March 7, 2008
Total Luxury Group, Inc.
00000 Xxxxxxxx Xxxx Xxxxx #000
Xxxxx, Xxxxxxx 00000
Attn: CFO
Re: Consulting Agreement Between Southridge Investment Group and
Total Luxury Group, Inc.
Gentlemen:
Southridge Investment Group LLC ("Southridge") is pleased to submit this
letter of engagement (the "Agreement") setting forth the terms and conditions
whereby Southridge will act as placement agent for Total Luxury Group, Inc.
(together with any affiliates the "Company"), in advising, the Company in it's
efforts to acquire certain shareholder blocks of the common stock and preferred
stock (the "Acquisition") of Petals Decorative Accents Inc. ("Petals") and in
raising additional capital to financing the Company's ongoing operations.
I. Services To Be Provided
Southridge will endeavor, on a best-efforts basis, to assist the Company in
the Acquisition. During the term of the Agreement, Southridge will be prepared,
at the request of the Company, to:
A. Advise the Company as to the structure and form of the
Acquisition;
B. Assist the Company in the preparation of materials (collectively
"Documents") that include select business and financial
information about the Company, due diligence information and
materials necessary for the Acquisition; and
C. Other services as contemplated or as may be deemed appropriate in
connection with the Acquisition.
The Company hereby grants Southridge the sole and exclusive right and
authority to perform the above mentioned services. In order that the Company and
Southridge can best coordinate efforts to effect a commitment satisfactory to
the Company during the term of this Agreement, the Company agrees to coordinate
all significant discussions' relating to the Acquisition only through
Southridge.
Total Luxury Group, Inc.
March 7, 2008
Page 2
II. Terms and Conditions
A. Authority. The Company represents and warrants that the Company
is in all respects qualified and authorized to undertake all
actions contemplated herein. Southridge is not responsible for
the qualifications of the Company, the vesting or quality of
title or any other matters affecting the consummation of the
Acquisition.
B. Performance of Services. The Company and Southridge expressly
agree and understand that Xxxxxxxxxx's services have been fully
performed as outlined herein, and the Company shall pay
Southridge compensation as outlined herein, upon closing of the
Acquisition.
C. Additional Financial Services. The Company and Southridge agree
that Southridge shall also provide general financial advisory,
consulting and investment banking services in connection with
identifying, assessing, evaluating, and if appropriate, executing
possible financing, refinancing or other transactions to assist
the Company in raising capital (each, a "Financing Transaction").
D. Company Information. The Company represents and warrants that all
information (a) made available to Southridge or its designer by
the Company or (b) contained in the Documents will, at all times
during the period of the engagement of Southridge hereunder, 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 in the light of the circumstances under which such
statements are made. The Company further represents and warrants
that any projections provided to Southridge or contained in the
Documents will have been prepared in good faith and will be based
on assumptions that, in light of the circumstances under which
they are made, are reasonable. The Company acknowledges and
agrees that, in rendering its services hereunder, Southridge will
be using and relying on such information (and additional
information available from public or other sources) without
independent verification, that Southridge will not assume
responsibility for the accuracy or completeness of such
information (included in the Documents or otherwise), and that
Southridge will not undertake to make an independent appraisal of
any of the assets of the Company or any of its subsidiaries.
E. Indemnification. The attached indemnity on Appendix A hereto is
included herein by reference.
Total Luxury Group, Inc.
March 7, 2008
Page 3
III. Compensation/Payment For Services
As compensation for Southridge's services, the Company will pay, or cause
to be paid, the following fees to Southridge:
A. Compensation to Southridge with respect to the Acquisition: In
connection with the Acquisition, Southridge shall be entitled to
a fee of two million dollars ($2,000,000), payable in the form of
an unsecured convertible promissory note ("Note"), junior to all
securities of the Company other than its common stock. The Note
shall be convertible into common stock of the Company at $0.04
per share, subject to the superior conversion rights of the
holders of the Senior Secured 9% Convertible Promissory Note (as
defined in the Stock Purchase Agreement dated as of the date
hereof between the Company and Accelerant Partners LLC) and the
Junior Unsecured 9% Convertible Promissory Note (as defined in
the Stock Purchase Agreement dated as of the date hereof between
the Company and the Sellers listed thereto).
B. Compensation to Southridge with respect to the Additional
Services set forth in Section II.C. above: In connection with
each future Financial Transaction, Southridge shall be entitled
to a fee equal to 10% of the aggregate value received by the
Company in excess of $1,000,000, payable in the same form as the
securities issued in connection with such Financial Transaction,
on the same terms over the same period as the securities issued
to the investors in such Financial Transaction.
C. Expenses. In addition to the fees described in Sections III.A.
and III.B. above, and whether or not the Acquisition or a
Financial Transaction is completed, the Company will pay all of
the Southridge's reasonable out-of-pocket expenses related
thereto, including travel for trips, FedEx and other mailing
charges, long distance telephone calls, and other incremental
costs incurred, including pre-approved fees and counsel.
IV. Miscellaneous
A. Term. This Agreement will become effective on the date of its
acceptance by the Company (the "Effective Date") and will
continue thereafter for a period of 12 months. This Agreement
will thereafter be automatically extended for successive 90-day
periods unless, prior to the expiration of the initial or any
succeeding 90-day term, either the Company or Southridge gives
written notice to the other of its desire to terminate the
Agreement. It is expressly agreed that the provisions of
paragraphs IV-B, IV-C, IV-G, and IV-H of this Agreement shall
survive any expiration or termination of this Agreement.
Total Luxury Group, Inc.
March 7, 2008
Page 4
B. Nature of Engagement. Southridge is being retained to serve as an
agent solely to the Company, and the engagement of Southridge
shall not be deemed to be on behalf of and is not intended to
confer rights or benefits on any shareholder or creditor of the
Company or its subsidiaries or on any other person. Unless
expressly agreed to in writing by Xxxxxxxxxx, no one other than
the Company is authorized to rely on this engagement of
Southridge or any statements, conduct or advice of Southridge. No
opinion or advice of Southridge shall be used for any other
purpose or reproduced, disseminated, quoted, or referred to at
any time, in any manner or for any purpose, nor shall any public
or other references to Southridge (or to such opinions or advice)
be made without the express prior written consent of Southridge,
which consent shall not be unreasonably withheld.
C. Announcements. The Company agrees that following the closing of
the Acquisition, Xxxxxxxxxx has 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 Southridge will submit a copy of any such
advertisements to the Company for its approval, which approval
shall not be unreasonably withheld.
D. Parties. This Agreement shall be binding on the parties and their
successors and assigns.
E. Modifications and Amendments. The Agreement represents (including
the attached indemnity) the entire understanding between the
Company and Southridge with respect to the Acquisition, and all
prior discussions are merged herein. It is understood that
Southridge's obligations under this Agreement are to use its best
efforts throughout the period for which it acts as the Company's
exclusive agent as described herein. Xxxxxxxxxx's engagement is
not intended to provide the Company or any other person or entity
with any assurances that any transaction will be consummated.
G. Arbitration. Any dispute related to this Agreement, any
transaction contemplated hereby, or any other matter contemplated
hereby shall be settled by arbitration in the City of New York,
State of New York, in accordance with the commercial arbitration
rules then in effect of the American Arbitration Association,
before a panel of three arbitrators. Any award entered by the
arbitrators shall be final, binding, and nonappealable, and
judgment may be entered thereon by any party in accordance with
applicable law in any court of competent jurisdiction. This
arbitration provision shall be specifically enforceable. The fees
of the American Arbitration Association and the arbitrators and
any expenses' relating to the conduct of the arbitration shall by
paid by the Company.
Total Luxury Group, Inc.
March 7, 2008
Page 5
H. Amendments. This Agreement may not be amended or modified except
pursuant to a writing signed by all parties and shall be governed
by and construed in accordance with the laws of New York State.
[Remainder of page intentionally left blank.]
Total Luxury Group, Inc.
March 7, 2008
Page 6
If the foregoing correctly sets forth the entire understanding and
agreement between Southridge and the Company, please so indicate in the space
provided for that purpose below and return an executed copy to us no later than
March 7, 2008, whereupon this letter shall constitute a binding agreement
between us as of the date first above written.
SOUTHRIDGE INVESTMENT GROUP LLC
By:____________________________
AGREED:
TOTAL LUXURY GROUP, INC.
By: ________________________
Title
________________________
Date
APPENDIX A
Indemnification Provisions
--------------------------
In connection with the engagement of Southridge Investment Group LLC
("SIG") by Total Luxury Group, Inc. (the "Company") pursuant to a letter
agreement dated _______, 2008, between the Company and SIG, as it may be amended
from time to time (the "Letter Agreement"), the Company hereby agrees as
follows:
1. In connection with or arising out of or relating to the engagement of
SIG under the Letter Agreement, or any actions taken or omitted,
services performed or matters contemplated by or in connection with
the Letter Agreement, the Company agrees to reimburse SIG, its
affiliates and their respective directors, officers, employees,
agents, and controlling persons (each an "Indemnified Party") promptly
on demand for expenses (including fees and expenses of legal counsel)
as they are incurred in connection with the investigation of,
preparation for, or defense of any pending or threatened claim, or any
litigation, proceeding, or other action in respect thereof. The
Company also agrees (in connection with the foregoing) to indemnify
and hold harmless each Indemnified Party from and against any and all
losses, claims, damages, and liabilities -- joint or several -- to
which any Indemnified Party may become subject, including any amount
paid in settlement of any litigation or other action (commenced or
threatened), to which the Company shall have consented in writing
(such consent not to be unreasonably withheld), whether or not any
Indemnified Party is a party and whether or not liability resulted;
provided, however, that the Company shall not be liable pursuant to
this sentence in respect of any loss, claim, damage, or liability to
the extent that a court having competent jurisdiction shall have
determined by final judgment (not subject to further appeal) that such
loss, claim, damage, or liability resulted primarily and directly from
the willful misfeasance or gross negligence of such Indemnified Party.
2. An Indemnified Party shall have the right to retain separate legal
counsel of its own choice to conduct the defense and all related
matters in connection with any such litigation, proceeding, or other
action. The Company shall pay the fees and expenses of such legal
counsel, and such legal counsel to the fullest extent consistent with
its professional responsibilities cooperate with the Company and any
legal counsel designated by the Company. The Company agrees to consult
in advance with SIG with respect to the terms of any proposed waiver,
release, or settlement of any claim, liability, proceeding, or other
action against the Company to which any Indemnified Party may also be
subject, and to use its best efforts to afford SIG and/or any such
Indemnified Party the opportunity to join in such waiver, release, or
settlement.
If indemnification is to be sought hereunder by an Indemnified Party,
then such Indemnified Party shall notify the Company of the
commencement of any litigation, proceeding, or other action in respect
thereof; provided, however, that the failure to notify the Company
shall not relieve the Company from any liability or obligation that it
may have under this paragraph or otherwise to such Indemnified Party.
Following such notification, the Company may elect in writing to
Total Luxury Group, Inc.
March 7, 2008
Page 8
assume the defense of such litigation, proceeding, or other action
(and the costs related thereto) and, on such election, the Company
shall not be liable for any legal costs subsequently incurred by such
Indemnified Party (other than costs of investigation or the production
of documents or witnesses) unless (i) the Company has failed to
provide legal counsel reasonably satisfactory to such Indemnified
Party in a timely manner or (ii) such Indemnified Party shall have
reasonably concluded that (A) the representation of such Indemnified
Party by legal counsel selected by the Company would be inappropriate
due to actual or potential conflicts of interest or (B) there may be
legal defenses available to such Indemnified Party that are different
from additional to those available to the Company or any other
Indemnified Party represented by such legal counsel.
3. In the event that the indemnity provided for in paragraphs 1 and 2
hereof is unavailable or insufficient to hold any Indemnified Party
harmless, then the Company shall contribute to amounts paid or payable
by an Indemnified Party in respect of such Indemnified Party's losses,
claims, damages, and liabilities as to which the indemnity provided
for in paragraphs 1 and 2 hereof is unavailable or insufficient (i) in
such proportion as appropriately reflects the relative benefits
received by the Company, on the one hand, and SIG, on the other hand,
in connection with the matters as to which such losses, claims,
damages, or liabilities relate, or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such
proportion as appropriately reflects not only the relative benefits
referred to in clause (i) but also the relative fault of the Company,
on the one hand, and SIG on the other hand, as well as any other
equitable considerations. The amounts paid or payable by a party in
respect of losses, claims, damages, and liabilities referred to above
shall be deemed to include any legal or other fees and expenses
incurred in defending any litigation, proceeding, or other action or
claim. Notwithstanding the provisions hereof, SIG's share of the
liability hereunder shall not be in excess of the amount of fees
actually received by SIG under the Letter Agreement (excluding any
amounts received as reimbursement of expenses incurred by SIG).
4. It is understood and agreed that, in connection with SIG's engagement
by the Company, SIG may also be engaged to act for the Company in one
or more additional capacities, and that the terms of any such
additional engagement may be embodied in one or more separate written
agreements. These Indemnification Provisions shall apply to the
engagement under the Letter Agreement and to any such additional
engagement and any modification of such additional engagement;
provided, however, that in the event that the Company engages SIG to
act as a dealer manager in an exchange or tender offer or as an
underwriter in connection with the issuance of securities by the
Company or to furnish an opinion letter (other than as indicated in
the Letter Agreement), such further engagement may be subject to
separate indemnification and contribution provisions as may be
mutually agreed on.
5. These indemnification provisions shall remain in full force and effect
whether or not any of the transactions contemplated by the Letter
Agreement are consummated and shall survive the expiration of the
period of the Letter Agreement, and shall be in addition to any
Total Luxury Group, Inc.
March 7, 2008
Page 9
liability that the Company might otherwise have to any Indemnified
Party under the Letter Agreement or otherwise. It is further agreed
that no Indemnified Party (including SIG) shall be liable to the
Company or any affiliate of the Company in connection with any matter
arising out of or relating to the engagement of SIG under the Letter
Agreement, or any actions taken or omitted, services performed or
maters contemplated by or in connection with the Letter Agreement,
expect to the extent that a court having competent jurisdiction shall
have determined by final judgment (not subject to further appeal) that
such liability resulted solely from the willful misfeasance or gross
negligence of such Indemnified Party.
SOUTHRIDGE INVESTMENT GROUP LLC
By: _____________________________________
Managing Director
Date: ___________________________________
TOTAL LUXURY GROUP, INC.
By: _______________________________
Date: _____________________________
