Exhibit 10.6

 

AMENDED AND RESTATED

CONTINUING GUARANTY

 

This Amended and Restated Continuing Guaranty (“Guaranty”), dated as of
December 7, 2011, is executed and delivered by SPELL C. LLC, a Delaware limited
liability company (“Guarantor”), in favor of U.S. BANK NATIONAL ASSOCIATION
(“Bank”) and in light of the following:

 

A.            Bank previously provided financial accommodations to Cherokee
Inc., a Delaware corporation (“Borrower”) pursuant to that certain Term Loan
Agreement dated as of February 16, 2011 between Borrower and Bank (as amended,
supplemented and restated from time to time, the “Original Loan Agreement”);

 

B.            Guarantor executed that certain Continuing Guaranty dated as of
February 16, 2011 in favor of Bank, guaranteeing Borrower’s obligations under
the Original Loan Agreement (“Original Guaranty”);

 

C.            Bank and Borrower have or are about to amend and restate the
Original Loan Agreement to provide additional financial accommodations to
Borrower pursuant to that certain Amended and Restated Term Loan Agreement dated
as of even date herewith between Borrower and Bank (as amended, supplemented and
restated from time to time, the “Loan Agreement”); and

 

D.            In order to induce Bank to extend, or continue to extend, certain
credit to Borrower pursuant to the Loan Agreement, Guarantor has agreed to enter
into this Guaranty in order to reaffirm its obligations under the Original
Guaranty and to confirm its guarantee of the Guaranteed Obligations (as defined
below).

 

NOW, THEREFORE, in consideration of the foregoing, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Guarantor hereby agrees, in favor of Bank, as follows:

 

1.             Definitions and Construction.

 

(a)           Definitions.  Capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Loan Agreement. 
As used in this Guaranty, “Guaranteed Obligations” shall mean and include any
and all obligations, indebtedness, or liabilities of any kind or character owed
by Borrower to Bank arising under the Loan Agreement and the other Term Loan
Documents, including all such obligations, indebtedness, or liabilities, whether
for principal, interest (including any interest which, but for the application
of the provisions of the Bankruptcy Code, would have accrued on such amounts),
premium, reimbursement obligations, fees, costs, expenses (including, attorneys’
fees), or indemnity obligations, whether heretofore, now, or hereafter made,
incurred, or created, whether voluntarily or involuntarily made, incurred, or
created, whether secured or unsecured (and if secured, regardless of the nature
or extent of the security), whether absolute or contingent, liquidated or
unliquidated, determined or indeterminate, whether Borrower is liable
individually or jointly with others, and whether recovery is or hereafter
becomes barred by any statute of limitations or otherwise becomes unenforceable
for any reason whatsoever, including any act or failure to act by Bank.

 

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(b)           Construction.  Unless the context of this Guaranty clearly
requires otherwise, references to the plural include the singular, references to
the singular include the plural, and the term “including” is not limiting.  The
words “hereof,” “herein,” “hereby,” “hereunder,” and other similar terms refer
to this Guaranty as a whole and not to any particular provision of this
Guaranty.  Any reference herein to any of the Term Loan Documents includes any
and all alterations, amendments, extensions, modifications, renewals, or
supplements thereto or thereof, as applicable.  Neither this Guaranty nor any
uncertainty or ambiguity herein shall be construed or resolved against Bank or
Guarantor, whether under any rule of construction or otherwise.  On the
contrary, this Guaranty has been reviewed by Guarantor, Bank, and their
respective counsel, and shall be construed and interpreted according to the
ordinary meaning of the words used so as to fairly accomplish the purposes and
intentions of Bank and Guarantor.

 

2.             Guaranteed Obligations.  Guarantor hereby irrevocably and
unconditionally guarantees to Bank, as and for its own debt, until final and
indefeasible payment thereof has been made, (a) payment of the Guaranteed
Obligations, in each case when and as the same shall become due and payable,
whether at maturity, pursuant to a mandatory prepayment requirement, by
acceleration, or otherwise; it being the intent of Guarantor that the guaranty
set forth herein shall be a guaranty of payment and not a guaranty of
collection; and (b) the punctual and faithful performance, keeping, observance,
and fulfillment by Borrower of all of the agreements, conditions, covenants, and
obligations of Borrower contained in the Loan Agreement  and in each of the
other Term Loan Documents.

 

3.             Continuing Guaranty.  This Guaranty includes Guaranteed
Obligations arising under successive transactions continuing, compromising,
extending, increasing, modifying, releasing, or renewing the Guaranteed
Obligations, changing the interest rate, payment terms, or other terms and
conditions thereof, or creating new or additional Guaranteed Obligations after
prior Guaranteed Obligations have been satisfied in whole or in part.  Guarantor
hereby absolutely, knowingly, unconditionally, and expressly waives and agrees
not to assert any right it has under Section 2815 of the California Civil Code,
or otherwise, to revoke this Guaranty as to future indebtedness.  If such a
revocation is effective notwithstanding the foregoing waiver, Guarantor
acknowledges and agrees that (a) no such revocation shall be effective until
written notice thereof has been received by Bank, (b) no such revocation shall
apply to any Guaranteed Obligations in existence on such date (including, any
subsequent continuation, extension, or renewal thereof, or change in the
interest rate, payment terms, or other terms and conditions thereof), (c) no
such revocation shall apply to any Guaranteed Obligations made or created after
such date to the extent made or created pursuant to a legally binding commitment
of Bank in existence on the date of such revocation, (d) no payment by
Guarantor, Borrower, or from any other source, prior to the date of such
revocation shall reduce the maximum obligation of Guarantor hereunder, and
(e) any payment by Borrower or from any source other than Guarantor, subsequent
to the date of such revocation, shall first be applied to that portion of the
Guaranteed Obligations as to which the revocation is effective and which are
not, therefore, guaranteed hereunder, and to the extent so applied shall not
reduce the maximum obligation of Guarantor hereunder.

 

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4.             Performance Under This Guaranty.  In the event that Borrower
fails to make any payment of any Guaranteed Obligations on or before the due
date thereof, or if Borrower shall fail to perform, keep, observe, or fulfill
any other obligation referred to in clause (b) of Section 2 hereof in the manner
provided in the Term Loan Documents, as applicable, Guarantor immediately shall
cause such payment to be made or each of such obligations to be performed, kept,
observed, or fulfilled.

 

5.             Primary Obligations.  This Guaranty is a primary and original
obligation of Guarantor and is an absolute, unconditional, and continuing
guaranty of payment and performance which shall remain in full force and effect
without respect to future changes in conditions, including any change of law. 
Guarantor agrees that it is directly, and jointly and severally with any other
guarantor of the Guaranteed Obligations, liable to Bank, that the obligations of
Guarantor hereunder are independent of the obligations of Borrower or any other
guarantor, and that a separate action may be brought against Guarantor whether
such action is brought against Borrower or any other guarantor or whether
Borrower or any such other guarantor is joined in such action.  Guarantor agrees
that its liability hereunder shall be immediate and shall not be contingent upon
the exercise or enforcement by Bank of whatever remedies it may have against
Borrower or any other guarantor, or the enforcement of any lien or realization
upon any security Bank may at any time possess.  Guarantor agrees that any
release which may be given by Bank to Borrower or any other guarantor shall not
release Guarantor.  Guarantor consents and agrees that Bank shall be under no
obligation (under Sections 2899 or 3433 of the California Civil Code or
otherwise) to marshal any assets of Borrower or any other guarantor in favor of
Guarantor, or against or in payment of any or all of the Guaranteed Obligations.

 

6.             Waivers.

 

(a)           Guarantor absolutely, unconditionally, knowingly, and expressly
waives:

 

(i)            (1) notice of acceptance hereof; (2) notice of any loans or other
financial accommodations made or extended under the Term Loan Documents or the
creation or existence of any Guaranteed Obligations; (3) notice of the amount of
the Guaranteed Obligations, subject, however, to Guarantor’s right to make
inquiry of Bank to ascertain the amount of the Guaranteed Obligations at any
reasonable time; (4) notice of any adverse change in the financial condition of
Borrower or of any other fact that might increase Guarantor’s risk hereunder;
(5) notice of presentment for payment, demand, protest, and notice thereof as to
any instruments among the Term Loan Documents; (6) notice of any unmatured event
of default or event of default under the Loan Agreement; and (7) all other
notices (except if such notice is specifically required to be given to Guarantor
hereunder or under any Term Loan Document to which Guarantor is a party) and
demands to which Guarantor might otherwise be entitled.

 

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(ii)           its right, under Sections 2845 or 2850 of the California Civil
Code, or otherwise, to require Bank to institute suit against, or to exhaust any
rights and remedies which Bank has or may have against, Borrower or any third
party, or against any collateral for the Guaranteed Obligations provided by
Borrower, Guarantor, or any third party.  In this regard, Guarantor agrees that
it is bound to the payment of all Guaranteed Obligations, whether now existing
or hereafter accruing, as fully as if such Guaranteed Obligations were directly
owing to Bank by Guarantor.  Guarantor further waives any defense arising by
reason of any disability or other defense (other than the defense that the
Guaranteed Obligations shall have been fully and finally performed and
indefeasibly paid) of Borrower or by reason of the cessation from any cause
whatsoever of the liability of Borrower in respect thereof.

 

(iii)          (1) any rights to assert against Bank any defense (legal or
equitable), set-off, counterclaim, or claim which Guarantor may now or at any
time hereafter have against Borrower or any other party liable to Bank; (2)  any
defense, set-off, counterclaim, or claim, of any kind or nature, arising
directly or indirectly from the present or future lack of perfection,
sufficiency, validity, or enforceability of the Guaranteed Obligations or any
security therefor; (3) any defense Guarantor has to performance hereunder, and
any right Guarantor has to be exonerated, provided by Sections 2819, 2822, or
2825 of the California Civil Code, or otherwise, arising by reason of:  the
impairment or suspension of Bank’s rights or remedies against Borrower; the
alteration by Bank of the Guaranteed Obligations; any discharge of Borrower’s
obligations to Bank by operation of law as a result of Bank’s intervention or
omission; or the acceptance by Bank of anything in partial satisfaction of the
Guaranteed Obligations; (4) the benefit of any statute of limitations affecting
Guarantor’s liability hereunder or the enforcement thereof, and any act which
shall defer or delay the operation of any statute of limitations applicable to
the Guaranteed Obligations shall similarly operate to defer or delay the
operation of such statute of limitations applicable to Guarantor’s liability
hereunder.

 

(b)           Guarantor absolutely, unconditionally, knowingly, and expressly
waives any defense arising by reason of or deriving from (i) any claim or
defense based upon an election of remedies by Bank; or (ii) any election by Bank
under Bankruptcy Code Section 1111(b) to limit the amount of, or any collateral
securing, its claim against the Borrower.

 

(c)           Until such time as all of the Guaranteed Obligations have been
fully, finally, and indefeasibly paid in full in cash: (i) Guarantor hereby
postpones any right of subrogation Guarantor has or may have as against Borrower
with respect to the Guaranteed Obligations;  (ii) Guarantor hereby postpones any
right to proceed against Borrower or any other Person, now or hereafter, for
contribution, indemnity, reimbursement, or any other suretyship rights and
claims, whether direct or indirect, liquidated or contingent, whether arising
under express or implied contract or by operation of law, which Guarantor may
now have or hereafter have as against Borrower with respect to the Guaranteed
Obligations; and (iii) Guarantor also hereby postpones any right to proceed or
seek recourse against or with respect to any property or asset of Borrower.

 

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(d)           WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER
PROVISION SET FORTH IN THIS GUARANTY, GUARANTOR HEREBY ABSOLUTELY, KNOWINGLY,
UNCONDITIONALLY, AND EXPRESSLY WAIVES AND AGREES NOT TO ASSERT ANY AND ALL
BENEFITS OR DEFENSES ARISING DIRECTLY OR INDIRECTLY UNDER ANY ONE OR MORE OF
CALIFORNIA CIVIL CODE SECTIONS 2799, 2808, 2809, 2810, 2815, 2819, 2820, 2821,
2822, 2825, 2839, 2845, 2848, 2849, AND 2850, AND CHAPTER 2 OF TITLE 14 OF THE
CALIFORNIA CIVIL CODE.

 

7.             Releases.  Guarantor consents and agrees that, without notice to
or by Guarantor and without affecting or impairing the obligations of Guarantor
hereunder, Bank may, by action or inaction:

 

(a)           compromise, settle, extend the duration or the time for the
payment of, or discharge the performance of, or may refuse to or otherwise not
enforce the Term Loan Documents;

 

(b)           release all or any one or more parties to any one or more of the
Term Loan Documents or grant other indulgences to Borrower in respect thereof;

 

(c)           amend or modify in any manner and at any time (or from time to
time) any of the Term Loan Documents; or

 

(d)           release or substitute any other guarantor, if any, of the
Guaranteed Obligations, or enforce, exchange, release (by action or inaction),
or waive any security for the Guaranteed Obligations (including, the collateral
referred to in Section 18 hereof) or any other guaranty of the Guaranteed
Obligations, or any portion thereof.

 

8.             No Election.  Bank shall have the right to seek recourse against
Guarantor to the fullest extent provided for herein, and no election by Bank to
proceed in one form of action or proceeding, or against any party, or on any
obligation, shall constitute a waiver of Bank’s right to proceed in any other
form of action or proceeding or against other parties unless Bank has expressly
waived such right in writing.  Specifically, but without limiting the generality
of the foregoing, no action or proceeding by Bank under any document or
instrument evidencing the Guaranteed Obligations shall serve to diminish the
liability of Guarantor under this Guaranty except to the extent that Bank
finally and unconditionally shall have realized indefeasible payment by such
action or proceeding.

 

9.             Indefeasible Payment.  The Guaranteed Obligations shall not be
considered indefeasibly paid for purposes of this Guaranty unless and until all
payments to Bank are no longer subject to any right on the part of any person,
including Borrower, Borrower as a debtor in possession, or any trustee (whether
appointed under the Bankruptcy Code or otherwise) of Borrower’s assets to
invalidate or set aside such payments or to seek to recoup the amount of such
payments or any portion thereof, or to declare same to be fraudulent or
preferential.  Upon such full and final performance and indefeasible payment of
the Guaranteed Obligations whether by Guarantor or Borrower, Bank shall have no
obligation whatsoever to transfer or assign its interest in the Term Loan
Documents to Guarantor.  In the event that, for any reason, any portion of such
payments to Bank is set aside or restored, whether voluntarily or involuntarily,
after the making thereof, then the obligation intended to be satisfied thereby
shall be revived and continued in full force and effect as if said payment or
payments had not been made, and Guarantor shall be liable for the full amount
Bank is required to repay plus any and all costs and expenses (including
attorneys’ fees) paid by Bank in connection therewith.

 

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10.           Financial Condition of Borrower.  Guarantor represents and
warrants to Bank that Guarantor is currently informed of the financial condition
of Borrower and of all other circumstances which a diligent inquiry would reveal
and which bear upon the risk of nonpayment of the Guaranteed Obligations. 
Guarantor further represents and warrants to Bank that Guarantor has read and
understands the terms and conditions of the Loan Agreement and the other Term
Loan Documents.  Guarantor hereby covenants that Guarantor will continue to keep
informed of Borrower’s financial condition, the financial condition of other
guarantors, if any, and of all other circumstances which bear upon the risk of
nonpayment or nonperformance of the Guaranteed Obligations.

 

11.           Subordination.  Guarantor hereby agrees that any and all present
and future indebtedness of Borrower owing to Guarantor is postponed in favor of
and subordinated to payment, in full, in cash, of the Guaranteed Obligations. 
In this regard, no payment of any kind whatsoever shall be made with respect to
such indebtedness until the Guaranteed Obligations have been indefeasibly paid
in full.

 

12.           Payments; Application.  All payments to be made hereunder by
Guarantor shall be made in lawful money of the United States of America at the
time of payment, shall be made in immediately available funds, and shall be made
without deduction (whether for taxes or otherwise) or offset.  All payments made
by Guarantor hereunder shall be applied as follows: first, to all costs and
expenses (including attorneys’ fees) incurred by Bank in enforcing this Guaranty
or in collecting the Guaranteed Obligations; second, to all accrued and unpaid
interest, premium, if any, and fees owing to Bank constituting Guaranteed
Obligations; and third, to the balance of the Guaranteed Obligations.

 

13.           Attorneys’ Fees and Costs.  Guarantor agrees to pay, on demand,
all reasonable attorneys’ fees and all other costs and expenses which may be
incurred by Bank in the enforcement of this Guaranty (including those brought
relating to proceedings pursuant to 11 U.S.C.) or in any way arising out of, or
consequential to the protection, assertion, or enforcement of the Guaranteed
Obligations (or any security therefor), whether or not suit is brought.

 

14.           Indemnification.  Guarantor agrees to indemnify Bank and hold Bank
harmless against all obligations, demands, or liabilities asserted by any party
and against all losses in any way suffered, incurred, or paid by Bank as a
result of or in any way arising out of, following, or consequential to Bank’s
transactions with Borrower.

 

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15.           Notices.  All notices or demands by Guarantor or Bank to the other
relating to this Guaranty shall be in writing and either personally served or
sent by registered or certified mail, postage prepaid, return receipt requested,
overnight delivery service, or by telefacsimile, and shall be deemed to be given
for purposes of this Guaranty on the earlier of the date of actual receipt or
three days after the deposit thereof in the mail.  Unless otherwise specified in
a notice sent or delivered in accordance with the provisions of this section,
such writing shall be sent as follows:

 

If to Bank:

 

U.S. Bank National Association

15910 Ventura Boulevard, Suite 1712

Encino, CA  91436

Attn:  Gary Terrasi

Telefacsimile:  (818) 789-3041

 

If to Guarantor:

 

Spell C. LLC

6835 Valjean Avenue

Van Nuys, California 91406

Telefacsimile: (818) 908-9191

 

16.           Cumulative Remedies.  No remedy under this Guaranty or under any
Term Loan Document is intended to be exclusive of any other remedy, but each and
every remedy shall be cumulative and in addition to any and every other remedy
given hereunder or under any Term Loan Document, and those provided by law or in
equity.  No delay or omission by Bank to exercise any right under this Guaranty
shall impair any such right nor be construed to be a waiver thereof.  No failure
on the part of Bank to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right.

 

17.           Books and Records.  Guarantor agrees that Bank’s books and records
showing the account between Bank and Borrower shall be admissible in any action
or proceeding and shall be binding upon Guarantor for the purpose of
establishing the items therein set forth and shall constitute prima facie proof
thereof.

 

18.           Severability of Provisions.  Any provision of this Guaranty which
is prohibited or unenforceable under applicable law, shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.

 

19.           Entire Agreement; Amendments.  This Guaranty constitutes the
entire agreement between Guarantor and Bank pertaining to the subject matter
contained herein.  This Guaranty may not be altered, amended, or modified, nor
may any provision hereof be waived or noncompliance therewith consented to,
except by means of a writing executed by both Guarantor and Bank.  Any such
alteration, amendment, modification, waiver, or consent shall be effective only
to the extent specified therein and for the specific purpose for which given. 
No course of dealing and no delay or waiver of any right or default under this
Guaranty shall be deemed a waiver of any other, similar or dissimilar right or
default or otherwise prejudice the rights and remedies hereunder.

 

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20.           Successors and Assigns.  The death of Guarantor shall not
terminate this Guaranty.  This Guaranty shall be binding upon Guarantor’s heirs,
executors, administrators, representatives, successors and assigns and shall
inure to the benefit of the successors and assigns of Bank; provided, however,
Guarantor shall not assign this Guaranty or delegate any of its duties hereunder
without Bank’s prior written consent.  Any assignment without the consent of
Bank shall be absolutely void.  In the event of any assignment or other transfer
of rights by Bank, the rights and benefits herein conferred upon Bank shall
automatically extend to and be vested in such assignee or other transferee.

 

21.           Choice of Law and Venue.  THE VALIDITY OF THIS GUARANTY, ITS
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF GUARANTOR AND
BANK, SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF CALIFORNIA.  GUARANTOR HEREBY AGREES THAT ALL
ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS GUARANTY SHALL BE TRIED
AND DETERMINED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, OR, AT THE SOLE OPTION OF BANK, IN ANY OTHER COURT
IN WHICH BANK SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS
SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY.  GUARANTOR HEREBY
EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION.

 

22.           Waiver of Jury Trial.  GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT
TO TRIAL BY JURY OF ANY ACTION, CAUSE OF ACTION, CLAIM, DEMAND, OR PROCEEDING
ARISING UNDER OR WITH RESPECT TO THIS GUARANTY, OR IN ANY WAY CONNECTED WITH,
RELATED TO, OR INCIDENTAL TO THE DEALINGS OF GUARANTOR AND BANK WITH RESPECT TO
THIS GUARANTY, OR THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE.  GUARANTOR HEREBY AGREES THAT ANY SUCH ACTION, CAUSE OF ACTION,
CLAIM, DEMAND, OR PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY
AND THAT BANK MAY FILE AN ORIGINAL COUNTERPART OF THIS SECTION WITH ANY COURT OR
OTHER TRIBUNAL AS WRITTEN EVIDENCE OF THE CONSENT OF GUARANTOR TO THE WAIVER OF
ITS RIGHT TO TRIAL BY JURY.

 

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23.           Waivers, Consents.  Guarantor warrants and agrees that each of the
waivers and consents set forth herein is made after consultation with legal
counsel and with full knowledge of its significance and consequence, with the
understanding that events giving rise to any defense or right waived may
diminish, destroy, or otherwise adversely affect rights which Guarantor
otherwise may have against Borrower, Bank, or others, or against any collateral,
and that, under the circumstances, the waivers and consents herein given are
reasonable and not contrary to public policy or law.  If any of the waivers or
consents herein are determined to be unenforceable under applicable law, such
waivers and consents shall be effective to the maximum extent permitted by law.

 

24.           Amended and Restated Agreement.  This Guaranty amends, restates
and replaces the Original Guaranty.  Nothing expressed or implied in this
Guaranty shall be construed as a release or other discharge of Guarantor from
any of its obligations or liabilities under the Original Guaranty.

 

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IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty as of the
date set forth in the first paragraph hereof.

 

 

 

SPELL C. LLC,

 

a Delaware limited liability company

 

 

 

 

 

By:

/s/ Henry Stupp

 

Name:

Henry Stupp

 

Title:

Chief Executive Officer

 

Amended and Restated Continuing Guaranty — Spell C. LLC

 

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