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Covenant Not to Compete

Category: Employment Agreements, Non Compete

COVENANT NOT TO COMPETE

THIS COVENANT NOT TO COMPETE (this “Agreement”) is made and effective as of the Effective Date, as defined in the Stock Purchase Agreement entered into by and between VCG Holding Company, a Colorado corporation, and Manana Entertainment, Inc. d/b/a Jaguar’s Gold Club Dallas and Bryan S. Foster on October 29, 2006 (the “Effective Date”), between Bryan S. (Niko) Foster, a resident of the State of Texas (“Prior Owner”), and VCG Holding Company, a Colorado corporation (“Employer”).

W I T N E S S E T H:

WHEREAS, all of the shares of common stock of Manana Entertainment, Inc., a Texas corporation d/b/a Jaguar’s Gold Club Dallas (“Dallas”) are to be acquired by Employer pursuant to a certain Stock Purchase Agreement (the “Purchase Agreement”); and

WHEREAS, Dallas thereafter will become wholly owned by Employer and will continue to conduct its respective business in the same manner as such business has been conducted by Dallas prior to the acquisition; and

WHEREAS, Prior Owner has been an owner of Dallas and has intimate knowledge of its business practices, which, if exploited by Prior Owner in contravention of this Agreement, would seriously, adversely and irreparably affect the interests of Employer and Dallas and the ability of Dallas to continue the business previously conducted by it; and

WHEREAS, to induce Employer to enter into the Purchase Agreement, make such cash payment to Prior Owner and consummate the other transactions contemplated by the Purchase Agreement, Prior Owner has agreed to execute and deliver this Agreement.

NOW, THEREFORE, in consideration of the transactions contemplated by the Purchase Agreement, the consideration paid and to be paid to Prior Owner under the Purchase Agreement, the above premises, the mutual promises and covenants of the parties hereto set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Prior Owner and Employer, intending to be legally bound, agree as follows:

1. Definitions. As used herein, the following terms shall have the following meanings unless the context otherwise requires:

(INITIALED: BF, MO)

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

b. “Business” shall mean the operations of Dallas as conducted as of the Effective Date.



c. “Competing Business” shall mean any business organization of whatever form engaged, either Directly or Indirectly, in any adult entertainment or any business or enterprise which is the same as, or substantially the same as, Dallas.

d. “Directly or Indirectly” shall mean (i) acting as an agent, representative, officer, director, or independent contractor of a Competing Business; (ii) participating in any such Competing Business as an owner, partner, limited partner, joint venturer, creditor or shareholder (except as a shareholder holding less than five percent (5%) interest in a corporation whose shares are actively traded on a regional or national securities exchange or in the over-the-counter market); and (iii) communicating to any such Competing Business the names or addresses or any other information concerning any past, present, or identified prospective client or customer of Dallas or an entity having title to the goodwill of Dallas.

e. “Restricted Period” shall mean the period commencing with the Effective Date and ending on the fifth (5th) anniversary thereof.

f. “Confidential Information” shall include any and all information related to the purpose and business of Dallas which is proprietary and not general public knowledge, specifically including (but without limiting the generality of the foregoing) any financial statements, appraisals, analysis data, cost analyses or strategies, clients, customer lists, suppliers, the sales price of Dallas paid by Employer, or any other matters regarding Dallas. Information that is orally disclosed will be considered “Confidential Information” if Employer indicates to Prior Owner at the time of disclosure the confidential or proprietary nature of the information and provides a written summary of such information to Prior Owner within ten (10) days after the initial oral disclosure thereof. Any technical or business information of a third-person furnished or disclosed shall be deemed “Confidential Information” of Dallas unless otherwise specifically indicated in writing to the contrary.

2. Agreement Not to Compete. Unless otherwise consented to in writing by Employer, Prior Owner agrees that during the Restricted Period, he will not, within the Area, either Directly or Indirectly, on his own behalf or in the service or on behalf of others, engage in any Competing Business or provide managerial, supervisory, administrative, financial or consulting services or assistance to, or own a beneficial interest (except as a shareholder holding less than five percent (5%) interest in a corporation whose shares are actively traded on a regional or national securities exchange or in the over-the-counter market) in any Competing Business.

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