CHEROKEE INC. (NASDAQ:CHKE) Files An 8-K Entry into a Material Definitive Agreement

CHEROKEE INC. (NASDAQ:CHKE) Files An 8-K Entry into a Material Definitive AgreementItem 1.01Entry into a Material Definitive Agreement.

Amendment to Cerberus Credit Facility

On August 11, 2017, Cherokee Inc. (the“Company”) entered into an amendment (the “Cerberus Amendment”) of its senior secured credit facility (the“Cerberus Credit Facility”) with Cerberus Business Finance, LLC (“Cerberus”).The Amendment includes a waiver of all defaults under the Cerberus Credit Facility arising from the Company’s failure to comply with financial covenants thereunder as of April 28, 2017. As of April29, 2017, the Company had approximately $49.2 million in principal amount of outstanding indebtedness owed under the Cerberus Credit Facility, all of which is due in December 2021.

to the Cerberus Amendment, (i)the required leverage ratio (as defined and calculated in the Cerberus Credit Facility) has been amended 16.00 to 1.00 through July31, 2017, 10.50 to 1.00 through October31, 2017, and decreasing ratios at the end of each of the Company’s fiscal quarters thereafter as set forth therein; (ii)the required fixed charge coverage ratio (as defined and calculated in the Cerberus Credit Facility) has been amended to 0.25 to 1.00 through July31, 2017, 0.35 to 1.00 through October31, 2017, and increasing ratios at the end of each of the Company’s fiscal quarters thereafter as set forth therein; (iii)the Company has agreed to a new liquidity covenant that requires the Company to maintain an amount of unrestricted cash on-hand, together with the availability under the revolving credit facility under the Cerberus Credit Facility, of no less than $3.0 million, and (iv)the parties agreed to certain additional administrative amendments. The Cerberus Amendment also provides that, if at any time the new liquidity covenant is not satisfied and Cerberus submits a written capital demand, the Company would be required to complete an equity financing resulting in net cash proceeds to the Company of the amount requested by Cerberus in such demand, subject to an aggregate maximum of approximately $5.5 million and certain additional conditions (such financings, the“Committed Financings”).

As a condition to effectiveness of the Cerberus Amendment, the Company was required to: (i)complete the Concurrent Financing, as defined and described below, and (ii)obtain a firm commitment from one or more investors to fund one or more Committed Financings if required on or prior toMarch 5, 2018, which is described below.

Concurrent Financing and Committed Financing

On August11, 2017, the Company and each of several investors, including certain of the Company’s directors, officers and large stockholders, entered into common stock purchase agreements (the“Purchase Agreements”) to effect the Concurrent Financing and agree to the Committed Financing as required by the Cerberus Amendment. to the terms of the Purchase Agreements, on August11, 2017, the investors agreed to purchase, and the Company agreed to issue and sell, an aggregate of 947,870 shares of the Company’s common stock in a private placement financing at a per share purchase price of $4.22 (the “Initial Price”), for net cash proceeds to the Company of approximately $4.0 million (the“Concurrent Financing”). The Concurrent Financing is expected to close on August 18, 2017. In addition, to the terms of the Purchase Agreements, each investor has agreed to participate in the Committed Financings, such that, if the Company notifies any such investor on or before March5, 2018 of a failure to meet the new liquidity covenant set forth in the Cerberus Amendment, then such investor will be obligated to purchase in a private placement financing additional shares of the Company’s common stock as requested based on a per share purchase price equal to the lower of the Initial Price, 90% of the average closing price of the Company’s common stock for the 20 days prior to the date of the Company’s notification, or the closing price of the Company’s common stock on the day prior to the Company’s notification, subject to certain other conditions and caps, including that the aggregate number of shares issuable in the Concurrent Financing and the Committed Financings shall not exceed 19.9% of the total number of shares of the Company’s common stock outstanding on the date of this Report. The maximum aggregate value of the commitments for the Committed Financings from all investors is approximately $5.5 million. In addition, to the terms of the Purchase Agreements, in consideration for the agreement of the investors to participate in the Committed Financings, the Company has issued to the investors warrants to purchase up to an aggregate of 326,695shares of the Company’s common stock at an exercise price equal to the Initial Price. The warrants are exercisable at any time from March5, 2018 until the seven-year anniversary of the initial issuance date, may be exercised in cash or on a “cashless”