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, 2002
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.)
3840 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. Yes X 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. Yes No X
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes No X
As of March 28, 2003, the aggregate market value of the outstanding
shares of the Registrant's Common Stock held by non-affiliates was approximately
$6,012,713 based on the average closing price of the Common Stock as reported by
the OTC Bulletin Board on March 28, 2003. Determination of affiliate status for
this purpose is not a determination of affiliate status for any other purpose.
As of March 28, 2003, 11,134,657 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, 2002
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, 2002, originally filed on April 4, 2003
(the "Original Filing"). The Company is refiling a portion of Part III to
include the information required by Items 10, 11, 12 and 13 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, 2002. In addition, in connection
with the filing of this Amendment and pursuant to the rules of the Securities
and Exchange Commission, the Company is including with this Amendment certain
currently dated certifications.
Except as described above, no other changes have been made to the
Original Filing. This Amendment continues to speak as of the date of the
Original Filing, and the registrant 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, and 13 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...................................................................... 9
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............................. 12
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................................. 14
SIGNATURE....................................................................................................... 17
CERTIFICATIONS.................................................................................................. 18
2
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The Board of Directors is currently composed of nine directors,
divided into three classes. Each class of directors is elected for a term of
office to expire at the third succeeding annual meeting of stockholders of the
company after their election and until their respective successors are elected
and qualified. The following table sets forth certain information about our
current directors and executive officers:
Staffan Th. Ahrenberg
Chairman of the Board and consultant to the
Company
Class I Director since 2002 (term expires in financing of motion pictures and
Age: 45
Mr. Ahrenberg has been a consultant to Societe de Finance et
D'Investissement S.A. ("SFI"), which provides multinational companies engaged in
the food processing, media and fashion industries with investment opportunities
and investment advisory services, and Saga Enterprises Holding Corp., which
provides the motion picture industry with services regarding the development,
production, acquisition, sale and other intellectual property. We have a written
2004) agreement with SFI through which we receive consulting services from Mr.
Ahrenberg. See "Certain Relationships and Related Transactions."
Olivier Bachellerie
President and Director General of GI
Promotion and Cravatatakiller S.A.
Class III Director since 2002 (term expires
in 2003)
Age: 41
Mr. Bachellerie has served since 1997 as President and Director General of
GI Promotion and Cravatatakiller S.A., and as President of Fashion Services of
America, Inc., each of which is beneficially owned by Marithe Bachellerie and
Francois Girbaud. Mr. Bachellerie is the son of Marithe Bachellerie, who
together with Mr. Girbaud, indirectly own and possess the right to vote
approximately 42% of the company's outstanding shares of common stock.
Robert J. Conologue
Chief Operating Officer and
Chief Financial Officer
Age: 54
Mr. Conologue joined us as our Chief Operating Officer and Chief Financial
Officer in February 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).
3
Rene Faltz
Senior Partner, Cabinet
D'Avocats Rene Faltz
Class I Director since 2002 (term expires in
2004)
Age: 49
Mr. Faltz has practiced law in the Grand Duchy of Luxembourg since 1976. He
has been with Cabinet D'Avocats Rene Faltz since March 2000 after leaving the
firm of Faltz & Kremer. Mr. Faltz is one of the Managing Directors of, and
serves as counsel to, several companies that are 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.
Sandra Finkelstein
Senior Vice President of Merchandising -
Girbaud Division
Age: 41
Ms. Finkelstein was Executive Vice President of Warnaco's Calvin Klein
Jeans Division from 1998 - January 2003. Between 1996 and 1998, she was Design
Manager at the J. Crew Group.
Neal J. Fox
Consultant
Director since Class I Director since 1998
(term expires in 2004)
Age: 68
Mr. Fox has held senior management positions at Neiman Marcus, Bergdorf
Goodman and I. Magnin. From 1983 to 1988, he was employed by Garfinkel's,
Raleigh & Co., or its predecessor, most recently as Chairman and Chief Executive
Officer, 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, Inc., a consulting firm specializing in brand management and
business development for the apparel, accessories, and luxury goods industries.
Since May 2000, Mr. Fox has served as a director and consultant for 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.
Daniel J. Gladstone
President of the Company
Class II Director since 1999 (term expires
in 2005)
Age: 46
Mr. Gladstone was President of the Company's Girbaud Division from January
1999 - February 2003, and was appointed President of the Company in March 2003.
He served as President of Calvin Klein Jeans at Warnaco, Inc. from 1997 to 1998
and as President of Calvin Klein Jeans at Designer Holding Ltd. from 1994 to
1997
Jon Hechler
President, T. Eliot, Inc.
Class II Director since 1984 (term expires
in 2005)
Age: 50
Mr. Hechler was employed by Ira J. Hechler and Associates, an investment
company, from 1980 to 1999. He is President of T. Eliot, Inc., a manufacturer of
bathroom equipment.
4
Roland Loubet
Chief Executive Officer of
Cedrico, S.A.
Class II Director since 2002 (term expires
in 2005)
Age: 61
Mr. Loubet has been employed as the Chief Executive Officer and sole owner
of Cedrico, S.A., a manufacturer and marketer of women's clothing, since 1997
Robert Stephen Stec
Chairman and Chief Executive Officer of
Lexington Home Brands
Class III Director since 2002 (term expires 2003)
Age: 48
Mr. Stec was Division President of VF Corporation and had sole
responsibility for VF's Girbaud division in the United States from 1989 through
1993. From 1996 to 1998, he served as President of London Fog Industries, Inc.,
a leading manufacturer and marketer of branded outerwear. 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 in has been employed as President and Chief Executive
Officer of Lexington Home Brands, a leading branded marketer of home
furnishings, since 1999.
Eugene C. Wielepski
Vice President - Finance;
Treasurer and Secretary
Age: 56
Mr. Wielepski was a director of the Company from 1991 - May, 2002. He was
Vice President - Finance and Chief Financial Officer of the Company from 1991 -
April 2003. Since that date, he has been our Vice President - Finance. 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.
DIRECTORS' COMPENSATION
Directors who are employed by us or any of our 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
our 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 shall not vest, and therefore, shall not be
exercisable, until December 2004.
BOARD COMMITTEES AND MEETINGS
The Board of Directors currently has standing Audit and Compensation
Committees. The Audit Committee has a written charter approved by the Board.
During 2002, as a result of our stockholders' approval of the
Framework Agreement and the Stockholders Agreement, the composition of our Board
changed, and that change also resulted in changes in the composition of both
committees.
From January 1, 2002 until mid-May, 2002, the Audit Committee was
comprised of Ronald S. Schmidt, Chairman, Neal J. Fox and Anthony J. Marterie.
In mid-May, 2002, Mr. Martarie resigned and was replaced by Jon Hechler. After
the 2002 Annual Meeting of Stockholders, the new Board appointed
5
a new Audit Committee consisting of Mr. Fox, as Chairman, and Jon Hechler,
Roland Loubet and Robert Stec.
From January 1, 2002 until the 2002 Annual Meeting, the Compensation
Committee consisted of Messrs. Hechler (Chairman), Schmidt and Fox. After the
2002 Annual Meeting, the new Board appointed a new Compensation Committee
consisting of Messrs. Hechler, as Chairman, Fox, Loubet and 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 2002, the Audit Committee held four meetings.
The Compensation Committee administers our Amended and Restated
Omnibus Stock Plan (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 two
meetings during 2002.
The Board of Directors held 12 meetings during 2002. 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
2002.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
Robert J. Arnot
In April 2002, our wholly owned subsidiary, I.C. Isaacs & Company,
L.P. (the "LP") entered into an amended and restated employment agreement with
Robert J. Arnot, who was then our Chairman of the Board, President and Chief
Executive Officer. Pursuant to that agreement, Mr. Arnot was entitled to
receive, among other things, base salaries of $400,000 in 2002, $425,000 in 2003
and $450,000 per year during the balance of an initial term that was to expire
on May 15, 2006.
In January 2003, we and the LP entered into a separation agreement
and general release with Mr. Arnot. Pursuant to that agreement, Mr. Arnot
resigned as a director and as our President and Chief Executive Officer. In
consideration for Mr. Arnot's execution of that agreement, the termination of
his employment agreement and his release and waiver of claims against us, the LP
and other parties and persons related to us, we agreed:
- - to engage Mr. Arnot as a paid consultant between the February 6, 2003
effective date of the separation agreement and May 2, 2003, and to make
severance payments to him from that latter date through December 15, 2003,
in an aggregate amount equal to that portion of the $425,000 base salary
that Mr. Arnot would have been entitled to receive during those two periods
of time, but for the termination of his employment agreement;
- - to continue Mr. Arnot's coverage under all of our benefit plans through
December 31, 2003;
- - to provide Mr. Arnot with office space and telecommunications facilities
through May 2, 2003; and
- - to release Mr. Arnot from any claims that we, the LP and other parties and
persons related to us had or might have against him.
Daniel J. Gladstone
In June 2002, the LP entered into an amended and restated employment
agreement with Daniel J. Gladstone, who was then President of the Girbaud
Division, that provided for an annual base salary
6
of $350,000 and incentive compensation based upon percentages of our annual
sales of Girbaud sportswear and Girbaud women's products. That agreement
contains the following termination provisions:
- - if Mr. Gladstone's employment is terminated without cause or he is
constructively discharged
- - after January 21, 2005, the LP must 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
- - prior to January 21, 2005, the LP must 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; and
- - if the LP decides not to renew the agreement, it must pay Mr. Gladstone an
amount equal to one year of his current base salary plus a Severance
Payment.
In April 2003, the LP entered into an amendment of Mr. Gladstone's
agreement which
- - provided that he would serve as President;
- - changed the initial term of the agreement so that it will end on December
31, 2005, and provided for automatic one year renewals of the agreement
unless either party gives notice of its non-renewal not later than
September 30, 2005 or September 30 of the then current renewal year; and
- - deleted Mr. Gladstone's entitlement to receive incentive compensation based
upon percentages of our sales, and added new incentive compensation
provisions that are based upon our achievement of pre-determined earnings,
cash flow and inventory turns targets.
The maximum amount of incentive compensation that Mr. Gladstone may
earn in 2003 is $297,500. The maximum amount of such compensation that he may
earn in 2004, 2005 and any renewal year is $350,000.
Robert J. Conologue
In March 2003, the LP entered into an employment agreement (with
effect from February 18, 2003) with Robert J. Conologue, our Chief Operating
Officer and Chief Financial Officer, that provides:
- - for an initial term that will end on December 31, 2005, and for automatic
one year renewals of the agreement unless either party gives notice of its
non-renewal not later than September 30, 2005 or September 30 of the then
current renewal year;
- - for payment of an annual base salary of $315,000 per year, a minimum bonus
of $40,000 in 2003 and incentive compensation provisions that are based
upon our achievement of pre-determined earnings, cash flow and inventory
turns targets;
- - 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 which shall
vest ratably on March 31, 2004, 2005 and 2006
- - in the event that Proposal 3 is adopted by the stockholders at the annual
meeting, for the issuance under the Plan of a five year fully vested option
to purchase 150,000 shares of common stock at the exercise price applicable
to option grants made under the Plan on the date of the annual meeting;
7
- - in the event that Mr. Conologue's employment is terminated without cause at
any time prior to December 31, 2005, for the payment of a severance payment
equal to his base salary for a period of six months; and
- - in the event that Mr. Conologue's employment is terminated without cause at
any time after December 31, 2005 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.
The maximum amount of incentive compensation that Mr. Conologue may
earn in 2003 is $236,250. The maximum amount of such compensation that he may
earn in 2004, 2005 and any renewal year is $267,750.
Sandra Finkelstein
In February 2003, the LP entered into an employment agreement with
Sandra Finkelstein, our Senior Vice President of Merchandising - Girbaud
Division, that provides:
- - for an initial term that will end on December 31, 2005, and for automatic
one year renewals of the agreement unless either party gives notice of its
non-renewal not later than September 30, 2005 or September 30 of the then
current renewal year;
- - for payment of a base salary of $310,000 per year, and up to $77,500 of
incentive compensation based upon our achievement of pre-determined
earnings, cash flow and inventory turns targets;
- - for the issuance under the Plan of a five year option to purchase 25,000
shares of common stock at an exercise price of $.60 per share which shall
vest ratably on March 31, 2004, 2005 and 2006; and
- - in the event that Ms. Finkelstein's employment is terminated without cause,
for the payment of a severance payment equal to his base salary for a
period of six months.
Eugene Wielespki
In April 2002, the LP entered into an amended and restated employment
agreement with Eugene Wielepski who was then our 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:
- - 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;
- - for payment of a base salary of $180,000 per year;
- - 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;
- - 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; or
8
- - prior to May 15, 2005, the LP must pay him the aggregate amount of his base
salary through May 15, 2006; and
- - 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.
Danielle Lambert
In June 2002, the LP entered into an agreement with Danielle Lambert,
who was our Vice President for Merchandising for the Girbaud Division. That
agreement provided:
- - for payment of a base salary of $180,000 per year and annual incentive
compensation equal to1/2of 1% of our net full price sales of Girbaud
products in excess of $40 million in each of the 2002, 2003 and 2004; and
- - if Ms. Lambert's employment was terminated
- - with or without cause, the LP must pay severance payment to her in an
amount equal to six months of his base salary; and
- - without cause, the LP also must pay any incentive compensation that may be
due for the year in which she is terminated, pro-rated with regard to the
portion of the year that elapses prior to her termination.
In May 2003, we and the LP entered into a separation agreement with
Ms. Lambert. Pursuant to that agreement, Ms. Lambert will receive the severance
and incentive compensation payments. She will also receive, in consideration for
her release of all claims that she might have against us, reimbursement of six
months of COBRA payments in the event that she elects to receive COBRA coverage.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires our
executive officers, directors and persons who beneficially own more than 10% of
our common stock to file initial reports of ownership and reports of changes in
ownership with the Securities and Exchange Commission ("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 our review of the forms furnished to us
and written representations from certain reporting persons, we believe that all
of those filing requirements were complied with by our executive officers and
directors during fiscal 2002, except that Messrs. Ahrenberg and Bachellerie
filed their initial statements of beneficial ownership on SEC Form 3 five days
and three 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 14 days after the date on which such form should have been filed and
Messrs. Ahrenberg, Bachellerie, Faltz, Loubet and Stec filed Statements of
Changes in Beneficial Ownership on SEC Form 4 39 days after the date on which
such forms should have been filed.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the
compensation paid during each of our last three fiscal years to our Chief
Executive Officer and to each of our executive officers other than our Chief
Executive Officer whose total annual salary and bonus amounted to more than
$100,000 and who were serving as executive officers at the end of 2002
(collectively, the "Named Executives"). No compensation that would qualify as
payouts pursuant to long-term incentive plans ("LTIP Payouts") or
9
"All Other Compensation" was paid to any of the Named Executive Officers
during the three year period ended on December 31, 2002, and we did not issue
any SARs during that period of time.
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation (1) Awards
Restricted Securities
Name and Principal Other Annual Stock Awards Underlying
-------
Position Salary ($) Bonus ($) Compensation ($) ($) Options (#)
------ --- --------- ------------ --- --- -----------
Robert J. Arnot, CEO 2002 $395,973 - - - -
2001 346,659 - - - 7,000
2000 344,960 - - - -
Daniel J. Gladstone, President -
Girbaud Division 2002 345,781 221,199 - - 7,000
2001 341,538 207,865 - - -
2000 344,960 18,022 - - -
Eugene C. Wielepski, Vice
President and CFO 2002 196,764 - - - 10,000
2001 172,531 - - - 7,000
2000 171,500 - - - -
Danielle Lambert, Vice President -
Design 2002 166,393 81,199 - - -
2001 150,115 62,865 - - -
2000 148,681 43,022 - - 10,000
(1) We 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.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The Company did not grant any options or SARs to any of the Named
Executive Officers during the year ended December 31, 2002 except Eugene C.
Wielepski. The following table sets forth information regarding that grant.
Potential Realizable Value at
Assumed Annual Rates of Stock
Appreciation
Name Individual Grants for Option Term (1)
- --------------------------- --------------------------------------------------------------------- ---------------------
Number of
Securities Percent of
Underlying Total Options Exercise Price
Options Granted to Per Expiration
Granted Employees Share Date
---------------- --------- -------------- ---------------
5% 10%
-------------- --------
Eugene C. Wielepski 10,000 5% $1.71 9/19/12 $10,754 $27,253
(1) In accordance with U.S. Securities and Exchange Commission rules, these
columns show gains that could accrue for the Named Executive's option, assuming
that the market price of our 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 executives from this option will be zero.
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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 our common stock held on December 31,
2002 by the Named Executive Officers. None of the Named Executive Officers
exercised any options during 2002.
Number of Securities Underlying
Unexercised Options at Fiscal Value of Unexercised In-the-Money
Shares Acquired Value Year-End Options at Fiscal Year-End
Name on Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
- -------------------------- ----------- -------- ------------------------- -------------------------
Robert C. Arnot 0 0 55,000/0 0
Daniel J. Gladstone 0 0 477,000/7,000 0
Eugene Wielepski 0 0 27,500/17,000 0
Danielle Lambert 0 0 20,000/0 0
DEFINED BENEFIT PENSION PLAN
We maintain a defined benefit pension plan (the "Pension Plan") for
our employees. 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. We pay the full cost of the benefits under the
Pension Plan through our contributions to a trust. Our cash contributions to the
Pension Plan during the year ended December 31, 2002 aggregated approximately
$1,375,000.
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:
Remuneration Years of Service
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
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.
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The estimated credited years of service for each of the Named
Executive Officers as of January 1, 2003 were as follows:
Estimated Credited Years of
Name Service
----------------------------------------------------------- -------
Robert C. Arnot 11
Daniel J. Gladstone 4
Eugene Wielepski 29
Danielle Lambert 4
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 May 14, 2003 by (i) each person who we know owns beneficially 5% or more
of our outstanding common stock, (ii) our President and each of our other "Named
Executive Officers," (iii) each director and nominee for election as a director,
and (iv) all of our directors, nominees for election as a director and officers
as a group:
Name and Address of Beneficial Owner (1) Shares Beneficially Owned
- ------------------------------------ ---------------------------------
Number Percent (2)
------ -------
Wurzburg, S.A. (3)................................................ 4,966,667 (4) 40.6 %
Robert J. Arnot (5)............................................... 544,871 (6) 4.5
Daniel J. Gladstone............................................... 477,000 (7) 3.9
Robert J. Conologue............................................... - (8) -
Sandra Finkelstein................................................ - (9) -
Eugene Wielepski................................................. 221,742 (10) 1.8
Danielle Lambert................................................. 20,000 (11) *
Staffan Ahrenberg (12)........................................... - (13) -
Olivier Bachellerie (14)......................................... - (13) -
Rene Faltz (15).................................................. - (13) -
Neal J. Fox...................................................... 25,000 (16) *
Jon Hechler...................................................... 362,791 (13) 3.0
Roland Loubet (17)............................................... 100,000 (13) -
Robert Stephen Stec (18)......................................... - (13) -
All Officers, Directors and Nominees for Director as a Group (of 12) 1,206,533 9.9
12
* 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,
350 Fifth Avenue, Suite 1029, New York, New York 10118.
(2) Based upon 12,239,157 shares assumed to be issued and outstanding which
includes 11,134,657 shares actually issued and outstanding on the date of
this proxy statement plus an aggregate of 1,104,500 shares that the persons
listed in the table may acquire pursuant to options that they may exercise
within 60 days of the date of this proxy statement.
(3) The address of this stockholder is 134 Boulevard de la Petrusse, L-2330
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") and 500,000 shares that Textile may acquire pursuant to
warrants that it may exercise within 60 days of the date of this proxy
statement.
(5) Mr. Arnot served as a director and as our chief executive officer during
the year 2002 and until his resignation which became effective on February
6, 2003.
(6) Includes 55,000 shares that Mr. Arnot may acquire pursuant to options
exercisable by him within 60 days of the date of this proxy statement.
Unless exercised on or before June 1, 2003, those options will expire on
that date.
(7) Includes 477,000 shares that Mr. Gladstone may acquire pursuant to options
exercisable by him within 60 days of the date of this proxy statement.
(8) Does not include (i) 225,000 shares issuable pursuant to an option granted
to Mr. Conologue under the Plan that will vest ratably on February 18,
2004, 2005 and 2006; or (ii) 150,000 shares that shall be issuable pursuant
to a fully vested option to be granted to Mr. Conologue under the Plan if
Proposal 3 is adopted by the stockholders at the annual meeting. See
"Employment Contracts, Termination Of Employment And Change In Control
Arrangements."
(9) Does not include 25,000 shares issuable pursuant to an option granted to
Ms. Finkelstein under the Plan that will vest ratably on February 15, 2004,
2005 and 2006. See "Employment Contracts, Termination Of Employment And
Change In Control Arrangements."
(10) Includes 27,500 shares that Mr. Wielepski may acquire pursuant to an option
exercisable by him within 60 days of the date of this proxy statement.
(11) Includes 20,000 shares that Ms. Lambert may acquire pursuant to an option
exercisable by her within 60 days of the date of this proxy statement.
(12) Mr. Ahrenberg's address is 16 Rue Voltaire, 1211 Geneva 13, Switzerland.
(13) Does not include 30,000 shares issuable pursuant to an option granted to
this director in December 2002 that has not vested.
13
(14) Mr. Bachellerie's address is 15 Rue Louis Blanc, 75010 Paris, France.
(15) Mr. Faltz's address is 41 Avenue de la Gare, Luxembourg, L-1611, Grand
Duchy of Luxembourg.
(16) Includes 25,000 shares that this director may acquire pursuant to options
exercisable by him within 60 days of the date of this proxy statement. Does
not include 37,000 shares issuable pursuant to options granted to this
director that have not vested.
(17) Mr. Loubet's address is Avenue du Leman 20, 1025 St-Sulpice,
Ch-Switzerland.
(18) Mr. Stec's address is c/o Lexington Home Brands, 411 South Salisbury
Street, Lexington, NC 27292.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In November 1997, we 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 Group1 of companies, as the
licensor and to include active influenced sportswear as a licensed product
category. Also in March 1998, we 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.
Under the Girbaud Men's Agreement, we are 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, we are subject to guaranteed minimum annual
royalty payments of $3.0 million each year from 2002 through 2007. We are
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 2002, we made royalty payments to under the Girbaud Men's
Agreement aggregating approximately $3,233,000.
Under the Girbaud Women's Agreement we are 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, we are subject to guaranteed minimum annual
royalty payments of $1.5 million each year from 2002 through 2007. We are
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 we are
required to contribute $190,000 per year to Latitude's advertising and
promotional expenditures for the Girbaud brand. During 2002, we made royalty
payments to under the Girbaud Women's Agreement aggregating $1,375,000.
- --------
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."
14
In August 1999, we issued 500,000 shares of restricted common stock
to Latitude in connection with an amendment of the Girbaud's Women's Agreement
to defer the obligation to open a Girbaud retail store. Under the Girbaud
Women's Agreement, because we did not sign a lease agreement for a Girbaud
retail store by July 31, 2002, we became obligated to pay Latitude an additional
$500,000 in royalties. We paid $175,000 of that royalty in 2001 and the balance
in 2002. Immediately upon the issuance of the 500,000 shares of restricted
Common Stock to Latitude, Latitude transferred them to Wurzburg.
In January 2000, we entered into a global sourcing agreement with
G.I. Promotions, an affiliate of Wurzburg, to act as a non-exclusive sourcing
agent to licensees of the Marithe & Francois Girbaud trademark for the
manufacture of Girbaud jeanswear and sportswear (the "Global Sourcing
Agreement"). The Global Sourcing Agreement extends until December 31, 2003 and
provides that we shall net a facilitation fee of 5.0% of the total FOB pricing
for each order shipped to licensees under the agreement. Also in January 2000,
we entered into a license agreement with Wurzburg. The license has a term of
three years and provides that we shall pay Wurzburg a royalty of 1.0% of the
total FOB pricing for each order shipped to a licensee under the Global Sourcing
Agreement.
In 2002, Wurzburg and its wholly owned subsidiary, Textile Investment
International, S.A. ("Textile"), acquired from Ambra, Inc. 666,667 shares of our
common stock, 3,300,000 shares of our Series A convertible preferred stock and a
promissory note payable by us in the principal amount of approximately
$6,558,000, the payment of which is collateralized by a security interest in all
of our assets that is subordinate to a lien we granted to Congress Financial
Corporation in those same assets. Pursuant to the terms of a Framework Agreement
(the "Framework Agreement") that we entered into in May 2002 with Textile,
Latitude and Wurzburg, we
- - amended the terms of the Series A preferred stock so that it became
immediately convertible, but only into our common stock,
- - granted Textile warrants to purchase 500,000 shares of our common stock for
$0.75 per share,
- - entered into a Stockholders' Agreement with Textile establishing certain
terms and conditions regarding the acquisition and disposition of our
securities as well as certain corporate governance matters (the
"Stockholders Agreement"), and
- - amended the Girbaud Agreements to
- - add an additional option permitting us to extend the term of each of those
agreements by four additional years through 2011 and
- - provide for the payment to Latitude of consulting fees of $125,000 per
agreement for calendar year 2002, and $150,000 per agreement for each
remaining calendar year under the term of each agreement (the "Consultants'
Fees").
Pursuant to the Stockholders Agreement, the Girbaud Group took
control of our Board via the election of five of their nominees for director at
our 2002 annual meeting of stockholders. The Girbaud Group then converted their
Series A preferred stock into 3,300,000 shares of our common stock.
In March 2003, in connection with our negotiations with Congress
Financial Corporation ("Congress") to waive certain covenant violations under,
and to renegotiate various amendments to, our credit facility with Congress, we
also requested and obtained Latitude's agreement to the following changes to the
Girbaud Agreements:
- - deferral of the December 2002 and January 2003 royalty payments of $250,000
each under the Girbaud Men's Agreement to October and November 2003
respectively;
- - deferral of the December 2002 royalty payment of $125,000 under the Girbaud
Women's Agreement to October 2003;
15
- - reduction of the 2003 minimum guaranteed annual royalty payments due under
the Girbaud Women's Agreement by $450,000 to $1,050,000 by paying $25,000
in each of the months of April and May, 2003; $125,000 in each of the
months of June, July, August, September, October and December, 2003; and
$250,000 in November, 2003;
- - deferral of payment of approximately $94,000 of Consultants' Fees which
became due in December 2002 under the Girbaud Men's and Women's Agreements
and payment of $30,000 of that amount in February 2003 and the balance in
August 2003; and
- - reduction of the Consultants' Fees payable in 2003 from $300,000 to
$100,000 and waiver of payment of approximately $97,000 that we owed for
samples provided by the Girbaud Group.
Messrs. Robert J. Arnot, our former Chairman and Chief Executive
Officer, and Daniel J. Gladstone, our President and a director, entered into
consulting agreements with Latitude in 2002 that were supposed to terminate on
December 31, 2005. Mr. Arnot's consulting agreement terminated in connection
with his resignation as our Chairman and Chief Executive. Mr. Gladstone agreed
to terminate his consulting agreement in February 2003 in connection with the
above-described restructuring of the payment obligations owed by us under the
Girbaud Agreements. During 2002, each of Messrs. Arnot and Gladstone received
$44,000 under those consulting agreements.
In March 2003, we entered into a consulting agreement with Societe de
Finance et d'Investissement, SA ("SFI"), pursuant to which we engaged SFI to
provide the services of Staffan Ahrenberg, the Chairman of our Board, to assist
us in our dealings with the senior managements of the Girbaud Group of
companies, support our efforts to comply with our obligations under the Girbaud
Agreements, expand the scope of our licenses under those agreements, promote the
sale of our products in Canada and assist us with regard to the manufacture of
our products in Asia, Europe and Mexico. The term of that agreement will end on
December 31, 2003. We have agreed to pay SFI $200,000 during that term in
consideration for the provision of such services by Mr. Ahrenberg.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 3. Exhibits (numbered in accordance with Item 601 of Regulation S-K). The
following is a list of Exhibits filed herewith:
23.01 Consent of BDO Seidman, LLP
99.01 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: May 21, 2003 By: /s/ Robert J. Conologue
--------------------------------------------
Robert J. Conologue
Chief Operating Officer and
Chief (Principle) Financial Officer
17
Certification Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Daniel J. Gladstone, certify that:
1. I have reviewed this amendment no. 1 to the annual report on Form
10-K of I.C. Isaacs & Company, Inc. for the year ended December 31, 2002 ("this
Amendment");
2. Based on my knowledge, this Amendment does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this Amendment;
3. Based on my knowledge, the financial statements, and other
financial information included in this Amendment, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this Amendment;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this Amendment is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
Amendment (the "Evaluation Date"); and
(c) presented in this Amendment our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors:
(a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize and report financial data and
have identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this Amendment whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Dated: May 21, 2003
/s/ Daniel J. Gladstone
------------------------------------------
Daniel J. Gladstone, President and CEO
18
Certification Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (Continued)
I, Robert J. Conologue, certify that:
1. I have reviewed this amendment no. 1 to the annual report on Form
10-K of I.C. Isaacs & Company, Inc. for the year ended December 31, 2002 ("this
Amendment");
2. Based on my knowledge, this Amendment does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this Amendment;
3. Based on my knowledge, the financial statements, and other
financial information included in this Amendment, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this Amendment;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this Amendment is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
Amendment (the "Evaluation Date"); and
(c) presented in this Amendment our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors:
(a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize and report financial data and
have identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this Amendment whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Dated: May 21, 2003
/s/ Robert J. Conologue
------------------------------------------
Robert J. Conologue, COO and CFO
19
Exhibit 23.01
Consent of Independent Certified Public Accountants
Board of Directors
I.C. Isaacs & Company, Inc.
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (333-63871) and (333-46916) of our reports dated February
28, 2003 relating to the consolidated financial statements and schedule of I.C.
Isaacs & Company, Inc. appearing in Amendment No. 1 to the Company's Annual
Report on Form 10-K for the year ended December 31, 2002.
BDO SEIDMAN, LLP
Bethesda, Maryland
May 21, 2003
20
Exhibit 99.1
Certification Pursuant to
Section 1350 of chapter 63 of title 18 of the United States Code
Each of the undersigned hereby certifies, for the purposes of section
1350 of chapter 63 of title 18 of the United States Code, in his capacity as an
officer of I.C. Isaacs & Company, Inc. ("Isaacs"), that, to his knowledge,
amendment no. 1 to the annual report on Form 10-K of I.C. Isaacs & Company, Inc.
for the year ended December 31, 2002, fully complies with the requirements of
Section 13(a) of the Securities Exchange Act of 1934 and that the information
contained in such amendment to said report fairly presents, in all material
respects, the financial condition and results of operation of Isaacs.
Dated: May 21, 2003
/s/ Daniel J. Gladstone
----------------------------------------------------
Daniel J. Gladstone, President and CEO
/s/ Robert J. Conologue
----------------------------------------------------
Robert J. Conologue, COO and CFO
21