PERFORMANCE INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT, dated as of November 30, 1998, is made by
and between Mossimo, Inc., a Delaware corporation, hereinafter referred to as
"Company," and Xxxxx Xxxxx, hereinafter referred to as "Optionee":
WHEREAS, the Company has adopted the Mossimo, Inc. Stock
Option Plan for Xxxxx Xxxxx (the terms of which are hereby incorporated by
reference and made a part of this Agreement);
WHEREAS, the Company desires to grant to Optionee an
incentive stock option to purchase 33,333 shares of the Company's Common
Stock which shall become vested and exercisable upon the satisfaction of the
performance goal described herein; and
WHEREAS, the Committee has determined that it would be to
the advantage and best interest of the Company and its shareholders to grant
the incentive stock option provided for herein to the Optionee as an
inducement to accept employment with the Company and accept appointment as
Chief Executive Officer and as an incentive for increased efforts during such
service, and has advised the Company thereof and instructed the undersigned
officers to issue said Option.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and other good and valuable consideration, receipt of which
is hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I.
DEFINITIONS
Whenever the following terms are used in this Agreement,
they shall have the meanings specified below unless the context clearly
indicates to the contrary. The masculine pronoun shall include the feminine
and neuter, and the singular the plural, where the context so indicates.
1.1. ADMINISTRATOR
"Administrator" shall mean the Committee.
1.2. CLOSING TRADING PRICE
"Closing Trading Price" for any Trading Day shall mean the
closing trading price of a share of Common Stock on the New York Stock
Exchange (composite quotations, rounded to the nearest whole cent) (or any
other principal exchange or quotation system through which the Common Stock
is traded) for the Trading Day.
1.3. BOARD
"Board" shall mean the Board of Directors of the Company.
1.4. CODE
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.5. COMMITTEE
"Committee" shall mean the Compensation Committee of the
Board, or such other committee appointed as provided in the Plan.
1.6. COMMON STOCK
"Common Stock" shall mean the Company's Common Stock, par
value $.001 per share.
1.7. COMPANY
"Company" shall mean Mossimo, Inc., a Delaware corporation.
1.8. EMPLOYEE
"Employee" shall mean any officer or other employee (as
defined in accordance with Section 3401(c) of the Code) of the Company.
1.9. EXCHANGE ACT
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
1.10. OFFICER
"Officer" shall mean an officer of the Company, as defined
in Rule 16a-1(f) under the Exchange Act, as such Rule may be amended in the
future.
1.11. OPTION
"Option" shall mean the incentive option to purchase Common
Stock of the Company granted under this Agreement.
1.12. PLAN
"Plan" shall mean the Mossimo, Inc. Stock Option Plan for
Xxxxx Xxxxx.
1.13. RULE 16b-3
"Rule 16b-3" shall mean that certain Rule 16b-3 under the
Exchange Act, as such Rule may be amended in the future.
1.14. SECRETARY
"Secretary" shall mean the Secretary of the Company.
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1.15. SECURITIES ACT
"Securities Act" shall mean the Securities Act of 1933, as
amended.
1.16. TRADING DAY
"Trading Day" shall mean any day after November 30, 1998 on
which shares of Common Stock are traded on the New York Stock Exchange (or
any other principal exchange or quotation system through which the Common
Stock is traded).
ARTICLE II.
GRANT OF OPTION
2.1. GRANT OF OPTION
Subject to Section 5.5, in consideration of the Optionee's
agreement to accept employment with the Company on the date hereof and to
accept appointment as Chief Executive Officer of the Company on December 1,
1998, on the date hereof the Company irrevocably grants to the Optionee the
option to purchase any part or all of an aggregate of 33,333 shares of Common
Stock upon the terms and conditions set forth in this Agreement.
2.2. PURCHASE PRICE
The purchase price of the shares of Common Stock covered by
the Option shall be $3.00 per share without commission or other charge.
2.3. CONSIDERATION TO COMPANY
In consideration of the granting of this Option by the
Company, the Optionee agrees to accept employment with the Company on the
date hereof and to accept appointment as Chief Executive Officer of the
Company on December 1, 1998. Nothing in this Agreement or in the Plan shall
confer upon the Optionee any right to continue in a business relationship
with the Company or shall interfere with or restrict in any way the rights of
the Company which are hereby expressly reserved, to terminate such employment
relationship at any time for any reason whatsoever, with or without cause.
2.4. ADJUSTMENTS IN OPTION
(a) Subject to Section 2.4(c), if the outstanding shares of
Common Stock are changed into or exchanged for cash or a different number or
kind of shares or securities of the Company or of another issuer, or if
additional shares or new or different securities are distributed with respect
to the outstanding shares of Common Stock, through a reorganization or merger
to which the Company is a party, or through a combination, consolidation,
recapitalization, reclassification, stock split, stock dividend, reverse
stock split, stock consolidation or other capital change or adjustment, an
appropriate adjustment shall be made in the number and kind of shares or
other consideration that is subject to or may be delivered under the Plan and
pursuant to this Option. A corresponding adjustment to the vesting price and
share amounts and other applicable provisions as well as to the consideration
payable with respect to this Option to the extent granted prior to any such
change shall also be made. Any such adjustment, however, shall
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be made without change in the total payment, if any, applicable to the
portion of the Option not exercised but with a corresponding adjustment in
the price for each share.
(b) Upon the dissolution or liquidation of the Company, or
upon a reorganization, merger or consolidation of the Company with one or
more corporations as a result of which the Company is not the surviving
corporation, the Plan shall terminate. Notwithstanding the foregoing
sentence, the Committee shall provide in writing in connection with, or in
contemplation of, any such transaction for any or all of the following
alternatives (separately or in combinations): (i) for the assumption by the
successor corporation of the Option or the substitution by such corporation
for such Option of options covering the stock of the successor corporation,
or a parent or subsidiary thereof, with appropriate adjustments as to the
number and kind of shares and prices and to the vesting price and share
amounts and other applicable terms and conditions; (ii) for the continuance
of this Plan by such successor corporation in which event the Plan and this
Option shall continue in the manner and under the terms so provided, or (iii)
for the payment in cash in an amount equal to the amount that could have been
obtained upon the exercise of the vested portion of this Option in lieu of
and in complete satisfaction of this Option.
(c) To the extent this Option is intended to qualify as
performance-based compensation under Section 162(m), no adjustment or action
described in this Section 2.4 or in any other provision of the Plan shall be
authorized to the extent that such adjustment or action would cause this
Option to fail to so qualify under Section 162(m), or any successor
provisions thereto; PROVIDED, HOWEVER, that the failure to make any such
adjustment or action shall not materially adversely affect Optionee's rights
under this Option. Furthermore, no such adjustment or action shall be
authorized to the extent such adjustment or action would result in
short-swing profits liability under Section 16 of the Exchange Act or violate
the exemptive conditions of Rule 16b-3 unless the Committee determines that
the Option is not to comply with such exemptive conditions. The number of
shares of Common Stock subject to the Option shall always be rounded to the
next whole number.
ARTICLE III.
VESTING; PERIOD OF EXERCISABILITY
3.1. VESTING SCHEDULE
(a) Upon the date of grant of the Option, the number of
shares of Common Stock with respect to which the Option shall be vested and
exercisable shall be zero.
(b) Subject to Section 5.5, in the event that the Optionee
is an Employee on the first Trading Day on which the Closing Trading Price
equals or exceeds ten dollars ($10.00), the Option shall then immediately
become 100% vested and exercisable.
(c) Subject to Section 5.5, in the event that Optionee is
then an Employee, the Option shall become 100% vested and exercisable on
November 30, 2005.
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3.2. EXPIRATION OF OPTION
The Option may not be exercised to any extent by anyone on
or after, and shall expire upon, the earliest of (i) November 30, 2008 or
(ii) the expiration of one (1) year from the date of the Optionee's death.
3.3. LIMITATION ON EXERCISABILITY
Notwithstanding any other provision of this Agreement, the
aggregate fair market value (determined at the time the Option is granted) of
the shares of the Company's stock with respect to which "incentive stock
options" within the meaning of Section 422 of the Code) are exercisable for
the first time by the Optionee during any calendar year (under the Plan and
all other incentive stock option plans of the Company, any Subsidiary and any
parent corporation thereof (within the meaning of Section 422 of the Code))
shall not exceed $100,000.
ARTICLE IV.
EXERCISE OF OPTION
4.1. PERSON ELIGIBLE TO EXERCISE
During the lifetime of the Optionee, only he may exercise
the Option or any portion thereof. After the death of the Optionee, any
exercisable portion of the Option may, prior to the time when the Option
becomes unexercisable under Section 3.2, be exercised by his personal
representative or by any person empowered to do so under the Optionee's will
or under the then applicable laws of descent and distribution.
4.2. PARTIAL EXERCISE
Any exercisable portion of the Option or the entire Option,
if then wholly exercisable, may be exercised in whole or in part at any time
prior to the time when the Option or portion thereof becomes unexercisable
under Section 3.2; provided, however, that each partial exercise shall be for
whole shares only.
4.3. MANNER OF EXERCISE
The Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary or his office of all of the
following prior to the time when the Option or such portion becomes
unexercisable under Section 3.2:
(a) A written notice complying with the applicable rules
established by the Committee stating that the Option, or a portion thereof,
is exercised. The notice shall be signed by the Optionee or other person then
entitled to exercise the Option or such portion;
(b) A bona fide written representation and agreement, in a
form satisfactory to the Committee, signed by the Optionee or other person then
entitled to exercise such Option or portion, stating that the shares of stock
are being acquired for his own account, for investment and without any present
intention of distributing or reselling said shares or any of them except as may
be permitted under the Securities Act and then applicable rules and regulations
thereunder, and that the Optionee or other person then entitled to exercise such
Option or portion will
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indemnify the Company against and hold it free and harmless from any loss,
damage, expense or liability resulting to the Company if any sale or
distribution of the shares by such person is contrary to the representation
and agreement referred to above. The Committee may, in its reasonable
discretion, take whatever additional actions it deems appropriate to insure
the observance and performance of such representation and agreement and to
effect compliance with the Securities Act and any other federal or state
securities laws or regulations. Without limiting the generality of the
foregoing, the Administrator may require an opinion of counsel acceptable to
it to the effect that any subsequent transfer of shares acquired on an Option
exercise does not violate the Securities Act, and may issue stop-transfer
orders covering such shares. Share certificates evidencing stock issued on
exercise of this Option shall bear an appropriate legend referring to the
provisions of this subsection (b) and the agreements herein. The written
representation and agreement referred to in the first sentence of this
subsection (b) shall, however, not be required if the shares to be issued
pursuant to such exercise have been registered under the Securities Act, and
such registration is then effective in respect of such shares; and
(c) In the event that the Option shall be exercised by any
person or persons other than the Optionee, appropriate proof of the right of
such person or persons to exercise the Option; and
(d) Full payment to the Secretary of the Company for the
shares with respect to which the Option, or portion thereof, is exercised,
(i) through cash payment; (ii) through the delivery of shares of Common Stock
which have been owned by Optionee for at least six months, duly endorsed for
transfer to the Company with a fair market value (as determined by the
Committee acting in good faith) on the date of delivery equal to the
aggregate exercise price of the Option or exercised portion thereof; or (iii)
through a combination of either of the foregoing; and
(e) Full cash payment to the Secretary of the Company of
any applicable withholding tax.
4.4. TIMING OF ISSUANCE OF SHARES
Notwithstanding anything in the Plan or this Agreement to
the contrary, the shares of Common Stock issuable upon exercise of the Option
shall be issued no later than the earlier of (i) the date of receipt by the
Company from Xxxxxxx Xxxxxxxxx of a number of shares of Common Stock equal to
the number of shares of Common Stock for which the Option is being exercised,
which shall be contributed by Xxxxxxx Xxxxxxxxx to the Company without any
consideration therefor from the Company and (ii) the expiration of 120 days
from the date on which the Optionee has satisfied the conditions under
Section 4.3 in all material respects. The Company shall instruct the
Custodian (as such term is defined in that certain Escrow Agreement dated as
of even date herewith between Xxxxxxx Xxxxxxxxx, the Company and the
Custodian (the "Escrow Agreement")), to release the appropriate number of
shares from the Escrow Account (as defined in the Escrow Agreement") within
two business days of the date on which Optionee has satisfied the conditions
under Section 4.3 in all material respects. Should the appropriate number of
shares from the Escrow Account not be released to the Company within four
business days of the date on which Optionee has satisfied the conditions
under Section 4.3 in all material respects, the Company shall immediately
return to Optionee the payments previously tendered to the
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Company by Optionee under Sections 4.3(d) and (e) in connection with such
exercise. Upon the occurrence of either (i) or (ii) above, the Company shall
have an unconditional obligation to issue the requisite shares of Common
Stock to Optionee, subject to Optionee's satisfaction of the conditions under
Section 4.3.
4.5. RIGHTS AS STOCKHOLDERS
Optionee shall not be, nor have any of the rights or
privileges of, a stockholder of the Company in respect of any shares
purchasable upon the exercise of any part of the Option unless and until such
shares have been issued by the Company to Optionee.
ARTICLE V.
OTHER PROVISIONS
5.1. ADMINISTRATION
The Administrator shall have the power to interpret the
Plan and this Agreement and to adopt such rules for the administration,
interpretation and application of the Plan as are consistent therewith and to
interpret or revoke any such rules. All actions taken and all interpretations
and determinations made by the Administrator in good faith shall be final and
binding upon the Optionee, the Company and all other interested persons. No
member of the Administrator shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan
or the Option.
5.2. OPTION NOT TRANSFERABLE
Neither the Option nor any interest or right therein or
part thereof shall be liable for the debts, contracts or engagements of the
Optionee or his successors in interest or shall be subject to disposition by
transfer, alienation, anticipation, pledge, encumbrance, assignment or any
other means whether such disposition be voluntary or involuntary or by
operation of law by judgment, levy, attachment, garnishment or any other
legal or equitable proceedings (including bankruptcy), and any attempted
disposition thereof shall be null and void and of no effect; provided,
however, that this Section 5.2 shall not prevent transfers by will or by the
applicable laws of descent and distribution.
5.3. NOTICES
Any notice to be given under the terms of this Agreement to
the Company shall be addressed to the Company in care of its Secretary, and
any notice to be given to the Optionee shall be addressed to him at the
address given beneath his signature hereto. By a notice given pursuant to
this Section 5.3, either party may hereafter designate a different address
for notices to be given to him. Any notice which is required to be given to
the Optionee shall, if the Optionee is then deceased, be given to the
Optionee's personal representative if such representative has previously
informed the Company of his status and address by written notice under this
Section 5.3. Any notice shall be deemed duly given when enclosed in a
properly sealed envelope or wrapper addressed as aforesaid, deposited (with
postage prepaid) in a post office or branch post office regularly maintained
by the United States Postal Service.
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5.4. TITLES
Titles are provided herein for convenience only and are not
to serve as a basis for interpretation or construction of this Agreement.
5.5. SHAREHOLDER APPROVAL
The Plan will be submitted for approval by the Company's
shareholders within twelve (12) months after the date the Plan was initially
adopted by the Board. This Option may not be exercised to any extent by
anyone prior to the time when the Plan is approved by the shareholders, and
if such approval has not been obtained by the end of said twelve-month
period, this Option shall thereupon be canceled and become null and void. The
Company shall take such actions as may be necessary to satisfy the
requirements of Rule 16b-3(b).
5.6. CONSTRUCTION
This Agreement shall be administered, interpreted and
enforced under the laws of the State of Delaware.
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IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto.
By: /s/ Xxxxxxx Xxxxxxxxx
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Chairman
By: /s/ Xxxxx Xxxxxxxxxx
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Secretary
/s/ Xxxxx X. Xxxxx
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Optionee
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Address
Optionee's Taxpayer
Identification Number:
###-##-####
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