Exhibit 10.96

 

FRAMEWORK AGREEMENT

 

                This Framework Agreement (this “Agreement”) is made as of the
14th day of May, 2002 (the “Effective Date”), between I.C. ISAACS & COMPANY,
INC., a Delaware corporation (the “Corporation”), I.C. ISAACS & COMPANY L.P., a
Delaware limited partnership (“Isaacs”), Textile Investment International S.A.,
a Luxembourg corporation (“Textile Investment”), Latitude Licensing Corp., a
Delaware corporation (“Latitude Licensing”), and Würzburg Holding S.A., a
Luxembourg corporation, also known in abbreviation as Würzburg S.A. (“Würzburg”)
(Textile Investment, Latitude Licensing and Würzburg are each referred to herein
individually as a “Girbaud Entity” and collectively as the “Girbaud Entities”).

 

                In consideration of the premises and the mutual promises herein
contained, the sufficiency and adequacy of which are acknowledged and agreed to
be fair and adequate, the parties intending to be legally bound agree as
follows:

 

ARTICLE I

CONSTRUCTION AND DEFINED TERMS

 

                SECTION 1.01               Articles and Sections.  The Article
and Section headings and captions in this Agreement are for convenience only and
shall not affect the construction or interpretation of this Agreement.  The
references in this Agreement to Articles and Sections shall be read as Articles
or Sections of this Agreement unless otherwise specifically provided.

 

SECTION 1.02.            Defined Terms.  Unless otherwise expressly stated in
this Agreement, capitalized terms used in this Agreement shall have the
following meanings:

 

                “Ambra” As defined in Section 2.02.

 

                “Ambra/Textile Purchase Agreement” As defined in Section 2.02.

 

                “Amendment to Men’s License Agreement” As defined in Section
2.01.

 

                “Amendment to Women’s License Agreement” As defined in Section
2.01.

 

                “Certificate of Designation” As defined in Section 2.01.

 

                “Class II Director” means one of the Directors elected at the
2002 Annual Meeting of Stockholders to serve until the 2005 Annual Meeting of
Stockholders.

 

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

 

                “Common Stock” As defined in Section 2.01.

 

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                “Company Director” means any Company Director (as defined in the
form of Stockholders’ Agreement attached hereto as Exhibit D, which definition
is incorporated herein by reference).

 

                “Company-Nominated Independent Director” means any
Company-Nominated Independent Director (as defined in the form of Stockholders’
Agreement attached hereto as Exhibit D, which definition is incorporated herein
by reference).

 

                “Congress Financial”  Congress Financial Corporation, a Delaware
corporation, and its successors and assigns.

 

                “Congress Financial Credit Documents” means collectively, the
Accounts Financing Agreement [Security Agreement] and Covenant Supplement to
Accounts Financing Agreement [Security Agreement] dated June 16, 1992, by and
between Congress Financial and Isaacs, and all agreements, documents, and
instruments at any time executed and/or delivered by Isaacs or any other Person
to, with, or in favor of, Congress Financial in connection therewith or related
thereto, as all of the foregoing may be amended, modified, supplemented,
extended, renewed, restated, or replaced from time to time.

 

                “Corporation Registered Agent” As defined in Section 10.07.

 

                “D & O Questionnaire” means any directors and officers
questionnaire for the Corporation prepared by the Corporation’s counsel.

 

                “Directors”  means the members of the Board of Directors of the
Corporation.

 

                “Exchange Act” As defined in Section 3.05.

 

                “First Consulting Fee Payment”  As defined in Section 3.03.

 

                “Girbaud License Agreements” means the Trademark License and
Technical Assistance Agreement dated January 15, 1998 and the Trademark License
and Technical Assistance Agreement For Women’s Collections dated March 4, 1998,
both by and between Latitude Licensing and Isaacs and both as amended.

 

                “Isaacs Registered Agent” As defined in Section 10.07.

 

                “Latitude Registered Agent” As defined in Section 10.07.

 

                “New York Court” As defined in Section 10.06.

 

                “New York Courts” As defined in Section 10.06.

 

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                “Original Note” means the Subordinated Secured Promissory Note
dated as of March 15, 2001 in the original principal amount of Seven Million Two
Hundred Thousand Dollars ($7,200,000) made by Isaacs payable to the order of
Ambra.

 

                “Person” means any natural person, corporation, limited
liability company, partnership, joint venture, entity, association, joint-stock
company, trust or unincorporated organization and any governmental authority.

 

                “Process Agent” As defined in Section 10.07.

 

                “Proxy Statement” means the Corporation’s Proxy Statement for
the 2002 Annual Meeting of Stockholders.

 

                “Replacement Note” means the Amended and Restated Subordinated
Secured Promissory Note dated as of May          , 2002 with a principal amount
of Six Million Five Hundred Fifty-seven Thousand Nine Hundred Eight and 53/100
Dollars ($6,557,908.53) in the form attached hereto as Exhibit A.

 

                “Satisfactory Nominees” As defined in the form of Stockholders’
Agreement attached hereto as Exhibit D.

 

                “Securities Act” As defined in Section 3.05.

 

                “Stock” As defined in the form of Stockholders’ Agreement
attached hereto as Exhibit D, which definition is incorporated herein by
reference).

 

                “Stockholder Director” means any Stockholder Director (as
defined in the form of Stockholders’ Agreement attached hereto as Exhibit D,
which definition is incorporated herein by reference).

 

                “Stockholder-Nominated Independent Director” means any
Stockholder-Nominated Independent Director (as defined in the form of
Stockholders’ Agreement attached hereto as Exhibit D, which definition is
incorporated herein by reference).

 

                “Stockholders” means Textile Investment and Würzburg.

 

                “Stockholders’ Agreement” As defined in Section 2.01.

 

                “Termination Date” As defined in Section 9.01.

 

                “Textile Consent Letter Agreement” means the consent letter
agreement made as of May 3, 2002 by and among the Corporation, Isaacs, Textile
Investment and Würzburg.

 

                “382 Affiliate” As defined in Section 3.07.

 

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                “Transaction Documents” means collectively, the Amendment to
Men’s License Agreement, the Amendment to Women’s License Agreement, the
Stockholders’ Agreement, the Certificate of Designation and the Warrants.

 

                “2002 Annual Meeting of Stockholders” means the 2002 annual
meeting of stockholders of the Corporation and any adjournments or postponements
thereof.

 

                “Voting  Agreement” means the Voting Agreement by and among
Textile Investment, Würzburg, Robert J. Arnot, Jon Hechler, Ronald S. Schmidt,
Eugene C. Wielepski, and Thomas Ormandy dated as of the date hereof.

 

                “Warrants” As defined in Section 2.01.

 

ARTICLE II

TRANSACTION DOCUMENTS

 

                SECTION 2.01               Execution and Delivery of Transaction
Documents.  Within fifteen (15) days after the satisfaction of all the
conditions set forth in Sections 2.02 and 2.03 hereof, the Corporation, Isaacs
and each of the Girbaud Entities shall execute and deliver, or to cause to be
executed and delivered and, if necessary for the effectiveness thereof, to be
filed with the appropriate governmental authorities, the following documents:

 

                                (a)           Amendment No. 4 to Trademark
License and Technical Assistance Agreement in the form of Exhibit B attached
hereto (the “Amendment to Men’s License Agreement”);

 

                                (b)           Amendment No. 6 to Trademark
License and Technical Assistance Agreement for Women’s Collections in the form
of Exhibit C attached hereto (the “Amendment to Women’s License Agreement”);

 

                                (c)           I.C. Isaacs & Company, Inc.
Stockholders’ Agreement in the form of Exhibit D attached hereto (the
“Stockholders’ Agreement”);

 

                                (d)           Second Certificate of Amendment to
Certificate of Designation, Number, Voting Powers, Preferences and Rights of the
Series of the Preferred Stock of I.C. Isaacs & Company, Inc. Designated as
Series A Convertible Preferred Stock in the form of Exhibit E attached hereto
(the “Certificate of Designation”); and

 

                                (e)           I.C. Isaacs & Company, Inc. Common
Stock Purchase Warrant No. 1 for 300,000 shares of common stock, par value
$0.0001 per share, of the Corporation and I.C. Isaacs & Company, Inc. Common
Stock Purchase Warrant No. 2 for 200,000 shares of common stock, par value
$0.0001 per share, of the Corporation (the “Common Stock”) in the forms of
Exhibit F-1 and Exhibit F-2 attached hereto (collectively, the “Warrants”).

 

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                SECTION 2.02.      Conditions Precedent to Obligation of the
Corporation and Isaacs to Execute the Transaction Documents.  The obligation of
the Corporation and Isaacs to execute and deliver the Transaction Documents, or
to cause the Transaction Documents to be executed and delivered, and, if
necessary for the effectiveness thereof, to be filed with the appropriate
governmental authorities, shall be subject to the satisfaction of each of the
following conditions:

 

                                (a)           the transactions contemplated by
that certain Asset Purchase Agreement dated May 6, 2002 by and between Ambra
Inc. (“Ambra”), Hugo Boss AG, Textile Investment and Frontline Clothing Limited
(the “Ambra/Textile Purchase Agreement”) have been consummated and any and all
documents, instruments and agreements contemplated by the Ambra/Textile Purchase
Agreement have been executed and delivered to Ambra, the Girbaud Entities or
such other Person as shall be specified in or required by the terms of the
Ambra/Textile Purchase Agreement, and the Corporation shall have received a
fully executed copy of the Ambra/Textile Purchase Agreement and any such
documents, instruments and agreements contemplated thereby or relating thereto;

 

                                (b)           Congress Financial shall have
consented in writing to the transactions contemplated by the Ambra/Textile
Purchase Agreement and the Corporation shall have received a complete copy of
such written consent;

 

                                (c)           Textile Investment shall have
delivered to Isaacs the Original Note, which shall have been indorsed to Textile
Investment by Ambra and marked “cancelled,” in exchange for the Replacement
Note;

 

                                (d)           each of Textile Investment and
Würzburg shall have fulfilled their obligations under the Textile Consent Letter
Agreement (provided that Textile Investment and Würzburg shall have until May
13, 2002 to satisfy the obligations required under the terms of the Textile
Consent Letter Agreement to have been satisfied on or before May 10, 2002);

 

                                (e)           the Corporation shall have
received,

 

(i)            all consents or approvals of Congress Financial with respect to
the Transaction Documents which are required under any of the Congress Financial
Credit Documents;

 

(ii)           an opinion letter or opinion letters from legal counsel to each
of the Girbaud Entities, in form and substance satisfactory to the Corporation
and Isaacs, which include, without limitation, opinions to the effect that (A)
each Girbaud Entity has the power and authority to enter into each of the
Transaction Documents to which it is a party, (B) the Transaction Documents to
which each Girbaud Entity is a party are the legal and binding obligations of
such Girbaud Entity, enforceable against such Girbaud Entity in accordance with
the terms thereof, including without limitation the provisions of the
Transaction Documents relating to choice of law, jurisdiction and arbitration,
and (C) an arbitral award or judgment obtained against any of the Girbaud
Entities would be enforced against such Girbaud Entity in the courts of the
jurisdiction of its formation; and

 

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                                (f)            the stockholders of the
Corporation shall have approved the Transaction Documents by the vote of a
majority of the shares present in person or by proxy and entitled to vote at the
2002 Annual Meeting of Stockholders.

 

                SECTION 2.03.              Conditions Precedent to Obligation of
the Girbaud Entities to Execute the Transaction Documents.  The obligation of
the Girbaud Entities to execute and deliver the Transaction Documents, or to
cause the Transaction Documents to be executed and delivered, shall be subject
to the satisfaction of each of the following conditions:

 

                                (a)           the stockholders of the
Corporation shall have approved the Transaction Documents by the vote of a
majority of the shares present in person or by proxy and entitled to vote at the
2002 Annual Meeting of Stockholders; and

 

                                (b)           the Girbaud Entities shall have
received,

 

(i)            an opinion letter or opinion letters from legal counsel to each
of the Corporation and Isaacs, in form and substance satisfactory to the Girbaud
Entities, which include, without limitation, opinions to the effect that (A)
each of the Corporation and Isaacs has the power and authority to enter into
each of the Transaction Documents to which it is a party, (B) the Transaction
Documents to which each of the Corporation and Isaacs is a party are the legal
and binding obligations of the Corporation and Isaacs, respectively, enforceable
against the Corporation and Isaacs, respectively, in accordance with the terms
thereof, including without limitation the provisions of the Transaction
Documents relating to choice of law, jurisdiction and arbitration, and (C) an
arbitral award or judgment obtained against either the Corporation or Isaacs
would be enforceable against the Corporation or Isaacs, respectively.

 

ARTICLE III

ADDITIONAL COVENANTS

 

SECTION 3.01.  Directors.  (a)  General.  As of the date hereof, the Board of
Directors of the Corporation has nine (9) seats, comprised as follows:

 

Name

 

 

 

Class I

 

Robert J. Arnot

 

Eugene C. Wielepski

 

Vacancy

 

 

 

Class II

 

Danny Gladstone

 

Jon Hechler

 

Thomas Ormandy

 

 

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Class III

 

Neal J. Fox

 

Ronald S. Schmidt

 

Vacancy

 

 

The Stockholders’ Agreement provides that at all times during the term of such
agreement, the Corporation and the Stockholders shall use their best efforts to
cause the composition of the Board of Directors to reflect the following
proportionate representation of Stockholder Directors, Company Directors, and
Independent Directors:

 

Three (3) Stockholder Directors

 

Two (2) Company Directors

 

Four (4) Independent Directors

 

 

The Stockholders’ Agreement further provides that two (2) of the Independent
Directors shall be Stockholder-Nominated Independent Directors and two (2) of
the Independent Directors shall be Company-Nominated Independent Directors.

 

The Corporation and the Stockholders anticipate that immediately following the
2002 Annual Meeting of Stockholders, the Board of Directors shall have nine (9)
members, comprised as follows:

 

Name

 

Category

 

 

 

Class I

 

 

Robert J. Arnot

 

Company Director

Staffan Ahrenberg

 

Stockholder Director

To Be Designated by the Stockholders

 

Stockholder Director or Stockholder-Nominated Independent Director

 

 

 

Class II

 

 

Danny Gladstone

 

Company Director

John Hechler

 

Company-Nominated Independent Director

To Be Designated by the Stockholders

 

Stockholder Director or Stockholder-Nominated Independent Director

 

 

 

Class III

 

 

Neal J. Fox

 

Company-Nominated Independent Director

Olivier Bachellerie

 

Stockholder Director

To Be Designated by the Stockholders

 

Stockholder Director or Stockholder-Nominated Independent Director

 

To cause the membership of the Board of Directors to be as described above, the
Corporation, its Board of Directors and the Stockholders shall proceed as
follows:

 

                                (b)           Incumbent Directors.  Messrs.
Gladstone and Hechler are presently Directors of the Corporation, and will be
named to the slate of nominees to be proposed for

 

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election at the 2002 Annual Meeting of Stockholders to continue as Class II
Directors.  Mr. Ormandy will not be named to the slate of nominees to be
proposed for election to Class II of the Board of Directors at the 2002 Annual
Meeting of Stockholders, and his term will expire at the 2002 Annual Meeting of
Stockholders.

 

                                (c)           Other Directors Continuing On. 
Messrs. Arnot and Fox are presently Class I and Class III Directors of the
Corporation, respectively, and will continue as Class I and Class III Directors,
respectively.

 

                                (d)           Appointment of Initial Girbaud
Directors.  Within seven (7) days following satisfaction of the conditions set
forth in Sections 2.02(a) and 2.02(c) hereof, the Board of Directors of the
Corporation shall appoint Staffan Ahrenberg to fill an existing vacancy in Class
I of the Board of Directors of the Corporation and Olivier Bachellerie to fill
an existing vacancy in Class III of the Board of Directors of the Corporation;
provided that Messrs. Ahrenberg and Bachellerie shall have provided the
Corporation with such information as the Corporation shall reasonably request,
including a completed and signed D & O Questionnaire for each of them, before
the expiration of such seven (7) day period.  Upon their appointment, Messrs.
Ahrenberg and Bachellerie shall be deemed Stockholder Directors.

 

                                (e)           Appointment of Additional Girbaud
Directors.  Messrs. Eugene C. Wielepski and Ronald S. Schmidt  have notified the
Board of Directors of their respective resignations, effective as of the 2002
Annual Meeting of Stockholders, and the Board of Directors has accepted such
resignations.  The Corporation shall (i) propose two (2) Satisfactory Nominees
to be elected at the 2002 Annual Meeting of Stockholders to fill the vacancies
in Class I and Class III of the Board of Directors of the Corporation created by
resignations of Eugene C. Wielepski and Ronald S. Schmidt, respectively, and
(ii) name an additional third Satisfactory Nominee to the slate of nominees to
be elected to Class II of the Board of Directors at the 2002 Annual Meeting of
Stockholders; provided in each case that Würzburg and Textile Investment shall
have identified such Satisfactory Nominees and provided to the Corporation such
information regarding such Satisfactory Nominees as the Corporation shall
reasonably request, including a completed and signed D & O Questionnaire for
each such Satisfactory Nominee, at least ten (10) days prior to the filing of
the Proxy Statement.

 

                                (f)            Best Efforts.  The Corporation
and the Stockholders shall each use its or their best efforts to cause each of
the Satisfactory Nominees named to the slate of nominees pursuant to subsection
(e) above to be elected to the Board of Directors of the Corporation.  For
purposes of this Agreement, (i) the Corporation shall be considered to have used
its “best efforts,” as required by this subsection (f), if it (A) causes two (2)
Satisfactory Nominees to be proposed to be elected at the 2002 Annual Meeting of
Stockholders to fill vacancies in Class I and Class III of the Board of
Directors created by the resignations of Eugene C. Wielepski and Ronald S.
Schmidt, and one (1) Satisfactory Nominee to be named to the slate of nominees
to be elected to Class II of the Board of Directors at the 2002 Annual Meeting
of Stockholders, (B) recommends the election of all such Satisfactory Nominees,
and (C) uses all reasonable efforts to cause the election of such Satisfactory
Nominees, including the solicitation of proxies in favor of the election of such
persons, and (ii) the Stockholders shall be considered to have used their “best

 

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efforts,” as required by this subsection (f), if at the 2002 Annual Meeting of
Stockholders Würzburg and Textile Investment vote the Stock and any shares of
Common Stock with respect to which they have been granted a proxy in accordance
with the terms of the Voting Agreement.  Notwithstanding anything to the
contrary contained in this Agreement, of the three (3) Satisfactory Nominees
named to the slate of nominees or proposed to the stockholders of the
Corporation pursuant to Section 3.01(e) above, two (2) shall be
Stockholder-Nominated Independent Directors and one (1) shall be a Stockholder
Director.

 

                                (g)           Proxy Statement; Annual Meeting. 
The Corporation shall cause the Proxy Statement to be filed with the U.S.
Securities and Exchange Commission and mailed to each stockholder of the
Corporation entitled to vote at the 2002 Annual Meeting of Stockholders or
otherwise entitled to receive the Proxy Statement in accordance with all
applicable laws, which Proxy Statement shall reflect the steps or proposals
described in this Section 3.01.

 

SECTION 3.02.              Transactions Approval.  The Corporation, Isaacs, and
each of the Girbaud Entities shall use their respective best efforts to cause
the transactions contemplated by this Agreement and the Transaction Documents to
be approved by all necessary Persons, including, without limitation, the board
of directors and/or the stockholders of the Corporation.  For purposes of this
Section 3.02, (i) the Corporation shall be considered to have used its “best
efforts,” as required by this Section 3.02, if it submits a proposal to the
stockholders of the Corporation regarding the Transaction Documents and the
transactions contemplated thereby and recommends that the stockholders approve
such proposal, and (ii) each of the Girbaud Entities shall be considered to have
used its “best efforts,” as required by this Section 3.02, if at the 2002 Annual
Meeting of Stockholders Würzburg and Textile Investment vote the Stock and any
shares of Common Stock with respect to which they have been granted a proxy in
accordance with the terms of the Voting Agreement.

 

SECTION 3.03.              Payment of Installment of Consulting Fee.  On June
30, 2002, Isaacs shall pay to Würzburg the first quarterly installment payment
of the annual consulting fee under the Girbaud License Agreements for the year
2002 in the amount of Sixty-two Thousand Five Hundred and 00/100 Dollars
($62,500.00) (the “First Consulting Fee Payment”).  Isaacs shall pay the First
Consulting Fee Payment to Würzburg regardless of whether or not the approval of
the stockholders of the Corporation, as described in Section 2.02(f), has been
obtained.  The First Consulting Fee Payment shall be credited to Isaacs toward
the annual consulting fee to be paid by Isaacs under the Girbaud License
Agreements.  If the transactions contemplated by the Transaction Documents are
not consummated, then Würzburg shall refund the First Consulting Fee Payment to
Isaacs immediately upon Isaacs demand therefor.  If upon demand by Isaacs of a
refund of the First Consulting Fee Payment Würzburg fails to refund the First
Consulting Fee Payment, then Latitude Licensing shall be obligated to refund to
Isaacs the First Consulting Fee Payment, or Isaacs may, at its option, set off
the First Consulting Fee Payment against any fees owed by Isaacs under the
Girbaud License Agreements.

 

SECTION 3.04.              Exchange of Original Note.  On or before May 17,
2002, Textile Investment shall return to Isaacs the original executed Original
Note indorsed by Ambra to Textile Investment and marked “cancelled” in exchange
for the Replacement Note.

 

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SECTION 3.05.              Reporting.  The Girbaud Entities shall cooperate with
the Corporation with respect to reporting under the Securities Act of 1933, as
amended (the “Securities Act”), the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), the rules promulgated under the Securities Act or the
Exchange Act, any state securities laws, rules or regulations, and to any other
U.S. governmental authorities as may be required by law.

 

SECTION 3.06.              Restrictions on Transfer.  From and after the date
hereof and to and including November 14, 2004, none of (i) Textile Investment,
(ii) Würzburg, or (iii) any other Person(s) the ownership of securities by which
would be attributable to Textile Investment or Würzburg for purposes of applying
Section 382 of the Code (a “382 Affiliate”), shall acquire or dispose of,
directly or indirectly, any interest in the Corporation if such acquisition
and/or disposition, together with all other acquisitions and/or dispositions of
interests in the Corporation prior to or subsequent to the date hereof involving
any one or more of (i) Textile Investment, (ii) Würzburg, (iii) any 382
Affiliate, and (iv) any other party (to the extent that the relevant acquisition
or disposition involving such other party is actually known to any of the
Girbaud Entities or is reported pursuant to the Exchange Act), would result in
an “ownership change” within the meaning of Section 382 of the Code.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE CORPORATION

 

The Corporation hereby makes the following representations and warranties to
each of the Girbaud Entities on and as of the Effective Date:

 

SECTION 4.01.              Existence.  The Corporation is a corporation duly
incorporated and validly existing under the laws of the State of Delaware and
has all requisite corporate power to execute, deliver and perform this
Agreement.

 

SECTION 4.02.              Authorization.  The execution, delivery and
performance of this Agreement have been duly authorized by all requisite
corporate action on the part of the Corporation and will not (a) violate any
applicable law or the Corporation’s organizational documents or (b) breach the
provisions of any contract binding on the Corporation.

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF ISAACS

 

Isaacs hereby makes the following representations and warranties to each of the
Girbaud Entities on and as of the Effective Date:

 

SECTION 5.01.              Existence.  Isaacs is a limited partnership duly
organized and validly existing under the laws of the State of Delaware and has
all requisite power to execute, deliver and perform this Agreement.

 

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SECTION 5.02.              Authorization.  The execution, delivery and
performance of this Agreement have been duly authorized by all requisite action
on the part of Isaacs and will not (a) violate any applicable law or Isaacs’
organizational documents or (b) breach the provisions of any contract binding on
Isaacs.

 

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF TEXTILE INVESTMENT

 

                Textile Investment hereby makes the following representations
and warranties to (and, in the case of Section 6.04, agrees with) the
Corporation and Isaacs on and as of the Effective Date:

 

                SECTION 6.01.              Existence.  Textile Investment is a
corporation duly organized and validly existing under the laws of the country of
Luxembourg and has all requisite power to execute, deliver and perform this
Agreement.

 

                SECTION 6.02.              Authorization.  The execution,
delivery and performance of this Agreement have been duly authorized by all
requisite action on the part of Textile Investment and will not (a) violate any
applicable law or Textile Investment’s organizational documents or (b) breach
the provisions of any contract binding on Textile Investment.

 

                SECTION 6.03.              Investor Representations.  Textile
Investment is wholly owned by Würzburg.

 

                SECTION 6.04.              Original Note.  Textile Investment
acknowledges that Isaacs has not defaulted on any of its payment obligations
under the Original Note or the Replacement Note.  Textile Investment agrees that
on the date hereof the outstanding unpaid principal balance of the Original Note
is Six Million Five Hundred Fifty-seven Thousand Nine Hundred Eight and 53/100
Dollars ($6,557,908.53) and that all of the accrued interest on the Original
Note has been paid in full through March 31, 2002.

 

                SECTION 6.05.              Ambra/Textile Purchase Agreement. 
The Ambra/Textile Purchase Agreement has been duly executed and delivered by all
parties thereto, and the transactions contemplated by the Ambra/Textile Purchase
Agreement have been consummated.

 

ARTICLE VII

REPRESENTATIONS AND WARRANTIES OF LATITUDE LICENSING

 

                Latitude Licensing hereby makes the following representations
and warranties to the Corporation and Isaacs on and as of the Effective Date:

 

                SECTION 7.01.              Existence.  Latitude Licensing is a
corporation duly organized and validly existing under the laws of the State of
Delaware and has all requisite corporate power to execute, deliver and perform
this Agreement.

 

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                SECTION 7.02.              Authorization.  The execution,
delivery and performance of this Agreement have been duly authorized by all
requisite corporate action on the part of Latitude Licensing and will not (a)
violate any applicable law or Latitude Licensing’s organizational documents or
(b) breach the provisions of any contract binding on Latitude Licensing.

 

ARTICLE VIII

REPRESENTATIONS AND WARRANTIES OF WÜRZBURG

 

                Würzburg hereby makes the following representations and
warranties to the Corporation and Isaacs on and as of the Effective Date:

 

                SECTION 8.01.              Existence.  Würzburg is a corporation
duly organized and validly existing under the laws of the country of Luxembourg
and has all requisite corporate power to execute, deliver and perform this
Agreement.

 

                SECTION 8.02.              Authorization.  The execution,
delivery and performance of this Agreement have been duly authorized by all
requisite corporate action on the part of Würzburg and will not (a) violate any
applicable law or Würzburg’s organizational documents or (b) breach the
provisions of any contract binding on Würzburg.

 

                SECTION 8.03.  Investor Representations.  The ultimate
beneficial owners of Würzburg are Francois Girbaud, who beneficially owns a
fifty percent (50%) ownership interest, and Marité Bachellerie, who beneficially
owns a fifty percent (50%) ownership interest.

 

ARTICLE IX

TERMINATION; EVENTS OF DEFAULT AND REMEDIES

 

SECTION 9.01.      Termination.  (a)  This Agreement may be terminated and the
transactions contemplated hereby may be abandoned:

 

(i)            at any time by the mutual agreement of the Corporation, Isaacs
and the Girbaud Entities; or

 

(ii)           by either the Corporation or Isaacs upon the occurrence of an
Event of Default by any of the Girbaud Entities (so long as neither the
Corporation nor Isaacs is then in material breach of any of its covenants,
agreements or other obligations contained in this Agreement); or

 

(iii)          by any of the Girbaud Entities upon the occurrence of an Event of
Default by either the Corporation or Isaacs (so long as no Girbaud Entity is
then in material breach of any of its covenants, agreements or other obligations
contained in this Agreement); or

 

(iv)          by either the Corporation or the Girbaud Entities upon written
notice to the other given not earlier than ten (10) days following the 2002
Annual Meeting of Stockholders (the “Termination Date”), if any of the
conditions to its obligations set forth in Sections 2.02 or

 

12

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2.03, as applicable, are not satisfied on or before the Termination Date for any
reason other than a material breach or default by the terminating party of its
respective covenants, agreements or other obligations under this Agreement.

 

(b)           This Agreement shall terminate upon the execution and delivery of
each of the Transaction Documents as contemplated hereby.

 

SECTION 9.02               Effect of Termination.  If this Agreement is
terminated pursuant to Section 9.01, all obligations of the parties under this
Agreement will terminate except for the obligations set forth in Sections 3.04,
3.05 and 3.06 and Article X hereof.

 

SECTION 9.03               Events of Default.  The occurrence of any of the
following events shall be deemed an “Event of Default” under this Agreement:

 

(a)           any party hereto shall materially breach any of its covenants,
agreements or other obligations (other than representations and warranties)
under this Agreement, and such breach remains uncured for a period of ten (10)
days after such breaching party’s receipt of written notice of any such breach;
or

 

(b)           any representation or warranty in this Agreement made by any party
hereto shall prove to be false or is breached in any material respect.

 

SECTION 9.04               Remedies upon Event of Default.  Upon the occurrence
of an Event of Default the parties shall have the following rights and remedies:

 

(a)           if an Event of Default by either the Corporation or Isaacs has
occurred, the Girbaud Entities shall have the right to

 

(i)                    terminate this Agreement pursuant to Section
9.01(a)(iii); and/or

 

(ii)                   file suit against the Corporation or Isaacs for damages;
and/or

 

(iii)                  seek specific performance of this Agreement; and

 

(b)           if an Event of Default by any of the Girbaud Entities has
occurred, the Corporation or Isaacs shall have the right to

 

(i)                    terminate this Agreement pursuant to Section 9.01(a)(ii);
and/or

 

(ii)                   file suit against any of the Girbaud Entities for
damages; and/or

 

(iii)                  seek specific performance of this Agreement.

 

13

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ARTICLE X

MISCELLANEOUS

 

                SECTION 10.01.            Congress Financial Consent.  The
parties hereto agree that if the consent of Congress Financial to the
transactions contemplated by the Transaction Documents is not obtained from
Congress Financial, such failure to obtain such consent shall not be an Event of
Default by any party to this Agreement.

 

                SECTION 10.02.            Stockholders’ Consent.  The parties
hereto agree that if the stockholders of the Corporation do not elect one or
more of the Satisfactory Nominees and/or approve any of the matters to be
submitted to such stockholders hereunder, such failure to elect such
Satisfactory Nominee(s) or obtain such approval shall not be an Event of Default
by any party to this Agreement.

 

                SECTION 10.03.            Notices.  Any notice required or
permitted by or in connection with this Agreement shall be in writing and shall
be made by telecopy, or by hand delivery, or by overnight delivery service, or
by certified mail, return receipt requested, postage prepaid, addressed to the
parties at the appropriate address set forth below or to such other address as
may be hereafter specified by written notice by the parties to each other. 
Notice shall be considered given as of the earlier of the date of actual
receipt, or the date of the telecopy or hand delivery, or one (1) business day
after delivery to an overnight delivery service (marked for next business day
delivery), or three (3) calendar days after the date of mailing, independent of
the date of actual delivery or whether delivery is ever in fact made, as the
case may be, provided the giver of notice can establish that notice was given as
provided herein.  Notwithstanding the aforesaid procedures, any notice or demand
upon any party, in fact received by such party, shall be sufficient notice or
demand.  Each undersigned Girbaud Entity (other than Latitude Licensing) hereby
appoints Latitude Licensing as its agent for purposes of receiving notices under
this Agreement, so that notices given to Latitude Licensing shall be fully
effective notice to Latitude Licensing and to each such other undersigned
Girbaud Entity (other than Latitude Licensing).

 

If to the Corporation

 

I.C. Isaacs & Company, Inc.

or Isaacs:

 

350 Fifth Avenue, Suite 1029

 

 

New York, New York 10118

 

 

Attn:  Mr. Robert J. Arnot, President and CEO

 

 

Telecopy No.:  212-695-7579

 

 

 

with copy to:

 

I.C. Isaacs & Company L.P.

 

 

3840 Bank Street

 

 

Baltimore, Maryland 21224

 

 

Attn:  Mr. Eugene C. Wielepski

 

 

Telecopy No.:  410-563-1512

 

14

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and copy to:

 

Piper Rudnick LLP

 

 

6225 Smith Avenue

 

 

Baltimore, Maryland 21209-3600

 

 

Attn:  Robert J. Mathias, Esquire

 

 

Telecopy No.:  410-580-3001

 

 

 

If to Textile Investment:

 

Textile Investment International S.A.

 

 

41 avenue de la Gare

 

 

Luxembourg L-1611

 

 

Luxembourg

 

 

Attn:  René Faltz, Managing Director

 

 

Telecopy No.:  011 352 26 48 47 47

 

 

 

with copy to:

 

Hall Dickler Kent Goldstein & Wood, LLP

 

 

909 Third Avenue

 

 

New York, New York 10022-4731

 

 

Attn:  Steven D. Dreyer, Esquire

 

 

Telecopy No.:  212-935-3121

 

 

 

If to Latitude Licensing:

 

Latitude Licensing Corp.

 

 

22 Carpenter Plaza, Suite 217

 

 

Wilmington, Delaware 19810

 

 

 

with copy to:

 

Martin & Associates LLC

 

 

325 E. 58th Street, Suite 1

 

 

New York, New York 10022

 

 

Attn:  Francois Martin, Esquire

 

 

Telecopy No.:  212-754-3397

 

 

 

If to Würzburg:

 

Würzburg Holding S.A.

 

 

41 avenue de la Gare

 

 

Luxembourg L-1611

 

 

Luxembourg

 

 

Attn:  René Faltz

 

 

Telecopy No.:  0 11 352 26 48 47 47

 

 

 

with copy to:

 

Hall Dickler Kent Goldstein & Wood, LLP

 

 

909 Third Avenue

 

 

New York, New York 10022-4731

 

 

Attn:  Steven D. Dreyer, Esquire

 

 

Telecopy No.:  212-935-3121

 

                SECTION 10.04.            Amendments, Waivers and Consents;
Successors and Assigns.  Neither this Agreement nor any of the terms hereof may
be amended, changed, waived or discharged, nor

 

15

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shall any consent be given, unless such amendment, change, waiver, discharge or
consent is in writing and signed by the parties hereto.  This Agreement shall
inure to the benefit of and be binding upon each party hereto and each party’s
successors and assigns.  This Agreement may not be assigned by any party hereto
without prior written consent of each of the other parties hereto.

 

                SECTION 10.05.            Governing Law.  The validity,
construction, operation and effect of any and all of the terms and provisions of
this Agreement shall be determined and enforced in accordance with the laws of
the State of New York without giving effect to principles of conflicts of law
thereunder.

 

                SECTION 10.06.         JURISDICTION; VENUE.

 

                                                (a)           Each party to this
Agreement hereby irrevocably consents to the exclusive jurisdiction of the
Supreme Court of the State of New York for the County of New York and/or United
States District Court for the Southern District of New York (collectively, the
“New York Courts” and each a “New York Court”) in connection with any and all
claims based upon or arising out of this Agreement or the matters or
transactions contemplated herein, and irrevocably agrees that all claims in
respect of any such matters or transactions may be heard in either of such New
York Courts.

 

                                                (b)           Each party to this
Agreement hereby waives any objection to jurisdiction and venue of any such
claim brought, or action instituted, hereunder in any New York Court and further
agrees not to assert (i) any defense based on the lack of jurisdiction or venue
in any New York Court, or (ii) any defense of improper venue or inconvenient
forum in any New York Court.

 

                                                (c)           Each party to this
Agreement hereby waives any right of jurisdiction on account of the place of
such party’s residence, or domicile, or on account of such party’s place of
incorporation, formation or organization.

 

                                                (d)           Each party to this
Agreement hereby acknowledges and agrees that any forum other than a New York
Court is an inconvenient forum and that a suit brought by any party against any
other party in any court other than a New York Court should be transferred to a
New York Court.

 

                SECTION 10.07.         SERVICE OF PROCESS.

 

                                                (a)           Textile Investment
hereby irrevocably and unconditionally appoints Steven D. Dreyer, Esquire of
Hall Dickler Kent Goldstein & Wood, LLP, currently located at 909 Third Avenue,
New York, New York 10022-4731 (the “Process Agent”) as its agent to receive on
behalf of Textile Investment service of copies of the summons and complaint and
any other process which may be served in any action or proceeding within the
scope of Section 10.06 of this Agreement in any New York Court and agrees
promptly to appoint a successor Process Agent in the City of New York (which

 

16

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appointment such successor Process Agent shall accept in writing) prior to the
termination for any reason of the appointment of the Process Agent (or the
termination of any successor Process Agent).  In any such action or proceeding
in any New York Court, such service may be made on Textile Investment by
delivering a copy of such process to Textile Investment in care of the Process
Agent at the Process Agent’s above address and by depositing a copy of such
process in the mails (certified or registered, if available), or by overnight
courier, addressed to Textile Investment at its address for notices in this
Agreement (such service to be effective upon receipt by the Process Agent, and
the depositing of such service in the mails (or delivery thereof to such
overnight courier)).  Textile Investment hereby irrevocably and unconditionally
authorizes and directs the Process Agent to accept such service on Textile
Investment’s behalf.  As an alternative method of service, Textile Investment
hereby irrevocably and unconditionally consents to the service of any and all
process in any such action or proceeding in any New York Court by mailing of
copies of such process to Textile Investment by mail (certified or registered,
if available), or by overnight courier, at its address for notices in this
Agreement.  Textile Investment agrees that, to the fullest extent permitted by
applicable law, a final judgment in any such action or proceeding in any New
York Court shall be conclusive and may be enforced in any other jurisdiction by
suit on the judgment or in any other manner provided by law.  Textile Investment
represents and warrants to the other parties to this Agreement that the Process
Agent has accepted its appointment as process agent for Textile Investment as
herein described, and Textile Investment covenants to give the other parties to
this Agreement prompt written notice of (x) any change in the name or address of
the Process Agent (or any successor Process Agent) and (y) the name and address
of any successor Process Agent.

 

                                                (b)           Würzburg hereby
irrevocably and unconditionally appoints the Process Agent as its agent to
receive on behalf of Würzburg service of copies of the summons and complaint and
any other process which may be served in any action or proceeding within the
scope of Section 10.06 of this Agreement in any New York Court and agrees
promptly to appoint a successor Process Agent in the City of New York (which
appointment such successor Process Agent shall accept in writing) prior to the
termination for any reason of the appointment of the Process Agent (or the
termination of any successor Process Agent).  In any such action or proceeding
in any New York Court, such service may be made on Würzburg by delivering a copy
of such process to Würzburg in care of the Process Agent at the Process Agent’s
address and by depositing a copy of such process in the mails (certified or
registered, if available), or by overnight courier, addressed to Würzburg at its
address for notices in this Agreement (such service to be effective upon receipt
by the Process Agent, and the depositing of such service in the mails (or
delivery thereof to such overnight courier)).  Würzburg hereby irrevocably and
unconditionally authorizes and directs the Process Agent to accept such service
on Würzburg’s behalf.  As an alternative method of service, Würzburg hereby
irrevocably and unconditionally consents to the service of any and all process
in any such action or proceeding in any New York Court by mailing of copies of
such process to Würzburg by mail (certified or registered, if available), or by
overnight courier, at its address for notices in this Agreement.  Würzburg
agrees that, to the fullest extent permitted by applicable law, a final

 

17

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judgment in any such action or proceeding in any New York Court shall be
conclusive and may be enforced in any other jurisdiction by suit on the judgment
or in any other manner provided by law.  Würzburg represents and warrants to the
other parties to this Agreement that the Process Agent has accepted its
appointment as process agent for Würzburg as herein described, and Würzburg
covenants to give the other parties to this Agreement prompt written notice of
(x) any change in the name or address of the Process Agent (or any successor
Process Agent) and (y) the name and address of any successor Process Agent.

 

                                                (c)           Latitude hereby
irrevocably and unconditionally appoints its registered agent, as specified in
its charter, as amended from time to time (the “Latitude Registered Agent”), as
its agent to receive on behalf of Latitude service of copies of the summons and
complaint and any other process which may be served in any action or proceeding
within the scope of Section 10.06 of this Agreement in any New York Court.  In
any such action or proceeding in any New York Court, such service may be made on
Latitude by delivering a copy of such process to Latitude in care of the
Latitude Registered Agent at the Latitude Registered Agent’s address and by
depositing a copy of such process in the mails (certified or registered, if
available), or by overnight courier, addressed to Latitude at its address for
notices in this Agreement (such service to be effective upon receipt by the
Latitude Registered Agent, and the depositing of such service in the mails (or
delivery thereof to such overnight courier)).  Latitude hereby irrevocably and
unconditionally authorizes and directs the Latitude Registered Agent to accept
such service on Latitude’s behalf.  As an alternative method of service,
Latitude hereby irrevocably and unconditionally consents to the service of any
and all process in any such action or proceeding in any New York Court by
mailing of copies of such process to Latitude by mail (certified or registered,
if available), or by overnight courier, at its address for notices in this
Agreement. Latitude agrees that, to the fullest extent permitted by applicable
law, a final judgment in any such action or proceeding in any New York Court
shall be conclusive and may be enforced in any other jurisdiction by suit on the
judgment or in any other manner provided by law. Latitude represents and
warrants to the other parties to this Agreement that the Latitude Registered
Agent has accepted its appointment as registered agent for Latitude as herein
described.

 

                                                (d)           The Corporation
hereby irrevocably and unconditionally appoints its registered agent, as
specified in its charter, as amended from time to time (the “Corporation
Registered Agent”), as its agent to receive on behalf of the Corporation service
of copies of the summons and complaint and any other process which may be served
in any action or proceeding within the scope of Section 10.06 of this Agreement
in any New York Court.  In any such action or proceeding in any such New York
Court, such service may be made on the Corporation by delivering a copy of such
process to the Corporation in care of the Corporation Registered Agent at the
Corporation Registered Agent’s address and by depositing a copy of such process
in the mails (certified or registered, if available), or by overnight courier,
addressed to the Corporation at its address for notices in this Agreement (such
service to be effective upon receipt by the Corporation Registered Agent, and
the depositing of such service in the mails (or delivery

 

18

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thereof to such overnight courier)).  The Corporation hereby irrevocably and
unconditionally authorizes and directs the Corporation Registered Agent to
accept such service on the Corporation’s behalf.  As an alternative method of
service, the Corporation hereby irrevocably and unconditionally consents to the
service of any and all process in any such action or proceeding in any New York
Court by mailing of copies of such process to the Corporation by mail (certified
or registered, if available), or by overnight courier, at its address for
notices in this Agreement.  The Corporation agrees that, to the fullest extent
permitted by applicable law, a final judgment in any such action or proceeding
in any New York Court shall be conclusive and may be enforced in any other
jurisdiction by suit on the judgment or in any other manner provided by law. 
The Corporation represents and warrants to the other parties to this Agreement
that the Corporation Registered Agent has accepted its appointment as registered
agent for the Corporation as herein described.

 

                                                (e)           Isaacs hereby
irrevocably and unconditionally appoints its registered agent, as specified in
its limited partnership agreement, as amended from time to time (the “Isaacs
Registered Agent”), as its agent to receive on behalf of Isaacs service of
copies of the summons and complaint and any other process which may be served in
any action or proceeding within the scope of Section 10.06 of this Agreement in
any New York Court.  In any such action or proceeding in any New York Court,
such service may be made on Isaacs by delivering a copy of such process to
Isaacs in care of the Isaacs Registered Agent at the Isaacs Registered Agent’s
address and by depositing a copy of such process in the mails (certified or
registered, if available), or by overnight courier, addressed to Isaacs at its
address for notices in this Agreement (such service to be effective upon receipt
by the Isaacs Registered Agent, and the depositing of such service in the mails
(or delivery thereof to such overnight courier)).  Isaacs hereby irrevocably and
unconditionally authorizes and directs the Isaacs Registered Agent to accept
such service on Isaacs’ behalf.  As an alternative method of service, Isaacs
hereby irrevocably and unconditionally consents to the service of any and all
process in any such action or proceeding in any New York Court by mailing of
copies of such process to Isaacs by mail (certified or registered, if
available), or by overnight courier, at its address for notices in this
Agreement. Isaacs agrees that, to the fullest extent permitted by applicable
law, a final judgment in any such action or proceeding in any New York Court
shall be conclusive and may be enforced in any other jurisdiction by suit on the
judgment or in any other manner provided by law. Isaacs represents and warrants
to the other parties to this Agreement that the Isaacs Registered Agent has
accepted its appointment as registered agent for Isaacs as herein described.

 

                SECTION 10.08          WAIVER OF IMMUNITY.  Each party to this
Agreement represents, warrants, and agrees that to the extent such party may
have or hereafter acquire any right of sovereign or other immunity from suit,
court jurisdiction, attachment in aid of execution of judgment, set-off,
execution or other legal process, such party hereby irrevocably and
unconditionally waives, to the fullest extent permitted by law, such right of
immunity with respect to its obligations hereunder and with respect to legal
proceedings to enforce the same and to enforce any judgment rendered in such
proceedings.

 

19

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                SECTION 10.09.            Counterparts; Facsimile.  This
Agreement may be executed in any number of counterparts, each of which when so
executed and delivered shall be an original, but all of which shall constitute
one and the same instrument.  It shall not be necessary in making proof of this
Agreement to produce or account for more than one such counterpart.  This
Agreement may be executed and transmitted by facsimile and with confirmation of
transmission shall have the same binding effect as though such executed
Agreement was delivered as an original.

 

                SECTION 10.10.            Third Party Beneficiaries.  There
shall be no third-party beneficiaries of this Agreement.

 

                SECTION 10.11.            Entire Agreement.  The parties hereto
agree that this Agreement, together with the Textile Consent Letter Agreement,
is a complete and exclusive expression of all of the terms hereof.

 

 

[Remainder of page intentionally left blank]

 

20

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IN WITNESS WHEREOF, and intending to be legally bound hereby, each of the
parties hereto executes this Agreement under seal as of the date first above
written.

 

 

I.C. ISAACS & COMPANY L.P.,

 

a Delaware limited partnership

 

 

 

 

By:

I.C. Isaacs & Company, Inc., a Delaware

 

 

corporation, its general partner

 

 

 

 

By:

/s/ Robert J. Arnot

(SEAL)

 

 

Name:

Robert J. Arnot

 

 

Title:

Chairman and Chief Executive Officer

 

 

 

 

I.C. ISAACS & COMPANY, INC.,

 

a Delaware corporation

 

 

 

 

By:

/s/ Robert J. Arnot

(SEAL)

 

 

Name:

Robert J. Arnot

 

 

Title:

Chairman and Chief Executive Officer

 

 

 

 

TEXTILE INVESTMENT

 

INTERNATIONAL S.A.,

 

a Luxembourg corporation

 

 

 

 

By:

/s/ René Faltz

(SEAL)

 

 

Name:

René Faltz

 

 

Title:

Managing Director

 

 

 

 

By:

/s/ Tom Felgen

(SEAL)

 

 

Name:

Tom Felgen

 

 

Title:

Managing Director

 

 

 

 

LATITUDE LICENSING CORP.,

 

a Delaware corporation

 

 

 

 

By:

/s/ Antoine Feidt

(SEAL)

 

 

Name:

Antoine Feidt

 

 

 

Title:

President

 

 

 

 

 

WÜRZBURG HOLDING S.A.,

 

a Luxembourg corporation

 

 

 

 

By:

/s/ René Faltz

(SEAL)

 

 

Name:

René Faltz

 

 

Title:

Managing Director

 

 

 

 

By:

/s/ Tom Felgen

(SEAL)

 

 

Name:

Tom Felgen

 

 

Title:

Managing Director

 

21

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EXHIBIT A

AMENDED AND RESTATED

SUBORDINATED SECURED PROMISSORY NOTE

 

$6,557,908.53

 

As of May                , 2002

 

                        FOR VALUE RECEIVED, the sufficiency and adequacy of
which is hereby acknowledged, I.C. ISAACS & COMPANY L.P., a Delaware limited
partnership (“Maker”), promises to pay to the order of Textile Investment
International S.A., a Luxembourg corporation (“Payee”), the principal sum of Six
Million Five Hundred Fifty-seven Thousand Nine Hundred Eight and 53/100 Dollars
($6,557,908.53), together with interest until paid, as set forth in this Note.

 

                        This Note amends, restates and replaces the Subordinated
Secured Promissory Note dated as of March 15, 2001, in the original principal
amount of Seven Million Two Hundred Thousand Dollars ($7,200,000) made by Maker
payable to the order of Ambra Inc., a Delaware corporation (“Ambra”), which
Payee purchased from Ambra on May 6, 2002 (the “Original Note”).

 

                        1.         Interest Rate.  Interest shall accrue and be
payable on the outstanding unpaid principal balance of this Note at the fixed
interest rate of eight percent (8.0%) per annum (except as otherwise provided in
Section 2(c) of this Note) computed on the basis of the actual number of days
elapsed over a year of 360 days.

 

                        2.         Principal and Interest Payments.  (a)  Maker
shall make quarterly installment payments of principal and interest on this Note
in the Quarterly Payment Amounts set forth below on the corresponding Quarterly
Payment Dates set forth below.

 

Quarterly Payment Amounts

 

Quarterly Payment Dates

 

$210,000

 

September 30, 2002

 

$210,000

 

December 31, 2002

 

 

 

 

 

$315,000

 

March 31, 2003

 

$315,000

 

June 30, 2003

 

$315,000

 

September 30, 2003

 

$315,000

 

December 31, 2003

 

 

 

 

 

$420,000

 

March 31, 2004

 

$420,000

 

June 30, 2004

 

$420,000

 

September 30, 2004

 

$420,000

 

December 31, 2004

 

 

 

 

 

$420,000

 

March 31, 2005

 

$420,000

 

June 30, 2005

 

$420,000

 

September 30, 2005

 

$420,000

 

December 31, 2005

 

 

 

 

 

$420,000

 

March 31, 2006

 

$420,000

 

June 30, 2006

 

$420,000

 

September 30, 2006

 

$420,000

 

December 31, 2006

 

 

 

 

 

$420,000

 

March 31, 2007

 

$420,000

 

June 30, 2007

 

$420,000

 

September 30, 2007

 

$558,689.72

 

December 31, 2007

 

 

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                                    (b)  Unless sooner paid in full, the entire
unpaid principal balance of this Note, together with all outstanding and unpaid
accrued interest, shall be due and payable on December 31, 2007.  Without
limiting the generality of the preceding sentence, any payment that is deferred
under Section 2(d) of this Note and has not been made before December 31, 2007
shall be due and payable on December 31, 2007.  All payments shall be made in
U.S. dollars by wire transfer of immediately available funds to Payee at:

 

                                            Name of the account:  Textile
Investment International S.A.

                                            Bank:  Banque Générale du Luxembourg

                                            Account number:  30-630 563-05-01

                                            Swift code:  BGLLLULL

 

or to such other account as Payee shall have previously designated to Maker in
writing not later than fourteen (14) days prior to the date on which such
payment becomes due.  All payments (including any prepayments) shall be applied
first to accrued and unpaid interest, and then to the unpaid principal balance
of this Note.

 

                                    (c)  If Maker fails to make timely payments
to Payee under this Note (except for payments deferred in accordance with
Section 2(d) of this Note), Maker shall pay to Payee on demand the amounts due
with interest at the rate of one and one-half percent (1.5%) per month from the
due date until paid.

 

                                    (d)  (i)  Notwithstanding anything to the
contrary contained in this Note, Maker shall not be obligated to make any
quarterly installment payment of principal and interest on this Note in the
Quarterly Payment Amounts set forth above for the corresponding Quarterly
Payment Dates set forth above unless each of the following conditions is
satisfied: (A) as of the date of such payment, the Excess Availability (as such
term is defined in the Senior Credit Agreements (as hereinafter defined in this
Note)) of Maker in accordance with the terms of the Senior Credit Agreements for
the immediately preceding thirty (30) consecutive day period shall have been not
less than $2,500,000, and (B) as of the date of any such payment, and after
giving effect to such payment, the Excess Availability (as such term is defined
in the Senior Credit Agreements) of Maker in accordance with the terms of the
Senior Credit Agreements shall be not less than $2,500,000, and (C) on the date
of any such payment and after giving effect to such payment, no Event of Default
(as such term is defined in the Senior Credit Agreements), or act,

 

2

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condition or event which with notice or passage of time or both would constitute
an Event of Default under the Senior Credit Agreements, shall exist or have
occurred or be continuing (each quarterly installment payment that, in
accordance with this Section 2(d), is not made as set forth above, is referred
to herein as a “Deferred Quarterly Payment”).

 

                                            (ii)  If there is one (1) Deferred
Quarterly Payment, then the Quarterly Payment Amount of such Deferred Quarterly
Payment shall be paid to Payee in twelve (12) equal monthly installment payments
of principal and interest due on the last day of the month, beginning with the
last day of the month immediately following the Quarterly Payment Date for which
the Quarterly Payment Amount of such Deferred Quarterly Payment was due and not
paid, and on the last day of each of the eleven (11) months thereafter;
provided, however, that Maker shall not make any such monthly installment
payment if on the date of such monthly installment payment, and after giving
effect to such payment, an Event of Default (as such term is defined in the
Senior Credit Agreements), or act, condition or event which with notice or
passage of time or both would constitute an Event of Default under the Senior
Credit Agreements, shall exist or have occurred or be continuing.

 

                                            (iii)  If there is more than one (1)
Deferred Quarterly Payment, then as to each Deferred Quarterly Payment
subsequent to the first (1st) Deferred Quarterly Payment (each such subsequent
Deferred Quarterly Payment being referred to herein as a “Subsequent Deferred
Quarterly Payment”) the Quarterly Payment Amount of such Subsequent Deferred
Quarterly Payment shall be paid to Payee in twelve (12) equal monthly
installment payments of principal and interest due on the last day of the month,
beginning with the last day of the month immediately following the Quarterly
Payment Date for which the Quarterly Payment Amount of such Subsequent Deferred
Quarterly Payment was due and not paid, and on the last day of each of the
eleven (11) months thereafter; provided, however, that Maker shall not make
monthly installment payments of principal and interest on this Note with respect
to any Subsequent Deferred Quarterly Payment unless each of the following
conditions is satisfied:  (A) as of the date of the monthly installment payment,
the Excess Availability (as such term is defined in the Senior Credit
Agreements) of Maker in accordance with the terms of the Senior Credit
Agreements for the immediately preceding thirty (30) consecutive day period
shall have been not less than $2,500,000, (B) as of the date of any such monthly
installment payment, and after giving effect to such payment, the Excess
Availability (as such term is defined in the Senior Credit Agreements) of Maker
in accordance with the terms of the Senior Credit Agreements shall be not less
than $2,500,000, and (C) on the date of any such monthly installment payment,
and after giving effect to such payment, no Event of Default (as such term is
defined in the Senior Credit Agreements), or act, condition or event which with
notice or passage of time or both would constitute an Event of Default under the
Senior Credit Agreements, shall exist or have occurred or be continuing.

 

                                            (iv)  For purposes of this Note,
“Senior Credit Agreements” shall mean collectively, the Accounts Financing
Agreement [Security Agreement] and Covenant Supplement to Accounts Financing
Agreement [Security Agreement] dated June 16, 1992, by and between Congress
Financial Corporation (referred to herein as “Congress Financial”) and Maker,
and all agreements, documents, and instruments at any time executed and/or
delivered by

 

3

--------------------------------------------------------------------------------

 

Maker or any other person or entity to, with, or in favor of, Congress Financial
in connection therewith or related thereto, as all of the foregoing may be
amended, modified, supplemented, extended, renewed, restated, or replaced from
time to time.

 

                        3.         Prepayment.  Maker shall be privileged to
prepay this Note in whole or in part, together with all interest accrued through
the date of payment, at any time without premium or penalty.  All partial
prepayments shall be applied in inverse order of maturity.

 

                        4.         Default; Acceleration; Costs of Collection. 
The occurrence of any of the following events shall be an “Event of Default”:
(a) failure of Maker to make any payment of principal or interest under this
Note within thirty (30) days after the due date thereof; or (b) the occurrence
of an Insolvency Event (as defined in Section 10 below).  Upon the occurrence of
an Event of Default, the unpaid principal with interest and all other sums
evidenced by this Note shall, at the option of Payee and in Payee’s discretion,
become immediately due and payable.  Upon and during the continuance of an Event
of Default, Maker shall pay Payee’s reasonable costs and expenses (including
reasonable attorneys fees and expenses) incurred in collecting the principal and
interest due under this Note, including, but not limited to, any reasonable
attorneys fees and expenses incurred by Payee in connection with asserting,
enforcing, pursuing or preserving its claim in any bankruptcy proceeding. 
Notwithstanding anything to the contrary in this Section 4, it shall not be
deemed an Event of Default for the failure of Maker to make any payment of
principal or interest under this Note which Maker shall not be obligated to make
under Section 2(d) of this Note.

 

                        5.         Certain Waivers.  As to this Note, Maker
waives all applicable exemption rights, whether under any state constitution or
otherwise, and also waives valuation and appraisement, diligence, presentment,
protest, demand for payment, notice of default, dishonor or nonpayment of this
Note, and notice of acceleration and expressly agrees that the maturity of this
Note, or any payment under this Note, may be extended from time to time without
in any way affecting the liability of Maker.

 

                        6.         Preservation of Payee Rights.  No failure on
the part of Payee to exercise any right or remedy hereunder, whether before or
after the happening of an Event of Default shall constitute a waiver thereof,
and no waiver of any past Event of Default shall constitute waiver of any future
default or of any other Event of Default.  No failure to accelerate the
indebtedness evidenced hereby by reason of any Event of Default hereunder, or
acceptance of a past due installment, or indulgence granted from time to time,
shall be construed to be a waiver of the right to insist upon prompt payment
thereafter, or shall be deemed to be a novation of this Note or as a waiver of
such right of acceleration or any other right, or be construed so as to preclude
the exercise of any right that Payee may have, whether by the laws of the State
of New York, by agreement, or otherwise.  This Note may not be changed orally,
but only by an agreement in writing signed by the party against whom such
agreement is sought to be enforced.

 

                        7.         Notices.  Any notice required or permitted by
or in connection with this Note shall be in writing and shall be made by
telecopy, or by hand delivery, or by overnight delivery service, or by certified
mail, return receipt requested, postage prepaid, addressed to the parties at

 

4

--------------------------------------------------------------------------------

 

the appropriate address set forth below or to such other address as may be
hereafter specified by written notice by the parties to each other.  Notice
shall be considered given as of the earlier of the date of actual receipt, or
the date of the telecopy or hand delivery, or one (1) business day after
delivery to an overnight delivery service (marked for next business day
delivery), or three (3) calendar days after the date of mailing, independent of
the date of actual delivery or whether delivery is ever in fact made, as the
case may be, provided the giver of notice can establish that notice was given as
provided herein.  Notwithstanding the aforesaid procedures, any notice or demand
upon any party, in fact received by such party, shall be sufficient notice or
demand.

 

 

If to Maker:

 

I.C. Isaacs & Company, Inc.

 

 

350 Fifth Avenue, Suite 1029

 

 

New York, New York 10118

 

 

Attn:  Mr. Robert J. Arnot, President and CEO

 

 

Telecopy No.:  212-695-7579

 

 

 

With copy to:

 

I.C. Isaacs & Company L.P.

 

 

3840 Bank Street

 

 

Baltimore, Maryland 21224

 

 

Attn:  Mr. Eugene C. Wielepski

 

 

Telecopy No.:  410-563-1512

 

 

 

And copy to:

 

Piper Rudnick LLP

 

 

6225 Smith Avenue

 

 

Baltimore, Maryland 21209-3600

 

 

Attn:  Robert J. Mathias, Esquire

 

 

Telecopy No.:  410-580-3001

 

 

 

If to Payee:

 

Textile Investment International S.A.

 

 

41 Avenue de la Gare

 

 

Luxembourg L-1611

 

 

Luxembourg

 

 

Attn:  René Faltz, Managing Director

 

 

Telecopy No.:  011 352 26 48 47 47

 

 

 

With copy to:

 

Hall Dickler Kent Goldstein & Wood, LLP

 

 

909 Third Avenue

 

 

New York, New York  10022-4731

 

 

Attn:  Steven D. Dreyer, Esquire

 

 

Telecopy No.:  212-935-3121

 

                        8.         Governing Law.  This Note shall be governed
by, and construed in accordance with, the laws of the State of New York
applicable to contracts made and to be performed entirely in the State of New
York without regard to such state’s choice of law rules.  In the event any legal
action becomes necessary to enforce or interpret the terms of this Note, the
parties agree that such action may be brought in the Supreme Court of the State
of New York, County of

 

5

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New York, or in the U.S. District Court for the Southern District of New York
sitting in New York County, and the parties hereby submit to the jurisdiction of
such courts.

 

                        9.         Severability.  In case any provision or any
part of any provision contained in this Note shall for any reason be held to be
invalid, illegal, or unenforceable in any respect, such invalidity, illegality,
or unenforceability shall not affect any other provision or remaining part of
the affected provision of this Note, but this Note shall be construed as if such
invalid, illegal, or unenforceable provision or part thereof had never been
contained herein but only to the extent such provision or part thereof is
invalid, illegal, or unenforceable.

 

                        10.       Subordination.  (a)  Payee, by accepting
delivery of this Note, covenants and agrees, for itself and each and every
subsequent holder of this Note, that upon and during the continuance of any
Insolvency Event (as defined below), the indebtedness evidenced by this Note
shall be subordinate and junior in right and priority of payment to Maker’s
indebtedness to Congress Financial and to Maker’s indebtedness to any other
lender (referred to herein as “Other Lender,” which term shall include its
successors and assigns) that may provide financing to Maker in replacement of
Maker’s credit facility from Congress Financial (Congress Financial and any such
Other Lender are referred to herein as “Lender”), such that upon and during the
continuance of any Insolvency Event, (i) no part of the indebtedness evidenced
by this Note shall have any claim to the assets of Maker on parity with or prior
to any claims of Lender to such assets; and (ii) unless and until Maker’s
indebtedness to Lender shall have been indefeasibly paid in full, Payee shall
not without the express prior written consent of Lender, take or receive from
Maker, and Maker shall not make, give or permit, directly or indirectly, by
set-off, redemption, purchase or in any other manner, any payment of any nature
or type for the whole or any part of the indebtedness evidenced by this Note,
provided that no such subordination shall be effective if all indebtedness owed
by Maker to Lender has been equitably subordinated to the claims of all other
general unsecured creditors of Maker by virtue of Lender’s acts or conduct by a
court of competent jurisdiction under a final and non-appealable order, judgment
or decree (a “Subordination Event”).  Payee, by accepting delivery of this Note,
further covenants and agrees, for itself and each and every subsequent holder of
this Note, that if any payment or distribution, whether consisting of money,
property or securities, shall be collected or received by Payee, or any such
subsequent holder of this Note, in respect of the indebtedness evidenced by this
Note, upon or during the continuance of an Insolvency Event, provided a
Subordination Event has not occurred, then Payee or such subsequent holder of
this Note immediately shall deliver the same to Lender, in the form received,
duly endorsed to Lender, if required, to be applied to the payment of Maker’s
indebtedness to Lender until Maker’s indebtedness to Lender is paid in full. 
Until so delivered, such payment or distribution shall be held in trust by
Payee, or such subsequent holder of this Note, as property of Lender, segregated
from other funds and property held by Payee, or such other holder of this Note. 
The provisions of this Section 10 are, and are intended solely, for the purpose
of defining the relative rights of Payee (and any subsequent holder of this
Note), on the one hand, and Lender, on the other, upon and during the
continuance of an Insolvency Event.  Lender is an intended beneficiary of the
subordination provided by the terms of this Section 10.  Notwithstanding
anything to the contrary in this paragraph, such subordination of the
indebtedness evidenced by this Note shall not prevent or limit Payee’s right or
ability to assert, enforce or otherwise pursue its claim under this Note

 

6

--------------------------------------------------------------------------------

 

during any Insolvency Event provided any payments to Payee are treated in
accordance with this Section.

 

                                                (b)  As used in this Note,
“Insolvency Event” means any of the following: (i) Maker commencing any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
administration, reorganization, conservatorship, or relief from debtors, seeking
to have any order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, administration, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (B) seeking appointment of an
administrator or receiver for it or for all or any substantial part of its
assets, or Maker making a general assignment for the benefit of its creditors,
or (ii) there being commenced against Maker any case, proceeding or other action
of a nature referred to in clause (A) hereof, or (iii) there being commenced
against Maker any case, proceeding or other action seeking issuance of a warrant
of attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of any order for any
such relief that is not satisfied within 90 days, or (iv) Maker taking any
action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii) or (iii) above,
or (v) Maker admitting in writing its inability to pay its debts as they become
due.

 

                                                    (c)  Notwithstanding
anything to the contrary set forth in this Note, so long as Maker is indebted to
Congress Financial, Payee’s rights under this Note shall also be subject to the
terms of that certain Intercreditor and Subordination Agreement dated as of
March 15, 2001, between Payee and Congress Financial (the “Intercreditor
Agreement,” which term shall include any amendments to and replacements for the
Intercreditor Agreement from time to time) and, in the event of a conflict
between the terms of this Note and the terms of the Intercreditor Agreement, the
terms of the Intercreditor Agreement shall govern.

 

                                                    (d)  Payee, by accepting
delivery of this Note, covenants and agrees, for itself and for each subsequent
holder of this Note, that in the event that Congress Financial (or any
subsequent Senior Creditor (as defined in the Intercreditor Agreement)) shall be
replaced by another Senior Creditor, then promptly upon Maker’s written request
Payee shall execute and deliver to such replacement Senior Creditor an
intercreditor and subordination agreement in favor of such replacement Senior
Creditor, which intercreditor and subordination agreement (a “Replacement
Intercreditor Agreement,” which term shall include any amendments to and
replacements for the Replacement Intercreditor Agreement) shall be identical to
the Intercreditor Agreement in form and substance, and so long as Maker is
indebted to such replacement Senior Creditor, Payee’s rights under this Note
shall also be subject to the terms of the Replacement Intercreditor Agreement
and, in the event of a conflict between the terms of this Note and the terms of
the Replacement Intercreditor Agreement, the terms of the Replacement
Intercreditor Agreement shall govern.

 

                        11.       Mutual Waiver of Jury Trial.  Maker and Payee
waive all rights to trial by jury of any claims of any kind arising under or
relating in any way to this Note.  Maker and Payee acknowledge that this is a
waiver of a legal right and represent to each other

 

7

--------------------------------------------------------------------------------

 

that these waivers are made knowingly and voluntarily after consultation with
counsel of their choice.  Maker and Payee agree that all such claims shall be
tried before a judge of a court having jurisdiction without a jury.

 

                        12.       Original Note.  Payee, by accepting delivery
of this Note, covenants and agrees that Payee shall mark the Original Note
“cancelled,” and immediately return the Original Note to Maker at the address
set forth in the notices provision of this Note.

 

                        IN WITNESS WHEREOF, and intending to be legally bound
hereby Maker executes this Note under seal as of the date first written above.

 

WITNESS:

 

I.C. ISAACS & COMPANY L.P.,

 

 

a Delaware limited partnership

 

 

 

 

 

By:

I.C. Isaacs & Company, Inc.,

 

 

 

a Delaware corporation, its general partner

 

 

 

 

 

By:

 

(SEAL)

 

 

 

Name:

Robert J. Arnot

 

 

 

Title:

Chief Executive Officer

 

8

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EXHIBIT B

 

AMENDMENT NO. 4

TO TRADEMARK LICENSE AND TECHNICAL ASSISTANCE AGREEMENT

 

                This Amendment No. 4, dated                       , 2002, is to
the Trademark License and Technical Assistance Agreement dated January 15, 1998,
by and between Latitude Licensing Corp. (“Licensor”) and I.C. Isaacs & Company
L.P. (“Licensee”) (the “Agreement”).  Previous amendments to the Agreement were
made effective on November 12, 1998, June 21, 2000 and May 31, 2001. 
Capitalized terms used herein have the meaning ascribed to them in the Agreement
unless otherwise indicated.

 

                WHEREAS, the parties therefore wish to extend the term and scope
of the Agreement and to provide for certain fees as set forth herein.

 

                NOW, THEREFORE, for good and valuable consideration, the
sufficiency and receipt of which are hereby acknowledged, the parties agree to
amend the Agreement as follows:

 

                1.             Section 2 — Term and Territory

 

                Section 2.1 of the Agreement, relating to the term and
territory, is hereby amended by adding the following provision as the last
sentence:

 

In addition, Licensee shall have the option to renew this Agreement for an
additional term of four (4) years commencing January 1, 2008 and ending December
31, 2011.

 

                2.             Section 5 — Royalties

 

                Section 5.2 of the Agreement, is hereby amended by adding the
following to the Minimum Royalties table set forth therein:

 

Calendar Year

 

Minimum Royalties

 

2008

 

$

3,000,000

 

2009

 

$

3,000,000

 

2010

 

$

3,000,000

 

2011

 

$

3,000,000

 

 

                3.             Section 9 — Sales

 

                Section 9 of the Agreement, relating to sales, is hereby amended
by adding the following provision as Section 9.3:

 

9.3           Licensor shall retain the services of a consultant or consultants
(which may be or include the Designated Representative, as such term is
hereinafter defined) (the “Consultants”) for the purpose of assisting Licensee’s
senior executives with the implementation of this Agreement.  The

 

--------------------------------------------------------------------------------

 

Consultants shall provide such services by way of interaction solely with
Licensee’s senior management.  The Consultants shall be selected by Licensor
subject to the prior approval of the Chief Executive Officer of Licensee. 
Licensee shall pay the Licensor Consultants’ fees (the “Consultants’ Fees”) in
an aggregate amount of One Hundred Twenty-five Thousand Dollars ($125,000) for
calendar year 2002, and One Hundred Fifty Thousand Dollars ($150,000) for each
remaining calendar year under the term of this Agreement; such amounts shall be
inclusive of all expenses relating to such Consultants for such calendar year
and shall be prorated for any partial year subsequent to 2002.  The Consultants’
Fees for each year under the term of this Agreement shall be payable in equal
installments on the last day of each fiscal quarter of the Company (each March
31, June 30, September 30 and December 31 of any year under the term of this
Agreement), beginning on June 30, 2002.

 

For purposes of this Section, “Designated Representative” shall mean an
individual designated in writing to the Licensee by                             
as the designated representative of                              .

 

                4.             Section 26 — Right of First Refusal

 

                The first sentence of Section 26, relating to the right of first
refusal, is hereby deleted and replaced with the following sentence:

 

Should Licensor decide, at its initiative or upon an offer from a third party,
to introduce, market, import, manufacture and/or distribute, or cause to be
introduced, marketed, imported or manufactured, within the Territory, any of the
following additional products: (i) Men’s Active, (ii) Boys’, Women’s and Girls’
Jeans, Casual or Active collections, and (iii) Underwear, Licensee shall have a
right of First Refusal for a license for these products, with terms and royalty
rates as offered by the third party or otherwise to be discussed and agreed upon
at that time.

 

                5.             Section 32 — Licensor’s Brand Strategy

 

                At the end of Section 31 of the Agreement, the following shall
be added to the Agreement as a new section:

 

                Section 32.             Licensor’s Brand Strategy. Licensor is
responsible for, and will control the brand’s strategic positioning and the
voice of the brand.  Licensor will provide communication guidelines to Licensee
to help in developing communication execution.  Licensee shall submit to
Licensor for review, prior to submission to the advertising agency, any campaign
briefing materials, and shall consult with Licensor before accepting any
creative

 

2

--------------------------------------------------------------------------------

 

response to such briefing materials.  The Trademarks, the visual representation,
and the image of the Products shall be subject to written approval by Licensor
(which shall not be unreasonably withheld) prior to public distribution or
display in any medium; provided, however, that any advertising or promotional
materials supplied by Licensor will not require its approval prior to
dissemination by Licensee, except as otherwise provided in this Agreement.  All
advertising campaigns in the Territory shall correspond to the international
advertising theme and image worldwide.  Licensor will make available to Licensee
all advertising campaigns produced worldwide.  The Licensee shall cause its
advertising staff and/or agency to consult with Licensor’s designated
advertising agency and/or creative staff, at least twice a year, for a review of
Product image and with a view toward coordinating and enhancing worldwide
advertising strategy.  Approved advertising and promotional materials shall not
be disapproved by Licensor for use within the same campaign.

 

                6.             Effective Date

 

                This Amendment No. 4 shall be effective as of the date first
written above.

 

                7.             Full Force and Effect

 

                Except as expressly amended by this Amendment No. 4, the
Agreement shall continue in full force and effect.

 

                IN WITNESS WHEREOF, the parties, by their duly authorized
representatives, have executed this Amendment No. 4 as of the dates indicated
below.

 

 

LATITUDE LICENSING CORP.

 

I.C. ISAACS & COMPANY L.P.

 

 

 

By:

 

 

By:

 

Name:

 

 

Name:

Robert J. Arnot

Title:

 

 

Title:

Chief Executive Officer

Date:

 

 

Date:

 

 

3

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EXHIBIT C

 

AMENDMENT NO. 6

TO TRADEMARK LICENSE AND TECHNICAL ASSISTANCE AGREEMENT FOR WOMEN’S COLLECTIONS

 

                This Amendment No. 6, dated                 , 2002, is to the
Trademark License and Technical Assistance Agreement For Women’s Collections
dated March 4, 1998 by and between Latitude Licensing Corp. (“Licensors”) and
I.C. Isaacs & Company L.P. (“Licensee”) covering Women’s Products (the
“Agreement”).  Previous amendments to the Agreement were made effective on June
18, 1998, November 12, 1998, December 23, 1998, August 2, 1999 and June 21,
2000.  Capitalized terms used herein have the meaning ascribed to them in the
Agreement unless otherwise indicated.

 

                WHEREAS, the parties wish to extend the term of the Agreement
and to provide for certain fees as set forth herein.

 

                NOW, THEREFORE, for good and valuable consideration, the
sufficiency and receipt of which are hereby acknowledged, the parties agree to
amend the Agreement as follows:

 

                1.             Section 2 — Term and Territory

 

                Section 2.1 of the Agreement, relating to the term and
territory, is hereby amended by adding the following provision as the last
sentence:

 

In addition, Licensee shall have the option to renew this Agreement for an
additional term of four (4) years commencing January 1, 2008 and ending December
31, 2011.

 

                2.             Section 4 — Royalties

 

                Section 4.2 of the Agreement, is hereby amended by adding the
following to the Minimum Royalties table set forth therein:

 

Calendar Year

 

Minimum Royalties

 

2008

 

$

1,500,000

 

2009

 

$

1,500,000

 

2010

 

$

1,500,000

 

2011

 

$

1,500,000

 

 

                3.             Section 9 — Sales

 

                Section 9 of the Agreement, relating to sales, is hereby amended
by adding the following provision as Section 9.3:

 

9.3           3              Licensor shall retain the services of a consultant
or consultants (which may be or include the Designated

 

--------------------------------------------------------------------------------

 

Representative, as such term is hereinafter defined) (the “Consultants”) for the
purpose of assisting Licensee’s senior executives with the implementation of
this Agreement.  The Consultants shall provide such services by way of
interaction solely with Licensee’s senior management.  The Consultants shall be
selected by Licensor subject to the prior approval of the Chief Executive
Officer of Licensee.  Licensee shall pay the Licensor Consultants’ fees (the
“Consultants’ Fees”) in an aggregate amount of One Hundred Twenty-five Thousand
Dollars ($125,000) for calendar year 2002, and One Hundred Fifty Thousand
Dollars ($150,000) for each remaining calendar year under the term of this
Agreement; such amounts shall be inclusive of all expenses relating to such
Consultants for such calendar year and shall be prorated for any partial year
subsequent to 2002.  The Consultants’ Fees for each year under the term of this
Agreement shall be payable in equal installments on the last day of each fiscal
quarter of the Company (each March 31, June 30, September 30 and December 31 of
any year under the term of this Agreement), beginning on June 30, 2002.

 

For purposes of this Section, “Designated Representative” shall mean an
individual designated in writing to the Licensee by
                               as the designated representative of
                                .

 

                4.             Effective Date

 

This Amendment No. 6 shall be effective as of the date first written above.

 

                5.             Full Force and Effect

 

Except as expressly amended by this Amendment No. 6, the Agreement shall
continue in full force and effect.

 

                IN WITNESS WHEREOF, the parties, by their duly authorized
representatives, have executed this Amendment No. 6 as of the dates indicated
below.

 

 

LATITUDE LICENSING CORP.

 

I.C. ISAACS & COMPANY L.P.

 

 

 

 

 

By:

 

 

By:

 

Name:

 

 

Name:

Robert J. Arnot

Title:

 

 

Title:

Chief Executive Officer

Date:

 

 

Date:

 

 

2

--------------------------------------------------------------------------------

 

EXHIBIT D

 

I.C. ISAACS & COMPANY, INC.

STOCKHOLDERS’ AGREEMENT

 

 

                This STOCKHOLDERS’ AGREEMENT (the “Agreement”) dated
                         , 2002 is by and among I.C. Isaacs & Company, Inc., a
Delaware corporation having its principal office and place of business at 3840
Bank Street, Baltimore, Maryland 21224-2522 (the “Company”), and the Persons (as
hereinafter defined) whose names are set forth in Schedule A hereto (the
“Stockholders” and each a “Stockholder”).

 

RECITALS

 

                WHEREAS, Textile Investment International S.A., a Luxembourg
corporation (“Textile Investment”), a wholly-owned subsidiary of Würzburg
Holding S.A., a Luxembourg corporation, also known in abbreviation as Würzburg
S.A. (“Würzburg”), has acquired from Ambra Inc., a Delaware corporation
(“Ambra”), shares of Common Stock, par value $.0001 per share, of the Company
(the “Common Stock”), and Series A Convertible Preferred Stock, par value $.0001
per share, of the Company (the “Preferred Stock”) representing, in the aggregate
and upon conversion of the Preferred Stock, Three Million Nine Hundred Sixty-Six
Thousand Six Hundred Sixty-Seven (3,966,667) shares of Common Stock (the
“Subsequently Acquired Stock”); and

 

                WHEREAS, prior to Textile Investment’s acquisition of the Common
Stock and the Preferred Stock from Ambra, each Stockholder held the number of
shares of Common Stock set forth opposite its name on Schedule A hereto (the
“Initial Stock”); and

 

                WHEREAS, the Company and the Stockholders desire to establish in
this Agreement certain terms and conditions regarding the acquisition and
disposition of securities of the Company by the Stockholders and the
Stockholders’ relationship with the Company.

 

                NOW, THEREFORE, in consideration of the foregoing, and of the
mutual covenants and agreements hereinafter provided, the parties to this
Agreement, on behalf of themselves and their successors and assigns, agree as
follows:

 

1.             DEFINITIONS

 

                As used in this Agreement, the following terms shall have the
following meanings:

 

                Affiliate.  Affiliate shall have the meaning set forth in Rule
12b-2 promulgated under the Exchange Act, but shall include, in the case of a
Person who is an individual, any relative or spouse of such Person or any
relative of such spouse, any of whom has the same home as such Person.

 

                Beneficial Ownership.  Beneficial Ownership with respect to any
Equity Securities shall mean having “beneficial ownership” of such Equity
Securities as determined pursuant to Rule

 

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13d-3 promulgated under the Exchange Act, but omitting the words “within 60
days” from Subsection (d)(1)(i) of such definition.

 

                Board of Directors.  Board of Directors shall mean the Board of
Directors of the Company.

 

                Budget.  Budget shall mean for fiscal year 2002, the budget
attached hereto as Exhibit A.  For each fiscal year after 2002, Budget shall
mean the budget substantially in the form of Exhibit A prepared by Senior
Executives for such year and approved by the Board of Directors by a
Supermajority Vote at least thirty (30) days prior to the commencement of such
fiscal year.  If no Budget for a fiscal year is approved by the Board of
Directors by a Supermajority Vote at least thirty (30) days prior to the
beginning of a fiscal year, until such time as a budget for such fiscal year is
approved as set forth herein, expenses, by category (as such categories are set
forth in Exhibit A hereto), for such fiscal year shall be in the same proportion
to sales of the Company for such fiscal year as the proportion of expenses, by
category (as such categories are set forth in Exhibit A hereto), to sales of the
Company for the fiscal year immediately preceding such fiscal year.

 

                Class I Directors.  Class I Directors shall mean the Directors
elected to serve until the 2004 Annual Meeting of Stockholders.

 

                Class II Directors. Class II Directors shall mean the Directors
elected at the 2002 Annual Meeting of Stockholders to serve until the 2005
Annual Meeting of Stockholders.

 

                Class III Directors.  Class III Directors shall mean the
Directors elected to serve until the 2003 Annual Meeting of Stockholders.

 

                Code.  Code shall mean the Internal Revenue Code of 1986, as
amended.

 

                Common Stock.  Common Stock shall have the meaning set forth in
the Recitals of this Agreement.

 

                Company.  Company shall have the meaning set forth in the first
paragraph of this Agreement.

 

                Company Directors.  Company Directors shall mean (i) the
Company’s Chief Executive Officer and (ii) the Company’s President—Girbaud
Division, or (iii) if such positions are vacant or do not exist, the Chief
Executive Officer and the President—Girbaud Division are the same person, or for
whatever reason either or both of the individuals referred to in (i) and (ii)
above cannot serve, such officers of the Company as are proposed by a majority
of the Directors other than the Satisfactory Nominees.

 

                Company-Nominated Independent Directors.  Company-Nominated
Independent Directors shall have the meaning set forth in Section 3.01(b)
hereof.

 

                Company Process Agent.  Company Process Agent shall have the
meaning set forth in Section 13 of this Agreement.

 

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                Directors.  Directors shall mean the members of the Board of
Directors of the Company.

 

                Exchange Act.  Exchange Act shall mean the Securities Exchange
Act of 1934, as amended.

 

                Equity Rights.  Equity Rights shall mean, with respect to any
Person, any subscriptions, options, warrants, commitments, purchase rights,
preemptive rights or agreements of any kind (including any stockholders’ or
voting trust agreements) for the issuance, sale, or voting of, any Equity
Securities in such Person.

 

                Equity Securities.  Equity Securities of any Person shall mean
any capital stock of any class, partnership interests, membership interests, or
other ownership interests of any kind, in such Person, or securities convertible
into shares of capital stock of any class, partnership interests, membership
interests, or other ownership interests of any kind, in such Person.

 

                Extraordinary Transaction.  Extraordinary Transaction means any
of the following in any one or more transactions: (i) any merger, consolidation,
share exchange or other business combination of the Company or any Subsidiary;
(ii) any sale, lease, pledge, granting of a security interest in, or exchange of
substantially all of the assets of the Company or any Subsidiary; (iii) the
disposal of a material amount of assets of the Company or any Subsidiary other
than in the normal course of business in a transaction involving a member of an
Investor Group; (iv) any issuance by the Company or any Subsidiary of Equity
Rights or Equity Securities to any member of an Investor Group; (v) the adoption
of any plan or proposal for liquidation or dissolution of the Company; (vi) the
making or granting by the Company or any Subsidiary of any loan, advance,
guarantee, pledge or other financial assistance or tax benefit to any member of
an Investor Group, directly or indirectly; (vii) any other material contract,
arrangement or agreement, including without limitation any agreement for the
redemption of Stock, involving the Company or any Subsidiary and a member of an
Investor Group; (viii) any termination, nonrenewal or amendment of or waiver of
any of the terms of, any agreement between the Company or any Subsidiary and any
member of an Investor Group; (ix) any merger, tender offer, reverse stock split
or other transaction that would result in the Company ceasing to be a reporting
company pursuant to Section 12 of the Exchange Act or in the Common Stock
ceasing to be listed on any of (a) the OTC Bulletin Board, (b) the Nasdaq Stock
Market or (c) a national exchange; or (x) any transaction involving the Company
or any Subsidiary (whether or not involving a member of an Investor Group) and
including, without limitation, any reclassification of securities (including a
reverse stock split), recapitalization or reorganization of the Company, any
self-tender offer or a repurchase of Equity Rights or Equity Securities of the
Company by the Company or any Subsidiary or any other transaction (whether or
not with or into or otherwise involving a member of an Investor Group) which in
any such case has the effect, directly or indirectly, of increasing the
proportionate Beneficial Ownership by any member of an Investor Group of the
outstanding shares of any class of Equity Securities of the Company or any
Subsidiary.

 

                Independent Director.  Independent Director shall mean any one
(1) of the Independent Directors.

 

3

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                Independent Directors.  Independent Directors shall mean
Directors who are (apart from such directorship) independent of, and otherwise
not affiliated with, any Stockholder, the Company or any Subsidiary, or any
Affiliate of any of the foregoing, and none of whom shall be a current or former
officer, employee, consultant or adviser (financial, legal or other) or
Affiliate of any Stockholder, the Company or any Subsidiary or any Affiliate of
any of the foregoing.  Notwithstanding the foregoing, the Independent Directors
shall not include any person unless such person has business experience, stature
and character that is commensurate with service on the board of a publicly-held
enterprise and would be deemed an independent director for purposes of Nasdaq
Marketplace Rule 4200(a)(14).  Notwithstanding anything in this definition to
the contrary, the Company and the Stockholders agree that each of Jon Hechler
and Neal J. Fox shall be deemed to meet the criteria for Independent Directors
set forth in this definition.

 

                Initial Stock.  Initial Stock shall have the meaning set forth
in the Recitals of this Agreement.

 

                Investor Group.  Investor Group shall mean (i) the Stockholders,
(ii) any Affiliates of Stockholders, and/or (iii) any Person with whom any of
the Stockholders is part of a 13D Group.

 

                Partnership.  Partnership shall mean I.C. Isaacs & Company L.P.,
a Delaware limited partnership.

 

                Person.  Person shall mean any individual, corporation,
partnership, limited liability company, association, joint venture or trust.

 

                Preferred Stock.  Preferred Stock shall have the meaning set
forth in the Recitals of this Agreement.

 

                Process Agent.  Process Agent shall have the meaning set forth
in Section 13 of this Agreement.

 

                Quarterly Payment Amounts.  Quarterly Payment Amounts shall have
the meaning set forth for such term in the Subordinated Secured Promissory Note.

 

                Quarterly Payment Dates.  Quarterly Payment Dates shall have the
meaning set forth for such term in the Subordinated Secured Promissory Note.

 

                SEC.  SEC shall mean the U.S. Securities and Exchange
Commission.

 

                Satisfactory Nominee.  Satisfactory Nominee shall mean a person
who is (i) a Stockholder Director or (ii) a Stockholder-Nominated Independent
Director.

 

                Securities Act.  Securities Act shall mean the Securities Act of
1933, as amended.

 

                Senior Executives.  Senior Executives shall mean the following
executive officers of the Company only:  (i) the President and the Chief
Executive Officer, (ii) the Chief Financial Officer and (iii) the President —
Girbaud Division.

 

4

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                Senior Executive Employment Agreements.  Senior Executive
Employment Agreements shall mean (i) that certain Executive Employment Agreement
by and between Robert J. Arnot and the Partnership, and, for the limited
purposes set forth therein, the Company, dated as of April 17, 2002; (ii) that
certain Executive Employment Agreement by and between Daniel Gladstone and the
Partnership and, for the limited purposes set forth therein, the Company, dated
as of April 17, 2002; and (iii) that certain Executive Employment Agreement by
and between Eugene C. Wielepski and the Partnership and, for the limited
purposes set forth therein, the Company, dated as of April 17, 2002.

 

                Stock.  Stock shall mean the Initial Stock, the Subsequently
Acquired Stock and any Equity Securities of the Company or any of its successors
or assigns hereinafter issued or paid, directly or indirectly, in respect of the
Initial Stock and/or the Subsequently Acquired Stock pursuant to the exercise of
any conversion rights, any stock split, stock dividend, recapitalization,
merger, share exchange or otherwise.

 

                Stockholder.  Stockholder shall have the meaning set forth in
the first paragraph of this Agreement.

 

                Stockholder Director.  Stockholder Director shall mean any
Director who is (a) a Stockholder (if such Stockholder is an individual), (b)
any person who is a current or former officer, employee, partner, owner,
consultant or advisor (financial, legal or other) or Affiliate of any
Stockholder, and (c) any other person proposed by a Stockholder who is not a
Stockholder-Nominated Independent Director and who, in the case of (a), (b) or
(c), at the time of nomination or appointment to the Board of Directors shall
have been satisfactory to the Board of Directors, as determined in its exercise
of its fiduciary duties to the stockholders of the Company.

 

                Stockholder-Nominated Independent Director. 
Stockholder-Nominated Independent Director shall have the meaning set forth in
Section 3.01(b) hereof.

 

                Stockholders.  Stockholders shall have the meaning set forth in
the first paragraph of this Agreement.

 

                Subordinated Secured Promissory Note.  Subordinated Secured
Promissory Note shall mean the Amended and Restated Subordinated Secured
Promissory Note of the Company dated as of May              , 2002 made payable
to the order of Textile Investment and having an original principal amount of
Six Million Five Hundred Fifty-Seven Thousand Nine Hundred Eight and 53/100
Dollars ($6,557,908.53).

 

                Subsequently Acquired Stock.  Subsequently Acquired Stock shall
have the meaning set forth in the Recitals of this Agreement.

 

                Subsidiary.  Subsidiary shall mean any Person of which more than
fifty percent (50%) of the outstanding Equity Securities having voting power
generally in the election of directors is Beneficially Owned, directly or
indirectly, by the Company, and shall include, without limitation, the
Partnership.

 

5

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                Supermajority Vote.  Supermajority Vote shall mean the
affirmative vote of a number of Directors equal to at least two-thirds (2/3) of
the total number of seats on the Board of Directors (including any seats that
are, at the time of such vote, vacant).

 

                13D Group.  13D Group shall mean any group of Persons who, with
respect to the acquiring, holding, voting or disposing of Voting Securities
would, assuming ownership of the requisite percentage thereof, be required under
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder to file a statement on Schedule 13D with the SEC as a “person” within
the meaning of Section 13(d)(3) of the Exchange Act, or who would be considered
a “person” under Section 13(g)(3) of the Exchange Act.

 

                382 Affiliate.  382 Affiliate shall have the meaning set forth
in Section 2.01 hereof.

 

                2002 Annual Meeting of Stockholders.  2002 Annual Meeting of
Stockholders shall mean the 2002 annual meeting of stockholders of the Company
and any adjournments or postponements thereof.

 

                Transfer.  Transfer shall mean to sell, assign, pledge, grant a
security interest in, hypothecate or otherwise to transfer, voluntarily or
involuntarily, by operation of law or otherwise.

 

                Vote of the Independent Directors.  Vote of the Independent
Directors shall mean the affirmative vote of at least a majority of the
Independent Directors, provided that such affirmative vote of at least a
majority of the Independent Directors shall not constitute a Vote of the
Independent Directors unless (a) such affirmative vote of at least a majority of
the Independent Directors includes the affirmative vote of not fewer than one
(1) Independent Director who is not a Satisfactory Nominee, and (b) at the time
of such vote, there shall be no fewer than two (2) Independent Directors who are
not Satisfactory Nominees; provided that preceding clause (b) of this definition
shall not be applicable with respect to a vote taken when one (1)
Company-Nominated Independent Director position is vacant if such position shall
have been vacant for a period of more than thirty (30) consecutive days without
a replacement Company-Nominated Independent Director having been proposed as a
nominee to fill such vacant position of Company-Nominated Independent Director
in accordance with Section 3.01(b) hereof.

 

                Voting Securities.  Voting Securities shall mean any outstanding
securities or other interests entitling the holder thereof to vote generally in
the election of directors or managers of a Person.

 

2.             RESTRICTIONS ON TRANSFERS AND ACQUISITIONS

2.01.        Restrictions on Transfer.  No Stockholder may Transfer any interest
in the Stock except to (i) the Company, (ii) an Affiliate of such Stockholder,
(iii) any Person pursuant to Rule 144 promulgated under the Securities Act,
provided that no such Transfers under this clause (iii) are made to any Person
that has (together with its Affiliates and any Persons that are, together with
such Person and/or any of its Affiliates, part of any 13D Group, after giving
effect to such

 

6

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Transfer) Beneficial Ownership of Equity Securities representing more than 5% of
the total Equity Securities of the Company, or (iv) any Person pursuant to an
exemption to the registration requirements of the Securities Act, provided that
the approval requirements of Section 3.05 hereof are satisfied; provided further
that the restrictions contained in this Agreement shall continue to be
applicable to the Stock following any transfer pursuant to (ii) or (iv) above,
and the transferees of any Stock pursuant to (ii) and (iv) above shall have
executed and delivered to the Company an Instrument of Accession substantially
in the form attached hereto as Exhibit B.  Notwithstanding the foregoing, from
and after the date hereof and to and including November 14, 2004, neither the
Stockholders nor any other Person(s) the ownership of securities by which would
be attributable to the Stockholders for purposes of applying Section 382 of the
Code (a “382 Affiliate”), shall Transfer, directly or indirectly, any Equity
Security or Equity Rights of the Company if such Transfer, together with all
other acquisitions and/or dispositions of Equity Securities or Equity Rights of
the Company prior to and/or subsequent to the date hereof involving any one or
more of (i) Textile Investment, (ii) Würzburg, (iii) any 382 Affiliate, and (iv)
any other party (to the extent that the relevant acquisition or disposition
involving such other party is actually known to the Stockholders or Latitude
Licensing Corp. or is reported pursuant to the Exchange Act), would result in an
“ownership change” within the meaning of Section 382 of the Code.

 

2.02.        Transfers in Breach of this Agreement. In the event of any Transfer
of Stock in breach of this Agreement, commencing immediately upon the time of
such attempted Transfer, (a) such Transfer shall be void and of no effect, (b)
no dividend of any kind or any distribution pursuant to any liquidation,
redemption or otherwise shall be paid by the Company to the purported transferee
in respect of such Stock (all such rights to payment by the transferring
Stockholder and/or the purported transferee being deemed waived), and (c)
neither the transferring Stockholder nor the purported transferee shall be
entitled to exercise any such rights with respect to such Stock until such
Transfer in breach of this Agreement has been rescinded.

2.03         RESTRICTIONS ON ACQUISITIONS

                From and after the date hereof and to and including November 14,
2004, neither the Stockholders nor any 382 Affiliate, shall acquire, directly or
indirectly, any Equity Securities or Equity Rights of the Company if such
acquisition, together with all other acquisitions and/or dispositions of Equity
Securities or Equity Rights of the Company prior to and/or subsequent to the
date hereof involving any one or more of (i) Textile Investment, (ii) Würzburg,
(iii) any 382 Affiliate, and (iv) any other party (to the extent that the
relevant acquisition or disposition involving such other party is actually known
to the Stockholders or Latitude Licensing Corp. or is reported pursuant to the
Exchange Act), would result in an “ownership change” within the meaning of
Section 382 of the Code.

 

3.             VOTING PROVISIONS

3.01.        Nomination of Satisfactory Nominees.  (a)  At all times during the
term of this Agreement, the Company and the Stockholders shall use their best
efforts to cause the composition of the Board of Directors to reflect the
following proportionate representation of Stockholder Directors, Company
Directors and Independent Directors and to cause the

 

7

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Satisfactory Nominees to be apportioned as evenly as possible among the Class I
Directors, Class II Directors and Class III Directors:

 

                Three (3) Stockholder Directors

                Two (2) Company Directors

                Four (4) Independent Directors

 

(b)           At each annual meeting of stockholders of the Company at which the
term of any Independent Director is to expire and at any time that a vacancy of
an Independent Director on the Board of Directors is to be filled, the identity
of the person nominated by the Company to stand for election to the Board of
Directors or to be appointed to fill such vacancy, as the case may be, shall be
determined in the following manner.  If the term of any Independent Director
initially proposed by the Stockholders or, thereafter, of any Independent
Director proposed by the committee referred to in this sentence (each, a
“Stockholder-Nominated Independent Director” and, collectively, the
“Stockholder-Nominated Independent Directors”), expires or such position on the
Board of Directors becomes vacant, a committee of Directors, a minority of whom
shall consist of Directors other than Satisfactory Nominees, shall propose to
the Board of Directors the nominee to serve as an Independent Director on the
slate to be recommended by the Board of Directors to fill such vacancy.  If the
term of any Independent Director initially proposed by the Senior Executives or,
thereafter, of any Independent Director proposed by the committee referred to in
this sentence (each, a “Company-Nominated Independent Director” and,
collectively, the “Company-Nominated Independent Directors”), expires or such
position on the Board of Directors becomes vacant, a committee of Directors, a
minority of whom shall consist of Directors who are Satisfactory Nominees, shall
propose to the Board of Directors the nominee to serve as an Independent
Director on the slate to be recommended by the Board of Directors to fill such
vacancy.  The Board of Directors shall approve the Independent Directors
proposed in accordance with the preceding two (2) sentences unless the Board of
Directors determines that to do so would constitute a breach of its fiduciary
obligations to the Company’s stockholders.  For purposes of this Agreement, Neal
J. Fox and Jon Hechler (assuming he was elected to the Board of Directors at the
2002 Annual Meeting of Stockholders) shall be deemed to be Independent Directors
initially proposed by the Senior Executives.

 

(c)           For purposes of this Agreement, (i) the Company shall be
considered to have used its “best efforts,” as required in Subsection (a), if it
causes each Satisfactory Nominee and each Company Director whose class then
stands for election to be included in the slate of nominees recommended by the
Board of Directors to the Company’s stockholders for election as directors and
uses all reasonable efforts to cause the election of such Satisfactory Nominees
and Company Nominees, including the solicitation of proxies in favor of the
election of such persons, and (ii) the Stockholders shall be considered to have
used their “best efforts,” as required in Subsection (a) above, if in each
election of Directors they vote the Stock in favor of the Stockholder Directors,
the Company Directors and the Independent Directors.

 

3.02         Declassification of the Board of Directors.      The Company shall
include in its proxy statement for the annual meeting of stockholders to be held
in 2003 a proposal that the

 

8

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Amended and Restated Certificate of Incorporation of the Company be amended to
declassify the Board of Directors and shall recommend to the stockholders of the
Company that such proposal be approved.

 

3.03.        Committees.  The Board of Directors will not establish any
committee authorized to exercise the power of the Board of Directors unless (i)
the Directors who are not Satisfactory Nominees are granted representation on
such committee consistent with the proportions of the total number of Directors
who are not Satisfactory Nominees to the total number of Directors as described
in Section 3.01(a) and (b) hereof, or (ii) in the case of the Audit Committee
and Compensation Committee, such committees consist of equal numbers of
Stockholder-Nominated Independent Directors and Company-Nominated Independent
Directors.  A committee of five (5) Directors having as its members two (2)
Directors who are not Satisfactory Nominees and three (3) Directors who are
Satisfactory Nominees shall be deemed to satisfy the requirements of clause (i)
of the preceeding sentence.  The Board of Directors shall not establish or
employ committees as a means designed to circumvent the purposes of this
Agreement.

 

3.04         Voting Provisions.  Except for any Extraordinary Transaction
approved by a Vote of the Independent Directors pursuant to Section 3.05 hereof,
the Company shall not take, or cause or permit any Subsidiary to take, any of
the following actions without approval by the Board of Directors by a
Supermajority Vote:

 

(a)           the creation of any new Subsidiary which is in any way
advantageous or preferential to any member of an Investor Group;

 

(b)           the entering into by the Company or any of its Subsidiaries of any
joint ventures, partnerships or profit sharing agreements;

 

(c)           the guarantee by the Company or any Subsidiary of the debts or
obligations of any entity other than a wholly-owned Subsidiary;

 

(d)           the entering into by the Company or any Subsidiary of any new
supplier or distribution agreements;

 

(e)           any media expenditures or sponsorships by the Company or any
Subsidiary inconsistent with past practice;

 

(f)            any material change to, or deviations from, the Budget;

 

(g)           the hiring and termination of any of the Senior Executives;

 

(h)           the loaning or advancing of money by, or bank overdrafts on any
account of, the Company or any Subsidiary in excess of $750,000 outstanding at
any time;

 

(i)            the use of cash or other assets of the Company or any Subsidiary,
or the incurring of any liability by the Company or any Subsidiary, in
connection with the opening of

 

9

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any retail stores, outlets or other retail distribution outlets; provided,
however, that nothing in this subsection shall prevent the Company or any
Subsidiary from entering into franchise agreements allowing franchisees to open
retail stores or outlets using trademarks owned by or licensed to the Company or
any Subsidiary (to the extent that such franchise agreements do not result in
any significant cost to, or the incurrence of liability by, the Company or any
Subsidiary);

 

(j)            the incurring by the Company or the Partnership of any costs or
liabilities, including without limitation liabilities pursuant to any pledge,
granting of a security interest, or guaranty, not directly related to the
apparel business of the Company or the Partnership;

 

(k)           any prepayment of the Subordinated Secured Promissory Note; or

(l)            the making of any quarterly installment of principal and interest
on the Subordinated Secured Promissory Note in the Quarterly Payment Amounts on
the corresponding Quarterly Payment Dates set forth in the Subordinated Secured
Promissory Note unless the Partnership has an average of at least Two Million
Five Hundred Thousand Dollars ($2,500,000) of availability under its line of
credit from Congress Financial Corporation (including its successors and
assigns) during the forty-five (45) day period immediately prior to such
Quarterly Payment Date.

 

3.05         Special Approval of Extraordinary Transaction.  The Company shall
not engage in, and shall not cause or permit any Subsidiary to engage in, any
Extraordinary Transaction unless it is determined by a Vote of the Independent
Directors that such Extraordinary Transaction is fair to the public stockholders
of the Company without taking into account any effect of the stock ownership of
the Stockholders and their Affiliates.  In making such determination, the
Independent Directors shall be entitled, in their sole discretion and at the
expense of the Company, to retain the services of independent legal counsel and
independent financial advisors to advise them regarding their fiduciary duties
and the overall fairness of the transaction.

 

3.06         Covenants of Stockholders.

 

                (a)           Except by virtue of the Stockholders’
representation on the Board, neither the Stockholders nor any of their
Affiliates shall act, alone or in concert with others, to seek to control the
day-to-day management of the Company or Board of Directors.

 

(b)           Neither the Stockholders nor any of their Affiliates shall, either
alone or in concert with others, (i) initiate or propose any stockholder
proposal or stockholder nominations or make, or in any way participate in,
directly or indirectly, any “solicitation” of “proxies” to vote, or seek to
influence any Person with respect to the voting of, any voting securities, or
become a “participant” in a “solicitation” (as such terms are defined in
Regulation 14A promulgated under the Exchange Act, as in effect as of the date
hereof) in contravention of any of the provisions of this Agreement; (ii)
otherwise act in contravention of the purposes of this Agreement or (iii)
advise, assist or encourage or finance other Persons in connection with any of
the foregoing types of activities.

 

10

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4.             LEGENDS ON CERTIFICATES

 

The certificates evidencing the Stock held by the Stockholders shall bear any
legends required by federal or state securities law and the following legend
required by Section 202 (a) of the Delaware General Corporation Law:

“The shares represented by this Certificate are subject to a Stockholders’
Agreement dated as of                   , 2002, a copy of which is on file at
the principal office of the Company and will be furnished to any prospective
purchaser on request.  Such Stockholders’ Agreement provides, among other
things, for certain restrictions on the sale, transfer, pledge, granting of a
security interest, hypothecation or disposition of the shares represented by
this Certificate.”

5.             BENEFIT

This Agreement shall be binding upon and shall operate for the benefit of the
parties hereto and their respective successors and assigns.

6.             INVALIDITY OF ANY PROVISION

The invalidity or unenforceability of any provision of this Agreement shall not
affect the other provisions hereof, and the Agreement shall be construed in all
respects as if such invalid or unenforceable provisions were omitted, provided
that the parties shall negotiate in good faith to replace the invalid provision
with a valid provision reflecting the same balance of economic interests.

7.             MODIFICATION OF AGREEMENT

No modification, amendment or waiver of any of the provisions of this Agreement
shall be valid unless approved by a majority of the Board of Directors
(excluding for this purpose any Director who is a Satisfactory Nominee) and made
in writing and signed by the Company and Stockholders owning, in the aggregate,
a majority of the Stock subject to this Agreement.

8.             FURTHER ACTION

Upon approval by the Board of Directors, a copy of this Agreement shall be made
a part of the minutes of the Company.

9.             ATTORNEY’S FEES AND COSTS

If any action at law or in equity (including any arbitration proceeding under
Section 11 hereof) is necessary to enforce or interpret the terms of this
Agreement, the prevailing party shall

 

11

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be entitled to reasonable attorneys’ fees, costs, and necessary disbursements,
in addition to any other relief to which it may be entitled.

 

10.           APPLICABLE LAW

This Agreement shall be construed in accordance with the laws of the State of
Delaware without the application of principles of conflicts of law.

11.           ARBITRATION OF DISPUTES

(a)  Any dispute regarding any aspect of this Agreement or any act which
allegedly has or would violate any provision of this Agreement will be submitted
to binding arbitration.  Such arbitration shall be conducted before an
arbitrator sitting in New York, New York or in such other location as may be
agreed upon by the Company and the Stockholders, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association then in
effect.  Judgment may be entered on the award of the arbitrator in any court
having competent jurisdiction.

(b)  The arbitration provision set forth in clause (a) of this Section shall not
restrict or otherwise affect the right of any party to this Agreement to bring
suit for specific performance of this Agreement.  The parties agree that
irreparable damage would occur in the event that any of the provisions of
Articles 2 or 3 of this Agreement was not performed in accordance with its
specific terms or was otherwise breached.  Each party agrees that, in the event
of any breach or threatened breach by such party of any covenant or obligation
contained in this Agreement, the other parties shall be entitled (in addition to
any other remedy that may be available to them, including monetary damages) to
seek and obtain (i) a decree or order of specific performance to enforce the
observance and performance of such covenant or obligation, and (ii) an
injunction restraining such breach or threatened breach.  The parties further
agree that neither the Company nor any other Person shall be required to obtain,
furnish or post any bond or similar instrument in connection with or as a
condition to obtaining any remedy referred to in this Section 11, and
irrevocably waive any rights they may have to require the obtaining, furnishing
or posting of any such bond or similar instrument.

12.          JURISDICTION; VENUE

 

                                                (A)          Each party to this
Agreement hereby irrevocably consents to the exclusive jurisdiction of the
Supreme Court of the State of New York for the County of New York and/or United
States District Court for the Southern District of New York (collectively, the
“New York Courts” and each a “New York Court”) in connection with any and all
claims based upon or arising out of this Agreement or the matters or
transactions contemplated herein, and irrevocably agrees that all claims in
respect of any such matters or transactions may be heard in either of such New
York Courts.

 

                                                (B)          Each party to this
Agreement hereby waives any objection to jurisdiction and venue of any such
claim brought, or action instituted, hereunder in any New York Court and further
agrees not to assert (i) any defense based on the lack of

 

12

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jurisdiction or venue in any New York Court, or (ii) any defense of improper
venue or inconvenient forum in any New York Court.

 

                                                (C)          Each party to this
Agreement hereby waives any right of jurisdiction on account of the place of
such party’s residence, or domicile, or on account of such party’s place of
incorporation, formation or organization.

 

                                                (D)          Each party to this
Agreement hereby acknowledges and agrees that any forum other than a New York
Court is an inconvenient forum and that a suit brought by any party against any
other party in any court other than a New York Court should be transferred to a
New York Court.

 

13.          SERVICE OF PROCESS; TEXTILE INVESTMENT; WÜRZBURG

                                                (a)           Textile Investment
hereby irrevocably and unconditionally appoints Steven D. Dreyer, Esquire of
Hall Dickler Kent Goldstein & Wood, LLP, currently located at 909 Third Avenue,
27th Floor, New York, New York 10022 (the “Process Agent”) as its agent to
receive on behalf of Textile Investment service of copies of the summons and
complaint and any other process which may be served in any action or proceeding
within the scope of Section 11 or 12 of this Agreement in any New York Court and
agrees promptly to appoint a successor Process Agent in the City of New York
(which appointment such successor Process Agent shall accept in writing) prior
to the termination for any reason of the appointment of the Process Agent (or
the termination of any successor Process Agent).  In any such action or
proceeding in any New York Court, such service may be made on Textile Investment
by delivering a copy of such process to Textile Investment in care of the
Process Agent at the Process Agent’s above address and by depositing a copy of
such process in the mails (certified or registered, if available), or by
overnight courier, addressed to Textile Investment at its address for notices in
this Agreement (such service to be effective upon receipt by the Process Agent,
and the depositing of such service in the mails (or delivery thereof to such
overnight courier)).  Textile Investment hereby irrevocably and unconditionally
authorizes and directs the Process Agent to accept such service on Textile
Investment’s behalf.  As an alternative method of service, Textile Investment
hereby irrevocably and unconditionally consents to the service of any and all
process in any such action or proceeding in any New York Court by mailing of
copies of such process to Textile Investment by mail (certified or registered,
if available), or by overnight courier, at its address for notices in this
Agreement.  Textile Investment agrees that, to the fullest extent permitted by
applicable law, a final judgment in any such action or proceeding in any New
York Court shall be conclusive and may be enforced in any other jurisdiction by
suit on the judgment or in any other manner provided by law.  Textile Investment
represents and warrants to the other parties to this Agreement that the Process
Agent has accepted its appointment as process agent for Textile Investment as
herein described, and Textile Investment covenants to give the other parties to
this Agreement prompt written notice of (x) any change in the name or address of
the Process Agent (or any successor Process Agent) and (y) the name and address
of any successor Process Agent.

 

13

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                                                (b)           Würzburg hereby
irrevocably and unconditionally appoints the Process Agent as its agent to
receive on behalf of Würzburg service of copies of the summons and complaint and
any other process which may be served in any action or proceeding within the
scope of Section 11 or 12 of this Agreement in any New York Court and agrees
promptly to appoint a successor Process Agent in the City of New York (which
appointment such successor Process Agent shall accept in writing) prior to the
termination for any reason of the appointment of the Process Agent (or the
termination of any successor Process Agent).  In any such action or proceeding
in any New York Court, such service may be made on Würzburg by delivering a copy
of such process to Würzburg in care of the Process Agent at the Process Agent’s
address and by depositing a copy of such process in the mails (certified or
registered, if available), or by overnight courier, addressed to Würzburg at its
address for notices in this Agreement (such service to be effective upon receipt
by the Process Agent, and the depositing of such service in the mails (or
delivery thereof to such overnight courier)).  Würzburg hereby irrevocably and
unconditionally authorizes and directs the Process Agent to accept such service
on Würzburg’s behalf.  As an alternative method of service, Würzburg hereby
irrevocably and unconditionally consents to the service of any and all process
in any such action or proceeding in any New York Court by mailing of copies of
such process to Würzburg by mail (certified or registered, if available), or by
overnight courier, at its address for notices in this Agreement.  Würzburg
agrees that, to the fullest extent permitted by applicable law, a final judgment
in any such action or proceeding in any New York Court shall be conclusive and
may be enforced in any other jurisdiction by suit on the judgment or in any
other manner provided by law.  Würzburg represents and warrants to the other
parties to this Agreement that the Process Agent has accepted its appointment as
process agent for Würzburg as herein described, and Würzburg covenants to give
the other parties to this Agreement prompt written notice of (x) any change in
the name or address of the Process Agent (or any successor Process Agent) and
(y) the name and address of any successor Process Agent.

 

                                                (c)           The Company hereby
irrevocably and unconditionally appoints its registered agent, as specified in
its charter, as amended from time to time (the “Company Registered Agent”), as
its agent to receive on behalf of the Company service of copies of the summons
and complaint and any other process which may be served in any action or
proceeding within the scope of Section 11 or 12 of this Agreement in any New
York Court.  In any such action or proceeding in any such New York Court, such
service may be made on the Company by delivering a copy of such process to the
Company in care of the Company Registered Agent at the Company Registered
Agent’s address and by depositing a copy of such process in the mails (certified
or registered, if available), or by overnight courier, addressed to the Company
at its address for notices in this Agreement (such service to be effective upon
receipt by the Company Registered Agent, and the depositing of such service in
the mails (or delivery thereof to such overnight courier)).  The Company hereby
irrevocably and unconditionally authorizes and directs the Company Registered
Agent to accept such service on the Company’s behalf.  As an alternative method
of service, the Company hereby irrevocably and unconditionally consents to the
service of any and all process in any such action or proceeding in any New York
Court by

 

14

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mailing of copies of such process to the Company by mail (certified or
registered, if available), or by overnight courier, at its address for notices
in this Agreement.  The Company agrees that, to the fullest extent permitted by
applicable law, a final judgment in any such action or proceeding in any New
York Court shall be conclusive and may be enforced in any other jurisdiction by
suit on the judgment or in any other manner provided by law.  The Company
represents and warrants to the other parties to this Agreement that the Company
Registered Agent has accepted its appointment as registered agent for the
Company as herein described.

 

14.          WAIVER OF IMMUNITY

Each party to this Agreement represents, warrants, and agrees that to the extent
such party may have or hereafter acquire any right of sovereign or other
immunity from suit, court jurisdiction, attachment in aid of execution of
judgment, set-off, execution or other legal process, such party hereby
irrevocably and unconditionally waives, to the fullest extent permitted by law,
such right of immunity with respect to its obligations hereunder and with
respect to legal proceedings to enforce the same and to enforce any judgment
rendered in such proceedings.

15.           ENTIRE AGREEMENT

This Agreement supersedes all agreements as to the subject matter hereof among
the Stockholders and the Company including in each case amendments thereto,
previously executed by the Stockholders and the Company, including without
limitation the Company’s Shareholders’ Agreement dated August 9, 1999.  This
Agreement sets forth all of the provisions, covenants, agreements, conditions
and undertakings between the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings express or implied, oral or written as to the subject matter
hereof.

16.           NOTICES

Unless otherwise specified herein, all notices, requests, demands and other
communications to be given under this Agreement shall be in writing and shall be
deemed given if (i) delivered in person, or by United States mail, certified or
registered, with return receipt requested, (ii) if sent by telex or facsimile
transmission, with a copy mailed on the same day in the manner provided in (i)
above, when transmitted and receipt is confirmed by telephone, or (iii) if
otherwise actually delivered:

TO THE COMPANY:

 

3840 Bank Street, Baltimore, MD 21224-2522;

 

 

 

TO ANY STOCKHOLDER:

 

As the name and address of such Stockholder appears on the records of the
Company;

 

or at such other address as may have been furnished by such person in writing to
the other parties.  Any such notice, demand or other communication shall be
deemed to have been given on the date actually delivered or as of the date
mailed, as the case may be.

 

15

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17.           TERM OF AGREEMENT

This Agreement shall be effective until the earliest to occur of (i) the
Stockholders becoming the Beneficial Owners of all of the Equity Securities of
the Company; (ii) liquidation or dissolution of the Company; or (iii) November
14, 2004.

 

16

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IN WITNESS WHEREOF, the parties hereto have executed and sealed this Agreement
as of the day and year first above written.

 

 

I.C. ISAACS & COMPANY, INC.

 

 

 

 

By:

 

 

 

 

Robert J. Arnot, Chief Executive Officer

 

 

 

 

STOCKHOLDERS:

 

 

 

 

TEXTILE INVESTMENT INTERNATIONAL S.A.

 

 

 

 

By:

 

 

 

 

Name:

René Faltz

 

 

Title:

Managing Director

 

 

 

 

By:

 

 

 

 

Name:

Tom Felgen

 

 

Title:

Managing Director

 

 

 

 

 

 

 

 

 

 

WÜRZBURG HOLDING S.A.

 

 

 

 

By:

 

 

 

 

Name:

René Faltz

 

 

Title:

Managing Director

 

 

 

 

By:

 

 

 

 

Name:

Tom Felgen

 

 

Title:

Managing Director

 

17

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SCHEDULE A

 

 

Stockholder

 

No. of Shares of Common Stock

 

Würzburg Holding S.A.

 

500,000

 

Textile Investment International S.A.

 

0

 

 

 

18

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EXHIBIT A

 

Budget

 

 

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EXHIBIT B

 

Instrument of Accession

 

 

The undersigned,                           , in order to become the owner or
holder of                       shares of Common Stock, $.0001 par value per
share (the “Shares”), of I.C. Isaacs & Company, Inc., a Delaware corporation,
hereby agrees to become a Stockholder under, and a party to, that certain
Stockholders’ Agreement, dated as of                 , 2002 (the “Stockholder
Agreement”), a copy of which is attached hereto.  This Instrument of Accession
shall become a part of such Stockholders’ Agreement.

                Executed as of the date set forth below under the laws of the
State of Delaware.

 

 

 

 

Signature:

 

 

Address:

 

 

 

 

 

 

 

 

 

 

 

Date:

 

 

Accepted:

 

I.C. ISAACS & COMPANY, INC.

 

 

By:

 

 

 

Date:

 

 

2

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EXHIBIT E

 

Second Certificate of Amendment to

 

Certificate of Designation, Number, Voting Powers,

Preferences and Rights of the Series of the Preferred Stock of

 

I.C. Isaacs & Company, Inc.

 

Designated as Series A Convertible Preferred Stock

 

 

I.C. Isaacs & Company, Inc. (the “Corporation”), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the “DGCL”), does hereby certify as follows:

FIRST:    The name of the Corporation is I.C. Isaacs & Company, Inc.

SECOND:  The Corporation desires to amend its Amended and Restated Certificate
of Incorporation (the “Certificate of Incorporation”) by amending certain
provisions contained in the Certificate of Designation relating to the Series A
Convertible Preferred Stock of the Corporation, as filed with the Secretary of
State of the State of Delaware (the “Secretary”) on November 5, 1999, as amended
pursuant to a Certificate of Amendment filed with the Secretary on March 30,
2001 (as so amended, the “Certificate of Designation”).

THIRD:  The following resolutions were duly adopted by the Board of Directors of
the Corporation on                         , 2002, in accordance with the
provisions of Sections 151 and 242 of the DGCL and pursuant to the authority
conferred on the Board of Directors of the Corporation by the Certificate of
Incorporation.  Pursuant to such resolutions, the Certificate of Designation is
hereby amended, from and after the date of acceptance of this Certificate of
Amendment by the Secretary, as follows:

WHEREAS, under Article Fourth of the Amended and Restated Certificate of
Incorporation (the “Certificate of Incorporation”) of the Corporation, the Board
of Directors of the Corporation is permitted to authorize the issuance of one or
more classes of its preferred stock with the designations, preferences, and
relative participating, optional, or other rights and qualifications,
limitations, or restrictions as may be fixed by the Board of Directors, and to
amend the same; and

WHEREAS, pursuant to the authority conferred on the Board of Directors of the
Corporation by the Certificate of Incorporation and in the provisions of Section
151 of the General Corporation Law of the State of Delaware, (i) the Corporation
duly adopted on November 1, 1999 a resolution providing for the establishment
and issuance of a series of preferred stock of the Corporation, par value
$0.0001 per share, which was designated “Series A Convertible Preferred Stock”
(the “Preferred Stock”) and which consisted of 3,300,000 shares, and had such
preferences and rights as are set forth in the Certificate of Designation filed
with the Secretary of State of the State of Delaware (the “Secretary”) on
November 5, 1999 (the “Original Certificate of Designation”), and (ii)

 

--------------------------------------------------------------------------------

 

the Corporation duly adopted on March 23, 2001 a resolution providing for an
amendment to the Original Certificate of Designation to amend the preferences
and rights of the Preferred Stock as set forth in the Certificate of Amendment
filed with the Secretary on March 30, 2001 (as so amended, the “Certificate of
Designation”); and

WHEREAS, the directors deem it fair, advisable and in the best interests of the
Corporation and its stockholders to amend the terms of the Preferred Stock as
set forth in the Certificate of Designation as follows:

RESOLVED, that Resolution Paragraphs (2) through (3) of the Certificate of
Designation shall be deleted in their entirety and replaced with the following
Paragraphs (2) through (3):

(2)           Until and including December 31, 2006 (the “Conversion Period”),
the shares of Preferred Stock shall be convertible, in whole as to all of such
shares but not in part, at the option of the holders thereof, into fully paid
and nonassessable shares of common stock of the Corporation, par value $0.0001
per share (the “Common Stock”), at a conversion ratio of 1:1 (the “Conversion
Ratio”).  The shares of Common Stock issuable upon conversion of the shares of
Preferred Stock, when such shares of Common Stock shall be issued in accordance
with the terms thereof, are hereby declared to be and shall be duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock held by the
holders thereof.

(3)                                  a.             To convert shares of
Preferred Stock into shares of Common Stock pursuant to Paragraph (2) above, the
holders thereof shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or to the transfer agent for the
Preferred Stock or the Common Stock, together with written notice to the
Corporation stating that it elects to convert the same and setting forth the
name or names in which the certificate or certificates for the shares of Common
Stock should be issued.

b.             No fractional shares of Common Stock shall be issued upon
conversion of shares of Preferred Stock.  Any fractional shares of Common Stock
resulting from conversion of the Preferred Stock shall be rounded down to the
nearest whole share.

c.             The Corporation shall, as soon as practicable after the surrender
of the certificate or certificates evidencing shares of Preferred Stock for
conversion at the office of the Corporation or the transfer agent for the
Preferred Stock or the Common Stock, issue to each holder of such shares, or its
nominee or nominees, a certificate or certificates evidencing the number of
shares of Common Stock (and any other securities and property) to which it shall
be entitled.  Such conversion shall be deemed to have been

 

2

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made immediately prior to the close of business on the date of such surrender of
the shares of Preferred Stock to be converted, and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock at such date and shall, with respect to such shares, have only
those rights of a holder of Common Stock of the Corporation.  At the time the
conversion is deemed to have occurred, the rights of the holders of the shares
of Preferred Stock shall cease except for the right to receive such shares of
Common Stock.

d.             If outstanding shares of the Common Stock shall be subdivided
into a greater number of shares, or combined into a smaller number of shares, or
a dividend or other distribution in shares of Common Stock or other securities
of the Corporation convertible into or exchangeable for shares of Common Stock
shall be paid in respect of the outstanding shares Common Stock (in which latter
event the number of shares of Common Stock issuable upon the conversion or
exchange of such securities shall be deemed to have been distributed), the
Conversion Ratio in effect immediately prior to such subdivision or combination
or at the record date of such dividend or distribution shall, simultaneously
with the effectiveness of such subdivision or combination or immediately after
the record date of such dividend or distribution, be proportionately adjusted so
that the holders of shares of Preferred Stock shall have the right to convert
such shares of Preferred Stock into the number of shares of Common Stock which
they would have owned after the event had such shares of Preferred Stock been
converted immediately before the happening of such event.  Any adjustment to the
Conversion Ratio under this Paragraph (3)d. shall become effective at the close
of business on the date the subdivision, combination, dividend or distribution
referred to herein becomes effective.

e.             In the event of any capital reorganization, any reclassification
of the Common Stock (other than a change in par value), or the consolidation or
merger of the Corporation with or into another Person (collectively referred to
hereinafter as a “Reorganization”), the holders of the Preferred Stock shall
thereafter be entitled to receive, and provision shall be made therefor in any
agreement relating to a Reorganization, upon conversion of the Preferred Stock
pursuant to Paragraph (2) above, the kind and number of shares of Common Stock
or other securities or property (including cash) of the Corporation, or other
corporation resulting from such consolidation or surviving such

 

3

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merger, to which a holder of the number of shares of the Common Stock of the
Corporation which such holder would have owned had such shares of Preferred
Stock been converted immediately before such Reorganization (based on the
Conversion Ratio then in effect) would have been entitled to receive with
respect to such Reorganization; and in any such case appropriate adjustment
shall be made in the application of the provisions herein set forth with respect
to the rights and interests thereafter of the holders of the Preferred Stock, to
the end that the provisions set forth herein (including the specified changes
and other adjustments to the Conversion Ratio) shall thereafter be applicable,
as nearly as reasonably practicable, in relation to any shares, other securities
or property thereafter receivable upon conversion of the Preferred Stock.  The
provisions of this Paragraph (3)e. shall similarly apply to successive
Reorganizations.

f.              The Corporation shall at all times reserve and keep available
out of its authorized but unissued shares of Common Stock, solely for the
purpose of effecting the conversion of the Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect a
conversion of all outstanding shares of the Preferred Stock, and if at any time
the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of the
Preferred Stock, the Corporation shall promptly seek such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose.  In the event of the consolidation or merger of the
Corporation with another corporation where the Corporation is not the surviving
corporation, effective provisions shall be made in the certificate or articles
of incorporation, merger, or consolidation, or otherwise of the surviving
corporation so that such corporation will at all times reserve and keep
available a sufficient number of shares of common stock or other securities or
property to provide for the conversion of the Preferred Stock in accordance with
the provisions of Paragraph (3) hereof.

g.             No conversion rights shall attach to the Preferred Stock after
the expiration of the Conversion Period.  Upon liquidation of the Corporation,
the right of conversion shall terminate as of the close of business on the day
fixed for payment of the liquidation preference payable with respect to the
Preferred Stock pursuant to Paragraph (4) hereof.

 

4

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IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed by
Robert J. Arnot, its President and Chief Executive Officer, this             
day of                            , 2002.

 

 

I.C. Isaacs & Company, Inc.

 

 

 

By:

 

 

 

 

Robert J. Arnot, President and CEO

 

5

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EXHIBIT F-1

 

NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF, HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAWS OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SUCH LAWS.

 

No. 1

 

 

I. C. ISAACS & COMPANY, INC.

 

Common Stock Purchase Warrant

 

 

                I.C. Isaacs & Company, Inc., a Delaware corporation (the
“Company”), hereby certifies that, for value received, Textile Investment
International S.A. (the “Holder”), is entitled, subject to the terms set forth
below, to purchase from the Company at any time after the date hereof (the
“Eligibility Date”) and before 5:00 P.M., New York time, on the Expiration Date
(as hereinafter defined), Three Hundred Thousand (300,000) fully paid and
nonassessable shares of Common Stock (as hereinafter defined) at a price of
$0.75 per share (the “Exercise Price”).  The number of shares of Common Stock
and the Exercise Price are subject to adjustment as provided herein.

 

                As used herein, the following terms, unless the context
otherwise requires, have the following respective meanings for purposes of this
Warrant:

 

(a)                                  “Affiliate” means, with respect to a
particular Person, any other Person, whether now or hereafter existing, which
controls, is controlled by, or is under common control with, such Person.  For
this purpose, “control” shall mean ownership of 50% or more of the total
combined voting power or value of all classes of stock or interests of the
Person.

 

(b)                                 “Company” means the Company and any Person
that shall succeed or otherwise assume the obligations of the Company hereunder.

 

(c)                                  “Common Stock” means (i) the Company’s
common stock, $0.0001 par value per share, and (ii) any other securities or
other property into which or for which such common stock may be converted or
exchanged pursuant to a plan of recapitalization, reorganization, merger, sale
of assets or other similar corporate rearrangement.

 

(d)                                 “Expiration Date” means December 31, 2011.

 

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(e)                                  “Fair Market Value” of a share of Common
Stock on the date of determination shall have the following meaning:

 

(i)                                     In the event that, as of the date of
determination, the Company is a Reporting Company, then Fair Market Value of the
Common Stock shall mean the last reported sale price per share of Common Stock
on such date or, in case no such sale takes place on such date, the average
closing bid and asked prices, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on a national securities exchange or included for quotation
on the Nasdaq-National Market or the Nasdaq Small Cap Market, as applicable, or
if the Common Stock is not so listed or admitted to trading or included for
quotation, the average high bid and low asked prices in the OTC Bulletin Board
(or other over-the-counter market regulated by the National Association of
Securities Dealers, Inc.) or, if such system is no longer in use, the principal
other automated quotations system that may then be in use or, if the Common
Stock is not quoted by any such organization, the average of the closing bid and
asked prices, as furnished by a professional market maker making a market in the
Common Stock as selected in good faith by the Board of Directors of the Company
or by such other source or sources as shall be selected in good faith by the
Board of Directors of the Company.  If the date of determination is not a
trading day, the determination shall be made as of the next preceding trading
day.  As used herein, the term “trading day” shall mean a day on which public
trading of securities occurs and is reported in the principal consolidated
reporting system referred to above, or if the Common Stock is not listed or
admitted to trading on a national securities exchange or included for quotation
on the Nasdaq-National Market or Nasdaq Small Cap Market, any business day.

(ii)                                  If, as of the date of the determination of
Fair Market Value, the Company is not a Reporting Company, then the Fair Market
Value shall be the appraised fair market value as of such date, as determined by
an independent appraiser of recognized standing and appraisal method selected by
the Board of Directors of the Company.

 

(f)                                    “Person” means a natural person or any
association, corporation, general partnership, limited partnership or limited
liability company.

 

(g)                                 “Reporting Company” means a company the
common stock of which is registered under Section 12 of the Securities Exchange
Act of 1934, as amended.

 

                1.             Exercise of Warrant.  The Holder may exercise
this Warrant at any time and from time to time after the date hereof until 5:00
P.M., New York time, on the Expiration Date,

 

2

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provided however, that if such day is a day on which banking institutions in the
State of New York are authorized by law to close, then on the next succeeding
day that shall not be such a day.

(a)           Full Exercise.  This Warrant may be exercised by the Holder by
surrender of this Warrant, with the form of subscription at the end hereof duly
executed by the Holder to the Company at its principal office, accompanied by
payment, in cash or by certified or official bank check payable to the order of
the Company, in the amount obtained by multiplying the number of shares of
Common Stock for which this Warrant is then exercisable by the Exercise Price.

 

(b)           Partial Exercise.  This Warrant may be exercised in part by
surrender of the Warrant in the manner and at the place provided in Section 1(a)
except that the amount payable by the Holder on such partial exercise shall be
the amount obtained by multiplying the number of shares of Common Stock
designated by the Holder in the subscription at the end hereof by the Exercise
Price.  Upon any such partial exercise, the Company at its expense will
forthwith issue and deliver to or upon the order of the Holder a new warrant or
warrants of like tenor, in the name of the Holder may request, calling in the
aggregate on the face or faces thereof for the number of shares of Common Stock
for which such warrant or warrants may still be exercised.

 

(c)           Exercise by Exchange of Warrant.  Notwithstanding the provisions
of Subsection (a) above, the exercise price may be paid at the Holder’s election
by surrender of all or a portion of the Warrant at any time or from time to time
prior to its expiration (“Net Issuance”).  If the Holder elects the Net Issuance
method, the Company will, as promptly as practicable, issue certificates
representing shares of its Common Stock to the Holder hereof in accordance with
the following formula:

 

X =  (P)(A-B)

      A

Where:                                                         X = the number of
shares of Common Stock to be issued to the Holder for the portion of the Warrant
being exercised.

P = the number of shares of Common Stock for which this Warrant is requested to
be exercised.

A = the Fair Market Value of one (1) share of the Company’s Common Stock as of
the date of such exercise.

B = the Exercise Price.

Such exchange shall be effective upon the date of receipt by the Company of the
original Warrant surrendered for cancellation and a written request from the
Holder that the exchange pursuant to this section be made, or at such later date
as may be specified in such request.  No fractional shares arising out of the
above formula for determining the number of shares issuable in such exchange
shall be issued, and the Company shall in lieu thereof make payment to the
Holder of

 

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cash in the amount of such fraction multiplied by the then Fair Market Value of
such securities on the date of the exchange.

 

                2.             Delivery of Stock Certificates, on Exercise.  As
soon as practicable after the exercise of this Warrant in full or in part, and
in any event within five (5) business days thereafter, the Company, at its
expense (including the payment by it of any applicable issue taxes), will cause
to be issued in the name of and delivered to the Holder, a certificate or
certificates for the number of fully paid and non-assessable shares of Common
Stock to which the Holder shall be entitled on such exercise, plus, any cash in
lieu of any fractional share to which the Holder would otherwise be entitled
(calculated in accordance with Section 1 (c), together with any other stock or
other securities and property (including cash, where applicable) to which the
Holder is entitled upon such exercise pursuant to Section 1 or otherwise.

 

                3.             Adjustment for Dividends in Other Stock,
Property, Reclassification.  In case at any time or from time to time, the
holders of Common Stock shall have received, or shall have become entitled to
receive (on or after the record date fixed therefor), without payment therefor,

 

(a)                                  other or additional stock or other
securities or property (other than cash) by way of dividend, or

 

(b)                                 any cash (excluding cash dividends payable
solely out of earnings or earned surplus of the Company), or

 

(c)                                  other or additional stock or other
securities or property (including cash) by way of spin-off, split-up,
reclassification, recapitalization, combination of shares or similar corporate
rearrangement,

 

other than additional shares of Common Stock issued as a stock dividend or in a
stock-split (adjustments in respect of which are provided for in Section 5
hereof), then and in each such case the Holder, upon the exercise hereof as
provided in Section 1 hereof, shall be entitled to receive the amount of stock
and other securities and property (including cash in the cases referred to in
subdivisions (b) and (c) of this Section 3) that Holder would hold on the date
of such exercise if on the date hereof had he been the holder of record of the
number of shares of Common Stock called for on the face of this Warrant and had
thereafter, during the period from the date hereof to and including the date of
such exercise, retained such shares and all such other or additional stock and
other securities and property (including cash in the cases referred to in
subdivisions (b) and (c) of this Section 3) receivable by him as aforesaid
during such period, giving effect to all adjustments called for during such
period by Sections 4 and 5.

 

                4.             Adjustment for Reorganization, Consolidation,
Merger.

 

(a)           General.  In case at any time or from time to time, the Company
shall (i) effect a reorganization, (ii) consolidate with or merge into any other
Person, or (iii) transfer all or substantially all of its properties or assets
to any other Person under any plan or arrangement contemplating the dissolution
of the Company, then, in each such case, except as otherwise

 

4

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provided in Section 4(c) hereof, Holder, upon the exercise hereof as provided in
Section 1 hereof, at any time after the consummation of such reorganization,
consolidation or merger or the effective date of such dissolution, as the case
may be, shall receive, in lieu of Common Stock issuable on such exercise prior
to such consummation or such effective date, the stock and other securities and
property (including cash) to which such holder would have been entitled upon
such consummation or in connection with such dissolution, as the case may be, if
such holder had so exercised this Warrant immediately prior thereto, all subject
to further adjustment thereafter as provided in Sections 3 and 5 hereof.

 

(b)           Dissolution.  In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, prior to such dissolution, shall at its expense deliver or cause to
be delivered the stock and other securities and property (including cash, where
applicable) receivable by the holders of this Warrant after the effective date
of such dissolution pursuant to this Section 4 to a bank or trust company, as
trustee for Holder.

 

(c)           Continuation of Terms.  Except as otherwise provided herein, upon
any reorganization, consolidation, merger or transfer (and any dissolution
following any transfer) referred to in this Section 4, this Warrant shall
continue in full force and effect and the terms hereof shall be applicable to
the shares of stock and other securities and property receivable on the exercise
of this Warrant after the consummation of such reorganization, consolidation or
merger or the effective date of dissolution following any such transfer, as the
case may be, and shall be binding upon the issuer of any such stock or other
securities, including, in the case of any such transfer, the Person acquiring
all or substantially all of the properties or assets of the Company, whether or
not such Person shall have expressly assumed the terms of this Warrant.

 

                5.             Adjustment for Extraordinary Events.  In the
event that the Company shall (a) issue additional shares of Common Stock as a
dividend or other distribution on outstanding Common Stock, (b) subdivide its
outstanding shares of Common Stock, or (c) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock, then, in each such
event, the Exercise Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the Exercise Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Exercise Price then in effect.  The
Exercise Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described in this Section 5.

 

                The holder of this Warrant shall thereafter, on the exercise
hereof as provided in Section 1 hereof, be entitled to receive that number of
shares of Common Stock determined by multiplying the number of shares of Common
Stock which would otherwise (but for the provisions of this Section 5) be
issuable on such exercise by a fraction, the numerator of which is the Exercise
Price that would otherwise (but for the provisions of this Section  5) be in
effect, and the denominator of which is the Exercise Price in effect on the date
of such exercise.

 

5

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                6.             Reservation of Stock, etc., Issuable on Exercise
of Warrant.  The Company will at all times reserve and keep available, solely
for issuance and delivery on the exercise of this Warrant, all shares of Common
Stock from time to time issuable on the exercise hereof.

 

                7.             Exchange of Warrant.  On surrender for exchange
of this Warrant, properly endorsed, to the Company, the Company at its expense
will issue and deliver to or on the order of the Holder thereof a new warrant or
warrant of like tenor, in the name of the Holder, calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock for which
this Warrant is then exercisable.

 

                8.             Replacement of Warrant.  On receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or
destruction of this Warrant, on delivery of an indemnity agreement or security
reasonably satisfactory in form and amount to the Company or, in the case of any
such mutilation, on surrender and cancellation of such Warrant, the Company at
its expense will execute and deliver, in lieu thereof, a new warrant of like
tenor.

 

                9.             Resale of Warrant or Securities.  Neither this
Warrant nor the securities issuable upon exercise of this Warrant have been
registered under the Securities Act of 1933, as amended (the “Securities Act”),
or under the securities laws of any state.  Neither this Warrant nor such
securities when issued may be sold, transferred, pledged or hypothecated,
directly or indirectly, in whole or in part, in the absence of (i) an effective
registration statement for this Warrant or such securities, as the case may be,
under the Securities Act and such registration or qualification as may be
necessary under the securities laws of any state, or (ii) an opinion of counsel
reasonably satisfactory to the Company that such registration or qualification
is not required.  The Company shall cause a certificate or certificates
evidencing all or any of the securities issued upon exercise of this Warrant
prior to said registration and qualification of such securities to bear the
following legend: “The shares evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended, or under the securities
laws of any state.  These shares may not be sold, transferred, pledged,
hypothecated or otherwise disposed of, directly or indirectly, in whole or in
part, in the absence of an effective registration statement under the Securities
Act of 1933, as amended, and such registration or qualification as may be
necessary under the securities laws of any state, or an opinion of counsel
reasonably satisfactory to the Company that such registration or qualification
is not required.”

 

                10.           Restrictions on Transfer.  In addition to the
restrictions set forth in Section 9 above, this Warrant shall not be
transferred, pledged or hypothecated, directly or indirectly, in whole or in
part, by the Holder to any Person other than the Company or an Affiliate of the
Holder without the prior written consent of the Company.  The Holder agrees that
any of the shares of Common Stock issued upon the exercise of this Warrant shall
be subject to the Stockholders’ Agreement by and between the Company and the
Holder dated                           , 2002, as hereinafter amended (the
“Stockholders’ Agreement”), which imposes certain stock transfer and other
restrictions on the holder of such shares as set forth in the Stockholders’
Agreement.

 

6

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                11.           Notices, Etc.  All notices and other
communications from the Company to the Holder of this Warrant shall be mailed by
first class registered or certified mail, postage prepaid, at such address as
may have been furnished to the Company in writing by the Holder.

 

                12.           Governing Law.  This Warrant shall be governed by,
and construed in accordance with, the laws of the State of Delaware.

 

                13.           Miscellaneous.  The headings in this Warrant are
for purposes of reference only, and shall not limit or otherwise affect any of
the terms hereof.  This Warrant is being executed as an instrument under seal. 
The invalidity or unenforceability of any provision hereof shall in no way
affect the validity or enforceability of any other provision.

 

 

Issue Date:                       , 2002

I.C. ISAACS & COMPANY, INC.

 

 

 

By:

 

 

 

Robert J. Arnot, President

 

7

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FORM OF SUBSCRIPTION

(To be signed only on exercise of Warrant)

TO:  I.C. Isaacs & Company, Inc.

 

                The undersigned Holder of the attached Warrant hereby
irrevocably elects to exercise this Warrant for, and to purchase thereunder,
               shares of Common Stock of I.C. Isaacs & Company, Inc. and
[herewith makes payment of $                  therefor] [hereby elects to have
such shares issued as a Net Issuance], and requests that the certificates for
such shares be issued in the name of, and delivered to
                            , whose address is
                                            .

 

                Effective as of Holder’s purchase of such shares of Common Stock
of I.C. Isaacs & Company, Inc. pursuant to the attached Warrant, Holder [and/or
each person in whose name certificates for shares of Common Stock of the Company
are issued pursuant hereto] agrees to be fully bound by, and be subject to, all
of the covenants, terms and conditions of the Company Stockholders’ Agreement
dated                         , 2002 (which has been made available to the
undersigned) as though an original party thereto and agrees that he/she/it shall
be deemed a “Stockholder” for all purposes thereof.

 

 

[HOLDER]

 

 

Dated:

 

 

(Signature must conform to name of holder as
specified on the face of this Warrant)

 

 

 

 

 

(Address)

 

 

 

 

Dated:

[Stockholder(s)]

 

 

 

 

 

 

 

 

 

(Address)

 

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EXHIBIT F-2

 

NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF, HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAWS OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SUCH LAWS.

 

No. 2

 

 

I. C. ISAACS & COMPANY, INC.

 

Common Stock Purchase Warrant

 

 

                I.C. Isaacs & Company, Inc., a Delaware corporation (the
“Company”), hereby certifies that, for value received, Textile Investment
International S.A. (the “Holder”), is entitled, subject to the terms set forth
below, to purchase from the Company at any time after the date hereof (the
“Eligibility Date”) and before 5:00 P.M., New York time, on the Expiration Date
(as hereinafter defined), Two Hundred Thousand (200,000) fully paid and
nonassessable shares of Common Stock (as hereinafter defined) at a price of
$0.75 per share (the “Exercise Price”).  The number of shares of Common Stock
and the Exercise Price are subject to adjustment as provided herein.

 

                As used herein, the following terms, unless the context
otherwise requires, have the following respective meanings for purposes of this
Warrant:

 

(a)                                  “Affiliate” means, with respect to a
particular Person, any other Person, whether now or hereafter existing, which
controls, is controlled by, or is under common control with, such Person.  For
this purpose, “control” shall mean ownership of 50% or more of the total
combined voting power or value of all classes of stock or interests of the
Person.

 

(b)                                 “Company” means the Company and any Person
that shall succeed or otherwise assume the obligations of the Company hereunder.

 

(c)                                  “Common Stock” means (i) the Company’s
common stock, $0.0001 par value per share, and (ii) any other securities or
other property into which or for which such common stock may be converted or
exchanged pursuant to a plan of recapitalization, reorganization, merger, sale
of assets or other similar corporate rearrangement.

 

(d)                                 “Expiration Date” means December 31, 2011.

 

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(e)                                  “Fair Market Value” of a share of Common
Stock on the date of determination shall have the following meaning:

 

(i)                                     In the event that, as of the date of
determination, the Company is a Reporting Company, then Fair Market Value of the
Common Stock shall mean the last reported sale price per share of Common Stock
on such date or, in case no such sale takes place on such date, the average
closing bid and asked prices, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on a national securities exchange or included for quotation
on the Nasdaq-National Market or the Nasdaq Small Cap Market, as applicable, or
if the Common Stock is not so listed or admitted to trading or included for
quotation, the average high bid and low asked prices in the OTC Bulletin Board
(or other over-the-counter market regulated by the National Association of
Securities Dealers, Inc.) or, if such system is no longer in use, the principal
other automated quotations system that may then be in use or, if the Common
Stock is not quoted by any such organization, the average of the closing bid and
asked prices, as furnished by a professional market maker making a market in the
Common Stock as selected in good faith by the Board of Directors of the Company
or by such other source or sources as shall be selected in good faith by the
Board of Directors of the Company.  If the date of determination is not a
trading day, the determination shall be made as of the next preceding trading
day.  As used herein, the term “trading day” shall mean a day on which public
trading of securities occurs and is reported in the principal consolidated
reporting system referred to above, or if the Common Stock is not listed or
admitted to trading on a national securities exchange or included for quotation
on the Nasdaq-National Market or Nasdaq Small Cap Market, any business day.

(ii)                                  If, as of the date of the determination of
Fair Market Value, the Company is not a Reporting Company, then the Fair Market
Value shall be the appraised fair market value as of such date, as determined by
an independent appraiser of recognized standing and appraisal method selected by
the Board of Directors of the Company.

 

(f)                                    “Person” means a natural person or any
association, corporation, general partnership, limited partnership or limited
liability company.

 

(g)                                 “Reporting Company” means a company the
common stock of which is registered under Section 12 of the Securities Exchange
Act of 1934, as amended.

 

                1.             Exercise of Warrant.  The Holder may exercise
this Warrant at any time and from time to time after the date hereof until 5:00
P.M., New York time, on the Expiration Date,

 

2

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provided however, that if such day is a day on which banking institutions in the
State of New York are authorized by law to close, then on the next succeeding
day that shall not be such a day.

(a)           Full Exercise.  This Warrant may be exercised by the Holder by
surrender of this Warrant, with the form of subscription at the end hereof duly
executed by the Holder to the Company at its principal office, accompanied by
payment, in cash or by certified or official bank check payable to the order of
the Company, in the amount obtained by multiplying the number of shares of
Common Stock for which this Warrant is then exercisable by the Exercise Price.

 

(b)           Partial Exercise.  This Warrant may be exercised in part by
surrender of the Warrant in the manner and at the place provided in Section 1(a)
except that the amount payable by the Holder on such partial exercise shall be
the amount obtained by multiplying the number of shares of Common Stock
designated by the Holder in the subscription at the end hereof by the Exercise
Price.  Upon any such partial exercise, the Company at its expense will
forthwith issue and deliver to or upon the order of the Holder a new warrant or
warrants of like tenor, in the name of the Holder may request, calling in the
aggregate on the face or faces thereof for the number of shares of Common Stock
for which such warrant or warrants may still be exercised.

 

(c)           Exercise by Exchange of Warrant.  Notwithstanding the provisions
of Subsection (a) above, the exercise price may be paid at the Holder’s election
by surrender of all or a portion of the Warrant at any time or from time to time
prior to its expiration (“Net Issuance”).  If the Holder elects the Net Issuance
method, the Company will, as promptly as practicable, issue certificates
representing shares of its Common Stock to the Holder hereof in accordance with
the following formula:

 

X =  (P)(A-B)

      A

Where:                                                         X = the number of
shares of Common Stock to be issued to the Holder for the portion of the Warrant
being exercised.

P = the number of shares of Common Stock for which this Warrant is requested to
be exercised.

A = the Fair Market Value of one (1) share of the Company’s Common Stock as of
the date of such exercise.

B = the Exercise Price.

Such exchange shall be effective upon the date of receipt by the Company of the
original Warrant surrendered for cancellation and a written request from the
Holder that the exchange pursuant to this section be made, or at such later date
as may be specified in such request.  No fractional shares arising out of the
above formula for determining the number of shares issuable in such exchange
shall be issued, and the Company shall in lieu thereof make payment to the
Holder of

 

3

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cash in the amount of such fraction multiplied by the then Fair Market Value of
such securities on the date of the exchange.

 

                2.             Delivery of Stock Certificates, on Exercise.  As
soon as practicable after the exercise of this Warrant in full or in part, and
in any event within five (5) business days thereafter, the Company, at its
expense (including the payment by it of any applicable issue taxes), will cause
to be issued in the name of and delivered to the Holder, a certificate or
certificates for the number of fully paid and non-assessable shares of Common
Stock to which the Holder shall be entitled on such exercise, plus, any cash in
lieu of any fractional share to which the Holder would otherwise be entitled
(calculated in accordance with Section 1 (c), together with any other stock or
other securities and property (including cash, where applicable) to which the
Holder is entitled upon such exercise pursuant to Section 1 or otherwise.

 

                3.             Adjustment for Dividends in Other Stock,
Property, Reclassification.  In case at any time or from time to time, the
holders of Common Stock shall have received, or shall have become entitled to
receive (on or after the record date fixed therefor), without payment therefor,

 

(a)                                  other or additional stock or other
securities or property (other than cash) by way of dividend, or

 

(b)                                 any cash (excluding cash dividends payable
solely out of earnings or earned surplus of the Company), or

 

(c)                                  other or additional stock or other
securities or property (including cash) by way of spin-off, split-up,
reclassification, recapitalization, combination of shares or similar corporate
rearrangement,

 

other than additional shares of Common Stock issued as a stock dividend or in a
stock-split (adjustments in respect of which are provided for in Section 5
hereof), then and in each such case the Holder, upon the exercise hereof as
provided in Section 1 hereof, shall be entitled to receive the amount of stock
and other securities and property (including cash in the cases referred to in
subdivisions (b) and (c) of this Section 3) that Holder would hold on the date
of such exercise if on the date hereof had he been the holder of record of the
number of shares of Common Stock called for on the face of this Warrant and had
thereafter, during the period from the date hereof to and including the date of
such exercise, retained such shares and all such other or additional stock and
other securities and property (including cash in the cases referred to in
subdivisions (b) and (c) of this Section 3) receivable by him as aforesaid
during such period, giving effect to all adjustments called for during such
period by Sections 4 and 5.

 

                4.             Adjustment for Reorganization, Consolidation,
Merger.

 

(a)           General.  In case at any time or from time to time, the Company
shall (i) effect a reorganization, (ii) consolidate with or merge into any other
Person, or (iii) transfer all or substantially all of its properties or assets
to any other Person under any plan or arrangement contemplating the dissolution
of the Company, then, in each such case, except as otherwise

 

4

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provided in Section 4(c) hereof, Holder, upon the exercise hereof as provided in
Section 1 hereof, at any time after the consummation of such reorganization,
consolidation or merger or the effective date of such dissolution, as the case
may be, shall receive, in lieu of Common Stock issuable on such exercise prior
to such consummation or such effective date, the stock and other securities and
property (including cash) to which such holder would have been entitled upon
such consummation or in connection with such dissolution, as the case may be, if
such holder had so exercised this Warrant immediately prior thereto, all subject
to further adjustment thereafter as provided in Sections 3 and 5 hereof.

 

(b)           Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, prior to such dissolution, shall at its expense deliver or cause to
be delivered the stock and other securities and property (including cash, where
applicable) receivable by the holders of this Warrant after the effective date
of such dissolution pursuant to this Section 4 to a bank or trust company, as
trustee for Holder.

 

(c)           Continuation of Terms.  Except as otherwise provided herein, upon
any reorganization, consolidation, merger or transfer (and any dissolution
following any transfer) referred to in this Section 4, this Warrant shall
continue in full force and effect and the terms hereof shall be applicable to
the shares of stock and other securities and property receivable on the exercise
of this Warrant after the consummation of such reorganization, consolidation or
merger or the effective date of dissolution following any such transfer, as the
case may be, and shall be binding upon the issuer of any such stock or other
securities, including, in the case of any such transfer, the Person acquiring
all or substantially all of the properties or assets of the Company, whether or
not such Person shall have expressly assumed the terms of this Warrant.

 

                5.             Adjustment for Extraordinary Events.  In the
event that the Company shall (a) issue additional shares of Common Stock as a
dividend or other distribution on outstanding Common Stock, (b) subdivide its
outstanding shares of Common Stock, or (c) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock, then, in each such
event, the Exercise Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the Exercise Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Exercise Price then in effect.  The
Exercise Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described in this Section 5.

 

                The holder of this Warrant shall thereafter, on the exercise
hereof as provided in Section 1 hereof, be entitled to receive that number of
shares of Common Stock determined by multiplying the number of shares of Common
Stock which would otherwise (but for the provisions of this Section 5) be
issuable on such exercise by a fraction, the numerator of which is the Exercise
Price that would otherwise (but for the provisions of this Section  5) be in
effect, and the denominator of which is the Exercise Price in effect on the date
of such exercise.

 

5

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                6.             Reservation of Stock, etc., Issuable on Exercise
of Warrant.  The Company will at all times reserve and keep available, solely
for issuance and delivery on the exercise of this Warrant, all shares of Common
Stock from time to time issuable on the exercise hereof.

 

                7.             Exchange of Warrant.  On surrender for exchange
of this Warrant, properly endorsed, to the Company, the Company at its expense
will issue and deliver to or on the order of the Holder thereof a new warrant or
warrant of like tenor, in the name of the Holder, calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock for which
this Warrant is then exercisable.

 

                8.             Replacement of Warrant.  On receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or
destruction of this Warrant, on delivery of an indemnity agreement or security
reasonably satisfactory in form and amount to the Company or, in the case of any
such mutilation, on surrender and cancellation of such Warrant, the Company at
its expense will execute and deliver, in lieu thereof, a new warrant of like
tenor.

 

                9.             Resale of Warrant or Securities.  Neither this
Warrant nor the securities issuable upon exercise of this Warrant have been
registered under the Securities Act of 1933, as amended (the “Securities Act”),
or under the securities laws of any state.  Neither this Warrant nor such
securities when issued may be sold, transferred, pledged or hypothecated,
directly or indirectly, in whole or in part, in the absence of (i) an effective
registration statement for this Warrant or such securities, as the case may be,
under the Securities Act and such registration or qualification as may be
necessary under the securities laws of any state, or (ii) an opinion of counsel
reasonably satisfactory to the Company that such registration or qualification
is not required.  The Company shall cause a certificate or certificates
evidencing all or any of the securities issued upon exercise of this Warrant
prior to said registration and qualification of such securities to bear the
following legend: “The shares evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended, or under the securities
laws of any state.  These shares may not be sold, transferred, pledged,
hypothecated or otherwise disposed of, directly or indirectly, in whole or in
part, in the absence of an effective registration statement under the Securities
Act of 1933, as amended, and such registration or qualification as may be
necessary under the securities laws of any state, or an opinion of counsel
reasonably satisfactory to the Company that such registration or qualification
is not required.”

 

                10.           Restrictions on Transfer.  In addition to the
restrictions set forth in Section 9 above, this Warrant shall not be
transferred, pledged or hypothecated, directly or indirectly, in whole or in
part, by the Holder to any Person other than the Company or an Affiliate of the
Holder without the prior written consent of the Company.  The Holder agrees that
any of the shares of Common Stock issued upon the exercise of this Warrant shall
be subject to the Stockholders’ Agreement by and between the Company and the
Holder dated                     , 2002, as hereinafter amended (the
“Stockholders’ Agreement”), which imposes certain stock transfer and other
restrictions on the holder of such shares as set forth in the Stockholders’
Agreement.

 

6

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                11.           Notices, Etc.  All notices and other
communications from the Company to the Holder of this Warrant shall be mailed by
first class registered or certified mail, postage prepaid, at such address as
may have been furnished to the Company in writing by the Holder.

 

                12.           Governing Law.  This Warrant shall be governed by,
and construed in accordance with, the laws of the State of Delaware.

 

                13.           Miscellaneous.  The headings in this Warrant are
for purposes of reference only, and shall not limit or otherwise affect any of
the terms hereof.  This Warrant is being executed as an instrument under seal. 
The invalidity or unenforceability of any provision hereof shall in no way
affect the validity or enforceability of any other provision.

 

 

Issue Date:                              , 2002

I.C. ISAACS & COMPANY, INC.

 

 

 

By:

 

 

 

Robert J. Arnot, President

 

7

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FORM OF SUBSCRIPTION

(To be signed only on exercise of Warrant)

TO:  I.C. Isaacs & Company, Inc.

 

                The undersigned Holder of the attached Warrant hereby
irrevocably elects to exercise this Warrant for, and to purchase thereunder,
           shares of Common Stock of I.C. Isaacs & Company, Inc. and [herewith
makes payment of $                therefor] [hereby elects to have such shares
issued as a Net Issuance], and requests that the certificates for such shares be
issued in the name of, and delivered to                                   ,
whose address is                                                      .

 

                Effective as of Holder’s purchase of such shares of Common Stock
of I.C. Isaacs & Company, Inc. pursuant to the attached Warrant, Holder [and/or
each person in whose name certificates for shares of Common Stock of the Company
are issued pursuant hereto] agrees to be fully bound by, and be subject to, all
of the covenants, terms and conditions of the Company Stockholders’ Agreement
dated                          , 2002 (which has been made available to the
undersigned) as though an original party thereto and agrees that he/she/it shall
be deemed a “Stockholder” for all purposes thereof.

 

 

 

[HOLDER]

 

 

Dated:

 

 

(Signature must conform to name of holder as
specified on the face of this Warrant)

 

 

 

 

 

(Address)

 

 

 

 

Dated:

[Stockholder(s)]

 

 

 

 

 

 

 

 

 

(Address)

 

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