Exhibit 10.1

CONVERSION AGREEMENT

This Conversion Agreement (the “Agreement”) is entered into as of the 9th day of
May, 2008, by and between I.C. Isaacs & Company, Inc., a Delaware company
(referred to herein as the “Company” or “Borrower”, as the context requires),
and Textile Investment International S.A., a Luxembourg company (referred to
herein as the “Purchaser” or “Lender”, as the context requires).

WITNESSETH:

WHEREAS, the Borrower and Lender are parties to that certain 8% Amended and
Restated Subordinated Secured Promissory Note (the “Note”), dated as of December
30, 2004;

WHERERAS, the principal amount of $2,103,461, remains outstanding under the Note
on the date hereof, together with accrued and unpaid interest in the amount of
$761,579, as of May 9, 2008 (the “Debt”);

WHEREAS, the Company desires to issue and sell and the Purchaser desires to
purchase from the Company, in the aggregate 14,325,200 of newly issued shares of
common stock of the Company (the “Common Stock”);

WHEREAS, Purchaser agrees, in consideration for the purchase of the Shares, to
forgive in its entirety the Debt under the Note; and

WHEREAS, the parties hereto desire to set forth certain agreements and certain
terms and conditions regarding the sale and purchase of the shares of Common
Stock and the forgiveness of the Debt under the Note;

NOW, THEREFORE, the parties hereto hereby agree as follows:

ARTICLE I

Sale and Purchase of Shares; Closing

Section 1.1. Sale and Purchase of Shares; Purchase Price.

(a) Upon the terms and subject to the conditions of this Agreement, the
Purchaser agrees to purchase from the Company, and the Company agrees to issue
and sell to the Purchaser, on the “Closing Date” (as defined herein), 14,325,200
shares of Common Stock (the “Company Shares”) in consideration for the
forgiveness of the Debt under the Note (the “Purchase Price”) pursuant to that
certain Debt Forgiveness Agreement (a copy of which is attached as Annex A
hereto).

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Section 1.2. Closing.

(a) The closing of the transactions under this Agreement (the “Closing”) shall
take place at the offices of Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of
the Americas, New York, New York 10036, at 10:00 a.m. (NY time) on the date
hereof (the “Closing Date”).

Section 1.3.  Deliveries at Closing. At the Closing:

(a) The Company shall deliver to the Purchaser a certificate representing the
Company Shares; except that a certificate for 4,675 of the Company Shares
deliverable to the Purchaser shall be delivered pursuant to Section 1.4 hereof.

(b) The Purchaser shall deliver to the Company the Debt Forgiveness Agreement.
 
(c) The Company shall provide evidence reasonably satisfactory to the Purchasers
that the following agreements have been or will be concurrently herewith entered
into (and in the case of (ii) and (iv) below, the transactions thereunder
consummated at Closing): (i) that certain notice of election of extension of
employment agreement, (ii) that certain stock purchase agreement by and between
the Company, Textile Investment International S.A. and the other parties thereto
(the “Investor Stock Purchase Agreement”); (iii) that certain investor rights
agreement between the Company, the Purchasers and Wurzburg Holding, S.A. (the
“IRA”); (iv) that certain stock purchase agreement by and between the Company
and Robert. S. Stec and (v) those two certain license amendment agreements to
the men’s and women’s collections, respectively (copies of all such agreements
which are attached hereto as Annex B, collectively with the Debt Forgiveness
Agreement, the “Related Documents”).

(d) The Company shall provide evidence reasonably satisfactory to the Purchasers
that the Wachovia consent (consenting to the transactions contemplated by and
the terms of this Agreement and the Related Documents and confirming that the
Third Amendment to Loan and Security Agreement remains in full force and effect)
has been or will be concurrently with the Closing received.

Section 1.4. Additional Share Certificate. The Company shall deliver to the
Purchaser within three (3) business days after the date hereof a certificate for
the 4,675 Company Shares which were not delivered to the Purchaser at Closing.

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ARTICLE II

Representations and Warranties of the Company

The Company, represents and warrants to, and covenants and agrees with the
Purchaser as follows:

Section 2.1. Organization and Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has no subsidiaries other than I.C. Isaacs & Company L.P.
and Isaacs Design, Inc. of which both are operating subsidiaries. The
subsidiaries are duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Company and each of its subsidiaries have all
requisite corporate power or limited partnership power, as the case may be, and
authority to own their properties and assets and carry on their businesses as
now conducted, and are duly qualified and in good standing as foreign
corporations in each jurisdiction in which the location or nature of their
property or the character of their businesses make such qualification necessary,
except where the failure to be so qualified would not have a material adverse
affect, financial or otherwise, on the business, condition, assets, properties,
liabilities or results of operations of the Company or its subsidiaries.

Section 2.2. Corporate Power; Authorization; Binding Agreements. The Company has
the corporate power and authority to execute and deliver this Agreement and the
Related Documents and to perform its obligations hereunder and thereunder. The
execution, delivery and performance of this Agreement and the Related Documents,
the issuance and sale by the Company of the Company Shares hereunder and the
consummation by the Company of the transactions contemplated hereby and by the
Related Documents have been duly authorized by all necessary action, corporate
or otherwise, on the part of the Company. This Agreement, the Related Documents
and the other agreements of the Company required to consummate the transactions
contemplated hereunder and thereunder have been duly executed and delivered by,
and constitute valid and binding obligations of, the Company and are enforceable
in accordance with their terms subject to the qualifications that enforcement of
the rights and remedies created hereby is subject to (i) bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
rights and remedies of creditors, and (ii) general principals of equity
(regardless of whether such enforcement is considered in a proceeding in equity
or at law).

Section 2.3. Capitalization; Valid Issuance. The authorized capital stock of the
Company consists of 50,000,000 shares of Common Stock, of which 13,740,127
shares are issued and 12,563,418 are outstanding on the date hereof, and
5,000,000 shares of Preferred Stock, of which no shares are issued and
outstanding on the date hereof. Except as disclosed in the Form 10-K (as defined
herein), there are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require the Company or any subsidiary to
issue, sell, or otherwise cause to become outstanding any of its capital stock.
The aggregate number of shares of common stock of the Company reserved or
required to be reserved by the Company for all such derivative securities,
contracts and commitments is 3,250,000. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights with
respect to the Company. There are no preemptive rights with respect to the
issuance or sale of the Company Shares or registration rights. All of the
presently outstanding shares of Common Stock have been duly and validly
authorized and issued and are fully paid and non-assessable. The Company Shares
to be issued hereunder have been duly and validly authorized and, when delivered
and paid for pursuant to this Agreement, will be validly issued, fully paid and
non-assessable. Assuming the accuracy of the Purchasers’ representations and
warranties in Article III, the Company Shares are being offered and sold
pursuant to an exemption from the registration requirements of the Securities
Act of 1933, as amended (the “Act”). In connection with the offer and sale of
the Company Shares, neither the Company, any affiliate of the Company nor any
person acting on the Company’s or such affiliates’ behalf has engaged in any
form of general solicitation or general advertising, as those terms are used in
Rule 502(c) of the Act.
 
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Section 2.4. Compliance with Other Instruments. The execution, delivery and
performance of this Agreement and the Related Documents will not conflict with
or, with or without notice or the lapse of time, result in any default or in any
modification of (i) any provision of the articles of incorporation or by-laws or
comparable organizational instruments of the Company or any subsidiary thereof
or (ii) the terms of any contract, agreement, obligation, commitment, license,
indenture, mortgage, deed of trust, loan or credit agreement or any other
agreement or instrument to which the Company or any subsidiary thereof is a
party or any of their assets are bound, or the creation of any lien, charge or
encumbrance of any nature upon any of the properties or assets of the Company or
any subsidiary thereof. The execution, delivery and performance of this
Agreement by the Company will not violate any judgment, decree, statute, rule or
regulation of any federal, state or local government or agency having
jurisdiction over the Company or any subsidiary thereof or any of their assets.

Section 2.5. Brokerage. No broker, finder, agent or similar intermediary has
acted on the Company’s behalf in connection with the transactions contemplated
by this Agreement and there are no brokerage commissions, finder’s fees or
similar items of compensation payable in connection therewith based on any
agreement made by or on behalf of the Company. The Company will indemnify and
hold the Purchasers harmless from and against any liability or any expense
arising out of any such claim.

Section 2.6.  Consents, etc. No consent, approval, waiver or authorization of or
designation, declaration or filing with any governmental or regulatory authority
or any other person is required in connection with the valid execution and
delivery of this Agreement or the Related Documents, the offer, sale and
issuance of the Company Shares or the consummation of the transactions
contemplated by this Agreement or the Related Documents, except for filings that
may be required to comply with applicable federal and state securities laws.

Section 2.7. No Governmental Proceeding or Litigation. No suit, action,
investigation, inquiry or other proceeding by any governmental body or other
person or legal or administrative proceeding has been instituted or, to the
Company’s knowledge, threatened which questions the validity or legality of the
transactions contemplated hereby or by the Related Documents or would reasonably
be expected to have a material adverse effect on the Company.

Section 2.8. Special Committee. The transactions contemplated by this Agreement,
the IRA and the Investor Stock Purchase Agreement have been unanimously approved
by the Special Committee of the Board of Directors. The Special Committee has
determined, after receiving and based upon the advice of its financial and legal
advisors and after consideration of the Company’s limited options for raising
external capital and the impact on the Company’s net operating losses, that the
consideration to be paid for the Company Shares pursuant to, and the
transactions contemplated by, this Agreement, the IRA and the Investor Stock
Purchase Agreement, are fair to and in the best interests of the Company’s
stockholders and the transactions contemplated by this Agreement, the IRA and
the Investor Purchase Agreement are in the best interests of the Company’s
creditors. The foregoing determination is reflected in all material respects in
the minutes of the meetings of the Special Committee held on April 29, 2008, May
2, 2008 and May 5, 2008, certified copies of which have been provided to the
Purchasers.
 
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Section 2.9. Form 10-K. The Company’s Annual Report on Form 10-K for the year
ended December 31, 2007, in the form delivered to the Purchasers on May 6, 2008
(the “Form 10-K”), has been completed (subject to immaterial non-substantive
language changes that might be made prior to filing), except for the Part III
information which will be completed prior to May 15, 2008, is in form ready to
be filed with the Securities and Exchange Commission (the “SEC”). The Company’s
independent registered public accounting firm has confirmed to the Company that
such firm’s audit report for the fiscal year ended December 31, 2007 is released
to the Company and that such firm will consent to the filing of the Form 10-K
with the SEC when the Part III information is inserted. The Form 10-K at the
time it is filed will comply as to form in all material respects with the
applicable requirements of the Act and the Securities Exchange Act of 1934, as
amended, as the case may be, the Sarbanes-Oxley Act and the rules and
regulations of the SEC thereunder applicable to such Company SEC reports. The
Form 10-K does not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements in such Form 10-K, in the light of the circumstances under
which they were made, not misleading.

Section 2.10. Financial Statements. Each of the consolidated financial
statements (including, in each case, any related notes and schedules) contained
in the Form 10-K (i) complies as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto and (ii) were prepared in accordance with United
States generally accepted accounting principles (“GAAP”) applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
to such financial statements). The consolidated balance sheets (including, in
each case, any related notes and schedules) contained in the Form 10-K fairly
presents in all material respects the consolidated financial position of the
Company and its subsidiaries as of the dates indicated and each of the
consolidated statements of income and of changes in financial position contained
in the Form 10-K (including, in each case, any related notes and schedules)
fairly presents in all material respects the consolidated results of operations,
retained earnings and changes in financial position, as the case may be, of the
Company and its subsidiaries for the periods set forth therein.

Section 2.11. Loan Agreement; No Default. There are no outstanding Defaults or
Events of Default (as such terms are defined in the Loan Agreement) under that
certain Loan and Security Agreement dated December 30, 2004 (as amended or
otherwise modified from time to time, including but not limited to the Third
Amendment thereto, the “Loan Agreement”) by and among I.C. Isaacs & Company,
L.P., as borrower, the Company and Isaacs Design, Inc., as guarantors, and
Wachovia.

Section 2.12. Royalty Deferrals. There are no deferred royalty payments (or
interest thereon) owing under the men’s or women’s license agreements between
the Company or its subsidiaries and Latitude Licensing Corp. other than the four
months of 2008 royalty payments being deferred pursuant to the license
amendments which are a part of the Related Documents.

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ARTICLE III

Representations and Warranties of the Purchaser

The Purchaser represents and warrants to, and covenants and agrees with the
Company as follows:

Section 3.1. Authorization; Power; Binding Agreements. The execution, delivery
and performance of this Agreement has been duly authorized by all necessary
action of the Purchaser. The Purchaser has the full right, power and authority
to enter into this Agreement. This Agreement constitutes the valid and binding
obligation of the Purchaser, enforceable in accordance with its terms subject to
the qualifications that enforcement of the rights and remedies hereby is subject
to (i) bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting rights and remedies of creditors, and (ii) general
principles of equity (regardless of whether such enforcement is considered in a
proceeding in equity or at law).

Section 3.2. Purchase for Investment. The Purchaser is purchasing the Company
Shares for its own account, for investment purposes and not with a view to, or
for resale in connection with, any distribution or public offering thereof
within the meaning of the Act.

Section 3.3. Unregistered Securities; Legend. The Purchaser understands that the
securities to be acquired by it pursuant to this Agreement have not been
registered under the Act, and will be issued in reliance upon an exemption from
the registration requirements thereof. The Purchaser acknowledge that the
certificate issued representing the Company Shares shall bear a restrictive
legend substantially as follows:

“The securities represented by this certificate have not been registered under
the Securities Act of 1933, as amended, or any applicable state securities laws
and may not be offered for sale, sold, transferred or conveyed without
registration or an opinion of counsel in form and substance satisfactory to the
Company to the effect that such registration is not required.”

Section 3.4. Access to Data; Experience; Accredited Investor. The Purchaser has
had an opportunity to discuss the Company’s business plans with the management
of the Company, and to ask questions of officers of the Company and to make an
independent assessment of its investment in the Company Shares. The Purchaser
has substantial experience in evaluating and investing in a nonliquid investment
such as the Company Shares and is capable of evaluating the merits and risks of
its investment in the Company. The Purchaser is an accredited investor as that
term is defined in Rule 501 of Regulation D under the Act, and understands that
the offer and sale of the Company Shares has been and is being made in reliance
upon an exemption from registration under the Act. The Purchaser is able to
withstand the loss of its entire investment.

Section 3.5. Brokerage. No broker, finder, agent or similar intermediary has
acted on the Purchaser’s behalf in connection with the transactions contemplated
by this Agreement and there are no brokerage commissions, finder’s fees or
similar items of compensation in connection therewith based on any arrangement
or agreement made by or on behalf of the Purchaser. The Purchaser will indemnify
and hold the Company harmless against any liability or expense arising out of
any such claim.
 
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Section 3.6. Organization and Good Standing. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of Luxembourg
and has all requisite corporate power and authority to carry on its business as
now conducted.

Section 3.7. Corporate Power; Authorization. The Purchaser has the corporate
power and authority to execute and deliver this Agreement and to perform fully
its obligations hereunder. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary action on the part of the Purchaser.

Section 3.8. No Conflicts or Violations. The execution, delivery and performance
of this Agreement will not conflict with or, with or without notice or the lapse
of time, result in any material default or in any material modification of (i)
any provision of the certificate of incorporation or by-laws of the Purchaser or
(ii) the terms of any contract, agreement, obligation, commitment, license,
indenture, mortgage, deed of trust, loan or credit agreement or any other
agreement or instrument to which the Purchaser is a party or any of its assets
are bound, or the creation of any lien, charge or encumbrance of any nature upon
any of the properties or assets of the Purchaser. The execution, delivery and
performance of this Agreement by the Purchaser will not violate any judgment,
decree, statute, rule or regulation of any federal, state or local government or
agency having jurisdiction over the Purchaser or its assets.
 

ARTICLE IV

Miscellaneous

Section 4.1. Survival of Representations. The representations, warranties,
covenants and agreements made herein or in any certificates or documents
executed in connection herewith shall survive the execution and delivery hereof
and thereof and the acquisition by the Purchaser of the Company Shares for a
period of 36 months following the Closing.

Section 4.2. Parties in Interest. All agreements, representations and warranties
contained in this Agreement by and on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto, whether so expressed or not.

Section 4.3. Entire Agreement; Amendments and Waivers. This Agreement (including
Annex A) and the Related Documents contain the entire agreement among the
parties with respect to the transactions contemplated hereby and thereby, and
supersede all prior agreements, written or oral, with respect thereto. Changes
in or additions to this Agreement may be made only upon written consent of the
Company and the Purchaser.
 
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Section 4.4. Governing Law. This Agreement and the rights and obligations of the
parties hereunder are to be governed and construed in accordance with the laws
of the State of New York, without regard to conflicts of law principles.

Section 4.5. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally or sent by
electronic mail or facsimile transmission, overnight courier, or certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally or sent by electronic mail or facsimile
transmission during normal business hours of the recipient, and if not sent
during normal business hours, then on the recipient’s next business day, one day
after deposit with an overnight courier, or if mailed, five (5) days after the
date of deposit in the mails, as follows:

if to the Purchaser, to:

Textile Investment International S.A.
41, Avenue de la Gare
Luxembourg L-1611
Grand Duchy of Luxembourg
Fax: 001 352 2648 4747
Attention: Rene Faltz, Managing Director

with a copy to:

Friedman Kaplan Seiler & Adelman LLP
1633 Broadway
New York, New York 10019
Fax: (212) 833-1250
Attention: Barry A. Adelman, Esq.

if to the Company, to:

I.C. Isaacs & Company, Inc.
475 10th Avenue, 9th Floor
New York, New York 10018
Fax: ____________________
Attention: Robert S. Stec

with a copy to:

Kramer Levin Naftalis & Frankel LLP
1177 Avenue of the Americas
New York, New York 10036
Fax: (212) 750-8000
Attention: Terrence L. Shen, Esq.
 
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Any party may by notice given in accordance with this section to the other
parties designate another address or person for receipt of notices hereunder.

Section 4.6. Counterparts. This Agreement may be executed in multiple
counterparts and by facsimile, each of which when so executed and delivered
shall be an original, but all of such counterparts shall together constitute one
and the same instrument.

Section 4.7. Effect of Headings. The section and paragraph headings herein are
for convenience only and shall not affect the construction hereof.

Section 4.8. Severability. This Agreement shall be deemed severable, and the
invalidity or unenforceability of any term or provision hereof shall not affect
the validity or enforceability of this Agreement or of any other term or
provisions hereof. Furthermore, in lieu of any such invalid or unenforceable
term or provision, the parties hereto intend that there shall be added as a part
of this Agreement a provision as similar in terms to such invalid or
unenforceable provisions as may be possible and be valid and enforceable.
 
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IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of
the date first set forth above.
 

 
I.C. Isaacs & Company, Inc.
             
By:
/s/ Robert S. Stec  
 
Name: Robert S. Stec
 
 
Title:   Chief Executive Officer
             
Textile Investment International S.A.
             
By:
/s/ René Faltz     /s/ Tom Felgen  
 
Name: René Faltz & Tom Felgen
 
 
Title:   Managing Directors

 

[Signature Page to Conversion Agreement]
 
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