ADMINISTRATIVE SERVICES AGREEMENT
This ADMINISTRATIVE SERVICES AGREEMENT (this "Agreement") is entered
into as of December 23, 1997, by and between SPELL C. LLC, a Delaware limited
liability company (the "Company"), and Cherokee Inc., a Delaware corporation, as
administrator hereunder (in such capacity, the "Administrator").
RECITALS
WHEREAS, Cherokee Inc., a Delaware corporation ("Cherokee"), has
transferred and assigned to the Company certain trademarks and rights under the
License Agreement (as defined below) pursuant to that certain Trademark Purchase
and License Assignment Agreement dated as of December 23, 1997 (as amended,
restated, supplemented or otherwise modified from time to time, the "Trademark
Agreement"), including all rights and obligations of Cherokee as licensor under
that certain License Agreement dated as of November 12, 1997 (as amended,
restated, supplemented or otherwise modified from time to time, the "License
Agreement"), by and between Cherokee and Xxxxxx Xxxxxx Corporation (the
"Licensee"); and
WHEREAS, the Company has entered into that certain Indenture dated as
of December 23, 1997 (as amended, restated, supplemented or otherwise modified
from time to time, the "Indenture"), by and between the Company and the trustee
named therein (in such capacity, the "Trustee"), pursuant to which the Company
has issued certain Notes which are secured by a security interest in the
Company's rights in the Trademark and the License Agreement; and
WHEREAS, the Administrator has developed certain familiarity with and
expertise in connection with establishing, maintaining and protecting the
Trademark and the rights under the License Agreement, as well as the
administration of the License Agreement; and
WHEREAS, the Company has requested that the Administrator perform
certain administrative duties on behalf of the Company in connection with, among
other things, the Trademark and the License Agreement, and the Administrator is
willing to so perform such duties, all on the terms set forth herein.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
AGREEMENT
1. Definitions. Capitalized terms used and not otherwise defined
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herein shall have the meanings given in the Indenture.
2. Appointment of Administrator. Until such time as the Company
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designates a new Administrator, Cherokee is hereby designated as, and hereby
agrees
to perform the duties and obligations of, the Administrator pursuant hereto. The
Administrator shall perform its obligations pursuant hereto not as an agent of
the Company but as an independent contractor and shall clearly identify to all
third parties that it is acting in its capacity as the Administrator pursuant to
this Agreement, and is not itself the owner of the Trademark or the License
Agreement. The Administrator may, with the prior written consent of the Company
(which consent shall not be unreasonably withheld or delayed), sub-contract
certain of its administrative activities hereunder, provided that the
Administrator shall not be relieved of its obligations and duties hereunder and
shall remain fully liable therefor and for any action or inaction of any such
subcontractor.
3. Administrator Duties. The Administrator shall perform the
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following duties for the benefit of the Company, subject to the further
direction of the Company:
a. Quality Control. The Company shall consult with the
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Administrator and shall establish standards of quality for goods and services
with which the Trademark is to be used by the Licensee. The Administrator shall
monitor the quality of all goods and services in connection with which the
Licensee (and any other licensee of the Trademark) uses the Trademark. From time
to time, upon request of the Administrator, the Company shall direct the
Licensee to submit to the Administrator, or to otherwise make available for
inspection by the Administrator, specimens of goods and other materials on or in
connection with which the Trademark is used. The Administrator shall report to
the Company in the event the Administrator discovers that any goods or services
in connection with which the Trademark is used fail to satisfy the Company's
quality standards. The Administrator shall take such action as may be necessary
or as the Company shall reasonably direct to cause Licensee to restore the
quality of goods and/or services offered by the Licensee in connection with the
Trademark to the Company's standards. Such action may include, without
limitation, notifying the Licensee of its breach of covenant to maintain product
quality, overseeing Licensee's efforts to restore product quality, and (only if
the Company expressly so directs) taking action to terminate the license granted
to the Licensee under License Agreement if Licensee's failure to satisfy the
Company's quality standards continues.
b. Applications and Registrations. The Administrator shall file
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in the name of the Company and thereafter diligently prosecute such applications
to register the Trademark in the United States in connection with such goods
and/or services as may be required under the License Agreement or as the
Company, after consulting with the Administrator, shall reasonably direct. The
Administrator shall take such actions as it determines appropriate to maintain
registrations for the Trademark in the United States. The Company shall
cooperate with the Administrator as shall be reasonably necessary or as the
Administrator may reasonably request to file, prosecute and maintain such
applications and registrations for the Trademark. The fees and costs for filing,
prosecuting and maintaining applications and registrations for the Trademark
shall be borne in accordance with Section 6 of this Agreement.
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Notwithstanding the foregoing, the Administrator shall not be obligated to file
or prosecute any application if (i) the Administrator has a reasonable belief
that it is unlikely that such application would proceed to registration and (ii)
it promptly notifies the Company in writing to such effect.
c. Trademark Protection. The Company agrees to notify the
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Administrator promptly in writing in the event it becomes aware that (i) any
legal action is threatened or instituted against the Company or the Licensee
relating to the use of the Trademark by the Company or the Licensee, or (ii) the
Company or the Licensee become aware of any infringement or illegal use by any
third party of the Trademark. The Administrator shall take such action
(including without limitation engaging counsel, and filing lawsuits,
cancellation petitions and notices of opposition) as may be necessary or as the
Company may reasonably direct to protect the Trademark and the rights of the
Company and the Licensee to use the Trademark. The Company shall cooperate with
the Administrator as shall be reasonably required in stopping any infringement
of the Trademark or defending or instituting action to protect the Trademark.
The Company shall serve as a named party in any suit, action or proceeding
brought by the Administrator to protect the Trademark. The cost and expense of
any such suit, action or proceeding and otherwise relating to trademark quality
and control, applications and registrations, and protection shall be borne in
accordance with Section 6 below. Notwithstanding the foregoing, the
Administrator shall not be required to institute legal action if (i) in the
reasonable opinion of the Administrator and its counsel, the probability of
success of such legal action does not justify the time and expense which would
be incurred in instituting such legal action and (ii) it promptly notifies the
Company in writing to such effect.
d. Use of Trademark. The Administrator shall cooperate with the
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Licensee as shall be reasonably necessary to enable the Licensee to establish
use of the Trademark in connection with goods and services and as may be
required under the License Agreement or as the Company shall from time to time
reasonably direct.
e. Licensor Duties. The Administrator shall generally review
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such reports and other communications from the Licensee it receives relating to
the License Agreement, the Trademark, or the Licensee's performance or
obligations under the License Agreement. The Administrator shall provide
periodic reports to the Company, on its view of the status of the Licensee's
performance under the License Agreement. At the Company's reasonable direction,
the Administrator shall engage personnel to inspect the Licensee's books or
records, and shall take other action on behalf of the Company as Administrator
determines appropriate for it to take and which is authorized to be taken under
the License Agreement. The Administrator shall otherwise generally assist the
Company in performing the Company's obligations under the License Agreement, and
in overseeing the Licensee's performance of its obligations under the License
Agreement, as the Company shall reasonably direct.
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f. Information. The Administrator shall keep the Company
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apprised of, and shall promptly notify the Company of, all matters that the
Administrator is aware of that may have a material adverse effect on the
validity or value of the Trademark or the License Agreement.
g. Services. Unless the Company notifies the Administrator to
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the contrary, the Administrator shall furnish or cause to be furnished to, the
Company the administrative, monitoring and ministerial services specified in
this Section 3(g);
(i) accounting and financial management services, including
advice in all required areas of accounting, internal and public financial
statements and any required federal, state or local governmental reports;
(ii) tax services, including regular and periodic advice and
consultation with respect to tax matters related to the Company, and the
preparation and filing of, and assistance with respect to, any required tax
returns;
(iii) insurance services, including the inclusion to the extent
agreed upon by the Company, of the Company under the insurance policies of the
Administrator including those relating to public liability, property damage,
workers compensation and other matters and processing and administration of
insurance claims;
(iv) management information and other system services,
including computer operations, data input systems and programming and technical
support;
(v) administration of legal formalities, including the
matters specified in the LLC Agreement;
(vi) other actions of the Company that are required or deemed
necessary or appropriate under the Basic Documents, to the extent that the
authority to perform such actions is not withheld pursuant to Section 4 hereof;
and
(vii) such other services as the Company and the Administrator
may hereafter agree.
h. Reports. Cherokee agrees to deliver promptly to the Company
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copies of all reports which Cherokee files with the Securities and Exchange
Commission pursuant to Sections 12 and 13 of the Securities Exchange Act of
1934, as amended. If Cherokee ceases to be a reporting company under such Act,
it shall deliver to the Company, not less frequently than quarterly, reports and
interim financial statements in scope reasonably satisfactory to the Company.
4. Authorities Withheld. The Company specifically withholds from the
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Administrator the following specific authorities, unless superseded by written
permission from the Company:
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a. Execution of documents on behalf of the Company granting or
perfecting any rights in the Trademark or the License Agreement;
b. Any use of the Company's name by the Administrator or any
representation by the Administrator that the Administrator is the Company or
holds any ownership interest in (other than as licensee of the Company with
respect to Cherokee Licenses) or with respect to the Trademark or the License
Agreement;
c. Other authorities or rights not expressly granted to the
Administrator hereunder; and
d. Other authorities or rights that expressly require the
Company's approval hereunder.
5. Standard of Care. In performing its duties pursuant hereto, the
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Administrator shall exercise that degree of skill and care consistent with the
degree of skill and care that the Administrator exercises with respect to
trademarks, trademark licenses and related rights held by the Administrator.
6. Expenses; Compensation. The Administrator shall be responsible
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to pay all expenses incurred by it in connection with the performance of the
services provided by it hereunder. As compensation for the services provided by
the Administrator hereunder, the Company shall pay the Administrator an
Administration Fee, which is to be separately determined between the parties.
Notwithstanding the foregoing, the Administration Fee shall accrue but not be
payable (i) to the extent there are insufficient funds available to the Company
pursuant to Section 3.03(v) or 3.04 of the Indenture, or (ii) during an Event of
Default.
7. Indemnification by the Administrator.
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a. Indemnification. The Administrator agrees to indemnify and
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save the Company harmless from and against all loss, cost, liability and
reasonable expense that arises from: (i) acts constituting theft, fraud, willful
misconduct or gross negligence on the part of the Administrator or (ii) the
Administrator's material breach of its obligations under this Agreement. Except
for any of the aforementioned acts or failures to act by the Administrator or
the Administrator's employees, agents and/or representatives, the Company shall
indemnify, defend and hold harmless the Administrator from any loss, cost,
liability and reasonable expense, relating to the Trademark or the License
Agreement that arises from the Administrator's performance of the
Administrator's obligations hereunder in accordance with the terms hereof,
provided:
(i) the Administrator notifies the Company and any insurance
carrier (as required) promptly after the Administrator receives notice of any
such loss, damage or injury;
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(ii) the Administrator takes no action (such as admission of
liability) that bars the Company from obtaining any protection afforded by any
insurance policy the Company may hold or that might prejudice the Company in its
defense to a claim based on such loss, damage or injury; and
(iii) any indemnification of the Administrator by the Company
hereunder shall be payable only from amounts available to the Company pursuant
to Section 3.03(v) or 3.04 of the Indenture.
The Administrator hereby agrees that it shall not acquiesce to, petition or
otherwise invoke or cause the Company to invoke the process of any court or
governmental authority for the purpose of commencing or sustaining a case
against the Company under any federal or state bankruptcy, insolvency or similar
law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Company or any substantial part of
the property of the Company, or ordering the winding up or liquidation of the
affairs of the Company.
b. Survival of Indemnification. The indemnifications set forth
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in this Section 7 shall survive the expiration or earlier termination of this
Agreement with respect to acts, facts, circumstances or occurrences which exist
or occur prior to such termination.
8. Term. This Agreement shall become effective as of the date
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hereof, and shall continue in full force and effect until the earlier of (a)
payment in full of the Notes and (b) the Company's termination of this Agreement
and the appointment of Cherokee as Administrator hereunder for cause. For
purposes of this Section 8, "cause" shall mean the occurrence of a material
breach hereunder by the Administrator which is not cured within thirty (30) days
of receipt by the Administrator of written notice of such breach from the
Company, it being understood that a failure to perform the obligations set forth
in Section 3 hereof shall constitute a material breach for purposes of this
Section entitling the Company, in addition to its remedies under this Section,
to recovery of expenses incurred in performing such obligations, to the extent
that the Company has made a good faith determination that the incurrence of such
expenses is necessary or appropriate. If so terminated, the Administrator shall
be obligated to pay to the Company the amount, if any, by which the compensation
to be paid to engage a reasonably qualified successor firm to provide the
services hereunder for the remainder of the term of this Agreement exceeds the
amount set forth in Section 6 hereof.
Upon termination pursuant to this Section 8, the Administrator shall
deliver to the successor firm books and records of the Company theretofore
maintained by the Administrator, on behalf of the Company.
9. Notices. Any notice required under this Agreement shall be
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written and shall be deemed to be delivered when deposited in the United States
mail, postage prepaid, registered or certified mail, return receipt requested
or, if delivered by hand,
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when received by an officer or principal of the party receiving the same or, if
transmitted by telecopy, when transmitted and receipt has been confirmed, in
each case, addressed to the parties at the following addresses:
If to the Company: SPELL C. LLC
000 Xxxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxx
Telephone: 000-000-0000
If to the Administrator: Cherokee Inc.
0000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Fax: 000-000-0000
Attention: Xxxxxx Xxxxxxxx
Either party may change its address by giving notice to the other party of such
change in writing in accordance herewith.
10. Entire Agreement. This Agreement represents the entire
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agreement between the parties with respect to the subject matter hereof, and no
alteration, modification or interpretation hereof shall be binding unless in
writing and signed by both parties.
11. Interpretation. All headings are inserted in this Agreement
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only for convenience and ease of reference and are not to be considered in the
construction or interpretation of this Agreement. Unless the context clearly
requires otherwise: (a) words such as "include," "including," or "such as" shall
be interpreted as if followed by the words "without limitation"; and (b) any
reference to an Article, Section, or other subdivision, or Exhibit or Schedule,
is intended to refer to an Article, Section, or other subdivision, or Exhibit or
Schedule, of this Agreement. In the event of any inconsistency between the text
of this Agreement and any Exhibit or Schedule attached hereto, the text shall
govern. This Agreement shall be so construed that whenever applicable the use
of the singular number shall include the plural number, and the use of the
plural number shall include the singular number, and the use of the feminine,
masculine, or neuter gender shall include the other genders.
12. Further Assurances. The Company and the Administrator agree to
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execute such other documents and perform such other acts as may be necessary or
desirable to carry out the purposes of this Agreement.
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13. Third Parties. Neither this Agreement nor any provision hereof
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nor any service, relationship or other matter referred to herein shall inure
to the benefit of any third party, to any trustee in bankruptcy, to any assignee
for the benefit of creditors, to any receiver by reason of insolvency, to any
another fiduciary or officer representing a bankrupt or insolvent estate of
either party, or to the creditors or claimants of such an estate, except that
the benefits of this Agreement may be assigned as collateral to the Trustee
under the Indenture as security for the payment of the Notes.
14. No Interest or Lien. This Agreement does not constitute an
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interest in or lien upon property of the Company. It shall not be recorded in
the public records where any property of the Company is located and shall not
constitute or establish any basis for claim, for filing of a lis pendens or
notice of pendency or claim of lien.
15. Confidentiality. The Administrator shall not make any public
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announcement concerning the negotiation or consummation of this Agreement, or
of any of the terms of this Agreement, without the Company's prior consent,
which consent may be granted or denied in the Company's sole discretion. The
Administrator shall keep confidential all information pertaining to the
administration of the Trademark, the License Agreement and the Indenture and all
financial information pertaining thereto and to the Company and the members of
the and their affiliates. Except as (a) may be required by law or (b) may have
been made publicly available by parties other than the Administrator or (c) may
be required to perform its duties and services hereunder, the Administrator
shall not disclose any such information which is designated by the Company as
being confidential without the Company's prior consent, which consent may be
granted or denied in the Company's sole discretion.
16. No Waiver. No consent or waiver, express or implied, by either
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party to any breach or default by the other party in the performance of any of
its obligations under this Agreement shall be deemed or construed to be a
consent or waiver to or of any other breach or default in performance by such
other party of such obligation or of any party of such obligation or of any
other obligation under this Agreement. To be effective, any waiver must be in
writing and be signed by the party intended to be bound thereby.
17. Exculpation. No member, officer or manager of the Company
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(direct or indirect) shall be personally liable for the performance of such
party's obligations under this Agreement, it being understood that the liability
of the Company for the Company's obligations under this Agreement shall be
limited to its interest in the Trademark and the License Agreement and the
proceeds thereof and the Administrator shall not look to any of the other assets
of the Company or any assets of any of the aforesaid parties in seeking either
to enforce the Company's obligations under this Agreement or to satisfy a
judgment for the Company's failure to perform such No shareholder, officer or
director of the Administrator (direct or indirect) shall be personally liable
for the performance of such party's obligations under this Agreement, provided,
however, nothing contained herein shall be deemed to exculpate the aforesaid
parties
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from liability arising out of theft, gross negligence or fraud on the part of
the Administrator.
18. Additional Remedies. The rights and remedies of the parties
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under this Agreement shall not be mutually exclusive. The exercise of one or
more of the remedial provisions of this Agreement shall not preclude the
exercise of any other remedial provisions hereof.
19. Company's Approval, Consent, Direction or Authorization. Any
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reference to the Company's approval, consent, direction or authorization in
this Agreement shall mean the written approval, consent, direction or
authorization of the Company, which may (unless expressly provided otherwise
herein) be granted or withheld in the Company's sole discretion.
20. Partial Invalidity. If any term, covenant, condition or
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provision of this Agreement or the application thereof to any person or
circumstance shall, to any extent be invalid, unenforceable or violate a
party's legal rights, then such term, covenant, condition or provision shall be
deemed to be null and void and unenforceable; however, all other provisions of
this Agreement, or the application of such term or provision to persons or
circumstances other than those to which are held invalid, unenforceable or
violative of legal rights, shall not be affected thereby, and each and every
other term, condition, covenant and provision of this Agreement shall be valid
and be enforced to the fullest extent permitted by law.
21. Governing Law. This Agreement shall be governed by the internal
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laws of the State of California, without regard to conflicts of law principles.
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IN WITNESS WHEREOF, the Company and the Administrator have executed
this Administrative Services Agreement as of the date first set forth above.
"Administrator"
CHEROKEE INC.*
By: /s/ Xxxxxxxx Xxxxxx
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Name: Xxxxxxxx Xxxxxx
Title: President
"Company"
SPELL C. LLC
By: /S/ Xxxxxx Xxxxxxxx
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Name: Xxxxxx Xxxxxxxx
Title: President
* Also known as Delaware Cherokee Inc.
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