Document:

Exhibit 10.1

 

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not withdrawn pursuant to the Offer (the “Tendered Shares”), the Purchaser shall merge with and into the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

 

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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

 

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(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

 

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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

 

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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.

 

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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

 

8

 

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.

 

9

 

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:

  	
   

  	
   

  

 

10Exhibit 10.1

 

AMENDMENT TO

EMPLOYMENT AGREEMENT

 

THIS
AMENDMENT TO EMPLOYMENT AGREEMENT is entered into as of the
16th day of September, 2005, by and between Advanced Cell Technology, Inc.,
a Nevada corporation (the “Corporation”) and James G. Stewart (the “Executive”).

 

W I T N E S S E T H:

 

WHEREAS,
the Executive is employed by the Corporation pursuant to the terms of an
Employment Agreement (the “Agreement”), dated as of March 13, 2005; and

 

WHEREAS,
the parties wish to amend the Agreement as more fully provided herein;

 

NOW,
THEREFORE, in consideration of the mutual promises and
undertakings hereinafter set forth, and intending to be legally bound hereby,
the parties hereby agree as follows:

 

1.             Section 2.A. is hereby amended
to read in its entirety as follows:

 

“STEWART’s annual salary shall be two hundred forty
five thousand dollars ($245,000). 
STEWART’s salary shall be paid in equal bi-monthly installments,
consistent with ACT’s regular pay practices. 
STEWART’s salary may be adjusted from time to time by ACT without
affecting this Agreement.”

 

2.             Except as expressly amended by this
Amendment, the Agreement remains in full force and effect in accordance with
its terms.

 

IN
WITNESS WHEREOF, the Corporation has caused this Agreement to
be executed by its duly authorized officer, and the Executive has executed this
Agreement, as of the date first written above.

 

	
   

  	
  ADVANCED CELL
  TECHNOLOGY, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William M.
  Caldwell, IV

  	
   

  
	
   

  	
   

  	
  Name: William M.
  Caldwell, IV

  
	
   

  	
   

  	
  Title: Chief
  Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EXECUTIVE

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ James G.
  Stewart

  	
   

  
	
   

  	
   

  	
  James G. Stewart

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