Exhibit 10.1

 

THIRD AMENDMENT TO EMPLOYMENT AGREEMENT

 

THIS THIRD AMENDMENT TO EMPLOYMENT AGREEMENT (this “Amendment”), is made and
entered into on the 28th day of July, 2011, by and between Henry Stupp (“Stupp”)
and Cherokee Inc., a Delaware corporation (the “Company”) with reference to the
following facts:

 

WHEREAS, the Company and Stupp entered into the Employment Agreement dated as of
August 26, 2010, as amended by the Amendment to Employment Agreement dated as of
January 28, 2011 and as further amendment by the Second Amendment to Employment
Agreement dated as of April 13, 2011 (as amended, the “Agreement”);

 

WHEREAS, the Company and Stupp entered into a Stock Option Agreement dated as of
August 26, 2010, as amended by the Amendment to Employment Agreement dated as of
January 28, 2011 ( as amended, the “Option Agreement”); and

 

WHEREAS, the parties desire to further amend the Agreement and the Option
Agreement as set forth herein.

 

NOW THEREFORE, in consideration of the foregoing recitals and the mutual
representations, warranties, covenants and promises contained herein, the
adequacy and sufficiency of which are hereby acknowledged, the parties agree as
follows:

 

1.            Amendment.  The Agreement is hereby amended as follows:

 

1.1          Section 3.4.a(ii) of the Agreement is hereby deleted and replaced
in its entirety with the following:

 

“Subject to the terms and conditions of this Agreement, Stupp agrees to
purchase, and the Company agrees to sell and issue to Stupp: (w) on or before
August 1, 2011, that number of shares of the Company’s Common Stock (the “First
Subsequent Shares”) equal to $200,000 (the “First Subsequent Purchase Price”)
divided by the closing sales price of the Company’s Common Stock as reported on
the Nasdaq Global Market on the date of such purchase and sale (the “First
Subsequent Purchase Date”); (x) on or before October 31, 2011, that number of
shares of the Company’s Common Stock (the “Second Subsequent Shares”) equal to
$200,000 (the “Second Subsequent Purchase Price”) divided by the closing sales
price of the Company’s Common Stock as reported on the Nasdaq Global Market on
the date of such purchase and sale (the “Second Subsequent Purchase Date”);
(y) on or before January 31, 2012, that number of shares of the Company’s Common
Stock (the “Third Subsequent Shares”) equal to $200,000 (the “Third Subsequent
Purchase Price”) divided by the closing sales price of the Company’s Common
Stock as reported on the Nasdaq Global Market on the date of such purchase and
sale (the “Third Subsequent Purchase Date”); and (z) on or before April 30,
2012, that number of shares of the Company’s Common Stock (the “Fourth

 

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Subsequent Shares” and together with the Initial Shares, the First Subsequent
Shares, the Second Subsequent Shares, and the Third Subsequent Shares, the
“Shares”) equal to $200,000 (the “Fourth Subsequent Purchase Price”) divided by
the closing sales price of the Company’s Common Stock as reported on the Nasdaq
Global Market on the date of such purchase and sale (the “Fourth Subsequent
Purchase Date”). Each of the First Subsequent Purchase Price, the Second
Subsequent Purchase Price, the Third Subsequent Purchase Price and the Fourth
Subsequent Purchase Price is payable by cash, check or wire transfer on the
First Subsequent Purchase Date, the Second Subsequent Purchase Date, the Third
Subsequent Purchase Date and the Fourth Subsequent Purchase Date, as
applicable.  The per share price of the First Subsequent Shares, the Second
Subsequent Shares, the Third Subsequent Shares and the Fourth Subsequent Shares
shall be equal to the closing sales price of the Company’s Common Stock as
reported on the Nasdaq Global Market on the First Subsequent Purchase Date, the
Second Subsequent Purchase Date, the Third Subsequent Purchase Date or the
Fourth Subsequent Purchase Date, as applicable.  Promptly after receipt of
payment for the First Subsequent Purchase Price, the Second Subsequent Purchase
Price, the Third Subsequent Purchase Price or the Fourth Subsequent Purchase
Price, as the case may be, the Company shall deliver to Stupp a stock
certificate representing the First Subsequent Shares, the Second Subsequent
Shares, the Third Subsequent Shares and the Fourth Subsequent Shares, as
applicable.”

 

1.2           Section 3.4(b) of the Agreement is hereby deleted and replaced in
its entirety with the following:

 

“Registration Rights.  On or before February 28, 2011, the Company filed with
the Securities and Exchange Commission a registration statement to effect the
registration for resale of both the Initial Shares and the shares of Common
Stock that may be acquired upon exercise of the Option (as defined below) (the
“Initial Registration Statement”).  Following the Fourth Subsequent Purchase
Date, the Company shall upon the written request of Stupp file with the
Securities and Exchange Commission a registration statement, or registration
statements if necessary, on an appropriate form(s) to effect the registration
for resale of each of the First Subsequent Shares, the Second Subsequent Shares,
the Third Subsequent Shares and the Fourth Subsequent Shares (the “Second
Registration Statement”). The Company shall use its commercially reasonable
efforts to cause such registration statement(s) to become effective and to keep
any such registration statement(s) continuously effective under the Securities
Act of 1933, as amended (the “Act”), until the earlier of (i) the date when all
of the Shares have been sold or (ii) the date when all of the Shares may be sold
immediately without registration pursuant to Rule 144 promulgated under the
Act.  The Company shall bear all expenses incident to the preparation and filing
of the Initial Registration Statement.  The expenses incident to the preparation
and filing of the Second Registration Statement shall be borne equally by the
Company and Stupp.”

 

1.3           Section 3.4(d) of the Agreement is amended to replace the
paragraph that commences with “In the event that Stupp . . .” with the
following:

 

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“In the event that Stupp does not comply with his obligations under
Section 3.4(a)(ii) above and complete the acquisition of the First Subsequent
Shares on or before August 1, 2011, then 37,500 of the shares subject to the
Option shall be forfeited on August 2, 2011, and the vesting schedule above
shall be appropriately modified to reduce the number of vesting shares on a pro
rata basis.  In the event that Stupp does not comply with his obligations under
Section 3.4(a)(ii) above and complete the acquisition of the Second Subsequent
Shares on or before October 31, 2011 then 37,500 of the shares subject to the
Option shall be forfeited on November 1, 2011, and the vesting schedule above
shall be appropriately modified to reduce the number of vesting shares on a pro
rata basis. In the event that Stupp does not comply with his obligations under
Section 3.4(a)(ii) above and complete the acquisition of the Third Subsequent
Shares on or before January 31, 2012 then 37,500 of the shares subject to the
Option shall be forfeited on February 1, 2012, and the vesting schedule above
shall be appropriately modified to reduce the number of vesting shares on a pro
rata basis.  In the event that Stupp does not comply with his obligations under
Section 3.4(a)(ii) above and complete the acquisition of the Fourth Subsequent
Shares on or before April 30, 2012 then 37,500 of the shares subject to the
Option shall be forfeited on May 1, 2012, and the vesting schedule above shall
be appropriately modified to reduce the number of vesting shares on a pro rata
basis.  The forfeited shares shall not be exercisable by Stupp.”

 

2.            Amendment to Option Agreement.  Section 2.1(d) of the Option
Agreement is hereby deleted and replaced in its entirety with the following:

 

“Notwithstanding the foregoing: (i) in the event that Optionee does not comply
with his obligations under Section 3.4(a)(ii) of the Employment Agreement, as
amended, and complete the acquisition of the First Subsequent Shares on or
before August 1, 2011, then 37,500 of the shares subject to this Agreement shall
be forfeited on August 2, 2011, and the vesting schedule above shall be
appropriately modified to reduce the number of vesting shares on a pro rata
basis; (ii) in the event that Optionee does not comply with his obligations
under Section 3.4(a)(ii) of the Employment Agreement, as amended, and complete
the acquisition of the Second Subsequent Shares on or before October 31, 2011
then 37,500 of the shares subject to this Agreement shall be forfeited on
November 1, 2011, and the vesting schedule above shall be appropriately modified
to reduce the number of vesting shares on a pro rata basis; (iii) in the event
that Optionee does not comply with his obligations under Section 3.4(a)(ii) of
the Employment Agreement, as amended, and complete the acquisition of the Third
Subsequent Shares on or before January 31, 2012 then 37,500 of the shares
subject to this Agreement shall be forfeited on February 1, 2012, and the
vesting schedule above shall be appropriately modified to reduce the number of
vesting shares on a pro rata basis and (iv) in the event that Optionee does not
comply with his obligations under Section 3.4(a)(ii) of the Employment
Agreement, as amended, and complete the acquisition of the Fourth Subsequent
Shares on or before April 30, 2012 then 37,500 of the shares subject to this
Agreement shall be forfeited on May 1, 2012, and the vesting schedule above
shall be appropriately modified to reduce the number of vesting shares on a pro
rata basis. The forfeited shares shall not be exercisable by Optionee.”

 

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3.             Governing Law.  The construction, validity and enforceability of
this Amendment shall be governed by the laws of the State of California, without
regard to its conflicts of laws principles.

 

4.             Counterparts.  This Amendment may be executed in separate
counterparts, each of which so executed and delivered shall constitute an
original but all such counterparts shall together constitute one and the same
instrument and any one of which may be used to evidence this Amendment.

 

5.             Severability.  All provisions of this Amendment are severable and
any provision which may be prohibited by law shall be ineffective to the extent
of such prohibition without invalidating the remaining provisions of this
Amendment and the parties hereto agree to cooperate to provide a legal
substitute for any provision which is prohibited by law.

 

6.             Entire Agreement; Modifications and Amendments.  This Amendment,
together with the Agreement and the Option Agreement, constitutes the entire
agreement between the parties concerning the subject matter hereof and
supersedes all prior agreements and understandings both oral and written,
between the parties with respect to the subject matter hereof.  No provision of
this Amendment may be amended or waived unless such amendment or waiver is
agreed to in writing, signed by the parties to this Amendment.

 

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IN WITNESS WHEREOF, each of the parties has executed this Amendment on the date
first written above.

 

 

HENRY STUPP

CHEROKEE INC.

 

 

 

 

 

 

 

 

 

 

By:

/s/ Henry Stupp

 

By:

/s/ Mark DiSiena

Name:

Henry Stupp

 

Name:

Mark DiSiena

 

 

 

Title:

Chief Financial Officer

 

[SIGNATURE PAGE TO THIRD AMENDMENT TO

EMPLOYMENT AGREEMENT]

 

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