Commitments and Contingencies

9 Months Ended

Nov. 02, 2013

Commitments and Contingencies

Commitments and Contingencies

(5) Commitments and Contingencies

Trademark Indemnities

Cherokee indemnifies certain licensees against liability arising from third-party claims of intellectual property rights infringement related to the Company’s trademarks. These indemnities appear in the licensing agreements with the Company’s licensees, are not limited in amount or duration and generally survive the expiration of the contracts. Given that the amount of any potential liabilities related to such indemnities cannot be determined until an infringement claim has been made, the Company is unable to determine the maximum amount of losses that it could incur related to such indemnification obligations.

Litigation

Estimated amounts for claims that are probable and can be reasonably estimated are recorded as liabilities in the consolidated balance sheets.

The likelihood of a material change in these estimated reserves would be dependent on new claims as they may arise and the expected probable favorable or unfavorable outcome of each claim. As additional information becomes available, the Company assesses the potential liability related to new claims and existing claims and revises estimates as appropriate. As new claims arise or existing claims evolve, such revisions in estimates of the potential liability could materially impact the results of operations and financial position.

Other

As part of the acquisition of Liz Lange and Completely Me by Liz Lange, the Company paid an earn-out payment of $0.4 million in March 2013 and agreed to pay an additional earn-out payment of $0.5 million (for a total of up to $0.9 million in contingent consideration), which additional earn-out payment is payable upon satisfaction of certain revenues attributable to the acquired assets during Fiscal 2014. In addition, as part of the acquisition, Cherokee agreed to assume the seller’s obligations under various agreements, including a consulting agreement with Ms. Lange as well as certain existing license agreements relating to the assets.