ex10_1.htm


    


    Exhibit
      10.1

     

    SALON
      CITY, INC.

    909
      N.
      Palm Avenue, Ste 311

    West
      Hollywood, CA  90069

    


    


    June
      26,
      2006

    


    PERSONAL
      AND CONFIDENTIAL

    


    Mr.
      Brian
      Battaglia

    President

    Capital
      Solutions, Inc.

    2817
      Carlaris Road

    San
      Marino, California  91108

    


    Dear
      Mr.
      Battaglia:

    


    This
      letter agreement ("Agreement") confirms the terms and conditions of the
      engagement of Capital Solutions, Inc. (“Capital”) and Brian Battaglia by Salon
      City, Inc. (the “Company”) to render certain professional services to the
      Company in connection with the Company's strategic and financial plans, as
      follows:

    


    1.           Services.  Capital
      agrees to perform the following services:

    


    
      	
              (a)  

            	
              Make
                Brian Battaglia available to actively participate in helping the
                Company
                with its financial planning, financings and other related financial
                activities;

            


    

    


    
      	
              (b)  

            	
              Make
                Brian Battaglia available to assist the CEO reach his financial and
                revenue milestones through active on-going
                communication;

            


    

    


    
      	
              (c)  

            	
              Make
                Brian Battaglia available to interface with the investment team of
                the
                Company;

            


    

    


    
      	
              (d)  

            	
              Make
                Brian Battaglia available to assist the Company to meet and accelerate
                its
                revenue goals from 2007, 2008, and 2009, which will be the basis
                for
                incentive bonuses; and

            


    

    


    
      	
              (e)  

            	
              Brian
                Battaglia will provide the above services independently of the Company,
                from a separate office, without taking on any direct Company
                responsibility.

            


    

     

    
      
         

      

      
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    2.           Fees.  The
      Company agrees to pay Capital for its services with a professional fee
      ("Professional Fee") of a total of:

    


    (a)  One
      million shares of restricted common stock of the Company (as such term
“restricted” is defined in Rule 144 under the Exchange Act) to be issued as
      promptly as practicable after the execution of this Agreement for services
      performed from January 1, 2005 to date.

    


    (b)  One
      million shares of restricted common stock of the Company (as such term
“restricted” is defined in Rule 144 under the Exchange Act) to be issued within
      30 days after end of the 2008 fiscal year, if and when the Company reaches
      $5.0
      million in sales, or a pro-rated portion of said one million shares based on
      annual volume for fiscal 2008.  Two examples of such pro rating are
      the following: (1) If the Company’s sales reach $4.0 million for fiscal 2008,
      the Company will be obligated to issue 800,000 restricted shares under this
      subsection; (2) if the Company’s sales reach $6.0 million for fiscal 2008, the
      Company will be obligated to issue 1,200,000 restricted shares under this
      subsection.

    


    (c)  One
      million shares of restricted common stock of the Company (as such term
“restricted” is defined in Rule 144 under the Exchange Act) to be issued within
      30 days after the end of the 2009 fiscal year, if and when the Company reaches
      $10.0 million in sales, or a pro-rated portion of said one million shares based
      on annual volume for fiscal 2009.   Two examples of such pro
      rating are the following:  (1) If the Company’s sales reach $8.0
      million for fiscal 2009, the Company will be obligated to issue 800,000
      restricted shares under this subsection; (2) if the Company’s sales reach $12.0
      million for fiscal 2009, the Company will be obligated to issue 1,200,000
      restricted shares under this subsection.

    


    (d)  Antidilution
      Protection - The Company will not, by amendment of its Certificate of
      Incorporation or through any reorganization, transfer of assets, consolidation,
      merger, dissolution, issue or sale of securities, or any other voluntary action,
      avoid or seek to avoid the percentage ownership position or potential percentage
      ownership position of Capital in the Company, but will at all times in good
      faith assist in the maintaining such ownership position or potential ownership
      position of Capital and in the taking of all such action as may reasonably
      be
      requested by the Capital in order to protect such ownership percentage or
      potential ownership percentage against dilution or other impairment, consistent
      with the tenor and purpose of this Agreement.

    


    (e)  All
      certificates for common stock of the Company to be issued pursuant to the terms
      of this Agreement shall be issued in the name of “Brian Battaglia,” the person
      who will be providing the services under this Agreement, and Brian Battaglia
      does hereby agree to perform such services.

    


    3.           Term.  The
      term of this Agreement shall commence on January 1, 2005, and end on the
      completion of fiscal 2009 (the "Term").  This Agreement may be renewed
      upon mutual written agreement of the parties hereto with the additional services
      and fees to be mutually agreed upon. This agreement may be terminated by the
      Company with 45 days prior written notice to Capital.

    


    4.           Indemnification.  In
      addition to the payment of fees and reimbursement of fees and expenses provided
      for above, the Company agrees to indemnify Capital and its affiliates with
      regard to the matters contemplated herein, as set forth in Exhibit A, attached
      hereto, which is incorporated by reference as if fully set forth
      herein.

     

    5.           Matters
      Relating to Engagement.   The Company acknowledges that
      Capital has been retained solely to provide the services set forth in this
      Agreement.  In rendering such services, Capital shall act as an
      independent contractor, and any duties of Capital arising out of its engagement
      hereunder shall be owed solely to the Company.  The Company further
      acknowledges that Capital may perform certain of the services described herein
      through one or more of its affiliates.

    


    The
      Company acknowledges that Capital is a consulting firm that is engaged in
      providing professional services. The Company acknowledges and agrees that in
      connection with the performance of Capital's services hereunder (or any other
      services) that neither Capital nor any of its employees will be providing the
      Company with legal, tax or accounting advice or guidance (and no advice or
      guidance provided by Capital or its employees to the Company should be construed
      as such) and that neither Capital nor its employees hold itself or themselves
      out to be advisors as to legal, tax, accounting or regulatory matters in any
      jurisdiction. The Company shall consult with its own legal, tax, accounting
      and
      other advisors concerning all matters and advice rendered by Capital to the
      Company and the Company shall be responsible for making its own independent
      investigation and appraisal of the risks, benefits and suitability of the advice
      and guidance given by Capital to the Company and the transactions contemplated
      by this Agreement.  Neither Capital nor its employees shall have any
      responsibility or liability whatsoever to the Company or its affiliates with
      respect thereto.

     

    
      
         

      

      
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    The
      Company recognizes and confirms that in performing its duties pursuant to this
      Agreement, Capital will be using and relying on data, material, and other
      information (the "Information") furnished by the Company or their respective
      employees and representatives. The Company will cooperate with Capital and
      will
      furnish Capital with all Information concerning the Company which Capital deems
      appropriate and will provide Capital with access to the Company's officers,
      directors, employees, independent accountants and legal counsel for the purpose
      of performing Capital's obligations pursuant to this Agreement.  The
      Company hereby agrees and represents that all Information furnished to Capital
      pursuant to this Agreement shall be accurate and complete in all material
      respects at the time provided, and that, if the Information becomes materially
      inaccurate, incomplete or misleading during the term of Capital's engagement
      hereunder, the Company shall promptly advise Capital in
      writing.  Accordingly, Capital assumes no responsibility for the
      accuracy and completeness of the Information.  In rendering its
      services, Capital will be using and relying upon the Information without
      independent verification evaluation thereof.  Capital hereby promises
      and agrees to hold all of such Information confidential and not to use such
      information for its benefit without the express written permission of the
      Company.

    


    6.           Governing
      Law.  This Agreement shall be governed by and construed in
      accordance with the laws of the State of California without regard to the
      conflict of laws provisions thereof.

    


    7.           No
      Brokers.  The Company represents and warrants to Capital that
      there are no brokers, representatives or other persons which have an interest
      in
      compensation due to Capital from any services contemplated herein.

    


    8.     Authorization.  The
      Company and Capital represent and warrant that each has all requisite power
      and
      authority, and all necessary authorizations, to enter into and carry out the
      terms and provisions of this Agreement and the execution, delivery and
      performance of this Agreement does not breach or conflict with any agreement,
      document or instrument to which it is a party or bound.

    


    9.           Miscellaneous.  This
      Agreement constitutes the entire understanding and agreement between the Company
      and Capital with respect to the subject matter hereof and supersedes all prior
      understanding or agreements between the parties with respect thereto, whether
      oral or written, express or implied.  Any amendments or modifications
      must be executed in writing by both parties.  This Agreement and all
      rights, liabilities and obligations hereunder shall be binding upon and insure
      to the benefit of each party’s successors but may not be assigned without the
      prior written approval of the other party.  If any provision of this
      Agreement shall be held or made invalid by a statute, rule, regulation, decision
      of a tribunal or otherwise, the remainder of this Agreement shall not be
      affected thereby and, to this extent, the provisions of this Agreement shall
      be
      deemed to be severable.  This Agreement may be executed in any number
      of counterparts, each of which, shall be deemed to be an original, but such
      counterparts shall, together, constitute only one instrument.  The
      descriptive headings of the Paragraphs of this Agreement are inserted for
      convenience only, do not constitute a part of this Agreement and shall not
      affect in anyway the meaning or interpretation of this Agreement.

    


    Please
      confirm that the foregoing correctly sets forth our agreement by signing below
      in the space provided and returning this Agreement to Capital for execution,
      which shall constitute a binding agreement as of the date first above
      written.

    


    Thank
      you.  We look forward to a mutually rewarding
      relationship.

    


    SALON
      CITY, INC.

    


    


    
      By:______________________________

    

    Name: Steve
      Casciola

    Title: President

    


    AGREED
      TO
      AND ACCEPTED

    AS
      OF
      JUNE __, 2006

    


    CAPITAL
      SOLUTIONS,
      INC.                                  BRIAN
      BATTAGLIA

    


    


    By:______________________________                     ______________________________

    Name: Brian
      Battaglia                                                      
      (In His Individual Capacity)

    Title: President

     

    
      
         

      

      
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    EXHIBIT
      A: INDEMNIFICATION

    


    The
      Company agrees to indemnify Capital, its employees, directors, officers, agents,
      affiliates, and each person, if any, who controls it within the meaning of
      either Section 20 of the Securities Exchange Act of 1934 or Section 15 of the
      Securities Act of 1933 (each such person, including Capital is referred to
      as
      "Indemnified Party") from and against any losses, claims, damages and
      liabilities, joint or several (including all legal or other expenses reasonably
      incurred by an Indemnified Party in connection with the preparation for or
      defense of any threatened or pending claim, action or proceeding, whether or
      not
      resulting in any liability) ("Damages"), to which such Indemnified Party, in
      connection with providing its services or arising out of its engagement
      hereunder, may become subject under any applicable Federal or state law or
      otherwise, including but not limited to liability or loss (i) caused by or
      arising out of an untrue statement or an alleged untrue statement of a material
      fact or omission or alleged omission to state a material fact necessary in
      order
      to make a statement not misleading in light of the circumstances under which
      it
      was made, (ii) caused by or arising out of any act or failure to act, or (iii)
      arising out of Capital's engagement or the rendering by any Indemnified Party
      of
      its services under this Agreement; provided, however, that the Company will
      not
      be liable to the Indemnified Party hereunder to the extent that any Damages
      are
      found in a final non-appealable judgment by a court of competent jurisdiction
      to
      have resulted from the gross negligence or willful misconduct of the Indemnified
      Party seeking indemnification hereunder.

    


    These
      indemnification provisions shall be in addition to any liability which the
      Company may otherwise have to any Indemnified Party.

    


    If
      for
      any reason, other than a final non-appealable judgment finding an Indemnified
      Party liable for Damages for its gross negligence or willful misconduct the
      foregoing indemnity is unavailable to an Indemnified Party or insufficient
      to
      hold an Indemnified Party harmless, then the Company shall contribute to the
      amount paid or payable by an Indemnified Party as a result of such Damages
      in
      such proportion as is appropriate to reflect not only the relative benefits
      received by the Company and its shareholders on the one hand and the Indemnified
      Party on the other, but also the relative fault of the Company and the
      Indemnified Party as well as any relevant equitable considerations.

    


    Promptly
      after receipt by the Indemnified Party of notice of any claim or of the
      commencement of any action in respect of which indemnity may be sought, the
      Indemnified Party will notify the Company in writing of the receipt or
      commencement thereof and the Company shall have the right to assume the defense
      of such claim or action (including the employment of counsel reasonably
      satisfactory to the Indemnified Party and the payment of fees and expenses
      of
      such counsel), provided that the Indemnified Party shall have the right to
      control its defense if, in the opinion of its counsel, the Indemnified Party's
      defense is unique or separate to it as the case may be, as opposed to a defense
      pertaining to the Company.  In any event, the Indemnified Party shall
      have the right to retain counsel reasonably satisfactory to the Company, at
      the
      Company's sole expense, to represent it in any claim or action in respect of
      which indemnity may be sought and agrees to cooperate with the Company and
      the
      Company's counsel in the defense of such claim or action.  In the
      event that the Company does not promptly assume the defense of a claim or
      action, the Indemnified Party shall have the right to employ counsel to defend
      such claim or action. Any obligation pursuant to this Annex shall survive the
      termination or expiration of the Agreement.

     

    
      
         

      

      
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    ADDENDUM
      TO LETTER AGREEMENT

     

    


     

    This
      clause below shall be incorporated into the contract dated June 26, 2006 between
      Salon City, Inc. ("Company"), Capital Solutions, Inc. and Brian Battaglia
      (collectively referred to as "Consultant") concerning the engagement of
      Consultant by Company to render certain professional services to Company
      ("Agreement").

     

    PERFORMANCE
      BONUS

     

    Company
      and Consultant agree that Consultant shall receive a performance bonus of THREE
      MILLION (3,000,000) restricted shares of Company common stock for Consultant's
      services to Company in 2006.  The additional shares shall be
      distributed to Consultant within a reasonable time after the signing of this
      Addendum.

     

    IN
      WITNESS WHEREOF, The parties
      hereto, intending to be bound, hereby sign this Addendum to Letter Agreement
      below as of February 20, 2007.

     

    SALON
      CITY, INC.

     

    
      /s/
        Steve Casciola

    

    Title: President

     

    CAPITAL
      SOLUTIONS, INC.

     

    By:_______________________
      Name:  Brian Battaglia Title:  President

     

    BRIAN
      BATTAGLIA

     

    (In
      his
      Individual Capacity)

     

     

    
      
         

      

      
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