Retail Sales Contract - Sample Library

Exhibit 10.11

*** CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT (INDICATED BY ASTERISKS) HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT UNDER 17 C.F.R. SECTION 200.80(B)(4), 200.83 AND 230.406.

Cover Agreement to
Cherokee Inc.—International Retail License Agreement

        This Cover Agreement relates to and is part of the Cherokee International Retail License Agreement to which it is attached. To the extent there is a conflict between any of the terms of this Cover Agreement and the License Agreement, the terms of this Cover Agreement shall supersede and govern over the License Agreement. The paragraph numbers relate to the paragraphs of the License Agreement. This Cover Agreement and License Agreement shall supercede the agreement between Licensee and Licensor dated August 1, 2001 (the "2001 Agreement"). This Cover Agreement and License Agreement shall have retroactive effect from August 1, 2001, and the 2001 Agreement is terminated and of no further force and effect.

• The Licensee is Tesco Stores Limited, a United Kingdom corporation, that is unrelated to or controlled in any manner by the Licensor, except as set forth in this Agreement.

  The date of the License Agreement is March 10, 2003.

        1.1   The Companies in the Territory are Tesco Stores Limited, Tesco Home Shopping Limited, Tesco.com and also includes other stores included in the Tesco PLC group provided Licensee provides Licensor with a listing of the said companies.

        Notwithstanding the foregoing, Licensee shall refrain from meeting any orders for delivery of Merchandise to customers outside the Territory or from supplying others in circumstances where Licensee believes or has reason to believe the intended ultimate destination of the Merchandise to be another country outside the Territory save that where an unsolicited order is received by Licensee in the Territory and where that Territory is a member state of the European Union, and the order is placed outside the Territory by a customer located in another member state of the European Union, Licensee shall not be precluded from meeting that order. Nothing in this clause shall be construed as permitting Licensee to conduct an active marketing policy in respect of licensed Merchandise outside the Territory.

        1.2   The exclusive categories of Merchandise are:

• Womens:     Casual Denim & Sportswear; Dresses; Activewear; Swimwear; Skiwear; Golfwear; Tenniswear; Bodywear; Intimate Apparel (sleepwear, robes, loungewear, daywear, panties, & foundations).

  Juniors:     Casual Denim & Sportswear; Dresses; Activewear; Swimwear; Skiwear; Golfwear; Tenniswear; Bodywear; Intimate Apparel (sleepwear, robes, loungewear, daywear, panties, & foundations).

  Fashion Accessories:     Handbags; *Small Leather Goods; Belts; Neckwear; Hair Goods; *Sunglasses; *Watches; Hats; Rainwear; Cold Weather; Gloves; Hosiery; Slippers.

*** Certain confidential information in this document has been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission.

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• Mens:     Casual Denim & Sportswear; Swimwear; Activewear; Skiwear; Golfwear; Tenniswear; Furnishings (hosiery, underwear; sleepwear, robes) Accessories.

  Young Mens:     Casual Denim & Sportswear; Swimwear; Activewear; Skiwear; Golfwear; Tenniswear; Furnishings; Accessories.

  Girls 0-14:     Casual & Denim Sportswear; Dresses; Activewear; Swimwear; Furnishings; Underwear; Fashion Accessories (cold weather accessories, slippers, accessories, handbags, backpacks, hosiery)

  Boys 0-20:     Casual & Denim Sportswear; Activewear; Swimwear; Furnishings (sleepwear, cold weather accessories, slippers, hosiery); Underwear.

  Newborn & Layette:     Boy and Girl

  Footwear:     Womens; Mens; Boys; Girls

  *Luggage and *Backpacks

  ---

  *

  Trademark applications pending in Ireland

        And shall include the full line of products covered by any and all of the present and future applications and registrations for the Trademark in the Territory and to which products may be added from time to time with the mutual agreement of the parties.

Licensor shall maintain the validity of the Trademark registrations in the Territory for the categories of Merchandise during the Term of this Agreement.

        1.3   The Territory is United Kingdom and Ireland.

        Notwithstanding the foregoing, subject to availability by Licensor and the existing rights given to Carrefour (said Carrefour rights shall supercede this provision), Licensee shall have:

• • 1.) a right of first refusal to add a country to the Territory during the Term of this Agreement provided (i) Licensee owns and has existing stores in the said country, (ii) the terms to add the said country shall be at least equal to the terms agreed to between Licensor and a third party and (iii) if Licensor negotiates an agreement with a third party, then, prior to entering into the agreement with the said third party, Licensor shall give written notice to Licensee (including the terms of the agreement with the third party) and Licensee shall have ten (10) days from receipt of such offer to accept or decline the said terms and amend the Agreement in writing accordingly or,

    2.) in the event that Licensee would like to add a country stated below to the Territory and Licensor is not in negotiations with a third party for the said country(s), then Licensee shall have a right to add the country(s) stated below to the Territory provided (i) Licensee owns and has existing stores in the said country(s) and (ii) the Annual Guaranteed Minimum Net Retail Sales will increase by the amount(s) stated below per Contract Year and the respective Annual Guaranteed Minimum Royalty(s) will increase accordingly and (iii) Licensee gives written notice to Licensor of its said election to do so.

*** Certain confidential information in this document has been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission.

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        2.1   The term of the Agreement will be three (3) years, and the Contract Years will be:

• • Contract Year 1 August 1, 2001 - January 31, 2003
    Contract Year 2 February 1, 2003 - January 31, 2004
    Contract Year 3 February 1, 2004 - January 31, 2005

Provided Licensee is in compliance with all the terms and conditions of this Agreement and Licensee's actual Net Retail Sales are at least US$ *** for Contract Year 3, this Agreement will automatically renew for successive term(s) of three (3) Contract Years (thirty six (36) months).

Each Contract Year of the renewal term(s) shall be comprised of a twelve (12) month period commencing February 1 and ending January 31.

        Notwithstanding the foregoing, Licensee may terminate this Agreement at the end of Contract Year 3 if it gives Licensor written notice of its intent to do so at least twelve (12) months prior to the end of Contract Year 3 and then Licensee may terminate this Agreement at the end of each subsequent three (3) year term if it gives Licensor written notice of its intent to do so at least twelve (12) months prior to the end of the relevant three (3) year term.

        3.1   The Initial License Fee is US$ *** payable upon the execution of this Agreement. This fee shall act as a deposit against the first Contract Year's Guaranteed Annual Minimum Royalties.

        3.2/3.3 Each contract year Licensee will pay Licensor as a royalty (the Royalty) an amount equal to the greater of (i) *** percent (***%) of its Net Sales of Merchandise during such Contract Year or (ii) *** percent (***%) of its Minimum Net Sales during such Contract Year. Notwithstanding the foregoing, if in any Contract Year Licensee's Net Sales of Merchandise are:

greater than US$ *** and less than US$ ***, the Royalty with respect to such sales greater than US$ *** and less than US$ *** shall be *** percent (***%);

and if in any Contract Year Licensee's Net Sales of Merchandise are US$ *** or greater, the Royalty with respect to such sales US$ *** or greater shall be *** percent (***%).

        Notwithstanding the foregoing, for each renewal term, the Net Sales (as applied to either Net Sales of Merchandise or Minimum Net Sales) corresponding to the Royalty Percentages herein referred to as "Net Sales Corresponding To The Royalty Percentages" will be adjusted in accordance with increases in the cost of living. As used in this paragraph, (1) "Base Month" means the calendar month prior to the first month of the current Term; (2) "Price Index" means the Consumer Price Index for Inflation produced in UK Retail Price index, excluding mortgage interest as published by the National Statistics Office, or

*** Certain confidential information in this document has been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission.

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any successor index or substitute therefor reasonably selected by Licensor; (3) "Adjustment Date" means the first day of the first month of the subsequent term; (4) "Adjustment Factor" means a fraction, the numerator of which shall be the Price Index for the month prior to the month in which the applicable Adjustment Date occurs and the denominator of which shall be the Price Index for the Base Month. On each Adjustment Date, the Net Sales Corresponding To The Royalty Percentages shall be adjusted to amounts equal to the then Net Sales Corresponding To The Royalty Percentages multiplied by the Adjustment Factor. In no event, however, shall the Net Sales Corresponding To The Royalty Percentages be less than the current Term. Such new Net Sales Corresponding To The Royalty Percentages shall be used to calculate the Royalties from such Adjustment Date to the next Adjustment Date.

         By way of example:

• Current Term
  0 - <10 ***%
  10 - <25 ***%
  25 - <50 ***%

  Month prior to applicable Adjustment Date ***
  Base Month ***
  Adjustment Factor ***%

  Subsequent Term
  0 - <10.5 ***%
  10.5 - <26.25 ***%
  26.25 - <52.5 ***%

  However, the Annual Minimum Net Retail Sales and the Annual Guaranteed Minimum Royalty for each Contract Year shall be as follows:

        If Licensee enters into the renewal Term(s), then for each Contract Year of the subsequent Term(s), the Annual Minimum Net Retail Sales will be US$ *** and the Annual Guaranteed Minimum Royalty will be US$ ***.

        Twenty days after the end of each three month period during each Year, Licensee will pay Licensor, the amount, if any, that the pro-rated minimum royalty exceeds the royalty based on Net Sales for such period.

        Notwithstanding the foregoing, the Minimum Net Sales figures are provided solely for the purposes of calculating the Annual Guaranteed Minimum Royalty. Licensee is not obligated to meet the Minimum Net Sales in any given Contract Year, provided, however, that Licensee must make its Royalty payment for that year which Royalty shall not be less than the Annual Guaranteed Minimum Royalty for that Contract Year.

        Notwithstanding the foregoing, for Contract Year 1 only, Royalty payments shall be due May 20, 2002; August 20, 2002; November 20, 2002 and February 20, 2003.

*** Certain confidential information in this document has been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission.

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        Notwithstanding the foregoing, if Licensor agrees in writing that Licensee has over paid Licensor a Royalty, then Licensee shall have the right to deduct the said overpayment from the future Royalty payment(s).

        The following Section 5.2 is deleted in its entirety and replaced by the following.

        5.2     Quarterly Reports.     Every Royalty payment pursuant to Section 4.1 shall be accompanied by a report (individually, the "Quarterly Report" and collectively, the "Quarterly Reports") as to:

• a.

  The quantity, description and net sales of all Merchandise sold by Licensee during the quarter to which such Royalty relates;
  
  

  b.

  Any other information that may be required under any other provision of this Agreement or that may, from time to time, be reasonably required by Licensor.

        The following Section 5.3 is deleted in its entirety and replaced by the following.

        5.3.     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. 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 *** percent (***%) per month, or if such rate exceeds the maximum rate allowed by law, at such maximum legal rate. In addition, if the audit discloses that the Royalty payments actually due exceed the Royalty payments paid by an amount greater than *** percent (***%) of the Royalty payments paid, all reasonable costs of the audit performed by Licensor shall be paid by Licensee. Said auditors shall be instructed by Licensor to treat the information obtained in confidence.

        The following Section 6.1 is deleted in its entirety and replaced by the following.

        6.1.     Maintenance of the Trademark.     The Licensor and Licensee mutually recognize the value of the Trademark in promoting the marketing of the Merchandise. To this end the Merchandise and any expression by Licensee, directly or indirectly, which by its nature conveys to others the existence of a relationship between Licensee and the Trademark or the Merchandise (including, without limitation, all packaging, labeling, fixturing, advertising, point of sale and sales promotion materials and product literature (any such expression is herein referred to as "Trademark Use Materials") (i) shall be of good quality and of such style, appearance, distinctiveness and quality (which shall comport with the Cherokee quality assurance manual dated July, 2000 or as reasonably revised by Licensor) as to protect and enhance the prestige of Licensor and of the Trademark and the goodwill pertaining thereto; (ii) shall in no manner adversely affect any rights of ownership of Licensor in the Trademark and shall in no manner derogate or detract from the repute of Licensor or the Trademark; (iii) shall in all respects (including, without limitation, the manufacture, sale, marketing and advertising) be in accordance with all of the terms and provisions of this Agreement, with all applicable laws, rules and regulations and with any approval decision made by Licensor; and (iv) shall be subject to the prior written approval by Licensor in accordance with all of the terms and provisions of this Agreement. In addition, Licensee shall supply Licensor or a designee of Licensor with samples of all packaging, labels and related materials featuring the Trademark. Upon receipt of such packaging, labels and related materials, Licensor shall have ten (10)

*** Certain confidential information in this document has been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission.

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business days in which to review and approve. If Licensor has not indicated approval in writing of any such materials with ten (10) business days, then such materials shall be deemed to have been approved.

        The following Section 6.4.2 is deleted in its entirety and replaced by the following.

        6.4.2     Pre-Production Sketches and Material Swatches.     In order to maintain the quality of the Trademark the Licensor requires the inspection of pre production sketches and material swatches prior to manufacturing any Merchandise or Trademark Use Materials Licensee shall submit to a representative of Licensor, who shall be designated by Licensor from time to time (the "Representative"), for the Representative's approval, sketches with appropriate material swatches of each planned item of Merchandise and Trademark Use Materials (hereafter referred to as "Pre-Production Information") using EXHIBIT B or in a format agreed to between Licensee and Licensor upon the execution of this Agreement. Pre-Production Information for each planned item of Merchandise and Trademark Use Materials shall be submitted by Licensee to the Representative as soon as practical, but no later than seven (7) days after the issuance of the purchase order. Licensor shall have seven (7) days to approve or disapprove any submission by Licensee. If Licensor disapproves a submission by Licensee, Licensee shall be entitled to resubmit a corrected Pre-Production Information Sheet. If the corrected Pre-Production Information sheet is not resubmitted within a reasonable time (such reasonable time to be determined under the circumstances by the Representative), or if the corrected Pre-Production Information sheet is disapproved or deemed disapproved by Licensor as hereinabove provided, neither the style represented by the disapproved Pre-Production Information sheet nor the corrected Pre-Production Information sheet shall be marketed or displayed to customers.

        The following Section 6.4.3 is deleted in its entirety and replaced by the following.

        6.4.3     Brand Manager of Licensee.     In order to assist the Licensee in fully developing the Trademark as the essential tool in marketing the branded merchandise, Licensee shall utilize a full time employee to act as a brand manager (the "Brand Manager") to perform various duties as designated by Licensee. Brand Manager shall be a person who is knowledgeable and experienced in the apparel, footwear, accessory business, and other related businesses, and shall be assigned to work with Licensor and Licensor-related matters. If any problem including unsatisfactory fulfillment of the duties of the Brand Manager happens, Licensor shall have the right to discuss the problem with the superior manager of Licensee supervising such Brand Manager to find the solution including replacement of such Brand Manager and Licensee shall respect the opinion of Licensor in good faith if it is reasonable.

        The following Section 6.5 is deleted in its entirety and replaced by the following.

        6.5.     Production Samples.     In order to assist the Licensee in fully developing the Trademark as the essential tool in marketing the branded merchandise, prior to showing, selling or displaying any Merchandise or Trademark Use Materials to any customer of Licensee, Licensee shall submit to a representative of Licensor, who shall be designated by Licensor from time to time (the "Representative"), for the Representative's approval, a representation of production samples of each planned item of Merchandise and Trademark Use Materials. Production samples of the representation of planned items of Merchandise and Trademark Use Materials shall be submitted by Licensee to the Representative as soon as practical. Licensor shall have seven (7) days to approve or disapprove any submission by Licensee. If Licensor disapproves a Production sample submitted by Licensee, Licensee shall be entitled to resubmit a corrected Production sample. If the corrected production sample is not resubmitted within a reasonable time (such reasonable time to be determined under the circumstances by the Representative), or if the corrected production sample is disapproved or deemed disapproved by Licensor as hereinabove provided, neither the style represented by the disapproved production sample nor the corrected production sample shall be marketed or displayed to customers.

*** Certain confidential information in this document has been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission.

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        The following Section 6.6 is deleted in its entirety and replaced by the following.

        6.6     Marketing and Advertising Materials.     As the value of the Trademark lies in promoting the quality and image of the Merchandise in the Territory of the Licensee, prior to advertising or marketing any Merchandise and Trademark Use Materials, Licensee shall submit a representation of seasonal advertising plans, layouts, concepts (herein referred to as "Advertising Materials") to Licensor. Licensor shall have seven (7) days to approve or disapprove any submission by Licensee. If Licensor disapproves Advertising Materials submitted by Licensee, Licensee shall be entitled to resubmit corrected Advertising Materials. If the corrected Advertising Materials are not resubmitted within a reasonable time (such reasonable time to be determined under the circumstances by the Representative), or if the corrected Advertising Materials are disapproved or deemed disapproved by Licensor as herein provided, neither the Advertised Materials nor the corrected Advertising Materials shall be displayed to customers.

        The following Section 7.2.1 is deleted in its entirety and replaced by the following.

        7.2.1.     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 unless otherwise agreed to in writing by Licensor of which said consent will not be unreasonably withheld.

        The following Section 7.2.3 is deleted in its entirety and replaced by the following.

        7.2.3.     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. Licensor shall reimburse Licensee for any expenses, pre approved in writing by Licensor, in conjunction with the said request. If Licensor does not approve the said reimbursement, then Licensee shall use its best efforts to cooperate with Licensor upon request to facilitate Licensors said request.

        The following Section 7.2.4 is deleted in its entirety and replaced by the following.

        7.2.4.     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 in the Companies. Licensee shall inform Licensor of complaints that might affect the goodwill associated with the Trademark or the reputation of Licensor and also of all complaints that might result in legal action between Licensor and any third party, and shall cooperate with Licensor upon request to achieve as good a reputation and press for the Trademark as possible. Licensor shall reimburse Licensee for any expenses, pre approved in writing by Licensor, in conjunction with the said request for cooperation. If Licensor does not approve the said reimbursement, then Licensee shall use its best efforts to cooperate with Licensor upon request to achieve as good a reputation and press for the Trademark as possible.

        The following Section 7.2.5 is deleted in its entirety and replaced by the following.

        7.2.5.     Indemnification of Licensee.     Licensor shall defend, indemnify and hold Licensee and its affiliates, directors, officers, employees, and agents (collectively, the "Licensee Parties") harmless of, from and against any damages which may be sustained or suffered by or secured against Licensee Parties based upon as a result of any material breach of this Agreement by the Licensor or arising out of any

*** Certain confidential information in this document has been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission.

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actual or alleged Trademark infringement arising solely out of the use of Licensee Parties of the Trademark as authorized in this Agreement, save for where such claims is the result of negligence or default on the part of Licensee, provided (i) that prompt written notice is given to Licensor of any such actual or threatened claims or suits; (ii) that Licensor shall have the option to exclusively undertake and conduct the defense and/or settlement of any such claims or suits; (iii) that Licensee Parties act, with the prior consent of Licensor, to mitigate any damages; and (iv) that no settlement or attempt at settlement of any such claims or suits is made without the prior written consent of Licensor. Licensor to provide written reply within 10 working days of notification by Licensee.

        The following Section 8.2 is deleted in its entirety and replaced by the following.

        8.2.     Remedies.     If Licensee has not cured any such breach or nonperformance within (i) fifteen (15) days after Licensee receives written notice of such breach or nonperformance from Licensor for financial matters or (ii) thirty (30) days after Licensee receives written notice of such breach or nonperformance from Licensor for non financial matters, in addition to all of the 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.

        The following Section 8.3 is deleted in its entirety and replaced by the following.

        8.3.     Effect of Expiration or Termination.     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, the Companies or otherwise save as provide under Clause 2.3. 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 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. Licensee is obligated to pay the pro-rated amount of the Annual Minimum Royalty to the date of termination and all the royalties due on Net Sales from liquidation of goods during the Disposal Period.

        The following Section 10.1 is deleted in its entirety and replaced by the following.

        10.1.     Indemnification of Licensor.     Licensee shall indemnify and hold Licensor and its affiliates, directors, officers, employees and agents (collectively, the "Licensor Parties") 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 any of the Licensor Parties involving the design, manufacture, packaging, distribution, promotion, sale, marketing, advertising or other use of the Trademark, the Merchandise or the Trademark Use Materials save for where such claims is the result of negligence or default on the part of Licensor.

        The following Section 10.2 is deleted in its entirety and replaced by the following.

        10.2.     Insurance.     Licensee shall obtain and maintain throughout the term of this Agreement, at its own expense, general liability insurance, product liability insurance, and such other insurance as it

*** Certain confidential information in this document has been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission.

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deems necessary with a responsible insurance carrier or carriers providing adequate protection to ensure it can meet any claims under this Agreement.

        The following Section 11.1 is deleted in its entirety and replaced by the following.

        11.1.     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 facsimile, electronic mail, or a delivery service (i.e. UPS or Federal Express) and addressed as follows:

        If sent by fax, electronic mail or a delivery service such notice or other communications shall be deemed delivered when received provided that the sender has confirmation of receipt. Either party may change its address at any time by written notice to the other party as set forth above.

        11.1 Notices to Licensee shall be sent to:

        The following Section 11.11 is deleted in its entirety and replaced by the following.

        11.11.     Change in Character of Licensee.     It is understood that the grant of the license herein by Licensor is premised upon the present character and composition of Licensee's management and Licensee's general good standing and reputation in the business community, and is therefore personal to Licensee. In the event of the sale or transfer of a substantial portion of the assets of Licensee's business or of a change in the controlling interest in Licensee's business or of a merger or consolidation of Licensee's business with any other entity, or in the event of substantial change in the management of Licensee or of Licensee's property being expropriated, confiscated or nationalized by the government, or in the event of the de facto control of Licensee or of any its subdivisions or agencies being assumed by a government or government agency or representative, Licensor may, at its reasonable option, terminate the license granted in this Agreement on thirty (30) day's written notice to Licensee.

        The following Section 11.13 is added to the Agreement.

*** Certain confidential information in this document has been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission.

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        11.13  No announcements regarding this Agreement or the relationship between the parties will be made by Licensee or Licensor without the prior approval of the Licensees Corporate Affairs Department and Licensor except that either party shall have the right to make such disclosures as required by law or court order.

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

*** Certain confidential information in this document has been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission.

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CHEROKEE INC.—INTERNATIONAL RETAIL LICENSE AGREEMENT

         THIS LICENSE AGREEMENT (this "Agreement"), is made and entered into as of the date set forth on the Cover Agreement to this Agreement ("Cover Agreement") by and between CHEROKEE INC., a Delaware corporation ("Licensor"), and the licensee indicated on the Cover Agreement ("Licensee"), with reference to the following facts:

        A.    Licensor is the owner of the "Cherokee" trademark and various other marks incorporating the name Cherokee with various stylized designs (collectively, the "Trademark"), and the goodwill associated with the Trademark. (See Exhibit C)

        B.    Licensor and Licensee desire to enter into this License Agreement with respect to the sale of certain merchandise all upon the terms and conditions herein set forth.

         NOW, THEREFORE , the parties hereto agree as follows:

         1.     Grant of License.     Upon the terms and conditions contained in this Agreement, Licensor hereby grants to Licensee, and Licensee hereby accepts, the exclusive right and license to use the Trademark in the Territory to market the branded Merchandise, obtained by the Licensee from its suppliers during the term provided in Section 2.1 below solely in connection with the sale of the merchandise bearing the Trademark in the categories indicated on the Cover Agreement (the "Merchandise") solely by the companies indicated on the Cover Agreement (the "Companies"), and to manufacture such Merchandise (and have such Merchandise manufactured) solely for sale by the Companies. 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 in the Companies 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 those Companies.

         2.     TERM.     

•         2.1     Term.     The term of this Agreement (the "Term") shall be as set forth on the Cover Agreement.

          2.2     Copies of Purchase Order.     In order to understand the volume of business being transacted by the Licensee, the Licensee shall provide Licensor with copies of all purchase orders Licensee issues for Merchandise as soon as practical after such purchase orders are issued by Licensee.

          2.3     Liquidation of Goods.     Upon the termination of this Agreement by Licensor or Licensee, for any reason whatsoever, Licensee shall immediately discontinue (except as hereinafter permitted) its use of the Trademark in connection with the design, manufacture or sale of the Merchandise or the Trade Use Materials, and thereafter will no longer use or have the right to use the Trademark in any form or manner whatsoever. Licensor shall thereupon have a right of first refusal to purchase any finished goods or any piece goods in Licensee's possession on the date this Agreement is terminated, at a price equal to Licensee's actual cost of production thereof. If Licensor declines to purchase all of such goods at that time, Licensee shall have *** days from the date of termination of this Agreement (hereinafter referred to as the "Disposal Period") in which to use the Trademark to dispose of its inventory of the Merchandise manufactured, or ordered and in production, by Licensee prior to the termination date. Such disposition must be through the same channels used by Licensee prior to the termination of this Agreement.

*** Certain confidential information in this document has been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission.

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         3.     PAYMENTS.     

•         3.1     Initial License Fee.     Concurrently with the execution of this Agreement, Licensee shall pay to Licensor that sum of dollars set forth on the Cover Agreement (the "Initial License Fee"). Licensee agrees that the Initial License Fee is fully earned by Licensor upon and for the grant of the license herein granted and that the Initial License Fee is neither refundable nor contingent on Licensee actually selling any of the Merchandise.

          3.2     Royalty.     Licensee shall pay to Licensor as a royalty (the "Royalty") an amount equal to that percentage of its Net Sales of Merchandise, as is indicated on the Cover Agreement. For purposes of this Agreement the term "Net Sales" shall mean and refer to the price for all Merchandise sold by Licensee, less any refunds and credits for returns actually given by Licensee to its customers. All royalties payable by Licensee hereunder shall be paid in full, without set-off or counterclaim, free of any deductions or withholdings. In the event that Licensee is prohibited by applicable law from making payments hereunder free of deductions or withholdings, thus Licensee shall pay such additional amounts to Licensor as may be necessary in order that the actual amount received after deduction or withholding (and after deduction or withholding or payment of any additional taxes or other charges due as a consequence of the payment of such additional amount) shall be equal to the amount that would have been received if such deduction or withholding were not required; provided, further, that if required by applicable law, Licensee shall withhold the amount of any taxes levied by the Government of The United Kingdom on payments made by Licensee to Licensor and which are by law payable by Licensor, shall promptly effect payment thereof to the appropriate tax authorities, and shall transmit to Licensor official tax receipts or other evidence issued by the appropriate tax authorities sufficient to enable Licensor to support a claim for the United States income tax credit in respect of any such taxes so paid.

          3.3     Annual Minimum Royalties.     Licensee shall pay Licensor the Annual Minimum Royalties as set forth on the Cover Agreement (the "Annual Minimum Royalties"). Such Annual Minimum Royalties shall not be refundable under any circumstance. Licensee shall pay Licensor one-fourth of the applicable Annual Minimum Royalties for each Contract Year, to the extent royalties accrued and paid for such Contract Year do not exceed Annual Minimum Royalties then due. Within *** calendar days following the end of each Quarter, Licensee shall calculate the aggregate accrued royalties payable to Licensor from the start of the applicable Contract Year to the end of such Quarter. Such aggregate accrued royalties shall be compared to the sum of all royalties already paid (including Annual Minimum Royalties) for such Contract Year. If such aggregate accrued royalties are less than the aggregate Annual Minimum Royalties due for the Contract Year to date, no royalties in addition to Annual Minimum Royalties shall then be payable. If such aggregate accrued royalties exceed aggregate Annual Minimum Royalties due for the Contract Year to date, the amount of such aggregate accrued royalties less the total of all royalties already paid for such Contract Year shall be due and payable. The foregoing provisions shall apply separately to each Contract Year, such that any excess of accrued royalties over Annual Minimum Royalties for any given Contract Year shall not apply toward satisfying Annual Minimum Royalties for any given Contract Year and shall not apply as a credit against any royalties accruing in any subsequent Contract Year.

         4.     MANNER OF PAYMENT.     

•         4.1     Quarterly Payment.     Not later than the twentieth (20th) day of each and every quarter beginning with the first quarter following the quarter during which Licensee first sells Merchandise, Licensee shall pay and deliver to Licensor the Royalty with regard to Net Sales in the previous quarter.

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•         4.2     Prompt Delivery.     Licensee acknowledges and agrees that the timely delivery of the payments required by Section 4.1 and of the Quarterly Reports required by Section 5.2 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 *** percent (***%) 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.     

•         5.1     Maintenance of Records.     Licensee shall keep true and accurate books of account and records in accordance with generally accepted accounting principles, consistently applied, covering all transactions relating to this Agreement and the license hereby granted. Such records shall be maintained for at least three years after the month to which such records relate.

          5.2     Quarterly Reports.     Every Royalty payment pursuant to Section 4.1 shall be accompanied by a report (individually, the "Quarterly Report" and collectively, the "Quarterly Reports") as to:

  •         a.     The quantity, description and gross sales of all Merchandise sold by Licensee during the quarter to which such Royalty relates;

            b.     The aggregate gross sales of all Merchandise and the Net Sales for such quarter;

            c.     Any other information that may be required under any other provision of this Agreement or that may, from time to time, be reasonably required by Licensor.

          5.3     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. 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 *** percent (***%) per month, or if such rate exceeds the maximum rate allowed by law, at such maximum legal rate. In addition, if the audit discloses that the Royalty payments actually due exceed the Royalty payments paid by an amount greater than *** percent (***%) of the Royalty payments paid, the cost of the audit performed by Licensor shall be paid by Licensee.

         6.     STANDARDS OF QUALITY.     

•         6.1     Enhancement of Trademark.     The Merchandise and any expression by Licensee, directly or indirectly, which by its nature conveys to others the existence of a relationship between Licensee and the Trademark or the Merchandise (including, without limitation, all packaging, labeling, fixturing,. advertising, point of sale and sales promotion materials and product literature (any such expression is herein referred to as "Trademark Use Materials") (i) shall be of good quality and of such style, appearance, distinctiveness and quality (which shall comport with the Cherokee quality assurance manual dated July, 2000 or as reasonably revised by Licensor) as to protect and enhance the prestige of Licensor and of the Trademark and the goodwill pertaining thereto; (ii) shall in no manner adversely affect any rights of ownership of Licensor in the Trademark and shall in no manner derogate or detract from the repute of Licensor or the Trademark; (iii) shall in all respects (including, without

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• limitation, the manufacture, sale, marketing and advertising) be in accordance with all of the terms and provisions of this Agreement, with all applicable laws, rules and regulations and with any approval decision made by Licensor; and (iv) shall be subject to the prior written approval by Licensor in accordance with all of the terms and provisions of this Agreement. In addition, Licensee shall supply Licensor or a designee of Licensor with samples of all packaging, labels and related materials featuring the Trademark. Upon receipt of such packaging, labels and related materials, Licensor shall have ten (10) business days in which to review and approve. If Licensor has not indicated approval in writing of any such materials with ten (10) business days, then such materials shall be deemed to have been approved.

          6.2     Quality Control.     In order to protect the value of the Trademark, as a designation of the quality of the Merchandise, the Licensee acknowledges and agrees that the control by Licensor over the nature and quality of all Merchandise, the Trademark and all Trademark Use Materials is an essential element of the license herein granted. Accordingly, all aspects of the Merchandise and Trademark Use Materials and use of the Trademark shall be submitted to Licensor's representative for approval pursuant to Section 6.4, and shall be subject to the prior written approval of Licensor. Licensor's approval of any Merchandise, any Trademark Use Materials or the use of the Trademark shall be limited to the particular subject matter of the submission (e.g., the approval of a particular Trademark Use Material shall not be construed as an approval of the Merchandise on which it may be associated) and shall be limited to the period of use set forth in the applicable approval document. Licensor may give Licensee notice (a "Non-Conformance Notice") at any time that (i) any or all of the Merchandise or the Trademark Use Materials being designed, manufactured or sold by Licensee under the Trademark do not meet the design or quality standards for that style or line of Merchandise or Trademark Use Materials as represented by the original sample, sketch or swatch approved by Licensor; (ii) that Licensee has otherwise failed to produce any or all of the Merchandise or the Trademark Use Materials in conformity with the approval given by Licensor, or (iii) that Licensee has otherwise failed to properly use the Trademark on any or all of the Merchandise or Trademark Use Materials in accordance with the terms and provisions of this Agreement or any applicable laws, rules or regulations (herein referred to as a "Non-Conforming Use"). The decision of Licensor as to whether or not there has occurred a Non-Conforming Use shall be binding upon the parties. If Licensor gives Licensee a Non-Conformance Notice, Licensee shall immediately (i) cease the manufacture or sale of such non-conforming items, (ii) correct the defects in any non-conforming items and submit such corrected items to Licensor for its approval or, if not correctable, destroy all such items, and (iii) correct the manufacturing process of such items and subject samples of the items made under the corrected process to Licensor for Licensor's approval prior to first re-shipment thereof. Licensee shall be deemed to have breached this Agreement if after Licensee receives a Non-Conformance Notice, Licensee fails to comply with any of the foregoing. Notice by Licensor hereunder shall not relieve Licensee from its obligation to pay the Royalty required under this Agreement on the sale of such Merchandise made by Licensee. The right to check the quality of the Trademarked goods in this manner does not effect the Licensee's rights to place the manufacture of the Merchandise with the manufacturers or suppliers of its choice, provide the Merchandise meets the quality control standards set forth in this Agreement.

          6.3     Licensee Standards and Procedures.     Concurrently with the execution of this Agreement, and on an annual basis thereafter, Licensee shall provide Licensor with a written copy of Licensee's quality control standards and procedures.

          6.4     Manufacture of Merchandise.     

  •         6.4.1  Manufacture of Products Using the Cherokee Trademark in order for the Licensor to satisfy themselves that the only manufacturers the quality and design of the Merchandise is paramount to the value and integrity of the Trademark. In order for the Licensor to satisfy themselves

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• • that only manufacturers used are those who meet the designated quality criteria laid down by the Licensor, the licensee shall, prior to entering into any agreement with a manufacturer to supply Merchandise, obtain the manufacturers agreement as set forth in Exhibit A and send a copy of such executed agreement to Licensor. In the event that the Licensed Products are manufactured by any person other than contractor, Licensee shall require such person contractually to observe and perform all relevant terms of this Agreement. This requirement in no way shall inhibit or hinder the licensee in selecting who shall manufacture or supply the Merchandise.

            6.4.2  Pre-Production Sketches and Material Swatches. Prior to manufacturing any Merchandise or Trademark Use Materials Licensee shall submit to a representative of Licensor, who shall be designated by Licensor from time to time (the "Representative"), for the Representative's approval, sketches with appropriate material swatches of each planned item of Merchandise and Trademark Use Materials (hereafter referred to as "Pre-Production Information") using EXHIBIT B. Pre-Production Information for each planned item of Merchandise and Trademark Use Materials shall be submitted by Licensee to the Representative as soon as practical, but no later than seven (7) days after the issuance of the purchase order. Licensor shall have seven (7) days to approve or disapprove any submission by Licensee. If Licensor disapproves a submission by Licensee, Licensee shall be entitled to resubmit a corrected Pre-Production Information Sheet. If the corrected Pre-Production Information sheet is not resubmitted within a reasonable time (such reasonable time to be determined under the circumstances by the Representative), or if the corrected Pre-Production Information sheet is disapproved or deemed disapproved by Licensor as hereinabove provided, neither the style represented by the disapproved Pre-Production Information sheet nor the corrected Pre-Production Information sheet shall be marketed or displayed to customers.

            6.4.3  Brand Manager of Licensee. In order to better coordinate, develop and grow the Licensed Mark, Licensee shall hire utilize a full time employee and continue to maintain, at Licensee's expense, a full time brand manager to act as a brand manager (the "Brand Manager") to perform various duties as designated by Licensee. Brand Manager shall be a person who is knowledgeable and experienced in the apparel, footwear, accessory business, and other related businesses, and shall be assigned to work with Licensor and Licensor-related matters. exclusively. If any problem including unsatisfactory fulfillment of the duties of the Brand Manager happens, Licensor shall have the right to discuss the problem with the superior manager of Licensee supervising such Brand Manager to find the solution including replacement of such Brand Manager and Licensee shall respect the opinion of Licensor in good faith if it is reasonable.

          6.5     Production Samples.     Prior to showing, selling or displaying any Merchandise or Trademark Use Materials to any customer of Licensee, Licensee shall submit to a representative of Licensor, who shall be designated by Licensor from time to time (the "Representative"), for the Representative's approval, production samples of each planned item of Merchandise and Trademark Use Materials. Production samples of each planned item of Merchandise and Trademark Use Materials shall be submitted by Licensee to the Representative as soon as practical. Licensor shall have seven (7) days to approve or disapprove any submission by Licensee. If Licensor disapproves a Production sample submitted by Licensee, Licensee shall be entitled to resubmit a corrected Production sample. If the corrected production sample is not resubmitted within a reasonable time (such reasonable time to be determined under the circumstances by the Representati