ESCROW AGREEMENT
This ESCROW AGREEMENT (this "Escrow Agreement") is made and entered
into as of November 30, 1998 (the "Effective Time"), by and among Xxxxxxx
Xxxxxxxxx, an individual ("Giannulli"); Mossimo, Inc., a Delaware corporation
(the "Company"); and _________________________, as Custodian of the Escrowed
Shares (as defined below) (the "Custodian").
A. The Company and Xxxxx X. Xxxxx ("Xxxxx") have entered into (i)
an Incentive Stock Option Agreement dated as of November 30, 1998 (the
"Incentive Base Option Agreement") pursuant to which Xxxxx has an option (the
"Incentive Base Option") to purchase up to 33,333 shares of common stock, par
value $.001 per share, of the Company ("Common Stock") on the terms and
subject to the conditions set forth therein, (ii) a Nonqualified Stock Option
Agreement dated as of November 30, 1998 (the "Nonqualified Base Option
Agreement" and, together with the Incentive Base Option Agreement, the "Base
Option Agreements") pursuant to which Xxxxx has an option (the "Nonqualified
Base Option" and, together with the Incentive Base Option, the "Base
Options") to purchase up to 5,152,778 shares of Common Stock on the terms and
subject to the conditions set forth therein, (iii) a Performance Incentive
Stock Option Agreement dated as of November 30, 1998 (the "Incentive
Performance Option Agreement") pursuant to which Xxxxx has an option (the
"Incentive Performance Option") to purchase up to 33,333 shares of Common
Stock on the terms and subject to the conditions set forth therein and (iv) a
Nonqualified Performance Stock Option Agreement dated as of November 30, 1998
(the "Nonqualified Performance Option Agreement" and, together with the
Incentive Performance Stock Option Agreement, the "Performance Option
Agreements") pursuant to which Xxxxx has an option (the "Nonqualified
Performance Stock Option" and, together with the Incentive Stock Option, the
"Performance Options") to purchase up to 966,667 shares of Common Stock on
the terms and subject to the conditions set forth therein.
X. Xxxxxxxxx and the Company have entered into a Contribution
Agreement dated as of November 30, 1998 (the "Contribution Agreement")
pursuant to which Giannulli has agreed to contribute to the Company a number
of shares of Common Stock equal to the aggregate number of shares of Common
Stock to be issued by the Company upon exercise of the Base Options and the
Performance Options.
C. The Contribution Agreement provides that Giannulli will place
6,186,111 shares of Common Stock (the "Initial Escrowed Shares") in an escrow
account pending the exercise of the Base Options and the Performance Options
on the terms set forth herein.
NOW, THEREFORE, for and in consideration of the foregoing and the
mutual covenants and agreements contained in the Contribution Agreement and
in this Escrow Agreement, the parties agree as follows:
1. ESTABLISHMENT OF ESCROW ACCOUNT
1.1. DEPOSIT OF SHARES. Giannulli shall deposit as soon as
practicable in the escrow account (the "Escrow Account") with the Custodian
the Initial Escrowed Shares.
Giannulli shall take all actions necessary to transfer record ownership of
the Initial Escrowed Shares to the Custodian. Any shares of capital stock of
the Company that result from any share dividend, reclassification, stock
split, subdivision or combination of shares, recapitalization, merger or
other events made with respect to any shares of Common Stock held in escrow
under this Escrow Agreement ("Additional Shares") shall be delivered by the
Company or Giannulli directly to the Custodian and shall be held in the
Escrow Account in accordance with this Escrow Agreement. Unless otherwise
indicated, as used in this Escrow Agreement, the term "Escrowed Shares"
includes the Initial Escrowed Shares and any Additional Shares.
1.2. DIVIDENDS AND VOTING. Any cash dividends, dividends
payable in property or other distributions of any kind (except for Additional
Shares) ("Related Distributions") made in respect of the number of Xxxxx
Escrowed Shares (as defined in that certain Stockholders Agreement dated as
of November 30, 1998 among the Company, Xxxxx and Giannulli (the
"Stockholders Agreement")) shall promptly be released by the Custodian to
Xxxxx. The Related Distributions made in respect of the number of Giannulli
Escrowed Shares (as defined in the Stockholders Agreement) shall promptly be
released by the Custodian to Giannulli. The Custodian shall have the right to
vote the Escrowed Shares held in the Escrow Account on each matter upon which
the holders of Common Stock of the Company are entitled to vote, and it shall
vote such Escrowed Shares as follows: (i) the number of Xxxxx Escrowed Shares
shall be voted as directed by Xxxxx and, in the absence of such directions,
shall not be voted, and (ii) the number of Giannulli Escrowed Shares shall be
voted as directed by Giannulli and, in the absence of such directions, shall
not be voted.
1.3. NO ENCUMBRANCE. None of the Escrowed Shares or any
beneficial interest therein may be pledged, sold, assigned or transferred,
including by operation of law, by the Company, or by Giannulli, or may be
taken or reached by any legal or equitable process in satisfaction of any
debt or other liability of the Company or Giannulli, prior to the delivery of
the Escrowed Shares by the Custodian to the Company pursuant to this Escrow
Agreement.
1.4. POWER TO TRANSFER ESCROWED SHARES. The Custodian is
hereby granted the power to effect any transfer of the Escrowed Shares
provided for in this Escrow Agreement.
2. RELEASE FROM ESCROW
2.1. RELEASE OF ESCROWED SHARES TO THE COMPANY. At such time
or times as Xxxxx (a) exercises the Incentive Base Option in accordance with
the terms of the Incentive Base Option Agreement, (b) exercises the
Nonqualified Base Option in accordance with the terms of the Nonqualified
Base Option Agreement, (c) exercises the Incentive Performance Option in
accordance with the terms of the Incentive Performance Option Agreement, or
(d) exercises the Nonqualified Performance Option in accordance with the
terms of the Nonqualified Performance Option Agreement, the Company shall
instruct the Custodian in writing to release to the Company, and, upon
receipt of such written instruction, the Custodian shall release to the
Company within two business days, a number of Escrowed Shares equal to the
number of shares of Common Stock for which the Incentive Base Option,
Nonqualified Base Option, Incentive Performance Option, or Nonqualified
Performance Option, as applicable, has been exercised.
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2.2. RELEASE OF ESCROWED SHARES TO GIANNULLI. Upon each of
(a) the expiration of the Incentive Base Option under the terms of the
Incentive Base Option Agreement, (b) the expiration of the Nonqualified Base
Option under the terms of the Nonqualified Base Option Agreement, (c) the
expiration of the Incentive Performance Option under the terms of the
Incentive Performance Option Agreement and (d) the expiration of the
Nonqualified Performance Option under the terms of the Nonqualified
Performance Option Agreement, the Company shall instruct the Custodian in
writing to release to Giannulli, and, upon receipt of such written
instruction, the Custodian shall release to Giannulli within two business
days, a number of Escrowed Shares equal to the number of shares of Common
Stock underlying the applicable option at the time of its expiration. For
purposes of clarity, at such time as all of the Incentive Base Option, the
Nonqualified Base Option, the Incentive Performance Option, and the
Nonqualified Performance Option have expired, all of the Escrowed Shares
remaining in the Escrow Account shall be released to Giannulli.
3. CUSTODIAN
3.1. DUTIES. The duties of the Custodian hereunder shall be
entirely administrative and not discretionary. The Custodian shall be
obligated to act only in accordance with written instructions received by it
as provided in this Escrow Agreement and is authorized hereby to comply with
any orders, judgments, or decrees of any court with or without jurisdiction
and shall not be liable as a result of its compliance with the same.
3.2. LEGAL OPINIONS. As to any legal questions arising in
connection with the administration of this Escrow Agreement, the Custodian
may rely absolutely upon the joint instruction of the Company or the opinions
given to the Custodian by its outside counsel and shall be free of liability
for acting in reliance on such opinions.
3.3. SIGNATURES. The Custodian may rely absolutely upon the
genuineness and authorization of the signature and purported signature of any
party upon any instruction, notice, release, receipt or other document
delivered to it pursuant to this Escrow Agreement.
3.4. RECEIPTS AND RELEASES. The Custodian may, as a condition
to the disbursement of monies or disposition of securities as provided
herein, require from the payee or recipient a receipt therefor and, upon
final payment or disposition, a release of the Custodian from any liability
arising out of its execution or performance of this Escrow Agreement, such
release to be in a form reasonably satisfactory to the Custodian.
3.5. INTERPLEADER. If any controversy arises between the
parties hereto or with any third person, the Custodian shall not be required
to determine the same or to take any action, but the Custodian in its
discretion may institute such interpleader or other proceedings in connection
therewith as the Custodian may deem proper, and in following either course,
the Custodian shall not be liable.
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4. INDEMNIFICATION
4.1. WAIVER AND INDEMNIFICATION. The Company and Giannulli
agree to and hereby do waive any suit, claim, demand or cause of action of
any kind which they may have or may assert against the Custodian arising out
of or relating to the execution or performance by the Custodian of this
Escrow Agreement, unless such suit, claim, demand or cause of action is based
upon the willful neglect or gross negligence or bad faith of the Custodian.
The Company further agrees to indemnify the Custodian against and from any
and all claims, demands, costs, liabilities and expenses, including
reasonable attorneys' fees, which may be asserted against it or to which it
may be exposed or which it may incur by reason of its execution or
performance of this Escrow Agreement, except to the extent attributable to
its willful neglect, gross negligence, or bad faith. Such agreement to
indemnify shall survive the termination of this Escrow Agreement until
extinguished by any applicable statute of limitations.
4.2. CONDITIONS TO INDEMNIFICATION. In case any litigation is
brought against the Custodian in respect of which indemnification may be
sought hereunder, the Custodian shall give prompt notice of that litigation
to the parties hereto, and the Company upon receipt of that notice shall have
the obligation and the right to assume the defense of such litigation with
counsel reasonably satisfactory to the Custodian; PROVIDED THAT failure of
the Custodian to give that notice shall not relieve the Company from any of
its obligations under this Section 4 unless that failure prejudices the
defense of such litigation by the Company. At its own expense, the Custodian
may employ separate counsel and participate in the defense. Neither the
Company nor Giannulli shall be liable for any settlement without their
consent.
5. ACKNOWLEDGMENT BY THE CUSTODIAN
By execution and delivery of this Escrow Agreement, the Custodian
acknowledges that the terms and provisions of this Escrow Agreement are
acceptable and it agrees to carry out the provisions of this Escrow Agreement
on its part.
6. RESIGNATION OR REMOVAL OF CUSTODIAN; SUCCESSOR
6.1. RESIGNATION AND REMOVAL.
6.1.1. NOTICE. The Custodian may resign as such
following the giving of thirty (30) days' prior written notice to the other
parties hereto. Similarly, the Custodian may be removed and replaced
following the giving of thirty (30) days' prior written notice to be given to
the Custodian jointly by Giannulli and the Company. In either event, the
duties of the Custodian shall terminate thirty (30) days after the date of
such notice (or as of such earlier date as may be mutually agreeable), and
the Custodian shall then deliver the balance of the Escrowed Shares then in
its possession to a successor Custodian as shall be appointed by the other
parties hereto as evidenced by a written notice filed with the Custodian.
6.1.2. COURT APPOINTMENT. If the parties hereto are
unable to agree upon a successor or shall have failed to appoint a successor
prior to the expiration of thirty (30) days following the date of the notice
of resignation or removal, then the acting Custodian may petition
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any court of competent jurisdiction for the appointment of a successor
Custodian or other appropriate relief, and any such resulting appointment
shall be binding upon all of the parties hereto.
6.2. SUCCESSORS. Every successor appointed hereunder shall
execute, acknowledge and deliver to its predecessor, and also to the parties
hereto, an instrument in writing accepting such appointment hereunder, and
thereupon such successor, without any further act, shall become fully vested
with all the duties, responsibilities and obligations of its predecessor; but
such predecessor shall, nevertheless, on the written request of its successor
or any of the parties hereto, execute and deliver an instrument or
instruments transferring to such successor all the rights of such predecessor
hereunder, and shall duly assign, transfer and deliver all property,
securities and monies held by it pursuant to this Escrow Agreement to its
successor. Should any instrument be required by any successor for more fully
vesting in such successor the duties, responsibilities, and obligations
hereby vested or intended to be vested in the predecessor, any and all such
instruments in writing shall, on the request of any of the other parties
hereto, be executed, acknowledged, and delivered by the predecessor.
6.3. NEW CUSTODIAN. In the event of an appointment of a
successor, the predecessor shall cease to be Custodian of any funds,
securities or other assets and records it may hold pursuant to this Escrow
Agreement, and the successor shall become such Custodian.
6.4. RELEASE. Upon acknowledgment by any successor Custodian
of the receipt of the then remaining balance of the Escrowed Shares, the then
acting Custodian shall be fully released and relieved of all duties,
responsibilities and obligations under this Escrow Agreement that may arise
and accrue thereafter.
7. FEE
The Custodian will be paid by the Company as billed for services
hereunder in accordance with the fee schedule attached hereto as Exhibit A.
In the event that the Custodian is made a party to litigation with respect to
the property held hereunder, or brings an action in interpleader, or in the
event that the conditions to this Escrow are not promptly fulfilled, or the
Custodian is required to render any service not provided for in this Escrow
Agreement and fee schedule, or there is any assignment of the interests of
this Escrow or any modification hereof, the Custodian shall be entitled to
reasonable compensation from the Company for such extraordinary services and
reimbursement for all fees, costs, liability, and expenses, including
attorneys fees.
8. TERMINATION; DEFICIENCY CLAIMS.
This Escrow Agreement and the Escrow Account created hereby shall
terminate following Custodian's delivery of all Escrowed Shares to the
Company and/or Giannulli pursuant to Section 2.
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9. MISCELLANEOUS PROVISIONS
9.1. PARTIES IN INTEREST. Xxxxx shall be a third party
beneficiary to this Agreement and shall be entitled to enforce the terms of
this Agreement against the parties hereto. Other than Xxxxx, this Escrow
Agreement is not intended, nor shall it be construed, to confer any
enforceable rights on any person not a party hereto. All of the terms and
provisions of this Escrow Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of the
parties hereto.
9.2. ATTORNEYS' FEES. In the event of any action to enforce
any provision of this Escrow Agreement, or on account of any default under or
breach of this Escrow Agreement, the prevailing party in such action shall be
entitled to recover, in addition to all other relief, from the other party
all attorneys' fees incurred by the prevailing party in connection with such
action (including, but not limited to, any appeal thereof).
9.3. ENTIRE AGREEMENT. This Escrow Agreement and the
Contribution Agreement constitute the final and entire agreement among the
parties with respect to the subject matter hereof and supersedes all prior
arrangements or understandings.
9.4. NOTICES. All notices, requests, demands or other
communications which are required or may be given pursuant to the terms of
this Agreement shall be in writing and shall be deemed to have been duly
given: (i) on the date of delivery if personally delivered by hand, (ii) upon
the third day after such notice is deposited in the United States mail, if
mailed by registered or certified mail, postage prepaid, return receipt
requested, (iii) upon the date scheduled for delivery after such notice is
sent by a nationally recognized overnight express courier or (iv) by fax upon
written confirmation (including the automatic confirmation that is received
from the recipient's fax machine) of receipt by the recipient of such notice:
If to the Company: Mossimo, Inc.
0000 Xxxxx Xxxx, 0xx Xxxxx
Xxxxxx, XX 00000
Attention: Chairman
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
If to Giannulli: Xxxxxxx Xxxxxxxxx
c/o Mossimo, Inc.
0000 Xxxxx Xxxx, 0xx Xxxxx
Xxxxxx, XX 00000
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
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If to Custodian:
Telephone No.:
Fax No.:
Such addresses may be changed, from time to time, by means of a notice given
in the manner provided in this Section 9.4.
9.5. CHANGES. The terms of this Escrow Agreement may not be
modified or amended, or any provisions hereof waived, temporarily or
permanently, except pursuant to the written agreement of the parties hereto.
9.6. SEVERABILITY. If any term or provision of this Escrow
Agreement or the application thereof as to any person or circumstance shall
to any extent be invalid or unenforceable, the remaining terms and provisions
of this Escrow Agreement or the application of such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable shall not be affected thereby and each term and provision of
this Escrow Agreement shall be valid and enforceable to the fullest extent
permitted by law.
9.7. COUNTERPARTS. This Escrow Agreement may be executed in
two or more partially or fully executed counterparts, each of which shall be
deemed an original and shall bind the signatory, but all of which together
shall constitute but one and the same instrument. The execution and delivery
of an Escrow Agreement - Signature Page in the form annexed to this Escrow
Agreement by any party hereto who shall have been furnished the final form of
this Escrow Agreement shall constitute the execution and delivery of this
Escrow Agreement by such party.
9.8. HEADINGS. The headings of the various sections of this
Escrow Agreement have been inserted for convenience of reference only and
shall not be deemed to be a part of this Escrow Agreement.
9.9. GOVERNING LAW. This Escrow Agreement shall be
construed and controlled by the laws of the State of California without
regard to the principles of conflicts of laws.
9.10. BINDING EFFECT. This Escrow Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
affiliates, successors and assigns.
(THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK)
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ESCROW AGREEMENT -- SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have duly executed this Escrow
Agreement as of the day and year first above written.
MOSSIMO, INC.
By:
-----------------------------------
Title: Chairman
-------------------------------------
XXXXXXX XXXXXXXXX
[CUSTODIAN]
By:
---------------------------------
Authorized Signatory
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