-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K35Q57qHMGp26IKIu2+LzhVVNRHvgCQiO9IG/8ZvTL5OmvIIIc9LfcohzmmNraBH mPru3GGQNeqXF5Yp5+QhGg== 0000944209-97-001635.txt : 19971125 0000944209-97-001635.hdr.sgml : 19971125 ACCESSION NUMBER: 0000944209-97-001635 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19971107 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19971124 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHEROKEE INC CENTRAL INDEX KEY: 0000844161 STANDARD INDUSTRIAL CLASSIFICATION: WOMEN'S, MISSES', AND JUNIORS OUTERWEAR [2330] IRS NUMBER: 954182437 STATE OF INCORPORATION: DE FISCAL YEAR END: 0528 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 033-26165 FILM NUMBER: 97727216 BUSINESS ADDRESS: STREET 1: 6835 VALJEAN AVE CITY: VAN NUYS STATE: CA ZIP: 91406-4713 BUSINESS PHONE: 8189511002 MAIL ADDRESS: STREET 1: 6835 VALJEAN AVE CITY: VAN NUYS STATE: CA ZIP: 91406-4713 FORMER COMPANY: FORMER CONFORMED NAME: GREEN ACQUISITION CO DATE OF NAME CHANGE: 19900814 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) November 7, 1997 CHEROKEE, INC. (Exact name of registrant as specified in its charter) DELAWARE File No.0-18640 95-4182437 (State or other jurisdiction (Commission File Number) (I.R.S. Employer of incorporation or organization) Identification Number)
6835 VALJEAN AVENUE VAN NUYS, CALIFORNIA 91406 (Address of executive offices) (818) 908-9868 ext. 309 (Registrant's telephone number) ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS On November 7, 1997, Cherokee Inc., a Delaware corporation ("Cherokee" or the "Company"), entered into an Agreement of Purchase and Sale of Trademarks and Licenses (the "Sideout Agreement") with Sideout Sport, Inc., a California corporation ("Sideout"), pursuant to which Cherokee agreed to purchase all of Sideout's trademarks, copyright, trade secrets and license agreements with respect thereto (the "Assets"). Pursuant to the Sideout Agreement, Cherokee agreed to pay Sideout $1.5 million at the closing of the acquisition and $500,000 upon release of certain liens on the Assets. Thereafter, Cherokee will, on a quarterly basis, pay Sideout 40% of the first $10.0 million of gross revenues (royalties and license fees received by Cherokee through licensing of the Sideout trademark), 10% of the next $5.0 million of gross revenues and 5% of the next $20.0 million of gross revenues. The royalty payments are subject to adjustment in certain circumstances. After October 22, 2004, Cherokee will have no further obligation to pay royalties. Cherokee will finance the initial acquisition purchase price with cash on hand. Thereafter, it will pay the royalty payments out of the licensing revenues that it receives. ITEM 5. OTHER EVENTS On November 12, 1997, Cherokee entered into a new licensing agreement with Dayton Hudson Corporation (the "Licensee"), the owner of Target Stores (the "Amended Target Agreement"). The Amended Target Agreement has an initial term commencing on February 1, 1998 and ending on January 31, 2004, with automatic annual extensions thereafter unless terminated by the Licensee. The Amended Target Agreement covers a broad range of categories of merchandise, including women's, men's and children's apparel and footwear, women's intimate apparel, fashion accessories, home textiles, cosmetics and others (the "Merchandise"). Under the terms of the Amended Target Agreement, the Licensee will pay Cherokee a royalty each fiscal year equal to the greater of (i) the Minimum Guaranteed Royalty (as defined below) for such year or (ii) 2% of the Licensee's net sales of Merchandise during such fiscal year up to $300.0 million, 1 1/2% of net sales greater than $300.0 million and up to $700.0 million, .8% of net sales greater than $700 million and up to $1.0 billion and .7% of net sales greater than $1.0 billion. The "Minimum Guaranteed Royalty" is $9.0 million for each of the two fiscal years ending January 29, 1999 and 2000 and $10.5 million for each of the four fiscal years ending January 31, 2001 through 2004. ITEM 7. EXHIBITS 2.1 Agreement of Purchase and Sale of Trademarks and Licenses, dated as of November 7 1997, by and between Cherokee and Sideout. 10.1 License Agreement, dated as of November 12, 1997, by and between Cherokee and Licensee 99.1 Press Release dated November 10, 1997 99.2 Press Release dated November 13, 1997 2 SIGNATURES Pursuant to the requirements of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CHEROKEE INC. By: /s/ Carol Gratzke --------------------- Carol Gratzke Chief Financial Officer Date: November 21, 1997 3 EXHIBIT INDEX Exhibit No. DESCRIPTION ----------- 2.1 Agreement of Purchase and Sale of Trademarks and Licenses, dated as of November 7, 1997, by and between Cherokee and Sideout. 10.1 License Agreement, dated as of November 12, 1997, by and between CHEROKEE and Licensee 99.1 Press Release dated November 10, 1997 99.2 Press Release dated November 13, 1997 EX-2.1 2 AGMT OF PURCHASE AND SALE OF TRADEMARKS & LICENSES EXHIBIT 2.1 AGREEMENT OF PURCHASE AND SALE OF TRADEMARKS AND LICENSES THIS AGREEMENT is made and entered into as of the 7/th/ day of November, ----- 1997 by and between Cherokee, Inc., a Delaware corporation, having its principal office at 6835 Valjean Avenue, Van Nuys, California 91406 ("Buyer") and Sideout Sport, Inc., a California corporation, having its principal office at 1551 S. Primrose Avenue, Monrovia, California 91016 ("Seller"). WHEREAS, Buyer desires to purchase from Seller and Seller desires to sell and/or assign to Buyer, on the terms and subject to the conditions of this Agreement, Seller's trademarks, copyrights, trade secrets, and license agreements with respect thereto. NOW, THEREFORE, in consideration of the mutual covenants, agreements, representations, and warranties contained in this Agreement, the parties agree as follows: 1. Definitions. The following terms shall have the following meanings for ----------- purposes of this Agreement: 1.1 Trademarks. "Trademarks" shall mean those trademarks of Seller that are identified on Exhibit A to this Agreement, together with the goodwill represented by said trademarks, and all registrations and applications for registration of said trademarks, and the right to sue for past infringements of said trademarks. 1.2 Copyrights. "Copyrights" shall mean all copyrighted works of Seller and all registrations and applications for registration of said copyrighted works, and the right to sue for past infringements of said copyrighted works. 1.3 Trade Secrets. "Trade Secrets" shall mean Seller's trade secrets and confidential information relating to the Trademarks and the manufacture, distribution and marketing of goods bearing the Trademarks, including without limitation, customer lists, vendor lists, product designs, and manufacturing and production techniques, together with the right to sue for past infringements of said trade secrets. 1.4 License Agreements. "License Agreements" shall mean all agreements to which Seller is a party with respect to the Trademarks, Copyrights and/or Trade Secrets. The License Agreements are identified on Exhibit B to this Agreement. 1.5 Assets. "Assets" shall mean the Trademarks, Copyrights, Trade Secrets and License Agreements. 1.6 Closing. "Closing" shall mean the single closing of the transactions contemplated by this Agreement at the offices of Buyer in Van Nuys, California, which shall take place on November 7/th/ 1997. ----- 1.7 Gross Revenues. "Gross Revenues" shall mean all royalties and license fees received by Buyer pursuant to the License Agreements and any future license agreements entered into by Buyer wherein the Trademarks are licensed to a third party. 1.8 Liens. "Liens" shall mean any mortgage, pledge, option, escrow, hypothecation, lien, security interest, financing statement, lease, charge, encumbrance, conditional sale or other title retention or security agreement or any other similar restriction, claim or right of others, whether arising by contract, operation of law or otherwise. 1.9 Maintenance Fees. "Maintenance Fees" shall mean all amounts actually expended by Buyer for maintenance and preservation of rights to the Trademarks during the calendar quarter to which a Quarterly Royalty payment applies, inc1uding, without limitation, taxes, government fees, reasonable attorneys' fees, litigation costs and expenses, and related amounts incurred in connection with the preservation of the Trademarks, fees and costs associated with prosecution of pending applications for registration of Trademarks as identified in Exhibit A, and fees and costs associated with continuing prosecution or defense of any litigation, actions, oppositions, cancellations and similar proceedings involving any of the Assets pending as of the Closing. 1.10 Purchase Price. "Purchase Price" shall mean the consideration to be paid by Buyer to Seller for the Assets pursuant to Section 3 of this Agreement. 1.11 Quarterly Royalties. "Quarterly Royalties" shall mean royalties payable by Buyer to Seller based on Buyer's receipt of Gross Revenues each calendar quarter (i.e., the three month period ending March 31, June 30, September 30 and December 31), pursuant to Section 3.3 hereof. 2. Purchase and Sale of Assets. Subject to the terms and conditions set forth --------------------------- in this Agreement, in consideration for the Purchase price, Seller agrees to sell, convey, transfer, assign, and deliver to Buyer, and Buyer agrees to purchase from Seller, the Assets at the Closing free of any Liens except those Liens identified in Exhibit C. 3. Purchase Price. In consideration for the sale of the Assets, Buyer shall -------------- pay the following (the "Purchase Price") to Seller: 3.1 Cash at Closing. Buyer shall deliver to Seller a bank check --------------- in the amount of One Million Five Hundred Thousand Dollars ($1,500,000). The sale shall be deemed complete upon the delivery of said sum, and the post closing recordation of any assignment documents shall not affect the sale. 3.2 Cash upon Satisfaction of Liens. Seller shall be obligated ------------------------------- to immediately obtain releases of any Liens. Seller shall deliver to Buyer proof that all Liens have been released or are otherwise satisfied, satisfactory to Buyer in its sole and absolute discretion. Upon receipt of such proof, Buyer shall deliver to Seller a bank check in the amount of Five Hundred Thousand Dollars ($500,000). 3.3 Quarterly Royalties. Not more than thirty (30) days after ------------------- the end of each calendar quarter, Buyer shall pay to Seller Quarterly Royalties based upon Gross Revenues from and after the date of the Closing until October 22, 2004, as follows: 3.3.1 Forty percent (40%) of the first Ten Million Dollars ($10,000,000) of Gross Revenues; 3.3.2 Ten percent (10%) of the next Five Million Dollars ($5,000,000) of Gross Revenues; 3.3.3 Five percent (5%) of the next Twenty Million Dollars ($20,000,000) of Gross Revenues. Buyer shall have no obligation to pay to Seller any moneys, including without limitation Quarterly Royalties, for any Gross Revenues received by Buyer after October 22, 2004, with the exception of royalties earned for the period preceding October 22, 2004, irrespective of when paid. 3.4 Payment of Quarterly Royalties. ------------------------------ 3.4.1 Payment. Buyer shall pay Quarterly Royalties to ------- Seller on or before the thirtieth (3Oth) day following the end of each calendar quarter, commencing with the calendar quarter ending December 31, 1997. 3.4.2 Offset for Maintenance Fees. Buyer may set off --------------------------- reasonable Maintenance Fees from payments of Quarterly Royalties. In the event of any lawsuit brought against Buyer by any third party involving any of the Assets or Buyer's use of any of the Assets, Buyer may place into an escrow account to be held by an escrow mutually acceptable to Buyer and Se1ler all or such portion of Quarterly Royalties thereafter payable as Buyer shall reasonably believe to be necessary to pay the costs of defense of, and to serve as a reserve against reasonably anticipated awards of damages (including without limitation reasonable attorney's fees and costs) or profits in, such lawsuit. 3.4.2.1 Litigation Fees. This Section 3.4.2.1 shall only apply if --------------- ---- Buyer brings an action against a third party for infringement of any of the Trademarks, and such third party brings a counterclaim or cross complaint against Buyer claiming that any of the Trademarks are invalid. In such case, the costs of defending against such counterclaim or cross complaint shall be considered to be Maintenance Fees only if (i) Buyer's institution of the action against the third party was commercially reasonable to protect Buyer's business and/or legal interests at the time the action was instituted and (ii) Buyer shall have given written notice to Seller of the institution thereof not later than ten (10) days after the institution of such litigation involving the Trademarks. Seller shall have thirty (30) days from receipt of such notice in which to notify Seller that the institution of the action was not commercially reasonable to protect Buyer's business and/or legal interests; Seller's failure to give notice during such thirty (30) days shall constitute Seller's agreement that the institution of the action was commercially reasonable to protect Buyer's business and/or legal interests. In the event that the Seller contends that Buyer's institution of the action was not commercially reasonable to protect Buyer's business and/or legal interests, Buyer and Seller shall meet within thirty (30) days following Buyer's receipt of Seller's notice and attempt to agree whether the institution of the action was commercially reasonable to protect Buyer's business and/or legal interests or not. If Buyer and Seller are unable to agree within ten (10) days of such meeting, each of Buyer and Seller shall within twenty (20) days following the date of their meeting select a judge affiliated with Judicial Arbitration & Mediation Services, Inc. or successor thereto ("JAMS")each of whom shall be a retired judge of the U.S. District Court or California Superior Court and the two JAMS judges so selected shall within ten (10) days of their selection select a third JAMS judge (formerly of the U.S. District or California Superior Court) who shall decide if the institution of the action was commercially reasonable to protect Buyer's business, and/or legal interests. Such third JAMS judge's shall, within thirty (30) days of selection, hold one hearing in Los Angeles, California, of not more than eight (8) hours total, at which hearing each of Buyer and Seller shall present evidence and arguments to convince such JAMS judge as to whether Buyer's institution of the action was commercially reasonable to protect Buyer's business and/or legal interest or not. The Third JAMS judge shall render a written decision within seven (7) days following the date of such hearing as to whether Buyer's institution of the action was or was not commercially reasonable to protect Buyer's business and/or legal interests. Such decision shall be considered final and non-appealable. Each party shall pay for its own fees and costs and the costs of the retired JAMS judge selected by such party. The party against whom the third retired JAMS judge rules shall pay the third retired JAMS judge's costs. In the event that JAMS is not in existence at the time a dispute arises under this Section 3.4.21, the parties shall attempt to agree upon a retired judge of the U.S. District Court or California Superior Court to decide if the institution of the action was commercially reasonable to protect Buyer's business and/or legal interests, and if the parties cannot agree. the parties shall request referrals to arbitration or mediation services from the Los Angeles County Bar Association, and shall appoint the first listed service in place of JAMS in this Section 3.4.2.1. 3.4.2.2 Recovery of Litigation Fees. If Buyer receives an award --------------------------- of costs and/or attorneys' fees in connection with litigation subject to 3.4.2.1, to the extent that any such costs and/or attorneys' fees had previously been treated as Maintenance Fees and set off against Quarterly Royalties, Seller shall share in such award pari passu with Buyer. 3.4.2.3. Costs and Fees for Assignment Recordation. Any ----------------------------------------- reasonable fees and costs incurred by Buyer in connection with the recordation of assignment of the Assets or any other perfection of the transfer of the Assets to Buyer shall be accrued and treated as Maintenance Fees incurred in any quarter or quarters ending on the second anniversary of the Closing or thereafter. 3.4.3 Statements. Each Quarterly Royalty shall be accompanied by a ---------- statement containing such information as Seller shall reasonably require to calculate the amount of Gross Revenues and Maintenance Fees and other offsets for the calendar quarter to which such Quarterly Royalty applies. 3.4.4 Records. Buyer shall keep and maintain complete and accurate ------- records and documentation concerning all Quarterly Royalties and amounts set off from Quarterly Royalties, and shall retain such records and documentation for not less than two (2) years from the date of their creation. Seller and its representatives and agents (who shall be subject to Buyer's approval, which approval shall not be unreasonably withheld) shall have the right upon reasonable notice to Buyer to inspect during regular business hours the records and documentation required to be retained pursuant to this Section 3.4.4 during the two (2) year period following creation of such records and documentation. The costs of any inspection pursuant to this Section 3.4.4 shall be borne by Seller unless as a result of such inspection it is determined that the amounts payable by Buyer to Seller for any calendar quarter are in error by greater than five percent (5%), in which case the costs of such inspection shall be borne by Buyer. Seller shall report the results of any such inspection to Buyer, and unless Buyer disputes the results of such inspection, Buyer shall promptly thereafter pay to Seller the amount of any underpayment, and the amount of any overpayment shall be credited by Seller against future amounts payable by Buyer to Seller. In addition, Buyer shall pay interest on the amount of such underpayments (and Seller shall pay interest on the amount of any overpayments) at a rate which is the lower of (i) one percent (1%) over the rate of interest announced by Bank of America NT&SA to be its "prime rate" as such "prime rate" is in effect from time to time and (ii) the highest rate permitted by applicable law, from the date such amount was underpaid (or overpaid) to the date such amount is paid or credited. In the event that Buyer disputes the results of the inspection, Buyer may withhold payment of any claimed underpayment, and may engage a certified public accountant (not including Buyer's certified public accountants) acceptable to Seller, which acceptance shall not be unreasonably withheld, to verify the accuracy of the results of Seller's inspection. Buyer and Seller shall abide by the decision of such certified public accountant as to the accuracy or inaccuracy of such inspection, and the amount of any underpayment or overpayment found by such certified public accountants which shall promptly thereafter be paid or credited (together with interest), as appropriate. 4. Representations and Warranties of Seller. Seller represents and warrants to ---------------------------------------- Buyer as follows: 4.1 Organization: Good Standing. Seller is a corporation duly --------------------------- organized validly existing and in good standing under the laws of the State of California. Seller has all requisite power and authority and legal right to own, operate and lease its properties, including the Assets. 4.2 Authorization: Binding Obligations. Seller has all requisite ---------------------------------- legal right, Power, authority and capacity to enter into this Agreement and to perform all of its obligations hereunder and thereunder. Seller has taken all necessary action to authorize the sale to Buyer of the Assets pursuant hereto, and has obtained the approval of its board of directors and shareholders if necessary authorizing the execution, delivery and performance of this Agreement and consummation of the transactions contemplated hereby. This Agreement has been duly executed by Seller and constitutes a legal, valid and binding obligation of Seller. 4.3 Title to Assets. With the exception of those Liens identified in --------------- Exhibit C attached hereto, Seller has good and marketable title to all of the Assets, in each case without Liens. Upon release and satisfaction of the Liens identified in Exhibit C hereto, Buyer will have good and marketable title to all of the Assets, free and clear of all Liens. 4.4 Trademarks. Exhibit A to this Agreement contains a schedule of ---------- the Trademarks, including all applications and registrations therefore throughout the world. All of the Trademarks, and the applications and registrations identified on Exhibit A, are valid and subsisting. Seller has no knowledge of any infringement or alleged infringement by others of any of the Trademarks. To the best of its knowledge, Seller has not infringed, and is not now infringing, on any trade name, trademark, or service mark be1onging to any other person, firm or entity. Except as set forth in Exhibit B. Seller is not a party to any license, agreement or arrangement, whether as licensor, licensee, franchisor, franchisee, or otherwise, with respect to any of the Trademarks. Seller owns all of the Trademarks. Seller's use of the Trademarks in its business as now conducted by Seller does not, and will not, conflict with, infringe on, or otherwise violate any rights of others. Seller has the right to sell and assign the Trademarks to Buyer. 4.5 License Agreements. Exhibit B to this Agreement contains a full ------------------ and complete listing and identification of all agreements of any kind and nature to which Seller is a party and which relate to the Trademarks, Copyrights and/or Trade Secrets. Seller has full right and authority to assign the License Agreements to Buyer. True and correct copies of each of the License Agreements have been delivered to Buyer. Each License Agreement is valid and subsisting; Seller has duly performed all its obligations thereunder to the extent that such obligations to perform have accrued; and no breach or default, alleged breach or default, or event which would (with the passage of time, notice or both) constitute a breach or default thereunder by Seller (or, to the best knowledge of Seller, any other party or obligor with respect thereto), has occurred or as a result of this Agreement or its performance will occur. Consummation of the transactions contemplated by this Agreement will not (and will not give any person a right to) terminate or modify any rights of, or accelerate or augment any obligation of, Seller under any License Agreement. 4.6 Copyrights. Seller has no knowledge of any infringement or ----------- alleged infringement by others of any of the Copyrights. All Copyrights, and any applications and registrations therefore, are valid and subsisting. To the best of its knowledge, Seller has not infringed, and is not now infringing, on any copyrighted work belonging to any other person, firm, or entity. Except as set forth in Exhibit B, Seller is not a party to any license agreement, or arrangement, whether as licensor, licensee, franchisor, franchisee, or otherwise with respect to any of the Copyrights. Seller owns all of the Copyrights. Seller has the right to sell and assign the Copyrights to Buyer. To the best of its knowledge, Seller has no copyright registrations and has not applied for copyright registration. 4.7 Trade Secrets. Seller has no knowledge of any infringement or ------------- alleged infringement by others of any of the Trade Secrets. Seller has taken appropriate measures to protect the confidentiality of the Trade Secrets. To the best of its knowledge, Seller has not infringed, and is not now infringing, on any trade secrets belonging to any other person, firm, or entity. Except as set forth in Exhibit B, Seller is not a party to any license, agreement, or arrangement, whether as licensor, licensee, franchisor, franchisee, or otherwise, with respect to any of the Trade Secrets. Seller owns all of the Trade Secrets. Seller's use of the Trade Secrets in its business as now conducted by Seller does not, and will not, conflict with, infringe on, or otherwise violate any rights of others. Seller has the right to sell and assign the Trade Secrets to Buyer. 4.8 Receipt of Reasonably Equivalent Value. The Purchase Price -------------------------------------- constitutes at least reasonably equivalent value for the transfer and assignment of the Assets by Seller to Buyer. Seller is not insolvent, will not be insolvent on the date of closing and Seller will not become insolvent as a result of the sale of Assets. Further, Seller is not engaged in business or a transaction, for which any property remaining with the Seller after the closing will constitute unreasonable small capital for the Seller's business, and Seller does not intend to incur, or believe that it will incur debts that would be beyond the debtor's ability to pay as such debts matured. If Seller is currently in default on any obligations owed to its creditors, Seller will apply the entire Purchase Price towards satisfaction of debts owed to its creditors, and shall continue to pay the Purchase Price, including all payments of Quarterly Royalties, until all outstanding creditor claims have been satisfied in fill. 4.9 Brokers and Finders. All negotiations relative to this Agreement ------------------- and the transactions contemplated hereby have been carried on by Seller without the intervention of any other person in such manner as to give rise to any valid claim for a finder's fee, brokerage commission or other like payment. Seller hereby agrees to indemnify, defend and hold harmless Buyer and its successors and assigns from and against and in respect of any such claim. 4.10 No Breach. The consummation of the transactions contemplated by --------- this Agreement will not result in or constitute any of the following. (1) a breach or default or an event that, with notice or lapse of time or both, would be a default, breach, or violation of the articles of incorporation or bylaws of Seller or any License, promissory note, loan agreement, conditional sales contract, commitment, indenture, mortgage, deed of trust, or other agreement including without limitation the License Agreements, instrument, or arrangement to which Seller is a party or by which Seller or Seller's property is bound; (2) an event that would permit any party to terminate any agreement or to accelerate the maturity of any indebtedness or other obligation of Seller; or (3) the creation or imposition of any lien, charge, or encumbrance on any of the Assets. 4.11 Royalty Revenue Schedule. Seller has provided an accurate ------------------------ schedule of license royalty payments due to Seller. A true and correct copy of such schedule is attached to this agreement as Exhibit D. 5. Representations and Warranties of Buyer. Buyer represents and warrants that --------------------------------------- it is a corporation duly organized, existing, and in good standing under the laws of the state of Delaware. Before Closing, Buyer shall obtain the approval of this Agreement from its Board of Directors. Buyer has utilized the services of one broker relative to the Agreement and the transactions contemplated hereby. Buyer hereby agrees to indemnify, defend and hold harmless Seller and its successors and assigns from and against and in respect of any valid claim for a finder's fee, brokerage commission or other like payment from any broker or other person engaged by Buyer with respect to this Agreement or the transactions contemplated hereby. 6. Indemnification of Buyer. Seller shall indemnify, defend and hold Buyer and ------------------------ its affiliates, directors, officers, employees and agents harmless from and against any and all liabilities, losses, claims, suits, damages, costs and expenses (including, without limitation, reasonable attorneys' fees and expenses) arising out of or otherwise relating to (i) any claims of third parties involving any of the Assets prior to the Closing; (ii) Seller's breach of any representation, warranty, covenant or agreement contained in this Agreement or any of the License Agreements; or (iii) the transactions contemplated by this Agreement being set aside for any reason, including without limitation on the basis that the sale of the Assets in accordance with the terms of this Agreement constitutes a fraudulent conveyance. In the event that this Agreement is set aside as a fraudulent conveyance and/or all or any portion of the Assets are returned to Seller or to Seller's estate in bankruptcy, as collateral to secure Seller's indemnification obligations pursuant to this Section, Seller hereby grants to Buyer a security interest in the Assets. 7. Conditions Precedent to the Obligations of Buyer. All obligations of ------------------------------------------------ Buyer under this Agreement are subject to the fulfillment, at the option of Buyer, at or before the Closing, of each of the following conditions. If Seller has not satisfied all of the following conditions at or prior to the Closing, Buyer shall have the option of electing not to consummate the transactions contemplated by this Agreement by giving written notice thereof to Seller. 7.1 Sellers Representations and Warranties. The representations and -------------------------------------- warranties of Seller contained in this Agreement shall be true on and as of the Closing with the same force and effect as though made on and as of the Closing, except as affected by the transactions contemplated or permitted by this Agreement. 7.2 Sellers Covenants. Seller shall have performed all of its ----------------- obligations and agreements and complied with all of its covenants contained in this Agreement to be performed and complied with by Seller before the Closing. 7.3 No Litigation. No investigation, action, suit or proceeding ------------- before any court or any other governmental or regulatory authority shall have been threatened or be pending against Seller or Buyer seeking to restrain, prevent or materially change any of the transactions contemplated by this Agreement or question the validity or legality of any of such transactions. No bankruptcy petition shall have been filed by or against Seller. 7.4 No Governmental Action. No action shall have been taken or law ---------------------- enacted or proposed to be enacted by any governmental authority or by any court or other tribunal having jurisdiction over the parties or the Assets which makes any of the transactions contemplated by this Agreement illegal. 8. Covenants of Seller Prior to Closing. ------------------------------------ 8.1 No Offers. Prior to the Closing, Seller shall not accept or --------- solicit any offers for sale of all or a substantial portion of its stock or sale or license of all or a substantial portion of its assets, nor shall Seller discuss such with any third party. The parties agree that any solicitation or acceptance of such an offer would be a source of great damage to Buyer. The parties have' discussed the potential for injury and damage to Buyer in the event of a breach by Seller of the prohibition of this Section 8.1, and agree that ascertaining the true extent and nature of damage to Buyer and its business and reputation due to a breach hereof by Seller would be impossible. Accordingly, the parties agree that, in the event of a breach by Seller of Seller's covenants pursuant to this Section 8.1, Buyer shall be entitled to receive Seven Hundred Fifty Thousand Dollars ($750,000) as liquidated damages from Seller, which the parties agree to be a reasonable approximation of the damages needed to compensate Buyer for such injury. 8.2 Operation of Business in Normal Course. There shall be no change -------------------------------------- that may be reasonably anticipated to adversely effect any of the Assets. 8.3 Access. Seller shall allow Buyer and its representatives to have ------ access to Seller's books and records, facilities and such documents and materials as Buyer shall reasonably require to conduct due diligence for the transactions contemplated by this Agreement. Seller shall cooperate with Buyer as Buyer shall reasonably require for conducting due diligence. 9. Closing. At the Closing: ------- 9.1 Seller shall deliver to Buyer: 9.1.1 such bills of sale and assignments (including without limitation the bill of sale assignment in the form of Exhibit B attached hereto), in form reasonably acceptable to Buyer, as shall be sufficient or necessary to transfer and assign the Assets to Buyer and to record such transfer and assignment. 9.1.2 such other instruments of transfer necessary or appropriate to transfer to and vest in Buyer all of Seller's right, title and interest in and to the Assets, including without limitation the consent of any party to any of the License Agreements from whom consent to assignment may be necessary for Seller to transfer such License Agreement to Buyer. 9.1.3 a receipt for cash (if any) to be delivered by Buyer at Closing. 9.1.4 such financing statements, memoranda of security interest, and such other instruments and documents as Buyer shall reasonably require to perfect the security interest granted by Seller pursuant to Section 6 of this Agreement. 9.1.5 all files, documents, records, specimens, artwork, screens, patterns, designs, marketing materials, computer disks and tapes, and other materials or other tangible assets respecting the Assets or in which any of the Assets are embodied. Seller shall deliver to Buyer a bill of sale for all such tangible assets to be delivered by Seller to Buyer at the Closing. 9.2 Buyer shall deliver to Seller a bank check in the amount of One Million Five Hundred Thousand Dollars ($1,500,000) payable to seller. 9.3 After the Closing, each of Buyer and Seller shall deliver such instruments and documents to the other party as shall be reasonably necessary to effect the transactions contemplated by this Agreement. Seller shall do such further acts as shall be necessary to effect the assignment and transfer of Seller's rights pursuant to the License Agreements to Buyer. 10. Continuing Covenants of Seller. From and after the Closing, Seller ------------------------------ shall not: (i) adopt or cause any other person or entity to adopt any mark similar or identical to any of the Trademarks, (ii) do any act that could infringe upon any of the rights in any of the Assets being sold and assigned to Buyer, or (iii) challenge directly or indirectly any of Buyer's rights in and to any of the Assets. From and after the Closing, Seller shall cooperate with Buyer, and shall allow Buyer and its representatives to have access to Seller's books and records, facilities and such documents and materials, as Buyer shall reasonably request in order to prosecute or to maintain any applications or registrations of or for any of the Assets, or to bring or defend any action against or by any third party with respect to any of the Assets. Seller agrees not to voluntarily file a petition for bankruptcy protection within twelve months following the Closing. 11. General Provision. ----------------- 11.1 Notices. Any notice or other communication hereunder must be ------- given in writing and either (i) delivered in person, (ii) transmitted by telex, facsimile or telecopy mechanism, provided that a receipt of such transmission is obtained and provided further that any notice so given is also mailed as provided herein, (iii) delivered by Federal express or similar commercial delivery service or (iv) mailed by certified or registered mail, postage prepaid, return receipt requested, to the recipient at the address set forth in the first paragraph of this Agreement, or to such other address as such party shall have last designated by such notice to the party giving notice. Each such notice or other communication shall be effective (i) if given by telecommunication, when transmitted, (ii) if given by mail, two (2) days after such communication is deposited in the mails, (iii) if given by Federal Express or similar commercial delivery service provided that a receipt of such delivery is obtained, one (i) business day after such communication is deposited with such service, or (iv) if given by any other means, when actually delivered. 11.2 Entire Agreement. This Agreement, including all schedules and ---------------- exhibits hereto, which are herein incorporated by this reference, sets forth the entire agreement and understanding between the parties with respect to the subject matter hereof and supersedes any and all prior negotiations, discussions and agreements relating to the subject matter hereof. This Agreement may not be orally changed, altered, modified or amended in any respect. To effect any change, modification, alteration or amendment of this Agreement, the same must be in writing and signed by all of the parties hereto. 11.3 Remedies. Except as otherwise specifically provided in this -------- Agreement, in the event that either party should breach or violate any of the covenants, representations or warranties contained in this Agreement, the other party shall be entitled to exercise any rights or remedy available to it hereunder, at law or in equity. Such rights and remedies shall include, without limitation, termination (as provided herein), damages and injunctive relief. The exercise of any right or remedy available to a party shall not preclude the concurrent or subsequent exercise, by it of any other right or remedy and all rights and remedies shall be cumulative. 11.4 Successors and Assigns. This Agreement shall be binding upon and ---------------------- shall inure to the benefit of the successors and permitted assigns of the parties. 11.5 Choice of Law. The validity, construction and enforcement of this ------------- Agreement shall be governed by the laws of the State of California without regard to its choice of law principles. 11.6 No Waiver. No waiver by either party, whether express or implied, --------- of any provision of this Agreement of any breach or default of any party, shall constitute a continuing waiver of such provision or any other provisions of this Agreement, and no such waiver by any party shall prevent such party from acting upon the same or any subsequent breach or default of the other party of the same or any other provision of this Agreement. 11.7 Disclaimer of Agency. Nothing in this Agreement shall create a -------------------- partnership or joint venture or establish the relationship of principal and agent or any other relationship of a similar nature between the parties hereto, and neither Buyer nor Seller shall have the power to obligate or bind the other in any manner whatsoever. 11.8 Attorneys. In the event that either party employs attorneys to remedy, prevent or obtain relief from a breach and/or default of this Agreement or arising out of a breach and/or default of this Agreement or in connection with or contesting the validity of this Agreement, any of the terms, covenants, provisions, and all conditions hereof or of any of the matters referred to herein, and such party is the prevailing party in any action or arbitration brought with respect thereto, such party shall be entitled to be reimbursed for all of its reasonable attorneys' fees, including, without Limitation, those attorneys' fees incurred in each and every action, suit or proceeding, including any and all appeals and petitions therefrom, and all costs and expenses incurred in connection therewith. In the event of any bankruptcy filing by one party, and/or any other entity, which affects or purports to affect the Assets or the other party's (the "Non- Debtor") rights and claims under this Agreement, the Non-Debtor shall be entitled to employ counsel to review and monitor any such bankruptcy and all proceedings arising in or under or related to such bankruptcy and to represent the Non-Debtor's position in regard thereto, and all attorneys' fees and that the first party shall pay and reimburse all costs so incurred by the Non-Debtor on a monthly basis. 11.9 Interpretation. All pronouns and any variation thereof shall be -------------- deemed to refer to the masculine, feminine, or neuter and to the singular or plural, as the identity of the person or persons may require for proper interpretation of this Agreement. Each of the parties to this Agreement has been represented by independent legal counsel. Therefore, the normal rule of construction that an agreement shall be interpreted against the drafting patty shall not apply. 11.10 Severability. If any provision or portion thereof of this ------------ Agreement is held to be unenforceable or invalid, the remaining provisions and portions thereof shall nevertheless be given and continue in full force and effect. 11.11 Authority. Each individual signing on behalf of a party hereto --------- represents and warrants that he or she is authorized by the Board of Directors of such party to execute this Agreement on behalf of such party. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. CHEROKEE INC. SIDEOUT SPORT, INC. a Delaware corporation a California corporation By: /s/ Robert Margolis By: /s/ Stephen Y. Ascher, Jr. -------------------- --------------------------- Robert Margolis Stephen Y. Ascher, Jr. Chairman and President Chief Executive Officer EXHIBIT "A" SIDEOUT SPORT
SIDEOUT SPORT U.S. TRADEMARKS Trademark Description Class Category Registration Registration Renewal Number Date Date Sideout Name 25 Apparel 1395798 6/3/84 Perpetual Sideout Name 25 Shoes 1834669 5/3/94 5/3/04 Sideout Logo 25 Apparel 1401285 7/15/86 Perpetual Sideout Grid Logo 25 Apparel 2091264 8/26/97 8/26/07 Sideout Name 14 Watches 1833286 4/26/94 4/26/00 Sideout Name 18 Accessories 2061649 5/13/97 5/13/07 Sideout Grid Logo 18 Accessories 2061648 5/13/97 5/13/07 Sideout Name 28 Athletic Balls 2093175 9/2/97 9/2/07 Sideout Grid Logo 28 Athletic Balls 2089312 8/19/97 8/19/07 Sideout Name 42 Retail 2061660 5/13/97 5/13/07 Sand King Name 28 Athletic Balls 1989174 7/23/96 7/23/06 King of the Beach Name 25 Apparel 1627248 12/11/90 12/11/00 Sideout Rotor Design 28 Athletic Balls 2102847 10/7/97 10/7/02 BIGGEST NAME Name 25 Apparel 2084097 7/29/97 7/29/02 IN VOLLEYBALL U.S. Applications Pending Sideout Name 42 Computer Services 12/13/96 King of the Beach Name 28 Athletic Balls 5/10/97 California Sideout Name & Logos 39 Apparel 76827 5/1/85 5/1/05
November 7, 1997 EXHIBIT "A" SIDEOUT SPORTS FOREIGN TRADEMARKS
Country Trademark Category of Status Application / Registration - ------------------------------------------------------------------------------------------------------------------------------ Argentina SIDEOUT & LOGO 25 - Clothing Registered; renewal due 12/31/01 - ------------------------------------------------------------------------------------------------------------------------------ Australia SIDEOUT & Hatch Label 25 - Wearing Apparel, Namely, Shorts, Registered; renewal due 10/21/09 Shirts, Sweatshirts - ------------------------------------------------------------------------------------------------------------------------------ Australia SIDEOUT 25 - Wearing Apparel, Namely, Shorts, Registered; renewal due 10/21/09 Shirts, Sweatshirts - ------------------------------------------------------------------------------------------------------------------------------ Benelux KING OF THE BEACH 25 - Clothing, Namely, Shorts, Registered; renewal due 07/31/00 Shirts, Sweatshirts 28 Volleyballs - ------------------------------------------------------------------------------------------------------------------------------ Benelux SIDEOUT & LOGO 25 - Wearing Apparel, Namely, Shorts, Registered; renewal due 09/13/99 Shirts, Sweatshirts - ------------------------------------------------------------------------------------------------------------------------------ Benelux SIDEOUT SPORT 25 - Wearing Apparel, Namely, Shorts, Registered; renewal due 06/06/99 Shirts, Sweatshirts - ------------------------------------------------------------------------------------------------------------------------------ Brazil SIDEOUT & LOGO 25 - Wearing Apparel, Namely, Shorts, Registered; renewal due 07/11/05 Shirts, Sweatshirts - ------------------------------------------------------------------------------------------------------------------------------ Brazil SIDEOUT 25 - Wearing Apparel, Namely, Shorts, Registered; renewal due 03/26/01 Shirts, Sweatshirts - ------------------------------------------------------------------------------------------------------------------------------ Canada SIDEOUT & LOGO 25 - Wearing Apparel, Namely, Shorts, Registered; renewal due 10/20/03 Shirts, Sweatshirts - ------------------------------------------------------------------------------------------------------------------------------ Canada SIDEOUT 25 - Wearing Apparel, Namely, Shorts, Registered; renewal due 07/05/06 Shirts, Sweatshirts - ------------------------------------------------------------------------------------------------------------------------------
Country Trademark Category of Status Application / Registration - --------------------------------------------------------------------------------------------------------------------------------- Chile SIDEOUT Awaiting confirmation that assignment was recorded; need copies of Registration from Sideout - --------------------------------------------------------------------------------------------------------------------------------- China SIDEOUT & LOGO 25 - Wearing Apparel, Namely, Registered; renewal due 02/19/01 Shorts, Shirts, Sweatshirts - --------------------------------------------------------------------------------------------------------------------------------- China SIDEOUT 25 - Wearing Apparel, Namely, Registered; renewal due 02/20/05 Shorts, Shirts, Sweatshirts - --------------------------------------------------------------------------------------------------------------------------------- Colombia SIDEOUT Waiting for opinion from associate on whether changes in law will affect application - --------------------------------------------------------------------------------------------------------------------------------- Colombia SIDEOUT & LOGO 25 - Wearing Apparel, Namely, Application rejected, Appeal filed-awaiting Shorts, Shirts, Sweatshirts decision from Trademark Office; Colombia has joined the Paris Convention-waiting for opinion from associate on whether changes in law will affect application - --------------------------------------------------------------------------------------------------------------------------------- Costa Rica SIDEOUT Awaiting filing instructions from Sideout - --------------------------------------------------------------------------------------------------------------------------------- European LOGO Awaiting description of goods from Sideout Community - --------------------------------------------------------------------------------------------------------------------------------- European SIDEOUT Awaiting description of goods from Sideout Community - --------------------------------------------------------------------------------------------------------------------------------- France SIDEOUT 25 - Wearing Apparel, Namely, Registered; renewal due 11/25/98 Shorts, Shirts, Sweatshirts - --------------------------------------------------------------------------------------------------------------------------------- France SIDEOUT & LOGO 25 - Wearing Apparel, Namely, Registered; renewal in progress Shorts, Shirts, Sweatshirts - ---------------------------------------------------------------------------------------------------------------------------------
Country Trademark Category of Status Application / Registration - ------------------------------------------------------------------------------------------------------------------------------ Germany SIDEOUT 25 - Wearing Apparel, Namely, Shorts, Registered; renewal due 10/28/98 Shirts, Sweatshirts - ------------------------------------------------------------------------------------------------------------------------------ Germany SIDEOUT & LOGO 25 - Wearing Apparel, Namely, Shorts, Registered; renewal due 10/28/98 Shirts, Sweatshirts - ------------------------------------------------------------------------------------------------------------------------------ Great Britain SIDEOUT 25 - Articles of Outer Clothing Registered; renewal due 10/21/05 - ------------------------------------------------------------------------------------------------------------------------------ Great Britain SIDEOUT & LOGO 25 - Articles of Outer Clothing Registered; renewal due 10/21/05 - ------------------------------------------------------------------------------------------------------------------------------ Greece SIDEOUT 25 - Wearing Apparel, Namely, Shorts, Registered; renewal due 11/12/00; Shirts, Sweatshirts Use due 01/17/99 - ------------------------------------------------------------------------------------------------------------------------------ Guatemala SIDEOUT & LOGO Awaiting Notarized Power of Attorney from Sideout - ------------------------------------------------------------------------------------------------------------------------------ Guatemala SIDEOUT Awaiting Notarized Power of Attorney from Sideout - ------------------------------------------------------------------------------------------------------------------------------ Hong Kong SIDEOUT & LOGO 25 - Hats, Shoes, Shorts and Shirts Registered; renewal in progress - ------------------------------------------------------------------------------------------------------------------------------ Hong Kong SIDEOUT 25 - Shirts, T-Shirts, Tank Tops, Registered; renewal due 06/16/00 Sweatshirts, Pants, Shorts, Sweatpants, Jackets, Caps, Visors, Hats and Shoes - ------------------------------------------------------------------------------------------------------------------------------ Indonesia SIDEOUT No applications filed - ------------------------------------------------------------------------------------------------------------------------------
Country Trademark Category of Status Application / Registration - ------------------------------------------------------------------------------------------------------------------------------ Israel LOGO 25 - Wearing Apparel, Namely, Shorts, Registered; renewal due 08/14/01 Shirts, Sweatshirts - ------------------------------------------------------------------------------------------------------------------------------ Israel SIDEOUT 25 - Wearing Apparel, Namely, Shorts, Shirts, Sweatshirts - ------------------------------------------------------------------------------------------------------------------------------ Italy SIDEOUT 25 - Wearing Apparel, Namely, Shorts, Registered; renewal due 11/09/08 Shirts, Sweatshirts - ------------------------------------------------------------------------------------------------------------------------------ Italy SIDEOUT & Grid Design Only 25 - Wearing Apparel, Namely, Shorts, Registered; renewal due 02/05/07 Shirts, Sweatshirts - ------------------------------------------------------------------------------------------------------------------------------ Japan KING OF THE BEACH 17 (N.C.) - Shorts, Shirts, Registered; renewal due 05/531/02 Sweatshirts, and Other Wearing Apparel, and All Other Goods in This Class - ------------------------------------------------------------------------------------------------------------------------------ Japan KING OF THE BEACH 24 (N.C.) - Volleyballs, Other Registered; renewal due 12/25/02 Sporting Goods, And All Other Goods in This Class - ------------------------------------------------------------------------------------------------------------------------------ Japan SIDEOUT 24 (N.C.) - Volleyballs, And All Registered; renewal due 12/25/02 Other Goods in This Class - ------------------------------------------------------------------------------------------------------------------------------ Japan SIDEOUT & LOGO 24 (N.C.) - Volleyballs, And All Registered; renewal due 08/01/00 Other Goods in This Class - ------------------------------------------------------------------------------------------------------------------------------
Country Trademark Category of Status Application / Registration - ------------------------------------------------------------------------------------------------------------------------------ Japan SIDEOUT 17 (N.C.) - Shorts, Shirts, Registered; renewal due Sweatshirts, Other Wearing Apparel, and All Other Goods in This Class - ------------------------------------------------------------------------------------------------------------------------------ Japan SIDEOUT & LOGO 17 (N.C.) - Shorts, Shirts and All Registered; renewal due Other Goods in This Class - ------------------------------------------------------------------------------------------------------------------------------ Mexico SIDEOUT & LOGO 25 - Clothing (Shoes are Now Excluded) Registered; renewal due - ------------------------------------------------------------------------------------------------------------------------------ Pakistan KING OF THE BEACH 28 - Volleyballs Application Pending - ------------------------------------------------------------------------------------------------------------------------------ Pakistan LOGO 25 - Wearing Apparel, Namely, Long Application Pending and Short Sleeve Shirts, Including T-Shirts; Tank Tops and Sweatshirts, Pants, Including Shorts and Sweatpants; Jackets; Caps; Visors, Hats and Shoes - ------------------------------------------------------------------------------------------------------------------------------ Pakistan LOGO 28 - Athletic Balls Application Pending - ------------------------------------------------------------------------------------------------------------------------------ Pakistan SAND KING 28 - Athletic Balls Application Pending - ------------------------------------------------------------------------------------------------------------------------------
Country Trademark Category of Status Application / Registration - ------------------------------------------------------------------------------------------------------------------------------ Pakistan SIDEOUT 25 - Wearing Apparel, Namely, Long Application pending; Reply to the Show and Short Sleeve Shirts, Including Cause has been filed T-Shirts; Tank Tops and Sweatshirts, Pants, Including Shorts and Sweatpants; Jackets; Caps; Visors, Hats and Shoes - ------------------------------------------------------------------------------------------------------------------------------ Pakistan SIDEOUT 28 - Athletic Balls Application pending - ------------------------------------------------------------------------------------------------------------------------------ Panama SIDEOUT & LOGO Awaiting instructions re filing cancellation proceedings against previous registration for SIDEOUT - ------------------------------------------------------------------------------------------------------------------------------ Panama SIDEOUT Awaiting instructions re filing cancellation proceedings against previous registration for SIDEOUT - ------------------------------------------------------------------------------------------------------------------------------ Peru SIDEOUT Previous registration for SIDEOUT is due for renewal before 9/25/97; associate cannot find use and it is possible to cancel a registration based on non-use - ------------------------------------------------------------------------------------------------------------------------------ Philippines SIDEOUT New application sent to Sideout for signature - ------------------------------------------------------------------------------------------------------------------------------ Philippines SIDEOUT & LOGO New application sent to Sideout for signature - ------------------------------------------------------------------------------------------------------------------------------
Country Trademark Category of Status Application / Registration - ------------------------------------------------------------------------------------------------------------------------------ Portugal SIDEOUT & LOGO 25 - Shirts, Shorts and Sweatshirts Registered; renewal due 05/10/03; Declaration of Use due 05/10/98 - ------------------------------------------------------------------------------------------------------------------------------ Singapore SIDEOUT 25 - Articles of Outer Clothing, Application has been accepted and will Shorts, Shirts, Sweatshirts, (White be published for opposition Shirts, Under Shirts, T-Shirts) - ------------------------------------------------------------------------------------------------------------------------------ South Korea SIDEOUT & LOGO 45 (N.C.) - Shirts and Sweatshirts Registered; renewal due 10/20/00 - ------------------------------------------------------------------------------------------------------------------------------ South Africa SIDEOUT Prior application filed by New Colours Clothing on 10/20/89; cannot litigate without establishing common law rights prior to 10/20/89 in South Africa - ------------------------------------------------------------------------------------------------------------------------------ Spain SIDEOUT Awaiting information re litigation from Sideout - ------------------------------------------------------------------------------------------------------------------------------ Spain SIDEOUT & LOGO Awaiting information re litigation from Sideout - ------------------------------------------------------------------------------------------------------------------------------ Switzerland LOGO 25 - Wearing Apparel, Namely, Long Registered; renewal due 08/10/04 and Short Sleeve Shirts, Including T-Shirts; Tank Tops and Sweatshirts, Pants, Including Shorts and Sweatpants; Jackets; Caps; Visors, Hats and Shoes - ------------------------------------------------------------------------------------------------------------------------------
Country Trademark Category of Status Application / Registration - ------------------------------------------------------------------------------------------------------------------------------ Switzerland SIDEOUT 25 - Wearing Apparel, Namely, Long Registered; renewal due 08/10/04 and Short Sleeve Shirts, Including T-Shirts; Tank Tops and Sweatshirts, Pants, Including Shorts and Sweatpants; Jackets; Caps; Visors, Hats and Shoes - ------------------------------------------------------------------------------------------------------------------------------ Taiwan SIDEOUT & LOGO 25 - Wearing Apparel, Namely Shorts, Registered; renewal due 07/31/00 Shirts and Sweatshirts - ------------------------------------------------------------------------------------------------------------------------------ Thailand SIDEOUT 25 - Shorts, Shirts and Sweatshirts Registered; renewal due 08/26/03 - ------------------------------------------------------------------------------------------------------------------------------ Uruguay SIDEOUT Power of Attorney sent to foreign associate; awaiting description of goods from Sideout - ------------------------------------------------------------------------------------------------------------------------------
Additional
Country Trademark Category of Status Application / Registration - ------------------------------------------------------------------------------------------------------------------------------ Brazil SIDEOUT 40.15 - Retail Registered; renewal due 4/22/07 - ------------------------------------------------------------------------------------------------------------------------------ European SIDEOUT & LOGO Application Pending Community - ------------------------------------------------------------------------------------------------------------------------------ Guatemala SIDEOUT 25 - Apparel Application filed 2/7/97 - ------------------------------------------------------------------------------------------------------------------------------ Israel SIDEOUT 25 - Apparel Registered; renewal due 8/14/01 - ------------------------------------------------------------------------------------------------------------------------------ Mexico SIDEOUT 42 - Retail Application filed 12/9/96 - ------------------------------------------------------------------------------------------------------------------------------ Peru SIDEOUT & LOGO 9, 18, 25 Registered; renewal due 7/7/07 - ------------------------------------------------------------------------------------------------------------------------------ Singapore SIDEOUT 25 - Apparel Registered; renewal due 6/22/03 - ------------------------------------------------------------------------------------------------------------------------------ Spain SIDEOUT & LOGO 25 - Apparel Registered; renewal due 9/04 - ------------------------------------------------------------------------------------------------------------------------------ Thailand SIDEOUT 25 - Apparel Registered; renewal due 8/26/03 - ------------------------------------------------------------------------------------------------------------------------------
EXHIBIT "B" SIDEOUT
Name Territory Category Roy % Adv % Annual Minimums - ------------------------------------------------------------------------------------------------------- Bag Square Inc. U.S Accessories for men and 8% 1% 8-15-98 250,000 Including women, namely athletic Puerto Rico bags, including but not Expend Option: limited to backpacks, 3% 12-31-99 325,000 duffles, gym bags, fanny 12-31-00 375,000 packs, hats, bandanas, 12-31-01 425,000 caps visors, & wallets 12-31-02 475,000 - ------------------------------------------------------------------------------------------------------- Isenburg U.S. Big & Tall clothing, 6% 1% 12-31-98 750,000 Enterprises, Inc Including including but not limited Puerto to T-shirts, tank tops, Option: Rico volley shorts, walk 99 825,000 shorts, shirts, pants, 00 915,000 jackets, warm-up suits, & 01 1,000,000 sweaters 02 1,100,000 03 1,200,000 - ------------------------------------------------------------------------------------------------------- Barry Horn dba A&E U. S. Toddler boys 2T-4T & 4-7 6% Expend 12-31-98 500,000 Group Including With Licensors approval 2%-4% 12-31-99 1,000,000 Puerto Rico boys 8-20 including but 12-31-0 1,750,000 not limited to T-shirts, volley shorts, walk 01 2,500,000 shorts, shirts, pants, 02 3,000,000 jackets, warm-up suits, 03 3,500,000 sweaters, boxer shorts, & lounge wear. Name Payments Term Options Restrictive Distribution Covenants - --------------------------------------------------------------------------------------------------------------------------- Bag Square Inc. Monthly for 1 year 4 years at Licensors Force Majeure Sec 24.2 minimums July 8/15/97-814/98 discretion & January Excess - -------------------------------------------------------------------------------------------------------------------------- Isenburg Monthly for 4 years 5 year - Force Majeure Sec 24.2 Enterprises, Inc minimums 06/01/94-12/31/98 provided Licensee gives January, notice to Licensor in April, July, writing not less then 6 October excess months prior to the end of the initial term - -------------------------------------------------------------------------------------------------------------------------- Barry Horn dba Monthly for 3years Force Majeure Sec 23.2 A&E Group minimums July 07/01/97- & January 12/31/00 excess - --------------------------------------------------------------------------------------------------------------------------
Name Territory Category Roy % Adv % Annual Minimums - -------------------------------------------------------------------------------------------------------------- International Italy, Including but not limited to Italy Expend Sch A missing 1.0 Sport Trading France, T-shirts, tank tops, volley 6% 4% per year? S.R.L Greece, shorts, walk shorts, shirt, Spain, bating suits, socks, pants, All Portugal & jackets, warm-up suits, Other Switzerland sweatshirts, sweaters, hats, 7% visors, & bags Rossignol S. A. Chile, Including but not limited to Chile Expend 23.2 Argentina, T-shirts, tank tops, volley 6% 3% Peru, shorts, walk shorts, shirts, Opt Bolivia, bathing suits, socks, pants, 5% Paraguay, & jackets, warm-up suits, Uruguay sweatshirts, sweaters, Other parkas, windbreakers, 6% jackets, hats, visors, bags, wallets, towels, & belts Rucanor Canada Including but not limited to 6% If 22.2 Canada LTD T-shirts, tank tops, volley licensor shorts, walk shorts, shirts, FIVB; 1% & bathing suits, socks, pants, expend jackets, warm-up suits, 3.5 sweatshirts, sweaters, windbreakers, jackets, hats No FIVB visors, bags, wallets, Expend towels, & belts 4% Sideout Sport Australia, Clothing 6% 12/31/97 650 Australia New Zealand Expend 3% Standard Accessories Corp Name International Quarterly Jan, 05/31/93- Shall be automatically Force Majeure Sec 23.2 Sport Trading Apr, July, Oct. 12/31/97 renewed for 2 year terms S.R.L unless notice is given by Jan, prior either party no less than 6 year settlement month before expiration Rossignol S. A. 12/31/94 200 Quarterly Chile Chile 2-3 year term by Force Majeure 12/31/95 220 9.1 04/01/94- giving notice to Licensor, 6 12/31/96 245 9.2 12/31/97 months in advance 12/31/97 270 9.3 12/31/98 350 others Other If mutually agreed 12/31/99 385 04/01/94-12/31/94 12/31/00 425 12/31/01 470 12/31/02 520 12/31/03575 Rucanor Canada LTD 12/31/96 200 Monthly Jan, 07/01/95-12/31/99 3 year at Licensees Force Majeure 12/31/97 300 Apr, July, Oct option 12/31/98 400 Excess 12/31/99 500 12/31/00 550 12/31/01 605 12/31/02 665 Sideout Sport 12/31/97 Australia Standard Expired? Accessories Corp
John H. U.S. Men's,Women's & 1. 4 Expend 500,000 Lovely, Argentina, Children's Footwear 2. 4 3% 2,500,000 An Australia, Including Sandals, athletics, 3. 5 4,000,000 Individual Benelux, sneakers 4. 5 6,000,000 Brazil, Casuals,dress,boots aqua socks, 5. 6 8,000,000 Canada, water sandals, sand foot Chile, covering, & other related beach Opt 8,500,000 China, footwear 6 9,000,000 France, Including canvas, leather rubber 10,000,000 Germany. & synthetic footwear, excluding 11,000,000 Greece, socks. 12,000,000 Hong Kong, Italy, Japan, Mexico, 13,000,000 Portugal, 13,500,000 Singapore, 14,000,000 S. Korea, 14,500,000 Taiwan, 15,000,000 UK If Licensor ------------------- Registeres ------------------- Any country it is added to the list ------------------- Matienzo Mexico Including but not 6% Expend `96-600,000 Mexico, Limited to T-shirts, 4% `97-700,000 S.A. Tank tops, volley shorts, walk `98-800,000 shorts, shirts, bathing suits, `99-900,000 socks, pants, jackets, warm-up `00-1,000,000 suits, sweatshirts, sweaters, `01-1,100,000 windbreakers, jackets, hats, `02-1,200,000 visors, bags, wallets, towels, & belts Dabra S.A. Argentina, Including but not limited to 6% Expend 12-21-97 Urugua T-shirts, tank tops, volley 4% 250,000 shorts, walk shorts, shirts, 12-31-98 bathing suits, socks, pants, 300,000 jackets, warm-up suits, sweatshirts, sweaters, 12-31-99 windbreakers, jackets, hats, 360,000 visors, bags, wallets, and belts. ----------- Option: 00 400,000 01 440,000 02 480,000 Quarterly 5 years 2 additional Sub-licensing Sec January, April, 1/1/95- 5 year terms provided Licensee Allowed 23.2 July 12/31/99 gives notice to Licensor in At & October writing not less than 6 month Licensee's prior to the end of the term Discretion Monthly 7 years Has the right to Sec For 1/1/96- use the name in the 22.2 Mini-mums 12/31/02 operation of retail July & stores owned & January operated by Excess Licensee or in a joint venture with others. Force Majeure Monthly 3 years 3 years provided Licensee Force Sec 21.2 For 1/1/96- gives notice to Licensor in Majeure Minimums 12/31/99 writing not less than 6 months 11.4 July & January prior to the end of the initial Excess term
SIDEOUT EXHIBIT "B"
- ------------------------------------------------------------------------------------------------------------------------------------ Tachikara U.S. Volleyballs 6% Expend 500,000 Monthly U.S.A. Inc Argentina, 4% 600,000 Australia, 700,000 Benelux, Brazil, 750,000 Canada, Chile, 750,000 China, France, Germany, Greece, Hong Kong, Italy, Japan, Mexico, Portugal, Singapore, S. Korea, Taiwan, UK - ------------------------------------------------------------------------------------------------------------------------------------ I.X. Optical U.S. & Eyewear & eyewear 7% 2% to 12/31/97 75.0 Monthly? worldwide accessories licensor 12/31/98 8.1.2 where & 300.0 8.2. Licensor expend 12/31/99 8.3.3 holds 2% 400.0 8.3.4. registrations 12/31/00 & apps 600.0 pending for 12/31/01 the name. 700.0 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Tachikara 5 years Force Sec U.S.A. Inc 01/04/95- Majeure 3.6 12/31/99 Sec 21.2 - ------------------------------------------------------------------------------------------------------------------------------------ I.X. Optical U.S. 5 years 12/31/96- 12/31/01 worldwide 3 years 12/01/96- 12/31/99 - ------------------------------------------------------------------------------------------------------------------------------------
Exhibit C - Sideout Sport, Inc. Lien Creditors As of 11/7/97 1. Bowen SongT 23814 Pasatiempo Lane Harbor City, CA 90710 Amount $ 1,885.00 Number 94K03115 Entered 4/13/97 2. San Pedro Surf N Skate 23814 Pasatiempo Lane Harbor City, CA 90710 Amount $1,833 Number 94K03115 Entered 4/13/94 Identical 3. Red Wing Knitting Mills C/O Sulmeyer, Kupetz, Baumann & Rothman 300 S. Grand Ave. 14th Floor Los Angeles, CA 90071-3124 Paid in full - lien release in process 4. State of California State Tax Lien Release Amount $114 Number 941595395 Entered 5/0/94 5. County of Santa Clara County Tax Lien Amount $81 Number 9613507564 Entered 11/1/95 6. Acme Display Fixtures Amount $4,187 Number 97M011950 Entered 4/22/97 7. California Marker Copies Inc Amount $841 Number 97M0693B Entered 6/23/97 8. State of California State Tax Lien Amount $114 Number 94842514 Entered 5/2/94 9. Nourollah Khanzadeh Kan Textile Plastic 11415 Rochester Ave.#8-A Los Angeles CA 90025 Amount $4000 Number 97M15548 Entered 6/28/97 10. Nourollah Khanzadeh Amount $5000 Number 97M15673 Entered 9/3/97 11. Republic Business Credit Corporation 1000 Wilshire Blvd; STE 400 Los Angeles CA 90017 FID/SS#133047463 Amount Number 9601860785 Entered 1/17/96 12. Northern Telecom Finance 1055 Westlake Dr. Berwyn, PA 19312 Amount Number 92241412 Entered 11/16/92 Equipment Lease 13. MasterLease 1055 Westlake Dr. Berwyn PA 19312 Amount Number Entered Equipment Lease 14. IBM Credit Corporation 290 Harbor Dr. Stamford CT Amount Number 891551512/90094231 Entered 6/5/89 / 4/12/90 Equipment Lease 15. IBM Dept.4725 B/O UW3 SCF Pasadena CA 91051-4725 Amount Number Entered 16. Business Credit Leasing In 115 W College Dr. Marshall MN Amount Number Entered Equipment Lease 17. Ford Motor Credit Co 330 Town Center Dearborn MI Amount Number Entered 18. Charter Equipment Leasing Corp 8383 Wilshire Blvd.STE 614 Beverly Hills CA 19. Orix Credit Alliance Inc 1625 NW Amberglen CT STE 100 Beaverton OR 97006 Equipment Lease 20. Cruttenden Roth Bridge Fund/Imperial Bank 18301 Von Karman Suite 100 Irvine, Ca 92715 21. Pitney Bowes 3020 Old Ranch Parkway # 400 Seal Beach, Ca Equipment Lease 22. Sanwa Leasing PO Box 7023 Troy, Mi 48007 Equipment Lease 23. Jeffery Stork C/O Hill, Farrer & Burrill LLP 445 S. Figueroa St. 35th Floor Los Angeles, CA 90071 24. Canon Financial Services 200 Commerce Sq. Blvd. Burlington, NJ 08016 Equipment Lease 25. Citicorp North America PO Box 7247-0150 Philadelphia, PA 19170-0150 Equipment Lease EXHIBIT "D" SIDEOUT SPORT LICENSEE ROYALTY PAYMENTS DUE
LICENSEE AMOUNT REPORTED THRU COMMENTS Isenburg 8/30/97 9/30 Report Due I.X. Optical $ 4,500.00 Minimum due thru 12/31/97 Lovely 9/30/97 Argentina 7/20/97 9/30/96 report due Canada 9/30/97 Chile $ 16,200.00 12/31/96 Minimum due for '97. Final payment due 1/31/98 Japan $ 89,999.00 Minimum due 4/1/98 for balance of '97, Net of 10% Tax Italy $ 15,947.54 6/30/96 Due for 2nd Qtr 97, Net of 20% Tax Mexico $ 17,657.20 6/30/96 Due 1st & 2nd Qtr. 3rd Qtr report due 11/7/97 A & E $( 7,500.00) 6/30/97 9/30 report due Bag Square $( 5,000.00) 6/30/97 9/30 report due Tachikara $( 2,553.96) 6/30/97 9/30 report due Japan $(40,500.00) Due 12/31/97, advance payment for '98, net of 10% tax.
As of November 7, 1997 EXHIBIT E BILL OF SALE AND ASSIGNMENT Sideout Sport, Inc., a California corporation, having its principal office at 1551 S. Primrose Avenue, Monrovia, California 91016 ("Seller"), hereby sells, assigns and transfers to Cherokee, Inc., a Delaware corporation, having its principal office at 6835 Valjean Avenue, Van Nuys, California 91406 ("Buyer"), the following: A. All worldwide right, title and interest held by Seller in and to the Assets (as such term is defined in that certain Agreement of Purchase and Sale of Trademarks and Licenses dated November 7, 1997, between - Seller and Buyer (the "Agreement")); and B. All files, documents, records, specimens, artwork, screens, patterns, designs, marketing materials, computer disks and tapes, and other materials or other tangible assets respecting the Assets or in which any of the Assets are embodied. SIDEOUT SPORT, INC. Dated: November 7, 1997 By: /s/ Stephen Y. Ascher, Jr. - --------------------------------- Stephen Y. Ascher, Jr., President EX-10.1 3 LICENSE AGREEMENT EXHIBIT 10.1 LICENSE AGREEMENT THIS LICENSE AGREEMENT, is made and entered into as of the 12th day of November, 1997, by and between CHEROKEE, INC., 6835 Valjean Avenue, Van Nuys, California 91406 ("LICENSOR"), and DAYTON HUDSON CORPORATION, 33 South Sixth Street, Minneapolis, Minnesota 55402 ("Licensee"), collectively referred to as the "Parties". WHEREAS, Licensor is the owner of the "Cherokee" trademark, various other marks incorporating the name Cherokee and certain common law rights in and to the name Cherokee, with various stylized designs (collectively, the "Trademark"), copies of which are attached as Exhibit A hereto, and the goodwill associated with the Trademark; and WHEREAS, LICENSOR and Licensee desire to enter into this License Agreement with respect to the sale, manufacture and importation of certain merchandise, all upon the terms and conditions herein set forth; NOW, THEREFORE, the Parties hereto agree as follows: 1. GRANT OF LICENSE. ---------------- a. Upon the terms and conditions contained in this Agreement, Licensor hereby grants to Licensee, and Licensee hereby accepts, the exclusive (as defined hereinbelow) right and license to use the Trademark, during the term provided in Section 2 below, solely in connection with the sale of the merchandise bearing the Trademark, in the categories indicated below (the "Merchandise"),solely by DHC Retail Operations (as hereinafter defined), located in the United States of America (the "Retail Operations"), and to manufacture such Merchandise (and have such Merchandise manufactured) solely for sale by the Retail Operations. Such rights shall include the right to advertise the Trademark in connection with the Merchandise. Such license shall not include the right to grant sublicenses to third parties. The foregoing license is limited to use of the Trademark in connection with the sale of Merchandise by the Retail Operations and does not include the right to use the Trademark in connection with the manufacture, distribution or sale of any products except for Merchandise sold by the Retail Operations. As used herein, the Retail Operations shall mean Dayton's, Hudson's, Marshall Field's, Mervyn's, Target Stores, Target Greatland, SuperTarget, and any other store opened by Licensee, within the United States, during the Term of this Agreement, and/or any other merchandising activities undertaken by Licensee, within the United States, during the Term of this Agreement, including but not limited to direct mail, interactive on line or kiosk selling. If Licensee desires to open a Retail Operation outside the United States, and Licensor owns the Trademark in such other country, and if Licensor has no license in such other country, this Agreement shall then apply to Licensee in such other country. b. The following categories of Merchandise, shall be exclusive to Licensee, in the United States, in all classes of trade: (i) Men's, Women's and Children's Apparel (including, but not limited to intimate apparel, foundations and sleepwear, but excluding industrial and school uniforms)*. (ii) Men's, Women's and Children's Footwear (excluding nurses and lab technicians' shoes). (iii) Men's, Women's and Children's Accessories, including, but not limited to, luggage*, jewelry, handbags*, small leather goods, belts, neckwear, hairgoods, hats, rainwear, gloves, hosiery, slippers, sunglasses/eyewear* and watches*. (iv) Bed and Bath Products and Accessories. (v) Luggage*, Sportsbags* and Backpacks*. (vi) Home Textiles. (vii) Domestics and Home Decor. (viii) Home Furnishings. (ix) Sporting Goods. (x) Cosmetics, Bath and Body Products. *The categories that are asterisked are the subject of unexpired wholesale license agreements between Licensor and unaffiliated third parties. The categories that are the subject of such agreements will become part of Licensee's exclusive categories, upon expiration/termination of such agreements, as set forth in Section 7b hereinbelow; provided, however, the Parties agree that the wholesale license agreements applicable to apparel and luggage shall be terminated by Licensor upon execution of this Agreement by both Parties. Licensee may propose additional classes of merchandise for inclusion in this Agreement. Should Licensor, in its sole discretion, determine to include such additional classes of merchandise, this Agreement shall be amended to include such additional classes of merchandise within the definition of Merchandise. Licensor shall be responsible for all costs and attorney's fees incurred by Licensor 2 in obtaining trademark registration under the laws of the United States for such additional classes of merchandise, if necessary and available. 2. Term. ---- a. Initial Term. The initial term of this Agreement shall commence on ------------ February 1, 1998 and shall end January 31, 2004. As used hereinafter, the term fiscal year shall mean the 12 month period ending at midnight on the Saturday closest to January 31 (hereinafter "Fiscal Year"). b. Extended Terms. Provided that Licensee is current in its payments of -------------- the Minimum Guaranteed Royalty (as hereinafter defined) for the Fiscal Year ending in 2004, this Agreement will automatically renew for the Fiscal Year ending in 2005, and will continue to automatically renew for successive one (1) Fiscal Year terms, provided that Licensee has paid a Minimum Guaranteed Royalty equal to or greater than $9,000,000 for the preceding Fiscal Year. (The Initial Term and the Extended Terms, if any, are hereinafter referred to as the "Term"). c. Termination. Notwithstanding Section 2b above, (i) Licensee may ----------- terminate this Agreement effective January 31, 2004, if it gives Licensor written notice of its intent to do so during February 2003, and (ii) Licensee may terminate this Agreement at the end of any Fiscal Year thereafter, if it gives Licensor written notice of its intent to do so during February of the calendar year prior to termination. 3. Payments. -------- a. Royalty. Each Fiscal Year during the term of this Agreement, Licensee shall pay to Licensor as a royalty (the "Royalty") an amount equal to the greater of (i) the minimum guaranteed royalty applicable to such Fiscal Year, as set forth in Section 3c below ("Minimum Guaranteed Royalty"), or (ii) two percent (2%) of Licensee's Net Sales (as defined in Section 3b below) of Merchandise during such Fiscal Year, on sales up to $300,000,000, one and one-half percent (1 1/2%) of Licensee's Net Sales of Merchandise during such Fiscal Year on sales greater than $300,000,000 and up to $700,000,000, eight-tenths of one percent (.8%) of Licensee's Net Sales of Merchandise during such Fiscal Year on sales greater than $700,000,000 and up to $1,000,000,000, and seven-tenths of one percent (.7%) of Licensee's Net Sales of Merchandise during such Fiscal Year on sales greater than $1,000,000,000. b. Net Sales. The term "Net Sales" as used herein shall mean the gross --------- sales price to customers of all sales of Merchandise (whether regular, markdown, clearance or otherwise), excluding sales tax and finance charges and less returns of Merchandise. No other deductions shall be taken. 3 c. Minimum Guaranteed Royalties. The Minimum Guaranteed Royalties shall ---------------------------- be as set forth below:
MINIMUM FISCAL YEAR GUARANTEED ROYALTY ----------- ------------------ 2/01/98 - 1/30/99 $ 9,000,000 1/31/99 - 1/29/00 $ 9,000,000 1/30/00 - 2/03/01 $10,500,000 2/04/01 - 2/02/02 $10,500,000 2/03/02 - 2/01/03 $10,500,000 2/02/03 - 1/31/04 $10,500,000
4. MANNER OF PAYMENT. ----------------- a. Quarterly Payment. Not later than the tenth (10th) day after the end ----------------- of each and every fiscal quarter, beginning with the first fiscal quarter of 1998, Licensee shall pay and deliver to Licensor an amount equal to the greater of (i) twenty five percent (25%) of the Minimum Guaranteed Royalty applicable to the then current Fiscal Year, or (ii) the applicable Royalty percentage (2%, 11/2%, .8% or .7% or combinations thereof as the case may be, on a cumulative basis, as set forth in Section 3a above) multiplied by its Net Sales in the immediately previous fiscal quarter (the applicable royalty). b. Prompt Delivery. Licensee acknowledges and agrees that the timely --------------- delivery of the payments required by Section 4a and the Quarterly Reports and Sales Reports required by Section 5 hereof are essential to this Agreement. Interest shall accrue on all past due payments hereunder from their respective due dates until paid at the rate of one percent (1%) per month, or if such rate exceeds the maximum rate allowed by law, at the maximum rate allowed by law, and shall be payable on demand. 5. REPORTS, RECORD KEEPING AND AUDITS. a. Maintenance of Records. Licensee shall keep books of account and ---------------------- records in accordance with generally accepted accounting principles, consistently applied, covering all sales relating to this Agreement and the license hereby granted. Such records shall be maintained for at least two (2) years after the quarter to which such records relate. b. Quarterly Reports. Every Royalty payment pursuant to Section 4a shall ----------------- be accompanied by a written report (individually, the "Quarterly Report" and collectively, the "Quarterly Reports") as to: 4 (i) The quantity, description and sales price of all Merchandise sold by Licensee during the quarter to which such Royalty relates; (ii) The aggregate gross sales of all Merchandise and the Net Sales of Merchandise, year to date, and the Net Sales of Merchandise for such quarter; (iii) Any other related information that may be reasonably requested by Licensor. c. Sales Reports. In addition, Licensee shall provide Licensor with ------------- weekly sales recap reports and seasonal sales projections as developed and revised (collectively, the "Sales Reports"); provided, however, that all such Sales Reports shall be in the form and format used by Licensee in the ordinary course of business. d. Audit. Licensor and its duly authorized representatives shall have the ----- right upon reasonable notice and at all reasonable hours during normal business days to examine and copy such books of account and records and all other documents and materials in the possession or under the control of Licensee with respect to the subject matter and the terms of this Agreement, the cost of which shall be borne by Licensor. Licensor shall not conduct an audit more than once with respect to any Fiscal Year, and in no event shall such audit be during Licensee 5 fourth fiscal quarter. If the audit discloses that the Royalty payments actually due exceed the Royalty payments paid, Licensee shall pay the unpaid Royalty and interest on such unpaid Royalty payments computed from the date such Royalty payments were due, accrued at the rate of one percent (1%) per month, or if such rate exceeds the maximum rate allowed by law, at such maximum legal rate. If the audit discloses that the Royalty payments made by Licensee exceed the Royalty payments due, Licensor shall reimburse Licensee in the amount the overpaid Royalty and interest on such overpayment, computed from the date such Royalty payments were made, accrued at the rate of one percent (1%) per month. In addition, if the audit discloses that the Royalty payments actually due exceed the Royalty payments paid by an amount greater than five percent (5%) of the Royalty payments paid, the cost of the audit performed by Licensor shall be paid by Licensee. e. Financial Statements. If, at any time during the Initial Term, -------------------- Licensee is no longer a company required to provide public financial information pursuant to the Securities and Exchange Commission reporting requirements, Licensee shall, upon reasonable request of Licensor, and from time to time thereafter, provide Licensor with interim and audited annual financial statements. 5 6. STANDARDS OF OUAIITV -------------------- a. Standards and Prestige of Merchandise. Licensee acknowledges that the ------------------------------------- Trademark has established prestige and goodwill and is well recognized in the minds of the public, and that it is of great importance to each party that in the manufacture and sale of the Merchandise the high standards and reputation that Licensor has established be maintained. Accordingly, all items of Merchandise manufactured or caused to be manufactured by Licensee hereunder and any other expression by Licensee, which by its nature conveys to others the existence of a relationship between the Licensee and the Trademark, including, without limitation, all packaging, labeling, fixturing, advertising, point-of-sale materials and product literature (any such expression as herein referred to as "Trademark Use Materials") shall (i) in the case of apparel Merchandise, be of a quality at least as high as the "middle" line of similar products being sold by Licensee at the time of execution of this Agreement (i.e. Licensee's HONORS(R) brand products), and (ii) in the case of non-apparel Merchandise, be of a quality at least as high as the standard set forth in Licensee's quality control standards and procedures for such non-apparel Merchandise. From time to time during the Term of this Agreement, and as Licensor reasonably requests, so as not to disrupt the ongoing business processes of Licensee, Licensee shall supply Licensor or a designee of Licensor with a reasonable assortment of samples of Merchandise (including samples of labeling and packaging used in connection therewith). Further, at all times during the Term hereof, and upon Licensor's prior request, Licensee shall make its manufacturing facilities available to Licensor at mutually satisfactory times, and shall use its reasonable efforts to make available each contractor's manufacturing facilities for inspection by Licensor's representatives during usual working hours. In addition, Licensee shall supply Licensor or a designee of Li censor with samples of its logo designs and formats for use of the Trademark in connection with labels and packaging materials. Upon receipt of such designs and formats, Licensor shall have ten (10) business days in which to review and approve those materials, which approval shall not be unreasonably withheld. Thereafter, all uses of the Trademarks by Licensee in connection with labels and packaging materials shall conform in all materials respects with the approved designs and formats and Licensee shall have no obligation to provide samples of such materials for review or approval by Licensor, as long as the approved designs and formats remain unchanged. If Licensor shall not have indicated approval of any such materials within seven (7) business days, Licensee shall contact Licensor regarding such approval, and Licensor shall have three (3) additional days in which to review and approve the materials. If Licensor shall not have indicated approval of any such materials in the said three (3) additional days, then the Materials shall be deemed to have been approved. Licensee shall sell or otherwise dispose of miscuts or damaged Merchandise only after Licensee has cut out the labels or any other item that identifies the Merchandise with the Trademark. 6 b. Standards and Procedures. Concurrently with execution of this ------------------------ Agreement, and not more than once each Fiscal Year thereafter, upon the request of Licensor, Licensee shall provide Licensor with a written copy of Licensee's quality control standards and procedures, and Licensor shall, upon the request of Licensee, provide Licensee with a written copy of Licensor's Quality Control Standards which apply to Licensor's other licensees. At Licensee's request, Licensor and Licensee will meet annually before Licensor's Quality Control Standards are established for such year and Licensee shall have the right to approve such standards and procedures, including, without limitation, the quality standards to be applied to retail drug store license agreements for cosmetics, if any, before they are implemented; provided, however, that such Quality Control Standards shall be consistent with the quality standard set forth in Section 6a hereinabove. 7. PROTECTION OF TRADEMARK ----------------------- a. Acknowledgments and Agreements of Licensee. As a material inducement ------------------------------------------ to Licensor to enter into this Agreement, and as a material part of the consideration to Licensor hereunder, Licensee hereby acknowledges and agrees that: (i) (a) Licensor owns the Trademark in various countries worldwide, and all rights, registrations, applications and filings with respect to such Trademark, and all renewals and extensions of any such registrations, applications and filings, (b) Licensor has the right to license the Trademark, and (c) Licensee is acquiring hereby only the right to use the Trademark for the purpose stated in and pursuant to the terms and conditions of the Agreement. (ii) (a) Great value is placed on the Trademark, and the goodwill associated therewith, (b) the Trademark and all rights therein and goodwill pertaining thereto belong exclusively to Licensor, and (c) all authorized use of the Trademark by Licensee shall inure to the benefit of Licensor. (iii) The conditions, terms, restrictions, covenants and limitations of this Agreement are necessary, equitable, reasonable and essential to assure the consuming public that all goods sold under the Trademark are of the same consistently high quality as sold by Licensor and by others who are licensed to design, manufacture and/or sell any products by, under or with the Trademark, if any. 7 b. Protection of Rights. -------------------- (i) Restriction on Use. Licensee shall not use or permit the use of ------------------ the Trademark for any purpose or use other than the uses licensed under this Agreement. (ii) General. Licensee shall cooperate fully and in good faith with ------- Licensor for the purpose of securing and preserving Licensor's (or any grantee of Licensor's) rights in and to the Trademark. Licensee shall cause to appear on and in connection with the Merchandise and the Trademark Use Materials the (R) or TM as applicable. (iii) Registration. Licensee shall, upon request, supply to Licensor ------------ enough specimens of advertisements, tags, labels and other use of the Trademark as may be required in connection with any of Licensor's Trademark applications or registrations. Licensee shall execute any instrument Licensor shall reasonably deem necessary or desirable to record or cancel Licensee as a registered user of the Trademark, it being understood and agreed that Licensee's right to use the Trademark in the event that the filing of a registered user application is required or is requested by Licensor shall commence only upon the filing of such registered user application, and shall continue only so long as this Agreement remains in effect. (iv) Customer Complaints. Licensee shall, in connection with its ------------------- duty to use the Trademark so as to promote the continuing goodwill thereof, give immediate attention and take necessary action to satisfy all legitimate customer complaints brought against Licensee in connection with the Merchandise or the Stores. Licensee shall give Licensor immediate written notice of all complaints that in Licensee's opinion are likely to result in litigation. Licensee shall cooperate with Licensor upon request to achieve as good a reputation and press for the Trademark as possible. (v) Exclusivity. Licensor agrees that during the term of this ----------- Agreement it will not license the Trademark, and/or renew or otherwise extend existing license agreements between Licensor and any third party(ies), in the United States, in any merchandise category whatsoever; excluding, however, the following: (a) Retail license agreements with Brylane, Caldor and/or Pamida, which may be extended, on the terms in force as of the date of signing of this Agreement, as long as such agreements are not extended beyond January 31, 2002, without the prior written consent of Licensee, which 8 may be granted or withheld at Licensee's sole option. In the event that Licensee does not consent to extension of the agreements beyond January 31, 2002, the categories that are subject of such agreements will become part of Licensee's exclusive categories. In the event that Licensee consents to extension of the agreements beyond January 31, 2002, Licensor shall pay and deliver to Licensee, not later than the tenth (10th) day after the end of each and every fiscal quarter, beginning with the first fiscal quarter of 2002, fifty percent (50%) of all royalties earned by Licensor from Brylane, Caldor and/or Pamida in connection with such agreements. (b) Retail license agreements with certain drug stores chains, as set forth and defined in Exhibit B hereto (in the category of cosmetics, bath and body products only). (c) Wholesale license agreements with Bueno Handbags (in the category of handbags, only), Golden State Watches (in the category of watches only) and/or Outlook/Creative Optics (in the category of sunglasses/eyeglasses only), which may be extended, for the same categories of merchandise as long as (i) such agreements are not extended beyond January 31, 2002, without the prior written consent of Licensee, which may be granted or withheld at Licensee's sole option, and (ii) any extension specifically prohibits the sale of merchandise by such wholesale licensees to any mass merchandising discount store, wholesale club, midtier store and/or value discounter (with the exception of Caldor and Pamida). The categories that are the subject of such agreements will become part of Licensee's exclusive categories if such agreements are not extended. 8. DEFAULTS AND REMEDIES. --------------------- a. Defaults by Licensee. The occurrence of any one or more of the -------------------- following shall constitute a default by Licensee under this Agreement: (i) Licensee shall fail to make any payment, submit any Quarterly Report or provide any financial information required under this Agreement when due, and such failure continues for more than thirty (30) days after written notice thereof, unless such failure cannot be cured within such thirty (30) day period and Licensee shall have commenced to cure the failure and proceeds diligently thereafter to cure such failure. (ii) Licensee uses the Trademark in any manner likely to endanger the validity of the Trademark or to damage or impair the reputation or value of the Trademark, and such action continues for more than thirty (30) days after written notice 9 thereof, unless the action cannot be cured within such thirty (30) day period and Licensee shall have commenced to cure the action and proceeds diligently thereafter to cure such action. (iii) The failure of Licensee to perform any of its other material obligations under this Agreement and such failure continues for more than thirty (30) days after written notice thereof, unless the failure cannot be cured within such thirty (30) day period and Licensee shall have commenced to cure the failure and proceeds diligently thereafter to cure such failure. b. Default by Licensor. If Licensor fails to perform any of its material ------------------- obligations under this Agreement and such failure continues for more than thirty (30) days after the written notice thereof, such failure shall constitute a failure by Licensor under this Agreement, unless the failure cannot be cured within such thirty (30) day-period and Licensor shall have commenced to cure such failure and proceeds diligently thereafter to cure such failure. c. Remedies -------- (i) If Licensee has not cured any such breach or non-performance in accordance with Section 8a above, in addition to all other rights and remedies available to Licensor, whether pursuant to the terms of this Agreement at law in equity or otherwise, Licensor shall have the right to terminate this Agreement without further notice to Licensee and all unpaid Minimum Guaranteed Royalty payments due and owing under this Agreement, shall be immediately due and payable. (ii) If Licensor has not cured any such breach or non-performance in accordance with Section 8b above, in addition to all of the other rights and remedies available to Licensee, whether pursuant to the terms of this Agreement at law, in equity or otherwise, Licensee shall have the right to terminate this Agreement without further notice to Licensor. d. Effect of Expiration or Termination. Except as specifically provided ----------------------------------- herein to the contrary, upon expiration or termination of this Agreement, the rights and licenses granted herein shall terminate and Licensee shall have no further right to use the Trademark in connection with the Merchandise or the Trademark Use Materials. Upon the request of Licensor, Licensee shall immediately execute without further consideration such assignments and other instruments which may be required to be recorded to effect the termination of the licenses and rights granted herein (and the assignments of Licensee's rights to Licensor). Within twenty (20) days of the expiration or termination of this Agreement, Licensee 10 shall deliver to Licensor all unpaid Royalties together with a final Quarterly Report covering all sales of Merchandise from the end of the period covered by the preceding Quarterly Report through the date of expiration or termination of this Agreement, e. Merchandise and Trademark Use Materials. Within one hundred and twenty --------------------------------------- (120) days of the expiration or termination of this Agreement, Licensee shall, at its sole expense, (i) remove or obliterate the Trademark from all Merchandise and Trademark Use Materials from which the Trademark can be removed or obliterated, and (ii) either destroy or deliver to Licensor all Merchandise and Trademark Use Materials from which the Trademark cannot be removed or obliterated. F. Assignments. Neither this Agreement nor any of the rights or duties ----------- hereunder nor the license granted hereby may be assigned, sub- licensed, encumbered or otherwise transferred in any way by Licensee, without the prior written consent and agreement of the Licensor. Any purported assignment, sub-license, encumbrance or other transfer, whether voluntary or involuntary by operation of law or otherwise, shall be null and void and shall constitute a default hereunder by Licensee. Notwithstanding the foregoing, Licensee hereby consents and agrees (i) to the transfer or assignment of this Agreement (and related Trademarks), including any and all rights or duties of Licensor hereunder or thereunder, or in connection herewith, by Licensor to a different entity, including a "bankruptcy remote" special purpose entity ("SPE"), (ii) to the assignment and pledging of rights (and related Trademarks) of the Licensor under this Agreement to investors as collateral in a financing or securitization transaction, (iii) to make payments under this Agreement to a designated controlled account, and (iv) to furnish information and take such other measures (at no material cost or disruption to Licensee) which are reasonably requested by Licensor to facilitate the proposed financing or securitization. In the event of a transfer or assignment of this Agreement to a successor licensor hereunder, Licensor shall no longer mean Cherokee Inc. but its successor licensor; provided, however, that once a transfer or assignment is made pursuant to the clauses (i) and (ii) above, any subsequent assignment or transfer to successor licensor hereunder, including, but not limited to, any sale or transfer of equity ownership in the SPE, may only be made with the written approval of Licensee, which approval shall not be unreasonably withheld. g. Contracts. Licensee shall have the right to contract the manufacture --------- of the Merchandise and the Trademark Use Materials bearing the Trademark to third party manufacturers, so long as (i) each such contractor shall sign and return a Manufacturer's Trademark Agreement, in substantially the form attached hereto as Exhibit C, (ii) each such contractor shall be subject to the inspection and quality control procedures set forth herein, and (iii) the Merchandise and Trademark Use Materials meet the quality standards set forth in this Agreement. 11 9. WARRANTIES. ---------- a. Licensor warrants and represents that Licensor (i) is free to enter into this Agreement, (ii) has the full power, right and authority to make the grant of rights to Licensee as provided hereunder and that the exercise by Licensee of such rights, as authorized hereunder, shall not violate the rights of any third party, and (iii) is not subject to any obligation which will or might hinder or prevent the full completion and performance by Licensor of any of the covenants and the conditions to be kept and performed by Licensor hereunder. b. Licensee hereby represents and warrants that Licensee (i) is free to enter into this Agreement, (ii) is not subject to any obligation which will or might hinder or prevent the full completion and performance by Licensee of any of the covenants and conditions to be kept and performed by Licensee hereunder, and (iii) will ensure that all uses of the Trademark and Trademark Use Materials comply with the terms of this Agreement. 10. INDEMNIFICATION AND INSURANCE. ----------------------------- a. Indemnification of Licensor. Licensee shall indemnify and hold --------------------------- Licensor and its affiliates, directors, officers, employees and agents harmless from and against any and all liabilities, losses, claims, suits, damages, costs and expenses (including, without limitation, reasonable attorneys' fees and expenses) arising out of or otherwise relating to any claims of third parties against the Licensor involving the design, manufacture, packaging, distribution, promotion, sale, marketing, advertising or other use of the Trademark, the Merchandise or the Trademark Use Materials, by Licensee and/or its contractors, provided that (i) prompt written notice is given to Licensee, upon Licensor becoming aware of any such actual or threatened claims or suits, (ii) Licensee shall have the option to exclusively undertake and conduct the defense and/or settlement of any such claims or suits, (iii) Licensor acts, with the prior consent of Licensee, to mitigate any damages, and (iv) no settlement or attempt at settlement of any such claims or suits is made without the prior written consent of Licensee. Licensee acknowledges that this indemnity does not include those items for which Licensor is indemnifying Licensee in Section 10b or 10c below. b. Limitation on Indemnification of Licensor. The foregoing ----------------------------------------- notwithstanding, it is hereby acknowledged that the Parties desire to participate in establishing common law usage of the Cherokee name in the cosmetics, bath and body category, but cannot anticipate what issues, if any, may be raised in that regard. As such Licensor defend, indemnify and hold Licensee and its affiliates, directors, officers, employees, and agents harmless, from and against any and all liabilities, losses, claims, suits, damages, costs and expenses (including, without limitation, reasonable attorneys' fees and expenses) which may be sustained or suffered by or secured against Licensee based upon or arising out of any 12 actual or alleged trademark infringement, unfair competition or infringement of similar proprietary rights, arising solely out of establishing common law usage of the Cherokee name in connection with such goods. The indemnification period will commence upon signing of this Agreement and will extend six (6) months after the date goods are first offered for sale in connection with the use of the Cherokee name in the cosmetics, bath and body category. In the event that Licensor obtains a federal trademark registration of the Cherokee name for the cosmetics, bath and body category, the provisions of (S) 10c below shall apply from the date of registration. c. Indemnification of Licensee. Licensor shall defend, indemnify and hold ------------------ -------- Licensee and its affiliates, directors, officers, employees and agents harmless from and against any and all liabilities, losses, claims, suits, damages, costs and expenses (including, without limitation, reasonable attorney's fees and expenses) which may be sustained or suffered by or secured against Licensee based upon or arising out of any actual or alleged trademark infringement, unfair competition or infringement of similar proprietary rights, arising solely out of the use by Licensee and/or its contractors of the Trademark as authorized in this Agreement, provided that (i) prompt written notice is given to Licensor, upon Licensee becoming aware of any such actual or threatened claims or suits, (ii) Licensor shall have the option to exclusively undertake and conduct the defense and/or settlement of any such claims or suits, (iii) Licensee acts, with the prior consent of Licensor, to mitigate any damages, and (iv) no settlement or attempt at settlement of any such claims or suits is made without the prior written consent of Licensor. d. Insurance. Licensee shall obtain and maintain throughout the term of --------- this Agreement, at its own expense, general liability insurance and product liability insurance, with a responsible insurance carrier or carriers acceptable to Licensor, providing adequate protection (at least in the amount of $1,000,000 single limits for personal injury or property damage) and naming Licensor as an additional insured. As soon as possible after the execution of this Agreement, Licensee shall deliver to Licensor a fully paid certificate or certificates of insurance, naming Licensor as an additional insured, and providing that such policy or policies are cancelable only after thirty (30) days prior written notice to Licensor. No changes shall be made in such policy or policies of insurance that affect Licensor without written notice of such changes being given to Licensor. 11. CONFIDENTIALITY --------------- Licensor acknowledges and agrees that any and all reports and financial information disclosed by Licensee pursuant to this Agreement is confidential information commercially valuable to Licensee (hereinafter the "Licensee Information"). Licensor acknowledges that the Licensee Information is disclosed to Licensor on a confidential basis to be used only as may be expressly 13 permitted by the terms and conditions of this Agreement. Licensor, its officers, directors, employees, and agents shall protect the Licensee Information as the confidential information and property of Licensee. Licensor shall not disclose any Licensee Information to any other person, firm, organization, or employee who is not authorized, in writing, by Licensee. Except as expressly permitted hereunder, the Licensee Information may not be copied, reprinted, duplicated, or recreated in whole or in part without the express written consent of Licensee. Licensor shall take reasonable action by instruction, agreement or otherwise with respect to Licensor's employees or other persons permitted to access the Licensee Information to comply fully with Licensor's obligations hereto with respect to the use, copying, protection, and security of the Licensee Information. Licensor agrees to return the Licensee Information, and all copies thereof, to Licensee, upon request. Licensee hereby consents to the disclosure of the License Information to any of the Licensor's attorneys, accountants and other third parties who have a business "need to know" in connection with any financing or securitization. 12. GENERAL PROVISIONS. ------------------ a. Notices. All notices and other communications required or permitted to ------- be given under this Agreement shall be in writing and shall be delivered either by personal service, facsimile or by prepaid over- night courier service and addressed as follows: IF TO LICENSOR: WITH A COPY TO: Cherokee Inc. Latham & Watkins 6835 Valjean Avenue 633 West 5th Street Van Nuys, CA 91406 Suite 4000 Attn: Chief Executive Officer Los Angeles, CA 90071 Fax: 818/908-9191 Attn: Robert Klyman Fax: 213/891-8763 IF TO LICENSEE: WITH COPIES TO: Target Stores Target Stores 33 South 6th Street 33 South Sixth Street Minneapolis, MN 55402 Minneapolis, MN 55402 Attn: Executive Vice President Attn: Assistant General Merchandising Counsel, General Business Fax: 612/304-6325 Fax: 612/304-8309 Attn: CFO, DHC Fax: 612/370-6565 Attn: Senior VP Merchandising, Softlines Fax: 612/304-3729 14 If delivered personally, such notices or other communications shall be deemed delivered upon delivery. If sent by fax, such notice or other communications shall be deemed delivered when received, provided that the sender has confirmation of receipt. If sent by prepaid over-night courier service, such notices or other communications shall be deemed delivered upon delivery or refusal to accept delivery as indicated on the return receipt. Either party may change its address at any time by written notice to the other party as set forth above. b. Entire Agreement. This Agreement sets forth the entire agreement ---------------- between the Parties with respect to the subject matter hereof, and all prior negotiations, discussions, commitments and/or understandings relating thereto, if any, are merged herein. Effective February 1, 1998, this Agreement shall supersede any and all other agreements and amendments between the Parties, bearing a date of November 11, 1997 or earlier, including, without limitation, that certain exclusive License Agreement between Licensor and Licensee dated August 15, 1995 as amended, and that certain non-exclusive License Agreement between Licensor and Licensee dated November 1, 1995 (and accompanying cover sheet), as amended, and may be modified only by a written agreement signed by duly authorized of each of the Parties. No representations, oral or otherwise expressed or implied, other than those specifically contained in this Agreement have been made by any party hereto. No other agreements not referred to or specifically contained herein, oral or otherwise, shall be deemed to exist or to bind any of the Parties hereto. c. Successors and Assigns. This Agreement shall be binding upon and shall ---------------------- inure to the benefit of the successors and permitted assigns of the Parties. d. Choice of Law. The validity, construction and enforcement of this ------------- Agreement shall be governed by the laws of the State of California without regard to its choice of law principles. e. Dispute Resolution. Any claim or controversy arising out of or ------------------ relating to this Agreement, or any breach thereof wherein only damages are sought, shall be settled by the appointment of a retired judge of the Superior or Appellate Courts of California who shall act pursuant to Section 638.1 of the California Code of Civil Procedure "to try any and all of the issues in an action or proceeding, whether of fact or of law, and to report a state of decision thereon". The Parties stipulate to the use of the referenced procedure and agree that the Superior Court of Los Angeles County of the State of California may issue such orders as are necessary to implement the Parties intent that any such claim or controversy shall be resolved through the use of the referenced procedure. The decision reached by the referee shall be entered as a judgment of the Superior Court appointing the referee and such decisions shall be fully appealable. All fees and expenses of the 15 referee shall be initially borne on a pro rata basis by the Parties, but shall be recoverable by the prevailing party. Additionally, the prevailing party shall be entitled to recover, as an element of such party's cost of suit, and not as damages, all reasonable costs and expenses incurred or sustained by such prevailing party in connection with such actions including without limitation, legal fees and costs. f. No Waiver. No waiver by either party, whether express or implied, of --------- any provision of this Agreement or of any breach or default of any party, shall constitute a continuing waiver of such provision or any other provisions of this Agreement, and no such waiver by any party shall prevent such party from acting upon the same or any subsequent breach or default of the other party of the same or any other provision of this Agreement. g. Disclaimer of Agency. Nothing in this Agreement shall create a -------------------- partnership or joint venture or establish the relationship of principal and agent or any other relationship of a similar nature between the parties hereto, and neither Licensee nor Licensor shall have the power to obligate or bind the other in any manner whatsoever. h. Construction. This Agreement shall be interpreted to provide Licensor ------------ with the maximum control of the Trademark and the use thereof. i. Licensor Approvals. Any approval required from Licensor under this ------------------ Agreement shall be effective and binding against Licensor only if it is in writing. Any approval required hereunder must be obtained by Licensee prior to Licensee taking any action which requires such approval. j. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. k. Authority. Each individual signing on behalf of a party hereto --------- represents and warrants that he or she is authorized to execute this Agreement on behalf of such party. l. Termination on Insolvency of Licensee. Licensor may terminate this ------------------------------------- Agreement if a petition for relief under applicable bankruptcy law is filed by or against Licensee, and is not dismissed within sixty (60) days of such filing, if Licensee makes any assignment for the benefit of its creditors, or if a receiver is appointed for Licensee for all or substantially are of its business interests. The license and rights granted hereunder are personal to Licensee. No assignee for the benefit of creditors, receiver, debtor in possession, trustee in bankruptcy, sheriff or any other officer of court charged with taking over custody of Licensee's assets or 16 business shall have any right to continue performance to exploit or in any way use the Trademark if this Agreement is terminated, except as may be required by law. m. Termination on Insolvency of Licensor. Licensee may terminate this ------------------------------------- Agreement, if a petition for relief under applicable bankruptcy law is filed by or against Licensor, and is not dismissed within sixty (60) days of such filing, if Licensor makes any assignment for the benefit of its creditors, or if a receiver is appointed for Licensor for all or substantially all of its business interests. In the event of such termination, Licensee shall have the right to continue thereafter to import and/or sell any and all Merchandise which Licensee has purchased, produced or committed to purchase prior to the date of termination. n. Non-Disclosure of Terms. The existence and content of this Agreement ----------------------- are confidential and are trade secrets, and shall not be released in whole or in part to any third party, or disclosed to any newspaper or other public medium, or in any other fashion whatsoever, without the mutual, prior approval of the Parties, in their sole discretion; except that any party shall have the right to make such disclosures as required by law or court order, or on a "need to know" basis within their respective organizations and related, affiliated and subsidiary companies, and to their respective accounts and attorneys. The provisions of this Section 12 shall survive the expiration or sooner termination of this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the 12th day of November, 1997 DAYTON HUDSON CORPORATION CHEROKEE, INC. By: /s/ Gregg Steinhafel By: /s/ Robert Margolis ----------------------- ----------------------- Gregg Steinhafel Robert Margolis Executive Vice President, Marketing Chief Executive Officer 17 EXHIBIT A CHEROKEE TRADEMARK REGISTRATION LISTING EXHIBIT B POTENTIAL RETAIL DRUG STORE LICENSEES* CVS Drugs Discount Drug Mart Drug Emporium Eckerd Genovese Drug Stores Haggens Harco K&B Lewis Drug, Inc. Longs Drug Stores Phar-Mor Revco D.S. Rite Aid Corp Smiths Snyder's Drug Stores Super D Drug Stores Taylor Drug Stores Thrifty Payless Waigreens Drug Stores *The drug stores listed above are representative only. Any new companies that emerge in the Retail Drug Store Class of Trade can be added, upon prior written notice to Licensee. For purposes of this Agreement, the Retail Drug Store Class of Trade shall be defined as consisting of retail stores that sell primarily health and beauty and/or cosmetics products; excluding, without limitation, mass merchandising discount stores, wholesale clubs, value discounters, retail stores or departments located within mass merchandising discount stores, and any merchandising activities other than retail store sales (e.g. direct mail, interactive on line or kiosk selling). EXHIBIT C MANUFACTURER'S TRADEMARK AGREEMENT THIS AGREEMENT, is made and entered into as of the ___ day of __________, 1997, by and between Target Stores, a division of Dayton Hudson Corporation, 33 South Sixth Street, Minneapolis, Minnesota 55402 (hereinafter "Target"), and _______________________________________________________________________ (hereinafter "Manufacturer"), collectively hereinafter the "Parties". WHEREAS, CHEROKEE, INC. (hereinafter "Cherokee") is the owner of the trademark Cherokee and/or equivalent variations thereof, evidenced by numerous U.S. registrations including, but not limited to Reg. Nos. 1,270,846, 1,279,965, 1,699,855, 1,751,953, 1,708,195 (collectively hereinafter the "Mark"); and WHEREAS, TARGET is a licensee of the Mark, and has the right to use the Mark in connection with certain Cherokee products ordered by Target from manufacturers from time to time; and WHEREAS, Manufacturer has been engaged by Target as a manufacturer of certain Cherokee products (hereinafter the "Products"); and WHEREAS, Manufacturer has agreed to manufacture and sell such Products to Target, and to use the Mark in connection with such Products, solely as set forth herein; NOW, THEREFORE, in consideration of the foregoing and of the mutual promises hereinafter set forth, as well as other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows: 1. Target grants to Manufacturer a non-exclusive, non-transferable license to use the Mark, during the term of this Agreement, solely in connection with the importation and sale of the Products to Target in the United States, and to manufacture such Products for Target. Manufacturer accepts the license subject to the following terms and conditions. 2. Manufacturer acknowledges the ownership of the Mark by Cherokee and agrees that nothing contained herein shall give Manufacturer any right, title or interest in or to the Mark, other than the right to use the Mark in accordance with this Agreement. 3. Manufacturer agrees to use the Mark only in the form and manner and with the legends as prescribed from time to time by Target, on the understanding that the Mark is neither licensed hereunder nor applicable to products manufactured or sold by Manufacturer for or to any company other than Target. Manufacturer shall affix or apply the Mark to the Products and/or related packaging materials strictly in accordance with the specifications provided by Target or as otherwise directed by Target. All Products bearing the Mark and all packaging materials relating thereto shall include the (R) or TM, as applicable. Manufacturer agrees to order any and all packaging, labeling and/or trim for the Products only from manufacturers who have been preapproved by Target. Target shall provide Manufacturer with a list of such approved manufacturers. 4. Manufacturer shall not use any other names, trademarks or designs in connection with the Mark and/or the Products unless so directed by Target. 5. Manufacturer represents and warrants that (a) all Products will be manufactured by Manufacturer in Manufacturer's factory(ies) or by subcontractors of Manufacturer in their factories, and that Manufacturer will provide Target with a list of all such factories and the countries in which they are located upon execution of this Agreement, (b) all subcontractors of Manufacturer, if any, will sign the attached Subcontractor's Certificate, copies of which will be provided to Target immediately upon execution, and (c) all Products will be labeled with the correct country of origin and in accordance with all applicable laws, rules and regulations of the United States and its agencies. 6. In the event that any Products are rejected by Target, for any reason, Manufacturer agrees to immediately remove all labels, tags, snaps and/or other markings on such Products bearing the Mark, before disposing of them (other than care labels if shipped to the United States). In the event that such markings cannot be removed from the Products, Manufacturer agrees to immediately notify Target of that fact and then Manufacturer may either (a) immediately destroy the Products, or (b) obtain approval from Target and Cherokee to sell the Products to a retailer which sells products at least equal to the standard of products sold by Target; provided, however, that (a) Manufacturer shall be required to pay a 3% royalty on the Products to Cherokee, and (b) in no event shall Manufacturer sell the Products to Wa1- Mart, K-Mart, or any of their affiliates, successors or assigns, "clubs" (i.e. Costco, Sams, Fedco), Dollar General, Pic'n Save, Hills, Bradlees, Arnes, diverters or jobbers, or outside of the United States. 7. Any information disclosed to Manufacturer by Target pursuant to this Agreement is confidential information commercially valuable to Target. Manufacturer acknowledges that the Target information is disclosed to Manufacturer on a confidential basis to be used only as may be expressly permitted by the terms and conditions of this Agreement. Manufacturer, its officers, directors, employees, and agents shall protect the Target information and all information pertaining thereto, whether written or oral, as the confidential information and property of Target. Manufacturer shall not disclose any information concerning Target data to any other person, firm, organization, or employee who is not authorized, in writing, by Target. Target information may not be copied, reprinted, duplicated, or recreated in whole or in part without the express written consent of Target. Manufacturer shall take reasonable action by instruction, agreement or otherwise with respect to Manufacturer's employees or other persons permitted access to the Target information to comply fully with Manufacturer's obligation hereto with respect to the use, copying, protection, and security of Target data. Manufacturer agrees to return all Target information, and all copies thereof, to Target, upon request. 8. During the term of this Agreement, manufacturer shall permit Target, Cherokee and/or their agents to inspect Manufacturer's activities and premises. 9. In the event of Manufacturer's failure to abide by any of the foregoing, Target and/or Cherokee may seek legal remedies against Manufacturer, including, but not limited to, compensation for all damages sustained as a result of Manufacturer's actions or omissions, as well as injunctive relief. 10. This Agreement shall commence as of the date hereof and shall continue in effect for such period of time as Target is purchasing the Products from Manufacturer. Target shall have the right to terminate this Agreement immediately upon written notice to Manufacturer in the event of (a) any affirmative act of insolvency by Manufacturer, (b) the appointment of any receiver or trustee to take possession of the properties of Manufacturer, (c) the winding-up, sale, consolidation, merger or any sequestration by governmental authority of Manufacturer, or (d) a material breach of any significant provision hereof by Manufacturer. In addition, should the Trademark License Agreement in effect between Target and Cherokee expire or be terminated, for any reason, this Agreement shall likewise terminate. 11. Upon termination of this Agreement, for any reason, Manufacturer agrees to immediately discontinue all use of the Mark and any terms confusingly similar thereto; provided, however, that Manufacturer shall have the right to sell any Products remaining in its inventory at the time of termination of this Agreement, in accordance with the terms of Section 6 hereinabove. Further, upon termination of this Agreement, for any reason, Target shall have the option, exercisable in its sole discretion, to purchase from Manufacturer, at Manufacturer's cost, Manufacturer's remaining inventory of Cherokee labels. In the event that Target elects not to purchase such labels, Manufacturer shall immediately destroy the labels and provide proof of such destruction to Target. 12. It is agreed that this Agreement will be interpreted according to the laws of the State of Minnesota, United States of America. 13. This Agreement contains the entire understanding between the parties hereto, with respect to the licensing of the Mark, and supersedes all prior agreements and proposals, if any, and will not be amended, modified, or altered except by an instrument in writing, signed by the parties to be charged. 14. This Agreement and all of the terms thereunder shall not be deemed assignable by Manufacturer without the express written consent of both Target and Cherokee. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date and year first above-written. DAYTON HUDSON CORPORATION, MANUFACTURER TARGET STORES DIVISION By: By: Name: Name: Title: Title: SUBCONTRACTOR'S CERTIFICATE THIS AGREEMENT, is made and entered into as of the ___ day of _______, 1997, by and Between _______________________________________________________ (hereinafter "Manufacturer"). And __________________________________________ (hereinafter "Subcontractor"), collectively hereinafter the "Parties". WHEREAS, Cherokee, Inc. (hereinafter "Cherokee") is the owner of the trademark and/or certain common-law rights in and to the name Cherokee with various stylized designs (collectively hereinafter the "Mark"); and WHEREAS, Target Stores, a division of Dayton Hudson Corporation (hereinafter "Target"), is a licensee of the Mark, and has the right to use the Mark in connection with certain products ordered by Target from manufacturers from time to time; and WHEREAS, Manufacturer has been engaged by Target as a manufacturer of certain Cherokee products (hereinafter the "Products") and holds a non- exclusive, non-transferable license to use the Mark, solely in connection with the importation and sale of the Products to Target in the United States, and to manufacture such Products for Target; and WHEREAS, Subcontractor has agreed to manufacture all or some of such Products for Manufacturer, and to use the Mark in connection with such Products, solely as set forth herein; NOW, THEREFORE, in consideration of the foregoing and of the mutual promises hereinafter set forth, as well as other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows: 1. Subcontractor acknowledges the ownership of the Mark by Cherokee and agrees that nothing contained herein shall give Subcontractor any right, title or interest in or to the Mark, other than the right to use the Mark in accordance with this Agreement. 2. Subcontractor agrees to use the Mark only in the form and manner and with the legends as prescribed from time to time by Target, on the understanding that the Mark is neither licensed hereunder nor applicable to products manufactured or sold by Subcontractor for or to any company other than Target. Subcontractor shall affix or apply the Mark to the Products and/or related packaging materials strictly in accordance with the specifications provided by Manufacturer or as otherwise directed by Manufacturer and/or Target. All Products bearing the Mark and all packaging materials relating thereto shall include the or TM, as applicable. Subcontractor agrees to order any and all packaging, labeling and/or trim for the Products only from manufacturers who have been pre-approved by Target. Manufacturer shall provide Subcontractor with a list of such approved manufacturers. 3. Subcontractor shall not use any other names, trademarks or designs in connection with the Mark and/or the Products unless so directed by Target. 4. Subcontractor represents and warrants that all Products will be (a) manufactured by Subcontractor in Subcontractor's factory(ies), and that Subcontractor will provide Manufacturer with a list of all such factories and the countries in which located upon execution of this Agreement, and (b) will be labeled with the correct country of origin and in accordance with all applicable laws, rules and regulations of the United States and its agencies. 5. In the event that any Products are rejected by Target, for any reason, Subcontractor agrees to immediately remove all labels, tags, snaps and/or other markings on such Products bearing the Mark, before disposing of them (other than care labels if shipped to the United States). In the event that such markings cannot be removed from the Products, Subcontractor agrees to immediately notify Target of that fact and then Subcontractor may either (a) immediately destroy the Products, or (b) obtain approval from Target and Cherokee to sell the Products to a retailer which sells products at least equal to the standard of products sold by Target; provided, however, that (a) Subcontractor shall be required to pay a 3% royalty on the Products to Cherokee, and (b) in no event shall Subcontractor sell the Products to any mass merchandising discount or department stores, diverters or jobbers, or outside of the United States. 6. Any information disclosed to Subcontractor by Target pursuant to this Agreement is confidential information commercially valuable to Target. Subcontractor acknowledges that the Target information is disclosed to Subcontractor on a confidential basis to be used only as may be expressly permitted by the terms and conditions of this Agreement. Subcontractor, its officers, directors, employees, and agents shall protect the Target information and all information pertaining thereto, whether written or oral, as the confidential information and property of Target. Subcontractor shall not disclose any information concerning Target data to any other person, firm, organization, or employee who is not authorized, in writing, by Target. Target information may not be copied, reprinted, duplicated, or recreated in whole or in part without the express written consent of Target. Subcontractor shall take reasonable action by instruction, agreement or otherwise with respect to Subcontractor's employees or other persons permitted access to the Target information to comply fully with Subcontractor's obligation hereto with respect to the use, copying, protection, and security of Target data. Subcontractor agrees to return all Target information, and all copies thereof to Target, upon request. 7. During the term of this Agreement, Subcontractor shall permit Manufacturer, Target, Cherokee and/or their agents to inspect Subcontractor's activities and premises. 8. In the event of Subcontractor's failure to abide by any of the foregoing, Target and/or Cherokee may seek legal remedies against Subcontractor, including, but not limited to, compensation for all damages sustained as a result of Subcontractor's actions or omissions, as well as injunctive relief. 9. This Agreement shall commence as of the date hereof and shall continue in effect for such period of time as Target is purchasing the Products from Manufacturer. This Agreement shall terminate immediately upon written notice to Subcontractor in the event of (a) any affirmative act of insolvency by Subcontractor, (b) the appointment of any receiver or trustee to take possession of the properties of Subcontractor, (c) the winding-up, sale, consolidation, merger or any sequestration by governmental authority of Subcontractor, or (d) a material breach of any significant provision hereof by Subcontractor. In addition, should the Agreement in effect between Target and Cherokee expire or be terminated, for any reason, this Agreement shall likewise terminate. 10. Upon termination of this Agreement, for any reason, Subcontractor agrees to immediately discontinue all use of the Mark and any terms confusingly similar thereto; provided, however, that Subcontractor shall have the right to sell any Products remaining in its inventory at the time of termination of this Agreement, in accordance with the terms of Section 6 hereinabove. Further, upon termination of this Agreement, for any reason, Target shall have the option, exercisable in its sole discretion, to purchase from Subcontractor, at Subcontractor's cost, Subcontractor's remaining inventory of Cherokee labels. In the event that Target elects not to purchase such labels, Subcontractor shall immediately destroy the labels and provide proof of such destruction to Target. 11. It is agreed that this Agreement will be interpreted according to the laws of the State of Minnesota, United States of America. 12. This Agreement contains the entire understanding between the parties hereto, with respect to the licensing of the Mark, and supersedes all prior agreements and proposals, if any, and will not be amended, modified, or altered except by an instrument in writing, signed by the parties to be charged. 13. This Agreement and all of the terms thereunder shall not be deemed assignable by Subcontractor without the express written consent of both Target and Cherokee. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above-written. MANUFACTURER SUBCONTRACTOR BY: BY: NAME: NAME: TITLE: TITLE: EX-99.1 4 PRESS RELEASE EXHIBIT 99.1 NEWS BULLETIN RE: CHEROKEE INC. 6835 VALJEAN AVENUE VAN NUYS, CA 91406 (818) 908-9868 TRADED:NASDAQ: CHKE FOR FURTHER INFORMATION AT THE COMPANY: AT THE FINANCIAL RELATIONS BOARD: Carol Gratzke Moira Conlon Daniel Saks or Harris Tajyar Chief Financial Officer Analyst contact General Info. (8l8) 908-9868 (310) 442-0599 (310) 442-0599
FOR IMMEDIATE RELEASE November 10, 1997 CHEROKEE - SIDEOUT JOIN FORCES VAN NUYS, CA, November 10, 1997 - Cherokee Inc. NASDAQ: CHKE) today announced it has reached an agreement with Sideout Sport, Inc. to purchase the worldwide rights to its various trademarks and all existing licensing agreements. Financial terms of the acquisition were not disclosed. Robert Margolis, chairman, said, "We have been looking to acquire additional brands to globally market our wholesale and retail direct licensing programs. Our objective was to locate a well respected, emerging brand to market to the upper moderate sector in America as a compliment to our Cherokee business. Our global marketing team is making major inroads into world markets with the Cherokee brand. Sideout will also be a significant adjunct to this international growth strategy." Patricia Warren, Cherokee president, added, "Sideout today has growing businesses in men's, boy's, and women's sportswear, activewear, footwear and accessories. We plan to expand this brand globally through four channels of distribution: department and specialty stores, sporting goods, and cosmetics channels. Cosmetics (Sunout by Sideout) will first be focused on sun care, hair care, lip and nail products." Sideout had its roots in volleyball, originating as a California beach lifestyle brand, evolving into active sportswear, known for quality and authenticity. Sideout has been endorsed worldwide by many top volleyball professionals, and with its "King of the Beach" trademark has become known as the innovator for international beach volleyball events. Internationally, Sideout is represented in Mexico, Argentina, Chile, Uruguay, Japan, Australia, Canada, Germany, Benelux, Italy, France, Spain, Portugal, Greece and Turkey. Steve Ascher, founder and chief executive officer of Sideout, will be joining the Cherokee Inc. marketing team to further develop the Sideout lifestyle concept and insure consistency and creative synergies across all products. Mr. Ascher also adds his marketing talents to the growth of the Cherokee brand and other brands it might acquire in the future. Ascher said, "We realized our brand was too big to internally finance our visions for expansion and began evaluating alternative growth opportunities. After several meetings with various executives from different organizations, it became clear that the Cherokee team had the most innovative approach to further develop the Sideout brand worldwide." John Lovely, founder and president of Palos Verdes Footwear, the largest and fastest growing licensee of Sideout Sport, said, "I am excited about the new growth opportunities that this relationship brings to our company. Since our beginning three years ago, Sideout Footwear has enjoyed phenomenal success and growth at both the better department stores and sporting goods levels." Mr. Lovely was formerly president of Cherokee Footwear and stated, "I have had years of experience working with Bobby Margolis in developing the Cherokee brand and I consider him a master in marketing and corporate brand development." Ms. Warren added, "Although our official marketing launch is planned for January, 1998, we have already begun meeting with cosmetic companies and have had conversations with leading executives in the apparel and sporting goods channels. Over the past eighteen months, our company has reviewed and negotiated numerous brand opportunities. We feel we have found the right one with Sideout." Cherokee Inc., based in Van Nuys, Calif, a marketer and licensor of Cherokee brand products, is continuing global negotiations for licensing contracts covering multiple categories of merchandise. Cherokee currently has licensing agreements in many categories, including family apparel, fashion accessories, home textiles including linens, as well as luggage, cosmetics and footwear. For more information on Cherokee Inc. by facsimile at no cost, call 1-800-PRO- INFO and enter company code CHKE. (Note: This release contains certain forward-looking statements regarding domestic and international expansion. Such statements are subject to risks and uncertainties. Actual results could vary materially from these statements or current trends. Investors should refer to Cherokee Inc. filings with the Securities and Exchange Commission, including forms 10-K and 10-Q, for a fuller description of risk factors.) EX-99.2 5 PRESS RELEASE EXHIBIT 99.2 NEWS BULLETIN RE: CHEROKEE INC. FROM 6835 VALJEAN AVENUE VAN NUYS, CA 91406 (818) 908-9868 TRADED: NASDAQ: CHKE FOR FURTHER INFORMATION: AT THE COMPANY: AT THE FINANCIAL RELATIONS BOARD: Carol Gratzke Moira Conlon Daniel Saks or Harris Tajyar Chief Financial Officer Analyst Contact General Info. (8l8)908-9868 (310)442-0599 (310)442-0599
FOR IMMEDIATE RELEASE November 13, 1997 CHEROKEE EXTENDS LICENSING AGREEMENT WITH DAYTON HUDSON CORP. TARGET STORES Libra Investments, Inc. Retained As Advisor on Possible Sale or Leveraged Recapitalization VAN NUYS, CA, November 13, 1997 - Cherokee Inc. (NASDAQ: CHKE) today announced that it has entered into a new licensing agreement with Dayton Hudson's (NYSE: DH) Target Stores that extends the term to the year 2004, broadens the categories and expands the degree of exclusivity of its previous licensing agreement with Target. The Licensing agreement now covers a broad range of categories of merchandise, including women's, men's and children's apparel and footwear, women's intimate apparel, fashion accessories, home textiles, cosmetics and others. Financial terms of the agreement were not disclosed. Gregg Steinhafel, Target Stores executive vice president merchandise, said, "The Cherokee brand has been an overwhelming success, fitting into our overall philosophy of offering our guests products with quality, fashion and dominance. We believe we have established a powerful Cherokee foundation thus far, and our new agreement will allow additional growth of category development in men's and boy's apparel, as well as other categories." Robert Margolis, Cherokee chairman and chief executive officer, added, "We feel fortunate to have aligned the Cherokee brand with the aggressive and progressive retail skills of Target Stores. Our retail direct partnership has clearly been an outstanding success in marketing the Cherokee brand, providing the consumer with design, quality and value. This retail direct partnership has created such strong consumer demand that more units were sold last year over a broader range of merchandise than any year in the brand's three-decade history." RETENTION OF LIBRA INVESTMENTS, INC. Cherokee also announced that it has retained Libra Investments, Inc. to act as its financial advisor in connection with a possible sale or leveraged recapitalization of Cherokee. The Board of Cherokee authorized the company to study the possibility of a leveraged recapitalization in which the company would borrow up to $50 million to make an extraordinary dividend of approximately $5.50 per share. The company noted that such a leveraged transaction, if completed, would reduce the company's net income in the short term, due to the interest expense associated with such a transaction, but the overall earnings before interest and taxes (EBIT) will be the same as it otherwise would have been if such a transaction had not occurred. Moreover, the company said that it has not yet received any financing commitment and that any such transaction is subject to market conditions and other contingencies. Cherokee Inc., based in Van Nuys, Calif., a worldwide marketer and licensor of brand products, including Cherokee, Sideout, King of the Beach, A-Smile, American Legends and Pacific Express, is continuing global negotiations for licensing contracts covering multiple categories of merchandise. Cherokee currently has licensing agreements in many categories, including family apparel, fashion accessories, home textiles including linens, as well as luggage, cosmetics and footwear. For more information on Cherokee Inc. by facsimile at no cost, call 1-800-PRO- INFO and enter company code CHKE. (Note: This release contains certain forward~looking statements regarding revenue and earnings trend~ and domestic and international expansion. Such statements are subject to risks and uncertainties. Actual results could vary materially from these statements or current trends. Investors should refer to Cherokee filings with the Securities and Exchange Commission, including forms 1O-K and 10-Q, for a fuller description of risk factors.) -----END PRIVACY-ENHANCED MESSAGE-----