Exhibit 10.3

 

AMENDMENT TO EMPLOYMENT AGREEMENT BETWEEN

CHEROKEE INC. AND HENRY STUPP

 

THIS AMENDMENT TO EMPLOYMENT AGREEMENT (this “Amendment”), is made and entered
into on the 28th day of January, 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 (the “Agreement”);

 

WHEREAS, the Company and Stupp entered into a Stock Option Agreement dated as of
August 26, 2010 (the “Option Agreement”); and

 

WHEREAS, the parties desire to 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
(x) on or before July 31, 2011, and the Company agrees to sell and issue to
Stupp, that number of shares of the Company’s Common Stock (the “First
Subsequent Shares”) equal to $400,000 (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”) and (y) on or before January 31, 2012, and the
Company agrees to sell and issue to Stupp, that number of shares of the
Company’s Common Stock (the “Second Subsequent Shares”, and together with the
Initial Shares and the First Subsequent Shares, the “Shares”) equal to $400,000
(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”). Each of the
First Subsequent Purchase Price and the Second Subsequent Purchase Price is
payable by cash, check or wire transfer on the First Subsequent Purchase Date
and the Second Subsequent Purchase Date, as applicable.  The per share price of
the First Subsequent Shares and the Second 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 or the Second Subsequent
Purchase Date, as applicable.  Promptly after

 

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receipt of payment for the First Subsequent Purchase Price or the Second
Subsequent Purchase Price, as the case may be, the Company shall deliver to
Stupp a stock certificate representing the First Subsequent Shares and the
Second 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 shall 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 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 Second 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 both the First Subsequent Shares and the Second 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:

 

“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 July 31, 2011, then 75,000 of the shares subject to the
Option shall be forfeited on August 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 Second Subsequent
Shares on or before January 31, 2012 then 75,000 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. 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: 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 July 31, 2011,

 

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then 75,000 of the shares subject to this Agreement shall be forfeited on
August 1, 2011, and the vesting schedule above shall be appropriately modified
to reduce the number of vesting shares on a pro rata basis; and 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 January 31, 2012 then 75,000 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. The forfeited shares shall not be
exercisable by Optionee.”

 

3.             Lock-Up Agreement.  Notwithstanding the provisions of
Section 3.4(c) of the Agreement, the Company hereby agrees that Stupp shall be
permitted to use the Shares as collateral for personal loans, provided that the
total amount of any loans collateralized by the Shares shall not exceed 50% of
the value of the Shares; provided further, that Stupp shall be obligated to
satisfy any margin or pledge calls or demands by using other assets and any sale
of the Shares must be made in compliance with the restrictions of
Section 3.4(c) of the Agreement as well as applicable law and Company policies.

 

4.             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.

 

5.             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.

 

6.             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.

 

7.             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/ Jess Ravich

Name:

Henry Stupp

Name:

Jess Ravich

 

 

 

 

 

Title:

Chairman of Independent Directors Committee

 

[SIGNATURE PAGE TO AMENDMENT TO EMPLOYMENT AGREEMENT BETWEEN HENRY STUPP AND
CHEROKEE INC.]

 

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