Filed
pursuant to Rule 424(b)(3)
|
||
Registration
File
No. 333-135496
|
1.
|
To
adopt the agreement and plan of merger pursuant to which Iconix Brand
Group, Inc. will acquire all of the common stock of Mossimo for
(a) 0.2271139 shares of Iconix common stock and $4.25 in cash per
share of Mossimo common stock, subject to adjustment under certain
conditions, and (b) a non-transferable contingent share right to
receive additional common stock of Iconix 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.
|
2.
|
To
transact such other business as may properly come before the special
meeting or any adjournment or postponement
thereof.
|
By order of the board of directors, | |
Mossimo G. Giannulli | |
Chairman and co-Chief Executive Officer |
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
|
15
|
SELECTED
SUMMARY HISTORICAL FINANCIAL DATA OF MOSSIMO
|
17
|
COMPARATIVE
HISTORICAL AND PRO FORMA PER SHARE DATA
|
18
|
COMPARATIVE
PER SHARE MARKET PRICE DATA
|
19
|
RISK
FACTORS
|
20
|
Risks
Relating to the Merger
|
20
|
Risks
Relating to Iconix’s Operations After Completion of the
Merger
|
23
|
THE
MOSSIMO SPECIAL MEETING
|
29
|
Proposal
to be Considered at the Special Meeting
|
29
|
Voting
Rights; Quorum; Vote Required for Approval
|
29
|
Voting
and Revocation of Proxies
|
29
|
Voting
by Mossimo Directors and Executive Officers
|
30
|
Proxy
Solicitation
|
30
|
Effective
Time of the Merger
|
30
|
Payment
of Merger Consideration and Surrender of Stock
Certificates
|
30
|
Merger
Financing
|
31
|
Interests
of Certain Persons in the Merger; Potential Conflicts of
Interest
|
31
|
Intent
to Vote; Recommendations
|
33
|
Estimated
Fees and Expenses of the Merger
|
33
|
MERGER
|
34
|
Background
and Reasons for the Merger
|
34
|
Structure
of the Merger
|
37
|
What
You Will Receive
|
38
|
Position
of Mossimo as to the Fairness of the Merger; Recommendation of
Mossimo’s
Board of Directors
|
39
|
Opinion
of Financial Advisor to Mossimo
|
40
|
Position
of Mossimo as to the Purposes, Alternatives, Reasons and Effects
of the
Merger
|
48
|
Position
of Iconix as to the Purposes, Alternatives, Reasons and Effects
of the
Merger
|
48
|
Iconix’s
Plans for Mossimo
|
49
|
Appraisal
Rights
|
49
|
Material
U.S. Federal Income Tax Consequences
|
51
|
Certain
Legal Matters
|
53
|
Regulatory
Filings and Approvals
|
54
|
THE
MERGER AGREEMENT
|
55
|
Structure
of the Merger
|
55
|
Merger
Consideration
|
55
|
Treatment
of Mossimo Stock Options
|
55
|
Completion
and Effectiveness of the Merger
|
55
|
Dissenters’
Shares
|
56
|
Representations
and Warranties
|
56
|
Conditions
to the Merger
|
57
|
Waiver
|
57
|
Exchange
of Mossimo Stock Certificates for Iconix Stock Certificates and
Cash
|
57
|
Interim
Operations
|
58
|
Access
to Information
|
58
|
Notices
of Certain Events; Continuing Disclosure
|
58
|
Compensation
|
59
|
Modern
Amusement
|
59
|
Consents
|
59
|
Non-Solicitation
|
59
|
Class
Action Suit
|
60
|
Confidentiality
|
60
|
Indemnification
|
60
|
Voting
|
60
|
Termination
|
60
|
Termination
Fee
|
61
|
Expenses
|
61
|
INFORMATION
ABOUT MOSSIMO
|
62
|
General
|
62
|
Modern
Amusement
|
62
|
Licensing
|
62
|
Products
|
63
|
Sourcing,
Manufacturing, and Distribution
|
63
|
Marketing
and Advertising
|
64
|
Trademarks
|
64
|
Personnel
|
64
|
Code
of Ethics
|
64
|
Mossimo
Risk Factors
|
64
|
Certain
Federal Tax Consequences
|
67
|
Properties
|
67
|
Legal
Proceedings
|
67
|
Market
Price and Dividends of Mossimo’s Common Stock
|
68
|
Mossimo
Quantitative and Qualitative Disclosure About Market Risk
|
68
|
Mossimo
Financial Statements and Supplementary Data
|
68
|
Mossimo
Changes In and Disagreements with Accountants on Accounting and
Financial
Disclosure
|
68
|
Holders
of Mossimo Common Stock
|
68
|
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
|
82
|
Pre-Merger
Principal Stockholders of Iconix
|
84
|
Post-Merger
Principal Stockholders of Iconix (Pro Forma)
|
85
|
COMPARISON
OF STOCKHOLDER RIGHTS AND CORPORATE GOVERNANCE MATTERS
|
88
|
UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
|
101
|
SELLING
STOCKHOLDERS
|
106
|
PLAN
OF DISTRIBUTION
|
107
|
OTHER
MATTERS AT THE SPECIAL MEETING
|
108
|
FUTURE
MOSSIMO STOCKHOLDER PROPOSALS
|
108
|
LEGAL
MATTERS
|
108
|
EXPERTS
|
108
|
WHERE
YOU CAN FIND MORE INFORMATION
|
109
|
INFORMATION
INCORPORATED BY REFERENCE
|
109
|
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
|
Ÿ
|
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;
|
Ÿ
|
Revenues
or net income following the merger may be lower than
expected;
|
Ÿ
|
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;
|
Ÿ
|
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;
|
Ÿ
|
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;
|
Ÿ
|
Iconix’s
business is very competitive, and increased competition could reduce
royalty revenue and net income;
|
Ÿ
|
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;
|
Ÿ
|
Interest
rates on Iconix’s debt could
increase;
|
Ÿ
|
Iconix
may not be able to consummate future acquisitions, and those acquisitions
that it does complete may be difficult to integrate into its
business;
|
Ÿ
|
If
stockholders sell their Iconix shares, the market price of Iconix
common
stock could be depressed;
|
Ÿ
|
Principal
stockholders who own a significant number of Iconix’s shares may have
interests that conflict with yours;
|
Ÿ
|
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;
|
Ÿ
|
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;
|
Ÿ
|
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
|
Ÿ
|
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.
|
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.
|
|
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 20 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.”
|
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 39.
|
|
Q:
|
When
do you expect to complete the merger?
|
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 fourth quarter of 2006.
|
Q:
|
When
and where is the Mossimo special meeting?
|
A:
|
The
Mossimo special meeting will take place on October 31, 2006, at 9:00
A.M.,
California time, and will be held at The Fairmont Miramar Hotel,
101
Wilshire Boulevard, Santa Monica, California, 90401.
|
|
Q:
|
Who
is entitled to vote at the special meeting?
|
A:
|
Holders
of record of Mossimo common stock at the close of business on October
10,
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.
|
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 55.
|
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:
|
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., California time, on October 30, 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.
|
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.
|
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 109, 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.
|
· |
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.
|
Ÿ
|
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;
|
Ÿ
|
its
belief that the merger was more favorable to stockholders than
any other
alternative reasonably available to Mossimo and its
stockholders;
|
Ÿ
|
the
likelihood that Iconix would be able to complete the transaction
and
successfully integrate the Mossimo
brand;
|
Ÿ
|
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;
|
Ÿ
|
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;
|
Ÿ
|
the
financial and other terms and conditions of the merger
agreement;
|
Ÿ
|
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;
|
Ÿ
|
the
market position of the combined
company;
|
Ÿ
|
the
likelihood, in the board’s view, that Iconix’s shares better diversify
brand risk because Iconix owns multiple brands;
and
|
Ÿ
|
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.
|
Ÿ
|
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. Although there
is no agreement, express or implied, to do so, Mr. Giannulli is
considering a possible transfer of up to one-half the after-tax
proceeds
received by him in the merger to Mr. Lewis in recognition of the
role Mr.
Lewis has played in Mossimo. 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.
|
Ÿ
|
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.
|
Ÿ
|
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.
Based
on the current level of royalties from licensees other than Target,
it is
expected that Mr. Giannulli’s income from this agreement will be lower
than his current compensation as a Mossimo
officer.
|
Ÿ
|
Although
there is no agreement, express or implied, to do so, Mr. Giannulli
is
considering a possible transfer of up to one-half the after-tax
proceeds
received by him in the merger to Mr. Lewis in recognition of the
role Mr.
Lewis has played in Mossimo.
|
Ÿ
|
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. Mr. Giannulli has agreed to pay approximately $3.3
million
for Modern Amusement, comprised of a $2 million base price plus
an
additional amount, expected to be approximately $1.3 million, calculated
based on the net value of certain assets of Modern Amusement, consisting
of accounts receivable, fixed assets, inventory and prepaid expenses,
reduced by Modern Amusement’s accrued expenses, accounts payable and
deferred rent. 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.
The
terms of this disposition were negotiated on an arm’s-length basis between
Mr. Cole and Mr. Giannulli after Iconix indicated it did not wish
to
acquire Modern Amusement because Modern Amusement does not fit
the Iconix
business model. The purchase price exceeds the value placed on
Modern
Amusement by FMV Opinions, Mossimo’s financial advisor, which valued
Modern Amusement between $2.392 million and $3.186 million on a
controlling interest basis. The valuation range included a 15%
control
premium.
|
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.
|
Ÿ
|
Mossimo’s
executive officers and directors will be entitled to continued
indemnification and certain liability insurance coverage under
the merger
agreement.
|
Ÿ
|
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.
|
Ÿ
|
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.
|
Ÿ
|
adoption
and approval of the merger agreement by holders of a majority of
the
outstanding shares of Mossimo common
stock;
|
Ÿ
|
the
approval for listing on the NASDAQ Global Market of the Iconix
common
stock to be issued to Mossimo stockholders in the
merger;
|
Ÿ
|
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;
|
Ÿ
|
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;
|
Ÿ
|
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);
|
Ÿ
|
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);
|
Ÿ
|
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.) ;
|
Ÿ
|
the
absence of any legal prohibitions against the
merger;
|
Ÿ
|
the
cancellation of all Mossimo stock
options;
|
Ÿ
|
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;
|
Ÿ
|
the
sale of all of the outstanding capital stock of Modern Amusement,
Inc. to
Mr. Giannulli, which sale has been required by
Iconix;
|
Ÿ
|
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;
|
Ÿ
|
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;
|
Ÿ
|
the
receipt of all necessary approvals and
consents;
|
Ÿ
|
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
|
Ÿ
|
the
absence of a material adverse effect on Mossimo or
Iconix.
|
Ÿ
|
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;
|
Ÿ
|
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;
|
Ÿ
|
by
either Mossimo or Iconix, if Mossimo stockholders fail to adopt
the merger
agreement at the special meeting;
|
Ÿ
|
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;
|
Ÿ
|
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;
|
Ÿ
|
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 59 of this proxy
statement/prospectus) other than the merger;
or
|
Ÿ
|
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 59 of this proxy
statement/prospectus).
|
Ÿ
|
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;
|
Ÿ
|
Mossimo’s
board of directors accepting a superior proposal;
or
|
Ÿ
|
Mossimo’s
failure to obtain stockholder approval of the merger
agreement.
|
Ÿ
|
solicit,
initiate, negotiate, or encourage the submission of any acquisition
proposal;
|
Ÿ
|
enter
into any agreement with respect to any takeover proposal;
or
|
Ÿ
|
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.
|
Ÿ
|
an
effective registration statement under the Securities Act covering
the
resale of those shares;
|
Ÿ
|
an
exemption under paragraph (d) of Rule 145 under the Securities
Act;
|
Ÿ
|
an
exemption under Rule 144 under the Securities Act;
or
|
Ÿ
|
any
other applicable exemption under the Securities
Act.
|
Ÿ
|
Commencing
as of May 2, 2002, the operating results of Unzipped Apparel, LLC,
referred to as Unzipped, one of Iconix’s subsidiaries, which conducted the
Bongo jeanswear business of Iconix until its transition to a licensing
model, were consolidated. Thus, operating results commencing with
the year
ended January 31, 2003, are not comparable to prior
years.
|
Ÿ
|
In
May 2003, Iconix changed its business model from that of a jeanswear
and
footwear wholesaler to a licensing only model and as a result its
fiscal
year ended January 31, 2004, 11 months ended December 31, 2004
and year
ended December 31, 2005 are not comparable with prior
years.
|
Ÿ
|
In
December 2004, Iconix determined to change its fiscal year end
from
January 31 to December 31, effective for the period ending December
31,
2004. As a result, while its most recently completed fiscal year
commenced
on January 1, 2005 and ended on December 31, 2005, its prior reporting
year, which was its transitional period, commenced on February
1, 2004 and
ended on December 31, 2004 and was thus reported as an 11-month
year.
|
Ÿ
|
Iconix
acquired the Badgley Mischka brand in October 2004 and the Joe
Boxer and
Rampage brands in the third quarter of 2005, which affects the
comparability of the information reflected in the selected data
presented
for the 11 months ended December 31, 2004 and the year ended December
31, 2005, respectively.
|
Ÿ
|
Further, Iconix completed the purchase of certain assets of Mudd (USA) in April 2006. |
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
|
-
|
-
|
-
|
55,795
|
104,230
|
116,306
|
70,468
|
|||||||||||||||
Gross
profit
|
31,678
|
8,587
|
30,156
|
13,185
|
27,147
|
40,477
|
30,934
|
|||||||||||||||
|
||||||||||||||||||||||
Selling,
general and administrative expenses (net of recovery pursuant to an
agreement of $438, $7,566, $1,626 and $438 in the year ended 12/31/05,
the
11 months ended 12/31/04, the year ended 1/31/04 and in the six
months
ended 6/30/05, respectively)
|
11,501
|
5,308
|
13,880
|
10,154
|
30,682
|
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 $295, $24, $36, $352 and $35 in the year ended 12/31/05, the
11 months
ended 12/31/04, the year ended 1/31/04, the six months ended
6/30/06 and
the six months ended 6/30/05, respectively)
|
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
|
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.
|
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.
|
|
Six
months
ended
June 30,
2006
|
Year ended
December
31,
2005
|
|||||
Iconix
historical data:
|
|
|
|||||
Income
per share
|
$
|
0.42
|
$
|
0.51
|
|||
Income
per diluted share
|
$
|
0.37
|
$
|
0.46
|
|||
Cash
dividends per share
|
$
|
—
|
$
|
—
|
|||
Net
book value per share at the end of the period (1)
|
$
|
4.64
|
$
|
3.23
|
|||
|
|||||||
Mossimo
historical data:
|
|||||||
Net
income per basic share
|
$
|
0.10
|
(2) |
$
|
0.30
|
(3) | |
Net
income per diluted share
|
$
|
0.10
|
(2) |
$
|
0.30
|
(3) | |
Cash
dividends per share
|
$
|
—
|
$
|
—
|
|||
Net
book value per share at the end of the period (1)
|
$
|
1.84
|
$
|
1.70
|
|||
|
|||||||
Pro
forma combined data (4):
|
|||||||
Income
per basic share (5)
|
$
|
0.32
|
$
|
0.56
|
|||
Income
per diluted share (5)
|
$
|
0.28
|
$
|
0.51
|
|||
Cash
dividends per share
|
$
|
—
|
$
|
—
|
|||
Net
book value per share at the end of the period (1)
|
$
|
5.67
|
$
|
|
|||
|
|||||||
Pro
forma combined equivalent data: (6)
|
|||||||
Income
per basic share
|
$
|
0.07
|
$
|
0.13
|
|||
Income
per diluted share
|
$
|
0.06
|
$
|
0.12
|
|||
Cash
dividends per share
|
$
|
—
|
$
|
—
|
|||
Net
book value per share at the end of the period
|
$
|
1.29
|
$
|
|
(1)
|
The
historical net book value per Iconix and Mossimo share is computed
by
dividing stockholders’ equity at the end of the period in question by the
weighted average number of shares of Iconix and Mossimo common stock
outstanding at the same date. The pro forma combined net book value
per
share is computed by dividing the pro forma combined stockholders’ equity
at the end of the period in question by the pro forma number of shares
of
Iconix common stock that would have been outstanding as of June 30,
2006, assuming the merger had occurred as of that
date.
|
(2)
|
The
Mossimo historical net income and cash dividends per share are shown
for
the six months ended June 30, 2006, and have been derived by dividing
(i) Mossimo’s net income as shown on its consolidated statement of
operations
for
the six months ended June 30, 2006, which is included with the
financial statements of Mossimo attached to this proxy
statement/prospectus as Appendix
G
by
(ii) the weighted average number of Mossimo shares outstanding during
the
period.
|
(3)
|
The
Mossimo historical net income and cash dividends per share are shown
for
the year ended December 31, 2005, and have been derived by dividing
(i) Mossimo’s net income as shown on its audited statement of operations
the year ended December 31, 2005, which is included with Mossimo’s
audited financial statements attached to this proxy statement/prospectus
as Appendix
F
by
(ii) the weighted average number of Mossimo shares outstanding during
the
period.
|
(4)
|
The
pro forma combined amounts for the six months ended June 30, 2006
have
been developed from (a) the unaudited condensed consolidated
financial statements of Iconix contained in its Form 10-Q for the six
months ended June 30, 2006 and (b) the unaudited financial
statements of Mossimo for the six months ended June 30, 2006
determined as described in Note 2 above after giving effect to pro
forma adjustments for the estimated impact of purchase accounting
relating
to the merger and the acquisition of the Mudd brand and other adjustments
determined to be appropriate in the circumstances. The pro forma
combined
amounts for the year ended December 31, 2005 were derived from (a)
the audited consolidated financial statements of Iconix contained
in its
Annual Report on Form 10-K for the fiscal year ended December 31,
2005, which is incorporated by reference in this document and (b)
the
audited financial statements of Mossimo for the twelve months ended
December 31, 2005, which are attached as Appendix
F
to
this proxy statement/prospective, after giving effect to pro forma
adjustments for the estimated impact of purchase accounting relating
to
the merger and the acquisition of the Joe Boxer, Rampage and Mudd
brands
and other adjustments determined to be appropriate in the circumstances.
For more information about the pro forma combined amounts, please
see the
section entitled “Unaudited Pro Forma Condensed Combined Financial
Statements”.
|
(5)
|
Shares
used to calculate unaudited pro forma combined income per basic share
were
computed by adding 3,608,433 shares assumed to be issued in the merger
(after giving effect to the cancellation of Mossimo shares held by
Iconix
and excluding any shares which may be issued under the non-transferable
contingent share rights) in exchange for the outstanding Mossimo
shares at
June 30, 2006 to Iconix’s weighted average shares outstanding for the
respective periods. Shares used to calculate unaudited pro forma
combined
income per diluted share were computed by adding 3,608,433 shares
assumed
to be issued in the merger (after giving effect to the cancellation
of
Mossimo shares held by Iconix and excluding any shares which may
be issued
under the non-transferable contingent share rights) to Iconix’s weighted
average shares outstanding. The pro forma per share data also includes
1,028,503 contingent shares in the diluted share amount. For this
illustration, management used $14.56, the twenty consecutive trading
day
average closing sale price during the period between August 10, 2006
and
September 7, 2006. For more information about the pro forma combined
amounts, please see the section entitled “Unaudited Pro Forma Condensed
Combined Financial Statements”.
|
(6)
|
The
pro forma combined equivalent data is calculated by multiplying the
pro
forma combined data amounts by the exchange ratio of 0.2271139 shares
of
Iconix common stock for each outstanding share of Mossimo common
stock.
|
|
Iconix
Common
Stock
|
Mossimo
Common
Stock
|
Equivalent
Value
of
Mossimo
Common
Stock
|
|||||||
March
31, 2006
|
$
|
14.55
|
$
|
5.47
|
$
|
3.30
|
||||
October
10, 2006
|
$
|
17.39
|
$
|
7.96
|
$
|
3.95
|
Ÿ
|
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;
|
Ÿ
|
increase
Iconix’s vulnerability to, and limit flexibility in planning for, adverse
economic and industry conditions;
|
Ÿ
|
affect
Iconix’s credit rating;
|
Ÿ
|
limit
the ability of Iconix to obtain additional financing to fund future
working capital, capital expenditures, additional acquisitions
and other
general corporate requirements;
|
Ÿ
|
create
competitive disadvantages compared to other companies with less
indebtedness; and
|
Ÿ
|
limit
Iconix’s ability to apply proceeds from an offering or asset sale to
purposes other than the repayment of
debt.
|
Ÿ
|
unanticipated
costs;
|
Ÿ
|
negative
effects on reported results of operations from acquisition-related
charges
and amortization of acquired
intangibles;
|
Ÿ
|
diversion
of management’s attention from other business
concerns;
|
Ÿ
|
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;
|
Ÿ
|
adverse
effects on existing licensing relationships;
and
|
Ÿ
|
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.
|
Ÿ
|
could
impair Iconix’s liquidity;
|
Ÿ
|
could
make it more difficult for Iconix to satisfy its other
obligations;
|
Ÿ
|
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;
|
Ÿ
|
could
impede Iconix from obtaining additional financing in the future
for
working capital, capital expenditures, acquisitions and general
corporate
purposes;
|
Ÿ
|
make
Iconix more vulnerable in the event of a downturn in Iconix’s business
prospects;
|
Ÿ
|
could
limit Iconix’s flexibility to plan for, or react to, changes in its
licensing markets; and
|
Ÿ
|
place
Iconix at a competitive disadvantage when compared to Iconix’s competitors
who have less debt.
|
Ÿ
|
you
must instruct your broker to vote your shares by following the
procedures
specified by the nominee for voting;
and
|
Ÿ
|
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.
|
Ÿ
|
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;
|
Ÿ
|
by
delivering to Mossimo a later-dated, signed proxy card or a written
revocation prior to the vote at the special
meeting;
|
Ÿ
|
by
attending the special meeting and voting in person;
or
|
Ÿ
|
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.
|
Ÿ
|
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.
|
Ÿ
|
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.
|
Ÿ
|
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. Based on the current level of royalties from
licensees
other than Target, it is expected that Mr. Giannulli’s income from this
agreement will be lower than his current compensation as a Mossimo
officer.
|
Ÿ
|
Although
there is no agreement, express or implied, to do so, Mr. Giannulli
is
considering a possible transfer of up to one-half the after-tax
proceeds
received by him in the merger to Mr. Lewis in recognition of the
role Mr.
Lewis has played in Mossimo.
|
Ÿ
|
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. Mr. Giannulli has agreed to pay approximately $3.3
million for Modern Amusement, comprised of a $2 million base price
plus an
additional amount, expected to be approximately $1.3 million, calculated
based on the net value of certain assets of Modern Amusement, consisting
of accounts receivable, fixed assets, inventory and prepaid expenses,
reduced by Modern Amusement's accrued expenses, accounts payable and
deferred rent. 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.
The terms of this disposition were negotiated on an arm’s-length basis
between Mr. Cole and Mr. Giannulli after Iconix indicated it did
not wish
to acquire Modern Amusement because Modern Amusement does not fit
the
Iconix business model. The purchase price exceeds the value placed
on
Modern Amusement by FMV Opinions, Mossimo's financial advisor,
which
valued Modern Amusement between $2.392 million and $3.186 million
on a
controlling interest basis. This valuation range included a 15%
control premium.
|
Ÿ
|
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.
|
Ÿ
|
Mossimo’s
executive officers and directors will be entitled to continued
indemnification and certain liability insurance coverage under
the merger
agreement.
|
Ÿ
|
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.
|
Ÿ
|
Iconix
owns 114,568 shares of common stock of Mossimo, which represents
approximately 0.7% of
the outstanding shares as of October 10,
2006.
|
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
|
Ÿ
|
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.
|
Ÿ
|
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.
|
Ÿ
|
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.
|
Ÿ
|
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.
|
Ÿ
|
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.
|
Ÿ
|
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.
|
Ÿ
|
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.
|
Ÿ
|
Brand
Diversification.
The board considered Mossimo’s risks in licensing a single brand, compared
with the diversification of Iconix’s business across several
brands.
|
Ÿ
|
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.
|
Ÿ
|
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.
|
Ÿ
|
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 to Iconix a “break-up” fee of $5,000,000,
which will be reduced to $3,500,000 pursuant to a memorandum of
understanding to settle certain
litigation.
|
Ÿ
|
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.
|
Ÿ
|
Appraisal
Rights.
The board considered that appraisal rights will be available to
dissenting
stockholders under the DGCL.
|
Ÿ
|
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.
|
Ÿ
|
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;
|
Ÿ
|
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;
|
Ÿ
|
visited
Mossimo’s headquarters;
|
Ÿ
|
reviewed
copies of the following agreements, documents and data, among
others:
|
Ÿ
|
the
proposed merger agreement;
|
Ÿ
|
the
restated license agreement by and between Mossimo and Target Brands,
Inc.;
|
Ÿ
|
the
licensing agreement by and between Joe Boxer Licensing, LLC and
Kmart
Corporation; and
|
Ÿ
|
the
licensing agreement by and among IP Holdings LLC, Candie’s, Inc., and
Kohl’s Department Stores, Inc.
|
Ÿ
|
internal
financial statements for the key Mossimo business segments for
the periods
from December 31, 2000 through December 31,
2005;
|
Ÿ
|
a
projected income statement for Mossimo prepared by Mossimo management
for
the period ended December 31,
2006;
|
Ÿ
|
Iconix’s
annual reports on Form 10-K for each of the five fiscal years ended
December 31, 2005;
|
Ÿ
|
pro
forma projections for Iconix, prepared by Iconix management for
the year
ended December 31, 2006;
|
Ÿ
|
two
presentations from Hewitt Associates dated May 4, 2004 and
August 6, 2004, respectively, regarding Mossimo’s executive
compensation;
|
Ÿ
|
historical
market prices and trading volume for Mossimo’s and Iconix’s publicly
traded securities;
|
Ÿ
|
certain
other publicly available financial data for certain companies that
FMV
Opinions deemed comparable to Mossimo and Iconix;
and
|
Ÿ
|
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.
|
Ÿ
|
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;
|
Ÿ
|
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
|
Ÿ
|
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.
|
Ÿ
|
Cherokee,
Inc.;
|
Ÿ
|
Guess?,
Inc.;
|
Ÿ
|
Iconix
Brand Group, Inc.;
|
Ÿ
|
Kenneth
Cole Productions, Inc.;
|
Ÿ
|
Perry
Ellis International, Inc.;
|
Ÿ
|
Quiksilver,
Inc.;
|
Ÿ
|
Skechers
USA, Inc.;
|
Ÿ
|
Steve
Madden Ltd.; and
|
Ÿ
|
VF
Corp.
|
|
Low
|
|
High
|
|
Median
|
|
Selected
|
|||||
Latest
Twelve Months
|
|
|
|
|
|
|
|
|
|
|
|
|
Enterprise
value/EBITDA (1)(2)
|
|
|
7.1x
|
|
|
12.2x
|
|
|
9.6x
|
|
|
7.0x
- 8.5x
|
Price/Earnings
(1)(2)
|
|
|
9.5x
|
|
|
30.7x
|
|
|
18.8x
|
|
|
14.0x
- 16.5x
|
Next
Fiscal Year
|
|
|
|
|
|
|
|
|
|
|
|
|
Enterprise
value/EBITDA (1)(2)
|
|
|
6.8x
|
|
|
10.7x
|
|
|
9.2x
|
|
|
7.0x
- 8.0x
|
Price/Earnings(2)
|
|
|
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 given Mossimo’s lack of history as a licensor, and the
fact that projected EBITDA from analyst reports reflected projected
acquisitions while enterprise value reflected current levels of
debt.
|
(2) |
The
mean of the enterprise value expressed as multiples of LTM and NFY
EBITDA
were 9.7x and 9.0x, respectively. The mean of the market value expressed
as multiples of LTM and NFY earnings were 19.5x and 19.7x, respectively.
|
Ÿ
|
the
acquisition of Haggar Corp. by Quiksilver,
Inc.;
|
Ÿ
|
the
acquisition of Rampage Licensing by Iconix Brand Group,
Inc.;
|
Ÿ
|
the
acquisition of Skis Rossignol SA by Quiksilver,
Inc.;
|
Ÿ
|
the
acquisition of JBC Holdings, LLC by Iconix Brand Group,
Inc.;
|
Ÿ
|
the
acquisition of Ocean Pacific Apparel Corp by Warnaco Group,
Inc.;
|
Ÿ
|
the
acquisition of Maxwell Shoe Co., Inc. by Jones Apparel Group,
Inc.;
|
Ÿ
|
the
acquisition of Vans, Inc. by VF
Corp.;
|
Ÿ
|
the
acquisition of Hockey Company Holdings by Reebok International
Ltd.;
|
Ÿ
|
the
acquisition of Nautica Enterprises, Inc. by VF
Corp.;
|
Ÿ
|
the
acquisition of Salant by Perry Ellis International,
Corp.;
|
Ÿ
|
the
acquisition of Gerber Childrenswear by Kellwood
Co.;
|
Ÿ
|
the
acquisition of VF Corp (Jantzen, Inc.) by Perry Ellis International,
Corp.;
|
Ÿ
|
the
acquisition of Full Line Distributors, Inc. by Bain Capital,
Inc.;
|
Ÿ
|
the
acquisition of Consolidated Apparel Group by Hartmarx
Corp.;
|
Ÿ
|
the
acquisition of Premiumwear, Inc. by New England Business Service,
Inc.;
|
Ÿ
|
the
acquisition of Authentic Fitness Corp by Warnaco Group, Inc.;
and
|
Ÿ
|
the
acquisition of Happy Kids, Inc. by HIG Capital Management,
Inc.
|
|
Low
|
|
High
|
|
Median
|
|
Selected
|
|
|||||
Latest
Twelve Months
|
|
|
|
|
|
|
|
|
|
||||
Enterprise
value/Revenue (1)(3)
|
|
|
0.3x
|
|
|
4.8x
|
|
|
0.8x
|
|
|
4.0x
- 4.5x
|
|
Enterprise
value/EBITDA (2)(3)
|
|
|
3.2x
|
|
|
15.0x
|
|
|
7.4x
|
|
|
7.5x
- 9.0x
|
|
Price/Earnings
(2)(3)
|
|
|
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.
|
(3)
|
The
mean of the enterprise value expressed as a multiple of LTM revenue
was
1.2x. The mean of the enterprise value expressed as a multiple of
LTM
EBITDA was 8.1x. The mean of the market value expressed as a multiple
of
LTM earnings was 16.7x.
|
|
Weighted
Average Cost of Capital (in millions)
|
|
||||||||
|
|
13.5%
(1)
|
|
14.0%
|
|
14.5%
(2)
|
|
|||
5.5%
|
|
$
|
116.903
|
|
$
|
110.026
|
|
$
|
103.913
|
|
6.0%
|
|
$
|
124.696
|
|
$
|
116.903
|
|
$
|
110.026
|
|
6.5%
|
|
$
|
133.603
|
|
$
|
124.696
|
|
$
|
116.903
|
|
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
|
|
Ÿ
|
Cherokee,
Inc.;
|
Ÿ
|
Guess?,
Inc.;
|
Ÿ
|
Kenneth
Cole Productions, Inc.;
|
Ÿ
|
Perry
Ellis International, Inc.;
|
Ÿ
|
Quiksilver,
Inc.;
|
Ÿ
|
Skechers
USA, Inc.;
|
Ÿ
|
Steve
Madden Ltd.; and
|
|
|
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.
|
|
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.
|
$
|
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
|
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.
|
|
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
|
%
|
Ÿ
|
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.
|
Ÿ
|
Iconix
has successfully acquired five different brands since October 2004.
|
Ÿ
|
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.
|
Ÿ
|
Iconix’s
belief that Mossimo is a strong and growing brand with high consumer
awareness in both the U.S. and around the
world.
|
Ÿ
|
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.
|
Ÿ
|
the
addition of Mossimo to the Iconix portfolio of brands furthers
Iconix’s
strategy to diversify in a number of different
ways:
|
Ÿ
|
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.
|
Ÿ
|
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.
|
Ÿ
|
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.
|
Ÿ
|
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.
|
Ÿ
|
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.
|
Ÿ
|
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.
|
Ÿ
|
The
stockholder must continuously hold the shares of record until the
completion of the merger.
|
Ÿ
|
financial
institutions and mutual funds;
|
Ÿ
|
banks;
|
Ÿ
|
insurance
companies;
|
Ÿ
|
investment
companies;
|
Ÿ
|
retirement
plans;
|
Ÿ
|
tax-exempt
organizations;
|
Ÿ
|
dealers
in securities;
|
Ÿ
|
traders
in securities that elect to use a mark-to-market
method;
|
Ÿ
|
persons
that hold Mossimo common stock as part of a straddle, a hedge against
a
currency risk or a constructive sale or conversion
transaction;
|
Ÿ
|
persons
that are or who hold Mossimo common stock through partnerships
or
pass-through entities;
|
Ÿ
|
persons
who are not citizens or residents of the United States or who are
foreign
corporations, foreign partnerships or foreign estates or
trusts;
|
Ÿ
|
persons
whose functional currency is not the U.S.
dollar;
|
Ÿ
|
stockholders
who hold Mossimo stock as qualified small business stock within
the
meaning of section 1202 of the
Code;
|
Ÿ
|
persons
who are subject to the alternative minimum tax provisions of the
Code;
or
|
Ÿ
|
persons
who acquired their Mossimo common stock in connection with a stock
option
or stock purchase plans or in some other compensatory
transaction.
|
Ÿ
|
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;
|
Ÿ
|
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;
|
Ÿ
|
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
|
Ÿ
|
an
estate, the income of which is subject to U.S. federal income taxation
regardless of its source.
|
Ÿ
|
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.
|
Ÿ
|
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.
|
Ÿ
|
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.
|
Ÿ
|
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.
|
Ÿ
|
that
any such approval or other action, if needed, would be obtained
or would
be obtained without substantial
conditions;
|
Ÿ
|
that
failure to obtain the approval or other action might not result
in
consequences adverse to Mossimo’s business;
or
|
Ÿ
|
that
there might be conditions to obtaining a required approval or action,
including, without limitation, the divestiture of certain parts
of
Mossimo’s business.
|
Ÿ
|
corporate
existence, qualification to conduct business and corporate
power;
|
Ÿ
|
capitalization,
ownership and subsidiaries;
|
Ÿ
|
corporate
authority to enter into and carry out the obligations of the merger
agreement;
|
Ÿ
|
absence
of conflicts between the merger agreement and applicable law, the
charter
documents and bylaws of each company, and certain material
agreements;
|
Ÿ
|
governmental
consents and approvals required for completion of the
merger;
|
Ÿ
|
financial
statements, filings with the SEC and internal accounting and disclosure
controls and procedures;
|
Ÿ
|
absence
of undisclosed liabilities;
|
Ÿ
|
absence
of specified changes or events through the closing of the
merger;
|
Ÿ
|
legal
proceedings and litigation;
|
Ÿ
|
compliance
with applicable laws;
|
Ÿ
|
properties
and assets;
|
Ÿ
|
material
contracts;
|
Ÿ
|
payment
of fees to finders or brokers in connection with the
merger;
|
Ÿ
|
tax
matters;
|
Ÿ
|
information
supplied in the merger agreement and related
documents;
|
Ÿ
|
intellectual
property; and
|
Ÿ
|
NASDAQ
requirements.
|
Ÿ
|
approval
of the merger agreement by holders of a majority of outstanding
common
stock of Mossimo;
|
Ÿ
|
accuracy
of representations and warranties;
|
Ÿ
|
no
provision of any applicable law or regulation and no judgment,
injunction,
order or decree shall prohibit the consummation of the
merger;
|
Ÿ
|
all
consents, waivers and approvals shall have been
obtained;
|
Ÿ
|
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;
|
Ÿ
|
Mr. Giannulli,
Mossimo and Iconix shall have executed an agreement for creative
director
services;
|
Ÿ
|
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;
|
Ÿ
|
the
registration statement registering the shares of Iconix common
stock to be
received by Mossimo stockholders shall have been declared effective
by the
SEC;
|
Ÿ
|
no
more than 5% of the outstanding Mossimo common stock shall remain
eligible
for appraisal in accordance with the DGCL;
and
|
Ÿ
|
the
shares of Iconix common stock issuable to Mossimo stockholders
shall have
been approved for listing on the NASDAQ Global
Market.
|
Ÿ
|
a
certificate representing Iconix common
stock;
|
Ÿ
|
the
cash portion of the merger consideration;
and
|
Ÿ
|
cash
in lieu of any fractional share of Iconix common
stock.
|
Ÿ
|
amend
its certificate of incorporation or
bylaws;
|
Ÿ
|
merge
or consolidate with any other person or acquire a material amount
of
assets of any other person;
|
Ÿ
|
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;
|
Ÿ
|
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;
|
Ÿ
|
issue
any securities of Mossimo or amend any term of any Mossimo option
plan or
any outstanding option;
|
Ÿ
|
incur
any indebtedness for borrowed money or guarantee any indebtedness
of any
other person or release or cancel any material indebtedness or
claim;
|
Ÿ
|
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;
|
Ÿ
|
enter
into, amend, modify or terminate any material agreement, contract
or
commitment;
|
Ÿ
|
settle
any claim, action or proceeding; or
|
Ÿ
|
agree
or commit to do any of the
foregoing.
|
Ÿ
|
give
the other party and its authorized representatives full access
to its
offices, properties, books and
records,
|
Ÿ
|
furnish
to the other party and its authorized representatives such financial
and
operating data and other information as such persons may reasonably
request; and
|
Ÿ
|
instruct
its employees, counsel and financial advisors to cooperate with
the other
party and its representatives.
|
Ÿ
|
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;
|
Ÿ
|
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
|
Ÿ
|
any
material failure of Mossimo or Mr. Giannulli to satisfy or comply
with any covenant, condition or agreement required under the merger
agreement.
|
Ÿ
|
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;
|
Ÿ
|
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;
|
Ÿ
|
recommend
the acquisition proposal to Mossimo’s stockholders;
and/or,
|
Ÿ
|
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;
|
Ÿ
|
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;
|
Ÿ
|
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
|
Ÿ
|
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.
|
Ÿ
|
by
either Mossimo and Mossimo 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;
|
Ÿ
|
by
either Mossimo and Mossimo 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;
|
Ÿ
|
by
either Mossimo or Iconix, if Mossimo stockholders fail to adopt
the merger
agreement at the special meeting;
|
Ÿ
|
by
Iconix and Moss Acquisition Corp., if Mossimo or Mossimo 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;
|
Ÿ
|
by
Mossimo and Mossimo Giannulli if Iconix and Moss Acquisition Corp.
have
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;
|
Ÿ
|
by
Iconix, if Mossimo’s board of directors has (1) failed to recommend
the approval of the merger agreement, (2) withdrawn or adversely
modified its recommendation of the merger agreement or the merger,
or
(3) recommended to Mossimo stockholders any acquisition proposal
other than the merger; or
|
Ÿ
|
by
Mossimo, if its board of directors has concluded, in good faith
after
consultation with outside counsel, that such action is necessary
in
connection with a superior proposal for the board to be deemed
to have
acted in a manner consistent with its fiduciary duties under the
DGCL;
provided that Iconix does not make, within two business days after
its
receipt of Mossimo’s written notice of its intent to terminate the merger
agreement, an offer that the Mossimo board determines in good faith
after
consolation with its financial advisors, is at least as favorable,
from a
financial point of view, to the Mossimo stockholders as the superior
proposal.
|
|
High
|
|
Low
|
|
|||
Fiscal
year ended December 31, 2006
|
|
|
|
|
|
||
First
quarter
|
|
$
|
6.29
|
|
$
|
5.47
|
|
Second
quarter
|
|
$
|
8.62
|
|
$
|
7.54
|
|
Third
Quarter
|
$
|
7.94
|
$
|
7.38
|
|||
|
|
|
|
|
|
|
|
Fiscal
year ended December 31, 2005
|
|
|
|
|
|
|
|
First
quarter
|
|
$
|
4.10
|
|
$
|
3.13
|
|
Second
quarter
|
|
$
|
4.53
|
|
$
|
3.32
|
|
Third
quarter
|
|
$
|
5.72
|
|
$
|
4.25
|
|
Fourth
quarter
|
|
$
|
5.91
|
|
$
|
4.94
|
|
|
|
|
|
|
|
|
|
Fiscal
year ended December 31, 2004
|
|
|
|
|
|
|
|
First
quarter
|
|
$
|
4.95
|
|
$
|
3.80
|
|
Second
quarter
|
|
$
|
4.39
|
|
$
|
3.79
|
|
Third
quarter
|
|
$
|
4.16
|
|
$
|
2.88
|
|
Fourth
quarter
|
|
$
|
3.87
|
|
$
|
2.99
|
|
Number of Shares
Beneficially Owned
(1)
|
Percentage
Ownership
(1)
|
||||||
Mossimo
G. Giannulli
|
10,272,822
|
64.2
|
%
|
||||
Edwin
H. Lewis
|
-0-
|
(2)
|
*
|
||||
William
R. Halford
|
42,000
|
(3)
|
*
|
||||
Robert
Martini
|
121,000
|
(4)
|
*
|
||||
Bryant
R. Riley
|
-0-
|
*
|
|||||
Vicken
J. Festekjian
|
13,333
|
(5)
|
*
|
||||
Roger
Feldman(6)
|
850,931
|
5.31
|
|||||
Harvey
Hanerfeld(6)
|
876,373
|
5.47
|
|||||
All
current directors and executive officers as a group (6
persons)
|
10,449,155
|
(7)
|
65.30
|
%
|
*
|
Less
than one percent.
|
(1)
|
Beneficial
ownership is determined in accordance with the rules of the SEC and
generally includes voting or investment power with respect to securities.
Shares of common stock subject to options and warrants which are
currently
exercisable, or will become exercisable within sixty days of October
10, 2006,
are deemed outstanding for computing the percentage of the person
or
entity holding such securities but are not outstanding for computing
the
percentage of any other person or entity. Except as indicated by
footnote,
and subject to the community property laws where applicable, to Mossimo’s
knowledge the persons named in the table above have sole voting and
investment power with respect to all shares of common stock shown
as
beneficially owned by them. Unless otherwise indicated, the address
for
each person is 2016 Broadway Boulevard, Santa Monica, California
90404.
|
(2)
|
Although
there is no agreement, express or implied, to do so, Mr. Giannulli
is
considering a possible transfer of up to one-half the after-tax proceeds
received by him in the merger to Mr. Lewis in recognition of the
role Mr.
Lewis has played in Mossimo. Mr.
Lewis did not own any Mossimo common stock as of October 10, 2006.
|
(3)
|
Includes
42,000 shares of common stock underlying options exercisable within
sixty
days of October 10, 2006.
|
(4)
|
Includes
106,000 shares of common stock underlying options exercisable within
sixty
days of October 10, 2006.
|
(5)
|
Includes
13,333
shares of common stock underlying options exercisable within sixty
days of
October 10, 2006.
|
(6)
|
According
to a Amendment No. 1 to Schedule 13G dated December 31, 2005,
Roger Feldman is the beneficial owner of 850,931 shares of common
stock,
constituting 5.4% of the issued and outstanding shares of common
stock,
and Harvey Hanerfeld is the beneficial owner of 876,373 shares of
Common
Stock, constituting 5.6% of the issued and outstanding shares of
common
stock. According to his Schedule 13G, Roger Feldman has the sole
power to
vote or to direct the voting of and to dispose and to direct the
disposition of the 24,558 shares of common stock beneficially owned
by him
as an individual. As sole stockholders of West Creek Capital, Inc.,
a
Delaware corporation that is the general partner of West Creek Capital,
L.P., a Delaware limited partnership that is the investment adviser
to
(i) West Creek Partners Fund L.P., a Delaware limited partnership
(the “Fund”) and (ii) certain private accounts (the “Accounts”),
Mr. Feldman and Mr. Hanerfeld may be deemed to have the shared
power to direct the voting and disposition of the 443,113 shares
of common
stock owned by the Fund and the 60,000 shares of common stock held
in the
Accounts. As voting members of Cumberland Investment Partners, L.L.C.,
a
Delaware limited liability company (“Cumberland”), Mr. Feldman and
Mr. Hanerfeld may be deemed to have the shared power to direct the
voting and disposition of the 322,660 shares of common stock owned
by
Cumberland. Mr. Hanerfeld also may be deemed to have shared power to
direct the voting and disposition of 50,000 shares of common stock
owned
by Mr. Hanerfeld’s wife. The address for Mr. Feldman and
Mr. Hanerfeld is 1919 Pennsylvania Avenue, NW, Suite 725,
Washington, DC, 20006.
|
(7)
|
Includes
161,333 shares of common stock underlying options exercisable within
sixty
days of October 10, 2006.
|
Payments
Due by Period(s):
|
||||||||||||||||
Contractual
Obligations
|
Less
than
1 year |
1-3
years
|
4-5
years
|
After
5 years
|
Total
|
|||||||||||
Operating
Leases (1)
|
$
|
315
|
$
|
657
|
$
|
196
|
—
|
$
|
1,168
|
|||||||
Other
Long-Term Obligations(2) (3)
|
2,865
|
2,535
|
—
|
—
|
5,400
|
|||||||||||
Total
Contractual Cash Obligations
|
$
|
3,180
|
$
|
3,192
|
$
|
196
|
—
|
$
|
6,568
|
(1)
|
These
amounts represent future minimum non-cancelable lease payments under
an
operating lease agreement through July 2009 for Mossimo’s office and
design studio facilities in Santa Monica, California including the
facilities for Modern Amusement.
|
(2)
|
These
amounts include $900,000 per year under Mossimo’s employment agreement
with Mr. Giannulli, Mossimo’s Chairman and Co-Chief Executive
Officer, through January 2008, that provides for a $900,000 annual
salary, plus a bonus which is determined at the discretion of the
board of
directors, in accordance with a performance criteria outlined in
the
Amended and Restated Mossimo Giannulli Bonus Plan, and is subject
to a
maximum annual amount based on a percent of Target license royalty
fees in
excess of the minimum annual fee under the Target agreement. The
future
bonus amounts, if any, have been excluded because they are at the
discretion of the board of directors and can not be
determined.
|
These
amounts also include $900,000 per year, commencing August 1, 2005,
under Mossimo’s employment agreement with Mr. Lewis, Mossimo’s
Co-Chief Executive Officer, through August 1, 2006, that provides for
a $900,000 annual salary, plus a bonus which is determined at the
discretion of the board of directors, in accordance with a performance
criteria outlined in the Amended and Restated Edwin Lewis bonus plan,
and
is subject to a maximum annual amount based on a percent of Target
license
royalty fees in excess of the minimum annual fee under the Target
agreement. The future bonus amounts, if any, have been excluded because
they are at the discretion of the board of directors and can not
be
determined.
|
(3)
|
Mossimo
has a commission obligation under an agreement with Cherokee, Inc.
for 15%
of fees received from Target for the duration of the Target agreement,
and
for subsequent extensions if they are exercised by Target. The future
commissions are based on the minimum royalty and design fee payment
from
Target of approximately $9.6 million through
January 2008.
|
Ÿ
|
applicability
to a broad pool of consumer brands;
|
Ÿ
|
focused
acquisition platform, which enables Iconix to quickly evaluate
and easily
integrate brand acquisitions;
|
Ÿ
|
scalability,
which allows Iconix to leverage its existing infrastructure to
add and
manage new licenses;
|
Ÿ
|
predictable
base of guaranteed minimum royalties;
and
|
Ÿ
|
low
overhead, absence of inventory risk and minimal spending
requirements.
|
Ÿ
|
restricting
the payment of dividends on Iconix common
stock;
|
Ÿ
|
diluting
the voting power of its common
stock;
|
Ÿ
|
impairing
the liquidation rights of its common
stock;
|
Ÿ
|
delaying
or preventing a change in control without further action by its
stockholders; or
|
Ÿ
|
decreasing
the market price of its common
stock.
|
Ÿ
|
a
stockholder who owns 15% or more of Iconix’s outstanding voting stock
(otherwise known as an interested
stockholder);
|
Ÿ
|
an
affiliate of an interested stockholder;
or
|
Ÿ
|
an
associate of an interested
stockholder;
|
Ÿ
|
the
board of directors of Iconix approves the transaction that made
the
stockholder an interested stockholder, prior to the date of that
transaction;
|
Ÿ
|
after
the completion of the transaction that resulted in the stockholder
becoming an interested stockholder, that stockholder owned at least
85% of
the voting stock of Iconix outstanding at the time the transaction
commenced, excluding shares owned by officers and directors of
Iconix;
or
|
Ÿ
|
on
or subsequent to the date of the transaction, the business combination
is
approved by the board of directors of Iconix and authorized at
a meeting
of its stockholders by an affirmative vote of at least two-thirds
of the
outstanding voting stock not owned by the interested
stockholder.
|
Ÿ
|
Meetings
of Stockholders.
The bylaws of Iconix provide that annual meetings of its stockholders
may
take place at the time and place established by its board of directors.
A
special meeting of Iconix’s stockholders may be called at any time by the
board or by any officer instructed by the directors to call the
meeting.
|
Ÿ
|
Filling
of Board Vacancies.
Vacancies and newly created directorships resulting from any increase
in
the authorized number of directors may be filled by the affirmative
vote
of a majority of Iconix’s directors then in
office.
|
Ÿ
|
Amendment
of the Bylaws.
Iconix’s bylaws may be amended or repealed by its board of directors or
its stockholders.
|
Ÿ
|
each
of the current directors of Iconix;
|
Ÿ
|
each
of the executive officers of Iconix designated as “Named Persons” in Item
11 of Iconix’s Annual Report on Form 10-K for the year ended December 31,
2005;
|
Ÿ
|
all
of the current executive officers and directors of Iconix, as a
group;
and
|
Ÿ
|
each
person known by Iconix to beneficially hold five percent or more
of the
outstanding common stock of Iconix.
|
|
Number
of shares of Iconix common stock beneficially owned
pre-merger
|
|
Percentage
of Iconix common stock beneficially owned
pre-merger
|
|
|||
Neil
Cole
|
|
|
4,321,075
(1)
|
|
|
9.7
|
%
|
David
Conn
|
|
|
425,000
(2)
|
|
|
1.0
|
%
|
Warren
Clamen
|
|
|
250,000
(2)
|
|
|
*
|
|
Deborah
Sorell Stehr
|
|
|
300,000
(3)
|
|
|
*
|
|
William
Sweedler
|
|
|
1,300,679
(4)
|
|
|
3.2
|
%
|
Claudio
Trust dated February 2, 1990
PO
Box 11360
Jackson,
WY 83002
|
|
2,381,737
(5)
|
|
|
5.9
|
%
|
|
Drew
Cohen
|
|
|
116,702
(6)
|
|
|
*
|
|
Barry
Emanuel
|
|
|
426,673
(7)
|
|
|
1.0
|
%
|
Michael
Groveman
|
|
|
116,702
(6)
|
|
|
*
|
|
Steven
Mendelow
|
|
|
380,988
(8)
|
|
|
*
|
|
Mudd
(USA) LLC
|
|
|
3,269,231
(9)
|
|
|
8.1
|
%
|
All
directors and executive officers
as
a group (9 persons)
|
|
|
6,497,140
(10)
|
|
|
14.0
|
%
|
*
|
Less
than 1%
|
(1)
|
Includes
3,885,875 shares of common stock issuable upon exercise of options
and
20,000 shares of common stock owned by Mr. Cole’s children. Does not
include shares held in Mr. Cole’s account under Iconix’s 401(k) savings
plan over which he has no current voting or investment
power.
|
(2)
|
Represents
shares of common stock issuable upon exercise of
options.
|
(3)
|
Represents
shares of common stock issuable upon exercise of options. Does not
include
shares held in Ms. Sorell Stehr’s account under Iconix’s 401(k) savings
plan over which she has no current voting or investment
power.
|
(4)
|
Includes
225,000 shares of common stock issuable upon exercise of options.
Also
includes 12,000 shares of common stock held by a charitable foundation
as
to which Mr. Sweedler has voting rights but no pecuniary interest.
As a
result of transactions in Iconix securities subsequent to September
7,
2006, including the exercise of such options and the sales of shares
by
the charitable foundation, among other transactions, Iconix believes
that
Mr. Sweedler beneficially owns 729,110 shares of Iconix common stock
as of
the date of this proxy
statement/prospectus.
|
(5)
|
Michael
Caruso serves as the trustee of this trust and exercises voting and
investment control over its
securities.
|
(6)
|
Includes
110,000 shares of common stock issuable upon exercise of
options.
|
(7)
|
Includes
405,250 shares of common stock issuable upon exercise of
options.
|
(8)
|
Includes
295,250 shares of common stock issuable upon exercise of options
and
60,750 shares of common stock owned by C&P Associates, with which Mr.
Mendelow and his wife are affiliated and over whose securities they
exercise shared voting and investment
control.
|
(9)
|
Represents
shares of common stock held by Mudd (USA) LLC, the seller in connection
with Iconix’s April 2006 acquisition of the Mudd brand, of which
Mr. Wing Kwok, Chairman, Mr. Conrad Lung, President, and Mr. Richard
Gilbert, Chief Financial Officer, have voting and/or investment
control over the securities. Includes 358,526 shares pledged as
collateral
to support certain of Mudd (USA) LLC’s post-closing obligations to Iconix
in connection with the acquisition, of which, commencing July 1,
2006, and
each quarter thereafter while any such shares remain pledged, a
portion of
the pledged shares, equal in value to up to $1.0 million, are to
be
released. The address of Mudd (USA) LLC is 1407 Broadway, 29th
Floor, New York, NY 10018.
|
(10)
|
Includes
5,921,375 shares of common stock issuable upon exercise of
options.
|
Ÿ
|
each
of the current directors of Iconix;
|
Ÿ
|
each
of the executive officers of Iconix designated as “Named Persons” in Item
11 of Iconix’s Annual Report on Form 10-K for the year ended December 31,
2005;
|
Ÿ
|
all
of the current executive officers and directors of Iconix, as a
group;
and
|
Ÿ
|
each
person known by Iconix to beneficially hold five percent or more
of the
outstanding common stock of Iconix on September 7, 2006 or
expected by Iconix to beneficially hold five percent or more of
the
outstanding common stock of Iconix following the closing of the
merger.
|
Ÿ
|
the
beneficial ownership of shares of Iconix common stock immediately
prior to
the merger is the same as that on September 7,
2006;
|
Ÿ
|
all
of Mossimo’s stock options will be cancelled in accordance with the terms
of the merger agreement, prior to the
merger;
|
Ÿ
|
no
Mossimo stockholder will exercise dissenters’ rights in connection with
the merger; and
|
Ÿ
|
a
total of 3,608,433 shares of Iconix common stock will be issued
in the
merger as of its closing.
|
|
Pro
Forma Number of shares of Iconix common stock beneficially owned
post-merger
|
|
Percentage
of Iconix common stock beneficially owned
post-merger
|
|
|||
Neil
Cole
|
|
|
4,321,075
(1)
|
|
|
9.0
|
%
|
David
Conn
|
|
|
425,000
(2)
|
|
|
*
|
|
Warren
Clamen
|
|
|
250,000
(2)
|
|
|
*
|
|
Deborah
Sorell Stehr
|
|
|
300,000
(3)
|
|
|
*
|
|
William
Sweedler
|
|
|
1,300,679
(4)
|
|
|
2.9
|
%
|
Claudio
Trust dated February 2, 1990
PO
Box 11360
Jackson,
WY 83002
|
|
|
2,381,737
(5)
|
|
|
5.4
|
%
|
Drew
Cohen
|
|
|
116,702
(6)
|
|
|
*
|
|
Barry
Emanuel
|
|
|
426,673
(7)
|
|
|
*
|
|
Michael
Groveman
|
|
|
116,702
(6)
|
|
|
*
|
|
Steven
Mendelow
|
|
|
380,988
(8)
|
|
|
*
|
|
Mudd
(USA) LLC
|
|
|
3,269,231
(9)
|
|
|
7.4
|
%
|
Mossimo
G. Giannulli
2016
Broadway Boulevard
Santa
Monica, CA 90404
|
|
|
2,333,101
(10)
|
|
|
5.3
|
%
|
All
directors and executive officers
as
a group (9 persons)
|
|
|
6,497,140
(11)
|
|
|
13.0
|
%
|
*
|
Less
than 1%
|
(1)
|
Includes
3,885,875 shares of common stock issuable upon exercise of options
and
20,000 shares of common stock owned by Mr. Cole’s children. Does not
include shares held in Mr. Cole’s account under Iconix’s 401(k) savings
plan over which he has no current voting or investment
power.
|
(2)
|
Represents
shares of common stock issuable upon exercise of
options.
|
(3)
|
Represents
shares of common stock issuable upon exercise of options. Does not
include
shares held in Ms. Sorell Stehr’s account under Iconix’s 401(k)
savings plan over which she has no current voting or investment
power.
|
(4)
|
Includes
225,000 shares of common stock issuable upon exercise of options.
Also
includes 12,000 shares of common stock held by a charitable foundation
as
to which Mr. Sweedler has voting rights but no pecuniary interest.
As a
result of transactions in Iconix securities subsequent to September
7,
2006, including the exercise of such options and the sales of shares
by
the charitable foundation, among other transactions, Iconix believes
that
Mr. Sweedler beneficially owns 729,110 shares of Iconix common stock
as of
the date of this proxy
statement/prospectus.
|
(5)
|
Michael
Caruso serves as the trustee of this trust and exercises voting and
investment control over its
securities.
|
(6)
|
Includes
110,000 shares of common stock issuable upon exercise of
options.
|
(7)
|
Includes
405,250 shares of common stock issuable upon exercise of
options.
|
(8)
|
Includes
295,250 shares of common stock issuable upon exercise of options
and
60,750 shares of common stock owned by C&P Associates, with which Mr.
Mendelow and his wife are affiliated and over whose securities they
exercise shared voting and investment
control.
|
(9)
|
Represents
shares of common stock held by Mudd (USA) LLC, the seller in connection
with Iconix’s April 2006 acquisition of the Mudd brand, of which Mr. Wing
Kwok, Chairman, Mr. Conrad Lung, President, and Mr. Richard Gilbert,
Chief
Financial Officer, have voting and/or investment control over the
securities. Includes 358,526 shares pledged as collateral to support
certain of Mudd (USA) LLC’s post-closing obligations to Iconix in
connection with the acquisition, of which, commencing July 1, 2006,
and
each quarter thereafter while any such shares remain pledged, a portion
of
the pledged shares, equal in value to up to $1.0 million, are to
be
released. The address of Mudd (USA) LLC is 1407 Broadway, 29th
Floor, New York, NY 10018.
|
(10)
|
Represents
estimated number of shares of Iconix common stock to be received
by Mr.
Giannulli upon the closing of the
merger.
|
(11)
|
Includes
5,921,375 shares of common stock issuable upon exercise of
options.
|
Iconix
|
Mossimo
|
|||
Authorized
Capital Stock
|
The
authorized capital stock of Iconix consists of (i) seventy-five million
(75,000,000) shares of common stock, par value $.001 per share, and
(ii)
five million (5,000,000) shares of preferred stock, par value $.01
per
share. Iconix has a stockholder rights plan in respect of Series
A Junior
Participating Preferred Stock, par value $0.01 per share (“Series A
Preferred Stock”), none of which are currently
outstanding.
|
The
authorized capital stock of Mossimo consists of (i) 30,000,000 shares
of common stock, par value $0.001 per share and (ii) 3,000,000 shares
of preferred stock, par value $0.001 per share. No shares of preferred
stock are outstanding.
|
||
Number
of Directors
|
Iconix’s
bylaws provide that the number will be not less than one. The exact
number
of directors constituting the entire board will be fixed from time
to time
by Iconix’s board of directors, or by the stockholders. Iconix’s board of
directors currently consists of 6 directors.
|
Mossimo’s
bylaws provide that the number of directors will be not less than
2 nor
more than 5. The exact number of directors constituting the entire
board
will be fixed from time to time by Mossimo’s board of directors. Mossimo’s
board of directors currently consists of 5 directors.
|
||
Cumulative
Voting
|
Iconix’s
certificate of incorporation does not provide for cumulative voting
and,
accordingly, holders of Iconix common stock do not have cumulative
voting
rights in connection with the election of directors.
|
Mossimo’s
certificate of incorporation does not provide for cumulative voting,
and
accordingly, holders of Mossimo common stock do not have cumulative
voting
rights in connection with the election of
directors.
|
||
Classification
of Board of Directors
|
Iconix’s
board of directors is not classified.
|
Mossimo’s
certificate of incorporation classifies the board of directors into
three
separate classes, with each class to consist, as nearly as possible,
of
one third of the total number of directors, with classes serving
staggered
three-year terms.
|
||
Removal
of Directors
|
Iconix’s
bylaws provide that any director may be removed with or without cause
by
the affirmative vote of the holders of a majority of the outstanding
shares of capital stock of the corporation entitled to vote generally
in
the election of directors.
|
Section
141(k)(1) of the DGCL provides that, unless a corporation’s
certificate of incorporation provides otherwise, directors of a
corporation with a classified board of directors may only be removed
for
cause. Mossimo’s certificate of incorporation does not provide otherwise.
Mossimo’s bylaws provide that any director may be removed with cause, but
only by the affirmative vote of the holders of a majority of the
outstanding shares of capital stock of the corporation entitled to
vote
generally in the election of directors.
|
||
Iconix’s
bylaws provide that any vacancy on the board of directors may be
filled by
a majority of the directors then in office, even if less than a quorum,
or
by a sole remaining director. Any director elected to fill a vacancy
shall
hold office until the next annual meeting of stockholders and until
his or
her successor is elected and qualified, or until his or her earlier
resignation or removal.
|
Mossimo’s
certificate of incorporation provides that any vacancy on the board
of
directors may be filled by a majority of the directors then in office,
even if less than a quorum, or by a sole remaining director. Any
director
elected to fill a vacancy shall hold office for a term that shall
coincide
with the term of the class to which such director shall have been
elected.
|
Iconix
|
Mossimo
|
|||
Stockholder
Action by
Written
Consent
|
Iconix’s
bylaws require the written consent of the holders of at least the
minimum
number of votes that would be necessary to authorize or take such
action
at a meeting at which all shares entitled to vote thereon were present
and
voted in order to take action by written consent in lieu of an action
required to be taken or which may be taken at any annual or special
meeting of stockholders.
|
Mossimo’s
certificate of incorporation requires the written consent of the
holders
of at least two-thirds of the outstanding shares of Mossimo capital
stock
entitled to vote in order to take action by written consent in lieu
of an
action required to be taken or which may be taken at any annual or
special
meeting of stockholders.
|
||
Amendment
to Certificate of Incorporation
|
Iconix’s
certificate of incorporation may not be amended in any manner which
would
materially alter or change the powers, preferences or special rights
of
the Series A Preferred Stock or adversely affect such stockholders
without
the affirmative vote of at least two-thirds of the outstanding shares
of
Series A Preferred Stock, voting together as a single class. Iconix
may
repeal, alter, amend or rescind any other provision of the certificate
of
incorporation in the manner prescribed by the DGCL. Under the DGCL,
Iconix’s certificate of incorporation may be amended only if the proposed
amendment is approved by the board of directors and the holders of
at
least a majority of the outstanding stock entitled to vote
thereon.
|
Articles
VII, VIII, X and XI, and the second paragraph of Article V, of Mossimo’s
certificate of incorporation may not be amended or repealed except
by the
affirmative vote of two-thirds of the outstanding stock of Mossimo
entitled to vote thereon. Mossimo may repeal, alter, amend or rescind
any
other provision of the certificate of incorporation in the manner
prescribed by the DGCL. Under the DGCL, Mossimo’s certificate of
incorporation may be amended only if the proposed amendment is approved
by
the board of directors and the holders of at least a majority of
the
outstanding stock entitled to vote thereon.
|
||
Amendment
of Bylaws
|
Iconix’s
bylaws provide that the board of directors or the stockholders may
adopt,
repeal, alter, amend or rescind the bylaws. Iconix’s certificate of
incorporation provides that the board may alter or amend the
bylaws.
|
Mossimo’s
certificate of incorporation provides that the board of directors
may
adopt, repeal, alter, amend or rescind the bylaws, and that the
stockholders may also take such actions by the affirmative vote of
holders
of not less than two-thirds of the outstanding stock entitled to
vote
thereon.
|
||
Special
Meeting of Stockholders
|
Iconix’s
bylaws provide that special meetings of the stockholders may be called
by
the board of directors or by any officer instructed by the board
to call a
meeting.
|
Mossimo’s
bylaws provide that special meetings of the stockholders may be called
only by the board of directors, the chairman of the board, the chief
executive officer, the president, or, upon the written request of
a
stockholder or stockholders holding shares in the aggregate entitled
to
cast not less than 10% of the votes at the meeting, by the
secretary.
|
||
Quorum
|
Iconix’s
bylaws provide that the holders of one third of the stock issued
and
outstanding and entitled to vote at the meeting, present in person
or
represented by proxy, shall constitute a quorum.
|
Mossimo’s
bylaws provide that the holders of a majority of the stock issued
and
outstanding and entitled to vote at the meeting, present in person
or
represented by proxy, shall constitute a quorum.
|
||
Iconix’s
bylaws provide that written notice of an annual meeting or special
meeting
stating the place, date, hour of the meeting and stating the place
within
the city or other municipality or community at which the list of
stockholders can be examined, will be given to each stockholder entitled
to vote at the meeting not less than 10 nor more than 60 days before
the
date of the meeting, and in the case of a special meeting, will state
the
purpose for which the meeting is called.
|
Mossimo’s
bylaws provide that written notice of an annual meeting or special
meeting
stating the place, date and hour of the meeting will be given to
each
stockholder entitled to vote at the meeting not less than 10 nor
more than
60 days before the date of the meeting, and, in the case of a special
meeting, will state the purpose for which the meeting is
called.
|
Iconix
|
Mossimo
|
|||
Delivery
and Notice Requirements of Stockholder Nominations and
Proposals
|
Iconix’s
bylaws provide that, to be properly brought before a meeting of
stockholders, business must be either:
· specified
in the notice of meeting;
·
brought
by or at the direction of the board; or
· otherwise
properly brought before the meeting by a stockholder.
To
be timely, a stockholder’s notice of business to be conducted at the
meeting or a director nomination must be delivered to or mailed and
received by Iconix’s Secretary at the principal executive offices of
Iconix:
· not
less than 50 nor more than 75 days prior to the meeting;
or
·
if
less than 65 days notice or prior public disclosure of the date of
the
meeting is given or made to stockholders, no later than the close
of
business on the 10th day following the day on which the notice of
the date
of the meeting was mailed or the public disclosure was
made.
A
stockholder’s written notice of business to be conducted at a stockholders
meeting must set forth:
· the
name and record address of the stockholder;
· the
class and number of shares of Iconix capital stock which are beneficially
owned by the stockholder as of the record date;
· a
brief description of the business desired to be brought before the
annual
meeting and the reasons for conducting the business at the meeting;
and
·
all
information that would be required to be included in the proxy statement
filed with the SEC, if such stockholder was a participant in the
solicitation subject to the Section 14 of the Exchange
Act.
|
Mossimo’s
bylaws provide that, to be properly brought before a meeting of
stockholders, business must be either:
· specified
in the notice of meeting; or
· otherwise
properly brought before the meeting by a stockholder.
Mossimo’s
bylaws also provide that nominations of persons for election to the
board
of directors at a meeting may be made at the meeting by or at the
direction of the board of directors or by any stockholder of Mossimo
entitled to vote for the election of directors at the meeting who
provides
timely notice to Mossimo in compliance with the notice procedures
summarized below.
To
be timely, a stockholder’s notice of business to be conducted at the
meeting or director nomination must be delivered to or mailed and
received
at the principal executive offices of Mossimo:
·
not
less than 60 nor more than 90 days prior to the meeting;
or
·
if
less than 70 days notice or prior public disclosure of the date of
the
meeting is given or made to stockholders, no later than the close
of
business on the 10th day following the day on which the notice of
the date
of the annual meeting was mailed or the public disclosure was
made.
A
stockholder’s written notice of business to be conducted at a stockholders
meeting must set forth:
·
the
name and record address of the stockholder;
·
the
class, series and number of shares of Mossimo capital stock which
are
beneficially owned by the stockholder;
· a
brief description of the business desired to be brought before the
annual
meeting and the reasons for conducting the business; and
· any
material interest of the stockholder in the business.
|
Iconix
|
Mossimo
|
|||
A
stockholder’s written notice of a director nomination must set
forth:
· the
name and record address of the stockholder giving the
notice;
· the
class and number of shares of Iconix’s capital stock which are
beneficially owned by the stockholder giving the notice as of the
record
date;
·
sufficient
information for the Nominating/ Governance Committee to assess the
suitability of the candidate, including the candidate’s qualifications,
name, age, business address and residence address;
·
information
regarding the recommended candidate relevant to a determination of
whether
the recommended candidate would be barred from being considered
independent under NASD Marketplace Rule 4200, or, alternatively,
a
statement that the recommended candidate would not be so
barred;
· a
representation that the stockholder making the nomination is a holder
of
record of capital stock of Iconix entitled to vote at such meeting
and
intends to appear in person or by proxy at the meeting to vote for
the
person or persons nominated;
· a
description of all arrangements and understandings between the stockholder
and each nominee and any other person or persons (naming such person
or
persons) pursuant to which the nomination was made by the
stockholder;
· such
other information regarding each nominee proposed by such stockholder
as
would be required to be included in a proxy statement filed pursuant
to
the proxy rules of the SEC had the nominee been nominated by the
board of
directors; and
·
the
consent of each nominee to serve as a director of Iconix if so
elected.
If
the facts warrant, the Chairman of the meeting will determine and
declare
that business was not properly brought in accordance with the procedures
summarized above. If the Chairman makes this determination, any business
or nomination declared by the Chairman not to be properly brought
will not
be transacted or will be disregarded, as the case may
be.
|
A
stockholder’s written notice of a director nomination must set
forth:
· the
name and record address of the stockholder giving the
notice;
· the
class and number of shares of Mossimo capital stock which are beneficially
owned by the stockholder giving the notice;
·
the
name, age, business address and residence address of any director
nominee;
·
the
principal occupation or employment of any director
nominee;
·
the
class and number of shares of Mossimo capital stock which are beneficially
owned by the director nominee; and
·
any
other information relating to the director nominee that is required
to be
disclosed in solicitations for proxies for election of directors
pursuant
to the rules and regulations of the SEC under Section 14 of the Exchange
Act.
If
the facts warrant, the presiding officer at the meeting will determine
and
declare that business was not properly brought, or that a director
nomination was not made in accordance with the procedures summarized
above. If the presiding officer makes this determination, any business
or
nomination declared by the presiding officer not to be properly brought
will not be transacted or will be disregarded, as the case may
be.
|
Iconix
|
Mossimo
|
|||
Iconix’s
bylaws provide that each stockholder entitled to vote at a meeting
of
stockholders may authorize another person(s) to act for him by written
proxy, but that no proxy shall be voted or acted upon after 3 years
from
its date unless the proxy provides for a longer
period.
|
Mossimo’s
bylaws provide that each stockholder entitled to vote at a meeting
of
stockholders may authorize another person(s) to act for him by written
proxy, but that no proxy shall be voted or acted upon after 3 years
from
its date unless the proxy provides for a longer period.
|
|||
Preemptive
Rights
|
Iconix’s
certificate of incorporation does not grant any preemptive
rights.
|
Mossimo’s
certificate of incorporation does not grant any preemptive
rights.
|
||
Dividends
|
Iconix’s
certificate of incorporation provides that after any preferential
dividends on preferred stock is paid, the directors may declare and
pay
dividends upon the Iconix common stock.
|
Mossimo’s
bylaws provide that the directors may declare and pay dividends upon
the
Mossimo capital stock, subject to (i) the DGCL or (ii) the
certificate of incorporation. Dividends may be paid in cash, property
or
in shares of Mossimo capital stock.
|
||
Limitation
of Personal Liability of Directors
|
Iconix’s
certificate of incorporation provides that, to the fullest extent
permitted by the DGCL, no director will be personally liable to Iconix
or
its stockholders for monetary damages for any breach of fiduciary
duty as
a director.
|
Mossimo’s
certificate of incorporation provides that, to the fullest extent
permitted by the DGCL, no director will be personally liable to Mossimo
or
its stockholders for monetary damages for any breach of fiduciary
duty as
a director.
|
||
Indemnification
of Officers and Directors
|
Iconix’s
bylaws provide that for actions by a person other than by or in the
right
of Iconix:
· Iconix
will indemnify any person who was or is a party or is threatened
to be
made a party to any action, suit, claim or proceeding, whether civil
or
criminal, whether formal or informal, including any action by or
in the
right of Iconix, by reason of the fact that the person is or was
a
director or officer of Iconix or any other enterprise, including
appeals
therein, or is or was serving at the request of Iconix as a director,
officer or in any other capacity of any other enterprise, against
any and
all judgments, fines, penalties, amounts paid in settlement, and
expenses,
including attorneys’ fees, actually and reasonably incurred by the person
in connection with the action, suit, claim or proceeding. If a judgment
or
other final adjudication adverse to such indemnitee establishes that
his
or her acts were committed in bad faith or were the result of active
and
deliberate dishonesty and were material to the cause of action so
adjudicated, or that such person gained in fact a financial profit
or
other advantage to which he or she was not legally entitled, no
indemnification shall be made. The board must authorize any action,
suit,
claim or proceeding in order for indemnification to be
required.
|
Mossimo’s
bylaws provide that for actions by a person other than by or in the
right
of Mossimo:
· Mossimo
will indemnify any person who was or is a party or is threatened
to be
made a party to any threatened, pending or completed action, suit
or
proceeding, whether civil, criminal, administrative or investigative,
other than an action by or in the right of Mossimo, by reason of
the fact
that the person is or was a director, officer, employee or agent
of
Mossimo, or is or was serving at the request of Mossimo as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, including attorneys’
fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by the person in connection with the action,
suit or
proceeding if the person acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of Mossimo,
and,
with respect to any criminal action or proceeding, the person had
no
reasonable cause to believe his or her conduct was unlawful;
and
|
|
|
Iconix
|
Mossimo
|
|||
· Employees
are not entitled to indemnification unless provided by the board.
Iconix
is not required to provide indemnification to an employee unless
such
services were rendered at the request of the
board.
|
· the
termination of any action, suit or proceeding, by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, will not, of itself, create a presumption that the person
did
not act in good faith and in a manner which he or she reasonably
believed
to be in or not opposed to the best interests of Mossimo, or, with
respect
to any criminal action or proceeding, had reasonable cause to believe
his
or her conduct was unlawful.
|
|||
|
Iconix’s
bylaws also provide that in making the determination as to whether
a
person is entitled to indemnification, it is presumed that such person
is
entitled to indemnification, and Iconix has the burden of proving
otherwise.
Under
Iconix’s bylaws, the indemnification and advancement of expenses provided
by Iconix’s bylaws:
·
will
not be deemed exclusive of any other rights to which any person seeking
indemnification or advancement of expenses may be entitled under
any
statute, corporate charter, bylaw, resolution or shareholders or
directors
agreement; and
·
will
be deemed to constitute contractual obligations of Iconix, and will
continue to exist after the repeal or modification of the section
in the
bylaws.
|
For
actions by a person by or in the right of Mossimo, Mossimo’s bylaws
provide that:
· Mossimo
will indemnify any person who was or is a party or is threatened
to be
made a party to any threatened, pending or completed action or suit
by or
in the right of Mossimo to procure a judgment in its favor by reason
of
the fact that such person is or was a director, officer, employee
or agent
of Mossimo, or is or was serving at the request of Mossimo as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including attorneys’
fees, actually and reasonably incurred by the person in connection
with
the defense or settlement of the action or suit if the person acted
in
good faith and in a manner reasonably believed to be in or not opposed
to
the best interest of Mossimo; and
|
Iconix
|
Mossimo
|
|||
·
no
indemnification will be made in respect of any claim, issue or matter
as
to which the person is adjudged to be liable to Mossimo unless and
only to
the extent that the Court of Chancery in Delaware or the court in
which
the action or suit was brought will determine upon application that,
despite the adjudication of liability but in view of all the circumstances
of the case, the person is fairly and reasonably entitled to indemnity
for
the expenses.
Mossimo’s
bylaws also provide that:
· any
indemnification, unless ordered by a court, will be made by Mossimo
only
as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper
in
the circumstances because the person has met the applicable standard
of
conduct. To the extent that a director, officer, employee or agent
of
Mossimo has been successful on the merits or otherwise in defense
of any
action, suit or proceeding described above, or in defense of any
claim,
issue or matter in the action, suit or proceeding, the person will
be
indemnified against expenses, including attorneys’ fees, actually and
reasonably incurred in connection with the action, suit or proceeding,
without the necessity of authorization in the specific case;
and
|
||||
|
·
expenses
incurred in defending or investigating a threatened or pending action,
suit or proceeding may be paid by Mossimo in advance of the final
disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director, officer, employee or
agent to
repay such amount if it will ultimately be determined that he or
she is
not entitled to be indemnified by Mossimo as authorized by Mossimo’s
bylaws.
Under
Mossimo’s bylaws, the indemnification and advancement of expenses provided
by Mossimo’s bylaws will not be deemed:
·
exclusive
of any other rights to which any person seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement,
contract, vote of stockholders or disinterested directors or pursuant
to
the direction of any court of competent jurisdiction or otherwise,
both as
to action in the person’s official capacity and as to action in another
capacity while holding such office, it being the policy of Mossimo
that
indemnification of, and advancement of expenses to, the persons specified
in Mossimo’s bylaws will be made to the fullest extent permitted by law;
or
|
Iconix
|
Mossimo
|
|||
·
to
preclude the indemnification of, and advancement of expenses to,
any
person who is not specified in the certificate of incorporation,
but whom
Mossimo has the power or obligation to indemnify under the provisions
of
the DGCL, or otherwise.
Mossimo’s
bylaws further provide that Mossimo may purchase and maintain insurance
on
behalf of any person who is or was a director, officer, employee
or agent
of Mossimo, or is or was serving at the request of Mossimo as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted
against
the person and incurred by the person in any such capacity, or arising
out
of his or her status, whether or not Mossimo would have the power
or the
obligation to indemnify the person.
|
||||
The
Iconix stockholders are not entitled to appraisal or dissenters rights
under Section 262 of the DGCL in connection with the merger because
Iconix
is not a constituent corporation in the merger. See “The Merger -
Appraisal Rights” on page 49.
|
The
DGCL provides that a holder of shares of any class or series has
the
right, in certain circumstances, to demand an appraisal of the fair
value
of the shares.
Dissenters’
rights are available to stockholders of Mossimo with respect to the
proposed merger. See “The Merger —Appraisal Rights” on page
49.
|
|||
Certain
Business Combination Restrictions
|
Section
203 of the DGCL protects publicly-traded Delaware corporations, such
as
Iconix, from hostile takeovers, and from actions following the takeover,
by prohibiting some transactions once an acquirer has gained a significant
holding in the corporation.
A
corporation may elect not to be governed by Section 203 of the Delaware
General Corporation Law. Neither the Iconix certificate of incorporation
nor the Iconix bylaws contains the election not to be governed by
Section
203 of the Delaware General Corporation Law. Therefore, Iconix is
governed
by Section 203 of the DGCL. This provision does not apply to Iconix
in the
merger.
|
Section
203 of the DGCL protects publicly-traded Delaware corporations, such
as
Mossimo, from hostile takeovers, and from actions following the takeover,
by prohibiting some transactions once an acquirer has gained a significant
holding in the corporation.
A
corporation may elect not to be governed by Section 203 of the DGCL.
Neither Mossimo’s certificate of incorporation nor its bylaws contain this
election. Therefore, Mossimo is governed by Section 203 of the DGCL.
However, Mossimo’s board of directors has expressly approved the merger
agreement and the transactions contemplated by the merger agreement,
including the merger. As such, the restrictions on business combinations
set forth in Section 203 of the DGCL do not apply to the merger agreement
or the transactions contemplated by the merger agreement, including
the
merger.
|
||
Rights
Plan
|
Each
share of Iconix common stock that is issued in connection with the
merger
has and will have a right attached to it that becomes exercisable
subject
to the terms set forth in a rights agreement between Iconix and its
rights
agent. The rights have certain anti-takeover effects and may be exchanged
and redeemed upon certain events.
|
Mossimo
does not have an anti-takeover rights plan.
|
|
Iconix
|
Mossimo
|
Pro
Forma Adjustments
|
||||||||||||||||
|
as
of 6/30/06 Historical
|
as
of 6/30/06 Historical
|
Note
(a)
|
|
Notes
(b)/(c)
|
|
Note
(d)
|
|
Pro
Forma Condensed Combined
|
||||||||||
Assets
|
|||||||||||||||||||
Current
assets
|
|||||||||||||||||||
Cash
(including restricted cash)
|
$
|
13,592
|
$
|
22,333
|
$
|
(2,483
|
)
|
$
|
12,597
|
$
|
(19,850
|
)
|
$
|
26,189
|
|||||
Marketable
securities
|
911
|
-
|
-
|
(911
|
)
|
-
|
-
|
||||||||||||
Accounts
receivable, net
|
8,246
|
6,042
|
(1,159
|
)
|
4,883
|
(4,883
|
)
|
13,129
|
|||||||||||
Due
from affiliate
|
219
|
-
|
-
|
2,000
|
-
|
2,219
|
|||||||||||||
Inventories
|
-
|
263
|
(263
|
)
|
-
|
-
|
-
|
||||||||||||
Deferred
income taxes
|
6,978
|
3,702
|
-
|
-
|
(3,702
|
)
|
6,978
|
||||||||||||
Prepaid
advertising and other
|
2,851
|
426
|
(3
|
)
|
424
|
(423
|
)
|
3,275
|
|||||||||||
Total
current assets
|
32,797
|
32,766
|
(3,908
|
)
|
18,993
|
(28,858
|
)
|
51,790
|
|||||||||||
Property
and equipment at cost:
|
|||||||||||||||||||
Furniture,
fixtures and equipment
|
2,585
|
2,373
|
(994
|
)
|
1,379
|
(1,379
|
)
|
3,964
|
|||||||||||
Less:
accumulated depreciation and amortization
|
(1,276
|
)
|
(1,565
|
)
|
419
|
(1,146
|
)
|
1,146
|
(2,422
|
)
|
|||||||||
1,309
|
808
|
(575
|
)
|
233
|
(233
|
)
|
1,542
|
||||||||||||
Other
assets:
|
|||||||||||||||||||
Restricted
cash
|
8,546
|
-
|
-
|
-
|
-
|
8,546
|
|||||||||||||
Goodwill
|
42,528
|
-
|
-
|
50,905
|
-
|
93,433
|
|||||||||||||
Intangibles,
net
|
229,758
|
84
|
(84
|
)
|
144,500
|
-
|
374,258
|
||||||||||||
Deferred
financing costs, net
|
3,759
|
-
|
-
|
-
|
-
|
3,759
|
|||||||||||||
Deferred
income taxes
|
15,302
|
1,581
|
-
|
5,283
|
(1,581
|
)
|
20,585
|
||||||||||||
Other
|
1,142
|
60
|
(13
|
)
|
-
|
(47
|
)
|
1,142
|
|||||||||||
301,035
|
1,725
|
(97
|
)
|
200,688
|
(1,628
|
)
|
501,723
|
||||||||||||
Total
assets
|
$
|
335,141
|
$
|
35,299
|
$
|
(4,580
|
)
|
$
|
219,914
|
$
|
(30,719
|
)
|
$
|
555,055
|
|
Iconix
|
Mossimo
|
Pro
Forma Adjustments
|
||||||||||||||||
|
as
of 6/30/06 Historical
|
as
of 6/30/06 Historical
|
Note
(a)
|
|
Notes
(b)/(c)
|
|
Note
(d)
|
|
Pro
Forma Condensed Combined
|
Liabilities
and stockholders equity
|
|||||||||||||||||||
Current
liabilities:
|
|||||||||||||||||||
Accounts
payable and accrued expenses
|
$
|
3,890
|
$
|
5,675
|
$
|
(377
|
)
|
$
|
12,404
|
$
|
(5,298
|
)
|
$
|
16,294
|
|||||
Promissory
note payable
|
750
|
-
|
-
|
-
|
-
|
750
|
|||||||||||||
Accounts
payable, subject to litigation
|
4,886
|
-
|
-
|
-
|
-
|
4,886
|
|||||||||||||
Current
portion of deferred revenue
|
2,645
|
-
|
-
|
-
|
-
|
2,645
|
|||||||||||||
Current
portion of long term debt
|
32,469
|
-
|
-
|
18,500
|
-
|
50,969
|
|||||||||||||
Total
current liabilities
|
44,640
|
5,675
|
(377
|
)
|
30,904
|
(5,298
|
)
|
75,544
|
|||||||||||
Deferred
rent
|
-
|
117
|
(97
|
)
|
-
|
(20
|
)
|
-
|
|||||||||||
Deferred
income taxes
|
6,640
|
-
|
-
|
48,300
|
-
|
54,940
|
|||||||||||||
Long
term debt
|
111,238
|
-
|
-
|
71,500
|
-
|
182,738
|
|||||||||||||
Contingencies
and commitments
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||
Stockholders'
equity:
|
|||||||||||||||||||
Common
stock, $.001 par value - shares authorized 75,000
|
39
|
15
|
-
|
-
|
(15
|
)
|
39
|
||||||||||||
Additional
paid-in capital
|
192,698
|
41,316
|
(375
|
)
|
69,376
|
(40,941
|
)
|
262,074
|
|||||||||||
Accumulated
other comprehensive income
|
166
|
-
|
-
|
(166
|
)
|
-
|
-
|
||||||||||||
Accumulated
earnings (deficit)
|
(19,613
|
)
|
(11,824
|
)
|
(3,731
|
)
|
-
|
15,555
|
(19,613
|
)
|
|||||||||
Treasury
stock - 198 shares at cost
|
(667
|
)
|
-
|
-
|
-
|
-
|
(667
|
)
|
|||||||||||
Total
stockholders' equity
|
172,623
|
29,507
|
(4,106
|
)
|
69,210
|
(25,401
|
)
|
241,833
|
|||||||||||
Total
liabilities and stockholders' equity
|
$
|
335,141
|
$
|
35,299
|
$
|
(4,580
|
)
|
$
|
219,914
|
$
|
(30,719
|
)
|
$
|
555,055
|
Unaudited
Pro Forma Condensed Combined Statement of Operations
|
For
the Year ending December 31, 2005
|
('000
omitted, except per share information)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended 12/31/2005 Iconix
Historical
|
2005
Closed
Acquisitions Historical
Note
(e)
|
2005
Closed
Acquisitions Pro Forma Adjustments
Note
(f)
|
Year
Ended 3/31/2006 Mudd
Historical
|
Mudd
Pro
Forma
Adjustment
|
Notes
|
Pro
Forma Iconix
|
Year
Ended
12/31/2005
Mossimo
Historical
|
Pro
Forma Note (l)
|
Pro
Forma Adjustment
|
Notes
|
Total
Pro
Forma
Condensed Combined
|
Notes
|
|||||||||||||||||||||||||
Net
sales
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
6,730
|
$
|
(6,730
|
)
|
$
|
-
|
$
|
-
|
||||||||||||||||
Licensing
income
|
30,156
|
14,890
|
-
|
10,994
|
8,000
|
(g
|
)
|
64,040
|
24,298
|
-
|
-
|
88,338
|
|||||||||||||||||||||||||
Net
revenue
|
30,156
|
14,890
|
-
|
10,994
|
8,000
|
64,040
|
31,028
|
-
|
-
|
88,338
|
|||||||||||||||||||||||||||
Cost
of goods sold
|
-
|
-
|
-
|
-
|
-
|
-
|
3,993
|
(3,993
|
)
|
-
|
-
|
||||||||||||||||||||||||||
Gross
profit
|
30,156
|
14,890
|
-
|
10,994
|
8,000
|
64,040
|
27,035
|
(2,737
|
)
|
-
|
88,338
|
||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||
Selling,
general & administrative expenses
|
13,880
|
4,588
|
835
|
6,061
|
868
|
(h
|
)
|
26,232
|
20,294
|
(4,191
|
)
|
1,810
|
(m
|
)
|
44,145
|
||||||||||||||||||||||
Special
charges
|
1,466
|
-
|
-
|
-
|
-
|
1,466
|
212
|
-
|
-
|
1,678
|
|||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||
Operating
income (loss)
|
14,810
|
10,302
|
(835
|
4,933
|
7,132
|
36,342
|
6,529
|
1,454
|
(1,810
|
)
|
42,515
|
||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||
Net
interest expense (income)
|
3,902
|
1,243
|
2,518
|
-
|
4,738
|
(i
|
)
|
12,401
|
(420
|
)
|
-
|
9,277
|
(n
|
)
|
21,258
|
||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||
Income
(loss) before income taxes
|
10,908
|
9,059
|
(3,353
|
4,933
|
2,394
|
23,941
|
6,949
|
1,454
|
(11,087
|
)
|
21,257
|
||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||
Provision
(benefit) for income taxes
|
(5,035
|
)
|
-
|
1,000
|
-
|
2,491
|
(j
|
)
|
(1,544
|
)
|
2,248
|
-
|
(3,161
|
)
|
(o
|
)
|
(2,457
|
)
|
|||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||
Net
income (loss)
|
$
|
15,943
|
$
|
9,059
|
$
|
(4,353
|
$
|
4,933
|
$
|
(97
|
$
|
25,485
|
$
|
4,701
|
$
|
1,454
|
$
|
(7,926
|
)
|
$
|
23,714
|
||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||
Earnings
per share:
|
|||||||||||||||||||||||||||||||||||||
Basic
|
$
|
0.51
|
$
|
0.66
|
$
|
0.56
|
(q
|
)
|
|||||||||||||||||||||||||||||
Diluted
|
$
|
0.46
|
$
|
0.61
|
$
|
0.51
|
(q
|
)
|
|||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||
Weighted
number of common shares outstanding
|
|||||||||||||||||||||||||||||||||||||
Basic
|
31,284
|
6,521
|
3,269
|
(k
|
)
|
38,512
|
3,608
|
(p
|
)
|
42,120
|
|||||||||||||||||||||||||||
Diluted
|
34,773
|
6,521
|
3,327
|
(k
|
)
|
42,059
|
4,637
|
(p
|
)
|
46,696
|
|
Six
Months Ended
6/30/2006
Iconix
Historical
|
Three
Months Ended 3/31/2006
Mudd
Historical
|
Pro
Forma Adjustment
|
Notes
|
Pro
Forma Iconix
|
|
Six
Months Ended
6/30/2006
Mossimo
Historical
|
|
Pro
Forma Note
(l)
|
|
|
Pro
Forma Adjustment
|
|
Notes
|
Total
Pro Forma Condensed Combined
|
|
Notes
|
|
||||||||||||||||||||||
Net
sales
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
3,655
|
$
|
(3,655
|
)
|
$
|
-
|
$
|
-
|
|||||||||||||||||||||||
Licensing
income
|
31,678
|
2,607
|
2,000
|
(g
|
)
|
36,285
|
11,581
|
-
|
-
|
47,866
|
||||||||||||||||||||||||||||||
Net
revenue
|
31,678
|
2,607
|
2,000
|
36,285
|
15,236
|
-
|
-
|
47,866
|
||||||||||||||||||||||||||||||||
Cost
of goods sold
|
-
|
-
|
-
|
-
|
1,842
|
(1,842
|
)
|
-
|
-
|
|||||||||||||||||||||||||||||||
Gross
profit
|
31,678
|
2,607
|
2,000
|
36,285
|
13,394
|
(1,813
|
)
|
-
|
47,866
|
|||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Selling,
general & administrative expenses
|
11,501
|
3,107
|
217
|
(h
|
)
|
14,825
|
11,215
|
(1,938
|
)
|
905
|
(m
|
)
|
25,007
|
|||||||||||||||||||||||||||
Special
charges
|
1,268
|
-
|
-
|
1,268
|
-
|
-
|
-
|
1,268
|
||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Operating
income (loss)
|
18,909
|
(500
|
)
|
1,783
|
20,192
|
2,179
|
125
|
(905
|
)
|
21,591
|
||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Net
interest expense (income)
|
4,826
|
-
|
1,185
|
(i
|
)
|
6,011
|
(416
|
)
|
3
|
4,884
|
(n
|
)
|
10,482
|
|||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Income
(loss) before income taxes
|
14,083
|
(500
|
)
|
598
|
14,181
|
2,595
|
122
|
(5,789
|
)
|
11,109
|
||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Provision
(benefit) for income taxes
|
(1,619
|
)
|
-
|
33
|
(j
|
)
|
(1,586
|
)
|
1,055
|
-
|
(2,099
|
)
|
(o
|
)
|
(2,630
|
)
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Net
income (loss)
|
$
|
15,702
|
$
|
(500
|
)
|
$
|
565
|
$
|
15,767
|
$
|
1,540
|
$
|
122
|
$
|
(3,690
|
)
|
$
|
13,739
|
||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Earnings
per share:
|
||||||||||||||||||||||||||||||||||||||||
Basic
|
$
|
0.42
|
$
|
0.40
|
$
|
0.32
|
(q
|
)
|
||||||||||||||||||||||||||||||||
Diluted
|
$
|
0.37
|
$
|
0.35
|
$
|
0.28
|
(q
|
)
|
||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Weighted
number of common shares outstanding
|
||||||||||||||||||||||||||||||||||||||||
Basic
|
37,208
|
1,834
|
(k
|
)
|
39,042
|
3,608
|
(p
|
)
|
42,650
|
|||||||||||||||||||||||||||||||
Diluted
|
42,872
|
1,950
|
(k
|
)
|
44,822
|
4,639
|
(p
|
)
|
49,461
|
|
(000’s
omitted except share information)
|
||||||
|
|||||||
Cash
paid at closing to Mossimo stockholders
|
$
|
67,525
|
|||||
Cash
paid at closing to Cherokee
|
33,000
|
||||||
Total
cash paid at closing
|
$
|
100,525
|
|||||
|
|||||||
Fair
value of 3,608,433 shares of $.001 par value common stock at $14.31
per
share fair market value per share (i)
|
51,637
|
||||||
Value
of the contingent share right relating to fair market value thresholds
guaranteed in the merger consideration (i)
|
15,888
|
||||||
Value
of 250,000 warrants ($15.93 exercise price) issued as a cost of
the
merger
|
1,851
|
||||||
Total
equity consideration
|
69,376
|
||||||
|
|||||||
Shares
of Mossimo stock previously acquired by Iconix
|
745
|
||||||
|
|||||||
Estimated
buyout of Mossimo employee stock option agreements
|
933
|
||||||
|
|||||||
Estimated
liability related to additional payment for buyout of Mossimo employee
stock option agreements
|
255
|
||||||
|
|||||||
Other
estimated costs of the merger, including $4,456 to be paid after
closing
|
4,989
|
||||||
|
|||||||
TOTAL
|
$
|
176,823
|
|
(000’s
omitted)
|
|||
|
||||
$
|
138,000
|
|||
License
agreements
|
3,700
|
|||
Non-compete
agreements
|
2,800
|
|||
Assumed
obligation under Cherokee contract
|
(8,100
|
)
|
||
Allocation
of Cherokee contract buyout
|
8,100
|
|||
Cash
acquired
|
23,655
|
|||
Note
receivable, related to sale of Modern Amusement
|
2,000
|
|||
Accounts
Receivable and other current assets
|
5,307
|
|||
Fixed
assets
|
233
|
|||
Deferred
tax asset
|
5,283
|
|||
Accounts
payable and accruals
|
(5,299
|
)
|
||
Accrued
exit costs
|
(1,206
|
)
|
||
Accrued
liabilities - options contingency
|
(255
|
)
|
||
Deferred
tax liability
|
(48,300
|
)
|
||
Goodwill
|
50,905
|
|||
TOTAL
|
$
|
176,823
|
Joe
Boxer
|
Joe
Boxer
|
Rampage
|
Rampage
|
2005
Closed
|
||||||||||||
1/1/05-6/30/05
|
7/1/05-
7/21/05
|
1/1/05-
6/30/05
|
7/1/05-
9/15/05
|
Acquisitions Historical |
||||||||||||
Licensing
Income
|
$
|
7,978
|
$
|
1,161
|
$
|
3,899
|
$
|
1,852
|
$
|
14,890
|
||||||
SG&A
|
2,015
|
246
|
1,542
|
785
|
4588
|
|||||||||||
Operating
Income
|
5,963
|
915
|
2,357
|
1,067
|
10,302
|
|||||||||||
Interest
expense - net
|
290
|
35
|
684
|
234
|
1,243
|
|||||||||||
Income
before Income taxes
|
5,673
|
880
|
1,673
|
833
|
9,059
|
|||||||||||
Provision
(benefit) for income taxes
|
-
|
-
|
-
|
-
|
-
|
|||||||||||
Net
Income (loss)
|
$
|
5,673
|
$
|
880
|
$
|
1,673
|
$
|
833
|
$
|
9,059
|
Joe
Boxer
|
Joe
Boxer
|
Rampage
|
Rampage
|
2005
Closed Acquisitions |
||||||||||||
1/1/05-6/30/05
|
7/1/05-7/21/05
|
1/1/05-6/30/05
|
7/1/05-9/15/05
|
Pro
Forma Adjustments |
||||||||||||
Licensing
Income
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
SG&A
|
340
|
42
|
320
|
133
|
835
|
(i)
|
||||||||||
Operating
Income
|
(340
|
)
|
(42
|
)
|
(320
|
)
|
(133
|
)
|
(835
|
)
|
||||||
Interest
expense - net
|
1,744
|
214
|
317
|
243
|
2,518
|
(ii) | ||||||||||
Income
before income taxes
|
(2,084
|
)
|
(256
|
)
|
(637
|
)
|
(376
|
)
|
(3,353
|
)
|
||||||
Provision
(benefit) for income taxes
|
1,000
|
-
|
-
|
-
|
1,000
|
(iii)
|
||||||||||
Net
income (loss)
|
$
|
(3,084
|
)
|
$
|
(256
|
)
|
$
|
(637
|
)
|
$
|
(376
|
)
|
$
|
(4,353
|
)
|
|
|
||||||||||||||||
Weighted
number of common
|
||||||||||||||||
Shares
outstanding
|
||||||||||||||||
Basic
|
4,350
|
2,171
|
6,521
|
(iv)
|
||||||||||||
Diluted
|
4,350
|
2,171
|
6,521
|
(in
thousands)
|
For
the Year ending December 31,
2005
|
For
the Six Months ending June 30, 2006
|
|||||||||||
|
Basic
|
Diluted
|
Basic
|
Diluted
|
|||||||||
Pro
Forma Net Income
|
23,714
|
23,714
|
13,739
|
13,739
|
|||||||||
Weighted
number of shares outstanding, as reported in Iconix 2005 Form 10-K/A
and 2006 Form 10-Q for the period ended June 30, 2006
|
31,284
|
34,773
|
37,208
|
42,872
|
|||||||||
Add:
Incremental shares for pre-acquisition periods:
|
|||||||||||||
Joe
Boxer (Total amount of shares issued)
|
2,419
|
2,419
|
N/A
|
N/A
|
|||||||||
Rampage
(Total amount of shares issued)
|
1,540
|
1,540
|
N/A
|
N/A
|
|||||||||
Subtotal
prior to 2006 completed transaction:
|
35,243
|
38,732
|
37,208
|
42,872
|
|||||||||
Add:
Incremental shares for pre-acquisition periods:
|
|||||||||||||
Mudd
(Total amount of shares issued)
|
3,269
|
3,269
|
1,834
|
1,834
|
|||||||||
Mudd
related Warrants1
|
-
|
58
|
-
|
116
|
|||||||||
Subtotal
prior to proposed transaction
|
38,512
|
42,059
|
39,042
|
44,822
|
|||||||||
Number
of shares estimated to be issued to Mossimo shareholders at
closing
|
3,608
|
3,608
|
3,608
|
3,608
|
|||||||||
Mossimo
related Warrants1
|
-
|
-
|
-
|
2
|
|||||||||
Mossimo
Contingent Shares (estimated at Iconix share price of $14.56)2
|
-
|
1,029
|
-
|
1,029
|
|||||||||
Pro
forma common and diluted shares outstanding
|
42,120
|
46,696
|
42,650
|
49,461
|
|||||||||
Earnings
per share:
|
$
|
0.56
|
$
|
0.51
|
$
|
0.32
|
$
|
0.28
|
|||||
1
Warrants included in the diluted share amount were calculated using
the
Treasury Stock Method
|
|||||||||||||
2
See Note (p) for detail
|
· |
the
beneficial ownership of shares of Mossimo common stock immediately
prior
to the merger will be the same as that on October 10,
2006;
|
· |
all
of Mossimo’s stock options will be cancelled, in accordance with the terms
of the merger agreement, prior to the
merger;
|
· |
no
Mossimo stockholder will exercise dissenters’ rights in connection with
the merger; and
|
· |
a
total of 3,608,433 shares of Iconix common stock will be issued
upon the
consummation of the merger.
|
|
Common
Stock Beneficially
Owned
After the Offering
|
||||||||||||
Selling
Stockholders
|
Number
of Shares of
Iconix
Common Stock
Beneficially
Owned
Prior
to the Offering
|
Shares
Being
Offered
|
Number
of
Shares
(1)
|
|
Percent
of
Outstanding
Shares
|
||||||||
Mossimo
Giannulli
|
2,998,099
|
2,998,099
(2)
|
|
0
|
0%
|
|
|||||||
Edwin
Lewis
|
-0-
|
(3)
|
|
0
|
0%
|
|
(1)
|
Assumes
the sale of all of the selling stockholders’ shares being offered by the
selling stockholder.
|
(2)
|
Includes 664,998
shares of Iconix common stock that may be issued pursuant to the
anticipated maximum number of non-transferable contingent share
rights
issuable to Mr. Giannulli in connection with the
merger.
|
(3)
|
Although
there is no agreement, express or implied, to do so, Mr. Giannulli
is
considering a possible transfer of up to one-half the after-tax
proceeds
received by him in the merger to Mr. Lewis in recognition of the
role Mr.
Lewis has played in Mossimo.
|
· |
block
trades in which the broker or dealer so engaged will attempt to
sell the
shares as agent but may position and resell a portion of the shares
as
principal to facilitate the
transaction;
|
· |
purchases
by a broker or dealer as principal and resale by such broker dealer
for
its account;
|
· |
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
· |
over-the
counter distribution in accordance with the rules of the NASDAQ
Global
Market;
|
· |
ordinary
brokerage transactions and transactions in which the broker solicits
purchasers;
|
· |
through
the writing of put or call options on the shares or other hedging
transactions (including the issuance of derivative securities),
whether
the options or other derivative securities are listed on an option
or
other exchange or otherwise;
|
· |
privately
negotiated transactions;
|
· |
a
combination of any such methods of sale;
and
|
· |
any
other method permitted pursuant to applicable
law.
|
· |
in
the over-the counter market or
otherwise;
|
· |
at
prices and on terms prevailing at the time of
sale;
|
· |
at
prices related to the then-current market price;
or
|
· |
in
negotiated transactions.
|
· |
the
date by which stockholder proposals must be received by Mossimo
for
inclusion in the proxy materials relating to the annual meeting
for the
fiscal year ended December 31, 2006, which proposals must comply with
the rules and regulations of the SEC then in effect;
and
|
· |
the
date by which notice must be received from stockholders who intend
to
present a proposal at Mossimo’s next annual meeting without including such
proposal in its proxy materials.
|
· |
Quarterly
Report on Form 10-Q for quarters ended March 31, 2006 and June
30, 2006,
filed with the SEC on May 10, 2006 and August 10,
2006;
|
· |
Current
Reports on Form 8-K filed with the SEC on January 5, 2006, April
6, 2006,
April 17, 2006, April 27, 2006, June 8, 2006, August 15, 2006,
August 17,
2006, August 24, 2006, September 1, 2006 and September 28, 2006
and
amendments to Current Reports on Form 8-K/A filed with the SEC
on October
7, 2005, October 14, 2005, December 2, 2005 and June 27,
2006;
|
· |
Annual
Report on Form 10-K for the fiscal year ended December 31, 2005,
filed
with the SEC on March 21, 2006, and an amendment to Annual Report
on Form
10-K/A filed with the SEC on September 28, 2006;
|
· |
the
proxy statement for Iconix’s 2006 annual meeting of stockholders;
and
|
· |
the
description of Iconix common stock and preferred share purchase
rights
contained in Iconix’s Registration Statements on Form 8-A, filed with the
SEC and all amendments or reports filed by Iconix for the purpose
of
updating those descriptions.
|
Page | ||||
1.
Basic Transaction
|
1
|
|||
1.1
The Merger
|
1
|
|||
1.2
Effective Time
|
1
|
|||
1.3
Merger Consideration
|
1
|
|||
1.4
Option Treatment
|
3
|
|||
1.5
Effect of the Merger
|
3
|
|||
1.6
Certificate of Incorporation; By-Laws
|
4
|
|||
1.7
Directors and Officers of Surviving Corporation
|
4
|
|||
1.8
Cancellation of Certificates; Payment of Merger
Consideration
|
4
|
|||
1.9
Exchange of Company Certificates
|
5
|
|||
1.10
Dissenting Stockholders
|
7
|
|||
2.
Representations and Warranties as to Company
|
7
|
|||
2.1
Organization, Standing and Power
|
7
|
|||
2.2
Capitalization
|
8
|
|||
2.3
Interests in Other Entities
|
8
|
|||
2.4
Authority
|
8
|
|||
2.5
Noncontravention
|
9
|
|||
2.6
Financial Statements
|
9
|
|||
2.7
Absence of Undisclosed Liabilities
|
9
|
|||
2.8
Absence of Changes
|
9
|
|||
2.9
Litigation
|
10
|
|||
2.10
No Violation of Law
|
10
|
|||
2.11
Properties; Assets
|
10
|
|||
2.12
Intangibles
|
10
|
|||
2.13
Systems and Software
|
11
|
|||
2.14
Tax Matters
|
11
|
|||
2.15
Banks; Powers of Attorney
|
13
|
|||
2.16
Employee Arrangements
|
13
|
|||
2.17
ERISA
|
13
|
|||
2.18
Certain Business Matters
|
13
|
|||
2.19
Contracts
|
13
|
|||
2.20
Governmental Approvals/Consents
|
14
|
|||
2.21
Accounts Receivable; Inventory
|
14
|
|||
2.22
Accounts Payable
|
14
|
|||
2.23
Customers and Suppliers; Loss of Business
|
14
|
|||
2.24
Insurance
|
14
|
|||
2.25
Regulatory Compliance; Information Supplied
|
15
|
|||
2.26
Board Approval; Vote Required
|
15
|
|||
2.27
Internal Accounting Controls; Disclosure Controls and
Procedures
|
15
|
|||
2.28
Listing and Maintenance Requirements
|
16
|
|||
2.29
Information as to Company
|
16
|
|||
3.
Representations and Warranties as to Acquisition Co and Acquisition
Sub
|
16
|
|||
3.1
Organization, Standing and Power
|
16
|
|||
3.2
Capitalization
|
16
|
|||
3.3
Interests in Other Entities
|
17
|
|||
3.4
Authority
|
17
|
|||
3.5
Noncontravention
|
17
|
|||
3.6
Financial Statements
|
18
|
|||
3.7
Absence of Undisclosed Liabilities
|
18
|
|||
3.8
Absence of Changes
|
18
|
|||
3.9
Litigation
|
18
|
|||
3.10
No Violation of Law
|
18
|
|||
3.11
Properties; Assets
|
19
|
|||
3.12
Intangibles
|
19
|
Page | ||||
3.13
Tax Matters
|
19
|
|||
3.14
Governmental Approvals/Consents
|
20
|
|||
3.15
ERISA
|
20
|
|||
3.16
Regulatory Compliance; Information Supplied
|
20
|
|||
3.17
Internal Accounting Controls
|
21
|
|||
3.18
Listing and Maintenance Requirements
|
21
|
|||
3.20
Information as to Acquisition Co.
|
21
|
|||
4.
Certain Covenants
|
22
|
|||
4.1
Public Announcements
|
22
|
|||
4.2
Brokers
|
22
|
|||
4.3
Investigation; Confidentiality
|
22
|
|||
4.4
Consummation of Transaction
|
22
|
|||
4.5
Cooperation/Further Assurances
|
22
|
|||
4.6
Accuracy of Representations
|
23
|
|||
4.7
Company Stockholder Approval; Proxy Statement; Acquisition Co.
Registration Statement
|
23
|
|||
4.8
Conduct of Business; Notification of Certain Matters
|
26
|
|||
4.9
No Solicitation of Transactions
|
26
|
|||
4.10
Tax Free Reorganization Treatment
|
27
|
|||
4.11
Record Retention
|
27
|
|||
4.12
Affiliates
|
28
|
|||
4.13
Legal Conditions to Merger
|
28
|
|||
4.14
Class Action Suit
|
28
|
|||
4.15
Parent Voting Restrictions; Lock Up
|
28
|
|||
4.16
Indemnification; Insurance
|
28
|
|||
5.
Conditions of Merger
|
29
|
|||
5.1
Conditions to Obligations of Acquisition Co. and Acquisition
Sub to Effect
the Merger
|
29
|
|||
5.2
Conditions to Obligations of Company and the Parent to Effect
the
Merger
|
30
|
|||
6.
The Closing
|
32
|
|||
6.1
Deliveries by Acquisition Co. and Acquisition Sub at or prior
to the
Closing
|
32
|
|||
6.2
Deliveries by Company and/or the Parent at or prior to the
Closing
|
32
|
|||
6.3
Other Deliveries
|
33
|
|||
7.
Termination, Amendment and Waiver
|
33
|
|||
7.1
Termination
|
33
|
|||
7.2
Effect of Termination
|
34
|
|||
7.3
Fees and Expenses
|
35
|
|||
7.4
Waiver
|
35
|
|||
8.
No Survival of Representations and Warranties
|
35
|
|||
9.
General Provisions
|
35
|
|||
9.1
Notices
|
35
|
|||
9.2
Severability. If
|
36
|
|||
9.3
Entire Agreement
|
36
|
|||
9.4
Amendment
|
36
|
|||
9.5
Schedules
|
36
|
|||
9.6
No Assignment
|
36
|
|||
9.7
Governing Law
|
36
|
|||
9.8
Counterparts
|
36
|
Exhibit
A
|
Certificate
of Merger
|
Exhibit
B
|
Certificate
of Incorporation of the Surviving Corporation
|
Exhibit
C
|
By-Laws
of the Surviving Corporation
|
Exhibit
D
|
Form
of Joint Press Release
|
Exhibit
E
|
Form
of Affiliate Agreement
|
Exhibit
F
|
Form
of Parent and Lewis Lock-Up Agreement
|
Exhibit
G
|
Form
of Opinion of Counsel to Company and Parent
|
Exhibit
H
|
Form
of Services Agreement
|
Exhibit
I
|
Form
of Registration Rights Agreement
|
Exhibit
J
|
Form
of Opinion of Counsel to Acquisition
Co.
|
|
|
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
|
|
|
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
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
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
|
|
|
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.
|
|
|
|
|
|
|
|
|
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:
|
|
|
|
|
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
|
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:
|
|
|
|
|
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.
|
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.
|
|
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
|
|
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
|
|||||
|
|||||||
|
|||||||
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
|
|
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
|
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
|
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
|
2005
|
2004
|
2003
|
||||||||
(in
thousands, except for per share data)
|
||||||||||
Net
earnings as reported
|
$
|
4,701
|
$
|
2,701
|
$
|
4,566
|
||||
Add:
Stock-based employee compensation expense
included
in reported net earnings
|
-
|
-
|
-
|
|||||||
Deduct:
Total stock-based employee compensation
expense
determined under the fair value method
|
(63
|
)
|
(305
|
)
|
(298
|
|||||
Pro
forma net earnings
|
$
|
4,638
|
$
|
2,396
|
$
|
4,268
|
||||
|
||||||||||
Earnings
per share:
|
||||||||||
Basic
- as reported
|
$
|
0.30
|
$
|
0.17
|
$
|
0.29
|
||||
Basic
- pro forma
|
$
|
0.29
|
$
|
0.15
|
$
|
0.27
|
||||
Diluted
- as reported
|
$
|
0.30
|
$
|
0.17
|
$
|
0.29
|
||||
Diluted
- pro forma
|
$
|
0.29
|
$
|
0.15
|
$
|
0.27
|
2005
|
2004
|
2003
|
||||||||
|
(in
thousands, except for per share data)
|
|||||||||
Income
available to common shareholders
-
basic and diluted
|
$
|
4,701
|
$
|
2,701
|
$
|
4,566
|
||||
|
||||||||||
Basic
weighted average common shares
|
15,751
|
15,738
|
15,613
|
|||||||
Incremental
shares related to stock options
|
33
|
21
|
45
|
|||||||
Diluted
weighted average common shares
|
15,784
|
15,759
|
15,658
|
|||||||
|
||||||||||
Net
earnings per share:
|
||||||||||
Basic
earnings per common share
|
$
|
0.30
|
$
|
0.17
|
$
|
0.29
|
||||
Diluted
earnings per common share
|
$
|
0.30
|
$
|
0.17
|
$
|
0.29
|
||||
|
||||||||||
Potential
common shares excluded from diluted
earnings
per share since their effect would be
antidilutive
- stock options
|
342
|
468
|
554
|
$
|
25
|
|||
Property
and equipment
|
20
|
|||
Goodwill
|
212
|
|||
Tradename
|
112
|
|||
Other
assets
|
6
|
|||
Assets
acquired
|
$
|
375
|
|
2005
|
2004
|
2003
|
|||||||
|
(IN
THOUSANDS)
|
|||||||||
Current:
|
||||||||||
Federal
|
$
|
209
|
$
|
40
|
$
|
162
|
||||
State
|
581
|
572
|
604
|
|||||||
|
790
|
612
|
766
|
|||||||
|
||||||||||
Deferred:
|
||||||||||
Federal
|
1,502
|
1,481
|
1,032
|
|||||||
State
|
(44
|
)
|
(310
|
)
|
77
|
|||||
|
1,458
|
1,171
|
1,109
|
|||||||
Total
provision for income taxes
|
$
|
2,248
|
$
|
1,783
|
$
|
1,875
|
2005
|
2004
|
2003
|
||||||||
|
(IN
THOUSANDS)
|
|||||||||
|
||||||||||
Provision
on earnings at federal statutory tax rate
|
$
|
2,380
|
$
|
1,518
|
$
|
2,198
|
||||
State
tax provision, net of federal tax effect
|
705
|
260
|
375
|
|||||||
Decrease
in valuation allowance
|
(862
|
)
|
-
|
-
|
||||||
Other,
including alternative minimum tax
|
25
|
5
|
(698
|
)
|
||||||
Total
provision for income taxes
|
$
|
2,248
|
$
|
1,783
|
$
|
1,875
|
2005
|
2004
|
||||||
|
(IN
THOUSANDS)
|
||||||
|
|||||||
Deferred
income tax assets:
|
|||||||
Net
operating loss carry-forwards
|
$
|
3,947
|
$
|
7,631
|
|||
Related
party accrued salary
|
665
|
-
|
|||||
Foreign
tax credits
|
371
|
314
|
|||||
Alternative
minimum tax credit
|
718
|
521
|
|||||
State
minimum tax credit
|
66
|
20
|
|||||
Other
|
405
|
6
|
|||||
|
|||||||
Total
|
6,172
|
8,492
|
|||||
Less
valuation allowance
|
(245
|
)
|
(555
|
)
|
|||
|
|||||||
Total
net deferred tax asset
|
$
|
5,927
|
$
|
7,937
|
|||
|
|||||||
Current
portion
|
$
|
4,004
|
$
|
1,869
|
|||
Long-term
portion
|
1,923
|
6,068
|
|||||
|
|||||||
Total
net deferred tax asset
|
$
|
5,927
|
$
|
7,937
|
|
2005
|
2004
|
|||||
|
(IN
THOUSANDS)
|
||||||
|
|||||||
Furniture
and fixtures
|
$
|
486
|
$
|
420
|
|||
Leasehold
improvements
|
1,365
|
1,282
|
|||||
Equipment
|
454
|
422
|
|||||
|
|||||||
|
2,305
|
2,124
|
|||||
Accumulated
depreciation and amortization
|
1,412
|
1,007
|
|||||
|
|||||||
|
$
|
893
|
$
|
1,117
|
2005
|
2004
|
2003
|
|||||||||||||||||
Shares
|
Weighted
Average
Price
|
Shares
|
Weighted
Average
Price
|
Shares
|
Weighted
Average
Price
|
||||||||||||||
Outstanding,
beginning of year
|
685,310
|
$
|
5.90
|
625,310
|
$
|
7.23
|
992,075
|
$
|
7.34
|
||||||||||
Granted
|
36,000
|
5.43
|
210,000
|
3.77
|
549,000
|
4.13
|
|||||||||||||
Exercised
|
(90,312
|
)
|
4.60
|
-
|
-
|
(250,400
|
)
|
3.40
|
|||||||||||
Canceled/forfeited
|
(81,667
|
)
|
4.15
|
(150,000
|
)
|
8.43
|
(665,365
|
)
|
6.06
|
||||||||||
Outstanding,
end of year
|
549,331
|
6.41
|
685,310
|
5.90
|
625,310
|
7.23
|
|||||||||||||
Options
exercisable, end of year
|
423,331
|
475,310
|
281,000
|
||||||||||||||||
|
|||||||||||||||||||
Weighted
average fair value of
options
granted during the year
|
$
|
3.88
|
$
|
1.80
|
$
|
2.18
|
|||||||||||||
Options
Outstanding
|
Options
Exercisable
|
|||||||||||||||
Range
of
Exercise
Prices
|
Number
Outstanding
at
12/31/2005
|
Weighted
Average
Remaining
Contractual
Life
|
Weighted
Average
Exercise
Price
|
Number
Exercisable
at
12/31/2005
|
Weighted
Average
Exercise
Price
|
|||||||||||
$0.88
- $1.88
|
36,000
|
4.32
|
$
|
1.71
|
36,000
|
$
|
1.71
|
|||||||||
$2.50
- $3.50
|
60,000
|
7.69
|
3.24
|
36,667
|
3.14
|
|||||||||||
$3.80
- $5.43
|
313,021
|
6.84
|
4.63
|
210,354
|
4.75
|
|||||||||||
$6.42
- $9.61
|
100,000
|
5.55
|
8.35
|
100,000
|
8.35
|
|||||||||||
$10.63
- $25.38
|
40,310
|
0.64
|
23.43
|
40,310
|
23.43
|
|||||||||||
|
||||||||||||||||
|
549,331
|
6.08
|
6.34
|
423,331
|
6.98
|
Year
ended December 31, 2005
|
Mossimo
|
Modern
|
Total
|
|||||||
Revenues
|
$
|
24,298
|
$
|
6,730
|
$
|
31,028
|
||||
Gross
Profit
|
-
|
2,737
|
2,737
|
|||||||
Depreciation
and Amortization
|
186
|
241
|
427
|
|||||||
Selling,
general and administrative expenses
|
16,315
|
3,979
|
20,294
|
|||||||
Goodwill
impairment loss
|
-
|
212
|
212
|
|||||||
Operating
Income (loss)
|
7,983
|
(1,454
|
)
|
6,529
|
||||||
Interest
Income
|
420
|
-
|
420
|
|||||||
Total
Assets
|
29,280
|
2,954
|
32,234
|
Year
ended December 31, 2004
|
Mossimo
|
Modern
|
Total
|
|||||||
Revenues
|
$
|
18,714
|
$
|
1,821
|
$
|
20,535
|
||||
Gross
Profit
|
-
|
580
|
580
|
|||||||
Depreciation
and Amortization
|
229
|
100
|
329
|
|||||||
Selling,
general and administrative expenses
|
12,041
|
2,802
|
14,843
|
|||||||
Operating
Income (loss)
|
6,601
|
(2,221
|
)
|
4,380
|
||||||
Interest
Income
|
104
|
-
|
104
|
|||||||
Total
Assets
|
20,753
|
2,720
|
23,473
|
· |
The
following information should be considered when reading the above
table
(in thousands):
|
· |
The
Company has no inter-segment revenue or
expense.
|
· |
Corporate
overhead has been allocated to the Mossimo
segment.
|
· |
The
provision for income tax is not allocated to business
segments.
|
· |
All
long-lived assets were geographically located in the United
States.
|
· |
Revenue
from countries other than the United States did not account for
10% or
more of total revenue.
|
· |
During
2003, the Company operated only the Mossimo
segment.
|
· |
Gross
profit is derived by reducing sales of the Modern segment of $6,730
by
$3,993 of cost of sales to arrive at a gross profit of approximately
$2,737 for 2005. For 2004, sales of the Modern segment were $1,821
reduced
by cost of sales of $1,241 to arrive at a gross profit of approximately
$580.
|
· |
Operating
expenses that have a direct correlation to each segment have been
recorded
in each respective segment.
|
BALANCE
AT
BEGINNING
PERIOD
|
ADDITIONS
CHARGED
TO
COSTS
AND
EXPENSES
|
DEDUCTIONS
|
BALANCE
AT
END OF
PERIOD
|
||||||||||
(IN
THOUSANDS)
|
|||||||||||||
Year
ended December 31, 2002 - Note (a):
|
|||||||||||||
Allowance
for doubtful accounts
|
$
|
207
|
$
|
-
|
$
|
(207
|
)
|
$
|
-
|
||||
Allowance
for sales returns and markdowns
|
6,229
|
-
|
(6,229
|
)
|
-
|
BALANCE
AT
BEGINNING
PERIOD
|
ADDITIONS
CHARGED
TO
COSTS
AND
EXPENSES
|
DEDUCTIONS
|
BALANCE
AT
END OF
PERIOD
|
||||||||||
(IN
THOUSANDS)
|
|||||||||||||
Year
ended December 31, 2004:
|
|||||||||||||
Allowance
for doubtful accounts
|
$
|
-
|
$
|
22
|
$
|
-
|
$
|
22
|
|||||
|
|||||||||||||
Year
ended December 31, 2005:
|
|||||||||||||
Allowance
for sales returns and markdowns
|
$
|
22
|
$
|
88
|
$
|
-
|
$
|
110
|
YEAR
ENDED DECEMBER 31, 2005
|
||||||||||||||||
FIRST
QUARTER
|
SECOND
QUARTER
|
THIRD
QUARTER
|
FOURTH
QUARTER
|
YEAR
|
||||||||||||
(IN
THOUSANDS, EXCEPT PER SHARE DATA)
|
||||||||||||||||
INCOME
STATEMENT DATA:
|
||||||||||||||||
Total
revenues
|
$ |
8,664
|
$ |
9,045
|
$ |
6,771
|
$ |
6,548
|
$ |
31,028
|
||||||
Earnings
before income taxes (a)
|
3,081
|
3,076
|
755
|
37
|
6,949
|
|||||||||||
|
||||||||||||||||
Provision
for income taxes
|
1,260
|
848
|
118
|
22
|
2,248
|
|||||||||||
|
||||||||||||||||
Net
earnings
|
1,821
|
2,228
|
637
|
15
|
4,701
|
|||||||||||
|
||||||||||||||||
Net
earnings per share:
|
||||||||||||||||
Basic
|
$ |
0.12
|
$
|
0.14
|
$
|
0.04
|
$
|
0.00
|
$
|
0.30
|
||||||
Diluted
|
0.12
|
0.14
|
0.04
|
0.00
|
0.30
|
YEAR
ENDED DECEMBER 31, 2004
|
||||||||||||||||
FIRST
QUARTER
|
SECOND
QUARTER
|
THIRD
QUARTER
|
FOURTH
QUARTER
|
YEAR
|
||||||||||||
(IN
THOUSANDS, EXCEPT PER SHARE DATA)
|
||||||||||||||||
INCOME
STATEMENT DATA:
|
||||||||||||||||
Total
revenues
|
$
|
6,236
|
$
|
6,208
|
$
|
4,934
|
$
|
3,157
|
$
|
20,535
|
||||||
|
||||||||||||||||
Earnings
loss before income taxes (b)
|
2,037
|
1,687
|
(175
|
)
|
935
|
4,484
|
||||||||||
|
||||||||||||||||
Provision
(benefit) for income taxes
|
847
|
680
|
(50
|
)
|
306
|
1,783
|
||||||||||
|
||||||||||||||||
Net
earnings (loss)
|
1,190
|
1,007
|
(125
|
)
|
629
|
2,701
|
||||||||||
|
||||||||||||||||
Net
earnings (loss) per share:
|
||||||||||||||||
Basic
|
$
|
0.08
|
$
|
0.06
|
$
|
(0.01
|
)
|
$
|
0.04
|
$
|
0.17
|
|||||
Diluted
|
0.08
|
0.06
|
(0.01
|
)
|
0.04
|
0.17
|
|
June
30,
2006
|
December
31, 2005
|
|||||
ASSETS
|
|||||||
CURRENT
ASSETS:
|
|||||||
Cash
and cash equivalents
|
$
|
21,490
|
$
|
19,658
|
|||
Restricted
cash
|
843
|
726
|
|||||
Investments
|
-
|
-
|
|||||
Accounts
receivable, net
|
6,042
|
4,372
|
|||||
Merchandise
inventory
|
263
|
101
|
|||||
Deferred
income taxes
|
3,702
|
4,004
|
|||||
Prepaid
expenses and other current assets
|
426
|
388
|
|||||
Total
current assets
|
32,766
|
29,249
|
|||||
|
|||||||
PROPERTY
AND EQUIPMENT, at cost, net of accumulated
depreciation
and amortization
|
808
|
893
|
|||||
|
|||||||
DEFERRED
INCOME TAXES
|
1,581
|
1,923
|
|||||
|
|||||||
GOODWILL
|
-
|
-
|
|||||
|
|||||||
TRADENAME
|
84
|
90
|
|||||
|
|||||||
OTHER
ASSETS
|
60
|
79
|
|||||
|
$
|
35,299
|
$
|
32,234
|
|||
|
|||||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
|
|||||||
CURRENT
LIABILITIES:
|
|||||||
Accounts
payable
|
$
|
887
|
$
|
884
|
|||
Accrued
liabilities
|
1,102
|
503
|
|||||
Accrued
commissions
|
1,542
|
388
|
|||||
Accrued
bonuses
|
2,144
|
3,458
|
|||||
Total
current liabilities
|
5,675
|
5,233
|
|||||
|
|||||||
DEFERRED
RENT
|
117
|
128
|
|||||
Total
liabilities
|
5,792
|
5,361
|
|||||
|
|||||||
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 16,002,775 at June 30, 2006 and
15,828,754
at December 31, 2005
|
15
|
15
|
|||||
Additional
paid-in capital
|
41,316
|
40,222
|
|||||
Accumulated
deficit
|
(11,824
|
)
|
(13,364
|
)
|
|||
Net
stockholders’ equity
|
29,507
|
26,873
|
|||||
|
$
|
35,299
|
$
|
32,234
|
For
the Three
Months
Ended
June
30,
|
For
the Six
Months
Ended
June
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Revenue
from license royalties and design service fees
|
$
|
9,020
|
$
|
8,113
|
$
|
11,581
|
$
|
15,467
|
|||||
Product
sales
|
1,278
|
932
|
3,655
|
2,242
|
|||||||||
Total
revenues
|
10,298
|
9,045
|
15,236
|
17,709
|
|||||||||
Operating
expenses:
|
|||||||||||||
Cost
of product sales
|
545
|
695
|
1,842
|
1,734
|
|||||||||
Selling,
general and administrative
|
5,438
|
5,353
|
11,215
|
9,928
|
|||||||||
Total
operating expenses
|
5,983
|
6,048
|
13,057
|
11,662
|
|||||||||
Operating
earnings
|
4,315
|
2,997
|
2,179
|
6,047
|
|||||||||
Interest
income
|
222
|
79
|
416
|
110
|
|||||||||
Earnings
before income taxes
|
4,537
|
3,076
|
2,595
|
6,157
|
|||||||||
Income
taxes
|
1,823
|
848
|
1,055
|
2,108
|
|||||||||
Net
earnings
|
$
|
2,714
|
$
|
2,228
|
$
|
1,540
|
$
|
4,049
|
|||||
Net
earnings per common share:
|
|||||||||||||
Basis
|
$
|
0.17
|
$
|
0.14
|
$
|
0.10
|
$
|
0.26
|
|||||
Diluted
|
$
|
0.17
|
$
|
0.14
|
$
|
0.10
|
$
|
0.26
|
|||||
Weighted
average common share outstanding:
|
|||||||||||||
Basic
|
15,996
|
15,738
|
15,943
|
15,738
|
|||||||||
Diluted
|
16,061
|
15,768
|
15,997
|
15,762
|
For
the Six Months
Ended
June 30,
|
|||||||
2006
|
2005
|
||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|||||||
Net
earnings
|
$
|
1,540
|
$
|
4,049
|
|||
Adjustments
to reconcile net earnings to net cash
provided
by operating activities:
|
|||||||
Depreciation
and amortization
|
159
|
252
|
|||||
Inventory
write-down
|
86
|
189
|
|||||
Deferred
rent
|
(11
|
)
|
2
|
||||
Provision
for bad debt
|
208
|
48
|
|||||
Deferred
income taxes
|
644
|
1,865
|
|||||
Excess
tax benefit from stock-based compensation
|
(141
|
)
|
-
|
||||
Stock-based
compensation
|
96
|
-
|
|||||
Changes
in:
|
|||||||
Accounts
receivable
|
(1,878
|
)
|
(3,588
|
)
|
|||
Merchandise
inventory
|
(248
|
)
|
(435
|
)
|
|||
Prepaid
expenses and other current assets
|
(38
|
)
|
61
|
||||
Other
assets
|
19
|
44
|
|||||
Accounts
payable
|
3
|
761
|
|||||
Accrued
liabilities
|
740
|
50
|
|||||
Accrued
commissions
|
1,154
|
520
|
|||||
Accrued
bonuses
|
(1,314
|
)
|
1,574
|
||||
Net
cash provided by operating activities
|
1,019
|
5,392
|
|||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|||||||
Proceeds
from sale of available-for-sale securities
|
-
|
4,800
|
|||||
Payments
for acquisition of property and equipment
|
(68
|
)
|
(103
|
)
|
|||
Net
cash provided (used in) investing activities
|
(68
|
)
|
4,697
|
||||
|
|||||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||
Restricted
cash - certificates of deposit
|
(117
|
)
|
(304
|
)
|
|||
Excess
tax benefit from stock-based compensation
|
141
|
-
|
|||||
Proceeds
from issuance of common stock
|
857
|
-
|
|||||
Net
cash provided by (used in) financing activities
|
881
|
(304
|
)
|
||||
|
|||||||
NET
INCREASE IN CASH AND CASH EQUIVALENTS
|
1,832
|
9,785
|
|||||
CASH
AND CASH EQUIVALENTS, beginning of year
|
19,658
|
4,903
|
|||||
CASH
AND CASH EQUIVALENTS, end of year
|
$
|
21,490
|
$
|
14,688
|
|||
|
|||||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|||||||
Cash
paid during the year for state income taxes
|
$
|
-
|
$
|
25
|
For
the Three Months Ended
June
30,
|
For
the Six
Months
Ended
June
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Net
earnings (loss)
|
$
|
2,714
|
$
|
2,228
|
$
|
1,540
|
$
|
4,049
|
|||||
Weighted
average number of common shares:
|
|||||||||||||
Basic
|
15,996
|
15,738
|
15,943
|
15,738
|
|||||||||
Effect
of dilutive securities - stock options
|
64
|
30
|
54
|
24
|
|||||||||
Diluted
|
16,061
|
15,768
|
15,997
|
15,762
|
|||||||||
Earnings
(loss) per share:
|
|||||||||||||
Basic
|
$
|
0.17
|
$
|
0.14
|
$
|
0.10
|
$
|
0.26
|
|||||
Effect
of dilutive securities - stock options
|
-
|
-
|
-
|
-
|
|||||||||
Diluted
|
$
|
0.17
|
$
|
0.14
|
$
|
0.10
|
$
|
0.26
|
|||||
Excluded
securities - antidilutive
|
97
|
394
|
100
|
394
|
Shares
|
Weighted
Average
Price
|
Weighted
Average
Remaining
Contractual
Term
(in
years)
|
Aggregate
Intrinsic
Value
|
||||||||||
|
|||||||||||||
Outstanding,
at December 31, 2005
|
554,331
|
6.34
|
|||||||||||
Granted
|
-
|
-
|
|||||||||||
Exercised
|
(174,021
|
)
|
4.93
|
||||||||||
Forfeited
|
(25,000
|
)
|
10.40
|
||||||||||
|
|||||||||||||
Outstanding,
at June 30, 2006
|
355,310
|
6.72
|
5.18
|
$
|
1,048,460
|
||||||||
|
|||||||||||||
Options
exercisable at June 30, 2006
|
255,977
|
7.64
|
5.08
|
$
|
688,875
|
For
the Three Months Ended
June
30,
|
For
the Six Months Ended
June
30,
|
||||||||||||
|
2006
|
2005
|
2006
|
2005
|
|||||||||
Stock-based
compensation expense included in operating expenses
|
$
|
48
|
$
|
-
|
$
|
96
|
$
|
-
|
|||||
|
|||||||||||||
Tax
benefit
|
(19
|
)
|
-
|
(38
|
)
|
-
|
|||||||
|
|||||||||||||
Stock-based
compensation expense related to employee stock options, net of
tax
|
$
|
29
|
$
|
-
|
$
|
58
|
$
|
-
|
Three
months
June
30,
2006
|
Six
months
June
30,
2006
|
||||||
Net
earnings as reported
|
$
|
2,228
|
$
|
4,049
|
|||
|
|||||||
Deduct:
|
|||||||
Total
stock-based employee compensation expense determined under fair
market value based method for all awards, net of related tax effects
|
(16
|
)
|
(32
|
)
|
|||
Pro
forma net earnings
|
$
|
2,212
|
$
|
4,017
|
|||
|
|||||||
Earnings
per share - basic and diluted
|
|||||||
As
reported - basic
|
$
|
0.14
|
$
|
0.26
|
|||
As
reported - diluted
|
$
|
0.14
|
$
|
0.26
|
|||
|
|||||||
Pro
forma - basic
|
$
|
0.14
|
$
|
0.26
|
|||
Pro
forma - diluted
|
$
|
0.14
|
$
|
0.26
|
Quarter
ended June 30, 2006
|
Mossimo
|
Modern
|
Total
|
|||||||
|
||||||||||
Revenues
|
$
|
9,020
|
$
|
1,278
|
$
|
10,298
|
||||
Gross
Profit
|
-
|
733
|
733
|
|||||||
Depreciation
and Amortization
|
26
|
54
|
80
|
|||||||
Selling,
general and administrative expenses
|
4,606
|
832
|
5,438
|
|||||||
Operating
Income (loss)
|
4,414
|
(99
|
)
|
4,315
|
||||||
Interest
Income
|
220
|
2
|
222
|
|||||||
Total
Assets
|
30,720
|
4,579
|
35,299
|
|||||||
Capital
Expenditures
|
18
|
-
|
18
|
|||||||
|
||||||||||
Quarter
ended June 30, 2005
|
Mossimo
|
Modern
|
Total
|
|||||||
|
||||||||||
Revenues
|
$
|
8,113
|
$
|
932
|
$
|
9,045
|
||||
Gross
Profit
|
-
|
237
|
237
|
|||||||
Depreciation
and Amortization
|
59
|
50
|
109
|
|||||||
Selling,
general and administrative expenses
|
4,419
|
934
|
5,353
|
|||||||
Operating
Income (loss)
|
3,694
|
(697
|
)
|
2,997
|
||||||
Interest
Income
|
79
|
-
|
79
|
|||||||
Total
Assets
|
26,979
|
2,898
|
29,877
|
|||||||
Capital
Expenditures
|
21
|
29
|
50
|
|||||||
Six
Months ended June 30, 2006
|
Mossimo
|
Modern
|
Total
|
|||||||
|
||||||||||
Revenues
|
$
|
11,581
|
$
|
3,655
|
$
|
15,236
|
||||
Gross
Profit
|
-
|
1,813
|
1,813
|
|||||||
Depreciation
and Amortization
|
51
|
108
|
159
|
|||||||
Selling,
general and administrative expenses
|
9,277
|
1,938
|
11,215
|
|||||||
Operating
Income (loss)
|
2,304
|
(125
|
)
|
2,179
|
||||||
Interest
Income
|
413
|
3
|
416
|
|||||||
Total
Assets
|
30,720
|
4,579
|
35,299
|
|||||||
Capital
Expenditures
|
31
|
37
|
68
|
|||||||
|
||||||||||
Six
Months ended June 30, 2005
|
Mossimo
|
Modern
|
Total
|
|||||||
|
||||||||||
Revenues
|
$
|
15,467
|
$
|
2,242
|
$
|
17,709
|
||||
Gross
Profit
|
-
|
508
|
508
|
|||||||
Depreciation
and Amortization
|
120
|
132
|
252
|
|||||||
Selling,
general and administrative expenses
|
8,036
|
1,892
|
9,928
|
|||||||
Operating
Income (loss)
|
7,430
|
(1,383
|
)
|
6,047
|
||||||
Interest
Income
|
110
|
-
|
110
|
|||||||
Total
Assets
|
26,979
|
2,898
|
29,877
|
|||||||
Capital
Expenditures
|
28
|
75
|
103
|
· |
Mossimo
has no inter-segment revenue or expense.
|
· |
Corporate
overhead has been allocated to the Mossimo segment.
|
· |
The
provision for income tax is not allocated to business
segments.
|
· |
All
long-lived assets were geographically located in the United
States.
|
· |
Revenue
from countries other than the United States did not account for
10% or
more of total revenue.
|
· |
Gross
profit is derived by reducing sales of the Modern segment of $1.28
million
by $545,000 of the cost of sales for the three months ended June
30, 2006
to arrive at a gross profit of approximately $733,000, compared
to sales
of $932,000 reduced by cost of sales of $695,000 to arrive at a
gross
profit of $237,000 for the three months ended June 30, 2005. For
the six
months ended June 30, 2006, sales of the Modern segment were $3.65
million
reduced by cost of sales of $1.84 million to arrive at a gross
profit of
approximately $1.81 million, compared to sales of $2.24 million
reduced by
cost of sales of $1.73 million to arrive at a gross profit margin
of
$508,000 for the six months ended June 30,
2005.
|
· |
Operating
expenses that have a direct correlation to each segment have been
recorded
in each respective segment.
|
STATEMENT
OF ASSETS SOLD (UNAUDITED)
|
2
|
|||
STATEMENTS
OF REVENUES AND DIRECT OPERATING EXPENSES OF ASSETS SOLD
(UNAUDITED)
|
3
|
|||
SELECTED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
|
4
|
|
2006
|
2005
|
|||||
|
|||||||
Trademarks
|
$
|
65,621,000
|
$
|
65,621,000
|
|||
Total
Assets
Sold
|
$
|
65,621,000
|
$
|
65,621,000
|
|
Three
Months
|
Three
Months
|
|||||
|
Ended
|
Ended
|
|||||
|
March
31, 2006
|
March
31, 2005
|
|||||
|
|||||||
Royalty
income
|
$
|
2,337,695
|
2,583,356
|
||||
Advertising
income
|
268,851
|
388,138
|
|||||
Total Revenue
|
2,606,546
|
2,971,494
|
|||||
|
|||||||
Direct
Operating Expenses
|
|||||||
Licensing agent fees
|
350,654
|
370,448
|
|||||
Advertising and promotion expenses
|
423,951
|
323,157
|
|||||
Legal fees
|
176,445
|
194,022
|
|||||
Accounting fees - external
|
5,000
|
5,000
|
|||||
Accounting salaries and related benefits
|
1,806
|
1,806
|
|||||
Termination of licensing agent fee agreement
|
2,149,346
|
—
|
|||||
Total
Direct Operating Expenses
|
3,107,202
|
894,433
|
|||||
(Deficiency)
Excess of revenues over direct operating expenses
|
$
|
(500,656
|
)
|
$
|
2,077,061
|