Edgar Filing: CHEROKEE INC

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
[Amendment No. ]

Filed by the Registrant [X]

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 Section 240.14a-11(c) or Section 240.14a-12

CHEROKEE INC.
(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of filing Fee (Check the appropriate box):

[X] No fee required.

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):

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[_] 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
previously was paid. Identify the previous filing by registration
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Notes:

CHEROKEE INC.
6835 Valjean Avenue
Van Nuys, California 91416

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On June 5, 2002

NOTICE IS HEREBY GIVEN that the 2002 Annual Meeting of the Stockholders of
Cherokee Inc. will be held at the Palisades Salon in the Loews Santa Monica
Beach Hotel, 1700 Ocean Avenue, Santa Monica, California, on June 5, 2002 at
10:00 A.M. (Pacific Time) for the following purposes:

1. To elect five directors to the Board of Directors who will serve until
the 2003 Annual Meeting of Stockholders of Cherokee Inc. and until their
successors have been duly elected and qualified; and

2. To transact such other business as may be properly brought before the
meeting or any postponement or adjournment thereof.

Stockholders of record at the close of business on April 19, 2002 will be
entitled to notice of and to vote at the annual meeting or any adjournments
thereof. A list of stockholders entitled to vote at the annual meeting will be
available for examination by any stockholder for any purpose germane to the
annual meeting during normal business hours for ten days prior to the annual
meeting at the Loews Santa Monica Beach Hotel.

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 Gratzke
Carol A. Gratzke
Secretary

Van Nuys, California
April 26, 2002

IMPORTANT

Whether or not you expect to attend the annual meeting in person, please
complete, date, sign and return the enclosed proxy card in the enclosed
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 annual meeting.

CHEROKEE INC.
6835 Valjean Avenue
Van Nuys, California 91406

-----------------

PROXY STATEMENT
2002 ANNUAL MEETING OF STOCKHOLDERS
To Be Held On June 5, 2002

-----------------

GENERAL INFORMATION

This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Cherokee Inc., a Delaware corporation, ("Cherokee" or the
"Company") of proxies to be used at the 2002 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 June 5, 2002, at 10:00 A.M. (Pacific
Time) and at any adjournments or postponements thereof. A form of the proxy is
enclosed for use at the annual meeting. Stockholders are being asked to vote
upon the election of five directors to the Board of Directors and to transact
such other business as may properly come before the annual meeting. The
approximate date on which this Proxy Statement and form of proxy are being
mailed to the stockholders is May 2, 2002.

Record Date, Outstanding Shares and Voting

The Company's Board of Directors has fixed April 19, 2002, as the record
date to determine stockholders entitled to notice of and to vote at the annual
meeting. As of the record date, there were 8,163,405 shares of common stock
outstanding. Each stockholder of record at the close of business on April 19,
2002 is entitled to one vote for each share of common stock then held on each
matter to come before the annual meeting, or any adjournments or postponements
thereof.

Quorum and Voting Requirements

A majority of the votes eligible to be cast at the annual meeting by holders
of common stock, or 4,081,704 votes, represented in person or by proxy at the
annual meeting is required for a quorum. Under Delaware law, shares represented
by proxies that reflect abstentions or "broker non-votes" will be counted as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum. Broker non-votes are shares held by a broker or nominee,
which are represented at the meeting but with respect to which such broker or
nominee is not empowered to vote on a particular proposal. Under the rules that
govern brokers, brokers who have record ownership of shares have the authority
to vote on certain "routine" matters even when they have not received
instructions from the beneficial owners of such shares. Brokers that do not
receive instructions are entitled to vote on the election of directors.
Directors will be elected by a favorable vote of a plurality of the shares of
voting stock present and entitled to vote, in person or by proxy, at the annual
meeting. The nominees receiving the five highest number of votes will become
directors. Abstentions will not affect whether the election of any nominee to
the Board of Directors is approved at the annual meeting. No other proposals
are expected to be presented at the annual meeting. However, most other
proposals, such as a proposal to postpone or adjourn the annual meeting, must
receive the favorable vote of a majority of the shares of common stock
represented and entitled to vote, in person or by proxy at the annual meeting.
Abstentions as to such other proposals will have the same effect as votes
against the proposals. Broker non-votes, however, will be treated as unvoted
for purposes of determining approval of such proposals and will not be counted
as votes for or against such other proposals. The Company's Certificate of
Incorporation does not provide for cumulative voting.

Voting and Revocation of Proxies

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 of Directors, and
as recommended by the Board of Directors 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 of Directors'
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 required to so notify the Secretary of the
Company prior to the beginning of the annual meeting.

Security Ownership of Principal Stockholders

The following table sets forth information regarding the beneficial
ownership of common stock as of April 19, 2002 by each person believed to own
beneficially five percent or more of the Company's common stock. Unless noted
otherwise, the holders listed below have sole voting power and dispositive
power over the shares beneficially held by them. Under the rules of the
Securities and Exchange Commission, in calculating percentage ownership, each
holder is deemed to beneficially own any shares subject to options exercisable
by the holder within sixty days of April 19, 2002, but options owned by others
are deemed not to be outstanding shares even if the options are exercisable
within sixty days. Percentage ownership is based on 8,163,405 shares of common
stock outstanding on April 19, 2002.

Name and Address Amount and Nature of Percentage
of Beneficial Owner Beneficial Ownership of Class
------------------- -------------------- ----------

Timothy Ewing.................. 1,494,546(1) 18.3%(1)
4514 Cole Avenue, Suite 808
Dallas, TX 75205

Value Partners, Ltd............ 1,453,469 17.8%
C/O Ewing & Partners
4515 Cole Avenue, Suite 808
Dallas, TX 75205

Robert Margolis................ 1,552,843(2) 19.0%(2)
6835 Valjean Avenue
Van Nuys, CA 91406

The Newstar Group, Inc......... 573,541(3) 7.0%(3)
dba The Wilstar Group
6835 Valjean Avenue
Van Nuys, CA 91406

Fidelity Management &.......... 696,500 8.5%
Research Corp.
82 Devonshire Street
Boston, MA 02109

--------
(1) Includes 10,000 shares, which may be acquired pursuant to options that are
currently exercisable and 1,453,469 shares held directly by Value Partners,
Ltd. Mr. Ewing is managing partner of Ewing & Partners, which is the
general partner of Value Partner's Ltd. Mr. Ewing expressly disclaims
beneficial ownership of such shares.

(2) Includes 573,541 shares owned by The Newstar Group, Inc. d/b/a The Wilstar
Group ("Wilstar"), 10,000 shares which may be acquired pursuant to options
that are currently exercisable and 126,891 shares contributed to The Robert
Margolis Foundation, Inc. ("Foundation"). Mr. Margolis expressly disclaims
beneficial ownership of such shares in the Foundation. Mr. Margolis is the
sole shareholder of Wilstar.

(3) Does not include 852,411 shares individually held by Mr. Margolis.

Security Ownership of Management

The following table sets forth information regarding the beneficial
ownership of common stock as of April 19, 2002, by each director and nominee
for director, the Chief Executive Officer and each of the four other most
highly compensated executive officers as of February 2, 2002, and all directors
and executive officers as a group. Unless noted otherwise, the holders listed
below have sole voting and dispositive power over the shares beneficially held
by them. Under the rules of the Securities and Exchange Commission, in
calculating percentage ownership, each holder is deemed to beneficially own any
shares subject to options exercisable by the holder within sixty days of April
19, 2002, but options owned by others are deemed not to be outstanding shares
even if the options are exercisable within sixty days. Percentage ownership is
based on 8,163,405 shares of common stock outstanding on April 19, 2002.

Amount and
Nature of
Beneficial Percentage
Name of Beneficial Owner Ownership of Class
------------------------ ---------- ----------

Robert Margolis(1)................................ 1,552,843 19.0%
Jess Ravich(2).................................... 38,316 *
Keith Hull(2)..................................... 38,277 *
Timothy Ewing(3).................................. 1,494,546 18.3%
Dave Mullen(4).................................... 5,000 *
Carol Gratzke(5).................................. 188,992 2.3%
Howard Siegel(6).................................. 168,450 2.0%
Steven Ascher(7).................................. 120,000 1.4%
Sandy Stuart...................................... 3,334 *
All Executive Officers and directors as a group(8) 3,609,758 41.7%

--------
* = less than 1%

(1) Includes 842,411 shares held individually by Mr. Margolis, 10,000 shares
which may be acquired pursuant to options that are currently exercisable,
573,541 shares owned by Wilstar and 126,891 shares held by the Foundation.
Mr. Margolis is the sole shareholder of Wilstar.

(2) Includes 15,000 shares, which may be acquired pursuant to options that are
currently exercisable.

(3) Includes 10,000 shares, which may be acquired pursuant to options that are
currently exercisable and 1,453,469 shares held directly by Value Partners,
Ltd. Mr. Ewing is managing partner of Ewing & Partners, which is the
general partner of Value Partner's Ltd. and, therefore, Mr. Ewing may be
deemed to be the beneficial owner of such shares.

(4) Includes 5,000 shares which may be acquired pursuant to options that are
currently exercisable.

(5) Includes 158,992 shares which may be acquired pursuant to options that are
or will be exercisable within sixty days of April 19, 2002.

(6) Includes 145,884 shares which shares may be acquired pursuant to options
that are or will be exercisable within sixty days of April 19, 2002.

(7) Includes 120,000 shares which may be acquired pursuant to options that are
or will be exercisable within sixty days of April 19, 2002.

(8) Includes 483,210 shares which may be acquired pursuant to options that are
or will be exercisable within sixty days of April 19, 2002.

ITEM 1. ELECTION OF DIRECTORS

At the annual meeting, stockholders will be asked to elect five directors to
serve until the next annual meeting of stockholders and until their respective
successors are elected and qualified. All five incumbent directors have been
nominated for re-election for one-year terms. Both Mr. Margolis and Mr. Hull
have been nominated pursuant to the terms of a management agreement between Mr.
Margolis and the Company. See "Executive Compensation--Employment and
Management Agreements--Management Agreement". None of the nominees has any
family relationship to any other nominee or to any executive officer of the
Company. Directors will be elected by a favorable vote of a plurality of the
shares of common stock present and entitled to vote, in person or by proxy, at
the annual meeting.

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 of Directors. The Board of
Directors 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, 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. Each nominee has consented to being named in this Proxy Statement as a
nominee for election as director and has agreed to serve as a director if
elected.

Name, Age and Principal Occupation for Past Five Years;
Present Position with the Company Other Directorships; Business Experience
--------------------------------- ------------------------------------------------------------------

Robert Margolis, 54...................... Mr. Margolis has been a director since May 1995. Mr. Margolis
Director, Chairman of the Board of was appointed Chairman of the Board of Directors and Chief
Directors and Chief Executive Officer Executive Officer on May 5, 1995. Mr. Margolis was the co-
founder of the Company's Apparel Division in 1981. He had been
the Co-Chairman of the Board of Directors, President and Chief
Executive Officer since June 1990 and became Chairman of the
Board of Directors 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. Mr.
Margolis' services as Chief Executive Officer are provided
pursuant to the terms of a management agreement between Mr.
Margolis and the Company. See "Employment and Management
Agreements."

Timothy Ewing, 41........................ Mr. Ewing has been a director since September 1997. Mr. Ewing, a
Director Chartered Financial Analyst, is the managing partner of Ewing &
Partners and manager of Value Partners, Ltd., a private investment
partnership formed in 1989. Mr. Ewing is vice-chairman of the
board of directors of First Fidelity Bancorp, Inc. in Irvine,
California and sits on the board of directors of Harbourton
Financial Corporation in McLean, Virginia. In addition, he is on
the Board of Trustees of the Baylor Health Care System
Foundation and The Dallas Opera, the governing board of the
Dallas Museum of Natural History, Princeton University's
advisory council for its Department of Chemical Engineering, and
the advisory board of the University of Texas at Dallas Holocaust
Studies Program.

Dave Mullen, 67.......................... Mr. Mullen has been a Director since May 2000. For more than
Director nine years, he was the President and CEO of Robinson's-May in
North Hollywood, California and retired from The May
Department Stores in July 1999. He joined The May Department
Stores in March 1988 and from March 1988 to June 1988 was the
President and CEO of Goldwater's in Phoenix, Arizona. From June
1988 to January 1991 he was President and CEO of Filene's in
Boston, Massachusetts and in January 1991 became the President
and CEO of Robinson's-May in North Hollywood.

Jess Ravich, 44.......................... Mr. Ravich has been a Director since May 1995. Mr. Ravich is the
Director Chairman and Chief Executive Officer of Libra Securities, LLC, a
Los Angeles based investment banking firm, focusing on the
research, trading and selling of both high yield and investment
grade corporate debt. In addition, Libra Securities manages various
mezzanine and private equity partnerships. Prior to founding Libra
in 1991, Mr. Ravich was a Senior Vice President at Drexel
Burnham Lambert. Mr. Ravich serves on the board of directors of
the Communication Intelligence Corporation. In addition to his
professional responsibilities, Mr. Ravich is also a board member of
The Jewish Television Network.

Keith Hull, 49.......... Mr. Hull has been a director since June 1995. For more than five
Director years, Mr. Hull has been President of Avondale Fabrics and
Corporate Vice President of its parent, Avondale Mills Inc.
Avondale Mills is a diversified manufacturer of textiles.

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 of Directors is not involved in
day-to-day operations. During the fiscal year ended February 2, 2002 ("Fiscal
2002") the Board of Directors met four times. Each director attended at least
80% of all Board of Directors and applicable committee meetings during Fiscal
2002.

Audit Committee

The Audit Committee recommends to the Board of Directors a firm of
independent certified public accountants to conduct, among other things, the
annual audit of the Company's books and records; reviews with the independent
accountants the scope and results of the annual audit and quarterly reviews
prior to the filing of a report on Form 10-K or 10-Q with the SEC; reviews and
discusses the audited financial statements with the Company's management;
consults with the independent accountants and management with regard to the
adequacy of the Company's system of internal accounting controls; receives from
the independent auditors the report required by Independence Standards Board
Standard No. 1 as in effect at that time and discusses it with the independent
auditors; reviews and reassesses annually the adequacy of its charter; prepares
a report each year for inclusion in the Company's annual Proxy Statement; and
reviews fees charged by the independent accountants for professional services.
The Cherokee Board of Directors has adopted a written charter for the Audit
Committee. In addition, the Board of Directors has determined that all of the
members of the Audit Committee are "independent", as defined by the rules of
The Nasdaq Stock Market, Inc.

Representatives of 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 2002, the Audit Committee consisted of
three non-employee directors, Mr. Hull, Mr. Mullen and Mr. Ravich. The Audit
Committee met four times during this period.

Compensation Committee

The Company's compensation program for executives is administered by the
Compensation Committee of the Board of Directors. The Compensation Committee
consists of Mr. Ravich, Mr. Ewing and Mr. Hull, all of whom are non-employee
directors and outside directors within the meaning of Rule 16b-3 of the
Securities Exchange Act of 1934, as amended, and Section 162(m) of the Internal
Revenue Code, respectively. The Compensation Committee is responsible for
setting and administering executive officer salaries and the annual bonus and
long-term incentive plans that govern the compensation paid to the Company's
executives. The Compensation Committee met four times during Fiscal 2002.

Compensation Committee Interlocks and Insider Participation

Except for Mr. Margolis, who is a director and Chief Executive Officer of
the Company, as well as the sole shareholder of Wilstar, 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. The
executive management services of Mr. Margolis as the Company's Chairman of the
Board and Chief Executive Officer are provided pursuant to a management
agreement between Mr. Margolis and the Company. See "Executive
Compensation--Employment and Management Agreements--Management Agreement."

Directors' Remuneration and Stock Options

For their services on the Board of Directors during Fiscal 2002, each
non-employee director was paid a retainer fee of $20,000 per annum. The fees
are paid on a quarterly basis. On May 31, 2001, the directors voted to increase
their retainer fee from $15,000 to $25,000 per year and elected not to grant
themselves stock options. None of the current directors exercised options
during Fiscal 2002.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR EACH OF THE DIRECTORS NOMINATED IN ITEM 1

EXECUTIVE COMPENSATION

Summary Compensation Table(1)

The following table includes information concerning annual and long-term
compensation earned by the Chief Executive Officer and the other four most
highly compensated executive officers as of February 2, 2002 (collectively, the
"Named Executive Officers"), for services rendered during each of the Company's
last three fiscal years.

Annual Compensation Long Term Compensation
---------------------------- --------------------------
Securities
Underlying All Other
Fiscal Option Awards Compensation
Name and Principal Position Year Salary $ Bonus $ # $
--------------------------- ------ ---------- --------- ------------- ------------

Robert Margolis....................... 2002 647,564(2) 2,564,155(2)
Chairman and Chief Executive Officer 2001 589,333(2) 2,175,760(2)
2000 590,367(2) 1,776,084(2) -- --

Carol Gratzke......................... 2002 150,000 229,374
Chief Financial Officer 2001 155,769 205,738
2000 150,000(3) 169,089 -- --

Howard Siegel......................... 2002 150,000 229,374
President-Operations 2001 155,769 205,738
2000 150,000(3) 1 69,089 -- --

Steven Ascher......................... 2002 350,000 37,197
Executive Vice President 2001 320,213 108,240
2000 250,000(3) 100,000 -- --

Sandi Stuart..........................
Executive Vice President 2002 177,885(4) 50,000 10,000 --

--------
(1) None of the Named Executive Officers received any compensation reportable
as Other Annual Compensation during the period covered by the Summary
Compensation Table, except for perquisites, which did not exceed the lesser
of $50,000 or 10% of total annual salary and bonus of such Named Executive
Officer, and as a result, the corresponding column was omitted.
Additionally, none of the Named Executive Officers received restricted
stock awards or long-term incentive plan payouts during the period covered
by the Summary Compensation Table and, as a result, the corresponding
columns were omitted.

(2) The executive management services of Mr. Margolis as the Company's Chairman
of the Board and Chief Executive Officer are provided pursuant to a
management agreement originally between Wilstar and the Company. Mr.
Margolis is the sole stockholder of Wilstar. On January 3, 2001, Wilstar
assigned the management agreement to Mr. Margolis. Under the management
agreement, Mr. Margolis is eligible to receive both base compensation and
annual cash bonuses for providing management services. See "Employment and
Management Agreements" below for a further description of the management
agreement.

(3) The Fiscal 2001 salary amount represents a 53-week year.

(4) Sandi Stuart joined the Company as Executive Vice President on May 7, 2001,
and her Fiscal 2002 salary amount represents a partial year.

Option Grants in Last Fiscal Year

Set forth below is further information on grants of stock options during
Fiscal 2002 to the Named Executive Officers.

Potential Realizable
Value at Assumed
Annual Rates of Stock
Number of Percentage of Price Appreciation
Securities total Options Exercise for Option Term
Underlying Granted to or Base ($)(2)
Options Employees in Price Expiration ---------------------
Name Granted(1)# Fiscal 2002 ($/Share) Date 5% 10%
---- ----------- ------------- --------- ---------- ------ -------

Sandi Stuart 10,000(3) 16.7% 8.90 5-06-11 55,971 141,843

--------
(1) All option grants were made pursuant to the Company's 1995 Incentive Stock
Option Plan, as amended. Under the plan, in the event of a liquidation,
merger, reorganization, or consolidation of the Company with any other
corporation in which the Company is not the surviving corporation or the
Company becomes a wholly-owned subsidiary of another corporation, each
option granted under the plan, to the extent not fully exercised, will be
cancelled unless the surviving corporation in any such merger,
reorganization or consolidation elects to assume the options or to grant
substitute options in place thereof. Notwithstanding the foregoing, vested
options will remain exercisable until the date of any such liquidation,
merger, reorganization, or consolidation and any unvested options will
become exercisable for a ten-day period ending on the fifth day immediately
preceding any such liquidation, merger, reorganization or consolidation.

(2) The dollar gains under these columns result from calculations assuming 5%
and 10% growth rates as set by the Securities and Exchange Commission and
are not intended to forecast future price appreciations of the Company's
common stock. The actual value, if any, the Named Executive 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 Executive Officer will be at or near the
value shown.

(3) On May 7, 2001, Ms. Stuart received an award of 10,000 options to purchase
common stock. Such options become exercisable in three installments of
3,333, 3,333 and 3,334, on the first, second and third anniversaries of the
date of the grant, respectively. The exercise price of each option is
$8.90, which equals the fair market value of the Company's common stock on
the date of grant. The options are exercisable ten years from the date of
grant and contain cashless exercise and antidilution provisions. The
options generally terminate three months after Ms. Stuart's employment with
the Company is terminated, unless her employment is terminated as a result
of her death or disability in which case the options terminate one year
after her employment is terminated.

Option Exercises and Fiscal Year End Values

Set forth below is certain information concerning exercised and unexercised
options to purchase common stock granted both in Fiscal 2002 and prior years to
the Named Executive Officers, and held by them at February 2, 2002. During
Fiscal 2002, none of the Named Executive Officers exercised options to purchase
stock.

Number of Unexercised Value of
Options at In-the-Money Options at
February 2, 2002 February 2, 2002 $(1)
------------------------- -------------------------
Shares Acquired Value
Name on Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ------------ ----------- ------------- ----------- -------------

Robert Margolis -- -- 10,000 -- 64,688 --
Carol Gratzke.. -- -- 158,991 -- 725,434 --
Howard Siegel.. -- -- 145,884 -- 693,278 --
Steven Ascher.. -- -- 120,000 -- 656,256
Sandi Stuart... -- -- -- 10,000 -- 51,000

--------
(1) The value of unexercised in-the-money options at FY-end was calculated
based on the market value of the underlying securities, minus the exercise
price, and assumes the sale of the underlying securities on February 1,
2002, the last trading day in Fiscal 2002, at a price of $14.00 per share,
which was the closing price of the Company's common stock on the NASDAQ
National Market System on that date.

Employment and Management Agreements

Management Agreement

The Newstar Group, Inc. d/b/a The Wilstar Group ("Wilstar") previously
provided the executive management services of Mr. Margolis as the Company's
Chairman of the Board and Chief Executive Officer pursuant to a management
agreement between Wilstar and the Company. The parties originally entered into
a management agreement on May 4, 1995, which was subsequently amended several
times. As of November 29, 1999, Wilstar and the Company entered into a revised
management agreement, which substantially revised and restated in one document
the terms under which Wilstar agreed to continue to provide executive
management services to the Company. Robert Margolis is currently the sole
stockholder of Wilstar. On January 3, 2001, in accordance with the terms of the
management agreement, Wilstar assigned the management agreement to Mr. Margolis.

Base Compensation and Performance Bonuses. As base compensation for
services rendered under the management agreement, Mr. Margolis is currently
paid $647,564 per fiscal year. Mr. Margolis' base compensation is subject to an
annual cost of living increase.

Mr. Margolis is also eligible for annual performance bonuses. Section 3.3 of
the management agreement provides, that, for each fiscal year after the
Company's fiscal year ended January 29, 2000 ("Fiscal 2000"), if the Company's
EBITDA for such fiscal year is no less than $5.0 million, then Mr. Margolis
will receive a performance bonus equal to (x) 10% of the Company's EBITDA for
such fiscal year in excess of $2.5 million up to $10.0 million, plus (y) 15% of
the Company's EBITDA for such fiscal year in excess of $10.0 million.

In all cases, EBITDA will be determined in accordance with U.S. generally
accepted accounting principles and will be reduced by all accrued compensation
expenses attributable to any compensation paid or payable to Mr. Margolis under
the management agreement, including but not limited to the performance bonuses
provided for under Section 3.3 and base compensation payable to Mr. Margolis.

Initial Term and Extensions. The initial term of the management agreement
terminated on February 2, 2002. If the Company's consolidated pre-tax earnings,
as set forth in its audited financial statements for any of its fiscal years
during the term of the management agreement, commencing with Fiscal 2000: (a)
are no less than

80% of the consolidated pre-tax earnings contained in the budget submitted to
and approved by the Compensation Committee for such fiscal year, and (b) are
also no less than the consolidated pre-tax earnings for the immediately
preceding fiscal year, then the termination date of the management agreement
will automatically be extended an additional year. There may be any number of
such extensions if the foregoing tests are met on multiple occasions. During
Fiscal 2002, Fiscal 2001 and Fiscal 2000, the foregoing tests were met and
therefore the term of the management agreement has been extended to February 1,
2005.

Composition of the Board of Directors. The management agreement provides
that if the Company's board is comprised of five directors, the Company will
use its commercially reasonable best efforts to ensure (a) that one director is
nominated by Mr. Margolis (the "Wilstar Director"); (b) that one director (the
"Investor Director") is nominated by the members of the group, other than Mr.
Margolis, that filed a Schedule 13-D, dated April 24, 1995, with respect to the
purchase of the Company's common stock (collectively, the "Outside Investors");
and (c) that three directors are nominated by the non-Wilstar non-Investor
Directors (the "Other Directors"). If there are seven directors, the Company
will use its commercially reasonable best efforts to ensure that a second
Investor Director is nominated by Outside Investors and four directors are
nominated by the Other Directors. If there are nine directors, the Company will
use its commercially reasonable best efforts to ensure that, in addition to the
Wilstar Director and the Investor Directors described above, one director is
nominated by Mr. Margolis and the Outside Investors together (the
"Wilstar/Investor Director") and five directors are nominated by the Other
Directors. If the Board of Directors is expanded, the Company will use its
commercially reasonable best efforts to ensure that Mr. Margolis is able to
maintain his proportionate representation. The Company will use its
commercially reasonable best efforts to ensure that the Board of Directors will
have an audit and a compensation committee, each of which will be comprised of
three members, one of whom shall be an Investor Director and two of whom shall
be selected by the entire Board of Directors from all of the remaining
directors, other than the Wilstar Director.

In addition to the events of termination described below under the title
"Events of Termination," Mr. Margolis may elect to treat the following events
relating to the composition of the Board of Directors as a breach of the
management agreement by the Company:

. the size of the Board of Directors is increased or decreased without Mr.
Margolis' maintaining or increasing his proportionate representation;

. the Wilstar Director, the Investor Directors or the Wilstar/Investor
Director, as applicable, are not elected to the Board of Directors or are
not put on the slate of directors recommended to the Company's
stockholders or any such director is removed from the Board of Directors
without Mr. Margolis' prior approval; or

. without Mr. Margolis' consent, he is not elected Chairman of the Board.

Events of Termination. Mr. Margolis may terminate the management agreement
if the Company materially breaches any of the terms and conditions of the
management agreement or fails to perform its material obligations thereunder.
Unless initiated or consented to by Mr. Margolis, the occurrence of any of the
following will be deemed to be a material breach of the management agreement:

. the assignment to Mr. Margolis of any duties materially inconsistent
with, or the diminution of Mr. Margolis' positions, titles, offices,
duties and responsibilities with the Company or any removal of Mr.
Margolis from, or any failure to re-elect Mr. Margolis to, any titles,
offices or positions held by Mr. Margolis under the Revised Management
Agreement, including the failure of the Board of Directors to elect Mr.
Margolis or his designee as Chairman of the Board or the failure to
elect, or the removal of, any Wilstar or Outside Investor nominee as
director from the slate of directors recommended to the Company's
stockholders by the Board of Directors;

. except as in accordance with the management agreement, a reduction by the
Company in the base compensation or any other compensation provided for
in the management agreement;

. a change or relocation of Mr. Margolis' offices at the Company that
materially and adversely affects Mr. Margolis' working environment; or

. any other substantial, material and adverse changes in Mr. Margolis'
working conditions imposed by the Company.

The Board of Directors may terminate the management agreement at any time
without cause. If appropriate, the Board of Directors may also terminate the
management agreement "for cause." "For cause" is limited to the willful
misfeasance or gross negligence on the part of Mr. Margolis in connection with
the performance of his duties pursuant to the management agreement, which
willful misfeasance or gross negligence directly causes material harm to the
assets, business or operations of the Company. The management agreement will
terminate immediately upon Mr. Margolis' death and may be terminated by the
Board of Directors if Mr. Margolis fails to render services to the Company for
a substantially continuous period of six months because of Mr. Margolis'
physical or mental disability during such period.

Payments to Mr. Margolis if the management agreement is Terminated. If the
management agreement is terminated for any reason by either the Company or Mr.
Margolis, the Company will:

. pay Mr. Margolis' base compensation through the date of termination;

. reimburse Mr. Margolis for all expenses incurred through the date of
termination;

. provide ongoing indemnification for Mr. Margolis and ongoing insurance
coverage comparable to the insurance offered to other terminated
directors, officers or employees of the Company; and pay Mr. Margolis any
unpaid performance bonuses earned pursuant to Section 3.3 during the
fiscal year in which the management agreement is terminated; unpaid
performance bonuses will be calculated using the results of the whole
fiscal year during which the management agreement is

. terminated, but will be pro rated for the number of full months occurring
in such fiscal year prior to the date of termination.

In addition to the payments and other compensation described above, if the
Company terminates the management agreement without cause or Mr. Margolis
terminates the management agreement after the Company materially breaches any
of the terms and conditions thereof or fails to perform its material
obligations thereunder, the Company will pay Mr. Margolis, within 60 calendar
days after the date of termination, a lump sum in cash equal to three times the
sum of (a) Mr. Margolis' base compensation at the rate in effect at the date of
the termination and (b) the "Previous Performance Bonus." The "Previous
Performance Bonus" means an amount equal to the performance bonus received by
Mr. Margolis under Section 3.3 of the management agreement in the Company's
last full fiscal year ending prior to the date of termination.

Cap on Payments Contingent on a Change in Control. If the Company's
accountants determine that any payments to Mr. Margolis under the management
agreement would result in the non-deductibility of some or all of such payments
under Section 280G of the Code, the payments to Mr. Margolis will be reduced to
the maximum amount that is payable without causing such payments to be
nondeductible by the Company.

Other Compensation Arrangements

Pursuant to a compensation arrangement with Steven Ascher, the Executive
Vice President of New Business, Mr. Ascher will receive an annual base salary
of $350,000. Effective for Fiscal 2001 and each fiscal year thereafter, as long
as he is employed by the Company, Mr. Ascher will receive bonuses equal to two
and one-half percent of the Company's EBIT growth year to year. EBIT is defined
at earnings before interest and taxes and will not include net revenues
received from Carrefour, which is one of the Company's international licensees
for the Cherokee brand. For Fiscal 2002, the Company accrued a bonus of $37,197
for Mr. Ascher. Bonus payments resulting from EBIT growth, if any, will be paid
in equal quarterly installments during the year following the fiscal year in
which the bonus is earned. Mr. Ascher will also receive five percent of the net
royalty

revenues received by the Company from Carrefour. If the Company terminates Mr.
Ascher's employment without cause, it must pay Mr. Ascher $175,000, any unpaid
bonus amounts related to the prior year's EBIT growth and five percent of the
net royalty revenues received by the Company from Carrefour for a period of
three years from the date of termination.

Pursuant to a compensation arrangement with Ms. Kathy Prost, the former
Executive Vice President of Business Development, Ms. Prost was to receive an
annual base salary of $250,000. Ms. Prost received a grant of 50,000 stock
options, which were to vest in equal installments on the first, second and
third anniversaries of her date of hire and which had an exercise price of
$8.50 per share. The compensation arrangement also provided that if, Ms.
Prost's employment was terminated without cause, the Company would be obligated
to pay Ms. Prost $125,000 in severance. The Company terminated Ms. Prost's
employment on January 2, 2002 and will pay Ms. Prost $125,000 in installment
payments over a six month period commencing on January 4, 2002. Also, the
50,000 stock options were unvested at the time of termination and were
cancelled.

Pursuant to a compensation agreement with Ms. Sandi Stuart, the Executive
Vice President of Marketing, Ms. Stuart will receive an annual base salary of
$250,000. Ms. Stuart received a grant of 10,000 stock options, which are to
vest in equal installments on the first, second and third anniversaries of her
date of hire and which had an exercise price of $8.90 per share.

Certain Relationships and Related Transactions

On November 7, 1997, the Company entered into an Agreement of Purchase and
Sale of Trademarks and Licenses with Sideout Sport Inc., pursuant to which the
Company agreed to purchase all of Sideout Sport Inc.'s trademarks, copyrights,
trade secrets and associated license agreements. Steven Ascher, an Executive
Vice President of the Company beneficially owns 37.2% of Sideout Sport Inc. Mr.
Ascher's father and father-in-law beneficially own 8.9 % and 5.0%,
respectively, of Sideout Sport Inc. Pursuant to the agreement with Sideout, the
Company paid $1.5 million at the closing of the acquisition and agreed to pay
an additional $500,000 upon release of liens on the assets that were purchased.
Most of the liens have since been released and $495,000 of the $500,000
holdback has been paid. Under the terms of the agreement with Sideout, the
Company also agreed to pay Sideout Sport Inc., on a quarterly basis, contingent
payments of 40% of the first $10.0 million, 10% of the next $5.0 million and 5%
of the next $20.0 million, of royalties and license fees received by the
Company through licensing of the Sideout trademarks. Upon the earlier of such
time as the Company has paid Sideout Sport Inc. total contingent payments of
$5.5 million or October 22, 2004, the Company will have no further obligation
to pay Sideout Sport Inc. During Fiscal 2002, the Company made payments
exceeding $1.3 million to Sideout Sport Inc. and since January 1999, the
Company has paid in total over $3.98 million in contingent payments to Sideout
Sport Inc.

On May 11, 1999, the Company loaned $100,000 to Mr. Ascher. Mr. Ascher
executed a note, dated May 11, 1999, in favor of the Company for $100,000,
which yields 6.0% interest per annum. The principal amount of the note and all
accrued interest thereon was due and payable on May 11, 2001. The remaining
principal amount of the note and accrued interest, totaling $81,861 was repaid
by Mr. Asher on May 11, 2001.

For information with respect to other transactions and relationships between
the Company and certain executive officers, directors and related parties, see
"Compensation Committee Interlocks and Insider Participation" above and
"Employment and Management Agreements" above.

Compensation Committee Report

The following Report of the Compensation Committee of the Board of Directors
covering Fiscal 2002 and the performance graph that follows are included herein
pursuant to Item 402 of Regulations S-K. Notwithstanding anything to the
contrary set forth in any of the Company's previous filings under the
Securities Act of 1933, as amended (the "Securities Act"), or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the information
contained in this report and the performance graph that follows shall not be

deemed "soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall such information be incorporated by reference, in whole
or in part, into any future filing under the Securities Act or Exchange Act,
and such information shall be entitled to the benefits provided in Item
402(a)(9) of Regulation S-K.

General. The Compensation Committee of the Board of Directors is currently
composed of three non-employee directors of the board, Mr. Ewing, Mr. Ravich
and Mr. Hull. The Compensation Committee reviews the performance of the Chief
Executive Officer whose services are provided pursuant to the management
agreement with Mr. Margolis, and when appropriate makes recommendations to the
Board of Directors as to the terms of the management agreement. As appropriate,
the Compensation Committee reviews and approves the recommendations of the
Chief Executive Officer regarding compensation for other executive officers,
including salary and cash bonus levels and the stock option grants under the
Company's 1995 Incentive Stock Option Plan, as amended. During Fiscal 2002, the
Company had five executive officers and fourteen total employees.
Compensation Policies. The Company's executive compensation policies are
designed to attract, reward and retain executive officers who contribute to the
Company's success, to provide economic incentives for executive officers to
achieve the Company's business and financial objectives by linking the
executive officers' compensation to the performance of the Company, to
strengthen the relationship between executive pay and stockholder value and to
reward individual performance. The Company uses a combination of base salary,
cash bonuses and stock options to achieve these objectives.

In carrying out these above listed objectives, the Compensation Committee
considers, among others, the following factors concerning the individual
performance of executive officers: (1) their ability to perform their given
tasks; (2) knowledge of their jobs; and (3) their ability to work with others
toward the achievement of the Company's goals. The Compensation Committee also
evaluates corporate performance by looking at factors such as the Company's
performance relative to the business environment and the success of the Company
in meeting its business and financial objectives. In reviewing the above listed
factors regarding both individual and corporate performance, the Compensation
Committee relies on its subjective evaluations of such factors.

Section 162(m) of the Internal Revenue Code limits the deductibility of
certain otherwise deductible compensation in excess of $1 million paid to the
Chief Executive Officer and the next four most highly compensated executive
officers. It is the policy of the Compensation Committee to attempt to have all
executive compensation treated as tax-deductible compensation wherever, in the
judgment of the Compensation Committee, to do so would be consistent with the
objectives of the compensation plan under which the compensation is paid.
However, this policy does not rule out the ability to make awards or to approve
compensation that may not qualify for the compensation deduction. The
Compensation Committee may elect to approve awards or grant compensation to
executive officers which is not deductible by the Company under Section 162(m)
of the Internal Revenue Code.

Components of Compensation. The annual base compensation and performance
bonuses payable to Mr. Margolis for providing his executive management services
as the Company's Chairman of the Board and Chief Executive Officer are governed
by the management agreement. See "Employment and Management
Agreements-Management Agreement" above. The Company seeks to pay its other
executive officers salaries that are commensurate with their qualifications,
duties and responsibilities. In reviewing and approving the Chief Executive
Officer's recommendations regarding the annual salaries of the other executive
officers, the Compensation Committee considers the individual and corporate
performance factors outlined above, and puts particular emphasis on the success
of the Company in meeting its business and financial objectives and the overall
contribution of each executive officer in helping to meet those objectives.

For Fiscal 2002, a bonus pool equal to approximately 4% of the Company's
EBITDA in excess of $2.5 million was established and all of the Company's
employees participated in the bonus pool. Ms. Gratzke and Mr. Siegel were each
entitled to 25% of the bonus pool, and the Chief Executive Officer allocated the

remainder of the bonus pool among the nine other employees based upon their
individual performance during Fiscal 2002. This approach is designed to
motivate the Company's employees to meet the business and financial objectives
of the Company because the bonuses are tied to the profitability of the
Company. Mr. Ascher, the Executive Vice President of New Business, is on a
different bonus plan designed to reward him when he generates new licensees for
the Company. Mr. Ascher will receive bonuses equal to two and one-half percent
of EBIT growth year to year. Mr. Ascher will also receive five percent of the
royalties from the Company's new licensee Carrefour. This bonus arrangement was
approved prior to obtaining the license agreement with Carrefour and was
designed as an incentive for Mr. Ascher to obtain a license agreement with
Carrefour, which is one of the world's largest retailers. See "Employment and
Management Agreements-Other Compensation Arrangements."

The Company's 1995 Incentive Stock Option Plan authorizes the Compensation
Committee to grant employees stock options. Stock options are granted under the
plan with exercise prices equal to or above the market price of the Company's
common stock on the date of grant and generally vest in annual installments
over two or three years. Since stock options have value only if the price of
the Company's common stock increases over the exercise/grant price, the
Compensation Committee believes that stock option grants to executive officers
provide incentives for executive officers to build stockholder value and
thereby align the interests of the executive officers with the stockholders.
The Compensation Committee also believes that these grants, which may vest over
a period of two or more years, provide incentives for executive officers to
remain with the Company. In determining the numbers of options granted in any
fiscal year, the Compensation Committee considers such factors as the seniority
of the executive officer, the contribution that the executive officer is
expected to make to the Company and the size of prior grants to the executive
officer.

Compensation of the Chief Executive Officer. Until November 1999,
compensation in return for the services of Mr. Margolis as Chief Executive
Officer of the Company was governed by an amended management agreement between
Wilstar and the Company that was originally entered into on May 4, 1995.
Wilstar is wholly owned by Mr. Margolis.

On November 29, 1999, Wilstar and the Company entered into a revised
management agreement (replacing the prior management agreement), which was
approved by both the Compensation Committee and the disinterested members of
the Board of Directors. The material terms of such management agreement are
summarized above under the section "Employment and Management
Agreements-Management Agreement." The terms of the management agreement
resulted from several months of negotiations between Wilstar and the Company.
The primary basis for the Compensation Committee's determination to approve the
terms of the management agreement was to retain the services of Mr. Margolis as
Chairman of the Board and Chief Executive Officer of the Company and to provide
a strong incentive for him to continue to increase the long-term value of the
Company for its stockholders. Under Mr. Margolis' leadership, the Company's
revenues have grown from approximately $8.7 million in the fiscal year ended
May 31, 1997 to approximately $30.7 million in Fiscal 2002, an increase of over
253% during that time period. Mr. Margolis' performance is further highlighted
by the performance graph on the next page, which compares the Company's stock
performance with the stock performance of other companies, as measured by broad
market indices. Mr. Margolis was Chief Executive Officer of the Company during
the entire period covered by the performance graph.

Under the management agreement Mr. Margolis' base compensation was adjusted
to account for cost of living increases but otherwise remained unchanged, as
compared to the prior management agreement. The method of calculating annual
cash performance bonuses also remained substantially the same as compared to
the prior management agreement. However, the receipt of such bonuses was made
subject to the attainment of certain performance goals designed to generally
qualify such bonuses as "qualified performance-based compensation" under
Section 162(m) of the Revenue Code of 1986. The provisions of the management
agreement regarding the annual cash performance bonus and the performance goals
related thereto, were

submitted to and approved by the stockholders of the Company in January 2000.
The performance goals were achieved in Fiscal 2002 and, as a result, Mr.
Margolis earned a cash bonus from the Company of $2.56 million for Fiscal 2002.

Respectfully submitted,

Compensation Committee
Mr. Jess Ravich, Chairman
Mr. Timothy Ewing
Mr. Keith Hull

Common Stock Performance

Due to the nature of the Company's business being that of a licensor of its
Cherokee and Sideout brands to wholesalers and retailers, which in turn put
those brands on various products 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
publicly-traded licensing companies exists; hence, the Company's return on
investment was compared to the S&P 100-LTD and NASDAQ INDEX COMPOSITE.

The graph below compares the cumulative total shareholder return on the
Company's common stock with the cumulative total return on the NASDAQ INDEX
COMPOSITE and the S&P 100-LTD for the period commencing January 27, 1997 and
ending on February 2, 2002. The data set forth below assumes the value of an
investment in the Company's common stock and each Index was $100 on January 27,
1997. The data set forth below also assumes the reinvestment of all dividends,
including, but not limited to the $5.50 per share dividend which was paid on
January 15, 1998.

Comparison of Total Return
Since January 27, 1997

AMONG CHEROKEE INC., THE NASDAQ COMPOSITE AND THE S&P 100-LTD
[CHART]

Cherokee Inc NASDAQ Composite Index S&P 100 Stock Index

1997 100.00 100.00 100.00
1998 178.272 139.099 121.48
1999 199.738 181.606 165.96
2000 199.738 281.702 191.252
2001 243.717 192.811 182.814
2002 366.492 138.511 147.538

FY 1997 FY 1998 FY 1999 FY 2000 FY 2001 FY 2002
1/31/1997 1/30/1998 1/29/1999 1/28/2000 2/2/2001 2/1/2002
--------- --------- --------- --------- -------- --------

Cherokee Inc.......... 100.000 178.272 199.738 199.738 243.717 366.492
NASDAQ Composite Index 100.000 139.099 181.606 281.702 192.811 138.511
S&P 100 Stock Index... 100.000 121.480 165.960 191.252 182.814 147.538

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and persons who own more than ten percent of a registered
class of the Company's equity securities to file various reports with the
Securities and Exchange Commission and the National Association of Securities
Dealers concerning their holdings of, and transactions in, securities of the
Company. The Securities and Exchange Commission rules also require that copies
of these filings be furnished to the Company.

To the Company's knowledge, based solely on its review of copies of such
reports received or written representations from certain reporting persons that
no other reports were required during Fiscal 2001, all Section 16(a) filing
requirements applicable to its officers, directors and ten percent stockholders
were met during Fiscal 2002.

AUDIT COMMITTEE REPORT

The following Report of the Audit Committee of the Company's Board of
Directors is included herein pursuant to Item 306 of Regulations S-K.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act or the Exchange Act, the information
contained in this report shall not be deemed "soliciting material" or to be
"filed" with the Securities and exchange Commission, nor shall such information
be incorporated by reference, in whole or in part, into any future filing under
the Securities Act or Exchange Act, and such information shall be entitled to
the benefits provided in Item 306(c) of Regulation S-K.

The Audit Committee of the Company's Board of Directors is comprised of
independent directors as required by the listing standards of The Nasdaq Stock
Market, Inc. The Audit Committee operates pursuant to a written charter adopted
by the Board of Directors.

The role of the Audit Committee is to oversee the Company's financial
reporting process on behalf of the Board of Directors. Management of the
Company has the primary responsibility for the Company's financial statements
as well as the Company's financial reporting process, accounting principles and
internal controls. The Company's independent public accountants are responsible
for performing an audit of the Company's financial statements and expressing an
opinion as to the conformity of such financial statements with generally
accepted accounting principles.

In this context, the Audit Committee has reviewed and discussed the audited
financial statements of the Company as of and for the year ended February 2,
2002 with management and the Company's independent public accountants. The
Audit Committee has discussed with the Company's independent public accountants
the matters required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees), as currently in effect. In addition, the
Audit Committee has received the written disclosures and the letter from the
Company's independent public accountants required by Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees), as
currently in effect, and it has discussed with the Company's independent public
accountants their independence from the Company. The Audit Committee has
considered whether the independent accountants' provision of non-audit services
to the Company is compatible with maintaining the independent public
accountants' independence.

The members of the Audit Committee are not engaged in the accounting or
auditing profession. In the performance of their oversight function, the
members of the Audit Committee necessarily relied upon the information,
opinions, reports and statements presented to them by management of the Company
and by the Company's independent public accountants. As a result, the Audit
Committee's oversight and the review and discussions referred to above do not
assure that management has maintained adequate financial reporting processes,
principles and internal controls, that the Company's financial statements are
accurate, that the audit of such financial statements has been conducted in
accordance with generally accepted auditing standards or that the Company's
independent public accountants meet the applicable standards for independent
public accountants independence.

Based on the reports and discussions described above, the Audit Committee
recommended to the Board that the audited financial statements be included in
the Company's Annual Report on Form 10-K for the fiscal year ended February 2,
2002, for filing with the Securities and Exchange Commission.

Respectfully submitted,

Audit Committee
Mr. Jess Ravich, Chairman
Mr. David Mullen
Mr. Keith Hull

INDEPENDENT PUBLIC ACCOUNTANTS

Since May 30, 1995, the Company has engaged PricewaterhouseCoopers LLP,
formerly Coopers & Lybrand L.L.P., to serve as its principal independent
accountant to audit its financial statements. A representative of
PricewaterhouseCoopers LLP is expected to be present at the annual meeting. The
representative will have an opportunity to make a statement during the annual
meeting if the representative desires to do so and the representative is
expected to be available to respond to appropriate questions.

Fees Paid to Independent Public Accountants

The fees paid by the Company to PricewaterhouseCoopers LLP, the Company's
independent public accountants, during Fiscal 2002 are as follows:

Fees Paid
---------

Audit Fees(1).................................................. $61,552
Financial Information Systems Design and Implementation Fees(2) $ --
All Other Fees(3).............................................. $36,909

--------
(1) Includes the aggregate fees billed for professional services rendered by
PricewaterhouseCoopers for the audit of the Company's annual financial
statements for the fiscal year ended February 2, 2002 and the reviews of
the financial statements included in the Company's Quarterly Reports on
Form 10-Q during such fiscal year.

(2) No fees were billed to the Company by PricewaterhouseCoopers LLP during the
fiscal year ended February 2, 2002 for the provision of information
technology services of the type described in Rule 2-01(c)(4)(ii) of
Regulation S-X.

(3) Includes the aggregate fees billed for all services rendered by
PricewaterhouseCoopers during Fiscal 2002, other than fees for services
that must be reported under "Audit Fees" and "Financial Information Systems
Design and Implementation Fees." Such services included income tax
research, quarterly estimated taxes calculations and the preparation of the
Company's annual federal and state tax returns.

OTHER MATTERS

Additional Information

A copy of the Company's Annual Report on Form 10-K for Fiscal 2002,
including financial statements, is being mailed with this proxy statement to
each stockholder of record on the record date for the annual meeting.
Additionally, copies of the Company's Annual Report on Form 10-K for Fiscal
2002, including financial statements and financial statement schedules, as
filed with the Securities and Exchange Commission, are available free of charge
upon written request to the office of Investor Relations, Cherokee Inc., 6835
Valjean Avenue, Van Nuys, CA 91406.

Date for Submission of Stockholder Proposals for the 2003 Annual Meeting

Any proposal relating to a proper subject which a stockholder may intend to
be presented for action at the 2003 Annual Meeting of Stockholders must be
received by the Company no later than January 2, 2003, to be considered for
inclusion in the proxy material to be disseminated by the Board of Directors in
accordance with the provisions of Rule 14a(8)(e)(1) 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.

In addition, if the Company has not received notice on or before March 18,
2003 of any matter a stockholder intends to propose for a vote at the 2003
Annual Meeting, then a proxy solicited by the Board of Directors may be voted
on such matter in the discretion of the proxy holder, without a discussion of
the matter in the proxy statement soliciting such proxy and without such matter
appearing as a separate matter on the proxy card.

Other Business of the Annual Meeting

The Board of Directors 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 of Directors, or if no such recommendation is given, in their own
discretion.

Cost of Soliciting Proxies

The expense of soliciting proxies and the cost of preparing, assembling and
mailing material in connection with the solicitation of proxies will be paid by
the Company. 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 services. The Company has retained U.S. Stock Transfer Corporation to
assist in soliciting proxies with respect to shares of common stock held of
record by brokers, nominees and institutions. The Company does not anticipate
that the costs of such proxy solicitation firm will exceed $12,000, 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 Gratzke
Carol A. Gratzke
Secretary

Van Nuys, California
April 26, 2002

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CHEROKEE INC.

2002 Annual Meeting of Stockholders, June 5, 2002

The undersigned hereby appoints 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 2002
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, on June 5, 2002 at 10:00 A.M.
Pacific Time, on all matters that may come before the Annual Meeting.

The undersigned hereby instructs said proxies or their substitutes:

1. ELECTION OF DIRECTORS. [_] To VOTE FOR all nominees [_] To WITHHOLD AUTHORITY to
listed below. vote for all nominees listed below:

Robert Margolis, Timothy Ewing, David Mullen, Jess Ravich, Keith Hull

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
Annual Meeting.

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 DIRECTORS.

The undersigned hereby revokes any proxies heretofore given by the
undersigned to vote at the Annual Meeting of Stockholders or any
adjournment thereof. The undersigned hereby acknowledges receipt of a copy
of the Notice of Annual Meeting of Stockholders and Proxy Statement, both
dated April 26, 2002, and a copy of the Company's Annual Report on Form
10-K for the fiscal year ended February 2, 2002.

Dated: ____________, 2002 _____________________

_____________________
Signature(s)

Note: Your signature
should appear the
same as your name
appears hereon. In
signing as attorney,
executor,
administrator,
trustee or guardian,
please indicate the
capacity in which
signing; when signing
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 authorized officer
and the corporate
seal affixed. No
additional postage is
required if mailed
within the United
States.