0001104659-12-061992.txt : 20120906 0001104659-12-061992.hdr.sgml : 20120906 20120906171615 ACCESSION NUMBER: 0001104659-12-061992 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20120904 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20120906 DATE AS OF CHANGE: 20120906 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: 0129 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-18640 FILM NUMBER: 121077585 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 a12-20297_18k.htm 8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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): September 4, 2012

CHEROKEE INC.

(Exact name of registrant as specified in its charter)

Delaware	1-18640	95-4182437
(State or Other Jurisdiction of	(Commission	(I.R.S. Employer
Incorporation)	File Number)	Identification Number)

5990 Sepulveda Boulevard

Sherman Oaks, California 91411

(Address of Principal Executive Offices) (Zip Code)

(818) 908-9868

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

On September 4, 2012, Cherokee Inc. (“Cherokee”) and JPMorgan Chase Bank, N.A. (“JPMorgan Chase”) entered into a credit agreement (the “Credit Agreement”). Pursuant to the Credit Agreement, JPMorgan Chase agreed to lend to Cherokee up to $15 million in principal (the “Loan”). The Loan is comprised of (i) a term loan in the principal amount of $13 million (the “Term Loan”), with interest on each advance equal to either: (i) an adjusted annual LIBOR rate reset monthly, bi-monthly or quarterly, plus 2.75% or (ii) JPMorgan’s annual prime rate minus 0.25%, with a floor equal to the one month LIBOR Rate plus 2.5%, and (ii) a revolving line of credit in the principal amount of $2 million (the “Revolver”), with interest on each advance equal to either: (i) an adjusted annual LIBOR rate reset monthly, bi-monthly or quarterly, plus 2.25% or (ii) JPMorgan’s annual prime rate minus 0.25%, with a floor equal to the one month LIBOR Rate plus 2.5%. The Term Loan is subject to a five year maturity date and is to be repaid in equal quarterly payments of principal in the amount of $650,000, together with interest payments made monthly as set forth in the Term Loan. The Revolver is subject to a three year maturity date and is to be repaid in monthly interest payments on any principal then outstanding, with the balance of any then-outstanding principal and interest to be repaid at maturity. Cherokee paid an upfront fee equal to $65,000 in connection with the issuance of the Term Loan and is obligated to pay a monthly non-usage fee of 0.25% per annum, in arrears, computed on the average daily unused portion of the Revolver, subject to Cherokee’s right to terminate the Revolver prior to maturity. In addition, Cherokee is obligated to pay an unspecified amount to be determined by JPMorgan Chase to compensate it for its loss in the event that Cherokee elects to repay all or a portion of the Loan prior to its maturity. The proceeds from the Term Loan were used to fund Cherokee’s acquisition of assets related to the “Liz Lange” and “Completely Me by Liz Lange” brands, which closed on September 4, 2012. A description of the acquisition is set forth in Item 2.01 below.

The Loan is evidenced by a term note in the principal amount of $13,000,000 and a line of credit note in the principal amount of up to $2,000,000, is secured by a continuing security agreement and a trademark security agreement executed by Cherokee and is supported by a continuing guaranty executed by Cherokee’s wholly owned subsidiary, Spell C. LLC (collectively, with the Credit Agreement, the “Loan Documents”). The Credit Agreement contains various affirmative and negative covenants that are customary for loan agreements and transactions of this type, including limitations on Cherokee’s ability to incur debt or other liabilities and limitations on Cherokee’s ability to consummate acquisitions in excess of $5,000,000 in the aggregate at any time while the Loan is outstanding. In addition, the Credit Agreement prohibits Cherokee, without first obtaining JPMorgan Chase’s consent, from (i) issuing any equity securities other than pursuant to Cherokee’s employee equity incentive plans and (ii) repurchasing or redeeming any outstanding shares of Cherokee’s common stock or paying dividends or other distributions, other than stock dividends, to Cherokee’s stockholders, unless such repurchases or other distributions would not cause Cherokee to be violation of the “fixed charge coverage ratio” (described below) after giving pro forma effect thereto. The Loan Agreement also imposes the following financial covenants, as specifically defined therein, including: (i) a minimum “fixed charge coverage ratio” of at least 1.2 to 1.0 to be calculated quarterly on a trailing four quarter basis and (ii) a limitation of Cherokee’s “senior funded debt ratio” not to exceed 2.0 to 1.0, measured at any time and based on the ratio of Cherokee’s consolidated total debt to Cherokee’s EBITDA for its most recently completed four-quarter test period. Further, as collateral for the Loan, Cherokee granted a security interest in favor of JPMorgan Chase in all of Cherokee’s assets (including trademarks), and the Loan is guaranteed by Cherokee’s wholly owned subsidiary, Spell C. LLC. In the event of a default under the Credit Agreement, JPMorgan Chase has the right to terminate its obligations under the Credit Agreement, accelerate the payment on any unpaid balance of the Credit Agreement and exercise its other rights under the Loan Documents, including foreclosing on Cherokee’s assets under the security agreement.

The foregoing summary description of the Loan Documents and the transactions contemplated thereby does not purport to be complete and is subject to and qualified in its entirety by reference to the terms and conditions of the Loan Documents, copies of which are attached hereto as Exhibits 10.1 — 10.6 and are incorporated herein by this reference.

Item 2.01 Completion of Acquisition or Disposition of Assets.

On September 4, 2012, Cherokee and LLM Management Co., LLC (the “Seller”) entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”), pursuant to which Cherokee acquired various assets related to the “Liz Lange” and “Completely Me by Liz Lange” brands (the “Assets” and such transaction, the “Acquisition”). The Acquisition closed on September 4, 2012. As consideration for the Acquisition, Cherokee agreed to pay a cash purchase price equal to $13.1 million, with $12.6 million paid by Cherokee concurrently with the closing and with $500,000 of which Cherokee agreed to place in an escrow fund that is to be released no later than March 31, 2013, subject to any funds which Cherokee recovers or that are to be retained pursuant to indemnification claims. In addition, Cherokee agreed to pay to the Seller additional earn-out payments of $400,000 and $500,000 (for a total of up to $900,000 in contingent consideration), which consideration is payable upon Cherokee’s achievement of specified revenue targets attributable to the Assets during the remainder of 2012 and during 2013. In addition, as part of the Acquisition, Cherokee agreed to assume the Seller’s obligations under various agreements, which include a consulting agreement with Ms. Lange as well as certain existing license agreements relating to the Assets, including a license agreement with Target Corp. The Asset Purchase Agreement contains various covenants, indemnities and representations and warranties that are customary for transactions of this type.

The foregoing summary description of the Asset Purchase Agreement and the Acquisition does not purport to be complete and is subject to and qualified in its entirety by reference to the terms and conditions of the Asset Purchase Agreement, a copy of which is attached hereto as Exhibit 2.1 and is incorporated herein by this reference.

Item 2.02 Results of Operations and Financial Condition.

On September 6, 2012, Cherokee issued a press release announcing its financial results for the three months ended July 28, 2012. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by this reference.

In accordance with General Instruction B.2 of Form 8-K, the information in this Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

Reference is made to the disclosure regarding the Loan Documents set forth under Item 1.01 above.

Item 8.01 Other Events.

On September 6, 2012, Cherokee issued a press release announcing the Acquisition. A copy of the press release is attached hereto as Exhibit 99.2 and is incorporated herein by this reference.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.		Description
2.1		Asset Purchase Agreement, by and between Cherokee Inc. and LLM Management Co., LLC, dated as of September 4, 2012*
10.1		Credit Agreement, by and between Cherokee Inc. and JPMorgan Chase Bank, N.A., dated as of September 4, 2012*
10.2		Term Note, executed by Cherokee Inc. in favor of JPMorgan Chase Bank, N.A., dated as of September 4, 2012*
10.3		Line of Credit Note, executed by Cherokee Inc. in favor of JPMorgan Chase Bank, N.A., dated as of September 4, 2012*
10.4		Continuing Security Agreement, executed by Cherokee Inc. in favor of JPMorgan Chase Bank, N.A., dated as of September 4, 2012*
10.5		Trademark Security Agreement, executed by Cherokee Inc. in favor of JPMorgan Chase Bank, N.A., dated as of September 4, 2012*
10.6		Continuing Guaranty, executed by Spell C. LLC in favor of JPMorgan Chase Bank, N.A., dated as of September 4, 2012*
99.1		Press Release of Cherokee Inc., dated September 6, 2012*
99.2		Press Release of Cherokee Inc., dated September 6, 2012*

*Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities 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.


Dated: September 6, 2012		By:	/s/ Mark DiSiena
			Mark DiSiena
			Chief Financial Officer

EX-2.1 2 a12-20297_1ex2d1.htm EX-2.1

Exhibit 2.1

ASSET PURCHASE AGREEMENT

by and among

CHEROKEE INC.

and

LLM MANAGEMENT CO., LLC

DATED AS OF SEPTEMBER 4, 2012

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of September 4, 2012 (the “Effective Date”), is entered into by and between LLM Management Co., LLC, a Delaware limited liability company (“Seller”), and Cherokee Inc., a Delaware corporation (“Buyer”).

PREAMBLE

A. Seller is the owner of the “Liz Lange” and “Completely Me by Liz Lange” brands and related or derivative trademarks and manages, markets, advertises and licenses a wide variety of products thereunder.

B. Seller desires to sell to Buyer the Purchased Assets (defined below), and Buyer desires to purchase the Purchased Assets, on the terms and conditions hereinafter set forth.

C. Seller is willing to make certain representations and warranties to Buyer regarding Seller and the Purchased Assets, and indemnify Buyer with respect to certain types of claims, in each case and collectively to induce the purchase of the Purchased Assets by Buyer, on the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the mutual covenants of the parties as hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto hereby agree as follows:

ARTICLE 1

DEFINITIONS

In addition to the capitalized terms defined elsewhere in this Agreement, the following capitalized terms shall have the meanings specified in this Article 1.

“Affiliate” means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the specified Person.

“Affiliated Group” means an affiliated group as defined in Section 1504 of the Code (or analogous combined, consolidated or unitary group defined under state, local or foreign income Tax law).

“Acquired Contracts” has the meaning set forth in Section 2.1(f).

“Artwork” has the meaning set forth in Section 2.1(a)(ii).

“Asset Schedule” means the complete and accurate listing of all Purchased Assets referenced in Section 2.1.

“Assumed Liabilities” has the meaning set forth in Section 2.3(a).

“Basket” has the meaning set forth in Section 8.1(c).

“Buyer” has the meaning set forth in the recitals.

“Buyer Indemnified Parties” has the meaning set forth in Section 8.2.

“Business Day” means a day other than Saturday, Sunday or a public holiday on which banks are closed under the laws of the State of New York.

“Code” means the Internal Revenue Code of 1986, as amended.

“Claim Notice” has the meaning set forth in Section 8.1(d).

“Closing” has the meaning set forth in Section 7.1.

“Closing Date” has the meaning set forth in Section 7.1.

“Closing Payment” has the meaning set forth in Section 2.3(c).

“Consents” means any and all consents, approvals, orders or authorizations of, or any declaration, filing or registration with, or any application or report to, or any waiver by, or any other action (whether similar or dissimilar to any of the foregoing) of, by or with, any Person, which are necessary to permit (i) Buyer and Seller to consummate the transactions contemplated hereby and perform their respective obligations hereunder, (ii) Seller to transfer to Buyer good and marketable title in and to the Purchased Assets, or (iii) Seller to transfer to Buyer the Acquired Contracts in full force and effect immediately following the Closing with the same terms as in effect immediately prior to Closing.

“Consultant” means Elizabeth Lange.

“Consulting Agreement” means (i) that certain Consulting and Noncompetition Agreement by and between Seller and Consultant dated November 15, 2007, as amended on August 18, 2011, and (ii) that certain Consultancy and Sharing Agreement by and between Seller and Consultant dated August 18, 2011.

“Contract” means any written or oral contract, agreement, instrument, order, commitment or binding arrangement, express or implied of any nature whatsoever.

“Control Party” has the meaning set forth in Section 8.4(a).

“Dispute” has the meaning set forth in Section 10.13(b).

“Disclosure Schedules” has the meaning set forth in the preamble to Article 3.

“Earn-Out Objection” has the meaning set forth in Section 2.3(d)(v).

“Earn-Out Payments” has the meaning set forth in Section 2.3(d)(ii).

“Effective Date” is defined in the recitals.

“Escrow Account” means the escrow account established pursuant to the Escrow Agreement.

“Escrow Agent” means JPMorgan Chase Bank, NA.

“Escrow Agreement” means that certain escrow agreement, substantially in the form attached hereto as Exhibit A, by and among Buyer, Seller and the Escrow Agent.

“Escrow Amount” means $500,000.

“Escrow Release Date” means the earlier of (i) ten (10) days following Buyer’s completion and delivery to the Seller of the results of its audit of Licensees with respect to the twelve (12) month period ended December 31, 2012, or (ii) March 31, 2013.

“Excluded Assets” has the meaning set forth in Section 2.2.

“Exclusivity Agreement” means that certain Exclusivity Agreement, by and between Buyer and Seller, dated as of June 13, 2012, as amended on July 11, 2012.

“First Earn-Out Period” has the meaning set forth in Section 2.3(d)(i).

“First Earn-Out Payment” has the meaning set forth in Section 2.3(d)(i).

“GMR” has the meaning set forth in Section 2.1(h).

“Gross Revenues” has the meaning set forth in Section 2.3(d)(iii).

“Indebtedness” means with respect to any Person (i) all obligations of such Person for borrowed money, whether current or funded, secured or unsecured, (ii) all obligations of such Person for the deferred purchase price of any property or services, (iii) all obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of a default may be limited to repossession or sale of such property), (iv) all obligations of such Person secured by a purchase money mortgage or other lien to secure all or part of the purchase price of property subject to such mortgage or lien, (v) all obligations under leases which shall have been or should be recorded as capital leases in respect of which such Person is liable as lessee, (vi) any obligation of such Person in respect of bankers’ acceptances or letters of credit, (vii) any obligations secured by liens on property acquired by such Person, whether or not such obligations were assumed by such Person at the time of acquisition of such property, (viii) all obligations of a type referred to in clause (i), (ii), (iii), (iv), (v), (vi), or (vii) above which is directly or indirectly guaranteed by such Person or which it has agreed (contingently or otherwise) to purchase or otherwise acquire or in respect of which it has otherwise assured a credit against loss, and (ix) any refinancings of any of the foregoing obligations; provided that the term “Indebtedness” shall not include any mechanics’ liens or statutory liens that are Permitted Liens.

“Intellectual Property Right(s)” means any and all rights (throughout the universe, in all media, now existing or created in the future, and for the entire duration of such rights) arising under statutory or common law, contract, or otherwise, and whether or not perfected, including without limitation, all (a) rights in and to Marks; (b) rights associated with works of authorship including, but not limited to, copyrights, moral rights, industrial design rights, patterns, copyright applications, copyright registrations, and rights to prepare derivative works; (c) rights related to Web sites including the content contained therein; (d) rights relating to the protection of trade secrets and confidential information including, without limitation, know-how and show-how; (e) product rights including, without limitation, mold rights; (f) rights analogous to those set forth in this definition; (g) rights associated with patent applications including divisionals, continuations, continuations-in-part, substitutes, renewals, reissues and extensions of the foregoing, and all patents, reissues and reexamined patents resulting there from, now existing, hereafter filed, issued, or acquired; and (h) the right to sue for past, present or future infringement of any Intellectual Property Right(s), and any and all goodwill related to the foregoing.

“Knowledge” means, with respect to Seller, information actually known by Ralph Gindi or Joseph Gabbay, or which reasonably should be known by any of such Persons upon reasonably diligent inquiry.

“Law” means the common law of any state, or any provision of any foreign, federal, state or local law, statute, rule, regulation, order, permit, judgment, injunction, decree or other decision of any court or other tribunal or governmental entity or agency legally binding on the relevant party or its properties.

“Liabilities” means any indebtedness, liabilities or obligations of any nature whatsoever (whether accrued, absolute, contingent, direct, indirect, perfected, inchoate, unliquidated or otherwise, whether due or to become due), and, with respect to Seller, including, but not limited to, all Indebtedness of Seller.

“License Agreement” means any license agreement in effect immediately prior to the Closing Date between Seller and any Person pursuant to which Seller granted such Person rights to exploit any of the Seller Intellectual Property (as defined in Section 2.1(a)), all of which license agreements are listed on Schedule 2.1(e).

“Licensee” means any licensee which is a party to a License Agreement.

“Liens” means any claims, liens, charges, rights, restrictions, options, preemptive rights, mortgages, deeds of trust, easements, leases, hypothecations, assessments, pledges, encumbrances, claims of equitable interest or security interests of any kind or nature whatsoever.

“Losses” has the meaning set forth in Section 8.2.

“Marks” means all trade names, corporate names, domain names, domain name registrations, fictitious names, trademarks, trademark applications, trademark registrations, service marks, service mark applications, service mark registrations; trade names, brand names, registered and unregistered product names, logos, trade dress, symbols, slogans, tag lines or other designations of origin.

“Material Adverse Effect” An event, violation, inaccuracy, circumstance or other matter will be deemed to have a “Material Adverse Effect” on Seller if such event, violation, inaccuracy, circumstance or other matter (considered together with all other matters that would constitute exceptions to the representations and warranties set forth in this Agreement but for the presence of “Material Adverse Effect” or other materiality qualifications, or any similar qualifications, in such representations and warranties) has or gives rise to a material adverse effect on (i) the Purchased Assets, (ii) the ability of Buyer and/or any permitted licensees to use and exploit the Purchased Assets after the Closing, or (iii) the ability of Seller to consummate the transactions contemplated by any of the Transaction Documents or to perform any of its material obligations under this Agreement prior to the date set forth in Section 9.1(b). For clarity, other than in the context of the definition of “Ordinary Course of Business” the concept of Material Adverse Effect shall not apply after the Closing Date.

“Material Contract” means every current Contract (other than License Agreement(s) and Consulting Agreement(s)) relating to the use and/or exploitation by Seller of the Purchased Assets and under which Seller is entitled to receive, or Seller is obligated to pay, total consideration in excess of $10,000, all of which are listed on Schedule 3.8 of the Disclosure Schedule.

“Negotiation Period” has the meaning set forth in Section 2.3(d)(v).

“Ordinary Course of Business” means an action taken by Seller that (i) is taken in the course of normal operations, consistent with its past practices and does not, and is not reasonably expected to, result in a Material Adverse Effect; and (ii) does not require any other separate or special authorization or consent of any nature by any governmental entity with respect to Seller.

“Other Contracts” has the meaning set forth in Section 2.1(f).

“Permitted Liens” means any inchoate mechanics’, carriers’, workers’ and other similar Liens that are not delinquent and that in the aggregate are not material in amount and do not interfere with the present or future use of the assets to which they apply.

“Person” means any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated association, corporation, entity or government (whether Federal, state, county, city or otherwise, including, without limitation, any instrumentality, division, agency or department thereof).

“Products” means any of the various branded products or goods manufactured or sold by any Licensees of Seller in connection with Seller’s ownership, operation, licensing or exploitation of the Purchased Assets.

“Purchase Price” has the meaning set forth in Section 2.3(c).

“Purchased Assets” has the meaning set forth in Section 2.1.

“Required Consents” has the meaning set forth in Section 3.3.

“Restricted Period” has the meaning set forth in Section 5.11.

“Second Earn-Out Period” has the meaning set forth in Section 2.3(d)(ii).

“Second Earn-Out Payment” has the meaning set forth in Section 2.3(d)(ii).

“Seller” has the meaning set forth in the recitals.

“Seller Indemnified Parties” has the meaning set forth in Section 8.3.

“Seller Intellectual Property” has the meaning set forth in Section 2.1(a).

“Tax” means any federal, state, local or foreign income, gross receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer, registration, value added, excise, natural resources, severance, stamp, occupation, premium, windfall profit, environmental, customs, duties, real property, personal property, capital stock, social security, unemployment, disability, payroll, license, employee or other withholding, or other tax, of any kind whatsoever, including any interest, penalties or additions to tax or additional amounts in respect of the foregoing; the foregoing shall include any transferee or secondary liability for a Tax and any liability assumed by agreement or arising as a result of being (or ceasing to be) a member of any Affiliated Group (or being included or required to be included) in any Tax Return relating thereto; provided, however, that the foregoing shall not include any Transfer Taxes.

“Tax Returns” means returns, declarations, reports, claims for refund, information returns or other documents (including any related or supporting schedules, statements or information) filed or required to be filed in connection with the determination, assessment or collection of any Taxes of any party or the administration of any Laws or administrative requirements relating to any Taxes.

“Termination Date” has the meaning set forth in Section 9.1(d).

“Third Party Claim” has the meaning set forth in Section 8.4(b).

“Transaction Documents” means each of the agreements, documents, certificates and instruments being delivered pursuant to this Agreement.

“Transfer Tax” means any stamp or other sales, use, transfer or transaction tax imposed under the Laws of the United States or any state, country or municipality or other subdivision thereof, arising as a result of the consummation of any of the transactions contemplated hereby.

ARTICLE 2

TRANSACTION

2.1 Purchase and Sale of Assets. Upon the terms and subject to the conditions contained herein, on the Closing Date, Seller will sell, convey, transfer, assign and deliver (such delivery, in each case, limited to the extent in the possession or custody of, or under the control of, the Seller) to Buyer, and Buyer will acquire, accept, and purchase from Seller, the following assets, properties and rights of Seller (collectively, the “Purchased Assets”) specified in this Section 2.1 or in any Schedule delivered by Seller to Buyer in connection with the execution hereof :

(a) Seller Intellectual Property. All of Seller’s worldwide right, title and interest in and to any Intellectual Property Rights, if any, licensed or sublicensed by Seller to any Person, or otherwise utilized in or relating to, the managing, marketing, advertising and licensing of “Liz Lange” or “Completely Me” brands and/or any related or derivative trademarks (collectively, the “Seller Intellectual Property”) (provided, however, that no representation or warranty is furnished in connection with such rights except as specifically set forth in Article 3 hereof), including, without limitation, all of Seller’s worldwide right, title and interest in and to the following, along with any and all priority rights, all registrations (if any) of any of the following, all applications (if any) for any of the following, all renewals (if any) of the following, all goodwill associated with all of the following, and all claims for past, present or future infringement or breach of the following:

(i) the Marks set forth in Schedule 2.1(a)(i); and

(ii) all of Seller’s artwork (including, without limit, any prints, designs, or patterns utilized in connection with the “Liz Lange” brand or any other Products) produced by or on behalf of Seller in respect of the managing, marketing, advertising and licensing of the Purchased Assets, including all of Seller’s right, title and interest in and to all registered and unregistered statutory and common law copyrights contained therein, if any, together with all registrations, renewals and applications therefore, and all goodwill associated therewith (the “Artwork”), including, without limitation, the registered statutory copyrights set forth in Schedule 2.1(a)(ii), if any.

(b) Rights Under Employee and Independent Contractor Agreements. Seller’s rights to enforce the terms of and to sue for any future violations of: (i) the provisions of those Contracts between the Seller and current employees of, and independent contractors to, the Seller dealing with assignment of inventions, intellectual property and other proprietary rights in favor of the Seller, but only in each case if and to the extent it relates to the Seller Intellectual Property or other Purchased Assets; and (ii) the provisions of those Contracts between the Seller and former employees of, and independent contractors to, the Seller (including the Consultant) dealing with assignment of inventions, intellectual property and other proprietary rights, non—competition, non—solicitation (whether of employees, customers or suppliers), secrecy, confidentiality and non—disclosure in favor of the Seller; but only in each case if and to the extent it relates to the Seller Intellectual Property or other Purchased Assets; provided, however, in each case (other than the Consultant), only to the extent so partially assignable (e.g., if such provisions cannot be partially assigned to Buyer with respect to any Person other than the Consultant, Seller shall retain all right, title and interest in, under and to such provisions), it being understood and agreed that Seller is hereby transferring to Buyer all rights of Seller and its Affiliates under such agreements to the extent such rights relate to the Seller Intellectual Property.

(d) Website. The website currently hosted at www.lizlange.com, and all of Seller’s right, title and interest in and to all Intellectual Property Rights related to the website, including without limitation, all registered and unregistered statutory and common law copyrights contained therein, together with all registrations, renewals and applications therefore, all goodwill associated therewith, and all claims for infringement or breach thereof, except that Seller makes no representation or warranty with respect to any photos, text or content thereon and Buyer hereby indemnifies and holds Seller harmless with respect to the use of any such photos, content or text, all pursuant to the provisions of Article 8 hereof);

(e) License Agreements. All of Seller’s right, title and interest in each of the License Agreements, a list of which is set forth in Schedule 2.1(e), including any right to royalties or other payments earned or accruing thereunder after the Closing Date (except as otherwise provided in this Agreement), and any indemnification rights or rights to sue and obtain remedies for past, present and future violations thereof.

(f) Other Contracts. All of Seller’s right, title and interest in and to each of the Contracts as well as any consent to use or concurrent use agreements and any customs recordation documents set forth in Schedule 2.1(f) (including any indemnification rights or rights to sue and obtain remedies for past, present and future violations of any of such agreements, contracts or documents) (collectively, the “Other Contracts”, and together with License Agreements and the Consulting Agreement, the “Acquired Contracts”).

(g) Trademark, Design and Art Files. All of Seller’s right, title and interest in and to any trademark files, design files and art files relating to or arising out of the managing, marketing, advertising and licensing of the Purchased Assets, which have been reduced to writing or stored electronically, including all computer-aided design (CAD), artwork, samples or other items relating thereto, except that Seller makes no representation or warranty with respect to any photos of models (or the like), if any, and Buyer is assuming any risk if Buyer chooses to continue using any such photos and Buyer hereby indemnifies and holds Seller harmless with respect to the use of any such photos pursuant to the provisions of Article 8 hereof.

(h) Certain Pre-paid Assets and Royalty Allocation. The pro rata portion (calculated as of the Closing Date based on number of days elapsed, with the Closing Date belonging to Seller) of any guaranteed minimum royalty (“GMR”) payments actually received by Seller (or due) for the calendar quarter during which the Closing occurs with respect to all License Agreements, except for (i) the License Agreement with Target whereby Seller is paid a royalty on a combination of GMR’s and net sales (such royalty to be split based on the actual date of each such sale, with all royalties for sales occurring on or prior to the Closing Date belonging to Seller and all royalties for sales occurring after the Closing Date belonging to Buyer, notwithstanding that such Target royalty will be received after the Closing Date, except that for the actual calendar month that the Closing takes place, the total royalties received with respect to such calendar month shall be split pro-rata as of the Closing Date based on the number of days elapsed, with the Closing Date belonging to Seller, and shall not be based on the actual date of such sales during such calendar month), or (ii) any other royalty payments based on net sales relating to periods on or prior to the Closing Date that are received by Buyer after the Closing Date, such royalties to be split based on the actual date of each such sale, with all royalties for sales occurring on or prior to the Closing Date belonging to Seller and all royalties for sales occurring after the Closing Date belonging to Buyer, notwithstanding that such royalty is received after the Closing Date. For clarity, notwithstanding anything to the contrary contained in this Agreement, in no event shall Buyer be entitled to (A) recover from Seller any guaranteed minimum royalties, guaranteed minimum advertising royalties, earned royalties or overage royalties paid to Seller under the Assigned Contracts which relate solely to any completed quarters or reporting periods (as such quarter or reporting period is defined or specified in each such Assigned Contract) prior to the quarter or reporting period, as the case may be, in which the Closing occurs and/or (B) claim a credit with respect to any earned royalties or overage royalties against any guaranteed minimum royalties or guaranteed minimum advertising royalties received by Seller which relate solely to any completed quarters or reporting periods (as such quarter or reporting period is defined or specified in each such Assigned Contract) prior to the quarter or reporting period, as the case may be, in which the Closing occurs, regardless of whether the applicable licensee claims an offset or credit for guaranteed minimum royalties or guaranteed minimum advertising royalties paid to Seller relating solely to any completed quarters or reporting periods (as such quarter or reporting period is defined or specified in each such Assigned Contract) prior to the quarter or reporting period, as the case may be, that the Closing occurs and Buyer hereby acknowledges that any such guaranteed minimum royalties, guaranteed minimum advertising royalties, earned royalties or overage royalties paid to Seller under the Assigned Contracts which relate solely to any completed quarters or reporting periods (as such quarter or reporting period is defined or specified in each such Assigned Contract) prior to the quarter or reporting period, as the case may be, in which the Closing occurs shall be the property of the Seller (and Buyer shall have no right to same). Notwithstanding the foregoing, any bonus amounts or other payments which may be owed to Consultant or other third-parties under an Assigned Contract after the Closing Date shall be pro-rated such that Buyer shall be responsible for 70% and Seller shall be responsible for 30% of any such payment; provided, however, that the maximum amount for which Seller shall be responsible for bonus payments is Thirty Thousand Dollars ($30,000.00) in the aggregate.

2.2 Retention of Assets Not Relating to Management, Marketing, Advertisement and Licensing of Assets. Notwithstanding anything to the contrary herein, the Seller is not selling and Buyer is not purchasing, and the Seller shall not contribute, convey, assign, or transfer and Buyer shall not acquire or have any rights to acquire, any assets, properties or rights of the Seller other than the Purchased Assets (the “Excluded Assets”), and the Seller will retain all such Excluded Assets. Without limiting the generality of the foregoing, the following shall constitute Excluded Assets:

(i) All cash, cash equivalent assets and securities of the Seller.

(ii) Subject to the provisions of Section 2.1(h) of this Agreement, all accounts or royalties receivable with respect to periods completed prior to the Closing Date, including accounts receivable in respect of the managing, marketing, advertising and licensing of the Purchased Assets relating solely to periods prior to the period during which the Closing occurs (notwithstanding the time that any such payment is actually received).

(iii) All bank and other depository accounts and safe deposit boxes of the Seller.

(iv) All insurance policies of the Seller (including, without limitation, those relating to the managing, marketing, advertising and licensing of the Purchased Assets), all rights of every nature and description under or arising out of such insurance policies, any refunds paid or payable in connection with the cancellation or discontinuance of any insurance policies, and any claims made on or under any such insurance policies.

(v) All actions, demands, rights and privileges against third Persons that relate to any of the Excluded Assets or Excluded Liabilities, including actions and rights under insurance policies relating thereto.

(vi) All rights of the Seller under this Agreement and the Transaction Documents, and all rights of the Seller to the Purchase Price hereunder.

2.3 Assumption of Certain Executory and Other Liabilities.

(a) Executory Liabilities Assumed by Buyer and Seller. As further consideration for consummation of the transactions contemplated hereby, subject to Section 2.3(b) hereof, at the Closing, Buyer shall assume and agree to thereafter pay when due and discharge and indemnify and hold harmless Seller with respect to the following (the “Assumed Liabilities”):

(i) the obligations of Seller under the Acquired Contracts, but only to the extent such obligations (A) arise after the Closing Date, (B) do not arise from or relate to any breach or failure to perform by the Seller of any provision of any Acquired Contract on or prior to the Closing Date, and (C) do not arise from the failure to obtain any required Consent from any third party in connection with the assignment and transfer of such Acquired Contracts to the Buyer pursuant to this Agreement.

(ii) any trade payables arising from the managing, marketing, advertising and licensing of the Purchased Assets after the Closing Date; and

(iii) any Liabilities that arise after the Closing Date with respect to the Purchased Assets and which do not arise from any pre-Closing acts or omissions of Seller.

provided, however, that to the extent that any confidentiality, non-compete, secrecy, invention or similar covenants in favor of Seller are contained in any employment, consulting or independent contractor agreement, Buyer shall be deemed to have acquired the rights of Seller to enforce and sue for any past, present or future violation of such agreements but shall not be deemed to have assumed any Liability of Seller to pay any compensation or otherwise perform Seller’s obligations thereunder for any period prior to the Closing.

(b) Liabilities Not Assumed by Buyer. Except for the Assumed Liabilities, Buyer shall not be deemed by anything contained in this Agreement to have assumed and Seller hereby agrees to indemnify, defend Buyer and its Affiliates and hold them harmless with respect to, any and all Liabilities and obligations of Seller, however and whenever arising, including, without limitation:

(i) Agreement Breaches. Any Liability of Seller to any person or entity, the existence of which constitutes a breach of any covenant, agreement, representation, or warranty of Seller contained in this Agreement;

(ii) Taxes. Any Liability of Seller for any Taxes arising from the managing, marketing, advertising and licensing of the assets of Seller (including, without limitation, the Purchased Assets) prior to the Closing Date;

(iii) Litigation. Any Liability or obligation (contingent or otherwise) of Seller arising out of any threatened or pending litigation, other than the Assumed Liabilities, whether or not set forth in Schedule 3.11;

(iv) Liabilities Arising from Past Operations. Any Liabilities or obligations arising out of services provided or products sold by Licensees prior to the Closing Date (except that with respect to any Liabilities for any products sold by any Licensees, Buyer shall look first to the indemnification obligations of such Licensee contained in such License Agreement); and

(v) Other Liabilities. Any other Liabilities, debts or obligations of Seller (whether known or unknown, direct or indirect, absolute or contingent, matured or unmatured, or otherwise), whether the same currently exist or come to exist in the future except for those Assumed Liabilities described in Section 2.3(a) above.

(c) Payment of Purchase Price. On the Closing Date, subject to the terms and conditions set forth in this Agreement and in consideration of the sale, assignment, transfer and delivery of the Purchased Assets, Buyer will pay to Seller (by wire transfer of immediately available funds to the account or accounts designated by the Seller) an amount equal to Thirteen Million One Hundred Thousand Dollars ($13,100,000) (the “Purchase Price”). The Purchase Price shall be payable as follows: (a) Twelve Million Six Hundred Thousand Dollars ($12,600,000) to be paid at the Closing by wire transfer to such accounts as may be designated by Seller (the “Closing Payment”), and (b) the Escrow Amount (to wit, $500,000) to be paid at the Closing by wire transfer to the Escrow Agent to be held in (and released from) the Escrow Account pursuant to the terms of the Escrow Agreement and to be paid to Seller on the Escrow Release Date (less any amounts subject to claims by Buyer in accordance with this Agreement) by wire transfer to such account as may be designated by Seller.

(d) Earn-Out. In addition to the Purchase Price, and subject to a right of offset for the amount of any chargeback issued by a Licensee for the periods prior to Closing, Buyer shall pay to Seller an aggregate earn-out of up to Nine Hundred Thousand Dollars ($900,000) which earn-out shall be payable upon achievement of the following thresholds:

(i) If Gross Revenues attributable to the four (4) month period commencing September 1, 2012 and ending December 31, 2012 (the “First Earn-Out Period”) are equal to or greater than Eight Hundred and Fifty Thousand Dollars ($850,000), then as additional consideration for the Purchased Assets purchased from Seller, Buyer shall make, or cause to be made, a cash payment of Four Hundred Thousand Dollars ($400,000) (the “First Earn-Out Payment”) to Seller within the earlier of (i) two (2) weeks after the receipt of any information from Licensee(s) that would allow Buyer the ability to determine that the threshold for the payment the First Earn-Out Payment has been reached or (ii) March 31, 2013 (in which event the First Earn-Out Payment shall be deemed due). For clarification, if Gross Revenues attributable to the First Earn-Out Period do not equal or exceed Eight Hundred and Fifty Thousand Dollars ($850,000), Buyer shall have no obligation to make any earn-out payment to Seller pursuant to this Section 2.3(d)(i).

(ii) In addition to the payment due pursuant to subsection (i) above, if Gross Revenues attributable to the twelve (12) month period commencing January 1, 2013 and ending December 31, 2013 (the “Second Earn-Out Period” and collectively with the First Earn Out-Period, each and collectively, as the context may require, “Earn Out Periods”) are equal to or greater than Two Million Seven Hundred and Fifty Thousand Dollars ($2,750,000), then as additional consideration for the Purchased Assets purchased from Seller, Buyer shall make, or cause to be made, a cash payment of Five Hundred Thousand Dollars ($500,000) (the “Second Earn-Out Payment”, and collectively with the First Earn-Out Payment, the “Earn-Out Payments”) to Seller within the earlier of (i) two (2) weeks after the receipt of any information from Licensee(s) that would allow Buyer the ability to determine that the threshold for the payment the Second Earn-Out Payment has been reached or (ii) March 31, 2014 (in which event the Second Earn-Out Payment shall be deemed due). For clarification, if Gross Revenues during the Second Earn-Out Period do not equal or exceed Two Million Seven Hundred and Fifty Thousand Dollars ($2,750,000), Buyer shall have no obligation to make any earn-out payment to Seller pursuant to this Section 2.3(d)(ii)

(iii) As used herein, “Gross Revenue” shall mean all amounts due to Buyer from Licensees in the United States and Canada with respect to the managing, marketing, advertising and licensing of the Purchased Assets, including but not limited to, GMR payments and royalty payments based on net sales (calculated prior to any reduction for design fees/chargebacks or other such items) as defined in each underlying License Agreement, and with respect to royalty payments based on net sales, such royalties shall be deemed due on the date each such sale is made (notwithstanding when actual payment is due and/or paid by each such Licensee).

(iv) During the Earn-Out Periods, Buyer shall provide Seller with monthly sales reports showing Gross Revenues, which shall be delivered not more than two (2) weeks following the Buyer’s receipt of such reports from the applicable Licensee(s) (or if no report is received from any Licensee with respect to any applicable period but money is received from any Licensee for such period, then Buyer shall report such amounts to Seller without Licensee reports).

(v) If the reporting from Licensees (and/or Buyer in the case(s) where no report is received from any Licensee) indicates that the targets set forth in Sections 2.3(d)(i) or (ii), in each such case, have not been satisfied, then Seller, within thirty (30) days after the later of (A) receipt by Seller of the final Licensee (and/or Buyer in the case(s) where no report is received from any Licensee) reports with respect to such Earn-Out Period or (B) expiration of the such Earn-Out Period, may deliver to Buyer a written notice objecting to the amounts set forth in all such reports (the “Earn-Out Objection”). If Seller timely delivers an Earn-Out Objection to Buyer, Seller and Buyer shall use commercially reasonable efforts for a period of thirty (30) days (or such longer period as they may mutually agree, the “Negotiation Period”) to resolve any disagreements with respect to the amounts set forth in all such reports. If, at the end of the Negotiation Period, Seller and Buyer are unable to resolve such disagreements, then either party may seek to resolve such dispute pursuant to the dispute resolution provisions set forth in Section 10.13. No more than twice during each twelve (12) month period, Seller and its duly authorized representatives shall have the right upon reasonable notice and during reasonable hours during normal business days to examine and copy such books and records in the possession or under the control of Buyer in order to verify whether or not an Earn-Out Payment is due, the cost and expense of which shall be borne by Seller. All information pertaining to Earn-Out Payments which is delivered by Buyer hereunder for Seller’s review shall be deemed to be confidential information and shall be treated by Seller as confidential in accordance with applicable law. If the audit discloses that any Earn-Out Payments which were not paid were actually due, Buyer shall pay the unpaid Earn-Out Payments and reimburse Seller for its reasonable costs incurred in connection with such audit. The provisions of this Section 2.3(d) shall survive the Closing.

2.4 Allocation of Purchase Price. The Purchase Price will be allocated among the Purchased Assets in accordance with Schedule 2.4 hereof. In connection with the mutual determination of such schedule, the parties shall cooperate with each other and provide such information as any of them shall reasonably request. The parties shall (a) prepare and, where applicable, file each report relating to the federal, state, local, foreign and other Tax consequences of the purchase and sale contemplated hereby (including the filing of IRS Form 8594) in a manner consistent with such allocation schedule and (ii) take no position in any Tax Return or other Tax filing, proceeding, audit or otherwise which is inconsistent with such allocation.

2.5 Transfer Taxes and Closing Costs. Except as otherwise provided herein, Seller shall be responsible for any Transfer Taxes or other taxes imposed by reason of the transfer of the Purchased Assets provided hereunder and any deficiency, interest or penalty asserted with respect thereto. Buyer shall be responsible for and shall promptly pay any and all recording costs, assignment costs, filings fees and all related costs, fees and expenses (including attorney’s and other fees) associated with the assignment and transfer of the Purchased Assets to Buyer and the registration and/or recordation of such assignment and transfer with any and all applicable international, federal, state or local governmental agency, body, or entity throughout the world.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF SELLER

Seller represents and warrants that, except as set forth in the disclosure schedule delivered by Seller on the Effective Date (the “Disclosure Schedule”) the statements contained in this Article 3 are true, correct and complete as of the Effective Date, and, except as set forth in the Disclosure Schedule, will be true, correct and complete as of the Closing Date as if made on that date. Disclosures in the Disclosure Schedule shall be made under numbered sections that correspond to specific numbered sections of Article 3. Any disclosure made in any section of the Disclosure Schedule shall apply solely to the specific representation or warranty to which the numbered section of the Disclosure Schedule corresponds and such disclosure shall be deemed an exception to such representation or warranty.

3.1 Authorization. Seller has full power, right and authority to enter into and perform its obligations under this Agreement and each of the Transaction Documents to which it is a party. This Agreement and each of the Transaction Documents to which Seller is a party have been or, upon the Closing, will be duly executed and delivered by Seller and constitute or will constitute upon execution the valid and binding obligations of Seller, enforceable against Seller in accordance with their respective terms. All corporate actions on the part of Seller, its managers, members and directors necessary for the authorization, execution, delivery and performance by Seller of this Agreement and each of the Transaction Documents to which it is a party have been taken.

3.2 Organization. Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware. Seller has full power and authority to own and hold the Purchased Assets it now owns or holds and to sell the Purchased Assets to Buyer. Seller has no Knowledge of any facts or circumstances that would prevent Seller from conducting the managing, marketing, advertising and licensing of the Purchased Assets in each jurisdiction in which its conduct of its business or other ownership or operation of its assets requires such qualification under applicable Law.

3.3 No Violation. The execution and delivery of this Agreement by the Seller and the execution and delivery by Seller of each Transaction Document to which it is a party, the performance by the Seller of its obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby will not, in each case assuming that the consents set forth on Exhibit B (the “Required Consents”) have been obtained:

(a) to the Knowledge of Seller, violate or conflict with or result in a breach of any Law;

(b) constitute a default under the formation and organizational documents of Seller or, to the knowledge of Seller, of any contract, agreement, lease, mortgage, note, bond, license or other instrument to which Seller is a party or by which the properties of Seller are bound;

(c) constitute an event which would permit any party to terminate, or accelerate the maturity of any Indebtedness or other obligation under, any contract, agreement, lease, mortgage, note, bond, license or other instrument to which Seller is a party or by which the properties of Seller are bound;

(d) result in the creation or imposition of any Lien upon any of the Purchased Assets;

(e) require any authorization, consent, approval or other action by or notice to any court or administrative or governmental body pursuant to any Laws; or

(f) require any approvals, consents or notifications to, or waiver from, any third Persons which are parties to any Material Contract.

3.4 Licenses.

(a) Schedule 3.4(a) of the Disclosure Schedule sets forth an accurate and complete list as of the Closing Date of (i) each License Agreement (including all amendments thereto) the term of which is currently in effect, or for which a sell-off period is presently in effect after expiration or termination of the License Agreement, (ii) all proposed License Agreements that are currently in active negotiation, and (iii) any GMR’s with respect to each License Agreement which relate to the quarter or reporting period in which the Closing takes place (as such quarter or reporting period is defined or specified in each such License Agreement). Except as set forth on Schedule 3.4(a) of the Disclosure Schedule, all License Agreements are in writing and there are no oral modifications or oral amendments to any License Agreements. The Seller has made available to the Buyer true, correct and complete copies of all License Agreements which are in writing, including all amendments thereto, set forth on Schedule 3.4(a) of the Disclosure Schedule. Except as set forth on Schedule 3.4(a), Seller has not received any written or oral notice from a Licensee, and Seller has no Knowledge of any facts, to the effect that such Licensee (i) does not intend to continue its relationship with the Seller upon the expiration of such License Agreement; (ii) is currently in breach of such License Agreement in such a manner as would prejudice, in any material respect, the rights of the Seller under such License Agreement; (iii) claims that such License Agreement has been breached by any other party thereto which would prejudice, in any material respect, the rights of the Seller under such License Agreement; or (iv) currently intends to exercise its right, if any, to terminate its License Agreement.

(b) Seller has not received notice that it is in breach or default in any material respects under any License Agreement and, to the Knowledge of Seller, Seller is not in breach of or default in any material respect under any License Agreement nor, to the Knowledge of Seller, has Seller performed any act or omitted to perform any act which, with notice or lapse of time or both, will become or result in a material violation, breach or default thereunder. Seller has not received notice of any demand, claim, suit, action, litigation, audit, investigation, arbitration, administrative hearing or other proceeding of any nature which challenges the validity or enforceability of any License Agreement (a “License Validity Claim”) and, to the Knowledge of Seller, no License Validity Claim is pending or has been made (in writing).

(c) (i) Except as set forth on Schedule 3.4(c) of the Disclosure Schedule, the License Agreements are fully assignable to Buyer without consent and are the valid and enforceable obligations of the Seller, and, to the Knowledge of the Seller, the other parties thereto, except as such enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws presently or hereafter in effect, affecting the enforcement of creditors’ rights generally, general equitable principles and public policy to the extent so determined by the court in the specific instance. Anything in this Agreement to the contrary notwithstanding (including the provisions of Article 8 hereof), the representation and warranty in this Section 3.4(c)(i) shall not apply to any License Agreement for which Seller shall have delivered a consent to Buyer in the form annexed hereto as Exhibit B-3.

(ii) Except as set forth on Schedule 3.4(c) of the Disclosure Schedule, no Person that is a party to a License Agreement has materially or consistently failed to make any payments required thereunder when due (after notice and cure period). Except as set forth on Schedule 3.4(c) of the Disclosure Schedule, to the Knowledge of the Seller, no Licensee has granted to a Person (other than an Affiliate of such Licensee) any rights to the Intellectual Property Rights granted to such Licensee pursuant to a License Agreement. The word “material” as used in the previous sentence means any non-payment not cured within the time period specified in a subject agreement that would permit the non-defaulting party to terminate the subject agreement. Except as set forth on Schedule 3.4(c) of the Disclosure Schedule, to the Knowledge of Seller, there is no existing material dispute between Seller and any Licensee.

(d) Except for the License Agreements set forth on Schedule 3.4(a) of the Disclosure Schedule and except as set forth on Schedule 3.4(d) of the Disclosure Schedule, there are no contracts or understandings between either Seller or its Affiliates, on the one hand, and any Licensee which is party to any License Agreement, on the other hand, relating to the Purchased Assets. Except as set forth on Schedule 3.4(d) of the Disclosure Schedule, to the Knowledge of Seller, neither the Seller nor any of its Affiliates owed money to any Licensee including, but not limited to, money owed for products shipped to either Seller for sale by Seller through retail stores or internet commerce channels.

(e) Except as set forth on Schedule 3.4(e) of the Disclosure Schedule, Seller is not a party to any exclusive sales representative, licensing or sales agency, or similar agreement or arrangement relating to or arising out of the managing, marketing, advertising and licensing of the Purchased Assets.

(f) To the Knowledge of Seller, no Licensee has the contractual right to renegotiate any amount paid or payable to Seller under any License Agreement or any other term or provision of any License Agreement.

3.5 Financial Statements. Seller represents and warrants that the “net income”, “Income Royalty” and expenses contained in the following financial statements attached as Schedule 3.5 to the Disclosure Schedule (collectively, the “Financial Statements”) are true and accurate in all material respects:

(i) The reviewed but unaudited Profit and Loss Statement of the Seller for 2011 calendar year; and

(ii) The reviewed but unaudited Profit and Loss Statement of the Seller for the following period in 2012 — January 1, 2012 through July 31, 2012.

Seller makes no representations regarding any financial forecasts or projections whether contained in the Financial Statements or otherwise.

3.6 Absence of Liabilities. Except as set forth on Schedule 3.6 of the Disclosure Schedule, as of the Closing, the Purchased Assets will not have and will not be subject to any Indebtedness.

3.7 Title and Condition of Purchased Assets.

(a) Ownership. Seller owns, and has good and marketable title to, (i) all registrations of the Marks and any applications for registration of Marks included in the Purchased Assets, and (ii) all rights as a licensor under the License Agreements (including the right to any royalty or license payments thereunder), in each case free and clear of all Liens other than Permitted Liens. To the Knowledge of Seller, Seller owns, and has good and marketable title to, all common law rights in the United States to the Marks.

(b) Title. Seller has received no notice that any Person has claimed ownership of the Marks and, to the Knowledge of Seller, no Person has claimed such ownership. Except as otherwise disclosed in this Agreement or Schedule 3.7 of the Disclosure Schedule, Seller has complete and unrestricted power and right to sell, assign, convey and deliver the Purchased Assets to Buyer as contemplated hereby. Neither Seller nor any of its Affiliates has any agreement, absolute or contingent, written or oral, with any other Person to effect any acquisition transaction related to the Purchased Assets or to sell or otherwise transfer any of the Purchased Assets.

3.8 Contracts. Schedule 3.8 of the Disclosure Schedule sets forth a correct and complete list of every Material Contract. Correct and complete copies of each written Material Contract previously have been furnished to Buyer. Except as set forth on Schedule 3.8 of the Disclosure Schedule, Seller has received no written notice that Seller is in breach, nor to the Knowledge of Seller has any event occurred which with the giving of notice or the passage of time or both would constitute a breach by Seller, under any Material Contract, including with respect to any restrictions on the use of Products purchased pursuant to any such Material Contracts. To the Knowledge of Seller, no other party to a Material Contract is in breach, and no event has occurred which with the giving of notice or the passage of time or both would constitute a breach by any other party to any such Material Contract. To the Knowledge of Seller, each of the Material Contracts is in full force and effect, is valid and enforceable in accordance with its terms and is not subject to any material claims, charges, set-offs or defenses. To the Knowledge of Seller, no Person is renegotiating, or has the right to renegotiate, any amount paid or payable to Seller under any Material Contract or any other term or provision of any Material Contract. Assuming each Required Consent has been obtained prior to the Closing, to the Knowledge of Seller, each of the Material Contracts will continue in full force and effect without any change or modification after the consummation of the transactions contemplated by this Agreement, subject in each case to any applicable right of the counterparty thereto to cancel or terminate such Material Contract in accordance with such terms.

3.9 Litigation. Except as set forth on Schedule 3.9 of the Disclosure Schedule, to the Knowledge of Seller, there is no suit, action, proceeding, investigation, claim or order pending or threatened against Seller relating to the Purchased Assets, before any court, or before any governmental department, commission, board, agency, or instrumentality; nor, to the Knowledge of Seller, is there any reasonable basis for any such action, proceeding or investigation. Seller (i) is not subject to any judgment, order or decree of any court or governmental agency in connection with the Purchased Assets; and (ii) is not engaged in any legal action to recover monies due it or for damages sustained by it in connection with the Purchased Assets. Schedule 3.9 of the Disclosure Schedule also sets forth a complete and correct list and brief description of all claims, suits, actions, proceedings and investigations that, to the Knowledge of Seller, have been made, filed or otherwise initiated in connection with the Purchased Assets in the past four (4) years and the resolution thereof. With reference to the Chinese oppositions and appeal set forth on Schedule 3.9 of the Disclosure Schedule, from and after the Closing, to the extent Buyer desires to pursue the Chinese trademark oppositions and appeal, Buyer shall assume same and pay all costs to be incurred from and after the Closing in connection therewith.

3.10 Compliance with Applicable Laws. Except as set forth on Schedule 3.10 of the Disclosure Schedule, to the Knowledge of Seller, Seller is not, and has not been during the past three (3) years, in violation, in any material respect, of any Law in connection with the managing, marketing, advertising and licensing of the Purchased Assets, and all activities in furtherance thereof, nor has Seller received written notice of any such violations. During the past three years, no notice, citation, summons, or order has been received, and to the Knowledge of Seller, no complaint has been filed, no penalty has been assessed, and no investigation or review is pending by any governmental or other entity with respect to (i) any alleged violation by Seller of any law, rule, regulation, judgment, order, permit, or approval relating to the managing, marketing, advertising and licensing of the Purchased Assets, or (ii) any alleged failure by Seller to have any license, permit, authorization, or other approval relating to the managing, marketing, advertising and licensing of the Purchased Assets.

3.11 Intellectual Property.

(a) Schedule 3.11 of the Disclosure Schedule contains a complete and correct list of all of the Seller Intellectual Property. The Seller Intellectual Property constitutes all of the Intellectual Property Rights that Seller has been utilizing in connection with the managing, marketing, advertising and licensing of the “Liz Lange” or “Completely Me” brands and/or any related or derivative trademarks.

(b) Except as set forth on Schedule 3.11 of the Disclosure Schedule, (i) to the Knowledge of Seller, Seller owns and possesses all right, title and interest in and to, or has a valid license to, all of the Intellectual Property Rights necessary for the managing, marketing, advertising and licensing of the Purchased Assets, as presently conducted; (ii) to the Knowledge of Seller, no claim by any third party contesting the validity, enforceability, use or ownership of any such Intellectual Property Rights is currently pending, and to the Knowledge of Seller, there is no reasonable basis for any such claim; (iii) within the four (4) years prior to the Effective Date, neither Seller nor any registered agent thereof has received any written notices of an allegation of any infringement or misappropriation by, or other conflict with, any third party with respect to such Intellectual Property Rights, nor has any such Person received any claims of infringement or misappropriation of or other conflict with any Intellectual Property Rights of any third party; (iv) to the Knowledge of Seller, Seller in the managing, marketing, advertising and licensing of the Purchased Assets has not infringed, misappropriated or otherwise violated in any material respect any Intellectual Property Rights of any third party; and (v) to the Knowledge of Seller, no other Person is infringing, misappropriating or otherwise violating the Seller Intellectual Property.

(c) Schedule 3.11 of the Disclosure Schedule, to the Knowledge of Seller, accurately identifies and describes each filing, payment, and action that must be made or taken on or before the date that is sixty (60) days after the Closing Date in order to maintain each such item of registered Seller Intellectual Property in full force and effect.

(d) To the Knowledge of Seller and except as disclosed in Schedule 3.11(d) of the Disclosure Schedule, no current or former employee or contractor of Seller who is or was involved in the creation or development of any Seller Intellectual Property has any claim, right (whether or not currently exercisable) or interest to or in any of the Seller Intellectual Property.

3.12 Insurance. Schedule 3.12 of the Disclosure Schedule contains the policy number and a brief description of the insurance policy relating to the managing, marketing, advertising and licensing of the Purchased Assets and such other assets as may be owned by Seller.

3.13 Matters Relating to the Consultant. Seller has not made any promise to the Consultant orally or in writing of any bonus or increase in compensation other than any bonus or increase in compensation provided for in the Consultant’s current written agreement(s) with Seller (copies of which have been provided to Buyer), and as of the Closing, except as set forth on Schedule 3.13 of the Disclosure Schedule, Seller has paid to Consultant such amounts as Seller shall then have been required to have paid to Consultant through such date.

3.14 Taxes. All Taxes due and payable by Seller have been paid in full. The liability for Taxes of Seller reflected in the Financial Statements is sufficient to provide for all Taxes, interest, penalties, assessments or deficiencies which were due and unpaid and the appropriate accrual for other unpaid Taxes not yet due. All Tax Returns that are required to have been filed by Seller have been filed in a timely manner and such returns are complete and correct in all material respects. Any deficiencies proposed as a result of any governmental audits have been paid or settled, and there are no present disputes as to Taxes payable by Seller. Seller has timely withheld and paid all Taxes required to be paid or owing to any officer, member, manager, current or former employee, or any third party or independent contractor of Seller. Seller has not entered into any tax sharing agreements or tax indemnification agreements.

3.15 Product Liability. Except as set forth on Schedule 3.15 of the Disclosure Schedule, and to the Knowledge of Seller, neither Seller nor any Licensee, is, as of the date hereof, nor has either of them been at any time during the last three years, a party to any suit, action, proceeding, investigation, claim or order arising out of any injury to persons or damage to property as a result of the ownership or use of any of the Products and, to Seller’s Knowledge, there exist no facts or circumstances that could reasonably be expected to form the basis of any such suit, action, proceeding, investigation, or claim. To Seller’s Knowledge, none of the Products have a design or manufacturing defect that renders the type, series or class of product (as opposed to any individual product) reasonably likely to either (i) result in injuries to persons or property (other than any injuries to persons or property that may occur as the result of or in connection with the normal functioning of such products) or (ii) give rise to an obligation to recall such type, series or class of product.

3.16 Brokers or Finders. Except with respect to the broker’s fee due to Triangle Capital Group which shall be the responsibility of Seller, neither Seller nor any of its members or managers has retained any broker or finder, made any statement or representation to any Person which would entitle such Person to, or agreed to pay, any broker’s, finder’s or similar fees or commissions in connection with the transactions contemplated by this Agreement.

3.17 Solvency. Seller has not made an assignment for the benefit of creditors or taken any action with a view to, or that would constitute a valid basis for, the institution of any such insolvency proceedings.

3.18 Related Party Transactions. There are currently no Contracts, transactions, understandings or other arrangements of any nature between or among any of the Seller and any current or former Affiliate, member, owner, shareholder, partner, director, manager, or officer of Seller (or any of their respective predecessors) related to the Purchased Assets.

3.19 Disclaimer of Other Representations and Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE 3, SELLER MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, RELATING TO THE MANAGING, MARKETING, ADVERTISING AND LICENSING OF THE ASSETS OF SELLER AND/OR THE PURCHASED ASSETS, LIABILITIES OR OPERATIONS, INCLUDING AS TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, AND ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer hereby represents and warrants to Seller that the statements contained in this Article 4 are true, correct and complete in all material respects as of the Effective Date and shall be true in all material respects as of the Closing Date:

4.1 Authorization. Buyer has full power, right and authority to enter into and perform its obligations under this Agreement and each of the Transaction Documents to which it is a party. The execution, delivery and performance by Buyer of this Agreement and each of the Transaction Documents to which it is a party have been duly and properly authorized by all requisite action in accordance with applicable Law and with the certificate of formation and operating agreement of Buyer. This Agreement and each of the Transaction Documents to which Buyer is a party have been duly executed and delivered by Buyer and are the valid and binding obligation of Buyer and are enforceable against Buyer in accordance with their respective terms. All corporate actions on the part of Buyer, its managers, members and directors necessary for the authorization, execution, delivery and performance by Buyer of this Agreement and each of the Transaction Documents to which it is a party have been taken. No permits, approvals or consents of or notifications to (i) any governmental entities or (ii) any other Persons are necessary in connection with the execution, delivery and performance by Buyer of this Agreement and the Transaction Documents and the consummation by Buyer of the transactions contemplated hereby or thereby.

4.2 Organization. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.

4.3 Transaction Not a Breach. Neither the execution and delivery of this Agreement and the Transaction Documents nor the performance by Buyer of its obligations hereunder or thereunder will:

(a) violate or conflict with or result in a breach of any provision of any Laws of any court or other tribunal or any governmental entity or agency binding on Buyer or conflict with or result in the breach of any of the terms, conditions or provisions thereof;

(b) constitute a default under the certificate of formation or operating agreement of Buyer or any contract, agreement, lease, mortgage, note, bond, license or other instrument to which Buyer is a party or by which Buyer, its assets or property are bound;

(c) constitute an event which would permit any party to terminate, or accelerate the maturity of any Indebtedness or other obligation under, any contract, agreement, lease, mortgage, note, bond, license or other instrument to which Buyer is a party or by which Buyer or Buyer’s properties are bound or subject; or

(d) require any authorization, consent, approval, exemption or other action by or notice to any court or administrative or governmental body.

4.4 Brokers or Finders. Except with respect to any fees due to CoView Capital, Inc., which shall be the sole responsibility of the Buyer, neither Buyer nor any of its members or managers has retained any broker or finder, made any statement or representation to any Person which would entitle such Person to, or agreed to pay, any broker’s, finder’s or similar fees or commissions in connection with the transactions contemplated by this Agreement.

4.5 Acknowledgement.

(a) Buyer hereby acknowledges and agrees that it has conducted and completed its own investigation, analysis and evaluation of the Purchased Assets and the Assumed Liabilities, that it has made all such reviews and inspections of the Purchased Assets and the Assumed Liabilities as it has deemed necessary or appropriate, that it has had the opportunity to request all information it has deemed relevant to the foregoing from Seller and has received all information Buyer has deemed relevant to the foregoing; provided, however, that nothing in this Section 4.5(a) shall be deemed to modify any representation or warranty of Seller or constitute a waiver of any right or remedy Buyer may have against Seller under this Agreement.

(b) In making its decision to enter into this Agreement and the Transaction Documents and to consummate the transactions contemplated hereby, other than the representations and warranties made expressly by Seller in this Agreement, Buyer (i) has relied solely on its own investigation, analysis and evaluation of the Purchased Assets and the Assumed Liabilities and (ii) is not relying in any way on, and hereby waives, any representations and warranties, including any implied warranties, made by or on behalf of Seller.

4.6 Financing. The Buyer has cash available or has, or reasonably expects to have, existing borrowing facilities or unconditional, binding funding commitments that are sufficient to enable it to consummate the transactions contemplated by this Agreement and pay all contemplated fees and expenses of the Buyer related thereto. For clarification and not limitation, the obligation to close this transaction in accordance with this Agreement shall not be contingent on Buyer obtaining any financing.

ARTICLE 5

COVENANTS

Seller covenants and agrees that from Effective Date until the Closing Date:

5.1 Maintenance of Activities Prior to Closing. Seller shall continue to carry on the business of Seller in the Ordinary Course of Business and will not take any action inconsistent therewith or with the consummation of the transactions contemplated by this Agreement. In addition, prior to the Closing Date (and including the Closing Date), Seller shall: (i) maintain the Seller’s assets in substantially their current state of repair, excepting normal wear and tear; (ii) continue to conduct the management, marketing, advertising and licensing of the Purchased Assets in the same manner as conducted and operated as of the Effective Date (including, without limitation, using all commercially reasonable efforts to keep available the services of the present employees, agents and consultants of Seller relating to the managing, marketing, advertising and licensing of the Purchased Assets, soliciting, taking, processing and filling product orders in the Ordinary Course of Business, and maintaining good relations with Licensees, suppliers, customers, referral sources, distributors and any other Persons having business relationships with Seller relating to the managing, marketing, advertising and licensing of the Purchased Assets), (iii) maintain insurance on a basis consistent with past practice, (iv) not take any action to amend or otherwise modify the terms of any license, distribution or other Material Contracts, and (v) consult with Buyer prior to (1) taking any action which would be reasonably likely to have a Material Adverse Effect, or (2) entering into any Contract that may be of strategic importance with respect to the Purchased Assets.

5.2 Diligence. Following the Effective Date, Seller shall provide Buyer with certain portions of that certain Asset Purchase Agreement, dated as of November 15, 2007, by and among Seller and Elizabeth Lange, LLC to the extent such provisions relate to representations and warranties, disclosures, and/or the post-Closing covenants of Elizabeth Lange, LLC or the consulting relationship. In addition, Seller shall continue to provide updated information and documentation as reasonably requested by Buyer and shall make its representatives available as reasonably requested by Buyer to answer questions and resolve issues. Nothing herein shall be deemed to permit Buyer to terminate this Agreement.

5.3 Update Representations and Warranties; Notice of Certain Events. Each party shall endeavor to give prompt notice to the other party of the occurrence, or failure to occur, of any event which occurrence or failure would be likely to cause any representation or warranty of such party contained in this Agreement to be untrue, incomplete or inaccurate in any material respect as of any time from the date hereof to the Closing Date; provided, however, that no such notice shall be deemed to modify, amend or supplement the representations and warranties of Seller herein or the schedules hereto for any purpose except that if Seller shall have actual knowledge of a specific breach of a representation or warranty of Seller prior to Closing, Buyer’s sole remedy shall be to terminate this Agreement and if Buyer shall have closed with actual knowledge of a specific breach by Seller of a representation or warranty, such representation or warranty shall be deemed to have been conformed to the knowledge that Buyer actually had. In addition, each party shall give prompt notice to the other party of any failure of such party to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder.

5.4 Intentionally Omitted.

5.5 Satisfaction of Conditions. All representations and warranties of Seller contained in this Agreement shall be true in all material respects as though such representations and warranties were made on and as of the Closing Date. Seller shall use all commercially reasonable efforts to satisfy those conditions required hereby to be satisfied by Seller set forth in Section 7.2 hereof.

5.6 No Solicitation or Negotiation. The Seller and the Buyer hereby ratify and confirm the terms of the Exclusivity Agreement, which terms are incorporated herein by reference. Seller shall refrain from entering into any agreement or consummating any transactions that would interfere with the consummation of the transactions contemplated by this Agreement. Seller shall not provide any confidential information concerning the managing, marketing, advertising and licensing of the Purchased Assets or assets of the Seller to any third Person other than in the Ordinary Course of Business consistent with past practice.

5.7 Public Announcements. Except as may otherwise be required by applicable Law (including any filings with the Securities and Exchange Commission deemed by Buyer to be necessary or appropriate), prior to the Closing, the parties will consult with each other before issuing, or permitting any agent, Licensee or Affiliate to issue, any press releases or otherwise making, or permitting any agent, Licensee or Affiliate to make, any public statements with respect to this Agreement or the transactions contemplated hereby. Subsequent to the Closing, except as may be required by applicable Laws or by obligations pursuant to any listing agreement with any securities exchange or any stock exchange regulations, no party to this Agreement shall issue any press release or make any other public statement, in each case relating to, connected with or arising out of the consummation of the transactions contemplated by this Agreement or the terms of such transactions without obtaining the prior written approval of the other parties (which consent shall not unreasonably be withheld or delayed), and the parties shall cooperate as to the timing and contents of any such release or statement. Notwithstanding the foregoing, Seller acknowledges that after the Closing, nothing contained herein shall restrict Buyer or its Affiliates from providing investors, analysts and/or other interested parties with such information as the Buyer shall deem reasonably necessary or appropriate, including but not limited to copies of this Agreement.

5.8 Communications with Licensees; Payments from Third Parties After Closing. On the Closing Date, Seller shall distribute letters to each Licensee under a License Agreement, which letters shall, among other things, inform each Licensee that (i) Buyer has acquired the License Agreement and will now be regarded as the licensor under such License Agreement, and (ii) the Licensee should remit to Buyer all royalties and other payments due and payable under the License Agreement from and after the Closing Date (except that the letter to Target shall inform Target that the payment due for the May 2012-July 2012 quarter which is expected to be sent mid-September 2013 shall be delivered to Seller (and all such amounts shall be the property of Seller) and any future payments after such payment shall be remitted to Buyer (and shall be allocated in accordance with Section 2.1(h) of this Agreement and Buyer shall pay any such amounts due to Seller promptly after receipt from each such Licensee). Except as otherwise provide herein, in the event that Seller receives any payment from a third-party after the Closing Date to which Buyer is entitled pursuant to the terms of this Agreement or any of the Assigned Contracts, Seller shall forward such payment, as promptly as practicable, to Buyer and notify such third party to remit all future payments pursuant to the Assigned Contracts to Buyer. For the period of twelve (12) months following the Closing Date, Buyer and its duly authorized representatives shall have the right upon reasonable notice and during reasonable hours during normal business days to examine and copy such books and records in the possession or under the control of Seller in order to verify Seller’s compliance with its obligations under this Section 5.8, the cost and expense of which shall be borne by Buyer. All information pertaining to Buyer’s verification shall be deemed to be confidential information and shall be treated by Buyer as confidential in accordance with applicable law; provided, however, that nothing herein shall limit or restrict Buyer’s ability to disclose all or a portion of such information to the extent reasonably necessary in order to comply with Buyer’s disclosure obligations as a publicly traded company under applicable Securities and Exchange Commission or stock exchange rules and regulations. Such information shall be provided to Buyer without representation, warranty or liability whatsoever.

5.9 Further Assurances. Each party shall, from time to time (whether before or after the Closing Date), upon the request of the other party, execute, acknowledge and deliver to the other party such other documents or instruments, and take any and all actions as are reasonably necessary for the implementation and consummation of the transactions contemplated by this Agreement. From and after the Closing, Seller shall, at Buyer’s expense, use its commercially reasonable efforts, including the making available of Seller’s accountants and the granting of access to Buyer and its Affiliates and accountants to all books and records of Seller used in connection with the Purchased Assets, to provide information regarding the Purchased Assets to Buyer which is reasonably necessary for Buyer or its Affiliates to prepare any financial statements or other filings which may be required in order for Buyer or its Affiliates to meet its reporting obligations within the applicable time periods.

5.10 Notice of Proceedings. Buyer or Seller, as the case may be, will promptly and in any case within five (5) Business Days notify the other in writing upon becoming aware of any pending or threatened order or similar issuance restraining or enjoining the consummation of this Agreement or the transactions contemplated hereunder.

5.11 Non-Interference. For a period commencing on the Closing Date and ending on the date that is two (2) years after the Closing Date, (the “Restricted Period”), Seller shall not conduct business or otherwise pursue any conversation about, or negotiate with, Target or any other Licensee (that is a Licensee as of the Closing Date) with respect to maternity wear to be manufactured, sold, or otherwise distributed by Target or any other Licensees (that are Licensees as of the Closing Date).

ARTICLE 6

CONDITIONS TO BUYER’S AND SELLER’S OBLIGATIONS

6.1 Conditions to Seller’s Obligations. The obligations of Seller to consummate the transactions contemplated by this Agreement are subject to the satisfaction, on or prior to the Closing Date, of each of the following conditions:

(a) Representations, Warranties, and Covenants. All representations and warranties of Buyer contained in this Agreement or in any schedule, certificate or document delivered by Buyer pursuant to the provisions of this Agreement shall be true and correct in all material respects at and as of the Effective Date and the Closing Date, except as and to the extent that the facts and conditions upon which such representations and warranties are based are expressly required or permitted to be changed by the terms hereof, and Buyer shall have performed all agreements and covenants required hereby to be performed by it prior to or at the Closing Date.

(b) No Governmental Proceedings or Litigation. No action by any governmental authority shall have been instituted or threatened which questions the validity or legality of the transactions contemplated hereby and which could reasonably be expected materially and adversely to damage Seller if the transactions contemplated hereunder are consummated.

6.2 Conditions to Obligations of Buyer. The obligations of Buyer to consummate the transactions contemplated by this Agreement are subject, in the discretion of Buyer, to the satisfaction, on or prior to the Closing Date, of each of the following conditions:

(a) Representations, Warranties, and Covenants. All representations and warranties of Seller contained in this Agreement or in any schedule, certificate or document delivered in connection herewith shall be true and correct in all material respects (except for those representations and warranties that are qualified by materiality, which representations and warranties shall be true and correct) at and as of the Closing Date, and Seller shall have performed all agreements and covenants required hereby to be performed by it prior to or at the Closing Date.

(b) Consents. All of the Required Consents set forth on Exhibit B shall have been obtained and, with respect to Target Corp. and Consultant, Seller shall have delivered to Buyer executed consents to assign such agreements in form and substance substantially similar to the consents which are hereto as Exhibits B-1 and B-2, respectively.

(c) No Governmental Proceedings or Litigation. No action by any governmental authority shall have been instituted or threatened which questions the validity or legality of the transaction contemplated hereby and which could reasonably be expected materially and adversely to damage Buyer if the transactions contemplated hereunder are consummated.

(d) Closing Deliveries. Seller shall have made the Closing deliveries referenced in Section 7.2.

(e) Payoff Letters. Seller shall have delivered payoff letters from any Persons with a security interest in any of the Purchased Assets, pursuant to which such Persons shall, upon receipt of any outstanding funds due at the Closing, authorize the release of their security interests in the Purchased Assets and, if applicable, shall authorize the filing by Buyer of one or more termination statements or amendments evidencing such release(s) with the appropriate Secretary(ies) of State or any other governmental authorities.

ARTICLE 7

CLOSING

7.1 Time and Place. The transactions contemplated by this Agreement shall be consummated (the “Closing”) at 10:00 a.m. (Eastern Standard Time) on , 2012, TIME BEING OF THE ESSENCE, or such other sooner time or date as the parties hereto may mutually agree in writing (the “Closing Date”), at the offices of Seller. The parties anticipate that Closing will occur remotely without a face to face meeting and will be accomplished by the Seller then authorizing Buyer’s legal counsel to release previously deposited signed documents to Buyer contingent upon Seller’s receipt of the signed documents required by this Agreement.

7.2 Deliveries of Seller. At the Closing, Seller will deliver or cause to be delivered to Buyer:

(a) Certificates of Good Standing. Certificates of Good Standing of Seller, dated not more than fifteen (15) days prior to the Closing Date issued by the Delaware Secretary of State and New York Secretary of State;

(b) Consents. All consents and pay-off letters required pursuant to Sections 6.2(b) and (e);

(c) Bill of Sale. A general Bill of Sale in the form attached as Exhibit C (the “Bill of Sale”), executed by a duly authorized member of Seller;

(d) Assignment and Assumption Agreement. An Assignment and Assumption Agreement, providing, among other things, for the assignment of the Assumed Liabilities by the Seller to Buyer and the assumption of the same by Buyer, in the form attached as Exhibit D (the “Assignment and Assumption Agreement”), executed by a duly authorized member of Seller;

(e) Assignment(s) of Marks. One or more Assignment(s) of Marks, in the form attached as Exhibit E (the “Assignment of Marks”), executed by a duly authorized member of Seller;

(f) Domain Name Transfer Agreement. An Agreement for the Transfer of Domain Names, in the form attached as Exhibit F (the “Domain Name Transfer Agreement”), executed by a duly authorized member of Seller;

(g) Manager’s Certificate. A certificate of the Manager of Seller, dated the Closing Date, as to the resolutions of the managers of Seller authorizing (i) the execution and performance of this Agreement and each Transaction Document to which it is a party and the transactions contemplated hereby and thereby; and (ii) duly authorizing the members of Seller executing this Agreement and each Transaction Document to which they are a party to execute this Agreement and each Transaction Document on behalf of Seller;

(h) Escrow Agreement. Escrow Agreement in the form attached as Exhibit A, executed by a duly authorized member of Seller; and

(i) Other Documents. Such other documents and instruments as Buyer or its counsel reasonably shall deem necessary to consummate the transactions contemplated hereby.

7.3 Deliveries of Buyer. At the Closing, Buyer will deliver to the Seller:

(a) Closing Payment. The Closing Payment as set forth in Section 2.3(c);

(b) Bill of Sale; Assignment and Assumption Agreement. The Bill of Sale and Assignment and Assumption Agreement, executed by a duly authorized officer of Buyer;

(d) Domain Name Transfer Agreement. The Domain Name Transfer Agreement, executed by a duly authorized officer of Buyer;

(e) Escrow Agreement. The Escrow Agreement, executed by a duly authorized officer of Buyer (together with the Escrow Amount to Escrow Agent in accordance with Section 2.3(c)); and

(f) Certificate of Good Standing. A Certificate of Good Standing of Buyer, dated not more than fifteen (15) days prior to the Closing Date issued by the Delaware Secretary of State.

(g) Secretary’s Certificate. A certificate of the Secretary of Buyer, dated the Closing Date, as to the resolutions of the Buyer authorizing (i) the execution and performance of this Agreement and each Transaction Document to which it is a party and the transactions contemplated hereby and thereby, and (ii) duly authorizing the officer of Buyer executing this Agreement and each Transaction Document to which they are a party to execute this Agreement and each Transaction Document on behalf of Buyer.

ARTICLE 8

INDEMNIFICATION

8.1 Survival Of Representations and Warranties; Exclusive Remedy; Limitations on Indemnification; Claim Notices.

(a) Survival of Representations and Warranties. The representations and warranties made in this Agreement shall survive until 11:59 p.m. (New York time) on the Escrow Release Date; provided, however, that (i) the representations and warranties in Sections 3.1, 3.3, 3.11, 3.15 and 3.16 shall survive the Closing and continue in full force and effect until 11:59 p.m. (New York time) on the date that is eighteen (18) months following the Closing Date, (ii) the representations and warranties in Sections 3.7 and 3.14 shall survive the Closing and continue in full force and effect until 11:59 p.m. (New York time) on the date that is three (3) years following the Closing Date, and (iii) if any bona fide Claim Notice is delivered prior to the applicable cut-off date set forth above, such claim shall survive until such claim is fully and finally resolved, either by means of a written settlement agreement executed on behalf of Seller and Buyer or by means of a final, non-appealable judgment issued by a court of competent jurisdiction. All of the covenants, agreements and obligations of the parties contained in this Agreement or any other document, certificate, schedule or instrument delivered or executed in connection herewith shall survive (i) until fully performed or fulfilled, unless non-compliance with such covenants, agreements or obligations is waived in writing by the party or parties entitled to such performance or (ii) if not fully performed or fulfilled, until the expiration of the relevant statute of limitations.

(b) Exclusive Remedy. From and after the Closing, other than in respect of claims based on conduct constituting fraud or intentional misrepresentation, this Article 8 shall be the sole and exclusive remedy for any claim or controversy arising out of or relating to any breach or inaccuracy of any representation or warranty made by the Seller or Buyer in this Agreement. Notwithstanding the foregoing, the provisions of this Section 8.1(b) shall not prevent or limit a cause of action to obtain equitable relief, including an injunction or injunctions, to prevent breaches of any covenants contained in this Agreement and to enforce specifically the terms and provisions hereof. In addition, the parties agree that (i) the Escrow Amount due to Seller shall be the first source of funds to be used to pay any indemnification claims finally determined to be payable by Seller to Buyer and any Buyer Indemnified Party; provided, however, that (subject to Section 8.1(c) below) the Escrow Amount shall in no way be construed, or implied to be, the exclusive source of Buyer’s remedy, damages, reimbursement or indemnification and shall be in addition to any and all other rights, remedies or damages that Buyer may possess, in both law and equity.

(i) Except for claims based on fraud or intentional misrepresentation on the part of Seller, the maximum amount of Losses which Buyer can recover pursuant to Section 8.2(a) is limited to $1,600,000 (the “Indemnification Limit”).

(ii) Seller shall not be required to indemnify any Buyer Indemnified Party pursuant to Section 8.2(a) with respect of any Losses arising from breaches of, or inaccuracies in, the representations or warranties of the Seller unless and until (A) the Losses relating to or arising out any individual claim exceeds Two Thousand Five Hundred Dollars ($2,500) (the “Claim Threshold”) and (B) the aggregate amount of Losses incurred by the Buyer Indemnified Parties thereunder (with respect to all claims that satisfy the threshold in (c)(ii)(A) brought at such time) exceeds Twenty-Five Thousand Dollars ($25,000) (the “Basket”) (at which point the Seller shall be required to indemnify the Buyer Indemnified Parties for the full amount of all such Losses that exceed the Basket). The Seller agrees and acknowledges that nothing in this Agreement (including this Section 8.1(c)) shall limit or restrict any of the Buyer Indemnified Parties’ rights to maintain or recover any amounts in connection with any action or claim based upon fraud, intentional misrepresentation or criminal misconduct or deceit.

(iii) Anything in this Agreement to the contrary notwithstanding, in no event shall either party be liable for any special, punitive, speculative, indirect and/or consequential and/or similar damages.

(d) Claim Notices. For purposes of this Agreement, a “Claim Notice” relating to a particular representation or warranty shall be deemed to have been given if any Indemnified Party, acting in good faith, delivers to the indemnifying party a written notice stating that such Indemnified Party believes that there is a breach of such representation or warranty and containing (i) a brief description of the circumstances supporting such Indemnified Party’s belief that there has been a breach, and (ii) a non-binding, preliminary estimate of the aggregate dollar amount of the actual and potential Losses that have arisen and may arise as a direct or indirect result of such possible breach; provided, however, that no delay or failure on the part of the Indemnified Party in so notifying the indemnifying party shall relieve the indemnifying party of any obligations hereunder except to the extent that the indemnifying party is prejudiced by such delay or failure.

(e) For purposes of this Article 8, each statement or other item of information set forth in the applicable Disclosure Schedule shall be deemed to be a representation and warranty made by the respective party in this Agreement. Notwithstanding anything herein to the contrary, the representations and warranties of the parties contained in this Agreement shall, for purposes of the Indemnifying Parties’ obligations pursuant to this Article 8, be deemed to be made as of the Closing Date.

8.2 Indemnification by Seller. Subject to Section 8.1 above, Seller hereby agrees to indemnify each of Buyer, its Affiliates, equity holders, managers, partners, officers, employees, agents, representatives, successors and permitted assigns (the “Buyer Indemnified Parties”) and save and hold each of them harmless from and against and pay on behalf of or reimburse the Buyer Indemnified Parties as and when incurred for any and all liabilities, demands, claims, actions, causes of action, assessments, losses, costs, damages, deficiencies, taxes, fines or expenses (whether or not arising out of third party claims), including, without limitation, interest, penalties, reasonable attorneys’ fees and expenses, and all amounts paid in investigation, defense or settlement of any of the foregoing (collectively, “Losses”), which any Buyer Indemnified Party may suffer, sustain or become subject to, in connection with, incident to, resulting from or arising out of or in any way relating to or by virtue of:

(a) Any material misrepresentation or breach of warranty on the part of Seller under Article 3 of this Agreement or any material misrepresentation in any of the representations, warranties or statements contained in any of the Transaction Documents furnished to Buyer by Seller or any of its agents;

(b) Except for Sections 5.1, 5.6 and 5.11, any nonfulfillment or breach of any covenant or agreement on the part of Seller under this Agreement solely for periods following the Closing Date;

(c) Any action, demand, proceeding, investigation or claim by any third party (including governmental agencies) against or affecting any Buyer Indemnified Party which, if successful, would evidence the existence of a material misrepresentation or material breach of any of the representations, warranties or covenants of Seller;

(d) Any and all federal, state or local income (or other earnings-based) Taxes due from Seller in connection with the managing, marketing, advertising and licensing of the assets of Seller (including, without limitation, the Purchased Assets), or with respect to the assets thereof, applicable to or arising from any period prior to the Closing Date; or

(e) Any and all Liabilities or Losses relating to the Excluded Assets.

8.3 Indemnification by Buyer. Buyer, on behalf of itself and its respective successors and assigns, hereby agree to indemnify Seller and its Affiliates, equityholders, directors, partners, officers, employees, agents, representatives, successors and permitted assigns thereof (the “Seller Indemnified Parties”) and save and hold each of them harmless from and against and pay on behalf of or reimburse the Seller Indemnified Parties as and when incurred for any and all Losses which any Seller Indemnified Party may suffer, sustain or become subject to, in connection with, incident to, resulting from or arising out of or in any way relating to or by virtue of:

(a) Any material misrepresentation or breach of warranty on the part of Buyer under Article 4 of this Agreement or any material misrepresentation in or omission from any of the representations, warranties or statements contained in any of the Transaction Documents furnished to Seller by Buyer;

(b) Any nonfulfillment or breach of any covenant or agreement on the part of Buyer under this Agreement solely for periods following the Closing Date;

(c) Any action, demand, proceeding, investigation or claim by any third party (including governmental agencies) against or affecting a Seller Indemnified Party which, if successful, would evidence the existence of a material misrepresentation or breach of any of the representations, warranties or covenants of Buyer;

(d) Any and all federal, state or local income (or other earnings-based) Taxes due from the managing, marketing, advertising and licensing of the Purchased Assets after the Closing Date, except to the extent that such Losses are related to transactions occurring prior to the Closing Date;

(e) Any action, demand, proceeding, investigation or claim by any third party against or affecting a Seller Indemnified Party and arising out of (i) the post-Closing use of website photos, content or text as provided in Section 2.1(d), or (ii) the post-Closing use of photos of models (or the like) if any, as provided in Section 2.1(g); and/or

(f) the Assumed Liabilities.

8.4 Indemnification Procedure for Third Party Claims.

(a) In the event that a Seller Indemnified Party or Buyer Indemnified Party (as the case may be, the “Indemnified Party”) desires to make a claim under Article 8 in connection with any action, suit, proceeding or demand at any time instituted against or made upon such Indemnified Party by any third party (a “Third Party Claim”) for which such Indemnified Party may seek indemnification hereunder from Seller, in the case of a Buyer Indemnified Party, or Buyer, in the case of a Seller Indemnified Party (each such notified party, the “Control Party”), it shall deliver written notice to the Control Party specifying the facts underlying such Third Party Claim and the amount demanded or claimed, to the extent known (the “Defense Notice”). The Control Party shall have thirty (30) days after receipt of a Defense Notice to notify the Indemnified Party in writing that (i) it may be liable under the provisions hereof for indemnity in the amount of such claim if such claim were successful, (ii) it disputes and intends to defend against such claim, liability or expense at its own cost and expense, and (iii) that it has elected to undertake, conduct and control, through counsel of its own choosing (subject to the consent of the Indemnified Party, such consent not to be unreasonably withheld, conditioned or delayed), and at its sole expense, the good faith settlement or defense of such Third Party Claim, and the Indemnified Party shall cooperate with the Control Party in connection therewith; provided, that (a) the settlement of a Third Party Claim by the Control Party shall require the prior reasonable consultation with the Indemnified Party and the prior written consent of the Indemnified Party, which consent shall not be unreasonably withheld, conditioned or delayed, and (b) the Indemnified Party shall be entitled to participate in such settlement or defense through counsel chosen by the Indemnified Party, provided that the fees and expenses of such counsel shall be borne by the Indemnified Party. So long as the Control Party is contesting any such Third Party Claim in good faith, the Indemnified Party shall not pay or settle any such Third Party Claim; provided, however, that notwithstanding the foregoing, the Indemnified Party shall have the right to pay or settle any such Third Party Claim at any time, provided that in such event it shall waive any right of indemnification therefor (whether from the Escrow Account or otherwise) pursuant to this Article 8. If the Control Party does not make a timely election to undertake the good faith defense or settlement of the Third Party Claim as aforesaid, or if the Control Party fails to proceed with the good faith defense or settlement of the matter after making such election, then, in either such event, the Indemnified Party shall have the right to contest, settle or compromise such Third Party Claim (provided that all settlements or compromises require the prior reasonable consultation with the Control Party and the prior written consent of the Control Party, which consent shall not be unreasonably withheld, conditioned or delayed). Notwithstanding the foregoing, the Control Party shall not be entitled to assume control of such defense (unless otherwise agreed to in writing by the Indemnified Party) and shall pay the fees and expenses of counsel retained by the Indemnified Party if (1) the claim for indemnification relates to or arises in connection with any criminal or quasi-criminal proceeding, action, indictment, allegation or investigation; (2) the Indemnified Party reasonably believes (based upon written advice of qualified outside counsel) an adverse determination with respect to the action, lawsuit, investigation, proceeding or other claim giving rise to such claim for indemnification would be materially detrimental to or cause serious injury to the Indemnified Party’s reputation; (3) the claim seeks an injunction or equitable relief against the indemnified party; (4) the Indemnified Party has been advised in writing by counsel that a reasonable likelihood exists of a conflict of interest between the Indemnified Party and the Control Party with respect to such matter; or (5) upon petition by the Indemnified Party, the appropriate court rules that the Control Party failed or is failing to vigorously prosecute or defend such claim.

(b) A failure by an Indemnified Party to give timely, complete or accurate notice as provided in this Section 8.4 will not affect the rights or obligations of any party hereunder except and only to the extent that, as a result of such failure, any party entitled to receive such notice was deprived of its right to recover any payment under its applicable insurance coverage or was otherwise directly and materially damaged as a result of such failure to give timely notice.

ARTICLE 9

TERMINATION

9.1 Termination. This Agreement may be terminated prior to the Closing Date:

(a) by mutual written consent of the Buyer and Seller; or

(b) by either Buyer or Seller if the transactions contemplated by this Agreement have not been consummated by September 5, 2012 (the “Termination Date”), TIME BEING OF THE ESSENCE, unless the failure of the Closing to occur by such date is attributable to a failure on the part of the party seeking to terminate this Agreement.

9.2 Effect of Termination. If this Agreement is terminated as provided in Section 9.1, this Agreement will be of no further force or effect; provided, however, that: (a) this Section 9.2 (Effect of Termination) and Article 10 (Miscellaneous) will survive the termination of this Agreement and remain in full force and effect, and (b) the termination of this Agreement will not relieve any party from any liability for any breach of this Agreement.

ARTICLE 10

MISCELLANEOUS

10.1 Notices, Consents, etc. Any notices, consents or other communications required or permitted to be sent or given hereunder by any of the parties shall in every case be in writing and shall be deemed properly served if (a) delivered personally, (b) sent by registered or certified mail, in all such cases with first class postage prepaid, return receipt requested, (c) delivered by a recognized overnight courier service, or (d) sent by facsimile transmission with written confirmation of receipt to the parties at the addresses as set forth below or at such other addresses as may be furnished in writing.

	If to Seller:

	LLM Management Co., LLC
	1370 Broadway, Suite 1107
	New York, New York 10018
	Attn: Mr. Joseph Gabbay
	Mr. Ralph Gindi
	Fax: (212) 290-1330

	with a copy to:

	Joseph S. Sutton, Esq.
	1370 Broadway, Suite 1107
	New York, New York 10018
	Fax: (212) 290-1330

	Email: JSutton@Bluestarall.com

	If to Buyer:

	Cherokee Inc.
	5990 Sepulveda Blvd., Suite 600
	Sherman Oaks, CA 91411
	Attn: Howard Siegel, President and COO
	Fax: (818) 908-9191

	with a copy to:

	Jeffer Mangels Butler & Mitchell LLP
	1900 Avenue of the Stars, 7th Floor
	Los Angeles, CA 90067
	Attention: Rod S. Berman, Esq.
	Fax: (310) 203-0567

Date of service of such notice shall be (w) the date such notice is personally delivered, (x) five (5) Business Days after the date of mailing if sent by certified or registered mail, (y) one (1) Business Day after date of receipt if sent by overnight courier or (z) the next succeeding Business Day after transmission by facsimile.

10.2 Severability. The unenforceability or invalidity of any provision of this Agreement shall not affect the enforceability or validity of any other provision.

10.3 Amendment and Waiver. This Agreement may be amended, or any provision of this Agreement may be waived, provided that any such amendment or waiver will be binding on Buyer only if such amendment or waiver is set forth in a writing executed by Buyer, and provided that any such amendment or waiver will be binding upon Seller only if such amendment or waiver is set forth in a writing executed by Seller. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a continuing waiver or as a waiver of any other breach.

10.4 Documents. Each party will execute all documents and take such other actions as any other party may reasonably request in order to consummate the transactions provided for herein and to accomplish the purposes of this Agreement.

10.5 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered to the other.

10.6 Expenses. Each of the parties to this Agreement shall pay all costs and expenses incurred or to be incurred by it in negotiating and preparing this Agreement and the Transaction Documents and in the closing and carrying out of the transactions contemplated hereunder and thereunder, including, but not limited to, legal and accounting fees and expenses.

10.7 Construction. This Agreement shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Agreement shall be governed by, the laws of the State of New York, without giving effect to provisions thereof regarding conflict of laws.

10.8 Headings. The subject headings of Articles, Sections and Schedules of this Agreement are included for purposes of convenience only and shall not affect the construction or interpretation of any of its provisions.

10.9 Assignment. This Agreement will be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but will not be assignable or delegable by any party without the prior written consent of the other parties; provided, however, that after the Closing Date, (i) there shall be no restriction on Buyer’s ability to assign any of its rights (including its indemnification rights hereunder) or obligations in connection with a sale of all or substantially all of its assets, a merger of Buyer with and into any other Person, or an assignment of any of the Purchased Assets to an Affiliate of Buyer, (ii) Buyer may assign its rights and obligations hereunder to a newly-formed or existing subsidiary of Buyer (which assignment shall be deemed to remove Buyer as a party to this Agreement and insert such subsidiary entity as “Buyer” hereunder), and (iii) Buyer may assign and grant a security interest in its rights, title and interest under this Agreement, including its rights to indemnification hereunder, for collateral security purposes to any lender(s) providing financing to Buyer or any of its Affiliates without any additional notice or consent of the other parties hereto, and any such lender(s) may exercise from time to time all of the rights and remedies of Buyer hereunder, in each case with prior written notice to Seller. Any attempted assignment in violation of this Section 10.9 shall be null and void.

10.10 Entire Agreement. This Agreement, and all the schedules and exhibits attached to this Agreement (all of which shall be deemed incorporated in the Agreement and made a part hereof), set forth the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements, written or oral, of the parties hereto (including but not limited to any letter of intent), and shall not be modified or affected by any offer, proposal, statement or representation, oral or written, made by or for any party in connection with the negotiation of the terms hereof, and may be modified only by instruments signed by all of the parties hereto. The disclosing, furnishing or making available for review of any document or other information to Buyer (including materials uploaded to the virtual data room) shall not be construed to modify, qualify or disclose any exception to any representation or warranty of Seller herein except as otherwise specifically set forth on the Disclosure Schedules.

10.11 Interpretative Matters. Unless the context otherwise requires, (a) all references to Articles, Sections or Schedules are to Articles, Sections or Schedules in this Agreement, (b) words in the singular or plural include the singular and plural and pronouns stated in either the masculine, the feminine or neuter gender shall include the masculine, feminine and neuter, and (c) the use of the word “including” in this Agreement shall be by way of example rather than limitation.

10.12 No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction will be applied against any party hereto.

10.13 Governing Law; Dispute Resolution.

(a) This Agreement shall be governed by and construed under the laws of the State of New York, exclusive of the body of law known as conflicts of law.

(b) Any claim or dispute, whether based on contract, tort, statute or any other legal or equitable theory, arising out of or relating to this Agreement or the transactions contemplated hereby (“Dispute”) shall be brought in the federal or state courts located in the State, City and County of New York. Each of the parties hereto expressly submits to the exclusive jurisdiction of such courts and waives any claim of improper jurisdiction or lack of venue in connection with any claim or controversy that may be brought in connection with this Agreement. Each party hereby agrees that such courts, as applicable, shall have in personam jurisdiction with respect to such party, and such party hereby submits to the personal jurisdiction of such courts. The parties hereby waive any objection to venue including those based upon form non conveniens. BUYER AND SELLER EACH HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, WAIVE ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS AGREEMENT OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BUYER AND SELLER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. SELLER OR BUYER, AS APPLICABLE, ARE HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BUYER OR SELLER, AS APPLICABLE. THE PROVISIONS OF THIS SECTION SHALL SURVIVE THE CLOSING OR EARLIER TERMINATION OF THIS AGREEMENT.

(c) If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.

10.14 Bulk Sales Law. Buyer hereby waives compliance by Seller with the bulk sales laws of any states where the Purchased Assets are located or in which the management, marketing, advertising and licensing of the assets of Seller are conducted.

10.15 Non-Recourse. No past, present or future director, officer, employee, incorporator, member, partner, stockholder, agent, attorney or representative of either party or its Affiliates (provided that such director, officer, employee, incorporator, member, partner, stockholder, agent, attorney or representative is an individual) shall have any personal liability for any obligations or liabilities of either party under this Agreement or the Transaction Documents or for any claim based on, in respect of, or by reason of, the transactions contemplated hereby and thereby.

10.16 Specific Performance. The parties to this Agreement agree that irreparable damage would occur if any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties to this Agreement shall be entitled to an injunction or injunctions to prevent breaches or threatened breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in the courts specified in Section 10.13, and the parties to this Agreement hereby waive any requirement for the posting of any bond or similar collateral in connection therewith. The parties agree that they shall not object to the granting of injunctive or other equitable relief on the basis that there exists adequate remedy at Law. Notwithstanding anything to the contrary in this Agreement, if either party fails to close because of a breach by the other party, then the non-breaching party shall be entitled to seek specific performance.

[Signatures on following page]

IN WITNESS WHEREOF, the parties have executed this Asset Purchase Agreement as of the date first above written.

“Buyer”

CHEROKEE INC., a Delaware corporation

By:	/s/ Henry Stupp
	Name:	Henry Stupp
	Title:	CEO


“Seller”

LLM MANAGEMENT COMPANY, LLC,
a Delaware limited liability company

By:	/s/ Joseph Gabbay
	Name: Joseph Gabbay
	Title: Managing Member

[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]

EX-10.1 3 a12-20297_1ex10d1.htm EX-10.1

Exhibit 10.1

Credit Agreement

This agreement dated as of September 4 2012 is between JPMorgan Chase Bank, N.A. (together with its successors and assigns, the “Bank”), whose address is 300 S. Grand Ave., Los Angeles, CA 90071-3109, and CHEROKEE INC, (individually, the “Borrower” and if more than one, collectively, the “Borrowers”), whose address is 5990 Sepulveda Boulevard, Suite 600, Sherman Oaks, CA 91411.

1. Credit Facilities.

1.1 Scope. This agreement governs Facility A and Facility B, and, unless otherwise agreed to in writing by the Bank and the Borrower or prohibited by any Legal Requirement (as hereafter defined), governs the Credit Facilities as defined below. Advances under any Credit Facilities shall be subject to the procedures established from time to time by the Bank. Any procedures agreed to by the Bank with respect to obtaining advances, including automatic loan sweeps, shall not vary the terms or conditions of this agreement or the other Related Documents regarding the Credit Facilities.

1.2 Facility A (Line of Credit). The Bank has agreed to extend credit to Borrower in the form of a revolving line of credit in the principal sum not to exceed $2,000,000.00 in the aggregate at any one time outstanding (“Facility A”). Credit under Facility A shall be repayable as set forth in a Line of Credit Note executed concurrently with this agreement, and any renewals, modifications, extensions, rearrangements, restatements thereof and replacements or substitutions therefor.

Non Usage Fee. The Borrower shall pay to the Bank a non-usage fee calculated on the average daily unused portion of Facility A at a rate of 0.25% per annum, payable in arrears within seven (7) business days of the end of each calendar month for which the fee is owing. The Bank may begin to accrue the foregoing fee on the date as of which all conditions precedent to the first extension of credit governed by this agreement and any initial advance under any of the Credit Facilities are satisfied. Borrower shall have the right to terminate Facility A upon delivery by Borrower to the Bank of a written notice of termination and thereupon the non-usage fee shall cease to accrue; provided that Borrower has paid to the Bank all outstanding Liabilities under Facility A and no default then exists under this agreement or any of the Related Documents.

1.3 Facility B (Term Loan). The Bank agrees to extend credit to the Borrower in the form of a term loan in the principal sum of $13,000,000.00 (“Facility B”), bearing interest and payable as set forth in the promissory note executed concurrently with this agreement, and with any and all renewals, modifications, extensions, rearrangements, restatements thereof and replacements or substitutions therefor.

Upfront Fee. The Borrower agrees to pay to the Bank a fee equal to 0.50% of the total amount advanced under Facility B, which shall be payable upon execution and delivery of this agreement.

2. Definitions and Interpretations.

2.1 Definitions. As used in this agreement, the following terms have the following respective meanings:

A. “Acquistion Agreement” means the Asset Purchase Agreement dated on or about the date hereof between the Borrower and LLM Management Co., LLC relating to the Borrower’s purchase of the Liz Lange/Completely Me brand and the related assets described therein.

B. “Affiliate” means any Person which, directly or indirectly Controls or is Controlled by or under common Control with, another Person, and any director or officer thereof. The Bank is under no circumstances to be deemed an Affiliate of the Borrower or any of its Subsidiaries.

C. “Authorizing Documents” means certificates of authority to transact business, certificates of good standing, borrowing resolutions, appointments, officer’s certificates, certificates of incumbency, and other documents which empower and authorize or evidence the power and authority of all Persons (other than the Bank) executing any Related Document or their representatives to execute and deliver the Related Documents and perform the Person’s obligations thereunder.

D. “Collateral” means all Property, now or in the future subject to any Lien in favor of the Bank, securing or intending to secure, any of the Liabilities.

E. “Control” as used with respect to any Person, means the power to direct or cause the direction of, the management and policies of that Person, directly or indirectly, whether through the ownership of Equity Interests, by contract, or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.

F. “Credit Facilities” means all extensions of credit from the Bank to the Borrower, whether now existing or hereafter arising, including but not limited to those described in Section 1, if any, and those extended contemporaneously with this agreement.

G. “EBITDA” means, for any Test Period, with respect to the Borrower and its Subsidiaries on a consolidated basis, consolidated net income for such period plus, without duplication and to the extent deducted in calculating consolidated net income for such period, the sum of (a) consolidated interest expense for such period, (b) the sum of federal, state, local and foreign income taxes accrued or paid in cash during such period, (c) the amount of depreciation and amortization expense deducted in determining consolidated net income, (d) any extraordinary or non-recurring items reducing consolidated net income for such period, and (e) any non-cash items reducing consolidated net income for such period, minus (i) any extraordinary or non-recurring items increasing consolidated net income for such period (exclusive of any revenue from royalty audits) and (ii) any non-cash items increasing consolidated net income for such period.

H. “Distributions” means all dividends and other distributions made to any Equity Owners, other than salary, bonuses, and other compensation for services expended in the current accounting period.

I. “Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest.

J. “Equity Owner” means a shareholder, partner, member, holder of a beneficial interest in a trust or other owner of any Equity Interests.

K. “GAAP” means generally accepted accounting principles in effect from time to time in the United States of America, consistently applied.

L. “Legal Requirement” means any law, ordinance, decree, requirement, order, judgment, rule, regulation (or interpretation of any of the foregoing) of any foreign governmental authority, the United States of America, any state thereof, any political subdivision of any of the foregoing or any agency, department, commission, board, bureau, court or other tribunal having jurisdiction over the Bank, any Pledgor or any Obligor or any of its Subsidiaries or their respective Properties or any agreement by which any of them is bound.

M. “Liabilities” means all indebtedness, liabilities and obligations of every kind and character of the Borrower to the Bank, whether the obligations, indebtedness and liabilities are individual, joint and several, contingent or otherwise, now or hereafter existing, including, without limitation, all liabilities, interest, costs and fees, arising under or from any note, open account, overdraft, credit card, lease, Rate Management Transaction, letter of credit application, endorsement, surety agreement, guaranty, acceptance, foreign exchange contract or depository service contract, whether payable to the Bank or to a third party and subsequently acquired by the Bank, any monetary obligations (including interest) incurred or accrued during the pendency of any bankruptcy, insolvency, receivership or other similar proceedings, regardless of whether allowed or allowable in such proceeding, and all renewals, extensions, modifications, consolidations, rearrangements, restatements, replacements or substitutions of any of the foregoing.

N. “Lien” means any mortgage, deed of trust, pledge, charge, encumbrance, security interest, collateral assignment or other lien or restriction of any kind.

O. “Material Contract” means the Restated License Agreement dated as of February 1, 2008 between the Borrower and Target General Merchandise, Inc., as amended October 1, 2011.

P. “Notes” means all promissory notes, instruments and/or contracts now or hereafter evidencing the Credit Facilities.

Q. “Obligor” means any Borrower, guarantor, surety, co-signer, endorser, general partner or other Person who may now or in the future be obligated to pay any of the Liabilities.

R. “Organizational Documents” means, with respect to any Person, certificates of existence or formation, documents establishing or governing the Person or evidencing or certifying that the Person is duly organized and validly existing in accordance with all applicable Legal Requirements, including all amendments, restatements, supplements or modifications to such certificates and documents as of the date of the Related Document referring to the Organizational Document and any and all future modifications thereto approved by the Bank.

S. “Permitted Acquisitions” means the purchase or acquisition (whether in one or a series of related transactions) by the Borrower of (a) more than 50% of the Equity Interests with ordinary voting power of another Person or (b) all or substantially all of the Property (other than Equity Interests) of another Person or division or line of business or business unit of another Person, whether or not involving a merger or consolidation with such Person; provided that (i) at the time thereof and after giving effect thereto, no default or event of default under Section 7 shall have occurred and be continuing or would result from such acquisition or purchase, (ii) the aggregate amount of the consideration (or, in the case of consideration consisting of assets, the fair market value of the assets) paid by the Borrower and its Subsidiaries shall not exceed $5,000,000 on a cumulative basis for all such acquisitions or purchases subsequent to the date hereof, (iii) the Borrower would be in compliance with the financial covenants set forth in Section 5 for the most recent calculation period and as of the last day thereof, if such acquisition or purchase had been completed on the first day of such calculation period, (iv) not less than five Business Days prior to the consummation of such proposed acquisition, the Borrower shall deliver to the Bank, a certificate of the chief financial officer of the Borrower setting forth in reasonable detail calculations demonstrating compliance with the conditions set forth in clauses (ii) and (iii) above, and (v) such acquisition or purchase is consummated on a non-hostile basis.

T. “Permitted Investments” means (1) readily marketable direct obligations of the United States of America or any agency thereof with maturities of one year or less from the date of acquisition; (2) fully insured (if issued by a bank other than the Bank) certificates of deposit with maturities of one year or less from the date of acquisition issued by any commercial bank operating in the United States of America having capital and surplus in excess of $500,000,000.00; (3) commercial paper of a domestic issuer if at the time of purchase such paper is rated in one of the two highest rating categories of Standard and Poor’s Corporation or Moody’s Investors Service; and (4) Permitted Acquisitions.

U. “Person” means any individual, corporation, partnership, limited liability company, joint venture, joint stock association, association, bank, business trust, trust, unincorporated organization, any foreign governmental authority, the United States of America, any state of the United States and any political subdivision of any of the foregoing or any other form of entity.

V. “Pledgor” means any Person providing Collateral.

W. “Property” means any interest in any kind of property or asset, whether real, personal or mixed, tangible or intangible.

X. “Rate Management Transaction” means any transaction (including an agreement with respect thereto) that is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option, derivative transaction or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures.

Y. “Related Documents” means this agreement, the Notes, Letters of Credit, applications for letters of credit, all loan agreements, credit agreements, reimbursement agreements, security agreements, mortgages, deeds of trust, pledge agreements, assignments, guaranties, and any other instrument or document executed in connection with this agreement or with any of the Liabilities

Z. “Subsidiary” means, as to any particular Person (the “parent”), a Person the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of the date of determination, as well as any other Person of which fifty percent (50%) or more of the Equity Interests is at the time of determination directly or indirectly owned, Controlled or held, by the parent or by any Person or Persons Controlled by the parent, either alone or together with the parent.

2.2 Interpretations. Whenever possible, each provision of the Related Documents shall be interpreted in such manner as to be effective and valid under applicable Legal Requirements. If any provision of this agreement cannot be enforced, the remaining portions of this agreement shall continue in effect. In the event of any conflict or inconsistency between this agreement and the provisions of any other Related Documents, the provisions of this agreement shall control. Use of the term “including” does not imply any limitation on (but may expand) the antecedent reference. Any reference to a particular document includes all modifications, supplements, replacements, renewals or extensions of that document, but this rule of construction does not authorize amendment of any document without the Bank’s consent. Section headings are for convenience of reference only and do not affect the interpretation of this agreement. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP. Whenever the Bank’s determination, consent, approval or satisfaction is required under this agreement or the other Related Documents or whenever the Bank may at its option take or refrain from taking any action under this agreement or the other Related Documents, the decision as to whether or not the Bank makes the determination, consents, approves, is satisfied or takes or refrains from taking any action, shall be in the sole and exclusive discretion of the Bank, and the Bank’s decision shall be final and conclusive.

3. Conditions Precedent to Extensions of Credit.

3.1 Conditions Precedent to Initial Extension of Credit under each of the Credit Facilities. Before the first extension of credit governed by this agreement and any initial advance under any of the Credit Facilities, whether by disbursement of a loan, issuance of a letter of credit, or otherwise, the Borrower shall deliver to the Bank, in form and substance satisfactory to the Bank:

A. Loan Documents. The Notes, and as applicable, the letter of credit applications, reimbursement agreements, the security agreements, the pledge agreements, financing statements, mortgages or deeds of trust, the guaranties, the subordination agreements, and any other documents which the Bank may reasonably require to give effect to the transactions described in this agreement or the other Related Documents;

B. Organizational and Authorizing Documents. The Organizational Documents and Authorizing Documents of the Borrower and any other Persons (other than the Bank) executing the Related Documents in form and substance satisfactory to the Bank that at a minimum: (i) document the due organization, valid existence and good standing of the Borrower and every other Person (other than the Bank) that is a party to this agreement or any other Related Document; (ii) evidence that each Person (other than the Bank) which is a party to this agreement or any other Related Document has the power and authority to enter into the transactions described therein; (iii) evidence that the Person signing on behalf of each Person that is a party to the Related Documents (other than the Bank) is duly authorized to do so; and (iv) evidence the Borrower’s authorization and approval of the Acquisition Agreement and the transactions contemplated thereby;

C. Liens. The termination, assignment or subordination, as determined by the Bank, of all Liens on the Collateral in favor of any secured party (other than the Bank); and

D. Acquisition Agreement. A true, correct and complete copy of the Acquisition Agreement and each of the other documents executed and delivered by the parties thereto in connection therewith.

3.2 Conditions Precedent to Each Extension of Credit. Before any extension of credit governed by this agreement, whether by disbursement of a loan, issuance of a letter of credit or otherwise, the following conditions must be satisfied:

A. Representations. The representations and warranties of the Borrower and any other parties, other than the Bank, in the Related Documents are true on and as of the date of the request for and funding of the extension of credit and after giving effect to the transactions provided for in the Acquisition Agreement;

B. No Event of Default. No default, event of default or event that would constitute a default or event of default but for the giving of notice, the lapse of time or both, has occurred in any provision of this agreement, the Notes or any other Related Documents and is continuing or would result from the extension of credit and/or after giving effect to the transactions provided for in the Acquisition Agreement;

C. Additional Approvals, Opinions, and Documents. The Bank has received any other approvals, opinions and documents as it may reasonably request;

D. No Prohibition or Onerous Conditions. The making of the extension of credit is not prohibited by and does not subject the Bank, any Obligor, or any Subsidiary of the Borrower to any penalty or onerous condition under, any Legal Requirement; and

E. Acquisition. In the case of Facility B, the transactions contemplated by the Acquisition Agreement shall have been consummated without any amendment, modification or waiver of any of the provisions of the same (other than those necessary and made to ensure compliance with the Related Documents).

4. Affirmative Covenants. The Borrower agrees to do, and cause each of its Subsidiaries to do, each of the following:

4.1 Insurance. Maintain insurance with financially sound and reputable insurers, with such insurance and insurers to be satisfactory to the Bank, covering its Property and business against those casualties and contingencies and in the types and amounts as are in accordance with sound business and industry practices, and furnish to the Bank, upon request of the Bank, reports on each existing insurance policy showing such information as the Bank may reasonably request.

4.2 Existence. Maintain its existence and business operations as presently in effect in accordance with all applicable Legal Requirements, pay its debts and obligations when due under normal terms, and pay on or before their due date, all taxes, assessments, fees and other governmental monetary obligations, except as they may be contested in good faith if they have been properly reflected on its books and, at the Bank’s request, adequate funds or security has been pledged or reserved to insure payment.

4.3 Financial Records. Maintain proper books and records of account, in accordance with GAAP, and consistent with financial statements previously submitted to the Bank.

4.4 Inspection. Permit the Bank, its agents and designees to: (a) inspect and photograph its Property, to examine and copy files, books and records, and to discuss its business, operations, prospects, assets, affairs and financial condition with the Borrower’s or its Subsidiaries’ officers and accountants, at times and intervals as the Bank reasonably determines; (b) perform audits or other inspections of the Collateral, including the records and documents related to the Collateral; and (c) confirm with any Person any obligations and liabilities of the Person to the Borrower or its Subsidiaries. The Borrower will, and will cause its Subsidiaries to cooperate with any inspection or audit. The Borrower will pay the Bank the reasonable costs and expenses of any audit or inspection of the Collateral (including fees and expenses charged internally by the Bank for asset reviews) promptly after receiving the invoice.

4.5 Financial Reports. Furnish to the Bank whatever information, statements, books and records the Bank may from time to time reasonably request, including at a minimum:

A. Within forty-five (45) days after each quarterly period, the consolidated financial statements of the Borrower and its Subsidiaries prepared and presented in accordance with GAAP, including a balance sheet as of the end of that period, and income statement for that period, and, if requested at any time by the Bank, statements of cash flow and retained earnings for that period, all certified as correct by one of its authorized agents and reviewed by an independent certified public accountant of recognized standing satisfactory to the Bank.

B. Within one hundred twenty (120) days after and as of the end of each of its fiscal years, the consolidated and consolidating financial statements of the Borrower and its Subsidiaries prepared and presented in accordance with GAAP, including a balance sheet and statements of income, cash flow and retained earnings, such financial statements to be audited by an independent certified public accountant of recognized standing satisfactory to the Bank.

C. Within fifteen (15) days after timely filing, a signed copy of the annual tax return(s), with all schedules and exhibits attached thereto, of the Borrower.

4.6 Notices of Claims, Litigation, Defaults, etc. Promptly inform the Bank in writing of: (1) all existing and all threatened litigation, claims, investigations, administrative proceedings and similar actions or changes in Legal Requirements affecting it which could materially and adversely affect its business, assets, affairs, prospects or financial condition; (2) the occurrence of any event which gives rise to the Bank’s option to terminate the Credit Facilities; (3) the institution of steps by it to withdraw from, or the institution of any steps to terminate, any employee benefit plan as to which it may have liability; (4) any reportable event or any prohibited transaction in connection with any employee benefit plan; (5) any additions to or changes in the locations of its businesses; and (6) any alleged breach by the Bank of any provision of this agreement or of any other Related Document.

4.7 Other Agreements. Comply with all terms and conditions of all other agreements, whether now or hereafter existing, between it and any other Person.

4.8 Title to Assets and Property. Maintain good and marketable title to all of its Properties, and defend them against all claims and demands of all Persons at any time claiming any interest in them.

4.9 Additional Assurances. Promptly make, execute and deliver any and all agreements, documents, instruments and other records that the Bank may request to further evidence any of the Credit Facilities consistent with the terms herein provided, cure any defect in the execution and delivery of any of the Related Documents, perfect any Lien, comply with any Legal Requirement applicable to the Bank or the Credit Facilities or describe more fully particular aspects of the agreements set forth or intended to be set forth in any of the Related Documents.

4.10 Employee Benefit Plans. Maintain each employee benefit plan as to which it may have any liability, in compliance with all Legal Requirements.

4.11 Banking Relationship. Establish and maintain its primary banking depository and disbursement relationship with the Bank.

5. Negative Covenants.

5.1 Unless otherwise noted, the financial requirements set forth in this section will be computed in accordance with GAAP applied on a basis consistent with financial statements previously submitted by the Borrower to the Bank.

5.2 Without the written consent of the Bank, the Borrower will not and no Subsidiary of the Borrower will:

A. Distributions. Redeem, retire, purchase or otherwise acquire, directly or indirectly, any of its Equity Interests, return any contribution to an Equity Owner or, other than stock dividends and dividends paid to the Borrower, declare or pay any Distributions unless (i) no default shall then exist or result therefrom and (2) after giving pro forma effect thereto, the Borrower shall be in compliance with the Fixed Change Coverage Ratio.

B. Sale of Equity Interests. Issue, sell or otherwise dispose of its Equity Interests, other than pursuant to Borrower’s employee stock option plan or stock awards program for employees.

C. Debt. Incur, contract for, assume, or permit to remain outstanding, indebtedness for borrowed money, installment obligations, or obligations under capital leases or operating leases, other than (1) unsecured trade debt incurred in the ordinary course of business, (2) indebtedness owing to the Bank, (3) indebtedness reflected in its latest financial statement furnished to the Bank prior to execution of this agreement and that is not to be paid with proceeds of borrowings under the Credit Facilities, and (4) indebtedness outstanding as of the date hereof that has been disclosed to the Bank in writing and that is not to be paid with proceeds of borrowings under the Credit Facilities.

D. Guaranties. Guarantee or otherwise become or remain secondarily liable on the undertaking of another, except for endorsement of drafts for deposit and collection in the ordinary course of business.

E. Liens. Create or permit to exist any Lien on any of its Property except: existing Liens known to and approved by the Bank; Liens to the Bank; Liens incurred in the ordinary course of business securing current non-delinquent liabilities for taxes, worker’s compensation, unemployment insurance, social security and pension liabilities, and purchase money obligations in an amount not to exceed $500,000 per calendar year for equipment and other goods acquired by Borrower.

F. Use of Proceeds. Use, or permit any proceeds of the Credit Facilities to be used, directly or indirectly, for: (1) any personal, family or household purpose; or (2) the purpose of “purchasing or carrying any margin stock” within the meaning of Federal Reserve Board Regulation U. At the Bank’s request, it will furnish a completed Federal Reserve Board Form U-1.

G. Continuity of Operations. (1) Engage in any business activities substantially different from those in which it is presently engaged; (2) other than in connection with Permitted Acquisitions, merge, acquire or consolidate with, or acquire substantially all the Property of, any other Person, (3) change its name without first notifying the Bank thereof in writing at least thirty (30) days prior to any such change, (4) dissolve, cease operations, liquidate, or transfer or sell any assets out of the ordinary course of business; (5) enter into any arrangement with any Person providing for the leasing by it of Property which has been sold or transferred by it to such Person; (6) change its business organization, the jurisdiction under which its business organization is formed or organized; or (7) change its chief executive office or any places of its businesses without first notifying the Bank thereof in writing at least thirty (30) days prior to any such change.

H. Limitation on Negative Pledge Clauses. Enter into any agreement with any Person other than the Bank which prohibits or limits its ability to create or permit to exist any Lien on any of its Property, whether now owned or hereafter acquired.

I. Conflicting Agreements. Enter into any agreement containing any provision which would be violated or breached by the performance of its obligations under this agreement or any of the other Related Documents.

J. Transfer of Ownership. Permit any pledge of any Equity Interest of Borrower in any Subsidiary other than any pledge required by this agreement or the Related Documents.

K. Limitation on Loans, Advances to and Investments in Others and Receivables from Others. Purchase, hold or acquire any Equity Interest or evidence of indebtedness of, make or permit to exist any loans or advances to, permit to exist any receivable from, or make or permit to exist any investment or acquire any interest whatsoever in, any Person, except: (1) extensions of trade credit to customers in the ordinary course of business on ordinary terms; (2) Permitted Investments; and (3) loans, advances, investments and receivables existing as of the date of this agreement that have been disclosed to and approved by the Bank in writing and that are not to be paid with proceeds of borrowings under the Credit Facilities.

L. Organizational Documents. Alter, amend or modify any of its Organizational Documents.

M. Government Regulation. (1) Be or become subject at any time to any Legal Requirement or list of any government agency (including, without limitation, the U.S. Office of Foreign Asset Control list) that prohibits or limits the Bank from making any advance or extension of credit to it or from otherwise conducting business with it, or (2) fail to provide documentary and other evidence of its identity as may be requested by the Bank at any time to enable the Bank to verify its identity or to comply with any applicable Legal Requirement, including, without limitation, Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318.

N. Subsidiaries. Form, create or acquire any Subsidiary, other than Permitted Acquisitions.

O. Financial Covenants.

(i) Fixed Charge Coverage Ratio. Permit the Borrower’s Fixed Charge Coverage Ratio for any Test Period to be less than 1.20 to 1.00. “Fixed Charge Coverage Ratio” means, for any Test Period, with respect to the Borrower and its Subsidiaries on a consolidated basis, the ratio of (a) (i) EBITDA for such period plus (ii) GAAP rental expense for such period minus (iii) capital expenditures for such period (exclusive of up to $900,000 of earn-out payments in connection with the Liz Lange acquisition that may be made in the eighteen month period following the closing of such acquisition) minus (iv) tax expenses paid in cash for such period minus (v) Distributions paid in cash during such period plus (vi) non-cash stock compensation, to (b) the sum of (i) cash rentals payable under leases of real and personal property for such period (without duplication of items included in consolidated interest expense), plus (ii) the current portion of long term debt payable during such period plus (iii) consolidated interest expense during such period.

(ii) Senior Funded Debt Ratio. Permit the Borrower’s Senior Funded Debt Ratio to be greater than 2.00 to 1.00. “Senior Funded Debt Ratio” means, at any date of determination, with respect to the Borrower and its Subsidiaries on a consolidated basis, the ratio of (a) consolidated total debt (less debt that is subordinated to the Liabilities) on such day to (b) EBITDA for the most recently completed Test Period prior to such date.

(iii) For purposes of sub-paragraphs (i) and (ii) above, “Test Period” means a trailing four consecutive fiscal quarters of Borrower, beginning with the Test Period ending on the last day of Borrower’s fiscal quarter ending on or about October 31, 2012, and on the last day of Borrower’s fiscal quarter ending on or about each January 31, April 30 and July 31 thereafter.

6. Representations.

6.1 Representations and Warranties by the Borrower. To induce the Bank to enter into this agreement and to extend credit or other financial accommodations under the Credit Facilities, the Borrower represents and warrants as of the date of this agreement and as of the date of each request for credit under the Credit Facilities that each of the following statements is and shall remain true and correct throughout the term of this agreement and until all Credit Facilities and all Liabilities under the Notes and other Related Documents are paid in full: (a) its principal residence or chief executive office is at the address shown above, (b) its name as it appears in this agreement is its exact name as it appears in its Organizational Documents, (c) the execution and delivery of this agreement and the other Related Documents to which it is a party, and the performance of the obligations they impose, do not violate any Legal Requirement, conflict with any agreement by which it is bound, or require the consent or approval of any other Person, (d) this agreement and the other Related Documents have been duly authorized, executed and delivered by all parties thereto (other than the Bank) and are valid and binding agreements of those Persons, enforceable according to their terms, except as may be limited by bankruptcy, insolvency or other laws affecting the enforcement of creditors’ rights generally and by general principles of equity, (e) all balance sheets, profit and loss statements, and other financial statements and other information furnished to the Bank in connection with the Liabilities are accurate and fairly reflect the financial condition of the Persons to which they apply on their effective dates, including contingent liabilities of every type, which financial condition has not changed materially and adversely since those dates, (f) no litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) is pending or threatened against it, and no other event has occurred which may in any one case or in the aggregate materially adversely affect it or any of its Subsidiaries’ financial condition, properties, business, affairs or operations, other than litigation, claims, or other events, if any, that have been disclosed to and acknowledged by the Bank in writing, (g) all of its tax returns and reports that are or were required to be filed, have been filed, and all taxes, assessments and other governmental charges have been paid in full, except those presently being contested by it in good faith and for which adequate reserves have been provided, (h) it is not an “investment company” or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended, (i) it is not a “holding company”, or a “subsidiary company” of a “holding company” or an “affiliate” of a “holding company” or of a “subsidiary company” of a “holding company” within the meaning of the Public Utility Holding Company Act of 1935, as amended, (j) there are no defenses or counterclaims, offsets or adverse claims, demands or actions of any kind, personal or otherwise, that it could assert with respect to this agreement or the Credit Facilities, (k) it owns, or is licensed to use, all trademarks (including, without limitation, those identified on Exhibit A hereto), trade names, copyrights, technology, know-how and processes necessary for the conduct of its business as currently conducted, (l) the execution and delivery of this agreement and the other Related Documents to which it is a party and the performance of the obligations they impose, if the Borrower is other than a natural Person (i) are within its powers, (ii) have been duly authorized by all necessary action of its governing body, and (iii) do not contravene the terms of its Organizational Documents or other agreement or document governing its affairs, and (m) the transactions contemplated by the Acquisition Agreement have been consummated in accordance with, and without any breach, waiver, modification or amendment of, the terms thereof.

7. Default/Remedies.

7.1 Events of Default/Acceleration. If any of the following events occurs, the Notes shall become due immediately, without notice, at the Bank’s option:

A. Any Obligor fails to pay when due any payment under any Note.

B. Any Obligor fails to pay when due any other Liabilities owed by Borrower to the Bank under this agreement or any other Related Document, in each case within ten (10) calendar days following delivery to Borrower of the Bank’s written demand for such payment.

C. Any Obligor fails to pay when due any indebtedness in an amount more than $500,000 owed to any other Person and any and all cure periods applicable for such payment default shall have expired.

D. Any Obligor or any Pledgor: (i) fails to observe or perform or otherwise violates any other term, covenant, condition or agreement of any of the Related Documents and, except with respect to the Borrower’s obligations under Sections 4.5 and 5.2(O) hereof as to which no cure period applies, such failure or other violation shall not have been cured within ten (10) calendar days; (ii) makes any materially incorrect or misleading representation, warranty, or certificate to the Bank; (iii) makes any materially incorrect or misleading representation in any financial statement or other information delivered to the Bank; or (iv) defaults under the terms of any agreement or instrument relating to any debt for borrowed money (other than the debt evidenced by the Related Documents) and the effect of such default will allow the creditor to declare the debt due before its stated maturity.

E. There is any loss, theft, damage, or destruction of any Collateral with a value in excess of $500,000 not covered by insurance.

F. Any event occurs that would permit the Pension Benefit Guaranty Corporation to terminate any employee benefit plan of any Obligor or any Subsidiary of any Obligor.

G. Any Obligor or any of its Subsidiaries or any Pledgor: (i) becomes insolvent or unable to pay its debts as they become due; (ii) makes an assignment for the benefit of creditors; (iii) consents to the appointment of a custodian, receiver, or trustee for itself or for a substantial part of its Property; (iv) commences any proceeding under any bankruptcy, reorganization, liquidation, insolvency or similar laws; (v) conceals or removes any of its Property, with intent to hinder, delay or defraud any of its creditors; (vi) makes or permits a transfer of any of its Property, which may be fraudulent under any bankruptcy, fraudulent conveyance or similar law; or (vii) makes a transfer of any of its Property to or for the benefit of a creditor at a time when other creditors similarly situated have not been paid.

H. A custodian, receiver, or trustee is appointed for any Obligor or any of its Subsidiaries or any Pledgor or for a substantial part of their respective Property.

I. Any Obligor or any of its Subsidiaries, without the Bank’s written consent: (i) liquidates or is dissolved; (ii) merges or consolidates with any other Person; (iii) leases, sells or otherwise conveys a material part of its assets or business outside the ordinary course of its business; (iv) leases, purchases, or otherwise acquires a material part of the assets of any other Person, except in the ordinary course of its business or in a Permitted Acquisition; or (v) agrees to do any of the foregoing; provided, however, that any Subsidiary of an Obligor may merge or consolidate with any other Subsidiary of that Obligor, or with the Obligor, so long as the Obligor is the survivor.

J. Proceedings are commenced under any bankruptcy, reorganization, liquidation, or similar laws against any Obligor or any of its Subsidiaries or any Pledgor and remain undismissed for thirty (30) calendar days after commencement; or any Obligor or any of its Subsidiaries or any Pledgor consents to the commencement of those proceedings.

K. Any judgment is entered against any Obligor or any of its Subsidiaries, or any attachment, seizure, sequestration, levy, or garnishment is issued against any Property of any Obligor or any of its Subsidiaries or of any Pledgor or any Collateral, and such condition continues thirty (30) calendar days or more (or if stayed pursuant to any order or agreement, then thirty (30) calendar days or more following the expiration of such stay).

L. Any individual Obligor or Pledgor dies, or a guardian or conservator is appointed for any individual Obligor or Pledgor or all or any portion of their respective Property, or the Collateral.

M. Any material adverse change occurs in: (i) the reputation, Property, financial condition, business, assets, affairs, prospects, liabilities, or operations of Borrower or, on a combined basis, other Obligors and Borrower’s Subsidiaries; (ii) the ability of Borrower or, on a combined basis, other Obligors and Borrower’s Subsidiaries, to perform their respective obligations under the Related Documents; or (iii) the Collateral.

N. Any Material Contract shall cease to remain in full force and effect through breach, a failure to renew or otherwise or the Borrower shall have been notified by the counterparty thereto of an intention not to renew the same and, in the case of a failure to renew, such contract shall not have been replaced by another contract satisfactory to the Bank.

7.2 Remedies. At any time after the occurrence of a default under this Agreement or any of the Related Documents and continuation thereof beyond any applicable cure period, the Bank may do one or more of the following: (a) cease permitting the Borrower to incur any Liabilities; (b) terminate any commitment of the Bank evidenced by any of the Notes; (c) declare any of the Notes to be immediately due and payable, without notice of acceleration, presentment and demand or protest or notice of any kind, all of which are hereby expressly waived; (d) exercise all rights of setoff that the Bank may have contractually, by law, in equity or otherwise; and (e) exercise any and all other rights pursuant to any of the Related Documents, at law, in equity or otherwise.

A. Generally. The rights of the Bank under this agreement and the other Related Documents are in addition to other rights (including without limitation, other rights of setoff) the Bank may have contractually, by law, in equity or otherwise, all of which are cumulative and hereby retained by the Bank. Each Obligor agrees to stand still with regard to the Bank’s enforcement of its rights, including taking no action to delay, impede or otherwise interfere with the Bank’s rights to realize on any Collateral.

B. Expenses. To the extent not prohibited by applicable Legal Requirements and whether or not the transactions contemplated by this agreement are consummated, the Borrower is liable to the Bank and agrees to pay on demand all reasonable costs and expenses of every kind incurred (or charged by internal allocation) in connection with the negotiation, preparation, execution, filing, recording, modification, supplementing and waiver of the Related Documents, the making, servicing and collection of the Credit Facilities and the realization on any Collateral and any other amounts owed under the Related Documents, including without limitation reasonable attorneys’ fees (including counsel for the Bank that are employees of the Bank or its Affiliates) and court costs. These costs and expenses include without limitation any costs or expenses incurred by the Bank in any bankruptcy, reorganization, insolvency or other similar proceeding involving any Obligor, Pledgor, or Property of any Obligor, Pledgor, or Collateral. The obligations of the Borrower under this section shall survive the termination of this agreement.

C. Bank’s Right of Setoff. The Borrower grants to the Bank a security interest in the Deposits, and the Bank is authorized to setoff and apply, all Deposits, Securities and Other Property, and Bank Debt against any and all Liabilities. This right of setoff may be exercised at any time from time to time after the occurrence of any default, without prior notice to or demand on the Borrower and regardless of whether any Liabilities are contingent, unmatured or unliquidated. In this paragraph: (a) the term “Deposits” means any and all accounts and deposits of the Borrower (whether general, special, time, demand, provisional or final) at any time held by the Bank (including all Deposits held jointly with another, but excluding any IRA or Keogh Deposits, or any trust Deposits in which a security interest would be prohibited by any Legal Requirement); (b) the term “Securities and Other Property” means any and all securities and other personal Property of the Borrower in the custody, possession or control of the Bank, JPMorgan Chase & Co. or their respective Subsidiaries and Affiliates (other than Property held by the Bank in a fiduciary capacity); and (c) the term “Bank Debt” means all indebtedness at any time owing by the Bank, to or for the credit or account of the Borrower and any claim of the Borrower (whether individual, joint and several or otherwise) against the Bank now or hereafter existing.

8. Miscellaneous.

8.1 Notice. Any notices and demands under or related to this agreement shall be in writing and delivered to the intended party at its address stated in this agreement, and if to the Bank, at its main office if no other address of the Bank is specified in this agreement, by one of the following means: (a) by hand; (b) by a nationally recognized overnight courier service; or (c) by certified mail, postage prepaid, with return receipt requested. Notice shall be deemed given: (a) upon receipt if delivered by hand; (b) on the Delivery Day after the day of deposit with a nationally recognized courier service; or (c) on the third Delivery Day after the notice is deposited in the mail. “Delivery Day” means a day other than a Saturday, a Sunday or any other day on which national banking associations are authorized to be closed. Any party may change its address for purposes of the receipt of notices and demands by giving notice of the change in the manner provided in this provision.

8.2 No Waiver. No delay on the part of the Bank in the exercise of any right or remedy waives that right or remedy. No single or partial exercise by the Bank of any right or remedy precludes any other future exercise of it or the exercise of any other right or remedy. The making of an advance during the existence of any default or subsequent to the occurrence of a default or when all conditions precedent have not been met shall not constitute a waiver of the default or condition precedent. No waiver or indulgence by the Bank of any default is effective unless it is in writing and signed by the Bank, nor shall a waiver on one occasion bar or waive that right on any future occasion.

8.3 Integration. This agreement, the Notes, and the other Related Documents embody the entire agreement and understanding between the Borrower and the Bank and supersede all prior agreements and understandings relating to their subject matter. If any one or more of the obligations of the Borrower under this agreement or the Notes is invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining obligations of the Borrower shall not in any way be affected or impaired, and the invalidity, illegality or unenforceability in one jurisdiction shall not affect the validity, legality or enforceability of the obligations of the Borrower under this agreement, the Notes and the other Related Documents in any other jurisdiction.

8.4 Joint and Several Liability. Each party executing this agreement as the Borrower is individually, jointly and severally liable under this agreement.

8.5 Governing Law and Venue. This agreement shall be governed by and construed in accordance with the laws of the State of California (without giving effect to its laws of conflicts). The Borrower agrees that any legal action or proceeding with respect to any of its obligations under this agreement may be brought by the Bank in any state or federal court located in the State of California, as the Bank in its sole discretion may elect. By the execution and delivery of this agreement, the Borrower submits to and accepts, for itself and in respect of its property, generally and unconditionally, the non-exclusive jurisdiction of those courts. The Borrower waives any claim that the State of California is not a convenient forum or the proper venue for any such suit, action or proceeding.

8.6 Survival of Representations and Warranties. The Borrower understands and agrees that in extending the Credit Facilities, the Bank is relying on all representations, warranties, and covenants made by the Borrower in this agreement or in any certificate or other instrument delivered by the Borrower to the Bank under this agreement or in any of the other Related Documents. The Borrower further agrees that regardless of any investigation made by the Bank, all such representations, warranties and covenants will survive the making of the Credit Facilities and delivery to the Bank of this agreement, shall be continuing in nature, and shall remain in full force and effect until such time as the Liabilities shall be paid in full.

8.7 Non-Liability of the Bank. The relationship between the Borrower on one hand and the Bank on the other hand shall be solely that of borrower and lender. The Bank shall have no fiduciary responsibilities to the Borrower. The Bank undertakes no responsibility to the Borrower to review or inform the Borrower of any matter in connection with any phase of the Borrower’s business or operations.

8.8 Indemnification of the Bank. The Borrower agrees to indemnify, defend and hold the Bank, its parent companies, Subsidiaries, Affiliates, their respective successors and assigns and each of their respective shareholders, directors, officers, employees and agents (collectively, the “Indemnified Persons”) harmless from any and against any and all loss, liability, obligation, damage, penalty, judgment, claim, deficiency, expense, interest, penalties, attorneys’ fees (including the fees and expenses of any attorneys engaged by the Indemnified Person) and amounts paid in settlement (“Claims”) to which any Indemnified Person may become subject arising out of or relating to the Credit Facilities, the Liabilities under this agreement or any other Related Documents or the Collateral, except to the limited extent that the Claims are proximately caused by the Indemnified Person’s gross negligence or willful misconduct. The indemnification provided for in this paragraph shall survive the termination of this agreement and shall not be affected by the presence, absence or amount of or the payment or nonpayment of any claim under, any insurance.

8.9 Counterparts. This agreement may be executed in multiple counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts, taken together, shall constitute one and the same agreement. Facsimile or electronic transmission in portable document format (pdf) of any signed original counterpart and/or retransmission of any signed facsimile or pdf shall be deemed to have the same effect as an original for purposes of this agreement and the Related Documents.

8.10 Advice of Counsel. The Borrower acknowledges that it has been advised by counsel, or had the opportunity to be advised by counsel, in the negotiation, execution and delivery of this agreement and any other Related Documents.

8.11 Recovery of Additional Costs. If the imposition of or any change in any Legal Requirement, or the interpretation or application of any thereof by any court or administrative or governmental authority (including any request or policy not having the force of law) shall impose, modify, or make applicable any taxes (except federal, state, or local income or franchise taxes imposed on the Bank), reserve requirements, liquidity requirements, capital adequacy requirements, Federal Deposit Insurance Corporation (FDIC) deposit insurance premiums or assessments, or other obligations which would (A) increase the cost to the Bank for extending, maintaining or funding the Credit Facilities, (B) reduce the amounts payable to the Bank under the Credit Facilities, or (C) reduce the rate of return on the Bank’s capital as a consequence of the Bank’s obligations with respect to the Credit Facilities, then the Borrower agrees to pay the Bank such additional amounts as will compensate the Bank therefor, within five (5) days after the Bank’s written demand for such payment. The Bank’s demand shall be accompanied by an explanation of such imposition or charge and a calculation in reasonable detail of the additional amounts payable by the Borrower, which explanation and calculations shall be conclusive in the absence of manifest error.

8.12 Expenses. The Borrower agrees to pay or reimburse the Bank for all its out-of-pocket costs and expenses and reasonable attorneys’ fees (including the fees of in-house counsel) incurred in connection with the preparation and execution of this agreement, any amendment, supplement, or modification thereto, and any other Related Documents. Notwithstanding anything to the contrary set forth in this agreement or the other Related Documents, the Bank’s right to recover attorneys’ fees and other legal expenses under any thereof is subject to California Civil Code Section 1717, including any revision or replacement of such statute or rule hereafter enacted..

8.13 Reinstatement. The Borrower agrees that to the extent any payment or transfer is received by the Bank in connection with the Liabilities, and all or any part of the payment or transfer is subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid or transferred by the Bank or paid or transferred over to a trustee, receiver or any other entity, whether under any proceeding or otherwise (any of those payments or transfers is hereinafter referred to as a “Preferential Payment”), then this agreement and the Notes shall continue to be effective or shall be reinstated, as the case may be, even if all those Liabilities have been paid in full and whether or not the Bank is in possession of the Notes and whether any of the Notes has been marked, paid, released or cancelled, or returned to the Borrower and, to the extent of the payment, repayment or other transfer by the Bank, the Liabilities or part intended to be satisfied by the Preferential Payment shall be revived and continued in full force and effect as if the Preferential Payment had not been made. The obligations of the Borrower under this section shall survive the termination of this agreement.

8.14 Assignments. The Borrower agrees that the Bank may provide any information or knowledge the Bank may have about the Borrower or about any matter relating to the Notes or the other Related Documents to JPMorgan Chase & Co., or any of its Subsidiaries or Affiliates or their successors, or to any one or more purchasers or potential purchasers of the Notes or the Related Documents. The Borrower agrees that the Bank may at any time sell, assign or transfer one or more interests or participations in all or any part of its rights and obligations in the Notes to one or more purchasers whether or not related to the Bank.

8.15 Waivers. Each Obligor waives (a) any right to receive notice of the following matters before the Bank enforces any of its rights: (i) any demand, diligence, presentment, dishonor and protest, or (ii) any action that the Bank takes regarding any Person, any Collateral, or any of the Liabilities, that it might be entitled to by law or under any other agreement; (b) any right to require the Bank to proceed against the Borrower, any other Obligor or any Collateral, or pursue any remedy in the Bank’s power to pursue; (c) any defense based on any claim that any Obligor’s obligations exceed or are more burdensome than those of the Borrower; (d) the benefit of any statute of limitations affecting liability of any Obligor or the enforcement hereof; (e) any defense arising by reason of any disability or other defense of any Obligor (other than payment in full of the Liabilities) by reason of the cessation from any cause whatsoever (other than payment in full) of the obligation of the Borrower for the Liabilities; and (f) any defense based on or arising out of any defense that the Borrower may have to the payment or performance of the Liabilities or any portion thereof (other than payment in full). Each Obligor consents to any extension or postponement of time of its payment without limit as to the number or period, to any substitution, exchange or release of all or any part of any Collateral, to the addition of any other party, and to the release or discharge of, or suspension of any rights and remedies against, any Obligor. The Bank may waive or delay enforcing any of its rights without losing them. Any waiver affects only the specific terms and time period stated in the waiver. No modification or waiver of any provision of the Notes is effective unless it is in writing and signed by the Person against whom it is being enforced.

8.16 Time is of the Essence. Time is of the essence under this agreement and in the performance of every term, covenant and obligation contained herein.

9. USA PATRIOT ACT NOTIFICATION. The following notification is provided to the Borrower pursuant to Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318:

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each Person that opens an account, including any deposit account, treasury management account, loan, other extension of credit, or other financial services product. What this means for the Borrower: When the Borrower opens an account, if it is an individual the Bank will ask for its name, taxpayer identification number, residential address, date of birth, and other information that will allow the Bank to identify it, and, if it is not an individual the Bank will ask for its name, taxpayer identification number, business address, and other information that will allow the Bank to identify it. The Bank may also ask, if the Borrower is an individual, to see its driver’s license or other identifying documents, and if it is not an individual, to see its Organizational Documents or other identifying documents.

10. WAIVER OF SPECIAL DAMAGES. THE BORROWER WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT THE UNDERSIGNED MAY HAVE TO CLAIM OR RECOVER FROM THE BANK IN ANY LEGAL ACTION OR PROCEEDING ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES.

11. JURY WAIVER AND JUDICIAL REFERENCE PROVISION. THE BORROWER AND THE BANK (BY ITS ACCEPTANCE HEREOF) HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) BETWEEN THE BORROWER AND THE BANK ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE BANK TO PROVIDE THE FINANCING DESCRIBED HEREIN.

IN THE EVENT ANY LEGAL PROCEEDING IS FILED IN A COURT OF THE STATE OF CALIFORNIA (THE “COURT”) BY OR AGAINST THE BORROWER OR THE BANK IN CONNECTION WITH ANY CONTROVERSY, DISPUTE OR CLAIM DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY) (EACH, A “CLAIM”) AND THE WAIVER SET FORTH IN THE PRECEDING PARAGRAPH IS NOT ENFORCEABLE IN SUCH ACTION OR PROCEEDING, THE BORROWER AND THE BANK (BY ITS ACCEPTANCE HEREOF) AGREE AS FOLLOWS:

(1) WITH THE EXCEPTION OF THE MATTERS SPECIFIED IN PARAGRAPH (2) BELOW, ANY CLAIM WILL BE DETERMINED BY A GENERAL REFERENCE PROCEEDING IN ACCORDANCE WITH THE PROVISIONS OF CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS 638 THROUGH 645.2, INCLUDING ANY REVISION OR REPLACEMENT OF SUCH STATUTES OR RULES HEREAFTER ENACTED. THE BORROWER AND THE BANK INTEND THIS GENERAL REFERENCE AGREEMENT TO BE SPECIFICALLY ENFORCEABLE IN ACCORDANCE WITH CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 638, INCLUDING ANY REVISION OR REPLACEMENT OF SUCH STATUTE OR RULE HEREAFTER ENACTED. EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT AND THE OTHER RELATED DOCUMENTS, VENUE FOR THE REFERENCE PROCEEDING WILL BE IN THE STATE OR FEDERAL COURT IN THE COUNTY OR DISTRICT WHERE VENUE IS OTHERWISE APPROPRIATE UNDER APPLICABLE LAW.

(2) THE FOLLOWING MATTERS SHALL NOT BE SUBJECT TO A GENERAL REFERENCE PROCEEDING: (A) NON-JUDICIAL FORECLOSURE OF ANY SECURITY INTERESTS IN REAL OR PERSONAL PROPERTY; (B) EXERCISE OF SELF-HELP REMEDIES (INCLUDING, WITHOUT LIMITATION, SET-OFF); (C) APPOINTMENT OF A RECEIVER; AND (D) TEMPORARY, PROVISIONAL OR ANCILLARY REMEDIES (INCLUDING, WITHOUT LIMITATION, WRITS OF ATTACHMENT, WRITS OF POSSESSION, TEMPORARY RESTRAINING ORDERS OR PRELIMINARY INJUNCTIONS). THIS AGREEMENT DOES NOT LIMIT THE RIGHT OF THE BORROWER OR THE BANK TO EXERCISE OR OPPOSE ANY OF THE RIGHTS AND REMEDIES DESCRIBED IN CLAUSES (A) - (D) AND ANY SUCH EXERCISE OR OPPOSITION DOES NOT WAIVE THE RIGHT OF THE BORROWER OR THE BANK TO A REFERENCE PROCEEDING PURSUANT TO THIS AGREEMENT.

(3) UPON THE WRITTEN REQUEST OF THE BORROWER OR THE BANK, THE BORROWER AND THE BANK SHALL SELECT A SINGLE REFEREE, WHO SHALL BE A RETIRED JUDGE OR JUSTICE. IF THE BORROWER AND THE BANK DO NOT AGREE UPON A REFEREE WITHIN TEN (10) DAYS OF SUCH WRITTEN REQUEST, THEN, THE BORROWER OR THE BANK, MAY REQUEST THE COURT TO APPOINT A REFEREE PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 640(B), INCLUDING ANY REVISION OR REPLACEMENT OF SUCH STATUTE OR RULE HEREAFTER ENACTED.

(4) ALL PROCEEDINGS AND HEARINGS CONDUCTED BEFORE THE REFEREE, EXCEPT FOR TRIAL, SHALL BE CONDUCTED WITHOUT A COURT REPORTER, EXCEPT WHEN THE BORROWER OR THE BANK SO REQUESTS, A COURT REPORTER WILL BE USED AND THE REFEREE WILL BE PROVIDED A COURTESY COPY OF THE TRANSCRIPT. THE PARTY MAKING SUCH REQUEST SHALL HAVE THE OBLIGATION TO ARRANGE FOR AND PAY COSTS OF THE COURT REPORTER, PROVIDED THAT SUCH COSTS, ALONG WITH THE REFEREE’S FEES, SHALL ULTIMATELY BE BORNE BY THE PARTY WHO DOES NOT PREVAIL, AS DETERMINED BY THE REFEREE.

(5) THE REFEREE MAY REQUIRE ONE OR MORE PREHEARING CONFERENCES. THE BORROWER AND THE BANK SHALL BE ENTITLED TO DISCOVERY, AND THE REFEREE SHALL OVERSEE DISCOVERY IN ACCORDANCE WITH THE RULES OF DISCOVERY, AND MAY ENFORCE ALL DISCOVERY ORDERS IN THE SAME MANNER AS ANY TRIAL COURT JUDGE IN PROCEEDINGS AT LAW IN THE STATE OF CALIFORNIA. THE REFEREE SHALL APPLY THE RULES OF EVIDENCE APPLICABLE TO PROCEEDINGS AT LAW IN THE STATE OF CALIFORNIA AND SHALL DETERMINE ALL ISSUES IN ACCORDANCE WITH APPLICABLE STATE AND FEDERAL LAW. THE REFEREE SHALL BE EMPOWERED TO ENTER EQUITABLE AS WELL AS LEGAL RELIEF AND RULE ON ANY MOTION WHICH WOULD BE AUTHORIZED IN A TRIAL, INCLUDING, WITHOUT LIMITATION, MOTIONS FOR DEFAULT JUDGMENT OR SUMMARY JUDGMENT. THE REFEREE SHALL REPORT THE REFEREE’S DECISION, WHICH REPORT SHALL ALSO INCLUDE FINDINGS OF FACT AND CONCLUSIONS OF LAW.

(6) THE BORROWER AND THE BANK RECOGNIZE AND AGREE THAT ALL CLAIMS RESOLVED IN A GENERAL REFERENCE PROCEEDING PURSUANT HERETO WILL BE DECIDED BY A REFEREE AND NOT BY A JURY.

Address for Notices:		Borrower:

Cherokee, Inc.
5990 Sepulveda Boulevard, Suite 600
Sherman Oaks, CA 91411		CHEROKEE INC.
Attn: Chief Financial Officer (Mark DiSiena)

With a courtesy copy only to:		By:	/s/ Howard Siegel

Cherokee, Inc.
5990 Sepulveda Boulevard, Suite 600
Sherman Oaks, CA 91411			Howard Siegel			COO
Attn: Chief Operating Officer (Howard Siegel)			Printed Name			Title


		Date Signed:		9/4/12


		By:	/s/ Mark DiSiena


			Mark DiSiena			CFO
			Printed Name			Title


		Date Signed:		9/4/12


Address for Notices:		Bank:

300 S. Grand Ave.		JPMorgan Chase Bank, N.A.
Los Angeles, CA 90071-3109
Attn:	Tom Jennings	By:	/s/ Tom Jennings


			Tom Jennings		Underwriter II
			Printed Name		Title


		Date Signed:

Signature Page to Credit Agreement

EX-10.2 4 a12-20297_1ex10d2.htm EX-10.2

Exhibit 10.2

	Term Note

	$13,000,000.00
Due: August 31, 2017	Date: September 4, 2012

Promise to Pay. On or before August 31, 2017, for value received, CHEROKEE INC. (the “Borrower”) promises to pay to JPMorgan Chase Bank, N.A., whose address is 300 S. Grand Ave., Los Angeles, CA 90071-3109 (the “Bank”) or order, in lawful money of the United States of America, the sum of Thirteen Million and 00/100 Dollars ($13,000,000.00) or so much thereof as may be advanced and outstanding, plus interest on the unpaid principal balance computed on the basis of the actual number of days elapsed in a year of 360 days at the rate(s) provided for below and at the rate of 3.00% per annum above such rate(s), at the Bank’s option, upon the occurrence of any default under this Note and continuation thereof beyond any applicable cure period as provided herein or in the Credit Agreement (as hereinafter defined), whether or not the Bank elects to accelerate the maturity of this Note, from the date such increased rate is imposed by the Bank.

Definitions. As used in this Note, the following terms have the following respective meanings:

“Adjusted LIBOR Rate” means, with respect to the relevant Interest Period, the sum of (i) the Applicable Margin plus (ii) the quotient of (a) the LIBOR Rate applicable to such Interest Period, divided by (b) one minus the Reserve Requirement (expressed as a decimal) applicable to such Interest Period.

“Adjusted One Month LIBOR Rate” means, with respect to a CB Floating Rate Advance for any day, the sum of (i) 2.50% per annum plus (ii) the quotient of (a) the interest rate determined by the Bank by reference to the Screen to be the rate at approximately 11:00 a.m. London time, on such date or, if such date is not a Business Day, on the immediately preceding Business Day for dollar deposits with a maturity equal to one (1) month, divided by (b) one minus the Reserve Requirement (expressed as a decimal) applicable to dollar deposits in the London interbank market with a maturity equal to one (1) month.

“Advance” means a LIBOR Rate Advance or a CB Floating Rate Advance and “Advances” means all LIBOR Rate Advances and all CB Floating Rate Advances under this Note.

“Applicable Margin” means with respect to any CB Floating Rate Advance, -0.25% (minus 0.25%) per annum, and with respect to any LIBOR Rate Advance, 2.75% per annum.

“Business Day” means a day (other than a Saturday or Sunday) on which banks generally are open in California and/or New York for the conduct of substantially all of their commercial lending activities and on which dealings in United States dollars are carried on in the London interbank market.

“CB Floating Rate” means the Prime Rate; provided that the CB Floating Rate shall, on any day, not be less than the Adjusted One Month LIBOR Rate. The CB Floating Rate is a variable rate and any change in the CB Floating Rate due to any change in the Prime Rate or the Adjusted One Month LIBOR Rate is effective from and including the effective date of such change in the Prime Rate or the Adjusted One Month LIBOR Rate, respectively.

“CB Floating Rate Advance” means any borrowing under this Note when and to the extent that its interest rate is determined by reference to the CB Floating Rate.

“Interest Period” means, with respect to a LIBOR Rate Advance, a period of one (1), two (2) or three (3) month(s) commencing on a Business Day selected by the Borrower pursuant to this Note. Such Interest Period shall end on the day which corresponds numerically to such date one (1), two (2) or three (3) month(s) thereafter, as applicable, provided, however, that if there is no such numerically corresponding day in such first, second or third succeeding month(s), as applicable, such Interest Period shall end on the last Business Day of such first, second or third succeeding month(s), as applicable. If an Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next succeeding Business Day, provided, however, that if said next succeeding Business Day falls in a new calendar month, such Interest Period shall end on the immediately preceding Business Day.

“LIBOR Rate” means with respect to any LIBOR advance for any Interest Period, the interest rate determined by the Bank by reference to Reuters Screen LIBOR01, formerly known as Page 3750 of the Moneyline Telerate Service (together with any successor or substitute, the “Service”) or any successor or substitute page of the Service providing rate quotations comparable to those currently provided on such page of the Service, as determined by the Bank from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market, to be the rate at approximately 11:00 a.m. London time, two Business Days prior to the commencement of the Interest Period for dollar deposits with a maturity equal to such Interest Period. If no LIBOR Rate is available to the Bank, the applicable LIBOR Rate for the relevant Interest Period shall instead be the rate determined by the Bank to be the rate at which the Bank offers to place U.S. dollar deposits having a maturity equal to such Interest Period with first-class banks in the London interbank market at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period.

“LIBOR Rate Advance” means any borrowing under this Note when and to the extent that its interest rate is determined by reference to the Adjusted LIBOR Rate.

“Prime Rate” means the rate of interest per annum announced from time to time by the Bank as its prime rate. The Prime Rate is a variable rate and each change in the Prime Rate is effective from and including the date the change is announced as being effective. THE PRIME RATE IS A REFERENCE RATE AND MAY NOT BE THE BANK’S LOWEST RATE.

“Reserve Requirement” means, with respect to an Interest Period, the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed under Regulation D.

“Regulation D” means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor thereto or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System.

Illegality. If any applicable domestic or foreign law, treaty, rule or regulation now or later in effect (whether or not it now applies to the Bank) or the interpretation or administration thereof by a governmental authority charged with such interpretation or administration, or compliance by the Bank with any guideline, request or directive of such an authority (whether or not having the force of law), shall make it unlawful or impossible for the Bank to maintain or fund the advances evidenced by this Note, then, upon notice to the Borrower by the Bank, the outstanding principal amount, together with accrued interest and any other amounts payable to the Bank under this Note or the Related Documents shall be repaid (a) immediately upon the Bank’s demand if such change or compliance with such requests, in the Bank’s judgment, requires immediate repayment, or (b) at the expiration of the last Interest Period to expire before the effective date of any such change or request.

Inability to Determine Interest Rates. If the Bank determines that quotations of interest rates for the relevant deposits for purposes of the definition of Adjusted LIBOR Rate are not being provided for purposes of determining the interest rate as provided in this Note, then the Bank shall, at the Bank’s option, give notice of such circumstances to the Borrower, whereupon (i) the obligation of the Bank to make advances evidenced by this Note shall be suspended until the Bank notifies the Borrower that the circumstances giving rise to the suspension no longer exists, and (ii) the Borrower shall repay in full the then outstanding principal amount of each advance evidenced by this Note, together with accrued interest, on the last day of the then current Interest Period.

Interest Rates. The Advance(s) evidenced by this Note may be drawn down and remain outstanding as up to five (5) LIBOR Rate Advances and/or a CB Floating Rate Advance. The Borrower shall pay interest to the Bank on the outstanding and unpaid principal amount of each CB Floating Rate Advance at the CB Floating Rate plus the Applicable Margin and each LIBOR Rate Advance at the Adjusted LIBOR Rate. In no event shall the interest rate exceed the maximum rate allowed by law. Any interest payment that would for any reason be unlawful under applicable law shall be applied to principal.

Interest Payments. Interest on the Advances shall be paid as follows:

A. For each CB Floating Rate Advance, on the last day of each month beginning with the first month following disbursement of the Advance; and

B. For each LIBOR Rate Advance, on the last day of the Interest Period for the Advance and, if the Interest Period is longer than three months, at three-month intervals beginning with the day three months from the date the Advance is disbursed.

Principal payments. The Borrower shall repay the principal amounts of this Note on a quarterly basis, commencing on November 30, 2012 and continuing on the last day of each February, May, August and November thereafter through August 31, 2017, in equal principal installments of $650,000.

The Borrower shall pay the Bank amounts sufficient (in the Bank’s reasonable opinion) to compensate the Bank for any loss, cost, or expense incurred as a result of any payment of a LIBOR Rate Advance on a date other than the last day of the Interest Period for the Advance, including, without limitation, acceleration of the Advances by the Bank pursuant to this Note or the other Related Documents; or

The Borrower shall make all payments on this Note and the other Related Documents, without setoff, deduction, or counterclaim, to the Bank at the Bank’s address above or at such other place as the Bank may designate in writing. If any payment of principal or interest on this Note shall become due on a day that is not a Business Day, the payment will be made on the next succeeding Business Day. In addition, the Borrower will make those additional payments required by the Credit Agreement. Payments shall be allocated among principal, interest and fees at the discretion of the Bank unless otherwise agreed or required by applicable law. Acceptance by the Bank of any payment that is less than the payment due at that time shall not constitute a waiver of the Bank’s right to receive payment in full at that time or any other time.

Notice and Manner of Electing Interest Rates on Advances. The Borrower shall give the Bank written notice (effective upon receipt) of the Borrower’s intent to draw down an Advance under this Note no later than 2:00 p.m. Pacific time, on the date of disbursement, if the full amount of the drawn Advance is to be disbursed as a CB Floating Rate Advance and no later than 11:00 a.m. Pacific time three (3) Business Days before disbursement, if any part of such Advance is to be disbursed as a LIBOR Rate Advance. The Borrower’s notice must specify: (a) the disbursement date, (b) the amount of each Advance, (c) the type of each Advance (CB Floating Rate Advance or LIBOR Rate Advance), and (d) for each LIBOR Rate Advance, the duration of the applicable Interest Period; provided, however, that the Borrower may not elect an Interest Period ending after the maturity date of this Note. Each LIBOR Rate Advance shall be in a minimum amount of One Hundred Fifty Thousand US Dollars ($150,000). All notices under this paragraph are irrevocable. By the Bank’s close of business on the disbursement date and upon fulfillment of the conditions set forth herein and in any other of the Related Documents, the Bank shall disburse the requested Advances in immediately available funds by crediting the amount of such Advances to the Borrower’s account with the Bank.

Authorization for Direct Payments (ACH Debits). To effectuate any payment due under this Note or under any other Related Documents, the Borrower hereby authorizes the Bank to initiate debit entries to Account Number 475392689 at the Bank and to debit the same to such account. This authorization to initiate debit entries shall remain in full force and effect until the Bank has received written notification of its termination in such time and in such manner as to afford the Bank a reasonable opportunity to act on it. The Borrower represents that the Borrower is and will be the owner of all funds in such account. The Borrower acknowledges: (1) that such debit entries may cause an overdraft of such account which may result in the Bank’s refusal to honor items drawn on such account until adequate deposits are made to such account; (2) that the Bank is under no duty or obligation to initiate any debit entry for any purpose; and (3) that if a debit is not made because the above-referenced account does not have a sufficient available balance, or otherwise, the payment may be late or past due.

Late Fee. Any principal or interest which is not paid within 10 days after its due date (whether as stated, by acceleration or otherwise) shall be subject to a late payment charge of five percent (5.00%) of the total payment due, in addition to the payment of interest, up to the maximum amount of One Thousand Five Hundred and 00/100 Dollars ($1,500.00) per late charge. The Borrower agrees to pay and stipulates that five percent (5.00%) of the total payment due is a reasonable amount for a late payment charge. The Borrower shall pay the late payment charge upon demand by the Bank or, if billed, within the time specified.

Purpose of Loan. The Borrower acknowledges and agrees that this Note evidences a loan for a business, commercial, agricultural or similar commercial enterprise purpose, and that no advance shall be used for any personal, family or household purpose. The proceeds of the loan shall be used only to finance the acquisition of LLM Management Co., LLC.

Miscellaneous. This Note binds the Borrower and its successors, and benefits the Bank, its successors and assigns. Any reference to the Bank includes any holder of this Note. This Note is subject to that certain Credit Agreement by and between the Borrower and the Bank, of even date herewith, and all amendments, restatements and replacements thereof (the “Credit Agreement”) to which reference is hereby made for a more complete statement of the terms and conditions under which the loan evidenced hereby is made and is to be repaid. The terms and provisions of the Credit Agreement are hereby incorporated and made a part hereof by this reference thereto with the same force and effect as if set forth at length herein. No reference to the Credit Agreement and no provisions of this Note or the Credit Agreement shall alter or impair the absolute and unconditional obligation of the Borrower to pay the principal and interest on this Note as herein prescribed. Capitalized terms not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. Time is of the essence under this Note and in the performance of every term, covenant and obligation contained herein.

Funding Loss Indemnification. If the Borrower pays all or any portion of the principal balance of this Note on a date other than the last day of the Interest Period or the maturity date of this Note (whether by acceleration, prepayment or otherwise) the Borrower shall pay the Bank amounts sufficient (in the Bank’s reasonable opinion) to compensate the Bank for any loss, cost, or expense incurred as a result thereof.

		Borrower:

Address:	5990 Sepulveda Blvd. Suite 600 Sherman Oaks, CA 91411	CHEROKEE INC.
		By:		/s/ Howard Siegel

				Howard Siegel				COO
				Printed Name				Title


		Date Signed:			9/4/12


		By:	/s/ Mark DiSiena

			Mark DiSiena				CFO
			Printed Name				Title


		Date Signed:				9/4/12

EX-10.3 5 a12-20297_1ex10d3.htm EX-10.3

Exhibit 10.3

Line of Credit Note

$2,000,000.00
Date: September 4, 2012

Promise to Pay. On or before September 4, 2015, for value received, CHEROKEE INC. (the “Borrower”) promises to pay to JPMorgan Chase Bank, N.A., whose address is 300 S. Grand Ave., Los Angeles, CA 90071-3109 (the “Bank”) or order, in lawful money of the United States of America, the sum of Two Million and 00/100 Dollars ($2,000,000.00) or so much thereof as may be advanced and outstanding, plus interest on the unpaid principal balance computed on the basis of the actual number of days elapsed in a year of 360 days at the rate(s) provided for below and at the rate of 3.00% per annum above the Note Rate, at the Bank’s option, upon the occurrence of any default under this Note and continuation thereof beyond any applicable cure period as provided herein or in the Credit Agreement (as hereinafter defined), whether or not the Bank elects to accelerate the maturity of this Note, from the date such increased rate is imposed by the Bank.

Definitions. As used in this Note, the following terms have the following respective meanings:

“Adjusted One Month LIBOR Rate” means, with respect to a CB Floating Rate Advance for any day, the sum of (i) 2.50% per annum plus (ii) the quotient of (a) the interest rate determined by the Bank by reference to the Screen to be the rate at approximately 11:00 a.m. London time, on such date or, if such date is not a Business Day, on the immediately preceding Business Day for dollar deposits with a maturity equal to one (1) month, divided by (b) one minus the Reserve Requirement (expressed as a decimal) applicable to dollar deposits in the London interbank market with a maturity equal to one (1) month.

“Advance” means a LIBOR Rate Advance or a CB Floating Rate Advance and “Advances” means all LIBOR Rate Advances and all CB Floating Rate Advances under this Note.

“Applicable Margin” means with respect to any CB Floating Rate Advance, -0.25% (minus 0.25%) per annum and with respect to any LIBOR Rate Advance, 2.25% per annum.

“CB Floating Rate” means the Prime Rate; provided that the CB Floating Rate shall, on any day, not be less than the Adjusted One Month LIBOR Rate. The CB Floating Rate is a variable rate and any change in the CB Floating Rate due to any change in the Prime Rate or the Adjusted One Month LIBOR Rate is effective from and including the effective date of such change in the Prime Rate or the Adjusted One Month LIBOR Rate, respectively.

“CB Floating Rate Advance” means any borrowing under this Note when and to the extent that its interest rate is determined by reference to the CB Floating Rate.

“Interest Period” means, with respect to a LIBOR Rate Advance, a period of one (1), two (2) or three (3) month(s) commencing on a Business Day selected by the Borrower pursuant to this Note. Such Interest Period shall end on the day which corresponds numerically to such date one (1), two (2) or three (3) month(s) thereafter, as applicable, provided, however, that if there is no such numerically corresponding day in such first, second or third succeeding month(s), as applicable, such Interest Period shall end on the last Business Day of such first, second or third succeeding month(s), as applicable. If an Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next succeeding Business Day, provided, however, that if said next succeeding Business Day falls in a new calendar month, such Interest Period shall end on the immediately preceding Business Day.

“LIBOR Rate” means with respect to any LIBOR advance for any Interest Period, the interest rate determined by the Bank by reference to Reuters Screen LIBOR01, formerly known as Page 3750 of the Moneyline Telerate Service (together with any successor or substitute, the “Service”) or any successor or substitute page of the Service providing rate quotations comparable to those currently provided on such page of the Service, as determined by the Bank from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market, to be the rate at approximately 11:00 a.m. London time, two Business Days prior to the commencement of the Interest Period for dollar deposits with a maturity equal to such Interest Period. If no LIBOR Rate is available to the Bank, the applicable LIBOR Rate for the relevant Interest Period shall instead be the rate determined by the Bank to be the rate at which the Bank offers to place U.S. dollar deposits having a maturity equal to such Interest Period with first-class banks in the London interbank market at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period.

“LIBOR Rate Advance” means any borrowing under this Note when and to the extent that its interest rate is determined by reference to the Adjusted LIBOR Rate.

Interest Payments. Interest on the Advances shall be paid as follows:

A. For each CB Floating Rate Advance, on the last day of each month beginning with the first month following disbursement of the Advance; and

Principal payments. All outstanding principal (together with any unpaid interest) is due and payable in full on September 4, 2015.

The Borrower shall make all payments on this Note and the other Related Documents, without setoff, deduction, or counterclaim, to the Bank at the Bank’s address above or at such other place as the Bank may designate in writing. If any payment of principal or interest on this Note shall become due on a day that is not a Business Day, the payment will be made on the next succeeding Business Day. Payments shall be allocated among principal, interest and fees at the discretion of the Bank unless otherwise agreed or required by applicable law. Acceptance by the Bank of any payment that is less than the payment due at that time shall not constitute a waiver of the Bank’s right to receive payment in full at that time or any other time.

Notice and Manner of Electing Interest Rates on Advances. The Borrower shall give the Bank written notice (effective upon receipt) of the Borrower’s intent to draw down an Advance under this Note no later than 2:00 p.m. Pacific time, on the date of disbursement, if the full amount of the drawn Advance is to be disbursed as a CB Floating Rate Advance and no later than 11:00 a.m. Pacific time three (3) Business Days before disbursement, if any part of such Advance is to be disbursed as a LIBOR Rate Advance. The Borrower’s notice must specify: (a) the disbursement date, (b) the amount of each Advance, (c) the type of each Advance (CB Floating Rate Advance or LIBOR Rate Advance), and (d) for each LIBOR Rate Advance, the duration of the applicable Interest Period; provided, however, that the Borrower may not elect an Interest Period ending after the maturity date of this Note. Each LIBOR Rate Advance shall be in a minimum amount of One Hundred Fifty Thousand US Dollars ($150,000). All notices under this paragraph are irrevocable. By the Bank’s close of business on the disbursement date and upon fulfillment of the conditions set forth herein and in any other of the Related Documents, the Bank shall disburse the requested Advances in immediately available funds by crediting the amount of such Advances to the Borrower’s account with the Bank.

Late Fee. Any principal or interest which is not paid within 10 days after its due date (whether as stated, by acceleration or otherwise) shall be subject to a late payment charge of five percent (5.00%) of the total payment due, in addition to the payment of interest, up to the maximum amount of One Thousand Five Hundred and 00/100 Dollars ($1,500.00) per late charge. The Borrower agrees to pay and stipulates that five percent (5.00%) of the total payment due is a reasonable amount for a late payment charge. The Borrower shall pay the late payment charge upon demand by the Bank or, if billed, within the time specified.

Credit Facility. The Bank has approved a credit facility to the Borrower in a principal amount not to exceed the face amount of this Note. The credit facility is in the form of advances made from time to time by the Bank to the Borrower. This Note evidences the Borrower’s obligation to repay those advances. The aggregate principal amount of debt evidenced by this Note is the amount reflected from time to time in the records of the Bank. Until the earliest to occur of maturity, any default, event of default, or any event that would constitute a default or event of default but for the giving of notice, the lapse of time or both, the Borrower may borrow, pay down and re-borrow under this Note subject to the terms of the Related Documents.

Miscellaneous. This Note binds the Borrower and its successors, and benefits the Bank, its successors and assigns. Any reference to the Bank includes any holder of this Note. This Note is subject to that certain Credit Agreement by and between the Borrower and the Bank, dated as of even date herewith, and all amendments, restatements and replacements thereof (the “Credit Agreement”) to which reference is hereby made for a more complete statement of the terms and conditions under which the loan evidenced hereby is made and is to be repaid. The terms and provisions of the Credit Agreement are hereby incorporated and made a part hereof by this reference thereto with the same force and effect as if set forth at length herein. No reference to the Credit Agreement and no provisions of this Note or the Credit Agreement shall alter or impair the absolute and unconditional obligation of the Borrower to pay the principal and interest on this Note as herein prescribed. Capitalized terms not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. Time is of the essence under this Note and in the performance of every term, covenant and obligation contained herein.

		Borrower:

Address:	5990 Sepulveda Blvd.	CHEROKEE INC.
	Suite 600
	Sherman Oaks, CA 91411

		By:	/s/ Howard Siegel

			Howard Siegel			COO
			Printed Name			Title


			Date Signed:		9/4/12


		By:	/s/ Mark DiSiena

			Mark DiSiena			CFO
			Printed Name			Title


			Date Signed:	9/4/12

EX-10.4 6 a12-20297_1ex10d4.htm EX-10.4

Exhibit 10.4

Continuing Security Agreement

Dated as of September 4, 2012

Grant of Security Interest. CHEROKEE INC. (whether one or more, the “Borrower”, individually and collectively if more than one) grants to JPMorgan Chase Bank, N.A., whose address is 300 S. Grand Ave., Los Angeles, CA 90071-3109 (together with its successors and assigns, the “Bank”) a continuing security interest in, pledges and assigns to the Bank all of the Collateral (as hereinafter defined) owned by the Borrower, all of the collateral in which the Borrower has rights or power to transfer rights and all Collateral in which the Borrower later acquires ownership, other rights or rights or power to transfer rights to secure the payment and performance of the Liabilities.

“Liabilities” means all obligations, indebtedness and liabilities of the Borrower whether individual, joint and several, absolute or contingent, direct or indirect, liquidated or unliquidated, now or hereafter existing in favor of the Bank, including without limitation, all liabilities, all interest, costs and fees arising under or from any note, open account, overdraft, letter of credit application, endorsement, surety agreement, guaranty, credit card, lease, Rate Management Transaction, acceptance, foreign exchange contract or depository service contract, whether payable to the Bank or to a third party and subsequently acquired by the Bank, any monetary obligations (including interest) incurred or accrued during the pendency of any bankruptcy, insolvency, receivership or other similar proceedings, regardless of whether allowed or allowable in such proceeding, and all renewals, extensions, modifications, consolidations, rearrangements, restatements, replacements or substitutions of any of the foregoing. “Rate Management Transaction” means any transaction (including an agreement with respect thereto) that is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option, derivative transaction or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures. The Borrower and the Bank specifically contemplate that Liabilities include indebtedness hereafter incurred by the Borrower to the Bank.

The term “Collateral” means all of the Borrower’s “accounts”; “chattel paper”; “deposit accounts” and other payment obligations of financial institutions (including the Bank); “documents”; “equipment”, including any documents and certificates of title issued with respect to any of the equipment; “general intangibles” and any right to a refund of taxes paid at any time to any governmental entity; “instruments”; “inventory”, including any documents and certificates of title issued with respect to any of the inventory; “investment property”; “financial assets”; “letter of credit rights”; all as defined in the UCC, whether now owned or hereafter acquired, whether now existing or hereafter arising, and wherever located. In addition, the term “Collateral” includes all “proceeds”, “products” and “supporting obligations” (as such terms are defined in the UCC) of the Collateral, including but not limited to all stock rights, subscription rights, dividends, stock dividends, stock splits, or liquidating dividends, and all cash, accounts, chattel paper, “instruments,” “investment property,” “financial assets,” and “general intangibles” (as such terms are defined in the UCC) arising from the sale, rent, lease, casualty loss or other disposition of the Collateral, and any Collateral returned to, repossessed by or stopped in transit by the Borrower, and all insurance claims relating to any of the Collateral. The term “Collateral” further includes all of the Borrower’s right, title and interest in and to all books, records and data relating to the Collateral, regardless of the form of media containing such information or data, and all software necessary or desirable to use any of the Collateral or to access, retrieve, or process any of such information or data. Where the Collateral is in the possession of the Bank or the Bank’s agent, the Borrower agrees to deliver to the Bank any property that represents an increase in the Collateral or profits or proceeds of the Collateral. Notwithstanding any provision to the contrary herein contained, any security interest herein granted in equity interests, shares or other securities of any foreign corporation or other foreign entity that is a Subsidiary of Borrower shall not exceed 66.6% of all such equity interests, shares or other securities.

The term “UCC” means the Uniform Commercial Code of California, as in effect from time to time.

Representations, Warranties and Covenants. The Borrower represents, warrants, and covenants to the Bank that each of the following is true and will remain true until termination of this agreement and payment in full of all Liabilities and agrees with the Bank that:

1. At its own expense, it shall maintain comprehensive casualty insurance on the Collateral against such risks, in such amounts, with such deductibles and with such companies as may be satisfactory to the Bank. Each insurance policy on the Collateral shall contain a lender’s loss payable endorsement satisfactory to the Bank and a prohibition against cancellation or amendment of the policy or removal of the Bank as loss payee without at least thirty (30) days’ prior written notice to the Bank. In all events, the amounts of such insurance coverages on the Collateral shall be in such minimum amounts that the Borrower will not be deemed a co-insurer. The policies on the Collateral, or certificates evidencing them, shall, if the Bank so requests, be deposited with the Bank.

2. It shall permit the Bank, at the Borrower’s expense, to inspect and examine the Collateral and to check and test the same as to quality, quantity, value, and condition.

3. It shall maintain the Collateral in good repair; use the Collateral in accordance with law and in compliance with any policy of insurance thereon; and exhibit the Collateral to the Bank on demand.

4. Until the Bank gives notice to the Borrower to the contrary or until the Borrower is in default and such default continues beyond any applicable cure period, it may use the funds collected in its business. Upon default and continuation thereof beyond any applicable cure period, the Borrower agrees that all sums of money it receives on account of or in payment or settlement of the accounts, chattel paper, certificated securities, negotiable certificates of deposit, documents, general intangibles and instruments shall be held by it as trustee for the Bank without commingling with any of the Borrower’s other funds, and shall immediately be delivered to the Bank with endorsement to the Bank’s order of any check or similar instrument. It is agreed that, at any time the Bank so elects, the Bank shall be entitled, in its own name or in the name of the Borrower or otherwise, but at the expense and cost of the Borrower, to collect, demand, receive, sue for or compromise any and all accounts, chattel paper, certificated securities, negotiable certificates of deposit, documents, general intangibles, and instruments, and to give good and sufficient releases, to endorse any checks, drafts or other orders for the payment of money payable to the Borrower and, in the Bank’s discretion, to file any claims or take any action or proceeding which the Bank may deem necessary or advisable. It is expressly understood and agreed, however, that the Bank shall not be required or obligated in any manner to make any demand or to make any inquiry as to the nature or sufficiency of any payment received by it or to present or file any claim or take any other action to collect or enforce the payment of any amounts which may have been assigned to the Bank or to which the Bank may be entitled at any time or times. All notices required in this paragraph will be immediately effective when sent. Such notices need not be given prior to the Bank’s taking action. The Borrower irrevocably appoints the Bank or the Bank’s designee as the Borrower’s attorney-in-fact to do all things with reference to the Collateral as provided for in this agreement including without limitation (1) to sign the Borrower’s name on any invoice or bill of lading relating to any Collateral, on assignments and verifications of account and on notices to the Borrower’s customers, and (2) to do all things necessary to carry out this agreement or to perform any of the Borrower’s obligations under this agreement, (3) to notify the post office authorities to change the Borrower’s mailing address to one designated by the Bank, and (4) to receive, open and dispose of mail addressed to the Borrower; provided, however, that the Bank may not exercise any of its rights as the Borrower’s attorney-in-fact until a default shall have occurred and continued beyond any applicable cure period thereof. The Borrower ratifies and approves all acts of the Bank as attorney-in-fact. This power of attorney appointment is irrevocable, coupled with an interest, and shall survive the death or disability of Borrower. The Bank shall not be liable for any act or omission, nor any error of judgment or mistake of fact or law, but only for its gross negligence or willful misconduct. This power being coupled with an interest is irrevocable until all of the Liabilities have been fully satisfied. Immediately upon its receipt of any Collateral evidenced by an agreement, “instrument,” “chattel paper,” certificated “security” or “document” (as such terms are defined in the UCC) (collectively, “Special Collateral”), it shall mark the Special Collateral to show that it is subject to the Bank’s security interest, pledge and assignment and shall deliver the original to the Bank together with appropriate endorsements and other specific evidence of assignment or transfer in form and substance satisfactory to the Bank.

5. It will not, sell, lease, license or offer to sell, lease, license, grant as security to anyone other than the Bank, or otherwise transfer the Collateral or any rights in or to the Collateral, without the written consent of the Bank, except for the sale of inventory and licenses granted or assigned in the ordinary course of business; or change the location of the Collateral from the locations of the Collateral disclosed to the Bank, without providing at least ten (10) days’ prior written notice to the Bank.

6. No financing statement or similar record covering all or any part of the Collateral or any proceeds is on file in any public office, unless the Bank has approved that filing.

7. When the Collateral is located at, used in or attached to a facility leased by the Borrower, the Borrower will, at the request of the Bank, obtain from the lessor a consent to the granting of this security interest and a release or subordination of the lessor’s interest in any of the Collateral, in form and substance satisfactory to the Bank.

Remedies Regarding Collateral. Upon the occurrence of a default and continuation thereof beyond any applicable cure period, the Bank shall have the right to require the Borrower to assemble the Collateral and make it available to the Bank at a place to be designated by the Bank which is reasonably convenient to both parties, the right to take possession of the Collateral with or without demand and with or without process of law, and the right to sell and dispose of it and distribute the proceeds according to law. The Borrower agrees that upon default and continuation thereof beyond any applicable cure period the Bank may dispose of any of the Collateral in its then present condition, that the Bank has no duty to repair or clean the Collateral prior to sale, and that the disposal of the Collateral in its present condition or without repair or clean-up shall not affect the commercial reasonableness of such sale or disposition. The Bank’s compliance with any applicable state or federal law requirements in connection with the disposition of the Collateral will not adversely affect the commercial reasonableness of any sale of the Collateral. The Bank may disclaim warranties of title, possession, quiet enjoyment, and the like, and the Borrower agrees that any such action shall not affect the commercial reasonableness of the sale. In connection with the right of the Bank to take possession of the Collateral, the Bank may take possession of any other items of property in or on the Collateral at the time of taking possession, and hold them for the Borrower without liability on the part of the Bank. The Borrower expressly agrees that the Bank may enter upon the premises where the Collateral is believed to be located without any obligation of payment to the Borrower, and that the Bank may, without cost, use any and all of the Borrower’s “equipment” (as defined in the UCC) in the manufacturing or processing of any “inventory” (as defined in the UCC) or in growing, raising, cultivating, caring for, harvesting, loading and transporting of any of the Collateral that constitutes “farm products” (as defined in the UCC). If there is any statutory requirement for notice, that requirement shall be met if the Bank sends notice to the Borrower at least ten (10) days prior to the date of sale, disposition or other event giving rise to the required notice, and such notice shall be deemed commercially reasonable. Without limiting any other remedy, the Borrower is liable for any deficiency remaining after disposition of the Collateral. The Bank is authorized to cause all or any part of the Collateral to be transferred to or registered in its name or in the name of any other person or business entity, with or without designating the capacity of that nominee. At its option the Bank may, but shall be under no duty or obligation to, discharge taxes, liens, security interests or other encumbrances at any time levied or placed on the Collateral, pay for insurance on the Collateral, and pay for the maintenance and preservation of the Collateral, and the Borrower agrees to reimburse the Bank on demand for any such payment made or expense incurred by the Bank with interest at the highest rate at which interest may accrue under any of the instruments evidencing the Liabilities. The Borrower authorizes the Bank to endorse on the Borrower’s behalf and to negotiate drafts reflecting proceeds of insurance of the Collateral, provided that the Bank shall remit to the Borrower such surplus, if any, as remains after the proceeds have been applied, at the Bank’s option, to the satisfaction of all of the Liabilities (in such order of application as the Bank may elect) or to the establishment of a cash collateral account for the Liabilities. The Bank shall have the right now, and at any time in the future in its sole and absolute discretion, without notice to the Borrower to (a) prepare, file and sign the Borrower’s name on any proof of claim in bankruptcy or similar document against any owner of the Collateral and (b) prepare, file and sign the Borrower’s name on any notice of lien, assignment or satisfaction of lien or similar document in connection with the Collateral. Notwithstanding anything to the contrary set forth in this agreement, the Bank’s rights to recover attorneys’ fees and other legal expenses hereunder is subject to California Civil Code Section 1717, including any revision or replacement of such statute or rule hereafter enacted.

Miscellaneous.

1. A carbon, photographic or other reproduction of this agreement is sufficient as, and can be filed as, a financing statement or similar record. The Borrower authorizes the Bank to file one or more financing statements or similar records covering the Collateral or such lesser amount of assets as the Bank may determine, or the Bank may, at its option, file financing statements or similar records containing any collateral description which reasonably describes the Collateral, and the Borrower will pay the cost of filing them in all public offices where filing is deemed by the Bank to be necessary or desirable. In addition, the Borrower shall execute and deliver, or cause to be executed and delivered, such other documents as the Bank may from time to time request to perfect or to further evidence the pledge, security interest and assignment created in the Collateral by this agreement. If any provision of this agreement cannot be enforced, the remaining portions of this agreement shall continue in effect. Time is of the essence under this agreement and in the performance of every term, covenant and obligation contained herein.

2. Borrower shall perform all steps reasonably requested by the Bank at any time to perfect, maintain, protect, and enforce the Bank’s security interest in the Collateral, including, without limitation: (a) executing and delivering to Bank customary financing statements, continuation statements, security agreements, and such other documents, including, without limitation, the Trademark Security Agreement in the form attached hereto as Exhibit A, as the Bank may reasonably require or deem advisable to carry into effect the purposes of this agreement or to better assure and confirm to the Bank its rights, powers, and remedies hereunder, and (b) taking such other steps at the Bank’s written request as are reasonably necessary or appropriate and consistent with this agreement and wherever required or permitted by law in order to perfect or preserve the Bank’s security interest in the Collateral.

Borrower:


CHEROKEE INC.


By:	/s/ Howard Siegel

	Howard Siegel			COO
	Printed Name			Title


Date Signed:		9/4/12


By:	/s/ Mark DiSiena

	Mark DiSiena		CFO
	Printed Name		Title


Date Signed:		9/4/12

Signature page to Continuing Security Agreement

EX-10.5 7 a12-20297_1ex10d5.htm EX-10.5

Exhibit 10.5

Trademark Security Agreement

TRADEMARK SECURITY AGREEMENT, dated as of September 4, 2012, among CHEROKEE INC. (the “Borrower”) and JPMORGAN CHASE BANK, N.A. (the “Bank”).

This Agreement is being entered into in connection with the Continuing Security Agreement dated as of even date hereof (the “Security Agreement”) between the Borrower and the Bank, and the related Credit Agreement dated as of even date herewith between the Borrower and the Bank.

The parties hereto agree as follows:

SECTION 1. Terms. Capitalized terms used in this Agreement and not otherwise defined herein have the meanings specified in the Security Agreement.

SECTION 2. Grant of Security Interest. As security for the payment or performance, as the case may be, in full of the Liabilities, the Borrower, pursuant to the Security Agreement, did and hereby does grant to the Bank, its successors and assigns, for the benefit of the Bank, a security interest in all right, title or interest in or to any and all of the following assets and properties now owned or at any time hereafter acquired by the Borrower or in which the Borrower now has or at any time in the future may acquire any right, title or interest (collectively, the “Trademark Collateral”):

(a) all trademarks, service marks, trade names, corporate names, company names, business names, fictitious business names, trade styles, trade dress, logos, other source or business identifiers, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all registration and recording applications filed in connection therewith, including registrations and registration applications in the United States Patent and Trademark Office or any similar offices in any State of the United States or any other country or any political subdivision thereof, and all extensions or renewals thereof, including those listed on Schedule I (the “Trademarks”);

(b) all goodwill associated with or symbolized by the Trademarks; and

SECTION 3. Security Agreement. The security interests granted to the Bank herein are granted in furtherance, and not in limitation, of the security interests granted to the Bank pursuant to the Security Agreement. The Borrower hereby acknowledges and affirms that the rights and remedies of the Bank with respect to the Trademark Collateral are more fully set forth in the Security Agreement, the terms and provisions of which are hereby incorporated herein by reference as if fully set forth herein. In the event of any conflict between the terms of this Agreement and the Security Agreement, the terms of the Security Agreement shall govern.

IN WITNESS WHEREOF, the parties hereto have duly executed this Trademark Security Agreement as of the day and year first above written.

	CHEROKEE INC., as the Borrower,


	By:	/s/ Howard Siegel
		Name: Howard Siegel
		Title: Chief Operating Officer

Signature page to Trademark Security Agreement

EX-10.6 8 a12-20297_1ex10d6.htm EX-10.6

Exhibit 10.6

Continuing Guaranty

Dated as of September 4, 2012

Guaranty. To induce JPMorgan Chase Bank, N.A., whose address is 300 S. Grand Ave., Los Angeles, CA 90071-3109 (together with its successors and assigns, the “Bank”), at its option, to make financial accommodations, make or acquire loans, extend or continue credit or some other benefit, including letters of credit, present or future, direct or indirect, and whether several, joint or joint and several, to CHEROKEE INC. (whether one or more, the “Borrower”, individually and collectively, if more than one), and because the undersigned (the “Guarantor”) has determined that executing this Guaranty is in its interest and to its financial benefit, the Guarantor absolutely and unconditionally guarantees to the Bank, as primary obligor and not merely as surety, the performance of and full and prompt payment of the Liabilities (as defined below) when due, whether at stated maturity, by acceleration or otherwise. The Guarantor will not only pay the Liabilities to the Bank, but will also reimburse the Bank for any and all fees, charges, costs and expenses, including reasonable attorneys’ fees (including fees and expenses of counsel for the Bank that are employees of the Bank or its affiliates) and court costs, that the Bank may pay in collecting from the Borrower or the Guarantor, and for liquidating any Collateral (collectively, “Collection Amounts”). The Guarantor’s obligations under this Guaranty shall be payable in lawful money of the United States of America.

Liabilities. The term “Liabilities” in this Guaranty means all debts, obligations, indebtedness and liabilities of every kind and character of the Borrower, whether individual, joint and several, contingent or otherwise, now or hereafter existing in favor of the Bank, including, without limitation, all liabilities, interest, costs and fees, arising under or from any note, open account, overdraft, credit card, lease, Rate Management Transaction, letter of credit application, endorsement, surety agreement, guaranty, acceptance, foreign exchange contract or depository service contract, whether payable to the Bank or to a third party and subsequently acquired by the Bank, any monetary obligations (including interest) incurred or accrued during the pendency of any bankruptcy, insolvency, receivership or other similar proceedings, regardless of whether allowed or allowable in such proceedings, and all renewals, extensions, modifications, consolidations, rearrangements, restatements, replacements or substitutions of any of the foregoing. The Guarantor and the Bank specifically contemplate that Liabilities include indebtedness to the Bank that may be hereafter incurred by the Borrower. The term “Rate Management Transaction” in this Guaranty means any transaction (including an agreement with respect thereto) that is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option, derivative transaction or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures.

Limitation. The Guarantor’s obligation under this Guaranty shall be UNLIMITED.

Continued Reliance. This Guaranty shall remain in effect until payment in full of the Remaining Liabilities (as defined below) following termination of this Guaranty by the Guarantor in accordance with this paragraph. This Guaranty will continue to be in effect until final payment and performance in full of all Liabilities and the termination of any commitment of the Bank to make loans or other financial accommodations to the Borrower. The Guarantor may terminate the Guarantor’s liability for Liabilities not in existence or for which the Bank has no commitment to advance or acquire by delivering written notice to the Bank as set forth in the paragraph below captioned “Notice.” After the Guarantor’s termination of this Guaranty, the Guarantor will continue to be liable for the following amounts (the “Remaining Liabilities”): (i) all Liabilities existing on the effective date of termination, (ii) all Liabilities to which the Bank has committed to advance or acquire prior to the effective termination date (whether or not the Bank is contractually obligated to advance or acquire the loans or extensions of credit), (iii) all subsequent renewals, extensions, modifications, consolidations, rearrangements, restatements, replacements and amendments (but not increases) of those Liabilities, (iv) all interest accruing on those Liabilities after the effective termination date, and (v) all Collection Amounts incurred with respect to those Liabilities, on or after the effective termination date. The Bank may continue to permit the Borrower to incur Liabilities and to issue commitments to the Borrower to advance or acquire Liabilities in reliance on this Guaranty until the effective date of termination hereunder, regardless of whether at any time, or from time to time, there are no existing Liabilities nor commitments by the Bank to advance or acquire Liabilities.

Security. The term “Collateral” in this Guaranty means all real or personal property described in all security agreements, pledge agreements, mortgages, deeds of trust, assignments, or other instruments now or hereafter executed in connection with any of the Liabilities, including, without limitation, the Continuing Security Agreement dated as of even date herewith between the Borrower and the Bank. If applicable, the Collateral secures the payment of the Liabilities.

Bank’s Right of Setoff. In addition to the Collateral, if any, the Guarantor grants to the Bank a security interest in the Accounts, and the Bank is authorized to setoff and apply, all Accounts, Securities and Other Property, and Bank Debt against any and all Liabilities and all obligations of the Guarantor under this Guaranty. This right of setoff may be exercised at any time and from time to time, and without prior notice to the Guarantor. This security interest in the Accounts and right of setoff may be enforced or exercised by the Bank regardless of whether or not the Bank has made any demand under this paragraph or whether the Liabilities are contingent, matured or un-matured. Any delay, neglect or conduct by the Bank in exercising its rights under this paragraph shall not be a waiver of the right to exercise the right of setoff or to enforce the security interest in the Accounts. The rights of the Bank under this paragraph are in addition to other rights the Bank may have by law. In this paragraph: (a) the term “Accounts” means any and all accounts and deposits of the Guarantor (whether general, special, time, demand, provisional or final) at any time held by the Bank (including all Accounts held jointly with another, but excluding any IRA or Keogh Account, or any trust Account in which a security interest would be prohibited by law); (b) the term “Securities and Other Property” means any securities entitlements, securities accounts, investment property, financial assets and all securities and other property of the Guarantor in the custody, possession or control of the Bank, JPMorgan Chase & Co. and their respective subsidiaries and affiliates (other than property held by the Bank in a fiduciary capacity); and (c) the term “Bank Debt” means all indebtedness at any time owing by the Bank to or for the credit or account of the Guarantor and any claim of the Guarantor (whether individual, joint and several or otherwise) against the Bank now or hereafter existing.

Remedies/Acceleration. If the Guarantor fails to pay any amount owing under this Guaranty, the Bank shall have all of the rights and remedies provided by law or under any other agreement. The Bank is authorized to cause all or any part of the Collateral to be transferred to or registered in its name or in the name of any other person or business entity with or without designation of the capacity of that nominee. The Guarantor is liable for any deficiency in payment of any Liabilities whether of principal, interest, fees, costs or expenses remaining after the disposition of any Collateral. The Guarantor is liable to the Bank for all Collection Amounts related to the making and collection of this Guaranty, including, without limitation, reasonable attorneys’ fees and court costs or costs or expenses incurred by the Bank in any bankruptcy, reorganization, insolvency or other similar proceeding. Notwithstanding anything to the contrary set forth in this Guaranty, the Bank’s rights to recover attorneys’ fees and other legal expenses hereunder is subject to California Civil Code Section 1717, including any revision or replacement of such statute or rule hereafter enacted. All obligations of the Guarantor to the Bank under this Guaranty, whether or not then due or absolute or contingent, shall, at the option of the Bank, without notice or demand, become due and payable immediately upon the occurrence of any default or event of default under the terms of any of the Liabilities or otherwise with respect to any agreement related to the Liabilities (or any other event that results in acceleration of the maturity of any Liabilities, including without limitation, demand for payment of any Liabilities constituting demand obligations or automatic acceleration in a legal proceeding) or the occurrence of any default under this Guaranty.

Permissible Actions. If any monies become available from any source other than the Guarantor that the Bank can apply to the Liabilities, the Bank may apply them in any manner it chooses, including but not limited to applying them against obligations, indebtedness or liabilities which are not covered by this Guaranty. The Bank may take any action against the Borrower, the Collateral, or any other person liable for any of the Liabilities. The Bank may release the Borrower or anyone else from the Liabilities, either in whole or in part, or release the Collateral, and need not perfect a security interest in the Collateral. The Bank does not have to exercise any rights that it has against the Borrower or anyone else, or make any effort to realize on the Collateral or any other collateral for the Liabilities, or exercise any right of set-off. The Guarantor authorizes the Bank, without notice or demand and without affecting the Guarantor’s obligations hereunder, from time to time, to: (a) renew, modify, compromise, rearrange, restate, consolidate, extend, accelerate, postpone, grant any indulgence or otherwise change the time for payment of, or otherwise change the terms of the Liabilities or any part thereof, including increasing or decreasing the rate of interest thereon; (b) release, substitute or add any one or more endorsers, sureties, Guarantor or other guarantors; (c) take and hold Collateral for the payment of this Guaranty or the Liabilities, and enforce, exchange, impair, substitute, subordinate, waive or release any Liabilities or any Collateral for the Liabilities; (d) proceed against such Collateral and direct the order or manner of sale of such Collateral as the Bank in its discretion may determine; (e) apply any and all payments from the Borrower, the Guarantor or any other obligor on the Liabilities, or recoveries from such Collateral, in such order or manner as the Bank in its discretion may determine; and (f) to accept any partial payment of Liabilities or collateral for the Liabilities. The Guarantor’s obligations under this Guaranty shall not be released, diminished or affected by (i) any act or omission of the Bank, (ii) the voluntary or involuntary liquidation, sale or other disposition of all or substantially all of the assets of the Borrower, or any receivership, insolvency, bankruptcy, reorganization, or other similar proceedings affecting the Borrower, any other obligor or any of their respective assets, (iii) any change in the composition or structure of the Borrower, the Guarantor or any other obligor on the Liabilities, including a merger or consolidation with any other person or entity, or (iv) any payments made upon the Liabilities. The Guarantor hereby expressly consents to any impairment of Collateral, including, but not limited to, failure to perfect a security interest and release Collateral and any such impairment or release shall not affect the Guarantor’s obligations hereunder.

Nature of Guaranty. This Guaranty is an absolute guaranty of payment and performance and not of collection. Therefore, the Bank may insist that the Guarantor pay immediately, and the Bank is not required to attempt to collect first from the Borrower, the Collateral, or any other person liable for the Liabilities. The obligation of the Guarantor shall be unconditional and absolute even if all or any part of any agreement between the Bank and the Borrower is unenforceable, void, voidable or illegal or uncollectible due to incapacity, lack of power or authority, discharge or for any reason whatsoever, and regardless of the existence of any defense, setoff, discharge or counterclaim (in any case, whether based on contract, tort or any other theory) which the Borrower may assert. If the Borrower is a corporation, limited liability company, partnership or trust, it is not necessary for the Bank to inquire into the powers of the Borrower or the officers, directors, members, managers, partners, trustees or agents acting or purporting to act on its behalf, and any of the Liabilities made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder. Without limiting the foregoing, the Guarantor’s liability is absolute and unconditional irrespective of, and shall not be released, diminished or affected by: (a) any present or future law, regulation or order of any jurisdiction (whether of right or in fact) or of any agency thereof purporting to reduce, amend, restructure, render unenforceable or otherwise affect any term of any Liabilities; or (b) any war, riot or revolution impacting multinational companies or any act of expropriation, nationalization or currency inconvertibility or non-transferability arising from governmental, legislative or executive measures affecting any obligor or the property of any obligor on the Liabilities.

Other Guarantors. If there is more than one Guarantor, the obligations under this Guaranty are joint and several. In addition, each Guarantor under this Guaranty shall be jointly and severally liable with any other guarantor of the Liabilities. If the Bank elects to enforce its rights against fewer than all guarantors of the Liabilities, that election does not release the Guarantor from its obligations under this Guaranty. The compromise or release of any of the obligations of any of the other guarantors or the Borrower shall not serve to impair, waive, alter or release the Guarantor’s obligations.

Rights of Subrogation. The Guarantor waives and agrees not to enforce any rights of subrogation, contribution or indemnification that it may have against the Borrower, any person liable on the Liabilities, or the Collateral, until the Borrower and the Guarantor have fully performed all their obligations to the Bank, even if those obligations are not covered by this Guaranty.

Waivers. The Guarantor waives (a) to the extent not prohibited by applicable law, all rights and benefits under any laws or statutes regarding sureties, as may be amended, and (b) any right the Guarantor may have to receive notice of the following matters before the Bank enforces any of its rights: (i) the Bank’s acceptance of this Guaranty, (ii) incurrence or acquisition of any Liabilities, any credit that the Bank extends to the Borrower, Collateral received or delivered, default by any party to any agreement related to the Liabilities or other action taken in reliance on this Guaranty, and all notices and other demands of any description, (iii) diligence and promptness in preserving liability against any obligor on the Liabilities, and in collecting or bringing suit to collect the Liabilities from any obligor on the Liabilities or to pursue any remedy in the Bank’s power to pursue; (iv) notice of extensions, renewals, modifications, rearrangements, restatements and substitutions of the Liabilities or any Collateral for the Liabilities; (v) notice of failure to pay any of the Liabilities as they mature, any other default, adverse change in the financial condition of any obligor on the Liabilities, release or substitution of any Collateral, subordination of the Bank’s rights in any Collateral, and every other notice of every kind that may lawfully be waived; (vi) the Borrower’s default, (vii) any demand, diligence, presentment, dishonor and protest, or (viii) any action that the Bank takes regarding the Borrower, anyone else, the Collateral, or any of the Liabilities, which it might be entitled to by law or under any other agreement, (c) any right it may have to require the Bank to proceed against the Borrower, any other obligor or guarantor of the Liabilities, or the Collateral for the Liabilities or the Guarantor’s obligations under this Guaranty, or pursue any remedy in the Bank’s power to pursue, (d) any defense based on any claim that the Guarantor’s obligations exceed or are more burdensome than those of the Borrower, (e) the benefit of any statute of limitations affecting the Guarantor’s obligations hereunder or the enforcement hereof, (f) any defense arising by reason of any disability or other defense of the Borrower or by reason of the cessation from any cause whatsoever (other than payment in full) of the obligation of the Borrower for the Liabilities, and (g) any defense based on or arising out of any defense that the Borrower may have to the payment or performance of the Liabilities or any portion thereof. The Bank may waive or delay enforcing any of its rights without losing them. Any waiver affects only the specific terms and time period stated in the waiver. No modification or waiver of this Guaranty is effective unless it is in writing and signed by the party against whom it is being enforced.

Additional Waivers. If the Liabilities are secured by an interest in real property, the Guarantor waives all rights and defenses that the Guarantor may have because the Liabilities are secured by real property. This means, among other things: (a) the Bank may collect from the Guarantor without first foreclosing on any real or personal property collateral pledged by the Borrower or any other person or entity to secure the Liabilities; and (b) if the Bank forecloses on any real property collateral pledged by the Borrower or any other person or entity to secure the Liabilities: (i) the amount of the Liabilities may be reduced only by the price for which the collateral is sold at the foreclosure sale, even if the collateral is worth more than the sales price; and (ii) the Bank may collect from the Guarantor even if the Bank, by foreclosing on the real property collateral, has destroyed any right the Guarantor may have to collect from the Borrower or any other person or entity. This is an unconditional and irrevocable waiver of any rights and defenses the Guarantor may have because the Liabilities are secured by real property. The Guarantor waives all rights and defenses arising out of an election of remedies by the Bank, even though that election of remedies, such as a non-judicial foreclosure with respect to security for a guaranteed obligation, has destroyed the Guarantor’s rights of subrogation and reimbursement against the Borrower by the operation of Section 580d of the California Code of Civil Procedure or otherwise. Without limiting any waiver, consent or agreement in this Guaranty, the Guarantor further expressly waives to the extent not prohibited by applicable law any and all rights and defenses, including without limitation any rights of subrogation, reimbursement, indemnification and contribution, that might otherwise be available to the Guarantor under California Civil Code Sections 2787 to 2855, inclusive, 2899 and 3433, or under California Code of Civil Procedure Sections 580a, 580b, 580d and 726, or any of such sections, including any revision or replacement of such statutes or rules hereafter enacted.

Cooperation. The Guarantor agrees to fully cooperate with the Bank and not to delay, impede or otherwise interfere with the efforts of the Bank to secure payment from the assets which secure the Liabilities, including actions, proceedings, motions, orders, agreements or other matters relating to relief from automatic stay, abandonment of property, use of cash collateral and sale of the Bank’s collateral free and clear of all liens.

Reinstatement. The Guarantor agrees that, to the extent any payment or transfer is received by the Bank in connection with the Liabilities, and all or any part of the payment or transfer is subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be transferred or repaid by the Bank or transferred or paid over to a trustee, receiver or any other entity, whether under any bankruptcy act or otherwise (any of those payments or transfers is hereinafter referred to as a “Preferential Payment”), then this Guaranty shall continue to be effective or shall be reinstated, as the case may be, and whether or not the Bank is in possession of this Guaranty, or whether the Guaranty has been marked paid, released or canceled, or returned to the Guarantor and, to the extent of the payment, repayment or other transfer by the Bank, the Liabilities or part thereof intended to be satisfied by the Preferential Payment shall be revived and continued in full force and effect as though the Preferential Payment had not been made.

Information. The Guarantor assumes all responsibility for being and keeping itself informed of the Borrower’s financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Liabilities and the nature, scope and extent of the risks that the Guarantor assumes and incurs under this Guaranty, and agrees that the Bank does not have any duty to advise the Guarantor of information known to it regarding those circumstances or risks.

Financial Information. The Guarantor further agrees that the Guarantor shall provide to the Bank such financial statements and other information relating to the financial condition, properties and affairs of the Guarantor as the Bank requests from time to time.

Severability. The provisions of this Guaranty are severable, and in any action or proceeding involving any state corporate law, or any state, federal or foreign bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of the Guarantor under this Guaranty would otherwise be held or determined to be avoidable, invalid or unenforceable on account of the amount of the Guarantor’s liability under this Guaranty, then, notwithstanding any other provision of this Guaranty to the contrary, the amount of such liability shall, without any further action by the Guarantor or the Bank, be automatically limited and reduced to the highest amount that is valid and enforceable as determined in such action or proceeding.

Representations and Warranties by Guarantor. The Guarantor represents and warrants that the following statements are true as of the date of this Guaranty and will remain true until termination of this Guaranty and payment in full of all Liabilities: (a) the execution and delivery of this Guaranty and the performance of the obligations it imposes do not violate any law, do not conflict with any agreement by which it is bound, or require the consent or approval of any governmental authority or any third party; (b) this Guaranty is a valid and binding agreement, enforceable against Guarantor according to its terms; (c) all balance sheets, profit and loss statements, and other financial statements furnished to the Bank in connection with the Liabilities are accurate and fairly reflect the financial condition of the organizations and persons to which they apply on their effective dates, including contingent liabilities of every type, which financial condition has not changed materially and adversely since those dates; (d) the Guarantor has filed all federal and state and, to the extent applicable foreign, tax returns that are required to be filed, has paid all due and payable taxes and assessments against the property and income of the Guarantor and all payroll, excise and other taxes required to be collected and held in trust by the Guarantor for any governmental authority; (e) the Guarantor has determined that this Guaranty will benefit the Guarantor directly or indirectly; (f) the Guarantor has (i) without reliance on the Bank or any information received from the Bank and based upon the records and information the Guarantor deems appropriate, made an independent investigation of the Borrower, the Borrower’s business, assets, operations, prospects and condition, financial or otherwise, and any circumstances that may bear upon those transactions, the Borrower or the obligations, liabilities and risks undertaken in this Guaranty with respect to the Liabilities; (ii) adequate means to obtain from the Borrower on a continuing basis information concerning the Borrower and the Bank has no duty to provide any information concerning the Borrower or any other obligor to the Guarantor; (iii) full and complete access to the Borrower and any and all records relating to any Liabilities now and in the future owing by the Borrower; (iv) not relied and will not rely upon any representations or warranties of the Bank not embodied in this Guaranty or any acts taken by the Bank prior to and after execution or other authentication and delivery of this Guaranty (including but not limited to any review by the Bank of the business, assets, operations, prospects and condition, financial or otherwise, of the Borrower); and (v) determined that the Guarantor will receive benefit, directly or indirectly, and has or will receive fair and reasonably equivalent value for, the execution and delivery of this Guaranty; (g) by entering into this Guaranty, the Guarantor does not intend to incur or believe that the Guarantor will incur debts that would be beyond the Guarantor’s ability to pay as those debts mature; (h) the execution and delivery of this Guaranty are not intended to hinder, delay or defraud any creditor of the Guarantor; and (i) the Guarantor is neither engaged in nor about to engage in any business or transaction for which the remaining assets of the Guarantor are unreasonably small in relation to the business or transaction, and any property remaining with the Guarantor after the execution or other authentication of this Guaranty is not unreasonably small capital. Each Guarantor, other than a natural person, further represents that: (1) it is duly organized, validly existing and in good standing under the laws of the state where it is organized and in good standing in each state where it is doing business; and (2) the execution and delivery of this Guaranty and the performance of the obligations it imposes (A) are within its powers and have been duly authorized by all necessary action of its governing body, and (B) do not contravene the terms of its articles of incorporation or organization, its by-laws, or any agreement or document governing its affairs.

Notice. Except as otherwise provided in this Guaranty, any notices and demands under or related to this document shall be in writing and delivered to the intended party at its address stated herein, and if to the Bank, at its main office if no other address of the Bank is specified herein, by one of the following means: (a) by hand, (b) by a nationally recognized overnight courier service, or (c) by certified mail, postage prepaid, with return receipt requested. Notice shall be deemed given: (i) upon receipt if delivered by hand, (ii) on the Delivery Day after the day of deposit with a nationally recognized courier service, or (iii) on the third Delivery Day after the notice is deposited in the mail. “Delivery Day” means a day other than a Saturday, a Sunday, or any other day on which national banking associations are authorized to be closed. Any party may change its address for purposes of the receipt of notices and demands by giving notice of such change in the manner provided in this provision. In connection with notices of termination, as provided above, such notices shall not be deemed received by the Bank until actually received by the [Manager of Commercial Loan Documentation Division, IL1-1145 (Floor 7), 10 S. Dearborn, Chicago, IL 60670, Attn: Manager of Commercial Loan Documentation Division] under written receipt and shall be effective at the opening of the Bank for business on the third Delivery Day after receipt of the notice.

Governing Law and Venue. This agreement shall be governed by and construed in accordance with the laws of the State of California (without giving effect to its laws of conflicts). The Guarantor agrees that any legal action or proceeding with respect to any of its obligations under this agreement may be brought by the Bank in any state or federal court located in the State of California, as the Bank in its sole discretion may elect. By the execution and delivery of this agreement, the Guarantor submits to and accepts, for itself and in respect of its property, generally and unconditionally, the non-exclusive jurisdiction of those courts. The Guarantor waives any claim that the State of California is not a convenient forum or the proper venue for any such suit, action or proceeding.

Miscellaneous. The Guarantor’s liability under this Guaranty is independent of its liability under any other guaranty previously or subsequently executed by the Guarantor or any one of them, singularly or together with others, as to all or any part of the Liabilities, and may be enforced for the full amount of this Guaranty regardless of the Guarantor’s liability under any other guaranty. This Guaranty binds the Guarantor’s heirs, successors and assigns, and benefits the Bank and its successors and assigns. The Bank may assign this Guaranty in whole or in part without notice. The Guarantor agrees that the Bank may provide any information or knowledge the Bank may have about the Guarantor, or about any matter relating to this Guaranty, to JPMorgan Chase & Co., or any of its subsidiaries or affiliates or their successors, or to one or more purchasers or potential purchasers of this Guaranty or the Liabilities guaranteed hereby. The use of headings does not limit the provisions of this Guaranty. Time is of the essence under this Guaranty and in the performance of every term, covenant and obligation contained herein.

WAIVER OF SPECIAL DAMAGES. THE GUARANTOR WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT THE UNDERSIGNED MAY HAVE TO CLAIM OR RECOVER FROM THE BANK IN ANY LEGAL ACTION OR PROCEEDING ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES.

JURY WAIVER AND JUDICIAL REFERENCE PROVISION. THE GUARANTOR AND THE BANK (BY ITS ACCEPTANCE HEREOF) HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) BETWEEN THE GUARANTOR AND THE BANK ARISING OUT OF OR IN ANY WAY RELATED TO THIS DOCUMENT. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE BANK TO PROVIDE THE FINANCING DESCRIBED HEREIN.

IN THE EVENT ANY LEGAL PROCEEDING IS FILED IN A COURT OF THE STATE OF CALIFORNIA (THE “COURT”) BY OR AGAINST THE GUARANTOR OR THE BANK IN CONNECTION WITH ANY CONTROVERSY, DISPUTE OR CLAIM DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY) (EACH, A “CLAIM”) AND THE WAIVER SET FORTH IN THE PRECEDING PARAGRAPH IS NOT ENFORCEABLE IN SUCH ACTION OR PROCEEDING, THE GUARANTOR AND THE BANK (BY ITS ACCEPTANCE HEREOF) AGREE AS FOLLOWS:

(1) WITH THE EXCEPTION OF THE MATTERS SPECIFIED IN PARAGRAPH (2) BELOW, ANY CLAIM WILL BE DETERMINED BY A GENERAL REFERENCE PROCEEDING IN ACCORDANCE WITH THE PROVISIONS OF CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS 638 THROUGH 645.2, INCLUDING ANY REVISION OR REPLACEMENT OF SUCH STATUTES OR RULES HEREAFTER ENACTED. THE GUARANTOR AND THE BANK INTEND THIS GENERAL REFERENCE AGREEMENT TO BE SPECIFICALLY ENFORCEABLE IN ACCORDANCE WITH CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 638, INCLUDING ANY REVISION OR REPLACEMENT OF SUCH STATUTE OR RULE HEREAFTER ENACTED. EXCEPT AS OTHERWISE PROVIDED IN THIS DOCUMENT AND THE OTHER DOCUMENTS AND INSTRUMENTS EXECUTED IN CONNECTION WITH THE LIABILITIES , VENUE FOR THE REFERENCE PROCEEDING WILL BE IN THE STATE OR FEDERAL COURT IN THE COUNTY OR DISTRICT WHERE VENUE IS OTHERWISE APPROPRIATE UNDER APPLICABLE LAW.

(2) THE FOLLOWING MATTERS SHALL NOT BE SUBJECT TO A GENERAL REFERENCE PROCEEDING: (A) NON-JUDICIAL FORECLOSURE OF ANY SECURITY INTERESTS IN REAL OR PERSONAL PROPERTY; (B) EXERCISE OF SELF-HELP REMEDIES (INCLUDING, WITHOUT LIMITATION, SET-OFF); (C) APPOINTMENT OF A RECEIVER; AND (D) TEMPORARY, PROVISIONAL OR ANCILLARY REMEDIES (INCLUDING, WITHOUT LIMITATION, WRITS OF ATTACHMENT, WRITS OF POSSESSION, TEMPORARY RESTRAINING ORDERS OR PRELIMINARY INJUNCTIONS). THIS DOCUMENT DOES NOT LIMIT THE RIGHT OF THE GUARANTOR OR THE BANK TO EXERCISE OR OPPOSE ANY OF THE RIGHTS AND REMEDIES DESCRIBED IN CLAUSES (A) - (D) AND ANY SUCH EXERCISE OR OPPOSITION DOES NOT WAIVE THE RIGHT OF THE GUARANTOR OR THE BANK TO A REFERENCE PROCEEDING PURSUANT TO THIS DOCUMENT.

(3) UPON THE WRITTEN REQUEST OF THE GUARANTOR OR THE BANK, THE GUARANTOR AND THE BANK SHALL SELECT A SINGLE REFEREE, WHO SHALL BE A RETIRED JUDGE OR JUSTICE. IF THE GUARANTOR AND THE BANK DO NOT AGREE UPON A REFEREE WITHIN TEN (10) DAYS OF SUCH WRITTEN REQUEST, THEN, THE GUARANTOR OR THE BANK, MAY REQUEST THE COURT TO APPOINT A REFEREE PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 640(B), INCLUDING ANY REVISION OR REPLACEMENT OF SUCH STATUTE OR RULE HEREAFTER ENACTED.

(4) ALL PROCEEDINGS AND HEARINGS CONDUCTED BEFORE THE REFEREE, EXCEPT FOR TRIAL, SHALL BE CONDUCTED WITHOUT A COURT REPORTER, EXCEPT WHEN THE GUARANTOR OR THE BANK SO REQUESTS, A COURT REPORTER WILL BE USED AND THE REFEREE WILL BE PROVIDED A COURTESY COPY OF THE TRANSCRIPT. THE PARTY MAKING SUCH REQUEST SHALL HAVE THE OBLIGATION TO ARRANGE FOR AND PAY COSTS OF THE COURT REPORTER, PROVIDED THAT SUCH COSTS, ALONG WITH THE REFEREE’S FEES, SHALL ULTIMATELY BE BORNE BY THE PARTY WHO DOES NOT PREVAIL, AS DETERMINED BY THE REFEREE.

(5) THE REFEREE MAY REQUIRE ONE OR MORE PREHEARING CONFERENCES. THE GUARANTOR AND THE BANK SHALL BE ENTITLED TO DISCOVERY, AND THE REFEREE SHALL OVERSEE DISCOVERY IN ACCORDANCE WITH THE RULES OF DISCOVERY, AND MAY ENFORCE ALL DISCOVERY ORDERS IN THE SAME MANNER AS ANY TRIAL COURT JUDGE IN PROCEEDINGS AT LAW IN THE STATE OF CALIFORNIA. THE REFEREE SHALL APPLY THE RULES OF EVIDENCE APPLICABLE TO PROCEEDINGS AT LAW IN THE STATE OF CALIFORNIA AND SHALL DETERMINE ALL ISSUES IN ACCORDANCE WITH APPLICABLE STATE AND FEDERAL LAW. THE REFEREE SHALL BE EMPOWERED TO ENTER EQUITABLE AS WELL AS LEGAL RELIEF AND RULE ON ANY MOTION WHICH WOULD BE AUTHORIZED IN A TRIAL, INCLUDING, WITHOUT LIMITATION, MOTIONS FOR DEFAULT JUDGMENT OR SUMMARY JUDGMENT. THE REFEREE SHALL REPORT THE REFEREE’S DECISION, WHICH REPORT SHALL ALSO INCLUDE FINDINGS OF FACT AND CONCLUSIONS OF LAW.

(6) THE GUARANTOR AND THE BANK RECOGNIZE AND AGREE THAT ALL CLAIMS RESOLVED IN A GENERAL REFERENCE PROCEEDING PURSUANT HERETO WILL BE DECIDED BY A REFEREE AND NOT BY A JURY.

	Guarantor:

Address: 5590 Sepulveda Blvd.	SPELL C. LLC
Sherman Oaks, CA 91411
	By:	Cherokee Inc., its sole member and manager


	By:	/s/ Howard Siegel


		Howard Siegel		COO
		Printed Name		Title


	Date Signed:		9/4/12


	By:	/s/ Mark Disiena

		Mark DiSiena		CFO
		Printed Name		Title


	Date Signed:		9/4/12

EX-99.1 9 a12-20297_1ex99d1.htm EX-99.1

Exhibit 99.1

Cherokee Inc.	Addo Communications, Inc.
5990 Sepulveda Blvd., Suite 600	2120 Colorado Ave., Suite 160
Sherman Oaks, CA 91411	Santa Monica, CA 90404
(818) 908-9868	(310) 829-5400
Contact: Mark DiSiena, Chief Financial Officer	Contact: Andrew Greenebaum/Kimberly Esterkin

For Immediate Release:

Cherokee Inc. Reports Second Quarter 2013 Financial Results

SHERMAN OAKS, CA (September 6, 2012) — Cherokee Inc. (NASDAQ: CHKE), a global brand management company, today reported financial results for the second quarter ended July 28, 2012.

Net revenues were $6.3 million for the quarter, down from $6.7 million in the prior-year period. SG&A expenses for the second quarter totaled $3.64 million, a decrease from $3.95 million in the second quarter of Fiscal 2012. Net income for the second quarter was $1.6 million, or $0.19 per diluted share, compared with $1.7 million, or $0.20 per diluted share, in the prior-year period.

“The first half of Fiscal 2013 has been very productive for the Cherokee Group, marked by further global expansion, additional product category extensions and the continued development and execution of our long-term strategic growth plan,” said Cherokee Group Chief Executive Officer Henry Stupp. “Revenue growth in the first half of the year was well diversified geographically, with nearly all of our retail partners posting solid year-over-year increases in royalty revenues in most of the over 40 countries where Cherokee branded products are sold. In addition, to further drive the global growth of the business, we are thrilled to announce the acquisition of the Liz Lange and Completely Me brands and welcome Liz’s maternity collection into our strong brand portfolio.”

Mr. Stupp continued, “Throughout the quarter, Cherokee’s management team traveled around the globe to meet with key partners and support our 360 degree brand management approach. In fact, I just returned from meetings at Tesco’s London headquarters and look forward to the re-launch of Cherokee men’s, women’s, girls’ and boys’ clothing at Tesco in spring 2013. We are also very proud of the growth we saw this past quarter in Asia, Latin America, and of course, domestically, with our largest retail partner, Target. This positive progress with Target has continued into the third quarter.”

Mr. Stupp concluded, “We expect the second half of Fiscal 2013 will continue to show encouraging developments for the Cherokee Group. Through the execution of our strategic plan, we look forward to continuing to generate unique, high-quality products, to increase our global distribution and to expand our brand portfolio to deliver strong returns for our shareholders.”

Subsequent Events

Today, September 6, 2012, the Cherokee Group announced that it has acquired the Liz Lange Maternity® and Completely Me® brands for an aggregate purchase price of up to $14 million, inclusive of performance based earn-outs.

Mr. Stupp noted, “On top of the strong strategic rationale, the economics of the transaction are equally compelling. We expect the transaction to prove immediately accretive and deliver positive free cash flow.

Longer term, we see the opportunity to deliver accelerated top-line growth through enhanced merchandising and marketing initiatives as well as expanded distribution worldwide.”

In connection with the transaction, the Cherokee Group arranged a term loan with JPMorgan Chase Bank to provide financing for the acquisition.

At August 31, 2012, the Company had cash and cash equivalents of approximately $3.2 million, down from $7.4 million at January 28, 2012 due to pre-payment of all outstanding principal and interest on both the Company’s four-year facility and two-year facility with U.S. Bank on June 5, 2012.

“We’re pleased that our strong balance sheet and cash flow enable us to grow and continue to diversify our business,” added Mr. Stupp. “As previously discussed, Cherokee is committed to strategic capital allocation and leveraging all available tools to maximize return for our shareholders. Given our current forecasting, management expects that it will recommend next quarter a future dividend of $0.10 per share for the third quarter of Fiscal 2013 to the Board of Directors.”

Conference Call

The Company will host a conference call today at 1:30 p.m. PT / 4:30 p.m. ET. To participate in the call, please dial (877) 407-0784 (U.S.) or (201) 689-8560 (International) ten minutes prior to the start time and use conference ID: 398787. The earnings call and accompanying slides will also be broadcast live over the Internet and can be accessed on the Investor Relations section of the Company’s Web site at http://www.thecherokeegroup.com. To listen to the live webcast, please visit the site prior to the start of the call in order to register, download and install any necessary audio software. For those unable to participate during the live broadcast, a replay will be available beginning September 6, 2012 at 4:30 p.m. PT / 7:30 p.m. ET, through September 20, 2012, at 8:59 p.m. PT / 11:59 p.m. ET. To access the replay, dial (877) 870-5176 (U.S.) or (858) 384-5517 (International) and use conference ID: 398787.

About Cherokee Inc.

Cherokee Inc. is a global marketer and manager of a portfolio of Fashion and Lifestyle brands it owns and represents in multiple consumer product categories and sectors around the world. The Company has license agreements with premier retailers and manufacturers covering over 40 countries around the world including Target Stores (U.S.), Tesco (U.K., Ireland and certain Central European countries), Zellers (Canada), RT-Mart (Peoples Republic of China), Pick ‘n Pay (South Africa), Falabella (Chile, Peru and Colombia), Arvind Mills (India and certain Middle Eastern countries), Shufersal LTD. (Israel), Comercial Mexicana (Mexico), Eroski (Spain), Nishimatsuya (Japan), Magnit (Russia), Landmark Group’s Max Stores (certain Middle East and North Africa countries), and the TJX Companies (U.S., Canada and Europe).

Such risks and uncertainties, include, but are not limited to, the effect of global economic conditions, the financial condition of the apparel and retail industry, adverse changes in licensee or consumer acceptance of products bearing the Company’s brands, the ability and/or commitment of the Company’s licensees to design, manufacture and market Cherokee, Sideout , Carole Little, Liz Lange, and Completely Me branded products, the Company’s dependence on Target for most of the Company’s revenues and the Company’s dependence on its key management personnel. The risks included here are not exhaustive. A further list and description of these risks, uncertainties and other matters can be found in the Company’s Annual Report on Form 10-K for Fiscal Year 2012, and in its periodic reports on Forms 10-Q and 8-K. Given these risks and uncertainties, you should not place undue reliance on forward-looking statements as a prediction of actual results. The Company disclaims any intent or obligation to update any of the forward-looking statements contained herein to reflect future events and developments.

CHEROKEE INC.

CONSOLIDATED BALANCE SHEETS

Unaudited

	July 28, 2012			January 28, 2012
Assets
Current assets:
Cash and cash equivalents	$	2,089,000		$	7,421,000
Receivables	5,963,000			5,320,000
Income taxes receivable	475,000			672,000
Prepaid expenses and other current assets	217,000			152,000
Deferred tax asset	101,000			100,000
Total current assets	8,845,000			13,665,000
Deferred tax asset	1,223,000			1,230,000
Property and equipment, net	937,000			733,000
Trademarks, net	5,075,000			5,596,000
Other assets	204,000			—
Total assets	$	16,284,000		$	21,224,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,571,000		$	850,000
Deferred Revenue — Current	100,000			320,000
Accrued compensation payable	124,000			268,000
Income taxes payable	1,119,000			—
Accrued dividends	1,679,000			1,677,000
Deferred tax liability — current	38,000			38,000
Short term debt	—			500,000
Total current liabilities	4,631,000			3,653,000
Long term liabilities:
Deferred Revenue — Non-Current	125,000			382,000
Long term debt	—			6,438,000
Total liabilities	4,756,000			10,473,000
Commitments and Contingencies
Stockholders’ Equity
Preferred stock, $.02 par value, 1,000,000 shares authorized, none issued and outstanding	—			—
Common stock, $.02 par value, 20,000,000 shares authorized, 8,394,667 issued and outstanding at July 28, 2012 and 8,387,167 issued and outstanding at January 28, 2012	167,000			167,000
Additional paid-in capital	19,726,000			19,271,000
Retained earnings (deficit)	(8,365,000		)	(8,687,000		)
Total stockholders’ equity	11,528,000			10,751,000
Total liabilities and stockholders’ equity	$	16,284,000		$	21,224,000

CHEROKEE INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited

	Three months ended						Six months ended
	July 28, 2012			July 30, 2011			July 28, 2012			July 30, 2011

Royalty revenues	$	6,306,000		$	6,658,000		$	13,821,000		$	13,602,000
Selling, general and administrative expenses	3,644,000			3,954,000			7,799,000			7,258,000

Operating income	2,662,000			2,704,000			6,022,000			6,344,000

Other income:
Interest expense	(23,000		)	(68,000		)	(73,000		)	(134,000		)
Investment and interest income	—			2,000			12,000			22,000

Total other income	(23,000		)	(66,000		)	(61,000		)	(112,000		)

Income before income taxes	2,639,000			2,638,000			5,961,000			6,232,000
Income tax provision	1,031,000			966,000			2,282,000			1,309,000

Net income	$	1,608,000		$	1,672,000		$	3,679,000		$	4,923,000

Basic earnings per share	$	0.19		$	0.20		$	0.44		$	0.58

Diluted earnings per share	$	0.19		$	0. 20		$	0.44		$	0.58

Weighted average shares outstanding
Basic	8,390,417			8,504,247			8,388,791			8,501,867

Diluted	8,405,788			8,534,518			8,396,338			8,528,301

EX-99.2 10 a12-20297_1ex99d2.htm EX-99.2

Exhibit 99.2

Cherokee Inc.	Addo Communications, Inc.
5990 Sepulveda Blvd., Suite 600	2120 Colorado Ave., Suite 160
Sherman Oaks, CA 91411	Santa Monica, CA 90404
(818) 908-9868	(310) 829-5400
Contact: Mark DiSiena, Chief Financial Officer	Contact: Andrew Greenebaum/Kimberly Esterkin

For Immediate Release:

Cherokee Inc. Announces Acquisition of

Liz Lange Maternity® and Completely Me® Brands

SHERMAN OAKS, CA (September 6, 2012) — Cherokee Inc. (NASDAQ: CHKE), a global brand management company, today announced that it has acquired the Liz Lange Maternity® and Completely Me® brands from LLM Management Co., LLC an affiliate of Bluestar Alliance, LLC for an aggregate purchase price of up to $14.0 million, inclusive of performance based earn-outs. The acquisition closed on September 4, 2012.

Credited with revolutionizing modern maternity wear by providing pregnant women stylish, fashion-forward clothing, Liz Lange is one of the most recognized and respected maternity brands sold throughout North America. “We are excited to welcome Liz as the latest addition to our strong and growing family of sought-after style-focused lifestyle brands. In addition to Liz’s current distribution, we see an opportunity to leverage our global platform, which spans over 40 countries worldwide,” said Cherokee Group Chief Executive Officer Henry Stupp.

Liz Lange, Founder and Creative Director of Liz Lange Maternity®, commented, “We are thrilled to become a part of the Cherokee family and work directly with the Cherokee Group management team to expand the reach of our brand to expecting moms around the world.”

The Liz Lange Maternity® collection is exclusively available at all Target stores nationwide and online at Target.com. Through its ten-year history with Target, Liz Lange Maternity® has revolutionized the maternity wear industry.

The acquisition also includes a sportswear line that Liz Lange launched in 2010 via exclusive relationships with both the Home Shopping Network in the United States and The Shopping Channel in Canada. Capitalizing on her fashion credibility and design talent, in 2010 Liz Lange launched Completely Me® by Liz Lange, a collection of comfortable sophisticated everyday apparel.

In connection with the transaction, Cherokee arranged a new term loan with JP Morgan Chase Bank, providing financing for the purchase price.

Mr. Stupp added, “On top of the strong strategic rationale, the economics of the transaction are equally compelling. We expect the transaction to prove immediately accretive and deliver positive free cash flow. Longer term, we see the opportunity to deliver additional top-line growth through enhanced merchandising and marketing initiatives as well as expanded distribution worldwide.”

Cherokee will provide additional details on the Liz Lange Maternity® and Completely Me® brands acquisition during today’s second quarter Fiscal 2013 earnings conference call, the details of which are below.

Conference Call

About Cherokee Inc.

About Bluestar Alliance, LLC

Bluestar Alliance, LLC, founded in 2007 by Joseph Gabbay and Ralph Gindi, owns, manages and markets a growing portfolio of consumer brands including Kensie®, Mac + Jac®, Joan Vass®, Kooba®, Yak Pak®, English Laundry®, Hot Kiss®, First Kiss®, Bell + Howell® and Harvé Benard®. Previous portfolio inclusions are The Sharper Image® and Ron Chereskin®. Bluestar licenses its brands to a network of best in class manufacturers and retailers both in the U.S. and internationally.

Statements included within this news release may contain forward-looking statements for purposes of the safe harbor provided by the Private Securities Litigation Reform Act of 1995. When used, the words “anticipates”, “believes”, “expects”, “may”, “should” and similar expressions are intended to identify such forward-looking statements. Forward-looking statements included in this press release (including, without limitation, express or implied statements regarding anticipated financial performance of the acquired brands and future dividend payments) involve known and unknown risk and uncertainties that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such risks and uncertainties, include, but are not limited to, the effect of global economic conditions, the financial condition of the apparel and retail industry, adverse changes in licensee or consumer acceptance of products bearing the Company’s brands the ability and/or commitment of the Company’s licensees to design, manufacture and market Cherokee, Sideout ,Carole Little, Liz Lange and Completely Me branded products, the Company’s dependence on Target for most of the Company’s revenues and the Company’s dependence on its key management personnel. The risks included here are not exhaustive. A further list and description of these risks, uncertainties and other matters can be found in the Company’s Annual Report on Form 10-K for Fiscal Year 2012, and in its periodic reports on Forms 10-Q and 8-K. Given these risks and uncertainties, you should not place undue reliance on forward-looking statements as a prediction of actual results. The Company disclaims any intent or obligation to update any of the forward-looking statements contained herein to reflect future events and developments.