UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 13, 2017
CHEROKEE INC.
(Exact name of registrant as specified in its charter)
Delaware |
|
1-18640 |
|
95-4182437 |
(State or other jurisdiction |
|
(Commission |
|
(I.R.S. Employer |
of incorporation) |
|
File Number) |
|
Identification Number) |
5990 Sepulveda Boulevard
Sherman Oaks, California 91411
(Address of principal executive offices) (Zip Code)
(818) 908-9868
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 4.01 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangement of Certain Officers.
(d) Director Appointment
Effective September 13, 2017, the Board of Directors (the “Board”) of Cherokee Inc. (the “Company”) appointed Mr. John T. McClain as a new director of the Company and as the chair of the Audit Committee of the Board. The Board has determined that Mr. McClain qualifies as an independent director under applicable rules of the Nasdaq Stock Market.
Mr. McClain, 56, served as chief financial officer of Lindblad Expeditions Holdings, Inc., a global provider of expedition cruises and adventure travel experiences, from November 2015 to September 2016. Mr. McClain served as the chief financial officer of The Jones Group Inc., a leading global designer, marketer and wholesaler of over 25 brands, from July 2007 until the sale of the company to Sycamore Partners in April 2014. From April 2014 to August 2014, he continued to provide senior advisory services related to financial operations to The Jones Group Inc. Prior to that, Mr. McClain held a number of roles at Avis Budget Group, Inc. formerly Cendant Corporation, a global provider of travel and real estate services. He joined Cendant Corporation in September 1999, serving as the senior vice president, finance and corporate controller until 2006. From July 2006 to 2007, Mr. McClain served as the chief accounting officer of Avis Budget Group and chief operating officer of Cendant Finance Holdings. Mr. McClain previously held leadership roles at Sirius Satellite Radio Inc. and ITT Corporation. Mr. McClain has served as a trustee of Seritage Growth Properties (NYSE: SRG), a real estate investment trust, since June 2015, and on the board of directors of Lands’ End, Inc. (NASDAQ: LE), a casual clothing, accessories, footwear and home products retailer, since May 2014, and Nine West Holdings, a designer, marketer and wholesaler of apparel, footwear and accessories, from April 2014 until October 2015. Mr. McClain holds a B.S degree in accounting from Lehigh University.
Mr. McClain’s compensation for his services as a director will be consistent with the Company’s compensation arrangements for its other non-employee directors, as described in the Company’s definitive proxy statement filed with the Securities and Exchange Commission on May 26, 2017. In general, these arrangements consist of annual cash compensation of $80,000 and additional cash compensation in connection with committee memberships and chairman roles, including an additional $20,000 annually for the director serving as chair of the Audit Committee, in all cases subject to each non-employee director’s ability to elect to receive equity awards in lieu of cash for all or a portion of his or her annual cash compensation for Board service. Additionally, the Company intends to enter into an indemnification agreement with Mr. McClain in the same form as the indemnification agreements the Company has entered into with its other directors. In general, these indemnification agreements provide, among other things, for the indemnification to the fullest extent permitted or required by applicable Delaware law, provided that an indemnitee shall not be entitled to indemnification in connection with any proceedings or claims initiated or brought voluntarily by the indemnitee and not by way of defense, subject to certain exceptions.
Other than the arrangements described above, there are no arrangements or understandings between Mr. McClain and any other persons pursuant to which Mr. McClain was selected as a director of the Company. Mr. McClain is not a party to any transaction that would require disclosure under Item 404(a) of Regulation S-K promulgated by the Securities and Exchange Commission.
Item 8.01 Other Events.
Press Release regarding Director Appointment
On September 14, 2017, the Company issued a press release announcing the appointment of Mr. McClain as a director of the Company, a copy of which is attached as Exhibit 99.1 hereto and incorporated herein by reference.
Cerberus Credit Facility Forbearance
As previously disclosed, as of July 29, 2017, the end of the Company’s most recently completed fiscal quarter, the Company was not in compliance with certain financial covenants set forth in its senior secured credit facility
2
(the “Cerberus Credit Facility”) with Cerberus Business Finance, LLC (“Cerberus”). The Company initially obtained a forbearance from Cerberus regarding these events of default on September 8, 2017, which was extended on September 15, 2017. Pursuant to the forbearance, as extended, Cerberus has agreed that it will not exercise its rights or remedies under the Cerberus Credit Facility solely with respect to these events of default through September 29, 2017. The Company is working with Cerberus to obtain a waiver of the events of default and/or amend certain terms of the Cerberus Credit Facility during the forbearance period. However, such a waiver or amendment may not be obtained, or if obtained, may not be obtained in a timely manner, during the forbearance period or on terms favorable to the Company. Any failure to obtain such a waiver or amendment within the forbearance period would subject the Company to significant risks, including Cerberus’s right to terminate its obligations under the Cerberus Credit Facility, declare all or any portion of the borrowed amounts then outstanding to be accelerated and due and payable, and/or exercise any other rights or remedies it may have under applicable law, including foreclosing on the Company’s and/or its subsidiaries assets that serve as collateral for the borrowed amounts.
Item 9.01 Financial Statements and Exhibits.
Exhibit No. |
|
Description |
99.1 |
|
3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
Cherokee Inc. |
|
|
|
|
Date: September 19, 2017 |
By: |
/s/ Jason Boling |
|
|
Jason Boling |
|
|
Chief Financial Officer |
4
Exhibit 99.1
Cherokee Global Brands Appoints John T. McClain to Board of Directors as Independent Director, Chairman of Audit Committee
SHERMAN OAKS, CA (September 14, 2017) — Cherokee Global Brands (NASDAQ: CHKE), a global brand marketing platform that manages a growing portfolio of fashion and lifestyle brands, today announced that it has appointed John T. McClain to the Company’s Board of Directors. Mr. McClain will serve as an independent director of the Company and Chair the Board’s Audit Committee effective immediately.
“John is the perfect addition to our Board,” commented Henry Stupp, Chief Executive Officer of Cherokee Global Brands. “Having served in various C-level and senior-advisory roles across a number of publicly traded and apparel enterprises, John brings extensive financial and industry acumen. We look forward to working closely with John and with the rest of the Board, to scale our brands, enhance productivity and grow profitably.”
Robert Galvin, Chairman of Cherokee Global Brands Board of Directors, commented, “On behalf of Cherokee’s Board of Directors, I am pleased to welcome John McClain to our Board. John will join our audit committee as chairperson and we look forward to leveraging his insights and strong financial skills as we continue to strengthen our financial discipline. As always, our mission is to increase long-term value for our shareholders.”
Mr. McClain currently serves on two publicly-traded Board of Directors including Lands’ End, Inc. (NASDAQ: LE) and Seritage Growth Properties (NYSE: SRG), and is a former Board member of Nine West Holdings, Inc. Mr. McClain is former Chief Financial Officer of Linblad Expeditions Holdings Inc., from 2015 to 2016, and The Jones Group, formerly Jones Apparel Group, from 2007 to 2014. Prior to Jones, Mr. McClain served as Chief Accounting Officer at Avis Budget Group. McClain is a Certified Public Accountant and holds a Bachelor of Science from Lehigh University in Bethlehem, Pennsylvania.
“I’m delighted to join Cherokee Global Brands Board of Directors,” commented Mr. McClain. “The Cherokee team has a compelling vision for the future of their brand portfolio and I look forward to helping guide that strategic direction at the board level while contributing my learnings as a CFO and from serving on other boards.”
About Cherokee Inc.
Cherokee is a global brand marketing platform that manages a growing portfolio of fashion and lifestyle brands including Cherokee®, Carole Little®, Tony Hawk® Signature Apparel and Hawk Brands®, Liz Lange®, Everyday California®, Sideout®, Hi-Tec®, Magnum®, 50 Peaks®, Interceptor® and Flip Flop Shops®, a leading franchise retail chain, across multiple consumer product categories and retail tiers around the world. The Company currently maintains license and franchise agreements with leading retailers and manufacturers that span over 110 countries in 12,000 retail locations and digital commerce.
1
Safe Harbor Statement
This news release may contain forward-looking statements regarding future events and the future performance of Cherokee. Forward-looking statements in this press release include, without limitation, statements regarding: the Company’s financial performance outlook for the full fiscal year 2018; the anticipated results of its business development efforts with respect to Cherokee, Hi-Tec, Magnum and Flip Flop Shops; the anticipated impact of the additions to its accounting staff; the anticipated resolution of the defaults under the Cerberus credit facility; and anticipated market developments and opportunities. A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances and is based on currently available market, operating, financial and competitive information and assumptions. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expected or projected, including, among others, risks that: the Company and its partners will not achieve the results anticipated in the statements made in this release; the Company will not be able to obtain a waiver or amendment of the Cerberus credit facility on reasonable terms or at all; that Cerberus will exercise its rights under the credit facility to accelerate repayment of the loan and foreclose on the collateral securing the loan; the anticipated benefits of the Hi-Tec acquisition will not be achieved; global economic conditions and the financial condition of the apparel and retail industry and/or adverse changes in licensee or consumer acceptance of products bearing the Company’s brands may lead to reduced royalties; the ability and/or commitment of the Company’s licensees to design, manufacture and market Cherokee®, Hi-Tec®, Magnum®, 50 Peaks®, Interceptor®, Carole Little®, Tony Hawk® and Hawk Brands®, Liz Lange®, Everyday California® and Sideout® branded products could cause our results to differ from our anticipations; the Company’s dependence on a select group of licensees for most of the Company’s revenues makes us susceptible to changes in those organizations; and the Company’s dependence on its key management personnel could leave us exposed to disruption on any termination of service. The risks included here are not exhaustive. Other risks and uncertainties are described in our annual report on Form 10-K filed on May 18, 2017, its periodic reports on Forms 10-Q and 8-K, and subsequent filings with the SEC we make from time to time, including the preliminary prospectus supplement that we filed in connection with the offering described herein. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Investor Contact:
Cherokee Global Brands
Jason Boling, CFO
818-908-9868
Addo Investor Relations
Laura Bainbridge/Patricia Nir
310-829-5400
2