--------------------------------------
STOCKHOLDERS AGREEMENT
by and among
XXXXXXX XXXXXXXXX,
Xxxxx X. Xxxxx,
and
MOSSIMO, INC.
dated as of
November 30, 1998
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TABLE OF CONTENTS
PAGE
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ARTICLE I. Definitions.......................................................1
Section 1.1. "Affiliate"..........................................1
Section 1.2. "Agreement"..........................................1
Section 1.3. "Base Options".......................................1
Section 1.4. "Beneficially Own"...................................1
Section 1.5. "Board"..............................................2
Section 1.6. "Buyer Notice".......................................2
Section 1.7. "cause"..............................................2
Section 1.8. "Company"............................................2
Section 1.9. "Common Stock".......................................2
Section 1.10. "Contribution Agreement"............................2
Section 1.11. "Control"...........................................2
Section 1.12. "Covered Transaction"...............................2
Section 1.13. "Deceased Party Voting Securities"..................2
Section 1.14. "Director"..........................................2
Section 1.15. "Disqualified Shares"...............................2
Section 1.16. "Election"..........................................2
Section 1.17. "Eligible Escrowed Shares"..........................2
Section 1.18. "Escrow Account"....................................2
Section 1.19. "Escrow Agreement"..................................3
Section 1.20. "Escrowed Shares"...................................3
Section 1.21. "Giannulli Escrowed Shares".........................3
Section 1.22. "Giannulli Nominee".................................3
Section 1.23. "Giannulli Termination Event".......................3
Section 1.24. "Group".............................................3
Section 1.25. "Heir"..............................................3
Section 1.26. "Inclusion Notice"..................................3
Section 1.27. "Xxxxx Escrowed Shares".............................3
Section 1.28. "Xxxxx Nominee".....................................3
Section 1.29. "Xxxxx Options".....................................3
Section 1.30. "Xxxxx Termination Event"...........................3
Section 1.31. "Mental Disability".................................3
Section 1.32. "1933 Act"..........................................3
Section 1.33. "1934 Act"..........................................3
Section 1.34. "Nominating Committee"..............................4
Section 1.35. "Notice of Intention"...............................4
Section 1.36. "Offered Stock".....................................4
Section 1.37. "Offeree"...........................................4
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Section 1.38. "Offer Price".......................................4
Section 1.39. "Other Stockholder".................................4
Section 1.40. "Performance Options"...............................4
Section 1.41. "Performance Option Shares".........................4
Section 1.42. "Permitted Transfer"................................4
Section 1.43. "person"............................................4
Section 1.44. "Proposed Quantity".................................4
Section 1.45. "Purchaser".........................................4
Section 1.46. "Registration Rights Agreement".....................4
Section 1.47. "Section 4.5 Offer".................................5
Section 1.48. "Selling Stockholder"...............................5
Section 1.49. "Shortfall".........................................5
Section 1.50. "Standstill Period".................................5
Section 1.51. "Subsequently Acquired Share".......................5
Section 1.52. "Successor".........................................5
Section 1.53. "Termination Event".................................5
Section 1.54. "Third Party".......................................5
Section 1.55. "13D Group".........................................5
Section 1.56. "Transfer"..........................................5
Section 1.57. "Transferor"........................................5
Section 1.58. "Voting Securities".................................5
ARTICLE II. Board of Directors................................................5
Section 2.1. Members of the Board.................................5
Section 2.2. Nominating Committee.................................6
Section 2.3. Vacancies............................................6
ARTICLE III. Voting Rights.....................................................7
Section 3.1. General..............................................7
Section 3.2. Voting of Escrowed Shares............................7
Section 3.3. Voting of Performance Option Shares..................7
Section 3.4. Voting of Subsequently Acquired Shares...............8
Section 3.5. Voting on Certain Matters............................8
Section 3.6. Voting Rights Upon Death.............................8
Section 3.7. Acknowledgment.......................................8
ARTICLE IV. Standstill Provisions.............................................8
Section 4.1. Standstill Period....................................8
Section 4.2. Restrictions During Standstill Period................9
Section 4.3. Restrictions on Transfer.............................9
Section 4.4. Right of First Refusal..............................10
Section 4.5. Right of Inclusion..................................11
Section 4.6. Termination Without Cause...........................12
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ARTICLE V. Covenants of the Company.........................................12
Section 5.1. Stockholder's Meeting...............................12
Section 5.2. Registration Rights.................................12
Section 5.3. Listing of Shares...................................13
Section 5.4. Restrictions Prior to Issuance of Shares............13
ARTICLE VI. Miscellaneous....................................................13
Section 6.1. Legends.............................................13
Section 6.2. Counterparts........................................13
Section 6.3. Governing Law.......................................13
Section 6.4. Entire Agreement....................................13
Section 6.5. Successors and Assigns..............................13
Section 6.6. Headings............................................13
Section 6.7. Amendments and Waivers..............................14
Section 6.8. Interpretation; Absence of Presumption..............14
Section 6.9. Severability........................................14
Section 6.10. Further Assurances.................................14
Section 6.11. Specific Performance...............................14
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THIS STOCKHOLDERS AGREEMENT (the "Agreement"), dated as of November
30, 1998, is made by and among Xxxxxxx Xxxxxxxxx ("Giannulli"), Xxxxx X.
Xxxxx ("Xxxxx") and, for the purposes of Articles II and V hereof only,
Mossimo, Inc., a Delaware corporation (the "Company").
RECITALS:
WHEREAS, the parties believe it to be in their best interests that
they enter into this Agreement to provide for certain rights and restrictions
with respect to Giannulli's and Xxxxx' ownership interests in the Company and
the corporate governance of the Company; and
WHEREAS, the Company, Giannulli and Xxxxx believe that Xxxxx'
leadership, expertise and experience in the apparel industry will
significantly enhance the Company's ability to pursue its growth and
operating strategies.
NOW, THEREFORE, in consideration of the premises and the covenants
and agreements contained herein and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
As used in this Agreement, the following terms shall have the
following respective meanings:
Section 1.1. "AFFILIATE" shall have the meaning ascribed thereto in
Rule 12b-2 promulgated under the 1934 Act, and as in effect on the date
hereof.
Section 1.2. "AGREEMENT" shall have the meaning set forth in the
first paragraph hereof.
Section 1.3. "BASE OPTIONS" shall mean the stock options granted to
Xxxxx pursuant to (i) the Incentive Stock Option Agreement dated as of even
date herewith between the Company and Xxxxx and (ii) the Nonqualified Stock
Option Agreement dated as of even date herewith between the Company and Xxxxx.
Section 1.4. "BENEFICIALLY OWN" shall mean, with respect to any
security, having direct or indirect "beneficial ownership" of such security,
as determined pursuant to Rule 13d-3 under the 1934 Act, including pursuant
to any agreement, arrangement or understanding, whether or not in writing;
PROVIDED, HOWEVER, that all of the shares of Common Stock that Xxxxx then has
the right to acquire upon exercise of a Xxxxx Option shall be deemed to be
Beneficially Owned by Xxxxx; PROVIDED FURTHER that the Giannulli Escrowed
Shares shall be deemed to be Beneficially Owned by Giannulli.
Section 1.5. "BOARD" shall mean the board of directors of the
Company.
Section 1.6. "BUYER NOTICE" shall have the meaning set forth in
Section 4.4(b).
Section 1.7. "CAUSE" shall have the meaning set forth in Section 4.6.
Section 1.8. "COMPANY" shall have the meaning set forth in the first
paragraph hereof.
Section 1.9. "COMMON STOCK" shall mean the common stock, par value
$.001 per share, of the Company.
Section 1.10. "CONTRIBUTION AGREEMENT" shall mean that certain
Contribution Agreement dated as of even date herewith between the Company and
Giannulli.
Section 1.11. "CONTROL" shall mean with respect to any person, the
power to direct the management and policies of such person, directly or
indirectly, whether through ownership of voting securities, by contract or
otherwise. "Controlled" shall have a correlative meaning.
Section 1.12. "COVERED TRANSACTION" shall have the meaning set forth
in Section 4.1.
Section 1.13. "DECEASED PARTY VOTING SECURITIES" shall mean the
Voting Securities over which Giannulli or Xxxxx, as applicable, has voting
rights at the time of his death.
Section 1.14. "DIRECTOR" shall mean a member of the Board.
Section 1.15. "DISQUALIFIED SHARES" shall mean a Performance Option
Share that has been (or the voting rights of which have been) transferred by
Xxxxx to a third party; PROVIDED that at such time as either Giannulli or
Xxxxx does not Beneficially Own at least ten percent (10%) of the outstanding
Common Stock, no shares shall be Disqualified Shares.
Section 1.16. "ELECTION" shall have the meaning set forth in Section
2.1(a).
Section 1.17. "ELIGIBLE ESCROWED SHARES" shall mean (i) the Escrowed
Shares in the Escrow Account which are to be released to the Company upon
exercise of the Base Options and (ii) at and after such time as either
Giannulli or Xxxxx does not Beneficially Own at least ten percent (10%) of
the outstanding Common Stock, the Escrowed Shares in the Escrow Account which
are vested under the Performance Options. For purposes of clarity, Eligible
Escrowed Shares will not include the Escrowed Shares referred to in clause
(ii) unless and until Giannulli or Xxxxx does not Beneficially Own ten
percent (10%) of the outstanding Common Stock.
Section 1.18. "ESCROW ACCOUNT" shall mean the escrow account
established pursuant to the Escrow Agreement.
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Section 1.19. "ESCROW AGREEMENT" shall mean that certain Escrow
Agreement dated as of even date herewith between the Company and Giannulli.
Section 1.20. "ESCROWED SHARES" shall have the meaning assigned to
such term in the Escrow Agreement.
Section 1.21. "GIANNULLI ESCROWED SHARES" shall have the meaning set
forth in Section 3.2.
Section 1.22. "GIANNULLI NOMINEE" shall have the meaning set forth
in Section 2.1(a).
Section 1.23. "GIANNULLI TERMINATION EVENT" shall mean the earlier
to occur of (i) the date on which Giannulli no longer Beneficially Owns a
number of shares of Common Stock equal to at least ten percent (10%) of the
outstanding Common Stock and (ii) Giannulli's death.
Section 1.24. "GROUP" shall mean a "group" as such term is used in
Section 13(d)(3) of the 1934 Act.
Section 1.25. "HEIR" shall have the meaning set forth in Section 3.6.
Section 1.26. "INCLUSION NOTICE" shall have the meaning set forth in
Section 4.5(a).
Section 1.27. "XXXXX ESCROWED SHARES" shall have the meaning set
forth in Section 3.2.
Section 1.28. "XXXXX NOMINEE" shall have the meaning set forth in
Section 2.1(a).
Section 1.29. "XXXXX OPTIONS" shall mean (i) the Base Options and
(ii) the Performance Options.
Section 1.30. "XXXXX TERMINATION EVENT" shall mean the earlier to
occur of (i) the date on which Xxxxx no longer Beneficially Owns a number of
shares of Common Stock equal to at least ten percent (10%) of the outstanding
Common Stock and (ii) Xxxxx' death.
Section 1.31. "MENTAL DISABILITY" shall mean, with respect to
Giannulli or Xxxxx, a mental condition which is determined by a court of
competent jurisdiction to constitute mental incapacity.
Section 1.32. "1933 ACT" shall mean the Securities Act of 1933, as
amended.
Section 1.33. "1934 ACT" shall mean the Securities Exchange Act of
1934, as amended.
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Section 1.34. "NOMINATING COMMITTEE" shall mean a committee of the
Board composed solely of Giannulli and Xxxxx.
Section 1.35. "NOTICE OF INTENTION" shall have the meaning set forth
in Section 4.4(a).
Section 1.36. "OFFERED STOCK" shall have the meaning set forth in
Section 4.4(a).
Section 1.37. "OFFEREE" shall have the meaning set forth in Section
4.5(a).
Section 1.38. "OFFER PRICE" shall have the meaning set forth in
Section 4.4(a).
Section 1.39. "OTHER STOCKHOLDER" shall have the meaning set forth
in Section 4.4(a).
Section 1.40. "PERFORMANCE OPTIONS" shall mean the stock options
granted to Xxxxx pursuant to (i) the Performance Incentive Stock Option
Agreement dated as of even date herewith between the Company and Xxxxx and
(ii) the Nonqualified Performance Stock Option Agreement dated as of even
date herewith between the Company and Xxxxx.
Section 1.41. "PERFORMANCE OPTION SHARES" shall mean the shares of
Common Stock issued by the Company to Xxxxx upon exercise of the Performance
Options (including any share(s) of capital stock of the Company that result
from any share dividend, reclassification, stock split, subdivision or
combination of shares, reclassification or merger or other events made with
respect to such shares), whether held by Xxxxx or subsequently transferred to
another party.
Section 1.42. "PERMITTED TRANSFER" shall mean any of (i) a Transfer
from Giannulli to the Company pursuant to the Contribution Agreement, (ii)
Transfers made in compliance with the requirements of Rule 144 of the 1933
Act, (iii) Transfers to a bona fide financial institution for the purpose of
securing bona fide indebtedness of Giannulli or Xxxxx, as applicable, and
(iv) bona fide gifts or Transfers for tax or estate-planning purposes,
PROVIDED in the case of this clause (iv) that the transferee agrees in
writing to be bound by the provisions of this Agreement.
Section 1.43. "PERSON" shall mean any individual, corporation,
partnership, limited liability company, joint venture, trust, unincorporated
organization or other form of business or legal entity.
Section 1.44. "PROPOSED QUANTITY" shall have the meaning set forth
in Section 4.5(a).
Section 1.45. "PURCHASER" shall have the meaning set forth in
Section 4.5(a).
Section 1.46. "REGISTRATION RIGHTS AGREEMENT" shall have the meaning
set forth in Section 5.2.
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Section 1.47. "SECTION 4.5 OFFER" shall have the meaning set forth
in Section 4.5(a).
Section 1.48. "SELLING STOCKHOLDER" shall have the meaning set forth
in Section 4.4(a).
Section 1.49. "SHORTFALL" shall have the meaning set forth in
Section 3.2.
Section 1.50. "STANDSTILL PERIOD" shall have the meaning set forth
in Section 4.1.
Section 1.51. "SUBSEQUENTLY ACQUIRED SHARE" shall mean any share of
any Voting Security acquired by Xxxxx or Giannulli after the date of this
Agreement; PROVIDED, HOWEVER, that the shares of Common Stock issued to Xxxxx
by the Company upon exercise of a Xxxxx Option shall not be considered
Subsequently Acquired Shares.
Section 1.52. "SUCCESSOR" shall have the meaning set forth in
Section 3.6.
Section 1.53. "TERMINATION EVENT" shall have the meaning set forth
in Section 2.1(d).
Section 1.54. "THIRD PARTY" shall have the meaning set forth in
Section 4.4(a).
Section 1.55. "13D GROUP" shall mean any group of persons acquiring,
holding, voting or disposing of Voting Securities which would be required
under Section 13(d) of the 1934 Act and the rules and regulations thereunder
(as in effect, and based on legal interpretations thereof existing, on the
date hereof) to file a statement on Schedule 13D with the Securities and
Exchange Commission as a "person" within the meaning of Section 13(d)(3) of
the 1934 Act if such group beneficially owned Voting Securities representing
more than five percent (5%) of any class of Voting Securities then
outstanding.
Section 1.56. "TRANSFER" shall have the meaning set forth in Section
4.3.
Section 1.57. "TRANSFEROR" shall have the meaning set forth in
Section 4.5(a).
Section 1.58. "VOTING SECURITIES" shall mean at any time shares of
any class of capital stock of the Company which are then entitled to vote
generally in the election of Directors.
ARTICLE II.
BOARD OF DIRECTORS
Section 2.1. MEMBERS OF THE BOARD.
(a) The Company, Giannulli and Xxxxx will take all actions
necessary to cause the Board to be structured to consist of five members, of
which one member will be designated by Giannulli (a "Giannulli Nominee"), one
member will be designated by Xxxxx (a
5
"Xxxxx Nominee"), and three members will be designated in accordance with
Section 2.2. The Company, Giannulli and Xxxxx will take all actions necessary
to cause the foregoing nominees to become members of the Board as soon as
practicable after the date hereof. At each annual or special meeting of
stockholders of the Company at which, or the taking of action by written
consent of stockholders of the Company by which, any class of Directors is to
be elected (an "Election"), each of Giannulli and Xxxxx shall have the right
(but not obligation) pursuant to this Agreement to designate one nominee to
the Board; PROVIDED, HOWEVER, that (i) if a Giannulli Nominee is, at the time
of the Election, in a class of Directors which does not stand for reelection
until a date following the Election, Giannulli shall not be entitled to
nominate a Director in the Election, (ii) if a Xxxxx Nominee is, at the time
of the Election, in a class of Directors which does not stand for reelection
until a date following the Election, Xxxxx shall not be entitled to nominate
a Director in the Election, (iii) after the occurrence of a Giannulli
Termination Event, if any, Giannulli's right to nominate Directors under this
Section 2.1 shall terminate and (iv) after the occurrence of a Xxxxx
Termination Event, if any, Xxxxx' right to nominate Directors under this
Section 2.1 shall terminate.
(b) Neither Giannulli nor Xxxxx will designate or nominate any person
as a Director if (i) such person is not reasonably experienced in business
and financial matters, (ii) such person has been convicted of, or has pled
nolo contendere to a felony, (iii) the election of such person would violate
any law, or (iv) any event required to be disclosed pursuant to Item 401(f)
of Regulation S-K of the 1934 Act has occurred with respect to such person.
Each of Giannulli and Xxxxx shall use his reasonable efforts to afford the
independent directors of the Company a reasonable opportunity to meet any
individual that he is considering designating or nominating as a director.
(c) The Company will support the nomination of and the election of
each Giannulli Nominee and Xxxxx Nominee, and the Company will exercise all
authority under applicable law to cause each Giannulli Nominee and Xxxxx
Nominee to be elected to the Board.
(d) Until the earlier to occur of (i) a Giannulli Termination Event
and (ii) a Xxxxx Termination Event (such occurrence shall be referred to
herein as a "Termination Event"), the number of Directors on the Board shall
not exceed five at any time.
Section 2.2. NOMINATING COMMITTEE. Upon execution of this Agreement, the
Board will create the Nominating Committee. Until such time as a Termination
Event occurs, each nominee to the Board of Directors (other than Giannulli
Nominees and Xxxxx Nominees) will require the unanimous approval of the
Nominating Committee. If the Nominating Committee cannot, after a reasonable
period of good faith discussions (not to exceed thirty (30) days),
unanimously agree on a nominee, the nomination will be referred to the entire
Board of Directors, which shall decide the matter based on a simple majority
vote. Upon a Termination Event, the powers of the Nominating Committee shall
revert back to the entire Board of Directors.
Section 2.3. VACANCIES. In the event that (i) any Giannulli Nominee
shall cease to serve as a Director for any reason other than the fact that
Giannulli no longer has a right to nominate a Director, as provided in
Section 2.1, or (ii) any Xxxxx Nominee shall cease to serve as
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a Director for any reason other than the fact that Xxxxx no longer has a
right to nominate a Director, as provided in Section 2.1, the vacancy
resulting thereby shall be filled by a Giannulli Nominee or a Xxxxx Nominee,
as applicable; PROVIDED, HOWEVER, that any Giannulli Nominee or Xxxxx Nominee
so designated shall satisfy the qualification requirements set forth in
Section 2.1(b).
ARTICLE III.
VOTING RIGHTS
Section 3.1. GENERAL. Except as otherwise provided in this Article III,
each of Giannulli and Xxxxx may vote the Voting Securities he owns in his
sole and absolute discretion.
Section 3.2. VOTING OF ESCROWED SHARES. The parties hereto acknowledge
and agree that (i) Xxxxx shall have the right to direct the vote of a number
of Escrowed Shares equal to the number of Eligible Escrowed Shares, LESS the
number of Disqualified Shares (the "Xxxxx Escrowed Shares"), and shall have
the sole and exclusive right to provide written instructions to the custodian
under the Escrow Agreement with respect to such votes and (ii) Giannulli
shall have the right to direct the vote of the number of Escrowed Shares
equal to the total number of Escrowed Shares, LESS the Xxxxx Escrowed Shares
(the "Giannulli Escrowed Shares"). In the event that Giannulli may be deemed
to have the right to vote the Xxxxx Escrowed Shares, Giannulli shall vote a
number of shares of Common Stock equal to the number of Xxxxx Escrowed Shares
as directed in writing by Xxxxx and, in the absence of such directions, shall
not vote such number of shares of Common Stock. In the event that Xxxxx may
be deemed to have the right to vote the Giannulli Escrowed Shares, Xxxxx
shall vote a number of shares of Common Stock equal to the number of
Giannulli Escrowed Shares as directed in writing by Giannulli and, in the
absence of such instructions, shall not vote such number of shares of Common
Stock. Xxxxx acknowledges and agrees that if (i) the Company issues shares of
Common Stock to Xxxxx upon exercise of the Xxxxx Options and (ii) the Company
is unable to timely obtain a sufficient number of shares of Common Stock from
the Escrow Account to fully cover such issuance (the difference between the
number of shares of Common Stock issued by the Company to Xxxxx and the
number of shares of Common Stock obtained by the Company from the Escrow
Account shall be referred to as the "Shortfall"), Xxxxx shall instruct the
custodian under the Escrow Agreement not to vote the number of Xxxxx Escrowed
Shares equal to the Shortfall.
Section 3.3. VOTING OF PERFORMANCE OPTION SHARES. With respect to any
matter upon which Xxxxx has the right to vote shares of Common Stock, Xxxxx
shall vote a number of shares of Common Stock equal to the number of
Performance Option Shares that have been issued by the Company (less any such
shares that are Disqualified Shares for purposes of Section 3.2) as directed
in writing by Giannulli and, in the absence of such instructions, shall not
vote such number of shares of Common Stock; PROVIDED, HOWEVER, that Xxxxx'
obligations under this Section 3.3 shall terminate at such time as either
Xxxxx or Giannulli does not Beneficially Own at least ten percent (10%) of
the outstanding Common Stock.
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Section 3.4. VOTING OF SUBSEQUENTLY ACQUIRED SHARES. Until such time as
either Xxxxx or Giannulli does not own at least ten percent (10%) of the
outstanding shares of Common Stock, (i) Giannulli shall vote one-half of any
Subsequently Acquired Shares over which he has voting control as directed in
writing by Xxxxx and, in the absence of such instructions, shall not vote
such shares, and (ii) Xxxxx shall vote one-half of any Subsequently Acquired
Shares over which he has voting control as directed in writing by Giannulli
and, in the absence of such instructions, shall not vote such shares.
Section 3.5. VOTING ON CERTAIN MATTERS. Until the occurrence of a
Termination Event, (i) Giannulli shall vote all the Voting Securities over
which he has voting control in favor of any Xxxxx Nominees and (ii) Xxxxx
shall vote all the Voting Securities over which he has voting control in
favor of any Giannulli Nominees. Giannulli shall vote all the Voting
Securities over which he has voting control in favor of the approval of the
Xxxxx Options and the plan pursuant to which such options were granted.
Section 3.6. VOTING RIGHTS UPON DEATH. In the event of the death or
Mental Disability of either Xxxxx or Giannulli, each Successor shall vote the
Deceased Party Voting Securities in accordance with the directions of
whichever of Xxxxx or Giannulli is the survivor and, in the absence of such
instructions, shall not vote such securities. It shall be a condition to the
transfer of Voting Securities to each Successor that such Successor agree to
be bound by the terms of this Section 3.6. As used herein, "Successor" shall
mean any of (i) any Person to whom the right to vote Deceased Party Voting
Securities is Transferred by will or the applicable laws of descent and
distribution (an "Heir") and (ii) any Person to whom Deceased Party Voting
Securities representing more than five percent (5%) of the outstanding Voting
Securities are Transferred by an Heir in one transaction or a series of
transactions. The provisions of this Section 3.6 shall terminate upon the
earlier of (i) such time as either Giannulli or Xxxxx does not Beneficially
Own at least ten percent (10%) of the outstanding Common Stock and (ii) the
death or Mental Disability of both Giannulli and Xxxxx.
Section 3.7. ACKNOWLEDGMENT. The parties acknowledge and agree that the
intent of the voting rights in this Article III is to provide that, until the
occurrence of certain termination events and except as provided in Section
3.6, Giannulli and Xxxxx have the right to vote an equal number of shares,
excluding any Transfers by either Giannulli or Xxxxx, and including any
Subsequently Acquired Shares.
ARTICLE IV.
STANDSTILL PROVISIONS
Section 4.1. STANDSTILL PERIOD. The "Standstill Period" shall be the
period commencing on the date of this Agreement and ending on the earlier of
(i) the ninetieth (90th) day after a Termination Event or (ii) the earlier of
(A) the authorization by the Company or the Board or any committee thereof of
the solicitation of offers or proposals or indications of interest with
respect to any merger, consolidation, other business combination,
liquidation, sale of the Company or all or substantially all of the assets of
the Company or any other change of control
8
of the Company or similar extraordinary transaction, but excluding any
merger, consolidation or other business combination in which the Company is
the surviving and acquiring corporation and in which the business or assets
so acquired do not, or would not reasonably be expected to, have a value
greater than fifty percent (50%) of the assets of the Company prior to such
merger, consolidation or other business combination (any of the foregoing, a
"Covered Transaction"); and (B) the written submission by any person or Group
other than Xxxxx, Giannulli or any Affiliate of them of a proposal to the
Company (including to the Board of any agent, representative or Affiliate of
the Company) with respect to, or otherwise expressing an interest in
pursuing, a Covered Transaction; PROVIDED, HOWEVER, that the Standstill
Period shall not terminate pursuant to this Section 4.1(a)(ii)(B) if, as soon
as practicable after receipt of any such proposal, the Board determines that
such proposal is not in the best interest of the Company and its stockholders
and for so long as the Board continues to reject such proposal as a result of
such determination.
Section 4.2. RESTRICTIONS DURING STANDSTILL PERIOD.
(a) During the Standstill Period, neither Giannulli nor Xxxxx will, or
will cause any of their Controlled Affiliates to, directly or indirectly:
(i) act in concert with any other person or Group by becoming a
member of a 13D Group; or
(ii) seek representation on the Board or a change in the
composition or size of the Board other than as permitted by Article 2;
PROVIDED, HOWEVER, that each of Giannulli and Xxxxx may do any of the
foregoing upon obtaining the prior written consent of the other.
Section 4.3. RESTRICTIONS ON TRANSFER. Until the earlier of (i) a
Termination Event and (ii) two years after the date hereof, neither Giannulli
nor Xxxxx will or will cause any of their Controlled Affiliates to, directly
or indirectly, sell, transfer, encumber or otherwise dispose of
(collectively, "Transfer") any shares of Common Stock unless such Transfer is
a Permitted Transfer. Thereafter, and during the remaining term, if any, of
the Standstill Period and subject to Section 3.6, none of Giannulli nor Xxxxx
nor their Heirs will or will cause any of their Controlled Affiliates to,
directly or indirectly, Transfer any shares of Common Stock except for (i)
Permitted Transfers, (ii) Transfers in a registered public offering and (iii)
Transfers pursuant to negotiated transactions with third parties provided
that if any such Transfer (whether in one transaction or a series of
transactions) is (A) for an amount of Common Stock representing greater than
five percent (5%) of the outstanding Common Stock and (B) is made to any
public or private company the principal business of which is, or that derives
more than $15 million of annual revenue from (in either case as of the date
of such Transfer), the manufacturing, distribution, licensing or sale of
clothing, THEN such Transfer shall require the consent of at least sixty
percent (60%) of the Directors. Notwithstanding anything to the contrary
herein, Giannulli shall not Transfer the Escrowed Shares except to the
Company in accordance with the Contribution Agreement.
9
Section 4.4. RIGHT OF FIRST REFUSAL.
(a) Except for Permitted Transfers and except for Transfers in
accordance with Section 4.5, if pursuant to a bona fide offer from a third
party either of Giannulli or Xxxxx desires to Transfer any of his shares of
Common Stock (such transferring person, a "Selling Stockholder" and such
shares proposed to be so Transferred, the "Offered Stock"), prior to any
Transfer he shall give written notice of the proposed Transfer (the "Notice
of Intention") to the other (the "Other Stockholder"), specifying the third
party making the offer (the "Third Party"), the number of shares of Offered
Stock which the Selling Stockholder wishes to Transfer, the proposed purchase
price (the "Offer Price") therefor and all other material terms and
conditions of the proposed Transfer.
(b) For a period of sixty (60) days following its receipt of the
Notice of Intention, the Other Stockholder shall have the right to purchase
all or any portion of the Offered Stock at the Offer Price and on the other
terms specified in the Notice of Intention, exercisable by delivery of an
irrevocable notice (the "Buyer Notice") to the Selling Stockholder specifying
the number of shares of Offered Stock with respect to which the Other
Stockholder is exercising its right.
(c) If the Notice of Intention has been duly delivered to the Other
Stockholder by the Selling Stockholder and the Other Stockholder fails to
deliver a Buyer Notice or determines not to exercise its right to purchase
the Offered Stock at the Offer Price and on the other terms specified in the
Notice of Intention or determines to exercise his option to purchase less
than all of the Offered Stock, then the Selling Stockholder shall have the
right, for a period of ninety (90) days from the earlier of (i) sixty (60)
days following delivery of the Notice of Intention and (ii) the date on which
he receives notice from the Other Stockholder that the Other Stockholder will
not exercise in whole or in part his rights granted pursuant to this Section
4.4, to sell to a Third Party the Offered Stock remaining unsold under this
Section 4.4 at a price not less than the Offer Price and on other terms which
shall not be materially more favorable to the Third Party in the aggregate
than those terms set forth in the Notice of Intention.
(d) The closing of any purchase and sale pursuant to this Section 4.4
shall take place on such date, not later than fifteen (15) business days
after the delivery to the Selling Stockholder of the Buyer Notice, as the
parties to such purchase and sale shall elect. At the closing of such
purchase and sale, the Selling Stockholder shall deliver any certificates
evidencing the Offered Stock being sold accompanied by written instruments of
Transfer in form satisfactory to the purchasers thereof, duly executed by the
Selling Stockholder, free and clear of any Liens, against delivery of the
Offer Price therefor.
(e) The provisions of this Section 4.4 shall terminate at such time as
either Xxxxx or Giannulli does not Beneficially Own at least ten percent
(10%) of the outstanding Common Stock.
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Section 4.5. RIGHT OF INCLUSION.
(a) Except for any Permitted Transfer and any sale pursuant to the
Registration Rights Agreement, if either Giannulli or Xxxxx ("Transferor")
proposes to Transfer, in one transaction or a series of related transactions,
shares of Common Stock representing more than five percent (5%) of the
outstanding Common Stock (the "Proposed Quantity") to any person (the
"Purchaser"), then, as a condition to such Transfer, the Transferor shall
cause the Purchaser to offer (the "Section 4.5 Offer") to whichever of
Giannulli or Xxxxx is not the Transferor (the "Offeree"), to sell to the
Purchaser, at the option of the Offeree, fifty percent (50%) of the Proposed
Quantity of Common Stock on the same terms and conditions as offered to the
Transferor. The Transferor shall provide a written notice (the "Inclusion
Notice") of the Section 4.5 Offer to the Offeree, who may accept the Section
4.5 Offer by providing a written notice of acceptance of the Section 4.5
Offer to the Transferor within twenty (20) business days of the delivery of
the Inclusion Notice.
(b) If the Offeree accepts the Section 4.5 Offer, he shall, within a
reasonable period prior to the closing of the purchase and sale of the Common
Stock covered by the Section 4.5 Offer, deliver to the Transferor a
certificate or certificates representing the Common Stock to be Transferred
pursuant to the Section 4.5 Offer by such Offeree, free and clear of all
Liens, together with proper instruments of transfer in form and substance
reasonably satisfactory to the Transferor and a limited power-of-attorney
authorizing the Transferor to sell or otherwise dispose of such Common Stock
pursuant to the terms of the Section 4.5 Offer; PROVIDED, that in the event
that the purchase and sale of Common Stock contemplated by this Section 4.5
Offer is not completed, such certificates shall be returned to the Offeree in
accordance with Section 4.5(d).
(c) The Transferor shall have thirty (30) days, commencing on the
expiration of the twenty (20) business day period referred to in Section
4.5(a), in which to Transfer to the Purchaser, on behalf of itself and the
Offeree, up to the Proposed Quantity of Common Stock. If all such shares of
Common Stock are not sold to Purchaser, the Transferor, at its option, may
elect to sell on behalf of itself and the Offeree such number of shares of
Common Stock as the Purchaser will purchase; PROVIDED that if the Offeree
accepts the Section 4.5 Offer, the shares of Common Stock Transferred to
Purchaser shall be allocated equally among the Transferor and the Offeree.
The material terms of any Transfer referred to in the two immediately
preceding sentences, including price and form of consideration, shall be as
set forth in the Inclusion Notice. If at the end of such thirty (30) day
period the Transferor has not completed the Transfer of all the shares of
Common Stock proposed to be sold, the Transferor shall return to the Offeree
his respective certificates, if any, representing the Common Stock which the
Offeree delivered for Transfer pursuant to this Section 4.5 and which were
not sold pursuant to the Section 4.5 Offer, and the provisions of this
Section 4.5 shall continue to be in effect.
(d) Concurrently with the Transfer of Common Stock of the Transferor
and, if applicable, the other Offeree to the Purchaser pursuant to this
Section 4.5, the Transferor shall notify the Offeree thereof, and the
Purchaser shall pay to the Transferor and, if applicable, the Offeree their
respective portions of the sales price of the Common Stock so Transferred and
shall
11
furnish such other evidence of the completion of such Transfer and the terms
thereof as may be reasonably requested by any Offeree.
(e) Notwithstanding anything to the contrary contained in this Section
4.5, (i) except for the Transferor's obligation to return to the Offeree any
certificates representing the Offeree's Common Stock, there shall be no
liability on the part of the Transferor to the Offeree in the event that any
proposed Transfer pursuant to this Section 4.5 is not consummated for any
reason, and (ii) whether or not any sale of Common Stock is effected pursuant
to this Section 4.5 shall be in the sole and absolute discretion of the
Transferor.
(f) The provisions of this Section 4.5 shall terminate at such time as
either Xxxxx or Giannulli does not Beneficially Own at least ten percent
(10%) of the outstanding Common Stock.
Section 4.6. TERMINATION WITHOUT CAUSE. At such time as either Giannulli
or Xxxxx is individually terminated as an employee of the Company without
"cause," the provisions of this Article IV shall terminate. For purposes
hereof, "cause" shall mean with respect to Giannulli or Xxxxx, (i) a
conviction for commission of a felony or crime including moral turpitude or
(ii) a willful commission of any act of theft, embezzlement, or
misappropriation against the Company which, in any case, is materially and
demonstrably injurious to the Company.
ARTICLE V.
COVENANTS OF THE COMPANY
Section 5.1. STOCKHOLDER'S MEETING. The Company agrees to duly call,
give notice of, convene and hold a meeting of its stockholders at which the
Company will seek approval for the granting of the Xxxxx Options and for the
plan under which the Xxxxx Options are granted no later than the earliest of
(i) seven (7) months from the date of this Agreement, (ii) immediately prior
to the consummation of any Covered Transaction and (iii) within thirty (30)
days of a request by Xxxxx PROVIDED that Xxxxx shall not be entitled to
request a meeting of stockholders under this clause (iii) unless he has a
reasonable belief that a stockholder meeting must be held in such thirty (30)
day period to prevent a material adverse affect on his rights under the Xxxxx
Options.
Section 5.2. REGISTRATION RIGHTS. The Company agrees to take all
reasonable actions necessary to enter into registration rights agreements
(the "Registration Rights Agreements") with each of Xxxxx and Giannulli
pursuant to which Xxxxx and Giannulli will each have certain rights to
register all of his shares of Common Stock, other than Subsequently Acquired
Shares. The Registration Rights Agreements will provide, at a minimum, for
one demand registration right and two piggyback registration rights for each
of Xxxxx and Giannulli. The Registration Rights Agreements will also provide
that each of Xxxxx and Giannulli shall bear his pro rata share of any
registration expenses.
12
Section 5.3. LISTING OF SHARES. The Company agrees to take all
reasonable actions necessary to list the shares of Common Stock issued by the
Company to Xxxxx upon exercise of the Xxxxx Options on all stock exchanges on
which the Common Stock is then listed.
Section 5.4. RESTRICTIONS PRIOR TO ISSUANCE OF SHARES. During any period
between a valid exercise by Xxxxx of a Xxxxx Option and the issuance by the
Company of the full amount of shares of Common Stock in respect of such
exercise, the Company shall not consummate (i) any Covered Transaction or
(ii) any other transaction which would have a material adverse affect on the
rights of Xxxxx under the Xxxxx Options.
ARTICLE VI.
MISCELLANEOUS
Section 6.1. LEGENDS. Until such time as either Giannulli or Xxxxx does
not Beneficially Own at least ten percent (10%) of the outstanding Common
Stock, each of Giannulli and Xxxxx agree to affix a legend to each Voting
Security he holds or which is held in the Escrow Account indicating that such
Voting Security is subject to this Agreement and, if appropriate, the Escrow
Agreement.
Section 6.2. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same instrument,
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other party. Copies of executed
counterparts transmitted by telecopy, telefax or other electronic
transmission service shall be considered original executed counterparts for
purposes of this Section, provided receipt of copies of such counterparts is
confirmed.
Section 6.3. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California without
reference to the choice of law principles thereof.
Section 6.4. ENTIRE AGREEMENT. This Agreement (including agreements
referenced herein) contains the entire agreement between the parties with
respect to the subject matter hereof and there are no agreements,
understandings, representations or warranties between the parties other than
those set forth or referred to herein. This Agreement is not intended to
confer upon any person not a party hereto (and their successors and assigns)
any rights or remedies hereunder.
Section 6.5. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors. No party shall be permitted to assign any of its rights hereunder
to any third party.
Section 6.6. HEADINGS. The Section, Article and other headings contained
in this Agreement are inserted for convenience of reference only and will not
affect the meaning or interpretation of this Agreement. All references to
Sections or Articles contained herein means Sections or Articles of this
Agreement unless otherwise stated.
13
Section 6.7. AMENDMENTS AND WAIVERS. This Agreement may not be modified
or amended except by an instrument or instruments in writing signed by the
party against whom enforcement of any such modification or amendment is
sought; PROVIDED, HOWEVER, that any provision of this Agreement other than
the provisions of Articles II and V may be amended by an instrument or
instruments in writing signed by both Giannulli and Xxxxx. Any party hereto
may, only by an instrument in writing, waive compliance by another party
hereto with any term or provision hereof on the part of such other party
hereto to be performed or complied with. The waiver by any party hereto of a
breach of any term or provision hereof shall not be construed as a waiver of
any subsequent breach.
Section 6.8. INTERPRETATION; ABSENCE OF PRESUMPTION. This Agreement
shall be construed without regard to any presumption or rule requiring
construction or interpretation against the party drafting or causing any
instrument to be drafted.
Section 6.9. SEVERABILITY. Any provision hereof which is invalid or
unenforceable shall be ineffective to the extent of such invalidity or
unenforceability, without affecting in any way the remaining provisions
hereof.
Section 6.10. FURTHER ASSURANCES. The parties agree that, from time to
time, each of them will, and will cause their respective Affiliates to,
execute and deliver such further instruments and take such other action as
may be necessary to carry out the purposes and interests hereof.
Section 6.11. SPECIFIC PERFORMANCE. The parties acknowledge that, in
view of the uniqueness of arrangements contemplated by this Agreement, they
would not have an adequate remedy at law for money damages in the event that
this Agreement were not performed in accordance with its terms, and therefore
agree that each of them shall be entitled to specific enforcement of the
terms hereof in addition to any other remedy to which the parties hereto may
be entitled at law or in equity.
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IN WITNESS WHEREOF, this Agreement has been signed by or on behalf
of each of the parties hereto as of the day first above written.
/s/ Xxxxxxx Xxxxxxxxx
----------------------------------
XXXXXXX XXXXXXXXX
/s/ Xxxxx X. Xxxxx
----------------------------------
XXXXX X. XXXXX
MOSSIMO, INC.
By /s/ Xxxxxxx Xxxxxxxxx
-------------------------------
Name: Xxxxxxx Xxxxxxxxx
----------------------------
Title: CHAIRMAN
---------------------------
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