Document:

f10q1210a1ex10xxxxi_att.htm

Exhibit (10)(41)

December 31, 2010

Mr. Roy Warren

Attitude Drinks Incorporated

10415 Riverside Drive, Suite 101

Palm Beach Gardens, FL 33410

	
  

	
RE:

	
Placement Agent Agreement for Private Placement of Secured Convertible Promissory Notes and Warrants

Dear Mr. Warren:

 

This letter confirms our agreement that Attitude Drinks Incorporated, a Delaware corporation (“ATTD” or the "Company”) has engaged  Perrin Holden & Davenport Capital Corp. (together with its affiliates and subsidiaries, “PHD” or the “Placement Agent”) to act as the Company’s exclusive Placement Agent in connection with the proposed private placement (the “Offering”) of secured convertible promissory notes  (the “Notes”) and warrants to purchase common stock (“Warrants” and together with the Notes, the “Securities”) of the Company. The terms of the Securities and the gross proceeds of such Offering will be substantially in the form to be negotiated between the Placement Agent and the Company with one or more accredited investors (described below). The gross proceeds of the Offering will be on a best efforts basis (no minimum) up to an aggregate of $400,000.

Upon acceptance, (indicated by your signature below), this letter agreement (the “Agreement”) will confirm the terms of the engagement between the Placement Agent and the Company.

1.           Appointment.

(a)           Subject to the terms and conditions of this Agreement, the Company hereby retains the Placement Agent, and the Placement Agent hereby agrees to act, as the Company’s exclusive Placement Agent in connection with the Offering.  As Placement Agent for the Offering, PHD will advise and assist the Company in identifying and assisting the Company in issuing the Securities to, one or more accredited Investors (“Investors”) in the Offering.  The Company acknowledges and agrees that the Placement Agent is only required to use its “commercially reasonable best efforts” in connection with the Offering and that this Agreement does not constitute a commitment by the Placement Agent to purchase the Securities or introduce the Company to Investors.  PHD will, in its sole discretion, determine the reasonableness of its efforts, and is under no obligation to perform at any level other than what it deems reasonable.  The Company retains the right to determine all of the terms and conditions of the Offering and to accept or reject any proposals submitted to it by the Placement Agent in its sole and absolute discretion.

 

  

  

  

Attitude Drinks Incorporated

December 31. 2010

Page 2

(b)           During the Term of this Agreement (as such term is hereinafter defined), neither the Company nor any of its subsidiaries will, directly or indirectly, solicit or otherwise encourage the submission of any proposal or offer (“Investment Proposal”) from any person or entity relating to any issuance of the Company’s or any of its subsidiaries’ equity securities (including debt securities with any equity feature) or participate in any discussions regarding an Investment Proposal.  The term “Investment Proposal” shall not include (i) any investment in the equity securities of any other entity, and (ii) any transaction or agreement with one or more persons, firms or entities designated as a “strategic partner” of the Company, as determined in good faith by the Board of Directors of the Company, provided that each such person, firm or entity is, itself or through its subsidiaries, an operating company in a business synergistic with the business of the Company and in which the Company receives benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.  The Company will immediately cease all contacts, discussions and negotiations with third parties regarding any Investment Proposal.

2.           Information.

(a)           The Company recognizes that, in completing its engagement hereunder, the Placement Agent will be using and relying on both publicly available information and on data, material and other information furnished to Placement Agent by the Company or the Company’s affiliates and agents.  The Company will cooperate with PHD and furnish, and cause to be furnished, to PHD, any and all information and data concerning the Company, its subsidiaries and the Offering that PHD deems appropriate, including, without limitation, the Company’s acquisition and/or merger plans and plans for raising capital or additional financing that is reasonably requested by PHD (the “Information”), including subscription agreements, and the forms of the Notes and Warrants (the “Private Placement Materials”).  Any Information and Private Placement Materials forwarded to prospective Investors will be in form acceptable to Placement Agent and its counsel.  The Company represents and warrants that all Information and Private Placement Materials, including, but not limited to, the Company’s financial statements and all information incorporated by reference therein, will be complete and correct in all material respects and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading.

(b)           It is further agreed that PHD will conduct a due diligence investigation of the Company and the Company will reasonably cooperate with such investigation as a condition of PHD’s obligations hereunder.  The Company recognizes and confirms that the Placement Agent: (i) will use and rely primarily on the Information, the Private Placement Materials and information available from generally recognized public sources in performing the services contemplated by this letter without having independently verified the same; (ii) is authorized as the Placement Agent to transmit to any prospective investors a copy or copies of the Private Placement Materials, forms of subscription documents and any other legal documentation supplied to the Placement Agent for transmission to any prospective investors by or on behalf of the Company or by any of the Company’s officers, representatives or agents, in connection with the performance of the Placement Agent’s services hereunder or any transaction contemplated hereby; (iii) does not assume responsibility for the accuracy or completeness of the Information or the Private Placement Materials and such other information, if any provided to the Investors; (iv) will not make an appraisal of any assets of the Company or the Company generally; and (v) retains the right to continue to perform due diligence of the Company, its business and its officers and directors during the course of the engagement.

 

  

  

  

Attitude Drinks Incorporated

December 31. 2010

Page 3

(c)           Until the date that is one year from the date hereof, PHD will keep all information obtained from the Company confidential except: (i) Information which is otherwise publicly available, or previously known to or obtained by, PHD independently of the Company and without breach of any of PHD’ agreements with the Company; (ii) PHD may disclose such information to its officers, directors, employees, agents, representatives, attorneys, and to its other advisors and financial sources on a need to know basis only and will ensure that all such persons will keep such information strictly confidential.  No such obligation of confidentiality shall apply to information that: (i) is in the public domain as of the date hereof or hereafter enters the public domain without a breach by PHD, (ii) was known or became known by PHD prior to the Company’s disclosure thereof to PHD, (iii) becomes known to PHD from a source other than the Company, and other than by the breach of an obligation of confidentiality owed to the Company, (iv) is disclosed by the Company to a third party without restrictions on its disclosure, (v) is independently developed by PHD or (vi) is required to be disclosed by PHD or its officers, directors, employees, agents, attorneys and to its other advisors and financial sources, pursuant to any order of a court of competent jurisdiction or other governmental body or as may otherwise be required by law.

(d)           The Company recognizes that in order for PHD to perform properly its obligations in a professional manner, the Company will keep PHD informed of and, to the extent practicable, permit PHD to participate in meetings and discussions between the Company and any third party relating to the matters covered by the terms of PHD’ engagement.  If at any time during the course of PHD’s engagement, the Company becomes aware of any material change in any of the information previously furnished to PHD, it will promptly advise PHD of the change.

(e)           The Offering shall be conditioned upon, among other things, the following:

(i) Satisfactory completion by PHD of its due diligence investigation and analysis of: (a) the Company’s arrangements with its officers, directors, employees, affiliates, customers and suppliers, and (b) the audited and unaudited historical financial statements of the Company;

(ii) The Company retaining a firm of independent certified public accountants acceptable to PHD and the Company, and will continue to engage accountants of comparable quality (as may be determined by the Company’s audit committee) for a period of at least three years after the Closing;

(iii) Reserved;

(iv) Reserved;

(v) The Company retaining a transfer agent for the Company’s Common Stock reasonably acceptable to PHD and the Company and continuing to retain a competent transfer agent for a period of three (3) years after the Closing;

(vi) Reserved; and

(vii) The Company acknowledges and agrees that the Company will maintain a Chief Financial Officer or a substantially equivalent financial position who shall oversee the Company’s financial reporting (“Executive Officer”) and such new potential Executive Officer shall be introduced to and be reasonably acceptable to PHD prior to the Company entering into any employment agreement with any such person.

 

  

  

  

Attitude Drinks Incorporated

December 31. 2010

Page 4

3.           Compensation.  As compensation for services rendered and to be rendered hereunder by Placement Agent, the Company agrees to pay Placement Agent the following fees in consideration of the services rendered by the Placement Agent in connection with the Offering:

(a)           The Company agrees to pay PHD a cash fee payable upon each closing of the transaction contemplated by this Agreement (“Closing”) equal to ten percent (10.0%) of the gross proceeds received by the Company at each Closing, the fees received by PHD are referred herein as the “Placement Fee”.

(b)           The Company agrees to issue to PHD (or its designated affiliated or assignees), at the final Closing, shares of Company common stock equal to ten percent (10%) of the total number of securities purchase warrants (the “Warrants”) being sold and/or issued in the Offering.

(c)           In addition to any fees payable to PHD hereunder, the Company shall reimburse PHD from the proceeds of the Closing for all expenses (including, without limitation, fees and disbursements of counsel and all travel and other out-of-pocket expenses) incurred by PHD in connection with its engagement hereunder; provided, however that the aggregate fees and expenses which shall be reimbursed by the Company shall not exceed $1,000 plus legal fees (not to exceed $10,000) and expenses.  In the event this Agreement is not completed within the term set forth in Section 4, PHD will be entitled to reimbursement of its out-of-pocket accountable expenses actually incurred in connection with this Offering.

(d)           The Company shall assist and cooperate with legal counsel to PHD in effecting a filing with respect to the public offering if a Registration Statement is filed in connection with the Offering (an “Issuer Filing”) with the Financial Industry Regulatory Authority (“FINRA”) Corporate Financing Department pursuant to FINRA Rule 2710(b)(10)(A)(i) and the Company shall pay the filing fee required by such Issuer Filing and the fees and expenses of counsel to PHD in connection with the Issuer Filing and clearing such filing with FINRA.  The Company shall assist legal counsel to PHD in pursuing the Issuer Filing until FINRA issues a letter confirming that it does not object to the terms of the Offering contemplated by such Registration Statement.

4.           Term of Engagement.

(a)           This Agreement will remain in effect until January 31, 2011, after which either party shall have the right to terminate it on fifteen (15) days prior written notice to the other.  The date of termination of this Agreement is referred to herein from time to time as the “Termination Date.”  The period of time during which this Agreement remains in effect is referred to herein from time to time as the “Term”.  In the event, however in the course of PHD’s performance of due diligence it deems it necessary to terminate the engagement, PHD may do so prior to the termination date and upon immediate written notice.   Upon termination of this Agreement and/or upon the closing of the Offering, PHD shall deliver to the Company a final list of all third parties it believed it introduced to the Company for the Company’s review and approval (it being agreed upon that each of Alpha Capital Anstalt and Whalehaven Capital Fund Limited shall not be included, the “List”). Upon agreement of such list by the Company and PHD, such list shall be deemed the final, complete and comprehensive list of all third parties introduced to the Company by PHD. Such list shall be kept confidential for a period of twenty-four (24) months following delivery of the list by PHD to the Company. If, within twenty-four (24) months after the Termination Date, the Company completes any private financing of equity or debt or other capital raising activity of the Company (other than the exercise by any person or entity of any options, warrants or other convertible securities other than the warrants issued pursuant to this Agreement) with any of the Investors set forth on the List, the Company will pay to PHD upon the closing of such financing the compensation set forth in Sections 3(a) and 3(b) as a “Source Fee”.

 

  

  

  

Attitude Drinks Incorporated

December 31. 2010

Page 5

 

(b)           Notwithstanding anything herein to the contrary, subject to the twenty four (24) month limitation described in Section 4(a) above, the obligation to pay the compensation and expenses described in Section 3, this Section 4, Sections 7 and 9-18 and all of Exhibit A attached, hereto (the terms of which are incorporated by reference hereto), will survive any termination or expiration of this Agreement.  The termination of this Agreement shall not affect the Company’s obligation to pay fees to the extent provided for in Section 3 herein and shall not affect the Company’s obligation to reimburse the expenses accruing prior to such termination to the extent provided for herein.  All such fees and reimbursements due shall be paid to the Placement Agent on or before the Termination Date (in the event such fees and reimbursements are earned or owed as of the Termination Date) or upon the closing of the Offering or any applicable portion thereof (in the event such fees are due pursuant to the terms of Section 3 hereof).

5.           Certain Placement Procedures.  The Company and the Placement Agent each represents to the other that it has not taken, and the Company and the Placement Agent each agrees with the other that it will not take any action, directly or indirectly, so as to cause the Offering to fail to be entitled to rely upon the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”).  In effecting the Offering, the Company and the Placement Agent each agrees to comply in all material respects with applicable provisions of the Act and any regulations thereunder and any applicable state laws and requirements.  In order to induce PHD to enter into this Agreement, the Company agrees that PHD may rely upon any representations and warranties made to any Investor in this Offering (as if fully set forth herein) for its benefit, and that all such representations and warranties shall be true and correct in all material respects, and shall be true and correct in all material respects as of the date of each Closing.   The Company agrees that it shall cause any opinion of its counsel delivered to any Investors in the Offering also to be addressed and delivered to the Placement Agent, or to cause such counsel to deliver to the Placement Agent a letter authorizing it to rely upon such opinion.

6.           Representations, Warranties and Covenants of PHD.

PHD hereby represents and warrants to, and covenants with, the Company that:

(a)           (i)           Sales of the Securities by the Placement Agent will be made only in such jurisdictions in which: (i) the Placement Agent is a registered broker-dealer; and (ii) the Placement Agent has been advised by counsel that the offering and sale of the Securities is registered under, or is exempt from registration under, applicable laws.

(ii)           Offers and sales of the Securities by the Placement Agent will be made in compliance with the provisions of Regulation D under the Act and/or Section 4(2) of the Act, and the Placement Agent shall furnish to each investor a copy of the Offering Documents (including all Schedules and Exhibits thereto) prior to accepting any payments for Securities.

(b)           The Placement Agent is: (i) a registered broker-dealer under the Exchange Act; (ii) a member in good standing of FINRA; and (iii) registered as a broker-dealer in each jurisdiction in which it is required to be registered as such in order to offer and sell the Securities in such jurisdiction.

 

  

  

  

Attitude Drinks Incorporated

December 31. 2010

Page 6

(c)           The Placement Agent will periodically notify the Company of the jurisdiction in which it intends the Securities to be offered by it or will be offered by it pursuant to this Agreement, and will periodically notify the Company of the status of the Offering conducted pursuant to this Agreement.

7.           Indemnification. The Company agrees to indemnify Placement Agent in accordance with the indemnification and other provisions attached to the Agreement as Exhibit A (the “Indemnification Provisions”), which provisions are incorporated herein by reference and shall survive the termination or expiration of the Agreement.

8.           Other Activities. The Company acknowledges that PHD has been, and may in the future be, engaged to provide services as an underwriter, placement agent, finder, advisor and investment banker to other companies in the industry in which the Company is involved.  Subject to the confidentiality provisions of PHD contained in Section 2 hereof, the Company acknowledges and agrees that nothing contained in this Agreement shall limit or restrict the right of PHD or of any member, manager, officer, employee, agent or representative of PHD, to be a member, manager, partner, officer, director, employee, agent or representative of, investor in, or to engage in, any other business, whether or not of a similar nature to the Company’s business, nor to limit or restrict the right of PHD to render services of any kind to any other corporation, firm, individual or association; provided that PHD and any of its member, manager, officer, employee, agent or representative shall not use the Information to the detriment of the Company.  PHD may, but shall not be required to, present opportunities to the Company.

9.           Future Rights. Upon the successful completion of any amount of the Offering, for a period of twenty-four (24) months from the final closing the Offering, the Company grants PHD the right of first refusal to act as lead underwriter or placement agent for any and all future public and private equity and debt offerings during such twenty four (24) month period of the Company, or any successor to or any subsidiary of the Company. Any economics in connection with a Financing that will be split with any additional agent(s) or underwriter(s) will be determined solely by PHD.

10.           Governing Law; Jurisdiction; Waiver of Jury Trial.  This Agreement will be governed as to validity, interpretation, construction, effect and in all other respects by the internal law of the State of New York.  The Company and PHD each (i) agree that any legal suit, action or proceeding arising out of or relating to this Agreement shall be instituted exclusively in the New York State Supreme Court, County of New York, or in the United States District Court for the Southern District of New York, (ii) waives any objection to the venue of any such suit, action or proceeding, and the right to assert that such forum is an inconvenient forum, and (iii) irrevocably consents to the jurisdiction of the New York State Supreme Court, County of New York, and the United States District Court for the Southern District of New York in any such suit, action or proceeding.  Each of the Company and PHD further agrees to accept and acknowledge service of any and all process that may be served in any such suit, action or proceeding in the New York State Supreme Court, County of New York, or in the United States District Court for the Southern District of New York and agree that service of process upon it mailed by certified mail to its address shall be deemed in every respect effective service of process in any such suit, action or proceeding.  The parties hereby expressly waive all rights to trial by jury in any suit, action or proceeding arising under this Agreement.

 

  

  

  

Attitude Drinks Incorporated

December 31. 2010

Page 7

 

11.           Securities Law Compliance.  The Company, at its own expense, will obtain any registration or qualification required to sell any Securities under the Blue Sky laws of any applicable jurisdictions within the applicable required time periods.

12.           Representations and Warranties.  The Company and PHD each respectively represent and warrant that:  (a) it has full right, power and authority to enter into this Agreement and to perform all of its obligations hereunder; (b) this Agreement has been duly authorized and executed and constitutes a legal, valid and binding agreement of such party enforceable in accordance with its terms; and (c) the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby does not conflict with or result in a breach of (i) such party’s certificate of incorporation or by-laws or (ii) any agreement to which such party is a party or by which any of its property or assets is bound.

13.           Parties; Assignment; Independent Contractor.  This Agreement has been and is made solely for the benefit of PHD and the Company and each of the persons, agents, employees, officers, directors and controlling persons referred to in Exhibit A and their respective heirs, executors, personal representatives, successors and assigns, and nothing contained in this Agreement will confer any rights upon, nor will this Agreement be construed to create any rights in, any person who is not party to such Agreement, other than as set forth in this paragraph.  The rights and obligations of either party under this Agreement may not be assigned without the prior written consent of the other party hereto and any other purported assignment will be null and void.  PHD has been retained under this Agreement as an independent contractor, and it is understood and agreed that this Agreement does not create a fiduciary relationship between PHD and the Company or their respective Boards of Directors.  PHD shall not be considered to be the agent of the Company for any purpose whatsoever and PHD is not granted any right or authority to assume or create any obligation or liability, express or implied, on the Company’s behalf, or to bind the Company in any manner whatsoever.

14.           Validity.  This Agreement contains the entire agreement between the parties hereto.  No party has made any statement, agreement or representation, either oral or written, in connection herewith, modifying, adding or changing the terms and conditions herein set forth. No present or past dealings between the parties shall be permitted to contradict or modify the terms hereof. No modification of this Agreement shall be binding unless such modification is in writing and signed by the parties hereto. In case any term of this Agreement will be held invalid, illegal or unenforceable, in whole or in part, the validity of any of the other terms of this Agreement will not in any way be affected thereby.

15.           Counterparts.  This Agreement may be executed in counterparts and each of such counterparts will for all purposes be deemed to be an original, and such counterparts will together constitute one and the same instrument.

16.           Notices.  All notices will be in writing and will be effective when delivered in person or sent via facsimile and confirmed by letter, to the party to whom it is addressed at the following addresses or such other address as such party may advise the other in writing (copies shall not constitute notice):

 

  

  

  

Attitude Drinks Incorporated

December 31. 2010

Page 8

 

	
To the Company:

	
Attitude Drinks Incorporated

	
  

	
10415 Riverside Drive, Suite 101

	
  

	
Palm Beach Gardens, FL 33410

Attention: Roy G. Warrern

Fax No.: (561) 799-5039

 

	
With a copy to:    

	Weed & Co. LLP

	
  

	4695 MacArthur Court, Suite 1430

	
  

	
Newport Beach, CA 92660

Attention:  Rick Weed

Fax No.: (949) 475-9087

 

	
To PHD:

	
Perrin Holden & Davenport Capital Corp.

	
  

	
5 Hanover Square

	
  

	
New York, NY 10004

	
  

	
Telephone: 212.269.3500

	
  

	
Fax: 212.269.3087

Attention:  Jody Eisenman

 

	With a copy to:   	Ellenoff Grossman & Schole LLP

	
  

	150 East 42nd Street, 11th Floor

	
  

	
New York, New York 10017

Attention:  Stuart Neuhauser, Esq.

 

17.           Best Efforts Engagement for Capital Raising.  It is expressly understood and acknowledged that PHD’s engagement for the Offering does not constitute any commitment, express or implied, on the part of PHD or of any of its affiliates to purchase or place the Company’s securities or to provide any type of financing and that the Offering will be conducted by PHD on a “best efforts” (no minimum) basis.

18.           Announcements. The Company agrees that PHD shall, upon a successful transaction, have the right to place advertisements in financial and other newspapers and journals at its own expense describing its services to the Company hereunder, provided that PHD shall submit a copy of any such advertisement to the Company for its approval, such approval not to be unreasonably withheld, conditioned or delayed.  The Company further agrees that it shall not issue any press release in connection with the Offering without PHD’s prior written approval of such press release.  The Company further agrees that PHD’s counsel shall have the right to review and comment on any Current Report on Form 8-K regarding the Offering prepared by or on behalf of the Company before the same is filed with the SEC.

(Signature Page Follows)

 

  

  

  

Attitude Drinks Incorporated

December 31. 2010

Page 9

 

We are delighted at the prospect of working with you and look forward to a successful offering.  If you are in agreement with the foregoing, please execute and return two copies of this engagement letter to the undersigned. This Agreement may be executed in counterparts, electronic mail and by facsimile transmission.

Very truly yours,

PERRIN HOLDEN & DAVENPORT CAPITAL CORP.

/s/ Jody Eisenman

Name: Jody Eisenman

Title: Chief Executive Officer

Agreed to and accepted this 31th day of December, 2010

ATTITUDE DRINKS INCORPORATED

By: /s/ Roy G. Warren

Name: Roy G. Warren

Title:   Chief Executive Officer

  

  

  

Attitude Drinks Incorporated

December 31. 2010

Page 10

 

 

Exhibit A

INDEMNIFICATION PROVISIONS

Capitalized terms used in this Exhibit shall have the meanings ascribed to such terms in the Agreement to which this Exhibit is attached.

The Company agrees to indemnify and hold harmless Placement Agent and each of the other Indemnified Parties (as hereinafter defined) from and against any and all losses, claims, damages, obligations, penalties, judgments, awards, liabilities, costs, expenses and disbursements, and any and all actions, suits, proceedings and investigations in respect thereof and any and all legal and other costs, expenses and disbursements in giving testimony or furnishing documents in response to a subpoena or otherwise (including, without limitation, the costs, expenses and disbursements, as and when incurred, of investigating, preparing, pursing or defending any such action, suit, proceeding or investigation (whether or not in connection with litigation in which any Indemnified Party is a party)) (collectively, “Losses”), directly or indirectly, caused by, relating to, based upon, arising out of, or in connection with, Placement Agent’s acting for the Company, including, without limitation, any act or omission by Placement Agent in connection with its acceptance of or the performance or non-performance of its obligations under the Agreement between the Company and Placement Agent to which these indemnification provisions are attached and form a part, any breach by the Company of any representation, warranty, covenant or agreement contained in the Agreement or the subscription agreement with the investors (or in any instrument, document or agreement relating thereto, including any agency agreement), or the enforcement by Placement Agent of its rights under the Agreement or these indemnification provisions, except to the extent that any such Losses are found in a final judgment by a court of competent jurisdiction (not subject to further appeal) to have resulted primarily and directly from the gross negligence or willful misconduct of the Indemnified Party seeking indemnification hereunder.

The Company also agrees that no Indemnified Party shall have any liability (whether direct or indirect, in contract or tort or otherwise) to the Company for or in connection with the engagement of Placement Agent by the Company or for any other reason, except to the extent that any such liability is found in a final judgment by a court of competent jurisdiction (not subject to further appeal) to have resulted primarily and directly from such Indemnified Party’s gross negligence or willful misconduct.

These Indemnification Provisions shall extend to the following persons (collectively, the “Indemnified Parties”):  Placement Agent, its present and former affiliated entities, managers, members, officers, employees, legal counsel, agents and controlling persons (within the meaning of the federal securities laws), and the officers, directors, partners, stockholders, members, managers, employees, legal counsel, agents and controlling persons of any of them.  These indemnification provisions shall be in addition to any liability, which the Company may otherwise have to any Indemnified Party.

 

  

  

  

Attitude Drinks Incorporated

December 31. 2010

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If any action, suit, proceeding or investigation is commenced, as to which an Indemnified Party proposes to demand indemnification, it shall notify the Company with reasonable promptness; provided, however, that any failure by an Indemnified Party to notify the Company shall not relieve the Company from its obligations hereunder.  An Indemnified Party shall have the right to retain counsel of its own choice to represent it, and the fees, expenses and disbursements of such counsel shall be borne by the Company.  Any such counsel shall, to the extent consistent with its professional responsibilities, cooperate with the Company and any counsel designated by the Company.  The Company shall be liable for any settlement of any claim against any Indemnified Party made with the Company’s written consent.  The Company shall not, without the prior written consent of Placement Agent, settle or compromise any claim, or permit a default or consent to the entry of any judgment in respect thereof, unless such settlement, compromise or consent (i) includes, as an unconditional term thereof, the giving by the claimant to all of the Indemnified Parties of an unconditional release from all liability in respect of such claim, and (ii) does not contain any factual or legal admission by or with respect to an Indemnified Party or an adverse statement with respect to the character, professionalism, expertise or reputation of any Indemnified Party or any action or inaction of any Indemnified Party.

In order to provide for just and equitable contribution, if a claim for indemnification pursuant to these indemnification provisions is made but it is found in a final judgment by a court of competent jurisdiction (not subject to further appeal) that such indemnification may not be enforced in such case, even though the express provisions hereof provide for indemnification in such case, then the Company shall contribute to the Losses to which any Indemnified Party may be subject (i) in accordance with the relative benefits received by the Company and its stockholders, subsidiaries and affiliates, on the one hand, and the Indemnified Party, on the other hand, and (ii) if (and only if) the allocation provided in clause (i) of this sentence is not permitted by applicable law, in such proportion as to reflect not only the relative benefits, but also the relative fault of the Company, on the one hand, and the Indemnified Party, on the other hand, in connection with the statements, acts or omissions which resulted in such Losses as well as any relevant equitable considerations.  No person found liable for a fraudulent misrepresentation shall be entitled to contribution from any person who is not also found liable for fraudulent misrepresentation.  The relative benefits received (or anticipated to be received) by the Company and it stockholders, subsidiaries and affiliates shall be deemed to be equal to the aggregate consideration payable or receivable by such parties in connection with the transaction or transactions to which the Agreement relates relative to the amount of fees actually received by Placement Agent in connection with such transaction or transactions.  Notwithstanding the foregoing, in no event shall the amount contributed by all Indemnified Parties exceed the amount of fees previously received by Placement Agent pursuant to the Agreement.

Neither termination nor completion of the Agreement shall affect these Indemnification Provisions which shall remain operative and in full force and effect.  The Indemnification Provisions shall be binding upon the Company and its successors and assigns and shall inure to the benefit of the Indemnified Parties and their respective successors, assigns, heirs and personal representatives.ex10_1.htm

Exhibit 10.1

 

CONSULTING AGREEMENT

 

This Consulting Agreement (this "Agreement") is made and entered into effective as of June 1, 2011 (“Effective Date”), by and between Respect Your Universe, Inc., a Nevada corporation ("Company") and Exit 21 Global Solutions LLC, dba Exit 21 Apparel Solutions, an Oregon limited liability company (“Consultant”), and its partners Eric Siffert (“Siffert”) and Chris Martens (“Martens”).

 

 

RECITALS

 

WHEREAS, Consultant has certain experience in the design, development, merchandising, sourcing and production of clothing lines;

 

WHEREAS, the Company has appointed Martens as the Company’s Chief Executive Officer (“CEO”) on a consulting basis via Consultant;

 

WHEREAS, the Company has appointed Siffert as the Company’s Chief Operations Officer (“COO”) on a consulting basis via Consultant; and

 

WHEREAS, the Company desires to engage the services of the Consultant to assist the Company in the development and production of a clothing line for the Company.

 

NOW, THEREFORE, in consideration of the mutual promises herein contained, the parties hereto hereby agree as follows:

 

1.                      CONSULTING SERVICES.  The “Consulting Services” refers to collectively the Product Consulting Services, CEO Consulting Services and the COO Consulting Services.

 

(A)           Product Consulting Services.  Attached hereto as Exhibit A and incorporated herein by this reference is a description of the services to be provided by the Consultant for the development and production of the Company’s clothing line during the Term of this Agreement (the "Product Consulting Services"). Consultant will provide the Consulting Services in a professional and workmanlike manner to the best of its abilities. Consultant makes no other warranty to the Company, and specifically disclaims any warranty of merchantability or fitness for a particular purpose with respect to any products designed by Consultant hereunder.

 

(B)           CEO Consulting Services.  During the Term of this Agreement, Martens shall act as the Company’s CEO, managing all aspects of the day-to-day business of the Company, and report to the Company’s Board of Directors.

 

  

1

  

 

(C)           COO Consulting Services.  During the Term of this Agreement, Siffert shall act as the Company’s COO, managing the Company’s operations, and report to the Company’s CEO.

 

(D)           Excluded Duties.  The Consultant Services hereunder shall not include either Siffert or Martens being appointed principal executive or accounting officer of the Company for purposes of any Securities and Exchange Commission filings, including certification of same pursuant to sections 302, 404 or 906 of the Sarbanes-Oxley Act of 2002 .

 

2.                      TERM OF AGREEMENT

 

This Agreement shall be in full force and effect commencing upon the Effective Date and expiring on December 31, 2011 (“Term”). Consultant or Company shall have the right to terminate this Agreement with 30 days notice in the event of (i) the bankruptcy, insolvency, or assignment for the benefit of creditors of the other, or (ii) a material breach of the Agreement of the other, and such failure continues un-remedied for a period of 15 days after written notice.

 

3.                      TIME DEVOTED BY CONSULTANT, SIFFERT AND MARTENS

 

It is anticipated that the Consultant, Siffert and Martens shall spend as much time as deemed necessary in order to perform their respective obligations hereunder. The Company understands that this amount of time may vary and that the Consultant may perform Consulting Services for other companies.

 

4.                      PLACE WHERE SERVICES WILL BE PERFORMED

 

The Consultant, Siffert and Martens will perform most services in accordance with this Agreement at Consultant's offices, or at such other place(s) as necessary to perform these services in accordance with this Agreement.

 

5.                      COMPENSATION

 

The compensation to for the Consulting Services shall be as set forth in Exhibit B attached hereto and incorporated herein by this reference.

 

6.                      INDEPENDENT CONTRACTOR; OWNERSHIP

 

(A)           Both Company and the Consultant agree that the Consultant, Martens and Siffert will act as an independent contractors in the performance of their respective duties under this Agreement.

 

  

2

  

 

(B)           All of the designs conceived by Consultant in connection with the Consulting Services shall be the sole and exclusive property of the Company.

 

7.                      CONFIDENTIAL INFORMATION

 

The Consultant and the Company acknowledge that each will have access to proprietary information regarding the business operations of the other and agree to keep, all, such information, secret and confidential and not to use or disclose any such information to any individual or organization without the non-disclosing party's prior written consent. It is hereby agreed that from time to time Consultant and the Company may designate certain disclosed information as confidential for purposes of this Agreement.

 

8                       INDEMNIFICATION

 

The Consultant shall indemnify and hold the Company harmless from any and al liabilities and obligations arising from Consultant's gross negligence and willful misconduct with the Consulting Services. The Company shall indemnify and hold Consultant Siffert, and Martens harmless from any and all liabilities and obligations arising from conduct and activities of the Company, including (i) any allegation of infringement or violation of any third-party intellectual property rights; (ii) any product liability claim in connection with any products designed hereunder; (iii) any claims under state, federal or local laws or regulations in connection with the offer or sale of the Company’s securities; (iv) any reporting or other requirement in connection with the Securities and Exchange Act of 1934 and other state or local securities laws; and (v) any claims in connection with the Excluded Duties set forth in Section 1(D).

 

The indemnity obligations of the parties under this paragraph 8 shall be binding upon and inure to the benefit of any successors, assigns, heirs, and personal representatives of the Company, the. Consultant and any other such persons or entities mentioned hereinabove.

 

9.                      COVENANTS OF CONSULTANT

 

Consultant covenants and agrees with the Company that, in performing Consulting Services under this Agreement, Consultant will: 

 

	
  

	
(a)

	
Comply with all federal and state laws;. and

 

	
  

	
(b)

	
Not make any representations on behalf of the Company other than those authorized by the Company.

 

10.                    SUBCONTRACTORS AND MANUFACTURERS

 

  

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(A)          Subcontractors. Consultant may, from time to time, engage subcontractors or independent contractors to perform portions of the Product Consulting Services under the authority, and control of Consultant.

 

(B)           Manufacturers. Consultant will identify certain manufacturers, factories, suppliers and facilities for the production of the Company's products, and will manage such relationships on behalf of the Company as part of the Product Consulting Services hereunder. The Company will be solely responsible for the payment of any invoices, posting of any requires letters-of-credit, and any other financial aspects of the business relationship with such manufacturers, factories, suppliers and facilities. Consultant is responsible for delivery of prototypes, as set forth on Exhibit A. The Company is responsible for the cost of salesman samples, as well as the cost of production lines for the products designed hereunder.

  

11.                      MISCELLANEOUS

 

(A)           Any controversy arising out of or relating to this Agreement or any modification or extension thereof, including any claim for damages and/or rescission shall be settled by arbitration in Los Angeles County, California in accordance with the Commercial Arbitration Rules of the American Arbitration Association before a single arbitrator. The arbitrator sitting in any such controversy shall have no power to alter or modify any express provisions of this Agreement or to render any award which by its terms effects any such alteration, or modification subject to 11(G). This Section 11 shall survive the termination of this Agreement.

 

(B)           If either party to this Agreement brings an action on this Agreement, the prevailing, party shall be entitled to reasonable expenses therefore, including, but not limited to, attorneys’ fees and expenses and court costs.

 

(C)           This Agreement shall inure to the benefit of the parties hereto, their administrators and successors in interest. This Agreement shall not be assignable by either party hereto without the prior written consent of the other.

 

(D)           This Agreement contains the entire understanding of the parties and supersedes all prior agreements between them.

 

(E)           This Agreement shall be constructed and interpreted in accordance with and the governed by the laws of the State of California.

 

(F)           No supplement, modification or amendment of this Agreement shall be binding unless, executed in writing by the parties. No waiver of any of the provisions of this Agreement shall be deemed, or shall constitute, a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver. No waiver shall be binding unless executed in. writing by the party making the waiver.

 

  

4

  

 

(G)           If any provision hereof is held to be illegal, invalid or unenforceable under present or future laws effective during the term hereof, such provision shall be fully severable. This Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised apart hereof, and the remaining provisions hereof shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom.

 

 

 

 

 

 

  

5

  

 

IN WITNESS WHEREOF, the parties hereto have placed their signatures hereon on the day below.

 

RESPECT YOUR UNIVERSE, INC.,

a Nevada corporation

 

 

	 
 
/s/ Kristian Andresen

	  	  
	
Name:

	

Kristian Andresen

	  	  
	
Title:

	

Corporate Secretary

	  	  
	
Date:

	

June 30, 2011

 

EXIT 21 GLOBAL SOLUTIONS LLC, DBA EXIT 21 APPAREL SOLUTIONS,

an Oregon limited liability company

 

 

 

	 
/s/ Christopher Martens

	  	  
	
Name:

	
Christopher Martens

	  	  
	
Title:

	

Partner

	  	  
	
Date:

	

June 30, 2011

 

 

 

CHRISTOPHER MARTENS

 

 

	/s/ Christopher Martens
	  	  
	
Date:

	

June 30, 2011

 

 

 

ERICK SIFFERT

 

 

	/s/ Erick Siffert
	  	  
	
Date:

	

June 30, 2011

 

  

6

  

 

EXHIBIT A

 

DESCRIPTION OF PRODUCT CONSULTING SERVICES

 

Consultant shall perform the following Product Consulting Services pursuant to the terms of this Agreement:

 

(1)           General consulting services for the design, development, merchandising, sourcing and production of a 20-style clothing line, including but not limited to:

 

(a)           competitive market analysis, merchandising, and line planning;

 

(b)           product and component design, including color and fabric selection;

 

(c)           raw material selection and purchasing for prototypes, including the delivery of garment prototypes;

 

(d)           fit and approval of garment and accessory prototypes; and

 

(e)           production: responsible for delivery management and quality control of all apparel and accessories.

 

The above services will be further defined and delineated by the parties from time to time as, necessary. Consultant will not be responsible for any inventory (raw material or finished product) warehousing, sales, sales forecasting and planning.

 

  

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EXHIBIT B

TERMS OF COMPENSATION

 

The compensation under the Agreement shall be as follows:

 

1.               CONSULTING SERVICES FEES.

 

	
  

	
a.

	
PRODUCT CONSULTING SERVICES. The fee for the Product Consulting Services $24,000 monthly. Any additional fees shall be mutually agreed upon in writing by Company and Consultant.

 

b.      CEO CONSULTING SERVICES FEES.  The fee for the CEO Consulting Services is $13,000 monthly.

 

c.      COO CONSULTING SERVICES FEES.  The fee for the COO Consulting Services in $13,000 monthly.

 

2.               EQUITY COMPENSATION. In addition to the Fees, the Board of Director of the Company shall approve on July 1, 2011 and the Company shall issue and deliver the following options to purchase Company common stock issued from the Company’s 2011 Incentive Award Plan:

 

	
OPTIONEE

	
OPTION

SHARES

	
ISSUE

DATE

	
VESTING

	
EXERCISE

PRICE

	
TYPE

	  	  	  	  	  	  
	
Christopher 

Martens

	
300,000

	
July 1, 2011

	
Fully vested on issuance

	
Market close on July 1, 2011

	
Non-Qual

	  	  	  	  	  	  
	
Eric Siffert

	
300,000

	
July 1, 2011

	
Fully vested on issuance

	
Market close on July 1, 2011

	
Non-Qual

	  	  	  	  	  	  

 

3.               EXPENSES. Consultant shall be reimbursed for all out-of-pocket expenses upon submission of receipts or accounting to the Company, including, but not limited to, all travel expenses, research material and charges, computer charges, long-distance telephone charges, facsimile costs, copy charges, messenger services, mail expenses and such other Company related charges as may occur exclusively in relation to the Company's business as substantiated by documentation. Any expenditure above $100 will require oral or written pre-approval of the Company.

 

 

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