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