CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION			1
QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING			2
About the Merger			2
About the Special Meeting			3
How to Get More Information			5
SUMMARY OF THE PROXY STATEMENT/PROSPECTUS			6
The Companies			6
Structure of the Merger			7
What You Will Receive			8
Recommendation of Mossimo’s Board of Directors			9
Mossimo’s Reasons for the Merger			9
Fairness   Opinion of FMV Opinions, Inc. to Mossimo’s Board of Directors			9
The Mossimo Special Meeting			10
Interests of Mossimo’s Directors and Executive Officers			10
Transaction-Related Costs and Financing Arrangements			11
Conditions to Closing			11
Termination of the Merger Agreement			12
Termination Fees to Be Paid by Mossimo			13
Mossimo Prohibited From Soliciting Other Offers			13
Regulatory Matters Relating to the Merger			13
Material U.S. Federal Income Tax Consequences			13
Resale of Iconix Common Stock Issued in the Merger			14
Appraisal Rights for Mossimo Stockholders			14
Comparative Market Prices and Dividends			14
Surrender of Mossimo Stock Certificates			14
Accounting Treatment			15
Comparison of Rights of Iconix Stockholders and Mossimo Stockholders			15
SELECTED SUMMARY HISTORICAL FINANCIAL DATA OF ICONIX			16
SELECTED SUMMARY HISTORICAL FINANCIAL DATA OF MOSSIMO			19
COMPARATIVE HISTORICAL AND PRO FORMA PER SHARE DATA			20
COMPARATIVE PER SHARE MARKET PRICE DATA			21
RISK FACTORS			22
Risks Relating to the Merger			22
Risks Relating to Iconix’s Operations After Completion of the Merger			25
THE MOSSIMO SPECIAL MEETING			31
Proposal to be Considered at the Special Meeting			31
Voting Rights; Quorum; Vote Required for Approval			31
Voting and Revocation of Proxies			31
Voting by Mossimo Directors and Executive Officers			32
Proxy Solicitation			32
Effective Time of the Merger			32
Payment of Merger Consideration and Surrender of Stock Certificates			32
Merger Financing			33
Interests of Certain Persons in the Merger; Potential Conflicts of Interest			33
Intent to Vote; Recommendations			34
Estimated Fees and Expenses of the Merger			35
MERGER			36

 

---

 

Background and Reasons for the Merger			36
Structure of the Merger			39
What You Will Receive			39
Position of Mossimo as to the Fairness of the Merger; Recommendation of Mossimo’s Board of Directors			40
Opinion of Financial Advisor to Mossimo			42
Position of Mossimo as to the Purposes, Alternatives, Reasons and Effects of the Merger			49
Position of Iconix as to the Purposes, Alternatives, Reasons and Effects of the Merger			49
Iconix’s Plans for Mossimo			50
Appraisal Rights			50
Material U.S. Federal Income Tax Consequences			52
Certain Legal Matters			54
Regulatory Filings and Approvals			55
THE MERGER AGREEMENT			56
Structure of the Merger			56
Merger Consideration			56
Treatment of Mossimo Stock Options			56
Completion and Effectiveness of the Merger			56
Dissenters’ Shares			57
Representations and Warranties			57
Conditions to the Merger			58
Waiver			58
Exchange of Mossimo Stock Certificates for Iconix Stock Certificates and Cash			58
Interim Operations			59
Access to Information			59
Notices of Certain Events; Continuing Disclosure			59
Compensation			60
Modern Amusement			60
Consents			60
Non-Solicitation			60
Class Action Suit			61
Confidentiality			61
Indemnification			61
Voting			61
Termination			61
Termination Fee			62
Expenses			62
INFORMATION ABOUT MOSSIMO			62
General			62
Modern Amusement			62
Licensing			63
Products			64
Sourcing, Manufacturing, and Distribution			64
Marketing and Advertising			64
Trademarks			65
Personnel			65
Code of Ethics			65
Mossimo Risk Factors			65
Certain Federal Tax Consequences			67
Properties			67
Legal Proceedings			68
Market Price and Dividends of Mossimo’s Common Stock			68
Mossimo Quantitative and Qualitative Disclosure About Market Risk			69
Mossimo Financial Statements and Supplementary Data			69

 

---

 

Mossimo Changes In and Disagreements with Accountants on Accounting and Financial Disclosure			69
Holders of Mossimo Common Stock			69
Dividends and Dividend Policy			69
Pre-Merger Principal Stockholders of Mossimo			69
Mossimo Management’s Discussion And Analysis of Financial Condition and Results of Operations			70
INFORMATION ABOUT ICONIX			78
Background			78
Description of Iconix’s Securities			79
Legal Proceedings			83
Pre-Merger Principal Stockholders of Iconix			85
Post-Merger Principal Stockholders of Iconix (Pro Forma)			86
COMPARISON OF STOCKHOLDER RIGHTS AND CORPORATE GOVERNANCE MATTERS			88
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS			98
SELLING STOCKHOLDERS			108
PLAN OF DISTRIBUTION			109
OTHER MATTERS AT THE SPECIAL MEETING			110
FUTURE MOSSIMO STOCKHOLDER PROPOSALS			110
LEGAL MATTERS			110
EXPERTS			110
WHERE YOU CAN FIND MORE INFORMATION			111
INFORMATION INCORPORATED BY REFERENCE			111

 

APPENDICES

Appendix A

Agreement and Plan of Merger dated as of March 31, 2006 among Iconix Brand Group, Inc., Moss Acquisition Corp., Mossimo, Inc., and Mossimo Giannulli

 

Appendix B

Registration Rights Agreement dated as of March 31, 2006 among Iconix Brand Group, Inc., Mossimo Giannulli and Edwin Lewis (to become effective as of the closing of the merger)

 

Appendix C

Section 262 of the Delaware General Corporation Law (Appraisal Rights)

 

Appendix D

Lock-up Agreement as of March 31, 2006 among Iconix Brand Group, Inc., Mossimo Giannulli and Edwin Lewis (to become effective as of the closing of the merger)

 

Appendix E

Opinion of FMV Opinions, Inc.

 

Appendix F

Financial Statements of Mossimo, Inc. for the Year Ended December 31, 2005

 

Appendix G

Financial Statements of Mossimo, Inc. for the Six Months Ended June 30, 2006

 

Appendix H

Financial Statements of Mudd (USA) LLC for the Quarter Ended March 31, 2006 and 2005

 

---

This document incorporates important business and financial information about Iconix from documents filed with the SEC that are not included in or delivered with this document. This information is available without charge at the SEC’s website at http://www.sec.gov, as well as from other sources. See “ Where You Can Find More Information” below.

 

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION

 

The statements contained or incorporated by reference in this proxy statement/prospectus that are not historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Words such as “believe,” “estimate,” “intend,” “may,” “expect,” “anticipate,” “predict,” “potential,” “project,” “counting on,” “plan,” “seek,” “continue,” “want,” “forecast,” “should,” “would,” “is confident” and “will” and similar expressions as they relate to Iconix or Mossimo are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Except to the extent required by federal securities laws, neither Iconix nor Mossimo undertakes any obligation to publicly release the result of any revisions to any such forward-looking statements that may be made to reflect events or circumstances after the date of this proxy statement/prospectus or to reflect the occurrence of unanticipated events.

 

All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations, including, but not limited to, the following:

 

·	Expected cost savings from the merger may not be fully realized or realized within the expected time frame, and costs or expenses relating to the merger may be higher than expected;

 

·	Revenues or net income following the merger may be lower than expected;

 

·	Costs or difficulties related to (i) completing the merger and (ii) following the merger, the integration of the business of Mossimo into Iconix may be greater than expected;

 

·	Synergies and accretion to reported earnings estimated to result from the merger may not be realized and the level of costs and expenses incurred by Iconix in connection with the merger may be higher than expected;

 

·	Iconix’s future operating results will depend on a number of factors beyond its control, which could cause its results to fluctuate significantly over time;

 

·	Iconix’s business is very competitive, and increased competition could reduce royalty revenue and net income;

 

·	Iconix depends on both senior management and certain key operating employees. If Iconix is unable to attract and retain these individuals, its results of operations may decline;

 

·	Interest rates on Iconix’s debt could increase;

 

·	Iconix may not be able to consummate future acquisitions, and those acquisitions that it does complete may be difficult to integrate into its business;

 

·	If stockholders sell their Iconix shares, the market price of Iconix common stock could be depressed;

 

·	Principal stockholders who own a significant number of Iconix’s shares may have interests that conflict with yours;

 

·	Iconix may discover internal control deficiencies in its operations or in an acquisition that must be reported in its SEC filings, which may result in a negative reaction by its stockholders that adversely impacts Iconix’s stock price;

 

·	Iconix’s acquisitions, including Mossimo, might fail to perform as anticipated, which could result in an impairment charge to write off some or all of the trademarks or goodwill for that entity;

 

·	Although Iconix plans to acquire additional brands, it may not succeed in identifying appropriate candidates or negotiating acceptable terms. If Iconix is unable to carry out its goals to acquire additional brands, its results of operations may be adversely affected; and

 

·	Other economic, business, competitive or regulatory factors may affect Iconix’s and Mossimo’s businesses generally as described in Iconix’s and Mossimo’s filings with the SEC.

 

All subsequent written and oral forward-looking statements attributable to Iconix or Mossimo or persons acting on their behalf are expressly qualified in their entirety by the foregoing. New risks and uncertainties may arise from time to time. We cannot predict these events or how they might impact us. For more information, see “Risk Factors” beginning on page 22 of this proxy statement/prospectus.

 

---

 

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING

 

In the following section we present questions that you, as a stockholder of Mossimo, Inc. may have regarding the merger and the special meeting of Mossimo stockholders. We also present brief answers to those questions which in many cases refer to other sections of this proxy statement/prospectus where more detailed information may be found. We refer to Mossimo, Inc. throughout this proxy statement/prospectus as Mossimo; Iconix refers to Iconix Brand Group, Inc. and, unless the context otherwise requires, to its subsidiaries, including IP Holdings LLC, which is referred to as IP Holdings. We urge you to read carefully this proxy statement/prospectus, including the documents included as appendices, because the information in this section does not provide all the information that might be important to you with respect to the matters being considered at the special meeting. Additional important information is also contained in the documents that are incorporated by reference in this proxy statement/prospectus. Copies of Iconix’s Annual Report on Form 10-K and other documents incorporated by reference in this proxy statement/prospectus are enclosed herewith..

 

Except as otherwise specifically noted, references to “us,” “we” and “our” refer to both Iconix and Mossimo.

 

About the Merger

 

Q:		What is the purpose of the special meeting?		A:  Iconix is proposing to acquire all of the outstanding capital stock of Mossimo. You are being asked to vote to adopt and approve the Agreement and Plan of Merger, dated as of March 31, 2006, by and among Iconix, Moss Acquisition Corp., Mossimo and Mossimo Giannulli, which we refer to in this proxy statement/prospectus as the merger agreement. The merger agreement contemplates a merger transaction in which Mossimo will merge with and into Moss Acquisition Corp. and thereby become a wholly-owned subsidiary of Iconix. We refer to this transaction as the merger throughout this proxy statement/prospectus.
Q:		What will I receive in the merger?		A:  For each share of Mossimo common stock you hold, you will receive consideration consisting of $4.25 cash and 0.2271139 of a share of Iconix common stock, subject to certain adjustments, unless you follow all of the statutory requirements to obtain appraisal rights. For information about the risks of holding Iconix common stock, see “Risk Factors” beginning on page 22 of this proxy statement/prospectus. You will also receive a non-transferable contingent share right entitling you to additional shares of Iconix common stock after the first anniversary of the merger if the Iconix common stock does not close at or above $18.71 for at least twenty consecutive trading days during the year following the merger. In the last five years, Iconix common stock has not closed at or above $18.71. After the merger, Mossimo common stock will no longer be publicly traded and Moss Acquisition Corp. will change its name to Mossimo, Inc. and will be the surviving corporation. For more information concerning the merger consideration, please see the section entitled “Summary of the Proxy Statement/Prospectus - What You Will Receive” beginning on page 8. The Iconix common stock to be issued in the merger will be registered under the Securities Act. These shares will be freely transferable under the Securities Act, except for Iconix common stock issued to any person who is deemed to be an “affiliate” (as that term is used in Rule 145 under the Securities Act) of Mossimo. Persons who may be deemed to be affiliates include individuals or entities that control, are controlled by, or are under common control with Mossimo and include Mossimo directors and certain officers as well as its principal stockholders. Affiliates may not sell their Iconix common stock acquired in the merger except pursuant to: an effective registration statement under the Securities Act covering the resale of those shares;   an exemption under paragraph (d) of Rule 145 under the Securities Act; an exemption under Rule 144 under the Securities Act; or any other applicable exemption under the Securities Act. The registration statement of which this proxy statement/prospectus forms a part will cover the resale of the number of shares of Iconix common stock acquired by Mr. Giannulli and, if applicable, Edwin Lewis, Co-Chief Executive Officer and a director of Mossimo. Mr. Giannulli and, if applicable, Mr. Lewis are Mossimo affiliates within the meaning of the Securities Act. This registration for resale will permit those stockholders to sell the shares of Iconix common stock they receive pursuant to the merger except to the extent that such shares are subject to certain lock-up arrangements. For more information concerning the resale of Iconix common stock issued in connection with the merger, please see the sections entitled “Summary of the Proxy/Statement Prospectus—Resale of Iconix Common Stock Issued in the Merger” and “Selling Stockholders.”

 

-2-

---

 

Q:		What is this document?		A:  Mossimo’s board of directors is using this document as a proxy statement to solicit proxies from the holders of Mossimo common stock to be voted at the special meeting. In addition, Iconix is using this document as a prospectus because Iconix is offering shares of Iconix common stock in exchange for shares of Mossimo common stock in the merger.
Q:		Does Mossimo’s board of directors recommend that Mossimo  stockholders vote “FOR” the merger agreement?		A:  Yes. Mossimo’s board of directors unanimously recommends that Mossimo stockholders vote “FOR” the adoption and approval of the merger agreement. To review the board’s reasons for recommending the merger agreement, please see the section entitled “The Merger - Position of Mossimo as to the Fairness of the Merger; Recommendation of Mossimo’s Board of Directors” beginning on page 40.
Q:		When do you expect to complete the merger?		A:  We expect to complete the merger as soon as possible after Mossimo stockholders adopt and approve the merger agreement at the special meeting, and after the satisfaction or waiver of all other conditions to the merger. We cannot predict when, or if, these conditions will be satisfied or waived, although we believe the merger can be completed in the third quarter of 2006.

About the Special Meeting

 

Q:		When and where is the Mossimo special meeting?		A:  The Mossimo special meeting will take place on __________, 2006, at ____, California time, and will be held at _______________________.
Q:		Who is entitled to vote at the special meeting?		A:  Holders of record of Mossimo common stock at the close of business on August 15, 2006, which is the date Mossimo’s board of directors has fixed as the record date for the special meeting, are entitled to vote at the special meeting.
Q:		What is the required vote to adopt and approve the merger agreement?		A:  For the merger to occur, the merger agreement must be adopted and approved by the holders of a majority of the outstanding shares of Mossimo common stock. The merger agreement requires Mossimo Giannulli, who holds approximately 64.2% of the outstanding Mossimo common stock, to vote all of his shares in favor of the adoption and approval of the merger agreement unless the Mossimo board of directors withdraws its recommendation that Mossimo stockholders vote in favor of the merger agreement and terminates the merger agreement. Therefore, unless the merger agreement is terminated prior to the special meeting in accordance with its terms, you should expect that the merger agreement will be approved at the special meeting regardless of the votes of any Mossimo stockholders other than Mr. Giannulli. The stockholders of Iconix are not required to approve the merger agreement. For additional information regarding the merger agreement, including the termination provisions, please see the summary of the merger agreement under “The Merger Agreement” beginning on page 56.

 

-3-

---

 

Q:		How do I vote shares I own directly?		A:  You can vote in person at the special meeting or you can vote by mail as described below. We recommend that you vote by proxy, even if you plan to attend the special meeting. If you abstain from voting or do not vote your shares, it will have the same effect as voting against the adoption and approval of the merger agreement.   If your shares are held in your name, you can vote by proxy as follows:   ·   By mail: Complete, sign, date and return your proxy card in the enclosed pre-addressed, postage-paid envelope.
Q:		How do I vote shares I hold through a nominee?		A:  If you hold shares through someone else, such as a stockbroker, bank or other nominee, you will receive material from that firm asking how you want to vote. You can complete the firm’s voting form and return it to the firm. If you do not provide your broker, bank or nominee with instructions on how to vote your shares, your broker, bank or other nominee will not be permitted to vote your shares on the merger agreement, which will have the same effect as voting against the adoption and approval of the merger agreement. Therefore, you should be sure to provide your broker, bank or other nominee with instructions on how to vote your shares.   If you intend to vote your nominee shares in person at the special meeting, you must obtain from your nominee a proxy card which covers your shares and bring it to the special meeting.
Q:		May I change my vote after I have submitted my proxy?		A:  Yes. If you are the stockholder of record, you may change your vote in one of the following ways before your proxy is voted at the special meeting:   ·   submit to the secretary of Mossimo a revocation letter with a later date than the date of your proxy card;   ·   deliver, no later than 11:59 p.m., Eastern Time, on ____________________, 2006, a second completed and signed proxy card dated later than the first signed proxy card; or   ·   attend the special meeting and vote in person.
Q:		Do I need to attend the special meeting in person?		A:  No.  It is not necessary for you to attend the special meeting to vote your shares if Mossimo has previously received your proxy, although you are welcome to attend.
Q:		Should I send in my Mossimo stock certificates with my proxy card?		A:  No.  Please do not send your Mossimo stock certificates with your proxy card. After the merger is completed, Continental Stock Transfer & Trust Company, acting as Iconix’s exchange/paying agent, will send you instructions (including a letter of transmittal) explaining how to exchange your shares of Mossimo common stock for the appropriate number of shares of Iconix common stock and cash.

 

-4-

---

 

Q:

What if I receive more than one proxy card or proxy voting instruction card for the special meeting?

A:  This may mean that your shares of Mossimo common stock are held in different ways or in more than one account. Please complete, sign, date and return by one of the methods described herein all proxy cards or proxy voting instruction cards you receive to ensure that all of your shares of Mossimo common stock are voted at the special meeting.

How to Get More Information

 

Q:		Where can I find more information about Iconix?		A:  Much of the business and financial information about Iconix that may be important to you is not included in this proxy statement/prospectus. Instead, this information is incorporated by reference to documents separately filed by Iconix with the Securities and Exchange Commission, which we refer to throughout this proxy statement/prospectus as the SEC. Mossimo also files reports with the SEC containing important business and financial information about Mossimo, although this proxy statement/prospectus does not incorporate Mossimo documents by reference. See “Where You Can Find More Information” beginning on page 111, for a list of documents that Iconix has incorporated by reference into this proxy statement/prospectus and for instructions on how to obtain copies of documents filed with the SEC by Iconix and Mossimo. The documents are available to you without charge. Copies of Iconix’s Annual Report on Form 10-K and other documents incorporated by reference in this proxy statement/prospectus are enclosed herewith.
Q:		Whom do I call if I have questions about the merger or the special meeting?		A:  If you have any questions about the merger or the special meeting or if you need additional copies of this proxy statement/prospectus or the enclosed proxy card, you should contact Mossimo’s Chief Financial Officer, Vicken Festekjian, at (310) 460-0040.

-5-

---

 

SUMMARY OF THE PROXY STATEMENT/PROSPECTUS

 

This summary highlights selected information from this proxy statement/prospectus but may not contain all of the information that is important to you. Accordingly, Iconix and Mossimo encourage you to read carefully this entire proxy statement/prospectus, including the appendices and the documents that are incorporated by reference. You may obtain a copy of the documents that Iconix has incorporated by reference without charge by following the instructions in the section entitled “Where You Can Find More Information” beginning on page 111 of this proxy statement/prospectus. We have included page references in this summary to direct you to more complete descriptions of the topics presented in this summary.

 

The Companies

 

Mossimo, Inc. (page 62)

 

2016 Broadway Boulevard

Santa Monica, California 90404

(310) 460-0040

Mossimo is a Delaware corporation formed in November 1995 which operates as a designer and licensor of apparel and related products principally under the “Mossimo” brand. Mossimo licenses the Mossimo brand to domestic and international third parties with Target Corporation and its affiliates, Mossimo’s primary domestic licensee. We refer to Target Corporation and its affiliates as “Target” throughout this proxy statement/prospectus. Mossimo’s design and licensing strategy is based on its belief that moderately priced apparel and accessories can be produced more effectively by large retailers that interact daily with consumers and operate with significant economies of scale.

 

Mossimo also licenses its Mossimo trademarks and provides design services to retailers outside of the United States, and licenses its Mossimo trademarks for use in collections of eyewear and women’s swimwear and bodywear sold in Target stores in the United States.

 

Mossimo’s net revenues for the year ended December 31, 2005 and the six months ended June 30, 2006 were approximately $31.0 million and $15.2 million, respectively, and its net income for the same periods was approximately $4.7 million and $1.5 million, respectively.

 

Iconix Brand Group, Inc. (page 78)

 

1450 Broadway, 4th Floor

New York, New York 10018

(212) 730-0030

Iconix is a brand management company engaged in licensing, marketing and providing trend direction for its portfolio of consumer brands. It currently owns six highly recognizable brands: Candie’s^®, Bongo^®, Badgley Mischka^®, Joe Boxer^®, Rampage^® and Mudd^®. Iconix licenses its brands directly to leading retailers and wholesalers for use in connection with a broad array of product categories, including apparel, footwear, accessories, beauty and fragrance and home accessories. Iconix’s brands are also distributed across a wide range of distribution channels, from the mass to the luxury markets, and target a broad range of customers. Iconix seeks to maximize the value of its brands by developing innovative marketing campaigns to increase brand awareness and by providing trend direction to its licensees to enhance product appeal.

 

As a brand management company, Iconix is able to transfer the typical operating company responsibilities of product design, manufacture and distribution to its carefully selected licensing partners, allowing Iconix to focus on the core elements of brand management: licensing, marketing and trend direction. Iconix retains in its license agreements significant oversight rights with respect to product design, packaging, channel selection and presentation to ensure consistency with its overall brand direction. Iconix’s business model is further differentiated from that of the traditional operating company by Iconix’s efficient approach to acquisitions and the multi-faceted diversification of its licensing portfolio: by brand, by product category and by distribution channel. As a result, Iconix believes its business model allows it to grow faster and generate higher net income with lower operating risk than a traditional operating business model. Key aspects of Iconix’s business model include its:

 

·	applicability to a broad pool of consumer brands;

 

·	focused acquisition platform, which enables Iconix to quickly evaluate and easily integrate acquired brands;

 

·	scalability, which allows Iconix to leverage its existing infrastructure to add and manage new licenses;

 

·	predictable base of guaranteed minimum royalties; and

 

·	low overhead, absence of inventory risk and minimal capital spending requirements.

 

-6-

---

 

Until recently, Iconix was a fully operating manufacturer and marketer of footwear and jeanswear products under two proprietary trademarks: Candie’s, which it has owned since 1993, and Bongo, which it has owned since 1998. In 2003, Iconix began to implement a shift in its business model designed to transform it from an operating company to a licensing entity, and away from the direct design, manufacturing, marketing and sale of merchandise, in order to maximize its core competencies in marketing and maximizing brand equity. In May 2003, Iconix licensed its Bongo footwear business to Kenneth Cole Productions, Inc. and its Candie’s footwear business to Steve Madden Ltd.  In June 2004, Iconix licensed its Bongo jeanswear business, which had been previously operated by a third party manager through its subsidiary, Unzipped, Inc.  In 2004, Iconix eliminated all of its legacy retail and manufacturing operations relating to footwear, reducing its workforce from over 200 to under 40. By the end of 2004, Iconix also entered into its first multi-category retail license agreement, pursuant to which it granted Kohl’s Department Stores, Inc. the exclusive right to design, manufacture, sell and distribute a broad range of products under the Candie's trademark in return for average guaranteed minimum royalties to Iconix of between $8.0 and $9.0 million per contract year. Iconix also began to grow its consumer brand portfolio and, between October 2004 and April 2006, it acquired four additional brands: Badgley Mischka, Joe Boxer, Rampage and Mudd.

 

Iconix was incorporated under the laws of the state of Delaware in 1978. In July 2005, it changed its name from Candies, Inc. to Iconix Brand Group, Inc. Candie’s®, Bongo®, Joe Boxer®, Rampage® and Mudd® are registered trademarks of Iconix’s wholly-owned subsidiary, IP Holdings, and Badgley Mischka® is the registered trademark of its wholly-owned subsidiary, Badgley Mischka Licensing LLC. Each of the other trademarks, trade names or service marks of other companies appearing in this prospectus or information incorporated by reference into this prospectus is the property of its respective owner.

 

Iconix’s net revenues for the year ended December 31, 2005 and for the six months ended June 30, 2006 were approximately $30.2 million and $31.7 million, respectively. Iconix’s net income for the year ended December 31, 2005 and for the six months ended June 30, 2006 were approximately $15.9 million and $15.7 million, respectively.

 

In April 2006, Iconix acquired certain assets of Mudd (USA) LLC related to the Mudd brand, trademarks, intellectual property and related names worldwide, excluding China, Hong Kong, Macau and Taiwan. In consideration for these assets, Iconix paid the seller $45 million in cash and 3,269,231 shares of Iconix common stock. In connection with this acquisition, Iconix also entered into a license agreement with Mudd (USA) giving it the exclusive right to use the Mudd trademark in connection with the design, manufacture, sale and distribution of women’s and children’s jeanswear and related products in the United States, in return for which Mudd (USA) has guaranteed Iconix a designated minimum amount of revenues with respect to the royalties due to Iconix under its license and those due to Iconix from all other licenses assumed by Iconix in the acquisition, for a period of two years. This guarantee, as well as certain other of Mudd (USA)’s obligations to Iconix, are secured by its pledge of a portion of the cash and shares issued by Iconix as consideration in the acquisition.

 

Moss Acquisition Corp.

 

1450 Broadway

New York, New York 10018

(212) 730-0030

Moss Acquisition Corp., a Delaware corporation, is a wholly-owned subsidiary of Iconix and was formed for the purpose of effecting the merger. Moss Acquisition Corp. has engaged in no business activities to date and it has no material assets or liabilities of any kind, other than those incident to its formation and those incurred in connection with the merger.

Structure of the Merger (page 39)

 

Iconix, Moss Acquisition Corp., Mossimo and Mr. Giannulli entered into the merger agreement, which is the legal document governing the merger, as of March 31, 2006. Under the terms of the merger agreement, Mossimo will merge with and into Moss Acquisition Corp., with Moss Acquisition Corp. continuing as the surviving corporation. As part of the merger, Moss Acquisition Corp.’s name will be changed to Mossimo, Inc. and it will remain a wholly-owned subsidiary of Iconix. Upon completion of the merger, all Mossimo common stock will be cancelled and will no longer be publicly traded.

 

The merger agreement is attached to this proxy statement/prospectus as Appendix A . We strongly urge Mossimo stockholders to carefully read the merger agreement in its entirety. For a summary of the merger agreement, please see the section entitled “The Merger Agreement” beginning on page 56.

 

The merger agreement requires Mossimo Giannulli, holder of approximately 64.2% of Mossimo’s outstanding common stock, to vote, subject to certain exceptions, all of his shares of Mossimo common stock in favor of the adoption and approval of the merger agreement. Therefore, the vote of Mr. Giannulli’s shares alone will be sufficient to approve the merger agreement and the transactions contemplated thereby.

 

-7-

---

 

What You Will Receive (page 39)

 

Common Stock

 

If Iconix and Mossimo complete the merger, Mossimo stockholders will be entitled to receive at closing 0.2271139 of a share of Iconix common stock and $4.25 in cash, subject to adjustment if Mossimo has a cash balance of less than $17,000,000 (as adjusted pursuant to the merger agreement) for each share of Mossimo common stock outstanding prior to the effective time. Each Mossimo stockholder will also receive a non-transferable contingent share right to receive additional shares of Iconix common stock after the first anniversary of the merger if Iconix common stock does not close at or above $18.71 per share for at least twenty (20) consecutive trading days during the year following the merger. In the last five years, Iconix common stock has not closed at or above $18.71. In the event that this share price is met and either maintained or exceeded for the requisite period, no contingent shares would be issuable. In the event that this price is not met and maintained or exceeded for the requisite period, the number of contingent shares to be issued will be based on the greater of the average closing price of Iconix common stock for the three business days prior to closing or the highest twenty consecutive trading day average closing price during the first year after closing. 

 

For example, if you hold 10,000 shares of Mossimo stock, you will receive 2,271 shares (10,000 * 0.2271139) of Iconix common stock and approximately $42,500 (10,000 * $4.25) in cash. If Iconix common stock does not close at or above $18.71 per share for at least twenty consecutive trading days during the year following the merger, each former holder of Mossimo common stock will be entitled to receive a number of additional shares of Iconix common stock determined by the following formula:

 

(a) The number of shares of Iconix common stock issued to the Mossimo stockholder as initial merger consideration multiplied by:

(b) The difference between (i) $18.71 and (ii) the greater of either:

(A) the highest twenty consecutive trading day average closing sale price during the year following the merger; or

(B) the average closing sale price of Iconix common stock as reported on the NASDAQ Global Market for three (3) business days prior to the closing;

(c) The product of which is then divided by the higher of either (A) or (B).

Thus, if a former Mossimo stockholder is issued 2,271 shares of Iconix common stock following the completion of the merger, and the average highest closing sales price of Iconix common stock over at least one twenty consecutive trading day period in the year following the merger is $14.01 (the twenty consecutive trading day average closing sale price during the period between July 3, 2006 and July 31, 2006), and if that price is higher than the average closing sale price of Iconix common stock as reported on the NASDAQ Global Market for the three (3) business days prior to the closing, then the former Mossimo stockholder would receive:

 

(2,271 shares * ($18.71 - $14.01)) / $14.01= 761 additional shares of Iconix common stock.

 

If additional Iconix shares become payable pursuant to the non-transferable contingent share rights, former Mossimo stockholders will receive such additional shares within twenty business days after the one-year anniversary of the closing of the merger (subject to certain exceptions in case of calculation disputes). Iconix will not reserve or place any shares of its common stock in escrow for issuance pursuant to the non-transferable contingent share rights.

 

Stockholders of record who properly perfect appraisal rights and meet all other statutory requirements will not receive this consideration, and will instead receive the fair value of their shares as determined by a Delaware court.

 

The number of shares of Iconix common stock you will receive in the merger will equal the number, rounded down to the nearest whole number, determined by multiplying 0.2271139 by the number of shares of Mossimo common stock you own. You will not receive any fractional shares of Iconix common stock. Instead, you will receive cash from Iconix, without interest, for any fractional share of Iconix common stock that you might otherwise have been entitled to receive.

 

Based upon 16,002,775 shares of Mossimo common stock outstanding as of August 9, 2006 (including 114,568 shares owned by Iconix which shall be cancelled in accordance with the merger agreement), Iconix would issue 3,608,433 shares of common stock. Therefore immediately after completion of the merger, assuming no change in the number of shares of Mossimo common stock outstanding, former Mossimo stockholders would hold approximately 3,608,433 or 8.4% of Iconix’s then-outstanding common stock (excluding any shares which may be issued under the non-transferable contingent share rights).

 

Both the stock number and the cash amount can be adjusted under the merger agreement. If the average closing price of Iconix common stock for the three trading days prior to the closing of the merger equals or exceeds $22.80 per share, as determined by a formula set forth in Section 1.3(d) of the merger agreement, the aggregate value of the initial merger consideration (i.e. $4.25 per share in cash plus the market value of the Iconix shares issued at the closing of the merger) will be capped at approximately $150,000,000. Iconix may also elect to pay any portion of the initial merger consideration in excess of an aggregate of $135,147,866 in either cash or Iconix common stock. In no event may the cash portion of the merger consideration exceed 60% of the total merger consideration and in no event may the number of shares of Iconix common stock issued to Mossimo stockholders exceed 19.99% of the total issued and outstanding shares of Iconix common stock at the date of the closing of the merger or at the end of the twelve month period following the merger.

 

-8-

---

 

Mossimo Stock Options

 

Prior to the closing of the merger, each option to purchase shares of Mossimo common stock that was granted under the Mossimo stock option plans, whether vested or unvested, will be cancelled and converted into the right to receive a cash payment equal to (1) the difference between (a) $7.50 (subject to adjustment in certain circumstances) and (b) the applicable per share exercise price, multiplied by (2) the number of shares of Mossimo common stock subject to such stock option. The cash payment will be subject to any applicable withholding of taxes. If additional shares of Iconix common stock become payable to former Mossimo stockholders after the first anniversary of the merger pursuant to the non-transferable contingent share right, Iconix will pay each option holder who is entitled to payment in respect of cancelled options an amount equal to the cash value of the additional merger consideration each option holder would have received had he or she exercised the options prior to the merger (less any applicable tax withholding). Assuming no change in the number of outstanding Mossimo options, Iconix will pay aggregate consideration of approximately $1.0 million to Mossimo optionholders.

 

Recommendation of Mossimo’s Board of Directors (page 40)

 

After careful consideration, Mossimo’s board of directors determined that the merger agreement and the merger are advisable and in the best interests of Mossimo and its stockholders, and therefore has unanimously approved the merger agreement. Mossimo’s board of directors unanimously recommends that stockholders vote “FOR” the adoption and approval of the merger agreement at the special meeting.

 

Mossimo’s Reasons for the Merger (page 49)

 

Mossimo’s board of directors based its decision to approve the merger agreement on many factors, including:

 

·	the premium offered for the shares of Mossimo common stock over the trading price of Mossimo’s common stock prior to the date of the merger agreement;

 

·	its belief that the merger was more favorable to stockholders than any other alternative reasonably available to Mossimo and its stockholders;

 

·	the likelihood that Iconix would be able to complete the transaction and successfully integrate the Mossimo brand;

 

·	its belief that the market price of the Mossimo common stock was not likely to rise to the level of the purchase price in the near future if Mossimo continued as an independent company;

 

·	its belief that for Mossimo stockholders, Iconix shares would be a more liquid investment than Mossimo shares in light of the substantially larger trading volume in Iconix shares;

 

·	the financial and other terms and conditions of the merger agreement;

 

·	the fact that the transaction will be immediately accretive to the earnings of Iconix and the stockholders of Mossimo will be able to participate in the potential benefits of the transaction through their ownership of the Iconix common stock;

 

·	the market position of the combined company;

 

·	the likelihood, in the board’s view, that Iconix’s shares better diversify brand risk because Iconix owns multiple brands; and

 

·	the requirement that Mossimo obtain a fairness opinion from a financial advisor stating that the merger consideration is fair, from a financial point of view, to the holders of Mossimo’s common stock.

 

For a summary of the factors considered by Mossimo’s board of directors in making its decision to approve the merger agreement and recommend its adoption and approval to the Mossimo stockholders, please see the section entitled “The Merger - Background and Reasons for the Merger” and “The Merger - Position of Mossimo as to the Fairness of the Merger; Recommendation of Mossimo’s Board of Directors” beginning on page 40 of this proxy statement/prospectus.

 

Fairness Opinion of FMV Opinions, Inc. to Mossimo’s Board of Directors (page 42)

 

In connection with the merger, FMV Opinions, Inc., which we refer to throughout this proxy statement/prospectus as FMV Opinions, delivered a written opinion to Mossimo’s board of directors that as of March 31, 2006, the merger consideration to be received by the holders of Mossimo common stock in the merger is fair, from a financial point of view, to such holders. The full text of FMV Opinions’ written opinion, dated as of March 31, 2006, is attached to this proxy statement/prospectus as Appendix E . We encourage you to read this opinion carefully and in its entirety for a description of the procedures followed, assumptions made, matters considered and limitations on the review undertaken. FMV Opinions’ opinion was provided to Mossimo’s board of directors in connection with its evaluation of the merger consideration, does not address any other aspect of the merger and does not constitute a recommendation to any stockholder as to how such stockholder should vote or act with respect to any matters relating to the merger.

 

-9-

---

 

The Mossimo Special Meeting (page 31)

 

Date, Time and Place

 

The special meeting will be held on ________________, 2006, at _____, California time, at __________.

 

Matters to be Considered

 

You will be asked to consider and vote upon a proposal to approve and adopt the merger agreement and the transactions contemplated thereby, and any other business properly brought before the meeting.

 

Record Date

 

If you own shares of Mossimo common stock at the close of business on August 15, 2006, which we refer to throughout this proxy statement/prospectus as the record date, you will be entitled to vote at the special meeting. You have one vote for each share of Mossimo common stock owned on the record date. As of August 9, 2006, there were 200 stockholders of record of Mossimo common stock, as shown on the records of Mossimo’s transfer agent.

 

Required Vote

 

Adoption and approval of the merger agreement requires the affirmative vote of the holders of a majority of the shares of Mossimo common stock outstanding on the record date. The merger agreement requires Mr. Giannulli, who owns approximately 64.2% of the outstanding Mossimo common stock, to vote all of his shares in favor of adoption and approval of the merger agreement unless the Mossimo board of directors withdraws its recommendation that stockholders vote in favor of the merger agreement and terminates after the merger agreement. Therefore, unless the merger agreement terminates in accordance with its terms, the merger agreement will be adopted and approved at the special meeting without the vote of any stockholder other than Mr. Giannulli.

 

Interests of Mossimo’s Directors and Executive Officers (page 33)

 

In considering Mossimo’s board of directors’ recommendation, Mossimo stockholders should be aware that some officers, directors, and other key employees of Mossimo have interests in the merger that may be different from, or in addition to, those of Mossimo stockholders generally, including the following:

 

·

In connection with the merger agreement, Iconix, Mr. Giannulli and Mr. Lewis agreed to enter into a registration rights agreement, which will become effective at, and subject to, the closing of the merger, pursuant to which Iconix will register with the SEC all shares of Iconix common stock to be received in the merger by Mr. Giannulli. Pursuant to an oral understanding, Mr. Giannulli may transfer a portion of the Iconix shares he receives in the merger to Mr. Lewis after the closing date. Mossimo filed the form of registration rights agreement with the SEC on April 6, 2006 as Exhibit I to the Agreement and Plan of Merger filed as Exhibit 2.1 to Mossimo’s Current Report on Form 8-K. Mossimo’s directors are not aware of any other Mossimo stockholders who will require a registration statement to resell Iconix stock received in the merger.

 

·

As consideration for investment banking services provided in connection with Mossimo’s negotiation and evaluation of the proposed merger and any alternative proposals, Mossimo has agreed to pay B. Riley & Co., Inc. an investment banking fee of $600,000. This fee is not contingent on the completion of any transaction. Bryant R. Riley, a director of Mossimo, is chairman and chief executive officer of B. Riley & Co., Inc. Because of this fee arrangement, Mr. Riley may be deemed to have an indirect material interest in the merger.  This fee was accrued and expensed by Mossimo in the financial statements for the three months ended March 31, 2006.

 

·

In connection with the merger, Mr. Giannulli will enter into an agreement for creative director services with Mossimo and Iconix, which will become effective at, and subject to, the closing of the merger, pursuant to which Mr. Giannulli will perform design and marketing services at the request of Iconix and will perform all services required of him pursuant to Mossimo’s license agreement with Target. Iconix will compensate Mr. Giannulli for his creative director duties with 20% of all royalties earned during the term of his creative director services agreement from sales, licensing or other economic exploitation of merchandise, licenses, trademarks or other tangible or intangible property related to the Mossimo brand, other than any royalties or other payments with respect to (i) the Target agreement, and (ii) any Mossimo goods sold by or through Target and its affiliates. The creative director services agreement provides for Mr. Giannulli to receive a non-refundable draw, at the annual rate of $250,000 per year, against the royalty payments.

 

·	Pursuant to an oral understanding between Mr. Giannulli and Mr. Lewis, Mr. Giannulli intends to transfer to Mr. Lewis the after-tax equivalent of one half of the consideration Mr. Giannulli receives in the merger.

 

·

Iconix has required that, as a condition to Iconix’s obligation to close the merger, Mr. Giannulli acquire from Mossimo all of the capital stock of Mossimo’s subsidiary Modern Amusement, Inc. prior to the effective date of the merger. Approximately $2,000,000 of the consideration to be paid will be payable by a promissory note which will be issued by Mr. Giannulli and payable in four equal installments over two years. The remaining consideration, in an amount to be agreed upon, will be paid in cash. Prior to this divestiture of Modern Amusement, the cash remaining on Modern Amusement’s balance sheet will be distributed to Mossimo, Inc. Iconix required that Mossimo divest Modern Amusement as a condition to the closing of the merger because Modern Amusement, which designs, manufactures and distributes clothing, does not fit into Iconix’s business model or strategy, which focuses exclusively on licensing.  Based on the unaudited pro forma condensed combined financial statements appearing elsewhere in this proxy statement/prospectus, the total selling price is expected to be $3.3 million.

 

-10-

---

 

·	Certain Mossimo directors and executive officers will be entitled to receive cash payments in respect of unexercised stock options in connection with the proposed merger.

 

·	Mossimo’s executive officers and directors will be entitled to continued indemnification and certain liability insurance coverage under the merger agreement.

 

·

In connection with the merger, Iconix has entered into a consulting agreement with Mossimo’s Chief Financial Officer, Vicken Festekjian, under which Mr. Festekjian will provide consulting services to Iconix with respect to the transitioning of the current Mossimo business from the closing of the merger to December 31, 2006. Under this agreement, Iconix will pay Mr. Festekjian a monthly consulting fee of $13,750, plus an aggregate fee of $150,000.

 

·

All unvested stock options held by Mossimo directors Bryant R. Riley, Robert M. Martini and William Halford, and Chief Financial Officer, Vicken Festekjian, will be deemed to be vested and cancelled, as will all other previously vested stock options, in return for a cash payment equal to the number of option shares multiplied by the difference between $7.50 per share and the exercise price of such options. Pursuant to this cancellation and payment, Mossimo expects that Mr. Riley will receive approximately $62,100, Mr. Martini will receive approximately $59,355, Mr. Halford will receive approximately $219,855 and Mr. Festekjian will receive approximately $81,000.

 

Transaction-Related Costs and Financing Arrangements (pages 35 and 56)

 

Upon completion of the merger, Iconix will pay aggregate cash consideration of approximately $67.5 million to Mossimo stockholders and will issue 3,608,433 shares of Iconix common stock (excluding any shares which may be issued under the non-transferable contingent share rights), assuming no change in the number of shares of Mossimo common stock outstanding. In addition, assuming no change in the number of outstanding Mossimo options, Iconix will pay aggregate consideration of approximately $1.0 million to Mossimo optionholders.  For information regarding estimated fees and expenses of the merger, see "The Mossimo Special Meeting - Estimated Fees and Expenses of the Merger" on page 35.

 

In connection with the merger agreement, Iconix has obtained a commitment letter from Merrill Lynch Mortgage Capital Inc. pursuant to which Merrill Lynch Mortgage Capital Inc. has agreed to provide, subject to the satisfaction of certain conditions, a two-year loan in an aggregate amount of up to $90 million to fund, together with the existing cash resources of Iconix and Mossimo, the cash portion of the merger consideration to be paid at closing, to provide for a $33 million payment to Cherokee, Inc. pursuant to an agreement described elsewhere herein and to pay costs and expenses relating to the merger. For a more complete description of the merger financing, see “The Mossimo Special Meeting - Merger Financing” beginning on page 33.

 

Conditions to Closing (page 58)

 

The completion of the merger is subject to the satisfaction or waiver of a number of conditions, including the following:

 

·	adoption and approval of the merger agreement by holders of a majority of the outstanding shares of Mossimo common stock;

 

·	the approval for listing on the NASDAQ Global Market of the Iconix common stock to be issued to Mossimo stockholders in the merger;

 

·	the registration statement covering the shares of Iconix common stock to be issued to Mossimo stockholders in the merger shall have been declared effective by the SEC;

 

·	no more than 5% of the outstanding Mossimo common stock shall remain eligible for appraisal in accordance with the Delaware General Corporation Law, which we refer to throughout this proxy statement/prospectus as the DGCL;

 

·

expiration or termination of the applicable waiting period (or any extension) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, or the HSR Act, and related rules (The Federal Trade Commission and the Department of Justice granted early termination of the waiting period effective May 30, 2006);

 

-11-

---

 

·	the receipt of all other governmental agency consents, approvals, permits, orders and authorizations required to complete the merger (other than those which if not made or obtained would not render the merger illegal);

 

·

Mossimo’s receipt of a fairness opinion of FMV Opinions, Inc., or another financial advisor, that the merger consideration is fair from a financial point of view to the holders of Mossimo common stock. (This condition was satisfied on April 26, 2006 when FMV Opinions delivered to Mossimo’s board of directors the fairness opinion attached as Appendix E to this proxy statement/prospectus.) ;

 

·	the absence of any legal prohibitions against the merger;

 

·	the cancellation of all Mossimo stock options;

 

·	the receipt by Iconix and Mossimo of opinions of counsel, including an opinion that the merger will constitute a reorganization within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended, which we refer to throughout this proxy statement/prospectus as the Code;

 

·	the sale of all of the outstanding capital stock of Modern Amusement, Inc. to Mr. Giannulli, which sale has been required by Iconix;

 

·	Mossimo’s and Iconix’s representations and warranties being true and correct as of the date of the completion of the merger, except where the failure of such representations and warranties to be true and correct would not result in a material adverse effect;

 

·

no claim, suit or other proceeding seeking to restrain, prohibit or change the terms of or obtain damages or other relief in connection with the merger agreement or the proposed merger shall have been instituted or threatened which, in the reasonable judgment of Iconix, makes it inadvisable to proceed with the merger;

 

·	the receipt of all necessary approvals and consents;

 

·	the performance, in all material respects, by each of Mossimo and Iconix of their respective agreements, covenants and obligations under the merger agreement and related agreements; and

 

·	the absence of a material adverse effect on Mossimo or Iconix.

 

Termination of the Merger Agreement (page 61)

 

Iconix and Mossimo may mutually agree in writing to terminate the merger agreement at any time before completing the merger, even after Mossimo’s stockholders have adopted the merger agreement. The merger agreement may also be terminated at any time prior to the effective time of the merger under specified circumstances, including:

 

·	by either Mossimo and Mr. Giannulli or Iconix and Moss Acquisition Corp., if the merger is not completed by October 30, 2006, unless the failure is the result of a willful and material breach of the merger agreement by the party seeking to terminate the merger agreement;

 

·	by either Mossimo and Mr. Giannulli or Iconix and Moss Acquisition Corp., if any court of competent jurisdiction or governmental entity issues a final order prohibiting or preventing the merger;

 

·	by either Mossimo or Iconix, if Mossimo stockholders fail to adopt the merger agreement at the special meeting;

 

·

by Iconix and Moss Acquisition Corp., if either Mossimo or Mr. Giannulli has breached or failed to perform any of their representations, warranties or covenants, the breach would give rise to a failure of a condition to the terminating party’s obligation to close, the breaching party is not using reasonable efforts to cure the breach and the breach cannot be or has not been cured within 5 business days of written notice of such breach to the non-breaching party;

 

·

by Mossimo and Mr. Giannulli if Iconix and Moss Acquisition Corp. has materially breached or failed to perform any of their representations, warranties or covenants, the breach would give rise to a failure of a condition to the terminating party’s obligation to close, the breaching party is not using reasonable efforts to cure the breach and the breach cannot be or has not been cured within 5 business days of written notice of such breach to the non-breaching party;

 

·

by Iconix, if Mossimo’s board of directors has (1) failed to recommend the merger agreement, (2) withdrawn or adversely modified its recommendation of the merger agreement or the merger to Mossimo’s stockholders, or (3) recommended to Mossimo stockholders any acquisition proposal (as described in the section entitled “The Merger Agreement — Non-Solicitation” beginning on page 60 of this proxy statement/prospectus) other than the merger; or

 

-12-

---

 

·	by Mossimo or Iconix, if Mossimo has determined to accept a superior proposal (as described in the section entitled “The Merger Agreement — Non Solicitation” beginning on page 60 of this proxy statement/prospectus).

 

Termination Fees to Be Paid by Mossimo (page 62)

 

Mossimo has agreed to pay Iconix a termination fee of $5,000,000 if the merger agreement is terminated as the result of:

 

·	Mossimo’s board of directors (1) withdrawing or adversely modifying its recommendation to Mossimo stockholders to adopt the merger agreement and the merger, or (2) recommending or approving an acquisition proposal other than the merger;

 

·	Mossimo’s board of directors accepting a superior proposal; or

 

·	Mossimo’s failure to obtain stockholder approval of the merger agreement.

 

Mossimo Prohibited From Soliciting Other Offers (page 60)

 

Except in connection with the exercise by Mossimo’s board of directors of its fiduciary duties, the merger agreement provides that Mossimo will not, and will not permit its directors, officers, employees or other representatives and agents to:

 

·	solicit, initiate, negotiate, or encourage the submission of any acquisition proposal;

 

·	enter into any agreement with respect to any takeover proposal; or

 

·	participate in any discussions or negotiations regarding, or furnish to any person any information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any takeover proposal.

 

However, if Mossimo receives an unsolicited, bona fide written acquisition proposal by a third party prior to the special meeting, and Mossimo’s board of directors determines in good faith, after receiving advice of its outside legal counsel and financial advisor, that the proposal is a superior proposal or could reasonably be expected to lead to one, Mossimo is permitted to furnish information about its business to the third party pursuant to a confidentiality agreement, engage in discussions and negotiations with the third party, and take and disclose to Mossimo’s stockholders a position with respect to the third party’s unsolicited acquisition proposal.

 

On April 17, 2006 Mossimo received an unsolicited proposal from Cherokee, Inc. to acquire all of the outstanding shares of Mossimo. While unable to conclude that Cherokee’s proposal was, in fact, a superior proposal within the meaning of the merger agreement, Mossimo’s board agreed to provide information to Cherokee pursuant to a confidentiality agreement as restrictive as the one executed between Mossimo and Iconix. Cherokee and Iconix subsequently entered into a termination and settlement agreement pursuant to which Cherokee agreed to withdraw its proposal (and not to reinstate or make any new offer) to acquire all or substantially all of the capital stock of Mossimo and to terminate, simultaneously with the merger, the finders agreement between Mossimo and Cherokee in respect of Mossimo’s royalties from Target in exchange for Iconix’s agreement to pay Cherokee $33,000,000 upon the closing of the merger.

 

Regulatory Matters Relating to the Merger (page 55)

 

Under the HSR Act, the merger cannot be completed until the expiration or early termination of a waiting period that follows the filing of notification forms by both parties to the merger with the Federal Trade Commission and the Antitrust Division of the Department of Justice. Iconix and Mossimo submitted their respective notification and report forms on May 12, 2006. The Federal Trade Commission and the Department of Justice granted early termination of the waiting period under the HSR Act effective May 30, 2006. However, the Federal Trade Commission or the Department of Justice, as well as a regulatory agency or government, state or private person, may challenge the merger at any time before or after its completion. Iconix and Mossimo must also comply with applicable federal and state securities laws and the rules and regulations of NASDAQ in connection with the merger.

 

Material U.S. Federal Income Tax Consequences (page 52)

 

In order for the merger to occur, both Iconix and Mossimo must receive an opinion from Blank Rome LLP, tax counsel to Iconix, to the effect that, based upon current law and certain other customary assumptions, the merger will qualify as a tax-deferred “reorganization” within the meaning of Section 368(a) of the Code. If the merger qualifies as a tax-deferred “reorganization,” for U.S. federal income tax purposes, (1) Mossimo generally will not recognize gain or loss as a result of the merger and (2) Mossimo stockholders generally will not recognize gain or loss as a result of the merger except to the extent of (a) cash received by them in exchange for their shares of Mossimo common stock and (b) cash received by them in lieu of fractional Iconix common shares. You may, however, recognize a taxable gain or loss when you dispose of any Iconix common shares that you receive as a result of the merger. The tax opinion of Blank Rome LLP is subject to certain assumptions and qualifications, including the accuracy of certain factual representations made by Iconix and Mossimo. This tax opinion is not binding on the Internal Revenue Service, which we refer to throughout this proxy statement/prospectus as the IRS, or any court and does not preclude the IRS or any court from adopting a contrary position. The federal income tax consequences described in this proxy statement/prospectus may not apply to all Mossimo stockholders. Your tax consequences will depend on your own situation. Tax matters are very complex and vary according to facts and circumstances applicable to each individual, and you are urged to consult your tax advisor so as to fully understand the tax consequences of the merger to you.

 

-13-

---

 

Resale of Iconix Common Stock Issued in the Merger (page 109)

 

The Iconix common stock to be issued in the merger will be registered under the Securities Act. These shares will be freely transferable under the Securities Act, except for Iconix common stock issued to any person who is deemed to be an “affiliate” (as that term is used in Rule 145 under the Securities Act) of Mossimo. Persons who may be deemed to be affiliates include individuals or entities that control, are controlled by, or are under common control with Mossimo and include Mossimo directors and certain officers as well as its principal stockholders. Affiliates may not sell their Iconix common stock acquired in the merger except pursuant to:

 

·	an effective registration statement under the Securities Act covering the resale of those shares;

 

·	an exemption under paragraph (d) of Rule 145 under the Securities Act;

 

·	an exemption under Rule 144 under the Securities Act; or

 

·	any other applicable exemption under the Securities Act.

 

The registration statement of which this proxy statement/prospectus forms a part will cover the resale of the number of shares of Iconix common stock acquired by Mr. Giannulli, and the Iconix shares, if any, which Mr. Giannulli may transfer to Mr. Lewis after the closing of the merger. See “Selling Stockholders.” This registration for resale will permit Mr. Giannulli and, if applicable, Mr. Lewis, to sell the shares of Iconix common stock they receive except to the extent that such shares are subject to certain lock-up arrangements.

 

Pursuant to the registration rights agreement, Iconix will also provide Mr. Giannulli, if applicable, and Mr. Lewis with certain demand and piggyback registration rights with respect to the shares of Iconix common stock to be received by Mr. Giannulli in the merger, some of which Mr. Giannulli may transfer to Mr. Lewis. Mossimo is not aware of any other Mossimo stockholders who will require registration of Iconix shares to be received in the merger other than pursuant to this proxy statement/prospectus.

 

Appraisal Rights for Mossimo Stockholders (page 50)

 

Under the DGCL, if you do not vote for adoption of the merger agreement and you comply with other statutory requirements, you may elect to receive, in cash, the judicially-determined fair value of your shares of stock instead of the merger consideration provided for under the merger agreement.

 

Merely voting against the merger will not protect your right to an appraisal, which requires completion of all the steps provided under the DGCL. The requirements under the DGCL for exercising appraisal rights are described in the section entitled “The Merger — Appraisal Rights” beginning on page 50 of this proxy statement/prospectus. Section 262 of the DGCL, which governs appraisal rights, is reproduced and attached as Appendix C to this proxy statement/prospectus.

 

If you vote for the adoption and approval of the merger agreement, you will waive your right to seek appraisal of your shares of Mossimo common stock under the DGCL.

 

Comparative Market Prices and Dividends (pages 20, 21 and 68)

 

Iconix common stock is quoted on the NASDAQ Global Market and Mossimo common stock is quoted on the NASDAQ Capital Market. Iconix common stock is quoted under the trading symbol “ICON” and Mossimo common stock is quoted under the trading symbol “MOSS.” On March 31, 2006, the last trading day before the public announcement of the signing of the merger agreement, Iconix common stock closed at $14.55 per share and Mossimo common stock closed at $5.47 per share.

 

On August 9, 2006, the most recent practicable date prior to the date of this proxy statement/prospectus, Iconix common stock closed at $13.53 per share and Mossimo common stock closed at $7.41 per share.

 

Surrender of Mossimo Stock Certificates (page 32)

 

Following the effective time of the merger, a letter of transmittal will be mailed by the exchange/paying agent to all holders of Mossimo common stock and will include detailed instructions for surrendering stock certificates. Certificates should not be surrendered until the letter of transmittal is received, completed and executed by the stockholder.

 

-14-

---

 

Accounting Treatment

 

In accordance with accounting principles generally accepted in the United States, Iconix will account for the merger using the purchase method of accounting for business combinations.

 

Comparison of Rights of Iconix Stockholders and Mossimo Stockholders (page 88)

 

 

Statement of operations data

		Six Months ended June 30,						Year ended December 31,			11 months ended December 31,			Year ended January 31,
		2006			2005			2005			2004(1)			2004(2)			2003			2002
		(unaudited)
Net sales		$	-		$	-		$	-		$	58,427		$	123,160		$	149,543		$	94,500
Licensing and commission revenue			31,678			8,587			30,156			10,553			8,217			7,240			6,902
Net revenues			31,678			8,587			30,156			68,980			131,377			156,783			101,402
Cost of goods sold (net of recoveries pursuant to an agreement of $1,626 in the year ended 1/31/04 and $7,566 in the 11 months ended 12/31/04)			-			-			-			48,229			102,604			116,306			70,468
Gross profit			31,678			8,587			30,156			20,751			28,773			40,477			30,934
Selling, general and administrative expenses (net of recovery pursuant to an agreement of $438 in the year ended 12/31/05 and $296 in the three months ended 3/31/05)			11,501			5,308			13,880			17,720			32,308			37,872			30,688
Special charges			1,268			707			1,466			295			4,629			3,566			1,791
Operating income (loss)			18,909			2,572			14,810			2,736			(8,164	)		(961	)		(1,545	)
Other expenses:
Interest expense - net of interest income of $36 in the year ended 1/31/04, $24 in the 11 months ended 12/31/04, $295 in the year ended 12/31/05, $35 in the six months ended 6/30/05 and $352 in the six months ended 6/30/06			4,826			1,054			3,977			2,495			3,118			3,373			1,175
Equity(income) in joint venture			-			-			-			-			-			(250	)		(500	)
Gain on sale of securities			-			-			(75	)		-			-			-			-
Income (loss) before income taxes			14,083			1,518			10,908			241			(11,282	)		(4,084	)		(2,220	)
Provision (benefit) for income taxes			(1,619	)		(1,780	)		(5,035	)		-			58			(139	)		62
Net income (loss)			15,702			3,298			15,943			241			(11,340	)		(3,945	)		(2,282	)
Earnings (loss) per share:
Basic		$	0.42		$	0.12		$	0.51		$	0.01		$	(0.45	)	$	(0.17	)	$	(0.12	)
Diluted		$	0.37		$	0.11		$	0.46		$	0.01		$	(0.45	)	$	(0.17	)	$	(0.12	)
Weighted average number of common shares outstanding:
Basic			37,208			28,516			31,284			26,851			25,181			23,681			19,647
Diluted			42,872			30,115			34,773			28,706			25,181			23,681			19,647

Balance Sheet Data (in thousands)

 

		At June 30,			At December 31,						At January 31,
		2006			2005			2004			2004			2003			2002
		(unaudited)
Total assets		$	335,141		$	217,244		$	60,160		$	74,845		$	103,437		$	50,670
Borrowings(3)		$	143,707		$	99,119		$	24,953		$	29,716		$	37,356		$	1,863
Stockholders’ equity		$	172,623		$	100,896		$	24,258		$	18,868		$	29,011		$	23,519

 

-17-

---

 

---

1

Included in operating income for the 11 months ended December 31, 2004 was a $7.6 million favorable adjustment for a shortfall payment of $6.9 million related to the management agreement between Unzipped and Sweet Sportswear LLC, with $685,000 recorded as a reserve pending the outcome of Iconix’s litigation relating to Unzipped.

 

2	Included in operating income for the fiscal year ended January 31, 2004 was a $1.6 favorable million adjustment for a shortfall payment of $74,000 related to the management agreement between Iconix’s wholly-owned subsidiary, Unzipped, and Sweet Sportswear LLC.

 

3	Included in borrowings were all third party debt and all borrowing from related parties and excludes payables from trading activities.

 

-18-

---

SELECTED SUMMARY HISTORICAL FINANCIAL DATA OF MOSSIMO

 

The selected data of Mossimo presented below under the captions “Selected Statements of Income,” “Balance Sheets” and “Statements of Cash Flow” for, and as the end of, each of the years in the four-year period ended December 31, 2005, are derived from the consolidated financial statements of Mossimo, Inc. and Subsidiary, which financial statements have been audited by KPMG LLP, an independent registered public accounting firm. The consolidated financial statements as of December 31, 2005 and 2004 and for each of the years in the three-year period ended December 31, 2005, and report thereon, are included elsewhere in this proxy statement/prospectus. The selected data presented below for the six-month periods ended June 30, 2006 and 2005, and as of June 30, 2006, are derived from the unaudited consolidated financial statements of Mossimo, Inc. and Subsidiary included elsewhere in this prospectus. The financial statements for the fiscal year ended December 31, 2001 were audited by Arthur Andersen LLP, then an independent public accounting firm. The data below is only a summary and should be read in conjunction with Mossimo’s financial statements and accompanying notes for each of those periods, as well as management’s discussion and analysis of financial condition and results of operations, all of which can be found in Mossimo’s publicly available documents filed with the SEC.

 

(in thousands except per share data)

		Six Months Ended						Fiscal Year Ended
		June 30, 2006 (1)			June 30, 2005			December 31, 2005 (1)			December 31, 2004			December 31, 2003			December 31, 2002			December 31, 2001
Statements of income		(unaudited)
Revenues		$	15,236		$	17,709		$	31,028		$	20,535		$	19,895		$	19,881		$	16,666
Net earnings (loss)		$	1,540		$	4,049		$	4,701		$	2,701		$	4,566		$	13,665		$	9,036
Earnings (loss) per common share
Basic			0.10			0.26			0.30			0.17			0.29			0.89			0.59
Diluted			0.10			0.26			0.30			0.17			0.29			0.87			0.59
Dividends			—			—			—			—			—			—			—
Balance sheets
Total assets		$	35,299		$	32,234		$	32,234		$	23,473		$	26,413		$	20,536		$	9,294
Borrowings			—			—			—			—			—		$	1,066		$	4,817
Stockholders’ equity		$	29,507		$	26,873		$	26,873		$	21,713		$	19,012		$	13,480		$	(678	)
Statements of cash flows
Cash provided (used) by:
Operating activities		$	1,019		$	5,392		$	10,031		$	1,730		$	2,367		$	8,349		$	4,666
Investing activities		$	(68	)	$	4,697		$	4,619		$	(1,121	)	$	(5,129	)	$	(487	)	$	(104	)
Financing activities		$	881		$	(304	)	$	105		$	(413	)	$	(317	)	$	(3,258	)	$	(1,430	)

 

---

(1)

For the year ended December 31, 2005, Mossimo incurred $2.18 million in costs for legal and financial advisory expenses for Mossimo and its special committee associated with the review and consideration of the transaction proposed by Mr. Giannulli to acquire all of Mossimo's remaining outstanding shares, and pending litigation relating to the proposal. In addition, for the six months ended June 30, 2006, Mossimo incurred $1.1 million related to costs for legal and financial advisory expenses primarily related to the merger of Iconix and Mossimo.

 

-19-

---

COMPARATIVE HISTORICAL AND PRO FORMA PER SHARE DATA

 

The following table sets forth for Iconix common stock and Mossimo common stock certain historical, pro forma combined and pro forma combined equivalent per share financial information. The pro forma combined and pro forma combined equivalent income and dividend per share data reflects the merger as if it had been effective on January 1, 2005. The pro forma combined and pro forma combined equivalent net book value per share reflects the merger as if it had been effective on June 30, 2006.

 

The pro forma data in the tables assume that the merger is accounted for using the purchase method of accounting and represents a current estimate based on available information of the combined company’s results of operations for the periods presented. As of the date of this document, Iconix has not completed the detailed valuation studies necessary to arrive at the required estimates of the fair market value of the Mossimo assets to be acquired and liabilities to be assumed and the related allocations of purchase price, nor has it identified all the adjustments necessary to conform Mossimo’s data to Iconix’s accounting policies. Actual results may differ from this pro forma combined data once Iconix has determined the final purchase price for Mossimo and has completed the detailed valuation studies necessary to finalize the required purchase price allocations and identified any necessary conforming accounting policy changes for Mossimo. Accordingly, the final purchase price allocation, which will be determined subsequent to the closing of the merger, and its effect on results of operations, may differ materially from the pro forma combined amounts included in this section, although these amounts represent Iconix management’s best estimates as of the date of this document.

 

 

		Iconix Common Stock			Mossimo Common Stock			Equivalent Value of Mossimo Common Stock
March 31, 2006		$	14.55		$	5.47		$	3.30
August 9, 2006		$	13.53		$	7.41		$	3.07

The above table shows only historical comparisons. These comparisons may not provide meaningful information to Mossimo stockholders in determining whether to approve the merger agreement and the merger. Mossimo stockholders are urged to obtain current market quotations for Iconix and Mossimo common stock and to review carefully the other information contained in this proxy statement/prospectus or incorporated by reference into this proxy statement/prospectus, when considering whether to approve the merger agreement and the merger. See “Where You Can Find More Information” beginning on page 111 of this proxy statement/prospectus.

-21-

---

RISK FACTORS

 

In addition to the other information included in this proxy statement/prospectus, including the matters addressed in “ Cautionary Statement Concerning Forward-Looking Statements, ” you should carefully consider the following risks before deciding whether to vote for approval and adoption of the merger agreement and the transactions contemplated by the merger agreement, including the merger. In addition, you should read and consider the risks associated with each of the businesses of Iconix and Mossimo because these risks will also affect the combined company. These risks can be found in the respective Iconix and Mossimo Annual Reports on Form 10-K for the year ended December 31, 2005, and the Iconix and Mossimo Quarterly Reports on Form 10-Q for the six months ended June 30, 2006 filed with the SEC. The Iconix reports filed with the SEC are incorporated by reference into this proxy statement/prospectus.

 

Risks Relating to the Merger

 

Iconix and Mossimo may be required to comply with material restrictions or conditions in order to obtain the regulatory approvals to complete the merger and any delays in obtaining regulatory approvals will delay and may possibly prevent the merger.

 

The merger is subject to review by the Antitrust Division of the U.S. Department of Justice and the U.S. Federal Trade Commission under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which we refer to as the HSR Act. Under the HSR Act, Iconix and Mossimo were required to make pre-merger notification filings and to await the expiration or early termination of the statutory waiting period prior to completing the merger. The Federal Trade Commission and the Department of Justice granted early termination of the waiting period under the HSR Act effective May 30, 2006. However, the Federal Trade Commission or the Department of Justice, as well as a regulatory agency or government, state or private person, may challenge the merger at any time before or after its completion.

 

The price of Iconix common stock at the time of completion of the merger might be lower than the price when the merger was publicly announced, which would decrease the value of the stock portion of the merger consideration to be received by certain Mossimo stockholders in the merger. Further, at the time of the Mossimo special meeting, Mossimo stockholders will not know the exact value of Iconix common stock that will be issued in the merger.

 

The price of Iconix common stock might decrease from its $14.55 market price on March 31, 2006, the last full trading day prior to the public announcement of the proposed merger, and be lower on the date of the Mossimo special meeting. If the price of Iconix common stock declines prior to the completion of the merger, the value of the stock portion of the merger consideration to be received by certain Mossimo stockholders in the merger will decrease. See “ The Merger Agreement — Merger Consideration” on page 56. The merger agreement does not provide Mossimo with a price-based termination right. Therefore, Mossimo cannot terminate the merger agreement solely because of a decrease in the trading price of Iconix common stock. However, Mossimo stockholders will be eligible to receive additional Iconix common stock if Iconix common stock does not close at or above $18.71 for at least twenty consecutive trading days during the year following the merger.

 

Iconix and Mossimo are working to complete the merger as quickly as possible. Because the date when the merger is completed may be later than the date of the special meeting, Iconix and Mossimo stockholders will not know the exact value of the Iconix common stock that will be issued in the merger at the time they vote on the merger proposals. As a result, if the market price of Iconix common stock at the completion of the merger is lower than the market price on the date of the Mossimo special meeting, the value of the Iconix common stock received by Mossimo stockholders that receive the stock portion of the merger consideration in the merger will be less than the value of such Iconix common stock on the date of the Mossimo special meeting, although they would be eligible to receive additional Iconix common stock on the terms described above. Moreover, during such period, events, conditions or circumstances could arise that could have a material impact or effect on Iconix, Mossimo or the apparel and brand management industries.

 

During the twelve-month period ending on August 9, 2006, the most recent practicable date prior to the date of this proxy statement/prospectus, the closing price of Iconix common stock varied from a low of $6.34 to a high of $17.90, and ended that period at $13.53. We encourage you to obtain current market quotations for Iconix common stock before you vote your shares.

 

Iconix will have more indebtedness after the merger, which could adversely affect its cash flows and business.

 

In order to complete the merger, Iconix anticipates arranging for and funding up to $90 million of new indebtedness. Proceeds from the indebtedness will be used to fund, together with existing cash resources of Iconix and Mossimo, the cash portion of the consideration paid to Mossimo stockholders at closing, to provide for a $33 million payment to Cherokee, Inc. pursuant to an agreement described elsewhere herein and to pay costs and expenses related to the merger. See “The Mossimo Special Meeting - Merger Financing.” Iconix’s debt outstanding as of June 30, 2006 was approximately $143.7 million. Giving effect to the merger, Iconix’s pro forma total debt outstanding as of June 30, 2006 would have been approximately $233.7 million. As a result of this increase in debt, demands on Iconix cash resources will increase after the completion of the merger. The increased levels of debt could, among other things:

·	require Iconix to dedicate a substantial portion of its cash flow from operations to make payments on its debt, thereby reducing funds available for working capital, capital expenditures, dividends, acquisitions and other purposes;

 

·	increase Iconix’s vulnerability to, and limit flexibility in planning for, adverse economic and industry conditions;

 

-22-

---

 

·	affect Iconix’s credit rating;

 

·	limit the ability of Iconix to obtain additional financing to fund future working capital, capital expenditures, additional acquisitions and other general corporate requirements;

 

·	create competitive disadvantages compared to other companies with less indebtedness; and

 

·	limit Iconix’s ability to apply proceeds from an offering or asset sale to purposes other than the repayment of debt.

 

If Iconix is unable to finance the merger through cash flow and borrowings, the completion of the merger will be jeopardized.

 

Iconix intends to finance the merger primarily with additional indebtedness. See “The Mossimo Special Meeting — Merger Financing”. If Iconix is unable to finance the merger, Iconix will have to adopt one or more financing alternatives, which may adversely affect Iconix’s business, financial condition and results of operations. Additionally, these sources of funds may not be sufficient to finance the merger, and other financing may not be available on acceptable terms, in a timely manner or at all. If Iconix is unable to finance the merger through cash flow and/or secure such additional financing, the completion of the merger will be jeopardized and Iconix will be in breach of the merger agreement.

 

Iconix may not realize all of the anticipated benefits of the merger.

 

Iconix’s ability to realize the anticipated benefits of the merger will depend, in part, on the ability of Iconix to integrate the Mossimo brand with the businesses of Iconix. The combination of two independent companies is a complex, costly and time-consuming process. This process may disrupt the business of either or both of the companies, and may not result in the full benefits expected by Iconix and Mossimo.

 

We cannot assure you that the combination of Mossimo with Iconix will result in the realization of the full benefits anticipated from the merger.

 

If the proposed merger is not completed, Iconix and Mossimo will have incurred substantial costs that may adversely affect Iconix’s and Mossimo’s financial results and operations as well as the market price of Iconix and Mossimo common stock.

 

Iconix and Mossimo have incurred and will continue to incur substantial costs in connection with the proposed merger. These costs are primarily associated with the fees of attorneys, accountants and financial advisors. In addition, Iconix and Mossimo have each diverted significant management resources in an effort to complete the merger, and are each subject to restrictions contained in the merger agreement on the conduct of its business. If the merger is not completed, each of Iconix and Mossimo will have incurred significant costs, including the diversion of management resources, for which it will have received little or no benefit. Also, if the merger is not completed under certain circumstances specified in the merger agreement, Mossimo is required to pay Iconix a break-up fee of $5,000,000. See “ The Merger Agreement — Termination Fee” on page 62.

 

In addition, if the merger is not completed, Iconix and Mossimo may experience negative reactions from the financial markets and Iconix and Mossimo’s collaborative partners, customers and employees. Each of these factors may adversely affect the trading price of Iconix and/or Mossimo common stock and Iconix’s and/or Mossimo’s financial results and operations.

 

Directors and officers of Mossimo may have interests in the merger that may be different from, or in addition to, the interests of Mossimo stockholders.

 

When considering the Mossimo board of directors’ recommendation that Mossimo stockholders vote in favor of the approval and adoption of the merger agreement, Mossimo stockholders should be aware that some directors and executive officers of Mossimo may have interests in the merger that may be different from, or in addition to, the interests of Mossimo stockholders. These interests include the sale of Mossimo’s subsidiary, Modern Amusement, to Mr. Giannulli prior to the merger, certain registration rights in respect of the Iconix common stock to be received by Mr. Giannulli and, if applicable, Mr. Lewis, the agreement for creative director services to be entered into among Mossimo, Mr. Giannulli and Iconix, the consulting agreement between Iconix and Mr. Festekjian, and the rights of directors and officers to receive continued indemnification and insurance coverage by Iconix for acts or omissions occurring prior to the merger.

 

As a result of these interests, these directors and officers could be more likely to vote to approve and adopt the merger agreement and the transactions contemplated by the merger agreement, including the merger, than if they did not hold these interests, and may have reasons for doing so that are not the same as the interests of other Mossimo stockholders. For a full description of the interests of directors and executive officers of Mossimo in the merger, see “ The Mossimo Special Meeting — Interests of Certain Persons in the Merger; Potential Conflicts of Interest” on page 33.

 

The merger agreement limits Mossimo’s ability to pursue alternatives to the merger.

 

The merger agreement contains provisions that limit Mossimo’s ability to initiate, solicit or discuss competing third party proposals to acquire all or a significant part of Mossimo. Under the merger agreement Mossimo may not (1) initiate, negotiate, solicit or knowingly encourage or facilitate (including by way of furnishing non-public information) any proposals with respect to a takeover proposal, (2) enter into any agreement with respect to any takeover proposal, or (3) furnish, or provide access to, any information or data to, or have or participate in any discussions or negotiations with, any person relating to a takeover proposal; provided, however, that (a) Mossimo may respond to an unsolicited bona fide written takeover proposal from a third party if Mossimo’s board of directors determines in good faith that the takeover proposal constitutes or is reasonably likely to constitute a superior proposal, and (b) Mossimo’s board of directors may withdraw or modify its recommendation of the merger if it determines that a takeover proposal is a superior proposal or if it determines in good faith, after consultation with its outside legal counsel and financial advisors, that failure to withdraw or modify its recommendation of the merger may be reasonably expected to violate its fiduciary duties under applicable law.

-23-

---

In addition, Iconix is entitled to receive a termination fee of $5,000,000 if Mossimo terminates the merger agreement because Mossimo’s board of directors has (1) withdrawn or adversely modified its recommendation of the merger, (2) recommended another acquisition proposal other than the merger, or (3) determined to accept a superior proposal.

 

Iconix required Mossimo to agree to these provisions as a condition to Iconix’s willingness to enter into the merger agreement. These provisions, however, might discourage a third party interested in acquiring all of or a significant part of Mossimo from considering or proposing that acquisition, even if that party were prepared to pay consideration with a higher per-share market price than offered by Iconix. Furthermore, a prospective competing acquiror might propose to pay a lower per share price to Mossimo stockholders than it would otherwise have proposed to pay because of Mossimo’s obligation, in connection with termination of the merger agreement, to pay Iconix the termination fee.

 

In addition, Mossimo Giannulli, the Chairman, Co-Chief Executive Officer and 64.2% stockholder of Mossimo, agreed under the merger agreement to vote all of his Mossimo shares in favor of the merger agreement and merger, as long as the Mossimo board of directors does not withdraw its recommendation or terminate the merger agreement. These provisions could discourage a potential competing acquiror from proposing a transaction with Mossimo, even if it were prepared to pay consideration with a higher per-share market price than Iconix proposes to pay in the merger.

 

Mossimo will be subject to business uncertainties and contractual restrictions while the merger is pending.

 

Uncertainty about the effect of the merger on employees, customers and suppliers may have an adverse effect on Mossimo and consequently on Iconix. These uncertainties may impair Mossimo’s ability to retain and motivate key personnel until the merger is completed, and could cause customers, suppliers and others that deal with Mossimo to defer transactions with, or other decisions affecting, Mossimo, or to seek to change existing business relationships with Mossimo. If key employees depart because of uncertainty about their future roles and the potential complexities of integration, the combined company’s business following the merger could be harmed. In addition, the merger agreement restricts Mossimo from taking specified actions outside of the ordinary course of business without the consent of Iconix until the merger occurs. These restrictions may prevent Mossimo from pursuing attractive business opportunities that may arise prior to the completion of the merger. See the section entitled “ The Merger Agreement — Non-Solicitation” beginning on page 60.

 

The opinion obtained by Mossimo from its financial advisor will not reflect changes in circumstances between the signing of the merger agreement and the completion of the merger.

 

Mossimo has not obtained an updated fairness opinion as of the date of this proxy statement/prospectus from its financial advisor. Changes in the operations and prospects of Iconix or Mossimo, general market and economic conditions and other factors which may be beyond the control of Iconix and Mossimo, on which the financial advisor’s opinion was based, may significantly alter the value of Iconix or Mossimo or the prices of shares of Iconix common stock or Mossimo common stock by the time the merger is completed. The opinion does not speak as of the time the merger will be completed or as of any date other than the date of such opinion, March 31, 2006. Because Mossimo currently does not anticipate asking its financial advisor to update its opinion, the opinion will not address the fairness of the merger consideration, from a financial point of view, at the time the merger is completed. For a description of the opinion that Mossimo received from its financial advisor, please refer to “ The Merger — Opinion of Financial Advisor to Mossimo” beginning on page 42. For a description of the other factors considered by Mossimo’s board of directors in determining to approve the merger, please refer to “The Merger — Background and Reasons for the Merger” beginning on page 36 and “The Merger — Position of Mossimo as to the Purposes, Alternatives, Reasons and Effects of the Merger” beginning on page 49.

 

The proposed merger is subject to pending litigation.

 

The proposed merger is subject to pending litigation in California and Delaware, which could delay the merger, cause additional expense, or cause a court to issue an injunction that might restrain, prohibit or change the terms of the merger, award damages or grant other relief in connection with the merger. On April 12, 2005, six purported class action lawsuits were filed in the Court of Chancery of the State of Delaware in connection with Mr. Giannulli’s going-private offer for all of the stock of Mossimo he did not own. Each of the complaints asserted that the Mossimo directors breached their fiduciary duties to Mossimo stockholders, and sought an injunction preventing the acquisition. On October 10, 2005, after the classes were consolidated as In re Mossimo, Inc. Shareholders Litigation, Mossimo and other defendants entered into a Memorandum of Understanding (“MOU”) to settle the litigation. The settlement was conditioned, along other things, on the consummation of the acquisition by Mr. Giannulli. On November 14, 2005, Mr. Giannulli announced that he had withdrawn the proposal to acquire the outstanding shares of Mossimo that he did not already own. The provisions of the MOU have thus become moot. After announcement of the proposed merger, on May 12, 2006, plaintiffs filed a first consolidated amended complaint alleging that Mossimo and its board of directors breached their fiduciary duties and engaged in self-dealing in approving the merger agreement. Under the merger agreement, Mossimo and Mr. Giannulli are required to use their best efforts to have the action withdrawn and terminated with prejudice or settle it to the reasonable satisfaction of Iconix. On April 12, 2006, a purported shareholder class action lawsuit was filed in the Superior Court of the State of California for the County of Los Angeles entitled Laborers’ Local #23 1 Pension Fund vs. Mossimo, Inc. et al. The lawsuit alleges that Mossimo and its board of directors breached their fiduciary duties and engaged in self-dealing in approving the merger agreement and seeks, among other relief, to enjoin the proposed merger of Mossimo with Iconix, the rescission of any agreements entered into in connection with the proposed merger, and costs, including attorney’s fees. Mossimo and its directors believe the allegations in the complaints filed in Delaware and California are without merit and intend to defend the claims vigorously, but are not able to predict or estimate the outcome of these cases or their effect on Mossimo’s financial statements. For a full description of the litigation matters, see “Information about Mossimo-Legal Proceedings” on page 68.

-24-

---

 

Risks Relating to Iconix’s Operations After Completion of the Merger

 

Iconix operates in a changing environment that involves numerous known and unknown risks and uncertainties that could materially adversely affect its operations. The following highlights some of the factors that have affected and in the future could affect Iconix’s operations:

 

Iconix’s business model is new and its operating history as a licensing and brand management company is limited, which makes it difficult to evaluate Iconix’s current business and future prospects.

 

Iconix began its transition in 2003 from a procurer of manufacturing, seller and marketer of footwear and jeanswear products to a licensing company that owns, licenses and manages its own consumer brands, and only completed its elimination of its retail and manufacturing operations in mid-2004. Iconix has, therefore, operated solely as a licensing and brand management company for one year, making it difficult to evaluate its ability to successfully manage and grow its business long term. Furthermore, Iconix’s business model depends on a number of factors for its continued success, including the continued market acceptance of Iconix’s brands, the production and sale of quality products by Iconix’s licensees and the expansion of Iconix’s brand portfolio through the growth of Iconix’s existing brands and the acquisition of additional brands. While Iconix has sought to diversify its brand portfolio and thereby protect it from the underperformance of any one brand or market segment, and Iconix believes that it will be able to grow organically through the development of its existing brands, through the acquisition of new brands, and by expanding internationally, Iconix cannot guarantee the continued success of its business.

 

The failure of Iconix’s licensees to adequately produce, market and sell products bearing Iconix’s brand names in their license categories could result in a decline in Iconix’s results of operations.

 

Iconix is no longer directly engaged in the sale of branded products and, consequently, its revenues are now almost entirely dependent on royalty payments made to Iconix under its licensing agreements. Although the licensing agreements for Iconix’s brands usually require the advance payment to Iconix of a portion of the licensing fees and provide for guaranteed minimum royalty payments to Iconix, the failure by its licensees to satisfy their obligations under these agreements or their inability to operate successfully, or at all, could result in the early termination of such agreements, thereby eliminating some or all of that stream of revenue. Moreover, during the terms of the license agreements, Iconix is substantially dependent upon the abilities of its licensees to maintain the quality and marketability of products bearing Iconix’s trademarks, as their failure to do so could materially tarnish Iconix’s brands, thereby harming Iconix’s future growth and prospects. In addition, the failure of Iconix’s licensees to meet their production, manufacturing and distribution requirements could cause a decline in their sales and potentially decrease the amount of royalty payments (over and above the guaranteed minimums) due to Iconix and thus also decrease Iconix’s potential revenues. Moreover, the failure by licensees party to several of Iconix’s material agreements to meet their financial obligations to Iconix could jeopardize Iconix’s ability to meet the debt service coverage ratio required in connection with the asset-backed notes issued by Iconix’s subsidiary, IP Holdings LLC, which would give the note holders the right to foreclose on the Candie’s, Bongo, Joe Boxer, Rampage and Mudd trademarks and other related intellectual property assets securing such debt.

 

Iconix’s business is dependent on continued market acceptance of Iconix’s Candie’s, Bongo, Badgley Mischka, Joe Boxer, Rampage and Mudd trademarks, as well as the Mossimo trademark after the completion of the merger, and the products of Iconix’s licensees bearing these brands.

 

Although, as indicated above, Iconix’s licensees guarantee minimum net sales and minimum royalties to Iconix, a failure of Iconix’s trademarks or of products utilizing Iconix’s trademarks to achieve or maintain acceptance in the marketplace could cause a reduction of Iconix’s licensing revenues, thereby negatively affecting Iconix’s cash flow. Such failure could also cause the devaluation of Iconix’s trademarks, which are Iconix’s primary assets, making it more difficult for Iconix to renew its current licenses upon their expiration or enter into new or additional licenses for Iconix’s trademarks. If such devaluation of Iconix’s trademarks were to occur, a material impairment in the carrying value of one or more of Iconix’s trademarks may occur and be charged as an expense to operating results. Continued market acceptance for Iconix’s trademarks and Iconix’s licensees’ products, as well as market acceptance of any future products bearing Iconix’s trademarks, is subject to a high degree of uncertainty, made more so by constantly changing consumer tastes and preferences. Maintaining market acceptance for Iconix’s licensees’ products and creating market acceptance for new products and categories of products bearing Iconix’s marks will require Iconix’s continuing and substantial marketing and product development efforts, which may from time to time also include Iconix’s expenditure of significant additional funds, to keep pace with changing consumer demands. Additional marketing efforts and expenditures may not, however, result in either increased market acceptance of, or additional licenses for, Iconix’s trademarks or increased market acceptance, or sales, of Iconix’s licensees’ products. Furthermore, while Iconix believes that it currently maintains sufficient control over the products its licensees produce under its brand names through the provision of design direction and its right to preview and approve all of such products as well as their presentation and packaging, Iconix does not actually design or manufacture its licensed products and therefore has more limited control over such products’ quality and design than a traditional product manufacturer might have.

-25-

---

Iconix has a material amount of goodwill and other intangible assets, including Iconix’s trademarks, recorded on its balance sheet. If, as a result of changes in market conditions and declines in the estimated fair value of these assets, Iconix is in the future required to write down a portion of this goodwill and other intangible assets, such write down would, as applicable, either decrease Iconix’s profitability or increase Iconix’s net loss.

 

As of June 30, 2006, after giving effect to Iconix’s April 2006 acquisition of Mudd, goodwill represented approximately $42.5 million, or 13% of Iconix’s total assets, and other intangible assets represented approximately $229.8 million, or 69% of Iconix’s total assets. Goodwill is the amount by which the costs of an acquisition accounted for using the purchase method exceed the fair value of the net assets acquired. Iconix adopted Statement of Financial Accounting Standard No. 142, or SFAS No. 142, entitled “Goodwill and Other Intangible Assets” in its entirety, on February 1, 2002. Under SFAS No. 142, goodwill and indefinite-lived intangible assets, including some of Iconix’s trademarks, are no longer amortized, but instead are subject to impairment evaluation based on the related estimated fair values, with such testing to be done at least annually. While, to date, no impairment write-downs have been necessary, any write-down of goodwill or intangible assets resulting from future periodic evaluations would decrease Iconix’s net income and those decreases could be material.

 

A substantial portion of Iconix’s licensing revenues are concentrated with two retailers such that the loss of either such licensee could decrease Iconix’s revenue and impair Iconix’s cash flows.

 

Iconix’s two largest licenses, together represented 42% of Iconix’s 2005 total revenue, are each a single retailer license. Iconix’s license agreement with Kohl’s Department Stores, Inc. currently gives Kohl’s the exclusive U.S. license with respect to the Candie’s trademark for a wide variety of categories of products, including women’s junior and children’s apparel, accessories (except shoes and handbags, which are currently licensed to it on a non-exclusive basis but which will become part of its exclusive license in January 2007, and prescription eyewear), beauty and personal care products, home accessories and electronics for an initial term expiring in January 2011. Iconix’s license agreement with Kmart Corporation, a subsidiary of Sears Holding Corp., grants Kmart (which came out of bankruptcy in May 2003) the exclusive U.S. license with respect to the Joe Boxer trademark for men’s, women’s and children’s apparel, apparel-related accessories, footwear and home products for an initial term expiring in December 2007. Because Iconix is dependent on these two licensees for a significant portion of Iconix’s licensing revenue, if either Kohl’s or Kmart were to have financial difficulties affecting its ability to make guaranteed payments or ceases to operate before the expiration of its license agreement, or if either licensee decides not to renew or extend its existing agreement with Iconix, Iconix’s revenue and cash flows could be reduced substantially. Moreover, since 2004, Kmart has not approached the sales levels of Joe Boxer products needed to trigger royalty payments in excess of its guaranteed minimums, and, if the Kmart license is not renewed or extended beyond 2007, Iconix could suffer disruption in Iconix’s revenue stream for the Joe Boxer brand until Iconix enters into one or more replacement licenses. Upon completion of the merger, Iconix will acquire all of Mossimo’s assets (other than the stock of Modern Amusement), including the Mossimo license with Target; assuming, on a pro forma basis, that the merger was completed on January 1, 2005, revenue under the Kmart, Kohl’s and Target licenses together would have represented approximately 51% of Iconix’s total pro forma revenue for 2005.

 

If Iconix is unable to identify and successfully acquire additional trademarks, Iconix’s growth will be limited, and, even if additional trademarks are acquired, Iconix may not realize planned benefits due to integration or licensing difficulties.

 

A key component of Iconix’s growth strategy is the acquisition of additional trademarks in product categories and/or channels that are complementary to, and provide Iconix further diversification with respect to, Iconix’s existing trademark portfolio. If competitors pursue Iconix’s licensing model, acquisitions could become more expensive and suitable acquisition candidates more difficult to find. In addition, even if Iconix successfully acquires additional trademarks, Iconix may not be able to achieve or maintain profitability levels that justify Iconix’s investment in, or realize planned benefits with respect to, those additional brands. Although Iconix seeks to temper Iconix’s acquisition risks by following acquisition guidelines relating to the existing strength of the brand, its diversification benefits to Iconix, its potential licensing scale and the projected rate of return on Iconix’s investment, acquisitions, whether they be of additional intellectual property assets or of the companies that own them, entail numerous risks, any of which could detrimentally affect Iconix’s results of operations and/or the value of Iconix’s equity. These risks include, among others:

 

·	unanticipated costs;

 

·	negative effects on reported results of operations from acquisition-related charges and amortization of acquired intangibles;

 

·	diversion of management’s attention from other business concerns;

 

-26-

---

 

·	the challenges of maintaining focus on, and continuing to execute, core strategies and business plans as Iconix’s brand and license portfolio grows and becomes more diversified;

 

·	adverse effects on existing licensing relationships; and

 

·	risks of entering new licensing markets (whether it be with respect to new licensed product categories or new licensed product distribution channels) or markets in which Iconix has limited prior experience.

 

Iconix’s ability to grow through the acquisition of additional trademarks will also depend on the availability of capital to complete the necessary acquisition arrangements. Iconix intends to finance its brand acquisitions through some combination of Iconix’s available cash resources, bank financing, and the issuance of additional equity and/or debt securities. Acquiring additional trademarks could have a significant effect on Iconix’s financial position and could cause substantial fluctuations in Iconix’s quarterly and yearly operating results. Also, acquisitions could result in the recording of significant goodwill and intangible assets on Iconix’s financial statements, the amortization or impairment of which would reduce Iconix’s reported earnings in subsequent years.

 

Moreover, Iconix’s issuance of additional shares of common stock as equity consideration in future acquisitions could dilute Iconix’s common stock because it could reduce Iconix’s earnings per share, and any such dilution could reduce the market price of Iconix common stock unless and until Iconix were able to achieve revenue growth or cost savings and other business economies sufficient to offset the effect of such an issuance. As a result, there is no guarantee that Iconix’s stockholders will achieve greater returns as a result of any future acquisitions it completes.

 

Iconix may require additional capital to finance the acquisition of additional brands and to fund organic growth with respect to its existing brands, and its inability to raise such capital on beneficial terms or at all could harm its operations and restrict its growth.

 

Iconix may in the future require additional capital to help fund all or part of potential trademark acquisitions and/or the expansion of its licensing portfolio with respect to its existing trademarks. If, at the time required, Iconix has not generated sufficient cash from operations to finance those additional capital needs, Iconix may need to raise additional funds through private or public equity and/or debt financing. Iconix cannot assure you that, if and when needed, additional financing will be available to it on acceptable terms or at all. If additional capital is needed and is either unavailable or cost prohibitive, Iconix's growth may be limited as Iconix may need to change its business strategy to slow the rate of, or eliminate, its expansion plans. In addition, any additional financing Iconix undertakes could impose covenants upon Iconix that restrict its operating flexibility, and, if Iconix issues equity securities to raise capital, its existing stockholders may experience dilution or the new securities may have rights senior to those of its common stock.

 

Iconix’s existing and future debt obligations could impair Iconix’s liquidity and financial condition, and, in the event Iconix is unable to meet its debt obligations, Iconix could lose title to its trademarks.

 

As of June 30, 2006, Iconix had total consolidated debt of approximately $143.7 million and had a working capital deficit of $11.8 million. As of June 30, 2006, Iconix had approximately $133.3 million in principal outstanding on asset backed notes issued by Iconix’s subsidiary, IP Holdings LLC. The payment of the principal and interest on the notes is made from amounts received by IP Holdings under license agreements with the various licensees of its intellectual property assets, all of which assets also serve as security under the notes. In addition, in connection with Iconix’s acquisition, in April 2002, of the other half of Unzipped, which made it one of Iconix’s wholly-owned subsidiaries, Iconix issued to Sweet Sportswear LLC, referred to as Sweet, an $11.0 million principal amount senior subordinated note. The principal amount of the note, referred to as the Sweet note, had been reduced to approximately $2.9 million as of December 31, 2005 as a result of certain shortfalls in the net income of Unzipped previously guaranteed by Sweet in the agreement under which, until August 2004, it served as Unzipped’s manager. Iconix is involved in litigation with Sweet and certain of its affiliates with respect to these shortfalls and other matters pertaining to Unzipped.

 

Iconix may also incur additional debt in the future to fund a portion of Iconix’s capital requirements and to fund acquisitions. Iconix’s debt obligations:

 

·	could impair Iconix’s liquidity;

 

·	could make it more difficult for Iconix to satisfy its other obligations;

 

·	require Iconix to dedicate a substantial portion of its cash flow to payments on its debt obligations, which reduces the availability of Iconix’s cash flow to fund working capital, capital expenditures and other corporate requirements;

 

·	could impede Iconix from obtaining additional financing in the future for working capital, capital expenditures, acquisitions and general corporate purposes;

 

·	make Iconix more vulnerable in the event of a downturn in Iconix’s business prospects;

 

·	could limit Iconix’s flexibility to plan for, or react to, changes in its licensing markets; and

 

-27-

---

 

·	place Iconix at a competitive disadvantage when compared to Iconix’s competitors who have less debt.

 

While Iconix believes that by virtue of the guaranteed minimum royalty payments due to it under Iconix’s licenses, it will generate sufficient revenues from Iconix’s licensing operations to satisfy Iconix’s obligations for the foreseeable future, in the event that Iconix were to fail in the future to make any required payment under agreements governing Iconix’s indebtedness or fail to comply with the financial and operating covenants contained in those agreements, Iconix would be in default regarding that indebtedness. A debt default could significantly diminish the market value and marketability of Iconix’s common stock and could result in the acceleration of the payment obligations under all or a portion of Iconix’s consolidated indebtedness. In the case of IP Holdings’ asset-backed notes, it would also enable the holders of such notes to foreclose on the assets securing such notes, including the Candie’s, Bongo, Joe Boxer, Rampage and Mudd trademarks.

 

Iconix’s licensees are subject to risks and uncertainties of foreign manufacturing that could interrupt their operations or increase their operating costs, thereby impacting their ability to deliver goods to the market, reduce or delay their sales and decrease Iconix’s potential royalty revenues.

 

Substantially all of the products sold by Iconix’s licensees are manufactured overseas. There are substantial risks associated with foreign manufacturing, including changes in laws relating to quotas, and the payment of tariffs and duties, fluctuations in foreign currency exchange rates, shipping delays and international political, regulatory and economic developments, any of which could increase Iconix’s licensees’ operating costs, making their licensing arrangements with Iconix less attractive to them. Iconix’s licensees also import finished products and assume all risk of loss and damage with respect to these goods once they are shipped by their suppliers. If these goods are destroyed or damaged during shipment, the revenues of Iconix’s licensees, and thus Iconix’s royalty revenues, could be reduced as a result of the licensees’ inability to deliver or their delay in delivering finished products to their customers.

 

Because of the intense competition within Iconix’s licensees’ markets and the strength of some of the competitors, Iconix and Iconix’s licensees may not be able to continue to compete successfully.

 

Currently, most of Iconix’s trademark licenses are for products in the apparel, footwear and fashion industries. These industries are extremely competitive in the United States and Iconix’s licensees face intense and substantial competition with respect to their product lines bearing Iconix’s brands. In general, competitive factors include quality, price, style, name recognition and service. In addition, the presence in the marketplace of various fads and the limited availability of shelf space can affect competition for Iconix’s licensees’ products. Many of the competitors of Iconix’s licensees have greater financial, distribution, marketing and other resources than Iconix’s licensees and have achieved significant name recognition for their brand names. Iconix’s licensees may be unable to successfully compete in the markets for their products, and Iconix may not be able to continue to compete successfully with respect to Iconix’s licensing arrangements.

 

Iconix’s failure to protect its proprietary rights could compromise Iconix’s competitive position and decrease the value of Iconix’s brands.

 

Iconix, through IP Holdings, owns federal trademark registrations for its brands that are vital to the success and further growth of Iconix’s business and which Iconix believes have significant value. Iconix monitors on an ongoing basis unauthorized filings of Iconix’s trademarks or imitations thereof, and relies primarily upon a combination of trademark, copyright and contractual restrictions to protect Iconix’s intellectual property rights. Iconix believes that such measures afford only limited protection and, accordingly, there can be no assurance that the actions taken by it to establish and protect Iconix’s trademarks and other proprietary rights will prevent infringement of Iconix’s intellectual property rights by others, or prevent the loss of licensing revenue or other damages caused therefrom. Despite Iconix’s efforts to protect Iconix’s intellectual property rights, unauthorized parties may attempt to copy aspects of Iconix’s intellectual property, which could harm the reputation of Iconix’s brands, decrease their value and/or cause a decline in the sales of Iconix’s licensees and thus Iconix’s revenues. In the future, Iconix may be required to assert infringement claims against third parties, and there can be no assurance that one or more parties will not assert infringement claims against Iconix. Any resulting litigation could result in significant expense to Iconix, and divert the efforts of its management personnel, whether or not such litigation is determined in Iconix’s favor. In addition, to the extent that any of Iconix’s trademarks were ever deemed to violate the proprietary rights of others, Iconix would be prevented from using them, which could cause a termination of Iconix’s licensing arrangements, and thus its revenue stream with respect to those trademarks. Litigation could also result in a judgment or monetary damages being levied against Iconix.

 

Iconix is dependent upon its chief executive officer and president and other key executives. If Iconix loses the services of these individuals, Iconix may not be able to fully implement its business plan and future growth strategy, which would harm Iconix’s business and prospects.

 

Iconix’s successful transition from a manufacturer and marketer of footwear and jeanswear to a licensor of intellectual property is largely due to the efforts of Neil Cole, Iconix’s president, chief executive officer and chairman. Iconix’s continued success is largely dependent upon his continued efforts and those of the other key executives he has assembled. Although Iconix has entered into an employment agreement with Mr. Cole, expiring on December 31, 2007, as well as employment agreements with other key Iconix executives, there is no guarantee that Iconix will not lose their services. To the extent that any of their services become unavailable to Iconix, it will be required to hire other qualified executives, and Iconix may not be successful in finding or hiring adequate replacements. This could impede Iconix’s ability to fully implement Iconix’s business plan and future growth strategy, which would harm Iconix’s business and prospects. As Iconix grows, its success will also be dependent upon its ability to hire and retain additional qualified marketing and product development personnel to raise consumer awareness of the brand names Iconix acquires and help Iconix’s licensees maintain the freshness of their product lines and meet market trend expectations. Iconix may not be able to hire or retain such necessary personnel.

-28-

---

 

Iconix is currently in litigation that could negatively impact its financial results.

 

Iconix is currently a plaintiff and cross-defendant in litigation pending in the Superior Court of the State of California involving Iconix’s wholly-owned subsidiary, Unzipped. Iconix is also a defendant in litigation pending in federal district court in New York involving a former supplier. Even if Iconix prevails on all counts in these actions, the costs of these litigation matters have been and are expected to continue to be high. They are not only expensive but time consuming to pursue and defend, thereby diverting Iconix’s available cash and personnel resources from other business affairs. Moreover, if Iconix is ultimately required to pay the monetary damages sought by the cross-complainants in the California action and the plaintiff in the New York action, or if it is adjudicated that Iconix’s contractual rights concerning Unzipped are invalid, Iconix’s operating results and profitability would be reduced.

 

Until recently Iconix incurred losses on a consistent basis and it may not be able to sustain its profitability in the future.

 

Although in connection with Iconix’s new business model, Iconix has recorded net income of $15.9 million for fiscal 2005 (including a non-cash tax benefit of approximately $5 million) and $241,000 for the 11-month period ended December 31, 2004, and while Iconix’s transition to a licensing business has, among other things, resulted in Iconix’s operating income for fiscal 2005 not being comparable to that of prior years, prior to Iconix’s transition to a licensing company, Iconix consistently sustained net losses, including in the fiscal years ended January 31, 2004, 2003 and 2002, in which Iconix incurred net losses of $11.3 million, $3.9 million and $2.3 million, respectively. Iconix cannot guarantee that it will continue to be profitable in the future.

 

The market price of Iconix common stock has been, and may continue to be, volatile, which could reduce the market price of Iconix common stock.

 

The publicly traded shares of Iconix common stock have experienced, and are likely to continue to experience in the future, significant price and volume fluctuations. This market volatility could reduce the market price of Iconix common stock, regardless of Iconix’s operating performance. In addition, the trading price of Iconix common stock could change significantly over short periods of time in response to actual or anticipated variations in Iconix’s quarterly operating results, announcements by Iconix, its licensees or competitors, factors affecting the licensees’ markets generally or changes in national or regional economic conditions, making it more difficult for shares of Iconix common stock to be sold at a favorable price or at all. The market price of Iconix common stock could also be reduced by general market price declines or market volatility in the future or future declines or volatility in the prices of stocks for companies in the trademark licensing business or companies in the industries in which Iconix’s licensees compete.

 

Future sales of shares of Iconix common stock may cause the prevailing market price of Iconix shares to decrease.

 

Iconix has issued a substantial number of shares of common stock that are eligible for resale under Rule 144 of the Securities Act and that may become freely tradable. Iconix has also already registered a substantial number of shares of common stock that are issuable upon the exercise of options and warrants and has registered for resale a substantial number of restricted shares of common stock issued in connection with Iconix’s acquisitions. If the holders of Iconix options and warrants choose to exercise their purchase rights and sell the underlying shares of common stock in the public market, or if holders of currently restricted shares of Iconix common stock choose to sell such shares in the public market under Rule 144 or otherwise, the prevailing market price for Iconix common stock may decline. The merger will result in the issuance to unaffiliated former holders of Mossimo stock of approximately 1,275,332 additional shares of Iconix stock which could be sold if former Mossimo stockholders elect to do so (plus an additional 2,333,101 shares if Mr. Giannulli, and if applicable, Mr. Lewis sell shares covered by their registration rights agreement), excluding any shares which may be issued after the first anniversary of the merger pursuant to the non-transferable contingent share rights. Such sales could cause the market price of Iconix stock to decrease. The sale of shares issued upon the exercise of Iconix derivative securities could also further dilute the holdings of Iconix’s existing stockholders. In addition, future public sales of shares of Iconix common stock could impair Iconix’s ability to raise capital by offering equity securities.

 

Changes in effective tax rates or adverse outcomes resulting from examination of Iconix’s income or other tax returns could adversely affect Iconix’s results.

 

Iconix’s future effective tax rates could be adversely affected by changes in the valuation of Iconix’s deferred tax assets and liabilities, or by changes in tax laws or interpretations thereof. In addition, Iconix is subject to the continuous examination of its income tax returns by the Internal Revenue Service and other tax authorities. Iconix regularly assesses the likelihood of recovering the amount of deferred tax assets recorded on the balance sheet and the likelihood of adverse outcomes resulting from examinations by various taxing authorities in order to determine the adequacy of Iconix’s provision for income taxes. Iconix cannot guarantee that the outcomes from these evaluations and continuous examinations will not harm Iconix’s reported operating results and financial conditions.

-29-

---

 

Provisions in Iconix’s charter and in Iconix’s share purchase rights plan and Delaware law could make it more difficult for a third party to acquire Iconix, discourage a takeover and adversely affect Iconix’s existing stockholders.

 

Certain provisions of Iconix’s certificate of incorporation and Iconix’s share purchase rights plan, either alone or in combination with each other, could have the effect of making more difficult, delaying or deterring unsolicited attempts by others to obtain control of Iconix, even when these attempts may be in the best interests of Iconix’s stockholders. Iconix’s certificate of incorporation authorizes 75,000,000 shares of common stock to be issued. Based on Iconix’s outstanding capitalization at August 9, 2006, after assuming the exercise of all outstanding options and warrants, there are still a total of 23,425,000 shares of common stock available for issuance by Iconix’s board of directors without stockholder approval. Iconix’s certificate of incorporation also authorizes Iconix’s board of directors, without stockholder approval, to issue up to 5,000,000 shares of preferred stock, in one or more series, which could have voting and conversion rights that adversely affect or dilute the voting power of the holders of Iconix common stock, none of which has been issued to date. And, under Iconix’s share purchase rights plan, often referred to as a “poison pill,” if anyone acquires 15% or more of Iconix’s outstanding shares, all of Iconix’s stockholders (other than the acquirer) have the right to purchase additional shares of Iconix common stock for a fixed price. Iconix is also subject to the provisions of Section 203 of the DGCL, which could prevent it from engaging in business combination with a 15% or greater stockholder for a period of three years from the date the 15% stockholder acquired that status, unless appropriate board or stockholder approvals are obtained.

 

These provisions could deter unsolicited takeovers or delay or prevent changes in control or management of Iconix, including transactions in which stockholders might otherwise receive a premium for their shares over the then-current market price. These provisions may also limit the ability of stockholders to approve transactions that they may deem to be in their best interests.

 

Iconix does not anticipate paying cash dividends on its common stock. Holders of Iconix common stock may never obtain a return on their investment.

 

Holders of Iconix common stock should not rely on the stock to provide any dividend income, as Iconix has not paid any cash dividends on its common stock and does not plan to pay any in the foreseeable future. Instead, Iconix plans to retain any earnings to maintain and expand its existing licensing operations, further develop its trademarks and finance the acquisition of additional trademarks. Accordingly, holders of Iconix common stock must rely on sales of the stock after price appreciation, which may never occur, as the only way to realize any return on their investment in Iconix.

-30-

---

THE MOSSIMO SPECIAL MEETING

 

The following is a summary of the special meeting and the material terms and conditions of the merger. This description is qualified in its entirety by reference to the schedules and appendices attached to this proxy statement/prospectus, including the merger agreement itself, which is attached as Appendix A and is incorporated herein by this reference. Please read the merger agreement in its entirety, since it is the legal document that governs the merger. See also “ The Merger Agreement” beginning on page 56 of this proxy statement/prospectus.

 

Proposal to be Considered at the Special Meeting

 

At the special meeting, you will be asked to consider and vote upon a proposal to approve and adopt the merger agreement and the transactions contemplated thereby.

 

At the effective time of the merger, Mossimo will merge with and into Moss Acquisition Corp., a subsidiary of Iconix, with Moss Acquisition Corp. surviving. The separate corporate existence of Mossimo will cease and Moss Acquisition Corp. will survive as a wholly-owned subsidiary of Iconix and will change its name to Mossimo, Inc. In the merger each outstanding share of Mossimo will be entitled to receive initial merger consideration consisting of (a) 0.2271139 shares of Iconix common stock and (b) $4.25 in cash, subject to adjustment under certain conditions set forth in the merger agreement. Mossimo stockholders will also receive a non-transferable contingent share right entitling them to receive additional shares of Iconix common stock after the first anniversary of the merger if Iconix common stock does not close at or above $18.71 for at least twenty consecutive trading days during the year following the merger. Mossimo stockholders who properly assert and perfect their appraisal rights under the DGCL will not receive the foregoing merger consideration, and will instead have their shares purchased for “fair value” as determined under the DGCL. See “ The Merger - Appraisal Rights .”

 

Voting Rights; Quorum; Vote Required for Approval

 

Stockholders of record at the close of business on August 15, 2006, the record date for the special meeting, are entitled to notice of, and to vote at, the special meeting. On August 9, 2006, there were approximately 200 holders of record of Mossimo common stock and 16,002,775 shares of Mossimo common stock outstanding. Each share of Mossimo common stock entitles the holder to cast one vote at the special meeting.

 

Stockholders may vote either in person at the special meeting or by proxy. However, if your shares are held for you by a bank, broker or other so-called “nominee” holder:

 

·	you must instruct your broker to vote your shares by following the procedures specified by the nominee for voting; and

 

·	if you want to vote in person at the meeting, you must request a proxy in your name from your bank, broker or other nominee.

 

The presence in person or by proxy of the holders of a majority in voting power of the Mossimo common stock outstanding on the record date is necessary to constitute a quorum at the special meeting. If there is no quorum, business cannot be conducted at the special meeting and the proposal to adopt the merger agreement cannot be voted on. Abstentions and so-called “broker non-votes” will be counted for the purpose of establishing a quorum at the special meeting.

 

Under the DGCL and Mossimo’s certificate of incorporation, the merger agreement must be adopted by the holders of a majority of the issued and outstanding common stock. Abstentions and broker non-votes will count as votes against the adoption of the merger agreement.

 

Voting and Revocation of Proxies

 

All shares of Mossimo’s common stock represented by properly executed proxies received by Mossimo and not revoked prior to or at the special meeting will be voted in accordance with the instructions marked on the proxies. If no instructions are given, the proxy will be voted FOR the proposal to adopt the merger agreement and the transactions contemplated thereby.

 

A stockholder may revoke a proxy:

 

·	by delivering to Mossimo’s corporate secretary at 2016 Broadway Boulevard, Santa Monica, California 90404 a later-dated, signed proxy card or a written revocation of the previously returned proxy, on or before the business day prior to the special meeting;

 

·	by delivering to Mossimo a later-dated, signed proxy card or a written revocation prior to the vote at the special meeting;

 

·	by attending the special meeting and voting in person; or

 

-31-

---

 

·	if a stockholder has instructed a bank, broker or other nominee holder to vote his or her shares, by following the procedure to change a vote specified by the nominee holder.

 

Merely attending the special meeting in person will not revoke a proxy without further action. You must take one of the actions specified above to validly revoke a proxy. Revoking a proxy after the vote is taken at the special meeting will have no effect.

 

Mossimo’s board of directors is not currently aware of any business to be brought before the special meeting other than the proposal to adopt the merger agreement and the transactions contemplated thereby. However, if other matters are properly presented, the persons named as proxies in the card will have the discretionary authority to vote in accordance with their judgment on any such matters.

 

Voting by Mossimo Directors and Executive Officers

 

As of the record date, the directors and executive officers of Mossimo beneficially owned and were entitled to vote 10,442,489 shares of Mossimo common stock, which represents approximately 65.25% of Mossimo common stock outstanding on that date. The merger agreement requires Mr. Giannulli, the Chairman and Co-Chief Executive Officer of Mossimo, to vote all of his shares in favor of the merger. Mr. Giannulli owns approximately 10,272,822 shares, or 64.2%, of Mossimo common stock outstanding on the record date.

 

Proxy Solicitation

 

Mossimo has hired the Bank of New York, Georgeson Shareholder Communications and ADP Proxy Services to solicit proxies and/or to distribute proxy materials for the special meeting.

 

Proxies may be solicited by directors, officers, and employees of Mossimo (none of whom will receive any additional compensation for such services) in person, by mail, by telephone, telegraph, over the internet or by fax. Mossimo anticipates that banks, brokers, nominees, custodians and fiduciaries will forward proxy soliciting material to beneficial owners of the common stock and that such persons will be reimbursed by Mossimo for expenses incurred in doing so.

 

Effective Time of the Merger

 

The merger will become effective at the time the certificate of merger is accepted for filing by the Secretary of State of the State of Delaware or at such other time as may be agreed by Mossimo and Iconix. Assuming the stockholders vote to adopt the merger agreement and all other conditions to the merger are satisfied or, to the extent permitted, waived, Mossimo expects to complete the merger as soon as practicable after the special meeting.

 

Payment of Merger Consideration and Surrender of Stock Certificates

 

Continental Stock Transfer & Trust Company has been designated to act as exchange/paying agent for the merger. Immediately after the merger, Iconix will provide the exchange/paying agent with the cash and shares of Iconix common stock necessary to pay the merger consideration to the stockholders of Mossimo. The exchange/paying agent will use these funds solely to pay the merger consideration to those stockholders entitled to receive such consideration pursuant to the merger agreement. The exchange/paying agent will deliver the merger consideration according to the procedures summarized below.

 

As soon as practicable after the merger, the exchange/paying agent will mail to all stockholders a letter of transmittal and instructions advising you how to surrender your stock certificates in exchange for the merger consideration. Upon surrender of your stock certificates, together with a properly completed letter of transmittal and any other items specified by the letter of transmittal, the exchange/paying agent will pay to you the applicable merger consideration, and your Mossimo stock certificates will be canceled. No interest will accrue or be paid on the merger consideration, regardless of any delay in payment. In addition, all cash payments made in connection with the merger will be reduced by any applicable withholding taxes.

 

If your stock certificates have been lost, mutilated or destroyed, you may deliver to the exchange/paying agent an affidavit and indemnity bond (in form and substance, and with surety, reasonably satisfactory to the exchange/paying agent and Iconix) instead of your stock certificates.

 

If you want any part of the merger consideration to be paid to someone else, your stock certificates must be properly endorsed, or otherwise in proper form for transfer, and you must pay to the exchange/paying agent any transfer or other taxes relating to the transfer, or establish to the satisfaction of the exchange/paying agent that the taxes have been paid or are not required to be paid.

 

Please do not forward your stock certificates to the exchange/paying agent without a letter of transmittal, and do not return your stock certificates with the enclosed proxy.

 

At and after the merger, you will cease to have any rights as a stockholder of Mossimo, except for the right to surrender your stock certificates, according to the procedures described in this section, in exchange for the merger consideration or, if you properly assert and perfect your appraisal rights, the right to receive the “fair value” of your shares as determined under Delaware law. At the effective time of the merger, Mossimo’s stock ledger with respect to shares of Mossimo stock that were outstanding prior to the merger will be closed and no further registration of transfers of these shares will be made.

-32-

---

The exchange/paying agent will, on demand, return to Iconix all cash that has not yet been distributed in payment of the merger consideration as of eighteen months following the merger, plus any accrued interest, and the exchange/paying agent’s duties will terminate. Thereafter, stockholders may surrender stock certificates directly to Iconix and receive merger consideration, without interest, less any applicable withholding taxes. However, stockholders will in no event have any greater rights against the surviving company than those of general creditors of Mossimo under applicable law, and none of Mossimo, Iconix or its subsidiaries will be liable to you for any merger consideration delivered to a public official under any applicable abandoned property, escheat or similar law.

 

Pursuant to the merger agreement, Iconix will issue a global security representing all non-transferable contingent share rights to the exchange/paying agent on the closing date of the merger. The non-transferable contingent share rights represent each Mossimo stockholder’s right to receive additional merger consideration following the first anniversary of the merger if Iconix common stock does not close at or above $18.71 for at least twenty consecutive trading days during the year following the merger. As of the date of this proxy statement/prospectus, Iconix cannot determine the number of shares of Iconix common stock, if any, that may be issued pursuant to the non-transferable contingent share rights.

 

Merger Financing

 

In connection with the merger agreement, Iconix has obtained a commitment letter from Merrill Lynch Mortgage Capital Inc. pursuant to which Merrill Lynch Mortgage Capital Inc. has agreed to provide, subject to the satisfaction of certain conditions, a two-year loan in an aggregate amount of up to $90 million to fund, together with the existing cash resources of Iconix and Mossimo, the cash portion of the merger consideration to be paid at closing, to provide for a $33 million payment to Cherokee, Inc. pursuant to an agreement described elsewhere herein and to pay costs and expenses relating to the merger.

 

The commitment letter contemplates a $90 million loan to a new Iconix subsidiary, which Iconix expects will be owned directly or indirectly by the surviving corporation. The activities of the new subsidiary will be limited to acquiring intellectual property assets, exploiting and maintaining such assets and borrowing funds in connection with those activities. The loan would be secured by the Mossimo trademarks and related licensing rights and other related intellectual property rights and licensing agreements and related proceeds and guaranteed by Iconix. It is expected that the interest rate under the loan would be equal to the three month LIBOR plus 5.125% per annum.

 

The closing of the loan is subject to the negotiation of definitive documentation. Merrill Lynch Mortgage Capital Inc.’s obligation to provide the financing is also subject to various other conditions including, without limitation, the absence of a material adverse change in the business, condition, operations, performance or properties of Iconix or Mossimo and Mr. Giannulli’s continued association with Mossimo.

 

Iconix’s receipt of the financing contemplated by the commitment letter or otherwise is not a condition to close the merger. Iconix does not currently have any alternative financing commitments in the event the financing with Merrill Lynch Mortgage Capital Inc. is not obtained.

 

Interests of Certain Persons in the Merger; Potential Conflicts of Interest

 

In considering the recommendations of the board of directors, you should be aware that certain of Mossimo’s executive officers and directors may have interests in the transaction that are different from, or are in addition to, the interests of Mossimo’s stockholders generally.

 

Interests of Mossimo’s Directors and Executive Officers

 

·

In connection with the merger agreement, Iconix, Mr. Giannulli and Mr. Lewis agreed to enter into a registration rights agreement, which provides certain registration rights relating to shares of Iconix common stock to be received in the merger by Mr. Giannulli and, if applicable, any shares transferred to Mr. Lewis after the closing by Mr. Giannulli.

 

·

Mossimo has agreed to pay B. Riley & Co., Inc. a fee of $600,000 for investment banking services provided in connection with Mossimo’s evaluation and negotiation of the proposed merger and any alternative proposals. The payment of this fee is not contingent on the completion of any transaction. Bryant R. Riley, a director of Mossimo, is chairman and chief executive officer of B. Riley & Co., Inc. and may be deemed to have an indirect material interest in the fee.  This fee was accrued and expensed by Mossimo in the financial statements for the six months ended June 30, 2006.

 

·

In connection with the merger, Mr. Giannulli has agreed to enter into an agreement for creative director services with Mossimo and Iconix, which will become effective at, and subject to, the closing of the merger, pursuant to which Mr. Giannulli will perform design and marketing services at the request of Iconix and as required pursuant to the Target license. Iconix will compensate Mr. Giannulli for his creative director duties with 20% of all royalties earned during the term of his creative director services agreement from sales, licensing or other economic exploitation of merchandise, licenses, trademarks or other tangible or intangible property related to the Mossimo brand, other than any royalties or other payments with respect to (i) the Target agreement, and (ii) any Mossimo goods sold by or through Target and its affiliates. The creative director services agreement provides for Mr. Giannulli to receive a non-refundable draw, at the annual rate of $250,000 per year, against the royalty payments.

 

-33-

---

 

·	Pursuant to an oral understanding between Mr. Giannulli and Mr. Lewis, Mr. Giannulli intends to transfer to Mr. Lewis the after-tax equivalent of one-half the consideration Mr. Giannulli receives in the merger.

 

·

Iconix has required that, as a condition to Iconix’s obligation to close the merger, Mr. Giannulli acquire from Mossimo all of the capital stock of Mossimo’s subsidiary Modern Amusement, Inc. prior to the effective date of the merger.  Approximately $2,000,000 of the consideration to be paid will be payable by a promissory note which will be issued by Mr. Giannulli and payable in four equal installments over two years. The remaining consideration, in an amount to be agreed upon, will be paid in cash. Prior to this divestiture of Modern Amusement, the cash remaining on Modern Amusement’s balance sheet will be distributed to Mossimo, Inc. Iconix required that Mossimo divest Modern Amusement as a condition to the closing of the merger because Modern Amusement, which designs, manufactures and distributes clothing, does not fit into Iconix’s business model or strategy, which focuses exclusively on licensing.  Based on the unaudited pro forma condensed combined financial statements appearing elsewhere in this proxy statement/prospectus, the total selling price is expected to be $3.3 million.

 

·

In connection with the merger, Iconix has entered into a consulting agreement with Mossimo’s Chief Financial Officer, Vicken Festekjian, which will become effective at, and subject to, the closing of the merger, under which Mr. Festekjian will provide consulting services with respect to the transition of the Mossimo business to Iconix from the closing of the merger to December 31, 2006. Under this agreement, Iconix will pay Mr. Festekjian a monthly consulting fee of $13,750, plus an aggregate fee of $150,000.

 

·	Mossimo’s executive officers and directors will be entitled to continued indemnification and certain liability insurance coverage under the merger agreement.

 

·

All unvested stock options held by Mossimo directors Bryant R. Riley, Robert M. Martini and William Halford and Chief Financial Officer, Vicken Festekjian will be deemed to be vested and cancelled, as will all other previously vested stock options, in return for a cash payment equal to the number of option shares multiplied by the difference between $7.50 per share and the exercise price of such options. Pursuant to this cancellation and payment, Mossimo expects that Mr. Riley will receive approximately $62,100, Mr. Martini will receive approximately $59,355, Mr. Halford will receive approximately $219,855 and Mr. Festekjian will receive approximately $81,000.

 

Employment, Consulting and Severance Arrangements for Certain Executive Officers

 

Giannulli and Lewis Employment Agreements. At the closing, Mr. Giannulli and Mr. Lewis’ employment agreements will be terminated. No consideration will be payable to Mr. Giannulli or Mr. Lewis in connection with such termination. However, Mr. Giannulli will enter into the agreement for creative director services with Iconix described above.

 

Festekjian Consulting Agreement. Iconix has entered into the consulting agreement, described above, with Mr. Festekjian under which Mr. Festekjian will provide consulting services to Iconix from the closing of the merger to December 31, 2006.

 

Indemnification and insurance. Mossimo’s articles of incorporation and bylaws provide that it will indemnify its directors and executive officers to the fullest extent permitted by the DGCL. Mossimo also maintains directors’ and officers’ liability insurance for the benefit of such persons. The merger agreement requires Iconix to continue to honor Mossimo’s indemnification obligations to its directors and officers in effect immediately before the merger, including a directors’ and officers’ insurance policy, until the sixth anniversary of the merger. See “ The Merger Agreement-Indemnification.”

 

Iconix and its Affiliates

 

As of the date of this proxy statement/prospectus, Iconix and its affiliates hold the following interests in Mossimo:

 

·	Iconix owns 114,568 shares of common stock of Mossimo, which represents approximately 0.7% of the outstanding shares as of August 9, 2006.

 

Intent to Vote; Recommendations

 

To the best of Mossimo’s knowledge, each of Mossimo’s executive officers and directors intends to vote all shares of Mossimo stock he beneficially owns in favor of the merger.

-34-

---

Mr. Giannulli, Mossimo’s Chairman of the Board and Co-Chief Executive Officer and owner of 64.2% of Mossimo’s common stock, agreed pursuant to the merger agreement to vote all of his shares of Mossimo common stock in favor of the merger, unless the board of directors withdraws its recommendation and terminates the merger agreement.

 

The Mossimo board unanimously recommends that you vote FOR the merger agreement and the transactions contemplated thereby.

 

Estimated Fees and Expenses of the Merger

 

Whether or not the merger is completed, all fees and expenses incurred in connection with the merger will generally be paid by the party incurring those fees and expenses. Under certain circumstances described in the merger agreement, Mossimo could be required to pay a $5,000,000 termination fee to Iconix. The estimated total fees and expenses to be incurred by Mossimo and Iconix in connection with the merger are as follows:

 

Description		Iconix			Mossimo
Advisory fees and expenses		$	4,351,000		$	600,000
Legal fees and expenses			723,000			500,000
Depositary fees and expenses			8,500			—
Proxy solicitor fees and expenses			—			20,000
Audit and accounting fees and expenses			450,000			50,000
Hart-Scott-Rodino filing fee			125,000			—
SEC filing fee			13,588			—
Printing and mailing costs			30,000			—
Fees and expenses associated with financing			900,000			—
Miscellaneous expenses			30,000			75,000
TOTAL		$	6,631,088		$	1,245,000

Except as set forth herein, neither Mossimo nor Iconix will pay any fees or commission to any broker, dealer or other person for soliciting proxies pursuant to the merger. Mossimo and Iconix have retained Continental Stock Transfer & Trust Company to act as exchange/paying agent in connection with the merger. The exchange/paying agent will receive reasonable and customary compensation for its services in connection with the merger, plus reimbursement for out-of-pocket expenses, and will be indemnified against certain liabilities and expenses in connection therewith, including liabilities under the federal securities laws.

 

Legal fees and expenses incurred by or on behalf of Mossimo and Iconix and their affiliates in connection with the merger will be paid by the party incurring the expense with the exception of the HSR filing fee (which has been paid by Iconix).

 

The expense of soliciting proxies from stockholders as well as preparing and mailing the notice of special meeting, the proxy statement and the proxy card(s) will be paid by Mossimo.

-35-

---

THE MERGER

 

Background and Reasons for the Merger

 

Mossimo is a Delaware corporation formed in November 1995 which operates as a designer and licensor of apparel and related products under the “Mossimo” brand and other brands it owns. Mossimo licenses the Mossimo brand to domestic and international third parties, with Target and its affiliates as Mossimo’s primary domestic licensee.

 

On April 11, 2005, Mr. Giannulli submitted a non-binding proposal to Mossimo’s board of directors to acquire all of the outstanding publicly-held shares of Mossimo common stock in a going private transaction for $4.00 per share in cash. In response to Mr. Giannulli’s proposal, the Mossimo board of directors appointed a special committee consisting entirely of independent directors to evaluate the proposal on behalf of stockholders and to make a recommendation to the board of directors on whether to approve the proposal. The special committee retained independent counsel and an independent financial advisor, Houlihan, Lokey, Howard and Zukin, which we refer to in this proxy statement/prospectus as Houlihan Lokey, to evaluate whether the $4.00 per share cash consideration in Mr. Giannulli’s proposed offer was fair, from a financial point of view, to Mossimo and its stockholders.

 

On August 16, 2005, Mr. Giannulli announced his decision to withdraw the proposal and indicated that, while he remained interested in acquiring the publicly-held minority interest in Mossimo’s common stock, he did not intend to make a new bid at Mossimo’s then-current stock trading levels. On August 15, 2005, Mossimo’s common stock closed at $5.72.

 

On September 21, 2005, Mr. Giannulli and Mossimo entered into an agreement for Mr. Giannulli to acquire the outstanding publicly-held minority shares of Mossimo in a going-private transaction for $5.00 per share in cash. The proposal consisted of a two-step transaction. The first step would be a tender offer to purchase all of the outstanding shares of Mossimo common stock not owned by Mr. Giannulli at a purchase price of $5.00 per share by Mossimo Acquisition Corp., a newly-formed, wholly-owned subsidiary of Mossimo Holding Corp., which itself was a newly-formed corporation of which Mr. Giannulli was the sole stockholder. Following the tender offer would be a second-step merger of Mossimo Acquisition Corp. with and into Mossimo, which would continue to exist as a wholly-owned subsidiary of Mossimo Holding Corp.

 

Mossimo’s board reconvened the special committee to evaluate Mr. Giannulli’s revised proposal on behalf of unaffiliated stockholders, and to make a recommendation to the board of directors. In connection with the proposed going-private transaction, the special committee retained Houlihan Lokey to evaluate whether the proposed $5.00 per share consideration was fair, from a financial point of view, to the unaffiliated public stockholders of Mossimo. After evaluating the proposed transaction, Houlihan Lokey issued an opinion to the special committee that the proposed $5.00 per share consideration was fair, from a financial point of view, to Mossimo’s public stockholders. On September 21, 2005, Mossimo’s board of directors, with the unanimous recommendation of the special committee, unanimously approved the proposed going-private transaction and related documents.

 

On October 9, 2005, Iconix indicated its interest in pursuing a business combination with Mossimo that could have resulted in Mossimo’s stockholders, including Mr. Giannulli, receiving greater cash consideration than that contemplated by Mr. Giannulli’s proposed tender offer. Mossimo, its directors, officers and professional advisors, including Houlihan Lokey, did not solicit Iconix’s indication of interest in acquiring Mossimo and were not aware of it prior to October 9, 2005. On October 21, 2005, Mossimo and Iconix entered into a confidentiality agreement enabling Iconix to conduct due diligence in connection with its proposed offer. In response to the Iconix proposal, Mossimo and Mr. Giannulli announced on October 31, 2005 that they had amended the agreement to extend the deadline for Mr. Giannulli to commence and complete the proposed tender offer.

 

On November 9, 2005, the special committee and Mr. Giannulli announced that they had received a letter from Iconix indicating that Iconix had decided to terminate its discussions with Mr. Giannulli and the special committee regarding a possible acquisition of Mossimo. On November 12, 2005, the special committee withdrew its recommendation of Mr. Giannulli’s proposed going-private transaction and related merger. In response, also on November 12, 2005, Mr. Giannulli delivered a letter to the special committee announcing that he was terminating the proposed going-private transaction, the merger agreement and the related agreements.

 

In January 2006, Mr. Giannulli learned that Iconix maintained interest in acquiring Mossimo. On January 20, 2006, Mr. Riley contacted Neil Cole, Iconix’s Chief Executive Officer, to arrange a January 27, 2006 meeting in New York to discuss a potential transaction. At that meeting, Mr. Cole proposed that Iconix purchase all of the outstanding stock of Mossimo for $7.50 per share. When Mr. Riley noted that Mossimo stockholders would need to receive at least $8.50 per share, Mr. Cole stated his belief that Iconix common stock would increase in value, and thus achieve $8.50 or more in consideration for Mossimo stockholders. Mr. Riley therefore proposed the contingent share right by which Mossimo stockholders would receive additional shares of Iconix common stock if Iconix common stock did not close at or above a specified value in the year following the merger. Mr. Giannulli and Mr. Riley discussed Mr. Riley’s meeting with Mr. Cole and agreed to convey Mr. Cole’s proposal to the other members of Mossimo’s board of directors. The division of the proposed consideration into cash and stock components was designed to ensure that the stock consideration would be entitled to deferred tax treatment. The proposed terms were informally discussed with each of the Mossimo board members, who requested that discussions continue.

 

On February 7, 2006, Mr. Riley and Mr. Giannulli discussed the general terms of a possible transaction between Mossimo and Iconix with Mr. Cole, and also conveyed that the financial terms discussed at the January 27, 2006 meeting were generally acceptable to Mossimo’s board. Mossimo’s board of directors did not appoint a special committee to evaluate the transaction because (i) it was an arm’s-length offer from a third party in which all Mossimo stockholders would receive the same consideration for their shares, (ii) the Mossimo board did not believe there had been a substantial change in Mossimo’s business since the proposed $5.00 per share going private transaction was terminated in November 2005, and (iii) no other acquisition proposals for Mossimo had emerged in the meantime. Mr. Riley, Mr. Giannulli and Mr. Cole then met in Los Angeles on February 15, 2006 to discuss the business of Mossimo, including its relationship with Target. Although the parties recognized that Mossimo’s license agreement with Target did not require the approval of the proposed transaction, both parties wished to obtain assurance from Target that the Target relationship would continue after the completion of the merger.

-36-

---

On February 21, 2006, Blank Rome LLP, counsel to Iconix, which we refer to as Blank Rome in this proxy statement/prospectus, delivered to Mossimo’s counsel a proposed form of merger agreement among Iconix, Moss Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Iconix to be formed to effect the acquisition, Mossimo and Mr. Giannulli so the parties could begin negotiating ancillary terms of a proposed transaction. Under the proposed merger agreement, Moss Acquisition Corp. would purchase all of the outstanding common stock of Mossimo for consideration equal to $7.50 per Mossimo common share, to be paid in a combination of cash and Iconix common stock. Iconix would pay additional Iconix common stock consideration if Iconix common stock did not close above specified levels during the year following the merger. Mossimo would merge with and into Moss Acquisition Corp., which would be the surviving corporation and change its name to Mossimo, Inc. following the merger. Mossimo retained Paul, Hastings, Janofsky & Walker LLP, which we refer to in this proxy statement/prospectus as Paul Hastings, as counsel to Mossimo and entered into negotiations with Iconix.

 

From February 22, 2006 to March 29, 2006, Mr. Giannulli, Mr. Lewis and Mr. Riley, on behalf of the Mossimo board of directors, together with Paul Hastings, actively negotiated certain terms and conditions of the proposed merger and merger agreement with Mr. Cole and other senior Iconix executives and Blank Rome.

 

On March 21, 2006, the Mossimo board held a telephonic meeting at which Mr. Giannulli, Mr. Riley and Paul Hastings reported to the full board on the status of the negotiations and the proposed transaction. The board authorized Mr. Giannulli and Mr. Riley to continue negotiations with Iconix. On March 24, 2006, drafts of the proposed merger agreement and ancillary agreements were sent to each Mossimo board member for review in preparation for a March 29, 2006 telephonic meeting. During this time, Iconix continued to perform due diligence on Mossimo and the parties continued to negotiate the merger agreement. On March 24, 2006, Mossimo sent diligence documents and draft disclosure schedules to the merger agreement to Blank Rome. On March 28, 2006, counsel and accountants for Iconix conducted a due diligence visit to Mossimo’s corporate offices in Santa Monica, California and met with Mossimo’s senior management and counsel from Paul Hastings.

 

During this time, Mossimo’s directors also discussed a proposed amendment to and extension of Mossimo’s license agreement with Target. On February 20, 2006, Mr. Giannulli met with a Target executive to explain the proposed transaction with Iconix and to discuss proposed revisions to Mossimo’s license agreement with Target. On March 28, 2006, Mr. Giannulli, Mr. Lewis and Mr. Cole flew to Minnesota to meet with Target executives to discuss the proposed Iconix transaction and the proposed revisions to Mossimo’s license agreement with Target. Target informed Mossimo that it did not object to the proposed Iconix transaction, and Mossimo continued its discussions with Target with respect to a revised license agreement, which Mossimo and Target executed on March 31, 2006.

 

Mossimo’s board of directors convened a special meeting to discuss the proposed merger and merger agreement on March 29, 2006. At the special meeting, Mr. Riley, Mr. Lewis, Mr. Giannulli and Paul Hastings reported on their discussions with Iconix and Blank Rome. Mr. Riley reported that Iconix had proposed to acquire Mossimo in a transaction that could result in all of Mossimo’s stockholders, including Mr. Giannulli, receiving consideration valued (as of the signing) at not less than $7.50 per share, with such purchase price to be paid in (i) shares of Iconix common stock having an aggregate value of approximately $51.5 million, (ii) $67.5 million in cash, and (iii) a non-transferable contingent right to receive additional shares of Iconix common stock if Iconix common stock does not close at or above a specified price for at least twenty consecutive trading days by the first anniversary of the Merger. On March 29, 2006, the closing price of Mossimo’s common stock on the NASDAQ Capital Market was $5.96.

 

At the March 29, 2006 special meeting, the Mossimo board also considered Mossimo’s reasons for the proposed merger agreement and the fairness of the proposed merger consideration to all Mossimo stockholders, including the public stockholders otherwise unaffiliated with Mossimo. The board evaluated several factors in detail, including Mossimo’s current market price and the premium offered by Iconix, the lack of alternative acquisition proposals, (including the lack of competing proposals from prospective acquirors other than Iconix during and after Mr. Giannulli’s 2005 tender offers), Mossimo’s historical and projected financial performance, the likelihood of a higher future trading price for Mossimo’s stock, the fact that the proposed merger agreement and proposed merger were the result of arm’s length negotiation, the requirement that Mossimo obtain a financial advisor’s opinion that the proposed merger consideration is fair, from a financial point of view, to Mossimo’s stockholders, the stockholder approval requirement, Mossimo’s ability to consider alternative proposals consistent with the board’s fiduciary duties to Mossimo stockholders, the costs of remaining a publicly traded company, and the availability of appraisal rights for dissenting stockholders, if there are any. The board also considered possible risks, including a possible future decline in the Iconix share price, the inability to actively solicit other offers, the proposed breakup fee, and the risk of a negative adjustment to the share price if Mossimo’s cash and equivalents failed at closing to meet the level required by the merger agreement. For additional information about the Mossimo board’s analysis of these factors, see “The Merger—Position of Mossimo as to the Fairness of the Merger; Recommendation of Mossimo’s Board of Directors.”

-37-

---

Following the board’s careful consideration of the proposed merger and merger agreement, the fairness of the merger consideration to all Mossimo stockholders and the reasons for the merger, and extensive discussions with Paul Hastings, the board unanimously deemed it to be in the best interests of Mossimo and its stockholders to continue negotiations with Iconix related to the proposed merger agreement and the transactions contemplated thereby, including the merger, and, if satisfactory terms could be reached, the board unanimously authorized Mossimo’s management to execute a definitive merger agreement. If a satisfactory agreement could be reached, the board also authorized Mossimo to prepare and file with the SEC a proxy statement and other materials relating to a special meeting of Mossimo stockholders to approve and adopt the merger agreement and the transactions contemplated thereby, and to specifically include in the proxy statement a statement that the Mossimo board recommends that Mossimo’s stockholders approve and adopt the merger agreement and the transactions contemplated thereby, including the merger.

 

The board also decided to engage a nationally-recognized financial advisor to provide an independent fairness opinion in connection with the proposed transaction. Mossimo’s board engaged FMV Opinions, Inc. to act as Mossimo’s financial advisor to issue a written opinion as to the fairness of the proposed merger consideration to Mossimo’s stockholders as of March 31, 2006. The board selected FMV Opinions because of its expertise as a financial advisor in mergers and acquisitions.

 

From March 29, 2006 through April 2, 2006, Mr. Giannulli, Mr. Lewis and Mr. Riley, together with Paul Hastings, engaged in extensive negotiations with Mr. Cole, other Iconix executives, and Blank Rome, to finalize the merger agreement and ancillary documents. The negotiations focused on, among other things, the treatment of Mossimo stock options and consideration payable to holders of such options, the non-transferable contingent share right mechanism for payment of additional merger consideration if Iconix common stock does not close at or above levels specified in the merger agreement during the year following the merger, a limitation on the number of shares of Iconix common stock issuable as merger consideration, certain representations and warranties, Mossimo’s divestiture of Modern Amusement, Inc. and certain ancillary agreements to the merger agreement.

 

The merger agreement was executed by the parties on April 2, 2006 and was effective as of March 31, 2006. Prior to the opening of trading on the NASDAQ National Market (now the NASDAQ Global Market) on April 3, 2006, Iconix issued a press release announcing the execution of the merger agreement and the amended Target agreement.

 

Subsequent to the execution of the merger agreement, Iconix contacted Cherokee, Inc. regarding a possible transaction involving Cherokee’s finders agreement with Mossimo, such transaction being consistent, in Iconix’s view, with its business model in respect of the ownership of virtually all of its licensing revenues. On April 17, 2006, Mossimo received a proposal from Cherokee to acquire all outstanding shares of Mossimo for $8.50 per share, consisting of $6.00 per share in cash and $2.50 per share in Cherokee stock. Cherokee’s April 17, 2006 proposal letter to Mossimo’s board specified that Cherokee’s acquisition proposal was “subject to the completion of a standard due diligence review” and proposed that Mossimo and Cherokee enter into a confidentiality agreement to begin the diligence review. Although Cherokee’s proposal letter noted that Cherokee had approximately $9,000,000 in cash on its balance sheet, Cherokee’s acquisition proposal would have required the payment of approximately $95,000,000, or $6.00 per Mossimo share, in cash consideration to Mossimo stockholders. Cherokee therefore provided Mossimo’s board with a letter from CapitalSource Finance LLC to Cherokee stating that CapitalSource was “highly confident in our ability to underwrite and commit to a total credit facility of approximately $100.0 million.” However, the CapitalSource proposal was subject to CapitalSource’s approval of the final transaction structure, acquisition purchase terms, and review of Cherokee’s financial model.

 

Mossimo’s board evaluated Cherokee’s proposal and convened a special meeting on April 19, 2006 to discuss it. At that meeting, the board was not able to determine that Cherokee’s offer, as presented to Mossimo, constituted a “superior proposal” within the meaning of the merger agreement in part based on the financing and due diligence contingencies in Cherokee’s proposal. Iconix’s proposal was not subject to a financing contingency. In addition, based on Cherokee’s past trading history, Mossimo’s board was concerned that Cherokee common stock could be subject to lower trading volume and greater price volatility than Iconix common stock, and that by receiving Cherokee common stock, Mossimo stockholders could be subject to greater risk and lower liquidity than they would be under Iconix’s proposal. Also, Cherokee’s proposal did not include a “floor” or other adjustment in case Cherokee’s stock price eroded prior to the closing of the merger. Mossimo’s board was also concerned that the Cherokee proposal’s due diligence contingency could give Cherokee the opportunity to withdraw or adversely modify its proposal after its due diligence review.

 

However, Mossimo’s board believed that Cherokee’s proposal should be explored. They believed that if Mossimo engaged Cherokee in discussions and allowed Cherokee to perform limited due diligence, the uncertainty created by the due diligence contingency could be eliminated, and Cherokee’s interest could reasonably be expected to lead to a superior proposal. Mossimo’s board also wished to perform due diligence on Cherokee to evaluate the Cherokee common stock offered in the Cherokee proposal. Mossimo advised Cherokee of these issues, and on April 21, 2006, Mossimo signed a mutual confidentiality agreement with Cherokee and both companies commenced a due diligence review. Iconix considered various possible actions in response to the Cherokee proposal; however, given the uncertainties associated with the proposal, no change was made to the merger consideration or any other terms of the merger transaction with Mossimo.

 

On or about April 26, 2006, while initial discussions were taking place between Mossimo and Cherokee, Iconix had discussions with Cherokee concerning a possible transaction and were able to reach mutually agreeable terms. On April 27, 2006, Iconix and Cherokee entered into a termination and settlement agreement pursuant to which Cherokee agreed to withdraw its proposal (and not to reinstate or make any new offer) to acquire all or substantially all of the capital stock of Mossimo, and to terminate, simultaneously with the merger, the finders agreement between Mossimo and Cherokee in exchange for Iconix’s agreement to pay Cherokee $33,000,000 upon the closing of the merger. On April 27, 2006, Cherokee delivered a letter to Mossimo’s board of directors withdrawing its proposal to acquire Mossimo and terminating all discussions, negotiations and diligence regarding a possible business combination with Mossimo. Prior to April 27, 2006, Mossimo was not aware of any discussions or negotiations between Iconix and Cherokee.

-38-

---

 

Structure of the Merger

 

Iconix, Moss Acquisition Corp., Mossimo and Mr. Giannulli entered into the merger agreement, which is the legal document governing the merger, as of March 31, 2006. Under the terms of the merger agreement, Mossimo will merge with and into Moss Acquisition Corp., with Moss Acquisition Corp. continuing as the surviving corporation. As part of the merger, Moss Acquisition Corp.’s name will be changed to Mossimo, Inc. and it will remain a wholly-owned subsidiary of Iconix. Upon completion of the merger, all Mossimo common stock will be cancelled and will no longer be publicly traded.

 

The merger agreement is attached to this proxy statement/prospectus as Appendix A . We strongly urge Mossimo stockholders to carefully read the merger agreement in its entirety. For a summary of the merger agreement, please see the section entitled “The Merger Agreement” beginning on page 56 of this proxy statement/prospectus.

 

The merger agreement requires Mr. Giannulli, holder of approximately 64.2% of Mossimo’s outstanding common stock, to vote all of his shares of Mossimo common stock in favor of the adoption and approval of the merger agreement, subject to certain exceptions.

 

What You Will Receive

 

Common stock

 

Upon completion of the merger, Mossimo stockholders will be entitled to receive 0.2271139 of a share of Iconix common stock and $4.25 in cash, subject to adjustment in certain circumstances, for each outstanding share of Mossimo common stock. Each Mossimo stockholder will also receive a non-transferable contingent share right to receive additional shares of Iconix common stock after the first anniversary of the merger if Iconix common stock does not close at or above $18.71 per share for at least twenty consecutive trading days during the year following the merger. In the last five years, Iconix common stock has not closed at or above $18.71.

 

In the event that this share price is met and either maintained or exceeded for the requisite period, no contingent shares would be issuable. In the event that this price is not met and maintained or exceeded for the requisite period, the number of contingent shares to be issued will be based on the greater of the average closing price of Iconix common stock for the three business days prior to closing or the highest twenty consecutive trading day average closing price during the first year after closing. 

 

For example, if you hold 10,000 shares of Mossimo stock, you will receive 2,271 shares (10,000 * 0.2271139) of Iconix common stock and approximately $42,500 (10,000 * $4.25) in cash. If Iconix common stock does not close at or above $18.71 per share for at least twenty consecutive trading days during the year following the merger, each former holder of Mossimo common stock will be entitled to receive a number of additional shares of Iconix common stock determined by the following formula:

 

(a)

The number of shares of Iconix common stock issued to the Mossimo stockholder as initial merger consideration multiplied by:

(b)

The difference between (i) $18.71 and (ii) the greater of either:

(A)

the highest twenty consecutive trading day average closing sale price during the year following the merger; or

(B)

the average closing sale price of Iconix common stock as reported on the NASDAQ Global Market for three (3) business days prior to the closing;

(c)

The product of which is then divided by the higher of either (A) or (B).

Thus, if a former Mossimo stockholder is issued 2,271 shares of Iconix common stock following the completion of the merger, and the average highest closing sales price of Iconix common stock over at least one twenty consecutive trading day period in the year following the merger is $14.01 (the twenty consecutive trading day average closing sale price during the period between July 3, 2006 and July 31, 2006), and if that price is higher than the average closing sale price of Iconix common stock as reported on the NASDAQ Global Market for the three (3) business days prior to the closing, then the former Mossimo stockholder would receive:

 

(2,271 shares * ($18.71 - $14.01)) / $14.01 = 761 additional shares of Iconix common stock.

 

If additional Iconix shares become payable pursuant to the non-transferable contingent share rights, former Mossimo stockholders will receive such additional shares within twenty business days after the one-year anniversary of the closing of the merger (subject to certain exceptions in case of calculation disputes). Iconix will not reserve or place any shares of its common stock in escrow for issuance pursuant to the non-transferable contingent share rights.

 

Both the stock number and the cash amount can be adjusted under the merger agreement. If the average closing price of Iconix common stock for the three trading days prior to the closing of the merger equals or exceeds $22.80 per share, as determined by a formula set forth in Section 1.3(d) of the merger agreement, the aggregate value of the initial merger consideration will be capped at approximately $150,000,000. Iconix may also elect to pay any portion of initial merger consideration in excess of an aggregate of $135,147,866 in either cash or Iconix common stock. In no event may the cash portion of the merger consideration exceed 60% of the total merger consideration.

-39-

---

The number of shares of Iconix common stock you will receive in the merger will equal the number, rounded down to the nearest whole number, determined by multiplying 0.2271139 by the number of shares of Mossimo common stock you own. You will not receive any fractional shares of Iconix common stock. Instead, you will receive cash from Iconix, without interest, for any fractional share of Iconix common stock that you might otherwise have been entitled to receive.

 

Based upon 16,002,775 shares of Mossimo common stock outstanding as of August 9, 2006 (including 114,568 shares owned by Iconix which shall be cancelled in accordance with the merger agreement), Iconix will issue approximately 3,608,433 shares of Iconix common stock to former Mossimo stockholders, assuming no change in the number of shares of Mossimo common stock outstanding and excluding any shares which may be issued under the non-transferable contingent share rights. Therefore immediately after completion of the merger, former Mossimo stockholders will hold approximately 3,608,433 shares or 8.4% of Iconix’s then-outstanding common stock (excluding any shares which may be issued under the non-transferable contingent share rights).

 

Mossimo stock options

 

Prior to the closing of the merger, each option to purchase shares of Mossimo common stock that was granted pursuant to the Mossimo, Inc. 1995 Stock Option Plan, whether vested or unvested, will be cancelled and converted into the right to receive a cash payment equal to (1) the difference between (a) $7.50 (subject to adjustment in certain circumstances) and (b) the applicable per share exercise price, multiplied by (2) the number of shares of Mossimo common stock subject to such stock option. The cash payment will be subject to any applicable tax withholding. If additional shares of Iconix stock become payable to former Mossimo stockholders after the first anniversary of the merger pursuant to the non-transferable contingent share right, Iconix will pay each option holder who is entitled to payment in respect of cancelled options an amount equal to the cash value of the additional merger consideration each option holder would have received had he or she exercised the options prior to the merger (less any applicable tax withholding).

 

Position of Mossimo as to the Fairness of the Merger; Recommendation of Mossimo’s Board of Directors

 

In evaluating the fairness and advisability of the merger agreement and the merger, the Mossimo board of directors has considered the following factors:

 

·

Market Price and Premium. The board discussed the historical market prices and recent trading activity in the Mossimo common stock, including the fact that the proposed Iconix merger consideration of at least $7.50 per Mossimo share payable upon closing of the merger represented a premium of approximately 26% to the closing price of the common stock on March 28, 2006, the last trading day before the board discussed the Iconix merger proposal.

 

·

Lack of Alternative Acquisition Proposals. Because Iconix was the only other party to express interest in acquiring Mossimo following Mr. Giannulli’s announcement of proposed tender offers in April 2005 and September 2005, and because no other third party had expressed interest in acquiring Mossimo following the termination of Mr. Giannulli’s proposal in November 2005, the board considered it unlikely that a credible competing offer could be obtained for Mossimo at a price higher than the Iconix offer. When Cherokee made a competing offer after the execution of the merger agreement, Mossimo's board decided to provide information to Cherokee and ask Cherokee for information to enable Mossimo’s board to examine Cherokee's offer to determine whether it was a "superior proposal" within the meaning of the merger agreement.  Before Mossimo's board could make this determination, however, Cherokee terminated its offer and all discussions, negotiations and diligence with Mossimo.

 

·

Risks. The board considered several possible risks of the proposed merger with Iconix, including a possible future decline in the Iconix share price, Mossimo's inability to actively solicit competing offers, the proposed breakup fee and the risk of a negative adjustment to the share price if Mossimo's cash and equivalents failed at closing to meet the level required by the merger agreement.

 

·

Historical and Projected Financial Performance. The board discussed Mossimo’s current and anticipated business, financial condition, results of operations and prospects, the volatile nature of the industry in which Mossimo operates, Mossimo’s dependence on a single major customer, and the board’s belief that Mossimo’s ability to achieve projected results of operations is subject to significant risks and uncertainties. The board also noted that historically Mossimo has not been able to reliably predict its results of operations.

 

·

Likelihood of a Higher Trading Price. The board discussed the historically volatile nature of Mossimo’s common stock price and both the historical and analyst projections of the trading range of the common stock. While the board believed it is possible that in the future Mossimo’s common stock will trade in excess of the price offered in the proposed Iconix merger, the board believed that prospect was highly uncertain and subject to substantial downside risk. The board also believed that the proposed Iconix merger represents a significant realizable benefit to stockholders, as compared to the mere possibility that at some undetermined future date the Mossimo common stock might trade at a higher level.

 

-40-

---

 

·

Offer Price and Merger Consideration. The board discussed whether, based on Mossimo’s negotiations with Iconix and other information available to it, that merger consideration set forth in the merger agreement represents the highest price that Iconix is willing to pay and, in light of the lack of proposals at comparable or higher valuations, it is likely the highest price reasonably attainable for Mossimo’s stockholders in a merger or other acquisition transaction. The board concluded that, as of the date of the meeting and based on the information available to the board, including discussions between board members and Iconix’s Chief Executive Officer, the merger consideration offered by Iconix represents the highest price Iconix would pay to acquire Mossimo under the circumstances in effect on that date. Later, when Cherokee made its offer to purchase Mossimo, Mossimo's board was unable to determine whether Cherokee's offer constituted a "superior proposal" for Mossimo, or whether Cherokee's proposal constituted circumstances that would increase the price Iconix would pay to acquire Mossimo.  Before Mossimo's board could obtain and evaluate the information needed to make this determination, Cherokee terminated its offer and all discussions, negotiations and diligence with Mossimo.

 

·	Arm’s Length Negotiations. The board considered that the merger agreement and the proposed merger consideration are the product of arm’s length negotiations between Iconix and Mossimo.

 

·	Brand Diversification. The board considered Mossimo’s risks in licensing a single brand, compared with the diversification of Iconix’s business across several brands.

 

·

Opinion of Financial Advisor. The board has considered that the merger agreement requires, as a condition to the closing of the merger, that Mossimo obtain an opinion from a nationally recognized financial advisor stating that the proposed merger consideration is fair, from a financial point of view, to Mossimo and its stockholders.

 

·	Stockholder Approval. The board considered that the merger agreement requires that it be adopted by the affirmative vote of the holders of a majority of the outstanding shares of common stock of Mossimo before the merger may be consummated.

 

·

Terms of the Merger Agreement. The board discussed the terms and conditions of the merger agreement, including the ability to negotiate with any third party which makes an unsolicited acquisition proposal, if the board determines that it must do so to comply with its fiduciary obligations to Mossimo stockholders. Further, the board considered that the merger agreement permits the board to terminate the agreement if Mossimo receives a superior proposal and the board determines that it must terminate the merger agreement to comply with its fiduciary duties to Mossimo’s stockholders, including the fact that if Mossimo terminated the merger agreement under such circumstances, Mossimo would be required to pay a “break-up” fee of $5,000,000 to Iconix.

 

·	Cost of Continuing as a Public Corporation. The board discussed the significant compliance costs it incurs as a publicly-traded corporation, including expected increases in costs in connection with compliance requirements under the Sarbanes-Oxley Act of 2002.

 

·	Appraisal Rights. The board considered that appraisal rights will be available to dissenting stockholders under the DGCL.

 

·

Opinion of FMV Opinions. The board also considered the analysis of FMV Opinions and in particular the opinion of FMV Opinions that, as of March 31, 2006, and based upon and subject to the factors and assumptions set forth in its opinion, the consideration to be paid under the merger agreement is fair from a financial point of view to Mossimo’s stockholders.

 

In addition to the matters mentioned above, the board considered the other terms and conditions of the merger agreement, the present economic environment and other relevant facts and circumstances pertaining to the proposed transaction. The board did not consider that it was practicable or useful to quantify or otherwise assign relative weights to the various factors considered by it, and therefore did not do so.

 

Although the merger is not subject to the approval of the majority of the stockholders unaffiliated with Mossimo, and neither a separate committee of independent directors nor an unaffiliated representative was appointed to act solely on behalf of the unaffiliated stockholders for purposes of negotiating the merger or preparing a report concerning the fairness of the merger, the board of directors believes that the merger is procedurally fair to the public stockholders. This belief is based on the following factors: (i) Mossimo vigorously negotiated the terms of the merger in an arm’s-length manner with Iconix with the incentive to obtain the maximum purchase price attainable for the outstanding capital stock of Mossimo; (ii) all stockholders will receive the same per share consideration; (iii) Mr. Giannulli, who in 2005 had stated he would not consider selling his Mossimo stock to a third party, was willing to accept the merger consideration and vote in favor of the merger agreement; (iv) the board retained an independent financial advisor experienced in making valuations of companies and in rendering fairness opinions, FMV Opinions, to advise it in evaluating the fairness of the merger consideration to be received by Mossimo stockholders under the merger agreement; (v) FMV Opinions delivered its opinion to the board that the consideration to be received by Mossimo stockholders the merger agreement, was fair, from a financial point of view, to the stockholders.

-41-

---

After considering the foregoing factors, the other information available to it, and after numerous meetings and discussions, the board unanimously determined that the terms of the merger agreement were fair to, and in the best interests of, Mossimo and its stockholders. The Mossimo board therefore recommends that the stockholders of Mossimo vote FOR the adoption of the merger agreement at the special meeting.

 

Opinion of Financial Advisor to Mossimo

 

Mossimo’s board retained FMV Opinions to act as financial advisor in assessing the fairness, from a financial point of view as of March 31, 2006, of the consideration to be received by holders of Mossimo’s common stock in the merger. On April 26, 2006, FMV Opinions delivered a written and oral opinion to Mossimo’s board at a special meeting. FMV Opinions opined that, as of March 31, 2006, and based upon and subject to the various factors, assumptions and limitations set forth in the opinion, the consideration to be received by the stockholders of Mossimo in connection with the merger is fair, from a financial point of view, to such stockholders.

 

The full text of the written opinion of FMV Opinions dated as of March 31, 2006, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Appendix E to this proxy statement/prospectus and is incorporated herein by reference. Mossimo’s stockholders should read the opinion carefully and in its entirety to understand the procedures followed, assumptions made, matters considered and limits of the review undertaken by FMV Opinions in rendering its opinion. FMV Opinions provided its opinion for the information and assistance of the board in connection with its consideration of the merger. The opinion is not a recommendation as to how any holder of Mossimo’s common stock should vote with respect to the merger.

 

In preparing its opinion, FMV Opinions did the following, among other things:

 

·	reviewed Mossimo’s annual reports on Form 10-K for each of the five fiscal years ended December 31, 2005, which Mossimo’s management identified as containing the most current financial statements available;

 

·	met with certain members of Mossimo’s senior management in-person and via teleconference to discuss its operations, financial condition, future prospects and projected operations and performance;

 

·	visited Mossimo’s headquarters;

 

·	reviewed copies of the following agreements, documents and data, among others:

 

·	the proposed merger agreement;

 

·	the restated license agreement by and between Mossimo and Target Brands, Inc.;

 

·	the licensing agreement by and between Joe Boxer Licensing, LLC and Kmart Corporation; and

 

·	the licensing agreement by and among IP Holdings LLC, Candie’s, Inc., and Kohl’s Department Stores, Inc.

 

·	internal financial statements for the key Mossimo business segments for the periods from December 31, 2000 through December 31, 2005;

 

·	a projected income statement for Mossimo prepared by Mossimo management for the period ended December 31, 2006;

 

·	Iconix’s annual reports on Form 10-K for each of the five fiscal years ended December 31, 2005;

 

·	pro forma projections for Iconix, prepared by Iconix management for the year ended December 31, 2006;

 

·	two presentations from Hewitt Associates dated May 4, 2004 and August 6, 2004, respectively, regarding Mossimo’s executive compensation;

 

·	historical market prices and trading volume for Mossimo’s and Iconix’s publicly traded securities;

 

·	certain other publicly available financial data for certain companies that FMV Opinions deemed comparable to Mossimo and Iconix; and

 

·	met with certain members of the senior management of Iconix via teleconferences, to discuss Iconix’s operations, financial condition, future prospects and projected operations and performance, and conducted other studies, analyses and inquiries, as it deemed appropriate.

 

In preparing its opinion, FMV Opinions assumed and relied on the accuracy and completeness of all information supplied or otherwise made available to it, discussed with or reviewed by or for it, or publicly available, and did not assume any responsibility for independently verifying that information nor did it undertake an independent evaluation or appraisal of any of Mossimo’s or Iconix’s assets or liabilities, nor was it furnished with any such evaluation or appraisal. With respect to the financial forecast information furnished to or discussed with FMV Opinions by Mossimo and Iconix, FMV Opinions assumed that it had been reasonably prepared and reflected the best currently available estimates and judgment of management of Mossimo and Iconix as to the expected future financial performance of Mossimo and Iconix. The FMV Opinions opinion was necessarily based upon market, economic and other conditions as they existed and could be evaluated on the information made available to FMV Opinions as of March 31, 2006.

-42-

---

FMV Opinions was not requested to consider, and FMV Opinions expressed no opinion as to, (a) any other aspect of the merger, (b) the underlying business decision of Mossimo’s board of directors to proceed with the merger, or (c) the relative merits of the merger as compared to any alternative business strategies that might exist for Mossimo or the effect of any other transaction in which Mossimo might engage.

 

The opinion addressed only the financial fairness, as of March 31, 2006, of the consideration to be received by Mossimo’s stockholders in the merger and did not address any other terms or conditions of the merger agreement or any related documents, the tax or legal consequences of the merger, including the tax or legal consequences to the stockholders of Mossimo, the fairness of any aspect of the merger not expressly addressed in the opinion, the relative merits of the merger or any alternatives to the merger, Mossimo’s decision to proceed with or the effect of the merger, or any other aspect of the merger. No restrictions or limitations were imposed by Mossimo upon FMV Opinions with respect to the investigation made or the procedures followed in rendering its opinion. The opinion did not constitute a recommendation to Mossimo’s board on whether or not to support the merger and recommend it to Mossimo’s stockholders and does not constitute a recommendation to stockholders as to whether or not to vote in favor of the merger.

 

To determine the fairness, from a financial point of view, of the consideration to be received by the stockholders of Mossimo in connection with the merger, FMV Opinions performed the following analysis as of March 31, 2006:

 

·	a determination of the fair market value per share of Mossimo on a controlling interest basis, through independently valuing the operations of Mossimo’s “Mossimo” brand, excluding Modern Amusement and its Modern Amusement brand independently;

 

·	a determination of the per share fair market value of Iconix common stock on a pro-forma basis, giving effect to Iconix’s acquisition of both Mossimo and the Mudd brand; and

 

·	a determination of the per share fair market value of consideration to be received by stockholders of Mossimo’s common stock in connection with the merger as compared to the per share fair market value of Mossimo common stock on a controlling interest basis.

 

FMV Opinions noted that as of the date of its opinion, Iconix had made the decision to acquire Mossimo and the Mudd brand. The Mudd brand acquisition actually closed on April 11, 2006.

 

The following is a brief summary of the material financial analyses performed by FMV Opinions in connection with its oral opinion and the preparation of its written opinion to the Mossimo board:

 

Valuation of Mossimo

 

Guideline public companies method . FMV Opinions compared certain financial data of Mossimo with that of the following publicly traded companies in the apparel industry:

 

·	Cherokee, Inc.;

 

·	Guess?, Inc.;

 

·	Iconix Brand Group, Inc.;

 

·	Kenneth Cole Productions, Inc.;

 

·	Perry Ellis International, Inc.;

 

·	Quiksilver, Inc.;

 

·	Skechers USA, Inc.;

 

·	Steve Madden Ltd.; and

 

·

VF Corp.

 

-43-

---

 

For each of these companies, FMV Opinions calculated valuation multiples including enterprise value as a multiple of latest twelve months (“LTM”) earnings before interest, taxes, depreciation and amortization (“EBITDA”), enterprise value as a multiple of projected next fiscal year (“NFY EBITDA”), market value as a multiple of LTM earnings (“P/E”), and market value of equity as a multiple of projected NFY earnings. Based on an analysis of these comparable companies relative to Mossimo, FMV Opinions selected multiples to apply to Mossimo’s representative LTM net income, projected NFY net income, LTM EBITDA, and projected NFY EBITDA. FMV Opinions, in calculating representative earnings levels for Mossimo, increased earnings by adding back all annual bonuses of Mossimo’s Co-Chief Executive Officers, Mr. Lewis and Mr. Giannulli, which totaled $3.3 million in 2005 and were projected to total $3.7 million in 2006. The following table presents the ranges and medians of the aforementioned multiples and FMV Opinions’ selected range of market multiples:

 

Low

High

Median

Selected

Latest Twelve Months

Enterprise value/EBITDA (1)

7.1x

12.2x

9.6x

7.0x - 8.5x

Price/Earnings (1)

9.5x

30.7x

18.8x

14.0x - 16.5x

Next Fiscal Year

Enterprise value/EBITDA (1)

6.8x

10.7x

9.2x

7.0x - 8.0x

Price/Earnings

9.2x

31.6x

19.6x

12.5x - 15.0x

(1)	Calculated excluding multiple of Iconix because FMV Opinions did not consider this multiple meaningful.

 

By applying the aforementioned selected multiples to representative financial data of Mossimo, taking averages of the low and high indications, and applying a control premium of 10 percent, FMV Opinions arrived at a range of equity values for the operations of Mossimo, on a controlling interest basis, from $106.930 million to $128.412 million. By adding cash, the value of Modern Amusement (as described below), and the value of Mossimo’s net operating loss carryforwards, FMV Opinions determined a range of controlling interest equity values for Mossimo from $122.790 million to $145.060 million, or $7.64 to $9.02 per share.

 

Mossimo purchased Modern Amusement in March of 2004 for approximately $375,000. In 2005, Modern Amusement generated an adjusted operating loss of $1.237 million on revenues of $6.730 million, and is projected to generate an operating loss in fiscal 2006 of $596,000. FMV Opinions valued Modern Amusement based on the aforementioned comparable companies. Accordingly, FMV Opinions selected multiples to apply to each of Modern Amusement’s representative LTM and projected 2006 revenues of 0.3x to 0.4x. Application of the aforementioned multiples to Modern Amusement’s representative financial data, in addition to a control premium of 15 percent, resulted in a range of equity values of Modern Amusement, on a controlling interest basis, from $2.392 million to $3.186 million.

 

Industry acquisitions method.   As part of its analyses, FMV Opinions observed valuation metrics for transactions involving the following acquisitions of companies in similar lines of business to Mossimo:

 

·	the acquisition of Haggar Corp. by Quiksilver, Inc.;

 

·	the acquisition of Rampage Licensing by Iconix Brand Group, Inc.;

 

·	the acquisition of Skis Rossignol SA by Quiksilver, Inc.;

 

·	the acquisition of JBC Holdings, LLC by Iconix Brand Group, Inc.;

 

·	the acquisition of Ocean Pacific Apparel Corp by Warnaco Group, Inc.;

 

·	the acquisition of Maxwell Shoe Co., Inc. by Jones Apparel Group, Inc.;

 

·	the acquisition of Vans, Inc. by VF Corp.;

 

·	the acquisition of Hockey Company Holdings by Reebok International Ltd.;

 

·	the acquisition of Nautica Enterprises, Inc. by VF Corp.;

 

·	the acquisition of Salant by Perry Ellis International, Corp.;

 

·	the acquisition of Gerber Childrenswear by Kellwood Co.;

 

·	the acquisition of VF Corp (Jantzen, Inc.) by Perry Ellis International, Corp.;

 

·	the acquisition of Full Line Distributors, Inc. by Bain Capital, Inc.;

 

·	the acquisition of Consolidated Apparel Group by Hartmarx Corp.;

 

-44-

---

 

·	the acquisition of Premiumwear, Inc. by New England Business Service, Inc.;

 

·	the acquisition of Authentic Fitness Corp by Warnaco Group, Inc.; and

 

·	the acquisition of Happy Kids, Inc. by HIG Capital Management, Inc.

 

For the transactions where financial data was available, FMV Opinions calculated valuation multiples including enterprise value as a multiple of LTM revenue, enterprise value as a multiple of LTM EBITDA, and P/E. Based on an analysis of these transactions, FMV Opinions selected multiples to apply to Mossimo’s representative LTM revenue, LTM EBITDA, and LTM earnings. FMV Opinions, in calculating representative earnings levels for Mossimo, increased earnings by adding back all annual bonuses paid to Mossimo’s Co-Chief Executive Officers, Mr. Lewis and Mr. Giannulli, which totaled $3.3 million in 2005 and were projected to total $3.7 million in 2006. The following table presents the ranges and medians of the aforementioned multiples and FMV Opinions’ selected range of market multiples:

 

Low

High

Median

Selected

Latest Twelve Months

Enterprise value/Revenue (1)

0.3x

4.8x

0.8x

4.0x - 4.5x

Enterprise value/EBITDA (2)

3.2x

15.0x

7.4x

7.5x - 9.0x

Price/Earnings (2)

6.8x

27.0x

16.4x

15.5x - 18.0x

(1)	Excludes multiples on Ocean Pacific Apparel Group, VF Corp (Jantzen, Inc.), and Consolidated Apparel Group, as such multiples were either not meaningful or not available.

 

(2)	Excludes multiples on Ocean Pacific Apparel Group, Vans, Inc., VF Corp (Jantzen, Inc.), and Consolidated Apparel Group, as such multiples were either not meaningful or not available.

 

Based on a comparison of Mossimo to the aforementioned comparable acquisitions, FMV Opinions selected multiples to apply to Mossimo’s representative LTM revenue, EBITDA and net income. FMV Opinions notes that representative earnings levels were increased by adding back all annual bonuses of Mossimo’s Co-Chief Executive Officers, Mr. Lewis and Mr. Giannulli. Application of the aforementioned multiples to Mossimo’s representative financial data, and taking averages of the low and the high indications, resulted in a range of equity values of Mossimo on a controlling interest basis of $103.596 million to $121.419 million. Adding cash, the value of Modern Amusement (as described above), and the value of Mossimo’s net operating loss carryforwards resulted in an adjusted range of controlling interest equity values for Mossimo from $119.450 million to $138.070 million, or $7.43 to $8.59 per share.

 

Income capitalization method. FMV Opinions calculated, using an income capitalization method, a range of values for Mossimo based on a fiscal 2006 net income projection provided by Mossimo management, adjusted by FMV Opinions to increase earnings by adding back the bonuses of Mossimo’s Co-Chief Executive Officers, Mr. Lewis and Mr. Giannulli. This value was estimated using a range of weighted average cost of capital (which FMV Opinions refers to as WACC) of 13.5% to 14.5%, a range of perpetuity growth rates of 5.5% to 6.5%, and a control premium of 10 percent. The WACC of 13.5% to 14.5% was deemed appropriate by FMV Opinions given the risk associated with Mossimo and the risk associated with achieving the projections. The following table provides a sensitivity analysis of the value of Mossimo’s operations based on the aforementioned assumptions.

 

Perpetual Growth Rate		Weighted Average Cost of Capital (in millions)
		13.5%			14.0%			14.5%
5.5%		$	116.903		$	110.026		$	103.913
6.0%		$	124.696		$	116.903		$	110.026
6.5%		$	133.603		$	124.696		$	116.903

Based on the average of the aforementioned indications through applying the WACC rates of 13.5 percent and 14.5 percent, respectively, FMV Opinions concluded on a range of equity values of Mossimo on a controlling interest basis of $110.281 million to $125.067 million, before adding cash, the value of Modern Amusement, and the value of net operating loss carryforwards. Adding cash, the value of Modern Amusement, and the value of net operating loss carryforwards, resulted in a range of controlling interest equity values for Mossimo from $126.140 million to $141.720 million, or $7.84 to $8.81 per share.

 

Value summary and conclusion. Based on the aforementioned approaches, FMV Opinions calculated aggregate equity and per-share fair market value indications for Mossimo as follows:

 

Valuation Method		Aggregate Equity Value (in millions)						Per-Share Equity Value
		Low			High			Low			High
Guideline Public Companies		$	122.790		$	145.060		$	7.64		$	9.02
Industry Acquisitions		$	119.450		$	138.070		$	7.43		$	8.59
Income Capitalization		$	126.140		$	141.720		$	7.84		$	8.81
Mean		$	122.790		$	141.620		$	7.64		$	8.81

 

-45-

---

As the table above illustrates, FMV Opinions calculated a range of aggregate and per-share equity values of Mossimo based on the average of the high and low indications of the valuation methods considered. This resulted in a range of equity values for Mossimo from $122.790 million to $141.620 million, or $7.64 to $8.81 per share.

 

Valuation of Iconix

 

In preparing its fairness opinion, FMV Opinions considered the pre-merger value of Iconix as of March 31, 2006 and a pro forma valuation of Iconix to include the impact of the merger and the Mudd brand acquisitions on Iconix’s share price.

 

Pre-Merger Valuation of Iconix ( Public Market Trading Price Method). As part of its analysis, FMV Opinions considered the public market trading price of Iconix as of March 31, 2006 to be a reasonable indication of value for Iconix as of that date. In assessing this, FMV Opinions compared Iconix to the following publicly traded comparable companies:

 

·	Cherokee, Inc.;

 

·	Guess?, Inc.;

 

·	Kenneth Cole Productions, Inc.;

 

·	Perry Ellis International, Inc.;

 

·	Quiksilver, Inc.;

 

·	Skechers USA, Inc.;

 

·	Steve Madden Ltd.; and

 

·

VF Corp.

 

For each comparable company, FMV Opinions calculated, reviewed and analyzed numerous financial and operating performance ratios, as well as numerous market capitalization ratios, such as the enterprise value as a multiple of revenues and EBITDA, and P/E. FMV Opinions calculated and examined market multiples based on the latest twelve month and projected NFY and NFY plus one financial data for the comparable companies. In addition, because Iconix represents a growth company, FMV Opinions considered ratios of Projected NFY and NFY plus one P/E divided by projected five-year earnings growth rates for each of the comparable companies. FMV Opinions compared the range of multiples of the comparable companies to the implied multiples of Iconix based on its current trading price, as illustrated in the following table:

 

Low

High

Median

Selected

Latest Twelve Months

Price to Earnings

9.5x

30.7x

18.8x

(1

)

Next Fiscal Year

Price/Earnings

9.2x

27.5x

17.7x

31.1x

Price to Earnings/Growth

0.90x

1.45x

1.14x

1.49x

Next Fiscal Year Plus One

Price/Earnings

9.1x

19.4x

16.6x

24.3x

Price to Earnings/Growth Rate

0.85x

1.29x

1.07x

1.16x

(1)	Not meaningful.

 

Based on the implied trading multiples of Iconix versus those of similar public companies, and an analysis of Iconix’s trading volume prior to the merger, FMV Opinions determined that the value of Iconix common stock to be $14.55 per share as of March 31, 2006, which FMV Opinions concluded was the fair market value of such stock prior to the merger.

 

Pro Forma Valuation of Iconix (Guideline Public Companies Method). As part of its analyses, FMV Opinions compared certain financial information of Iconix with that of a group of eight other publicly traded companies engaged in similar lines of business to Iconix, or in lines of business which are believed to be exposed to similar overall economic and business trends. The group of companies was the same as indicated above under the “Public Market Trading Price.” In addition, FMV Opinions included Iconix as a comparable company in order to assess the value of Iconix pro forma to include the impact of the merger. For each of the comparable companies, FMV Opinions calculated valuation multiples such as enterprise value as a multiple of Projected NFY EBITDA, and market value of equity to projected NFY earnings. Based on a comparison of Iconix to the aforementioned comparable companies, FMV Opinions selected multiples to apply to Iconix’s representative NFY EBITDA and net income, pro forma to include the impact of the Mossimo and Mudd brand acquisitions as supplied by Iconix’s management. In its analysis, FMV Opinions assumed that the Mudd acquisition would close, which it subsequently did. The following table presents the ranges and medians of the aforementioned multiples and FMV Opinions’ selected range of market multiples:

-46-

---

 

Low

High

Median

Selected

Next Fiscal Year

Enterprise value/EBITDA (1)

6.8x

10.7x

9.2x

12.5x - 13.5x

Price/Earnings

9.2x

31.6x

19.6x

23.0x - 28.0x

(1)	Calculated excluding multiple of Iconix as this multiple was considered not meaningful.

 

Applying the aforementioned multiples to Iconix’s pro forma financial data, and taking averages of the low and high indications, resulted in a range of equity values of Iconix on a minority marketable interest basis from $739.310 million to $854.210 million, or $15.09 to $17.43 per share.

 

Valuation of Consideration to be Received by Mossimo Stockholders

 

In connection with the merger, each stockholder of Mossimo will receive for each share of Mossimo stock held: (i) $4.25 in cash; (ii) 0.2271139 of a share of Iconix common stock; and (iii) a non-transferable continent right to receive additional shares of Iconix common stock in the future if Iconix common stock does not close at or above $18.71 for twenty consecutive days during the twelve month period following the effective date of the merger (subject to certain limitations set forth in the merger agreement). As the following table illustrates, FMV Opinions based its value of the 0.2271139 of a share of Iconix common stock to be received in the merger on the three-day average price of Iconix through March 31, 2006 and the high end of its pro-forma valuation of Iconix. This indicated a value range for Iconix common stock from $14.31 per share to $17.43 per share.

 

Iconix Stock Price		$	14.31		$	17.43
Cash		$	4.25		$	4.25
Value of Initial Iconix Stock		$	3.25		$	3.96
Value of Non-Transferable Contingent Share Right		$	0.45		$	0.11
Total Value of Consideration		$	7.95		$	8.32

As indicated above, FMV Opinions valued the consideration to be received in connection with the merger in the range of $7.95 per share to $8.32 per share of Mossimo stock. In comparison, FMV Opinions valued Mossimo’s common stock in the range of $7.64 per share to $8.81 per share.

 

FMV Opinions estimated the value of the non-transferable contingent right to receive additional shares of Iconix stock based on an analysis using the Black-Scholes option pricing model. Essentially, the stock portion of the consideration received in the merger can be expressed in three parts. The first is the value of the maximum amount of shares that can be received, which is $4.25 per share. From this, the second part, which is subtracted from $4.25 per share, is the value of a call on the maximum number of shares with a stock price and exercise price equal to the value assumption for Iconix stock. The second part of the equation represents the forfeiture of contingent shares as the Iconix stock price rises. The third part, a call on Iconix stock assuming a stock price equal to the FMV Opinions value assumption on Iconix and an exercise price of $18.71 per share (which represents the 12-month target price pursuant to the merger agreement at which point the non-transferable contingent right to receive any additional shares ceases) is added to $4.25 per share. This third part of the equation represents the fact that the initial shares are never forfeited. Pursuant to the aforementioned formula, as the value of Iconix stock rises from $14.31 to $18.71 per share, the value of the initial 0.2271139 shares of Iconix stock received by Mossimo stockholders increases, the value of the first call on Iconix stock increases but is offset by the reduced number of contingent shares, and the value of the second call option increases. The following table, which illustrates the aforementioned formula, assuming various prices for Iconix’s stock, illustrates this concept.

-47-

---

 

	Iconix Share Price		Value of Maximum Number of Shares			Less: Value of a Call on Maximum Number of Shares (1)			Plus: Call on Minimum Number of Shares (2)			Value of Stock Consideration			Less: Value of Initial Shares			Value of Non-Transferable Contingent Right			Value of all Consideration(3)
$	14.31		$	4.25		$	1.02		$	0.47		$	3.70		$	3.25		$	0.45		$	7.95
$	17.43		$	4.25		$	1.02		$	0.84		$	4.07		$	3.96		$	0.11		$	8.32
$	18.71		$	4.25		$	1.02		$	1.02		$	4.25		$	4.25		$	0.00		$	8.50

 

(1)	At Iconix share price.

 

(2)	At $18.71.

 

(3)	Equals the value of stock consideration plus $4.25 cash.

 

FMV Opinions also considered the premiums implied by the range of per-share value consideration over Mossimo’s share prices one day, 30-days, and 60-days prior to the announcement of the merger. FMV Opinions’ value of the consideration of $7.95 to $8.32 per share of Mossimo common stock implied the following premiums.

 

Premium to:		Range of Premium
One trading day prior to announcement			45% to 52	%
30 calendar days prior to announcement			29% to 35	%
60 calendar days prior to announcement			32% to 39	%

FMV Opinions also examined stock price premiums on nine operating companies in the same or similar industry to that of Mossimo whereby control was acquired. The median control premium in this analysis was 26 percent, with a low of 2.0 percent and a high of 138 percent.

 

FMV Opinions’ Conclusion as to the Fairness of the Merger Consideration to be Received by Mossimo Stockholders

 

FMV Opinions concluded that the fair market value of Mossimo common stock, on a controlling interest basis, was in the range from $7.64 per share to $8.81 per share. Furthermore, FMV Opinions determined that the fair market value of the consideration to be received by stockholders of Mossimo in connection with the merger was in the range from $7.95 to $8.32 per share. Based on the foregoing, FMV Opinions concluded that the consideration to be received by the holders of common stock of Mossimo in connection with the merger is fair, from a financial point of view, as of March 31, 2006.

 

FMV Opinions conducted its analyses and issued its opinion as of March 31, 2006, based on information available on March 31, 2006. FMV Opinions did not consider any developments that may have occurred, or any additional information that may have become available, after March 31, 2006.

 

The preparation of a fairness opinion is a complex process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of these methods to the particular circumstances and, therefore, is not necessarily susceptible to partial analysis or summary description. Selected portions of the analyses or of the summaries set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying the FMV Opinions opinion. In arriving at its fairness determination, FMV Opinions considered the results of all such analyses. FMV Opinions made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all such analyses. No company or transaction used in the above analyses as a comparison is directly comparable to Mossimo or the proposed Iconix merger.

 

Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by such analyses. Because such analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of Mossimo, FMV Opinions or any other person assumes responsibility if future results are materially different from those forecast. As described above, the FMV Opinions opinion was among many factors taken into consideration by Mossimo’s board in making its determination to approve the proposed Iconix merger.

 

FMV Opinions is a nationally-recognized firm engaged in the valuation of businesses and securities in connection with mergers and acquisitions, competitive biddings, private placements and valuations for corporate and other purposes. After interviewing several valuation firms, the board selected FMV Opinions to act as its financial advisor in connection with the proposed Iconix merger based on FMV Opinions’ qualifications, expertise, reputation, cost estimates and the recommendations of Mossimo’s financial advisors. No restrictions or limitations were imposed by the board upon FMV Opinions with respect to the investigations made or the procedures followed by FMV Opinions in rendering its opinion.

-48-

---

Pursuant to a letter agreement dated April 4, 2006, Mossimo engaged FMV Opinions as its financial advisor with respect to assessing the fairness as of March 31, 2006 of the merger consideration to be received by the stockholders of Mossimo. Mossimo paid FMV Opinions a fee of $75,000, plus reasonable out-of-pocket expenses, for its services.

 

Position of Mossimo as to the Purposes, Alternatives, Reasons and Effects of the Merger

 

Purposes. The purpose of the merger is for Iconix to indirectly acquire all outstanding shares of common stock of Mossimo in exchange for cash and Iconix common stock, while providing liquidity for, and maximizing the value to be received by, the public stockholders.

 

Alternatives. Mossimo’s board considered various alternatives to Iconix’s proposal, including those described under “ The Merger - Background and Reasons for the Merger.”

 

Reasons. The board’s reasons for the merger are described under “ The Merger -- Background and Reasons for the Merger .”

 

Effects. As a result of the merger, Mossimo will cease to be a publicly held company and Iconix will indirectly hold all of the capital stock, assets and liabilities of Mossimo through one of Iconix’s subsidiaries. If the merger occurs, stockholders, other than Iconix and its affiliates, will no longer have any equity interest in Mossimo, and instead will have only the right to receive the consideration pursuant to the merger agreement. See “ The Merger - What You Will Receive” on page 39 of this proxy statement/prospectus. Therefore, former stockholders of Mossimo will not receive any benefits from Mossimo’s business after the merger, nor will they bear the risk of any decrease in the value of Mossimo after the merger, except indirectly through ownership of Iconix stock, if they retain shares received in the merger.

 

After the merger, Mossimo will deregister its common stock under the Exchange Act. In addition, as a private company, Mossimo’s officers, directors and the owners of more than 10% of Mossimo’s common stock will no longer be subject to the short-swing profit provisions of Section 16(b) of the Exchange Act.

 

Position of Iconix as to the Purposes, Alternatives, Reasons and Effects of the Merger

 

Purposes. The purpose of the merger for Iconix is to acquire all outstanding shares of common stock of Mossimo. The merger will allow Iconix to acquire Mossimo’s business and assets and operate it as a private company.

 

Reasons. In reaching its decision to adopt the merger agreement, Iconix’s board of directors consulted with its financial and legal advisors and with Iconix’s senior management and considered a number of factors, including but not limited to:

 

·	the expectation that the acquisition will be accretive to Iconix and add $20 - $25 million in incremental annualized royalty revenue in 2007; however, there can be no assurance with respect to the amount and timing of any future revenue enhancements resulting from the merger.

 

·	Iconix has successfully acquired and integrated three different brands in the last 12 months that have been highly accretive to its earnings and driven substantial appreciation of the Iconix share price.

 

·	Iconix’s belief that, through the organic growth of its existing brands and potential future acquisitions, it will continue to be a high-growth company.

 

·	Iconix’s belief that Mossimo is a strong and growing brand with high consumer awareness in both the U.S. and around the world.

 

·

Iconix’s belief that the Mossimo brand is an attractive property to be licensed internationally. Mossimo currently generates approximately $1 million per year in licensing revenue through agreements with third parties in Australia, Chile, Mexico and Asia, and Iconix believes that there are opportunities to further penetrate these territories as well as enter into new agreements in other countries around the world.

 

·	the addition of Mossimo to the Iconix portfolio of brands furthers Iconix’s strategy to diversify in a number of different ways:

 

·	channel diversification - with the addition of Mossimo, Iconix will have substantially greater penetration within the mass channel of distribution and, for the first time, Iconix will have a brand distributed through Target stores.

 

·	product diversification - Mossimo, having a large men’s apparel and accessories business, will further balance Iconix’s portfolio, which today is concentrated more heavily in women’s apparel and accessories.

 

-49-

---

 

·

revenue base diversification - with the addition of Mossimo, on a pro forma basis, Iconix is expected to be at the point where its largest brand accounts for only approximately 22% of its revenue base, enhancing Iconix’s ability to limit the adverse effect of potential softness in any particular brand.

 

·	the addition of Mossimo Giannulli to Iconix as creative director for the Mossimo brand is expected to facilitate Iconix’s growth of the Mossimo business at Target and its ability to enter into new, international license agreements.

 

Additionally, Mossimo will no longer be subject to the reporting requirements of the Exchange Act. This will allow Mossimo to eliminate the time and significant expense devoted by its management and certain other employees to matters which relate exclusively to Mossimo being a publicly held company. Although Iconix is a public company, the separate costs previously incurred by Mossimo as a publicly held company will be reduced significantly, including the additional legal costs, insurance costs, the costs of certain accounting and auditing activities and internal controls, the cost of annual meetings, the cost of preparing, printing and mailing corporate reports and proxy statements to Mossimo stockholders, the expense of a transfer agent and the cost of investor relations activities.

 

These assessments are based upon publicly available information regarding Mossimo, Iconix’s knowledge of Mossimo and Iconix’s experience in investing in or managing public and private companies generally.

 

Iconix’s board of directors believes that the benefits of the merger will be realized based on the relatively extensive due diligence performed by Iconix’s senior management with respect to Mossimo and the merger, as well as the board’s business experience and informed business judgment. For a discussion of the potential risks related to the merger, please see “Risk Factors - Risks Relating to the Merger.” Iconix’s board of directors concluded, however, that the merger’s potential benefits to Iconix and its stockholders outweighed the countervailing risks. In view of the variety of the factors considered in its deliberations in connection with the merger, Iconix’s board of directors did not find it practicable to, and accordingly did not, quantify or otherwise assign relative weights to, the specific factors considered in reaching its determination. In addition, individual members of Iconix’s board may have applied different weight to different factors.

 

Effects. As a result of the merger, all of assets and liabilities of Mossimo will be indirectly owned by Iconix through a wholly-owned subsidiary. If the merger is consummated, stockholders other than Iconix will no longer have an equity interest in Mossimo and will not participate in any of the future earnings growth of Mossimo except indirectly through ownership of Iconix stock, if they retain shares received in the merger, and instead will have only the right to receive cash and stock consideration pursuant to the merger agreement. See “ The Mossimo Special Meeting - Payment of Merger Consideration and Surrender of Stock Certificates .” Similarly, after exchanging their shares in the merger, stockholders of Mossimo will not bear the risk of any decrease in the value of Mossimo except indirectly through ownership of Iconix stock, if they retain shares received in the merger. If the merger is consummated, Iconix will have a 100% interest in the surviving company’s net book value and tax attributes after the merger (the use of such tax attributions is subject to certain limitations).

 

As a result of the merger, the surviving company will be a privately held corporation and there will be no public market for Mossimo stock . Mossimo stock will not be traded on any securities exchange. In addition, registration of Mossimo common stock under the Exchange Act will be terminated. This termination will make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions and the requirement of furnishing a proxy or information statement in connection with stockholders’ meetings, no longer applicable.

 

Iconix’s Plans for Mossimo

 

Iconix intends to operate the Mossimo business by utilizing Mossimo Giannulli and a small team based in Santa Monica, California to assist Target in the design of the collection. As creative director for Mossimo, Mr. Giannulli will also make himself available to Target for marketing, events and promotions as needed and will work with Iconix to license the Mossimo brand internationally. Iconix intends to leverage its New York-based marketing, brand management and business development infrastructure to oversee and grow the Mossimo business both at Target and abroad.

 

Appraisal Rights

 

If the merger is consummated, holders of Mossimo common stock who follow the procedures set forth below will be entitled to appraisal rights under Section 262 of the DGCL.

 

Delaware law entitles the holders of record of shares of Mossimo common stock who follow the procedures specified in Section 262 of the DGCL to have their shares appraised by the Delaware Court of Chancery and to receive the “fair value” of those shares, without taking into account the merger, as determined by the court. The “fair value” could be greater than, less than or the same as the merger consideration offered by Iconix.

 

In order to exercise these rights, a stockholder must demand and perfect the rights in accordance with Section 262. The following is a summary of the material provisions of Section 262 and is qualified in its entirety by reference to Section 262, a copy of which is attached as Appendix C to this proxy statement/prospectus. Stockholders should carefully review Section 262 as well as the information discussed below.

-50-

---

Any stockholder who wishes to exercise appraisal rights under Section 262 must do all of the following:

 

·

The stockholder must deliver to Mossimo a written demand for appraisal of shares of the Mossimo stock held. The demand must reasonably inform Mossimo of the identity of the stockholder and the appraisal demand, before the vote is taken on the merger agreement at the special meeting. This written demand for appraisal must be in addition to, and separate from, any proxy or vote against the merger agreement. Voting against, abstaining from voting or failing to vote on the merger agreement does not constitute a valid demand for appraisal within the meaning of Section 262.

 

·

The stockholder must not vote in favor of adopting the merger agreement. Failing to vote or abstaining from voting satisfies this requirement. However, a vote in favor of the merger agreement, by proxy or in person, or the return of a signed proxy that does not specify an abstention or a vote against adoption of the merger agreement, constitutes a vote in favor of the merger agreement and thereby waives the stockholder’s right of appraisal and nullifies any previously delivered written demand for appraisal.

 

·	The stockholder must continuously hold the shares of record until the completion of the merger.

 

All written demands for appraisal must be addressed to Mossimo, Inc., 2016 Broadway Boulevard, Santa Monica, California 90404, Attention: Vicken Festekjian, Chief Financial Officer, and be received before the vote is taken on the merger agreement at the special meeting. The demand must reasonably inform Mossimo of the identity of the stockholder and that the stockholder is demanding appraisal of his, her or its shares of Mossimo stock.

 

The written demand for appraisal must be executed by or for the record holder of shares of the Mossimo stock, fully and correctly, as the holder’s name appears on the certificate(s) for their shares. If the shares of Mossimo stock are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of the demand must be made in that capacity, and if the shares are owned of record by more than one person, such as in a joint tenancy or tenancy in common, the demand must be executed by or for all joint owners. An authorized agent, including one of two or more joint owners, may execute the demand for appraisal for a holder of record; however, the agent must identify the record owner(s) and expressly disclose the fact that, in executing the demand, the agent is acting as agent for the record owner(s).

 

A beneficial owner of shares of the Mossimo stock held in “street name” who desires appraisal should take such actions as may be necessary to ensure that a timely and proper demand for appraisal is made by the record holder of the shares. Shares of Mossimo stock held through brokerage firms, banks and other nominee holders are frequently deposited with and held of record in the name of a nominee of a central security depository such as Cede & Co. Any beneficial owner desiring appraisal who holds shares of stock through a nominee holder is responsible for ensuring that the demand for appraisal is timely made by the record holder. The beneficial holder of the shares should instruct the nominee holder that the demand for appraisal should be made by the record holder of the shares which may be the nominee of a central security depository if the shares have been so deposited.

 

A record holder, such as a bank broker, fiduciary, depository or other nominee, who holds shares of the Mossimo stock as a nominee for others, may exercise appraisal rights with respect to the shares held for all or less than all beneficial owners of the shares as to which the person is the record owner. In that case, the written demand must set forth the number of shares of Mossimo stock covered by the demand. Where the number of shares is not expressly stated, the demand will be presumed to cover all shares of Mossimo stock outstanding in the name of the record owner.

 

Within ten days after the merger, Mossimo will give written notice of the date of the completion of the merger to each stockholder of Mossimo who has properly demanded appraisal and satisfied the requirements of Section 262, referred to as a dissenting stockholder. Within 120 days after the completion of the merger, Mossimo or any dissenting stockholder may file a petition in the Delaware Court of Chancery demanding a determination of the fair value of the shares of Mossimo stock that are held by all dissenting stockholders. Mossimo is under no obligation, and has no present intention, to file such a petition. Accordingly, it is the obligation of the stockholders of Mossimo seeking appraisal rights to initiate all necessary actions to perfect appraisal rights within the time prescribed by Section 262.

 

If a petition for appraisal is timely filed, the court will determine which stockholders are entitled to appraisal rights and will determine the fair value of the shares of Mossimo stock held by dissenting stockholders, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with a fair rate of interest, if any, to be paid on the amount determined to be fair value. In determining fair value, the court shall take into account all relevant factors. The Delaware Supreme Court has stated, among other things, that “proof of value by any techniques or methods which are generally acceptable in the financial community and otherwise admissible in court” should be considered in an appraisal proceeding. In addition, Delaware courts have decided that the statutory appraisal remedy may or may not be, depending on the factual circumstances, the stockholder’s exclusive remedy in connection with transactions such as the merger. The court may determine fair value to be more than, less than or equal to the consideration that the dissenting stockholder would otherwise be entitled to receive pursuant to the merger agreement. If a petition for appraisal is not timely filed, then the right to an appraisal will cease. The costs of the appraisal proceeding shall be determined by the court and taxed against the parties as the court determines to be equitable under the circumstances. Upon application of a stockholder, the court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including reasonable attorneys’ fees and the fees and expenses of experts, to be charged pro rata against the value of all shares of Mossimo stock entitled to appraisal.

-51-

---

From and after the completion of the merger, no dissenting stockholder shall have any rights of a stockholder with respect to that holder’s shares for any purpose, except to receive payment of fair value and to receive payment of dividends or other distributions, including the special distribution, on the holder’s shares of Mossimo stock, if any, payable to the stockholders of Mossimo of record as of a time prior to the completion of the merger. If a dissenting stockholder delivers to the surviving company a written withdrawal of the demand for an appraisal within 60 days after the completion of the merger or subsequently with the written approval of the surviving company, or, if no petition for appraisal is filed within 120 days after the completion of the merger, then the right of that dissenting stockholder to an appraisal will cease and the dissenting stockholder will be entitled to receive only the merger consideration. Once a petition for appraisal is filed with the Delaware court, the appraisal proceeding may not be dismissed as to any stockholder without the approval of the court.

 

If you wish to exercise your appraisal rights, you must not vote in favor of the merger agreement and you must strictly comply with the procedures set forth in Section 262 of the Delaware General Corporation Law. If you fail to take any required step in connection with the exercise of appraisal rights, it will result in the termination or waiver of these rights.

 

Material U.S. Federal Income Tax Consequences

 

General

 

The following is a summary of the expected material U.S. federal income tax consequences of the merger to Mossimo stockholders who are U.S. persons (as defined below). This summary does not discuss the tax consequences of the merger to Mossimo stockholders who are not U.S. persons. This summary is based on provisions of the Code, Treasury Regulations promulgated thereunder, and administrative and judicial interpretations of the Code, all as in effect as of the date of this proxy statement/prospectus, and all of which are subject to change, possibly with retroactive effect.

 

This discussion does not address all U.S. federal income tax considerations that may be relevant to particular Mossimo stockholders in light of their individual circumstances or to Mossimo stockholders who are subject to special rules, such as:

 

·	financial institutions and mutual funds;

 

·

banks;

 

·	insurance companies;

 

·	investment companies;

 

·	retirement plans;

 

·	tax-exempt organizations;

 

·	dealers in securities;

 

·	traders in securities that elect to use a mark-to-market method;

 

·	persons that hold Mossimo common stock as part of a straddle, a hedge against a currency risk or a constructive sale or conversion transaction;

 

·	persons that are or who hold Mossimo common stock through partnerships or pass-through entities;

 

·	persons who are not citizens or residents of the United States or who are foreign corporations, foreign partnerships or foreign estates or trusts;

 

·	persons whose functional currency is not the U.S. dollar;

 

·	stockholders who hold Mossimo stock as qualified small business stock within the meaning of section 1202 of the Code;

 

·	persons who are subject to the alternative minimum tax provisions of the Code; or

 

·	persons who acquired their Mossimo common stock in connection with a stock option or stock purchase plans or in some other compensatory transaction.

 

This summary is also limited to persons who hold Mossimo common stock as a capital asset. The following summary does not address the tax consequences of the merger under state, local and foreign laws and U.S. federal laws other than U.S. federal income tax laws. Mossimo stockholders are urged to consult their tax advisors as to the specific tax consequences to them of the merger, including the applicability and effect of U.S. federal, state, local and foreign income and other tax laws to their particular circumstances.

 

-52-

---

For purposes of this discussion, a “U.S. person” is:

 

·	a citizen or individual resident of the U.S., including an alien individual who meets one of the resident-alien tests under Section 7701(b) of the Code;

 

·	a corporation or other entity taxable as a corporation created or organized under the laws of the U.S. or any of its political subdivisions;

 

·

a trust if (A) a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (B) the trust has made a valid election under the applicable Treasury Regulations to be treated as a U.S. person; or

 

·	an estate, the income of which is subject to U.S. federal income taxation regardless of its source.

 

Tax Opinions

 

Iconix and Mossimo have structured the merger to qualify as a reorganization within the meaning of Section 368(a) of the Code. The obligation of Iconix to effect the merger is conditioned on its receipt of an opinion from Blank Rome LLP to the effect that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code.

 

The opinion of Blank Rome LLP and the opinions set forth below have been rendered on the basis of certain assumptions, representations, and covenants, including those contained in officers’ certificates of Mossimo and Iconix, all of which must be true and accurate in all respects as of the effective date of the registration statement and must continue to be true and accurate in all respects as of the effective time of the merger. If any of those assumptions or representations are inaccurate, incomplete, or untrue or any of the covenants are breached, the conclusions contained in the opinions referred to in this paragraph or stated below could be affected. Further, the accuracy of this discussion could be affected to the extent that there is an adverse change in the U.S. federal income tax law.

 

This discussion and the tax opinion do not bind the Internal Revenue Service from adopting a contrary position, and it is possible that the Internal Revenue Service may successfully assert a contrary position in litigation or other proceedings. No ruling has been, or will be, sought from the Internal Revenue Service as to the tax consequences of the merger.

 

U.S. Federal Income Tax Consequences to the Entities

 

Except as may result from the sale by Mossimo of Modern Amusement to Mr. Giannulli, no gain or loss will be recognized by Mossimo or Iconix as a result of the merger transaction.

 

U.S. Federal Income Tax Consequences to Mossimo stockholders

 

General. Subject to the limitations and qualifications set forth herein, the following discussion constitutes the opinion of Blank Rome LLP as to the material U.S. federal income tax consequences of the merger to a Mossimo stockholder that is a U.S. person:

 

·

Each Mossimo stockholder generally will recognize gain (but not loss) equal to the lesser of: (1) the amount of cash received by the stockholder in the merger and (2) the excess, if any, of (a) the sum of the amount of cash and the fair market value of the Iconix common stock received by the stockholder in the merger over (b) that stockholder’s adjusted tax basis in the Mossimo common stock exchanged by the stockholder in the merger. For this purpose, a Mossimo stockholder must calculate gain separately for each identifiable block of Mossimo common stock exchanged by the stockholder in the merger. Cash received instead of fractional shares of Iconix stock is excluded from the calculations discussed in (1) and (2) above, and instead is treated as discussed below under “— Cash Received Instead of a Fractional Share.” Except as discussed under “—Possible Treatment of Cash as a Dividend,” any gain recognized by a Mossimo stockholder in the merger generally will constitute capital gain.

 

·

The aggregate tax basis of the shares of Iconix common stock received by a Mossimo stockholder in exchange for Mossimo common stock pursuant to the merger will be the same as the aggregate tax basis of the stockholder’s Mossimo common stock surrendered in the merger, decreased by the amount of cash received by the stockholder in the merger and increased by the amount of gain or dividend income recognized by the stockholder in the merger.

 

·	The holding period of the shares of Iconix common stock received by a Mossimo stockholder in the merger generally will include the holding period of the stockholder’s Mossimo common stock exchanged for Iconix common stock

 

·

If a Mossimo stockholder has differing bases or holding periods in respect of his or her shares of Mossimo common stock, such stockholder should consult his or her tax advisor prior to the exchange to identify the bases or holding periods of the particular shares of Iconix common stock received in the merger.

 

-53-

---

 

Possible Treatment of Cash as a Dividend. There are certain circumstances, generally involving a Mossimo stockholder who is also a substantial holder of Iconix common stock, in which all or part of the gain recognized by such stockholder would be treated as a dividend rather than as capital gain. Each Mossimo stockholder should consult his or her tax advisor about the possibility that all or a portion of any cash received in exchange for Mossimo common stock will be treated as a dividend, based on the stockholder’s specific circumstances.

 

Cash Received Instead of a Fractional Share.   Iconix will not issue any fractional shares of Iconix common stock in the merger. Rather, each holder of Mossimo common stock exchanged in the merger who otherwise would have received a fraction of a share of Iconix common stock will receive cash. A Mossimo stockholder who receives cash instead of a fractional share of Iconix common stock generally will recognize capital gain or loss based on the difference between the amount of cash received and the tax basis that the stockholder would have had in such fractional share.

 

Capital Gain and Dividend Income of Individuals. Capital gain recognized by an individual holder of Mossimo common stock in connection with the merger generally will be long term capital gain subject to a maximum U.S. federal income tax rate of 15% if the individual’s holding period for the Mossimo common stock is more than one year at the effective time of the merger. Capital gain on stock held for one year or less may be taxed at regular rates of up to 35%. The deductibility of capital losses is subject to limitations. Any dividend income recognized in the merger by individual Mossimo stockholders generally will be subject to tax at a maximum rate of 15%.

 

Reporting Requirements. Mossimo stockholders receiving Iconix common stock in the merger must file a statement with their U.S. federal income tax returns setting forth their tax basis in the Mossimo common stock exchanged in the merger and the fair market value of Iconix common stock and the amount of any cash received in the merger. In addition, Mossimo stockholders will be required to retain permanent records of these facts relating to the merger.

 

U.S. Federal Income Tax Consequences to Stockholders that Exercise Appraisal Rights

 

A U.S. person who receives cash pursuant to the exercise of appraisal rights generally will recognize capital gain or loss measured by the difference between the cash received and their adjusted tax basis in its Mossimo common stock.

 

Backup Withholding

 

Certain holders of Mossimo common stock may be subject to backup withholding (currently at a rate of 28%) on amounts received pursuant to the merger. Backup withholding will not apply, however, to a Mossimo stockholder who provides a correct taxpayer identification number or a certificate of foreign status and certain other required information or comes within certain exempt categories and, in each case, complies with applicable certification requirements. In addition to being subject to backup withholding, if a Mossimo stockholder does not provide Iconix (or the exchange/paying agent) with his or her correct taxpayer identification number or a certificate of foreign status or other required information, the stockholder may be subject to penalties imposed by the Internal Revenue Service. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against the stockholder’s U.S. federal income tax liability, provided that the stockholder furnishes certain required information to the Internal Revenue Service.

 

Obtain Personal Tax Advice

 

The summary of material U.S. federal income tax consequences set forth above is intended to provide only a general summary of the merger and is not intended to be a complete analysis or description of all potential U.S. federal income tax consequences of the merger. In addition, the summary does not address tax consequences that may vary with, or are contingent on, individual circumstances. Moreover, the summary does not address any non-income tax or any foreign, state, local or other tax consequences of the merger. Accordingly, each Mossimo stockholder is urged to consult his or her own tax advisor to determine the particular federal, state, local or foreign income, reporting or other tax consequences of the merger to that stockholder.

 

Certain Legal Matters

 

General

 

Except as described in this section, neither Mossimo nor Iconix is aware of any license or regulatory permit that appears to be material to the business of Mossimo that might be adversely affected by the merger, nor are they aware of any approval or other action by a domestic or foreign governmental, administrative or regulatory agency or authority required for the merger to occur that is not described in this proxy statement/prospectus. Should any such approval or other action be required, Iconix and Mossimo presently contemplate that such approval or other action will be sought, except as described below under State Anti-Takeover Statutes . While Iconix does not presently intend to delay the merger pending the outcome of any such matter (unless otherwise described in this proxy statement/prospectus), there can be no assurance:

 

·	that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions;

 

·	that failure to obtain the approval or other action might not result in consequences adverse to Mossimo’s business; or

 

-54-

---

 

·	that there might be conditions to obtaining a required approval or action, including, without limitation, the divestiture of certain parts of Mossimo’s business.

 

See “ The Merger Agreement - Conditions to the Merger,” below, for certain conditions to the merger, including conditions with respect to governmental actions.

 

State Anti-Takeover Statutes

 

A number of states have adopted laws and regulations that purport to apply to attempts to acquire corporations that are incorporated in those states, or whose business operations have substantial economic effects in those states, or which have substantial assets, security holders, employees, principal executive offices or principal places of business in such states. In 1982, in Edgar v. MITE Corp ., the Supreme Court of the United States invalidated on constitutional grounds the Illinois Business Takeover statute, which, as a matter of state securities law, made certain corporate acquisitions more difficult. However, in 1987, in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the State of Indiana may, as a matter of corporate law and in particular with respect to those aspects of corporate law concerning corporate governance, constitutionally disqualify a potential acquirer from voting on the affairs of a target corporation without the prior approval of the remaining stockholders. The state law before the Supreme Court was by its terms applicable only to corporations that had a substantial number of stockholders in the state and were incorporated there.

 

Section 203 of the DGCL provides certain restrictions on business combination transactions with a person who is or has become an “interested stockholder,” as defined in Section 203. Generally speaking, an interested stockholder is a person, group or entity that has acquired ownership of 15% or more of the common stock of a Delaware corporation.

 

Regulatory Filings and Approvals

 

Mossimo does not believe that any material federal or state regulatory approvals, filings or notices are required by it in connection with the merger, except for the HSR filing and the filing of this proxy statement/prospectus with the SEC and a filing of a certificate of merger with the Delaware Secretary of State. The Federal Trade Commission and the Department of Justice granted early termination of the HSR waiting period effective May 30, 2006.

-55-

---

 

THE MERGER AGREEMENT

 

The following is a summary of certain provisions of the merger agreement. We urge you to read the merger agreement carefully and in its entirety because it is the legal document governing the merger.

 

Structure of the Merger

 

In accordance with the merger agreement and Delaware law, Mossimo will merge with and into Moss Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Iconix. As a result of the merger, the separate corporate existence of Mossimo will cease and Moss Acquisition Corp. will survive as a wholly-owned subsidiary of Iconix. As part of the merger, Moss Acquisition Corp. will change its name to Mossimo, Inc.

 

Merger Consideration

 

Upon completion of the merger, Iconix will acquire all of the outstanding shares of Mossimo for cash and common stock of Iconix with a deemed value of $7.50 per share (based on the value of Iconix common stock at the time the merger agreement was entered into) of Mossimo common stock (which the merger agreement refers to as the initial merger consideration). If Iconix common stock does not close at or above $18.71 for at least twenty consecutive trading days during the year following the merger, the holders of Mossimo common stock prior to the effective time (as defined below) of the merger will also receive a non-transferable contingent right to receive additional shares of Iconix common stock (which the merger agreement refers to as additional merger consideration).

 

At the effective time of the merger (which the merger agreement refers to as the effective time), each outstanding share of Mossimo will be entitled to receive the initial merger consideration, consisting of: (a) 0.2271139 shares of Iconix common stock, and (b) $4.25 in cash, subject to adjustment if Mossimo has a cash balance of less than $17,000,000 (as adjusted pursuant to the merger agreement) for each share of Mossimo common stock outstanding prior to the effective time. The additional merger consideration will become payable if Iconix common stock does not close at or above $18.71 during each day of at least one twenty consecutive trading day period during the twelve-month period following the effective date (which the merger agreement refers to as the measurement period). If the additional merger consideration becomes payable, Iconix will issue to each former holder of Mossimo common stock entitled to merger consideration a number of additional shares of Iconix common stock determined by dividing: (i) the product of (A) the number of shares of Iconix common stock issued to such holder as initial merger consideration, multiplied by (B) the difference between (x) $18.71 and (y) the greater of (I) the highest twenty consecutive trading day average closing sale price of Iconix common stock during the measurement period and (II) the average closing sale price of Iconix common stock as reported on the NASDAQ Global Market for the three business days prior to the effective date (which the merger agreement refers to as Iconix average closing price) (the higher stock price in this clause (y) is referred to as the actual price), by (ii) the actual price. The number of shares of Iconix common stock issuable as initial and/or additional merger consideration is subject to limitation as set forth in the merger agreement.

 

Both the stock number and the cash amount can be adjusted under the merger agreement. If the average closing price of Iconix common stock for the three trading days prior to the closing of the merger equals or exceeds $22.80 per share, as determined by a formula set forth in Section 1.3(d) of the merger agreement, the aggregate value of the initial merger consideration will be capped at approximately $150,000,000. Iconix may also elect to pay any portion of initial merger consideration in excess of an aggregate of $135,147,866 in either cash or Iconix common stock. In no event may the cash portion of the merger consideration exceed 60% of the total merger consideration.

 

Treatment of Mossimo Stock Options

 

Subject to the merger occurring, each unexpired and unexercised option to purchase Mossimo common stock, whether vested or unvested, to purchase shares of the Mossimo common stock, without regard to whether such option is then exercisable, will be cancelled. Each former holder of any cancelled Mossimo option shall be entitled to receive, in consideration of the cancellation, a payment in cash (subject to any applicable tax withholding) of the excess, if any, of $7.50 (subject to the per-share amount of any reduction in cash consideration) over the per-share exercise price of the Mossimo common stock previously subject to such option. If the additional merger consideration becomes payable pursuant to the merger agreement, each holder of a Mossimo option cancelled pursuant to the merger agreement who was entitled to a payment therefor will receive a cash payment equal to the per-share cash value of the additional merger consideration he or she would have received if he or she had exercised the option prior to the effective time, less any applicable tax withholding.

 

Completion and Effectiveness of the Merger

 

The merger will be effective at the time and date stated in the certificate of merger that will be filed with the Secretary of State of Delaware, the state of incorporation of Mossimo and Moss Acquisition Corp. Under the merger agreement, the filing of the certificate of merger and the closing of the transactions contemplated in the merger agreement will occur as promptly as practicable, but not later than two days after the satisfaction or waiver of all conditions to the merger.

 

Mossimo and Iconix are working to complete the merger as soon as possible. However, because completion of the merger is subject to regulatory approvals and other conditions, Mossimo and Iconix cannot predict the actual timing of the closing.

-56-

---

Dissenters’ Shares

 

Shares of Mossimo common stock held by any Mossimo stockholder that properly demands payment for the shares in compliance with dissenters’ appraisal rights under Section 262 of the DGCL will not be converted into the right to receive the merger consideration. Instead, Mossimo stockholders who properly exercise appraisal rights will be entitled to payment as described in this proxy statement/prospectus under “The Merger—Appraisal Rights.” However, if any Mossimo stockholder fails to perfect, or otherwise waives, withdraws or loses the right to receive payment under Section 262 of the DGCL, then that Mossimo stockholder will not be paid in accordance with Section 262, and the shares of Mossimo common stock held by that Mossimo stockholder will be exchangeable solely for the right to receive the merger consideration.

 

Representations and Warranties

 

In the merger agreement Mossimo and Mr. Giannulli, on the one hand, and Iconix and Moss Acquisition Corp., on the other hand, make certain representations and warranties to each other about their respective businesses. The representations and warranties in the merger agreement relate to:

 

·

corporate existence, qualification to conduct business and corporate power;

 

·

capitalization, ownership and subsidiaries;

 

·

corporate authority to enter into and carry out the obligations of the merger agreement;

 

·

absence of conflicts between the merger agreement and applicable law, the charter documents and bylaws of each company, and certain material agreements;

 

·

governmental consents and approvals required for completion of the merger;

 

·

financial statements, filings with the SEC and internal accounting and disclosure controls and procedures;

 

·

absence of undisclosed liabilities;

 

·

absence of specified changes or events through the closing of the merger;

 

·

legal proceedings and litigation;

 

·

compliance with applicable laws;

 

·

properties and assets;

 

·

material contracts;

 

·

payment of fees to finders or brokers in connection with the merger;

 

·

tax matters;

 

·

information supplied in the merger agreement and related documents;

 

·

intellectual property; and

 

·

NASDAQ requirements.

 

The merger agreement also contains representations and warranties of Mossimo and Mr. Giannulli relating to employee arrangements, benefit plans and labor matters, board approval, key customers and suppliers, accounts receivable and payable, inventory and certain material contracts.

 

The merger agreement also contains representations and warranties of Iconix and Moss Acquisition Corp. regarding Iconix’s financing arrangements in respect of the merger.

 

The representations and warranties contained in the merger agreement are in many cases subject to materiality and knowledge qualifications in many respects, and do not survive the effective time of the merger.

 

This description of the representations and warranties has been included in this proxy statement/prospectus to provide stockholders with information regarding the terms of the merger agreement. The assertions embodied in the representations and warranties are qualified by information in confidential disclosure schedules that Iconix and Mossimo have exchanged in connection with signing the merger agreement (although any specific facts that contradict the representations and warranties in the merger agreement in any material respect have been disclosed in this proxy statement/prospectus). The disclosure schedules contain information that modifies, qualifies and creates exceptions to the representations and warranties. Moreover, certain representations and warranties may not be complete or accurate as of a particular date because they are subject to a contractual standard of materiality that is different from those generally applicable to stockholders and/or were used for the purpose of allocating risk among the parties rather than establishing certain matters as facts. Accordingly, you should not rely on the representations and warranties as characterizations of the actual state of facts at the time they were made or otherwise.

 

-57-

---

Conditions to the Merger

 

The respective obligations of Iconix and Moss Acquisition Corp. and Mossimo and Mr. Giannulli to effect the merger are subject to the satisfaction or valid waiver of each of the following conditions, among others:

 

·

approval of the merger agreement by holders of a majority of outstanding common stock of Mossimo;

 

·

accuracy of representations and warranties;

 

·

no provision of any applicable law or regulation and no judgment, injunction, order or decree shall prohibit the consummation of the merger;

 

·

all consents, waivers and approvals shall have been obtained;

 

·

the parties shall have performed in all material respects all of their obligations and shall have delivered to each other certificates signed by appropriate officers confirming such compliance;

 

·

Mr. Giannulli, Mossimo and Iconix shall have executed an agreement for creative director services;

 

·

no claim, suit or other proceeding seeking to restrain, prohibit or change the terms of or obtain damages or other relief in connection with the merger agreement or the proposed merger shall have been instituted or threatened which in the reasonable judgment of Iconix makes it inadvisable to proceed with the merger;

 

·

the registration statement registering the shares of Iconix common stock to be received by Mossimo stockholders shall have been declared effective by the SEC;

 

·

no more than 5% of the outstanding Mossimo common stock shall remain eligible for appraisal in accordance with the DGCL; and

 

·

the shares of Iconix common stock issuable to Mossimo stockholders shall have been approved for listing on the NASDAQ Global Market.

 

In addition, Mossimo and Mr. Giannulli’s obligations to effect the merger are subject to Mossimo’s receipt of the opinion of a financial advisor that the merger consideration is fair from a financial point of view, to the holders of Mossimo common stock. FMV Opinions delivered an opinion on April 26, 2006 stating that the merger consideration was fair, from a financial point of view, to the holders of Mossimo common stock. Moreover, Iconix’s obligation to effect the merger is subject to, among other things, there being no amendment to the Target agreements (and such agreements continuing in effect), Mr. Giannulli acquiring the stock of Modern Amusement, and Mossimo’s employment agreements with Messrs. Giannulli and Lewis having been terminated.

 

Waiver

 

Iconix may, with respect to Mossimo or any stockholder of Mossimo, and Mossimo may, with respect to Iconix or Moss Acquisition Corp. (a) extend the time for the performance of any of the other party’s obligations or other acts, (b) waive any inaccuracies in the other party’s representations and warranties or (c) waive compliance with any of the agreements or conditions in the merger agreement. Any such extension or waiver must be in writing signed by the party or parties to be bound thereby.

 

Exchange of Mossimo Stock Certificates for Iconix Stock Certificates and Cash

 

Iconix has retained Continental Stock Transfer & Trust Company as the exchange/paying agent for the merger to handle the exchange of shares of Mossimo common stock for the merger consideration, including the payment of cash for fractional shares.

 

Only those holders of Mossimo common stock who properly surrender their Mossimo stock certificates in accordance with the exchange/paying agent’s instructions will receive:

 

·

a certificate representing Iconix common stock;

 

·

the cash portion of the merger consideration; and

 

-58-

---

 

·

cash in lieu of any fractional share of Iconix common stock.

 

After the effective time of the merger, each certificate representing shares of Mossimo common stock that has not been surrendered will represent only the right to receive upon surrender of that certificate each of the items listed in the preceding sentence. Following completion of the merger, Mossimo will not register any transfers of Mossimo common stock outstanding on its stock transfer books prior to the merger.

 

To effect the exchange of shares of Mossimo common stock, the exchange/paying agent will take the following actions. As soon as reasonably practicable after the effective time of the merger, the exchange/paying agent will mail to each record holder of shares of Mossimo common stock a letter of transmittal and instructions for surrendering the certificates representing shares of Mossimo common stock for merger consideration. Upon surrender of certificates representing shares of Mossimo common stock for cancellation, together with an executed letter of transmittal, to the exchange/paying agent, the holder of those certificates will be entitled to receive the appropriate merger consideration. The surrendered certificates representing Mossimo common stock will be cancelled.

 

Interim Operations

 

Pursuant to the merger agreement, during the period from the date of the merger agreement to the effective time of the merger, Mossimo has agreed that it shall conduct its business in the ordinary course consistent with past practices and shall use its best efforts to preserve intact its business organization and relationships with third parties and to keep available the services of its present officers and employees. During such period, Mossimo has agreed not to take any of the following actions, among others, without the written consent of Iconix:

 

·

amend its certificate of incorporation or bylaws;

 

·

merge or consolidate with any other person or acquire a material amount of assets of any other person;

 

·

sell, lease, license, mortgage, encumber or otherwise dispose of any material assets or property except (i) in the ordinary course consistent with past practices and (ii) the sale of the capital stock of Modern Amusement.

 

·

effect any direct or indirect redemption, purchase or other acquisition of any securities of Mossimo, or declare, set aside or pay any dividend or make any other distribution of assets of any kind whatsoever with respect to any securities of Mossimo;

 

·

issue any securities of Mossimo or amend any term of any Mossimo option plan or any outstanding option;

 

·

incur any indebtedness for borrowed money or guarantee any indebtedness of any other person or release or cancel any material indebtedness or claim;

 

·

increase the compensation or fringe benefits of any director, officer or employee, except for ordinary course of business increases to non-officer employees consistent with past practice;

 

·

enter into, amend, modify or terminate any material agreement, contract or commitment;

 

·

settle any claim, action or proceeding; or

 

·

agree or commit to do any of the foregoing.

 

Access to Information

 

From the date of the merger agreement until the effectiveness of the merger, each of Mossimo and Iconix shall:

 

·

give the other party and its authorized representatives full access to its offices, properties, books and records,

 

·

furnish to the other party and its authorized representatives such financial and operating data and other information as such persons may reasonably request; and

 

·

instruct its employees, counsel and financial advisors to cooperate with the other party and its representatives.

 

Notices of Certain Events; Continuing Disclosure

 

The merger agreement requires each of Mossimo and Iconix to promptly notify the other of among other things:

 

·

the occurrence of any event which could be likely to cause any representation in the merger agreement to be untrue or inaccurate in any material respect;

 

-59-

---

·

the non-occurrence of any event, the non-occurrence of which would be likely to cause any representation in the merger agreement to be untrue in any material respect; and

 

·

any material failure of Mossimo or Mr. Giannulli to satisfy or comply with any covenant, condition or agreement required under the merger agreement.

 

Compensation

 

Except as permitted in the merger agreement, Mossimo will not enter into or modify any consulting, employment or severance contracts, increase the salaries, wage rates or fringe benefits of its officers, directors or employees or pay bonuses or other remuneration except for current salaries, severance and other remuneration for which Mossimo is obligated under arrangements existing on March 31, 2006.

 

Modern Amusement

 

The merger agreement requires Mossimo to sell all of the capital stock of Modern Amusement to Mr. Giannulli prior to the closing. Approximately $2,000,000 of the consideration to be paid will be payable by a promissory note which will be issued by Mr. Giannulli and payable in four equal installments over two years. The remaining consideration, in an amount to be agreed upon, will be paid in cash. Prior to this divestiture of Modern Amusement, the cash remaining on Modern Amusement’s balance sheet will be distributed to Mossimo.

 

Consents

 

Mossimo will use commercially reasonable efforts to obtain all third party consents required to consummate the merger, and make all filings with governmental entities, required with respect to the consummation of the merger.

 

Non-Solicitation

 

Until the merger becomes effective or the merger agreement is terminated, neither Mossimo nor any of its officers, directors, employees, investment bankers, attorneys, accountants, consultants or other agents or advisors, including Mr. Giannulli, may directly or indirectly, (i) solicit, initiate or encourage the submission of any acquisition proposal (as defined in the merger agreement), (ii) participate in any negotiations with, furnish any information relating to the foregoing or otherwise cooperate in any way with, or assist, participate in, facilitate or encourage any effort by any person to do or seek an acquisition proposal, (iii) approve, endorse or recommend any acquisition proposal or (iv) enter into any letter of intent or similar document or any contract, agreement or commitment contemplating or otherwise relating to any acquisition proposal.

 

Notwithstanding the foregoing, the Mossimo board may:

 

·

in response to an unsolicited bona fide written acquisition proposal, engage in negotiations or discussions with any third party that has made (and not withdrawn) a bona fide acquisition proposal that the Mossimo board reasonably determines (after consultation with Mossimo’s financial advisor) constitutes a superior proposal (as defined in the merger agreement), or could reasonably be expected to constitute a superior proposal;

 

·

furnish to such third party information relating to Mossimo pursuant to a confidentiality agreement with terms no less favorable to Mossimo than those contained in the existing confidentiality agreement with Iconix;

 

·

recommend the acquisition proposal to Mossimo’s stockholders; and/or,

 

·

following receipt of such an acquisition proposal, withdraw, modify in a manner adverse to Iconix, or fail to make a recommendation as to the advisability of the merger;

 

If, in each case:

 

·

the Mossimo board shall have concluded in good faith would, if consummated, constitute a superior proposal (as defined in the merger agreement), or could reasonably be expected to constitute a superior proposal;

 

·

the board of Mossimo determines in good faith (after consultation with its outside legal counsel) that the failure to take such action would be reasonably likely to result in a breach of its fiduciary obligations to Mossimo’s stockholders under applicable law; and

 

·

prior to furnishing any such nonpublic information to, or entering into any such discussions with, such person or group, Mossimo receives from such person or group an executed confidentiality agreement containing terms no less favorable with regard to Mossimo’s confidential information than the confidentiality agreement executed with Iconix.

 

-60-

---

Mossimo will keep Iconix fully and promptly informed of the status (including amendments or proposed amendments) of any such acquisition proposal or inquiry.

 

An acquisition proposal, as defined in the merger agreement, is any offer or proposal concerning any (a) merger, consolidation, business combination, or similar transaction involving Mossimo, (b) sale, lease or other disposition directly or indirectly by merger, consolidation, business combination, share exchange, joint venture, or otherwise of assets of Mossimo representing 20% or more of the consolidated assets of Mossimo and Modern Amusement, (c) issuance, sale, or other disposition of (including by way of merger, consolidation, business combination, share exchange, joint venture, or any similar transaction) securities (or options, rights or warrants to purchase, or securities convertible into or exchangeable for such securities) representing 20% or more of the voting power of Mossimo, (d) transaction in which any person or group shall acquire beneficial ownership, or the right to acquire beneficial ownership of 20% or more of the outstanding voting capital stock of Mossimo or (e) any combination of the foregoing (other than the proposed merger with Iconix).

 

A superior proposal, as defined in the merger agreement, is a bona fide acquisition proposal (except that references in the definition of acquisition proposal to “20%” shall be “50%”) that the Mossimo board determines in its good faith business judgment (after consultation with its financial advisors of nationally recognized reputation and legal counsel) (i) would result in a transaction that is more favorable to its stockholders (in their capacities as stockholders), from a financial point of view, than the transactions contemplated by the Iconix merger agreement (including any amendments), and (ii) is, a proposal for which financing, to the extent required, is then fully committed or which, in the good faith judgment of Mossimo’s board (after consultation with financial advisors of nationally recognized reputation) is reasonably capable of being financed, and which is reasonably capable of being completed on the terms proposed.

 

As described in this proxy statement/prospectus, Mossimo complied with these terms in connection with the unsolicited Cherokee proposal.

 

Class Action Suit

 

 

If to Acquisition Co. or
Acquisition Sub:		Iconix Brand Group, Inc.
		1450 Broadway, 4th Floor
		New York, New York 10018
		Attn: Neil Cole, CEO
		Fax: (212) 391-0127
with a copy to:		Blank Rome LLP
		405 Lexington Avenue
		New York, New York 10174
		Attn: Robert J. Mittman, Esq.
		Fax: (212) 885-5001
If to Company:		Mossimo, Inc.
		2016 Broadway
		Santa Monica, California 90404
		Fax: (310) 460-0124
with a copy to:		Paul, Hastings, Janofsky & Walker LLP
		695 Town Center Drive, 17 th Floor
		Costa Mesa, California 92626
		Attn: Peter J. Tennyson
		Fax: (714) 668-6337
If to the Parent:		Mossimo Giannulli
		c/o Mossimo, Inc.
		2016 Broadway
		Santa Monica, California 90404
		Fax: (310) 460-0124

 

A-35

---

 

with a copy to:		Paul, Hastings, Janofsky & Walker LLP
		695 Town Center Drive, 17 th Floor
		Costa Mesa, California 92626
		Attn: Peter J. Tennyson
		Fax: (714) 668-6337

9.2  Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the greatest extent possible.

 

9.3  Entire Agreement. This Agreement, together with the Confidentiality Agreement and the other agreements referred to herein constitute the entire agreement, and supersede all prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof.

 

9.4  Amendment. This Agreement may not be amended except by an instrument in writing signed by each of the parties hereto.

 

9.5  Schedules. All references in this Agreement to Schedules shall mean the schedules identified in this Agreement, which are incorporated into this Agreement and shall be deemed a part of the representations and warranties to which they relate. To the extent a disclosure has been made by Acquisition Co., Acquisition Sub, Company or the Parent on any Schedule, it shall be in writing, shall indicate the section pursuant to which it is being delivered, and shall be initialed by the delivering party. For purposes of this Agreement, information which is necessary to make a given Schedule complete and accurate, but is omitted therefrom, shall nevertheless be deemed to be contained therein if it is contained on any other Schedule; but only if such information appears on such other Schedule in such form and detail that it is responsive to the requirements of such given Schedule.

 

9.6  No Assignment. This Agreement shall not be assigned by operation of law or otherwise, and any assignment shall be null and void.

 

9.7  Governing Law. This Agreement shall be governed by, and construed in accordance with, the law of the State of Delaware without regard to its choice of law principles. Each of Acquisition Co., Acquisition Sub, Company and the Parent hereby irrevocably and unconditionally consents to submit to the jurisdiction of the courts of the State of Delaware and of the United States located in the Delaware for any litigation arising out of or relating to this Agreement and the transactions contemplated hereby and waives any objection to the laying of venue of any such litigation in such courts and agrees not to plead or claim that such litigation brought in any such courts has been brought in an inconvenient forum.

 

9.8  Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement.

 

IN WITNESS WHEREOF, each of Acquisition Co., Acquisition Sub and Company, by their respective officers thereunto duly authorized, and the Parent, have caused this Agreement to be executed as of the date first written above.

 

ATTEST			ICONIX BRAND GROUP, INC.
By:	/s/ Deborah Sorell Stehr		By:	/s/ Neil Cole
	Name: Deborah Sorell Stehr Title:   Secretary			Name: Neil Cole Title:   CEO

 

A-36

---

 

ATTEST			MOSS ACQUISITION CORP.
By:	/s/ Deborah Sorell Stehr		By:	/s/ Neil Cole
	Name: Deborah Sorell Stehr Title:   Secretary			Name: Neil Cole Title:   President
ATTEST			MOSSIMO, INC.
By:	/s/ Edwin Lewis		By:	/s/ Mossimo Giannulli
	Name: Edwin Lewis Title:   Co-CEO			Name: Mossimo Giannulli Title:   Co-CEO
ATTEST
By:	/s/ Edwin Lewis		/s/ Mossimo Giannulli
	Name: Edwin Lewis Title:   Co-CEO		MOSSIMO GIANNULLI

 

A-37

---

APPENDIX B

REGISTRATION RIGHTS AGREEMENT

 

Registration Rights Agreement (this “Agreement”), dated as of ____________, 2006, by and among Iconix Brand Group, Inc., a Delaware corporation (the “Company”), Edwin Lewis and Mossimo Giannulli (each, a “Holder”).

 

RECITALS

 

WHEREAS, the Company is concurrently herewith entering into an Agreement and Plan of Merger (the “Merger Agreement”), with Moss Acquisition Corp., Mossimo Giannulli, and Mossimo, Inc.;

 

WHEREAS, pursuant to the Merger Agreement, the Company will prepare and file with the Securities and Exchange Commission (the “Commission”) a registration statement on Form S-4 in connection with the registration under the Securities Act of 1933, as amended (the “Securities Act”), of shares (the “Shares”) of the Company’s common stock, par value $.001 per share, to be issued to the stockholders of Mossimo, Inc., including each Holder (to the extent such Holder at the Effective Time of the Merger owns shares of Mossimo, Inc. common stock), in connection with the merger of Mossimo, Inc. with and into Moss Acquisition Corp. (the “Merger Registration Statement”); and

 

WHEREAS, pursuant to the Merger Agreement, the Company has agreed to grant to each Holder the registration rights set forth herein with respect to the Shares, any securities issued in exchange for or in replacement of the Shares, and any securities issued by way of any stock split, reverse stock split, recapitalization, or other similar transaction affecting the Shares or any such other securities, and any shares of the Company’s common stock issued to Holder as Additional Merger Consideration (collectively, the “Registrable Securities”).

 

NOW, THEREFORE, intending to be legally bound, the parties hereto agree as follows. Capitalized terms used but not defined herein have the meanings given to such terms in the Merger Agreement.

 

NOW, THEREFORE, intending to be legally bound, the parties hereto agree as follows:

1. Merger Registration Statement. The Company acknowledges, and agrees to comply with, its obligations in the Merger Agreement in respect of the Merger Registration Statement.

 

2. Piggyback Registration.

 

(a) If, at any time after the date hereof, the Company proposes to prepare and file with the Commission a registration statement on Form S-3 (or any successor form thereto) covering only the resale of equity securities of the Company held by its stockholders, the Company will give written notice of its intention to do so to the Holders at least ten (10) days prior to the filing of each such registration statement. Upon the written request of the Holders, made within five (5) days after receipt of the notice, that the Company include any of the Registrable Securities in the proposed registration statement, the Company shall, as to the Holders, use reasonable best efforts to effect the registration under the Act of such Registrable Securities which it has been so requested to register (the “Piggyback Registration”);

 

(b) Notwithstanding the provisions of paragraph (a) above, the right to Piggyback Registration shall not apply, unless the Company otherwise agrees in writing, to any registration statement: (i) relating to an underwritten public offering of securities of the Company; (ii) relating solely to securities of the Company to be offered pursuant to (x) an employee benefit plan, or (y) a dividend or interest reinvestment plan (including such a plan that has an open enrollment or cash investment feature); (iii) relating to securities of the Company to be issued for a consideration other than solely cash; (iv) relating to securities of the Company to be offered solely to existing security holders of the Company, through a “rights offering” or otherwise; (v) relating solely to securities of the Company to be issued on the exercise of options, warrants and similar rights, or on the conversion or exchange of other securities, issued by the Company or any other person; (vi) relating to debt securities of the Company, including debt securities that are convertible or exchangeable for equity securities of the Company; or (vii) that may become effective automatically upon filing with the Commission pursuant to Rule 462 under the Act or otherwise.

 

B-1

---

 

(c) Notwithstanding the preceding provisions of this Section, the Company shall have the right to elect not to file or to defer the filing of any proposed registration statement or to withdraw the same after the filing but prior to the effective date thereof.

 

3. Demand Registration.

 

(a) At any time commencing on the first date the prospectus forming a part of the Merger Registration Statement is no longer current and available for use by a Holder for resales of Registrable Securities because the financial statements included in the prospectus forming a part thereof no longer satisfy the requirements of Section 10(a)(3) of the Securities Act, the Holders may collectively, on one occasion only, submit to the Company a joint written notice (the “Demand Registration Request”), to have the Company use its reasonable best efforts to prepare and file with the Commission, at the sole expense of the Company (except as hereinafter provided), in respect of up to the aggregate number of Registrable Securities not at such time covered in an effective registration statement filed by the Company pursuant to Section 2, a registration statement so as to permit a public offering and sale of such Registrable Securities until, subject to the terms and provisions of this Agreement, the earlier of the date on which: (i) all Registrable Securities covered by such registration statement, or other registration statements filed by the Company, have been sold pursuant thereto or otherwise lawfully sold without registration under the Securities Act; or (ii) all of the remaining Registrable Securities may be publicly sold without volume restrictions pursuant to Rule 144(k) under the Securities Act, as determined by written opinion of counsel to the Company on which Holders are expressly entitled to rely (the “Effectiveness Period”). The registration statement filed following a Demand Registration Request shall be on any form the Company is eligible to use to register for resale the Registrable Securities. The Company shall, upon receipt of a Demand Registration Request, use its reasonable best effort to cause to be registered under the Securities Act as soon as practicable thereafter all of the Registrable Securities that Holders have so requested to be registered.

 

(b) Notwithstanding any provision in this Agreement to the contrary, if, at the time a Demand Registration Request is given to the Company under Section 3 hereof (i) the Company is engaged in negotiations with respect to an acquisition, merger, financing or other material event which would require the Company to file a Form 8-K in the event that such acquisition, merger, financing or other material event is consummated or has otherwise occurred, or (ii) the Company is otherwise unable to obtain information required to be included in the registration statement to be filed or (iii) in the event the Company shall furnish to the Holders a certificate signed by the Chief Executive Officer of the Company stating that in the good faith judgment of the Company and its investment banker that it would be detrimental to the Company and its stockholders for the Company to immediately proceed with a registration statement and it is therefore essential to defer the filing of such registration statement or any amendment thereto, then, in each such case, the Company will have the right to defer such filing for a period not to exceed one hundred eighty (180) days from the date of the Demand Registration Request; provided that the Company shall use its reasonable best efforts to cause any registration statement filed pursuant to this Section 3 to become effective as soon as practicable after such deferral period, and provided further that the Company may not delay any registration requested pursuant to this Section 3 more than once during any twelve-month period. Moreover, if the Company is proceeding with the registration process but the registration statement is subject to review by the Commission and/or audited financial statements for a fiscal year are required to be included but not yet available, the Company may elect to defer filing for a period not to exceed one hundred eighty (180) days.

 

(c) Nothing herein contained shall require the Company to undergo an audit, other than in the ordinary course of business.

 

4. Covenants of the Company. The Company hereby covenants and agrees as follows:

 

(a) In accordance with the Securities Act and the rules and regulations promulgated thereunder, and subject to the terms and provisions of this Agreement, the Company shall use its reasonable best efforts to prepare and file with the Commission a registration statement as expeditiously as reasonably possible.

 

B-2

---

 

(b) Not less than two business days prior to the filing of a registration statement or any related prospectus or any amendment or supplement thereto, furnish to the Holders copies of all such documents proposed to be filed which documents will be subject to the review of the Holders and the counsel to the Holders.

 

(c) Use its reasonable best efforts to prepare and file with the Commission such amendments, including post-effective amendments, to the registration statement and the prospectus used in connection therewith as may be necessary to keep the registration statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period in the case of a Demand Registration.

 

(d) Notify the Holders as promptly as practicable: (A)(1) when a prospectus or any prospectus supplement or post-effective amendment to a registration statement is proposed to be filed hereunder; (2) when the Commission notifies the Company whether there will be a “review” of such registration statement and whenever the Commission comments in writing on such registration statement; and (3) with respect to the registration statement or any post-effective amendment, when the same has become effective; (B) of any request by the Commission or any other Federal or state governmental authority for amendments or supplements to the registration statement or prospectus or for additional information; (C) of the issuance by the Commission of any stop order suspending the effectiveness of the registration statement covering any or all of the Registrable Securities or the initiation of any proceedings for that purpose; (D) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose; and (E) of the occurrence of any event or passage of time that makes the financial statements included in the registration statement ineligible for inclusion therein or any statement made in the registration statement or prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to the registration statement, prospectus or other documents so that, in the case of the registration statement or the prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

(e) Prior to any public offering of Registrable Securities, use its commercially reasonable efforts to register or qualify or cooperate with the selling holders in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or Blue Sky laws of all jurisdictions within the United States reasonably requested by Holders, to keep each such registration or qualification (or exemption therefrom) under this Agreement hereof effective during the Effectiveness Period and to do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by the registration statement; provided, that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Company to any material tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction.

 

(f) Cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to the registration statement, and to enable such Registrable Securities to be in such denominations and registered in such names as any such persons may request.

 

(g) With a view to making available to the Holders of Registrable Securities the benefits of Rule 144 (or its successor rule) under the Securities Act and any other rule or regulation of the Commission that may at any time permit such Holders to sell Registrable Securities to the public without registration, the Company covenants and agrees to: (i) make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act until the earlier of: (A) such date as all of the Registrable Securities may be resold to the public without volume restrictions pursuant to Rule 144(k) under the Securities Act or any other rule of similar effect or (B) such date as all of the Registrable Securities shall have been resold; (ii) file with the Commission in a timely manner all reports and other documents required to be so filed pursuant to Rule 144(c) under the Securities Act in order to permit the Holders of the Registrable Securities to be entitled to transfer the Registrable Securities without registration pursuant to Rule 144 under the Securities Act; and (iii) furnish to each Holder of Registrable Securities upon request: (A) a written statement by the Company that it has complied with the reporting requirements of the Exchange Act and (B) such other information as may be reasonably requested in order to avail such Holder of any rule or regulation of the Commission that permits the selling of any such Registrable Securities without registration.

 

B-3

---

 

(h) The Company will pay all costs, fees and expenses in connection with any registration statement filed pursuant to this Agreement, including, without limitation, all registration and filing fees, the Company’s legal and accounting fees, printing expenses and blue sky fees and expenses; provided, however, that the Holders shall be solely responsible for the fees of any counsel and other experts retained by the Holders in connection with such registration and any transfer taxes or underwriting discounts, selling commissions or selling fees applicable to the Registrable Securities sold by the Holders pursuant thereto.

 

(i) The Company shall use its reasonable best efforts to list the Registrable Securities covered by such registration statement with each securities exchange or interdealer quotation system or other market on which similar securities of the Company are then listed.

 

(j) The Company will furnish to each Holder and to his legal counsel, (a) promptly after a registration statement is filed hereunder with the Commission, one copy of the registration statement and any amendments thereto, each preliminary prospectus and final prospectus and each amendment or supplement thereto; and (b) a number of copies of a prospectus, including a preliminary prospectus, and all amendments and supplements thereto, and such other documents as each Holder may reasonably request to facilitate the disposition of the Registrable Securities owned by such Holder. The Company will promptly notify each Holder and his designated counsel by facsimile or email of the effectiveness of the applicable registration statement and any post-effective amendment.

 

(k) The Company will permit Holders’ legal counsel to review the registration statement and all amendments and supplements thereto a reasonable amount of time prior to their filing with the Commission, and will not file any document in a form to which such counsel reasonably objects, unless otherwise required by law in the opinion of the Company’s counsel. The sections of any such registration statement, including information with respect to each Holder, such Holder’s beneficial ownership of securities of the Company or such Holder’s intended method of disposition of Registrable Securities, must conform to the information provided to the Company by each Holder or his counsel, except for such changes resulting from Commission comments.

 

(l) At the joint request of the Holders, the Company will promptly prepare and file with the Commission such amendments (including post-effective amendments) and supplements to the registration statement, and the prospectus used in connection with the registration statement, as may be necessary in order to change the plan of distribution in a manner reasonably requested by the Holders jointly set forth in such registration statement; provided however, such change shall not provide for the disposition of the Registrable Securities on the basis of an underwritten offering and may be modified as required by the Commission or as deemed necessary or appropriate by the Company to respond to Commission comments or to comply with applicable law.

 

5. Acknowledgements and Covenants of the Holders.

 

(a) The Holders, upon receipt of notice from the Company that an event has occurred which requires a post-effective amendment to a registration statement or a supplement to the prospectus included therein, shall promptly discontinue the sale of Registrable Securities until the Holders receive a copy of a supplemented or amended prospectus from the Company, which the Company shall provide as soon as practicable after such notice. The Company shall use reasonable best efforts to file and have declared effective any such post-effective amendment as soon as possible.

 

(b) The obligations of the Company under this Agreement with respect to the Registrable Securities are expressly conditioned on the Holders’ furnishing to the Company such appropriate information concerning the Holders, the Registrable Securities and the terms of the Holders’ offering of such Registrable Securities as the Company may reasonably request.

 

B-4

---

 

(c) Each Holder agrees, if so requested by the Company’s underwriter or managing underwriter in connection with a proposed transaction or offering of securities of the Company, not to sell, make any short sale of, loan, grant any option for the purchase of, effect any public sale or distribution of or otherwise dispose of, any equity securities of the Company during such period of time and on such other terms and conditions as may be requested by such underwriter, provided that the Chief Executive Officer of the Company has also agreed not to sell, make any short sale of, loan, grant any option for the purchase of, effect any public sale or distribution of, or otherwise dispose of, any equity securities of the Company under the circumstances and pursuant to the terms and conditions applicable to the Holders.

 

6. Termination of Registration Rights. Notwithstanding the foregoing provisions, the Company’s obligation to register the Registrable Securities under this Agreement shall terminate as to any particular Registrable Securities (a) when all of the Registrable Securities have been sold by each Holder in an offering registered under the Securities Act or otherwise, or (b) when a written opinion (i) upon which each Holder is expressly entitled to rely, and (ii) which states that such Registrable Securities may be sold without registration under the Securities Act or applicable state law and without restriction as to the quantity and manner of such sales, shall have been received from counsel for the Company.

 

7. Indemnification.

 

(a) The Company shall indemnify, defend and hold harmless each Holder, each of its directors, officers, employees, advisors, attorneys, underwriters, accountants and any person who controls such Holder within the meaning of Section 15 of the Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal fees or other fees or expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action) caused by or arising out of any untrue statement or alleged untrue statement of a material fact contained in a registration statement or prospectus or any amendment or supplement thereto included therein or caused by or arising out of any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein in light of the circumstances in which they are made not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or alleged untrue statement or omission or alleged omission based upon information furnished or required to be furnished in writing to the Company by such Holder expressly for use therein; provided, however, that the Company shall not be liable to indemnify a Holder insofar as such losses, claims, damages, liabilities or actions are (i) caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to the Holder furnished to the Company in writing by Holder expressly for use therein, (ii) based upon Holder’s failure to provide the Company with a material fact relating to Holder which is required to be included in the registration statement or necessary to make a statement in the registration statement not be misleading, (iii) relate to sales of Registrable Securities by Holder to the person asserting any such losses, claims, damages, liabilities or actions if such person was not sent or given a prospectus by or on behalf of the Holder, if required by law so to have been delivered, at or prior to the written confirmation of the sale of the Registrable Securities to such person, and if the prospectus (as so amended or supplemented) would have cured the defect giving rise to such losses, claims, damages or liabilities, unless such failure is the result of noncompliance by the Company or based upon the Holder’s use of a prospectus during a period when the Holder has been notified that the use of the prospectus has been suspended. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of Holder, and any directors, officers, participating person, or controlling person thereof, and shall survive the transfer of such Registrable Securities by Holder. Each Holder shall at the same time indemnify the Company, its directors, each officer signing a registration statement and each person who controls the Company within the meaning of the Act from and against any and all losses, claims, damages and liabilities caused by or arising out of any untrue statement or alleged untrue statement of a material fact contained in a registration statement or prospectus included therein, or caused by or arising out of any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case, only insofar as such losses, claims, damages or liabilities are caused by any untrue statement or alleged untrue statement or omissions or alleged omission based upon information furnished in writing to the Company by the Holder expressly for use therein.

 

B-5

---

(b) If for any reason the foregoing indemnity is unavailable, or is insufficient to hold harmless any indemnitee, then the indemnitor shall contribute to the amount paid or payable by the indemnitee as a result of such losses, claims, damages, liabilities, or expenses (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnitor on the one hand and the indemnitee on the other from the registration, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, or provides a lesser sum to the indemnitee than the amount hereinafter calculated, in such proportion as is appropriate to reflect not only the relative benefits received by the indemnitor on the one hand and the indemnitee on the other but also the relative fault of the indemnitor and the indemnitee as well as any other relevant equitable considerations. The relative fault of the Company and each Holder shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Holders and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. Notwithstanding the provisions of this Section 6(b), in no event shall the Company be required to contribute any amount of any damages that a Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

 

(c) If any proceeding shall be brought or any claim asserted against any person entitled to indemnity under Sections 7 hereof (an “Indemnified Party”), such Indemnified Party promptly shall notify the person from whom indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all reasonable fees and expenses incurred in connection with the defense thereof; provided, however, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that the Indemnifying Party is actually prejudiced the Indemnifying Party.

 

(d) An Indemnified Party shall have the right to employ separate counsel in any such proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Indemnified Parties unless: (i) the Indemnifying Party has agreed in writing to pay such fees and expenses; (ii) the Indemnifying Party shall have failed promptly to assume the defense of such proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such proceeding; or (iii) the named parties to any such proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that representation of both parties by the same counsel would be inappropriate under applicable ethical legal standards due to actual or potential interests between them, (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, such counsel shall be at the reasonable expense of the Indemnifying Party; provided, however, that in no event shall the Indemnifying Party be responsible for the fees and expenses of more than one separate counsel). The Indemnifying Party shall not be liable for any settlement of any such proceeding effected without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such proceeding.

 

(e) Subject to the foregoing, all reasonable fees and expenses of the Indemnified Party (including fees and expenses to the extent incurred in connection with investigating or preparing to defend such proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten (10) business days of written notice thereof to the Indemnifying Party, which notice shall be delivered no more frequently than on a monthly basis (regardless of whether it is ultimately determined that an Indemnified Party is not entitled to indemnification hereunder; provided, that the Indemnifying Party may require such Indemnified Party to undertake to reimburse all such fees and expenses to the extent it is finally judicially determined that such Indemnified Party is not entitled to indemnification hereunder).

 

B-6

---

8. Governing Law.

 

(a) This Agreement shall be governed by and interpreted and enforced in accordance with the laws of the State of New York, without giving effect to any choice of law or conflict of laws rules or provisions (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York.

 

(b) Each of the Company and each Holder hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the courts of the State of New York and of the United States of America located in the County of New York, State of New York (the “New York Courts”) for any litigation arising out of or relating to this Agreement and the transactions contemplated hereby (and agrees not to commence any litigation relating thereto except in such courts), waives any objection to the laying of venue of any such litigation in the New York Courts and agrees not to plead or claim that such litigation brought in any New York Courts has been brought in an inconvenient forum.

 

9. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by express, registered or certified mail, postage prepaid, return receipt requested, as follows:

 

	If to the Company, at:
	Iconix Brand Group, Inc. 1450 Broadway, 4th Floor New York, NY 10018 Attn: Neil Cole, Chief Executive Officer
	with a copy of the same to:
	Blank Rome LLP 405 Lexington Avenue New York, New York 10174 Attn: Robert J. Mittman, Esq.
	if to the Holders, at that address set forth under its name on the signature page;
	with a copy of the same to:
	Paul, Hastings, Janofsky & Walker 695 Town Center Drive, 17 th Floor Costa Mesa, California 92626 Attn: Peter J. Tennyson, Esq.

; or such other address as has been indicated by either party in accordance with a notice duly given in accordance with the provisions of this Section.

 

10. Amendment. This Agreement may only be amended by a written instrument executed by the Company and the Holders.

 

11. Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof.

 

12. Assignment; Benefits. The Holders may not assign the Holders’ rights hereunder without the prior written consent of the Company, which consent may not be unreasonably withheld. Notwithstanding the foregoing, a Holder may assign such Holder’s rights hereunder to a purchaser which acquires all of such Holder’s Registrable Securities in a single transfer. Notwithstanding the foregoing, no rights may under any circumstances be transferred in respect of any Contingent Share Rights.

 

B-7

---

13. Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Agreement.

 

14. Severability. Any provision of this Agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.

 

15. Execution in Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document.

 

IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto on the date first above written.

 

			THE COMPANY, INC.
			By:
			Name:
			Title:
			Holder:	Mossimo Giannulli
			Signature
			Address:
			Attention:
Number of Registrable Securities:

Holder:

Edwin Lewis

			Signature
			Address:
			Attention:
Number of Registrable Securities:

 

[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

B-8

---

APPENDIX C

 

SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW

 

(a) Any stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection (d) of this section with respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has otherwise complied with subsection (d) of this section and who has neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to Section 228 of this title shall be entitled to an appraisal by the Court of Chancery of the fair value of the stockholder’s shares of stock under the circumstances described in subsections (b) and (c) of this section. As used in this section, the word “stockholder” means a holder of record of stock in a stock corporation and also a member of record of a nonstock corporation; the words “stock” and “share” mean and include what is ordinarily meant by those words and also membership or membership interest of a member of a nonstock corporation; and the words “depository receipt” mean a receipt or other instrument issued by a depository representing an interest in one or more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with the depository.

 

(b) Appraisal rights shall be available for the shares of any class or series of stock of a constituent corporation in a merger or consolidation to be effected pursuant to Section 251 (other than a merger effected pursuant to Section 251(g) of this title), Section 252, Section 254, Section 257, Section 258, Section 263 or Section 264 of this title:

 

(1) Provided, however, that no appraisal rights under this section shall be available for the shares of any class or series of stock, which stock, or depository receipts in respect thereof, at the record date fixed to determine the stockholders entitled to receive notice of and to vote at the meeting of stockholders to act upon the agreement of merger or consolidation, were either (i) listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders; and further provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the stockholders of the surviving corporation as provided in subsection (f) of Section 251 of this title.

 

(2) Notwithstanding paragraph (1) of this subsection, appraisal rights under this section shall be available for the shares of any class or series of stock of a constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to Sections 251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock anything except:

 

a. Shares of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof;

 

b.  Shares of stock of any other corporation, or depository receipts in respect thereof, which shares of stock (or depository receipts in respect thereof) or depository receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or held of record by more than 2,000 holders;

 

c. Cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a. and b. of this paragraph; or

 

d. Any combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a., b. and c. of this paragraph.

 

(3) In the event all of the stock of a subsidiary Delaware corporation party to a merger effected under Section 253 of this title is not owned by the Iconix corporation immediately prior to the merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation.

 

(c) Any corporation may provide in its certificate of incorporation that appraisal rights under this section shall be available for the shares of any class or series of its stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale of all or substantially all of the assets of the corporation. If the certificate of incorporation contains such a provision, the procedures of this section, including those set forth in subsections (d) and (e) of this section, shall apply as nearly as is practicable.

 

C-1

---

(d) Appraisal rights shall be perfected as follows:

 

(1) If a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for such meeting with respect to shares for which appraisal rights are available pursuant to subsections (b) or (c) hereof that appraisal rights are available for any or all of the shares of the constituent corporations, and shall include in such notice a copy of this section. Each stockholder electing to demand the appraisal of such stockholder’s shares shall deliver to the corporation, before the taking of the vote on the merger or consolidation, a written demand for appraisal of such stockholder’s shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such stockholder’s shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of each constituent corporation who has complied with this subsection and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or

 

(2) If the merger or consolidation was approved pursuant to Section 228 or Section 253 of this title, then, either a constituent corporation before the effective date of the merger or consolidation, or the surviving or resulting corporation within ten days thereafter, shall notify each of the holders of any class or series of stock of such constituent corporation who are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy of this section. Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also notify such stockholders of the effective date of the merger or consolidation. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of such notice, demand in writing from the surviving or resulting corporation the appraisal of such holder’s shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such holder’s shares. If such notice did not notify stockholders of the effective date of the merger or consolidation, either (i) each such constituent corporation shall send a second notice before the effective date of the merger or consolidation notifying each of the holders of any class or series of stock of such constituent corporation that are entitled to appraisal rights of the effective date of the merger or consolidation or (ii) the surviving or resulting corporation shall send such a second notice to all such holders on or within 10 days after such effective date; provided, however, that if such second notice is sent more than 20 days following the sending of the first notice, such second notice need only be sent to each stockholder who is entitled to appraisal rights and who has demanded appraisal of such holder’s shares in accordance with this subsection. An affidavit of the secretary or assistant secretary or of the transfer agent of the corporation that is required to give either notice that such notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. For purposes of determining the stockholders entitled to receive either notice, each constituent corporation may fix, in advance, a record date that shall be not more than 10 days prior to the date the notice is given, provided, that if the notice is given on or after the effective date of the merger or consolidation, the record date shall be such effective date. If no record date is fixed and the notice is given prior to the effective date, the record date shall be the close of business on the day next preceding the day on which the notice is given.

 

(e) Within 120 days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who has complied with subsections (a) and (d) hereof and who is otherwise entitled to appraisal rights, may file a petition in the Court of Chancery demanding a determination of the value of the stock of all such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the merger or consolidation, any stockholder shall have the right to withdraw such stockholder’s demand for appraisal and to accept the terms offered upon the merger or consolidation. Within 120 days after the effective date of the merger or consolidation, any stockholder who has complied with the requirements of subsections (a) and (d) hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting from the consolidation a statement setting forth the aggregate number of shares not voted in favor of the merger or consolidation and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. Such written statement shall be mailed to the stockholder within 10 days after such stockholder’s written request for such a statement is received by the surviving or resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under subsection (d) hereof, whichever is later.

 

 

C-2

---

(g) At the hearing on such petition, the Court shall determine the stockholders who have complied with this section and who have become entitled to appraisal rights. The Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder.

 

(h) After determining the stockholders entitled to an appraisal, the Court shall appraise the shares, determining their fair value exclusive of any element of value arising from the accomplishment or expectation of the merger or consolidation, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the Court shall take into account all relevant factors. In determining the fair rate of interest, the Court may consider all relevant factors, including the rate of interest which the surviving or resulting corporation would have had to pay to borrow money during the pendency of the proceeding. Upon application by the surviving or resulting corporation or by any stockholder entitled to participate in the appraisal proceeding, the Court may, in its discretion, permit discovery or other pretrial proceedings and may proceed to trial upon the appraisal prior to the final determination of the stockholder entitled to an appraisal. Any stockholder whose name appears on the list filed by the surviving or resulting corporation pursuant to subsection (f) of this section and who has submitted such stockholder’s certificates of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal rights under this section.

 

(i) The Court shall direct the payment of the fair value of the shares, together with interest, if any, by the surviving or resulting corporation to the stockholders entitled thereto. Interest may be simple or compound, as the Court may direct. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares represented by certificates upon the surrender to the corporation of the certificates representing such stock. The Court’s decree may be enforced as other decrees in the Court of Chancery may be enforced, whether such surviving or resulting corporation be a corporation of this State or of any state.

 

(j) The costs of the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances. Upon application of a stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorney’s fees and the fees and expenses of experts, to be charged pro rata against the value of all the shares entitled to an appraisal.

 

(k) From and after the effective date of the merger or consolidation, no stockholder who has demanded his appraisal rights as provided in subsection (d) of this section shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record at a date which is prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e) of this section, or if such stockholder shall deliver to the surviving or resulting corporation a written withdrawal of such stockholder’s demand for an appraisal and an acceptance of the merger or consolidation, either within 60 days after the effective date of the merger or consolidation as provided in subsection (e) of this section or thereafter with the written approval of the corporation, then the right of such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed as to any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just.

 

(l) The shares of the surviving or resulting corporation to which the shares of such objecting stockholders would have been converted had they assented to the merger or consolidation shall have the status of authorized and unissued shares of the surviving or resulting corporation.

 

C-3

---

APPENDIX D

LOCK-UP AGREEMENT

 

LOCK-UP AGREEMENT (this “AGREEMENT”), dated as of ____________, 2006, by and among Iconix Brand Group, Inc., a Delaware corporation (“Acquisition Co.”), Mossimo Giannulli and Edwin Lewis, each a stockholder (each individually, a “Stockholder” and together, the “Stockholders”) of Mossimo, Inc., a Delaware corporation (the “Company”).

 

RECITALS

 

WHEREAS, Acquisition Co., Moss Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Acquisition Co. (“Acquisition Sub”), and the Company have entered into an Agreement and Plan of Merger, dated as of March 31, 2006 (the “Merger Agreement”), pursuant to which the Company will be merged with and into the Acquisition Sub, and the Acquisition Sub shall be the surviving corporation following the merger (the “Merger”).

 

WHEREAS, as of the date hereof, each Stockholder is a Beneficial Owner (as defined below) of Subject Shares (as defined below).

 

WHEREAS, in order to induce Acquisition Co. to enter into the Merger Agreement, the Stockholders have agreed to enter into this Agreement.

 

NOW, THEREFORE, intending to be legally bound, the parties hereto agree as follows:

 

1. Definitions.

 

(a) “Beneficially Own” or “Beneficial Owner” with respect to any securities means having “beneficial ownership” as determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

(b) “Company Capital Stock” means shares of common stock, par value $0.001 per share, of the Company.

 

(c) “Company Options and Other Rights” means options, warrants and other rights to acquire, directly or indirectly, shares of Company Capital Stock.

 

(d) “Expiration Date” means the earlier to occur of (i) the Effective Time (as defined in the Merger Agreement) or (ii) the date on which the Merger Agreement is terminated pursuant to its terms.

 

(e) “Subject Shares” means (i) all shares of Company Capital Stock Beneficially Owned by each Stockholder as of the date of this Agreement and (ii) all additional shares of Company Capital Stock of which each Stockholder acquires Beneficial Ownership during the period from the date of this Agreement through the Expiration Date.

 

(f) Unless otherwise specifically defined herein, all capitalized terms used herein shall have the respective meanings assigned to them in the Merger Agreement.

 

2. Lock-up Agreement.

 

(a) In consideration of the issuance of common stock of Acquisition Co. in exchange for the Subject Shares (the “Acquisition Co. Shares”) to each of the Stockholders pursuant to the terms of the Merger Agreement, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and notwithstanding any registration of the Acquisition Co. Shares under the Securities Act of 1933, as amended (the “Securities Act”), each Stockholder agrees that, during the period beginning from the Effective Time (as defined in the Merger Agreement) and continuing for ninety (90) days thereafter (as the same may be extended pursuant to this Section 2(a), the “Release Date”) (the “Lock-up Period”), each Stockholder will not, directly or indirectly, through an “affiliate” or “associate” (as such terms are defined in the General Rules and Regulations under the Securities Act), a family member or otherwise, (a) offer, sell, contract to sell, pledge, hypothecate, encumber, assign, tender, make any short sale or otherwise dispose of, or enter into any contract, or other arrangement or understanding with respect to the sale or other disposition or transfer or grant any rights with respect to any Acquisition Co. Shares, privately or publicly, pursuant to Rule 144 of the General Rules and Regulations under the Securities Act or otherwise, or (b) engage directly or indirectly in any transaction the likely result of which would involve a transaction prohibited by clause (a), except as permitted by Section 2(e) below. Notwithstanding the foregoing provisions of this Section 2(a), at the request of underwriters or the managing underwriter in connection with a proposed transaction or public offering by Acquisition Co., each Stockholder will agree to extend the Lock-up Period for a term consistent with the period for which the Chief Executive Officer of Acquisition Co. enters into an agreement imposing on his shares of Acquisition Co. Common Stock similar restrictions on transfer.

 

D-1

---

(b) The foregoing restriction is expressly agreed to preclude each of the Stockholders from engaging in any hedging or other transaction which is designed to, or reasonably expected to lead to, or result in, a sale or disposition of the Acquisition Co. Shares even if such shares would be disposed of by someone other than the Stockholders. Such prohibited hedging or other transactions would include without limitation any short sale or any purchase, sale or grant of any right (including without limitation any put or call option) with respect to any of the Acquisition Co. Shares or with respect to any security that includes, relates to, or derives any significant part of its value from the Acquisition Co. Shares.

 

(c) Each Stockholder further represents and agrees that he has not taken and will not take, directly or indirectly, any action which is designed to or which has constituted or which might reasonably be expected to cause or result in stabilization or manipulation of the price of any security of Acquisition Co. to facilitate the sale or resale of the Acquisition Co. Shares, or which has otherwise constituted or will constitute any prohibited bid for or purchase of the Acquisition Co. Shares or any related securities.

 

(d) Each Stockholder acknowledges and agrees that, prior to the Release Date, any additional Acquisition Co. Shares acquired by such Stockholder, including in connection with the exercise of any options, may not be sold or otherwise transferred, notwithstanding that a registration statement may be effective with respect thereto.

 

(e) Notwithstanding the foregoing restrictions on transfer, each Stockholder may transfer all or any part of his Acquisition Co. Shares (i) to the other Stockholder (provided, however, that no transfer may be in respect of any Contingent Share Rights); (ii) by will or intestacy, (iii) to any trust for the direct or indirect benefit of such Stockholder or the immediate family of such Stockholder, provided that any such transfer shall not involve a disposition for value, or (iii) in a private transaction prior to the Release Date so long as the acquirer of Acquisition Co. Shares, by written agreement with Acquisition Co. entered into at the time of acquisition and delivered to Acquisition Co. prior to the consummation of such acquisition, agrees to be bound by the restrictions set forth herein. For purposes of this letter agreement, “immediate family” shall mean any relationship by blood, marriage or adoption, not more remote than first cousin. Any Stockholder may pledge Acquisition Co. Shares to secure indebtedness incurred by such Stockholder (in such amount as is necessary to pay taxes or estimated taxes related to the Merger), such pledge to be subject to the prior written approval of Acquisition Co., which approval shall not be unreasonably withheld.

 

(f) Each of the Stockholders agrees and consents to the entry of stop transfer instructions with Acquisition Co.’s transfer agent and registrar against the transfer of the Acquisition Co. Shares except in compliance with the foregoing restrictions of this Section 2. Each of the Stockholders understands that the restrictions with respect to the Acquisition Co. Shares set forth herein are in addition to any other restrictions upon transfer that may arise pursuant to any other agreement to which either of the Stockholders is a party or under applicable securities laws.

 

3. Written Consent of Stockholders. Upon the U.S. Securities and Exchange Commission’s declaration of the effectiveness of the Registration Statement on Form S-4 filed by Acquisition Co. in connection with the Merger, each Stockholder shall deliver to the Company (with a copy thereof concurrently delivered to Acquisition Co.) a proxy in favor of the adoption of the Merger Agreement and the Merger. Such proxy may be revoked or withdrawn if Company’s Board of Directors withdraws its recommendation of the Merger and terminates the Merger Agreement.

 

D-2

---

4. Representations and Warranties of Stockholders. Each Stockholder represents and warrants to Acquisition Co. as follows:

 

(a)           (i) As of the date of this Agreement and at all times through the Expiration Date:

 

(ii) Such Stockholder is the Beneficial Owner (free and clear of any encumbrances or restrictions, except as set forth on Exhibit A hereto) of the outstanding shares of Company Capital Stock set forth under the heading “Number and Class of Shares of Company Capital Stock”, on Exhibit A hereto;

 

(iii) Such Stockholder is the Beneficial Owner (free and clear of any encumbrances or restrictions) of the outstanding Company Options and Other Rights set forth under the heading “Number of Company Options and Other Rights” on Exhibit A; and

 

(iv) Such Stockholder does not directly or indirectly Beneficially Own any shares of Company Capital Stock or Company Options or Other Rights or other securities of the Company, other than the shares of Company Capital Stock and Company Options and Other Rights on Exhibit A.

 

(b) Each Stockholder has the legal capacity, power and authority to enter into and perform all of its obligations under this Agreement. This Agreement has been duly executed and delivered by such Stockholder, and upon its execution and delivery by Acquisition Co., will constitute a legal, valid and binding obligation of such Stockholder, enforceable against such Stockholder in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to creditors rights generally, and the availability of injunctive relief and other equitable remedies.

 

(c) The execution, delivery and performance by each Stockholder of this Agreement will not conflict with, require a consent, waiver or approval under, or result in a breach of or default under, any of the terms of any contract, commitment or other obligation (written or oral) to which such Stockholder is a party or by which any of such Stockholder’s assets may be bound.

 

(d) No filing with, and no permit, authorization, consent or approval of, any state or federal public body or authority is necessary for the execution of this Agreement by such Stockholder and the consummation by such Stockholder of the transactions contemplated hereby.

 

5. Covenants of Each Stockholder. Each Stockholder covenants and agrees for the benefit of Acquisition Co. that, until the Expiration Date, such Stockholder will not:

 

(a) offer, sell, contract to sell, pledge, hypothecate, encumber, assign, tender or otherwise dispose of, or enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, pledge, hypothecation, encumbrance, assignment, tender or other disposition of, or the transfer or grant of any rights with respect to (i) any Subject Shares or any interest therein, or (ii) any Company Options and Other Rights or any interest therein; provided, however, that such Stockholder may convert, exercise or exchange Company Options and Other Rights into or for shares of Company Capital Stock in which event such shares of Company Capital Stock shall become and be deemed Subject Shares subject to all the terms and conditions of this Agreement;

 

(b) acquire any Company Capital Stock except pursuant to existing Company Options and Other Rights or transfers from the other Stockholder;

 

(c) grant any powers of attorney or proxies or consents in respect of any of the Subject Shares, deposit any of such Subject Shares into a voting trust, or enter into a Agreement with respect to any of such Subject Shares; and

 

D-3

---

(d) take any other action with respect to the Subject Shares that would in any way restrict, limit or interfere with the performance of such Stockholder’s obligations hereunder or the transactions contemplated hereby and the Merger Agreement.

 

6. Adjustments; Additional Shares. In the event (a) of any stock dividend, stock split, merger, recapitalization, reclassification, combination, exchange of shares or the like of the capital stock of the Company on, of or affecting the Subject Shares or (b) that a Stockholder shall become the Beneficial Owner of any additional shares of Company Capital Stock, then the terms of this Agreement shall apply to the shares of Company Capital Stock or other instruments or documents held by such Stockholder immediately following the effectiveness of the events described in clause (a) or such Stockholder becoming the Beneficial Owner thereof as described in clause (b), as though, in either case, they were Subject Shares hereunder. The foregoing shall apply ( mutatis mutandis ) to the Acquisition Co. Shares and Section 2 of this Agreement.

 

7. Covenant of Acquisition Co. Regarding Additional Merger Consideration. Acquisition Co. recognizes that the Stockholders may lose the intended benefit of the Additional Merger Consideration (as provided in the Merger Agreement) if the circumstances causing the Contingent Share Rights to become void occur during the period prior to the Release Date. In such event, Acquisition Co. agrees to promptly thereafter issue to each Stockholder the Additional Merger Consideration attributable to such Stockholder’s Company Common Stock unless the circumstances causing the Contingent Share Rights to become void are satisfied following the Release Date (including any extension of the Lock-up Period under Section 2(a) of this Agreement).

 

8. Amendments and Waivers. Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement, or in the case of a waiver, by the party against whom the waiver is to be effective. No failure or delay by any party in exercising any right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. To the maximum extent permitted by law, (a) no waiver that may be given by a party shall be applicable except in the specific instance for which it was given and (b) no notice to or demand on one party shall be deemed to be a waiver of any obligation of such party or the right of the party giving such notice or demand to take further action without notice or demand.

 

9. Assignment. This Agreement may not be assigned by any party hereto without the prior written consent of the other parties. Subject to the foregoing, all of the terms and provisions of this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective executors, heirs, personal representatives, successors and permitted assigns. Notwithstanding the foregoing, no rights may under any circumstances be transferred in respect of any Contingent Share Rights.

 

10. Entire Agreement. This Agreement and the documents, instruments and other agreements specifically referred to herein or the Merger Agreement or delivered pursuant hereto or thereto, set forth the entire understanding of the parties with respect to the subject matter hereof. Any and all previous agreements and understandings between or among the parties regarding the subject matter hereof, whether written or oral, are superseded by this Agreement.

 

11. Notices. Any notice, request, demand, waiver, consent, approval or other communication which is required or permitted hereunder shall be in writing and shall be deemed given (a) on the date established by the sender as having been delivered personally; (b) on the date delivered by a private courier as established by the sender by evidence obtained from the courier; (c) on the date sent by facsimile, with confirmation of transmission, if sent during normal business hours of the recipient, if not, then on the next business day; or (d) on the fifth day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications, to be valid, must be addressed as follows:

 

D-4

---

	If to Acquisition Co., to:
		Iconix Brand Group, Inc.
		1450 Broadway, 4 th Floor
		New York, New York 10018
		Attn: Neil Cole
		Fax: (212) 391-0127
	With a copy to:
		Blank Rome LLP
		405 Lexington Avenue
		New York, New York 10174
		Attn: Robert J. Mittman, Esq.
		Fax: (212) 885-5001
	If to:
		Mossimo Giannulli or Edwin Lewis
		c/o Mossimo, Inc.
		2016 Broadway
		Santa Monica, California 90404
		Fax: (310) 460-0124
	With a copy to:
		Paul, Hastings, Janofsky & Walker
		695 Town Center Drive, 17 th Floor
		Costa Mesa, California 92626
		Attn: Peter J. Tennyson, Esq.
		Fax: (714) 668-6337

or to such other address or to the attention of such person or persons as the recipient party has specified by prior written notice to the sending party (or in the case of counsel, to such other readily ascertainable business address as such counsel may hereafter maintain). If more than one method for sending notice as set forth above is used, the earliest notice date established as set forth above shall control.

 

12. Captions. All captions contained in this Agreement are for convenience of reference only, do not form a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement.

 

13. Severability; Enforcement. Any provision of this Agreement which is invalid or unenforceable in any jurisdiction shall be ineffective to the extent of such invalidity or unenforceability without invalidating or rendering unenforceable the remaining provisions hereof, and any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

14. Specific Performance. Each Stockholder acknowledges that the agreements contained in this Agreement are an integral part of the transactions contemplated by the Merger Agreement, and that, without these agreements, Acquisition Co. would not enter into the Merger Agreement, and acknowledges that damages would be an inadequate remedy for any breach by such Stockholder of the provisions of this Agreement. Accordingly, each Stockholder agrees that such Stockholder’s obligations hereunder shall be specifically enforceable and such Stockholder shall not take any action to impede the other from seeking to enforce such right of specific performance.

 

15. Consent to Jurisdiction. Each party irrevocably submits to the exclusive jurisdiction of (a) New York County, New York, and (b) the United States District Court for the Southern District of New York, for the purposes of any action, suit or proceeding arising out of this Agreement or any transaction contemplated hereby. Each party agrees to commence any such action, suit or proceeding either in the United States District Court for the Southern District of New York or if such action, suit or proceeding may not be brought in such court for jurisdictional reasons, in the Supreme Court sitting in New York County (including its Appellate Division). Each party further agrees that service of any process, summons, notice or document by U.S. registered mail to such party’s respective address set forth above shall be effective service of process for any action, suit or proceeding in New York with respect to any matters to which it has submitted to jurisdiction in this Section 14. Each party irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in (i) the United States District Court for the Southern District of New York, or (ii) the Supreme Court sitting in New York County (including its Appellate Division), and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF SUCH PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.

 

D-5

---

 

 

16. Governing Law. This Agreement shall be governed by and interpreted and enforced in accordance with the laws of the State of New York, without giving effect to any choice of law or conflict of laws rules or provisions (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York.

 

[Remainder of Page Intentionally Left Blank]

D-6

---

IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto all as of the day and year first above written.

 

	ICONIX BRAND GROUP, INC.
	By:
	Name:
	Title:
	Address:	1450 Broadway, 4 th Floor New York, NY 10018
	MOSSIMO GIANNULLI
	Signature:
	Address:
	EDWIN LEWIS
	Signature:
	Address:

 

D-7

---

APPENDIX E

 

OPINION OF FMV OPINIONS, INC.

April 26, 2006

The Board of Directors

c/o Mossimo Giannulli

Chairman of the Board

Co-Chief Executive Officer

Mossimo, Inc.

2016 Broadway

Santa Monica, CA 90404

Ladies and Gentlemen:

We understand that Iconix Brand Group, Inc. (“Iconix” or Acquisition Co.”) and Mossimo, Inc. (“Mossimo” or the “Company” hereinafter) have entered into an agreement dated March 31, 2006, which provides for the acquisition of Mossimo by Iconix for aggregate consideration (“Merger Consideration”) of: (i) $7.50 per share in initial merger consideration (“Initial Merger Consideration”), comprised of $4.25 per share in cash and $3.25 per share in Iconix stock; and (ii) Additional Merger Consideration (as defined below), if any. The merger between Mossimo and Iconix is referred to hereafter as the “Transaction.” We further understand that the Additional Merger Consideration consists of additional Acquisition Co. common stock that would be issued to former stockholders of Mossimo following the first anniversary of the Transaction if Iconix’s share price does not equal or exceed a target price of $18.71 during each day of any 20-day consecutive period within the twelve month period following the closing of the Transaction. In the event that Iconix’s share price does equal or exceed $18.71 for any 20-day consecutive period during the twelve month period following the close of the Transaction, Iconix will not be required to issue the Additional Merger Consideration. On behalf of the Board of Directors of Mossimo, you have requested that FMV Opinions, Inc., (“FMV”) render an opinion that as of March 31, 2006, the Merger Consideration is fair, from a financial point of view, to the holders of the Company’s common stock (the “Opinion”).

 

We have conducted investigations and analyses that we considered necessary in order to render the Opinion. In determining the Opinion, we have, among other things:

 

1.	reviewed Mossimo’s annual reports on Form 10-K for each of the five fiscal years up to and including the fiscal year ended December 31, 2005, which Company management identified as containing the most current financial statements available;

 

2.	via in-person and teleconference, met with certain members of the senior management of Mossimo to discuss its operations, financial condition, future prospects and projected operations and performance;

 

3.	visited the headquarters of Mossimo;

 

4.	reviewed copies of the following agreements:

 

a.

the Agreement and Plan of Merger by and among Iconix, Moss Acquisition Corp., Mossimo and Mossimo Giannulli dated March 31, 2006;

 

b.

the Mossimo Transition Services Agreement by and between Mossimo and Target Brands, Inc.;

 

c.

the Mossimo Restated License Agreement by and between Mossimo and Target Brands, Inc.;

 

d.

the Licensing Agreement by and between Joe Boxer Licensing, LLC, and Kmart Corporation; and

 

e.

the Licensing Agreement by and among IP Holdings, LLC, Candie’s, Inc., and Kohl’s Department Stores, Inc.

 

E-1

---

5.	reviewed internal financial statements for the key business segments of Mossimo for the periods from December 31, 2000 through December 31, 2005;

 

6.	reviewed a projected Income Statement for Mossimo prepared by Mossimo management for the period ended December 31, 2006;

 

7.	reviewed Iconix’s annual reports on Form 10-K for the five fiscal years ended December 31, 2005 ;

 

8.	reviewed pro forma projections for Iconix, prepared by Iconix management for the year ended December 31, 2006;

 

9.	reviewed two presentations from Hewitt Associates, dated May 4, 2004 and August 6, 2004, respectively, regarding Mossimo’s executive compensation;

 

10.	via several teleconferences, met with certain members of the senior management of Iconix to discuss its operations, financial condition, future prospects and projected operations and performance;

 

11.	reviewed historical market prices and trading volume for Mossimo’s and Iconix’s publicly traded securities;

 

12.	reviewed certain publicly available financial data for certain companies that we deemed comparable to Mossimo and Iconix; and

 

13.	conducted other studies, analyses and inquiries, as we deemed appropriate.

 

Our investigations have consisted of gathering and reviewing information directly available from management of the Company and Iconix, and their representatives and advisors, as well as from public sources. In preparing the Opinion, we assumed and relied on the accuracy and completeness of all information supplied or otherwise made available to us, and did not assume any responsibility for independently verifying such information. We assumed that statements by management of the Company and Iconix regarding expectations for future financial performance reflected the most current estimates and judgment of management of the Company and Iconix available on March 31, 2006. Our opinion is based upon market, economic, and other conditions as they existed on March 31, 2006. We have not considered any developments that may have occurred subsequent to March 31, 2006, including any additional information that may have become available after that date.

 

We note that we are not legal, tax or accounting experts and have relied upon, without assuming any responsibility for independent verification or liability thereof, the assessment of the Company’s legal, tax and accounting advisors with respect to the legal, tax and regulatory matters related to the Transaction. We have assumed that all governmental, regulatory or other consents and approvals (contractual or otherwise) required to be obtained for or in connection with the consummation of the Transaction will be obtained without any adverse effect on the Company that is in any respect material to our analyses.

 

This opinion is directed to the Board, and addresses only whether the consideration to be received by the Company’s stockholders in connection with the Transaction is fair to the Company’s stockholders from a financial point of view. This opinion may be reproduced in full in any proxy or information statement to be provided to the stockholders.

 

We have not acted as a financial advisor to the Company in connection with the Transaction. Our fee is not contingent upon our Opinion or the completion of the Transaction. We have not been asked to solicit, nor have we solicited, any persons to invest in the Company through the Transaction or otherwise.

 

Based upon the foregoing, and in reliance thereon, it is our opinion that as of March 31, 2006, the Merger Consideration to be received by the Company stockholders in connection with the Transaction is fair to such stockholders from a financial point of view.

 

Very truly yours,

/s/ FMV OPINIONS, INC .

FMV OPINIONS, INC .

 

E-2

---

APPENDIX F

 

FINANCIAL STATEMENTS OF MOSSIMO, INC.
FOR THE YEAR ENDED DECEMBER 31, 2005

 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

	PAGE
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F-1
CONSOLIDATED FINANCIAL STATEMENTS:
Balance sheets as of December 31, 2005 and 2004	F-2
Statements of earnings for the years ended December 31, 2005, 2004 and 2003	F-3
Statements of stockholders’ equity for the years ended December 31, 2005, 2004 and 2003	F-4
Statements of cash flows for the years ended December 31, 2005, 2004 and 2003	F-5
Notes to consolidated financial statements	F-6

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Board of Directors and Stockholders

Mossimo, Inc.:

We have audited the accompanying consolidated balance sheets of Mossimo, Inc. and subsidiary as of December 31, 2005 and 2004, and the related consolidated statements of earnings, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2005. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Mossimo, Inc. and subsidiary as of December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.

 

/s/ KPMG LLP

March 24, 2006

Los Angeles, California

 

F-1

---

MOSSIMO, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE DATA)

		December 31,
		2005			2004
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	19,658		$	4,903
Restricted cash			726			413
Investments			-			4,800
Accounts receivable, net			4,372			2,908
Merchandise inventory			101			539
Deferred income taxes			4,004			1,869
Prepaid expenses and other current assets			388			436
Total current assets			29,249			15,868
PROPERTY AND EQUIPMENT, at cost, net of accumulated depreciation and amortization			893			1,117
DEFERRED INCOME TAXES			1,923			6,068
GOODWILL			-			212
TRADENAME			90			112
OTHER ASSETS			79			96
		$	32,234		$	23,473
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable		$	884		$	352
Accrued liabilities			503			809
Accrued commissions			388			258
Accrued bonuses			3,458			206
Total current liabilities			5,233			1,625
DEFERRED RENT			128			135
Total liabilities			5,361			1,760
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
Preferred stock, par value $.001; authorized shares 3,000,000; no shares issued or outstanding			-			-
Common stock, par value $.001; authorized shares 30,000,000; issued and outstanding 15,828,754 at December 31, 2005 and 15,738,442 at December 31, 2004			15			15
Additional paid-in capital			40,222			39,763
Accumulated deficit			(13,364	)		(18,065	)
Net stockholders’ equity			26,873			21,713
		$	32,234		$	23,473

 

See accompanying notes to consolidated financial statements

 

F-2

---

MOSSIMO, INC.

CONSOLIDATED STATEMENTS OF EARNINGS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

 

		YEARS ENDED DECEMBER 31,
		2005			2004			2003
Revenue from license royalties and design service fees		$	24,298		$	18,714		$	19,895
Product sales			6,730			1,821			-
Total revenues			31,028			20,535			19,895
Operating expenses:
Cost of product sales			3,993			1,241			-
Selling, general and administrative			20,294			14,843			12,834
Goodwill impairment loss			212			-			-
Settlement costs of disputed commissions			-			71			643
Total operating expenses			24,499			16,155			13,477
Operating earnings			6,529			4,380			6,418
Interest income			420			104			23
Earnings before income taxes			6,949			4,484			6,441
Income taxes			2,248			1,783			1,875
Net earnings		$	4,701		$	2,701		$	4,566
Net earnings per common share:
Basic		$	0.30		$	0.17		$	0.29
Diluted		$	0.30		$	0.17		$	0.29
Weighted average common shares outstanding:
Basic			15,751			15,738			15,613
Diluted			15,784			15,759			15,658

See accompanying notes to consolidated financial statements

 

F-3

---

MOSSIMO, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(IN THOUSANDS)

 

	COMMON STOCK						ADDITIONAL
	SHARES			AMOUNT			PAID-IN CAPITAL			ACCUMULATED DEFICIT			TOTAL
BALANCE, December 31, 2002		15,488		$	15		$	38,797		$	(25,332	)	$	13,480
Exercise of stock options		250			-			749			-			749
Income tax benefit from exercise of stock options		-			-			217			-			217
Net earnings		-			-			-			4,566			4,566
BALANCE, December 31, 2003		15,738			15			39,763			(20,766	)		19,012
Net earnings		-			-			-			2,701			2,701
BALANCE, December 31, 2004		15,738			15			39,763			(18,065	)		21,713
Exercise of stock options		90						418						418
Income tax benefit from exercise of stock options								41						41
Net earnings		-			-			-			4,701			4,701
BALANCE, December 31, 2005		15,828		$	15		$	40,222		$	(13,364	)	$	26,873

See accompanying notes to consolidated financial statements

 

F-4

---

 

MOSSIMO, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

	YEARS ENDED DECEMBER 31,
	2005			2004			2003
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	4,701		$	2,701		$	4,566
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		427			329			257
Inventory write-down		328			-			-
Deferred rent		(7	)		-			-
Provision for bad debt		88
Deferred income taxes		1,458			1,171			1,109
Goodwill impairment		212
Changes in:
Restricted cash		-			4,585			(4,585	)
Accounts receivable		(1,552	)		(876	)		(81	)
Merchandise inventory		110			(539	)		-
Prepaid expenses and other current assets		48			(154	)		(158	)
Other assets		17			154			(152	)
Accounts payable		532			(173	)		(407	)
Accrued liabilities		287			(569	)		181
Accrued commissions		130			(4,993	)		2,590
Accrued bonuses		3,252			94			(953	)
Net cash provided by operating activities		10,031			1,730			2,367
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of available-for-sale securities		4,800			3,950			-
Purchases of available-for-sale securities		-			(3,750	)		(5,000	)
Payments for acquisition of property and equipment		(181	)		(946	)		(129	)
Acquisition of Modern Amusement		-			(375	)		-
Net cash provided by (used in) investing activities		4,619			(1,121	)		(5,129	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Restricted cash - certificates of deposit		(313	)		(413	)		-
Proceeds from issuance of common stock		418			-			749
Payments of loan payable		-			-			(1,066	)
Net cash provided by (used in) financing activities		105			(413	)		(317	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		14,755			196			(3,079	)
CASH AND CASH EQUIVALENTS, beginning of year		4,903			4,707			7,786
CASH AND CASH EQUIVALENTS, end of year	$	19,658		$	4,903		$	4,707
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year of interest	$	-		$	-		$	10
Cash paid during the year for state income taxes	$	415		$	60		$	640

See accompanying notes to consolidated financial statements

 

F-5

---

 

MOSSIMO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

1. SUMMARY BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES

 

Mossimo, Inc. (the Company) is a Delaware corporation formed in November 1995, and presently operates as a designer and licensor of apparel and related products. A substantial amount of the Company’s revenue is derived under an agreement with Target Corporation as further described below.

 

In January 2004 the Company acquired substantially all the assets of Modern Amusement LLC through a wholly owned subsidiary, Modern Amusement, Inc. (“Modern Amusement”). Modern Amusement designs, merchandises, sources, markets, sells and distributes wholesale apparel and related accessories for young men. The products are offered at moderate to upper price points thru traditional specialty store and better department store distribution channels.

 

LICENSING AGREEMENTS

 

The Company entered into a multi-year licensing and design services agreement with Target Corporation (“Target”) in March 2000, subsequently amended in February 2002, and in February and June 2003, hereinafter referred to as the “Target Agreement”. Under the terms of the Target Agreement, Target has the exclusive license, for production and distribution through Target stores, of substantially all Mossimo products sold in the United States.

 

Under the Target Agreement the Company provides design services and has approval rights for product design, marketing and advertising materials. Target collaborates on design and is responsible for product development, sourcing, quality control and inventory management with respect to the Target licensed product line. Target is obligated to pay the Company design service fees and license royalty fees. Total fees payable by Target are based upon a percentage of Target’s net sales of Mossimo branded products, with minimum total guaranteed fees of approximately $9.6 million annually. Target fees are based on net sales achieved multiplied by a rate, as defined in the Target Agreement. The Company pays a 15 percent commission, based on fees received from Target, to a third party who assisted the Company in connection with entering into the initial agreement with Target. The Target Agreement is subject to early termination under certain circumstances. If Target is current with payments of its obligations under the Target Agreement, Target has the right to renew the Target Agreement, on the same terms and conditions, for additional terms of two years each. In January 2003, Target exercised its first renewal option extending the Target Agreement through January 31, 2006. In January 2005, Target exercised its second renewal option extending the Target Agreement through January 31, 2008. The next renewal option could be exercised by Target on or before January 2007, this renewal option could extend the Target Agreement thru January 2010, if it is exercised by Target.

 

In addition to the Target Agreement, the Company also licenses its trademarks and provides design services outside of the United States, and also licenses its trademarks for use in collections of eyewear and women’s swimwear and body-wear sold in Target stores in the United States.

 

In May 2002, the Company entered into an agreement with Hudson’s Bay Company. Under the agreement, the Company provided product design services, and granted a license for the Mossimo trademark to Hudson’s Bay Company exclusively in Canada, in return for license royalties and design service fees. Hudson’s Bay Company collaborated on product design, and was responsible for manufacturing, importing, marketing, advertising, selling and distributing merchandise bearing the Mossimo trademark. The initial term of the agreement was three years beginning in May 2002. The agreement expired in May of 2005, we expect to receive royalty payments through the third quarter of 2006. There are no plans to renew the agreement.

 

BASIS OF PRESENTATION

 

The consolidated financial statements include the accounts of Mossimo, Inc. and its wholly-owned subsidiary, Modern Amusement, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.

 

USE OF ESTIMATES

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

F- 6

---

 

 

II-1

---

 

Iconix’s certificate of incorporation also provides that no director shall be personally liable to Iconix or its stockholders for any monetary damages for breaches of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to Iconix or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) under Section 174 of the DGCL; or (iv) for any transaction from which the director derived an improper personal benefit.

 

Iconix’s employment agreements with Mr. Neil Cole, its chief executive officer and Ms. Deborah Sorell Stehr, its senior vice president and general counsel, generally provide that Iconix shall indemnify each of them for the consequences of all acts and decisions made by such person while performing services for Iconix. These agreements also require that Iconix use its best efforts to obtain directors’ and officers’ liability insurance for such persons.

 

Iconix has obtained an insurance policy providing for indemnification of officers and directors and certain other persons against liabilities and expenses incurred by any of them in certain stated proceedings and conditions.

 

The indemnification provisions in Iconix’s certificate of incorporation and bylaws may be sufficiently broad to permit indemnification of its directors and officers for liabilities arising under the Securities Act.

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to Iconix’s directors, officers and controlling persons pursuant to the foregoing provisions or otherwise, Iconix has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

 

Iconix’s summaries are necessarily subject to the complete text of the statute, Iconix’s certificate of incorporation and bylaws and the agreements referred to above, and are qualified in their entirety by reference thereto.

 

Item 21. Exhibits and Financial Statement Schedules

 

(a)  Exhibits

 

The Exhibits required to be filed as part of this Registration Statement are listed on the attached Exhibit Index.

 

(b) Financial Statement Schedules

 

Statement of Revenues and Direct Operating Expenses of Assets Sold for the three months ended March 31, 2006 and March 31, 2005  (Unaudited).

 

Statement of Assets Sold as of March 31, 2006 and March 31, 2005 (Unaudited).

 

(c)  Report, Opinion or Appraisal Exhibits

 

The opinion of FMV Opinions Inc. is attached as Appendix E to the proxy statement/prospectus included in this Registration Statement.

 

Item 22. Undertakings

 

(1) The undersigned registrant hereby undertakes to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:(i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; (iii) to include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement.

 

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial   bona fide offering thereof.

 

II-2

---

 

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

 

(4)  The undersigned registrant hereby undertakes as follows: that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form.

 

(5) The registrant undertakes that every prospectus (i) that is filed pursuant to paragraph (4) immediately preceding, or (ii) that purports to meet the requirements of section 10(a)(3) of the Securities Act of 1933, and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

 

(7)  Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions hereof, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

 

(8) The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.

 

(9) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.

 

II-3

---

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on August 17, 2006.

 

	ICONIX BRAND GROUP, INC.
	By:	/s/ Neil Cole
		Neil Cole
		Chairman of the Board, President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 1 to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated:

 

Name		Title		Date
/s/Neil Cole		Chairman of the Board, Chief Executive Officer and Treasurer (Principal
Neil Cole		Executive Officer)		August 17, 2006
/s/ Warren Clamen		Chief Financial Officer (Principal Financial and Accounting Officer)
Warren Clamen				August 17, 2006
/s/ Drew Cohen		Director
Drew Cohen				August 17, 2006
/s/ Barry Emanuel		Director
Barry Emanuel				August 17, 2006
/s/ Michael Groveman		Director
Michael Groveman				August 17, 2006
/s/ Steven Mendelow		Director
Steven Mendelow				August 17, 2006

Neil Cole, by signing his name below, signs this document on behalf of each of the above named persons specified by an asterisk (*), pursuant to a power of attorney duly executed by such persons and filed with the Securities and Exchange Commission in the Registrant’s Registration Statement on June 30, 2006.

 

	*  By:
		Neil Cole Attorney-in-fact

 

II-4

---

EXHIBIT INDEX

 

2.1	Merger Agreement dated as of March 31, 2006 by and among Registrant, Moss Acquisition Corp., Mossimo, Inc., and Mossimo Giannulli (attached as Appendix A to the proxy statement/prospectus included in this Registration Statement) (1)+

 

3.1	Certificate of Incorporation of Registrant(2)

 

3.2	Restated and Amended Bylaws of Registrant(3)

 

4.1	Rights Agreement dated January 26, 2000 between Registrant and Continental Stock Transfer & Trust Company (4)

 

4.2	Second Amended and Restated Indenture dated as of July 1, 2005 by and among IP Holdings LLC, as issuer, and Wilmington Trust Company, as Trustee (5)

 

4.3	Third Amended and Restated Indenture dated as of September 1, 2005 by and among IP Holdings LLC, as issuer, and Wilmington Trust Company, as Trustee (6)

 

4.4	Fourth Amended and Restated Indenture dated as of April 11, 2006 by and among IP Holdings LLC, as issuer, and Wilmington Trust Company, as Trustee (7)

 

5.1	Opinion of Blank Rome LLP regarding legality of securities being registered

 

8.1	Form of opinion of Blank Rome LLP regarding tax matters (9)

 

10.1	Termination and Settlement Agreement dated as of April 27, 2006 among the Registrant, Moss Acquisition Corp., and Cherokee Inc. (8)

 

10.2	Form of Registration Rights Agreement among Registrant, Mossimo Giannulli and Edwin Lewis (attached as Appendix B to the proxy statement/prospectus included in this Registration Statement)

 

10.3	Form of Lock-up Agreement (attached as Appendix D to the proxy statement/prospectus included in this Registration Statement)

 

10.4	Form of global certificate in respect of non-transferable contingent share rights

 

23.1	Consent of BDO Seidman, LLP, Independent Registered Public Accounting Firm of Iconix Brand Group, Inc.

 

23.2	Consent of BDO Seidman, LLP, Independent Registered Public Accounting Firm of JBC Holdings, LLC

 

23.3	Consent of BDO Seidman, LLP, Independent Registered Public Accounting Firm of Mudd (USA) LLC

 

23.4	Consents of Cohn Handler & Co (related to the financial information for Rampage)

 

23.5	Consent of KPMG LLP, Independent Registered Public Accounting Firm to Mossimo, Inc.

 

23.6	Consent of Blank Rome LLP (included in Exhibits 5.1 and 8.1 hereto)

 

24.1	Power of Attorney (included on the signature page of the Form S-4 and incorporated herein by reference).

 

99.1	Opinion of FMV Opinions, Inc. (attached as Appendix E to the proxy statement/prospectus included in this Registration Statement)

 

99.2	Consent of FMV Opinions, Inc.

 

99.3	Form of Mossimo, Inc. Proxy Card (9)

 

II-5

---

 

---

(1)	Filed as an exhibit to Registrant’s Current Report on Form 8-K for the event dated March 31, 2006 and incorporated by reference herein.

 

(2)	Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 and incorporated by reference herein.

 

(3)	Filed as an exhibit to Registrant’s Annual Report as Form 10-K for the year ended January 31, 2000, and incorporated by reference herein.

 

(4)	Filed as an exhibit to Registrant’s Current Report on Form 8-K dated January 26, 2000 and incorporated by reference herein.

 

(5)	Filed as an exhibit to Registrant’s Current Report on Form 8-K for the event dated July 22, 2005 and incorporated by reference herein.

 

(6)	Filed as an exhibit to Registrant’s Current Report on Form 8-K for the event dated September 16, 2005 and incorporated by reference herein.

 

(7)	Filed as an exhibit to Registrant’s Current Report on Form 8-K for the event dated April 11, 2006 and incorporated by reference herein.

 

(8)	Filed as an exhibit to Registrant’s Current Report on Form 8-K for the event dated April 27, 2006 and incorporated by reference herein.

 

(9)	Previously filed.

 

+	The Company omitted certain schedules and exhibits pursuant to Item 601(b) (2) of Regulation S-K and has undertaken to furnish supplementally to the SEC copies of any of the omitted schedules and exhibits upon request by the SEC.

 

II-6

---