I.C.
ISAACS & COMPANY, INC.
____________________________
INVESTOR
RIGHTS AGREEMENT
MAY
9
TH ,
2008
____________________________
TABLE
OF CONTENTS
| |
|
Page |
| |
|
|
|
SECTION
1 Definitions
|
1
|
| |
|
|
|
SECTION
2 Preemptive Rights
|
3
|
| |
|
|
|
2.1
|
Preemptive
Rights
|
3
|
| |
|
|
|
SECTION
3 Registration Rights
|
6
|
| |
|
|
|
3.1
|
Demand
Registration
|
6
|
|
3.2
|
Company
Registration
|
8
|
|
3.3
|
Registration
on Form S-3
|
9
|
|
3.4
|
Limitations
on Subsequent Registration Rights
|
9
|
|
3.5
|
Expenses
of Registration
|
10
|
|
3.6
|
Registration
Procedures
|
10
|
|
3.7
|
Indemnification
|
12
|
|
3.8
|
Information
by Holder
|
14
|
|
3.9
|
Rule
144 Reporting and Form S-3
|
14
|
|
3.10
|
Transfer
of Registration Rights
|
15
|
| |
|
|
|
SECTION
4 Legends
|
15
|
| |
|
|
|
4.1
|
Legends
|
15
|
| |
|
|
|
SECTION
5 Board Representation; Approval Rights
|
15
|
| |
|
|
|
5.1
|
Board
Members
|
15
|
|
5.2
|
Approval
Rights
|
17
|
|
5.3
|
Committees
|
17
|
|
5.4
|
Indemnification
|
17
|
| |
|
|
|
SECTION
6 Miscellaneous
|
17
|
| |
|
|
|
6.1
|
Governing
Law
|
17
|
|
6.2
|
Entire
Agreement; Amendment
|
18
|
|
6.3
|
Survival
|
18
|
|
6.4
|
Successors
and Assigns
|
18
|
|
6.5
|
Aggregation
|
18
|
|
6.6
|
Notices,
etc.
|
19
|
|
6.7
|
Severability
|
19
|
|
6.8
|
Counterparts
|
19
|
|
6.9
|
Delays
or Omissions
|
19
|
|
6.10
|
Attorneys’
Fees
|
20
|
|
6.11
|
Specific
Performance
|
20
|
|
6.12
|
Further
Instruments and Actions
|
20
|
|
6.13
|
Effect
of Change in Company’s Capital Structure
|
20
|
I.C.
ISAACS & COMPANY, INC.
INVESTOR
RIGHTS AGREEMENT
This
Investor Rights Agreement (this “
Agreement ”)
is made as of May 9, 2008 by and between I.C.
Isaacs & Company, Inc., a
Delaware corporation (the “
Company ”),
and the entities and persons listed on the Schedule of Investors
attached hereto as Exhibit A (collectively the “
Investors ”
and each individually an “
Investor ”).
RECITALS
WHEREAS,
the Company and the Investors (or Affiliates thereof) are
parties to the Stock Purchase Agreement of even date herewith
(the “
Purchase Agreement ”),
pursuant to which the Company has agreed to issue, and the
Investors have agreed to buy, shares of the Company’s Common
Stock, on the terms and subject to the conditions set forth in the
Purchase Agreement; and
WHEREAS,
the Purchase Agreement requires, as a condition to closing the
issuance and sale of the shares of Common Stock, that the
parties hereto enter into this Agreement.
NOW,
THEREFORE, in consideration of the mutual promises and
covenants set forth herein, the Investors hereby agree as
follows:
SECTION 1
1.1
Definitions .
As
used in this Agreement, the following terms shall have the
following respective meanings:
“
Affiliate ”
shall mean, with respect to any Investor, any Person which,
directly or indirectly, controls, is controlled by or is under
common control with such Person, and shall include, without
limitation, any partner, officer, director, or member of such
Person. For the purposes of this definition, “control”
(including, with correlative meanings, the terms “controlled
by” and “under common control with”), as used
with respect to any Person means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management or policies of such Person whether through the ownership
of voting securities or by agreement or otherwise.
“
Board of Directors ”
shall mean (except where the context clearly indicates otherwise)
the board of directors of the Company after the reconstitution
thereof in accordance with Section 5.1 hereof.
“
Commission ”
shall mean the Securities and Exchange Commission or any other U.
S. federal agency at the time administering the Securities
Act.
“
Common Stock ”
shall mean shares of the Company’s Common Stock, $0.0001 par
value per share.
“
Company
” has
the meaning set forth in the preamble.
“
Exchange Act ”
shall mean the Securities Exchange Act of 1934, as
amended.
“
Holder or Holders ”
shall mean each of the Investors listed on Exhibit A and their
transferees as permitted by Section 3.10 holding Registrable
Securities.
“
Indemnified Party ”
has the meaning set forth in Section 3.7(c).
“
Indemnifying Party ”
has the meaning set forth in Section 3.7(c).
“
Initiating Holders ”
shall mean (i) any Investor or Investors who hold Registrable
Securities or (ii) any Holder or Holders who in the aggregate hold
at least ten percent (10%) of the Registrable
Securities.
“
Investors ”
has the meaning set forth in the preamble.
“
Person ”
shall mean an individual, corporation, limited liability company,
trust, general partnership or other entity.
“
Preemptive Right ”
has the meaning set forth in Section 2.1(a).
“
Preemptive Notice ”
has the meaning set forth in Section 2.1(a).
“
Registrable Securities ”
shall mean (a) the Shares, (b) any Common Stock issued as
(or issuable upon the conversion or exercise of any warrant, right
or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement
of, the Shares, and (c) shares of Common Stock issued or
issuable pursuant to the conversion of New Securities (as defined
in Section 3.1(a) hereof) acquired by the Investor under
Section 3.1 hereof, excluding in all cases, however, any
Registrable Securities that have been sold to or through a broker
or dealer or underwriter in a public distribution or a public
securities transaction or which have been sold in a private
transaction in which the transferor’s rights under this
Agreement are not assigned.
The
terms “
register ,”
“
registered ”
and “
registration ”
refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act, and
the declaration or ordering of the effectiveness of such
registration statement.
“
Registration Expenses ”
shall mean all reasonable expenses, except as otherwise stated
below, incurred by the Company in complying with Sections 3.1, 3.2
and 3.3 hereof, including, without limitation, all registration,
qualification and filing fees, printing expenses, escrow fees, fees
and disbursements of counsel for the Company (and reasonable fees
and disbursements of one special counsel for Holders), accounting
fees, blue sky fees and the expense of any special audits incident
to or required by any such registration (but excluding the
compensation of regular employees of the Company which shall be
paid in any event by the Company).
“
Securities Act ”
shall mean the Securities Act of 1933, as amended, or any similar
United States federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the
time.
“
Selling Expenses ”
shall mean all underwriting discounts, selling commissions and
stock transfer taxes applicable to the securities registered by the
Holders.
“
Shares ”
shall mean
the shares of the Company’s Common Stock held by the
Investors at the date hereof, whether pursuant to the Purchase
Agreement or otherwise, or which are hereafter transferred from one
Investor to another, or which are transferred to other Holders
pursuant to Section 3.10.
“
Wurzburg ”
shall mean Wurzburg Holding S.A., one of the
Investors.
1.2
Securities Subject to this Agreement .
The securities entitled to the benefits of this Agreement are the
Registrable Securities but, with respect to any particular
Registrable Security, only so long as such security continues to be
a Restricted Security. A Registrable Security that has ceased to be
a Registrable Security cannot thereafter become a Registrable
Security. As used herein, a Restricted Security is a Registrable
Security which has not been distributed in accordance with an
effective Registration Statement and which has not been distributed
by a Holder pursuant to Rule 144, Rule 903 or Rule 904, unless, in
the case of a Registrable Security distributed pursuant to Rule 903
or 904, any applicable restricted period has not expired or the SEC
or its staff has taken the position in a published release, ruling
or no-action letter that securities distributed under Rule 903 or
904 are ineligible for resale in the United States under Section
4(1) of the Securities Act notwithstanding expiration of the
applicable restricted period. Securities shall cease to be
Registrable Securities at such time as they are tradeable by the
then holder without restriction as to volume pursuant to Rule
144.
SECTION 2
Preemptive Rights
2.1
Preemptive Rights
The
Company shall not, and it shall not permit any of its
subsidiaries to, issue or sell any New Securities (as defined
in Section 2.1(a)), unless prior to the issuance or sale of
such New Securities, each Investor shall have been given the
opportunity (such opportunity being herein referred to as the
“
Preemptive Right ”)
to purchase such Investor’s pro rata portion (as described in
this paragraph) of New Securities that the Company or any of its
subsidiaries may, from time to time, propose to sell and issue. An
Investor’s pro rata portion, for purposes of this Preemptive
Right, is equal to the product of the aggregate number of New
Securities the Company (or its subsidiary) proposes to sell and
issue multiplied by the quotient of (x) the number of shares
of Common Stock owned by such Investor, divided by (y) the
total number of shares of Common Stock outstanding. Each Investor
shall have the right to assign, in whole or in part, its Preemptive
Right to purchase its pro rata share of such New Securities to any
one or more of its Affiliates. The Preemptive Right shall be
subject to the following provisions:
(a)
“
New Securities ”
shall mean any common stock of the Company (or any subsidiary, as
applicable), whether now authorized or not, and any rights, options
or warrants to purchase said common stock of the Company (or its
subsidiary, as applicable), and securities of any type whatsoever
that are, or may become, convertible into common stock of the
Company (or its subsidiary, as applicable); provided, however, that
New Securities does not include (i) securities issued pursuant
to the acquisition of another corporation or entity by the Company
(or its subsidiary, as applicable) by merger, purchase of
substantially all of the assets or other reorganization, in each
case as approved by the Board of Directors; (ii) up to 10% of
the shares of Common Stock outstanding at closing issued or
issuable to officers, directors, consultants or employees of the
Company pursuant to stock option or stock purchase plans or
agreements on terms approved by the Board of Directors; (iii)
securities issued upon the conversion or exercise of convertible or
exercisable securities provided that such convertible or
exercisable securities were offered to the Investors under this
Section 2.1 (or that such Investors waived their Preemptive Right
with respect to such convertible or exercisable securities) or were
outstanding on the date of this Agreement; (iv) securities
issued to financial institutions or lessors in connection with
commercial credit arrangements, equipment financings or similar
transactions approved by the Board of Directors;
(v) securities issued in connection with any stock split,
reverse stock split, stock combination, stock dividend,
recapitalization or similar event by the Company (or its
subsidiary, as applicable); (vi) securities issued in
connection with any reorganization, reclassification, exchange,
substitution or other similar adjustment approved by the Board of
Directors; (vii) securities issued as a dividend or
distribution on the Common Stock if such dividend or distribution
is distributed to the holders of Common Stock ratably based on the
number of shares of Common Stock held by all shareholders of the
Company on the record date for such dividend or distribution; or
(viii) securities issued by a wholly-owned subsidiary to the
Company or to another wholly-owned subsidiary of the
Company.
(b)
In
the event that the Company (or any subsidiary, as applicable)
proposes to issue New Securities, it shall give each Investor
at least thirty (30) days prior written notice (the
“
Preemptive Notice ”)
of
its intention, describing the type of New Securities, the price,
and the general terms upon which the Company (or its subsidiary, as
applicable) proposes to issue the same, the total amount of capital
to be raised, the name and address of the bona fide purchaser to
which the Company (or such subsidiary) proposes to issue or sell
New Securities and the number of such New Securities which such
Investor is entitled to purchase (determined as provided in the
first paragraph of this Section 2.1). Each Investor shall have
twenty (20) days from the date of mailing of any such notice
to agree to purchase up to its full pro rata share of such New
Securities for the price and upon the general terms specified in
the notice by giving written notice to the Company; provided, that
if (i) the consideration specified in the Preemptive Notice to be
paid for the New Securities is not all cash, or (ii) any property
other than New Securities is proposed to be transferred in
connection with the issuance of New Securities to which the
Preemptive Notice relates, then the price payable by an Investor
shall be the consideration specified in the Preemptive Notice or
(at the election of the Investor) (A) a cash amount equal to the
fair market value thereof in the case of clause (i) and (B) a cash
amount equal to the fair market value of the consideration
allocable to the New Securities to be purchased by such Investor in
the case of clause (ii). Subject to Section 2.1(e), in the event
any determination of fair market value is required pursuant to this
Section 2.1, such determination shall be made in good faith by the
Board of Directors following (if the property is not publicly
traded securities) receipt (at the Company’s expense) of a
valuation from an independent appraiser with appropriate industry
experience. At
the expiration of such twenty (20) day period, the Company shall
promptly notify each Investor that elects to purchase or acquire
all the shares available to it (each, a “
Fully Exercising Investor ”)
of any other Investor’s failure to do likewise. During the
ten (10) day period commencing after the Company has given such
notice, each Fully Exercising Investor may, by giving notice to the
Company, elect to purchase or acquire, in addition to the number of
shares specified above, up to that portion of the New Securities
for which Investors were entitled to subscribe but that were not
subscribed for by the Investors which is equal to the proportion
that the Common Stock issued and held (assuming
conversion, exercise or exchange of all outstanding securities
convertible into or exercisable or exchangeable for Common
Stock) by
such Fully Exercising Investor bears to the Common Stock issued and
held (assuming
conversion, exercise or exchange of all outstanding securities
convertible into or exercisable or exchangeable for Common
Stock) by
all Fully Exercising Investors who wish to purchase such
unsubscribed shares.
(c)
If
all N ew
Securities referred to in the Preemptive Notice are not
elected to be purchased or acquired as provided in
Section 2.1(b) ,
the Company may, during the sixty (60) day period following the
expiration of the periods provided in
Section 2.1(b) ,
offer and sell (or enter into an agreement pursuant to which the
sale of New Securities covered thereby shall be closed, if at all,
within thirty (30) days from the execution of such agreement) the
remaining unsubscribed portion of such New Securities to any Person
or Persons at a price not less than, and upon terms no more
favorable to the offeree than, those specified in the Preemptive
Notice. If the Company does not sell such New Securities within
such 60-day period (or such 30-day period after execution of such
agreement, as applicable), the right provided under this
Section 2.1 shall
be deemed to be revived and such New Securities shall not be
offered unless first reoffered to the Investors in accordance with
this
Section 2.1 .
(d)
Any
Investor’s failure to exercise this Preemptive Right on
any issuance of New Securities shall not adversely affect such
Investor’s Preemptive Right to purchase subsequent
issuances of New Securities.
(e)
If
the consideration received by the Company (or its subsidiary,
as applicable) in exchange for the New Securities is other
securities, its value will be deemed its fair market value as
determined as follows:
(i)
Securities
not subject to investment letter or other similar restrictions
on free marketability covered by (ii) below:
(A)
If
traded on a securities exchange, the value shall be deemed to
be the average of the closing prices of the securities on such
quotation system over the thirty (30) day period ending
three (3) days prior to the closing with
the exercising Investor s;
(B)
If
actively traded over-the-counter, the value shall be deemed to
be the average of the closing bid or sale prices (whichever is
applicable) over the thirty (30) day period ending three
(3) days prior to the closing with the exercising
Investors; and
(C)
If
there is no active public market, the value shall be the fair
market value thereof, as determined by the Board of
Directors.
(ii)
The
method of valuation of securities subject to investment letter
or other restrictions on free marketability (other than
restrictions arising solely by virtue of a stockholder’s
status as an affiliate or former affiliate) shall be to make
an appropriate discount from the market value determined as
above in (i) (A), (B) or (C) to reflect the
approximate fair market value thereof, as determined by the
Board of Directors.
SECTION 3
Registration Rights
3.1
Demand Registration
(a)
Demand for Registration .
In case the Company shall receive from Initiating Holders a written
request that the Company effect any registration, qualification or
compliance with respect to an offering for an anticipated aggregate
offering price of not less than $2,000,000 (before underwriting
discounts and other selling expenses), the Company
will:
(i)
promptly
(and in no event later than ten (10) days after the date such
request is received) give written notice of the proposed
registration, qualification or compliance to all other
Holders; and
(ii)
as
soon as practicable (and in any event within sixty (60) days
after the date that the Company receives such written request
from the Initiating Holders), effect such registration,
qualification or compliance (including, without limitation,
appropriate qualification under applicable blue sky or other
state securities laws and appropriate compliance with
applicable regulations issued under the Securities Act and any
other governmental requirements or regulations) as may be so
requested and as would permit or facilitate the sale and
distribution of all or such portion of the Registrable
Securities as are specified in such request, together with all
or such portion of the Registrable Securities of any other
Holder or Holders joining in such request as are specified in
a written request received by the Company within twenty
(20) days after receipt of such written notice from the
Company;
Provided, however ,
that the Company shall not be obligated to take any action to
effect any such registration, qualification or compliance pursuant
to this Section 3.1(a):
(A)
In
any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in
effecting such registration, qualification or compliance
unless the Company is already subject to service in such
jurisdiction and except as may be required by the Securities
Act;
(B)
During
the period starting with the date thirty (30) days prior
to the Company’s estimated date of filing of, and ending
on the date three (3) months immediately following the
effective date of, any registration statement pertaining to
securities of the Company sold by the Company (other than a
registration of securities in a Rule 145 transaction or with
respect to an employee benefit plan), provided that the
Company is actively employing in good faith all reasonable
efforts to cause such registration statement to become
effective;
(C)
After
the Company has effected an aggregate of two
(2) registrations pursuant to this Section 3.1(a) or
3.3(a), provided that (i) such registrations have been
declared or ordered effective and (ii) the offerings
thereunder are not interfered with by any stop order,
injunction, order or requirement of the Commission or other
agency or court of competent jurisdiction; or
(D)
If
the Company shall furnish to such Holders a certificate signed
by the Chief Executive Officer of the Company stating that in
the good faith judgment of the Board of Directors it would (i)
be materially detrimental to the Company or its stockholders,
(ii) materially interfere with a significant acquisition,
corporate reorganization, or other similar transaction
involving the Company, or (iii) require premature disclosure
of material information that the Company has a bona fide
business purpose for preserving as confidential, if a
registration statement were to be filed in the near future,
then the Company’s obligation to register, qualify or
comply under this Section 3 shall be deferred for a period not
to exceed ninety (90) days from the date of receipt of
written request from the Initiating Holders, provided,
however, that in such event, (i) the Initiating Holders shall
be entitled to withdraw such request and retain its rights
under this Section 3.1(a) and (ii) the Company shall not
utilize this right more than once in any twelve
(12) month period.
Subject
to the foregoing clauses (A) through (D), the Company
shall file a registration statement covering the Registrable
Securities so requested to be registered as soon as
practicable after receipt of the request or requests of the
Initiating Holders.
(b)
Underwriting .
In the event that a registration pursuant to Section 3.1(a) is for
a registered public offering involving an underwriting, the
Initiating Holders will so advise the Company as part of the
written request given by such Initiating Holders pursuant to
Section 4.1(a), and the Company shall in turn advise all other
Holders as part of the notice given pursuant to Section 4.1(a)(i).
In such event, the right of any Holder to registration pursuant to
Section 4.1 shall be conditioned upon such Holder’s
participation in the underwriting arrangements required by this
Section 4.1, and the inclusion of such Holder’s Registrable
Securities in the underwriting to the extent requested shall be
limited to the extent provided herein.
The
Company shall (together with all Holders proposing to
distribute their securities through such underwriting) enter
into an underwriting agreement in customary form with the
managing underwriter(s) selected for such underwriting by the
majority in interest of the Initiating Holders, but subject to
the reasonable approval of the Company. Notwithstanding any
other provision of this Section 3.1, if the managing
underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares
to be underwritten, then the Company shall so advise all
Holders, and the number of shares that may be included in the
registration and underwriting shall be allocated among all
Holders in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by such
Holders at the time of filing the registration
statement.
If
any Holder disapproves of the terms of the underwriting, such
person may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the Initiating
Holders. The Registrable Securities and/or other securities so
withdrawn shall also be withdrawn from
registration.
3.2
Company Registration
(a)
Notice of Registration .
If at any time or from time to time the Company shall determine to
register any of its securities, either for its own account or the
account of a security holder or holders or a combination thereof,
other than (i) a registration relating solely to employee
benefit plans or (ii) a registration relating solely to a
corporate reorganization or other transaction covered by Commission
Rule 145, the Company will:
(i)
promptly
(and in no event later than twenty (20) days prior to the
filing of any registration statement) give to each Holder
written notice thereof; and
(ii)
include
in such registration (and any related qualification under blue
sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in
a written request or requests made by any Holder within twenty
(20) days after receipt of such written notice from the
Company.
(b)
Underwriting .
If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company
shall so advise the Holders as part of the written notice given
pursuant to Section 3.2(a)(i). In such event, the right of any
Holder to registration pursuant to this Section 3.2 shall be
conditioned upon such Holder’s participation in such
underwriting and the inclusion of Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing
to distribute their securities through such underwriting shall,
together with the Company, enter into an underwriting agreement in
customary form with the managing underwriter selected for such
underwriting by the Company, but subject to the reasonable approval
of the Holders. Notwithstanding any other provision of this Section
3.2, if the managing underwriter determines that marketing factors
require a limitation of the number of shares to be underwritten,
the managing underwriter may limit the number of shares of
Registrable Securities to be included in such registration without
requiring any limitation in the number of shares to be registered
on behalf of the Company. The Company shall so advise all Holders
and the number of shares that may be included in the registration
and underwriting by all Holders requesting inclusion of their
Registrable Securities or other Company securities, as applicable,
shall be allocated among them, as nearly as practicable,
first ,
to the Company solely with respect to shares proposed to be sold
for the Company’s account, and
second ,
among the Holders in proportion to the respective amounts of
Registrable Securities held by such Holders at the time of filing
of the registration statement. If any Holder disapproves of the
terms of any such underwriting, such holder may elect to withdraw
therefrom by written notice to the Company and the managing
underwriter. Any securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
Notwithstanding
anything contained herein to the contrary, in connection with any
offering involving an underwriting of the Company’s
securities the Company shall not be required to include any of the
Registrable Securities in such an underwriting unless the Holders
accept the terms of the underwriting as agreed upon between the
Company and its underwriters, and t
| 
