<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
[AMENDMENT NO. .........................]
[X] Filed by the Registrant
[_] Filed by a Party other than the Registrant
CHECK THE APPROPRIATE BOX:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule 14a
6(e)(2)
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Sec. 240.14a-12
CHEROKEE INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
CHEROKEE INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] $125 per Exchange Act Rules 0-11(c)(I)(ii), 14a-6(i)(1), 14a g(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule () 11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
[_] Check box if any part of the fee is offset as provided by exchange act
rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: ________________________________________________
2) Form Schedule or Registration Statement No.: ___________________________
3) Filing Party: __________________________________________________________
4) Date Filed: ____________________________________________________________
<PAGE>
CHEROKEE INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
ON OCTOBER 14, 1996
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of
Cherokee Inc. (the "Company") will be held at the Palisades Salon in the Loews
Santa Monica Beach Hotel, 1700 Ocean Avenue, Santa Monica, California, on
October 14, 1996, at 10:00 A.M. (Pacific Time) for the following purposes:
1. To elect seven directors to the Board of Directors who will serve until
the Company's 1997 Annual Meeting of Stockholders and until their
successors have been duly elected and qualified;
2. To transact such other business as may be properly brought before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on September 13, 1996 will
be entitled to notice of and to vote at said meeting or any adjournments
thereof. A list of such stockholders shall be open to the examination of any
stockholder at the meeting and for a period of ten days prior to the date of the
meeting at the office of Cherokee Inc., 6835 Valjean Avenue, Van Nuys,
California 91406.
The Board of Directors urges each stockholder to read carefully the
enclosed proxy statement which is incorporated herein by reference.
By Order of the Board of Directors,
/s/ Carol A. Gratzke
Carol A. Gratzke
Secretary
6835 Valjean Avenue
Van Nuys, CA 91406
Dated: September 19, 1996
IMPORTANT
WHETHER OR NOT YOU EXPECT TO ATTEND THE 1996 ANNUAL MEETING IN PERSON, PLEASE
COMPLETE, DATE, SIGN, AND RETURN THE ENCLOSED PROXY IN THE ENCLOSE ENVELOPE
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. YOUR PROXY WILL BE
REVOCABLE ANY TIME PRIOR TO ITS EXERCISE EITHER IN WRITING OR BY VOTING YOUR
SHARES PERSONALLY AT THE 1996 ANNUAL MEETING.
<PAGE>
CHEROKEE INC.
6835 VALJEAN AVENUE
VAN NUYS, CA 91406
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 14, 1996
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors (the "Board") and management of Cherokee Inc., a Delaware
corporation ("Cherokee" or "Company"), of proxies to be used at the Annual
Meeting of Stockholders to be held at the Palisades Salon in the Loews Santa
Monica Beach Hotel, 1700 Ocean Avenue, Santa Monica, California, on October 14,
1996, at 10:00 A.M. (Pacific Time) and at any adjournments thereof. A form of
the proxy is enclosed for use at the meeting. Stockholders are being asked to
vote upon the election of seven directors to the Board and to transact such
other business as may properly come before the meeting.
If no instructions are given on the proxy, all shares represented by valid
proxies received pursuant to this solicitation (and not revoked before they are
voted) will be voted FOR the directors nominated by the Board, and as
recommended by the Board with regard to all other matters or if no such
recommendation is given, in the discretion of the proxy holder. Proxies marked
"withhold" and/or "abstain" will be counted towards the quorum requirement but
will not be voted for the election of the Board's director nominees.
A proxy may be revoked at any time before it is exercised by giving written
notice of revocation to the Secretary of the Company or by submitting, prior to
the time of the meeting, a properly executed proxy bearing a later date.
Stockholders having executed and returned a proxy, who attend the meeting and
desire to vote in person, are requested to so notify the Secretary of the
Company prior to the time of the meeting.
The mailing address of the Company is 6835 Valjean Avenue, Van Nuys,
California 91406. The approximate date on which this Proxy Statement and form
of proxy are being mailed to the stockholders is September 19, 1996.
GENERAL INFORMATION
OUTSTANDING SHARES AND VOTING RIGHTS
There were 7,650,813 shares of common stock of the Company ("Common Stock")
outstanding as of September 13, 1996, the Record Date for the stockholders
entitled to vote at the Annual Meeting. Each stockholder of record at the close
of business on September 13, 1996 is entitled to one vote for each share of
Common Stock then held on each matter to come before the meeting, or any
adjournments thereof.
A majority of the votes eligible to be cast at the Annual Meeting by
holders of Common Stock, or 3,825,407 votes, represented in person or by proxy
at the Annual Meeting is required for a quorum. A plurality of the votes cast
at the Annual Meeting by holders of shares of Common Stock entitled to vote, and
present, in person or by proxy at the Annual Meeting voting for the election of
directors is required for the election of each nominee as a director. Votes
that are withheld from any nominee will be excluded from the vote and will have
no effect. Brokers who hold shares in street name have the authority to vote on
certain "routine" matters when they have not received instructions from
beneficial owners. Brokers that do not receive instructions are entitled to
vote on the election of directors. The Company's Certificate of Incorporation
does not provide for cumulative voting.
<PAGE>
The Company's Plan of Reorganization (the "1994 Plan") which was filed on
November 7, 1994 with the Company's petition for relief under Chapter 11 and
which became effective December 23, 1994, provided for the issuance to general
unsecured creditors of 60.5504 shares of Common Stock for each $1,000 of
creditors' claims allowed by the bankruptcy court. To implement distribution of
Common Stock to general unsecured creditors, 1,000,000 shares of Common Stock
were issued to Shawmut Bank as disbursing agent. As of the Record Date, Shawmut
Bank had distributed 517,795 shares of Common Stock to general unsecured
creditors, canceled 475,000 shares of Common Stock at the Company's request and
held 7,205 shares of Common Stock. The Company will instruct Shawmut Bank to
vote the shares of Common Stock it held on the Record Date FOR the election of
all seven nominees for director.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of September 13, 1996 by each person
believed by the Company to own beneficially more than 5% of the outstanding
shares of any class of the Company's voting securities. Unless noted otherwise,
the holders listed below have sole voting power and dispositive power over the
shares beneficially held by them. As of September 13, 1996, 7,650,813 shares of
Common Stock were outstanding.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENTAGE
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
------------------- -------------------- ----------
<S> <C> <C>
Value Partners, Ltd.
C/O Fisher Ewing Partners
2200 Ross Avenue
Suite 4660 West
Dallas, TX 75201 2,007,369 26.2%
Robert Margolis/(A)/
6835 Valjean Avenue
Van Nuys, CA 91406 2,445,056 /(A)/ 30.2%/(A)/
Cowen & Company
Financial Square
New York, NY 10005 394,391 /(B)/ 5.16%/(B)/
The Newstar Group, Inc.
dba The Wilstar Group
6835 Valjean Avenue
Van Nuys, CA 91406 2,125,185 /(A) (C)/ 26.2%/(A) (C)/
</TABLE>
/(A)/ Includes 1,674,739 shares acquired by The Newstar Group, Inc. d/b/a The
Wilstar Group ("Wilstar") pursuant to the exercise of performance option
and includes 450,446 shares which may be acquired by Wilstar pursuant to
currently exercisable options. Mr. Margolis is majority shareholder and
Chief Executive Officer of Wilstar.
/(B)/ Includes 7,148 shares with respect to which voting power and dispositive
power are shared.
/(C)/ Does not include 319,871 shares individually held by Mr. Margolis.
2
<PAGE>
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of June 1, 1996, owned by all
Executive Compensation Table and all directors and executive the holders listed
below have sole voting and dispositive directors, each of the executive officers
named in the officers as a group. Unless noted otherwise, power over the shares
beneficially held by them.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENTAGE
NAME OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- ------------------------ ---------- ----------
<S> <C> <C>
Robert Margolis /(A)/ 2,445,026 30.2%
Herschel Elias 5,000 *
Douglas Weitman /(B) / 148,092 1.9%
Jess Ravich /(B)(C)/ 170,072 2.2%
Keith Hull /(B)(D)/ 5,000 *
Avi Dan /(B)(E)/ 371,667 4.9%
Jeffrey Schultz 5,000 *
Patricia Warren /(F)/ 31,449 .4%
All Executive Officers and
directors as a group /(G)/ 3,181,306 39.08%
* = Less than 1%
</TABLE>
/(A)/ Includes 319,871 held individually by Mr. Margolis and 1,674,739 shares
acquired by Wilstar pursuant to the exercise of performance options and
includes 450,446 shares which may be acquired by Wilstar pursuant to
currently exercisable options. Mr. Margolis is the majority shareholder
and Chief Executive Officer of Wilstar.
/(B)/ Includes 5000 shares which may be purchased pursuant to a currently
exercisable warrant at an exercise price of $3.00 per share.
/(C)/ Includes 165,033 shares owned by Libra Investments, Inc. ("Libra"). Mr.
Ravich is the Chairman and Chief Executive Officer of Libra and,
therefore, may be deemed to be the beneficial owner of such shares.
/(D)/ Excludes 77,386 shares owned by Avondale Mills, Inc. Mr. Hull is a Vice
President of Avondale Mills, Inc., however, he disclaims to be the
beneficial owner of such shares.
/(E)/ Includes 366,667 shares owned by Axicom Capital Group. Mr. Dan is the
President of Axicom Capital Group and, therefore, may be deemed to be the
beneficial owner of such shares.
/(F)/ Includes 20,000 shares which may be purchased pursuant to currently
exercisable options at an exercise price of $3.00.
/(G)/ Includes 490,446 shares which may be acquired pursuant to currently
exercisable warrants and options.
3
<PAGE>
ITEM 1. ELECTION OF DIRECTORS
At the October 30, 1995 Annual Meeting, eight directors were elected by the
Shareholders. One director resigned on January 5, 1996. On July 25, 1996, the
By-laws of the Company were amended to decrease the authorized number of
directors from nine to seven. All seven current directors have been nominated
for reelection at the meeting for one-year terms, expiring at the 1997 Annual
Meeting of Stockholders and until their successors have been duly elected and
qualified.
In the event that any nominee for director should become unavailable, it is
intended that votes will be cast, pursuant to the enclosed proxy, for such
substitute nominee as may be nominated by the Board. The Board has no present
knowledge that any of the persons named will be unavailable to serve.
INFORMATION CONCERNING DIRECTORS AND NOMINEES FOR BOARD OF DIRECTORS
The following table sets forth the principal occupation or employment and
principal business of the employer, if any, of each director and nominee for
director of the Company, as well as his age, business experience, other
directorships held by him and the period during which he has previously served
as director of the Company.
<TABLE>
<CAPTION>
NAME, AGE
AND PRINCIPAL OCCUPATION FOR PAST FIVE YEARS;
PRESENT POSITION WITH THE OTHER DIRECTORSHIPS;
COMPANY BUSINESS EXPERIENCE
- --------------------------- ------------------------------------------------
<S> <C>
Robert Margolis, 48 Mr. Margolis was appointed Chairman of the Board
Director, Chairman of the and Chief Executive Officer of the Company on
Board of Directors and May 5, 1995. Mr. Margolis was the co-founder of
Chief Executive Officer the Company's Apparel Division in 1981. He had
been the Co-Chairman of the Board of Directors,
President and Chief Executive Officer of the
Company since June 1990 and became Chairman of
the Board on June 1, 1993. Mr. Margolis
resigned all of his positions with the Company
on October 31, 1993 and entered into a one-year
consulting agreement with the Company. Since
1994 Mr. Margolis has been Chief Executive
Officer and a Director of a privately owned
company which manufactures and distributes
textile and apparel related products.
Herschel Elias, 48 Mr. Elias has been a director of the Company
Director since December 1994. During the past five
years, Mr. Elias has served as a real estate and
financial analyst for Investment Management
Corporation, a real estate and securities
investment firm.
Jeffrey Schultz, 50 Dr. Schultz has been a director of the Company
Director since December 1994. Dr. Schultz has served as
a Professor at Christian Brothers University
since 1986. Dr. Schultz served as a consultant
for the following companies: Southmark
Corporation from 1990 and 1993, Prime Motor Inns
from 1991 to 1993, and PGI Industries, Inc. from
1991 to 1993. Dr. Schultz also currently serves
as a director of Pharmhouse, Inc. (discount
beauty aids and pharmaceutical retailer).
Douglas Weitman, 53 Mr. Weitman has been a director of the Company
Director since May 1995. For more than five years, Mr.
Weitman has been the Chief Executive Officer of
Security Textile Corp., a privately owned
manufacturer of apparel and textile related
products.
Jess Ravich, 39 Mr. Ravich has been a Director of the Company
Director since May 1995. Mr. Ravich has been the Chief
Executive Officer and the
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
majority shareholder of Libra Investments, Inc.
("Libra") a registered broker dealer since it
was founded in June 1991. From March 1990 to
March 1991, he was Executive Vice President and
Director of High Yield Trading with Jeffries &
Co. a registered broker dealer.
Keith Hull, 43 Mr. Hull has been a director since June 1995.
Director For more than five years, Mr. Hull has been
President of Avondale Fabrics and Vice President
of its parent, Avondale Mills Inc. Avondale
Mills is a diversified manufacturer of textiles.
Avi Dan, 38 Mr. Dan has been a director since June 1995.
Director Mr. Dan is President of Axicom Capital Group, a
foreign investment company. From August 1993,
to the present Mr. Dan has been the President of
Cove Capital, a privately owned investment
company. From August, 1990 to August, 1993 Mr.
Dan was the President of Perlman Realty Co., a
real estate investment company.
</TABLE>
THE BOARD RECOMMENDS VOTES FOR THE ELECTION OF ALL SEVEN NOMINEES FOR
DIRECTORS. ALL THE NOMINEES CURRENTLY SERVE AS DIRECTORS OF THE COMPANY.
PROXIES GIVEN WITHOUT INSTRUCTIONS WILL BE VOTED FOR ALL SEVEN NOMINEES.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The business affairs of the Company are managed under the direction of the
Board of Directors, although the Board is not involved in day-to-day operations.
During the Fiscal year ended June 1, 1996 the Board met 5 times. Each director
attended at least 75% of all Board and applicable committee meetings during the
Fiscal year ended June 1, 1996. All outside directors have received a five year
warrant to purchase 5000 shares of Common Stock at an exercise price
approximately equal to the market price of the Common Stock at the time of
grant. On June 21, 1995, the By-laws of the Company were amended to increase the
authorized number of directors from seven to nine. On July 25, 1996, the By-
laws of the Company were again amended to decrease the authorized number of
directors from nine to seven.
AUDIT COMMITTEE
The Audit Committee recommends to the Board of Directors a firm of
independent certified public accountants to conduct the annual audit of the
Company's books and records; reviews with such accounting firm the scope and
results of the annual audit; consults with the independent accountants with
regard to the adequacy of the Company's system of internal accounting controls;
and reviews fees charged by the independent accountants for professional
services.
The Company's independent public accountants are invited to attend meetings
of the Audit Committee and certain members of management may also be invited to
attend. In Fiscal 1996, the Audit Committee consisted of two non-employee
directors, Herschel Elias and Jess Ravich. The Audit Committee met once during
this period.
COMPENSATION COMMITTEE
The Compensation Committee reviews and approves all salary arrangements and
other remuneration for officers of the Company. During Fiscal 1996 the
Compensation Committee consisted of Robert Margolis, and two non-employee
directors, Douglas Weitman and Dr. Jeffrey Schultz. The Compensation Committee
met once during this period.
5
<PAGE>
The Company completed the reorganization of its businesses during Fiscal
1996, from being a manufacturer and distributor of apparel and footwear to
that of a licensor of the Cherokee brand name. In connection with the
foregoing, it terminated its principal lines of business, sold a majority of its
assets and downsized to approximately 15 employees at June 1, 1996. As a result
of the fundamental changes being undertaken in the Company's business during
Fiscal 1996 and the limited number of mid-level and senior employees engaged by
the Company during such period, the Compensation Committee dealt with a very
limited number of employees on a case by case basis. As the Company begins to
grow during Fiscal 1997, the Compensation Committee will be formulating a
remuneration policy to accommodate the Company's emerging business and a report
will be issued during fiscal year ending May 31, 1997.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Except for Messrs. Margolis and Weitman who are directors of Wilstar, where
Mr. Margolis is the Chief Executive Officer, none of the executive officers of
the Company has served on the board of directors or on the compensation
committee of any other entity, any of whose officers served either on the Board
of Directors or on the Compensation Committee of the Company.
DIRECTORS' REMUNERATION AND WARRANT GRANTS
For their services on the Board during Fiscal 1996, non-officer or non-
employee directors were paid a retainer fee of $15,000 per annum, $1,500 for
each Board Meeting and $750 for each Telephonic Board Meeting attended.
Shown below is information concerning the amount paid to each non-officer
or non-employee director during Fiscal 1996:
<TABLE>
<CAPTION>
Director Fees Paid in Fiscal 1996
- -------- ------------------------
<S> <C>
Herschel Elias $15,250
Jeffrey Schultz 19,150
Douglas Weitman 12,000
Jess Ravich 16,500
Keith Hull 17,250
Avi Dan 17,250
</TABLE>
Set forth below is further information on warrants that the Company granted
to non-employee directors. Each warrant entitled the director to purchase 5,000
shares of Common Stock:
<TABLE>
<CAPTION>
Director # of Options Date of Grant Exercise Price Date exercised
- ------------------ ------------ ---------------- -------------- --------------
<S> <C> <C> <C> <C>
Herschel Elias 5,000 February 1, 1995 $2.43 April 24, 1996
Jeffrey Schultz 5,000 February 1, 1995 2.43 April 24, 1996
Keith Hull 5,000 July 25, 1995 3.00 unexercised
Jess Ravich 5,000 July 25, 1995 3.00 unexercised
Avi Dan 5,000 July 25, 1995 3.00 unexercised
Douglas Weitman 5,000 July 25, 1995 3.00 unexercised
</TABLE>
EXECUTIVE COMPENSATION TABLE
Shown below is information concerning the annual and long-term compensation
for services in all capacities to the Company for the years ended June 1, 1996,
June 3, 1995 and May 28, 1994 of those persons who were at any time during the
year ended June 1, 1996 the Chief Executive Officer and at June 1, 1996 the four
other most highly compensated executive officers of the Company.
6
<PAGE>
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION /(A)/ COMPENSATION
------------------ ------------
NAME AND SALARY /(B)/ BONUS /(B)/ STOCK OPTION
PRINCIPAL POSITION YEAR $ $ AWARDS # SHARES
------------------ ---- ------------ ----------- ---------------
<S> <C> <C> <C> <C>
Robert Margolis 1996 - /(C)/ - /(D)/
Chairman and Chief Executive Officer 1995 - /(C)/ - /(D)/
1994 1,225,140 /(E)/ - -
Patricia Warren 1996 125,000 - 75,000
President
Carol Gratzke 1996 68,269 - 30,000
Chief Financial Officer 1995 31,250 - -
1994 105,500 - 3,000
Michael Seyhun 1996 475,000 /(F)/ - -
Chief Financial Officer 1995 242,500 105,000 96,000
1994 150,000 40,000 -
Cary Cooper 1996 271,385 /(G)/ - -
Secretary & General Counsel 1995 252,000 63,000 -
1994 240,000 - -
</TABLE>
/(A)/ None of the named executive officers earned other annual compensation
except for perquisites which in no case exceeded the lesser of $50,000 or
10% of total annual salary and bonus for Fiscal 1994, 1995 and 1996.
/(B)/ Amounts shown include cash and non-cash compensation earned by named
executive officers; no amounts earned were deferred at the election of
those officers.
/(C)/ Mr. Margolis was appointed Chairman and Chief Executive Officer on May 4,
1995. Mr. Margolis provides his services to the Company pursuant to the
terms of the Wilstar Agreement. Wilstar receives $400,000 in annual
compensation for providing such services, is eligible for certain cash
bonus and has received certain options to purchase the Company Common
Stock pursuant to the Wilstar Agreement. Mr. Margolis owns approximately
50.1% of the stock of Wilstar. His compensation at Wilstar is based on its
profitability. (See Employment Contracts and Management Agreements below
for a further description of the Wilstar Agreement).
/(D)/ Pursuant to the Wilstar Agreement, Wilstar received options to purchase
shares of Common Stock. (See Employment Contracts and Management
Agreements below for a further description of the Wilstar Agreement).
/(E)/ Mr. Margolis was employed pursuant to an employment agreement which would
have expired on May 31, 1994. Under such agreement, Mr. Margolis would
have received an annual salary of $780,550 during Fiscal 1994; Mr.
Margolis was actually paid $345,140 in salary prior to his resignation.
Mr. Margolis resigned all of his positions with the Company on October 31,
1993 and entered into a consulting agreement with the Company pursuant to
which he agreed to make himself available as a consultant to the Company
for a period of one year for a fee of $1,130,000 of which $880,000 was
paid during Fiscal 1994. The $250,000 which was owed to Mr. Margolis
became an unsecured creditors claim in the Company's 1994 Plan; Mr.
Margolis received the same treatment as all other unsecured creditors and
received 15,259 shares of the Company's Common Stock in full satisfaction
of such claim.
/(F)/ Mr. Seyhun terminated his employment with the Company on January 5, 1996.
/(G)/ Mr. Cooper terminated his employment with the Company on December 1, 1995.
7
<PAGE>
OPTION GRANTS
Set forth below is further information on grants of stock options during
the years ended June 3, 1995 and June 1, 1996, to the named officers which are
reflected in the Executive Compensation Table:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF POTENTIAL REALIZABLE VALUE
SECURITIES TOTAL OPTIONS AT ASSUMED
UNDERLYING GRANTED TO ANNUAL RATES OF
OPTIONS GRANTED EMPLOYEES IN EXERCISE OR STOCK PRICE
/(1)/ FISCAL 1995 & BASE PRICE EXPIRATION APPRECIATION FOR
NAME (#) 1996 ($/SHARE) DATE OPTION TERM /(4)/
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5% 10%
-----------------------
Michael Seyhun 96,000 /(5)/ 100% $2.00 /(5)/ Feb. 1, 2000 -/(5)/ -/(5)/
- ------------------------------------------------------------------------------------------------------------------------
Patricia Warren 60,000 /(2)/ 100% $3.00 /(2)/ July 25, 2000 249,750 499,500
15,000 100% $3.85 /(3)/ Feb. 26, 2001
- ------------------------------------------------------------------------------------------------------------------------
Carol Gratzke 30,000 /(2)/ 100% $3.125 /(2)/ Jan. 9, 2001 86,750 173,500
$3.85 /(3)/ Feb. 26, 2001
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
/(1)/ Does not include stock options granted to Wilstar pursuant to the Wilstar
Agreement in connection with the Company's engagement of Robert Margolis
as Chairman and Chief Executive Officer. (See Employment Contracts and
Management Agreements below for a further description of the Wilstar
Agreement.
/(2)/ The options were granted on various dates and vest in equal shares over a
three year period. If the grantee's employment is terminated under certain
circumstances or there is a restructuring of the Company (as set forth in
the option agreement) these options would become immediately exercisable.
/(3)/ The option exercise price is subject to adjustment in the event of a stock
split or dividend, recapitalization or certain other events.
/(4)/ The actual value, if any, the named officer may realize will depend on the
excess of the stock price over the exercise price on the date the option
is exercised, so that there is no assurance the value realized by the
named officer will be at or near the value estimated. This account is net
of the option exercise price.
/(5)/ The options were granted as of February 1, 1995 and were to vest in 50%
installments on the first and second anniversaries of the grant date. As
part of Mr. Seyhun's severance settlement, the options were canceled.
Option Exercises and Fiscal Year-End Values
- -------------------------------------------
Set forth below is information with respect to the unexercised options to
purchase Common Stock granted in fiscal 1996 and prior years under employment
agreements to the named officers and held by them at June 1, 1996. None of the
named officers exercised any stock options during Fiscal 1996.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
NAME JUNE 1, 1996 JUNE 1, 1996
- ------------------ --------------------------- ---------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Patricia Warren - 75,000 $ - $249,750
Carol Gratzke - 30,000 $ - $ 86,750
</TABLE>
8
<PAGE>
/(1)/ Does not include stock option granted to Wilstar pursuant to the Wilstar
Agreement in connection with the Company's engagement of Robert Margolis
as Chairman and Chief Executive Officer. Wilstar exercised certain of
these options during the Fiscal year ended June 1, 1996. (See Employment
Contracts and Management Agreements below for a further description of the
Wilstar Agreement.).
/(2)/ Based on the closing price of the NASDAQ Small Cap Issue Market on May
31, 1996 ($6.50), net of the option exercise price.
EMPLOYMENT CONTRACTS AND MANAGEMENT AGREEMENTS
On April 24, 1995, a group which included Mr. Margolis acquired
approximately 22.3% of the Company's then outstanding Common Stock (the
"Group"). The Group sought to have Mr. Margolis installed as Chief Executive
Officer of the Company and to have Mr. Margolis appointed a director of the
Company. On May 4, 1995, the Company and Wilstar entered into a Management
Agreement (the "Agreement") pursuant to which Wilstar agreed to provide
executive management services to the Company by providing the services of Robert
Margolis as Chief Executive Officer. The Agreement will terminate on May 31,
1998; however, the Agreement will automatically extend for additional one-year
terms as long as the Company's pre-tax earnings are equal to at least 80% of the
pre-tax earnings contained in the budget submitted to and approved by the Board
of Directors for such fiscal year. During Fiscal 1996, Wilstar met the 80% pre-
tax earnings rule; hence, the contract was extended for an additional one year
term. Wilstar will receive an annual management fee of $400,000 and a bonus
equal to 10% of the Company's pre-tax earnings in excess of $2,666,666 in Fiscal
1996 and in excess of $2,500,000 thereafter. In addition, Wilstar received an
option to purchase 7 % of the Company's Common Stock on a fully diluted basis
(675,700 shares) at a purchase price of $3.00 per share (the "Wilstar Options").
Two thirds of these options are exercisable and the remaining one third of the
options will vest on May 3, 1997. Wilstar's ability to exercise the options
granted to it accelerates and such options become fully exercisable upon the
occurrence of certain events, including a termination of the Agreement without
cause, termination due to the Company's breach, or, under certain circumstances,
the merger of the Company, sale of substantially all of its assets, or sale of a
majority of its Common Stock.
In the original Agreement Wilstar had the right to purchase up to an
additional 22.5% of the Company's Common Stock at a price of $.02 per share
until May 3, 2000 based on the equity value of the Company as follows:
<TABLE>
<CAPTION>
CUMULATIVE PERCENTAGE OF DILUTED
COMMON STOCK EXERCISABLE EQUITY VALUE OF THE COMPANY/(i)/
<C> <S>
7.5% Equal to or Greater than $32,500,000
7.5% Equal to or Greater than $52,500,000
5.0% Equal to or Greater than $72,500,000
2.5% Equal to or Greater than $92,500,000
----
22.5%
====
</TABLE>
(i) The "Equity Value" of the Company shall be computed as the product
of the average closing trading price of the Common Stock for any
ninety (90) day period ending on or before May 3, 2000 during the term
of the agreement, multiplied by the weighted average number of
outstanding shares of Common Stock during such period.
On April 24, 1996, the Board of Directors revised the Agreement to
accelerate the vesting of Wilstar's Performance Options so that Wilstar was
immediately vested in its right to purchase up to 20% of the Company's fully
diluted Common Stock. Wilstar agreed to relinquish its rights to purchase up to
an additional 2.5% of the Company's fully diluted stock pursuant to the
Performance Options. Wilstar exercised the Performance Option in full on April
25, 1996 and purchased 1,674,739 shares. The Company accounted for this
transaction as a non-cash charge to earnings of $4,567,000.
The Agreement further provides that Wilstar and the Group each have the
right to elect two members of the Company's Board of Directors.
9
<PAGE>
Ms. Warren, the President of the Company, is employed pursuant to a three-
year agreement expiring May 30, 1998 which provides for a salary at an annual
rate of $100,000 from June 21, 1995 to May 31, 1996 and $325,000 from June 1,
1996 to May 31, 1998. Ms. Warren could earn bonuses in Fiscal 1996, Fiscal 1997
and Fiscal 1998 ranging from 10% of her salary up to $400,000 in Fiscal 1996 and
up to $175,000 in Fiscal 1997 and Fiscal 1998 based upon the Company's earnings
before interest and taxes. The agreement gives the Company the right to
terminate Ms. Warren's employment without cause at any time. If the Company had
exercised such right before November 30, 1995 it would have been obligated to
pay Ms. Warren $50,000; if it exercises such right any time thereafter it must
pay Ms. Warren $162,500.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 4, 1995, the Company and Wilstar entered into a Management Agreement
pursuant to which Wilstar agreed to provide executive management services to the
Company by providing the services of Robert Margolis as Chief Executive Officer.
Wilstar is a private label manufacturer and makes apparel clothing bearing the
Cherokee trademark for several retail stores, who have existing licensing
agreements with the Company. All deals are arms length transactions between
Wilstar and these retail stores and are negotiated separately and apart from the
Company. Mr. Margolis has not been involved in any of these transactions.
Since May 26, 1995, the Company has shared 3,000 square feet of office
space with Wilstar. The Company uses approximately one-half of such space and
pays Wilstar for such usage at the rate of $.75 per square foot or $1,125 per
month. In addition, the Company reimburses Wilstar for one-half of certain
costs relating to this office space. The rent and costs are prorated based upon
square footage used by Cherokee and Wilstar does not profit from this
reimbursement. Since May 4, 1996, the Company has shared 4,000 feet of
Wilstar's warehouse space at $.50 per square foot as storage space for its
financial records. Both rental agreements are on a month to month basis.
Since May 5, 1995, the Company has sold certain fabric and trim to Wilstar
for approximately $150,000 and has purchased certain finished apparel products
for approximately $510,000 from Wilstar for sale to the Company's customers.
The Company does not expect to sell any other assets to Wilstar and does not
expect to purchase any more product from Wilstar. The Company's purchases of
product from Wilstar were to fill existing orders from the Company's customers.
In connection with its purchases and sales to and from Wilstar, the Company
believes that the prices and terms were fair to the Company and were at least as
advantageous to the Company as the Company could have negotiated with unrelated
parties.
On July 28, 1995, Cherokee sold the assets of the Uniform Division to
Strategic Partners, Inc., a corporation which was formed by Michael Singer and
investors unaffiliated with Cherokee. Mr. Singer was the President of the
Uniform Division until the sale of the Uniform Division and is the President and
Chief Executive Officer of Strategic Partners. The assets sold included
accounts receivable, inventory, furniture and fixtures, equipment, and the
exclusive right to use the Cherokee trademark with respect to the manufacture
and sale of uniforms. The sales price was approximately $11,700,000, which was
$4,000,000 greater than the book value of the assets that were sold. Of the
purchase price, approximately $9,575,000 was paid in cash and $2,125,000 was
paid by a 10% subordinated promissory note (the "Note"). The Note requires
quarterly payments of interest and annual principal payments of $300,000 on July
27, 1997, 1998, 1999 and 2000 with the remaining principal amount due on July
27, 2001. In addition, Strategic Partners will pay Cherokee royalties with
respect to its sales of Cherokee brand uniform footwear, and beginning in June
2001, will pay Cherokee, subject to certain conditions, a royalty equal to 2% of
annual sales of Cherokee brand uniforms in excess of $30,000,000.
Due to its recent emergence from Chapter 11 Bankruptcy Proceedings in March
1995, it became clear that the Company could not continue to operate its
businesses without increasing its borrowing capacity, its lender at that time,
CIT, would not permit the Company to increase its borrowings without new
collateral. In April 1995, the Company entered into agreements in principle
pursuant to which Avi Dan or his nominee would have received a warrant to
purchase 440,000 shares of Common Stock at an exercise price of $.02 per share
and Mr. Dan would be appointed a director of the Company in consideration for
(a) paying $500,000 to CIT to purchase the warrant held by CIT entitling CIT to
purchase up to 10% of the shares of Common Stock to be issued in connection with
the 1994 Plan (approximately 570,000 shares) at an exercise price of $0.02 per
share and surrendering such warrant to
10
<PAGE>
the Company, (b) guaranteeing a $4,000,000 overadvance facility to be provided
the Company by CIT until August 31, 1995 and a $2,000,000 overadvance facility
from September 1, 1995 to January 31, 1996 and (c) securing such guarantee with
standby bank letters of credit. Mr. Dan paid CIT $500,000 and the CIT warrant
was surrendered to the Company. Prior to the issuance of the new warrant to Mr.
Dan, Robert Margolis became Chief Executive Officer of the Company. Mr.
Margolis effectuated a change of strategy as a result of which the Company no
longer required the CIT overadvance. The Company negotiated a new agreement
with Mr. Dan pursuant to which Mr. Dan and the Company agreed to surrender all
of their rights under the original agreement between them and the Company agreed
to issue Mr. Dan or his nominee 366,667 shares of Common Stock and to reimburse
Mr. Dan for his legal fees up to $10,000 (the "Axicom Capital Agreement"). On
June 21, 1995, Mr. Dan became a director of the Company and on August 21, 1995,
the Company issued 366,667 shares of Common Stock to Axicom Capital Group, Mr.
Dan's nominee.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16 of the Securities Exchange Act of 1934, as amended, requires the
Company's directors and executive officers and persons who own more than 10% of
a registered class of the Company's equity securities to file various reports
with the Securities and Exchange Commission concerning their holdings of, and
transactions in, securities of the Company. Copies of these filings must be
furnished to the Company.
Wilstar filed in July 1996 a late Report on Form 3 relating to its
acquisition of Wilstar Options and the Performance Options, and the April 1996
revisions with respect to the vesting requirements of the Wilstar Options. Mr.
Margolis filed in July 1996 a late Report on Form 4 relating to his indirect
beneficial interests with respect to the aforementioned Performance and Wilstar
Options and in connection with the revised vesting requirements of the Wilstar
Options.
COMMON STOCK PERFORMANCE
The Company has reorganized under Chapter 11 of the Bankruptcy Code twice
since June of 1993. As a result of the 1993 and 1994 Chapter 11
reorganizations, holders of the Company's then outstanding common stock received
approximately 8% and 1.6% of the reorganized Company's common stock,
respectively. Accordingly, the holder of 1000 shares of the Company's then
outstanding common stock during the quarter ended May 29, 1993 which shares
traded as high as $.875 per share during such period would now have the right to
less than one share of Common Stock of the Company. As described above, the
Company's Chapter 11 reorganizations in 1993 and 1994 essentially diluted the
Company's then outstanding common stock to a fraction of its value prior to such
reorganizations thereby making stock performance comparisons with the trading
price of the then outstanding common stock of the Company or other comparable
companies during such periods meaningless.
In connection with the Company's Chapter 11 reorganization in December
1994, the Company filed a Form 15 with the Securities and Exchange Commission
terminating the registration of its old Common Stock under the Securities
Exchange Act of 1934 (the "Act"). On April 25, 1995, the Company filed a form
10 Registration Statement (the "Form 10") with the SEC to register its Common
Stock under the Act. The Form 10 became effective on June 27, 1995.
Accordingly, the effective date of the Common Stock's registration under the Act
occurred after the end of the Company's fiscal year ended June 3, 1995.
On September 6, 1996 the last trade of the Common Stock on the NASDAQ Small
Cap Market was $5.625 per share.
Due to the nature of the Company's business being that of a licensor of its
Cherokee brand to wholesalers and retailers, which put this brand on various
product categories including but not limited to footwear, apparel, accessories,
watches, eyewear, home textile products and sporting goods, the Company does not
believe that a comparable peer group of publically traded licensing companies
exists; hence, the Company's return on investment was compared to the S&P 100-
LTD and NASDAQ INDEX COMPOSITE.
11
<PAGE>
For Fiscal 1996 the graph below compares the cumulative total shareholder
return on the Company's Common Stock with the cumulative total return on the
NASDAQ COMPOSITE INDEX and the S&P 100 LTD for the period commencing June 27,
1995 (the date the Form 10 on the new Common Stock became effective) and ending
on June 1, 1996. The data set forth below assumes the value of an investment in
the Company's Common Stock and each Index was $100 on June 27, 1995.
Comparison of Total Return*
Since June 27, 1995
AMONG CHEROKEE INC., THE NASDAQ INDEX COMPOSITE AND THE
S & P 100-LTD
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period CHEROKEE S&P NASDAQ INDEX
(Fiscal Year Covered) INC/DE 100-LTD COMPOSITE
- --------------------- ------------- ------- ------------
<S> <C> <C> <C>
Measurement Pt- 06/27/95 $100.00 $100.00 $100.00
FYE 09/01/95 $162.50 $102.98 $110.86
FYE 12/01/95 $120.83 $112.71 $114.76
FYE 03/01/96 $137.50 $121.37 $118.11
FYE 05/31/96 $235.93 $126.93 $135.22
</TABLE>
*Please note that the price of Common Stock set forth in the graph
reflects the $0.60 per share dividend which was paid on May 30, 1996.
12
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
On May 30, 1995 the Company engaged Coopers & Lybrand L.L.P. ("Coopers") to
serve as its principal independent accountant to audit its financial statements
for the year ended June 3, 1995. Coopers replaced Ernst & Young L.L.P. ("Ernst
& Young"), which served as Cherokee's independent accountant since 1989. The
decision to dismiss Ernst & Young and change independent accountants was made by
Cherokee management and was approved by the Audit Committee.
The report of Ernst & Young with respect to the consolidated financial
statements of Cherokee as of, and for the year ended, May 29, 1993 noted that
Cherokee accounted for its Plan of Reorganization that was confirmed on May 28,
1993 using "Fresh Start Reporting" as recommended by the American Institute of
Certified Public Accountants Statement of Position 90-7 on "Financial Reporting
by Entities in Reorganization under the Bankruptcy Code". The report of Ernst &
Young with respect to the consolidated financial statements of Cherokee as of,
and for the year ended, May 28, 1994 contained a going concern qualification.
The qualification was based upon Cherokee's continuing operating losses and the
expectation that it would not meet its scheduled fiscal 1995 debt service
payments on its outstanding debt securities.
To the knowledge of Cherokee, there have been no disagreements between
Cherokee and Ernst & Young on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure. Furthermore,
there have been no reportable events as set forth in Item 304(a)(1)(v) of
Regulation S-K. Ernst & Young furnished the Securities and Exchange Commission
with a letter stating they agree with the above statements.
A representative of Coopers, who is expected to be present at the Annual
Meeting, will have an opportunity to make a statement, and will be available to
answer questions, if any, from stockholders.
OTHER MATTERS
ADDITIONAL INFORMATION
Copies of the Company's Annual Report on Form 10-K for the fiscal year
ended June 1, 1996, (including financial statements and financial statement
schedules) as filed with the Securities and Exchange Commission are available
upon written request from the office of Investor Relations, Cherokee Inc., 6835
Valjean Avenue, Van Nuys, CA 91406.
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 1997 ANNUAL MEETING
Any proposal relating to a proper subject which a stockholder may intend to
be presented for action at the next Annual Meeting of Stockholders currently
scheduled to be held on October 27, 1997 must be received by the Company no
later than August 18, 1997, to be considered for inclusion in the proxy material
to be disseminated by the Board in accordance with the provisions of rule 14a
(8) (3) (i) promulgated under the Exchange Act. Copies of such proposals should
be sent to the Corporate Secretary at the Company's principal executive offices.
To be eligible for inclusion in such proxy materials, such proposals must
conform to the requirements set forth in Regulation 14A under the Exchange Act.
OTHER BUSINESS OF THE MEETING
The Board is not aware of any matter to be presented at the Annual Meeting
or any postponement or adjournment thereof which is not listed on the Notice of
Annual Meeting and discussed above. If other matters should properly come
before the meeting, however, the persons named in the accompanying proxy will
vote all proxies in accordance with the recommendation of the Board, or if no
such recommendation is given, in their own discretion.
COST OF SOLICITING PROXIES
The Company will bear the cost of proxy solicitation for the election of
the Board's nominees for director. In addition to the use of the mail, proxies
may be solicited by personal interview, telephone or telegraph, by officers,
directors and other employees of the Company, who will not receive any
additional compensation for such
13
<PAGE>
services. The Company may also elect to engage a proxy solicitation firm to
assist in the soliciting of proxies. The Company may also elect to engage a
proxy solicitation firm to assist in the soliciting of proxies. The company does
not anticipate that the costs of such proxy solicitation firm would exceed
$10,000, plus its out of pocket fees and expenses. The Company will also request
persons, firms and corporations holding shares in their names, or in the names
of their nominees, which are beneficially owned by others, to send or cause to
be sent proxy materials to, and obtain proxies from, such beneficial owners and
will reimburse such holders for their reasonable expenses in so doing.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Carol A. Gratzke
CAROL A. GRATZKE
SECRETARY
LOS ANGELES, CALIFORNIA
DATED: SEPTEMBER 19, 1996
14
<PAGE>
[LETTERHEAD OF CHEROKEE GROUP]
ROBERT MARGOLIS
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
Dear Fellow Shareholders:
When I was appointed Chief Executive Officer of Cherokee Inc. at the end of
Fiscal 1995, my mission was to implement a strategy repositioning the Company's
business and operations from that of a manufacturer and distributor of apparel
and footwear goods to a low risk and low overhead licensor of the Cherokee name
and trademark. I am pleased to report that during the first thirteen months of
operations of the "New Cherokee", we have essentially accomplished our initial
goals and have positioned the Company to re-emerge as a dominant consumer
franchise in a broader base of categories with various contractual agreements
that will provide a growing stream of revenues.
During the course of this past fiscal year, we had three major goals, the
successful disposition of the Company's apparel and footwear inventories and the
sale of the Uniform Division, recruiting a new and experienced management team
committed to the licensing strategy and adding new license agreements which
would increase our income stream for future years. All of these goals were
accomplished beyond our expectations. In the first quarter, we recruited
quality management, signed a licensing agreement with Target Stores,
substantially liquidated all existing apparel and footwear inventories and sold
the Uniform Division for a profit of $4M. In the second quarter, we signed
additional non-exclusive retail direct license agreements with Target Stores,
Pamida and Modern Woman, the "Rockers" trademark was sold for $250,000 and the
Company eliminated all debt by paying off CIT. In the third quarter, we signed
non-exclusive retail direct license agreements with The Caldor Corporation and
Venture Stores, re-negotiated several existing wholesale licensee contracts,
signed a master licensing agreement with a Philippines conglomerate and
implemented our licensing data base controls system. During the fourth quarter,
we signed wholesale licensing agreements with Westpoint Stevens for the
development and distribution of Home Textile product categories and with
Blackduct Enterprises Ltd. of Nicosia, Cyprus for the development of men's and
women's casual shoes and boots in the European market, paid to shareholders a
capital dividend, settled in principal all debtor claims, retired 475,000 of the
1,000,000 shares set aside for distribution to holders of trade claims and
received a letter of intent signed by Suzuya Co. Ltd., our Japanese licensee,
regarding an option to purchase all of Cherokee's trademark rights. In granting
this option, Suzuya gave up (and Cherokee received back a year earlier) the
trademark assignments for the six other Asian territories listed in the original
licensing agreement. This option expires on October 31, 1996.
This year we began to realize the fruits of our labors. Pamida launched this
Spring, Target launched storewide in July, Mondragon opened in the Philippines
in July, Caldor and Venture are beginning this Fall, while Modern Woman and
Brylane should be effectively marketing Cherokee in Spring 1997. Thus far, our
Cherokee retail sales have been in line with our internal budget expectations.
Our licensees are benefiting from our unique approach and all have plans to grow
their businesses by expanding into other product categories. Overall, these
successes equate to increasing revenues.
Adding to these revenues, a debt free balance sheet, a low overhead and a small
yet talented staff, we are now positioned to further develop our Cherokee
franchise globally and begin to contemplate other potential transactions to
continue to increase our shareholder value. As a reflection of the foregoing,
we have almost doubled our shareholder value with the Company's stock rising
from an average price of $2.93 for the month of May 1995 to a price of $5.38 on
September 13, 1996.
<PAGE>
Vision becomes reality
- ----------------------
There are visionaries who anticipate the important changes taking place in their
industries. Successful companies not only have the vision, but execute
strategies necessary for their visions to become a reality. At Cherokee, our
executive team, headed by Patricia Warren, our President, Carol Gratzke, our
Chief Financial Officer, Howard Siegel, our Vice President of Operations and
Ruth Eng, our Vice President of International Licensing, is ultimately
responsible for the understanding and execution of our corporate objectives that
enable us to make our visions a reality.
Objectives this year
- --------------------
All of our objectives are towards the goal of increasing the Company's
profitability and the growth of our franchise which we believe will enhance
shareholder value. Domestically we intend to continue to develop our franchise
by expanding categories and increasing penetration in our existing accounts
while we continue to selectively solicit and develop new accounts that would add
revenue and synergy to our program. As part of the expansion, we hope to become
a more significant factor in the home products area. We expect our licensees to
begin to market home products to consumers by Spring of 1997.
On a long term basis, global expansion is our primary objective. American
brands are sought out worldwide. Internationally we currently have an
established presence in Japan, Korea, the Philippines, Hong Kong, Taiwan, Greece
and Cyprus. We are presently communicating and negotiating potential global
affiliations to build the Cherokee brand. We will also make our first trade
show appearance in Germany in September and in Asia in October.
In our global ventures, we have also been effective in networking licensees so
that globally we now intermarket apparel, footwear, accessories and home
products. We see tremendous global opportunities forthcoming.
In addition, the disposition of the Company's former headquarters and
distribution facility remains a high priority. The sale of the Wentworth
facility was scheduled to close in early May 1996, but the buyer was unable to
complete the transaction. There has been a lot of activity regarding the
building and we expect to sell it profitably in the near future.
This year we will also continue to redefine our internal operating systems while
we continue to develop our staff so we may be in a position to capitalize on
investment opportunities synergistic with our systems and management
capabilities.
We are pleased that fiscal 1997 is off to a good start. We want to convey how
appreciative we are that our shareholders have been supportive and loyal to
Cherokee's present management team. We thank you for your investment in
Cherokee's future.
Sincerely yours,
CHEROKEE INC.
/s/ Robert Margolis
Robert Margolis
Chairman and
Chief Executive Officer
<PAGE>
PROXY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS PROXY
CHEROKEE INC.
1996 ANNUAL MEETING OF STOCKHOLDERS OCTOBER 14, 1996
The undersigned does hereby appoint Robert Margolis and Keith Hull, and each
of them, proxies for the undersigned with full power of substitution, to vote
all of the shares which the undersigned is entitled to vote, with all powers
the undersigned would possess if personally present at the 1996 Annual Meeting
of Stockholders of Cherokee Inc. (including all adjournments thereof) to be
held at the Loews Santa Monica Beach Hotel, 1700 Ocean Avenue, Santa Monica,
California, October 14, 1996 at 10:00 A.M. Pacific Time, on all matters that
may come before the Meeting.
The undersigned hereby instructs said proxies or their substitutes:
1. ELECTION OF DIRECTORS
[_] To VOTE FOR all nominees listed below.
[_] To WITHHOLD AUTHORITY to vote for all nominees listed below.
Robert Margolis, Herschel Elias, Jeffrey Schultz, Douglas Weitman,
Jess Ravich, Keith Hull, Avi Dan
Instructions: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.
- --------------------------------------------------------------------------------
2. DISCRETIONARY AUTHORITY: In their discretion, the proxies are authorized to
vote with respect to all other matters which may properly come before the
Meeting.
(Continued and to be SIGNED ON REVERSE SIDE)
THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
STOCKHOLDER. UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF THE NOMINEES FOR DIRECTOR AND FOR THE APPROVAL OF THE STOCK OPTION
PLAN.
THE UNDERSIGNED HEREBY REVOKES ANY PROXIES HERETOFORE GIVEN, AND RATIFIES AND
CONFIRMS THAT ALL THE PROXIES APPOINTED HEREBY, OR EITHER OF THEM, OR THEIR
SUBSTITUTE OR SUBSTITUTES MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE
THEREOF. THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF A COPY OF THE NOTICE OF
ANNUAL MEETING AND PROXY STATEMENT, BOTH DATED SEPTEMBER 19, 1996, AND A COPY
OF THE COMPANY'S ANNUAL REPORT ON FORM 10K FOR THE YEAR ENDED JUNE 1, 1996.
Dated , 1996
-------------
, (L.S.)
---------------
, (L.S.)
---------------
Signature(s)
NOTE: YOUR SIGNATURE SHOULD
APPEAR THE SAME AS YOUR NAME
APPEARS HEREON. IN SIGNING AS
ATTORNEY, EXECUTOR, ADMINIS-
TRATOR, TRUSTEE OR GUARDIAN,
PLEASE INDICATE THE CAPACITY
IN WHICH SIGNING, WHEN SIGN-
ING AS JOINT TENANTS, ALL
PARTIES IN THE JOINT TENANCY
MUST SIGN. WHEN A PROXY IS
GIVEN BY A CORPORATION, IT
SHOULD BE SIGNED BY AN AUTHO-
RIZED OFFICER AND THE CORPO-
RATE SEAL AFFIXED. NO ADDI-
TIONAL POSTAGE IS REQUIRED IF
MAILED WITHIN THE UNITED
STATES.
