SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K/A
Amendment No. 1
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2004
Commission File No. 0-23379
I.C. ISAACS & COMPANY, INC.
(Exact name of registrant as specified in charter)
DELAWARE 52-1377061
State or other jurisdiction of (IRS employer
incorporation or organization) identification no.)
840 BANK STREET, BALTIMORE, MARYLAND 21224-2522
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: (410) 342-8200
Securities Registered Pursuant to Section 12(b) of the Act:
NONE
Securities Registered Pursuant to Section 12(g) of the Act:
Title of Class:
---------------
COMMON STOCK, $.0001 PAR VALUE PER SHARE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [_] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K. [_]
Indicate by check mark if Registrant is an accelerated filer (as defined in Rule
12b-2 of the Act). [_] Yes [X] No
The aggregate market value of the voting common stock held by non-affiliates of
the Registrant as of the last business day of the Registrant's most recently
completed second fiscal quarter, at June 30, 2004, was approximately $7,172,000
based on the average closing price of the Common Stock as reported by the OTC
Bulletin Board on that day. Solely for purposes of the foregoing calculation all
of the Registrant's directors and officers are deemed to be affiliates. The
Registrant does not have outstanding any non-voting common stock.
As of April 28, 2005, 11,707,573 shares of Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
I.C. ISAACS & COMPANY, INC.
FORM 10-K/A AMENDMENT NO. 1
FISCAL YEAR ENDED DECEMBER 31, 2004
EXPLANATORY NOTE
This Amendment No. 1 to the Annual Report on Form 10-K of I.C. Isaacs &
Company, Inc. (the "Company") amends the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 2004, originally filed on March 31, 2005
(the "Original Filing"). The Company is refiling a portion of Part III to
include the information required by Items 10, 11, 12, 13, and 14 of Part III
because the Company's proxy statement will not be filed within 120 days of the
end of the Company's fiscal year ended December 31, 2004.
Except as described above, and the updating of the number of shares of
common stock outstanding and the Item 405 disclosures appearing on the cover
page, no other changes have been made to the Original Filing. This Amendment
continues to speak as of the date of the Original Filing, and, except for the
Company has not updated the disclosures contained therein to reflect any events
that occurred at a date subsequent to the filing of the Original Filing. The
filing of this Form 10-K/A is not a representation that any statements contained
in items of Form 10-K other than Part III Items 10, 11, 12, 13, and 14 are true
or complete as of any date subsequent to the date of the Original Filing.
TABLE OF CONTENTS
PART III PAGE
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY....................3
ITEM 11. EXECUTIVE COMPENSATION............................................10
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT....................................................13
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS....................15
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES............................16
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES...........................17
SIGNATURE....................................................................18
2
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The Board of Directors is currently composed of nine directors. The
Company's directors are elected to serve for terms that expire at each annual
meeting of stockholders and when their respective successors are duly elected
and shall have qualified. The following table sets forth certain information
about the Company's current directors:
Peter J. Rizzo Mr. Rizzo has worked within the apparel industry during the past 27 years. He
Age 52 became the Company's Chief Executive Officer in December, 2003, and was
Chief Executive Officer of the Company appointed to the Board in February 2004. During the two years prior to joining
Director since February 2004 the Company, Mr. Rizzo was a consultant to the Neiman Marcus Group. He was
President and Vice Chairman of Bergdorf Goodman from 1999 to 2002. From 1997 to
1999, he served as President of Polo Retail at Polo Ralph Lauren. From 1978 to
1997, he was Executive Vice President and Head Merchant of Barneys New York.
Olivier Bachellerie Mr. Bachellerie has served since 1997 as President and Director General of GI
Age: 44 Promotion and Cravatatakiller S.A., and as President of Fashion Services of
Director since 2002 America, Inc., each of which is beneficially owned by Marithe Bachellerie and
President and Director General of GI Francois Girbaud. Mr. Bachellerie is the son of Marithe Bachellerie, who
Promotion and Cravatatakiller S.A. together with Mr. Girbaud, indirectly own and possess the right to vote
approximately 39% of the Company's outstanding shares of common stock.
Robert J. Conologue Mr. Conologue served as the Company's Chief Operating Officer and Chief
Age: 56 Financial Officer from February 2003 until November 29, 2004. He was elected to
Director since 2003 the Company's Board of Directors in June 2003. Between 2000 and 2002, he served
as Executive Vice President and Chief Financial Officer of Interiors, Inc., a
$250 million manufacturer, marketer and retailer of decorative accessories for
the home. Between 1997 and 2000, Mr. Conologue worked for The Warnaco Group,
Inc., a $2.1 billion global apparel company, starting as Chief Financial
Officer of Calvin Klein Jeanswear (1997-1998), and then serving as Senior Vice
President - Finance of the parent company and as Chief Operating Officer of the
Calvin Klein Divisions (1998-2000).
Rene Faltz Mr. Faltz has practiced law in the Grand Duchy of Luxembourg since 1976. He has
Age: 51 been with Cabinet D'Avocats Rene Faltz since March 2000 after leaving the firm
Director since 2002 of Faltz & Kremer. Mr. Faltz is one of the Managing Directors of, and serves as
Senior Partner, Cabinet D'Avocats Rene Faltz counsel to, several companies that, since 2002, have been beneficially owned by
Marithe Bachellerie and Francois Girbaud in connection with the conduct of
their business activities as designers and marketers of clothing and other
items bearing the various Girbaud trademarks.
3
Neal J. Fox Mr. Fox has held senior management positions at Neiman Marcus, Bergdorf Goodman
Age: 70 and I. Magnin. From 1983 to 1988, he was employed by Garfinkel's, Raleigh &
Director since 1998 Co., or its predecessor, most recently as Chairman and Chief Executive Officer,
Consultant and was also a principal shareholder of that company. From 1989 through March
1999, Mr. Fox served as the President and Chief Executive Officer of Sulka, an
international menswear retailer. In 1999, Mr. Fox founded NJF Associates,
Incorporated, a consulting firm specializing in brand management and business
development for the apparel, accessories and luxury goods industries. Mr. Fox
served as a director of Today's Man, a 30 unit menswear retailer. In March,
2003, Today's Man filed a petition under Chapter 11 of the US Bankruptcy Code.
Francois Girbaud Mr. Girbaud, an internationally renowned designer and manufacturer of
Age: 60 clothing, and licensor of clothing designs and trademarks for more than 25
Director since 2004 years, became one of the Company's directors in October 2004 Pursuant to
agreements that the Company has companies co-owned directly or indirectly by
Mr. Girbaud and Marithe Bachellerie, the Company licenses the Girbaud
trademarks and designs for use in the manufacture and sale of various items of
clothing in North America.
Jon Hechler Mr. Hechler was employed by Ira J. Hechler and Associates, an investment
Age: 52 company, from 1980 to 1999. He is President of T. Eliot, Inc., a manufacturer
Director since 1984 of the Sani Seat (R) hygiene toilet seat system.
President, T. Eliot, Inc.
Roland Loubet Mr. Loubet has been employed as the Chief Executive Officer and sole owner of
Age: 62 Cedrico, S.A., a manufacturer and marketer of women's clothing, since 1997.
Director since 2002
Chief Executive Officer of Cedrico, S.A.
4
Robert Stephen Stec Mr. Stec was a Division President of VF Corporation and had sole
Age: 50 responsibility for VF's Girbaud division in the United States from 1989
Director since 2002 through 1993. From 1996 to 1998, he served as President of London Fog
Chairman and Chief Executive Officer of Industries, Inc., a leading manufacturer and marketer of branded outerwear.
Lexington Home Brands During 1997 and 1998, Mr. Stec served as a part-time consultant to Girbaud
Design, Inc. and certain of its affiliates. In 1999, Mr. Stec served as a
consultant to London Fog for several months. Mr. Stec has been employed as
President and Chief Executive Officer of Lexington Home Brands, a leading
branded marketer of home furnishings, since 1999.
PRINCIPAL EXECUTIVE OFFICERS OF THE COMPANY WHO ARE NOT ALSO DIRECTORS
The following table sets forth the names and ages of the Company's
principal executive officers who are not directors. The table also provides a
description of the positions of employment held by each of such executives for
at least the past five years.
Jesse de la Rama Mr. de la Rama began his employment with the Company in March 2004 as Vice
Age: 51 President of Merchandise Planning and Retail Development. In December 2004, he
Chief Operating Officer of the Company began serving as the Company's Chief Operating Officer. Mr. de la Rama engaged
in business during the period from 1997 through February 2004 as a consultant
to the fashion retail industry and other clients, including Calvin Klein,
Inc., Lambertson/Truex and Sotheby's, Inc., as president of his own company,
Jesse de la Rama, Inc. Between 1994 and October 1997, Mr. de la Rama was
Senior Vice President - Retail of Bally of Switzerland. Between 1979 and
September 1994, he was employed by Barney's New York and served in various
executive capacities, including Vice President - Outlet Division and Warehouse
Sales (1992 - 1994) and Vice President - Merchandise Planning (1983 - 1992).
Eugene C. Wielepski Mr. Wielepski was a director of the Company from 1991 - May, 2002. He has
Age: 57 served as Vice President - Finance since 1991. He served as Chief Financial
Vice President - Finance, Chief Financial Officer of the Company from 1991 - April 2003, and began serving in that
Officer, Treasurer and Secretary capacity again in December 2004. He has also held the positions of Secretary
and Treasurer since 1976. From 1976 to 1990, he was Controller. He is a
Certified Public Accountant and has been employed by the Company since 1973.
5
DIRECTORS' COMPENSATION
Directors who are employed by the Company or any of its subsidiaries
receive no compensation for serving on the Board of Directors. Directors who are
not so employed (the "Outside Directors") receive an annual retainer fee of
$10,000 for their services and attendance fees of $750 per Board or committee
meeting attended. The Chairman of the Audit Committee receives an additional
$10,000 for the services he renders in that capacity. All directors are
reimbursed for expenses incurred in connection with attendance at Board or
committee meetings. In addition, members of the Board of Directors are eligible
to participate in the Company's Amended and Restated Omnibus Stock Plan (the
"Plan"). In 2002, Outside Directors were awarded non-qualified stock options to
purchase an aggregate of 210,000 shares of common stock at an exercise price of
$0.58 per share. Those options vested in December 2004.
BOARD COMMITTEES AND MEETINGS
The Board of Directors currently has standing Audit, Compensation and
Nominating Committees.
The Audit Committee has a written charter approved by the Board. Only
independent directors, as that term is defined by the Marketplace Rules of The
Nasdaq Stock Market, may serve as members of the Audit Committee.
The members of the Audit Committee are Neal J. Fox (Chairman), Jon Hechler
and Robert Stec.
The Audit Committee assists the Board of Directors in its general
oversight of the Company's financial reporting, internal controls and audit
functions. During 2004, the Audit Committee held eight meetings. The Board of
Directors has determined that the Neal J. Fox, the Chairman of the Audit
Committee, is an "audit committee financial expert," as such term is defined
under applicable SEC regulations.
The members of the Compensation Committee are Messrs. Hechler (Chairman),
Fox, Loubet and Stec.
The Compensation Committee administers the Plan, including the review and
grant of stock options to officers and other employees under the Plan. The
Compensation Committee also reviews and approves various other company
compensation policies and matters, and reviews and approves salaries and other
matters relating to compensation of the executive officers of the company. The
Compensation Committee held five meetings during 2004.
In October 2004, the Board of Directors created a Nominating Committee,
adopted a charter governing that committee's operations, and appointed Messrs.
Stec (Chairman), Fox and Loubet to serve as the members thereof. The Nominating
Committee did not hold any meetings in 2004.
The Board of Directors held nine meetings during 2004. Each director is
expected to attend each meeting of the Board and the committees on which he
serves. In addition to meetings, the Board and its committees review and act
upon matters through written consent procedures. No director attended less than
75% of all the meetings of the Board and the committees on which he served in
2004.
6
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
Peter J. Rizzo
Peter J. Rizzo, the Company's Chief Executive Officer, is employed by the
Company's subsidiary, I.C. Isaacs & Company, LP (the "LP"), pursuant to an
employment agreement dated December 9, 2003, which was amended on October 19,
2004. That agreement, as amended, provides:
o for an initial term that will end on December 9, 2007, and for
automatic one year renewals of the agreement unless either party
gives notice of its non-renewal not later than June 30, 2007 or June
30 of the then current renewal year;
o for payment of an annual base salary of $500,000 during the initial
term increasing by 10% per year during each one year renewal term,
and incentive compensation provisions, subject to a guaranteed
annual minimum of $175,000, that are based upon the Company's
achievement of pre-determined earnings, cash flow and inventory
turns targets;
o for the issuance under the Plan of a five year option to purchase
500,000 shares of common stock at an exercise price of $.95 per
share vesting ratably on December 9, 2004 and December 9, 2005; o
for the issuance under the Plan of a ten year option to purchase up
to 100,000 shares of common stock at an exercise price of $3.10 per
share on or after December 9, 2007;
o that, as long as the Nominating Committee of the Company's Board
continues to approve Mr. Rizzo as a director, he will be included on
the slate of nominees that the Company will propose for election as
directors throughout the term of his employment agreement;
o that, if (a) Mr. Rizzo is not appointed as Chairman of the Board or
he is removed from that position, (b) his duties as CEO are
materially adversely changed or reduced, (c) his employment is
terminated by the LP without cause or if, as a result of the
occurrence of any of the events described in clauses (a) or (b), he
resigns, he will be entitled to receive the following severance
benefits:
o If such termination occurs on or before December 31, 2006, he
will be entitled to receive severance in an aggregate amount
equal to 1.5 times his base salary and incentive compensation
for the immediately preceding year (a minimum of $937,500 up
to as much as $1,275,000),
o If such termination occurs after December 31, 2006, he will be
entitled to receive severance in an aggregate amount equal to
his base salary plus a pro-rata portion of any incentive
compensation that otherwise would have become due and payable
to him if his employment had not been terminated prior to the
end of the year (a minimum of $625,000 up to as much as
$850,000) and
o All unvested options granted to Mr. Rizzo under the Plan will
immediately vest in full and will be exercisable by him for a
period of one year after his employment is terminated.
The maximum amount of incentive compensation that Mr. Rizzo may earn in
any year of the initial term and any renewal year is $350,000.
7
Jesse de la Rama
On March 1, 2004, the LP entered into an employment agreement with Jesse de la
Rama, the Company's Chief Operating Officer, that provides:
o for an initial term that will end on February 28, 2006, and for
automatic one year renewals of the agreement unless either party
gives notice of its non-renewal not later than December 31, 2005 or
December 31 of the then current renewal year;
o for payment of an annual base salary of $175,000, and incentive
compensation provisions that are based upon the achievement of
pre-determined earnings, cash flow and inventory turns targets;
o for the issuance under the Plan of a five year option to purchase
25,000 shares of common stock at an exercise price of $.86 per share
which shall vest ratably on March 1, 2005, 2006 and 2007;
o that, in the event that Mr. de la Rama's employment is terminated
without cause, he shall receive severance payments ranging between
three and 12 months salary depending on the length of his employment
at the time of termination.
The maximum amount of incentive compensation that Mr. de la Rama may earn
in 2004, 2005 and any renewal year is $43,750.
Daniel J. Gladstone
Daniel J. Gladstone, the former President of the Company's Girbaud
Division, was employed by the LP pursuant to an employment agreement dated April
17, 2002, which was amended on May 15, 2003. That agreement, as amended,
provided:
o for an initial term ending on December 31, 2005, and for automatic
one year renewals of the agreement unless either party gave notice
of its non-renewal not later than September 30, 2005 or September 30
of the then current renewal year;
o for payment of an annual base salary of $350,000, and incentive
compensation provisions based upon the Company's achievement of
pre-determined earnings, cash flow and inventory turns targets,
subject to guaranteed minimum annual bonuses of $100,000 in 2003 and
$125,000 thereafter;
o that, if Mr. Gladstone's employment was terminated without cause or
he was constructively discharged
o after January 21, 2005, the LP would pay him an amount equal
to one year of his base salary plus a severance payment in a
lump sum equal to his incentive compensation for the last full
year prior to his termination (the "Severance Payment"); or
o prior to January 21, 2005, the LP would pay him the aggregate
amount of his base salary through December 31, 2005, plus a
Severance Payment within 90 days after each year remaining
during the term of the agreement;
8
o that, if the LP decided not to renew the agreement, it would be
required to pay Mr. Gladstone an amount equal to one year of his
current base salary plus a Severance Payment; and
o if Mr. Gladstone's employment was terminated for cause, he would
forfeit all rights and benefits he otherwise would have been
entitled to receive under the agreement including, but not limited
to, his rights to receive salary, severance and incentive
compensation, and all rights under any Plan options granted to him
prior to such termination.
Mr. Gladstone did not earn any incentive compensation in 2003 other than
the $100,000 guaranteed minimum bonus due under his employment agreement. In
April 2005, Mr. Gladstone's employment was terminated for cause. Accordingly, no
incentive compensation payment was made to him with regard to 2004.
Robert J. Conologue
In March 2003, the LP entered into an employment agreement (with effect
from February 18, 2003) with Robert J. Conologue, the Company's former Chief
Operating Officer and Chief Financial Officer, that provided:
o for an initial term that ending on December 31, 2005, and for
automatic one year renewals of the agreement unless either party
gave notice of its non-renewal not later than September 30, 2005 or
September 30 of the then current renewal year;
o for payment of an annual base salary of $315,000 per year, and
incentive compensation provisions based upon the Company's
achievement of pre-determined earnings, cash flow and inventory
turns targets;
o for the issuance under the Plan of a five year option to purchase
225,000 shares of common stock at an exercise price of $.68 per
share vesting ratably on March 31, 2004, 2005 and 2006;
o for the issuance under the Plan of a five year fully vested option
to purchase 150,000 shares of common stock at an exercise price of
$.48 per share;
o that, in the event that Mr. Conologue's employment was terminated
without cause at any time after December 31, 2003 or as a result of
a change of control of the company, for the payment of a severance
payment equal to his base salary for a period of 12 months.
On November 29, 2004, the LP terminated Mr. Conologue's employment without
cause. Pursuant to a post-termination separation agreement executed by Mr.
Conologue and the LP, he will receive severance payments equal to his base
salary during the 12 month period ending on November 28, 2005, he received
$185,000 in payment of all incentive compensation due to him in 2004 and the
unexercised portion of the 150,000 share option (35,950 shares) shall remain
exercisable through November 28, 2005.
Eugene Wielespki
In April 2002, the LP entered into an amended and restated employment
agreement with Eugene Wielepski who was then the Company's Vice President and
Chief Financial Officer. In March 2003, the LP and Mr. Wielepski entered into an
amendment of that agreement. As so amended, the agreement provides:
9
o that Mr. Wielepski shall serve as Vice President - Finance for an
initial term that will end on May 15, 2006, and for automatic one
year renewals of the agreement unless either party gives notice of
its non-renewal not later than March 16, 2006 or March 16 of the
then current renewal year;
o for payment of a base salary of $180,000 per year;
o for the issuance under the Plan of a fully vested ten year option to
purchase 10,000 shares of common stock at an exercise price of $1.71
per share;
o that, if Mr. Wielepski's employment is terminated without cause
after May 15, 2005, the LP must pay him an amount equal to one year
of his base salary; and
o that, if the LP decides not to renew the agreement, it must pay Mr.
Wielepski an amount equal to one year of his current base salary.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, directors and persons who beneficially own more
than 10% of the Company's common stock to file initial reports of ownership and
reports of changes in ownership with the SEC. Such persons are required by SEC
regulations to furnish us with copies of all Section 16(a) forms filed by such
persons. Based solely on the Company's review of the forms furnished to it, the
Company believes that all of those filing requirements were complied with by the
Company's executive officers and directors during 2004, except that Mr.
Conologue filed his initial statement of beneficial ownership on SEC Form 3 and
a Statement of Changes in Beneficial Ownership on SEC Form 4 approximately 13
months, and seven days, respectively, after the dates on which such forms should
have been filed, Mr. Hechler filed a Statement of Changes in Beneficial
Ownership on SEC Form 4 eight days after the date on which such form should have
been filed and Mr. Wielepski filed a Statement of Changes in Beneficial
Ownership on SEC Form 4 16 days after the date on which such form should have
been filed.
CODE OF ETHICS
The Company has adopted a Code of Ethics applicable to its Chief Executive
Officer and Chief Financial Officer. A copy of such code will be provided by the
Company without charge to any person requesting same. All such requests should
be sent by first class mail to I.C. Isaacs & Company, Inc., 3840 Bank Street,
Baltimore, Maryland 21224, Attention of Investor Relations Department.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the
compensation paid during each of the Company's last three fiscal years to its
Chief Executive Officer and to each of its executive officers other than the
Chief Executive Officer whose total annual salary and bonus amounted to more
than $100,000 and who (except for Mr. Conologue) were serving as executive
officers at the end of 2004 (collectively, the "Named Executive Officers"). No
compensation that would qualify as payouts pursuant to long-term incentive plans
("LTIP Payouts") or "All Other Compensation" was paid to any of the Named
Executive Officers during the three year period ended on December 31, 2004, and
the Company did not issue any SARs during that period of time.
10
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
ANNUAL COMPENSATION(1) AWARDS
-------------------------------------------------------- ---------------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) AWARDS($) OPTIONS(#)
--------------------------- ---- --------- -------- --------------- ---------- ----------
Peter J. Rizzo, CEO ...........................2004 490,761 -- -- -- 100,000
2003(2) 28,846 -- -- -- 500,000
2002 -- -- -- -- --
Daniel J. Gladstone, Acting CEO
(2003), Former President--Girbaud
Division (2002 and 2004) ....................2004 340,922 100,000 339,896(3) -- --
2003 357,091 207,895 -- -- --
2002 345,781 221,199 -- -- --
Robert J. Conologue, Former COO and
CFO ...........................................2004(4) 315,757 40,000 625,342(3) -- --
2003 273,828 -- -- -- 375,000
2002 -- -- -- -- --
Jesse De La Rama, Sr. VP and COO ..............2004(5) 136,694 -- -- -- 25,000
Eugene C. Wielepski, Vice President ...........2004 181,393 -- -- -- --
2003 184,571 -- -- -- --
2002 196,764 -- -- -- 10,000
- --------------
(1) The LP also provided various perquisites and other benefits that did not
exceed the lesser of $50,000 or 10% of the aggregate amounts reflected in
the salary and bonus columns for each of the Named Executive Officers.
(2) Mr. Rizzo was only employed for a period of 23 days (from December
9-December 31) in 2003.
(3) Compensation resulting from exercise of Plan Option.
(4) Mr. Conologue's employment was terminated without cause on November 29,
2004.
(5) Mr. de la Rama started his employment on March 1, 2004.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The Company did not grant any SARs to any of the Named Executive Officers
during the year ended December 31, 2004. The following table sets forth
information regarding grants of options made by the company to the Named
Executive Officers during 2004.
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------ VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL EXERCISE APPRECIATION FOR
UNDERLYING OPTIONS PRICE OPTION TERM(1)
OPTIONS GRANTED TO PER EXPIRATION ---------------------
NAME GRANTED EMPLOYEES SHARE DATE 5% 10%
---- ---------- ---------- -------- ---------- --- ---
Peter J. Rizzo ... 100,000 80% $ 3.10 10-14-14 $196,000 $493,000
Jesse De La Rama.. 25,000 20% $ 0.87 03-01-09 $ 13,750 $ 35,500
- --------------
11
(1) In accordance with U.S. Securities and Exchange Commission rules, these
columns show gains that could accrue for the Named Executive Officer's option,
assuming that the market price of the Company's common stock appreciates from
the date of grant over a period of 10 years at an annualized rate of 5% and 10%,
respectively. If the stock price does not increase above the exercise price at
the time of exercise, realized value to the Named Executive Officer from this
option will be zero.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
The following table sets forth information concerning the number and value
of unexercised options to purchase the Company's common stock held on December
31, 2004 by the Named Executive Officers.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE FISCAL YEAR-END FISCAL YEAR-END
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ------------------------- -------------------------
Peter J. Rizzo........................ 0 0 250,000/350,000 $737,500/$817,500
Daniel J. Gladstone................... 111,350 $339,896 372,650/0 $921,326/$0
Robert J. Conologue................... 182,000 $625,342 43,000/0 $147,060/$0
Jesse De La Rama...................... 0 0 0/25,000 $0/$75,750
Eugene Wielepski...................... 0 0 44,500/0 $117,494/$0
DEFINED BENEFIT PENSION PLAN
The Company maintains a defined benefit pension plan (the "Pension Plan")
for its employees, and the employees of its subsidiaries. The normal retirement
benefit, payable at age 65, is 20.0% of base compensation up to $10,000 plus
39.5% of base compensation over $10,000 and up to a maximum of $75,000, prorated
for service less than 30 years. A reduced benefit is also payable on early
retirement, after attainment of age 55 and completion of 15 years of service.
The Pension Plan also provides disability retirement and death benefits. The
Company pays the full cost of the benefits under the Pension Plan through its
contributions to a trust. The Company's cash contributions to the Pension Plan
during the year ended December 31, 2004 aggregated approximately $175,000.
The Pension Plan Table below provides the estimated annual benefits
payable under the Pension Plan upon retirement in specified compensation and
years of service classifications:
YEARS OF SERVICE
-------------------------------------------------------------------------
REMUNERATION 15 20 25 30 35
------------ -- -- -- -- --
$100,000......................................$ 13,838 $ 18,451 $ 23,063 $ 27,676 $ 27,676
125,000...................................... 13,838 18,451 23,063 27,676 27,676
150,000...................................... 13,838 18,451 23,063 27,676 27,676
175,000...................................... 13,838 18,451 23,063 27,676 27,676
200,000...................................... 13,838 18,451 23,063 27,676 27,676
225,000...................................... 13,838 18,451 23,063 27,676 27,676
250,000...................................... 13,838 18,451 23,063 27,676 27,676
300,000...................................... 13,838 18,451 23,063 27,676 27,676
400,000...................................... 13,838 18,451 23,063 27,676 27,676
450,000...................................... 13,838 18,451 23,063 27,676 27,676
500,000...................................... 13,838 18,451 23,063 27,676 27,676
12
The compensation considered in determining benefits under the Pension Plan
(as provided in the column titled "Remuneration") is the annual average
compensation for the five consecutive calendar years producing the highest
average. The compensation considered is limited to $75,000. All amounts of
salary, bonus and other compensation as reported in the Summary Compensation
Table, up to $75,000, are included in compensation considered under the Pension
Plan. The amounts provided in the Pension Plan Table are the benefits payable
per year in equal monthly installments for the life expectancy of the
participants (i.e., straight life annuity amounts). The Pension Plan is
integrated with Social Security, and its benefit formula is as follows: (i)
0.6667% of compensation, multiplied by years of service up to 30 years; plus
(ii) 0.65% of compensation in excess of $10,000 multiplied by years of service
up to 30 years.
The estimated credited years of service for each of the Named Executive
Officers as of January 1, 2004 were as follows:
ESTIMATED CREDITED
NAME YEARS OF SERVICE
---- ----------------
Peter J. Rizzo..................................... 1
Daniel J. Gladstone................................ 6
Robert J. Conologue................................ 1
Jesse De La Rama................................... 0
Eugene Wielepski................................... 31
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
NUMBER OF SECURITIES WEIGHTED AVERAGE
TO BE ISSUED UPON EXERCISE PRICE OF
EXERCISE OF OUTSTANDING NUMBER OF SECURITIES
OUTSTANDING OPTIONS, OPTIONS, WARRANTS REMAINING AVAILABLE
PLAN CATEGORY WARRANTS AND RIGHTS AND RIGHTS FOR FUTURE ISSUANCE
------------- ------------------- ---------- -------------------
Equity compensation plans approved by security
holders .................................................. 1,522,817 $ 1.09 192,750
Equity compensation plans not approved by security
holders .................................................. 0 N/A N/A
Totals ..................................................... 1,522,817 $ 1.09 192,750
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
None of the directors serving on the Compensation Committee is an employee
of the Company, and neither the Chief Executive Officer nor any of the Named
Executive Officers has served on the Compensation Committee. No director or
executive officer of the Company is a director or executive officer of any other
corporation that has a director or executive officer who is also a director or
board committee member of the Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is information concerning the common stock ownership as of
April 28, 2005 by (i) each person who the Company knows owns beneficially 5% or
more of its outstanding common stock, (ii) the Company's Chief Executive Officer
and each of its other "Named Executive Officers," (iii) each director, and (iv)
all of the Company's directors and officers as a group:
13
Name and Address of Beneficial Owner (1) Shares Beneficially Owned
- ------------------------------------ ----------------------------------
Number Percent (2)
------ -------
Wurzburg, S.A. (3).......................................... 4,549,167(4) 38.9%
Peter J. Rizzo.............................................. 228,500(5) 1.9
Robert J. Conologue (6)..................................... 35,950(7) *
Daniel J. Gladstone (8)..................................... -- *
Eugene Wielepski............................................ 44,500(9) *
Olivier Bachellerie (10).................................... 30,000(11) *
Rene Faltz (12)............................................. 30,000(11) *
Neal J. Fox................................................. 52,000(13) *
Jon Hechler................................................. 211,091(14) 1.8
Roland Loubet (15).......................................... 380,000(16) 3.2
Robert Stephen Stec (17).................................... 30,000(11) *
All Officers, Directors and Nominees for Director
as a Group (of 10) 1,042,041(18) 8.4
- ----------------
* Less than one percent
(1) All shares are owned beneficially and of record unless indicated
otherwise. Unless otherwise noted, the address of each stockholder is c/o
the company, 3840 Bank Street, Baltimore, Maryland 21224.
(2) Based upon 11,707,573 shares outstanding on the date of this report, plus,
where applicable, any shares issuable pursuant to options or warrants
exercisable within 60 days of such date.
(3) The address of this stockholder is 41, Avenue de la Gare, L-1611
Luxembourg.
(4) Includes 3,966,667 shares owned beneficially and of record by this
stockholder's wholly owned subsidiary, Textile Investment International,
S.A. ("Textile").
(5) Includes 228,500 shares that Mr. Rizzo may acquire pursuant to an option
exercisable by him within 60 days of the date of this report.
(6) The address of this stockholder is 216 LeRoy Avenue, Darien, CT.
(7) Includes 35,950 shares that Mr. Conologue may acquire pursuant to an
option exercisable by him within 60 days of the date of this report.
(8) The address of this stockholder is 11 Annandale Drive, Chappaqua, NY.
(9) Includes 44,500 shares that Mr. Wielepski may acquire pursuant to options
exercisable by him within 60 days of the date of this report.
(10) Mr. Bachellerie's address is 15 Rue Louis Blanc, 75010 Paris, France.
(11) Includes 30,000 shares that this person may acquire pursuant to an option
exercisable by him within 60 days of the date of this report.
(12) Mr. Faltz's address is 41 Avenue de la Gare, Luxembourg, L-1611, Grand
Duchy of Luxembourg.
(13) Includes 52,000 shares that Mr. Fox may acquire pursuant to options
exercisable by him within 60 days of the date of this report.
14
(14) Includes 37,000 shares that Mr. Hechler may acquire pursuant to options
exercisable by him within 60 days of the date of this report.
(15) Mr. Loubet's address is Avenue du Leman 20, 1025 St-Sulpice,
Ch-Switzerland.
(16) Includes 30,000 shares that Mr. Loubet may acquire pursuant to an option
exercisable by him within 60 days of the date of this report. Also
includes 250,000 shares issuable pursuant to two warrants aggregating
500,000 shares that are exercisable within 60 days of the date of this
report. Mr. Loubet is deemed to hold an indirect 50% beneficial ownership
interest in those warrants.
(17) Mr. Stec's address is c/o Lexington Home Brands, 411 South Salisbury
Street, Lexington, NC.
(18) Includes 767,950 shares that may be acquired by Messrs. Rizzo, Conologue,
Wielepski, Bachellerie, Falz, Fox, Hechler, Loubet and Stec pursuant to
options and/or warrants exercisable by them within 60 days of the date of
this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In November 1997, the Company entered into an exclusive license agreement
(the "Girbaud Men's Agreement") with Girbaud Design, Inc. and its affiliate,
Wurzburg Holding S.A. ("Wurzburg"), both of which are companies wholly owned,
directly or indirectly, by Francois Girbaud and Marithe Bachellerie. The Girbaud
Men's Agreement granted to us the right to manufacture and market men's
jeanswear, casualwear and outwear under the Girbaud brand and certain related
trademarks (the "Girbaud Marks") in all channels of distribution in the United
States, including Puerto Rico and the U.S. Virgin Islands. In January and March
1998, the Girbaud Men's Agreement was amended and restated to name Latitude
Licensing Corp. ("Latitude") another member of the Girbaud Group(1) of
companies, as the licensor and to include active influenced sportswear as a
licensed product category. Also in March 1998, the Company entered into an
exclusive license agreement (the "Girbaud Women's Agreement" and together with
the Girbaud Men's Agreement, the "Girbaud Agreements") with Latitude to
manufacture and market women's jeanswear, casualwear and outerwear, including
active influenced sportswear, under the Girbaud Marks in all channels of
distribution in the United States including Puerto Rico and the U.S. Virgin
Islands. The Girbaud Agreements, as amended, include the right to manufacture
the licensed products in a number of foreign countries through 2007.
Under the Girbaud Men's Agreement, the Company is required to make
payments to Latitude in an amount equal to 6.25% of our net sales of regular
license merchandise and 3.0% in the case of certain irregular and closeout
licensed merchandise. Except as noted below, the Company is subject to
guaranteed minimum annual royalty payments of $3.0 million each year from 2002
through 2007. The Company is required to spend the greater of an amount equal to
3% of Girbaud men's net sales or $500,000 in advertising and related expenses
promoting the men's Girbaud brand products in each year through the term of the
Girbaud men's agreement. During 2004, the Company made royalty payments under
the Girbaud Men's Agreement aggregating approximately $3,028,100.
- ----------
(1) Mr. Girbaud, Ms. Bachellerie, together with Wurzburg, Latitude and the
various companies that they directly and indirectly control, are
collectively referred to as the "Girbaud Group."
15
Under the Girbaud Women's Agreement the Company is required to make
payments to Latitude in an amount equal to 6.25% of our net sales of regular
licensed merchandise and 3.0% in the case of certain irregular and closeout
licensed merchandise. Except as noted below, the Company is subject to
guaranteed minimum annual royalty payments of $1.5 million each year from 2002
through 2007. The Company is required to spend the greater of an amount equal to
3% of Girbaud women's net sales of $400,000 in advertising and related expenses
promoting the women's Girbaud brand products in each year through the term of
the Girbaud Women's Agreement. In addition, over the term of the Girbaud Women's
Agreement the Company is required to contribute $190,000 per year to Latitude's
advertising and promotional expenditures for the Girbaud brand. During 2004, the
Company made royalty payments to under the Girbaud Women's Agreement aggregating
$1,125,000.
The Company is obligated to pay a minimum of $7.4 million during 2005 in
the form of minimum and deferred royalty payments, fashion show and advertising
and promotional expenses pursuant to the Girbaud Agreements. In 2005, the
Company expects that substantially all of its net sales will come from apparel
associated with the Girbaud licenses.
In connection with the refinancing of the Company's credit facility in
December 2004, Latitude and the Company agreed to defer approximately $2.3
million of the 2004 minimum and additional royalty payments to 2005. The Company
expects to pay these amounts in the first half of 2005 and pay all 2005 royalty
payments as they become due. In 2004, the Company made royalty payments of
approximately $4.2 million.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The following table shows the fees that the Company paid or accrued for
the audit and other services provided by BDO Seidman, LLP in 2004 and 2003.
Years Ended
December 31,
--------------------------
2004 2003
---------- ----------
Audit Fees(1) ............... $ 249,000 $ 255,605
Audit-related fees .......... 51,566(2) 24,170(3)
Tax Fees .................... 15,500 15,355
---------- ----------
Total .................. $ 316,066 $ 295,130
========== ==========
(1) Includes audit of the Company's consolidated financial statements and
quarterly review of its financial statements and filings on SEC forms
10-Q.
(2) Includes consultation regarding accounting and reporting matters, an audit
of the Company's employee benefit plan, the Company's preparation of
registration statements on SEC forms S-3 and S-8 and out of pocket
expenses.
(3) Includes consultation regarding accounting and reporting matters, and an
audit of the Company's employee benefit plan.
All audit and audit related services were pre-approved by the Audit
Committee, which concluded that the performance of such services by BDO Seidman,
LLP was compatible with the maintenance of that firm's independence in the
conduct of its auditing functions.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) 3. Exhibits (numbered in accordance with Item 601 of Regulation S-K). The
following is a list of Exhibits filed herewith:
14 Code of Ethics For senior financial executives
31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification Pursuant to Section 1350 of chapter 63 of Title 18 of the
United States Code
16
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, I.C. Isaacs & Company, Inc. has duly caused this Amendment
No. 1 on Form 10-K/A to be signed on its behalf by the undersigned, thereunto
duly authorized.
I.C. ISAACS & COMPANY, INC.
(REGISTRANT)
Date: April 29, 2005 By: /s/ Eugene Wielepski
-------------------------------------
Eugene Wielepski
Vice President - Finance and
Chief (Principle) Financial Officer
17