COVENANT NOT TO COMPETE

Exhibit 10.2

COVENANT NOT TO COMPETE

THIS COVENANT NOT TO COMPETE (this “Agreement”) is made and effective as of the 28 day of July, 2008 (the “Closing Date”), between Glenn Smith, a resident of the State of California (“Smith”), and VCG-IS, LLC, a Colorado limited liability company (“VCG-IS”).

W I T N E S S E T H:

WHEREAS, all of the assets of 2640 W. Woodland, Inc. (“Woodland”) are to be acquired by VCG-IS pursuant to a certain Assets Purchase Agreement (the “Purchase Agreement”); and

WHEREAS, Imperial Showgirls (hereinafter the “Business”) thereafter will become wholly owned by VCG-IS and will continue to conduct the Business in the same manner as such Business has been conducted by Woodland prior to the Purchase Agreement; and

WHEREAS, Smith is the sole owner of Woodland and has intimate knowledge of the business practices of the Business, which, if exploited by Smith in contravention of this Agreement, would seriously, adversely and irreparably affect the interests of VCG-IS and the Business and the ability of VCG-IS to continue the business of The Business as previously conducted; and

WHEREAS, to induce VCG-IS to enter into the Purchase and consummate the other transactions contemplated by the Purchase Agreement, Smith has agreed to execute and deliver this Agreement.

NOW, THEREFORE, in consideration of the transactions contemplated by the Purchase Agreement and the consideration to be paid to Smith in connection with the Purchase Agreement, the above premises, the mutual promises and covenants of the parties set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Smith and VCG-IS, 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:

a. “Area” shall mean a radius of twenty-five (25) miles of the Business located at 2640 W. Woodland Drive in Anaheim, California.

b. “Business” shall mean the operations of Imperial Showgirls as conducted as of the Closing Date.

c. “Competing Business” shall mean any business organization of whatever form engaged, either Directly or Indirectly, in any adult entertainment or any

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business or enterprise which is the same as, or substantially the same as, the Business; excluding, however, California Girls, 815 S. Brookhurst, Anaheim, California; California Girls, 1109 S. Harbor, Santa Ana, California; California Girls, 1189 E. Ash, Fullerton, California; TJ’s Theater, 10350 Beach Blvd., Stanton, California; Imperial Showgirls, 9329 Slauson Ave., Pico Rivera, California, or any other such business currently owned or controlled, directly or indirectly, by Sellers or in which Smith is a shareholder, member, partner, officer or director.

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 the Business or an entity having title to the goodwill of the Business.

e. “Restricted Period” shall mean the period commencing with the Closing Date and ending on the third (3rd) anniversary thereof.

f. “Confidential Information” shall include any and all information related to the purpose and business of the Business 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 paid by VCG-IS, or any other matters regarding the Business. Information that is orally disclosed will be considered “Confidential Information” if VCG-IS indicates to Smith at the time of disclosure the confidential or proprietary nature of the information and provides a written summary of such information to Smith 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 the Business unless otherwise specifically indicated in writing to the contrary.

2. Agreement Not to Compete. Unless otherwise consented to in writing by VCG-IS, Smith 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.

3. Agreement Not to Solicit Employees. Smith agrees that during the period commencing with the Closing Date and ending on the three (3rd) anniversary thereof, he will not without the prior written consent of VCG-IS, either Directly or Indirectly, on his own behalf or via sendee or on behalf of others, solicit, divert, or hire away, or attempt to solicit, divert, or hire away from the employment of the Business any Person employed by the Business, whether or not such employee is a full-time employee or temporary employee, whether or not such employment is pursuant to a written agreement, whether

or not such employment is for a determined period or is at will and whether or not such employee has voluntarily terminated their employment. Further, Smith agrees that he will not, without the prior written consent of VCG-IS, either Directly or Indirectly, on his own behalf or in the service or on behalf of others, solicit, divert, or hire away, or attempt to solicit, divert, or hire away any entertainers who have performed at the Business during the proceeding six (6) months prior to the Closing Date until one (1) year following the Closing Date. The parties agree that this provision shall not prohibit the continued use of entertainers who currently work with other clubs that are currently owned by Smith.

4. Confidentiality. Smith agrees to hold all Confidential Information of the Business in confidence for so long as VCG-IS treats such information as confidential or proprietary, unless otherwise agreed to in writing by the VCG-IS. During such period Smith will use such information solely for the purpose set forth in this Agreement unless otherwise agreed to in writing by VCG-IS. Smith agrees not to copy such Confidential Information of the Business unless otherwise agreed to in writing by the VCG-IS. S