NUISANCE ABATEMENT SETTLEMENT AGREEMENT

Re:

Claims and controversies between nightclubs affiliated with Ali Davari and the City of Houston, included in the following ongoing lawsuits: Cause No. 2012-28683; The State of Texas and the City of Houston v. D. Houston, Inc. d'b/a Treasures, and the Premises Located at 5647 Westheimer Road, Houston, Harris County, Texas, In Rent; in the 164th Judicial District Court of Harris County, Texas; removal proceedings in Civil Action No. H-12-2718; in the United States District Court for the Southern District of Texas, Houston Division; appellate proceedings in the Fourteenth Court of Appeals No. 14-I2-0832-CV; and mandamus proceedings in the Texas Supreme Court No. 12-0852 and No. 12-0908 (the ''Nuisance Action"). Civil Action No. H-12-2038; D. Houston, Inc. and Ali Davari v. The City of Houston, et a!.\ in the United States District Court for the Southern District of Texas, Houston Division (the "1983 Action"); and Cause No. 2010-19512; The City of Houston v. A.H.D. Houston, Inc., et al.\ in the 295th Judicial District of Harris County, Texas (the "Declaratory Judgment Action").

This Nuisance Abatement Settlement Agreement ("Agreement") is entered into by and between Ali Davari ("Mr. Davari"), D, Houston, Inc., d/b/a Treasures, Nabilco, Inc., the Premises Located at 5647 Westheimer Road, Houston, Harris County, Texas, A.H.D. Houston, Inc., d/b/a Centerfolds, D.N. W. Houston, Inc., d/b/a Gold Cup, and D. Rankirt, Inc., d/b/a Trophy Club (collectively the "Davari Parties"), on the one hand, and the City of Houston (the "City") on the other hand. All parties to this Agreement shall collectively be known as the "Parties." "Treasures" refers to the business operating at 5647 Westheimer Road, Houston, Harris County, Texas. WHEREAS, the City brought suit against certain of the Davari Parties in Cause No. 2012-28683; The State of Texas and the City of Houston vs. D. Houston, Inc. d/b/a Treasures; and the Premises Located at 5647 Westheimer Road, Houston Harris County, Texas, in Rein; in the 164th Judicial Bjstrict Court of Harris County, Texas (the "Nuisance Action");

CONFIDENTIAL WHEREAS, certain of the Davari Parties brought suit against the City in Civil Action No. H-12-2038; D. Houston, Inc. and Ah" Davari v. The City of Houston, el al., in the United States District Court for the Southern District of Texas, Houston Division (the "1983 Action"); WHEREAS, the City brought suit against certain of the Davari Parties in Cause No. 2010-19512; The City of Houston v. A.HD. Houston, Inc., el al.; in the 295th Judicial District of Harris County, Texas (the "Declaratory Judgment Action"); WHEREAS, the parties desire to join together in an effort to eliminate certain illegal activities in the City of Houston, including human trafficking; WHEREAS, bona fide disputes and controversies exist between the Davari Parties, on the one hand, and the City on the other hand, both as to liability and damages, if any, by reason of such disputes and controversies, and without making any admission of liability or damages, the Davari Parties and the City desire to compromise and settle all causes of action pending between the Davari Parties and the City in the Nuisance Action, the 1983 Action, and the Declaratory Judgment Action; WHEREAS, D. Houston, Inc. is currently operating and will continue to operate its businesses in accordance with the law, D. Houston, Inc. shall insure that al! managers and employees are aware of the commitment to eliminate prostitution and will be instructed to perform their duties in such a manner as to prevent, detect and stop any illegal conduct or any conduct that would constitute a violation of this Agreement. D. Houston, Inc. maintains it has not and will not knowingly permit nor sanction, directly or indirectly, its employees or independent contractors to perform in such a manner with customers that violates the law or in such a way as to violate this Agreement.

-2-

CONFIDENTIAL WHEREAS the Davari Parties and the City of Houston recognize human trafficking is taking place in the City of Houston. It is the mutual desire of both parties to take steps to prevent and eliminate human trafficking to the extent possible. While the City of Houston dedicates law enforcement resources toward the elimination of human trafficking and prostitution, the Davari Parties are also interested in assisting in the eradication of these crimes. Toward that end, D. Houston, Inc. will voluntarily deposit $100,000.00 into a Nuisance Abatement Fund as described in section 1 below. Moreover, D. Houston, Inc. will continue its long-standing policies of not knowingly allowing minors to enter the club, acquiesce or condone prostitution in any form and will not employ or use an independent contractor, entertainer, or dancer who appears to be accompanied by another person who seems to speak for her, holds her identification, collects her pay for "safekeeping" or appears to exercise force, fraud or coercion over the person. ACCORDINGLY, in consideration of the above recitals and the consideration listed below, the Parties agree to contract as follows: 1. A Nuisance Abatement Fund will be established. D. Houston, Inc. hereby agrees,

pursuant to Section 125.047 of the Texas Civil Practice & Remedies Code, to deposit the sum of One Hundred Thousand Dollars ($100,000 and 00/100 Dollars) in an escrow account to be established by the City of Houston Legal Department and D. Houston, Inc. for the purpose of nuisance abatement (the "Nuisance Abatement Fund"). The deposit of the funds will occur pursuant to the terms of an escrow agreement. Said monies will be used to detect and combat human trafficking or to engage in enforcement by the Houston Police Department to enjoin and abate common nuisances occurring at businesses known to engage in human trafficking. 2. Upon execution of thjs agreement, Mr. Davari and D. Houston, Inc. shall institute |
i

the following policies at Treasures: -3-

CONFIDENTIAL a. Beginning immediately upon execution of this Settlement Agreement and for a

period of one year, D. Houston, Inc. shall maintain signage stating that no illegal activities are permitted in this facility including prostitution, public lewdness, drug use and the purchase or sale of controlled substances. These signs shall be placed and remain on every table where customers are served and posted throughout the first and second floors of Treasures; b. Beginning immediately upon execution of this Settlement Agreement and

continuing through February 7, 2013 (the "Verification Period"), D. Houston, Inc. shall conduct and record video surveillance using low-light video cameras with continuous timed video (which shows the time and date of recording) without editing which are capable of capturing the area of the first floor commonly identified as the "Library," and all areas of Treasures on the second floor, excluding the balcony and the offices. c. Upon request by the City of Houston, D. Houston, Inc. shall provide all video

surveillance described in subsection (b) above weekly, to the City of Houston by close of business Monday for the preceding week. After being reviewed by the City of Houston, all parts of any video recording provided to the City of Houston which does not contain images of conduct described in section 3 below shall be destroyed. 3. The Verification Period will extend to April 30, 2013, if, during the initial Verification

Period, the City of Houston discovers evidence of any of the following activities at Treasures on four (4) or more separate occasions: a. b. c. Public lewdness as defined by Texas Penal Code 21.07; Indecent exposure as defined by Texas Penal Code 21.08; Delivery, possession, manufacture, or use of a controlled substance in violation of Chapter 481, Health and Safet/Code;
-4-

CONFIDENTIAL d. Prostitution, promotion of prostitution, aggravated promotion of prostitution or compelling prostitution as prohibited by the Penal Code; or Any violation of the clothing requirements as described in Paragraph 9 of this Agreement.

e.

In determining the number of offenses that have occurred during the Verification Period, two prostitution offenses, as defined in 43.02 of the Texas Penal Code, shall constitute a single act of prostitution. 4. The City shall utilize an inspector/observer ("Observer") to monitor Treasures in an D. Houston, Inc. will pay the City of Houston to reimburse expenses

undercover capacity.

incurred by the Observer in accordance with the terms of the above referenced escrow agreement. The Observer shall document his or her findings, which will promptly be disclosed to D. Houston, Inc. within 72-hours of each visit to Treasures, Upon disclosure of the

Observer's findings, D. Houston, Inc. shall promptly take affirmative steps to abate any illegal activity reported to have been observed at Treasures. Evidence of public lewdness, indecent exposure, violations of the clothing requirements as provided in Paragraph 9 of this Agreement, deliver)', possession, manufacture, or use of a controlled substance in violation of Chapter 481 of the Health and Safety Code, or prostitution, promotion of prostitution, aggravated prostitution or compelling prostitution by an independent contractor or employee of Treasures will result in that individual's immediate suspension or termination. Any individual charged and convicted with public lewdness, indecent exposure, or delivery, possession, manufacture, or use of a controlled substance in violation of Chapter 481 of the Health and Safety Code, or prostitution, promotion of prostitution, aggravated prostitution or compelling prostitution while at Treasures shall be permanently banned from working for Treasures or any other Davari Party. Treasures shall report all abatement action taken in response to the illegal activity occurring in Treasures within 72-hours of the action taken. Nothing herein shall be construed to limit the number of times an -5-

CONFIDENTIAL
Observer may enter Treasures for purposes of monitoring the conduct of or compliance by the employees and independent contractors. 5. The Davari Parties shall execute, in duplicate, a Notice of Dismissal without Prejudice of

the 1983 Action within one (1) day of the execution of this Agreement and shall provide one original of the Non-Suit to counsel for the City of Houston, 6. The City shall execute, in duplicate, a Non-Suit without Prejudice in the Nuisance Action

in the 164th Judicial District Court within one (1) day of the execution of this Agreement and shall provide one original of the Non-Suit to counsel for D. Houston, Inc. 7. If the Davari Parties materially breach this Agreement and the City subsequently brings

an action pursuant to Chapter 125 of the Texas Civil Practice & Remedies Code against Treasures, the City shall not be precluded from using any activities occurring on or after October 23, 2012 in support of any suit it may bring pursuant to Chapter 125 of the Texas Civil Practice & Remedies Code. The Davari Parties waive their right to assert res judicata, judicial estoppel or stare decisis on the basis of the City's Dismissal of the Nuisance Action in subsequent Chapter 125 claims brought by the City of Houston to the extent those claims allege conduct occurring on or after October 23, 2012. 8. In the event any illegal conduct or other violation of this Agreement is observed by the

manager, floor managers or security, it shall be reported to higher management and Treasures shall be required to take remedial measures to insure the activity is not repeated, including, but not limited to, suspension or termination of the employee or independent contractor, D.

Houston, Inc. shall report the remedial measures taken to the City of Houston within 72 hours of the action taken. No event or illegal conduct reported pursuant to this paragraph may be used or

-6-

CONFIDENTIAL
admitted into evidence in any proceeding pursuant to Chapter 125 of the Texas Civil Practice & Remedies Code against D. Houston, Inc. 9. All women who are independent contractors or employees of D. Houston, Inc. shall be

required to wear bottoms which cover their genitals, pubic region and pubic hair, A G-string or Brazilian bikini shall not be worn; however, a regular bikini bottom may be worn. The breasts or any portion thereof that is situated below a point immediately above the top of the areola must be completely covered and the cover may be latex application. The terms of this paragraph are intended to exist in perpetuity. 10. The City of Houston Legal Department does not instruct or direct the Houston Police

Department or the Houston Police Department Vice Division on how to enforce the law. However, the Vice Division will not engage in activity for the sole purpose of enforcing this Agreement. Nothing in this Agreement is meant to restrict or impair the law enforcement

obligations of the Houston Police Department, including the Vice Division. 11. Effective at the end of the Verification Period, the Davari Parties, including their

successors and assigns, and all agents, servants, and employees, and all persons, natural or corporate, in privity with them, or any of them, RELEASE, ACQUIT AND FOREVER DISCHARGE the City and any employee of the City sued in their official and/or individual capacity from all causes of action now pending against the City in the Nuisance Action, the 1983 Action, and the Declaratory Judgment Action. 12. Effective at the end of the Verification Period, the City, including their successors and

assigns, and all agents, servants, and employees, and all persons, natural or corporate, in privity with them, or any of them, RELEASE, ACQUIT AND FOREVER DISCHARGE the Davari

-7-

CONFIDENTIAL
Parties from all causes of action now pending against the Davari Parties in the Nuisance Action, the 1983 Action, and the Declaratory Judgment Action. 13. On or before February 7, 2013, the City of Houston will ask the Texas Alcoholic

Beverage Commission ("TABC") to dismiss any proceedings currently pending against D. Houston, Inc. in the State Office of Administrative Hearings. 14. The Parties desire a cordial and cooperative relationship. In the event that any problems

or issues arise relating to (a) this Agreement or (b) Treasures and/or the City of Houston's efforts to eliminate illegal activity, the Davari Parties will contact Ms. Donna Edmundson of the City of Houston Legal Department at (832) 393-6268. Likewise, the City of Houston will contact Casey Wallace at (713) 860-0517, to discuss and resolve any enforcement or implementation issues relating to (a) this Agreement or (b) Treasures and/or the City of Houston's efforts to eliminate illegal activity. In the event the Parties are unable to reach a resolution of problems or issues relating to this Agreement, or Treasures and the City of Houston's efforts to eliminate illegal activity, the parties agree to mediate before Alvin Zimmerman at
MEYER, STERN ZIMMERMAN, AXELRAD,

&

WISE,

P.C. In the event the parties are unable to resolve any dispute relating to

this Agreement at mediation, the parties agree to submit to arbitration before Alvin Zimmerman. Any decision or award resulting from that arbitration shall be final and binding upon the parties to the arbitration proceeding. The parties waive to the extent permitted by law any rights to appeal or to seek review of such award by any court or tribunal. The parties also agree that judgment upon such award may be entered in any court of competent jurisdiction. The terms of this paragraph are intended to exist in perpetuity. The Parties further acknowledge that the reciprocal commitments contained in this clause are the sole consideration for this paragraph.

CONFIDENTIAL 15. The Parties represent and warrant that they are the owner of the claims settled and

released and that no such claims have been assigned, conveyed, or in any way transferred to any third party. The Parties further represent and warrant that they are authorized to settle and release the claims released by this Agreement and that all necessary approvals or authorizations required to enter into this Agreement, if any, have been obtained. 16. The Parties acknowledge and agree that each party shall bear its own costs already

incurred in connection with the disputes made the subject of this Agreement, including without limitation, attorneys' fees, filing fees, and court costs. The City expressly waives any claim and releases the Davari Parties from all liability relating to attorneys' fees, expenses, or costs incurred relating to removal of the Nuisance Action (H-12-2718). 17. The Parties and their counsel agree that the terms of this Agreement, including but not

limited to, the amount and nature of the settlement, shall be and remain CONFIDENTIAL, to the extent permitted by law, and shall not be disclosed to any person or entity, including but not limited to, any person associated with the press, news, or media. The Parties may disclose the terms of this Agreement as required by the Parties' respective accounting and tax obligations, regulators, or as required by law. The Parties further agree that they will not make, in any form or medium whatsoever, disparaging statements concerning the Parties, No statements published during the course of a judicial or quasi-judicial proceeding between the Parties shall be considered disparaging. 18. To the extent any document is required to be executed or any act is required to be

performed by any of the Parties to effectuate this Agreement, the Parties agree to execute and deliver such document and perform such act.

-9-

CONFIDENTIAL 19. It is expressly understood and agreed that the terms of this Agreement are contractual and

not merely recitals and that the agreements contained in this Agreement and the consideration transferred is to compromise disputed claims, avoid litigation and buy peace, and that no payments made nor other consideration given shall be construed as an admission of liability, all liability being expressly denied, 20. This Agreement constitutes the entire agreement of the Parties. No prior or subsequent

oral agreement can modify the terms of this Agreement. This Agreement is binding on and shall inure to the benefit of the Parties and their respective heirs, personal representatives, successors, legal representatives, assigns, principals, officers, directors, shareholders and partners. 21. Each Party represents and warrants that it has been fully informed of the terms, contents,

conditions and effect of this Agreement; that the terms, contents, and conditions of this Agreement were negotiated between the Parties and were a product of an arm's length transaction; that each Party was knowledgeable in the business matters discussed in this Agreement; that the release language in this Agreement was clear; that in making this Agreement each Party had the benefit of counsel of its own choosing; and that no promise or representation of any kind has been made except as expressly stated in this Agreement and that no Party is relying upon any such promise or representation in executing this Agreement. Each Party has relied solely and completely upon its own judgment and the advice of its counsel in making this Agreement. Each Party expressly waives any claim for fraud or fraudulent inducement in

entering into this Agreement, 22. In the event of any action to enforce any provision of this Agreement, in addition to arty

damages that may be awarded, the prevailing party shall be entitled to its reasonable attorneys'
V-

fees and costs. -10-

CONFIDENTIAL 23. 24. This Agreement may be executed in multiple originals. If any provision of this Agreement or the application thereof shall be invalid or

unenforceable to any extent, the remainder of this Agreement and the application of the remaining provisions shall not be affected and shall be enforced. 25. Unless otherwise specified, all terms of this Agreement shall terminate May I, 2013.

-11-

[Signature Page to Confidential Settlement Agreement and Release of All Claims! READ, AGREED, AND ACCEPTED; DAVID M. FELDMAN
Date:

For the City of Houston. SUBSCRIBED AND SWORN TO BEFORE ME, on December T , 2012.

TERRY EtAINE SAUTER Notary Public. State of Texas My Commission Expires September 24, 2013

Notary Public, State of Texas My Commission Expires: / "

{Signature PagetoCvttfldenilat Settlement Agreement and Release of All Claims/

READ, AGREED, AND ACCEPTED; ALI DAVARI

Pate: Mt./S'/jjf IJL

Individually for D. Houston, Inc., d/b/a Treasures, A.H.D. Houston, Inc., d/b/a Centerfolds, D.N. W. Houston, Inc., d/b/a Gold Cup, and D. Rankin, Inc., d/b/a Trophy Club SUBSCRIBED AND SWORN TO BEFORE ME, on December 5^012.

Notary Public, Stale of Texas T l~ L - / My Commission Expires: *^ ' -* ' ^

214148.1-12042012

BRENDAK ROBERTS S MARCH 25, 2013 b