EXHIBIT 10.18

 

NON-QUALIFIED STOCK OPTION AGREEMENT

 

FROM THE 2006 INCENTIVE AWARD PLAN OF CHEROKEE INC.

 

THIS AGREEMENT, dated February 16, 2011, is made by and between Cherokee Inc., a
Delaware corporation, hereinafter referred to as the “Company,” and Jess M.
Ravich, a Director of the Company or a Parent Corporation or Subsidiary of the
Company, hereinafter referred to as “Director.”

 

WHEREAS, the Company wishes to afford the Director the opportunity to purchase
shares of its Common Stock, par value $0.02 per share; and

 

WHEREAS, the Company wishes to carry out The 2006 Incentive Award Plan of
Cherokee Inc. (the “Plan”) (the terms of which are hereby incorporated by
reference and made a part of this Agreement);

 

WHEREAS, the independent members of the Company’s Board of Directors (other than
the Director) have determined that it would be to the advantage and best
interest of the Company and its stockholders to grant the Non-Qualified Stock
Option (the “Option”) provided for herein to the Director as an inducement to
him to continue to serve on the Board of Directors of the Company as
non-executive Chairman, and has advised the Company thereof and instructed the
undersigned officer to issue said Option; and

 

WHEREAS, all capitalized terms used herein without definition shall have the
meanings ascribed to such terms in the Plan.

 

NOW, THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:

 

ARTICLE I

 

GRANT OF OPTION

 

1.1           Grant of Option.  In consideration of the Director’s agreement to
continue to serve as a member of the Board of Directors of the Company as
non-executive Chairman and for other good and valuable consideration, effective
as of January 28, 2011 (the “Date of Grant”), the Company irrevocably grants to
the Director the option to purchase any part or all of an aggregate of 100,000
shares of Common Stock, upon the terms and conditions set forth in this
Agreement.  The Option is comprised of 100,000 Non-Qualified Stock Options, with
such Option being fully-vested as of the Date of Grant as set forth on page two,
Section 2.1.

 

1.2           Purchase Price.  The purchase price of the shares of Common Stock
covered by the Option shall be $18.15 per share without commission or other
charge (which was the closing stock price on the Date of Grant); provided,
however, that the price per share of the shares subject to the Option shall not
be less than the greater of (i) 100% of the Fair Market

 

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Value of a share of Common Stock on the Date of Grant, or (ii) 110% of the Fair
Market Value of a share of Common Stock on the Date of Grant in the case of an
Director then owning (within the meaning of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary or parent corporation thereof (within the meaning of
Section 422 of the Code).

 

1.3           Consideration to the Company.  In consideration of the granting of
the Option by the Company, the Director agrees to render faithful and efficient
services as a member of the Board of Directors of the Company, for a period of
at least one (1) year from the Date of Grant.

 

1.4           Adjustments in Option.  The Committee may make adjustments with
respect to the Option in accordance with the provisions of Section 9.3 of the
Plan.

 

ARTICLE II

 

PERIOD OF EXERCISABILITY

 

2.1           Commencement of Exercisability.  Subject to Section 4.9, the
Option shall be fully vested and exercisable as of the Date of Grant.

 

2.2           Duration of Exercisability.  The Option shall remain exercisable
until it becomes unexercisable under Section 2.3.

 

2.3           Expiration of Option.  The Option may not be exercised to any
extent by anyone after the expiration of five (5) years from the Date of Grant.

 

ARTICLE III

 

EXERCISE OF OPTION

 

3.1           Person Eligible to Exercise.  During the lifetime of the Director,
only the Director may exercise the Option or any portion thereof.  After the
death of the Director, any exercisable portion of the Option may, prior to the
time when the Option becomes unexercisable under Section 2.3, be exercised by
the Director’s personal representative or by any person empowered to do so under
the deceased Director’s will or under the then applicable laws of descent and
distribution.

 

3.2           Partial Exercise.  Any exercisable portion of the Option or the
entire Option, if then wholly exercisable, may be exercised in whole or in part
at any time prior to the time when the Option or portion thereof becomes
unexercisable under Section 2.3; provided, however, that each partial exercise
shall be for whole shares only.

 

3.3           Manner of Exercise.  The Option, or any exercisable portion
thereof, may be exercised solely by delivery to the Secretary or the Secretary’s
office of all of the following prior to the time when the Option or such portion
thereof becomes unexercisable under Section 2.3:

 

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(a)           A written notice complying with the applicable rules established
by the Committee stating that the Option, or a portion thereof, is exercised. 
The notice shall be signed by the Director or other person then entitled to
exercise the Option or such portion of the Option;

 

(b)           Full cash payment to the Secretary of the Company for the shares
with respect to which the Option, or portion thereof, is exercised.  However,
the Committee may in its sole and absolute discretion (i) allow a delay in
payment up to thirty (30) days from the date the Option, or portion thereof, is
exercised; (ii) allow payment, in whole or in part, through the delivery of
shares of Common Stock which have been owned by the Director for at least six
months, duly endorsed for transfer to the Company with a Fair Market Value on
the date of delivery equal to the aggregate exercise price of the Option or
exercised portion thereof; (iii) allow payment, in whole or in part, through the
surrender of shares of Common Stock then issuable upon exercise of the Option
having a Fair Market Value on the date of Option exercise equal to the aggregate
exercise price of the Option or exercised portion thereof; (iv) allow payment,
in whole or in part, through the delivery of a notice that the Director has
placed a market sell order with a broker with respect to shares of Common Stock
then issuable upon exercise of the Option, and that the broker has been directed
to pay a sufficient portion of the net proceeds of the sale to the Company in
satisfaction of the Option exercise price, provided that payment of such
proceeds is then made to the Company upon settlement of such sale; or (v) allow
payment through any combination of the consideration provided in the foregoing
subparagraphs (ii), (iii) and (iv);

 

(c)           Such representations and documents as the Committee, in its
absolute discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other federal or state
securities laws or regulations.  The Committee may, in its absolute discretion,
also take whatever additional actions it deems appropriate to effect such
compliance including, without limitation, placing legends on share certificates
and issuing stop-transfer notices to agents and registrars; and

 

(d)           In the event the Option or portion thereof shall be exercised
pursuant to Section 3.1 by any person or persons other than the Director,
appropriate proof of the right of such person or persons to exercise the Option.

 

3.4           Conditions to Issuance of Stock Certificates.  The shares of
Common Stock deliverable upon the exercise of the Option, or any portion
thereof, may be either previously authorized but unissued shares or issued
shares which have then been reacquired by the Company.  Such shares shall be
fully paid and nonassessable.  The Company shall not be required to issue or
deliver any certificate or certificates for shares of Common Stock purchased
upon the exercise of the Option or portion thereof prior to fulfillment of all
of the following conditions:

 

(a)           The admission of such shares to listing on all stock exchanges on
which such Common Stock is then listed; and

 

(b)           The completion of any registration or other qualification of such
shares under any state or federal law or under rulings or regulations of the
Securities and Exchange

 

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Commission or of any other governmental regulatory body, which the Committee
shall, in its absolute discretion, deem necessary or advisable; and

 

(c)           The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable; and

 

(d)           The receipt by the Company of full payment for such shares,
including payment of all amounts which, under federal, state or local tax law,
the Company (or other employer corporation) is required to withhold upon
exercise of the Option; and

 

(e)           The lapse of such reasonable period of time following the exercise
of the Option as the Committee may from time to time establish for reasons of
administrative convenience.

 

3.5           Rights as Stockholder.  The holder of the Option shall not be, nor
have any of the rights or privileges of, a stockholder of the Company in respect
of any shares purchasable upon the exercise of any part of the Option unless and
until such shares shall have been issued by the Company to such holder.

 

ARTICLE IV

 

OTHER PROVISIONS

 

4.1           Administration.  The Committee shall have the power to interpret
the Plan and this Agreement and to adopt such rules for the administration,
interpretation and application of the Plan as are consistent therewith and to
interpret, amend or revoke any such rules.  All actions taken and all
interpretations and determinations made by the Committee in good faith shall be
final and binding upon the Director, the Company and all other interested
persons.  No member of the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan,
this Agreement or the Option.  In its absolute discretion, the Board may at any
time and from time to time exercise any and all rights and duties of the
Committee under the Plan and this Agreement, except with respect to matters
which under Rule 16b-3 or Section 162(m) of the Code, or any regulations or
rules issued thereunder, are required to be determined in the sole discretion of
the Committee.

 

4.2           Option Not Transferable.  Neither the Option nor any interest or
right therein or part thereof shall be sold, pledged, assigned or transferred in
any manner other than by will or the laws of descent and distribution, unless
and until the Option has been exercised, or the shares underlying such Option
have been issued, and all restrictions applicable to such shares have lapsed. 
Neither the Option nor any interest or right therein or part thereof shall be
liable for the debts, contracts or engagements of the Director or his or her
successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect, except to the extent that such disposition is
permitted by the preceding sentence.

 

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4.3           Shares to Be Reserved.  The Company shall at all times during the
term of the Option reserve and keep available such number of shares of Common
Stock as will be sufficient to satisfy the requirements of this Agreement.

 

4.4           Notices.  Any notice to be given under the terms of this Agreement
to the Company shall be addressed to the Company in care of the Secretary, and
any notice to be given to the Director shall be addressed to the Director at the
address given beneath the Director’s signature hereto.  By a notice given
pursuant to this Section 4.4, either party may hereafter designate a different
address for notices to be given to that party.  Any notice which is required to
be given to the Director shall, if the Director is then deceased, be given to
the Director’s personal representative if such representative has previously
informed the Company of such representative’s status and address by written
notice under this Section 4.4.  Any notice shall be deemed duly given when
enclosed in a properly sealed envelope or wrapper addressed as aforesaid,
deposited (with postage prepaid) in a post office or branch post office
regularly maintained by the United States Postal Service.

 

4.5           Titles.  Titles are provided herein for convenience only and are
not to serve as a basis for interpretation or construction of this Agreement.

 

4.6           [RESERVED]

 

4.7           Notification of Disposition.  The Director shall give prompt
notice to the Company of any disposition or other transfer of any shares of
stock acquired under this Agreement if such disposition or transfer is made
(a) within two (2) years from the Date of Grant with respect to such shares or
(b) within one (1) year after the transfer of such shares to him.  Such notice
shall specify the date of such disposition or other transfer and the amount
realized, in cash, other property, assumption of indebtedness or other
consideration, by the Director in such disposition or other transfer.

 

4.8           Construction.  This Agreement shall be administered, interpreted
and enforced under the laws of the State of California without regard to
conflicts of laws thereof.

 

4.9           Conformity to Securities Laws.  The Director acknowledges that the
Plan is intended to conform to the extent necessary with all provisions of the
Securities Act and the Exchange Act and any and all regulations and
rules promulgated by the Securities and Exchange Commission thereunder, and
state securities laws and regulations.  Notwithstanding anything herein to the
contrary, the Plan shall be administered, and the Option is granted and may be
exercised, only in such a manner as to conform to such laws, rules and
regulations.  To the extent permitted by applicable law, the Plan and this
Agreement shall be deemed amended to the extent necessary to conform to such
laws, rules and regulations.

 

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IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto.

 

 

 

CHEROKEE INC.

 

 

 

 

 

 

 

 

By

/s/ Mark DiSiena

 

 

 

Mark DiSiena

 

 

 

Chief Financial Officer

 

 

 

 

 

 

/s/ Jess M. Ravich

 

 

Director

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Address

 

 

 

 

 

Director’s Social Security Number:

 

 

 

 

 

 

 

 

 

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Exhibit A

 

FORM OF EXERCISE NOTICE

 

Cherokee Inc.

6835 Valjean Avenue

Van Nuys, California 91406

 

Attention:  Corporate Secretary

 

Re:          Exercise of Stock Option

 

Ladies and Gentlemen:

 

1.             Exercise of Option.  The undersigned Director,
                                              , was granted an option (the
“Option”) to purchase shares of the Common Stock, par value $0.02 per share
(“Common Stock”), of Cherokee Inc., a Delaware corporation (the “Company”),
effective as of                               , pursuant to the Stock Option
Agreement, dated                              (the “Option Agreement”).  The
undersigned hereby elects to exercise the Option as follows:

 

The undersigned hereby elects to exercise the Option as to
                       shares of the Common Stock, in accordance with
Section 2.1 of the Option Agreement (the “Shares”).

 

2.             Payment.  The undersigned has enclosed herewith
                     (representing full payment for such Shares in accordance
with Section 3.3 of the Option Agreement).

 

3.             Binding Effect.  The undersigned agrees that the Shares are being
acquired in accordance with and subject to the terms, provisions and conditions
of the Option Agreement set forth therein, to all of which the undersigned
hereby expressly assent.  This Agreement shall inure to the benefit of and be
binding upon the heirs, executors, administrators, successors and assigns of the
undersigned.

 

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The undersigned understands that he is purchasing the Shares pursuant to the
terms of the Option Agreement, a copy of which the undersigned has received and
carefully read and understands.

 

 

 

 

 

 

 

 

 

 

 

Receipt of the above is hereby acknowledged

 

 

 

 

 

CHEROKEE INC.,

 

 

a Delaware corporation

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

Title:

 

 

 

 

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