Exhibit 10.1

tlysform8kexhibit101s_image1.gif [tlysform8kexhibit101s_image1.gif]

September 11, 2019

VIA EMAIL

Dear Tricia:

On behalf of World of Jeans & Tops, d/b/a Tilly’s (the “Company”), I am pleased
to offer you the position of Executive Vice President, Chief Merchandising
Officer (hereafter, “EVP CMO”) of the Company, reporting to the Chief Executive
Officer. You will have the duties, responsibilities and authority commonly
associated with this position, in addition to those set forth in the Company’s
by-laws. Your anticipated start date at the Company will be September 30, 2019
(or such other date as mutually agreed, in any event, the “Employment Start
Date”). Your employment with the Company will be subject to the terms of this
letter agreement (the “Agreement”).

During your employment, you will devote your full business efforts and time to
the Company. Therefore, you may not serve on the board of directors of any other
company without the prior approval of the Company’s Board of Directors. In
addition, any other activities outside of the Company must not interfere or
conflict with your full-time responsibilities or your ability to perform your
duties of employment to the Company.

1.     Annual Base Salary.

Your starting annual base salary rate (“Base Salary”) will be $550,000, less
applicable taxes and withholdings, paid in accordance with the Company’s normal
payroll practices, and subject to annual review. The Company’s Chief Executive
Officer will evaluate your performance annually. Your annual review will
coincide with the annual review cycle of the Company’s management team, which at
this time occurs within 90 days after each fiscal year end.

2.    Annual Incentive Bonus.

You will be eligible to receive an annual incentive bonus (“Incentive Bonus”),
which at target is 75% of your Base Salary and up to 150% of your Base Salary at
maximum. The Incentive Bonus for the first fiscal year that you are with the
Company (the year ending February 1, 2020, “fiscal 2019”) will be based upon
budgeted pre-bonus operating income. You will receive the maximum payout on that
year’s Incentive Bonus if the Company’s actual pre-bonus operating income equals
or exceeds 115% of its fiscal 2019 budgeted pre-bonus operating income. You will
receive no Incentive Bonus for this period if the Company’s actual pre-bonus
operating

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income is less than 85% of the fiscal 2019 budgeted pre-bonus operating income.
The Incentive Bonus payout will be calculated in a linear fashion for
achievement between 85% and 115% of target. For the first fiscal year of your
employment, your bonus will be prorated based upon your Employment Start Date.

Additionally, beginning with the fiscal year ending January 30, 2021 (“fiscal
2020”), and continuing for each of your first full four (4) fiscal years of
employment with the Company, you will receive a minimum guaranteed bonus of
$250,000 per year (the “Guaranteed Bonus”). For clarity, during each of the
fiscal years 2020 through 2023, you will receive the greater of the Incentive
Bonus or Guaranteed Bonus, but not both the Incentive and the Guaranteed Bonus.

The Compensation Committee of the Board of Directors (the “Compensation
Committee”) will, at its discretion, establish the Incentive Bonus opportunity
for subsequent years based upon the Company’s performance compared to bonus
targets established for the relevant year. In establishing bonus targets for
your Incentive Bonus, we expect the Compensation Committee to use the Company’s
performance metrics such as, but not limited to, budgeted operating income,
pre-tax income or net income in order to align your incentive compensation with
the interests of the shareholders.

Your Incentive Bonus (or any Guaranteed Bonus, if applicable) payments will be
subject to applicable taxes and withholdings. To earn an Incentive Bonus (or any
Guaranteed Bonus, if applicable), you must remain continuously employed with the
Company and be in good standing through the date that any bonus is approved for
payment by the Compensation Committee, subject to the provisions of this
Agreement. The Company intends to pay annual bonuses following completion of the
year-end audit of the Company’s financial statements during the fiscal year
following the fiscal year for which the applicable bonus criteria applied.

3.    Sign-On Bonus

In connection with your Employment Start Date, you will receive a Sign-On Bonus
in the aggregate amount of $300,000, to be paid in three installments of
$100,000 each. The installments of this Sign-On Bonus will be paid to you: (i)
with respect to the first installment, in connection with the Company’s first
normal payroll cycle following your Employment Start Date; and (ii) with respect
to the second and third installments, on the first two anniversaries of such
date, subject to your continued employment through the applicable date. The
Company will withhold all applicable taxes, other normal payroll deductions, and
any other amounts required by law to be withheld from the Sign-On Bonus
payments.

You and the Company acknowledge and agree that the Sign-On Bonus will not be
earned in full until the third anniversary of the Employment Start Date, and
each installment of the Sign-On Bonus will be considered earned in 1/12
installments for every full calendar month after the Employment Start Date that
you work for the Company. If you resign from employment with the Company for any
reason, or are terminated by the Company for Cause (as defined below), in either
case, prior to the third anniversary of the Employment Start Date, you will
repay a portion of the most recently-paid $100,000 installment of the Sign-On
Bonus, in an amount calculated as

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the difference between: (i) $100,000 and (ii) 1/12 of such $100,000 with respect
to each full calendar month after the Employment Start Date (or applicable
anniversary thereof) that you work for the Company. Within 30 days of the last
day of your employment, you must repay the remaining unearned amount of the
Sign-On Bonus.  You agree that you will be liable for the cost to the Company of
collecting the unearned Sing-On Bonus, including attorney fees and court costs,
if not repaid as set forth above.

4.     Stock Option Grant.

As a part of the Company’s executive management team, we strongly believe that
ownership of the Company’s stock by our employees is an important factor to our
success. Therefore, as part of your compensation, the Company will grant you
non-qualified stock options to purchase 300,000 shares of the Company’s Class A
common stock (the “Option Grant”) at an exercise price equal to the closing
price of the Company’s stock on the New York Stock Exchange on the grant date.

Your Option Grant will be issued pursuant to the terms and conditions of the
Company’s Amended and Restated 2012 Equity and Incentive Award Plan (the “Plan”)
and the stock option agreement in a form prescribed by the Company. Your Option
Grant will vest in four equal installments, with the first installment vesting
on the first anniversary of your Employment Start Date and the remaining three
installments each vesting on the subsequent anniversaries of your Employment
Start Date, subject to your continued service with the Company through the
applicable vesting date. The Option Grant will expire 10 years after the date of
grant, subject to earlier termination as provided by this Agreement, provisions
in the Plan and in the related stock option grant documents.

5.     Relocation Reimbursement.
 
The Company will reimburse you for all reasonable moving expenses incurred as a
result of your, and your family’s relocation to the Orange County, California
area. Costs eligible for reimbursement include all reasonable costs to move
personal possessions, reasonable temporary living expenses for yourself and your
family in the Orange County, California area until December 31, 2019,
transportation expenses for you to return on weekends to Washington up to twice
a month until December 31, 2019, and up to three house hunting trips. Upon your
Employment Start Date and continuing through July 31, 2020, the Company will
also reimburse you for the costs of your current lease agreement in Washington.
You will need to provide the Company with appropriate receipts or other
documentation reasonably acceptable to be reimbursed. Any reimbursements under
this Section 5 that do not constitute non-taxable reimbursable business expenses
will be reported as income, and in such an event the Company will pay you an
additional amount sufficient to pay any federal, state or local income or
employment taxes that would be imposed on such amount (and any pyramiding taxes
on such additional amount). You agree to complete you and your family’s
relocation by December 31, 2019, otherwise you agree to return all relocation
reimbursements to the Company at that time.

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6.    Benefits.

You will be eligible to participate in the benefit packages available to all
full-time Company employees when you satisfy standard eligibility conditions.
These benefits include health insurance benefits (medical, dental and vision),
life insurance, short-term and long-term disability, and a 401(k) Plan. Please
refer to benefit plan documents for eligibility. Of course, the Company may
change its benefits at any time.

You will be entitled to 20 days of paid time off per year in accordance with the
Company’s paid time off policy, which may change from time to time. Per Company
policy, paid time off accruals max out at two times your annual accrual rate
(or, 40 days, in this case). You will begin accruing your paid time off on your
Employment Start Date.

7.    At-Will Employment; Termination.

(a)     At-Will Employment. This Agreement does not constitute a contract of
employment for any specific period of time, but will create an employment
at-will relationship that may be terminated by the Company at any time, with or
without Cause (as defined below) and by you with or without Good Reason (as
defined below). However, you agree to provide the Company with at least 30 days
written notice of any voluntary resignation. The at-will nature of your
employment relationship may not be modified or amended except by written
agreement of the Company’s Board of Directors and you. You agree that if your
employment is terminated for any reason, you will immediately resign from all
officer positions you hold with the Company and any of its affiliates.

(b)    Acceleration upon a Change in Control. If you are terminated without
Cause (as defined below) in contemplation of a Change in Control (as defined
below), as determined in the sole discretion of the Board of Directors of the
Company, or within 90 days immediately following the consummation of a Change in
Control, your outstanding and unvested equity awards in the Company will
accelerate in full upon such termination.

A “Change in Control” means an event or a series of related events where (i) a
person or group of persons acting in concert (other than the Company, any of its
subsidiaries, Hezy Shaked or any Hezy Shaked Entity (as defined in the Tilly’s,
Inc. Amended and Restated Certificate of Incorporation) or any entity that is
controlled by or under their common control or their family trusts) acquires
direct or indirect beneficial ownership (within the meaning of Rule 13d-3 under
the Securities Exchange Act of 1934, as amended) of more than 50% of the total
combined voting power of the Company’s securities outstanding immediately after
such acquisition from Hezy Shaked or any Hezy Shaked Entity and (ii) immediately
after such acquisition, Hezy Shaked, the Hezy Shaked Entities and entities
directly or indirectly controlled by them or their family trusts, when taken
together, beneficially own less than 5% of the aggregate voting power of shares
of Class A Common Stock and Class B Common Stock of the Company; provided that
any sale of such shares by Hezy Shaked or any Hezy Shaked Entity into the public
market will not be captured by the foregoing definition of Change in Control.
The Board of Directors of the Company will have the right to determine whether
multiple sales or exchanges of voting stock of

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the Company or multiple events are related, and its determination shall be
final, binding and conclusive.

(c)    Cause. For purposes of this Agreement, and as reasonably determined by a
majority of the full Board of Directors, you will be deemed terminated for Cause
if you have: (1) been determined by a court of law to have committed any felony;
(2) been convicted, or entered a plea of no contest, for violation of any
criminal statute constituting a felony, provided that the Board of Directors
reasonably determines that the continuation of your employment after such event
would have an adverse impact on the operation or reputation of the Company or
its affiliates; (3) engaged in an act of fraud, theft, embezzlement, or
misappropriation against the Company; (4) committed one or more acts of gross
negligence or willful misconduct, either within or outside the scope of your
employment that has the effect of materially impairing the goodwill or business
of the Company or causing material damage to its property, goodwill or business,
or would, if known, subject the Company to public ridicule; (5) failed to
materially perform the duties commonly associated with the position of EVP CMO
(continuing without cure for 10 days after receipt of written notice by you from
the Board of Directors of the need to cure); (6) allowed the Company’s
performance to be materially weaker than its competitors and the retail industry
generally (as determined by the Board of Directors); (7) materially breached the
Company’s Code of Ethics and Business Conduct or other written Company policies;
(8) breached this Agreement, after we have provided you notice and given you a
reasonable opportunity to cure; or (9) failed to use reasonable efforts to
relocate you and your family to the Orange County, California area by March 31,
2020.

(d)    Good Reason. For purposes of this Agreement, Good Reason means you
terminated your employment within 90 days following: (1) a material diminution
in your duties, responsibilities or authority as EVP CMO of the Company; or (2)
the Company failed to pay you material compensation or benefits that are
required to be provided under this Agreement. However, your termination will not
be treated as for Good Reason unless you have given the Company 30 days advance
written notice of your intention to terminate your employment and the Company
has failed to cure the acts within this 30-day period.

(e)    Clawbacks. If you choose to leave your employment with the Company (other
than for Good Reason, as defined above) or you are terminated by the Company for
Cause (as defined above) during the 12 months following your Employment Start
Date, you will be required to repay to the Company all relocation expenses
reimbursed to you by the Company.

8.    Proprietary Information & Ownership of Works-for-Hire Agreements.

As an employee of the Company, you will become knowledgeable about confidential
and/or proprietary information related to the operations, products and services
of the Company. Further, during your employment with the Company you may create
intellectual property that is the Company’s property. To protect the interests
of the Company, you will need to read and sign employee confidentiality and
works for hire agreements prior to beginning employment. A copy of these
agreements will be provided for you to read and sign.

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9.     Restatements.

In the event of a restatement of financial results, the Compensation Committee
will review all incentive awards for performance periods during the restated
period (whether in cash or equity), and all equity grants vesting or paid based
upon achievement of performance goals or stock price related in whole or part to
the restated financial period. If any such award would have been lower had the
level of achievement of applicable financial goals been calculated based upon
such restated financial results or a grant not have vested or not been paid, the
Compensation Committee may, if it determines appropriate in its sole discretion,
to the extent permitted by applicable law, require you to reimburse the Company
the incremental portion of the bonus in excess of that which would have been
paid to you based on the restated financial results, unvest equity grants and
require repayment of profits on equity that was vested or paid on such results
and realized by you. You shall promptly comply with any such request of the
Compensation Committee. This provision is in addition to, and not in lieu of,
any requirements under the Sarbanes-Oxley Act or any other law, Company plan,
award or grant.

10.     Non-Competition During Employment; Non-Solicitation of Clients.

You agree that, during your employment with the Company, you will not engage in,
nor have any direct or indirect interest in any person, firm, corporation or
business (whether as an employee, officer, director, agent, security holder,
creditor, consultant, partner or otherwise) that is competitive with the
Company. Notwithstanding the foregoing, you may have ownership interests in
publicly traded companies subject to the limitations in the Company’s Code of
Ethics. In addition, during your employment with the Company and thereafter, you
will not use any trade secret of the Company or its subsidiaries or affiliates
to solicit, induce, or encourage any customer, client, vendor, or other party
doing business with any member of the Company and its subsidiaries and
affiliates to terminate its relationship therewith or transfer its business from
any member of the Company and its subsidiaries and affiliates, and you will not
initiate discussion with any such person for any such purpose or authorize or
knowingly cooperate with the taking of any such actions by any other individual
or entity.

11.    Non-Solicitation.

You agree that at no time during your employment with the Company, and for a
period of one year immediately following your termination, will you directly or
indirectly, on behalf of yourself or any other person or entity, solicit,
recruit or encourage any employee to leave the employ of the Company.

12.     Cooperation.

During your employment and thereafter, you agree to reasonably cooperate with
and make yourself available on a continuing basis to the Company and its
representatives and legal advisors in connection with any matters in which you
are or were involved or any existing or future claims, investigations,
administrative proceedings, lawsuits and other legal and business matters, as
reasonably requested by the Company. You also agree that within five business
days

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of receipt (or more promptly if reasonably required by the circumstances) you
will send to the Company, attention Chief Financial Officer and/or General
Counsel, copies of all correspondence (for example, but not limited to,
subpoenas) received by you in connection with any legal proceedings involving or
relating to the Company, unless you are expressly prohibited by law from so
doing. You agree that you will not voluntarily cooperate with any third party in
any actual or threatened claim, charge, or cause of action of any nature
whatsoever against the Company or affiliates.

13.    Code of Conduct and Company Policies.

The Company is committed to creating a positive work environment and conducting
business ethically. As an employee of the Company, you will be expected to abide
by the Company’s policies and procedures.

14.    Indemnification.

The Company and you will enter into the Company’s standard form of
indemnification agreement for executive officers. You will be provided with
director’s and officer’s liability insurance coverage to the same extent as
other executive officers. This coverage will continue after your service with
the Company ceases while you have continuing liability with regard to your
actions or inactions on behalf of the Company on the same basis as coverage for
other former officers.

15.    Non-Disparagement.

You agree that, both during and for five years after your employment with the
Company terminates, not to knowingly disparage the Company or its officers,
directors, employees or agents in any manner likely to be harmful to it or to
them or to the Company’s or their business, business reputation or personal
reputation. However, this provision does not include statements made regarding
Company employees if these statements were made in the good faith performance of
your duties and statements made in connection your fiduciary duties or otherwise
required by applicable law. The Company will direct its executive officers to
abide by these same restrictions with regard to you. You will not violate this
section by making statements which are truthful, complete and made in good faith
in response to any question, inquiry or request for information required by
legal process or governmental inquiry.

16.    Exceptions.

Notwithstanding anything in this Agreement, nothing shall prohibit or impede you
from communicating, cooperating or filing a complaint with any U.S. federal,
state, or local governmental or law enforcement branch agency or entity
(“Governmental Agency”) with respect to possible violations of any U.S. federal,
state or local law or regulation or otherwise making disclosure to any
Governmental Agency, in each case, that are protected under the whistleblower
provisions of any such law or regulation to the extent such communications
and/or disclosures are consistent with applicable law. In addition, you are
hereby notified in accordance

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with the Defend Trade Secrets Act of 2016 (“DTSA”) that you will not be held
criminally or civilly liable under any federal or state trade secret law for the
disclosure of a trade secret that is made (a) in confidence to a federal, state,
or local government official, either directly or indirectly, or to an attorney,
solely for the purpose of reporting or investigating a suspected violation of
law; or (b) in a complaint or other document that is filed under seal in a
lawsuit or other proceeding. You are further notified that if you file a lawsuit
for retaliation by the Company for reporting a suspected violation of law, you
may disclose the Company’s trade secrets to your attorney and use the trade
secret information in the court proceeding if you file any document containing
the trade secret under seal and do not disclose the trade secret, except
pursuant to court order. You understand that you will be bound by any subsequent
changes or amendments to the DTSA. Notwithstanding the foregoing, under no
circumstance are you authorized to disclose any information covered by the
Company’s attorney-client privilege or attorney work product without the prior
written consent of the Company.

17.    Entire Agreement; Notice; Severability.

(a)     This Agreement constitutes the entire agreement between you and the
Company with respect to your employment and supersedes all prior or
contemporaneous oral or written representations, understandings, agreements or
communications between you and the Company concerning those subject matters. It
may only be terminated or modified in a writing executed by you and an
authorized representative of the Board of Directors. This Agreement will be
interpreted under, and governed by, the laws of the state of California without
regard to its conflict of law provisions.

(b)    Notices will be delivered in writing either personally or by overnight
delivery service and will be deemed given on the date delivered if delivered
personally or the day after the day sent if sent by overnight delivery service.
Notices will be delivered as follows (or to such other address as the party
shall notify the other by notice sent as aforesaid): (a) if to the Company, at
the Company’s executive offices (attn: Chairman) with a copy to the Chief
Financial Officer and/or General Counsel; and (b) if to you, at your last home
address on file with the Company.
 
(c)    If a court should determine that any provision of this Agreement is
invalid or unenforceable, in whole or in part, the invalidity or
unenforceability of that provision will not make any other provision of this
Agreement invalid or unenforceable.

18.    General 409A Compliance; Income Tax Withholding.

(a)    The intent of the parties is that payments and benefits under this
Agreement comply with or be exempt from Section 409A of the Internal Revenue
Code (“Section 409A”) and, accordingly, to the maximum extent permitted, this
Agreement shall be interpreted to be in compliance therewith. If you notify the
Company (with specificity as to the reason therefore) that you believe that any
provision of this Agreement (or of any award of compensation, including equity
compensation or benefits) would cause you to incur any additional tax or
interest under Section 409A and the Company concurs with such belief or the
Company (without

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any obligation whatsoever to do so) independently makes such determination, the
Company will, after consulting with you, to the extent legally permitted and to
the extent it is possible to timely reform the provision to avoid taxation under
Section 409A, reform such provision to try to comply with Section 409A through
good faith modifications to the minimum extent reasonably appropriate to conform
with Section 409A. To the extent that any provision hereof is modified in order
to comply with or be exempt from Section 409A, such modification shall be made
in good faith and shall, to the maximum extent reasonably possible, maintain the
original intent and economic benefit to you and the Company of the applicable
provision without violating the provisions of Section 409A. The Company shall
have no liability to you with regard to any additional tax, penalties or
interest you are required to pay pursuant to Section 409A.

(b)    A termination of employment shall not be deemed to have occurred for
purposes of any provision of this Agreement providing for the payment of any
amounts or benefits which is nonqualified deferred compensation under
Section 409A upon or following a termination of employment unless such
termination is also a “separation from service” within the meaning of
Section 409A and, for purposes of any such provision of this Agreement,
references to a “termination,” “termination of employment” or like terms shall
mean “separation from service.” If you are deemed on the date of termination to
be a “specified employee” within the meaning of that term under Section
409A(a)(2)(B), then with regard to any payment that is considered deferred
compensation under Section 409A payable on account of a “separation from
service,” such payment or benefit shall be made or provided at the date which is
the earlier of (i) the expiration of the six month period measured from the date
of such “separation from service” of you, and (ii) the date of your death (the
“Delay Period”). Upon the expiration of the Delay Period, all payments and
benefits delayed pursuant to this section (whether they would have otherwise
been payable in a single sum or in installments in the absence of such delay)
shall be
paid or reimbursed to you in a lump sum without interest, and any remaining
payments and benefits due under this Agreement shall be paid or provided in
accordance with the normal payment dates specified for them herein.

(c)    With regard to any provision herein that provides for reimbursement of
costs and expenses or in-kind benefits, except as permitted by Section 409A,
(i) the right to reimbursement or in-kind benefits shall not be subject to
liquidation or exchange for another benefit, (ii) the amount of expenses
eligible for reimbursement, of in-kind benefits, provided during any taxable
year shall not affect the expenses eligible for reimbursement, or in-kind
benefits to be provided, in any other taxable year, provided that the foregoing
clause (ii) shall not be violated without regard to expenses reimbursed under
any arrangement covered by Code Section 105(b) solely because such expenses are
subject to a limit related to the period the arrangement is in effect and
(iii) such payments shall be made on or before the last day of your taxable year
following the taxable year in which the expense occurred. Tax gross-up payments,
if any, shall be made no later than the end of the calendar year immediately
following the calendar year in which you remit the related taxes. Any
reimbursement of expenses incurred due to a tax audit or litigation shall be
made no later than the end of the calendar year immediately following the
calendar year in which the taxes subject of the audit or litigation are remitted
to the taxing authority or the audit or litigation is completed, whichever
occurs later.

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(d)    For purposes of Section 409A, your right to receive any installment
payments pursuant to this Agreement shall be treated as a right to receive a
series of separate and distinct payments. Whenever a payment under this
Agreement specifies a payment period with reference to a number of days (e.g.,
“payment shall be made within 30 days following the date of termination”), the
actual date of payment within the specified period shall be within the sole
discretion of the Company.

(e)    All payments hereunder shall be subject to applicable federal, state and
local income tax withholding, provided that all equity grants shall provide for
net share withholding at the minimum applicable statutory withholding rates upon
exercise or settlement, as the case may be, unless otherwise agreed in writing
by the parties and in accordance with applicable law.

19.    Accepting this Offer; Conditions.

Our offer to you is conditioned upon:
    
(a)
Returning this signed offer letter to us by September 19, 2019;

(b)
us completing your background check and being satisfied with the results;

(c)
us checking your references; and

(d)
you starting employment at the Company on the Employment Start Date.

To accept this offer, please sign this letter in the space provided below and
return it to our Chief Financial Officer, Michael Henry, via email or facsimile.

We look forward to your joining us and hope that you find your employment with
Tilly’s enjoyable and professionally rewarding.

Very truly yours,
 
 
/s/ Ed Thomas

Ed Thomas
President, Chief Executive Officer

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I accept this offer of employment with the Company and agree to the terms and
conditions outlined in this Agreement.

 
 
/s/ Tricia D. Smith

Tricia D. Smith

September 19, 2019