0001104659-05-024822.txt : 20050523 0001104659-05-024822.hdr.sgml : 20050523 20050520174114 ACCESSION NUMBER: 0001104659-05-024822 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20050523 DATE AS OF CHANGE: 20050520 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: 05849256 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 a05-9779_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. 3)*

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

633 WEST FIFTH STREET

SUITE 4000

LOS ANGELES, CALIFORNIA 90071-2007

May 18, 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) 65.27%(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 MARCH 31, 2005 (15,738,442), AS STATED ON THE COMPANY’S FORM 10-Q FILED FOR THE QUARTER ENDED MARCH 31, 2005

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. 3 is filed on behalf of Mossimo Giannulli (“Giannulli”). As described in Item 3 below, Giannulli has entered into a commitment letter regarding the financing necessary for consummation of the transactions described in Item 4 below.
	(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
Giannulli has obtained a commitment letter for funding for the proposed transaction described in Item 4 below through third party debt financing with CIT Group/Commercial Services, Inc. acting as lender (the “Financing”). A copy of the commitment letter (the “Financing Letter”) is being filed herewith as Exhibit 7.03. The Financing Letter provides for a three-year secured committed term loan credit facility in an amount not to exceed $14,500,000. The information set forth in this paragraph is qualified in its entirety by reference to the Financing Letter, which is incorporated herein by reference.
Giannulli expects that the Financing, together with other funds available to Giannulli and, potentially, 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 Acquisition Company (as defined in Item 4 below) or the surviving corporation in connection with the Financing following the consummation of the Acquisition (as that term is defined in Item 4 below) described in Item 4 below (for example, funds necessary to consummate the Acquisition and certain transaction fees and expenses), such funds may be paid from generally available working capital of the surviving corporation.
Giannulli or the Acquisition Company 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 Acquisition.
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 has 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.
As described in the Proposal Letter, the Proposal contemplates the possible formation of a new entity designed for the purpose of effecting the transactions contemplated by the Proposal (the “Acquisition Company”). Under the Proposal, Giannulli or the Acquisition Company proposes to acquire all of the outstanding shares of the Company's Common Stock not currently owned by Giannulli for a price per share of $4.00 payable in cash (the “Acquisition”). No agreement with respect to the Acquisition has been reached, and no definitive structure for the Acquisition has been determined. If the proposed Acquisition is completed, the Common Stock would be eligible for termination of registration pursuant to Section 12(g) of the Securities Act and the Common Stock would be delisted from the NASDAQ Stock Market.
The Proposal is subject to negotiation of structure and definitive documentation and the approval of the Special Committee and the Board of Directors, and the Proposal shall not create any agreement, arrangement or understanding between Giannulli or other parties with respect to the Company or the Common Stock for purposes of any law, rule, regulation, agreement or otherwise, until such time as definitive documentation and any agreement, arrangement or understanding has been approved by the Special Committee and the Board of Directors and thereafter executed and delivered by the Company and all other appropriate parties. The Special Committee has not objected to Mr. Edwin H. Lewis, the current Co-Chief Executive Officer of the Company and a member of its Board of Directors (“Lewis”), providing Giannulli with consultative assistance in connection with the Acquisition. There is, however, currently no agreement, arrangement or understanding between Giannulli and Lewis with respect to any compensation for Lewis for such assistance.
The foregoing is a summary of Giannulli’s current proposal and should not be construed as an offer to purchase shares of the Company’s Common Stock. Neither the Company nor Giannulli is obligated to pursue or to complete the Acquisition. Giannulli reserves the right to modify his proposal in any way as a result of negotiations or to withdraw the Proposal at any time. Giannulli beneficially owns approximately 65.27% of the total outstanding votes of the Common Stock entitled to vote on the Proposal as a single class and intends to vote for the Proposal in the event that the Proposal is submitted to the stockholders for their approval and will not agree to any other transaction involving his stake in the Company.
Other than as set forth in the Proposal Letter, Giannulli has no plans or proposals that relate to or would result in any of the events set forth in Items 4(a) through (j) of Schedule 13D. However, if the Proposal is not consummated for any reason, Giannulli intends to review continuously the Company’s business affairs, capital needs and general industry and economic conditions, and, based on such review, Giannulli may, from time to time, determine to increase his ownership of Common Stock, approve an extraordinary corporate transaction with regard to the Company or engage in any of the events set forth in Items 4(a) through (j) of Schedule 13D, except that Giannulli currently has no intention of selling any shares of Common Stock.
The information set forth in response to this Item 4 is qualified in its entirety by reference to the Proposal Letter, 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 65.27% of the outstanding shares of Common Stock.
	(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
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		Proposal Letter dated April 11, 2005 (incorporated by reference to Exhibit 7.01 to Giannulli’s Schedule 13D/A, as filed with the Commission on April 12, 2005)
	Exhibit 7.02		Press Release dated April 12, 2005 (incorporated by reference to Exhibit 7.02 to Giannulli’s Schedule 13D/A, as filed with the Commission on April 12, 2005)
	Exhibit 7.03		Financing Letter dated May 18, 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.

	May 20, 2005
	Date
	/s/ Mossimo Giannulli
	Signature
	Mossimo Giannulli
	Name/Title

EX-7.03 2 a05-9779_1ex7d03.htm EX-7.03

Exhibit 7.03

May 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. (the “Company”) that you do not already own through an as yet to be determined transactional structure. 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 $14,500,000 (“Term Loan Facility”), consisting of, and subject to, the below. Because we do not know the actual structure of the transaction we do not know who the actual Borrower will be and any use of the terms Borrower or affiliates to the Borrower herein are for generic purposes:

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, not to exceed the lesser of (a) $14,500,000, or (b) up to 35% of the fair market value of the trademark value 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 upon any termination of the Term Loan Agreement or 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.

The Borrower may terminate the Agreement at any time. However, should the Borrower terminate the Agreement prior to the Termination Date upon sixty (60) days prior written notice to the Lender, (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 would be in an amount equal to the product of: a) the Early Termination Percentage, times (b) the amount of the principal amount outstanding or being repaid, as applicable.

The Early Termination Percentage shall be two percent (2%) if the Term Loan Facility is terminated 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 terminated in the second Contract Year, and one-half of one percent (0.5%) if terminated 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.

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 first and exclusive lien on all of the Borrower’s and as applicable, each Guarantor’s present and future right, title and interest in accounts, credit balances, inventory, trademarks,

patents, copyrights, 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) 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.

5. GUARANTEES

The Lender will be provided with guarantees from a holding company which owns 100% of the capital stock of the Borrower and from all domestic subsidiaries of the holding company and 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, at such time the Borrower is identified) 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; ii) credit references on the Borrower; iii) an updated examination of the books and records of the Borrower, 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 Borrower. 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 stock purchase 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, or (ii) could have a material adverse effect on any license agreement of the Borrower or any of its 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 average cash balance in an amount of $3 million in the first contract year and adjusted at each contract year thereafter and measured quarterly 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, the holding company that owns Borrower 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 both as a licensor and licensee; and

p. 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, the Lender requests 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 Company 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 with your check to our order in the amount of the Due Diligence Fee not later than the close of business on May 23, 2005. At the time we identify who the Borrower will be, that party will need to authorize 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/ Mitchell Cohen

	Title:	Senior Vice President

READ AND AGREED TO:


/s/ Mossimo Giannulli
MOSSIMO GIANNULLI

Under the Securities Exchange Act of 1934 (Amendment No. 3)*

Signature

Under the Securities Exchange Act of 1934
(Amendment No. 3)*