-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QdlVv+k7K42yweP7A2/y1E8ysL8EL1LcdABaS9HNTFvxNulFdtL5v4u+8HgRt4wd NlcRXHQIUQuG5xleieyBcg== 0001104659-05-045234.txt : 20050922 0001104659-05-045234.hdr.sgml : 20050922 20050922083059 ACCESSION NUMBER: 0001104659-05-045234 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20050922 DATE AS OF CHANGE: 20050922 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: MOSSIMO INC CENTRAL INDEX KEY: 0001005181 STANDARD INDUSTRIAL CLASSIFICATION: MEN'S & BOYS' FURNISHINGS, WORK CLOTHING, AND ALLIED GARMENTS [2320] IRS NUMBER: 330684524 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-49745 FILM NUMBER: 051097098 BUSINESS ADDRESS: STREET 1: 2450 WHITE ROAD STREET 2: 2ND FLOOR CITY: IRVINE STATE: CA ZIP: 92614- BUSINESS PHONE: 9497970200 MAIL ADDRESS: STREET 1: 15320 BARRANCA PARKWAY CITY: IRVINE STATE: CA ZIP: 92718 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: MOSSIMO GIANNULLI CENTRAL INDEX KEY: 0001033335 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: C/O MOSSIMO INC STREET 2: 15320 BARRANCA CITY: IRVINE STATE: CA ZIP: 92718 BUSINESS PHONE: 7144531300 MAIL ADDRESS: STREET 1: 15230 BARRANCA CITY: IRVINE STATE: CA ZIP: 92718 SC 13D/A 1 a05-16634_1sc13da.htm SC 13D/A

	UNITED STATES
	SECURITIES AND EXCHANGE COMMISSION
	Washington, D.C. 20549

	SCHEDULE 13D

Under the Securities Exchange Act of 1934
(Amendment No. 5)*

MOSSIMO, INC.

(Name of Issuer)

COMMON STOCK

(Title of Class of Securities)

619696 10 7

(CUSIP Number)

MOSSIMO GIANNULLI
C/O MOSSIMO, INC.
2016 BROADWAY
SANTA MONICA, CALIFORNIA 90404
TEL. NO.: (310) 460-0040

(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)

WITH A COPY TO:

PAUL TOSETTI, ESQ.

LATHAM & WATKINS LLP

633 WEST FIFTH STREET

SUITE 4000

LOS ANGELES, CALIFORNIA 90071-2007

September 21, 2005

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. o

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

^* The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

CUSIP No. 619696 10 7

	1.	Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only) Mossimo Giannulli

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			o
		(b)			o

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) BK, SC, PF

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o

	6.	Citizenship or Place of Organization U.S.A.

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power 10,272,822

			8.	Shared Voting Power -0-

			9.	Sole Dispositive Power 10,272,822

			10.	Shared Dispositive Power -0-

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 10,272,822

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) o

	13.	Percent of Class Represented by Amount in Row (11) 65.23%(1)

	14.	Type of Reporting Person (See Instructions) IN

(1) THIS PERCENTAGE IS CALCULATED USING THE TOTAL NUMBER OF SHARES OF THIS CLASS OF SECURITIES OUTSTANDING AS OF SEPTEMBER 21, 2005 (15,748,442). THIS PERCENTAGE DOES NOT TAKE INTO ACCOUNT SHARES OF THE COMPANY’S COMMON STOCK THAT MAY BECOME ISSUABLE PURSUANT TO THE STOCK OPTION AGREEMENT DESCRIBED MORE FULLY IN ITEM 4 BELOW.

Item 1.	Security and Issuer
This statement relates to the Common Stock (the “Common Stock”) of Mossimo, Inc., a Delaware corporation (the “Company”) having its principal executive offices at 2016 Broadway, Santa Monica, CA 90404.
Item 2.	Identity and Background
	(a) This Schedule 13D Amendment No. 5 is filed on behalf of Mossimo Giannulli (“Giannulli”). (b) The business address of Giannulli is c/o Mossimo, Inc., 2016 Broadway, Santa Monica, CA 90404. (c) The present principal occupation of Giannulli is Chairman and Co-Chief Executive Officer of the Company. (d) During the last five years, Giannulli has not been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) During the last five years, Giannulli has not been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which Giannulli was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws, or finding any violation with respect to such laws. (f) Giannulli is a citizen of the United States of America.
Item 3.	Source and Amount of Funds or Other Consideration
In connection with the transaction described in Item 4, Giannulli estimates that the total amount of funds required to purchase all of the Common Stock not currently owned by Giannulli in the Offer (as defined in Item 4) and the Merger (as defined in Item 4), settle outstanding options with an exercise price less than the Offer Price (as defined in Item 4) and pay estimated fees and expenses will be approximately $32 million.
On May 18, 2005, Giannulli received a commitment letter (the “May 18 Financing Letter”) from CIT Group/Commercial Services, Inc. to provide funding for the Offer and the Merger (the “Financing”). A summary of the May 18 Financing Letter was included in Item 3 of, and a copy of the May 18 Financing Letter was filed as Exhibit 7.03 with, the Schedule 13D Amendment No. 3 filed with the SEC on May 23, 2005. On September 21, 2005, Giannulli entered into a new commitment letter (the “September 21 Financing Letter “) with substantially similar terms as the May 18 Financing Letter. The September 21 Financing Letter provides for the terms of the Offer and Merger as set forth in the Merger Agreement (as defined in Item 4). This summary of the September 21 Financing Letter, as amended, does not purport to be complete and is qualified in its entirety by the September 21 Financing Letter, which is attached hereto as Exhibit 7.01 and is incorporated herein by reference.
Giannulli expects that the Financing, together with other funds available to Giannulli and available funds of the Company, will be sufficient to consummate the proposed transaction. To the extent any amounts are due or may be paid by Giannulli or the Purchaser (as defined in Item 4) or the surviving corporation in connection with the Financing following the consummation of the Offer and the Merger (for example, funds necessary to consummate the Offer and the Merger and certain transaction fees and expenses), such funds may be paid from generally available working capital of the surviving corporation.
Giannulli or the Purchaser intends to repay any amounts borrowed pursuant to the Financing through the generally available corporate funds of the surviving corporation after the consummation of the Merger.

Item 4.	Purpose of Transaction
As previously reported, on April 11, 2005, Giannulli submitted a non-binding proposal (the “Proposal”) for a going-private transaction to the Company's Board of Directors (the “Board of Directors”). A copy of the Proposal Letter was filed as Exhibit 7.01 to the Schedule 13D Amendment No. 2 filed with the SEC on April 12, 2005. The Board of Directors formed a special committee of independent directors (the “Special Committee”) to consider the terms and conditions of the Proposal and to recommend to the Board of Directors whether to approve the Proposal.
On August 16, 2005, Giannulli announced his decision to withdraw the Proposal and indicated that while he remained interested in acquiring the publicly held minority interest in the Company, he did not intend to make a new bid at the Company’s then current stock trading levels.
On September 21, 2005 Giannulli submitted a revised non-binding proposal (the “New Proposal”) for a going-private transaction to the Special Committee. A copy of the New Proposal Letter is attached hereto as Exhibit 7.02 and is incorporated herein by reference. On September 21, 2005 the Special Committee considered the terms of the New Proposal and recommended to the Board of Directors that they approve the New Proposal. On September 21, 2005 the Board of Directors resolved to approve the New Proposal.
On September 21, 2005, Giannulli, Mossimo Holding Corp. (“Parent”) (a newly-formed corporation wholly-owned by Giannulli), Mossimo Acquisition Corp. (the “Purchaser”) (a newly-formed, wholly-owned subsidiary of Parent) and the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) that, as an initial step, contemplates a tender offer by the Purchaser (the “Offer”) to purchase all of the outstanding shares of the Common Stock not owned by Giannulli (the “Shares”) at a purchase price of $5.00 per share. The Offer is subject to, among other things, a non-waivable condition (the “Minimum Condition”) that, pursuant to the Offer, there shall have been validly tendered and not withdrawn before the Offer expires the number of Shares, other than Shares tendered by any officer or director of the Company, which constitutes at least a majority of the outstanding Shares not beneficially owned by Giannulli, Parent or the Purchaser.
Following the completion of the Offer, assuming all conditions to the Offer and the Merger, including the receipt of the Financing described in Item 3, are satisfied or, if applicable, waived, the Purchaser would be merged (the “Merger”) with and into the Company in accordance with the terms of the Merger Agreement and Delaware law, and the Company would then exist as a wholly-owned subsidiary of Parent.
If the tender offer results in the satisfaction of the Minimum Condition but the Purchaser beneficially owns less than 90% of the then outstanding shares of Common Stock, the Purchaser shall have the option (the “Option”) to purchase from the Company the number of Shares that would increase the Purchaser’s total beneficial ownership to 90% of the then outstanding shares of Common Stock. The Option is exercisable for cash or a combination of cash and a promissory note. The Purchaser’s exercise of the Option shall be subject to the terms and conditions of the Stock Option Agreement, dated as of September 21, 2005, by and among Giannulli, Parent, the Purchaser and the Company attached hereto as Exhibit 7.03 and incorporated herein by reference.
If the tender offer and, if necessary, the Purchaser’s exercise of the Option result in the Purchaser beneficially owning at least 90% of the then outstanding shares of Common Stock, the Merger will be completed without a vote of stockholders pursuant to Section 253 of the Delaware General Corporation Law. Upon successful consummation of the Merger, the shares of Common Stock of the Company will become eligible for termination of registration pursuant to Section 12(g) of the Securities Exchange Act, and such shares of Common Stock will cease to be quoted on the NASDAQ SmallCap Market.
Stockholders who do not tender their shares of Common Stock during the Offer will also receive $5.00 per share in cash for their shares in the Merger. A copy of the Merger Agreement is attached hereto as Exhibit 7.04 and incorporated herein by reference.
The Company and Giannulli issued a joint press release on September 22, 2005 announcing the execution of the Merger Agreement. The text of the press release is attached hereto as Exhibit 7.05 and incorporated herein by reference.
The foregoing is intended for informational purposes only and is not an offer to buy, a solicitation of an offer to sell or a recommendation to sell any shares of the Common Stock. The solicitation of offers to sell Shares will only be made pursuant to a tender offer statement on Schedule TO and an offer to purchase and related materials. The Company’s shareholders and other interested parties are urged to read the tender offer statement on

Schedule TO, the offer to purchase and the Company’s recommendation statement on Schedule 14D-9 and other relevant documents filed with the SEC by Giannulli, Parent, the Purchaser and the Company when they become available because they will contain important information. The Company’s shareholders will be able to obtain such documents free of charge at the SEC's web site: www.sec.gov.
The Commission has adopted Rule 13e-3 under the Act which is applicable to certain “going private” transactions, including the Merger. Rule 13e-3 requires among other things, that certain financial information concerning the Company, and certain information relating to the fairness of the proposed transaction and the consideration offered to minority stockholders in such transaction, be filed with the Commission and disclosed to minority stockholders prior to consummation of the transaction. Giannulli, Parent and the Purchaser intend to file the information required by Rule 13e-3 with the Commission upon commencement of the Offer as part of the tender offer disclosure statement and to provide such disclosure statement, including the required Rule 13e-3 information, to holders of Shares upon commencement.
Other than the above-described Offer and Merger, Giannulli does not have any plans or proposals that relate to or would result in any of the events set forth in Items 4(a) through (j).
The information set forth in response to this Item 4 is qualified in its entirety by reference to the Merger Agreement and the Stock Option Agreement, each of which is incorporated herein by reference.
Item 5.	Interest in Securities of the Issuer
	(a) Giannulli beneficially owns 10,272,822 shares of Common Stock, which represents 65.23% of the outstanding shares of Common Stock, which number excludes shares of Common Stock that may become issuable pursuant to the Stock Option Agreement described more fully in Item 4 above. (b) Giannulli has the sole power to vote and dispose of 10,272,822 shares of Common Stock. (c) Except as provided in Item 3 and Item 4 above, Giannulli has not effected any transactions in any shares of Common Stock of the Company during the past 60 days. (d) Other than Giannulli, no person has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the shares of Common Stock beneficially owned by Giannulli. (e) Not applicable.
Item 6.	Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer
Other than as set forth above, to the best knowledge of Giannulli, there are no contracts, arrangements, understandings or relationships (legal or otherwise) between himself and any other person with respect to any securities of the Company, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, divisions of profits or loss, or the giving or withholding of proxies, or a pledge or contingency, the occurrence of which would give another person voting power over the securities of the Company.
Item 7.	Material to Be Filed as Exhibits
	Exhibit 7.01 Financing Letter dated September 16, 2005 Exhibit 7.02 Proposal Letter dated September 21, 2005

Exhibit 7.03 Stock Option Agreement, dated September 21, 2005, by and among Mossimo Giannulli, Mossimo Acquisition Corp. and Mossimo, Inc.

Exhibit 7.04 Agreement and Plan of Merger, dated September 21, 2005, by and among Mossimo Holding Corp., Mossimo Acquisition Corp., Mossimo Giannulli and Mossimo, Inc.

Exhibit 7.05 Joint Press Release issued by Mossimo, Inc and Mossimo Giannulli, dated September 22, 2005.

Signature

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

	September 22, 2005
	Date
	/s/ Mossimo Giannulli
	Signature
	Mossimo Giannulli
	Name/Title

EX-7.01 2 a05-16634_1ex7d01.htm EX-7.01

Exhibit 7.01

September 16, 2005

Mossimo Acquisition Corp.

2314 La Mesa

Santa Monica, CA 90402

Attn: Mr. Mossimo Giannulli

Dear Mr. Giannulli:

It has been a pleasure working with you to develop a financing facility to support your acquisition (the “Acquisition”) of the shares in Mossimo, Inc., a Delaware corporation (the “Company”) that you do not already own through a tender offer by Mossimo Acquisition Corp., a Delaware corporation (the “Borrower,” the term “Borrower” shall include the Company following the merger of the Company and the Borrower), a wholly-owned subsidiary of Mossimo Holdings Corp. (“MHC”), a Delaware corporation wholly owned by you, promptly followed by a short form merger of the Borrower with and into the Company, with the Company as the survivor. Such tender offer, contribution, financing and merger shall be treated as an integrated, contemporaneous transaction. In connection therewith, The CIT Group/Commercial Services, Inc. (the “Lender”) is pleased to consider a secured committed term loan credit facility to the Borrower in an amount not to exceed $22,042,000 (“Term Loan Facility”), consisting of, and subject to, the below:

1. TERM LOAN

A three year Term Loan (“Term Loan”) in the principal amount sufficient to finance the Acquisition, made in a single draw on the Closing Date concurrent with the closing of the tender offer and prior to the completion of the merger, not to exceed the lesser of (a) $22,042,000, or (b) up to 35% of the fair market value of the trademark value as determined by Consor of “Mossimo” to be repaid as follows:

One-half of the principal amount of the Term Loan will be paid in thirty-six (36) consecutive equal installments, payable on the first business day of each month, commencing on the first business day of the second calendar month following the Closing Date (each such payment date, a “Payment Date”), plus a final installment of the remaining one-half of the principal amount of and all remaining amounts due pursuant to the Term Loan Facility.

In addition to the amortization schedule, the Borrower shall prepay the Term Loan without liability for an Early Termination Fee thirty (30) days after each

fiscal quarter end by an amount equal to fifty percent (50%) of the Borrower’s excess cash flow during such fiscal quarter. Such prepayments will be applied to the Term Loan in the inverse order of maturity and may not be re-borrowed. The definition and calculation of excess cash flow will be mutually agreed upon.

2. TERM

The Agreement shall have a term of three years. The Agreement may be terminated by the Borrower at any time upon sixty (60) days prior written notice to the Lender, provided, however, the Borrower shall pay an Early Termination Fee. The Term Loan shall be due and payable in full at the Lender’s option upon any termination of the Term Loan Agreement or the termination of the Target License Agreement.

3. INTEREST RATE AND FEES

Interest on the outstanding principal amount of the Term Loan will be computed and payable in arrears on each Payment Date at a rate equivalent to the JP Morgan Chase Bank Rate (“Chase Rate”) plus one-quarter of one percent (0.25%) per annum or at the Borrower’s option, Libor plus three and one-quarter of one percent (3.25%) per annum. The interest rate will be reduced to a rate equivalent to Chase Rate per annum or at Borrower’s option, Libor plus three percent per annum upon the execution of a Factoring Agreement by Modern Amusement, Inc. with Lender. The Chase Rate is the rate of interest per annum announced by JP Morgan Chase Manhattan Bank N.A. (“Chase Bank”) from time to time as its prime rate in effect at its principal office in the City of New York. Such rate is not intended to be the lowest rate charged by Chase Bank to its borrowers. Libor shall be the one-month Libor quoted by JPMorganChase Bank 2 business days prior to the end of the month and if not elected within 3 business days in advance of such month-end, the reference rate shall be the Chase Rate.

The Term Loan shall bear a Default Rate of Interest at 2.5% above the rate otherwise applicable thereto.

A Closing Fee, payable at closing of one and one-half of one percent (1.5%) of the committed amount.

An Administrative Collateral Management Fee of $2,000.00 per month, each fully earned and payable as of the last day of each calendar month so long as any obligations are outstanding under the Agreement.

A Field Examination Fee of $850.00 per day per examiner, plus out-of-pocket expenses capped at $10,000.00 per year; provided such limitation shall not apply upon the occurrence and continuance of an Event of Default.

The Borrower may prepay the Agreement at any time, upon sixty (60) days prior written notice to the Lender. However, should the Borrower prepay the Agreement prior to the maturity date of the Term Loan (the “Termination Date”)

(a) all Obligations owed to Lender must be paid in full or otherwise satisfied as determined in Lender’s sole and absolute discretion and (b) Borrower must pay an Early Termination Fee. No partial prepayments will be permitted, except for mandatory excess cash flow prepayments.

Such Early Termination Fee shall be in an amount equal to the product of: a) the Early Termination Percentage, times (b) the amount of the principal amount outstanding.

The Early Termination Percentage shall be two percent (2%) if the Term Loan Facility is prepaid in the first Contract Year (a Contract Year is the 12 month period commencing on the date of the Term Loan Facility and ending on the last day of the month occurring 12 months after the date of the Term Loan Facility and each subsequent 12 month period thereafter), one percent (1%) if prepaid in the second Contract Year, and one-half of one percent (0.5%) if prepaid in the third Contract Year on a date that is more than 90 days prior to the Termination Date. If the Lender opts to terminate the Agreement as a result of the termination of the Target license agreement by the licensor, the Early Termination Fee in the third Contract Year will be waived. However, if such Target license is terminated prior to the third Contract Year, or if the Agreement is terminated for any other reason by Lender, the Early Termination Fee shall be payable.

4. COLLATERAL

To secure any and all present and future indebtedness and obligations due the Lender by the Borrower, (a) the Borrower and the Guarantors will, subject to customary exceptions, grant the Lender i) a perfected, first and exclusive lien on all of the Borrower’s (including specifically the Company following the merger) and each Guarantor’s present and future right, title and interest in accounts, credit balances, inventory, trademarks, patents, copyrights, licenses, general intangibles (including payment intangibles), equipment, owned real estate, deposit accounts, the issued and outstanding stock of any subsidiaries/affiliates of the Borrower/Guarantor and the proceeds of each of the foregoing; and ii) following the merger, lien(s) on the “Mossimo” domestic and foreign trademark(s) and related trademarks owned by the Borrower, Guarantors and related affiliates (the “Trademark”) will be filed with the U.S. Patent and Trademark Office in Washington, D.C. and lien(s) on any registered copyrights will be filed with the U.S. Copyright Office in Washington, D.C., and such other international offices as appropriate for Trademarks and Copyrights, with the understanding that any pledge of collateral by a foreign entity is to be limited to an amount that will not result in a deemed dividend; (b) the Lender will receive a pledge of 100% of the shares in the Borrower and any subsidiaries of the Borrower; provided that this pledge shall be limited to 65% of the equity of any foreign subsidiary; and (c) the Borrower shall obtain and maintain a life insurance policy in the amount of $9,000,000.00 on Mossimo Giannulli, which policy shall be collaterally assigned to the Lender. Mossimo Giannulli will also grant the Lender a lien on all of the

issued and outstanding stock of MHC as collateral for the Obligations, such pledge to be non recourse to Mossimo Giannulli.

5. GUARANTEES

The Lender will be provided with guarantees from MHC which owns 100% of the capital stock of the Borrower and from all domestic subsidiaries of MHC and/or the Borrower, which guarantees will be secured by the assets described above in the section labeled Collateral, and from foreign subsidiaries guarantying the obligations of the Borrower or other guarantors up to amounts and in a manner that such guaranty from a foreign subsidiary will not result in a deemed dividend.

6. REPRESENTATIONS AND COVENANTS

The Agreement will contain such warranties, representations, covenants and events of default as are customary for financing transactions of this type. The Borrower will provide to the Lender such information concerning its business affairs and financial condition as the Lender may reasonably request, including financial statements certified by an independent public accountant mutually acceptable to each of Borrower and Lender.

7. OUT OF POCKET EXPENSES

You or the Borrower shall reimburse the Lender (whether or not this transaction is consummated) for reasonable out-of-pocket costs and expenses (including reasonable fees and actual and reasonable out-of-pocket costs and expenses of in-house and outside legal counsel) incurred in connection with the Agreement including, but not limited to, those incurred by the Lender in connection with the preparation, execution, closing and servicing of this financing transaction, and the perfection of liens and security interests.

8. CONDITIONS OF CLOSING

The foregoing is furnished as a means of affording the Borrower a guide to, and an outline of, the material terms and conditions of the proposed facility and is not a commitment on the part of Lender and should not be construed as a commitment. Moreover, the foregoing is subject to:

a. Successful completion of all the above items;

b. The execution and delivery of appropriate legal documentation which must be satisfactory in form and substance to Borrower and Lender and their respective counsel;

c. The Lender’s satisfaction with: i) the financial condition of the Borrower and the Company; ii) credit references on the Borrower and the Company; iii) an updated examination of the books and records of the Borrower and the Company, and iv) verification of outstanding balances on specified accounts receivable.

d. The absence of any material adverse change in the financial condition, business, projections, profitability, assets or operations of the Company. It is understood and agreed that any material adverse change in the terms, conditions, assumptions or projections supplied by the Borrower and on which the Lender based its decision to issue this letter may, in the Lender’s reasonable business discretion, be construed by the Lender as a material adverse change. It is further understood and agreed that Lender’s understanding of shareholder lawsuits immediately prior to closing or loan funding may result in a material adverse change;

e. The Lender’s receipt of, and satisfaction with, financial projections detailing quarterly balance sheet, income statement and cash requirements covering the 3 year Term, and a pro forma balance sheet reflecting status of the Company after the Acquisition contemplated by this financing transaction;

f. The Borrower’s agreement to provide the Lender with a minimum of quarterly reviewed financial statements prepared by an independent public accountant;

g. Lender’s determination that neither the financing arrangement nor any of the transactions contemplated in connection therewith: (i) present any exposure under any laws relating to bulk sales, fraudulent conveyances or similar matters, (ii) shall fail to comply with any laws and regulations, including Regulation U, and (iii) could have a material adverse effect on any license agreement of the Borrower or the Company or any of their respective affiliates;

h. The approval of the Lender’s executive credit committee;

i. The Lender’s receipt of, and satisfaction with, a springing deposit account control agreement with a banking institution acceptable to both parties, pertaining to the accounts where all proceeds from accounts will be directed and deposited and for which Borrower shall have the right to use the funds until notice is given by Lender, which terms shall be satisfactory to both parties;

j. The Lender’s receipt of, and satisfaction with, an appraisal indicating i) a fair market value of the trademark of at least $41,500,000. The appraisal, to be engaged by the Lender, must be performed by an appraiser mutually agreed upon who will be retained by the Lender but paid for by the Borrower;

k. Holders of 100% of the outstanding stock of the Borrower shall pledge such stock to the Lender as additional collateral for all obligations owed by the Borrower to the Lender, pursuant to a pledge agreement in form and substance satisfactory to the Lender;

l. The Term Loan Facility shall include certain financial covenants, including but not limited to the following: (i) Fixed Coverage Ratio in an amount to be mutually agreed upon and measured quarterly, (ii) Total debt to net worth in an amount to be mutually agreed upon and measured quarterly, (iii) Maximum capital expenditures, in any year, of an amount to be mutually agreed upon, (iv) Minimum cash balance in an amount of $3.0 million as of the end of each fiscal

quarter in the first contract year and adjusted at each contract year thereafter and (v) Minimum EBITDA in an amount to be mutually agreed upon and measured quarterly;

m. The Term Loan shall include certain negative covenants, including but not limited to limitations on: indebtedness (including guarantee obligations) except for indebtedness incurred in the normal course of business (other than debt for borrowed money); liens; mergers, consolidations, liquidations and dissolutions; sales of assets; dividends and other payments in respect of capital stock; acquisitions, creation of subsidiaries, investments, loans and advances; payments and modifications of material debt instruments; transactions with affiliates; sale-leasebacks; changes in fiscal year; hedging arrangements; lease terminations; negative pledge clauses; and changes in lines of business. The foregoing covenants shall be subject to various exceptions to be agreed upon;

n. Events of Default shall include: Nonpayment of principal, interest, fees or other amounts within 5 days of when due; material inaccuracy of representations and warranties; violation of covenants (subject, in the case of certain affirmative covenants, to a grace period to be agreed upon); cross-default to material indebtedness; bankruptcy events; certain ERISA events; material judgments; actual or asserted invalidity of any guarantee or security document; a change of control (the definition of which is to be agreed upon); material adverse change; Mossimo Giannulli or any of his affiliates starts or becomes an officer, director or advisor of a competing business of Borrower, MHC or their respective subsidiaries; Mossimo Giannulli shall cease to own at least 51% of the outstanding stock of the Company or ceases for any reason (including, as a result of death) to be actively engaged in the management of the Company;

o. Satisfactory review by the Lender and comfort, in Lender’s reasonable discretion, with existing licensing agreements of the Borrower and the Company both as a licensor and licensee; and

p. The terms and conditions of the tender offer, the merger and the structure of the financing shall, at all times, be reasonably acceptable to Lender; and

q. Upon the occurrence of any the following events, the amounts shall be applied to prepay the Term Loan Facility first to cost and expenses, then to interest accruals, then to the Early Termination Fee applicable to the principal amount to be paid, with the remainder to principal in the inverse order of maturity until paid in full: (i) 100% of the proceeds realized by any Borrower or Guarantor from the sale or other disposition of stock of the Company or affiliate after the Closing Date, or (ii) 100% of the net proceeds of any sale or other disposition (including as a result of casualty or condemnation) by the Company or any Guarantor of any assets outside the ordinary course of business (which shall, except for baskets to be agreed, require the consent of the Lender), but excluding proceeds that are reinvested in the business and the sale or other disposition of (1) accounts, (2) inventory, (3) deposit accounts, or (4) other assets to be agreed upon.

9. CONFIDENTIALITY

This letter and the financing arrangements described herein are delivered with the understanding that neither this letter nor the substance of said proposed financing arrangements shall be disclosed by you to anybody outside your organization, except to those professional advisors who are in a confidential relationship with you and require knowledge thereof to perform their duties (such as legal counsel, accountants and financial advisers), or where disclosure is required by law. Nothing herein shall prevent you from disclosing the nature of the proposal to the Company or its Board of Directors or within any public disclosure document you are required to file pertaining to your acquisition transaction. The non-public information delivered to the Lender by the Company in connection with this letter (the “Information”) is delivered with the understanding that the Information shall not be disclosed by the Lender to anybody outside the Lender’s organization (which organization includes the Lender and its affiliates and their respective officers, directors and employees to the extent such affiliates, officers, directors and employees have a legal obligation to keep the Information confidential), except those professional advisors who are in a confidential relationship with Lender and require knowledge thereof to perform their duties (such as accountants, auditors, and legal counsel) or where disclosure is required by law.

10. DUE DILIGENCE FEE

To induce the Lender to proceed with its consideration of the requested financing facility and to confirm that the request is made in good faith, you have previously provided to the Lender a $75,000.00 due diligence fee (the “Due Diligence Fee”). In the absence of a written agreement to the contrary, said Due Diligence Fee less the sum of the Field Examination Fee and out of pocket costs and expenses required to be paid by the Borrower pursuant to paragraph 7 above the Lender may incur will be i) returned to the you if the parties are unable to consummate a financing arrangement, or ii) retained by the Lender but credited against the Closing Fee due at closing if an arrangement is consummated.

This letter (a) embodies the entire agreement and understanding between the parties hereto with respect to the subject matter of this letter and supersedes all prior agreements, commitments, arrangements, negotiations or understandings, whether oral or written, of the parties with respect thereto, and (b) can be changed only by a writing signed by each of the parties hereto and shall bind and benefit each of such parties and their respective successors and assigns.

If the foregoing is acceptable to you, please so indicate by signing and returning to us the enclosed copy of this letter together not later than the close of business on September 23, 2005. The Borrower hereby authorizes us to prepare and file Uniform Commercial Code financing statements covering the Collateral in the appropriate filing office(s) prior to closing the proposed financing transactions. We welcome the opportunity to work with you on this transaction and we hope to hear from you soon. Should you have any questions or comments, please feel free to contact us at anytime.

Very truly yours,

THE CIT GROUP/COMMERCIAL SERVICES, INC.


By:	/s/ Maria Contino

Title:		Vice President

READ AND AGREED TO:


/s/ Mossimo Giannulli
MOSSIMO GIANNULLI
President and Chief Executive Officer
Mossimo Acquisition Corp.

EX-7.02 3 a05-16634_1ex7d02.htm EX-7.02

Exhibit 7.02

September 21, 2005

Special Committee of the Board of Directors

Mossimo, Inc.

2016 Broadway

Santa Monica, California 90404

Ladies and Gentlemen:

I am pleased to present a new proposal to acquire, through Mossimo Acquisition Corp., all of the outstanding common shares of Mossimo, Inc. in a going private transaction for $5.00 per share in cash.

I believe that this proposal presents an excellent opportunity for shareholders of the Company to achieve liquidity for their shares. I am confident that you will conclude that the proposal is fair and in the best interests of the public sharehold ers. I have obtained a revised financing commitment from The CIT Group/Commercial Services, Inc., and I am prepared, at the earliest possible time, to enter into a binding merger agreement in the form accompanying this letter.

I look forward to your response at your earliest convenience.

	Very truly yours,


	Mossimo Giannulli

EX-7.03 4 a05-16634_1ex7d03.htm EX-7.03

Exhibit 7.03

EXECUTION COPY

STOCK OPTION AGREEMENT

STOCK OPTION AGREEMENT (this “Agreement”), dated as of September 21, 2005, by and among Mossimo, Inc., a Delaware corporation (the “Company”), and Mossimo Acquisition Corp., a Delaware corporation (the “Purchaser”). Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Merger Agreement.

WHEREAS, the Company, Mossimo Holding Corp., a Delaware corporation (“Parent”), the Purchaser and Mossimo Giannulli, an individual (“Giannulli”), have contemporaneously with the execution of this Agreement entered into an Agreement and Plan of Merger, dated as of the date hereof (the “Merger Agreement”), which provides, among other things, that upon the terms and subject to the conditions thereof, the Purchaser will commence a tender offer (the “Offer”) for all of the issued and outstanding shares of common stock (the “Company Common Stock”), par value $0.001 per share, of the Company (the “Shares”) and, after accepting for payment and paying for the Shares validly tendered and not withdrawn pursuant to the Offer (the “Tendered Shares”), the Purchaser shall merge with and into the Company with the Company continuing as the surviving entity and wholly owned subsidiary of Parent;

WHEREAS, as an essential condition and inducement to Parent and the Purchaser entering into the Merger Agreement and in consideration therefor, the Company has agreed to grant the Purchaser the Option (as hereinafter defined);

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein and in the Merger Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereby agree as follows:

1. Grant of Option. The Company hereby grants to the Purchaser an irrevocable option (the “Option”) to purchase a number of fully paid and nonassessable shares of Company Common Stock (such shares being referred to herein as the “Option Shares”) equal to the Applicable Amount (as hereinafter defined) at any time prior to the Expiration Date (as hereinafter defined), at a price per share equal to the Offer Price (the “Exercise Price”), subject to the terms and conditions set forth herein, including, without limitation, the conditions to exercise set forth in Section 2(a). If not exercised prior to the Expiration Date, the Option and all rights granted under the Option shall expire and lapse. The “Applicable Amount” shall be the number of Option Shares which, when added to the number of Shares owned (of record or beneficially) by Giannulli, Parent, the Purchaser and their respective subsidiaries immediately prior to the exercise of the Option, would result in Giannulli, Parent, the Purchaser and their respective subsidiaries owning (of record or beneficially) in the aggregate, immediately after exercise of the Option, ninety percent (90%) of the then issued and outstanding Shares; provided, however, that the Option shall not be exercisable to the extent that the Applicable Amount exceeds the number of authorized shares of Company Common Stock available for issuance.

2. Exercise of Option.

(a) Conditions to Exercise of Option. The Purchaser may exercise the Option if, but only if (i) the Purchaser shall have accepted for payment all Tendered Shares (the “Accepted Shares”), and (ii) the Accepted Shares (excluding all Shares tendered by any officer or director of the Company) shall represent at least a majority of the outstanding Shares not owned by Giannulli, Parent or the Purchaser at the commencement of the Offer.

(b) Expiration of the Option. The right to exercise this Option shall expire upon the earlier of (i) the termination of the Merger Agreement, (ii) the Effective Time of the Merger, or (iii) at 5:00 p.m., California time, on the thirtieth (30th) Business Day following the expiration of the Offer (the “Expiration Date”).

(c) Exercise of the Option. Subject to the conditions set forth in Section 2(a), the Option may be exercised by the Purchaser by surrender and presentment of this Agreement to the Company, accompanied by a duly executed written notice delivered in accordance with Section 8.3 of the Merger Agreement (such notice being herein referred to as an “Exercise Notice” and the date of delivery of an Exercise Notice being herein referred to as the “Notice Date”) indicating that the Purchaser is exercising the Option and specifying (i) the total number of Option Shares that it will purchase pursuant to such exercise, and (ii) a place and date not later than five (5) Business Days from the Notice Date for the closing of such purchase (the “Option Closing”), together with the payment of the aggregate Exercise Price (“Aggregate Exercise Price”) for the number of Option Shares specified in the Exercise Notice in the manner specified in Section 2(d) hereof.

(d) Delivery of Exercise Price. At the Option Closing, the Aggregate Exercise Price for the Option Shares shall be paid by the Purchaser to the Company (i) by wire transfer of immediately available same day funds to a bank account designated by the Company, or (ii) in lieu of paying the entire Aggregate Exercise Price in cash, (A) by wire transfer of immediately available same day funds to a bank account designated by the Company in the amount equal to the aggregate par value of the number of Option Shares specified in the Exercise Notice (“Par Value Cash Payment”), and (B) by delivery of a promissory note in the form attached hereto as Exhibit A in the principal amount equal to the Aggregate Exercise Price minus the Par Value Cash Payment.

(e) Issuance of Option Shares. At the Option Closing, simultaneously with the payment or provision for payment of the Aggregate Exercise Price in the manner provided in Section 2(d), the Company shall deliver to the Purchaser a certificate or certificates representing the Option Shares purchased upon such exercise.

(f) Record Holder; Expenses. Upon the delivery by the Purchaser of the Exercise Notice and the payment or provision for payment of the Aggregate Exercise Price in the manner specified in Section 2(d), the Purchaser shall be deemed to be the holder of record of the Option Shares issuable upon such exercise, notwithstanding that the stock transfer books of the Company may then be closed, that certificates representing such Option Shares may not then have been actually delivered to the Purchaser or that the Company may have

failed or refused to designate the bank account described in Section 2(d). The Company shall pay all expenses that may be payable in connection with the preparation, issuance and delivery of stock certificates.

3. Investment Intent. The Purchaser represents and warrants that it is entering into this Agreement and will acquire the Option Shares or Other Option Securities (as hereinafter defined) for its own account and not with a view to resale or any public distribution of all or any part of the Option Shares or Other Option Securities in violation of applicable law.

4. Evaluation of Investments. The Purchaser, by reason of its knowledge and experience in financial and business matters, and further by reason of its specific knowledge of the Company and the Company’s industry, represents and warrants that it is capable of evaluating the merits and risks of an investment in the Option Shares and any Other Option Securities (as hereinafter defined) pursuant to this Agreement.

5. Reservation of Shares. Subject to the terms and conditions hereof, and for so long as the Merger Agreement has not been terminated pursuant to the provisions thereof, the Company agrees (a) that it shall at all times maintain, free from preemptive rights, sufficient authorized but unissued or treasury shares of Company Common Stock (or Other Option Securities) issuable pursuant to this Agreement so that the Option may be exercised without additional authorization of shares of Company Common Stock (or Other Option Securities) after giving effect to all other options, warrants, convertible securities and other rights to purchase shares of Company Common Stock (or Other Option Securities), (b) that it will not, by charter amendment or through reorganization, consolidation, merger, dissolution or sale of assets, or by any other voluntary act, avoid or seek to avoid the observance or performance of any of the covenants to be observed or performed hereunder by the Company, and (c) promptly to take all action as may from time to time be required in order to permit the Purchaser to exercise the Option and the Company to duly and effectively issue the Company Common Stock (or Other Option Securities) pursuant hereto.

6. Lost Options. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Agreement, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Agreement, if mutilated, the Company will execute and deliver a new agreement of like tenor and date.

7. Adjustment Upon Changes in Capitalization. The number of Option Shares purchasable upon the exercise of the Option shall be subject to adjustment from time to time as provided in this Section 7.

(a) Transaction Adjustment. In the event of any change in the shares of Company Common Stock by reason of stock dividends, splits, reclassifications, mergers, recapitalizations, combinations, subdivisions, conversions, exchanges of shares or other similar transactions, then the Option Shares purchasable upon exercise hereof shall be appropriately adjusted so that the Purchaser shall receive upon exercise of the Option and payment of the Exercise Price hereunder the number and class of shares or other securities

(any such other securities referred to herein as “Other Option Securities”) that the Purchaser would have owned or been entitled to receive after the happening of any of the events described above if the Option had been exercised immediately prior to such event, or the record date therefor, as applicable.

(b) Option Price Adjustment. Whenever the number of Option Shares subject to this Option are adjusted pursuant to Section 7(a), the Option Price shall be appropriately adjusted, if applicable, by multiplying the Option Price by a fraction, the numerator of which shall be equal to the aggregate number of Option Shares purchasable under the Option prior to the adjustment and the denominator of which shall be equal to the aggregate number of Option Shares purchasable under the Option immediately after the adjustment. If the Option shall be adjusted so that Other Option Securities are issuable hereunder, then the price for such Other Option Securities shall be determined ratably and equitably, in the good faith discretion of the Company Board and the Special Committee.

8. Representations and Warranties of the Company. The Company hereby represents and warrants to the Parent and the Purchaser as follows:

(a) Authority. The Company has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Company Board and the Special Committee and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions so contemplated. This Agreement has been duly and validly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with the terms hereof.

(b) Other Actions. The Company has taken all necessary action to authorize and reserve and to permit it to issue, and at all times from the date hereof through the termination of this Agreement in accordance with its terms will have reserved for issuance upon the exercise of the Option, that number of shares of Company Common Stock equal to the maximum number of shares of Company Common Stock at any such time and from time to time issuable hereunder, and all such shares of Company Common Stock, upon issuance pursuant hereto and in accordance with the terms hereof, will be duly authorized, validly issued, fully paid, nonassessable, and will be delivered free and clear of all liens created by the Company and not subject to any preemptive rights.

(c) No Conflict. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby and compliance with the terms hereof will not, conflict with, result in any violation of or default (with or without notice or lapse of time or both) under, any provision of any trust agreement, loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise, license, judgment, order, notice, decree, statute, law, ordinance, rule or regulation applicable to the Company or the Company’s property or assets. No consent, approval, order or authorization of, or registration, declaration or filing with, any court, administrative

agency or commission or other governmental authority or instrumentality, domestic, foreign or supranational, is required by or with respect to the Company in connection with the execution and delivery of this Agreement or the consummation by the Company of the transactions contemplated hereby.

9. No Transfer; No Assignment.

(a) The Option may not be offered, sold, assigned, pledged, hypotheticated, or otherwise transferred (a “Transfer”). Further, neither the Option Shares nor the Other Option Securities may be Transferred except in compliance with the Securities Act. The Company may cause a legend to this effect to be set forth on each certificate representing the Option Shares.

(b) The Purchaser may not assign any of its rights or obligations under this Agreement to any other Person. The Company may not assign any of its rights or obligations under this Agreement without the prior, express written consent of the Purchaser. Any purported assignment in violation of the foregoing prohibitions shall be void and of no force or effect whatsoever.

10. Specific Performance. Except after the termination of the Merger Agreement, (a) each party hereto agrees that irreparable damage would occur in the event that any of the provisions of this Agreement was not performed in accordance with its specific terms or was otherwise breached, and (b) it is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court permitted under Section 13, this being in addition to any other remedy to which they are entitled at law or in equity.

11. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.

12. Notices. All notices, claims, demands and other communications hereunder shall be deemed to have been duly given or made when delivered in accordance with Section 8.3 of the Merger Agreement.

13. Governing Law; Jurisdiction; Waiver of Jury Trial. This Agreement shall in all respects be governed by and construed in accordance with the laws of the State of Delaware. Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement may be brought against any of the parties in the Court of Chancery of the State of Delaware and any appellate court thereof, and each of the

parties hereto hereby consents to the exclusive jurisdiction of such court (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and waives any objection to venue laid therein. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the State of Delaware. Without limiting the generality of the foregoing, each party hereto agrees that service of process upon such party at the address referred to in Section 8.3 of the Merger Agreement, together with notice of such service to such party, shall be deemed effective service of process upon such party. To the extent permitted by applicable law, the parties hereby irrevocably waive any and all rights to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

14. Expenses. Except as otherwise expressly provided herein or in the Merger Agreement, each of the parties hereto shall bear and pay all costs and expenses incurred by it or on its behalf in connection with the transactions contemplated hereunder, including fees and expenses of its own financial consultants, investment bankers, accountants and counsel.

15. Entire Agreement. This Agreement and the Merger Agreement constitute the entire agreement of the parties and supersede all prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof and, except as otherwise expressly provided herein, are not intended to confer upon any other person any rights or remedies hereunder.

16. Amendment; Waivers. This Agreement may be amended, modified, and supplemented by a subsequent writing signed by each of the Company and the Purchaser. Any provision of this Agreement may be waived only in writing at any time by the party that is entitled to the benefits of such provision. The failure of any party at any time or times to require performance of any provision hereof shall in no manner affect the right of such party at a later time to enforce the same or any other provision of this Agreement. No waiver of any condition or the breach of any provision contained in this Agreement in one or more instances shall be deemed to be or construed as a further or continuing waiver of such condition or breach or a waiver of any other condition or the breach of any other term of this Agreement.

17. Further Assurances. In the event of any exercise of the Option by the Purchaser, the Company and the Purchaser shall execute and deliver all other documents and instruments and take all other action that may be reasonably necessary to the fullest extent permitted by law in order to consummate the transactions provided for by such exercise. Nothing contained in this Agreement shall be deemed to authorize the Company or the Purchaser to violate, breach or otherwise fail to perform any provision of the Merger Agreement.

18. Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

19. Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

	MOSSIMO ACQUISITION CORP.


	By:
		Mossimo Giannulli
		President and Chief Executive Officer


	MOSSIMO, INC.


	By:
	Name:
	Title:

(Signature Page to Stock Option Agreement)

EXHIBIT A

FORM OF UNSECURED PROMISSORY NOTE

PROMISSORY NOTE

$[ ]

Santa Monica, California
[September] , 2005

FOR VALUE RECEIVED, the undersigned, Mossimo Acquisition Corp. a Delaware Corporation (“Mossimo”), promises to pay to Mossimo, Inc., a Delaware corporation (the “Company”), the principal amount of [ ], with interest from the date hereof on the unpaid principal balance hereunder at the rate of [ ] percent ( %) per annum (on the basis of a 365/366 day year and the actual number of days elapsed).

1. Subject to Paragraph 3 below, the principal amount under this Note shall be due and payable upon the earliest to occur of the following dates (the “Maturity Date”): (1) [ ], 200[ ]; or (2) the date on which the indebtedness hereunder is accelerated as provided for hereunder. All accrued and unpaid interest shall be due and payable monthly, concurrently with principal. On the Maturity Date the entire remaining unpaid principal balance of this Note, together with any and all costs and expenses provided for hereunder and accrued and unpaid interest, shall be due and payable.

2. Each payment under this Note shall first be credited against costs and expenses provided for hereunder, second to the payment of accrued and unpaid interest, and the remainder shall be credited against principal. All amounts due hereunder shall be payable without defense, set off or counterclaim, in lawful money of the United States of America. If a payment hereunder otherwise would become due and payable on a Saturday, Sunday or legal holiday, the due date thereof shall be extended to the next succeeding business day, and interest shall be payable thereon during such extension.

3. This Note may be prepaid in whole or in part at any time without premium or penalty. Any prepayment shall be without penalty except that interest shall be paid to the date of payment on the principal amount prepaid.

4. Upon the occurrence of a default hereunder the Company or any holder hereof may, at its option, without notice to or demand upon Mossimo or any other party, declare immediately due and payable the entire principal balance hereof together with all accrued and unpaid interest thereon, plus any other amounts then owing pursuant to this Note, whereupon the same shall be immediately due and payable. If the level of interest otherwise chargeable under this Note would violate any applicable law; it shall, instead, accrue the highest rate permitted by law until such time as all interest which would have been collected but for the application of such laws is collected.

5. No waiver or modification of any of the terms of this Note shall be valid or binding unless set forth in a writing specifically referring to this Note and signed by a duly authorized officer of the Company or any holder hereof, and then only to the extent specifically set forth therein.

6. If any default occurs in any payment due under this Note, Mossimo and all endorsers hereof, and their successors and assigns, promise to pay all costs and expenses, including attorneys’ fees, incurred by each holder hereof in collecting or attempting to collect the indebtedness under this Note, whether or not any action or proceeding is commenced. None of the provisions hereof and none of the holder’s rights or remedies hereunder on account of any past or future defaults shall be deemed to have been waived by any indulgence granted by the holder to Mossimo.

7. Mossimo and all endorsers hereof, and their successors and assigns, hereby waive presentment, demand, diligence, protest and notice of every kind, and agree that they shall remain liable for all amounts due hereunder notwithstanding any extension of time or change in the terms of payment of this Note granted by any holder hereof or any delay or failure by the holder hereof to exercise any rights under this Note. Mossimo and all endorsers hereof, and their successors and assigns, hereby waive the right to plead any and all statutes of limitation as a defense to a demand hereunder to the full extent permitted by law.

8. This Note shall inure to the benefit of the Company, its successors and assigns and shall bind the heirs, executors, administrators, successors and assigns of Mossimo. Mossimo shall not assign, sell, transfer or delegate any of its rights or duties under this Note without the prior written consent of the Company.

9. In the event that any one or more provisions of this Note shall be held to be illegal, invalid or otherwise unenforceable, the same shall not affect any other provision of this Note and the remaining provisions of this Note shall remain in full force and effect.

10. This Note shall be governed by and construed in accordance with the laws of the State of California.

IN WITNESS WHEREOF, Mossimo has caused this Note to be duly executed the day and year first above written.

	Mossimo Acquisition Corp.,
	a Delaware corporation


	By:

EX-7.04 5 a05-16634_1ex7d04.htm EX-7.04

Exhibit 7.04

EXECUTION COPY

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

MOSSIMO HOLDING CORP.,

MOSSIMO ACQUISITION CORP.,

MOSSIMO GIANNULLI

AND

MOSSIMO, INC.

DATED AS OF SEPTEMBER 21, 2005

TABLE OF CONTENTS

Article 1 The Offer

Section 1.1	The Offer
Section 1.2	Company Actions

Article 2 The Merger

Section 2.1	The Merger
Section 2.2	Effective Time
Section 2.3	Effect of the Merger
Section 2.4	Certificate of Incorporation; By-laws
Section 2.5	Directors and Officers
Section 2.6	Conversion of Securities
Section 2.7	Options; Stock Plans
Section 2.8	Merger Without Meeting of Stockholders
Section 2.9	Dissenting Shares
Section 2.10	Payment for Shares
Section 2.11	Withholding

Article 3 Representations and Warranties of the Company

Section 3.1	Organization and Qualification; Subsidiaries
Section 3.2	Capitalization
Section 3.3	Authority
Section 3.4	No Conflict; Required Filings and Consents
Section 3.5	Opinion of Financial Advisor
Section 3.6	Brokers

Article 4 Representations and Warranties of Parent and the Purchaser

Section 4.1	Organization and Qualification; Capitalization of the Purchaser
Section 4.2	Authority
Section 4.3	No Conflict; Required Filings and Consents
Section 4.4	Financing
Section 4.5	Brokers

Article 5 Covenants

Section 5.1	Conduct of Business by the Company Pending the Closing
Section 5.2	Access to Information; Confidentiality
Section 5.3	No Solicitation of Transactions
Section 5.4	Appropriate Action; Consents; Filings
Section 5.5	Certain Notices
Section 5.6	Public Announcements
Section 5.7	Indemnification of Directors and Officers
Section 5.8	Section 16

Section 5.9	Financing
Section 5.10	Contribution of Giannulli’s Shares
Section 5.11	Integrated Transaction Treatment

Article 6 Conditions to Consummation of the Merger

Section 6.1	Conditions to Obligations of Each Party Under This Agreement

Article 7 Termination, Amendment and Waiver

Section 7.1	Termination
Section 7.2	Effect of Termination
Section 7.3	Amendment
Section 7.4	Waiver

Article 8 General Provisions

Section 8.1	Non-Survival of Representations and Warranties
Section 8.2	Fees and Expenses
Section 8.3	Notices
Section 8.4	Certain Definitions
Section 8.5	Terms Defined Elsewhere
Section 8.6	Headings
Section 8.7	Severability
Section 8.8	Entire Agreement
Section 8.9	Assignment
Section 8.10	Parties in Interest
Section 8.11	Mutual Drafting
Section 8.12	Governing Law; Consent to Jurisdiction; Waiver of Trial by Jury
Section 8.13	Counterparts

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER, dated as of September 21, 2005 (this “Agreement”), is entered into by and among Mossimo Holding Corp., a Delaware corporation (“Parent”), Mossimo Acquisition Corp., a Delaware corporation and wholly owned subsidiary of Parent (the “Purchaser”), Mossimo Giannulli, an individual (for purposes of Section 5.10 only) (“Giannulli”), and Mossimo, Inc., a Delaware corporation (the “Company”).

WHEREAS, Giannulli beneficially owns 10,272,822 shares of the common stock, par value $0.001 per share, of the Company (the “Company Common Stock”), representing 65.23% of the outstanding shares of Company Common Stock, and Giannulli owns all of the outstanding shares of the capital stock of the Parent;

WHEREAS, Giannulli has formed Parent and Parent in turn has formed the Purchaser for the purpose of making a tender offer (the “Offer”) to purchase all of the Company Common Stock (the “Shares”) (other than Shares beneficially owned by Giannulli or Shares held in the treasury of the Company or any of its wholly owned subsidiaries), at a price per Share of $5.00 in cash (the “Offer Price”), subject to the terms and conditions set forth in this Agreement;

WHEREAS, the Board of Directors of Parent, the Board of Directors of the Purchaser and the Board of Directors of the Company (the “Company Board”) and the Special Committee of independent directors of the Company Board (the “Special Committee”) have approved the merger of the Purchaser with and into the Company with the Company as the survivor (the “Surviving Corporation”), as set forth below (the “Merger”), in accordance with Section 253 of the General Corporation Law of the State of Delaware (the “DGCL”) and upon the terms and subject to the conditions set forth in this Agreement, whereby each issued and outstanding Share not owned directly or indirectly by Giannulli, Parent, the Purchaser or the Company will be converted into the right to receive the Offer Price in cash;

WHEREAS, immediately prior to the effective time of the Merger, Giannulli intends to contribute the shares of Company Common Stock owned by him to Parent, and Parent in turn will contribute such shares of Company Common Stock to the Purchaser (collectively, the “Contribution”);

WHEREAS, each of Parent and the Purchaser has required as a condition and an inducement to its willingness to enter into this Agreement that concurrently with the execution and delivery of this Agreement and incurring the obligations set forth herein, with the approval of the Company Board and the Special Committee, the Company, Parent and the Purchaser shall enter into and deliver a Purchaser Stock Option Agreement in substantially the form attached hereto as Exhibit A (the “Purchaser Stock Option Agreement”);

WHEREAS, the Company Board and the Special Committee have, on the terms and subject to the conditions set forth herein, (i) determined that each of the Offer and the Merger is advisable, fair to and in the best interest of the stockholders of the Company (other than Parent, the Purchaser and Giannulli), (ii) approved the Offer and (iii) approved and adopted this Agreement and are recommending that the Company’s stockholders accept the Offer and tender their Shares to the Purchaser;

WHEREAS, Parent, the Purchaser and the Company intend that the Offer, the Contribution and the Merger (collectively, the “Transaction”) shall be treated as an integrated

transaction, after which Giannulli will own, through Parent, all of the outstanding stock of the Surviving Corporation, and Parent, the Purchaser and the Company do not intend to consummate any step of the Transaction without also consummating the other steps of the Transaction; and

WHEREAS, Parent, the Purchaser and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Offer and the Merger and also to prescribe various conditions to the Offer and the Merger;

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Agreement and intending to be legally bound hereby, the parties hereto agree as follows:

Article 1

The Offer

Section 1.1 The Offer.

Section 1.1.1 Provided that this Agreement shall not have been terminated in accordance with Article 7 hereof and none of the events set forth in Annex I hereto (the “Tender Offer Conditions”) shall have occurred, the Purchaser shall (A) commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (including the rules and regulations promulgated thereunder, the “Exchange Act”)) as promptly as practicable, an offer to purchase all outstanding Shares at the Offer Price, (B) in cooperation with Parent and after affording the Company a reasonable opportunity to review and comment thereon, file a Tender Offer Statement on Schedule TO and a Transaction Statement on Schedule 13E-3 and all other necessary documents with the Securities and Exchange Commission (the “SEC”), make all deliveries, mailings and telephonic notices required by Rule 14d-3 under the Exchange Act, and publish, send or give the disclosure required by Rule 14d-6 under the Exchange Act by complying with the dissemination requirements of Rule 14d-4 under the Exchange Act in each case in connection with the Offer (collectively, together with any amendments or supplements thereto, the “Offer Documents”) and (C) use reasonable efforts to consummate the Offer, subject to the terms and conditions thereof. Each of Parent and the Purchaser, on the one hand, and the Company, on the other hand, agrees promptly to correct any information provided by it for use in the Offer Documents if and to the extent that it shall have become false or misleading in any material respect, and each of Parent and the Purchaser further agrees to take all steps necessary to cause the Offer Documents as so corrected to be filed with the SEC and to be disseminated to stockholders of the Company, in each case as and to the extent required by applicable federal securities laws. The obligation of the Purchaser to accept for payment or pay for any Shares tendered pursuant to the Offer will be subject only to the satisfaction of the Tender Offer Conditions.

Section 1.1.2 Without the prior written consent of the Company, the Purchaser shall not decrease the Offer Price or change the form of consideration payable in the Offer, decrease the number of Shares sought to be purchased in the Offer or impose additional conditions to the Offer or amend any other term of the Offer in any manner adverse to the holders of Shares. The Offer shall remain open until the date that is 20 business days (as such term is defined in Rule 14d-1(g)(3) under the Exchange Act) after the commencement of the Offer (the “Expiration Date”), unless the Purchaser shall have extended the period of time for which the Offer is open pursuant to, and in accordance with, the terms of this Agreement or as

may be required by applicable law, in which event the term “Expiration Date” shall mean the latest time and date as the Offer, as so extended, may expire. If, at any Expiration Date, any of the Tender Offer Conditions are not satisfied or waived by the Purchaser, the Purchaser may, but shall not be required to, extend the Offer. Subject to the terms of the Offer and this Agreement and the satisfaction of all the Tender Offer Conditions as of any Expiration Date, the Purchaser will accept for payment and pay for all Shares validly tendered and not validly withdrawn pursuant to the Offer as soon as practicable after such Expiration Date. In addition, if, at the Expiration Date, all of the conditions to the Offer have been satisfied (or, to the extent permitted by this Agreement, waived by Purchaser), but the number of Shares validly tendered and not withdrawn pursuant to the Offer, when taken together with the shares of Company Common Stock beneficially owned by Giannulli, constitute less than 90% of the Shares then outstanding, the Purchaser shall (subject to applicable law) have the right to provide, but shall not be required to provide, a subsequent offering period after the Expiration Date, in accordance with Rule 14d-11 under the Exchange Act, for up to 20 business days after Purchaser’s acceptance for purchase of the Shares then tendered and not withdrawn pursuant to the Offer, in which case Purchase shall (i) give the required notice of such subsequent offering period and (ii) immediately accept for purchase, and promptly pay for, all Shares tendered and not withdrawn as of the Expiration Date. Without the prior written consent of the Company, the Purchaser shall not accept for payment or pay for any Shares in the Offer if, as a result, the Purchaser would acquire less than the number of Shares necessary to satisfy the Minimum Condition (as defined in Annex I hereto).

Section 1.2 Company Actions.

Section 1.2.1 The Company shall, after affording each of Parent and the Purchaser a reasonable opportunity to review and comment thereon, file with the SEC and mail to the holders of Shares an Information Statement on Schedule 14D-9 (together with any amendments or supplements thereto, the “Schedule 14D-9”) reflecting the recommendation of the Company Board that holders of Shares tender their Shares pursuant to the Offer and shall disseminate the Schedule 14D-9 as required by Rule 14d-9 promulgated under the Exchange Act. The Schedule 14D-9 will set forth, and the Company hereby represents, that the Company Board, based on the recommendation of the Special Committee, at a meeting duly called and held at which a quorum was present throughout, has (A) determined by unanimous vote of all of its directors in attendance that each of the transactions contemplated hereby, including each of the Offer and the Merger, is advisable, fair to and in the best interests of the Company and its stockholders, (B) approved the Offer and adopted this Agreement in accordance with the DGCL, (C) recommended acceptance of the Offer, and (D) taken all other action necessary to render Section 203 of the DGCL inapplicable to the Offer, the Merger and the Purchaser Stock Option Agreement; provided, however, that such recommendation and approval may be withdrawn, modified or amended to the extent permitted by Section 5.3.3. In addition, the Schedule 14D-9 will set forth, and the Company further represents, that, prior to the execution hereof, Houlihan Lokey Howard & Zukin (the “Company Financial Advisor”) has delivered to the Special Committee its written opinion that, as of September 21, 2005 the consideration to be received by the holders of Shares pursuant to the Offer and the Merger is fair to the holders of Shares from a financial point of view. The Company hereby consents to the inclusion in the Offer Documents of the recommendations of the Company Board described in this Section 1.2.1 and the terms of the opinion of the Company Financial Advisor. Each of the Company, on the one hand, and each of Parent and the Purchaser, on the other hand, agree promptly to correct

any information provided by any of them for use in the Schedule 14D-9 if and to the extent that it shall have become false or misleading, and each of the Company, Parent and the Purchaser further agree to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated to the holders of Shares, in each case as and to the extent required by applicable federal securities laws.

Section 1.2.2 The Company will promptly, and from time to time as requested by the Purchaser, furnish the Purchaser with mailing labels, security position listings, any non-objecting beneficial owner lists and any listing or computer list containing the names and addresses of the record holders of the Shares as of the most recent practicable date that are in the Company’s possession or control and shall furnish the Purchaser with such additional available information (including, but not limited to, updated lists of holders of Shares and their addresses, mailing labels and lists of security positions and non-objecting beneficial owner lists) and such other assistance as the Purchaser or its agents may reasonably request in communicating to the Company’s record and beneficial stockholders.

Article 2
The Merger

Section 2.1 The Merger. Upon the terms and subject to satisfaction or waiver of the conditions set forth in this Agreement, and in accordance with the DGCL, the Purchaser shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of the Purchaser shall cease, and the Company shall continue as the Surviving Corporation.

Section 2.2 Effective Time. As soon as practicable after the satisfaction or, if permissible, waiver of the conditions set forth in Section 6.1, the parties hereto shall cause the Merger to be consummated by filing a certificate of ownership and merger (the “Certificate of Ownership and Merger”), with the Secretary of State of the State of Delaware, in such form as required by, and executed in accordance with the relevant provisions of, the DGCL (the date and time of such filing, or if another date and time is specified in such filing, such specified date and time, being the “Effective Time”).

Section 2.3 Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, at the Effective Time, except as otherwise provided herein, all the property, rights, privileges, powers and franchises of the Company and the Purchaser shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and the Purchaser shall become the debts, liabilities and duties of the Surviving Corporation.

Section 2.4 Certificate of Incorporation; By-laws. At the Effective Time, the Certificate of Incorporation and the By-laws of the Company shall be amended to read as set forth on Exhibit B and Exhibit C hereto, respectively, and, as so amended, shall be the Certificate of Incorporation and Bylaws of the Surviving Corporation.

Section 2.5 Directors and Officers. The directors of the Purchaser immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and By-laws of the Surviving Corporation. The officers of the Company immediately prior to the Effective

Time shall be the initial officers of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and By-laws of the Surviving Corporation.

Section 2.6 Conversion of Securities. At the Effective Time, by virtue of the Merger and without any action on the part of Parent, the Purchaser, the Company or the holders of any of the following securities:

Section 2.6.1 Conversion Generally. Each Share issued and outstanding immediately prior to the Effective Time (other than (i) any Shares held by Giannulli, Parent, the Purchaser, in the treasury of the Company or by any wholly-owned subsidiary of the Company, which Shares, by virtue of the Merger and without any action on the part of the holder thereof, shall be cancelled and retired and shall cease to exist with no payment being made with respect thereto, and (ii) Dissenting Shares), shall be cancelled and retired and shall be converted into the right to receive $5.00, or any higher price per Share paid pursuant to the Offer, in cash (the “Merger Consideration”), payable to the holder thereof, without interest thereon, upon surrender of the certificate formerly representing such Shares.

Section 2.6.2 Purchaser Common Stock. Each share of common stock, par value $0.001 per share, of the Purchaser (the “Purchaser Common Stock”) issued and outstanding immediately prior to the Effective Time shall be converted into and become one newly and validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation.

Section 2.7 Options; Stock Plans. Prior to the Effective Time, the Company Board (or, if appropriate, any committee thereof) shall adopt appropriate resolutions and take all other actions necessary and appropriate to provide that, immediately prior to the Effective Time, each unexpired and unexercised option or similar rights to purchase Shares, under any stock option plan of the Company, including the 1995 Stock Plan (pursuant to which the Company has issued the “Company Options”) and the 1995 Directors Stock Option Plan (pursuant to which the Company has issued the “Director Options”) or any other plan, agreement or arrangement, excluding the Purchaser Stock Option Agreement (the “Company Stock Option Plans”), whether or not then exercisable or vested, shall be cancelled and, in exchange therefor, each former holder of any such cancelled Company Option or Director Option shall be entitled to receive, in consideration of the cancellation of such Company Option or Director Option and in settlement therefor, a payment in cash (subject to any applicable withholding or other taxes required by applicable law to be withheld) of an amount equal to the product of (A) the total number of Shares previously subject to such Company Option or Director Option and (B) the excess, if any, of the Merger Consideration over the exercise price per Share previously subject to such Company Option or Director Option (such amounts payable hereunder being referred to as the “Option Payment”). From and after the Effective Time, any such cancelled Company Option or Director Option shall no longer be exercisable by the former holder thereof, but shall only entitle such holder to the payment of the Option Payment, and the Company will use its reasonable best efforts to obtain all necessary consents to ensure that former holders of Company Options and Director Options will have no rights other than the right to receive the Option Payment. After the Effective Time, all Company Stock Option Plans shall be terminated and no further Company Options, Director Options or other rights with respect to Shares shall be granted thereunder.

Section 2.8 Merger Without Meeting of Stockholders. In the event that the Purchaser shall acquire and then hold at least 90% of the outstanding Shares that, absent Section 253 of the DGCL, would be entitled to vote on the merger pursuant to the Offer or otherwise (including Shares acquired upon exercise of the option granted pursuant to the Purchaser Stock Option Agreement), the parties hereto agree to take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after the acceptance for payment of Shares by the Purchaser pursuant to the Offer without a meeting of stockholders of the Company, in accordance with Section 253 of the DGCL.

Section 2.9 Dissenting Shares. Notwithstanding Section 2.6.1, Shares outstanding immediately prior to the Effective Time and held by a holder who has not voted in favor of the Merger or consented thereto in writing and who has demanded appraisal for such Shares in accordance with the DGCL (“Dissenting Shares”) shall not be converted into a right to receive the Merger Consideration but shall be entitled only to such rights as are granted by the DGCL to a holder of Dissenting Shares, unless such holder fails to perfect or withdraws or otherwise loses such holder’s right to appraisal. If after the Effective Time such holder fails to perfect or withdraws or loses his right to appraisal in respect of his Shares, such Shares shall be treated as if they had been converted as of the Effective Time into a right to receive the Merger Consideration in accordance with Section 2.6, without interest thereon, upon the surrender of certificates representing such shares. Notwithstanding anything to the contrary in this Section 2.9, if the Merger is rescinded or abandoned, the right of any holder to receive the fair value of his Dissenting Shares shall cease. The Company shall give the Purchaser prompt notice of any demands received by the Company for appraisal of Shares, and the Purchaser shall have the right to participate in and to control all negotiations and proceedings with respect to such demands. The Company shall not, except with the prior written consent of the Purchaser, make any payment with respect to, or settle or offer to settle, any such demands.

Section 2.10 Payment for Shares.

Section 2.10.1 From and after the Effective Time, such bank or trust company as shall be designated by the Purchaser and reasonably acceptable to the Company shall act as paying agent (the “Paying Agent”) in effecting the payment of the Merger Consideration in respect of certificates (the “Certificates”) that, prior to the Effective Time, represented Shares entitled to payment of the Merger Consideration pursuant to Section 2.6.1. Promptly following the Effective Time, the Purchaser shall deposit, or cause to be deposited, with the Paying Agent the aggregate Merger Consideration to which holders of Shares shall be entitled at the Effective Time pursuant to Section 2.6.1.

Section 2.10.2 Promptly after the Effective Time, the Purchaser shall cause the Paying Agent to mail to each record holder of Certificates that, immediately prior to the Effective Time, represented Shares a form of letter of transmittal which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Paying Agent, and instructions for use in surrendering such Certificates and receiving the Merger Consideration in respect thereof. Upon the surrender of each such Certificate, the Paying Agent shall pay the holder of such Certificate the Merger Consideration multiplied by the number of Shares formerly represented by such Certificate, in consideration therefor, and such Certificate shall forthwith be cancelled. Until so surrendered, each such Certificate (other than Certificates representing Shares held by Parent, the Purchaser, any wholly-owned subsidiary of either Parent or the Purchaser, in the treasury of the Company

or by any wholly-owned subsidiary of the Company or Dissenting Shares) shall represent solely the right to receive the aggregate Merger Consideration relating thereto. No interest or dividends shall be paid or accrue on the Merger Consideration. If the Merger Consideration (or any portion thereof) is to be delivered to any person other than the person in whose name the Certificate formerly representing Shares surrendered therefor is registered, it shall be a condition to such right to receive such Merger Consideration that the Certificate so surrendered shall be properly endorsed or otherwise be in proper form for transfer and that the person surrendering such Shares shall pay to the Paying Agent any transfer or other similar taxes required by reason of the payment of the Merger Consideration to a person other than the registered holder of the Certificate surrendered, or shall establish to the satisfaction of the Paying Agent that such tax has been paid or is not applicable.

Section 2.10.3 If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by the Purchaser, the posting by such person of a bond, in such reasonable amount as the Purchaser may direct, as indemnity against any claim that may be made against any of Parent, the Purchaser, the Surviving Corporation or the Paying Agent with respect to such Certificate, the Purchaser will pay to the holder of such lost, stolen or destroyed Certificate the aggregate Merger Consideration relating thereto, without any interest thereon.

Section 2.10.4 Promptly following the date which is 180 days after the Effective Time, the Paying Agent shall deliver to the Surviving Corporation all cash, Certificates and other documents in its possession relating to the transactions described in this Agreement, and the Paying Agent’s duties shall terminate. Thereafter, each holder of a Certificate formerly representing a Share may surrender such Certificate to the Surviving Corporation and (subject to applicable abandoned property, escheat and similar laws) receive in consideration therefor the aggregate Merger Consideration relating thereto, without any interest thereon. None of Parent, the Purchaser or the Company shall be liable to any holder of Shares for any cash delivered to a public official pursuant to any abandoned property, escheat or similar Law.

Section 2.10.5 After the Effective Time, there shall be no transfers on the stock transfer books of the Surviving Corporation of any Shares which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates formerly representing Shares are presented to the Surviving Corporation or the Paying Agent, they shall be surrendered and cancelled in return for the payment of the aggregate Merger Consideration relating thereto, as provided in this Article 2.

Section 2.11 Withholding. The Purchaser and the Paying Agent, as applicable, shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any stockholder in the Offer or Merger such amounts as the Purchaser and the Paying Agent are required to deduct and withhold under the Internal Revenue Code of 1986, as amended, or any Tax law, with respect to the making of such payment. To the extent that amounts are so withheld by the Purchaser or the Paying Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the stockholders in respect of whom such deduction and withholding was made by the Purchaser or the Paying Agent.

Article 3
Representations and Warranties of the Company

Except as set forth in the Disclosure Schedule delivered by the Company to each of Parent and the Purchaser prior to the execution of this Agreement (the “Company Disclosure Schedule”), which identifies exceptions by specific Section references, the Company hereby represents and warrants to each of Parent and the Purchaser as follows:

Section 3.1 Organization and Qualification; Subsidiaries. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Each subsidiary of the Company (each a “Company Subsidiary” and, collectively, the “Company Subsidiaries”) has been duly organized, and is validly existing and in good standing, under the laws of the jurisdiction of its incorporation or organization, as the case may be. Each of the Company and each Company Subsidiary has the requisite power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted, except for such failures to have such power and authority or approvals would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. Each of the Company and each Company Subsidiary is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification, licensing or good standing necessary, except for such failures to be so qualified, licensed or in good standing that would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

Section 3.2 Capitalization. The authorized capital stock of the Company consists of 30,000,000 shares of Company Common Stock and 3,000,000 shares of preferred stock, par value $0.001 per share (the “Company Preferred Stock”). As of the date hereof (A) 15,748,442 shares of Company Common Stock (other than treasury shares) were issued and outstanding, all of which were validly issued and fully paid, nonassessable and free of preemptive rights, (B) no shares of Company Common Stock were held in the treasury of the Company or by the Company Subsidiaries, (C) 601,310 shares of Company Common Stock were issuable (and such number was reserved for issuance) upon exercise of Company Options and Directors Options outstanding as of such date and (D) no shares of Company Preferred Stock are issued or outstanding. Except for the Purchaser Stock Option Agreement, the Company Options and the Director Options to purchase not more than 601,310 shares of Company Common Stock, there are no options, warrants or other rights, agreements, arrangements or commitments of any character to which the Company or any Company Subsidiary is a party or by which the Company or any Company Subsidiary is bound relating to the issued or unissued capital stock or other Equity Interests of the Company or any Company Subsidiary, or securities convertible into or exchangeable for such capital stock or other Equity Interests, or obligating the Company or any Company Subsidiary to issue or sell any shares of capital stock or other Equity Interests, or securities convertible into or exchangeable for such capital stock of, or other Equity Interests in, the Company or any Company Subsidiary. The Company also has reserved shares of Common Stock for issuance upon exercise of the Purchaser Stock Option Agreement. The Company has previously provided the Purchaser with a true and complete list, as of the date hereof, of the prices at which outstanding Company Options and Director Options may be exercised under the applicable Company Stock Option Plan and the number of Company Options and Director Options outstanding at each such price. All shares of Company Common Stock subject to

issuance under the Company Stock Option Plans, upon issuance prior to the Effective Time on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights.

Section 3.3 Authority.

Section 3.3.1 The Company has all necessary corporate power and authority to execute and deliver this Agreement and the Purchaser Stock Option Agreement, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated by this Agreement and the Purchaser Stock Option Agreement to be consummated by the Company. The execution and delivery of this Agreement and the Purchaser Stock Option Agreement by the Company and the consummation by the Company of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of the Company and no stockholder votes are necessary to authorize this Agreement or the Purchaser Stock Option Agreement or to consummate the transactions contemplated hereby or thereby, including the Offer and the Merger. This Agreement and the Purchaser Stock Option Agreement have been duly authorized and validly executed and delivered by the Company and constitute a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with their respective terms.

Section 3.3.2 The Company has taken all appropriate actions so that the restrictions on business combinations contained in Section 203 of the DGCL will not apply with respect to or as a result of this Agreement or the Purchaser Stock Option Agreement and the transactions contemplated hereby and thereby, including the Offer and the Merger, without any further action on the part of the stockholders or the Company Board. No other state takeover statute or similar statute or regulation applies or purports to apply to the Offer, the Merger or any other transaction contemplated by this Agreement or the Purchaser Stock Option Agreement.

Section 3.4 No Conflict; Required Filings and Consents.

Section 3.4.1 The execution and delivery of this Agreement and the Purchaser Stock Option Agreement by the Company does not, and the performance of this Agreement and the Purchaser Stock Option Agreement by the Company will not, (A) conflict with or violate any provision of the Company Certificate or Company By-laws or any equivalent organizational documents of any Company Subsidiary, (B) assuming that all consents, approvals, authorizations and permits described in Section 3.4.2 have been obtained and all filings and notifications described in Section 3.4.2 have been made and any waiting periods thereunder have terminated or expired, conflict with or violate any Law applicable to the Company or any Company Subsidiary or by which any property or asset of the Company or any Company Subsidiary is bound or affected or (C) require any consent or approval under, result in any breach of or any loss of any benefit under, or constitute a change of control or default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, vesting, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance on any property or asset of the Company or any Company Subsidiary pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, Company Permit or other instrument or obligation, except, with respect to clauses (B) and (C), for any such conflicts, violations, breaches, defaults or other

occurrences which would not, individually or in the aggregate, reasonably be expected to (1) prevent or materially delay consummation of the Offer or the Merger, (2) otherwise prevent or materially delay performance by the Company of any of its material obligations under this Agreement or the Purchaser Stock Option Agreement or (3) have a Company Material Adverse Effect.

Section 3.4.2 The execution and delivery of this Agreement and the Purchaser Stock Option Agreement by the Company does not, and the performance of this Agreement and the Purchaser Stock Option Agreement by the Company will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity or any other person, except (A) under the Exchange Act, Securities Act, any applicable Blue Sky Law, the rules and regulations of the Exchange and the filing and recordation of the Certificate of Ownership and Merger as required by the DGCL and (B) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications to a person other than a Governmental Entity, would not, individually or in the aggregate, reasonably be expected to (1) prevent or materially delay consummation of the Offer or the Merger, (2) otherwise prevent or materially delay performance by the Company of any of its material obligations under this Agreement or the Purchaser Stock Option Agreement or (3) have a Company Material Adverse Effect.

Section 3.5 Opinion of Financial Advisor. The Company Financial Advisor has delivered to the Special Committee its written opinion that, as of September 21, 2005, the consideration to be received by the holders of Shares pursuant to the Offer and the Merger is fair to the holders of Shares from a financial point of view, a copy of which has been delivered to the Purchaser.

Section 3.6 Brokers. No broker, finder or investment banker (other than the Company Financial Advisor) is entitled to any brokerage, finder’s or other fee or commission in connection with the Offer, the Merger or any other transaction contemplated by this Agreement or the Purchaser Stock Option Agreement based upon arrangements made by or on behalf of the Company or any Company Subsidiary. The Company has previously provided the Purchaser with a true and complete copy of each agreement between the Company and the Company Financial Advisor pursuant to which such firm would be entitled to any payment in connection with the Offer, the Merger or any other transaction contemplated by this Agreement or the Purchaser Stock Option Agreement.

Article 4
Representations and Warranties of Parent and the Purchaser

Parent and the Purchaser hereby jointly and severally represent and warrant to the Company as follows:

Section 4.1 Organization and Qualification; Capitalization of the Purchaser. Each of Parent and the Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The authorized capital stock of Parent consists of 1,000 shares of common stock, $0.001 par value per share (the “Parent Common Stock”), of which 1,000 shares are outstanding. All of the issued and outstanding shares of Parent Common Stock are validly issued, fully paid and non assessable and are owned, beneficially and of record, by Giannulli, free and clear of all security interests, liens, claims, pledges, options, rights of first

refusal, agreements, limitations on Giannulli’s voting rights, charges and other encumbrances of any nature whatsoever. The authorized capital stock of the Purchaser consists of 1,000 shares of Purchaser Common Stock, $0.001 par value per share, of which 1,000 shares are outstanding. All of the issued and outstanding shares of Purchaser Common Stock are validly issued, fully paid and non assessable and are owned, beneficially and of record, by Parent, free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on Parent’s voting rights, charges and other encumbrances of any nature whatsoever. Each of Parent and the Purchaser was formed solely for the purpose of engaging in the transactions contemplated by this Agreement and has engaged in no other business activities. Each of Parent and the Purchaser has not entered into or become subject to any liability or obligation to any other person that would adversely affect its ability to perform its obligations under this Agreement or consummate the transactions contemplated by this Agreement.

Section 4.2 Authority. Each of Parent and the Purchaser has all necessary corporate power and authority to execute and deliver this Agreement and the Purchaser Stock Option Agreement, to perform its obligations hereunder and thereunder, and to consummate the transactions contemplated by this Agreement and the Purchaser Stock Option Agreement to be consummated by it. The execution and delivery of this Agreement and the Purchaser Stock Option Agreement by each of Parent and the Purchaser and the consummation by each of Parent and the Purchaser of the transactions contemplated hereby or thereby have been duly and validly authorized by all necessary corporate action (including approval by Giannulli as the sole stockholder of Parent and approval by Parent as the sole stockholder of the Purchaser), and no other corporate proceedings on the part of either Parent or the Purchaser are necessary to authorize this Agreement or the Purchaser Stock Option Agreement or to consummate the transactions contemplated hereby and thereby. This Agreement and the Purchaser Stock Option Agreement to have been duly authorized and validly executed and delivered by each of Parent and the Purchaser and constitute a legal, valid and binding obligation of each of Parent and the Purchaser, enforceable against them in accordance with their terms.

Section 4.3 No Conflict; Required Filings and Consents.

Section 4.3.1 The execution and delivery of this Agreement and the Purchaser Stock Option Agreement do not, and the performance thereof by each of Parent and the Purchaser will not (A) conflict with or violate any provision of the Certificate of Incorporation or By-laws of Parent or the Purchaser, (B) (assuming that all consents, approvals, authorizations and permits described in Section 4.3.2 have been obtained and all filings and notifications described in Section 4.3.2 have been made and any waiting periods thereunder have terminated or expired) conflict with or violate any Law applicable to either Parent or the Purchaser or by which any property or asset of either Parent or the Purchaser is bound or affected or (C) result in any breach of, any loss of any benefit under or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance on any property or asset of either Parent or the Purchaser pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, other instrument or obligation, except, with respect to clauses (B) and (C), for any such conflicts, violations, breaches, defaults or other occurrences which would not, individually or in the aggregate, reasonably be expected to (1) prevent or materially delay consummation of the Offer or the Merger, or (2) otherwise prevent or materially delay performance by either Parent

or the Purchaser of any of their material obligations under this Agreement or the Purchaser Stock Option Agreement.

Section 4.3.2 The execution and delivery of this Agreement and the Purchaser Stock Option Agreement do not, and the performance hereof and thereof by each of Parent and the Purchaser will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity or other person, except (A) under the Exchange Act, Securities Act, any applicable Blue Sky Law, the rules and regulations of the Exchange and filing and recordation of the Certificate of Ownership and Merger as required by the DGCL and (B) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not, individually or in the aggregate, reasonably be expected to (1) prevent or materially delay consummation of the Offer or the Merger, or (2) otherwise prevent or materially delay performance by either Parent or the Purchaser of any of their material obligations under this Agreement or the Purchaser Stock Option Agreement.

Section 4.4 Financing. Attached hereto as Exhibit D is a true and correct copy of the commitment letter (the “Financing Letter”) dated September 16, 2005 from CIT Group/Commercial Services, Inc., pursuant to which the parties thereto have committed, subject to the terms and conditions set forth therein, to provide or cause to be provided financing of up to $22,042,000 in connection with the Offer and the Merger (the “Financing”). The Financing, together with cash available from the Company following the Effective Time, will provide sufficient funds to consummate the Offer and the Merger and pay related fees and expenses. As of the date of this Agreement, neither Parent nor the Purchaser has reason to believe that any of the conditions to funding under the Financing Letter will not be satisfied or that the funds from the Financing will not be available on a timely basis for the Offer and the Merger.

Section 4.5 Brokers. No broker, finder or investment banker (other than Piper Jaffray & Co., the Purchaser’s financial advisor) is entitled to any brokerage, finder’s or other fee or commission in connection with the Offer or the Merger based upon arrangements made by or on behalf of either Parent or the Purchaser.

Article 5
Covenants

Section 5.1 Conduct of Business by the Company Pending the Closing. The Company agrees that, between the date of this Agreement and the Effective Time, except as set forth in Section 5.1 of the Company Disclosure Schedule or as specifically permitted by any other provision of this Agreement, unless the Purchaser shall otherwise agree in writing: the Company will, and will cause each Company Subsidiary to, (A) conduct its operations only in the ordinary and usual course of business consistent with past practice and (B) use its reasonable best efforts to keep available the services of the current officers, key employees and consultants of the Company and each Company Subsidiary and preserve the current relationships of the Company and each Company Subsidiary with such of the customers, suppliers and other persons with which the Company or any Company Subsidiary has significant business relations as is reasonably necessary to preserve substantially intact its business organization. Without limiting the foregoing, and as an extension thereof, except as set forth in Section 5.1 of the Company Disclosure Schedule or as specifically permitted by any other provision of this Agreement, the Company shall not (unless required by applicable Law or the regulations or requirements of any stock exchange or other regulatory organization applicable to the Company), and shall not permit

any Company Subsidiary to, between the date of this Agreement and the Effective Time, directly or indirectly, do, or agree to do, any of the following without the prior written consent of the Purchaser:

Section 5.1.1 amend or otherwise change its certificate of incorporation or by-laws or equivalent organizational documents;

Section 5.1.2 (A) issue, sell, pledge, dispose of, grant, transfer, encumber, or authorize the issuance, sale, pledge, disposition, grant, transfer, or encumbrance of any shares of capital stock of, or other Equity Interests in, the Company or any Company Subsidiary of any class, or securities convertible or exchangeable or exercisable for any shares of such capital stock or other Equity Interests, or any options (excluding the options issuable pursuant to the Purchaser Stock Option Agreement), warrants or other rights of any kind to acquire any shares of such capital stock or other Equity Interests or such convertible or exchangeable securities, or any other ownership interest (including, without limitation, any such interest represented by contract right), of the Company or any Company Subsidiary, other than the issuance of Shares upon the exercise of Company Options or Director Options outstanding as of the date hereof in accordance with their terms or (B) sell, pledge, dispose of, transfer, lease, license, guarantee or encumber, or authorize the sale, pledge, disposition, transfer, lease, license, guarantee or encumbrance of, any material property or assets (including Intellectual Property) of the Company or any Company Subsidiary, except pursuant to existing contracts or commitments or the sale or purchase of goods in the ordinary course of business consistent with past practice, or enter into any commitment or transaction outside the ordinary course of business consistent with past practice;

Section 5.1.3 declare, set aside, make or pay any dividend or other distribution (whether payable in cash, stock, property or a combination thereof) with respect to any of its capital stock or enter into any agreement with respect to the voting of its capital stock;

Section 5.1.4 reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock, other Equity Interests or any other securities;

Section 5.1.5 (A) acquire (including, without limitation, by merger, consolidation, or acquisition of stock or assets) any interest in any person or any division thereof or any assets, other than acquisitions of assets in the ordinary course of business consistent with past practice; (B) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of any person (other than a wholly-owned Company Subsidiary) for borrowed money, except for indebtedness for borrowed money incurred in the ordinary course of business or other indebtedness for borrowed money with a maturity of not more than one year in a principal amount not, in the aggregate, in excess of $200,000 for the Company and the Company Subsidiaries taken as a whole; or (C) terminate, cancel or request any material change in, or agree to any material change in, any Company Material Contract;

Section 5.1.6 except as may be required by contractual commitments or corporate policies with respect to severance or termination pay in existence on the date of this Agreement: (A) increase the compensation or benefits payable or to become payable to its directors, officers or employees (except for increases in accordance with past practices in salaries or wages of employees of the Company or any Company Subsidiary which are not

across-the-board increases), (B) grant any rights to severance or termination pay to, or enter into any employment or severance agreement with, any director, officer or employee of the Company or any Company Subsidiary, or establish, adopt, enter into or amend any collective bargaining, bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement for the benefit of any director, officer or employee, except to the extent required by applicable Law or the terms of a collective bargaining agreement in existence on the date of this Agreement or (C) take any affirmative action to amend or waive any performance or vesting criteria or accelerate vesting, exercisability or funding under any Company Benefit Plan, except, in each case, to the extent required by applicable Law or existing term of any such Company Benefit Plan described in the Company Disclosure Schedule;

Section 5.1.7 (A) pre-pay any long-term debt, or pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, contingent or otherwise), except in the ordinary course of business consistent with past practice and in accordance with their terms, (B) accelerate or delay collection of notes or accounts receivable in advance of or beyond their regular due dates or the dates when the same would have been collected in the ordinary course of business consistent with past practice, (C) delay or accelerate payment of any account payable or in advance of its due date or the date such liability would have been paid in the ordinary course of business consistent with past practice, or (D) vary the Company’s inventory practices in any material respect from the Company’s past practices;

Section 5.1.8 make any change in accounting policies or procedures, except as required by GAAP or by a Governmental Entity;

Section 5.1.9 waive, release, assign, settle or compromise any material claims, or any material litigation or arbitration;

Section 5.1.10 make any material tax election or settle or compromise any material liability for Taxes;

Section 5.1.11 modify, amend or terminate, or waive, release or assign any material rights or claims with respect to any confidentiality or standstill agreement to which the Company is a party;

Section 5.1.12 write up, write down or write off the book value of any assets, individually or in the aggregate, for the Company and the Company Subsidiaries taken as a whole, except for depreciation and amortization in accordance with GAAP consistently applied;

Section 5.1.13 take any action to exempt or make not subject to (A) the provisions of Section 203 of the DGCL, or (B) any other state takeover law or state law that purports to limit or restrict business combinations or the ability to acquire or vote shares, any person (other than either Parent or the Purchaser) or any action taken thereby, which person or action would have otherwise been subject to the restrictive provisions thereof and not exempt therefrom; or

Section 5.1.14 take any action that is intended or would reasonably be expected to result in any of the Tender Offer Conditions or the conditions to the Merger set forth in Article 6 not being satisfied.

Section 5.2 Access to Information; Confidentiality. Except as required pursuant to any confidentiality agreement or similar agreement or arrangement to which the Company or any Company Subsidiary is a party (which such person shall use its reasonable best efforts to cause the counterparty thereto to waive) from the date of this Agreement to the Effective Time the Company shall, and shall cause each Company Subsidiary and each of their respective directors, officers, employees, accountants, consultants, legal counsel, advisors, and agents and other representatives, (collectively, “Company Representatives”) to: (A) provide to the Purchaser and its respective officers, directors, employees, accountants, consultants, legal counsel, advisors, agents and other representatives (collectively, “Purchaser Representatives”) access at reasonable times upon prior notice to the officers, employees, agents, properties, offices and other facilities of such party and its subsidiaries and to the books and records thereof and (B) furnish promptly such information concerning the business, properties, contracts, assets, liabilities, personnel and other aspects of such party and its subsidiaries as the other party or its Representatives may reasonably request. No investigation conducted pursuant to this Section 5.2 shall affect or be deemed to modify or limit any representation or warranty made in this Agreement.

Section 5.3 No Solicitation of Transactions.

Section 5.3.1 The Company agrees that, prior to the Effective Time, it shall not, and shall not authorize or permit any Company Subsidiary or Company Representative, directly or indirectly, to take any action to (A) encourage (including by way of furnishing non-public information), solicit, initiate or facilitate any inquiries or the making of any proposal or offer with respect to, or that could reasonably be expected to lead to, an Acquisition Proposal, (B) enter into any agreement with respect to any Acquisition Proposal or enter into any agreement, arrangement or understanding requiring it to abandon, terminate or fail to consummate the Merger or any other transaction contemplated by this Agreement or (C) enter into, continue or otherwise participate in any way in discussions or negotiations with, or furnish any information to, any person in connection with, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or could reasonably be expected to lead to, any Acquisition Proposal; provided, however, that if, at any time prior to the consummation of the Offer, the Company Board determines in good faith, after consultation with outside counsel, that it would otherwise constitute a breach of its fiduciary duties to stockholders under applicable law, the Company may, in response to a Superior Proposal, or an Acquisition Proposal that would reasonably be expected to result in a Superior Proposal, that did not result from a breach of this Section 5.3 and subject to the Company’s compliance with Section 5.3.2, (1) furnish information with respect to the Company and the Company Subsidiaries to the person making such Superior Proposal or Acquisition Proposal pursuant to a customary confidentiality agreement in a form that is reasonably acceptable to the Purchaser and (2) participate in discussions with respect to such Superior Proposal.

Section 5.3.2 The Company shall, as promptly as practicable, advise the Purchaser of any inquiry received by it relating to any potential Acquisition Proposal and of the material terms of any proposal or inquiry, including the identity of the person and its affiliates making the same, that it may receive in respect of any such potential Acquisition Proposal, or of any information requested from it or of any negotiations or discussions being sought to be initiated with it, shall furnish to the Purchaser a copy of any such proposal or inquiry, if it is in writing, or a written summary of any such proposal or inquiry, if it is not in writing and shall

keep the Purchaser fully informed on a prompt basis with respect to any developments with respect to the foregoing.

Section 5.3.3 Except as otherwise set forth in this Section 5.3.3 neither the Company Board nor the Special Committee thereof shall (A) withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to the Purchaser, the approval or recommendation by the Company Board or the Special Committee of the Offer and the Merger, (B) approve or recommend, or propose publicly to approve or recommend, any Acquisition Proposal other than the Offer and the Merger, or (C) cause the Company to enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement related to any Acquisition Proposal other than the Offer and the Merger. Nothing contained in this Section 5.3.3 shall prohibit the Company (1) from taking and disclosing to its stockholders a position contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange Act with regard to an Acquisition Proposal (provided that the Company Board shall not withdraw or modify in an adverse manner its approval or recommendation of the Offer, the Merger or this Agreement except as set forth below) or (2) in the event that a Superior Proposal is made in compliance with this Section 5.3 and the Company Board determines in good faith, after consultation with outside counsel, that it would otherwise constitute a breach of its fiduciary duty to stockholders under applicable law, from withdrawing or modifying its recommendation of the Offer and the Merger prior to consummation of the Offer and no earlier than five business days following the day of delivery of written notice to the Purchaser of its intention to do so, so long as the Company continues to comply with all other provisions of this Agreement. The Company agrees that, during the five business day period prior to withdrawing its recommendation, the Company and Company Representatives shall negotiate in good faith with the Purchaser and Purchaser Representatives regarding any revisions to the terms of the transactions contemplated by this Agreement.

Section 5.4 Appropriate Action; Consents; Filings.

Section 5.4.1 The Company, Parent and the Purchaser shall use their reasonable best efforts to (A) take, or cause to be taken, all appropriate action and do, or cause to be done, all things necessary, proper or advisable under applicable Law or otherwise to consummate and make effective the transactions contemplated by this Agreement and the Purchaser Stock Option Agreement as promptly as practicable, (B) obtain from any Governmental Entities any consents, licenses, permits, waivers, approvals, authorizations or orders required to be obtained or made by Parent, the Purchaser or the Company or any of their respective subsidiaries, or to avoid any action or proceeding by any Governmental Entity, in connection with the authorization, execution and delivery of this Agreement and the Purchaser Stock Option Agreement and the consummation of the transactions contemplated herein and therein, including without limitation the Offer and the Merger, and (C) make all necessary filings, and thereafter make any other required submissions, with respect to this Agreement and the Purchaser Stock Option Agreement, the Offer and the Merger required under (1) the Exchange Act, and any other applicable federal or state securities Laws and (2) any other applicable Law; provided, that the Company, Parent and the Purchaser shall cooperate with each other in connection with (A) preparing and filing of the Offer Documents, the Schedule 14D-9, Proxy Statement and any Other Filings, (B) determining whether any action by or in respect of, or filing with, any Governmental Entity is required, in connection with the consummation of the Offer or the Merger and (C) seeking any such actions, consents, approvals

or waivers or making any such filings, including providing copies of all filed documents to the non-filing party and its advisors prior to filing and, if requested, accepting all reasonable additions, deletions or changes suggested in connection therewith; and provided, further, that nothing in this Section 5.4.1 shall require either Parent or the Purchaser to agree to (I) the imposition of conditions, (II) the requirement of divestiture of assets or property or (III) the requirement of expenditure of money by Parent, the Purchaser or the Company to a third party in exchange for any such consent. The Company, Parent and the Purchaser shall furnish to each other all information required for any application or other filing under the rules and regulations of any applicable Law (including all information) in connection with the transactions contemplated by this Agreement and the Purchaser Stock Option Agreement.

Section 5.4.2 The Company and the Purchaser shall give (or shall cause their respective subsidiaries to give) any notices to third parties, and use, and cause their respective subsidiaries to use, all reasonable efforts to obtain any third party consents, (A) necessary, proper or advisable to consummate the transactions contemplated in this Agreement and the Purchaser Stock Option Agreement, (B) required to be disclosed in the Company Disclosure Schedule or (C) required to prevent a Company Material Adverse Effect from occurring prior to or after the Effective Time; provided, however that the Company and the Purchaser shall coordinate and cooperate in determining whether any actions, consents, approvals or waivers are required to be obtained from parties to any Company Material Contracts in connection with consummation of the Offer or the Merger and seeking any such actions, consents, approvals or waivers. In the event that either party shall fail to obtain any third party consent described in the first sentence of this Section 5.4.2, such party shall use all reasonable efforts, and shall take any such actions reasonably requested by the other parties hereto, to minimize any adverse effect upon the Company and Parent, their respective Subsidiaries, and their respective businesses resulting, or which could reasonably be expected to result after the consummation of the Offer or the Effective Time, from the failure to obtain such consent.

Section 5.4.3 From the date of this Agreement until the Effective Time, the Company shall promptly notify the Purchaser in writing of any pending or, to the knowledge of the Company, threatened action, suit, arbitration or other proceeding or investigation by any Governmental Entity or any other person (A) challenging or seeking material damages in connection with the Offer, the Merger or any other transaction contemplated by this Agreement or the Purchaser Stock Option Agreement or (B) seeking to restrain or prohibit the consummation of the Offer, the Merger or any other transaction contemplated by this Agreement or the Purchaser Stock Option Agreement or otherwise limit the right of Giannulli, Parent or the Purchaser to own or operate all or any portion of the businesses or assets of the Company or any Company Subsidiary, which, in either case, would reasonably be expected to have a Company Material Adverse Effect prior to or after the Effective Time.

Section 5.5 Certain Notices. From and after the date of this Agreement until the Effective Time, each party hereto shall promptly notify the other parties hereto of (A) the occurrence, or non-occurrence, of any event that would be likely to cause any condition to the obligations of any party to effect the Offer, Merger or any other transaction contemplated by this Agreement or the Purchaser Stock Option Agreement not to be satisfied or (B) the failure of the Company, Parent or the Purchaser, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it pursuant to this Agreement which

would reasonably be expected to result in any condition to the obligations of any party to effect the Offer, the Merger or any other transaction contemplated by this Agreement or the Purchaser Stock Option Agreement not to be satisfied; provided, however, that the delivery of any notice pursuant to this Section 5.5 shall not cure any breach of any representation or warranty contained in this Agreement or otherwise limit or affect the remedies available hereunder to the party receiving such notice.

Section 5.6 Public Announcements. Parent, the Purchaser and the Company shall consult with each other before issuing any press release or otherwise making any public statements with respect to the Merger and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable Law or any listing agreement with the Exchange.

Section 5.7 Indemnification of Directors and Officers.

Section 5.7.1 Parent and the Surviving Corporation agree that the indemnification obligations set forth in the Company Certificate and the Company By-laws shall survive the Merger (and the Certificate of Incorporation and By-laws of the Surviving Corporation shall reflect such provisions) and shall not be amended, repealed or otherwise modified for a period of 6 years after the Effective Time in any manner that would adversely affect the rights thereunder of any individual who on or prior to the Effective Time was a director, officer, trustee, fiduciary, employee or agent of the Company or any Company Subsidiary or who served at the request of the Company or any Company Subsidiary as a director, officer, trustee, partner, fiduciary, employee or agent of another corporation, partnership, joint venture, trust, pension or other employee benefit plan or enterprise, unless such amendment or modification is required by Law.

Section 5.7.2 For 6 years from the Effective Time, the Surviving Corporation shall provide to the Company’s current directors and officers an insurance and indemnification policy that provides coverage for events occurring prior to the Effective Time (the “D&O Insurance”) that is no less favorable than the Company’s existing policy (true and complete copies which have been previously provided to Parent) or, if substantially equivalent insurance coverage is unavailable, the best available coverage; provided, however, that the Surviving Corporation shall not be required to pay an annual premium for the D&O Insurance in excess of 200% of the last annual premium paid prior to the date of this Agreement, which premium the Company represents and warrants to be approximately $323,612. The provisions of the immediately preceding sentence shall be deemed to have been satisfied if prepaid policies have been obtained prior to the Effective Time for purposes of this Section 5.7 , which policies provide such directors and officers with coverage for an aggregate period of 6 years with respect to claims arising from facts or events that occurred on or before the Effective Time, including, without limitation, in respect of the transactions contemplated by this Agreement. If such prepaid policies have been obtained prior to the Effective Time, Parent shall, and shall cause the Surviving Corporation to, maintain such policies in full force and effect, and continue to honor the obligations thereunder. The obligations under this Section 5.7 shall not be terminated or modified in such a manner as to adversely affect any indemnitee to whom this Section 5.7 applies without the consent of such affected indemnitee (it being expressly agreed that the indemnitees to whom this Section 5.7 applies shall be third party beneficiaries of this Section 5.7 ).

Section 5.7.3 In the event Parent, the Purchaser or the Surviving Corporation (A) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (B) transfers all or substantially all of its properties and assets to any person, then, and in each such case, proper provision shall be made so that such continuing or surviving corporation or entity or transferee of such assets, as the case may be, shall assume the obligations set forth in this Section 5.7 .

Section 5.8 Section 16. Prior to the Effective Time, the Company Board, or an appropriate committee of non-employee directors thereof, shall adopt a resolution consistent with the interpretive guidance of the SEC so that the disposition by any officer or director of the Company who is a covered person of the Company for purposes of Section 16 of the Exchange Act and the rules and regulations thereunder (“Section 16”) of Shares or options to acquire Shares pursuant to this Agreement and the Merger shall be an exempt transaction for purposes of Section 16.

Section 5.9 Financing. Parent and the Purchaser shall use commercially reasonable efforts to satisfy, on or before the Closing Date, all requirements of the Financing Letter and to obtain the Financing contemplated thereby. The obligations contained herein are not intended, nor shall they be construed, to benefit or confer any rights upon any person, firm or entity other than the Company.

Section 5.10 Contribution of Giannulli’s Shares. Giannulli hereby agrees that (i) on or prior to the Effective Time, Giannulli shall contribute all Shares beneficially owned by him to Parent, (ii) on or prior to the Effective Time, Giannulli shall cause Parent to contribute all Shares beneficially owned by Parent to the Purchaser, and (iii) neither Giannulli nor Parent shall take any action, or omit to take any action which either Giannulli or Parent could reasonably be expected to take, if the taking of, or the omission to take, such action could reasonably be expected to adversely affect the ability of either Parent or the Purchaser to consummate the transactions contemplated hereby; provided, however, that Giannulli shall only be required to make the contributions described in subsection (i) of this Section 5.10 if all of the conditions set forth in Article 6 are satisfied unless the failure to satisfy such conditions is a result of Giannulli knowingly taking any action, or knowingly omitting to take any action which Giannulli could reasonably be expected to take, if the taking of, or omission to take, such action could reasonably be expected to adversely affect the ability of the Purchaser to consummate the transactions contemplated hereby.

Section 5.11 Integrated Transaction Treatment. Parent, the Purchaser and the Company (a) shall treat the Offer, the Contribution and the Merger as an integrated transaction, after which Parent will own, and Giannulli will indirectly own, all of the outstanding stock of the Surviving Corporation, and (b) shall treat the Purchaser as a transitory corporation that is disregarded for purposes of determining the U.S. federal income tax consequences of the Transaction.

Article 6
Conditions to Consummation of the Merger

Section 6.1 Conditions to Obligations of Each Party Under This Agreement. The respective obligations of each party to consummate the Merger shall be subject to the satisfaction at or prior to the Effective Time of each of the following conditions:

Section 6.1.1 The Purchaser shall have accepted for payment and paid for Shares in an amount sufficient to meet the Minimum Condition and otherwise pursuant to the Offer in accordance with the terms hereof.

Section 6.1.2 The consummation of the Merger shall not be restrained, enjoined or prohibited by any order, judgment, decree, injunction or ruling (whether temporary, preliminary or permanent) of a court of competent jurisdiction or any other Governmental Entity and there shall not have been any statute, rule or regulation enacted, promulgated or deemed applicable to the Merger by any Governmental Entity which prevents the consummation of the Merger or has the effect of making the purchase of Shares illegal.

Article 7
Termination, Amendment and Waiver

Section 7.1 Termination. This Agreement may be terminated, and the Offer and/or the Merger contemplated hereby may be abandoned, at any time prior to the Effective Time by action taken or authorized by the board of directors (or special committee thereof) of the terminating party or parties, as applicable:

Section 7.1.1 By mutual written consent of Parent, the Purchaser and the Company, by action of their respective Boards of Directors or Special Committee, as applicable;

Section 7.1.2 By the Company if (A) the Purchaser fails to commence the Offer as provided in Section 1.1 hereof by October 31, 2005 or (B) the Purchaser shall not have accepted for payment and paid for Shares pursuant to the Offer in accordance with the terms hereof and thereof on or before January 31, 2006; provided, however, that the Company may not terminate this Agreement pursuant to this Section 7.1.2 if the Company shall have (1) failed to fulfill any obligation under this Agreement, which failure has been the cause of, or resulted in, the failure of any condition to the Offer to have been satisfied on or before such date, or (2) otherwise materially breached this Agreement;

Section 7.1.3 By either the Company or the Purchaser if the Offer is terminated or withdrawn pursuant to its terms without any Shares being purchased thereunder; provided, however, that neither the Company nor the Purchaser may terminate this Agreement pursuant to this Section 7.1.3 if such party shall have materially breached this Agreement;

Section 7.1.4 By either the Company or the Purchaser if any court of competent jurisdiction or other Governmental Entity shall have issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting (A) the acceptance for payment of, or payment for, Shares pursuant to the Offer or (B) the Merger, and such order, decree, ruling or other action shall have become final and nonappealable (which order, decree, ruling or other action the party seeking to terminate this Agreement shall have

used its reasonable best efforts to resist, resolve or lift, as applicable, subject to the provisions of Section 5.4);

Section 7.1.5 By the Purchaser prior to the Purchaser’s purchase of Shares pursuant to the Offer, if (A) the Company Board shall have withdrawn or adversely modified (including by amendment to the Schedule 14D-9), or failed upon the Purchaser’s request to reconfirm, its approval or recommendation of the Offer, the Merger or this Agreement (or determined to do so); or (B) the Company Board shall have determined to recommend to the Company’s stockholders that they approve an Acquisition Proposal other than the Offer and the Merger or shall have determined to accept a Superior Proposal;

Section 7.1.6 By the Company, if the Company Board determines to accept a Superior Proposal, but only after the Company provides Parent with not less than 72 hours notice of its determination to accept such Superior Proposal, including all material terms thereof (provided that the Company’s right to terminate this Agreement under this Section 7.1.6 shall not be available if the Company is then in breach of Section 5.3); or

Section 7.1.7 By Purchaser, prior to the Purchaser’s purchase of Shares pursuant to the Offer, if the Minimum Condition shall not have been satisfied by the Expiration Date of the Offer and on or prior to such Expiration Date an Acquisition Proposal shall have been publicly announced or disclosed.

Section 7.2 Effect of Termination. In the event of termination of this Agreement by any of the Company, Parent or the Purchaser as provided in Section 7.1, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of Parent or the Company or their respective subsidiaries, officers or directors except (A) with respect to Section 5.2, Section 5.6, this Section 7.2 and Article 8 and (B) with respect to any liabilities or damages incurred or suffered by a party as a result of the willful and material breach by another party of any of its representations, warranties, covenants or other agreements set forth in this Agreement or the Purchaser Stock Option Agreement.

Section 7.3 Amendment. Subject to Section 1.1.2 hereof, this Agreement may be amended by the parties hereto by action taken by or on behalf of their respective Boards of Directors at any time prior to the Effective Time; provided, however, that no amendment may be made which, by Law or in accordance with the rules of any relevant stock exchange, requires further approval and adoption by such stockholders. This Agreement may not be amended except by an instrument in writing signed by the parties hereto, and in the case of the Company, approved by the Special Committee.

Section 7.4 Waiver. Subject to Section 1.1.2, at any time prior to the Effective Time, Parent or the Purchaser, on the one hand, and the Company, on the other hand, may (A) extend the time for the performance of any of the obligations or other acts of the other, (B) waive any inaccuracies in the representations and warranties of the other contained herein or in any document delivered pursuant hereto and (C) waive compliance by the other with any of the agreements or conditions contained herein other than the Minimum Condition. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party or parties to be bound thereby, but such extension or waiver or failure to insist on strict compliance with an obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Without limiting the effect of any other provision of this Agreement that confers authority upon the Special Committee, it is

expressly agreed that all of the rights of the Company under this Agreement (including rights of waiver and enforcement) are hereby vested exclusively in the Special Committee and shall be exercised by the Company only with the consent of, or at the direction of, the Special Committee.

Article 8
General Provisions

Section 8.1 Non-Survival of Representations and Warranties. None of the representations and warranties in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time. This Section 8.1 shall not limit any covenant or agreement of the parties which by its terms contemplates performance after the Effective Time.

Section 8.2 Fees and Expenses. All Expenses incurred by the parties hereto shall be borne solely and entirely by the party which has incurred the same, except that the Company shall reimburse Purchaser, in immediately available funds by wire transfer to an account specified by Purchaser, promptly after termination of this Agreement, an amount equal to Purchaser, Parent and Giannulli’s aggregate out-of-pocket costs and expenses reasonably incurred in connection with this Agreement, the Offer, the Merger and the transactions contemplated by this Agreement (including without limitation all legal, accounting, printing and financial advisory fees and expenses and any fees or expenses payable to financing sources) if: (i) this Agreement is terminated by Purchaser pursuant to Section 7.1.5; (ii) this Agreement is terminated by any party and the Company has breached its obligations under Section 5.3; or (iii) the Company terminates this Agreement pursuant to Section 7.1.6.

Section 8.3 Notices. Any notices or other communications required or permitted under, or otherwise given in connection with this Agreement, shall be in writing and shall be deemed to have been duly given when delivered in person or upon electronic confirmation of receipt when transmitted by facsimile transmission (but only if followed by transmittal by national overnight courier or hand for delivery on the next business day) or on receipt after dispatch by registered or certified mail, postage prepaid, addressed, or on the next business day if transmitted by national overnight courier, in each case as follows:

If to Giannulli, Parent or the Purchaser, addressed to it at:

Mossimo Giannulli

2016 Broadway

Santa Monica, California 90404

Tel: (310) 460-0040

Attention: Mossimo Giannulli

with a mandated copy to:

Latham & Watkins LLP

633 West Fifth Street, Ste 4000

Los Angeles, CA 90071

Tel: (213) 485-1234

Fax: (213) 891-8763

Attention: Paul D. Tosetti

and to:

Latham & Watkins LLP

650 Town Center Drive, 20^th Floor

Costa Mesa, California 92626-1925

Tel: (714) 540-1235

Fax: (714) 755-8290

Attention: Cary K. Hyden

If to the Company, addressed to it at:

Mossimo, Inc.

2016 Broadway

Santa Monica, California 90404

Tel: (310) 460-0040

Attention: Corporate Secretary

with a mandated copy to:

Gibson, Dunn & Crutcher LLP

Jamboree Center

4 Park Plaza, Suite 1400

Irvine, California 92614-8557

Tel: (949) 451-3800

Fax: (949) 451-4220

Attention: Thomas Magill

and to:

Buchalter, Nemer, Fields & Younger

601 Figueroa Street

Ste# 2400

Los Angeles, CA 90017

Tel: (213) 891-5020

Fax: (213) 896-0400

Attention: Mark Bonenfant

Section 8.4 Certain Definitions. For purposes of this Agreement, the term:

“affiliate” means a person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the first-mentioned person;

“Acquisition Proposal” means any offer or proposal concerning any (A) merger, consolidation, other business combination or similar transaction involving the Company or any Company Subsidiary, (B) sale, lease or other disposition directly or indirectly by merger, consolidation, business combination, share exchange, joint venture or otherwise, of assets of the Company or any Company Subsidiary representing 20% or more of the consolidated assets, revenues or net income of the Company and the Company Subsidiaries, (C) issuance or sale or other disposition (including by way of merger, consolidation, business combination, share exchange, joint venture or similar transaction) of Equity Interests representing 20% or more of

the voting power of the Company, (D) transaction in which any person will acquire beneficial ownership or the right to acquire beneficial ownership or any group has been formed which beneficially owns or has the right to acquire beneficial ownership of, Equity Interests representing 20% or more of the voting power of the Company or (E) any combination of the foregoing (other than the Offer and the Merger).

“beneficial ownership” (and related terms such as “beneficially owned” or “beneficial owner”) has the meaning set forth in Rule 13d-3 under the Exchange Act.

“Blue Sky Laws” means any state securities, “blue sky” or takeover law.

“Company Material Adverse Effect” means any change, event or effect that is, or would be, materially adverse to the condition (financial or otherwise), properties, assets (including intangible assets), liabilities, business, operations or results of operations of the Company and the Company Subsidiaries, taken as a whole; provided, however, that any adverse change, effect, event, occurrence, state of facts or development after the date hereof, attributable to conditions affecting any of the industries as a whole in which Company participates, the U.S. economy as a whole, shall not be deemed to constitute a Company Material Adverse Effect unless the Company and the Company Subsidiaries, taken as a whole, are disproportionately affected by such change, effect, event, occurrence, state of facts or development.

“contracts” means any of the agreements, contracts, leases, powers of attorney, notes, loans, evidence of indebtedness, purchase orders, letters of credit, settlement agreements, franchise agreements, undertakings, covenants not to compete, employment agreements, licenses, instruments, obligations, commitments, understandings, policies, purchase and sales orders, quotations and other executory commitments to which the Company or any Company Subsidiary is a party or to which any of the assets of the Company or any Company Subsidiary are subject, whether oral or written, express or implied.

“control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly or as trustee or executor, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of stock or as trustee or executor, by contract or credit arrangement or otherwise.

“Equity Interest” means any share, capital stock, partnership, member or similar interest in any entity, and any option, warrant, right or security convertible, exchangeable or exercisable therefor.

“Exchange” means the NASDAQ SmallCap Market.

“Expenses” includes all reasonable out-of-pocket expenses (including, without limitation, all fees and expenses of counsel, accountants, investment bankers, experts and consultants to a party hereto and its affiliates) incurred by a party or on its behalf in connection with or related to the authorization, preparation, negotiation, execution and performance of this Agreement and the transactions contemplated hereby, including the preparation, printing, filing and mailing of the Offer Documents, Schedule 14D-9 and Proxy Statement and any solicitation of stockholder approvals and all other matters related to the transactions contemplated by this Agreement.

“GAAP” means generally accepted accounting principles as applied in the United States.

“Governmental Entity” means any domestic or foreign governmental, administrative, judicial or regulatory authority.

“group” is defined as in the Exchange Act, except where the context otherwise requires.

“Intellectual Property” means all intellectual property or other proprietary rights of every kind, including all domestic or foreign patents, domestic or foreign patent applications, inventions (whether or not patentable), processes, products, technologies, discoveries, copyrightable and copyrighted works, apparatus, trade secrets, trademarks, trademark registrations and applications, service marks, service mark registrations and applications, trade names, trade dress, copyright registrations and applications, certification mark registrations and applications, mask work registrations and applications, customer lists, confidential marketing and customer information, licenses, confidential technical information, software, and all documentation thereof.

“knowledge” will be deemed to be present when the matter in question was brought to the attention of any officer of Parent, the Purchaser or the Company, as the case may be.

“Law” means foreign or domestic law, statute, code, ordinance, rule, regulation, order, judgment, writ, stipulation, award, injunction, decree or arbitration award or finding.

“on a fully diluted basis” means, as of any date, (A) the number of Shares outstanding, plus (B) the number of Shares the Company is then required to issue pursuant to obligations outstanding at such date under employee stock option or other benefit plans or otherwise (assuming all options and other rights to acquire such Shares are fully vested and exercisable and all Shares issuable at any time have been issued), including, without limitation, pursuant to the Company Stock Option Plans but excluding the options issuable pursuant to the Purchaser Stock Option Agreement.

“Other Filings” means all filings made by, or required to be made by, the Company with the SEC other than the Schedule 14D-9 and the Proxy Statement.

“person” means an individual, corporation, limited liability company, partnership, association, trust, unincorporated organization, other entity or group.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“subsidiary” or “subsidiaries” of Parent, the Purchaser, the Company, the Surviving Corporation or any other person means any corporation, partnership, joint venture or other legal entity of which Parent, the Purchaser, the Company, the Surviving Corporation or such other person, as the case may be (either alone or through or together with any other subsidiary), owns, directly or indirectly, a majority of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity.

“Superior Proposal” means a bona fide Acquisition Proposal made by a third party which was not solicited by the Company, any Company Subsidiary, any Company Representatives or any other Company affiliates and which, in the good faith judgment of the Company Board, taking into account, to the extent deemed appropriate by the Company Board,

the various legal, financial and regulatory aspects of the proposal and the person making such proposal (A) if accepted, is reasonably likely to be consummated, and (B) if consummated would, based upon the written opinion of the Company’s financial advisor, result in a transaction that is more favorable to the Company’s stockholders, from a financial point of view, than the Offer and the Merger.

“Taxes” means any federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security, unemployment, disability, real property, personal property, sales, use, transfer, registration, ad valorem, value added, alternative or add-on minimum or estimated tax or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not.

Section 8.5 Terms Defined Elsewhere. The following terms are defined elsewhere in this Agreement, as indicated below:

*“Agreement”*		Preamble
*“business day”*		Section 1.1.2
*“Certificate of Ownership and Merger”*		Section 2.2
*“Certificates”*		Section 2.10.1
*“Company”*		Preamble
*“Company Board”*		Recitals
*“Company Common Stock”*		Recitals
*“Company Disclosure Schedule”*		Article 3
*“Company Financial Advisor”*		Section 1.2.1
*“Company Options”*		Section 2.7
*“Company Preferred Stock”*		Section 3.2
*“Company Representatives”*		Section 5.2
*“Company Stock Option Plans”*		Section 2.7
*“Company Subsidiary”*		Section 3.1
*“Contribution”*		Recitals
*“D&O Insurance”*		Section 5.7.2
*“Director Options”*		Section 2.7
*“DGCL”*		Recitals
*“Dissenting Shares”*		Section 2.9
*“Effective Time”*		Section 2.2
*“Exchange Act”*		Section 1.1.1
*“Expiration Date”*		Section 1.1.2
*“Financing”*		Section 4.4
*“Financing Letters”*		Section 4.4
*“Giannulli”*		Preamble
*“Merger”*		Recitals
*“Merger Consideration”*		Section 2.6.1
*“Minimum Condition”*		Annex I
*“Offer”*		Recitals
*“Offer Documents”*		Section 1.1.1
*“Offer Price”*		Recitals

*“Option Payment”*		Section 2.7
*“Parent”*		Preamble
*“Parent Common Stock”*		Section 4.1
*“Parent Representatives”*		Section 5.2
*“Paying Agent”*		Section 2.10.1
*“Purchaser”*		Preamble
*“Purchaser Common Stock”*		Section 2.6.2
*“Purchaser Stock Option Agreement”*		Recitals
*“Schedule 14D-9”*		Section 1.2.1
*“SEC”*		Section 1.1.1
*“Shares”*		Recitals
*“Special Committee”*		Recitals
*“Surviving Corporation”*		Recitals
*“Tender Offer Conditions”*		Section 1.1.1

Section 8.6 Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

Section 8.7 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.

Section 8.8 Entire Agreement. This Agreement (together with the Exhibits, the Company Disclosure Schedule and the other documents delivered pursuant hereto) and the Purchaser Stock Option Agreement constitute the entire agreement of the parties and supersede all prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof and, except as otherwise expressly provided herein, are not intended to confer upon any other person any rights or remedies hereunder.

Section 8.9 Assignment. This Agreement shall not be assigned by operation of law or otherwise.

Section 8.10 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and their respective successors and assigns, and nothing in this Agreement, express or implied, other than pursuant to Section 5.9, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

Section 8.11 Mutual Drafting. Each party hereto has participated in the drafting of this Agreement, which each party acknowledges is the result of extensive negotiations between the parties.

Section 8.12 Governing Law; Consent to Jurisdiction; Waiver of Trial by Jury.

Section 8.12.1 This Agreement shall be governed by, and construed in accordance with, the Laws of the State of Delaware, without regard to laws that may be applicable under conflicts of laws principles.

Section 8.12.2 Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Chancery Court of the State of Delaware, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the agreements delivered in connection herewith or the transactions contemplated hereby or thereby or for recognition or enforcement of any judgment relating thereto, and each of the parties hereby irrevocably and unconditionally (A) agrees not to commence any such action or proceeding except in such courts, (B) agrees that any claim in respect of any such action or proceeding may be heard and determined in such Delaware State court or, to the extent permitted by law, in such Federal court, (C) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such action or proceeding in any such Delaware State or Federal court, and (D) waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such Delaware State or Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 8.3. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

Section 8.12.3 EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.12.3.

Section 8.13 Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

IN WITNESS WHEREOF, Parent, the Purchaser, Giannulli and the Company have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

	MOSSIMO HOLDING CORP.


	By:
		Mossimo Giannulli
		President and Chief Executive Officer


	MOSSIMO ACQUISITION CORP.


	By:
		Mossimo Giannulli
		President and Chief Executive Officer


	MOSSIMO, INC.


	By:
	Name:
	Title:


	As to Section 5.10 hereof only:

	MOSSIMO GIANNULLI

(Signature Page to Agreement and Plan of Merger)

ANNEX I

Conditions to the Offer. Notwithstanding any other provisions of the Offer, the Purchaser shall not accept for payment or, subject to any applicable rules and regulations of the SEC including Rule 14e-1(c) promulgated under the Exchange Act, pay for any tendered Shares, and may terminate or, subject to the terms of the Agreement, amend the Offer, unless there shall have been validly tendered and not validly withdrawn prior to the Expiration Date that number of Shares, other than Shares tendered by any officer or director of the Company, which represents at least a majority of the total number of outstanding Shares on a fully diluted basis on the date of purchase not then owned by either Giannulli, Parent or the Purchaser (the “Minimum Condition”). In addition, notwithstanding any other term of the Offer or the Agreement, the Purchaser shall not be required to accept for payment or, subject as aforesaid, pay for any tendered Shares, and may terminate or, subject to the terms of the Agreement, amend the Offer, at any time on or after September 21, 2005 and prior to the time of acceptance for payment or payment for any Shares, if any of the following events shall occur:

(A) the Purchaser shall not have received funds under the Financing Letters sufficient to purchase the Shares pursuant to the Offer and the Merger and pay related fees and expenses (the “Financing Condition”); or

(B) there shall be any statute, rule, regulation, legislation, interpretation, judgment, order or injunction enacted, enforced, promulgated, amended, issued or deemed applicable to the Offer, by any legislative body or Governmental Entity that, in the reasonable judgment of the Purchaser, would be expected to, directly or indirectly: (i) make illegal or otherwise prohibit or materially delay consummation of the Offer or the Merger or impose material damages or make materially more costly the making of the Offer, (ii) prohibit or materially limit the ownership or operation by the Purchaser of all or any material portion of the business or assets of the Company and the Company Subsidiaries taken as a whole or compel the Purchaser to dispose of or hold separate all or any material portion of the business or assets of the Purchaser, or of the Company and the Company Subsidiaries taken as a whole, or seek to impose any material limitation on the ability of the Purchaser to conduct its business or own such assets, (iii) impose material limitations on the ability of the Purchaser effectively to acquire, hold or exercise full rights of ownership of the Shares, including without limitation the right to vote any Shares acquired or owned by the Purchaser on all matters properly presented to the Company’s stockholders, (iv) require divestiture by the Purchaser of any Shares or (v) result in a Company Material Adverse Effect; or

(C) there shall be instituted or pending any action or proceeding by any Governmental Entity seeking, or that would reasonably be expected to result in, any of the consequences referred to in clauses (i) through (v) of paragraph (B) above or by any third party for which there is a substantial likelihood of resulting in any of the consequences referred to in clauses (i) through (v) of paragraph (B) above; or

(D) any Company Material Adverse Effect shall have occurred; or

(E) (i) the Company Board shall have withdrawn or adversely modified (including by amendment to the Schedule 14D-9), or failed upon the Purchaser’s request to reconfirm, its approval or recommendation of the Offer, the

I-1

Merger or the Agreement (or determined to do so); (ii) the Company Board shall have determined to recommend to the Company’s stockholders that they approve an Acquisition Proposal other than the Offer and the Merger or shall have determined to accept a Superior Proposal; (iii) a tender offer or exchange offer that, if successful, would result in any person or group becoming a beneficial owner of 20% or more of the outstanding Shares is commenced (other than by Parent or an affiliate of Parent, including the Purchaser) and the Company Board fails to recommend that the Company’s stockholders not tender their Shares in such tender or exchange offer; or (iv) any person (other than Parent or an affiliate of Parent, including the Purchaser) or group becomes the beneficial owner of 20% or more of the outstanding Shares; or

(F) the Company, Parent and the Purchaser shall have reached an agreement that the Offer or the Agreement be terminated, or the Agreement shall have been terminated in accordance with its terms; or

(G) any of the representations and warranties of the Company set forth in the Agreement, when read without any exception or qualification as to materiality or Company Material Adverse Effect, shall not be true and correct, as if such representations and warranties were made at the time of such determination (except as to any such representation or warranty which speaks as of a specific date, which must be untrue or incorrect as of such specific date) except (and for such purposes ignoring qualifications as to materiality in such representation or warranty) where the failure to be so true and correct would not, individually or in the aggregate, reasonably be expected to (i) have a Company Material Adverse Effect, (ii) prevent or materially delay the consummation of the Offer, (iii) materially increase the cost of the Offer to the Purchaser or (iv) have a material adverse effect on the benefits to Parent and the Purchaser of the transactions contemplated by the Agreement; or

(H) the Company shall have failed to perform in any material respect or to comply in any material respect with any of its material obligations, covenants or agreements under the Agreement or the Purchaser Stock Option Agreement; or

(I) any consents, authorizations, permits, orders or approvals of any Governmental Entity required for the consummation of the Offer shall not have been obtained, except those the failure of which to be obtained, individually or in the aggregate, would not have a Company Material Adverse Effect.

(J) there shall have occurred, and continued to exist, (i) any general suspension of, or limitation on prices for, trading in securities on the NASDAQ SmallCap Market, (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or a material limitation (whether or not mandatory) by any Governmental Entity on the extension of credit by banks or other lending institutions, or (iii) a commencement of a war, armed hostilities or other national or international crisis involving the United States or, in the case of any of the foregoing existing on September 21, 2005 a material acceleration or worsening thereof.

The foregoing conditions (including the Minimum Condition) are for the benefit of Parent and the Purchaser and may be asserted by either Parent or the Purchaser regardless of the circumstances giving rise to any such conditions and, except for the Minimum Condition,

I-2

may be waived by either Parent or the Purchaser in whole or in part at any time and from time to time in its sole discretion, in each case subject to the terms of the Agreement. The failure by either Parent or the Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time.

The capitalized terms used in this Annex I shall have the meanings set forth in the Agreement and Plan of Merger, dated as of September 21, 2005, by and among Mossimo Holding Corp., Mossimo Acquisition Corp., Mossimo Giannulli and Mossimo, Inc.

I-3

EXHIBIT A

Purchaser Stock Option Agreement

EX-7.05 6 a05-16634_1ex7d05.htm EX-7.05

Exhibit 7.05

MOSSIMO GIANNULLI AND MOSSIMO, INC. ANNOUNCE EXECUTION OF
AGREEMENT FOR ACQUISITION OF PUBLIC MINORITY STAKE IN MOSSIMO, INC.

SANTA MONICA, CA (September 22, 2005) - Mossimo, Inc. [NASDAQ: MOSS] and Mossimo Giannulli (Giannulli) announced that they have reached an agreement for Giannulli to acquire the outstanding publicly held minority shares of Mossimo for $5.00 per share. The price represents a 50.6% premium over the April 11, 2005 closing price of $3.32 and a 25% premium over Giannulli’s original proposal of $4.00 per share made on April 11, 2005. Mossimo, Inc.’s full Board of Directors, with a unanimous recommendation of a Special Committee comprised of independent directors, unanimously approved the transaction. The transaction will be structured as a cash tender offer by Mossimo Acquis ition Corp. (MAC), a wholly-owned subsidiary of Mossimo Holding Corp. (MHC), itself a corporation wholly-owned by Giannulli, to be commenced in approximately two weeks, followed by a merger. Upon completion of the transaction, which Giannulli expects will be completed by the end of November, MAC will merge with and into Mossimo, Inc., so that Mossimo, Inc. will become a wholly owned subsidiary of MHC.

“I am pleased to reach an agreement that provides a full and fair price to Mossimo, Inc.’s stockholders. This transaction will allow Mossimo, Inc.’s stockholders the opportunity to gain liquidity and receive a substantial cash premium over the April 11 closing price,” said Giannulli.

As the next step in the process, Giannulli and MAC expect to commence a tender offer that will be subject to the condition that the majority of the publicly held minority shares are validly tendered and not withdrawn before the expiration of the tender offer, as well as other customary conditions, including the receipt of financing sufficient to complete the tender offer and the merger.

Piper Jaffray & Co. is serving as Giannulli’s exclusive financial advisor in this transaction. Houlihan Lokey Howard & Zukin is serving as exclusive financial advisor to the Special Committee of Mossimo, Inc.’s Bo ard of Directors in this transaction. CIT Group/Commercial Services, Inc. has committed, subject to certain conditions and execution of definitive loan documents, to provide approximately $22 million to fund the transaction, pay related fees and expenses, and provide Giannulli and MAC additional liquidity.

Founded in 1987, Mossimo, Inc. is a designer, licensor and distributor of men’s, women’s, boy’s and girl’s apparel, footwear, and other fashion accessories such as jewelry, watches, handbags, and belts.

This press release is inte nded for informational purposes only and is not an offer to buy, a solicitation of an offer to sell or a recommendation to sell any shares of Mossimo, Inc. common stock. The solicitation of offers to sell Mossimo, Inc. shares will only be made pursuant to a tender offer statement on Schedule TO and an offer to purchase and related materials. Mossimo, Inc. stockholders and other interested parties are urged to read the tender offer statement on Schedule TO, the offer to purchase and Mossimo, Inc.’s solicitation/recommendation statement on Schedule 14D-9 and other relevant documents filed with the SEC by Giannulli, MHC, MAC and Mossimo, Inc. when they become available because they will contain important information.

Mossimo, Inc. stockholders will be able to obtain such documents free of charge at the SEC’s web site: www.sec.gov or by directing a request to Mossimo, Inc. at 2014 Broadway, Santa Monica, CA 90404, Attention: Chief Financial Officer.

CAUTIONARY STATEMENT: Statements in this release represent the current intentions, plans, expectations and beliefs of Giannulli and Mossimo, Inc. and involve risks and uncertainties that could cause actual events to differ materially from the events described in this release, including risks or uncertainties related to whether the conditions to the tender offer will be satisfied, and if not, whether the tender offer and merger will be comp leted, as well as changes in general economic conditions, stock market trading conditions, tax law requirements or government regulation, and changes in the apparel industry or the business or prospects of Mossimo, Inc. Giannulli and Mossimo, Inc. wish to caution the reader that these factors, as well as other factors described or to be described in Giannulli’s or Mossimo, Inc.’s SEC filings with respect to the transaction, are among the factors that could cause actual events or results to differ materially from Giannulli’s or Mossimo, Inc.’s current expectations described herein.

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Under the Securities Exchange Act of 1934 (Amendment No. 5)*

Signature

Article 2 The Merger

Article 3 Representations and Warranties of the Company

Article 4 Representations and Warranties of Parent and the Purchaser

or the Purchaser of any of their material obligations under this Agreement or the Purchaser Stock Option Agreement.

Article 5 Covenants

Section 5.1.1 amend or otherwise change its certificate of incorporation or by-laws or equivalent organizational documents;

Section 5.1.3 declare, set aside, make or pay any dividend or other distribution (whether payable in cash, stock, property or a combination thereof) with respect to any of its capital stock or enter into any agreement with respect to the voting of its capital stock;

Section 5.1.4 reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock, other Equity Interests or any other securities;

Section 5.1.8 make any change in accounting policies or procedures, except as required by GAAP or by a Governmental Entity;

Section 5.1.9 waive, release, assign, settle or compromise any material claims, or any material litigation or arbitration;

Section 5.1.10 make any material tax election or settle or compromise any material liability for Taxes;

Section 5.1.11 modify, amend or terminate, or waive, release or assign any material rights or claims with respect to any confidentiality or standstill agreement to which the Company is a party;

Section 5.1.12 write up, write down or write off the book value of any assets, individually or in the aggregate, for the Company and the Company Subsidiaries taken as a whole, except for depreciation and amortization in accordance with GAAP consistently applied;

Section 5.1.14 take any action that is intended or would reasonably be expected to result in any of the Tender Offer Conditions or the conditions to the Merger set forth in Article 6 not being satisfied.

keep the Purchaser fully informed on a prompt basis with respect to any developments with respect to the foregoing.

Article 6 Conditions to Consummation of the Merger

Section 6.1.1 The Purchaser shall have accepted for payment and paid for Shares in an amount sufficient to meet the Minimum Condition and otherwise pursuant to the Offer in accordance with the terms hereof.

Article 7 Termination, Amendment and Waiver

Section 7.1.1 By mutual written consent of Parent, the Purchaser and the Company, by action of their respective Boards of Directors or Special Committee, as applicable;

used its reasonable best efforts to resist, resolve or lift, as applicable, subject to the provisions of Section 5.4);

Article 8 General Provisions

Section 8.12.1 This Agreement shall be governed by, and construed in accordance with, the Laws of the State of Delaware, without regard to laws that may be applicable under conflicts of laws principles.

Under the Securities Exchange Act of 1934
(Amendment No. 5)*

Article 2
The Merger

Article 3
Representations and Warranties of the Company

Article 4
Representations and Warranties of Parent and the Purchaser

Article 5
Covenants

Article 6
Conditions to Consummation of the Merger

Article 7
Termination, Amendment and Waiver

Article 8
General Provisions