Robert Margolis is walking away from Cherokee Inc. after two decades, but he’s hardly doing so empty-handed.
This story first appeared in the February 1, 2011 issue of WWD. Subscribe Today.
His separation agreement and private sales of stock to the company and his two successors, chief executive officer Henry Stupp and non-executive chairman Jess Ravich, stand to add more than $10.5 million to his worth, according to documents filed with the Securities and Exchange Commission Monday.
Margolis has stepped down as executive chairman and a director of Cherokee. He relinquished the post of ceo in August and was succeeded in that role by Stupp. Ravich, a managing director at investment banking firm Houlihan Lokey and a Cherokee director since 1995, will replace him as chairman but on a non-executive basis.
The separation agreement with Margolis calls for him to receive $2.26 million, the sum of his base salary and the performance bonus to which he would have been entitled had he served with the company through next January. Options to purchase up to 100,000 shares of Cherokee common stock will become fully vested and exercisable.
Additionally, Cherokee will repurchase 400,000 shares of common stock from Margolis at a price of $18.15 a share, its closing price on Friday, for $7.26 million.
To fund the stock repurchase and separation costs, Cherokee has negotiated a term loan of $10 million from U.S. Bank secured by the firm’s assets.
Margolis will also sell 10,000 shares to Stupp and 50,000 shares to Ravich for $18.15 a share, or a total of about $1.1 million.
According to a Dec. 9 filing with the SEC, Margolis owns more than 743,000 shares of Cherokee in addition to 135,000 held indirectly through The Wilstar Group. The repurchase and sale of the shares to Cherokee, Stupp and Ravich would reduce his holdings to about 418,000 shares, about 4.7 percent of those outstanding.
Also Monday, Cherokee cut its quarterly dividend to 20 cents a share. It was reduced to 38 cents from 50 cents a year ago.