Investor Rights Agreement

I.C. ISAACS & COMPANY, INC.





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INVESTOR RIGHTS AGREEMENT





MAY 9 TH , 2008





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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.





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" 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).





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" 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:





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(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.





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(c) If all New 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 Investors;



(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.





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(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;





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(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 ...