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): January 31, 2013
CHEROKEE INC.
(Exact name of registrant as specified in its charter)
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Delaware |
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1-18640 |
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95-4182437 |
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(State or Other Jurisdiction |
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(Commission |
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(I.R.S. Employer |
5990 Sepulveda Boulevard
Sherman Oaks, California 91411
(Address of Principal Executive Offices) (Zip Code)
(818) 908-9868
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report.)
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.
Asset Purchase Agreement with Strategic Partners
On January 31, 2013, Cherokee Inc. (“Cherokee”) and Strategic Partners, Inc. (the “Seller”) entered into an asset purchase agreement (the “Asset Purchase Agreement”). Pursuant to the Asset Purchase Agreement, Cherokee acquired from the Seller various rights relating to the Cherokee brand in the category of school uniforms and apparel (the “Assets”) in exchange for a cash payment of $4.25 million (the “Purchase Price” and such transaction, the “Acquisition”). The Acquisition closed on January 31, 2013. The Asset Purchase Agreement contains various covenants, indemnities and representations and warranties that are customary for transactions of this type. Cherokee previously sold the Assets to the Seller in July 1995.
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.
Amendment to Restated License Agreement with Target
In connection with the Acquisition, Cherokee and Target General Merchandise, Inc. (“Target”) entered into an amendment (the “Target Amendment”) to the Restated License Agreement entered into between Cherokee and Target as of February 1, 2008 and previously amended as of December 1, 2011 (the “Target License Agreement”). The Target Amendment became effective concurrently with the closing of the Acquisition on January 31, 2013.
Pursuant to the Target Amendment, (i) the product categories contemplated by the Target License Agreement were expanded to include the category of children’s school uniforms, (ii) Target agreed to pay Cherokee an annual royalty rate for its sales of Cherokee-branded children’s school uniforms products in the United States equal to 2% of Target’s net sales of such products and subject to a minimum annual royalty of $800,000 (the “Minimum Royalty”), (iii) the term applicable to the children’s school uniforms category under the Target License Agreement shall continue through January 31, 2016 (the “Initial Term”), and (iv) the Initial Term shall automatically renew for successive two year terms in the event that (a) Target’s net sales of Cherokee-branded children’s school uniforms for the prior fiscal year period are sufficient to meet the Minimum Royalty and (b) Target does not provide Cherokee with its notice to terminate the children’s school uniform portion of the Target License Agreement as of the end of the Initial Term, which notice must be provided by Target on or before January 31, 2015 to be effective.
The foregoing summary description of the Target Amendment does not purport to be complete and is subject to and qualified in its entirety by reference to the terms and conditions of the Target Amendment, a copy of which is attached hereto as Exhibit 10.1 and is incorporated herein by this reference.
Amendment to Credit Agreement and Note with JP Morgan Chase
Also in connection with the Acquisition, effective January 31, 2013, Cherokee and JP Morgan Chase Bank N.A. (the “Bank”) entered into amendments (the “Loan Agreement Amendments”) to the credit agreement (the “Credit Agreement”) and the term note (the “Note”) entered into between Cherokee and the Bank as of September 4, 2012. Pursuant to the Loan Agreement Amendments, the aggregate principal amount that may be borrowed from the Bank pursuant to the Note was increased from $13 million to $16.6 million. The Loan Agreement Amendments were conditioned on, and became effective following, the execution and delivery of the Target Amendment and the consummation of the Acquisition. Cherokee increased the aggregate amount outstanding under the Note by the amount of the Purchase Price, or $4.25 million, to $16.6 million concurrently with its payment of the Purchase Price on January 31, 2013. Pursuant to the Loan Agreement Amendments, the principal outstanding under the Note is to be repaid on a quarterly basis, commencing on November 20, 2012 and continuing through August 31, 2017, in equal principal installments of (i) $650,000 for the period ending on February 28, 2013 and (ii) $886,111 thereafter.
The foregoing summary description of the Loan Agreement Amendments 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 Agreement Amendments, copies of which are attached hereto as Exhibits 10.2 and 10.3 and are incorporated herein by this reference.
Item 2.01 Completion of Acquisition or Disposition of Assets.
Reference is made to the disclosure regarding the Asset Purchase Agreement and the Acquisition set forth under Item 1.01 above.
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 Agreement Amendments set forth under Item 1.01 above.
Item 8.01 Other Events.
On February 4, 2013, Cherokee issued a press release announcing the Acquisition. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by this reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
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Exhibit No. |
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Description |
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2.1 |
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Asset Purchase Agreement, by and between Cherokee Inc. and Strategic Partners, Inc., dated as of January 31, 2013*(1) |
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10.1 |
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Amendment No. 2 to Restated License Agreement, by and between Cherokee Inc. and Target General Merchandise, Inc., effective as of January 31, 2013* |
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10.2 |
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First Amendment to Credit Agreement, by and between Cherokee Inc. and JPMorgan Chase Bank, N.A., dated as of January 31, 2013* |
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10.3 |
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First Amendment to Term Note, executed by Cherokee Inc. in favor of JPMorgan Chase Bank, N.A., dated as of January 31, 2013* |
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99.1 |
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Press Release of Cherokee Inc., dated February 4, 2013* |
*Filed herewith.
(1) Schedules and exhibits omitted pursuant to Item 601(b)(2) of Regulation S-K. Cherokee agrees to furnish a supplemental copy of any omitted schedules or exhibits to the Securities and Exchange Commission upon request.
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of January 31, 2013 (the “Effective Date”), is entered into by and between Strategic Partners, Inc. aka Strategic Partners, a California corporation (“Seller”), and Cherokee Inc., a Delaware corporation (“Buyer”). Seller and Buyer shall be referred to from time to time singly as a “Party” and jointly as the “Parties”.
PREAMBLE
A. Seller has previously acquired from Buyer certain assets pursuant to the terms of an Asset Purchase Agreement, dated as of July 17, 1995, by and between Buyer and Seller (the “Original APA”), a copy of which is attached hereto (without exhibits) as Exhibit A, including rights related to uniform apparel to school, medical, corporate, military, governmental, hospitality, hotel, motel, airline, clean room, safety, industrial, police and fire markets (collectively, “Uniform Apparel”).
B. In connection with the transactions contemplated by the Original APA, Seller and Buyer entered into a Mutual Consent, dated July 27, 1995 (the “Mutual Consent”) a copy of which is attached hereto as Exhibit B.
C. 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.
D. The Parties are willing to make certain representations and warranties to each other and to indemnify each other with respect to certain types of claims, in each case and collectively to induce the sale of the Purchased Assets by Seller and the purchase of the Purchased Assets by Buyer, all on the terms and conditions hereinafter set forth.
E. In addition, Seller and Buyer entered into that certain agreement dated February 13, 2008 (the “Introduction Agreement”) by which Seller is to pay Buyer a commission based upon revenues Seller receives pursuant to that certain License Agreement between Seller and Target Corporation (aka “Target Stores”) dated November 12, 2007, as amended August 27, 2010 (the “Target License”).
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:
1. Purchase and Sale of Assets.
(a) Upon the terms and subject to the conditions contained herein, on the Closing Date, Seller will sell, convey, transfer, assign and deliver to Buyer, and Buyer will acquire, accept, and purchase from Seller, the following assets (collectively, the “Purchased Assets”):
(i) all of Seller’s worldwide right, title and interest in and to all past and present “Cherokee” Marks, including, without limitation, those shown in Schedule 1 attached hereto and incorporated herein by this reference (but excluding any Marks that Seller has not heretofore used in connection with the manufacture, marketing and sale of school uniforms and apparel marketed specifically to the school uniform market); and any and all priority rights, applications, registrations, and renewals, including, without limitation, those listed in Schedule 1, but only insofar as they relate to the manufacture, marketing and sale of school uniforms and apparel marketed specifically to the school uniform market (collectively, the “School Uniform Apparel Marks”) and expressly excluding any use of the foregoing Cherokee Marks in connection with any uniform and apparel market other than the school uniform and school apparel market (the “Non-School Uniform Markets”), along with all goodwill associated with the School Uniform Apparel Marks; and
(ii) all of Seller’s Intellectual Property Rights associated with any of the foregoing.
(b) Notwithstanding the foregoing, Seller shall retain and does not hereby agree to sell, convey, transfer, assign or deliver to Buyer, and Buyer does not hereby acquire any interest in, (i) Seller’s rights in and to the Marks or any Intellectual Property Rights associated therewith, insofar as they relate to the Non-School Uniform Markets, or (ii) any royalties or other payments payable to Seller related to or in respect of the Marks to the extent such royalties or other payments accrued or relate to the sale of products prior to January 31, 2013, subject to Seller’s payment to Buyer of commissions due under the Introduction Agreement. Buyer acknowledges that certain products marketed and sold by Seller to Non-School Uniform Markets (e.g., polo shirts) may be similar to, or the same as, products hereafter sold by Buyer under or in connection with the School Uniform Apparel Marks. For the avoidance of doubt, medical scrubs, whether or not marketed or sold for use by nursing, medical or other school students, shall not be deemed to be “school uniforms or apparel” for purposes of this Agreement. Notwithstanding anything in this Agreement to the contrary, nothing herein shall be deemed to provide Seller with any rights beyond those acquired by Seller to the Cherokee Marks and Intellectual Property pursuant to the Original APA.
2. Definitions. For purposes of this Agreement:
(i) “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 and (b) 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.
(ii) “Marks” means all marks, 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 source indicia.
3. Closing; Purchase Price.
(a) Closing of the transactions contemplated herein (the “Closing”) shall take place at the offices of Buyer on the date of this Agreement or such other date as the parties hereto may agree in writing (the “Closing Date”).
(b) Simultaneously with the execution of this Agreement, 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 Four Million Two Hundred Fifty Thousand Dollars ($4,250,000) (the “Purchase Price”).
(c) At the Closing, Seller shall deliver such bills of sale, assignment instruments, powers of attorney or other documents or certificates as Buyer shall reasonably require in order to effect the sale and transfer of the Purchased Assets contemplated by this Agreement. After the Closing, as requested by Buyer, Seller shall deliver to Buyer such documents as Buyer shall reasonably request in order to demonstrate Seller’s sale to Buyer of the Purchased Assets including, without limitation, such documents as Buyer shall reasonably request to record any assignments and seek any registrations thereof.
4. No Assumed Liabilities. Notwithstanding anything to the contrary contained in this Agreement Buyer shall not be deemed by anything contained in this Agreement or otherwise to have assumed any claims, demands, liabilities and obligations of Seller, however and whenever arising.
5. Representations and Warranties of Seller. Seller hereby makes the following representations and warranties to Buyer, each of which shall be true and correct as of the Closing Date and shall survive the Closing:
(a) Seller is a corporation duly incorporated, validly existing and in good standing under the laws of the State of California. Seller has full corporate power and authority to own and lease its properties (including the Purchased Assets) and to conduct its business as and where such business has been and is now being conducted.
(b) Seller owns and has, and will transfer and deliver to Buyer at the Closing, good and marketable title to all of the Purchased Assets free and clear of all liens, claims, security interests, charges, rights, restrictions, options, hypothecations, or encumbrances of any kind or nature whatsoever (“Claims and Restrictions”), other than any Claims and Restrictions retained by or granted to Seller under the Original APA and Mutual Consent. Seller has complete and unrestricted power and right to sell, assign, convey and deliver the Purchased Assets to Buyer as contemplated hereby.
(c) Except for the Target License, Seller has not assigned or granted any licenses or other rights with respect to any of the Purchased Assets. Seller has not received any claims or notice that its use of the Purchased Assets or any of them infringes on any Intellectual Property Rights of any third party. Seller has received no notice that any person or entity has claimed ownership of the School Uniform Apparel Marks and, to the knowledge of Seller, no person or entity has claimed such ownership. All of Seller’s registrations and applications pending as of the Closing Date for the marks shown in Schedule 1 in Class 25 are listed in Schedule 1.
The Target License expired as of January 31, 2012; however, the parties thereto have continued to operate under the terms of the expired Target License. Other than the Target License, no licensing agreements or manufacturing relationships resulted from the Introduction Agreement.
(d) This Agreement has been duly authorized, executed and delivered by Seller and constitutes the legal, valid and binding obligation of Seller, enforceable in accordance with its terms, except as limited by laws relating to bankruptcy or insolvency or general equitable principles. Seller has the requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder.
(e) All consents, approvals, resolutions, authorizations, actions or orders, including, without limitation, those which must be obtained from governmental agencies or authorities, required of Seller for the authorization, execution and delivery by Seller of, and for the consummation by Seller of the transactions contemplated by, this Agreement have been obtained by Seller.
(f) The execution and delivery of this Agreement by Seller does not, and the consummation by Seller of the transactions contemplated by this Agreement does not, (i) conflict with or violate any judicial or administrative order, award, judgment or decree applicable to Seller, or (ii) conflict with any of the terms, conditions or provisions of the articles of incorporation or bylaws of Seller, or any mortgage, instrument, lease, agreement, contract or restriction to which Seller is a party, or by which Seller is bound or which is applicable to any of the Purchased Assets, or (iii) require the approval, consent or authorization of any federal, state or local court, or any creditor of Seller or any other person or entity, other than such approvals, consents or authorizations as have heretofore been obtained.
(g) To Seller’s knowledge there are no investigations, actions, lawsuits, claims, arbitrations or proceedings, either judicial, administrative or otherwise, pending or threatened or contemplated, against or affecting Seller with respect to the Purchased Assets.
(h) No representation or warranty of Seller in this Agreement contains any untrue statement of a material fact or misstatement of a material fact or omits to state a material fact necessary to make the statements of Seller in this Agreement not misleading.
6. Representations and Warranties of Buyer. Buyer hereby makes the following representations and warranties to Seller, none of which shall survive the Closing:
(a) Buyer is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. Buyer has full corporate power and authority to own and lease its properties and to conduct its business as and where such business has been and is now being conducted.
(b) This Agreement has been duly authorized, executed and delivered by Buyer and constitutes the legal, valid and binding obligation of Buyer, enforceable in accordance with its terms, except as limited by laws relating to bankruptcy or insolvency or general equitable principles.
Buyer has the requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder.
(c) All consents, approvals, resolutions, authorizations, actions or orders, including, without limitation, those which must be obtained from governmental agencies or authorities, required of Buyer for the authorization, execution and delivery by Buyer of, and for the consummation by Buyer of the transactions contemplated by, this Agreement have been obtained by Buyer.
(c) The execution and delivery of this Agreement by Buyer does not, and the consummation by Buyer of the transactions contemplated by this Agreement does not, (i) conflict with or violate any judicial or administrative order, award, judgment or decree applicable to Buyer, or (ii) conflict with any of the terms, conditions or provisions of the articles of incorporation or bylaws of Buyer, or any mortgage, instrument, lease, agreement, contract or restriction to which Buyer is a party, or by which Buyer is bound, or (iii) require the approval, consent or authorization of any federal, state or local court, or any creditor of Buyer or any other person or entity.
(d) No representation or warranty of Buyer in this Agreement contains any untrue statement of a material fact or misstatement of a material fact or omits to state a material fact necessary to make the statements of Buyer in this Agreement not misleading.
7. Indemnification.
(a) 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 any material misrepresentation or breach of warranty on the part of Seller under this Agreement or any breach of any covenant or agreement on the part of Seller under this Agreement.
(b) Buyer hereby agrees to indemnify each of Seller, its affiliates, equity holders, managers, partners, officers, employees, agents, representatives, successors and permitted assigns (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 any material misrepresentation or breach of warranty on the part of Buyer under this Agreement or any breach of any covenant or agreement on the part of Buyer under this Agreement.
(c) The provisions in Section 19(d) of the Original APA regarding defense of claims shall apply with respect to any claims for indemnification made pursuant to this Section 7.
8. Sale of Inventory. As of the Closing Date, Seller has in inventory fewer than 3,500 units of school uniform merchandise sold in connection with the School Uniform Apparel Marks. Seller shall have the right for a period of six (6) months following the Closing Date to continue to market, sell and distribute (but not manufacture) such merchandise, provided such sales do not hinder or interfere with the marketing of school uniform apparel by Buyer. At the end of such six (6) month period, Seller shall cease all use of the School Uniform Apparel Marks and destroy any remaining inventory or remove any School Uniform Apparel Marks on or incorporated in such inventory.
9. Mutual Consent. Notwithstanding anything to the contrary contained in the Mutual Consent, from and after the Closing Date the consent of Buyer contained in Section 1 of the Mutual Consent shall not be deemed to apply to (and Seller shall not make any application for) the registration of any Marks for use in connection with school uniforms.
10. Pending Applications and Existing Registrations.
(a) Amendment of Pending Applications/Registrations. Seller shall forthwith amend all of its trademark applications and registrations with respect to the Marks including, but not limited to, those identified in Schedule 1 to reflect that school uniforms are excluded from the identification of goods listed therein, subject however, to the following: If (i) (a) the applications and registrations cannot by law or without unreasonable cost be amended consistent with the foregoing, or (b) the trademark office of the relevant country will allow the simultaneous registration of the same Mark with, on the one hand, school uniforms and on the other hand, with one or more of medical, corporate, military, governmental, hospitality, hotel, motel, airline, clean room, safety, industrial, police and fire uniforms, and (ii) no third party owns prior rights to any Mark shown on Schedule 1 for any goods in Class 25 that cover any type of uniforms, then Buyer and Seller may promptly file new class 25 trademark applications where the goods in Buyer’s new application are apparel for school, and the goods in Seller’s new application are one or more of apparel for medical, corporate, military, governmental, hospitality, hotel, motel, airline, clean room, safety, industrial, police and fire markets, and thereafter the relevant pending application or registration will be cancelled by Seller; provided, however, that in no event shall Seller be required to file any amendment, registration, cancellation or withdrawal that would or could reasonably be expected to, diminish in any respect Seller’s Intellectual Property Rights as they relate to Non-School Uniform Markets. In the event that Seller (a) cannot contractually make the amendments as described above and the law of the relevant country will not allow the aforementioned concurrent registration, or (b) making such amendments would or could reasonably be expected to, diminish in any respect Seller’s Intellectual Property Rights as they relate to Non-School Uniform Markets, then this Agreement shall be deemed to include a grant by Seller to Buyer of a royalty free, fully paid-up, fully transferable, exclusive license to use the School Uniform Apparel Marks consistent with this Agreement (such license expressly excluding use of the Marks with respect to Non-School Uniform Markets), and such license including minimum quality control by Seller such that it does and will not interfere in any way with Buyer’s business . Subject to the foregoing, Buyer and Seller shall cooperate to amend any applications and registrations to reflect the intent of this Agreement.
(b) Seller Not to Use School Marks. Seller shall never use, register, or apply for registration of the School Uniform Apparel Marks, and Seller shall not assert its rights against Buyer for its use of the School Uniform Apparel Marks. Other than the School Uniform Apparel Mark included in the Purchased Assets, Seller has not used, and in the future will not use, and “Cherokee” Marks in connection with the manufacture, marketing and sale of school uniforms and apparl marketed specifically to the school uniform market. The foregoing is not intended to, and shall not, restrict Seller’s rights with respect to the Marks in connection with Non-School Uniform Markets.
(c) Future Applications of Seller. All future applications for registration by Seller of any Mark shown on Schedule 1 for any goods in Class 25 that cover any type of uniforms will clearly reflect that school uniform apparel is excluded from the identification of goods listed therein. By way of illustration, an application or registration may not simply recite “uniforms,” but an application or registration reciting “uniform apparel to medical, corporate, military, governmental, hospitality, hotel, motel, airline, clean room, safety, industrial, police and fire markets,” would be permissible. An application reciting “uniforms excluding school uniforms” would also be permissible.
d. Enforcement of Rights. If Buyer seeks to enforce its rights in the registrations listed in Schedule 1 which cover the School Uniform Apparel Marks and these registrations cannot be amended consistent with the foregoing, then Seller shall provide Buyer with whatever rights Buyer reasonably needs to enforce its rights in the School Uniform Apparel Marks for the duration of such enforcement effort, but only insofar as doing so does not diminish Seller’s Intellectual Property Rights as they relate to Non-School Uniform Markets. Seller shall cooperate with Buyer in Buyer’s enforcement of its rights in the School Uniform Apparel Marks, and Buyer shall reimburse Seller for any out-of-pocket costs incurred by Seller in connection therewith.
11. Miscellaneous.
a. Original APA. The provisions of Section 21 of the Original APA are hereby made a part of this Agreement by this reference; provided, however, that for these purposes, references therein to (i) “Agreement” shall be deemed to refer to this Agreement, (ii) “Seller” shall be deemed to refer to Buyer hereunder, (iii) “Buyer” shall be deemed to refer to Seller hereunder, (iv) “Acquired Assets” shall be deemed to refer to the Purchased Assets, and (v) addresses for purposes of the notice provisions therein shall be deemed to refer to the current addresses and contacts for each of Buyer and Seller as set forth on the signature page hereof.
b. Introduction Agreement. Seller shall retain any royalty payments received pursuant to the Target License, and Seller shall pay Buyer any commissions due under the Introduction Agreement including, without limitation, with respect to such sales.
c. Introduction Agreement. The Introduction Agreement is terminated as of the Closing Date.
d. Physical or Electronic Files. Upon the reasonable request of Buyer, in order that Buyer may enforce its rights in the Purchased Assets, Seller shall provide Buyer with a copy of any of the physical or electronic files related to the School Uniform Apparel Marks in its possession, custody or control.
[Signature Page follows]
IN WITNESS WHEREOF, the undersigned have caused their duly authorized officers to execute this Agreement as of the date first set forth above.
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“Buyer” | |||||
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CHEROKEE INC., a Delaware corporation | |||||
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By: |
/s/ Henry Stupp | ||||
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Name: |
Henry Stupp | |||
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Title: |
CEO | |||
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“Seller” | |||||
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STRATEGIC PARTNERS, INC., a California corporation | |||||
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By: |
/s/ Robert Pierpoint | ||||
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Name: |
Robert Pierpoint | |||
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Title: |
COO/CFO | |||
Address for Notices:
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If to Buyer: |
If to Seller: |
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Cherokee Inc. 5990 Sepulveda Blvd., Suite 600 Sherman Oaks, CA 91411 Attn: Howard Siegel, President and COO Fax: (818) 908-9191 |
Strategic Partners, Inc. 9800 DeSoto Avenue Chatsworth, CA 91311 Attn: Bob Pierpoint Fax: (818) 686-1575 |
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with a copy to: |
with a copy to: |
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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 |
Michelman & Robinson LLP 15760 Ventura Blvd., 5th Floor Encino, CA 91436 Attention: Sanford L. Michelman, Esq. Fax: (818) 783-5507 |
Schedules and Exhibits
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Schedule 1 |
Trademarks |
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Exhibit A |
Original APA |
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Exhibit B |
Mutual Consent |
EXHIBIT 10.1
AMENDMENT NO. 2 TO
RESTATED LICENSE AGREEMENT
THIS AMENDMENT NO. 2 to the Restated License Agreement (this “Amendment”), is dated January 29, 2013 between Cherokee Inc., (“Licensor”), and TARGET GENERAL MERCHANDISE, INC. (“TGMI”), with reference to the following facts:
WHEREAS, the Parties entered into a Restated License Agreement, dated as of February 1, 2008, and amended as of December 1, 2011 (as amended, the “Restated Agreement”); and
WHEREAS, the right to use the Trademark on children’s school uniforms (the “School Uniform Right”) is owned by Strategic Partners, a third party entity with an address at 9800 De Soto Avenue, Chatsworth, CA (“SP”).
WHEREAS, Licensor desires to obtain the School Uniform Right from SP, and the Parties desire, contingent upon Licensor’s ownership of the School Uniform Right, to amend the Restated Agreement to include children’s school uniforms on the terms and conditions contained herein.
NOW THEREFORE, the Parties hereto agree as follows:
1. Capitalized terms used and not defined herein shall have the same meaning as in the Restated Agreement.
2. This Amendment No. 2 shall only take effect if and when Licensor owns the School Uniform Right. Licensor shall provide TGMI with written notice (e-mail acceptable) of the date upon which it obtains such ownership, free and clear of any claim of SP with respect thereto (the “Amendment Effective Date”), and this Amendment No. 2 shall automatically go into effect as of such date.
3. Section b.(i) of the Restated Agreement is amended as of the Amendment Effective Date by removing “school uniforms” from the excluded categories listed in the parenthetical therein and adding it to the included categories to read as follows:
“b.(i) Men’s, Women’s and Children’s Apparel (including, but not limited to intimate apparel, foundations, sleepwear and children’s school uniforms, but excluding industrial, hospital and nurses uniforms). Except as otherwise expressly set forth herein, children’s school uniforms shall be included in the definition of Merchandise.”
3. Section 3 of the Restated Agreement is amended as of the Amendment Effective Date by adding a new subsection d. as follows:
“3.d. Uniform Royalty, Minimum and Term. Commencing as of the Amendment Effective Date and continuing through January 31, 2016, (the “Uniform Term”), Licensee shall pay to Licensor as a royalty on the sale of children’s school uniforms an amount equal to the greater of (i) two percent (2%) of Licensee’s Net Sales of children’s school uniforms (the “Uniform Royalty”) or (ii) $800,000.00 per Fiscal year (“Minimum Guaranteed Uniform Royalty Per Fiscal Year”).
In the event the Uniform Royalties actually earned for a Fiscal Year during the Uniform Term are less than the Minimum Guaranteed Uniform Royalty, Licensee shall pay Licensor the shortfall within thirty (30) days after the end of such Fiscal Year. Provided that Licensee has had sufficient Net Sales to meet the Minimum Guaranteed Uniform Royalty Per Fiscal Year for the Fiscal Year ending January 31, 2016, the license for children’s school uniforms set forth herein will automatically renew for successive two (2) Fiscal Year terms on the same terms unless Licensee provides Licensor with notice on or before January 31, 2015 that it does not wish to renew the children’s school uniform portion of this Restated Agreement. In the event Licensee does not have sufficient Net Sales to meet the Minimum Guaranteed Uniform Royalty Per Fiscal Year ending January 31, 2016, the parties may, in each party’s sole discretion, mutually agree to renew the license for children’s school uniforms on such terms as the parties may agree upon.”
4. This Amendment No. 2 may be executed by facsimile and in one or more counterparts, all of which shall be considered one and the same agreement.by adding a new
5. Except as expressly amended or set forth herein, all of the terms and conditions contained in the Restated Agreement shall remain in full force and effect. References herein or in the Restated Agreement to “this Agreement” shall, after the Amendment Effective Date, be deemed to refer to the Restated Agreement as amended by this Amendment No. 2.
IN WITNESS WHEREOF, each of the parties has executed this Amendment No. 2 on the date first written above.
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Target General Merchandise, Inc. |
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Cherokee Inc. | ||||
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By: |
/s/ Patricia M.Adams |
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By: |
/s/ Henry Stupp | |
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Patricia M. Adams |
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Henry Stupp | |||
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Senior Vice President |
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Chief Executive Officer | |||
EXHIBIT 10.2
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) dated as of January 31, 2013, is by and between Cherokee Inc., a Delaware corporation (the “Borrower”), and JP Morgan Chase Bank N.A. (the “Lender”).
In consideration of the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:
W I T N E S S E T H:
WHEREAS, the Borrower and the Lender are parties to that certain Credit Agreement dated as of September 4, 2012, which provides for a term loan in the form of “Facility B” under the Credit Agreement;
WHEREAS, the Borrower has heretofore issued in favor of Lender that certain Term Note dated as of September 4, 2012 (the “Term Note”) in connection with Facility B under the Credit Agreement in respect of which $12,350,000 is currently outstanding as of the date hereof;
WHEREAS, the Borrower has requested, and the Lender has agreed, for the aggregate amount of borrowings under Facility B to be increased to $16,600,000 in connection with a proposed acquisition of additional assets by the Borrower; and
WHEREAS, the parties desire to amend the Credit Agreement to provide for the increased amount of Facility B and to concurrently herewith amend the Term Note to reflect the same.
NOW, THEREFORE, in consideration of the agreements contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Defined Terms. Capitalized terms used, but not defined herein shall have the meanings assigned to them in the Credit Agreement, as amended by this Amendment.
ARTICLE II
AMENDMENTS AND CONDITIONS
SECTION 2.1 Amendments.
(a) Facility B. The reference in Section 1.3 of the Credit Agreement to “$13,000,000” shall be amended to read “$16,600,000.”
(b) Acquisition. The language in paragraph (E) of Section 3.2 in the Credit Agreement shall be amended in its entirety to read as follows:
“Acquisition. In the case of Facility B, the transactions contemplated by each of (1) the Acquisition Agreement and (2) the Asset Purchase Agreement entered into in January, 2013 between the Borrower and Strategic Partners, Inc., a California corporation, 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).”
SECTION 2.2 Upfront Fee. In connection with the upfront fee of 0.50% payable under Section 1.3 of the Credit Agreement, an upfront fee of $21,250 shall be payable upon execution and delivery of this Amendment in respect of the increased amount of $4,250,000 under the Term Note.
SECTION 2.3 Conditions. This Amendment shall become effective upon the first date on which each of the following conditions has been satisfied:
(a) The Lender shall have received this Amendment and the amendment to the Term Note, each executed and delivered by the authorized officers of the Borrower.
(b) The Lender shall have received a certificate dated as of the date of this Amendment from an authorized officer of the Borrower in form and substance satisfactory to the Lender certifying as to the matters set forth in paragraphs (A) and (B) of Section 3.2 of the Credit Agreement.
(c) The Lender shall have received evidence satisfactory to the Lender that Amendment No. 2 to the Restated License Agreement between the Borrower and Target General Merchandise Inc. has been executed and delivered by the parties thereto in the form heretofore provided to Lender.
ARTICLE III
MISCELLANEOUS PROVISIONS
SECTION 3.1 Amended Credit Agreement. This Amendment shall be deemed to be an amendment to the Credit Agreement, and the Credit Agreement, as amended hereby, shall continue in full force and effect. All references to the Credit Agreement in any other document, instrument, agreement or writing shall hereafter be deemed to refer to the Credit Agreement as amended hereby.
This Amendment shall constitute a “Related Document” for all purposes under the Credit Agreement.
SECTION 3.2 Severability. Any provision of this Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Amendment or affecting the validity or enforceability of such provision in any other jurisdiction.
SECTION 3.3 Headings. The various headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of this Amendment or any provisions hereof.
SECTION 3.4 Execution in Counterparts. This Amendment may be executed by the parties hereto in several counterparts, each of which shall be an original and all of which shall constitute together but one and the same agreement.
SECTION 3.5 Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA.
SECTION 3.6 Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective successors and assigns.
SECTION 3.7 Each guarantor acknowledging this Amendment below hereby consents to the modifications to the Credit Agreement contemplated by this Amendment and agrees that its continuing guaranty in favor of the Lender provided in connection with the Credit Agreement is, and shall remain, in full force and effect after giving effect to this Amendment.
[Signature page follows]
IN WITNESS WHEREOF, the Borrower and the Lender have executed this Amendment on the date first above written.
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ACKNOWLEDGED BY THE GUARANTORS |
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SPELL C.LLC |
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CHEROKEE BRANDS LLC | ||||||
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Howard Siegel |
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Howard Siegel | ||
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COO |
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COO | ||
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Mark DiSiena |
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Mark DiSiena | ||
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CFO |
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CFO | ||
EXHIBIT 10.3
FIRST AMENDMENT TO TERM NOTE
THIS FIRST AMENDMENT TO TERM NOTE (this “Amendment”) dated as of January 31, 2013, is by and between Cherokee Inc., a Delaware corporation (the “Borrower”), and JP Morgan Chase Bank N.A. (the “Lender”).
In consideration of the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:
W I T N E S S E T H:
WHEREAS, the Borrower has heretofore issued in favor of Lender that certain Term Note dated as of September 4, 2012 (the “Term Note”) in connection with the Credit Agreement entered into between the Borrower and the Lender as of September 4, 2012;
WHEREAS, the Borrower has requested, and the Lender has agreed, for the aggregate amount that may be borrowed under the Term Note to be increased to $16,600,000 and have concurrently herewith entered into an amendment to the Credit Agreement to provide for such increase; and
WHEREAS, the parties desire to amend the Term Note to provide that the borrowed amount under the Term Loan has been increased.
NOW, THEREFORE, in consideration of the agreements contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Defined Terms. Capitalized terms used, but not defined herein shall have the meanings assigned to them in the Term Note, as amended by this Amendment.
ARTICLE II
AMENDMENTS
SECTION 2.1. Principal amount. Each reference in the Term Note to the principal amount of “$13,000,000” shall be amended to read “$16,600,000.”
SECTION 2.2. The section in the Term Note captioned “Principal Payments” shall be amended and restated in its entirety to read as follows:
“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 (A) $650,000 for the payment dates up to and including February 28, 2013 and (B) $886,111.10 thereafter.”
ARTICLE III
MISCELLANEOUS PROVISIONS
SECTION 3.1 Ratification of and References to the Promissory Note. This Amendment shall be deemed to be an amendment to the Term Note, and the Term Note, as amended hereby, shall continue in full force and effect and is hereby ratified, reaffirmed, approved and confirmed in each and every respect. All references to the Term Note in any other document, instrument, agreement or writing shall hereafter be deemed to refer to the Term Note as amended hereby.
SECTION 3.2 Severability. Any provision of this Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Amendment or affecting the validity or enforceability of such provision in any other jurisdiction.
SECTION 3.3 Headings. The various headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of this Amendment or any provisions hereof.
SECTION 3.4 Execution in Counterparts. This Amendment may be executed by the parties hereto in several counterparts, each of which shall be an original and all of which shall constitute together but one and the same agreement.
SECTION 3.5 Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA.
SECTION 3.6 Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective successors and assigns.
[Signature page follows]
EXHIBIT 99.1
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Cherokee Inc. |
Addo Communications, Inc. |
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5990 Sepulveda Blvd., Suite 600 |
12121 Wilshire Blvd., Suite 775 |
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Sherman Oaks, CA 91411 |
Los Angeles, CA 90025 |
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(818) 908-9868 |
(310) 829-5400 |
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Contact: Mark DiSiena, Chief Financial Officer |
Contact: Patricia Nir/Kimberly Esterkin |
For Immediate Release:
Cherokee Announces Developments with Two Key Retail Partners
· Expansion at Target with the Re-Acquisition of the Cherokee School Uniform Category
· Extension of Cherokee Brand License Agreement with Comercial Mexicana
SHERMAN OAKS, CA (February 4, 2013) — Cherokee Inc. (NASDAQ: CHKE), a leading innovator and global marketer of style-focused lifestyle brands, announced today that effective January 29, 2013 the Company has re-acquired the Cherokee School Uniform category from Strategic Partners.
“The acquisition of the Cherokee School Uniform rights from Strategic Partners allows us to bring a strategic business back within our control,” said Henry Stupp, Chief Executive Officer of Cherokee Inc. “This is another important milestone for our Company that will expand our overall product offering. Additionally, acquiring the Cherokee School Uniform category will further strengthen our relationship with Target through a multi-year license term, which includes separate minimum guarantees and additional royalties. We expect this transaction will be immediately accretive for shareholders, and we will work closely with Target to expand our product offering for Cherokee families.”
Cherokee Inc. also announced today the recent extension of its Cherokee brand license agreement with Comercial Mexicana. The license agreement has been extended an additional six years through December 31, 2019. As partners for over six years, Cherokee and Comercial Mexicana have enjoyed mutual success and both parties look forward to continuing to build and grow the Cherokee brand throughout Mexico’s retail market.
“Comercial Mexicana has been an exceptional partner of the Cherokee brand, and we are very pleased to extend our licensing relationship,” Stupp commented. “Comercial Mexicana is a strong supporter of the Cherokee brand and vision. We look forward to continuing to roll-out our newly re-branded Comercial Mexicana locations throughout the year as well as building upon the strong Cherokee presence throughout Mexico.”
About Cherokee Inc.
Cherokee Inc. is a global marketer and manager of a portfolio of Fashion and Lifestyle brands including Cherokee®, Carole Little®, Liz Lange® and Sideout®, 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).
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 potential future business development) 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, Liz Lange, Completely Me, Sideout and Carole Little 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.