CHEROKEE INC. (NASDAQ:CHKE) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01 Entry into Material Definitive Agreement.
On December 28, 2018, Cherokee Inc. (the“Company”) entered into an amendment to its senior secured credit facility with Gordon Brothers Finance Company (“Gordon Brothers”), as administrative agent and collateral agent for the lenders from time to time party thereto (the “Amendment”). Also on December 28, 2018, the Company entered into Subordinated Note Agreements (the “Subordinated Notes”) with each of (i) Jess Ravich, a member of the Company’s Board of Directors, (ii) Cove Street Capital LLC and Jeff Bronchick, Lead Principal Portfolio Manager of Cove Street Capital, which is a major stockholder of the Company and (iii) Dwight Mamanteo, a member of the Company’s Board of Directors.
The Amendment permits the Company to enter into the Subordinated Notes and for such Subordinated Notes to be repaid in certain circumstances prior to their maturity in November 2021.The Amendment also removes the requirement in the senior secured credit facility that the Company raise $2.0 million of additional capital before May 4, 2019 if the Company’s average working capital does not exceed an agreed upon level at the close of the Company’s fiscal year ending February 2, 2019.
The Subordinated Notes aggregate to $2.0 million in principal, and the net proceeds thereunder are expected to be used by the Company for general working capital purposes.The Subordinated Notes do not bear interest through January 31, 2019 and thereafter bear interest based on LIBOR plus an applicable margin of 8.15% payable quarterly in cash, plus 3.00% payable in kind with such interest being added to the principal balances of the Subordinated Notes.If the Subordinated Notes are not repaid by January 31, 2019, the Company is required to grant warrants to purchase an aggregate of 276,000 of the Company’s common stock at an exercise price based on the market price of such shares at that date, plus an additional 3% fee.
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The descriptions of the Amendment and the Subordinated Notes set forth in this Current Report on Form 8-K are intended to be summaries and do not purport to be complete. As a result, such descriptions are subject to, and qualified in their entirety by reference to, the applicable documents to be filed as exhibits to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission for the fiscal year ending February 2, 2019.
Item 2.03Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
Reference is made to the disclosure regarding the Subordinated Notes under Item 1.01 above, which is incorporated herein by this reference.
About CHEROKEE INC. (NASDAQ:CHKE)
Cherokee Inc. is a marketer and manager of a portfolio of fashion and lifestyle brands it owns or represents, licensing the Cherokee, Liz Lange, Completely Me by Liz Lange, Hawk, Tony Hawk, Sideout, Carole Little, Everyday California , Flip Flop Shops and ale by alessandra brands and related brands in various consumer product categories and sectors. The Company operates in the segment of marketing and licensing of brand names and trademarks for apparel, footwear and accessories. It is a licensor of style focused lifestyle brands for apparel, footwear, home products and accessories. It performs a range of services, including marketing, solicitation of licensees, contract negotiations and administration and maintenance of license or distribution agreements, among others. It operates in the United States, Canada, Latin America, Asia, the United Kingdom and Europe. Its brands are licensed with retail and wholesale licensees in over 50 countries and approximately 9,000 retail locations.