EXHIBIT 10.3

 

MOSSIMO, INC.

 

2005 STOCK OPTION PLAN

 

1.               Purpose of Plan.  The purpose of the Mossimo, Inc. 2005 Stock
Option Plan is to attract and retain the best available personnel for positions
of substantial responsibility, to provide additional incentive to Directors,
Employees and Consultants of Mossimo, Inc., and to promote the success of its
business. Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant of an Option and subject to the applicable provisions of Section 422 of
the Code and the regulations promulgated thereunder.

 

2.               Definitions.  As used herein, the following definitions shall
apply:

 

(a)                        “Administrator” means the Board or its Committee
appointed pursuant to Section 4 of the Plan.

 

(b)                       “Board” means the Board of Directors of Mossimo, Inc.

 

(c)                        “Code” means the Internal Revenue Code of 1986, as
amended.

 

(d)                       “Committee” means the Committee appointed by the Board
in accordance with Section 4 of the Plan.

 

(e)                        “Common Stock” means the common stock, $.001 par
value, of the Company.

 

(f)                          “Company” means Mossimo, Inc., a Delaware
corporation.

 

(g)                       “Consultant” means any person who is engaged by
Company to render consulting or advisory services and is compensated for such
services.

 

(h)                       “Continuous Status as a Director, Employee or
Consultant” means that the director, employment or consulting relationship with
Company is not interrupted or terminated. Continuous Status as a Director,
Employee or Consultant shall not be considered interrupted in the case of
(i) any leave of absence approved by Company or (ii) transfers between locations
of Company or transfers to any subsidiary of Company, or between a subsidiary
and Company or any successor. A leave of absence shall include sick leave or any
other personal leave approved by an authorized representative of Company. For
purposes of Incentive Stock Options, no such leave may exceed 90 days, unless
reemployment upon expiration of such leave is guaranteed by statute or contract,
including policies of Company. If reemployment upon expiration of a leave of
absence approved by Company is not so guaranteed, on the day which is three
months after the 91st day of such leave any Incentive Stock Option held by the
Optionee shall cease to be treated as an Incentive Stock Option and shall be
treated for tax purposes as a Nonstatutory Stock Option.

 

(i)                           “Director” means a member of the Board of
Directors of Company.

 

(j)                           “Employee” means any person, including an Officer
or Director, employed by Company. The payment of a director’s fee by Company
shall not be sufficient to constitute “employment.”

 

(k)                        “Exchange Act” means the Securities Exchange Act of
1934, as amended.

 

(l)                           “Fair Market Value” means, as of any date, the
value of the Common Stock determined as follows:

 

(i)                     If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation (“Nasdaq “) System, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system for the last market trading day
prior to the time of determination and reported in The Wall Street Journal or
such other source as the Administrator deems reliable;

 

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(ii)                  If the Common Stock is quoted on the Nasdaq System (but
not on the Nasdaq National Market thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination; or

 

(iii)               In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.

 

(m)                     “Incentive Stock Option” means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.

 

(n)                       “Nonstatutory Stock” Option” means an option not
intended to qualify as an Incentive Stock Option.

 

(o)                       “Notice of Grant” means the notice of stock option
grant to be given to each of the Optionees.

 

(p)                       “Officer” means a person who is an officer of Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.

 

(q)                       “Option” means a stock option granted pursuant to the
Plan.

 

(r)                          “Optionee” means a Director, Employee or Consultant
who receives an Option.

 

(s)                        “Plan” means the Mossimo, Inc. 2005 Stock Option
Plan.

 

(t)                          “Rule 16b-3” means Rule 16b-3 promulgated under the
Exchange Act or any successor thereto.

 

(u)                       “Section 16(b)” means Section 16(b) of the Exchange
Act.

 

(v)                       “Share” means each of the shares of Common Stock
subject to an Option, as adjusted in accordance with Section 11 below.

 

3.               Stock Subject to Plan.  Subject to the provisions of Section 11
of the Plan, the maximum number of shares of Common Stock that may be issued
under this Plan is 1,500,000 unless amended by the Board or the shareholders of
Company.

 

If an Option expires or becomes unexercisable without having been exercised in
full, or is surrendered pursuant to an option exchange pursuant to
Section 4(c)(vi) or otherwise, the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated). However, Shares that have actually been issued under the Plan
upon exercise of an Option shall not be returned to the Plan and shall not
become available for future distribution under the Plan.

 

4.               Administration of the Plan.

 

(a)                        Administration by Board or Committee of Board.  The
Plan shall be administered as follows:

 

(i)                     Administration With Respect to Directors and Officers. 
With respect to grants of Options to Directors or Employees who are also
Officers or Directors, the Plan shall be administered by a Committee designated
by the Board to Administer the Plan, which Committee shall be constituted to
comply with any applicable laws, including the rules under Rule 16b-3 relating
to the disinterested administration of employee benefit plans under which
Section 16(b) exempt discretionary grants and awards of equity securities are to
be made and solely of “outside directors” (within the meaning of Treas. Reg.
1.162-27(e)(3)) or such other persons as may be permitted from time to time
under Section 162(m) of the Code and the Treasury Regulations promulgated
thereunder.

 

(ii)                  Administration With Respect to Other Employees and
Consultants.  With respect to grants of Options to Employees or Consultants who
are neither Directors nor Officers, the Plan shall be administered by (A) the
Board or (B) a Committee designated by the Board, which committee shall be
constituted in such a manner as to satisfy the legal requirements relating to
the administration of

 

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stock option plans, if any, of United States securities laws, of Delaware
corporate and securities laws, of the Code, and of any applicable stock exchange
(the “Applicable Laws”). Once appointed, such Committee shall continue to serve
in its designated capacity until otherwise directed by the Board. From time to
time the Board may increase the size of the Committee and appoint additional
members thereof, remove members (with or without cause) and appoint new members
in substitution therefore, fill vacancies, however caused, and remove all
members of the Committee and thereafter directly administer the Plan, all to the
extent permitted by the Applicable Laws.

 

(b)                       Powers of the Administrator.  Subject to the
provisions of the Plan and, in the case of the Committee, the specific duties
delegated by the Board to such Committee, and subject to the approval of any
relevant authorities, including the approval, if required, of any stock exchange
upon which the Common Stock is listed, the Administrator shall have the
authority in its discretion:

 

(i)                          to determine the Fair Market Value of the Common
Stock in accordance with Section 2(1) of the Plan;

 

(ii)                       to select the Directors, Consultants and Employees to
whom Options may from time to time be granted hereunder;

 

(iii)                    to determine whether and to what extent Options are
granted hereunder;

 

(iv)                   to determine the number of Shares to be covered by each
such award granted hereunder;

 

(v)                      to approve forms of agreement for use under the Plan;

 

(vi)                   to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan.

 

(c)                        Effect of Administrator’s Decision.  All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.

 

5.               Eligibility.

 

(a)                        Nonstatutory Stock Options may be granted to
Directors, Employees and Consultants. Incentive Stock Options may be granted
only to Employees. A Director, Employee or Consultant who has been granted an
Option may, if otherwise eligible, be granted additional Options.

 

(b)                       Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designation, to the extent that the aggregate Fair
Market Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of Company) exceeds $100,000, such Options shall be treated as
Nonstatutory Stock Options. For purposes of this Section 5(b), Incentive Stock
Options shall be taken into account in the order in which they were granted. The
Fair Market Value of the Shares shall be determined as of the time the Option
with respect to such Shares is granted.

 

(c)                        Neither the Plan nor any Option shall confer upon any
Optionee any right with respect to continuation of his or her employment or
consulting relationship with Company, nor shall it interfere in any way with his
or her right or Company’s right to terminate his or her employment or consulting
relationship at any time, with or without cause.

 

6.               Term of Plan.

 

(a)                        The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the shareholders of
Company, as described in Section 17 of the Plan. It shall continue in effect for
a term of ten years unless sooner terminated under Section 13 of the Plan.

 

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7.               Term of Option.

 

(a)                        The term of each Option shall be the term stated in
the Option Agreement; provided, however, that the term shall be no more than ten
years from the date of grant thereof. In the case of an Incentive Stock Option
granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent of the voting power of all classes of stock
of Company, the term of the Option shall be five years from the date of grant
thereof or such shorter term as may be provided in the Option Agreement.

 

8.               Option Exercise Price and Consideration.

 

(a)                        The per share exercise price for the Shares to be
issued upon exercise of any Option shall be such price as is determined by the
Administrator, but shall be subject to the following:

 

(i)                          In the case of an Incentive Stock Option

 

(A)                      granted to an Employee who, at the time of grant of
such Option, owns stock representing more than ten percent of the voting power
of all classes of stock of Company, the per Share exercise price shall be no
less than 110 percent of the Fair Market Value per Share on the date of grant.

 

(B)                        granted to any other Employee, the per Share exercise
price shall be no less than 100 percent of the Fair Market Value per Share on
the date of grant.

 

(ii)                       In the case of a Nonstatutory Stock Option granted to
any person, the per Share exercise price shall be no less than 100 percent of
the Fair Market Value per Share on the date of grant.

 

(b)                       The consideration to be paid for the Shares to be
issued upon exercise of an Option, including the method of payment, shall be
determined by the Administrator (and, in the case of an Incentive Stock Option,
shall be determined at the time of grant). Such consideration may consist of
(i) cash, (ii) check or (iii) any combination of those methods of payment. In
addition, if there is a public market for the Shares, the Administrator may
allow the Optionee to elect to pay the exercise price through either of the
following procedures:

 

(i)                          A special sale and remittance procedure under which
the Optionee provides irrevocable written instructions to a designated brokerage
firm to effect the immediate sale of a portion of the purchased Shares and remit
to Company, out of the sale proceeds available on the settlement date, an amount
sufficient to cover the aggregate option price payable for the purchased Shares
plus all applicable Federal and State income and employment taxes required to be
withheld by Company by reason of such purchase and/or sale. The Optionee must
also provide such irrevocable written instructions to Company to deliver the
certificates for the purchased Shares directly to such brokerage firm to effect
the sale transaction. In making its determination as to the type of
consideration to accept, the Administrator shall consider if acceptance of such
consideration may be reasonably expected to benefit Company Optionee shall also
deliver a properly executed exercise notice together with such other
documentation as the Administrator and a broker, if applicable, shall require to
effect an exercise of the Option. Notwithstanding the above, Company shall not
be required to permit the Optionee to utilize the sale and remittance procedure
described above if Company’s legal counsel advises Company that the procedure
may violate any applicable law, regulation or regulatory guidance.

 

(ii)                       The surrender to Company of shares of Company’s
common stock which have already been owned by the Optionee for more than six
months. The shares of Company’s common stock which are surrendered to Company as
payment for Shares issued upon the exercise of an Option shall be valued at
their Fair Market Value on the date of exercise of the Option.

 

9.               Exercise of Option.

 

(a)                        Procedure for Exercise; Rights as a Shareholder.  Any
Option granted hereunder shall be exercisable at such times and under such
conditions as determined by the Administrator and as permissible under the terms
of the Plan, but in no case at a rate of less than 20 percent per year over five

 

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years from the date the Option is granted. The right to exercise an Option may
be conditioned on specific performance criteria with respect to Company and/or
the Optionee. An Option may not be exercised for a fraction of a Share.

 

An Option shall be deemed to be exercised when written notice of such exercise
has been given to Company in accordance with terms of the Option by the person
entitled to exercise the Option and full payment for the Shares with respect to
which the Option is exercised has been received by Company Full payment may, as
authorized by the Administrator, consist of any consideration and method of
payment allowable under Section 8(b) hereof. Until the issuance (as evidenced by
the appropriate entry on the books of Company or of a duly authorized transfer
agent of Company) of the stock certificate evidencing such Shares, no right to
vote, receive dividends or any other rights as a shareholder shall exist with
respect to the Shares, notwithstanding the exercise of the Option. Company shall
issue (or cause to be issued) such stock certificate promptly upon exercise of
the Option. No adjustment shall be made for a dividend or other right for which
the record date is prior to the date the stock certificate is issued, except as
provided in Section 11 hereof.

 

Exercise of an Option in any manner shall result in a decrease in the number of
Shares which thereafter may be available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.

 

(b)                       Termination of Directorship, Employment or Consulting
Relationship.  Except as otherwise provided in subsections (c) and (d) below, in
the event of termination of an Optionee’s Continuous Status as a Director,
Employee or Consultant (but not in the event of an Optionee’s change of status
from Employee to Director or Consultant (in which case an Employee’s Incentive
Stock Option shall automatically convert to a Nonstatutory Stock Option three
months and one day following such change of status) or from Director or
Consultant to Employee), such Optionee may, but only within 30 days after the
date of such termination (and in no event later than the expiration date of the
term of such Option as set forth in the Option Agreement), exercise his or her
Option to the extent that the Optionee was entitled to exercise it at the date
of such termination; provided, however, that the Administrator may extend the
period during which a Nonstatutory Stock Option may be exercised following such
termination on a case-by-case basis, as the Administrator deems appropriate in
the Administrator’s discretion. To the extent that the Optionee was not entitled
to exercise the Option at the date of such termination, or if the Optionee does
not exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate.

 

(c)                        Disability of Optionee.  In the event of termination
of an Optionee’s Continuous Status as a Director, Employee or Consultant as a
result of his or her disability, the Optionee may, but only within 12 months
from the date of such termination (and in no event later than the expiration
date of the termination of such Option as set forth in the Option Agreement),
exercise the Option to the extent otherwise entitled to exercise it at the date
of such termination. However, in the event of termination of an Optionee’s
Continuous Status as a Director, Employee or Consultant as a result of his or
her “permanent disability” as such term is defined in Section 22(e)(3) of the
Code, the Optionee shall be entitled, but only within 12 months from the date of
such termination (and in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), to exercise all Options such
Director, Employee or Consultant would have been entitled to exercise had such
Director, Employee or Consultant remained employed for one year from the date of
such termination. If such disability is not a “permanent disability,” in the
case of an Incentive Stock Option such Incentive Stock Option shall
automatically cease to be treated as an Incentive Stock Option and shall be
treated for tax purposes as a Nonstatutory Stock Option three months and one day
following such termination. If the Optionee does not exercise such Option to the
extent so entitled within the time specified herein, the Option shall terminate,
and the Shares covered by such Option shall revert to the Plan.

 

(d)                       Death of Optionee.  In the event of the death of an
Optionee, the Optionee’s estate or any person who acquired the right to exercise
the Option by bequest or inheritance shall be entitled, but only within 12
months from the date of such termination (and in no event later than the
expiration date of the

 

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term of such Option as set forth in the Option Agreement), to exercise all
Options such Director, Employee or Consultant would have been entitled to
exercise had such Director, Employee or Consultant remained employed for one
year from the date of such termination. All remaining Shares covered by the
unexercisable portion of the Option shall immediately revert to the Plan. If,
after the Optionee’s death, the Optionee’s estate or a person who acquires the
right to exercise the Option by bequest or inheritance does not exercise the
Option within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.

 

(e)                        Rule 16b-3.  Options granted to a person subject to
Section 16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain
such additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.

 

10.         Non-Transferability of Options.  Options may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee; provided, however, that any
Nonstatutory Stock Option may be transferred by the optionee to any member of
the Optionee’s immediate family, to a partnership the members of which (other
than the Optionee) are all members of the Optionee’s immediate family, or to a
family trust the beneficiaries of which (other than the Optionee) are all
members of the Optionee’s immediate family.

 

11.         Adjustments Upon Changes in Capitalization or Merger.

 

(a)                        Changes in Capitalization.  Subject to any required
action by the shareholders of Company, the number of shares of Common Stock
covered by each outstanding Option, and the number of shares of Common Stock
that have been authorized for issuance under the Plan but as to which no Options
have yet been granted or that have been returned to the Plan upon cancellation
or expiration of an Option, as well as the price for each share of Common Stock
covered by each such outstanding Option, shall be proportionately adjusted for
any increase or decrease in the number of issued shares resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease as determined by the
Administrator. Such adjustment shall be made by the Administrator, whose
determination in that respect shall be final, binding and conclusive. Except as
expressly provided herein, no issuance by Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number of shares of Common Stock subject to an Option.

 

(b)                       Terminating Events.  A Terminating Event shall be
defined as any one of the following events: (i) a dissolution or liquidation of
Company; (ii) a reorganization, merger or consolidation of Company with one or
more corporations, as the result of which (A) Company is not the surviving
corporation or (B) Company becomes a subsidiary of another corporation (which
shall be deemed to have occurred if another corporation shall own directly or
indirectly, over 50 percent of the aggregate voting power of all outstanding
equity securities of Company); (iii) a sale of substantially all the assets of
Company to another corporation; or (iv) a sale of the equity securities of
Company representing more than 50 percent of the aggregate voting power of all
outstanding equity securities of Company to any person or entity, or any group
of persons and/or entities acting in concert. Upon a Terminating Event
(i) Company shall deliver to each optionee, no less than thirty days prior to
the Terminating Event, written notification of the Terminating Event and the
optionee’s right to exercise all options granted pursuant to this Plan, whether
or not vested under this Plan or applicable stock option agreement, and (ii) all
outstanding options granted pursuant to this Plan shall completely vest and
become immediately exercisable as to all shares granted pursuant to the option
immediately prior to such Terminating Event. This right of exercise shall be
conditional upon execution of a final plan of dissolution or liquidation or a
definitive agreement of consolidation or merger. Upon the occurrence of the
Terminating Event all then outstanding options and the Plan shall terminate;
provided, however, that any outstanding options not exercised as of the
occurrence of the Terminating Event shall not terminate if there is a successor
corporation which assumes the outstanding options or substitutes for such
options, new options covering

 

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the stock of the successor corporation with appropriate adjustments as to the
number and kind of shares and prices.

 

(c)                        Compliance with Incentive Stock Option Provisions. 
Notwithstanding anything to the contrary herein, each adjustment made to an
Incentive Stock Option pursuant to this Section 11 shall comply with the
rules of Section 424(a) of the Code, and no adjustment shall be made that would
cause any Incentive Stock Option to become a Nonstatutory Stock Option.

 

12.         Timing of Granting Options.  The date of grant of an Option shall,
for all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Director, Employee or
Consultant to whom an Option is so granted within a reasonable time after the
date of such grant.

 

13.         Amendment and Termination of The Plan.

 

(a)                       Amendment and Termination.  The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made which would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 under
the Exchange Act or with Section 422 of the Code (or any other applicable law or
regulation, including the requirements of the NASD or an established stock
exchange), Company shall obtain shareholder approval of any Plan amendment in
such a manner and to such a degree as required.

 

Effect of Amendment or Termination.                   Any amendment or
termination of the Plan shall not affect Options already granted, and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Administrator, which agreement must be in writing and signed by the Optionee
and Company.

 

14.         Conditions Upon Issuance of Shares.  Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the laws of the
United States, including the Securities Act of 1933, as amended, the Exchange
Act, the rules and regulations promulgated thereunder, and the requirements of
any stock exchange upon which the Common Stock may then be listed, and shall be
further subject to the approval of counsel for Company with respect to such
compliance. As a condition to the exercise of an Option, Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for Company, such a representation is required by any of the
aforementioned relevant provisions of law.

 

15.         Reservation of Shares.  During the term of this Plan, Company shall
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by Company counsel to be necessary to the lawful issuance and sale of
any Shares hereunder, shall relieve Company of any liability in respect of the
failure to issue or sell such Shares as to which such requisite authority shall
not have been obtained.

 

16.         Agreements.  Options shall be evidenced by written agreements in
such form as the Administrator shall approve from time to time.

 

17.         Shareholder Approval.  Continuance of the Plan shall be subject to
approval by the Shareholders of the Company within 12 months, or after the Plan
is adopted. Such shareholder approval shall be obtained in the degree and manner
required under applicable state and federal law and the rules of any stock
exchange (including NASDAQ) upon which the Common Stock is listed.

 

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MOSSIMO, INC.

 

2005 STOCK OPTION PLAN

 

STOCK OPTION AGREEMENT

 

Capitalized terms used without definition in this Stock Option Agreement (the
“Option Agreement”) shall have the meanings given such terms in the
Mossimo, Inc. 2005 Stock Option Plan (the “Plan”).

 

I.

 

NOTICE OF STOCK OPTION GRANT

 

1.               Option.  You have been granted an option to purchase shares of
common stock (the “Shares”) of Mossimo, Inc., a Delaware corporation (the
“Company”), subject to the terms and conditions of the Plan and this Option
Agreement, as follows:

 

Date of Grant:

 

 

 

Exercise Price per Share:

 

 

 

Total Number of Shares Granted:

 

 

 

Total Exercise Price:

 

 

 

Type of Option:

 

 

 

Expiration Date:

10 Years From Date of Grant

 

2.               Vesting and Expiration

 

3.               Termination.  So long as the Optionee maintains Continuous
Status as a Director, Employee or Consultant, this Option may be exercised, in
whole or in part, with respect to any vested Shares, anytime prior to the
Expiration Date. If the Optionee’s Continuous Status as a Director, Employee or
Consultant terminates for any reason, the Optionee shall have that amount of
time set forth in Section 9 of the Plan to exercise any vested Shares, after
which time this Option shall expire.

 

II.

 

AGREEMENT

 

1.               Grant of Option.  The Company hereby grants to the Optionee
(the “Optionee”) named in the Notice of Stock Option Grant set forth above (the
“Notice of Grant”) an option (the “Option”) to purchase the total number of
Shares set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the “Exercise Price”), subject to the terms,
definitions and provisions of the Plan, which is incorporated herein by
reference.

 

2.               Exercise of Option.

 

(a)                        Right to Exercise. This Option shall be exercisable
prior to its expiration date only, in accordance with the Vesting Schedule set
out in the Notice of Grant and with the applicable provisions of the Plan and
this Option Agreement.

 

(b)                       Method of Exercise. This Option shall be exercisable
by written notice which shall state the election to exercise the Option, the
number of Shares with respect to which the Option is being exercised, and such
other representations and agreements as to the Optionee’s investment intent with
respect to the Shares as may be required by the Company pursuant to the
provisions of the Plan. Such notice is attached hereto as Exhibit A. The written
notice shall be signed by the Optionee and shall be delivered in person or by
certified mail to the Secretary of the Company. The written notice shall be

 

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accompanied by payment of the Exercise Price. This Option shall be deemed to be
exercised upon receipt by the Company of such written notice accompanied by the
Exercise Price.

 

(c)                        Compliance with Law. No Shares will be issued
pursuant to the exercise of any Option unless such issuance and such exercise
shall comply with all relevant provisions of law and the requirements of any
stock exchange upon which the Shares may then be listed. Assuming such
compliance, for income tax purposes the Shares shall be considered transferred
to the Optionee on the date on which the Option is exercised with respect to
such shares.

 

3.               Method of Payment.  Subject to Section 8, payment of the
Exercise Price shall be paid by (a) cash, (b) check or (c) any combination of
those methods of payment. In addition, if there is a public market for the
Shares, the Optionee may elect to pay the Exercise Price through a special sale
and remittance procedure under which the Optionee provides irrevocable written
instructions to a designated brokerage firm to effect the immediate sale of a
portion of the purchased Shares and remit to the Company, out of the sale
proceeds available on the settlement date, an amount sufficient to cover the
aggregate option price payable for the purchased Shares plus all applicable
Federal and State income and employment taxes required to be withheld by the
Company by reason of such purchase and/or sale. The Optionee must also provide
such irrevocable written instructions to the Company to deliver the certificates
for the purchased Shares directly to such brokerage firm to effect the sale
transaction. Notwithstanding the above, the Company shall not be required to
permit the Optionee to utilize the sale and remittance procedure described above
if the Company’s legal counsel advises the Company that the procedure may
violate any applicable law, regulation or regulatory guidance.

 

4.               Optionee’s Representations.  In the event the Shares
purchasable pursuant to the exercise of this Option have not been registered
under the Securities Act of 1933, as amended, at the time this Option is
exercised, Optionee shall, if required by the Company, concurrently with the
exercise of all or any portion of this Option, deliver to the Company an
investment representation statement in a form reasonably required by the
Company.

 

5.               Non-Transferability of Option; Assignment by Company.  This
Option may not be transferred in any manner otherwise than by will or by the
laws of descent or distribution and may be exercised during the lifetime of
Optionee only by Optionee; provided, however, that any Nonstatutory Stock Option
may be transferred by Optionee to any member of Optionee’s immediate family, to
a partnership the members of which (other than Optionee) are all members of
Optionee’s immediate family, or to a family trust the beneficiaries of which
(other than Optionee) are all members of Optionee’s immediate family. The terms
of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of Optionee. The Company may assign any of its rights
under this Option Agreement to single or multiple assignees, and this Option
Agreement shall inure to the benefit of the successors and assigns of the
Company.

 

6.               Restrictions on Transfer.  All certificates representing Shares
purchased under this Option Agreement may be imprinted with an appropriate
legend with respect to any applicable restriction on transfer. The Company may
issue appropriate stop-transfer instructions to its transfer agent to ensure
compliance with these transfer restrictions. If the Company transfers its own
securities, it may make appropriate notations to the same effect in its own
records. The Company shall not be required to transfer on its books any Shares
that have been sold or transferred in violation of any of the provisions of the
Plan or this Option Agreement, or to treat as the owner of such Shares or to
accord the right to vote or pay dividends to any purchaser or transferee to whom
such Shares has been sold or transferred.

 

7.               Market Stand-Off Agreement.  Optionee hereby agrees that if so
requested by the Company or any representative of the underwriters in connection
with the first registration statement of the Company to become effective under
the Securities Act which includes securities to be sold on behalf of the Company
to the public in an underwritten public offering, Optionee shall not sell or
otherwise transfer the Shares or any other securities of the Company during the
180-day period following the effective date of such registration statement. The
Company may impose stop-transfer instructions with respect to securities subject
to the foregoing restrictions until the end of such 180-day period. Optionee
agrees that the Company may assign his or her obligation hereunder to any
underwriter of the Company’s initial public offering.

 

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8.               Acknowledgments of Optionee.

 

(a)                        NO RIGHT OF EMPLOYMENT. OPTIONEE ACKNOWLEDGES AND
AGREES THAT THE VESTING OF SHARES PURSUANT TO THE OPTION IS EARNED ONLY BY
CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL OF THE COMPANY (NOT THROUGH THE
ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER).
OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN
THE MOSSIMO, INC. 2005 STOCK OPTION PLAN THAT IS INCORPORATED HEREIN BY
REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION OF
EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH
OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE OPTIONEE’S EMPLOYMENT OR
CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.

 

(b)                       Receipt of Plan. Optionee acknowledges receipt of a
copy of the Plan and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee has reviewed the Plan and this Option in their
entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Option and fully understands all provisions of the Option.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions arising under the
Plan or this Option. Optionee further agrees to notify the Company upon any
change in the residence address indicated above.

 

9.               Notice.  Any notice required or permitted under this Option
Agreement shall be given in writing and shall be deemed effectively given upon
personal delivery or upon deposit in the United States mail by certified mail,
with postage and fees prepaid, addressed to the party at its address as shown
below, or to such other address as such party may designate in writing from time
to time to the other party.

 

10.         Entire Agreement; Governing Law.  The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and the Optionee
with respect to the subject matter hereof, and may not be modified adversely to
the Optionee’s interest except by means of a writing signed by the Company and
Optionee. In case of conflict between the provisions in the Plan and this Option
Agreement, the provisions in the Plan shall prevail. This Option Agreement is
governed by Delaware law except for that body of law pertaining to conflict of
laws.

 

Date:

 

 

MOSSIMO INC.

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

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