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MICHAEL E. WEINSTEN (SBN 155680) DANIEL R. GUTENPLAN (SBN 260412) LAVELY & SINGER PROFESSIONAL CORPORATION 2049 Century Park East, Suite 2400 Los Angeles, California 90067-2906 Telephone: (310) 556-3501 Facsimile: (310) 556-3615 E-Mail: mweinsten@lavelysinger.com dgutenplan@lavelysinger.com Attorneys for DEFENDANTS/CROSS-COMPLAINANTS JULY MOON PRODUCTIONS, INC. AND SELENA GOMEZ SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF LOS ANGELES- WEST DISTRICT ) ADRENALINA INCORPORATED, a Nevada) corporation, ) ) Plaintiff, ) ) vs. ) ) JULY MOON PRODUCTIONS, INC., a ) California corporation, SELENA GOMEZ, ) an individual, ) ) Defendants. ) ) ) ) JULY MOON PRODUCTIONS, INC., a California corporation, SELENA GOMEZ, ) ) an individual, ) Cross-Complainants, ) ) ) vs. ) ADRENALINA INCORPORATED, a Nevada) corporation; GIGANTIC PARFUMS, LLC, a ) ) Florida Limited Liability Company; ILIA ) LEKACH, an individual. ) Cross-Defendants. ) ___________________________________ )

CASE NO. SC120598 [Hon. Gerald Rosenberg, Dept. K] CROSS-COMPLAINT FOR: (1) (2) BREACH OF CONTRACT; AND DECLARATORY RELIEF.

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CROSS-COMPLAINT 1

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Cross-Complainants July Moon Productions, Inc. and Selena Gomez (collectively, Cross-Complainants) allege as follows: INTRODUCTION 1. This action commenced by Florida-based fragrance company Adrenalina is born

of pure fiction - a tactical ploy to escape liability for its own breaches of contract and exposure to millions in damages. In early 2011, Adrenalina was a company on its last legs, running on fumes, and looking for a miracle to turn it around. Having gone from 122 full-time employees to 5 in just three years, Adrenalina had already abandoned its prior business plan and began targeting celebrities for licenses it could exploit. One of those celebrities was actress/pop star Selena Gomez, who was then hot off the launch of her new clothing line, Dream Out Loud. 2. In June 2011, Adrenalina convinced Ms. Gomez to sign a five-year worldwide

license for rights to exploit the Selena Gomez brand and trademark in connection with a new line of fragrances to be developed and distributed by Adrenalina. It did so by promising to pay Ms. Gomez a 5% royalty with a guaranteed minimum payment of $5.7 million. Adrenalina also promised to invest millions each year for advertising in trade and consumer press, with $2 million to be spent in the first year alone. Those promises, however, proved meaningless. As would later be disclosed in public filings, but which was not known to Ms. Gomez or her representatives at the time, Adrenalina was a company with a checkered past and without the wherewithal to fund its financial commitments. 3. Indeed, on March 15, 2012, just 45 days before launch of the new Selena

Gomez line of fragrances, Adrenalina publicly announced in SEC filings that it did not in fact have the capital necessary to meet its contractual obligations. In an Annual Report to the SEC, Adrenalina revealed: Our licensing agreements with both Selena Gomez and [another celebrity] require us to incur advertising expenses during the term of each agreement. This expense, together with costs associated with hiring additional personnel, development, production and distribution costs will put tremendous pressure on our working capital requirements. We currently do not have sufficient capital to fund these activities. . . . We currently do
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not have any commitments for financing and there can be no assurance that we will be able to secure sufficient financing to implement our business strategy and comply with our contractual commitments. (emphasis added). Elsewhere in the report, Adrenalina states: [w]e have not generated sufficient revenues to cover our operating expenses, and [o]ur current financial condition has raised doubt regarding our ability to continue as a growing concern. 4. Of course, Adrenalina did not disclose any of this to Ms. Gomez or her

representatives when it pitched the idea of a worldwide license just nine months earlier. Nor did they disclose it to the investing public. In its Annual Report, Adrenalina makes the startling admission: We are not in compliance with the reporting requirements as established by the rules and regulations promulgated by the Securities and Exchange Commission. . . . We have not filed any required reports since the quarter ended September 30, 2008. Had Adrenalina been forthcoming with its financial problems, Ms. Gomez would never have gone into business with Adrenalina, or its Chairman- a man dubbed by the Wall Street Journal in 2006 as Worst CEO of the Year. 5. Over the past fourteen years, Ms. Gomez (now 21) has worked hard building an

impressive career as an actress and singer. Her popularity and unblemished reputation have translated into one of the most sought after celebrity brands. To protect her valuable brand, the license expressly required that Adrenalina conduct its business in a manner consistent with the high reputation of Ms. Gomez, and that it refrain from any conduct that might reflect negatively on Ms. Gomez or her brand. The license also required that Adrenalina provide sufficient capital to ensure payment of its bills, invest heavily in advertising, and employ best commercially reasonable efforts to maximize sales, marketing and distribution. Having failed to secure the necessary financing, Adrenalina could not, and did not, meet any of these obligations. 6. Specifically, in March of this year, Ms. Gomez learned for the first time of

Adrenalinas financial problems when her representatives were contacted by a principal supplier concerning monies owed by Adrenalina. That supplier has since sued Adrenalina for
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over $1.2 million and for an injunction which would effectively destroy Adrenalinas ability to manufacture and distribute products under the license. By failing to pay its bills, and by jeopardizing the brand with a public lawsuit, Adrenalina has breached both the express terms of the license and the implied covenant of good faith and fair dealing that enures to every contract. Adrenalina has also breached by failing to advertise in trade and consumer press as promised, and by falling well short of its promise to use best efforts to distribute globally. Despite that this was a worldwide license, and that Ms. Gomez is known across the globe, Adrenalina did virtually nothing to secure distribution outside of North America. 7. Under these circumstances, Ms. Gomez had no choice but to terminate the

license to protect her reputation and brand. She had every right to do so under the express terms of her contract, and under California law. Unfortunately, rather than accept responsibility for its own failures, Adrenalina has instead engaged Ms. Gomez is what is best described as a classic celebrity shakedown. As a result, Ms. Gomez will now rely on the court to set the record straight and to recover in excess of $5.2 million in damages caused by Adrenalinas broken promises.

THE PARTIES 8. Cross-Complainant Selena Gomez is, and at all times relevant herein was, an

individual residing in Los Angeles, California. Ms. Gomez is a world-renowned pop star and award-winning actress, perhaps best known for her starring roles in the hit television series Wizards of Waverly Place and such popular films as Monte Carlo (2011), Another Cinderella Story (2008) and Spring Breakers (2012). 9. Cross-Complainant July Moon Productions, Inc. (July Moon) is, and at all

relevant times herein was, a California corporation with its principal place of business in Los Angeles, California. July Moon is a company in the business of lending the services of Ms. Gomez and licensing rights to her trademarks. 10. Cross-Complainants are informed and believe, and on that basis allege, that

Cross-Defendant Adrenalina Incorporated (Adrenalina) is, and at all times relevant herein
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was, a Nevada corporation with its principal place of business in Hallandale Beach, Florida. 11. Cross-Complainants are informed and believe, and on that basis allege, that

Cross-Defendant Gigantic Parfums LLC is, and at all times relevant herein was, a limited liability company organized under the laws of the state of Florida. 12. Cross-Complainants are informed and believe, and on that basis allege, that

Cross-Defendant Ilia Lekach is, and at all times relevant herein was, an individual residing in Florida.

FIRST CAUSE OF ACTION (Breach Of Contract Against All Cross-Defendants) 13. Cross-Complainants incorporate by reference Paragraphs 1 through 12,

inclusive, as though fully set forth herein. 14. In or about June 2011, July Moon on behalf of Selena Gomez entered into an

Exclusive License Agreement with Adrenalina, pursuant to which Adrenalina acquired a worldwide license to the Trademark Selena Gomez in connection with the design, manufacture, marketing, distribution and sale of fragrances and related products (hereafter, the License). A true and correct copy of the License is attached hereto as Exhibit A and incorporated herein by reference. 15. In exchange for these valuable rights, Adrenalina agreed to pay Cross-

Complainants a royalty of 5% of Whole Sale Net Sales with Guaranteed Minimum Royalties of $5,700,000. (License 9). In other words, regardless of how well or poor Adrenalina performed under the License, Adrenalina was obligated to pay July Moon at least $5.7 million. Adrenalinas payment obligations were and are secured by the personal guarantee of Adrenalina Chairman Ilia Lekach, and a separate guarantee executed by Gigantic Parfums, an entity affiliated with Adrenalina and Lekach. (License, Addenda A & B). 16. Critical to this deal, Adrenalina also agreed that it would invest a minimum of

20% of forecasted minimum wholesale net sales each year on advertising the Products in trade and consumer press. (License 10(b)). This meant that in the first year alone,
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Adrenalina was obligated to spend a minimum of $2,000,000 on advertising the licensed products. These minimum advertising spends were separate from, and in addition to, any monies spent by Adrenalina to promote the licensed products through launch events, contests and other marketing type activities. 17. Equally important, Adrenalina promised to use its best commercially reasonable

efforts to maximize the sales, marketing, and distribution of the Products. (License 10(a)). Consistent with industry norms for exploitation of worldwide distribution rights, at a very minimum, Adrenalina was obligated at the outset to engage with distributors in all major foreign markets. 18. The provisions of Section 10 were particularly important to protect and ensure

Adrenalinas commitment to the valuable Selena Gomez brand, a brand that Ms. Gomez carefully nurtured and built over her thirteen plus years in the entertainment business. 19. To this same end, the License required that Adrenalina would not only provide all

capital and fully fund the manufacturing, marketing, distribution and sale of the Products (License 3(d)), but that it would: (a) do so in accordance with all applicable local laws and in manner which will not reflect adversely on [Ms. Gomez] ( 16(a)(v)); (b) conduct business in a manner at all times consistent with the high reputation of the Licensor ( 15(a)); and (c) refrain from any act or thing which might impair or affect the [Selena Gomez] Trademark or Licensors rights and interests therein. ( 16(a)(vii)). 20. In addition to these express terms, as in all contracts, Adrenalina had an implied

obligation of good faith and fair dealing which required, among other things, that Adrenalina do everything the License presupposes it would do to accomplish its purpose, and that it further refrain from doing anything which would destroy, injure or frustrate Cross-Complainants right to receive the benefits of the License. 21. Despite these clear obligations, in or about March 2013, Adrenalina breached the

express and implied terms of the License by, among other things, failing and refusing to pay monies due to a key vendor, Victory International, which had contracted with Adrenalina to manufacture the Selena Gomez fragrances. Cross-Complainants are informed and believe,
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and on that basis allege, that the amount owed by Adrenalina to Victory exceeds $1.2 million. Cross-Complainants are further informed and believe, and on that basis allege, that Adrenalina granted Victory a security interest in, and lien, upon goods being manufactured for the License in the event of a default by Adrenalina, and a right to sell and/or liquidate inventory of finished products maintained by Victory. Cross-Complainants are informed and believe, and on that basis allege, that Victory has exercised these rights and has and will continue to sell finished product at below wholesale prices. 22. On or about March 11, 2013, Victory sued Adrenalina for in excess of $1.2 million

in damages, and for injunctive relief precluding Adrenalina from entering into any agreement with another manufacturer. 23. In responding to that Complaint, Adrenalina has publically admitted that it failed

to meet its delivery deadlines with Macys [a major buyer] which in turn led to delays, order cancellations and penalties during launch of the line equivalent to hundreds of thousands of dollars. Adrenalina further admitted that it failed to fulfill orders because of a delay in obtaining 30ml pumps, and that this and other manufacturing problems have caused damaged to its reputation and credibility. Of course, any damage to Adrenalinas reputation and credibility directly impacts the Selena Gomez brand. Moreover, while Adrenalina attempts to blame Victory for its manufacturing and delivery issues, the fact remains that under the License, Adrenalina has assumed the risk of any problems with its chosen suppliers. 24. By failing to pay a major manufacturer (as required by 3(d) of the License),

instigating a major public lawsuit and failing to fulfill orders, Adrenalina has not conducted itself consistent with the high reputation of Selena Gomez. To the contrary, its actions reflect negatively on Ms. Gomez and have caused undue risk to her Trademarks and brand - all in direct breach of the License. 25. By failing to pay Victory, Adrenalina has also allowed Victory to place a lien on

and liquidate its inventory of products, and to block Adrenalina from contracting with others- all in contravention with Adrenalinas obligation to use its best commercially reasonable efforts to maximize the sales, marketing, and distribution of the Products.
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26.

Cross-Complainants are informed that Adrenalina, in fact, has a history of not

paying its bills. As one example, in April 2013, Ms. Gomezs representatives were notified that Adrenalina had yet to pay a photographer from a 2011 photo shoot with Ms. Gomez, and that a lawsuit to shut down the Selena Gomez Perfume website was imminent. Again, although Ms. Gomez was not at fault, Adrenalinas reckless behavior reflected negatively on Ms. Gomez and her brand. 27. However, these are not the only material breaches by Adrenalina. Cross-

Complainants are informed and believe, and on that basis allege, that Adrenalina has not complied with its advertising obligations. Despite its dubious claims to have spent millions in promotions of the Licensed products, based on information provided by Adrenalina, it appears that Adrenalina did virtually no advertising at all in trade and consumer press (e.g., newspaper and magazine ads, trade circulars, etc.), and that it in fact fell well short of the $2 million promised for advertising. 28. Adrenalina also breached by failing to use its best commercially reasonable

efforts to market and sell globally, despite that this was a worldwide license. Indeed, CrossComplainants are informed and believe, and on that basis allege, that Adrenalina made little if any effort to market, sell and distribute the Licensed products in countries outside of North America. Virtually all sales reported by Adrenalina to date appear to be from the USA, Canada and Mexico (with a nominal amount of sales from Dubai). At a very minimum, Adrenalina should have secured distributors in all major global markets, particularly since Ms. Gomez enjoys international popularity. 29. As a result of Adrenalinas multiple breaches of contract, on or about March 21,

2013, Cross-Complainants (through counsel) terminated the License in accordance with its terms, with an express reservation of rights, including without limitation the right to sue for damages based on the listed and other breaches. 30. Further, as set forth in Addenda A & B to the License, Cross-Defendants Gigantic

Parfums, LLC and Ilia Lekach have each individually guaranteed the prompt, full and complete performance by [Adrenalina] of all of its payment obligations to Licensor. Adrenalina has not
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fulfilled its payment obligations, including without limitation its obligation to pay minimum guarantees now due under the License. Although these Cross-Defendants are obligated to pay all amounts owed by Adrenalina, they have failed to do so. 31. Cross-Complainants have performed all conditions, covenants and promises

required to be performed by Cross-Complainants under the License, except those, if any, that have been prevented or otherwise excused by Cross-Defendants' conduct. 32. As a direct and proximate result of Cross-Defendants breaches, Cross-

Complainants have been damaged in an amount to be proven at trial but which CrossComplainants are informed and believe exceeds $5.2 million.

SECOND CAUSE OF ACTION (Declaratory Relief Against All Cross-Defendants) 33. Cross-Complainants incorporate by reference Paragraphs 1 through 32,

inclusive, as though fully set forth herein. 34. Adrenalina maintains that Cross-Complainants did not have a right to terminate

the License, and further asserts that Selena Gomez failed to render reasonable commercial efforts to assist with public relations for the products and failed to render a reasonable amount of such services. 35. Cross-Complainants vehemently deny these allegations. As set forth previously,

Cross-Complainants had an express contractual right to terminate in the face of Adrenalinas various material breaches of the License. 36. With regard to promotions, Ms. Gomez more than exceeded her promotional

obligations. The License required only that Ms. Gomez render a reasonable amount of promotional services, with all such services being subject to Ms. Gomezs unfettered approval rights and availability. In this case, Ms. Gomez was vigilant in promoting her brand and products including, without limitation, participating in photo shoots, a fragrance commercial, a major appearance at Macys in New York, promotions on social media, and more. Although Ms. Gomez had no contractual obligation at all to do personal appearances,
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Ms. Gomez and her representatives were more than cooperative in attempting to schedule additional appearances in Miami and Mexico. Indeed, after Ms. Gomez agreed to do a Miami appearance on June 30, 2012 (a date proposed by Adrenalina), it was Adrenalina that pulled the plug. 37. In view of the above, an actual controversy now exists between the parties

concerning their respective rights and obligations in connection with the License. CrossComplainants maintain that the License was validly terminated under its own terms and under California law, which permits a party to terminate and sue for damages in the face of a material breach by the opposing party. Cross-Complainants further maintain that Ms. Gomez has exceeded her promotional obligations. Adrenalina has taken a contrary position. 38. Cross-Complainants now desire a judicial determination as to the parties

respective rights and obligations vis a vis the License. 39. A judicial declaration is necessary and appropriate in order that the parties may

proceed in accordance with their rights as determined by the Court.

PRAYER FOR RELIEF Wherefore, Cross-Complainants pray for relief as follows: As to the First Cause of Action: 1. For compensatory damages against all Cross-Defendants, jointly and

severally, in an amount to be determined in accordance with proof at trial, but in any event no less than $5.2 million; As to the Second Cause of Action: 2. For a judicial determination and declaration that the License has been

properly terminated by Cross-Complainants, and 3. For a judicial determination and declaration that, prior to termination, Ms.

Gomez fully performed and met her promotional obligations set forth in the License; /// ///
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As to All Causes of Action: 4. 5. 6. Dated: May 8, 2013 Pre- and post-judgment interest at the maximum legal rate; All costs of suit incurred herein; and Such other and further relief that the Court deems just and appropriate. LAVELY & SINGER PROFESSIONAL CORPORATION MICHAEL E. WEINSTEN DANIEL R. GUTENPLAN

By:

______________________________ MICHAEL E. WEINSTEN Attorneys for Defendants and CrossComplainants JULY MOON PRODUCTIONS, INC. AND SELENA GOMEZ

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