Document:

Exhibit 10.1 Employment Agreement

    
      

    

    Exhibit
      10.1

    

    Execution
      Copy

    

    EMPLOYMENT
      AGREEMENT

     

    THIS
      AGREEMENT (the “Agreement”), made in New York, New York as of April 19, 2007,
      between I.C. Isaacs & Company, Inc., a Delaware corporation (the “Company”),
      and Robert S. Stec (“Executive”).

     

    WHEREAS,
      the Company desires to employ Executive as its interim Chief Executive Officer,
      and Executive desires to accept such employment on the terms and conditions
      hereinafter set forth;

     

    NOW,
      THEREFORE, IN CONSIDERATION of the mutual covenants and agreements hereinafter
      set forth, the Company and Executive agree as follows:

     

    1.    Term.

     

    Unless
      earlier terminated in accordance with Section 4 hereof, the term of this
      Agreement shall be the one-year period commencing on April 5, 2007 and ending
      on
      April 4, 2008 (the “Term”). The Term may be extended by mutual written agreement
      of the parties under terms and conditions that are mutually agreed by the
      parties.

     

    2.    Employment.

     

    (a) Employment
      by the Company; Director.
      Executive agrees to be employed by the Company during the Term upon the terms
      and subject to the conditions set forth in this Agreement. Executive shall
      serve
      as the interim Chief Executive Officer of the Company and shall report to the
      Board of Directors of the Company (the “Board of Directors”). Executive is
      currently a member of the Company’s Board of Directors and agrees to continue
      serving in such capacity.

     

    (b) Performance
      of Duties.
      Throughout the Term, Executive shall faithfully and diligently perform
      Executive’s duties in conformity with the directions of the Board of Directors
      and serve the Company to the best of Executive’s ability. Executive shall devote
      at least eighty percent (80%) of his business time and best efforts to the
      business and affairs of the Company. In his capacity as the Chief Executive
      Officer of the Company, Executive shall have such duties and responsibilities
      as
      are customary for Executive’s position and any other duties or responsibilities
      that he may be assigned by the Board of Directors.

     

    (c) Place
      of Performance.
      Executive shall be principally based at the Company’s offices in New York, New
      York. Executive recognizes that his duties may require, at the Company’s
      expense, travel to domestic and international locations.

     

     

     

    
      
        
        

      

      
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    3.    Compensation
      and
      Benefits.

     

    (a) Base
      Salary.
      The
      Company agrees to pay to Executive a base salary (“Base Salary”) at the annual
      rate of $660,000. Payments of the Base Salary shall be payable in accordance
      with the Company’s standard payroll practices.

     

    (b) Performance
      Bonus.
      Unless
      otherwise determined by the Board of Directors, in its sole discretion,
      Executive shall not be eligible to receive any bonus payment.

     

    (c) Stock
      Options.
      The
      Company shall grant to Executive an option to purchase 75,000 shares of the
      common stock of the Company, in accordance with and subject to the provisions
      of
      the I.C. Isaacs & Company, Inc. Amended and Restated Omnibus Stock Option
      Plan, as it may be amended from time to time, and a Nonstatutory Stock Option
      Grant Agreement in substantially the form attached hereto as Exhibit
      A.

     

    (d) Benefits
      and Perquisites.
      Except
      as set forth herein, Executive shall not be entitled to participate in any
      benefit plans and programs, or to receive any benefits and perquisites,
      generally provided by the Company to senior executives of the Company, including
      without limitation family medical insurance (subject to applicable employee
      contributions). Executive shall be entitled to receive twenty (20) days of
      annual paid vacation.

     

    (e) Business
      Expenses.
      The
      Company agrees to reimburse Executive, in accordance with its standard senior
      executive policies from time to time in effect, for all reasonable and necessary
      travel, business entertainment and other business expenses incurred by Executive
      in connection with the performance of his duties under this Agreement. Such
      reimbursements shall be made by the Company on a timely basis upon submission
      by
      Executive of reasonable documentation supporting such expenses. 

     

    (f) Personal
      Travel and Expenses.
      The
      Company agrees to reimburse Executive for the cost of one roundtrip, economy
      class airline ticket each month during the Term for travel between New York,
      New
      York and Greensboro, North Carolina. Executive shall be solely responsible
      for,
      and the Company shall not be obligated to reimburse Executive for, Executive’s
      housing and living expenses. Notwithstanding anything to the contrary herein,
      the Company agrees to reimburse Executive once during the Term for the
      reasonable cost of two nights’ stay by Executive in a hotel in New York, New
      York during the period that Executive searches for an apartment in New
      York.

     

    (g) No
      Other Compensation or Benefits; Payment.
      The
      compensation and benefits specified in this Section 3 and in Section 5 of this
      Agreement shall be in lieu of any and all other compensation and benefits.
      Payment of all compensation and benefits to Executive specified in this Section
      3 and in Section 5 of this Agreement (i) shall be made in accordance with the
      relevant Company policies in effect from time to time to the extent the same
      are
      consistently applied, and (ii) shall be subject to all legally required and
      customary withholdings.

     

    (h) Cessation
      of Employment.
      Subject
      to and as provided in Section 5, in the event Executive shall cease to be
      employed by the Company for any reason, then Executive’s compensation and
      benefits, if any, shall cease on the date of such event, except as otherwise
      specifically provided herein or as required by law.

     

     

    
      
        
        

      

      
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    4.    Termination
      of
      Employment.  Executive’s employment hereunder may be terminated prior
      to the end of the Term under the following circumstances.

     

    (a) Death.
      Executive’s employment hereunder shall terminate upon Executive’s
      death.

     

    (b) Executive
      Becoming Totally Disabled.
      The
      Company may terminate Executive’s employment hereunder at any time after
      Executive becomes “Totally Disabled.” For purposes of this Agreement, Executive
      shall be “Totally Disabled” in the event Executive is unable to perform the
      duties and responsibilities contemplated under this Agreement for a period
      of 90
      consecutive days due to physical or mental incapacity or impairment. During
      any
      period that Executive fails to perform Executive’s duties hereunder as a result
      of incapacity due to physical or mental illness (the “Disability Period”),
      Executive shall continue to receive the compensation and benefits provided
      by
      Section 3 of this Agreement until Executive’s employment hereunder is
      terminated; provided, however, that the amount of base compensation and benefits
      received by Executive during the Disability Period shall be reduced by the
      aggregate amounts, if any, payable to Executive under any disability benefit
      plan or program provided to Executive by the Company; and provided further
      that
      in no event shall such payments be made for a period in excess of 29
      months.

     

    (c) Termination
      by the Company for Cause.
      The
      Company may terminate Executive’s employment hereunder for Cause at any time
      after providing written notice to Executive. For purposes of this Agreement,
      the
      term “Cause” shall mean any of the following: (i) the neglect or failure or
      refusal of Executive to perform any material duty of Executive hereunder (other
      than as a result of total or partial incapacity due to physical or mental
      illness), which neglect or refusal has, in the good faith determination of
      the
      Board, a negative impact on the Company; (ii) the engaging by Executive in
      gross negligence or misconduct which is injurious to the Company or any of
      its
      affiliates, monetarily or otherwise; (iii) perpetration of an intentional and
      knowing fraud against or affecting the Company or any of its affiliates or
      any
      customer, client, agent, or employee thereof; (iv) any willful or intentional
      act that could reasonably be expected to injure the reputation, business, or
      business relationships of the Company or any of its affiliates or Executive’s
      reputation or business relationships; (v) Executive’s material failure to
      comply with, and/or a material violation by Executive of, the internal policies
      of the Company or any of its affiliates and/or procedures or any laws or
      regulations applicable to Executive’s conduct as an employee of the Company;
      (vi) Executive’s conviction (including conviction on a nolo contendere
      plea) of
      a felony or any crime involving fraud, dishonesty or moral turpitude; (vii)
      the
      breach of a covenant set forth in Section 6; or (viii) any other material breach
      by Executive of this Agreement; provided, however, that, if susceptible of
      cure,
      a termination by the Company under Sections 4(c)(i), 4(c)(v) or 4(c)(viii)
      shall
      be effective only if, within 14 days following delivery of a written notice
      by
      the Company to Executive that the Company is terminating his employment for
      Cause, Executive has failed to cure the circumstances giving rise to
      Cause.

     

    (d) Termination
      by the Company Without Cause.
      The
      Company may terminate Executive’s employment hereunder at any time for any
      reason or no reason by giving Executive sixty (60) days prior written notice
      of
      the termination. Following any such notice, the

     

     

     

    
      
        
        

      

      
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    Company
      may reduce or remove any and all of Executive’s duties, positions and titles
      with the Company.

     

    (e) Termination
      by Executive for Good Reason.
      Executive may terminate his employment hereunder for Good Reason at any time
      after providing written notice to the Company. For purposes of this Agreement,
      the term “Good Reason” shall mean any of the following: (i) the Company fails to
      pay the compensation described in Sections 3(a) and 3(b) (in accordance with,
      and subject to, such provisions); (ii) Executive no longer holds the office
      of
      Chief Executive Officer or an office of equivalent stature, or his functions
      and/or duties are materially diminished by the Board of Directors; or (iii)
      Executive’s job site is relocated to a location outside of New York, unless the
      parties mutually agree to such relocation; provided, however, that a termination
      by Executive for Good Reason shall be effective only if, within 14 days
      following delivery of a written notice by Executive to the Company that
      Executive is terminating his employment for Good Reason, the Company has failed
      to cure the circumstances giving rise to Good Reason.

     

    (f) Termination
      by Executive Without Good Reason.
      Executive may terminate his employment hereunder at any time for any reason
      or
      no reason by giving the Company sixty (60) days prior written notice of the
      termination. Following any such notice, the Company may reduce or remove any
      and
      all of Executive’s duties, positions and titles with the Company, and any such
      reduction or removal shall not constitute Good Reason.

     

    5.    Compensation
      Following Termination Prior to the End of the Term. In the event that
      Executive’s employment hereunder is terminated prior to the end of the Term for
      any reason, Executive shall be entitled only to the following compensation
      and
      benefits upon such termination:

     

    (a) General.
      On any
      termination of Executive’s employment, he shall be entitled to:

     

    
      	 	
              (i)

            	
              any
                accrued but unpaid Base Salary for services rendered through the
                date of
                termination; provided, however, that in the event Executive’s employment
                is terminated pursuant to Section 4(b), the amount of Base Salary
                received
                by Executive during the Disability Period shall be reduced by the
                aggregate amounts, if any, payable to Executive under any disability
                benefit plan or program provided to Executive by the
                Company;

            

    

     

    
      	 	
              (ii)

            	
              any
                vacation accrued to the date of termination; and
                

            

    

     

    
      	 	
              (iii)

            	
              any
                accrued but unpaid expenses through the date of termination required
                to be
                reimbursed in accordance with Sections 3(e) and 3(f) of this
                Agreement.

            

    

     

    (b) Termination
      by the Company Without Cause; Termination by Executive for Good
      Reason.
      In the
      event that Executive’s employment is terminated prior to the 

     

     

     

    
      
        
        

      

      
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    expiration
      of the Term by the Company without Cause pursuant to Section 4(d) or by
      Executive for Good Reason pursuant to Section 4(e), Executive shall be entitled
      only to the following:

     

    
      	 	
              (i)

            	
              those
                items identified in Section 5(a);
                and

            

    

     

    
      	 	
              (ii)

            	
              the
                continued payment of the Base Salary (as determined pursuant to Section
                3(a)) for one month (such sums to be paid at the times and in the
                amounts
                such Base Salary would have been paid had Executive’s employment not
                terminated, which payments shall be made on or before the 90th day
                immediately following the date Executive’s employment terminates).
                

            

    

     

    (c) No
      Further Liability; Release.
      Payment
      made and performance by the Company in accordance with this Section 5 shall
      operate to fully discharge and release the Company and its directors, officers,
      employees, affiliates, stockholders, successors, assigns, agents and
      representatives from any further obligation or liability with respect to
      Executive’s employment and termination of employment. Other than providing the
      compensation and benefits provided for in accordance with this Section 5, the
      Company and its directors, officers, employees, affiliates, stockholders,
      successors, assigns, agents and representatives shall have no further obligation
      or liability to Executive or any other person under this Agreement. The payment
      of any amounts pursuant to this Section 5 (other than payments required by
      law)
      is expressly conditioned upon the delivery by Executive to the Company of a
      release in form and substance reasonably satisfactory to the Company of any
      and
      all claims Executive may have against the Company and its directors, officers,
      employees, affiliates, successors, assigns, agents and
      representatives.

     

    (d) Offset;
      No Obligation to Mitigate.
      The
      Company’s obligation to make the payments provided for in this Agreement and
      otherwise to perform its obligations hereunder shall not be affected by any
      set-off, counterclaim, recoupment, defense, or other claim, right, or action
      that the Company may have against the Executive or others. In no event shall
      the
      Executive be obligated to seek other employment or take any other action by
      way
      of mitigation of the amounts payable to the Executive under any of the
      provisions of this Agreement and such amounts shall not be reduced whether
      or
      not the Executive obtains other employment. 

     

    6. Exclusive
      Employment; Noncompetition; Nonsolicitation; Nondisclosure of Proprietary
      Information; Surrender of Records; Developments.

     

    6.1 No
      Conflict; No Other Employment.
      During
      the period of Executive’s employment with the Company, Executive shall not: (i)
      engage in any activity which conflicts or interferes with or derogates from
      the
      performance of Executive’s duties hereunder nor shall Executive engage in any
      other business activity, whether or not such business activity is pursued for
      gain or profit and including service as a director of any other company, except
      as approved in advance in writing by the Company; provided, however, that
      Executive shall be entitled to manage his personal investments and otherwise
      attend to personal affairs, including charitable, social and political
      activities, in a manner that does not unreasonably
      interfere with his responsibilities hereunder, or (ii) accept or engage in
      any
      other

     

     

    
      
        
        

      

      
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    employment,
      whether as an employee or consultant or in any other capacity, and whether
      or
      not compensated therefor. Notwithstanding the foregoing, the Company agrees
      that, subject to the second sentence of Section 2(b) hereof, Executive may
      continue to act in the following positions with the following companies during
      the Term: (x) Chairman and Chief Executive Officer of Prestige Brands of North
      Carolina, LLC, a home furnishings company, and (y) Chief Executive Officer
      of
      Brand Force One, LLC, a marketing consulting company.

     

    6.2 Noncompetition;
      Nonsolicitation.

     

    (a) Executive
      acknowledges and recognizes the highly competitive nature of the Company’s
      business and that access to the Company’s confidential records and proprietary
      information renders him special and unique within the Company’s industry. In
      consideration of the payment by the Company to Executive of amounts that may
      hereafter be paid to Executive pursuant to this Agreement (including, without
      limitation, pursuant to Sections 3 and 5 hereof) and other obligations
      undertaken by the Company hereunder, Executive agrees that during (i) his
      employment with the Company and (ii) the period beginning on the date of
      termination of employment for any reason and ending one year after the date
      of
      termination of employment (the “Post-Employment Period”), Executive shall not,
      directly or indirectly, engage (as owner, investor, partner, stockholder,
      employer, employee, consultant, advisor, director or otherwise) in any Competing
      Business, provided that ownership by Executive of less than 1% of the
      outstanding common stock of a publicly-traded company that is a Competing
      Business will not be a breach of the provisions of this Section 6.2(a). For
      purposes of this Agreement, “Competing Business” shall mean (i) any business
      engaged in the design or marketing of branded jeanswear and sportswear; (ii)
      any
      business in which the Company is currently engaged anywhere in the world, and
      (iii) any other business which the Company engages in anywhere in the world
      during Executive’s employment with the Company.

     

    (b) In
      further consideration of the payment by the Company to Executive of amounts
      that
      may hereafter be paid to Executive pursuant to this Agreement (including,
      without limitation, pursuant to Sections 3 and 5 hereof) and other obligations
      undertaken by the Company hereunder, Executive agrees that during his employment
      and the Post-Employment Period, he shall not, directly or indirectly, (i)
      solicit, encourage or attempt to solicit or encourage any of the employees,
      agents, consultants or representatives of the Company or any of its affiliates
      to terminate his, her, or its relationship with the Company or such affiliate;
      (ii) solicit, encourage or attempt to solicit or encourage any of the
      employees of the Company or any of its affiliates to become employees or
      consultants of any other person or entity; (iii) solicit, encourage or attempt
      to solicit or encourage any of the consultants of the Company or any of its
      affiliates to become employees or consultants of any other person or entity,
      provided that the restriction in this clause (iii) shall not apply if (A) such
      solicitation, encouragement or attempt to solicit or encourage is in connection
      with a business which is not a Competing Business and B)
      the
      consultant’s rendering of services for the other person or entity will not
      interfere with the consultant’s rendering of services to the Company; (iv)
      solicit or attempt to solicit any licensor, customer, vendor or distributor
      of
      the Company or any of its affiliates with respect to any product or service
      being furnished, made, sold or leased by the Company or such affiliate, provided
      that the restriction in this clause (iv) shall not apply if such solicitation
      or
      attempt to solicit is (A) in connection with a business which is not a Competing
      Business and (B) does not interfere
      with, or conflict with, the interests of the Company or any of its affiliates;
      or (v)

     

     

    
      
        
        

      

      
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    persuade
      or seek to persuade any licensor or customer of the Company or any affiliate
      to
      cease to do business or to reduce the amount of business which any licensor
      or
      customer has customarily done or contemplates doing with the Company or such
      affiliate, whether or not the relationship between the Company or its affiliate
      and such licensor or customer was originally established in whole or in part
      through Executive’s efforts. For purposes of this Section 6.2(b) only, the terms
“licensor”, “customer,” “vendor” and “distributor” shall mean a licensor,
      customer, vendor or distributor who has done business with the Company or any
      of
      its affiliates within twelve months preceding the termination of Executive’s
      employment.

     

    (c) During
      Executive’s employment with the Company and during the Post-Employment Period,
      Executive agrees that upon the earlier of Executive’s (i) negotiating with any
      Competitor (as defined below) concerning the possible employment of Executive
      by
      the Competitor, (ii) receiving an offer of employment from a Competitor, or
      (iii) becoming employed by a Competitor, Executive will (A) immediately provide
      written notice to the Company of such circumstances and (B) provide copies
      of
      Section 6 of this Agreement to the Competitor. Executive further agrees that
      the
      Company may provide notice to a Competitor of Executive’s obligations under this
      Agreement, including without limitation Executive’s obligations pursuant to
      Section 6 hereof. For purposes of this Agreement, “Competitor” shall mean any
      entity (other than the Company or any of its affiliates) that engages, directly
      or indirectly, in any Competing Business.

     

    (d) Executive
      understands that the provisions of this Section 6.2 may limit his ability to
      earn a livelihood in a business similar to the business of the Company or its
      affiliates but nevertheless agrees and hereby acknowledges that the
      consideration provided under this Agreement, including any amounts or benefits
      provided under Sections 3 and 5 hereof and other obligations undertaken by
      the
      Company hereunder, is sufficient to justify the restrictions contained in such
      provisions. In consideration thereof and in light of Executive’s education,
      skills and abilities, Executive agrees that he will not assert in any forum
      that
      such provisions prevent him from earning a living or otherwise are void or
      unenforceable or should be held void or unenforceable.

     

    6.3 Proprietary
      Information.
      Executive acknowledges that during the course of his employment with the Company
      he will necessarily have access to and make use of proprietary information
      and
      confidential records of the Company and its affiliates. Executive covenants
      that
      he shall not during the Term or at any time thereafter, directly or indirectly,
      use for his own purpose or for the benefit of any person or entity other than
      the Company, nor otherwise disclose, any proprietary information to any
      individual or entity, unless such disclosure has been authorized in writing
      by
      the Company or is otherwise required by law. Executive acknowledges and
      understands that the term “proprietary information” includes, but is not limited
      to: (a) the software products, programs, applications, and processes utilized
      by
      the Company or any of its affiliates; (b) the name and/or address of any
      licensor, customer or vendor of the Company or any of its affiliates or any
      information concerning the transactions or relations of any licensor, customer
      or vendor of the Company or any of its affiliates with the Company or such
      affiliate or any of its or their partners, principals, directors, officers
      or
      agents; (c) any information concerning any product, technology, or procedure
      employed by the Company or any of
      its
      affiliates but not generally known to its or their customers, vendors or
      competitors, or under development by or being tested by the Company or any
      of
      its affiliates but not at the time

     

     

    
      
        
        

      

      
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    offered
      generally to customers or vendors; (d) any information relating to the computer
      software, computer systems, pricing or marketing methods, sales margins, cost
      of
      goods, cost of material, capital structure, operating results, borrowing
      arrangements or business plans of the Company or any of its affiliates; (e)
      any
      information which is generally regarded as confidential or proprietary in any
      line of business engaged in by the Company or any of its affiliates; (f) any
      business plans, budgets, advertising or marketing plans; (g) any information
      contained in any of the written or oral policies and procedures or manuals
      of
      the Company or any of its affiliates; (h) any information belonging to customers
      or vendors of the Company or any of its affiliates or any other person or entity
      which the Company or any of its affiliates has agreed to hold in confidence;
      (i)
      any Developments (as defined below) covered by this Agreement; and (j) all
      written, graphic and other material relating to any of the foregoing. Executive
      acknowledges and understands that information that is not novel or copyrighted
      or patented may nonetheless be proprietary information. The term “proprietary
      information” shall not include information generally available to and known by
      the public or information that is or becomes available to Executive on a
      non-confidential basis from a source other than the Company, any of its
      affiliates, or the directors, officers, employees, partners, principals or
      agents of the Company or any of its affiliates (other than as a result of a
      breach of any obligation of confidentiality).

     

    6.4 Confidentiality
      and Surrender of Records.
      Executive shall not during the Term or at any time thereafter (irrespective
      of
      the circumstances under which Executive’s employment by the Company terminates),
      except as required by law, directly or indirectly publish, make known or in
      any
      fashion disclose any confidential records to, or permit any inspection or
      copying of confidential records by, any individual or entity other than in
      the
      course of such individual’s or entity’s employment or retention by the Company.
      Upon termination of employment for any reason or upon request by the Company,
      Executive shall deliver promptly to the Company all property and records of
      the
      Company or any of its affiliates, including, without limitation, all
      confidential records. For purposes hereof, “confidential records” means all
      correspondence, reports, memoranda, files, manuals, books, lists, financial,
      operating or marketing records, magnetic tape, or electronic or other media
      or
      equipment of any kind which may be in Executive’s possession or under his
      control or accessible to him which contain any proprietary information. All
      property and records of the Company and any of its affiliates (including,
      without limitation, all confidential records) shall be and remain the sole
      property of the Company or such affiliate during the Term and
      thereafter.

     

    6.5 Inventions
      and Patents.
      All
      inventions, innovations or improvements (including policies, procedures,
      products, improvements, software, ideas and discoveries, whether patent,
      copyright, trademark, service mark, or otherwise) conceived or made by
      Executive, either alone or jointly with others, in the course of his employment
      by the Company, belong to the Company. Executive will promptly disclose in
      writing such inventions, innovations or improvements to the Company and perform
      all actions reasonably requested by the Company to establish and confirm such
      ownership by the Company, including, but not limited to, cooperating with and
      assisting the Company in obtaining patents, copyrights, trademarks, or service
      marks for the Company in the United States and in foreign
      countries.

    6.6 Enforcement.
      Executive acknowledges and agrees that, by virtue of his position, his services
      and access to and use of confidential records and proprietary information,
      any
      violation by him of any of the undertakings contained in this Section 6
      would

     

     

    
      
        
        

      

      
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    cause
      the
      Company and/or its affiliates immediate, substantial and irreparable injury
      for
      which it or they have no adequate remedy at law. Accordingly, Executive agrees
      and consents to the entry of an injunction or other equitable relief by a court
      of competent jurisdiction restraining any violation or threatened violation
      of
      any undertaking contained in this Section 6. Executive waives posting by the
      Company or its affiliates of any bond otherwise necessary to secure such
      injunction or other equitable relief. Rights and remedies provided for in this
      Section 6 are cumulative and shall be in addition to rights and remedies
      otherwise available to the parties hereunder or under any other agreement or
      applicable law.

     

    7.    Key
      Man Insurance. Executive recognizes and acknowledges that the Company or its
      affiliates may seek and purchase one or more policies providing key man life
      insurance with respect to Executive, the proceeds of which would be payable
      to
      the Company or such affiliate. Executive hereby consents to the Company or
      its
      affiliates seeking and purchasing such insurance and will provide such
      information, undergo such medical examinations (at the Company’s expense),
      execute such documents, and otherwise take any and all actions reasonably
      necessary or desirable in order for the Company or its affiliates to seek,
      purchase, and maintain in full force and effect such policy or
      policies.

     

    8.    Assignment
      and Transfer.

     

    (a) Company.
      This
      Agreement shall inure to the benefit of and be enforceable by, and may be
      assigned by the Company without Executive’s consent to, any purchaser of all or
      substantially all of the Company’s business or assets, or to any successor to
      the Company or any assignee thereof (whether direct or indirect, by purchase,
      merger, consolidation or otherwise).

     

    (b) Executive.
      The
      parties hereto agree that Executive is obligated under this Agreement to render
      personal services during the Term of a special, unique, unusual, extraordinary
      and intellectual character, thereby giving this Agreement special value.
      Executive’s rights and obligations under this Agreement shall not be
      transferable by Executive by assignment or otherwise, and any purported
      assignment, transfer or delegation thereof shall be void; provided, however,
      that if Executive shall die, all amounts then payable to Executive hereunder
      shall be paid in accordance with the terms of this Agreement to Executive’s
      estate.

     

    9.    Miscellaneous.

     

    (a) Other
      Obligations.
      Executive represents and warrants that neither Executive’s employment with the
      Company nor Executive’s performance of Executive’s obligations hereunder will
      conflict with or violate or otherwise are inconsistent with any other
      obligations, legal or otherwise, which Executive may have. Executive covenants
      that he shall perform his duties hereunder in a professional manner and not
      in
      conflict or violation, or otherwise inconsistent with other obligations legal
      or
      otherwise, which Executive may have.

    (b)
      Nondisclosure; Other Employers.
      Executive will not disclose to the Company, use, or induce the Company to use,
      any proprietary information, trade secrets or confidential business information
      of others. Executive represents and warrants that Executive

     

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

     

    does
      not
      possess any property, proprietary information, trade secrets and confidential
      business information belonging to any prior employers.

     

    (c) Cooperation.
      Following termination of employment with the Company for any reason, Executive
      shall cooperate with the Company, as requested by the Company, to effect a
      transition of Executive’s responsibilities and to ensure that the Company is
      aware of all matters being handled by Executive. The Company shall reimburse
      Executive’s reasonable out-of-pocket expenses incurred in connection with the
      obligations in this Section 9(c).

     

    (d) Mitigation.
      Executive shall not be required to mitigate damages or the amount of any payment
      provided to him under Section 5 of this Agreement by seeking other employment
      or
      otherwise, nor shall the amount of any payments provided to Executive under
      Section 5 be reduced by any compensation earned by Executive as the result
      of
      employment by another employer after the termination of Executive’s employment
      or otherwise.

     

    (e) Protection
      of Reputation.
      During
      the Term and thereafter, Executive agrees that he will take no action which
      is
      intended, or would reasonably be expected, to harm the Company or any of its
      affiliates or its or their reputation or which would reasonably be expected
      to
      lead to unwanted or unfavorable publicity to the Company or its affiliates.
      Nothing herein shall prevent Executive from making any truthful statement in
      connection with any legal proceeding or investigation by the Company or any
      governmental authority.

     

    (f) Governing
      Law.
      This
      Agreement shall be governed by and construed (both as to validity and
      performance) and enforced in accordance with the internal laws of the State
      of
      New York, without regard to the principles of conflicts of law or where the
      parties are located at the time a dispute arises.

     

    (g) Arbitration.

     

    
      	 	
              (i)

            	
              General.
                Executive and the Company specifically, knowingly, and voluntarily
                agree
                that they shall use final and binding arbitration to resolve any
                dispute
                (an “Arbitrable Dispute”) between Executive, on the one hand, and the
                Company (or any affiliate of the Company), on the other hand. This
                arbitration agreement applies to all matters relating to this Agreement
                and Executive’s employment with and/or termination of employment from the
                Company, including without limitation disputes about the validity,
                interpretation, or effect of this Agreement, or alleged violations
                of it,
                any payments due hereunder and all claims arising out of any alleged
                discrimination, harassment or retaliation, including, but not limited
                to,
                those covered by Title VII of the Civil Rights Act of 1964, as amended,
                the Age Discrimination in Employment Act of 1967, as amended, the
                Americans With Disabilities Act, the New York State Human Rights
                Law, the
                New York City Human Rights Law, the New York Labor Law, or any other
                federal, state or local law relating to discrimination in
                employment.

            

    

     

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

     

    
      	 	
              (ii)

            	
              Injunctive
                Relief.
                Notwithstanding anything to the contrary contained herein, the Company
                and
                any affiliate of the Company (if applicable) shall have the right
                to seek
                injunctive or other equitable relief from a court of competent
                jurisdiction to enforce Section 6 of this Agreement. For purposes
                of
                seeking enforcement of Section 6, the Company and Executive hereby
                consent
                to the jurisdiction of any state or federal court sitting in the
                City,
                County and State of New York.

            

    

     

    
      	 	
              (iii)

            	
              The
                Arbitration.
                Any arbitration pursuant to this Section 9(g) will take place in
                New York,
                New York, under the auspices of the American Arbitration Association,
                in
                accordance with the Employment Arbitration Rules and Mediation Procedures
                of the American Arbitration Association then in effect, and before
                one
                arbitrator selected in accordance with such rules. Judgment upon
                the award
                rendered by the arbitrators may be entered in any state or federal
                court
                sitting in the City, County and State of New York, or any other court
                of
                competent jurisdiction.

            

    

     

    
      	 	
              (iv)

            	
              Fees
                and Expenses.
                In any arbitration pursuant to this Section 9(g), except as otherwise
                required by law, each party shall be responsible for the fees and
                expenses
                of its own attorneys and witnesses, and the fees and expenses of
                the
                arbitrators shall be divided equally between the Company, on the
                one hand,
                and Executive, on the other hand. Notwithstanding the foregoing,
                the
                prevailing party on a claim to enforce the terms of this Agreement
                shall
                be entitled to the reimbursement of his, her or its reasonable fees
                and
                expenses in connection with such claim, including reasonable attorneys’
                fees, from the other party.

            

    

     

    
      	 	
              (v)

            	
              Exclusive
                Forum.
                Except as permitted by Section 9(g)(ii) hereof, arbitration in the
                manner
                described in this Section 9(g) shall be the exclusive forum for any
                Arbitrable Dispute. Except as permitted by Section 9(g)(ii), should
                Executive or the Company attempt to resolve an Arbitrable Dispute
                by any
                method other than arbitration pursuant to this Section 9(g), the
                responding party shall be entitled to recover
                from the initiating party all damages, expenses, and attorneys’ fees
                incurred as a result of that
                breach.

            

    

     

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (h) Entire
      Agreement.
      This
      Agreement (including the plans referenced in Section 3(d)) contains the entire
      agreement and understanding between the parties hereto in respect of Executive’s
      employment and supersedes, cancels and annuls any prior or contemporaneous
      written or oral agreements, understandings, commitments and practices between
      them respecting Executive’s employment, including all prior employment
      agreements between the Company and Executive, which agreement(s) hereby are
      terminated and shall be of no further force or effect.

     

    (i) Amendment.
      This
      Agreement may be amended only by a writing which makes express reference to
      this
      Agreement as the subject of such amendment and which is signed by Executive
      and,
      on behalf of the Company, by its duly authorized officer.

     

    (j) Severability.
      If any
      provision of this Agreement or the application of any such provision to any
      party or circumstances shall be determined by any court of competent
      jurisdiction or arbitration panel to be invalid or unenforceable to any extent,
      the remainder of this Agreement, or the application of such provision to such
      person or circumstances other than those to which it is so determined to be
      invalid or unenforceable, shall not be affected thereby, and each provision
      hereof shall be enforced to the fullest extent permitted by law. If any
      provision of this Agreement, or any part thereof, is held to be invalid or
      unenforceable because of the scope or duration of or the area covered by such
      provision, the parties hereto agree that the court or arbitration panel making
      such determination shall reduce the scope, duration and/or area of such
      provision (and shall substitute appropriate provisions for any such invalid
      or
      unenforceable provisions) in order to make such provision enforceable to the
      fullest extent permitted by law and/or shall delete specific words and phrases,
      and such modified provision shall then be enforceable and shall be enforced.
      The
      parties hereto recognize that if, in any judicial or arbitral proceeding, a
      court or arbitration panel shall refuse to enforce any of the separate covenants
      contained in this Agreement, then that invalid or unenforceable covenant
      contained in this Agreement shall be deemed eliminated from these provisions
      to
      the extent necessary to permit the remaining separate covenants to be enforced.
      In the event that any court or arbitration panel determines that the time period
      or the area, or both, are unreasonable and that any of the covenants is to
      that
      extent invalid or unenforceable, the parties hereto agree that such covenants
      will remain in full force and effect, first, for the greatest time period,
      and
      second, in the greatest geographical area that would not render them
      unenforceable.

     

    (k) Construction.
      The
      headings and captions of this Agreement are provided for convenience only and
      are intended to have no effect in construing or interpreting this Agreement.
      The
      language in all parts of this Agreement shall be in all cases construed
      according to its fair meaning and not strictly for or against the Company or
      Executive. As used herein, the words “day” or “days” shall mean a calendar day
      or days.

     

    (l) Nonwaiver.
      Neither
      any course of dealing nor any failure or neglect of either party hereto in
      any
      instance to exercise any right, power or privilege hereunder or under law shall
      constitute a waiver of any other right, power or privilege or of the same right,
      power or privilege in any other instance. All waivers by either party hereto
      must be contained in a written
      instrument signed by the party to be charged and, in the case of the Company,
      by
      its duly authorized officer.

     

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (m) Notices.
      Any
      notice required or permitted hereunder shall be in writing and shall be
      sufficiently given if personally delivered or if sent by registered or certified
      mail, postage prepaid, with return receipt requested, addressed: (i) in the
      case
      of the Company, to I.C. Isaacs & Company, Inc., 475 10th
      Avenue,
      9th
      Floor,
      New York, NY 10018, attn.: Chairman of the Board of Directors, with a copy
      to
      Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of the Americas, New York,
      New York 10036, attn.: Terrence L. Shen, Esq.; and (ii) in the case of
      Executive, to Executive’s last known address as reflected in the Company’s
      records, or to such other address as Executive shall designate by written notice
      to the Company. Any notice given hereunder shall be deemed to have been given
      at
      the time of receipt thereof by the person to whom such notice is given if
      personally delivered or at the time of mailing if sent by registered or
      certified mail.

     

    (n) Assistance
      in Proceedings, Etc.
      Executive shall, without additional compensation, during and after the Term,
      upon reasonable notice, furnish such information and proper assistance to the
      Company as may reasonably be required by the Company in connection with any
      legal or quasi-legal proceeding, including any external or internal
      investigation, involving the Company or any of its affiliates. The Company
      shall
      reimburse Executive’s out-of-pocket expenses incurred in connection with the
      obligations in this Section 9(n).

     

    (o) Survival.
      Cessation or termination of Executive’s employment with the Company shall not
      result in termination of this Agreement. The respective obligations of Executive
      and the Company as provided in Sections 5, 6, 8 and 9 of this Agreement shall
      survive cessation or termination of Executive’s employment
      hereunder.

     

    (p) No
      Representations Regarding Tax Implications.
      The
      Company makes no representations regarding the tax implications of the
      compensation and benefits to be paid to Executive under this Agreement,
      including, without limitation, under Section 409A of the Internal Revenue Code
      of 1986, as amended (the “Code”). Executive and the Company agree that in the
      event the Company reasonably determines that the terms hereof would result
      in
      Executive being subject to tax under Section 409A of the Code, Executive and
      the
      Company shall negotiate in good faith to amend this Agreement to the extent
      necessary to prevent the assessment of any such tax, including by delaying
      the
      payment dates of any amounts hereunder.

     

    (q) Counterparts.
      This
      Agreement may be executed in two or more counterparts, each of which shall
      be
      deemed an original and all of which together shall be deemed to be one and
      the
      same instrument. 

     

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    

     

    IN
      WITNESS WHEREOF, the Company has caused this Agreement to be duly executed
      on
      its behalf by an individual thereunto duly authorized and Executive has duly
      executed this Agreement, all as of the date and year first written
      above.

    

     

    I.C.
      ISAACS & COMPANY, INC.                                        EXECUTIVE:

     

     

     

    By:___________________________________                                _________                                                                                         

         
      Name: Gregg A. Holst                                              
      Robert
      S.
      Stec

         
      Title:   Chief Financial Officer

    

    

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

        
        

      

    

    EXHIBIT
      A

     

    I.C.
      ISAACS & COMPANY, INC. 

    AMENDED
      AND RESTATED OMNIBUS STOCK PLAN

    NONSTATUTORY
      STOCK OPTION GRANT AGREEMENT

     

    AGREEMENT
      dated the 19th day of April, 2007 from I.C. ISAACS & COMPANY, INC., a
      Delaware corporation (the “Company”), to Robert S. Stec, an employee and a
      director of the Company (“Optionee”). Capitalized terms used without being
      defined herein shall have the meanings ascribed to them by the I.C. Isaacs
&
Company, Inc. Amended and Restated Omnibus Stock Plan, as the same may be
      amended from time to time hereafter (the “Plan”).

     

    WHEREAS,
      in order to implement the purposes of the Plan, the Company has granted the
      Optionee an opportunity to purchase shares of its $.0001 par value Common Stock
      (the “Common Stock”), as hereinafter provided; and

     

    WHEREAS,
      on April 19, 2007 (the “Grant Date”) the Compensation Committee of the Board of
      Directors of the Company, acting pursuant to the Plan, granted to the Optionee
      the option evidenced hereby at the exercise price in effect under the Plan
      for
      the Grant Date;

     

    NOW,
      THEREFORE, in consideration of the premises, mutual covenants and agreements
      herein, the Company and Optionee agree as follows:

     

    ARTICLE
      1

    GRANT
      OF OPTION

     

    Section
      1.1 Grant of Option.
      The
      Company has granted to Optionee, pursuant to the provisions of the Plan, a
      non-qualified stock option to purchase from the Company, at a price equal to
      the
      fair market value of the shares on the date of grant, which is $1.33 per share
      (the “Exercise Price”), up to 75,000 shares of Common Stock, subject to the
      provisions of this Option (this “Option”). This Option shall expire at 5:00 p.m.
      Eastern Time on the first anniversary of the Vesting Date (the “Expiration
      Date”), unless fully exercised or terminated earlier pursuant to this Option.
      The period between the Vesting Date (as defined below) and the Expiration Date
      is hereinafter referred to as the “Option Term.”

     

    ARTICLE
      2

    VESTING

     

    Section
      2.1 Vesting Schedule.
      Unless
      this Option has earlier terminated pursuant to the provisions of this Agreement,
      the Optionee’s right to purchase Common Stock pursuant to this Option shall vest
      with respect to all of the shares of Common Stock subject to this Option on
      April 4, 2008 (the “Vesting Date”), provided that Optionee shall be an active
      employee on such date.

     

    Section
      2.2 Acceleration of Vesting.
      Unless
      this Option has earlier terminated pursuant to the provisions of this Option,
      vesting of this Option granted to Optionee hereunder shall be accelerated so
      that the unvested portion of this Option shall become 100% vested in Optionee
      upon the earliest to occur of: (i) Optionee’s termination of employment with the
      Company or its

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    subsidiaries
      due to Disability, as defined in Article 4 hereunder; (ii) termination of
      Optionee’s employment with the Company or its subsidiaries as a result of
      Optionee’s death; (iii) termination of Optionee’s employment with the Company or
      its subsidiaries by the Company without “Cause” (as defined in Optionee’s
      employment agreement with the Company, dated April 19, 2007); or (iv) a Change
      of Control that occurs while Optionee is employed by the Company or its
      subsidiaries (each of the foregoing events, a “Triggering Event”). For purposes
      of this Option, the term “Change of Control” shall mean (i) the sale of all or
      substantially all of the assets of the Company, (ii) the sale of more than
      50%
      of the outstanding capital stock of the Company in a non-public sale, (iii)
      the
      dissolution or liquidation of the Company, or (iv) any merger, share exchange,
      consolidation or other reorganization or business combination of the Company
      if
      immediately after such transaction either (A) persons who were members of the
      Board of Directors of the Company immediately prior to such transaction do
      not
      constitute at least a majority of the Board of Directors of the surviving
      entity, or (B) persons who hold a majority of the voting capital stock of the
      surviving entity are not persons who held voting capital stock of the Company
      immediately prior to such transaction. In the event that the vesting of the
      Option is accelerated pursuant to this Section 2.2, the “Vesting Date” shall be
      the date that the Triggering Event occurs.

     

    ARTICLE
      3

    EXERCISE
      OF OPTION

     

    Section
      3.1 Exercisability of Option.
      Unless
      this Option has earlier terminated pursuant to the provisions of Article IV
      hereof, this Option may be exercised at any time, and from time to time during
      the Option Term, with respect to the number of shares subject to the Option
      in
      which Optionee is then vested.

     

    Section
      3.2 Manner of Exercise.
      This
      Option may be exercised, in whole or in part, by delivering written notice
      to
      the Company’s Secretary in such form as the Administrator may require from time
      to time; provided, however, that this Option may not be exercised at any one
      time as to fewer than ten shares (or such lesser number of shares as to which
      this Option is then exercisable). Such notice shall specify the number of shares
      of Common Stock subject to this Option as to which this Option is being
      exercised, and shall be accompanied by full payment of the Exercise Price for
      such shares in accordance with this Section 3.2. The exercise shall be effective
      upon receipt by the Company’s Secretary of such written notice accompanied by
      the required payment. Payment of the Exercise Price shall be made (a) in cash
      (or via certified or cashier’s check, or money order); (b) by a broker-assisted
      cashless exercise in accordance with Regulation T of the Board of Governors
      of
      the Federal Reserve System and the provisions of the next paragraph; or (c)
      by
      any combination of the foregoing. In the Administrator’s sole and absolute
      discretion, the Administrator may authorize payment of the Exercise Price to
      be
      made, in whole or in part, by such other means as the Administrator may
      prescribe. This Option may be exercised only in multiples of whole shares and
      no
      fractional shares shall be issued.

     

    If
      the
      Common Stock is publicly traded on a national exchange, payment of the exercise
      price may be made, in whole or in part, subject to such limitations as the
      Administrator may determine, by delivery of a properly executed exercise notice,
      together with irrevocable instructions: (i) to a brokerage firm approved by
      the
      Company to deliver promptly to the Company the aggregate amount of sale or
      loan
      proceeds to pay the exercise price and any

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    withholding
      tax obligations that may arise in connection with the exercise, and (ii) to
      the
      Company to deliver such purchased shares directly to such brokerage
      firm.

     

    Section
      3.3 Issuance of Shares and Payment of Cash upon Exercise.
      Upon
      exercise of this Option, in whole or in part, in accordance with the terms
      hereof and upon payment of the Exercise Price for the shares of Common Stock
      as
      to which this Option is exercised, the Company shall issue to Optionee, the
      brokerage firm specified in the Optionee’s delivery instructions pursuant to a
      broker-assisted cashless exercise, or such other person exercising this Option,
      as the case may be, the number of shares of Common Stock so paid for, in the
      form of fully paid and nonassessable Common Stock and, as soon as practicable
      thereafter, shall either deliver certificates therefore or instruct its transfer
      agent to issue such shares in book entry form on the books of the transfer
      agent. Unless such shares are registered or an exemption from registration
      is
      available under applicable federal and state law, if the shares of Common Stock
      issued hereunder are in certificated form, the stock certificates for any such
      shares shall, bear a legend restricting transferability of such shares, and
      if
      the shares are in book entry form, they shall be subject to electronic coding
      or
      stop order restricting transferability of such shares. 

     

    Section
      3.4 Legal Compliance.
      The
      Company shall not be obligated to cause to be issued any shares of Common Stock
      pursuant hereto unless and until the Company is advised by its counsel that
      the
      issuance and delivery of such certificates is in compliance with all applicable
      laws, regulations of governmental authority and the requirements of any
      securities exchange on which shares of Common Stock are traded.  The
      Administrator may require, as a condition of the issuance and delivery of
      certificates evidencing shares of Common Stock pursuant to the terms hereof,
      that the recipient of such shares make such covenants, agreements and
      representations, and that such certificates bear such legends, as the
      Administrator, in its sole discretion, deems necessary or
      desirable.  

     

    ARTICLE
      4

    TERMINATION
      OF OPTION

     

    Section
      4.1 Termination, In General.
      This
      Option shall terminate and be of no force or effect after the Expiration Date,
      unless terminated prior to such time as provided below. 

     

    Section
      4.2 Termination of Employment for Cause.
      In the
      event that the Optionee’s employment with the Company is terminated for Cause,
      this Option shall terminate on the commencement of business of the effective
      date of such termination of employment with respect to all shares of Common
      Stock not purchased hereunder prior to such Termination Date.

     

    The
      good
      faith determination by the Administrator of whether the Optionee’s employment
      was terminated by the Company or one of its subsidiaries for Cause shall be
      final and binding for all purposes hereunder.

     

    Section
      4.3 Upon Optionee’s Death.
      Unless
      this Option has earlier terminated for Cause or due to the Optionee’s Disability
      or the Company’s termination of Optionee’s employment without Cause, upon
      Optionee’s death, Optionee’s executor, personal representative, or the person(s)
      to whom this Option shall have been transferred by will or the laws of descent
      and distribution, as the case may be, may exercise all or any part of the
      outstanding Option, provided

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    such
      exercise occurs within one year after the date of Optionee’s death, but not
      later than the Expiration Date of this Option. Unless sooner terminated, this
      Option shall terminate upon the expiration of such one year period.

     

    Section
      4.4 Termination of Employment by Reason of Disability.
      Unless
      this Option has earlier terminated for Cause or due to the Optionee’s death or
      the Company’s termination of Optionee’s employment without Cause, in the event
      that Optionee ceases, by reason of Disability, to be an employee of the Company
      or any of the Company’s subsidiaries, any unexercised portion of this Option may
      be exercised in whole or in part at any time within one year after the date
      of
      Optionee’s termination of employment due to Disability, but not later than the
      Expiration Date of this Option. Unless sooner terminated, this Option shall
      terminate upon the expiration of such one year period. For purposes of this
      Option, Disability shall mean the inability to engage in any substantial gainful
      activity by reason of any medically determinable physical or mental impairment
      which can be expected to result in death or which has lasted or can be expected
      to last for a continuous period of not less than 12 months. The Administrator
      may require such proof of Disability as the Administrator in its sole discretion
      deems appropriate and the Administrator’s determination as to whether Optionee
      is Disabled shall be final and binding on all parties concerned.

     

    Section
      4.5 Termination of Employment.
      In the
      event that the Optionee’s employment with the Company is terminated other than
      for cause or due to the Optionee’s death or Disability, any unexercised portion
      of this Option that was vested as of the date of termination of employment
      may
      be exercised in whole or in part at any time within the 90-day period following
      the Optionee’s termination of employment, but not later than the Expiration Date
      of this Option. In the event that Optionee dies during the 90-day period, any
      unexercised portion of this Option that was vested as of the date of death
      may
      be exercised in whole or in part at any time within one year after the date
      of
      death, but not later than the Expiration Date of this Option. Unless sooner
      terminated, this Option shall terminate upon the expiration of such 90-day
      or
      one-year period. 

     

    Section
      4.6 Leave of Absence.
      For
      purposes of this Option, the Optionee’s employment with the Company or any of
      the Company’s subsidiaries shall not be deemed to terminate if the Optionee
      takes any military leave, sick leave, or other bona fide leave of absence
      approved by the Administrator of 90 days or less. In the event of a leave in
      excess of 90 days, the Optionee’s employment shall be deemed to terminate on the
      91st day of the leave unless the Optionee’s right to re-employment with the
      Company or Affiliate remains guaranteed by statute or contract.

     

    Section
      4.7 Termination of Employment, Definition.
      References on this Agreement to the Optionee’s termination of employment from
      the Company shall mean the termination of the Optionee’s employment with the
      Company, provided, however, that (i) a transfer of Optionee’s employment
      relationship from the Company to a subsidiary or vice versa or from one
      subsidiary to another subsidiary shall not constitute a termination of
      employment, and (ii) an employee who terminates such relationship with the
      Company but continues in a consulting relationship with the Company shall not
      incur a termination of employment until such individual terminates the last
      of
      such relationships with the Company.

     

     

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

     

    ARTICLE
      5

    ADJUSTMENTS;
      BUSINESS COMBINATIONS

     

    Section
      5.1 Adjustments for Events Affecting Common Stock.
      In the
      event of changes in the Common Stock of the Company by reason of any stock
      dividend, split-up, recapitalization, merger, consolidation, business
      combination or exchange of shares and the like, the Administrator shall make
      appropriate adjustments to the number, kind and price of shares covered by
      this
      Option, and shall, in its discretion and without the consent of the Optionee,
      make any other adjustments in this Option, including but not limited to reducing
      the number of shares subject to this Option or providing or mandating
      alternative settlement methods such as settlement of this Option in cash or
      in
      shares of Common Stock or other securities of the Company or of any other
      entity, or in any other matters which relate to this Option as the Administrator
      shall, in its sole discretion, determine to be necessary or appropriate in
      order
      to prevent the dilution or enlargement of rights under this Option.

     

    Section
      5.2 Modifications or Adjustments for Unusual Events.
      Notwithstanding anything in the Plan or this Option to the contrary and without
      the consent of the Optionee, the Administrator, in its sole discretion, may
      make
      (a) in order to facilitate any business combination that is authorized by the
      Board, any modifications to this Option, including but not limited to
      cancellation, forfeiture, surrender or other termination of this Option in
      whole
      or in part regardless of the vested status of this Option; and/or (b) any
      adjustments in the terms and conditions of, and the criteria included in, this
      Option in recognition of unusual or nonrecurring events affecting the Company,
      or the financial statements of the Company or any subsidiary of the Company,
      or
      of changes in applicable laws, regulations, or accounting principles, whenever
      the Administrator determines that such adjustments are appropriate in order
      to
      prevent dilution or enlargement of the benefits or potential benefits intended
      to be made available under this Option or the Plan.

     

    Section
      5.3 Binding Nature of Adjustments.
      Modifications or adjustments under this Article 5 will be made by the
      Administrator, whose determination as to what adjustments, if any, will be
      made
      and the extent thereof will be final, binding and conclusive. No fractional
      shares will be issued pursuant to this Option on account of any such
      modifications or adjustments.

     

    ARTICLE
      6

    MISCELLANEOUS

     

    Section
      6.1 Non-Guarantee of Employment.
      Nothing
      in the Plan or this Option shall alter the employment status of Optionee, nor
      be
      construed as a contract of employment between the Company or any of the
      Company’s subsidiaries, and Optionee, or as a contractual right of Optionee to
      continue in the employ of the Company or any of its subsidiaries, or as a
      limitation of the right of the Company, or any of the Company’s subsidiaries to
      discharge Optionee at any time with or without cause or notice.

     

    Section
      6.2 No Rights of Stockholder.
      Optionee shall not have any of the rights of a stockholder with respect to
      the
      shares of Common Stock that may be issued upon the exercise of this Option
      until
      such shares of Common Stock have been issued to Optionee upon the due exercise
      of this Option. No adjustment shall be made for dividends or distributions
      or
      other 

     

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    rights for which the record date is prior to the date such
      shares are issued, whether by means of a stock certificate or certificates
      or in
      book entry form.

     

    Section
      6.3 Non-Qualified Nature of Option.
      This
      Option is intended to be an agreement concerning a stock option arrangement
      which does not qualify under section 422 of the Internal Revenue Code, and
      this
      Option shall be so construed. Optionee acknowledges that, upon exercise of
      this
      Option, Optionee will recognize taxable income in an amount equal to the excess
      of the then Fair Market Value of the shares over the Exercise Price and must
      comply with the provisions of Section 6.6 of this Option with respect to any
      tax
      withholding obligations that arise as a result of such exercise.

     

    Section
      6.4 Confidential Information.
      In
      consideration of the granting of this Option, Optionee agrees and covenants
      that, except as specifically authorized by the Company, the Optionee will keep
      confidential any trade secrets or confidential or proprietary information of
      the
      Company or any Affiliate which are now or which hereafter may become known
      to
      Optionee as a result of Optionee’s employment by the Company, the Company or any
      of the Company’s subsidiaries, and shall not at any time, directly or
      indirectly, disclose any such information to any person, firm, corporation
      or
      other entity, or use the same in any way other than in connection with the
      business of the Company or any Affiliate, at all times during and after
      Optionee’s employment.

     

    Section
      6.5 The Company’s Rights.
      The
      existence of this Option shall not affect in any way the right or power of
      the
      Company or its stockholders to make or authorize any or all adjustments,
      recapitalizations, reorganizations or other changes in the Company’s capital
      structure or its business, or any merger or consolidation of the Company, or
      any
      issue of bonds, debentures, preferred or other stocks with preference ahead
      of
      or convertible into, or otherwise affecting the Common Stock or the rights
      thereof, or the dissolution or liquidation of the Company, or any sale or
      transfer of all or any part of the Company’s assets or business, or any other
      corporate act or proceeding, whether of a similar character or
      otherwise.

     

    Section
      6.6 Withholding of Taxes.
      The
      Company or any of the Company’s subsidiaries shall have the right to deduct from
      any compensation or any other payment of any kind (including withholding the
      issuance of shares of Common Stock) due Optionee the amount of any foreign,
      federal, state or local taxes required by law to be withheld as the result
      of
      the exercise of this Option or the lapsing of any restriction with respect
      to
      any shares of Common Stock acquired on exercise of this Option; provided,
      however, that the value of the shares of Stock withheld may not exceed the
      statutory minimum withholding amount required by law. In lieu of such deduction,
      the Administrator may require Optionee to make a cash payment to the Company
      or
      an Affiliate equal to the amount required to be withheld. If Optionee does
      not
      make such payment when requested, the Company may refuse to issue any shares
      of
      Common Stock under the Plan until arrangements satisfactory to the Administrator
      for such payment have been made.

     

    Section
      6.7 Optionee.
      Whenever the word “Optionee” is used in any provision of this Option under
      circumstances where the provision should logically be construed to apply to
      the
      estate, personal representative or beneficiary to whom this Option may be
      transferred by will or by the laws of descent and distribution, the word
“Optionee” shall be deemed to include such person.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    Section
      6.8 Nontransferability of Option.
      This
      Option shall be nontransferable otherwise than by will or the laws of descent
      and distribution and during the lifetime of Optionee, this Option may be
      exercised only by Optionee or, during the period Optionee is under a legal
      disability, by Optionee’s guardian or legal representative. Except as provided
      above, this Option may not be assigned, transferred, pledged, hypothecated
      or
      disposed of in any way (whether by operation of law or otherwise) and shall
      not
      be subject to execution, attachment or similar process.

     

    Section
      6.9 Notices.
      All
      notices and other communications made or given pursuant to this Option shall
      be
      in writing and shall be sufficiently made or given if hand delivered or mailed
      by certified mail, addressed to Optionee at the address contained in the records
      of the Company, or addressed to the Administrator, care of the Company for
      the
      attention of its Corporate Secretary at its principal office or, if the
      receiving party consents in advance, transmitted and received via telecopy
      or
      via such other electronic transmission mechanism as may be available to the
      parties.

     

    Section
      6.10 Entire Agreement.
      This
      Option contains the entire agreement between the parties with respect to the
      subject matter contained herein. Any oral or written agreements,
      representations, warranties, written inducements, or other communications made
      prior to the execution of this Option shall be void and ineffective for all
      purposes.

     

    Section
      6.11 Amendments.
      This
      Option may not be modified, except as provided in the Plan or in a written
      document signed by each of the parties hereto.

     

    Section
      6.12 Conformity with Plan.
      Except
      for the provisions of this Option that are contrary to the provisions of the
      Plan, (a) this Option is intended to conform in all respects with, and is
      subject to all applicable provisions of, the Plan, which is incorporated herein
      by reference; and (b) any inconsistencies between this Option and the Plan
      shall
      be resolved in accordance with the terms of this Option. In the event of any
      ambiguity in this Option or any matters as to which this Option is silent,
      the
      Plan shall govern. A copy of the Plan is available upon request to the
      Administrator.

     

    Section
      6.13 Governing Law.
      This
      Option shall be governed by and construed in accordance with the laws of the
      State of Delaware, other than the conflict of laws principles
      thereof.

     

    Section
      6.14 Headings.
      The
      headings in this Option are for reference purposes only and shall not affect
      the
      meaning or interpretation of this Option.

     

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the Company has caused this Option to be executed by its duly
      authorized officer as of the date first above written.

     

                I.C.
      ISAACS &
COMPANY, INC.

     

                By:
      ____________________________

                Name:
      Gregg A.
      Holst

                Title:
      Chief
      Financial Officer

    

    The
      undersigned hereby acknowledges that he/she has carefully read this Agreement
      and the Plan and agrees to be bound by all of the provisions set forth in such
      documents.

     

                OPTIONEE

     

                ______________________________

                Robert
      S.
      Stec

                Date:

     

     

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    CORPORATE
      SECRETARY

    I.C.
      ISAACS & COMPANY, INC.

    3840
      BANK
      STREET

    BALTIMORE,
      MARYLAND 21224

     

    Gentlemen:

     

    I
      hereby
      elect to exercise the Option made to me on April __, 2007 by I.C. ISAACS &
COMPANY, INC. (the “Company”), pursuant to an Agreement dated April __, 2007
      concerning the grant subject to all the terms and provisions of the Nonstatutory
      Stock Option Grant Agreement previously executed by me, and the I.C. ISAACS
      & COMPANY, INC. AMENDED AND RESTATED OMNIBUS STOCK PLAN. Pursuant to this
      election, I wish to purchase ____________ shares of Common Stock of the Company
      at a price of $[ ] per share.

     

    Enclosed
      is payment for such shares in the amount of $_____________ in the form
      of:

     

    £ Cash
        £ Certified
      or Cashier’s Check   £ Money
      Order 

     

    £ Irrevocable
      Broker-Assisted Cashless Exercise Instructions

     

    I
      understand that my election will be effective the date this election notice,
      together with the cash, check or other payment of the purchase price, is
      received by the Company as indicated below.

     

    My
      address of record is:

     

    _________________________________

     

    _________________________________

     

    _________________________________

     

    And
      my
      Social Security Number is: __________________

     

    Date:
      ________________________   ___________________________________

    [Optionee]

     

    Received
      by I.C. ISAACS & COMPANY, INC. on

    _____________________________________

     

    By:
      __________________________________

    Title:
      _________________________________

     

    

     

     

    
 

    23SERIES C 8% CONVERTIBLE PREFERRED STOCK

       NUMBER                                                    SHARES
    ------------                                              ------------
    XXXXXXXXXXXX                                              XXXXXXXXXXXX
--------------------------------------------------------------------------------

                          ELITE PHARMACEUTICALS, INC.

------------  INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE  ------------

              ----------------------------------------------------
                                                         SEE REVERSE SIDE FOR
65,000,000 SHARES OF COMMON STOCK                        CERTAIN DEFINITIONS AND
PAR VALUE $0.01 PER SHARE                                LEGENDS
4,483,442 SHARES OF PREFERRED STOCK
PAR VALUE $0.01 PER SHARE

THIS CERTIFIES THAT __________________*S*P*E*C*I*M*E*N*__________________ IS THE

REGISTERED HOLDER OF _____________________*N*O*N*E*______________________ SHARES
                           FULLY PAID AND NON-ASSESSABLE SHARES OF
              THE SERIES C 8% CONVERTIBLE PREFERRED STOCK, $0.01 PAR VALUE, OF

                                 ELITE PHARMACEUTICALS, INC.

transferable only on the books of the Corporation by the holder hereof in
person or by Attorney upon surrender of this Certificate properly endorsed.

In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed

   _XXXXXXXXXXXXXXX_ this _XXXXXXXXXXXXXXX_ day of _XXXXXXXXXXXX_ A.D. 20_XX_

        /s/ illegible                                      /s/ illegible
                       ELITE PHARMACEUTICALS, INC.
          SECRETARY           CORPORATE SEAL                PRESIDENT
                                   1997

JERSEY TRANSFER AND TRUST CO.   __XXXXXXXXXXXXXXXX__
201 BLOOMFIELD AVE.             AUTHORIZED SIGNATURE
VERONA, NJ 07044                   TRANSFER AGENT

<PAGE>

NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON CONVERSION OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.

THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS,
THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE PARTICIPATING, OPTIONAL OR
OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.

For Value Received, ______ hereby sell, assign and transfer unto

________________________________________________________________

_________________________________________________________ Shares

represented by the within Certificate, and do hereby irrevocably constitute
and appoint

_______________________________________________________ Attorney

to transfer the said Shares on the books of the within named
Corporation with full power of substitution in the premises.

      Dated ___________________________ 20 _____
                  In presence of

________________________________________________________________

            NOTICE. THE SIGNATURE OF THIS ASSIGNMENT
       MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE
     FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
       ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.

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