Exhibit 10.24

 

December 13, 2017

 

PERSONAL AND CONFIDENTIAL

 

Steve Brink
6525 Fremont Circle
Huntington Beach, CA  92648

 

Dear Steve,

 

I am pleased to offer you the position of Chief Financial Officer at
Cherokee, Inc. (the “Company”).  I am confident that you will find Cherokee to
be an exciting and challenging environment in which to work.  This letter will
confirm the most important details of our offer to you.

 

I.          TITLE

 

Chief Financial Officer.

 

II.        RESPONSIBILITIES

 

You shall have the typical duties, responsibilities, functions and authority
associated with the position of Chief Financial Officer, subject to the power
and authority of the Company’s Board of Directors.  You will report to Henry
Stupp, the Company’s Chief Executive Officer.  You will have responsibility over
finance and other functional areas to be determined, which initially shall
include IT, HR, IR tax and legal.  Please also refer to the attached
schedule.  Except upon the prior written consent of the Company, you will not,
during the term of your employment by the Company, (i) accept any other
employment, or (ii) engage, directly or indirectly, in any other business
activity (whether or not pursued for pecuniary advantage) that might interfere
with your duties and responsibilities hereunder or create a conflict of interest
with the Company; provided, however, that you may serve on civic or charitable
boards or engage in charitable activities without remuneration if doing so is
not inconsistent with, or adverse to, your employment hereunder.  In addition,
with the prior written consent of the Company’s Chief Executive Officer, you may
serve as a member of the board of directors of another entity for remuneration
so long as such entity is not a direct competitor of the Company and such
service does not materially interfere with your obligations to the Company.

 

III.        COMPENSATION AND BENEFITS

 

(a)        Base Salary. In consideration of the services to be rendered, the
Company shall pay you a salary at the rate of Four-Hundred-Thousand Dollars
($400,000.00) per year (“Base Salary”).  The Base Salary shall be paid bi-weekly
in arrears in accordance with the Company’s regularly established payroll
practice.  Your Base Salary will be reviewed from time to time in accordance
with the established procedures of the Company for adjusting salaries for
similarly situated employees and may be adjusted (upward but not downward) in
the sole discretion of the Compensation Committee of the Company’s Board of
Directors (the “Compensation Committee”).

 

 

 

 

 

 

 

Steve Brink

Page 1 of 9

/s/ SB

 

/s/ HS

 

 

 

initial

initial

 

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

 

(b)        Performance Bonus.  For each fiscal year commencing with the fiscal
year ending January 31, 2019, you shall be eligible to receive a performance
bonus based on level of achievement of the Company’s EBITDA for such fiscal year
relative to the EBITDA target included in the budget approved by the Board for
such fiscal year (and taking into account any Board approved adjustments to the
budgeted EBITDA resulting from any business acquisitions or dispositions
consummated during the relevant fiscal year). The amount of the performance
bonus shall be $127,500 at 100% achievement, with a minimum bonus of $85,000 at
80% achievement and a maximum bonus of $170,000 at 120% achievement (with linear
interpolation between 80% and 120% achievement).  If the Company’s EBITDA for
such fiscal year is less than 80% of the EBITDA target included in the budget
approved by the Board for such fiscal year (and taking into account any Board
approved adjustments to the budgeted EBITDA resulting from any business
acquisitions or dispositions consummated during the relevant fiscal year), then
you shall not be entitled to any performance bonus. The determination regarding
the satisfaction of the criteria for the performance bonus in this Section shall
be made by the Compensation Committee of the Board in good faith after reviewing
the financial results of the Company for the relevant fiscal year.  Any award
payable under this Section shall be paid in accordance with the Company’s
regularly established payroll practice within 75 days of the end of the relevant
fiscal year.  Notwithstanding the foregoing, if the Company adopts a bonus plan
(or amends one or more of its equity plans to include a cash-based component)
that is intended to permit the payment of bonuses that qualify as
performance-based  compensation  under Section 162(m) of the Internal Revenue
Code of 1986, as amended, the Compensation  Committee may determine in its
reasonable discretion that the bonuses described in this shall be payable
pursuant to such plan and subject to the terms and condition thereof.  Under
such circumstances, in the event of any conflict between this Section and the
terms and conditions of the applicable bonus or equity plan, the bonus or equity
plan shall govern.

 

(c)        Discretionary Bonus Eligibility.  In addition, the Compensation
Committee shall at least annually evaluate your performance in light of factors
that such committee deems relevant.  Based on this evaluation, you may be
eligible to receive a discretionary bonus award for performance in each fiscal
year.  The amount of the discretionary bonus, if any, shall be determined in the
sole discretion of the Compensation Committee and shall be paid in accordance
with the Company’s regularly established payroll practice no later than 75 days
after the end of the relevant fiscal year.

 

(d)         Guaranteed Bonus.  For the fiscal year ending January 31, 2019, if
you continue to be employed by the Company through such date, you shall receive
a guaranteed minimum $50,000.00 bonus payable in accordance with the Company’s
regularly established payroll practice no later than 75 days after the end of
such fiscal year.

 

(e)        Equity Incentive Awards. Subject to the approval of the Compensation
Committee prior to commencement of your employment, as a material inducement to
join the Company, you shall be awarded an option to acquire 50,000 shares of the
Company’s common stock on terms consistent with the Company’s 2013 Stock
Incentive Plan.  The award shall vest in annual one-third

 

 

 

 

 

 

Steve Brink

Page 2 of 9

/s/ SB

 

/s/ HS

 

 

 

initial

initial

 

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

 

(1/3) increments over a three-year period commencing with the first day of your
employment at the Company.  You shall also be entitled to the future grant of
equity incentives at the discretion of the Compensation Committee.

 

(f)        Business Expenses.  The Company shall reimburse you for all
reasonable business expenses incurred by you in the course of performing your
duties and responsibilities as Chief Financial Officer which are consistent with
the Company’s policies in effect from time to time with respect to travel,
entertainment and other business expenses, subject to the Company’s requirements
with respect to reporting and documentation of such expenses.

 

(g)        Benefits.  In addition to the Base Salary and any annual bonuses or
other compensation payable to you as described above, you shall be entitled to
participate in all of the Company’s employee benefit programs for which senior
executive employees of the Company and its Subsidiaries are generally eligible
on terms and conditions no less favorable than offered to such other senior
employees. In addition, the Company will pay the annual premiums on your
existing life insurance and long term disability insurance policies in an
aggregate amount not to exceed $9,000 per year. You will be entitled to paid
vacation days and paid holidays in accordance with the normal vacation policy
and applicable paid holiday policy of the Company, provided that in no event
shall you be entitled to less than fifteen (15) paid vacation days per
year.   Under the Company’s existing policies, medical insurance coverage is
effective the first day of the month following your first 90 days of
employment.  As consideration for your services during such period, you shall
receive additional compensation in the amount of $TBD per month for each of the
first three months of your employment, which amount is intended to subsidize the
costs of insurance that you may incur during that period.

 

(h)        Indemnification.  The Company agrees that it shall defend, indemnify,
and hold you harmless to the fullest extent permitted by applicable law from and
against any and all liabilities, costs and claims, and all expenses actually
incurred by you in connection therewith by reason of the fact that you are or
were employed by the Company, served as an officer of the Company, or otherwise
provided services to the Company including, without limitation, all costs and
expenses actually and reasonably incurred by you in defense of litigation
arising out of your employment hereunder. All amounts payable to you or on your
behalf under this subsection (f) shall be paid to you or on your behalf
immediately on you incurring such liability.

 

V.        TERMINATION

 

(a)        At-Will Termination by the Company.  We look forward to a prosperous
and mutually beneficial working relationship with you.  However, your employment
with the Company shall be “at will” at all times.  The Company may terminate
your employment with the Company at any time, without any advance notice, for
any reason or no reason at all, notwithstanding anything to the contrary
contained in or arising from any statements, policies or practices of
the Company relating to the employment, discipline or termination of its
employees.  Upon and after such termination, all obligations of the Company
under this Agreement shall cease, except as otherwise provided herein.

 

 

 

 

 

 

Steve Brink

Page 3 of 9

/s/ SB

 

/s/ HS

 

 

 

initial

initial

 

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

 

(b)        At-Will Termination by CFO.  Similarly, you may terminate your
employment with the Company at any time for any reason or no reason at all, upon
four weeks’ advance written notice.  During such notice period you shall
continue to diligently perform all of your duties hereunder.  The Company shall
have the option, in its sole discretion, to make your termination effective at
any time prior to the end of such notice period.  Thereafter all obligations of
the Company shall cease, except as otherwise provided herein.

 

(c)        Effect of Termination.  Upon termination of your employment, you
shall be deemed to have resigned from all offices and directorships then held
with the Company.  Following any termination of employment, you shall cooperate
with the Company in the winding up of pending work on behalf of the Company and
the orderly transfer of work to other employees. You shall also cooperate with
the Company in the defense of any action brought by any third party against the
Company that relates to your employment by the Company. If you are terminated
for any reason, then you shall be entitled to receive your Base Salary through
the date of termination or expiration, together with any vested retirement or
other benefits accrued on or prior to such termination, accrued life, disability
insurance benefits and accrued but untaken vacation days and other amounts owing
hereunder as of the date of such termination that have not yet been paid,
including, but not limited to unreimbursed business expenses.  Any outstanding
equity or equity-based awards granted to Executive prior to the date of
termination or expiration shall be subject to the terms and conditions of the
applicable plan and award agreement and Sections V(d) and V(e) below.

 

(d)        Severance Benefits.  If you are terminated by the Company for reasons
other than for Cause, by Death or by Disability then, in addition to the amounts
payable under Section V(c) above, you will receive severance payments according
to the schedule below; provided, however, that you will not be entitled to any
such severance benefits unless you first execute and deliver (and do not revoke)
a release agreement in the form and substance reasonably satisfactory to the
Company within forty-five (45) days following your termination of
employment.  Severance payments shall commence on the sixtieth (60th) day
following your termination of employment and shall be paid in accordance with
the Company’s regular payroll practices, or, in the discretion of the Company
and subject to Section VI below, in a lump sum.

 

 

 

 

 

# of months
employed by
Company

(# of months of then current
base compensation) 

0  –  6

9 months

>6

1 year

 

(e)        Change in Control Benefits. During the term of your employment with
the Company, in the event that (i) the Company undergoes a Change in Control

 

 

 

 

 

 

Steve Brink

Page 4 of 9

/s/ SB

 

/s/ HS

 

 

 

initial

initial

 

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

 

Event and (ii) within 12 months of the Change in Control Event, your position is
eliminated, you are terminated by the Company or its successor for any reason
other than Cause, or you terminate your employment for Good Reason, then you
shall be entitled to the following benefits (“Change in Control Benefits”):

 

1.   A lump sum payment in an amount equal to twelve (12) months of your
annualized base salary;

 

2.   A lump sum payment in an amount equal to any guaranteed or earned but
unpaid bonus;

 

3.   A lump sum payment in an amount equal to the costs of the continuation of
your health care coverage under COBRA for twelve (12) months; and

 

4.   Full vesting of all equity held by you at the effective date of the Change
in Control Event, with any performance-based equity vesting at target; provided,
 however, that any such equity that constitutes a nonqualified deferred
compensation arrangement within the meaning of Section 409A (as defined below),
will be paid or settled in the earliest date coinciding with or following your
termination that does not result in a violation of or penalties under
Section 409A.

 

Notwithstanding the foregoing, you shall not be entitled to any Change in
Control Benefits unless you first execute and deliver (and do not revoke) a
release agreement in the form and substance reasonably satisfactory to the
Company or its successor within forty-five (45) days following your termination
of employment.  Change in Control Benefits payments shall be payable on the
sixtieth (60th) day following your termination of employment.

 

VI.        TAXES

 

(a)        Withholding Taxes.  All amounts paid under this Agreement (including,
without limitation, Base Salary) shall be paid less all applicable state and
federal tax withholdings and any other withholdings required by any applicable
jurisdiction or authorized by Executive.

 

(b)        Compliance with Section 409A.  To the extent applicable, it is
intended that this Agreement and any payment made hereunder shall comply with
the requirements of Section 409A of the Internal Revenue Code of 1986, as
amended, or an exemption or exclusion therefrom and any related regulations or
other guidance promulgated with respect to such Section by the U.S. Department
of the Treasury or the Internal Revenue Service (“Section 409A”) and shall be
interpreted accordingly, provided that for the avoidance of doubt, this
provision shall not be construed to require a gross-up payment in respect of any
taxes, interest or penalties imposed on you as a result of Section 409A.  Any
provision that would cause the Agreement or any payment hereof to fail to
satisfy Section 409A shall have no force or effect until amended in the least
restrictive manner necessary to comply with Section 409A, which amendment may be
retroactive to the extent permitted by Section 409A.  Notwithstanding anything
to the contrary in this Agreement, no severance pay or benefits to be paid or
provided to you, if any, pursuant to this offer letter or otherwise that are

 

 

 

 

 

 

Steve Brink

Page 5 of 9

/s/ SB

 

/s/ HS

 

 

 

initial

initial

 

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

 

considered deferred compensation under Section 409A will be paid or otherwise
provided until you have had a “separation from service” within the meaning of
Section 409A.  Similarly, no severance payable to you, if any, that otherwise
would be exempt from Section 409A pursuant to Treasury Regulation
Section 1.409A-1(b)(9) will be payable until you have had a “separation from
service” within the meaning of Section 409A.  Each payment and benefit payable
under this offer letter is intended to constitute a separate payment for
purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.   To the extent
required in order to avoid accelerated taxation and/or tax penalties under
Section 409A, amounts that would otherwise be payable and benefits that would
otherwise be provided pursuant to this Agreement during the six (6)-month period
immediately following your termination of employment will instead be paid on the
first business day after the date that is six (6) months following your
termination of employment (or upon your death, if earlier). With respect to
expenses eligible for reimbursement or in-kind benefits under the terms of this
Agreement, (i) the amount of such expenses eligible for reimbursement or in-kind
benefits provided in any taxable year will not affect the expenses eligible for
reimbursement or in-kind benefits provided in another taxable year, (ii) any
reimbursements or in-kind benefits will be made no later than the end of the
calendar year following the calendar year in which the related expenses were
incurred, (iii) any reimbursement is for expenses incurred during your lifetime
(or during a shorter period of time specified in this Agreement), and (iv) your
right to have the Company pay or provide such reimbursements or in-kind benefits
may not be liquidated or exchanged for any other benefit, except, in each case,
to the extent that the right to reimbursement or in-kind benefits does not
provide for a “deferral of compensation” within the meaning of Section 409A.

 

VII.        DEFINITIONS

 

(a)        Change in Control”.  For purposes hereof, the term “Change in
Control” shall mean (i) any person (other than the Company any trustee or other
fiduciary holding securities under any employee benefit plan of the Company, or
any company owned, directly or indirectly, by the beneficial owners of voting
securities the Company in substantially the same proportions as their ownership
of voting securities of the Company), becoming the beneficial owner (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934, as amended), directly
or indirectly, of securities of the Company representing more than fifty percent
(50%) of the combined voting power of the Company’s then outstanding securities,
(ii) during any twelve (12) month period, individuals who, as of the date of
this letter, constitute the Board (the “Incumbent Board”) cease for any reason
to constitute at least a majority of the Board; provided,  however, that any
individual becoming a director subsequent to such date whose election, or
nomination for election by the Company’s stockholders, was approved by a vote of
at least two-thirds of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board, (iii) a merger or consolidation of the Company with any other entity,
other than a merger or consolidation which would result in the voting

 

 

 

 

 

 

Steve Brink

Page 6 of 9

/s/ SB

 

/s/ HS

 

 

 

initial

initial

 

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

 

securities of such entity outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the combined voting power
of the voting securities of the Company (as applicable) or such surviving entity
outstanding immediately after such merger or consolidation; provided,  however,
that a merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no person (other than those covered by
the exceptions in subsection (i) above) acquires more than fifty percent (50%)
of the combined voting power of the Company’s (as applicable) then outstanding
securities shall not constitute a Change in Control for purposes of this
agreement, or (iv) a complete liquidation or dissolution of the Company or the
consummation of a sale or disposition by the Company of all or substantially all
of its assets, other than the sale or disposition of all or substantially all of
such assets to a person or persons who beneficially own, directly or indirectly,
50% or more of the combined voting power of the outstanding voting securities of
the Company at the time of the sale; provided,  further, that notwithstanding
the foregoing, to the extent required to avoid payments under this Agreement
being subject to any accelerated or additional tax under Section 409A of the
Code, a Change in Control shall not be deemed to have occurred under this
Agreement unless the transaction or event constituting would also constitute a
“change in control event” (as defined in Treasury Regulation §1.409A-3(i)(5)).

 

(b)       “Cause”.  For purposes hereof, the term “Cause” shall mean any of the
following: (i) your conviction of, or plea of guilty to, a felony or crime
involving moral turpitude; (ii) your personal dishonesty directly affecting the
Company; (iii) your willful misconduct or gross negligence; (iv) your breach of
a fiduciary duty to the Company; (v) your commission of an act of fraud,
embezzlement or misappropriation against the Company; or (vi) your failure to
substantially perform your duties as Chief Financial Officer of the Company.

 

(c)       “Disability”.  For purposes hereof, the term “Disability” shall mean
that you are unable to carry out the responsibilities and functions of the
position held by you by reason of any physical or mental impairment for more
than 120 days in any twelve-month period.  If you suffer from a Disability,
then, to the extent permitted by law, the Company may terminate your
employment.  The Company shall pay to you all compensation to which you are
entitled up through the date of termination, and thereafter all obligations of
the Company under this offer letter shall cease.  You will not be entitled to
any severance payments.  Nothing in this offer letter shall affect your rights
under any disability plan in which you are a participant.

 

(d)       “Good Reason”.  For purposes hereof, “Good Reason” means (i) a
material reduction in your duties or responsibilities without your express
written consent, (ii) a material, uncured breach by the Company of its
obligations hereunder, and (iii) a relocation of your principal place of work to
a facility more than 100 miles from the Company’s current headquarters for a
period of more than 180 days; provided, however, that such event will not
constitute Good Reason unless: (x) you give notice to the Company specifying the
condition or event relied upon for your termination within ninety (90) days of
the initial existence of the condition or event constituting Good Reason; and
(y) the Company fails to cure the condition or event constituting Good Reason
within thirty (30) days following receipt of the

 

 

 

 

 

 

Steve Brink

Page 7 of 9

/s/ SB

 

/s/ HS

 

 

 

initial

initial

 

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

 

Notice of Termination (the “Cure Period”).  If the Company fails to remedy the
condition constituting Good Reason during the applicable Cure Period, your
termination of employment must occur, if at all, within ninety (90) days
following the last day of such Cure Period in order for such termination as a
result of such condition to constitute a termination for Good Reason.

 

VIII.         MISCELLANEOUS

 

(a)       Confidentiality; No Solicitation. You acknowledge and agree that in
your role as Chief Financial Officer, you shall acquire confidential and
proprietary information belonging to the Company.  To preserve and protect this
information and the assets of the Company, you agree that during the period of
your employment by the Company you will not, without the Company’s express
written consent, engage in any employment or business activity other than for
the Company, and for the period of your employment by the Company you will not:
(i) induce any employee of the Company to leave the employ of the Company; or
(ii) solicit the business of any client or customer of the Company (other than
on behalf of the Company).  You further agree that, after the date of
termination of your employment with the Company, you will not: (i) use or
disclose to others the Company’s proprietary information for any purpose at any
time; or (ii) engage in any acts of unfair competition, including but not
limited to use or disclosure of the Company’s trade secrets for the benefit of
or to any competitor; or (iii) for (1) year after the date of termination of
your employment by the Company, solicit for hire any associate or key consultant
of the Company with whom you became familiar or otherwise gained any knowledge
while you were employed by the Company.

 

(b)        Representations.  You hereby represent and warrant to the Company
that, (i) upon the execution and delivery of this agreement by the Company, this
agreement shall be the valid and binding obligation of yours, enforceable in
accordance with its terms except as previously disclosed in writing to
the Company and (ii) your execution, delivery and performance of this agreement
do not and shall not conflict with breach, violate or cause a default under
(i) any contract, agreement, instrument, order, judgment or decree to which you
are a party or by which you are bound. You hereby acknowledge and represent that
you have had the opportunity to consult with independent legal counsel regarding
your rights and obligations hereunder and that you fully understand the terms
and conditions contained herein.

 

(c)        Entire Agreement; Governing Law; Amendments. This letter contains our
entire agreement and understanding regarding the terms of your employment with
the Company and supersedes any prior representations or agreements, whether
written or oral. This agreement shall be governed by and construed in accordance
with the laws of the State of California. This letter may be modified only in an
express writing signed by you and the Chief Executive Officer of the Company.

 

START DATE

 

Your employment is contingent on you executing a Proprietary Information and
Inventions Agreement and providing the Company with legal proof of your identity
and

 

 

 

 

 

 

Steve Brink

Page 8 of 9

/s/ SB

 

/s/ HS

 

 

 

initial

initial

 

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

 

authorization to work in the United States at the time of hire.  This offer is
also subject to approval of the Compensation Committee, which I expect will be
obtained imminently.

 

I am enclosing two copies of this letter.  Please sign and return one copy to me
and keep the other copy for your files.

 

We are very excited about you joining the Cherokee team and look forward to your
contributions to the growth and success of the Company.

 

 

 

 

 

 

 

Sincerely,

 

 

 

 

 

/s/ Henry Stupp

 

 

 

 

 

Cherokee, Inc.

 

 

Henry Stupp

 

 

Chief Executive Officer

 

 

 

 

 

 

ACCEPTED:

 

 

 

 

 

 

 

 

/s/ Steve Brink

 

Date:

12/13/2017

Steve Brink

 

 

 

 

 

 

 

 

 

 

Steve Brink

Page 9 of 9

/s/ SB

 

/s/ HS

 

 

 

initial

initial

 

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