MEMORANDUM OF UNDERSTANDING

This Memorandum of Understanding, herein after Memorandum, is presented to Fred Smith dba Mod (Mod) by ABC Entertainment, LLC dba ABC Special Projects (ABC) to formalize their Agreement to form a business venture regarding the sale, marketing, promotion and distribution of the WHAT OnTHING (Hat). WHEREAS, ABC is the owner of certain intellectual property rights regarding the WHAT On Hat; and, WHEREAS, ABC has an existing relationship with XYZ and XYZ has demonstrated that they have extensive experience in the sale, marketing, promotion and distribution of goods, in particular goods in the fashion industry; and, WHEREAS, ABC desires to enter into a business relationship with XYZ to gain access to and benefit from said experience of XYZ regarding their ability to sell, market, promote and distribute the Hat; and, WHEREAS, XYZ desires to enter into a business relationship with ABC regarding the Hat; and WHEREAS, ABC and XYZ desire to memorialize their discussions to date into a Memorandum of Understanding regarding the sale, marketing, promotion and distribution of said Hat,

NOW, THEREFORE, ABC and XYZ desire to enter into a Memorandum of Understanding between them; setting out the terms and conditions regarding sale, marketing, promotion and distribution of said Hat, terms and conditions will be written into a Business Sales Agreement at a later date. I. SCOPE OF MEMORANDUM A. Parties agree to jointly use their best efforts and reasonably prudent business practices to develop, protect and bring to market, the intellectual property known as the WHAT OnTHING belonging to ABC. B. XYZ shall develop a marketing plan, detailing the scope of the best markets available for the Hat, along with choosing the optimal manufacturing and distribution channels. C. XYZ shall have 3 months to develop said marketing plan and shall have
MEMORANDUM OF UNDERSTANDING REGARDING WHAT ON HAT Page 1 of 4 Initials : _____/_______

D.

E.

F.

G. H.

detailed volume pricing, manufacturing and distribution channels within 6 months of the signing of this Memorandum and shall have product in said markets within 12 months of signing of this Memorandum. ABC shall have the final approval of all pricing, licensing, manufacturing and distribution agreements and product and packaging appearance. ABC shall have exclusive control over any details, patches or any other items added to theTHING prior to distribution. ABC agrees to give XYZ exclusive worldwide rights in the distribution, manufacture and sale of the intellectual property known as the Hat, based upon said final approval. Said exclusive rights are predicated upon the obtainment of agreed upon sales targets and marketing objectives as detailed in Section I part C and any written agreements regarding sales goals. Said rights, scope of rights, licenses, targets, objectives and goals to be reviewed and approved in writing on an annual basis without automatic renewal. ABC shall create, prior to the initial distribution of product into said markets, a corporate entity, whereby XYZ shall have 25% ownership stake in said corporate entity, said corporate entity shall be incorporated under the laws of Delaware. Each Party shall bear there own administrative costs up to the initial distribution of product into said markets, whereupon said corporate entity shall absorb all overhead. ABC shall make all reasonable efforts to secure all available intellectual property rights of the Hat, including but not limited to, patent, trademark and copyright. No rights, other than the limited rights detailed herein, shall be transferred to Mod.

II. CONTRACTUAL OBLIGATIONS OF THE PARTIES A. Buyer and Seller agree that this Memorandum is the complete representation of the intent of the parties and supersedes all previous Memorandums including written, verbal or collateral Memorandums between the parties as it relates to this Memorandum. Parties hereto agree that this Memorandum is personal, and that it shall not be assigned by either Party without the written consent and written approval of the other Party, excluding changes in Entity Names where participating Parties are not changed in composition. Nothing in this Memorandum shall constitute a partnership, joint venture or any other business relationship. B. The Parties are fiduciaries to one another and neither Party shall profit exclusively for any actions taken under this Memorandum and neither Party shall execute any action whereby one party does, or causes to be done, anything to prevent the other Party from full satisfaction and performance of said Memorandum C. This Memorandum was entered into and shall be deemed to have been made under the laws of the State of California, and shall for all purposes be governed and construed under the laws thereof regardless of where any action or proceeding is brought in connection with this Memorandum. The parties consent to the exclusive
MEMORANDUM OF UNDERSTANDING REGARDING WHAT ON HAT Page 2 of 4 Initials : _____/_______

D.

E.

F.

G. H.

jurisdiction and venue of the federal and state courts located in Los Angeles County, California in any action arising out of or relating to this Memorandum. The parties waive any other venue to which either party might be entitled by domicile or otherwise. Any claims or matters arising out for related to this Memorandum or Memorandum involving actual monies in controversy, shall be arbitrated in Los Angeles, California with prevailing party entitled to recover reasonable attorney's fees, expert fees and other arbitration expenses. The arbitrated award is final and binding and enforceable by any Court. Injunctive Relief: Any Breach of this Memorandum, may cause either Party irreparable harm, the amount of which may be difficult to ascertain, and therefore Parties agrees that the Parties shall have the right to apply to a court of competent jurisdiction for an order enjoining any such breach and for such other relief as a competent court of law deems appropriate. This right of the injured Party is to be in addition to the remedies otherwise available to him. Waiver and Severability : Failure to exercise any right provided in this Memorandum or Memorandum shall not be a waiver of prior or subsequent rights. If a Court finds any provision of this Memorandum invalid or unenforceable, the remainder of this Memorandum shall be interpreted so as best to effect the intent of the parties. Neither Party is not allowed, without written permission of the other, to remove any literature, samples, customer information, including customer lists, pricing information, or any financial activities of customers or vendors of the other Party from the premises of the others, EXCEPT that product which is/was developed, made, mocked up, produced, sampled or manufactured in furtherance of this Memorandums purpose, said product which will belong solely to ABC. Time is of the essence and this Memorandum shall be completed, by the exchange of mutual consideration, no later than _______________, 2011 CONFIDENTIAL TRADE SECRETS Either Party may have been entrusted with or may have had access to, confidential proprietary trade secret information of the other Party ("Confidential Information") that consists of information and materials that are valuable and not generally known by competitors or others and may constitute an economic advantage for a competitor or other. This information may have been disclosed through oral or written means. Such Information may include; (1) Any and all information concerning Partys current, future or proposed business concepts, proposals, operations or ideas, including, but not limited to, formulations, samples, formulas, designs, devices, drawings, specifications, notebook entries, technical notes and graphs, computer printouts, technical memoranda and correspondence, product development Memorandums and related Memorandums. The presence, terms and status of on-going dialogues, discussions, negotiations regarding the contents of this Memorandum and the Memorandum are considered confidential. (2) Information and materials relating to purchasing, accounting and marketing, including, but not limited to, marketing plans, sales goals and data, business methods, unpublished promotional material, costs and pricing information and customer lists. The use of certain vendors, and disclosures to those vendors
MEMORANDUM OF UNDERSTANDING REGARDING WHAT ON HAT Page 3 of 4 Initials : _____/_______

regarding this Memorandum is considered Confidential Information. The formulations, samples, compositions and compilations developed by either Party and/or provided by vendors and/or customers are held to be Confidential Information. (3) Information of the type described above which one Party has obtained from other Party is treated as confidential. Neither shall not disclose any Confidential Information to any other party without written permission of the other Party. I. DIVULGENCE OF TRADE SECRETS Neither Party is not to disclose any Confidential Information that is in possession of the either Party, either through memory, notes, or other documents, to any third party, if that Confidential Information creates, or will create, an economic advantage to the third party over either Party. Parties shall disclose all Confidential Information necessary to operate said business in the furtherance of this Memorandum.

IN WITNESS WHEREOF, the parties have executed this Memorandum in ______________, California on the date and year below first written:

FOR : ABC ENTERTAINMENT, LLC DBA ABC SPECIAL PROJECTS: Signature:________________________ Print Name:_____________________ Date: ___________________________ _ FOR : FRED SMITH DBA MOD

Signature: _________________________ Print Name:________________________ Date: __________________________

MEMORANDUM OF UNDERSTANDING REGARDING WHAT ON HAT Page 4 of 4 Initials : _____/_______