
              Behzad
      Bahrami, Individually

            
	 
      	
              Date:

            

    

     

     

    Purchase Agreement - Page
15

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